Urbanization and domestic migration in Kazakhstan: Causes and impacts of government mitigation

by Dmitriy Belyanin

Introduction

Cities are growing, especially in developing countries.  While urbanization quickens innovation and economic growth, it also produces unemployment, road congestion, pollution and crime. 

In transition economies, urbanization increased rapidly with the Soviet collapse, when many agricultural enterprises, state-owned or collectivized, went bankrupt.  In nations that retained ownership of farmland, declining living standards in the countryside induced people to move to cities.

Being the most urbanized country in Central Asia, as shown by the urban share of the population, Kazakhstan underwent recession, growth and recovery, which affected the growth of cities – as do public policies, not to mention geopolitical and geoeconomic trends. 

Dynamics of Urbanization Trends in Kazakhstan

After the USSR imploded in 1991, hyperinflation and the removal of subsidies afflicted farm workers throughout the Commonwealth of Independent States.   In Kazakhstan, farm subsidies decreased from 10-12 percent of GDP in 1991 to 2-3 percent in 1993, becoming negligible in 1995-1999, according to economist Richard Pomfret.  About 300,000 people left desert areas, estimated Alexandra Kazakova of the Central Asian Bureau for Analytical Reporting.   Thousands are leaving the Aral Sea area, though construction of Dike Kokaral attracted workers and residents. Total urban population declined from 9.2 million in 1991 to 8.3 million in 2001, according to the World Bank’s World Development Indicators.  This can be explained by emigration from Kazakhstan. 

Country	1991	1996	2001	2006	2011
Kazakhstan	9,241,068	8,714,741	8,250,388	8,345,355	8,871,192
Kyrgyzstan	1,673,404	1,669,279	1,745,422	1,841,521	1,948,970
Tajikistan	1,684,318	1,661,237	1,664,255	1,838,160	2,057,349
Turkmenistan	1,697,180	1,921,229	2,100,046	2,270,962	2,487,307
Uzbekistan	8,344,763	8,844,080	9,306,248	9,675,098	10,612,941

Table 1: Dynamics of total urban population in the Central Asian countries, 1991-2011

Source: The World Bank, World Development Indicators

Unlike cities in Kazakhstan, those in Uzbekistan and Turkmenistan grew even during the depression of the 1990s (Table 1).  Reforms in Uzbekistan proceeded much more slowly than in Kazakhstan.  This smoothed Uzbekistan’s transition in the short run but reduced its standard of living in the long run.  As in Kazakhstan, people living in rural areas of Uzbekistan near the Aral Sea left for Tashkent and other large cities. 

Turkmenistan's repressive laws made emigration difficult.   As Ades and Glaeser have shown, a dictatorship typically has a higher concentration of population in the nation’s main city than does a democracy.  And a country with heavy trade barriers typically has greater population density in the main city than does a country with freer trade.  Economic instability also concentrates people in the most populated city. Kazakhstan, having free trade, relative stability, and a less repressive government than all other countries in the region except Kyrgyzstan, has the lowest share of the population in the main city (Table 2).

Country	1991	1996	2001	2006	2011
Kazakhstan	11.75	12.79	14.32	15.56	16.09
Kyrgyz Republic	38.74	42.98	44.24	43.66	42.96
Tajikistan	34.70	34.38	34.38	35.27	35.96
Turkmenistan	24.85	24.77	25.57	26.69	27.50
Uzbekistan	25.33	23.94	22.97	22.50	20.89

Table 2: Population of the largest city in Central Asian countries, as a percent of total urban population (1991-2011)

Source: The World Bank, World Development Indicators

People also migrate from small cities to large.  Consider the so-called mono-town, a Soviet legacy in which one enterprise provides most jobs.  In 2013, Kazakhstan had 27 mono-towns. 

The move of the national capital from Almaty to Astana created an alternative for domestic migrants.  Astana’s population increased 55% from 2003 to 2012, according to the Ministry of the National Economy of the Republic of Kazakhstan.  But many people still migrate to Almaty.  The share of total population living in cities with more than a million residents (Almaty, in the case of Kazakhstan) increased from 6.6% in 1991 to 8% in 2001 and 8.6% in 2011, according to the World Development Indicators.  The rate of migration from smaller cities to Almaty leveled off after an oil boom ended the recession of the 1990s. 

During the boom, cities grew, since they provided most new jobs.  Government support of agriculture persuaded few to stay in villages.  Cities grew during the Great Recession of the 2000s, and they still grow.  Though grain has been an important export for Kazakhstan, it lags behind oil, metals, and other raw materials.  The lag affects rural growth, because exports account for 40% of grain production, which is concentrated in rural areas. The Akmola, Kostanai and North Kazakhstan oblasts account for 66% of grain production, compared to 6% for the Almaty oblast and 3% for Aktobe, Karaganda, Zhambyl and East Kazakhstan oblasts each, according to Esaydar of G-Global.  Since southern oblasts offer few farm jobs, their residents migrate to Almaty and Shymkent. 

The lack of capital in grain production also causes the rural economy to stagnate.  In recent years, cereal yield per hectare in Kazakhstan has been one of the lowest in the CIS, according to the World Development Indicators.  In 2014, the yield was 1,164 kg per hectare, compared with 2,904 for Kyrgyzstan, 1,988 for Turkmenistan, 4,766 for Uzbekistan, 2,798 for Tajikistan, 2,240 for Russia, and 4,064 for Ukraine.  This can be explained by insufficient funds for farm equipment and seeds.

Impact of urbanization

The benefits of urbanization include:

Quicker spread of information and innovation

Wider choice of jobs

Larger and more competitive markets that take advantage of scale economies and raise wages

And increase of trade (domestic and international). 

Drawbacks include:

Increasing unemployment due to competition for jobs

Higher prices, pollution, road congestion and crime. 

In analyzing the government’s measures to mitigate the effects of urbanization, this article will focus on road congestion and pollution. It will also describe recent government measures and trends affecting urbanization.

Since labor costs in Uzbekistan and Kyrgyzstan are much lower than in Kazakhstan, and since Kazakhstan's trade regime is relatively liberal, agricultural producers in these countries can supply many farm products more cheaply.  This enabled city residents to buy food at lower prices than would have existed under protectionism.  But many moved to the cities because farming didn’t pay – and failed to find formal jobs.  So they joined the shadow economy, not paying taxes or receiving pensions and other social benefits. 

While wages have been among the main reasons why people of Kazakhstan have been moving to the cities, realizing the benefit of scale economies and increased innovation has been more difficult. Almaty, the largest city in Kazakhstan, accounted for only 16% of the country’s urban population in 2014, according to World Development Indicators.

Diversifying Kazakhstan’s economy has been challenging, due to low population and population density. These factors limit the migrant’s choice of city jobs. The likelihood of earthquakes in Almaty, and the wish to preserve the city’s historical landscape, make tall buildings undesirable, though these factors were neglected during the construction boom. 

Some urbanization costs, such as congestion, are low in Almaty by world standards, but they were negligible in the Soviet period.  This disturbs the populace and adds to the popularity of measures against their adverse effects, as well as against urbanization itself.

Fighting road congestion and pollution

As of September 1, 2015, there were 390 cars per 1,000 people in Almaty, almost double the ratio for Kazakhstan (200 cars), according to the Agency on Statistics, as reported by Idrive.kz. 

Both ratios are low relative to developed countries – yet automotive pollution is much greater here.  Carbon dioxide emissions, in metric tons per capita, are 15.8 as of 2011, compared with 12.6 for the same year for Russia, 12.2 for Turkmenistan, 6.7 for Belarus, 6.3 for Ukraine, 3.9 for Uzbekistan, 1.2 for Kyrgyzstan, and 0.4 for Tajikistan, estimated the World Bank.  For G7 countries, the values were 17 for the United States, 7.1 for the United Kingdom, 9.3 for Japan, 6.7 for Italy, 8.9 for Germany, and 14.1 for Canada.  Automobile pollution accounts for 80% of pollution in large cities of Kazakhstan, according to Akhmetzhan Yesimov, former mayor of Almaty, reports Kazinform.

Charging fees for congestion or pollution would cause motorists to weigh the costs they impose on other people, such as lung illness. But it would also add to the already-high costs of driving, by raising gasoline prices.  So the government builds roads.  This may increase congestion over the long run, since people will want to buy more cars or drive more often.  But it might not occur in practice, because of high gasoline prices, high interest rates on automobile loans, stricter conditions for borrowing, and falling incomes.

The subway in Almaty, with nine stations built out of the 24 expected, is too limited to decongest roads.  Building the first line cost $1.1 billion.  With 6.56 million rides in 2013 (according to Asmetro.ru), at a ticket price of 80 KZT (about 22 cents at the current exchange rate), revenues cannot cover construction cost, not to mention operating costs. This typifies subways around the world.

Nevertheless, the subway is profitable politically if not financially.  One Almaty station was named “Moskva,” the Russian word for Moscow -- and one of the Moscow stations was named “Alma-Atinskaya,” after the old Kazakh term for Almaty, to symbolize strong relations between the two cities. 

Also, building the subway created 1,350 jobs, reports Zakon.kz.  Most subway employees are migrants, earning an average monthly salary of 145,000 tenge, plus benefits.  This compensation is high by local standards, reports the business weekly newspaper Kapital.

The Almaty metro will be backed by light rail transit. This replaces the old Soviet trams, which are unpopular due to low speed and frequent damage.  Light rail transit is much cheaper to create and operate.  And it is expected to decrease congestion by 25,000 automobiles daily, reports Tengri News. 

Almaty attracts 250,000 cars per day from other cities, according to Mayor Baurzhan Baibek.  The city plans to restrict driving downtown and to provide cheap parking on the outskirts, where a motorist could save 2,400 tenge per day, reports Tengri News.  Since domestic migrants often need cars to commute, this plan may not work even if parking were free.  And parking space may diminish in the long run since urbanization will continue.

In the program “Almaty 2020,” the akimat (Kazakh for “local government”) plans pedestrian-only streets, bicycle routes, and tree plantings.  All this would cost 800 million tenge, reports Tengri News.  But closing streets to motorists may congest other streets, and bike routes have not proved popular.  Trees can reduce carbon emissions but not other pollutants.

For Astana, officials decided in 2013 that light rail would cost too much, so they adopted rapid buses instead.  According to President Nursultan Nazarbayev, French companies providing light rail offered a price of 300 billion KZT, which the akimat found prohibitive, reports Nur.kz. But in December 2015, City Hall nixed the bus project because of inefficient spending, reports Tengri News. 

Other policies to reduce car pollution have bogged down.  In 2013, Kazakhstan adopted the Euro-4 standard of environmental safety for automobiles.  Under this standard, Kazakhstan can import cars from specific countries only if they were made after specific years.   Unfortunately, many Kazakhstanis cannot afford new cars.  And it’s possible that Kazakhstan can legally import cars only years after exporters adopt environmental standards.  In borderline cases, a special laboratory must certify the car before the sale.  Kazakhstan lacks the facilities and means for creating a database of types of autos imported, said Olzhas Sutemgenov, deputy director of the Department of Automobile Transport of the Ministry of Transport and Communications, as reported by Prokopenko from Tengrinews.kz.

Some plans would make automobiles use more natural gas.  Kazakhstan produces 2.5 million tons of natural gas per year but uses only 600,000 tons.  Only 15,000 cars in the country, out of over 4 million, use natural gas.  Since only 2% of all automobiles produced in the world rely on natural gas, those in Kazakhstan must be converted, which isn’t cheap.  Also, changing the car’s technical parameters deprives the owner of warranty service, said Sergey Smirnov, analyst of oilnews.com, as reported by Gaifutdinova, of Forbes.kz.

Developing new centers

On January 17, 2014, Nazarbayev announced that Aktobe and Shymkent would become big cities like Almaty and Astana.  Aktubinsk oblast has 808,000 residents, 53% of whom live in Aktobe.  As of 2014, 31 new villages had joined the campaign to urbanize.  Due to migration, 70,000 people had queued up for land plots, and 12,000 were waiting for apartments, reports Tokar of caravan.kz.  

The government will create an industrial zone near Aktobe.  Unlike special economic zones, industrial zones serve for indefinite time periods, and they receive no tax breaks.   For new projects in industrial zones, the government refunds 30% of the amount invested.  This induces creation of enterprises, but many may go bankrupt, wasting taxpayers' money.  Organizing industrial zones is the prerogative of oblast akimats, which leads to different results for different zones. 

As of July 2015, only the South Kazakhstan akimat had specific recommendations with the power of a regulatory act.  According to Yevgeniy Bolgert, executive secretary of the "Atameken" National Chamber of Entrepreneurs, the entrepreneurial code should include specific rules.  And Kazakhstan should learn from Russia and Turkey, which tap professional management companies to run the zones, reports palata.kz.

More than 40 factories -- from the oil and gas, petrochemical, construction and transportation industries -- are to be built in the zones.  The ratio of private to government investments in the project is 7 to 1.  The land plots will eventually be sold out, while the engineering and communications services and facilities are to be provided free, reports Kazinform.  This should diversify the city economy and employ more people, including migrants.

Shymkent is the largest city in the CIS in terms of territory.  To save space, the city plans more buildings with up to 20 stories.  Their share of all buildings would rise from the current 20% to 50%.  The city would also spend 15 billion tenge on communications, social welfare facilities, and transportation – and it may build a subway – because it has nearly 1 million residents, reports Barlybayevs from Astana TV.  Given the cost and time spent on the Almaty subway, one might not desire Shymkent’s.

In 2010, the government created the "Ordabasy" industrial zone in Shymkent, on the site of a former tire factory. The zone produces rolled metal products, steelwork, energy-saving lamps, soap, plastic pipes, mechanical products, construction materials, washer fluids, windshields, and fitting pieces, according to its Web page.  It also provides transportation, logistics, and storage services. 

New trends in agriculture

Kazakhstan's accession to the World Trade Organization will make it difficult for small farms to compete, since the WTO restricts subsidies and trade protection.  Together with high gasoline prices, this will spur migration from villages to cities, though construction of an oil refinery, jointly with Iran and China, may slow migration by increasing gasoline supply and decreasing its price. 

The removal of sanctions against Iran creates opportunities for Kazakh agricultural enterprises.  A meat processing factory, with a capacity of five million tons, is to be built in the South Kazakhstan oblast by September for 6.3 million tenge.  The factory will export to Iran and the United Arab Emirates as well as sell locally.  It will create 196 jobs, reports Agroalem.kz.

Iran plans to export fruits and vegetables to Kazakhstan, hindering domestic producers. Kazakhstan, for its part, exports grain.   While the former can be grown by small firms, the latter must be produced in large enterprises.  Thus, increasing trade with Iran will enlarge Kazakhstani farms and cities.  Other Kazakhstani exports to Iran, under the "Nurly Zhol" Program and the Program of Accelerated Industrial and Innovation Development, may include chemicals, construction materials, agricultural equipment, and steel, reports Kazinform. 

Another threat for small farms is the possible cultivation of genetically modified (GM) crops in Kazakhstan, primarily by multinational corporations such as Monsanto.  On January 17, 2014, Nazarbayev supported growing of drought-resistant and genetically modified plants since such farming will spread throughout the world.  In his opinion, GM foods are edible, and people should not fear them, reports TengriNews.  In any case, the new producers will lobby the legislature to remain in the market.  Many of the new jobs will require sophisticated skills, inducing domestic migration.  More people will move to cities than vice versa, since the new farms will use advanced technology that substitutes for manpower.

Laid-off agricultural workers may find jobs in other spheres while remaining in the suburbs or the countryside.  Resorts, highway cafes and other tourist facilities require drivers, cleaners, and construction workers, who may be hired among villagers if tourism develops.  Living in villages is cheap, so employers can pay villagers less than city residents, though this may reduce the quality of the work.  A luxurious hotel or restaurant will prefer to attract people from large cities.  Because many tasks are seasonal, tourism employees in large cities must find other jobs for the winter or summer.  Another obstacle is the low demand for domestic tourism, thanks to its bad reputation and to recession.

Restoration of the Small Aral Sea

The Small Aral Sea also affects migration.  In 1989, the Aral Sea split into the Large Aral Sea (the southern part, in Kazakhstan and Uzbekistan) and the Small Aral Sea (which is in Kazakhstan).  With a $64.5 million loan, an $86 million dam called Dike Kokaral was completed in 2005.  In January 2015, the water level was 12 meters higher than at its minimum in 2003.  The fish catch increased from 695 metric tons in 2005 to 5,595 in 2014.  This is much lower than the 34,160 tons in 1961, but still it encourages people to return to the area.  More than 5,000 people did.

A drawback is that the project harms the Large Aral Sea.  Uzbekistan could upgrade its irrigation, but it blames Tajikistan for the drying up of Amu Darya, since Tajikistan operates a hydroelectric dam, reports Bland from Eurasianet.org.  People are unlikely to return soon to the Uzbek shores of the Aral Sea.  

Conclusion

Transition from the Soviet command economy to a market economy hindered agriculture in all CIS countries and induced migration to cities.  In Central Asia, urbanization has been especially rampant in highly authoritarian Uzbekistan and Turkmenistan. In Kazakhstan, during the recession of the 1990s, urban population fell due to emigration out of the country.

Various factors account for migration within Kazakhstan.  The north produces much more grain than the other regions, so its crop yields per unit of land are low.  Many people left the Aral Sea area for better environments.  Trade with Uzbekistan and Kyrgyzstan has made it hard for Kazakh farmers to compete, and WTO accession will aggravate the problem by cutting subsidies and trade barriers.  Mono-towns focus on a single enterprise which hires fewer than a competitive labor market would.  This too has increased migration from villages to cities. 

Of all cities in Kazakhstan, Almaty attracts the largest share of domestic migrants, though the replanting of the capital in Astana resulted in its own enormous growth.  Increasing migration has also swelled Shymkent and Aktobe, where new industrial zones create jobs. 

Having a low population and population density, Kazakhstan cannot exploit such benefits of urbanization as scale economies and increased spread of information.  Also, people try to mitigate such social costs of urbanization as traffic congestion and pollution.

The government is building new roads and creating new means of transportation, such as the subway in Almaty and light rail transit.  There are also attempts to enable automobiles to run on cleaner fuel.  These policies develop slowly, with interruptions and side effects.

Information and communication technologies, underdeveloped in Kazakhstan, can free firms and employees of the constraints of location, slowing urbanization.  Laid-off farm workers can find jobs in other spheres while living outside of the cities.  The end of sanctions against Iran creates new opportunities for agricultural enterprises in Kazakhstan.   Due to the nature of goods traded between the two countries, however, large farms benefit while small ones face risk.  The cultivation of GM crops in Kazakhstan may bankrupt many small farms, since these crops are produced by multinational corporations.  Though much remains to be done to restore the Aral Sea, people are already returning to the area, due to the Kokaral Dam, which helped restore the northern water level.

Dmitriy Belyanin has a Master’s degree of Business Administration in finance and a Bachelor of Arts degree in economics from KIMEP University.  Since 2007, he has been writing on issues in economics and finance ranging from stock markets to environmental economics. He is the associate editor of this blog.

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