Publication: Eurasia Daily Monitor Volume: 5 Issue: 20

On January 23, addressing members of the Political Council of the ruling Nur Otan party, Kazakhstan’s President Nursultan Nazarbayev announced several key personnel changes. Bakhitzhan Zhumagulov, the deputy chairman of the party, would be replaced by Adilbek Zhaksybekov, head of the presidential administration. Kairat Kelimbetov, former managing director of the state-controlled Kazyna Foundation, takes the helm of the presidential administration, while Zhumagulov becomes deputy speaker of parliament.

Such surprise reshuffles in the corridors of power are not rare in Astana, thanks to the constant behind-the-scenes intrigues and struggles for top positions in the ruling hierarchy. But this time the personnel changes appear to have a solid economic rationale. Despite the official rosy view of economic development, inflation is on the rise, and low-income families cannot afford staple food items. Apparently, Nazarbayev is pinning his hopes on Kelimbetov, who is reputed to be an expert on macroeconomics and who served as minister of economics and budget planning in 2002. Dolat Sultanov, director of the Kazakh Institute for Strategic Research, thinks that Kelimbetov’s ascent to the presidential administration, the second-most powerful post in the hierarchy, signals a policy shift away from political reform toward addressing economic problems (Liter, January 25).

Nazarbayev pointed out that currently 80% of economically active population is employed in the private sector. Thus this latest round of administrative reform is accompanied by schemes to get small- and medium-sized businesses involved in fighting poverty and improving living standards, a task the inefficient government is ill-prepared to handle. During his recent trip to the mining town of Zhezkazgan in Qaraghandy region, Nazarbayev explicitly stated that entrepreneurs should create jobs for the unemployed and increase wages as part of the social partnership program. He also promised a 1% reduction in the value-added tax.

Coal producing Qaraghandy region is one of Kazakhstan’s hotbeds of social tension. On January 11, just before Nazarbayev’s visit, seven miners were killed by a methane gas explosion and another 23 were buried alive in one of the coal mines owned by Lakshmi Mittal’s Arcelor Mittal Temirtau company. It was the second devastating mining accident since September 2006, when 41 miners were killed by a methane gas blast. Another 21 miners were killed in a similar accident in this region in 2004. Independent trade unions accuse the government of putting foreign investors ahead of worker safety. After the latest explosion, the public mood was inflamed when tax authorities reported that Arcelor Mittal Temirtau had evaded Kazakh taxes (Turkistan, January 17).

However, far more serious damage for Kazakhstan’s economy comes from the rampant corruption and mismanagement of public funds plaguing government offices. Nazarbayev, buoyed by Astana’s promised chairmanship of the OSCE in 2010, recently called on his Nur Otan party to be in the forefront of the fight against corruption (see EDM, January 22).

Ironically, nearly all of the corrupt top-level government officials are Nur Otan members, which turns the declared “all-out war” on corruption and bribery in government offices into a farce. Speaking at a government session on January 26 Nazarbayev cited numerous cases of flagrant lawlessness and financial impropriety pervading ministerial cabinets and governors’ offices. He said the most depressing setback in the widely trumpeted campaign against corruption is that law-enforcement bodies are too lenient toward bribe-taking officials. In 2006, for example, 692 officials were brought to trial on corruption charges, 99 police officers, 29 high-ranking customs officials, 28 officials from the justice department, 21 court bailiffs, four prosecutors, and three judges, but none of them was put behind bars. Nazarbayev said that most people do not trust law-enforcement bodies and appeal to media outlets and non-government organizations for justice. Much of the abuse occurs when local officials distribute housing and land.

Prosecutor General Rashid Tusupbekov has complained that court officials often obstruct corruption-related cases and leave influential officials unpunished. Last year the financial police seized 63.3 billion tenge ($527 million) circulated by shadow economy. This sum exceeds the amount of illegal money confiscated in 2006 by 25%. Corruption and mismanagement also thrive in the government-controlled energy sector. According to financial police, Buzachi Oil illegally extracted 33,000 tons of oil worth of 1.5 billion tenge ($12.5 million). Another leading gas company, KazTransGaz, is charged with embezzling 533 million tenge ($4.4 million) from public funds. Corruption has penetrated other spheres as well. Investigations by financial police have revealed that many students sent abroad to get higher education within the Bolashak (Future) government program actually had poor academic records and did not deserve government grants (Express-K, January 25).

Kazakhstan faces the formidable task of eradicating the deep-rooted corruption. As long as financial crimes thrive, Kazakhstan’s OSCE chairmanship, as well as the ratification of the UN convention on corruption, remains unrealistic. Sadly, Kazakhstan’s campaign against corruption is prompted not by a genuine desire to stamp out crime, but largely by outside political factors.