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Update No: 289 - (27/01/05)
The authoritarian regime buoyed by economic boom
After Kazakhstan gained independence from the Soviet Union in 1991, many hoped
this Central Asian country would pursue democracy. President Nursultan
Nazarbayev, elected in 1991 and 1999, promised as much, before shifting towards
He consolidated his power by employing his family, stifling the media and
silencing critics (including journalists) who oppose his excessive control. The
government has made it harder for opposition parties to jockey for position, and
Mr Nazarbayev seemed to be laying the groundwork for his daughter to succeed
him. But elections in September 2004 probably foiled this attempt at a political
dynasty. Democratic Choice, an opposition party that once seemed formidable, has
lost much of its momentum.
In Kazakhstan, the long-term political perspective is murky. President
Nazarbayev and his ruling Otan party retained a strong majority in the Mazhilis
(lower chamber of parliament) after 19 September elections, that elicited howls
of protest from opposition parties and a politely negative assessment from the
OSCE. Some members of the president's own team, such as former Mazhilis speaker
Zharmakhan Tuyakbai, joined the opposition, which found itself at year's end
contemplating the wisdom of a move toward greater confrontation with the
Meanwhile, speculation centered on the date of future presidential elections --
likely to take place in 2006, but theoretically possible in 2005 -- and the
thorny issue of succession, especially after presidential daughter Darigha
Nazarbayeva lost some of her lustre as a potential successor when her Asar party
put in an uninspired showing in parliamentary elections. The perpetually
fractured opposition does not seem capable of mobilizing mass support, and the
president and his team have the deck stacked very much in their favour, but the
gradual hollowing out of the political process under President Nazarbayev makes
any real forecasting problematic at best.
As Kazakhstan becomes important to American interests (it was an ally in the
Afghan war, and its oil is part of plans for a pipeline bypassing Russia and
Iran), it has grown harder for Western governments to ignore its dictatorial
politics, especially as Mr Nazarbayev becomes more oppressive. Some say it is in
America's interest to pressure Kazakhstan to reform, even if the country's 15m
people are a politically passive lot. Plans to diversify the economy, by
developing agriculture and privatising land (a controversial move for a nomadic
culture), ran into political trouble in June 2003. But reform in Kazakhstan's
financial sector has been very successful.
Nazarbayev has undoubtedly overseen a petroleum-fuelled economic upturn and
shepherded a comfortably pro-presidential majority into parliament, yet his very
domination of the political arena and the looming uncertainty of succession
conspires to cast a pall over the future.
Kazakhstan stood out as the economic leader, with plentiful oil to sell amid
high world prices and a rapidly developing financial system to move the money
around, but the hydrocarbon-heavy mix promises the country an uphill battle if
it is to avoid the fate of an oil-dependent rentier state and arrive at a more
Canny foreign policy
Nazarbayev, who pioneered the "multivector" approach to foreign policy
in the region, no doubt relished the sight of his broadening legacy, as
Kyrgyzstan, Tajikistan, and Uzbekistan attempted to replicate Kazakhstan's feat
of maintaining cordial relations with such regional and global heavyweights as
Russia, the United States, and China while getting something for themselves in
The basic rules of the "multivector" game, as played in the
southeastern arc of Central Asia, have now emerged: cooperation with Russia and
China premised on a common acceptance of authoritarian political practice and
driven by economic interests, often in the energy sector; cooperation with the
West, primarily the United States, premised on the primacy of security concerns
and driven by common opposition to Islamic extremism; and just enough tension
between the big outside players to let the smaller Central Asian players extract
concessions with the occasional move to and fro. To protect its oil-wealth,
which lies in and around the Caspian sea, Kazakhstan is creating a full-fledged
WB offers 35m euro for Kazak agro development
The World Bank (WB) approved the allocation of a 35m euro credit for the
realisation of the second stage of Post-Privatisation Agriculture Support
project in Kazakstan, the bank's press service said recently, Kazinform
The combined value of the project is 96.1m euro and it consists of several
components. Kazakstan joined the World Bank in 1992. Since then the bank's
investments in the country have amounted to nearly 2bn euro in 23 investment
The aim of the project is the provision of assistance to farmers and
agricultural SMR's in getting access to commercial financial services, thus
stimulating general development of the farming sector in the country and raising
the living standard of rural inhabitants.
A drop in agricultural production and a rise in investment requirements have
conditioned a growing demand for financial services in the farming sector,
especially in the field of long-term crediting.
The needs in innovative financial products and instruments have sharpened due to
the continued privatisation of farming enterprises, bringing in a new clientele
who do not always possess adequate mortgage.
"Kazakstan's banking sector is already playing an important role in
agriculture, but its scale is mostly limited by large farms and
enterprises," WB country manager for Kazakstan, Loup Brefort said.
The key task of this project is encouragement of deeper and more extensive
financial intermediation in agriculture for the benefit of small farming
businesses, thus increasing the range of available resources for their
development, improving their competitiveness and finally increasing the incomes
of small agricultural producers, he added.
These are financial consultancy services for agricultural risk management, price
risk management, increase of the scales of financial services in rural areas and
development of micro-financing.
Moody's upgrades KEGOC issuer rating to Baa3
Moody's Investors Service upgraded to Baa3 from B1 the long-term issuer rating
of Kazakstan Electricity Grid Operating Company (KEGOC), the state-owned
electricity transmission grid owner and system operator of Kazakstan, Interfax
reported recently. In a report, the agency said that the rating outlook is
With over 23,606kms of electricity transmission networks, KEGOC had revenues of
over 15.7bn tenges (€106m) in 2003. The company is 100% state-owned through
the Kazak Ministry of Energy and Mineral Resources.
According to Moody's, the upgrade reflects KEGOC's low-risk, regulated monopoly
business profile, its ownership and support from the government and its
increasing strategic importance to Kazakstan's economic growth. KEGOC's revenues
are regulated by the country's Agency on Regulation of Natural Monopolies,
although there is no fixed tariff period.
Moody's noted that the regulatory framework is still developing, but has been
generally favourable to KEGOC so far and the upgraded rating reflects Moody's
expectation that this scenario will continue.
However, Moody's warned that Kazakstan's transmission grid infrastructure
suffers from poor reliability in some areas and requires major capital
expenditure in order to improve the quality of electricity supplies and manage
the expected rapid growth in volumes. Although Moody's expects KEGOC's leverage
to increase over the short to medium term as it carries out the investment
necessary, government support for the successful completion of these
infrastructure projects substantially mitigates the financial risk involved.
KEGOC is also responsible for implementing the government's plans for the
liberalisation of the Kazak electricity market. Even as Moody's believes that
this may expose the company to some greater operating risks over the short term,
the rating agency anticipates that, in the medium term, the potential for
increased electricity transmission volumes resulting from a liberalised market
may benefit KEGOC.
There are no plans to privatise KEGOC and Moody's believes that the Kazak
government will support the group in case of need.
Tolkynneftegaz to build gas plant in Kazakstan
Kazak oil company Tolkynneftegaz plans to build a gas processing plant in
Mangistau region at an estimated cost of €97m, Adilbek Kusherov, director of
the regional economics, industry and trade committee told Interfax recently. He
said the plant would be able to process 10m cubic metres of natural gas per day,
produced at the Tolkyn field by Tolkynneftegaz and also at other nearby fields.
The plant will produce liquid propane and butane and pentane mixes. Kusherov
said the plant should be completed in 2006 and construction would be carried out
using a credit from a commercial bank in the republic, Tolkynneftegaz is
currently preparing a feasibility study for the project and is setting up a
company to build the facility.
Kazakstan and Israel talk business development
Kazak businessmen of the State Export Credit and Investments Insurance
Corporation organised a business seminar recently outlining that the mechanism
of external risks insurance is one of the important factors stimulating the
development of the country's exports of goods and investments, Kazinform
The rich experience of other countries in reduction of risks in foreign economic
activity appeared to be valuable material for the development of Kazakstan's
At the opening of the seminar Israeli ambassador at Astana Mikhael Lotem
expressed expectations that Israeli experience will not only help Kazakstan in
the development of exports, but it will also allow for ways to heighten mutually
beneficial cooperation. Director of the department of insurance policies
management of the Israeli Export Credit Agency IFTRIC Adi Gross spoke about the
role of the agency in development of trade cooperation between the two
countries. The largest banks of Israel and famous Israeli companies successfully
apply this financial instrument in their business in Kazakstan.
Non-payments of foreign trade partners reached US$60m. The debtors are not only
CIS countries, but also Great Britain, Turkey, China. "Having united
efforts we should collect the debts and establish civilised trade
exchange," said the President of the Kazak Insurance Corporation, Alikhan
China-Kazakstan trade to reach US$4bn
Trade between Kazkakstan and China may increase to US$4bn, up from US$3.2bn in
2003, Interfax News Agency reported.
"Early reports indicate that last year trade turnover would reach US$4bn.
In 2003 we achieved trade turnover of US$3.2bn," Chinese Ambassador to
Kazakstan, Zhou Xiaopei, said at a meeting with the parliamentary Agrarian
Industrial Labour Union.
He said the target figure of US$5bn would be reached earlier than 2010 named by
the leaders of the two countries.
The ambassador named three conditions which he found essential for boosting
bilateral trade. Firstly, the completion of the oil pipeline from West Kazakstan
to West China, secondly the construction of a gas pipeline from Kazakstan to
China and finally the construction of a railway from the Dostyk-Alashankou
terminal to the Caspian Sea and further to Turkmenistan, Iran and Turkey.
MINERALS & METALS
Eureka Mining to speed up prospecting at Shorskoyev
Eureka Mining managing gold-mining projects in Kazakstan plan to accelerate the
prospecting for the molybdenum deposit Shorskoyev in Kazakstan, Interfax News
The decision was made in connection with the rise in demand for stainless steel.
Work will be completed in the first quarter of this year. The deposit Shorskoyev
is expected to produce 3.8m pounds of molybdenum and 1.2m pounds of copper by
the end of 2005. "At present, there is a deficit of this product,"
company chief, Kevin Fu, said, adding: "We are also studying other
molybdenum projects in Kazakstan and the Russian Federation." Steel
founders, including Thyssenkrupp AG, use more than 60 per cent of molybdenum.
The world production of stainless steel has increased by 7.3 per cent over the
first nine months of the current year. Fu said the new project will cost US$30m.
Kazakstan ups 11-month steel roll output by 6%
Kazakstan raised production of flat rolled steel products 6% year-on-year to
3.69m tonnes in January-November last year, Interfax News Agency reported.
The figure included 268,120 tonnes of tin-plate and tin-plated sheet, up 10%,
and 704,770 tonnes of galvanised steel, up 9%. Kazakstan increased crude steel
production 8% year-on-year to 4.97m tonnes in the 11-month period.
Production of carbon electric steel soared 90% year-on-year to 223,190 tonnes.
Ferroalloy production went up by 3% to 1.32m tonnes, including 981,210 tonnes of
ferrochrome, up 8%, and 95,700 tonnes of ferrosilicon chrome, up 7%.
However, ferrosilicon output decreased by 8% to 95,250 tonnes and ferrosilicon
manganese production fell 2% to 144,010 tonnes. Kazakstan produced 3.94m tonnes
of pig iron, up 4% year-on-year.
Production of large and small diameter tubes and hollow steel sections fell 8%
to 49,990 tonnes, while production of cold-deformed carbon angles and sections
rose 53% to 32,410 tonnes.