The U.S.-Kazakhstan Transitioning Relationship: Supporting a Rising Middle Income Power
November 2, 2015
Following talks in Vienna, Secretary of State John Kerry flew to Central Asia this weekend to visit all five former Soviet republics—a first for an American secretary of state. Secretary Kerry’s trip is a reminder of the continued ties that the United States has in the region, and the potential that exists especially with Kazakhstan—the largest of the five countries. As the Soviet Union collapsed in 1991, Kazakhstan was one of 15 former Soviet republics that declared independence. In the 25 years since then, Kazakhstan has seen steady economic growth and raised per capita income to approximately $13,000 per year. As Kazakhstan’s second largest trading partner behind Russia, the United States should view Kazakhstan as an important economic and strategic partner in Central Asia, and work to ensure that Kazakhstan follows the path of other middle income countries such as South Korea.
In order to encourage a closer economic relationship, the United States should actively support Kazakhstan’s on-going engagement with the OECD, with the ultimate goal of Kazakhstan joining the OECD. Furthermore, Kazakhstan should commit to: a) improving transparency; b) increasing accountability; and c) cutting corruption. I’ve discussed the strong ties between good governance and economic growth especially when coupled with citizen participation. These three areas will help secure OECD membership for Kazakhstan in the future, moving the country toward better governance, and its relationship with the United States.
While Kazakhstan has made significant progress in a number of areas, consistent effort is required to address governance and human rights issues. This is not the first time that the U.S. government has worked with a rising middle income power with a troubling human rights and governance record. This was true in the case of South Korea when U.S. foreign assistance programs ended in 1980. At that time, South Korea was a growing economic power, regional security partner of the United States, and deeply authoritarian government. Yet for strategic and economic reasons, the United States remained engaged with South Korea: in the place of foreign aid programs, the two countries constructed a series of binational institutions (i.e. the U.S.-Korea Foundation) that sought to deepen ties. These ties laid the ground work for the close relationship that remained as South Korea transitioned to a multi-party democracy in the late 1980s.
In the case of Kazakhstan, the United States faces a similar situation, and though there are challenges, the opportunity is immense. Kazakhstan wants to diversify away from simply a choice between its traditional partner—Russia—or its encroaching neighbor—China. There are a number of areas where the United States can play a role in supporting Kazakhstan’s transition. First, the United States should identify a small amount of foreign assistance resources to assist Kazakhstan’s implementation of the Bali Trade Facilitation Agreement . Kazakhstan will ratify membership in the WTO in December immediately before the WTO ministerial meeting in Kenya where countries are to submit their programs of action for the Trade Facilitation Agreement. This is important not only for U.S.-Kazakhstan relations, but it will also help Kazakhstan realize its ambitions to be a regional trade hub and further regional trade integration—Central Asia is one of the least integrated regions in the world.
Second, the two nations should work to create a binational foundation which would promote U.S.-Kazakhstani cooperation in trade, investment, and good governance. The United States should use remaining foreign assistance dollars in Kazakhstan to seed such an organization, seeking matching funds from the Government of Kazakhstan, as well as engaging the private sector. The fund would be established with an endowment or it might be set up as a sinking fund to be spent down. Such a binational foundation could also work to improve governance by supporting independent civil society, independent media, support other transparency initiatives, and deepen trade and people-to-people ties.
The most recent Doing Business Indicators for Kazakhstan reflect room for improvement in transparency for the business environment, receiving six out of a scale of zero to nine on the corporate transparency index. Developing approaches to citizen-based service delivery by encouraging citizen participation in policy making, monitoring, and evaluation should frame Kazakhstan’s approach to increasing transparency. With 43 percent of Kazakhstanis living in rural areas and four out of 16 oblasts providing 47 percent of Kazakhstan’s GDP, simplifying the strategic planning process and increasing citizens’ access to decision making would foster greater transparency.
Kazakhstan has taken some important steps towards improving accountability, most notably a comprehensive tax system reform in 2010, and is currently ranked 17th globally for its tax system. However, the Government of Kazakhstan still has significant work to do in terms of decentralization; clarifying levels of government and roles and responsibilities of cabinet members, ministries, and subnational organizations is critical.
Finally, Kazakhstan needs to confront grand corruption. Corruption is a tax on business, as we have written about it here, and corruption endangers the legitimacy of any government. As Kazakhstan begins to consider what a post Nazarbayev government looks like, a transition’s odds of success will be higher if corruption is confronted now. For all its progress on the Doing Business Indicators, Transparency International still ranks Kazakhstan 126th out of 177 globally in terms of corruption , citing the highest levels in judiciary, police, customs, property rights, land registration, and construction projects. Many developing countries have taken steps to reduce corruption and Kazakhstan should follow that well-worn path.
Some key practices Kazakhstan might use to reinforce its dedication to good governance include:
- Kazakhstan must remain committed to the governance reforms outlined in President Nazarbayev’s reform program—the 100 Steps. Though the country is widely seen as a stable and safe destination for investment, over time there is the possibility that as incomes continue to increase citizens will demand greater accountability and transparency. This would be a laudable outcome; if Kazakhstan does not manage this properly it could lead to instability, and therefore the government must remain committed to governance reforms that will address their citizens’ future demands.
- Kazakhstan ranks poorly on strength of government protection for minority investors in the Doing Business Indicators. Kazakhstan can facilitate a better investment climate through targeting the roots of these low scores through well-defined practices. Clearly delineating these processes and responsibilities for civil servants will increase accountability and reduce opportunities for corruption.
- Kazakhstan should undertake an OECD integrity review for its ministerial departments. Once roles and processes are better defined, undertaking this review would reaffirm Kazakhstan’s commitment to OECD standards for its member states. It should seek participation in OECD’s “Enhanced Engagement” program, which acts as a transitional step for its eventual accession process .
Kazakhstan has demonstrated impressive progress, and has defied many who believed that the country would collapse quickly following independence from the Soviet Union. Its next steps will require even greater political will. Increasing accountability and fighting corruption will be difficult tasks. Unlike other partners, the United States offers a genuine partnership built on shared interests and mutual benefits. The United States and other partners to Kazakhstan should remain engaged because we have a willing and capable partner in Kazakhstan. If the United States does not engage fully, then others will.
Daniel F. Runde holds the Schreyer Chair in Global Analysis and directs the Project on Prosperity and Development at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Conor Savoy is deputy director and fellow with the Project on U.S. Leadership in Development and the Project on Prosperity and Development at CSIS.
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