KAZAKHSTAN BUSINESS REFORM.   Term Paper ID:22708 Click to get this paper

Essay Subject: Examines former Soviet republic's privatization of large businesses, Soviet influences, fiscal & labor environments, funding, effectiveness, future.... More...

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Paper Abstract: Examines former Soviet republic's privatization of large businesses, Soviet influences, fiscal & labor environments, funding, effectiveness, future. Paper Introduction: PRIVATIZATION OF LARGE BUSINESS ENTERPRISE IN KAZAKHSTAN Introduction This research examines the process and progress of the privatization of large business enterprise in Kazakhstan. Large business enterprise, as the term is used in this research, refers to industrial concerns. The findings of this examination are presented in discussions focusing on (1) the nature of the problem--the need for economic reform, (2) the process of reform--reform initiatives and implementation, (3) the progress of privatization--successes and failures, and (4) prognosis for the future of privatization in Kazakhstan. Nature of the Problem: Need for Economic Reform The mine wo Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. There are fewlegal restrictions on who may organize an investment fund, and manyunsavory parties already have infiltrated the investment fund business inthe country. Brady, "Today, Kazakhstan, Tomorrow Russia?" Business Week, 25May 1992, 32. Puzanov, "Quite Tensions," Bulletin of Atomic Scientists 49(October 1993): 3 . Thefindings of this examination are presented in discussions focusing on (1)the nature of the problem--the need for economic reform, (2) the process ofreform--reform initiatives and implementation, (3) the progress ofprivatization--successes and failures, and (4) prognosis for the future ofprivatization in Kazakhstan. [23]Ibid. The attitudes of the public officials pose a serious impediment tothe successful implementation of Kazakhstan's privatization program. "Inside the Soviet Debt Machine." Euromoney, January 1987, 46- 54.Winestock, G. [2 ]J. The coupons may be used only to buyshares in investment companies. [22]"Big Firms Shy From Kazak Selloff: But Traders Get Ready," Platt'sOilgram News 73 (7 August 1995): 1. Economic reform in the Former Soviet Union wasinitiated prior to that country's dissolution by the last president of theSoviet Union, Mikhail Gorbachev. Gorbachev, Perestroika: New Thinking for Our Country and theWorld (New York: Harper & Row, Publishers, 1987), 149. President Nazarbeev seeksforeign investment in the petroleum industry, however, future developmentin the industry is dependent upon the construction of an oil exportpipeline. [13]Ibid. S. Approximately 38 large business enterprises have been privatized inKazakhstan.[19] Most of these enterprises are in the petroleum,pharmaceutical, and metal mining industries. [3]D. "Kazakhstan's Move to the Market: Difficult Economic Conditions Lead to Accelerated Reforms." Middle East Executive Reports 18 (March 1995): 8-13.Shirreff, D. Indications of poor worker attitudes are difficult are conditions andbehaviors in many Kazakhstan industrial facilities, where work areas tendto be "very messy," the quality of the finished products is generally poor,product labeling is "messy and uneven," the storage of goods in process is"haphazard," and the equipment-when operational- either breaks "downconstantly" or is "undergoing adjustment."[13] How much of the problem isthe result of poor management or poor worker attitude is "difficult tojudge, but much greater emphasis must be placed on efficiency within thecompany to ensure the success of a newly privatized firm."[14] The chances of "finding experienced, well-trained managers are notgood" in Kazakhstan.[15] In Soviet era, "all instructions came down thechain of command from the state officials. [16]Ibid. "Don't Blame Moscow." Bulletin of Atomic Scientists 49 (October 1993): 52."Big Firms Shy From Kazak Selloff: But Traders Get Ready." Platt's Oilgram News 73 (7 August 1995): 1-2.Brady, R. [14]Ibid. [9]O. The coupons cannot be used to buy shares in companies,and the coupons may be sold for cash. Winestock, "Privatization Plan Aims to Lure Western Cash,"Journal of Commerce and Commercial, 6 May 1994, 1A. The principal economic goal of the reforms was an increase ineconomic productivity.[4] The most significant of the reforms targetedprimary industry and large enterprise.[5] While Gosplan, the state'scentral planning agency, continued to play a major role, individual largeenterprises were permitted to make major decisions related to products tobe produced, quantities to be produced, and product quality. [19]G. The large enterprisesthemselves had an incentive to become more productive, because the state,in the wake of reform, was prepared to permit inefficient enterprises tofail, a policy that had never before been contemplated in the Soviet Union.[6] Process of Reform: Reform Initiatives and Implementation Although the government of independent Kazakhstan enacted lawspermitting privatization and encouraging foreign investment within a fewmonths of the collapse of the Former Soviet Union, through October of 1993,private enterprise in the country has little success in attracting foreignprivate investment.[7] State-owned enterprise, however, attractedsubstantial levels of foreign capital. "Quite Tensions." Bulletin of Atomic Scientists 49 (October 1993): 3 .Saba, J. These reforms, however, were notcompleted prior to the collapse, and, as a consequence, the former SovietSocialist Republics became politically sovereign countries with economiesthat were neither fully centrally-planned nor fully market-driven. The rate of structural reform in Kazakhstan has been acceptable.[2 ]The rate of inflation has been slowed, an occurrence that have benefitedprivatization. Perestroika: New Thinking for Our Country and the World. [11]Ibid. A Rehabilitation Trust has been created to assistdistressed firms. "Revolution from Above." Canadian Dimension 26 (March 1992): 35- 38.Minor, M. "Privatization Plan Aims to Lure Western Cash." Journal of Commerce and Commercial, 6 May 1994, 1A-2A.----------------------- [1]D. "Pitfalls in Privatization in Kazakhstan." Business Forum 19 (Winter-Spring 1994): 33-35.Naylor, T. Planning for the future oftheir business. Nature of the Problem: Need for Economic Reform The mine workers in the Soviet Socialist Republic of Kazakhstan playeda key role in the development of the environment within which the demise ofthe Former Soviet Union occurred.[1] It is, thus, not surprising thatKazakhstan both initiated a process of privatization and invited foreignbusiness entities to invest in the country.[2] Kazakhstan became anindependent country in December 1991, in the wake of the dissolution of theFormer Soviet Union. Price rises approached the 1, percent levels in 1993.[11] A highrate of inflation tends to moderate the effects of high interest rates.Nevertheless, foreign investors tend to view a high rate of inflation as agreater detriment than high interest rates. H. H. The ultimate success of the privatization program, thus,depends upon the effectiveness of the investment companies. [21]A. The inflation rate, whichaffects bank loans negatively, is one of the major obstacles to keeping anewly privatized company solvent. Koen, "Kazakh State Oil enterprises Move TowardPrivatization," Oil and Gas Journal 93 (21 August 1995): 48. [1 ]Minor, 33. Specifically,these large enterprises were given the authority to improve productivitythrough incentive compensation, discharge inefficient employees, and retainprofits for reinvestment within the enterprise. D. Shares in the investment funds,however, may not be sold until the entire privatization program iscompleted. Kazakhstan's oil and gas industry iscontrolled by various government agencies and companies. [12]Ibid., 34. Major foreign petroleum firms are "indifferent about theprivatization of Kazakhstan's petroleum industry."[22] Major foreigninvestors apparently "do not believe the legal and financial infrastructureare in place to manage the privatization."[23] BibliographyArdaev, V. The Ministry ofOil and Gas is responsible for production and refining; the Ministry ofGeology is responsible for minerals programs; and state-ownedKazakhstanneftegaz is an integrated oil company. Minor, "Pitfalls in Privatization in Kazakhstan," BusinessForum 19 (Winter-Spring 1994): 33-35. [5]Ibid. [7]V. Prognosis for the Future of Privatization in Kazakhstan In spite of the problems encountered by Kazakhstan's privatizationprogram, the country and its economy are described as "a modern,sophisticated society with a developing economy. PRIVATIZATION OF LARGE BUSINESS ENTERPRISE IN KAZAKHSTAN Introduction This research examines the process and progress of the privatizationof large business enterprise in Kazakhstan. Progress of Privatization: Successes and Failures The privatization scheme in Kazakhstan is different from those inRussia and other Eastern European countries.[18] Under the Kazakprivatization program, coupons were distributed to all of the country's 17million citizens. "Changing the Economic Mechanism in the Soviet Union." Planning Review, 14 (8 February 1986): 3 -37.Puzanov, O. Saba, "Kazakhstan's Move to the Market: Difficult EconomicConditions Lead to Accelerated Reforms," Middle East Executive Reports 18(March 1995): 8. The prime impetus for the economic initiatives of Former SovietPresident Gorbachev was a dissatisfaction with the direction of economicperformance.[3] Economic growth in the Soviet Union had become stagnant,the demands of consumers were not being met, and productivity wasdeclining. Shirreff, "Inside the Soviet Debt Machine," Euromoney, January1987, 46-54. In an 18-month period in 1993-1994, asan example, electricity rates increased 35 percent. D. In addition, they lack the necessary schooling background,and experience to be responsible managers. Most of the funds, however, are thought to be honestly andefficiently managed. S. [6]M. New York: Harper & Row, Publishers, 1987.Koen, A. "Kazakh State Oil enterprises Move Toward Privatization." Oil and Gas Journal 93 (21 August 1995): 48-5 .Mandel, D. [4]T. [17]Ibid., 35. Economic and businessgrowth has been hampered by previous Soviet domination."[21] The petroleumand metal mining sectors appear to be the key to the long-term success ofKazakhstan's privatization program. The reasons underlying thedifficulties experienced by private enterprises in attracting foreignprivate investment were the very same factors that created difficulties forthe privatization process in Kazakhstan--high interest rates, high rate ofinflation, utility rates that are both high and unstable, worker attitudes,workforce composition, managerial inexperience, attitudes of publicofficials, and inconsistent application of the privatization laws.[8]Further, the majority of the population in Kazakhstan proved to be highlyresistant to political change.[9] In 1993 and 1994, interest rates in Kazakhstan frequently hoveredaround the 3 percent levels.[1 ] Further, interest rates in the countrytend to be highly unstable. [2]R. [15]Ibid. New restrictions have been placed on holding companies,many of which have developed into monopolies within the Kazakhstan economy. 'Managers' in the various areashad the Important decisions made for them. Naylor, "Changing the Economic Mechanism in the SovietUnion," Planning Review, 14 (8 February 1986): 3 -37. Large business enterprise, asthe term is used in this research, refers to industrial concerns. [8]M. "Today, Kazakhstan, Tomorrow Russia?" Business Week, 25 May 1992, 32-33."Free for All." Economist 331 (3 April 1994): 42.Gorbachev, M. Approximately four-fifths of the bureaucrats are hold-overs from theformer Soviet-era administration.[12] These administrators have noexperience with a market-based economic system, and are highly resistant tochange. Now they must make criticaldecisions that affect their businesses, but they have neither the necessaryinformation to make these decisions nor the ability to get thisinformation. including financial planning, has not been a part of theirwork history."[16] Kazakhstan has a law that exempts newly privatized firms from payingtaxes for several years.[17] The interpretation of this law varies,however, because it is not applied uniformly throughout the country. High interest rates both motivate Kazakenterprises to seek joint-venture partnerships with foreign firms, andfrighten foreign investors away from the country. Ardaev, "Don't Blame Moscow," Bulletin of Atomic Scientists 49(October 1993): 52. Mandel, "Revolution from Above," Canadian Dimension 26 (March1992): 35. The investment companies are permitted tobuy shares in privatized companies. [18]"Free for All," Economist 331 (3 April 1994): 42. 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