Kazakstan inherited a decaying but still powerful manufacturing
and processing capacity from the centrally managed Soviet system.
In that system, among Kazakstan's designated products for the
general all-union market were phosphate fertilizer, rolled metal,
radio cables, aircraft wires, train bearings, tractors, and bulldozers.
Kazakstan also had a well-developed network of factories producing
military goods that supplied about 11 percent of the total military
production of the Soviet Union. In some areas of military production,
Kazakstan had a virtual monopoly. In the post-Soviet era, much
of the defense industry has stopped or slowed production; some
plants now produce nonmilitary electronic equipment and machines.
Most of the republic's manufacturing, refining, and metallurgy
plants are concentrated in the north and northeast, in Semey,
Aqmola, Petropavl, and Aqtöbe (see fig. 5). In south-central Kazakstan,
the most important industrial centers are Shymkent (chemicals,
light industry, metallurgy, and food processing), Almaty (light
industry, machine building, and food processing), and Zhambyl
(chemicals, machine building, and food processing).
Structure of Industry
The energy sector is the most productive component of Kazakstan's
industrial structure, accounting for about 42 percent of total
output. Metallurgy generates about one-quarter of industrial output,
divided equally between the processing of ferrous and nonferrous
metals (see table 8, Appendix). Engineering and metalworking account
for 6.2 percent of industrial output, chemicals and petrochemicals
for 3.6 percent, and construction materials for 2.7 percent. Kazakstan's
entire light industry sector accounts for only 4.8 percent of
industrial output. In the Soviet era, the republic had more than
fifty military-industrial enterprises, employing as many as 75,000
workers. Because Baykonur, one of the world's two largest spaceports,
was located in Kazakstan, as were 1,350 nuclear warheads, the
prosperity of this sector was assured during the Soviet period.
Military-related enterprises produced or processed beryllium,
nuclear reactor fuel, uranium ore, heavy machine guns, antiship
missiles, torpedoes, chemical and biological weapons, support
equipment for intercontinental ballistic missiles, tactical missile
launcher equipment, artillery, and armored vehicles.
In general, Kazakstan's industry suffered a disastrous year
in 1994, when overall output dropped 28.5 percent. The metallurgy
and energy industries were the main contributors to the 1994 decline,
although by percentage light industry (down 56 percent) and engineering
and metalworking (down 43 percent) suffered the sharpest reductions.
However, in the last few months of 1994 and the first half of
1995, production decreased more slowly. Although monthly production
continued to decline compared with 1994, the rate of decline between
1994 and 1995 was about half the rate shown between 1993 and 1994.
By mid-1995, the chemical, oil-refining, natural gas, timber,
ferrous metallurgy, and oil extraction industries were showing
higher outputs than they had for the same periods of 1994. Reduced
consumer purchasing power exacerbated declines in most processing
and consumer goods industries, however; overall light industry
output was 61.2 percent lower in the first five months of 1995
than in the same period of 1994. In the first five months of 1995,
the republic's industries produced goods valued at 253.1 billion
tenge, or about US$4 billion--a drop of 16.5 percent from the
five-month output value for 1994.
Kazakstan has remained highly dependent on Russia as a customer
for its manufactured products; this dependence has been the main
cause of the shrinkage in the industrial base, as Russia has reduced
its demand for most of Kazakstan's export products in the early
and mid-1990s (see International Financial Relations, this ch.).
Although more than 80 percent of Kazakstan's industrial production
is still intended for sale in Russia, trade with Russia in 1995
was only about 20 percent of what it was in 1991. In January 1995,
some 230 enterprises, with about 51,000 employees, were idle;
by April the figures had grown to 376 enterprises and more than
90,000 employees. Also alarming is the growing debt load of the
enterprises, which continue to support their unprofitable operations
by unregulated borrowing among themselves. By March 1994, total
agricultural and industrial indebtedness had reached 230.6 billion
tenge. One consequence of falling production and growing indebtedness
is that the republic's enterprises are increasingly unprofitable.
As of March 1995, the government categorized 2,483 enterprises,
or about one-third of the republic's total, as unprofitable. As
of early 1996, however, very few had been forced into formal bankruptcy.
Data as of March 1996