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KAZAKHSTAN K WORLD RANK: 42 REGIONAL RANK: 11 ECONOMIC FREEDOM STATUS: MODERATELY FREE azakhstan’s economy has benefited substantially from increased openness and flexibility over the past decade. Although the state continues to maintain its ownership in key enterprises, particularly in the energy sector, the economy is mostly in private hands, and more privatization is being sought. Beneficial structural reforms have included bank privatization, implementation of competitive flat tax rates, and modernization of the trade regime. Deeper institutional reforms to reduce barriers to investment and increase the efficiency of the judiciary are critical to further success. Despite measures to expand the non-energy sector, the overall regulatory framework needs to be more streamlined to enhance competitiveness. ECONOMIC FREEDOM SCORE 69.0 ( ▲ UP 5.4 POINTS ) 0 50 60 70 80 60.4 60.9 REGIONAL AVERAGE WORLD AVERAGE (ASIA-PACIFIC REGION) NOTABLE SUCCESSES: Government Size and Trade Freedom 100 CONCERNS: Rule of Law, Investment Freedom, and Financial Freedom OVERALL SCORE CHANGE SINCE 2013: +6.0 QUICK FACTS FREEDOM TREND 90 80 70 60 POPULATION: 17.7 million UNEMPLOYMENT: 5.6% GDP (PPP): $429.1 billion 1.2% growth in 2015 5-year compound annual growth 4.8% $24,268 per capita INFLATION (CPI): 6.5% FDI INFLOW: $4.0 billion PUBLIC DEBT: 23.3% of GDP 50 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2015 data unless otherwise noted. Data compiled as of September 2016 BACKGROUND: President Nursultan Nazarbayev, whose rule began in 1989 when Kazakhstan was still a Soviet republic, won a sixth five-year term in 2015. The opposition is marginalized, and the lack of a succession plan creates longer-term political uncertainty. Kazakhstan joined the Eurasian Economic Union, which includes Russia and Belarus, on January 1, 2015. The past year has been tumultuous for Kazakhstan. In April 2016, there were widespread protests against government land-reform plans. In June, a terrorist attack in the northwestern city of Aqtobe left 28 people dead. Modernization of the Atyrau, Shymkent, and Pavlodar refineries is due to be completed in 2018. Kazakhstan is also the world’s largest producer of uranium. 138 2017 Index of Economic Freedom KEY: WORLD AVERAGE 12 ECONOMIC FREEDOMS | KAZAKHSTAN RULE OF LAW 70th GOVERNMENT SIZE 52nd 93rd 100 100 80 80 70 70 60 60 50 50 56.1 56.5 38.0 Property Rights Judicial Effectiveness Government Integrity Property rights are not protected effectively, although the government has made enforcement of contracts easier by introducing a simplified fast-track procedure for small claims. Judges are subject to political influence, and bias is evident throughout the judicial system. Corruption is widespread, and those in positions of authority and individuals with ties to government or law enforcement officials may act with impunity. 49th 13th 100 80 80 70 70 60 60 50 50 82.5 73.9 Business Freedom Labor Freedom Monetary Freedom The regulatory framework has undergone a series of reforms. The private sector now faces fewer constraints, although there is still much room for institutional reform. Labor regulations are relatively flexible, facilitating the development of a more dynamic labor market. Kazakhstan is subsidizing renewable energy with the goal of having 10 percent of its needs met by renewables by 2030. 85.7 98.9 Tax Burden Government Spending Fiscal Health OPEN MARKETS 127th 74.5 93.3 Rank The flat personal income tax rate is 10 percent, and the standard corporate tax rate is 20 percent. Other taxes include a value-added tax and excise taxes. The overall tax burden equals 13.2 percent of total domestic income. Government spending has amounted to 21.8 percent of total output (GDP) over the past three years, and budget surpluses have averaged 0.5 percent of GDP. Public debt is equivalent to 23.3 percent of GDP. 100 0 14th 0 REGULATORY EFFICIENCY 0 31st KAZAKHSTAN 0 15th 91st 135th 70th 78.5 40.0 50.0 Trade Freedom Investment Freedom Financial Freedom Rank Trade is important to Kazakhstan’s economy; the value of exports and imports taken together equals 53 percent of GDP. The average applied tariff rate is 3.3 percent. Foreign investment in some sectors of the economy is restricted, and state-owned enterprises distort the economy. The state has been providing additional support to the banking sector since 2014. The number of nonperforming loans continues to be high. The Heritage Foundation | heritage.org/Index 139