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Counting the Cost

Kazakhstan's changing fortunes

The resource-rich country is reforming its financial sector but is diversification coming at a price?
Last Modified: 23 Feb 2013 14:13

Amidst the hype of Facebook's stock-market listing back in May 2012, few could have predicted the social networking giant would hit a slump - but one man did, and he did not work on Wall Street.

In fact, he was thousands of kilometres away, in the Central Asian country of Kazakhstan. Despite that, Yerlan Abdikarimov will lose his job and it is him, and his story, which give us an insight this week into the changing economy of Kazakhstan.

After first raiding the National Oil Fund for a $10bn bank bailout in 2008, the Kazakh government has now set its sights on reigning in the rest of the financial industry.

The president, Nursultan Nazarbayev, has called for the merger of the country's private pension funds. Combined, the state-owned and 10 private pension funds have $21bn and he wants that used to boost economic growth without resorting to the oil fund. Kazakhstan's economy slowed to 5 percent growth in 2012 from 7.5 percent a year earlier.

Similar to other resource-rich nations, the government wants to diversify where currently 85 percent of exports are oil, gas and base metals.

So, can Kazakhstan diversify its economy? Many commodity nations have tried, and it is a long road with many pitfalls. Al Jazeera's Robin Forestier-Walker put that question to Gregory Marchenko, the governor of the Central Bank of Kazakhstan.

A Middle Eastern trading bloc?

It has been two years since the uprisings in the Middle East and North Africa began, but economies are still struggling to create jobs. And there are now calls - from the likes of the United Nations, the Arab League and the World Bank - for greater regional integration.

But such attempts at creating an economic trading bloc have stumbled in the past due to political issues. Still, the economic case is compelling. The US and the European Union, for example, are planning a free trade agreement that could boost EU growth by 0.5 percent and create at least 2 million jobs.

Here is how some of the world's trading blocs fare:

  • The EU - the world's largest integrated economy - has more than 500 million consumers and a GDP of over $17tn
  • ASEAN - the Association of Southeast Asian Nations - brings together a promising group, with a combined GDP of around $2.3tn. ASEAN has about 600 million people, which puts it second only to China and India in the region
  • Latin America, has no official bloc, but a GDP worth $2.9tn
  • The CIS - Commonwealth of Independent States - is a post-Soviet development bloc worth $2.5tn. Of course, Russia is the biggest economic force there
  • And SAARC - the South Asian Association for Regional Cooperation - is another economic bloc with a GDP of over $2tn

In the Middle East, it is worth pointing out that there is the GCC - the Gulf Co-operation Council - comprising of Kuwait, Bahrain, the United Arab Emirates, Qatar, Oman and Saudi Arabia.

But the story is really out there in the wider Middle East and North Africa. Trade among Arab countries accounts for less than 10 percent of their total trade. The Maghreb countries in North Africa have the lowest share of non-oil trade - at less than 5 percent.

The big issue though is job creation. North Africa and the Middle East had 10.3 and 11 percent unemployment respectively last year. According to the World Bank, 5 million jobs are needed every year for young people in the region. The GCC has created about 7 million new jobs over the past 10 years and 2 million of those went to GCC nationals, 5 million to non-nationals.

So, can all of this be pulled together into a coherent Middle Eastern trading bloc? Earlier in the week we put that question to Ali Chebbi, an advisor to the Minister of Economics in Tunisia, where job scarcity is a big problem.

 
Watch each week at the following times GMT: Friday: 2230; Saturday: 0930; Sunday: 0330; Monday: 1630. Click here for more Counting the Cost.

Follow Kamahl Santamaria @KamahlAJE and business editor Abid Ali @abidoliverali

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Source:
Al Jazeera
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