Anti-Corruption Conference in Astana
Two weeks ago I attended an international conference
on fighting corruption and promoting good governance in Eastern Europe and Central Asia that took place in Astana, Kazakhstan and was co-organized by the OECD and the Financial Police of Kazakhstan. This was a particularly significant event because it was the first conference of this kind in the post-Soviet space since the fall of the Berlin Wall.
Over 150 delegates from over 40 countries from as far away as Latin America to as nearby as Kyrgyzstan included high-level dignitaries and anti-corruption specialists who descended onto a seemingly empty, but posh capital city of Astana for several days. It is difficult not to think of fighting corruption and improving good governance as two of the most fundamentally critical pillars for increasing widereaching national economic prosperity and developing sound, transparent and accountable democratic institutions. Disappointingly, however, civil society was notably absent from this event.
Following years of negotiations with the EU on issues from protectionism to IP infringement Russia finally looked poised to enter the WTO by the end of this year. This was, of course, until the predictably unpredictable leaders of the Russian government announced that they would only enter the WTO as a “customs union” of Belarus, Russia and Kazakhstan. News reports from the Financial Times and Wall Street Journal contain the shocked reactions of many of the EU and US negotiators to the announcement from Mr. Putin.
Mr Putin’s announcement that Russia was scrapping talks as an individual nation came days after senior EU and US trade officials held top-level talks at the St Petersburg investment forum in which Russian officials said they were committed to ironing out differences to ensure Russia’s soonest possible entry.
… a [EU trade commission] spokesman added that during the talks in St Petersburg “the Russian side said it was committed to WTO accession by the end of the year. But should the basic parameters of these negotiations be changed this would create a new situation.”
Belarus, Russia, and Kazakhstan, although sharing a common historical and cultural heritage, are each at a different threshold of economic development. It has taken Russia 16 year of on-again/off-again negotiations to reach agreement, but with two additional partners now joining a new bid it looks as if the negotiations are back to square one. I would say the chances of Russia joining the WTO this year are unlikely – or – to borrow a Russian phrase they will enter the WTO когда рак на горе свистнет (when a lobster whistles on a mountain).
Freedom House has just released the country reports from the latest edition of its annual Freedom in the World survey, as well as Nations in Transit report – a comprehensive annual study of reform in the former Communist states of Europe and Eurasia.
According to the findings, the year 2007 was marked by a notable setback for global freedom and one of the regions where it was most pronounced is former Soviet Union. One of the key findings of the Nations in Transit report is that as oil and natural gas revenues surge in Russia and Central Asia, democratic institutions are more and more in trouble. The erosion of democratic governance has occurred not just in electoral practices, but also in the areas of civil society, independent media, and judicial independence.
The reason for that decline is growing reliance on natural resource exports. It erodes the institutions of democratic governance because massive inflows of export revenue go directly into the state’s coffers with little or no accountability and oversight. Not surprisingly, that generates corruption and cronyism undermining both democratic governance and free markets. Freedom House Director of Studies, Christopher Walker, comments:
“The resource curse is taking root. The growing authoritarianism in oil and natural gas-rich countries such as Russia, Kazakhstan and Azerbaijan is severely restricting the ability of democratic institutions to operate.”
This negative correlation between petroleum wealth and democracy is certainly not new, with the oil-rich and non-democratic Middle East being the prime example. But rising prices of oil and gas on the global markets add to the problem and allow authoritarian rule to thrive – or tighten – where the governments are in a possession of sufficient natural wealth to rest their power upon it.
As oil and gas prices continue to climb, all three post-Soviet resource-rich countries mentioned earlier received a “downward trend” assessment of their political rights and civil liberties. This was also the case in Freedom House’s rating a year ago and unfortunately this year may not be the last one when such trends continue.
While many in Kazakhstan and abroad are wondering whether a large financial crisis is in store for this oil-rich giant, others are hoping that this could be a window of opportunity to bring about reform that embodies transparency, inclusiveness, rule of law and accountability, all key elements in ensuring long-term stability and prosperity. Some have praised Kazakhstan as a rock of stability and a regional leader in economic growth, however its current troubling developments point to the danger of the contrary.
Recent political and economic trends in Kazakhstan have disappointed many well-wishing international observers, who view the country as having significantly drifted away from openness and transparency and embraced strong-armed tactics in the political arena as well as the economy. These trends are disturbing not only because they stifle channels of civic participation in the policymaking process, essential for democratic progress, but also because they discourage investment and undermine the sustainability of Kazakhstan’s hailed economic boom. If a crisis can lead to reform, then one can hope that this situation presents such an opportunity.
Today, business laws in Kazakhstan typically favor the top-heavy Government and its loyal financial groups, which emerged as a result of the opaque privatization of the 1990s. State interests, including state-owned businesses, have a high stake in ensuring that the ruling party stays as strong as possible: August 2007 Parliamentary elections, which by most accounts were flawed, cemented the ruling party’s hold on the nation. In the last six months, Kazakhstan’s policy has shifted harshly toward increasing government intrusion into business activity in the energy sector, enacting laws that substantially boost the position of domestic government-loyal business groups’ stake in the energy sector and granting the government power to unilaterally cancel any contract with a foreign company that it deems to endanger the nation’s interest.