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№5 (238) 11 - 24 March 2009

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The cabinet reshuffling marks a new epoch in the history of Kazakh establishment. The logic is very simple: political elites should be aware that new leaders should be appointed to the key posts during economic turmoil. New model of behavior is required. It should differ dramatically from that usually applicable in conditions of economic boom

Sultan Akimbekov

No doubt, Kazakh establishment does its best to respond quickly and efficiently to the crisis. Let's take the revision of budget downwards when it became clear that petroleum prices hit lows from their spike of $120 in August 2008. In Russia for example the parliament adopted a budget that took into account old prices $95 per barrel. While Russian deputies were considering the budget petroleum price fell to $50 approximately.

Kazakhstan reacted to the drop in petroleum price immediately. In late December, 2008 our country abolished export tariff on crude oil. The debate surrounding this case lasted one year. In Russia the export tariff on crude oil was reduced but there was a delay in introduction of this policy. This paralyzed the whole oil industry. Stagnation struck the oil market.

Meanwhile Kazakh authorities didn't abandon liberal tax policies. Tax cuts were planned for 2009 and officials don't see any hindrance to implementation of this strategy. At the same time Russia descended into a recession and this lessen chances of Russian economy to recover all on its own. To tidy things up Russian officials will have to raise taxes.

As for devaluation, unlike Russia, Kazakh government took urgent corrective measures. Russia ,on the contrary, preferred time consuming model of minimal monetary intervention. If you study the issue in detail it appears that the Kazakh variant might produce less devastating effect on the economy in whole and on adequacy of money supply in particular.

Meanwhile Kazakh corporate debt reached $105 billion; this is roughly accounts for %100 of annual GDP of our state. The lion share of this sum falls at the investments of Western companies into its affiliate structures. The government is worried about the future of the banking sector as banks amassed $40 billion of arrears. Kazakh state followed the lead of Iceland, Latvia, Belgium. It nationalized banks in exchange of money poured into bail -outs. Even taking into consideration all disadvantages of the system, the state continues to service debt of its banks. It managed to prevent financial default, which would have been more ruinous for the country.

It goes without saying that if economic catastrophe is avoided, the financial crisis will impose great costs on consumers, workers and businesses. Even the most developed economies encounter big troubles let alone Kazakh entrepreneurs who became a bit dizzy of what had occurred to them. They lucked out and reaped high profits. In the years to come they are to live within their means and they have never experienced lack of liquidity.

Political elites in CIS republics also lived in prosperity and serenity for quite a long time. They were deeply involved in all business processes. After the USSR collapse they more or less successfully managed affairs of their states. In the years that followed, namely in the era of economic boom many political elites delivered prosperity to their nations. They just distributed growing wealth. It wasn't difficult at all. As a result when the crisis hit the markets have been slow to recognise the scale of their own problems and mastermind any rescue packages.

Specific of vertical of power built in Kazakhstan and Russia implies that reshufflings or simply revamping of political systems is a sheer necessity sometimes. For instance in March the former akim(governor) of Southern Kazakhstan became the Minister of Ecology and the Minister of Welfare took the office of akim of Eastern province of the country.

De facto the state sent a signal to officials at all levels of power that they had to work hard if they were resolved to retain their jobs. No weaknesses are acceptable all decrees of the government should be taken seriously. Nomination of the akims is the best showcase for radical policies of the state. Astana appointed Berdibek Saparbayev(descendant of Southern Kazakh clan) to the akim post in Eastern province. Astana is resolved to mend all flaws in the governing system, and sort out economic mess, taking into consideration the needs of the nation first and local requirements to the personality of the akim second. Local sentiments won't have priority over national interests anymore.

On March 6th, 2009 the president delivered its annual message to the parliament. Regulating policies are the focal point of the president's message. Anti-crisis economic policies should be elaborated to give the government more say in the economic regulation. Kazakhstan can boast one of the most liberal taxation systems in the world, so the president proposal is the following: Kazakhstan is to rely on the anti crisis methods and techniques developed by Roosvelt on the one hand and Milton Freedman on the other hand. This is seemingly ambiguous position is the key solution to the problems. As for Roosvelt influence, the state plans to pour certain sums in the development of infrastructure and stimulate demand by distributing jobs for those people who are agree to construct roads for minimal wages. As for Freedman influence, the state will cut taxes. Few countries can afford lower taxes those days. Latvia for example will raise its taxes to survive.

Kazakhstan serves a best illustration to the fact that the united consolidated country is more equipped to respond the crisis than disintegrated Ukraine and Georgia. Society and political elites should work hand in hand to stave off economic collapse.

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