Marla Valdez
LONDON, June 25
(the GLOBE)
The Astana Invest Conference 99 was opened by Deputy Prime Minister and Minister for Foreign Affairs Kasymzhnomart Tokaev speaking on a new capital for a new millennium. Other officials from the Kazakhstani government included Minister of Transport and Communications Serik Bourkitbaev, Minister of State Revenues Zeinulla Kaimzhanov, Deputy Chairman of Kazakhstan Investment Agency Daulet Kuanyshev and Mayor of Almaty Adilbek Dzhaksybekov. Notably absent from the conference were Prime Minister Balgimbaev {please confirm that he was on the original list of attendees}, Minister of Finance Oraz Jandosov, Minister of Energy, Trade and Industry Mukhtar Ablyazov, and Chairman of Kazakhoil Nurlan Kapparov. No official explanation was given as to their absence, but it was well known that the current debate on the budget demanded that many of the key officials remain in Astana. Conference attendees were generally disappointed that so many of the Kazakhstan dignitaries were not in attendance, but nevertheless felt that the conference was informative.
Other notable speakers included Parliamentary under Secretary of State Dr. Kim Howells and other British dignitaries, Ron Freeman of Salomon Smith Barney, and representatives of the EBRD, IFC, and private sector representatives such as R.J.. Reynolds International, Tractebel Group and Seimens AG.
All the presentations were generally optimistic about the long term prospects of Kazakhstan and noted the progress that Kazakhstan has made since independence. Deputy Prime Minister Tokaev acknowledged that depressed prices in commodities and the slump of the world economy has had a negative effect on Kazakhstan. This reflected, he said, that Kazakhstan was now fully integrated in the world economy.
The delegates of the conference focused primarily on the positive aspects of Kazakhstan weathering the world economic downturn. Prime Minister Tokaev noted that the average monthly wage of employees in all spheres of the economy had increased since 1997 by 12% and the average nominal wage of Kazakhstan citizens is the largest of any CIS countries. Kazakhstan has attracted approximately US $8 billion in direct investments since 1993, being the highest per capital rate of any CIS country.
Prime Minster Tokaev expressed Kazakhstan�s commitment to legislative reform and referred to over thirty new bills currently before Parliament aimed at improving the economy. Such reforms include measures aimed at speeding up bankruptcy procedures for insolvent enterprises, developing a programme for further privatisation of the economy, making laws more transparent and understandable, with particular concerns on tax legislation, as well as the Government�s continued fight against corruption.
Nevertheless, a number of delegates indicated that Kazakhstan is competing for limited investment funds and recommended that the Republic continue to work towards resolving hurdles encountered by investors. In response to some of the hurdles, Prime Minister Tokaev indicated that the Government has set up the Foreign Investors council of the President as a forum to discuss how to improve the investment climate. Kazakhstan also recently adopted the Programme for attracting foreign investment for the years 1999 and 2000. One plan is the adoption of a single procedure for all investment applications which will be regulated by a new law �On Investments.�
Other important measures include introduction of special business visas to allow executives of foreign companies to fast track passport and customs checks and the abolishment of registration requirements at their branch offices. Also of importance to foreign investors are plans to reform the labour licensing procedures and replacing the current licensing requirements with permits. No specifics were given were given on any of these measures, except that the foreign qualifications criteria would be raised.
Deputy Prime Minister Tokaev emphasized that the Government wished to avoid investment disputes and has set up a special interdepartmental working group for settling such disputes. This group was referred to as the collective ombudsman.
One important shift in the presentations was the emphasis of support to small and medium size enterprises. Until recently, the focus has been primarily on large investments in the oil and gas and mining sectors. Now Kazakhstan plans to focus on industries such as food production, textiles, production of agricultural machinery, mineral fertilizers, and pharmaceuticals
While many of the presentations focused specifically on opportunities available in Astana, the overall thrust was that Kazakhstan was committed to make the necessary conditions necessary to attract foreign investors.
�Kazakhstan Energy �, is a magazine-appendix to THE GLOBE presents the announcement of the article �Kazakhstan�s economy during reformation period: Dynamics and transformation directions,
Current status and some tendencies� by Pyotr Svoik. You may read the full variant of the article in the third number of �Kazakhstan Eenrgy� which is sold in the Supermarket �Ramstor�, at the filling stations �Texaco� and in the office of THE GLOBE.
Money system
The money and the banking systems of Kazakhstan are weak. The national currency is still stable only due to its �non-market character� and an extremely limited application.
In defiance of a sharp shortage of payment means, the National Bank is conducting a policy of money �pressing�. In accordance with a statement of the chairman of the National Bank K. Damitov, during the ten-months period of 1998, as a result of changes in the net external and internal assets, the money base fell to 28.9% (Tenge 81.2 billion). Cash money decreased by 25.8% and came to Tenge 68.9 billion. The degree of monetization of economy was less than 10%, which is several times less than generally accepted standards. (In the developed countries, the monetization level is 55 to 65%, in Russia it is 16%). According to official evaluations, by the beginning of 1999, the degree of monetization fell by up to 9%. According to the experts� evaluations � this number could be as low as 7%.
The critics of the government�s monetary policy usually point to the necessity of money emission in order for Kazakhstan�s economy to grow. Indeed, there is a lack of money in Kazakhstan. However, in any case, this situation cannot be simply solved with additional emission. Any economy at any moment has exactly the volume of money mass that it requires. The extremely low degree of monetization of Kazakhstan economy only confirms its objectively non-market, non-monetary and �non-Tenge� character.
In accordance with the experts� evaluations, the demands of Kazakhstan domestic market are indeed serviced by dollar in the amount of at least one billion, i.e. the same as of national currency. Only cash dollars are used to pay for all big purchases. Besides that, according to the same evaluations, the population keeps a minimum of two billion dollars more �in stockings�. Therefore we can say with confidence that the volume of dollars is three to four times more than the Tenge.
Further, the barter transactions, inter-settlements, product credits and other various substitutes are widely applied to execute payments. Lastly, the main preventive means against the immediate hyperinflation, complete bankruptcy of the budgets of all levels and the entire economic collapse is considered to be non-payments.
The volumes of non-payments are steadily increasing and have reached a gigantic size. According to State statistics, as of the first half-year of 1998, the total liabilities of enterprises and organisations were estimated at Tenge 1290.9 billion. This number equals approximately 76.9% of GNP of 1997, or half as much again as the total circulating money mass. The ill-timed debts towards salary (Tenge 25.8 billion). The debts of Kazakhstan�s enterprises to their foreign partners were 4.7 times more than what was owed to them. Inside the republic, the credit liability was 1.7 times more than the debits. Such a misbalance confirms the damage of a normal system of registration and reporting. The �black hole� exists between debits and credits is approximately Tenge 650 billion. (It is well known that separate �debit� and �credit� statements are an artificial method of double accountancy records, which are based upon an additional guarantee of accuracy by keeping the totally symmetrical debit and credit records.) All these factors make the �unbinding� of non-payments, the control of tariffs of the natural monopolies, the execution of purposed crediting, sanctions and bankruptcies, and other measures meant to improve the economical situation, unrealisable.
As of November 1, 1998, the total amount of ill-timed debts under liabilities came to Tenge 1481 billion, including budget debts of Tenge 105.5 billion and wage arrears of Tenge 36.9 billion. Out of this amount, the debts of the budget organisations towards salary only came to Tenge 4.4 billion.
As of January 1, 1999, the liability of the budgets of all the levels and of non-budget funds came to Tenge 59 billion. The debt of the central authorities was Tenge 10 billion.
The National Bank persists on reducing the money mass, preventing from an inflow of money into the economy. As of December 1, 1998, the total money mass was Tenge 76.8 billion, having reduced from the beginning of the year by 33.5%. During the same period of time, the money base fell by 17.4%, to Tenge 142.3 billion. The volume of circulating money decreased by 30%, i.e. it was Tenge 65.1 billion.
Despite the sad Russian experience, the National bank and the Finance Ministry trying to stimulate potential investors� interest to the state securities. Last year the profitability of SS increased by 9.5%, while the profitability of notes of the National Bank increased by 14.2%.
Banks
The main characteristics of Kazakhstan�s banking system are monopolisation and limited resources.
As of October 1998, 76 second level banks, including one interstate bank and 24 others with foreign participation, were registered in Kazakhstan.
However, about 65% of all the credits and 66% of the deposits are executed by only three banks: by the People�s Bank, Kazcommertsbank and Turan-Alem bank. In the last six months the share capital of all the second-level banks increased by 27.7%. Still the registration amount only reached Tenge 41.2 billion (USD 515 million), out of which only Tenge 35.5 billion had been actually paid. In the last ten months, the private capital of the second level banks has increased by 35.2%, but it was only Tenge 39.6 billion. (All of the world�s twenty largest banks possess assets of hundreds of billion of dollars.) The total assets of the second level banks are evaluated in the amount of approximately Tenge 180 billion, out of which Tenge 95 billion are credits and about Tenge 25.5 billion are securities. The specific weight of the short-term credits is the proportion, amounting to 74.5% of all allotted loans.
In the system of commercial banks at the above-mentioned date, there were 14 representatives of foreign banks working in Kazakhstan. This number is obviously insufficient. The total capital of the banks with foreign participation was only Tenge 7.8 billion. The National Bank limits the ratio of foreign capital in the share capital of the commercial banks to 25%. At present this volume is actually equal to 22% (and approximately 12% in Russia).
As on November 1998, the deposits of natural and juridical persons (except banks) came to Tenge 79.6 billion, out of which deposits in Tenge were 57.9 billion. The deposits of natural persons were estimated to be only Tenge 31.4 billion. According to a statement of the National Bank, the deposits of natural persons for the first six months of 1998 increased in comparison with the same period of the previous year by 40%. However, this �rapid� increase was caused by the fact that the average amount of deposits in all the commercial banks does not exceed USD 20 per a single Kazakhstan citizen. More than 90% of population have no bank deposits at all (not taking into consideration the savings-bank books of the USSR period).
The announced gold-and-hard currency reserves of the National Bank as of the same date were estimated to be USD 2 billion. However, in addition to its assets, the National Bank also has some liabilities. According to the data of the National Bank, its net international reserves fell during the first half-a-year of 1998 by USD 370 million (13.6%). As of July 1, these reserves amounted to USD 1.4 billion. In the corresponding six months, the net internal assets of the National Bank fell by 47.1%.
According to independent international organisations, the cost to the National Bank incurred last year of supporting the Tenge was approximately USD 600 million. Comparing this figure to the announced reserves, we can conclude that there is some �non-declared� source to supplement the hard currency reserves of the country.
As of March 1999, 76 second-level banks worked in Kazakhstan, out of which 18 are under the process of reorganisation. Nine of these banks intend to reorganise into another business entity, six of them are going to unite, and three are preparing for self-liquidation.
June 28
(INTERFAX-Kazakhstan)
According to the Program of State Investments (PSI), for the period from 1999 to 2001 it is planned to utilise US$ 1.35 billion of investments in Kazakhstan. It is supposed to invest the most part of the above-mentioned volume to the development of transport and communications (47.4%), as well as to the agriculture and water resources (16.8%).
The main financing sources of the Program till 2001 will be foreign loans and unpaid grants allotted to the Kazakhstan government. The share of these sources in the total volume of investments is 86.8%, 13.2% will be financed by the republican budget. According to the Program, the investment amount in this year will be US$ 525.75 million, including US$ 38.8 million provided in the republican budget-1999.
According to the chairman of the Agency on Strategic planning, in 1999 to 2001 the main sources of external loans will be credit lines of the Japan government (39% of the total amount of the external loans), World bank (27%) and Asian Bank of Development (8%).
June 28
(INTERFAX-KAZAKHSTAN),
The growth of prices of fuel is being observed for two weeks. In particular, prices of petrol have increased 1 to 2 times. In the western regions of the republic there is a sharp deficit of petrol.
The availability of Russian petrol in the republican internal market is estimated in the amount of 36 to 38%. Taking into consideration the contraband, in the regions bordering on Russia this share comes to 50 to 60%.
According to the governmental decree the prices of services on procession of crude oil supplied by local oil-processing plants are regulated by state from June 10, 1999.
Before the introduction of the free-floating exchange rate of the national currency (it was introduced on April 5) the price of processing of 1 ton of oil at �Shymkentnefteorgsyntez� was 1750 tenge (i.e. US$ 20 at the exchange rate as on April 1). In June this price came to 2548.7 tenge (the current exchange rate is US$ 1/131 tenge). Before the introduction of the free-floating tenge�s rate, the cost of the same service at the Atyrau Oil Processing Plant was 1722 tenge. After the devaluation of tenge this cost came to 2282.4 tenge (for enterprises which were not included in the National Oil Company �Kazakhoil�). For the first quarter of 1999, Kazakhstan�s oil output was 6.8 million tons, including 1.2 million tons (i.e. 18.1% of the total output) were supplied to the internal market.
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