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 You are in: Bureaus/Offices Reporting Directly to the Secretary > Policy Planning Staff > Secretary's Open Forum > Proceedings > 2001 - 2002

Kazakhstan: Unfulfilled Promise

Martha Brill Olcott, Carnegie Endowment for International Peace
Remarks to the Open Forum
Washington, DC
May 13, 2002

Opening Remarks and Introduction by Alan Lang, Chairman of the Open Forum

Photo of Martha Brill OlcottThank you very much for the lovely introduction, and for the opportunity to speak here today. Iím going to talk a little about my book and what I see coming in Kazakhstan, taking you beyond November, which is when the book finally went to press. The book, as you saw, is called, Kazakhstan: Unfulfilled Promise.

What Iíd like to focus on today is the unfulfilled nature of Kazakhstanís promise. I'd like to talk some about the title of the book and what hopes I hold out for Kazakhstan, and share with you some sense of the frustration that I feel, as Iím sure many people in Kazakhstan feel, of what might have been, and might still be. I'll talk about the opportunities that I see as having been squandered in the first decade of independence.

The thesis of the book is that Kazakhstan could have made steady strides to becoming a more pluralistic and democratic society, at the same time as becoming a more diversified and functioning market economy. I feel very strongly, and I spend a good part of the book explaining why, that the preconditions were all there to make it possible for Kazakhstan to have had this kind of transition. But the preconditions were not so well established that it was inevitable that Kazakhstan make the transition to a pluralistic and democratic society.

By this I mean that there was enough there that the Kazak elite could have made a very different kind of transition. I would argue that a part of the elite present in Kazakhstan in 1991 was a significant number of people that understood what a participatory government entailed, or at least had enough of a glimmering of an understanding of what a participatory government entailed that they could have, with greater international engagement, gone much more smoothly and much further along this direction.

So Iím not saying that in Kazakhstan was this large, nascent, proto-democratic movement, but there was a sufficient number of people within the elite class itself that this was certainly among the possible forms of government available to Kazakhstan. Unfortunately, many of these people were not those closest to the people in power. You know, they were part of the elite class, but they werenít the ones necessarily in the inner circle. There certainly were some people in the inner circle who felt this way, but those within the inner circle proved not to be strong.

There were some people within the inner circle -- since this is on the record, I wonít name who they were -- but those of you who want to know can grab me after -- there were some people in the inner circle who did understand and, if it had been easier, would have remained strong proponents of democratic reform in Kazakhstan. But once it became difficult, it was easier for them to simply go the other way.

Kazakhstan also had some of the most professionalized media outside of Russia in the former Soviet Union -- Iím excluding the Baltics. I'm looking at the independent journalists I met, and the journalists I met really had in Kazakhstan the basis of that critical support group for democratic change. This was true despite the trauma of the Kolbin years, Kazakhstan from 1986-89, when many of the other post-Soviet states, still then pre-Soviet republics, were beginning to consolidate growing independent political groups.

In Kazakhstan, there was an enormous amount of pressure working against this in that period because of the transfer of power in 1986. From 1989, when President Nazarbayev came to power, the political arena opened somewhat, but in Kazakhstan, it did open later than in other of the Central Asia states. Nonetheless, I feel very strongly that the tepid nature of the independence movement in 1990-91 is not an accurate indicator of the political barometer in Kazakhstan in these years.

But it was, in fact, a measure of the fear of ethnic tension on the part of the elite throughout Kazakhstan, that ethnic Kazakhs and ethnic Russians both feared the prospect of ethnic tension coming in Kazakhstan. And thatís why even the strong Kazak nationalists in this period were not demanding immediate independence: they were demanding autonomy. So that if you look at Kazakhstanís political life in 1990-91, from a distance it looks like thereís less there there than there really was if you stood on the ground and were meeting with the Kazakhs.

I mean, it was partly the fear of antagonizing Russian nationalist groups, and the manner in which political mobilization took place. You know, it largely took place on ethnic grounds in that period, but the Nevada-Semipalatinsk Anti-Nuclear Movement, which began to develop in 1989 and became an enormous mass movement by the end of 1990, demonstrated the ease with which Kazakhs could be mobilized -- the population of Kazakhstan, I donít mean ethnic Kazakhs. It demonstrated the ease with which the population of the country could be mobilized on shared political goals.

And I think that a group with a strong democratic agenda, I mean, had the government taken on a strong democracy building agenda, it would have been possible to mobilize people, along inter-ethnic lines, on some of these shared goals. Iíd like to talk some about the functioning of political institutions in the early years, and why they were proto-pluralistic. I donít like democratic because I think democracy takes a long time to develop within a culture, but I do think pluralistic institutions could have developed, and still could develop.

I spend a lot of time in the book looking at the parliament, and I just want to draw your attention to the first two Kazak parliaments. The 1990-93 parliament, which was the parliament of the Soviet era, was very fractious, like most of the parliaments in the other Soviet republics. But it also was a very important political laboratory for the formation of political groupings -- for people to gain participatory experience, for there to be a debate on issues.

This parliament was disbanded in 1993 after the Russian parliament was stormed. Thatís the one thing about President Nazarbayev: he was really quick to see political opportunity. He saw the opportunity to get rid of this burdensome beast after the Russian parliament was eliminated. And, of course, since he did it very peacefully in Kazakhstan, there was very little criticism of him for the effort, because the argument was that this body was not capable of playing a useful function in society, given its strong pro-communist or former communist leanings.

The next parliament, which only stayed in power for a year, was elected in 1994 and was disbanded in 1995, when the Kazakh courts found an election irregularity in the election of one of the members of the parliament. In one of the election districts, an irregularity was found and the whole parliament was disbanded. This parliament was becoming, I felt fairly strongly, an arena of political debate. And that was precisely the reason why it was disbanded.

It was seen as a brake on economic reform -- brake, I mean, a car brake -- that it was stopping economic reform. And for that reason, there was tacit external acquiescence to this policy, because the U.S. and the West saw it so important that Kazakhstan move to macroeconomic reform, and this parliament was really going to debate it to death, to be sure. The argument that was made, and that was made by the Kazhegeldin Government, as well as President Nazarbayev, was that what you needed was a period of executive rule in order to get macroeconomic reform legislated and in place, and then your new parliament would come in and provide legal ratification of the executive decisions.

At the same time, though, in 1995, there was a new constitution, and that constitution further made the country a presidential system. So that I would argue that the fallacy -- and Iím consistent in my argument; I argued it in 1995, and I think time has shown that the argument was, in fact, correct -- that the notion of top-down economic reform thatís legitimated solely by decree establishes no precedent for legal accountability. There were a whole lot of good laws passed in this period, but the notion of legal accountability really became absent, I would say, from Kazakh political culture from this point on. Legal accountability became something in the local culture you could manipulate from the top down, as you needed to.

As I mentioned, the presidential system was strengthened. President Nazarbayev got an extended term through referendum. Again, I think another notion of relativity and subjectivity of rule of law. And I would argue even more importantly, or as importantly, local government was held back as a potential arena of competition. In this period from 1993-95, the Russian system is moving towards much greater decentralization of political power.

I mean, Russia is a federal system; Kazakhstan is not. But Russia, like Kazakhstan, is an enormous country. Kazakhstan is smaller, but itís still plenty large. And the notion in Moscow was that government could not ensure its control without this decentralization of power. In Kazakhstan, Nazarbayev originally flirted with the idea of decentralizing power, of at least empowering local governments within a unitary system -- empowering local governments through permitting their direct or indirect election of the governors. And then when he saw he didnít have to do this to maintain external credibility, and he didnít have to do this to maintain his internal power base, he really backed away from this position.

Now, again, heís talking about it. But you know, there have been many, many years lost. You have had, in the interim, a squashing of political initiatives at the Oblast level. I mean, where Kazakhstan would have developed a much greater and more diverse political environment had the Oblast been an area of political contestation from the mid-1990s on, where alternative elites would begin to be formed, where there would be a trickle up of public opinion.

Instead, youíve had a consolidation of power in the center, and you have not rid the country of its distinctiveness, but youíve not allowed that distinctiveness to flourish in any sort of competitive way. At the same time, the Kazakhstan independent media was strongly cut back beginning in 1995 and has been steadily cut back. The sphere in public life of politically unaffiliated people has been steadily cut back in recent years.

Okay, why did this occur? Well, I would say this occurred for two reasons. First, there was a failure of elite will in Kazakhstan. I mean that the potentially opposing political elite, the democratic reformers, and those who are really interested in economic transparency and a broadening of economic opportunity didnít join together, and there was no willingness to press the governing elite.

The economic elite thought that they would be able to continue to increase their own power; that the changes in legislation and the introduction of macroeconomic reform, they believed, would allow them the possibility to diversify their holdings, to become powerful economic actors, and that eventually, they would be able to get the political system to give them more political participation.

Iíll come back in a couple more minutes to how this is not occurring, but that was why, in 1995-96, they demurred, because they thought the future was still theirs. And also, I would argue, part of the reason this occurred was because of a failure of leadership in the U.S., and the Western community more generally, to press the Kazakhs hard to do the right thing. I think that the feeling in the West was they were willing, the U.S. and Europeans, were willing to see Kazakh society through the eliteís eyes, through the governing eliteís eyes.

They accepted the presentations of the governing elite that, (a), the society was immature and could not take a large degree of empowerment; and (b) that eventually things would be reversed, that this group of visible early reformers were very articulate and very attractive, and they really werenít fully beholden to the president. This was true of some of the most articulate economic reformers who came through the area

This built in the perception in the West that eventually, Kazakhstan would cede power to these people, and right the ship of state, that this was a temporary setback. And this was really the position of the ruling elite itself, you know. This became, I canít think of a better way to say it than to say that there really was an implicitly semi-racist assumption on the part of many from the outside world that looked at Central Asia -- and not just Kazakhstan.

Iím sorry that I donít have a better word for it, but there was this notion that we shouldnít expect more or better from these post-Soviet Asian societies; that somehow, they werenít capable of providing more than their leaders said that they were able to provide. You know, the leaders were at the top of society; they had been the cream. If they say the population couldnít do it, we should accept that the population couldnít do it.

I think people accepted this because they didnít see -- the Westerners who came to Central Asia in this period -- didnít understand the dynamism and capacity that had existed in a society like Kazakhstan and many of the others -- Kyrgyzstan, Uzbekistan -- in the Soviet era. There was enormous capacity in these societies, and those at the very top of that party nexus were not the best representatives of it.

They werenít the cream. They were the best insiders, they were the most skilled insiders, but they were not the cream of society. The really talented people in this society were their children and the friends of the children. And I donít mean that you have to be the presidentís child to be talented. They call them the golden youth, the youth of the party elite that had had good training in Moscow, in some cases, some training in the West, and their friends, because it had been a meritocracy, to some degree. There were always politically unaffiliated people that got to go to the right schools and got to break out of the ghettos that they lived in.

Thatís the group from whom this reformers group has been drafted, the economic reformers were drafted, they really were. Those people were present in each of these countries. They really were the best of what society had to offer, and they were a product of a Soviet system that was then infused with contact with the West.

Moreover, the Western advisors that came in failed to see that corruption was inherent in the decisions that were made. By making rule of law accountable to the president rather than the president accountable to rule of law, you were creating a situation in which corruption begets corruption. The scale of corruption in and around the presidential family seems to have increased dramatically post-1995.

Now, this is on the record -- and I use "seems" because itís simply the kind of evidence that has come out on various forms of the press. Iím not making any allegations that I would want to sustain in court. But the assumption that has been -- and I talk about this at length in the book -- that especially post-1997, after Kazhegeldinís departure -- not because he was so, you know, Iím not implying that he was a beacon of democracy, but I am implying that there was a transfer of power after 1997 -- from that point on, I would argue, and I do argue in the book, that you have had a dramatic consolidation of economic power, and not just political power, in the hands of the top ruling elite in Kazakhstan, in the hands of the ruling family and their representatives and friends.

And that what you have done is gone to a new stage, where itís not simply assets that have gone offshore, but what you have is these offshore assets are now being invested in productive companies, both offshore and onshore. So you have a transfer of ownership, which I would argue would make it very difficult to renationalize some of these holdings if somebody else came to power. And that with this transfer of ownership, itís already time to introduce a transparency, that everything that has been moved out of this economy could be moved back in the economy in ways that protect those that actually hold the assets.

At the same time, though, as the family and those around it were accumulating economic power, you developed -- and this is about where the book went to press -- a competitive model was developing in Kazakhstan, largely, crudely around the two sons-in-law, although it was much more complicated than that. And many of the more market-driven reformers gathered around the second son-in-law, the younger son-in-law, Kulibaev, whoís now the number two person in the new Kazakh Oil and Gas Company.

The other son-in-law, Rakhat Aliyev, was largely dominate in security. Inevitably, though, there was a clash of forces. In fact, when the book went to press, the clash was occurring, and the text predicts the clash of forces. And this clash occurred at the time that the prime minister was replaced last fall, when Tokayev went back to being foreign minister.

I would argue that from the point of view of elite and economic competition, the resolution of the contestation between the two branches of the family has not been a good thing for Kazakhstan. Because since the younger son in law is consolidating his position in the oil and gas industry, his more reform minded friends have become more expendable, and weíve seen that in the past six months. Weíve seen a group of reformers go into opposition, and some of them have even come under arrest.

What lies ahead? Okay. I think it would be very hard for even more power to be consolidated in the hands of the family than has already occurred. Now the question is: what do they do with the power that they have accumulated? How good or bad the future of Kazakhstan is depends upon how well the national oil fund is used. The government created an oil fund last year, and they are putting money into it.

But the real test, for me, itís a dual test that they have to meet. The first is that they have to be transparent with the funds that are going into this oil fund, which they may well be. Secondly, they have to get to 2010, when the oil income will begin to really be maximized without the social pressure thatís building within the country, building too much.

So transparency of the oil fund is not sufficient. You have to have some means of dispelling social and economic pressure between now and the time that this oil fund can begin to do the things that itís intended to do. Itís intended to be a developmental fund creating economic opportunity.

What I see developing, though, I mean, is not very good. The pattern thatís developing as we wait for the oil wells to accumulate, is one of limited shielding of certain sectors. The Kazakh economy is trying to move towards further increasing direct foreign investment, and Kazakhstan has the largest per capita foreign direct investment in the former Soviet Union. One of the ways that corruption-ridden societies can keep foreign direct investment is to shelter the sectors, to shelter the investment and protect the sector.

But I see only limited shielding going on of the critical sectors in Kazakhstan. You see Kazakh commitment to having Kazakh firms develop their own oil and gas is increasing, and the perception of vulnerability on some of the contracts has really increased, given changes in the tax structure.

Thereís continuation of democratic rhetoric, some willingness to talk about a timetable for the transfer of power in the localities to the population. But the regime is very committed to handing off power at the very top to a successor of Nazarbayevís own choosing. And this, I think, is going to increase the difficulty of shifting power from the center to locally chosen, local administrations.

Pressure on independent forces has increased. I worry that its net effect will be to drive the elite out, to drive out that sort of support sector of the elite that you need to run the economy, the new businesses, that you need to run the state administration, that you need to run local administrations, that you need to be engaged in the economy. I worry that increasingly, these people will leave the country for opportunities that lie elsewhere, that thereís a process of disillusionment I see that is going on, has begun, but has not reached an irreversible stage.

And that what you see the country developing into are pockets of poverty and non-participation, and regions that really hold promise, economic promise. And in a country as large as Kazakhstan, you can insulate the central government from these pockets of poverty, but the social implications of that really become problematic down the way.

I also worry about whether those who are fighting to keep the level of social benefits high, whether they will simply get exhausted and leave. You know, the pension fund has been reformed in Kazakhstan, but it really takes a lot of energy to keep these projects on track. And if this level of social reformers begins to tire and takes the kind of economic opportunities that theyíve been offered outside of the country, if they begin to take those jobs up, then I think that you really will have a sad situation.

Okay, now, I really want to get to my conclusion. Will this bring Kazakhstan to the level of state collapse that we have seen in Africa? Thatís obviously the risk that Iím concerned about -- Nigeria without ports. Nigeria began independence with an enormous number of advantages that they, over 30 or 40 years, managed to squander -- squander, at least, from the perspective of much of the population. Is this likely to occur in Kazakhstan, and if it does, when, and how can it be avoided?

I would argue, in conclusion, that mineral resources are corrupting precisely because of the ease with which they allow elites to get rich, and the illusion that they provide, that it will be easy for the governments to simultaneously provide for the population at the same time that they get rich. In reality, meeting both sets of demands and satisfying the lust for riches and wealth on the part of the governing elite, while satisfying popular needs, requires striking a very difficult and sometimes impossible balance.

For the population, economic and political improvement are always tied, to some degree, to one another, and creating economic opportunities for people requires giving them legal protection -- protection, at least, for their businesses. This, in turn, restricts the freedom of action of the governing elites and their capacity to expand their own holdings at will, and raises the specter that the new elite can overshadow those who are already governing.

We have already seen this beginning to happen in Kazakhstan. The Nazarbayev regime is trying hard right now to regulate elite competition. However, the streets of Almaty and Astana are already littered with the political corpses of those successful business and political elites that were developing their own bases of political and economic power.

When will the pinch come? I think it will come in 3 to 5 years. You know, Kazakhstanís not imploding from within, but I think that as the current administration moves to the next presidential election, it will become clearer that the society is beginning to gravitate on that edge between stagnation and corruption. Or there will be some dramatic changes that I donít, unfortunately, see imminent in the next couple of years.

The problem, from the point of view of U.S. policy -- and this is really what Iím going to stop on -- is that there is no danger that is imminent. I do think the U.S. has some weapons in terms of conditionality of various forms of economic guarantees. But they have to be used very subtly, and their potential impact may be limited. But U.S. interest in Kazakhstanís energy shouldnít be a reason for closing our eyes to the risks that exist in Kazakhstan down the road.

And we canít meet our long-term needs by endorsing shortsighted, short-term strategies. Thank you. Iíd be happy to take questions.

Question and Answer Session:
Mr. Lang: Ms. Olcott, on behalf of the open forum, Iíd like to thank you for that superb and timely presentation. Please give her another round of applause. Now, Iíd like to open the floor to your comments and questions. As a courtesy, please identify yourself and state your organizational affiliation before posing your question. Iíd like to recognize Ambassador Harriet Babbitt.

Question: Thank you very much. Iím Hattie Babbitt. Iím with Hunt Alternatives. You mentioned Nigeria as a possible model, if you will. A Nigeria without ports would be the worst possible outcome. Venezuela comes to mind as another unsuccessful model of a country with enormous oil and natural gas resources. Are there any successful models?

Ms. Olcott: I spent a long time, when I was writing the book, looking for a successful model outside of the European context that was roughly analogous to Kazakhstan, and I really didnít find one. I think itís incumbent on the Kazakhstanis to make their own successful model. To say there are no successful Asian oil-rich models is to say that the conditions arenít there to do it, is to imply that the conditions arenít there to do it differently.

I think that the conditions were there in í95 to do it differently. I think with some work, it could be still done right today, and it doesnít require a model thatís easily applicable. The Kazakhs, I think, are doing a fine job choosing, you know, the Norwegian model for managing the oil. You know, they have to pick and choose among models that are out there of settings that are not analogous that have handled some of the challenges of mineral wealth well.

I mean, the Europeans have done a good job in the North Sea. I donít like the example of Indonesia, because I think that the country is analogous. Itís not even that the outcome is different, but I think a large country of 100 million is very different than a country that is relatively under-populated and has this kind of wealth. Again, I donít think the Middle East examples give you the right breakdown of the population in terms of education levels or patterns of employment.

Kazakhstan started as a highly developed, economically multifaceted country. You know, it has still today a whole host of non-mineral-resource-driven ways for people to make income. So, thatís what makes the Middle East cases really non-analogous, but it doesnít start at the developmental level, obviously, of the North Sea countries. But picking and choosing, Iíd say, is what they have to do.

Mr. Lang: Iíd like to ask a question at this point. Youíve noted in recommendations, and in fact, as long ago as May 6, 1999, you testified before the Commission on Security and Cooperation in Europe, and at that time, you recommended that we strongly urge Kazakhstan to make the transition from appointed to elected local officials on an explicit timetable. And youíve noted in your remarks today that youíre seeing a process of disillusionment.

What specific steps should the president take to foster public confidence aside from moving from appointed to elected officials?

Ms. Olcott: I think that there should be an expansion of the functions of locally elected governments. I mean that the local legislatures at every level should have expanded functions. You can start with locally elected officials at the sub-oblast level, but again, there should be a plan, a 30-year plan if you want, but I would certainly like to see 10-year plan of increasing the functions of the various local levels.

The budgetary reform has put some money at the hands of the administrations, and theyíve done a good job, in the past 2 years, in delineating revenue sharing between the oblast and the center. Again, more explicit revenue sharing with sub-oblast levels, I think, would do a lot. That coupled with a greater role for locally elected councils and a move to at least some local elections of local level officials. Theyíre doing it on a very experimental basis.

I think this would be political empowerment. I think it would also create the kind of environment that would be much more supportive of the development of smaller, middle class entrepreneurs, which everybody sees as the key for the diversification of Kazakhstanís economy. It's also key to maintaining a diversified economy at the time that the oil wealth begins to come in.

Question: Iím not connected with any organization, so I can speak my mind. I feel that you have argued on a pessimistic note; Iíd like to argue on an optimistic note. Youíve made the comparison to Nigeria, and some other places, and you sort of shied away from Europe and Japan as a comparison.

The first 10 years after World War II, Germany and Japan were a disappointment to everybody else. They were a laughing stock. Germany made Volkswagens and Japan made junk. Now, things are different. Your faith in Kazakhstan is closely tied to Russia. Russia is no further along in this progress of events than Kazakhstan is. And what youíve had is a major society breakdown. I mean, itís like going through a brainwashing and coming out of it.

The first couple of years, youíre not going to be very productive. And, you know, a lot of people are wandering, reassessing things, and then getting back in and getting organized again. What Iím saying is that there is hope for Kazakhstan, and it will be up and going again in the future.

You have talked about a variety of internal problems, and you made a description of it. All the problems that you described in Kazakhstan we have here, the same problems, in the United States. One of the things that I would point out, you said the children of the elite in Kazakhstan are the ones that get the advantage and leadership. In our last presidential election, the two main candidates were children of elites who had that opportunity handed to them on a silver platter.

So Kazakhstan's problems are, I would say, making progress where they should be. You have not gone the way of the Balkans, and you donít have the Taliban running through your country, so you could be quite fortunate to not have a massive amount of bloodshed in your country right now. Iím just trying to say I think things are good for Kazakhstan, from where you have come from, and things will get better in the future.

Ms. Olcott: Iíd like to take up some of the points that you made. I talk in the book about how there has been much more stability in Kazakhstan than any of us thought was possible. I didnít talk today about Kazakhstanís relationship with Russia. I think one of the major accomplishments of the 10 years has been that the Russian leadership accepts Kazakhstanís existence as a state, which was really up for question 10 years ago.

I think that on a diplomatic level, Nazarbayev has really achieved a great deal -- heís created a role for himself internationally, not just in terms of his dealing with Russia, but in terms of his dealings with a whole host of other people. And Putin does have real respect for him, I think. And he started 10 years ago as somebody with very limited experience internationally. I would say I think that this international positioning of himself on Kazakhstan is probably the greatest single success.

What I would say, though, about some of the points that youíve made -- first of all, I really would not agree that Kazakhstan is as far along as Russia. I think that Russia has, in the transition process, not closed off opportunities for competing elites in the same way that Kazakhstan has. I think that the political process in Russia, for all its messiness, is a much more open and competitive one than the political process anywhere in central Asia.

And I say that, you know, having spent a lot of time in Russia as well as in central Asia. But thatís something people can simply disagree on. I think you missed my point about the children of the elite. I wasnít assuming that thatís bad at all; thatís true in every society. This was the advantage that that society had, like all these societies, that there was this group of people who were out there with real capacity. That they were the children of the elite didnít bother me.

Kazakhstan to this day does a better job in preserving some of the elements of meritocracy than many of the other central Asia states; there is opportunity for talented young people to study abroad and win scholarships. Thatís unprecedented in any of the other countries. But at the same time, the deterioration of schools in the rural areas are so serious that the likelihood that young people will emerge from anything other than the largest, most prosperous cities, is really very limited.

Finally, Iíd like to take up the issue of the Balkans and the Taliban. I think that we have to look at societies and judge them in terms of what they have there and what their likely fate was. Central Asia's history is very different from the history of the Balkans. Itís a part of the world in which multiple ethnic groups have always lived together. They donít always like each other. They occasionally kill each other, but they have almost never done it on a mass scale.

It is really a place where cultures merge. These ethnic communities, if I say they assimilated, itís too strong a word. But they have blended one in the other -- the Mongol tradition, the Turkish tradition, the Persian tradition blend in this part of the world, and you get populations that are more distinctly one than the other.

So, I donít think any of us saw the likelihood of the Balkans happening, any of us that were really students of the region. Similarly, with the Taliban. I mean itís just not an appropriate model for Kazakhstan. The religious revival that is going on in Kazakhstan is going on throughout the country. But Islamic fundamentalism, as Taliban represents, is not found anywhere in central Asia, and the most fundamentalist population is found in the Fergana Valley in Uzbekistan.

It does reach out, going north and east, but it does it very tentatively; the possibility of these countries adopting Islamic fundamentalist rule is almost impossible, given their history and the role that Islam has played in it.

Question: Iíd like to ask you to comment briefly on U.S. foreign assistance. Do you think itís adequate? Specifically, where should it be channeled in the future?

Ms. Olcott: My biggest problem with U.S. foreign assistance is there isnít nearly enough of it. I think that some of the rule-of-law programs, as applied in Kazakhstan, have done a lot. If we could help the Kazakhs engage in judicial reform at a much faster rate, I think we would really do more for them.

To me, the legal oriented programs are the ones that are most useful. I think that this should have been, in the mid 90s, more a condition of support for the big technical assistance projects. The oil and gas sector assistance should have been more implicitly linked to certain political changes. The technical assistance, that weíve given on things like budgeting and local government, has been very successful. But itíd be great to sit down with the Kazakhs and have them work out a project that theyíre comfortable with on transfer of authority to the local level and more dispersion of that authority. Then, working with the Europeans, we could substantially upgrade the amount of technical assistance thatís available to work in the localities to make it more of a reality.

If we look at U.S. assistance in these countries compared to U.S. investment, itís nickels. If we took just a little bit more of the tax money that some of these energy firms pay into the U.S. Government and spend it on some of these foreign assistance packages, we might have products that, in a decade, make us all happier.

Mr. Lang: We have time for one more question.

Question: Based on your research, would you consider it beneficial if we raise foreign assistance to Kazakhstan, working directly with local authorities and local entrepreneurs and political leadership, in terms of Kazakhstanís transition to democracy. And if yes, do you see any efficient mechanisms to positively impact Kazakhstan policies?

Ms. Olcott: I think that we should be focused towards working in the localities. The challenge is going to be to work in localities that have very little economic promise. Itís going to be easier to work in those that have the oil and gas wealth. But what on earth are they, and anybody that wants to help them, going to do in the communities that have very limited prospects for foreign investment or local investment of capital?

Thereís where, again, I see the two kinds of assistance that the international community is offering as the most fruitful: assistance for small and medium sized entrepreneurs, and also these poorer areas -- small and smaller entrepreneurs, and also working with local administrations. The key, to me, in Kazakhstanís stability is going to be for the government to find ways to find mechanisms to take the pressure off them at the national level and at the local level, as these disparities of wealth grow more profound, as theyíre inevitably going to do in Kazakhstan. And both these efforts, I see, would contribute to that.

Mr. Lang: Iíd like to thank you all for your thoughtful comments and questions this afternoon. At this time, it gives me great pleasure to present to Ms. Olcott the Open Forumís Distinguished Public Service Award in recognition of outstanding contributions to national and international affairs, and in grateful appreciation for participating in our Distinguished Lecture Series. Congratulations.

Ms. Olcott: Thank you so much.

Released on May 31, 2002

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