ALACO DISPATCHES: Kazakh president rattled by land privatisation protests

ALACO DISPATCHES: Kazakh president rattled by land privatisation protests
President Nursultan Nazarbayev has dismissed protesters’ fears as groundless.
By Yigal Chazan of Alaco May 4, 2016

In a rare display of defiance, hundreds of people have been demonstrating over moves to privatise Kazakhstan’s farmland. The protests, sparked by rumours that the land would be sold to foreigners, have been held over the past week in a number of cities, including Atyrau, Aktobe and Semey, amid signs of growing discontent over financial hardships caused by the country’s economic downturn.

Under a law due to come into effect on July 1, authorities will be able to sell unused agricultural land to citizens and Kazakhstani-controlled joint ventures as well as lease it to foreigners for up to 25 years. But many of the protesters fear land will ultimately end up in the hands of Chinese investors whose stake in the Kazakhstan economy has increased considerably in recent years. “After 25 years, they will stay for 65. After 65 their descendants will take Kazakhstan citizenship and our descendants will be their slaves,” one protester said at the Aktobe rally, according to news reports.

The reform, intended to attract much-needed investment into Kazakhstan’s agricultural sector, is part of much broader plans to revitalise the country’s commodity-dependent economy, which has been pummelled by tumbling oil prices. Clearly unnerved by the demonstrations, President Nursultan Nazarbayev has dismissed protesters’ fears as groundless and threatened to punish those behind the rumours. The president appeared on state television on May 1 to warn that national disunity could lead to turmoil on the scale of the Ukraine conflict. Nazarbayev has so far allowed the protests to pass off peacefully, but in the past has cracked down brutally on dissent.

Worryingly for Nazarbayev, there are already signs that the land privatisation tensions may turn into wider protests over his handling of the economy. Activists are planning to hold a rally in the capital Astana on May 21 under the slogan “Shal Ket” (Old Man Leave), a reference to the 75-year-old authoritarian leader, who has been in power for over 20 years.

Kazakhstanis have in the past enjoyed relatively high living standards, but the fall in oil revenues has led to cuts in public spending and the suspension of new housing and social programmes, while savings have been hit by a plunge in the value of the national currency. Nazarbayev recently brought the country’s planned general election forward by a year seemingly because of concerns that worsening economic conditions might lead to instability.

The government’s room for manoeuvre is narrowing. It is already drawing heavily on the $64bn national oil fund in order to prop up the slumping economy. Growth shrank from 6% in 2013 to 1.2% in 2015 and is anticipated to slow even more this year.

An ambitious privatisation programme, announced in November, envisages the sale of dozens of state-owned enterprises, including national nuclear, railway and oil companies. Officials are hoping the move will raise tens of billions of dollars, but some commentators predict that Western investors may be wary of the debts, investment needs and social obligations of many companies. High levels of corruption and the inconsistent implementation of laws and regulations are among a number of factors that could also dampen interest.

The omens are not good. Several privatisations in the early 1990s following independence were criticised for giving rise to a class of wealthy oligarchs, while a decade later a bid to allow citizens to acquire stakes in large companies through so-called “People’s IPOs” proved a disappointment.

Although Kazakhstan’s growing ties with China promise huge economic benefit, they could also prove to be a source of instability.

Beijing views Kazakhstan as an important partner in its Silk Road Economic Belt project – a plan to create a trading network linking Asia and Western Europe. China has invested heavily in Kazakhstan’s mining, construction and energy sectors, and last year the two countries signed a raft of multi-billion-dollar deals. 

But as the land privatisation protests highlight, closer links with Beijing may well fuel anti-Chinese sentiment amongst ordinary citizens concerned over their giant neighbour’s expansion into the region.

Yigal Chazan is an associate at Alaco. Alaco Dispatches is the business intelligence consultancy’s take on events and developments shaping the CIS region.