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Kazakhstan & WTO: End of an Odyssey or New Leap Forward?

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Kazakhstan applied to join the World Trade Organization (WTO) in January of 1996. Twenty long years later (July 27, 2015), President Nazarbayev signed the official ascension documents in Geneva, making it the 162nd WTO member state.

While assessing the impact of Kazakhstan’s entrance into the WTO is difficult at this early stage, speculation is rampant given current geopolitical tension in Central Asia and the global price of oil. This article will attempt to contextualize this decision by adding insight to three questions – why, why now, and what’s next?

Why?

The WTO is an important stepping stone for legitimacy and integration on the world stage. To some, most notably Kazakh economist Aidarkhan Khusainov, WTO membership is more comparable to United Nations membership, simply providing an image boost, rather than a substantive change in Kazakh political economy. This diminished outlook is not the only position in Kazakhstan and around the world, however, as many believe that this move will open up Kazakh markets, allow for increased foreign investment, and diversify the largely energy-dependent and landlocked nation.

Regardless of economic prognostications, Nazarbayev’s signature ultimately formalized an already informal economic reality. As Nazarbayev himself said, “In the mid-1990s, Kazakhstan had ties only with post-Soviet states, while now we are trading with 185 countries of the world.” Kazakhstan’s elevated status into the WTO, therefore, is a bit more pomp and circumstance, and less substantive change, as much of the Kazakh economy has already been developed in the global arena for some time. Thus, WTO membership is more about affirmation of deeds already accomplished, than hope for potential development somewhere far off in the future.

Why Now?

Kazakhstan’s membership status in some ways could always be seen as a foregone conclusion. For example, more than 50% of the nation’s trade is with the European Union. WTO membership, therefore, is a continuation of a two-decade long process of real economic integration and reform, rather than a radical departure from it. The significance of ‘now’ is less about Kazakhstan’s economic reality and more about the potential geopolitical and economic challenges in the region.

First, the global drop in the price of oil has had a significant impact on the Kazakh economy. WTO membership will not only provide new opportunities for investment and economic diversification, but greater flexibility in global markets.

Second, U.S.-led sanctions on Russia have indirectly constrained Kazakhstan’s economy. Russia and Kazakhstan are more than trade partners, but members of the Eurasian Economic Union (EEU), which features Kazakhstan, Russia, and Belarus. Russia’s economic woes have negatively affected the strength of this union. Evidence of this from a political perspective is the renewed stress on WTO negotiations from both Kazakhstan and Belarus starting in 2013. Moreover, Russia has gradually shown a willingness to support these negotiations (Russia joined the WTO in 2012) rather than oppose them.

Third, the why now of this moment is representative of a broader desire for engagement in Central Asia, particularly between those global players with higher stakes in the region. We are far from a proliferation of cooperation, but recent events have shown an environment in cautious conversation and optimistic consideration. WTO membership does not magically transform enemies into friends, but it does pave the way for a more solid process of enhanced cooperation between Kazakhstan and many other nations.

What remains to be seen is whether this shift is more representative of the dynamism of the landscape or the individual states? In this case, will we see motivated regional cooperation or cooperation in lieu of state capacity for direct or unilateral action?

What’s Next?

Economic projections range from the optimistic (new investment and development) to the pessimistic (job loss, wage decrease, and simply being out competed) to the apathetic (WTO is more about banal prestige and less about workable policy). Any basic economic theory will show that increased free trade comes with benefits and drawbacks, where the effect on the state is ultimately determined by good governance. What is most clearly next is Kazakhstan’s opportunity to diversify economically and have that diversification feed into a new positive political evolution. If the country is able to broaden its economic capacity, then its membership in the WTO, at least in the short term, is a win, offering Kazakhstan an outlet from energy export dependence. If it is able to broaden that into real political (read: democratic) consolidation, then membership in the WTO will have proven far more invaluable than anyone could have surmised. These potential geopolitical ramifications and speculative regional suggestions are what should be seen as the truly fascinating, and still unknown mystery, of pending WTO ascension.

What Kazakhstan’s WTO entrance hopefully suggests is less contestation and more cooperation across Central Asian economies. The EEU can be seen as strong evidence of this. Until very recently, the EEU was a barrier for Kazakhstan’s entrance in the WTO. With Russia and Kazakhstan now WTO members, and Belarus poised to follow, the EEU (which is Russian-led), has shown a clear willingness to conform to global economic standards. The EEU is thus now operating within the parameters of the WTO. What remains to be seen is if there is a bigger or more politically-motivated strategy behind Russia’s cooperation. Put another way – how does this affect the regional economic strategy of Russia’s so-called privileged area of influence? Is Kazakhstan moving away from the regional fold and into independence (or interdependence) in the global market? I find it difficult to believe that Russia would passively allow the countries of what it considers to be its personal sphere of influence to integrate one by one into the global economy (a US and EU-led order) without also trying to achieve serious advantages or privileges for itself. This is not necessarily a bad thing. Indeed, it is quite a normal thing when considering international political economy. But there are both acceptable ways of achieving those advantages or privileges and non-constructive ways. In this case, a win for WTO liberal institutionalism is a sign that both sanctions and the regional economic landscape have limited Russia’s influence and ability to project power arbitrarily. Russia can either adapt to that reality and incorporate itself better into that changing landscape or problematically try to fight such change. Time will tell exactly how that plays out.

To turn to Kazakhstan’s strategic outlook, however, WTO membership represents not only a win for Nazarbayev’s ambitions, but for Kazakhstan’s potential as a serious player on the international stage. Being the strongest economy of the former Soviet states but also quite literally surrounded by great and regional powers, Kazakhstan has been unable so far to cast a long geopolitical shadow in any direction. I expect Kazakhstan to gradually fill this opportunity of potential by trying to expand its own capacity and in so doing drafting more of an independent, rather than subservient, strategy to its large imposing neighbor to the North. Hopefully, Kazakhstan will carve out that new role without incurring a heavy price militarily or in terms of new economic regional conflict. So congratulations, Kazakhstan, on the end of your 20-year odyssey. Here is to hoping a WTO with Kazakhstan turns into a win-win-win for all sides: Kazakhstan, Central Asia, and the global community.

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Central Asia

Kazakh President Tokaev introduces reforms

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Authors: Srimal Fernando and Kirtan Bhana* 

Political transformation will make Kazakhstan a success story. Political reforms will ignite progress in economic reforms this, according to President Tokaev  as he met with the National Council of Public Trust in Nur-Sultan (formerly Astana), the Kazakh capital on December 20.

The Council, created by President Tokaev .   in July is entrusted with facilitating the reforms through interactions and discussions with the general public, political parties, civil society and business. Composed of 44 public figures the Council is representative of the broader Kazakh demographic.

‘Different Opinions, One Nation’ said the President as he introduced new measures that guarantee the fundamental rights and freedoms to all its citizens. These measures will deepen the public discourse allowing for debate and open engagement on issues that affect all Kazakhs.

The emotive issue of land and its effective use was top on the list of challenges to be tackled by the Tokaev  Presidency.  Apart from the unbreakable link to ancestry and heritage the economic value of the land is priceless. Kazakhstan is listed as the 9th largest country in the world with a relatively small population of around 19 million people. On this issue, my position is adamant: only those who are able to cultivate the land deserve to be its owner stated Tokaev. The Ministry of Agriculture is implementing a pilot project to monitor unused land through remote earth sensing, and to increase the base tax rate for those who own but do not use their land from 10 to 20 times.

Growing the private sector and reducing the economic involvement of state businesses in competitive markets and adjusting the quota of foreign labour by 40% were also proposed.  

On Foreign debt President Tokaev  instructed The Ministries of the National Economy, Finance and the National Bank to develop a Unified Register of External Debt in the form of a digitised database by April 2020.

Stabilising the Tenge (the currency in Kazakhstan) to increase public and investor confidence, a new monetary policy strategy will be adopted. The National Bank will, from 1 January, announce the exchange rate of the National Fund’s currency market on a monthly basis.

Modernizing the pension system, jobs for disabled people, state allowances and social packages for low-income households will be increased by over 70%.  In addition school going children from these families will receive free school meals, uniforms and kits, as well as free transportation to and from school. These were among other social services measures presented to the council.

Political reforms were central to the President’s remarks. A draft law on political rallies will outline the correct registration procedures of political rallies and will determine the status of the organiser(s), participants, observers and their respective rights and obligations. A minimum membership threshold needed to register a political party will be reduced from 40,000 to 20,000 members. Women and Youth candidates must make up 30% of party election lists. A law will be passed to allow representatives from other parties to hold Chair positions on some Parliamentary committees, in order to foster alternative views and opinions.

The Ministry of Foreign Affairs is tasked to begin the process of acceding to the Second Optional Protocol to the International Covenant on Civil and Political Rights, which deals with abolishing the death penalty. Article 130 of the Criminal Code on defamation will be decriminalised and transferred to the Administrative Code.

Key Domestic reforms include the transition of the Kazakh language from a Cyrillic to a Latin alphabet will necessitate a modernising of the language system and require a scientific approach.

“Much depends on simple values that are cherished by our people, in the family, in everyday life. Frankly speaking, today people are tired of the world full of aggression and conflict. Therefore, we must spread good intentions and good actions. We should be kind, benevolent and principled – this is the driving force of sustainable development and spiritual revival,” said President Tokaev as he concluded his speech.

*Kirtan Bhana in the Founding Editor and Travel Envoy for the Diplomatic Society of South Africa.

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Central Asia

Kazakhstan: Celebrating 28 Years of Independence

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Pictured cutting the celebratory cake are (l-r) Mr Kanat Tumysh, Ambassador of Kazakhstan, Mr Joseph Gerard B. Angeles, Ambassador of Philippines and Dean of the Asian Group, Mr Bene M’Poko, Ambassador of the DRC and Dean of the Diplomatic Corps and Dr Monde Tom, Director-General of the Department of Trade and Investment of South Africa

Authors: Srimal Fernando and Kirtan Bhana

In Kazakhstan, like in many other nations around the globe, Independence Day is commemorated by conferring awards, national orders and medals on those that have made exemplary contributions to statehood. On December 16, 1991 the Constitutional Independence Law of the Republic of Kazakhstan was passed making Kazakhstan the last of the Soviets to leave the Union and declare sovereignty.

Many other milestones followed this historic date for the Kazakh people, including membership of the United Nations (UN), the International Monetary Fund (IMF) in 1992 and the International Atomic Energy Agency (IAEA) in 1994. This year also marks the tenth anniversary of the closing of the world’s second largest Nuclear Test Site at Semipalatinsk by the historic decree of Nursultan Nazarbayev, First President of Kazakhstan, which paved the way for the adoption in 1996 of the Comprehensive Test Ban Treaty – CTBT. The country was declared a nuclear weapon free country.

Located strategically in the heart of Central Asia, Kazakhstan shares a 6800km border with Russia and a1700km border with China. Kyrgyzstan, Uzbekistan, and Turkmenistan are the other three regional neighbours. Kazakhstan is considered a landlocked country but adjoins a large part of the Caspian Sea in the west.

The Kazakh people elected a Presidential system of government with two chambers of parliament. There are 14 political parties; Nur-Otan is the current ruling party. The lower house is the Mazhilis, with 107 seats and the upper house is the Senate which has 47 members. Women representation in national and local government is steadily increasing.

Having diplomatic relations with over 120 countries, Kazakhstan has a clear multi-vector international relations policy and has achieved much on the global stage in almost three decades of independence. Being elected as a non-permanent member of the United Nations Security Council (UNSC), Kazakhstan was further crowned by being elected as president of the UNSC for 2018. Its stance on non-proliferation of nuclear weapons is well known and so is its support for the transformation of the UNSC. Kazakhstan also presented a proposal for ending terrorism in the world by 2025 during its presidency.

Kazakhstan has become a fully integrated member of the international community joining many multilateral organizations, and bilateral treaties and agreements. Turkey was the first country to present letter of credence for the Extraordinary and Plenipotentiary Ambassador to Kazakhstan.

The radical transformation of the economic to a free market has seen large foreign direct invest flows into the country, growing the economy to become the most significant in the Central Asian region. New president KassymJomart Tokayev has introduced a raft of new measures that are directly aimed at stimulating enterprise, entrepreneurship and small business development. Other reforms introduced are motivation for Kazakhstan to become one of the top 30 economic nations.

Islam was introduced to Kazakhstan in the 7th century. Its ancient history is steeped in nomadic life of hunters and animal rearing. The philosophy of Al-Farabi and the poetry of Abai is legendary and filled with folklore. The dombra, a string instrument, is at the very essence of Kazakh culture and resonates with the music of love and heartache.

Modern and contemporary art forms, classical music and ballet have also found place in Kazakh society as the younger generations narrate poetry in restaurants. This together with the Kazakh’s nomadic heritage, Islamic traditions and modern art and culture has become an attraction for tourists looking for new and dynamic destinations to experience and explore. Its breath-taking landscapes and abundant natural beauty and the snow-capped mountains offers much to the intrepid traveller as it emerges as a unified nation with much potential, opportunities and prospects.

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Central Asia

Poverty Continues to Decline, but Pace of Poverty Reduction is Slowing in Central Asia

MD Staff

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Although poverty rates in Central Asia continue to decline overall, the pace of poverty reduction is slowing, according to new data released by the World Bank. High levels of poverty remain in pockets of rural and remote areas, which also suffer from lack of employment opportunities, say new Poverty Outlooks for Central Asian countries, released ahead of International Day for the Eradication of Poverty on 17 October.

“The good news is that Central Asia continues to make progress towards eliminating poverty,” says Lilia Burunciuc, World Bank Country Director for Central Asia “However, poverty reduction is happening much less quickly than before. Rekindling inclusive growth should therefore be among the region’s most urgent priorities.”

Since the 2000s, all Central Asian countries have made significant progress in reducing poverty, but most of this progress occurred in the first few years of that decade. In the eight years from 2002 to 2009, the poverty rate dropped an average of seven percentage points per year in both Tajikistan and the Kyrgyz Republic – down from nearly 70 percent to 25 percent in Tajikistan and to 20 percent in the Kyrgyz Republic. Since then, however, poverty rates have fallen much more slowly: by only one percentage point per year on average in Tajikistan (from 25 percent to a projected 13 percent in 2019), and by nearly zero in the Kyrgyz Republic, stalling at about 20 percent from 2009 through to today.

Poverty in Kazakhstan was already lower in the early 2000s and declined at a rate of four percentage points per year from 2002 to 2009, at which point the country had almost eliminated poverty, as measured by the low-middle-income indicator of $3.20 per day. However, when measured by the upper-middle-income indicator of $5.50 per day, the poverty rate in Kazakhstan reached its lowest point in 2013, at about 6 percent, and since then has remained stuck above 7 percent.

The slowing rate of poverty reduction in Central Asian countries reflects several economic challenges, as well as difficulties securing jobs with decent incomes for vulnerable groups of the population.

Youth and women in the region are most likely to struggle with unemployment or low incomes. In Uzbekistan, World Bank data shows that over 25 percent of women aged 15-24 were unemployed in 2018, compared to 13 percent of men in the same age group. In the Kyrgyz Republic, 15 percent of women aged 15-28 were unemployed at that time, compared to only 9 percent of men in the same age group.

Recently published poverty maps for Central Asian countries reveal that many of the remaining poverty hotspots in the region are in rural areas that lack close integration with urban growth centers. This is especially pertinent for parts of Tajikistan and the Kyrgyz Republic, where poverty rates are above 40 percent in the most remote districts.

The analysis also finds that the middle-class in Central Asia is almost entirely concentrated in and around a handful of big cities: Nur-Sultan, Almaty, Tashkent, and to a lesser extent, in Dushanbe and Bishkek. One of the main challenges faced by all countries in the region is ensuring that people are not excluded from these dynamic labor markets.

The World Bank recommends policies that provide greater employment opportunities for people, expanding the availability of affordable housing in growing and prosperous cities, encouraging faster wage growth, and supporting vulnerable groups so they can be more competitive in the labor market.

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