Even critics of social reforms were obviously baffled by the announced program to protect the most vulnerable section of the population. Strictly speaking, the planned increase of the pension is barely enough to catch up with the minimal subsistence level of 5211 tenge ($34). But it is the first time in the last decade that the president has declared in his annual address a clear-cut scheme which signals a change from high-sounding macroeconomic preoccupations to the down-to-earth needs of the masses. Probably for this reason, the announced program was accepted by the wider public as a turning point ushering in a new welfare policy.

Kazakhstan lost many years trying to step up social reforms, often patterned on western models, by painful trial and error. In June 1996 the parliament adopted the first law on non-state pension funds on voluntary basis. The law failed to revive the system, since the impoverished population could not be persuaded into making contributions to funds. According to the director of the Association of Pension Funds, a non-government body, in the years 1996-1997 arrears of pensions to be paid by the state amounted to 4 billion tenge.

The next attempt was the adoption in 1998 of the updated pension law, which was in essence a slightly adapted model of the Chilean system. The retirement age was advanced from 60 to 63 for male, and from 55 to 58 for female. Given the low life expectancy (57 years for male), it would be naïve to believe that many live long enough to get their hard-earned pensions. People of pre-retirement age are a burden both for government offices and private companies. An employee or a qualified worker often does not stand the competition from young and vigorous educated people well versed in computer skills. In these circumstances, an early retirement with low pension is the only option for many people over 55.

On the positive side, the 1998 law stimulated pension fund managers to widen and upgrade their network of services. While the results of the 1996 reform efforts were utterly discouraging, now there are 16 non-state pension funds operating all over Kazakhstan. Their number, as well as the rate of capitalization of funds, is growing. Despite the collapse of some “bubble funds” and cases of duping contributors in the first half of nineties, public confidence has not been seriously eroded. According to the new law, contributors are free to switch from one fund to another, and it encourages competition among these funds.

The law provides that managers of enterprises and private companies will transfer 10% of their workers’ wages to a pension fund. But many employers are reluctant to do so. The existing regulatory mechanisms of the pension system leave a number of loopholes. According to Labor and Public Welfare minister Gulshan Karakusova, out of the total number of 1,690,000 retired people of Kazakhstan, 900,000 receive less than $40. She believes that the pension system of the country should be revised and the amount of the retirement pension must be strictly pegged to the last active year’s income and the years of service of a retiree, which is not the case under the current regulations.

The government is planning to set aside 20 bln. tenge for next year to increase the pension level. An additional 50 bln. tenge is earmarked for salary raises. However, government officials seem to realize well that financial injections alone cannot solve the problem of poverty and unemployment. They encourage local governors to develop further the network of so-called social relief works to employ the jobless in cleaning the streets and parks. Nearly every city in Kazakhstan has one or two doss-houses with a soup-kitchen, a social rehabilitation center. Apparently it will take many years for the well-thought social schemes to be effectively implemented.