Kazakhstan offers carrot and stick to mono-towns

By bne IntelliNews May 22, 2012

Clare Nuttall in Almaty -

In a bid to avert industrial and social unrest spreading following the events in Zhanaozen late last year, the Kazakh government is to pump huge sums into developing the country's mono-industry towns, it announced on May 21. It's also offering digital TV and a political clampdown.

With tension spreading from the oil rich west to the industrial towns of central Kazakstan, the government is working on plans to channel funds into single-industry towns across the country in a bid to prevent a repeat of the December 2011 unrest in Zhanaozen, where clashes between strikers and police left 16 dead. Over $900m will be spent between 2013 and 2015, with additional funding promised in the following five years.

At a meeting on May 21, the Kazakh government approved proposals by the Ministry of Economic Development and Trade (MINT) for a financial package to support the single industry towns that were bequeathed throughout the country by the Soviet system. The Single-Industry Cities Development Programme for 2012-2020 will support 27 settlements across the country. Most are small, with populations of under 50,000, but collectively they add up to a total of 1.5m people, or almost 10% of the population.

The government will allocate KZT38.2bn ($258m) for the development of the towns in 2013, with a further KZT43.2bn to be spent in 2014, and KZT53.9bn in 2015, Kazakhstan's Minister of Economic Development and Trade Bakytzhan Sagintayev told a government session. Regional akims (governors) have been given until July 1 to submit proposals to the central government. Each akim has been instructed to prepare at least three proposals for projects to diversify the economy of each town, Kazinform reports.

The Kazakh government turned its attention to development of the country's single industry-towns immediately after the Zhanaozen tragedy. On December 16, 2011, 16 people died when police opened fire on rioters in the western oil town. The riot followed a seven-month strike by workers at the Uzen oilfield - the longest and most acrimonious industrial dispute in Kazakhstan's history.

However, with signs of unrest cropping up across the country, the funding will spread further than the oil-rich west. In particular, the remote industrial cities scattered across the central steppe will be in focus, as workers in Kazakhstan's massive mining sector begin to lobby for better conditions.

Out of steppe

Karaganda, in central Kazakhstan used to be a byword for remoteness, the Soviet equivalent of Timbuktoo. However, the city is now very much on the map compared to other towns in the region thanks to the nearby copper mining towns Zhezkazgan, and Temirtau - location of the steelworks where President Nursultan Nazarbayev worked as a young man before turning to politics.

At the end of a branch line, an overnight journey southwest of Karaganda arrives in the copper mining town of Zhezkazgan. This was where one of the spurs of the Soviet rail network ended, and the town's main attraction is a row of trees planted by Yuri Gagarin and other cosmonauts who got off the train from Moscow to head even further out into the steppe to the Baikonur cosmodrome.

Starting out as the Kengir gulag, Zhezkazgan is where the headquarters of Kazakhmys, the London-listed mining giant that now operates the town's massive mining complex - seven mines and three concentrators - is located. Kazakhmys dominates life in the town. Residents go to work on Kazakhmys buses, study at Kazakhmys-sponsored schools, get treated at the Kazakhmys medical centre, and support the FC Kazakhmys football team.

While based on mining rather than oil, the living situation in central Kazakhstan's mining towns is not dissimilar to that in Zhanaozen. Although salaries are decent by Kazakh standards, the cost of living is also high. Given Kazakhstan's poor distribution networks, consumer goods and fresh fruit and vegetables can be hard to find and cost well above the national norm. In a bid to entice shoppers, boards outside stores in Zhezkazgan boast: "Everything at Almaty prices".

Such are the parallels between Zhanozen and other mono-industry towns that the government is now watching for any hint of discontent. Even in the remotest corners of Kazakhstan, residents have become increasingly aware of the difference between their own lives and those of the business and political elite in Astana and Almaty. In recent weeks, there have been incidents in both Zhezkazgan and Temirtau.

A three-day strike started on May 5 at the former's Annenskiy mine, where 98 workers refused to return to the surface after their shift. They were later joined by workers from the Vostochnyy, Zhezkazgan and Yuzhnyy mines, with a total of 250 people sitting in underground and around 2,000 supporters above. The dispute was resolved on May 8, when Kazakhmys management agreed to higher pay and better working conditions.

In a statement issued on May 8, Kazakhmys CEO Eduard Ogay said that the dispute had been resolved using a model developed after the Zhanaozen tragedy. However, the promised pay rise does not solve the long-term doom facing Zhezkazgan when its ore deposits are eventually exhausted.

Two weeks later, on May 19, around 3,000 workers from the ArcelorMittal Temirtau (AMT) steelworks demonstrated to demand higher pay. A company official met trade union leaders, but AMT is understood to be unwilling to pay the 30% pay rise demanded by workers.

Astana is taking a two-pronged approach in the aftermath of Zhanaozen. The government has sought to appease angry workers by promising generous financial assistance to help diversify single-industry towns, but it also appears to hope it can lull them back to peace.

Astana plans to increase development funding for Zhanaozen with several new funds for the town established, whilst the Zhezkazgan region will receive KZT130bn under the new plan for socio-economic development. At the same time, following the line that television is the 21st century opium of the people, the communications ministry has put Zhanaozen and Zhezkazgan at the very top of the list to receive digital TV when the national roll out starts this year.

Other towns expected to benefit from the new programme(s) include Balkhash; Karatau, the site of phosphate deposits in south Kazakhstan; and Arkalyk, a bauxite mining town in Kostanai region, Kazakhstanskaya Pravda reports.

The government has also sacked the Zhanaozen mayor and other officials connected to the riots, with the highest profile casualty being Nazarbayev's son-in-law Timur Kulibayev, who was sacked from his position as head of Samruk-Kazyna, the main shareholder in KazMunaiGas which operates the Uzen field. At the same time, however, there has been a severe clampdown on opposition activity, with several opposition leaders and journalists arrested in January.

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