Beyond oil: Kazakhstan’s prospects for economic boom
In a speech last year, Kazakhstan’s minister of National Economy Timur Suleimenov announced that his country’s economy was projected to grow by 3.4 percent by the beginning of this year.
To the sceptics, this was a wild dream given that the central Asia country had suffered a drawback in growth owing to the 2016 slowdown in global oil prices and weak domestic demand.
Kazakhstan’s oil production capacity stands at 1.608 million barrels a day while its oil refinery produces 21 million tons of oil annually.
The 2016 slump oil prices saw Kazakhstan’s real Gross Domestic Product (GDP) growth drop from 1.2 percent in 2015 to 1 percent in 2016.
This however offered a lesson for the government to invest in other sectors such as agriculture, mining, pharmaceuticals, light industry, food and beverages which saw the country jump to 4.3 percent growth rate during the first half of 2017.
“The industry, construction, trade, transport and communication sectors became the main drivers of growth. The industry sector shows a steady growth of 8.3 percent since the beginning of the year,” Suleimenov was quoted by Astana Times newspaper as having said.
According to the newspaper, Kazakhstan’s mining volume increased 11.3 percent and manufacturing by 5.7 percent. Ferrous metallurgy production rose 7.8 percent; non-ferrous, 6.6 percent while agricultural growth remained at 1.9 percent during the same period.
The World Bank in its semi-annual economic development report on Kazakhstan published in May 2017 indicated the country’s economy was projected to grow by three percent over a period of three years (2017 to 2019).
The World Bank however advised that the former Soviet Republic needs to diversify its investments and tap into the agricultural sector.
“To accelerate and deliver more sustainable and inclusive growth, Kazakhstan will need to complete the macroeconomic adjustment to the ‘new normal’ – addressing the legacy of financial sector issues and fostering the development of a more dynamic, export-oriented, and productive private sector,” the World Bank report partly reads.
There are significant opportunities for Kazakhstan to increase labor productivity in agriculture by turning its unutilised land into productive farm land.
Nearly 15 percent of Kazakhstan’s total arable land is unutilised, but given its location and scale of agricultural resources, Kazakhstan becomes very attractive to domestic and foreign investors.
“Agriculture is a very important sector for diversification of the Kazakh economy. Low energy prices and a subdued growth rate in other sectors make the agricultural sector a top priority,” Ato Brown, World Bank’s country manager for Kazakhstan stated in the report.
“Fostering an enabling environment for agriculture is a prerequisite to unleash the potential of the sector for boosting growth and reducing poverty. The focus should also be on agricultural research, innovation, and education. Access to finance is also an important agenda to address,” Brown further stated.
Kazakhstan’s dream is become on of the World’s most developed economies by 2050.
To achieve this, Kazakhstan’s government in its program to attract investments is prioritising diversification of Kazakhstan’s economy away from its overdependence on extractive industries.
It for instance announced a set of industries that feature tax waivers and simplified procedures for acquiring visas and work permits.
It also created special economic zones that range from oil and gas to Information technology (IT) and logistics.
The special economic zones are intensed to foster better economic relations and stronger investment.
To promote investment, the Kazakh president, Nursultan Nazarbayev maintains a direct dialogue with foreign investors under the Foreign investors’ council (FIC).
FIC is an advisory body created to promote efficiency of investment activities and enhance the investment climate in general.