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COUNTRY PROFILE: KAZAKHSTAN - page 10 / 20

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Library of Congress – Federal Research Division

Country Profile: Kazakhstan, December 2006

1998 and 2005, the unemployment rate dropped from 13.7 percent to 8 percent. In 2002 the labor force was divided by sectors as follows: 20 percent worked in agriculture, 30 percent worked in industry and construction, and 50 percent worked in the services sector. In 2005 the minimum subsistence wage was US$40 per month, and the official minimum wage was US$69 per month. The average monthly wage in 2005 was US$274; urban workers generally earned substantially higher wages than those in rural areas. In recent years, substantial numbers of illegal Uzbek immigrants have joined the workforce.

Foreign Economic Relations: Because it relies heavily on oil exports, Kazakhstan’s landlocked position increases the cost of trade substantially. As a result of improved relations with Russia, between 2002 and 2004 trade with that country increased from US$4.3 billion to US$4.8 billion. The value of trade with Russia in 2005 was about US$9.6 billion, dominated by Russia’s 38 percent share of Kazakhstan’s import value. Pipelines through Russia continue to carry the largest volume of Kazakhstan’s exported oil, and Kazakhstan will not be connected with the Baku–Tbilisi–Ceyan pipeline bypassing Russia until 2008. Kazakhstan has not been able to revive economic interdependence among the former Soviet states in the Eurasian Economic Community (formerly the customs union of the Commonwealth of Independent States), which instead has insulated members from world prices and discouraged outside competition. In 2007 Belarus, Kazakhstan, and Russia were expected to form a customs union, which eventually would include the other members of the Eurasian Economic Community (Kyrgyzstan, Tajikistan, and Uzbekistan). Kazakhstan’s manufactured goods have not been competitive on Western markets.

Since 1999 oil exports have provided Kazakhstan a substantial trade surplus; in 2005 export values totaled US$27.8 billion and import values, US$17.4 billion. The main export commodities are oil, natural gas, vegetable products, metals, and chemicals. The main import commodities are machinery and equipment, mineral products, chemicals, and semi-finished metal products. In 2004 the main purchasers of Kazakhstan’s exports were Switzerland, Italy, Russia, and France. The main suppliers of Kazakhstan’s imports were Russia (dominated by coal and electricity), Germany, China, and the United States. In 2005 exports to Russia amounted to 10.5 percent of Kazakhstan’s total (compared with 14.1 percent in 2004), and imports from that country accounted for 38 percent of total imports (about the same share as in 2004). In 2005 commercial relations with China expanded significantly with completion of the Atasu–Alashankou oil pipeline into Xinjiang Province and an agreement to export US$10 billion worth of electric power to China. China also bought one of Kazakhstan’s largest oil companies, PetroKazakhstan, and a major natural gas pipeline into Xinjiang was in the planning stage. The imbalance of Kazakhstan’s domestic economy makes non-petroleum producers vulnerable to competition from imported goods. Poor border controls have encouraged the smuggling of goods into Kazakhstan, as well as unrecorded small-scale trade along the borders with Kyrgyzstan, Russia, and Uzbekistan.

Balance of Payments: In 2004 the overall balance of payments was US$4 billion. The 2004 current account balance of US$529 million was positive for the first time in four years because of increased oil prices and borrowing, and the capital account surplus increased because of increased foreign direct investment. However, in 2005 the current account balance fell to a negative US$486 million. After increasing steadily for the previous decade, the foreign exchange

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