ASTANA. The lower house of the Kazakh parliament has submitted a government draft of changes in the republican budget for 2000 to the upper house.

The draft stipulates reducing the budget deficit from 1.4 billion tenge to 62.39 billion tenge, or 2.7% of GDP.

It also increases budget revenues by 7.514 billion tenge to 347.514 billion tenge, and raises spending by 5.827 billion tenge to 409.904 billion tenge.

The government explains the revision of budget revenues and spending by an improvement in macroeconomic indications and a favorable external situation.

The income tax on legal entities will bring in 60.1 billion tenge, an increase of 37.5 billion tenge, the draft says. Revenues will also rise through a bigger repayment of budget loans to reach 3.947 billion tenge, an increase of 2.675 billion tenge.

Planned profits from selling and leasing state property will drop by 36.875 billion tenge to 23.2 billion tenge. The planned excise profits will be 3.8 billion tenge less and total 17.2 billion tenge.

The planned withdrawals from sub-republican budgets will decline by 544.6 million tenge to a total of 52 billion tenge.

Spending will increase most on order and security (by 9.3 billion tenge to reach 36.4 billion tenge), as well as on social security (by 6.3 billion tenge to total 151 billion tenge).

At the same time, spending on the servicing of the government debt will be cut by 8.414 billion tenge to total 37.831 billion tenge, while spending on transport and communication will go down by 3.1 billion tenge to reach 16.5 billion tenge, and spending on education will be 306.4 billion tenge less.

GDP growth this year will total 5%, the draft says. Growth is forecast at 2.289 trillion tenge by the end of this year, compared to 2.128 trillion tenge planned by the current budget.

The index of consumer prices will be 13% at year's end, compared to the initially expected 15%, and the exchange rate will total 143.3 tenge to the dollar against the planned 157 tenge to the dollar.

(By Alisher Taksanov )

It is worth noting that since Uzbek President Islam Karimov began paying particular attention to developing small and medium businesses in Uzbekistan this sector has seen drastic changes - not only has there been a reduction in the statistical and tax burden for Uzbek entrepreneurs but also the issue of their financing has been put on the agenda.

A meeting of the Working Group of the National Coordination Council for the Encouragement of Small and Private Enterprise stated that as of 1 May 2000 domestic commercial banks had received 2,406 applications for micro-crediting totaling 2.1 billion Uzbek sums, of which applications 1.8 billion sums had been satisfied.In the Tashkent province alone such leading banks as Pakhta-Bank, Uznatsbank, Asaka Bank, and Tadbikorbank had granted to farmers and private entrepreneurs 302 micro-credits totaling 397.4 million sums.

The Tashkent province administration and the Chamber of Producers and Entrepreneurs have worked out a number of model micro-crediting projects in hard currency.To date, the National Bank of Financial Economic Activity has approved two model projects (milk processing and poultry breeding).

Meanwhile, the Business Fund, the Fund for Employment Promotion of the Labor Ministry, and the Fund for the Support of Peasants and Farmers have allocated monies for developing small and medium-sized businesses in the amounts of 1 billion, 2 billion, and 200 million sums, respectively.(The overall amount of non-budget funds in 2000 has been planned to be 3.2 billion sums.)These funds have already allocated 53% of this year's total financing, or 1.7 billion sums.

Foreign financial organizations also grant micro credits for the development of small and medium businesses in Uzbekistan.So in 2000 the EBRD, KfB, International Finance Corporation, and eight other banks have opened credit lines totaling US $65 million, US $54 million of which must be used this year.It is also planned to attract another US $140 million in foreign credits, US $15 million of which is to be used this year.

Supporting private enterprise, the Uzbek Government has reconsidered the schedule for using credit lines by domestic banks.So, as of 1 May 2000, the amount of credits used totaled US $8.1 million, including US $5.5 million used by Uznatsbank and DM 2.13 million used from a DM 10 million credit line of KfW.

The government and banks have assisted the private sector in Khorezm province.They have developed a credit program for 433 farms, using 8 loss-making enterprises as a model for calculating the need for credit resources totaling 394 million sums.These funds are to be provided by five banks (228 million sums) and non-budget funds (164 million).

However, financing small and medium businesses has some problems, including the quality of legal business plans, which delays their consideration by the financing organizations.This shows the necessity of improving the skills of entrepreneurs, as well as those of specialists and organizations assisting private enterprises.

Another problem is providing a guarantee for credit.The current guarantees provided by makhallya (local body of the citizens' community) are sometimes in the arena of wrongdoing by makhallyas.According to experts, such guarantees are often formal, that is, not secured by any liquid assets.This problem is particularly relevant in rural areas due to a low liquidity of rural property, an underdeveloped real estate market, and low purchasing power of potential market participants.

However, it is worth noting that this problem faces not only transition economies but also developed countries.So the United States is solving this problem through its Small Business Administration program (SBA), the coordinating agency for supporting small and medium businesses in the country.The SBA carries out credit projects through commercial banks, providing 75%-80% of credit collateral.The recurrence of such credits is very high and averages 95%.Every year the SBA provides collateral worth up to US $10 billion for different credit projects and receives a commission of 0.25%-4%, depending on the goal and size of the credit.

Uzbekistan's experts have suggested changing the target of public financial resources granted through non-budget funds, that is, re-orient them at providing a 75% collateral to commercial banks for their credits to small and medium businesses.In addition, part of the public financial resources (up to 25%) can be used to form the equity capital of small and medium businesses implementing investment projects using high-tech equipment and innovative technology.

"Kazakhstan's Strategic Planning Agency has developed the Economic Security Strategy of Kazakhstan and Strategic Development Plan Until 2010," according to the Agency Chairman, Kairat Kelimbetov.

In October-November the Agency will complete the 10-year plan with the Government's proposals in mind.The plan was discussed in Astana on October 11 at a conference to sum up the results of the first 3-year stage of the Kazakhstan-2030 strategy.The meeting stated that almost 70% of what was planned until 2000 has been fulfilled.Commenting on the economic security strategy, Mr. Kelimbetov pointed out that economic security problems in transitional countries are connected first of all with structural deformation of their economy."Over 10 years of independence, Kazakhstan has seen a rapid development of the mining industry which has grown ten percent, whereas the processing industry and agriculture have gradually lost their significance," said Kelimbetov."So we have many problems resulting from the structural deformation of our economy and the export of capital."

The strategy aims to equalize the conditions for foreign and domestic investors in Kazakhstan."Foreign companies coming to Kazakhstan were granted various privileges to encourage their coming here, sometimes causing losses to domestic investors," stresses the Agency chairman.In his words, provisions of several commercial contracts that have been concluded with foreign companies over the past 10 years have turned out to be unfavorable for the state.This particularly concerns taxation and pricing issues.Mr. Kelimbetov thinks the time has come when domestic investors must not feel limited in their rights.

Nevertheless, the Government must fulfill its obligations and the previous contracts cannot be cancelled."Being a lawful civilized state, we cannot unilaterally, or by pressure, impose contractual provisions, regardless of what government signed them," said Mr. Kelimbetov.At the same time, he thinks that "if many foreign investors have come to work in Kazakhstan for a long time, there is the opportunity for discissing and holding talks to reconsider some conditions and positions of the parties."

The Strategic Planning Agency Chairman predicts that non-raw material sectors of the economy will strengthen their position during the next 20-30 years.He thinks that until 2010 Kazakhstan must lay the the foundation and create prerequisites for developing other industries, such as processing and chemical industries and should introduce new technologies."By the end of the first decade, Kazakhstan should have it's first, large investment resource. This can be achieved by developing the Kashagan oilfield and raising oil extraction to 100 million tons," said Mr. Kelimbetov.

In Kelimbetov's opinion, this re-orientation of the economy must go along with a budget planning reform.Last year, the Agency introduced the first experience of budget programming (allocation of funds to concrete programs.)In Mr. Kelimbetov's words, "This year, the parliament's budget commission, for the first time, outlined budget policy priorities.The budget has increased defense expenses, allocated large amounts to repay debts, raised salaries of budget-paid employees, indexed pensions, and allocated funds to pay off social welfare debts.The budget has earmarked more funds for road construction because the roads have an annual transit potential of up to US$1 billion and guarantee health care and education services to rural areas."Mr. Kelimbetov thinks that the 2001 budget can be called a "development budget."