Before its independence, Kazakhstan's designated manufactures included phosphate fertilizer, rolled metal, radio cables, aircraft wires, train bearings, tractors, and bulldozers. The country also had a well-developed network of factories that produced about 11% of the Soviet Union's military goods. Overwhelmingly dominated by state-owned enterprises under the centrally planned economy, independent Kazakhstan's economy has been substantially, if incompletely, privatized and reoriented to the market economy. Government plans originally called for an almost complete privatization by 2000 through a combination of auctions, the distribution of investment coupons to the public, and case-by-case negotiations for larger enterprises. As of 2001, according to government reports, 71% of the total number of organizations with state participation had been privatized, including 23,170 state-owned enterprises and state stock holdings and state shares in 3,495 organizations.
The process of restructuring its industry has been wrenching, however. Industrial production declined by 13.8% in 1992, by 14.8% in 1993 and by 28.5% in 1994. Decline continued in 1995, but at the single digit rate of 8%. The first positive growth in industrial production after independence was a weak 0.3% improvement in 1996. Privatization moved ahead quickly in that year and into the summer of 1997, a year in which real GDP increased 4%. However, industrial production declined again in 1998—by 2%—due primarily to the combined effects of the Russian financial crisis and a fall in world oil prices. The president, citing the low fuel prices, decreed a halt to further privatization in the country's vital oil and gas sector, and slowed the negotiations on privatization of the remaining large state enterprises called the "Blue Chips." Subsequently, industrial growth resumed at a moderate 3% in 1999, but then at robust double-digit rates of 16% in 2000 and 14% in 2001. For 2002, the estimated growth rate is 9.8%, slightly ahead of overall GDP performance. The share of industrial production fell from 25.9% of GDP in 1994 to 21.8% of GDP in 1995, but had risen to 30% by 2001, according to CIA estimates.
To stimulate recovery, increasingly liberal foreign investment incentives were offered 1991–97. In 1995 Kazakhstan's largest pre-independence operation, the Karaganda Steel Mill (Karmet) was acquired by a London-based company. Pre-independence, Karmet was one of the largest integrated metallurgical complexes in the world, producing coke and chemical products in addition to pig iron, steel, and a wide variety of steel products. In 1995, it was operating at less than half its capacity, workers' wages were often months in arrears, and its installations were being degraded for lack of maintenance. By 2002, about $800 million had been invested in the renamed Ispat Karmet, and output had risen from2.1 million tons of rolled steel in 1995 to 3.63 million tons in 2001 (still nearly 40% below pre-independence levels).
Most of Kazakhstan's manufacturing, refining and metallurgy plants are concentrated in the north and northeast, in Semey, Petropavl, and Aktobe. In south-central Kazakhstan, Shymkent is an important center for chemicals, light manufactures, metallurgy, and food processing; Almaty is important for light industry, machine building, and food processing.
The mining industry accounts for over a third of industrial production, three-fourths of which by value is the production of crude oil and associated gas. Fuel production's share in industrial value-added rose from 11% in 1995 to more than 25% in 2000. By contrast, coal and lignite, 96% of which is produced in Pavlodar and Karaganda oblasts, and iron ore mining, have experienced steady declines since 1991, and each currently accounts for less than 2% of industrial production.
Manufacturing accounts for about half of industrial production. By value the biggest manufacturing category is the processing of agricultural products, accounting for almost 17% of industrial production. Second is the production of nonferrous metals, at about 13% of the total. Textiles and leather manufacturing is served by inputs of wool and other material from the country's own livestock as well as imports of cotton from other parts of the former USSR. Textiles and related products make up an estimated 8% of total industrial output.
Almost 7% of industrial output (14% of manufactures) is accounted for by ferrous metallurgy. Production includes bulldozers, excavators, and metal-cutting equipment.
Kazakhstan's total oil refining capacity in 2002, according to the US Department of Energy, was about 427,000 barrels per day. There are three refineries: one in the north (at Pavlodar), one in the west (at Atyrau), and one in the south (at Shymkent). In early 2002, the refineries were working at about one-third capacity, averaging about 143,388 barrels per day. Refinery products account for about 4% of total production. Smaller contributions are made by mechanical engineering (2.4%) and the chemical industry (1.2%).
The production and distribution of power accounts for about 13.5% of industrial production.