Reform and modernization in Kazakhstan

Reform and modernization in Kazakhstan
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Pierre-Olivier Bussières examines the impact of new reforms in Kazakhstan.

This past January, Kazakh President Nursultan Nazarbayev announced an unprecedented shift of presidential power, followed by major economic reforms. This will be the first time the president of a post-soviet central Asian country willingly devolved so much power to the parliament. After the unexpected death of Uzbekistan’s president Islam Karimov last year, the move towards decentralization is widely considered a move to facilitate the next presidential succession. However, the depth of the economic reform suggests a much deeper agenda.

More stability, more investments

On a special televised address Jan. 25 to the nation, President Nazarbayev described the described his planned reform as ‘’a serious redistribution of power and a democratization of the political system as a whole.” According to Informburo, the President would keep control of the Army the police and foreign policy, but ‘’devolve over 40 areas of responsibilities to the parliament’’. To be sure, there was no question of developing political pluralism, but rather adapting decision-making structures to the developing economy. Under this reform, parliament would also be granted much greater authority over local government, which many see as shift away from the current appointment system.

Dubbed ‘’Operation Successor’’ by Kazakh politician and journalist Amirzhan Kosanov, this deliberate weakening of the presidency is primarily aimed at reassuring investors over the succession of the the 76-year-old president, who has ruled Kazakhstan since 1989 when the country was still part of the USSR. The unexpected death of Islam Karimov sent a powerful wake-up call to Central Asia on the risk of having no clear succession mechanism in place.

Kashagan Oil Field in Kazakhstan
Aerial shot of Kazakhstan’s Kashagan Oil Field in the Caspain Sea.

Kazakhstan’s third economic phase

Perhaps the greatest revelation of these sweeping reforms concerns the responsibilities devolved to cabinet over economic matters. In a second televised announcement, on January 30, Nazarbayev laid out the groundwork of what he called the ‘’third stage of Kazakhstan’s modernisation’’. Nazarbayev explained his vision saying “the first [modernisation phase] was the creation of an entirely new state based on the principles of a market economy. The second was the implementation of the Strategy 2030 and the creation of our country’s capital, Astana.”

It is no coincidence that the reforms were announced only five days apart. Both projects complete each other as part of a grand scheme to improve government effectiveness. Corruption and over-regulation have long worried investors in Kazakhstan. The decentralization of government, paired with effective deregulation, could trigger a hike of confidence in investors after several corruption scandals erupted last year. Just one week before the announcement of these reforms, former Economic Minister Kuandyk Bishimbayev was charged with accepting multiple large bribes. Two months earlier, police arrested Bishimbayev’s former Deputy Chairman at Baiterek development Aslan Dzhakupov and two other company officials on similar allegations.

Against this backdrop, Kazakhstan’s third modernisation phase, as the president puts it, would increase opportunities for small and medium enterprises by decreasing state control over their operation and giving them greater liberty. The stated goal of this development strategy is to progressively decrease state ownership in state enterprises, and pave the way for a more competitive economic landscape for small and medium enterprises.

2017: A milestone

After struggling with poor growth and social unrest in 2016 due to low commodity prices, the World Bank expects the Kazakh economy to rebound in 2017. Large uncertainties remain around the two parallel reforms. One the one hand, the language of the announcement on political reform was vague and heavily wrapped in rhetoric. On the other hand, the multitude of economic priorities outlined by the government shortly in the last week of January signals much improvisation, naming agriculture and the strengthening of small and medium business as key drivers of growth.

Pierre-Olivier Bussières is an incident analyst with Intelligence Fusion and Associate Editor for Iaffairs Canada. He holds a graduate degree in Eastern European, Russian and Eurasian studies from Carleton University as well as a practical certificate in country risk analysis and geopolitical scenario planning from the Maastricht university. He has written a number of articles on political stability in Eastern Europe and Western Africa for the Diplomat, Iaffairs Canada and Republic of the East.

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