ARABS are coming!

Abu Aliev

Kazakhstani authorities have been meeting Arab leaders quite frequently recently – both with regular and official visits. Only within the past year, there have been meetings with the United Arab Emirates, Oman, Saudi Arabia, Jordan, Egypt, Kuwait, Syria and other countries, with some leaders – more than once. The Arab business community is also being extraordinarily active, particularly in such economic sectors as construction, finance and banking, as well as in implementation of large-scale infrastructure projects, etc. Surprisingly, the financial crisis that has considerably reduced the interest taken by international business in the Republic has not affected Arabs’ persistence. Just on the contrary. One might say, “Arabs are expanding”! But why and how is this happening?To begin with, we would like to mention that traditionally the Arab world comprises 21 states in the Middle East and North Africa. As of 2008 the Arab population includes 320 million people, GDP is equal to two trillion US Dollars, more than 70 per cent of hydrocarbon resources are concentrated here. However, the Arabs do not represent a single whole. They are separated by a number of economic, ideological and political differences.
The process of establishing relationships between the Arab world and Kazakhstan has not been intense from the very beginning, although the Central Asian states that have gained independence attracted great interest within the context of collapse of bipolar world and search of their own place under the sun. Some states insisted on providing not only moral but also money support to the Muslim Brethren in order to bring them back to the Muslim world. Besides Kazakhstan’s economic and raw material potential, the interest was roused in the early 1990s by the fact that Kazakhstan was the only state in the Muslim community that possessed nuclear weapons.
By that time extremist forces had already been strengthening in the Middle East, the most active of them being located in Egypt, Saudi Arabia, Algeria and Sudan. From their point of view, the perspective of reinforcement of the Muslim world by influential players seemed to be quite attractive. It is clear that the official authorities neither approved of the radicals nor shared their viewpoint, although the higher echelons of society also called for bringing closer the brothers in faith and taking them under patronage. Another incentive was undercover competition with the regional centers of influence, particularly with Iran.
However, after the first familiarization tour around Central Asia, preference was given to wait-and-see policy. Firstly, the Arab capitals came to unfavourable conclusion that they are not as influential as Iran or Turkey. Secondly, priority was given to solution of burning issues within the Arab world. Thirdly, the local elite did not have a clear view of the orientation preferred by the new partners.
The second half of the 1990s witnessed some revival, mostly due to the fact that Kazakhstan and its Central Asian neighbours joined the Islamic Conference Organization. One of the most important incentives at that time was to attract preferential investments by joining the financial institution within the framework of the Islamic Development Bank (IsDB).
Nevertheless, bilateral cooperation, mainly in the economic field, still remained scanty.
True, there have been some cases of Arabs’ interest in Kazakhstani investments, for example, participation of Oman Oil Company in the development of oil fields in the west of the country, the Caspian pipeline consortium, a number of infrastructure projects financed by the Islamic Development Bank. However, most attempts ended in failure. One of such failures was an attempt by a large Saudi company to enter the emerging market of cellular communications in Kazakhstan. Ben Laden Group Construction Company that had been designing the general layout of Astana also failed. Furthermore, throughout the 1990s there were no key conditions for large-scale cooperation due to lack of information, non-existence of direct transportation, similar export articles focused on raw materials, underdevelopment of Kazakhstan’s economy accompanied by unstable legislation, frequent change of leaders of branch ministries – all these factors entailed variation of the defined rules of play. Perhaps the only target that attracted the Arab countries, first of all the rich Gulf oil monarchies, was the prerogative of elite hunting in Kazakhstan. Traditionally, the Arabs have worshiped and appreciated hunt with hunting birds (using saker falcons for hunting houbara bustard). The fact is that in practically all Arab countries, it is prohibited to hunt rare representatives of wild fowl listed in the Red Book. So Kazakhstan turned up just at the right moment. In pursuit of Arab’s loyalty, the Republic explicitly manifested its readiness to waive its natural resources, while the oil magnates were ready to pay any price for satisfying the national delight. The contact was established.
Later on the government took several resolutions that authorized hunting and established fowling quotas. The sheikhs in their turn were generous enough to offer financial support to Kazakhstani law enforcement agencies. Certainly, hunting and Arab financial aid were not directly linked, although this connection was implied. Interestingly, there are only two regions in the Republic that still have populations of saker falcons and houbara bustard, these are Mangistauskaya and South Kazakhstan regions. It is in these regions, besides the capital, where the Arabs are constructing large infrastructure and social objects.
The Arabs’ role in Astana development deserves particular attention. No one in the world, except for Arab emirs, has allocated grants for the development of the capital without return. In its turn, Kazakhstan has not granted exclusive rights for falcon hunting to anyone except Arabs. Thus, the United Arab Emirates and Saudi Arabia allocated for this purpose 15 million US Dollars, Qatar, Kuwait and Oman – 10 million US Dollars each. Among the objects that have been erected at this expense are the President’s palace “Akorda”, the Senate’s building, central mosque “NurAstana”, reception house, etc. The overall investment in the Republic’s economy by the Arabs’ foundations, particularly the Islamic Development Bank, Abu Dhabi Foundation, Kuwait Foundation for Arab Economic Development, and Saudi Development Fund, has exceeded 200 million US Dollars. It is clear that the prosperous Arab monarchies would not be as such without pragmatic approach and long-term estimates. Therefore, gratuitous aid to brotherly Kazakhstan could not possibly be altruistic. Everything has its value in this world.
It might seem that the aid provided is a positive factor in the evolution of the links between Kazakhstan and the Arab world. However, the unilateral investments cannot but give rise to alarm, taking into account the fact that they are supposed to bring dividends to their owners – economic or at least political. Therefore, while financing Astana’s development the sheikhs may appeal to their investments to enter into beneficial agreements with the Kazakhstani party.
Finally, sale of the national heritage that includes flora and fauna, involves damage only, since it is care of the national heritage that creates international reputation of a country. Reputation cannot be priced. In the mid and late 1990s, mass media, public and environmental organizations, and even some parliamentarians tried to hinder “falcon diplomacy” – that’s how this queer way of international convergence was referred to at that time. Although the imminent scandal was eventually hushed up, the problem remained. From the specialists’ perspective, only 150-200 nestling pairs of such unique birds as saker falcons have remained in Kazakhstan (in early 1990s their population made up 4 thousand). So if the situation does not change, this species will disappear within three years.
Meanwhile, what happened on September 11, 2001, proved to be an important factor that made the Arabs turn their attention to Kazakhstan – first of all, from the perspective of excess capital of Arab monarchies. At that time, due to the “witch hunting” initiated by the Americans, their assets in western banks were under the threat of freezing. The sums in question are quite impressive. For example, in Saudi Arabia alone, there are more than 50 thousand millionaires whose overall wealth amounts to 800 billion US Dollars. Similar indicators made up 300 billion US Dollars in the United Arab Emirates, and 200 billion in Kuwait. Therefore, the Arabs rushed to move their savings to the Asian countries, partly CIS. 
But compared to even medium-size players such as Iran or Turkey, the Arab existence in the Republic was not tangible and the level of attention remained inadequate. This may be proved, for instance, by the following fact: within the period from 1991 to 2005 out of two dozens of Arab countries the official visits to Kazakhstan were paid only by the deceased Palestinian leader Yasir Arafat and emir of tiny Qatar.
Since 2006, the situation began to improve rapidly. Among the strategic incentives are as follows: Arabs’ willingness to diversify their foreign policy and trade and economic ties, thus reducing their vulnerability in the West. The area that attracted attention thereupon comprised former USSR countries, particularly Russia, Ukraine and Kazakhstan (let us remember that during the “cold war” period the Arabs mostly staked on the Soviet Union); repulsing the increasing attacks against the Muslim world, taking into account Astana’s weight in the relationships with the key centers of influence – Washington, Moscow and Beijing; Iran’s factor in the light of concern of the Arab monarchies and the chance to use Kazakhstan as one of the means of influencing Teheran; Kazakhstan acting as a mediator in the dialog between the Arabs and Israel, taking into consideration good contacts between Astana and Tel Aviv, as well as international initiatives by President N. Nazarbayev, particularly by Conference on Interaction and Confidence-building Measures in Asia, and the dialog between religions (with both Israel and the Arab countries participating). Economic incentives include the oil factor; interest of private companies and investment funds operating in the Arab world, placing funds, food supply, taking into account Kazakhstan’s export potential. Another important factor is trust relationship between the Kazakh leader and his Arab counterparts – the factor that is perhaps not so significant in the dialog with the West, but not in this context.
Probably, the group signal has played an important role – when the first Arab that discerned a reliable partner in Astana was followed by others.
Within two years trade turnover between Kazakhstan and the Arab world has grown several times and reached 500 million US Dollars. Certainly, compared to large trade partners such as Russia or China, this volume is not significant. But taking into consideration the growth dynamics, this result is quite substantial. In the west of the Republic the “Aktau city” project has been launched jointly by Kazakhstan and the United Arab Emirates whose budget amounts to several billion US Dollars; another ambitious project - “Abu Dhabi Plaza” is being implemented in Astana; one of the giants of construction industry in the Middle East – Damak Company – is also looking closely at Almaty and Astana. The plans for the near future include launch of a number of industries and social objects based on attraction of the Arab capital. 
Saudi Arabian Prince Al-Walid ben Talal, being one of the 10 wealthiest people on the planet, who is now the Chairman of the Board of Directors of Kingdom Company, states that Saudi Arabia will not only increase its capital investments in Kazakhstan but also attract investments from other Arab countries: “For example, we are interested in hotel business. So we are going to attract such companies as Four seasons and Citibank to your Republic – not only to Almaty and Astana but other regions of Kazakhstan as well”.
Recently the Emirate Investment Fund has purchased 25% of Kazkommertsbank which is quite a significant fact. Islamic banking is the topic that deserves special attention. The specific feature of Islamic banking is prohibition of interest by Shariah. The relationships between the bank and the customer are based on trust, interest-free loans being usually extended to the bank’s partners. As far as the bank’s profit is concerned, it is formed by means of joint transactions. The growing interest and penetration of Islamic banking are quite understandable: our second-tier banks are in need of alternative and more flexible financial instruments, attracting new investors and diversification of funding sources. Kazkommertsbank, Bank TuranAlem and others are taking efforts at present to introduce this form of banking. 
There is also movement in reverse direction. One of the main directions of Kazakhstan’s private investments is the United Arab Emirates, particularly their real estate market. The volume of export of Kazakhstani wheat to Egypt has almost reached 1 million tons. In this connection, Astana and Cairo are discussing the issue of constructing a terminal and plant producing flour in one of the Mediterranean ports. Plenty of similar examples of growing cooperation may be enumerated.
On the whole, the relationships with the Arab world are of great importance for Astana, not only at present but in the future as well: implementation of large-scale investment projects jointly with the Arab partners, as well as applying their experience to Kazakhstan, particularly the sheikhs’ now-how in establishing state control over the oil industry. Their huge financial savings are of no less importance. The American Business Week magazine states that investments made by the Gulf countries based on the gains from oil are least of all exposed to situational devaluation – unlike the western investors that are experiencing hard times due to the crisis in the credit and financial markets. Therefore, cooperation with the Arabs does not only fit the ideology of Astana’s multiple view foreign policy, but can also provide backup in need, for instance, in the case of impending global financial crisis. The important thing is to maintain cooperation on equal terms, without squandering reserves, including poor falcons.