Kazakhstan Economic Overview:


The perspective of the Kazakhstan economy is closely connected with further integration into international economic relations, utilisation of unique reserves of energy and mineral resources, vast possibilities to export industrial and agricultural products, optimum employment of country's transit potential and also with availability of highly qualified specialists in different spheres.

During the Soviet period Kazakhstan was an agrarian, raw materials supplier of the former Soviet economy, where the military industry played the major role. The main economic content of 15 years of independence has become transition from the central command planning to a market system. During these years, Kazakhstan has made considerable progress in implementing complex political, economic and social reforms to establish a democratic state with a market economy.

While the country has not experienced political disturbances during the transition period, it has faced numerous economic, social and environmental challenges.

The first few years of Kazakhstan’s independence were characterized by an economic decline (mostly due to the destabilizing force of disintegration of the Soviet Union): by 1995 real GDP dropped to 61,4% of its 1990 level. This economic deterioration exceeded the losses experienced during the Great Depression of the 1930s.

The wide-ranging inflation observed in the early 1990s peaked at annual rate of up to 3000% in mid-nineties.  

Since 1992, Kazakhstan has actively pursued a programme of economic reform designed to establish a free market economy through privatisation of state enterprises and deregulation and today is generally considered to be more advanced in this respect than most other countries of the CIS.

Kazakhstan remains one of the most successful reformers in the CIS, and it has the strongest banking system in Central Asia and CIS.

The main goals of current structural policy are diversification and the strengthening of the non-oil sector. A number of development agencies and research centres (Development Institutions) have been established and the Government is looking at establishing techno and science parks to support the diversification of higher-value added industries. But there are certain obstacles inherited from the past to quickly achieve this.

The EU and USA have recognized Kazakhstan (first in CIS) as a country with market economy in 2001 and 2002 respectively. In October 2002 international rating agency Moody’s upgraded Kazakhstan by two notches to Baa3, thus Kazakhstan has become the first country in the CIS to reach investment grade status. Current ratings as of 5 April 2007: (LTFC/LTLC/Outlook): Moody’s Baa2/Baa1/Positive; Standard&Poor’s BBB/BBB+/Positive; Fitch BBB/BBB+/Positive. In January 2005 the Organization for Economic Cooperation and Development (OECD) has upgraded Kazakhstan’s country export risks rating, moving it from the 5th to the 4th group of risks.

Kazakhstan possessing sizable amounts of oil and gas, coal, uranium is an important energy player in the world. However, having these abundant resources, the Government and the country’s energy sector keep an attentive eye on global energy trends. Optimal energy mix, energy use efficient, significant environment component of energy policy, research and development of renewables are all on the country’s energy policy agenda. In 2006 Kazakhstan has produced its first wheat-based bioethanol and this private sector programme will expand further.

Energy transportation and infrastructure are key elements of a viable energy policy. EU and its Energy Commissioner have identified last year their strong interest to cooperate with Kazakhstan in this area, particularly on trans-continental gas and oil transportation issues. Kazakhstan has made it clear that this fully meets its own vision for the development of multiple energy transportation routes from and through Kazakhstan.

Commercial viability, technical and environmental safety and financial soundness are the guiding principles for Kazakhstan’s strategy in this crucial area.

The main economic priority for Kazakhstan is to avoid overdependence on its oil and gas and minerals sector, but to use these natural assets to build a modern, diversified, highly-technological, flexible and competitive economy with a high value-added component. This is the central goal of the National Strategy until 2030 and of the recently adopted State Industrialization and Innovation Programme until 2015.   

In 2006 Kazakhstan has additionally announced a major drive for the strategy to enter the 50 most completive nations in the world in ten years time.

The World Bank presented its ranking of the world economies in terms of the GDP size in 2006. Kazakhstan ranked 55th out of 183 countries with the GDP as large as USD 77 billion. Kazakhstan's GDP will increase 10% year-on-year in 2007 to 100 billion. By 2015 it will make 300 billion dollars.

Diversification of the economy, introduction of international technical, financial, business standards, accession to the WTO, promotion of corporate governance, greater transparency and accountability, education and a concerted administrative reform have been identified as the key drivers to implement the strategy.

In 2006 the Government has drastically increased  the  budget  of  a  state-run  scholarship  programme “Bolashak” (“Future”). If to date only about 800 Kazakh students could enjoy the benefits of “Bolashak” scholarship since its inception in 1994, starting from 2006 the Government fully funds 3000 Kazakh students annually to study in the world’s best universities.

·Aiming to cut bureaucracy the Government is widely introducing the “e-government” in all major sectors. This measure coupled with other result-oriented administrative reform steps is viewed, among other things, as an important tool in the fight against red-tape and corruption.

·In order to further improve the country’s competitive edge and regional role through enforcing the principles of efficient corporate governance and management, greater transparency and accountability as well by boosting its financial markets the Government has taken major steps in early 2006, namely it established the “ Samruk” State holding company, “Kazyna” Fund for sustainable development and initiated the establishment of the Regional Financial Centre in Almaty (RFCA).

·Over the last two years (2005-2007) 18 Kazakhstan companies have been listed at the London Stock Exchange (7 – on the main market, and the rest on AIM). This has proved de-facto Kazakhstan’s leadership in the former Soviet Union in implementing Western instruments, managerial skills and business standards in the country’s economy.

Starting from 2005 Kazakhstan has been practically implementing the Extractive Industries Transparency Initiative with the aim to deliver a clear signal to international investors community and financial institutions that the Government of Kazakhstan commits itself to greater transparency to further improve investment climate, strengthen accountability and good governance, as well as promote greater economic and political stability throughout the country which will be based on the principles of decentralization, industry specialization, free market competition and transparency.

Kazakhstan has officially announced its aspiration to become a trilingual nation to help meeting its ambitious goals. These will be Kazakh as the state language, Russian as the language of interethnic communication, and English as the language of successful integration into the global economy and community.

During these years Kazakhstan has achieved significant results. Having created and strengthened social and political stability by implementing democratic and market reforms on the steady basis, Kazakhstan has gained macroeconomic stability, formed legislation essential for conducting successful business, realised structural reforms which created firm basis and favourable environment for accelerated development of the country.