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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: 262 - (22/10/02)
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.
Opening up EurAsian space
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 at more like 7.8%; and the reason is a downturn in relations with Russia, an anomaly since the Russian economy is also booming. This is the conclusion of EAEC official, Nigmatzhan Isingarin, who says: "What made us lose the 2.4%? Largely the goods turnover with Russia." 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 trade between the two countries is far too low, comparing with a US-Canadian 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 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 noted that in the coming 10 years some US$150-200bn were planned to be invested in various projects in the region. This 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.
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.
Nazarbayev in defence of his regime
The president has given a robust defence of his regime in his Constitution Day address. The country needs a strong presidential rule, not the fractious in-fighting of a parliamentary regime.
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.
He is in tune with much of his electorate. They want effective government above all. So long as he delivers that he is assured of support.
Fabulous rates of growth
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 of the 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, as we have seen, 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
One big plus is 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.
Investment grade status for Kazakstan, first in CIS
The Financial Times (FT) reported that the Central Asian republic of Kazakstan has succeeded in clinching an investment grade status. It is the first country in the Commonwealth of Independent States to do so.
International credit rating agency, Moody's, raised Kazakstan to Baa3, the same rating given to Saudi Arabia and Bahrain.
The upgrade, which was carried out in a period of shrinking flows into emerging markets and reduced enthusiasm for emerging markets risk, reflected an increase in foreign direct investment and export growth, driven mostly by oil and non-ferrous metals, Moody's was quoted as saying.
The upgrade will give Kazakstan an opportunity to draw on a large pool of investors, who may not be willing to inject their money into a sub-investment grade credit, FT quoted Ashmore's research head Jerome Booth as saying.
Kazakstan's upgrade might potentially annoy Russia, which is still rated Ba3. According to Moody's, this is three levels below the investment grade. FT wrote that the upgrade comes despite a heavy dependence on volatile oil exports and the slow progress of privatisation in the country.
"The growth of oil export volumes stemming from construction of new pipelines should in the medium-to-long term compensate for price volatility," Moody's said in its report. "The economy will eventually diversify into pipeline and machinery sectors, followed by development of food processing and machinery for construction and infrastructure," the agency added.
The CIS member has also reported a budget surplus, mainly brought on by high oil prices and improved collection of taxes, FT said. A portion of the budget surplus is fixed on the oil fund that will help plug any budget holes in the coming months.
US oil major to invest US$3bn in Kazak deposits in 2003-2005
The US oil company ChevronTexaco plans to invest US$3bn in the development of Kazakstan's oil fields, the company's chairman and CEO, David O'Reilly told reporters, Prime-TASS News Agency has reported.
He said that the company plans to invest the funds in the Tengiz oil field in 2003-2005.
Earlier this year, officials said that investment in oil production at the Tengiz oil field is expected to total US$3bn over the next three years...
Transneft mulling Kazak oil transit expansion
Kazakstan has asked Russia to consider the possible enlargement of Kazak oil transit to 16.5m tonnes a year, reports New Europe. Transneft Vice President, Sergei Grigoryev, said on September 19th that his company had confirmed the technical capacity of the pipelines to carry that amount of Kazak oil. He said Kazak oil transit would be discussed at the next session of the governmental commission for main pipelines. Russia and Kazakstan signed a 15-year intergovernmental agreement in June 2002, stipulating the transportation of no less than 15m tonnes of Kazak oil a year through Russia's main pipelines.
Iran to consider building oil pipeline from Kazakstan
Iran will give serious consideration to the possible construction of a Kazak-Iranian pipeline, Interfax News Agency has reported.
"Iran may start considering the construction of a pipeline from Kazakstan through Turkmenistan," the Iranian oil and gas ministry's director-general for the Caspian region said at the 10th international oil and gas conference in Almaty on 3rd October.
"As far as I understand, the Kazak government is also in favour of this project," he said.
He said that nobody has any doubts that the Iranian oil route is the most economical and ecologically safe. Oil companies regard this route as the most viable, because it is geographically good for transit, it is inexpensive and it is relatively short.
He does not deny other options for oil export. "I am sure that the region will produce enough oil and gas to supply them by different routes," he said.
Companies prospecting oil and gas in the Caspian region can be sure that Iran will be cooperative and offer its territory for oil and gas transit to world markets.
International oil group to build gas plant in Kazakstan
Agip KCO international oil consortium, which drills appraisal wells in the Kazak sector of the Caspian Sea, will build a gas-processing plant in Karabatan, 30 kilometres from Atyrau, Interfax News Agency has reported.
"Documents are being prepared in Atyrau for the assignment of a land lot to Agip for building the gas-processing plant in Karabatan," head of the foreign economic department of the Atyrau regional administration, Lyubov Yevstifeyeva, told Interfax. A special commission of the Environmental Protection Ministry met the Agip KCO request for assigning the land lot in the middle of September...
Agip KCO made no comments on the choice of the land lot for the construction of the gas-processing plant, but said the consortium needed to gain approval from its partners under the production sharing agreement...
FOREIGN LOANS & DEBT
EBRD credit to Kazak bank to be used to boost private enterprise
The European Bank for Reconstruction and Development has granted a long-term syndicated loan of US$50m to Kazakstan's Kazkommertsbank (KKB,) Interfax News Agency has reported .
KKB said that US$30m of the loan was lent directly by the EBRD and US$20m syndicated among international commercial banks. The EBRD funds will be extended for four years, while the syndicated part of the loan will be extended for two years with an option to renew for another two years.
The co-lenders include Bayerische Hypo- und Vereinsbank AG, Landesbank Schleswig-Holstein Girozentrale, Citibank N.A, Erste Bank, Hamburgische Landesbank Girozentrale, and Natexis Banques Populaires.
KKB will use the money to increase its lending to private companies across Kazakstan that want to modernise and expand their businesses.
Kazkommertsbank is the leading private bank in Kazakstan, the largest in terms of its assets, capital and credit portfolio. Its assets were US$1.4bn as of 30th June 2002, which is about 23 per cent of the aggregated assets of the entire Kazak banking system. The KKB's audited net profit, calculated by international accounting standards, was 3.55bn tenge in the first half of 2002, which is 45 per cent more than in the same period last year. Foreign investors hold 33 per cent of the banks shares.
Japanese bank loan helps fund Kazak oil refinery upgrade
The Kazak government will continue the reconstruction of the Atyrau oil refinery with a US$200m loan from the Japanese Bank for International Cooperation (JBIC), Lyazzat Kiinov, the president of national gas company, KazMunayGaz, told a news conference on 1st October, Prime-TASS News Agency has reported.
Kiinov noted, however, that the upgrade of the Atyrau refinery requires US$480m - US$235m to upgrade the refinery proper, US$75m to renovate general infrastructure, US$96m to service the loan and US$74m to pay taxes.
According to KazMunayGaz estimates, the Atyrau refinery could repay the loan within 13 years of the upgrade.
Earlier, KazMunayGaz offered to pay for the upgrade out of its own pocket, but the Kazak government preferred to use the JBIC loan, citing political factors and the fact that the refinery is the main employer in the area.
In January-July, the Atyrau refinery processed 1.157m tonnes of crude oil, down 10.1 per cent on the year.
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