Kazakhstan is a country of contrasts, with no exaggeration: desperate poverty neighbors with arrogant wealth, economic growth is accompanied by decline of social sphere and expansion of state control, and tolerance abuts discrimination. Such is the set of topics in focus of Kazakhstani blogosphere this week.

Eilide, a blogger living in Armenia but closely watching the developments in Kazakhstan, wonders if everything is really as good in Kazakhstan as some of her country’s experts describe:

“They praise institutional development, stock market and financial sphere on the whole. A nice picture of rich and prosperous country. But there is crisis in banking sector, stock market is still very weak and most pension funds show low profitability. Or am I missing something?”, she asks [ru].

Although financial and banking sector do indeed demonstrate vesible sustainability in comparison with other CIS countries, expansion of the state raises serious concerns of the observers, especially after amendments in the subsoil legislation that had been introduced last year, giving the government an exceptional right to unilaterally cancel contracts with the foreign investors that work in the sphere of extraction of natural resources. (more…)

Every monetary reform costs 200 million US Dollars on average. 

Yet Turkmenistan seems to be ready to incur such costs in 2009 in order to conduct a denomination calculated at 1000 to 1 Turkmen Manat, the current monetary unit.

Is this a good news or a bad news? And what is the point of denomination?

Denomination is a way to augment a national currency - without changing its name - through exchanging the old bank notes into the new ones according to the ratio established by the Government. The aim of denomination is to regularize the currency circulation, to facilitate discount and settlements in country and, simultaneously, to convert prices, rates, salaries etc. at the same ratio.  Denomination was done in many countries, for example, in France, Israel, Poland and others. In the USSR, old Roubles were exchanged into new ones at a 10:1 ratio in 1961, January the 1st. Denomination in Russia was implemented in 1998 when new Rouble was exchanged for one thousand old Roubles.

Denomination is a process of changing the scale of prices at a certain rate.

In practice, all monetary reforms have been introduced as a means to fight the growing inflation – the process of money depreciation, and devaluation – significant drop of national currency rate in relation to foreign currency or a change in metal (gold) content of the national monetary unit. That is, during the times of countries’ economic crisis.

When it comes to Turkmenistan the logic of the forthcoming reform is clear – 2009 will see completion of all major projects that aim to considerably increase export of Turkmen gas to Russia, China, and, possibly, to Europe through the Caspian Sea.

In doing so, the Turkmen Manat, having got rid of three noughts, will have acquired if not gold, then gas cover. This would ensure the new Turkmen Manat does not hastily slip into the inflation precipice like the Manat did back in 1993 when the initial exchange rate of 2 Turkmen Manats to 1 US Dollar dropped to 15 TMM to 1 USD dollar within one month.
Prices are a different question. Denomination will inevitably cause increase in prices for all types of commodities and services. If currently the price of one litre of petrol is 300 Turkmen Manat (0.0125 USD) then how much will it cost in 2009?
Simple math will not help here because the microscopic cost of fuel is a result of a five-fold difference between the official exchange rate of 5,200 TMM to 1 USD and the actual purchasing power of our national currency that stands at 24,000 TMM to 1 USD.
If, after denomination, one litre of petrol will cost 0.3 TMM, then its dollar equivalent will increase at least fivefold.
Such a significant increase in the cost of petrol will inevitably result in increased prices for nearly everything. Produce, social services, commodities and public transport is by far an incomplete list of what Turkmen people will have to pay for much more in 2009 than they do now.
Implacable laws of economics will shatter an illusion of building a Golden Age where gas, bread, salt, petrol and housing bills can cost almost nothing in a separately taken country which is isolated from the rest of the world.

Probably also due to my new job*, I have discovered a strange affection for numbers within me. Add on top of that The Pocket World in Figures 2008 which The Economist was kind enough to send me for a new subscription I took out. Let’s have a look at some of the numbers from the region in international perspective. Of course all taken with a pinch of salt!

• Of the metropoles in the region, Tashkent scores worst - it comes in 18 places from the bottom in the quality of life index. Almaty is closing in, though, on the 31th last spot on that same list (compare Moscow, which is 43th from the bottom).
• Afghans make up the largest refugee population in the world (1.9 million people), Azerbaijan’s is the 9th-largest (0.23 million people).
• Speaking of which, Azerbaijan had the 4th-highest annual average growth rate between 1995 and 2005 in the world (10.2%). Kazakhstan comes on position 21 with 6.3%.
• Uzbekistan currently has the world’s 5th-highest annual inflation rate (21%).
• Kazakhstan’s foreign debt burden (as % of exports of goods and services) is the 20th-highest, after Turkey, and above Brazil. In a list of countries’ foreign debt as a percentage of GDP, Kazakhstan is at number nine (106%). Kazakhstan’s debt service ratio - i.e. debt service as a percentage of the country’s exports - stands at 42%, second only to Brazil (45%).
• Kyrgyzstan is Central Asia’s biggest recipient of foreign aid. In international perspective, the meagre $268mn put the small country at position 60. Tajikistan follows closely on position 64 with $241mn.
• Between 2000 and 2005, Tajikistan beat Kazakhstan in industrial output growth (11.6% vs. 11.3%). Kyrgyzstan is most dependent on agriculture in the region (34.1% of GDP, position 18 in international perspective).
• Uzbekistan is the least energy-efficient country in the world.
• 100% of Turkmenistan’s energy is produced from gas (number one worldwide).
• Kyrgyzstan has the sixth-worst brain drain in the world.
• Kazakhstan’s stock exchange had the second highest growth in market capitalisation between 2001 and 2006 (3,529%). Yet, it only ranks 52nd in terms of actual market capitalisation ($44bn).
• Uzbekistan saw the third-biggest growth rates worldwide in company listings between 2001 and 2006 (1,800%).
• Kyrgyzstan is only 22 spots away from the bottom in terms of car ownership per 1,000 inhabitants (39 cars). However, it ranks 15th in the category “most deaths in road accidents” (18 people killed per 100,000 inhabitants), only topped by Kazakhstan (12th, 21 people killed).
• Each Kazakhstani travels on average 809 km via train each year (rank 12 worldwide).
• Kazakhstan spends only 2.3% of its GDP on education, making it the 17th-worst country in the world in that category.
• Save Iraq and Afghanistan, Turkmenistan is the country outside of Africa with the highest infant mortality in the world (74 deaths per 1,000 live births).
• A tight race for the prime spot in the category “cardiovascular disease” - Turkmenistan comes in first worldwide (844 deaths per 100,000 population), Tajikistan second (753), Kazakhstan third (713), Uzbekistan sixth (663), Kyrgyzstan tenth (602).
• Uzbekistan is the mobile-phone-craziest country in Central Asia, with 68.4 subscribers per 100 people (rank 44 worldwide).
• Every Kazakhstani, from baby to pensioner, smokes 5 cigarettes per day - on average (rank 15).
• Kyrgyzstan has the 9th-highest incidence of murder per 100,000 inhabitants (8.0).
• Uzbekistan is the fourth-largest awarder of death penalties - with 62 executions per year.
• 489 out of 100,000 Turkmen citizens sit in prison (rank 5 worldwide).
• Baku is the city worldwide with the lowest city health and sanitation index value (27.6), Almaty comes in 9th, just behind Baghdad.
• Tajikistan protects 18.3% of its total land area for conservation purposes (rank 12).

*Probably also due to my new job, I couldn’t come up with anything better to post on!

While the usual discussions about political cobwebs and oil business intrigues kept the Kazakhstani bloggers busy, two dramatic incidents stood out: A rocket crash potentially threatening the health of thousands of people and the murder of a Russian blogger made the Kazakhstani blogosphere think about the value of a human life.

But politics first: Andy-taker draws attention to the fact that ministers in Kazakhstan are being shuffled, migrating from one government to another, without particular affixment to their profession. Pretty much the same happens on lower levels; maybe this is the reason for the people’s dissatisfaction with the officials?

After visits to a number of government bodies and agencies, Astanchanka is left very angry: “Bureaucrats are just killing me! They are rude and ignorant - ridiculously explaining this with low salaries and tiredness. Gorbachev was right: Citizens should start Perestroika from themselves” (RUS).

Raseyannaya from Ekibastuz (a town in Central Kazakhstan) is indignant towards those officials who are skeptical about non-traditional religions, consider Krishna followers as extremists and want to introduce religious education in schools. “Our state is secular”, she reminds people, “and even if I want to worship a Steam Iron, nobody shall have any objections” (RUS).

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The World Bank just released its annual “Doing Business” report for 2007, and there is good news for Central Asia (sort of). Eastern European Central Asian countries ranked among the best reformers for improving the business climate. What does that mean, exactly?

For starters, a closer look at the specific Central Asian countries disaggregated from the Eastern European makes it rather clear which side of the Caucasus was weighting the designation of “most reformed.” For instance, Kazakhstan’s business climate seems to have net deteriorated since last year, as did Kyrgyzstan’s. Tajikistan was more or less a wash, and — surprisingly — Uzbekistan improved the business climate significantly, according to the WB. They didn’t even bother to survey Turkmenistan.

There is a country by country description of reforms made, but it is rather technical. An easier way to break it down is by their individual indicators. For instance, in Tajikistan it became easier to open a business, but harder to get a license or register property. On average, it now takes 49 days to open a business over 13 different procedures there, according to the WB. In another example, registering property became dramatically easier in Uzbekistan, though closing a business was marginally more complicated.

Despite Uzbekistan’s putative improvement, Central Asia still fares pretty poorly overall. Out of a total of 178 countries, Tajikistan comes in at 153, with a more difficult business environment than 86% of the countries surveyed, roughly on par with Afghanistan, and beaten out even by Zimbabwe and Rwanda. Kazakhstan ranked the highest of the Central Asian countries at 71, with a business climate comparable to Kenya or the UAE.

Google has a fun map if you want a snapshot of “Doing Business” over the entire world.

(Hat tip to the Private Sector Development blog for the story.)

The recent price increases mentioned in the roundup of Asel take place not only Kyrgyzstan but also in Tajikistan. The government is trying to regulate the prices but there are still no positive changes. According to official reports, the increase of prices for agricultural products is an artificial phenomenon which is made on purpose by the owners of the local markets or it happens due to inefficient management. The mayor of Dushanbe gave an order to dismiss the heads of the major local markets from their positions, but this decision will not solve the problem.

Probably, Andrea Dall’Olio gives the best explanation about what is happening in the private sector now and what the problems are. He reports on business environment in Tajikistan and particularly on the recent IFC report Business Environment in Tajikistan as Seen by Small and Medium Enterprises, 2006. Andrea says that according to the IFC report, doing business in Tajikistan is very complicated. The representatives of SMEs are facing unrealistic challenges caused by taxation, permit system and foreign trade procedures. He hopes that some positive changes will be seen soon.

International donors have a great impact on the development of Tajikistan. However, the resources that they allocate for the development of the country are very often improperly used and in result the goals are not achieved. Anna Nadgrodkiewicz on the CIPE Development blog gives general recommendations for the donors. She points to three important things which donors should have in mind in their relations with local NGOs or other organizations which are responsible for the implementation of development projects: (more…)

Dr. Johannes Linn of the Wolfensohn Center in the Global Economy and Development Program at the Brookings Institution was kind enough to share with neweurasia his thoughts on a diverse range of topics related to Central Asia. Dr. Linn is currently the Executive Director of the Wolfensohn Center where he serves as Special Advisor to the Asian Development Bank’s Central Asia Regional Economic Cooperation Program, and he was formerly the Vice President of the World Bank for Europe and Central Asia. His recent publications include “New Impetus towards Economic Integration between Europe and Asia” in Asia Europe Journal, Volume 4, Number 1 / April, 2006, the 2006 UNDP Human Development Report for Central Asia, and even some more personal thoughts on the region for neweurasia.

The interview transcript below includes discussion of themes such as economic development; regional integration; Russia and regional geopolitics; human rights; development prospects for Kazakhstan and Tajikistan; and potential paths forward for Turkmenistan.
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Russland Aktuell reports of a new survey undertaken by Russian pollsters VZIOM that again sheds light at (the perception of) happiness in the CIS. According to the findings, there is a majority of happy people in seven out of twelve CIS states.

Leading the league are Kazakhstani citizens: 73% of those asked responded that they are happy with their lives. Coming in second and third are Belarus and Kyrgyzstan (both 65%). The share of Russia’s population being happy with their lives is 51%. The majority of Azeris (52%) and Ukrainians (61%) are unhappy.

Asked for their economic situation, 45% of all Kazakhstanis responded with “positive” and only 2% with “negative”. As money alone doesn’t make you happy, Azeris are (despite their general unhappiness) generally positive about their material situation (41%).

Now here comes the expert opinion on why Kazakhstan tops the league (my translation and emphasis):

According to VZIOM communications director Igor Eidman, Kazakhstan’s top position is not only explained by the booming economy. “The assessment of one’s own happiness depends on two factors: one objective, on which the general economic situation and personal welfare have a strong influence; and one subjective, which is determined by people’s mentality.”

The oriental attitude of those people in Kazakhstan and also Kyrgyzstan makes them more loyal to their leaders: “It isn’t customary there to complain of the state about one’s fortune,” Eichman says.

Although public opinion polling in the region is weak, it’s true that happiness indeces continuously show high general life satisfaction in Central Asia. In one of our posts on the Uzbekistan blog, James presents some better reasons for this Central Asian Happiness. James says that it might have something to do with relatively decent levels of income equality.

Unfortunately, the article didn’t have any data on Uzbekistan, but I’ll look out for updates.

Masses of ethnic Russians from Kazakhstan migrated to Russia; the majority of ethnic Germans that ended up in Central Asia more than 50 years ago made use of the blanket invitation to repatriate to their ancestral home; poor and mostly male labour migrants leave their homes in Tajikistan, Uzbekistan or Kyrgyzstan for seasonal work in Russia (and all too often encounter deep-rooted racism in becoming victims of ethnic crimes).

The above demonstrates that the movement of people across the boundaries of the former Soviet Union and beyond is fairly well-documented. But rarely has it been analysed in its entirety by one of the big international organisations. This has now changed with the World Bank publishing its new report Migration and Remittances: Eastern Europe and the Former Soviet Union.

Needless to say, the 200-pages document includes lots of interesting statistics and facts for the interested researcher, including fairly exact figures on how many people emigrated, immigrated, and how big the ’stock’ of immigrants is in selected countries. There are, however, problems with data collection, as the example of Turkmenistan can show: According to Turkmen population statistics, it is the only country of the ECA countries (Eastern Europe and FSU) which sees both substantial positive net migration and a positive natural increase of its population, something the authors of the report deem unrealistic (and something that is due to inflated Turkmen statistics).

Kazakhstan is among the top-10 worldwide migrants-receiving countries, mostly due to an inflow of low-skilled labour from the poorer Central Asian republics. However, Kazakhstan is also the country that has lost the highest share of its population during the 1990s. Almost 20% of the country’s population had left by 1999. The report mentions as well that quite a few of those ethnic Russians leaving Kazakhstan initially have returned.

One of the other major sections of the report pertains to remittances and their growing proportion vis-à-vis some countries’ GDP. Tajikistan and Kyrgyzstan lead the Central Asian nations in terms of their GDPs’ reliance on them. The report also mentions the major expenditure patterns from remittances. While food and clothing, education and home repairs come in high, “special events” also makes the list.

I vividly remember a trip to Batken in southern Kyrygzstan, where the local development agencies complained that the remittances coming in from Russia were all too often being spent on lavish celebrations, including weddings, circumcisions and funerals - often catering hundreds of people and eating up money that could have been invested more productively.

Editor’s Note: What follows is part of a cross-blog survey that explores what Central Eurasia might look like fifteen years from now.

I will be 40 in 2021 - that is the first scary thought crossing my mind writing this. Central Asia will no doubt face more challenges of greater import than the past fifteen years. All scare-mongering aside though, a point in time fifteen years in the future gives ample room for wild speculation. With that in mind, I hereby invite all participants of this survey for a drink some days before Christmas 2021 - drinks are free for whoever came closest to the future reality.

To get some sort of idea of what lies ahead, a look back in time bestows some of the scale future developments might entail (as we did in the last survey). In 1991, Central Asia was newly independent. A friend of mine is writing his Master’s dissertation on the predictive analyses written back then, which were not unlike what I am writing here (which will probably prove equally misguided).

‘Which way forward for Central Asia - Where will it stand in 2006?’. Needless to say, the bulk of regional forecasts proved at least partly obsolete - the fault lines and crises that actually evolved were hardly of the variety observers had predicted.
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