KAZAKHSTAN’S FINANCIAL REFORMS YIELDING RESULTS, BUT NOT FOR EVERYONE

Visiting Astana on November 16, World Bank President James D. Wolfensohn praised Kazakhstan for its recent economic performance and stressed that the poverty rate in the country has decreased from 18% to 12%. Most importantly, he said, Kazakhstan has made remarkable success in developing its financial system. At the same time, Wolfensohn pointed out that the government still has some elements remaining, such as drafting a comprehensive poverty program and investing more money in health care and education.

Wolfensohn also announced that the World Bank would continue the Joint Economic Research Program, currently underway in Kazakhstan, for another three years. With a $1 million annual price tag, JERP is a costly project for cash-strapped Kazakhstan; therefore, it is co-financed by the World Bank.

Since 1992 Kazakhstan has actively developed joint economic, monetary, and social-reform projects, investing $1.4 billion to implement these ventures. The Prime Minister of Kazakhstan, Daniyal Akhmetov, addressing the media, proudly stressed that the huge inflow of investments testified to “a positive attitude of the World Bank towards our country and its president.” He added that he sees raising the competitiveness of Kazakhstan on world markets and the deepening of financial reform as urgent tasks in terms of future cooperation with the World Bank (Kazakhstanskaya pravda, November 17).

World Bank experts regard Kazakhstan as a country with a medium-level income. Recognized as a market economy by the United States, Kazakhstan is the leading economy in Central Asia. With private bank deposits exceeding $3 billion, newly created investment and innovation technology funds, and small business development funds, Kazakhstan’s Development Bank is ready to support nation-wide projects.

Kazakhstan may seem to have made impressive progress in modernizing its financial sector. However, President Nursultan Nazarbayev took a more critical view of the banking sector, which, in his words, is updating its services at a very slow pace. He admitted that bank credits are not available to those who really need them. The crux of the matter seems to be rooted in the underdevelopment of Kazakhstan’s stock markets. Pension funds, for example, have accumulated 446 billion tenge ($3.4 billion), but they lack mechanisms to profitably invest that money in the domestic economy. This happens at a time when most social projects, such as irrigation and housing construction, badly need funding and the domestic economy is largely dependent on foreign loans. Nazarbayev sharply noted that up to 80% of the country’s GDP is controlled by “mega holdings,” which hampers the development of small and medium-sized businesses. The president called on national companies to concentrate all their assets in a state holding company in order to sell a part of their state-owned shares on the stock market. According to some observers, this step signals the state’s firm determination to revive the hitherto lackluster domestic stock market (Panorama, November 19).

Nazarbayev also made it clear that banks must give top priority to the interests of their clients. This remark comes in the aftermath of the recent scandal involving Nauryz Bank Kazakhstan, which was closed for three months after failing to fulfill its contract liabilities on payments and filing false bank statements. Even though international experts regard Kazakhstan’s banking reform as a success, cases like Nauryz Bank seriously sap public confidence in country’s financial institutions.

Some opposition forces are incorporating criticism of financial reforms and declining confidence in the government’s monetary policy into their slogans. Long before this year’s parliamentary elections, the pro-democratic Ak Zhol party demanded that the millions of dollars accumulated in the National Fund from the sale of oil and mineral resources should be distributed among the population of the country. There is a great deal of truth in opposition claims that ordinary people do not benefit in any way from widely touted GDP growth statistics.

Economists predict that the country’s GDP will be $37.5 billion this year. However, the average wage next year will be barely over $200 (Yegemen Kazakhstan, November 16). There is little reason to believe that belated measures will be enough to close the widening gap between the poor and the rich. Health workers and teachers remain the lowest-paid professions.

Wolfensohn stressed the importance of economic and financial reforms with a human face when he said: “If you don’t invest in people, you will never reach stability. The oil fund should be used to finance the health care system and education, that is to say, for the development of the entire human potential of the country (Epoha, November 19).