Kazakhstan’s Next Stage of Development

By Daniel Witt, Douglas Townsend

Kazakhstan’s parliamentary election for the lower house (Majilis) held last month reflects the start of a new phase in its development based on broader parliamentary pluralism, economic diversification and the gradual introduction of competitive elements into the political system.  The country is committed to reducing its dependence on raw materials exports and developing the conditions to accelerate the growth of the non-resource sector, in particular, competitive small and medium enterprises.  This in turn requires the expansion of a middle class with a greater voice in the country’s development and a stake in successful institutional reform.

Three parties make up the new Majilis: Nur Otan, the presidential party and previously the only party in parliament, has 83 seats while the pro-business Ak Zhol party and the Communist Peoples’ party entered parliament with eight and seven seats respectively.  This will change the dynamic of parliamentary business by promoting greater debate among these different interests.

Although Kazakhstan is far from being a western-style liberal democracy, these changes can be viewed as part of a gradual effort to create a balanced political model to eventually replace President Nazarbayev’s “super presidential” rule.  The establishment of a strong “vertical of power” undoubtedly played a vital role in the establishment and consolidation of Kazakhstan’s statehood but a different model independent of one individual will be needed to create sustainable institutions over the longer-term.

The Majilis election took place in the immediate aftermath of violent disturbances that occurred in the oil town of Zhanaozen in the west of the country, 2800 kilometers from the capital, Astana.  Tragically, 17 people died and many more were injured as a labor dispute between oil workers and their state company that employer escalated out of control.  Police resorted to lethal force in an effort to restore order.  The unrest was unprecedented in Kazahstan’s 20 years of independence and provoked reactions of shock and outrage across the country.

The Zhanaozen events are a reminder to Kazakhstan’s leaders that while per capita GDP in Kazakhstan has grown that rapidly since the early 1990s after the collapse of the Soviet economy and now stands at over $11,000, the distribution of growth based largely on high commodity prices has been uneven.

Government and state company representatives have been candid in acknowledging the mishandling of the oil-workers strike in Zhanaozen and have taken punitive measures against some of those responsible for using excessive force.  Criminal charges have been brought against both the alleged instigators of the violence and some police officers accused of using excessive force.

Synchronizing the country’s economic transformation with matching political reform will remain a challenge.  As the former head of the Kazakhstan Soviet Republic, President Nazarbayev experienced first-hand the strategic errors of the Kremlin that caused political reforms to spin out of control and plunge the USSR into economic chaos and ultimate collapse.

A middle class is emerging in today’s Kazakhstan. It can be expected to want to its voice heard and heeded, as is now visible in neighboring Russia.  President Nazarbayev has consistently made the case for structural reform of the economy and the promotion of business in order to sustain economic growth based on the middle class.  Ak Zhol, a party representing particularly middle class business interests, has almost certainly not appeared by chance.

Kazakhstan is an exceptional economic success story in Central Asia based on a combination of political stability, the development of its raw materials base, respect for private enterprise and carefully managed policies to attract and retain foreign direct investment.  It secured 47th place out of 183 countries in the latest World Bank’s “Ease of Doing Business” ratings (neighboring Russia, by contrast was in 120th place).  In terms of investor protection, Kazakhstan was ranked 10th, a remarkable achievement for a post-Soviet country, putting it ahead even of reformist Georgia in this category.

GDP growth has averaged 5-7% over the last ten years.  The key to sustaining growth is finding the right formula and pace for political reform that will maintain the legitimacy of the system without destabilising it.  With a relatively small and well educated population, abundant resources and a pivotal position between Europe and Asia, Kazakhstan has bright prospects if it can achieve and preserve this balance and meet the aspirations of the expanding middle class.

Kazakhstan also has an additional advantage that can stimulate economic growth: 43% of its population was under the age of 24 in 2010.  This has important implications for the shape and size of the workforce over the next 30-40 years and for budget resources devoted to social spending.

The new generation that is coming of age is fortunately less influenced by Kazakhstan’s Soviet past, proud of their country and its diverse cultural heritage, but keenly conscious of the outside world. The government’s sustained efforts to develop a new class of managers and entrepreneurs, particularly through foreign education, are bearing fruit.  Tapping this new generation’s creative potential will be essential to ensuring Kazakhstan’s continued success.
Foreign Policy Journal