Albert Einstein told us that “in the middle of difficulty, there is opportunity.” It was a message echoed by President Nursultan Nazarbayev Nov. 30 in a sombre yet confident State of the Nation address. With the right policies and a national effort to see them through, he forecast that Kazakhstan could emerge from the present crisis stronger and on a faster development path.
Kazakhstan’s leader, however, did not hide the scale of the problems that the nation faced. The country, he said, was feeling the full force of storms from outside its borders. The combined impact of the slowdown in global growth, the collapse in commodity markets including oil prices, and increasing political instability and competition means Kazakhstan, like many countries, is facing a very challenging time.
We have heard the same gloomy message from some outside commentators. But Kazakhstan’s leader reminded both his citizens and international friends that this was not the first crisis that the country and its people had faced and, ultimately, overcome. Indeed, he said modern Kazakhstan was born out of the collapse of Soviet Union in 1991, which had a terrible impact, for a time, on living standards in the country.
Just as Kazakhstan was successfully charting its way out of these difficulties, the financial crisis in Asia at the end of the last century threatened to reverse progress. The response was to accelerate market reforms, which have been vital for the country’s economic success.
Kazakhstan also did not just survive but, almost uniquely, continued growing during the recent global financial crisis. The result, as President Nazarbayev said, is a modern, prosperous country whose citizens have seen their lives improve by every measure.
But while this history demonstrates the country’s resilience, it cannot, of course, be taken for granted. The same courage, determination and unity, coupled with effective reforms, have to be demonstrated again.
As with everything in life, the sooner the right steps are taken, the better chance of success. Here, Kazakhstan has an advantage thanks to President Nazarbayev himself. He was one of the first world leaders to warn of the dark clouds approaching, which he said, had the potential to be even more damaging than the global crisis of 2008-09.
More importantly, he has also ensured that the country began to put in place the reforms needed to see it through this impending storm. Over the last few months, a whole range of far-reaching steps have been either put in place or accelerated through the Nurly Zhol economic stimulus programme and the 100 Concrete Steps reform plan. Already, up to 80 laws and other legal documents have been approved and are being put in place, creating a markedly different society and environment for businesses come Jan. 1, 2016 when the majority of these regulations kick in.
The diversification of the economy to reduce dependence on the export of raw materials has been stepped up. Major investment to modernise national infrastructure has been found. This has been coupled with far-reaching modernisation of the country’s key institutions so they serve the economy and citizens better.
All these will bring both short-term and long-term advantages. The investment in infrastructure projects, for example, will give an anti-cyclical boost to growth and jobs when it is needed most while ensuring the country is better prepared to seize the opportunities a growing world economy and our position between East and West will bring in the future.
It is on this solid foundation for modernisation and development that the initiatives announced in the State of the Nation this week will be built. There was a new emphasis on regional development so all parts of the country can benefit from economic growth. Welfare policies will be modernised with increased support for the vulnerable coupled with reforms to encourage work rather than welfare dependency.
Privatisation is to be stepped up to encourage competition, efficiency and entrepreneurial spirit. Samruk Kazyna’s assets alone account for more than 40 percent of the nation’s gross domestic product and, along with Baiterek and KazAgro holdings are to be reduced in size and influence on the economy. A new drive to encourage exports to help rebalance the economy is to be launched.
These reforms were all shaped within a clear commitment that Kazakhstan will live within its means. The national resources carefully built up in the country’s Sovereign Wealth Fund will not be used to fund current expenditure or to defend the currency. Government departments will have to show they are providing value for money. The tax system is to be simplified including by replacing VAT with a broader sales tax to close loopholes and tackle the shadow economy.
Private investment, from overseas as well as within Kazakhstan, is to replace public money in funding capital projects. The country’s openness and attractiveness to outside investment has been an important motor of past economic growth. The State of the Union promised a new impetus to improve the country’s investment climate, already judged as well within the best 50 in the world.
These measures will all maintain outside confidence in Kazakhstan’s future, which President Nazarbayev said was one of the country’s great achievements. Along with Kazakhstan’s reputation as a trusted ally in international affairs, it also helps explain why investment continues to flow into the country from our partners and international financial institutions.
Kazakhstan is not, as he said, facing these challenges alone. But, in the end, it is the will and unity of the Kazakh people which will ultimately decide if opportunity emerges from challenge. Past experience shows why, although the path ahead will be difficult, there is reason for confidence.