Kazakhstan’s trade with Central Asia reaches $4.6 billion in 2020, says Kazakh minister
It is hard to travel in Kazakhstan without thinking of Singapore. So different in every way, but both the successful creations of post-colonial leaders; singular men with singular vision. Also, it is hard if you are an investor not to want a part of the alluring future that is emerging in Central Asia, writes Llewellyn King.
Lee Kaun Yew, the late prime minister of Singapore, wrested a poor city from the British after World War II and turned it into a city-state economic powerhouse. Former Kazakh President Nursultan Nazarbayev took a landlocked country that had been hard used and abused by Soviet Russia and turned it into the most successful of the former Central Asian republics. Something of gem, a tiger economy.
Nazarbayev came to power as one of the communist rulers of the country which sprawls across the Great Steppe. Today’s Kazakhstan is this man’s creation, as though he had sat before a big, empty canvas and painted his vision of what his country could be.
When the Soviet Union collapsed in 1991, Nazarbayev moved from Soviet first secretary to being the first president of the Republic of Kazakhstan. The country was in horrible shape. Soviet Russia had used it as a place to do that which was unspeakable: throw people into Gulag prisons, conduct nuclear tests, and dump nuclear waste; and to launch space probes.
The Soviet view was if it is dirty, dangerous or inhuman, do it in Kazakhstan. One third of the Kazakhs were starved to death in the 1930s by Soviet communists in a heavy-handed agricultural collectivization, as the nomads were forced to give up their herds and settle. The Kazakh culture and language were suppressed, and the ethnic Russian population was beginning to approach 50 percent of the population as a whole.
Now the ethnically Turkic Kazakhs are 70% of the population, and their culture and language are dominant. Some Russians, Ukrainians and Germans have left but, more important, Kazakhs have come home from China, Russia, and neighboring countries. The Kazakh diaspora was reversed.
Since gaining independence in 1991, Kazakhstan has made considerable strides. But the modern gloss of its capital, Nur-Sultan (f0rmerly Astana), conceals the need the country has for growth, inward investment, and expertise.
Western companies flood in
Western companies, led by big US names, started investing initially in the oil and gas sector and eventually across the board in many industries. They range from GE, which has interests in the railroads and alternative energy, to the engineering giant Fluor, to consumer goods companies such as PepsiCo and Procter & Gamble. The total foreign direct investment stood at $161 billion in 2020, with $30bn coming from the United States.
Nazarbayev’s transformation of his continental country — it is the largest landlocked nation and the ninth-largest country in the world, which spans three time zones, but its population is only 19 million — was made possible by oil and gas, and these have continued to set the pace of economic activity.
There have been years of growth, at over 10 percent, and years of stagnation; mostly, growth has been around 4.5 percent. The Kazakh government is determined to get off oil dependency and favors a diversified future, beyond raw materials export, with more manufacture in Kazakhstan; greater value added.
The World Bank ranks Kazakhstan as the 25th easiest place to do business out of 150 indexed countries. There is every evidence that the country is out to make itself more business-friendly and to ease the weaknesses of central planning which have lingered.
In March 2019, Nazarbayev retired and Kassym-Jomart Tokayev, a diplomat with experience in Singapore and China, became acting president, according to the country’s constitution. He was confirmed by a June 2019 election with 71% of the vote.
The transformation from a land of nomads to an exploited and abused Soviet satellite state to a modern, forward-leaning country has been boosted by waves of returning students from the United States and Europe.
They are graduates of the Bolashak programme, initiated to educate the new managerial elite of post-communist Kazakhstan. They make up what amounts to a new class of Kazakhs. They have brought with them a sense of comfort with the West and western business practices; and they speak English.
Kazakhstan watchers expect these young managers to further pry open the investment door. Behind it are treasures in many sectors.
Plethora of Resources
After oil and gas resources (Kazakhstan produces 1.5 million barrels of oil per day and an increasing amount of gas) comes uranium. Kazakhstan is the largest uranium producer in the world and holds the second-largest proven reserves after Australia. It also has huge coal reserves, which it uses to fuel its electricity sector. Other resources include bauxite, chrome, copper, iron, tungsten, lead, zinc.
There is a major wind resource on the flat Kazakh Steppe, maybe the world’s largest. With a gas infrastructure in place, couldn’t a hydrogen industry based on the wind follow? There, too, are rare earths, so necessary in wind turbines and modern electronics.
The Kazakhs are working to improve transportation. To move goods out of a landlocked country and maintain price competition, excellent roads, railroads, airports, and pipelines are needed. The original Silk Road ran through Kazakhstan, and it seeks to be a great Central Asian transportation hub again. And its vast lands can supply large amounts of organic and clean-grown foods for Chinese and Eurasian markets. Tyson Foods is investing in chicken and beef production.
For Kazakhstan to prosper, it requires skilled diplomacy, and the Kazakhs are proud of their diplomatic ability. It has some tetchy neighbors. Kazakhstan is bounded on the north and northwest by Russia, on the east by China, and on the south by Kyrgyzstan, Uzbekistan, and Turkmenistan.
Building on their neighborly skills, the Kazakhs are hoping to join that small group of nations which offer their good offices in dispute resolution, such as Ireland, Switzerland and Finland, a source at the university told me.
A word on the social stability: At times, there has been labor unrest in the oil fields and there have been election protests. The country is predominantly Muslim — with a light touch. Religious diversity is allowed and even encouraged. I have interviewed the Roman Catholic bishop, the chief rabbi, and a Protestant pastor, all at their places of worship in Nur-Sultan.
The Astana International Financial Center (AIFC), the booming financial services hub, is following the Dubai model and boasts a fintech incubator, a green finance center, and an Islamic finance centre. In tandem with London, it participates in IPOs of fintech and uranium companies.
However, in what seems like an admission that the country’s legal system isn’t yet in conformity with global standards, AIFC uses English common law and has a retired chief justice of England and Wales and a bench of English judges doing their business – setting disputes, hearing civil cases, and presiding over arbitrations — in English.
Apparently, where there is a will, there is a workaround.