The E of K is a 104 page glossy magazine devoted to the economic, political and cultural issues which affect life in Kazakhstan. We hope to contribute to your understanding of this fascinating nation. Since the pilot issue, the E of K has undergone several major changes and we expect that you will notice some improvements. This month the following articles are featured:
i) The Tenge is in its Sixth Year: Too Late to Change the Conception of the Market:
Since the introduction of the tenge in November 1993, our main �competitors�, Russia, Belarus, Ukraine have undergone much more serious currency shocks, were forced to introduce a new currency (the grivna), and have experienced catastrophic devaluation rates unfamiliar to us. The crisis compelled them to employ non-market measures of currency regulation such as the compulsory sale of enterprises� currency revenue at exchanges and even much tougher methods in the case of Belarus. Despite a number of strains on the system, such as a poor harvest from June 1997 to April 1998, the Kazakh government has managed to avoid such steps so far. However, the relatively high value of the currency combined with the low price of commodities, have put an increasing strain upon export industries. Must Kazakhstan also sacrifice the stable, market contolled sector of finance circulation to save our export industries and ease payment problems? Andrey Tsalyk, of the information agency of financial markets �IRBIS�, provides the answers.
ii) The Last Storm of the Century. Kazakhstan�s Experience of Privatization and State Regulation:
The crisis in Southeast Asia not only triggered the collapse of the Russian economy, but revealed extremely negative tendencies in the development of all post-Soviet economies. For Kazakhstan, declining demand has meant the fall of oil and metal prices and a general decrease of the export rate. Pipeline dreams and the hope of living adequately on the dividends from the sale of raw materials continue to fade. Privatization has failed to become a cure-all for the new economies and industry continues to deteriorate. It is now clear that a strong state economic policy is necessary. The captains of the CIS economies have to decide to what extent the state should intervene in the economy. But the interests of the real economy and domestic producers are more and more in discord with the course recommended to governments by the IMF and other international financial institutions. Is there a way out? The Government of Kazakhstan has advanced the conception of industrial policy favouring the development of home production. Will it be carried out?
iii) People Assess the Reforms: Kazakhstan 1994-1998:
Shock therapy has not led to a fast breakthrough to the promised �bright capitalism.� Rather, the acceleration of reforms has resulted in a tremendous fall in production and for most of the population a steadily declining standard of living. It should come as no surprise then, that simplistic models of transition have resulted in more and more negative attitudes of the populous towards reforms. As the crisis in Southeast Asia and Russian economic collapse continues to shock the Kazakh economy, it can be expected that this trend will continue. Since 1994, we have conducted surveys in 9 towns in Kazakhstan asking citizens to assess the results of the reform process on both their personal lives and on society as a whole. In this issue, Bakhytzhamal Bekturganova, of the Association of sociologists and politologists offers her assessment of the results of the survey and discusses the potential for negative social tensions.
iv) Oil after the Cold War: Less Politics, More Economics:
Oil has always been a political matter. Moguls of the industry were compensated for their political and geological risks by low extraction expenses and relatively high returns. The union of the Arab countries against Israel and its Western allies which provoked the energy crisis of the 1970s is perhaps the clearest example of the influence of politics on the price of oil. However, Moscow�s policies were also very influencial upon the oil and gas market throughout the Cold War. Blessed with huge reserves of energy resources, the USSR was both able to and had an obvious interest in increasing the costs of its energy dependent adversaries� industrial production. The situation has changed dramatically since the end of communism and the fall of the Iron Curtain. How can the structure of the international oil market be expected to evolve without the global conflict between Moscow and Washington? What does this mean for Kazakhstan?
v) The Politics of Reform in Postcommunist Inner Asia: the Mongolian and Kazakh Experience:
Oil profits have the same effect in Kazakhstan that they have in Nigeria, Algeria, Turkmenistan, the Soviet Union, and many other resource-rich countries: they have made possible to defer important structural reforms in the economy without quickly encountering the consequences of failing to reform. Energy exports provide a cushion that enable governments to avoid painful, but necessary economic adjustments. Without this luxury, Mongolia has been forced to pursue a different course. How has Mongolia progressed in its pursuit of economic and political liberalism? Professor M. Steven Fish of the University of California examines the lessons of the Mongolian experience.
vi) The White and Black Bone People in Kazakh History:
In studying the social structure of the Kazakh society of the khanate period (15th to 19th) centuries, two main principles can be clearly identified. One of them is that Kazakh clans and tribes entered according to their seniority into three associations, named by Kazakhs themselves as Ulu Zhuz, Ora Zhuz, Kishi Zhuz (as described in the last issue of �The Energy of Kazakhstan). The other basic principle of public structure in the Kazakh khanate was the Kazakh society�s subdivision into two basic social groups which opposed each other: ak-suyek (white bone) and kara-suyek (black bone). These two groups differed not so much in economic as in political and legal attributes. For more information about these important historical categories, which continue as prejudices in modern society, please read the authoritative article by Professor Tursun Sultanov of St. Petersburg University.
vii) Paradise 52 Kilometers Away from Almaty:
Come with us to the Arboretum in Issyk, only 52 kilometers outside of Almaty. Established 40 years ago under the patronage of the Academy of Sciences, the planners wanted to create conditions to grow and breed trees and bushes from all over the world. In a grand Soviet scheme, the plants were then to be distributed throughout the whole region. Over 1500 species of tree, bushes, and lianas were tested. Nine hundred of them have survived. What remains is a visual treasure to behold. We are pleased to share it with you.
viii) The Kurds:
Thirty million Kurds spread across several countries of the Middle East consider themselves a people and a nation. For at least a thousand years, the peoples� dream of a country has been unrealized. Kurdistan has won no territory of its own. This ancient ambition and its frustrations however, have suddenly become central to the geopolitics of both East and West. Eugeniya Vasilyeva, Doctor of Historical Sciences at the St. Petersburg branch of the Institute of Orientology provides a timely report, examining the social and historical developments which continue to affect this troubled people. The information provided in this article is important to understanding the passionate eruptions which have followed the arrest of Abdullah Ocalan.
ix) Kazakhstan and the Experience of Development in South-east Asia:
Most developing countries, in whose number Soviet republics were surprised to find themselves, have one common and painfully urgent goal. Most developing countries aspire to become developed. The nations of South-east Asia have proven this aspiration realizable, but is their route to development repeatable? Many authors argue that the experience of Japan and South-east Asia is an exception. What were the principles of South-east Asia�s development? What lessons can Kazakhstan draw upon South-east Asia�s experience?
x) Private Viewing:
Their works are found in the State Museums of Kazakhstan, Russia, the Ukraine, China, Turkey, Poland, and Denmark. Some of Alibay and Saule Bapanov�s creations are also highly valued acquisitions of private collections in Kazakhstan, Russian, Germany, England, France, the USA, and Liechtenstien. Witness for yourself the much sought after tapestries of this remarkable Kazakh couple.
A review on the state of affairs in Kazakhstan�s currency market by the eighth week of the year (February 22-28)
Andrei TSALUK
Informational Agency for Financial Markets (IAFM)
ALMATY (Specially for THE GLOBE)
Introduction
Contrary to New Year�s eve, Spring is not so much a time to cherish hopes which may by some miracle suddenly come true. Rather Spring is a time, in which people tend to lay their hopes in tackling problems on their own efforts.
The past week�s analysis of the country�s finances leaves the impression that the government, banks, so-called institutional investors and all others not linked to the production sphere share this mood.
Now these very people with their computers are pointing to new dollar-tenge exchange rate targets, and domestic producers currently cannot influence the situation. The issues of investments, production, tax collection and the budget were under discussion, and everywhere the word �devaluation� loomed.
The officials failed to clarify the situation, but only stated that currently the government is not planning an emission of money. The situation ressembled that of a game of cards, in which everyone waits for a player to pull the first card. The initiating player turned out to be with the banks, which, following the course of events, managed to reveal intriguing tendencies of the gamble. The discretion of the Finance Ministry and the National Bank may to some extent, be explained by these tendencies. This gives the intrigue to the moment.
The �Spring tune�
At the close of Monday and Tuesday�s session, the currency market had managed to maintain the previous Friday�s position, despite concerns of a lack of available tenge. At the February 19 auction, the National Bank had apparently picked up everything to the last tenge. Dollars for sale were in abundance.
Monday�s situation was the following: the demand at AFINEX practically dropped to zero (the total of the session did not exceed $25 000), and the Finance Ministry at the auction on distribution of MEKKAM-6 could not even attract the planned volumes. The market was suspended at the (American) bench-mark of T85.8000, and according to all data, had to fall. But Tuesday showed a new height - T86.0000 - as a result of the buying activity of ten banks. This activity, in turn provoked the participation of other traders. The trick proved to be successful, and the bench-mark for Wednesday appeared at the height of T86.2000. The deficit of tenge currency was obvious. As traders put it, the market seems �overheated�, i.e. it has become impossible to buy any further. Now, at the end of the week, the unpredicted and unrestricted growth of dollar exchange rate - 51% per year - could be seen by everybody. This might be called a tendency, or a new �spring tune�, if you like these words. Since the beginning of the year, this �tune� was evaluated at 18.1% per year. The business press of the last week does not exclude the possibilityof the National Bank�s launching of a 18-20% devaluation in 1999, and that will not become a catastrophy.
Perhaps the Bank has already dared to embark upon this path, and we are simply unaware of it? It is possible that this uncertainty was a factor influencing the traders who stepped up buying at AFINEX the last day of the week. Having rather quickly bought $3 million, the banks again raised the dollar exchange rate by 15 tiyins. As a result, the rate of devaluation to the ninth week of the year was 46.02% per year compared with less than 12.04% the previous week.
The outcome
One may conclude that some decisions concerning the dollar rate of exchange for the nearest future have been made at the top level. But the measures have not been announced because of their capability to create a groundless panic at the population level, a potentially very dangerous consequence. The market remains overheated.
MOSCOW, Feb 27 (AFP)
An earthquake measuring 7 points on the Richter scale at its epicenter 210 kilometers (130 miles) southeast of the former capital Almaty shook Kazakhstan Saturday evening, ITAR-TASS news agency reported.
The quake hit the northern Tian Shan mountains on the Kirghiz-Chinese border. Kazakhstan�s Agency for Emergency Situations has not reported any casualites or damage.
All Over the Globe is published by IPA House.
© 1998 IPA House. All Rights Reserved.