I. Macroeconomic stabilization in Kazakhstan

1.1.Anti-inflationary monetary policy

Monetary theory of inflation based on the fact that inflation is always and everywhere a monetary nature only. According to the classical equation of exchange, the rate of inflation (price increase) is directly proportional to the rate of growth of the money supply, the rate of increase in velocity and inversely proportional to the magnitude of the actual product. Known equation I. Fisher, linking the levels of prices and production with money supply:

PY = МV,

где P — price level;

Y — volume of production;

М — money supply;

V — velocity of money.

Knowing these variables, it is possible not only to explain the movement of inflation in the past, but also to predict its development in the future. The presence of this pattern in the rate of change of the actual product, served with money, does not change the nature of monetary inflation. The decline in the real product at a stable level of money supply leads to an increase in the rate of inflation, as opposed to the smaller volume of the product formerly money. The increase in the same amount of real product in the same volume of money supply promotes deflation - a decline in the price level. The main factor of inflation on monetary theory, is the rate of growth of the money supply.   The money supply is created by the National Bank. The process of its creation has two stages. The first stage - the primary issue when the National Bank increased its assets by providing loans to the government, commercial banks, foreign countries, as well as acquiring gold reserves. The increase in assets is a simultaneous increase in liabilities, ie the creation of the monetary base. It consists of currency in circulation, as well as binding and non-commercial banks' reserves at the National Bank. The second stage - the secondary emission occurs when the commercial banks, relying on its reserves, increase lending to their customers. The balances with customers along with cash in circulation up the money supply. The relationship between money supply and monetary base, which indicates how much money is created as a result of "sprawl" of the monetary base, called the money multiplier. Thus, the amount of money in circulation is completely predetermined by the emission of the National Bank of Credit. The growth of its assets inevitably leads to an increase in the monetary base, which is a multiplier effect leading to an increase in the money supply, which affects the acceleration of inflation. Any increase in the assets of the National Bank is inflationary. According to monetary theory, inflation is caused by uncontrolled distribution of loans by the National Bank. The main source of inflation is the huge budget deficit, financed by the uncontrolled emissions. The root cause of this deficit - the continuing support of the former state sector of the economy through the provision of loans, tax exemptions and subsidies to enterprises. Factor acts as an indirect subsidy "soft" credit policy of the National Bank. High inflation is only terminated when the government is finding new sources of revenue for the budget or reduce costs. Without the permission of the budget deficit measures to tighten monetary policy does not give the desired effect. The budget deficit - the main but not the only source of monetary expansion. It can be increased by the issuance of central bank credit to commercial banks.

2. What cost the macroeconomic stability of Kazakhstan.

The country had the following objectives: to bring the economy out of a deep depression while carrying out systematic structural and institutional market reforms, which is the essence of the transformation of a planned economy to a market economy. The question arose: where to start? For the reformers, the answer was the same: to postliberalization prices and the conversion of hidden inflation in the open, with price increases of 2-3. This suggests the need for macroeconomic stabilization policies, whose main objective is "to stop the rise in prices, inflation enter into acceptable limits, thereby creating the conditions for economic growth and human well-being."

Meanwhile, it was not difficult to notice from the "shock therapy", so did not think anything. Most politicians, scientists, economists, offered to begin the transformation process immediately after recovery, growth, structural upgrading, etc. Conduct of macroeconomic stabilization policies considered dictated by Western institutions, an attempt to "Westerners" have to use monetary theory, which, they say, never used and is not recognized by many Western scholars, etc. etc. They themselves familiar with this theory have not been used and third-hand information. Thus, they showed a lack of knowledge of the works and VI Lenin, no one else, and the JM Keynes wrote: "Ulyanov Lenin argued that the best way to destroy the capitalist system - is to debauch its currency through inflation." Consequently, sound money - a primary, and the growth of production - is secondary. To make money reliably, you should suppress inflation, which can only be done by monetary, monetary instruments. But in Kazakhstan, not everything was in the "home" in the truest sense of the word.

First, the means of payment remained the Russian ruble, as in 1992, Kazakhstan did not introduce a national currency or surrogate currency, as did some former Soviet republics. And, of course, the emission function remained at the Central Bank of the Russian Federation and Kazakhstan had to beg for the necessary funds from the Russian government, which sought to release the requested amount under its monetary policy. Of course, in the beginning he often failed to adhere to this condition, so in the middle of summer 1992, it decided to issue the requested amount of government debt. On July 1, 1992 have been opened special correspondent accounts for the conduct of inter-state settlement in the CIS and installed quotes of non-cash ruble zone. Kazakhstan now had to issue the debt as public debt Russia to the terms of repayment of external debt.

Second, the task of reform and macroeconomic stabilization policies were attributed to the government Tereshchenko SA, formed in November 1991, and the leadership of the National Bank of Kazakhstan headed by G. Baynazarova. The government consists mainly known footage of the old school, the former party-government and economic leaders planning and financial agencies that predominantly technical education. The National Bank has worked in management positions mainly economists of the old Soviet system. They are for the most part were good organizers of production, skilled leaders of the groups in the planning and management of administrative and command and control were essential in extreme conditions. However, many of them have been extremely difficult to master all the intricacies of the course of the market economy, macroeconomic policy, in particular to imagine what and how dangerous inflation, its relationship with economic growth, investment, unemployment, how to effectively deal with it, etc. Therefore, it was unknown to the essence of anti-inflationary monetary policies of the government and the National Bank.

Country could learn in May 1992 with just basic directions of economic reforms that President Nursultan Nazarbayev outlined in his article "Strategy for the formation and development of Kazakhstan as a sovereign state." These areas included: the creation in Kazakhstan of the social market economy, based on a combination of different forms of ownership, the systematic transformation of the economy with the fixation of the stages and the respective specific tasks.

The objectives were to be achieved in 10-15 years in three stages:

1. for the years 1992-1998 provided by macroeconomic stabilization, normalization of the consumer market and is a significant part of the privatization of state property;

2. for the period 1998-2005 are made structural changes in order to overcome the raw material orientation of the economy, the development of markets for goods, capital and labor;

3. over the next 5-7 years is expected to become one of the newly industrialized countries, based on the accelerated development of an open economy.

However, all of these goals and objectives of the reforms to May 1993 were not translated into concrete programs. The country was in the ruble zone, adopted the "rules of the game", given by the Government of Russia, and for two years followed all the zigzags in its economy. The independence of the republic's economic policy was manifested only in private matters. From the government and the National Bank was not decisive and flexible synchronous and sequential actions, adequate changing conditions, there was no predictability in their work.

Meanwhile, the planned targets - reducing and stabilizing both inflation and the decline in production - have been difficult to achieve, at least, required a casual piece of work of all branches and units of power, competence and determination of their leaders, the work of all agencies as a unified team. Unfortunately, all this was not. There was this, and in the government of the Russian Federation in the monetary policy which depended the success of macroeconomic stabilization and Kazakhstan.

Easing of monetary and fiscal policy immediately caused a sharp jerk of the money supply up, which, in turn, again greatly boosted inflation. Money supply increased during the year in ruble terms 16.3 times compared to 4.5 times in 1991, the volume of credit to the economy increased by 10.6 times. Inflation grew by an average of 20% per month.

To curb inflation, the government of Kazakhstan has come up with nothing else to do but to put a price on a number of goods, mainly producing raw materials under the strict control of the state.

May 14, 1992 the Decree of the President of the Republic of Kazakhstan to expand the range of goods and services sold at fixed prices. It spread to the fuel and energy and other strategic goods (products industry, agriculture) as well as for socially important goods and services. It was supposed to retard the growth of prices for products processed from its own resources.

The primary task of macroeconomic stabilization, set by the President Nursultan Nazarbayev, it seems very few people are interested then. All producers, including those in the government was more interested in the problem of stopping the recession and boost production. In this case, the root cause they were not looking at fundamental changes in the economy and rising inflation, but a lack of investment in production and sufficient working capital of enterprises.

In 1991, the Supreme Council of the Republic of Kazakhstan to the revival of production adopted the Law on the establishment of a republic of free economic zones (SEZs). It provided for the granting of businesses located in such areas, a wide range of tax exemptions and other preferences, for example, the right to export raw materials, produced in the SEZ, and the rights of self-use area of ​​export proceeds. By law, any land could declare himself a free economic zone with the permission of the Supreme Council without the consent of the government. Their numbers began to grow like mushrooms after rain.

This should also add practiced for many years, beginning in 1992 and subsidized loans to central government of various sectors of the economy (the military-industrial complex, agriculture, transport, etc.).

Such generous tax breaks and subsidies from spending a big budget with no rules and low fiscal discipline, coupled with the continuing decline in production led to a large national budget deficit.

As can be seen in two years the budget deficit was very high, staying in 7% of GDP. Interestingly, in 1993, he was surprisingly low - 1.2% of GDP, and in 1994, on the contrary, very high. This is due to the policy of the government of Kazakhstan is not so much how much Russia. The fact that the Russian government with the July 1, 1992, first eliminate the ruble zone with cashless monetary system, and secondly, opened to all countries in the ruble zone correspondent accounts for the conduct of inter-state settlement of the CIS countries with Russia. Were put quotes of non-cash ruble zone and demanded to issue debt of the Member States of the CIS as their public debt Russia to the terms of repayment.

  At this point in the field of non-cash expenses ruble zone ceased to exist. In addition, Russia has decided to issue now is not technical, but only related to government loans.

Of course, the government itself Kazakhstan in 1993 also attempted to establish macroeconomic stabilization policy. In April 1993, the Supreme Council of the Republic of Kazakhstan was adopted good "program of urgent anti-crisis measures and deepening social and economic reforms" initiated and developed under the leadership of Vice-President of the Republic of Kazakhstan, Doctor of Economic Sciences Erik Asanbayeva and presented to the MPs of the Supreme Council of President Nazarbayev.

It was determined a priority macroeconomic stability, in particular, the fight against inflation and the accelerated conversion of property. At the same time adopted another "National program of privatization of state property in the Republic of Kazakhstan for 1993-1995."

However, the first anti-inflationary program due to the lack of national currency, poor staffing, and low activity of the NSC had no chance of being realized, did not leave any visible in the macroeconomic policy of the state.

At the same time, the government has intensified its intervention in the economy in order, as it seemed to the Cabinet, its active adjustment to keep the economy from collapsing, and first of all to stop the decline in production, to start changing the structure of the economy. The country has developed long-term program of development of 18 industries, including consumer services, began the development of the so-called indicative plan for the example of France, Japan, South Korea and Malaysia, have tried to step up investment policies from public sources and attracting foreign direct investment. All this work leadership of the Ministry of Economy, whose role has increased markedly, were created Agency for Foreign Investment Committees prices on computer science and others.

There was a change in leadership of the Committee for State Property to accelerate the process of privatization of state property. The results of the implementation of the program of privatization of state property were recognized by President unsatisfactory.

From Russia to Kazakhstan old cars dumped rubles, which served as a breeding ground for inflation.

We were faced with a dilemma - either to squeeze money supply, or install a strict state control over prices. The second option seemed more familiar with the old times, but initially contradict the logic of the reforms.

We have chosen a path that assumed the introduction of the national currency. Kazakhstan last of the former Soviet Union went for it, as the other was a more economically connected with Russia. But credit our patience is exhausted. And from November 15, 1993, we have gained an important attribute of economic independence - the national currency tenge. Recently we celebrated the 10 years of this event, which has become the most important achievement, pave the way for further large-scale transformations. This allowed us in 1994 to bring down hyperinflation, and in 1995 - to curb the inflationary process, bringing the level up to double digits.

Immediately after independence, came to the fore issues and create an independent budget, tax and customs systems. In fact, we had to build them from scratch. In the first step needed to create an adequate legal framework.

The breakdown of the old system in the early years has led to very large distortions of the state budget, as the size of the social security exceeds the real economic opportunities. For example, the budget deficit in 1991 exceeded 20 percent.

In theory, reducing the budget deficit can be achieved by a sharp increase in taxes on businesses and the equally sharp cuts in social programs. However infinitely enhance the tax burden was impractical because it could lead to a decline in business activity and care economy in the shade. Yes, companies and does not have sufficient funds to pay high taxes.

Kazakhstan was the first CIS countries had tax reform. Already in 1995, the President issued a decree having the force of law, "On taxes and other obligatory payments to the budget." According to him, the number of taxes was reduced by more than 3 times. The activities of the tax service has acquired a fundamentally different nature. Taxes began to be considered not only as a method of replenishing the state budget, but also as a tool to stimulate investment and production activities.

Now, with the start of a period of economic stability in the tax system we have shifted from the sphere of production to the sphere of circulation. In 2002, the reduced rate of VAT to 16 per cent social security tax - from 26 to 21 percent. Since 1 January 2004, the VAT rate was reduced to 15 percent, and in the calculation of the social tax acts regressive rate - from 20 percent to 7 percent.

Kazakhstan has created a fundamentally new and modern two-tier banking system, which all international financial organization called the best in the CIS. National Bank became independent. This greatly increased the effectiveness of monetary policy. Impetus for the development of second-tier banks have received. In turn, the reforms in the banking sector supported by renewed efforts to create a market of securities.

The reform of the budget system began with the adoption in 1996 of the Law "On budget system." The government has refused to raise loans from the practice of the National Bank to cover the budget deficit and shifted to the use of non-inflationary sources of financing. All these measures, together with the strict limitation of government spending were the basis for macroeconomic stabilization.

Monetary contraction and the suppression of inflation had a downside. Started staying enterprise. Payments crisis escalated. Became the basis of mutual barter. All that has been done over the years, has been threatened.

Elementary logic dictates that a real transition to a market economy is not possible without the privatization of state property. This step is important not only from the point of view of creation of market, but also from the perspective of shaping public psychology of the owner.

So we went to the large-scale privatization. Today, we can distinguish four stages in the assessment. The first three are related to the specifics of privatization, the fourth stage is characterized by a focus on improving the management of public property.

We started with small-scale privatization. In a first phase in 1991-1992, was privatized around 5000 objects, including more than 470 farms transferred to collective ownership.

The second phase was conducted on the basis of "national program of privatization of state property in the Republic of Kazakhstan for 1993-1995."

The most important step of this phase were unified management and privatization of state property. Then was the start of the development of small and medium-sized businesses. Began the transformation of the former Soviet trading system, including the wholesale link.

Wholesale and retail, commercial and road transport associations, before the small-scale privatization were segmented to create separate legal entities. With this in services, including shops, restaurants, pharmacies, gas stations, there was a competitive environment.

We understand that the main subject of the market economy is the owner that uses advanced and effective methods of marketing and management. Bitter lesson of coupon privatization is that the property can not simply share and distribute. The new owner should be able to attract capital and technology.

The third phase began in December 1995 with a decree having the force of law "On Privatization" and lasted until 1999. Since then, it has been implemented only for cash.

We are justified believed that foreign companies will bring much-needed investment, advanced management experience. As a result, our company has gained impetus for its development. Create new jobs. People began to receive a steady salary.

After 1999, came to the fore issues of improving the management of state assets. Therefore, at this fourth stage, we have introduced new approaches to the distribution of powers between the state authorities on the management and disposal of public property.

Start optimizing republican state and municipal public enterprises. Through national companies to retain influence and the state share in strategic sectors of the economy that determine the economic security of the country. In the oil and gas sector - a "KazMunaiGas", in power - "KEGOK" in telecommunications - "Kazakhtelecom" on the railroad - "Kazakhstan Temir Joly".

Today we come to reform and these areas. Launched a program of restructuring the rail industry. The task of de-monopolization of the electricity and telecommunications sectors.

For all its costs have nearly completed the process of privatization has led to the creation of the basic conditions for effective competition. Currently, about 85 percent of the total industrial output of the republic produced in the private sector.

Economic reforms are easily traced in the structure of GDP. Thus, over the period from 1991 to 2003, the share of the production of goods declined by 23 points to 43 percent, respectively, the share of the production of services - from 37.2 to 52.3 percent. This change in the structure of GDP corresponds to the modern world trends. In Kazakhstan, the share of services in GDP is one of the highest among the CIS (CIS average 44 per cent). In developed countries the share services of about 60-73 percent, in particular, in Japan - 66 percent in the UK and Germany - 71 percent.

In the period of the economic system has received priority investment policy. The main focus was the focus on attracting foreign investment, which required the creation of a favorable investment climate. In Kazakhstan were established institutional and legal prerequisites for activation of attracting financial resources in the economy. So, there were specialized competent authority and the Foreign Investors Council under the President of the Republic of Kazakhstan. Laws on investment, entered into a number of intergovernmental agreements on the promotion and reciprocal protection of investments, avoidance of double taxation.

Back in 1997, approved the list of priority sectors for investment. This is the manufacturing industry, the objects of the new capital of the country, social services, and tourism, and agriculture.

As a result, at the moment in terms of utilized foreign direct investment per capita - Kazakhstan undisputed leader among the CIS countries. Kazakhstan first assigned investment grade rating. Source: Agency for Statistics.

Such a high rate of investment appeal was due to the fact that we have opened the way for foreigners to the development of mineral resources, including oil and gas industry. Given the lack of financial resources, depreciation of fixed assets, Kazakhstan itself could not fully absorb the huge field.

At first, the issue of attracting foreign investment was complicated by the fact that the business world of the West had no idea of ​​the viability and reliability of Kazakhstan as an economic partner. The arrival in 1993 of the corporation "Chevron" and the conclusion of agreements with its unique Tengiz has served as a kind of signal to other transnational corporations.

From the beginning of active investors in the coming oil and gas industry. Today in Kazakhstan are working all the major oil companies in the world. Among them, "Exxon Mobil", "Shell", "Annie", "Chevron Texaco", "Total", "BP", "Lukoil", the China National Petroleum Corporation. Their presence in the Kazakh market confirms a high investment attractiveness of the country and the stability of legislation to protect the rights and interests of investors.

With the opening of the largest in the last 30 years of the Kashagan field, with estimated reserves of 10 billion barrels, Kazakhstan went to one of the world leaders in terms of proven oil reserves.

Our strategy for the development of oil reserves in the country is not reduced to a production of hydrocarbons. No less important was to create an infrastructure for transporting them to the world markets. In Soviet times, Kazakhstan, with its focus on the domestic market, such pipelines had. The first years of independence and the project was successfully implemented the Caspian Pipeline Consortium. With the introduction of the CTC, we have begun to implement a consistent policy of diversification of transport routes. Last year was a breakthrough in the negotiations on the Caspian Sea. The strategic partnership with Russia now finds practical expression in the major joint projects on the shelf. The construction of the pipeline to China.

It is difficult to overestimate the role of the oil factor in the economic development of our country. Indeed, compared with 1985, we were able to increase the production of hydrocarbons at 225.4 percent, while worldwide production grew less than 1.3 times, while Russia is just beginning to restore the level of the period of the eighties. Source: BP Statistical Review of World Energy; CISSTAT, network resource - www.refine.com.ru/pageid-512-2.html

Indeed, thanks to oil, we were able to speed up the transformation of the economic system. But the achievement of the current pattern of development has affected not only the rise in world energy prices. This is - the result of economic reforms.

Today, only a quarter of the state budget is formed by oil revenues. Direct investments have raised the efficiency of ferrous and non-ferrous metallurgy. Corporations "Samsung" and "Kazakhmys" invested in the development of industry 1 833.5 million. It has already been possible to exceed the level of 2000 in 1990 to 9% for the production of refined copper. The current annual copper production exceeds the best indicators of past years. Karmet has invested in the development of production of over 500 million dollars. Karmetkombinat passed the stage of industrialization with the release of a powerful metal sheet coated with metals and polymers.

Kazhrom and Kazalyuminy become a highly efficient production due to investments in the amount of 537.2 million dollars. The same can be said of the lead-zinc industry. These branches today one of the main fillers budget. In the future, the budget will increasingly be supplemented by the production of finished products with high added value, revenue from small-and medium-sized businesses and the development of manufacturing industries.

By themselves, the reforms in the economy could produce an effect only if the change of attitude on the part of the property of ordinary citizens, as happened during the privatization of housing. Giving the property led to a change in the mentality of the population. Hope for the state, paternalistic psychology began to leave in the past. Now the responsibility for their own homes passed to the citizens themselves.

There was a need for further reforms of housing and communal services. Instead of treasury ZhEKov bet was made on the self-organization of the population in the face of cooperative apartment owners.