About global financial crisis;

4 ноября, 2008

Zarina Pakhirdinova

Anvar Saydenov, Chairman of National Bank of Kazakhstan:
Role of government, budgetary resources at the period of turbulent events are very important

— If we talk about lessons that everybody should receive from these events, including National Bank and system of governmental regulations, most important in my opinion is coordination of activities; in our case among government, National Bank and Agency of Financial Regulation. Second we should act quickly and adequately because sometimes into account are taken not only few days but even few hours. For example, when a year ago we used wide radical measures for usage of National Bank reserves for maintaining Tenge exchange rate in short period of time we lost large size of our reserves, for 2007 they decreased by 7 billions, whereas for the period of August – September they decreased by 6 billions. Factually we used a little less than third of our reserves just to calm down our populations, which received wrong signal and started massively withdraw their deposits and this as the snowball could have lead to higher instability level in our banking system. That is why any actions must be taken quickly and decisively. And finally we once more receive additional proves that in any county banking system is special element in overall economical body, lets say its health is not only important for itself, not only for monetary officials, regulators, government but for society in general.
I think that if there were not banking industry reforms we would suffer from the storm much more. But on the other hand we could make such paradoxical conclusion, if our system would not have been integrated into global structure then this storm could have gone us untouched. However isolation could never be seen as a step towards progress. In addition we understood that role of government, budgetary resources at the period of turbulent events are very important. This is all correct, from the one hand strength reserves of our banking system allowed it to stay floating rather than sink, from the other we must strongly correct the course and maybe re-equip this ship.

Vecheslav Nikonov, “Politics” Fund’s president, “Russian world” Fund’s executive director, doctor of history:
There are high chances for such currencies as Ruble, Yuan, and Rupee to become reserve currencies.

For today creation of CIS united financial system is impossible. There is too low economical integration among members of CIS. I do not exclude that in future there will be something like Euro for our region. At the same time every country is interested in ensuring that all calculation would be done in national currencies or in Rubles. This is especially so if we take into consideration unpredictable dynamics of dollar, pounds, yen exchange rates. Western economies are growing slowly and their perspective is lower than of developing countries.
There are huge efforts for saving American economy both from USA and from “big eight”. Currently China is subsidizing American economy for almost half of trillion dollars. Russia is investing tens of billions into American capital commitments in order to keep their economy floating. For now American economy is not able to help anybody else and in this case saving of those that are sinking is their own task. EU actively coordinates its financial institutions’ efforts through actions of Central bank. All national regulating bodies in CIS are working as well. It is obvious that we need establishment of global financial system regulating institutes. World trade volume not matter of its size is tens times smaller than volume of world financial system. At the same time world trade is regulated by above national level – WTO, whereas financial markets are not regulated at all. That is why I consider that we must create world financial organization which will regulate money market in global frame. All existing global regulating instruments showed their inadequacy.
So called Bretton-Wood institutes include World Bank have much less financial resources than any developing country. Economical and social development organizations more look like expert organizations which are not able to influence on anything. World trade organization seemed to be quite effective instrument for conducting conference and antidumping procedures, but it powerless at current situation. None of existing global economy regulating institutes is doing anything and actually cannot do. That is why global crisis requires global answers but every country must protect their own markets. I think that there should be taken certain steps in order to overcome world financial crisis within the framework of CIS. But we must underline that Commonwealth countries are much prepared to face challenges of the crisis than western countries. We have rapidly developing economies whereas western economies show zero or negative growth In all CIS countries we have certain level of financial reserves but western countries, especially USA lack it.
Moreover Moscow and Astana are already financial centers. There are quite developed financial institution and stock exchange markets. But when there talks regarding turning Moscow into financial center they talk about making Ruble one of the reserve currency. That is to ensure that golden reserves of other countries are kept in Russian currency. Now countries are diversifying their golden reserves portfolio. They use basket of currencies: Euro, British pounds, yen… I think that in future there are high chances for such currencies as Ruble, Yuan, and Rupee to become reserve currencies. Whereas Kazakhstan even turning into serious financial centre cannot hope for national currency to become reserve currency.

Yelena Bahmutova, Chief of Kazakhstan Agency for regulating financial market and financial institutions (AFR):
Those banks which will overcome this strength test will become even stronger

We always must look into situation in dynamics. Yes system is currently under stress, it is being tested. That is why there must be patience and tolerance. We must underline not only our mistakes but lessons that financial institutions learned from unstable period. In any case they received this attack with dignity, adapted their systems, they did not try to transpose their problems on others and this creates certain trust level.
We are young country and our financial system is built on our eyes. We must not forget about people who stood at the roots of its independence. Strict rules which allowed our banks to withstand today were set exactly at that time.
When people say that we lost leading positions in CIS this is not quite true. Any crisis could be overcome only by strongest. There is famous saying: “They give two unbeaten for one beaten”, i.e. those banks which will overcome this strength test will become even stronger. This will be their competitive advantage especially in CIS framework.
I believe that we will have such model which will be good in future as well. Today it does not exist because where are in situation with worldwide constant changes in game rules. On our eyes we see collapse of such system as investment banks, maybe there will certain transformation. I think that those 16 years which were used for construction of domestic capital gave us invaluable experience and knowledge of Kazakhstan market which could not be received otherwise. Plus an experience received during unstable period will give them additional weight.
As for the rumors that government is trying to enter into private banks through purchase of their shares this is too exaggerated. In reality government is not willing to grasp banking sector in this way, I have to underline that we are talking only about timely intervention. Only if shareholders could not or will not be able to participate in this process due to certain problems and if this situation will be dangerous for system, deposits and other clients, and only if bank will have major share on financial market, only then government will intervene spending taxpayers money in order to save this bank. This measure will be used only to keeping investors’ trust. We should not be viewing this as change of regulation concepts, movement from private capital towards governmental capital because it is not true.
This is described in the Law project which we presented in the Parliament. I believe that its major part will not have any changes. I consider that high development level of our society will not allow changing idea of the law and used it in other, selfish ends. There are enough instruments to stand against such situation development.

Alexander Chaliy, First deputy of Ukrainian minister of foreign affairs
(1998-2004). Extraordinary and Plenipotentiary Ambassador:
There are at least 10-15 countries in the world that are willing to become world financial centers

Recently German minister of finance made a statement that now America does not exist as the only financial superpower, world is turning into multipolar system.
The thing is that specialists have red line between united and common environments. That is why if we are discussing formation of united financial environment between Ukraine, Russia and Kazakhstan then we must understand that such space in which all financial streams will not have national regulations rather there should be developed system of above national regulations, above all three governments, here my answer is obvious – Ukraine will never go for creation of united environment is post Soviet system, its future is Euro integration. In perspective, maybe in far future we will become Euro country, but we will not become country of new Ruble or any other currency. In this context I negatively answer your question and want to ensure that you do not have any illusions. From the other hand if we are talking about transformation, which is currently under place around the world, in financial and political spheres then in this context integration is possible. For example Kazakhstan financial capital is rapidly coming to Ukraine, this in accordance means that mutual interests between Ukraine, Russia and Kazakhstan will be getting stronger.
If this is so then we must understand that there are at least 10-15 countries in the world that are willing to become world financial centers. These are as the rule great powers and other financially independent countries such as Singapore and Switzerland but without global coordination of all leading financial countries we will not be able to find an answer. In this context position of President Medvedev which says that neither Great 7 nor 8 are able to find an answer to global crisis without China. This is also true regarding Brazil and India, talking about regulations without them is impossible. Second layer countries – non Great powers such as Ukraine and Kazakhstan are not Great powers in geopolitical context – for us this is big happiness because being a Great power is not so easy. In any case small countries will dependent on leading economies of the world that is why it is correct that your President is insisting on global dialogue between Russia, USA and European Union. Kazakhstan is the country which promoting real integration projects on Eurasian territory.
Here I would like to give one interesting example. Here in Ukraine we have such movement named Yalta strategic initiatives. Every year in Yalta in Livadiy palace there is a meeting of high ranked representatives from all countries, they discuss modern trends and place and role of Ukraine in this process. This year while entering well known hall, which saw meeting of Stalin, Churchill and Roosevelt I saw another person on the picture – sitting Mao. This was work of one Chinese famous artist, this way he wanted to underline that if this meeting would have been conducted today then Mao Tszedun would have to be present there. I would like to say that representatives from USA, Europe, Russia, Ukraine and Asia at these meeting which is our mini Davos came into agreement that trend of Asia and Eurasian directions, I underline Eurasian because Kazakhstan is Eurasian country will get only stronger both in middle and long term perspectives. This is so because all resources including energy and production resources: metals, mineral stuff, etc are really valuable. For today most of resources are concentrated in Eurasian continent including human resources which is main progress force. Baby boom in this region leads to savings boom.
What is main difference between Ukraine and Kazakhstan? We are similar in the context that both are located between huge civilizations, Eurasian and European. We are on the breakthrough between two civilizations and identify ourselves as European civilization and are trying to integrate into European Union. Kazakhstan is demonstrating itself as one of the Eurasian locomotives. It does not have such choice problem as Ukraine. I think that in closest future we will completely sure that there is no best alternative rather European integration. We will be trying to solve our problems looking at them how this will help us in integration with EU. From the other hand there will be change of idea which is dominated in Ukrainian society which is translated by several political parties. They consider that if we want to integrate with Europe as soon as possible then we must break all our relations with post Soviet territory, with Eurasia. Today we understand that it is all upside down, without understanding that we are binding chain between Europe and Eurasia we could not achieve our goal, this will be dominating idea in Ukraine. There will be change of paradigm point of view. We will understand that for successful European integration we need to straight down over relations with Eurasia, first of all with Russia. From my point of view today certain political consensus is being developed which will lead to such decisions.

Michael Delyagin, Director of globalization problems institute:
Set impossible goals – you will receive at least something

An idea that Russian, Ukrainian and Kazakhstan financial systems are on the same level are very much exaggerated and please do not understand this as great power chauvinism. Ukrainian financial system under total control of western investors, Russian exchange market collapsed but nobody noticed that. Kazakhstan is most modernized country on post Soviet territory but its banking system turned out to be unstable. Russian system is quite more stable, this is of course first of all because it is much larger – but most important it more institutionally developed. Even exchange markets on our country played not only speculative role in the economy but with the help of “securitization” they played essential role in attracting finances into Russian economy. In any case unification of these financial systems, formation of united financial environment and then united financial infrastructure is a good thing. At the time we Euro was only created everybody repeated: “integration is a good thing”. Of course there would be minor disagreements. Russia as the largest country with concentrated financial streams will consider that it feeds everybody. Ukraine, Belorussia and Kazakhstan will say that their opinions are not taken into consideration, etc. However since there are not any principal disagreement between Russia and Kazakhstan it is impossible to draw economical borders. Russia and Belorussia have funny economical relations as well, I am not even discussing situation with Russia and Ukraine which has fearless political fight but these “damn Ukrainian fighters” are sponsored both by Western and our businessmen.
That is why in economical terms Russia cannot exist without united economic environment including financial unification with these countries. This is minimum required for survival; we could be well without Tajikistan and Azerbaijan but not without Kazakhstan, Ukraine and Belorussia. Even technological chains that are left from Soviet times will be broke down but fixing them inside one country is not only expensive but not even profitable and nobody needs that. Process of more active movements towards EurAsianEC is developing. When Glazyev who is not liked by our political elite rather than any governmental official was appointed as head of EurAsiaEC customs union is the positive move. This person is highly qualified, he possessed with it, and he has strict idea of what could be foregone and what could not be. I am happy with that. United Europe should serve as an example for us. They of course gone too far in enlargement but we should not hasten so much.
People say “set impossible goals – you will receive at least something”, but in reality we can talk only about regional status for Almaty – Central Asia and maybe part of China, which I however doubt, we will have to fight with them, this is natural. For know we can attract Afghanistan, Pakistan, Iran but due to political factors this is hard to do. Moscow is financial center for much larger region; it will include Central Asia, maybe post Soviet territory, Baltic region, certain parts of China, Poland and possible Finland because crisis will hit them strongly.
There is such understanding as global competition. How Moscow could compete with Dusseldorf, London, Beijing and Tokyo? First of all we must built a competitive economy at least similar to Portugal compared to GDP per capita, only then we could set up ambitious goals. We have certain region; we first must acquire it, if we could move further we will. Crisis could open wide opportunities but it could also keep them close, why make predictions.
Russia received very strict punch and it will continue receiving them because at certain time and even today we continue uniquely stupid politics for creating artificial money deficit inside the country. Money which were earned by the country were thrown outside the borders. As the result our enterprises took the same money as loans from Western banks. They started to have liquidity problems and stopped returning our money for interest rates and we turned into depression. Economical growth could be equal 5% but in reality we have great lack of credit resources, necessity to turn external loans at without any refinancing. Measures taken by the government are not enough. From the one hand it solved the problem of supporting banking system liquidity and worst case scenario is behind us. In middle of September there was a real danger for banks to lose their clients’ deposits because panic from business groups transferred to general population. This problem could have been solved without using forces, external pressure, etc. But there is much larger problem – we must refinance not only banking system but economy as the whole. We must restart refinancing mechanism which we gave to the Western world. This requires more qualified financial control, more qualified strategic vision and I am not sure that our activists could solve this problem. If we could not solve this problem before end of the year then in autumn 2009 or spring 2010 we will face systematic crisis: disorganization of economy, politics, reformation of ruling bodies and change of economical course, its large rationalization. Of course we would love to achieve this without crisis.
Goal before our government is very simple – save system of payments and loans. If private banks are not able to withstand the crisis and ask for liquidity support which equals their accumulated capital then why should we even trouble with them? It is much simpler to nationalize them and later privatize, or introduce external financial management. Why does it happen in our country? Banks receive money for refinancing, however there are not any limitations regarding its use. Tomorrow this money turned out to be on speculative markets – on exchange market we notice wild jump with small volumes, on FOREX Russian Federation lost 10 billion dollars in world reserves within first three October days. We must forbid speculative operations for the banks, this means strict financial control from the government.

Sergei Dubkov, head of main banking control department, member of Directors’ Council (Belorussia):
Countries that have common history, mentality, economical interests and vision of future must unite

Belorussian banks started integration in world banking system quite late. Most aggressive steps towards integration have been taken within few last months. Moreover share of non-resident banks in Belorussia among overall resource base is 12-14%. In aggregate of assessed capital it is 23-24%. In particular these numbers regarding assessed capital for the last year almost doubled. Regarding the resource base such parity is holding for the long period. We do not have direct dependency from international financial markets.
Unfortunately, but for current moment happily, we do not have developed exchange market and those global processes happening in exchange markets affect us minimally. However we highly depend from situation on debt markets in particular refinancing as attraction of loans in international markets. Secondly we have very GDP growth ambitious plans but as any developing country we have only limited internal resources. That is why currently most important for us is attraction of foreign investments. At the end of the last year it was decided that our country most become member of 30 most attractive countries for foreign investors according to World Bank methodology. If sometime ago we were only on 115th position then by the result of last year we are already on 85th place so we have the progress. Many serious steps have been taken in order to achieve this progress. Among them is cancellation of golden share, establishment of preferential terms for tax payments for small and middle size business in cities less than 20 000 people. This is serious expansion for free economical zones. We also canceled moratorium for movement of shares and equities, simpler tax system, etc. This is first moment, second: Belorussian banks actively consider going into international debt markets; of course currently such plans are being adapted. Today one of the major problems is financing planned economical growth. For now we do not have direct influence of world financial markets problems on our national banking sector.
In order to ensure economical effectiveness there must be mutual penetration of banking structures. This can be seen on the base of our country. We have Russian and Kazakhstan bank and this is quite correct that they act as locomotives of further integration.
Countries that have common history, mentality, economical interests and vision of future must unite. That is why it is quite logical that our National bank conducts consultations with colleagues from Russia, Ukraine, Kazakhstan and Baltic region. We are the neighbors and neighbors must be friendly to each other.

Natalya Boytsun, Ukranian deputy minister of economy, candidate of science, international finance professor:
I like high ambitions of Kazakhstan banks, they certainly have high chances

I think that true source of financial crisis is serious financial markets globalization. That is why separated efforts of certain countries to overcome this crisis will not be effective. Moreover, most serious methods which will truly allow eliminating reasons of the crisis, rather than only its consequences could be achieved by coordinated actions of many countries.
Of course this crisis will differently affect every country. There are expert opinions from WB and IMF that most of all it will affect such countries as US and European Union, whereas for the countries with developing economies this crisis will not be so bad. In particular there are forecasts that BRIC (Brazil, Russia, India, China) countries will be minimally affected by the crisis, because actually crisis started not as banking sector crisis. It was maturing for several years and there were few signs which could have helped to forecast it. These are problems on US mortgage market, re-orientation of investors into resource industry, food crisis, and high inflation rate which took place the entire world due to food crisis and other world economy aspects. Moreover all these processes have been influenced by slowdown in world economy and for now even decrease of Gross Domestic Product. However all these sings have been ignored, even though there is detailed description of them in the history. There is even special theory regarding fighting with banking crisis. There is expenditure scale for prevention and overcoming of such crises. This is very expensive pleasure measured in percentage of world Domestic Product but costs of failure are much higher.
I like high ambitions of Kazakhstan banks, they certainly have high chances. Ukrainian market is very attractive and has high capacity. From my point of view current macroeconomic situation only supports attractiveness for foreign capital. Presence of foreign banks in our system is growing on annual bases and if I am not currently mistaken equal to 36%.
But let’s remind ourselves Chinese experience. Only fifteen years ago among ten largest banks there was only one Chinese bank. If we open webpage of world economical agencies today Chinese banks strengthened their positions among top ten and top hundred leading banks. Everything depends on overall strategy, if it is directed towards larger presence in different countries then there definitely should be enough of financial resource and management skills in order to development strategic program of representing the bank in these countries.
Let’s imagine that fur Ukraine this is European integration. Development of any trade and economy processes with European Union countries is very important for us. We currently spend a lot of attention for development of investment climate and our relations with European Union in general and every country in particular. But as the specialist in international economical relations I would like to underline that development of trade and investment relations with CIS partners is even more dynamic. We happy that commodity circulation with Russia is constantly growing, for seven months of this year it is already 50% higher than same period of 2007. For example with Kazakhstan commodity circulation grew by 50% as well. Unfortunately investment cooperation does not grow as fast as trading. From the point of view of international trade this is definitely minus, because only those international relations that are bind with deep both side investments allow better strategic planning including trade and promote production on the territory of other country introducing own technologies, know-how. These are fastening strategic factors which will increase of commodity circulation even in future. For now we do not have such system and I believe that our businesses should work on it.