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Kazakhstan Steering through Troubled Waters

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Earlier this year, the Central Asian nation of Kazakhstan announced a new campaign called “Invest in Kazakhstan,” which was designed to attract foreign investors. Throughout the campaign it released new commercials that enticed potential investors with exemptions from corporate income tax, land taxes, property taxes, and customs duties for up to ten years.

To lure new stockholders, the commercials promised state-in-kind grants (like goods, services and expertise), stability of investment legislation (drawing on the 2003 Kazakh Law of Investments which virtually guaranteed the stability of assets), strong protection of investors’ rights, no work permits for foreign labor, and visa-free entry for citizens of many countries. As if these benefits weren’t enough, Kazakhstan went even further, offering thirty percent cash back on investments. One would think that with this kind of economic bait – and the fact that Kazakhstan had very low debt – foreign investors would be jumping at the opportunities. So why hasn’t the country been able to draw more foreign investment?

Perhaps, with the exception of multinational oil companies, potential investors are turned off by the many disadvantages there are to investing in Kazakhstan. In addition to being quasi-democratic and geographically landlocked, Kazakhstan’s private sector lacks experience, still has to develop a larger educated workforce, and suffers from global doubt as to its financial ability to follow through on the aforementioned promises. It also doesn’t help that Kazakhstan acts like an autocracy at times in that its government is known for its lack of transparency and has high levels of corruption. It maintains tight controls over the press, lacks diversity, and has an unimpressive civil rights record. Dealing with these political complications would be an inevitable headache for investors.

Perhaps most importantly, Kazakhstan is currently dealing with a currency crisis where capital is hemorrhaging at an alarming rate. The tenge, Kazakhstan’s native currency, was tightly controlled for years until the government decided to switch to a floating exchange rate. This decision, due to falling crude prices around the globe, caused the tenge to lose almost a quarter of its value. However, as the dominoes have fallen in reaction to cheap oil from China to South Africa, Kazakhstan’s government still does not appear too concerned. In fact, while everyone else is calling it a crisis, Kazakh leadership is calling it a normal “transition.”

Even though Kazakhstan has recovered some of its losses (ten percent), there is still a very good possibility it will drop again in the next few weeks. This is because of the tremendous pressure on Kazakhstan by its neighbors. Like other emerging markets in the region, Kazakhstan – a country that is sandwiched between Russia and China – is economically dependent on both regional superpowers. Its economy is linked to Russia’s and has been negatively impacted by the Russian sanctions caused by the crisis in Ukraine. This impacts Kazakhstan on two fronts: the Russian ruble has become so weak that Russians can hardly afford Kazakh goods and, at the same time, Russian imports are threatening to flood Kazakhstan’s market with low-cost imports. To make matters worse, there is a weaker demand for Kazakhstan’s exports by China, the second-largest economy in the world. China’s recent move to devalue its currency – the Yuan – may have been done to boost the country’s exporters in an attempt to make their products cheaper and easier to sell. This could very well spark a currency war in the region and further damage susceptible currencies in emerging markets, including Kazakhstan. In sum, China’s devalued currency, Russia’s plummeting ruble and crushing sanctions, and the likely increased supply of oil from Iran after the new nuclear accord – all exacerbate the problem in Astana and may be putting Kazakhstan’s long-term economic future on shaky ground.

It appears that Kazakhstan, still resolute to integrate into the global market community, has an ambitious plan to use its WTO and EEU memberships to boost its image and attract new investments. Furthermore, the Asian Development Bank (ADB) just announced it will loan Kazakhstan one billion dollars so it can resume governmental programs designed to stimulate the country’s economy. This loan presents Kazakhstan with an opportunity to diversify, create new jobs, provide continued support and services to its disadvantaged citizens, grow its private sector, and build up smaller businesses. Unfortunately, making substantial domestic policy changes pertaining to civil liberties and democratic freedoms do not appear to be a part of the strategy at the moment.

While it is difficult to know exactly how this complex economic strategizing will play out in Kazakhstan, there is one thing we do know. Kazakhstan’s President Nursultan Nazarbayev – the only leader the former Soviet Republic has had since its independence in the early 90s – has great energy and enthusiasm for the future of his country. His grand geopolitical ambitions strive to take the country to new heights of economic, political and industrial growth. While Kazakhstan is considered authoritarian by international standards, by regional standards it is regarded as a much “softer” version than its Asian counterparts. This may give it an important edge as it strives to stay innovative and relevant while expanding its political, military, diplomatic, and economic reach.

Another important demographic factor is just how young the country is, in both population and geopolitical terms. For one, Kazakhstan has managed to utilize its resources and the productive capacity of citizens to not only break away from its domineering progenitor but also set itself up for long-term sustainability. It transformed itself mostly into a market economy that, under the right conditions and strategies, could dramatically transform and deepen from international trade and investment. While it would certainly be a stretch to describe Kazakhstan as a wealthy nation, it most definitely is not a poor one. Post-Soviet Kazakhstan has been remarkably responsible with its fiscal, industrial, trade and macroeconomic policies. Plus, it has worked very hard to carefully cultivate relationships with other countries so that Kazakhstan is largely regarded within the region as a stable and rational geopolitical voice.

While Kazakhstan still needs to diversify its overconcentration on natural resources, the country still has time, opportunities, important economic alliances, and room to grow. Kazakhstan’s economy and political ties do not necessarily have to remain constrained by corruption and political controls either. For the country to overcome the challenges it currently faces and to attract foreign investors, it needs to continue to embrace innovation that can accommodate social unity and a more balanced policy geared towards diversification and development. Perhaps the greatest challenge of all, but also provide definitive proof to the global community (and its foreign investors), is the willingness of the country to venture more boldly with democratic freedoms and civil liberties experiments that will accentuate and reinforce its sound economic strategies. Being able to develop both economically and democratically, to show the world that unlike so many emerging economies Kazakhstan is not afraid to give its people and its system more independence and freedom, might be the one element of harmony that will distinguish the country from all other competitors and, ironically, provide it with the stability to ride out the cyclical nature of economic crisis.

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Central Asia

Prevention and Encroachment of ISIS into Central Asia from Afghanistan

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Central Asia is a region that seems the next possible target for (Islamic State of Iraq and Al-Sham) ISIS. There can be different reasons behind it, but at the same time, it is a dilemma that either ISIS will be able to get into Central Asian Republics (CARs)? The main thing can be the geographic location and plans of ISIS that seems very interested in that region. Furthermore, we can see that Afghanistan shares a border with 3 out of 5 CARs that increase the threat of ISIS in the region. Soon after the creation of ISIS, they entered into Afghanistan and started their activities in eastern and northeastern parts of the country; however, after the takeover of the Taliban of Kabul, a number of suicide attacks happened in larger cities of Afghanistan which gives a clue of a more substantial presence of the group and their strength.

Most important tricks to prevent ISIS possible expansion into CARs states we should know about their recruitments policies. Nowadays, in the 21st century, media is considered a 4th organ of the state, and it is diverting people’s attention through different meanings to reach the end. Most importantly, I believe that media is a great tool that ISIS (K) uses to recruit foreign fighters; they disseminate information in different ways, especially through social media. But at the same time, we can see that some people in Central Asia feel neglected by the states, and discrimination is going on with them in different aspects of life. It might be socially, politically, and economically. It will not be an exaggeration to mention here that in this region (CARs), people are fed from the ongoing political systems where they are not enjoying the freedom of speech, no free media, political rivalries are almost unacceptable. There is no clear way to choose the successor for the state, though Kyrgyzstan is a kind of half democratic system, so all these aspects led people or compelled them to join such terrorist groups. It is worth mentioning that many Central Asians are working as labour migrants in different parts of the world, especially in Russia as Diasporas. They are sending a considerable amount of remittances into their leaving countries from Russia, but they are facing many issues there as well. Most important is the behaviour of the local people with whom they are working and some government departments as well. They are recruiting people mainly from the people going into mosques in Russia because they know that these people have an Islamic pan idea. 

Strategists should come with a clear stance to make a policy that helps states to avoid the access of ISIS in the region. International cooperation is necessary to prevent further expansion of this lethal terrorist organization. In this regard, in my view, the number of surgical strikes should be increased to demise this acute disease, not to convert it into a chronic situation. Major Powers like Russia, the USA, and China should come to a consensus on several Middle East and Afghanistan issues to eliminate them. It is also necessary to have strong border patrol guards to protect illegal crossing of borders and to stop the flow of Central Asian terrorists into Turkey and Afghanistan, which are the nearest ways to join them. Once they join ISIS, they can easily access Central Asia when they have local people from the region. I think policymakers should keep some triggering forces in mind like nationalism, ideology, morality, ideas, and most importantly, national interests that motivate policy to shape a comprehensive plan against ISIS. Fortunately, nationalism is decreasing, and Central Asian people may not have any pan Turkic ideas.      

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Central Asia

CICA Meeting Seeks to Update Regional Cooperation and Dialogue

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The world has recently experienced sharp challenges. The COVID-19 pandemic, while hopefully receding, has caused global economic problems that may take some time to resolve.

Meanwhile the crucial and dramatic changes in Afghanistan have clearly demonstrated that multilateralism has become the only possible approach to ensuring global stability, security and peace. Neither the pandemic and its consequences, nor regional tensions and crises can be resolved without dialogue and the cooperation of states at regional and global levels.

The influence of Asian countries in global developments will continue to increase due to the rapid economic and demographic growth of the region. Asia is on track to top 50 percent of global GDP by 2040. By that point, it is expected to account for 40 percent of the world’s total consumption. The region is making not only economic progress but rapid strides in human development. As noted by international observers, the question is no longer how quickly Asia will rise; it is how Asia will lead. Despite Asia’s remarkable rise, its family of nations are sometimes kept apart by difficult geography and even more difficult history.

For this reason, it is vital to ensure that there is space for Asian states to conduct dialogue in order to unite efforts on resolving key regional and global issues. The Conference on Interaction and Confidence Building Measures in Asia, an intergovernmental forum, is the most appropriate platform in the region to consolidate the collective wisdom of all Asian nations for peace, cooperation, security and development.

CICA has come a long way since the initiative to convene it was first proposed by the First President of Kazakhstan, Nursultan Nazarbayev, at the 47th Session of the United Nations General Assembly in October 1992. Today, almost 30 years later, CICA brings together 27 Member States. The region covered by CICA stretches from the Pacific to the Mediterranean and from the Ural to the Indian Ocean, covering more than 50 percent of the world’s population.

The establishment of the CICA forum emerged from the firm belief that international progress can come about only through strong and effective partnerships. Since the first ministerial meeting, which took place in 1999, CICA has strived to enhance cooperation through elaborating multilateral approaches towards promoting peace, security and stability in Asia.

Yet the world has changed dramatically in the past two decades. Asia has become a key driver of global economic growth and development. Multi-polarity has become the norm of international relations. Countries are actively cooperating thanks to globalization, yet at the same time nationalism is on the rise in many parts of the world. To adapt to these changes, the CICA forum must transform in order to continue to fulfil its important role.

Kazakhstan, as Chair of CICA for 2020-2022, has put forward a number of proposals aimed at making the forum more effective.

Firstly, we believe that it is time to gradually transform it into a fully-fledged international organisation that will be better equipped to cope with the fast-changing security environment and help to pursue developmental goals in our continent. CICA’s transformation into such an organisation will expand its capabilities to strengthen cooperation between the member states, cover the entire Asia with a system of deep mutual trust and mutual assistance, as well as increase its status and influence in the international arena.

Secondly, given the dramatic changes that impacted the world in the last two years, it is necessary to update the activities and areas of cooperation within CICA. Due to the threat of the current pandemic, as well as potential future health crises, it is necessary to consider the development of cooperation in the field of epidemiological security, public health and pharmaceuticals. In addition, digitalisation is an important field as the world moves further towards the use of digital technologies. We must also not forget about issues that have been of persistent importance over the last few years, including mitigating climate change, empowering women and youth.

Finally, given the global nature of current challenges, CICA and its member states must also focus on building partnership with other regional and global organisations, particularly the Eurasian Economic Union, the Association of Southeast Asian Nations, the Organisation of Islamic Cooperation and others.

The overarching ambition of CICA is clear – to reduce global geopolitical tensions and threat of conflicts, and instead focus on collaboration and development, especially in Asia, where we share common values and aspirations. Ahead of the upcoming CICA Meeting of Foreign Ministers on 11-12 October in Kazakhstan, we must embrace the idea that CICA should be playing one of the key roles along with other international organisations in the region in achieving these common objectives. This will encourage Asian countries to build bridges among each other and shape a prosperous future in Asia.

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Central Asia

Mirziyoyev’s Uzbekistan: Marching Confidently Towards a Brighter Future

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As Uzbekistan celebrates 30 years of independence from former USSR, it is also the time that the nation is completing five years of rule by incumbent president Shavkat Mirziyoyev.

Mirziyoyev took power in September 2016, when the country’s first president – Islam Karimov, having ruled since 1991 – passed away, what was seen as a big shock for the entire nation. Since then, Mirziyoyev – elected formally to the presidency later that year – not only steered his nation out of that shock but also put the country on the road to globally-acknowledged reforms, uplift and progress.

Past five years have been a period of extraordinary reform, development and international prestige for this most populous nation of Central Asia. The new leader laid the foundation of a ‘New Uzbekistan’ with broad-based, comprehensive, inclusive and all-encompassing reforms in economic, political and social spheres.

Economic reforms were aimed primarily at liberalization of economy, moving towards free-market systems and regulations. These have born fruits significantly, with country’s economy growing at a healthy average rate, over past years. Output augmented – both in agriculture, and industrial sectors – and per capita incomes increased notably. Confidence of local and foreign investors in Uzbek economy deepened and international institutions started looking towards the country as a new bright spot for regional growth. Welfare of the people, especially the working class, has been put at the centre stage in these sets of reforms.

The democratic reforms, also seen as a model for the region by international observers, revolve around decentralization of power, political inclusiveness and transparency of the electoral processes. This transparency and fairness of electoral processes is noted with appreciation by all those observing the country’s political transformation. At the heart of this scheme of political reform lies the awareness and greater participation of masses, country’s people from all backgrounds and regions, in the political processes. All the segments of society feel the benefits of this process of political reform pouring down in the form of political empowerments at grassroots.

The country has emerged as one of the most attractive tourist destinations not only in the region but in the whole world. Much of it owes to focused development of tourism of ziaraats, as the country boats a rich cultural and religious heritage – making it a magnet for a large number of people from around the Muslim world, especially from countries such as Pakistan. Uzbekistan Airways, the national flag-carrier, is now one of the most important airlines connecting a sizeable number of countries and regions.

At international stage, country’s prestige has continuously been enhancing during past half a decade.  Mirziyoyev played a vital role in bringing the leaders of other four Central Asian republic to table, for re-start of the negotiations for the region’s integration. Uzbekistan’s efforts in this period for Afghanistan’s peace and stability and providing the Afghan people with an unattached opening towards Central Asia are noteworthy.

Uzbek president in recent couple of years has played a leading role for the whole wider region by promoting re-initiation and strengthening longstanding bonds and connectivity between Central and South Asia. The July 2021 conference held in Tashkent turned out to be the largest such initiative by Uzbek leadership under Mirziyoyev. Not only Pakistani PM and the then Afghan president were present but ministerial level leaders from some 30 countries and heads of several major international organizations also participated in the mega forum. I have no hesitation in saying that 2021 conference in Tashkent aimed at Central and South Asia connectivity has already started a journey that would not be stopped now; no matter how the things shape in the region. Uzbekistan-Afghanistan-Pakistan railway would be the flagship imove of this journey.

As mentioned above, the reforms’ being all-encompassing may be witnessed from the special focus and attention on development of mass media, arts, sports and cultural activities – including the preservation and development of cultures of all the ethnic groups of the nation.

In the nutshell, Uzbekistan of today has assumed a much more vital position in the affairs of the region. The country’s people are now living peaceful, prosperous, content and confidence-filled lives, also basking in increasing international glory of their nation. The journey is all set to continue towards greater achievements and a brighter future.

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