Wednesday, 22 January 2014

President Nazarbayev Sets Priority Goals Up to 2050

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By Georgiy Voloshin (the 22/01/2014 issue of the CACI Analyst)

On January 17, Kazakhstan’s President Nursultan Nazarbayev made his annual address to the Nation, outlining key government priorities for the upcoming year. Most of his speech was dedicated to the implementation of the “Kazakhstan 2050” strategy that he unveiled in December 2012. An earlier strategy entitled “Kazakhstan 2030” was adopted back in 1997 and subsequently declared largely implemented by the president. In line with Kazakhstan’s new strategic course, the country has set out to become one of the world’s top 30 developed nations by the turn of this century.

Speaking before an audience comprised of high-ranking public officials, including the heads of the two chambers of Parliament and the Prime Minister, Nazarbayev said that Kazakhstan would seek to maintain annual GPD growth above four percent, after its economy grew by six percent last year. While the country has scaled back its growth expectations due to the diminished prospects of the global hydrocarbon market, it now intends to boost the development of non-extracting sectors. With the number of urban dwellers set to increase by at least 15 percent by 2050, Kazakhstan’s small and medium enterprises should account for half the country's GDP by that date, instead of the current 20 percent.

Kazakhstan is also keen to attract more foreign direct investments, bringing their overall share up from 18 to 30 percent of its GDP. According to Nazarbayev, the government should by September 1, 2014, work out a new package of laws regulating the field of venture investments. In this vein, the best practices introduced by members of the Organization for Economic Cooperation and Development (OECD) are likely to serve as the general framework for Kazakhstan’s innovative development initiatives.

Since higher education and science were mentioned in the “Kazakhstan 2050” strategy as the core focus areas of the national policy agenda for the next several decades, four cities have been identified by the president as having the potential to become innovation hubs. Besides Astana and Almaty, Kazakhstan’s former and present capitals, Aktobe and Shymkent, respectively in the west and south of the country, should receive both public and private funding to develop cutting-edge scientific and technological projects.

In his speech, President Nazarbayev deplored regular shortages of gasoline and aviation fuel in a country widely known for its well-developed oil and gas production industries. Currently, Kazakhstan has three oil refineries on its territory, all undergoing comprehensive overhauls aimed at increasing their production capacity. Last year, the Oil and Gas Ministry already noted that a fourth oil refinery might be constructed by 2025, when the three existing facilities will have become largely incapable of satisfying the constantly growing demand. The president, however, ordered his government to prepare a detailed plan for the construction of a new refinery by the end of this year’s first quarter.

Nazarbayev also said that his country would need to accelerate the construction of a nuclear power plant to generate cheaper and abundant electricity. Previously, Kazatomprom, Kazakhstan’s state-owned uranium company, made public its decision to locate the nuclear facility in the country’s west. In 1972-1999, a power generation and desalination installation was already in operation in the city of Aktau on the Caspian Sea. However, it has been decommissioned and is currently being closed in stages, waiting for a replacement. Russian, French and American firms are said to be in competition to build a modern nuclear power facility, the exact location of which is yet to determined. 

Furthermore, the president ordered the National Bank to come up with a plan to reduce inflation to some three or four percent annually, although it already amounted to only 4.8 percent last year, due to a less upbeat economic performance. In 2014, Kazakhstan’s central bank should also elaborate a state program for the development of the domestic financial sector up to 2030, in a bid to incentivize securities trading and ensure a better exposure of local companies to potential overseas investors. The first quarter of 2014 should also see the adoption of a comprehensive privatization scheme, in line with Nazarbayev’s intention to generate extra budget revenue by downsizing the Samruk-Kazyna sovereign wealth fund and transferring some of its key assets into private hands. Finally, Nazarbayev stressed the importance of enhancing Kazakhstan’s transit potential and developing close transport ties with neighboring markets, especially within the Customs Union with Russia and Belarus.

While the extent of Nazarbayev’s proposals is ambitious as usual, their actual feasibility is far from certain. They will surely require not only coherent, timely and well-managed policies but also continuous political leadership which may be found lacking in case of a presidential succession. Kazakhstan’s freedom of action may further be constrained by its membership in the Customs Union set to become the Eurasian Economic Union as of January 2015 as well as any future turbulence on the energy markets. 

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