Central Asia Digest | July 2019

Political Development

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.

Economic Developments 

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. 

The bodies of a young man and woman, possibly in their teens were found buried facing each other in a cemetery dating back about 4,000 years in Kazakhstan. The ancient cemetery has remains of humans and horses. They were buried with a variety of grave goods including jewellery (some of which is gold), knives, ceramics and beads.

Trade turnover of Kazakhstan with Eurasian Economic Union (EAEU) countries in January-May of 2019 decreased by 4.8% amounting to US$23.2 billion. Export of Kazakhstan to Russia during this period stood at US$2.1 billion, which is 2.4% less than in the same period of 2018. Its export to Kyrgyzstan decreased by 16.6% to US$217.5 million, to Belarus by 14.7% to US$39.1 million, to Armenia by 26.7% to US$2.7 million.

Kyrgyzstan was the only country in EAEU, which increased its export to Kazakhstan. Within 5 months, the country supplied goods to Kazakhstan of US$126.8 million, which is 13.5% more than in 2018. Other member states, on the contrary, reduced their exports to Kazakhstan. Russia decreased its export by 4.6%, Belarus by 4.2%, Armenia by almost 41%. The objective of Russia-inspired EAEU is to bind member nations more closely to it. In Central Asia, this goal is proving elusive, although officials remain confident that better times are imminent.

Inflow of US investment in Kazakhstan in 2018 increased by 44.7% to US$5.3 billion. Trade turnover in 2018 between the two countries increased by 37.3% to US$2.2 billion.

European Union will provide two million euro (US$2.2 million) for 50 Afghan women to support economic empowerment through education and training in Kazakhstan and Uzbekistan as part of a project to be administered by the United Nations Development Programme.

Uzbekistan has launched the official negotiation process to join the World Trade Organization (WTO) and submitted an updated memorandum on the foreign trade regime of the country.

Kazakh government has waived visas for citizens of more than 60 countries to boost investment attractiveness and create favourable business climate.


India-Central Asia Relations 

Indian citizens transiting through Nur-Sultan (Astana) and Almaty can stay in Kazakhstan visa-free for 72 hours. Kazakh citizens can also obtain electronic visas to visit India. In 2018, Kazakh embassy in New Delhi issued more than 25,000 visas to Indian citizens, which is four times more than in 2014.

In November-December 2019, Kazakh President Kassym-Jomart Tokayev is expected to visit India. This is expected to significantly expand bilateral cooperation.

A new branch of Tengri Bank, an associate of Punjab National Bank was opened in Karaganda, Kazakhstan with launch of their own credit card operations. Tengri Bank now has a total of 16 branches in 9 cities. 

India remains one of the key trade, economic and investment partners of Kazakhstan in South Asia. Over 2005-2018, the gross inflow of foreign direct investment from India into Kazakh economy amounted to US$317 million. Negotiations are currently underway with several Indian companies to attract them in mining, agricultural and other industries. Over past 5 months of 2019, Kazakhstan has identified about 10 new projects with participation of potential Indian investors.

Indian delegation with more than 20 business representatives from various sectors like health care, pharmaceuticals, textiles, leather processing, construction, hotel business participated in the 'International Invest in Namangan Forum' in Uzbekistan.

Maulana Azad National Urdu University, Hyderabad and Tashkent State Institute of Oriental Studies signed an MoU on Cooperation in Education paving way for Double Degree Programme and mutual exchange of students.

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About the Author

Ambassador Ashok Sajjanhar

Former Ambassador of India to Kazakhstan, Sweden and Latvia; President, Institute of Global Studies and Distinguished Fellow, Ananta Centre

Ambassador Ashok Sajjanhar belongs to the Indian Foreign Service and has acquitted his responsibilities in the diplomatic service for 34 years. He was Ambassador of India to Kazakhstan, Sweden and Latvia and has worked in senior diplomatic positions in Indian Embassies/Missions in Washington DC, Brussels, Moscow, Geneva, Tehran, Dhaka and Bangkok and also at Headquarters in India. He negotiated for India in the Uruguay Round of Multilateral Trade Negotiations and in negotiations for India-EU, India-ASEAN and India-Thailand Free Trade Agreements.

He contributed significantly to strengthening strategic ties and promoting cultural cooperation between India and USA, EU, Russia and other countries.Ambassador Sajjanhar worked as head of National Foundation for Communal Harmony to promote amity and understanding between different religions, faiths and beliefs. Ambassador Sajjanhar has been decorated by Governments of Kazakhstan and Latvia with their National Awards and by Universal Peace Federation with Title of ''Ambassador of Peace.'' Currently Ambassador Sajjanhar is President of Institute of Global Studies, New Delhi. He writes, travels and speaks extensively on issues relating to international relations, foreign policy and themes of contemporary relevance and significance. He appears widely on TV panel discussions. Ambassador Sajjanhar is interested in reading, music and travelling. His wife Madhu is an economist and an educationist. They have a son and a daughter both of who are accomplished singers. Their son passed out of Yale University and their daughter is pursuing her PhD at University of Minnesota.