Kazakhstan’s President Kassym-Jomart Tokayev is likely to pursue main economic policy priorities of his predecessor. These include structural reforms and, more recently, increasing social spending. Kazakhstan’s budget encompasses the large programme of social expenditure announced by Nazarbayev in February 2019 that includes a 50% increase in minimum wage, tax cuts for low-income earners, and investment in housing and transport infrastructure. Government debt is low and favourable oil prices will help to contain the budgetary impact of higher government spending. Tokayev may seek to consolidate his popularity with further increases in social and investment spending. Following his election, he asked the prime minister to develop new social policy initiatives and measures to boost employment. Tokayev has also announced debt relief ‘for people who find themselves in very difficult living circumstances’. This initiative would target 3 million Kazakhs, or 16% of the population.
President Putin asserted his authority as an arbiter of regional stability by signalling his support for embattled former Kyrgyz president Almazbek Atambayev, a protégé of Putin who has been charged with corruption in Kyrgyzstan. The current impasse was reached after a serious falling out between him and his successor Sooronbai Jeenbekov whom Atambayev had worked hard to install in his position. Following a meeting with Atambayev in Moscow, Putin urged President Jeenbekov, not to press charges. Several associates of Atambayev have been arrested on corruption charges. Atambayev himself faces five counts of criminal misconduct while in office from 2011 to 2017 — including corruption, abuse of office, and illegally enriching himself. Atambayev stated that the current Kyrgyz authorities should stop political persecution of their opponents. He added that his supporters should have an opportunity to calmly prepare for the 2020 parliamentary elections. He stated that Putin planned to talk about it with Jeenbekov. At the end of June, Kyrgyzstan’s parliament had voted to strip Atambaev of his immunity from prosecution (as a former president), opening the way for prosecutors to investigate possible violations Atambaev may have committed as head of state. At the same time, building on his visit to Kyrgyzstan in March, 2019, Putin offered Jeenbekov a carrot. He said that everybody needs to unite around the current president and help him develop the state.
Kyrgyzstan was shaken by a major corruption scandal involving a Chinese company. The scandal, involving a US$386 million contract handed to a Chinese company in 2013, has led to arrest of two former prime ministers highlighting the potential hazards facing Beijing’s ambitious Belt and Road Initiative. Prosecutors investigating the scandal allege that officials awarded a contract to refurbish the Soviet-built Bishkek Thermal Power Station to Tebian Electric Apparatus (TBEA), a Chinese company, without a proper tender. The government chose the Chinese company and did not consider other options which offered to do the same work more cheaply. Former Prime Minister Isakov argued that the choice of TBEA was the official position from Bejing and they could not change it.
A joint Tajik-Chinese military exercise was conducted in a Tajik region bordering China’s troubled north-western region of Xinjiang. This suggests that increased Chinese-Russian military cooperation has not eroded their gradually mounting rivalry in Central Asia, long viewed by Moscow as its backyard. The exercise, the second in three years, coupled with the building by China of border guard posts and a training centre as well as the creation of a Chinese security facility along the 1,300 kilometre long Tajik Afghan Border, Chinese dominance of the Tajik economy, and the handover of Tajik territory almost two decades ago, challenges Russian-Chinese arrangements in the region. Limitations of Russian- Chinese cooperation have been evident for some time. This demonstrates China’s continuing ability to either compel or impose its will on Tajikistan without anybody, including Moscow, being able to do much about it. The exercise represents a further step in China’s overall encroachment upon Russia’s self-proclaimed “sphere of influence” in Central Asia. Again, Moscow either cannot or will not do anything to counter that trend.
Presidents of Kyrgyzstan and Tajikistan met in end-July near the site of a bitterly contested border area that was the scene of deadly clashes earlier in the week. Purpose of this meeting was to reach a territorial demarcation agreement to put an end to recurrent hostilities among border communities vying for access to land and water. A Tajik man was shot dead in violence along the contested border. Despite working at border delimitation since the end of the Tajik Civil War in the 1990s, the two countries have so far demarcated only 53.5% of their common border (520kms out of 970kms). Moreover, they acknowledge that the 70 most difficult problem areas, including those involving enclaves, remain unaddressed.
Iran, Turkey and Russia, as well as representatives of Syrian government and opposition, met for the 13th round of talks on Syria for the Astana peace process in Nur-Sultan, capital of Kazakhstan. The Syrian opposition delegation agreed to a ceasefire in Idlib. It was said that terrorist presence remained in Idlib and they would not abide by it, but the Syrian opposition present at the Talks agreed to the ceasefire.
President Tokayev has stated that he ordered prosecutors to conduct a thorough investigation into torture at a penal facility north of Almaty. This appears to be the first reference to torture ever made by a Kazakh head of state. Political commentators suggested Tokayev would like to position himself in the mould of Uzbek President Shavkat Mirziyoyev. While retaining a firm and unchallenged grip over the levers of power, Mirziyoyev has earned much praise for curbing his PREDECESSOR Islam Karimov’s authoritarian excesses. Tokayev’s space for manoeuvre is however limited as long as he stays under the strict control of President Nazarbayev. What is subtly being made clear is that although Nazarbayev is consulted, his views no longer carry overriding import. Even though the presence of the 79-year-old former president looms large, his 66-year-old successor could try to carve out his own profile and agenda.
Uzbek President paid a state visit to Belarus. Following the talks between the Presidents of the two countries, a joint statement was signed on further development of bilateral relations. They agreed to strengthen partnership in the fight against terrorism and smuggling. Special attention was paid to humanitarian, scientific and educational spheres.
A host of perennial issues — like borders, water and railroads — and preparation for forthcoming visit by Uzbek President Shavkat Mirziyoyev to Kyrgyzstan were discussed during visit of Uzbek PM to Kyrgyzstan. Relations between Kyrgyzstan and Uzbekistan have been on an upswing since the death of Uzbekistan’s first president, Islam Karimov, in late August 2016. Kyrgyzstan is considering taking a US$100 million loan from Uzbekistan. Issues of infrastructure, like the long-delayed China-Kyrgyzstan-Uzbekistan railway, as well as water, are contentious, and ongoing discussions are important to push such efforts ahead.
World Bank is increasing its support for Uzbekistan and has praised reforms to promote a market economy. The Bank announced loan and grant agreements totalling US$656 million for projects in Uzbekistan. It said that energy sector is key to growth but the country suffers from weak financial and operational performance, infrastructure bottlenecks, and an incomplete policy and regulatory framework.
During recent visit of Kazakh Prime Minister to Bishkek and his meeting with Kyrgyz President, it was agreed to bring their trade to US$1 billion in 2020. In 2018, bilateral trade amounted to US$850 million, a 13% year-on-year increase. The countries reaffirmed the commitment to forge trade and economic cooperation in water and energy sectors, strengthening trans-border cooperation, digitisation and space projects.
Short-term economic activity in Kazakhstan weakened in May for a second consecutive month, amid a drop in industrial production that was brought upon by a slowdown in manufacturing and the sharpest slump in oil output since 2016 due to maintenance of three key oil fields. Growth is thus expected to decelerate this year. If domestic demand proves resilient, thanks to a planned fiscal stimulus program supporting consumption, loose credit and fixed-asset investment, then the economy should do well this year and next. Analysts expect GDP to increase by 3.5% in 2019 and again in 2020. Foreign direct investment has fallen by around 11% to come in at US$5.9 billion in the first quarter. This is however above historical averages of US$4.3 billion. The gross inflow of foreign direct investment in Kazakhstan was above US$24 billion in 2018. Kazakhstan plans to double this figure.
Uzbekistan’s foreign trade turnover in the first half of 2019 reached US$19.68 billion, up US$4.52 billion year-on-year. Uzbekistan exported goods and services worth US$8.44 billion while importing goods and services worth US$11.24 billion in first six months of 2019. China topped the list of Uzbekistan’s trade partners with a trade turnover of US$3.9 billion. Russia was the second largest partner with US$2.9 billion while Kazakhstan was third with US$1.7 billion.