Theme 14. Foreign trade of Kazakhstan and wto

1. Dynamics of export and import of Republic of Kazakhstan. Paying balance of the country.

2. Trading balance of Kazakhstan. Goods turnover, balance of trading balance. Geographical and commodity structure of export. Geographical and commodity structure of import.

3. Foreign trade policy of Republic of Kazakhstan. Problems and tendencies of development of foreign trade of Kazakhstan.

4. Introduction of Kazakhstan into the WTO: features, problems and prospects.

1. Dynamics of export and import of Republic of Kazakhstan. Paying balance of the country

The economy of Kazakhstan is the largest economy in Central Asia. It possesses enormous oil reserves as well as minerals and metals. It also has considerable agricultural potential with its vast steppe lands accommodating both livestock and grain production, as well as developed space infrastructure, which took over all launches to the International Space Station from the Space Shuttle. The mountains in the south are important for apples and walnuts; both species grow wild there. Kazakhstan's industrial sector rests on the extraction and processing of these natural resources and also on a relatively large machine building sector specializing in construction equipment, tractors, agricultural machinery, and some military items. The breakup of the USSR and the collapse of demand for Kazakhstan's traditional heavy industry products have resulted in a sharp contraction of the economy since 1991, with the steepest annual decline occurring in 1994. In 1995-97 the pace of the government program of economic reform and privatization quickened, resulting in a substantial shifting of assets into the private sector. The December 1996 signing of the Caspian Pipeline Consortium agreement to build a new pipeline from western Kazakhstan'sTengiz Field to the Black Sea increases prospects for substantially larger oil exports in several years. Kazakhstan's economy turned downward in 1998 with a 2.5% decline in GDP growth due to slumping oil prices and the August financial crisis in Russia. A bright spot in 1999 was the recovery of international petroleum prices, which, combined with a well-timed tenge devaluation and a bumper grain harvest, pulled the economy out of recession.

Current GDP per capita shrank by 26% in the Nineties. However since 2000, Kazakhstan's economy grew sharply, aided by increased prices on world markets for Kazakhstan's leading exports—oil, metals and grain. GDP grew 9.6% in 2000, up from 1.7% in 1999. Since 2001, GDP growth has been among the highest in the world. In 2006, extremely high GDP growth had been sustained, and grew by 10.6%.^[8]Business with booming Russia and China, as well as neighboring Commonwealth of Independent States (CIS) nations have helped to propel this amazing growth. The increased economic growth also led to a turn-around in government finances, with the budget moving from a cash deficit of 3.7% of GDP in 1999 to 0.1% surplus in 2000.

Macro-economic trend

This chart shows trends in the gross domestic product of Kazakhstan at market prices estimated by the International Monetary Fund, with figures in millions of Kazakhstani tenges

Year	Gross Domestic Product	US Dollar Exchange	Inflation Index (2000=100)	Per Capita Income (as % of USA)
1995	78,014,200	61.11 Tenges	64	3.81
2000	102,599,902	142.26 Tenges	100	3.53
2005	147,453,000	132.88 Tenges	140	9.01

For purchasing-power parity comparisons, the US Dollar is exchanged at 59.95 Tenges only. Mean wages comprised $6.93 per man-hour in 2009.

Kazakhstan has managed its monetary policy well. Its principal challenge in 2001 was to manage strong foreign-currency inflows without sparking inflation. Inflation had, in fact, stayed under control, registering 9.8% in 2000, and appeared likely to be under 10% in 2001. Because of its strong economic performance and financial health, Kazakhstan became the first former Soviet republic to repay all of its debt to the IMF by paying back $400 million in 2000; 7 years ahead of schedule. Overall foreign debt amounts to about $12.5 billion, $4 billion of it owed by the government. This amounts to 6.9% of GDP, well within manageable levels.

The upturn in economic growth, combined with the results of earlier reforms in taxation and in the financial sector, dramatically improved government finances from the 1998 budget deficit level of 4.2% of GDP to a slight surplus in 2000. Government tax-revenues grew from 16.4% of GDP in 1999 to 20.6% of GDP in 2000. In 2000, Kazakhstan adopted a new tax-code in an effort to consolidate these gains. Its strong financial position also allowed the government to reduce the value-added tax (VAT) from 20% to 16% and to reduce social (payroll) taxes as of July 2001. Kazakhstan's stronger budget-position and strong export-earnings earned it credit-rating upgrades from Moody's, S&P, and Fitchduring 2001.

Kazakhstan instituted a pension reform program in 1998 that was partly based on the model of the Chilean pension system but included modifications. By July 2001, Kazakhstanis had contributed more than $1 billion to their own personal pension-accounts, mostly managed by the private sector. The National Bank oversees and regulates the pension funds. The pension funds' growing demand for quality investment outlets triggered rapid development of the debt-securities market. Pension-fund capital is being invested almost exclusively in corporate and government bonds, including Government of Kazakhstan Eurobonds. The Kazakhstani banking system is developing rapidly. Banking systems capitalization now exceeds $1 billion. The National Bank has introduced deposit insurance in its campaign to strengthen the banking sector. Several major foreign banks have branches in Kazakhstan, including ABN AMRO, Citibank, and HSBC. Kazakhstan is also a member of the Economic Cooperation Organization (ECO).

According to the Republic of Kazakhstan Agency for Statistics, in January–March 2010 production of GDP amounted to 3,881.6 billion tenge and an increase of 7.1%.

Dynamics of exports and imports for the period 2006-2007,

The foreign trade turnover of the Republic of Kazakhstan in 2007 amounted to 80,625 million U.S. dollars, compared with 2006 increased by 30%, including export - 47 761 million (25%), import - 32 864 million ( 39%).

In the commodity structure of exports of mineral products is 72.7% in 2006 and 69.8% in 2007. The share of non-precious metals and their products from 15.7% in 2006 to 17.3% in 2007, foodstuffs and raw materials for their production from 2.6% to 3.9%.

In the structure of imports is dominated by imports of machinery, equipment, vehicles, devices and instruments, their share was 45.4% in 2006 and 46.8% in 2007. The share of imports of food products was 7.1% in 2006 and 6.8% in 2007.

For certain types of goods in January-December 2007, exports increased. Export of wheat and meslin was 147.3% of the corresponding period of 2006, wheat flour and rye -129.6%, oil and gas condensate, 111.4%, oil - 118,6%. In exports of individual products is not present nomenclature of new export-oriented products, the production of which should be provided as part of the strategy of industrial-innovative development of Kazakhstan till 2015 and the development of the country's competitiveness. Products intended for export diversification has not occurred.

The country still remains exporter of raw materials. Exports of high-tech products export share of manufacturing industry is only 2%, whereas in countries such as Hungary with amounts to 29%, the Czech Republic, 13%.

At the same time, we should note the increase in costs of the private sector on innovative technologies. According to the statistical report "Science and Innovation in Kazakhstan in 2006" industrial enterprises realized innovative products to the amount of 155,822.1 million tenge, including the newly introduced products or subjected to significant technological changes in the amount of 88,416, million tenge. In this case, the specific percentage of sales of innovative products manufacturing businesses was 80.4%, of which 49.2% - production of metallurgical industry and fabricated metal product manufacturing, 21, 4% of production of machinery, equipment and vehicles, 7.5 % - Other non-metallic minerals, 5.8% - food products, 4.8% of products manufactured coke, refined petroleum and nuclear materials. As costs of technological innovation in 2004-2006 most of the funds of private companies (from 65.5% to 90.7%). In 2006, the cost of the national budget for technological innovations were 7069.5 million tenge, or 8.8% of total expenditures.

For the production of major industrial products in the Republic of Kazakhstan for the period 2006-2007, significant changes of nomenclature also did not happen.

In 2007, doubled its production of natural gas and reached 29,221.1 million cubic meters, the growth rate of 202.7% of the corresponding periods of the previous year.

Wool production increased by more than 2.5 times and amounted to 2,614 tons, or 252.8% compared to 2006. Growth index of physical volume of mineral nitrogen fertilizers 330.7%, or 219,148 tons, passenger cars - 214.3% or 6,311 pieces, skin -161.3% or 171,569.2 sq dtsm., freight cars -134.1% or 2034 units. Growth of physical production of certain types of manufacturing industry is due, primarily, domestic demand for goods and services.

According to customs statistics, in 2007, imports increased and the vehicle cargo, as percentage of 2006 - 147.7%. The import of alcohol, alcoholic beverages - 141.2%, petroleum products - 124.1%, 148.3%, furniture, machinery and equipment - 122,8%.

In the total volume of industrial production share of the mining sector remained high in 2007 - 56.7%, processing industry - 37.9%, production and distribution of electricity, gas and water - 5.5%.

Statistical analysis of volumes of main food products and imports (according to customs statistics) suggests that not observed any balance between production and consumption of major food items, not to mention other consumer goods. The result of non-compliance with the balance of production and consumption in the market for goods and services is expressed in the uncontrolled growth of the prices of most consumer goods and services, that is out of balance the economy of production, trade and services. For example, according to the statistical reporting meat imports in volume in 2007 was 170.7 thousand tons, and produced in the country - 43.6 thousand tons, which is almost four times smaller than the volume of imports. Sugar produced in the country 390.1 tons, imports amounted to 468.8 thousand tons. Vegetable oils and fats produced 132.3 thousand tons, import - 81.7 tons. Import of liquid milk and cream in the customs statistics do not reflect.

If we compare the percentage of growth of imports in terms of volume and value, then to individual products in terms of value growth than import volumes several times. For example, in general, the import of vegetable oils and fats to the country in the past year, from Belgium by volume increased by 28 times, and at a cost of 122 times. Among the CIS countries import these products compared to 2006 increased by 5.7%, while the cost of an increase of 64, 5%. In physical terms, the products produced in 2007, 43.7 thousand tons, which is half the volume of imports of the products. A similar relation of production and import alcoholic beverages, imports of which is 147% compared to 2006, or 147.7 million dollars, while the production of products distilleries in 2007 was 91.4%, except for beer.

Became apparent in the second half of 2000, the trend to slower global economic growth in 2001 have been further developed. Even before September 2001 a significant reduction in the rate of economic growth was recorded simultaneously in the three major economies - Japan's economy continued to decline, a recession of the U.S. economy, sharply slowing economic growth in the euro area. The growth of world trade, estimated at 13.3% of the World Bank in 2000, according to preliminary estimates, in 2001 amounted to less than 2%. The tragic events of 11 September 2001. further exacerbated the negative trends of the world economy. Results of foreign economic activity of the country for the first 9 months of 2002 show a further strengthening of the external position of Kazakhstan. A significant increase in export earnings in July-September of the current year to offset the decline in the first half and led to the reduction of current account imbalances. Along with a major influx of external financing, the main component of which is direct investment, it is a growth rate of international reserves and the improvement of the country's external liquidity. Reduction of total external demand and the subsequent decline in prices in January-September 2001, significantly slowed the rate of growth of exports, scored by Kazakhstan in 2000. Capacity quantitative export of Kazakh oil and gas condensate to September 2001 offset the decline in prices, which occurred on the main commodities exported by Kazakhstan, and provided a slight increase in the total value of exports compared to 2000 (2.4% in the first 9 months of 2001), but sharp fall in energy prices in October-December led to a decrease in export revenues for the year. Since early 2001, the weighted average index of world prices for major Kazakh exports decreased by 23.4% (fourth quarter of the year compared to the same period of 2000), including 13.4% in the fourth quarter of 2001. A significant share of energy in the export of Kazakhstan predetermined higher rates of lower export prices relative to import (by 3% year to date), resulting in deterioration in the external terms of trade for Kazakhstan-average terms of trade in 2001 was 6.8% lower than in 2000. The main factor in the achievement of the third quarter of the current year record high quarterly revenues from exports - $ 2.9 billion, was the rise in crude oil prices. The sharp rise in oil prices was recorded in the second quarter of 2002 - of the average spot price for crude oil was up by 30.5% compared to the fourth quarter of 2001 and the third quarter of 2002, the average spot price for crude oil was up 6 , 7% compared to the second quarter of the current year In the first half of 2002, average world price index was 9.7% lower than in the comparable period last year, a whole 9 months of 2002, the index of world prices for basic Kazakhstan's export goods was only 4.2% lower than in the base period. The increase in revenues from the export of goods was also achieved volume growth of exported products. Real GDP growth in January-September 2002 was 9.4% compared to the base period. The largest increase in physical volumes of output recorded in mining (13.4%) and manufacturing (8.1%). Prospects for exports of energy products to ensure the preservation of stable high foreign direct investment. Implementation of long-term investment projects financed by the private equity investors, led to a further increase in imports of goods and services.

Dynamics of world prices for major exports of Kazakhstan

		2000	1 кв. 2001	2 кв 2001	3 кв. 2001	4кв. 2001	2001	1кв .2002	2кв.2002	3кв 2002
	Oil ($\баррель)	28,23	26,07	26,75	25,28	19,31	24,4	20,9	25,2	26,9
	Copper ($\м. тонна)	1813	1764	1652	1472	1426	1 578,5	1381	1356	1516
	Zinc ($\м. тонна)	1128	1020	934	826	763	885,8	795	782	766
	Lead ($\м. тонна)	454	493	463	470	479	476,3	491	455	430
	Aluminum ($/м. тонна) ($\м.тонна тонна)	1549	1576	1501	1379	1318	1 443,5	1557	1611	1310
	Silver (цент\тр. унция)	499,9	55,8	439,9	428,5	430,3	438,6	450,7	475,4	470,1
	Gold ($\тр. унция)	279	263,5	267,7	274,5	278,4	271	290,4	312,8	314,2

Moderate rate of nominal devaluation - the exchange rate of the tenge against the U.S. dollar since the beginning of the year decreased by 3.8% - helped to preserve the level of relative competitiveness prevailing in 2000. Designed for the end of 2001, the index of the real effective exchange rate (REER) was 1.5% lower than in December 2000, with respect to the group of CIS currencies devalued the tenge by 6.9%, and by groups of currencies of other countries more expensive was only 1.8%. Against the background of continued high rates of economic growth of the Russian Federation (5.7% in 2001) is a real devaluation of the tenge against the Russian ruble has kept the export value to Russia at the 2000 level with a significant reduction in prices for base metals. Moderate rates of devaluation contributed to the competitiveness of domestic goods. In January-September 2002 price drop KZT-USD was 2.4%, and for up to the end of September 2002, the index of the real effective exchange rate (REER) of 3 was 6.5% lower than in December 2001. Moreover, in relation to a group of CIS currencies devalued the tenge by 4.3%, and by groups of currencies of other countries - by 8.1%.