How Can the EU Respond to Kazakhstan's Starry Ambition?

The following commentary was sent to EurActiv by Aleksander Kwasniewski, a former president of Poland and current advisor to the Kazakh government, on the occasion of the launch from Kazakhstan of one of the world’s largest commercial satellites.

"When I was a small boy, Kazakhstan suddenly exploded into my and the world’s consciousness as the launch site for Yuri Gagarin's historic space flight. Nearly half a century later, the lift-off today of one of the largest ever commercial satellites from the same site is testament to independent Kazakhstan's continued desire to look upwards. A joint US and Russian venture, it will provide 4G communications for smartphone users in the West," writes Aleksander Kwasniewski, a former president of Poland.

"Back on earth, Kazakhstan has had to face some difficult decisions. The economy faltered during the crisis with an over-exposure to property and its two principal banks teetering on the verge of collapse.

The solution was found in an unlikely place. Prior to the crisis, Sovereign Wealth Funds had sometimes been seen as the tools of governments acting extraterritorially to further opaque foreign policy aims. But the role of SWFs in recapitalising the financial sector, particularly in emerging economies, has begun to transform this image.

Kazakhstan's own fund, Samruk-Kazyna, took an 81% stake in the country's largest bank, BTA, helping it to restructure with the assistance of US and UK advisers. As well as managing the wealth of the country's vast natural resources, Samruk has a specific mandate to attract investment and drive modernisation within Kazakhstan.

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The country's leaders have recognised that the extraction and export of mineral resources – what Russia's President Dmitry Medvedev called 'primitive economies' - provides no long-term guarantee of national prosperity. So Kazakhstan is using resources generated in the boom years to shift to a more sustainable model of growth.

The first element of its vision is to achieve maximum productivity in the extractive industries through new investments and international partnerships. The second is to carry out a higher proportion of processing functions within Kazakhstan by investing in oil refineries and petrochemical plants. The final strand is to invest in new infrastructure, supporting the growth of small and medium-sized businesses and developing new productive industries like pharmaceuticals, locomotive engineering and plastics.

Having acted as an adviser to the government, I can see several reasons why the EU should welcome and support this model of economic development. The most important is that Kazakhstan's diversification and its determination to move production up the value chain will contribute to global economic rebalancing.

Kazakhstan needs high levels of innovation and productivity to drive this diversification and modernisation – something EU member states can provide. The government will need to respond with the prudent management of assets to ensure investors get a good return along with a firm commitment to the rule of law.

The current Partnership and Co-operation Agreement, now nearly 11 years old, is due a revamp later this year to meet the EU's 'New Partnership' strategy for Central Asia, which seeks to strengthen relations across the piece – from social and economic reform to infrastructure and energy co-operation.

As the regional hub, Kazakhstan is the key to making that strategy work – accounting for as much trade with the EU as all her Central Asian neighbours put together – and avoiding the kind of ethnic unrest that has befallen other bordering countries.

The EU is leading in some areas. European Commission President José Manuel Barroso stated clearly after Kazakh President Nursultan Nazarbayev's recent visit to Brussels that the Commission would support Kazakhstan's application for membership of the World Trade Organisation. And France is helping to build a 110 million euro space centre as part of trade agreements worth more than two billion euros, including the sale of locomotives and helicopters, as well as nuclear co-operation.

So while France has firmly grabbed the economic opportunities and has now overtaken Germany and Britain as Kazakhstan's principal trading partner, the question for other member states is how they respond to Kazakhstan's starry ambition."