Endnotes

¹Central Asia is composed of Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan.

²See Furceri and Mourougane (2009). Box 6 in their paper talks about transmission mechanisms from banking crises to activity.

³There are different trade financing instruments that require different collateral. These are further discussed subsequently.

⁴This part draws from Finger and Schuknecht (1999).

⁵In both, a buyer undertakes to pay by a specified future date but the latter offers less legal protection.

⁶This part draws from International Monetary Fund (IMF) (1999).

⁷The World Bank uses the following income classification of countries: Low income US$11,456. A caveat is in order for Turkmenistan's GNI because statistics are considered state secrets in the country and the published GDP data are subject to wide margins of errors.

⁸In Turkmenistan, the private sector share is significant only in food processing and consumer trade and services.

⁹See Footnote 7 on Turkmenistan's statistics.

¹⁰UNECE (2003a).

¹¹Importantly, none of the official definitions of SMEs coincide with the classification that this paper uses in subsequent discussions. The paper follows other studies on SMEs that simply base firm classification on the number of employees or, if available, the amount of annual sales/turnover. Micro and small enterprises are those with less than 50 employees, medium with 50 to 249 employees, 250 and above are large firms.

¹²Based on the collected information from the IFC, I averaged all the collected share of MSME employment according to economic income category.

¹³UNECE (2003a).

¹⁴The main BEEP Survey in 2005 is composed of 300 firms each from Kazakhstan and Uzbekistan, 202 from Kyrgyz Republic, and 200 from Tajikistan. For both 1999 and 2005, the survey sample used stratified sampling, with various quotas on the basis of sector, size (based on number of employees), and location. For the 2005 survey, additional targets were included in the sample design, namely: at least 10% small enterprises (2-49 employees), and 10% large (250–9,999 employees); at least 10% of firms should be foreign controlled (more than 50% shareholding) and 10% under state control; at least 10% of firms export at least 20% of total sales; and at least 10% should be from a small city/countryside. Furthermore, the sectoral composition of the sample was determined according to the relative share in GDP. The sample excluded firms with only one employee, or those in sectors that are subject to government price regulation and prudential supervision like banking, or utilities (electric power, rail transport, water). See methodological notes on the BEEPS from the European Bank for Reconstruction and Development at www.ebrd.org.

¹⁵In subsequent discussion, the results do not materially change when I used both number of employees and amount of turnover/sales. So I opted for the more simple classification using employment. See Footnote 10.

¹⁶Indirect export is when firms sell to a distributor or direct exporter.

¹⁷This is merely the targeted quota for exporters in the sample.

¹⁸For this subsection, the paper draws from IMF (1999) which discussed in greater detail the Central Asian crisis following the Russian financial crisis.

¹⁹This usually refer to services related transactions in a country's current account.

²⁰IMF (1999).

²¹This actually depends on whether the reduction is temporary or permanent. The reduction in capacity utilization will ensue if reduction is permanent. However, because of demand uncertainty, firms can also cut capacity even if the demand reduction is temporary.

²²SMEs in their study are enterprises with less than 500 employees. This definition is different from most studies e.g. by EBRD or World Bank, where SMEs are defined to be those with 250 employees and less (300 employees for World Bank studies).

²³In many studies, the World Bank uses the following definition for SMEs: medium – up to 300 full time employees and annual sales up to US$15 million; small – up to 50 employees and annual sales of up to US$3 million; and micro—up to 10 employees and annual sales of up to US$100,000.

²⁴Various issues of the EBRD Transition Report discussed some of the financing problems in CIS countries. A similar situation happened to Indonesia forcing the central bank to deposit part of their foreign currency reserves in foreign banks as guarantee or collateral for the L/Cs issued by Indonesian banks.

²⁵This is due to various factors. SME creditworthiness is hard to evaluate, and in the region, many of them are new and have no credit history.

²⁶Open account is essentially like a trade credit given to importers by the exporter where payment may be delayed even as ownership of the exported goods had already been transferred to the importers. It takes an enormous deal of trust among parties for open account to be granted. This normally takes place, especially among vertically integrated firms or parent-subsidiary trade, where risk is extremely low and repeat business characterizes the relationship.

²⁷IMF (2009b).

²⁸Using 122.40 tenge: 1 US$ average exchange rate in 2008.

²⁹See Dorsey (2009).

³⁰The sample is comprised of 300 firms each for Kazakhstan and Uzbekistan, 202 for Kyrgyz Republic, and 200 for Tajikistan. Sectoral composition is as follows: 26% wholesale, retail, and repairs; 21% manufacturing; 12% construction; 9% real estate, rentals and business services; 6% transport, storage and communication; 4% hotels and restaurants; 2% mining and quarrying; and 4% other sectors.

³¹The choice of 20% is arbitrary. The EBRD and World Bank used the 20% cut off for direct exports as a basis for the stratified sampling targets, hence I considered it, likewise, as a realistic benchmark for categorizing “exporters” from “non-exporters”.

³²The choice of 20% is arbitrary. The EBRD and World Bank used the 20% cut off for direct exports as a basis for the stratified sampling targets, hence I considered it, likewise, as a realistic benchmark for categorizing “exporters” from “non-exporters”.

³³See UNECE (2003a). It provides an excellent survey of SME policies in transition economies.

³⁴Approximately, US$956 million using exchange rate of 122.379 tenge to one US$.

³⁵In Tajikistan, the constitution still holds that the property rights to land belong to the state only. Therefore legal entities and individuals cannot own and sell the land. Land legislation allows land use rights but does not envisage alienation (i.e. ownership or subsequent sale and resale). There is also no normative legal base duly regulating the issues of land mortgage.

³⁶UNECE (2003a).

³⁷There is no corresponding data for Turkmenistan.

³⁸In some cases, this restriction has driven some SMEs out of business. For example, when a small sewing company needed to import fabric from abroad, it requested the large factory that ordered it to make an advance payment of Som600,000, which was duly deposited in its bank account. But the sewing company was unable to withdraw that cash to make the purchase, leading it to default on its contract.

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