What If Almaty Diversified Beyond Resources Earlier?

The Actual History

Almaty (formerly known as Alma-Ata) was the capital and largest city of the Kazakh Soviet Socialist Republic during the Soviet era and remained Kazakhstan's capital until 1997 when the government relocated the capital to Astana (now Nur-Sultan). Throughout much of its modern history, the economic development of Almaty and Kazakhstan broadly followed the pattern typical of resource-dependent regions within the Soviet economic system.

During the Soviet period (1922-1991), Kazakhstan's economy was largely structured around resource extraction and primary production. The Kazakh SSR was integrated into the Soviet Union's centrally planned economy primarily as a supplier of raw materials, agricultural products, and basic industrial goods. The region's abundant natural resources—including oil, gas, uranium, and various minerals—were developed primarily to serve the needs of the broader Soviet economy rather than to create a diversified economic base within Kazakhstan itself.

Almaty developed as an administrative, cultural, and industrial center within this framework. While the city hosted some light and medium industry, educational institutions, and administrative functions, its economic foundation remained relatively narrow. The Soviet economic planners prioritized the extraction and processing of natural resources over the development of high-value manufacturing, advanced services, or knowledge-based industries in Central Asian republics.

Following the dissolution of the Soviet Union in 1991, independent Kazakhstan emerged into a challenging economic environment. The collapse of Soviet economic networks triggered a severe economic contraction throughout the former Soviet space. Kazakhstan's GDP declined by approximately 40% between 1991 and 1995, unemployment soared, and hyperinflation undermined economic stability.

Under President Nursultan Nazarbayev's leadership, Kazakhstan pursued a resource-led development strategy, opening its vast oil and mineral wealth to foreign investment. The Tengiz oil field deal with Chevron in 1993 marked the beginning of large-scale foreign investment in Kazakhstan's oil sector. Throughout the 1990s and 2000s, Kazakhstan's economic growth became increasingly tied to commodity prices, particularly oil.

Almaty, despite losing its capital status in 1997, emerged as Kazakhstan's primary commercial and financial center. However, the city's economic development continued to reflect the country's broader resource dependence. The financial sector that developed in Almaty was heavily oriented toward servicing the resource economy rather than financing diverse economic activities.

Kazakhstan experienced an economic boom in the 2000s, driven by rising oil prices and increased production. However, this growth reinforced rather than reduced resource dependence. When global commodity prices collapsed in 2014-2015, Kazakhstan's economy stagnated, highlighting the vulnerability created by insufficient economic diversification.

While the Kazakh government has repeatedly announced diversification initiatives—including the "Kazakhstan 2030" strategy (1997), the "Kazakhstan 2050" strategy (2012), and various industrial policies—progress has been limited. As of the early 2020s, hydrocarbons still account for approximately 35-40% of government revenue, 40% of export earnings, and 15-20% of GDP, with mining adding significantly to these figures.

Almaty today remains Kazakhstan's largest city and primary commercial hub, with a more diverse economy than most of Kazakhstan. It has developed some strength in sectors including finance, education, and services. However, the city's economic foundation continues to be heavily influenced by the resource-dominated national economy, limiting its potential as an engine for broader economic transformation.

The Point of Divergence

What if Almaty had diversified beyond resources earlier? In this alternate timeline, we explore a scenario where economic diversification efforts in Almaty began in earnest during the late Soviet period, creating a more resilient economic foundation before Kazakhstan's independence in 1991.

The point of divergence occurs in 1984, when Dinmukhamed Kunayev, the long-serving First Secretary of the Communist Party of Kazakhstan and an ethnic Kazakh with considerable influence in Moscow, successfully advocated for an experimental economic development zone in Almaty. In our timeline, Kunayev remained a traditionalist within the Soviet system until his removal in 1986. However, in this alternate timeline, Kunayev—influenced by the limited economic experiments occurring in the Baltic republics and inspired by early Chinese special economic zones—convinced Soviet leadership to approve an "Almaty Economic Development Initiative" focused on building non-resource industries.

There are several plausible mechanisms for this divergence:

First, Kunayev might have been influenced earlier by reformist thinking within the Communist Party, particularly as Mikhail Gorbachev began his ascent to power. Recognizing that reform was inevitable, Kunayev could have strategically positioned Kazakhstan—and particularly Almaty—to benefit from controlled economic experimentation rather than resisting change.

Alternatively, Soviet economic planners might have recognized the strategic importance of developing more sophisticated industrial capacity in Central Asia as a counterbalance to growing Chinese influence in the region. With Sino-Soviet relations beginning to thaw in the early 1980s after decades of hostility, Moscow might have sought to strengthen Soviet Central Asia economically while maintaining political control.

A third possibility involves international factors. Following the 1979 Soviet invasion of Afghanistan, the USSR faced increased international isolation. Developing a showcase of economic modernization in Almaty—a city visible to visitors from Asia—could have served Soviet propaganda purposes, demonstrating that the Soviet model could deliver sophisticated economic development beyond resource extraction.

Regardless of the specific mechanism, this divergence would have positioned Almaty as an experimental zone for selected market mechanisms, joint ventures with foreign companies (particularly from non-aligned nations), and investment in technology and human capital—all while remaining firmly within the Soviet political system. The initiative would have focused on developing electronics manufacturing, precision engineering, software development, and tourism, leveraging Kazakhstan's educated workforce and Almaty's attractive mountain setting.

This early start—seven years before the Soviet collapse—would have given Almaty crucial time to build new economic capabilities, establish international connections, and develop institutional frameworks that could survive the turbulence of the Soviet dissolution.

Immediate Aftermath

The Final Soviet Years (1984-1991)

The implementation of the Almaty Economic Development Initiative transformed the city's trajectory during the final years of the Soviet Union. Initially viewed with skepticism by orthodox Communist Party members, the project gained momentum as early successes demonstrated its potential.

By 1986, several key developments had taken shape:

Special Legal Framework: The initiative established special regulatory provisions for businesses in designated zones of Almaty, reducing bureaucratic hurdles and allowing greater managerial autonomy. While still operating within the Soviet system, these enterprises gained limited freedom to make production and investment decisions.
Joint Ventures: Following careful political vetting, the Soviet authorities approved a selection of joint ventures with companies from India, Finland, and Yugoslavia—countries maintaining good relations with the USSR while having access to Western technology. These partnerships focused on electronics assembly, telecommunications equipment, and computer programming.
Educational Reorientation: Almaty's universities, particularly the Kazakh Polytechnic Institute (now Satbayev University), established new faculties focused on computer science, electronics, and international business management. Exchange programs with Eastern European technical universities brought new knowledge and teaching methodologies.

The December 1986 events took a different turn in this timeline. When Gorbachev removed Kunayev from power, replacing him with an ethnic Russian, the protests that erupted in Almaty—known as Jeltoqsan—were more complex than in our timeline. While ethnic tensions remained a factor, the protests also included a significant component demanding the preservation and expansion of Almaty's economic experiments. This dual nature of the protests—combining ethnic Kazakh nationalism with economic reform advocacy—complicated the Soviet leadership's response.

Rather than simply suppressing the protests, Moscow made a strategic compromise. While maintaining the leadership change, Gorbachev publicly endorsed the continuation and expansion of the Almaty Economic Initiative as part of his broader perestroika reforms. This decision helped stabilize the situation while allowing Moscow to position itself as supporting economic modernization.

Between 1987 and 1991, as the Soviet system entered its final crisis years, Almaty's experimental economic zone expanded in influence:

Technology Focus: The initiative increasingly emphasized information technology, with several software development centers established to serve both Soviet domestic needs and, increasingly, to earn foreign currency through exports to India, Eastern Europe, and even limited engagement with Western markets.
Tourism Development: Taking advantage of Almaty's stunning mountain setting, a tourism development program began, initially focusing on visitors from the Eastern Bloc but gradually expanding to include carefully managed tourism from Western countries. This brought both foreign currency and international exposure.
Small Business Growth: By 1990, as Gorbachev's reforms deepened, regulations allowed for the establishment of small private businesses in Almaty, particularly in services, retail, and technology. These became an important economic safety valve as the broader Soviet economy deteriorated.
Diaspora Connections: Ethnic Kazakhs living abroad, particularly in Turkey and Germany, began establishing business relationships with Almaty enterprises, creating channels for knowledge transfer and eventual investment.

Early Independence (1991-1995)

When the Soviet Union dissolved in December 1991, Kazakhstan gained independence under challenging circumstances. However, unlike in our timeline, Almaty possessed a more diverse economic foundation to weather the post-Soviet economic collapse.

The immediate post-independence period saw several divergences from our timeline:

Institutional Continuity: The legal frameworks and institutions developed for the economic initiative provided a blueprint for broader economic reforms. While still requiring massive adaptation to full market conditions, these provided greater continuity than the abrupt institutional rupture experienced elsewhere.
Private Sector Buffer: The emerging private businesses in Almaty, though still small, provided an economic buffer that partially offset the collapse of Soviet industrial networks. Employment in these firms grew rapidly, absorbing some workers displaced from failing state enterprises.
Foreign Investment Beyond Resources: While oil and gas remained Kazakhstan's primary attraction for foreign investors, Almaty's technology and service sectors attracted a different category of investors. Several European and East Asian technology companies established operations in Almaty between 1992-1995, attracted by the combination of lower costs and the surprisingly developed technical workforce.
Banking Development: Almaty's banks, which had gained limited experience with commercial operations during the economic initiative, adapted more successfully to market conditions than in our timeline. By 1994, Almaty had established itself as the financial center of Central Asia, with banks that, while still developing, had more sophisticated capabilities than their regional counterparts.

While Kazakhstan still suffered severe economic contraction during this period, the decline in Almaty was less pronounced. Official statistics showed unemployment in Almaty peaking at 12% compared to 18-20% nationally, and GDP contraction in the city was approximately 25% compared to 40% nationwide. These figures, though still representing a severe economic crisis, created crucial social and political stability in the country's largest city during the turbulent transition.

President Nazarbayev, recognizing Almaty's relative success, incorporated elements of the city's economic model into national policy sooner than in our timeline. The 1994 "Kazakhstan Economic Transformation Strategy" explicitly called for replicating Almaty's diversification efforts in other urban centers, though implementation would prove challenging amid the continuing economic crisis.

Long-term Impact

Diverging Development Path (1995-2005)

By the mid-1990s, the divergence between this alternate timeline and our own became increasingly pronounced. While Kazakhstan still pursued resource development as a key economic strategy, the presence of Almaty's more diversified economic base created a distinctly different national development trajectory.

Balanced Investment Approach

In our timeline, the massive 1993 Tengiz oil field deal with Chevron marked the beginning of Kazakhstan's heavy emphasis on foreign investment in the resource sector. In the alternate timeline, while the Tengiz deal still occurred, the government simultaneously pursued significant investment packages in Almaty's technology, finance, and manufacturing sectors:

Technology Parks: By 1997, Almaty hosted three major technology parks specializing in software development, telecommunications, and electronics manufacturing. These facilities, developed through public-private partnerships with international technology companies, employed over 15,000 skilled workers and generated export earnings approaching $500 million annually.
Financial Center Development: Building on its early banking advantages, Almaty established a comprehensive financial district with specialized regulatory frameworks. By 2000, the city had emerged as the undisputed financial hub of Central Asia and was beginning to compete with Moscow in certain specialized financial services.
Manufacturing Evolution: Rather than focusing exclusively on raw material processing, manufacturing in and around Almaty evolved toward higher-value products. Particular success emerged in precision components, medical devices, and specialized industrial equipment.

Modified Resource Management

The existence of a visible alternative development model influenced how Kazakhstan managed its resource wealth:

Earlier Sovereign Wealth Fund: The Kazakhstan National Fund was established in 1998 (versus 2000 in our timeline) with more sophisticated investment and stabilization mechanisms, partially modeled on Norway's approach but adapted to Kazakhstan's circumstances.
Domestic Value Addition: A higher percentage of resource revenues was systematically directed toward developing domestic industries that could provide inputs to the resource sector, creating stronger economic linkages.
Education Investment: The resource boom funded a massive expansion of technical education, with particular emphasis on engineering, computer science, and business management. Kazakhstan's technical universities developed partnerships with leading international institutions earlier and more comprehensively than in our timeline.

Political and Social Dimensions

The economic diversification had significant political and social implications:

Emerging Middle Class: By 2005, Almaty had developed a substantial middle class employed in professional services, technology, education, and entrepreneurial ventures. This group, comprising approximately 35% of the city's population (compared to 15-20% in our timeline), began articulating distinct political and social interests.
Civil Society Development: The presence of international companies and a more diversified economy created space for civil society organizations focused on business standards, professional development, and eventually broader social issues. While still operating within Kazakhstan's authoritarian political system, these organizations fostered important networks of civic engagement.
Regional Influence: Almaty's success made Kazakhstan a more attractive model for other Central Asian states. Uzbekistan particularly began emulating elements of Kazakhstan's diversification approach after 2000, creating more balanced regional development.

Weathering Economic Storms (2005-2015)

The global financial crisis of 2008-2009 and the commodity price collapse of 2014-2015 revealed the full advantages of the alternate timeline's more diversified economy:

Crisis Resilience

During the 2008-2009 global financial crisis, Kazakhstan still experienced significant economic challenges, particularly in its banking sector. However, the impact was substantially moderated compared to our timeline:

Balanced Export Portfolio: With technology exports comprising approximately 22% of foreign earnings (versus less than 5% in our timeline), the collapse in commodity prices had a less severe impact on the external balance.
Counter-Cyclical Sectors: As resource projects scaled back, some technology and service sectors actually expanded, absorbing laid-off workers from construction and extractive industries. Software development companies, in particular, gained global market share as Western firms sought cost-saving outsourcing solutions.
Fiscal Stability: The more sophisticated sovereign wealth management and diversified tax base meant government finances remained relatively stable despite resource revenue declines.

The 2014-2015 commodity price collapse, which severely impacted Kazakhstan in our timeline, demonstrated even more pronounced differences. While growth slowed, the economy avoided recession entirely. GDP growth remained positive at 1.8% in 2015 (compared to a 0.3% contraction in our timeline), and the currency, while still devaluing, avoided the extreme volatility experienced in our reality.

Technological Leapfrogging

The established technology base allowed Kazakhstan to adapt more quickly to emerging digital trends:

Digital Financial Services: Building on its financial center status, Almaty became a hub for financial technology innovation in Central Asia. By 2012, mobile banking penetration in Kazakhstan reached levels comparable to more developed economies.
E-Government Implementation: Kazakhstan implemented comprehensive e-government services earlier and more effectively than in our timeline, reducing corruption opportunities and improving business conditions.
Tech Entrepreneurship: A vibrant startup ecosystem emerged, centered in Almaty but gradually expanding to other cities. By 2015, the country had produced several technology companies valued at over $100 million, primarily in enterprise software, financial technology, and resource efficiency solutions.

Geopolitical Positioning

The more balanced economy altered Kazakhstan's geopolitical stance in subtle but important ways:

Reduced Dependency: The lower relative importance of resource exports gave Kazakhstan greater flexibility in its relations with Russia, China, and Western powers. While still pursuing a multi-vector foreign policy, the country could afford more independent positions on certain issues.
Regional Leadership: Kazakhstan emerged more definitively as Central Asia's economic leader, with Almaty serving as the primary business hub for the entire region. This economic gravity helped Kazakhstan shape regional initiatives more effectively.
Educational Attainment: By 2015, Kazakhstan had the highest tertiary education enrollment rate in Central Asia, with particularly strong performance in technical fields. This human capital advantage reinforced the country's regional leadership position.

Present Day Outcomes (2015-2025)

By 2025 in our alternate timeline, the cumulative effects of four decades of diversification have created a fundamentally different economic and social landscape in Kazakhstan:

Economic Structure

The economy of Kazakhstan in 2025 exhibits substantially different characteristics from our timeline:

Sector Balance: Natural resources (including oil, gas, and mining) account for approximately 22% of GDP (versus 35-40% in our timeline), while technology and advanced services contribute 28% (versus approximately 10% in our reality).
Innovation Metrics: R&D expenditure reaches 1.8% of GDP (versus 0.12% in our timeline), with private sector research accounting for over half of this investment. Patent applications per capita are approximately seven times higher than in our reality.
Economic Complexity: The Economic Complexity Index ranks Kazakhstan 38th globally (versus 78th in our timeline), reflecting a much more diverse and sophisticated production capability.
Income Levels: GDP per capita reaches approximately $18,000 (versus approximately $10,000 in our timeline), with substantially lower income inequality due to the broader distribution of economic opportunities.

Urban Development

Almaty's development has taken a distinctly different path:

Global City Status: Almaty ranks among the world's top 75 global cities in various indexes, recognized particularly for its role as a business hub connecting Europe, Asia, and the Middle East. The city hosts regional headquarters for over 200 multinational corporations.
Urban Planning: Rather than the sprawling development of our timeline, Almaty implemented more comprehensive urban planning, with better public transportation, green spaces, and mixed-use developments. The city's air quality, a major problem in our timeline, is substantially better due to earlier investment in clean transportation and district heating systems.
Cultural Influence: Almaty has emerged as a significant cultural center, with a thriving creative economy spanning film, music, design, and digital media. The city's universities attract students from throughout Central Asia, the Middle East, and increasingly, global markets.

Sociopolitical Evolution

Perhaps most significantly, the alternate economic development path has influenced Kazakhstan's social and political evolution:

Political Liberalization: While still not a full democracy, Kazakhstan has undergone more substantial political liberalization than in our timeline. The emergence of an economically independent middle class and the necessity of creative freedom for innovation-based industries created pressure for greater political openness beginning around 2010.
Institutional Quality: Government effectiveness, regulatory quality, and control of corruption all measure significantly higher than in our timeline, driven by the requirements of a more complex economy and greater civic engagement.
Regional Integration: Kazakhstan has taken a more active role in promoting economic integration in Central Asia, with Almaty serving as the headquarters for several regional economic coordination mechanisms focusing on water management, trade facilitation, and educational cooperation.
National Identity: The success of Kazakhstan's development model has strengthened a civic national identity that accommodates the country's ethnic diversity while creating shared pride in economic achievements. This has reduced ethnic tensions and strengthened social cohesion relative to our timeline.

While Kazakhstan still faces significant challenges—including environmental issues from earlier resource extraction, ongoing governance reforms, and navigating complex relations with Russia and China—the alternate timeline presents a country that has more successfully leveraged its resources to build a sustainable, diverse economy with broader social benefits.

Expert Opinions

Dr. Aliya Nurpeisova, Professor of Economic History at Nazarbayev University, offers this perspective: "The resource curse is not inevitable—it's a product of institutions and policy choices. In our actual history, Kazakhstan's post-Soviet economic policies were shaped under extreme duress, with policymakers forced to prioritize immediate stabilization over long-term diversification. Had economic experimentation begun earlier, as in this alternate scenario, the institutional foundations for a more balanced development model could have been established before the crisis of transition. The experiences of countries like Malaysia and Chile demonstrate that resource wealth can coexist with economic diversification when appropriate institutions develop early enough. The alternate Almaty scenario is particularly plausible because it works with, rather than against, Soviet-era human capital investments in education and technical training."

Dr. Martin Chen, Research Director at the Central Asia Economic Forum, provides a different assessment: "While the alternate timeline presents an attractive vision, I believe it understates the structural constraints that would have persisted even with earlier diversification efforts. The geography of landlocked Central Asia, the legacy of Soviet economic planning, and the fundamental political economy of resource-rich states would still have posed significant challenges. That said, the scenario correctly identifies the crucial importance of timing. By beginning diversification before the crisis of the Soviet collapse, this alternate Kazakhstan would have preserved and redirected human capital that was largely lost in our timeline. The scenario's emphasis on Almaty as an incubator for national economic transformation is particularly insightful—city-level economic diversification can create models and momentum for broader national changes, as we've seen in cases from Barcelona to Bangalore."

Dr. Svetlana Kozhirova, Senior Fellow at the Kazakhstan Institute of Strategic Studies, emphasizes the geopolitical implications: "The most significant long-term consequence of this alternate development path would be Kazakhstan's enhanced geopolitical position. In our actual history, Kazakhstan's economic dependence on resource exports has constrained its foreign policy options, despite its formal commitment to multi-vector diplomacy. A Kazakhstan with a more diversified economic base—particularly one with significant technology and financial service capabilities—would have greater practical autonomy in navigating relations with Russia, China, and Western powers. The regional leadership role outlined in this scenario is especially plausible—economic diversification would have allowed Kazakhstan to offer neighboring states a more compelling development model and practical economic linkages beyond resource trade. This could have meaningfully altered the trajectory of Central Asian regional integration."