This Country Partnership Strategy (CPS) has been developed in close collaboration with the Government of Kazakhstan to ensure that it responds to the country’s emerging development objectives and to its rapidly changing economic and social conditions. Financing will not be the primary relationship driver for this CPS. Rather, the Bank will use its international knowledge and experience to help Kazakhstan build a modern, rapidly growing and diverse economy that improves the welfare of all its citizens and especially the poor.
The next phase of the relationship between the Government and the Bank will build on the Joint Economic Research Program (JERP), an innovative approach to non-lending services under implementation for the past two years. The JERP is cofinanced by the Government and its content is agreed to annually in parallel with the Government's regular planning and budget cycle.
Kazakhstan's recent economic performance has been impressive and its reform record is among the best in the CIS. Growth has been buoyant at about 11 percent on average since 2000, with income per capita expected to be above $2000 this year, 65 percent higher than in 2000. Growth has been driven mainly—but not exclusively—by oil production and oil prices. Many industries, including electricity, food, construction, and banking, have rebounded strongly thanks to structural reforms, economic stability and demand generated by oil revenues.
The Governemnt's Development Program; Lessons Learned from Past World Bank Experience
Over the past several years the Government of Kazakhstan has created a vision for its future built around two key goals: to become a full member of the global economy through the adoption of international standards for its productive, financial and public sectors and to diversify the economy away from oil and minerals. To reach these objectives, a four-pronged policy agenda is being designed and implemented: (1) reducing losses in competitiveness through prudent management of the oil windfall and increased public sector efficiency; (2) promoting competitiveness by strengthening the government's capacity to identify and reduce barriers to businesses and private investors; (3) building the foundation for future competitiveness by investing in human capital and basic infrastructure; (4) ensuring future growth will not harm the environment and past liabilities are mitigated.
While the JERP is a key driver of the CPS, the Government recognizes increasingly that the Bank’s involvement in project preparation and supervision can transfer knowledge and skills in ways that the JERP alone cannot accomplish. The areas of focus are the following: (i) preventing loss of competitiveness through appropriate macro and fiscal management; (ii) enhancing competitiveness and private business by building a supportive role for the state; (iii) building a foundation for competitiveness through strengthening human resources and infrastructure; (iv) ensuring sustainable growth through a focus on the environment.
The strategy outlined in this document faces two broad sets of risks -- the first associated with Kazakhstan’s dependence on oil revenues and the second associated with the nature of the CPS. Risks associated with oil dependency fall into two groups: those having to do with macroeconomic management and those having to do with behaviors and incentives. Risks associated with the strategy stem from the fact that it represents a new business approach for the Bank in Kazakhstan. Kazakhstan is also vulnerable to other external shocks beyond those associated with the oil sector.
This CPS is designed to ensure strong Government ownership of the Bank’s program, to allow the Government and the Bank to adjust that program to changing Government priorities and country circumstances, and thereby to maximize the Bank’s contribution to Kazakhstan’s development. As would be the case for any new relationship, the strategy will challenge both the Bank and the Government, but if it is successful, it will create a real partnership in service to the people of Kazakhstan.
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