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Perspectives and challenges of the development

of the service sector in Kazakhstan

Dr. Marco Artavia

DIW ECON GmbH

Astana, 13 March 2015

International Conference: “Green Economy and Top 30 Strategy

of Kazakhstan – Economic Challenges Ahead”


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Introduction

Kazakhstan’s economy depends strongly on the developments in

the oil sector.

Oil exports are close to 30% as share of GDP.

Oil exports are close to 60% as share from total exports.

Current low oil prices put pressure on Kazakhstan’s economy.

Diversification of the economy is a key target of the Top-30

Concept.

Purpose of the presentation

Discuss the main developments towards 2050

Discuss the role of the service sector for GDP and GHG

emissions

Identify the main challenges of the service sector towards its

expansion and modernisation


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CGE (macroeconomic) model for Kazakhstan

Scenarios

Business-as-usual (BAU)

Continuation of present developments (incl. small increases in

energy efficiency) without significant reforms (i.e. without

implementation of the GEC, ETS, etc.)!

GREEN

Policies of the GEC including the restructuring of the power sector

and increasing energy efficiency through investments in modern

production technology and infrastructure in selected sectors

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-

1

2

3

4

5

6

7

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

2041

2043

2045

2047

2049

(in %

)

Main develpments towards 2050 (i)

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Projected real GDP growth rate

Strong productivity growth

Oil peak

Slower growth in oil extraction

Diversification

With the decrease

of oil extraction

rates diversification

of the economy is

need

IMF projection

Increase of demand for land transport


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-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

2041

2043

2045

2047

2049

Services

Transport

Utilities

Manufacturing

Mining

Agriculture

Avg. Gr.: 4.6% p.a.

Real GVA development (in bln KZT)

Avg. Gr.: 5.8% p.a.

Avg. Gr.: 4.3% p.a.

Avg. Gr.: 1.7% p.a.

Services, transport, and

Industry present the

strongest growth rates

Main develpments towards 2050 (ii)


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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Services

Transport

Utilities

Manufacturing

Mining

Agriculture

Real GVA development (shares)

Services play a key

and growing role in

the economy

Main develpments towards 2050 (iii)


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7

srv 2011

srv 2050

tra 2011

tra 2050

srv 2030

tra 2030

0%

10%

20%

30%

40%

50%

60%

70%

0% 10% 20% 30% 40% 50% 60% 70%

Shar

e in

em

issi

on

s

Share in GDP

Transport: • moderate contribution to

GDP growth • large contribution to GHG

emissions growthServices: • large contribution to GDP

growth • very small contribution to

GHG emissions growth

Services play a key role in:

the reduction of EMISSION INTENSITY (i)


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0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

80.000

agriculture mining manufacturing utilities transport services households

GH

G e

mis

sio

ns

in G

g C

O2

eq

, 20

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Liquid fuel combustion Solid fuel combustion Gaseous fuel combustion Fugitive and process emissions

The sector of theeconomy with thelowest GHG emissions

Services play a key role in:

the reduction of EMISSION INTENSITY (ii)

GHG emissions in million tonnes CO2 eq. in 2011


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Challenges of the service sector (i)

0,00

20,00

40,00

60,00

80,00

100,00

120,00

140,00

160,00

180,00

Gro

ss o

utp

ut

of

serv

ices

(in

co

nsta

nt

1995 U

SD

per

1000 e

mp

loyed

p

ers

on

s)

Labor productivity in the service sectorof the top 20 world performers vs. Kazakhstan in 2009

Source: WEF (2013-2014) and The Agency of Statistics of the Republic of Kazakhstan. Own calculations.

According to the WEF (2013-2014), all top 20 world performers in terms of labor productivity in services belong to the group of countries, which are on the highest stage of development – “Innovation-driven economies”. World Economic Forum (WEF). The Global Competitiveness Report 2013–2014: Full Data Edition. Geneva.

Strong efforts

required in the

improvement of

labour productivity


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R&D expenditure(2011)

Ease of doingbusiness index

(2014)

Public spending oneducation, total

(2010)

Health expenditure,total (2012)

ICT DevelopmentIndex (2013)

Chile

Czech Republic

Hungary

Kazakhstan

Poland

Slovenia

World Bank rank

(2014): 77 of 189

economies

Sources: The World Bank – World development indicators; International Telecommunication Union – Measuring the Information Society Report 2014

Urgent need for

improving business

environment

Challenges of the service sector (ii)


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Cost to export

(2014)

Cost to import

(2014)

Documents to

export (2014)

Documents to

import (2014)

Time to export

(2014)

Time to import

(2014) Chile

Czech Republic

Hungary

Kazakhstan

Poland

Slovenia

Sources: The World Bank – World development indicators

Strong efforts required in

improving institutions

regulating trade

Challenges of the service sector (iii)


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The voice of the business community

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Corruption

Access to financing


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Conclusions

With the decrease of oil extraction rates diversification of the

economy is need.

Services play a key role in

Economic growth

Reduction of GHG emission intensity

Howerver urgent need to improve the business environment

Increase labour PRODUCTIVITY

Increase expenditure in EDUCATION, R&D, and HEALTH

Improve institutions for TRADE

Reduce CORRUPTION

Improve access to FINANCING

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Contact

Dr. Marco Artavia

Consultant

DIW Econ GmbH Mohrenstraße 58

10117 Berlin Germany

Phone +49.30.20 60 972 25

Fax +49.30.20 60 972 99

E-mail: [email protected]

URL: www.diw-econ.com

Head office: Berlin, Germany, Reg.-No.: HRB 108699 B, Local court: Charlottenburg


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Thank you for your attention!

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