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Uncertainty surrounds Kazakhstan's leadership change

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      By Michael A. Cirami, CFA, Co-Director of Global Income, Eaton Vance Management and Eric Stein, CFA, Co-Director of Global Income, Eaton Vance Management

      Boston - The decision by the long-term leader of Kazakhstan, Nursultan Nazarbayev, to step down last week marks the start of a new era for the country. Unfortunately, his decision offers little clarity regarding a successor government, but the initial indications are not encouraging.

      Last year, we reported on efforts by Kazakhstan to position itself as a financial hub for Central Asia through the creation of the Astana International Financial Center (AIFC), with a new stock exchange - the Astana International Exchange (AIX) - at its heart.

      The push to establish the financial center was part of the country's effort to rehabilitate its reputation for having one of the most corrupt governments in the world, according to Transparency International's Corruption Perception Index. Kazakhstan has been hurt economically by the oil price slump, so the country has had major incentive to diversify its economy.

      On March 20, Kassym-Zhomart Tokayev, chairman of the Senate, was sworn in for the rest of Mr. Nazarbayev's term, as the constitution stipulates, as part of a multistep transition. But from all appearances, Tokayev is little more than a seat warmer, with very little constitutional power. At the inauguration ceremony, he got no applause, nor would anyone shake his hand. In contrast, Nazarbayev was greeted by lengthy, over-the-top applause, befitting the last of Soviet-era dictators.

      The most telling move, in terms of a new direction for the presidency, was the appointment of Nazarbayev's daughter as head of the Senate. That positions her to succeed Tokayev should he step down. New elections are scheduled for the end of 2020, but Nazarbayev has yet to indicate a preferred candidate. In the meantime, he has retained significant postretirement powers that will enable him to greatly influence the new administration.

      Bottom line: We are hopeful that the economic modernization championed by Nazarbayev will survive, and that the corruption and lack of democracy that characterized his rule will continue to recede.