Kazakhstan to bet on economy diversification

Kazakhstan to bet on economy diversification

Baku, Azerbaijan, Nov.12

By Elena Kosolapova - Trend:

Kazakhstan will bet on economy diversification, Russian expert Azhdar Kurtov has concluded from the message of the President Nursultan Nazarbayev to the people Nov.11.

"In his speech, the president has emphasized the need to develop production with high added value, i.e. establish processing in Kazakhstan," the chief editor of the Problems of National Strategy magazine of the Russian Institute of Strategic Studies Kurtov told Trend Nov.11 by phone.

The expert recalled that after the collapse of the Soviet Union, Kazakhstan bet on the natural resources.

"But time has shown that it is very dangerous for the state to live only at the expense of subsoil," said the expert. "Situations not depending on the Kazakh leadership emerge, and incomes decline. Diversified economy could mitigate consequences of the fall in prices on the world markets. Apparently, we will bet exactly on that."

He said that Kazakhstan does really have some problems, risks, or even threats. In particular, success of Kazakhstan in the first place is the result of its subsoil wealth, he said.

"First of all it's oil, gas and metals," Kurtov said. "That's the group of sufficiently liquid goods that Kazakhstan extracted from the earth and sold on foreign markets and had a good profit by converting it into a different kind of economic and social programs within its own country."

But now the situation on the world markets is unfavorable, he said.

"Oil prices fall, and it is likely to expect a change in prices for natural gas after that, because in most cases the price parameters for these goods are related," said the expert. "Prices for a group of metals also fall."

He said that even if there is some kind of collusion between the states, it applies only to the oil prices. But in general, decline in prices is due to the economic slowdown. Growth rates fall in China, the EU and North American countries.

"And that means less goods, especially raw materials are required," Kurtov said. "And the prices for this product fall, since the proposal on the market is large enough."

He said that Kazakhstan is even more vulnerable in this situation than other countries, because of its geographical location.

"This state is known to be "landlocked" in the center of the Eurasian continent, and it has no access to the open seas and oceans," said the expert. "Consequently, delivery of its export products is always more expensive than that of the coastal states. In this sense, the Kazakh goods are less competitive than those of the other countries. And with a decrease in global demand and the reduction of economic development it is namely such countries that primarily suffer."

Furthermore, Kurtov said that Western sanctions against Russia will have influence on Kazakhstan as well. In the current situation, Kazakhstan will try to get some indulgence from Russia within the Customs Union, the expert said.

"Since economic difficulties have emerged in Russia and its funding, in particular, access of the Russian banks to the western loans is being cut, the consequences will be negative for Kazakhstan as well," he said. "This means that Russian banks will be less able to finance projects, including those associated with Kazakhstan."

In addition, Kazakhstan hoped to attract Russian business with its more favorable and inviting economic model when joining the Customs Union, according to the expert. There was a high probability that Russian companies would be registered in Kazakhstan, as it carried fewer burdens on the state budget expenditures than Russia, in particular on defense, and therefore taxes were less there. Thus, Kazakhstan could entice capital from Russia.

"But now such hope in terms of sanctions is rather illusive," Kurtov said.

Thus, the Western sanctions will surely affect the states of the Customs Union and the Union as a whole.

"And the top leaders of the United States have repeatedly stated that they will hinder such alliances in the post-Soviet space," he said.

On Nov.11, the president of Kazakhstan spoke with a message to the people, in which he announced the launch of the new economic policy.

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