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EXPLANATION: What post-trouble reforms is Kazakhstan proposing?

Kazakhstan’s leader has trumpeted ambitious economic reforms after the worst unrest in the country of 19 million people in three decades. The measures aim to reduce the state’s deep involvement in the economy, bridge the gap between the wealthy minority and the struggling majority – and eliminate triggers for further turbulence.

Experts say the announced changes look good on paper, but wonder if the new government of the energy-rich former Soviet state will implement them.

A look back at the causes of discontent and the reforms promised by the government:

WHAT IS KAZAKHSTAN ROILING?

On January 2, small protests erupted in an oil town in western Kazakhstan, where residents were unhappy with the sudden spike in prices for liquefied gas, which is widely used as automotive fuel.

Protests quickly spread across the vast country, reflecting wider public discontent with steadily declining incomes, deteriorating living conditions and authoritarian government. On January 5, protests turned violent, with armed groups storming government buildings and torching cars and buses in Kazakhstan’s largest city, Almaty.

To quell the violence, President Kassym-Jomart Tokaev sought help from a Russian-led security alliance, the Collective Security Treaty Organization. The bloc of six former Soviet states sent over 2,000 troops.

Authorities arrested thousands of people and more than 220, mostly civilians, were killed. About a week after the protests began, order has largely been restored.

WHY HAVE GAS PRICES BEEN SUCH A SOFT POINT?

Gasoline prices soared to 120 tenge ($0.27) a litre, a significant increase in the country where, by Tokayev’s own admission, half the population earns no more than 50,000 tenge ( $114) per month. The spike came as the government moved away from price controls as part of efforts to build a market economy.

Analysts say the increase came as a complete surprise.

“All these decisions were made without transparency. … People woke up to a new gasoline price that was 2.5 times higher,” said Kassymkhan Kapparov, an economist in Kazakhstan and founder of the Economist.Kz think tank.

The western region of Kazakhstan, where the protests began, also produces oil and gas. Residents were outraged that the price rose while their salaries remained stagnant, said Rustam Burnashev of the Kazakh-German University of Almaty, an expert on regional security in Central Asia.

“They were like, ‘Guys, we produce it, and now we (have to) buy it at astronomical prices? They agree that gas prices (everywhere) go up, but in that case (they say) that “our wages should too,” Burnashev said.

HOW DID KAZAKHSTAN GET IN THIS SITUATION?

Kazakhstan became independent when the Soviet Union collapsed in 1991. In the first years after independence, the country experienced rapid economic growth and increasing prosperity. For nearly three decades, it was dominated by Nursultan Nazarbayev, its last Communist Party leader at the time of independence.

The country has benefited from its natural resources, especially oil. Foreign investors were welcome, money flowed into state coffers, and social spending helped keep abject poverty low. But key sectors such as mining, telecommunications and banking were dominated by state-owned companies and a few figures linked to Nazarbayev, either politically or through family ties.

Over time, Nazarbayev increasingly monopolized the country’s politics, suppressing opposition and introducing a highly personalized form of government as Elbasy, the nation’s leader. Nazarbayev resigned in 2019, but until recently remained head of the ruling Nur Otan party and chairman of the Security Council. Tokayev, the speaker of the upper house of parliament, was named president and renamed the capital of Astana to Nur-Sultan, in honor of his predecessor.

WHAT ARE THE ISSUES BEHIND THE PUBLIC’S DISSATISFIED?

The discontent of ordinary people goes far beyond gas prices. People are aware of the country’s stark level of inequality and the immense economic privilege of those around Nazarbayev, where 162 people control more than half of the country’s wealth.

Meanwhile, the average monthly salary is about 243,000 tenge, or $558, according to government statistics, although the cost of living is relatively low compared to Western countries.

A recent report by the Organized Crime and Corruption Reporting Project found that a charitable foundation created by Nazarbayev held assets worth $7.8 billion, including stakes in banks, shopping malls, logistics companies and food production.

British authorities have issued ‘unexplained wealth orders’ to Nazarbayev’s daughter and grandson demanding they reveal where they obtained funds for three London properties worth more than £80million. A judge threw out the orders.

WHAT APPROACH IS THE CURRENT PRESIDENT USING?

Tokayev publicly acknowledged Kazakhstan’s endemic inequality and initially tried to quell the protests with a few concessions: he capped gasoline prices for 180 days, appointed a new cabinet, and ousted Nazarbayev from the National Security Council.

The president outlined future reforms to “reset” the economy, remarking, “We need to set new ‘rules of the game’ – fairer, more transparent and fairer.”

Among the ambitious measures he touted are reducing government involvement and the influence of oligarchs on business; reforming the Samruk-Kazyna sovereign wealth fund, which owns large companies; and ensuring fair competition, a better investment climate and the integrity of private property, in part by overhauling the country’s judicial system.

WHAT CHANCES OF SUCCESS DO THE PROPOSED REFORMS HAVE?

Kapparov, the economist, said significant questions remain about the Samruk-Kazyna fund and its companies.

“Will there be privatization? At what scale? How soon?” He asked. “Will it be open to everyone, including foreign investors? These issues were not mentioned.

The power and influence of the inner circle raise serious obstacles to any far-reaching reforms that would be needed to privatize state-owned enterprises and allow outside interests to compete in key sectors, said the former head of World Bank Simon Commander, now managing partner of emerging markets advisory firm Altura. The partners. Tokayev’s speech, while interesting, is “certainly more radical than is likely possible. … Let’s hope he turns out to be a real reformer.”

But he added: “I am very skeptical. Their economic and political structure encircles them.”

WHAT ABOUT POLITICAL REFORMS?

During his years in power, Tokayev also promised limited political reforms, including local elections.

But the crackdown on protesters suggests authorities have no intention of allowing genuine political opposition, and without political reform, economic reform is hard to imagine.

Hailing the discontent with more than 12,000 arrests “is a pretty good measure of how the regime thinks it should respond,” Commander said.

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McHugh reported from Frankfurt, Germany.


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