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Astana 2017: Kazakhstan’s City on a Hill

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Kazakhstan, a country with immense oil wealth but relatively little global influence, has recently been trying to convert its wealth into influence. The successful bid to hold an exposition in Astana this summer is so far the crowning achievement of this international push to engage with countries directly outside of the post-Soviet space. The preparation for Astana 2017 is decades in the making and has literally been built from the ground up.

Twenty years ago Astana, Kazakhstan’s capital and second largest city, was a nondescript village in the country’s northern steppes. Fast forward to present day and the gleaming metropolis is adorned with skyscrapers and unique structures designed by the world’s best architects. The city was willed into reality as a representation of Kazakhstan’s new wealth and outlook for the twenty-first century. Astana was designed to grab the world’s attention and to be used as a spectacle for events like this year’s world expo. Having failed to secure the 2022 Winter Olympics, Kazakh authorities have pulled out all the stops to promote the expo. A massive futuristic pavilion will house the expo and even world famous boxer Gennady Golovkin has been recruited to promote the event.

The wealth needed to allow for such projects only emerged following the tumultuous 90s. Under the leadership of Soviet era strongman Nursultan Nazarbayev, Kazakhstan has risen from planned economy stagnation to double digit GDP growth. Granted, this was not achieved through transparent economic practice and the rule of law, but through the development of its petrochemical industry. Hydrocarbons accounted for 60% of exports in 2015. However, due to the collapse of crude prices in late 2014, Kazakhstan has had to adapt to an alternate reality where sustainable development and outside investment needs to matter for the continued upward movement of the Kazakh state.

Astana 2017’s theme of “Future Energy” is an important continuation of the general worldwide consensus following the 2015 UN Climate Change Conference. As of September of last year, 101 countries have confirmed their participation at the expo with more than two million individual visitors planned for the three-month long event. Astana will take center stage for Kazakhstan’s future ambitions. Mr. Nazarbayev’s real vision of Kazakhstan’s role in the world is known only to him and a select few individuals in his inner circle. It is difficult to imagine him wanting Kazakhstan to take a leading role in the fight against climate change or energy equity.

Kazakhstan has outlined a plan to obtain 50% of its energy needs from renewable sources by 2050. This target is not binding to any supranational organizations of which Kazakhstan is a part (ex. Eurasian Economic Union [EEU] and Commonwealth of Independent States [CIS]). Additionally, with the country so heavily invested in hydrocarbons all the while lacking almost any renewable energy infrastructure, it is unlikely that Kazakhstan will be able to meet it, despite an enormous renewable energy potential. These speculative inferences point to a likely scenario where Mr. Nazarbayev does not foresee his country using soft power to influence its neighbors with energy policy.

Instead of traditional established partnerships with its CIS and EEU partners, Kazakhstan may be looking for outside investment. With its conventional economy tied to the EEU trading block, which is also hurting due to the low price of oil, Astana 2017 could prove to be particularly useful to attract investment and diversify its economy. In addition to international representatives, the world’s largest energy and tech companies will be making an appearance. It is through partnerships with these giants that Kazakhstan can create its own homegrown industries which may be competitive in the EEU and abroad. Rapil Zhoshybayev, a Kazakh commissioner for Expo 2017 and a former deputy foreign minister described the expo’s mission in an article for The Diplomat:

“Our aim is to use EXPO to drive the next stage of our industrial development and diversification with a new emphasis on sustainability, high-tech and skills. The exhibition site and its buildings will, wherever possible, use the latest renewable power sources, smart energy networks and sustainable construction techniques. Their use will embed these skills and knowledge throughout our wider industry”.

It is extremely unlikely that Kazakhstan would hope to become a global leader in renewable energy. However, it can hope to be a player in an underdeveloped regional market and expand its influence that way.

Astana 2017 can lead to a more diversified and successful future for Kazakhstan. Unfortunately, its typical post-Soviet government may derail any plans even before they are formed. Mr. Nazarbayev is currently 76 years old and has been in power for more than 26 years. His recently more liberal attitude towards finance, development, and succession could all be rolled back should he be unable to fulfill his duties as president. There is no guarantee that his successor will be as open minded. Corruption, the traditional enemy of free enterprise in this part of the world, will also almost certainly have an impact. It is just a question of how much of an impact.

Kazakhstan has had an impressive start to the 21st century and its economy looks set to continue to grow. Astana 2017 presents a bridge to the outside world which Kazakhstan would likely be best served to explore.

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Central Asia

Productive Employment Needed to Boost Growth in Tajikistan

MD Staff

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Tajikistan will need to create enough jobs to maximize productivity of the country’s increasing working-age population and spur economic growth, says a new Asian Development Bank (ADB) report.

In its new Asian Development Outlook (ADO) 2018, ADB projects Tajikistan’s gross domestic product (GDP) growth to reach 6% in 2018 and 6.5% in 2019. GDP growth for the country stood at 7.1% in 2017. ADO is ADB’s annual flagship economic publication.

“Tajikistan has a young population and the percentage of working-age people is projected to continue rising to 2030. In many countries, this has led to higher growth from a ‘demographic dividend’,” said Pradeep Srivastava, ADB Country Director for Tajikistan. “But for Tajikistan to benefit from such a dividend, it needs to undertake structural reforms to improve the investment climate, increase human capital and skills, and let entrepreneurship flourish to create productive jobs for the workforce.”

Despite Tajikistan’s economy growing at an average of about 7.2% from 1997 to 2016, the country is not creating enough productive jobs for its growing working-age population, which grew by 3% annually from 1991 to 2016. However, employment only rose by 0.7% annually over the same period. The report notes the need for structural reforms to improve the country’s business climate—for example, reducing and consolidating the number of inspection bodies, creating a healthier banking sector to facilitate lending, and streamlining procedures for issuing construction permits, paying taxes, and enforcing contracts.

The report also highlights the importance of strengthening local value chains and helping small and medium-sized enterprises improve their productivity and earnings to promote job creation. Assessing demand for various skills and using that information to improve job training can match workforce skills to market demand.

ADB’s growth forecasts for Tajikistan in 2018 comes on the back of expected fiscal tightening from the government to address the high ratio of public debt to GDP, which will likely constrain public investment, and a weak banking sector curbing private investment. The slight recovery in growth projection in 2019 is based on expected gains in the country’s manufacturing and mining sectors, as well as strengthened remittances.

Inflation is forecast to accelerate to 7.5% in 2018—reflecting higher liquidity spurred by potential sizable bank recapitalization, public salary and electricity tariff hikes, and modest somoni depreciation—before easing back to 7.0% in 2019. In 2017, inflation reached 6.7%.

ADB is celebrating 20 years of development partnership with Tajikistan in 2018. To date, ADB has approved around $1.6 billion in concessional loans, grants, and technical assistance to the country. ADB and Tajikistan’s development partnership, which began in 1998, has restored and built the country’s new transport and energy infrastructure, supported social development, expanded agricultural production, and improved regional cooperation and trade.

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Central Asia

ILO Reports Important Progress on Child Labour and Forced Labour in Uzbek Cotton Fields

MD Staff

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A new International Labour Organization report to the World Bank finds that the systematic use of child labour in Uzbekistan’s cotton harvest has come to an end, and that concrete measures to stop the use of forced labour have been taken.

The report Third-party monitoring of measures against child labour and forced labour during the 2017 cotton harvest in Uzbekistan is based on more than 3,000 unaccompanied and unannounced interviews with a representative sample of the country’s 2.6 million cotton pickers. It shows that the country is making significant reforms on fundamental labour rights in the cotton fields.

“The 2017 cotton harvest took place in the context of increased transparency and dialogue. This has encompassed all groups of civil society, including critical voices of individual activists. This is an encouraging sign for the future. However, there is still a lag between the sheer amount of new decrees and reforms being issued by the central government and the capacity to absorb and implement these changes at provincial and district levels,” says Beate Andrees, Chief of the ILO’s Fundamental Principles and Rights at Work Branch.

The ILO has been monitoring the cotton harvest for child labour since 2013. In 2015, it began monitoring the harvest for forced labour and child labour as part of an agreement with the World Bank.

Interviews carried out by the monitors took place in all provinces of the country and included cotton pickers and other groups which are directly or indirectly involved in the harvest such as local authorities, education and medical personnel. In addition, a telephone poll of 1,000 randomly selected persons was conducted. Before the harvest, the ILO experts organized training for some 6,300 people directly involved with the recruitment of cotton pickers.

The results confirm that the large majority of the 2.6 million cotton pickers engaged voluntarily in the annual harvest in 2017 and that there is a high level of awareness in the country about the unacceptability of both child and forced labour. The report confirms earlier findings that the systematic use of child labour in the cotton harvest has ended though continued vigilance is required to ensure that children are in school.

Instructions have been given by the Uzbek national authorities to local administrations to ensure that all recruitment of cotton pickers is on a voluntary basis. In September 2017, an order was given withdrawing certain risk groups (students, education and medical personnel) from the harvest at its early stage.

Moreover, cotton pickers’ wages have been increased in line with recommendations by the ILO and the World Bank. The ILO recommends that the government continues to increase wages and also addresses working conditions more broadly to further attract voluntary pickers.

Last September, Uzbekistan President Shavkat Mirziyoyev spoke before the United Nations General Assembly in New York where he pledged to end forced labour in his country and underscored his government’s engagement with the ILO. In November 2017, at the Global Conference on the Sustained Eradication of Child Labour in Argentina, Uzbekistan also pledged to engage with independent civil society groups on the issue.

The ILO Third-Party Monitoring (TPM) project in Uzbekistan will now focus on the remaining challenges, particularly the need for further awareness raising and capacity building, which varies between provinces and districts. It will ensure that all those involved in recruitment will have the information and tools needed to ensure that cotton pickers are engaged in conformity with international labour standards.

The monitoring and results from a pilot project in the area of South Karkalpakstan also show that cotton picking economically empowers women in rural areas. The cotton harvest provides many women with a unique opportunity to earn an extra cash income which they control and can use to improve the situation of their families.

The ILO TPM Project is funded by a multi-donor trust fund with major contributions by the European Union, United States and Switzerland.

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Central Asia

Kazakhstan Launches Online Platform for Monitoring and Reporting Greenhouse Gases

MD Staff

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An online platform for monitoring, reporting and verifying emission sources and greenhouse gases (GHG) was officially launched today by the Ministry of Energy of the Republic of Kazakhstan and the World Bank.

The platform is an essential element of the National Emissions Trading System of Kazakhstan, which was launched in 2013 as the country’s main instrument to regulate domestic CO2 emissions and to drive the development of low-carbon technologies. Today, the National Emissions Trading System of Kazakhstan covers all major companies in the energy, oil and gas sectors, mining, metallurgical, chemical and processing industries.

Since 2014, the World Bank Trust Fund Partnership for Market Readiness has provided technical assistance to Kazakhstan in supporting the implementation of the National Emissions Trading System of Kazakhstan and related climate change mitigation policies.

“Kazakhstan’s emissions trading system is the first of its kind in the Central Asia region,” said Ato Brown, World Bank Country Manager for Kazakhstan. “With support from the Partnership for Market Readiness, the country has made a great effort to develop policy options for mid- and long-term emissions pathways and to develop an action plan on GHG emissions reductions by 2030. The World Bank will continue to support the Government during the crucial stages of policy implementation.”

The platform enables Kazakhstan’s major emitters to transmit and record data on GHGs emissions, as well as trade online. The National Allocation Plan, adopted in January 2018, sets an emission cap for 129 companies for the period 2018-2020. Per the national allocation plan, quotas have been allocated until 2020.

“The electronic platform undoubtedly proves the evolution of the Kazakhstan emission control system, which will allow the monitoring, reporting and verification system to be upgraded to a much higher level,” said Sergei Tsoy, Deputy General Director of JSC Zhasyl Damu.

GHG data is confirmed by accredited bodies for verification and validation and transferred to the Cadastre using an electronic digital signature. To date, there are seven verification companies accredited in Kazakhstan, with five more in the process of accreditation.

The platform was developed by JSC Zhasyl Damu with the support of France’s Technical Center on Air Pollution and Greenhouse Gases. The system is administered by JSC Zhasyl-Damu, while the beneficiaries are the Climate Change Department and the Committee for Environmental Regulation and Control of the Ministry of Energy of the Republic of Kazakhstan.

Background

Kazakhstan is one of the largest emitters of GHG in Europe and Central Asia with total annual national emissions of 300.9 MtCO2e in 2015. The energy sector accounts for 82% of total GHG emissions, followed by agriculture (9.6%) and industrial processes (6.4%). More than 80% of produced electricity in Kazakhstan is coal-fired, followed by natural gas (7%) and hydro power (8%).

Kazakhstan proposed as its Nationally Determined Contribution (NDC) an economy-wide reduction of GHG emissions of 15% from 1990 emissions levels by 2030. Kazakhstan ratified the Paris Agreement in November 2016 and committed itself to the fulfilment of the proposed target as its first INDC. The objective will contribute to sustainable economic development as well as to the achievement of the long-term global goal of keeping global temperatures below 2 degrees Celsius. 

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