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Kazakstan
Post-Soviet Economic Developments
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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