The world offers an almost unlimited supply of very interesting countries to analyze and learn from. That’s one of the most useful and promising aspects of globalization. One of those very attractive cases is Kazakhstan, a relatively unknown Central Asia republic with 15.5 million inhabitants, and the world’s largest land-locked country –the world’s ninth largest, overall– with a territory slightly larger than Western Europe’s. Kazakhstan was one of the 24 countries that emerged as an independent nation from the Soviet system implosion in 1990–1991.
Unquestionably, the most interesting aspect of Kazakhstan’s contemporary history is its relative good economic performance, within a relatively stable political local environment. Kazakhstan is the most affluent Muslim country in Central Asia. Like the popular saying goes, “Kazakhstan is a good house in a terrible neighborhood”. Although Kazakhstan is far from being at the forefront in socioeconomic development among its former Soviet brethren –like Slovenia, Czech Republic, Slovakia, Poland, Estonia, Croatia and Lithuania–, whose performance, on the average, exceeds that of Russia’s, it is not that far behind from the latter. Most unfortunately, the remaining 16 former Soviet republics’ socioeconomic performance is very poor, some of them indeed deplorable. Among the former Soviet republics, Hungary could have been classified as a successful case, until recently; however, given its ongoing monumental debt crisis, it is left apart. Among those 16 lagging, former Soviet countries are Kyrgyzstan, Uzbekistan, and Turkmenistan, three neighbors of Kazakhstan.
The current and only president Kazakhstan has had during the last 20 years as an independent, post-Soviet nation is Nursultan Nazarbayev, its former communist-era leader. To a different degree, Nazarbayev has been following some of Deng Xiaoping’s transformation footsteps. The major similarity in both cases is the commitment to get away from the centrally-planned economy model.
Kazakhstan’s vast oil and gas reserves make it an energy powerhouse, the major pillar of its economy. It has been making significant progress toward developing a market economy, becoming one of the first former Soviet country to receive an investment-grade credit rating, in September 2002. Kazakhstan established, since January 2001, a sovereign oil fund, modeled after Norway’s StatOil experience, currently worth over US$20 billion; it is funded from oil, gas, and other extractive industries taxes, royalty payments, and signing bonuses by joint venture partners.
Kazakhstan has, since 1998, an ambitious private pension program in place. Vanguard tax reforms have been adopted since the 1990s, lowering the tax burden across the board. It has also embarked itself on an ambitious diversification program, aimed at developing strategic sectors like telecommunications, transport, pharmaceuticals, petrochemicals and food processing.
During 2011, Kazakhstan had a solid economic performance: both the budget deficit and the government debt level, as a percentage of GDP –2.3% and 16%– are low and very low, respectively. The inflation rate, is still at an unacceptable level –8.3%, although it seems not to represent any immediate threat. The economy approximately grew by 6.5% during 2011.
Kazakhstan may have a very bright future ahead, provided that profound structural reforms continue to materialize. It is very encouraging to see the smart government policies this Central nation has taken since becoming independent from the Soviet Union. Kazakhstan’s government has been remarkable in overcoming its communist origins, and having chosen an increasingly pro-market orientation. Although, in that regard is seriously lagging most of its European former Soviet brethren, so far it is the only viable former Soviet country in Asia. In the political side, there is much to be done still, towards a more open, democratic, transparent, accountable and equitable society. A solid economic background, however, seems to be an ideal springboard for that utmost objective. Kazakhstan is, by and large, the most prosperous of the Central Asian countries, compared to everyone, not only to the former communist countries. It seems to have the momentum in place for an adequate transition to a developed economy status in the decades ahead.