Charting a Path Forward: Kazakhstan Futures

In a May 2024 opinion poll conducted by the Kazakhstan Institute for Strategic Studies (KazISS), 68% of respondents were optimistic about their future, expecting a significant or moderate improvement in their living standards. In January 2023, Oxus Society launched the Kazakhstan Futures program with funding from the Public Affairs Section of the U.S. Embassy in Kazakhstan, an 18 month-long program and workshops exploring how Kazakhstan’s future socio-economic challenges and opportunities may evolve by 2050. Topics included infrastructure development, climate resilience, human capital development, and foreign direct investment. The program brought together 26 experts from Kazakhstan and the United States. Program activities, including a series of reports, news briefings, public events, and presentations, involved a diverse group of over 100 experts, private-sector, and government stakeholders in Kazakhstan. The program was implemented in two phases culminating in public events starting in Phase One in September 2023 and then in April 2024 for Phase Two.

Participants addressed the following questions: 

• What are the prospects for decarbonization in Kazakhstan? What factors are inhibiting this?
• What is the potential for a transition to green energy?
• How can we ensure the green transition provides benefits to all Kazakhs?
• What role might critical minerals play in Kazakhstan’s future economy?
• How can the benefits of economic growth be more evenly distributed throughout society and in different regions of the country?
• How can Kazakhstan improve its investment climate?
• How can Kazakhstan provide jobs for its growing population?
• How can human capital be improved? What role can education play in this?
• How can Kazakhstan harness the AI revolution?

This report provides a summary of the current challenges facing Kazakhstan and a list of policy recommendations outlined by our participants over the course of the program to help reform the Kazakh economy, meet the challenges and capitalize on the opportunities of the 21st century as the country pursues its ambitious Kazakhstan 2050 Strategy. 

Background 

Kazakhstan is Central Asia’s largest economy both in absolute and per capita terms and has substantial influence over the entire region’s development. In 2024, its total GDP amounted to $296 billion, making it a middle income country with a highly skilled and educated workforce. Today, Kazakhstan’s per capita wealth places it above Russia, China and Turkey, showcasing its substantial progress over the past decade. Nevertheless, there are huge challenges ahead for Astana. First, Kazakhstan is heavily reliant on its natural resources and mining sectors, which combined account for over a third of its economic activity and account for the bulk of the country’s tax revenues. Second, while it positions itself as a bridge between Europe and Asia its landlocked status and lack of transport infrastructure leaves it highly vulnerable to supply chain disruptions and exogenous shocks brought on by geopolitical developments in Eurasia such as the conflict in Ukraine. Third, resource depletion and global move toward combating climate change mean Kazakhstan will have to restructure its economy into clean energy production and wean itself off dependence on unsustainable hydrocarbon supplies. Since coming to power in 2019, President Kassym-Jomart Tokayev has prioritized economic diversification, stating in his 2023 State of the Nation address  that “The urgency for economic diversification has never been greater.” His government has made efforts to develop sectors such as manufacturing and tourism, and  boosted initiatives such as Digital Kazakhstan, which was first introduced in 2017 to develop the digital economy. As Kazakhstan attempts to shift its economic focus away from dependence on fossil fuels and extractive industries there will be a growing need to understand the social and political impacts for the wider economy and society. 

Policy Recommendations

The Kazakhstan Futures program has provided a comprehensive platform to explore the multi-faceted challenges and opportunities facing Kazakhstan as it transitions towards a greener, more diversified economy. Through rigorous dialogue and collaboration among experts, private-sector leaders, and government stakeholders, several critical themes have emerged that highlight both the potential and obstacles in Kazakhstan’s path to sustainable development. 

Green Energy Transition: Kazakhstan’s commitment to decarbonization and renewable energy development is evident through its substantial wind and solar resources and international cooperation efforts. The nation’s ambitious target to generate 50 percent of its electricity from renewables by 2050 are commendable, but achieving these goals will require overcoming significant barriers related to outdated infrastructure, regulatory hurdles, and a workforce predominantly skilled in fossil fuel industries. As our report “Decarbonizing Kazakhstan: What Future Awaits Mining Regions and Towns?” by Madina Junussova, Zarina Adambussinova and Alexander Diener highlights, it is unclear how the government plans to adapt its policies to the needs of different regions and especially “monotowns” reliant on extraction. To be sustainable and just, the green energy transition needs to involve local populations and businesses in the process of economic diversification and efforts to improve the quality of life for the community.

Green Energy also offers an opportunity to attract foreign investment. “Zhanatas: A Test Case for International Financing in Kazakhstan’s Green Development” by Max Hess examines how Kazakhstan’s largest wind power project, the Zhanatas Wind Farm, offers not only an example of a successful renewable energy project, but also a case study of public, private and international cooperation. Investors included not only the Kazakh government and domestic private actors, but also financing from the London-based European Bank for Reconstruction and Development (EBRD), whose largest capital contributor is the United States, and from the Beijing— based Asian International Investment Bank (AIIB), whose largest shareholder is the People’s Republic of China. More cooperation between these stakeholders could help Kazakhstan green its economy and provide benefits for all.

Capitalizing on Critical Minerals: With vast reserves of critical minerals like lithium, tungsten, and uranium, Kazakhstan is poised to become a key global supplier essential for the clean energy transition. Developing this sector can spur economic diversification, create jobs, and attract significant foreign investment. However, sustainable mining practices and regulatory enhancements will be crucial to mitigate environmental and social impacts. Local communities need to benefit from extraction also. But as “Decarbonizing Kazakhstan: What Future Awaits Mining Regions and Towns?” demonstrates, this is often not the case. Greater transparency from mining companies on their safety and environmental policies can help build trust with local communities. Providing living wages, safe working conditions and investments in local communities will also ensure that Kazakhstan’s critical minerals boom is not captured by a narrow elite. 

Economic Diversification and Inclusivity: The discussions underscored the importance of tailored development programs to address regional disparities and ensure that the benefits of economic growth reach all segments of society. Improving education, healthcare, and infrastructure, especially in underdeveloped regions, along with supporting SMEs, will be pivotal in creating a more just and equitable economy. As outlined in “Ensuring a Positive Future for Kazakhstan” by Madina Junnusova, Aigul Beimisheva, Mereke Tanaguzova and Albina Tortbayeva, the envisioned model advocates for a governance structure where local governments actively engage with their communities and industries, fostering a dialogue beyond governmental confines to include citizen feedback. 

Rising Regional Cooperation: Experts have long described Central Asia as one of the world’s “least integrated” regions. But this has started to change with the death of Uzbek President Islam Karimov in 2016 and his successor Shavkat Mirziyoyev’s commitment to a “Central Asia First” foreign policy. Faced with collective challenges, such as climate change, the situation in Afghanistan and Russia’s invasion of Ukraine, the region’s countries stand to gain a great deal from cooperation. “Central Asian Regional Interactions in a Changing Geopolitical Context” by Aizada Nuriddenova and Zhanibek Arynov draws on an original dataset of interactions between presidents, prime ministers, and foreign ministers from Central Asia. They document an increase from 60 interactions in 2015 to 158 in 2023. But more coordination is needed. At present, the consultative meetings of presidents, which have taken place since 2018, have only been semi-institutionalized with the establishment of the Council of National Coordinators. BY creating a regional institution for Central Asia, much could be done to address common problems. Greater regional efforts not only among governments, but among businesses, civil society and academia, also have great potential to collectively address regional issues. 

Improving the Investment Climate: Kazakhstan has attracted over two thirds of the total  foreign direct investment (FDI) in Central Asia since independence. The government of Kazakhstan has ambitious targets to increase the country’s GDP to $450 billion by 2029. To do so would require $150 billion in foreign direct investment. To attract and sustain investment, Kazakhstan must streamline its regulatory framework, strengthen property rights, and enhance transparency. Judicial reforms and anti-corruption measures will further bolster investor confidence, while substantial investments in infrastructure and human capital will support long-term economic resilience and growth. 

Harnessing AI and Technological Advancements: In the spring of 2024, the Kazakh Ministry of Digital Development, Innovation and Aerospace Industry developed its strategy on artificial intelligence (AI) for 2024-2029. A few months later the Prime Minister announced a new Digital Code, which will set out the guiding principles for the country’s digitization. But to realize these ambitious ideas greater input from the expert community and business sector are needed.  Integrating AI into education and industry, fostering local innovation through dedicated research centers, and developing robust data infrastructure are critical steps for Kazakhstan to harness the AI revolution. Public-private partnerships and smart city initiatives will also play pivotal roles in leveraging AI for sustainable urban management and economic efficiency. 

Kazakhstan stands at a pivotal juncture, with immense opportunities to transform its economy through strategic investments in green energy, critical minerals, and technological advancements. The insights and recommendations from the Kazakhstan Futures program offer a roadmap for navigating these transitions, emphasizing the need for inclusive policies, sustainable practices, and international collaboration. As Kazakhstan moves forward, continuous engagement with diverse stakeholders and adaptive policy-making will be essential in realizing a prosperous, resilient, and equitable future.