Kazakhstan is the 9th largest national territory in the world. Its oil reserves are ranked 12th in the world and its natural gas reserves are 19th. It is a global leader in the production of coal, copper, zinc, bauxite, uranium and chrome ore. The extractive industries contributed 33.4% to Kazakhstan’s GDP and because of its substantial amount of natural resources and a relatively open approach to economic reform and foreign investment, Kazakhstan has been enjoying more than two decades of impressive economic growth.
The annual volume of FDI has been increasing year by year since 1998 and the share of investments in the oil and gas industry in total volume of FDI remains high. But over the last several years, state participation in the oil and gas industry has increased. The vertically integrated National KMG controls 20% of total oil and gas proved reserves of Kazakhstan and produces 27% of total oil and gas condensate and 14% of gas.
Under the leadership of President Nursultan Nazarbayev, Kazakhstan has been experiencing an impressive economic growth for the past two decades. With a GDP of US$ 201.7 billion and a population of less than 17 million, Kazakhstan aims to join the world’s top 30 economies by 2050.
However, Kazakhstan’s heavy reliance on natural resources has also made it more susceptible to external pressure. As I mentioned in my previous blog post, the slumping oil prices has taken its toll on the economic growth of this oil-rich country. At the same time, rising social problems such as shrinking job markets in some ageing oilfields and domestic security concerns, potential political instability because the successor of the 73-year-old President Nursultan Nazarbayev remains unknown, worrying Russia-Ukraine and other geopolitical crisis, as well as the global economic recession have all contributed to the slowdown of Kazakhstan’s economic growth.
Another issue facing Kazakhstan’s healthy development of its extractive industries and the country as a whole is corruption and a lack of public supervision in government spending. The level of corruption remains sufficiently high, especially in the spending of public funds. Kazakhstan ranked at the 126th out of 175 countries in the 2014 Corruption Perception Index. The International Crisis Group estimated that more than 50% of Kazakhstan’s GDP is controlled by a single sovereign-wealth fund, Samruk-Kazyna, which was once led by President Nazarbayev’s son-in-law.
Perhaps that’s why the EITI introduced new rules and requirements on the issue of sub-national reporting on resource revenues in July 2011. The rationale behind such is that a more accurate disclosure of corporate payments and government revenues at the local level in the extractive industries would help curtail corruption and other forms of mismanagement of funds.
Kazakhstan, despite its corruption problems and unlimited presidential authority, is worth studying and learning from in terms of civil society participation in the EITI process.
Sergey Gulyayev, General Director of Decenta Public Foundation (DPF) in Kazakhstan, introduced in my exchange of emails with him that local non-governmental organizations (NGOs) as well as civil society organizations (CSOs) initiated the discussion of sub-national reporting earlier than the EITI’s new standard was introduced.
When it comes to civil society engagement, NGOs and CSOs in Kazakhstan have been working hard to push forward public participation. According to a report by DPF, there were a few attempts to develop communication strategy on EITI in Kazakhstan to help better engage the public. These attempts have been made by: Coalition of NGOs “Oil Revenues – Under Public Control”, Dialogue Platform of NGOs, National Stakeholders Council, Working Group of the National Stakeholders’ Council, and Ministry of Information and Culture with Ministry of Industry and New Technologies.
Despite the good progress in civil society engagement and all stakeholders’ awareness of sub-national reporting, Sergey Gulyayev remarked that few specific steps or plans have been taken so far to develop strategy of sub-national development for EITI reporting.
Still, civil society was still the most interested party to promote EITI in Kazakhstan. The experience and progress in EITI Kazakhstan can served as a learning model for other countries such as Mongolia. Advancements in transparency have been seen in Kazakhstan now but additional efforts will be needed to strengthen the accountability side of the equation.