Historical background

Native Kazakhs, a mix of Turkic and Mongol nomadic tribes who migrated into the region in the 13th century, were rarely united as a single nation. The area was conquered by Russia in the 18th century, and Kazakhstan became a Soviet Republic in 1936. During the 1950s and 1960s agricultural "Virgin Lands" program, Soviet citizens were encouraged to help cultivate Kazakhstan's northern pastures. This influx of immigrants (mostly Russians, but also some other deported nationalities) skewed the ethnic mixture and enabled non-Kazakhs to outnumber natives. Independence in 1991 caused many of these newcomers to emigrate. Kazakhstan's economy is larger than those of all the other Central Asian states combined, largely due to the country's vast natural resources and a recent history of political stability. Current issues include: developing a cohesive national identity; expanding the development of the country's vast energy resources and exporting them to world markets; achieving a sustainable economic growth; diversifying the economy outside the oil, gas, and mining sectors; enhancing Kazakhstan's competitiveness; and strengthening relations with neighboring states and other foreign powers.

Economic overview

Kazakhstan, the largest of the former Soviet republics in territory, excluding Russia, possesses enormous fossil fuel reserves and plentiful supplies of other minerals and metals. It also has a large agricultural sector featuring livestock and grain. Kazakhstan's industrial sector rests on the extraction and processing of these natural resources. Kazakhstan enjoyed double-digit growth in 2000-01 and 8% or more per year in 2002-07 - thanks largely to its booming energy sector, but also to economic reform, good harvests, and increased foreign investment; growth slowed to 2.4% in 2008, however, as a result of declining oil prices and a softening world economy. Inflation reached 10% in 2007 and 17% in 2008. In the energy sector, the opening of the Caspian Pipeline Consortium in 2001, from western Kazakhstan's Tengiz oilfield to the Black Sea, substantially raised export capacity. In 2006, Kazakhstan completed the Atasu-Alashankou portion of an oil pipeline to China that is planned in future construction to extend from the country's Caspian coast eastward to the Chinese border. The country has embarked upon an industrial policy designed to diversify the economy away from overdependence on the oil sector by developing its manufacturing potential. The policy changed the corporate tax code to favor domestic industry as a means to reduce the influence of foreign investment and foreign personnel. The government has engaged in several disputes with foreign oil companies over the terms of production agreements, most recently, with regard to the Kashagan project in 2007-08. Since 2007, Astana has provided financial support to the banking sector which has been struggling with poor asset quality and large foreign loans.