Economic Relations between Kazakhstan and Russia
abuses in trade and banking structures.
The prevailing technological, economic and organizational standards
made a significant impact on the potential of foreign trade relations. “The
cohesion of the economic space of the former USSR was affected through
centralized state planning implemented by command-administrative
management. In the process, the country’s economy worked as a ‘single
workshop’, and not all production and economic links here were rational
from the market point of view. The transition to a market economy
throughout the economic space of the former USSR required a profound
restructuring, and this called for considerable resources and time,” Ex-
Prime Minister A.M. Kazhegeldin stressed.
The policy of liberalization of foreign trade activity and of open
economy did not result in 1993 in any growth of exports. It amounted to
$1.5 billion, thus remaining at the 1992 level. Shifts in the geography of
Kazakhstan export due to the re-orientation of foreign trade links to
industrially developed nations resulted in the strengthening of raw
materials exports. The share of machines, equipment and transport vehicles
in the export dropped to 2 percent, and the share of fuel and energy
complex and that of metallurgy rose to 80 percent. Rising domestic prices
prevented partners from concluding long-term foreign trade deals,
stimulating instead commodity exchanges. The share of barter and clearing
deals in export operations made up more than 26 percent. More than 56
percent of imports were affected through exchange of commodities. Barter
operations were mostly in the nature of structurally unbalanced exchanges.
The republic suffer considerable losses due to inadequate knowledge of the
market conditions and the desire to access foreign markets at any price.
A noticeable feature of Kazakhstan economy is the low level of the
development of machine building, which is not up to present-day
requirements, and this makes an adverse impact on other branches of the
economy, as it results in the common shortage of metal-tooling products.
This aggravates the shortage of spare parts and of products used in several
adjacent branches of industry and adversely affects the standards of
servicing.
Some of Kazakhstan most important tasks in 1994 were the closure of, and
changing production lines at, non-viable enterprises and development of
promising export-oriented ones, which also satisfy domestic demand. This
called for a set of measures to identify enterprises in the state of
depression, closing down unprofitable lines of production in energy-
consuming industries and rehabilitation and reorganization of non-
profitable production lines.
The basis of the development of Kazakhstan, just as of Russia and many
other CIS countries, is export of natural resources. In 1994, the
government introduced regulations for the licensing of natural resources,
and a law was adopted on payments for utilization of natural resources. It
was at that time that efforts were initiated to attract domestic and
foreign investors to develop the fuel and energy complex. The development
began of the Tengiz, Karachiganak, and some other oil yields at oil fields
continued to be introduced. Open – cut coal mining was expanded at
Ekibastuz, Maykubek, and Shubarkul coalfields, with the aim of reducing the
mining of coal underground at low-profit and non-profitable mines of the
Karaganda coalfields.
In the metallurgical industry, the development of production of
ferrous metals and the raw-materials basis of such production continued,
including the revamping of the Karaganda metallurgical plant with the aid
of foreign investment; its re-orientation toward the iron ore pellets of
the Sokolovsko – Saribai mining association; the development of production
of stainless steel and rolled metal and the building of an electric
metallurgical plant for the production of stainless steels in Aktobe;
further development of ferrous alloys in Aktobe and Aksu and of its raw-
materials basis –the Donskoy ore –dressing plant; the re-orientation of
idle production lines of JSC Khimprom to the production of ferromanganese.
Organizational measures were taken in 1994 to develop production of
fireproof materials.
At the same time there was a fall in the production of ferrous
metallurgy due to an aggravation of the raw materials and fuel shortage and
a parlous state of equipment at enterprises of this industry. The decline
in industrial production was to a considerable extent due to non-solvency
of enterprises in view of their insufficient financial resources, non-
payment by the buyers for products delivered, and weak financial
discipline.
The decline in non-ferrous metallurgy continued, as production of
copper, titanium, and manganese fell. To check the decline in this branch
of industry, the production lines at the Chilisai ore-dressing plant
switched to a different product; the Zyryanovsky lead plant was rebuilt,
and its commissioning was brought forward; the raw – materials basis for
the titanium industry was created, as was the Syrymbet tin field, the tin
being produced at the Tselinny chemical plant. The functioning gold mines
and ore-dressing plants were revamped, and work was accelerated to develop
major gold fields at Vasilkov, Bakyrchik, and Akbakai.
In 1994, the share of machine-building industry and machine tooling in
the overall industrial production continued to fall, amounting to six
percent. Low investment activity, non- competitiveness of the Kazakhstan
machine-building industry, limited financial consumer capacity
predetermined an almost twofold reduction volumes in most types of machine
–building branches even compared to the crisis-ridden year of 1993.
The situation was worst in the chemical and petrochemical industries,
whose production capacities far exceeded the republic’s domestic needs.
Considerable share of the product was exported to other CIS countries and
the “far abroad”, but the enterprises suffered from shortage of raw
materials, even shortages of oil, which is produced in Kazakhstan itself.
JSC Polipropilen, AKPO, Khimvolokno production association used imported
raw materials only. In 1994, the decline in most types of petrochemical
products reached 55-60 percent. Oil refining dropped by 20.3percent.
The timber, woodworking, and papermaking industries suffered from
shortage of raw materials. Between the beginning of 1993 and the end of
1994, the production of timber fell by 21 percent, and this had a negative
effect on the state of production at sawmills and woodworking factories.
The production of saw-timber, chipboard, and cardboard fell by 31.9, 59.3,
and 47.5 percent respectively, but the production of paper increased
threefold.
In 1993 and 1994, decline in production also continued in the
construction materials industry. Production of cement declined to the level
of 1973, while production of pre cast concrete products dropped to the
level of 1974. There was a considerable drop in production at enterprises
producing asbestos cement pipes and coupling (by 34.2percent), linoleum (by
40.3 percent), cement (by 61.6 percent), asbestos (by 71.2 percent), bricks
(by 78.8 percent). Production of sanitary wares dropped by 25 percent.
During the last five years, GDP volumes continued to fall, declining
roughly twofold; the greatest decline (by 25.4 percent) was observed in
1994, and in 1995 it was almost nine percent.
However, during the time of the reform considerable changes took place in
the structure of GDP: The share of services grew sharply – from 32 percent
in 1992 to 47 percent in 1995; the share of commodity production declined
by 12 percent. The volume and share of services mostly grew in the trade,
.•.
•3 • ti '
Competitiveness of the Kazakhstan machine-building industry, limited
financial consumer capacity predetermined an almost twofold reduction in
production volumes in most types of machine-building branches even compared
to the crisis-ridden year of 1993.
The situation was worst in the chemical and petrochemical industries,
whose production capacities far exceeded the republic's domestic needs. A
considerable share of the product was exported to other CIS countries and
the "far abroad," but the enterprises suffered from shortages of raw
materials, even shortages of oil, which is produced in Kazakhstan itself.
JSC Polipropilen, AKPO, Khimvolokno production association in Kustanai,
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