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Kazakhstan: Despite Oil Wealth, Many Live Below Poverty Level

Kazakhstan is suffering with wide gaps between rich and poor as it pursues changes in its foreign investment law. But the neighborhoods near Almaty's presidential palace may give little confidence that the wealth gained from foreign companies will be shared.

Almaty, 18 September 2001 (RFE/RL) -- Within sight of the luxury hotel in Almaty where government leaders from six countries met on 13-14 September stands a cluster of crumbling houses where people living below the poverty line struggle to survive.

The dirt lane behind Seffulina Street in Kazakhstan's commercial capital is just a short walk from the five-star hotel where the prime ministers from Russia, China and four Central Asian nations gathered in a banquet room to discuss economic development and security.

The poor section is also on the same street as the Presidential Palace, the vast hall where President Nursultan Nazarbaev hosted the government heads of the five-nation Eurasian Economic Community last week.

It is nearly impossible to reach the meeting places without passing by the rutted road where piles of trash are hidden by a few dusty trees.

The contrast is a measure of how Kazakhstan's growing oil wealth has been shared with its people. The government has already collected more than $1.1 billion in excess oil revenues in its National Fund. So far, however, residents like 21-year-old Nastya have seen none of it.

A visitor asks how Kazakhstan's leaders can pass by these crumbling buildings without doing something to help. Nastya says she "is wondering the same thing."

She lives in a house here with her child and her grandparents, earning a meager living by cleaning other houses. Nastya says that she and her neighbors in the crowded buildings are waiting for new apartments to be built:

"There aren't very many houses, but many people are registered in each house. They don't live here, but they're all registered here."

But there are few signs of low-cost housing construction in Almaty. Luxury apartments are going up in the city, costing up to $250,000 for flats with two to three bedrooms, residents say. Cheaper apartments are under development, but these are on the outskirts of town.

It is not clear that Nastya will even be able to afford one of these flats, however, because her monthly earnings have fallen while prices have gone up:

"Five or six years ago [I] used to get $150, and now [I] get 7,000 tenge. It's only $50."

On the same street, shoppers crowd the shiny new Ramstor supermarket. But Nastya cannot shop here because food costs twice as much as in the central market. Residents say that people who lived in houses like Nastya's were paid to move away when the Ramstor was built.

Nastya said she believes that people should be paid according to their abilities, but she wishes the government would lower her taxes so that life would not be so hard. For many others, life is far worse. Beggars surround the city's central mosque and its cathedral.

The situation seems to be a key to understanding the controversy surrounding Kazakhstan's efforts to revise its foreign investment law.

Foreign companies fear the changes will threaten their profits, making it impossible to continue doing business. Kazakh officials argue that changes are needed because the country has not benefited enough from foreign investment.

In early September, President Nazarbaev told the country's lawmakers to review existing contracts, saying, "The question is whether Kazakhstan undertook too many international obligations and whether all these obligations meet [the] interests of Kazakhstan," the Caspian News Agency reported.

Foreign oil companies have been blamed for not hiring enough domestic workers and for not using enough domestic products. Many have tried to meet the government's demands. But they are worried by suggestions that the government may revise their contracts without their consent. Officials say they are only seeking to "clarify" the terms.

Daniel Witt, president of the International Tax and Investment Center, a non-profit group in Washington, said in a phone interview, "They're trying to get some more money, and they call it clarification."

In comments to the investment law made in June, the American Chamber of Commerce in Kazakhstan wrote that the draft law weakens protections for investors in the country. "The end result is a law that makes investments in Kazakhstan seem riskier and less valuable," the U.S. business group said.

But the issue of who benefits from business in Kazakhstan is a difficult one.

A local businessman, who asked not to be identified, said that some older contracts allowed foreign companies to import unlimited amounts of goods for their own workers without duties. Some of the goods were reportedly sold on the local market, making it hard for domestic businesses to compete.

The companies have since given up those privileges voluntarily, business sources say. The government may only be trying to win similar concessions on older contracts again.

But the situation on Seffulina Street may make it hard to believe that the new fruits of investment will be shared with people like Nastya. So far, the record, like the neighborhood, has been poor.