Kazakhstan

Kazakhstan has rebounded well from the economic recession that affected the country in the first half of 2009. During the crisis, GDP growth rate registered at just 1.2% and the country plunged into recession from the sharp fall of oil and commodity prices. With an estimated growth rate of 7.1% the first half of 2011, this oil-producing country ranks in the top 10 fastest growing countries, according to the International Monetary Fund.

Rising commodity prices and the expansion of the oil industry have helped to revive the economy with continued growth predicted, barring a dramatic decline in oil prices. However, most non-resource sectors of the economy continue to suffer from low productivity and competitiveness, and the country remains vulnerable to commodity price fluctuations.

A customs union (CU) between Kazakhstan, Russia and Belarus was established in January 1, 2010 and marked a major change in the path of regional integration with important implications for Kazakhstan. The ultimate goal is the creation of a Common Economic Space (CES) for the market of 170 million people by the end of 2012. Kazakhstan is also pursuing accession to the World Trade Organization (WTO) by end of 2012. The ongoing negotiations with EU focus on application of recently introduced customs duty on oil exports.

An upper-middle-income country, Kazakhstan’s per capita GDP was US$ 11,245 in 2011. In the past decade there has been a significant decrease in poverty rates, from 46.7% in 2001 to 6.5% in 2010. The gap between urban and rural living standards still remains - the poverty rate is under 5% in urban areas, while it is about 10% in rural locations. Overall, about 30% of the population receives some sort of social assistance.

Education is a high priority for Kazakhstan, and in 2009, Kazakhstan ranked first on UNESCO’s “Education for All Development Index” by achieving near-universal levels of primary education, adult literacy, and gender parity. These results have reflected Kazakhstan’s efforts of expanding pre-school access and free, compulsory secondary education. For the next 10 years, Kazakhstan is embarking on further major reforms across all education levels.

Kazakhstan faces challenges in restructuring its healthcare system. The country’s health outcomes lag behind its rapidly increasing income. The major causes of adult mortality are non-communicable diseases such as cancer, cardiovascular disease, other tobacco and alcohol-related diseases and injuries. The new State Health Care Development Program recognizes health as one of the country’s major priorities and a pre-requisite for sustainable socioeconomic development.

Agriculture accounts for only 5% of GDP, but the sector continues to employ almost one third (28.3%) of the working population and is critical to addressing poverty and food security, as well as providing an important avenue for diversification of the economy.

Kazakhstan inherited significant environmental concerns related to past military nuclear testing programs, industrial and mining activities, as well as land degradation, desertification, and water scarcity problems. Air and water pollution are a significant environmental concern in Kazakhstan. Environmental monitoring systems are not adequately funded to reflect the current pollution load on the environment. The Government has made progress in environmental management, but significant challenges remain.

Kazakhstan joined the World Bank in 1992. Since then, the Bank has provided 39 loans to the country totaling more than US$5.6 billion, of which about 70% or a little over US$3.9 billion dollars has already been disbursed.

The World Bank’s current portfolio is composed of 12 projects with a total net commitment of US$2.55 billion, of which US$905.3 million is disbursed. Three-fourths of the funds are concentrated in the South-West Corridor Project, which is part of the Government’s plan to upgrade and improve the international transit corridor linking Europe and Russia to China through Kazakhstan. The lending pipeline includes several projects at various stages of preparation.

The new Country Partnership Strategy (CPS) from May 1, 2012 is designed to help the Government of Kazakhstan advance implementation of country development agenda through a high impact program, concentrating on key priorities of competitiveness and jobs, improved governance through higher standards and accountability in public administration and service delivery, and safeguarding the environment. The CPS is programmatic by inter-linking knowledge interventions through sequenced products in a multi-year framework to maximize impact. The CPS targets key areas of lagging performance as revealed by country development strategies or the Bank’s assessment tools, including international comparative analysis.

The strategy is organized around three broad areas of engagement:

• Improving competiveness and fostering job creation with a focus on (i) strengthening fiscal discipline and trade openness; (ii) expanding non-oil sector exports and employment, (iii) re-invigorating financial sector,  (iv) strengthening knowledge for sustained growth, (v) improving energy transmission to poor areas, (vi) building transport connectivity, lowering costs;
• Strengthening governance and public services with a focus on (i) improving governance, (ii) strengthened budget and accounting institutions, (iii) reforming social protection system, (iv) sharpening strategic approach to health reforms;
• Ensuring development is environmentally sustainable with a focus on (i) safeguarding the environment, (ii) raising energy efficiency.

The strategy also acknowledges the role Kazakhstan can play as a provider of experience, and assistance in the Central Asia region and in a broader regional context.  The Bank will continue to promote regional cooperation in energy, water, transport, trade, and communicable diseases.

The CPS Completion Report for 2005-2011, submitted to the Board in May 2012, reflects significant progress on several major development issues, based on continued generation of dialogue and debate around high quality advisory and analytical services, responsiveness, CPS outcomes, innovation, and strong, strategic partnership formed under the CPS.

Joint Economic Research Program (JERP) – the cornerstone of the CPS – is a demand-driven technical support and advisory services program co-financed by the Government of Kazakhstan. It has been providing extensive expert support to the Government’s development needs since 2002. The JERP provided extensive advisory and analytical services (AAA) to the Government on the institutional design and implementation of the National Fund (NF). More recently, JERP advisory services helped the Government to avoid fiscally risky banks’ bailout strategies in the wake of a financial sector crisis and to balance macroeconomic and monetary stability with sustainable growth objectives. Also, JERP supported the formulation of medium-term macroeconomic forecasts and government staff training in this area. JERP AAAs on financial sector risks has spurred important amendments to the regulatory and supervision framework for commercial banks and capital markets. Bank AAA under the JERP on all these elements were made highly effective by the Government’s approach of sponsoring a series of high-level brainstorming engagements with the Bank (co-chaired by the Prime Minister), which helped clarify and internalize the policy advice and recommendations.

Given the country's low need for external financing, the World Bank program is built on the premise of cutting-edge knowledge transfer, capacity enhancement and implementation support, bringing benefits that go well beyond funding.

In the first few years after Kazakhstan’s independence, the World Bank focused on helping the country to implement financial and private sector reforms. After 1997, the focus shifted to public administration reform, with specific attention to improving the country's welfare and social protection policies. Currently, the World Bank is assisting the country with managing public sector and finances, promoting competitiveness and fostering job creation, strengthening governance and public services, and ensuring environmentally sustainable growth.

The Bank assisted in upgrading and modernizing the country's power transmission systems, helped increase agricultural productivity by rehabilitating deteriorating irrigation systems, and encouraged the rural community to diversify into non-traditional areas by nurturing their business skills. In addition, people in the country's western region, who have suffered from a shortage of quality water, now enjoy better health as a result of improved water supply and sanitation. The Bank continues help improving the timely availability of water for productive purposes, including irrigated agriculture, fisheries and industry, while at the same time reviving the Northern Aral Sea. Elimination of the legacy of significant environmental problems related to pollution and natural resource use by heavy industries is another big step towards safeguarding the fragile environment.

World Bank projects making a difference:

Eliminating Mercury's Invisible Threat in Kazakhstan
Mercury pollution is invisible but dangerous. For decades, a factory just 2 km from Temirtau threatened the health of the 170,000 people living there, and their fragile environment. As a result, more than 1,500 tons of this heavy metal were discharged into the Nura River. A project supported by the World Bank and the Government of Kazakhstan invested into the cleanup of the contaminated area to reduce health risks from this toxic substance.

Connecting the North and South
Strong economic growth has led to a sharp increase in the demand for electricity in Kazakhstan. Much of the country's power generation comes from the north, from power plants located in the coal-producing regions and hydroelectric facilities. Power sources in the south are generally small-scale; limited to small hydro, combined heat and power plants, and a high cost oil-fired power plant in Taraz. The combination of unusually severe cold in last several years and antiquated infrastructure used to leave thousands of people in the south in the dark. Cold snaps are still a problem in the region, but power outages have become rare. Since 2009, with support from the World Bank, Kazakhstan has built a new electricity transmission line. This new line provides ample reliable energy to about 3 million people in South Kazakhstan and doubles the energy flow from the north to the south of the country.

Benefiting Before a Road is Built
A new road brings many things; access to new places and services, fresh faces, mobility…and jobs. A new road in Akzharma, a remote village in Kazakhstan, isn’t finished yet, but it has already brought enormous changes. Here, the building of the road is nearly as important to locals as the road itself.