Enhanced links boost trade opportunities
By building stronger economic relations with other countries, both near and further afield, Kazakhstan is attracting more foreign direct investment and positive growth. By Tim Gosling
Before independence, Kazakhstan’s trade of mainly metals and ores, wheat and a modest quantity of oil was dictated from Moscow, with most roads leading north. The border with China was sealed. Twenty years later, with commodities powering economic growth of eight to nine percent each year, the Kazakh government is working to diversify the economy, and the country now offers a spectrum of opportunities for investment and trade in non-energy sectors.
Trade surplus
Apart from a temporary setback in 2009, provoked by the global economic crisis, Kazakhstan has seen its foreign trade expand aggressively every year since 2000, when total exports were just $9.86 billion, according to the United Nations. By 2005, that figure had leapt to $30.5 billion, and then to $60 billion in 2010. That year, Kazakh exports and imports of merchandise totaled $90 billion – illustrating the strong trade surplus that the country enjoys.
Due to Kazakhstan’s rapid development of its oil and gas deposits – as well as the infrastructure to export it – energy leads the country’s trade ties. Oil and oil products accounted for 59 percent of exports in 2009.
The country’s traditional role as a supplier of metals and ores remains strong, too, with this sector making up 19 percent of exports. However, the government’s efforts to boost the chemicals industry are paying off, with the sector accounting for five percent of the export market. Foreign sales of machinery are weighing in at three percent, while grain is becoming a staple of foreign trade.
Widening the net
Powering this boom in foreign trade is Kazakhstan’s widening economic relations with countries both Asian and European, on top of the strong ties it retains with the other members of the Commonwealth of Independent States (CIS).
China is a leading light, and last year for the first time became the number-one export destination for Kazakh goods. Kazakhstan’s eastern neighbor absorbed 17.1 percent of Kazakh exports, as it looked to Astana to help build the Xinjiang region into an industrial hub. The same year, Italy took 16.2 percent of Kazakh exports, with Russia the third biggest importer at 8.1 percent.
However, there are many other countries increasing trade with Kazakhstan, as Astana looks to forge stronger commercial ties with Asian powerhouses such as India (0.4 percent of foreign trade in 2009) and South Korea (0.7 percent). Reflecting this strategy, Grigoriy Marchenko, chairman of the National Bank of Kazakhstan (NBK), said in January that the country was close to signing a currency swap agreement with China to ease fi nancial transactions and trade between the two countries, and a similar deal with South Korea was in the works.
At the same time, trade with the developed world is growing. The United States was Kazakhstan’s fi fth largest partner in 2009, accounting for three percent of imports and exports, according to the European Commission, while as a bloc, the European Union is by far Kazakhstan’s biggest trade partner, with 32 percent.
Investment shadowing trade
Not surprisingly, this boom in trade has sparked a similar dynamic in foreign direct investment (FDI) fl ows into Kazakhstan over the past decade, as investors have rushed to pump cash into the country’s developing sectors. In 2006, FDI infl ows totaled $6.3 billion, according to the UN, but had swollen to $15.8 billion by 2008, with the uplift being particularly driven by oil and gas investments. According to the NBK, 2010 saw a huge rebound after a disappointing 2009, with FDI of $20 billion.
By far the largest slice of those infl ows ($8.1 billion) originated in the Netherlands, although a large percentage can be traced to corporates around Europe. Investments offi cially originating in the Netherlands include those by PricewaterhouseCoopers, AT&T and Unilever. In addition, Royal Dutch Shell has a large investment in the Kashagan oilfi eld, while Dutch banks such as ABN Amro also made signifi cant commitments.
France leads investors from outside the Netherlands – a trend sealed by a meeting in October 2010 when French president Nicolas Sarkozy visited Astana to agree $6 billion in trade and investment deals with Kazakh president Nursultan Nazarbayev. Among the 24 deals announced were contracts with aerospace group EADS, engineering group Alstom and energy fi rm Areva, which will build a nuclear materials assembly plant in Kazakhstan.
SOURCE: Invest in Kazakhstan, 2011, p. 38-41
