bne:Invest in Astana - August 2014

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Top story

Astana starts preparations for Expo 2017

Kazakhstan's glitzy capital Astana has started preparations to host the Expo 2017 international fair. The organisers believe the preparations, which include the construction of all the pavilions and facilities from scratch, to stage the exhibition will be completed on time in December 2016 for participants to start setting up their exhibits in January 2017.

When in 2010 Kazakhstan announced its intention and in 2011 it submitted its bid to host

the exhibition in Astana, proponents hailed the idea as a chance to showcase Kazakhstan, its achievements and young capital, which will turn 20 in 2017. Supporters also claim that the fair will give an impetus to the country's innovative development and improve infrastructure.

But for sceptics this was another vogue, expensive project on which the authorities, emboldened by a string of successful events such as an OSCE summit or Asian Winter Games in 2011, are going

The Islamic Corporation for the Development of the Private Sector is a multilateral partner of the Invest in Astana newsletter


to waste public funds. Critics say such grand-scale events do little to promote the country and argue the billions spent on Expo 2017 would be better used to solve social problems.

The International Exhibitions Bureau chose Astana over the Belgian town of Liège in November 2013 and officially recognised Astana as the host city of Expo 2017 this June, presenting Kazakhstan with the flag of the exhibition. This marked the official start of preparations for the exhibition. According to the fair rules, the host city cannot start the preparations before the official recognition, but Astana had been granted an exemption because of its long, harsh winter that shortens the "construction season" in the Kazakh capital. As a result, the first construction works actually started in April with site clearing, earthwork, building engineering networks (power, roads, water, sewage and so on) and other activities.

Talgat Yermegiyayev, chairman of the Astana Expo 2017 national company responsible for the organisation of the fair, says that all the necessary legislation for building facilities for the event was passed last year and the two and a half years remaining for their completion are "critical" because constructing buildings with a total floor area of over 1m square metres is "very difficult and almost unrealistic" in such short time. "Moreover, the point is about unique and highly complicated facilities. For example, the main building – Kazakhstan's pavilion in a spherical form – will be 80 metres in diameter with a base platform of more than 90 metres," Yermegiyayev told Forbes Kazakhstan magazine in July. "We have weighed up all the risks and all the complexities which may lead to failure. The schedule is tight but realistic and I can reassure you that we will stick to the schedule for 100%."

The theme of the Astana Expo is green energy and it will be held under the motto, "Future Energy". The organisers believe the fair's green credentials will draw attention to sustainable development, the use of renewable energy sources and adoption

of energy efficiency programmes in Central Asia and the CIS. For this purpose, Kazakh power companies intend to dot the city with 100 wind turbines to make a "contribution to the inimitable look of the capital." The "green" plans also envisages constructing a solid waste-recycling plant, facilities to process rainwater and sewage, as well as a $100m power station with solar panels with a capacity of 50 MW covering 100 ha.

The Expo tsar admits that at a price tag of $3bn there is criticism the project will not be profitable and the money could be used wisely for "more important" purposes. "Talk that the exhibition will not pay off is just groundless insinuations. I guarantee the project will be profitable," he claims.

At the same time, he notes that the return on the money invested in the fair "shouldn't be measured only in monetary terms," because the future generations will remember Expo 2017 as a "project with social, educational and, finally, spiritual meaning."

The government hopes that the private sector will invest at least $500m in building residential and commercial properties, as well as leisure and shopping centres for the exhibition. In order to entice local businesses to get involved in the project, the government has simplified customs procedures for goods imported from outside the Customs Union of Kazakhstan, Russia and Belarus, and exempted them from customs duties.

Taking into account the problem of white elephants left by previous fairs around the world, authorities are placing particular stress on the use of facilities after the exhibition: hotels and other residential buildings will be converted into apartments, while pavilions and other commercial facilities will be turned into offices. "Our task is to think about the future use of all these buildings after the Expo," President Nursultan

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Nazarbayev said during his inspection of the Expo campus, which will cover an area of over 170 hectares, in July. "All residential properties which will serve as hotels should then be used as flats for Kazakhs. Everything should be used." Echoing Nazarbayev, Yermegiyayev explains that the designs of Expo pavilions envisage their conversion into typical office buildings.

The Expo 2017 organisers also hope to recover some of the costs indirectly via the boost that the local economy will receive from domestic and foreign tourism during the event: over 2m people are expected to visit the fair during three months of its operations between June 10 and September 10, 2017, of whom 15% will be foreigners.

July 2014


Interview

Kazakh sovereign wealth fund to aim at efficiency, transparency

Kazakhstan's sovereign wealth fund, Samruk-Kazyna, is in process of transforming itself from a "passive" shareholder into an "active" investor, adopting an investment policy that is designed to boost the efficiency and transparency of the fund's subsidiaries and subordinated entities. The new policy also aims to improve interaction between the fund and organisations within the investment processes.

The policy approved by the fund's board of directors in late June envisages the development of "master plans" of national companies, which will be consolidated in order to identify Samruk-Kazyna's best investment strategy with priority investment areas and the targeted structure of the fund's investment portfolio. The master plans are

a set of investment projects designed to achieve key indicators set by the company's development strategy.

While allowing national companies to invest in projects in their respective sectors, the policy enables the fund to fulfil investment projects through a specialised subsidiary if certain companies' are limited from implementing investment projects independently.

The dichotomy will not add another layer of red tape or slowdown the decision-making regarding investment projects, insists Yelzhas Otynshiyev, director of the Samruk Invest Fund's department for investment project analysis. "The investment policy envisages the transfer of a number of responsibilities from the fund to subsidiary companies, which can now make decisions that were previously resolved by the fund," Otynshiyev tells bne. "This aims to strengthen the role of national companies' boards of directors in making decisions on investment. This measure will reduce time needed to make decisions on investment projects."

At the same time, the fund will still be involved in the decision-making process when it comes to business expansion, creation of new entities and productions and mergers and acquisitions: "These measures are needed to prevent the uncontrolled creation of new legal entities and non-core businesses which might compete against the private sector," Otynshiyev explains.

Moreover, by transferring some decision-making powers, Samruk-Kazyna will speed up the approval process for investment projects. The fund is also working on business process development at national companies, including the investment processes, automatisation and integration of project management. "The adoption

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of such processes at the fund's subsidiaries will significantly improve the quality of planning and monitoring and will cut labour intensity both at subsidiaries and at the fund," says Otynshiyev.

In July, the Kazakh government endorsed the second stage of the innovative industrial programme for 2015-2019, which will see investment worth $36bn, 90% of which is private, put in to raise manufacturing output by 43% and productivity by 40%. Since the industrial innovative programme aims to develop priority sectors of the economy by diversifying and improving competitiveness, Samruk-Kazyna and the state companies it controls will be involved in the fulfilment of the programme, Otynshiyev notes. "In turn, the government is offering both financial and

non-financial support through systemic measures of economic policy at the macro and sectoral level," he says.

As part of the first stage of the programme that started in 2010, Samruk-Kazyna's current investment portfolio consists of 32 projects worth $33.7bn, of which 23 projects are of national significance totalling $31.3bn, while nine projects worth $2.4bn are of regional importance. These projects are mostly realised by state oil and gas firm KazMunaiGas, railway holding Kazakhstan Temir Zholy, the power-engineering firm Samruk-Energo and chemical firm UCC Engineering – the national companies which make up the backbone of state-owned assets managed by Samruk-Kazyna

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Kazakhstan's foreign policy is facing one of its stiffest tests since the country gained independence from the Soviet Union in 1991.

Despite the declared "multi-vector" foreign policy, Astana has been caught in the midst of tit-for-tat trade wars between its closest ally and major trading partner Russia and the West over the crisis in Ukraine. For the moment, though, Astana has managed to secure its national interests by persuading Moscow that as members of the Russian-led Customs Union, Kazakhstan and Belarus should not be drawn into these wars.

Russia's confrontation with the West following its annexation of Crimea and support for separatists in eastern Ukraine presents a number of challenges to Kazakhstan. US and EU sanctions against Moscow are hurting Russia's economy. This in turn is depressing demand for Kazakh imports, which in the first five months of 2014 were down about 20% from the year-earlier period. Experts predict that the trade restrictions imposed on Russia could lead to a depreciation of its currency and higher inflation, which is likely to impact the Kazakh economy because Russia is Kazakhstan's largest supplier. In addition, Kazakhstan, Russia and Belarus have agreed

to deepen their integration by transforming the Customs Union into the Eurasian Economic Union (EEU) in January 2015.

The situation in Kazakhstan is further complicated by the problems in its oil and gas sector, which is struggling to maintain oil output at last year's 82m tonnes: the continuing delays in getting production from the giant Kashagan oilfield in the Caspian Sea, which was halted last autumn due to the need to replace pipelines linking the field with onshore facilities, means the expected significant increases in output will not happen until Kashagan restarts production, which is not expected before late 2015. As a result, the Kazakh economy posted growth of only 3.8% in the first quarter of 2014, well below the government target of 6% for the whole year.

Gulf in understandingGiven the unpredictable consequences of the sanctions for the Kazakh economy, Astana has drafted a "separate package of measures," which is going to be implemented in September, National Economy Minister Yerbolat Dossayev told a government meeting on August 6.

No details of the plan have been made public, but Kazakhstan will likely have to rethink and diversify its trade relations, while managing to maintain good relations with the US and EU despite the sanctions. In a June paper entitled "Foreign Policy in Kazakhstan: Looking Outwards and Moving Forwards," the Kazakh Foreign Ministry-funded think-tank the Eurasian Council on Foreign Affairs (ECFA) acknowledges that "Russia has always been a close partner with Kazakhstan" due to "deep and historic ties" between the countries, but insists that Kazakhstan is not a "Kremlin puppet."

One of the regions that Kazakhstan could expand its trade with is the Gulf

Feature

Kazakhstan rethinks its foreign policy

July 2014


Cooperation Council countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). Kazakhstan's trade with these countries totalled $210m in 2012, or less than 0.2% of the country's total exports. Expanding Kazakhstan's trade with these countries has "significant prospects," Almaty-based political analyst Rasul Zhumaly tells bne. "One the one hand, they are an important region; on the other, given Kazakhstan's multi-vector foreign policy, they are one of the few alternatives we can use to conduct a balanced foreign policy."

Kazakhstan and Gulf countries are close in many ways – geographically, culturally and in terms of nomadic past and Islamic heritage. Furthermore, they also have economic compatibility that derives

from the similar structure of their economies, which is mostly based on the oil and gas industry, says Luca Anceschi, lecturer in Central Asian Studies at the University of Glasgow. "Despite these similarities, Kazakhstan and the Gulf countries do not interact, and the relations between them are not developed as they should be and not as what many people would have thought they would develop in the 1990s," he says in an interview with bne.

There are two reasons for the poor development of relations between Kazakhstan and Gulf Arab countries. Since both have lop-sided economies with a big emphasis on oil and gas, they are not particularly interested in investing in one another. The second reason is political, namely

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an Islam practised in the Gulf which the Kazakh government regards as a danger. "In my opinion, for economic and political reasons compatibility has transformed into incompatibility and that's why Kazakhstan is not interacting with the Gulf countries as it should be," Anceschi explains.

Historically, Kazakh people practised the Hanafi school of Islam, whereas Gulf Arabs mostly practise the Salafi (aka Wahhabi) school of Islam. Anceschi believes that the problem is not in differences between these schools of Islam, but it is about what the Kazakh government wants Islam to be in Kazakhstan. "The Kazakh government is instrumental in making this gap to be more substantive than it is," he says.

In order to prevent the penetration of what authorities describe as alien versions of Islam into Kazakhstan, the government has reduced its links with Saudi Arabia because the promotion of Islam is a central part of its foreign policy. This has been done through cutting the number of Kazakhs performing the annual pilgrimage to Mecca, limiting the number of students studying at Saudi Islamic educational establishments and imposing restrictions on independent mosques that operate outside the semi-official Spiritual Directorate of Kazakhstan's Muslims. "The insulation of Islam practised in Kazakhstan has created an Islam which is more coherent with the regime and tame," Anceschi notes.

Fly EmiratesOut of all the Gulf countries, Kazakhstan has the closest relationship with the UAE, which

accounted for over 80% of the country's trade with the region in 2012. According to Anceschi, this is down to the close personal relationship between President Nursultan Nazarbayev and UAE President Sheikh Khalifa, the emir of Abu Dhabi.

The Emirates are popular not only with President Nazarbayev, who visits the country a few times a year in both an official and unofficial capacity, but also with ordinary Kazakhs: 10,000 Kazakhs are believed to permanently reside there and about 1,000 Kazakh students study there. The UAE is the third most popular destination for Kazakh travellers after Moscow and Istanbul.

In addition to opening up the Gulf countries as export markets for Kazakh products, Kazakhstan could also learn from these countries' experience in developing their oil and gas sectors. "At one point they also ceded their oilfields to global oil giants to develop them... and the Arabs have managed in a civilised way to return them and now own them 100%," the analyst Zhumaly says.

Zhumaly also cites Dubai's experience in diversifying its formerly oil-based economy after it ran out of oil for export in the early 2000s. The Kazakh government has made diversifying the country's economy to reduce its dependence on the oil and gas industry a top priority. "Despite losing such a powerful springboard, this emirate is developing very well. In a very short time, some 20 years, it has managed to create a strong alternative – a hi-tech, diversified economy based on property, manufacturing, tourism, services and re-exports," Zhumaly says.

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Kazakh President Nursultan Nazarbayev announced a major government reshuffle on August 6 as part of attempts to revive economic growth, which has slowed due to stagnant oil production and falling exports.

Nazarbayev said the changes were aimed at reducing the bloated bureaucracy. In the new slimmed-down government, the number of ministries will be cut from 17 to 12. Nine agencies have been abolished and committees reduced from 54 to around 30. "We now need to create an efficient system of government and we need a compact government. We don't need to bloat bureaucracy more than is necessary," Nazarbayev said, adding that the civil service has grown by over 8,500 to more than 90,000 people over the past decade.

Prime Minister Karim Massimov retained his job in the reshuffle – though he will now have only two deputies, instead of four – as did Deputy Prime Minister Bakytzhan Sagintayev, who is handling Kazakhstan's negotiations on the Eurasian Economic Union with Russia and Belarus.

The plan is that a more effective government will help to boost growth. Economic growth has fallen below target due to the stagnant oil and gas production sector – mainly because of

delayed production at the giant Kashagan field in the Caspian – and falling exports to Russia and Ukraine. GDP expanded by just 3.8% in the first quarter of this year, well below the government's 6% target for the whole year. Meanwhile, the delay in production at Kashagan, which was halted last autumn over technical issues just as it finally started producing oil, means the country's output will see no significant rise until late 2015 at the earliest.

Telling officials that the country's energy sector is in a "mess," Nazarbayev announced the creation of a giant new energy ministry, to be headed by the former chief of the state nuclear company, Vladimir Shkolnik. In a move apparently without intended irony, the enlarged ministry will also encompass the duties of the disbanded environment ministry. Two other ministries to be expanded are the national economy ministry and the investment and development ministry.

Analysts met the government re-jig with a lack of enthusiasm. "I don't expect the reshuffle itself to change Kazakhstan's investment climate because, as far as the announcement goes, the reshuffle does not entail any changes in economic policies," Sabit Khakimzhanov at Halyk Finance tells bne. "By default, we expect the policies to remain largely unchanged. That does not mean that the policy is not changing or that the investment climate is not improving - it is; but not because of the reshuffle."

Noting that on the surface the reduction of bureaucracy makes sense, Eurasianet suggests the realities in Kazakhstan mean it's likely to drag on efforts to improve growth, as officials fight over a redirected and reduced power and rent flows. "One shake-up likely to spark a round of infighting... is the abolition of the financial police, replaced by an anti-corruption agency," it writes, noting "cynics may see as just another re-division of lucrative spoils in the war on graft."

Kazakhstan re-jigs government in bid to boost flagging growth

July 2014


Kazakh plans for gas development face obstacles

The Kazakh government has adopted a programme to develop the gas sector with the aim of increasing domestic consumption, but market players believe heavy regulation and an approach that sees gas as simply an auxillary to oil discourages investment.

The government adopted a scheme to expand gas supply networks in Kazakhstan until 2030, in June. Just two months later, one investor told bne that the plan makes little sense unless Astana does more to encourage development of smaller scale gas deposits.

According to the scheme, domestic gas consumption should go up from the current 11bn cubic metres (cm) to 18bn cm a year in 2030. Former Oil and Gas Minister Uzakbai Karabalin said the programme aims to increase the number of settlements supplied with gas from the current 988 to 1,621, covering 12m people, or 56% of the projected population in 2030.

The policy envisages building new gas pipelines, doubling the total length the network to 57,500km.

That will require investment worth KZT656bn ($3.6bn) Karabalin suggests.

All of which of course means more gas will need to be pumped into the pipes. Overall, the scheme will demand that the output of marketable gas must rocket from 21bn cm to 60bn cm annually.

The government believes that the Turkmenistan-Uzbekistan-Kazakhstan-China gas pipeline - with a capacity of 55bn cm of gas a year - should help improve gas supply in the country's south. Kazakhstan's major hydrocarbons fields are located in its western regions, and in order to supply gas to consumers in southern regions and export it to China the country has built the 1,143-km Beyneu-Bozoy-Shymkent route, which will supply 5bn cm inside Kazakhstan with the remainder heading for export. For the meantime, the south consumes mostly Uzbek gas.

Best optionHowever, Astana could struggle to persuade private investors to contribute to the scheme. A tightly regulated market, combined with excessive red tape, is a hurdle for investors because Kazakhstan is not "a cheap place" to operate, says David Robson, executive chairman of Tethys Petroleum. That will change only if the government liberalises the gas market, says the investor, whose company is developing the Kyzyloi and Akkulka gas fields in the Aral Sea region.

The gas sector in Kazakhstan is regulated by legislation that grants the government a pre-emptive right to acquire gas assets. Producers must also sell all gas output at regulated prices, which allow a maximum profit margin of 10%, to national utility KazTransGas. While that only applies to associated gas, that actually constitutes the vast bulk of the country's current output. The

Sector

July 2014


government considers it little more than a "by-product" of oil production.

Meanwhile, deposits of dry gas are small, meaning large investors show little interest, preferring the much-prized oil fields. The smaller investors that might take the gas reserves on are however put off by the tight control.

"Kazakhstan should be following free-market principles, and one of the most important is a free market in energy," Robson tells bne. "While you have a market which is controlled it discourages investment, because you can't derive a true price for your products." The British oil executive suggests having just a single, state-controlled gas purchaser is "not the best option".

In addition to the regulated pricing, which is currently around $85 per 1,000 cm, the state's pre-emptive rights - as well as the bureaucracy oil and gas companies face – is another obstacle for investment in smaller fields, he claims. The pre-emptive right is triggered even when a stake of as little as 0.1% in minor gas assets changes hands, Robson complains, insisting that it should be limited to "big, strategic projects" such as the giant Kashagan oil field in the Caspian Sea. Companies involved in small projects should be able to buy and sell assets "quickly and simply," he says.

Illustrating the point, Tethys sold a 50% stake in its Kazakh assets to the Beijing-based SinoHan Oil and Gas Investment for $75m plus bonuses in November. It is still awaiting a green light from the government for the deal.

"Legislation relating to the transfer of assets is so cumbersome that it will take you at least a year to get the necessary consents to be able to bring in a partner, and not everyone is willing to wait a year," Robson laments.

Export routeHowever, Tethys doesn't appear too discouraged. The Chinese investment will open the way to more exploration, says Robson, describes his company as a "good explorer". He says Tethys is the first to discover commercial oil in the northwest Aral Sea area. That has encouraged others, such as the French supermajor Total, to move into the area he adds.

The company plans to invest around $170m into new exploration over the next two to three year, with revenue to lead in providing the funds. Tethys expects to produce about 800,000 cm of gas per day by the end of the year, and 1m cm next year. It also anticipates oil output to rise. Tethys turned over around $36m last year.

The central point in that investment drive however is that the Beyneu-Bozoy-Shymkent pipeline will allow Tethys to export to China. The regulated prices on the domestic market "are not good enough for us to invest more," Robson insists. That means Tethys will not be contributing to the gasification scheme.

"Despite what might be said, we are not bound by the gas law because we produce dry gas," he explains. "Our contract allows us to export, but we will pay an increased mineral usage tax. We'll also pay profit tax, plus excess profit tax, so Astana will get cash. If the price in Kazakhstan were competitive with export prices, then, of course, I would prefer to sell domestically.

Red tape is another obstacle to potential investment, the executive claims. While he says Kazakhstan "is not as corrupt place today as it was reputed to be a few years back," he says that has only seen bureaucracy spike. "The rules which have been put in place to prevent corruption means everything takes a long time. It's very difficult to operate efficiently because of bureaucracy," he complains.

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Kazakhstan in nuclear power station JV with Canada

Kazakhstan is in talks with the Canadian government on the possibility of jointly investing into nuclear power for the Central Asian republic.

President Nursultan Nazarbayev announced the plans during a ceremony where he accepted the credentials of the new Canadian ambassador.

"Development of comprehensive relations with Canada is of high importance for Kazakhstan. We bring together mutual interests in global and

regional security, economy and energy, trade and investment. Canada is an important trading partner of Kazakhstan in the Americas, and Kazakhstan is an important partner for Canada in the CIS", Nazarbayev said, reports Kazinform.

Canadian investment has been growing in recent years and some 170 Canadian companies are already operating in the country focusing mainly on the mining, agricultural, construction and education sectors.

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IMF ends consultation with Kazakhstan, puts 2014 GDP growth at 4.8%

On August 5, the International Monetary Fund (IMF) announced the conclusions of its latest consultations with Kazakhstan that ended July 21, which commended the country's economic performance, though was forced to cut the GDP growth forecast in 2014 to 4.8%.

"[IMF] Directors commended Kazakhstan’s solid economic performance in recent years. However, given the recent growth slowdown and rise in inflation amid heightened external uncertainties, Directors stressed the importance of strengthening the macroeconomic policy frameworks to improve the economy’s resilience and long-term prospects," is said in a statement.

The IMF noted that growth slowed from 6% in 2013 to 3.8% on year in the first quarter of 2014, due to weaker external demand, especially from China and Russia; the confidence effects of regional tensions and the February devaluation of the tenge on domestic demand; and slower production in the mining sector.

The global uncertainty forced the government into some unplanned actions, notably the 19% devaluation of the tenge, sprung on the population in February as a response to the fall in the Russian ruble.

Despite the expected positive contributions from fiscal stimulus, the IMF said it expects real GDP growth in 2014 at 4.8%, one percentage point below earlier projections. And medium-term growth prospects hinge on the projected rise in oil output, it added. "Risks to the outlook are predominantly on the downside, reflecting possible additional unfavorable developments in Russia and Ukraine, and a prolonged slowdown in emerging markets," it said.

Inflation, on the other hand, has risen, fuelled by the devaluation and amid heightened external uncertainties, reaching 7% on year in June compared with 4.8% at end-2013, the IMF said. Headline inflation is expected to further increase to around 9% in 2014, although it said the Kazakh authorities are determined to maintain it within the 6–8% target range

The banking sector recovery continues, it noted. "The authorities have taken more aggressive steps to reduce the large stock of Non Performing Loans (NPLs), and have committed to enhancing the monetary and fiscal policy frameworks," it said.

The central bank has redoubled efforts in the wake of the Ukrainian crisis to deal with one of the spectres hanging over the local banking system, namely the level of NPLs. These are a legacy of rampant, unsustainable property lending before the global financial meltdown in 2007-2008, but the country has failed to provide the institutional tools to allow banks to work them down to a safer

Economics & finance

July 2014


level – something the new central bank governor, Kairat Kelimbetov, believes would put the banks on a surer footing. "There was a very tolerant policy towards NPLs [under previous governor Grigori Marchenko]. When I arrived, everyone understood that we couldn’t continue this policy," he has told bne.

In its recommendations, the IMF welcomed the authorities’ more aggressive efforts to reduce the large stock of NPLs, and highlighted the urgency of supervisory actions to enforce nonperforming loan ceilings and ensure adequate provisions. "Directors also underscored the importance of an asset quality review by an independent international entity ahead of the merger of

two systemic financial institutions. They also recommended further strengthening risk-based supervisory functions and closely monitoring foreign currency risks associated with increased dollarization," it said.

The IMF also noted that the Kazkh authorities have strengthened their commitment to speeding up structural reforms and in this context deepened their cooperation with the multilateral development institutions. "The newly launched Eurasian Economic Union, with Belarus, Kazakhstan, and Russia as members, will formally come into effect in January 2015, while accession to the World Trade Organization (WTO) is expected later this year," it said.

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Chart

Fearing negative effects of its major trading partner Russia's tit-for-tat trade war with the West following its annexation of Crimea and meddling in the conflict in eastern Ukraine,

the Kazakh government is taking measures to minimise the impact of Moscow's fallout with the West. Russia is Kazakhstan's major supplier accounting for over a third of total imports, and along with Ukraine, is a major destination for Kazakh exports. Due to the continuing crisis in Ukraine and recession in Russia, Kazakh exports fell by 31% and nearly 20% year on year to these countries in the first five months of 2013.

Kazakh trade hurt by Russia's tit-for-tat trade war with Europe

Kazakhstan’s major markets, 2013

Kazakhstan’s major suppliers, 2013

18.40%

17.30%

11.80% 7%

6.40%

5.20%

4.40%

3.20%

3.10%

2.50%

20.70%

Italy

China

The Netherlands

Russia

France

Switzerland

Austria

Canada

Turkey

Ukraine

Others

36.20%

16.80%

5.70% 4.80%

4.60%

2.60%

2%

27.30%

Russia

China

Germany

USA

Ukraine

South Korea

Italy

Others

36.20%

16.80%

5.70% 4.80%

4.60%

2.60%

2%

27.30%

Russia

China

Germany

USA

Ukraine

South Korea

Italy

Others

July 2014


Over 45,000 Kazakh students studying abroad

More than 45,000 Kazakhstani students are studying abroad, Tengrinews reported, citing Kazakhstan's Ministry of Education and Science.

According to Kazakhstan embassies and foreign education ministries, 26,600 Kazakhstanis are studying in Russia, with 19,100 of them being full-time students and 1,700 studying in the framework of international agreements. There are 9,670 in China, 628 of them hold various education grants; 4,000 are in the United Kingdom; around 1000 are in the United States; around 1000 are in the Czech Republic; around 1500 are in Malaysia; 715 are in the United Arab Emirates; 783 are in Turkey; and 300 are in Poland.

Kazakh-British JV acquires licence to explore gold mine in east

The Kazakh-British Kogodai Joint Venture, subsidiary of Orsu Metals Corporation, acquired a license for exploration of the Kogodai gold field, around 70km to the northwest of Karchiga field, reported Oilnews.kz.

The Big Kogodai field is in East Kazakhstan Region. It was discovered in 1909. 224.6kg of gold was extracted at the field during 1909-1918.

Kazakhstan to launch about 100 industrialisation projects in H2

It is planned to put into operation about 100 projects of the Industrialization Map in the second half of 2014, Deputy Prime Minister of Kazakhstan and Minister of Industry and New Technologies Asset Issekeshev said, Kazinform reported.

"In the second half of the year is planned to put about 100 projects of the Industrialization Map worth KZT600bn. The second five-year plan was approved, the government developed a step by step plan of action and started work in the new format," Issekeshev noted.

Kazakhstan's international reserves stand at nearly $104bn

Kazakhstan's international reserves, including the gold and FX reserves of the Central Bank and the assets of the National Oil Fund, grew from $95.5bn to $103.7bn from January to July, according to the Central Bank, Tengrinews reported.

The gold and FX reserves grew by 9.23% for the period under review, reaching $26.9bn, with the assets of the National Oil Fund growing by 8.4% to $76.7bn.

News in brief

July 2014


Kazakh president orders demolition of all unregulated markets

Kazakh President Nursultan Nazarbayev has ordered all the unregulated flea markets in the country to be closed, Tengrinews reported.

"Shadow economy is a large reserve of money that can be channelled into the state budget… There are hundreds of thousands of unregulated markets in Kazakhstan. They are unsanitary. Outrageous things happen there. Can't our businessmen take this profitable business in their hands? It is necessary to build normal, organized indoor shopping centers. Akims (governors) should allocate land for this purpose without delays, include these facilities into free economic zones, exempt them from taxes and close all the unorganized markets in the country," Nazarbayev said.

Kazakh president announces tax amnesty for SMEs

Kazakh President Nursultan Nazarbayev has announced a tax amnesty for the country's small businesses, Tengrinews reported.

"Before December 2014 the government is expected to adopt a program to support businesses. I commission the government to administer a tax amnesty to provide relief of all the penalties accrued as of October 1, 2014 to small and middle-sized businesses," the president said.

Qatar Solar Energy Signs Deal with Kazakhstan's Kazatomprom

Qatar Solar Energy signed a deal with Kazakhstan-based energy company Kazatomprom to boost Qatar's renewable energy production, Energy Digital reported.

Kazatomprom will provide Qatar with solar grade silicon at a very low fixed cost for the next ten years. With demand for polysilicon expected to increase over the next few years, Qatar has potentially positioned itself to be a leader in solar for the Middle East and North Africa (MENA) region.

July 2014

bne:Invest in Astana - August 2014

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