Kazakhstan burst forth onto the global stage in 1991 as the second-largest member of the Commonwealth of Independent States (CIS). Its position between Russia and the Caspian Sea in the west, the Central Asian Republics to the south, and China to the east give it a unique role as a crossroads facilitating trade and economic growth throughout the region.
Celebrating 20 years of independence, Kazakhstan today has the largest economy in Central Asia, and has become the decision-making hub of the region for many international businesses. The GDP of the country alone is 1.3 times more than the aggregate GDP of the other four former Soviet Central Asian states put together: Uzbekistan, Tajikistan, Kyrgyzstan, and Turkmenistan. In terms of its development, Kazakhstan posted strong annual economic growth of more than 9% from 2000 through 2007. Although the global economic crisis and decreasing commodity prices put a dent in its growth path during the global financial crisis, the government reacted quickly by devaluing the local currency, the tenge, and injecting $19 billion into the local banking system. This determined policy mix saw the country quickly show strong signs of recovery. By 2010, Kazakhstan was once again recording 7% annual economic growth, with 2011 shaping up strongly as well.
Kazakhstan owes its emergence as the business hot spot of the region to a well-executed capitalization of its natural resource base. Not only does the Central Asian nation have enormous fossil fuel reserves, it is also a major supplier of other minerals and metals including copper, zinc, and uranium—for which it has been the world’s largest producer since 2009. Today investments in raw materials constitute 74% of all investments in the national economy.
The majority of investment is directed towards the development of its extensive oil and gas fields. With 30 billion barrels of proved reserves, Kazakhstan has the world’s 11th largest reserves of crude oil. Out of the 13 major production areas, the giant Tengiz and Kashagan fields host 69% of the country’s hydrocarbon reserves. The share of exported oil in the total oil output of Kazakhstan has increased from 61% in 1998 to 92% in the first half of 2010. With the further development of its major oilfields, Kazakhstan is soon expected to increase this ratio and become one of the world’s top oil exporters.
In order to reduce the economy’s reliance on the revenues generated from its oil and
extractive industries, the government has initiated the Business Road Map 2020, a program to support the non-oil economy in the post-crisis period. The road map has five objectives: to subsidize the interest rates on loans for new projects, to issue partial loan guarantees, to develop manufacturing infrastructure, to provide service support for businesses, and to create jobs.
In line with the objectives of the Business Road Map 2020, Kazakhstan has also enacted an accelerated industrial-innovation development program to strengthen the export potential of targeted sectors such as transport, pharmaceuticals, telecommunications, petrochemicals, and food processing by 2015.
The better utilization of Kazakhstan’s full natural resource base is taking place in an investment-friendly environment, strengthened by the government’s progressive reforms. The country was listed among the World Bank’s top reformers according to the 2011 Doing Business report, coming in at number 59 in the world, up 15 places on 2010. The Kazakhstani tax regime is also considered to be one of the most attractive among all of the members of the CIS.
In addition to structural reforms and government programs to rebalance the economy, the country has been actively improving its integration into the global economy to ensure Kazakhstani businesses are able to access the potential of the massive markets that it shares borders with: Russia and China. In this respect the processes of Eurasian integration and World Trade Organization (WTO) accession have been running in parallel. The Customs Union between Russia, Kazakhstan, and Belarus came into effect on January 1, 2011 setting up a market with a population of 170 million, an aggregate trading volume of $900 billion, and a current aggregate GDP of $2 trillion. WTO accession remains a foreign policy priority for Kazakhstan. However, Kazakhstan’s international significance is not limited to the economic sphere. In January, 2010 Kazakhstan became the first former Soviet state to take up the year-long chairmanship of the Organization for Security and Cooperation in Europe (OSCE), with Astana becoming the first Central Asian capital to hold an OSCE summit.
Between January 30 and February 6 Almaty and Astana played host to the 7th Asian Winter Games, the biggest sports event to be organized in Kazakhstan, which has a strong record in winter sports. Kazakhstan’s pioneering role in the international arena as a Central Asian country will further be enhanced as Astana chairs the Organization of the Islamic Conference in 2011/2012.
Kazakhstan offers opportunities as wide and untouched as the steppes of Central Asia, with a touch of local hospitality in every level of business.
© The Business Year