Kazakhs eye Europe as economy
falters By Robert M Cutler
MONTREAL - Kazakhstan's
faltering economic growth, masked last year thanks
to a bumper harvest, is clearly exposed by
the latest monthly figures, which show a decline
to 4.8% expansion in gross domestic product (GDP) on
an annualized basis for January and 3.8%
year on year.
Growth this year would
decline only to 6.9% overall, the State Statistics
Agency of Kazakhstan projected earlier. GDP
increased 7.5% last year, up on the 7.3% gain in
the previous 12 months, thanks to the grain
harvest more than doubling to 27 million tonnes
from 12.2 million tonnes. Industrial output grew
only 3.5% in 2011, against 10% in 2010.
President Nursultan Nazarbayev had set out
a 10-point plan for
economic growth in his annual
"state of the nation" address in January, listing
employment as the number one priority and
accelerating government programs for social
transfers and investment.
He ordered that the
state draw on the National Fund of Kazakhstan, the
country's sovereign wealth fund, to invest in
large-scale industrial projects (pointing to the
construction, metallurgy, and forestry sectors in
particular) that would be complemented by a
program to improve training and increasing
established to stabilize the economy against
external shocks, held US$45.5 billion at the end
of 2011. The president also seeks to create a more
mobile labor force. The country's 16.7 million
people are scattered across an area four times the
size of Texas.
Expansion of industrial
production fell in January to an annualized 1%
rate, despite increased output in the chemical,
metallurgical, and machine-building sectors.
The good harvest and higher international
energy prices helped the current account surplus
jump to $13.6 billion last year from $3 billion at
the end of 2010, according to estimates released
last week. Energy prices averaged 39.3% above the
Abundant food supply kept a
lid on domestic food-price inflation last year, at 6.5%.
Overall inflation for 2011 declined to 7.4% from
7.8% the previous year. The country's central bank
projects this to hover between 6% and 8%
for the next several years. January inflation was 5.9% compared
with a year earlier.
determination to increase industrial production is
also in response to riots in December in the
oil-producing city of Zhanaozen (formerly Novyi
Uzen') in the west of country, which left at least
17 dead. Such protests, and there have been others
less notable in the recent past, are as much as an
economic as a political concern, as they can delay
industrial projects and discourage foreign direct
The activity of nine
Special Economic Zones (SEZs) is to be enhanced.
The zones are governed by a July 2011 law designed
to improve the efficiency of their management and
functioning, attract professional management
companies, and provide tax incentives.
these zones, the best known is perhaps the
"Khorgos-Eastgate" SEZ, established on the Chinese
border late last year after years of bilateral
planning. Among other things, this SEZ will enable
Chinese firms to manufacture products with a "Made
in Kazakhstan" stamp for duty-free export to
Russia and other members of the Eurasian Economic
Community. It also facilitates the integration of
transport and logistics.
intended as magnets for FDI, are being established
in South Kazakhstan province, to focus on
textiles; in Atyrau, on the Caspian Sea, to focus
on petrochemical industry; in Pavlodar in the
north, also to focus on chemicals and
petrochemicals; in Karaganda in the center of the
country, to focus on the metallurgy and metal
processing sector; and in the capital Astana, to
focus on industrial development. Four more are
planned, distributed across the national
Kazakhstan is seeking also to
diversify its foreign investors, looking beyond
China, the United States, and Russia, to Europe.
Foreign Minister Erzhan Kazykhanov this week
revealed in Washington that his country intends to
sign an agreement on cooperation with the European
Union. Kazakhstan's trade turnover with the EU
rose 32% in 2011 over 2010. Kazykhanov was
attending a conference of the Atlantic Council
marking the 20th anniversary of the establishment
of diplomatic relations with the US, which was the
first state to recognize independent Kazakhstan).
The announcement follows by several days
the successful conclusion of a visit by Nazarbayev
to Germany where, after being received by
Chancellor Angela Merkel, the two sides signed
nearly 50 agreements for economic cooperation
including contracts estimated to be worth between
US$3 billion and $4 billion.
agreed to establish a "strategic partnership"
allowing German mining firms access to rare earths
and other industrial commodities in the Central
Asian country. Germany will in exchange invest in
technological development in Kazakhstan. It signed
a similar agreement with Mongolia four months ago,
also targeting rare earths mining.
Robert M Cutler (http://www.robertcutler.org),
educated at the Massachusetts Institute of
Technology and The University of Michigan, has
researched and taught at universities in the
United States, Canada, France, Switzerland, and
Russia. Now senior research fellow in the
Institute of European, Russian and Eurasian
Studies, Carleton University, Canada, he also
consults privately in a variety of fields.
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