February 5th saw a significant shake-up in some of the highest positions in the government of Kazakhstan. A decree released by the Office of the President confirmed that President Kassym-Zhomart Tokayev had accepted the resignation of the Kazakh Prime Minister, Alikhan Smailov. President Tokayev named Smailov’s first deputy, Roman Sklyar, as interim Prime Minister. Other members of the former Cabinet will continue performing their duties pending the approval of a new Cabinet.
According to Kazakh governmental procedure, the ruling Amanat party will now nominate a candidate for Prime Minister to Tokayev. The president will then submit his choice to the Kazakh Parliament for approval. On Wednesday, February 7, President Tokayev will take part in a meeting with the current and incoming Cabinet members. It is expected that at this gathering he will officially name the new Prime minister and set key tasks for the incoming Cabinet.
The Office of the President has not disclosed the official reason for Smaliov’s resignation. Alikhan Smailov, 51, stepped into the role of Prime Minister in January 2022, replacing three-year Prime Minister Askar Mamin. Smailov’s appointment came in the wake of a period of violent unrest and reflected a need for new leadership to address social problems. While relative calm has been achieved, it is easy to speculate that this latest change in leadership might stem from the President’s frustration at the slow progress the Cabinet has made on implementing urgently needed economic reforms. The president is attempting to achieve ambitious economic goals that require bold action, perhaps he feels a new team is needed to see his vision become a reality.
In 2024 Kazakhstan marks its fifth year under the leadership of President Kassym-Zhomart Tokayev. Compared to the almost 30-year rule by Nursultan Nazarbayev, Kazakhstan’s first and “lifelong” leader since the early years of independence, Tokayev’s time in office has been brief. Although Tokayev’s presidency has been relatively short for Kazakhstan, measured against the presidential terms of countries with more mature democracies, Tokayev has already been in power for a standard presidential term. Certainly, this has been long enough to expect measurable steps toward the fulfillment of the government’s economic aims.
Smailov held the role of Prime Minister for almost half of Tokayev’s time to date in office. Knowing that his mandate runs only until 2029, Tokayev may be feeling a sense of urgency to reach economic targets and see large projects undertaken soon to energize the Kazakh economy. The actions required by local and central government to achieve Tokayev’s economic reform goals have simply not been sufficient to this point. The president may be looking for a Prime Minister who can hold stakeholders accountable and effectively drive progress toward dramatic economic improvement.
Tokayev indicated recently, in a conversation with local journalists that the biggest task he has set before the Cabinet is to double the country’s GDP in the next five years, bringing its value up to $450bn. While the GDP should not be considered as an ultimate measure of the country’s well-being, achieving this goal will be a crucial part of changing the economic environment and direction of the country. Reaching the GDP goal will require strong leadership on the part of the future Prime Minister.
According to the president, several steps are required to reach the goal of doubling the GDP. The first element of Tokayev’s strategy centers on undertaking sizeable industrial projects. In his most recent “Address to the Kazakh Nation” (delivered in September of last year), Tokayev called on the Cabinet to come up with a list of large-scale projects and to develop a detailed roadmap leading to their implementation.
A further method for making the Kazakh economy grow at a fast pace, according to Tokayev’s plan, is to accelerate work on attracting foreign investment. Two other mechanisms that Tokayev believes will be effective in boosting economic growth in Kazakhstan are privatizing state-owned assets and repatriating wealth stolen by members of the previous political regime.
In his address to the nation, Tokayev also enumerated a number of other approaches he thinks will support the goal of doubling the Kazakh GDP by 2029. These include drafting a new Tax Code and Budget Code, changing state procurement legislation, and improving mechanisms for public-private partnership initiatives.
To implement all the political and economic reforms President Tokayev has attempted to undertake in Kazakhstan in the past five years, Kazakhstan’s government will need strong leadership, decisive action, and a firm commitment to implementing reformative and innovative policies.
The current reality is that the country has simply not made enough progress towards achieving the kind of structural, political and economic transformation it needs to truly thrive. Doubling the GDP will be a difficult, if not impossible, goal to reach under current conditions and with a lack of expertise at some levels of government. Despite genuine efforts by the Kazakh authorities to modernize society and the economy, change has not come quickly enough for the average citizen. Many who call Kazakhstan home are frustrated with the current state of life. They are understandably disgruntled with high levels of unemployment, increasing food and fuel prices, poor infrastructure and high levels of pollution. They are also struggling to cope with frequent and confusing changes in the systems of public education and health care.
Reports about unhappy oil workers and miners demanding better pay and working conditions appear frequently in local Kazakh media. And while a larger nationwide protest in Kazakhstan is unlikely to happen in the near future, memories of the tragic events of January 2022 (when violent unrest shocked the country) are still vivid and painful.
Whoever takes the post of the Kazakh Prime Minister next, will have to do well to have the complex issues facing the average Kazakh citizen front and central on their agenda. The new Prime Minister will also have to understand that doubling the Kazakh GDP will call for monumental effort and immensely skilled management. It will require Kazakhstan to become a radically different type of economy than it is at present, one that leaves behind many of its current characteristics. This new economy could not depend so heavily on exports of the country’s natural resources or have its contribution to the global economy determined by carbon-based energy flows. It would also need to be significantly less tied to a northern neighbor whose isolation from the global economy is ever-increasing. In this new economy, the government could not be so reliant on transfers from the National oil wealth fund, in order to maintain macroeconomic stability and finance fiscal liabilities.
If we are to envision a rapidly growing economy for Kazakhstan, it would include healthy changes in the lives of ordinary Kazakh citizens. No longer would the country’s population be so concentrated around the three large cities of Almaty, Astana, and Shymkent. Rural areas and smaller towns would be engines of economic growth along with the bigger cities. In a better economic model, Kazakhstan would move away from having so many of its people employed informally, in ways that keep them from contributing to social security (thus endangering their living standards for retirement). The new economy would see workers valued and protected, even if that means holding foreign investors and managers to account for workplace conditions. It would not be an economy where the government waits for three decades to end its “cooperation” with a foreign investor whose management failed to implement basic safety measures, letting hundreds of coal miners lose their lives, leaving their grieving families without a source of income.
There have been indicators that this new and better type of economy is beginning to form in Kazakhstan. The country is gradually diversifying its energy transportation and trade links by focusing on direct cooperation with the European Union and China. For example, Kazakhstan entered a deal with the EU in 2022 to supply it with raw materials and rare earth metals. This agreement represented a bold step toward greater independence from Russia. Concerning China, Kazakhstan is also actively trying to strengthen its economic cooperation with this major economy. In 2023, Kazakhstan assumed the chairmanship of the Shanghai Cooperation Organization (SCO), a position that it will hold for one year. President Tokayev sees it as an opportunity to reposition the SCO members to prevent, in the words of the experts from the London-based Economist Intelligence Unit, “a deeper geopolitical rift between East and West.” According to the EIU report, the “SCO leadership period will allow Kazakhstan to continue to punch above its weight on the international stage as it positions itself as an honest broker in a period of geopolitical divisions.”
In addition to the new foreign policy initiatives, Kazakhstan is trying to change its economic approaches. In particular, the idea of privatization is back on the agenda. In 2022, Kazakhstan’s most significant state-owned energy company KazMunaiGas had the largest IPO in Kazakh economic history. Currently, Air Astana, the state air carrier is preparing for IPO as well. While such efforts seem to be positive developments, looks can be misleading. The IPO for KazmunaiGas showed only 3 percent of shares becoming available for public trade, leaving the “privatized” company still very much in government hands. It is not clear how much of the Air Astana shares will be publicly traded. Any movement towards privatization, however, is better than none and paves the way for future openness to involvement by private companies in areas traditionally dominated by government.
Economic reform in Kazakhstan is a long and winding road. Having achieved significant progress on the path to higher diversification and competitiveness, Kazakhstan still has a long way to go before it can be considered a truly developed economy with a high value of GDP per capita.
When it comes to the ambitious goal of doubling the GDP in five years, the big challenge is not just the difficulty of obtaining massive material and financial resources. It is not even about overcoming huge geopolitical, cultural, and social barriers. In my opinion, it is more about the lack of adequate human resources and the dearth of political will from people in positions of power who need to step up and be real decision-makers.
Kazakhstan is still, in many ways, very young as an independent nation. Its people are continuing to build capacity in regard to self-determination and internal leadership. Kazakhstan was historically a nomadic society, one which was rapidly and artificially transformed by outside forces. First, it was made into an agricultural supplier of Russia and then into an industrial powerhouse for the entire Soviet Union. Unfortunately, that transformation was achieved at a colossal social, cultural, and environmental cost, resulting in huge losses of life and the creation of ecological disasters. Kazakhstan was forced to accept outside leadership and also flooded with skilled immigrants whose higher level of qualifications saw them dominating in many fields. To reach transformative economic goals, Kazakhstan must continue to nurture and support its people in learning how to take ownership of projects and to skillfully lead those projects to a successful completion. There is a human capital element that cannot be neglected in overhauling the Kazakh economy.
Since assuming the office of president almost five years ago, Tokayev, a former career diplomat, has positioned himself as a political and economic reformer. His approach has included trying to develop an entrepreneurial culture and seeking to lay a foundation for the economy based on new technologies. During his presidency, he proposed many programs intended to transform the Kazakh economy and boost investment in the high-tech sector. In regards to political reforms, Tokayev deserves huge respect for putting a focus on exterminating the “oligarchic capitalism” of the Nazarbayev era and “cracking down” on the corrupt members of the former President’s family and their allies. In addition, his efforts in strengthening the role of Parliament are praiseworthy.
Questions linger, though, about whether government reshuffling efforts will be sufficient to help hit the target of doubling the Kazakh GDP. More significantly, however, we should ask if efforts made to reach the GDP goal will positively impact the Kazakh people. Will those in leadership be able to stay the course in making difficult decisions and taking the kind of decisive action that will provide real long-term value for the nation?
Only time will tell us whether current changes will bear good fruit or not. It must not be forgotten that economic indicators like the GDP do not fully reflect whether everyday people are experiencing a good quality of life. For the average Kazakh, a functional economy is one with available jobs, affordable housing, and a safe transportation system that can enable them to travel quickly and comfortably across its vast territory. Ordinary citizens do not want figurative macroeconomic numbers, they want high-quality education and healthcare systems. Their focus is not on foreign investment but on having working agricultural and manufacturing sectors that will help keep prices under control and allow them to maintain acceptable living standards.
Kazakhstan is a land of beauty and possibility, with talented workers and rich natural resources. It is a country, however, in transition, facing the challenge of embracing new ways and leaving behind practices that no longer support a high quality of life. The new government, in my opinion, needs to put its efforts into constructing a bridge between the economies of the old and the new Kazakhstan, a bridge that all Kazakhs can cross into a brighter and more stable future. The upcoming cabinet and future Prime Minister may play a valuable part in constructing that bridge of opportunity.
By Assel Nussupova
Assel Nussupova is a highly accomplished analyst with an extensive background in economics and over two decades of dedicated service to the Kazakh government. Holding a prestigious Master's Degree in Economics from Georgetown University in Washington, DC, she has become a recognized authority in the fields of macroeconomics, commodity markets, financial markets, and economic and social policies. With a profound understanding of Kazakhstan's economic landscape and a global perspective, Nussupova is a sought-after expert who continues to contribute valuable insights to the field of economics. Additionally, she is a prominent contributor to the Astana Times, where her articles provide readers with expert analysis and in-depth perspectives on economic matters.
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