Kazakhstan authorities nonetheless were in the process of forming new and formalized local content measures, drawing from experiences and success stories from other countries (Yerkebulanov 2012). The surge in upstream investments encouraged positive trickle-down effects to the country’s economy. In addition, there was a stronger public sentiment toward a better utilization of oil resources. This was supported by continuous media efforts shedding light on cases where potential businesses were lost to foreign enterprises while local capabilities existed. Over the near future, more stringent enforcement of LCPs is likely to be observed.
4.1 Structural Context For over 20 years, Kazakhstan has been in a gradual transition from Soviet influence to independent governance. Although political independence was granted in 1991, a Soviet legacy carries on in several fronts of the country’s social and economic scene. Despite the growth and development achieved on the back of the discovery of natural resources, mainly oil and gas, the country still faces a number of structural difficulties. Limited access to capital, lack of adequate education, corruption, and bureaucracy are among the top challenges facing businesses in Kazakhstan (WEF 2011). 4.1.1 Economy
Upon receiving its independence, Kazakhstan launched a reform plan centered on liberalization of prices and privatization. This was followed by macroeconomic stability measures upon leaving the ruble currency in 1993. Despite these efforts, the 1990s era was characterized by hyperinflation and limited growth that was highly impacted by the Russian financial crisis of 1998 (Kalyuzhnova 2008). Driven by currency devaluation and oil market dynamics, Kazakhstan’s GDP steadily increased from 1999 to 2008. Following the global recession, the country’s GDP dropped by 1.2 percent in 2009 before returning to it precrisis growth path. In 2010 Kazakhstan’s GDP per capita was approximately $9,070, the highest it had been since 1990 (World Bank 2012b). Upon leaving the ruble zone in 1993, the country experienced a period of hyperinflation (Kalyuzhnova 2008). In fact the inflation rate did not come under control until recently. In 2000 the inflation rate reached 13.2 percent, which was a significant drop from the 170 percent experienced in 1994. In 2004 Kazakhstan’s real interest rates became positive, but have since “gradually decreased from very high levels at the beginning of reforms” (Craig and others 1999). In 2010 the International Monetary Fund (IMF) directors “agreed that real interest rates should be kept positive to maintain depositor confidence, and cautioned against the use of subsidized interest rates” (IMF 2010). Projections show inflation rates in the range of 6 percent until 2017 (IMF 2012). Table 4.1 presents key economic indicators for Kazakhstan. Table 4.1 Key Economic Indicators of Kazakhstan, 1990–2010 1990 GDP (constant 2000 $, billion)
1995
2000
2005
2006
2007
2008
2009
2010
26.3
16.2
18.3
30.0
33.2
36.1
37.3
37.8
40.5
1,611.7
1,022.9
1,229.0
1,977.7
2,166.3
2,332.3
2,380.1
2,345.9
2,481.7
176.2
13.2
7.6
8.6
10.8
17.2
7.3
7.1
Exchange rate (LCU per $)
61.0
142.1
132.9
126.1
122.6
120.3
147.5
147.4
Trade (% of GDP)
82.5
105.7
98.3
91.6
92.2
94.4
75.9
73.2
21.6
7.0
5.9
5.3
6.3
9.5
10.2
GDP per capita (constant 2000 $) Inflation, CPI (%)
Government debt (% of GDP)
Source: Based on data from World Bank 2012b. Note: CPI = consumer price index; GDP = gross domestic product; LCU = local currency unit.
Compared to neighboring countries and developed economies (for example, the United Kingdom and Canada), Kazakhstan relies more heavily on exports. Between 1992 and 2010, 4060 percent of Kazakhstan’s GDP was derived from exports of goods and services.56 In 2009 total exports were comprised mostly of 56
Over the same period the UK share of GDP from export of goods and services ranged from 20 to 30 percent.
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