Kazakhstan Boosts Development in Third Stage Modernisation
Kazakhstan has launched a new programme to spur development, its third modernisation strategy, in order to ensure the country grows sustainably and is able to compete on the global stage.
“We need to radically improve the institutional and business environment, we need to create conditions comparable to the level of developed countries for the effective development of human capital. All this requires a pragmatic approach,” Minister of National Economy Timur Suleimenov told in a recent interview. “We have to create a new model of economic growth in a short period of time.”
After a sudden drop in oil prices led to a difficult economic few years, Kazakhstan’s growth is picking up. “Annual inflation in 2016 was 8.5 percent compared to 13.6 percent in 2015,” Suleimenov reports. “Since early 2016, there has been an improvement in economic activity and the indicators of the real sector of the economy.”
The key agriculture sector grew by 1.6 percent, industry by 4.5 percent, construction by 5.3 percent, trade by 2 percent and transport by 3.2 percent, he said.
But of course, there is work to be done, especially as Kazakhstan is integrated into world markets. “Our economy cannot be unaffected by issues of the global economy and geopolitics that have occurred or are taking place here and now. And the year 2016, as well as the two previous years, was rather complicated for Kazakhstan. We looked for ways to adapt to new external and internal conditions,” the minister explained.
“We want to have accelerated development, but we are restrained by high dependence on the raw materials sector and yet-low rates of technological modernisation in most industries, due to insufficiently active involvement of new technologies in production. This also includes the still-wide participation of the state in regulating business processes.”
The third modernisation programme is a wide-ranging mechanism to address this, and recreate Kazakhstan’s economy in a non-commodity-based, modern form.
“We are coming to the end of a cycle of high prices for raw materials and, accordingly, ultra-high rental income,” Suleimenov said. “The world, as you see, is moving from hydrocarbons to renewable energy sources. In Kazakhstan today, the pace of modernisation of the economy and the development of different technologies, including the use of renewable energy resources, is not high. Therefore, in order to prevent structural changes in the global economy from leading us to significant costs and becoming an obstacle to productivity growth, we will create new industries at the junction of traditional sectors and the services sector. The technological re-equipment of basic industries will increase labour productivity growth by 1.3 times by 2020.”
The country has been investing in development – a process that is raising the country’s national debt in a way that is sustainable and normal in the developed world, Suleimenov said. “According to the Ministry of Finance, the national debt as of Jan. 1, 2017, amounted to 11.4 trillion tenge ($36.4 billion), or 25 percent of GDP. And this is a safe level of national debt.”
The government’s debt is $28.4 billion, 19.4 percent of GDP; the National Bank’s debt is $7.9 billion, or 5.5 percent of GDP, he explained. National debt has increased by $7.7 billion since early 2016, mostly through implementing national monetary policy and taking loans for development projects. Among this is a $1 billion loan taken from the World Bank to finance the budget deficit, Suleimenov said.
Nearly half of the government’s external debt, $7 billion, is loans from the International Bank of Reconstruction and Development (IBRD), the European Bank of Reconstruction and Development (EBRD), the Asian Development Bank (ADB) and the International Development Bank (IDB).
“In general, the presence of national debt is evidence that the economy is developing: the country borrows from foreign markets for development,” the minister explained. “Twenty-five percent of GDP is a safe level of national debt.”