Saule Yegemberdiyeva, Bibigul Issayeva, Perizat Sadykova
THE IMPACT OF THE OIL AND GAS SECTOR ON SOCIO-ECONOMIC DEVELOPMENT OF THE REPUBLIC OF KAZAKHSTAN
The article discusses the role of the oil and gas industry in Kazakhstan and its impact on social and economic development of regions and the country as a whole. Theoil and gas industry is the breadwinner of Kazakhstan’s economy, promoting improvement of various industries’ domains. This sector’s functioning is also closely linked with the implementation of major social programs across the state. The study highlights the latest trends in the progress of Kazakhstan’s oil and gas industry, significant problems related to it and its effect on socio-economic indices.
Keywords: socio - economic development, oil and gas industry, correlation.
Table 2. Picture 3. Bibliography 10
Formulation of the problem.At this stage development of oil and gas sector plays a crucial role in the economy of Republic of Kazakhstan. Proceeds from oil and gas companies make the main part of the national budget. Oil and gas sector has a decisive impact on socio-economic development of the country and its regions, in fact, it is as donor to the overall state economy, contributes to development of other sectors.
Due to work results of oil and gas companies implements the most important social programs across the regions and the state whole. Significant hydrocarbon reserves, favorable geographical position of the state gives further increase in oil and gas production and indicatesthe future of oil and gas complex which will occupy a leading position in the economy of the Republic of Kazakhstan, that will give its development some hope for further socio-economic development of the country.
Review of publications. The socio-economic development of a country is a multidimensional process, which covers economic growth, structured economic shifts, enhancement of conditions and the quality life. There is a great variety of models of socio-economic development stemming from unique national characteristics, yet general patterns and parameters can still be defined.
Any analysis of the socio - economic development of a country depends on the specific character of economic and social and natural conditions. Development in Kazakhstan’s regions and this difference is distinguished not only by the initial level of development, but also by distinctive features of each region, for example structure, geographic location, industrial structure, production specializationetc. This analysis focuses on socio-economic progress in various regions and the factors which negativelyaffect regional development, suggestions are offered toimprove the situation and solve problematic issues.
Theoretical and practical aspects of the impact of the oil and gas complex on socio-economic development of the country are investigated by many economicsscholars. Kazakhstaniresearchers, namely R.Alshanov (2004), D.Madiyarova (2010), E.Karibdzhanov (2005), U.Shalbolova (2003), G.Shakulikova (2006), O.Yegorov (2003) and A.Yesentugelov (2011) have made significant contributions to the research in this field.
Unsolved parts of the problem. This topic is timely because a justification is needed for further development ofthe oil and gassector of the countryas the most importantand integralcomponent of the nationaleconomyof the Republic ofKazakhstan.
Undoubtedly, the role and importance of hydrocarbon resources in development of the country is great, since they are the basis of export potential and, therefore, the main item of export revenues of the state. It is not surprising that modern Kazakhstanhas become a state where the interests of many countries are met, and the main reason is the presence of huge hydrocarbon reserves.
Ina globalized economy,major oilcompanies which are strongly interestedin increasingbusiness capacity, are increasing penetrationinto the priorityareas of nationaleconomy.This showsthat moderncommodity and raw marketshave turnedinto a spaceof global international cooperationwith allthe ensuing consequences (R.Alshanov, 2004,E.Karibdzhanov, 2005).
Meanwhile, significant amounts of foreign capital attracted to the economy of Kazakhstan has not solved existing problems (for instance, in fiscal, social, and environmental spheres). This high degree of openness of the national economy to foreign capital created new structural imbalances and content contradictions. Two basic reasons for this can be noted. Firstly,Kazakhstan’s oil and gas industry has not been considered as part of a unified system of the world market, and secondly, its development is carried out without connection with other sectors of the economy of the country. Hence, there is a need for the state to develop strategic directions for the regulation of the oil and gas complex of the Republic of Kazakhstan.
The government now has an important role in the management of natural resources. Cleargovernment regulationof such kinds of relationships is considered a stimulating factorin attracting foreigninvestorsto the country.
The purpose of this research is to investigate the processes of socio - economic development of the country and to estimate the impact of the oil and gas industry on its parameters in the Republic of Kazakhstan.
Key results of the study. Companies of the oil and gas industry make up more than a quarter of the industrial output of the Republic, more than a third of all taxes and other earnings to the overall country’s budget and more than half of its export revenues. Capital investments into the oil and gas sector (all sources of funding) provide nearly one-third of the total investments.
As can be seen from Table 1, for the last 10 years, the economy of Kazakhstan has not become less resource oriented. The main evidence for this is the index of the NHS share in general export’s outcome. If in 1998 it leveled at 43.8%, in 2010 this result almost doubled and became equal to 74% (The Agency of Statistics of the RK, 2010). However is the increasing orientation ofthe economy to the resources considered a "resource curse"? Looking at the growth dynamics of the GDP per capita (in constant prices of 1998), we will observe good results: the average growth rate climbed to 10%. But it was achieved due to increased oil prices. Then, after the dramatic decline of oil prices in the autumn of 2008, GDP per capita in 2009 demonstrated a negative growth rate.
Table 1 - Share of oil and gas industry in Kazakhstan's basic economic indicators, 1998-2010(%)
Year / Gross output / GVA / Reward / Net income / Exports / GDP / Investments to the fixed capital1998 / 10,40 / 8,40 / 8,00 / 5,00 / 43,80 / 7,90 / 28,80
1999 / 13,80 / 11,00 / 9,40 / 8,80 / 49,30 / 10,40 / 42,00
2000 / 17,70 / 14,00 / 10,30 / 12,20 / 54,40 / 13,00 / 49,80
2001 / 14,90 / 12,30 / 9,30 / 8,20 / 58,20 / 11,40 / 44,30
2002 / 16,70 / 13,10 / 9,40 / 5,50 / 61,20 / 12,10 / 41,50
2003 / 17,30 / 13,00 / 10,80 / 5,30 / 65,50 / 12,10 / 35,50
2004 / 19,30 / 14,50 / 9,80 / 9,50 / 69,70 / 13,60 / 27,00
2005 / 21,80 / 16,80 / 9,40 / 17,20 / 74,00 / 15,80 / 22,30
2006 / 20,10 / 17,20 / 9,30 / 17,70 / 71,80 / 16,10 / 22,56
2007 / 19,50 / 16,20 / 7,80 / 17,40 / 69,70 / 15,10 / 29,22
2008 / 22,30 / 20,10 / 8,00 / 24,90 / 73,00 / 18,70 / 15,67
2009 / 19,40 / 18,70 / 8,20 / 21,40 / 74,00 / 17,90 / 24,64
2010 / 22,30 / 20,10 / 8,00 / 24,90 / 74,00 / 18,70 / 15,67
Source: The Agency of Statistics of the Republic of Kazakhstan, 2010
To sum up, it can be said that pair correlation coefficients between the main macroeconomic indexes (GDP, industrial production amount, GVA, exports) and Kazakhstan's oil extraction went up to 0.94, 0.95, 0.94 and 0.87, which demonstrate strong connection between indicators (I.Dreyler, 2001.,R.Thomas, 2011).
The oil and gas sector in the process of market transformation of the economy of the Republic implies a wide sphere of influence of its functioning. In addition, the conducted research has shown that the oil and gas industry has had a huge effect on the social and economic progress of the countryin the following four areas: at the national, sectorial, regional and enterprise levels. For this analysis the following parameters have been used which are shown in Table 2.
There is an impact on the complex of all applicable factors of production: human resources, capital, materials, and in all aspects of societal development, including economic, legislative, social and organizational. On the one hand, investment in the form of financial resources, expertise, management methods, contributed to the growth of factors of production and led to satisfaction of foreign flows’ amounts.On the otherhand, inconjunction withappropriateactivities and otherfactorsof production, theyhave contributed tothe actualachievement ofmulti-specieseffects(growth in oil and gas productions, growth in GDP per capita, growth in employment, increase in living level etc.)
Table 2 – Indicators for calculation of dependencies
Year / Extraction, mln. tons / GDP,bln. tg / Industrial output amount, bn. tg. / Gross value added, bln. tg. / Export,
bln. tg.
2000 / 35 / 2600 / 1798 / 2427 / 1472
2001 / 40 / 3251 / 200 / 3026 / 1492
2002 / 47 / 3776 / 2337 / 3504 / 1774
2003 / 51 / 4612 / 2836 / 4299 / 2233
2004 / 59 / 5870 / 3868 / 5517 / 2082
2005 / 61 / 7591 / 5253 / 7123 / 4064
2006 / 65 / 10214 / 6510 / 9548 / 5224
2007 / 67 / 12850 / 7816 / 11930 / 6315
2008 / 71 / 16053 / 10196 / 14928 / 9185
2009 / 76 / 16100 / 9122 / 13453 / 6231
2010 / 79 / 16500 / 11757 / 14928 / 7436
Source: The Agency of Statistics of the Republic of Kazakhstan, 2010
Having analyzedthe given correlation indexes of the oil and gas industry, it is not able that the biggest impact is indicated in the number of employed in the oil and gas sector(Fig1).
Among the general indexes that characterize possible consequences of the oil and gas sector activity in the country the following can be mentioned:
- The growth of national economy. If we follow the modifications of GDP of Kazakhstan for 2000-2010, the nominal growth rate was in the range of 16-34%, and the real growth rate stayed constant at 8.9 - 13.5% (The Agency of Statistics of the RK, 2010).
The calculation revealed that the effect of a million tons of crude oil on oil and gas enterprises in Kazakhstanwas a GDP boom of 359.4 billion. In otherwords, eachtonensures the growthof the grossdomestic product of339 400 tg. (Fig 2).
Fig 1 - The correlation coefficients
Calculations also show that for every million tons of crude oil in Kazakhstan’s the oil and gas enterprises a rise in exports of 163.5 billion tg resulted. In other words, from every ton we derive considerable growth of exports, adding up to about 163,500 tg (Fig. 2). This means that the degree of Kazakhstan’s integration in the international division of labor is definitely changing in a positive direction. International economic relations are developing in two possible ways: through participation in the international division of labor and cooperation in international producing. The different types of international specialization of production and exchange are well known. There is, for example specialization and exchange of goods between one or more spheres of enterprise cooperative agreement on a reimbursable basis or loans to get equipment abroad and other sorts of transactions.
Figure 2 - The dependence of GDP from oil industry
Owing to joint ventures in the oil and gas sector the contingentof the partner countrieswhich now collaborate with Kazakhstan has expanded considerably. The size of export-import operations in the Republic has increased, and new directions inthe field of internationalcooperation have been developed (U.Shalbolova, 2003).
Oil and gas companies can be considered as a means ofsaturation of the domesticmarket with domestic products. Almost alloil and gas companiesin the countrysupported the policy ofimport substitutionof the Government ofthe Republic ofKazakhstan. Oil and gas companieshave becomea source ofincreased productionof goods and services, and thestatistics show thatinthe same year, Kazakhstan’s companiesandorganizations providedservicesforJSC ExplorationandProduction KazMunaiGas totaling more than $ 2 million.
Improvement in social policy is defined by several directions, such as employment growth and the resolution of the problems of unemployment, the growth of income of current workers and the level of economic conditions, etc. Employment leveled at 36.8% in 1991, but in the following ten years grew to 44.3% and by 2005 and 2010 stood at 91.9% and 93.4% respectively (The Agency of Statistics of the RK, 2010).
Figure 3 – Dependence of unemployment rate from oil producing
The calculations of Figure 3 point out that for every million tons of crude oil extracted in Kazakhstan, unemployment is reduced slightly by 0,134%.
The distribution of employed persons over the whole various enterprises by ownership is as follows: on 2001, 25% of the population was involved in state-owned enterprises, in 2010, the amount was similar 23.1%. If the structure of employment in Kazakhstan earlier had share of wage workers about 57.7%, now this index picked to 70%, and the self-employed workers degree before and nowadays (2010) correspondingly 42.3%, and 30% (D.Madiyarova, 2010; G.Shakulikova, 2006).
Analysis shows that the operation of the oil and gas sector mostly provided significant rise in employment level all over the country. New jobs creation, raising incomes, retraining and study of experts both abroad and in higher educational institutions are now held in natural order.
This demonstrates theattractiveness ofthe sectorforemployees.As a result of the creation and operation of oil and gas companies the situation in the areas have changed. For instance, household income exceeds the cost of living in all regions, but purchasing power in the Republic varies: in Astana it is 3.2 times higher than the cost of living in Kyzyl-Orda region - 1.2 times. The living wage on average in the country is 15,999 tenge, it is lower in the Zhambyl region, but higher in the Mangystau and Atyrau regions (The Agency of Statistics of the RK, 2010).
The study shows thatthe quantitative growth ofoil and gas companiesin the areasin recent yearshas beeninsignificant.Meanwhile, there is a tendency of stabilityin the growthof labor productivity, both in the production of goodsandprovision of servicesand, consequently,in the overall economy.
Significant value of oil and gas enterprises for the development of any country, which is a recipient, is ensured due to the important opportunity to create new jobs.
In developed countries, the share of technologies, products and equipment containing know-how, is now 70 to 85% of GDP, and in many ways this factor is a key to high competitiveness(Yesentugelov, 2011). At the same time, the lack of development in the innovation sphere could become a barrier to the entry of Kazakhstan in the 50 most competitive countries of the world. For example,during the last yearour ratingin this areahas decreased from65thto75thposition (Yesentugelov, 2011). We havea shortageof engineers and researchers(98th placeaccording to IMD competitiveness rating), and alow level ofcooperationbetween researchinstitutes and industry (Yesentugelov, 2011). There are anumber of problems thatKazakhstan still has to solve in order to stimulateinnovation processesin the country.The firstgoal is the formationof an adequate legislativeframework. Business needs toknow exactly how to workwithin the law,and whatshould be done. Besides, it is necessary to create those conditions which will be favorable for private businesses, in this case forventure capital funds. As for the impact of the oil and gas industry on other sectors of Kazakhstan’seconomy of, it should be notedthat oilcompaniesseriouslyaffect thegrowth of productionin the industry.
Conclusion.This study presents find outqualitative characteristics of the influence ofoil and gas companieson thedevelopment of the economy, implying a procedure of identificationof possible consequencesand thenestimationtheir occurrenceas aresultof influence.The first step aims to identifypositive results, and the second stepto identifythe negative impacton economy, and the third step torecordthe occurrence in different levels: the country overall, whichattractscapital, itsindividual industries and regions, and individual enterprise. The fourth step is aimed attaking into account manyfactors and eventsin the real marketat the micro andmacro levels,and the use ofcomputing andanalytical tools. The last step related to the search for toolsto determine the extent andnature of the influencethat impliesthe useofappropriate indicators.
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