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SD ANALYSIS - Kazakhstan’s Social Modernization
Dr. Mehmood Ul Hassan Khan
07 Ocak 2019 13:25

We are living in a globalized world where unfortunately regional and international economies are shrinking because of so many complicated reasons not confined to protectionism, trade wars, geopolitical compulsions and geostrategic end games. Societies, minorities and humanities have been unfortunately, marginalized in the chase and race of greater economic gains, profitability and corporate governance. In this context, President of Kazakhstan, Nursultan Nazarbayev announced new series of reforms aimed for comprehensive social modernization in his country.     

President of Kazakhstan, Nursultan Nazarbayev announced “Third Stage of Modernization” during 2018 which has further consolidated its position in the regional as well as at international level. Now Kazakhstan’s President of H.E. Nursultan Nazarbayev has announced new social initiatives aimed at improving the lives of the citizens of Kazakhstan. The new integrated policy initiatives to boost the life of ordinary people in the country by providing new mortgage loans, reduction of the tax burden for citizens with low wages, increasing accessibility and quality of university education, expansion of micro-credit, further expansion of the country's gas production.

It has actually started “new chapter” of social development in the country. Being expert on Kazakhstan and Central Asia I personally think that the competitiveness of Kazakhstan and its global authority would also benefit from the newly announced and implemented five social policy initiatives because it has multiplier effects. 

Kazakhstan, the largest economy of the Central  Asia has surpassed all the regional economies in terms of high GDPs, GNPs, exports and the last but not the least, smarter economy.  Now, it is on the path of immense glory. Social development has been one of the main priorities of its government since inception. It values human capital.  It projects comfort of life. It guarantees basic necessities of life.

The five initiatives are part of a long-term project launched in 2012-13 with the "Kazakhstan 2050 Strategy", which aims to making the country one of the top 30 world economies within the next 32 years, through a series of reforms in the political, economic and social context. 2.6 trillion tenge ($7.9 billion) would be allocated to implement his social initiatives, which, among other measures, promote access to housing. Now housing loans will be easily available because of the provision of “mortgage loan”. Moreover, housing sector will also be developed because all working Kazakhs have the possibility of securing a mortgage under the new conditions. Mortgage interest now may not exceed 7 percent (currently 16 percent), and the life of the loan may be extended up to 25 years. It will benefit millions of ordinary people especially young people, who will be able to buy homes through this program. Common people, working class, businessmen, investors, professionals and manufactures would be biggest beneficiaries of this social modernization initiative of Kazakhstan. 

According to new policy initiative the implementation of the program will give a powerful impetus to the construction of housing and, as a result, access to housing for many Kazakhstanis will increase.

The President stated that extra 20,000 grants should be offered in the 2018-2019 academic year. Approximately 11,000 of these grants should be offered to those studying engineering at universities which will revolutionize engineering education and sector alike in the country. By 2022 new student accommodation will be built that will provide 75,000 new places to stay for students. It should be done through public-private partnerships.

President Nazarbayev announced the decision to build a natural gas pipeline from the Kyzylorda region to Astana. It will not only provide gas to 2.7 million people, but will also help small and medium-sized businesses. It will also positively impact the ecology, as in Astana alone, harmful emissions will decrease by six-fold. In this regard, the government will explore ways to finance this project, including by attracting international investment.

The foundation for the implementation of the social modernization has already been laid in Kazakhstan. Starting from January 2019 the tax burden on low-wage citizens will be reduced by 10 times. The micro-financing for starting own business has increased by KZT 62 billion, and preparatory works for the construction of the Saryarka gas pipeline nears completion.

The Kazakh government has approved the “Five Social Initiatives roadmap”. The roadmap, developed by the National Bank and various ministries, was presented by Minister of National Economy Timur Suleimenov.

The National Bank of Kazakhstan is primarily responsible for the first initiative to provide new opportunities for families to purchase accommodations for which a roadmap has been developed jointly with concerned state agencies. It consists of 35 actions. It provides a roadmap for the development of drafts of 7 laws, 6 draft Government resolutions, and 3 draft resolutions of the Board of the National Bank, as well as the adoption of 2 ministerial orders and 4 decrees of Akimats.. It will establish a subsidiary national company as the sole operator of the program. The company will purchase 25-year, 7 percent mortgages provided by second-tier banks to citizens with 20 percent initial payment.

The Ministry of National Economy will be responsible for the second initiative seeking to reduce the tax burden and increase income of low-paid workers. Relevant amendments related to income tax to the tax code have been initiated and investigation of potential implementation of progressive income tax system by August will also be started. The changes will enter into force during the next tax period beginning January 1, 2019. At present, the tax burden is reduced ten times for employees with a salary of up to 60,125 tenge (US$163.70).

The Ministry of Education and Science will be accountable for the third initiative meant to increase the accessibility and quality of higher education and improve living conditions for students. Plans are underway to provide 20,000 state scholarships for technical majors during the next academic year, including 16,000 for undergraduate studies, 3,000 for master’s degrees and 1,000 for PhDs. The regional governors have identified land slots near universities and colleges for dormitory construction. The objective is to build housing for 75,000 students by 2022. More emphasis has been given to technical education/ specialties. An ideal combination of public-private partnership will also be achieved.

The fourth initiative, increasing business loans, will be implemented by the Ministry of Labour and Social Protection. It will amend the productive employment and mass entrepreneurship programme for 2017-2022 by seeking a bigger objective of boosting microloans and stimulating entrepreneurship, especially in rural areas. Micro financing has been increased this year by 20 billion tenge (US$54.46 million), including 6 billion tenge (US$16.34 million) in cities and 14 billion tenge (US$38.12 million) in villages. Microcredits totalling 62 billion tenge ($US168.84 million), 45 billion tenge (US$122.55 million) in rural areas and 17 billion tenge (US$46.29 million) for urban areas, are expected to cover 14,000 people.

Moreover, in total, from the beginning of the year, 38.4 billion tenge (US$104.57 million) was spent on microcredit, of which 10.5 billion tenge (US$28.59 million) was in urban areas and 27.9 billion tenge (US$75.98 million) in rural areas. The best indicators in terms of the regions are observed in the city of Almaty and the Almaty, West Kazakhstan and Zhambyl regions.

The Ministry of Energy will be responsible for the last initiative on further gas provisions, namely construction of a gas pipeline from Kyzylorda to the capital through Zhezkazgan and Karagandy.

“The construction scheme of the Saryarka pipeline and finance terms will be identified very There are plants to attract investment from international financing institutions, such as the European Bank for Reconstruction and Development (EBRD) and Eurasian Development Bank. Regional governors will earmark land lots for the pipeline in June and the project will be launched in June to terminate in February 2019.

New social modernization initiatives of Kazakhstan are aimed at improving the quality of life, which is one of the main components of the nation's competitiveness. Better accessibility and quality of higher education will contribute to the growth of human capital and competitiveness of the nation that are evaluated under the three “Ts” criterion: talent, technology, and tolerance. Housing initiative should have a great social effect.

Kazakhstan is the “pioneer” of introducing of comprehensive reforms in the field of social sector which has already “revolutionized” its economy, society, banking industry, construction and of course service sectors. President of Kazakhstan, Nursultan Nazarbayev announced new reforms of social modernization. Its roadmap has also been approved. Furthermore, allocation of funds has also been disbursed to different sectors for achieving the desired goals of this policy initiative 2018. 

It has actually started a “new chapter” of “socio-economic prosperity” in Kazakhstan since March 2018. It is first giant step towards social revolution. It is a “paradigm shift” in the whole of CIS and especially Kazakhstan since 2013. It is a “permanent” and “continuous process”. It has started “vertical” as well as “horizontal” approach for implementing social modernization. 

Over the past decade, Kazakhstan has built a record of strong macroeconomic management and a rules-driven fiscal framework, strengthened public management and the business climate, shifted resources toward social services and critical infrastructure, and started addressing environmental problems. Kazakhstan’s development objective is to join the ranks of the 30 most developed countries by 2050. Its long-term vision focuses on economic diversification to move away from natural resource dependence and toward more balanced growth, and social modernization away from social disparity and toward more inclusive growth.

Since 2014, President of Kazakhstan, Nursultan Nazarbayev has promoted a “multi-layered” vision for modernization, impacting the Kazakh culture, traditions, politics, society and business and which, ultimately, aims to lead the country toward a sustainable future. This fundamental shift has been carefully crafted by the country’s political leadership to have a steady and significant impact on the society. It has introduced a new model of economic development which will be further consolidated through initiating comfort of life, providing basic necessities of life, education, and of course development of human capital.

Kazakhstan’s modernization process is “evolutionary not revolutionary”. It introduced meaningful reforms in the fields of economy and politics and resultantly, achieved elements of stability and sustainability in economy and sense of maturity and development in national politics. Now the government has initiated rigorous social modernization in the country which will benefit the whole working class and especially youth.

Provisions of micro-credit in the newly announced social initiatives will benefit the youth of the country. Micro-credit is the “engine” for the growth of Small and Medium Enterprises (SMEs) in the world which has produced “miraculous” results in various countries. The government of Kazakhstan has also announced new reforms in the fields of micro-credit. It will also be useful for achieving the “Sustainable Development Goals” in Kazakhstan because it deals with the social and ecological needs of humanity.     

Raising minimum wage is a huge step. It will benefit the entire working population. Minimum wage from 28,000 to 42,000 tenge will be implemented from January 1, 2019. This step will benefit about 1.3 million people in Kazakhstan. To this end, 96 billion tenge will be allotted from the republican budget annually in 2019-2021. The increase will apply to 275 thousand workers of state-funded organisations, whose salaries will grow on average by 35 percent. The government has allocated 96 billion tenge annually from the republic’s budget for 2019-2021. From now on, the minimal salary will not depend on the subsistence level. In general, the amount of the new minimal salary will boost the labour remuneration covering the whole economy.

Being prominent expert on Kazakhstan and Central Asia, I personally think that five social initiatives by President H.E. Nursultan Nazarbayev can be great progress tools for Kazakhstan. The current set of reforms is a big step towards social development and stabilization in Kazakhstan. Social development is crucial for achieving elements of stability and sustainability in its macro-economy.  It is very important that the population receives such wide support from the state, including benefits on rent, lower taxes, and education and micro loans. It also indicates that the overall level of Kazakhstan's economic development has further developed.

Five social initiatives of Kazakhstan are “inspiring”. The whole Kazakhstan will benefit from the president's five social initiatives. The life of “underprivileged” may be further improved. Five social initiatives of Kazakhstan is consist of providing basic needs such as housing, education, better wages and more amenities to the needed.

Being prominent expert on Kazakhstan and Central Asia, I stress the ideal combination of “quantitative and qualitative” higher education not only in “engineering” but also to other “disciplines”. Germany is the prime example of free higher education which must be further studied for its genuine implementation in the country.

In housing sector/policy initiative provision of housing per capita should be rationalized which is currently 21 square meters, and the construction of houses per capita per year. It would give impetus to the construction industry in terms increased competition, professionalism and responsibility. The standards shall improve; the geometry of the residential buildings shall take into account the climatic conditions throughout Kazakhstan. The cost of housing construction will be further reduced enough to maintain affordability of the mortgages. The construction industry will emerge as a driver of the economy affecting the financial sphere and banking industry in the future.

Furthermore, the allocation of housing certificates will enhance the affordability of mortgages for highly-skilled teachers, medical workers, police officers and other experts the region needs. It will also enhance the construction of rental housing for socially vulnerable population in big cities. It will help more than 250 thousand families to improve their housing conditions. The construction of utility infrastructure for massive housing areas, the state will help 650 thousand families or more than 2 million of our citizens in five years.

Reduction of the tax would allow 2 million law-paid people to receive about 150 billion tenge of additional revenue per year. This would have positive social impact and give significant impulse for the economy due to increased aggregate demand, consumption of goods and services produced in Kazakhstan.

In taxation system, progressive taxation must not be limited to the individual income tax rather it must cover all the important sector of its national economy and channels of production. Singapore is the prime example of a progressive taxation system (individual income taxation) which has enabled to reduce the taxes on business and increase their collection. I must say all recent initiatives of the Kazak President are aimed at improving of the well-being of every citizen of Kazakhstan and shall result in better quality of the human capital and modernization of the society. Moreover, further gasification of the central and northern regions of Kazakhstan and the city of Astana will definitely prevent further environmental degradation. The gas pipeline to be constructed shall attract more investment into Kazakhstan in the days to come.

President of Kazakhstan, Nursultan Nazarbayev announced five social policy initiative i.e. mortgage loaning, reduction of tax burden, quantitate and qualitative higher education, availability of micro-credit and the last but not the least easy and smooth gasification is indeed a “investment of the future” owning to which its youth will be great assets to its economy and society alike in the days to come. There will be further women empowerment in the different regions of the country especially in rural areas. The ratios of poverty will be further decreased. Business activity will be accelerated. Public-Private partnership will be further explored.

Denial of social development usually supports societal fragmentation and produces spirits of divergence in a country.  A sustained social development is the custodian of economic prosperity and political stability. Social development is one of the main sources of job generation. It actually transforms a nation’s thinking towards social justice, law, family, nationalism, pragmatism and above all human values. Keeping in view, the strategic importance of social development a new set of social modernization has been initiated in Kazakhstan by its visionary President of Kazakhstan, Nursultan Nazarbayev.

Social development is the “crown” of any economic system or policy. It is about improving the well-being of every individual in society so they can reach their full potential. It connects “dynasties with dynamics. It is pro-development. It is pro-human because success of society is linked to the well-being of each and every citizen. It is meant to invest in people. It requires the removal of barriers so that all citizens can journey towards dreams in lives and President of Kazakhstan, Nursultan Nazarbayev’s “five social policy initiatives” are the basis of human development in the country.