The northern region of Pavlodar boasts some of Kazakhstan’s key strategic industries, such as the country’s only aluminum factory (Alyouminii Kazakhstana), its sole chrome factory (Kazakhchrome), and one of the country’s two oil refineries (Pavlodar Oil Refinery, or NPZ). The months of November and December are witnessing a pilgrimage of officials from Almaty to the region to assess how these major industries have fared under the direction of foreign companies since they first assumed management responsibilities three years ago.
The government was confident back in 1994 that such management contracts would be the best way to avoid mass unemployment, pay monthly salaries, and honor a company’s outstanding debts. In all three of the above cases, these aims, to different degrees, have been achieved. (Panorama, November 21) Those relative successes stand in a stark contrast to the absence of foreign management at Pavlodar’s Tractor Factory, where output has fallen from a previous average 4,000 to 200 units per month; where the workforce of 20,000 has been cut in half; and where the wages of those remaining have not been paid for over two years. (Monitor interview with former Pavlodar Tractor Factory employee, Pavlodar, November 27)
There is nevertheless an increasing sense amongst observers that some of the actions taken by foreign managements are undesirable. For example, the managers of Alyouminii Kazakhstana — White Swan Ltd. — have increased their ownership share in the company from two percent to over 50 percent, and there are rumors that both White Swan and the managers of NPZ — CC-Oil — have now actually bought the companies from the government. According to one source, government officials visiting from Almaty have actually been barred from entering some foreign-run companies. (Panorama, November 21) One unofficial observer recounts how the government, wishing to review the performance of NPZ under the leadership of CC-Oil, was simply denied documentation. (Monitor interview, Pavlodar, November 27)
The state has already started to sell its shares in these companies, and existing foreign managers can be expected to jostle to add these shares to their existing majority stake. The initial five-year management contracts will thus become defunct. Developments over the past three years bear out some of the fears of anti-privatizers of strategic industries that foreign managers would not invest in fixed capital out of a preference for short-term profits. But other observers are more optimistic and contend that, even if they have not done so already, the new managers, as prospective owners, will see it in their interest to plan for long-term gains.
The Monitor is a publication of the Jamestown Foundation. It is researched and written under the direction of Senior Analysts Elizabeth Teague, Vladimir Socor, Stephen Foye, and Analysts Igor Rotar, Douglas Clarke, Ben Slay, Peter Rutland, Sally Cummings, and Roger Kangas.
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