The Republic of Kazakhstan celebrated its 32 independence day. It is the largest economy of Central Asia and has achieved miraculous socio-economic achievements and succeeded to uplift the lives of common people. Constant economic stability and sustainability successfully strengthened its political stability and caravans of real politicization and democratization remained on right path to protect human values, rights and social justice since its inception. Thus there is no issue of violation of human rights and ethnic discrimination.
Visionary leadership succeeded to improve its socio-economic indicators and transformed the country into a modern state with a strong economy, politics and vibrant society due to which it has been dubbed as the most responsive state in the world. Right from the beginning it adopted numerous holistic and comprehensive policies and constant economic structural reforms in business, trade, and industrialization making Kazakhstan a progressive and prosper country.
Wise political decisions enabled stable economic growth after the collapse of the Soviet Union. The economic situation in the early 90s was not up the mark due to which industrial enterprises were shutting down, all economic ties were severed; wages, pensions and benefits were delayed for months, the country experienced rising inflation and a massive shortage of essential goods. The economy was derailed and society was de-focused.
During 2022 Kazakhstan’s GDP reached 104 trillion tenge, and it attracted a record-breaking US$28 billion in foreign direct investment. Its foreign trade turnover hit a record level of US$136 billion, with exports accounting for US$84 billion. It external reserves have approached the US$100 billion mark.
Moreover, in the fiscal year 2022-2023, Kazakhstan successfully attracted an impressive US$41.3 billion foreign direct investment the highest in the Central Asia and South Caucasus regions.
Evidently, Kazakhstan’s President H.E. Kassym-Jomart Tokayev announced Kazakhstan’s new economic course in September 2023.
President Tokakev presented new economic model of a “Just Kazakhstan,” and announced numerous integrated socio-economic and political structural reforms in the diverse sectors of economy, business, investment, trade, defense, geology, and transport. It was indeed a holistic and comprehensive road map to further transform the national economy.
The 2022 economic reforms yielded impressive results and GDP exceeded to US$226 billion, foreign direct investments reached US$28 billion, and foreign trade volume at US$134 billion.
Kazakhstan President introduced a new economic model based on principles of fairness, inclusiveness, and pragmatism, stressing the pivotal role of the manufacturing sector in achieving economic self-sufficiency. Kazakhstan's economic strategy also encompasses the development of a comprehensive production cycle to reduce reliance on foreign goods.
The transportation and logistics sector, representing 6.2 percent of GDP in 2022, is slated for further growth, aiming to raise its share to at least 9 percent.
It seems that the primary objective of these proposed changes is to achieve a steady economic growth rate between 6 percent and 7 percent, with the objective of doubling the national economy's size to US$450 billion by 2029. The particular emphasis on enhancing the Trans-Caspian corridors serves as a clear indicator of Kazakhstan's commitment to unlocking regional economic opportunities and strengthening collaboration with its neighbors. Resultantly, Kazakhstan’s regional trade has now been increased.
Since the 2000s, Kazakhstan has witnessed impressive economic growth driven by the market-oriented reforms, vast mineral resources extraction, and strong FDI. Sustained economic growth has transformed the country into an upper middle-income economy and rising living standards and reducing poverty.
The economy grew by 5 percent during the first half of the year 2023; it appears that Kazakhstan has recovered from its modest dip in 2022.
Kazakhstan has nevertheless emerged as not only the largest economy in Central Asia but also the one with the highest income per capita in the region. It constantly achieved 10 percent GDP in 2000s.
According to the International Monetary Fund (IMF), Kazakhstan undertook rapid growth and increases in living standards because of the country’s, structural reforms and prudent macroeconomic management. Kazakhstan is now pioneer of market economy.
The inflows of FDI also significantly accelerated during 2023’s first three quarters. It registered a massive 13.1percent year-on-year growth compared with the 9.2-percent growth rate during all of 2022. Strong investment dynamics were supported by continued production increases in mining and manufacturing while the contribution from housing investment eased.
The expansions of free-trade zones (FTZs) and special economic zones (SEZs) supported native industries with tax incentives and better access to international markets. Kazakh Invest established by the government to showcased Kazakhstan’s untapped investment potential across a range of priority industries, including agribusiness, mining and metals, chemicals and petrochemicals, machinery manufacturing and infrastructure development.
Furthermore, the creation of the Astana International Financial Centre (AIFC) in 2018 proved a vibrant financial hub that has established a solid legal framework to advance the development of many financial services, including banking, asset management, capital markets, Islamic finance and FINTECH (financial technology).
The rating agency S&P Global Ratings the economy will expand by nearly 5 percent in 2023, supported by growth in the construction, trade, information and communications, transport, and mining sectors. Over the next three years, it forecasts that the expansion of the Tengiz oil field, which should significantly increase oil production.
In summary, Kazakhstan has been achieving high ratios of GDP, GNP, FDI, FPI and joint ventures in the last three decades confirming its economic potential and diversification.
Constant and continued economic structural reforms enabled Kazakhstan to achieve the Middle Income goal but somehow because of various internal and external reasons, it became stuck in the Middle Income Trap (MIT) which should be removed through massive qualitative industrialization, green transformation, openness, modernization, economic globalization, innovations, digitalization and diversification of economy along with further growth of human capital in the days to come. In this regard, the integrated economic policies of China, Vietnam, Indonesia and even Singapore may also be useful to overcome the existing MIT.
It is suggested that Kazakhstan should further strengthen competition and human capital and try to improve public sector and SOEs performances to make its economy more competitive and advance. It should also initiate various reforms in carbon and energy pricing, strengthen social protection, and invest in climate adaptation.
There is an urgent need to accelerate the non-oil sector in the country. Reduction of the role of the state, increase finance for the real economy, develop infrastructure, and improve public administration particularly the tax system should be initiated as soon as possible.
Obviously, robust economic growth and productivity should be pursued by implementing structural reforms to transition from a state-dominated development model to a more resilient private sector-led in which private sector has more stakes.
The overhauling of the government’s industrial policy, specifically its plans for import substitution and economic diversity needs to be rectified. There should be lesser protectionist measures to stimulate local manufacturing and services.
Moreover, there should be balance between the consumer and corporate lending in the country so that real integration and modernization of banking & financial sector may be achieved.
The fostering competition and limiting the market dominance of SOEs, reinforcing the rule of law, and resolute anticorruption action should be carried out in the country. The private investment and competition in non-oil growth sectors should be promoted and encouraged.
Last but not least, the future path of Kazakhstan will heavily rely on further economic diversification, green transformation, energy & food security, digitalization, community development, development of Islamic banking, banking & financial integration, services sector and SME.
It is important for the policy makers of Kazakhstan to reduce trust, financial and economic deficits between North-South regions disparity through balanced regional development. New economic model should be pursued and implemented achieving a balanced Urban-Rural integration. Greater regional connectivity and sustainable economic ties with Pakistan would be helpful. Peaceful exports of massive uranium reservoirs to France and other European countries and GCC member would be a jack-pot for its economy in the days to come.
Dr Mehmood Ul Hassan Khan, executive Director: The Center for South & International Studies (CSAIS) Islamabad
