Publication: Monitor Volume: 4 Issue: 97

Eager to revive its ailing defense industry, Kazakhstan has announced plans to sell branches of several of its military plants to interested investors. Addressing a news conference on May 13, Bekbulat Baigarin, head of the Defense Industry Committee (DIC) at the Ministry of Defense, said some of the plants will be split into segments to be privatized separately. Last month, President Nursultan Nazarbaev encouraged the defense industry to diversify and upgrade the quality of its output. Baigarin said he hoped that, coupled with revenue from arms sales, privatization would assist this modernization drive. (Reuters, May 13)

In the Soviet era, the military-industrial complex in east, north and northwestern Kazakhstan produced mainly military vehicles and some (mainly nautical) firearms. With the Soviet Union’s demise, domestic and foreign demand for obsolescent products fell, creating severe problems of unemployment for entire towns and even regions constructed around these plants. While Kazakhstan’s 1991 military production was 4.7 percent of GDP, it has since fallen to less than 1 percent. Some plants responded by attempting to convert military output into civilian products ranging from meat mincers to telecommunication systems. However, shortage of funds and lack of foreign interest have stalled conversion.

Interest in locally produced arms was, however, apparent at last month’s three-day exhibition in Almaty of Kazakhstani-produced military vehicles and firearms. At the exhibition, Kazakhstan’s Defense Minister Mukhtar Altynbaev indicated that Kazakhstan hopes to sell to developing countries some of the obsolete weapons and ammunition it inherited from the Soviet era. In 1997, Kazakhstan’s arms sales, including locally produced torpedoes, mines and firearms, are valued by experts at 1.3 billion tenge ($17 million) (Reuters, April 27) At the exhibition, some half a dozen contracts totaling around $10 million were reportedly signed.

It is hoped that “segmented” privatization will generate further income for the industry. The DIC will gradually issue tenders for the fifteen military factories under its control. To preempt allegations that state security is being undermined, Baigarin said the segmented approach “will leave to foreign investors only those segments that having nothing to do with state secrets.” (Reuters, May 13) He insisted that the government will continue to exercise tight control over arms manufacture and sales. The first tender, to be announced shortly, concerns two military factories in the northern town of Petropavlovsk. (Panorama [Almaty], May 15) –SC

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