Boosting Resilience and Economic Growth in New Kazakhstan
NUR-SULTAN. KAZINFORM – As Kazakhstan enters a new stage of development under the New Kazakhstan Agenda, sweeping large-scale reforms are underway. You can find more information on how Kazakhstan plans its development in the latest Kazinform article.
According to Advisor to the President of Kazakhstan, Deputy Chairman of the Supreme Council for Reforms and former Chairman of the EBRD (European Bank for Reconstruction and Development), Sir Suma Chakrabarti, one of the greatest things that has happened in Kazakhstan in recent months is the trajectory of political reforms.
“Investors love stability and Kazakhstan has been known for many years for its stability. Then came January and the events of January. It was clearly the time when people were calling for a new political framework, a new way to create stability in the country and the president responded extremely well,” Chakrabarti said.
During the years of independence, according to government data, Kazakhstan attracted $390 billion in foreign direct investment, most of it in the past 10 years. The strategic location between Europe and Asia, political stability and predictability, and the investment climate have been some of the factors that have driven investment up over the years.
In 2021, the total investment inflow was $24 billion, 38% more than the previous year. At the same time, investment in oil and gas was just 28%, down from 50% in 2018-19, as the country tries to break its dependence on fossil fuels.
In 2021, the main investors in Kazakhstan were the Netherlands, the United States, Switzerland, Russia, China, Belgium, the United Kingdom, South Korea, Turkey and France.
All key sectors showed growth, including mining – 18.3%, manufacturing – 65.4%, trade – 46.7%, finance and insurance – 57.2% and construction – 37.8%.
Chakrabarti praised Kazakhstan’s efforts to introduce environmental, social and corporate governance (ESG) standards, an approach to assess how well a company is working on behalf of social goals that go beyond the role of a company to maximize profits on behalf of the company. shareholders.
The current regional and global economic outlook is challenging, he said, and this must be acknowledged. The Global Economic Prospects report released by the World Bank in June indicates that the aggravated damage from the COVID-19 pandemic and the current situation in Ukraine have prolonged the slowdown in the global economy, which could become an “extended period low growth and high inflation”. .” Global growth is expected to contract from 5.7% in 2021 to 2.9% in 2022, while growth in Europe and Central Asia is expected to contract by around 3% in 2022.
“The conflict and the significant sanctions imposed on Russia are of course very seriously weighing on the economic prospects of Kazakhstan. The Russian economy is contracting and is expected to continue to contract throughout this year and next year,” Chakrabarti said.
He cited the IMF’s forecast for Kazakhstan, saying Kazakhstan’s GDP growth would decline to 2.3% in 2022, down from last fall’s forecast of 3.8%.
The challenge, however, can be an opportunity, he said, encouraging Kazakhstan to diversify its trade with other countries and diversify transportation routes, including oil supply routes.
New investment policy until 2026
Under the new investment policy until 2026 approved by the government on June 23, Kazakhstan seeks to raise the level of fixed capital investment to 25.1% of GDP and increase the inflow of foreign direct investments up to 25.5 billion dollars in 2026. The document has a set of measures aimed at revising the investment attraction policy in view of new trends, allowing to change the structure of investments towards the competitive production of goods with high added value.
“The main vision for investment development is a balanced approach to attracting investment, considering the contribution of each industry to economic development. The main driver of competitiveness will be the manufacturing industry,” First Deputy Minister of National Economy Timur Zhaksylykov said at the government meeting in June.
Emphasis will be placed on the growth of labor productivity, the increase in the volume and complexity of exports, the development of new productions with greater redistribution and the gradual localization of production.
Developing a transparent and predictable investment policy, promoting the growth of private sector investment activity and unlocking the investment potential of the economy through the simplification of bankruptcy procedures are among the three main objectives.
According to Kazakh Prime Minister Alikhan Smailov, Kazakhstan is attractive for foreign direct investment and maintains a leading position in terms of foreign investment inflow to the Central Asian region.
“To strengthen this position in the current environment, we must be proactive in seeking foreign investment and creating the most optimal conditions for investors. We should expand sources of financing for investment projects in non-resource sectors of the economy,” Smailov said.
Speaking at an investment roundtable at Astana Finance Days, Smailov said Kazakhstan, with its strong political and economic base, is a gateway to the world’s largest markets in more than a century. billion potential consumers, including the Eurasian Economic Union and China.
Significant natural reserves make Kazakhstan an important supplier to world commodity markets. Kazakhstan ranks sixth in the world in terms of agricultural land area.
He talked about the preferences offered to investors. Kazakhstan has 13 special economic zones and 36 industrial zones with preferential investment regimes. The Astana International Financial Center serves as a point of attraction for investors from all over the world.
“The government invites foreign investors to enter into contracts and new projects. We can guarantee that the interests of investors will be taken into account as much as possible,” Smailov said.
Kazakhstan’s economic growth reaches 4.6% in five months of 2022
According to Kazakh National Economy Minister Alibek Kuantyrov, who presented his report at the June 14 government meeting, the growth rate of Kazakhstan’s economy reached 4.6 percent in the five months of 2022. There has been steady momentum in the real sector, growth in the service sector and a strong increase in the volume of exports.
Growth in the real sector reached 4.8%, while business activity in the services sector increased to 3.9%. The growth rate of investment in fixed assets was 2.5%.
Highlighting the volatility of global markets, President of the National Bank of Kazakhstan Galymzhan Pirmatov said in May 2022 that inflation in annual terms had accelerated to 14% from 13.2% in April this year. According to the forecasts of the National Bank, in 2023 inflation will gradually slow down to 7.5-9.5%, taking into account the measures taken within the framework of monetary policy, the gradual reduction of external pressures on the inflation and the planned implementation of the countercyclical fiscal rule.
Kazakhstan’s long-term development prospects
Dr. Indermit Gill, Vice President for Equitable Growth, Finance and Institutions at the World Bank, spoke about the country’s long-term development prospects, which are more difficult than solving short-term problems. The report mentioned by Dr. Gill is an economic memorandum that presents an analysis and recommendations on how Kazakhstan should design its economic development. He noted the importance of addressing underlying structural factors and institutional changes.
While Kazakhstan’s stated goal is to become one of the world’s top 30 economies by 2050, certain factors are hampering progress – resource dependence, remoteness and dispersed population.
“There is a close three-way relationship between a country’s per capita income, the sectoral composition of its output, and the share of urban settlements in its population. The team finds that per capita income increased mainly during the period when Kazakhstan’s export prices were high,” Gill said.
He said that the structure of production has not changed much as well as the level of urbanization has remained unchanged for more than a decade.
Structural transformation can be driven by strengthening factor markets, including for labor and capital, reducing the share of state-owned enterprises, increasing bank lending to medium-sized firms, and promoting fair competition .
Overall, the country’s ability to improve living standards and boost economic growth will depend on its ability to increase productivity, mobility and connectivity, according to the expert.
Written by Assel Satubaldina