ON THE POLITICAL AND ECONOMIC SITUATION
IN KAZAKHSTAN AFTER THE PRESIDENTIAL ELECTIONS
AND BEFORE THE PARLIAMENTARY ELECTIONS
Report by Peter Svoik, Co-Chair, "Azamat," at Hearings Before
the Commission on Security and Cooperation in Europe (Helskinki Commission)
United States Congress, Washington, D.C., May 6, 1999
The early elections of the President held in January 1999 were criticized in the U.S. and the OSCE as a departure from democratic principles.
In April the Parliament of Kazakhstan approved a new law on elections, drafted by the Administration. The law preserves virtually unchanged the main methods which are used by the executive power to attain the results it needs for itself. Specifically:
1. The exclusion from the ballot "undesirable" candidates who have been prosecuted in the past for insignificant infractions. Such prosecutions are conducted in violation of the current Constitution and use as the basis the no longer valid Administrative Code of the Kazakh SSR, without due process, without a record of the proceedings, and without an opportunity for counsel or witnesses.
2. Excessively high fees for the registration of candidates -- more than a thousand dollars, which is significantly more than the annual income of the average citizen. The only people who have this kind of money to spend in Kazakhstan are the ones controlled by or connected to the government.
3. The dependence of the electoral commissions on the local government. The law gives the right to local government representatives to select the members of electoral commissions. The local government appoints people depending on them administratively or financially as directors of the electoral commissions, and selects individuals in a similar state of dependence on the directors as commission members.
4. The absence of independent control over the activities of the electoral commissions. The law support external observers only in letter; no provisions for practical provisions to control the electoral procedure are included.
Without condoning this government policy, it is worth noting that the government is pressured to do this by the sharp downturn in the economic situation. It is natural that, experiencing serious and ever increasing difficulties in the collection of taxes, the payment of debts on its obligations, and the prevention of inflation, the government fears a complete loss of control in the country in the event that, in addition to severe economic problems, it also has to contend with a radically opposed parliament.
The official reasons for the economic downturn in Kazakhstan attribute it entirely to the world financial crisis, the fall in prices of natural resources, and the devaluation of the ruble in Russia. However, these factors only exacerbated severe internal problems that had accumulated over a ten-year period of market reform. The essence of these problems is that in its present condition the Kazakh economy is neither a market economy, nor is it stable.
There are three major economic distortions leading Kazakhstan to a financial collapse.
1. The general manufacturing capabilities of the country are insufficient. The gross domestic product (GDP) reached only about 20 million dollars (less than half of what it was in the Soviet time), which is grossly insufficient for such a large country. The main part of this product is expended on consumption; investment in development is practically non-existent.
Such economic potential, speaking financially, does not make it possible to support an adequate government structure, to protect the borders, or to maintain transportation and communication systems.
2. Budget deficit. Tax collection is extremely low (about 12 -14 percent of GDP), while the cost is inordinately high to maintain the current bureaucratic apparatus, the law enforcement and the military, and fiscal agencies, significantly exceeding all social spending and other budgetary items. In all, budgetary expenditures (after accounting for hidden deficits in the budgets of local governments) tend to be twice the amount of tax collections.
3. The continued deficit in the country’s balance of payments. Throughout all recent years, Kazakhstan has been importing consumer goods at a 1.3 to 1.5 billion dollars more than its exports of oil, metals and other resources.
This imbalance has been compensated by a hasty sell-of of property rights in major natural resource deposits, export complexes, energy and communications enterprises, and by the receipt of foreign credits.
With such imbalances, the Kazakh economy has been turned into a powder keg for several years now, and the fuse underneath it was ignited as early as the beginning of last year, when three factors occurred simultaneously: a decline in the receipt of dollars from privatization activities, a fall in receipts from exports, and the due dates of various loans extended on favorable conditions.
The government acknowledged the severity of the situation only recently. This can be explained by the fact that the government persists in its inability to look economic realities in the eye, and by the fact that in the autumn and winter the government was completely occupied by the early reelection of the President.
If one asks, "Why did this disproportion come to be?", then the true answer is that all the market reforms in Kazakshtan were turned into efforts at radically transforming the economy alone, without affecting the political system.
The undemocratic electoral legislation is only the visible tip of the iceberg. In Kazakhstan there are not many political institutions, in the absence of which it is practically impossible to speak of a modern market economy. In particular, the legal system is not capable of fighting corruption and is unable to guarantee the right of private property, fair competition and protection against monopoly. Parliament plays no independent role and is controlled entirely by the executive branch. Political parties and labor unions operate outside the system and do not play a serious role. The instruments of mass media have no opportunity to adequately reflect what is going on.
The reality is such that Kazakhstan has entered into a period of severe deficit in financial and other resources, along with obviously insufficient social stability and the sort of political system that does not develop, but rather stifles the remaining economic potential.
The upcoming parliamentary elections may be called future-forming inasmuch as, after them, the President is to be reelected only after seven years and the parliament after five to six years. However, it could happen that the Kazakh stability faults as soon as in two or three years.
If, in the parliamentary elections, the government simply reelects itself (note that the new law was drafted exactly that), the political lid on the Kazakh pressure cooker of economic, social and international problems will be shut for a long time. Possibly, the pressure cooker will not stand the overheating, the top will blow off, and we will quickly arrive in a state of general instability. More likely, given the Kazakhstan history, the decline will continue under a heavy lid, with a loss of the most [politically] active part of the general public, and a decline in economic and cultural potential, including a weakening of the government. The finale in both of these scenarios is the same: Kazakhstan will once and for all become a problem territory, a polygon of drug trafficking, terrorism and extremism, a wasteland for the proliferation of Chinese hegemony and Islamic fundamentalism, and a stimulant for activation of the nationalistic forces in Russia.
What can be done to turn this tide of events? It is no illusion that the problem can be solved by relatively simple methods, namely, through the conduct of truly fair elections.
The partial, trumped-up, and nonsystematic democratization of the current government is even more dangerous than the existing authoritarianism. Thus, we may surely predict a negative result of the anticipated transition from appointment to elections of lower level local representatives in the year 2000, which the government is planning after the holding of "manageable" elections in the new Parliament. This will only add to the conflict and opposition in a system of power lacking realistic opportunities for the solution of local problems.
All the same, one must account for the obvious insufficiency of resources to support the democratic reform in the existing political system. The government is in obvious need of public help, but it does not want that help and fears it. The opportunities for mass media, NGOs, political parties, and individual opposition leaders, are also obviously inadequate. The political forces in Kazakhstan are weak and polarized, and dialog between them and the administration is non-existent. The main problem of the government is the absence of public trust. On the other hand, the general public today also unable to manifest its will.
Kazakhstan today is a country that is rapidly loosing economic, cultural, and general humanitarian potential, has small population living on a vast Eurasian territory, which is a crossroads of various geopolitical, economic, ideological, and religious interests of many leading countries of the world. The only chance to keep Kazakhstan under control is to join all internal political and public resources in implementing a political liberalization and economic stabilization plan. Such a plan needs to be developed in advance, have a scientific basis, enough financing and organizational resources for its implementation, and be understood and supported by the general public.
This can only be accomplished if supported by other countries, namely, Kazakhstan’s allies, which can draw in outside resources, and the guarantees and monitoring by international organizations.
We believe that the United States has the key role in this process. We also believe that this is not only about the responsibility for the future of our country (which in many ways is considered an important player), but also about the responsibility for the unsuccessful past reforms.
During the first years of country’s independence, the Kazakh president’s advisors included representatives of many different countries and several countries, one after another, were used as ‘models’ for Kazakhstan’s development. Still, the United States has been clearly the leader in this respect from the very start and in recent years has been above the competition all together. All important economic and social reforms have been implemented based on direct recommendations or in consultation with the World Bank and the International Monetary Fund (IMF) and have been financed by these organizations.
The government of Kazakhstan was repeatedly praised for its leadership in radical economic reforms. We were the first to abandon government subsidies in the utilities sector, introduce medical insurance, and implement a social security reform. Finally, it is the recommendations of the World Bank and the IMF that form the basis for our country’s monetary policy.
Little praise, however, can be given to the results of the reforms. They are a failure organizationally; their economic effect is negative; and, most importantly, they resulted in undermining our general public’s trust in the market economy and in the good faith of our overseas partners.
It should be noted that these results were predicted by some, because it is impossible to implement modern free market mechanisms in an archaic political system environment. When the World Bank demonstrates an amazing persistence in promoting its economic reforms and, at the same time, displays complete indifference to the formation of the independent judiciary, a multi-partisan political system, and the right of the Parliament to control the executive branch, it should be held responsible for the spread of corruption that has become the leading problem in Kazakhstan today.
In conclusion, we would like to address the most important things that may take the country out of its current crisis.
President Nazarbayev today enjoys unchallenged power in the country. He has sufficient authority to start and implement a systematic democratization process. However, such process needs to be backed up by clear goals, resources, guarantees, and, most importantly, the unshakable political will of our overseas partners.
Currently everyone’s focus is on the upcoming parliamentary elections. The law that has been recently adopted does not help make the elections honest and competitive, but the President has all that’s necessary to prevent a negative outcome, and he needs all the support he can get.
In addition, we believe that a speedy government restructuring is needed, where the leading representatives of major Kazakh political movements are included in the government to restore the general pubic and the business community trust in our political system. The new government must immediately begin consulting international organizations on a joint action plan that would not only ensure the economic stabilization, but also improve on the current legal, regulatory, and parliamentary systems, as well as help form local governments that enjoy free elections and real authority.