To Break the Bank: “Enlightened” Authoritarianism and the Banking Sector Reform in Kazakhstan
Total Page：16
File Type：pdf, Size：1020Kb
To Break The Bank: “Enlightened” Authoritarianism And The Banking Sector Reform In Kazakhstan A Dissertation submitted to the Faculty of the Graduate School of Arts and Sciences of Georgetown University in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Government By Sergei Gretsky, M.A. Washington, DC December 15, 2014 Copyright 2014 by Sergei V. Gretsky All Rights Reserved ii TO BREAK THE BANK: “ENLIGHTENED’ AUTHORITARIANISM AND THE BANKING SECTOR REFORM IN KAZAKHSTAN Sergei V. Gretsky, M.A. Thesis Advisor: Daniel M. Brumberg , Ph.D . ABSTRACT Why do market-oriented economic reforms in developing countries succeed or fail? Of the three sets of factors that affect the outcome of the reforms – economic policies, formal and informal institutions, and leadership – the role of political leaders and reform teams in initiating and implementing reforms, has received the least attention. However, the prevailing conceptualization of this leadership dynamic has not moved further than the assumption that the success with reforms depends on the presence of a committed and visionary chief executive (the politician), a cohesive technocratic reform team, which he selects and empowers to implement reforms, and synergy between the two. Through an in-depth study of the banking sector reform in Kazakhstan this dissertation seeks to enhance our understanding of the role of leadership by focusing on factors that create or undermine synergy. By comparing two periods of the reform this dissertation demonstrates why and how the market-oriented reform and the creation of a privately owned banking sector in the first were reversed and state control over the banks was reinstated in the second. Building on the “politician’s dilemma” concept, the dissertation argues that in countries with authoritarian regimes the technocratic reformers’ decision to become independent political actors, i.e., technopols, is treated by the politician as a threat to his regime and makes him choose his own survival over the pursuit of market-oriented economic reforms, which create economic and political sources of power independent of him, leading to the reform reversal and re-imposition of state control over the economy. Based on a comparative analysis of Kazakhstan and Chile, the dissertation contributes to building a theory of economic reforms in developing countries by advancing two arguments. First, it suggests that synergy between the politician and the reform team, and by extension, a successful outcome of economic reforms depend on the division of functions whereby the politician manages the politics of economic reforms while the reform team performs a technocratic function, i.e., designs and implements the reforms. Second, it argues that a successful outcome of economic reforms depends on ideological cohesion of the economic reform and political teams that work for the chief executive. iii TO MY PARENTS , NADEZHDA AND VALENTIN GRETSKY iv ACKNOWLEDGEMENTS I owe a special debt of gratitude to Daniel Brumberg, Thane Gustafson, and Raj Desai for their patience, encouragement, and unfailing support throughout my research and writing of the dissertation. I am grateful to all my Kazakhstani friends and scholars who were generous with their time, indulged my curiosity, challenged my observations, and whose hospitality I enjoyed in Almaty and Astana. I owe special thanks to Maira Salykova, Zhanar Sultanbekova, Marat Bekenov, and Mukhtar Khasanov, who recently – and tragically – passed away. The theoretical and empirical arguments, opinions, and errors are solely mine. I am indebted to the Institute for the Study of World Politics in Washington, DC for providing me with a grant that enabled my fieldwork in Kazakhstan. I would like to give special thanks to three close friends, Muriel Atkin, Steven Carrell, and Engel’s Doroshevich, without whom this dissertation would have not been completed. Thane Gustafson and Alex van Oss deserve special gratitude for their invaluable editorial advice, which made my English more readable. My sister, Irina Korsunova, and my nephew, Sergei Korsunov, reeceive my deepest gratitude and love for their dedication, encouragement, and support. I owe my greatest debt to my parents, Nadezhda and Valentin Gretsky, to whom this dissertation is dedicated. v TABLE OF CONTENTS Chapter I. Introduction ..................................................................................................... 1 Chapter II. Understanding and explaining agency in economic reforms developing and post-communist countries…..………………………………………………………17 2.1. Understanding economic reforms…………………………….…………………….17 2.2. Explaining economic reform………………………………………………………..22 2.3. Agents of change……………………………………………………………………24 2.4. Politics of the economic reforms: technocrat or technopol?......................................27 2.5. Conclusion…………………………………………………………………………..35 Chapter III. Political leadership: Nazarbayev as a reformer (1991-2001)……………….37 3.1. Independence comes to Kazakhstan…………………………………………………41 3.2. Nazarbayev: a portrait…………...…………………………………………………..43 3.3. Reforming the political system……………………………………………………...48 3.4. Nazarbayev as a reformer…………………………………………………………...56 3.5. Conclusion…………………………………………………………………………..63 Chapter IV. Reformers and reforms……………………………………………………..65 4.1. Soviet banking system………………………………………………………………66 4.2. Banking in Soviet Kazakhstan………………………………………………………69 4.3. Embarking on the banking sector reforms…………………………………………..71 4.4. The breakthrough of 1995…………………………………………………………...78 4.5. Reforming the banking sector……………………………………………………….82 4.6. Introduction of the new legislation and normative acts……………………………..85 4.7. Stamping out Soviet-era banking practices………………………………………….89 4.8. Enforcement of the new legislation and uprooting corrupt practices………………..91 4.9. The 1997-98 financial crisis…………………………………………………………95 4.10. The rise of Kazkommertzbank……………………………………………………..97 4.11. The NBK reform team and the bank lobbying……………………………………106 4.12. Conclusion………………………………………………………………………..111 Chapter V. Nazarbayev as a reformer (2001-2009)…………………………………….114 5.1. Political upheaval in Kazakhstan…………………………………………………..114 5.2. The first cracks in Nazarbayev’s relations with the NBK reformers and the bankers……………………………………………………………………………..118 vi 5.3. The cracks turn into open confrontation…………………………………………… 120 5.4. Nazarbayev changes course………………………………………………………….127 5.5. Bankers beware: the case of the Kazakhstani Khodorkovsky……………………….131 Chapter VI. To break the bank: the global financial crisis of 2007-2010………………..149 6.1. BTA nationalization…………………………………………………………………157 6.2. The hunt for Ablyazov………………………………………………………………166 6.3. Conclusion…………………………………………………………………………..172 Chapter VII. The banking sector after the BTA nationalization…………………………174 7.1. KKB and Nurzhan Subkhanberdin: uncertainty continues………………………….175 7.2. The regime takes control over the banking sector…………………………………..178 7.3. The Kazakhstani banking sector since the financial crisis…………………………..180 7.4. Banks and the real economy: to intermediate or not to intermediate?........................182 7.5. Conclusion…………………………………………………………………………...202 Chapter VIII. The revenge of Genghis Khan…………………………………………….207 8.1. Kazakhstan’s political culture……………………………………………………….209 8.2. Nazarbayev, Kazakh political culture, and Kazakhstani politics……………………212 8.3. Political elite…………………………………………………………………………215 8.4. The revenge of Genghis Khan……………………………………………………….220 8.5. Elite cohesion and economic reforms………………………………………………..230 8.6. Conclusion…………………………………………………………………………...241 Chapter IX. Conclusion…………………………………………………………………..243 9.1. Leadership, reformers, and reforms………………………………………………….245 9.2. Politician’s dilemma Kazakhstan-style………………………………………………247 9.3. Quo vadis…………………………………………………………………………….252 Appendix A. List of interviews…………………………………………………………..255 Bibliography……………………………………………………………………………...262 vii LIST OF TABLES Table 1. Violation of prudential norms and regulations, 1993-2001………………………….. 94 Table 2. Banking system, 1993-2000…………………………………………………………. 185 Table 3. Macroeconomic stability, 2006-2013……………………………………………….. 187 Table 4. Bank loans by the economic sector, 2004-2012……………………………………... 190 Table 5. Bank loans by the economic sector, 2004-2012…………………………………….. 191 Table 6. Violation of prudential norms and regulations, 2002-2010………………………… 203 Table 7. Importance of social circles or groups in Central Asia……………………………... 224 viii LIST OF FIGURES Figure 1. Bank concentration, 1998-2006……………………………………………………. 139 Figure 2. 5-bank asset concentration, 1998-2011……………………………………………. 140 Figure 3. Consumer loans, 2001-2007……………………………………………………….. 151 Figure 4. Housing prices, 2002-2007………………………………………………………… 152 Figure 5. 5-Bank concentration, 1997-2011………………………………………………….. 179 Figure 6. Non-Performing Loans, 2008-2011………………………………………………… 181 Figure 7. GDP of Kazakhstan, 1990-2011……………………………………………………. 186 Figure 8. GDP per capita in Kazakhstan, 1990-2011………………………………………… 186 Figure 9. Broad money (M3) in Kazakhstan, 1993-2011…………………………………….. 187 Figure 10. Bank deposits to GDP ratio, 1994-2011………………………………………….. 188 Figure 11. Bank credits to GDP, 1994-2011…………………………………………………. 189 Figure 12. Bank credit to GDP, U.S., Russian Federation, Kazakhstan, 1995-2010………… 192 Figure 13. NPLs to gross loans ratio, 2008-2011…………………………………………….. 193 Figure 14. Bank concentration, 1997-2011…………………………………………………… 196 Figure 15. Rule of law index, 1996-2012…………………………………………………….. 197 Figure 16.