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Kazakhstan: Market Profile

Major Economic Indicators

Table: Major Economic Indicators of Kazakhstan
Table: Major Economic Indicators of Kazakhstan
  • Growth of the Kazakh economy decelerated to 1.2% in 2015 from 4.3% in 2014, mainly because slow global growth cut demand for Kazakhstan’s main export commodities: oil, coal, metals, chemicals, and grain. Conditions worsened with a sharp decline in oil prices (which accounts for 25% of GDP and 60% of the balance of payments) and spillover from sanctions on Russia, a major trading partner.
  • The Kazakh economy is forecast to see a 1.6% GDP contraction (the first time since 1998) in 2016. This reflects slumping oil prices, economic weakness in Russia, and sharp currency (tenge or KZT) depreciation following the institution of a freely floating exchange rate since 20 August 2015, which has compromised the business and investment sentiment. Growth is projected to recover to around 1% in 2017 as the economy adjusts to low oil prices and as stimuli including US$9 billion in cash injections over three years taken from Kazakhstan’s oil fund, the WTO membership (since 30 Nov 2015) and the upcoming hosting of Expo 2017 take hold.
  • Kazakhstan is an important world energy supplier due to its significant reserves of oil,natural gas and coal. It is estimated that proven reserves in Kazakhstan account for some 3% of world oil reserves, 1% of world gas reserves and 4% of the world coal reserve. It is also endowed with some other mineral deposits like chrome, lead, tungsten, copper, zinc, iron and gold.
  • Other than the energy sector, processing of metals and steel production are the leading industries of the country. Coupled with other smaller manufacturing sectors like production of machines, chemicals and food and beverages, industries account for about one-third of GDP. Construction, which is highly dependent on the performance of the energy sector, contributes to some 6% of GDP. The rest of the economy comprises the agricultural sector, as well as an extensive but mostly small-scale service sectors, including wholesale/retail trade, real estate, finance and insurance.
  • Under the “State Programme of Accelerated Industrial and Innovative Development (SPAIID)”, there have been various measures to facilitate growth of the non-raw materials industries via technological innovation and development of small and medium-sized enterprises, primarily by facilitating development of the chemical and light industries, and upgrading the agricultural and food processing sectors. These are aimed at reducing the country’s reliance on energy and mineral resources sectors. To improve its transport infrastructure, Kazakhstan has also plans to invest substantially in the next 10 years to strengthen its transport links connecting Russia, China and the Gulf States, including a planned (not yet confirmed) high-speed railway stretching some 7,000 kilometers between Moscow and Beijing.
  • To further improve business environment and attract FDI, the government has launched an annual US$3 billion stimulus package for 2015-17, as part of the Bright Path five year economic plan, with investment priorities including transport and logistics, utility networks and energy infrastructure. Meanwhile, the government is devoted to greatly reduce the time required to register a business (to one hour), and paperwork needed for customs procedures and other business operations (by 60%), and extended and expanded its visa-free entry scheme for citizens of a number of countries in order to boost tourism and foreign investment. More information on investment environment and regulations can be found at the Invest in Kazakhstan and HKTDC Research.
  • Situated in central Asia, deep in the Eurasian continent, Kazakhstan occupies an area of some 2,724,900 km2, being the 9th largest country of the world. It is also the biggest landlocked country, bordering Russia, China, Turkmenistan, Uzbekistan and Kyrgyzstan, as well as the Aral Sea and the Caspian Sea. It has a low density of population, with only 6 persons per 1 km2.
  • Kazakhstan’s economy is the largest in central Asia, and is ranked the second largest in the CIS after Russia. However, its per capita GDP of US$11,000 in 2015 was the highest in the CIS, higher than that of Russia (around US$8,400) and the third largest CIS economy Ukraine (around US$2,100).
  • In order to overcome the economic handicaps of being a landlocked country, Kazakhstan is committed to boosting its connectivity with its neighbours and further integrating itself with the global economy. After 20 years of negotiation, Kazakhstan was officially accepted as the 162nd WTO member on 30 November 2015. Not only will WTO accession limit the country’s average tariffs on goods to 6.1% (tariffs on agricultural imports would be limited to an average of 7.6% and non-agricultural goods to 5.9%) from 8.6% in 2014, but it will also remove the 49% foreign equity cap on foreign investment in the telecommunications sector. The branching limitation on foreign banks and insurance companies will also be lifted over the coming five years.
  • The Customs Union (which became the Eurasian Economic Union (EAEU) as of 1 January 2015) between Kazakhstan, Russia and Belarus came into existence in 2010, and customs borders among the three countries were removed on 1 July 2011. Since then, a free-trade zone has come into operation, and the three countries have adopted unified import and export duties against trade with other countries, although exceptions still remain for certain sectors like pharmaceuticals, plastics and transport equipment. Armenia joined the Union on 2 January 2015, while Kyrgyzstan officially became the fifth member on 12 August 2015.
  • Yet China is currently the largest trading partner of Kazakhstan (accounting for some 20% of Kazakh’s total trade), and Kazakhstan is China's second largest trading partner in the CIS region after Russia. There are several joint investment projects that have facilitated trade between the two countries. As an important strategic partner in the construction of China’s Silk Road Economic Belt and the 21st Century Maritime Silk Road (the Belt and Road Initiative), Kazakhstan, being also a founding member of Asia Infrastructure Investment bank (AIIB), has been the biggest recipient of Chinese FDI in the former Soviet Union, receiving a total of US$22 billion in investment from 1991–2013. As of the end of 2014, China’s total stock of FDI to Kazakhstan exceeded US$7.5 billion, up from US$245 million in 2005. Investment from Hong Kong, though, is far from significant.
  • Following the visit of the Chinese Premier Li Keqiang in December 2014, a new package of economic deals totalling US$14 billion was unveiled. Further at the January 2015 Kazakh–China investment forum, officials announced that Kazakhstan would launch more than 20 joint projects with Chinese companies in the near future, focusing on priority sectors in the Kazakh manufacturing industry, such as mining, oil and gas, construction, chemical and light industry, and transport. In March 2015, the two countries signed a series of cooperation agreements worth of US$23.6 billion, on closer co-operations in various sectors such as railway, electricity, nuclear energy and agriculture.
  • One example is the oil-and-gas development project in Aktyubinsk region of Kazakhstan. Certain oil pipelines have been built to allow direct oil exports to China, including the pipeline running from Kazakhstan's Caspian shore to Xinjiang of China. Major participants in the projects include the China National Petroleum Corporation and the Kazakh oil company KazMunayGas.
  • Kazakhmys Plc, Kazakhstan's largest copper miner and manufacturer of copper products, has been listed in the Hong Kong Stock Exchange by way of secondary listing since June 2011 (primary listing in London). As the first Kazakh company listed in Hong Kong, Kazakhmys Plc opened a regional office in Hong Kong in 2012, when its marketing and logistics department was relocated to Hong Kong from London. In a similar move, KTZ Express, a subsidiary of Kazakhstan Railways, opened a Hong Kong office in 2014.

Hong Kong's trade with Kazakhstan

Table: Hong Kong Trade with Kazakhstan
Table: Hong Kong Trade with Kazakhstan
  • Hong Kong’s total exports to Kazakhstan slid by 41% to US$62 million in 2015, after growing by 24% to US$106 million in 2014. Major export items in 2015 included telecommunications equipment and parts (shared 58% of the total), computers (8%), travel goods & handbags (8%), parts & accessories of office machines/computers (4%), musical instruments & parts/accessories; sound recordings (4%), internal combustion piston engines & parts (2%), men’s or boys’ wear of textile fabrics, not knitted (2%), watches and clocks (2%) and office machines (2%).
  • On the other hand, Hong Kong’s imports from Kazakhstan soared by 492% (due to a low base) to US$31 million in 2015, after sliding by 93% to US$5 million in 2014. Major import items in 2015 included crude minerals (shared 97% of the total) and special transactions and unclassified commodities (3%).

Related information: Kazakhstan infographics

Content provided by Picture: Louis Chan
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