ASTANA — Kazakhstan should think like a small, open economy and look to California’s transformation beyond oil, rather than relying on higher commodity prices and government spending to sustain economic growth, former World Bank chief economist Indermit Gill told The Astana Times on Oct.
29. Economist Indermit Gill speaks at the EFSD International Economic Conference. Photo credit: EFSD Gill, who, alongside economist Homi Kharas, coined the widely used term “middle-income trap” in a landmark 2007 World Bank report, pointed to California’s evolution from an oil-producing economy into a major center of technology, entertainment and agriculture as an example of the transformation Kazakhstan could pursue.
Indermit Gill and The Astana Times reporter Nagima Abuova on the sidelines of the EFSD International Economic Conference in Astana on Oct. 29. Photo credit: EFSD The comparison offers a different way to view Kazakhstan’s resource wealth. Oil and gas revenues have helped finance the country’s development, but the more consequential question is whether that wealth can generate industries that can sustain prosperity independently of commodity prices.
“I think Kazakhstan has done a good job in terms of converting resources that are underground into converting, into resources that are above ground. Astana, for example, it’s a great achievement. But you have to reinvent yourself,” Gill told The Astana Times. “The most successful case of a resource-rich economy becoming diversified is California.
California used to depend a lot on oil. But now you hear about services like entertainment services. You hear about Silicon Valley. You hear about agriculture. That’s the kind of thing that I’m thinking about for Kazakhstan,” he said. His comments came on the sidelines of an international economic conference organized by the Eurasian Fund for Stabilization and Development (EFSD) in Astana, where economists and policymakers discussed the foundations of sustainable growth and structural transformation.
According to Gill, the distinction between temporary economic expansion and lasting transformation comes down to productivity: how effectively an economy converts capital, labor and energy into goods and services. He pointed to Kazakhstan’s experience of rising per capita income followed by periods of decline, illustrating how growth supported by favorable external conditions can prove difficult to sustain without changes in the underlying economy.
“It has grown, then it’s come down again. And the reason why it’s come down is because that structural transformation didn’t take place, so you didn’t have a new structure which could sustain a high income. That comes from having a more productive economy,” said Gill.
Participants attend the EFSD International Economic Conference in Astana. Photo credit: EFSD