Kazakhstan's Changing Economyby Rit Nosotro
Change Over Time essay
Describe changes to the economy of Kazakhstan since the collapse of the USSR.
Plastic bags were everywhere. Not literally, but more in the sense that everyone was carrying one. Not the venders, but the buyers. After making a purchase, we would pull a bag from our pocket, and they would put the product in. If we were buying flour, we would prop up our little bag on the scale, and they would weigh the flour in from a big sack. And no, we didn't just carry bags when we went shopping, we always carried them, because, well, we were always shopping. On our way to classes, we'd be looking out for anything and everything that we needed. If we found something, we'd stop right there, and buy it, because it wouldn't be there the next time we walked by. And this is how we lived our lives in Almaty, Kazakhstan, following the collapse of the Soviet Union.
The Kazakhstan economy has come a long way since those days in early 1994, but the changes were certainly not overnight. The improvements have come with a lot of time and trouble, and a lot of problems had to be overcome to reach the point that Kazakhstan is now (2005). In order to appropriately see the progress that has been made, it is essential to see where the economy has come from, which dates back to the days of the Soviet Union. The main aspects of the economy that have noticeably changed are the different sectors of the economy, such as agriculture and industry, the imports and exports, and the currency changes.
Kazakhstan Economy During the Soviet Union
While under Soviet dominance, Kazakhstan's resources were brutally ripped out, and shipped to other parts of the USSR to be manufactured. Land that was previously used only for herding animals became farming land in a venture called the "Virgin Lands Project". Kazakhstan's 3.5 million hectares soon became one of the principle sources of agricultural produce for the Soviet Union. Oil and other natural resources were improperly mined, leaving the sources ineffectual. Not only this, but because Kazakhstan was only involved in the first parts of the production processes, they were completely dependent on the rest of the USSR for imports to meet their needs.
Leading up to and Following the Collapse of the USSR
In the closing days of the Soviet Union, Mikhail Gorbachev realized the economic problems that they were facing, and tried to change the policies that governed the Soviet Union. He had two main proposals of change. The first one was "perestroika," which called for a restructuring of the government through decentralizing the economic and social systems that governed the country. The second, "glasnost," was a call for more openness in the arrangement of the Soviet Union. Although these policies helped ease the country into the collapse, nothing could have prepared Kazakhstan for what resulted.
When Kazakhstan officially declared independence from the USSR on December 16th, 1991, the country was thrown into massive upheaval. As Dr. Erik Asanbaev, the Vice-President puts it, they "began without either time or experience; we were unprepared. The neglect of sociology and political science in the past took its toll: the post- Soviet states did not know how to make a realistic assessment of the social consequences of changes." 1 Almost everything came to a grinding halt, and the very real possibilities of economic collapse, famine and civil war presented themselves. Although these things were avoided, a lack of all kinds of resources was painfully felt by the entire country.
With the breakdown of the economic systems, the production of raw materials stopped. Previously, people in Kazakhstan had simply been told to make the produce, they were directed where and when to send their products, and the government provided the means to do this with. When the governments switched, it no longer had the power, means, or knowledge of how to do this. Because there was nowhere to ship the raw products, factories and farms closed down.
The problems Kazakhstan was facing were being felt all over the 15 countries of the former Soviet Union. Similar to how Kazakhstan no longer had the ability to pay for imports, no one else could either. This meant that there was no where for Kazakhstan to ship its exports, and all trade stopped. Consequently, no imports were available. Kazakhstan did not have the means of producing finished products itself, and they weren't able to bring things in from anywhere else. Lines for bread, a simple staple, stretched down the streets. More luxurious items, such as toilet paper, were nearly impossible to find.
Furthering the economic problems was the fact that Kazakhstan was not stable enough to have its own currency, and therefore, it was still attached to the ruble system. Because Russia was facing multiple problems of its own, the ruble was extremely unstable. "Reforms" that where ill-advised caused approximately 3,000 percent inflation in 1992. However, as things stabilized, inflation dropped, and on the 15th of November, 1993, a major step towards strengthening the country's economic independence was taken when a new national currency, "tenge" was introduced at four tenge to the US dollar.
Changes and the Current Situation
Since the early 90's, conditions have changed drastically. Farms and industries are back up and running, and construction, which had come to a halt, has picked back up again. Services are also more readily available. Mining for natural resources has also picked up, and international oil companies have flocked in and are rapidly involved in oil production. An increase in production has certainly made a positive difference in the economy.
Although import and export rates are at a more natural level, this area of the economy has definitely faced some challenges. One example of the challenges that have been faced is something that happened a few years back. France was involved in some negotiations with the Kazakhstan government, in the matter of plastic bottle production. The French government was going to lend Kazakhstan money to buy bottle machines from French companies. However, in order to make these bottles, a certain type of plastic bead is needed, which Kazakhstan did not have the ability to produce. This meant that these beads would also have to be shipped in, so all together, it led to very large production expenses. However, the beads were made using oil, which Kazakhstan has in abundance. Rather then giving Kazakhstan the means of producing the beads themselves, France was taking advantage of them through economic colonialism. This was similar to what England did with America back in the 1700's, and India in the 1800's. This is just one example of the many challenges Kazakhstan has had to face and overcome as they work up to independence in their importing and exporting. A similar challenge has been in how to get their oil out of the country. Kazakhstan, a landlocked country, has had to ship its oil through Russia, who has used this as a tool to retain power. And so the struggle goes on.
The currency has had its ups and downs since being established in late 1993. By February 1994, it had reached 12.8 tenge to the dollar, and its value fell to 85 tenge to the dollar by March 1998. Up to this point, the tenge had been propped up by the government. However, in the wake of the Russian financial crisis, the government let the currency value fall. Overnight, the whole market went out of sync, and within the first week, exchange prices were being offered everywhere from 130 to 112. It finally settled at 117 tenge to the dollar, and remained fairly stable. The exchange rate in November, 2004 was 130 tenge to the dollar.
While the economy has made fairly steady growth, several issues threaten it. For, while Kazakhstan is full of natural resources, the government has been spending these resources with a secularist worldview. God made people to be stewards of the earth, as can be seen in Genesis1:26- "Then God said, "Let us make man in our image, in our likeness, and let them rule over the fish of the sea and the birds of the air, over the livestock, over all the earth, and over all the creatures that move along the ground." However, the government believes that resources are meant to be used up, rather then stewarded. Therefore, the resources are dwindling, and when they are used up, nothing has been done to replace them. This could lead to a very large problem in the future.
In conclusion, the Kazakhstan economy has changed a lot since its early days as a part of the Soviet Union. The country is much more stable, and self-sufficient. It is producing and exporting at a healthy rate, and its currency is fairly stable. Nonetheless, if resources are not stewarded, or used more carefully, they will soon run out, and then Kazakhstan might once again be facing economic difficulties. For the time being, however, things are looking good for the economy.
1 Interview: Asanbaev, Erik. "An Alternative Persepective on the Economic Development of Kazakhstan." Central Asia in Transition. Armonk: M.E. Sharpe, 1996. 227-236
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Rumer, Boris, ed. Central Asia in Transition. Armonk: M.E. Sharpe, 1996.
Goldman, Stuart D. "Gorbachev,Mikhail Sergeyevich." World Book Encyclopedia.
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