Economy of Kazakhstan

The presidential address offered a timely platform to try to regain the trust of the domestic and foreign public, reaffirming Kazakhstan’s commitment to a gradual political yet dynamic socio-economic development. At least half of the stated priorities focused on social development. The government plans to create quality jobs for 1.5 million people by 2020 by developing entrepreneurship in rural areas and improving training and labor mobility across the country’s major economic zones. It also intends to improve human capital through better education and healthcare, upgrade pension system, create more affordable housing, develop regions and small towns, improve public services by curbing corruption and simplifying administrative procedures, and modernize judicial and law enforcement systems.

The social and economic priorities have been tailored to be mutually reinforcing. The government will now train a political class of managers to meet the new demands of governance. This is indicative of the need to reduce government inefficiency and mitigate potential setbacks amid the gradual opening of the political system and head of major leadership changes. It also plans to boost agricultural development through improved access to credit and creation of a grain holding to ensure food security amid occasional spikes in food and fuel prices on global and local markets. Agriculture now contributes approximately 4.6 percent to GDP, while the industry and service sectors –  about 34.2 percent and 55.7 percent respectively.

To calm and invite potential investors, Nazarbayev said the administration was committed to the Accelerated Industrial and Innovative Development program, which aims to modernize and diversify the economy dependent on hydrocarbons by developing petrochemicals, food processing, transport and other sectors. Planned multi-billion dollar projects are here to help and include construction of several enterprises: a power station in Balkhash to address the energy deficit in the south; a petrochemical complex to produce propylene and polyethylene; a compound fertilizer complex for agricultural development of Zhambyl and southern areas in general; an oil-processing plant in Atyrau to increase fuel supply; a gas processing plant at the Karachaganak field; and gas pipelines to central regions and the capital Astana. They also include the completion of Kazakhstan’s part of the international auto corridor “Western Europe-Western China” to integrate Kazakhstan and others within Eurasia and two railway lines connecting Jezkazgan and Beyneu and Arkalyk and Shubarkol to develop the Jezkazgan-Arkalyk region.

Authorities plan to use National Fund resources to finance these projects, but it is not clear what investment options they will ultimately pursue. Attracting foreign direct investment (FDI) may prove forward-looking. Kazakhstan has attracted more than $122 billion in FDI since 1993, but it needs more FDI to transform the economy from the one previously based on Moscow’s heavy planning. In his address, Nazarbayev highlighted tourism as a lucrative sector, saying it attracts up to 10 percent of GDP in developed countries, but only less than 1 percent in Kazakhstan. This should not come as a surprise because Kazakhstan is not a developed economy, despite its eager efforts to become one in the future. This is not to dismiss the important strides Kazakhstan has made in opening up to the rest of the world. The FDI figures aside, Kazakhstan advanced from 74th to 59th place among 183 economies in the World Bank’s “Ease of Doing Business” report and has made a series of major improvements in the investment climate. However, it is yet to improve corporate governance, legal and regulatory environment, and boost efficiency of production and improve infrastructure, according to the Ernst & Young’s Investors Opinion Survey (EDM, June 23, 2011). Nazarbayev mentioned the “Business Roadmap – 2020” program and plans for Kazakhstan to become a WTO member in 2012 as steps needed to further boost the investment climate.

In a region prone to instability, doing so requires foreign policy commitments promoting security in Eurasia and the world at large. In his speech, Nazarbayev focused on the need to advance nuclear security initiatives, including the imperative of adopting the Comprehensive Declaration of Nuclear-free World, and the “G global” scheme to accelerate the exit of the global economy from the current malaise. He also underscored Kazakhstan’s commitment to the “balanced foreign policy,” saying it will continue cooperation with West, East, and Russia and Belarus as part of the single economic space. He further noted the need for a “Eurasian police” to combat crimes in the expanding economic zone.

Whether Kazakhstan can deliver on its grand domestic and foreign policy ambitions remains unclear, not least because the priorities in the presidential address require long-term commitments. By emphasizing the socioeconomic component of its modernization strategy, the country’s leadership not only seeks to silence critics at home and abroad, but also accelerate the economically dynamic yet socially stable development of the country, whose image of a Central Asian outlier has been recently tarnished.

In keeping with the Strategic plan-2020 priority goals for near economic decade are: post crisis economic modernization, rise of human capital, participation in formation of a “new architecture of international relations and the world trade-financial system”  and provision of “Kazakhstan’s leadership” in regional economy.

At that industrialization, innovative development and regional economic policy have been determined priorities for post crisis modernization.

On the state leader’s instructions the AIID (the State program of accelerated industrial-innovative development) and the detailed map of the country’s industrialization were elaborated. In coming five years 162 projects with the total investment volume of KZT 6, 5 trillion (over 40% of the republican GDP) are to be realized and 200 thousand new vacancies – created in near three years.

 “Forced diversification and rise of domestic economics’ competitiveness” are laid in the base of the balanced postindustrial development, the President said. To implement the above plans $ 20bn of additional foreign investments was attracted for non-primary sector, industrial programs, infrastructure and joint ventures.

The expected “fruits” from this policy are structural economic changes at the account of processing industry’s share in GDP which is to make up 13% at least by 2020 according to the forecasts and increasing share of non-primary export –by 45%.

AIC is another important segment of diversification. Growing volumes of processed agro-output, introduction of new technologies will settle the problem of food safety in the republic. By 2014 internal market must be saturated by domestic output at 80%. Export potential in agrarian branch will be doubled by 2015 (from 4% to 8%). By that time they plan to provide construction market with domestic construction materials by 80%.

The national innovative system will develop “economy of future”. Much attention is paid to elaboration of new legislative drafts, first of all the Law “On science” and a new bill on special economic zones, industrial parks and creation of three new scientific centers within the frames of New University in Astana.

Support of innovative system at all management levels is the task for the Government for near decade.

Labor productivity is a complex index of AIID development, which is to double by 2020 in processing industry; and its fourfold increase is forecast in AIC.

Innovative-actively businesses’ share will grow from 4% to 20% in the current decade, while GDP energy capacity is to reduce by 25% at least.

New regional policy in the Address is regarded as “part and parcel of the Strategic plan -2020”; and reforms in regional development are principle constituents of the new economic policy of Kazakhstan, the elements of which are centers of economic growth within the map of industrialization and industrial capacities’ placement. The west Kazakhstan will develop on the base of oil-gas sector while mining-metallurgic complex, atomic and agrarian industry will be launched in the center, north and east of the republic.

 

Conclusion

 

“Human is the main value in our country”, - said the President determining the main resource of Kazakhstan’s economic development. A range of measures is envisaged in educational, healthcare and social spheres within AIID frames for provision with qualified personnel. Particularly the Government has been instructed to provide reformation in educational system in keeping with high international standards, i.e. to introduce the system of 12-year secondary schooling by 2020, to launch a special program “Balapan” for preschool children and to elaborate a draft on establishment of “flagmans of domestic educational system” – a New international university and a Special fund and intellectual schools.

In healthcare a new system of funding and medical services’ payment is introduced and base conditions for effective pharmaceutical provision (50% of domestically manufactured drugs) –created.

Employment remains the main goal of social policy. By 2020 unemployment is to reduce to 5% and the share of the population with low incomes (below subsistence level) – to 8%. By 2015 base pension will make up 60% of subsistence level and state allowances will be raised by 1, 2 times to 2010.

The Strategic plan-2020 implies large scale modernization in housing communal economy and reforms in housing construction.

Priorities in external economic policy are speeding up of integration processes on CIS space, support of the national economics’  competitiveness and entrance to the number of 50 most economically advanced states. Main conditions for the above goals’ achievement are fruitful trade within the Customs union between Kazakhstan, Russia and Belarus, common economic space to be formed by 1 January of 2012.

The CU will expand boundaries of export potential at the account of market of regional integration group. CA and Caucasus states, Near East are the main external –trade partners.

To enter the number of 50 states with most favorable business climate by 2020 we should provide sustainability of domestic financial system and domestic stock market must become the “regional center of Islamic banking in CIS and Central Asia”.

 

 

 

References

 

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4. Gamarnik G. N. Management of economy of Kazakhstan: methodology, approaches, realization ways. - Almaty. – 2009.

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7. Kazakhstan on a way to new model of development: tendencies, potential and growth imperatives. P.1. – Almaty.-2001.   

8 www.miplan.kz - ministry of Economic Development and Trade of Kazakhstan Official website

9. www.akorda.kz – official site of the President of the Republic of Kazakhstan

10. www.kazpravda.kz