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KAZAKSTAN


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 29,749 24,205 22,400 60
         
GNI per capita
 US $ 1,780 1,510 1,350 119
Ranking is given out of 208 nations - (data from the World Bank)

Books on Kazakstan

REPUBLICAN REFERENCE

Area (sq.km) 
2,717,300 

Population
15,143,704

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




Update No: 294 - (28/06/05)

Kazakhstan should elect president in December 2006 - Zhumabekov
Kazakhstan should have presidential elections in December 2006, Kazakh Central Electoral Commission Chairman Onalsyn Zhumabekov said on June 17th. 
The term of office of President Nursultan Nazarbayev will expire in January 2006, but the constitution says that the presidential elections shall be held on the first Sunday of December, Zhumabekov said. "This means that the elections shall be held in December 2006," he said, adding that the parliament's lower house sets the day of presidential elections. A convenient way of extending the presidential term by a year.
Meanwhile, many experts, politicians and statements think it necessary to hold the presidential elections this December. Wherever, elections in the FSU states are now the critical point for democratic challenge. Nazarbayev is not a monster like his neighbour in Uzbekistan but he is nevertheless an autocrat who runs his republic like a family business.

Nazarbayev against "100%" import of Western values
Zhumabekov's sort of original thinking lends spice to the recent reflections of President Nazarbayev himself. He is against a full transfer of Western values to the country during the implementation of full-scale reforms. "We are asking our Western partners for one thing only - to give up the idea of a 100-per-cent transfer of Western values, as they are, to Kazakhstan," Nazarbayev said at a reception for participants in the international business conference "Kazakhstan is attracting a new wave of investment - strategies of diversification and sustainable growth", which opened in Almaty on 15th June. 
"We are in agreement on all other things. We receive friendly advice and at the same time criticism. We listen to criticism and draw conclusions but taking into account our own peculiarities," the president said. 
The head of state believes that the achievement of democracy, which is the main task of the country's ongoing reforms, "is not the beginning of the path, but the main goal for Kazakhstan". He added: "We believe that democracy is a culture which should be fostered and we are going to educate the electorate first, which will create a developed medium-sized business and a middle class."
This is all code for: ' we want your technology and market access; - but, thanks, not a lot of nannying lectures about liberalism and democracy.'
He may be right. It took Western Europeans centuries to develop liberalism and democracy. Why should Central Asians snap into shape straight away?
But then there is the example of Mongolia, where that is exactly what seems to be happening. Food for thought either way, but Magnolia did not appoint it's last Communist General Secretary to become President of the new non-Communist republic - Kazakstan did!

Kazakstan comes of age in oil sector
For their part Western countries eager for an alternative to the volatile Middle East cannot afford to ignore a place like Kazakstan. The country lies on the shores of the Caspian Sea, thought to be one of the last regions where big oil finds can still be made. Kashagan, a field discovered off-shore in 2002, with 10-15bn barrels of oil, was the biggest find in 30 years and is the largest oil field outside the Middle-East. Kazakstan hopes to nearly triple oil production from its current 1.33m barrels a day by 2015, making it one of the world's top 10 crude exporters.
The country's newfound confidence has created problems for small operators, such as Petrokazakstan, of which more anon. "There have been repeated attempts to appropriate some or all of the assets of second-tier, independent companies by people in power, for their own personal enrichment," says Julian Lee of the London-based Centre for Global Energy Studies. "That has created huge uncertainty."
Ruled for the past 15 years by authoritarian but pro-business President Nazarbayev, Kazakstan says its welcome mat is still out - on its own terms. This year, it plans to negotiate with foreign companies to develop dozens of offshore Caspian blocks, which officials say could attract US$30bn, or about 25bn Euro, in investment by 2015. US, European and Southeast Asian companies are interested, Mr Shkolnik says.
Relations with the foreign business community have long been jittery. About five years ago, Kazakstan toyed with the idea of "rebalancing" existing oil contracts, alarming long-term investors like Chevron Corp, lead developer of the huge Tengiz field. The government later backed off, but instead rewrote the tax code for new projects, increasing its take from oil income from 65% to 85% and introducing a new levy on oil exports. Oil executives say the new terms lower the rate of return to 9% to 10% from about 15%, which they say isn't enough to justify the risks of developing big offshore fields, where much of their interest is.
"There's concern that the new regime makes new projects in Kazakstan unattractive, even at high oil prices," says Bill Page, an oil and gas specialist at Deloitte. "It's certainly cooled people's interest in the area." Big state-owned Chinese and Indian oil companies, less fixated on high returns for shareholders, appear to be stepping in to fill the void.
KazMunaiGaz (KMG), the state-owned oil company, is fast-emerging as Kazakstan's national energy champion. KMG is now guaranteed a 50% stake in every new offshore Caspian project. "Our constitution says Kazakstan's mineral wealth belongs to the state," Mr Shkolnik said. He cites the example of Norway's Statoil ASA, another state-owned company that until recently took big stakes in most of Norway's major oil fields. Another law recently gave the government pre-emptive rights to buy stakes in any joint ventures that come up for sale.
The government has long complained that Petrokazakstan, which acquired Kazak oil assets at bargain prices in 1996, charged too much for fuel produced by its Kazak oil refinery. This year, conflict flared up again when Petrokaz declined to take part in a government program to supply discounted diesel to Kazak farmers. The company says the fuel actually ends up in the hands of middlemen who sell it to gas stations at market prices.
In April, the refinery-pricing dispute took a new turn when police filed criminal charges against two company executives, Thomas Dvorak and Clayton Clift, accusing them of violating antimonopoly laws. Petrokaz calls the charges an "unfortunate and unnecessary escalation of what is essentially a civil dispute."
Mr Shkolnik, the energy minister, denies that the company is being singled out. "If Petrokazakstan has problems, it is because it is breaking the law," he says.

Odessa-Brody pipeline intrigues Kazakstan
Kazakstan and Ukraine launched negotiations recently to cooperate in the development of infrastructure for Ukraine which included Kazakstan's participation in the development of Ukrainian oil infrastructure, President Nazarbayev said at a press conference in Ukraine. He remarked that Kazakstan is interested in the continuation of Odessa-Brody oil pipeline to Polotsk and then further to Gdansk. 
"The Odessa-Brody section is significant. Kazakstan is ready to take part in the oil pipeline construction to own a share of stock," he added. "We also listened to the appeal of the Ukrainian party to construct an additional 52km of the Dnepropetrovsk oil pipeline. We are ready to finance and to build this section that will be the property of Kazakstan or a joint venture," Nazarbayev concluded.

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AGRICULTURE

Rostselmash, Kazagromarketing sign cooperation agreement

Russia's leading producer of agricultural machines, Rostselmash, and Kazak agricultural marketing firm, Kazagromarketing, signed a cooperation agreement in Almaty. Under the terms, Rostselmash will deliver more than 700 grain harvesters to Kazkastan this year and will open a chain of maintenance stations, Kazinform reported.
Andrei Kolesnikov, the director of the Kazak subsidiary of Rostselmash, said that at least 50 "Niva-Effect" grain harvesters would be assembled at plants in the western Kazakstan region. According to Kolesnikov, the system of interaction of companies will speed up the process of modernisation of harvesters in Kazakstan and will also cut the expenses to the minimum.

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CREDIT RATINGS

Fitch affirms Kazakhtelecom rates

International agency Fitch Ratings affirmed on May 5th AO Kazakhtelecom's (Kaztel, formerly OJSC Kazakhtelecom) ratings at senior unsecured foreign currency and local currency BB with stable outlook and short-term B, New Europe reported recently.
The ratings take into account Kaztel's near-monopoly market position as a national fixed-line incumbent operator with control over PSTN and privileges to carry the dominant share of the country's long-distance traffic.
Industry deregulation is at a slower pace, which has benefited the company as it continues to capitalise on its near-monopoly position, Fitch stated. In spite of the possibility of strong competition, Kaztel would suffer only gradual erosion of its market share as competitors lack trunk infrastructure and will be unable to independently carry their traffic.
The company is close to completing the build-out of a new digital trunk network capable of carrying large volumes of both data and voice traffic that will afford Kazakstan a state-of-the art national backbone network and enable the provision of more advanced telecommunications services across the country.
In future, Kaztel may be required to allow other operators to access this network but Fitch believes it is well placed to complete with them. Kaztel is exposed to high regulatory risks, given its heavily regulated tariffs and its continuing burden of heavy cross-subsidisation between profitable long-distance and corporate segments and predominantly loss-making rural and residential local services. Kaztel has no direct exposure to mobile business, which limits its growth opportunities and leaves it strategically exposed to fixed-to-mobile substitution. As the government has not set a deadline for issuing the third GSM licence in the country, Kaztel's prospects to enter the mobile business appear slim.
It holds a 49% stake in the leading national mobile operator GSM Kazakstan (operating under the K-Cell brand name) and a 50% stake in Altel, a fringe CDMA cellular provider. The value of Kaztel's stake in GSM Kazakstant has appreciated substantially on strong mobile growth. This mobile operator began paying dividends in 2004, which supports Kaztel's operating contribution.
Kaztel reported strong 2004 results with revenues up 21.6% on an annual basis and operating income before debt and amortisation margin at a strong 39.7%.
The company's free cash flow turned positive that led to its financial flexibility. However, the planned 76% increase in capital expenditure (greenfield projects) in 2005 is expected to turn business free cash flow negative again and result in increased debt at Kaztel.
The current higher planned investments will reduce the need for investments in future and with a large part of its capital expenditure being discretionary, Kaztel has the flexibility to cut expenditure if needed. At end of 2004 around 50% of the Kaztel's debt was secured, reflected by the dominant US$110m EBRD loan.

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FOREIGN ECONOMIC COOPERATION

Kazakstan and Azerbaijan to sign economic agreements

Kazak President Nursultan Nazarbayev is expected to visit Baku on May 24th to 25th, where Azerbaijan and Kazakstan will sign 4 or 5 economic agreements especially in oil production and petrochemical engineering, Interfax News Agency reported. 
"Oil production is increasing in Kazakstan and we are interested in collaborating in petrochemical engineering and studying Azerbaijan's experience in this area," said the Kazak Ambassador to Baku, Andar Shukputov.

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FOREIGN RELATIONS

Turkey, Kazakstan target stronger ties

Kazak President Nursultan Nazarbayev inaugurated the exhibition of Turkish export goods on the Silk Road train in Almaty on May 27th. Turkish prime Minister Recep Tayyip-Erdogan, who arrived in Kazakstan on a two-day official visit, participated in the ceremony.
Nazarbayev said the train passed through Iran, Turkmenistan, Tajikistan and Uzbekistan and then came to Almaty renewing the ancient Silk Road where Kazakstan's ancestors had established friendly relations and trade. The train-fair consisted of 19 expo-carriages representing the products of the leading Turkish companies. The train left Istanbul last April.
For his part, Erdogan said Turkey wishes to strengthen economic ties with Kazakstan. By the close of the year they intend to increase the commodity turnover between the states up to US$1bn.
At the meeting both the sides considered the state and perspectives of bilateral trade-economic relations development, Kazinform reported.
They spoke about increasing trade turnover between Kazakstan and Turkey. By the end of 2004 it was about US$790m. After the meeting, both sides signed three intergovernmental documents.
The intergovernmental accord on cooperation in fighting terrorism, organised crime, illicit drug trafficking, psychotropic remedies, precursors and other crimes was signed by the Home Ministers of Kazakstan and Turkey, Zautbek Turisbekov and Abdulkadyr Aksu, respectively.
Kazak Minister of Culture, Information and Sport, Yessetzhan Kossubayev, and Turkey's Director General of Record Office, Yussuf Saragai, signed the treaty on archive-keeping cooperation. The agreement between the two government structures was signed by the head of Kazakstan's Statistics Agency, Kali Abdiyev, and State Minister of Turkey Beshir Alatai.

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INFORMATION TECHNOLOGY

Broadband access to internet by Kazaktelecom

The cities of Almaty, Karagnada and Petropavlovsk were chosen as pilot areas for the implementation of a new service on broadband access to the global network under the new trademark, Megaline, by Kazaktelecom JSC, Interfax News Agency reported.
The new service is provided within the local internet-market development programme with the application of advanced technology as Metro Ethernet. Kazaktelecom expects much from the new product and intends to make it very popular and mass at the expense of considerable price decrease.
Megaline will allow the use of internet and phone line at the same time with the 24-hour access to information database without permanent dial-up net-working. Kazaktelecom has provided the broadband access since late 1990s. The service was available for corporate clients of the company. The service became accessible for all people last year.

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TOURISM

Russian tourist operator expands Kazak operations

The largest Russian tourist operator, Tez Tour, has opened its office in Almaty to render land-based services. The company decided to approach the market of Kazakstan as it reflects an active economic growth.
Kazakstan numbers above 1,000 tourist companies having partners in 80 countries of the world. The share of the tourism in Kazakstan's gross domestic product (GDP) was 1.5% in 2003. Last year the tourist flow hit 11 million people. The volume of travelling in 2004 grew 63.3% comparing to 2003. Living standards of the developed area of Kazakstan are more or less are compatible to the Russia city millionaires. So, the citizens of Kazakstan have the means for tourism and rest. Royal laws and taxation against the Russian businessmen operating in Kazakstan also contribute to development of the Russian tourist networks in the country.

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TRANSPORT

China, Kazakstan mull Trans-Kazakstan railway

A meeting was recently held in Beijing between the Kazakstan ambassador to China, Zhanybek Karibzhanov, and the Chinese Minister of Railways, Lu Chijun, Kazinform reported.
During the talks both countries discussed the successful development of cooperation on railway traffic and the increase of mutual cargo freight, inclusive of container transportation, between Kazakstan and China. Based on 2004 results the volume of railway cargo transportation exceeded 9.2m tonnes. The composition of Kazakstan-Chinese cooperation committee includes the sub-committee on railway transport cooperation that plays an important role in the goods traffic development, realisation of transport capacity, search new ways for the dynamic development of Eurasian transportation corridor. Both sides hold the same opinion on the Trans-Kazakstan project. The strategic geographic location of Kazakstan and China will prove lucrative for commercial transit freight activities. Both sides also discussed the use of the northern corridor of Transasian railway main for the transit of goods from Europe to Japan and North Korea and back.

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