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Politics and Macroeconomics

Kazakh Foreign Ministry Denies Chinese Farmers Moving To Kazakhstan

Kazakh Deputy Foreign Minister Mukhtar Tleuberdi told a press conference in Astana on 8 January that there is no substance to media reports that an unidentified Kazakh official has agreed to lease vacant land in Kazakhstan's Alakol Raion to 3,000 Chinese farmers, who would use it to grow soybeans and wheat and to raise livestock. The story apparently originated in a media outlet in western China's Xinjiang Province and appeared in the "China Daily" in December. No indication was given of when the agreement was supposed to have been concluded. Many Kazakhs have long feared that China is casting covetous eyes on their sparsely populated country. (Gazeta.kz)

2003 Inflation Rate In Kazakhstan Reaches 6.8%

The consumer price index (CPI) in Kazakhstan, a key indicator of inflation, rose 6.8% in 2003, up from a rise of 6.6% in 2002, according to the state Statistics Agency.

Food prices rose most sharply in 2003, up 7.1% on the year. Prices for non-food goods rose by 6.9% in 2003, while the price of services was up 5.9%.

Inflation struck most dramatically at the end of the year: the CPI rose 0.9% in December alone, with food prices shooting up 1.5% during the month (non-food goods were up 0.3% and services were up 0.4% during the same period).

The government and National Bank had forecast an inflation rate of 6.1% in 2003.

In its 2004 forecast, the National Bank has predicted a rise in inflation within the range of 5-7%. At the same time, the annual index of hidden inflation, an indicator introduced this year, was forecast at 4-6%. (Interfax)

National Bank UPS Gold Purchases

Kazakhstan's National Bank purchased almost 2.3 tonnes of gold on the domestic market in 2003, as state gold purchases shot up from just 280 kg in 2002.

The National Bank paid some KZT 4.5 Billion to boost its gold holdings by the aforementioned 2.3 tonnes, bank Monetary Operations Department Director Batyrbek Alzhanov announced.

All of the gold was bought from local producers, Alzhanov stressed. As of December 23, Kazakhstan possessed 54.07 tonnes of gold assets, or 14.13% of total reserves, he said.

In 2004, the National Bank plans to purchase an additional 3.1 tonnes of gold, again from domestic producers.

Over 30 gold producing plants currently operate in Kazakhstan. Kazakhstan produced over 29 tonnes of gold in 2003, good for 3rd place in the Commonwealth of Independent States. (Interfax)

Russia And Kazakhstan Agree To Main Parameters Of New Agreement On Baykonur

Russia and Kazakhstan have practically wrapped up the drafting of two documents on the use of Kazakhstan's Baykonur Cosmodrome by Russia. The Russian and Kazakhstani Presidents are expected to sign the aforementioned documents in January during Russian President Vladimir Putin visit to Kazakhstan.

"At present Kazakhstan has prepared a draft agreement that stipulates a 50-year extension of Russia's lease for the Baykonur complex," RosAviaKosmos Deputy Director Alexander Kuznetzov announced.

Meanwhile, Kuznetzov emphasized that "for the present, [the Kazakhstanis] haven't decided how the lease will be prolonged: There are differences in our approaches regarding how to get these 50 years: whether simply to increase already existent 20-year rent up to 50 years or to add 50 years more. Thus, I can't say final terms of the rental agreement," Kuznetzov explained.

One of the main foci of the new agreement is "working to ensure the environmental safety of the work at the Cosmodrome," Kuznetzov added. (Golden Eagle Partners)

World Media Comment On Nazarbaev's Comments On Caspian Oil Cartel

World media has been reacting over the past several weeks to an interview given to Interfax news agency by Kazakhstani President Nursultan Nazarbaev in which the president calls for Caspian littoral states to create an oil cartel in lieu of joining the Organization of Petroleum Exporting Countries (OPEC).

US-based economic magazine Forbes emphasized the phrase: "International experts believe that Arab oil producers and other OPEC members are threatened not only by the volumes of Caspian oil reserves, but also by the fact that Caspian states are not OPEC members."

In reaction to this nervousness on the part of OPEC, Nazarbaev declared, "I have proposed that the Caspian littoral states found our own organization" rather than join OPEC. The Kazakhstani leader went on to specify that Iran, which is already an OPEC member, would not likely join any new Caspian oil cartel, thus making only Azerbaijan, Russia, Turkmenistan and Kazakhstan the only likely members.

"Among our partners, principally we would like to see Russian businessmen.

We are holding intensive consultations with LUKoil," Nazarbaev said. Forbes also noted the gradual rapprochement of Kazakhstan and Russia in recent years and noted Russian President Vladimir Putin's visit to Kazakhstan scheduled for later this month.

Venezuelan web-site www.petroleumworld.com, which generally reports on the South American oil market, highlighted the portion of the Interfax interview with Nazarbaev in which the Kazakhstani president reportedly declared that "Caspian oil can break OPEC and prevent it from fixing high prices and using oil as an instrument for political blackmail." (Golden Eagle Partners)

Exports Strengthen Kazakhstani Economy

In his first public comments as head of Kazakhstan's National Bank, Anvar Saydenov said that the fast growth of export revenues (primarily as a result of high oil prices) in 2002 and the prospects for steady export growth (primarily as a result of increased oil output) in the future augur strength for the Kazakhstani economy.

Saydenov this week was named acting National Bank Chairman, replacing Grigoriy Marchenko who was named First Deputy Prime Minister. Saydenov will soon sit before a parliamentary hearing in order to have the "acting" removed from his title.

Kazakhstan's current accounts balance for nine months of 2003 was in the black at USD 508 Million. Exports were up more than 33% for the period vis-à-vis 2002 results, mainly as a result of high oil and metals prices (oil prices were up 18% over the same period in 2002). Foreign trade as a whole increased 25.1% and totalled USD 16 Billion.

Foreign direct investment in the first nine months of 2003 was up 14% over the previous year and totalled USD 1.6 Billion.

As a result of the strong exports and inflows of investment capital, Kazakhstan's national currency, the tenge, strengthened by 14% against the dollar, KazInform reported citing Saydenov. (KazInform)

Grigoriy Marchenko Named First Deputy Prime Minister

Long-time head of the National Bank Grigoriy Marchenko this week was appointed Kazakhstan's new First Deputy Prime Minister.

Marchenko replaces another government veteran, ex-first deputy premier Alexander Pavlov, who has served in numerous top government jobs over the years. Pavlov's political future has not been announced.

Marchenko will be replaced at the National Bank, temporarily, by Anvar Saydenov, who had been his deputy chairman.

In addition, Bolat Zhamishev has been named the chairman of a new government agency, the Agency for the Regulation and Supervision of the Financial Market and Operations. (Khabar)

Prime Minister Says Foreign Investors Will Not Be Restricted In Telecoms Investments

"There is no sense to restricting the share of foreign investors to 49% in all telecommunications spheres," Kazakhstani Prime Minister Daniyal Akhmetov announced this week.

Akhmetov was commenting on a measure introduced in the draft law "On Communications" that would restrict foreign ownership in the telecom sector to 49%.

"If we shall speculate in terms of national security, this restriction should mainly concern main telecommunications. The remainder of the sector should be free for competition," Akhmetov declared. He urged the Information and Communications Agency and other relevant departments "to attentively study this issue."

According to KazInform, Akhmetov noted that the planned liberalization and privatization of Kazakhstan's telecoms sectors is intended to create a competitive market, "therefore, the restriction of foreign companies to 49% seems to me not quite advisable." (KazInform)

Equities

The KASE-Shares index increased by 1.46% to 144.49 by the end of period on January 7 2004. 

KASE-Shares index and weekly volume of trades

Note: KASE-Shares index is based on ask prices for equities in A Listing

In the period between December 25 2003 and January 7 2004, the volume of equity trades at the KASE decreased to USD 8,576,728 from USD 18,567,202 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Bank CenterCredit (CCBN), Dana Bank (DNBN), Kazakhmys (KZMS), Neftebank (NFBN), Temirbank (TEBN), UKTMK (UTMK), ValutTransit Bank (VTBN) and Zerde (ZERD) and preferred shares of Narodny Bank (HSBKp) and ValutTransit Bank (VTBNp). (Irbis)

Company News

Oil & Gas

Kazakhstan's Ministry of Energy and Mineral Resources and state oil and gas company KazMunayGas last week signed a production sharing agreement (PSA) for the development of the Tub-Karagan and Atash sites in the Kazakhstani sector of the Caspian Sea. The two fields are part of the Dostyk structure, a USD 3 Billion project that KMG plans to develop with Russian oil and gas giant LUKoil.

KMG signed the PSA just days before new Kazakhstani tax legislation went into effect that would have severely limited the company's ability to develop the sites on the basis of a PSA agreement. By signing before the tax changes went into effect, KMG also avoids being subject to a new tax on oil export. KMG also benefited from old laws guaranteeing a stable tax rate for the project that have since been amended.

"Currently the agreement is signed within the framework of the old law, however it is worth mentioning that the parameters of the agreement and its application are very close to the new law," Energy and Mineral Resources Minister Vladimir Shkolnik said after the contract signing ceremony.

The agreement guarantees 15% profitability for the project, Shkolnik noted. KMG will hold a 50% stake in the development project.

After a meeting with Kazakhstani Prime Minister Daniyal Akhmetov recently, LUKoil President Vagit Alekperov said that his company will sign on to the PSA agreement in early January.

"The first step on fulfilling the government's Caspian Shelf Development program has been taken. I would like to congratulate all of you with this event," Shkolnik said. (TuranAlem)

***

State oil company KazMunayGas has celebrated the New Year by reshuffling several of its top executives.

According to a KMG press release, former KMG presidential administration head Ermek Kosherbaev has left the company to take over as General Director at Rauan Media Group. Askar Smankulov has been named to replace Kosherbaev as head of the KMG presidential administration.

Long-time KMG Managing Director for Economics and Finance Daniyar Berlibaev has been named General Director of state shipping company KazMorTransFlot. Berlibaev has been replaced in his managing director position at KMG by Aydan Karibzhanov, who was previously the managing director of VISOR Investment Solutions.

Former KazMorTransFlot head Kayrat Krymov, who has been replaced by Berlibaev, has been named Deputy General Director of state oil transport company KazTransOil.

Finally, Murat Abdrakhmanov, heretofore KMG's Information Technologies Department Director, has been named General Director of KazTransCom. Seitzhagipar Artygalin has been named Abdrakhmanov's deputy. (KazInform)

***

An Astana municipal court has ordered leading oil products company PetroKazakhstan Oil Products (formerly ShNOS) to repay KZT 149.323 Million to the state budget, the Agency for the Regulation of Natural Monopolies Regulation and Protection of Competition announced in a press release this week.

An inspection by the Anti-Monopoly Agency conducted in fall 2003 found that violations of anti-monopoly law by PetroKazakhstan had cost the state KZT 947 Million in revenue, and the company was ordered by the agency to repay that sum to the state. PetroKazakhstan disputed this decision, arguing the Anti-Monopoly Agency had overstepped its authority.

The court established that after August 6, 2002 PetroKazakhstan did set its prices for petrol and diesel fuel in a manner incompatible with the requirements of Kazakhstani anti-monopoly law.

The Anti-Monopoly Agency in its press release re-affirmed its commitment to take measures to compel PetroKazakhstan to fully recompense the state for damages resulting from the company's alleged non-compliance with anti-monopoly laws. (Kazakhstanskaya Pravda)

Banking and Finance

The Asian Development Bank (ADB) plans to allot USD 190 Million in loans to Kazakhstan during the 2004-06 period, the bank's country strategy and program reveals.

According to ADB officials in Kazakhstan, the bank is hoping to finance projects in the spheres of rural development, transportation, water supply and sanitation.

"Final decisions will be taken by the [Kazakhstani] government," an ADB official stated.

According to Kazakhstani Finance Minister Erbolat Dosaev, the ADB is eager to allot Kazakhstan a USD 55.4 Million loan for the Atyrau-Aktau highway reconstruction project. The total cost of the highway project is estimated at USD 243 Million, of which USD 119 Million has been pledged by the European Bank for Reconstruction and Development.

In addition to loans, the ADB intends to render Kazakhstan USD 6 Million worth of technical aid as part of its country strategy. (Interfax)

***

Kazakhstan's commercial ATF Bank has drawn a USD 10 Million loan from the state development banks of the Netherlands and Germany.

According to the ATF Bank press service, "the bank signed a credit agreement for USD 10 Million from German and Dutch state banks DEG and FMO". The loan has been allotted for a 5-year term, including a 2-year grace period. The loan is intended to support ATF-financed projects in transport, industry, agriculture, tourism and trade.

ATF Bank, formerly Almaty Merchant Bank, is among the top four Kazakhstani banks (NB: the ATF press service's clever way of saying it is the fourth largest bank). It has branches in 14 cities and assets exceeding KZT 100 Billion. (Interfax)

Power

The Aksu TETS power plant increased its output in 2002 to 10 billion kW/h, 1.8 billion kW/h more than in 2002, a plant official said.

The successful operation of the plant is a result of a long-term reconstruction plan undertaken by the owner of the facility, Eurasian Energy Corp., EEC President Abduazim Rustambaev stated.

The technical upgrade of the plant started seven years ago and will last till 2016. The USD 35 Million reconstruction of the fourth energy block at the facility boosted capacity by 10 MW, while control and management systems were upgraded. A modern Swiss-made Alstom electric filter was installed at the plant, a first in the Kazakhstani power sector. The aforementioned filter catches 99.6% of harmful emissions.

The boost in output at the Aksu TETS has fortunately been accompanied by an increased demand for power from the facility, principally from its largest clients - the Aksu Ferro-Alloys Plant, Sokolov-Sarbay Mining-Enrichment Plant and steel giant Ispat-Karmet. (KazInform)

Metal and Mining

Major copper producer Kazakhmys saw its refined copper production fall by 37,365 tonnes or 3.3% in 2003, the company's press service announced this week. For the year, Kazakhmys turned out 417,366 tonnes of refined copper.

Meanwhile, copper wire rod production in 2003 comprised 54,645 tonnes, down from 59,852 tonnes in 2002. Company officials said the reductions in output were planned.

The company produced over 40.14 million tonnes of copper ore, vis-à-vis 41.144 million tonnes of ore in 2002. Kazakhmys also produced 78,078 tonnes of zinc last year, up from 72,342 tonnes in 2002, according to the Company sources. (Interfax)

***

The Aksu Ferro-Alloy Plant (Pavlodar oblast) has wrapped up a USD 7 Million total overhaul of electric furnace #64 in its alloy workshop. "Thus, chrome alloy workshop #6 has 4 reconstructed electric furnaces," metals giant KazChrome, the owner of the Aksu plant, announced in a press release this week.

The new furnace will allow the Aksu plant to boost its ferrochrome smelting capacity by 38,000-40,000 tonnes in 2004. When the reconstructed furnace reaches full capacity in 2005, the plant's output will be up almost 80,000 tonnes from the present.

AFAP is a subdivision of KazChrome, which also runs the Donsk Mining Enrichment Plant and JSC Ferrochrome. (Interfax)

Money Markets

KZT/USD market rate dynamics during the week

Currency Rates as of 12 January 2004

Note: Some of the information quoted in this issue has been provided for us by Golden Eagle Partners. For more information on those articles, please contact: jmann1@AOL.com or newswire@ges.kz

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