Prospective destination for investors and exporters
Kazakhstan is a country located in Central Asia and Eastern Europe with a population of 19.6 million. Kazakhstan, which gained independence in 1991 after the collapse of the USSR, is the ninth-largest country in the world. It is also a country with significant economic potential and the largest energy producer in the Central Asian region. These factors boost Kazakhstan’s geopolitical weight from a global policy perspective.
In recent years Kazakhstan’s economic growth has averaged 5% per year. In 2022, GDP was $220.6 billion ($11,243 per capita). In the GDP structure, industry accounts for 34.5%, services for 52.6%, and agriculture for 5.2%. As for the business environment, micro, small, and medium-sized enterprises (SMEs) account for 96.4% (1.6 million) of all enterprises. Driven by the mining industry and foreign investment inflows, Kazakhstan has become an upper-middle-income economy. Yet despite the poverty decline, considerable inequality still exists in the country.
Dependence on raw material exports makes Kazakh exports unstable and the economy vulnerable to abrupt shocks. The recommended export diversification is also critical to reducing greenhouse gas emissions. In February 2023, Kazakhstan adopted “The Strategy on Achieving Carbon Neutrality by 2060“. Its deployment requires phasing out coal, increasing the share of renewable energy resources to 83%, and boosting investment in low-carbon technologies.
Population of Kazakhstan
The population of Kazakhstan is 19.6 million. The largest ethnic groups are Kazakhs (69.9%), Russians (17.9%), Uzbeks (3.3%), Uighurs (1.5%), Ukrainians (1.3%), and Tatars (1%). The largest religious groups are Muslims (70.2%) and Christians (26.2%), mainly Orthodox. Official languages are Kazakh and Russian.
The labor force numbers more than 9.6 million people, yet Kazakhstan is increasingly dependent on foreign workers, mainly from Kyrgyzstan, Tajikistan, and Uzbekistan (the number was more than 668,000 in 2022). High-skilled Kazakhs continue to emigrate, mainly to Russia, seeking better job prospects.
Kazakhstan’s population is relatively young, but the country has already begun to move into the early stages of population aging. According to forecasts, the number of people aged 65 or older will rise to 14% by 2050 compared to 7.5% in 2019. 58.2% of citizens live in cities. The largest are Almaty (1.9 million), the country’s capital, Astana (formerly Nur-Sultan, 1.3 million), and Shymkent (1.1 million).
Economy of Kazakhstan
Since 2015, Kazakhstan has been a member of the Eurasian Economic Union (EEU), which includes Armenia, Belarus, Kyrgyzstan, and Russia. Kazakhstan also cooperates with the Organization for Economic Cooperation and Development (OECD) and the Organization of Petroleum Exporting Countries (OPEC) under the OPEC+ framework. Kazakhstan has a pivotal role in developing the New Silk Road since it accounts for 70% of land transit from China to Europe. Another 112 infrastructure projects worth $12.6 billion are planned by 2025.
Kazakhstan’s industrial sector is based on mining and mineral processing. Kazakhstan has the world’s 12th-largest proven oil reserves and 14th-largest natural gas reserves. It also ranks among the top ten countries regarding coal, gold, chromium, zinc, lead, and bauxite reserves. Kazakhstan is the world’s largest producer of uranium.
Agriculture is a vital sector of Kazakhstan’s economy. Kazakhstan is one of the largest wheat producers, and other core crops include barley, cotton, sugar beets, and rice. The chief livestock are cattle, poultry, pigs, horses, and sheep, making Kazakhstan a major producer of wool, milk, and eggs. Trade, transportation, construction, real estate, and education top the service sector. Logistics, financial services, and the ICT sector are also gradually expanding, but the pace depends on access to capital.
International trade
Kazakhstan is the world’s 52nd-largest economy, 55th-largest exporter, and 57th-largest importer. Kazakhstan’s exports are worth $53.6 billion, and imports are worth $47.5 billion. Kazakhstan’s main trading partners are Russia, China, the United States, Japan, South Korea, the United Kingdom, Germany, Turkey, Italy, the Netherlands, and Uzbekistan.
The group of most imported goods includes industrial machinery and electrical equipment (25%), mineral products (15%), transportation equipment (12%), base metals and related products (10%), chemicals (8%), and food and beverages (6%). Other goods include motor vehicles and parts, electronics, medicines, and iron and steel articles.
The most exported goods are oil and related products, accounting for 73% of total exports. Other exported goods include ferrous metals, copper, aluminum, zinc, uranium, gold, silver, and wheat.
Trade agreements
Kazakhstan has extensive trade relations, including under the Eurasian Economic Union (EEU). Kazakhstan has concluded 52 bilateral investment agreements. Five of them are pending ratification, and three have not been renewed.
Kazakhstan has signed free trade agreements with the following countries:
Armenia
Azerbaijan
Belarus
Georgia
Kyrgyzstan
Moldova
Russia
Tajikistan
Ukraine
Uzbekistan
Agreements with associations of countries:
Eurasian Economic Union (EEU)
Central Asia Regional Economic Cooperation Program (CAREC)
Agreements as a member of the EEU:
China
Iran
Serbia
Singapore
Vietnam
Kazakhstan-European Union relations
The European Union and Kazakhstan established relations in the 1990s. In December 2015, the two sides signed an “Enhanced Partnership and Cooperation Agreement“, which came into force on March 1, 2020. It strengthened cooperation in trade, investment, energy, transportation, environmental protection, education, and scientific research, among others. In November 2022, a protocol was signed on strategic partnerships in the supply of raw materials and the manufacturing of batteries and green hydrogen, which is expected to accelerate the green and digital transformation of the economies of both parties.
As a recipient of 39% of Kazakh exports, the European Union is Kazakhstan’s largest trading partner. The EU is also the largest foreign investor in Kazakhstan. In 2021, the value of foreign direct investment from EU countries was 61.5 billion euros. In turn, in 2022, the value of trade in goods was 40.2 billion euros, 74% more than in 2021. The EU imports mainly mineral products and exports machinery, transport equipment, chemical products, optical instruments, and plastics. Trade in services is worth 2.1 billion euros.
Opportunities and challenges
Kazakhstan is a prospective market for foreign entrepreneurs. Among the critical issues for exporters are customs regulations. As a member of the Eurasian Customs Union, Kazakhstan enforces import duties and non-tariff barriers. However, Kazakhstan has implemented significant changes concerning laws and procedures. The average tariff rate is 10.6% for agricultural products and 6.4% for other products. Conversely, the maximum tariff rates are 50% and 19%, respectively. Trade barriers include the judicial system, unclear regulations, corruption, and bribery.
Kazakhstan’s dependence on raw material exports poses risks for entrepreneurs. The opportunity for them, however, is economic diversification, which requires investment, technology, and know-how. Kazakhstan does not have a well-developed consumer products industry, so it has to import them, which is an opportunity for the apparel, food, automotive, or electronics sectors. Moreover, transportation and logistics infrastructure expansion generates demand for products and services from the construction, machinery, and energy sectors.
Energy transformation entails investing in the existing energy infrastructure and transitioning to renewable energy resources such as green hydrogen and hydropower. These efforts are supported by the European Union, which has agreed with Kazakhstan on an action plan for 2023-2024. Another growth area is the digitalization of the economy and public services. Economic cooperation is fostered by 27 industrial and 13 special economic zones, categorized by specialization (petrochemicals, metallurgy, logistics, trade, and ICT services).