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kazakhstan

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KAZAKSTAN


 

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 24,205 22,400 18,300 60
         
GNI per capita
 US $ 1,510 1,350 1,250 117
Ranking is given out of 208 nations - (data from the World Bank)

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

  

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: 276 - (01/01/04)

The Central Asian Tiger
One republic in the former USSR which does deserve the sobriquet of being deemed a tiger economy is Kazakstan It is growing phenomenally, GDP rising by 10% annually on average in the 2000s. It is the great beneficiary of 9:11 in the region. That might seem to be Uzbekistan, which has been accorded $500m in aid by the US in return for its help in waging war in Afghanistan or for that matter Tajikistan, which has escaped Russian dominance in the same period.
But Kazakstan has benefited more handsomely by reason of now being seen as the prime alternative supplier of oil and gas in Eurasia after giant Russia, for the West and Asia itself. It has proven reserves of 15bn barrels of oil and 2 trillion cu. m of gas. Since then huge fields have come on stream in the Caspian Sea. The Kashagan field has reserves of 15bn barrels alone and likely ones of 40bn barrels, making it the largest find since the discovery of Prudhoe Bay in Alaska thirty years ago.

The IMF in town and very positive
The head of the IMF, Horst Koehler, was in a very upbeat mood in addressing a conference on the 10th anniversary of the Kazak tenge, a highly successful currency. Inflation is in low single figures, declining to 5-6% per annum after hyperinflation in the 1990s, and the economy is booming. "I congratulate Kazakstan on its achievements."
Grigori Marchenko, the governor of Kazakstan's central bank who was elected last year Euromoney's Central Banker of the Year, recalled how the Russian ruble's inflation had reached 2,165% when Kazakstan introduced the tenge on November 15th, 1993. By 1998, inflation was less than 2%, and it has stabilised around 5%, he said.
In a speech to the conference, Koehler noted that over the past decade, "growth in Asia outpaced Europe by 5 percentage points per year."
But no nation has done better than Kazakstan, which for the past three years has seen its economy expand an average of 10% a year. Growth is expected to stay above 8%.
Two months ago, the IMF had decided not to replace its resident representative at the end of his tour, saying there was little likelihood that this Central Asian nation stretching from Europe to China would need to borrow IMF money anytime soon.
The booming economy's locomotive has been oil: sustained high prices and increasing production that in 2003 reached 1 million barrels per day and is set to triple within 15 years, which would make it one of the world's top five exporters.
Koehler lauded Kazakstan's "prudent management of oil revenue," a reference to the US$3bn that have been set aside as a cushion against low oil prices in an offshore fund modelled on Norway's.
Noting that oil wealth "can often be a curse rather than a blessing," he said that "transparency is the key to successfully eliminating lucrative opportunities for fraud and corruption" and is "correlated with better investment and growth performance."
In a federal indictment in New York federal court changing President Nazarbayev's one-time chief adviser on oil matters, James Giffen, with multiple violations of the US Foreign Corrupt Practices Act, Kazakstan's ruler since 1988 is portrayed as pocketing US$60m in the early 1990s in kickbacks from international oil companies. Giffen is due to be tried this year.
Today, oilmen regularly complain of shakedowns in various forms from Kazak officials and members of Nazarbayev's family.
The president has denied involvement in any corruption and says his relatives are as free to engage in business as anyone else.
Koehler also said that Kazakstan must not abandon its "unfinished reform agenda" by improving the investment climate while rebuilding the social protection net torn up by the collapse of the Soviet Union 12 years ago.

EBRD to the rescue
Koehler is not the only big banker to have praised Kazakstan recently. Not surprisingly, because the republic is the success story of Central Asia. It has won the plaudits of the President of the EBRD, Jean Lemierre, who praises the reforms made so far.
He puts this in a nuanced way in saying: "Kazakstan has undertaken structural reforms in the financial, transport and telecommunications sectors. A new tax code, a transfer pricing law, a draft law on investments and amendments to the joint stock company law all contribute to healthy economic legislation. The banking sector is efficient and is financing more and more of the real economy.
"Perhaps the element that most differentiates Kazakstan from its Central Asian neighbours was its early position that it would try to attract foreign investment and build a strong economy, in part by building a strong democracy. A lively press developed in Kazakstan, political opposition was fairly vocal and there was a general perception that the rule of law applied to contracts and trade agreements as well as to the broader society.
"Events in the past year, though, have given rise to particular concerns over freedom of the media and political opposition. There have been allegations of wrongful arrest and mistreatment of journalists, and official backlash over reports of the government's failure to disclose funds deposited abroad."
Lemierre went on to note that the republic now belongs to the Eurasian Economic Union, which links together the economies of Russia, Belarus, Kyrgyzstan, Tajikistan and Ukraine. That is seen by some as a retrogressive step, incompatible with membership of the World Trade Organisation. But Lemierre did not say that. 
The EBRD will continue its extensive funding policy to the country, which has seen substantial investments in the oil capital, Atyrau, on the Caspian Sea, where an abundance of oil reserves lie in the Kazak share of the sea. 

The terrorist threat mounts
The Kazaks are not so affected by terrorism as neighbouring Uzbekistan and Kyrgyzstan, but they do face problems with it all the same. The Islamic Movement for Uzbekistan (IMU) operates in the region and has tentacles in Kazakstan too. The police and security forces liaise to combat the menace, pooling their resources.
The borders are highly porous in the huge country, the size of Western Europe. The Hizb ut-Tahrir al-Islami (HTI) operates in Kazakstan. It is not listed as a terrorist organisation by Western states, but it has been increasing in militancy in the last twenty months since the war in Afghanistan and distributes pamphlets of a subversive nature throughout most of the region. This may be due to widespread discontent at the new US military presence in Central Asia, which is resented by nearly all Moslems. The increased scale of governmental repression also breeds the very scourge it is designed to curb.
Although it is not so likely that the bulk of the HTI network would join the IMU, there remain concerns that frustrated HTI cells may act as sleepers for future IMU activity. Moreover, the growing discontent within HTI ranks indicate that the group may feel obliged to turn to alternative modes of action in the near future. These could include organising demonstrations against the detention and imprisonment of HTI members and even the use of violence to confirm commitment to the cause.
The economic recovery does not benefit the young
The main additional reason for the rise in militancy is the high incidence of youth unemployment. Although the rate of growth of GDP has been spectacular, in the scale of double figures for several years on the back of a massive oil and commodities boom, it has not benefited the bulk of the population, while clearly doing so for the upper echelons in the regime. If GDP rises by 10%, as in 2000-01 (it rose by 8% in 2002), this does not automatically translate into jobs and prosperity for all.
President Nursultan Nazarbayev, who runs a tight ship, addressed the problem in his annual state-of-the-nation speech on April 4th. He indicated that the large budget surplus, created by the boom, would be used to generate an expansion of infrastructure investments and job-creation programmes in both industry and agriculture. At the same time there is to be an enhanced role for social welfare, with higher wages and lower taxes. Increases in pensions and in the minimum wage are on the statute book. As of January 1st, 2004, the value-added tax is to be lowered from 16% to 15%, while the maximum rate of income tax is to be lowered from 30% to 20%. 
All very commendable and to some degree capable of being implemented, but not in time to stem a rise in disaffection among many young people. 

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AGRICULTURE

Kazakstan ships 1.5m tonne of food-grade wheat since July


Kazakstan recently announced it had exported, to date, 1.5m tonnes of food-grade wheat in the agricultural year, which started on July 1st, according to Interfax News Agency. 
The former Soviet republic shipped some 800,000 tonnes to Ukraine and 200,000 tonnes to each of Russia and Azerbaijan, said Abai Bisembayev, deputy head of Food Contract Corp, which procures grain for Kazkastan's state reserve.
"Kazakstan's export priorities have changed since 2002, when the country shipped grain to Jordan, Saudi Arabia and Turkey," Bisembayev said. The country's gross harvest totalled 17.1m tonnes of grain last year. The clean weight harvest should reach some 15m tonnes.

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ENERGY

EBRD to subsidise US$270m power transmission line project

The European Bank for Reconstruction and Development (EBRD) and State Development Bank (BRK) of Kazakstan recently forged an agreement to subsidise the US$270-280m construction of a second North-South power transmission line, PRK President, Kambar Shalgimbayev said, Interfax News Agency reported.
EBRD will cover 70% of the financing of the first tranche and the Kazak bank, according to Shalgimbayev, will give the rest. The two financial institutions are examining the composition of the second and third tranches, he said. The 500kV transmission line linking Ekibastuz in northern Pavlodar region to Shu in southern Pavlodar region will be 1,163km long.

Russia access allows Kazakstan to pump more oil

The Russian government's commission on pipeline access has allowed Kazakstan to pump 5.7m tonnes of crude via Russia in the fourth quarter, 900,000 tonnes more than in the third quarter, a commission source was quoted as saying by Interfax News Agency.
The Russian Energy Ministry, though, said Kazakstan shipped 10.31m tonnes of crude via Russia, 500,000 tonnes less than it was allocated, in January-October. The overall 2003 allocation is 17.5m tonnes, against 15m tonnes in 2002.

Kazakstan oil exports up 14% in 9 months

Kazakstan raised oil and gas condensate exports 14% year-on-year to 33.363m tonnes in January-September, national statistics agency data showed, New Europe reported.
Exports grew in value by 50% year-on-year to US$5.248bn. Kazakstan exported 1.43m tonnes of oil products (up 58% year-on-year) for US$183.6m (almost double). Oil product imports amounted to 674,700 tonnes (down 21%) for US$156.5m (up 10%). Imports of natural gas amounted to 6.497bn cubic metres (up 8%) or US$191.1m (up 7%). Kazakstan produced 33.013m tonnes of oil and 4.337m tonnes of gas condensate in the period.

Sogrinsky breaches environmental law, may shut down

The Sogrinsky thermal power plant, owned by US utility, AES, may be forced to shut down its operations because of violations on the environmental law, Interfax News Agency quoted Kazak Environmental Minister, Aitkul Samakova, as telling a recent news conference.
"If it keeps on working the way it does today, we will close the Sogrinsky TETs even though it heats all of Ust-Kamenogorsk (the regional administrative centre)," Samakova said. The plant's management company will not be licensed to use natural resources as long as it does not redress the violations, she warned.
Nurlan Iskakov, deputy environmental minister, noted that the facility's could be brought to a stop in the new year. "The environment ministry decided not to extend the company's licence, since its management has thrice put off the building of a third ash disposal area and has not taken the steps necessary to re-cultivate the ash existing in the first disposal area built in 1961," Iskakov said.
"It contains more than 1.8 million square metres of ash of an acceptable 400,000 square metres." This deposit is located near the river Ulba, which flows into the trans-border river Irtysh.
The US company has owned the Sogrinsky power plant for the last six years. AES was given the Ust-Kamenogorsk and Shulbinsk hydro-power stations in concession for 20 years in 1997. AES also owns the AE-Ekibastuz power station.

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ENVIRONMENT

Oil companies cannot ensure Caspian ecological safety

Kazakstan's ecological problems could worsen with intensive hydrocarbon production in the Caspian Sea, the country's environment minister, Aitkul Samakova, cautioned during the parliament's government hour. Kazakstan plans to be extracting up to 150m tonnes of oil a year from its part of the Caspian shelf by 2015, New Europe reported. 
Samakova noted that the republic has not yet closely defined what would be an acceptable production limit without harming the environment, nor has it determined any off-limits areas. Such steps are included in the government's plan for developing the shelf passed last May, she said. Early in November, Teheran hosted four of the five littoral states (excluding Turkmenistan) for the signing of a convention setting mechanisms for preventing, reducing and controlling pollution, preserving and replenishing the Caspian ecosystem.

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FOREIGN ECONOMIC RELATIONS

Nazarbayev pushes for stronger ties with Singapore

The president of Kazakstan started a state visit to Singapore recently with the signing of a trade and industry agreement, a highlight of his agenda, according to Deutsche-Presse Agentur (dpa). Nursultan Nazarbayev, who arrived on the night of November 6th with top government officials and a business delegation, called on Prime Minister, Goh Chok Tong, and other leaders to discuss ways to strengthen economic links between the two countries. President SR Nathan, who invited Nazarbayev, hosted a state dinner in his honour. Nazarbayev also addressed the Singapore-Kazakstan Business Forum. It was his second visit, he first visited Singapore in May 1996.
In another development, the Kazak leader was due to visit the Philippines, during which he and president, Gloria Macapagal Arroyo, were expected to discuss ways to boost bilateral ties, the Kazak Foreign Affairs Department said recently.
According to the Kazak Department of Foreign Affairs, Nazarbayev was expected to arrive in Manilla for a three-day visit - the first in the Philippines for a Kazakstan president.
The department said the two leaders were expected to discuss a possible joint oil exploration venture during the visit.
"There is an enormous potential for oil exploration between the two countries," it said in a statement. "They are rich in oil and energy resources."
Arroyo was also expected to take up with Nazarbayev the possibility of providing Filipino manpower services for the construction sector in Kazakstan, and market prospects for Philippine goods and services there.
Trade and economic cooperation between the Philippines and Kazakstan remains at a minimal level since diplomatic relations were established between the two countries in 1992. In 2002, two-way trade between the Philippines and Kazakstan totalled only US$129,106.
The department said Arroyo sought Kazakstan's support for the Philippines' application for observer status in the 56-member Organisation of Islamic Conference.

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TELECOMMUNICATIONS

Kazakstan wants Russia's help to design, launch its first telecom satellite

Russia's Khrunichev State Space Research Centre representatives are holding talks with Astana on designing and launching Kazakstan's first communications and broadcasting satellite, the deputy general director of the space centre, Denis Pivnyuk, told ITAR-TASS News Agency.
He said that the Kazak government had put forward a series of conditions for the implementation of the project, including the training of Kazak staff directly during designing, testing and launching the satellite.
The Kazak side would also like to get access to new space technologies and to ensure the construction of terrestrial mission control centres in Kazakstan. The Kazak authorities would also like to ensure Khrunichev's technical support for upgrading the country's telecoms infrastructure.
Astana counts on the introduction of new technologies in the space telecoms and communication systems. It intends to make use of the satellite to explore the Caspian Sea area and border territories, as well as to ensure the country's information security.

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