Kazakhstan and its Implication in Economic Prosperity of Nepal

Kazakhstan is the ninth largest country and largest landlocked country of the world. It is 27^th most corrupt country of the world and ranks forty position behind Botswana in the ranking of economic freedom published by the Heritage Foundation. The country has been ruled by same president- Nursultan Nazarbayev- since its separation from Soviet Union in 1991.  The president has slashed free media so as to make it non existential, has arrested opposition leaders, and “has passed laws making it impossible for new political parties to form” (infoplease). It is not difficult to surmise, in light of these evaluations of Kazakhstan’s political aspects, the motivation for making of the film BORAT even though the slandering of political and social aspects of Kazakhstan is a massive hyperbole in the film! 

The book Why Nations Fail completely ignores Kazakhstan when describing extractive institutions in Central Asia but if Corruption Perception Index for Kazakhstan is any indication of level of extractive political institutions, it definitely is exacerbate.   “[Kazakhstan] is a part of current mosaic societies under extractive institutions, and unfortunately it has many commonalities with other Soviet Socialist Republics- Armenia, Azerbaijan, Kyrgyzstan, Tajikistan, [Uzbekistan] and Turkmenistan” (Robinson & Acemoglu, 2013, p. 372). Despite all these factors, Kazakhstan is the richest central Asian per capita with GDP per capita (PPP) of 13,200 US dollars as of 2013. How could Kazakhstan -but no other countries listed above- achieve an economic growth of above eight percent despite lacking sound political institutions? We will answer this questions at the end of the article, but let us first review what literature tells us in this regard.

Some scholars- prominent of which are Acemoglu and Robinson-assert that inclusive economic and political institutions are very important because economic growth and prosperity are associated with inclusive political and economic institutions as we mentioned in the case of Botswana. They claim that geography and resources alone cannot determine prosperity of the country, but it is upon economic and political institutions of the country which leads the country into greater economic growth.  The United States being richer today than geographically well suited and resource rich Mexico or Peru (Ibid, p. 42), the contrast of economic development of South and North Korea (Ibid, p. 75) and rapid economic development of countries such as Singapore, Malaysia and Botswana despite having a very hot climate (Ibid, p.49) are arguments in favor of institutions over geography and economic resources.

 However, resource rich countries such as Russia, Iran, Saudi Arabia or Venezuela have achieved satisfactory economic progress in spite of what we would call as extractive institutions and restricted economies. This phenomenon has led Thomas L. Friedman to devise the first law of Petro politics, which states that democracy and oil- an important economic resource or perhaps the most important- do not mix (Friedman, 2006). Other research suggests that oil wealth impedes the democratic transformation in authoritarian states and that “oil wealth lengthens the tenure of authoritarian rulers, although this result is somewhat fragile” (Ross, 2008), oil rich Kazakhstan, as we will explore later, being no exception.  Moreover, these countries are unlikely to go through  a "fundamental transformation" of extractive institutions towards inclusive institutions, for their economic growth is generated by "the increase in the value of the natural resources" (Robinson & Acemoglu, 2013, p. 445).  

Institutional explanation does not account for the reason of Kazakhstan’s prosperity but the explanation from resources perspective does. Kazakhstan is a one of the resource richest country per capita as it has the every single element of Mendeleev's periodic table on their land. On top of that, it has an abundant supply of uranium(first) petroleum and natural gas(11th largest reserve in the world), potassium (main export), uranium, chromium,  lead, and zinc (second largest reserves in the world) , manganese(third largest reserve), copper(fifth largest reserves) and coal, iron, and gold(ranks in the top ten) ,and to a less extent  diamond (Mineral Wealth, 2013).  

Nepal is different from Kazakhstan or Botswana for it underwent civil war and political restructuring after adoption of democracy in 1951.  An explanation is that Nepal lacked as much economic resource as Kazakhstan, modern technological advancement and industrialization to spearhead economic boom in the country as Kazakhstan did. In addition to lack of as much economic resources as Kazakhstan, the failure of economic boom in Nepal, as we discussed in the earlier post, was because of short-sightedness of Ranas and political players thereafter, which made the country devoid of creative destruction in industrialization, technology and education sector. While the economic boom in Kazakhstan has held back Kazakh from revolting against its extractive political institutions, the relative deprivation in Nepal led to civil war, political instability, and lower economic growth.

So, we can conclude that inclusive political and economic institutions in conglomeration with economic resources pave a way for virtuous cycle of economic prosperity and political stability. While countries with extractive political institutions in conglomeration with large economic resources can produce a large economic growth and maintain political stability, countries without substantial economic resources may fall in a vicious trap of failure to establish an inclusive institution, to remove extractive institutions, to maintain political stability and to have a high economic growth.It seems there is no alternative to embracing inclusive political and economic institutions in Nepal.

Note:

Extractive institutions are meant to benefit the selected few by extracting from many,while inclusive institutions, on the other hand, distribute power in a pluralistic manner, enact rules of law, and encourage investment in new technologies and skills which are conducive to pluralistic  economic growth.

References:

Friedman, T. L. (2006, May 1). The first law of petropolitics. Retrieved from Foreign Policy: http://www.foreignpolicy.com/articles/2006/04/25/the_first_law_of_petropolitics

infoplease. (n.d.). Retrieved from Kazakhstan : http://www.infoplease.com/country/kazakhstan.html?pageno=3

Mineral Wealth. (2013). Retrieved from Bussiness and Econmy: http://prosites-kazakhembus.homestead.com/mineralwealth.html

Robinson, A. J., & Acemoglu, D. (2013). Why Nations Fail. New York: Public Affairs in Papers.

Rodrik, D. (2003). In search of Prosperity. Princeton and Oxford: Princeton University Press.

Ross, M. (2008). Retrieved from CiteSeer: http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.387.1268