KAZAKHSTAN: LABOR MARKET CONCERNS TAKE CENTER STAGE AT

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SUBJECT: KAZAKHSTAN: LABOR MARKET CONCERNS TAKE CENTER STAGE AT
MAZHILIS ROUNDTABLE

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1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: The Nur Otan National Democratic Party of
Kazakhstan co-hosted a roundtable on January 19 at the lower house
of parliament (Mazhilis) to discuss the legal definition of
"self-employment" and how to implement policy mechanisms to address
this discreet -- if not illegal -- form of entrepreneurship.
Members of parliament were more concerned about the absence of
quality vocational education and the inability of Kazakhstan to
respond quickly to changes in the labor market. END SUMMARY

THE SELF-EMPLOYED IN KAZAKHSTAN


3. (SBU) The Ministry of Labor and Social Protection, together with
the Presidential Commission on Women's Issues and Family
Demographics, commissioned a local research institute to study
"self-employment" in Kazakhstan. The research, funded by the United
Nations Development Fund for Women (UNIFEM),studied a sample of 300
self-employed people in the city and oblast of Almaty.


4. (SBU) There is no official definition of "self-employment" in
Kazakhstan. This roundtable recommended that parliament agree on a
legal definition and amend legislation regulating employment, the
tax code, and licensing to formalize this informal sector of the
labor market. Some parliamentarians defined self-employment as
working without declaration of income while failing to pay taxes and
failing to contribute to the national pension fund. (NOTE: The IRS
defines self-employment as carrying on a trade or business as a sole
proprietor. END NOTE).


5. (SBU) The roundtable initiated a legislative dialogue on
understanding and classifying self-employment, in order to usher the
more than one-third of the Kazakhstani labor force (an estimated 3
million citizens) into the legal licensing framework. Social
advocates at the roundtable saw this discussion as an opportunity
for the government to take a more active role in fighting poverty
and advancing the rights of women and families. However, the
discourse quickly became adversarial, with parliamentarians viewing
the integration of the informal sector as a long over-due task of
legal compliance.

SIMPLIFY, INCENTIVIZE AND STIMULATE


6. (SBU) The roundtable participants suggested that the government
simplify the registration (patents) procedure for the self-employed;
enhance microcredit possibilities; offer tax incentives for labor
legitimacy; retool the manner in which unemployment benefits are
distributed; and stimulate the creation of women-owned and
youth-owned businesses through the provision of technical assistance
in business planning, access to finance, and retail consulting
services.


7. (SBU) The roundtable concluded with a recommendation to appeal
to international organizations (UNIFEM, UNDP, and the ILO were
identified) for assistance to support and protect the self-employed
in Kazakhstan.


8. (SBU) Advocates for the self-employed promoted mainstream labor
market integration and support for those who wish to become or
remain self-employed. However, members of parliament accused the
self-employed of bankrupting the social welfare system, by straining
the services of the state for medical attention and failing to
contribute to the "greater good" of society.

SELF-EMPLOYMENT: THE RESULT OF POOR LABOR MARKET ANALYSIS?


9. (SBU) According to several deputies in attendance,
self-employment is on the rise because of Kazakhstan's inability to
teach and train individuals to meet the demands of the labor market.
Deputy Svetlana Ferkho, for example, opined that university
students pursue the wrong course of study. Pointing to East

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Kazakhstan oblast, where thousands of students study engineering and
economics, she exclaimed, "Do we really need this many engineers and
bean-counters?" She further lamented that "a specialized diploma in
Kazakhstan is fast becoming a route to unemployment." Ferkho said
that too many Kazakhstani students pursue international relations
degrees and added tersely, "How many people do we really need with
this type of degree? We have a diplomatic academy for international
relations. This field of study is strictly for diplomats, not for
those entering the workforce." (NOTE: Another deputy echoed these
comments and recommended students pursue jobs in high demand, such
as pastry chefs and seamstresses. END NOTE).


10. (SBU) The roundtable participants then discussed the ability of
the Kazakhstani workforce to respond to the demands of the labor
market. Vladimir Nekhoroshev, Deputy Leader of Nur Otan, said that
"no one in Kazakhstan effectively studies the demands of the labor
market -- not the Ministry of Education, not the Ministry of
Labor... Kazakhstan requires a qualified cadre of specialists."
His rhetorical questions resonated: "How can we prepare students
for jobs that are in high demand? Even more important, how do we
know what jobs in five to ten years will be in demand?"

IS THE WORLD'S OLDEST PROFESSION CONSIDERED SELF-EMPLOYMENT?


11. (SBU) After initial constructive comments, Deputy Nekhoroshev
proved to be a distraction. Following a rant that official
recognition of self-employment was "just a ploy to hide the true
unemployment rate," he wondered if prostitutes would qualify as
self-employed; and if so, "would 'ladies of the night' be given the
same government support that this roundtable recommends?" (NOTE:
In December 2009 Nekhoroshev proposed a ban on advertisements of
sexual services in the media and Internet. He was unsuccessful in
his bid, which garnered considerable media attention. END NOTE).


12. (SBU) COMMENT: The roundtable focused primarily on
Kazakhstan's readiness to meet labor market demands, but did not
address the more immediate and equally essential challenge of
passing legislation to define and classify "self-employment."
Development assistance to improve understanding of labor
classification, labor market responsiveness, and the creation of a
robust vocational education framework will likely be welcome at the
Ministry of Labor and Social Protection and the Ministry of
Education and Science. These issues also touch on related issues of
women's rights, rural development, and small business development, a
niche for Kazakhstan NGOs. END COMMMENT.

SPRATLEN