The economy of Kazakhstan is based on its extensive agricultural and mineral resources. The second largest of the former Soviet republics (after Russia), Kazakhstan’s vast steppes support wheat farms and livestock grazing. Abundant fossil-fuel and other mineral resources lie beneath the land. Heavy industry was developed to support the extraction of these mineral reserves, and it gives the country a relatively diversified economy. In 1999 the gross domestic product (GDP), which measures the value of goods and services produced in the country, was $15.8 billion. Agriculture produced 11 percent of GDP, industry (including mining and construction) accounted for 32.4 percent, and the remainder came from services such as trade and financial activities.
Kazakstan possesses abundant natural resources. Its major exports include agricultural products, raw materials, chemical products, and manufactured goods. Privatization of state-owned industries was undertaken during the 1990s. In 1994 Kazakstan, Uzbekistan, and Kyrgyzstan formed an economic union that enabled free movement of labour and capital among the three countries and established coordinated economic policies.
Kazakhstan, the second largest of the former Soviet republics in territory, possesses enormous fossil fuel reserves as well as plentiful supplies of other minerals and metals. It also is a large agricultural - livestock and grain - producer. Kazakhstan's industrial sector rests on the extraction and processing of these natural resources and also on a growing machine-building sector specializing in construction equipment, tractors, agricultural machinery, and some defense items. The breakup of the USSR in December 1991 and the collapse of demand for Kazakhstan's traditional heavy industry products resulted in a short-term contraction of the economy, with the steepest annual decline occurring in 1994. In 1995-97, the pace of the government program of economic reform and privatization quickened, resulting in a substantial shifting of assets into the private sector. The Caspian Pipeline Consortium agreement to build a new pipeline from western Kazakhstan's Tengiz oil field to the Black Sea increases prospects for substantially larger oil exports in several years. Kazakhstan's economy again turned downward in 1998 with a 2% decline in GDP due to slumping oil prices and the August financial crisis in Russia. The recovery of international oil prices in 1999, combined with a well-timed tenge devaluation and a bumper grain harvest, pulled the economy out of recession in 2000. Astana has embarked upon an industrial policy designed to diversify the economy away from overdependence on the oil sector by developing light industry.
