- Published on Friday, 25 August 2017 17:01
KUALA LUMPUR — Kazakhstan, Central Asia’s largest country and the ninth largest in the world, is on course to strengthen its economy as well as global competitiveness, by weaning itself away from an over reliance on commodities.
Towards this end, the former Soviet republic has in place, economic and investments strategies under the Third Modernisation model announced earlier this year, and which is projected to position the country among the top 30 global economies by 2050.
The government realises that the economy suffers from an over-reliance on oil and extractive industries and has made initial attempts to diversify by targeting sectors, including transport, pharmaceuticals petrochemicals and food processing, for greater development and investments.
Geographically, the largest of the former Soviet republics, Kazakhstan possesses substantial fossil fuel reserves and other minerals and metals, such as uranium, copper, and zinc, as well as a large agricultural sector featuring livestock and grain.
Under the Third Modenisation of Kazakhstan, five priorities were outlined by President Nursultan Nazarbayev and includes accelerating technological modernisation of the economy, improving and expanding the business environment as well as ensuring macroeconomic stability.
The focus of industrialisation will be on the development of competitive exports in priority sectors with the Kazakhstan government tasked to double non-commodity exports by 2025.
Over the past decade, Kazakhstan has made strong policy strides and responsibly absorbed large natural resource–based earnings by implementing a rules-driven fiscal framework.
However, diversification remains a challenge for a country with the ninth-largest oil reserves in the world as the hydrocarbon output accounted for 18 per cent of gross domestic product (GDP) and about 60 per cent of exports in 2015.
The President had in November 2014 announced a robust domestic stimulus policy, Nurly Zhol (Bright Path), to drive state and foreign direct investments (FDI) into critical infrastructure and priority sectors and spur economic growth.
Totalling about US$9 billion, Nurly Zhol would help shift productivity towards agribusiness, manufacturing, trade and logistics, tourism, information technology and finance, and away from the oil sector.
Thanks to the stimulus and the country’s “100 Specific Steps” National Plan, Kazakhstan has passed through the initial stage of its complex global transformation and followed by the Third Modernisation model.
In 2016, the gross inflow of FDI to Kazakhstan amounted to US$20.6 billion from US$14.8 billion in 2015, signalling a return of foreign investors’ interest which had weakened from an earlier economic crisis.
In 2014–2016 alone, the country had allocated an additional 1.7 trillion Kazakh tenge to support the economy and all these presented an opportunity for economic growth and support for business and for creating over 200,000 new jobs. (US$1= 331.09 Kazakh tenge).
The initiative had led to a 1.0 per cent growth in gross domestic product (GDP) last year under challenging circumstances, albeit lower than the 1.2 per cent recorded in the previous year.
The World Bank projected that Kazakhstan would slowly pick-up growth as oil prices recovered and oil production gradually expanded, but GDP growth would remain lower than the 4.2 per cent recorded in 2014.
Meanwhile, the non-oil economy is also projected to expand, aided by gradually improving investor sentiment and consumer confidence to support domestic demand.
As the inflationary effect of currency depreciation fades, real wages and the purchasing power of the population, is expected to improve.
This may help poverty reduction, but at a much slower pace.