Economic Relations between Kazakhstan and Russia
Shymkentshina 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 20.3 percent.
The timber, woodworking, and papermaking industries suffered from
shortages 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 couplings (by 34.2 percent), 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] in banking and finances, insurance, and realty, while the share of
everyday services fell. In other words, the main trend in the changes of
macro-economic proportions was a move towards parameters characteristic of
countries with well-developed market economies. The share of consumption of
end products rose to 69 percent of utilized GDP as contrasted with 58
percent in 1993. Investment in 1995 amounted to some 30 percent of GDP.
Beginning in the second half of 1994, certain positive changes began to
occur: a decline in the rate of inflation, a growth in accumulation of
capital, a stabilization in the exchange rate of the national currency, a
decline in the banks' interests rates, and a relative growth in industrial
production.
The rate of inflation steadily declined from 4.9 in June 1994 to 3.2
percent in April 1995. The decline in production, which sharply Increased
in November 1993 through March 1994, practically, ceased in some branches
in 1994. As a result, industry as a whole grew by 0.3 percent in September,
by 1.1 percent in December, and by 1.2 percent in April. As distinct from
the previous years, a certain stabilization of production, which began in
June 1994, was accompanied by a certain slowing down rather than
acceleration of inflation.
The rate of price growth in the production and consumption sectors of the
economy in 1995 slowed down. The highest inflation occurred in January (an
increase of 108.9 percent compared to the previous month), and the lowest,
in August (102.1 percent). The annual index of consumer prices throughout
the republic was estimated at 160 percent (the monthly index, 104.3
percent, whereas the annual index of inflation of consumer prices in 1994
amounted to 1256 percent, which corresponds to a monthly inflation rate of
123.4 percent. (The annual index of production prices was at the level of
141.2 percent).
The positive dynamics in the consumer and wholesale prices was achieved
above all by harsh financial and credit policies and the government's
measures aimed at stage by stage liberalization of prices and tariffs for
commodities and services, which resulted hi a sharp reduction in the range
of regulated prices. At the beginning of 1996, only the prices of electric
power, heating, gas, passenger and freight railway traffic were regulated,
and at the local level, regulation involved prices" and tariffs of communal
services and the services of urban passenger transport.
In 1995, the monetary and credit policies were characterized by changes
in the monetary and credit instruments of the National Bank, its operations
at the inter bank credit, currency, and stock markets, and the development
of the market of state securities. Whereas hi 1994 and January 1995 the
principal instruments were centralized and auction credits, in 1995 the
emphasis shifted from state-apportioned credits to the development of
securities markets and auction credits.
The primary market of state treasury bonds actively began to develop.
The volume of trading on this market is steadily growing, with demand
exceeding supply. Toward the end of 1995, 4.3 billion tenge's worth of
treasury bonds had been issued. In September 1995, pawnshop credits were
introduced, with state treasury bonds as collateral.
The National Bank's average refinancing rate went from 210 percent in
January to 52.5 percent in December 1995. This reduction was made possible
by a considerable alleviation'' of the inflation situation.
The weighted average percentage rate for auction credits amounted in
1994 to 292.61 percent; during ten months of 1995, it went down to 103.29
percent, and in October 1995 it stabilized at the 52.56 percent level.
In 1995, the reduction in production output amounted to eight percent.
Production output fell at 44 percent of enterprises. Of the 220 most
important kinds of industrial products, production of 48 kinds increased
and that of 167, decreased. It should be noted at the same time that hi
1995 decline in production was overcome, and there was an increase in
production compared to the previous year in electric power production,
metallurgy, and in the chemical and petrochemical industries.
In 1995, the policy of liberalization of foreign trade activity
continued; distribution of export quotas was completely eliminated, and the
list of licensed export products was considerably reduced. Kazakhstan
traded with 124 states of near and far abroad.
In the framework of official aid for development, Kazakhstan received a
number of credits to the tune of $1.3 billion from international financial
organizations and individual donor countries.
One of the main types of foreign resources for the republic was direct
investment, in particular the setting up of joint ventures and foreign
enterprises. The rate of establishment of joint ventures in Kazakhstan is
fairly high. Thus, at the end: of 1990 there were just 15 of them, while at
the end of 1995 more than 2000. JVs operated in the republic, of which 500
operated on foreign capital only. Most of these were set up in the;
mining industries.
From the beginning of 1995, steadily increasing numbers of enterprises
were turned over for administration. Toward the end of December 1995,
external administration was introduced at some 20 major industrial
enterprises in various sectors. The necessary legislative basis was created
for the involvement of foreign capital in Kazakhstan.
Thus the implementation of economic policies in 1992-1995 in Kazakhstan
resulted in the liberalization and openness of the economy and the
expansion of private enterprise.
There were significant shifts in the market infrastructure. Trade and
the banking sector developed rapidly, and other financial institutions were
born - in other words, there was, progress in those spheres of the economy
that had previously; been underdeveloped but that were vital for the
functioning of the market economy.
The liberalization of foreign and domestic trade resulted in a slight
reduction of export in 1994 and early 1995 compared to the decline in the
volume of GDP. The export of commodities, mostly to CIS countries, amounted
to $13 billion in 1994 and $4.97 billion in 1995. The greatest share of
exports went to the Russian Federation — 47 percent, or $1.4 billion's
worth in 1994; in 1995, the exports amounted to $2.8 billion, including
$2.1 billion to Russia.
Russia's share in Kazakhstan's imports from CIS countries at the
beginning of 1995 was the largest - 70 percent; Turkmenistan's, 10 percent;
and Uzbekistan's, 9 percent. Of considerable significance is the fact that
more than 50 enterprises securing Russia's defense interests work on
Kazakhstani territory. All principal roads of Russia leading east and
southeast, Yuzhsib and Transsib railways included, pass through Kazakhstan.
Major Russian high voltage power lines, communications lines, and pipelines
are also connected with Kazakhstan.
As before, Kazakhstan's exports to Russia are raw materials, oil and
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