Kazakhstan Has High Hopes for Agricultural Reform

With an eye on accession to the World Trade Organization, officials in Kazakhstan are implementing an ambitious rural reform program in 2004. Although touted by President Nursultan Nazarbayev as the largest investment infusion ever made in the country's agricultural sector, some analysts wonder whether the initiative will be able to reverse years of rural decline.

Kazakhstan's economy is booming, but the country's prosperity is closely linked to the development of the oil-and-gas sector. Other economic spheres in Kazakhstan, especially agriculture, are hampered by inefficiency. Kazakhstan's sprawling countryside is home to 43 percent of the country's population, and roughly 33 percent of rural residents live in poverty.

About one in five Kazakhstanis work in the agricultural sector, where production rates have declined by 10 percent since the 1991 Soviet collapse. Though Kazakhstan ranks as the world's sixth largest grain producer, its competitiveness in other food categories is less noticeable: imports dominate the home market, particularly for such staples as butter and meat.

Outside observers have expressed concern that Kazakhstan is prone to so-called "Dutch disease," in which heavy foreign investment in the energy sector causes the appreciation of the country's currency. That, in turn, can severely damage a country's manufacturing and agricultural sectors by making its products more expensive in potential export markets. If Kazakhstan does not take steps to make the agricultural sector more efficient, the country could be hit by economic stagnation and rural discontent, some experts believe.

Officials in Astana are aware of the dangers, and are anxious to implement reforms in the near term. Their haste is driven in part by the realization that if Kazakhstan gains membership in the World Trade Organization in 2006, as planned, fixing the countryside's problems will be immeasurably more difficult. Once a WTO member, Kazakhstan would have less recourse to trade barriers and subsidies as a means to protect non-competitive domestic markets.

Last August, Kazakhstani President Nursultan Nazarbayev began pushing for the rural overhaul. In a major policy address, he called on agricultural areas to act as the "locomotive" for the country's drive toward WTO membership. He later urged farmers to be more innovative. "Every farmer . . . should think of it now. You should ask;