Kazakhstan’s Economic Development in the near future

Kazakhstan is a relatively young player in the global economy. The country appeared on

the world economic and diplomatic arena as an independent state only at the end of 1991, when

it received its long-awaited Independence as a result of the collapse of the Soviet Union.

Kazakhstan identifies itself as:

  1. The Republic of Kazakhstan asserts itself as a democratic, secular, legal, and social

    state, the highest values of which are a person, his life, rights, and freedoms.

  2. The fundamental principles of the activities of the Republic are public harmony and

    political stability, economic development for the benefit of the entire people, Kazakhstani

    patriotism, the solution of the most important issues of state life by democratic methods,

    including voting at a republican referendum or in Parliament.”

Source: Constitution of the Republic of Kazakhstan, Section 1; Article 1

The transition of the Soviet Union from a planned economy (a planned economy is a type

of economic system in which production is controlled by state power, private property and

commerce by individuals is prohibited) with a communist ideology to a market economy (a

market economy is a type of economic system in which entrepreneurs and manufacturers are the

main engines of development, as well as buyers) with a democratic agenda during the reign of

Mikhail Sergeyevich Gorbachev and his reforms, called “Perestroika” - was the end for the

country, but it began a new period and history for Kazakhstan.

“Perestroika” (/ˌpɛrəˈstrɔɪkə/; Russian: perestroika) was a political reform movement

within the Communist Party of the Soviet Union (CPSU) during the late 1980s, widely associated

with CPSU general secretary Mikhail Gorbachev and his glasnost (meaning “transparency”)

policy reform. The literal meaning of perestroika is “restructuring”; referring to the restructuring

of the political and economic systems of the Soviet Union in an attempt to end the Era of

Stagnation.

Source: https://en.wikipedia.org/wiki/Perestroika

After the collapse of the Soviet Union, it became clear for the already Independent

Kazakhstan that a market economy was needed, so an active process of privatization began

(privatization is the process of transfer-sale of (full or partial) state (municipal) property to

private) to create and attract a class of entrepreneurs and create economic activity. The first

decade was certainly a favorable time for starting a business and trading activities; many large

companies and banks in Kazakhstan began their activities at that time because Kazakhstan

developed inclusive economic and political institutions. It was during the times of inclusive

political and economic institutions that the fastest economic growth in the country’s history took

place: a stable national currency, high employment, low inflation, as well as a steady growth in

GDP per capita promised Kazakhstan further development and entry into the circle of rich and

developed countries, but these figures are declining every year.

Institutions give access to participation in economic and political activities of various

sections of society. Institutions of this kind are aimed at protecting the rights of private property,

which creates the ground for the development of innovative education, thereby ensuring long—

term growth in prosperity. Among the inclusive institutions, the main one is the group of

institutions of democracy, which determines the inviolability of the constitution.

So, in 1993, the year of the release of the independent national currency - tenge, the

average annual exchange rate of the dollar against the national currency over 30 years increased

by 438.41 tenge: in 1993, $ 1 cost 5.25 tenge, and in 2023 - 443.66 tenge. The Kazakh

tenge has depreciated by 98.8% since its issuance. Every year, tenge depreciates in the world

currency market; this process is called devaluation.

Tenge exchange rate source: https://lsm.kz/kak-menyalsya-kurs-nacional-noj-valyuty-s-

1993-goda

In 2023, the employment of the population is 95.3% on the official statistical website of

the Republic of Kazakhstan, but it must be taken into account that the group of employed also includes the self-employed, that is, those who do not have a permanent job, do not pay taxes, etc. The statistics in the international portal on labor and employment of the peoples of the countries of the world on the site https://ilostat.ilo.org/topics/employment/ International Labor Statistics, Kazakhstan has 66% of the population’s employment. Unfortunately, the international statistical portal does not provide data for the 2000s, but there is data for 2020 during the coronavirus pandemic, which is 65.2% https://ilostat.ilo.org/data/country-profiles/

That is, the growth in employment was only 0.8% three years after the pandemic, which is an

meager rate, which is naturally a sign of an unhealthy economy.

As for inflation - the reduction of the purchasing power of money, in the 90s, the first years after

independence, the economy of Kazakhstan suffered from high inflation associated with the

destruction of the market after the collapse of the USSR. Still, the economy recovered rapidly thanks to effective reforms and inclusive political and economic institutions.

Thus, in 1992, inflation in Kazakhstan was 1662.3%; in 1997, it was 17.4%, and in 2002, inflation

was 5.9%. That is, from 1992 to 2002, there was a decrease in inflation for a decade, but

since 2013, inflation has been increasing annually; in 2013, inflation was 5.8%, and this year it is

already 15%. Given that the Kazakhstan Statistical Bureau is notorious for data falsification,

these figures over the past few years have been very different from the real ones, making it

difficult to assess the economy's health.

GDP (Gross Domestic Product) - is an important factor in assessing the economic

productivity of the country, it shows how much production was produced in a particular year.

GDP in Kazakhstan is growing every year, thanks to the extraction of oil and minerals,

respectively, and GDP per capita. In 1992, the GDP was $7,052, and in 2002 it was $9,999; last

year it was $30,544. But to assess the potential for development, it is worth paying attention to

public investment in research and innovation. One of the most important engines for the

development of any state is technology.

“Thus, it is the technological progress which keeps the economy moving. Inventions and

innovations have been largely responsible for rapid economic growth in developed countries.

The growth of net national income in developed countries cannot be claimed to have been due to

capital alone. Kindleberger observed that major part of this increased productivity is due to

technological changes. Robert Solow estimated that technological change accounted for about

2/3 of growth of the U.S. economy; after allowing for growth in the labor force and capital

stock.”.

Source: https://www.economicsdiscussion.net/articles/role-of-technology-in-economic-

development/4455#google_vignette

Despite the annual growth in funding for science and science and technology, the

comments of Kazakh scientists on the funding of science and technology indicate a lack of funds

for the development of science: “According to the Bisam Central Asia report “State and

problems of Kazakhstan science: an inside look,” as a result of a survey of 701 representatives

science, the most powerful places of Kazakhstani science, the interviewed scientists consider the

experience and qualifications of personnel. The weakest points are the material and technical

support of scientific institutions and especially the salaries of scientific workers. Also, Kazakh

scientists gave a low rating to the state's support of science and the introduction of scientific

achievements in practice. Scientists are concerned about Kazakhstan's backlog in financing and searching for new sources, modernizing the management of the scientific

environment. Most employees of scientific institutions and university teachers find a

way out of this situation in an increase in state funding.”

Source:https://vlast.kz/kz/jekonomika/21610-skolko-tratit-kazahstan-na-naucnye-issledovania.html.

The decline in these areas lies in limiting the activities of inclusive

economic and political institutions. With the strengthening of the power of the first President of

the Republic of Kazakhstan N.A. Nazarbayev, who led the country from 1991 to 2019, inclusive

political institutions that began to weaken. Thereby, economic institutions were replaced by

extractive political institutions that gave rise to the same financial institutions, which

led to such sad indicators and decline. Extractive institutions are understood as those aimed at squeezing the maximum income from exploiting one part of society and

directing it to enrich another. In other words, extractive institutions (EI) limit the

participation of the masses in the economic cycle and give them the place of an exploited social

group that cannot use its human capital productively. A new president came to replace him -

K.K. Tokayev, the president, was replaced, but the vicious circle system did not change at all.

With the further development and strengthening of extractive institutions in the Republic, which

will not fully protect the rights of entrepreneurs, as well as limiting freedom of speech and

democratic values, thereby counteracting the development of medium and small businesses, the

falsification of statistical data will in no way be able to hide the existing problems in the country,

Kazakhstan expects economic and political stagnation, as it was in the USSR.

Written by Amina Amirkhanova | Proofread by Yasmin Uzykanova

Previous
Previous

The concept of gender mainstreaming and its economic impact

Next
Next

From Inflation to Greedflation