Four Years of 10% Economic Growth and the Central Asian “Leader” Got into a Debtor's Prison for a Quarter of a Century.
Economic analysis is not empiric knowledge anymore in the modern world and it turned into a part of public relations, became a subject of practical interest of both governments and research centers and ordinary people.
The most well-known and recognized independent economic researches and prognoses are prepared by specialized financial institutions, like the World Bank, the IMF as well as governmental agencies like the CIA, which publish annual reports about countries of the world. For example, the “CIA fact book”. There is another - third - category of the centers, like Economist Magazine’s Economist Intelligence Unit (EIU). This center regularly conducts studies on the status of economies, political systems and social indexes in more than 200 countries of the world.
Majority of international experts and analysts usually use basic indexes when evaluating status of economy or its specific areas in one or another state, which are included in these centers’ reports.
Below find the comparison table on economic indexes of particular countries, both Kazakhstan’s partners and those having social, economic or political systems similar to Kazakhstan’s. The data was taken from the above-mentioned sources.
Country Population GDP (US$)
(2007) GDP on purchasing-power parity (PPP)
(US$) PPP/GDP per capita Foreign Debt (FD)
(2007) Correlation of FD and GDP FD/GDP
in %
1. Kazakhstan 15.4m. 103.8b. 144.8678b. $9.407 103.617b. 1.001 100
2. Russia 142.3m. 1.236.3b. 1.915.748.9
trillion $13.463 360.761b. 3.427 29.18
3. Ukraine 46.2m. 141.1b. 395.795b. $8.567 46.694b. 3.021 33.09
4. Belarus 9.7m. 40.5b. 89,996b. $9.278 - - -
5. Uzbekistan 26.5m. 17.996b. 88.197b. $2.498 5.409b. 3.327 30.05
6. Venezuela 27.3m. 222.6b. 225.962b. $8.277 44.598b. 4.991 20.03
7. Egypt 76m. 127.6b. 399.0228b. $5.253 33.048b. 3.861 25.89
8. Malaysia 27.2m. 187.684b. 329.446b. $12.112 51.286b. 3.659 27.32
9. Saudi
Arabia 24.3m. 374.7b. 365.933b. $15.059 55.495b. 6.751 14.81
10. Pakistan 164.2m. 142.9b. 452.371b. $2.755 40.582b. 3.521 28.39
As the table shows, there is no any prejudgment in country’s selection. Among countries referred, in principle, countries with similar economic basis (former Soviet states), with similar regional identity (Central Asia), hydrocarbon-oriented export (Venezuela and others), or so-called group of Muslim/Asian states (Malaysia, Egypt). Moreover, most of the countries in the table have export-oriented economies. The main emphasize, thus, is given to Kazakhstan’s comparison with countries with close (economic, landscape-climatic, geographical or socio-political) characteristics. Kyrgyzstan, Tajikistan or even Turkmenistan were not included in the table, neither Baltic states nor developed countries of the West. One might say, in order “to compare orange with orange, not with potatoes”.
Which is most alarming indicator in the table? Yes, that’s right - the last column, in which the index of parity between foreign debt and domestic gross product is referred to, i.e. correlation of what a country produced to amount of its debt.
In our case, Saudi Arabia has the best figures - produced 6.5 times more goods than it owes its creditors. Besides Kazakhstan, Ukraine has the “worst” index among all countries indicated. But it could pay its foreign debts in three months. Kazakhstan, in its turn, has to pay back creditors all what it had produced during the year. Of course, nobody in this world is going to request “payment” immediately - money is borrowed to make more profits from debtors. So, according to the most conservative estimate of the EIU, Kazakhstan will pay about US$23-25 billion foreign credits’ debt service and payment of interest in close of year. But this is not going to be like this every year. It is going to be even much worse. To pay debts in 2008, Kazakhstan will have to allocate US$29.5-30 billion, and in 2009 - US$32-35 billion. Roughly speaking, the economic indicators of Kazakhstan, at least, three times worse than of majority of the countries included in the table, and in comparison to Venezuela and Saudi Arabia - even worse.
There were a number of negative comments from my readers reacting to some of my articles, stating that F.Asimov is “illiterate in economics” and “he does not like Kazakhstan”, or “Kazakhstan’s loans are borrowed by private banks from foreign banks, and we are not gonna pay it”… My fellow countrymen – wake up! I am not an economist by profession, indeed, I’m a system analyst with economic background. And what I have been trying to inform Kazakhstanis last years is a simple thought: we are all involved in a huge fraud. A narrow group of Kazakhstan’s powerful elites under the direct patronage of N.Nazarbayev have devastated our country twice – at privatization and reselling of resources, thus, robbing ordinary people, who, as a matter of fact, are co-owners of national resources (hydrocarbons, minerals, lands, etc.). And now an attempt is being made right in front of us to undertake one of the scaled frauds: not only our children, but also the next generation, our grandchildren and great children are being robbed. Unfortunately, it is not good to be a foreteller in own homeland, especially because all worst prognoses come true.
Let us recall the recent past. In 2005, Kazakhstan’s aggregate foreign debt of was US$41.5 billion or 74% of GDP (US$56.35 billion). In the end of 2006 the total amount of the foreign debt rose to 95% of GDP and reached US$74.1 billion. And in the end of 2007 even foreign analysts sounded the alarm because of disastrous worsening of the Kazakh economy – the debt of US$103.617 billion became equal to GDP (US$103.8 billion)! It means that now each Kazakh owes his country’s creditors US$6.728 annually. And if we take into account the average per capita index of 9.407, figured out by purchasing-power parity (PPP), there is no money left, because we pay in actual prices, not in accordance with PPP. So, accordingly to real figures, an average statistical Kazakh citizen earns US$6.740 (dividing US$103.8 billion by 15.4 million people). As we can see, the money, you, your family and neighbors earn, is directed to pay off principal debt’s interests. And there are only three sources of money, as it were, we “have”: from selling our natural resources, foreign banks’ credits, and additional emissions of the National Bank, which would with the greatest pleasure turn the money printing-press into a “the field of miracles” from the novel “The Adventures of Pinocchio”.
The Kazakhstan’s tragedy is aggravated by the apathy, crept over the youth and middle-age people, i.e. the most active citizens of Kazakhstan, who are today the basis of economic activity. There is “their own” point of view regarding the ongoing economic crisis in the country – they say: “all this “talking-shop” about national economy, GDP (per capita), inflation is a nonsense. We have been thoroughly zombied by these definitions, being forced to believe that these categories determine the core of national economy management”. As a matter of fact, the real reins of control over the national economy not in our hands anyway. The West invests into us, it won’t harm; it is better to become the 51st state of the United States (a member of European Union, a Chinese province, etc.), but not to solve our own problems and bear responsibility”.
Unfortunately, many experts of large state governance institutions, particular banks and corporations share this point of view. In principle, their opinions accordant to the position mentioned above, though more academic. “Level of replacement of social benefits with additional payments, injection of foreign currency (which is not so “hard” anymore), level of debts to foreign creditors. So called “market relations”, crediting and credit multiplier are a subsequent phenomena of the policy conducted by the West in order to make a fool of “economic mass” of indigenous countries, like our economists. The parity of money/services and money supply… prices adjustment was violated and we can do nothing about that in any case; our job is to extract as much oil as possible, it is enough for 2-3 years and then, perhaps, prices will grow…» But, this is only a rat race and nothing else. Kashagan is another example that no oil prices growth could take us out of debtor's prison; all that Nazarbayev presented is not going to be given back to us. In 2007 – the year of extremely high oil prices – the country had 5% deficit on current transfers in balance of payments! What would happen if the prices shrink to 50-60 dollars for a barrel?
It seemed 2-3 years ago that there would be always a serene over Kazakhstan and this would last long time, if not forever. Oil resources seemed to be huge as there never is any financial or economic collapse. But new problems with Kashagan emerged, a new wave of less scaled process of “resaling” of key sectors of industry and raw material sectors happened, but our debt just kept increasing and still doing with catastrophic speed. The “Sneeze” of the Western financial system – the US mortgage crisis, affecting all financial centers of the world has become a big spot on reputation of Kazakhstan, as a “leader” of economic reforms. It was a real tsunami for the financial system and economy in Kazakhstan.
It turned out that notorious vaunted Kazakh banking system is a badly covered and “reeking” Kazakh political elite’s deal with foreign businessmen, like a “pyramid” of Leonid Golubkov’s “MMM” in its worst version, aimed at trading the “presence and future” of the country called “the Republic of Kazakhstan”. With loud fanfares about “the best investment climate and advanced banking system in the CIS” the West extracts added costs (natural revenue) from Kazakhstan directly or through loans to our second-level banks. Therefore, exploitation of national economy continues without economic situation’s visible improvement. And this happens despite the government keeps harping on market principles, implementation of overseas’ “experts’” wishes and dying to enter a group of fifty “best” states.
Once I was interested in a single question: whether farther of all Kazakhs is so stupid not to realize the ongoing developments? This question is not of current importance for already three years – it is understandable that any deal is mot possible without involvement of two sides. In our case – it is N.Nazarbayev or somebody else, who represents him; and from the other side – foreign governments, Transnational Corporations or they all together. Ordinary people are the loser, as usual. We are led by our nose again. Neither 2010 OSCE Presidency and “record-breaking” GDP, nor the high level of crediting have led us to improvement of quality of life and economic prosperity. Moreover, this situation is not going to provide us with realistic mechanisms of surviving in the period of forthcoming comprehensive crisis. What will happen in 5-7 years, when there is no current leadership and “black gold” prices start to shrink?
In scientific sphere of Kazakhstan the total profanation prevails, verging upon psychosis. Roundtables and workshops devoted to “serious” discussion of the theme “Kazakhs, as ancestors of human civilization” are held. Voices are heard about “Kazakhs as magnificent brains of the planet, and sciences and arts originated from them!” Stop it, people! Collect yourselves! This is an old trick – to make a fool of people with the idea of their superiority and to steal all money on the quiet. In practice, it is simple – particular clans seizure control over resources and profits, and other population stay in poverty and make both ends meet, being happy that “blue blood” flows their veins.
It is possible to create developed economic state without vast territories and natural resources. And, on the contrary, to possess vast territories, with large natural resources, but at the same time have hungry, destitute and illiterate population, which would have no access to regular medicine service and education. Unfortunately, last years’ practice proved that the people themselves, more exactly, their mentality - inclination to clan-type society, not-stopping interethnic tension, that is, in principle, one of kinds of clan relations, are partly guilty in economic backwardness of Kazakhstan. There are other negative trends in the society, still enhancing in the period of the Nazarbayev’s ruling. As a result, instead of finding the optimal ways of development and following them, there is a search for the guilty and it goes back to the antiquity: the older the better. And this gibberish is sponsored at the highest level. But have a look at us – we are poor, wild, embittered, hungry and abuse one another.
I receive a lot of letters from the people, who read my articles. Not always able to answer them. Many thank for firm and objective assessment of the developments in the country. Many ask: “Where is a solution?” I think, I won’t be the first to say that, most likely, my recommendations hardly can change anything. Moreover, time’s gone and most processes are irreversible.
It is necessary to abandon the permanent rush for “excellent indicators”, “leadership”, “entrance”, etc. Stop be deceived! Why we need artificial and ungrounded figures? Kazakhstan needs the increase in quality. Let the GDP’s growth be even negative, but its structure should be different – neither hydrocarbon nor export-oriented! Stop talking about fictitious squire meters of accommodation – we need to reduce prices! What we need is to plan and subsequently realize specific physical capabilities and infrastructure projects (roads, schools, universities, hospitals, personnel, energy-saving technologies and researches, increased production efficiency, agriculture and cattle breeding).
To realize all these, one must address the principle problem – the power! Nazarbayev and his circle do not want and are not able to approve reforms – they sold everything to the West long ago and continue their policy - disastrous for the country - towards oil resources and the last “ring-buoy” – uranium. Obviously, the West has Kazakhbashi and his circle by their “intimate organs” (and banking accounts)! For a long time Nazarbayev is not an independent actor when it comes to the most vital issues for the country; he lost everything in exchange for the West’s “glass beads”: OSCE, “30 corporative leaders”, “50 competitive states”, “leader” in investments, banks, etc.
Make judgments yourselves, gentlemen...
Fuad Asimov
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