Kazakhstan

Politics:

• Analysis

  Kazakhstan politics: Quick View - Conscript jailed for life for mass murder

  Event

  On December 11th a military conscript accused of killing fellow border guards at a post near the Sino-Kazakh frontier was found guilty of mass murder and sentenced to life imprisonment.

  Analysis

  Vladislav Chelakh was convicted of the murder of 15 people (14 border guards and one national park ranger) who were found dead in May 2012 at the Arkankergen border guard post in south-east Kazakhstan, near the frontier with China. Mr Chelakh, aged 19 at the time of the incident, was found guilty on eight other charges, including desertion, damaging military property and theft of weapons. Mr Chelakh initially confessed to the murders and described his motive as revenge for bullying by fellow soldiers, which is common in Kazakhstan's conscripted armed forces. He later retracted his confession, saying that he had been coerced by investigators and that his unit had been attacked by unknown assailants. A senior member of the border services, Director Major-General Nurzhan Myrzaliyev, resigned over Mr Chelakh's case.

  There was widespread scepticism in Kazakhstan about Mr Chelakh's guilt, and various theories have been put forward to explain the incident, such as an extremist attack on the post, or that the killings were perpetrated as a means of discrediting the president, Nursultan Nazarbayev. However, the balance of evidence suggests that Mr Chelakh was guilty of the crime, which highlights the poor state of discipline in Kazakhstan's armed forces. Bullying is a serious problem in the military: in June, 11 conscripts deserted the Tersayryk unit in north-east Kazakhstan to protest against abuse by fellow soldiers, prompting the arrest of their commander. In the wake of Mr Chelakh's case, the authorities have not shown a serious willingness to tackle bullying within the armed forces. It therefore seems likely that bullying and discipline problems will remain endemic in the military for the foreseeable future, undermining the armed forces' combat capability.

  December 14, 2012

• Background

  Kazakhstan: Political forces at a glance

  Political outlook: Political forces at a glance

  Current government: Kazakhstan is a republic in which the president has extensive powers. The president appoints the prime minister, who presides over the Council of Ministers (the government). The incumbent president, Nursultan Nazarbayev, has been in power since 1989. Following a snap election on April 3rd 2011, Mr Nazarbayev was re-elected for a five-year term (previous legislative amendments reduced the presidential term to five years from seven). Mr Nazarbayev competed against three virtually unknown candidates and received 95.5% of the vote. Constitutional changes approved by parliament in 2007 removed all term limits on Mr Nazarbayev, paving the way for him to remain in office for life. A parliamentary election was brought forward from August to January 2012, bringing the number of parties in parliament to three.

  Majilis election, Jan 15th 2012
  	Share of vote (%)	Seats (no.)
  Nur Otan	81.0	83
  Ak Zhol	7.5	8
  Communist People's Party of Kazakhstan	7.2	7
  National Social Democratic Party	1.7	0
  Total incl others	100.0	98
  Source: Organisation for Security and Co-Operation in Europe, Election Observation Mission Final Report.

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  Next elections: The next parliamentary election is scheduled for 2017 and the next presidential election is scheduled for 2016.

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  June 22, 2012

• Structure

  Kazakhstan: Political structure

  Official name

  Republic of Kazakhstan

  Legal system

  On December 16th 1991 the Republic of Kazakhstan became the last of the former Soviet republics to declare its independence following the collapse of the Soviet Union. Parliament approved amendments to the 1995 constitution in 2007, ostensibly aimed at redistributing the balance of power away from the presidency in favour of the legislature

  National legislature

  Bicameral: 107-seat lower house (Majilis), 47-seat upper house (Senate)

  Electoral system

  Universal suffrage over the age of 18 for the presidential and Majilis elections; senators are partly elected by the regions and partly appointed by the president

  National elections

  April 2011 (presidential); January 2012 (Majilis); August 2011 (one-half of the Senate). Next elections: 2016 (presidential); 2017 (Majilis); 2014 (one-half of the Senate)

  Head of state

  The president, Nursultan Nazarbayev, first elected in December 1991 and re-elected in January 1999, December 2005 and April 2011

  National government

  Council of Ministers, headed by a prime minister, who is appointed by the president. In practice, Mr Nazarbayev exercises total control

  Main political parties

  Pro-presidential: Nur Otan (Light-Fatherland). Opposition: Communist Party of Kazakhstan (KPK); Ak Zhol (Bright Path); Republican People's Party of Kazakhstan (RNPK); Party of Patriots; Communist People's Party of Kazakhstan (KNPK). In October 2009 Azat (Freedom) and the National Social Democratic Party (OSDP) merged to form OSDP Azat (Freedom National Social Democratic Party)

  Prime minister: Serik Akhmetov

  Deputy prime ministers:

   Asset Isekeshev

   Erbil Orynbayev

   Kairat Kelimbetov

   Krymbek Kusherbayev

  Council of Ministers

  Agriculture: Asylzhan Mamytbetov

  Culture & information: Darkan Mynbai

  Defence: Adilbek Dzhaksybekov

  Economic development & trade: Yerbolat Dosayev

  Economic integration: Zhanar Aytzhanova

  Education & science: Bakytzhan Zhumagulov

  Finance: Bolat Shamishev

  Foreign affairs: Yerlan Idrisov

  Health: Salidat Kairbekova

  Internal affairs: Kalmukhanbet Kasymov

  Industry & new technologies: Asset Isekeshev

  Justice: Berik Imashev

  Labour & social protection: Serik Abdeniv

  Oil & gas: Sauat Mynbayev

  Transport & communications: Askar Zhumagaliyev

  Head of the presidential administration

  Karim Masimov

  Speakers of parliament

  Kayrat Mami (Senate); Nurlan Nigmatullin (Majilis)

  Central bank chairman

  Grigory Marchenko

  November 07, 2012

• Outlook

  Kazakhstan: Key developments

  Outlook for 2013-17

  • The authoritarian rule of the president, Nursultan Nazarbayev, is likely to continue, underpinned by relatively strong economic growth and the weakness of the opposition.
  • The authorities were unnerved by the unrest in Zhanaozen in December 2011. The violence damaged Kazakhstan's image as one of the more stable regimes in the region, but will not greatly threaten the Nazarbayev administration.
  • China will become an increasingly important energy partner as Kazakhstan diversifies its export routes. Nonetheless, ties with Russia will continue to develop, especially following the establishment of a customs union in 2010.
  • The budget deficit is estimated to have widened to 2.6% of GDP in 2012, owing to lower tax revenue inflows. The budget deficit will narrow gradually over the forecast period, as external economic conditions improve.
  • The sale of state assets under the "People's IPO" (initial public offering) scheme, which will begin in late 2012, will boost government revenue up until 2015, when the programme will end.
  • The tenge appreciated modestly against the US dollar in 2011. Appreciation pressure has abated in 2012; during the forecast period the tenge will be supported by rising oil production, high oil prices and energy investment.
  • A weak external economic environment will restrain economic growth in 2013, as has been the case in 2012. The coming on stream of the Kashagan oilfield will drive GDP growth in subsequent years of the forecast period.
  • The current account will record substantial surpluses in the forecast period. The trade surplus will be boosted by rising oil production, but the current-account surplus will be checked by high outflows of investment earnings.

  Review

  • The prime minister, Karim Masimov, resigned on September 24th and was replaced by his deputy, Serik Akhmetov. Mr Masimov has been appointed to the powerful position of head of the presidential administration.
  • In October the World Bank agreed to lend US$1.1bn to the government. The money will be used in the construction of a 300 km road from Kazakhstan's main financial hub, Almaty, to Khorgos, a city in north-east China.
  • Samruk Kazyna, the national welfare fund, confirmed in October that a 10% stake in KazTransOil, the country's pipeline operator, will be sold in early November. The authorities hope to raise US$200m from the sale.
  • The government cut its real GDP growth estimate for 2012 to 5.4% on October 23rd, from 5.8%, owing to concerns over the fall in global metals prices.

  November 07, 2012

Economy:

• Background

  Kazakhstan: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	16.7	Population growth	1.6
  GDP (US$ bn; market exchange rate)	183.1	Real GDP growth	5.6
  GDP (US$ bn; purchasing power parity)	217.2b	Real domestic demand growth	6.4
  GDP per head (US$; market exchange rate)	10,982	Inflation	10.1
  GDP per head (US$; purchasing power parity)	13,028b	Current-account balance (% of GDP)	0.5
  Exchange rate (av) Tenge:US$	147	FDI inflows (% of GDP)	9.6
  a Actual. b Economist Intelligence Unit estimates.

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  Background: Nursultan Nazarbayev has ruled Kazakhstan since 1989, before the country declared independence from the Soviet Union in 1991. He was elected president of independent Kazakhstan in December 1991, and a referendum in 1995 extended his term until December 2000. An early election in January 1999 returned him to office for a seven-year term; he was re-elected in December 2005 for another seven years. Following a snap election in April 2011, he was re-elected for a further five-year term (previous legislative amendments reduced the presidential term to five years).

  Political structure: Kazakhstan is a presidential republic where, despite the separation of powers in principle, the president wields almost total control over all three branches of government and dictates national policy priorities. Mr Nazarbayev has sidelined the bicameral parliament, and has kept the opposition under strict scrutiny. A parliamentary election was held in mid-January 2012 (brought forward from August) for the Majilis (the lower house of parliament). In addition to Nur Otan (Light-Fatherland), a pro-presidential vehicle, two other parties were allowed in to parliament, although both are tame pro-government organisations. Nonetheless, there is some evidence that the elites are increasingly dissatisfied with limited political influence.

  Policy issues: A sharp fall in oil prices in late 2008, which lasted until the second quarter of 2009, highlighted Kazakhstan's overdependence on oil. Improving the stability of the banking sector and countering the effects of another period of global economic uncertainty in 2012 will be the main lines of government policy in the short to medium term. Diversification away from hydrocarbons will be a longer-term priority. The economic slowdown in 2009 reinforced the government's interventionism, and the state will continue to promote favoured enterprises, obstructing the free functioning of market mechanisms.

  Taxation: A new tax code came into effect on January 1st 2009, which cut the rate of corporate tax from 30% to 20% and lowered the rate of value-added tax (VAT) from 13% to 12%. Personal income tax is levied at 10%. A social tax paid by employers is set at 11% of the employee's wage. A withholding tax is levied at a rate of 20% on payments made to non-residents, and VAT applies to import values, inclusive of customs and excise duties.

  Foreign trade: In 2011 goods exports reached US$89bn and imports amounted to US$41bn. Russia remains a leading source of imports and market for exports. This is partly the result of the difficulty in moving up the value-added ladder, which makes Kazakhstan unable to compete in Western markets. Instead, the bulk of Kazakh exports to the West consist of raw materials, particularly oil and metals.

  Major exports 2011	% of total	Major imports 2011	% of total
  Mineral products	77.8	Machinery & equipment	41.1
  Metals	13.2	Mineral products	13.8
  Chemicals	3.7	Chemicals	13.1
  Food products	2.1	Metals	9.9
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  China	18.5	Russia	42.8
  Italy	17.1	China	13.2
  Russia	8.5	Germany	5.5
  France	6.1	Italy	4.6

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  November 07, 2012

• Structure

  Kazakhstan: Economic structure

  Data and charts: Annual trends charts

  
  

  

  November 07, 2012

• Outlook

  Kazakhstan: Country outlook

  Kazakhstan: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The president, Nursultan Nazarbayev, has been in power since before the collapse of the Soviet Union, and Kazakhstan has never held free and fair elections. The political shift under way in the Middle East and North Africa (MENA) has raised the question of whether a similar process could take hold in the former Soviet Union. There are similarities between Kazakhstan and the MENA countries. They have been subject to long rule by autocratic leaders and suffer from entrenched corruption. Institutions have been corroded by the effects of oil-based development. However, the Kazakh economy is more dynamic, and the regime has made some improvements to living standards. Employment has grown steadily since 2010, reducing the risk of social unrest. Although economic growth over the next few years will be slower, it should remain sufficient for Mr Nazarbayev to maintain patronage networks. One intention behind the government's "People's IPO" (initial public offering) privatisations is to try to widen the support base of the regime by giving more people a stake in the country's wealth.

  ELECTION WATCH: A presidential election was held in April 2011. Mr Nazarbayev received 95.5% of the vote. Several of the main opposition parties decided not to field candidates, citing concerns over the electoral process. Since Kazakhstan gained independence, no election has been judged free or fair by credible international observers. Although Mr Nazarbayev enjoys some level of support, or at least acquiescence, among the electorate, administrative resources played an important role in his re-election for a further term in office. The next presidential election is due in 2016, and Mr Nazarbayev has indicated that he will stand. If he does, he is expected to win. A parliamentary election was held in January 2012 for the Majilis (the lower house). Mr Nazarbayev's party, Nur Otan (Light-Fatherland), won 81% of the vote. Two other groups passed the 7% threshold to obtain seats in parliament. However, their entrance into parliament will not bring any substantial changes in policymaking or implementation, as both are tame pro-government parties. The next parliamentary election is scheduled for 2017.

  INTERNATIONAL RELATIONS: China will become an increasingly important energy partner over the forecast period, as it wants to secure greater access to Central Asian hydrocarbons, and Kazakhstan wants to diversify its export routes. Nonetheless, links with Russia will remain strong. Kazakhstan established a customs union with Russia and Belarus in 2010, and this is gradually taking effect. From January 1st 2012 a common economic space was established, enabling the free flow of people, services and capital, in addition to goods. Membership of the World Trade Organisation (WTO) is being negotiated separately by the customs union members, and could take place in 2013 for Kazakhstan. In 2010 Kazakhstan became the first member of the Commonwealth of Independent States (CIS) to chair the Organisation for Security and Co-operation in Europe (OSCE), despite concerns over its poor record on political freedom and human rights. In 2013-17 the country will aim to raise its international profile further.

  POLICY TRENDS: The government will focus on expanding output of energy and minerals, and may push ahead with the construction of a fourth oil refinery. The authorities will encourage economic diversification. Implementation of this programme began in 2010, and will be backed by investment in infrastructure and training. The authorities hope to diversify the economy partly by attracting foreign investment into areas outside the natural resources sector. However, the success of this approach is likely to be hindered by contradictory policy imperatives, including the move since the crisis of 2008-09 towards increasing the government's role in the economy, and the policy of domestic privatisation in the form of the People's IPO, which began in November. This chimes with a return to favouring some industries over others and "picking winners", which could hinder private enterprise, fail to enthuse foreign investors and hamper efforts to reduce corruption.

  ECONOMIC GROWTH: Real GDP grew by 7.5% in 2011, according to the Statistics Agency of the Republic of Kazakhstan (SARK), compared with 7.3% in 2010. The services sector grew rapidly as domestic demand climbed. After a drought in 2010, agricultural output soared by more than one-quarter. Manufacturing was the best performer in industry. However, industrial and export expansion overall was held back by mining, where output stagnated, in part owing to industrial disputes.

  INFLATION: Average annual consumer price inflation rose to 8.3% in 2011 from 7.1% in 2010, breaching the upper limit of the NBK's inflation target band of 6-8%. Food price inflation had followed a disinflationary trend since September 2011, falling from a peak of 13.6% in August 2011. However, food prices started to rise in August 2012, and climbed by 4.7% year on year in October, ending the disinflationary trend. Food prices will continue to rise in the remainder of 2012, owing to the impact of a severe drought on the grain harvests of Kazakhstan and other grain producers in the CIS. Nonetheless, the weaker economic outlook at home and abroad will help to dampen inflationary pressures, and The Economist Intelligence Unit estimates annual average inflation of 5.2% in 2012. The impact of the poor grain harvest will continue to be felt in the initial months of 2013. The outlook for the global economy will begin to improve in 2013; combined with a jump in domestic oil production when Kashagan comes on stream, this will put upward pressure on prices. Such pressures should weaken modestly in the later part of the forecast period, in tandem with slowing inflation in the CIS and a modest deceleration in economic growth after a strong performance in 2013. A potential risk to the inflation forecast is a sustained fall in oil prices: such a deterioration in the terms of trade would dampen domestic demand growth and so reduce pressure on goods prices in the home market. It could also reduce the transport costs of domestic trade.

  EXCHANGE RATES: The tenge appreciated only modestly against the US dollar in 2011, in part as the US currency strengthened on international markets after April. In addition, the authorities remained wary of allowing the currency to appreciate too strongly, for fear of harming the competitiveness of non-oil companies. In mid-2012 the tenge came under modest depreciation pressure, triggered by a drop in global oil prices, which fell below US$100/b (although they have since rallied), and to strong downward pressure on the Russian rouble. In response, the governor of the National Bank of Kazakhstan (NBK, the central bank), Grigory Marchenko, felt obliged to emphasise that the tenge would not be devalued. We estimate an average exchange rate of Tenge149.1:US$1 in 2012.

  EXTERNAL SECTOR: According to the NBK, in 2011 the current-account surplus rocketed to US$14.1bn (equivalent to 7.7% of GDP). The large increase was driven by strong growth in the trade surplus, which rose to US$47.3bn, from US$28.7bn in 2010, as global metals and energy prices rose sharply. However, the expansion of the external surplus was kept in check by the simultaneous rapid growth of debits on the income account, where the shortfall widened to more than US$26bn. The largest part of these debits represents repatriated earnings on foreign investment in Kazakhstan, but payments to foreign workers were also substantial.

  December 01, 2012

• Forecast

  Kazakhstan: Country forecast summary

  Country forecast overview: Highlights

  • The president, Nursultan Nazarbayev, won a further term in office in April 2011. The Economist Intelligence Unit believes that he will remain in power throughout the forecast period. Factors that will sustain the continuity of his tenure include lower unemployment and sufficient economic growth to support traditional patronage networks. Nevertheless, if the economy were to falter, this would pose a risk to his rule.
  • The authorities have been unnerved by the events in Zhanaozen in December 2011, when a strike ended in the deaths of up to 16 protesters. Although the violence has damaged Kazakhstan's image as one of the more stable regimes in the region, the strikes and related political demonstrations have not posed a strong threat to Mr Nazarbayev's administration.
  • Relations with China will continue to improve, and China will become an increasingly important energy partner as Kazakhstan seeks to diversify its export routes. Russia will remain an important economic partner. The customs union formed with Russia and Belarus in January 2010 is being gradually deepened.
  • The state budget deficit is estimated to have widened to 2.6% of GDP in 2012 as weaker economic performance weighed on budget revenue. From 2013 onwards, an improvement in economic conditions will help to narrow the deficit to 0.4% of GDP by 2017.
  • We estimate real GDP growth in 2012 of 5.5%, slower than the 7.5% expansion in 2011. In 2013 the outlook for the external economic environment remains weak. Lower oil prices than in 2012 will also weigh on Kazakhstan's growth prospects. From 2014 growth will be driven by the coming on stream of the Kashagan offshore oilfield. We forecast average annual real GDP growth in 2013-17 of around 5.4%, which is much slower than in 2000-07.
  • The tenge is estimated to have appreciated only modestly in nominal terms against the US dollar in 2012. Through the forecast period the the currency will remain supported by high global oil prices and energy investment. Appreciation pressure will be stronger from 2014 onwards.
  • The current-account surplus is estimated at US$12.6bn in 2012. The current account will remain in surplus in 2013-17, owing to higher export revenue, reflecting modest increases in oil and gas production and high global energy prices. The trade surplus will be partly offset by a persistent services deficit as energy companies import foreign geological and technological expertise.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	5.5	5.1	6.7	5.6	4.9	4.7
  Consumer price inflation (av; %)	5.2	6.9	7.6	6.4	5.8	5.6
  Budget balance (% of GDP)	-2.6	-1.8	-1.3	-0.6	-0.4	-0.4
  Current-account balance (% of GDP)	6.5	4.2	5.7	5.9	5.3	4.1
  Short-term T-bill rate (year-end; %)	1.6	2.0	2.3	2.5	2.5	2.5
  Exchange rate Tenge:US$ (av)	148.99	149.88	147.99	146.22	144.01	141.90
  Exchange rate Tenge:€ (av)	191.27	189.23	185.35	180.95	181.45	178.47

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  November 07, 2012

View detailed map

Country Briefing

Land area

2,717,300 sq km

Population

16.2m (December 31st 2010)

Main towns

The capital was moved from Almaty to Astana (formerly Akmola) on December 10th 1997

Population in '000 (1999 census)

Almaty: 1,129

Karaganda: 437

Shymkent: 360

Astana: 313

Ust-Kamenogorsk: 311

Pavlodar: 301

Semipalatinsk: 270

Petropavlovsk: 204

Climate

Continental. Average temperature in Astana in winter: -18°C; in summer: 20°C. Average temperature in Almaty in winter: -8°C; in summer: 22°C

Languages

Kazakh is the state language. Russian is the most widely spoken language and is the de facto language of administration

Weights and measures

Metric system

Currency

Tenge. Average exchange rate in 2011: Tenge146.6:US$1

Fiscal year

Calendar year

Time

Six hours ahead of GMT; five hours ahead of GMT in western Kazakhstan

Public holidays

January 1st-2nd (New Year); March 8th (Women's Day); March 20th (Novruz); May 1st (Unification holiday); May 9th (Victory Day); August 30th (Constitution Day); October 25th (Republic Day), October 26th (Eid al-Adha), December 16th (Independence Day)

March 06, 2012