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President confirms Kazakhstan’s positive investment climate 10/12/2007At the Foreign Investors’ Council (FIC) meeting, held in Astana on Friday, President Nursultan Nazarbayev reassured international companies of Kazakhstan’s economic climate and the country’s position re. Kashagan.
During a press-conference that followed the FIC session, the Kazakh President spoke of Kazakhstan’s discussions with ENI, the Italian Energy company leading the consortium charged with exploiting the Kashagan oil-field.
“Kazakhstan is a party of the consortium, and we have certain claims against ENI. After we have settled the dispute, we will sit at the negotiating table to discuss the omissions and achieved successes and decide on how to proceed.” The Energy Minister, Mr Mynbayev, he said, has been negotiating with the projects participants – “most of whom accept Kazakhstan’s conditions, and talks are under way with the rest.”
President Nazarbayev reiterated that Astana does not want to abandon this contract or review any previously signed agreement relating to subsoil use.
Kazakhstan Responds to International Financial Instability 15/11/2007According to a statement, the Kazakh Government is confident that the country’s economy will continue to grow amid instability on global financial markets.
Kazakh banks are operating as usual: in spite of a decrease in funding, banks continue to extend credit – a growth of 53.8% this year (with August-October responsible for 4.9%). Borrowing requirements have been toughened however; as a short-term stabilisation measure the National Bank is granting liquid funds to banks to refinance their debts.
The Kazakh government is undertaking specific measures in order to offset the instability of the international markets. By the end of 2007, USD 1 billion will be allocated, and at least USD 3 billion will be earmarked in 2008. These funds will be used to:
- maintain mortgage market stability
- assist S&MBs
- promote further economy diversification
This year Kazakhstan’s real GDP rose by 9.7% year-on-year. According to estimates, despite current international markets conditions the rate in 2008 will not go below 5-7% which will be propelled by high prices for Kazakhstan’s main exports - oil, metals and wheat. Dynamic development of exports will also support other sectors including S&MBs.
Foreign Investment In Kazakhstan 26/10/2007From 1993 to the end of March 2007, gross inflow of direct foreign investments into the Kazakh economy totalled USD 54.6 billion - which forms 80% of all investment into the Central Asian economies.
The EU is Kazakhstan’s largest trade partner and turnover with EU countries in 2006 rose to USD 22.7 billion (the EU’s share in Kazakhstan’s total foreign trade turnover constitutes 36.8%). Bilateral trade turnover in the first half of 2007 reached USD 12.5 billion and, as of now, the EU’s investments make-up over half (53%) of total foreign investments into the Kazakh economy.
UK Investment
French Investment
German Investment
Dutch Investment 2005–2020: Kazakhstan & Space 03/12/2007Kazakhstan enters the exclusive club of global space powers – with ambitious plans to develop the legendary Baikonur cosmodrome
Since independence, Kazakhstan is home to the Baikonur cosmodrome located to the east of the Aral Sea. Though Russia negotiated the use of the launch site until 2050, an agreement signed in 2004 increased Kazakhstan’s role in the site’s management and use for non-military purposes. This latest agreement led to the construction of Angara boosters (heavy launch rockets that use non-toxic propellants) and the Baiterek Space Complex, which will commence operations in 2012. This last project is entirely financed by Kazakhstan.
Kazakhstan’s plan to become a major space power is becoming increasingly concrete – with the planned creation of a National Space Agency, the establishment of an International Centre of Space Industry in Baikonur, a National Space Laboratory, a plant to assemble and test space vehicles and the training of specialist engineers.
Kazakhstan is working in partnership with other countries such as Russia, India, France and Spain on space-based telecommunications technology projects, satellite positioning, fundamental and applied space research in the realm of physics, space biotechnology and biomedicine, as well as earth remote sensing.
Baikonur: A Brief Overview
The Baikonur cosmodrome is key to Kazakhstan’s ambitious space plan – which has two major mid-term objectives: the inauguration by 2012 of the Baiterek Space Complex and the launch the environment-friendly Angara boosters which use non toxic propellants.
Sputnik 1, the first artificial satellite, was launched from the cosmodrome on October 4 1957. Four years later, on April 12 1961, Yuri Gagarine, became the first man in space.
Located 200km East of the Aral Sea, at 45.6°N and 63.3°E, Baikonour is today leased by Russia at US$115 million per year. In 2009, the US will stop launching shuttles and all the space vehicles heading for the ISS will be launched from Baikonur.
Baikonur is closer to the Equator than other launch sites – a situation that facilitates geostationary orbit or orbits less inclined to reach the International Space Station (ISS). This privileged geographic placement enables the launch of more significant payloads.
An Ambitious Development Programme
In 2008, Kazakhstan will unveil an earth remote sensing system: the data provided will enable Kazakh scientists to locate natural resources deposits with a 70% accuracy rate, yielding – it’s hoped - a swift return on investment.
By 2009-2010, Kazakhstan will have a satellite system equivalent to the French one. In 2020, the country will have a total of 12 satellites, 30 newly-built or modernised on-ground installations and 12 companies specialising in space vehicle and component construction.
A total of USD 300 million will be allocated to the development of the space industry in Kazakhstan.
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Economy & Trade
Economic OverviewEconomic indicators paint a bright picture of Kazakhstan’s future. With a GDP growth rate around 10 % since 2000 the country is among the fastest growing economies of the world and outpaces all other Central Asian states by far. In the first eight months of 2007 the GDP has grown by 10,2 % : Kazakhstan continues the trend of two digit growth rates.
Foreign trade turnover shows a similar evolution. It has been rising over the past 10 years at an annual average growth rate of 19,1 % (highest rate for the 1995-2006 period worldwide) to reach 50 168,3 million USD by the end of August 2007. Thanks to high oil and gas prices as well as an increase oil export volumes, the country will again reach a positive balance of trade in 2007. Russia is still one of Kazakhstan's main trading partners and its major source of imports. The bulk of Kazakh exports to the West consist of raw materials, particularly oil and metals.
Its dynamic growth makes the Kazakh economy attractive for foreign investors. Foreign direct investments into Kazakhstan account for about 80 % of all capital inflows into the Central Asian economies, with EU countries being the most important source of investments. The highly developed banking system, stable institutions and investment-friendly government policies further encourage foreign investment.
| Key economic indicators
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2001
|
2002
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2003
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2004
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2005
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2006
|
| Real GDP growth (%)
|
13.5
|
9.8
|
9.3
|
9.6
|
9.7
|
10.7
|
| Consumer price inflation (av. %)
|
6.4
|
6.6
|
6.8
|
6.7
|
7.5
|
8.4
|
| Trade turnover growth rate (av. %)
|
9
|
8
|
31
|
54
|
37
|
37
|
| Exchange rate Tenge:US$ (av)
|
146.74
|
153.28
|
149.58
|
136.04
|
133.93
|
126.09
|
| Exchange rate Tenge:€(av)
|
132.40
|
144.68
|
168.79
|
169.04
|
159.29
|
158.27 |
|
|
|
|
|
|
|
| Leading markets 2006
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% of total
|
Leading suppliers 2006
|
% of total
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| Italy
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18.0
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Russia
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38.3
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| Switzerland
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17.6
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China
|
8.1
|
| Russia
|
9.8
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Germany
|
7.6
|
| China
|
9.4
|
US
|
4.7 |
Transition to market economyToday’s economic situation is the result of a 15 year-long transition period from a former Soviet economy to a free market economy. Since independence from the Soviet Union in 1991, Kazakhstan has implemented a wide range of social, economic and political reforms. After a period of economic decline and high inflation in the 1990ies, the reforms now show their results. Priorities of current economic policy are the diversification of the economy, namely the strengthening of the non-oil industries to reduce the country's dependence on natural resources.
Because of its strong macroeconomic performance, Kazakhstan became the first former Soviet republic to repay all its debts to the International Monetary Fund (IMF) in 2000, seven years ahead of schedule. In March 2002, the U.S. Department of Commerce graduated Kazakhstan to market economy status under U.S. trade law. The change in status recognized substantive market economy reforms in the areas of currency convertibility, wage rate determination, openness to foreign investment, and government control over the means of production and allocation of resources. In September 2002 Kazakhstan became the first country in the CIS to receive an investment-grade credit rating from the major international credit rating agency Moody's.
Between 2005 – 2007, 18 Kazakh companies were listed on the London Stock Exchange. Kazakhstan was the first CIS country to be granted market economy status by the EU in 2001 and USA in 2002, and to be moved to investment grade status by Moody’s in 2002.
Ratings as of 5 April 2007: (LTFC/LTLC/Outlook): Moody’s Baa2Baa1/Positive; Standard & Poor’s BBB/BBB+/Positive; Fitch BBB/BBB+/Positive. In January 2005 the Organisation for Economic Cooperation and Development (OECD) upgraded Kazakhstan’s country export risk rating, moving it from the 5th to the 4th group of risks. National ProductionKazakhstan is rich in oil and minerals. Oil production reached 64.8 million tons in 2006, net oil exports accounted for 57.1 million tons. Kazakh natural and crude gas production in 2006 reached 27 billion cubic meters. Kazakhstan holds about 32.5 billion barrels of proven recoverable oil reserves and 3 trillion cubic meters of gas.
Industry analysts believe that a planned increase in oil production and the development of new oil fields will enable Kazakhstan to produce as much as 3 million barrels (477,000 m³) per day by 2015, lifting the country into the ranks of the world's top 10 oil-producing nations. Major oil and gas fields and their recoverable oil reserves are Tengiz with 7 billion barrels (1.1 km³); Karachaganak with 8 billion barrels (1.3 km³) and 1,350 km³ of natural gas; and Kashagan with 7 to 9 billion barrels (1.1 to 1.4 km³).
Kazakhstan has an abundant supply of accessible mineral and fossil fuel resources. Development of petroleum, natural gas, and mineral extraction has attracted most of the $40 billion foreign investment in Kazakhstan since 1993 and accounts for some 57% of the nation's industrial output (approximately 13% of GDP). According to estimates, Kazakhstan has the second largest uranium, chromium, lead, and zinc reserves, the third largest manganese reserves, the fifth largest copper reserves, and ranks in the top ten for coal, iron, and gold. Kazakhstan also exports diamonds.
Agriculture accounted for 5.7% of Kazakhstan's GDP in 2006. Grain (Kazakhstan is the sixth-largest producer in the world) and livestock are the most important agricultural commodities. Around 74% of the country's territory is suitable for agricultural production, 20% of the labour force works in the agricultural sector. Traditionnally, stockbreeding is the dominant agricultural activity. Chief livestock products are dairy products, leather, meat, and wool. The country's major crops include wheat, barley, cotton, and rice. Wheat exports, a major source of hard currency, rank among the leading commodities in Kazakhstan's export trade. In 2006 Kazakhstan exported around 6,2 mln. tons of wheat out of 18 mln. tons produced. Other agricultural products include fruit and wine. Kazakh agriculture still has many environmental problems from mismanagement during its years in the Soviet Union.
| Major exports 2006
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% of total
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Major imports 2006
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% of total
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| Mineral products
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71.9
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Machinery&equipment
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45.2
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| Metals
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16.1
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Mineral products
|
14.3
|
| Chemicals
|
4.2
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Metals
|
13.3
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| Food products
|
2.8
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Chemicals
|
10.8
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Other key facts- Industrial Production Growth: (2005) 4.6%; (2006) 7%
- GDP per capita: (2005) US$ 3771.3; (2006) US$ 5291.6
- Nominal GDP : (2005) US$ 57bn (2006) US$ 81bn
- Inflation Rate: (2005) 7.6%; (2006) 8.6%
- Unemployment Rate: (2005) 8.2%; (2006) 7.8%
- Capital Investment Growth: (2005) 22.1% (2006) 10.6%
- Foreign Direct Investments: (1993-2007) US$ 51.2bn, of which US$ 6.5bn in 2006
- Internal Investments: over US$ 80bn
- Hard currency reserves: (2007) US$ 37.4bn, including National Oil Fund – US$ 15.9bn (17% of GDP)
- Natural Resources: The world’s largest reserves of barite, lead, tungsten and uranium; second largest reserves of chromites, silver and zinc; third largest of managanese; significant deposits of copper, gold and iron ore; world class oil and gas reserves.
Regional Financial Center of Almaty 06/11/2007A major new financial centre will soon emerge in Asia – in Almaty, Kazakhstan... The Regional Financial Centre of Almaty (RFCA) will act as a financial hub, attracting international investment funds as well as listed companies. The RFCA is a logical step to further diversify the Kazakh economy and decrease dependence on natural resources. The Kazakh government expects the Centre to boost the internal stock market and contribute to reforms of the economy’s real sector.
The creation of the RFCA was first mooted in the mid of 1990s but it was in 2003-2004 that President Nazarbayev formally proposed the project to Kazakhstan’s financiers. The RFCA was thus created in February 2006, as part of an initiative by the government to create a stock market operating to international standards of market regulation and best practice.
Experts and consultancies were invited to contribute to its foundation, including Boston Consulting Group (BCG) - experienced in establishing financial centres, and James Wolfensohn, ex-president of the World Bank. Three models – Dublin, Dubai and Singapore – were chosen as exemplars: the RFCA has absorbed their common features – namely, Accessibility, Transparency, Reliability, Incentives and State Support for all participants.
Experts with BCG believe that bonds issued at the RFCA will amount to USD 5 billion per annum by the third year of the Centre’s existence - and rise to USD 8 billion per annum in its fifth year. This volume will be constituted by Kazakh companies and issuers from Russia and Ukraine. After five years, the RFCA will accommodate issues of companies from other Central Asian countries.
To ensure a competitive centre, the Kazakh Government has introduced a number of unprecedented measures: a highly favourable tax regime and a special body under the direction of Kazakhstan’s President to register and administrate players. The RFCA will be a special zone with unique legal governance. A major principle will be to provide equal conditions for both Kazakhstan and foreign participants.
The laws governing the RFCA - along with secondary legislation - were adopted in June 2006. A special financial court has been set-up to ensure legal protection and a standing International Advisory Council will be formed.
The RFCA’s ultimate goals include development of the securities market, integration of the internal securities market with international capital markets, attraction of domestic and foreign investments into the Kazakh economy and entry onto foreign securities markets for Kazakh capital.
The package of mid-term measures will include…
- running of IPOs of national companies and banking institutions on the trading floor
- introduction of new financial instruments such as index funds (ETFs), securitised
assets (SPVs), futures, options, instruments of Islamic banking (Sukuk etc.) which will
be accessible to institutional investors and individuals and ensure effective
development of the Kazakh securities market;
- creation of a new technology-intensive infrastructure in line with other international
securities markets;
- involvement of the Bank for Kazakhstan Development into all RFCA activities
- annual issuance of treasury notes by the Finance Ministry;
- establishment of a Kazakh clearing house;
- optimum utilisation of internal investment opportunities through involvement of internal
investors looking for long-term investments
- implementation of large-scale investment projects to upgrade living standards, through
Government project-related bonds
- provision of tax incentives in cases of insuring against risks
- permission to the accumulation pension funds to establish associated organisations to
be registered as participants of the centre’s operations.
The RFCA plans to establish ties with 17 stock exchanges, including New York, Tokyo, Switzerland, Shanghai, Moscow Interbank FX and the Kazakh Stock Exchange (KASE). In late 2006, the RFCA signed a cooperation agreement with the London Stock Exchange, an MoU with Deutsche Borse and the Stock Exchanges of Seoul and Singapore.
Almaty was Kazakhstan’s capital city until 1998; it is home to 29 of the 34 banks operating in Kazakhstan, 28 of the 39 insurance companies, 12 out of 14 accumulation pension funds. Almaty accounts for 80% of allocated loans and over half of the country’s deposits. As of today, the city provides 1/5th of the national GDP, boasts 70% of all banking transactions, 20% of all tax proceeds into the central budget, over 50% of wholesale and retail transactions, 1/5th of the foreign trade turnover, 14% of all new housing commissioned, 18% of all investments as well as 1/3rd of all goods and services produced by small and medium-sized businesses. Fitch has assigned a ??+ rating to the city.
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