Any topic which will be raised by the participants, whether concerning the economy, political reforms, human rights or social developments will eventually be related to the improvement of people’s lives. However, nothing deprives people more from better living than corruption and absence of the rule of law.
I am confident that quarter-century is a reasonable time for the oil rich country with small and well-educated population to build diversified economy, grow independent and transparent business and attract strong investments. However, seeing stagnation in all economic spheres, devaluation of national currency, high inflation rates and overall decline in Kazakhstan’s standard of living makes me think that something went wrong.
We all make mistakes. The problem of corruption is common to all Central Asian countries, and the recent FCPA cases, involving high-ranking officials from these countries serve as a demonstrative example. All strategic economic sectors of the countries are riddled with corruption and nepotism. Trying to lower the corruption level, the states employed the least effective “after-the-fact” detective mechanism, which mostly focuses on adopting imperative legislative norms to prosecute state-officials.
Corruption prevention through fostering business integrity is a new subject in the region. The role of the private sector is underestimated and the legislators need to promote business integrity by special measures, such as formalization of compliance function at least for the enterprises in the form of Joint Stock Companies, which securities are traded on the international or local stock exchanges. Currently the working group on introducing such amendments to the Parliament of Kazakhstan is being formed by experts, including myself.
Such legislative innovation needs to be introduced for the private sector to become a strong player in the fight against corruption. Fostering business integrity in private sector will not only have the positive effect on the commercial bribery statistics, but also on the corruption figures related to state officials, as businesses are usually the ones who pay bribes.
This initiative is important to the region, because our countries are looking for serious investments to be injected in the economy and adequate compliance programs need to be rolled out at least in strategic economy sectors of the region, such as oil and gas in Kazakhstan, mining in Kyrgyzstan and textile in Uzbekistan. Conducting a very light due-diligence on any more or less profitable organization almost always reveals connections to the state officials, the connection to very high-ranked officials or their close relatives is always revealed when the company in question is considered to be of a strategic importance, such as energy, extractive industry or banks.
Stakeholders’ confidence is essential, especially at this stage, when Kazakhstan is at the cusp of attracting foreign investments, developing the local capital markets and financial sector and promoting their integration into the global markets by establishing Astana International Financial Centre in cooperation with NASDAQ and anticipated IPO of the state companies, including national oil & gas company KazMunayGas, national air carrier AirAstana, national atomic energy company KazAtomProm and national railroad and postal companies.
In order for these endeavours to be a success and not to repeat the mistakes made over these years, we need to focus on preventive mechanisms of corruption through legislative formalization of compliance function, strengthening independence of business, grow of confidence, ethical business conduct and cultivate intolerance to corruption.
It’s a high time for Kazakhstan to start acting proactively on improving the economic climate because the viability of the Eurasian Economic Union (“EEU”) is in question thanks to Russia’s involvement in the Ukrainian and Syrian conflicts and imposition of economic sanctions.
Due to the geopolitical situation, all Central Asian countries are experiencing side-effects of economic sanctions against Russia and subsequent ruble crisis was a serious problem for national currencies of the EEU member states, but first and foremost to the Kazakhstan tenge which devaluated by almost 100% since 2014. The forecast is that the situation with economic sanctions against Russia will only deteriorate further after Russian Presidential election and concrete steps taken pursuant to the U.S. law, passed in the middle of 2017, codifying these sanctions – “Countering Russian Influence in Europe and Eurasia Act” will fuel the fire.
As a compliance expert with legal background, working in a high-risk country, in terms of corruption, I strongly believe that formalization of compliance function at the state level in Kazakhstan and other Central Asian republics, will deliver benefits in the form of lowering the corruption index, confidence of investors, grow of independent business, which capital is formed based on international investments and as a result born of independent lobbying power in the political arena of Central Asia, which will ultimately shape the future of the region.