Doctor of Economics, professor Dulambaeva R.T., Satybaldy Togzhan

Kazakh national University named after al – Farabi, Kazakhstan

The agricultural possibilities of Kazakhstan

         Kazakhstan is important to world energy markets because it has significant oil and natural gas reserves. With sufficient export options, Kazakhstan could become one of the world's largest oil producers and exporters in the next decade. But Kazakhstan's strategic aspiration is to become a modern, diversified economy with a high value added and high-tech component, well integrated in to the global economy. The energy sector is viewed as a good basis to achieve this goal. The perspective of the Economy of Kazakhstan is closely connected with further integration into international economic relations, utilization of unique reserves of energy and mineral resources, vast possibilities to export industrial and agricultural products, optimum employment of country's transit potential and also with availability of highly qualified specialists indifferent spheres.

    During the Soviet period Kazakhstan was an agrarian, raw materials supplier of the former Soviet economy, where the military industry played the major role. The main economic content of more than 10 years of independence has become transition from the central command planning to a market system. During these years, Kazakhstan has made considerable progress in implementing complex political, economic and social reforms to establish a democratic state with a market economy. While the country has not experienced political disturbances during the transition period, it has faced numerous economic, social and environmental challenges.

   The main goals of current structural policy are diversification and the strengthening of the non-oil sector. A number of development agencies and research centers (Development Institutions) have been established and the Government is looking at establishing techno and science parks to support the diversification of higher-value added industries. But there are certain obstacles inherited from the past to quickly achieve this.

   This has resulted in a stable level of inflation (2002 - 6.6%, 2003 - 6.8%, 2004 - 6.7%, 2005 - 6.6%), a budget surplus, a firm currency, and a decreasing unemployment rate (2003 - 8.8%, 2004 - 8.4%). After posting moderate growth of 2.7% in 1999 as a whole, Kazakhstan's real gross domestic product (GDP) rose 9.6% in 2000, 13.2% (2001), easily the country's best year of economic performance since independence, 9% in 2002, 9.1% in 2003, 9.3 in 2004 and according to The Economist Intelligent Unit Kazakhstan is within Top 10 world fastest-growing economies in 2005.

  The main driver behind Kazakhstan's economic growth has been foreign investment, mainly in the country's booming oil and natural gas industries. Since independence from Soviet rule in 1991, Kazakhstan has received more than 30 bln. US$ of foreign direct investment - the highest per capital indicator in the former Eastern Bloc.

Pie chart 1. Structure of direct foreign investments by countries

Hard currency reserves of the National Bank and National Fund combined reached US$ 14.4 bln. in 2004 (growth 66.3%). In 2004 the minimum wage in comparison with 2003 grew by 32% and average wages grew by 21.4%.Real income during this period grew by 13.5%. Real growth of average monthly pensions was 23.4% and there has been a significant increase in social payments by the state. As US Under-Secretary of state for Economic Business and Agricultural Affairs, Mr. Alan P. Larson, said recently in his address to the American Chamber of Commerce in Kazakhstan: "Since its independence in 1991, Kazakhstan has been in the midst of a remarkable transition from communism to free markets. When completed, this transformation could bring Kazakhstan into the global market place in a way not seen since Central Asia dominated international trade routes hundreds of years ago. Now country's investment potential is based on minerals and raw materials. Because their exploitation creates more than a half of the gross product, the quality and extent of deposits utilization and the reproduction of raw material reserves play decisive role in the present and future of Kazakhstan. For example, it is supposed that exploitation of the oil and gas field Kashagan which is one of largest fields in the world will make Kazakhstan one of the major producers of hydrocarbons not only on the regional, but also on the international level.

According to certain estimates, in the next 10 years the oil and gas sector of the country, particularly the Kazakh sector of the Caspian Sea, could attract between to 150-200 bln. US$. At the same time, the Kazakhstan Government's top priority is to encourage foreign direct investments into industry, agriculture, innovation, processing sectors in order to decrease the dependence of the Economy of Kazakhstan on energy and extracting sectors and to ensure continued growth of Kazakhstan's economy.Aiming at attracting foreign direct investments Kazakhstan carries out the policy of ensuring stable macroeconomic environment and realizes other measures which contribute to the improvement of investment climate in the country. The Government and the National Bank pursue the co ordinated policy directed to ensuring sustainable economic growth with low inflation rate and budget deficit not higher than it is envisaged.

All these institutions serve the further development and diversification of the economy of Kazakhstan. Thus, during these years Kazakhstan has covered a path which has not been easy, and has achieved significant results. Having created and strengthened sociopolitical stability by implementing democratic and market reforms on a steady basis, Kazakhstan has gained macroeconomic stability, formed legislation essential for conducting successful business, and realized structural reforms which, while being unpopular initially, created a firm basis and favorable environment for the accelerated development of the country in the mid and long terms.During the first decades of the Soviet regime (1920's and 30's) the Kazakhs, like all other populations of the former USSR, was attacking an ancient backwardness and struggled against poverty and economic inertia. Russians and other fraternal people participated in the construction and exploitation of the mines, plants, and factories in Kazakhstan, in the agricultural reforms, and the development of education, science and culture. In 1920, the production of industry in Kazakhstan was only 5.3% of the total production of the Kazakh economy, but by 1945, that figure had reached nearly 66 per cent. If Kazakhstan and  Russia were behind the advanced countries by 50-100 years in technical development, then in the pre-war, war and post-war periods our people greatly reduced that distance. As a result, Kazakhstan became one of the leading industrial centers of the former USSR and held fourth place among the other republics. In that period, different branches of economy began to develop in Kazakhstan.

Pie chart 2.The total volume of the economic production of the republic in 1991

In the same year, 1991, Kazakhstan was able to satisfy only 42% of the local consumer market with its own products, which means that Kazakhstan was formed and remained as a raw material supplier to the economy of the USSR. Up to this point, Kazakhstan had remained a country with a primary economy - mining, industry and agriculture, but at the same time one with a big pantry of mineral wealth. Nevertheless, honestly speaking, during the Soviet regime Kazakhstan was transformed into a great industrial and agricultural region. Huge centers of energy, metallurgy, fuel, chemical and machine-building industry were built in the republic.

Now, Kazakhstan is the biggest producer of ferrous and non-ferrous metals, uranium, coal, oil, corn, and products of stock-breeding. The years of the Soviet regime were the most favourable for the development of Kazakhstan's economy with regard to the production of these heavy industries . According to the estimation of some leading specialists, in 1992 the slump in production against the relatively stable level of 1990 was 14.6%, in 1993 - 28%, in 1994 - 48%, and in 1995-57%. According to the conclusions of many authoritative scientists, the lands of Kazakhstan can feed more than one billion people if reasonably used. In 1992, work on the reformation of the economy to a market basis began, and at the end of 1993 was made more active. During these years especially, the process of the formation of a multi-structural economy geared up. 91,300 economic enterprises, of which 73,400 represented the non-state sector, operated in Kazakhstan at the end 1995. The portion of industrial production produced in 1995 by enterprises in the non-state sector of the economy was 30.4%; their share of the volume of gross production in agriculture was 38.9%. Medium and small businesses are developing in the republic. At the beginning of 1996, 21,300 enterprises and organizations were represented and 147,200 people worked at these firms. At the same time, the continued process of privatization is one of the factors which is promoting the development of business. 

Kazakhstan is used as an intermediate zone for the transportation of natural gas of the republics of Central Asia to Russia. The natural gas of Kazakhstan is transferred to Russia without any processing, but not to its users, even in the western region where the gas is extracted. Because of this, the main problem of Kazakhstan is the necessity of the improvement of usage within the republic and the modernization of the present infrastructure. 

References

1.                                          "Kazakhstan becoming pillar of energy security in Asia and Europe". Alexander's Gas & Oil Connections. 13 September 2006. Retrieved 2007-06-10.

2.                                          "Kazakhstan energy data, statistics and analysis - oil". US EnergyInformationAgency. October 2006. Retrieved 2007-06-10.

3.                                          "Central Asia's Energy Risks. Asia Report No. 133" (PDF). International Crisis Group. 2007-05-24. Archived from the original (PDF) on 2007-06-13. Retrieved2007-05-26

4.                                         Mikhail Alexandrov (February 1998). "Russian-Kazakh Contradictions on the Caspian Sea Legal Status. Russian and Euro-Asian Bulletin". CERC - ContemporaryEuropeResearchCentre. Retrieved 2007-05-26.