Following the disintegration of the Soviet Union, Kazakhstan experienced significant restructuring problems and economic decline. The country has privatized 60 percent of the state industry and enrolled in the International Monetary Fund and the World Bank. Kazakhstan has opened up to moderate market reforms with strong elements of state governance. A privatization program was adopted in April 1994. More than half of all state property is privatized. Very often the new owners are based on the old Soviet power elite.
As in the other former Soviet republics, the collapse of the planning economy has led to a sharp fall in production. When the common ruble zone collapsed in the fall of 1993, Kazakhstan introduced its own currency, tenge. Its value fell in 1994 to one-sixth of its original rate compared to the Russian ruble. Since 1995 there has been some upturn, and with rich natural resources including in the form of metals and petroleum, the outlook is relatively good.
Following the temporary upswing in 1995, the Russian financial crisis in 1998 had very negative consequences. In the spring of 1999, the government saw itself forced to allow the currency to float. Thanks to strong oil exports, the economy saw a significant upswing from the turn of the millennium. The economy is still sensitive to fluctuations in the business cycle in Russia. Large discoveries of oil and natural gas make the outlook bright in the longer term. Because of the oil, Kazakhstan has attracted greater foreign investment per capita than any previous Soviet republic. However, widespread corruption, complicated bureaucracy and a poorly developed justice system have deterred foreign stakeholders.
The tourism industry is underdeveloped, but in 2001 it was declared a priority sector. A number of projects were implemented under the Development Plan for Tourism, 2003-2005. Kazakhstan is at the intersection of Europe and Asia, with many historical monuments along the Silk Road and other ancient trade routes. Almaty has the famous ice rink Medeo, and in the mountains outside is a popular winter sports resort, Chimbulak.
Mining and energy
Kazakhstan has significant oil and gas reserves, probably more than 50 billion barrels of oil equivalent. The largest discovery to date, the Kashagan field in the Caspian Sea, was made in 2000. It holds 9 to 13 billion barrels of oil, according to preliminary estimates from the operator. This may be the largest oil field detected anywhere in the world since the 1970s. Norwegian Statoil operates exploration drilling in the Abay field, south of Kashagan on the Kaspi shelf.
Another large field, Tengiz, lies just north of the Caspian Sea. Kazakhstan’s breakthrough as an oil exporter came in 2001 with the opening of a pipeline from Tengiz to the Russian Black Sea port of Novorossijsk.
Kazakhstan also has huge mineral reserves, and the coal fields at Karaganda, Turgay, Maykub and Ekibastus were among the most important in the former Soviet Union. Mining accounts for 2 percent of employment.
In 2016, Kazakhstan’s electric energy production was 106 TWh. Coal is the major source of energy, accounting for 66.5 percent of electricity produced. Gas power contributed 21 percent, while 11.5 percent came from hydropower. Virtually all state power companies were transformed into privately owned limited companies in the period 1996–2002.
The Kazakhs have traditionally lived mostly from livestock, and breeding sheep, goats, pigs and cattle is still of great economic importance. However, the cultivation of grain and industrial crops, such as cotton, play a greater role than animal husbandry, but this agriculture depends on artificial irrigation. Wheat, barley, rice, cotton, sugar beets, grapes, fruits, tobacco and vegetables are grown in irrigated oases. The Black Earth Belt in northern Kazakhstan is the most important grain cultivation area, accounting for 10-15 percent of the Soviet Union’s wheat harvest. However, the large-scale increase of the cultivation area initiated in the 1950s has created serious ecological problems, including increased soil erosion.
Wheat is still grown on over half of all arable land. By independence it was said that the state collective agriculture should be privatized. At the turn of the millennium, about 90 percent of the state collectives were transferred to private owners, largely organized as private collectives or corporations. In 2008, agriculture accounted for 32.2 percent of employment and 5.8 percent of GDP.
In the Caspian Sea, sturgeon is being fished, which produces “Russian” caviar, but over-taxation threatens the stock. Until the 1970s fishing was also in the Aral Sea, but as the sea decreases and the salt content increases, almost all fish have disappeared. Since the 1970s, the Aral Sea has shrunk to less than half and the water volume to a quarter.
As a Soviet Republic, Kazakhstan was heavily industrialized, and the Republic took third place among the industrial republics of the former USSR. The industry is dominated by heavy industry based on local raw materials. Important industrial products include iron and steel products, metallurgical products, workshop and chemical products, as well as washing machines and refrigerators. Most of Kazakhstan’s industrial potential is concentrated around the Karaganda mines in the northeast and the oil fields on the Caspian Sea. In 2003, the manufacturing industry accounted for around 10 percent of employment and 15.9 percent of GDP.
In 1994, Kyrgyzstan, Uzbekistan and Kazakhstan entered into an agreement to form a single economic zone. Since 1992, individuals and companies have been able to conduct foreign trade without the permission of the government, but goods of ‘national interest’ such as fuels, minerals, fertilizers, grains, cotton, wool, caviar and pharmaceutical products are exempt from this.
According to Countryaah, main export goods are commodities; agricultural products, and since 2001 petroleum products are increasing rapidly. Kazakhstan’s main trading partners are primarily the SUS countries, but the country also has trade relations with China and the US, among others.
Transport and Communications
Because of the country’s wide reach, there are large areas that are difficult to access. The railways have played an important role in the Republic’s economic development, but are best developed in the north-south direction, with no transverse lines. The railway network is a total of about 13 700 kilometers. The most important lines are the Turksib route, which links the Central Asian network with the Trans-Siberian railway via Almaty and Semipalatinsk, and the Transkasakh line. In 1991, a new international rail link opened between Drushba (east of Kazakhstan) and Alataw Shankou in Xinjiang, China. In 1994 an express connection was established between Almaty and Nukus (Uzbekistan). Construction of the 100 kilometer railway from Almaty to Issyk-Kul in Kyrgyzstan began in 2004.
The total road network is approximately 91,563 kilometers, of which about 70 percent is paved. Kazakhstan has road links to Russia, Kyrgyzstan, Uzbekistan, Turkmenistan, Iran and China.
Several private airlines operate alongside the national Kazakhstan Airlines.