Kazakhstan - Future trends

Kazakhstan's government has made substantial progress in the transition to a modern, globally integrated economy. Following independence, Kazakhstan quickly carried out macroeconomic reforms and established the legal and regulatory structure of a private economy. The country has adopted a tradable currency, liberalized prices, and privatized major sectors of the economy including industry, telecommunications, and energy. Kazakhstan lifted virtually all subsidies on consumer goods in 1994. State industrial subsidies were abandoned in 1994, and small-scale privatization has also taken place. Kazakhstan established the fundamental institutions of a civil society—a constitution recognizing a separation of powers, an electoral process, a professional judiciary, a deliberative parliament, a free press, and rights of speech, assembly, and religious freedom. Kazakhstan's record of protection of human and civil rights compares favorably with that of its former Soviet neighbors. Given these facts, it can be argued that Kazakhstan has gone further than many of the former Soviet states in the establishment of a modern state. Yet serious challenges remain.

Kazakhstan inherited a physical infrastructure designed to serve the Soviet economy by providing primary commodities such as energy and minerals to industrial markets in the north, particularly in the Ural and central Siberian industrial regions of Russia. Kazakhstan's industry was previously tightly connected to these regions of Russia because its industrial suppliers and consumers were primarily in these regions. The country's rail and road transportation systems were designed to connect its primary commodity industries with the northern manufacturing markets. These are the realities of Kazakhstan's contemporary situation: primarily commodity-based industries, a sparse population, previous economic specialization under Soviet-style socialism , and a legacy of centralized planning.

In terms of Kazakhstan's political future, the stakes are obviously big. Kazakhstan is potentially one of the richer countries of the region, and perhaps one of the richer countries of the world if it can succeed in negotiating access to world markets for its oil, gas, and mineral riches. But an oil-led economic development strategy has potential drawbacks for Kazakhstan. A strategy that relies exclusively on the export of primary commodities and raw materials is likely to make Kazakhstan susceptible to fluctuations in international markets. Like the other post-communist countries, Kazakhstan will very likely continue to be influenced by economic trends that it cannot control. Private international investors, with the exception of the major oil companies, have been reluctant to make major commitments to Kazakhstan. Those foreign companies that have moved into the Kazakhstan market, such as Tractabel, the large European energy company, have found the Kazakh domestic market to be more challenging than they anticipated. There is a consensus that the Kazakh government needs to strengthen the institutional and legal underpinnings of a market economy, balance its public and private sectors, and make a more substantial commitment to strengthening the social safety net. The Kazakh government has made substantial progress in developing a market-based policy framework, at least in theory. Making this framework function in practice is one of the main challenges facing the country's economic managers.

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