The world is struggling with the economic crisis. While every country is fighting it their own way, these ways have much in common since the challenges we all face are similar. The G20 Pittsburg summit set the stage for an even closer cooperation among developed and developing nations. Kazakhstan, a famously rich energy producer and a newly independent state by historical measurements, is trying to overcome this crisis through a concerted program of actions. Since the country is playing an increasingly critical role for global energy security and economic development of a pivotal region of Central Asia, it is important to understand where Kazakhstan is heading economically. The current crisis has made it clear: we have reached the goal to which we have so long and persistently aspired – we have indeed built an open market economy in Kazakhstan. An economy that is fully integrated into the global one, with all its positive and negative consequences. Hence the problems now.
Kazakhstan has joined the world economy during the rising phase of the credit cycle, when money was cheap and they were plenty. We had lived well, spending money, not really thinking about the need to return them. From 2002 to August 2007, credit on Western markets was fantastically cheap. Kazakh banks got used to cheap money, thinking this would last forever and it would always be possible to re-credit to repay the current one. The Kazakh banking system was considered the best in the Commonwealth of Independent States, and all willingly gave us money. Paradoxically, we have become hostages of our success. However, cheap money in the near future will not be available, hence re-crediting wouldn’t work. As a result, Kazakh banks are experiencing great difficulties.
Yet, it would be wrong to blame the global financial crisis along for our problems. We have largely put ourselves in a quandary, and this applies not only to the banking system. Our economy has kept afloat and, mostly, keeps afloat thanks to the export of commodities whose prices over the past few years have grown incredibly. This was a most powerful relaxing factor for our economy. Our growth was fueled by “protein,” rather than achieved through daily “grueling training.” We grew “muscles” without expending any energy. Athletes implicated in the use of such stimulators, get disqualified and stripped of awards. Roughly the same thing is happening with our economy. We have had a lot of awards, yet we failed the “doping test.” As a result, we may lose those awards.
In this situation, we must realistically assess the situation and be ready for a serious decline in economic growth. Already, the country’s GDP in the first half of 2009 decreased by 3.9 percent compared to the same period last year. Given that for the past eight years, GDP growth hovered at nine to 10 percent, and in 2008, our economy grew by 3.2 percent, it is quite a serious decline. However, high economic growth in recent years has been achieved at the expense of income from raw materials and cheap capital. There are no such sources now, and the economy returns to its real, not too high level, which corresponds to available material and technical conditions and state of the industry. And it cannot be called a critical situation.
I am confident this economic crisis will help us greatly. It will sober us as an icy shower after a hot sauna. We are learning that without the grueling daily workouts we will never become champions. We will finally realize that the “protein” and “dope” provide only a temporary effect and pay for their use can be very severe - we can lose all our “medals.”The de-coupling theory says some developing countries can grow based on their own resources, both economic and financial, irrespective of developed countries. Kazakhstan fits these criteria to some extent. There are considerable financial resources that the government is now actively using to mitigate possible negative effects of the crisis. It is well known that the most effective drivers of competitiveness are science, technology, entrepreneurship, finance, logistics and education. That’s why the government finances major projects, changing approaches to managing and developing these sectors.
President Nursultan Nazarbayev has defined these areas and the renewal of the industrial base as fundamental. This gives great hope Kazakhstan will come out of the crisis as an even stronger and more successful nation. During the first half of this year, the volume of investments in fixed capital increased by 6.3 percent compared to last year. Practically most of funds allocated by the state under its anti-crisis program to stabilize economy, which is more than $18.3 billion, or about 20 percent of the GDP, has gone into implementing an innovation and industrial program aimed at strengthening innovation in the industry. Kazakhstan now has a clear understanding that the economic model built on high oil prices and the availability of cheap money abroad is more than precarious.
That is why we are actively developing other sectors of the economy, building on such competitive advantages as highly educated and highly qualified workforce, political stability and a healthy ambition of the country’s leadership, a rich resource base and a huge territory. We have got all conditions for the development of highly efficient agriculture, petrochemical and metallurgy, transport and construction industries. Extraction of rare metals, which are becoming increasingly popular in engineering, can in itself lead the country to a club of the most powerful nations. The lack of “doping” in the shape of cheap money and commodity revenues is forcing us to radically redefine a concept of economic development, and if our government has political will and competent analysis, than, with available resources, we can expect a fairly sustainable and stable future development.

Dr. Aigul Tulembayeva is a professor of Kazakh National University