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Market reforms

Researchers noted the relationships between transition reforms and rapidly growing corruption in transitional countries (Weisskopf, 1992; Kaufmann and Siegelbaum, 1996; Stiglitz, 2002, Botalova, 2011). The rapid and ill-prepared market reforms weakened political, economic, and social institutions in Kazakhstan: illegitimate property rights and rapidly changing laws created the ground for the rapid spread of corruption (Varese, 1997). This happened in Kazakhstan quicker than in Russia and some other independent states because Kazakhstan embarked on market reforms immediately after independence. Kazakhstan initiated a privatization program in 1991, and become a privatization test field for the economists from the World Bank in 1992, who drafted a market reform plan for the country. The privatization in the development context of the FSU countries means the actual sale of government owned assets to private investors, which creates multiple opportunities for corrupt practices. Research shows that people in Kazakhstan also made the mental connection between privatization of state property and corruption. Kazymbetova (2004) describes the results of the 2001 survey of 700 people in Kazakhstan about the causes of corruption. The study finds that corruption revealed itself most decisively in the process of privatization in Kazakhstan as Chart 4 indicates below.
Chart 4. Corruption related reforms in Kazakhstan

Source: Kazymbetova, 2004
Chart 4 indicates that the respondents linked the growth of corruption to market reforms such as bank credits to new Kazakh businesses (65%), transfer of property rights to foreign companies (55%), mass privatization (50%), and small-scale privatization (50%). In the early 1990s government officials accelerated the rhetoric on the causal relationships between market economies and democracy, while local experts and regular people in Kazakhstan linked democracy to corruption.
As Chart 4 depicts, the survey results in Kazakhstan in 1997 showed the perceived relationship between privatization and corruption. The answers to another survey confirmed that respondents have connected the growing inequality to the results of privatization (Abdykaromov et al. 2011).
Chart 5. Privatization and growing inequality in Kazakhstan

Source: Abdykarimov, 2011
Chart 5 shows that 63.7 % of respondents have related the privatization of state owned property to growing economic inequality, while only 18.1 % disagreed. Two charts above suggest that a relationship exists between privatization, corruption and economic inequality in Kazakhstan.
Corruption and inequality have become distinctive marks of economic reforms in Kazakhstan. Bowyer (2011) summarized the effect of the misleading political rhetoric “Tragically, the promise of democracy has fallen short in the Central Asian republics… Most people in these republics saw their illusions quickly shattered as the advantages of independence benefitted a small elite in each country. For many, the notion of “democracy” is equated with unemployment, graft or official corruption” (http://www.ifes.org, 2011). I conclude that the promise of market-induced prosperity failed, corruption burgeoned, and inequality divided people. People have found their personal economic situations rapidly deteriorating and their value system shattered.
Rapid economic and ideological transition involves serious institutional change, which weakens control over public office and growing special interests. In 1991 the World Bank drafted privatization plans and implemented them in Kazakhstan. Yet, already in 2000 the World Bank experts admitted
“…it is clear that the simultaneity of political and economic reform that characterizes the process of transition has introduced scope in some nations for powerful interests to influence the structure of state institutions and the formulation and implementation of economic policy to their own advantage” (Pradhan et al., 2000, p. 57).
People in Kazakhstan have experienced privatization results firsthand by losing jobs and living through uncontrollable inflation. Rigi argued: “Privatization of state property is considered as the root of moral chaos, because those who benefit from it are supposed to steal massively and openly appropriate public wealth” (2004, p.114). Kazakhstani started thinking that theft and graft have become an established way to achieving monetary success. People changed their behavior to adapt to new realities in the country.

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