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Kazakhstan, Economy

cash auctions, state farms, voucher system, Soviet republics, livestock grazing

The economy of Kazakhstan is based on its extensive agricultural and mineral resources. The second largest of the former Soviet republics (after Russia), Kazakhstan’s vast steppes support wheat farms and livestock grazing. Abundant fossil-fuel and other mineral resources lie beneath the land. Heavy industry was developed to support the extraction of these mineral reserves, and it gives the country a relatively diversified economy. In 2000 the gross domestic product (GDP), which measures the value of goods and services produced in the country, was $18.2 billion. Agriculture produced 9 percent of GDP, industry (including mining and construction) accounted for 42.9 percent, and the remainder came from services such as trade and financial activities.

At the beginning of the 20th century the Kazakh economy was based primarily on nomadic agriculture. The country underwent a rapid transformation during the Soviet period. Large sections of the northern steppes were converted into state farms, and some industry was introduced. Soviet planning also tightly tied the region to Russia, replacing its historic connections with other central Asian republics. Most communication and transportation routes led through Russia, complicating Kazakhstan’s transition to an independent economy following the breakup of the Soviet Union. Adding to difficulties after independence was a shortage of knowledgeable administrators to direct the transition, as for many years economic decisions mostly had been made in Moscow.

The economy of Kazakhstan declined sharply following independence, as it did throughout the former Soviet Union. GDP declined by more than one-half as established trading relationships were broken. Compounding the fall was a drought that severely damaged agricultural output. Although Kazakhstan is one of the most modern republics in Central Asia, the process of economic reform started off very slowly. Mass privatization, which drew extensive global interest in the first year of independence, was suspended in early 1993 after achieving few results. Later that year, a second, more successful phase was introduced. Small enterprises were sold in cash auctions. Medium and large operations were sold by a voucher system, in which citizens were given coupons and allowed to invest in operations of their choosing. A select number of major operations were sold on a case-by-case basis, mostly to foreign companies. Kazakhstan’s new constitution, approved in August 1995, permits private land ownership but maintains government control over water and natural resources.

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