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:
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.
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
