Abstract
Kazakhstan is not invulnerable to the global financial crisis or to slippage
in the prices of oil and gas – of
which it is a major producer. At
this stage, BMI envisages that real GDP growth will slow from 8.5% in
2007
to 3.4% in 2008 to just 1.7% in 2009. However, we are looking for growth to
accelerate again from
2010. In spite of this, we envisage that
infrastructure spending will remain robust.
In short, Kazakhstan
represents something of an infrastructural bonanza. A sparsely populated,
increasingly wealthy, landlocked country which has a government that is
committed to developing road
links to countries that provide access to
major export markets. Kazakhstan is a crucial part of the Silk
Road
terrestrial trading routes between the Asia-Pacific region (and China
especially) and Europe (and
Russia especially). The crucial hydro-carbons
industry needs substantial new investment if production
and exports are to
increase as planned. Further, the USSR-era has left Kazakhstan with a curious
legacy –
the need to import electricity and gas to supply the major
cities in the south and the southeast of the
country (including Almaty,
which is the former capital and still by far the most populous city in
Kazakhstan). The government has a vested interest in promoting pipelines and
power distribution
networks which will enable Kazakhstan to meet its
requirements with locally produced energy.
For most developing countries,
growth and foreign investment depends on improving governance,
improving
transparency and a reduction in political/ policy risk. Kazakhstan is in the
unusual position
where it is low ranking on many surveys of transparency
and good governance really do not matter. This
is because the main
protagonists in the hydro-carbons industry – and indeed other sectors
where
infrastructure is being built-up rapidly – are risk tolerant.
Put bluntly, domestic State Owned Enterprises
(SOEs), multi-national oil
companies and multi-lateral institutions such as the World Bank and the
European Bank for Reconstruction and Development (EBRD) are largely
insensitive to external
perceptions of risk in Kazakhstan.
In the
short-term, though, residential construction in Almaty and Astana has ground
to a halt – essentially
as a result of the global credit crunch. The
Kazakh banks have become unable to get funding from
wholesale markets
– with the result that the construction companies’ credit lines
have become closed. The
government, in conjunction with the Kazyna
Sustainable Development Fund and the EBRD have taken
steps to address this
situation.
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