Liberalizing Kazakhstan’s Economy Must Not Become Uncontrolled Privatization, Expert Warns

Last week, President Kassym-Jomart Tokayev signed a decree on reducing the state’s participation in the economy, aiming to help develop competition and private business. This could be a significant boost to the economy, financial analyst Rassul Rysmambetov, an Almaty-based expert in distressed assets and Director of the Financial Freedom Public Foundation, told The Times of Central Asia, though everything will depend on how the decree is implemented. Firstly, the decree envisages creating a National Office for Privatization under the Agency for the Protection and Promotion of Competition. This office is to develop criteria for state assets subject to privatization and create a list of them. In addition, measures are provided to increase the autonomy, quality, and independence of corporate governance at Samruk-Kazyna, the National Welfare Fund, and its subsidiaries. “The government must establish a specific list of large entities that will offer major stakes in the next two years in IPOs,” President Tokayev explained. According to Tokayev, the quasi-public sector – bloated and often ridden with debt – needs serious reform. “We need to put an end to the question of where state participation should continue and where competition can be developed. The largest share of the state in the economy is represented by the group of companies held by the Samruk-Kazyna fund, so that is where this work must start. New, systemic measures are required to fundamentally rehabilitate the fund,” the president stated. A separate section of the decree presents measures aimed at protecting the rights and legitimate interests of business, including decriminalizing offenses related to economic activity and coordinating with prosecutors on prohibitive and restrictive measures initiated by government agencies. This is not the first time Kazakhstan has tried to liberalize its economy – it has even privatized social institutions, such as hospitals, schools, and creative centers for children before – but previous attempts yielded no tangible successes. “We need to continue to work to improve the quality of services, consistently reduce state participation and eliminate excessive regulation and restrictions. This applies to all sectors of the economy,” Tokayev stressed. “Uncontrolled monopolies, unequal access to resources and unfair trade practices must be eliminated at the root. A pillar of economic liberalization will be effective privatization. There have been so many privatization plans, but every time we make the same mistakes.” Rysmambetov believes that professionals should take the lead. “Liberalizing the economy is a process. By no means can it be limited to a single decree – it is a strategic course. I see here dozens, if not hundreds of by-laws, industry reference documents and possibly new laws and codes. I'm afraid that parliament will prove unable to keep up with the pace at which these reforms should be carried out,” he stated. According to Rysmambetov, Samruk-Kazyna could be dissolved tomorrow, but the holding has taken on a lot of debt for its subsidiaries, meaning that in the near term its assets can only be partially privatized. In general, each Samruk-Kazyna company has a related supervising ministry, so, to...

Cleaning up the Samruk-Kazyna National Welfare Fund

In his efforts to transition Kazakhstan from previous president Nazarbayev’s era, President Kassym-Jomart Tokayev has centered his policy agenda on strengthening justice and eradicating kleptocracy in Kazakhstan. His presidential platform, known as “Just and Fair Kazakhstan,” remains a focal point in his addresses, which often emphasize dismantling systems that have facilitated kleptocracy in the country. Tokayev's anti-corruption efforts aim to enhance transparency and combat corruption through retrieving stolen assets, implementing digital monitoring of public expenditures, mandating financial disclosures from officials, and reallocating confiscated funds to infrastructure projects. In its 2023 consultations, the IMF recognized these positive steps. These initiatives, combined with a notable increase in the public’s trust in the anti-corruption agency from 30% in 2022 to 43% in 2023, reflect tangible progress in Kazakhstan's fight against corruption. A 2024 report by Transparency International asserts that “President Tokayev has initiated a series of anti-corruption reforms, and Kazakhstan is currently in the process of implementing recommendations made by the Council of Europe’s Group of States against Corruption (GRECO) in its 2022 evaluation report.” Critics claim, however, that the country’s administration has not gone far enough in combatting corruption and that the government still lacks transparency when it comes to the management of state assets. Recently, Eurasianet commented that “Kazakhstan shows improvement on graft, but [is] still struggling.” Radio Free Europe has further reported that high-profile Kazakhs were escaping prosecution. Tokayev has been visibly distraught with the government’s progress to date on tackling corruption and has even made major leadership changes, including in the office of the General Prosecutor in 2023. Also in 2023, the former Minister of Justice came under investigation for corruption. In February 2024, the Cabinet resigned to make way for a new government under Olzhas Bektenov, a former head of an anti-corruption watchdog. This move was widely recognized as the latest effort to clean out a bureaucracy compromised by its ties to business elites, particularly those linked with the “Old Kazakhstan” under former president Nazarbayev, who have undermined the state’s capacity to ensure a fair business environment, as well as to effectively investigate and prosecute corruption charges.   New steps to combat corruption and kleptocracy In a presidential decree signed last week “On measures to liberalize the economy” that introduced several initiatives aimed at “ensuring freedom of entrepreneurship by developing competition, reducing state participation in the economy, and reducing business costs”, the President took aim at Samruk-Kazyna National Welfare Fund, i.e., the country’s Sovereign Wealth Fund, which has almost $70 billion under its’ management. The fund has been highly scrutinized for being an instrument of kleptocracy. It has provided unreasonable support to banks, written-off major loans, given exorbitantly favorable loan terms, and in one case, caused a bank to fail and be taken over by a rival months later. As in other post-Soviet republics, banks have been vehicles for oligarchs ascendancy by way of using government funds to build massive business empires. Tokayev has publicly stated that the government needed to “immediately stop this orgy of leaking state...