June 19, 2007

Future of Kazakhstan

Interesting visit – giving a presentation on the investment potential of the country at a conference in Karaganda opened by the Prime Minister. Kazakhstan is a spectacularly vast and beautiful country, with massive resources of oil, gas, coal, copper, uranium and many other minerals. Kazakhstan is the size of Europe, yet most people in Europe cannot place it on a map. Kazakhstan suffered under the former Soviet regime, was host to many Gulag camps, has been affected by industrial and nuclear pollution on a massive scale, is severely short of water (hence death of the Aral sea), and yet life expectancy and incomes fell from already low levels when Communism ended.

The ending of Russian control created high expectations but the reality was half a decade of chaos and uncertainty as reforms gradually worked through and internal markets began to develop. Living standards fell sharply during those years and life was very tough for millions of people.

Rapid development of oil and gas fields in the early 2000s has resulted in huge economic growth, and Kazakhstan is likely to see continued inflation in real estate prices as well as in other sectors. Government income will rise rapidly as new oil and gas fields come on stream through 2008 onwards, and we can expect major investment in large-scale infrastructure as well as in health and education. At the same time, expect major environmental initiatives, some linked to ecotourism, of which one will be renewed regional efforts to allow the Aral Sea to recover.

Kazakhs are returning to the country and birth rates are rising, while significant numbers of Russians continue to leave. The net effect is likely to be population growth of around 0.5m to 1m every two years. There is a feel of optimism and yet there is a long way to go in improving basic health care and social support, especially for the elderly or vulnerable. Kazakhstan is likely to find that oil and gas wealth is a mixed blessing. As energy exports rise, so will the value of the national currency, making other exports more difficult for tens of thousands of small and medium sized businesses on which the wider and more sustainable future of the economy will depend.

As we have seen in many other oil-rich nations, huge energy reserves can create other challenges ranging from national security threats from energy hungry neighbours, to internal threats from groups keen to take power and cream off wealth for themselves. Neither seem a significant issue at present in Kazakhstan.
Kazakhstan is strategically placed with political stability, good relations with neighbouring nations, carefully balanced diplomacy with both Russia and the US, and greater religious tolerance than some of its neighbours (the country is roughly half Muslim and half Christian).

There are huge business opportunities here for people who are sensitive to history and culture, globalised in outlook and well connected to people who matter.
The visit was interesting for another reason: the AIDS foundation I started in 1988 (ACET) has trained community workers in HIV prevention in Kazakhstan and other countries in the region so it was helpful to meet key people and learn about the spread of HIV and practical steps being taken to save the lives of young people at risk.
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