11. Labor Policies and Practices
The July 2017 EBRD Kazakhstan Diagnostic Paper singles out skills mismatches across sectors as the fifth most important constraint that is holding back private sector growth in Kazakhstan. The gaps create real operational challenges such as high recruitment and training costs, lower productivity and constraints on innovation and new product development, according to the EBRD. The existing skills mismatches are not a result of lack of access in education, but rather failure to acquire job-relevant skills and competencies, the EBRD report reads. The 2019 OECD report on Monitoring Skills Development through Occupational Standards in Kazakhstan echoes the EBRD findings – despite improvements in educational attainment and labor market participation, Kazakhstan faces challenges with respect to skill relevance and availability, especially among large and middle-sized companies. Strengthening vocational education and training is critical, because skilled manual workers, with medium and high qualifications, represent 40 percent of the total workforce need, according to the OECD.
Many large investors rely on foreign workers and engineers to fill the void. Kazakhstan approved a quota for 29,300 foreign workers for 2020. As of February 1, 2020, Labor Ministry had issued 19,100 work permits. Chinese workers received over 27 percent of all permits, with the rest going to foreign workers from Turkey, U.K., India, Uzbekistan, and others.
The Kazakhstani government has made it a priority to ensure that Kazakhstani citizens are well represented in foreign enterprise workforces. In 2009, the government instituted a comprehensive policy for local content, particularly for companies in extractive industries. The government is particularly keen to see Kazakhstanis hired into the managerial and executive ranks of foreign enterprises. In November 2015, the government amended the legislation on migration and employment that resulted in new rules for foreign labor starting January 2017 (please see details in Part 5, Performance and Data Localization Requirements). U.S. companies are advised to contact Kazakhstan-based law and accounting firms and the U.S. Commercial Service in Almaty for current information on work permits. AIFC-registered entities may employ a foreign workforce without any work permits.
Kazakhstan joined the International Labor Organization (ILO) in 1993, and has ratified 24 out of 189 ILO conventions, including eight fundamental conventions pertaining to minimum employment age, prohibition on the use of forced labor and the worst forms of child labor, and prohibition on discrimination in employment, as well as conventions on equal pay and collective bargaining. In March 2019, Kazakhstan’s Federation of Trade Unions proposed that the Kazakhstani government join five more ILO technical conventions on social security (minimum standards), minimum wage fixing, collective bargaining, part-time work, and safety and health in agriculture, but the country has not ratified any new ILO conventions since then.
In September 2017, the ILO expressed concern over Kazakhstan’s compliance with the Freedom of Association and Protection of the Right to Organize Convention and the Right to Organize and Collective Bargaining Convention by calling on the government to amend the relevant legislation in order to: (1) enable workers to form and join trade unions of their own choosing, (2) allow labor unions to benefit from joint projects with international organizations, and (3) allow financial assistance to labor unions from international organizations. The Constitution and National Labor Code guarantee basic workers’ rights, including occupational safety and health, the right to organize, and the right to strike. Amendments to the Labor Code since July 2018 leave many labor-related issues, including dismissals and layoffs, to the discretion of employers. It imposes tighter collective bargaining restrictions on employees involved in labor disputes. According to the Ministry of Labor and Social Protection, 33.4 percent of all working enterprises have collective agreements. Kazakhstan’s three independent labor unions – the Federation of Trade Unions of the Republic of Kazakhstan (FTU), Commonwealth of Trade Unions of Kazakhstan Amanat, and Kazakhstan Confederation of Labor (KCL) – had over three million members, or 40 percent of Kazakhstan’s workforce, as of March 1, 2020.
Article 46 of the Labor Code gives the employer the right to change work conditions due to fluctuating market conditions with proper and timely notifications to employees. Article 52 of the Labor Code gives the employer the right to cancel an employment contract in case of a decline in production that may lead to the deterioration of economic and financial conditions of the company. Article 131 of the Labor Code allows for severance of payment of average monthly wages for two months in case of layoffs for economic reasons. The Ministry of Labor and Social Protection is responsible for offering alternative job openings within state programs of the so-called Employment Road Map, alternative professional training, or temporary jobs to workers laid off for economic reasons. The 2017-2021 Productive Employment and Mass Entrepreneurship National Program, run by the Ministry of Labor and Social Protection, aims at connecting workers with permanent jobs. The program provides micro-loans and grants, and equips workers with basic entrepreneurial skills.
Chapter 15 of the Labor Code describes a mechanism for resolution of individual labor disputes via direct negotiations with an employer, mediation commission, and court. Chapter 16 of the Labor Code identifies a mechanism for resolution of collective labor disputes via direct negotiations with an employer, mediation commission, labor arbitration, and court.
Labor unrest presents a risk where unemployment is high and where the bargaining power of limited skilled labor is relatively high, but authorities have been quick to intervene with controls and mitigating measures. In June 2019, a violence broke out at the Chevron-operated Tengiz oilfield, in which large mobs of Kazakh men attacked dozens of their colleagues from countries like Jordan and the United Arab Emirates. The unrest had ostensibly been triggered by an interpersonal conflict, though it was widely acknowledged that festering resentment about pay and working conditions underlaid the violence. Another conflict that took place on August 12, 2019, in the Zhairem settlement of the Karaganda region reportedly had similar grounds — fifty Zhairem residents trespassed the site of the Zhairem enrichment plant, owned by KazZinc (i.e. Glencore International AG), and started a brawl with Turkish workers. The altercation resulted in the minor injuries of six Turkish workers. The regional police brought charges for hooliganism and property theft against seven Zhairem residents.
In September 2019, several strikes over living standards hit the Chinese-run companies in the Mangystau region. At least 165 workers of Mobil Service Group Ltd that provides transportation services for Oil Construction Company LLP in the Kalamkas field and Karazhanbasmunai JSC in the Karazhanbas field in the Mangystau region went on strike on September 20, 2019 to demand a 100 percent increase of wages and to complain about getting paid up to ten times less than their western and Chinese colleagues. The labor dispute was resolved after MSG management agreed to raise wages by 50 percent.
Approximately 24 workers of the Sinopec-run Karakudykmunay and Buzachi Operating companies went on strike on September 23, 2019, demanding a 100 percent wage increase. Over 150 workers wrote letters to the company’s management and to the ruling Nur Otan party prior to the strike. Another strike over low wages reportedly took place at Buzachi Operating on October 31, 2019, which was later dismissed by the company’s management, stating that it was a regular staff meeting.
On September 30, 2019, a local newspaper published on its website a (https://www.lada.kz/aktau_news/society/73745-rabochie-esche-odnoy-kompanii-v-mangistau-trebovali-povysheniya-zarabotnoy-platy.html ) to President Tokayev allegedly recorded by Emir Oil workers, requesting a 50 percent increase in wages. Kazakh-Malaysian oil company, Emir Oil Ltd, dismissed this information, stating that the company had been negotiating with workers and gradually implementing a pay increase since March 2019.
Security workers of KMG-Security, a subsidiary of KazMunayGas National Company (KMG NC), held a strike demanding a wage increase and improved working conditions in the oil town of Zhanaozen in the Mangystau region on January 27, 2020. Their requests have been addressed by KMG NC. The government is particularly sensitive to any signs of unrest in Zhanaozen, after a seven-month strike of oil workers in the town culminated in riots that killed 15 and injured over 100 in December 2011.
Workers’ rights to strike are limited by several conditions. It may take over 40 days to initiate the strike in accordance with the law, representatives of labor unions report. Workers can strike if all arbitration measures defined by law have been exhausted. Strike votes must be taken in a meeting where at least half of workers are present, and strikers are required to give five days’ notice to their employer, include a list of complaints, and tell the employer the proposed date, time and place of the strike. Courts have the power to declare a strike illegal at the request of an employer or the General Prosecutor’s office. Employers may fire striking workers after a court declares a strike illegal. The Criminal Code enables the government to target labor organizers whose strikes are deemed illegal.
The Labor Union Law generally restricts workers’ freedom of association. Under the law, any local (and potentially independent) labor union must be affiliated with larger unions, and the right to freely establish and join independent organizations without prior authorization is restricted. On the basis of this law, in 2016 authorities did not allow the registration of one independent labor union and ordered its liquidation. In 2018, the U.S. government initiated a review of Kazakhstan’s compliance with the Generalized System of Preferences following a petition by the AFL-CIO, based on the country’s alleged failure to afford internationally-recognized workers’ rights. The AFL-CIO petition highlights the Law on Unions and also raises concerns about the use of Article 404 of the Criminal Code, which appears to prohibit unregistered organizations. The amendments were signed into law by President Tokayev on May 4, 2020. The law removes the requirement of affiliation with a large labor union for local labor unions. Other changes include softening restrictions on strikes. Workers employed in the railway, transport and communications, civil aviation, healthcare, and public utilities sectors may strike, if they maintain minimum services for the population, that is, provided there is no harm caused to other people. The law also reduces the penalty for calls to continue strikes declared illegal by a court. If such calls do not result in a material violation of rights and interests of other people, they will be classified as criminal misconduct, and penalty will be limited to fines or hours of community service. The previous law classified such calls as criminal offences, and the penalties included restriction on freedom of movement or imprisonment.
Please see details at the Human Rights Report at: https://www.state.gov/reports/2019-country-reports-on-human-rights-practices/.
The official unemployment rate in Kazakhstan has regularly been near five percent in recent years. In 2019, Kazakhstan’s unemployment rate stood at 4.8 percent, and youth unemployment rate was 3.7 percent.
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs
The Overseas Private Investment Corporation (OPIC) and the government of Kazakhstan signed an Investment Incentive Agreement in 1992, and OPIC has been active in Kazakhstan since 1994. In January 2018, OPIC signed a Memorandum of Understanding with KazakhInvest JSC to support U.S. investment in Kazakhstan and improve collaboration between the two countries. The U.S. Development Finance Corporation (DFC), the successor of OPIC, seeks commercially viable projects in Kazakhstan’s private sector and offers a full range of investment insurance and debt/equity stakes. Kazakhstan is also a member of the Multilateral Investment Guarantee Agency, which is part of the World Bank Group and provides political risk insurance for foreign investments in developing countries.