The coronavirus pandemic has seriously impacted the economy and job security in Kazakhstan. One of the outbreak’s devastating effects has been the income loss for businesses in hospitality and catering, manufacturing, retail, as well as commercial and administrative activities. What about employment before and during the crisis?
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Kazakhstan had declared a state of emergency and introduced lockdown measures on March 16. This is when businesses, except for the food facilities, started to temporarily close their doors and work online, followed by job losses. There is no way to tell how many have lost their jobs, but we might as well rely on the number of people that received the second payment from the State Social Insurance Fund. These people received 42,500 tenge of social benefits (a little over $ 100) for the loss of income during the state of emergency. According to the Ministry of Labor and Social Protection of the Population, by mid-May, more than 2.9 million Kazakhstanis received the compensation.
Kazakhstan’s Committee on Statistics states that labor force in 2019 aged 15 and older, per the results of a sample employment survey, estimated at 9.2 million people. Hence, 2.9 million applicants for compensation suggests that the unemployed rate (of those economically active) in Kazakhstan to be 31%.
Support for the population amid a pandemic
Based on official statistics, the unemployment rate in Kazakhstan over the past five years has stabilized ranging between 4.8% and 5.2%. But also, we can barely rely on official figures in state reports since the majority of the population are considered self-employed and do not fall under the ‘unemployed’ category. The self-employed, therefore, had the chance to apply for compensation of 42,500 tenges (a little more than 100 US dollars) by paying USP (unified social payment of 1 monthly notional unit – for individuals living in the capital, as well as in the cities of national and regional importance (2 651 tenges); 0.5 MCI – for individuals living in other towns (1 326 tenges)). Also, having lost sources of income, only a few get officially registered at government agencies, as one needs to contact the employment center and try to seek opportunities through them. Kazakhstanis are basically seeking job opportunities autonomously and therefore remain in the shadows for government agencies.
According to economist Aydakhan Kusainov, 42,500 tenge payment is a performance indicator for the anti-crisis plan and general response to the crisis in Kazakhstan.
“42,500 were at first paid to one category, then to another. The compensation was accompanied by threats and punishments (the Ministry of Labor said that the actions of people illegally receiving social benefits fall under Articles 190 (fraud) and 195 (causing property damage by deceit or breach of trust) of the Criminal Code of the Republic of Kazakhstan), ” said Kusainov.
Expert, therefore, believes that the state should increase the amount of unemployment benefits stimulating people to get registered and generating employment. The unemployment rate in Kazakhstan is forecasted to rise to 5.1% in 2021, according to ILO.
30% of all employed in Kazakhstan, or 2.7 million people, work in high-risk industries, wherein 76.7% of Kazakhstanis were in employment in 2020.
The rest of Kazakhstanis were mainly involved in individual entrepreneurship or operated in private chambers. It was the small and medium-sized businesses that suffered most the destructive effects of the pandemic, necessitating the anti-crisis measures. The Government has established a raft of prompt measures to support business and ensure the labor market stability by increasing access to financing, providing guarantees and tax incentives, reducing the number of business inspections and ensure job security.
Aidarkhan Kusainov, argues, however, that the state should not offer soft loans.
“No sane business develops investment projects amid the crisis. When I hear the phrase “deter the growing importance of unemployment”, on which Kazakhstan’s anti-crisis policy is based, I instantly think it’s stupid. It has to be accepted that the unemployment rate will increase, and we must address it. The same goes to “prevent declining business loans”; this is nonsense. A crisis entails a decline in business lending. There’s no such thing as a consolidating stable business lending amid the crisis. From this perspective, it doesn’t seem right to lend out, because businesses either won’t borrow or they might take a loan and not pay it back, ”the economist says.
The Government, therefore, should curtail all preferential lending programs, thus making money vacant for other purposes.
Who will be affected deeply by the crisis?
According to Finprom research, the outbreak’s devastating effects manifest in income loss for businesses in hospitality and catering, manufacturing, retail, as well as commercial and administrative activities.
Minister of Labor and Social Protection Nurymbetov said that the labor market situation and the restoration of employment mightily depend on lifting of quarantine rules, the resumption of business operations, and those measures to revive the economy.
“We expect most quarantine rules to be lifted in June-July and for employment recovery to start in the 4th quarter of 2020. Perhaps by the end of the year, the unemployment rate will be at 5.9% compared to 4.8 % prior to the emergency rule, ” the minister explained at a briefing on May 11 .
Yerbolat Abulkhatin, director of the employment and labor market development department, is not so quick to make assumptions, claiming possible revision in November.
“A new “Employment Roadmap” has been developed through the implementation of infrastructure projects. The repair of schools, clinics, and settlement upgrading will create job opportunities,” said Abulkhatin.
He also asserted that the Department plans to create nearly 240 thousand jobs next year. The Employment Center will be responsible to take 50% of those jobs, i.e. for unemployed. Half of 149 thousand unemployed registered in employment agencies are reportedly participating in the Enbek program. Now with the new Employment Roadmap in force, the program plans to employ 1.2 million unemployed Kazakhstanis.
In his speech at a meeting of the State of Emergency Commission on April 10, Kassym-Zhomart Tokayev said that “it is critical that the allocated funds will bring the end-result and not disappear, as happened many times.”
Troubled Employment Programs
Since 2011, Kazakhstan has recurrently announced various employment programs spending 800 billion tenge from the republican budget on them. This is the “Employment Program 2020”, relevant for 2011-2012, the “Employment Roadmap 2020” and the above mentioned Enbek program developed for 2017-2021.
But the problem with all these programs is that they are all temporary, like the new Roadmap, where 95% of the planned work is provisional. Besides, these programs have been implicated in corruption scandals, whereas their effectiveness is disputable. In just 3 years of implementing Enbek, officials have revealed 88 corruption cases. Therefore, it is difficult to tell whether state-introduced measures amid the pandemic would make an impact.
The economist Kusainov finds the new Roadmap appropriate.
“It is appropriate, with direct employment and deployment methods it becomes decent, while the Enbek program is a mess. It’s wrong in its objectives, essence and perceptions,” the economist said.
He also noted the need to separate the unfolding shifts in power. We have new measures that are sound, on the one hand; they derive from a new and correct economy. But we also have existing programs that are inherently crooked. Suppose they say they plan to fight unemployment. In so doing, the plan includes measures to increase funding for the current employment roadmap. What gets on the Employment Roadmap will be inoperative as the principles of the Program are wrong. Hence, its failure to deliver results, but the new Program will definitely work. For instance, the Government started paying social benefits, proposing new progressive income tax, reducing utility bills, among other measures. Time will tell how the measures taken will do the job.
“I would suggest building schools and hospitals. It’s a real problem in the country; there are not enough schools and hospitals in villages. Somehow, we have road infrastructure, but its economic effect is not that beneficial as opposed to what we would have from building schools. And we shouldn’t be looking up to the American experience as their economic scene was different,” Kusainov said.
As part of the Employment Roadmap for 2020-2021, 3,096 projects have been already launched with 26,300 jobs created. The implementation of infrastructure projects for the Roadmap stipulates enforcement of at least 90% of the domestic goods and services. At least half of the employees are to be hired through employment centers, while unemployed youth will be given a priority. A proper budget allocation (1 trillion tenges) would enable employment generation for the people that lost their jobs because of the lockdown.
This material has been prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project. The opinions expressed in the article do not reflect the position of the editorial board or donor.