M1L7: India Kazakhstan relations

Let us first try to understand the geography of India to know our roots.

On three sides India is protected from invasion; by the Himalaya Mountains on the north, and on the east and west by the sea. But on the north-west side, along the line of the Indus, it is vulnerable to attack. On this side, she was successfully invaded in ancient times by the Persians, the Greeks, and the Indo-Scythians. Later, in modern times, she was successfully assailed by the Turks under Mahmud Ghaznavi and Muhammad Ghori, and by the Mongols under Babur.

The Persian rule in N. W. India lasted for about two centuries, 500 B.C. to 330 B.C, from the time of Darius to the invasion of Alexander the Great. The Greek dominion lasted for about three centuries, from BC 330 to BC 26, when the Kabul valley and the Punjab were conquered by Kujula, king of the Kushan Scythians. The flourishing period of Indo-Scythian rule lasted for about three centuries, from B.C. 26 down to the end of 3^rd century A.D. when it met the Gupta dynasty, that was rapidly consolidating power in the Gangetic plains of Northern India.

(source: https://www.historyfiles.co.uk/images/FarEast/CentralAsia/Map_Bactria-&-India-50BC_big.jpg)

These Indo-Scythians were a subset of the much larger nomadic tribe known as the Scythians, the Sakas or the Indo-Iranian Sakas. The question is… Who are these people and in the present time, where do they exist?

We have no records of his people’s great poetic epics, their popular songs, their typical dishes or courtship rituals or favorite jokes, because they did not write. We don’t know whether they even thought of themselves as a single people, or as more of a confederation, or even a subculture. However, we can derive some knowledge from the coins, they had issued when they ruled upon India.

The hints we do have, though, are tantalizing. Almost everything we know about this people (or these peoples) comes to us from their neighbors — literate civilizations like the ancient Assyrians, Greeks, Achaemenid Persians, and even the Zhou Chinese.

Their own word for themselves almost certainly comes from the Iranian root sak– “to go; to roam.” This word lent them the name by which they were known most widely in their heyday, among the peoples they fought, raided and traded with, all across the vast continent of Asia: in Old Persian, they were the Sakā. In ancient Greek, Σάκαι. In Sanskrit, Śaka. In Old Chinese, Saik.

In their own tongue, they called themselves the Saka — the Ones Who Roam. But we know them today by the name Herodotus gave them: the Scythians.

At their peak, the Scythians ranged freely across the vast belt of steppe-land that stretches from Hungary, Turkey and Ukraine in the west, to northern China in the east; from the Arctic Circle in the north to Iran and Afghanistan in the south. While they were nomads, they did realize one thing… They have unlocked a genuine real-life superpower by domesticating the horse. With this, steppe life would never be the same. From the interior of the steppes, waves of new class of warriors now started erupting outward across Europe and Asia.

For the first time in human existence, speed and distance were no longer limited by legs. People could fly now, sailing above the ground atop thundering hooves. Hunters could range across dozens of square miles every day in search of food — and warriors could ride for distant battlefields to raid their enemies (Reminds me of Dothraki from “Game of Thrones.”).

Where now it is possible to find Scythians?

They are now known as Kazakhs… in the modern-day Kazakhstan

Modern day Kazakhstan

In terms of Ease of doing Business, Kazakhstan ranks better than the other Eurasian countries.

The World Bank’s International Bank for Reconstruction and Development’s Doing Business 2018 report ranked Kazakhstan 36 out of 190 for “ease of doing business” and 6 out of 190 for “enforcing contracts.” The country was also ranked number 1 for “protecting minority investors.” A World Bank Group Central Asia Regional Program overview published in December also highlights that in 2017, more than 60% of all FDI to the region was invested in Kazakhstan. Thus, the level of foreign direct investment is among the highest in the former Soviet Union. The United States is one of the largest investors in the market along with the Netherlands and China.

Its GDP based on PPP was ranked 43rd globally. The unemployment rate was at 5% in 2015. (Source: www.worldatlas.com)

Kazakhstan is the biggest economy in Central Asia and is reliant on massive deposits of natural resources such as oil, gas, and other minerals. The country also has a landscape that favors considerable agriculture such as livestock keeping and grain production. The country is hugely reliant on the exportation of oil, and this has affected its revenue especially in 2016 where there was a global slump in the oil prices. The country’s industrial sector is reliant on the extraction and manufacture of the minerals and the production of heavy machinery. The disintegration of the former USSR negatively affected the value of its GDP.

Leading Industries of Kazakhstan

The primary drivers of the country’s economy are ore, manganese, chromite, lead, and zinc among others. Agriculture is also very essential accounting for 5%, industry 35%, and service 60%. The country also produces and exports oil and gas in hundreds of thousands of metric tons. It also produces uranium accounting for 35% of the global production and the second uranium reserves deposits after Australia. Kazakhstan’s vibrant service industries are related to technology and retail. In 2015 the country ranked 13 out of 30 in Global Retail Development Index.

Challenges to The Economy of Kazakhstan

The heavy reliance by the country on the revenue from oil and oil products has at times negatively impacted its economic growth. The market forces in the international arena determine the prices which have hampered its ability to plan financially. The country has experienced a contracting GDP and budgetary deficits on account of the problem.

These fluctuating commodity prices have thus exposed the economic volatility of Russia and Kazakhstan. They now no longer trust on oil and gas as a major source of their incomes and therefore want to diversify their sources of revenue to cushion the negative process that are created by falling oil prices in the international market.

Future plans

Kazakhstan has launched an ambitious economic diversification plan under the ‘Kazakhstan 2050 economic agenda’.

Kazakhstan is continuously working to increase the foreign direct investments. In 2014, the government signed into law tax concessions designed to increase the FDI. It included a ten-year exemption from corporate tax, an eight-year exemption from property tax, and a further ten-year freeze on other forms of taxes. The government has also reduced VAT and other forms of levies. These measures are aimed at attracting foreign investors to boost the economic growth of Kazakhstan.

However significant challenges remain in improving the Ease of doing Business Climate. This includes lack of privatization, corruption, governance issues, inadequate amount of skilled human capital etc.

The economic reforms enacted under the Complex Privatization Plan for 2016-2020 are aimed at improving the country’s business and investment climate through measures that eliminate red tape and improve intellectual property protections. The idea behind the change is to use common law principals in commercial law to foster best practice in corporate finance.

The four-year plan covers over 900 facilities that are in the process of being privatized or reorganized and re-registered under the government. Several profitable sectors of the economy including agriculture, metallurgy, domestic and transnational railways, and ICT are now offering IPOs. The government also hopes to digitize the economy and increase broadband reach to modernize and support the new Kazakhstan.

As per StartupBlink (the world's most comprehensive startup ecosystem map and research center), Kazakhstan is ranked at number 69 out of 100 top startup ecosystems globally as per mapping and research center for startup environment of countries globally. It ranks low due to poor logistics and infrastructure.

However, the government is taking steps to attract startups by creating innovation technology parks, hubs, and accelerator programs. As a part of this endeavor, Kazakhstan is looking to boost its startup ecosystem seeking support from the world’s third-largest startup ecosystem — India.

Kazakhstan is looking to implement the startup listing platform and support offered by the Bombay Stock Exchange (BSE) to startups and small businesses at the Kazakhstan Stock Exchange (KASE) based in the country’s financial hub Almaty. If materialized, this would be the fourth one to be established by BSE.

The other three platforms are as follows

· first, an incubator in collaboration with Ryerson University and the Simon Fraser University of Canada;

· second, SME platform with close to 300 companies listed;

and

· third, startup platform for young hi-tech companies.

India’ trade with Kazakhstan

India’s current trade with Central Asia is minimal – just about $1.5 billion which is a mere 0.11 per cent of India’s overall trade.

India’s Trade with Central Asian Countries in 2017-2018
(Values in US $ Millions)

Country	Exports	Imports	Total
Kazakhstan	125.37	907.43	1032.81
Kyrgyzstan	28.59	30.94	59.53
Tajikistan	23.94	50.29	74.24
Turkmenistan	54.31	26.15	80.46
Uzbekistan	132.72	101.67	234.39
Total	364.93	1,116.49	1,481.21

Source; Department of Commerce: Export Import Data Bank
http://www.commerce.nic.in/eidb/ergnq.asp updated on 14/08/2018

As noticed from the table, India’s trade among all the C5 countries of Eurasia is largest with Kazakhstan. Uzbekistan is a distant second. At this moment, Indian companies enjoy a lot of expertise in management of cooperatives, manufacturing devices for health monitoring, pharma and generic medicines, disaster management, agribusiness, academic engagement, IT and service sectors etc.

Currently, Kazakhstan supplies uranium concentrate to India, oil, asbestos, steel, salt, sulfur, lime, cement, raw hides and ferrous metals. India exports to Kazakhstan include coffee, tea, spices, tobacco, organic chemical compounds, pharmaceutical products, plastics, rubber, rubber products, electrical machinery and mechanical equipment.

Kazakhstan is ranked fifth in the world in terms of consuming Indian tea and imports 12.61 million kg annually. Kazakhs are amongst the highest tea drinkers in the world with a per capita consumption of 1.5 kg annually, that is, an average of 5 to 6 cups a day, a reason why many people are labelled as "tea drunkards". Given the enormous popularity of tea, the Kaznet website was created for "tea drunkards".

Unfortunately, India’s tea exports to Central Asia during 2013 have been reduced to 208.26 million kilograms as against 211.86 million kilograms in 2012. India’s market share is lost to tea from Kenya and Sri Lanka. However, the popularity of Indian tea remains high in most Central Asian countries. To rectify and regain its market, the Indian Tea Exporters’ Association (ITEA) or Indian Tea Board should take the initiative of setting up a simple tea blending & packing factory in Central Asia to offer best quality Indian teas to the tea loving people of the region.

Apart from tea, pharmaceuticals represent the largest component of the Indian export basket to Central Asia worth USD 151.41 million or 28.14 per cent of total exports. Most of the large Indian companies are represented in the market. Given India’s strong position in this sector, Indian companies should push for aggressive marketing to expand their market share. There are almost ready opportunities for Indian companies to establish joint ventures and manufacturing units of pharmaceutical products in the region.

Under the Belt and Road initiative, the region is experiencing a real boom in the construction and infrastructure sector. New business centres, shopping malls, cultural centres, sports complexes, roads, etc are being planned in the cities along the oil-rich Caspian region in the west. There is a huge potential for large Indian companies to tap this opportunity by bidding for road and railway construction projects, electric power transmission and distribution, telecommunications, power generation, etc.

With plans to improve the state of connectivity from India to Eurasia, gaining more and more chorus among Indian businesses, India is now firmly planning to establish a quadrilateral connectivity corridor (India-Iran-Turkmenistan-Kazakhstan).

Plans are afoot to link Gujarat's Mundra Port with Bandar Abbas and connect it to Iran-Turkmenistan-Kazakhstan railway network and onwards to Eastern Russia. The idea is to not only access markets of this landlocked region but also create a corridor to import natural resources from the region in a shorter period than being done currently, according to officials. To facilitate visa processing speed for businesses, Kazakhstan has recently established its consulate in Gujarat.

Kazakhstan in a member of Eurasian Economic Union. With the Preferential Trade Agreement (PTA) between member states of the Eurasian Economic Union and Iran, expected to enter into force by end of 2019, Indian business can further increase their potential to export their finished goods to Kazakhstan via Iran by integrating Iran into their Global value Chains (GVCs).

Additionally, with sanctions on Russia, their MNCs are also moving out of it. If India signs a Preferential Trade Agreement (PTA) or a Free Trade Agreement (FTA) with Eurasian Economic Union (EaEU) of which Russia is also a member, India will be able to attract these companies willing to reexport their products to Russia and Eurasia.

However, this should be taken with a pinch of salt. With sanctions on Russia because of its alleged interference in the affairs of Ukraine and Georgia, the prices of Russian currency also known as ‘Ruble’ is falling. This makes their products cheaper compared to the ones manufactured in Kazakhstan. Consequently, it has been found that Russians are now dumping their surplus capacity of steel in Kazakhstan. Arcelor Mittal (now headquartered in Rotterdam) has established production capacity in Kazakhstan to tap the lucrative market in Russia and the larger Eurasian Economic Union. However, now it is suffering huge losses since it is unable to compete with this cheaper steel, that is dumped by Russia in Kazakhstan.

If India signs FTA with EaEU, this casualty can also happen with India.

Space cooperation

There already exists agreement between India and Kazakhstan related to space research. Both ISRO and the National Space Agency of Kazakhstan have signed an agreement to help and co-operate with each other in space activities.

The Central Asian country is host to the famous Baikonur Cosmodrome. Though it is a major research Centre in space, Kazakhstan hopes to work together with ISRO in research and development of satellites. Negotiations are going on between the space agencies of India and Kazakhstan on the possibility of developing a space communication system (satellite) KazSat-2R.

Other areas of cooperation and development of ties between businesses in India and Kazakhstan include areas of IT such as digital connectivity and e-network, education, health and academia, fintech and cybersecurity, banking and financial inclusion etc.

Kazakhstan is a close ally of Russia. This is by virtue of the fact, that even after breaking away from Soviet Union, the Kazakhstan business still have strong connections with Moscow. Russia borders 7000 km with Kazakhstan and is her largest trading partner. 40% of all population residing in Russia are ethnically Russians.

In fact, it was Kazakhstan that proposed Eurasian Economic Union (EaEU) and has always participated in Russian led institutions like CSTO, EuraSec, CIS, Eurasian Customs Union (EACU) and off course EaEU.

There have been several changes in the political landscape in the geography of Central Asia — Russia is now willing to play a larger role in geopolitical affairs. Since Kazakhstan is the largest country in Eurasia, it is now emerging as a critical power in the Central Asia region. With this, Kazakhstan is now looking to increase its presence in Central Asia by fostering ties with India to facilitate a North-South trade corridor. Thus, it is also important for India to look at Kazakhstan as a stepping stone into the markets of Central Asia and develop an outreach strategy to connect to Central Asia to compete with the growing presence of China in that region.

With the entry of China as a major player in funding key infrastructure projects in the region under the umbrella of B&RI, Kazakhstan is wary of Chinese intentions. Most of the investment done under these projects have very little transparency and are economically unviable. Kazakhstan, as a part of its multi-vectoring policy is willing to diversify its relations, to reduce its dependence on a handful of countries as a source of FDI.

Other challenges faced by Kazakhstan is the extremist ideologies and terrorism emanating out of Afghanistan due to ongoing political instability, lack of infrastructure to bring its products out of its region south to the borders of India, and geopolitical challenges concerning the weakening influence and capability of USA to deter other major powers.

India is seen as a non-interfering nation and a risk averse country. Respect for other countries territorial integrity, sovereignty and the right to self-determination have always been the backbone of India’ foreign policy.

Kazakhstan borders Xinjinag region of China. Uyghur Muslims form 1.5% of overall population of Kazakhstan. What is the perception of China towards Kazakhstan? With growing investments from China under the B&RI, what should be the role of India to help Kazakhstan exert its sovereignty?

Energy resources of Kazakhstan

Kazakhstan has 12% of the world’s uranium resources and became the leading uranium producing country in 2009. By 2011, Kazakhstan was the world’s largest uranium producer. India has therefore signed a civil nuclear agreement with Kazakhstan. In January 2009, Kazatomprom signed an agreement with India’s Nuclear Power Corporation (NPCIL) to supply 2100 tonnes of uranium to India for the time period 2010-2014.

Kazakhstan is a part of NSG grouping by virtue of being part of the nuclear supply chain (because it exports raw material i.e. Uranium). Kazakhstan also supported Indian case to get the NSG waiver in the year 2008.

Since Kazakhstan has such a huge amount of uranium, Russians used to do all the testing of their nuclear weapons in Kazakhstan at a site known as Semipalatinsk when it was under the former Soviet Union. However, the moment, Kazakhstan got independent, it destroyed all the nukes inside its territory and tried to make the entire region a Nuclear Weapons Free Zone (NWFZ).

In the Iranian nuclear deal that was negotiated by the Obama administration, the Iranians were proposed a safer option to send all their surplus Uranium (beyond the agreed limit) to Kazakhstan. This is due to the fact, that they still possess technical know-how on managing Uranium and storing the same. Although not reported, it is also suspected that Iran has tried to employ few Kazakh scientists in its nuclear program who became unemployed after the local Kazakhstan government shut down the nuclear program that was inherited from the former Soviet administration.

Kazakhstan has abundant coal, uranium and gas reserves. ONGC Videsh Limited and KazMunaiGaz have signed an agreement in April 2011 to purchase 25% stake in the Satpayev Oil Block in the Caspian Sea was signed in Astana. Since, Kazakhstan has a huge network of oil and gas pipelines, it can be connected to the TAPI gas pipeline network in future.

However, it should also be understood that the juridical status of maritime boundaries of countries surrounding Caspian Sea is still unresolved. This is leading to an arms race in that region, which may hurt Indian interests of tapping oil and gas in this region.

The republic possesses considerable reserves of iron, vanadium, molybdenum, gold, industrial diamonds, mining-technical (vermiculite, asbestos, wollastonite, bentonites etc.) and mining-chemical raw materials. (phosphorites, barytes, fluorite, sulphur etc.)

It has considerable resources of halite, potassium and manganese salts, sodium sulfates and borates. There are huge reserves of a face and ornamental stones, construction materials, mineral and thermal waters.

Western Kazakhstan is known as the heart of iron ore. It lies in magnetite and sedimentary deposits of brown iron ores of northern Kazakhstan. Total volume amounts billion of tons.

Among all the C5 countries in Eurasia, Kazakhstan has the highest per capita GDP followed by Turkmenistan and then Uzbekistan. However, diving further deep reveals that per capita GDP of Uzbekistan is only 25% of Kazakhstan. This shows the extent of disparity in the entire region.

In a larger picture, the rate of growth (in terms of PPP) of C5 countries taken together is hardly 4% of China and 22% of Russia. Does this mean, that they are so much backward than India?

Military to Military ties

For thousands of years, a Kazakh tribe has trained Golden Eagles in the region’s barren alpine mountains to swoop down and capture foxes for food and furs. Hundreds of miles from the nearest city, tribal families live without electricity or running water, and they rely on the eagles for survival. Goat and cattle herders, they move three times a year, following the animals and the pastures, selling meat and dairy along the way.

This deep understanding extends to the local Golden Eagle population. According to tradition, when a young boy is 13, his father begins to train him to hunt with eagles. The tribe captures young female eagles who are not yet old enough to fly, raise them, and after seven years return them to the wild to breed.

After independence in 1991, the golden eagle become the national symbol of Kazakhstan. It can also be spotted on the Kazakhstan flag.

Every year, the U.S. Central Command conducts multi-lateral exercise with Kazakhstan. They are known as Exercise STEPPE EAGLE.

As part of the exercise, military personnel from the United Kingdom, India, Kyrgyzstan, Tajikistan, Turkey, United States and Uzbekistan jointly worked out various elements of peacekeeping operations.

The tasks included serving at checkpoints, escorting and convoying humanitarian supplies, negotiating with local population, patrolling areas, clearing mined fields and roads, cleaning and providing water and carrying out first aid treatment.

The exercise has been conducted since 2003 in order to improve the peacekeeping skills of the military personnel in the course of performing joint theoretical and practical tasks.

India Kazakhstan joint exercise is known as Kaz-Ind.

The fourteen-day joint training exercise held in 2018 aims to build and promote army to army relations and exchange skills and experiences between Indian Army and the Kazakhstan Army.

Counter terrorism and training

The primary focus of the Kaz-Ind exercise was to train and equip the contingents to undertake joint counter insurgency and counter terrorist operations in urban and rural environment under mandate of United Nations. It had provided an ideal platform for both contingents to share their operational experience and expertise while also being instrumental in broadening the interoperability and cooperation between the armies of India and Kazakhstan.

While not discussed in our media, India and Kazakhstan can also collaborate on R&D in defense. If calculated, the potential for exports of weapons and equipment by DRDO and their equivalent organization is immense.

Since major of the weapon systems in the Indian Armed Forces is of Soviet era, there is scope of joint ventures with Kazakh companies for the production of torpedoes and related systems for the Indian Navy. Also, the companies have expertise for the Indian Army and the Air Force.

Kazakhstan’ role in global governance

In the year 2019, Kazakhstan Peacekeeping Company has been deployed with the Indian Army’s JAT Infantry Battalion in the United Nations Interim Force in Lebanon (UNIFIL) for peacekeeping operations. All the reimbursement- paid for service in UN peacekeeping- for the Kazakhstan troops will be routed through India.

This is a first time; Kazakhstan has sent its own troops for peacekeeping operations. At the same time, this is also the first time that Indian Army unit has taken the command of a foreign army contingent.

While this a big boost to the military-to-military diplomacy between India and Kazakhstan, this is also indicative of the fact that the country wants to play a larger role in global governance. Kazakhstan is also the largest country in Eurasia. By virtue of it, should India support its aspirations to become a ‘P’ member of United Nations Security Council (UNSC)?

We hear a lot about overseas aid coming from the US and EU, but it is far less well known that Kazakhstan has been providing aid to other countries for the last two decades. Currently, active work is being undertaken to establish a national official development assistance operator in the form of an agency, provisionally called KazAID.

KazAID is the first ODA programme among the Central Asian states, and one that will have a neighbourhood focus. The new agency will also fit with Kazakhstan’s broad, long-term strategy to make the country a regional hub for international diplomacy.

This initiative if seen, in the light of the ongoing process of withdrawal of U.S. and allied International Security Assistance Force (ISAF) military from Afghanistan, shows that Kazakhstan is highly concerned about the political instability that can derail its own development and the region. Can India and Kazakhstan work together in Afghanistan?

Those who are further interested to explore Kazakhstan are requested to watch this documentary