For reasons adduced in Chapter 4, Kazakhstan’s industrial economy was substantially concentrated in primary sectors like ferrous and nonferrous metals, fuels, electricity generation, metallurgy and machine building, and chemical concerns at the time of the country’s independence in December 1991. The enterprises were generally large, each sector had only a few, and they were tied closely to related enterprises elsewhere in the Soviet Union. Moreover, around 90 percent of the enterprises in Kazakhstan remained under all-union control until just before independence, even though the Soviet government had taken a number of initiatives to decrease control of various aspects of the economy (Pomfret 1995:79). Not until March 1991 was control of the large enterprises transferred to the government of Kazakhstan and then only as a result of deliberate negotiations undertaken by President Nazarbayev after the first of what would become several coal miner’s strikes in Karaganda.
According to official figures, there were 37,000 state enterprises in Kazakhstan at the end of 1991 (World Bank 1993:75-7). Of these, 200 were very large enterprises with 5,000 or more employees. Another 1,300 were classified as special enterprises because they were in the mining, oil, power, water, heating, and/or telecommunications sectors and thus of particular concern to the new government. Of the total of 37,000 enterprises, about 18,500 (or half) comprised the industrial economy, and those in metallurgy, mining, heating, and electricity accounted for over 60 percent of the fixed assets in the industrial sector. There were also a substantial number of ‘one-company towns, ’ cities built to support the development of a specific resource and whose entire livelihood depended upon the continuation of that enterprise. Thus, Kazakhstan’s economy was in many ways very fragile despite the great mineral wealth upon which it was built.
Planning even before independence, the government developed a three-phase program to privatize virtually all of the state enterprises. 1 In the initial phase, the legal framework was to be developed, and up to 50 percent of the small and medium-sized enterprises, that is those with 200 to 5,000 employees, were to be privatized in the small-scale privatization program. 60