Globalization’s Benefits in Kazakhstan Essay

Introduction

Globalization is important for each company and country. Each company benefits from globalization; globalization increases brand awareness allowing each company to market in a wider range of buyers, whether it is consumers, businesses, or even governments. Countries benefit by increasing their GDP and tourist attraction for business and pleasure.

In today’s world, globalization is vital to the profitability of each country and company. People work together by using resources around the world. Resources are rich in a different land, in Canada its lumber, in Ghana its gold, and in Kazakhstan (the topic of discussion) its oil. Globalization is an important factor in achieving economic prosperity.

Kazakhstan became apart of the Soviet Union in 1920 and was officially named Kirghiz Autonomous Socialist Soviet Republic when Bolshevik () came in to preserve the Soviet Union. Under the control of the Soviet Union, the name of the country changed to Kazakh Autonomous Socialist Soviet Republic in 1925, then again in 1936 to the Russian Soviet Federative Socialist Republic.

During 1986, the protest began to erupt for their independence, and in 1991 they finally won their independence with Nazarbayev becoming the first leader in the new independent country in the global world. Kazakhstan is now a leading country in Central Asia. Its economy is the largest in Central Asia. It has huge oil reserves as well as metals and minerals. “The top exports of Kazakhstan are Crude petroleum ($39.7B), Refined Petroleum ($3.6B), Petroleum Gas ($5.51B), Radioactive Chemicals ($2.26B) and Refined Copper ($1.99B), using the 1992 revision of the HS(Harmonized System) classification.

Its top imports are Cars ($2.32B), Refined Petroleum ($1.49B), packaged Medicaments ($1.1B), planes, helicopter or spacecraft ($842M) and computers ($642M)” According to the world economic forum it is in the 53rd place out of 138 economies on the global competitiveness 2016-2017 report. Kazakhstan contributes to the global economy, mainly through the oil industry; it is one of the tenth largest oil exporters in the world. Although globalization can be very helpful in growing an economy there were some negative consequences that came along with doing that. In this essay I will be analyzing Kazakhstan from how they impact and are impacted by globalization, to the major companies that have an influence in the country to whether or not I would start a business there.

Kazakhstan is surrounded by five countries China, Russia, Uzbekistan, and Turkmenistan, kryghstan. It is actually the largest landlocked country and 9th largest country in the world. This does not stop Kazakhstan and is not a trap like it would normally be for other countries. It has a close relationship with the Russian economy because it depends on it’s routes to get access into the international market. Globalization has been really beneficial to Kazakhstan. It has given Kazakhstan a chance to evolve by bringing newer standards to the country. Foreign investments by huge companies like Chevron and British petroleum has contributed to Kazakhstan’s economic growth.

Each country plays a role in the globalized world. Each country brings in a certain set of resources and consumer good to the global market, better than other countries. For example, United States bring the iPhone, Germany gave us Mercedes-Benz, and Kazakhstan gives us, well oil. As I mentioned earlier, Kazakhstan is in the top ten of producers of oil. Oil is a hot commodity; you can’t do anything without oil. Whether its transportation of good or running machines, oil is a very necessary part of our lives. Oil puts Kazakhstan on the map. Ever since Kazakhstan gained its independence, the country’s foreign direct investment increased by double digits. With oil and gas production robust, the country’s foreign direct investment went up to 215 billion between the moths of 2005-2015. China has consistently invested in Kazakhstan for projects like the Silk Road.

While globalization can be very beneficial but that was not always the case it is a double-sided coin, with good and bad. Although International companies came into Kazakhstan to make an impact they bring in their own labor workers and specialist. This makes the development of Kazakhstan laborers limited. Kazakhstan’s has also suffered from the Dutch disease. Once the large oil reserves were discovered it made it harder for other products that Kazakhstan has to offer; everything became less price competitive on the export market. Globalization has also changed Kazakhstan culture and society into a western way. Which mainly is affecting the youth however the older folks want to remain with their identity and put emphasis on keeping the Kazakhstan traditions.

Companies from Kazakhstan That Have/ Had a Presence in the Global Economy

Kazakhstan is a fast developing country with a growing economy and a broad scope of profitable businesses many of which are known worldwide. One of the most prominent companies from Kazakhstan that has achieved a global presence is JSC KazMunaiGas Exploration Production. This company is specialized in acquisition, development, production, processing and export hydrocarbon and its products (“Company Overview of JSC KazMunaiGas Exploration Production”).

The company is based in the West of the country in the city of Astana; there it owns a variety of gas and oil properties and Mangistau and Pre-Caspian basins. In addition, the company is a subsidiary of National Company KazMunaiGas, a joint stock organization that is owned by the state (“History”). The company’s history dates back to 2004 when it first appeared out of a merger of Embamunaigas and Uzenmunaigas – two older joint stock companies. In 2005, KazMunaiGas shifted its operations and assets to an upstream focus for a higher level of efficiency and excellence; also, a year later, IPO was carried out by the company that decided to place its global depository receipts on the LSE (London Stock Exchange) (“History”). A year after that, the company has seen some significant growth that resulted in acquisitions of shares and stakes of some other Kazakh oil mining companies (“History”). Today, KazMunaiGas is listed as one of the world’s 2000 most profitable companies with the market value of 7.9 billion dollars.

Global Companies’ Impact on Kazakhstan’s Economy

As it was briefly mentioned previously, the amount of foreign direct investment (FDI) in Kazakhstan has been experiencing steady growth. To be more precise, over the last couple of years there has been registered a significant increase in FDI that represented the addition 1 billion US dollars to the average 4 billion that the country has received annually from 2001 to 2016; the lowest and the highest FDI peaks were 2002 and 2012 respectively (“Kazakhstan Foreign Direct Investment”). The major sources of FDI are such states as Germany, the Russian Federation, the United States, Korea, China, and Canada.

As a result of the steady and strong inflow of the foreign direct investment, the economy of Kazakhstan has become more powerful due to a variety of diversification opportunities. The diversification of Kazakhstan’s economy is one of the core cornerstones for the further development because it is heavily dependent on the oil prices and oil products as the major source of profit.

Kazakhstan is a growing and developing economy, and thus it is rather attractive for the transnational companies and corporations. Some of the most influential and successful multinational companies that are present in the markets of Kazakhstan are Nestle, Johnson & Johnson, Proctor and Gamble. These companies are widely represented in their respective industries in the territory of Kazakhstan. Due to their presence, as well as the presence of many other international and multinational companies, Kazakhstan’s markets have the ability to interact with the foreign economies and benefit from the prevalence of foreign businesses attracting more international interest in Kazakhstan as the recipient country.

However, it is possible to note that the vast majority of international businesses present in the markets of Kazakhstan represent very strong and recognizable brands with powerful reputations and influence. This is partly the case because there exist significant barriers to the successful operation of foreign businesses in the territory of Kazakhstan. In particular, one of such obstacles is an elevated level of corruption and low transparency as the country is ranked 145th in the list of 180 in regard to the information disclosure and fairness (“Kazakhstan: Foreign Investment”). Naturally, the presence of high rates of corruption in the country’s economy is not a good sign for its future development. However, it is important to notices that Kazakhstan is interested in developing its relations with foreign companies and maximizing its foreign direct investment. In that way, it might be possible to state that as the presence of foreign business and investment becomes stronger in Kazakhstan, its policymakers would have to work harder for the creation a more welcoming business environment in order to attract more capital.

Leaders in Kazakhstan That Have Impact on the Global Environment of Business

The growing economy of Kazakhstan serves as a fruitful ground for the development of the country’s most prominent business leaders. In particular, some of them were mentioned by Forbes in the list of 50 richest business people in Kazakhstan.

The leader ranked first was Bulat Utemuratov who is worth 2.6 billion US dollars; this outstanding leader was followed by Alijan Ibragimov with a capital of 2.2 billion US dollars, the third and the fourth ranks were occupied by two successful spouses – Dinara and Timur Kulibayev worth 2.1 billion US dollars each (“50 richest businessmen of Kazakhstan on Forbes ranking”).

These business authorities along with the other prominent figures in the list are the owners of rather successful businesses that function both in the territory of Kazakhstan and outside of it in the neighboring or partnering countries. The businesses built by these leaders play an active role in the development of the economy of Kazakhstan, as well as its promotion as a pleasurable environment for foreign and domestic business and a welcoming and resourceful neighbor. To date, Kazakhstan and its business leaders are working actively on the creation of stronger and more attractive reputation for the country’s economy as a source of interest for investors.

Knowing that the economy of this country is currently undergoing a lot of changes, it is possible to theorize that more profitable and big businesses are going to appear within the next decade. Moreover, the existing large domestic companies of Kazakhstan are oriented at expansion and the maximization of profit. It is also possible that more of the domestic and national businesses of Kazakhstan will attempt to establish their global presence.

Military Expenditures in Relation to Overall GDP

Kazakhstan has a significant military budget that estimates close to 2.35 billion dollars (“Kazakhstani Military Budget”). When compared to the country’s GDP, it represented over 1%. The budget includes the expenditures that cover the activities and maintenance of the state’s armed forces, as well as peacekeeping forces; in addition, it involves the costs taken from the country’s budget by the governmental agencies and ministries engaged in the defense practices and projects (“Military expenditure (% of GDP) in Kazakhstan”).

Moreover, the budget also includes the expenses taken by all the paramilitary forces that are characterized as trained specifically for the participation in military activities and space operations of a military nature. Also, the budget is expected to cover the funds paying military pensions to the retired military personnel, as well as other types of help provided to this group of the population (social services, treatments); additionally, the budget also includes the costs of military research, procurement, and maintenance, and aids (in the cases when Kazakhstan assumes the role of the air donor for another state).

At the same time, discussing the military budget of Kazakhstan, it is important to mention which expenditures are not a part of it. First of all, the budget does not cover the activities that were involved in the military operations conducted previously. Some examples of such activities are the provision of monetary and other tangible benefits and pensions for veterans, conversion, demobilization of the military forces, and the elimination of weapons. In addition, since different countries tend to have different approaches to military funds, budgets, and initiatives, there exists a range of activities that may or may not be included in the overall state military budget based on the country leaders’ decisions. Some of such activities are reserves, civil defense, auxiliary forces, dual-purpose forces, police (civilian and non-civilian), and military grants, to name a few. All in all, the total amount spent by Kazakhstan on military expenses over the course of the last twelve years incorporates over 12 billion US dollars.

Major Companies Headquartered in Kazakhstan

The list of major companies and organizations based in Kazakhstan includes some of the most established and recognized firms in the country. KazMunayGas is one of the most influential domestic businesses in the country that is specialized in oil and gas mining it deserves to be listed first among the most powerful national companies. Next, Kazakhstan Electricity Grid Operating Compan KEGOC is another big and profitable Kazakhstani business that also performs in oil and gas industry. The other well-known companies of the country are Tau-Ken-Samruk, Kazakhstan Temir Zholy, and KazakhTelecom. All of them are renowned and strong competitors in the domestic arena of Kazakhstan.

Works Cited

“50 richest businessmen of Kazakhstan on Forbes ranking.” KazPravda, 2015. Web.

“Company Overview of JSC KazMunaiGas Exploration Production.” Bloomberg, 2017. Web.

“History.” KazMunaiGas, 2017. Web.

“Kazakhstan Foreign Direct Investment.” TradingEconomics, 2017. Web.

“Kazakhstan: Foreign Investment.” Santander, 2017. Web.

“Kazakhstani Military Budget.” MilitaryBudget.org, 2012. Web.

“Military expenditure (% of GDP) in Kazakhstan.” TradingEconomics, 2017. Web.