Investment: Central Asia

Why come to Kazakhstan?

28 April 2007

As always, corruption starts at the top. President Nursultan Nazarbayev is hugely respected by his citizens, and rightly so: he has kept the economy on an even keel while raising the wealth of the people, even if most of it has fallen into the hands of the well-connected. He has also balanced the onerous and capricious demands of China to the east, Russia to the north, and the United States and Europe to the west. But his government is a working shrine to nepotism. One of his sons-in-law, Timur Kulibayev — the 458th richest man in the world, according to Forbes — is a major shareholder in several leading Kazakh firms, including Halyk Bank. Another, Rakhat Aliyev, was in February abruptly dispatched to serve as Kazakh ambassador to Austria after the disappearance of two former officials of another domestic lender, Nurbank. The wife of one of the missing officials, Zholdas Timraliyev, alleges that her husband was kidnapped when he declined to hand over the manager-ial rights to a local business centre to a business connected to Aliyev.

Meanwhile, the straitjacket into which Astana is trying to squeeze foreign corporations is about to be tightened. The country’s subsoil laws, which have been successively reinforced over the years, now grant the state first rights over any energy or mineral wealth. Not content with that, this February the country’s new premier, Karim Masimov, said the government was prepared to alter, and even cancel, existing operating licences held by foreign energy and mining firms.

Rising wealth has brought increased bureaucracy as well as rampant nationalism and corruption. Astana has loaded itself up with new officials, each one in need of a cushy office, a respectable title and a new Mercedes C-Class. Many spend their time inventing new rules for foreign business, and finding ever more ingenious ways to extort money from them. All this is creating enormous antagonism within the foreign business community — which by and large consists of a hardy crew well versed in navigating their way through the minefields of central Asia.

‘They’re killing the goose that laid the golden egg,’ says one London-based oil and gas banker who travels regularly to the region. ‘They’re under huge pressure to diversify their economy away from minerals and oil, but so far they haven’t managed it. So rather than embracing foreign investors, who bring money and know-how and equipment and technology, they attack them with bows and arrows and pitchforks and calculators. All of this bureaucratic meddling has soured the climate for everyone, and all the foreigners are just worn down by the experience.’