AFTER FIVE YEARS of rapid economic growth, Kazakhstan is set this year to make important decisions on government spending increases and on whether to continue the public-sector reforms that started so well in the financial sector.
The thoroughly reformed banking and financial system has now reached the level of eastern Europe. The number of banks has been trimmed from 230 to 32 in a decade. Banking assets are 35% of GDP (compared with 15% in 2000) and there is no reason why they should not reach Poland's level of 70% in a few years, since assets are doubling every two years.
For some banks growth has been spectacular. For example, Alliance Bank, the fastest growing, posted figures for assets up 168% in 2002 and 162% in 2003. "The cost of funding is pretty much the same for everyone," says managing director Kurmangazy Iklasbekov. "Our focus is on the quality of the service."
Big ambitions
The biggest bank, Kazkommertsbank, grew 73% last year to $3.1 billion in assets, says a managing director, Andrey Timchenko. "This year we are offering the first-ever subordinated Eurobond in the Community of Independent States (CIS)," he says.
Yerzhan Tatishev, chairman of Bank Turan Alem, the country's second-largest bank, says it grew 70% to $2.5 billion in assets last year. "We intend to build one of the biggest banking groups in the CIS," he says.
Against this rosy background, Grigori Marchenko, Euromoney's 2003 Central Banker of the Year, left the National Bank of Kazakhstan on January 1 to become first deputy prime minister.
In his four-year governorship, he is widely credited with a vigorous implementation of the reforms begun in 1993 by his predecessors and taking over and strengthening supervision of insurance companies and pension funds.
These supervisory functions were consolidated in a department inside the central bank and spun off as a new agency for financial supervision, located in the national bank building in Almaty, the economic capital.
It is headed by Bolat Zhamishev, a 46-year-old former deputy governor of the bank. Previously, he headed the national pension fund agency, was vice-minister of labour and, later, of finance. He now reports directly to the president.
Marchenko's replacement as national bank governor is Anvar Saidenov, 43, another deputy governor who had been running the financial supervision department for the past two years. He says he had expected to head the newly independent agency but instead was appointed to head the bank by president Nursultan Nazarbayev at the last minute.
Saidenov studied in Moscow and London. He spent three years with the European Bank for Reconstruction and Development in London and served a previous stint as a deputy governor and vice-minister of finance.
He and others say the main decision for Kazakhstan's economic leadership this year will be an enviable one: how much to save and how much to spend in the second half of the decade as oil production continues to grow at a steady rate.
About a third of the budget comes from oil revenues. To keep it stable, in 2001 the government decided that, for the following five years, budgets would be predicated on a benchmark oil price of $19 a barrel, with the difference being paid into an offshore national fund modelled on Norway's.
The fund now holds $3.7 billion, the country is a net creditor to the world and there is agreement that a $4 billion fund will be adequate for a country with a GDP of $30 billion and a population of 15 million.
So clearly the benchmark needs to be lifted for the next five years. The question is by how much.
Dramatically increasing spending on the woefully unreformed and corrupt health, education and infrastructure sectors could be a waste of money, says a senior official from an international lending institution who declined to be identified.
"There is a general understanding of the need to tackle poverty," says Saidenov. He adds: "We have funds. "The point is to use these funds in a correct manner, because nobody can deny that there is corruption, misuse of funds, misguided policies."
Whether Marchenko will have the backing of the president to reform large parts of the public sector remains in doubt. Oraz Jandosov, a key reformist and former central bank governor, says that when he served a stint as first deputy prime minister for the economy, he was not allowed to choose his ministers, which, he says, considerably diminished his influence.
A senior banker who requested anonymity says that there was no indication that Marchenko would fare better than Jandosov has been able to do. "His job may just be a case of window-dressing," he says. "In any case, I don't think he'll be able to choose his ministers." The significance of this will become clear in time.
In the end, the decision about how far to extend the reforms will depend on the will of president Nazarbayev, who has ruled Kazakhstan with an iron – yet non-violent – fist since before independence in 1991.
His economic record so far is widely viewed as positive. While Russia stuck with Viktor Gerashchenko, often derided as the world's worst central banker, Nazarbayev appointed Daulet Sembayev, a diminutive, gravel-voiced central planner with no prior knowledge of western finance, or macroeconomics, during the storm-tossed introduction of the national currency in 1993.
It was Sembayev who hired in turn Jandosov, Kadyrzhan, Damitove and Marchenko, who, in that order, succeeded him as governors and carried out the reforms that, Marchenko said, would not have been possible without the support of Nazarbayev.