Kazakhstan accelerates shift from raw materials to high-value industries
Kazakhstan Pursues Steady Shift Away from Raw Materials Economy
Diversifying Kazakhstan's economy has long been a key strategic priority. The reason is clear: reliance on oil and gas leaves the country vulnerable to external shocks.
"We must accelerate diversification efforts, with a focus on deep-processing industries that can compete in global markets," President Kassym-Jomart Tokayev emphasized in his September 2023 address to the nation.
At the state level, the challenge is framed unambiguously: Kazakhstan must move beyond its raw materials model and build a diversified, technology-driven economy. This means not just developing individual sectors but overhauling the entire economic system.
"In short, diversifying Kazakhstan's economy is first and foremost about reducing dependence on oil revenues. There are actually many avenues to explore, and the country's potential is substantial," notes financier Marat Kairlenov.
For example, Atyrau Region has already established polypropylene production. The Shymkent Oil Refinery is expanding, increasing both processing depth and fuel output. In metallurgy, export-oriented projects for ferroalloys and aluminum production stand out.
The government is tackling the issue through large-scale industrialization programs. Over recent years, initiatives in manufacturing have been launched, aiming not just to extract raw materials but to produce higher value-added goods within the country. Subsidies, tax incentives, and infrastructure development support these goals.
Particular emphasis is placed on oil refining and petrochemicals—seen as a natural extension of Kazakhstan's resource-based economy but with greater processing depth. At the same time, the country is investing in its transit potential. Strategically located between Europe and Asia's major markets, Kazakhstan is leveraging its geographic advantage by developing rail and road corridors, modernizing Caspian ports, and upgrading border logistics.
"Expanding transport routes is a major component of enhancing Kazakhstan's transit capacity and strengthening its role as a bridge between regions," explains Kairlenov.
This strategy is already yielding results and is considered one of the most successful diversification efforts, delivering tangible returns in relatively short timeframes.
Another key focus is building financial infrastructure. The country has established the Astana International Financial Centre (AIFC), which operates under English common law, offers a special tax regime, and provides streamlined conditions for investors.
In recent years, Kazakhstan has placed growing emphasis on its digital economy. Under a state-led program, IT hubs are being developed, startups supported, and the range of e-government services expanded. This sector is seen as a potential high-growth area with relatively low barriers to entry and strong returns. At the same time, experts note that Kazakhstan also retains traditional industries with established competitive advantages.
When it comes to sectors where Kazakhstan already holds a competitive edge, mining leads the way, followed by agriculture—a field with vast potential thanks to the country's expansive territory. Another key area is oil refining and petrochemicals, according to one financial analyst.
Agriculture remains a government priority, with farmers receiving financial support, grain and meat exports expanding, and efforts underway to boost processing capacity. Yet structural challenges persist, including climate risks, infrastructure gaps, and relatively low productivity.
Energy also demands attention. Kazakhstan is exploring opportunities to enter foreign electricity markets.
"One project under discussion involves laying a high-voltage undersea power cable across the Caspian Sea, connecting to Azerbaijan and onward to Turkey and the EU," says Marat Kairlenov. "This could open a new export avenue for the country."
Additionally, Kazakhstan is investing in green energy, developing solar and wind farms—a strategic move to adapt to the global energy transition and potential declines in hydrocarbon demand.
Other diversification efforts include tourism.
"We can't overlook Kazakhstan's tourism potential," the analyst notes. "Take hunting tourism, for example: the country is home to vast saiga antelope populations, which have remarkable regenerative capacity. With the right approach, steppe hunting could become a sustainable niche market."
The state plays a central role in these processes, setting sectoral priorities, allocating resources, and acting as the primary investor—a model that allows for rapid project implementation.
While diversification options abound, the core issue is that these opportunities are not being fully realized, experts warn. Questions linger over the efficiency of investments.
"Industrial and innovation policies have involved significant state funding, yet the effectiveness of many projects remains in doubt," one expert observes, citing the automotive industry as a case in point.
