Kazak Unemployment Fears

Construction workers first to feel the pinch but others could follow.

By Marik Koshabaev in Almaty (RCA No. 556, 18-Nov-08)

As the effects of global financial crisis make themselves felt in Kazakstan, there are fears that the country could face unprecedented social unrest if construction firms and other companies lay off large numbers of workers.

While analysts in the country are not predicting mass protests over unemployment during the coming winter, they say this is more than likely if the economy continues to slow down through 2009.

The worst-hit groups at the moment are building site workers, some of them people from rural parts of Kazakstan, and others migrant labourers from the poorer neighbouring states of Kyrgyzstan and Uzbekistan.

The construction sector experienced a boom lasting several years, with new buildings appearing all over the major cities. The buildings, and the mortgages to buy them, were financed by the then thriving banking sector.

But towards the end of 2007, financial institutions found they had overstretched themselves with large foreign borrowing, and began making their domestic lending policies more restrictive. The downturn in mortgage and loan availability led to many building projects being put on hold or shelved altogether.

Asan, 36, is fairly typical of the Kazaks who came in from the countryside to get work on building sites in the boom years. He has been working as a builder in Almaty, Kazakstan’s biggest city and commercial capital, for the last four years. His wife and two children still live in the village of Otar, about 100 kilometres away.

As part of the downturn in construction, Asan lost his job six months ago. Now he feels frustrated that people in his position have nowhere to turn to.

“There are thousands of people like me, and no one cares about us. I think we should unite in some kind of trade union that would defend our rights properly,” he told IWPR.

Asan has managed to find a temporary job as a guard at car park but he fears this will not last long, as fewer and fewer drivers are parking there.

Official statistics put the unemployment rate at 6.4 per cent in the third quarter of this year. Assuming this figure is accurate, it does not appear to capture the growth of redundancies in the construction industry, where even some of the major players have been shedding staff.

Janibek Suleev, chief editor of Dialog.kz a news website, says the employment situation is definitely getting worse.

“Wages and jobs are now being cut,” he said. “Small and medium-sized businesses are dying on their feet. The banks are bumping up interest rates and there’s no money around, so the [business] sector is beginning to stagnate.”

At the beginning of November, the construction corporation Kuat dismissed 500 workers from one of its most prestigious projects, a luxury housing complex called Grand Astana. The project was put on ice because banking finance had dried up, leaving insufficient money to pay wages and buy construction materials.

Workers in other industries, too, are worried about the future. Last month, the northern city of Pavlodar was hit by a wave of rumours that several metal-working and other heavy industrial plants were about to shed workers. Confirmation that one plant was sacking 200 of its 220 staff members undermined public confidence in official attempts to reassure them.

In an apparent attempt to dampen down the sense of alarm, Labour and Welfare Minister Berdibek Saparbaev paid a surprise visit to Pavlodar and promised that there would be no mass redundancies.

Like many observers, Suleev does not believe even a substantial growth in the number of unemployed will bring protesters out into the streets in the short term.

“Logically, there is of course potential for protests to grow,” he said, “But I don’t think that’s going to happen in the near future. The decline in living standards is still under way, and there’s still a sense of euphoria left over from what appeared to be a time of plenty…. But now the banks are putting the squeeze on and the deadlines [for repaying short-term mortgages] are coming close.”

Suleev believes protests will not take off before 2009, saying, “Unless there’s some radical move to stabilise things, there will be protests next autumn or winter… We are still falling and we haven’t yet landed with the kind of bump that would send everyone onto the streets.”

Political analyst Sergei Duvanov agrees that the full social impact of the employment crisis will be delayed until people have used up any financial cushioning they managed to build up in past years when the Kazak economy was still growing.

“The real question is how deep this crisis is going to be and how long it will last,” he said, warning that if Kazakstan suffers an economic slowdown over a longer period, demonstrations will spread from the construction industry to other industries.

Duvanov believes Kazakstan is more vulnerable than many other countries to the effects of the current financial crisis because its economy is so heavily dependent on oil and related industries. If the oil price drops from this year’s record levels, the employment position could get much worse.

“The entire weight of the crisis will fall on ordinary people’s shoulders, and they may experience big problems in a year or two. At that point one would expect to see trouble, protests of some kind,” he said.

In other countries, trade unions would provide a channel for voicing discontent and negotiating redundancies. However, as Duvanov noted, the labour movement is deeply divided, broadly between organisations regarded as “state trade unions” and the independent groups, as well as by schisms within the latter.

According to Vladislav Yuritsyn, a journalist with the internet site Zona.kz, “The trade union movement is in ruins… the independent unions have been deliberately pressured and demolished since the Nineties, and it’s continued through the current decade.”

Yuritsyn argues that the street protests that have taken place recently merely show how “segmented” the different interest groups involved are, such as investors who have lost money in failed construction firms, and others who have been evicted from their homes to make way for urban redevelopment.

The unemployed, too, may take to the streets, but Yuritsyn says that “for now, there are no issues that would join up a string of protests into a unified one”.

Kazakstan’s recent history may suggest its population is passive, but Suleev warns that this could change, “It’s unprecedented for ordinary people to come out [and protest], and it’s only now, in the coming year, that we can expect this to happen.”

Marik Koshabaev is an IWPR contributor in Kazakstan.