EXPLAINER: What post-riot reforms is Kazakhstan proposing? | business news

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By DASHA LITVINOVA and DAVID McHUGH, Associated Press

MOSCOW (AP) – Kazakhstan’s leader has announced ambitious economic reforms after the worst unrest in the country of 19 million in three decades. The measures are aimed at reducing the state’s deep interference in the economy, bridging the gap between the wealthy minority and the struggling majority – and removing triggers for further turmoil.

Experts say the announced changes look good on paper but doubt the new government in the energy-rich former Soviet state will implement them.

A look at the causes of the discontent and the government’s promised reforms:

WHAT DOES KAZAKHSTAN TOUCH?

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On January 2, small-scale protests erupted in an oil town in western Kazakhstan, where residents were unhappy at a sudden rise in the price of liquefied petroleum gas, which is widely used to fuel cars.

The demonstrations soon spread across the vast country, reflecting general public dissatisfaction with steadily falling incomes, deteriorating living conditions and the authoritarian government. On January 5, protests escalated into violence when armed groups in Kazakhstan’s largest city, Almaty, stormed government buildings and set cars and buses on fire.

To quell the violence, President Kassym-Jomart Tokayev asked for help from a Russian-led security coalition, the Collective Security Treaty Organization. The bloc of six former Soviet states sent more than 2,000 soldiers.

Authorities arrested thousands of people and more than 220 – mostly civilians – were killed. About a week after the protests began, order was largely restored.

WHY WERE GAS PRICES SUCH A MIRACLE?

Gasoline prices rose to 120 tenge ($0.27) a liter, a sharp rise in the country where Tokayev says half the population earns no more than 50,000 tenge ($114) a month. The rise came as the government backed away from price controls as part of efforts to build a market economy.

Analysts say the surge came as a complete surprise.

“All these decisions were made without transparency. … People woke up to a new gas price that was 2 1/2 times higher,” said Kassymkhan Kapparov, an economist in Kazakhstan and founder of the think tank Ekonomist.Kz.

The western region of Kazakhstan, where the protests began, is also producing oil and gas. Residents are outraged that the price has gone up while their salaries have stagnated, said Rustam Burnashev of the Kazakh-German University in Almaty, an expert on regional security in Central Asia.

“They said, ‘Guys, we produce it and now (have to) buy it at astronomical prices?’ They agree that gas prices are going up (around the world), but in this case (they say) that “our salaries should too,” Burnashev said.

HOW did Kazakhstan get into this situation?

Kazakhstan became independent after the collapse of the Soviet Union in 1991. In the first years after independence, the country experienced rapid economic growth and increasing prosperity. For almost three decades it was dominated by Nursultan Nazarbayev, its last Communist Party leader at the time of independence.

The country benefited from its natural resources, above all oil. Foreign investors were welcome, money flowed into the state coffers and social spending helped to keep abject poverty low. But key sectors such as mining, telecommunications and banking were dominated by state-owned companies and a few figures linked to Nazarbayev either politically or through family ties.

Over time, Nazarbayev increasingly monopolized the country’s politics, suppressed the opposition, and instituted a highly personalized form of rule as Elbasy, the nation’s leader. Nazarbayev resigned in 2019, but until recently remained head of the ruling Nur Otan party and chairman of the Security Council. Tokayev, the head of the upper house of parliament, was appointed president and renamed the capital of Astana Nur-Sultan in honor of his predecessor.

WHAT ARE THE PROBLEMS BEHIND THE PUBLIC DISSATISFACTION?

The dissatisfaction of ordinary people goes far beyond the price of gasoline. People know about the country’s blatant inequality and the immense economic privileges of the people around Nazarbayev, in which 162 people control more than half of the country’s wealth.

Meanwhile, the average monthly wage is around 243,000 tenge, or US$558, according to government statistics, although the cost of living is relatively low compared to Western countries.

A recent report by the Organized Crime and Corruption Reporting Project revealed that a charitable trust established by Nazarbayev held $7.8 billion in assets, including stakes in banks, shopping malls, logistics companies and food manufacturing.

British authorities issued Nazarbayev’s daughter and grandson “inexplicable assets orders” and ordered them to disclose where they received funds for three London properties worth more than £80million. A judge overturned the orders.

WHAT IS THE CURRENT PRESIDENT’S APPROACH?

Publicly acknowledging Kazakhstan’s rampant inequality, Tokayev first attempted to quell the protests with a number of concessions: he cut gas prices for 180 days, appointed a new cabinet and ousted Nazarbayev from the National Security Council.

Outlining future reforms to “reboot” the economy, the President remarked: “We need to define new ‘rules of the game’ – fairer, more transparent and more equitable.”

Ambitious measures he touts include reducing government involvement in and oligarchs’ influence over corporations; the reform of the Samruk-Kazyna sovereign wealth fund, which owns large companies; and ensuring fair competition, a better investment climate and the integrity of private property, in part by overhauling the country’s judicial system.

WHICH CHANCES OF SUCCESS DO THE PROPOSED REFORMS HAVE?

Kapparov, the economist, said that important questions about the Samruk Kazyna fund and its companies remain unanswered.

“Will it be privatized? On what scale? In what period of time?” he asked. “Will it be open to everyone, including foreign investors? These problems were not mentioned.”

The power and influence of the inner circle pose serious obstacles to sweeping reforms that would be needed to privatize state-owned companies and allow outside interests to compete in key sectors, said former World Bank official Simon Commander, now managing partner of emerging markets consultancy Altura Partner. Tokayev’s speech, while interesting, is “certainly more radical than is probably possible. … Let’s hope he turns out to be a real reformer.”

But he added: “I’m very skeptical. Their economic and political structure limits them.”

WHAT ABOUT POLITICAL REFORMS?

During his tenure, Tokayev has also promised limited political reforms, including local elections.

But the crackdown on protesters suggests the authorities have no intention of allowing genuine political opposition, and economic reform is hard to imagine without political reform.

Welcoming the dissatisfaction with more than 12,000 arrests “is a pretty good gauge of how the regime thinks it needs to respond,” Commander said.

McHugh reported from Frankfurt, Germany.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, transcribed or redistributed.

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