We asked Petr Svoik, the well-known economist whose economical forecasts frequently (and unfortunately) come true and the person who had experience working for government, to comment on the situation of increasing prices. In our opinion, the present situation shows that the economical problems in Kazakhstan are for the large part caused by the ineffective administering process. How and why does it happen?
- Petr Vladimirovich, to which extent the government and in general state organs are responsible for the increase of inflation?
- Considering the present state structures it is extremely difficult to say which member of the Cabinet is responsible for prices. The Ministry of Finance is definitely not. The Ministry of Economics has never monitored this issue and no one from its leaders said something definite about it, although ideally it should not be the case. The Statistics Committee examines the level of prices but can not influence it. Traditionally only the National Bank was responsible for prices. The population, community and journalists used to address all questions about prices to the National Bank.
In the meantime, the National Bank is able to influence only the monetary factor and there are many more other important price factors.
The present uncontrollable increase in prices revealed the problems that were implicit for many years. The state and a number of experts affiliated with it were euphoric when in 1999 oil prices started to increase, resulting in increase of the National Fund and the 10 % GDP growth rate. However, they didn’t consider seriously the simple fact that this economy was built on export of raw materials and import of absolutely all necessary goods.
- The monetary and non-monetary factors of inflation are sometimes a discussion topic among independent experts. Which factors prevail in our country?
- The inflation is a complex event and involves many factors - both monetary and non-monetary and the latter dominate. However, this fact was ignored and the National Bank made the government and all of us think that only monetary factor causes the increase in prices. However, it is not the reality.
What do we have now? First, the infrastructure component of pricing in Kazakhstan is problematic. The Kazakh transport, electricity and public utility industries, which influence every price, are in archaic condition, lack needed capacities and are catastrophically ineffective in everything. More specifically, they lack energy-efficient technologies. These industries as well as others, for example, road industry, require large investments not only to maintain the present capacities but also to enlarge them. Until now these industries were maintained using old Soviet reserve and as it came to its end the new investments are required.
These investments will result in higher utility, electricity and transport tariffs as well as in higher prices on everything else. And the government can not think of the prevention methods.
Moreover, there is no theoretical understanding of what parts of the investments and restoration costs could be included into infrastructure and utility natural monopolies’ tariffs. Also it is not clear how to obtain the money needed for the part of investments excluded from tariffs. For example, what money resources and on what terms should the government invest in infrastructure and public utility companies? And if there is private investor, what is the procedure of repayment? There are no answers to these questions. As there is no the required legislation. Thus it’s the description of the first non-monetary factor that caused the price growth.
Second, the domestic goods are quite expensive and hardly compete with the similar products from CIS countries even at the local market. Let