Hot on the heels of celebrations marking its 20th year, Kazakhstan enters the next period of its history boasting political stability, a prosperous economy, and improving social indicators that lead the way in the CIS.
With the ninth largest territory in the world, Kazakhstan continues to leverage its location on the axis of the historic Silk Route to boost trade and investment. While Astana is the political heart of the country, the former capital Almaty still wields significant economic clout. Atyrau and Aktau, in the west of the country, are also emerging as oil and gas centers. A population of only 16.7 million has not put off investors, as companies look to Kazakhstan as an export base between Russia and China. Although Kazakh is the official language, Russian is recognized as the language of inter-ethnic communication between Kazakhstan’s majority Kazakh population and minority Russian population.
As economic growth rolls on boosted by oil and gas profits, Kazakhstan closed 2011 with GDP growth of 7.5% and a per capita income of $8,200. The IMF, international ratings agencies, and the country’s central bank also foresee growth of between 5% and 7% in 2012, while the World Bank predicts that per capita GDP will double by 2016.
Inflation decreased from 7.4% at end-2011 to 4.5% in March 2012. Kazakhstan’s combined international reserves and oil fund resources also totaled $73 billion, or around 40% of GDP at end-2011, constituting a “comfortable buffer to the economy,” according to the IMF.
The current account surplus is currently widening due to rising commodity exports, growing 4.5 times to 7.3% of GDP in 2011, further highlighting Kazakhstan’s reliance on the extractive industries. Mining also remains lucrative, with the country boasting 33% of total world uranium production.
With 30 billion barrels of proven reserves, Kazakhstan has far more oil dollars to look forward to as it continues its long march toward diversification. Daily oil production, of which the majority is carried out at the Tengiz, Karachaganak, Uzen, Magistau, and Aktobe fields, currently exceeds 1.61 million barrels per day (bbl/d), more than 1.5 million bbl/d of which is exported. Its oil production and exports have been increasing steadily since 1992, and by 2020 the country aims to raise its oil exports to 3 million bbl/d. Development of the Kashagan field, off the coast of the Caspian Sea, is also continuing, and it is estimated to hold around 11 billion barrels of oil. Production at the field is planned to begin in 2013, and peak production is predicted to top 1.5 million bbl/d by 2019.
To expand its industrial base, Kazakhstan has embarked on the National Program of
Accelerated Industrial and Innovative Development for 2010-2014 to mitigate the economy’s dependence on extractive industries, bringing value-added to national output and widening the revenue base. As part of the larger Business Roadmap 2020 initiative, measures are being put in place aimed at ensuring sustainable and balanced growth in the non-oil sectors, including food processing, petrochemicals, pharmaceuticals, transport, and ICT. Transport is particularly promising as the development of the Western China-Western Europe highway and modern rail network plays into the hands of logistics companies and freight forwarders. Additionally, the country’s large territory and advancing manufacturing base make power generation and distribution, as well as ICT, promising areas for investors to explore, while increasing food prices have drawn attention to Kazakhstan’s agricultural potential as one of the world’s biggest grain exporters, with 2011 a record year for the production of wheat—26.9 million tons of grain produced, while exports stood at 15 million tons.
According to the International Finance Corporation (IFC) and the World Bank’s Doing Business 2012 report, Kazakhstan is now among the top 50 nations in terms of its business environment, climbing 11 places to rank 47th. With the Kazakhstan-Russia-Belarus Customs Union evolving into the Common Economic Space on January 1, 2012, Kazakhstan is emerging as a business hub for a combined market of 170 million people.
Kazakhstan is also moving ahead with capital markets reforms. In the second or third quarter of 2012, the first wave of the People’s IPO is set to take place, with 10% of shares in several public companies including KEGOC and KazTransoil set to be offered to the public on the Kazakhstan Stock Exchange (KASE), marking the beginning of a new era in the country’s financial history.
The success of Kazakhstan’s active foreign policy matches its solid economic performance. Increasingly active on the world stage, Kazakhstan took over the chairmanship of the Organization of Islamic Cooperation (OIC) in 2011, and also hosted the International Forum for a Nuclear-Weapons-Free World in Astana. It is now bidding to host a World Expo in Astana on the capital’s 20th anniversary in 2017 under the “Future of Energy” theme. And for the future, Kazakhstan will continue to leverage its resource wealth to assume global-player status.
© The Business Year