Kazakhstan is the largest economy in Central Asia, and is important to the world energy market due to its significant oil and natural gas reserves. Following independence from the former Soviet Union in 1991, Kazakhstan actively pursued a series of economic reforms to establish a free market economy. Apart from de-monopolisation and price liberalisation, Kazakhstan also enacted laws on investment to create favourable conditions to attract foreign investment. Between 1993 and 2007, the growth of foreign direct investment into Kazakhstan totalled US$68 billion, which accounted for more than 80% of all foreign direct investment in Central Asia.

On the back of a strong increase in foreign investment and a rise in world commodities prices, since 2000 Kazakhstan enjoyed impressive economic growth of 10% per annum until 2007, which has led to the rise of sizable middle class. It is estimated that Kazakhstan's middle class numbers at 25% of the total population, about four million in number. As incomes increase and government reforms help secure the basic needs of housing, healthcare and education, middle-class Kazakhs are using their increasing disposable income to enjoy life.

A consumer boom is evident in the proliferation of new shopping malls and upmarket resident apartments all around Almaty and Astana, the two largest cities in Kazakhstan. New brands such as Esprit, Zara and Nike have entered the market and a mid-range market has become increasingly visible in Kazakhstan. In 2007, Kazakhs spent more than US$1 billion on apparel and shoes, and according to figures provided by the Market Research and Business Information Centre, retail sales of 16 categories of electronic goods, including audio visual equipment and cellphones, increased 70% to US$1.2 billion.

Though the financial crisis hit the Kazakhstan economy hard, Kazakhstan's early reform programmes have provided a stronger foundation from which to deal with the current economic difficulties. For example, Kazakhstan has already announced a stimulus package of US$18 billion to help recapitalise the country's banks and to support real activity. Kazakhstan's investment in roads, rail and other infrastructure is in progress, and reform of the stock market continues. Kazakhstan's ambition to become a regional logistics hub and financial centre of Central Asia in the long term remains unchanged.

Regional Logistics Hub and Financial Centre

The volume of trade and cargo flows between Kazakhstan and its neighbours has increased significantly since the late 1990s along with the recovery in Central Asian economies and the boom in China. Since 2001 the Kazakh government has initiated investment projects in the transport and logistics sectors, which include road and railway networks, logistics parks, bonded warehouses and intermodal container terminals. The vision of the Kazakh government is to develop Kazakhstan into a regional logistics hub with a complex network of transportation routes criss crossing Central Asia, and to attract cargo trade between Europe and Asia back to the region.

Aspiring to become a Central Asian financial centre, Kazakhstan is keen to develop Almaty into the financial capital of Central Asia. In February 2006, Kazakhstan embarked on the project of the Regional Financial Centre of Almaty (RFCA). RFCA activities are aimed at attracting international investment funds along with listed companies from the wider Eastern European and Central Asian region, and creating a stock market operating to internationally recognised standards of market regulation and best practice.

Business Opportunities for Hong Kong

As the tastes of the Kazakh middle class moves upmarket, and as the Kazakhstan government welcomes foreign support and advice to modernise its services sector, Hong Kong products and services should enjoy good chances of making inroads into Kazakhstan.

In general, Kazakh people are fashion conscious, and are adventurous in trying new brands with good qualities. Hong Kong's fashion items, jewellery and watches that are of good quality and design should have good potential in the market. In particular, Kazakhstan's big local developers are expected to open more new generation malls and shopping centres in Almaty and Astana. The management companies of these malls are expanding their product sourcing networks and are interested in looking for distribution rights of new brands and new products.

Hong Kong services are known to be competitive by providing international standard services with a billing comparatively much lower than its European and US counterparts. Kazakhs in general have a good impression of Hong Kong. They are able to differentiate between Hong Kong and the Chinese mainland as well as their respective services and products.

In view of Kazakhstan's relatively underdeveloped services sector, Kazakh companies and authorities are looking for foreign proposals and partnerships that can improve the human capital and management systems in various fast developing sectors. Services sectors that have good potential for Hong Kong include finance, IT, logistics, consultancy and management. Particular sectors that require consultancy services are urban development, transportation, hotel management, tourism, shopping mall management and real estate management.

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