Closing the Territorial Gap: Diagnostics of Regional Inequality in Kazakhstan

While gross domestic product (GDP) per capita has increased in Kazakhstan over the past 20 years, the additional wealth linked to this economic growth has been distributed unevenly and concentrated in a limited number of regions. At the same time, deviation from the country mean has widened.

Figure 1: Gross Regional Product (GRP) Per Capita, 1998–2020 (‘000 Kazakhstani Tenge)

Note: GRP per capita in current prices. Country values are calculated as the arithmetic average of regional values.
Source: Kazakhstan Statistical Department.

Kazakhstan’s regional inequalities are significantly higher than those of most developed countries, a factor that may be a future obstacle for the aspirations of the country to join the ranks of the most developed economies. Empirical evidence suggests that recent rises in territorial inequalities have widened the gap between better- and less well-off regions to levels that are higher than those found in other developing countries in Central Asia and elsewhere.

Spatial analysis techniques reveal two parallel trends. First, the difference in GRP per capita, productivity and poverty levels between the western and some northern regions, and southern and some eastern regions is large and growing. Western regions (e.g., Atyrau) display exceptionally high levels of wealth with the presence of major natural resource reserves, while southern regions outside big cities (e.g., Turkestan) lag far behind and struggle to benefit from greater innovation which characterizes parts of Kazakhstan’s economy. Second, a similar divide can be detected between urban centers such as Almaty and Nur Sultan, and the more remote and rural areas of the country.

On average, urban agglomerations display higher levels of wealth and productivity and substantially lower poverty rates. While preliminary evidence on economic dynamics in the early phases of the coronavirus disease (COVID-19) pandemic show a reduction of spatial inequalities among regions, this effect is likely to be short-lived. This is largely driven by the greater economic downturn experienced by urban centers rather than improvements in the economic dynamism of the lagging regions.

Restricting the focus of analysis to a snapshot of regional divides, however, only captures a fraction of the picture. Regional differences evolve over time and is a function of the intertwined relationship between a myriad of variables.

The ADB study introduced innovative indices to measure territorial inequalities in Kazakhstan to take into account the dynamic nature of spatial imbalances.

The Development Trap Index identified patterns of economic stagnation across Kazakh regions. A high score on the index implies high risk of economic stagnation and a poor socioeconomic regional performance vis-à-vis past economic dynamism and the national average.

The computed index for Kazakhstan shows a high risk of stagnation and falling into an economic trap. For example, the risk for Atyrau is considerable and reflects the region’s struggle to diversify its economy and ignite greater dynamism within its regional business ecosystem. Other regions, such as Turkestan, are at low levels of development and yet still at a relatively high risk of falling into a trapped status. Against this backdrop, growth slowdowns in the less-developed regions may contribute to widening the gap between the more virtuous regions and rural and remote areas.

The Regional Competitiveness and Cohesion Index provided a more comprehensive and multidimensional measure of regional economic performance. It indicated a highly uneven picture when it studied the performance of Kazakh regions across several dimensions (education, health, innovation, labor markets and technological readiness). Some regions have been capable of dynamizing their economies by creating pro-business ecosystems for firms and individuals to thrive and develop their full potential. In contrast, other regions are struggling. Even the more advanced regions showed weak performance in some competitiveness dimensions such as Atyrau in the case of basic health.

Dealing with regional inequalities requires a concerted, whole-of-government effort, tailored to the specific needs of individual regions.

In Kazakhstan, facilitating catching-up processes for less developed territories will help the government reach more ambitious socioeconomic targets as all regions will be able to contribute to the country’s economic development.

In addition, this can address the emergence of social unrest and discontent of having a highly unbalanced territorial distribution of resources and wealth. This phenomenon could be seen both in developed countries such as the United States, and in developing countries such as Brazil and the People’s Republic of China. For all these reasons, territorial inequalities cannot be considered an unavoidable phase in the development trajectory of the country and deserve the greatest attention from the government and central authorities.

Place-sensitive development strategies, which aim to close the gap between regions by tapping into their full potential, are most suited to bring about greater dynamism, innovation and knowledge in a wider group of regions.

Blanket policies and piecemeal strategies are unlikely to revitalize Kazakhstan’s regional economies characterized by poor performance in areas as diverse as innovation capabilities and health standards. Also, no off-the-shelf policy intervention will be able to acknowledge and integrate regional specificities, even in regions at similar stages of development.

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