Kazakstan: Amnesty or Amnesia for Big Business?

The authorities in Kazakstan are trying to push through a law which they say will help regulate property ownership in the commercial sector. But their critics fear it is designed to legalise shady acquisitions which powerful businessmen made in the early years of privatisation.

Legislation now going through the Kazak parliament would call an amnesty on real estate, meaning that buildings acquired during the privatisation process which followed independence in 1991 could be declared without threat of prosecution for tax evasion or other. The idea, officials, say is that by drawing these properties back into the legal - and taxable - fold, the treasury will get more revenue and there will be an overall improvement in business regulation.

"Legalisation is being pursued so that enterprises operating in the shadow economy can start working legally and paying taxes to the state," explained Zeinulla Makashev, who heads the parliamentary group working on the law.

The move follows a similar amnesty for capital which "legalised" about half a billion US dollars in 2001. To underline that past sins were being forgotten, the authorities tore up previous tax returns filled out by businessmen who came clean.

The new law is rather different: whereas the capital amnesty was designed mainly to encourage businessmen to repatriate funds they had placed abroad, this one is aimed at assets which never moved, but were concealed from state regulation behind elaborate fronts.

As in Russia, privatisation in Kazakstan allowed people in positions of power to acquire valuable state-owned assets at knock-down prices. As a way of evading taxes, the new owners often registered some of their properties under another name, as if they belonged to someone else. Both the methods used in the privatisation process and any subsequent fraudulent actions could - if discovered - leave owners exposed to legal action, but the proposed amnesty will change that.

The government says the new law is expected to result in the legalisation of property worth some 700 million dollars - about 30 per cent of the commercial-sector real estate that is now concealed in the twilight zone.

Parliament first reviewed the legislation in June, but appeared uncertain about its merit. That changed when President Nursultan Nazarbaev reaffirmed his support for it at the end of October, telling businessmen, "We shouldn't be afraid of legalisation, because nowhere in the world was primary capital accumulated very honestly. With legalisation, we can bring enormous funds into circulation… You need to make your business visible and work honestly. Don't you want to sleep at night?"

Some analysts agree that an amnesty is the only practicable method of reducing the scope of Kazakstan's shadow economy. "Legalisation will allow an increase in business activity in the country, and will also stimulate production and create new jobs," Dosym Satpaev, director of the non-government Assessment of Risk Group, told IWPR. "This has been shown by the experience of several European countries, where private shadow-economy property was made legitimate by new legislative initiatives."

But Satpaev cautioned that by letting the big fish off the hook, the government may annoy ordinary people. "In addition to its economic aims, the legalisation has a political goal - to boost financial and political confidence in the state. But the process of legalisation could mean that the public in Kazakstan will see it as just another case where those who illegally 'acquired' national property receive a pardon from the authorities."

Other observers say the amnesty will not produce the claimed improvements in transparency and revenue.

"It is not certain whether the new law will make the shadow economy transparent," said businessman Alibek Tleshev. "There's so much money floating around in the illegal sphere that the law will fail."

Parliamentary deputy Serikbay Alibaev doubts the 700 million dollar figure the government has cited as expected revenue, "You can't make approximate calculations and produce figures out of thin air. No one has actually conducted a specific analysis of properties and legalisation."

Alibaev bases his scepticism in part on the experience of the previous amnesty on capital. "We didn't get anything out of it," he said. "At least, there's been no information that new enterprises or jobs were created.

"We simply legalised thieves who used to steal - the people whose fault it was that pensioners didn't receive their pensions, workers didn't get paid and the government didn't resolve social issues."

Alibaev's parliamentary colleague Tolen Tokhtasynov agrees, "No results from the first legalisation can be seen in the economy."

Others say that the amnesty is worse than merely ineffective, alleging that its real intention is to look after the interests of big businessmen, many of them also senior state officials, who were among the prime beneficiaries of privatisation.

"The legalisation of property will be carried out in the interests of a small group of high-ranking people, to legalise what has been stolen," said Serikbolsyn Abdildin, leader of Kazakstan's communist party. "Legalisation will bring no benefit to state or society."

"The authorities themselves stole national property and now they want to amnesty themselves," said Olga Konstantinova, a pensioner from Astana.

Such suspicions are fuelled by the fact that parliament's request for a comprehensive list of properties thought to be held in the shadow economy has not been met.

Businessman Igor Seliverstov doubts the change has any relevant for the average entrepreneur, "Legalisation of property will do nothing for small- and medium-size businesses, although there are business interests behind the amnesty process. Entrepreneurs don't need legalisation of capital, they need a favourable tax environment."

Gani Kaliev, leader of Kazakstan Auyl, a social democratic party, believes the whole issue is so complex that it needs a lot more discussion. "In Kazakstan, the level of corruption among officials is high, and we know how close state bodies are to corrupt elements and criminal structures," he said. "So in legalising property, we need to consider all the points for and against it."

Eduard Poletaev is director of IWPR's Kazakstan office. Roman Sadanov is the psudonym of a journalist in Astana.