View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Trepo - Institutional Repository of Tampere University NYGMET IBADILDIN Role of the Old and New Institutional Framework in Combating the Resource Curse in Kazakhstan ACADEMIC DISSERTATION To be presented, with the permission of the board of School of Management of the University of Tampere, for public discussion in the Lecture Room Linna K 103, Kalevantie 5, Tampere, on April 29th, 2011, at 12 o’clock. UNIVERSITY OF TAMPERE ACADEMIC DISSERTATION University of Tampere School of Management Finland Distribution Tel. +358 40 190 9800 Bookshop TAJU Fax +358 3 3551 7685 P.O. Box 617 [email protected] 33014 University of Tampere www.uta.fi/taju Finland http://granum.uta.fi Cover design by Mikko Reinikka Acta Universitatis Tamperensis 1600 Acta Electronica Universitatis Tamperensis 1058 ISBN 978-951-44-8390-5 (print) ISBN 978-951-44-8391-2 (pdf) ISSN-L 1455-1616 ISSN 1456-954X ISSN 1455-1616 http://acta.uta.fi Tampereen Yliopistopaino Oy – Juvenes Print Tampere 2011 TABLE OF CONTENTS List of abbreviations ...........................................................................................................................5 Abstract ...............................................................................................................................................6 1. Introduction .....................................................................................................................................7 1.1 Research agenda........................................................................................................................7 1.2 Importance of the project, initial research question,structure of the research, and methodological issues ...........................................................................................................12 2. Theoretical background ................................................................................................................16 2.1 Resource curse definitions and understanding of the institution‘s role in the resource curse avoidance strategies ..............................................................................................................16 2.2 Economic institutions and the resource curse .........................................................................17 2.2.1 Academic debates over the definition of the resource curse ............................................17 2.2.2 The Dutch disease model .................................................................................................24 2.2.3 Property rights, taxation, and other economic institutions ..............................................27 2.3 Political Institutions ................................................................................................................30 2.3.2 Political regime and natural resource factor ....................................................................35 2.3.3 Power concentration and weakness of rule of law ...........................................................38 2.4 Social Institutions....................................................................................................................40 2.4.1 Education and human capital issues ................................................................................40 2.4.2 Social capital issues .........................................................................................................41 2.4.3 Obstacles for the development of civil society ................................................................43 2.4.4 Summing up the resource curse analysis .........................................................................44 3. Methodology and data collection .................................................................................................46 3.1 Research Questions and Hypotheses ......................................................................................46 3.2 Qualitative Methods in the Research ......................................................................................49 3.2.1 Interviews and interpretive repertoires ............................................................................49 3.2.2 Difficulties with interviews .............................................................................................50 3 3.2.3 Data collection through publicly available sources ........................................................51 3.3 Quantitative methods in the research ......................................................................................52 4. The political system of Kazakhstan in history and today .............................................................54 4.1 Kazakhstan and its historical, political, and economic context ..............................................54 4.1 Contemporary political system and institutions in Kazakhstan ..............................................58 5. Oil resources and their role in Kazakhstan‘s energy policy .........................................................83 5.1 The role of foreign actors in Kazakhstan‘s energy policy ......................................................83 5.2 The role of domestic actors in Kazakhstan‘s energy policy .................................................900 5.3 Interplay between the state and oil business in the case of contracts .....................................94 5.4 Effects of oil on economic development in Kazakhstan .......................................................100 5.5 The Kashagan case as an example of public pressures and government maneuvering in oil business in Kazakhstan .....................................................................................................1077 6. Interpretive repertoires analysis ..................................................................................................112 6.1 Interpretive repertoires analytical framework .......................................................................112 6.2 Oil as a positive phenomenon ...............................................................................................114 6.3 Oil as a negative phenomenon ............................................................................................1177 6.4 Other interpretations and some analysis of the repertoires and interviews ..........................121 6.5 Analysis of the publicly available materials on the oil influence in politics and the economy in Kazakhstan ......................................................................................................................125 7. Kazakhstan‘s energy policy in the cross-national context ..........................................................128 7.1 Cross-national statistical descriptions ...................................................................................129 7.2 Brief cross-national information on Kazakhstan and its historical, political and economic context .................................................................................................................................147 7.3 Resource curse analysis in comparative context ...................................................................149 8. Conclusion ..................................................................................................................................153 Bibliography ...................................................................................................................................162 4 List of abbreviations ADB - Asian Development Bank AgipKCO - Agip Kazakhstan North Caspian Operating Company BTC – Baku Tbilisi Ceyhan BTI - Bertelsmann Transformation Index BTS – Baltic Pipeline System (Baltiiskaya Truboprovodnaya Sistema) DVK – Democratic Choice of Kazakhstan (Demokraticheski Vybor Kazakhstans) CPC – Caspian Pipeline Consortium CPI - Corruption Perception Index EIA – Energy Information Administration EITI –Extractive Industries Transparency Initiative EIU - Economist Intelligence Unit EU – European Union FCPA - Foreign Corrupt Practices Act FOB – Free On Board GDP – Gross Domestic Product HDI – Human Development Index IMF – International Monetary Fund IWPR - Institute for War and Peace Reporting KMG – KazMunaiGas (Kazakh Oil and Gas Company) KNB – Committee for National Security (Komitet Natsionalnoi Bezopasnosti) NGO – Non-Governmental Organization OKIOC - Offshore Kazakhstan International Operating Company OPEC – Organization of Petroleum Exporting Countries OSCE – Organization for Security and Cooperation in Europe OSDP – United Social Democratic Party (Ob’edinennaya Sotsial Demokraticheskay Partia) NCPSA - North Caspian Production Sharing Agreement PPP – Purchasing Power Parity PSA – Production Sharing Agreement RFERL – Radio Free Europe Radio Liberty TNC – Trans National Corporation UN - United Nations UNDP – United Nations Development Program USA – United States of America USD – United States Dollar USSR – Union of Soviet Socialist Republics WGI - The Worldwide Governance Indicators YKOS – Yganskneftegas i KuibeshevOrgSintez (Russian Oil Company) 5 Abstract Social, political, and economic risks caused by a natural resource abundance has been dubbed as the resource curse. Many developing countries have experienced it in the oil boom of 1970s and following the oil-glut in the 1980s when financial inflows from oil were so large and so fast that institutional development was not catching up with it. Methodologically, this research is based upon statistical