KAZAKH NATIONAL CURRENCY MAY FACE PROBLEMS. Astana all the currency exchange offices in the Kazakh capital are closed on April 5. No tables displaying the currencies rates are working reportedly. RFE/RL correspondents were told at some exchange booths of Astana that they were not working due to absence of the hard currency. Meanwhile in the former capital - Almaty, the exchange offices are working today and the rate is 88,5 Tenges for $1.
Last Friday, Vice Premier of Kazakhstan Oraz Zhandosov told journalists that in the nearest future a new law on commission fee 1 per cent) for the hard currency exchange would be introduced. RFE/RL correspondents in Oskemen, Eastern Kazakhstan report that in that city some exchange offices have already started requiring up to 3 per cent for the hard currency change.
According to Kazakh Vice Prime Minister Oraz Zhandosov the situation in the international oil and metals market may cause the abrupt fall of Tenge making the rate up to 120 Tenges for $1.
Some unnamed sources at the Kazakh Finance Ministry told RFE/RL correspondents in Astana today that the possible rate by the end of this month might be even 200 Tenges for $1.
Kazakh Parliament continues to discuss the law on introducing the commission fee for the hard currency exchange.
STATE BANKS STARTED BEING PRIVATIZED. Vice Premier Oraz Zhandosov as having reported that one of the most stable state-run domestic banks TURANALEMBANK, was privatized last week. 100 per cent of all the TURANALEMBANK�s shares were reportedly sold to several local companies. No names were given. It was also reported by Vice PM Zhandosov that two more state run financial giants - KAZKOMMERTZBANK and HALYQ-BANK would be merged and privatised this year. Oraz Zhandosov told journalists at the press conference held on April 2 that those changes would not affect the competition among the domestic and international banks working in Kazakhstan.
ORAL CITY�S METALLIST PLANT SEEMS TO BE INVOLVED IN SCANDAL AROUND SIX MILITARY JETS IMPOUNDED IN BAKU. RFE/RL correspondents in Almaty quote Kazakh mass media as reporting that General Director of Metallist Weaponry Producing plant of Oral (Uralsk) City in Western Kazakhstan made some statements revealing additional facts on the scandal around six MIG-21 Military jets, found by Azerbaijani officials aboard the Russian carrier RUSLAN two weeks ago. The Kazkah airjets were supposed to be brought to Eastern Europe according to contract signed by Czech Company AGROPLAST and METALLIST Plant. The latter had a license issued by the Kazakh government and allowing the plant�s administration to sell outdated military equipment abroad. According the latest reports the jets� destination was Bosnia, not Kosovo or Serbia.
(RFE/RL)
(Printed in brief)
A significant devaluation of the national currencies in the countries-partners of Kazakhstan, first of all Russia, taken place in the last year and which is still obvious, caused an essential increase of tenge rate in comparison with their national currencies. That resulted in a significant reduction of competitiveness of Kazakhstan products, enterprises and the economy on the whole. First of all, it caused an increase of negative balance on the foreign trade operations, reduction the gold and hard currency reserves and the GNP.
Closing the customs borders for a long time is appropriate neither in economic nor political respect.
After the thorough analysis of the all proposals, the government and the National Bank took a decision to shift to the regime of freely fluctuation of tenge exchange rate, considering it the most appropriate, due to openness of Kazakhstan economy and instability the worlds� financial and trade markets. The regime of freely fluctuation of tenge exchange rate means that tenge exchange rate will depend on the basis of demand and offer without any significant interference of the central bank. However, the National Bank will not allow tenge fluctuations exceed the rational expectancy.
The monetary-crediting policy of the National Bank will be oriented to a low inflation, and, subsequently, it will be still rigid enough. As the fundamental parameters, at least within 1999,
the limited values of monetary aggregates will be used.
The government and the National Bank will not allow any defaults of the internal and external liabilities of the state, to happen. At the same time, no limitations of the existing regime of hard currency operations are provided.
The government and the National Bank will take the required measures to soften the sequences of the shift to the regime of freely tenge fluctuation.
In the result of such a shift it is expected, that the internal trade competitive circumstances will be restored for the domestic products, and the financial situation for the enterprises working in the export and import-substitute sectors, will be essentially improved.
Hence, a significant improvement of the external trade balance, a growth of gold and hard currency reserves of the National Bank, deceleration of GNP reduction and rebirth of its growth from the second half of 1999, are expected.
All the mentioned measures are not something unique and widely used in the developed countries, as well as in the developing countries. They are a way to treat the financial and industrial systems, and are caused by the objective reasons of the world and regional character.
The decision of the government and the National Bank are well-grounded economically. First of all we make our economy more competitive. Secondly, we will be able to soften social sequences of this decision, due to the correctly chosen moment. And at last, the improving effect of these measures on the Kazakhstan economy will influence positively on every Kazakhstan citizen�s live in some period of time.
(on the announcement of the Government and the National Bank regarding the further policy of tenge exchange rate)
Dear citizens of Kazakhstan!
I would like to answer three questions, which every man living in Kazakhstan will ask having read the Announcement of the Government and the National Bank:
1. What does it mean?
2. What caused it?
3. What sequences will it arise for the entire country and for each citizen?
The answer to the first question is very simple. From now onwards the US$ exchange rate will be determined by a demand and offer in the hard currency market, and the National Bank will not essentially interfere in this process. As you know, the National Bank spent before its gold and hard currency reserves to support the exchange rate at a definite level. The taken measures mean only treatment of our financial and economic systems.
The answer to the second question consists of several parts.
First of all, for the last several months the Economic Policy Council subordinate to the Government, observed attentively the situation in the world. Unfortunately, there was no improvement of the international situation, as well as in the neighboring countries. Of course, the situation in Yugoslavia did not make the circumstances better. The Kazakhstan external trade turnover decreased by almost 9%, i.e. US$ 1 billion 300 million, while our export reduced by US$ 1 billion 250 million.
We have to take these urgent measures due to the external factors and economic policy of the neighboring countries.
Secondly, we have introduced very serious restrictions on import of separate products from Russia and 200% duties on some products imported from Kyrgyzstan and Uzbekistan. But we have an open border with these friendly countries. The cheap imported goods literally strike our producers and sweep out hard currency from the country. It is impossible to close the borders due to economic and political reasons: as Russia, as well as other neighboring countries are our friends and we cannot begin the trade wars.
From this point of view we have the only way-out: to shift to the freely fluctuation tenge exchange rate.
Thirdly, for the last two years the real economic dramas happened in the world (e.g. Indonesia, Thailand, Russia and Brazil). We were under threat, but survived.
Though it is still required to react accurately and fast to the changing situation.
We should give our enterprises an opportunity to survive in this situation. It is one of the most important matters of the Kazakhstan economic policy during the crisis.
At last the third and the most significant question. The key point is that no collapse will happen. We will have the control for the process. I can assure you, that our step is not a sign of our weakness, it is the result of accurate policy.
We have prepared the whole complex of measures on social protection of the population. I can say, that some of these measures are unique in a way. That is why I address to all the depositors: be quiet, all your deposits will be protected. Those people who in panic will take their money will just lose, though it is the right of every depositor. Choose yourself: to lose or to save.
Besides, we will control very strictly the prices of the natural monopolies and public utilities. I can state firmly, that minimum in the next month they will not be increased (I repeat, minimum).
If inflation exceeds the projected level, beginning from the third quarter on this year we compensate the incurred losses of the people with low profits.
We also will take some measures to protect the accumulative pension funds.
Dear compatriots!
All the proposed measures were thoroughly evaluated. We have resources to influence actively on the situation in any moment. We guarantee social protection to the population, especially to people having deposits in the banks.
Difficulties of the next months should not conceal the simple fact: the economy of the country will get a positive impulse and we will soon feel the results.
We request people, the Parliament and the President to support the decision of the Government and the National Bank.
Andrei Tsalyuk,
Informational agency of
financial markets �IRBIS�
Almaty
(specially for THE GLOBE)
It did happen. The budget was approved. It is high time to say: Let�s work, comrades!
The week brought a lot of news, and even more � material for meditation. If we look at the situation from a far distance and try to mark out the main point, we will understand that we have to make a choice. That is proposed by the government, though it was not mentioned.
It is well known, that the local industry should be restored, as oil will not save Kazakhstan. It will take some time, though. Now we have to survive. To survive we need money. The latter may be got from further privatisation. But it is difficult, since the moment is not suitable for such a purchase. The money may be borrowed, but it will be too expensive way. The European markets are shaking not with the financial problems, but because of the blows in Yugoslavia. I suppose, Kazakhstan was just forgotten for some time.
It is much more cheaper to take money from us, in so-called domestic market. We should be conscious and accumulate money not in stockings and in dollar, but in the local banks in tenge deposits, the rate of which is thoroughly regulated by the market methods. Moreover, we should reconcile ourselves to the low deposit interest. And then we win.
We really have a lot of money. According to the most moderate evaluations, it is approximately US$ 2 billion. It is difficult to imagine, what may happen in Kazakhstan, if this money are invested to �business�, are taken from the shadow circulation. It is OUR country. We will live here, whatever country it is. You should agree, it is a weighty argument. We have been already investing to our country our lives and our children. And money, which are not small. We want dividends. It seems to us, that it is high time to get them. Especially our parents, who were just thrown away, should get them.
That is why everyone, except pensioners, has a choice.
1. It is possible (maybe necessary) to accept this program, having armed ourselves with another portion of civil patience, and to assist the country. If everybody does this, we will have a chance to succeed. Veterans and pensioners should reconcile themselves with reduction of social programs and privileges, with miserable pensions, transport fees (it seems a trifle, when we are talking about the budget!). Young people should forget about dollar. Businessmen should stop at last �cash� inter-payments and pay taxes accurately, after which they hardly can be called businessmen, etc.
2. We may leave the country, though not all of us.
3. We may just live as we lived before and to demand the promised dividends as far as one can.
But were these dividends promised indeed? To my mind, nobody promised anything much. We will live here, whatever country it is. That is the main dividend. In other words, you get peace, that is actually the right to live at the bottom of these beautiful mountains without any revolutions, smoke and fires and other force-majeure circumstances. That is enough, you should agree.
Our choice can be predicted. The third point seems the most actual. It is the point on which the budget was based.
Though there are some details characteristic only for the current moment.
Recently the Treasury institute was established in Kazakhstan, and the state began actively borrow money from the market subjects to serve the budget deficit �without inflation�. The subjects were mainly represented by the banks, where professionals work. It is difficult to deal with the professionals, as they follow everything and react fast. That is why it is difficult to borrow from them: the loan should be reimbursed timely and their opinion is to be taken into consideration. All the efforts to borrow a big volume from population were unsuccessful, as the population being financially illiterate, preferred to invest money to the private trust companies, that meant to throw money into the furnace. The ideal variant would have been population�s mass investment to the State Securities (SS). It was not possible technically.
Then the pension reform was introduced. The people�s money was accumulated, in the volumes, sufficient for the SS, in the state and non-state pension funds. This money began to work for the state, not for us.
It was naturally, that the state tried to save us from investment hazards at maximum. It allowed the funds to invest money only to absolutely liquid instruments without any hazards. Profitability was not the first aim. The state considered such instruments to be its own securities (MEKAM and NBK notes). Though we should mention, that gold and hard currency reserve of our country is presented by monetary gold, and a little � by hard currencies, about 36% � by the state securities. These state securities are not Kazakhstan ones, they are different (American, German) having the highest credit rating, i.e. less risky and the most liquid.
We face the crisis, when the state occurred to be unable to protect our and its own money from devaluation. But it is the crisis, moreover, it is the world one. Our national currency began to fall in comparison with the world main reserve currency (as well as in comparison with gold). Not to make the situation worse, the state accelerated the devaluation rate, though it was announced, that the SS profitability would not be increased. We are talking about August�98.
Almost a year has passed from this moment, within this period we transmitted our money to the pension funds. These funds have increased. At the same time the banks invested less and less money to the SS, as their profitability did not satisfy them. A share of the funds in the SS market increased. Suddenly once it became possible not to take into consideration the banks� opinion in the SS market. This �market� may be further built without the banks.
It is interesting, that at present the government proposes to double tenge devaluation, while the Finance Minister announces, that SS profitability is now maximum high, and it further can only be decreased.
What does it mean for us? It means that in case of annual tenge devaluation rate in amount of 22%, we will gain annually only 18% in tenge or � less 4% annually in dollar in case of no inflation.
Why cannot the SS profitability be raised synchronously with devaluation? Because in this case it will be the same pyramid as of the private trust companies. Because the debt will increase and it will be impossible to repay it. Then the SS of the Finance Ministry will not be a financial instruments without risks. Because it will result in the more budget deficit, further reduction of social programs and the total financial collapse, which we will not be able to overcome by the market, non-political methods. Then at the bottom of these beautiful mountains the force-majeure circumstances will be the only circumstances in our life.
Everyone has a choice: to believe or not to believe, to live in the country or not to live, to assist this country or to assist only himself.
Epilogue
/IRBIS, 02.04.99/ � According to the results of the poll Friday of the several dealers of the Finance Ministry of Kazakhstan placing MEKAM, at present no trader of these banks is interested in any significant investments to the state securities of the Finance Ministry.
According to the dealers, the existing interest does not compensate the investment hazards level. An opinion about possible long-term securities default by the Finance Ministry is widely accepted.
The only financial instrument, which the bank traders trust to is US dollar. This answer was given by all the respondents. Though some of them added, that they would prefer to accumulate dollar in a foreign bank.
The personnel of the bank expressed their personal opinion regarding their savings, not the bank�s position or strategy.
ALMATY,
April 2 (THE GLOBE)
�Kazakhoil� checked the information regarding the operation of the JV �Kazakhturkmunai� and came to the conclusion, that this enterprise is a perspective one�, the official representative of the company said to THE GLOBE in Almaty. We remind you, that recently the Turkish mass media mentioned that activity of the Kazakh-Turkish JV �Kazakhturkmunai� is having no prospects and that Turkey was caused a damage in the amount US$ 250 to 300 million.
According to the representative, the examination determined, that investments as on January, 1, 1999 amounted to US$ 263 million, the main inflow of which (57.7%) was directed to the well drilling.
The average cost of a well is US$ 1.161 million, that is several times less than the well cost of the other enterprises with foreign capital working in the territory of Kazakhstan.
The representative of the national oil company remarked, that according to the contract signed between Kazakhstan government and the JV, all the expenses incurred by the enterprise at the all blocks are considered losses of the Turkish party, and neither Kazakhstan government nor the Kazakhstan party are responsible for compensation of these expenses to the Turkish party or the JV.
�The oil reserves, which are being excavated are 18.6 million tons, that is a little less than the total oil volume mined in the last year�, he said.
The representative of �Kazakhoil� also stated, that in future the company will execute the rigid monitoring of the entire oil-gas sector of Kazakhstan to observe interests of the republic and its foreign investors.
Anthony Richter
3 Apr
RFE/RL
Askar Gabdullin, director-general of the Metallist plant in Kazakhstan, told Interfax on 1 April that the six obsolete MiG-21s the plant sold to the Czech firm Agroplast were destined for Bosnia. He added that the sale contract had been approved by the government of Kazakhstan. The MiGs were impounded in Baku on 19 March (see �RFE/RL Newsline,� 24 March 1999).
CTK on 1 April quoted RFE/RL�s Slovak Service as reporting that since 1993, Agroplast has used Bratislava airport (the alleged destination of the Russian cargo plane that transported the MiGs) for illegal arms shipments. It added that Agroplast has delivered arms from unnamed CIS states to third countries.
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