This paper analyses the impact that the availability of mineral resources has on Kazakhstan’s economic growth, and proposes policy measures to make Kazakhstan’s economic growth more balanced. According to the authors, Kazakhstan’s economy is highly dependent on the extraction and export of mineral resources. During the years of economic transition, that dependence increased, due to the following reasons:
the production of finished goods declined rapidly during the first years of transition
changes in the composition of GDP led to changes in employment patterns, with a threefold increase in the number of unemployed people from 1993 to 1995
the Kazakhstan economy was closed, with little trade links outside the former Soviet Union
Kazakhstan was successful in attracting foreign direct investment in the oil and gas sector, with over $9.5 billion in 1993- 2000
there is evidence that FDI generated spillovers to the domestic economy
The authors then used econometric techniques to investigate the direction of causality between the production of oil and gas and the production of non-oil traded goods. The authors find that the causality is absent, meaning that petroleum production does not influence the production of finished goods.
The authors conjecture that abundant natural resources may generate the necessary budget inflows and prevent the emergence of an efficient manufacturing and service sector. The authors then debate the effectiveness of various ways of managing the country’s economic growth. The most important existing project is the national oil fund. It is designed to accumulate foreign currency proceeds in order to offset the volatility of oil prices, and to invest in strategic projects.
The authors state that the fund’s management is a serious problem because of the government’s corruption and bureaucracy. The authors identify several other problems:
the government must make sure that in the future it can commit to the promised course of action (this is especially important regarding established agreements with oil investors)
the country should pursue measures guarding its population from world oil price volatility
the country should take into account the fact that oil and gas are non-renewable resources, and that proceeds from the sale of these resources should be used to finance investment rather than consumption