Building a Diversified and Sustainable Economy in Kazakhstan | Asian Development Bank

Building a Diversified and Sustainable Economy in Kazakhstan

Article | 18 September 2017

ADB expects to provide $3 billion in assistance to Kazakhstan in 2017-2021 to support the country’s ambition to be a top 30 global economy by 2050.

Kazakhstan is committed to becoming one of the 30 most developed countries in the world by 2050. The Asian Development Bank (ADB) will support this goal through the provision of more than $3 billion in assistance to the country between now and 2021.  Giovanni Capannelli, ADB’s Country Director for Kazakhstan, says the Bank’s focus will be on helping the country diversify its economy and achieve inclusive development and sustainable growth. Transforming the agriculture sector and expanding private sector investment are key opportunities.

What are Kazakhstan’s development priorities?

The major long-term development priorities of Kazakhstan are enshrined in its Strategy 2050, which aims to strengthen the country and make it one of the 30 most developed economies in the world by the year 2050. To achieve this long-term development goal, in January 2017 President Nazarbayev introduced a new mid-term plan, the so-called Third Modernization of Kazakhstan.  

The first modernization helped move the country from a planned economy into a market economy back in 1991 when it declared independence from the Soviet Union. The second modernization laid the foundations for social and economic development.

“Kazakhstan aims to introduce technological innovation through digitalization of the economy.”

Giovanni Capannelli

Now, with this third modernization, the country aims to introduce technological innovation through digitalization of the economy, strengthen the role being played by the private sector in the economy, upgrade its human resources, and introduce reforms to the public service to enhance its governance and institutions.

What challenges does the country face in achieving these goals?

First and foremost is diversifying its economy.

Kazakhstan is a country that, unlike many of the modern economies, didn’t undergo structural transformation from primary into secondary and then eventually into the tertiary sector. It jumped from inefficient agricultural focused on intensive labor technologies into a foreign direct investment-led capital-intensive service sector. It lacked the passage through the manufacturing sector, which is very important for developing skills and new technologies.

A major challenge now is diversifying its economy out of hydrocarbons, promoting the agricultural sector, and strengthening its role in connecting the People’s Republic of China (PRC) with Europe through enhancement of its logistics services, and connectivity.

How does ADB help support these efforts?

In our new Country Partnership Strategy for 2017-2021 we include three strategic pillars: The first pillar is to help the country diversify its economy. Second is for promoting inclusive development. And the third pillar is to promote and strengthen a green and sustainable economy. 

With regard to the first pillar, economic diversification, we are really focusing on the agricultural sector, helping with a number of interventions both upstream and downstream in agribusiness. 

With the second pillar on inclusive growth, we are trying to bridge a gap that exists and is very wide between urban and rural development. In particular, Almaty and Astana are fairly developed while if you go to the countryside you see a completely different situation with lots of underdeveloped infrastructure and poorly delivered public services. 

In the third pillar of sustainable and green growth we are helping the country with a new strategy for renewables in promotion of the green economy. Kazakhstan has signed a number of international commitments and treaties including the Paris Agreement and they are now trying to reach this target of achieving 3% of energy being generated by renewables. As of today, it is only at 0.8% so the journey is still long and intensive, and we are very keen to support the country as much as we can in this regard. 

What sort of investments do you anticipate in the agriculture sector?

Agriculture is an extremely interesting sector for Kazakhstan nowadays. During the Soviet Union times the country was known as the breadbasket of the Soviet Union and it has very, very large availability of arable land and pasture land.

“Agriculture is an extremely interesting sector for Kazakhstan nowadays.”

Giovanni Capannelli

So, in terms of infrastructure for agriculture we are working on an irrigation project. You know, 65% or so of water in Kazakhstan is being used for irrigation and now the Asian Development Bank, together with other international financial institutions, is supporting the rehabilitation of major irrigation canals.  

With regard to infrastructure for the wholesale market, for perishable goods in particular, now under a program called the Almaty-Bishkek Economic Corridor we are supporting the country to introduce those infrastructure needed to help reveal prices and rationalize production,               including enhancing traceability of products to help, eventually, agricultural production to be exported to the PRC and other countries as well.  

We are also looking into opportunities to work together with local counterparts for creating a commodities exchange market in connection with the establishment of the Astana International Financial Center, which is a new proposition of the government. And together with that we are looking into the possibilities of creating a number of warehousing facilities where these commodities would be stored.  

And, last but not least, we are trying to support SMEs in the agriculture sector through credit lines to promote their processing capacity and be more able to process goods from the current situation where they almost export only commodities.