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Institutional reforms. Economic development

The transition to the new market relations not only led to radical changes, but also spawned and developed many of the negative phenomena in our society, like: racketeering, raiding, black economy, corruption, etc. Corruption has a negative effect on the national economy of the country. The approximate annual losses from corruption in the country estimated at billions of tenge. Denationalization and privatization. The main stages of the privatization in Kazakhstan. Within the scale of Kazakhstani economy, privatization has some significant features. There was an objective necessity to accelerate the formation of market oriented economic structures, and also to form a critical layer of owners as effective business entities. Some of the decrees issued in the Republic of Kazakhstan, like "On denationalization and privatization" of June 22, 1991 and "On privatization" of 23 December 1995, had become the legal basis for denationalization and privatization. A decree "On denationalization and privatization" defines privatization as a sale of a state property to physical entities as well as to non-governmental and legal entities, which is produced by the will of the state as the owner under the special procedures. The objects of privatization were defined as some special types of public property, for example: public enterprises, institutions, manufacturing and non-manufacturing units, the property companies, stocks and also stakes in the equity capital of the limited liability partnerships, and others The decree "On denationalization and privatization", provided for the following forms of transformation of a state property: property leasing; the purchase of property that has been leased; the repayment of property by the members of work collective; the sale of the property on competition or on the auction; the transformation of the State enterprise into the joint-stock company. The amount if the created joint-stock companies was the highest within the framework of the privatization of the medium and large state-owned enterprises. By contrast, the privatization of the small and medium enterprises as well as the objects of trade, public food services and domestic services, was carried out through the direct sales. The Privatization in Kazakhstan has gone through four stages. On the first stage (1991-1992) the privatization was having a proactive nature, when State enterprises were making their decision only upon the receiving of the corresponding application from the public enterprise. Only then it was possible to hold an auction, contest, or conduct a compensation-free transfer of the industrial or social infrastructure to the labor collective. A special project was developed “The program of denationalization and privatization of state property in the Kazakh SSR during 1991-1992 “, it was based on the idea of total involvement of the citizens  into the process of property category changing through their labor groups. The formation of the housing market as well as the creation of the necessary conditions for the development of market relations, are the main features at this stage of privatization. The lease and collective enterprises were formed, communal facilities were sold at the auction and the services market was gradually formed. The ongoing transformation boosted the business development and as such the formation of the groups of owners. At the end of the first stage, more than 4.7 thousand state property objects have been transformed. Apart of the total number of privatized enterprises, the objects of retail facilities, food services, communal services and other were accounted for 60%. The trading facilities (29,6%) and communal service facilities (25,8%) were the highest among them. The adoption of the “National program of privatization in the Republic of Kazakhstan” was conducted at the beginning of the second stage of the privatization in Kazakhstan (1993-1995). It was the most massive and difficult period in the history of privatization, which was carried out in four main areas: small-scale privatization (competitive and auction sale of objects of trade, consumer services and industrial enterprises employing up to 200 people); mass privatization (enterprises with number of employees from 200 to 5000 people.); privatization on individual projects (companies with fewer than 5,000 people.), privatization of agriculture. It was planned to conduct a large scale privatization, which will only cover the basic sectors of Kazakhstan economy: the large and medium scale state-owned industrial enterprises, agriculture, construction, banking, industries producing consumer goods.. The variety of different methods of privatization: sale of shares through the stock exchange, auction, commercial tender, the investment tender, direct sale, the companies transfer in trust, and others. Regarding the existing wide-scope of areas of privatization, the small privatization has a very important role. The country sold more than six thousand objects, thousands of private enterprises, belonging to small and medium-sized businesses, began to work productively. The unclaimed enterprises were sold in 1996 after a several  price cuts. The cost of small-scale objects of privatization could be paid in cash (50%) and housing coupons (50%). The system of  purchase and sale of the housing codes, was implementing through the various branches of the National Savings Bank. The method of the direct marketing sale of the enterprises to the labor groups was implemented as well. About 50% of funds from small-scale privatization were left to the local budget. The process of transition to private ownership should become irreversible. This was required by the logic of that period. In June 1994, the President of the  Republic of Kazakhstan N.A Nazarbayev submitted in Parliament a Memorandum on economic policy for the coming three-year period, in which the economic strategy of the Country was defined. It included very strict measures to reform the economy and to establish a macroeconomic stabilization. The task was to conduct a quick and vigorous privatization. The attitude of our people to foreign partners has undergone a fundamental transformation. In February 1997, a decree "On state support of direct investments in Kazakhstan", has been prepared at no time. The system of privileges for foreign investment has been significantly expanded by this decree. After the adoption of the decree, the foreign capital has played a crucial role in the national economy growth. The third stage of privatization (1996-1998) became the stage of transition to sector programs, during which the privatization of the electricity and gas industry was made, as well as in the social sector: health, education, science and culture. The full edged domestic investors were formed during this period and it was important as they were able to buy a large industrial enterprises. About 95 major companies were privatized during the second and the third stages, including a total of 57 ownerships that has been transferred to foreign investors. It helps to create enterprises with the public and state capital, to save the workplaces and to strengthen the economy of the country. The fourth stage of privatization has begun from 1999and lasts at the present time, it’s characterized by new approaches to the distribution of authorities between the levels of state management in the issues of regulation and disposal of government property. The Program of privatization and increase in the effectiveness of state property governance for 1999-2000 should be called as a document, which initiated the beginning of the fourth privatization stage. The state saved participation in definite strategically important spheres of economy, including those providing for the production of significant goods and services. Reformation of banking system. The establishment of the own bank system of Kazakhstan was started from December, 1990. The Law “On banks and banking activity in Kazakh SSR”, promoting to the creation of basement of bimodal banking system, was adopted in January, 1991. The Republican State bank was reformed into the National bank of the Republic of Kazakhstan with regional departments and administration. So, to the moment of introduction in November, 1993, bank system of Kazakhstan underwent significant transformation: there was bimodal bank system, all specialized banks were reorganized into joint stock ones, and the National bank was allotted to the range of the functions of central bank. The Decree “On the National bank of the republic of Kazakhstan”, signed by the State President N.A. Nazarbayev in March, 1995, and having the power of law, had a principally important meaning for status setting of the National bank. The National bank became independent and accountable for only the Head of state. The first Program on reformation of Republican banking system was adopted in 1995. The Program of adoption of bimodal banks to international standards of financial statement, which was established in December, 1996, was the next important step in the banking system development. Thus, Modern banking sector was created in Kazakhstan in the nineties in the course of economic reforms. National currency introduction. In the beginning of the nineties the President of the Republic of Kazakhstan N.A. Nazarbayev realized well that pricing reforms would be inevitably followed by currency reform, and then trouble would became purely Russian currency. B.N. Yeltsin and V.S. Chernomyrdin assured him many times that in this cade Russia and Kazakhstan would obligatory “synchronize their watches”. However, the personal interests always prevail in politics. Therefore in the beginning of 1992 the secret decree on preparation of the national currency – tenge, was issued. The national currency introduction was preceded by a complex and long negotiating process. There were tens of meetings at the very different levels, including negotiations between presidents of two states –N.A. Nazarbayev and B.N. Yeltsin. Our own national currency was printed in the Great Britain and transferred to the republic. The President established a governmental commission, which elaborated the entire scenario of tenge introduction. This was a compound complex of political, economic, technical and organizational measures. As a result of decisive actions of the President and Government the national currency of the Republic of Kazakhstan – tenge was successfully introduced on November, 15, 1993. The Agency in strategic planning and reforms, which receives a clear task of the Head of state: “to look into future, think over model, over strategy where Kazakhstan must move towards”, was created in 1997 by the Decree of the President of state. The national fund was established by the decree of the Head of state in 2000. In 2000 the state economy was read to make a new round in its development. The model transformation presupposed the active state participation in formation of economic and political conditions, which stimulated the creation of transnational corporations, capable to compete in the market conditions both at home and abroad. The process of formation of development model, Oriented to export, began. The structural reforms in economy, in general, had been finished in the country to 2003: privatization of state property implemented; economic sphere, adequate for standards of developed market, formed. Kazakhstan was recognized by the developed countries as the state with market economy within the number of the first member-states of CIS. 2003 year marked the country’s conversion from decision of tactical tasks in the sphere of economy to strategic ones. Nursultan Nazarbayev supported the Strategy of industrial and innovative development for 2003-2015, aimed at diversification of economy and overcoming of state dependence on raw materials factor. Within the frameworks of that strategy there were the first steps, purposed at the active structural reorganization of industry and giving the innovative character to the economic development of country, creation of favorable business sphere, development of processing industries, and increase in economic competitive ability. State institutions, established in accordance with the Strategy of industrial and innovative development, were endued with sufficient financial resources to credit investment projects, as well as to be engaged partially in authorized fund of originating enterprises. These measures allowed observing a high tempo of industry growth, rapid decline in unemployment and decrease in real incomes of population. The State program of launching oil and gas fields on Kazakhstani part of the Caspian Sea for the period till 2015 year” was adopted in the same 2003. By order of the President the Government of Kazakhstan elaborated and established the Plan of actions on economy and financial sector stabilization for 2009-2010 years on November, 25, 2008.  The Fund of national welfare “Самрук-Казына” came out on behalf of state, the main task of which was assistance for the development of Kazakhstani economy in the conditions of global crisis with involvement of financial resources of national development institutions. 52 billion tenge was allotted from the Republican budget with the first tranche to capitalization of Stress assets fund in 2008. Authorized capital stock of the Fund was 122 billion tenge in 2009. The problems of real estate market were the second important direction of antirecessionary program. The state allotted 5 billion of the USA dollars (3 billion of the USA dollars was taken from the National fund and the other 2 billion potentially – from pension system). Support of small-scale business is the third direction of anti-ecessionary program. 1 billion of the USA dollars had been allotted from the National fund to support small-scale business. The sum was aimed at refinancing of existing credits for small-cale business, as well as the giving the new ones. At the same time lending rate didn’t exceed the level, which had existed before crisis (no more than 14 %). At the beginning of September of 2013 one of the most significant rating of states competitiveness on a world scale World economic  forum (Davos, Switzerland) appreciated Kazakhstan in its report for 2011, which included a compound system of statistic and prognostic analysis of different economy branches. This year Kazakhstan rose to the 21’St positionand took the 51’St place. Strategic understanding of the most important role of business in Kazakhstani economic development gradually led to the sustainable economic development and increase in the life support level. Small and medium scale business of the Republic took an essential niche in the state economy. More than one third of current entrepreneurs (40 %) were engaged in business, whereas just 11, 4 % - in the industrial sphere. Part of population from the whole number of people, engaged in small-scale entrepreneurship, increased from 23 % in 2009 to 29 % 2011. Business supplied about 2.5 million of Kazakhstani citizens with work in 2012.

Source: AyaganB.G., AbzhanovH.M., SeliverstovS.V., BekenovaM.S., Modern history of Kazakhstan: the manual for students of non-historical  professions (bachelor degree) of institutions of higher education. Edited by B.G. Ayagan.– Almaty: Raritet, 2010. – 432 p. 165-167, 200-228.

The information is given by the Institute of state history of Science Committee of the Ministry of Science and Education of the Republic of Kazakhstan.

Material provided by the Science Committee of the Ministry of Science and Education of the Republic of Kazakhstan.


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