Kazak Construction Slump Sparks Protests

As the construction boom seen in Kazakstan’s larger cities slows to a halt, anger over unbuilt homes and broken promises is driving people to take to the streets in protest.

A series of protests over housing issues have taken place in the capital Astana and the country’ commercial centre Almaty this month.

The demonstrators represented various groups – former army officers with nowhere to live, people whose homes are to be demolished to make way for redevelopment, and others who have lost everything they invested in now bankrupt construction firms.

Over the last decade, both Astana and Almaty have experienced large influxes of people looking to benefit from the better employment prospects there, which are largely the result of the country’s oil wealth. With housing in high demand, the construction industry took off and new buildings started shooting up.

However, by the end of 2007, the crisis in the United States mortgage market was making itself felt in Kazakstan. Local banks that had been underwriting the building boom found themselves over-exposed by extensive borrowing from abroad. There were also concerns about domestic loan quality – whether people who had taken out mortgages would be able to repay them.

Kazak banks reacted by raising interest rates and cutting the amount of credit on offer, and this had an immediate impact in Almaty, Astana and other large cities, where some projects were scaled down and others suspended entirely pending an upturn.

Recent protests have included one on October 20 by a group of people in Astana who paid over money to a construction firm that then went bankrupt; a demonstration in Almaty against a construction firm that stopped building a housing complex even though the project was being funded by government; and a street action by retired defence ministry staff who collected money to give to the ministry since it had failed to find the funds to pay for housing for them.

The biggest event was a rally on October 11 which brought together army reserve officers demanding to be housed, residents of areas scheduled for demolition, and people who had lost out in mortgage deals. Although their demands differed, they presented a united front in demanding firm government action against the state agencies, courts and businesses they blamed for their problems.

Many of them represented pressure groups which have fought lengthy legal battles with property developers and the local authorities.

“This is not a rally to shed tears, it is a rally to protest,” the protesters were told by Aynur Kurmanov, who heads Talmas, one of the groups that organised the event.

Esen, a 42-year-old Almaty resident attending the rally, was there because the area where he lives in central Almaty is scheduled for redevelopment. The city authorities have approved demolition of the 1950s housing blocks there and awarded property developers a building permit for this prime location.

“Our housing block doesn’t interest them,” said Esen. “The land it’s built on and the surrounding area can be sold at a profit to build luxury housing.”

The Almaty authorities have offered to rehouse residents, but the apartments it has in mind are a long way from the city centre, and it can take up to two and a half years to get one.

“Only a fool would agree to that,” said Esen. “My neighbours and I are in a difficult situation and I am afraid they will force us out.”

Another group represented at to October 11 rally were members of the emerging middle class who took out mortgages to invest in construction ventures, only to find that the firms went bust or that they were fictitious front companies.

Igor Li, 39, from Almaty fell into the latter category and blames the government for allowing companies to operate fraudulently.

“All these companies were legally registered and really existed for some time; they had tax inspections and audits. Why didn’t the authorities spot the fraudsters at the time, and why don’t they hold them accountable now?” he asked.

Pressure groups focusing on a particular social issue are not a new phenomenon in Kazakstan. (See Kazak Authorities Reluctant to Allow Public Protests, RCA No. 490, 23-Apr-07; and Kazakstan: Trouble in Suburbia, RCA No. 443, 14-Apr-06.)

However, this year has seen them coalesce to form a broader front.

“New movements issuing demands to the government and to financial and commercial institutions have appeared,” said Kurmanov. “Disputes over social issues are going to grow; that is obvious from the rising number of meetings, pickets and rallies.”

Independent journalist Daur Dosybiev believes protests grounded in social concerns have taken on much more of a political colouring than they had a couple of years ago.

This, he says, because people increasingly believe the problems they face are a direct consequence of “the alliance between money and power”.

“Today the protestors see they are the victims of companies that continue to prosper, some businessmen make the transition into government, and when people get cheated, the courts either make strange decisions or issue orders that are simply ignored.”

Vladimir Yuritsin, a journalist who covered the October 11 rally, believes Kazakstan is likely to see further social unrest stemming from a range of concerns.

“The potential for protests is definitely growing, as can be seen by the rise in inter-ethnic tension and the confrontation between rich and poor, and between members of the public and the institutions of government,” he said.

Gulmira Kurganbaeva, who heads the national government department in charge of overseeing Almaty’s finances, insisted that the authorities were addressing the concerns raised by demonstrators.

“First, those construction firms that received state funding are going to resume building work. And there are plans to introduce a law protecting shareholder rights,” she said.

Although she acknowledged that these were difficult times and government intervention was needed, she said people who invested in construction projects should have done more to safeguard their assets.

“If the shareholders themselves had pushed for legislation to protect their rights three years ago, we wouldn’t have had the current situation,” she said.

Irina Stupakova is an IWPR-trained journalist in Almaty.