Kazakhstan’s Rough Road To Wto Accession

Publication: Eurasia Daily Monitor Volume: 1 Issue: 78

The Secretary-General of the World Trade Organization, Supachai Panitchpakdi, made a landmark visit to Kazakhstan on August 25. Panitchpakdi hailed Kazakhstan’s efforts to join the WTO and positively evaluated the reforms carried out by the government, particularly in updating its foreign trade rules in accordance with the principles of the WTO. Statistics report that the export volume in the first half of the current year, increased by 40% over the corresponding period of last year. Over the same period, imports of goods and materials rose by 56%. But talks with the WTO chief revealed a number of hurdles blocking Kazakhstan’s entrance into the WTO, particularly agricultural reform (Kazakhstanskaya pravda, August 27).

Over the last decade the government has taken steps to increase agricultural efficiency through land privatization and financial support for farmers. But these half-hearted measures have failed to produce radical changes. Most small farmers and individual households cannot secure bank credits due to high interest rates. Without credit, it is difficult to increase production. Speaking one month ago in Petropavlovsk, North Kazakhstan, an expert from Kazakhstan’s Ministry of Agriculture, Akzhol Abdukalimov, noted that the country lags at least three years behind Russia in terms of processing its agricultural yield. He added that only 19 of Kazakhstan’s more than 600 agricultural processing enterprises were planning to introduce ISO international quality standards. Inefficient processing facilities and high production costs are among the main factors that make Kazakh agricultural produce uncompetitive even in domestic markets. Abdukalimov admitted that Kazakhstan still imports 88% of its condensed milk, 70% of its cooking oil, and 30% of its sausages. Last year only 16% of the meat and 13% of the milk produced in Kazakhstan were processed.

The poor state of agricultural production minimizes the overall effect of the much-trumpeted positive economic performance. The national Statistical Agency registered 9.1% GDP growth in the first half of this year. But the growth in agricultural sector was a paltry 5.2%, compared to a 9.4% increase in industrial output and 12% growth in transport and communications. Not surprisingly, these apparent statistical gains are actively used for propaganda purposes. Recently Prime Minister Danial Akhmetov boasted that the high economic achievements recorded in Kazakhstan for five consecutive years were characteristic of the states that hold leading positions in the world.

Many analysts are more cautious in forecasting the pace of the economy in coming years. They attribute the steady GDP growth to rising oil prices in the world market over last five years. Other trends are cause for alarm. The production of goods in Kazakhstan makes up only 41% of the economy, whereas the service sector holds 53.5%. In reality, the annual GDP growth rate is much slower in Kazakhstan than in neighboring Kyrgyzstan and Uzbekistan, where the economy is beginning to outpace the performance of Kazakhstan (Epoha, August 20).

The complex relations among the Central Asian states help explain the political value Astana sees in gaining WTO membership. Kazakhstan, praised by Washington as a leading market economy in Central Asia, had its pride wounded when Kyrgyzstan became the first in the region to join the World Trade Organization.

While Russia and Kazakhstan have declared their intention to synchronize WTO accession efforts within the Eurasian Economic Community, little substantive work has been done. Dozens of interstate and intergovernmental agreements aimed at regulating railway tariffs and removing customs barriers remain largely unimplemented. Nevertheless, on August 24 Prime Minister Akhmetov, in talks with CIS executive committee chairman Vladimir Rushailo, resurrected the subject of integration within the CIS and coordinated entry into WTO. Yet the Prime Minister’s optimism contrasts with reality. Many regional managers are from the older generation and offer stiff resistance to the introduction of ISO standards. They favor closer ties with Russia and harbor suspicion of international institutions like the WTO. The most widespread fear is that, if Kazakhstan becomes the member of the WTO, foreign goods will flood domestic markets, driving local industries to ruin.

However, there is a growing recognition that Kazakhstan needs WTO membership. Although no date has been set for Kazakhstan’s WTO accession, it is becoming clear that the country will join this organization. Earlier this year, the government launched an industrial innovation program to stimulate the introduction of high-tech methods into the production process. The official message is that Kazakhstan can no longer rely on exports of raw materials and should become an industrial state.