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KAZAKSTAN


 

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 29,749 24,205 22,400 60
         
GNI per capita
 US $ 1,780 1,510 1,350 119
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 323 - (26/11/07)

An upbeat Nazarbayev
Kazakhstan's economy is not threatened by a global credit crunch and a construction slowdown may put growth on a more sustainable path, President Nursultan Nazarbayev said on November 15.

"Our real estate sector has been overheating in the past few years. A square meter fetched a sky-high price, credit was cheap and everyone was buying and building," he said. "Prices rose to the point where if [a crisis] did not happen this year, it would have happened next year ... So this had a positive, sobering aspect," he told his country's Security Council.

He has grasped the central point that Marxists never did - capitalism thrives on crisis.
Kazakh banks that have borrowed heavily abroad have found it difficult to roll over debts since a global credit squeeze took hold in August, forcing them to rein in borrowing in the construction sector, slowing activity.

However, Nazarbayev said, "Overall, there is no danger to our economy, because we have built up reserves to deal with such an eventuality." Nazarbayev ordered his government to work more effectively to restrain inflation and meet budget targets. The government has promised $4 billion to its banks, particularly to those investing in construction, $1 billion of which must go to them by the end of this year.

The extraordinary success of the economy, based on double digit growth in oil revenues, gives its government the scope to reform.

Necessary reforms on the agenda
President Nursultan Nazarbayev again called for the reform of the country's defense and security structures. 

On November 15, he ordered the various heads of the defense and security bodies to prepare detailed proposals for restructuring their agencies, as part of the ongoing administrative reforms in the country. Berik Imashev, secretary of Kazakhstan's Security Council, explained, "The defense and security agencies have turned out to be on the sidelines of the ongoing administrative reform, apparently because some of them are directly subordinate to the president. In this connection, the president instructed the heads of defence and security structures to formulate their vision of ways of meeting the objectives set for their organizations and, accordingly, reform institutional structures of the agencies."

In parallel, amendments are also being prepared to Kazakhstan's law on state defence, intended to increase the level of mobilization readiness in the country. These reforms, however, suggest a rather superficial administrative-led approach to updating these important agencies. Until now, many of these organizations have escaped this process or minimized its impact. Earlier in 2007, after the appointment of Kazakhstan's first civilian defense minister, former prime minister Daniyal Akhmetov, the government promised movement toward a new era in defence reform. The most publicized change to date is new uniforms.

The new uniform will be more durable and certainly more expensive. Coupled with longer lasting, comfortable Turkish army boots, these changes will be welcomed by the ordinary soldier. 
One critical difference is that soldiers will be allowed to demobilize with it, meaning new recruits will need new uniforms. In theory, transferring more soldiers to a contract basis, making the army more attractive as a career choice, and engaging in reforms that reduce the hemorrhaging of personnel from the ranks in favor of civilian careers could offset this cost. 
However, Kazakhstan's armed forces face problems far deeper than their uniform design, particularly corruption. Investigations of military units have uncovered a plethora of economic crimes. Defence Minister Akhmetov has launched an unprecedented level of auditing to closely scrutinize military expenditure, placing himself at the forefront of efforts to address serious corruption inside the Ministry of Defence. In Regional Command South, 122 auditors carried out detailed inspections during the past few months. The Ministry has refused to release the results of this process.

Akhmetov believes these ills cannot be cured without taking more ruthless action against senior generals and colonels, who perceive themselves as exempt from any recrimination concerning their actions. Corruption at this level needs political will from the top, in order to tackle such widespread abuse of state funds. Akhmetov is airing the view that these individuals require something other than a "severe dressing down" (Novoye pokoleniye, October 26).

Previous audits have revealed an alarming insight into the breathtaking nature and scope of this corruption. Open scams, deception, and embezzlement are widespread. The most common modus operandi involves overestimating the cost of construction work and then pocketing the surplus funds. Another technique popular with senior ministry officials involves payments for bogus work.

Military personnel suffer as a direct result. Current estimates of homeless officers in Kazakhstan have around 5,000 waiting for apartments. In 2006 approximately 27% of the military budget was earmarked for building apartments. Investigations into the activities of Main Directorate for Logistical Support (MDLS) in 2006 found financial violations costing $64 million. Akhmetov intends to double the monthly wages for contract soldiers from January 2008; they currently are paid $300-320 per month. Such increases may be late in coming, given the scale of financial corruption in the ministry (Novoye pokoleniye, October 26).

It is naive in the extreme, to attempt any evaluation of Kazakhstan's military capabilities based on reported increases to its defence budget, since it ignores the corruption that gobbles up a significant portion of the official figures. Similarly, Kazakhstan's current reform priorities appear focused on "knees, elbows, and bottoms," while avoiding deeper issues, such as housing. Akhmetov is demonstrating a remarkable level of resolve to tackle existing corruption among some of Kazakhstan's generals and colonels, but heads have yet to roll.

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