25 October 2016
President Nursultan Nazarbayev of Kazakhstan shakes hands with Chinese leader Xi Jinping. Thanks to the "One Belt, One Road" strategy the Central Asian country has come under the spotlight lately. Photo: CNSA
President Nursultan Nazarbayev of Kazakhstan shakes hands with Chinese leader Xi Jinping. Thanks to the "One Belt, One Road" strategy the Central Asian country has come under the spotlight lately. Photo: CNSA

How can Hong Kong gain from Kazakhstan’s economic reforms?

Thanks to the “One Belt, One Road” strategy that has received a lot of publicity lately, Kazakhstan, a landlocked country in Central Asia that was a part of the former Soviet Union, has become increasingly known to the Hong Kong public.

The Premier of Kazakhstan, Karim Massimov, even paid an official visit to our city last month and met with our chief executive.

Largely because of its rich natural resources, Kazakhstan is regarded as a key player in the One Belt One Road blueprint.

It has an estimated 30 billion barrels of oil reserves and 85 trillion cubic feet of proven natural gas reserves, making it the second largest energy exporter across the Eurasian continent after Russia.

Due to its vast energy reserves, both China and the European Union are working aggressively to establish stable partnership with Kazakhstan and conclude bilateral agreements on energy supply in order to reduce their reliance on Russian oil.

Currently, 76 percent of Kazakhstan’s oil is exported to the EU, and with its oil supply secured, the EU now has a lot more bargaining chips when dealing with Russia.

In the meantime, China is also planning to invest billions of dollars in infrastructure in Kazakhstan to strengthen bilateral relations.

Given the painful lesson of the former Soviet era, Kazakhstan now appears to be hedging its bets by befriending Russia, China and the EU at the same time.

Apart from energy, Kazakhstan also has quite a lot of potential for doing business, thanks to its thriving middle class and high degree of urbanization.

The Kazakh government has placed much emphasis on public education over the years and today the literacy rate among Kazakh youth is almost 99 percent, the highest in the region.

Many of them have got a degree from overseas universities and can speak multiple languages.

Moreover, the government is offering a lot of concessions to small businesses in order to create jobs and boost the economy, and as a result the average income level of the Kazakh people has been on the rise in recent years.

However, like any other emerging market, Kazakhstan is also plagued by rampant corruption, nepotism, bureaucratic practices and a dysfunctional judiciary, creating quite a big put-off factor for multinational companies.

But still, the lack of infrastructure in Kazakhstan has created a huge opportunity for Chinese companies, many of which have already established their business divisions there.

It is estimated that by 2030, the country is likely to attract at least US$25 billion of foreign investment, mainly in building transport and telecommunication infrastructure, as well as in real estate.

In 2012, President Nursultan Nazarbayev launched a project called “Kazakhstan 2050”, the Kazakh equivalent of China’s 13th Five-Year Plan, to enhance the country’s infrastructure development and economic reforms.

Hong Kong’s business sector may not gain much from the project’s infrastructure focus, which is more relevant to China under the One Belt One Road strategy.

Nevertheless, Kazakhstan has expressed interest in using Hong Kong as an overseas platform to draw foreign investment, which will play to our strengths.

The economic prospects of Kazakhstan look very promising, but like many other Third World countries without a stable democratic system, there is still a huge uncertainty over its political stability.

President Nazarbayev has remained in power for almost 20 years. Now that he is getting old and weak, the problem of succession has become imminent, causing widespread concern in the international business community.

Many western business leaders believe it’d be better to remain patient and put their investment plans on hold until it has become certain who will succeed Nazarbayev.

This article appeared in the Hong Kong Economic Journal on March 10.

Translation by Alan Lee

[Chinese version 中文版]

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Associate professor and director of Global Studies Programme, Faculty of Social Science, at the Chinese University of Hong Kong; Lead Writer (Global) at the Hong Kong Economic Journal

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