GOVERNMENT DEBATES DRAFT INDUSTRIAL POLICY.

On September 15, Mukhtar Ablyazov, Kazakhstan’s Minister for Energy, Industry and Trade, outlined at a meeting of central and local government officials a new industrial policy which would create new state-owned companies in all sectors of industry. The government’s draft met a mixed reaction, however.

Kazakhstan’s industrial sector has been dominated since independence by early-stage processing of oil and industrial raw materials. In 1995 heavy industry accounted for 85 percent of total industrial production. Oil currently accounts for 22 percent of Kazakhstan’s total export revenues, and non-ferrous and ferrous metals together account for 31 percent. By contrast, light, chemical, petrochemical and machine-building industries have collapsed since independence. Light industry, for example, shrank from 15.6 percent of total industrial production in 1990 to 2.4 percent in 1996. The country produces hardly any industrial or household manufactures (EIU Country Profile, 1998-99, pp. 28-9). Ablyazov expressed confidence that a 25 percent growth in industrial output would follow in 1999-2003 through the creation of “holdings or state corporations in the form of national companies.” These state companies, he argued, would be set up from reorganized bankrupt firms and would benefit from considerable state investment, good management and special rates on electricity and railway transportation. Kazakhstan, known for its liberal economic policy, has so far preferred to maintain state control only over so-called natural monopolies, such as electricity or water. The emphasis on state-owned and -managed companies would mark a departure from the practice of management contracts under Prime Minister Nurlan Balgimbaev’s predecessor, Akezhan Kazhegeldin, under whose government foreign companies were often invited to manage domestic industries.

Not all at the September 15 meeting shared Ablyazov’s optimism. Vitaly Mette, former deputy prime minister in charge of industry and now head of administration in East Kazakhstan region, stated that “not a single national company has ever done any good.” Deputy Finance Minister Orazaly Erzhanov argued that it is liberal economies that have best withstood the current world crisis. But Prime Minister Balgimbaev sprang to Ablyazov’s defense, arguing that state intervention is an inevitable response to the unwillingness of local banks to invest in unprofitable sectors (Reuters, September 15).–SC

Correction: Yesterday’s Monitor mistakenly reported an official of the Russian Central Bank as saying that “nearly a million” new rubles had been printed in the previous several days. This should have read “billion.”

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