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The diversification of the economy should help Kazakhstan recover from its economic crisis. In reality, however, the raw materials sector remains the driving force.

By Monika Hollacher

The opening of the Kashagan oil field last year and investments in the expansion of the Tengiz and Karachaganak gas and oil fields running into the billions of dollars provide important impetus for the Kazakh economy. They are forecast to boost growth in the gross domestic product (GDP) of this Central Asian Republic to 2.5 percent in 2017. Investment of 37 billion US dollars is currently planned for Tengiz alone. In addition, billion-dollar sums are planned to modernize capacities for the initial and further processing of crude oil in Atyrau, Pavlodar and Shymkent. The government will also invest in further improving and expanding the distribution networks all over Kazakhstan.

Despite these measures, machine exports to Kazakhstan are not quite gaining momentum. Indeed, in the first nine months to the end of the third quarter they declined again, representing a total drop of 1.8 percent compared to the same period of the previous year. In contrast, exports to Russia increased by almost 23 percent and to Belarus by an impressive 66 percent during this period.

The situation varies greatly between the individual machinery sectors: While exports of agricultural machinery, machine tools, construction equipment and building materials machines are enjoying strong growth, valves, pumps and compressors are contending with double-digit declines. These sectors are major suppliers to the gas and oil industry.

China expands presence in Kazakhstan

One possible reason for the development of German machine exports is the high presence of Chinese investors and companies in the country. Kazakhstan is an important source of raw materials for China. Alongside crude oil, the country also supplies uranium, copper, zinc and iron alloys. The Chinese state oil company CNPG is involved in many construction projects for pipelines and refineries and is establishing joint ventures with state-run Kazakh firms for this purpose. It is primarily the Chinese suppliers that benefit from this arrangement.

The importance of China is also growing outside of the raw materials sector. Since Chinese President Xi Jinping introduced the "Belt and Road Initiative" in Astana in 2013, Kazakhstan has focused on becoming the hub between East and West. Kazakhstan is contributing to the initiative with the "Nurly Zhol" economic stimulus program, for which approximately 23 billion US dollars is budgeted in order to develop and modernize infrastructure and the economy until 2019.

China is also planning billions of dollars' worth of investment in Kazakhstan which, alongside gas and oil, will focus on the fields of mining, agriculture and food processing, as well as the chemicals and metal industries. This will provide stimulus for further investment, from which German suppliers can also benefit. After all, even if Chinese market players prefer to source supplies from China, Kazakh companies are often critical of this and are certainly interested in alternative vendors. Therefore, German machine manufacturers should not let up but rather recognize and take advantage of the opportunities that arise.

Further Information

VDMA Foreign Trade  

Monika Hollacher, VDMA Foreign Trade.