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kazakhstan

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  KAZAKSTAN

REPUBLICAN REFERENCE

Area (sq.km) 
2,717,300 

Population
16,731,303

Principal 
ethnic groups 
Kazaks 44.3%
Russians 35.8%
Ukrainians 5.1%
Germans 3.6%
and many others

Capital 
Astana
(formerly Akmola)

Currency
Tenge

President 
Nursultan Nazarbayev

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Background:
Native Kazaks, a mix of Turkic and Mongol nomadic tribes who migrated into the region in the 13th century, were rarely united as a single nation. The area was conquered by Russia in the 18th century and Kazakstan became a Soviet Republic in 1936. During the 1950s and 1960s agricultural "Virgin Lands" program, Soviet citizens were encouraged to help cultivate Kazakstan's northern pastures. This influx of immigrants (mostly Russians, but also some other deported nationalities) skewed the ethnic mixture and enabled non-Kazaks to outnumber natives. Independence has caused many of these newcomers to emigrate. Current issues include: developing a cohesive national identity; expanding the development of the country's vast energy resources and exporting them to world markets; and continuing to strengthen relations with neighbouring states and other foreign powers. 

Update No: 263 - (26/11/02)

Nazarbayev in defence of his regime
The president of Kazakstan, Nursultan Nazarbayev, has given a robust defence of his regime in his Constitution Day address. The country needs strong presidential rule, not the fractious in-fighting of a parliamentary regime, he claims.
He reiterated his opposition to the idea of governors of provinces being elected locally, instead of being appointed from the centre. He wants to install a new law on the media which would set out the rights and duties of the authorities and the media. That in effect means censorship. Having banned any disrespect of his person, it is clear enough what sort of media Nazarbayev has in mind.
Also prohibited are aspersions on the members of his extensive family who control most of the commanding heights of the economy.

Opposition mounts
The government is not totally opposed to the idea of democracy, at least formally. Political parties are allowed to organise and form in opposition to it, but the legal minimum number of their members for recognition has been raised from 3,000 to 50,000. There is one party at home that has surmounted this hurdle, having 65,000 members and doubtless even more sympathisers, Ak Zhol (White Path). It is the first party to apply for re-registration. Its leaders, former senior government officials and a prominent businessman, are moderates, hoping that the country's autocratic system can be changed by reforms. Their supporters are mostly Kazaks, not the local
Russians. Uraz Jandosov, Ak Zhol co-chairman and a former deputy premier, says that Kazaks are aware that it is up to them to reform the system or be stuck with it for good.
A more radical party, the Republican People's Party, operates from abroad. It is led by former premier, Akezhan Kazhageldin, who has lived in exile for four years. He has proposed merger with another radical group, Democratic Choice, to work for "the removal of the shameful regime of personal authority and pervasive corruption" of Mr Nazarbayev.
The Az Zhol leaders were among the founders of Democratic Choice. Their ideas, backed by financial resources, attracted many supporters and other organisations. An opposition began to form that unnerved the authorities.
The middle classes are on the move; and when that happens revolutionary changes can follow. All revolutions, whether liberal-democratic, nationalist or communist, have been led by middle class figures or lesser lights among the ruling strata. They have the education, know-how and self-confidence to perceive the weaknesses of the existing order of things and to exploit them for its overthrow. Thus it was with the ancien regime in the French Revolution. Thus it may one day be for a regime with far less lustre and legitimacy in contemporary Kazakstan.

Fabulous rates of growth
The big plus going for the regime is the economy. The economic dynamism of the republic is not in dispute. Nazarbayev was able to tell US Secretary of State Powell on a recent visit that GDP growth has been phenomenal since 1999. GDP expanded by almost 40% between July 1st 1999 and July 1st 2002. 
Public sector wages and pensions rose by nearly a third. Almost half a million people found new employment and one and a half million Kazaks moved out from poverty level. Raising as many as possible out of the poverty trap is a top priority for the premier, Imangaliy Tasinagambetov, and his government team.
GDP growth for this year, after being around 10% per annum in the first years of the decade, is due to be corrected down from 10.2% to 7-8%. But this is still the highest growth expected anywhere in Central Asia. Investment is spurting upwards by 18-20%, securing a brighter future, while inflation is running at under 6% annually.
The economy is booming all right. The concern is whether the rewards can be distributed more equally in a country that in world terms is still very poor, as the premier well knows.

Positive profile abroad
Such economic good news means that Kazakstan is now rated as a sound proposition on the international financial markets. Its foreign debt at US$3.75bn is easily manageable given the trade and budget surpluses. As the Kazak National Bank chairman, Grigory Marchenko, could boast in late August: "Kazakstan's assets exceed its liabilities."
The Development Bank of Kazakstan received a long-term rating of BB-, a short-term B and a support rating 4T from the global agency Fitch in August. Fitch said that the outlook for the long-term rating is positive. The majority shareholder of the bank is the government.
Moody's has upped its rating for Kazakstan to Baa3, the same rating as for Saudi Arabia and Bahrain. This should widen the pool of investors on which it can draw.

Opening up EurAsian space
The Kazaks are acting as the leaders of Central Asia, both geopolitically and economically. Uzbekistan, with its central location there and its 22m population astride the fertile Feghana Valley, might seem to be the natural leader for the region. But Islam Kasimov, the Uzbek president, is hanging back here. He rates new ties with the US as far more important.
President Nursultan Nazarbayev is far from wanting to shun the US, with whom close links are being forged at both governmental and corporate levels. But he realises that Kazakstan can only be an even greater lure for US firms if it consolidates itself as the hub of the region and its leader.
One body in which it is doing this is the EurAsian Economic community (EAEC): another is the Shanghai Five, now Six, including all its neighbours. The EAEC includes Kazakstan, Kyrgyzstan and Tajikistan, as well as Russia and Belarus. A common EurAsian space is to be opened up.
2002 has not seen this vision realised as Nazarbayev would like. The rise of GDP, which was due to be 10.2% this year, is coming in, as we have seen, at more like 7.8%; and the reason is a downturn in trade with Russia, an anomaly since the Russian economy is also booming. Kazak-Russian trade was US$2.6bn in the first half of 2001 and was only US$1.8bn in that of 2002.
The figure of US$5bn for annual cross-border trade between the two countries is far too low, comparing with say, a US-Canadian cross-border trade of nearly fifty times that amount. There is scope for a huge growth in bilateral commerce, which should be the cornerstone of the EAEC. A common energy grid is one idea of Nazarbayev's to boost the EAEC. Another is cooperation over water management.

Uzbek-Kazak trade contracts too
The downturn in trade with Russia has been matched by a similar contraction of that with Uzbekistan, which declined by 6.3% in the first half of the year.
Nazarbayev welcomed the Uzbek president to the capital, Astana, in late summer, where he laid out a programme of cooperation on energy and water management to redress the situation. There is a need to intensify the work of the joint commission on trade and economic cooperation.
The fact is that the two ex-Soviet states now set a far higher store on relations with the West, especially the US, then with each other or Russia. But, as they are beginning to realise, the old ties need to be revamped. A coming highway from Kungrad in Western Uzbekistan to the Aktau seaport on the Caspian Sea in Western Kazakstan should boost trade between Uzbekistan and Russia via Astrakhan. But also the highway should benefit Uzbek-Kazak trade.

The Houston Initiative
The new interest of the US in Central Asia is paying off in one new respect. An earlier accord signed between Nazarbayev and President Bush, called the Houston Initiative, is getting off the ground.
The Houston Initiative is a partnership between Kazakstan and the United States to bring the private sectors in both countries closer, increase the competitiveness of the business sector of the republic, and also bolster joint production and sales on world markets.
The Kazak minister, Kasymzhomart Tokayev, has stressed that the Kazak energy sector has attracted the main attention of the international business community, and claimed that in the coming 10 years some US$150-200bn were planned to be invested in various projects in the region. Such a figure needs to be treated with caution. Everything depends on what happens to Iraq; should its oil come back on stream in full, this would marginalize Kazakstan, which has the oil, but is so remote with the obvious disadvantage of higher transportation costs to get the product to world markets.
Tokayev noted that the Houston Initiative is aimed at the complex development of the economy and its diversification, and ensuring international competitiveness, especially of local small and mid-sized business. Concluding the official announcement, Tokayev underlined that as part of this partnership "massive" support for small and mid-sized businesses would be initiated shortly. Such backing would include crediting business, direct investment, insuring credits and risks, implementing cooperation systems between large and small companies and technical aid.

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ENERGY

British Gas is basically happy with its Kazak operations

In an interview with the Kazak newspaper 'Novoye Pokoleniye,' published under the title "Kazakstan occupies a key place in the activities of British Gas," David McManus, the BG Group's executive vice president for the Eastern Hemisphere, says that the company's investment in Kazakstan tops US$1.5bn to date. On the unresolved legal status of the Caspian, he notes that this causes a number of problems for investors, and BG is not contemplating the acquisition of any more contract sites at the moment. After stressing the country's basically healthy economy, he pointed out that day-to-day practice must be improved. Investment contracts should not be modified for the sake of short-term gain. He agreed that as much use as possible should be made of local goods and services so as to diversify the economy. 
In the interview Mr McManus said: "British Gas's investment in Kazakstan's economy is in excess of US$1.5bn. This money has been channelled into developing the Karachaganak [oil and gas condensate] field in western Kazakstan, carrying out exploratory drilling in the north Caspian and building the CPC [Caspian Pipeline Consortium] pipeline. Our company is, thus, a major British investor in the country. One should also note British Gas's indirect investment, thanks to which local contractors are given ample opportunities to take part in the Karachaganak project. 
"In 2001, we allocated more than US$10m to social needs, including US$6m to financing projects stipulated by our contractual obligations. The remainder comprised investment to develop communal services, as well as grants, donations and also sponsorship and support for universities, research institutions and charities." 

South Korea, Kazakstan discuss joint oil projects

Kazak President Nursultan Nazarbayev and South Korean presidential envoy and Minister of Commerce, Industry and Energy, Shin Kook-hwan discussed the outlook for cooperation between their countries on 7th November, Interfax News Agency has reported.
The meeting covered South Korea's possible participation in the development of Kazakstan's mineral resources, particularly oil, and training Kazak engineers in advanced technologies, Shin Kook-hwan told journalists after the meeting. He expressed the hope that Kazakstan would agree to let South Korean companies participate in oil projects, he said.
Talks were scheduled in Astana for 8th November with the Kazak Energy and Mineral Resources Ministry, during which a memorandum was to be signed and talks held with the Transportation and Roads Ministry and the Industry and Trade Ministry. It was thought that participation of a South Korean consortium in oil projects on the Kazakh Caspian shelf could come up for discussion,
Shin Kook-hwan held talks with Kazak State Secretary and Foreign Minister Kasymzhomart Tokayev and managers of the national oil and gas company KazMunayGaz [Kazak oil and gas].

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FOOD & DRINK

Carlsberg enters Kazakstan with majority stake in IRBIS

Giant Danish brewery, Carlsberg, has secured a stronger foothold in the former Soviet market thanks to the acquisition of a 76 per cent stake in IRBIS, a leading Kazakstan-based beer brand, New Europe has reported quoting an article in the Almaty Herald Daily. The news came as the beer maker disclosed positive preliminary figures that saw profits jump with higher sales in the Russian and Ukrainian markets.
With regard to the international market, Carlsberg saw its net revenues reach 26.9bn Danish crowns (US$3.6bn), accounting for a jump of five per cent, while operating profit expanded by 14 per cent to 3.2bn crowns.
One of Carlsberg's holdings, the Baltic Beverages Holding (BBH), 50 per cent controlled by the Danish brewery, raised its share of the money-spinning Russian market to more than a third in the first three quarters of 2002, representing a five percentage point increase on the same period as 2001. The volume increase shows that BBH continues to outperform the market," Carlsberg was quoted as saying.
The beer maker said its fiscal 2002 performance will remain buoyant. Group operating profit is expected to increase by 15 per cent, while revenues will rise by a tenth. Although Carlsberg did not disclose the financial terms of the Kazak purchase, it noted that the expansion would help boost figures at BBH. "Beer consumption in Kazakstan has increased by 20 per cent in the last four years," Carlsberg said.

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MINERALS & METALS

Orken presents new technology

Kazakstan's Orken, formerly the Lisakovsky GOK ore mining combine, will spend US$45m to introduce technology to remove sulphur from iron ore, Interfax News Agency has reported. 
An Orken official told a meeting of the Kostanai region government that the project would be implemented in two stages. The first phase, which will cost US$25m, will be completed by December 2004 and the second phase worth US$30m by December 2006, he said.
Studies of the project will be completed by the end of this year and the work will begin in 2003. He said the company's main problem is that the iron ore it produces has a high phosphorus content, which makes it uncompetitive. "Research conducted over the past two years by Kazak, Russian and US specialists showed that the new technology will reduce the phosphorus content in the ore from 0.7 per cent to 0.2 per cent," he said. 
Kostanai region leader, Umirzak Shukeyev, described the new technology as "revolutionary" and pledged the full support of the local authorities to the enterprise, which had made "such a substantial investment in advanced technology."

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TELECOMMUNICATIONS

MIG gives away Altel shares for US$5m

Metromedia International Group (MIG), a US company that owns telecommunications assets in the CIS and Eastern Europe, has sold its 50% stake in Altel, an AMPS-standard mobile operator in Kazakstan, to an unnamed buyer, Interfax News Agency reported recently. 
The deal was worth about US$5m, MIG said in a press release. "MIG is happy with the sale of Altel, which was part of the company's programme to sell some of its assets with the aim of improving its financial structure," MIG board Chairman and president, Carl Brazell, commented. "Altel's growth prospects are quite limited, as the operator works in an analogue standard and is facing ever fiercer competition from GSM operators," Brazell said. He explained that in order for the company to grow further, significant capital outlays would be required to switch to a digital standard, which is not part of MIG's plans.

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