Kazakhstan's economy is export-oriented. Gas, oil, and metals make up 72 percent of Kazakhstan's exports. Since a rise in world market prices for oil in 1999, Kazakhstan's oil and gas sector has benefitted from strong foreign demand, comparatively strong domestic demand, a crossroads geographic location, a favorable foreign investment climate, and multiple joint ventures with Western and Eastern oil companies. Agriculture, while accounting for 23 percent of employment in Kazakhstan, accounted in 1999 for just slightly over 10 percent of the GDP. Industry, with 27 percent of the country's employment, accounted for 30 percent of Kazakhstan's GDP. Kazakhstan's industrial sector rests on the extraction and processing of natural resources and also on a relatively small machine building sector. This sector specializes in construction equipment, tractors, agricultural machinery, and transportation equipment such as small
The breakup of the USSR and the collapse of demand for Kazakhstan's traditional heavy industry products have resulted in a sharp contraction of the economy since 1991, with the steepest annual decline occurring in 1994. In the period 1995-97 the pace of the government program of economic reform and privatization quickened, resulting in a substantial shifting of assets into the private sector.
The December 1996 signing of the Caspian Pipeline Consortium agreement to build a new pipeline from western Kazakhstan's Tengiz oil field to the Black Sea increased prospects for substantially larger oil exports in the years ahead. Kazakhstan's economy turned downward, however, in 1998 with a 2.5 percent decline in the GDP growth due to slumping oil prices and the August financial crisis in Russia. A bright spot in 1999 was the recovery of international oil prices, which, combined with a well-timed tenge devaluation and a bumper grain harvest, pulled the economy out of recession . If initial reports of the production capacity of the new Kashagan field on Kazakhstan's Caspian shelf turn out to be accurate, Kazakhstan's ability to produce oil will far outstrip its ability to get it to market.