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Update No: 288 - (01/01/05)
Despotism with a difference
Kazakstan has the usual Central Asian despotism, but with one difference. It has
a lot more money than its neighbours and that brings with it great corruption of
Economic growth, fuelled by the country's sprawling oil and natural gas
industries, has been robust of late. The Kazak economy, for example, expanded by
9.5 percent in 2003, marking the highest growth rate in the Commonwealth of
Independent States. A similar growth rate occurred in 2004
As warnings resound that the national economy is energy-heavy, however, emphasis
has been placed on developing economic sectors where investment and income have
Stamping on the oppostition
After recent elections Kazak President Nursultan Nazarbayev has driven his
political opponents out of parliament. The September parliamentary elections,
which international observers criticized as unfair, gave Nazarbayev an
overwhelming legislative majority. The leading pro-presidential party, Otan
(Fatherland), holds 50 of the 77 seats in Kazakstan's Majilis, or parliament,
with the remainder in the hands of parties sympathetic to the president. The one
opposition member to win a parliamentary seat, Alikhan Baimenov, co-chairman of
Ak Zhol, refused to accept his mandate in a protest against the vote-rigging.
Another potential source of criticism, Zharmakhan Tuyakbai, a member of Otan,
resigned in October as speaker of the Majilis after the presidential
administration failed to act on demands for an investigation of alleged election
Now Nazarbayev is trying to drive his opponents out of business. He launched a
campaign in early November designed to greatly curtail the influence of
Kazakstan's oligarchs, or entrepreneurs who run many of the country's largest
conglomerates. Those being targeted are key financial backers of opposition
political parties, including Ak Zhol and Democratic Choice of Kazakhstan (DCK).
In a speech delivered at the newly elected parliament's opening session on
November 3, Nazarbayev depicted the oligarchs as intent on monopolizing the
economy and squashing all competitors, (a rather apt phrase for him to use).
About 10 mega-holdings control more than 80 percent of the economy, the
president said. They, as a rule, are against the emergence of competitors. That
is why they impede the development of small and mid-size business. Among the
conglomerates identified as stifling development are some of the nation's
leading banks, the state oil and gas company KazMunaiGaz, and the Eurasian
Industrial Association. Another conglomerate labelled as a mega-holding was the
Khabar media empire, which is run by the president's daughter, Dariga
Criticisms levelled by the president against conglomerates range from tax
evasion to the mishandling of investor relations. As a result, Nazarbayev
contended, Kazakhstan's stock market has failed to meet its potential. To
correct the situation, the president has suggested that conglomerates shed some
of their non-core holdings. He additionally proposed that an undefined number of
state holdings be created to include strategically important and big state
companies. Other firms may be put up for auction.
Critics say Nazarbayev's stated aim of ensuring the economic sector is open to
greater competition is disingenuous. They point out that many of the president's
family members, friends and political associates possess vast business holdings,
but they do not seem to be the targets of the anti-oligarch campaign. The real
aim of the campaign, critics assert, is to deny opposition parties the financial
ability to compete in the upcoming presidential election, scheduled for 2006.
Nazarbayev has indicated he will seek another seven-year term.
Still, politics appears to shape Nazarbayevs agenda for change. Political power,
the president told parliamentarians, is the oligarchs' end goal. Oligarchic
capital strangles its competitors. After collecting money and strength, they
start to strive for power, Nazarbayev said.
That declaration appears to be a direct strike against Ak Zhol, a centrist party
made up largely of influential businesspeople, and the only opposition party to
win a seat in parliament in the September 19 elections.
Already, the presidential administration has implied that Kazkommertsbank, a
private bank with close ties to Ak Zhol, could be a prime target in the
Parallel with Russia
Presidential political adviser Ermukhamet Ertysbayev, in an interview with
the Interfax news agency, described bank chairman Nurzhan Subkhanberdin as a
Kazak Khodorkovsky. Ertysbayev was referring to Mikhail Khodorkovsky, the
founder of Russian energy company Yukos, who was imprisoned by Russian
authorities in 2003 on charges of tax fraud and evasion. Many observers believe
the charges to be politically motivated, designed to punish the erstwhile energy
mogul for his financial support of Russian President Vladimir Putin's political
Kazakhstani legislators, many of them perceived to be beholden to Nazarbayev for
their positions, are reportedly considering a bill to tighten regulations on
political lobbying activity. One specific aim of the legislation would be to
install checks on the ability of conglomerates and various elite groups to
influence politics. In the transition period, in the post-Soviet area,
Ertysbayev told Interfax, any attempt from the oligarchs to influence the
president, the parliament and the government can result in serious political
Ertysbayev described the move against oligarchs as the logical end to the
country's anti-monopolization laws. However, those rules are unlikely to be
applied to Nazarbayev supporters, opposition supporters contend. In trying to
draw attention to the politicised nature of the anti-oligarch campaign, the
opposition paper Respublika said in a front-page commentary on November 12th
that the presidents de-monopolization efforts could give Kazaks a chance to see
how the government will put monopolists and their protectors from the head of
states inner circle in their place.
Nazarbayev seems set to use his super-majority to pass legislation that, some
observers say, is designed to bolster his popular appeal in advance of the
presidential election. A top point on the legislative agenda is the creation of
a social security system, Nazarbayev indicated during a November 15 speech at a
conference of business executives in Almaty. The president is also pushing for a
significant boost in salaries for doctors and teachers in 2005.
Better grain harvest in Kazakstan
Kazakstan has harvested 13.9m tonnes of grain in bunker weight, the deputy chief
of the Agriculture Ministry farming department, Anna Buts, said on national TV
on November 8th, 2004, reported New Europe.
"Grain growers this year have harvested 13.9m tonnes of grain in bunker
weight with yields averaging 9.8 centres per hectare," she said, adding
that the quality of grain is much better than in 2003. Buts noted that 1.9m
tonnes of grain have been stored for seed to be sown next year. She expected
grain exports to decline this year because of good harvests in Russia and
Ukraine. Nevertheless, there would be a demand on the markets of the two
countries for Kazak grain due to its high quality. "In Russia only 31% of
grain belongs to grade three while we have over 88% of it. Naturally our wheat
will be demand for improving wheat flour in those countries," Buts said.
She expected Kazakstan to export 4-5m tonnes of grain of the 2004 harvest.
Fitch rates Tengizchevroil bond
International rating agency Fitch Ratings gave an expected BBB- (BBB minus)
rating to Tengizchevroil Finance Company Sarl's upcoming issue of 1.1bn in
Eurobonds redeemable in 2014, a Fitch press release reported.
The lead managers for the issue are ABN Amro and Lehman. "The expected
rating is contingent upon receipt of final documents conforming to information
already received," Interfax quoted the statement as saying. Tengizchevroil
is one of Kazakstan's largest oil producers, accounting for almost a quarter of
the oil extracted in the country.
Moody's improves Kazak Development Bank outlook
International investors service Moody's has changed the outlook on both
Development Bank of Kazakstan's Baa3 issuer rating and Alliance Bank's E+
financial strength rating to positive from stable, a Moody's report said
"The positive outlook on Alliance Bank's E+ (financial strength rating)
reflects a gradually strengthening franchise as a result of the bank's expansion
into retail banking and a more active focus on small- and medium-sized
enterprises," "a growing focus on technology" and "adequate
capitalisation," the report said. The outlook for Development Bank of
Kazakstan's Baa3 rating for is issue of 400m in mid-term notes was also
improved to positive from stable, reflecting a recent forecast improvement for
Kazakstan's long-term foreign currency bond rating, the report said.
A three-day seminar on the study of the Russian banking and tax legislation
specifics was completed in the Development Bank of Kazakstan, Interfax reported,
citing a bank statement. It was organised by the Development Bank of Kazakstan
as a part of measures on realisation of the strategy of bank's approach to world
Teachers of the oldest economic university St Petersburg State University of
Economy and Finance, read lectures for bank specialists.
The participants of the seminar studied regulation of the Russian banking
system, the order of opening branches and representations in the Russian
Federation, watching and regulation system of the central bank over credit
organisations, participation of foreign investors in the capital of credit
organisations on the territory of Russia.
Kazak bankers also listened to the lectures on protection of foreign
investments, legal regulation of investments affairs, and other issues connected
with activity of Russian financial institutions.
Kazmortransflot oil transport up in Caspian
Kazakstan's national shipping company Kazmortransflot shipped 3.078m tonnes of
oil in the Caspian Sea in the first nine months of 2004, up 73% from 1.782m
tonnes in the same period of 2003, the company said in a statement released
recently, Interfax News Agency reported.
This was 51 per cent of the oil exported from Kazakstan's Aktau port in the
period, according to the statement. Kazmortransflot was formed in 1998 to
develop sea transport. It has been operating since November 2001. The transport
and communication ministry and KazMunaiGaz hold equal shares in the company.
Kazmortransflot shipped 1.795m tonnes of oil to Makhachkala in the period, 44.2
per cent more than planned. It shipped 1.113m tonnes of oil to Iran's Neka port,
which was 23.7 per cent more than planned.
KEGOC mulls investment
Kazak grid company, KEGOC, will invest 575.7m by the end of 2015 for the
implementation of two large projects, group President, Kanat Bozumbayev, said at
a meeting of the country's power suppliers in Astana recently, Interfax News
KEGOC will spend 295.7m to build the second North-South high-voltage power
line (VL-500 kilovolts) under the investment programme and some 280m to
upgrade the country's power grid. "There aren't any more large investments
proposed for KEGOC until 2015," Bozumbayev said.
Kazak's power sector needs an estimated 3.5bn in total investments within the
next 11 years, he said. These resources need to be used to revive generating
capacity assets, and the distribution and fuel grids.
Kazakstan requires 838m in investments to upgrade its power stations'
generating capacity before 2015, Bozumbayev added. He believes the country will
need 345m for its generating units with a total capacity of 4,900 megawatts
until 2010 and 225m for generating units with a capacity of 2,500 megawatts
in 2010-2015. Estimated investments of 230m are needed to boost generating
capacity at regional heat and power plants of 2,600 megawatts before 2010 and
38m for stations of 560 megawatts in 2010-2015.
"Implementing the said measures will increase the capacity of existing
equipment by more than 1.5 times," Bozumbayev said. Kazak power stations
have a set capacity of 18,460 megawatts and a proposed capacity of 13,200
megawatts, "which is proof that existing generating capacity is
significantly underused," he said. Bozumbayev said it was beneficial to
revive the sector's energy potential by upgrading large energy units with a
capacity of 300-500 megawatts first of all.
Kazak power stations generated 63.7bn kilowatt-hours of electricity in 1990.
Power output could reach the 1990 level by 2013. "If we keep growing at 5
per cent to 10 per cent a year, we will reach this figure by 2012-2013,"
KEGOC property includes power cables of between 110 to 1,150 kilovolts and
substations, forming a national power grid, in addition to a central dispatch
department. Kazakstan has 1,400 km of public use power lines with a voltage of
1,150 kilovolts, more than 5,500 km of lines of 500 kilovolts, more than 20,200
km of 220 kilovolts, some 44,500 km of 110 kilovolts, over 62,000 km of 35
kilovolts and some 204,000 km of 6-10 kilovolts.
FOREIGN ECONOMIC COOPERATION
Astana and Rome to enhance economic ties
Issues of developing trade and economic cooperation between Kazakstan and Italy,
including industry and investment, were discussed in Rome at the third joint
session of the intergovernmental Kazakstan-Italian work group, created in
conformity with the agreement on friendship and cooperation, signed in 1997, New
The head of the delegation, Deputy Foreign Minister, Vadim Zverkov, represented
Kazakstan during the talks. The parties considered an opportunity to attract
Italian investments in order to boost the current economic potential of
bilateral cooperation. During the course of the meeting the parties agreed the
main principles of the memorandum on mutual understanding and cooperation in
business between Kazakstan and Italy will be signed up to the end of the year.