In December 2020 at the Climate Ambition Summit the President of Kazakhstan announced the country’s intention to achieve carbon neutrality by 2060.
However, such ambitions require real actions and significant investments. According to experts, transitioning to a low-carbon economy will require $666.5 billion —this accounts for 24% of gross fixed capital or 38% of all investments in new technologies and fixed assets.
Achieving these large-scale goals necessitates a radical transformation of the entire economy. First and foremost, this involves modernizing existing industries, creating new, modern enterprises, and developing sustainable infrastructure that will become the foundation for economic growth and social stability.
What is Sustainable Infrastructure?
Sustainable infrastructure is infrastructure that remains environmentally responsible, socially inclusive, and economically viable throughout its entire lifecycle. In the context of global climate change and the COVID-19 pandemic, investments in such infrastructure are recognized as one of the most effective strategies for economic recovery. They create jobs, stimulate short-term economic growth, and contribute to long-term development that aligns with the Sustainable Development Goals (SDGs) and the Paris Agreement.
Factors Shaping the Demand for Sustainable Infrastructure:
- Climate Change and Resilience: Infrastructure accounts for 70% of global greenhouse gas emissions. Sustainable infrastructure is key to adapting to and preventing climate change.
- Economic Recovery and Job Creation: Sustainable infrastructure is the foundation for economic recovery on the principle of “building back better” after the pandemic.
- Improving Social Welfare and Equality: Sustainable infrastructure provides more environmentally clean and socially inclusive services.
- New Technologies and Innovations: Electrification of the transportation sector and the development of renewable energy sources are key areas for implementing sustainable infrastructure.
- Changing Urbanization Patterns and Migration: Accelerated urbanization and migration from rural areas to cities have increased the demand for quality infrastructure services.
However, developing sustainable infrastructure requires significant expenditures. These costs could be in the trillions of tenge, considering the growth of the economy and population. According to the Asian Development Bank, about 75% of existing infrastructure in Kazakhstan requires replacement or reconstruction. One reason for the high level of infrastructure deterioration is the uneven distribution of investments across economic sectors.
A New Approach to Investments is Needed
Between 2000 and 2019, $195.6 billion was invested in Kazakhstan’s economy. Of this amount, approximately 58% ($112.5 billion) was directed towards energy projects. Transport projects received 20% of the investments, manufacturing—14%, and the extraction of minerals—7%. However, water management projects, including water supply, irrigation, and water resource management, received only $471 million USD.
This imbalance in the allocation of funds has led to uneven development across different sectors of the economy, which in turn has deteriorated the infrastructure in some key sectors.
PPP as a Tool to Solve the Problem
The issue of imbalance in the development of Kazakhstan’s economic sectors can be addressed through the active use of public-private partnerships (PPP). The potential for PPPs in Kazakhstan is high, as confirmed by the 2019 “Infrascope” report.
Among 21 Asian countries, Kazakhstan ranks:
- 11th in terms of favorable conditions for PPPs;
- 7th in terms of overall investment and business climate;
- 8th in terms of institutional quality;
- 11th in terms of financial conditions;
- 13th in terms of regulation;
- 15th in terms of market maturity.
Note: The Infrascope index is a comparative analysis tool that assesses the ability of countries to implement sustainable and effective public-private partnerships (PPPs) in key infrastructure sectors, such as transport, energy, water supply and sanitation, waste management, and social infrastructure.
In the overall ranking, Kazakhstan holds 59th place, indicating the need for further reforms and improvements to attract private investors.
Recommendation:
To develop sustainable infrastructure projects, Kazakhstan needs to more actively attract private capital by developing new forms of PPPs across all economic sectors. Currently, out of 1362 PPP projects planned for 2024, only 227 are aimed at the development of economic sectors. Most projects are related to social facilities—schools, kindergartens, and medical institutions. This clearly indicates the need to revise priorities and actively utilize the potential of PPPs to transform the country’s infrastructure.
By Erlan Karimov
