Wednesday, August 17, 2011 -
The government of Kazakhstan, Central Asia's largest crude producing country, needs to diversity away from the oil sector to spur job creation, the International Monetary Fund (IMF) said in a study released Tuesday.
Although the republic holds proven oil reserves of nearly 40 billion barrels and provides two percent of global crude output, a key challenge is to spread that wealth among the whole population, it said.
Nearly 50 percent of government revenues are drawn from the extraction and export of oil.
But the capital-intensive oil sector is not a key source of job opportunities, while any prolonged downward turn in volatile oil prices will eventually challenge the government’s overall fiscal spending plans.
A number of key domestic growth drivers, such as manufacturing, construction, real estate and some other services, do not benefit directly from the oil sector.
The chemicals sector has distinct comparative advantages that could be spurred by facilitating private sector activity to help bolster development, the report suggests.
Kazakhstan has already been recognized as having made impressive headway toward creating a positive business environment.
The country won kudos in the World Bank’s 2011 global “Doing Business” report by climbing 15 places, a feat that earned it the distinction of being the fastest improver in Central Asia.
The authorities need to safeguard these developments to preserve the capacity of investors to plan ahead, the IMF said.
While the country scored well in terms of the relative ease of registering property and starting a business, it fell short in terms of trading across borders and having access to credit, as well as its relatively low results in standards of health and education.
The report attributed these less than impressive results to relatively low state spending in these areas.
However, financing is available. The National Fund of the Republic of Kazakhstan, the country’s stabilization fund grown up by saving a portion of oil-related revenues, currently holds more than $38.7 billion, up from $20 billion in 2009 thanks to high oil prices.
This fund can be used toward a public investment strategy by financing investments in health, education and infrastructure, the IMF recommended.