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Kazakstan - ECONOMY

Kazakstan - The Economy


Although Kazakstan has the potential to be a wealthy nation, since independence it has suffered consistent and precipitous economic decline. Reporting problems and incompatibility of data make precise measurement of the republic's economic shrinkage difficult, but it is generally accepted that, by the mid-1990s, GDP had dropped to about half of what it was in 1990 (see table 6, Appendix). Despite the presence of rich deposits of natural resources, the republic's industrial sector was developed in the Soviet period only in specific areas such as metal processing, chemicals, textiles, and food processing. The semiarid condition of much of Kazakstan's territory does not preclude the export of wheat, meat, and some vegetables.

<>Natural Resources
<>Work Force
<>Post-Soviet Economic Developments
<>Banking and Finance


Kazakstan - Natural Resources


Soviet geologists once boasted that Kazakstan was capable of exporting the entire Periodic Table of Elements. During the Soviet period, Kazakstan supplied about 7 percent of the union's gold, or about twenty-four tons per year. Since independence, the republic has attracted large foreign partners to develop existing or new mines. President Nazarbayev announced intentions to increase annual gold production to fifty or sixty tons by 1995 or 1996.

In 1989 the mines of Kazakstan yielded 23.8 million tons of iron ore and 151,900 tons of manganese. The republic also possesses deposits of uranium, chrome, titanium, nickel, wolfram, silver, molybdenum, bauxite, and copper. Major phosphate mines feed fertilizer plants in the southern city of Zhambyl. Three major coal fields--Torghay, Qaraghandy, and Ekibastuz--produced 140 million tons of hard coal in 1991, but by 1994 Kazakstan's national total had dropped to 104 million tons.

In the mid-1990s, all minerals in Kazakstan belonged to the republic. Authority for decisions concerning their development was delegated to the prime minister, provided that these decisions were consistent with laws on natural resource development. The fundamental law "On Natural Resources and the Development of Mineral Resources" was passed in May 1992, but its treatment of foreign development of minerals is limited to two brief paragraphs stipulating that foreign development be conducted in accordance with international and national law.


Kazakstan - Agriculture


In the early 1990s, agriculture was the second largest sector of the economy, contributing about 36 percent of GDP and employing about 18 percent of the workforce in 1993. The climate and soil of most of Kazakstan are best suited to the light grazing by which the nomadic Kazaks had traditionally supported themselves, following herds of sheep, cattle, camels, and horses about the open steppe. Despite such natural advantages, Soviet policy encouraged cultivation, especially in the northern parts of the republic. The major transformation occurred under premier Khrushchev during the Virgin Lands program of the late 1950s and early 1960s. Its objectives were to reduce Soviet grain imports to Central Asia and settle the remaining nomadic herdsmen of Kazakstan and Kyrgyzstan. Under that program, 60 percent of Kazakstan's pastureland went under cultivation. An estimated 30 percent of that land was not suitable for cultivation, however, and Khrushchev was ousted in 1964 after a series of crop failures in Kazakstan. In 1992 the total area under cultivation was 36.5 million hectares, of which 2.3 million hectares were irrigated. Much of this land is dedicated to large-scale wheat farming, which requires intensive capitalization and does not lend itself to privatization. Even with the emphasis on grain production, about 84 percent of the republic's agricultural land, or about 187 million hectares, remains devoted to pasturage, mainly of cattle and sheep. Continuation of the Soviet system of intensive livestock management, dependent on fodder more than on natural grazing, has left much grazing land unused and has distorted cultivation in favor of fodder production.

The primary agricultural regions are the north-central and southern parts of the republic. Grain production is especially important in the north-central region, and cotton and rice predominate in the south (see table 7, Appendix). Kazakstan also is a major producer of meat and milk.

In 1993 only about 1.5 percent of agricultural land was in private hands. Although some privatization had occurred, the bulk of Kazakstan's agriculture remained organized in 7,000 to 8,000 state and collective farms that averaged 35,000 to 40,000 hectares each. Many of those farms had moved into a transitional stage of joint-stock ownership, private collectives, or farming associations (see Post-Soviet Economic Developments, this ch.). The state also has maintained control of agricultural inputs and equipment, as well as some processing and marketing policies and operations. In the wake of price liberalization, the mandated state share of agricultural sales has decreased annually from the 1991 level of 70 percent.

Until the early 1990s, western Kazakstan was an important fishing area, but sharply increased salination has made the Aral Sea sterile. Fishing output dropped from 105,300 tons in 1960 to 89,600 tons in 1989. The current figure is probably close to zero, judging by the decision of Soviet central planners in 1990 to fly Arctic fish to Kazakstan for processing as a means of maintaining local employment in that operation.


Kazakstan - Industry


Kazakstan inherited a decaying but still powerful manufacturing and processing capacity from the centrally managed Soviet system. In that system, among Kazakstan's designated products for the general all-union market were phosphate fertilizer, rolled metal, radio cables, aircraft wires, train bearings, tractors, and bulldozers. Kazakstan also had a well-developed network of factories producing military goods that supplied about 11 percent of the total military production of the Soviet Union. In some areas of military production, Kazakstan had a virtual monopoly. In the post-Soviet era, much of the defense industry has stopped or slowed production; some plants now produce nonmilitary electronic equipment and machines.

Most of the republic's manufacturing, refining, and metallurgy plants are concentrated in the north and northeast, in Semey, Aqmola, Petropavl, and Aqtöbe (see fig. 5). In south-central Kazakstan, the most important industrial centers are Shymkent (chemicals, light industry, metallurgy, and food processing), Almaty (light industry, machine building, and food processing), and Zhambyl (chemicals, machine building, and food processing).

Structure of Industry

The energy sector is the most productive component of Kazakstan's industrial structure, accounting for about 42 percent of total output. Metallurgy generates about one-quarter of industrial output, divided equally between the processing of ferrous and nonferrous metals (see table 8, Appendix). Engineering and metalworking account for 6.2 percent of industrial output, chemicals and petrochemicals for 3.6 percent, and construction materials for 2.7 percent. Kazakstan's entire light industry sector accounts for only 4.8 percent of industrial output. In the Soviet era, the republic had more than fifty military-industrial enterprises, employing as many as 75,000 workers. Because Baykonur, one of the world's two largest spaceports, was located in Kazakstan, as were 1,350 nuclear warheads, the prosperity of this sector was assured during the Soviet period. Military-related enterprises produced or processed beryllium, nuclear reactor fuel, uranium ore, heavy machine guns, antiship missiles, torpedoes, chemical and biological weapons, support equipment for intercontinental ballistic missiles, tactical missile launcher equipment, artillery, and armored vehicles.

Production Levels

In general, Kazakstan's industry suffered a disastrous year in 1994, when overall output dropped 28.5 percent. The metallurgy and energy industries were the main contributors to the 1994 decline, although by percentage light industry (down 56 percent) and engineering and metalworking (down 43 percent) suffered the sharpest reductions. However, in the last few months of 1994 and the first half of 1995, production decreased more slowly. Although monthly production continued to decline compared with 1994, the rate of decline between 1994 and 1995 was about half the rate shown between 1993 and 1994. By mid-1995, the chemical, oil-refining, natural gas, timber, ferrous metallurgy, and oil extraction industries were showing higher outputs than they had for the same periods of 1994. Reduced consumer purchasing power exacerbated declines in most processing and consumer goods industries, however; overall light industry output was 61.2 percent lower in the first five months of 1995 than in the same period of 1994. In the first five months of 1995, the republic's industries produced goods valued at 253.1 billion tenge, or about US$4 billion--a drop of 16.5 percent from the five-month output value for 1994.

Kazakstan has remained highly dependent on Russia as a customer for its manufactured products; this dependence has been the main cause of the shrinkage in the industrial base, as Russia has reduced its demand for most of Kazakstan's export products in the early and mid-1990s (see International Financial Relations, this ch.). Although more than 80 percent of Kazakstan's industrial production is still intended for sale in Russia, trade with Russia in 1995 was only about 20 percent of what it was in 1991. In January 1995, some 230 enterprises, with about 51,000 employees, were idle; by April the figures had grown to 376 enterprises and more than 90,000 employees. Also alarming is the growing debt load of the enterprises, which continue to support their unprofitable operations by unregulated borrowing among themselves. By March 1994, total agricultural and industrial indebtedness had reached 230.6 billion tenge. One consequence of falling production and growing indebtedness is that the republic's enterprises are increasingly unprofitable. As of March 1995, the government categorized 2,483 enterprises, or about one-third of the republic's total, as unprofitable. As of early 1996, however, very few had been forced into formal bankruptcy.


Kazakstan - Energy


Kazakstan is well endowed with energy resources, including abundant reserves of coal, oil, and natural gas, which made the republic one of the top energy-producing regions of the Soviet Union. In 1993 Kazakstan was the second largest oil producer, third largest coal producer, and sixth largest natural gas producer among the former Soviet republics. Industry in Kazakstan is dominated by the energy sector; in 1994 electric power generation accounted for 19 percent of GDP, and fuel extraction and processing accounted for nearly 23 percent. Thus, the national economy is strongly affected by changes in levels of fuel extraction and energy production (see fig. 6).


Kazakstan's oil reserves have been estimated at as much as 2,100 million tons, most of which is in relatively new fields that have not yet been exploited. In addition, new offshore discoveries in the north Caspian more than replaced the annual drawdown of known reserves in the early 1990s. In 1993 Chevron Oil made an initial investment in a joint venture, Tengizchevroil, to exploit the Tengiz oil fields at the northern end of the Caspian Sea in what was envisioned as the leading project among foreign oil investments. Recoverable reserves at Tengiz are estimated at 25 billion barrels, or about twice the amount in the Alaskan North Slope, although Tengiz oil is extremely high in sulfur. The French firm Elf-Aquitaine has leased about 19,000 square kilometers of land in the Emba region northeast of the Caspian, where there are known to be large quantities of sulfur-free oil and natural gas. Other oil deposits, with paraffin, asphalt, or tar (all harder to process), have been found in the Caspian Sea near Novyy Uzen and Buzachiy.

Oil production, which increased by an average of 3 percent per year through 1991, reached a peak production of 26.6 million tons that year before output began to decline in 1992. The most productive region in the early 1990s was the Mangyshlak Peninsula on the east shore of the Caspian Sea. In the early 1990s, Mangyshlak yielded more than 50 percent of the republic's oil output before experiencing a decline of 11 percent in 1992. Kazakstan also is known to be rich in deposits of heavy oil, which currently are not commercially viable but which are potentially valuable.

The republic planned to increase its oil exports from the 7.8 million tons of 1992 (15 percent of total exports) to as much as 37 million tons in 1996 (50 percent of total exports), for which anticipated revenue was about US$2.9 billion. By 1993, however, domestic and CIS industry conditions made such goals unrealistic. The most important obstacles to increased oil production and export involve Russia. In 1994 Russian refineries in western Siberia, upon which Kazakstan's oil industry continues to rely heavily for processing, cut their operations drastically because paying customers could not be found; this cut resulted in the plants' lower demand for crude oil from Kazakstani suppliers. Thus, in the first nine months of 1994, Kazakstan's oil sales fell to 4.5 million tons from 8 million tons in the same period of 1993, and production for the year fell 11.7 percent. Because of the oil-exchange agreement with Russia, the cutback in Russian refinery production also reduced domestic refinery production nearly 25 percent in 1994.

The second obstacle to greater production and export of oil is pipeline access through Russia to Western customers, which Russia has curtailed because of capacity limits and political maneuvering. The lack of pipeline facilities caused Chevron to announce substantial capital investment cutbacks in the Tengiz oil fields for 1995. In the mid-1990s, the pipeline that connects Kazakstani oil fields with the Russian Black Sea port Novorossiysk provided the sole access to the oil of the Tengiz fields for Chevron and its Western customers (see Transportation and Telecommunications, this ch.). The uncertainties of relying on the existing Russian line or on a second line passing through the war-torn Caucasus region led to discussions of new pipeline projects passing through Iran or even eastward across China to the Pacific Ocean. In September 1995, a new agreement with Turkey laid plans for pipelines crossing Georgia to ports in Georgia and Turkey, providing a new outlet possibility for Kazakstan's Tengiz oil. Also, in October 1995 Kazakstan joined in a new consortium with Russian and United States companies to build a pipeline to the Black Sea. Chevron and Mobil Oil of the United States, British Gas, Agip of Italy, and Russia's LUKoil enterprise were to fund the entire pipeline project in return for a 50 percent share in the pipeline. The governments of Kazakstan and Russia were to receive the other 50 percent. However, pipeline construction was delayed amid further international negotiation over alternative routes.

In the first quarter of 1995, major accidents and power shortages at drilling sites reduced production by about 10 percent compared with output in the first quarter of 1994. Refinery output in that period was even lower; only about half the first quarter's oil was refined, and the Pavlodar refinery closed entirely because it received no crude oil from Russia.

Natural Gas

Kazakstan has enormous reserves of natural gas, most notably the giant Karachaganak field in the northwest near the Russian border, under codevelopment by a consortium of Agip of Italy, British Gas, and the Russian Natural Gas Company (Gazprom). In 1992 natural gas production was 8.5 million cubic meters, half of which came from Karachaganak. By 1994, however, production was only 4.1 million cubic meters because Russian consumption had dropped drastically in the early 1990s. A 1995 deal with Gazprom gave that organization part ownership of Karachaganak in exchange for a guaranteed purchase of natural gas from Kazakstan. Foreign investment projects at Tengiz and Karachaganak were expected to triple domestic gas output and enhance gas processing capabilities in the later 1990s. The usefulness of increased output depends on new pipeline agreements--still in the formative stage in 1996--with Russia and other countries in the region.


In 1994 coal production decreased 6.7 percent to 104.4 million tons, after a production peak of 140 million tons was reached in 1991. About thirty major coalfields exist, most of them within 400 kilometers of Qaraghandy in north-central Kazakstan. This region offers some of the most accessible and cheaply extracted coal in the CIS; however, most of Kazakstan's coal is high in ash. The largest open-pit mines are located in the Ekibastuz Basin northeast of Qaraghandy. According to estimates, presently exploited mines contain 100 years of coal reserves at today's rate of consumption. Coal is a key input for industry; in the early 1990s, more than 75 percent of coal consumption in Kazakstan went to thermoelectric stations for power generation, and another 14 percent went to the steel industry. In the early 1990s, Kazakstan exported about 40 percent of its coal to CIS customers, mainly Russia.

The coal industry has been plagued by poor management and strikes that shut down major underground operations at Qaraghandy and surface operations at Ekibastuz in 1994 and 1995. The large metallurgical works of Qaraghandy, built under the Soviet concept of the territorial-industrial complex combining heavy industry with on-site fuel reserves, has been forced to curtail production when strikes are called.

Current Fuel Supply and Consumption

Despite its fuel endowments, Kazakstan remains a net importer of energy, partly because of falling production in the early 1990s and partly because of remaining barter agreements from the Soviet era. Undeveloped east-to-west transportation infrastructure has prevented efficient supply of domestic fuels to industries, which are energy intensive. As a consequence, Kazakstan still must import oil, natural gas, lubricating oil, gasoline, and diesel fuel from Russia, which in the postindependence years has taken advantage of its neighbor's vulnerability to economic pressure. In the mid-1990s, the oil exchange system between Kazakstan and Russia meant that declining demand in Russia reduced availability of those Russian products to Kazakstan. In 1994 Russia sent only 40 percent of the crude oil and 48 percent of the refined products prescribed in the bilateral agreement for that year. Gas imports showed a similar drop.

The national electric power system is divided into three grids. The northern grid, which serves a large part of heavy industry, is connected to the adjacent Siberian grid in Russia, and the southern grid is connected to the Central Asian System. Kazakstan depends on Russia for electricity and fuel. Although the Siberian generating stations that supply the northern grid are located in Russia, they are fired largely by coal exported from Kazakstan. Some electric power also is received from Kyrgyzstan's hydroelectric stations to the south in exchange for coal (see Energy, ch. 2).

In 1991 Kazakstan consumed 101.6 billion kilowatt-hours of electricity (84.7 percent of which was produced domestically), making it a relatively heavy energy consumer among nations of its economic stature. About 85 percent of domestic generation occurs in coal-fired thermoelectric plants. A few thermoelectric plants use natural gas or oil; the remaining 15 percent of energy comes from those plants and from hydroelectric stations. The main sources of coal-generated electricity are the fields of Ekibastuz, Maykubin, Torghay, and Borlin. There are three large hydroelectric stations, at Bukhtarmin, Öskemen, and Kapchagay. The republic's one nuclear power station is located near the city of Aqtau.


Kazakstan - Work Force


In 1992 some 16 percent of Kazakstan's work force was employed in manufacturing 24 percent in agriculture and forestry, 9 percent in construction, 9 percent in transportation and communications, and 32 percent in trade and services (see table 9, Appendix). An estimated 28.3 percent of the work force had at least a secondary education at the time of independence. Russians generally were employed in higher-paying sectors such as industry, transportation, and science, and Kazaks predominated in lower-paying areas such as health care, culture, art, and education. Overall, about two-thirds of workers and about 80 percent of industrial workers were non-Kazaks. In state enterprises, which provided 95 percent of employment before independence, one-half of the work force was female in 1990. The high participation rate of women contributed to an overall participation rate of 79 percent of working-age citizens in some form of employment.

In 1990 the working population of the republic peaked at around 6.7 million people, in a command economy where the legal requirement of full employment of both men and women meant substantial underemployment not revealed by official statistics. By the end of 1994, the number of employed people had declined about 8.9 percent, to about 6.1 million. This drop was caused in part by the privatization of Kazakstan's economy (by 1993 about 7 percent of Kazakstanis were working outside the state sector), but it also reflected growing unemployment and underemployment. In January 1995, there were 85,700 officially registered unemployed people in the republic, up from 4,000 in 1992. That figure does not include an unknown but significant number of workers whose names remained on official payroll lists while they were on forced leave, reduced hours, and delayed wage-payment schedules.


Kazakstan - Post-Soviet Economic Developments


Until 1990, when the whole central planning system collapsed, Kazakstan was part of the Soviet command economy. Even at the time of the 1991 coup that led to independence, 43 percent of the republic's industrial capacity was under Moscow's direct control, 48 percent was under joint republic and union control, and only 8 percent was strictly under republic control.

Although economic production declined dramatically in the early 1990s, some indicators showed a slower rate of decline by early 1995. In 1994 GDP declined 25.4 percent compared with 1993, including drops of 28.5 percent in industry and 21.2 percent in agriculture. In January and February 1995, additional GDP declines of 18.8 percent and 15.8 percent occurred (against the same months in 1994); however, March 1995 showed an increase of 4 percent (against 1994), fueled mainly by an increase in industrial production. Agricultural production, however, continued to drop in early 1995; 1994 first-quarter production was 79 percent of the same period in 1993, and the first quarter of 1995 almost duplicated that decline.

Much of Kazakstan's economic future depends upon its ambitious three-stage privatization program, which began in 1992 and reached the end of its second stage in 1995. The Kazakstan State Property Committee has responsibility for all three phases. In the first stage, housing and small enterprises employing fewer than 200 people were privatized. Most conversions of small enterprises were accomplished by auction to groups of employees, often under the leadership of the incumbent manager. Housing, which by 1995 was nearly all in private ownership, was privatized either by giving the residence outright to its current occupant or by payment of government-issued vouchers. The second stage entailed the privatization of almost everything except the republic's mineral wealth and industrial plants employing more than 5,000 people (such plants accounted for most of Kazakstan's military-related industry).

Privatization of the largest state enterprises is the principal goal of stage three, which did not begin as scheduled in late 1995. Until that time, these enterprises were run as self-managing joint-stock companies in which the government of Kazakstan was the largest stockholder. This interim stage, which was considered beneficial, required preparation of profit-and-loss statements in anticipation of full commercial operation sometime in the future. Meanwhile, 3,500 medium-sized firms, including 70 percent of state-owned industries, were offered for sale in a mass privatization program beginning in April 1994. These firms could be purchased with government-licensed investment funds.

Under Kazakstan's privatization system, vouchers are issued to individual citizens. Vouchers then can be deposited in privatization investment funds, which in turn can buy up to 20 percent of large companies being privatized. The initial voucher issue reached an estimated 95 percent of citizens. After four auctions, in mid-1994 about 85 percent of forty-five small-to-medium-sized enterprises, mainly in light industry, machinery manufacturing, and fuel distribution, had been sold.

By the end of 1994, about 60 percent of enterprises were owned by individuals or cooperatives. (In 1990 the figure already had reached 40 percent, however.) The success of the privatization of small enterprises, together with the formation of new private enterprises, meant that in 1994 some 61 percent of retail trade occurred in the private sector, an increase of 17 percent over the 1993 figure. Large-enterprise privatization has been less successful, however. Nominally privatized enterprises often maintain close contact with government officials who permit firms to maintain outdated production practices and supply relationships, and even to keep unpaid workers on their rolls.

Distribution of vouchers among the 170 government-licensed investment funds also has been problematic. In 1994 and early 1995, twenty companies collected nearly 60 percent of the vouchers, while another nineteen funds accumulated more than 20 percent; half the funds received a total of only 4 percent of the vouchers. One fund, Butia-Kapital, received nearly 10 percent of the vouchers, the largest single holding. This fund was widely rumored to be controlled by a nephew of President Nazarbayev. Although proceeds from privatization amounted to an income of 242 million tenge for the state treasury in the first quarter of 1995, complaints persisted that objects of privatization were priced too low and that favored funds received "sweetheart" deals.

Privatization of land has been handled differently than that of industry because the concept of individual land ownership does not exist in Kazakstan. Individuals and corporations can purchase only the right to use the land, and that right can be resold. Initial sale prices of state land are determined by the State Committee on Land Relations and Tenure. Government efforts to legalize a private land market have been stymied by both Russian and Kazak groups, each fearing that the other might gain control of the country's agriculture. By June 1995, some form of ownership or management change had occurred in 1,490 state farms, about three-quarters of the total remaining in operation. Many state farms, or portions of them, were converted into joint-stock companies that retained the same group of occupants and state-dominated arrangements for supply and marketing as under the previous nomenclature. The creation of small, individually managed farms was uncommon because capital, inputs, equipment, and credit were in very short supply for individuals attempting to start agricultural enterprises.


Kazakstan - Banking and Finance


Restructuring of the state-controlled banking and financial systems that Kazakstan inherited in 1991 has been a long, slow process. As in the Soviet era, the national bank continues to dominate the financial system, including currency management. Other commercial institutions have been established, but they play small roles in the country's financial life.


Kazakstan's banking industry was created on the basis of a subsequently modified law enacted in April 1993. That law created a central institution, the National Bank of Kazakstan (NBK), which has regulatory authority over a system of state, private, joint-stock, and joint banks. Licensed banks are authorized to perform all of the traditional banking functions.

The introduction of a modern banking system has not progressed smoothly. Scandals have involved swindles by bank employees, questionable loans, and the maintenance of heavy portfolios of nonproductive loans. Several bank failure scares also have occurred. Major modifications of banking regulations have been introduced several times. In June 1994, Kazakstan instituted a fifteen-month program of financial and economic reform, tightening banking and credit laws, liberalizing price policies, and ending the granting of credits to state-owned institutions. Another short-term reform was introduced in March 1995, in part to tighten regulation of capital requirements and to increase the professionalism of the existing bank's operations. To that end, a system of partnership with foreign banks was introduced, pairing domestic banks with experienced foreign partners. Guidance for this bank reform is being provided by the IMF, as well as by international auditing firms such as Ernst and Young and Price Waterhouse.

In 1994 the national bank system included a State Export and Import Bank and a State Bank for Development, both of which functioned under full government control rather than as market institutions. Four large, state-owned banks controlled 80 percent of financial assets. Of the 200 small commercial banks in operation in 1994, the majority were attached to enterprises. About thirty private banks were licensed to deal in foreign exchange.

The aim of the 1995 reform was to create a republic-wide banking system, including ten to fifteen large banks with total capital of at least US$10 million, headquartered in Almaty and with branches throughout Kazakstan; foreign branch banks, most of which would have single representative offices in Almaty; several dozen smaller banks, both in Almaty and in the provinces, with capital in the range of US$2-US$3 million; and savings banks, some with specialized purposes such as the Agricultural and Industrial Bank (Agroprombank).

In 1995 the NBK planned to release 80 percent of the credit funds it granted to an auction market, departing from the previous policy of rationing credit by directing it to designated enterprises. No stock exchange or capital markets existed as of 1995, although a law on securities and stock exchange had been adopted in 1991.

Fiscal Management

State revenue is derived primarily from various taxes, the introduction of which has been somewhat problematic. A fundamental revision of the national tax code in 1995 reduced the number of taxes from forty-five to eleven and the volume of prospective revenue by 17 percent. Five national corporate taxes remained after the reform, which reduced the corporate tax rate to 30 percent. Prior to that revision, the largest contributions to state income were business-profit taxes (15 percent); a uniform, 20 percent value-added tax (see Glossary), a personal income tax (ranging from 12 to 40 percent and accounting for 16 percent of tax income); and special-purpose revenue funds (17 percent). However, the system has suffered from chronic undercollection. The primary long-term goal of the 1995 tax reform was to encourage fuller compliance with tax laws. The 1996 budget called for reducing the deficit to 3.3 percent of GDP.


CITATION: Federal Research Division of the Library of Congress. The Country Studies Series. Published 1988-1999.

Please note: This text comes from the Country Studies Program, formerly the Army Area Handbook Program. The Country Studies Series presents a description and analysis of the historical setting and the social, economic, political, and national security systems and institutions of countries throughout the world.

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