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Update No: 294 - (28/06/05)
Kazakhstan should elect president in December 2006 -
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
"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
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
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
"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
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.
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
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.
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
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
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
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
"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.
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
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.
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
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.
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
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,
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.