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Problems Seen Remaining in Kazakhstan Despite New Government

Almaty, Kazakhstan’s recently reopened city hall building stood as a harrowing symbol of the January 2022 events.
Almaty, Kazakhstan’s recently reopened city hall building stood as a harrowing symbol of the January 2022 events.

Kazakhstan has a new government with a big mandate from President Kassym-Jomart Tokayev – to clean up the fallout from years of corruption while delivering a huge boost in the size of the economy over the next five years.

Tokayev accepted the resignation of Prime Minister Alikhan Smailov and his government on Feb. 5 in what was seen as a bid to consolidate his power two years after deadly unrest rocked the country.

The next day, Tokayev replaced Smailov with his 43-year-old chief of staff, Olzhas Bektenov, who had previously served as the country’s corruption czar.

Smailov became prime minister in January 2022 after an earlier government was dismissed for increasing fuel prices, a move that sparked protests that turned violent and resulted in at least 238 deaths.

Smailov was considered a compromise figure to ease the transition from a political setup in which long-time ruler Nursultan Nazarbayev still exercised enormous powers through his chairmanship of the Security Council — a body that had the power to overrule presidential decisions — despite having resigned the presidency in 2019.

Tokayev replaced Nazarbayev as chairman of the Security Council days before Smailov’s appointment.

Bektenov is seen as having been picked because of his loyalty to Tokayev, although he has no experience holding executive posts in the government; his anticorruption position was not part of the government.

Moreover, although Tokayev has highlighted Bektenov’s “vast knowledge in the economic sphere and other spheres” and “great organizational skills,” others expressed doubts.

“He’s loyal to the president and enjoys his trust,” Shalkar Nurseitov, director of the Almaty-based Center for Policy Solutions think tank, told VOA.

With an eye on his own legacy, Tokayev is placing his confidence in Bektenov to deliver an economic revolution that will boost the size of the economy to $450 billion by 2029, when he is due to leave office.

For this to happen, the government calculates that the economy would have to grow, considering exchange rate changes and other factors, by at least 6% annually over the coming years – an ambitious target that the former government was clearly not going to deliver, experts say. The country’s gross domestic product grew by 5.1% last year.

The combined image shows artist Yerbosyn Meldibekov’s installation depicting the fall of Nursultan Nazarbayev’s statue in Taldykorgan during the January 2022 events.
The combined image shows artist Yerbosyn Meldibekov’s installation depicting the fall of Nursultan Nazarbayev’s statue in Taldykorgan during the January 2022 events.

After Smailov’s government resigned, the president leveled a host of criticisms at the former Cabinet, complaining about the low efficiency of the budget, tax policies, and government spending of public funds. He also accused it of focusing too much on immediate problems rather than pursuing long-term strategies.

“The efficiency of the budget and tax policy should be radically improved. … This means the government still faces an objective of efficiently managing budget and making quality forecasts for budget parameters,” Tokayev said.

“Another systemic problem is the way the budget is spent, because it doesn’t promote economic activity, but money is spent on solving immediate problems, while strategic goals take a back seat,” he said while chairing the new government’s meeting Feb. 7.

Retreat from tax reform proposal

Bektenov’s government has already retreated from one key proposal of the old Cabinet, to raise Kazakhstan's value added tax to reduce the budget deficit, estimated at $6.2 billion in 2023. That proposal would have raised the rate from 12% to 16% but without eliminating provisions that allow large companies to claim it back.

Kassymkhan Kapparov, the founder of the economic analysis website, told VOA that the VAT structure benefits mostly large corporations, such as oil giants Chevron and Shell, because as foreign investors or exporters they can claim it back.

Tokayev criticized the plan to boost the tax because of opposition from business and called for “reforming” it. Bektenov subsequently said the plan would be abandoned, although he did not say what would replace it and he has not said how the government will meet its ambitious growth target.

“Tokayev’s criticism of VAT sends a message to them [Chevron and other exporters and investors] that this loophole would be closed or their contracts should be renegotiated,” Kapparov said, noting there had been discussions about replacing it with a sales tax.

“Sales tax is more transparent than VAT and it works in the U.S.,” he said.

Bektenov’s performance in his former role as anti-corruption czar, when he was charged with recouping assets illegally appropriated during Nazarbayev’s rule, evidently pleased his boss, who said efforts to claw back illicit assets would continue. As of late last year, the state had recouped some $2.2 billion, including $600 million from abroad, according to government figures.

However, skeptics are not convinced by the Tokayev’s anticorruption drive, which officials tout as part of their efforts to rid Kazakhstan of the legacy of Nazarbayev. The former president fell into disgrace after the violent unrest in 2022, in which some of his associates are believed to have been complicit.

Nurseitov, from the Center for Policy Solutions, pointed to a lack of transparency in the asset return program, with neither the public nor parliament provided with specifics about what the assets are, who appropriated them, and whether those who engaged in wrongdoing faced any repercussions.

“The main issue is where these assets are being returned to. It looks more like the redistribution of property rather than return of assets to the state coffers because there is no transparency or any information,” he said.

“Tokayev now has to solve all the problems in the system and while attempting to clean all that mess up, placing responsibility on the old regime,” Kapparov said. “Everything that was stolen during Nazarbayev’s rule he would try to bring to light to show that he is different from his predecessor and cares about the state and people.”

With the change of government, Tokayev is trying to emphasize the difference between the old regime and what he bills as his New Kazakhstan.

Part of his strategy is to tackle some of the economic problems that sparked the socioeconomic grievances that brought the public out onto the streets in 2022.

Although he has instituted some political reforms over the last two years, analysts say he is not rooting out the authoritarianism that is Nazarbayev’s main legacy.

“We don’t see the main fight against the most important legacy – authoritarianism. On the contrary, the current authorities aim to benefit from this system,” Nurseitov said, “Only the frontman and his entourage have changed.”