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Economy

Kazakhs stay home as economy spikes holiday plans

ALMATY -- The curved open-air swimming pool at the Eight Lakes resort outside Kazakhstan's commercial capital Almaty is billed as the largest of its kind in the former Soviet Union, testifying to a penchant for grandeur in Central Asia's richest country.  

On a searing summer day, its chilly waters host three generations of middle-class Kazakhs, whose four-wheel drive vehicles pack the parking lot while they frolic with inflatable alligators and beach balls.

But at the poolside bar under a pagoda there are echoes of the public grumbling that has become the soundtrack for an alarming economic downturn in the oil-producing republic.

"In Thailand, the pool would be just as big, the beer would be cheaper and the service would be [higher] level," said Marat Isayev, a specialist masseur sipping a $4 glass of imported lager, who saw his one-time $3,000 monthly income drop by half after the crash of the country's currency, the tenge, last year.

"Some months, if I had good clients, I earned $4,000 or $5,000. I thought it was normal for a masseur to earn that much. Maybe, in 10 years, oil will go back up and I can see Thailand again," he said, referring to his favorite holiday destination.

It was the crash in prices for hydrocarbons making up well over half of exports and exposure to the economic crisis in sanctions-struck Russia that moved the government to scrap the tenge's costly trading band with the dollar in August last year.

The tenge has since shed about 50% of its value, relieving the burden on the national reserves but piling political pressure on an authoritarian government that took credit for impressive economic growth during the post-millennial oil boom.

With fewer savings, it is the country's poorest people that are least well equipped to deal with the collapse in real incomes. But it is the relatively sizeable and increasingly grumpy middle class, forced to sacrifice foreign holidays and other hard currency-linked spending, which has witnessed the most dramatic change in lifestyle.

"The [most prohibitive] cost in terms of outbound tourism is the high prices of international flights," said Kassymkhan Kapparov, director of the Bureau for Economic Research of Kazakhstan, a think tank. "There is not much that local tourist firms can do in terms of price flexibility as most of them buy wholesale packages each year with no price hedge."

Although official data for the tourist season are not yet available, local tour operators are predicting a 70% shortfall in outbound tourism for 2016. Kapparov said anecdotal evidence suggested this has led to an increase in short stays at resorts inside the country.  

Ironically, some of the more upmarket of these, such as Eight Lakes , are rumored to be owned by the family of 76-year-old autocrat President Nursultan Nazarbayev, who has ruled over Kazakhstan since before independence in 1991.

"Who else would have this much land so close to Almaty?" asked one taxi driver from a village close to Eight Lakes, which offers mini-safari tours taking in wild pigs and deer in the outback of its vast 1,100 hectares.  

"They save all the best places for themselves," added the driver, who did not want to give his name. Staff members refused to comment on the ownership of the resort, which is publicly spearheaded by Vitali Kim, a local businessman.

Demonstrations

State policy over land use -- and in particular a controversial scheme to extend the length of  leases for foreigners -- were at the heart of demonstrations that rocked the regime of the usually popular Nazarbayev in spring.

The government attempted to head off the unrest by sacking two ministers linked to the proposed reform and detaining hundreds of people ahead of planned nationwide protests in May.

This month Nazarbayev signed off on a moratorium on further amendments to the land code lasting through 2021, effectively accepting defeat in pursuing the reform.

The regime, whose legitimacy is founded partly on strong economic growth, faces an increasing challenge to demonstrate that it is in touch with the concerns of ordinary citizens living in an atmosphere of austerity.

Public relations gaffes in recent times include Nazarbayev's call last year for Kazakhs to learn to live without foie gras, the "hugest" Land Cruisers and imported bananas. Nazarbayev's eldest daughter Dariga Nazarbayeva also courted controversy in February by exhorting citizens to pay their taxes.

"There is no need to be greedy. It is necessary to share," said Nazarbayeva, 53, who is also the country's deputy prime minister and a potential successor to Nazarbayev.  

Companies in the service sector that have weathered the crisis have watched revenues fall as purchasing power shrinks. Top-of-the-range hotels such as the Rixos chain have offered rooms at a third of the cost of their pre-devaluation prices, car dealerships are selling vehicles at a loss, and restaurant-goers have ditched high-end eateries for middle-of the-range and budget options. 

With global prices for crude oil hovering around $50, down from more than $100 in the first half of 2014, the World Bank in its most recent report predicted a slow recovery and "significant headwinds" for the economy, which shrank by 0.2% in the first five months of 2016.

Although Kazakhstan's economic woes broadly mirror those of Russia, analysts warn that the country of 18 million has a more limited armory with which to tackle a long-term commodities price slump than its neighbor to the north.

"Russia has a far larger domestic consumer market, as well as a relatively more diversified economy and greater actual and potential exports," said Austin Peat, co-founder of the London-based Edward Austin company, which offers business research and consultancy services throughout the ex-Soviet region. "For Kazakhstan, with its fundamentally different demographic reality, there is far greater emphasis on transforming internally to compete externally."

Young, educated Kazakhs may not be prepared to wait for long-promised reforms to bear fruition, and it is among this demographic that "discussions [on social media] about emigration have intensified," according to Kapparov.

That spreading sense of desperation has also prompted air travel service providers to resort to novel methods to stimulate demand for trips abroad.

"They have started selling air tickets in installments," wrote well-known Facebook humorist Rinat Balgabayev of the tactics of one local company, Choco Travel, in a post liked by hundreds of users this month. "After a few more [currency] devaluations we'll be taking out loans to travel several stops on the bus."

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