Kazakhstani president Nazarbaev decided to leave the article 26 of the constitution in its previous revision, for the time being, because it didn’t find a support among the general population. We asked the experts to examine this decision and its consequences.

According to Nursultan Nazarbaev, during nationwide discussions of constitutional amendments, “over 70 percent supported the idea of changing article 26, however, there were other opinions as well.”

“The has to with ownership rights. Some people think that the concept of ownership only applies to ownership of land. Because during the passing of the land reform people had questions. There needs to be a unified opinion on the subject. Considering that any political decision has to weighted, uniting people and consolidating people around common goals, it has been decided to keep article 26 in its present form, without any revisions” noted the president during a joint meeting of the chambers of Kazakhstani parliament on march 3^rd.

For and against

Let’s remind our readers, what exactly didn’t suit the public about the amendments to this article.

First of all, there were fears that the new version of the article will lift the moratorium for selling land to foreign citizens.

Lawyer, Ersain Rahmetulin on his Facebook page, while describing the situation in detail, noted that if today according to constitution, Kazakh citizens can have in their ownership any legally acquired property, there are restrictions imposed on foreigners, outlined in certain constitutional norms of the Kazakh Republic. In particular, the land code of the Kazakh Republic, only talks about foreigners rights to lease land.

“If they make amendments into clause 1 of the article 26 of the constitution and it will then say: Anyone can have ownership rights to any legally attained property, we will then know that along with citizens of Kazakhstan, foreigners and individuals without citizenship also get constitutionally guaranteed rights to own any legally attained property. As we know, constitution has the highest judicial power and direct influence in the entire territory of Kazakhstan. Laws and other legal enactments cannot be in conflict with it and should follow its norms, i.e. restrictions listed in the laws of Kazakh Republic for foreigners and non-citizens must be lifted and this includes restrictions listed in the land code” – the expert says.

However, it is not only the ownership rights issue that confused lawyers.

On his Facebook page, lawyer Johar Utebekov noted the amendments to the following clause of the article 26: “It is forbidden to enact laws and other legally binding acts that limit or deprive of ownership rights to property, ATTAINED legally unless otherwise covered by constitutin”. This, in my opinion, is the key moment in the whole plan to redistribute ruling powers…Sounds more like a guarantee of retaining property rights, in the case of power transfer, including warranties for properties of foreign companies”.

However, some opinions were in support of the amendments. Experts said that securing ownership rights is necessary and will help make Kazakhstan more attractive to investors, since they will stop worrying about business agreements being breeched, in the case of power changing hands. Heated discussions over article 26 changes lasted for a month. There were even calls for flash mobs and protest meetings in social media. Whether it was due to pressure or for other reasons, Akorda decided to put away the idea of amendments to this article. Thus, two questions arise.

1. What was the point of even starting the discussion on amendments to article 26, considering the issue of property rights has always made Kazakhstanis anxious, to say the least?
2. Now that the issue is no longer relevant to the news, what are some possible consequences of this decisions, say from the point of view of Kazakhstan’s attractiveness to potential investors?

Beating around the bush

As follows from explanations of director of the Center for Latest Research, Andrey Chebotarev, the inclusion by the ruling regime of the amendments to the article 26 into the list of proposed amendments to the constitution of the country, wasn’t coincidental.

“Most likely the proposed revision of this article was included into the project on constitutional amendments with the goal of distracting the public and especially its protest-oriented part, from the main issue relating to redistributing of ruling powers among key institutes of the government. Thus, president’s decision of leaving article 26 as is, wasn’t surprising,” – says Chebotarev.

In his opinion, in doing this, ruling powers satisfied those Kazakhstanis who were fixated on this article and were vocal against revising it. At the same time, they let the most insistent foreign political and business circles, interested in revising that article know that for the time being they can’t do anything.

As for the issue of investment attractiveness, it depends on many factors.

“The situation around article 26, most likely won’t have a serious influence here. On the other hand, in my opinion, foreign business cares about how the transfer of power will take place in our country in the future, and to what extent new administration will be able to secure stability and follow the “rules of the game” with regards to investors, – expert says. Thus, the latter will look at to what extent the added amendments to the constitution correspond to all those factors. However, the ruling elite will conduct constitutional reforms in a way that aligns with their own personal interests and goals, first. Everything else is secondary to them.

Constitution is of no help to investors

The head of Central Asia and Kazakhstan department of the CIS Institute, Andrey Grozin has a differing opinion. He assumes that debates around amendments to article 26, is a reflection of interests of different influence groups. One of them is latifundistas  – “ people who have a real ownership of large swaths of land in wheat producing regions of the republic, and don’t care about any foreign partners or competitors.”

“Of course when we talk about tens and hundreds of millions of dollars, all types of influence mechanisms turn on, including a support for civic activism. This particular subject came to light, and public’s attention was focused on a relatively small number of possible changes.

Of course, you can’t have the whole focus strictly on the land code. But the public’s opinion was formed around such an interpretation. Moreover, nobody is bothered by the fact that foreigners can have and already have an ownership of industrial objects, natural deposits, something that is secured by agreements on division of production, that are classified, and by contracts that weren’t published. But, public is more worried that the Chinese will come and buy everything up.

I allow for the possibility that proposed revisions to the article 26 could be explained as an “anti-anxiety pill” to all interested in it, i.e. no matter in which way the transit  of power will go, ownership is an inalienable right, it will be protected including the ownership rights of foreigners. It is a normal approach. Neither a domestic investor nor a foreign one should worry that in the case the power changes hands he will stand to lose everything. Ownership rights guarantees is a condition of functioning of any normal economic system, based on capitalistic principles of production.

However, it is evident that even if they passed the amendments in the way they were proposed, it most likely wouldn’t have solved the tasks that were put forward in Kazakhstan. Like an old joke goes: The three letter word is written on the shed, but there is only firewood inside. In other words, it doesn’t matter what is said on the paper about property being untouchable and inalienable right, constitution of Kazakhstan is not a US one, they can change it or even ignore its norms. Take Turkmenistan, for example, where everyone forgot, what is said in constitution, during the process of dragging Mr. Berdymuhamedov on the throne, or Uzbekistan, where after the death of Karimov, Shavkat Mirziyoev became president interim, despite what is said in the constitution.

That is as far as politics go. However, one needs to remember that taking away certain businesses from losing opponents, is a sort of a tradition in a post-Soviet space. However, in some cases, it happens in a more or less civilized way, and in other cases, it happens like it did with Rahat Aliev. In other words, after the transit, there will be a group of friends that wins and a group of friends that loses. Whatever norms, they try to put into the constitution today, those who will lose, will have everything taken from them.

As late Nurbulat Masanov said, many years ago, power and ownership are not one and the same in Central Asia, power goes first and then goes the ownership. If you have power, you will have ownership, and if you don’t have the power you will lose ownership in a heartbeat. I think this practice won’t change in the foreseeable future.”

No less detailed was political expert’s answer about the question of what will be the effect of president Nazarbaev’s decision to leave unchanged the controversial article 26 of the constitution about the investment attractiveness of the country.

“I don’t think that it will have any effect, simply because competition rise every year on world investment markets, following the rise of world crises investment markets collapse. Just look at Beijing – Washington relations. By and large it is a collision of two mutually-exclusive models of economic development and models of investment activity. China is fighting to save its position as world’s priority market for investments while expanding its own investment activity. Trump, based on his statements has a totally different model. He wants to re-navigate world investment streams in favor of American domestic economic system.

It is a macro and geo-economics, but it is directly related to Kazakhstan, because competition on world investment markets will keep rising under conditions of colliding of two leading world economies. Unknown will win right now. A compromise would be the best option. Then, the post-soviet space including Kazakh Republic, might get some economic preferences.

Such a scenario is quite possible, because there is a Chinese foreign policy initiative, although they insist it is an economic one, called one belt -one road.  Chinese economy is refocusing on domestic consumption, which will require transport and logistic presence in all nearby regions, which requires investments. In fact, Kazakh Nur Joly program is Astana’s attempt to become a brick in the Chinese transport program wall.

Such development is understandable, since China is the sole source of investments for all of post-Soviet Asia, all of post-Soviet space and a large part of the world. There’s no expecting investments from elsewhere. Trump is focusing on bringing money to America, so it is pointless to rely on investments from over there, at least on large-scale ones like the ones in the 90s when there was investing into major natural resource projects in Kazakhstan.

Thus, if China will keep developing without economic conflicts with other outside centers, we can expect investments to keep coming in. And if the conflict happens, regardless of the constitution says, there won’t be any investments.” – Grozin summarized. In conclusion we want to note that following president’s statements to leave article 26 as is, the process of passing amendments started in full swing: project is already passed on to the parliament, and will most likely be reviewed in the coming days.