Not one to waste a good crisis, Kazakhstan’s premier, Karim Massimov, wants to speed up structural reforms and rebalance the economy by lessening the dependence on hydrocarbons.
Kazakhstan is implementing a slew of reforms plucked from the most forward-thinking governments around the world as it seeks to diversify its decelerating, commodities-heavy economy.
Yet even that may not be enough to prevent growth from slowing to a crawl this year — a direct result of the recession bedeviling its largest trading partner, Russia.
In its latest Regional Economic Prosp-ects outlook, issued on Thursday, the ERBD tipped growth in Kazakhstan to come in at just 1.5% this year and 2% in 2016, down from 4.3% in 2014, hit by lower oil prices, an influx of cheap imports from recession-hit Russia and the “spillovers of negative investment sentiment from the Russia/Ukraine crisis”. The threat of higher non-performing loan ratios at leading Kazakh lenders would return, the development bank warned, along with heightened social unrest.
Yet Central Asia’s largest economy and its premier Karim Massimov see the challenges of a sharply flagging economy as an opportunity to push through greater reform, reckons the EBRD Kazakhstan country director, Janet Heckman. “The prime minister has a saying: ‘Never waste a good crisis’,” she said. “He believes it’s easy for an energy-rich country to avoid necessary structural reforms when oil prices are high — and that diversifying an economy is that much harder when oil prices drop and regional growth declines.”
If Massimov is indeed looking for that sort of challenge, he’s in luck. The Kazakh economy remains overly dependent on oil and commodities, having embraced reform only in fits and starts since Nursultan Nazarbayev became president in 1991.
Yet since becoming premier for the second time in April 2014, Massimov has introduced a 30% capital rebate on all foreign investments of more than five years, and scrapped visas for short-term visitors from 10 countries including the UK, Japan and Germany. In July, that programme is set to be expanded to include the US and all western European countries.
BORROWING GOOD IDEAS
In a move reminiscent of China’s special economic zones, the country has streamlined the process through which foreign investors acquire land, secure construction permits and build factories, while pushing ahead with accession plans to join the OECD and the World Trade Organisation.
Kazakhstan appears content to pick and choose best-practice reforms from around the world. It has eased the process of registering a car and placed a moratorium on SMEs being investigated by the police. “Most important to the country’s international standing is enshrining the rule of law into the constitution,” said Heckman
Investor-friendly arbitration courts modeled on those in Singapore and the United Arab Emirates are planned for the near future. Finally a Kt1tr ($5.4bn) stimulus package introduced November 2014 will be used to support SMEs, pay for road and rail upgrades and finance new airports in Astana and Almaty.
“Kazakhstan is borrowing from everyone, looking at global best practices and employing best-practice indicators, while the civil service is being shaken up by bringing in foreign-educated Kazakhs, a process seen as critical to dealing with corruption,” Heckman said.
Source :Emerging Market
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