Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Kazakhstan is the second-largest republic of the former Soviet Union, after Russia, and the ninth-largest country in the world in the territory. The country has an abundance of natural resources - including oil, gas, coal, uranium, and other mineral deposits - and has exploited these resources to build Central Asia’s leading economy. Kazakhstan is also emerging as a major transport and logistics hub in the region, linking the large and fast-growing markets of China and South Asia to those of Russia and Western Europe by road, rail and ports on the Caspian Sea. Kazakhstan presents a trade gateway to a market of about 150 million consumers in Caspian Sea countries, 50 million in Central Asia and 300 million in Western China. In addition, Kazakhstan boasts significant agricultural potential for both grain and livestock production and U.S. companies are well-positioned to help Kazakhstan diversify across this segment of the economy. With a growing middle class, Kazakhstan provides trade and investment prospects for U.S. firms seeking new opportunities in this growing, emerging market.
Since gaining independence in 1991, Kazakhstan has steadily worked to improve its business and investment climate. The Government of Kazakhstan realizes the need to implement transformative economic reforms to boost productivity and growth. Implementation of reforms has been uneven, however, and challenges remain in addressing problems related to the country’s competitiveness and economic diversification, its over-reliance on the extractive sector, corruption, inefficient bureaucracy, criminal liability for unintended tax infractions, and arbitrary law enforcement, especially at the regional and municipal levels.
According to the World Bank, Kazakhstan’s real GDP in the first quarter of 2021 grew moderately at 1.9 percent relative to the fourth quarter last year. The external environment has generally improved and lifted the value of Kazakhstan’s exports; however, there is still very slow productivity growth among Kazakhstani firms and necessity to ensure competition in the product market, reduce barriers to entry for firms in sectors dominated by state-owned enterprises, improve the effectiveness of investment policy and promotion, and boost firms’ capability to innovate. Kazakhstan’s failure to diversify its economy away from the oil and gas industry means the road to post-COVID-19 pandemic economic recovery will largely depend on a recovery in the price of oil. Nevertheless, Kazakhstan’s fast-growing agriculture sector and potential as a key transit hub in the region will help as the country works to regain its economic footing.
Key Economic Indicators and Trade Statistics
Kazakhstan has an export-oriented economy that is highly dependent on shipments of oil and related products (73 percent of total exports). In addition to oil, its main export commodities include natural gas, ferrous metals, copper, aluminum, zinc and uranium. It counts China, Italy, Russia, the Netherlands, Uzbekistan, India, Turkey, and France as its main export destinations. Others include Switzerland, Greece, Spain, Romania, and South Korea. The United States accounts for 1.3 % of Kazakhstani exports.
In 2020, total U.S.–Kazakhstan goods trade was USD 2.3 billion, with the United States holding a negative trade balance of USD 461 million. The main imports from Kazakhstan in 2020 were fuels (55%), metals (18%) and inorganic chemicals (12%). The main U.S. exports to Kazakhstan in 2020 were capital goods (53%), machinery and electrical products (41%), and consumer goods (25%).
Kazakhstan’s economy was in a relatively favorable position prior to the COVID-19 pandemic, with low unemployment (4.9%), with real GDP rising (4.1% in 2019) and relatively low public debt. Despite the ongoing global economic crisis resulting from the COVID-19 pandemic, Kazakhstan remains the largest economy in Central Asia and a country with much-unfulfilled potential.
The country remains the world’s largest producer of uranium and possesses enormous deposits of a wide range of metals, including gold, iron, chrome, copper, zinc, vanadium and rare earths. Kazakhstan also has the second–largest oil reserves and the second–largest oil production after Russia among the former Soviet republics. The United States is among the largest foreign investors in Kazakhstan, with the bulk of investment directed in the oil & gas industry. Launched in 2018, the Astana International Financing Center (AIFC) offers special tax, visa, and employment regimes for companies looking to invest in this middle-income market. The AIFC Court and International Arbitration Center (separate and independent from the Republic of Kazakhstan judicial system) provide a common law court system for the resolution of commercial disputes. AIFC is also actively involved in developing green finance and a green bonds market in the country, as well as other sustainable development programs.
A growing middle class and a rise in real incomes have increased demand for quality products and brand names. Inexpensive Russian and Chinese goods flow across Kazakhstan’s borders, but Western goods and expertise are also in demand. In some cases, consumers are willing to pay more for imported goods and services that offer higher quality and innovation. Customer service in Kazakhstan is sometimes lacking; providing customers with after-sales service could give businesses an edge in the market.
New Opportunities Revealed by the COVID-19 Pandemic
While upending the economy in 2020, the COVID-19 crisis has also revealed opportunities in Kazakhstan. In particular, the crisis has placed a renewed focus on logistics, digital technologies, and the financial sector. According to KPMG’s report on the Impact of COVID-19 on Key Economic Sectors in Kazakhstan, among the most pressing needs are: use of e-platforms to deliver key public services (including remote education to rural areas); online trade solutions; cargo transportation; development of digital products in the financial sector; IT solutions to track productivity of remote work; modernization of telecommunications networks due to high workload; financing and investments in airports and capital-intensive projects in mining and agriculture among others.
The Government of Kazakhstan has endeavored to reform the investment climate, an effort that has succeeded in transforming some of the regulatory landscape, but much work remains. Kazakhstani authorities have implemented 43 reforms acknowledged by the World Bank Doing Business Report since 2008. However, the country still lags in transparency and other metrics critical to investors, ranking 94 out of 180 countries in Transparency International’s (TI) 2020 Corruption Perception Index. According to TI’s Global Corruption Barometer, 17% of public service users in Kazakhstan paid a bribe in the previous 12 months. The government’s efforts to improve the investment landscape are ongoing under the Business Roadmap 2025 and extend beyond it with the Kazakhstan 2050 Strategy, which aims to position the country among the 30 most developed nations by 2050. The most recent report from the Heritage Foundation’s Index of Economic Freedom rated the country as “moderately free” and ranked it 34 out of 180 countries, well above neighboring China (107) and Russia (92). Its overall score has increased by 1.5 points, primarily because of an improvement in fiscal health.
The country has much to build on: experienced leaders interested in taking Kazakhstan to the next level; an economy with unfulfilled potential that continues to deliver sustained growth, despite its failings; a developing civil society eager to assist in the reform process; large land area with potential for development of agriculture and renewable energy; a geographical position that places it in the crossroads of regional transportation, and a young, dynamic, and educated work force.
Overseas Security Advisory Council (OSAC)
The Overseas Security Advisory Council’s mission is to promote security cooperation between American business and private sector interests worldwide, and the U.S. Department of State. OSAC, which falls under the Bureau of Diplomatic Security, is an active partner of American businesses and universities, helping them to remain competitive and secure in a global environment through the dissemination of vital security-related information. The Council, established in 1985 under Secretary of State George Shultz, is made up of 34 private sector and four public sector member organizations that represent specific industries or agencies that operate abroad. The more than 4,600 U.S. companies and organizations affiliated with OSAC receive the tools needed to cope with security-related issues abroad. The Mission Kazakhstan OSAC Country Committee is an overseas extension of OSAC and provides a forum for effective communication between U.S. Embassy Nur-Sultan/ U.S. Consulate General Almaty and the U.S. private sector in Kazakhstan. The Mission Kazakhstan OSAC committee is one of over 150 OSAC Country Committees operating globally.
· Establish continuing liaison and provide for operational security cooperation between State Department security functions and the private sector
· Provide for regular and timely interchange of information between the private sector and the State Department concerning developments in the overseas security environment
· Recommend methods and provide material for coordinating security planning and implementation of security programs
· Recommend methods to protect the competitiveness of American businesses operating worldwide
Sector-specific Working Groups:
· Media & Entertainment
· Faith-based Organizations
· Int’l Development/NGOs
For more information about OSAC please visit www.OSAC.gov. For U.S. companies with a presence in Kazakhstan interested in joining the U.S. Mission Kazakhstan OSAC Country Committees in Atyrau, Almaty or Nur-Sultan, please contact MissionKazakhstanOSAC@state.gov.
Special American Business Internship Training Program (SABIT)
A global technical assistance program housed in the U.S. Department of Commerce, SABIT promotes free, fair, and reciprocal economic relationships between the United States and Kazakhstan. The program builds partnerships and provides opportunities for mid- to senior-level business leaders from transitioning countries to see, first-hand, U.S. business practices. The program’s worldwide alumni network of almost 7,000 leaders from the business, community, and scientific organizations all over the world use their SABIT training to create better business climates for trade and investment and are predisposed to work with American companies. More than 470 of these leaders are from Kazakhstan.
The SABIT training is industry-specific and is developed closely with the U.S. private sector, facilitating high-level meetings with U.S. companies, industry associations, educational institutions, et al. These meetings provide a forum where U.S. organizations share innovative leadership ideas with the delegates and showcase their technologies, equipment, and services. The program links American companies with foreign partners and aids both in the development of new relationships and the strengthening of existing ties. Programs focus mainly on the private sector, but government officials often participate as well, allowing U.S. companies important access to decision-makers in complex markets.
The U.S.-based training programs generate significant diplomatic and commercial results by assisting American organizations to create new relationships and strengthen existing ties with foreign partners and customers. The linkages formed through SABIT also serve as a basis for new business development and lead to tangible results. For example, the program has generated more than USD1 billion in U.S. exports to Eurasia alone since its inception in 1990. This represents a return on investment of 14-to-1.
Starting in 2021, the SABIT program in Central Asia focuses solely on promoting the development of Renewable Energy sources in the region. Due to the pandemic, SABIT holds online webinars for local companies and government representatives on Wind and Solar Power Generation, Energy Market Design and other topics partnering with American associations and private sector. For more information on the SABIT Program, please visit: https://www.trade.gov/sabit.