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Politics and Macroeconomics

Kazakhstan Eases Visa Requirements For Many

A new set of foreign ministry regulations effective February 15 will relax entry visa requirements for citizens from 27 states, Foreign Ministry consular service Director Valikhan Konurbaev stated.

According to the new regulations, citizens of the following countries will no longer be required to present a letter of invitation in their visa application: Australia, Austria, Belgium, Great Britain, Greece, Denmark, Ireland, Iceland, Spain, Italy, Canada, Liechtenstein, Luxembourg, Malaysia, Monaco, the Netherlands, New Zealand, Norway, Portugal, Singapore, the United States, Finland, France, Germany, Switzerland, Sweden and Japan.

Citizens of the aforementioned states can receive one-month tourist, business or private visas to Kazakhstan at any of the republic's embassies or consulates abroad.

"Citizens from these states don't pose a migration threat - of illegal labour migration or human trafficking," Konurbaev said.

In the future the Kazakhstani government will expand the number of countries on the list of relaxed entry visa requirements, he added.

In addition, Kazakhstan will introduce a new visa stamp in March 2004, Konurbaev said. The new visa will have more security measures to make it harder to forge, but will also be fully computerized and will contain personal information on a barcode on the visa itself. (KazInform)

High Oil Prices Could Hamper Kazakhstan's Efforts To Diversify Economy, Deputy Minister Says

High world oil prices - around USD 30 per barrel and higher – coupled with a continuing decline in the strength of the dollar "would negatively influence the balance of payments for Kazakhstan's processing and service industries" and hamper economic diversification, Deputy Minister of Economics and Budget Planning Bakhyt Sultanov stated.

In a scenario of high world oil prices, Kazakhstan's raw materials exports would likely increase to offset losses from processing and services, a situation that "could become a real barrier in our efforts to diversify the economy and deemphasize natural resources industries," Sultanov said. Such a scenario would also mean the tenge would strengthen, which would mean Kazakhstan would be likely to import more goods and services, Sultanov explained.

Oil price fluctuations cause problems for government efforts to present straightforward economic forecasts, Sultanov added.

"It's impossible to assign an unequivocally optimistic or pessimistic scenario for development. If oil prices were to fall significantly, for example, then the dollar would likely strengthen. This would mean, in turn, that the tenge would fall vis-à-vis the dollar." This would be good for the development of Kazakhstan's processing and services sectors (as their goods would be more cheaper (and therefore more competitive on export markets), but it might be damaging to Kazakhstan's economy as well as the republic is so dependent on oil revenues, Sultanov explained. (Kazakhstan Today)

2003 Budget Deficit Rings Up To KZT 40.3 B

Kazakhstan rang up a budget deficit of KZT 40.3 Billion in 2003, or 0.9% of gross domestic product, the national Statistics Agency stated.

Kazakhstan collected KZT 1.022 trillion in revenue to the state budget in 2003, 24.5% higher than in the previous year. At the same time, the republic had expenditures of KZT 1.062 trillion, 27.4% higher than in 2002. (Kazakhstan Today)

Special Tax Regime For Oil And Gas Processing Plants

A special tax regime for enterprises involved in oil and gas processing has gone into effect in Kazakhstan in order to promote investment in this crucial sector, Minister of Economy and Budget Planning Kayrat Kelimbetov announced at a meeting of the Ministry of Industry and Trade this week.

Under the special tax rules for oil and gas processors, these enterprises are exempted from corporate revenues taxes for the first five years after the launch of a new oil-chemical facility, Kelimbetov explained.

At the same time, Kazakhstan still needs to tweak its tax system in order to promote the competitiveness of Kazakhstani products. In order to achieve this aim, by 2005 the republic will introduce new rules for calculating the amortization of expenses for fixed assets and expenses to repair primary means of production. These changes should "ensure the creation and development of scientifically-advanced, high technology production as well as the introduction of new measures to improve the investment attractiveness of the non-raw materials-based sectors of the economy, Kelimbetov said. (KazInform)

Gold And Currency Reserves Up 2.9% In First Half Of February

Kazakhstan's gold and currency reserves, including the National Fund (which re-invests oil revenues), increased by 2.9% in the first half of February to total USD 9.368 Billion as of February 16.

According to the National Bank, the National Fund currently totals USD 3.685 Billion. Meanwhile, the National Bank and the Finance Ministry currency purchases on the domestic market in the first half of the month boosted net reserves by USD 235.1 Million to a total of USD 4.958 Billion.

The National Bank's gold assets grew by USD 20 Million during the reported period to total USD 721.2 Million thanks to an increase in world gold prices by 2.7%. (Interfax)

Equities

The KASE-Shares index increased by 3.01% to 168.67 by the end of period on February 18 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 February 12 2004 and February 18 2004, the volume of equity trades at the KASE decreased to USD 1,797,358 from USD 5,612,236 in the previous period. The shares traded during the period were common shares of Almaty Kus (ALKS), Alyans Bank (HRLT), Kazkommertsbank (KKGB), Kazakhmys (KZMS), Temirbank (TEBN) and ValutTransit Bank (VTBN) and preferred shares of ValutTransit Bank (VTBNp) and ValutTransit Zoloto (VTZLp).  (Irbis)

Company News

Oil & Gas

Workers at the Amangeldy gas field in Zhambyl oblast have completed drilling on two 2,500-meter deep wells at the deposit. The wells are currently undergoing technical testing.

Currently there are six wells in operation at the Amangeldy field (to which the latest two will soon be added). The field, which is operated by state gas company KazTransGas (a unit of KazMunayGas), in January produced 10 million cubic meters of gas.

Three more wells are now being drilled at the deposit. According to specialists, the goal is to have 17 wells in operation at Amangeldy by the end of 2004.

The Kazakhstani government has made the development of the Amangeldy field a priority project in order to reduce southern Kazakhstan's dependency on Uzbekistan for natural gas. (Khabar)

***

The standoff between the Kazakhstani government and the Agip KCO consortium of international oil companies developing the massive Kashagan offshore field has been resolved. In the near future the two sides will sign an agreement on the on-going development of the field, which is estimated to contain 9 to 13 billion barrels of crude.

The foundation for a compromise over tax issues and the start date for oil production was laid two weeks ago when Agip KCO managers met with Kazakhstani Prime Minister Daniyal Akhmetov and state oil company KazMunayGas President Uzakbay Karabalin. After this meeting the Kazakhstani side announced a general compromise had been reached, pending negotiation of certain details.

Agip KCO, the Eni-led operating company for Kashagan, first presented its development plan to the Kazakhstani government in December 2002. The Kazakhstani government has refused to approve that plan because it called for the production of the first oil from the field only in 2006, a year later than had been stipulated in the 1997 Production Sharing Agreement that governs the Kashagan development.

The Kazakhstani government has demanded compensation for the delay in the production of the first oil. Initially, Agip KCO resisted the compensation possibility, arguing that the 1997 PSA calls only for the investors to "take all reasonable measures" to ensure production in 2005. Late last year, after months of quiet confrontation with the government, the company softened its stance on compensation.

According to the Moscow Times, in the latest agreement, Agip KCO has agreed to pay a specific amount in compensation to the government for the delay in oil production. But the consortium has also managed to insert a line in the agreement to the effect that the Kazakhstani government cannot present any more fines or demands for monetary compensation from the operator on similar issues. (Interfax & RusEnergy)

***

Major oil producer PetroKazakhstan, operator of an oil refinery in Shymkent and the Kumkol oil fields in southern Kazakhstan, intends to appeal a recent ruling by an Astana court ordering seven of the company's oil products distribution companies to pay a total of roughly USD 91 Million for alleged price-fixing, according to the PetroKazakhstan press service.

As the NewsWire reported on February 19, an Astana court this week upheld a USD 91 Million fine ordered by the state Anti-Monopoly Agency against seven PetroKazakhstan distributors for allegedly working together to inflate oil products prices in the republic.

PetroKazakhstan "believes the allegations [by the Anti-Monopoly Agency] are baseless." PetroKazakhstan in a press release pointed out that the Kazakhstan's oil products market is highly competitive, with many actors, and that current market prices in the republic simply reflect world oil prices, which are nearing historical highs.

The prices charged by PetroKazakhstan distributors are competitive with those for imported fuel from Russia or for oil products sold by Kazakhstan's two other major refineries, the company said. The sale prices of fuel sold under the PetroKazakhstan brand are among the lowest in all city gas stations.

Further, PetroKazakhstan said it is looking into the possibility of launching a lawsuit of its own in order to defend its rights in the privatisation agreement for the Shymkent refinery, which strictly stipulates that the company has the right to sell any and all oil products from the refinery in Kazakhstan and abroad at free market prices; in addition, the contract obligates the Kazakhstani government to support a free market in oil products.

At the same time, PetroKazakhstan said it intends to maintain an open dialogue with the government and its authorized agencies in order to obviate any difficulties with prices for oil products and monitoring of the oil products market. (Kazakhstan Today)

Banking and Finance

The Kazakhstani government sold off its 100% stake in EximBank Kazakhstan in an auction held on February 11, the Ministry of Finance stated.

The winner of the tender was Exim-Invest consortium, a group of 11 companies. Also taking part in the sale was the Central Asian Fuel and Energy Company, Finance Ministry officials said.

Exim-Invest paid KZT 2.1 Billion (USD 15.089 Million) for the state stake. The initial asking price had been KZT 1.842 Billion (USD 13.236 Million).

EximBank Kazakhstan holds a standard banking license from the Kazakhstani National Bank to accept deposits, open and manage accounts and transfers, organize foreign currency transactions, and so on. (NewsWire)

***

Major Kazakhstani commercial bank Halyk Savings Bank presented a new customer management system, the so-called "electronic queue", in Almaty this week.

According to Halyk retail banking department head Vitaliy Pemzov, the "electronic queue" will help improve the speed and efficiency of customer service and will eliminate the old fashioned concept of a line.

Under the new system, a client will input his desired banking transaction in a small computer upon entering the bank. That machine will then print out a number indicating the client's place in line. Once the client has entered the transaction into the computer, the bank tellers will already be aware of what he desires and so will be better equipped to serve him when his number is called, Pemzov explained.

The equipment for "the electronic queue" was supplied by Swedish-based company Nemo Q. The equipment cost some EURO 17,000 to buy and install. In the future, similar systems will likely be installed in larger Halyk branches in Almaty and Astana. (Kazakhstan Today)

Power

National atomic company KazAtomProm plans to switch technologies used to process uranium from its mines, going away from mining plants and putting all facilities at the mines themselves.

KazAtomProm recently completed construction of own 2,000-ton per year uranium processing facility at its central mining department in South Kazakhstan oblast). In the future the processing capacity of that plant will be increased to 8,000 tonnes per year, KazAtomProm officials stated.

According to the Kazakhstani government's uranium industry development program up to 2015, the implantation of new processing facilities will allow KazAtomProm to "significantly reduce" costs and to improve overall efficiency. (Interfax)

Metals and Mining

Russian metals giant Magnitogorsk Metallurgy Complex plans to increase its use of iron ore from Kazakhstan's Sokolov-Sarbay Mining and Enrichment Plant in 2004, MMC First Deputy Director Andrey Morozov told journalists recently.

Morozov was in Kazakhstan last week as a member of a trade delegation from Russia's Chelyabinsk oblast.

In 2003 the Magnitogorsk plant used 10.2 million tonnes of iron ore from SSMEP; Kazakhstani ore constituted 80% of all ore processed at MMC, Morozov said. In 2004 the Russian company will boost imports of ore from SSMEP to 10.4 million tonnes, he added.

The geographical proximity of SSMEP to Magnitogorsk - the two lie just 600 kilometers apart - aids cooperation, Morozov said. Magnitogorsk is over 2,000 km away from comparable producers, even Russian suppliers.

While he was in Rudniy, Morozov held talks with Sokolov-Sarbay managers and discussed the volume of ore to be shipped to MMC, the schedule for shipments and other issues.

In 2003 SSMEP produced just less than 14 million tonnes of iron ore, 6.6% more than in 2002. In 2004 the plant plans to produce 15 million tonnes of ore, including 9 million tonnes of iron pellets. (Interfax)

***

Shareholders in the Ust-Kamenogorsk Titanium-Magnesium Plant in East Kazakhstan oblast have approved a plan to raise the enterprise's charter capital by 5.5 times.

In order to increase its authorized capital up to KZT 119.780 Million, the company plans to sell 971,190 new shares on KASE. At present UKTMP has a charter capital of just KZT 21.585 Million.

In addition, UKTMP shareholders decided to change the ownership structure of the company from an OJSC to a JSC and to re-register the company.

As has been previously reported, the Kazakhstani government sold the last of its shareholding in UKTMP - a 15% stake - in January. (KASE & Interfax)

***

Kazakhstan-focused mining company Oryel Resources on February 16 announced plans to list in London next month, a move expected to value the nickel and gold producer involved in the former Soviet Union at over UKP 90 Million (USD 170 Million).

Oryel said it expected to rise about UKP 25 Million from the initial public offering (IPO). Canaccord Capital is advising on the flotation on the AIM, London's junior share market, which is expected to take place around mid-March.

The funds raised will help Oryel purchase a 51% interest in the Shevchenko nickel deposit in northern Kazakhstan. It has a right to increase the stake to 90%.

Oryel said the project concerned an estimated 100 million ton nickel deposit; independent consultants expect at least 30 million tonnes to be commercially extractable.

Oriel has gold mining interests in Kazakhstan and Kyrgyzstan and plans to buy and develop projects in Russia and elsewhere in the Commonwealth of Independent States. (Reuters)

***

The Jezkazgan Mining and Metallurgy Plant is developing a new technology to process local ore domestically, rather than shipping it to Russia's Ural region as has been the norm in the past.

According to Viktor Tsvetkov, deputy director of the JMMP, the plant has recently launched an important new oxidized ore-processing unit that will help use up millions of tonnes of oxidized ores that have accumulated at the mining plant over the years.

The plant is using more efficient oxidized ore processing technologies that allows the production of copper concentrate of 65% concentration. Though the enterprise reached its peak productivity in 2000, when it turned out 24.952 million tonnes of copper concentrate, the plant hopes to hit the 24 million ton mark again this year. As the copper content in ore produced at the mines falls, it is increasingly important for the enterprise to adapt technologically to better process and maximize the ore, Tsvetkov noted. (KazInform)

Transport and Telecommunications

Major Kazakhstani cellular provider Altel this week announced the launch of a new pre-paid mobile communications plan, PAThWORD, according to the Altel press release.

PAThWORD is the first mobile communications network based on third generation (3G) CDMA2000 1X technology; the new technology and payment system is aimed to attract a new generation of users of mobile communication in the republic.

PAThWORD's use of CDMA technology uses 3-4 times less power than the GSM cellular systems that dominate the Kazakhstani mobile market, making it cheaper, more efficient and safer to operate. PAThWORD subscribers will also soon be able to send and receive e-mail at high speeds (up to 153 KB/s) and a wide range of other new services.

3G CDMA technology is currently available only in the 11 largest cities of Kazakhstan, though the service area will soon be expanded. (KazInform)

***

State-owned airline Air Kazakhstan owes creditors some USD 55-60 Million, Civil Aviation Committee Chairman Almazbek Mambetov recently told Air Kazakhstan employees at a company meeting.

Mambetov said Air Kazakhstan's debt issues arose in 1999, when a poor management decision led the company to lease two Boeing-737s and two Airbus A-310s for about USD 102 Million. This sum turned out to be "too heavy a load" for the airline, Mambetov said.

Despite the financial difficulties, Mambetov said it is still "too early to talk about the bankruptcy of the company." Air Kazakhstan has asked for a loan, but its business plan still leaves the company with USD 16 Million in debts.

"The state should act as a guarantor [for that loan], but it won't. Debts remain debts," Mambetov said.

Questioned about the possible sale of a stake in Air Kazakhstan, which is 100% state-owned, to a strategic investor, Mambetov dismissed this as unlikely.

"It is impossible to sell a share with such debts," he said.

Even the failure of Air Kazakhstan would not seriously diminish competition in the national civil aviation market, Mambetov said, pointing out that charter carriers such as Skat, Atyrau Aue Zholy and Sayahat would remain to compete with the state-owned flagship carrier Air Astana. (Kazakhstan Today)

***

Kazakhstan's Ministry of Transport and Communication will not take efforts to block the bankruptcy of state-owned airline Air Kazakhstan, First Deputy Minister Yuriy Lavrinenko stated this week.

Lavrinenko said Air Kazakhstan management itself seems to be admitting failure, having cancelled flights. Creditors are likely to "initiate bankruptcy proceedings" in court soon, and "the court will decide on the bankruptcy of the company. We [the Transport Ministry] can do nothing in this regard," Lavrinenko told journalists in Astana on February 18.

Lavrinenko claimed that "the government has made maximum efforts" to support the state airline financially, but criticized the company's management for "failing to take firm measures" to optimise the company's resources, citing "burdensome leasing agreements and inefficient borrowing" as key problems.

Air Kazakhstan First Vice President Serik Sabirov disputed Lavrinenko' s characterizations, saying that "2003 was the best year for Air Kazakhstan in its history." He noted that the company planned to pay back all of its debts in 2005, noting that those debts (the leasing agreements and borrowing cited by Lavrinenko) were actually created three or four years ago under previous management.

Moreover, Lavrinenko's assertion of government support is undercut by recent history. In 2002, the government created a second state airline, Air Astana (a 50-50 joint venture with Britain's BAE Systems) and since then that airline has been awarded the plum domestic and international routes, to the detriment of Air Kazakhstan. (Interfax)

Money Markets

KZT/USD market rate dynamics during the week

Currency Rates as of 2 February 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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