Is Kazakhstan prepared for strong demand for its commodities?

In its oil and mining sectors, Kazakhstan has long welcomed international direct investment. By 2020, $161 billion will have been invested there, with $30 billion coming from the United States. Also, it received a large investment of $27.6 billion from China (via the Belt and Road Initiative), with half of that sum dedicated for oil and natural gas.

Transparency in those projects is probably ensured by the participation of publicly traded Western energy companies, which are subject to stringent internal checks and balances and must deal with Wall Street analysts, investigative journalists, home country regulators, and extractive industry activists. Since the sector accounts for 35% of the nation’s GDP, 75% of exports, and the majority of FDI, the government should take a “Trust, but verify” stance. This is because any ructions might stall funding for the reform programme and concern international investors.

On the other hand, public tenders might be an area where reforms make progress in pointing out flaws in the tendering process and naming the businesspeople and bureaucrats who benefited from insider knowledge and political influence.

For instance, French prosecutors are negotiating a settlement and fines with European aerospace company Airbus SE (which is also a supplier to the American military) over claims of money laundering, fraud, and corruption of foreign officials in the 2009 sale of helicopters, satellites, and a satellite control centre to Kazakhstan.

Kazakhstan opposed Russia’s invasion of Ukraine, is moving away from Moscow, the majority of its imports’ source, and may favour China, the majority of its exports’ final destination. Although officials have stated that relations will be on a commercial, not political, basis and that they will not help Moscow evade Western sanctions, both capitals signed bilateral deals with Russia’s Gazprom despite initial criticism of the country’s proposed tripartite gas union with Kazakhstan and Uzbekistan.

In addition, Kazakhstan has looked into energy and freight lines that go through Russia to avoid doing business with firms that Russia has been sanctioned for. The state railway operator of Kazakhstan will receive a $105 million investment from the European Bank for Reconstruction and Development to support the creation of new freight lines, the bank said in late 2022.

The success of President Tokayev in expanding the economy and luring FDI will depend on his ability to fight corruption, but blaming Nazarbayev for all of it will only get him so far. He must implement reforms that not only increase incomes but also appease influential foreign anti-corruption campaigners, like Transparency International, which claimed Kazakhstan’s 2022 ranking “continues to decline” when in fact the ranking slipped by one point from 2021 and has been up and down since 2018. He must also resolve issues, like the Airbus scandal.

With a GDP of $180 billion, which is more than half the Economy of all of Central Asia, Kazakhstan can now exert economic pressure on the Taliban to change their policies.

In Kazakhstan, where independence came in 1991, more than 49% of the population is under 30. Tokayev has the opportunity to prove to his countrymen that their faith in him is well-placed by having children, which is a vote of trust in the future.