Kazakhstan sees surging presence of foreign contractors

Vitalie Iambla, Construction Analyst, PMR

According to official data, Kazakh construction output increased by 4.4% in 2015 and by 7.4% in 2016. However, the upward trend in the last few years was highly uneven and questionable, and official data suggest that it was supported exclusively by foreign companies. It is estimated that construction output generated by Kazakh private companies faded by about 6.6% in 2016, following a 5.9% reduction in 2015. Furthermore, output generated by state-owned companies also underwent two consecutive contractions: of 2.8% in 2015 and 7.7% in 2016. As mentioned above, the positive trend in the last few years was apparently maintained chiefly by foreign companies, who observed a 54% surge in construction output in 2016, following a 63% expansion a year before. However, these companies accounted for only 23% of the country’s construction output in 2015 and for 33% in 2016. The lion’s share of the output was largely related to the Kashagan project, to development of the Kazakh stretch of the Western Europe-Western China road corridor and to construction of the infrastructure for the EXPO-2017 World Fair. However, in 2017 all three projects will be completed.

During the past two decades, the oil and gas industries have, along with the mining industry, been the fundamental drivers of Kazakhstan’s economic growth. Nevertheless, Kazakh officials have accepted that economic development based overwhelmingly on factor endowment is unsustainable in the long term and have launched a number of programmes in order to try to reduce the country’s dependence on the oil and gas and mining industries. Between 2015 and 2019 the second stage of the State Programme of Accelerated Industrial and Innovative Development will be implemented in Kazakhstan. Improving economic growth figures, a strong political commitment to modernisation and innovation and an improving global economy will encourage international investors to expand their presence in Kazakhstan. Without the government’s extensive involvement in the construction market, the condition of the industry would have been much worse. A great deal of effort is being exerted in order to simplify the procedures pertaining to the building process and also to update building norms and regulations. In the World Bank’s 2017 Doing Business report, Kazakhstan was in the 22nd place among 190 countries in terms of the simplicity of dealing with construction permits, up from the 100th place taken two years earlier. Overall, the report ranks Kazakhstan in 35th place among the 190 countries analysed in terms of the ease of doing business (a substantial improvement from 41st place in 2015 and 77th in 2014).