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INTERVIEW-Oil-rich Kazakhstan growing fast, must diversify
By Dmitry Solovyov

ASTANA, Jan 28 (Reuters) - Kazakhstan's economy may double by 2010 against a background of high oil prices and rising crude output, but risks long-term stagnation by relying too heavily on easy oil revenues, the Economy Minister said in an interview.

"Our strategy until 2010 contains a political task to double gross domestic product (GDP) compared with 2000," Economy and Budget Planning Minister Kairat Kelimbetov told Reuters late on Monday.

"To achieve this, the economy must grow by an average seven percent a year," said the charismatic Kelimbetov, the youngest minister in the cabinet who turned 34 on Tuesday.

Kazakhstan, a vast Central Asian nation of 15 million with abundant reserves of oil and metals, appears to be set to meet the ambitious target.

GDP, in steep decline immediately after independence in 1991, expanded by 9.8 percent in 2000 and by 13.2 percent in 2001. The government estimates the economy grew 9.5 percent last year, beating the original 7.0 percent growth target.

"This is the objective reality," Kelimbetov said. "It's obvious the economy and its growth will be pegged to growing oil output, crude exports and, naturally, to (world oil) prices."

Kelimbetov said that by 2015 Kazakhstan would be one of the world's top five oil producers when its crude and gas condensate output would hit 150 million tonnes (3.0 million barrels per day). This year's output is set to rise to 52.7 million tonnes from 47.2 million tonnes in 2002, he said.

The minister said the government forecast a "realistic scenario" for the next few years, under which average world oil prices would fluctuate between $20 and $23 per barrel.

He said that, given this "sober realism," the economy would expand by 6.3 percent this year, higher than an earlier official estimate of 6.0 percent growth.

Annual GDP growth would then speed up to 8.6 percent in 2006, when oil output is due to start rising briskly from new offshore oilfields in the Caspian Sea.


But while painting a rosy picture based on pumping the country's "black gold," Kelimbetov also warned against complacency and said that hard times may not be far off if the country does not make efforts to diversify its lopsided economy.

"The main cause for concern is that the bulk of investment is flowing into oil, not processing industries," he said.

"In economies based on raw materials, sooner of later there comes complacency, and this corrupts. In this case, those countries which are void of natural resources turn out to be much more competitive in the final analysis."

Mineral-rich Kazakhstan, sprawling between giant neighbours Russia and China, is a land-locked country and a relatively small consumer market in the Eurasian region.

But Kelimbetov said that Kazakhstan had yet to make efficient use of its well-educated and highly-skilled workforce to find a "market niche" of its own.

While "diversification" is the economic buzzword used by officials from strongman President Nursultan Nazarbayev down, Kelimbetov said that the country must try to export more varied goods rather than impose barriers for imports.

"This (trade barriers) is just unthinkable now, while we aspire to join the World Trade Organisation," he said.

He said land reform, which envisages private land ownership, was a top priority. According to official statistics, some 40 percent of Kazakhstan's population live in rural regions, but generate less than 10 percent of national GDP.

Kelimbetov said Kazakhstan, a large alumina producer, would build its first aluminium smelter. A tender to sell a state-run stake in alumina firm Alyumini Kazakhstan will be held on Tuesday. Building a smelter is a key term investors must meet.

Large chunks in several state companies may be offered to investors to improve their corporate governance and bolster the currently listless stock market, Kelimbetov said. He added however that this might take two to three years.

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