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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: 279 - (23/03/04)
The boom continues
The economy of the Kazak republic continues to be by far the most dynamic in the entire former Soviet sphere. Its GDP is growing at an annual average of 10% in the 2000s, about the highest in the world. The high energy and primary commodity prices world-wide are of course the explanation for the republic with 60% of the mineral resources of the Former Soviet Union (FSU).
This has been based on phenomenal increases in exports, making it a classic case of the macro-economist's dream, an export-led boom. There are no monetary restraints on the boom because it is not money created by the domestic central bank that is generating higher demand, but the finance of foreign countries.
In 2003, for example, the trade surplus rose by 42% on the back of a 33% rise in exports outstripping a 28% rise in imports. Two thirds of trade is conducted outside the FSU. The trade surplus was $4.57bn on a trade turnover of $14.35bn.
There is every reason to expect this expansion to continue. Exports of oil and related products are growing even faster, fuelling the export boom. Oil output was 800, 000 barrels per day in 2001, of which 70% were exports. By 2010 it is expected to reach 3.5m bpd, of which 90% will be exports.
There is no external constraint on growth then, nor an immediate monetary one. But even in such a benign situation inflationary pressures can still build up, as the economy becomes overheated. In fact inflation is running in the 5-7% range. But the Bank of Kazakstan is targeting future inflation in the 4-6 range; and it has previously tended to achieve its targets.
Foreign enthusiasm growing
The success of the economy is acting as a magnet for foreign investment, which is made welcome by generous tax relief and other measures, more so than in Russia. Above all
Kazakstan is benefiting handsomely from 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.
Foreign investment on an accumulative basis in 1993-2003 was now $24.5bn, greater than in Russia. The figure is probably reasonably accurate since a breakdown of its total into country statistics can be checked with those of other countries. The leading investors were the US, the UK, Italy, South Korea and Switzerland.
In the British case investment in 2002 alone totalled $622m and in Jan-Sep 2003 $425m, over one billion in twenty-one months from the second largest investor, making the full total plausible. Moreover since 1999 the share of manufacturing and other non-mineral resource sectors has increased.
Repression remains the norm
Despite having a secure Central Asian-style dictatorship, the recent events in Georgia have been noted in Kazakstan, where an opposition of sorts does exist, just as the regime keeps up an appearance of democracy. Elections to parliament are due in October and the events in Tbilisi have given them a new interest and focus.
Nobody supposes for a moment that the regime of President Nursultan Nazarbayev is in serious danger. It is far more repressive than Shevardnadze's in Georgia. He is dealing from a far stronger hand. It is inconceivable that Nazarbayev would suffer the same fate as his Georgian counterpart. But the elections are likely to be more keenly contested than previously.
London pledges more oil, SMEs support to Astana
Britain is getting ready to assist Kazakstan not only in developing its oil and gas industry, but also small and medium enterprises (SMEs). This new business approach became evident during British Foreign Secretary, Jack Straw's, visit to Astana, Kazak Monitor daily reported.
Straw participated at the inauguration ceremony of a second representative office of Great Britain's embassy in Kazakstan and British Council in Astana.
Speaking at the ceremony Straw stressed that the new openings mark the significance Britain place on developing trade ties with the Kazak nation. "The reason is in our relations with Kazakstan," the minister said.
Straw said that British enterprises invest heavily in Kazakstan, but mainly in the country's oil and gas industry. Meanwhile, he indicated support that SMEs development will help Kazakstan in diversifying its economy in order not to be one-sided aimed only at the raw materials.
"Kazakstan's development since obtaining its independence was very significant. It is also important that the republic has developed economic institutions," Straw was quoted as saying. He added that British businessmen operating in Kazakstan indicate "economic environment in the country favourable for their activities."
The foreign secretary said the embassy would be relocated to Astana within 1-2 years.
It is recalled that the first trade mission in Kazakstan was opened in Atyrau (administrative centre for Atyrau oblast) on September 24th, 2003 during the visit of His Royal Highness Duke of York, Prince Andrew - who has status of London's official representative on trade and investments.
Britain is the second biggest foreign direct investor in the Kazak economy.
Its foreign direct investment in 2002 totalled US $622.1m and in January-September 2003 amounted to US $425.3m.
According to the state's statistical agency, currently there are 212 enterprises with British capital operating in Kazakstan, including 80 joint ventures and 132 representative offices.
Total sole foreigner investing in Kazak Caspian oil
Kazakstan does not plan to ask investors other than France's Total to participate in developing the North Caspian Kurmangazy field, Uzakbai Karabalin, president of national oil company KazMunaiGaz, said at a news conference in Astana recently, Interfax News Agency reported.
"At the moment, we do not plan to include any investors other than Total in our alliance with (Russia's) Rosneft for developing Kurmangazy," he said. Total is a large company with the required finances and technological potential, he said.
Kazakstan plans to sell Total half of its share in the Kurmangazy project, Karabalin said. In effect, Total will own 25% of the project, he said.
"Talks are underway with the competent executive agency, the energy and mineral resources ministry, on signing a production sharing agreement on the Kurmangazy project," Karabalin said.
Calculations are being made in line with new production sharing agreement legislation and discussions are underway on various approaches to the development of Kurmangazy, he said.
Attracting other investors may be discussed once the Kazak government signs a production sharing agreement with KazMunaiGaz and Rosneft, Karabalin said.
Karabalin said earlier that important talks have been underway with Rosneft since last year, which should result in their reaching a common position on most important items of the production sharing agreement in the first half of 2004.
Kazakstan and Russia agreed in the spring of 2002 to develop the Kurmangazy field jointly. The 1998 agreement on dividing the Caspian and a protocol of May 13th, 2002 sets the geographical coordinates of the division line between Russia and Kazakstan on the seabed of the Caspian Sea's northern zone.
Under the protocol, an authorised Kazak organisation was to have 50% of the Kurmangazy field development project, and an authorised Russian organisation, 25%.
A Kazak government working group, made up of officials from various ministries, is negotiating with KazMunaiGaz and Rosneft on the conditions of a production sharing agreement on Kurmangazy. An estimated US$10bn must be invested in the project if the field is to be thoroughly developed.
Kazakstan, Agip KCO to end Kashagan talks soon
Negotiations with the Agip KCO international consortium on the delayed industrial development of the Kashagan field in the Kazak sector of the Caspian Sea and the size of compensation for the delay will be completed in the near future, Kazak Prime Minister, Danial Akhmetov, said recently. "I hope that all problems will be resolved. We have a complete mutual understanding of all questions," he said at a briefing in Astana. Akhmetov is rather optimistic about the talks. Kazakstan "will receive a certain compensation," he noted, refusing to specify the amount. "The consortium chiefs realise that some compensation is necessary," he added. The consortium is made up of the operator, ENI, which holds 16.67% of the project, TotalFinaElf with 16.67%, ExxonMobil - 16.67%, Shell - 16.67%, Inpex - 8.33%, Phillips - 8.33%, and BG - 16.67%. BG has announced its intention to quit the project and the other consortium members will buy out its shares. The consortium was set after the signing of a 40-year production sharing agreement in 1997. The agreement says the consortium should start the industrial development of the Kashagan field in 2005, New Europe reported recently.
FOREIGN LOANS & AID
ADB offers key financing to Kazakstan
The Asian Developemtn Bank (ADB) has announced its decision to allocate a US$34.6m loan to Kazakstan for the improvement of rural water supply and sewer systems. Kazak Finance Minister, Yerbolat Dosaev and country director for the ADB office in Kazakstan, Kazuhiko Higuchi, signed the loan agreement recently in Astana, New Europe reported.
The loan is offered for 25 years, with a five-year grace period, at Libor plus 6%, Dosaev said. Kazakstan's rural development programme for 2004-2010 envisages a project to improve water supply and sewerage that is estimated to cost US$65m. The project also envisages technical aid from the Japanese government costing US$350,000.
MINERALS & METALS
Gold production up 4%
Kazakstan increased its refined gold production by 4% year-on-year to 861kg in January. Silver production, though, fell 17% to 53.948 tonnes, the national statistics agency told Interfax News Agency reported recently.
Production of refined copper edged up 0.6% to 36,837 tonnes and production of alumina 2% to 123,261 tonnes, while primary zinc production was a flat 25,061 tonnes. Production grew 4% for magnesium and its products, including scrap and waste and 24% for titanium and its products, including scrap and waste, the statistics agency said, without saying how much of these metals were produced. Kazakstan produced 118 tonnes of unprocessed cadmium, including scrap and waste, and powders, 258% more than in January 2003.
Kazakhtelecom reports surging 2003 profits
Kazakstan's national telecommunications operator Kazakhtelecom increased its net profit 45% to 17.6bn tenges in 2003, Interfax News Agency reported recently, citing preliminary figures presented by company President, Aben Bektasov.
"Revenue from offering services was 65.8bn tenges in 2003 and this is 1.5% of GDP," Bektasov said. Kazakhtelecom is the only telecommunications operator in Kazakstan that offers services in rural areas and it has exclusive rights to offer interstate and international services. The Kazak government owns 50% plus one share of the company. Sayat, Zholshy, Darkhan & Bado own 30.05% of the company and Bank of New York hold 6.73%.
Kazatomprom mines more uranium, targets higher sales
Kazakstan's national nuclear corporation Kazatomprom plans to mine 3,240 tonnes of uranium in 2004 compared with some 2,840 tonnes in 2003 and 2,665 in 2002, Interfax News Agency reported recently.
Kazatomprom said it is targeting sales of US$97.6m for the current year. Sales were tentatively US$74.5m in 2003 compared with US$63.8m in 2002. the company is expected to unveil its final 2003 results in the near future. Meanwhile, the Kazak government has adopted an uranium industry development programme for 2004-2015 which aims to consolidate national uranium corporation Kazatomprom's position as one of the world's leading uranium companies. The development programme further envisages the opening of representative offices or joint ventures in the main uranium-consuming countries as part of the country's bid to strengthen its position on the world uranium market.
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