The Kazakh Economy: A Contrary View

From The Spectator, an interesting look at how the credit crunch has reached & affected Kazakhstan.  Unlike the bullish news we regularly see on the country’s petro-driven economy, this article notes:

“…these are troubling times for Kazakhstan’s 15 million citizens. The economy is slowing — from over 9 per cent growth in 2006 to an expected 4 or 5 per cent this year. Leading Almaty-based lenders — notably BTA and London-listed Kazkommertsbank — are in all sorts of difficulties. Only the super-conservative Halyk Bank, also London-listed, has avoided the meltdown. Many bank staff haven’t been paid for months. Almaty’s genial people are eager to elevate their living standards above those of parents and grandparents who toiled under the Soviet yoke. The fear is that economic slowdown, allied to contraction in the construction industry and an almost total lack of bank liquidity, will quickly shred their raised aspirations.

…Two vastly different structures sum up the contradictory forces dividing modern Almaty. On the road toward the mountains lies the brand new Almaty Financial District (AFD), a horrid, angular, steel-and-glass office complex inevitably designed by Sir Norman Foster. The twin towers of the AFD loom over the city, providing an aura of financial expertise it doesn’t deserve. Any Kazakh company worth its salt is listed in London, while Almaty’s tiddler of a stock exchange is reserved mostly for casual insider trading. Meanwhile, in the faded red-brick downtown district the refurbished 19th-century Russian Orthodox Zenkov Cathedral sits in verdant Panfilov Park. In mid-afternoon, babushkas fill Zenkov with beautiful, haunting choral singing. In the park outside, teenagers gather, rosy of cheek, wielding guitars and smiles rather than knives and scowls. While playing the ‘Test Your Strength’ machine, some of them were pushed aside by the park bully, the worse for wear after a few Derbes beers. But his paltry punch barely registered: his score, out of a thousand, came up ‘93: Weedy’. The freshly scrubbed teenagers howled; the bully stormed off; all was well in Panfilov again.

A nomadic people traditionally camel-rich but cash-poor, the Kazakhs display appalling taste when splashing the cash. On the highway south to Medeo and Shymbulak, the vertiginous twin venues for the 2011 Asian Winter Games, lies some of the world’s most vulgar real estate. One particularly vile estate clusters around a giant, plastic-fronted spa: at dusk, neon tubes encircling the building light up and jiggle around. ‘Atrocious, isn’t it,’ opines a Canadian oil-and-gas lawyer who has just moved into a three-storey pile that came fully furnished with white leather sofa, velour furnishings, and a kitchen straight out of a 1980s Habitat catalogue. Each home typically boasts three cars: his ’n’ hers SUVs and a Lada for the handyman-gardener.

Almaty’s bumpy boulevards are tailor- made for the thousands of black-tinted Land Rovers and Toyota Landcruisers that cram them every moment of the working day. At 8 a.m. the city is still asleep. By nine, the traffic has brought Gogol, Formanova and Dostyk avenues to a standstill. What do all these people do all day? Almaty’s service sector is badly malnourished, and few people have real office jobs. ‘I’ve been here two years, and I really don’t know what they do,’ says a British private-equity investor. ‘I think a lot of them just drive around.’ An old joke runs that while the Uzbeks to the south get rich and buy houses, the Kazakhs associate wealth with travelling in style. In the past that meant owning a camel train; the modern equivalent is a second-hand Mercedes. Occasionally you see truly spectacular crashes. One of the best involved a BMW that ended up on its roof, on top of a tram, still in one piece. The British investor’s first-floor office was once rammed by a car which had somehow become airborne at more than 100mph, driven by a drunken Kazakh wearing only a pair of tight red underpants. Amazingly, no one was hurt.

And however troubling the economic barometer here, at least Almatyites can forget their worries by trolling some of the world’s cheapest and weirdest shops. The city is home to thousands of ethnic Chinese, who occupy every nook of the street markets, and of the larger, indoor Green Market. One shop literally sold nuts and bolts — pistachios and DIY equipment. Another offered the double delight of Chinese-made ‘Typical’ brand sewing machines and The Best of Lassie on DVD. A third sold timepieces made by ‘Rolexo of Swaziland’. The owner, sporting an unconvincing wig, assured me they were not fakes. For proof, he pointed to the laughably high prices, which were, as my Canadian heifer-importing friend would undoubtedly agree, rather on the bullish side.”

This entry was posted on Saturday, August 30th, 2008 at 5:50 am and is filed under Kazakhstan.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

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