Books on Kazakstan
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Update No: 291 - (29/03/05)
Lately a number of countries have laid a new course for
democratisation and political reforms, often in reply to mass public protests,
such as Georgia and Ukraine. In history revolutions and defeats in battle have
often served as catalysts of radical political renovations. Is there another way
for transition economies to ensure sustainable and continuous reforms?
The Kazaks say they have a Third Way
President Nursultan Nazarbayev has recently promulgated a panoptic plan of
reforms for the Republic of Kazakhstan. It aims at wide-ranging reforms in
politics, economy and education with simultaneous enhancement of the social
protection of citizens, carrying on the policy of tolerance in regard to the
multinational population of Kazakhstan and its pro-Western foreign political
orientation. A group of experts met to discuss the new programme and the meaning
of reforms suggested by President Nursultan Nazarbayev on March 18th in Harvard
University, the US.
One indisputable achievement to the credit of Nazarbayev is that he voluntarily
relinquished Kazakstan's nuclear arsenal after independence in 1991. Opening the
seminar Gram Allison, founder of the Caspian Research Programme, emphasized the
leading role of Kazakhstan in disarmament and ensuring global security giving a
good example to other countries. "One can have reasons to anticipate
Kazakhstan to play an analogous role in economic modernization and political
democratisation in the Central-Asian region and beyond."
US ex-Secretary of Defence Gram Allison, who assisted Kazakhstan in its nuclear
disarmament programme, underlined that the non-nuclear example of Kazakhstan and
successful cooperation between their two states is relevant today as never
before: "I deem that Kazakhstan deserves recognition and gratitude for its
contribution to a nuclear-free future. Moreover, I believe that after President
Nazarbayev's reformatory urge is implemented we will be celebrating new triumphs
of the country."
Brenda Schaffer, instructor of the Caspian Research Program, and Ariel Cohen,
senior assistant of the Washington-based Heritage Foundation, presented in their
reports the analysis of Kazakhstani reformation program and its meaning for the
republic, regional development and geopolitics.
Brenda Schaffer, who has been researching Kazakhstan for many years, states that
the important initiatives specified in the Message of the President can lead the
internal processes of the republic to the path of sustainable reformation.
His proposals to strengthen Parliament's role, to decentralize power, to reform
the judicial system, to improve people's living standards, to fight against
corruption, and others open wide horizons for cooperation between the power and
the nation in joint modelling of Kazakhstan's future. This is why President
Nazarbayev's urge to take part in drafting the national political reforms
programme is 'an absolutely important factor' that would secure 'step-by-step
development of the country in another way, the third one. This is a demo version
for other economies.' The true Third Way?
By noting that Kazakhstan had been accomplishing its state formation and
political and socioeconomic reforms in intricate external and internal
conditions, in his speech Ariel Cohen designated US priorities in Central Asia,
determining its concern in Kazakhstan's successful development. These priorities
are the provision of geopolitical balance, non-admission of radical Islamic
ideas to disseminate, control of illicit turnover of drugs and weapons, human
traffic, exploration of oil treasure of the Caspian shelf, and transportation to
world markets. Finally, the development of regional states towards democracy and
market economy, independent of primary sector and leaning towards hi-tech
Dictatorial ways prevail
Nevertheless, for all this up-beat rhetoric, it is as well to recognise that
the regime in Kazakstan is dictatorial; there is no doubt about that. It rigs
elections, as last October to parliament, and, unlike its Georgian and Ukrainian
counterparts, it gets away with it.
Latterday evidence for this is not lacking. Police in Kazakhstan arrested seven
opposition activists at a protest on January 29th against the recent banning of
the former Soviet republic's main opposition party, party officials said.
The seven were among around 2,000 people who converged on the former capital
Almaty to demand political change in this oil-rich country led by President
Nursultan Nazarbayev and the restoration of the Democratic Choice movement's
party status, a Democratic Choice spokeswoman said. "They came from all
over Kazakhstan to hold a rally ... but the police prevented it," the
spokeswoman told AFP.
At an overnight court hearing five of the seven were handed jail terms of
between two and seven days and the other two were fined and released, Democratic
Choice said in a press release.
The reason that the regime gets away with it is that the economy is booming
like none other in the FSU. This does not mean that everyone is benefiting - far
from it. But it does mean that anyone with initiative and a gung-ho spirit has a
good chance of doing well. They are not therefore going to contemplate
revolution as the solution, unlike in Georgia and Ukraine.
In 2004 in Kazakhstan a tentative estimation showed economic growth at 9%, a
modest reduction from the 10% average growth rates of yore. Industrial output
increased by 10.2%. The international reserves of the country increased in
general by 66.3% and amounted to US$14.3bn.
The problem is that this is all due to just one factor - high global prices for
the country's main export - oil.
Nazarbayev is well aware that the main problem is to diversify the economy. He
has ordered the government to finalize the shadow economy legalization programme
in the first quarter of 2005.
"The programme for legalizing the shadow sector has not been worked out
yet. Despite the difficulty of the problem, there are no grounds for
delay," Akayev said at an extended cabinet meeting in Astana, the new
The magnet in Eurasia for FDI
There is no doubt of the possibilities for adventurous businessmen opening
up in Kazakstan. Foreign Direct Investment (FDI) is simply inundating the place,
vast as it is.
Kazakstan's government on January 7th said that its economy received foreign
direct investments of US$3.9bn during the first 9 months of 2004, up by 17.6%
compared to the same period in 2003. This is of all Commonwealth of Independent
States countries - the second highest capital inflow in volume after Russia and
the highest inflow by capita. The information was released in the latest report
of the National Bank of Kazakstan.
The United States is still the largest foreign investor in Kazakstan, with
foreign direct investments of nearly 1.2bn Euro during the first three quarter
of 2004, up 45% over same-period 2003 (1.09bn Euro). Second is the Netherlands,
with investments of 571m Euro over the same period, up by 34.7% over 2003.
Britain came third with 529m Euro, up 23.7% over 2003.
The natural-resources sector remains the most attractive sector for foreign
investment, but during the first 9 months of 2004, foreign investments in the
consumer goods industry grew by 50.7% to 164.4m Euro.
However, even if the oil and gas industry will remain the most attractive sector
in which to invest for years to come, other sectors are emerging. During the
first 9 months of 2004, foreign investments in the consumer goods industry grew
by 50.7%, reaching US$164.4m, whereas investments in transport and
communications related industries rose by 6.6% over the same period to US$65.9m.
Growth in the non-oil sector is at least partially due to the government's
economic development programme "Strategy of Industrial and Innovation
Development for 2003-2015," which aims to diversify the country's economy
in order to reduce its dependence on oil.
"Kazakstan will take further measures to improve the investment
climate," announced the Kazak President at the annual meeting of Foreign
Investors Council last December in Astana. "The republic devotes much
attention to the enhancement of the legislation to protect investors'
rights," he said, which is probably right, Kazakstan saw the need for that
long before Russia did.
New airport terminal opens in Astana
An official ceremony to open the new terminal of the Astana International
Airport was held in the Kazak capital on February 2nd. President Nursultan
Nazarbayev, Prime Minister, Daniyal Akhemotov, the members of the government,
representatives of construction companies of Japan, Germany, Turkey and Great
Britain and the general public participated in the event, New Europe reported.
The reconstruction works started in September 2002. After the launch, Nazarbayev
said the airport is a visiting card of any state and its opening is of great
significance. Astana is at the centre of the Eurasian continent. "I want to
be sure that the terminal will be made a transit point between Europe and Asia
of the world air companies, all necessary conditions will be created for
that," Nazarbayev was quoted as saying.
S&P: Kazkommerts debt rating stays unchanged
Standard & Poor's Ratings Services recently said that it BB- senior
unsecured debt rating on the 350m Euro 7.0 per cent notes due 2009, issued by
Kazkommerts International BV, a Netherlands-based special-purpose vehicle,
remain unchanged, New Europe reported.
The agency said in a report that this followed a proposed increase in the issue
amount to 500m Euro. The notes were guaranteed by Kazakstan based Kazkommerts-bank
(KKB; BB-/positive/B). The ratings on KKB reflect the improving Kazak economic
environment, the bank's strong domestic franchise, more diversified funding
profile and rapid loan growth. KKB has been using Kazakstan's improved economic
prospects to its advantage, attracting primary funds as well as longer-term
international debt and growing its profitable lending business.
Agip KCO agrees to sell 50% of BG to Kazakstan
Members of Agip KCO agreed to sell one half of BG's share in the North Caspian
project to Kazakstan (the whole of BG's share stands at 16.67%), Vladimir
Shkolnik, minister of energy and mineral resources of Kazakstan, said at a
meeting with members of senate committee for social and cultural development on
January 28th, Interfax News Agency reported.
"They agreed to sell 50% of this share. The state will buy it. I hope that
we will be able to conclude this deal. This is the return of a very great asset
back to the country. It is needed badly and it is very beneficial for the
country," Shkolnik was quoted as saying. "This means the return of a
very large asset to the country. This is very necessary and profitable for the
country," he added.
Regarding the price of the deal, Shkolnik said: "The market value of the
entire stake, established by BG, amounts to 1.23bn Euro and for half: We need to
divide this figure by two." He said that the deal might be financed using
budget funds and also internal or borrowed funds from KazMunaiGaz. Shkolnik said
there would be no problem with financing, particularly for a project of this
kind. "We really hope that we will manage to finish negotiations by the end
of March," he explained.
This is "a legally complicated task, but we will try," the minister
said. He said that the next round of talks with Agip KCO participants is planned
for February 2nd in Astana. Shkolnik said that under Kazak law, the state has
first right of refusal for stakes in production assets, and that the process of
buying up stakes "could begin when money started appearing in the
The Agip KCO consortium is drilling work at a number of sections in the Kazak
sector of the northern Caspian, the largest of which is the Kashagan field. The
partners in Agip KCO are ENI, Exxon Mobil, Shell and TotalFinaElf, each with
16.67% interest and ConocoPhillips and INPEX, each with 8.33%. The consortium
was set up following the signing of a PSA for 40 years in 1997.
The consortium plans to start industrial production in 2007-2008. According to
an announcement by Agip KCO, recoverable reserves at Kashagan are estimated at
7bn to 9bn barrels, with total geological oil reserves of 38bn barrels. Shkolnik
didn't quote the price that will be paid for 50% of BG's share in the project.
He also noted "negotiations regarding other fields are also being
Shkolnik reminded that in accordance with current legislation, which was adopted
on November 5th, 2004, the state has pre-emptive rights to buy shares in
extractive projects. The head of the oil ministry said that the process of
purchasing shares in a number of extraction projects "could only have been
started after the country had the necessary money." Agip KCO was created
after corresponding production share agreement was signed in 1997 for a 40-year
Kazakstan to increase oil, condensate output by 2008
"Forecast oil and gas condensate output is 60m tonnes in 2006, rising to
around 72m tonnes in 2008," First Deputy Energy and Mineral Resources
Minister, Bak-tykozha Izmukhambetov, said at a recent conference on Kazakstan's
mid-term socio-economic development for 2006-2008, New Europe has reported.
Izmukhambetov said that Kazakstan could boost oil and gas condensate output 22%
to 72m tonnes by 2008, from 59.17m tonnes in 2004. According to him, 9.8bn Euro
of investment in the mineral sector were anticipated in 2006 of which 7.2bn Euro
of it from abroad. An investment of 12.7bn Euro is forecast in 2008, including
9.3bn Euro from abroad. Meanwhile, Kazak national oil and gas company,
KazMunaiGaz and Japan Bank for International Cooperation recently signed a
cooperation agreement, the Kazak company said in a statement. "According to
the terms of the agreement, key objectives are to study future KazMunaiGaz
projects and actively exchange information about investment plans and operating
strategy," the statement said.
Japan offers financial aid for social projects in Uzbekistan
Five grants with a combined value of US$283,158 for the implementation of
small-scale projects in Uzbekistan were issue on February 7th, Interfax News
The government of Japan issued new grants to Uzbekistan with no-strings attached
financial assistance. The supported projects are aimed at improving the quality
of medical services and supporting women in their professional retraining and
strengthening their social status.
The NGO Woman and Society Institute of Tashkent received US$14,362 to purchase
necessary equipment. Four grants were earmarked to supply regional central
hospitals of Samarkand (US$58,160), Jizzakh (US$77,270), Navoi (US$77,526) and
Kashkandarya (US$55,840) regions with modern medical equipment.
MINERALS & METALS
Kazakhmys to boost refined copper output
Kazakhmys, a leading copper producer from Kazakstan aims to raise refined copper
output by 7.7 per cent to 460,000 tonnes in 2005 from 427,000 tonnes last year,
the company said, Interfax News Agency reported.
Kazakhmys specialises in the production of refined copper and copper ore. It
comprises Zhezkazgan Copper Plant (former Zhezkazgantsvetmet), Balkhash
Metallurgical Plant (BGMK), Zhezkent GOK. East-Kazakstan spokesman Vladislav
Nikolayev said that Kazakhmys would export the zinc to Italy among other
destinations. Overall commercial output is targeted at 1.5bn Euro. Nikolayev
said the corporation's Balkhash zinc smelter would achieve design capacity of
105,000 tonnes this year. It was officially launched in October 2003, but did
not start producing zinc until February last year. Output was 169bn tenges in
2004. Kazakhmys produced 66,000 tonnes of zinc in concentrate, 22,000 tonnes of
metallic zinc and 11m tonnes of coal in 2004. Capex totalled 180m Euro, up from
128m Euro in 2003.
Kazakstan targets 2.4% increase on aluminium output
Aluminium of Kazakstan, one of the world's nine biggest aluminium producers and
the company that controls Kazakstan's bauxite and aluminium industry, aims to
increase aluminium output by 2.4% to 1.5m tonnes in 2005 from 1.465m tonnes in
2004, the company's press office said recently, Interfax News Agency reported.
Aluminium of Kazakstan incorporates the Pavlodar aluminium refinery and Torgai
and red October bauxite mines. It also controls the Keregetas limestone quarry
and a heat and power plant.
Bauxite production will be unchanged from the 4.7m tonnes achieved in both 2004
and 2003, the company said.
Aluminium of Kazakstan is preparing to have its divisions certified to ISO-14000
environmental standards. The company said it spent 849m tenges on environmental
and work safety in 2004.
Frontier Mining eyes Kazak gold and copper development
US company, Frontier Mining Ltd, has decided to start a gold operation in
Kazakstan in the near future. The company has posted encouraging results on two
copper properties in the same country. Frontier Mining was incorporated in the
United States in August 1998 with a view to gold and copper exploration and
development in Kazakstan and progressing on three deposits and even has
potential for development of a further two, Kazinform reported.
The company has recently announced that metallurgical test work has shown copper
to be recoverable via solvent-extraction electrowinning (SXEW) technology from
oxide ore at its Beschoku and Yubileiny deposits.
Frontier Mining has two licences covering a total area of 4,326 sq km in
Kazakstan. These are the Naimanjal exploration and mining licence, which is held
by FML Kazakstan and the Baltemir exploration licence, held by Baltemir LLP.
Frontier Mining is currently focusing on three gold projects that contain
between them over two million ounces of gold and two copper/gold projects with a
combined resource in excess of one billion pounds of copper (454,000 tonnes).
These prospective licence areas are located adjacent to each other in
northeastern Kazakstan, on the former nuclear test site commonly referred to as
the polygon. Frontier was the first foreign company to receive an exploration
and mining licence for the environmentally safe part of the Polygon. The company
has made significant progress since its listing on AIM in September 2004, and
its most advanced operation is the Naimanjal gold/silver project, which should
commence heap leach production in May with an initial target production rate of
25,000 ounces per year.
Naimanjal consists of low cost oxide ore, open along strike and at depth, and
underlain by a potentially much larger sulphide orebody. With a gold operation
ready to go and potential low cost copper production, Frontier can be popular as
one of the first western mine producers in Kazakstan.
Director of Exploration, Edward Bloomstein, has 30 years experience as a
successful international exploration executive in the mining industry and has
managed exploration programmes that have led to the discovery of multi-million
ounce gold deposits in the US, Russia, Kyrgyzstan and Kazakstan, including the
discovery of the multi-million ounce Ivanhoe deposit in Nevada. The board has
considerable experience including long-term relationships in Kazakstan.