A Study on Economic Development in the New Silk Road

KazakhstanMukhamediyev BULAT

Kazakh National University

• Territory of the republic (thsd. sq. km) 2724,9• Population (1.05.2011, thsd., person) 16 536• Density 6.06• Capital was moved from Almaty to

Astana in 1997

Economic Development of Kazakhstan in 2000-2010

• Rate of GDP growth 9-10 % last 10 years– The extraction of natural resources– Favorable investment climate – Developed financial sector

• The Economy is closely integrated into global processes– Reflects the cycles of the global economy, all its ups and

downs– Due to the structure of exports it is able to extract excess

profits in times of crisis

Rate of GDP growth

GDP growth

Inflation • 6-8 % in period 2000–2006• Up to 19 % in 2007-2008• The banking bubble (excessive borrowing)• The real estate bubble (housing prices rise in ten

times)• They burst with the onset of the global financial crisis• The sharp decline in lending to the economy• The slowdown in economic activity• Decline in real incomes

Government measures

• Increases in pensions and salaries for public sector employees

• Support the banking system

• Strengthening the raw material orientation of the economy

• In 2010 exports of mineral products - 74.9%

– including oil and associated gas 50% of exports

The Resource Curse • Increased production of oil and gas

condensate• Reserves will last for 35-50 years• Dutch disease • The development of economic and political

institutions, the OF• Diversification of the economy • Financial sector development, access to

investment resources• The increase in total factor productivity

REER

Estimated crude oil production in Kazakhstan, mln barrels per day

Oil

• Tengiz and Kashagan - an annual increase of 5 million tons

• In the next 10 years the RK may enter to the five largest suppliers of mineral resources

• Problems in oil refining sector

The structure of oil and gas condensate in the ROK in 2000-2011, mln. T

The structure of oil and gas condensate in the ROK in 2000-2011, mln. T

0

10

20

30

40

50

60

70

80

90

100

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Export Domestic consumption Import

Economic Development• High prices are favorable for the development

of the economy of Kazakhstan.

• However, the productivity decreases for a large part of non-oil economy.

• Liquidity in the banking system is restored, but new loans made in small quantities.

• The most important factor of the growth is the price of oil. In 2010, they rose by 41%.

• Fixed capital investment has shifted from foreign sources to domestic sources.

• The state budget deficit - about 2%.

The price of Brent crude oil, U.S. $ per barrel

Industry

Foreign Direct Investment in fixed assets for the years 1993 -2010, USD million

GDP growth

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Real GDP growth, % 9,8 13,5 9,8 9,3 9,6 9,7 10,7 8,9 3,2 1,2 7,0

Nominal GDP, $ billion 18,3 22,2 24,6 30,8 43,2 57,1 81 105 132 113 146

Oil Extraction and its Price

Inflation

Export and Import, 2010Export, % Import, %

CIS 13.4 45.8

Russia 8.1 37

Europe 54.1 25.3

Italy 16.2 5.3

France 7.5 1.7

Asia 25.7 21.7

China 17.1 13.3

Turkey 2.1 2.1

Japan 0.9 1.9

Korea 0.4 1.8

Risks• The main risk to Kazakhstan is the price of oil.

According to the WB the oil price rise by 1% leads to an increase in GDP by 0.08%.

• Oil in 2009 was about 70 percent of exports, 26 percent of GDP.

• Diversification of export destinations:- KPC and Atyrau-Samara- Baku-Tbilisi-Ceyhan pipeline- Atasu-Alashankou

• External risks to the financial sector• The instability of the flow of portfolio

investment (12% of GDP in 2010)• External debt equels about 80% of GDP.

Customs union

• Russia, Kazakhstan, Belarus - 01.01.2010.• Creating a single economic space2012 году.• Для Казахстана средний тариф увеличился с 6.7 до

11.5.• В 2010 году общий объем импорта остался почти

неизменным.• Однако, импорт за пределами ТС сократился на

20%, а из Китая – на 48%.• В 2011 импорт из Китая медленно

восстанавливается, а из Европы и Северной Америки снижается.

до 45 суток

10 суток

14 суток

Западная Европа -Западный Китай – 8 445 км

Транссиб – 11 500 км

Морской путь через Суэцкий канал – 24 000 км

45 days

10 days

14 days

West Europe - China – 8 445 km

Transsib– 11 500 km

The sea route through the Suez Canal – 24 000 km

Impact of the new Silk Road

• The Economy of Kazakhstan• Other countries