London, 16 April 1997 (RFE/RL) -- A report published by the European Bank for Reconstruction and Development (EBRD) says the medium-term economic growth prospects for Kazakstan are "bright" because of its rich natural resources, political stability and pragmatic government.
The report says foreign investors have recognised this and that their investment of $2.8 million to date -- with commitments to invest exponentially more -- underpin the country's economic future.
The report says the government and its private sector partners have made "impressive" progress in developing the oil industry.
It says development of the Tengiz oilfield, near the Caspian Sea, one of the largest oilfields in the world, with estimated reserves of 6,000 million barrels, is moving forward on schedule. The Tengiz field is the largest oil discovery in the world in the past 20 years, and the single largest joint venture operating in the former Soviet Union.
The report -- prepared on behalf of Kazakstan authorities by the EBRD's country promotion team and bank staff -- was released at the EBRD's sixth annual meeting in London this week.
The report says the sharp decline in output in Kazakstan since the disintegration of the Soviet Union has been reversed as the GDP in the second half of 1996 started to grow. Strict fiscal and monetary policy have brought inflation down from hyperinflation levels in 1993 and 1994 to an end-year value of 28.7 percent in 1996.
In 1994, the country suffered a fall in GDP of 25 percent and hyperinflation of 1,158 percent. In 1996, the economy grew 1.1 percent, the first positive growth since 1989. This year the economy is forecast to grow by two percent.
The report says the government has committed itself to further stabilisation and restructuring programs worked out in conjunction with international institutions. It has developed a strong independent central bank and worked hard to protect old trade relations and forge new ones.
When in November, 1993, Kazakstan introduced its own currency, the tenge, it faced a serious economic crisis. The report says: "Since that crisis point, economic performance has steadily improved."
Along with Russia and Lithuania, Kazakstan is only one of three ex-Soviet republics to successfully borrow on global capital markets. The country's success has permitted the National Bank to accumulate hard currency reserves equal to three or four months of imports.
The report says Kazakstan is concentrating on continuing tight monetary and fiscal policies resulting in the maintenance of proper budget discipline and improving the banking system, as well as carrying out the third stage of the privatisation and restructuring of enterprises.
Between 1993 and 1995, the country sold a majority of its 1,700 medium-sized companies (over 200 employees) through auctions and the sale of shares to Investment Privatization Funds. Much of the remainder were sold by the end of 1996. The country has also transferrred most agribusinesses into private hands.
Kazakstan is now focusing on privatising large enterprises (over 5,000 employees) on a case-by-case basis. This includes the sale of state property and enterprises to foreigners for hard currency. Some 44 mostly mineral-extracting enterprises have been turned over to outside managements. Twelve of these contract managers are foreign.
Thirty of Kazakstan's biggest loss-making enterprises have been placed under control of a Rehabilitation Bank. But the restructuring of large loss-making units has been slow. The report says: "The labor shedding associated with this process will be one of the major challenges faced by the government as it continues to pursue market reform."
With the exception of utility prices, the country completed price liberalisation by the end of 1994. All fixed prices for crude oil and oil products have been removed. Meanwhile, interest rates, which were previously high in real terms, have been gradually reduced.
The tenge is freely convertible for foreign trade. The report says, "There is no shortage of dollars in the country inhibiting the process."
Since independence in 1991, flows of foreign capital into the country have steadily increased -- from $473 million in 1993 to $1.2 billion in 1996. These foreign investments have come from the U.S., Britain, Turkey, South Korea, France, Japan and others.
Kazakstan's crude oil will begin reaching international markets via a new Caspian Sea pipeline in 2000. The report says this will focus foreign attention on the potential of a country which, aside from its oil and minerals wealth, is one of the world's largest exporters of wheat.