In the pre-Soviet era most Kazakhs led a nomadic or semi-nomadic life Their primary occupation was rasing animals. The primary economic concern was the division of pastures.

Beginning in the nineteenth century, Kazakhstan suffered from waves of large-scale implantation of Russians, including the agricultural settlements of Tsar Nicholas II’s Minister of Interior Pyotr Stolypin. The tsars viewed the Kazakh steppe as potential farm land. All land was declared to property of the Russian state and Russian and Ukrainian peasants, Tatars and Cossacks were invited to cultivate the land, primarily in northern Kazakhstan. Land-hungry peasants arrived en mass after serfdom was abolished in Russia and the Ukraine in 1861. One million settlers arrived in the 1890s.

Under Russian rule, agricultural was developed, trade increased and the first industries were established. Among the Kazakhs contact with the Russians kindled Russification and a sense of nationalism and ethnic identity. The Russians took their best agricultural land but also taught them. A Europeanized educated class and a working class developed, both of which had not existed before. At same time thousands died in revolts and famines.

Marxist View of Traditional Kazakh Economic Life

According to the Marxist view of the Chinese government: “The Kazakhs have accumulated much experience in stock raising over a long period of history. However, under the feudal system, their production level was very low and, being conservative in technical matters, the nomads made little effort to improve their expertise and depended entirely on the natural growth of the stock. As they had no means to resist natural disasters, great numbers of animals died in snowstorms in winter and spring. Disease also took its toll of the herds. [Source: *|*]

“Kazakh handicrafts were basically a family undertaking. Blacksmiths and carpenters were not specialized, they were herdsmen with expertise in these fields. The making of buttered tea, milk products and felt, tanning animal skins and tailoring furs were all done by women. Though Kazakh animal husbandry provided wool, hides and skins and livestock, the commodity economy was not developed. In the pastures barter trade was in vogue, with sheep as the standard of the price. The herdsmen exchanged their stock for food grain, tea, cloth, daily utensils and handicrafts. In remote Altay, they bartered a sheep skin for only 100 to 150 grams of tea. *|*

“A minority of rich Kazakhs in the early 20th century owned thousands of head of cattle, sheep, horses and camels, while the majority of herdsmen kept very little stock and that was for subsistence. Though the pastures were owned by the whole tribe, they were in fact the property of clan chieftains and big herd-owners, the winter pasturelands in particular. As commerce developed in Xinjiang after the 19th century, Kazakh animal husbandry economy grew closer ties with markets. The merchants, the privileged Russian merchants in particular, plundered the herdsmen through unfair exchange of commodities. Usury came into being, too. Such ruthless exploitation made the head of animals drop drastically and Kazakh stock breeding virtually struggled on the brink of bankruptcy on the eve of liberation. *|*

“The Kazakhs began farming in the late Qing Dynasty (1644-1911). The main farm implements include katuman (a kind of mattock), sickles, ploughs and grinding stones. In some localities, seeds were sown from horseback before ploughing. Flood irrigation was used, weeding was never done and fertilizers were not applied. As they were short of production means, the poor Kazakhs who switched to farming had to be hired hands. In the Kazakh rural and semi-rural areas, the herd-owners and herd-owner-landlords monopolized the farmland, irrigation facilities, draught animals and farm implements. *|*

“Of all the feudal practices, "partnership farming" was the most common. "Partnership farming" was a form that incorporated labour rent and rent in kind. The landlords or rich peasants offered land, seeds and farm implements, and the tenants sold their labor, sometimes bringing with them some of the seeds and farm implements. The harvest was divided up 50 to 50, or two-thirds for the landlords. Exploitation through hiring of labor was also a very common practice. The pay was either in cash or in kind, all very low. Water and farm implements were leased by the landlords, who made use of feudal privileges to force peasants to toil for them without pay or exercised political persecution, sometimes even to the extent of enslaving the peasants, for the purpose. *|*

Soviet-Era Economy in Kazakhstan

Kazakhstan was more heavily industrialized by the Soviets than the other Central Asian nations. It was a center of space exploration and the testing of nuclear, biological and chemical weapons, each employed lots of people and had huge facilities.

During the Soviet-era, Kazakhstan was a cog in the centrally-planned Soviet economy. Its economic sectors—such as cotton production— were very specialized. Kazakhstan was dependent on the rest of the Soviet Union for markets, goods and supplies. Industry and mining didn't really get cranked up until after World War II. Much of the development of the oil industry has taken place since the break up of the Soviet Union

The Soviet Union developed specific sectors of industry such as chemicals, metals, and military equipment. The industrial infrastructure was geared to feeding materials into the Soviet economy. The emphasis of the national economy was on attaining and processing raw materials, while the daily needs of ordinary people were ignored. Shortages of consumer goods and food products were a problem.

Collectivization and Mass Starvation in the Kazakh Republic

From 1929 to 1934, during the period when Soviet leader Joseph V. Stalin was trying to collectivize agriculture, Kazakhstan endured repeated famines because peasants had slaughtered their livestock in protest against Soviet agricultural policy. In that period, at least 1.5 million Kazakhs and 80 percent of the republic's livestock died. Thousands more Kazakhs tried to escape to China, although most starved in the attempt. [Source: Library of Congress, March 1996 *]

Under Stalin’s policy of de-nomadization and collectivization, nomadic Kazakhs and Kyrgyz were forced to settle down and turn their animals over to the state. The Kazakhs resisted. Many people chose to slaughter their animals rather than give them to the state. In some cases guerrillas fighting against the Communists killed the animals.

The populations of entire villages perished—hundreds of thousands of families. Many of those that survived left everything behind, their homes, their animals, and fled to Siberia and elsewhere in Central Asia and the Soviet Union. An estimated 1 million people made their way to China, Mongolia, Afghanistan and other places.

Between 1929 and 1932, it is estimated 1.75 million to 2.5 million people died (including 40 to 50 percent of Kazakhs in Kazakhstan) of malnutrition and starvation as a result of the loss of animals. President Nazarbaev told the Washington Post, “It was terrible. My father saw with his own eyes and told me...You’d walk along a path and see corpses everywhere.” Millions of Kazakhs fled to China and Afghanistan to avoid starvation.

World War II and Industrial Development in the Kazakh Republic

Within the centrally controlled structure of the Soviet system, Kazakhstan played a vital industrial and agricultural role; the vast coal deposits discovered in Kazakhstani territory in the twentieth century promised to replace the depleted fuel reserves in the European territories of the union. The vast distances between the European industrial centers and coal fields in Kazakhstan presented a formidable problem that was only partially solved by Soviet efforts to industrialize Central Asia. [Source: Library of Congress, March 1996 *]

During the 1930s, industrialization began in Kazakhstan. During War II, factories were moved to Kazakhstan to get them out harms way. Industrialization continued after war. Large numbers of Russians are other Slavs moved to Kazakhstan to work in the factories and mines. These endeavors left a mixed legacy: a population that includes nearly as many Russians as Kazakhs; the presence of a dominating class of Russian technocrats, who are necessary to economic progress but ethnically unassimilated; and a well-developed energy industry, based mainly on coal and oil, whose efficiency is inhibited by major infrastructural deficiencies.

Kazakhstan played a critical role in World War II by providing coal, oil and strategic metals for the war effort and supplied the armed forces with food. Around 1.2 million citizens of the Kazakh Republic were drafted to fight in World War II. Of these 96,638 received medals.

Virgin Lands Campaign

In the 1950s and 60s, large numbers Russians arrived in Central Asia, particularly Kazakhstan, as part of the Virgin Lands campaign , whose aim was to boost the Soviet Union's grain supply by bringing vast tracts of Central Asia under cultivation. The 1950s and 60s also ushered in the intensive development of the Syr-Darya and Amu-Darya rivers — mostly in Uzbekistan — for irrigation for cotton, which caused the demise of the Aral Sea. See the Aral Sea.

The Virgin Lands program was a largely unsuccessful program to convert the grazing land in the steppe to agricultural land for growing wheat. The aim of campaign was to boost Soviet grain production to a level above that of the United State and provide the Soviet Union with a safety net in case the grain crop in Ukraine failed.

Under dramatic Virgin Lands campaign in the mid-1950s, Khrushchev opened vast tracts of land to farming in the northern part of the Kazak Republic and neighboring areas of the Russian Republic. These new farmlands turned out to be susceptible to droughts, but in some years they produced excellent harvests. Later innovations by Khrushchev, however, proved counterproductive. His plans for growing corn and increasing meat and dairy production failed miserably, and his reorganization of collective farms into larger units produced confusion in the countryside. Future Soviet leader Leonid Brezhnev began his political career in Dnipropetrovsk in eastern Ukraine. He made a name for himself by making the Virgin Land campaign look better on paper than it really was.

In the 1950s, some 640,000 migrant workers arrived in Kazakhstan, 1.8 million hectares of steppe—60 percent of Kazakhstan’s newly opened land—was plowed and hundreds of collective farms were established. The program helped Kazakhstan produce 20 percent of the Soviet Union’s grain and helped make Kazakhstan the third largest grain producer in the Soviet Union behind Russia and Ukraine. In 1956, Kazakhstan produces 16.38 million kilograms of bread, more than the 11 preceding years combined.

See History

Post-Soviet Economy in Kazakhstan

Independence in Kazakhstan was supposed to unleash economic reforms, privatization and prosperity. Since the country was rich in resources and had a relatively small population everyone was supposed to prosper. That is not what happened. Instead economic reforms were slow in taking place or didn’t take place at all and primarily the well connected have got rich while the general population, initially anyway, got poorer. A number of measures were taken to create a market economy. Joint-stock companies, cooperative works and the privatization of state businesses were all authorized. Land was given to farmers , with the right to unlimited use and inheritance. Prices were freed on a number of farm and industrial products, except for those deemed necessities.

Average growth between 1990 and 1998 was 1.9 percent. In 1994 the estimated growth rate -25.4 percent. In the early 1990s, growth was hindered by Soviet-era specialization and centralization, and slow privatization. Because Kazakhstan’s economy was closely linked to Russia’s in the centrally planned system of the Soviet Union, the breakup of that union in 1991 caused a severe economic downturn in the years that followed. In the 1990s, the contribution of industry to the gross domestic product (GDP) fell from 31 percent to 21 percent, and GDP fell by 36 percent between 1990 and 1995. By 2002 new oil extraction operations restored the GDP share of industry to about 30 percent, and overall economic indicators rose substantially. The government engaged in widespread privatization, although many profitable enterprises went to members of the government-connected elite. [Source: Library of Congress, December, 2006 **]

Although Kazakhstan had the potential to be a wealthy nation. In the years after independence it suffered consistent and precipitous economic decline. Reporting problems and incompatibility of data made precise measurement of the republic's economic shrinkage difficult, but it was generally accepted that, by the mid-1990s, GDP had dropped to about half of what it was in 1990. Despite the presence of rich deposits of natural resources, the republic's industrial sector was developed in the Soviet period only in specific areas such as metal processing, chemicals, textiles, and food processing. The semiarid condition of much of Kazakhstan's territory does not preclude the export of wheat, meat, and some vegetables. [Source: Library of Congress, March 1996]

Problems and Reforms and Kazakhstan’s Post-Soviet Economy

The economy declined in the years after independence. Nazarbayev and other leaders had no businesses sense or grasp of market economic fundamentals. Runaway inflation, collapse of industry, disappearance of markets, inadequate distribution and storage, and lack of capital for modernization were among the problems that occurred. When the new currency — the tenge — was introduced in 1993 it lost much of its value in its first couple years of existence. Between 1990 and 1995, GDP fell by 50 percent and per capita incomes declined. In the period between 1995 and 1997 a number of unsuccessful management contacts were cancelled.

As was true with oligarchs in Russia, a handful of businessmen made a fortune selling commodities such as oil, zinc and copper obtained cheaply at government-controlled prices and selling them on the international market. Some businessmen also obtained large stakes in most potentially profitable former Soviet state-woned enterprises.

Economic reforms included liberalizing capital controls and prices and removing export restrictions. The Central Bank was made fully independent in 1994. New legislation established helped establish a sound financial sector. State-owned companies were privatized. Public resource management was overhauled. The civil service was streamlined.

The tenge was devalued in 1999. A National Fund was setup to manage extra oil income based on the Norwegian model. An effort was made to turn Almaty into a regional financial hub. Kazakhstan bent over backwards to attract foreign investors. Reforms made by the government to attract investors included making contract irrevocable, bringing trade laws in line with those demanded of the WTO, offering incentives and reducing regulations. Especially in the early days, Kazakhstan attarcted risk takers who were willing to take a big chance to get on the bottom floor and make large profits if everything worked out.

Economic Developments in Kazakhstan in the 1990s

Until 1990, when the whole central planning system collapsed, Kazakhstan was part of the Soviet command economy. Even at the time of the 1991 coup that led to independence, 43 percent of the republic's industrial capacity was under Moscow's direct control, 48 percent was under joint republic and union control, and only 8 percent was strictly under republic control. [Source: Library of Congress, March 1996 *]

Although economic production declined dramatically in the early 1990s, some indicators showed a slower rate of decline by early 1995. In 1994 GDP declined 25.4 percent compared with 1993, including drops of 28.5 percent in industry and 21.2 percent in agriculture. In January and February 1995, additional GDP declines of 18.8 percent and 15.8 percent occurred (against the same months in 1994); however, March 1995 showed an increase of 4 percent (against 1994), fueled mainly by an increase in industrial production. Agricultural production, however, continued to drop in early 1995; 1994 first-quarter production was 79 percent of the same period in 1993, and the first quarter of 1995 almost duplicated that decline. *

Energy industries, which also played a large part in the Soviet economy, suffered from substantial reductions in Russia's post-Soviet demand, as was the case with other industries that remained dependent on Russian markets. Government goals for 1996 included reducing inflation to 28 percent (the 1995 rate was 60 percent), reducing the budget deficit to about 3.3 percent of the gross domestic product (GDP) ; and limiting devaluation of the tenge to a 10 percent decline against the dollar. Substantial aid was provided by the International Monetary Fund (IMF). Full membership in the Islamic Development Bank, achieved in mid-1996, brought Kazakhstan additional aid for trade operations, personnel training, and infrastructure improvements. *

Privatization of the largest state enterprises did not begin as scheduled in late 1995. Until that time, these enterprises were run as self-managing joint-stock companies in which the government of Kazakhstan was the largest stockholder. This interim stage, which was considered beneficial, required preparation of profit-and-loss statements in anticipation of full commercial operation sometime in the future. *

Inflation, Wages, and Currency in Kazakhstan in the 1990s

Kazakhstan experienced hyperinflation after independence in the early 1990s. In 1993 and 1994 the inflation rate was 1,880 percent. After that inflation was brought under better control with tightened loan policy. In 1995 inflation was estimated to be around 190 percent. *

The freeing of government price controls, followed by introduction of the tenge as Kazakhstan's independent currency unit, set off hyperinflation, which badly eroded real wages, pensions, and savings. Introduced in November 1993 at approximately five to the United States dollar, the tenge fell to about fifty-six per dollar by late November 1994. Subsequently, the currency remained relatively stable, falling only to sixty-four per US$1 at the beginning of 1996. The tenge's stabilization was due in part to the government's determination to control the state budget, in part to the availability of an IMF stabilization fund, and in part to the backing of government reserves of US$1.02 billion in hard currency and gold. By 1995 inflation had decreased substantially to 190 percent, still way above the prime minister's target figure of 40 percent. [Source: Library of Congress, March 1996 *]

Inflation strongly affected wages and family budgets. In July 1994, for example, nominal wages in the republic increased by an average of twenty times, but the costs of food, services, and goods increased by more than thirty-two times in the same month. As a result of such conditions, real wages in the republic declined by about one-third in the first half of 1994. The overall average monthly wage in the republic in February 1995 was 3,650 tenge, or about US$61 at the exchange rate of the time. In mid-1995, the overall average wage was 4,613 tenge, but the disparity between industrial and agricultural wages was growing steadily: the industrial average was 7,452 tenge, the agricultural average 2,309 tenge. Wages in service occupations such as education and health are quite low, and government employees in those occupations often are not paid on time. Chronic nonpayment of wages has caused strikes in industrial enterprises and coal mines. *

Many enterprises made wage payments in merchandise rather than money; this practice led to a large volume of merchandise resale at bazaars, either by workers or by private wholesalers. The actual level of consumer welfare was unknown because prices and the availability of goods changed rapidly. Because Kazakhstan lacked a strong consumer-goods industry, imports began to replace CIS products, notably clothing, housewares, and electronics. In 1995 wage increases continued to lag behind the rising cost of living, causing spending power to decline by 2 to 3 percent per month. *

The greatest losses in real wages were suffered in industrial (and mostly Russian) northern Kazakhstan. One consequence of declining purchasing power was that families devoted as much as 10 percent of their budgets to the purchase of foreign currency, presumably as a hedge against inflation. In 1995 the purchase of food became the largest family expenditure, exceeding 50 percent of average budgets. Even so, purchases of all categories of foodstuffs declined in the republic, while purchases of nonfoodstuffs dropped 40 percent or more. *

Privatization in Kazakhstan in the 1990s

Some 17,000 enterprises were sold off during Kazakhstan’s privatization effort. Among the industries that were privatized were television, electricity, steel, oil and gas. The privatization of land and agriculture has been slow. As of 2003, many powerful national companies— Kazmunagaiz, KazTemirZhly and Kazakhtelecom—were still state-owned and under government control.

Kazakhstan's ambitious three-stage privatization program began in 1992 and reached the end of its second stage in 1995. The Kazakhstan State Property Committee had responsibility for all three phases. In the first stage, housing and small enterprises employing fewer than 200 people were privatized. Most conversions of small enterprises were accomplished by auction to groups of employees, often under the leadership of the incumbent manager. Housing, which by 1995 was nearly all in private ownership, was privatized either by giving the residence outright to its current occupant or by payment of government-issued vouchers. The second stage entailed the privatization of almost everything except the republic's mineral wealth and industrial plants employing more than 5,000 people (such plants accounted for most of Kazakhstan's military-related industry). [Source: Library of Congress, March 1996 *]

Privatization of the largest state enterprises was the principal goal of stage three, which did not begin as scheduled in late 1995. Meanwhile, 3,500 medium-sized firms, including 70 percent of state-owned industries, were offered for sale in a mass privatization program beginning in April 1994. These firms could be purchased with government-licensed investment funds.

Under Kazakhstan's privatization system, vouchers were issued to individual citizens. Vouchers then could be deposited in privatization investment funds, which in turn could buy up to 20 percent of large companies being privatized. The initial voucher issue reached an estimated 95 percent of citizens. After four auctions, in mid-1994 about 85 percent of forty-five small-to-medium-sized enterprises, mainly in light industry, machinery manufacturing, and fuel distribution, had been sold. *

By the end of 1994, about 60 percent of enterprises were owned by individuals or cooperatives. (In 1990 the figure already had reached 40 percent, however.) The success of the privatization of small enterprises, together with the formation of new private enterprises, meant that in 1994 some 61 percent of retail trade occurred in the private sector, an increase of 17 percent over the 1993 figure. Large-enterprise privatization was less successful, however. Nominally privatized enterprises often maintain close contact with government officials who permit firms to maintain outdated production practices and supply relationships, and even to keep unpaid workers on their rolls.

Distribution of vouchers among the 170 government-licensed investment was problematic. In 1994 and early 1995, twenty companies collected nearly 60 percent of the vouchers, while another nineteen funds accumulated more than 20 percent; half the funds received a total of only 4 percent of the vouchers. One fund, Butia-Kapital, received nearly 10 percent of the vouchers, the largest single holding. This fund was widely rumored to be controlled by a nephew of President Nazarbayev. Although proceeds from privatization amounted to an income of 242 million tenge for the state treasury in the first quarter of 1995, complaints persisted that objects of privatization were priced too low and that favored funds received "sweetheart" deals.

Privatization of land was handled differently than that of industry because the concept of individual land ownership did not exist in Kazakhstan. Individuals and corporations could purchase only the right to use the land, and that right could be resold. Initial sale prices of state land was determined by the State Committee on Land Relations and Tenure. Government efforts to legalize a private land market were stymied by both Russian and Kazakh groups, each fearing that the other might gain control of the country's agriculture. By June 1995, some form of ownership or management change had occurred in 1,490 state farms, about three-quarters of the total remaining in operation. Many state farms, or portions of them, were converted into joint-stock companies that retained the same group of occupants and state-dominated arrangements for supply and marketing as under the previous nomenclature. The creation of small, individually managed farms was uncommon because capital, inputs, equipment, and credit were in very short supply for individuals attempting to start agricultural enterprises.

By 2003, 80 percent of the economic was private and Kazakhstan was labeled by the U.S. State department as having a stable market economy. Kazakhstan was given an investment-grade credit rating by Moody something that even Russia had not been able to achieve. A Moody executive\ said, “Kazakhstan is well-placed for economic growth, due to foreign investment and increased pipeline export capacity.

Economy of Kazakhstan Improves

Economic reforms slowly bore fruit in Kazakhstan. In the mid 1990s the economy shrunk less considerably than in other Soviet and Central Asian countries. In 1997 the GDP was 45 percent of the 1990 level, compared to 85 percent in Uzbekistan and 62 percent in Russia. Kazakhstan managed to survive the Asian financial crisis in 1997-1998, the Russian financial crisis of 1998 and managed to continue attracting investors even when the price of oil dropped to $14 a barrel.

Inflation was reigned in. It slowed from 17.8 percent in 1999 to 9.8 percent in 2000 to 6.9 percent in 2001. By 2003, Kazakhstan had built up reserves of $3 billion, about 10 percent of GNP.

The reforms were largely in place when the price of oil began to rise. Kazakhstan enjoyed the windfall that high oil prices brought and didn’t waste too much money from this windfall. One problem that accompanied the high oil prices was inflation. The National Bank tried to keep inflation within a 5 percent to 7 percent range by regulating deposits rates, refinancing loans, intervening on the foreign exchange market and following advise from the IMF.

Kazakhstan’s Economy Takes Off

By the early 2000s, spurred by the development of the energy sector and high oil prices, the Kazakhstan economy took off. More than $25 billion in foreign investment poured in. Gold and foreign reserves were in excess of $8 billion. Kazakhstan paid off its IMG debts eight years early. The IMF closed its Kazakhstan offices in August 2003.

The Kazakhstan economy grew by 75 percent between 1998 and 2005 and per capita income grew to $2,250, about five times higher than in neighboring Uzbekistan. Growth was over 10 percent in 2000, 2001 and 2002, and 9.3 in 2003, 9.4 percent in 2004 and over 9 percent in 2005, 2006 and 2007. Oil expansion accounted for most of the growth.

The economy was doing so well Kazakhstan was called the “tiger of the steppe”—a label meant to group it with Asian tigers such as South Korea, Taiwan and Singapore. The IMF praised Kazakhstan’s “economic progress,” saying it had “seen rapid growth and increases in living standards, thanks to the country’s oil wealth, structural reforms and prudent macroeconomic management. Kazakhstan is now well advanced in its transition to a market economy.”

Ordinary people began to feel that the sacrifices they made had been worth it and they were starting to enjoy the fruits of those sacrifices. Pensions and salaries and savings in bank deposits was the highest among former Soviet republics. In his manifesto “Prosperity, Security and the Ever-Growing Welfare of all Kazakhstanis,” published in 2000, Kazakhstan President Nazarbayev described his vision for his country: “Our young state would grow up and reach its manhood and with it our children and grandchildren would also become grown-up people. Our children would become highly skilled workers, and farmers, engineers, bankers, men of arts, owners of shops, teachers and doctors” and “producers of high-tech commodities....all in demand on the world market because of low price and excellent quality.”

The situation, however was not worry free. Incomes were still low in the Kazakhstan countryside. There were worries that the economy might overheat, the real estate market might collapse, and the banks might give out loans too easily and accumulate bad loans. Prices in some cases rose so fast that things that were once affordable became out of reach for ordinary Kazakhstanis. This was particularly the case with housing and real estate. The resale value of housing in Almaty increased 329 percent. In some places the square meter price of choice pieces of land soared from $150 to $1,230 and even $3,000.

Global Financial Crisis of 2008-2009 and Kazakhstan

Before the Global Financial Crisis in 2008 and 2009, banks in Kazakhstan lent out too much money when oil prices were high and were caught short when oil prices fell and the global economic crisis occurred. Maria Golovnina of Reuters wrote: “Long the darling of emerging market investors, the land-locked ex-Soviet state is suffering badly, after years of unlimited access to cheap credit funded economic expansion. With oil prices now falling and investors fleeing high-risk markets, the pace of Kazakh economic growth has already halved to five percent this year from an average 10 percent since 2000. [Source: Maria Golovnina, Reuters, November 25, 2008 >>>]

“As the gloom seeps fast through society, the crisis is a worry to veteran leader, Nursultan Nazarbayev, who knows how much stability in a volatile region depends on economic fundamentals. So worried are senior figures about eroding confidence that a top official suggested that Nazarbayev stop using the very word "crisis" altogether -- a telling insight into the minds of those who run Central Asia's biggest economy. Adding political undertones, activists have held small but regular rallies against what they see as the injustices of Nazarbayev's rule -- a rare trend in a society where the state, as in Soviet times, brooks no dissent. >>>

As investors who had sought to ride the high-risk Kazakh wave panicked, the cost of insuring Kazakh debt against restructuring or default soared in the credit default swaps market to around 1,300 basis points: a rate of 1,000 basis points traditionally denotes distressed debt. This meant it cost $1.3 million a year for five years to insure $10 million of debt. Dealers were demanding upfront payments, a further sign of stress. That strain eased slightly after confidence-boosting measures by the government including a $21 billion aid package, an unprecedented injection given the size of Kazakhstan's $100 billion economy. >>>

"The fundamentals of Kazakhstan look very attractive at these sort of prices," said Jerome Booth, head of research at Ashmore Investment in London, which manages $32 billion in emerging market assets. But others say it may not be enough. "The external crisis has deepened and it seems that the authorities and banks have been slow to recognise this," said Ali Al-Eyd, an economist at Citigroup. "There seems to be a learning process that they are going through, insofar as external funding will remain challenging." Analysts say Kazakh growth may fall below even conservative forecasts of 4.5 percent amid sustained concerns about the quality of banks' assets.” >>>

Impact of 2008-2009 Global Financial Crisis or Ordinary Kazakhs

Maria Golovnina of Reuters wrote: From a lone shepherd in the great silence of the empty steppes to the champagne-sipping socialites of the big cities, no-one in Kazakhstan can escape a looming shadow. Life may already be tough enough for Danaibek Saidenov, who like generations of nomadic ancestors lives in austere, fog-filled pastures protecting his sheep from wolves. Now, with a global financial crisis, he faces an enemy far more pervasive than anything the steppes have seen. "Life's much harder now," said Saidenov, as he let the reins fall loosely on his horse's neck. "There is simply no money. When bankers have no money, that means we don't have it either." [Source: Maria Golovnina, Reuters, November 25, 2008 >>>]

“With demand for sheep products falling and shearing costs still high, Saidenov says he is struggling. He sighs and kicks his horse into a gallop as his flock streams down the hillside. In this remote corner of the world near Kazakhstan's border with China, Saidenov's concern shows the spread of damage from the world's worst financial crisis in 80 years. >>>

Few people seem to blame the government for their trouble, alhough Ainur Kurmanov, an opposition activist, said discontent is quietly rising. "People are tired of waiting for the government to do something about it," he said, a battered bag with a Che Guevara logo slung against his shoulder. But in an old village of mud-brick huts -- itself curiously called Kazakhstan -- people are still going about their daily tasks tending their flocks and passing on skills. "Everyone is talking about the crisis," said Yerbol, the 55-year-old head of a big family, his face brick-red from years spent in the steppe. "Of course life is tougher now. But when has it not been tough?" >>>

Impact of the 2008-2009 Global Financial Crisis on Kazakhstan’s Elite

Maria Golovnina of Reuters wrote: Just an hour's drive from the barren steppes where Saidenov grazes his sheep lies Kazakhstan's financial capital Almaty -- a city of bleak Soviet architecture glossed over by the flashy extravagance of Kazakhstan's new-found wealth. The sight of dozens of cranes, towering motionless over Almaty's hazy skyline, is testament to how the crisis has frozen the highly leveraged real estate industry. [Source: Maria Golovnina, Reuters, November 25, 2008 >>>]

“At a fashion show this month, the crisis was the talk of the day for celebrities, socialites and fashion gurus as they savoured champagne beneath lavish chandeliers. "In the pre-crisis days, girls would come over and buy five or more garments at a time, but now it's just two on average," lamented Sayat Dosybayev, a prominent Kazakh designer. "It's a global problem, so what can we do?" he added, his futuristic tinted spectacles and spiky hairstyle catching the light.

“Demand for luxury goods, foreign travel, fashion items, and cars -- all coveted status symbols across the ex-Soviet world -- is falling fast. Few statistics are available but one night-club owner complained he could now sell only one bottle of vintage Cristal champagne a night -- down from three before the crisis. Sales of Porsche and Mercedes cars have halved year-on-year so far this year. "People who have done well are just going to have to get used to buying fewer Louis Vuitton bags," said Doris Bradbury, a seasoned Kazakhstan-watcher at the American Chamber of Commerce. >>>

“Average wages fell 1.1 percent in Kazakhstan in the first nine months of the year, but in some sectors like tourism they shed as much as 25 percent. "Everyone feels the crisis," said Anatoly Fedoseyev, a young entrepreneur from the industrial city of Karaganda. "Before, I travelled a lot to places like France but now I can afford to travel only inside Kazakhstan." >>>

Impact of the Global Financial Crisis on Kazakhstan’s Housing Market

Irina Stupakova of the McClatchy-Tribune news service wrote: In the late 1990s and early 2000s, “both Astana and Almaty experienced large influxes of people looking to benefit from the better employment prospects there, which are largely the result of the country’s oil wealth. With housing in high demand, the construction industry took off and new buildings started shooting up. [Source: Irina Stupakova, McClatchy-Tribune news service, November, 2008 <^>]

“However, by the end of 2007, the crisis in the United States mortgage market was making itself felt in Kazakhstan. Local banks that had been underwriting the building boom found themselves over-exposed by extensive borrowing from abroad. There were also concerns about domestic loan quality — whether people who had taken out mortgages would be able to repay them. <^>

“Kazakh banks reacted by raising interest rates and cutting the amount of credit on offer, and this had an immediate impact in Almaty, Astana and other large cities, where some projects were scaled down and others suspended entirely pending an upturn.” As the construction boom slowed to a halt, anger over unbuilt homes and broken promises drove people to take to the streets in protest. <^>

Kazakh Construction Slump Sparks Protests

In October 2008, A series of protests over housing issues took place in Kazakhstan’s capital Astana and the commercial centre Almaty. Irina Stupakova of the McClatchy-Tribune news service wrote: “ The demonstrators represented various groups — former army officers with nowhere to live, people whose homes are to be demolished to make way for redevelopment, and others who have lost everything they invested in now bankrupt construction firms.” [Source: Irina Stupakova, McClatchy-Tribune news service, November, 2008 <^>]

The protests included one “by a group of people in Astana who paid over money to a construction firm that then went bankrupt; a demonstration in Almaty against a construction firm that stopped building a housing complex even though the project was being funded by government; and a street action by retired defence ministry staff who collected money to give to the ministry since it had failed to find the funds to pay for housing for them. <^>

“The biggest event was a rally on October 11 which brought together army reserve officers demanding to be housed, residents of areas scheduled for demolition, and people who had lost out in mortgage deals. Although their demands differed, they presented a united front in demanding firm government action against the state agencies, courts and businesses they blamed for their problems.”<^>

One “group represented at to October 11 rally were members of the emerging middle class who took out mortgages to invest in construction ventures, only to find that the firms went bust or that they were fictitious front companies. Igor Li, 39, from Almaty fell into the latter category and blames the government for allowing companies to operate fraudulently. “All these companies were legally registered and really existed for some time; they had tax inspections and audits. Why didn’t the authorities spot the fraudsters at the time, and why don’t they hold them accountable now?” he asked.

Gulmira Kurganbaeva, who heads the national government department in charge of overseeing Almaty’s finances, insisted that the authorities were addressing the concerns raised by demonstrators. “First, those construction firms that received state funding are going to resume building work. And there are plans to introduce a law protecting shareholder rights,” she said. Although she acknowledged that these were difficult times and government intervention was needed, she said people who invested in construction projects should have done more to safeguard their assets. “If the shareholders themselves had pushed for legislation to protect their rights three years ago, we wouldn’t have had the current situation,” she said.

Kazakhstan Economy in Recent Years


p><During 2014, Kazakhstan’s economy was hampered by Russia’s slowing economy, the weakening ruble, falling oil prices, and problems at its Kashagan oil field. Kazakhstan devalued its currency, the tenge, by 19 percent in February and in November the government announced a stimulus package to cope with the economic challenges. [Source: CIA World Factbook]

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, U.S. government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated April 2016

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