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WEEKLY NEWSLETTER
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Kazakstan
Index
Until 1990, when the whole central planning system collapsed, Kazakstan
was part of the Soviet command economy. Even at the time of the 1991 coup
that led to independence, 43 percent of the republic's industrial capacity
was under Moscow's direct control, 48 percent was under joint republic and
union control, and only 8 percent was strictly under republic control.
Although economic production declined dramatically in the early 1990s,
some indicators showed a slower rate of decline by early 1995. In 1994 GDP
declined 25.4 percent compared with 1993, including drops of 28.5 percent
in industry and 21.2 percent in agriculture. In January and February 1995,
additional GDP declines of 18.8 percent and 15.8 percent occurred (against
the same months in 1994); however, March 1995 showed an increase of 4
percent (against 1994), fueled mainly by an increase in industrial
production. Agricultural production, however, continued to drop in early
1995; 1994 first-quarter production was 79 percent of the same period in
1993, and the first quarter of 1995 almost duplicated that decline.
Much of Kazakstan's economic future depends upon its ambitious
three-stage privatization program, which began in 1992 and reached the end
of its second stage in 1995. The Kazakstan State Property Committee has
responsibility for all three phases. In the first stage, housing and small
enterprises employing fewer than 200 people were privatized. Most
conversions of small enterprises were accomplished by auction to groups of
employees, often under the leadership of the incumbent manager. Housing,
which by 1995 was nearly all in private ownership, was privatized either
by giving the residence outright to its current occupant or by payment of
government-issued vouchers. The second stage entailed the privatization of
almost everything except the republic's mineral wealth and industrial
plants employing more than 5,000 people (such plants accounted for most of
Kazakstan's military-related industry).
Privatization of the largest state enterprises is the principal goal of
stage three, which did not begin as scheduled in late 1995. Until that
time, these enterprises were run as self-managing joint-stock companies in
which the government of Kazakstan was the largest stockholder. This
interim stage, which was considered beneficial, required preparation of
profit-and-loss statements in anticipation of full commercial operation
sometime in the future. Meanwhile, 3,500 medium-sized firms, including 70
percent of state-owned industries, were offered for sale in a mass
privatization program beginning in April 1994. These firms could be
purchased with government-licensed investment funds.
Under Kazakstan's privatization system, vouchers are issued to
individual citizens. Vouchers then can be deposited in privatization
investment funds, which in turn can buy up to 20 percent of large
companies being privatized. The initial voucher issue reached an estimated
95 percent of citizens. After four auctions, in mid-1994 about 85 percent
of forty-five small-to-medium-sized enterprises, mainly in light industry,
machinery manufacturing, and fuel distribution, had been sold.
By the end of 1994, about 60 percent of enterprises were owned by
individuals or cooperatives. (In 1990 the figure already had reached 40
percent, however.) The success of the privatization of small enterprises,
together with the formation of new private enterprises, meant that in 1994
some 61 percent of retail trade occurred in the private sector, an
increase of 17 percent over the 1993 figure. Large-enterprise
privatization has been less successful, however. Nominally privatized
enterprises often maintain close contact with government officials who
permit firms to maintain outdated production practices and supply
relationships, and even to keep unpaid workers on their rolls.
Distribution of vouchers among the 170 government-licensed investment
funds also has been problematic. In 1994 and early 1995, twenty companies
collected nearly 60 percent of the vouchers, while another nineteen funds
accumulated more than 20 percent; half the funds received a total of only
4 percent of the vouchers. One fund, Butia-Kapital, received nearly 10
percent of the vouchers, the largest single holding. This fund was widely
rumored to be controlled by a nephew of President Nazarbayev. Although
proceeds from privatization amounted to an income of 242 million tenge for
the state treasury in the first quarter of 1995, complaints persisted that
objects of privatization were priced too low and that favored funds
received "sweetheart" deals.
Privatization of land has been handled differently than that of
industry because the concept of individual land ownership does not exist
in Kazakstan. Individuals and corporations can purchase only the right to
use the land, and that right can be resold. Initial sale prices of state
land are determined by the State Committee on Land Relations and Tenure.
Government efforts to legalize a private land market have been stymied by
both Russian and Kazak groups, each fearing that the other might gain
control of the country's agriculture. By June 1995, some form of ownership
or management change had occurred in 1,490 state farms, about
three-quarters of the total remaining in operation. Many state farms, or
portions of them, were converted into joint-stock companies that retained
the same group of occupants and state-dominated arrangements for supply
and marketing as under the previous nomenclature. The creation of small,
individually managed farms was uncommon because capital, inputs,
equipment, and credit were in very short supply for individuals attempting
to start agricultural enterprises.
Data as of March 1996
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