Oil, Transition and Security in Kazakhstan - Assignment Example

The wealthiest economic sector in oil and gas, Kazakhstan produced 61.9 million tons of oil and gas in 2005 with the export of 52.4 million tons during 2004 and 2005. (Kazakhstan, Sept 2006) Kazakh government with premium management skills turned to foreign investors on a scale unprecedented in the former Soviet Union for capital to repair and restart the large enterprises that in some cases had virtually ceased operation. Most recently, however, Kazakhstan has been placing much greater emphasis on local sourcing of as many inputs as possible and on the training of local employees by all foreign investors in what appears to be a concerted effort to regain greater control of their industry.

The new emphasis is certainly understandable which foretells a change in the investment climate. Kazakhstan is a Central Asian country is limited by the high cost of transport and raw materials. According to a report, raw materials, in 2000 represented 60% of the total products exported. That means Kazakhstan is completely dependant upon raw materials. Another weakness confronted by Kazakhstan is the high-cost variable of traveling across the border at the local and international levels. In this context traveling is the main obstruction in trade.

This obstruction escorts towards the disorganized infrastructure of trading and even that at a high cost. Traveling on a local level has given rise to expensive transport companies. According to Raballand (2003), "freight in transit through Kazakhstan has dropped by more than 90%". (Raballand, 2003)Besides freight, Kazakhstan is also confronted with serious water shortage problems. Increasing population, reliance on hydropower in certain states, and dependence on irrigation for growing cotton and other crops in others have all resulted in a growing demand for water.

(Cummings, 2003, p. 203)Pollution, lack of educational institutions and poor border security issues are other noticed weaknesses of the country. According to the USAID Report, 25% of the population lives below the poverty line. (USAID, 2006)Opportunity:Currently, the Government aims to achieve its developmental goals by 2009 as it aims to contribute over $15 million to a $40 million USAID economic development project. In the last 2-3 years, the United States has provided almost $1.205 billion in technical assistance and investment support in Kazakhstan (Kazakhstan, Sept 2006)Recently, a joint venture agreement has been signed with a governmental body to "build and operate the plant at 'Kyzylorda', in the south of Kazakhstan near Tashkent".

(Future, 2006) It would be the first float plant of its kind, which would commence its construction in 2007. This project is no less than an economic opportunity for a country that is facing glass crises since its independence with no glass manufacturer or supplier throughout the country. (Future, 2006) The country is attracting foreign investors towards the energy sector with the advancement in the banking division and small-scale privatization sector. (USAID, 2006) Taking both agricultural production and agribusiness together, opportunities for rural household income growth depend on linking farmers more closely to both domestic and export demand.