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Politics and Macroeconomics

New Deputy Minister Of Energy Appointed

Bakhytkozha Izmukhambetov has been appointed Kazakhstan's First Deputy Minister of Energy and Mineral Resources. Izmukhambetov was heretofore a managing director for asset management at state oil and gas company KazMunayGas. He also helped start up KMG's offshore operations affiliate.

35-year old Daniyar Abulgazin, formerly vice president of Caspian Financial Industrial Group, has been tapped as KMG's new managing director in place of Izmukhambetov.

The 55-year-old Izmukhambetov holds a Candidate's degree in Engineering and is a member of Kazakhstan's Academy of Mineral Resources and the International Academy of Mineral Resources. He has previously served as in the Ministry of Geology and Subsoil Protection as well as headed up oil company Kazakhturkmunay Ltd. (KazInform)

Putin Visits, Year Of Russia In Kazakhstan Announced

Kazakhstan announced that 2004 will be celebrated as the "Year of Russia" in the republic in order to consolidate bilateral relations and support the existing friendliness and goodwill between the two states, Kazakhstani President Nursultan Nazarbaev announced on January 9 in the course of a meeting with Russian President Vladimir Putin.

Putin visited Kazakhstan for two days at the end of last week, the Kazakhstani presidential press service disclosed.

Both sides hailed the progress being made in bilateral cooperation, particularly on the economic front. Nazarbaev pointed out that Russian-Kazakhstani trade rose by over 30% in 2003, soaring to over USD 5 Billion on the year.

The two presidents also discussed energy issues, including the joint development of the hydrocarbons resources of the North Caspian Sea shelf and cooperation on oil and gas exports and power generation. The leaders also addressed space exploration as well as international highway and railway transportation issues.

They noted Kazakhstan and Russia's joint international efforts, through the Eurasian Economic Community, the CIS as well as in the larger world through the UN and other global organizations.

Putin and Nazarbaev also signed several documents: an agreement on the use of the Baykonur Cosmodrome in Kazakhstan; a memorandum on further cooperation at Baykonur; and an agreement on cooperation and interaction on border issues. (Golden Eagle Partners)

Foreign Ministry Denies Renting Land To China

Kazakhstani Deputy Foreign Minister Mukhtar Tleuberdi held a press conference in Astana on January 8 to deny media reports that the Kazakhstani government had agreed to rent 7,000 hectares in Almaty oblast to China.

"I must officially state on behalf of the Kazakhstani Ministry of Foreign Affairs that there was no agreement to rent land to China nor to accept the arrival of 3,000 farmers from China," Tleuberdi declared.

There have been a smattering of press reports since November 2003, including in China's main English-language China Daily, saying that Kazakhstan had agree to let China rent plots in Alakol district in Almaty oblast.

Tleuberdi did confirm, however, that representatives from China's western Xinjiang-Uighur Autonomous Region have in fact been meeting with officials from Alakol district and have been asking about the possibility of renting land from Kazakhstan. Any such agreement will be resolved at the governmental level and approved by Parliament, Tleuberdi insisted. (Interfax)

Gas Production Up 22.7% In '03

Total gas production in Kazakhstan in 2003 totalled 13.877 billion cubic meters of gas, 22.7% more than in 2002, according to the national Statistics Agency. Natural gas production in 2003 totalled 7.299 billion cubic meters, 22.6% more than during the previous year, the agency noted.

According to the Oil Information Agency, affiliates of state oil and gas company KazMunayGas produced 1.261 billion cubic meters of gas in 2003, down 4.4% from 2002 output. UzenMunayGas produced the bulk of KMG's output - 1.163 billion cubic meters, but this figure was down 4.3% from 2002. EmbaMunayGas, which produced 98.534 million cubic meters in 2003, saw production decline 5.9%. (Interfax) 

New Market Supervision Agency Set Up

A presidential decree created the new Agency for the Regulation and Inspection of Financial Markets on January 1, 2004. The new agency is authorized to supervise all aspects of financial markets.

According to Bolat Zhamishev, head of the new agency, the creation of a new body, separate from the National Bank, is in keeping with best practice around the world. Such a separation of authority has already been effected in places such as Great Britain, Hungary, Germany, Japan and other developed countries.

The Agency will nonetheless operate under the aegis of the National Bank, though Zhamishev will answer directly to the Kazakhstani president. In the past, supervision of financial markets has been carried out by various state bodies, coordinated by the National Bank. (KazInform Golden Eagle Partners) 

Prices On Industrial Wares Up 0.2% In December

Prices for industrial wares produced in Kazakhstan, including industrial services, were up 0.2% in December 2003 vis-à-vis the previous month, Kazakhstan's state Statistics Agency announced last week.

Prices in the processing industry were up 1.3% in December, while in the minerals industry prices fell 0.8%. Prices for electric, gas and water distribution remained unchanged.

Industrial energy costs fell in December as gas condensate prices dropped 1.4% and oil prices were down 0.9%. Natural gas prices, however, rose 0.5%. (KazInform)

Mangystau Oblast Announces Oil Output Targets

According to the Mangystau oblast strategic development plan, the region should produce 14.4 million tonnes of crude oil in 2004, an increase of 6.9% over 2003 output. In 2004 the oblast expects oil producers to rack up KZT 307.5 Billion in sales. By 2005 output is expected to 16.6 million tonnes.

The oblast plan also calls for the underground repair of 5,200 wells in the oblast as well as 630 wells at major producer MangystauMunaygas. Another big regional producer, UzenMunayGas, plans to drill 160 production wells and 100 injection wells. By 2010 the rehabilitation of the Uzen field will be complete and UzenMunayGas production is expected to soar to over 7 million tonnes per year. In addition, Karazhanbasmunay plans to ramp its production up to 2.5 million tonnes per year by 2006.

Oil production is also predicted to rise at the North Buzachi deposit, recently acquired by China's CNPC, and the Dunga field. In addition, the Bautino base, which services Agip KCO's offshore drilling work at the Kashagan field, is expected to rapidly grow.

The oil industry represents over 90% of Mangystau oblast's total industrial production. (Kazakhstan Today) 

Russian Communications Minister Against Hasty Railway Unification With Kazakhstan

Speaking to the media in Astana on January 10, Russian Communications Minister Vadim Morozov said the harmonization of railway tariffs with Kazakhstan should not be rushed.

"We shouldn't take any abrupt actions right now insofar as these could disturb the interests of Russian companies," Morozov insisted.

"First, we should equalize macroeconomic factors and later settle the issue of freight charges," Morozov said.

Kazakhstani President Nursultan Nazarbaev has urged faster unification of the Kazakhstani and Russian railways.

At the same time, Morozov said that Russia in 2003 and 2004 has take and will take "special decisions on reducing tariffs for Kazakhstani cargo."

In 2003 some 48 million tonnes of freight were shipped from Kazakhstan to Russia, and another 14 million tonnes were shipped via Russia in transit. 14 regular long-distance trains service the two states. (Interfax)

Economic Growth Fuels KZ's Human Development, UNDP Says

Economic growth in the republic has fuelled a rise in Kazakhstan's score on the United Nation's human development index, UN Development Program representative in Kazakhstan Fikret Akchura announced at a presentation on Kazakhstan's human development in 2002 on January 13 in Almaty.

According to its score for 2002, Kazakhstan ranks 79th in the world on the UN human development index, putting it in the "average" category.

The UN highlighted 2000-02 as a period of strong economic growth, with an 8.2% GDP rise in 2002 alone. This growth in turn led to a fall in the percentage of the population living below the poverty line from 34.5% to 24.2% over the 2000-02 period. Average monthly earnings for the population increased by 32% over those two years, while unemployment fell from 13.5% to 9.3%.

Other UN-approved figures include an average life expectancy for Kazakhstanis of 65.8 years, a literacy rate of 99.5% and GDP per capita of USD 7,275. (Kazakhstan Today)

Kazakhstan Oil Shipments Via Russia In '03 Total 32 Million Tonnes

Russia is Kazakhstan's "number one" oil export corridor, Kazakhstani President Nursultan Nazarbaev declared in a speech in Astana earlier this week. Nazarbaev noted that Kazakhstan shipped 32 million tonnes of oil for export via Russia in 2003, including 14 million tonnes via the privately owned, Kazakhstan-focused Caspian Pipeline Consortium Tengiz-Novorossiysk pipeline.

Kazakhstan has considerable oil reserves "and, according to the latest figures, now is among the top ten states in terms of oil reserves in the world," Nazarbaev recalled. But a major boost in Kazakhstani exports wouldn't occur before 2010, when several major Kazakhstani projects still in the early development phases would hit peak or near-peak production.

"When the country produces over 100 million tonnes of oil per year, the issue of new export routes should arise."

Though some media were reporting this week that Russian President Vladimir Putin last week secured a promise from Nazarbaev not to commit oil to the US-backed Baku-Tbilisi-Ceyhan export route, Nazarbaev's comments from earlier this week indicate BTC is still on the table for Kazakhstan.

"Basically the issue concerns 10 million tonnes per year; further development would depend on the volumes of oil produced oil and the pipeline 's capacity," Nazarbaev said. (RusEnergy)

Equities

The KASE-Shares index increased by 0.15% to 144.71 by the end of period on January 14 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 January 8 2003 and January 14 2004, the volume of equity trades at the KASE decreased to USD 5,999,817 from USD 8,576,728 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Bank CenterCredit (CCBN), Narodny Bank (HSBN), Kazakhmys (KZMS), Temirbank (TEBN), ValutTransit Bank (VTBN) and Zerde (ZERD) and preferred shares of Narodny Bank (HSBKp) and ValutTransit Bank (VTBNp). (Irbis)

Company News

Oil & Gas

The Pavlodar Petrochemical Plant (PPP), one of Kazakhstan's three major refineries, has begun using new equipment to produce a European-standard winter grade diesel fuel that has a lower freezing temperature, as well as other fuels such as furnace fuel and technical carbon, plant officials stated.

In addition to the new fuels being produced at the Pavlodar plant, the facility has also doubled its output of AI-96 and AI-98 high-octane gasoline.

"PPP is one of just a few plants in the CIS to have a set-up to produce a wide range of oil products, - PPP Managing Director Valeriy Fomin noted.

"Among the aforementioned oil products are over ten types of motor petrol, jet engine fuel, diesel fuel, petroleum coke and residual oil, liquefied gases and bitumen of various types. The plant invests a great deal of money into technological improvements," Fomin added.

In 2003, PPP processed over 2 million tonnes of oil. It also paid KZT 3.2 Billion in taxes, increased salaries for employees and supported several local charities. (KazInform)

***

Major oil producing joint venture TengizChevroil hosted a conference for Kazakhstani companies interested in participating in TCO's Gas Injection project (GIP) and Second Generation Project (SGP) at TCO headquarters in Atyrau.

Attendees at the conference discussed results of work with Kazakhstani goods and services suppliers on the GIP project in 2003 and plans for 2004, as well as plans to boost Kazakhstani involvement in the TCO project even further. The GIP and SGP projects at TCO have projected costs upwards of USD 3.5 Billion. Once implemented, they will enable TCO to boost output at the Tengiz field to 19 million tonnes per year (from over 13 million this year). (KazInform)

Banking and Finance

A key tenet of the Kazakhstani National Bank's strategy for 2004-06 is to make Kazakhstan's monetary policy-making process as close as possible to those of developed countries, notably European Union standards, National Bank Chairman Anvar Saydenov stated at a press conference last week.

According to Saydenov, the latest changes to the law "On the National Bank", which went into effect on January 1, 2004, stipulate the transfer to European Union monetary policy standards as a means to shift the republic's economic priorities from exchange rate stability to price stability. The bank plans to approve a monetary policy with an eye on its impact on medium-and long-term inflation. The main aim would be to keep the average inflation rate between 4-6% in 2004 and 3-5% in 2005-06.

The National Bank intends to support the competitiveness of Kazakhstani goods on foreign markets by continuing to float the national currency, the tenge. The Bank will no longer set objectives for the tenge exchange rate and will not intervene to support the currency, according to Saydenov. (KazInform)

***

An internal credit rating (ICR) of Billion and an outlook of stable has been given to local heat and power producer AES Ust-Kamenogorsk TETS. The ICR was assigned to the Ust-Kamenogorsk utility by Kazakhstani investment company Kazkommerts Securities.

Kazkommerts Securities also rated AES Ust-Kamenogorsk TETS's domestic bonds at ΡΡΡ+ with an outlook of stable.

"The key advantage of the company is its convenient location in the center of Ust-Kamenogorsk power center and its outlet to power transmission lines owned by several distribution companies," Kazkommerts Securities noted, stressing that "production and financial matters have been stabilized" since the power station was taken over by US-based AES Corporation in 1997.

In East Kazakhstan oblast, AES Corp. also owns the AES Sogrinsk TETS, AES Ust-Kamenogorsk Hydroelectric Plant, AES Shulbinsk Hydroelectric Plant. (Interfax)

***

Major Kazakhstani bank Caspian Bank has received a loan of USD 13 Million from a syndicate of western banks led by Raiffeisen Zentralbank Oesterreich AG (Austria). Some 10 other banks from Germany, USA, Canada, United Arab Emirates, Slovenia also took part in the syndicate.

The annual interest rate on the loan was set at LIBOR + 3.25%. The loan was allocated for a six-year period, with a possible extension for another six years.

Caspian Bank plans to use the loan to finance trade operations for its clients.

According to a bank press release, "The syndicated loan is evidence of foreign investors' great confidence in Caspian Bank and its strong position on international financial markets."

Caspian Bank has received a long-term credit rating of B-, a short-term rating of Billion and an individual rating of D/E from international rating agency Fitch. The outlook on those ratings is positive. (Kazakhstan Today)

***

Halyk Savings Bank of Kazakhstan, the former state-owned bank, announced new rates for current accounts held by individuals. The new KZT 50 monthly service charge for individual account holders would mainly affect pensioners, some 63% of whom have accounts with Halyk.

Halyk Bank says the new service charge is necessary to help the bank pay for expenses related to managing the accounts.

The service charge was originally supposed to go into effect on January 1, but HSBK postponed its introduction under pressure from the government. Currently the State Center for Pensions is investigating whether the introduction of the new charge is actually economically necessary. (Khabar)

***

Pursuant to its new country strategy for Kazakhstan, the Asian Development Bank is going to allocate 13 technical aid grants for a total of USD 6 Million and for major loans totalling USD 190 Million to Kazakhstan in 2004-06, ADB head in Kazakhstan Kazukhiko Kiguchi announced at a press conference on January 14 in Almaty.

According to Kiguchi, in 2004 and thereafter, the ADB plans to work closely with the Kazakhstani government to ensure efficient allocation of bank resources to key projects. Pursuant to its new cooperation strategy, ADB technical aid would involve natural resources management, rural water supply, rural economic development, education, transport and private sector. Since Kazakhstan joined the ADB in 1994, the republic has received some 50 technical aid grants totalling USD 23.4 Million as well as USD 501.6 Million worth of loans. (Kazakhstan Today)

Manufacturing

South Korean Electronics Company LG will be presenting a special television set produced at its Almaty factory to honour the 150th anniversary of the city of Almaty. The set is also the one and a half millionth television produced at the Almaty factory since LG took over the facility six years ago. Currently that factory produces 186 televisions per hour.

According to Sabit Sartabaev, LG Electronics' General Director in Kazakhstan, the construction of the LG plant is the largest household appliances production investment in Kazakhstan. The plant employs 450 people and produces 32 different types of domestic appliances. Goods from the factory are sold throughout the CIS, as well as to Iran and Finland. (Khabar)

Metal and Mining

Zhambyl oblast industrial giant KazPhosphate has suspended some operations due to a sharp increase in electric power costs, Interfax reported.

According to KazPhosphate Zhambyl oblast General Director Alexander Poyarel, the company suspended operations at its Karatau mining and enrichment plant and a fertilizer plant. Only one furnace at the Novozhambylsk Phosphorus Plant is operating, and over 5,000 workers from the aforementioned plants have been sent home for unpaid leave.

KazPhosphate blames its energy suppliers, Pavlodar-based AES Ekibastuz and the Aksu GRES for increasing electricity tariffs by 41.18% in the last quarter of last year and another 20% at the start of 2004. Prior to the work stoppage, KazPhosphate received 120 mW/h from the Zhambyl GRES and 80 mW/h from the two Pavlodar suppliers.

KazPhosphate has sent a letter to Kazakhstani Prime Minister Daniyal Akhmetov asking him to resolve the problems in the power generation and distribution sector. The company is urging the government to either offer subsidies to companies to offset the high costs for buying domestically produced electricity or permit companies to purchase electricity from Kyrgyzstan, where energy tariffs are 60% lower. (Interfax)

Transport and Telecommunications

The Aktau Seaport, Kazakhstan's main Caspian outlet, shipped over 8 million tonnes of cargo in 2003, 1.3 million tonnes more than in 2002, port officials stated.

In 2003 the Aktau port shipped 6.9 million tonnes of oil and oil products, up from 5.5 million tonnes the previous year. Thus the growth in oil and oil products cargo turnover was 25.5%. The port also handled 861,300 tonnes of dry cargo last year, up from 795,500 tonnes in 2002. (Kazakhstan Today)

Money Markets

KZT/USD market rate dynamics during the week

Currency Rates as of 19 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

For more information and other publications please contact Yelena Kovalenko at +7 (3272) 596 708

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