Kazakhstan represents the largest economy in Central Asia. Even in the 1990s, against a background of mass poverty and the collapse of the former Soviet republics, Kazakhstan remained outstanding in the post-soviet space by the living standards of its citizens, its political calm and operating enterprises.
At the beginning of the 2000s, a system of governmental capitalism with elements of socialism was established in Kazakhstan.
The authorities did not leave the nation to starvation. The reforms of 1995-97 and the well-structured monetary-credit policy revived and strengthened the economy.
In the period of the recession in 2008-09, through the implemented anti-crisis measures of governance by the National Bank and the Agency of Financial Oversight, Kazakhstan managed to avoid the consequences of the decline of the world economy.
Kazakhstan occupied the leading positions among the CIS countries after the recession of 2008.
In 2008-10, Kazakhstan was included on the list of the top 3 fastest-growing economies of the world.
Pursuant to the Global Competitiveness Report 2012-2013, launched by the World Economic Forum, Kazakhstan took 16th place among 144 countries in the rankings of macroeconomic stability.
Following the deceleration in 2014-15, there has been an economic recovery over the past three years.
The GDP of the country increased by 4.1% in 2018, seeing the establishment of a strong private sector. Kazakh banks commenced allocating investments in other post-Soviet countries.
The country owns exceptionally large oil supplies, metals, as well as minerals. The Republic ranks 12th in the world in oil supply and 19th in terms of natural gas.
Kazakh international oil and gas companies are located in the city of Atyrau, where it is planned to launch new oil refining enterprises.
In terms of gold supplies, Kazakhstan is in the leading position in the world ranking of gold-mining countries.
This factor alone already makes the country worthy of the close attention of foreign investors.
Prerequisite of Kazakhstan’s Stability – Growth of Quality of Life of the Population
Back in October 1997, the government of the country implemented the strategy for development entitled ‘Kazakhstan 2030’.
The program comprises seven priority goals: National Security; Domestic political stability and consolidation of society; Economic growth; Health, education and well-being of Kazakhstani citizens; Power resources; Development of infrastructure, transport and communication in particular; Professional state.
These goals have gradually been achieved, and the country spares no effort for the full realisation of the given development strategy.
The fulfilment process of the complex state program named ‘Nurly Zhol’, aimed at the modernisation of the country’s infrastructure, kicked off in 2014. Social indicators have been ameliorated.
The percentage of the population with an income below the poverty line decreased from the maximum level of 46.7% in 2001 to 2.7% in 2017. Life expectancy in that time increased from 65.8 to 73 years.
Openness and Safety for Foreign Investors
Macroeconomic stability and the prevention of imbalance accumulation, as well as a legal security guarantee, make the country attractive for Foreign Direct Investments (FDIs).
Kazakhstan ranks 28th among 190 countries in 2019 for Investment Attractiveness of the Doing Business ranking. According to the known figures, investments to the value of $300 billion have been brought into the country over the past 20 years.
In 2017, for the improvement of the investment climate, the Ministry for Investment and Development of Kazakhstan, along with the World Bank, developed the National Investment Strategy 2018-22.
Putting into action the national strategy aims to increase Foreign Direct Investment flowing into the country’s economy by 26% within the next 5 years.
The ‘KazakhInvest’ structure, aimed at the implementation of the state support measures in terms of attracting FDIs was also launched.
The Law of Kazakhstan on Investments (January 8, 2003) envisages introducing various types of guarantees which will minimise risks for investors.
According to the data of the Statistics Committee of Kazakhstan, the number of enterprises under foreign ownership or with foreign participation, increased by 25% (3,000-4,000) in April 2017.
Within five years, China is to bring to Kazakhstan 51 enterprises with a total cost of $26 billion. China is investing in various fields in Kazakhstan: oil and gas, chemicals, the mining and metallurgical industry, power engineering, agro-industrial sector, and engineering.
With the support of the Ministry of Foreign Affairs of Kazakhstan and ‘KazakhInvest’, 2018 saw 27 investment projects implemented with the participation of foreign capital worth $27 billion, opening 6,000 workplaces.
There were 157 projects with the involvement of foreign investors from 26 countries with a total value of $40 billion in March 2019.
Their implementation may contribute to the creation of nearly 45,000 workplaces.
The second wave of the privatisation policy took place in 2018, introducing over 800 companies for bidding.
The possibility of the privatisation of large companies through the IPO procedure caught the eye of multiple investors.
The tax reform of Kazakhstan carried out in 2017 is to allow to attract 4.1 trillion KZT and expand the budget revenue by 653 billion KZT.
The tax administration of Kazakhstan takes into account all the international norms of fiscal policy and is gradually sophisticating.
According to the information of the Ministry for Investment and Development (of August 1, 2018), The Netherlands was leading in terms of investing in Kazakhstan, where the capital investment from 2005 to 2017 amounted to $77.9 billion. The Netherlands was followed by the USA and Switzerland.
Development of the Monetary-Banking Sphere
The shift in the monetary policy has proved to be one of the government’s most important decisions in the monetary sector.
In August 2015, the National Bank transitioned from a fixed currency exchange rate mode to an inflation targeting policy and free exchange rate.
This allowed the National Bank to stabilise inflationary expectations and control the inflation dynamics.
According to the results, the annual inflation in 2018 was 5.3% with the target of 5.7% by the end of the year. Inflation in 2016-18 remained within the target corridor, enabling the National Bank to decrease the basic rate from 17% in March 2017 to 9.25% in March 2019.
In autumn 2018, the top-rated agencies S&P and Moody’s approved the sovereign credit rating of Kazakhstan at the level of BBB-A/3, with a ‘Stable’ forecast.
The analysts of the agencies took into account the positive balance sheet and low government debt. According to the S&P assessment, the tempo of economic growth in 2020 will be 3%, 3.1% and 3.2% in 2021 and 2022 respectively.
The banking sphere remains stable even during plummeting oil prices.
The Bank of Astana, Capital Bank Kazakhstan, and Forte Bank, seeing G. Andronikashvili as the Chairman of the Board, Kaspi Bank, (the largest retail bank of Kazakhstan) with M. Lomtadze as the Chairman of the Board, are among the major banks in the country.
The government has applied a series of measures to find a solution to the problem of non-performing loans (NPLs). Shifts have been introduced in the Tax Code, enabling banks to launch subdivisions on managing NPLs related to real estate.
The Importance of the International Financial Center of Astana
According to the official forecast, despite the availability of huge natural resources, the alternative energy share in the energy balance of Kazakhstan needs to be increased by 50% by 2050.
Under the initiative of President Nazarbayev, from June 10 to September 10, 2017, Astana hosted the international exhibition Expo 2017: Future Energy.
New energy-saving technologies and alternative sources of energy, including the energy of wind, sun, sea and thermal waters, represented essential themes of the event. In addition, the exhibition set the technological modernisation of the country’s economy and increasing its scientific potential as major aims.
The event proved to be very successful, visited by a huge number of foreign guests, while after its closing, the Astana International Financial Center (AIFC) commenced operating in January 2018, on the base of the modern infrastructure of the exhibition.
In addition, the 70th step of the ‘100 Concrete Steps’ set out by Nazarbayev, was targeted on the launch of the AIFC and granting it a special status.
The idea of the AIFC was born back in 2003. The operation system of the Financial Center of Dubai was explored prior, seeing a special team of researchers, boasting Kazakhstani specialists, sent to Dubai. Kazakhstan introduced special jurisdiction based on the principles of Anglo-Saxon Commercial Law.
British lawyers were invited to the juridical departments of the AIFC, a major and unprecedented event in the post-Soviet space.
Through its tax system, the AIFC is to be similar to an offshore one.
The supremacy of the AIFC laws on its territory over the laws of Kazakhstan is set to be outlined with particular articles in the country’s Constitution.
The Center is expected to become the financial hub for the CIS and Central Asian countries. Its operation will be ensured by the British lawyers. The AIFC is to be included in the top-20 contemporary financial centres of the world.
Development of the Real Sector of the Economy
The fact that the Kazakh industrial sector is self-sufficient and is provided with its own natural resources is one of the outstanding features of this field. 99 of the 110 chemical elements of the Mendeleev’s Periodic Table are found on the grounds of Kazakhstan, with 70 of them being explored and 60 extracted and utilised.
According to the published data, Kazakhstan boasts more than 50% of the world’s tungsten reserves, 21% reserves of uranium, 19% of lead, 13% of zinc, 10% of iron, as well as brass. Kazakhstan is also rich in aluminum, barite, chromium, titanium, coal, lignite and peat, and manganese ores.
Russia, China and the USA represent the main trade partners of Kazakhstan, whereas minerals, oil, natural gas, wheat, uranium, zinc, aluminum, Ferro-alloys and peat are among Kazakhstan’s major export products.
Kazakhstan has huge potential for expansion in all sectors of agriculture. In the vast areas of the country, there are sufficient capabilities for the even development of pastoralism and production of various field crops.
The FDI inflow into the agrarian sector of the Republic will substantially increase the production of agricultural goods.
In the 19th century, Kazakhstani pastoralists exported their products to the neighbouring Russian counties in large quantities, much contributed to and facilitated by the presence of wide grazing lands and rivers. Currently, the grazing lands sprawl across on 180 million hectares.
Sheep, horse and poultry farming, as well as camel-herding, are also developing across Kazakhstan. It is planned to launch embryonal transplantation with the aim to improve the species of cattle. Wheat, barley, oat, and other crop cultures are grown in the north of the country, whereas rice, sugar beets, grapes, and tobacco are found in the south.
Kazakhstan also develops the pharmaceutical industry.
The share of medications produced within the country increases annually. There are over 50 medication-producers operating in Kazakhstan, which benefits from the government’s support to expand their potential.
The country has impressive capabilities in terms of developing winter and summer tourism. The Almaty mountain cluster, Turkistan, Mangystau, Bayanaul, Balkhash, Imantau-Shalkar resort, and other destinations found across Kazakhstan, attract the attention of numerous tourists.
The government has set providing all the popular tourist locations with modern infrastructure like one of its pivotal goals.
Kazakhstan’s Transit Potential
The capabilities of Kazakhstan as the Eurasian transport-transit hub are strengthening. After gaining independence from a country dependent on transit, Kazakhstan has transformed into a transit country itself.
In his speeches, Nursultan Nazarbayev often focused on the huge transit significance of the Republic of Kazakhstan.
The strong transit potential of the country attracts multiple investors from China, Russia, and Europe.
Railways and roads are being constructed and sophisticated transport-logistic infrastructure. 5,500 km of roads and 2,500 km of railway have been launched so far.
The participation of Kazakhstan in the Chinese Silk Road Project is to increase the volume of transit transportation.
The proper functioning of the Kazakhstan-Turkmenistan-Iran railway corridor (total length nearly 900 km, linked by said countries in 2014), and the automobile corridor Western China-Western Europe, will give Kazakhstan impressive financial revenue.
A network for the improvement of transit routes has been functioning the Republic of Kazakhstan since 2014: ‘North-South’, TRACECA, Lianyungang–Horgos Port Aktau. Five international vehicle routes pass through Kazakhstan.
Relations between Kazakhstan and Georgia are Growing
Georgia represents an important transit route for Kazakhstani crops and oil, which are exported through the Batumi and Poti ports.
Aktau Caspian Port plays a key role in the development of the transport potential of Kazakhstan.
This port enables the country to reach the gate to the Black Sea (through Azerbaijan and Georgia), the Persian Gulf (through Iran) and the Indian Ocean.
Kazakhstan has invested more than $400 million in Georgia, representing one of the highest indicators in comparison with other countries where Kazakhstani investments have also been allocated.
Trade relations between the two countries are enhancing and integrate a wide nomenclature of goods. The Embassy of Kazakhstan to Georgia plays a major role in this respect.
The Embassy, as a structure of the Ministry of Foreign Affairs, is paramount in terms of developing the trade-economic ties of Kazakhstan abroad.
That is why each Georgian businessman interested in communications with Kazakhstan is free to address the Kazakhstani Embassy in Tbilisi.
The collapse of the USSR introduced unimaginable perspectives to Kazakhstan. Even in ancient times, the majestic Silk Road passed through the territory of Kazakhstan.
Numerous foreign experts have even been heard to suppose Kazakhstan will become “the Dubai of Central Asia” and the new “Asian Tiger.”