A Comparative Analysis of the Development of the Manufacturing Sector in Kazakhstan
Yuri Shokamanov, First Vice Chairman of the Kazakhstan Statistical Agency, Doctor of Economics
The manufacturing sector of Kazakhstan has been growing steadily since 1999. Sectors such as metallurgy, metalworking, and the production of foodstuffs and petroleum products are growing particularly rapidly. In 2002, enterprises in this sector produced a total of 1,011.4 bn tenge worth of products, which accounts for 43.3% of the total industrial production. At present, 369,200 people are employed in the sector (55% of the total labour force in the industrial sectors), and the average wage is 21,600 tenge. It is worth mentioning that the agricultural products processing sector accounts for 28% of the total production in the country, and 90% of its production of foodstuffs. However, I would like to present some statistical data on the mining sector, which includes a large segment of the oil and gas sector, in order to compare them to indices in manufacturing and adequately evaluate the role of the latter for the Kazakh economy.
Investment and production in the mining and manufacturing sectors
A large share of total capital investment is currently directed into the mining sector. In 1999-2002, its share of investment was between 38-50% of the total investment in all sectors of economy; and during the first nine months of the current year it reached 48%. Investment in the manufacturing sector was about 8-12%. Last year investment in the mining sector grew by 4.9 times against 1999, but in the manufacturing sector the growth was only 2.3 times. The amounts of investment going into the processing of agricultural products and food production were considerably smaller (2.1–3.8% and 1.9–2.9% respectively). However, in nominal terms there was some increase in investment to these sectors (by 1.9 and 2.4 times respectively).
Even though the increase in industrial production in Kazakhstan is mainly due to the mining sector (44-49% in 2000-2002 and the first nine months of 2003), the role of the manufacturing sector (43-47%) should not be underestimated. Although production in the mining sector increased by 1.75 times in physical terms in 1999-2002, it grew by 1.5 times in the manufacturing sector. Moreover, over the first nine months of the current year, production growth rate in the manufacturing sector was slightly higher than in the mining sector (8.1% and 7.6% respectively).
Metallurgy and metalworking play an important role in the manufacturing sector. Last year they accounted for 17.9% of total industrial production. However, the share due to the agricultural products processing industry was also considerable (13.4%). Over the last four years, agricultural product processing increased by 23%, and foodstuff production by 25%. During the first nine months of the current year production growth rates in this sector were relatively high (9.8%).
The share of the mining and manufacturing sectors in total industrial production in Kazakhstan: a regional breakdown
A pronounced tendency towards raw material development is a characteristic of only five out of the 16 administrative regions of Kazakhstan. For example, in Atyrau, Kzyl-Orda and Mangistau regions the share of the mining sector in total industrial production is currently over 90%. In West Kazakhstan region the figure is 70%, and in Aktobe region it is 50%. Growth rates are also relatively high in these regions: production grew by 1.5-2.9 times in 1999-2002.
The situation in the other regions (with the exception of Kostanai) is just the opposite. There is a clear dominance of manufacturing in these areas; it accounts for more than two thirds of total industrial production. This is especially true for Almaty, Zhambyl, Karaganda and South Kazakhstan regions and the cities of Almaty and Astana, where the manufacturing sector makes up more than three quarters of total industrial production. In 1999-2002, the production growth rate in the manufacturing sector in these regions reached 123-195% (Table).
Employment, labour efficiency and profitability in the mining and manufacturing sectors
Even though total employment in the country has increased by 9.9% over the last three years, it has declined by 8.9% in industrial sectors. Whilst employment in the mining sector grew almost by 30%, in the manufacturing sector it decreased by almost 20%. An assessment of data on production and employment growth rates in these sectors of economy leads to the conclusion that labour efficiency has increased by 1.2 times in the mining sector, and 1.8 times in manufacturing over the last three years.
Wages in these sectors have been growing at a broadly similar rate and have almost doubled over the last four years. At the same time, the rate of growth of production costs per worker was higher than the rate of increase in wages: by 2.1 times in the mining sector, and 1.6 times in manufacturing. This was mainly because prices in the mining sector rose more rapidly, and as a result profits were higher.
Data on earnings and profitability support these conclusions. Thus, in 1998 the mining sector experienced losses, in 2000 profitability reached 45%, and in the manufacturing industry it remained at a level of 21%. In 2002, the profitability of the two sectors was 32% and 19% respectively.
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