Each region is headed by a governor appointed by the president and a directly elected council. There are also city, town and village governments. There are now 14 provinces and three cities. In 1997 the number of provinces (oblasts or “oblastars”) was reduced from 19 to 14. In the early 1990s there were 17 oblasts, with 218 rural and 33 urban districts. The capital is Astana.

The governors of the provinces and districts, called “akims”, are appointed by the president. In 2006 a reform measure established direct elections for local governors, who previously were appointed by the “akims”. At city, district, and province level, the legislative body is the council (“maslikhat”), which is directly elected but has only budgetary and tax-raising power. The province “maslikhats “also elect the members of the national Senate from their provinces. [Source: Library of Congress, December, 2006]

The local legislatures lack the authority to choose the local executive, who is appointed directly by the president. The local executive has the job of ensuring that decisions of the national government are enforced and that the constitution is observed. Province and regional "heads of administration," known by the Russian term glav or the Kazakh term hakim , are presidential appointees. The hakim , in turn, appoints the members of his staff, who are the department heads of the jurisdiction. The hakim also can reverse budgetary decisions of the local councils. [Source: Library of Congress, March 1996 *]

There has been considerable pressure, especially in the predominantly Russian north, to make the hakim posts elective rather than appointive. In 1994 Nazarbayev indicated that he would consider doing so, but the 1995 constitution provides only that the local councils can express no confidence in their hakim by a two-thirds vote. The president also has the power to override or revoke decisions taken by local councils; a hakim has the power to control budgetary decisions taken by the local council. *

Administrative Divisions in Kazakhstan

Administrative divisions: 14 provinces (oblystar, singular - oblys) and 3 cities* (qalalar, singular - qala); Almaty, Almaty*, Aqmola (Astana), Aqtobe, Astana*, Atyrau, Batys Qazaqstan [West Kazakhstan] (Oral), Bayqongyr [Baykonur]*, Mangghystau (Aqtau), Ongtustik Qazaqstan [South Kazakhstan] (Shymkent), Pavlodar, Qaraghandy, Qostanay, Qyzylorda, Shyghys Qazaqstan [East Kazakhstan] (Oskemen), Soltustik Qazaqstan [North Kazakhstan] (Petropavlovsk), Zhambyl (Taraz). note: administrative divisions have the same names as their administrative centers (exceptions have the administrative center name following in parentheses). [Source: CIA World Factbook =]

In 1995, the Governments of Kazakhstan and Russia entered into an agreement whereby Russia would lease for a period of 20 years an area of 6,000 square kilometers enclosing the Baykonur space launch facilities and the city of Bayqongyr (Baykonur, formerly Leninsk); in 2004, a new agreement extended the lease to 2050. =

In 1997 an administrative reform reduced the number of Kazakhstan’s provinces from 19 to 14. The cities of Almaty, Astana, and Baykonur have the same status as provinces. The 1997 reform divided the country into 160 districts and 10 municipal districts.

Provinces are divided into regions that consist of a number of settlement points. Each province and region and most settlements have their own elective councils, charged with drawing up a budget and supervising local taxation. Cities have their own local councils as well, and large cities are divided into regions, each of which has its own council. [Source: Library of Congress, March 1996]

Bureaucracy in Kazakhstan

The old Soviet-era Communist Party bureaucracy remains in place. Describing a day in the life of a Peace Corp volunteer, Bruce Watson wrote in Smithsonian, “Up early. Visit the Ministry of Foreign Affairs to register for something Kafkesque. “Nyet”, not possible today. Come back tomorrow Go the train station to but a ticket for next week. “Nyet”, o tickets. Tomorrow. Off to work for a few hours, then to the Ministry of Education to register for something cryptic. “Nyet”, not possible today. Try next week.”

According to Expat Arrivals: “The post Soviet bureaucracy in Kazakhstan is highly developed, confusing and often frustrating to both expatriates and Kazakhstanis alike. The bureaucratic nightmare, more than anything else, is often the biggest cultural shock for expatriates arriving in Kazakhstan. On arrival all expatriates are required to register with the authorities (employers will often arrange this) and renew the registration each time they leave the country or every 90 days if they have not gone abroad in that time.

In 2014, Kazakhstan President Nursultan Nazarbayev announced a restructuring of the Kazakhstan’s bureaucracy. Nazarbayev said: “I went through all the stages of leadership: from the bottom, to the enterprise, and to the national level.. In a department of 10 people, two of the 10 work, and eight are sitting around. Is this not true?” As a result,“I decided on a new structure of government consisting of 12 ministers, about 30 committees instead of the 17 ministries, nine agencies, 54 committees and 272 departments today. All nine agencies are abolished and transferred to the ministries in the form of committees.” [Source:Astana Times, August 19, 2014 |::|]

The Astana Times, reportedl: “The President highlighted the fact that over the past 10 years, the bureaucracy in Kazakhstan grew by 8,500 people. The 3.5 fold increase in the costs of maintaining the large amount of state employees means that 600 billion tenge ($3.3 billion) is currently spent on 90,000 civil servants. Such expensive upkeep costs are wasteful for the government budget and usurp resources that are needed for much-needed development projects. Also, the time spent in various level government meetings doesn’t allow for work to be carried out in an orderly fashion. Work is frequently being interrupted.” |::|

Taxes and Budget of Kazakhstan

Taxes and other revenues: 18.6 percent of GDP (2014 est.), country comparison to the world: 174. Budget surplus (+) or deficit (-): -1.6 percent of GDP (2014 est.), country comparison to the world: 71 Public debt: 12.1 percent of GDP (2014 est.); 13.8 percent of GDP (2013 est.), country comparison to the world: 148. Fiscal year: calendar year. [Source: CIA World Factbook =]

In 2002, oil made up 20 percent of all the budget revenues. In January 2004, the maximum rate of income tax for individuals was reduced from 30 percent to 20 percent. Kazakhstan could afford to do this because of the large amounts of oil money coming in at that time. Also in January 2004, the value added tax (VAT, sales tax) was reduced from 16 percent to 15 percent. In an effort to bring back money stashed abroad, the government offered amnesty on tax payments of the money was brought back into the country.

After the national budget ran deficits of 3 to 4 percent of gross domestic product in the late 1990s, revenues and expenditures were approximately equal in the first years of the 2000s because of increased oil revenue and currency reform. In 2004 tax cuts and increased expenditures brought a budget shortfall of about US$1.2 billion. The shortfall in 2005 decreased to US$250 million. The 2006 national budget called for revenues of US$11.0 billion and expenditures of US$11.8 billion, creating a projected shortfall of US$800 million. The approved budget for 2007 calls for expenditures of US$14.9 billion and revenues of US$16.6 billion, a projected surplus of US$1.7 billion. In 2004 Kazakhstan reduced its value-added and payroll tax rates, while the corporate tax rate remained the same. [Source: Library of Congress, December, 2006 **]

State revenue is derived primarily from various taxes, the introduction of which has been somewhat problematic. A fundamental revision of the national tax code in 1995 reduced the number of taxes from forty-five to eleven and the volume of prospective revenue by 17 percent. Five national corporate taxes remained after the reform, which reduced the corporate tax rate to 30 percent. Prior to that revision, the largest contributions to state income were business-profit taxes (15 percent); a uniform, 20 percent value-added tax, a personal income tax (ranging from 12 to 40 percent and accounting for 16 percent of tax income); and special-purpose revenue funds (17 percent). However, the system has suffered from chronic undercollection. The primary long-term goal of the 1995 tax reform was to encourage fuller compliance with tax laws. The 1996 budget called for reducing the deficit to 3.3 percent of GDP. [Source: Library of Congress, March 1996 *]

Kazakhstan Government and Foreign Oil Companies Fight Over taxes

Many of the lucrative oil contracts struck with the Kazakhstan government by foreign oil companies were signed when Kazakhstan was still in the early stages of developing a national government, and many in Kazakhstan thought the terms given foreign oil companies were too generous. The government decided to take a stand on the issue and demanded that tax term be “clarified” so that the government could get higher tax revenues and larger stakes in the profits. The foreign oil companies cried foul and some long and bitter disputes ensued over the contacts, which in some cases for 25 years.

A new amendment added to Kazakhstan tax laws in the early 2000s, raised the government share of oil income from 65 to 85 percent and removed a clause that stated that tax rates would not be increased during the duration of the contracts. Analysts regarded the rate as exorbitantly high especially when one considers there is so much risk, uncertainty and expense searching for oil, especially in Kazakhstan. Many oil companies and investors were turned off by this move. One analyst told the New York Times, “Host governments understand the majors are desperate for big projects. You can have horrendous terms and they will still come and invest, but here the terms are so horrible that the companies are staying away.”

Kazakhstan’s finance minister Zeinulla Kakimzhanov said, “To say that the investment climate here is bad is nonsense. The figures bear that out. I can only think that the companies who are thriving here want to reserve this ‘bad’ image. They want to keep everything for themselves, and don’t want any competition.”

Chevron and Kazakhstan Government Tax Dispute

The conflict between the Kazakhstan government and foreign oil companies came to a head in November 2002 when the government and Chevron (Tengizchevroil) became involved in a bitter dispute over taxes. The dispute began when Chevron began moving forward on a $3.5 billion expansion of the Tengiz oil field, using revenues from the project. The Kazakhstan government protested saying the move would cut into its tax receipts.

The dispute drew international media attention. Chevron suspended the expansion program. A compromise was reached in January 2003 but not after ruffling a lot of feathers in the oil world and damaging Kazakhstan’s image as a good place to invest.

In the deal the Chevron consortium agreed to pay $810 million to the Kazakh government, $600 million of it in tax payments, paid in installations through 2005. In addition the consortium took out a loan to cover the Kazakhs government’s share of the expansion. On analyst told the New York Times, “At the end of the day, no one was willing to drive off a cliff. Everyone really wanted it solved.”

Welfare in Kazakhstan

Although the 1995 constitution retained many Soviet-era social protections, the state’s funding level and service bureaucracies have not been able to provide adequate benefits for retirees, the disabled, the unemployed, orphans, and the infirm and elderly. Pension payments have been in arrears because of a demographic imbalance between pension contributors and pension recipients and because of tax collection failures. [Source: Library of Congress, December, 2006]

The Soviet system of social welfare, which remained in place in Kazakhstan in the early 1990s, presupposed a very high level of public services. The 1993 constitution maintained most of the assumptions of the Soviet era without providing a clear mechanism for paying for "guaranteed" workers' benefits such as free education, medical care, pensions, and vacations. The constitution ratified in 1995 somewhat reduces the list and scale of guaranteed protections, but remaining guarantees include a minimum wage, pensions for the retired and the disabled, social benefits for orphans and for people who are elderly or infirm, legal assistance, housing, and what is called "social defense against unemployment." [Source: Library of Congress, March 1996 *]

In practice, social benefits have proven difficult to supply because of financial considerations and the lack of a firm organizational structure for service provision. For example, in the Soviet period housing was supplied by the state or by employers. In 1990 housing began to be privatized, a process almost completed by the mid-1990s. The result has been a healthy resale market for existing housing. In 1995 apartment costs in Almaty could exceed 15,000 tenge per square meter, but there had been no corresponding boom in new housing construction, in part because privatization of the land on which such housing would stand remained a sensitive and unresolved issue. As a result, the republic's housing crisis, already acute in the Soviet period, has grown far worse. In the mid-1990s the housing shortage was especially serious in Almaty, where tens of thousands were on waiting lists. In 1995 housing construction decreased by about 25 percent. *

Unemployment is perhaps the most difficult category of social problem because it is a phenomenon that officially did not exist until 1991 and still carries a considerable social stigma. As of January 1, 1995, some 85,700 people officially were registered as unemployed, about 55 percent of them in rural areas. However, this figure is commonly assumed to be too low because many workers still are nominally employed, even though their salaries have been reduced or stopped altogether under a variety of cutback conditions. In January 1995, some 230 enterprises, with a normal work force of about 51,000 employees, were standing idle; by April 1995, the number had grown to 376 enterprises with more than 90,000 employees. *

Pensions and Social Security in Kazakhstan

Kazakhstan has a relatively new pension system modeled after the Chilean pension system. In 1997 the government began replacing its inefficient pay-as-you-go pension system with individual pension funds overseen by the National Bank of Kazakhstan. By 2005 nearly all funds were privately run under the supervision of the Ministry of Labor and Social Protection. In 2005 some 85 percent of Kazakhstan’s workers were participating, and the system—the first private pension system in the Commonwealth of Independent States—had US$3.7 billion in assets, some of which the government reportedly was to use in building new electric power stations. [Source: Library of Congress, December, 2006 **]

Employees and the self-employed pay 10 percent of their income into mandatory retirement accounts. Under the new program, pensioners whose payments fall below a minimum amount are eligible for social assistance, as are individuals not eligible for contributory benefits. In 2004 social security and public assistance received 24.4 percent of state budget allocations. **

An independent pension fund was created in 1991 on the basis of a social insurance tax on enterprises (37 percent of wages in 1992) and contributions by employees (1 percent of wages in 1992). The national budget nominally covers remaining deficits in the pension fund. Pensions initially were set at 60 percent of average pay, with minimal pensions available even to elderly citizens such as housewives who never had drawn a salary. However, the high inflation of 1991-93 badly eroded existing pensions; the state has continually adjusted pensions upward in a futile struggle to keep pace. In addition, the administration of pensions has been reconfigured several times, leading to lengthy delays in the payment even of the small sums pensioners are owed. Such delays have prompted numerous public demonstrations. Although the value of pensions has shrunk dramatically in real terms, by 1992 government expenditures on them were 4.7 percent of the GDP. In March 1995, the government had to divert 632 million tenge from the national budget to cover pension arrears. [Source: Library of Congress, March 1996 *]

Similar problems have occurred in other categories of allowances to citizens, especially lump-sum payments to newborns; child allowances to large families (those with four or more children) and abandoned children; assistance to single mothers; and assistance to the children of soldiers. In 1992 payments in these categories reached 5 percent of Kazakhstan's GDP. Slow payment and the lag between inflation and cost-of-living adjustments have had a particularly severe effect on Kazakhstan's poorer families, for some of whom government subsidies provide as much as one-quarter of total income. In 1994 about 2.1 million citizens received retirement pensions, and about 800,000 received other types of pension.

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, U.S. government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

Last updated April 2016

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