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KAZAKHSTAN IN THE GLOBAL CONTEXT: STATE OF THE ECONOMY

This report was prepared by the DESHT Team (Institutional Transformation Group) based on data from the open sources of the World Bank and the Asian Development Bank, as well as on adapted economic complexity analysis methodologies.


The work is intended only for the purpose of informing and developing the discussion and does not call for specific business projects or government policies.


When using this report directly or indirectly, it is required to refer to the original source: the name of the organisation, the name of the report and the year of issue.


Summary


Evidence on a global scale confirms the existence of 3 development stages of economic systems (agrarian, industrial, post-industrial). A variety of countries’ economic features are formed under the influence of certain groups of industries.


The economies of poorer countries are predominantly agricultural, which also paves the way for next processing stages, namely labour-intensive manufacturing (food, light industry, woodworking). Economies that specialise in them are the least complex and stand apart from others in a country space; their consumption is dominated by households due to a lack of income surplus.


The economies of wealthier countries are dominated by business and social services. The first testifies to the professionalisation of the economy and geographic concentration, since the steady demand for these services is created mainly by the headquarters of large companies, concentrated in the centre of big cities. The growth of the latter is stimulated by a minimal “shadow” sector, the availability of surpluses and strong public demand for higher living standards (healthcare), including through greater government participation.


Developed countries are very similar to each other. This is more about consumption than production – the logic of the influence of the income level on the expenditure structure is rather clear. All the countries are located at the top of the economic complexity rating.


The situation with intermediate, industrial countries is not so straightforward. There is no direct relationship between the level of development and the share of the manufacturing in GDP or in its individual sectors. This may be due to their high multiplier effects – for 1 USD of their own output they create 1.5–2 times more for others, which constrains their share. Moreover, high-tech processing (machinery, chemicals, and pharmaceuticals) also has a “hidden” effect on the economy, which is expressed by its high position in the complexity rating.


Care should be taken when studying international experience, especially based on ratings. It is found that complexity ratings based only on export of goods do not reflect the fullpicture of competitiveness, as they do not consider production for domestic market and most of services. The potential of rich exporters of raw materials (for example, Australia) is underestimated while assembly sites are overestimated (countries of South and East Asia). The established space of countries by production similarity (Fig. 11) allows to determine a more precise palette of economic models than a random selection of benchmarks.


Kazakhstan is a country with a small (<0.2% of global GDP) and mixed resource economy. Still, it retains specialisation in the agro-industrial complex. On the other hand, there is a large mining chain component, pulling up the shares of primary processing (especially metallurgy), wholesale trade and logistics (pipelines) and reducing the shares of other industries.


Incomes from industrial raw materials artificially inflate the level of consumption, unusual for an agrarian economy. Kazakhstan’s structure is more akin to Eastern European countries than to poor countries, which contradicts the widely held belief that the country is impoverished. For the same reason, net exports account for a significant chunk of GDP measured by final consumption, which suppresses the shares of other components (households, government agencies, and investments).


Market forces in Kazakhstan are still weak. The common multipliers are low, industrial output is mainly formed by GVA rather than by intermediate consumption. This may indicate that specialisation and exchange do not fully occur (all operations are carried out independently), including due to high transport and transaction costs. At the same time, the thesis about the low level of local content on the scale of the economy is not confirmed – Kazakhstan does not differ much from developed countries.


According to the country space, Kazakhstan is integrated into the peripheral chain of resource-rich economies, being located between Mongolia and Russia. At the same time, this chain includes developed Australia, Norway, and Canada, indicating that the economy is not doomed. Government efforts limit the growth potential of several industries (for example, tariff caps in utilities or over-regulation of labour-intensive processing).


The business services and technologically advanced manufacturing industries are in their infancy by global standards and have low initial growth prerequisites. Their excessive regulation by the standards of developed countries is dangerous, especially given their critical importance for the transition to the post-industrial world.

KAZAKHSTAN IN THE GLOBAL CONTEXT STATE OF THE ECONOMY
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