Kazakhstan’s WTO Accession Providing a Gateway to the World

By Martin Sieff

2013 should be the year that Kazakhstan finally joins the World Trade Organization after a 17- year accession process. The road has been a long one. “Kazakhstan is at an advanced stage of its accession negotiations. My guess is that this could be doable this year,” WTO Director General Pascal Lamy told reporters on the sidelines of the Gaidar Forum, an economic conference in Moscow on Jan. 17.

Kairat Umarov, Kazakhstan’s new ambassador to Washington agrees with this analysis. “We are optimistic that Kazakhstan will soon become part of the World Trade Organization. Those talks are continuing apace and we are confident that they will succeed and we will become a full partner in the global trade regime,” he told a meeting at the Johns Hopkins School for Advanced International Studies in Washington, D.C. on Feb. 13. Umarov told his audience that full WTO membership “would be a milestone for a young nation.”

Kazakhstan first submitted its application for WTO membership back in 1996. But Umarov explained why the negotiations, by their very nature, have taken so long. “The Working Party on Kazakhstan’s accession to the WTO consists of 39 WTO member-states with 27 European Union member states as one party,” he said. “Kazakhstan has signed protocols that capped off bilateral negotiations on goods markets with 30 WTO member-states including United States and the European Union.”

The United States and Russia both support Kazakhstan’s accession as soon as possible. Kazakhstan completed in 2010 its six-year, complex negotiation process with the Bush and Obama administrations. And in 2012, Russia, Kazakhstan’s partner in the Eurasian Economic Community, the Common Economic Space and the Customs Union also completed its long accession process and finally became a full member of the WTO. Given the close trading and growing economic ties between the two nations, Russia’s success made it far easier for Kazakhstan to clear up many of the remaining details in its own accession process.

Kazakhstan first applied to join the WTO less than five years after achieving full independence from the Soviet Union. Since then, its economic progress has been significant. Yet despite its success, the hydrocarbon-rich Central Asian state is one of the few countries in the world that remains outside the international trading club. Membership is expected to launch a new wave of massive economic growth by opening the Kazakh economy to far more foreign investors.

Experts note that long accession negotiations are the rule, not the exception, for emerging market nations and former Soviet republics. Most of the nations in the Commonwealth of Independent States (CIS) have not entered the WTO yet except for Armenia, which joined in 2003; Georgia in 2000; Kyrgyzstan in 1998; and Moldova in 2001. Nor is full WTO membership an automatic guarantee of rapid growth and prosperity. Armenia, Georgia, Kyrgyzstan and Moldova have not achieved significant economic success as a result of their memberships.

shutterstock_108226607However, full membership is likely to mean far more for Kazakhstan precisely because it has already integrated successfully into the global community. Full WTO membership, if granted this year, will come right after Kazakhstan has launched its new Strategy 2050 to become one of the 30 most competitive nations in the world by 2050. As a result of Kazakhstan’s previous program, Strategy 2030, the country is already rated one of the 50 most competitive nations in the world in major listings. And the World Bank’s most recent Doing Business Report lists it 25th out of 185 nations for the ease with which new businesses can be established. Kazakhstan is also implementing a “New Silk Road” program to construct the largest and most modern road and railways passenger and cargo transportation system in Central Asia. This will make the country the key crossroads for trade between Western Europe and the great industrial economies of China and the rest of Northeast Asia. “The construction of so much major road and rail infrastructure there cements its natural geographical position and serves the interests of China and Europe as well as those of Kazakhstan itself,” Charles W. Freeman, former U.S. Ambassador to Saudi Arabia and China, told EdgeKz.

Kazakhstan, therefore, is far more prepared to take full advantage of joining the WTO than it could have done had it joined the organization 10 or 15 years ago. Within only the past five years, Kazakhstan has become one of the world’s leading food producing and exporting nations on a level comparable with Argentina, Canada and Australia. It has done so by adopting advanced ecological practices of renewable and sustainable farming. “Kazakhstan’s accession to the WTO should be welcomed by all,” Freeman told EdgeKz. “The world needs all the meat and grain that Kazakhstan can produce. Its emergence as a major food producing nation is a boon to augmenting total global food resources.”

The long, tortuous nature of the WTO accession process Kazakhstan has experienced is not unique. It took 15 years for China to finally become a member in 2001. Russia applied in 1993 and after 19 years of stop-start negotiations finally entered the WTO last year. Before the WTO was created, nations could join the previous global trade-promoting international organization, the General Agreement on Tariffs and Trades (GATT) more quickly. However, the WTO covers more policy areas than the GATT and negotiations to join it are, therefore, longer and more complicated.

Also, the process to join the WTO is more political. The issues governments need to negotiate and reform during the accession process are at the heart of domestic politics. Geopolitical considerations may also be involved. Finally, countries wanting to join the WTO are often in the process of transition from being a command economy to becoming a market economy. That transition requires a fundamental reorganization of economic and political structures. The task for Kazakhstan was an enormous one. But it’s been successfully completed.

Strong Domestic Economy

From the beginning of the 21st century, Kazakhstan’s growth was boosted by a global boom in commodity prices. The giant economy of China became the greatest engine for economy growth in Asia and vast quantities of Kazakhstan’s oil, gas and uranium began to be exported to the world’s most populous nation to provide a secure and close energy resource for its continued growth. Today, Kazakhstan is the largest economy in Central Asia. It has built a stable and prosperous economy that is rapidly catching up with the developed world. During 21 years as an independent nation, Kazakhstan has made significant progress in implementing complex political, economic and social reforms to establish a democratic state with a market economy.

shutterstock_9088621Despite the temporary disruption of the 2008-9 global economic crisis, over the past decade, the country’s GDP growth rates, for example, have been among the highest in the world. By 2016, Kazakhstan’s GDP per capita is expected to reach $15,000, compared with the current level of $11,300, and Kazakhstan will be classified as a “high-income economy” by the World Bank.

The nation that is looking forward to joining the WTO this year is, therefore, a vastly different one from the still poor country struggling to break free of its old communist associations when the WTO accession process began in the mid 1990’s. Kazakhstan is now a vibrant, powerful participant in the global economy even before it joins the world trade body. WTO membership, therefore, offers far greater opportunities today than anyone in the Central Asian nation could have imagined 17 years ago.

Negotiating the Details

Kazakhstan’s negotiators with the World Trade Organization know that the end of a 17-year process is not a time to rush the details. The country’s chief negotiator on the process, Minister for Economic Integration Zhanar Aitzhanova, is not willing to cut corners or put the country’s long-term interests at risk just to close the deal. “(A) WTO accession date is important for us, but (negotiating the most favourable) conditions for Kazakhstan are more significant,” Aitzhanova told a conference on economic integration in Astana on Oct. 15, 2012.

Now, the long, slow and careful process is almost done. On Feb. 13, Kairat Umarov, Kazakhstan’s ambassador to the United States, addressed the Central Asia-Caucasus Institute (CACI) at Johns Hopkins University School of Advanced International Studies (SAIS) in Washington, D.C. and spelled out some of the details of the careful negotiations and deals that are liberalizing Kazakhstan’s economy and clearing the final issues for full entry into the WTO.

“The gradual liberalization of key sectors of the economy is proceeding together with Kazakhstan’s bilateral negotiations on access to the services market,” the ambassador told his audience. “Kazakhstan will eliminate the 49 percent limitation on foreign participation in (the) telecommunications sector,” Umarov said. “In addition, the 49 percent foreign-capital restriction for joint ventures supplying architectural, urban-planning, construction and engineering services has been eliminated.”

In a far-reaching concession, the ambassador said “legal entities of Kazakhstan with 100 percent foreign ownership will be allowed to provide these services.” Umarov pointed out that in the financial services sector, his country had already taken major steps towards liberalization. “Back in 2006, Kazakhstan eliminated the 50 percent limitation on foreign participation in the banking and insurance sectors,” he said. “Accession to the WTO has always been and remains a foreign policy priority for Kazakhstan,” the envoy said. “To make that happen Kazakhstan has implemented comprehensive reforms aimed at building sustainable market economy policies and institutions.”

Umarov acknowledged that “one of the major challenges still being addressed by the government is how to balance implementation of Kazakhstan’s key economic priorities, economic diversification and the development of processing industries with the country’s commitments to WTO accession.

“In particular, we are carefully reviewing the policies applied by WTO members to facilitate development of ‘services based’ industries, which supply new types of services and produce high value-added goods in a WTO-consistent way,” he said. Umarov also added that Kazakhstan has submitted draft legislation that will assist the implementation of WTO agreements in such key areas as customs, technical barriers to trade and licensing and sanitary and phytosanitary (keeping plants free from pests and diseases) regulations.

The Nation’s Chief Negotiator

Kazakhstan’s chief negotiator on the WTO accession process is the right person in the right job at the right time. This description perfectly fits Zhanar Aitzhanova, Kazakhstan’s formidably accomplished, Harvard-educated chief negotiator to join the World Trade Organization.

The 47-year-old Aitzhanova previously served as Minister for Economic Development and Trade before being appointed Minister for Economic Integration in 2011 and taking on the enormous job of handling the complex series of bilateral and multilateral negotiations needed to clear the way for Kazakhstan’s entry into the WTO.

Aitzhanova-Economics-Integration-MinisterAitzhanova proved to be the perfect choice for the job and is an example of the new generation of the rising, sophisticated and meritocratic leaders who are navigating Kazakhstan’s many opportunities to engage with the global economy in the new century. Like so many Kazakhs of her generation, Aitzhanova’s life has spanned two very different worlds. She was born into an obscure corner of the Soviet Union, forgotten by most of the world for centuries. When she was only 26, she witnessed the chaotic disintegration of the Soviet Union and the collapse of communism and boldly seized the opportunities available for herself and her country in a suddenly open, free new world. Now, still in the early prime of life, she holds one of the highest political position than women have held in the history of her country. And she is playing a central role in piloting it to a central place in the emerging global economy of Eurasia, where Kazakhstan occupies the crucial position of transportation, trade and communications hub of two continents – Europe and Asia.

Fluent in English and German as well as Russian, Aitzhanova is equally at home in Moscow, New York, Vienna and Washington. From 1982 to 1988, the young Aitzhanova studied and then completed her graduate studies in the Department of History at Kazakh State University, Almaty. In 1996-97, she studied Economics and Finance at the Joint Vienna Institute in Austria and in 2003 took a Master’s in Public Administration at the John F. Kennedy School of Government at Harvard University. She then served in the United Nations Development Program from 1996 to 2002 and for three years as the UNDP’s Program Manager, Cluster I, Central Asia, Regional Bureau for Europe and Commonwealth of Independent States, based in New York. This gave her unparalleled experience and insight into the trade and business dynamics of Central Asia and the entire post-Soviet space in the new world following the collapse of communism. It also made her the natural choice to become her country’s chief negotiator in the WTO accession process, serving also as Vice-Minister of Industry and Trade from 2003 to 2010.

In March 2010, she became Minister of Economic Development and Trade and earned widespread commendation for her contributions in helping restore robust growth following the disruptions of the 2008-9 global financial crisis. Little more than a year later, she took up her current position with increased powers to see the WTO accession to a successful conclusion.

Charming, articulate and witty in person, she has a remarkable mind and has won acclaim around the world as a great trade negotiator. Behind her relaxed charm and attractive personality, she has a reputation as a tireless workaholic who will spend endless hours to master her briefing papers and negotiating issues. She is now a familiar presence at the annual World Economic Forums in Davos, Switzerland. Her grasp of the meanings, details and nuances of myriad trade issues is unparalleled. She has become a leading trade adviser to President Nursultan Nazarbayev and Prime Minister Serik Akhmetov. She passionately shares their vision of a prosperous and secure Kazakhstan thriving under a regime of free trade and a welcoming climate for business as the cosmopolitan business hub of Eurasia.

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