Mukhtar Ablyazov's Message

© mukhtarablyazov.org 20.02.2014

We know that our country is rich in a variety of natural resources. The National Oil Fund of Kazakhstan has been created, more than 70 billion USD has been accumulated. Yet the citizens of the country do not know what these means are being used for and are detached from the country's resources.

We also know that the citizens of other oil-bearing states enjoy a higher standard of living, receiving part of their income from the use of natural resources on their territory. The government keeps claiming that the National Oil Fund was created for future generations. But whose children, grandchildren and great-grandchildren is it for – those of all the Kazakhstan citizens? or those which have and will descend from the highest authorities of the state?
 
World oil prices are now very high. This situation, favorable for an oil-bearing country, has already lasted for over than 10 years. Therefore, our citizens should be in receipt of part of the natural resources income now. Kazakhstan joined the Customs Union with Russia. The participants of the Union are striving to level out taxes and create equal, competitive spaces for the economies of the member states. However, the oil export duty in Russia is now $ 395,6 per ton, while in Kazakhstan it accounts for only $ 60! This begs a few questions. Why do the Russian oil-producing companies pay such high duties, yet still remain prosperous? Why don't our oil-producing companies pay as much? Where does the money from export duties go? In the case of Kazakhstan, the amount in question exceeds 20 billion USD. In 2013, Kazakhstan exported 72 million tons of oil. If a $ 395,6 per ton export duty is imposed instead of the current $60, it will benefit the national budget of Kazakhstan to the tune of 28,5 billion USD.
 
Oil exports are increasing with every coming year. Nowadays, the main bulk of the country's revenue, generated through oil, is controlled by a small group of people in power and is concentrated in large cities such as Astana and Almaty. In many other regions, people live in poverty, with no steady job and no stable income. Using the money obtained through the increase of duties, provided that it is distributed directly to all the citizens of the country, will undoubtedly trigger the development not only of several cities, but of Kazakhstan in general. Then many of our citizens will soon be able to solve their numerous problems: provide their children with education, build a place to live, pay their utility bills and, finally, live a decent life in their country.

I propose that the duties are increased to the Russian level and that a new fund is created which ensures that these assets are accumulated and distributed in order to satisfy the needs of people from now on. I suggest that every citizen of Kazakhstan pays 120,000 KZT (about 770 USD) annually. The expenses of the new fund might be as follows:
 
Social benefits:

1. The population of the country is 17 million people. Let's multiply this number by 120,000 KZT– what we get is about 11 billion USD, the rate being 185 KZT per USD;

2. Pensioners – who make up 10 % of the population, according to the statistics – would be paid 50,000 KZT monthly. This would equate to about 5,5 billion USD;

3. All the disabled people would be paid 50,000 KZT monthly. This would equate to about 1,825 billion USD;

4. There are about 550,000 students in Kazakhstan. To increase the monthly scholarship by 50,000 KZT we would need about 1,825 billion USD;

5. A monthly salary increase of 50,000 KZT for all the public sector employees will take about 324 million USD;

6. The childbirth allowance could be 300,000 KZT. This would equate to about 640 million USD per year.

The total sum needed is about 21,1 billion USD.
The total sum we have is 28,5 billion USD.
 
Free allocation of land to Kazakhstan citizens

Land is the most valuable asset. We propose the following method of calculating the price of the land an average four-person family could be allocated:
Even if we assume a land price of 0, investing no less than 2000 USD per 100 m2 for the sake of infrastructure development will increase the land price to 2000 USD per 100 m2. This investment amount is sufficient, provided that the land in question is located around the cities, where the hard infrastructure (electrical grids, roads, water supply) has been already built.

Our point of departure is that every citizen of Kazakhstan has a right to obtain land for individual housing: 1000 m2 for a city dweller and 2500 m2 for a villager.
On the basis of the approximate numbers of 2000 USD per 100 m2 and 1000 m2 per person we can see that creating the infrastructure on the territory of 200 million m2 throughout Kazakhstan would take about 4 billion USD from the new fund.
If a person gets 1000 m2 of land, its price being no less than 2000 USD per 100 m2, the minimal price of 1000 m2 of land would be 20,000 USD.
Thus, an average city family of four will get 4000 m2 for free, the land value being about 80,000 USD (i.e. 4000 m2 of land multiplied by 2000 USD).
For large cities like Almaty, Astana etc., the calculation will be different because the land in such cities is certain to cost more than 2000 USD per 100 m2.
 
State/national assets for private housing construction credits

About 4 billion USD could be allocated annually for housing construction credits. They should be allocated in KZT at yearly interest rates of 5 per cent maximum, the average price being no higher than 700 USD per m2. A national programme has to be devised – a program allocating no more than 500 USD per m2 for a house’s construction. Assuming that the average family consists of four persons and the average time taken for a house’s construction is 1 year, we see that at least 40,000 houses can be built annually. This means that the housing problems of 160,000 people will be resolved every year. We could even provide housing construction credits at the rate of 25,000 USD per 1 family member but no less than 100,000 USD per house. The term of such credit would be 30 years.
If the infrastructure is developed throughout the territory of 200 million m2 annually, then 200,000 persons will be allocated land every year. Even if not all of them use it for house construction, in 10 years this program will go a long way to solving the Kazakhstanis' housing problems. It is possible that apartment blocks will be built somewhere on this land, construction companies might purchase the land with the infrastructure in place and build apartment houses in order to sell them on. But the production cost of building such houses will be lower anyway, as the construction companies won't need to spend money on infrastructure development. Moreover, this will lead to the creation of a huge number of vacancies in adjoining sectors.
 
Tax revenues increase

If every year brings about 30 billion USD to the country's economy, at least 15 % of the investment value will increase tax revenues in the country's budget by an additional 4 to 5 billion USD approximately.

Banks will enhance financing of different programs. If the earnings of the population grow, so does its solvency, and the credit increases. This means growth of the country's economy, even a greater one than in the early 2000s. In that period, banks relied on borrowings from foreign markets, which triggered the development, while we'll be able to use our own money, not borrowed funds. About 20 billion USD flow into the country's economy every year, 4 more billion USD shall be obtained in the form of credit and 4 more billion to develop the infrastructure. I'll say it again: 24 billion USD, which is interest-free, non-borrowed and backed by hard currency – together with 4 borrowed billion USD – flow into the country's economy every year..

Along with that, the existing National Oil Fund can continue accumulating revenues for the future generations. The Constitution of Kazakhstan sets such principles of state activity as economic development for the benefit of all the people and solving the most important issues of the state life democratically.

Let us take a look at what our Constitution, the principal law of the state, starts from. It starts from the characteristics of the Kazakhstan people and the expression of its will.
What kind of people is this? A people united by their common historical destiny, a people building a nationhood on the authentic Kazakh land, a people seeing itself as a peaceful civil society committed to the ideals of freedom, equality and concord, a people wishing to take a worthy place in the international community, a people realising its high responsibility to the living and future generations, a people that has a sovereign right.
Therefore, this people has a right to inform the authorities about a potential promising source of the society's prosperity. Over 20 billion USD of additional revenue into the country's budget. Why was Russia able to impose these export duties? Why can't Kazakhstan do the same?

Having realised the opportunities of gaining additional revenues for the whole country and its society, the people of Kazakhstan have a right to express their vision of the ways of further successful economic development of the country for the benefit of all its people, and to strive to put this idea into practice.

I address all the citizens of the country. I address to the civil activists!
It is necessary to create a people's movement which will demand that the government impose these duties and create a special fund for the people of Kazakhstan to be able to already receive the money. This is possible.
 
Kazakhstani people, we have ideas and internal resources for every citizen of the country to live a comfortable life. Let us move towards this goal!

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