Publication: Monitor Volume: 4 Issue: 149

A conference organized by the National Private Pension Funds Association in Almaty on July 30 revealed bottlenecks in Kazakhstan’s ambitious pension reform. Obstacles persist, despite a World Bank loan of US$300 million in June which aimed to address social protection, public information and the establishment of a legal and regulatory framework for the program. (Panorama [Almaty], July 31)

In January, Kazakhstan embraced a sweeping reform of its pension system that should, when fully implemented, make the republic the first CIS-member to shift responsibility for retirement pensions from the state to the individual. (See the Monitor, April 29) Each employee pays a mandatory 25.5 percent of his or her total income into a pension fund. Since the beginning of this year, 15.5 percent of these contributions have been channeled to the State Pension Center, while 10 percent have gone to private funds. (Kazkommerts Securities Weekly News [Almaty], March 23)

Last week’s conference showed why most of the contributions still go to the State Pension System. As in the early days in Chile’s pension reform, on which Kazakhstan’s is modeled, Kazakhstan’s private pension funds have been slow to win public confidence. This is because each private pension fund operates according to its own rules, and many fail to explain themselves clearly to potential customers. Moreover, Association Chairman Aidar Alibaev admitted, a “code of ethics” to regulate private pension funds, including guarantees to private investors, is not yet in operation. As a result of these problems, private funds are not attracting the finance they need to develop.

Both Alibaev and Aben Bektasov, Chairman of the National Securities Commission, said they were confident that local pension funds will procure such finance by bidding for shares in Kazakhstan’s potential blue-chip companies. The government has yet to announce the date of these promised sales. Alibaev told a news conference on July 14 that “inactivity on the stock market thwarts the progress of pension reforms,” and that nearly all of the twelve private pension funds set up since the start of the year are investing ninety percent or more of their assets in treasury bills. (Reuter, July 14) The minority stakes promised for auction include five percent in oil firms Mangistaumunaigaz and Aktobemunaigaz, 5-20 percent in the Jezkazgantsvetmet copper plant, 16.5 percent in the Oskemen titanium and magnesium plant, up to 4.5 percent in Kazaktelekom and 10 percent in Kazakhstan’s Halyk Savings Bank.–SC

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