Kazakhstan Business & Economy - The Times Of Central Asia

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AI Regulation

Kazakhstan Adopts Pragmatic AI Regulation in Financial Sector

The global financial market faces a strategic choice: impose tighter restrictions on artificial intelligence or allow the technology to evolve within existing regulatory frameworks. While the European Union has opted for comprehensive regulation, Kazakhstan has adopted a more pragmatic approach. According to the National Bank of Kazakhstan, approximately 75% of the country’s banks already use AI technologies, and 88% plan to expand their use. This indicates that AI integration is no longer experimental but systemic within the financial sector. Madina Abylkasymova, Chair of the Agency for Regulation and Development of the Financial Market, articulated the principle of technological neutrality as early as 2025: the regulator does not intend to introduce artificial constraints until uniform global standards for AI are established. In her view, existing regulatory frameworks remain sufficient. Cybersecurity requirements, data protection standards, and risk management rules continue to apply regardless of whether decisions are made by humans or algorithms. Accountability and oversight remain unchanged. At the same time, the market faces significant structural barriers. These include a shortage of specialists at the intersection of finance and data science, the absence of unified data standards, and the high cost of computing infrastructure. The introduction of additional “European-style” restrictions could disproportionately burden smaller market participants and potentially force them out of the sector. Recognizing the high cost of entering the AI ecosystem, the state is assuming an infrastructural role. Timur Suleimenov, Governor of the National Bank of Kazakhstan, has outlined a strategic objective: to establish secure and scalable infrastructure to support AI development in the financial sector. This includes the launch of domestic data centers and the expansion of partnerships with global technology companies. The stated goal is to strengthen technological sovereignty and ensure the protection of citizens’ personal data. In practical terms, the regulator aims to create a sovereign “sandbox” in which fintech companies can test algorithms without transferring sensitive information to foreign servers. The rapid expansion of AI also requires a transformation of supervisory practices. Currently, 39% of financial organizations in Kazakhstan use neural networks in some capacity. Over the past year, the number of companies that have progressed from pilot projects to partial implementation has nearly doubled. International institutions, including the Bank for International Settlements and the International Monetary Fund, argue that AI does not generate fundamentally new categories of risk. Rather, it accelerates and amplifies existing risks, credit, market, and operational. This suggests that regulators do not need to rewrite foundational rules but must enhance the speed, scale, and depth of analytical capabilities. In response, the National Bank of Kazakhstan and the Agency for Regulation and Development of the Financial Market have launched an internal SupTech (Supervisory Technology) program. The first phase involves deploying AI assistants for document analysis and chatbots to support knowledge management. In subsequent stages, authorities plan to introduce multi-agent autonomous systems capable of analyzing large transaction datasets in real time, detecting systemic risk signals, identifying potential market overheating, and flagging suspicious patterns that may indicate money laundering. Kazakhstan’s approach reflects a deliberate balancing...

SCAT Airlines

Largest Aircraft Maintenance Center in Central Asia Under Construction in Kazakhstan

Kazakhstan’s SCAT Airlines, in partnership with Boeing, has begun construction of a new maintenance, repair, and overhaul (MRO) center in Shymkent. The facility is expected to become the largest aircraft maintenance complex in Kazakhstan and across Central Asia. The capsule-laying ceremony, held on February 27, was attended by Shymkent Mayor Gabit Syzdykbekov, Deputy Transport Minister Talgat Lastayev, and Boeing Vice President of Sales and Marketing for Eurasia, India, and South Asia Paul Righi. According to the Ministry of Transport, the center will specialize in servicing Boeing aircraft, including the Boeing 737 (Classic, NG, and MAX), Boeing 757 and 767 models, as well as the Boeing 777 widebody aircraft. The facility will occupy 10 hectares, with engineering and technical infrastructure covering 45,000 square meters. The aircraft parking area alone will span more than six hectares. The project is intended to establish a modern, internationally certified repair and maintenance base capable of servicing not only domestic carriers but also foreign airlines, thereby expanding Kazakhstan’s technical expertise and aviation services export potential. Kazakhstan’s civil aviation sector continues to demonstrate steady growth. According to the Ministry of Transport, in 2025 the country’s airports handled 31.8 million passengers, compared to 29.7 million in 2024. Cargo traffic reached 173,300 tons, up from 170,900 tons the previous year. Deputy Minister Talgat Lastayev stated that the growth in traffic has been accompanied by systematic efforts to strengthen safety oversight. Kazakhstan’s compliance with international aviation safety standards reached 95.7%, significantly exceeding global and regional averages and placing the country among the world’s top 20 performers in this category. Lastayev also noted that KazMunayGas-Aero LLP, a jet fuel supply subsidiary of the national oil and gas company KazMunayGas, has been granted direct access to airport infrastructure and has begun providing direct “into-plane” refueling services. This has reduced the average cost of jet fuel at Kazakh airports. According to the ministry, direct refueling without intermediaries has lowered jet fuel prices to below $1,000 per ton, compared to $1,200-$1,300 per ton in other countries. The new refueling mechanism was introduced on the instructions of the President of Kazakhstan to support the development of international air hubs by ensuring stable supplies of competitively priced aviation fuel. Officials say it is expected to improve the reliability of fuel supply for airlines and reinforce the country’s role as a key transit hub.

Iran

Iran Volatility Tests Central Asia’s Overland Corridors

The current escalation around Iran holds the potential for transforming the long-term geopolitical configuration of Eurasia, including Central Asia. In the short and medium term, aside from the security and safety of its citizens, Central Asia's main concern is economic, because it puts stress on overland rail and trucking routes that cross Iranian territory. Central Asian exporters do not ship through the Gulf, so for now the key issue is whether an Iran-crossing land route remains reliable enough, and financeable enough, to serve as a routine outlet for trade. The Iran transit option differs from trans-Caspian reliance on ports and rail interfaces around the Caspian Sea, transiting to onward rail across the South Caucasus and into Europe. The Iran option offers a continuous land arc from Central Asian railheads and road networks into Iran, then onward to Türkiye and connected European rail networks, with the additional possibility of reaching Iran’s southern ports for Indian Ocean-facing trade. Each route has its own chokepoints, paperwork burdens, and exposure to risk premiums. Rail is efficient for bulk and container flows when schedules and documentation are stable. Trucking provides flexibility, short-notice capacity, and last-mile options, but it is more sensitive to security conditions and border clearance delays. Technical capacity at the Iran–Turkmenistan crossings is key. Recent reports of discussions in Sarakhs describe efforts to expand the use of a specialized rail logistics process whereby entire wheel assemblies are replaced on railcars to transition between different track gauges. There is also a need to address customs constraints at Sarakhs and Incheh Borun. Against that operational background, Kazakhstan has signaled diplomatic attention to Gulf partners and Jordan. President Kassym-Jomart Tokayev has sent messages of support to leaders of the United Arab Emirates, Saudi Arabia, Qatar, Bahrain, and Kuwait, followed by a similar message to Jordan, and a phone call with Qatar’s emir. The language emphasized solidarity and diplomacy and, in commercial terms, reads as partner-management. It reassures major investors and energy-market counterparts that Kazakhstan is engaged, attentive, and positioning itself for stability rather than escalation. The trans-Iran rail foundation is over a decade old. On December 3, 2014, the presidents of Kazakhstan, Turkmenistan, and Iran inaugurated the 928-kilometer Uzen–Bereket–Gorgan railway, characterized by RFE/RL (which gave the length as 935 kilometers) as the shortest railway connecting the three states. The International Union of Railways similarly notes the inauguration of the Gorgan–Inche Boroun link on that date as part of the corridor connecting Iran to Turkmenistan and Kazakhstan. Recent reporting suggests renewed efforts to operationalize the Iran option as a westbound channel. Uzbekistan, in cooperation with Türkiye, launched freight rail services along the Uzbekistan–Turkmenistan–Iran–Türkiye route in 2022. The Organization of Turkic States described a December 2022 event in Tashkent as the first freight train organized from Türkiye to Uzbekistan, which anchors the same basic idea: make westbound rail via Iran more regular and more visible to logistics markets. The point is not that Iran becomes the sole answer, but that Central Asian exporters and transit states have been...

GDP Forecast

S&P Global Ratings Expects Kazakhstan’s GDP Growth to Slow in 2026

The international rating agency S&P Global Ratings has affirmed Kazakhstan’s long-term sovereign credit rating at BBB- and its short-term rating at A-3, while maintaining a positive outlook on the long-term rating. At the same time, S&P analysts expect economic growth to decelerate in 2026 and warn of persistently high inflation. According to commentary on S&P’s projections by analysts at the Halyk Finance research center, Kazakhstan’s GDP growth is forecast to slow to 4.1% in 2026. The projected slowdown is attributed to a 4% decline in oil production, weaker fiscal stimulus, and reduced consumer activity amid higher taxes and tighter credit conditions. In the medium term, for 2028-2029, S&P expects GDP growth to remain at around 4% or slightly higher. However, risks persist, particularly those related to geopolitical tensions and the continued sensitivity of Kazakhstan’s budget revenues and exports to fluctuations in global oil prices. For comparison, Kazakhstan’s GDP grew by 6.5% in 2025. In 2026, the government expects growth of 6.2%, a notably more optimistic projection than S&P’s estimate. Other international institutions have offered varying forecasts. The European Bank for Reconstruction and Development (EBRD) recently upgraded its 2026 GDP growth forecast for Kazakhstan to 4.7%, up from 4.5%. In contrast, the International Monetary Fund (IMF) in January lowered its 2026 growth forecast by 0.4 percentage points to 4.4%. Returning to S&P’s projections, the agency expects inflation to reach 11% by the end of 2026 and forecasts an exchange rate of 540 tenge per $1. Halyk Finance analysts stated that they broadly agree with S&P’s GDP and inflation forecasts. However, they consider the risks of further weakening of the national currency to be greater than the agency anticipates. According to their estimates, the exchange rate in 2026 could depreciate to 580-590 tenge per $1. S&P also expects the Kazakh government to continue fiscal consolidation in the medium term by expanding the tax base and tightening control over public spending, while preserving substantial liquid reserves. Over the next three years, the government does not plan to withdraw additional funds from the National Fund through targeted transfers or bond placements. The guaranteed annual transfer from the National Fund is set at $5.5 billion, half the $11.1 billion withdrawn in 2025. “We share S&P Global Ratings’ positive assessment, provided that the government strictly adheres to its fiscal consolidation commitments and reduces transfers from the National Fund,” Halyk Finance concluded. The Times of Central Asia previously reported that the IMF believes Kazakhstan’s current GDP growth rate exceeds the country’s long-term economic potential, thereby increasing inflationary pressures and signaling potential overheating of the economy.

Migration Policy

Kazakhstan to Focus on Skilled Migrants in New Migration Policy

Kazakhstan is shifting toward a more pragmatic migration policy aligned with the needs of the national economy. The government’s newly approved Migration Policy Concept through 2030 prioritizes attracting in-demand highly skilled professionals and encouraging internal migration to regions experiencing labor shortages. According to the Ministry of Labor and Social Protection, the number of foreign labor migrants in Kazakhstan reached 16,100 in 2025. Minister of Labor Askarbek Yertayev said that greater emphasis will be placed on assessing the professional qualifications of foreign workers. Priority will be given to specialists with relevant education, work experience, and competencies sought in the domestic labor market. By 2030, the share of skilled workers among labor migrants is expected to increase to 95%. To support these objectives, the ministry has launched a pilot project on the digital platform migration Enbek.kz. The initiative introduces a comprehensive scoring system to evaluate applicants when issuing permanent residence permits and granting kandas status, a designation for ethnic Kazakhs returning to their historical homeland. A draft law has also been prepared that includes revising fees for hiring foreign labor, tightening regulation of private employment agencies, and formally integrating the digital scoring mechanism into migration decision-making processes. The quota for attracting foreign workers in 2026 has been set at 0.25% of the total national workforce, according to official data. The main countries of origin for officially employed foreign nationals remain China, Uzbekistan, Turkey, and India. At the same time, the government is strengthening measures to manage internal migration. In 2025, 14.7% of participants in state-supported interregional resettlement programs relocated to northern regions of the country. Major cities such as Almaty and Astana continue to attract young people from less economically developed regions, exacerbating territorial imbalances.

Oil and Gas

Kashagan and Karachaganak: Will Kazakhstan’s Claims Lead to Changes in the Shareholder Structure?

The beginning of 2026 has been marked by a new round of confrontation between Kazakhstan and the international consortia developing the country’s largest oil and gas fields, North Caspian Operating Company N.V. (Kashagan) and Karachaganak Petroleum Operating B.V. (Karachaganak). Below is an overview of the current situation and the possible scenarios. Arbitration proceedings initiated in early 2023 have expanded from $16.5 billion to more than $170 billion. Over three years, Kazakhstan has secured preliminary victories on several claims, enough, in my view, to suggest that the era of foreign oil consortia dominating Kazakhstan’s strategic projects may be coming to an end. Ecology and NCOC Violations This week, Bloomberg reported in its article “Oil Majors Seek Arbitration Over $5 Billion Kazakh Sulfur Fine” that the NCOC consortium is filing in international arbitration to challenge a Kazakh court decision to collect 2.3 trillion tenge (KZT). The Bloomberg headline, however, presents the issue inaccurately. Environmental violations, including the excessive storage of approximately 1 million tons of sulfur, were identified during an inspection in March 2023, when the exchange rate stood at 451.71 KZT per $1. The rate later rose to 520-540 and currently stands at around 500 KZT per $1. According to investment forecasts, it may reach 600 KZT per $1 by the end of 2026. As a result, the dollar equivalent of the fine has decreased significantly. At the March 2023 rate, 2.3 trillion KZT amounted to approximately $5.1 billion. At 500 KZT per $1, it equals about $4.6 billion. At 600 KZT per $1, it would fall to roughly $3.8 billion, a difference of about $1.3 billion. After my earlier publications arguing that foreign consortia should be fined in foreign-currency equivalent at the exchange rate prevailing at the time of filing, the proposal was also raised in Parliament. Such an approach would be logical: the consortia export their oil and receive revenue in foreign currency, yet fines are imposed in tenge. After several rounds of appeals, the consortium lost what became the largest environmental dispute in Kazakhstan’s history, initially involving more than 20 systematic violations of environmental legislation. Correspondence between consortium members published in Western media indicated they were aware of the violations but considered remediation and compliance financially costly. NCOC’s annual revenue is approximately $10 billion. Media reports also stated that the consortium offered around $110 million, roughly 50 times less than the fine, for regional social programs in exchange for waiving environmental claims. Neither NCOC nor the Kazakh government confirmed such negotiations. In 2010-2011, similar environmental and tax claims against the Karachaganak consortium resulted in Kazakhstan receiving a 10% stake in the project. The current ownership structure of NCOC is: ENI (Italy) - 16.81% ExxonMobil (U.S.) - 16.81% CNPC (China) - 8.33% INPEX (Japan) - 7.56% TotalEnergies (France) - 16.81% Shell (UK) - 16.81% KazMunayGas (Kazakhstan) - 16.88% Total investment in Phase One of Kashagan is estimated at $60 billion. By analogy with Karachaganak, the environmental fine could hypothetically lead to an increase in Kazakhstan’s share by 5-7 percentage...