The effect of the financial crash on Kazakhstan’s economy

Fiscal Crises. Analysis of House prises in London and Almaty and how universe fiscal crises affected Kazakhstan ‘s economic system.


Abstract 2

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1.0 Introduction 3

2.0 Background 5

3.0 Methodology 9

3.1 Research Philosophy and Approach 10

3.2 Research Strategy 10

3.3 Information Search 10

3.4 Research Questions 12

4.0 Literature Review 13

4.1 Kazakhstan 17

4.2 London 27

4.3 Subprime Crisis 37

4.4 Global Financial Sector 39

5.0 Evidence 41

6.0 Decision 48

7.0 Recommendations 50

Bibliography 57


The subprime market crisis that hit the fiscal markets in the summer of 2007 caused a series of negative market reactions on a planetary graduated table. The tightly entwined nature of universe fiscal markets represents a planetary cringle whereby happenings in one market have deductions in and for others. This factor has been and will go on to be one that triggers international fiscal incidents, and in some instances they result in what are termed as a crisis. A crisis is defined as “…an unstable or important clip or province of personal businesss in which a decisive alteration is impending ; particularly: one with the distinguishable possibility of a extremely unwanted outcome” [ 1 ] . This describes the fiscal state of affairs that forms the footing for this survey, the subprime mortgage meltdown in the United States that hit the planetary phase in the Summer of 2007. In comparing the branchings of the preceding, two venues will function as the focal point of the foregoing.

London and Almaty are two illustrations that offer a distinguishable contrast in footings of where they sit in the planetary economic sphere. London is located in the fiscal stable European Union, and is a metropolis that has gone through differing economic convulsion in its long history. Almaty, is located in Kazakhstan, a new state that was borne out of the ashes of the break-up of the Soviet Union, and is seeking its economic individuality through making an substructure that is being crafted from the province run Soviet system that left few positives in its passing.

The fiscal services sector is frequently a small understood sphere owing to the complexnesss of how it operates within the context of international economic activity and the variables of the market economic system. The intricate nature of the ties between differing parts, and how they interact upon one another represents a complex set of macro and micro economic facets within which this crisis developed and wedged every corner of the Earth. This survey shall look into the mode in which this fiscal crisis affected the existent estate markets in Almaty, Kazakhstan every bit good as London, England looking to bring out the why of this impact, along with the branchings.

1.0 Introduction

The tightly interlinked nature of the planetary economic system has brought every corner of the Earth closer together as a consequence of the progresss in engineering. This fact is besides of class true for the fiscal services sector. In the ulterior portion of 2006 a fiscal issues began brewing in the United States as a consequence of loaning activities in the place existent estate sector. The underlying jobs created from the loaning of favorable involvement rate loans that were put into gesture by the Federal Reserve System in the United States to spur economic growing translated into a subsequently meltdown as a consequence of defaults. The Secretary of the Treasury, Henry Paulson, Jr. , stated that the state of affairs “… came approximately because of some bad loaning patterns ” [ 2 ] . Timing, fortunes, and other factors in the complex web of national economic sciences that are tied to planetary economic sciences can bring forth an unpredictable set of happenings that can mushroom in about any way.

Such is the state of affairs that befell the subprime mortgage sphere as it reeled from a cascading series of events than impacted planetary markets. So great were the branchings that the state of affairs still threatens the U.S. economic system. Fears of a recession have been forecast as a possible result of the downswing this state of affairs contributed to. The treatment of what transpired in the United States is built-in to understanding the moving ridge of events that represent the focal point of this survey. There are those who believe that the foundation for the crisis was laid in good economic rules, and it was the greed of some operators in the U.S. fiscal sector that abused the directive with what is termed as predatory loaning patterns [ 3 ] . There are others who fault financess and banking systems for assisting to fuel the underpinnings that lead to the crisis, and still others who think that such market agitate outs are the manner in which the international fiscal sector finds ways to cover with loose bolts within the system [ 4 ] . Alexander et Al ( 2002 ) tell us that [ 5 ] :

“Finding that some loans are more hazardous than others does non, by itself, connote a market inefficiency. Inefficiency exists merely if loans with different hazard receive similar involvement rates. We document such an inefficiency” .

The branchings of the tightly wound international fiscal system is that while it provides chances to do money, it besides magnifies the downsides and loses money. Gains ever have their negatives, therefore fiscal bad lucks have and will go on to go on. In understanding the subprime fiscal crisis, a wide figure of topic countries will be covered herein to pull a image of the affair in which fiscal markets work in this case. One cardinal facet of the foregoing is liquidness. McGee [ 6 ] Tells us “The kernel of a liquidness crisis is a flight from riskier assets to cash” . In understanding the many contributing factors, one has to be aware that this state of affairs originated in the United States, therefore there are other considerations that besides factor into the equation.

Fiscal crises state of affairss are nil new ; they are market happenings that appear on an all excessively frequent footing. Chi and Gai [ 7 ] supply a position on this:

“The batch of fiscal crises in emerging market economic systems every bit diverse as Brazil, Korea, Mexico, Russia, and Turkey, during the 1990s has focused attending on the importance of bettering the policy model for the direction and bar of crises. A typical characteristic of these modern crises has been the function of instabilities in the national balance sheet. Maturity, currency, and capital construction mismatches meant that the capital history took centre-stage, with big external funding spreads emerging as a consequence of alone reversals of capital flows. Foreign investors wanted, and attempted, to retreat from these states at the same clip, much like a run by depositors on a bank. Once sentiment soured sufficiently so that a critical mass of investors rushed to retreat their claims, the crises became self-fulfilling as others found it rational to fall in the herd.”

The predating state of affairs represents a different fiscal crisis, nevertheless it does supply us with some valuable penetrations that will steer us through the varied facets that will be discussed herein. The of import portion of their statement is the fact that hazard represents an underpinning in fiscal minutess, therefore hazard is a state of affairs to be minimised. A sense of the complexness of this scrutiny is provided by Langley [ 8 ] who states:

“Any effort to grok modern-day universe finance brushs non merely important structural alterations that can non easy be captured, but besides the predomination of neo-liberal political economic system in bordering our cognition of universe finance. Options to the neo-liberal manner of cognition of universe finance are a necessary first measure towards preventing the worst contingencies of the current structural transmutation.

Neo-Liberalism represents a aspect of this scrutiny in that [ 9 ] :

“The most powerful alliances between province agents and economic histrions are found in broad political economic systems. The Soviet Union offered an option to capitalist economy that theoretically emphasized economic justness and stuff public assistance, one that intertwined economic and political power even more closely together than elites are thought to be in broad capitalist provinces. Even so, the power of the economic agents of the Soviet province was more structurally constrained than the power of capitalist provinces and their agents.

In a planetary economic system, the underpinning foundation is capital, and the motion of that capital to consequence adoption and loaning, along with the fiscal instruments that accompany such action [ 10 ] . Capital motions have rhythms that are marked by up bends and down bends based upon the activities within markets and the determination of the cogs ( persons ) that run the machinery. The foundation, influence, grounds and concluding behind those determinations represent waies that lead in differing waies which impact other class of actions that create rhythms. This survey shall follow these waies as they related to the subprime crisis.

2.0 Background

As indicated, the fiscal crisis under scrutiny originated in the United States, get downing as far back as 2002. The branchings of that event shall be covered in the Literature Review of this scrutiny. In puting up the way of understanding for the journey through the turns and bends of the crisis, a foundational pillar of apprehension is necessary in order to see the varied branchings. Carrada-Bravo [ 11 ] advises “the procedure of making value starts with the designation of a market need.” Today’s international fiscal system is an branch of [ 12 ] :

“The prostration of the Bretton Woods system of fixed exchange rates in the early 1970s marked the last major turning point in the development of planetary finance, showing in the generalized ‘non-system ‘ of exchange rate agreements that survives today. However, at least as of import in the development of international fiscal dealingss since so has been the tremendous growing in the volume of international capital flows. In big portion, this growing is attributable to the dismantlement of the panoply of exchange controls introduced during the Bretton Woods epoch to ease exchange rate direction by cardinal Bankss under the protections of the International Monetary Fund.”

In understanding the kineticss of the fortunes that comprise the comparing of events in London and Almaty, Makin [ 13 ] provides us with an of import capsulisation of the underpinnings that will be brought out herein:

“The domestic fiscal markets of many economic systems have hence been progressively internationalised in the aftermath of liberalizing policy enterprises implemented by authoritiess around the universe. Fiscal market liberalization in many advanced economic systems was virtually complete by the late eightiess. With the remotion of antecedently rigorous ordinances over domestic and international fiscal minutess, institutional barriers hindering the motion of fiscal capital between many parts of the universe have now mostly disappeared. Attach toing the domestic deregulatory alterations were tighter prudential agreements in advanced economic systems aimed at beef uping the capitalization of Bankss and therefore the stableness of domestic fiscal systems. Such attach toing agreements have been missing in many emerging economic systems nevertheless and this has been a cardinal ground for recurrent fiscal crises in these economies…”

The extremely incorporate nature of international fiscal markets as a consequence of globalization has integrated national economic systems to the point that the universe is virtually a seamless flow of capital. The foregoing, combined with the international liberalization of universe fiscal markets that arose out of Bretton Woods facilitated a dramatic addition in fiscal motions across boundary lines that has been aided by progresss in engineering that have reduced dealing clip, and take downing costs [ 14 ] . The increased efficiency of the preceding has helped to increase the pool of financess available for loaning activities to all states. Capital mobility is the underpinning for the preceding as fund handinesss can be rapidly correlated. These progresss have brought with them built-in jobs, one of which is an of import aspect of the mode in which the subprime crisis impacted Almaty more than it did London. The following provides insight into an country that is an of import point of understanding to be remembered [ 15 ] . :

“International money market activity of this order and the lightning velocity at which financess can now discontinue states has besides prompted many observers to oppugn its worth and, in visible radiation of heightened exposure to foreign investor sentiment, to underscore its sensed dangers. In peculiar, strong expostulations to the ever-increasing tendency of fiscal globalization have been raised on the evidences that the authoritiess of the economic systems most affected have ceded their economic sovereignty to international investors.”

Therefore, the actions of persons within a market can get down a eating craze based upon the promise of available chances that seem to be available in the hereafter to lure bankers into loaning policies that incur the preceding. This is precisely what occurred in Almaty, as shall be explained in the Analysis. Given the aforesaid complexnesss involved in a treatment of this crisis. This background is being utilised to shoot nucleus issues that will be utile in understanding the fortunes and other countries to be explored.

In finance, hazard equates into a higher rate of return as fewer chances for borrowing are present. This has been a cardinal rule of loaning since antiquity. High current history shortages along with lifting foreign debt, means more hazard, therefore involvement premiums must be charged. This makes the cost of money higher inside a state and Acts of the Apostless as an inhibitor to adoption. The predating translates into the creditability of the borrower and the fortunes involved. Desai and Said [ 16 ] aid us in understanding the relationships involved in international finance in term of how they apply to the states in which London and Almaty are located in, which impacts the events that occurred:

“Financial crises, from the position of territorial order, arise because of a loss of control by autonomous provinces over fiscal markets and fiscal flows. The job is constantly seen as one of unequal ordinance, the failure of authoritiess either separately, or in concert with others, to exercise sufficient control over the international economic system. Economic agents have created forms of activity which have escaped the control of authoritiess. The response to these jobs is to happen ways of reconstructing the control of each crowned head province over these activities by increasing ordinance. This may affect implementing bing powers, or making new establishments, either intergovernmental or national in their scope.“

In times of crisis, increased fiscal ordinance is imposed either internally by the autonomous province, or externally by loaning controls that make the cost of money more expressive, and thereby limits its usage. This represents what Desai and Said [ 17 ] tell us is

“cosmopolitan order” in planetary finance that:

·… emphasises non province sovereignty but either market sovereignty or the sovereignty of capital accretion. There are many different discrepancies of the widely distributed construct of universe order – including neo-liberal, Marxist and Austrian strands – but what all of them portion is the premise that the province and political relations are low-level to the manner in which the economic system is organised, whether this is the self-generated market order of Hayek or the system of production dealingss of Marx. These constructions determine how the society as a whole evolves and they supply its ordination rules.

This means that provinces have to run within reasonably tight restraints, imposed by the manner in which markets and accretion work. They do non hold much discretion in finding their responses. The growing of a planetary system of production and exchange, from the really first, tended to run in front of provinces and national legal powers. It ended up undermining and circumscribing them. It has non destroyed them, but it has created powers, resources, webs and establishments which go far beyond them and which it is impossible for provinces to command without destructing the conditions for economic growing and prosperity and with them the financial footing for their ain being. World order is widely distributed instead than national in this sense. It is based non on provinces and intergovernmental co-operation, but on the logic of markets and capital accumulation.”

The preceding is another of import cardinal facet that is a portion of this survey, in that it applies to Almaty, and how the subprime meltdown rippling consequence was handled to convey about a rectification in Kazakhstan.

3.0 Methodology

The attack to this survey utilised a figure of techniques to near the scrutiny of how the United States subprime mortgage crisis impacted Almaty and London. The complexness of the state of affairs entailed looking at economic, statistical, historical, pre and post market factors, and other elements to compare the forces moving upon assorted markets in order to reap a image of the what transpired. The undermentioned will put away the assorted techniques used.

3.1 Research Philosophy and Approach

Qualitative and quantitative research was used in this survey as the combination of these two attacks led to a more comprehensive apprehension of the forces moving upon the state of affairs. The foregoing aided in comparing cardinal facets of the survey as represented by happenings that transpired in the market, along with historical constituents. Secondary research that entailed books, diaries, magazines and the Internet were used as the survey entailed garnering past informations and modern-day information in order to roll up a image of the state of affairs and facets associated with this probe. As the scope of the scrutiny took in a wide array of fiscal, market constituents, it must be understood that in researching informations it might hold been possible that some information was either unmarked and or non available. The volumes of informations on the survey besides rendered the possibility that some more of import beginnings of information where non found that could hold possible altered the findings, analysis, decisions and or recommendations reached. In order to guard against such possibilities a figure of differing beginnings were reviewed in order to organize a more balanced appraisal of the information.

3.2 Research Strategy

One of the research methods utilised in this survey represented what is termed as a cross-sectional survey. The foregoing represents a method implying observation of a figure of points during the same point of clip [ 18 ] . The preceding was utilised as opposed to a longitudinal survey as the ulterior represents observations happening over a long period of clip [ 19 ] . In carry oning this survey using the cross-section method, the foregoing entailed exploratory, every bit good as descriptive and explanatory aspects as it delved into the niceties of the industry, seeking to depict the contextual factors, along with the account of schemes, and tactics.

The huge positions of attack, and thought contained in understanding this survey takes in a wide scope of secondary research as this method provides exposure to a balanced position that is non skewed by what can happen in primary research. Secondary research allows us to be in touch with many different points of position, nevertheless, it can non ever be relied upon as the research worker may hold sourced the incorrect stuffs in doing the analysis, and or missed certain cardinal points that were either non available, or unknown at the clip the survey was conducted.

Secondary research represents the assemblage of information from books, diaries, articles, other research beginnings, and instance illustrations. Secondary research represents a agencies to roll up information sing techniques and processs, every bit good as schemes, principles and the grounds behind classs of action, and or fortunes. Within this survey, the literature hunt represented the chief beginnings of information. It, the literature hunt, consisted of an scrutiny of bing stuff, seeking for information pertinent to the undertaking.

The means via which to near the survey of a undertaking can take on many signifiers. Inductive and deductive research represent two techniques that can be brought together to understand the positions of differing attacks to the country under scrutiny [ 20 ] . The combine of research methodological analysiss has been advised as a agency to better the quality of an scrutiny, and it is possible to convey these different attacks to bear on one survey, whereby there are advantages in so making.

Table 1– Comparison of Inductive and Deductive Research [ 21 ]

Deductive Research Emphasis

Inductive Research Emphasis

Utilises scientific rules

Additions an apprehension of the

significances people attach to events

Moves from theory to informations

Obtains a close apprehension of

the research context

Collects quantitative informations

Collects qualitative informations

Utilises the application of controls

to guarantee the cogency of informations

Represents a more flexible construction

that permits alterations of the research

accent as the research progresses

Is a extremely structured attack

Brands the apprehension that the

research worker is a portion of the research procedure

The research worker is independent of

what is being researched

Has less concern with regard to

the demand to generalize

Has a necessity to choose samples

that represent sufficient size in

order to generalize decisions

Saunders’ ( 2006, p. 121 ) advises that the way of deductive research frequently is faster in footings of completion, as the information aggregation is normally based on what he footings as “… one take” . Inductive research nevertheless, states Saunders ( 2006, p. 121 ) “… can be much more drawn-out …” in that often the thoughts are “… based on a much longer period of informations aggregation and analysis… ” all of which has to emerge bit by bit.

3.4 Research Questions

In order to compare the reply or replies to the question implying how the fiscal crisis impacted the existent estate sectors in London and Almaty, the research inquiries entailed looking into an apprehension of how economic systems work on a national every bit good as international degree, along with fiscal market operation on a national and international degree.

4.0 Literature Review

Allen [ 22 ] in his book “Financial Crisis and Recession in the Global Economy” tells us of the fact that the “…rapid enlargement and globalization of fiscal markets shadows most other recent developments in international economics” . The foregoing is a critical constituent in the apprehension of the recent U.S. bomber premier mortgage crisis and its impact on planetary markets. Allen [ 23 ] advises that during the past 20 old ages, the international fiscal sector has changed and advanced in dramatic manner, earmarked by the debut and success of an wholly new currency, and alteration in the underpinnings of fiscal coherence that impacts the states of the European Union every bit good as the remainder of the universe. The Euro is the remarkable most notable development in the rapid enlargement of international finance that is marked by a host of of import happenings. He explains that new fiscal instrument such as derived functions, offshore banking, offshore fiscal markets, along with legion other developments are at work in a planetary fiscal system that binds itself closer and closer by grades each twenty-four hours Allen [ 24 ] .

In his book, Allen [ 25 ] explains that the progresss in information engineering has straight impacted the growing and interlinkages in international finance as he states:

“A fiscal dealing can slackly be defined as any concern agreement where money alterations custodies but the merely other thing that alterations custodies is certification. Both money and certification are moved by information engineerings ; hence fiscal market activity is enhanced by progresss in those engineerings. Expanding usage and public presentation of electronic and regular mail service, telephones, computing machines, fax machines, image processing devices, communicating orbiters, fiber optics, the World Wide Web and so on creates better chances in finance”

In exemplifying the foregoing, Allen [ 26 ] explains that in the early 1980s fiscal minutess were communicated across telephone lines, via facsimile machines, and satellite transmittals that were “…collectively owned and operated by national authoritiess through Intelsat in proportion to national use” . In his book, Allen [ 27 ] advises that developments in the velocity of transmittal of the facsimile machine during the 1980s corresponded to additions in international fiscal minutess. In the early 1980s a individual page transmittal took six proceedingss, by the terminal of the eightiess that clip frame was down to three seconds. Increased velocity in transmittal times helped to ease international fiscal minutess, therefore conveying planetary fiscal instructions closer together in footings of their ability to carry on concern in a more timely mode.

In today’s universe, international fiscal minutess take topographic point over T1 webs using packet-switching webs that can pass on with any bank, anyplace about in existent clip, as volumes of informations and paperss can be transmitted in seconds [ 28 ] . The significance of the progress of engineering is further explained by Allen, as he stated [ 29 ] :

“Changes in communications have ever affected the construction of finance, but these developments of the last few decennaries are responsible for the truly planetary nature of today ‘s fiscal markets. As participants use these new engineerings and webs, linkages are formed between assorted national and international sub-economy fiscal markets. New international chances have occurred for centuries, but merely late has mutuality become so permeant to deserve the word global”

The rapid developments of information engineering and its impact on planetary pecuniary motions brought capitalist economic systems closer together and rendered the opposing province planned economic system as a dinosaur, therefore, along with a long list of other of import development, helped to take to the prostration of communism as an alternate economic system [ 30 ] . The developments in information sharing systems, transmittal, interbank minutess, international currency and stock trading underpins what is termed as the planetary economic system that transcends the century’s old manifestation of boundary lines. DeMartino [ 31 ] helps us to better understand the preceding by explicating:

“…emerging today is non merely the latest experiment in economic organisation, it is, so, the highest possible signifier of economic system. Globalneoliberalism, the extension of market-based economic integrating across all local, regional and national boundary lines, will supply world with the optimum agencies to accomplish prosperity from now until infinity. With the flawlessness of the planetary capitalist market economy—and the attendant obliteration of communism socialism and all signifiers of province planning—economic history as the competition among alternate signifiers of economic systems … come ( s ) to an end.”

DeMartino’s [ 32 ] statement refering neoliberalism represents an of import construct within the context of this scrutiny, therefore it shall be explored briefly, to add light as to its significance. Martinez and Garcia [ 33 ] aid us to understand the foregoing by saying:

“Neo-liberalism is a set of economic policies that have become widespread during the last 25 old ages or so. Although the word is seldom heard in the United States, you can clearly see the effects of neo-liberalism here as the rich grow richer and the hapless grow poorer. Around the universe, neo-liberalism has been imposed by powerful fiscal establishments like the International Monetary Fund ( IMF ) , the World Bank and the Inter- American Development Bank… .the capitalist crisis over the last 25 old ages, with its shrinkage net income rates, inspired the corporate elite to resuscitate economic liberalism. That ‘s what makes it ‘neo ‘ or new.”

The construct of neoliberalism comes into drama in footings of the branchings of the recent U.S. subprime crisis. The undermentioned, represent market undertones that help to explicate the underlying every bit good as open aspects involved that were linked factors that impacted the economic system of Kazakhstan, along with the banking and fiscal market radioactive dust from the subprime crisis. Per Martinez and Garcia [ 34 ] neoliberalim’s cardinal points represent:

  1. Rule of the Market:

This facet of neoliberalism represents the liberation of private endeavor from bonds that are imposed by the province, irrespective of the impact such causes in footings of societal alteration. The predating entails developing internal mechanisms and policies that foster an increased openness to international investing every bit good as trade. In add-on, monetary value controls are removed, along with freedom of capital motion, services and goods.

  1. Deregulation:

This facet calls for the decrease of province ordinance of all countries that would hold an impact on cut downing net incomes.

  1. Denationalization

State owned endeavors are divested, stand foring banking establishments, public-service corporations, infirmaries, of import industries, instruction system and allied countries. Unfortunately, in most cases denationalization has had the consequence of seting a concentration of wealth in a few custodies when systems are dismantled, as has been the instance in Kazakhstan every bit good as other former Soviet axis provinces, ensuing in higher monetary values for goods and services.

  1. Elimination of the Concept of the Public Good or Community

This represents replacing of the foregoing with what is termed as single duty. This is exampled by coercing the poorer sections of society to happen their ain solutions for deficiency of wellness attention, employment and instruction, and so happening mistake when they do non work out these and or similar jobs

Martinez and Garcia [ 35 ] farther explain neoliberalim, by reding that it represents a policy reform that has been imposed by the World Bank and other planetary fiscal establishments. Neoliberalism in the United States is leveling the public assistance system, irrigating down labour rights, and doing cuts in societal plans [ 36 ] . The account of neoliberalim is significantly in understanding what happened to the Russian economic system and its new provinces after the break-up of the Soviet Union. The passage policy crafted for Russia after its economic prostration was crafted by what are termed as extremist neoliberal reformists [ 37 ] .

4.1 Kazakhstan

Kazakhstan is the largest economic system every bit good as state in Central Asia, possessing highly rich oil militias along with minerals [ 38 ] . Agriculture besides represents a strong sector and a good industrial base for the extraction and processing of some of these natural resources [ 39 ] . That foundation has provided stableness for the country’s economic system, which rests strongly on the export of oil, grain, and metals that have produced a GDP per capita that ranks 100 in the universe, the United Kingdom stands at 19th [ 40 ] :

Chart 1 – GDP per Capita [ 41 ]



GDP – per capita



$ 55,100


United States

$ 37,800



$ 37,700



$ 32,800



$ 31,200



$ 30,900



$ 30,000


Irish republic

$ 29,800



$ 29,700



$ 29,000



$ 28,900


Hong Kong

$ 28,700



$ 28,600



$ 28,000


United Kingdom

$ 27,700



$ 27,600



$ 27,500


Soviet union

$ 8,900



$ 8,200



$ 7,600



$ 7,000



$ 7,000



$ 6,900

The economic system of Kazakhstan is fundamentally about wholly dependent “… upon the production of basic trade goods … ( such as ) … agricultural merchandises like wheat and farm animal, minerals like Cu, alumina, lead, zinc, Fe ore, and steel, and mineral fuels like oil, gas, and coal” [ 42 ] . Prior to the U.S. subprime mortgage crisis the Kazakhstan economic system had been basking a steady growing rate, chiefly as a consequence of oil exports, with existent GDP growing runing about 10.4 % for the period between 2000 and 2004 that marked a major betterment from the sulky growing rates of the 1990s as the state adjusted from its neoliberial start [ 43 ] . During that period the economic system recorded modest rising prices, with a governmental budget excess [ 44 ] . On the negative side, and a aspect that is of import in understanding the ulterior reappraisal of the existent estate sector, is that the concern environment is known for widespread corruptness that impedes the behavior of concern [ 45 ] . As existent estate is a valued trade good, this facet needs to be considered in the rating of factors involved in the subprime mortgage recognition crunch. The fiscal sector of the state is reported as being comparatively good developed, marked by low involvement rate spreads [ 46 ] . A study by Nathan Associates [ 47 ] commented that the rapid growing of recognition needed to be accompanied by improved ordinance of the fiscal market every bit good as supervising, a critical factor when a crisis state of affairs surfaces. The undermentioned illustrates cardinal economic countries:

Table 2 – Kazakhstan Analysis / Notable Strengths and Weaknesses [ 48 ]


The fundamentally strong economic underpinnings are weakened by the reasonably structured province of the fiscal sector, and the country’s corruptness index. The country’s overall pecuniary and financial policies were rated as sound in the Nathan Associates [ 49 ] study, which emphasised the trust on oil exports as a cardinal driver of the economic system as productiveness of the work force is rated low. As mentioned, corruptness is a job in the concern sector where under the Index of Economic Freedom the state ranks 76th in the universe which puts it in the class of largely free [ 50 ] :

Table – Index of Economic Freedom 2008 [ 51 ]


United Kingdom


United States





Overall Mark




Business Freedom




Trade Freedom




Fiscal Freedom




Government Size




Monetary Freedom




Investing Freedom




Fiscal Freedom




Property Rights




Freedom from Corruptness




Labour Freedom




* The superior system represents 80-100 Free / 70 – 79.9 Mostly Free / 60-69.9 Moderately Free / 50-59.9 Mostly Free / 0-49.9 Repressed

Atmaty is Kazakhstan’s largest metropolis, holding a population that exceeds 1,226,000, and is the major commercialism Centre of the state [ 52 ] . Considered as comparatively stabile, the existent estate in Atmaty has been noted as a finish for foreign investing signifier many persons with capital, termed every bit good to make [ 53 ] . Condo gross revenues in Atmaty moved briskly prior to the fiscal crisis. In a study generated by the American Chamber of Commerce in January of 2006 [ 54 ] , before the fiscal crisis, “… Land development, building and selling of commercial and residential belongingss … ( had ) … go a critical portion of the national economy” .

Figure – Map of Kazakhstan [ 55 ]


Figure – Map of Almaty, Kazakhstan [ 56 ]


The addition in existent estate investing prior through 2006 had been a consequence of the introducing of policies and reforms to spur investing and growing in that sector, which impacted Almaty, Astana and Atyrau [ 57 ] . Real estate market investing and growing have proceeded good in Almaty since the late 1990s, nevertheless the moving of the capital to Astana saw a moderate passage of occupants that included many governmental forces [ 58 ] . The existent estate sector’s growing rate during that period showed an overheating of domestic existent estate monetary values every bit good as monetary values for assets, along with edifice force per unit areas in footings of the grasp of the existent exchange rate [ 59 ] .

In a study generated by the Harvard Business School Institute for Strategy and Competitiveness [ 60 ] , the overall chances for the economic system were rated as worsening due to the predating factors, which besides included the laterality of oil in the nation’s economic system as making overall instabilities. The competitory challenges for the state as indicated in the predating study mentioned that this was besides a worsening factor in that the geographical location is distant, the structural failing in the concern environment, the deficiency of human rational capital every bit good as institutional capacity to undertake the wide scope of economic and competitory issues to be addressed, the deficiency of clear policy precedences that sets forth a sequenced methodological analysis for accomplishing ends and aims to develop a balanced economic system, and a vision of where the state sees itself heading over the long term, with the route map to make that finish [ 61 ] .

The Harvard Business School study pointed out other structural failings as represented by the undermentioned [ 62 ] :

  1. The prosperity the state has been able to accomplish has been derived from the merchandising of natural resources and existent estate, without the benefit of an industrial base and other signifiers of trade.
  2. The prosperity of the state is constrained as a consequence of it being dependent upon the usage of natural resources, therefore rendering growing beyond that kingdom as limited.
  3. The country’s authorities is to a great extent engaged in the economic system, along with it being the proprietor every bit good as distributer of wealth as defined by natural resources.
  4. Interest groups seek increasing parts of the country’s wealth therefore disregarding investings in production installations and the development of a fabrication and or industrial base.
  5. The country’s resource gross dependence and unproductive economic policies permit uneconomical methods.
  6. Resources are utilized to back up subsidies that contribute to uneconomical patterns

The predating wide based reappraisal of the economic sector has been undertaken to uncover the structural constituents of the economic system of Kazakhstan, and its little fabrication underpinnings that indicate an economic failing. The foregoing represents a possible fiscal bubble that could endure dramatic reversal in economic downswings and or fiscal crisis state of affairss.

The predating analysis of the Kazakhstan economic system is supported by a study conducted by the International Monetary Fund in 2005 [ 63 ] that pointed to the same economic sector structural failings:

  1. Inflationary force per unit areas are being created by additions in governmental wages therefore making a demographic market inconsistent with the state as a whole.
  2. The pecuniary challenges in the state were indicated every bit go oning as a consequence of the dependence on oil grosss. It besides stated that the grasp of the value of the currency is lending to heightened force per unit areas on rising prices.
  3. The International Monetary Fund placed peculiar accent on the country of bank recognition that has seen a dramatic rise, adverting the existent estate sector in peculiar. It stated that the addition in banking recognition was being financed through external adoption that creates important hazards

As shown throughout this Literature Review, the heightening of recognition loaning, and existent estate under an inflationary currency, underpinned by an economic system extremely dependent upon oil and natural stuff exports, does non stand for a strong foundation for difficult plus grasp ( Real estate ) over the long term [ 64 ] . In a study generated by the International Monetary Fund [ 65 ] specific hazards associated with the existent estate sector were mentioned as a consequence of the rapid rise in loaning. The increased hazard as a consequence of the heightened rise in mortgage and consumer adoption tripled during 2004, with indicants indicating to continued additions in these countries [ 66 ] . Consumer adoption for grounds related to belongings, intending including consecutive mortgage loans, represented 37 % of bank portfolios exposed to existent estate, which is inordinately high [ 67 ] . The IMF study went on to province that as a consequence of imparting bounds on Bankss for existent estate have been established, such bounds were fundamentally nonmeaningful as this was circumvented by masking existent estate loans as consumer loaning to conceal their classs [ 68 ] . Another failing in this country was revealed by the fact that there were no income revelation demands for commercial belongings loans every bit good as building loans [ 69 ] .

Other underlying jobs in the banking sector was besides identified, as the Kazakhstan banking sector had dramatically increased its international adoption to subvention the domestic extension of recognition [ 70 ] The International Monetary Fund revealed concern over long-run bonds that were being issued by the banking sector as a consequence of the concern over contract options allowing the loaners to exert early refund options which would impact upon the adulthood rates [ 71 ] . Supervisory additions refering regulative facets in the banking sector were besides raised as the rapid growing in the sector, the heightened consumer adoption profile and addition in existent estate, commercial belongings and building loans indicated a to a great extent banking portfolio skew in one economic sector therefore bespeaking portfolio instability [ 72 ] .

The publicity of Almaty as the country’s fiscal sector after the moving of the capital had helped to brace the existent estate sector after some resident resettlements and moving, nevertheless concern was indicated sing the edifice in the commercial sector in expectancy of such growing, which was besides accompanied by existent estate purchase for bad every bit good as income potencies [ 73 ] . All of the predating points to a comparative strength in economic growing, but weaknesses in the construction of the underlying economic system as a consequence of dependance on oil grosss. The extension of a disproportional per centum of loans into the existent estate sector for commercial, building and existent estate besides was indicated as a structural failing.

Inflation represents an of import term in this scrutiny. It, rising prices, harmonizing to the 1983 definition as contained in Webster’s New Universal Unabridged Dictionary, represents [ 74 ] :

“ An addition in the sum of currency in circulation, ensuing in a comparatively crisp and sudden autumn in its value and rise in monetary values: it may be caused by an addition in the volume of paper money issued or of gold mined, or a comparative addition in outgos as when the supply of goods fails to run into the demand” .

In 2000, Webster’s Dictionary revised its definition of rising prices to read [ 75 ] :

“A relentless addition in the degree of consumer monetary values or a relentless diminution in the buying power of money, caused by an addition in available currency and recognition beyond the proportion of available goods and services.”

The new definition indicated that rising prices was the effect of lifting monetary values as opposed to being its cause, a important alteration in face of the predating reappraisal of Kazakhstan’s economic system and its way prior to the fiscal crisis. The definition position of Webster’s revised version is supported by a figure of beginnings. [ 76 ] define rising prices as “The overall general upward monetary value motion of goods and services in an economic system, normally as measured by the Consumer Price Index and the Producer Price Index. Over clip as the cost of goods and services addition, the value of a dollar is traveling to fall because a individual wo n’t be able to buy every bit much with that dollar as he/she antecedently could. [ 77 ] ” The economic growing in Kazakhstan prior to the fiscal crisis was underpinned my mild rising prices that was slightly keep in cheque by oil grosss and external banking sector adoption that supplied currency for consumer loaning and existent estate. Therefore when the crisis hit, these sectors underlying failings magnified.

4.2 London

As the capital of England, London has ever held a polar topographic point in the economic system of the state. It is home to the 2nd most of import fiscal capital in the universe after New York [ 78 ] , with the monetary values for existent estate in London among the world’s highest, viing with New York and Tokyo for that differentiation [ 79 ] . In comparing London with Almaty, there are a big figure of cardinal differences that shall be covered herein in order to supply apprehensions as to the impact of the fiscal crisis on each venue. In brief, London is a planetary fiscal capital every bit good as location for retailing, corporate central office for planetary companies, is a polar location as a gateway between the United States and Europe, is a transporting finish every bit good as being linked with the strong economic underpinnings of the European Union. The foregoing are highlighted differences between it and landlocked, oil dependent Almaty that has a limited economic base, nevertheless, there are a host of factors that go deeper. London has a strong and skilled work force that is extremely diverse, along with an economic base that is spread into differing sectors therefore offering balance in the instance of economic downswings.

In a study of the most dearly-won metropoliss, London ranked as 3rd after Tokyo and Osaka Japan [ 80 ] :

Table 3 – World’s Most Costliest Cities[ 81 ]



Last twelvemonth ‘s rank


Tokyo, Japan



Osaka, Japan



London, Britain



Moscow, Russia



Seoul, South Korea





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