Kazakhstan’s First Trade Policy Review: Progress since WTO Accession and the Future

Since its accession to the World Trade Organization (WTO) in November 2015, Kazakhstan has made substantial progress in reforming and liberalizing its trade policies. This was the focus of its first Trade Policy Review (TPR), held through two days of discussion on September 25-27, 2024, which gave an in-depth look at the country’s efforts to modernize its economy, diversify away from the oil and gas sectors, and integrate more fully into the global trade system.

During the review period from 2017 to 2023, Kazakhstan demonstrated economic resilience in the face of several external shocks, including the COVID-19 pandemic and supply chain disruptions due to the war in Ukraine. While the pandemic caused a 2.6% contraction in 2020, Kazakhstan's economy rebounded, and maintained an average GDP growth rate of 3.3% between 2017 and 2023, primarily driven by strong exports of hydrocarbons, which still constitute around 60% of its total merchandise exports.

Trade

Trade plays a pivotal role in Kazakhstan’s economy. In 2023, trade in goods and services accounted for 62% of the nation’s GDP, up from 57% in 2017. This increase underscores Kazakhstan’s growing openness to global markets, especially with the European Union, Russia, and China accounting for nearly 70% of the country’s exports and 60% of its imports.

Kazakhstan’s commitment to regional integration is also evident in its membership in the Eurasian Economic Union (EAEU), which has facilitated the creation of common markets in goods and services with other member states. Since joining the EAEU in 2015, Kazakhstan has become party to 12 regional trade agreements, with ongoing negotiations (as a member of the EAAU) to expand these agreements to new partners like Egypt, Indonesia, and the UAE.

Except the EAEU and the Agreement between the EAEU and Vietnam, Kazakhstan’s all regional trade agreements cover only trade in goods.

Digitalization and Trade Facilitation

Kazakhstan has taken significant strides toward building a more business-friendly environment, thanks to its rapid digital transformation. One of the most notable achievements has been the development of a comprehensive e-government system, which has simplified many trade-related procedures. Kazakhstan ranks 28th (3 ranks ahead of Türkiye) in the E-Government Development Index, with 92% of government services offered electronically.

The implementation of the Eurasian Economic Union (EAEU) Customs Code in 2018 marked a significant milestone, introducing a union-wide authorized economic operator scheme. The country has been transitioning to paperless trade with a national single-window portal for imports and exports. These reforms have been streamlining customs procedures and enhanced trade efficiency, supporting Kazakhstan’s efforts to become a regional trade and logistics hub.

Non-Tariff Barriers to Trade

Another area of concern is Kazakhstan's use of non-tariff barriers (NTBs), which have, at times, been implemented unilaterally to control domestic prices and ensure local supply. Such measures, while intended to address immediate economic needs, could undermine Kazakhstan’s long-term trade liberalization efforts and its commitment to maintaining an open trade regime.

As part of its WTO commitments, Kazakhstan has fully implemented the Trade Facilitation Agreement (TFA), achieving this milestone by February 2023. Kazakhstan has also signed the Information Technology Agreement (ITA) and has been involved in various Joint Statement Initiatives (JSIs) on E-commerce, Services Domestic Regulation, and Investment Facilitation for Development.

Kazakhstan can be encouraged to further reduce non-tariff barriers and continue its efforts to integrate into the global trade system, including its plans to accede to the Government Procurement Agreement (GPA) and improve its public consultation mechanisms with foreign investors.

Strategic Role in Eurasian Trade

Kazakhstan’s strategic geographic position at the heart of Eurasia was highlighted throughout the TPR discussions. The country aims to become a major regional transit hub by 2030.

Its role as a transit hub has become increasingly critical, with 80% of the country’s oil being exported through the Northern Corridor via Russia. However, Kazakhstan is also working on diversifying its transport routes by upgrading its infrastructure along key trade routes, such as the Trans-Caspian International Transport Route, which links Kazakhstan with China and Europe.

Economic Diversification and Investment Climate

Economic diversification remains a key challenge. The government has introduced several measures to attract investment, particularly in the manufacturing and services sectors. These efforts are part of a broader strategy to reduce the state’s direct involvement in the economy, especially in sectors such as gas, electricity, and rail transport, where state monopolies still exist.

Foreign investment has increased, particularly in energy-related projects, but challenges remain. Some WTO members encouraged Kazakhstan to eliminate the remaining investment restrictions in specific service sectors and improve its regulatory transparency. Members also praised Kazakhstan’s progress in creating a more competitive environment but noted that further reforms are needed to attract and retain foreign investors.

Although Kazakhstan's investment regime is de jure open, some restrictions remain, particularly in air transport, media, and fixed telecommunications.

Green and Social Challenges

TPR also touched on Kazakhstan’s efforts to transition to a greener economy. The country has set ambitious targets for carbon neutrality by 2060, but achieving these goals will require substantial investment in renewable energy and energy efficiency. Kazakhstan is the largest energy producer in Central Asia, relying heavily on fossil fuels, but the government has committed to gradually reducing the economy’s energy intensity.

Socially, Kazakhstan is working to enhance its contribution to global trade by promoting gender equality through initiatives like the WTO Informal Working Group on Trade and Gender. Members commended Kazakhstan for its proactive stance on these issues and encouraged the country to continue making progress.

The Future of Kazakhstan’s Trade Policy

Looking ahead, Kazakhstan’s trade policy direction appears focused on fostering economic diversification, improving its business environment, and enhancing regional and international connectivity. The country’s active participation in regional trade agreements, such as the Eurasian Economic Union (EAEU), and its bilateral trade agreements with countries like Vietnam and the United Arab Emirates, underscore its commitment to broadening its trade partnerships.

Kazakhstan vs. Economic Cooperation Organization

Despite Kazakhstan’s robust engagement with global trade, it is noteworthy that there is no specific mention of its involvement with the Economic Cooperation Organization (ECO) in its first WTO Trade Policy Review documents.

While Kazakhstan is a member of the ECO, the organization seems to have a more peripheral role on Kazakhstan’s core trade strategies compared to more active and economically impactful partnerships, like the EAEU. Kazakhstan is not a signatory of ECOTA (ECO Trade Agreement) not being implemented so far – which may explain why its mention in the context of trade policy is minimal. Kazakhstan’s trade priorities seem to be more aligned with regions and countries that have a stronger economic impact on its economy, such as the EU, Russia, and China, which account for a significant portion of its trade.

Kazakhstan’s trade policy could continue to leverage its geographic position and expanding infrastructure to increase its potential within the ECO region. Most importantly, within the ECO framework, Kazakhstan can collaborate with member countries to promote digital trade, enhance digital infrastructure, and create regional e-commerce platforms. These efforts would foster innovation and help small and medium-sized enterprises (SMEs) tap into regional markets.

Conclusion

Kazakhstan’s first WTO Trade Policy Review is a clear success, highlighting the country’s resilience and commitment to trade liberalization despite facing significant external challenges. With a rapidly developing e-government system, improvements in infrastructure, and a focus on economic diversification, Kazakhstan is well-positioned to strengthen its role in global trade.

However, the country still faces some challenges, particularly in reducing its reliance on oil and gas exports and making its business environment more transparent and competitive. Further reforms in state monopolies, investment policies, and regulatory transparency will be essential as Kazakhstan seeks to achieve its ambitious trade and economic goals.

Disclaimer: The views expressed in this article are solely those of the author and do not reflect any official position of the Economic Cooperation Organization.