Our comprehensive assessment of Kazakhstan's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Kazakhstan, as well as the latest industry developments that could impact Kazakhstan's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Kazakhstan before your competitors.

Country Risk

Kazakhstan Country Risk

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CORE VIEWS

  • The Kazakh government will prioritise aid to state companies over households in its policy response to declining public revenues from lower oil prices. Nevertheless, the pace of fiscal consolidation will fall short of eroding living standards to the extent that they destabilise the regime of President Nursultan Nazarbayev.

  • The collapse of Prime Minister Djoomart Otorbayev's cabinet in April has heightened regulatory and political uncertainty, casting a dark cloud on the country's mining sector and foreign direct investment outlook. A worsening balance of payments outlook will further ramp up downside pressure on the Kyrgyz som, which is already under pressure from weakening remittance inflows, further stoking inflation.

  • Severe summer flooding has already darkened the already subdued real GDP growth outlook for...

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Kazakhstan Operational Risk Coverage (10)

Kazakhstan Operational Risk

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BMI View: Kazakhstan offers enormous potential for foreign direct investment (FDI), with its vast natural resource wealth providing lucrative opportunities, and generous incentives available for investment in alternative priority development sectors. The government has made some progress towards an open market, and impending membership of the World Trade Organization (WTO) will ensure reforms to the business environment continue. This great potential is the driving factor behind Kazakhstan's score of 60.4 out of 100 in the BMI Trade and Investment Risk Index, which places the country relatively highly in the Emerging Europe region, in 13th position out of 31 states. However, Kazakhstan is still in transition...

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Kazakhstan Operational Risk

Kazakhstan Crime & Security

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Kazakhstan poses modest security risks to foreign business travellers, expatriates, and tourists. For the most part, the greatest risks to these groups are petty crime such as pick-pocketing and theft, rather than violent crimes. However, we believe that public security risks could increase once President Nursultan Nazarbayev, 74, leaves office. Nazarbayev has led Kazakhstan since the late Soviet era, and a potential power vacuum after his departure could increase political instability.

Terrorism is a relatively new phenomenon in Kazakhstan, which has seen a series of small-scale attacks in the last three years. There are concerns that the segments of the population could become radicalised by Islamic extremists from nearby countries. Kazakhstan's proximity to Afghanistan and Russia's North Caucasus - two hotbeds of Islamic militancy and extremism - exposes it to regional threats. We expect terrorism and political violence to become a more...

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Kazakhstan Labour Market

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Kazakhstan fares reasonably well with regards to labour market risks, with a high level of primary education boosting basic skills among the workforce, while low levels of unemployment point towards a developed labour market. The key risk to investors here is the poor quality of tertiary education in the country and declining secondary education enrolment rates, which could indicate a long-term decline in the quality of the available workforce. Overall Kazakhstan has a score of 61.1 out of 100 for Labour Market Risk, putting the country in 7 th position in Emerging Europe, ahead of all of its immediate neighbours with the exception of Russia, while globally Kazakhstan sits in a competitive 34 th position.

High employment rates and a good volume of female labour force participation help to boost Kazakhstan's score for size of labour force, which at 58.9 puts the country in a very positive 2 nd place in the...

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Kazakhstan Logistics

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Kazakhstan's transport network presents potential investors with some substantial risks, with low road density and long rail transit times creating extensive delays when importing and exporting goods. Although the export market is well developed, it is mainly focused on oil and oil related products, and as a result the logistics network, particularly the ports, are largely unsuitable for the transport of other goods. For these reasons, Kazakhstan's score in the Logistics Risk Index is 41.5. This places it in 23 rd position in the Emerging Europe market, and in 112 th position globally. While it fares better than its neighbours in Central Asia, particularly Uzbekistan and Kyrgyzstan, Kazakhstan still has a long way to go if it is to achieve its aim of being a key transit point between Asia and Europe.

Covering a vast expanse of 2,724,900 square kilometres, much of it desert, Kazakhstan contains difficult terrain to cross...

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Kazakhstan Trade & Investment

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Kazakhstan's trade and investment environment presents potential investors with some substantial risks, with corruption endemic throughout the government and judiciary systems and poor legal enforcement limiting protection of intellectual property. While exports are strong, the import market is limited and there are extensive bureaucratic barriers to operating in the country. Overall, Kazakhstan has a Trade and Investment Market Risks score of 49.45, ranking 22 nd in Emerging Europe and 80 th globally.

Kazakhstan's export market is driven largely by the lucrative oil industry, which accounts for more than 70% of total exports; total exports currently account for over 51% of GDP. Moving forward, the government is keen to diversify the export market, through a range of programmes contained under the National Strategy 2030 including introducing new manufacturing businesses to the country. FDI is relatively high in...

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Kazakhstan Industry Coverage (15)

Agribusiness

Kazakhstan Agribusiness

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BMI View: Kazakh livestock producers are feeling the impact of economic turmoil in neighbouring Russia. Kazakh poultry meat is being undercut due to the weak rouble, with the government resorting to temporary restrictions on consumer protection grounds. We do not see long-term damage to the sub-sector resulting from this situation, although with GDP growth slowing down in Kazakhstan there is the risk that public sector support for revitalising the industry could come under threat. Ambitious plans for the beef sector are especially reliant on subsidies, but we do not yet see any cause to doubt the government's commitment. There have been suggestions from the Ministry of Agriculture, however...

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Autos

Kazakhstan Autos

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BMI View:  BMI's outlook on auto production and sales in Kazakhstan and Uzbekistan remains positive, despite a slowdown in sales figures in the first eight months of 2014. Both countries boast solid macroeconomic fundamentals and both are seeing strong demand for cars from their citizens.

Turning to production first, Kazakh auto production looks set for strong growth over BMI's five-year forecast period to 2017. This reflects new production plans by carmakers  Toyota Motor and Russia's AvtoVAZ and Kazakh AutoBIPEK.

Kazakh auto production looks set for strong growth over BMI's forecast period to 2018. We estimate...

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Commercial Banking

Kazakhstan Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Defence & Security

Kazakhstan Defence & Security

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BMI View: Kazakhstan's determination to develop a solid domestic defence manufacturing base has been exemplified in its strong push to setting up numerous joint ventures and partnerships with key foreign industry players as well as its efforts to organise its own international exhibition of weapons and military equipment - KADEX. With a somewhat unstable regional environment, Kazakhstan will see to its defence expenditure being increased over our forecast period in an effort to be ready to combat any potential breaches in security. However, BMI believes that if it is to truly excel in this field and achieve its goal of creating a strong...

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Food & Drink

Kazakhstan Food & Drink

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BMI View: The devaluation of the tenge in early 2014 and elevated consumer price inflation (forecast to reach 9.0% in 2015) will impact on household spending in Kazakhstan. However, private consumption is set to remain the primary driver of economic growth in the longer term, which keeps our outlook positive for spending on food and drink. Future drivers of growth will be portfolio expansion by major manufacturers and importers, including strong marketing and promotional campaigns targeting younger and more aspirational consumers. The Kazakh government&#39...

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Freight Transport

Kazakhstan Freight Transport

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Following a year that saw increasing volumes across all modes of Kazakhstan's freight transport sector, BMI believes 2015 will signal further growth in line with the country's macroeconomic outlook.

Total trade is projected to pick up with our Country Risk desk forecasting a year-on-year (y-o-y) increase of 6.4% in 2015 following an estimated growth of 5% in 2014.

The most potential for growth and development in Kazakhstan's freight transport sector remains in the country's rail freight market. The country's exports are concentrated on the freighting of bulk products, namely oil and grain. The country's rail freight sector has developed to cater for these needs and will continue to do so in the longer term, as both commodities look set to continue dominating Kazakhstan's trade sector.

Rail freight is also in high demand as Kazakhstan develops its role as a conduit for...

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Infrastructure

Kazakhstan Infrastructure

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BMI View: The Kazakh infrastructure sector is facing severe challenges stemming from falling oil revenues, cuts to government expenditure and weak credit conditions. However, preparations for the 2017 World Expo, the country's rich natural resource endowment, a desire for economic diversification and sovereign wealth-backed infrastructure development will provide for distinct investment opportunities, some growth relief and continued investments. Following a generally weakening domestic economy, including falling loan and private consumption levels, we nonetheless expect infrastructure and construction growth to remain far below previously expected levels.

Key Trends And Developments

  • Against the weakened economic background, the government was forced to adjust its 2015-2017 budget plan, including a drop in public expenditure in...

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Insurance

Kazakhstan Insurance

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BMI View : We have a favourable outlook for the Kazakh life and non-life insurance markets. The life and non-life segments are structurally different -- while life insurance is highly concentrated, non-life insurance is considerably fragmented; however, neither segment is dominated by a single company. Although non-life insurance is suppressed through 2015 by negative developments in property insurance, we foresee that long-term improvements in households' disposable incomes should translate into more demand for both life and non-life solutions -- especially in the motor insurance segment.

Accounting for roughly 31% of total written insurance premiums in 2015, and a penetration rate of 0.2% (i.e. life premiums as a percentage of GDP), life insurance...

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Mining

Kazakhstan Mining

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BMI View: Kazakhstan's mining sector growth outlook will be supported by the country's vast mineral reserves and supportive business environment. Increasing output of both industrial and precious metals, including coal, copper, gold and iron ore, will account for the bulk of the value of Kazakhstan's mining industry. However, the country's inadequate infrastructure remains one of the main obstacles for the sector's long-term growth.

Kazakhstan's vast mineral reserves will support the sector's long-term growth outlook. The...

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Oil & Gas

Kazakhstan Oil & Gas

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BMI View: Despite prolonged delays at the giant Kashagan field, which are suppressing Kazakhstan's huge underground potential, and the gradually worsening regulatory environment, we maintain a largely positive longer-term outlook for the country's oil and gas sector. Between 2014 and 2024, we forecast Kazakhstan's oil and gas output to increase by 46% and 86% respectively, thus boosting exports and supporting the country's oil-dependent economy.

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Headline Forecasts (Kazakhstan 2013-2019)
2013

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Petrochemicals

Kazakhstan Petrochemicals

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Russia's economic problems stemming from its trade war with the West are having a negative impact on the Central Asian petrochemicals market with Kazakhstan's imports dropping sharply in 2014. BMI's latest Kazakhstan and Uzbekistan Petrochemicals Report anticipates further falls in imports as both states prepare for a surge in capacity in 2016.

Both Kazakhstan and Uzbekistan will have sufficient production to cover domestic needs with a surplus likely to stimulate polymers conversion and boost exports. The Central Asian market is robust and growing fast, providing a sound basis for new petrochemicals capacities.

Most consumption will be focused on finished products with a lack of domestic plastics converters to fulfil demand. This could change as domestic petrochemicals capacities evolve, enabling local sourcing of cheap raw material for the manufacturing of end products.

  • The ongoing...

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Pharmaceuticals & Healthcare

Kazakhstan Pharmaceuticals & Healthcare

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BMI View: Although pharmaceutical sales grew at a slower pace than we previously forecast in 2014, Kazakhstan's pharmaceutical market will maintain its rapid local currency growth rate over the long term. The government will continue to support increased healthcare expenditure in order to bolster popular support and ensure political stability, and we expect that this will contribute towards growth in pharmaceutical sales, boosting the country's attractiveness to multinational drugmakers. A key risk to our outlook is the reliance of the Kazakh economy on oil exports, which will be a weak point in the country's economic prospects and threaten its long-term growth outlook.

Headline Expenditure Projections

  • Pharmaceuticals: KZT310.05bn (USD1.73bn) in 2014 to KZT349.57bn (USD1.80bn) in 2015; +12.7...

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Power

Kazakhstan Power

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BMI View: This quarter our view on the Hungarian power market remains largely unvaried. We continue to expect healthy growth in Kazakhstan's power sector over BMI's 10-year forecast period to 2024, in terms of generation and consumption. Although coal will continue to maintain its dominance over our ten-year forecast period to 2024, , non-hydro renewables will grow rapidly, with a slew of foreign-financed wind and solar projects in the pipeline. The...

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Telecommunications

Kazakhstan Telecommunications

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BMI View: State interference and political risk remains the most important risk of doing business in the Central Asian region. This was again amplified as government involvement became a key theme over the first six months of 2015. In Turkmenistan, a new state-owned company was created to spur competition, in Kyrgyzstan, state-owned Kyrgyz Mobile Company was sold to state-owned Mega C om and in Uzbekistan, state-owned Uzmobile launched a GSM network to better compete in the mobile market. This therefore does not appear to be a risk that is going to end in the short or long term. Kazakhstan is the most attractive of the region and its ascension to the WTO in June 2015 should lead to wide-...

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Water

Kazakhstan Water

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BMI View: This quarter we have revised our forecasts due to the release of additional historical data, and expanded our coverage to include non mains consumption, desalination production, together with additional wastewater and consumption revisions to factor in the new content. Overall we take a positive outlook for the services sector, although we note that heavy water consuming industries will continue to have difficulties in many regions owing to rising desertification.

The greatest issue in Kazakhstan continues to be that of water scarcity in many regions. However, although there are some developments in the more stringent billing for and metering of water consumption, over the longer term we believe the country will need to look to alternative water resources, particularly recycled water. However, the improvement of...

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