Privatisation and Corporate Governance in Kazakhstan and Uzbekistan : Insights from a Corporate Survey in Food and Light Industries

This paper presents the results from a private sector survey among companies of the food industry in Kazakhstan and Uzbekistan as well as of the light industry in Uzbekistan. It provides microeconomic evidence on the change in the companies’ ownership structure resulting from the privatisation programmes as well as the development in more recent years. The privatisation of companies was more profound in Kazakhstan than in Uzbekistan where the state still retained larger shares in its companies and even managed to re-increase its stakes due to strategic considerations. While the data confirm and prove the extent of the insider privatisation in Kazakhstan, Uzbek companies‘ ownership got more dispersed and company insiders play a very subordinate role. The use and design of manager contracts in these two countries does not turn out to feature basic incentive components on a broad scale as in the case of the Chinese management contracts contradicting the hypotheses of a similar application in Uzbekistan’s de facto state enterprises. Company control was highly transferred into the responsibility of corporate bodies in both countries though state interference in the companies’ affairs remains an important aspect of doing business, especially in Uzbekistan. The companies face further obstacles which hinder and retard the development of a sound private corporate sector, especially a high tax burden and bureaucratic red tape, macroeconomic instability, lack of finance and an inadequate provision of infrastructure. The state, especially in Uzbekistan, still intervenes in the private sector in favour of selected companies which improves these companies’ perception about the role of the state. On the other hand, this state behaviour prevents or at least delays the dissolution of the inherited structural and corporate distortions which would improve corporate efficiency and would be essential for a successful transition to a market economy.

Fiscal Decentralization in Centralized States : The Case of Central Asia

The resource-based Central Asian countries Kazakhstan, Turkmenistan, and Uzbekistan constitute a special case for fiscal decentralization. Political and administrative centralization is accompanied by the centralized administration of resource rents and weak governance structures on local levels. Following best practices, fiscal decentralization is on the reform agenda in all three transition countries. As advocated in economic literature and indicated in empirical evidence, policymakers expect positive results on macroeconomic outcomes as well as on overall state governance. But the mechanism for the positive effects of fiscal decentralization is the creation of appropriate incentives by transferring information rights and authority to the local levels. How do the centralized states of Central Asia apply fiscal decentralization and what are the outcomes of their policies? To answer this question, we analyze the progress of fiscal decentralization in Kazakhstan, Uzbekistan, and Turkmenistan since independence. In all three countries we observe high levels of fiscal decentralization. The de-facto institutional design of fiscal decentralization, however, is not appropriate to make incentive mechanisms work. Fiscal autonomy at the revenue and expenditure side is almost absent, and the transfer system lacks transparency and predictability. Administrative and political centralization are the drivers of this institutional design and create obstacles for the merits of fiscal decentralisation to materialize.

Die Pipeline Odessa-Brody. Entscheidung für die strategische Leere

Am 4. Februar diese Jahres ging der bislang heftigste Streit um die Nutzung der seit Mai 2002 leerstehenden Pipeline Odessa-Brody zu Ende: Das ukrainische Minsterkabinett entschied nach einem halben Jahr Diskussion, Gutachten und Gegengutachten, die Pipeline lieber richtig herum (von Odessa nach Brody) gar nicht zu nutzen, als verkehrt herum (von Brody nach Odessa) russisches Öl zu pumpen. Damit hat sich die Ukraine eindeutig für die „westliche Variante“ der Pipelinenutzung entschieden, die auch von Deutschland als potentiellem Abnehmer für Öl aus dem Kaspischen Raum favorisiert worden war. Problematisch an dieser Entscheidung ist, dass der Ukraine voraussichtlich ein weiteres Jahr Verluste aus der Pipeline entstehen. Zum einen konnte die Zulieferung kaspischen Öls trotz Verhandlungen mit Aserbaidschan und Kasachstan noch nicht gesichert werden. Zum anderen ist die Pipeline noch nicht an das westliche Leitungsnetz angeschlossen, der Bau des weiterführenden polnischen Teilstücks nach Plock wurde noch nicht einmal begonnen. Durch die strategische Entscheidung der Ukraine wächst nun der Druck auf die potentiellen Abnehmerländer im Westen, den lobenden Worten beim Bau der Pipeline Taten folgen zu lassen.

Opting out of Blueprints? The fate of Emissions Trading in Kazakhstan as a lesson for international climate policy

Emissions trading system (ETS) as an instrument to induce emission reductions in the private sector are largely favoured by economic literature and financed by international organizations. National ETS is the first step towards international emission trading, and it allows to report fix amounts of future reductions in worldwide climate scenarios and climate treaties. However, an ETS is not the only option to cope with emission reduction, and blueprints do not fit them all. Kazakhstan, which in 2013 was the first country among the post-Soviet states to implement an ETS, suspended ETS in February, 2016. Considering the challenges of the ETS in Kazakhstan in country context, we argue that a carbon tax could be a better option. A tax provides price certainty for business, less transaction costs, and a potential double dividend for the environment and the economy if revenues are wisely spent. National autonomy and international obligations are not inconsistent, as the experience of other countries shows

Inside Oligarchs versus Outside India: technical (non)progress and environmental effects in Post-Soviet Steel

The recent case of the Ilva Steelworks in Italy demonstrates that outdated technology in steel production can persist and respective environmental damage can occur if economic and political interests that stick to an overcome developmental model collude. Steel played also a prominent role for economic development of the Soviet Union, but over decades under the plan mechanism a pronounced technological backwardness of the sector evolved. Despite privatization, trade liberalization and rising prices for input goods since transition, backwardness persists till now and environmental damage caused by the sector is a serious concern. Our article examines technical (non)progress in the steel sector of Russia, Ukraine and Kazakhstan and looks at the explanatory factors for backwardness, with a special focus on ownership. To overcome the locked-in situation, we propose that EU anti-dumping investigations and trade agreements should take into account a broader range of potential subsidies and include environmental factors alike

Privatisierung und unternehmerische Probleme in Zentralasien : Ergebnisse von Unternehmensumfragen in Kasachstan, Usbekistan und Turkmenistan

This paper is presenting the results of two surveys undertaken in Kazakhstan, Uzbekistan and Turkmenistan during 2002-2004. Altogehter 136 privatized enterprises of food processing and light industries have been questioned, supplemented by qualitative interviews of selected enterprises. The overall progress in privatization of the surveyed industries as expected is in line with the respective indicator of the EBRD-Transition Index. A new, although not surprising result is the existence of a russian-style insider-privatization in Kazakhstan. A fundamentally new result is the non-existence of a chinese-style privatization in gradual reforming Uzbekistan. As in China, privatization is proceeding slowly, but in contrary to China, incentive inducing manager contracts are not widely used. Privatization in Turkemenistan reminds one of private collective enterprises coming into existence at late soviet times, who were allowed to occupy certain niches of the plan economy. The different proceeding of privatization in the three states results in differing enterprise problems. In Kazakhstan, insider privatization causes coporate governance problems like asset stripping and difficult access to credit, but restructuring is active and performance shows a strong upward trend. In Uzbekistan, enterprises in many respects still perceive support by state organs. Former line ministries, who are managing the state shares, still have control- and management rights. Hence many enterprises stay passive and show weaker performance than their counterparts of the same industry in Kazakhstan. In Turkmenistan, privatized enterprises can not compete with highlysubsidezed state enterprises and newly established joint ventures and thus stay in their niches.