The Presidential inauguration ceremony in Astana on January 11 was a widely trumpeted political event conceived to attract international attention and world leaders to Kazakhstan. But the propaganda effect of the inauguration ceremony obviously fell short of the expectations as most prominent Western leaders did not appear for the event and sent lukewarm messages of congratulation. In all other aspects, it was a pompous and solemn celebration attended by, as announced by official sources, representatives of more than seventy countries. The most prominent guest of the festivities was the Russian president Vladimir Putin surrounded by leaders of Central Asian states, Ukraine, Belarus and Georgia. President Nursultan Nazarbayev did not seem to be discouraged by the eloquent absence of Western leaders from the inauguration ceremony and told journalists at a news conference that “the participation of Russian President [Vladimir Putin] in the inauguration festivities raise the status and international significance of this event” and added that he was planning to make his first foreign trip to Moscow after the inauguration.

Talks that took place in the sidelines of the main event showed that Astana still remains adhered to the idea of forging an economic and political alliance within the Single Economic Space states, despite the cool attitude from Kyiv to any Russian-dominated alliance in CIS space. Given the prolonged chill between Moscow and Kyiv, the talks conducted between Yushenko and Putin in Astana in a bid to break the political and economic deadlock in gas war can be regarded as a major breakthrough. It remains unclear to what extent President Nazarbayev influenced the thaw in relations between Ukraine and Russia, but the rapprochement of two Slavic states, the envisaged Ukrainian-Russian nuclear energy cooperation, the agreement on Black Sea Fleet are welcome developments for Astana concerned over the fate of the Single Economic Space. After his talks with Putin, Nazarbayev told journalists that Single Economic Space members, Russia, Belarus, Kazakhstan and formally Ukraine, will sign a package of documents in March to set up a customs union. However, long-standing divergences on customs duties, transit fees and other issues still remain even between the closest partners within the SES, Kazakhstan and Russia. Probably, the most tangible outcome of Putin’s talks with his Kazakh counterpart was the agreement concluded between Russian Vnesheconombank and the Development Bank of Kazakhstan. The ultimate purpose of the major financial groups of the two countries is to set up a Eurasian Bank with its head office in Almaty to finance joint projects. However vague is the future of this joint financial structure, the event can be welcomed as a step towards real economic integration .

In his inauguration speech, President Nazarbayev outlined the economic achievements made in the years of his rule, stressing that more than $40 billion of direct foreign investments were made in the Kazakh economy. He reiterated earlier announced plans of raising Kazakhstan to the level of the 50 most developed and economically competitive countries of the world in the next decade. Nursultan Nazarbayev noted that GDP growth up to 10% achieved in the last five years was possible thanks to the “Kazakhstan model of economic development’. The optimistic note of the presidential speech clashes with economic realities pointed out by some analysts. In the nine months of the last year, Kazakhstan’s foreign debt grew by 14 percent to total $36.8. The most saddening aspect of the oil-based economic development is the continuing capital flight on the one hand, and shortage of investments on the other, particularly in the social sphere.

The ruling elite is well aware of the dangers of ignoring the social needs of the population, and heavily relies on small business in fighting poverty. Speaking at parliament on January 18, Nazarbayev outlined the priority tasks to be tackled by newly appointed prime minister Daniyal Akhmetov, placing accent on reforming tax and tariff policy to boost entrepreneurship. The Government will also have to prove its efficiency in curbing rising inflation. The discouraging sign is that there is hardly a new name among government members appointed by the president after his inauguration. Many unpopular ministers have retained their posts or changed places. For example, Industry and Trade minister Sauat Mynbayev was replaced by minister of Energy and Mineral Resources Vladimir Shkolnik who was succeeded by his deputy minister Baktykozha Izmukhambet, little known to the public. A slightly surprising move was the appointment of presidential aide Yermukhambet Yertysbayev as minister of culture, information and sports.

Critics of the current economic course note that the government would be well advised to start its reform efforts with fighting rampant corruption in its own ranks. The Prosecutor-General’s office reported recently that in 2005, numerous officials were held responsible for financial crimes, including 87 officers of the Interior Ministry, 24 staff members of the Emergency Situations Ministry and 19 governors. It’s a long way to go to genuine economic reform.