Portrait sketch of Aset Irgaliyev

Amid mounting short-term economic challenges, states must not lose sight of the need to position themselves to thrive in a changing world, writes the chairman of Kazakhstan’s Agency for Strategic Planning and Reforms.

In a time characterised by urgent economic pressures, a rapidly shifting geopolitical climate and the frantic pace of global news cycles, an obsessive focus on the short term is inevitable.

While attending to immediate problems and addressing them as effectively and efficiently as possible is an obvious priority for governments, there is also the risk that in the frenetic pace of this globalised world states lose sight of the long-term horizon. The only way that economies can thrive, rather than merely survive, in the face of the relentless boom and bust that our globalised system creates, is to chart a clear path for the long run and adopt a perspective which thinks in terms of decades, rather than weeks.

This is the primary function of Kazakhstan’s Agency for Strategic Planning and Reforms: to step back from the exigencies of day-to-day politics and provide essential long-term perspectives which can inform government decision-making in the economic sphere.

Therefore, even at a time in which the world is feeling the impacts of soaring inflation, contractionary monetary policy, food and energy security issues, disrupted supply chains, flatlining equity markets and the knock-on impact of sanctions – which has been particularly felt in our region – there is cause for significant optimism around Kazakhstan’s economy. According to the European Bank for Reconstruction and Development’s recent report, Kazakhstan’s economy is proving more resilient than initially expected to the geopolitical shocks of 2022.

While we are, of course, responding to the short-term imperatives created by this difficult climate, we are also overseeing a broader shift. We are looking ahead to the global economy of the future and reorienting ourselves such that we are best positioned to thrive in a new world: one built on different economic principles.

A new age of prosperity

Kazakhstan is setting out to transform itself into a global powerhouse for the economy of the future, making transformative investments in the fundamentals of our economy to catapult us from the ‘middle-income trap’ into a new era of prosperity for our people.

This starts, of course, with our approach to our greatest income earner: energy. Oil has been both the literal and figurative fuel which has powered our economy in the three decades since independence. Oil income has not just brought us significant national wealth and economic growth, its reinvestment has allowed us to build top-tier public services and infrastructure. Rather than repeating the mistakes made by other countries blessed with natural resources – the so-called ‘resource curse’ – we have continually reinvested our profits in our population.

Yet we know this cannot last forever. Quite aside from oil and other hydrocarbons being finite resources, the price to pay for a continued reliance on oil is too high, both in terms of climate harm and environmental damage, and in terms of the volatility created by an overreliance on commodities.

Fortunately, the potential for the growth and diversification of the energy sector beyond hydrocarbons is seemingly limitless.

Natural advantages

This starts with our potential for renewable energy production. Kazakhstan is ideally suited for the development of major productive capacity thanks to its natural advantages. Particularly in the north of the country, we have some of the world’s windiest areas outside the polar regions. Our wind power potential is estimated at more than 920 terawatt-hours (TWh) annually. For perspective, in 2021, wind and solar power globally provided 2894 TWh of electricity. In our country’s southern regions, there are also significant opportunities for solar power production with annual potential of up to 2.5 TWh. The vast expanse of steppe in our country means that there are huge swathes of sparsely populated areas which would be ideal for these green developments.

In Kazakhstan’s southern regions, there are significant opportunities for solar power production with annual potential of up to 2.5 TWh

As well as being a potential powerhouse in our own right, Kazakhstan also has an enormous role to play as a supplier to the world. In terms of nuclear power, the fact that Kazakhstan holds 14% of the world’s uranium and produces 45% of the world’s current mining supply means that for those seeking to use more nuclear power, Kazakhstan is an essential partner.

What is more, these uranium resources mean that we will have a critical role to play in supplying rare earths to a global economy which will become increasingly reliant on metals like dysprosium and neodymium. From renewable technology to microchips to catalytic converters, rare earths – which can be produced from uranium tailings – will play a larger role in both Kazakhstan’s economy and the global economy as a whole.

We are already making significant progress on this. Our memorandum of understanding signed with the EU on raw materials, focused on the potential to expand these industries and develop secure and sustainable supply chains to Europe, was another valuable step in this direction. This memorandum also covered green hydrogen, another major growth area, and coincided with the announcement of the $50bn agreement with Svevind Energy group to build a 20 gigawatt green hydrogen plant – set to be among the world’s largest – in Kazakhstan.

People power

Kazakhstan, therefore, is gearing up for major economic growth in the decades to come, based around these key areas. This is just a part of our strategy, however. We know that for all the many natural resources we have, our most important resource is unquestionably our vibrant population.

We are, therefore, making an even greater investment in our human capital. This includes unprecedented increases in financial support for our young people, who will be the driving force behind the Kazakhstan of tomorrow. The president has launched a National Fund for Children, which dedicates 50% of our sovereign investment fund’s annual income to special accounts for each young person to help them get the best start possible to their adult lives. We have, once again, raised our minimum wage. We are taking new measures to support entrepreneurism – adding new incentives for those starting new businesses through microcredit.

We understand that the effectiveness of economic policy significantly depends on institutional development. Therefore, to pave the way towards a markedly new model of economic growth, our president has launched institutional reforms. These will focus on radical systemic change, rather than superficial fixes. This new institutional environment will be the foundation for a modernised, well-diversified and inclusive economy.

Our reforms envisage promotion of democratic principles, the advance of the rule of law, the protection of property rights and the establishment of favourable conditions for entrepreneurship. We aim to form a modern and professional and independent public service that will ensure the high-quality implementation of economic programmes and the timely delivery of public services to Kazakh businesses and citizens.

Adding value

Economic diversification and rural job creation are increasingly important aims of economic policy given the expected impact of declining oil prices on revenues, employment and trade. The agricultural sector, for example, which is currently operating at low productivity levels, can significantly contribute to economic diversification and rural job creation, not least through the development of value-added agribusinesses.

In agriculture, and in all potential growth sectors, increasing and attracting investment – including foreign investment – will be a major driving force for economic renewal. For this reason, the programme of reform set out by the president, and the strides taken in recent years, have served to facilitate a better investment environment.

We want to ensure that we continue to be a good and easy place to do business. New incentives package for investors include better approaches to communication with the government and provide stable guarantees for investors.

These efforts are championed by the Astana International Finance Centre (AIFC), which was set up to become the finance and investment hub of central Asia. The AIFC is taking innovative steps to create the best investment environment possible in Kazakhstan. This includes the creation of the AIFC Court and International Arbitration Centre, which allows all businesses to resolve disputes in a forum governed by the highest standards of English law.

They are also promoting high-technology industries, including by driving Kazakhstan’s potential as one of the global hubs for blockchain technology, which will no doubt evolve to play a major role in our economy and our society.

As a country, therefore, we have our sights firmly set on the future. We are building the foundations of an economy which will thrive in a transformed global economy, one which thrives and indeed shapes global shifts, rather than merely reacting to them. We are confident that this will put us on the right course for future growth, and take us into a new era of prosperity for Kazakhstan’s people.

Aset Irgaliyev is chairman of Kazakhstan’s Agency for Strategic Planning and Reforms.


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