Kazakhstan: The Illusion of Economic Growth or Financial Vaccination against the Teflon Mark?

Kazakhstan is at the epicenter of rumors: billions of tenge are pouring into the economy, investors are rushing to return their capital, and Dutch Prime Minister Mark Rutte, known as “Teflon Mark,” is flying to Astana. What is behind this sudden influx of investment and what is the real picture of the Kazakhstan economy?

False impression of growth

At first glance, everything looks impressive: the volume of investments in fixed assets in the first four months of 2024 increased by 19.9% and reached 403.2 billion tenge. The contribution of the manufacturing industry amounted to 4.3 billion tenge, demonstrating an increase of 105.2% over the four months. In 2023, labor productivity reached $52.7 thousand per person, and production in the manufacturing sector in the first four months of 2024 amounted to 7.1 trillion tenge, with exports of goods worth $5.6 billion.

Metallurgy: gold plating

Production in the metallurgical industry increased by 5.1%. Production of cast iron reached 1 million tons, steel - 1.3 million tons, flat products - 834 thousand tons, aluminum - 87.4 thousand tons, zinc - 89 thousand tons, copper - 159.8 thousand tons. Kanat Sharlapaev, Minister of Industry and Construction, announced the implementation of 21 projects in the metallurgical industry totaling 464.2 billion tenge, which will create over 4,700 jobs.

Chemical industry: growth and prospects

The chemical industry showed growth of 6% in 2023. In 2024, it is planned to launch 14 projects with investments of 29 billion tenge. The KazAzot company in the Mangystau region will begin production of ammonium sulfate, and TenizEcoService in the Atyrau region - liquid nitrogen.

Light industry: a forgotten industry

Against the backdrop of these successes, the weakness of the light industry is visible, which showed growth of only 0.3% in 2023 due to a decrease in the production of textile and leather products. The state promises to purchase goods to support this area for two years, and private companies are encouraged to do the same. In 2024, it is planned to implement 12 projects in light industry with an investment volume of 23.4 billion tenge and the creation of 720 jobs. Among them: KazFeltec in the Aktobe region, which produces building materials from recycled wool, and the Balabi Textile and Nappa factories in Shymkent, specializing in the production of socks and shoes.

Building materials: slow progress

Production of construction materials increased by only 1.1% in 2023. As part of the national project “Comfortable School” and restoration work after floods, it is planned to increase growth rates through the use of domestic products. In the domestic market, the share of domestic manufacturers of building materials reached 68%. Kazakhstani manufacturers fully supply the domestic market with basic building materials, such as concrete, dry mixes and cement. However, the production of finishing materials remains at a low level.

Mark Rutte: Teflon guest

Against the backdrop of these successes, Dutch Prime Minister Mark Rutte visited Kazakhstan. President of Kazakhstan Kassym-Jomart Tokayev noted that the Netherlands is the largest investor in the Kazakh economy, with direct investments exceeding $120 billion. However, few people know that a significant part of these funds is Kazakh money, repackaged through Dutch offshore companies.

Petrochemicals: steps towards protectionism

Energy Minister Almasadam Satkaliev announced the development of a law “On the petrochemical industry” to stimulate and support the petrochemical industry. This is one of the protectionist measures that has already begun to bear fruit, unlike the “free market” of the past.

Mass poverty: the other side of the coin

Despite the impressive figures, mass poverty remains a pressing problem. The economy of Kazakhstan is growing, but most of the population does not feel it. The authorities claim great achievements, but the real incomes of the population remain low.

Kazakhstan: Illusion of Economic Growth or Financial Vaccination against the “Teflon Mark”? (Part 2)

Behind-the-scenes games and hidden risks: Despite glowing reports of economic growth, there are serious problems and risks lurking behind the scenes that are not advertised. What price does Kazakhstan pay for its “success” and who really benefits from these investments?

The other side of the coin: hidden debts and obligations

Behind the increase in investment and productivity is an equally significant increase in external debt and obligations to foreign creditors. Kazakhstan’s debt burden is growing, which creates serious risks for the country’s financial stability in the future.

Dependence on raw materials

The economy of Kazakhstan remains heavily dependent on the export of raw materials such as oil, gas and metals. Despite attempts at diversification, the bulk of the country’s income comes from the export of raw materials, making the economy vulnerable to fluctuations in world prices for these resources.

Offshore schemes and dubious investments

As mentioned earlier, a significant portion of the investment in Kazakhstan comes from the Netherlands, but many of these funds are Kazakh money returned through offshore schemes. These dubious financial transactions call into question the transparency and integrity of the country’s economic processes.

Corruption and bureaucracy

Corruption and bureaucracy remain serious problems hampering the development of private business and foreign investment. Numerous corruption scandals involving high-ranking officials undermine confidence in the government and economic reforms.

Social problems and inequality

Mass poverty and social inequality continue to be a pressing problem. Despite growth in GDP and productivity, real incomes remain low, and the standard of living of most Kazakhstanis has not improved. Many families face difficulties in accessing quality education, health care and social services.

Plans for the future: reality or utopia?

The government of Kazakhstan is announcing ambitious plans to develop various sectors of the economy, including metallurgy, chemical industry and light industry. However, without serious structural reforms and the fight against corruption, these plans may remain on paper.

Kanat Sharlapaev, Minister of Industry and Construction, promises the implementation of 21 projects in the metallurgical industry with a total investment of 464.2 billion tenge and the creation of over 4,700 jobs. Energy Minister Almasadam Satkaliev speaks about the development of a law “On the Petroleum and Gas Chemical Industry,” which should stimulate the development of the industry.

Real results and conclusions

The economy of Kazakhstan does show some signs of growth, but this growth is largely artificially supported by offshore schemes and loans. For sustainable development, the country needs to address deep structural problems such as corruption, bureaucracy and social inequality.

The current economic growth is more an illusion created by artificially pumping up finances than the result of real reforms and improvements. The country’s true prosperity is only possible through profound changes and a real fight against systemic problems.

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