Prospects for Sustainable Development of the Kazakh Economy in the

Context of a Pandemic

Zulfiia Magrupova

,Gaukhar Koshebayeva

and Gulnara Abzalbek

Karaganda Technical University, Nursultan Nazarbayev Avenue 56, Karaganda, Republic of Kazakhstan

Keywords: Pandemic, Regional Economy, Government Regulation, Systemic Measures, Balanced Development.

Abstract: The study presents the results of the socio-economic development of the Republic of Kazakhstan for 2020,

which defines not only the results of activities in the context of a pandemic, but also the guidelines for the

development of the Kazakhstani economy for the future. In the conditions of an unstable economy, it becomes

critically important to increase the self-sufficiency of the economy of the Republic of Kazakhstan on the basis

of a system of measures to increase the stability of the economy of the Republic of Kazakhstan to crisis

phenomena in the economy. State regulation of sustainable development is aimed at disclosing

the industrial potential of individual regions and territories of the Republic of Kazakhstan. In addition to

social support measures to mitigate the negative consequences of the pandemic, create and preserve jobs, an

anti-crisis program, an employment roadmap was considered, key problems of the development of the real

sector and entrepreneurship, fiscal and monetary, investment, social, foreign trade and regional policies were

analyzed.

1 INTRODUCTION

Today, the world economy is in its deepest recession

in 100 years. The accumulated structural problems in

the global economic architecture, such as growing

inequality between developed and developing

countries, trade and sanctions confrontations,

changes in the labor market against the backdrop of

comprehensive digitalization, are complicated by the

so-called “coronacrisis”. There is a high level of

uncertainty in the capital and commodity markets

associated with the current and likely re-emergence

of the pandemic.

In the context of the coronavirus pandemic and

new economic challenges, one of the most significant

problems in many states is the prevention of an

increase in unemployment, the creation of permanent

jobs, and the search for new forms of

employment. Judging by the official data, the

domestic economy is developing and even the

quarantine restrictions caused by the pandemic (the

conditions of the pandemic and the restrictions

https://orcid.org/0000-0001-8190-5757

https://orcid.org/0000-0002-0393-9844

https://orcid.org/0000-0002-5068-1209

caused by it) were a kind of impetus for further

growth. The strategic goal of Kazakhstan is to

become one of the 30 developed countries of the

world by 2050. In the “Concept for Kazakhstan's

joining the 30 most developed countries in the

world”, approved in January 2014, the average annual

GDP growth rate, in case of maintaining a favorable

economic environment, is set at 5.5% (On the

Concept for Kazakhstan's entry into the 30 most

developed countries in the world, Decree of the

President of the Republic of Kazakhstan dated

January 17, 2014 No. 732). However, the crises of

2014-2015, as well as the current crisis associated

with the spread of the coronavirus, have a

constraining effect on economic growth, drastically

changing the baseline development scenario for

Kazakhstan.

The Leader of the Nation, the Elbasy, at an

expanded meeting of the Nur Otan party council on

August 21, 2019, set the task of ensuring 7.5% growth

in Kazakhstan's GDP (An expanded meeting of the

Political Council of the "Nur Otan" party was chaired

Magrupova, Z., Koshebayeva, G. and Abzalbek, G.

Prospects for Sustainable Development of the Kazakh Economy in the Context of a Pandemic.

DOI: 10.5220/0011120100003439

In Proceedings of the 2nd International Scientiﬁc and Practical Conference "COVID-19: Implementation of the Sustainable Development Goals" (RTCOV 2021), pages 327-333

ISBN: 978-989-758-617-0

327

by Elbasy. August 21, 2019). In today's realities,

achieving such a high economic growth rate of 7.5%

is an ambitious task.

2 RESEARCH METHODOLOGY

At present, due to the slowdown in world economic

growth and high uncertainty about the duration of

restrictive measures, a deep change, a "reset" of

economic policy, is required. Today, many countries

are looking for new drivers of economic development

to ensure self-sufficiency and sustainability of the

economy, as well as food security.

The theoretical basis of the scientific research was

the theoretical concepts and methodological

developments of domestic and foreign scientists on

the problems of regional development, and in

addition, general scientific methods were used,

including the systems approach, network theory, the

method of expert assessments, the classification of

species, the comparison method, methods of

quantitative analysis and some others. Periodic,

statistical, analytical and translated literature in the

direction of research was used as information

resources.

The purpose of the study was to analyze and

assess the directions of state support for the industrial

policy of the regions of Kazakhstan in order to

determine comprehensive measures to overcome the

crisis in the economy and minimize losses caused

by restrictions in the context of a pandemic.

To ensure the continuous growth of the economy,

it is necessary to conduct an analysis and a critical

review of the prospects for further development,

which will make it possible to take timely measures

to prevent negative trends in the economy, and

therefore create a favorable environment for further

economic growth.

When developing the State Program for the

Development of the Regions of the Republic of

Kazakhstan until 2020, the materials of the applied

research "Expert and analytical support for improving

regional policy in terms of conceptual adjustment of

the provisions of the Program for the Development of

Regions" were used (Materials of applied research

"Expert and analytical support for improving regional

policy in terms of conceptual adjustments to the

provisions of the Regional Development

Program"). The assessment of the State Program was

carried out on the basis of the Methodology for

assessing the Strategic Development Plan of the

Republic of Kazakhstan and government

programs (Methodology for assessing the Strategic

Development Plan of the Republic of Kazakhstan, the

Forecast Scheme of the country's territorial and

spatial development, state and sectoral

programs. Approved by the order of the Minister

of National Economy of the Republic of

Kazakhstan dated April 28, 2015 No. 365). Speaking

about the prospects for the development of regions in

an unstable economy, we relied on the results of the

implementation of government programs aimed at

developing the country's economy in the context of

coronavirus infection and the restrictions caused by

them. Taking into account the current situation, the

Government, on behalf of the Head of State, took

urgent measures to support the population and

stabilize the economy. The achievements of the

Kazakh economy are presented in the report of the

Government of the Republic of Kazakhstan on the

results of socio-economic development for 2020,

which defines not only the results of activities, but

also the guidelines for the development of the Kazakh

economy for the future (Speech by the Prime Minister

of the Republic of Kazakhstan A. Mamin at an

expanded meeting of the Government with the

participation of President K. Tokayev. January 26,

2021).

Thus, along with measures of social support to

mitigate the negative consequences of the pandemic,

create and preserve jobs, on behalf of the Head of

State, an anti-crisis program was launched. for 2020-

2021 (On approval of the Employment Roadmap for

2020 - 2021, Order of the Prime Minister of the

Republic of Kazakhstan dated March 27, 2020 No.

55). For its implementation, financial resources were

planned in the amount of 1 trillion. tenge.

The employment roadmap has provided many

Kazakhstanis with work and income, and has also

made a significant socio-economic effect. It laid the

groundwork for the post-crisis period through the

renewal of infrastructure, which in turn gives impetus

to the development of the main sectors of the

economy, such as construction, production of

materials and the provision of services, where, among

other things, existing jobs will be preserved.

3 RESEARCH RESULTS

There is a significant increase in unemployment in

almost all countries (8.4%, OECD) , a decline in

world trade (by 20%, UN) ("COVID-19: a challenge

for economic growth" 10/14/2020.). International

financial institutions: IMF, WB, ADB, EBRD predict

a 5% slowdown in the global economy in 2020

(consensus forecast), followed by recovery in 2021

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from 2.8% (OECD) to 5.2% (IMF). The deepest drop

in 2020 among the main partners of Kazakhstan

occurred in the Eurozone and the United States, by

10.2% and 8%, respectively. Also, a significant

decrease in the rate of development of the Russian

economy by 6.6% in 2020 can be noted. At the same

time, international analysts predict sluggish GDP

growth in China at 5-6% in the medium term. The

economic vector in the country is shifting from the

external to the domestic market and decarbonization

is increasing, which changes the volume and structure

of the economy. Thus, China's economic policy will

be redirected from ensuring high growth to high-

quality and sustainable economic development.

The risks of a global financial and debt crisis are

growing. There is a flow of capital from developing

countries to developed countries amid the search for

the least risky investment instruments. This will

strengthen the trend of strengthening the currencies of

developed countries and weakening currencies of

developing countries. In some countries of the world,

another wave of outbreaks of coronavirus infection

has begun. France, Great Britain, Italy have

introduced tough restrictive measures. The lack of an

effective vaccine against COVID-19 imposes fears on

the speed of the global economic recovery.

So, according to the estimates of the International

Labor Organization in the 1st quarter of 2020, the

global losses of the working time fund amounted to

5.4% or 185 million jobs, in the 2nd quarter of 2020

- 14% or 480 million jobs with a 40-hour work week

(ILO Newsletter: COVID-19 and the world of

work. Seventh Edition Updated Assessments and

Analysis. January 25, 2021).

In general, due to the impact of the pandemic, the

unemployment rate in the country increased from

4.8% in the first quarter of this year to 5% in the

second quarter. The number of unemployed increased

by 2.6% to 454 thousand people. There is a decrease

in the number of employed people in almost all

regions of the country.

Due to the ongoing pandemic, there is still a high

level of uncertainty about the future development of

the global economy. Supply chain disruptions and

continued restrictions due to existing quarantine

measures, a decline in global demand, and increased

protectionist rhetoric are putting pressure on the

global economic recovery. Against this background,

international financial organizations are revising the

parameters of the forecast values.

In addition, it should be noted that since 2000, in

all countries of the world, there has been a decrease

in GDP growth rates. In low-income countries in the

second decade of the 21st century, the average annual

growth rate decreased by 1.4 percentage

points. compared with the first decade (from 5.4% in

2000-2009 to 4.0% in 2010-2019). A similar picture

is observed in middle-income countries (from 5.8%

in 2000-2009 to 5.0% in 2010-2019). In high-income

countries, growth rates in 2010-2019 rose by 0.1

pp (from 1.9% in 2000-2009 to 2.0% in 2010-2019)

(The economic boom in developing countries was an

anomaly. October 14, 2016).

The economy of Kazakhstan is open and highly

integrated into the world economy. In this regard,

high uncertainty affects the national economy

through trade, foreign exchange and investment

channels. The restrictive and quarantine measures

taken also negatively affected the economy of

Kazakhstan. The service sector suffered the most,

where small and medium-sized businesses are mainly

engaged. Affected industries find appropriate

measures by providing tax incentives, subsidizing

loan rates, as well as concessional lending to small

and medium-sized businesses under the National

Bank's program. These measures helped to avoid a

deep recession in the economy of Kazakhstan.

At the end of January-September 2020, the

decrease in GDP was 2.8% due to a decrease in the

volume of services by 6.1%. At the same time, the

production of goods increased by 2.2%, including

construction - by 10.5%, agriculture - by 5.0%,

manufacturing industry - by 3.3%. Some sub-sectors

of the manufacturing industry showed double-digit

growth: the automotive industry - by 51.6%,

pharmaceuticals - by 39.8%, finished metal products

- by 18.9%, paper products - by 15.1% and light

industry - by 14.1%. %.

At the end of 2019, according to the World Bank

classification, Kazakhstan is in the group of

developing countries with above-average income per

capita (Overview for Kazakhstan). Thus, Kazakhstan

is very close to the upper border of countries with

middle income. However, the existing structure of the

economy creates risks for Kazakhstan to fall into the

“middle income trap”. Questions of a relatively low

level of labor productivity, diversification of the

economy, investment, the predominance of raw

materials exports, as well as problems in monetary

and fiscal policies are relevant.

Over the past 30 years, Poland and South Korea

have been able to overcome this trap through such

successful factors as the adaptation of new

technologies through R&D, investment in human

capital, institutional reforms, and productivity growth

through international integration.

To implement the set task of the Leader of the

Nation - Elbasy, the Ministry of National Economy,

Prospects for Sustainable Development of the Kazakh Economy in the Context of a Pandemic

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together with the Institute for Economic Research,

developed practical recommendations for ensuring

GDP growth at the level of 7.5% (The tasks of the

National Project on Economic Growth were named in

the Ministry of National Economy of the Republic of

Kazakhstan).

Within the framework of the work, the

key problems of the development of the real sector

and entrepreneurship, fiscal and monetary,

investment, social, foreign trade and regional policies

have been analyzed.

To restore stable and high-quality economic

growth and overcome the noted problems, further

active work is needed to attract investment, create a

strong entrepreneurial class, increase the self-

sufficiency of the economy and promote exports,

industrial and service development, increase the

social welfare of the population and macroeconomic

stability.

4 DISCUSSIONS OF THE

RESULTS

Increased global competition for capital amid trade

and sanctions rivalries is redefining established

supply chains. In order to attract quality investment,

it is necessary to focus from a passive, investor-

friendly approach to working directly with each

capital holder at all stages of the value

chain. Systemic support measures are needed for each

investor based on priority and potential effect on the

economy as a whole. In order to stimulate the inflow

of investments, the stability of legislative conditions

and conditions of state programs, including

concessional financing, partial guarantees of loans,

and export support mechanisms, must be ensured.

For large projects, it is necessary to ensure the

extension of preferences in free economic zones,

guaranteed procurement from the state, quasi-public

sectors and subsoil users, reimbursement of part of

capital costs from taxes by offsetting tax liabilities

arising after the end of the preferential tax period.

Ensuring the implementation of the principles of

fairness and equality in interaction with investors,

protection against expropriation, guaranteeing the

most favored nation treatment will expand the circle

of potential investors and improve the conditions for

financing the Kazakh economy.

To improve the investment

climate, measures should be taken to develop the

level and accessibility of basic infrastructure

facilities. This will be possible due to the

reimbursement of investors' costs for the

development and / or construction of engineering and

communication infrastructure (roads, sewerage, heat

and water supply, gas supply, telephone and electrical

networks). The developed infrastructure will

diversify the investment portfolio for public-private

partnership projects and improve the quality of

projects. Investors implementing PPP projects will be

offered “package solutions” with an individual

approach.

Measures should be developed to target the

attraction of strategic investors and the formation of

new ecosystems in the sectors of the

economy. Moreover, strategic investors

implementing investment projects that are significant

for the economy should be given the opportunity to

conclude an investment agreement, which provides

for special conditions and procedure for granting

benefits and preferences, which will be regulated,

including by the law of the AIFC (jurisdiction of

disputes to the court and arbitration of the AIFC).

Taking into account the world experience, it is

proposed to apply the offset policy (international

tenders, off-take contracts) used in many advanced

countries of the world and, in addition, to develop and

determine the minimum list of services provided to

investors in regional front offices.

As a result, in the medium term, the level of

investment in fixed assets will increase from 18.1%

in 2019 to 30% of GDP by 2025 . Annual gross

foreign direct investment will increase from $ 24.1

billion in 2019 to $ 30 billion by 2025 (Investments

as a key driver of the growth of the Kazakh economy:

new enterprises, advanced technologies and job

creation).

Entrepreneurship is the basis for sustainable,

dynamic economic development, as well as a key

source of income and employment for the

population. Therefore, it is necessary to launch a new

cycle of business activity, to take systemic and

effective measures to stimulate the development of

entrepreneurial activity.

It is required to change the focus from making a

profit to developing competition, creating conditions

for private business to enter new sectors of the

economy, including those in which the state

dominates at the moment. Work should continue to

unlock the potential of private capital. To do this, it is

necessary to exclude the excessive presence of the

state in the economy and the interference of state

bodies in entrepreneurial activity, to increase the

efficiency of state regulation of Regulatory Quality,

entrepreneurial literacy and digitalization of services

for business.

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Since January 1 of this year, a three-year

moratorium has been in effect on inspections,

preventive control and supervision with visits to small

and micro-business entities (Moratorium on

inspections and tax exemptions - how business will

develop in Kazakhstan in the next 3 years. February

07, 2020). As a result of the moratorium at the end of

the first half of 2020, the number of inspections in

relation to small and microenterprises decreased by

7.5 times (from 34.9 thousand to 4.6 thousand). There

is a 3.5-fold decrease (from 46 thousand to 13

thousand) in the number of inspections in relation to

all entrepreneurs, a 1.5-fold decrease in the number

of preventive measures carried out by state bodies

with a visit to the subject (from 20 thousand to 14

thousand).

To improve the business climate and introduce

regulation from scratch, a regulatory and legal

framework for small and medium-sized businesses

should be developed. For this, it is proposed to

conduct a radical review of the entire array of state

regulation by changing the basic approaches in

regulatory policy and creating a new comprehensive

and effective regulation in order to prevent the

adoption of regulatory instruments that do not meet

the principles of protecting the health of citizens and

the environment. This will require the adoption of a

number of measures:

 firstly, revision of business requirements,

reporting, permits;

 secondly, the cancellation in 2025 of the non-

automated information obligations of the

business, in the absence of their automation and

integration with the information system for

registration of inspections;

 third, the transfer of state control of 8 areas to

preventive control (SES; tax sector; nuclear

energy; fire safety; circulation of poisons,

weapons, military equipment and certain types

of weapons; industrial safety; medical services;

circulation of medicines);

 fourth, the maximum rejection of certifications,

accreditations, permits in areas where licensing

has been introduced;

 fifth, improvement of procedures and

mechanisms for the analysis of regulatory

impact.

An important aspect of the development of small

and medium-sized businesses is the simplification of

taxation. To optimize the number of taxes, a proposal

is being considered to combine property tax and land

tax, abolish the land tax for apartment buildings (2.7

million taxpayers), and introduce a single payment

with the payroll (pension contributions, combined

social payments). Another proposal that needs to be

addressed is the introduction of a retail tax on a

voluntary basis. It is considered advisable to establish

a flat rate in the range of 6-8% with exemption from

VAT. This will reduce the tax burden, simplify the

payment of taxes and payments, and increase the

share of SMEs to GDP from 31.7% in 2019 to 35% in

2025. At the same time, the number of employed

people will reach 4 million.

The implementation of new approaches to create

a strong entrepreneurial class and further

improvement of the business environment will allow

Kazakhstan to enter the top 20 countries with the most

favorable conditions for doing business in the world.

Within the framework of the Roadmap, it is

planned to create more than 240 thousand

jobs. According to the Ministry of Labor and Social

Protection of the Population of the Republic of

Kazakhstan, during this period, the program provided

jobs for more than 180 thousand people with an

average salary of 130 thousand tenge, taking into

account the family members of the program

participants, about 700 thousand people were

provided with income.

Orders were received by 19 thousand small and

medium-sized businesses in the amount of 370 billion

tenge.

Thanks to the employment roadmap, 683 new

social, communal and transport infrastructure

facilities have been built. Of course, thanks to this

Program, the population was able to find work and

improve their financial situation. In the current

environment, we see that this anti-crisis Roadmap

was timely.

5 CONCLUSIONS

Given the relevance of the development of the

country's regions, it is necessary to continue the

implementation of the State Program aimed at

developing the regional economy in the post-crisis

and post-pandemic period . The implementation of

the State Program for the Development of the

Regions of the Republic of Kazakhstan until 2020

became the initial stage of the reboot of the country's

regional policy, and made it possible to develop

comprehensive measures to solve the problems of

regional development (On the approval of the State

Program for the Development of Regions until

2020. Resolution of the Government of the Republic

of Kazakhstan dated November 16, 2018 No. 767). In

this regard, the continuation of the implementation of

the main directions of regional policy is enshrined in

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331

the State Program for the Development of Regions for

2020 - 2025 approved by the Government Decree of

December 29, 2019 No. 990 (Resolution of the

Government of the Republic of Kazakhstan dated

December 27, 2019 No. 990 "On approval of the State

Program for the Development of Regions for 2020 -

2025").

The goal and objectives of the new program are

consonant with the main directions of the long-term

strategy of the country's economic development and

are a logical continuation of the previous program. It

is important to pay special attention to single-industry

towns through city-forming enterprises.

Since there are forecasts for the next "wave" of

COVID-19, and given that if it repeats and restrictive

measures are adopted, 2.2 million people may need

support, it is now necessary to take a package of

operational and systemic measures to promote

employment and job creation.

All this will allow taking measures to:

 supporting enterprises in the sectors most

affected by the impact of the pandemic and

preventing large-scale redundancies in

workers;

 to provide the necessary social support and

prevent a decrease in the income of the

population;

 preservation and creation of jobs through

infrastructure projects.

It is advisable to consider the issue of continuing

the implementation of the Employment Roadmap

program in 2021 and possibly in 2022, with the

inclusion of projects that solve the most acute

infrastructure needs of the regions, taking into

account the views of the local community, as well as

to ensure its appropriate funding.

One of the tasks that need to be addressed is

increasing the self-sufficiency of the economy and

promoting exports. The existing raw material base

and geographical location allow Kazakhstan to create

complex ecosystems for the production of food

products: meat, sugar, dairy products, vegetables,

fruits, grain and oilseeds. As a result, by 2027,

compared to 2019, the export of agricultural products

will double. 350 thousand new jobs will be created in

the agro-industrial complex, more than 1 million rural

residents will receive a stable income.

In the face of modern challenges, it becomes

critically important to increase the self-sufficiency of

the economy, primarily to cover the needs of the

domestic market in food and non-food products,

electricity and fuels and lubricants, while promoting

the export of domestic finished products. For this, it

is necessary to take measures to strengthen the

relationship with external markets and maintain the

country's status as a responsible participant in the

world economic community.

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