Discusses key economic indicators and trade statistics, which countries are dominant in the market, the U.S. market share, the political situation if relevant, the top reasons why U.S. companies should consider exporting to this country, and other issues that affect trade, e.g., terrorism, currency devaluations, trade agreements.
Last Published: 10/5/2020

Kazakhstan is the second-largest republic of the former Soviet Union, after Russia, and the ninth-largest country in the world in territory.  The country has an abundance of natural resources - including oil, gas, coal, uranium and other mineral deposits - and has exploited these resources to build Central Asia’s leading economy.  Kazakhstan is also emerging as a major transport and logistics hub in the region,  linking the large and fast-growing markets of China and South Asia to those of Russia and Western Europe by road, rail and a port on the Caspian Sea.  Kazakhstan presents a trade gateway to a market of about 150 million consumers in Caspian Sea countries, 50 million in Central Asia and 300 million in Western China.  In addition, Kazakhstan boasts significant agricultural potential for both grain and livestock production and U.S. companies are well positioned to help Kazakhstan diversify across this segment of the economy. With a growing middle class, Kazakhstan provides trade and investment prospects for U.S. firms seeking new opportunities in this growing, emerging market.
Since gaining independence in 1991, Kazakhstan has steadily worked to improve its business and investment climate.  The government of Kazakhstan realizes the need to implement transformative economic reforms to boost productivity and growth.  Implementation of reforms has been uneven, however, and challenges remain in addressing problems related to the country’s competitiveness and economic diversification, its over-reliance on the extractive sector, continued corruption, inefficient bureaucracy, criminal liability for unintended tax infractions and arbitrary law enforcement, especially at the regional and municipal levels. 
In 2019, the World Bank had put its forecast for Kazakhstan’s economy to grow by 3.7% in 2020.  This would be down from the slightly over 4% Kazakhstan logged in 2019.  The COVID-19 pandemic, however, has given Kazakhstan the biggest shock to its economy in almost two decades and is already having a highly negative impact on growth.  Kazakhstan’s failure to diversify its economy away from the oil & gas industry means the road to economic recovery will largely depend on a recovery in the price of oil.  Nevertheless, Kazakhstan’s fast-growing agriculture sector and potential as a key transit hub in the region will help as the country works to regain its economic footing.
Key Economic Indicators and Trade Statistics
Kazakhstan has an export-oriented economy, highly dependent on shipments of oil and related products (73% of total exports).  In addition to oil, its main export commodities include ferrous metals, copper, aluminum, zinc and uranium.  It counts Italy, China, Netherlands, Russia and France as its main export destinations.  Others include Switzerland, Ukraine and Canada.  The United States account for 1.6% of Kazakh exports.
In 2019, total U.S.–Kazakhstan goods trade was USD 1.9 billion, with the United States holding a negative trade balance of USD 471 million.   The main imports from Kazakhstan in 2019 were mineral fuel, oil (63%), iron and steel (13%) and inorganic chemicals (11%). The main U.S. exports to Kazakhstan in 2019 were heavy machinery (29%), aerospace equipment (26%) and electrical machinery (6%).
Kazakhstan’s economy was in a relatively favorable position prior to the COVID-19 pandemic, with low unemployment (4.9%), with real GDP rising (4.1%) and relatively low public debt. However, structural challenges may constrain the government’s ability to respond to the crisis.  According to the World Bank Economic Update, Kazakhstan’s economy in 2020 is expected to contract by nearly 3.0% as commodity prices have dropped, trade has declined and COVID-19 preventive measures have slowed economic activity.  Weak consumer demand and low oil prices, as well as the protracted pandemic, have exposed significant risks to Kazakhstan’s economic outlook.  Moderate GDP recovery is projected by 2.5% in 2021, though uncertainties about the trajectory of the pandemic skew risks to the downside.
Despite the ongoing global economic crisis resulting from the COVID-19 pandemic, Kazakhstan remains the largest economy in Central Asia and a country with much unfulfilled potential. In 2020, Kazakhstan further improved its standing in the World Bank’s Ease of Doing Business Report, where it ranked 25th out of 190 countries. The country has made recent significant improvements in starting a business, dealing with construction permits, registering property, getting credit and resolving insolvency, according to the Report.
The country remains the world’s largest producer of uranium and possesses enormous deposits of a wide range of metals, including gold, iron, chrome, copper, zinc, vanadium and rare earths.  Kazakhstan also has the second–largest oil reserves and the second–largest oil production after Russia among the former Soviet republics.  The United States is among the largest investors in Kazakhstan, with the bulk of investment directed in the oil & gas industry.
Launched in 2018, the Astana International Financing Center offers special tax, visa and employment regimes for companies looking to invest in this middle-income market. The AIFC Court and International Arbitration Center (separate and independent from the Republic of Kazakhstan judicial system) provide a common law court system for the resolution of commercial disputes.  
A growing middle class and a rise in real incomes have increased demand for quality products and brand names.  Inexpensive Russian and Chinese goods flow across Kazakhstan’s borders, but Western goods and expertise are also in demand.  In some cases, consumers are willing to pay more for imported goods and services that offer higher quality and innovation. Customer service in Kazakhstan is sometimes lacking; providing customers with after-sales service could give businesses an edge in the market.
New Opportunities Revealed by the COVID-19 Pandemic
While upending the economy in 2020, the COVID-19 crisis has also revealed opportunities in Kazakhstan.  In particular, the crisis has placed a renewed focus on logistics, digital technologies and the financial sector.  According to KPMG’s report on the Impact of COVID-19 on Key Economic Sectors in Kazakhstan, among the most pressing needs are: use of e-platforms to deliver key public services (including remote education to rural areas); online trade solutions; cargo transportation; development of digital products in the financial sector; IT solutions to track productivity of remote work; modernization of telecommunications networks due to high workload; financing and investments in airports and capital-intensive projects in mining and agriculture among others.
Other Considerations
The government of Kazakhstan has endeavored to reform the investment climate, an effort that has succeeded in transforming some of the regulatory landscape, but much work remains.  Kazakhstani authorities have implemented 43 reforms acknowledged by the World Bank Doing Business Report since 2008.   However, the country still lags in transparency and other metrics critical to  investors, ranking a mere 113 out of 180 countries in Transparency International’s (TI) 2019 Corruption Perception Index.  According to TI’s Global Corruption Barometer, 17% of public service users in Kazakhstan paid a bribe in the previous 12 months.  The government’s efforts at improving the investment landscape are ongoing under the Business Roadmap 2025 and extends beyond it with the Kazakhstan 2050 Strategy, which aims to position the country among the 30 most developed nations by 2050.
The most recent report from the Heritage Foundation’s Index of Economic Freedom rated the country as “moderately free” and ranked it 39th out of 180 countries, well above neighboring China (#103) and Russia (#94).  Kazakhstan’s overall score increased by 4.2 points over the previous year due to a large increase in the fiscal health score.
The country has much to build on: experienced leaders interested in taking Kazakhstan to the next level; an economy with unfulfilled potential that continues to deliver sustained growth, despite its failings; a developing civil society eager to assist in the reform process; and a young, dynamic and educated work force.

 

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.