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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: 261 - (26/09/02)

The pivotal state
The Kazak government is massively concerned to promote economic growth, which gives it a certain legitimacy, despite its dictatorial ways. These are easier to justify in the aftermath of 9:11 and the reality of the terrorist threat in Central Asia, which emanates from the Islamic Movement of Uzbekistan (IMU). IMU is taking all the regimes in the region in its sights, excepting that of Turkmenistan. Kazakstan is a number one target, rich in resources and pivotal in situation, the largest republic after Russia in the entire former Soviet Union.
The US is concerned to bring the Kazak regime on side in the struggle against terrorism. US Secretary of State Colin Powell has been to town recently, urging further reforms and endorsing President Nursultan Nazarbayev's pro-Western stance.
Nazarbayev is able to boast of considerable success on the economic front already. But this has been concentrated in certain sectors, energy and primary commodities, and has left huge swathes of countryside, where 40% of the 16 million population live, largely unaffected. Small to medium businesses need to be encouraged and a private economy allowed to develop outside the state sector, that provides the framework for the dynamic energy and primary commodities sectors.

Fabulous rates of growth
Their dynamism is not in dispute. Nazarbayev was able to tell Powell that GDP growth has been 33% 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 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.

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.

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CREDIT RATINGS

City of Almaty, Kazakstan, ratings upgraded

Fitch Ratings, the international rating agency, recently upgraded the City of Almaty's Long-term foreign currency and local currency ratings to 'BB-' (BB minus) from 'B+'; the rating Outlook remains Stable. At the same time, a Short-term foreign currency rating is assigned to the city at 'B'. The rating upgrade reflects Almaty's growing economy, strong budget balances, low debt burden and support provided by central government, its main creditor and guarantor, in repayment of the city's debts in 2002. However, they also take into account the uncertainty arising from changes in revenue-sharing arrangements with the central government as well as the system of official transfers to the republican budget and demand for more investment in the city's infrastructure.
Almaty is the former capital of Kazakstan and its financial, commercial and cultural centre, accounting for approximately 7 per cent of the country's population and 16 per cent of national GDP. The performance of the local economy determines the well-being of Almaty, as the city's budget is largely made up of tax revenue. The steady growth of the local economy since the mid-1990s has helped offset the impact of the move of the capital city to Astana in 1997.
To date the city has been entirely self-financed, using cash balances carried over from previous years to cover its negative balance before debt operations. Almaty's direct debt burden has remained moderate as measured by usual and adjusted direct debt/current revenue ratios (excluding transfers to the centre from the current revenue). At end -2001 the former stood at 13 per cent of the current revenue, largely unchanged on end-2000 levels (14 per cent). The latter was also low, at 25 per cent at the end of 2001 against 32 per cent at the end of 2000. Refinancing risk associated with a spike in debt repayments in 2002 has been reduced through debt rescheduling and by financial support from the central government.
The city has no flexibility with regard to tax rates but can broaden its tax base. On the expenditure side, flexibility exists due to a portion of capital expenditure which is quite rigid because of transfers to the Republic's budget, payments which are senior to all other expenses, including debt servicing. Like other sub nationals, in 2002 the city was adversely affected by the redistribution of business income tax, which accounted for 22 per cent of its tax revenue in 2001, in favour of the Republic's budget. As a result, budget revenue in 2002 was set at a lower level than in the previous year. However, this negative effect has been mitigated by measures provided by central government to help the city repay its debts to the Republic. Fitch understands that further changes in intergovernmental relations are expected and notes that uncertainty about their impact on the city poses a concern.
The city of Almaty is situated in the southeast of Kazakstan and has a population of 1.1 million. For any further information contact: Ilona Dmitrieva, Moscow, Tel: +7 095 1923 346.

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ENERGY

Caspian Pipeline Consortium reports steady rise in oil throughput

The Caspian Pipeline Consortium (CPC) has transported 8m tonnes of crude oil to date through its pipeline system from the Tengiz oil field in Kazakstan to the Black Sea terminal near the Russian port of Novorossiysk, the CPC said in a press release on 5th September.
According to the release, the CPC has shipped almost 7.1m tonnes of crude oil since the beginning of the year.
The CPC, which started pumping oil last October, plans to move a total of 11.3m tonnes of crude this year. The release said that the CPC is pumping more than 1.1m tonnes of crude oil per month.
Currently the CPC is only moving crude for Tengizchevroil, a joint venture between the Kazak government and ChevronTexaco, which is developing the Tengiz field.
However, according to the release, the CPC is in the process of completing transportation agreements with other shippers.
Furthermore, the release said that when the connection with Kazakstan's Karachaganak field is completed next year, the CPC will be operating close to capacity in Kazakstan.
The CPC director-general Ian McDonald previously said that when the pipeline reaches capacity 6m tonnes of crude should come from the Karachaganak field.
The CPC expects to reach its initial throughput capacity of 20m t of crude per year by mid-2003.

KazRosGaz plans increased exports of Kazak gas

Kazak-Russian joint venture, KazRosGaz, has announced that it intends to transport 3.5-4bn cubic metres of Kazak natural gas in 2002 and expects this volume to reach six billion cubic metres by 2004. KazRosGaz board member and Gazprom Deputy Chairman, Yuri Komarov, said the shipment would depend on developments at the Karachaganak oil and gas condensate field in northern Kazakstan, New Europe has reported.
He added, however, that in future, the joint venture might transport gas from the Tengiz oilfield and other fields under development.
KazRosGaz board member Timur Kulibayev, who is also first vice president of Kazakstan's new state-owned oil and gas company, KazMunayGaz, said that a modernisation programme for Kazakstan's gas transport system is underway
Local news agencies quoted Kulibayev as saying US$500m would be invested in upgrading the system by 2005 and that US$150m had been invested during 2001. He said the main source of funds for investment is the revenue earned by Kazakstan for transiting Russian, Turkmen and Uzbek gas through Kazak territory.
KazRosGaz was established in June of 2002 following agreements between Russia and Kazakstan on the delimitation of the northern Caspian seabed and the transport of some 17.5m tonnes of Kazak crude through Russia for a 15-year period. KazMunayGaz holds 50 per cent of the joint venture, while Russia gas monopoly, Gazprom, holds 30 per cent and Rosneft holds 20 percent. The company is capitalised at around US$100,000.
The main activities of KazRosGaz will be to develop a joint balance for supplies and transit of Russian and Kazak gas, work on a joint policy for the development of the gas transport system in the two countries, conduct operations for the mutual exchange of gas, develop joint hydrocarbon transport projects, conduct joint natural gas exploration and production projects, and standardise the regulatory-technical base governing the functioning of the gas transport system.

Hurricane JV to finance Kazak pipeline

The Hurricane Kumkol Munai, Turgai Petroleum and the KazGerMunai joint venture has been chosen to finance the Kumkol-Akshabulak-Kkyzylorda gas pipeline construction project, said Serikkbai Nurgisayev, Kyzylorda region administration head of Kazakstan.
Technical details of the project are currently being coordinated. The first phase of the future gas pipeline is scheduled to be completed by September 2003.

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FOREIGN ECONOMIC RELATIONS

Kazak president pledges closer cooperation with Uzbekistan

Kazakstan and Uzbekistan have pledged to develop ties in all fields, Kazak President Nursultan Nazarbayev announced, Interfax News Agency has reported.
He made this statement at a joint press conference with Uzbek President Islam Karimov after the negotiations in Astana on 9th September.
"We will work on the close rapprochement between Kazakstan and Uzbekistan in all fields. Our work will be pragmatic," Nazarbayev said.
He said that they discussed a broad range of issues in bilateral ties, including the construction of a highway between Kungrad (west Uzbekistan) and the Aktau seaport (in the Caspian Sea, west Kazakstan).
"The two governments are quickly building the road in order to give Uzbek commodities access to the Russian market via the Aktau port and Astrakhan," he said.
The negotiations also addressed the liberalization of market and other reforms in Uzbekistan in connection with the participation of Kazak companies in tenders being held by Uzbek enterprises, Nazarbayev said.
"This is being done in order to bring the two economies closer together," he stressed.

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