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According to deputy chairman of Executive Committee of the Association of Banks of Kazakhstan B.Baishev, “the total sum of overdue credits of the banks of Kazakhstan is $8.2 billion or 9,9%. According to most optimistic estimates, the share of credits, subjected to stress, as per S&P, is equal to 35-40%. For example, “Kazcommertsbank” has overdue credits totaling $ 2.8 billion, BTA Bank – $1,26 billion, Alliance Bank – $725 mln., ATFbank – $700 mln.
The financial crisis in Kazakhstan is caused by a number of factors, including the growth of inflation. According to official data, in May 2008 the inflation in the republic was 19%, while non-official sources report 40%. The reasons which have caused inflation during the last two years, were: growth of import while the labor efficiency growth rate slowed down; the rise of average contract prices for imported goods; relatively high total inner demand; growth of payments to non-residents; decrease in foreign capital inflow as a result of global crisis of liquidity; price shock at international food markets etc.
Today one can witness the increase of overdue debts of the population of Kazakhstan. According to B.Baishev, the debt will continue growing. “We have conducted some studies. If the sum of the credit is $100 000, with the annual interest rate 18%, within 25 years the sum to be paid will reach $355000. Just imagine how 60-70% incomes of an individual from so called middle class will be paid out to cover the credit. Such are real conditions, which the banking system has created for the people”. Along with this, as deputy chairman of Executive Committee of the Association of Banks of Kazakhstan puts it, “on May 2008 the deposits of individuals totaled $12 billion. In other words, the Kazakh banks will have to annul all deposits of the people in order to pay out foreign debts!
But this is not all. The shares of majority of Kazakh companies at foreign exchanges last September showed catastrophic decline while the financial crisis soared. Thus, the rates of GDR Zhaikmunai LP, a mother structure of oil company Zhaikmunai, declined at London Exchange to 26,67%. The rates of Kazakmus PLC holding which have united assets in color metallurgy, energy and oil industry, went down to 21,85%. The shares of Eurasian Natural Resouces Corporation PLC went down to 19,14%, GDR “Alliance bank”, one of the largest in the country, - to 16,58%.
The same thing is taking place in inner markets. According to vice-president of Kazakhstan Stock Exchange (KASE) A.Tsalyuk, “the Kazakh Stock market will continue long dramatic declining”. He said “by now the decline is over 35%”. This is a very substantial decline even for our market. But this is not yet the bottom of the market”.
Thus, the second half of 2008 started unluckily for the Stock market of Kazakhstan. From the first dates of July the index of Kazakhstan Stock Market started going down and by 15 September it reached 1709,72, the lowest from August 2006, although in late February it was 2876.
From July the market price of companies, listed in government list of KASE, dropped to 44,4% down to $52,7 billion. The most capitalized companies at Kazakh Stock exchange such as ENRC, RD KazMunaiGaz, Kazcommertsbank, BTA Bank have lost 39-50% in price since early July.
The volume of trade soared as well. Within 8 months of 2008 the volume of shares transactions (buy-sell) at KASE and at special trade platform of regional financial center of Almaty was $2,6 billion (314,0 billion tenge), that is lower than the same period of the previous year for 2,77 billion USD (345,9 billion tenge) or 2,1 fold.
Kazakhstan is experiencing one of the deepest declines during its history. The officials of RK are reasoning this with the “world crisis”. How boring are these Kazakh analysts and their persistence in blaming the rest of the world for their miscalculations! A two-roomed flat in Almaty which cost $250 000 at the beginning of the last year, is now only $35-40 000. And there was much fuss about the rumor that almost everyone in Kazakhstan became “dollar millionaire”. Why Astana made this “show off” which has been based, as it turned out, on foreign debts totaling an astronomical sum – $103.8 billion as of 1 January 2008!
Not so many people point to the real reason – the internal problems in banking and raw material sectors of the country, as well as miscalculated economic policy pursued within the last 15 years. The “national actors” in Kazakhstan who could pay their own bills or support their own activities, have almost gone because of lack of free resources and countrywide debt.
This became possible as a result of selling out the national treasures at low prices and involving the citizens in various financial and banking tricks at international scale under the slogan of economic modernization and building market economy.
Today nobody tries to remember numerous boasting speeches of our leaders, who declared that “Kazakhstan was the first in the CIS which could reform the banking system (financial, pension, state). Result of this reform is evident – all the country, all legal entities and individuals, with the exception of those close to the president, became debtors. We’ll see how they are going to pay out their debts.
Today all immovable property of Kazakhstan, pledged by banks, cost about 40 billion USD. This is not a big sum at world scale. In fact the economy of Kazakhstan can be bought for $50 billion. In fact the only winners in this situation are investors, who are ready to make long-term investments. Further drop of prices at Almaty Stock exchange can seriously aggravate economic crisis. And the “economic 11 September”, which was caused by the refusal of the US Congress to allocate $700 billion, may not only bring to bankruptcy of Kazakh banks and their acquisition by foreigners, what is happening already, but also to sovereign default of RK as it was in Russia in 1998.
One of pressing issues facing the actors of the immovable property market: when are we going to see the price touching the bottom and the price decline being replaced by its growth, which will give some impetus to the sector?
The Chairman of the Commodity Producers Association of Almaty S.Turzhanov says, that “the situation in Almaty and Astana is being thoroughly studied by representatives of Middle East, Sought-East Asia and Russia. They are looking for something to purchase. And if they used to ask in the past for the permission to do business at 10%, now, being aware of the lack of money and that foreigners will not give the money just for the hell of it, they are now hinting at 25%, and 40 to 50% at average. His opinion is shared by vice-president of Kazakh Federation of Immovable Property, deputy chairman of the Board of Kazakh Association of Evaluators A.Kalinin.
It was already in autumn this year, when analytics, in particular the representatives of Scot Holland, said that now, when the soup bulb has blown away, the market became attractive for foreign actors. Although it’s true that the arrival of foreign developers in the light of new tendencies is considered otherwise than it was 5-7 years ago. The resources which they will earn from buy/sell transactions, will go out of Kazakhstan without being reinvested in the economy of the country.
The natural resources are owned or “managed” by foreign shareholders of the companies, which became 2-fold cheaper in inner and foreign markets. Thus, only the third force remains – the foreign investors who will purchase al low prices the physical and financial infrastructure of the country which remains after the crisis.
In this situation the population which became poor and newly-born home companies will have the right of slaves in their own country. The only result will be a legally documented and fully legalized voluntary economic slavery of Kazakhstan. Was this the ultimate aim of N.Nazarbaev when he declared the Independence of the country? Actually, today RK is “smoothly entering” the mode of political and financial and economic management by West. The question is how many months will it take Kazakhstan to turn into Central Asian Rwanda!?
Posted November 9th, 2008 by borboru
