Nursultan Nazarbayev: bettering business in a rough economy

Nursultan Nazarbayev: bettering business in a rough economy

A GRI Power Brokers feature on President Nursultan Nazarbayev of Kazakhstan.

Kazakhstan shows great promise in its positive economic impact, in large part due to the leadership and strategy of Mr. Nazarbayev.

With all five Central Asian states enduring economic decline since 2014 following Russia’s sinking financial system and perpetually depressed oil prices, isolating a regional political figure with positive economic impact is, without ceremony, a challenge.

Making matters more tenuous, the region’s post-Soviet composition as four authoritarian regimes and a highly unstable democracy has plagued each nation with a constant background of secession risk and corruption. Yet, while his country is archetype of the financial crises and human rights violations currently inherent to the region, no figure in Central Asia has maintained the economic vision needed to weather such turmoil other than Kazakhstani President Nursultan Nazarbayev.

To be clear, Kazakhstan’s economy entered 2016 in dire straits, and President Nazarbayev’s regime is an unabashed proponent of the vices and shortcomings that afflict the region as a whole. Kazakhstan is overly dependent on oil, its currency performed dreadfully in 2015, and suppression of dissent is well-documented — all par for the course in Central Asia, 2016. What makes Kazakhstan different is the President’s longer-term ambition to reform the country into an attractive investment location and the region’s dominant economic power.

Through Nazarbayev’s steady authoritarian hand, the government in Astana has overseen consistent improvement in the ease of doing business in Kazakhstan, even initiating more business-minded reforms than any other country during the 2014-2015 period.

At the same time, he has also balanced a complicated international climate to extract lucrative deals with competing major powers via tactful economic diplomacy. While there is much to criticize about his now 27-year-old regime, President Nazarbayev has kept his eyes on the prize as other Central Asian states have remained myopic or unfocused — planting the seeds necessary for Kazakhstan’s longer-term economic success in a region where risk is implied in every corner.

Improving regulatory quality and efficiency

Source: The World Bank, Doing Business 2016

Like many countries in Central Asia, Kazakhstan’s oil-rich economy has grown immensely during Nazarbayev’s regime as a result of high prices on energy commodities. This growth was naturally a positive development for the Kazakh economy and the narrative of Nazarbayev’s rule even in spite of its superficiality.

However, oil-led growth has now shifted to oil-led decline — both in Kazakhstan and the rest of the interdependent region. Nazarbayev has distinguished himself among his Central Asian peers by beginning to think beyond commodity wealth, steadily edging Astana towards the more elusive and valuable ingredients for a prosperous modern economy: effective and efficient business regulations.

According to the World Bank’s Doing Business 2016 report, Kazakhstan initiated more reforms aimed at improving the local climate for business than any other country in the 2014-2015 period. In the past year alone, President Nazarbayev has initiated reforms that have streamlined the processes for starting businesses, dealing with construction permits, registering property, acquiring credit, protecting minority investors, and enforcing contracts.

These impressive improvements have not been fleeting — the same World Bank report also recognized Nazarbayev’s Kazakhstan as the most improved country in the world in 2011, and the nation has steadily risen through the ranks over the past decade.

As a result of these efforts , Kazakhstan stands as 41st in the world in terms of ease of doing business — far and away the best business climate in the region. In comparison, Kyrgyzstan comes in at 67th, and Tajikistan is ranked at 132nd. Turkmenistan, the only other country in the region, is too reclusive and opaque to even be included in the World Bank’s analysis. Though Uzbekistan’s business climate has also notably improved over the same period as the significant reforms of President Nazarbayev, the country has yet to come close to Kazakhstan’s success and is currently listed at 87th.

The reforms carried out by Nazarbayev have made Kazakhstan the primary — and in many senses, only — country in the region for small and medium-sized entrepreneurs and investors. For this reason, the building success of Nazarbayev’s business strategy has provided Kazakhstan with a much more promising outlook in the long-term when compared to other Central Asian states, even if the country was not able to diversify its economy in time to escape depressed oil prices.

In addition to these already impressive reforms, President Nazarbayev has formulated the only clear and ambitious future agenda in the region for establishing a modernized, prosperous economy. Announced in 2012, his “Kazakhstan 2050” strategy seeks to bring the country into the top 30 most developed nations on the planet. Nazarbayev has already outlined 100 concrete steps to fulfill this aspiration, and though a significant amount of work will be needed for the agenda to be met in full, his long-term vision indicates a foresight that caters to investors better than any other Central Asian leader.

An ambitious vision for the future

Nazarbayev has also buttressed his business-minded domestic reforms with a tactful economic diplomacy, thus far managing to  balance all the major powers with interests in the region and bring benefits to Kazakhstan. Although the ex-Soviet nation naturally holds deep ties to Russia, Nazarbayev has balanced its lucrative relationship with Moscow — through which Kazakhstan has secured significant energy-related investments — with an ever-increasing list of partnerships with China in both energy and infrastructure.

Rounding out this balancing act is the European Union and the U.S., courted through generous tax exemptions and also providing Kazakhstan’s greatest share of foreign direct investment. By actively seeking relationships with all major players without warming to one side too noticeably, Nazarbayev has successfully worked an increasingly competitive international environment.

As expected from a country experiencing a sharp economic downturn, serious challenges stand in front of President Nazarbayev. With the Kazakh economy yet to be diversified, a sizable portion of his effectiveness to execute the ambitious strategy presented rests on commodity prices well outside his control, and rising tensions between the West, China, and Russia will make the continuation of a successful multivector diplomacy difficult. At 75 years old, Nazarbayev’s age has also begun to elicit murmurs of secession risk, even after his party swept recent Parliamentary “elections”. Coupled with the regime’s poor human rights record, there is no doubt that Kazakhstan remains a work in progress.

Yet, for the moment, the President has secured a number of domestic and foreign accomplishments that have made Kazakhstan the most attractive state for investment in Central Asia. Despite all the challenges Kazakhstan faces today, Nursultan Nazarbayev has provided the country with a promising long-term vision in a region largely dictated by short-sighted economic policies — demonstrating commitment to the finer regulations and institutions needed for a successful modern economy once crisis subsides.

GRI Power Brokers features high-level individuals having a positive impact on political risk environments. Through interviews, in-depth analysis and insider profiles, GRI explores how power brokers are affecting the distribution of political or economic power, offering unique insight into those individuals that are shaping market trends in all corners of the world. 

About Author

Ian Armstrong

Ian Armstrong is Commissioning Editor and Senior Analyst at GRI. He also serves as the Geostrategy and Diplomacy Fellow at Young Professionals in Foreign Policy. Previously, Ian assisted in research at Temple University, the University of Pennsylvania, Scottish Parliament, and Hudson Institute’s Center for Political-Military Analysis, where he has focused on non-proliferation and international energy. Ian’s analysis has been featured at prominent outlets such as Huffington Post, Business Insider, Foreign Policy Association, CBS News, and RealClearEnergy.