2023 annual address to the nation of Kazakhstan: Implementation of President’s economic initiatives
In Kazakhstan, the political season traditionally begins in early September, marked by the President’s annual address, which sets the course for the country’s future development. In last year’s address, Kassym-Jomart Tokayev emphasized the need to accelerate the country’s economic growth. A Kazinform News Agency analyst examined what has been achieved in this area over the past year.
The strategy for attracting investments to the country
In his address to the people of Kazakhstan titled “The Economic Course of a Fair Kazakhstan” Kassym-Jomart Tokayev identified the lack of investments as the main problem limiting economic growth. To enhance the country’s investment attractiveness, the Ministry of National Economy has developed a New Investment Policy Concept, which will be in effect until 2029. This document is part of Kazakhstan’s strategic planning system.
Aigul Kosherbayeva, the Chief Research Fellow in the Department of Economic Policy Analysis at the Kazakhstan Institute for Strategic Studies under the President of the Republic of Kazakhstan (KazISS), notes that the Concept is aimed at increasing investment volumes in the non-resource sector, enhancing labor productivity, and gradually localizing production facilities. The plan includes simplifying procedures for foreign investors, which should reduce administrative barriers and improve access to investment resources.
Over the past year, there has been a positive trend in attracting investments to Kazakhstan. According to data from the National Bureau of Statistics of the Agency for Strategic Planning and Reforms of the Republic of Kazakhstan, compared to 2022, investments in Kazakhstan’s fixed capital amounted to 18 trillion tenge in 2023, an increase of 13.7%. However, in January-June 2024, the volume of investments in fixed capital was 6,654.3 billion tenge, which is 3.5% less than in the same period in 2023 (in comparable prices).
In 2023, Kazakhstan introduced new benefits and preferences for investors aimed at improving the investment climate and attracting capital. Specifically, these included a unified package of incentives for investors, such as a 30% reduction in tax reporting, a 20% decrease in tax payments, and the retention of existing effective incentives for investors. Additionally, fiscal incentives were introduced for geological exploration to attract investments in this area and to replenish the mineral resource base in the oil and gas sector. Moreover, support was extended to investors in special economic zones (SEZ). SEZ participants now have the option to purchase land plots after fulfilling all their investment obligations, providing additional incentives for investors operating in these zones.
“According to the National Infrastructure Plan until 2029, approved by a Presidential Decree in July 2024, ways of providing investors with ready infrastructure are being considered. The possibility of allowing investors to develop infrastructure independently, which would reduce their costs, is also under review,” explains expert Aigul Kosherbayeva.
In addition, a special Council on Investment Attraction (Investment Headquarters) operates under the Government of Kazakhstan, actively working to address the immediate and systemic issues faced by investors and businesses. A list of major projects for creating high-value-added clusters in priority areas of the manufacturing industry has already been approved. This list includes 17 projects in the metallurgy and chemical industries, petrochemicals, automotive manufacturing, and other sectors.
Development of nuclear energy
The President’s directive on the development of nuclear energy has become a particularly important economic and political issue. Kassym-Jomart Tokayev emphasized that as the world’s largest producer of uranium, Kazakhstan should have its own nuclear generation capacity. He instructed that public hearings and comprehensive discussions on the construction of a nuclear power plant (NPP) should continue.
“The construction or rejection of a nuclear power plant is an extremely important issue concerning the future of our country. Therefore, I propose to bring it to a nationwide referendum. We will determine the specific timing later,” said the Head of State.
In June 2024, Kassym-Jomart Tokayev announced that a referendum on the NPP would be held this fall. Subsequently, public hearings were held in all regions of the country. Last week, public hearings on the construction of a nuclear power plant took place in Almaty and Astana.
The area around Lake Balkhash was selected for the construction of the NPP. After extensive research, the choice fell on the small village of Ulken in the Almaty region. The government has formed a so-called shortlist of reactor technology suppliers who have expressed interest in the NPP project in Kazakhstan. The list includes four leading global companies: the French EDF with the EPR-1200 reactor, the Russian state corporation “Rosatom” with the VVER-1200 reactor, the Korean KHNP with the APR-1400 reactor, and the Chinese CNNC with the HPR-1000 reactor.
The Director General of the National Nuclear Center of Kazakhstan, Erlan Batyrbekov, is confident that the construction of a nuclear power plant is necessary not only to address the electricity shortage but also to develop the industry in our country.
“Considering the growing global environmental challenges related to greenhouse gas emissions, our country has adopted a course towards achieving carbon neutrality by 2060. The Strategy for Achieving Carbon Neutrality of the Republic of Kazakhstan has been approved by a presidential decree. The era of thermal energy in Kazakhstan, as well as worldwide, is gradually coming to its logical conclusion. Therefore, our energy system urgently needs the introduction of new large-scale base generating capacities, as well as modernization and diversification overall,” said Erlan Batyrbekov.
Economic growth and inflation management
In his address to the nation on September 1, 2023, the President stated that the primary goal of the planned reforms is stable economic growth at the level of 6-7%. Kazakhstan has set ambitious goals to double its GDP by 2029, reaching $450 billion. Aigul Kosherbayeva believes that this can be achieved through a comprehensive approach supported by business, infrastructure, and innovation development.
“The government forecasts economic growth in 2024 to be at least 5.3%. Meanwhile, the International Monetary Fund predicts that growth will not exceed 3.1% in 2024, mainly due to declining oil prices, potential obstacles in oil exports, and slowing growth in trading partner countries (Europe, China). Geopolitical tensions, including the likelihood of secondary sanctions, could weaken business activity and investor confidence in the region. Additionally, ambitious goals for decarbonizing the economy and climate change challenges may negatively impact the financial system and economy due to their high capitalization. The general concern about restrained economic growth in Kazakhstan in 2024 compared to 2023, as well as the forecasts of the Asian Development Bank at 4.3% and the UN at 4.8%, are also based on this,” noted Kosherbayeva.
According to data from the National Bureau of Statistics, in 2023, compared to the previous year, the real GDP growth was 5.1%, including real growth in the production of goods, services, and net taxes on products, which were 4.4%, 5.2%, and 7.4%, respectively.
Furthermore, as explained by KazISS, economic growth depends on the implementation of the National Development Plan, approved by the President on July 30, 2024. Experts highlight several factors contributing to economic growth: foreign trade, investment in fixed capital, the dynamics of the service and construction sectors, business activity index trends, and changes in inflation. The development of foreign trade, taking into account the growth of regional initiatives within the framework of Central Asian cooperation, can significantly impact its growth.
Experts predict moderate economic growth in 2024. Government measures and changes in monetary policy are expected to improve business activity.
“Sustainable growth in various sectors of the economy, such as agriculture and manufacturing, will be driven by ongoing structural reforms and economic diversification aimed at reducing dependence on hydrocarbons. A special focus is on increasing investments in manufacturing, creating new industries, and boosting investments in education and workforce training, which will help build a highly skilled labor force capable of working in innovative sectors and with new technologies,” commented a KazISS researcher.
Regarding another factor of economic growth, in 2023, the inflation rate was halved to 9.8%. According to Aigul Kosherbayeva, this enhances economic stability for businesses.
The expert notes that doubling GDP growth by 2029 largely depends on the pace of labor productivity growth. The Ministry of Industry and Infrastructure Development of Kazakhstan is currently actively working to reimburse part of the costs associated with promoting domestic processed goods, works, and services in the domestic market.
Thus, to accelerate economic growth, Kazakhstan succeeded in 2023 in increasing investments, supporting the manufacturing sector, controlling inflation, and improving foreign economic activity. Experts are confident that these reforms will lay the foundation for further sustainable economic growth.
