Kazakhstan’s Market Economy: Key Milestones and Achievements

In my new book, “Kazakhstan’s Emerging Economy: Between State and Market,” I study the type of market economy that has evolved in Kazakhstan since 1991 by focusing on the interaction between the state and private business.

Roman Vakulchuk

Roman Vakulchuk

Today, Kazakhstan is considered to be the most successful market reformer among the post-Soviet countries. Kazakhstan’s transition has been unique in many respects. First, the economy was in crisis in the early 1990s, inflation reached four-digit figures, unemployment rates were high and future economic prospects were uncertain. However, since 2000, Kazakhstan has achieved high economic growth and the economic well-being of the population has improved. True, the development and export of energy resources helped the country recover from the economic collapse of the 1990s. On the other hand, we should bear in mind that without the appropriate market-oriented institutions responsible for economic policy-making and improvingthe business climate, the management of energy resources would hardly have proven successful and sustainable. Despite depending on the export of energy resources, the government has established effective political and economic institutions that have helped the country avoid the ‘resource curse’ and attract significant foreign direct investment.

Second, unlike other resource-rich countries, which usually restrict access to foreign investors, Kazakhstan has been open to foreign companies and investment from the very beginning. In particular, it largely privatised its energy sector and attracted foreign capital for developing the economy. Moreover, Kazakhstan has actively learned from the experiences of other countries in implementing economic policies. These measures helped to achieve progress in implementing market reforms.

Third, over the years of independence, a new culture of state-business interaction based on mutual dialogue has emerged in Kazakhstan. Communication platforms were established where two parties exchange information, discuss joint projects and solve problems. Despite existing difficulties in the private sector, many issues are solved successfully through this dialogue.

I would like to stress two main conclusions of my work. First of all, from the point of view of the rules of the game, the economy of Kazakhstan represents a ‘core–periphery’ model, in which the ‘core’ part is more state-led and consists of strategic industries and big companies, whereas the ‘periphery’ part is more market oriented and includes non-strategic industries and small and medium-sized companies. The state controls and coordinates the core by market mechanisms; for the periphery, it seeks to provide conditions for developing a market-oriented environment with little state involvement.

The second conclusion relates to the fact that the evaluation of Kazakhstan’s economic development, for instance by international organisations, is based mainly on the analysis of the energy sector, which is controlled by the state. Generalisations are then made with respect to the entire economy and therefore many consider state regulation of the economy to be excessive. However, my results demonstrate that despite the fact that the energy sector is important for the entire economy, other industries (e.g. services) also play an important role and develop within the market-oriented environment with minimal state regulation. Unlike the energy sector, however, these industries have been under-researched by experts and scholars until today. Therefore, in contrast to many previous studies, this work shows that a balance between state and market regulation of the economy has been found. This I see as the main success in the market-oriented development of Kazakhstan since independence.

The author holds a Ph.D. in economics and is a senior research fellow at the Norwegian Institute of International Affairs (NUPI) in Oslo.