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The Effects of Oil Revenues on Kazakhstan’s Economy

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Kazakhstan's Diversification from the Natural Resources Sector

Part of the book series: Euro-Asian Studies ((EAS))

Abstract

This chapter discusses the effects of oil income on the economy of Kazakhstan, focusing on social development. It argues that Kazakhstan is expecting to face a significant economic slowdown if it remains dependent on the energy sector only. This chapter explores the alternative avenues of economic growth available for the country to avoid overreliance on oil, through the further development of institutions and complex socio-economic reforms. Analyzing broad reforms aimed at modernization and diversification of the economy the government has enacted recently, it suggests that redistribution of oil rents through more effective market mechanisms is critical for diversifying economies in oil-producing regions. This research concludes that more efforts are needed in activating market forces in the economy.

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Notes

  1. 1.

    The third stage of modernization in Kazakhstan. Announced on January 31, 2017, by the former President Nazarbayev. More details about this strategic initiative in the paragraphs below.

  2. 2.

    The income that a government accrues from taxation and duties (both customs and excise duties) collected for servicing the public expenditure.

  3. 3.

    Uzbeks, Ukrainians, and Germans are minority groups.

  4. 4.

    Resulting in default of the Russian State in August 1998.

  5. 5.

    Former President Nazarbayev served as President of Kazakhstan since the office was established in 1990 (28 years ago). The institution of the presidency plays an important role in the political system of Kazakhstan; that is why the president initially announces all significant initiatives.

  6. 6.

    Russian financial crisis (Russian Default) hit Russia on 17 August 1998. It resulted in the Russian government devaluing the rouble from about US $6 up to US $24 during several months. The reasons for it were internal, such as declining productivity, high fixed exchange rate, and chronic fiscal deficit in combination with two external chocks—1997 Asian financial crisis and declining oil prices.

  7. 7.

    GDP is the value of the total goods produced and services delivered in a particular nation for one year.

  8. 8.

    Oil rents refers to the profit before tax or royalties of oil exploration. Taxes and royalties are paid by oil companies to the state where the oil exploration takes place.

  9. 9.

    Middle-income trap is a term describing the failure of the country to sustain growth and transit from resource-driven growth, based on low-cost labor and capital, to productivity-driven growth (Khakas & Kohli, 2011).

  10. 10.

    Current exchange rate is 390 tenge to US $1 (1 December 2019).

  11. 11.

    The O&G industry dominating economy suppresses economic growth and often resource-rich countries are unable to use wealth to develop their economies and have therefore lower economic growth than expected, even lower than natural resource-scarce economies (Sachs & Warner, 1995). This phenomenon has been called a “paradox of plenty” or “resource curse.”

  12. 12.

    Aktobe, Kyzylorda, and the Caspian Sea, later including WKO, Atyrau, and Mangystau.

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Authors and Affiliations

  1. Henley Business School, University of Reading, Reading, UK

    Irina Heim

  2. Ministry of Finance, Nur-Sultan, Kazakhstan

    Kairat Salimov

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  1. Irina Heim
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  2. Kairat Salimov
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Correspondence to Irina Heim .

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  1. Henley Business School, University of Reading, Reading, UK

    Irina Heim

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Heim, I., Salimov, K. (2020). The Effects of Oil Revenues on Kazakhstan’s Economy. In: Heim, I. (eds) Kazakhstan's Diversification from the Natural Resources Sector. Euro-Asian Studies. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-37389-4_3

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  • DOI: https://doi.org/10.1007/978-3-030-37389-4_3

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