Market Access Series 2024-25: The Republic of Kazakhstan

The report titled “The Republic of Kazakhstan” is part of the Pakistan Business Council’s Market Access Series 2024-25. It provides an overview of Kazakhstan’s economy, trade dynamics, and the potential for improving bilateral trade & investment relations between Pakistan and Kazakhstan.

The Republic of Kazakhstan (Kazakhstan) is the world’s ninth-largest country by area, with an area of 2.7 million square kilometres and a population of around 20.5 million which comprises of more than 100 nationalities and ethnic groups.

The country ranks 81st among the 132 economies on the Global Innovation Index 2023 and 62nd out of 184 countries on the latest Index of Economic Freedom.

As of 2023, the real GDP growth of the economy was reported at an annual rate of 4.6%, with the total gross domestic product of $259.29 billion.

The primary export commodities include petroleum, copper, natural gas, zinc, steel and iron. In the agricultural sector, wheat exports are a major source of foreign exchange. The country also exports livestock, dairy products, oil seeds, corn grain, and other preserved goods.

Kazakhstan’s tourism sector has also shown steady growth and in 2023, the number of foreign tourist arrivals reached 9.2 million which was almost double the number of tourists who visited the country in the previous year.

The Machinery and vehicle sector together account for almost a quarter of imports. Food imports as a percentage of merchandise imports was around 9.7% in 2023. Kazakhstan is a net importer of agricultural commodities, despite being ranked 32nd out of 113 countries in the global food security index in 2022.

The figure below shows Kazakhstan’s trade balance in goods and services from 2000 to 2023.

Kazakhstan’s Major Trade Partners

In 2023, China was the top trading partner of Kazakhstan. The same year, the country traded the most with China, France, Italy, the Netherlands, Russia, Spain, South Korea, Türkiye, United States and Uzbekistan.

Italy remains Kazakhstan’s largest export market and accounted for 18.74% of total exports in 2023. In terms of exports, the European Union ($41.4 billion,) China ($31.5 billion,) and Russia ($26 billion,) were the three important export markets for Kazakhstan in 2023.

Pakistan and Kazakhstan Bilateral Trade Relations

Pakistan was among the first countries to recognize Kazakhstan as an independent state in December 1991 and diplomatic ties between the two countries date back to February, 1992.

In June 2023, a significant breakthrough in trade relations between the two countries was achieved with the operationalization of the Quadrilateral Traffic in Transit Agreement (QTTA,) that allowed Pakistan to send its first transit shipment to Kazakhstan via the historic Silk Road.

The Figure below shows an overview of bilateral trade between Pakistan and Kazakhstan. Pakistan has maintained a positive trade balance over the years with Kazakhstan. In 2023, the volume of bilateral trade between the two countries amounted to $52.5 million, where Pakistan’s exports to Kazakhstan amounted to $46.8 million and Kazakhstan’s imports from Pakistan were  worth $5.7 million.

Pakistan’s Export Potential to Kazakhstan in Goods:

Kazakhstan presents substantial untapped export potential for Pakistan, particularly in sectors where Pakistan possesses a comparative advantage. As of 2023, Pakistan’s total export potential to Kazakhstan for its top 25 products at the HS-06 level was estimated at $1.7 billion. Key sectors include textiles, pharmaceuticals, agriculture, leather goods, and surgical instruments.

Pakistan can also explore niche categories such as processed food, spices, ethnic groceries, and Halal-certified products, in addition, leather goods, sportswear, and surgical instruments remain promising for diversification.

Pakistan’s Export Potential to Kazakhstan in Services:

Expanding services exports to Kazakhstan should be a priority area for Pakistan.

Pakistan can tap into demand for:

• IT and software development services
• Education and remote learning platforms, especially English-language instruction
• Professional consulting services, particularly in engineering, accounting, and financial services

Kazakhstan’s Export Potential to Pakistan in Goods:

Kazakhstan’s export potential to Pakistan is estimated at $4.6 billion, which is primarily driven by agriculture and metals, where Kazakhstan has a revealed comparative advantage (RCA.)

High-potential agricultural products include:

• Linseed, whether or not broken (HS-120400)
• Barley (HS-100390)
• Dried, shelled lentils (HS-071340)
• Safflower seeds (HS-120760)

In the metals and minerals sector, key products include:

• Flat-rolled products of iron or non-alloy steel (HS-720839)
• Unwrought zinc, not alloyed (HS-790111)
• Copper cathodes (HS-740311)
• Refined, unwrought lead (HS-780110)

Kazakhstan’s proximity and competitive pricing position it to compete with Pakistan’s current suppliers like China, Afghanistan, and Saudi Arabia, especially in industrial and agricultural raw materials.

Kazakhstan’s Export Potential to Pakistan in Services:

Kazakhstan demonstrates comparative strength in the services sector, particularly in:

• Transport and logistics services – critical for Central Asian connectivity
• Insurance and financial services – where Kazakhstan has developed capabilities and regulatory frameworks that  are aligned with international standards

Challenges in Exporting to Kazakhstan

Bilateral trade between Pakistan and Kazakhstan faces a series of structural, regulatory, and institutional bottlenecks that inhibit growth despite strong complementarities. The primary challenges are outlined as follows:

Key Challenges:

1. Structural and Logistical Barriers
   The absence of direct land connectivity, underdeveloped transit infrastructure, and Kazakhstan’s landlocked geography, which is further compounded by Pakistan’s reliance on unstable Afghan routes, have resulted in high freight costs and inconsistent trade flows.
2. Regulatory Misalignments
   Pakistani exporters face difficulties navigating Kazakhstan’s stringent certification standards due to Pakistan’s own weak domestic compliance ecosystem. Moreover, the absence of a preferential
   trade agreement and gaps in digital customs systems (despite the availability of tools like WeBOC and PSW) add to transaction difficulties.
3. Financial and Institutional Constraints
   Lack of direct banking channels necessitates costly third-party arrangements through intermediary banks in the UAE or the US. Exporters also operate without trade insurance or export credit guarantees, this increases their exposure to risk.
4. Product-Level Compliance Issues
   Kazakhstan mandates bilingual (Kazakh and Russian) labeling, and its phytosanitary standards often duplicate Pakistani processes that further creates redundancy and higher costs. Mutual recognition of standards remains absent.
5. Geopolitical and Security Risks
   Trade routes via Afghanistan are vulnerable to political disruptions. Instability among Central Asian Republics also hinders regional infrastructure cooperation and sustained trade flow.
6. Digital and Data Limitations
   The absence of integrated digital platforms and discrepancies in bilateral trade statistics hamper real-time decision-making and obscure the true scale of commercial activity.
7. Information and Access Gaps
   SMEs, in particular, face a lack of accessible regulatory, market, and investment information. There is also no structured B2B facilitation platform, which explains the lack of private-sector engagement.
8. Mobility and Connectivity Limitations
   Restrictive visa regimes, limited direct flight routes, and bureaucratic travel protocols hinder business travel, networking, and engagement.
9. Logistics Market Informality
   Freight networks along the Afghan corridor are often cartelized, informal, and unregulated, this drives up costs for exporters and reduces service reliability. Reverse cargo flows also remain negligible, and completely skew the cost dynamics.
10. Provincial Taxation Issues
    The 2% export cess imposed by Khyber Pakhtunkhwa government on exports adds significant cost pressures, especially for price-sensitive exports.

Key Recommendations:

To reach the full trade potential between Pakistan and Kazakhstan, the following policy and institutional interventions are recommended:

• Prioritize Connectivity Projects: Fast-track regional transport corridors including QTTA, CASA-1000, TUTAP, and the proposed Pakistan-Kazakhstan railway to reduce logistical friction.
• Strengthen Digital Infrastructure: Develop integrated trade platforms and real-time information-sharing systems, drawing on the Pakistan-China Digital Corridor as a model.
• Simplify and Harmonize Regulation: Align customs procedures, recognize each other’s certification systems, and remove overlapping NTBs through institutional cooperation.
• Develop Direct Financial Channels: Establish bilateral banking arrangements and secure settlement mechanisms to bypass third-party financial intermediaries and mitigate FX and payment delays.
• Negotiate a PTA: Conclude a Preferential Trade Agreement to provide a structured tariff framework, and reduce entry barriers.
• Regularize Transit via Afghanistan: Stabilize trade protocols with Afghanistan through trilateral engagement and streamlined border documentation.
• Promote High-Potential Sectors: Focus on priority trade sectors, such as agri-commodities, food staples, and industrial inputs, to build momentum and confidence.
• Build Broader Economic Ties: Encourage joint ventures in fintech, e-commerce, logistics, and industrial manufacturing through public-private facilitation.
• Institutionalize B2B Channels: Establish a Pakistan-Kazakhstan Joint Chamber of Commerce and dedicated bilateral working groups to open dialogue and solve operational issues.
• Launch a Business Information Portal: Provide exporters – particularly SMEs – with a bilingual, centralized portal that offers regulatory, logistical, and market intelligence.
• Facilitate Travel and Exchange: Expand direct flight operations, simplify visa regimes, and promote cultural and academic exchange to build people-to-people connectivity.
• Encourage Trade Exhibitions: Hold sector-specific trade expos in both countries to showcase capabilities and strengthen commercial partnerships.
• Improve Data Sharing: Set up a bilateral trade data platform to reconcile discrepancies, and enable evidence-based strategy formulation.
• Formalize Logistics Ecosystem: Regulate and professionalize regional logistics operators to combat cartelization and introduce licensing and quality benchmarks.
• Review Provincial Taxation: Reevaluate the KP export cess and consider fiscal incentives to preserve competitiveness of Afghan-route exports.
• Support Local Market Entry: Facilitate Pakistani firms in establishing warehouses, offices, or JVs in Kazakhstan through government advisory support and easy licensing.

 

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

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