The recently announced “People's IPO”, a new round of public offerings by Kazakhstan's largest and most profitable corporations and companies was designed to address one of the country’s most divisive and contentious issues – the rise of extreme inequality between the very small class of nouveau riches who acquired former state companies for a song, and the large class (up to 70–80 percent) of impoverished citizens. The new ‘People's IPO’ immediately became the center of heated public debate in Kazakhstan. The main question is whether this bold and innovative act by Kazakhstan's government can address the fundamental problem of social inequality.

BACKGROUND: The main streets of Almaty and Astana today are the best examples of a successful transition from the centralized Soviet economy, infamous for its shortages, to a mid-income market-oriented economy with a rising middle class and growing prosperity. Yet, Kazakhstan is a place of sharp contrasts and disparities. For example, the special (Kazakhstan edition) issue of glossy Conde Nast magazine is full of stories about the lives of the so-called “new Kazakhs”, a term reserved for a class of nouveau riches in Kazakhstan. The magazine runs front reports about a top Italian jeweler moving to Almaty and selling diamond bracelets and necklaces for a half a million dollar apiece, about high-end parties with a price tag of US$ 200,000–300,000 per night and about social clubs in Almaty where it is a must for women to display the most expensive clutch-bags in the world to avoid “social death”.

However, just one step away in the city's mikroraion boroughs, rural districts or small towns and cities, the picture is very different. Many people, especially young families, can barely afford the basics; the average income of those agricultural sector wage earners is about US $230 per month. In some remote areas houses still have no water or gas and very often experience power outages. According to official statistics, about 7 percent of the population, over a million people, lives below the poverty line, i.e. about US$ 3.6 or even less per day. The Economist ranks Kazakhstan 48th in the world in its list of countries with the highest unemployment rates. According to the UNDP Human Development Report of 2009, the poorest 10 percent of the population’s share in Kazakhstan’s national income is 3.5 percent, while the richest 10 percent control 25.9 percent. True, the standard of living has steadily risen in Kazakhstan during the last decade, as average incomes rose from US$ 3,200 in 2000 to US$ 8,883 in 2010 (IMF, est.), propelling Kazakhstan into the club of medium-income countries. However, the social contrasts and disparities remain quite visible, leading to growing dissatisfaction and grievances among some groups within society.

IMPLICATIONS: The rise of social polarization in the country has had several long-lasting implications. One of the most visible consequences of this development has been growing regional disparities in the standards of living between urban and rural areas and between resource-rich and resource-poor provinces. This creates a vicious circle as in this environment most foreign direct investments (FDIs) are channeled to very few large urban, industrial and energy-rich centers (i.e. Almaty and Atyrau), while many small cities and towns remain far behind and struggle to catch up. In turn, this development has led to a second important implication; deepening economic imbalances and an economic divides, unequal employment opportunities and the emergence of economically depressed areas, where people and businesses struggle to survive. In the end, these distortions have led to the development of a political divide between the political elite and various formal and informal groupings. Although the government of Kazakhstan has created a quite comprehensive social welfare system and a system of social subsidies, the differences in living standards and the level of economic development remain significant, while social and political dissatisfaction and grievances are quite profound: according to the Almaty-based Institute for Political Solutions, up to 45 percent of the people surveyed in 2010 expressed their readiness to participate in various protest actions. Kazakh expert Dosym Satpayev believes that the global economic crisis of 2008–2010 contributed to the fact that “our [Kazakhstan's] society is fragmented [and] divided”, with this fragmentation further deepening grievances and potentially giving rise to a politically explosive situation.

Designed to address the social polarization and grievances over economic inequality, the ‘People's IPO’ was debated by Kazakhstan’s government against the backdrop of the revolution in neighboring Kyrgyzstan in spring and summer 2010. It became obvious to many experts and policy-makers in Kazakhstan that it was the issue of social injustice and economic polarization that brought thousands of young people to the streets of Bishkek, Osh and other major cities. After lengthy governmental debates, President Nazarbayev officially announced the ‘People's IPO’ on February 11, 2011. The announcement was an indication that the government had decided to abandon the state-led wealth-redistribution model of economic development (as seen in many countries in the Middle East and in Russia) and to introduce a kind of hybrid participatory model. 

CONCLUSIONS: In the opinion of Prime Minister Karim Masimov published in the Tengrinews, this step would provide “an opportunity for every Kazakh citizen to become a shareholder and benefit directly from large national companies known as ‘national leaders’” and thus, these citizens could become stakeholders in the economic policy of the state. Astana hopes that the sale of shares in the specially identified 22 largest national companies, an offer exclusively available to citizens of Kazakhstan (no foreigners are allowed to participate in the IPO at this stage), will not only help to redistribute a part of the national wealth, but also to create a vast class of shareholders who would have a stake in the economic growth of the country. The government officials suggested that shares in these companies, including the highly profitable KazMunaiGaz, KazAtomProm, and Samruk-Energo, would be sold below their market price. According to Masimov, the government believes that “private shareholders (a shareholder is an owner) have a powerful incentive to demand high levels of performance from company management, which is something we want to encourage”. In order to succeed and to effectively address the problems of social polarization, however, the government should make its process more transparent at all stages, devoting more time and energy to educating the population, especially in areas outside the largest urban centers, and in short do everything possible to curb corruption and inefficiencies.

AUTHORS’ BIOS: Rafis Abazov, PhD, teaches at SIPA, Columbia University and Hunter College (New York). He is author of The Formation of Post-Soviet International Politics in Kazakhstan, Kyrgyzstan and Uzbekistan (1999), The Culture and Customs of the Central Asian Republics (2007) and editor of Green Desert: Life and Poetry of Olzhas Suleimenov (2011). He has been awarded an IREX 2010–2011 EPS fellowship (Title VIII program) for research on political development in Kazakhstan. Dilara Istybayeva is a PhD student at School of Journalism at Kazakh National University, Almaty, Kazakhstan.