Kazakhstan Chamber of Commerce in the USA


New flight from Amritsar to Kazakhstan 0

Posted on September 13, 2011 by Alex

Indian Express, Sept 9, 2011

Chandigarh: October 14 onwards, British Midland International (BMI) will begin operating a flight from Amritsar to London via Almaty in Kazakhstan. This flight, which will operate three times in week, will take 12 hours to reach Amritsar to London. The return journey will take 11 hours 35 minutes with a brief stopover in Almaty.

“Traditionally, Punjab and UK share strong business and social relations. Business and leisure customers now have a real choice and greater flexibility when travelling to London, connecting regionally within the UK or flying onward to North Atlantic with one of our partner airlines,” said Vikas Mathur, BMI’s Sales Manager.

SOURCE: http://www.kazakhembus.com/index.php?mact=News,cntnt01,detail,0&cntnt01articleid=776&cntnt01origid=15&cntnt01returnid=201


Posted on August 19, 2011 by Alex

based on Q3 2011 “Kazakhstan and Central Asia Business Forecast”

by Business Monitor International, Ltd (BMI)


Political Outlook


President Nursultan Nazarbayev has been in office since the late Soviet era, and continues to dominate the political landscape, having been re-elected to another five-year term in April 2011 with 95% of the vote. In addition, his Nur Otan party dominates parliament. However, because Nazarbayev is 70 years old, the succession question is gaining in importance. Kazakhstan under Nazarbayev has actually been a major success story among ex-Soviet states, mainly because of the country’s vast oil and gas wealth, which has led to high levels of foreign investment, rapid economic growth, and a per capita GDP of almost US$10,000. At the same time, Kazakhstan has prevented the formation of opposition forces that could challenge the regime. While many Kazakhs would probably welcome a more democratic political system, anecdotal evidence suggests that Nazarbayev enjoys genuine public support, and citizens would probably not wish to jeopardise their country’s economic success.

Kazakh Foreign Minister Yerzhan Kazykhanov met with his Chinese counterpart Yang Jiechi on May 14 to discuss bilateral cooperation. Meanwhile, the National Bank of Kazakhstan has announced that it plans to diversify its foreign exchange reserves into Chinese yuan; and major Kazakh resource firm Kazakhmys (which generated 48% of revenues from China in 2010) is aiming to complete a secondary listing in Hong Kong. The deepening of ties between Kazakhstan and China has sparked fears that Beijing may establish too much control over its north-western neighbor, with Kazakhstan’s leading opposition party Azat attempting to organize protests against growing Chinese influence. BMI expects such fears will continue to surface given the two countries’ close economic relationship, but doubts this will spill over in any meaningful way.


Economic Activity


BMI maintains its upbeat assessment of the Kazakh growth story for the coming quarters, with first quarter real GDP growth of 6.9% largely in line with our forecast for economic expansion of 7.2% and 6.9% in 2011 and 2012 respectively. Such growth will be driven by continued development of the nation’s vast natural resources and the positive spillover effect this will have on non-resource sectors.

Building upon the robust 7.0% expansion witnessed in 2010, the Kazakh economy expanded at a healthy 6.9% y-o-y clip in the first quarter of 2011. The reading is in line with experts’ expectation that the Kazakh economy will enjoy robust growth through coming quarters, and affirms the BMI’s forecast for 7.2% real GDP growth in 2011, followed by a 6.9% expansion in 2012.

Global macroeconomic conditions certainly remain conducive to a continuation of the rapid expansion the Kazakh economy has registered both prior to and following the global financial crisis. Economic growth in Asia remains firm whilst the US and European recoveries remain on course. In turn, Brent crude is hovering above the US$100/bbl mark and metals prices are at levels comparable to those seen prior to the global economic downturn. Such a landscape bodes very well for Kazakhstan.

Recovery in external macroeconomic conditions over the past 18 months has resulted in a dramatic rebound in demand for commodities and thereby Kazakh exports (minerals and metals account for more than 75% of exports). The first quarter of 2011 saw quarterly Kazakh exports rise by an impressive 35.9% y-o-y to US$18.5bn, not

far below the US$21.3bn all-time high set in Q308. With the global economy set to continue expanding for the foreseeable future (the US recovery is a mere two years old), BMI forecasts continued gains in Kazakh exports through coming quarters.

Such robust external demand conditions are spurring industrial activity in Kazakhstan, with industrial production rising at a 6.4% y-o-y clip in April. Summit Atom Rare Earth Co, part owned by Kazakh state uranium miner Kazatomprom, has announced plans to begin production of 1,500 tonnes of rare earth oxides per year. Production will be sourced from the treatment of uranium tailing, while the company will embark on a search for rare earth deposits across Central Asia. BMI experts believe that successful development of a rare earths industry in Kazakhstan would represent a positive development for the country’s business environment, adding to the attractiveness of Kazakhstan as a destination for FDI .

However, strength is not only being seen in mining and quarrying, up 4.0% y-o-y in April, but also in Kazakh manufacturing, up 8.5% y-o-y in April. Strong demand for the commodities produced by Kazakhstan’s extractive industries has considerable positive spillover effects in terms of gross fixed capital formation and wider economic activity. Such a trend is clearly reflected in the Kazakh labor market, which continues to tighten – unemployment came in at a mere 5.5% in April. With the Kazakh labor market in such good condition observers are optimistic that private consumption will also be a strong contributor to real GDP growth in 2011-2012.

Also supportive of such a dynamic will be the government’s decision to open up the fiscal taps (which it certainly has room to do, given that its budget is based upon the assumption that oil averages US$65/bbl). On January 1, pension payments were increased by 30%; while, from July 1, state workers will receive a 30% pay rise – developments that bode very well for private consumption growth in 2011. Growth will also receive a boost from the government’s ambitious investment plans, which entail

projects equal to KZT8.1trn (more than 35% of GDP) within the next 24 months. However, while such expansionary policy will boost growth, it will also add to the inflationary pressures faced by the National Bank of Kazakhstan – which will respond by allowing the tenge to appreciate through to end-2011.

With the Kazakh economy expanding firmly and inflationary pressures rising, the Kazakh authorities are likely to tighten monetary policy over the course of 2011. Beyond the interest rate hike implemented by the National Bank of Kazakhstan on March 9, BMI sees further hikes ahead, forecasting the bank’s refinancing rate at 8.50% by year-end (implying a further 100 basis points of hikes), while hikes to the deposit rate (currently 0.5% on one-week money) are also likely. Increases in bank reserve requirements can also be expected.

Furthermore, BMI forecasts meaningful appreciation of the Kazakh tenge through 2011-2012, as the National Bank of Kazakhstan allows the national currency to strengthen in order to quell inflationary pressures. The Kazakh economy certainly appears ready for such a policy stance, with unemployment at just 5.5% while consumer price inflation is already running at relatively elevated levels – coming in at 8.4% in April.

Kazakhstan’s central bank has to intervene in the foreign exchange market to the tune of hundreds of millions of dollars each month in order to surpress the value of the tenge. Holding down the tenge using such means not only ensures higher imports costs but also results in elevated tenge liquidity. With inflation already fairly high, BMI does not believe such policy can be sustained. BMI experts forecast that the tenge will be allowed to appreciate to KZT140.00/US$ by end-2011, with further gains expected in 2012.

The most obvious risk to BMI’s upbeat stance on the Kazakh economy and thereby the tenge is a fall in commodity prices. The tenge is very much a commodity currency, and oil exports in particular are of crucial importance to the currency’s value. A very sharp decline in the price of oil would no doubt undermine the tenge, due to the less-positive impact oil would then have on the Kazakh economy.

BMI’s base scenario already foresees oil prices moderating somewhat, with Brent crude forecast to return below the US$100/bbl through the latter half of 2011, and BMI’s Kazakhstan forecasts reflect such an assumption. Therefore, only a dramatic move lower in oil prices (of approximately 75%) would seriously alter BMI’s upbeat outlook and the tenge’s trajectory. Such a move in oil prices was witnessed during the global financial crisis, but experts believe an event of comparable magnitude would be required for such price movement to be repeated. Obviously there are numerous potential catalysts for this outcome, such as a European fiscal and banking collapse or an outright Chinese property market crash, but these are very much low-probability tail risks rather than our core scenario.


The Kazakh Economy to 2020:

developing non-oil sectors is key to sustaining growth


The Kazakh government’s drive to diversify the non-oil sector and invest in developing strategic industries, as well as the national infrastructure, supports BMI’s favorable long-term outlook for the economy. Moreover, BMI experts believe the growing integration of Kazakhstan into global markets will help reduce the impact of external shocks and put the economy on a more sustainable growth path.

Despite notching up a stellar 9.3% average annual rate of economic growth over the course of 2000-2008, Kazakh growth will settle on a lower path through to 2020 owing to the severity of 2009’s recession, combined with a protracted period of deleveraging. BMI experts forecast annual growth to average 6.6% throughout the forecast period. Coming from a higher base and investing heavily in developing the national infrastructure and non-oil sectors, Kazakhstan will further consolidate its position as the regional powerhouse in Central Asia over the long term. For the less-developed economies in Central Asia, this will mean more employment opportunities, cross-border investments and demand for primary and processed exports for Kazakh industries.

With population forecast to reach around 17.5 mln by 2020 and GDP per capita reaching US$28,509, the consumer will become instrumental in driving growth dynamics over the long term. The opportunities available for retailers to exploit are likely to see foreign retail operators from Russia, and potentially China, starting to build up a market presence in Kazakhstan. Moreover, with the government keen to develop its banking and financial sectors, BMI expects to see an increase in credit availability for the consumer, particularly credit cards and overdraft facilities, which will extend to the poorer sectors of the retail market and thus allow for an expansion in consumption possibilities for Kazakh households. As a result of these dynamics, BMI expects consumer spending to contribute around one-third of economic growth. Since the government is likely to continue working towards reducing the economy’s dependence on oil over the long term (with the current correction in global energy prices hammering home the consequences of relying on oil and gas to drive growth), observers expect to see further diversification away from the oil sector. Key industries are likely to include retail, manufacturing, construction and finance. As a result of this diversification drive, investment in fixed capital will continue to buoy economic growth over the long term. Moreover, in much the same way that increased credit availability will spur consumer spending, BMI expects to see a broader and more sophisticated array of financial products coming to the market, which will facilitate investment (particularly with regard to hedging risks, leveraging and gaining exposure to new markets) and business transactions.

Kazakhstan’s ever-growing prominence in Central Asia will also facilitate investment into the wider region. The development of the country’s physical and financial infrastructure will attract more foreign investors wanting to increase their exposure to frontier markets such as Tajikistan and Kyrgyzstan without having to base operations in these countries. Similarly, the economic development of these countries (as well as Turkmenistan and Uzbekistan) will see demand for imported capital grow, allowing Kazakhstan to become an export platform to these countries.

Although BMI believes that domestic demand will increasingly become the driving force of growth, oil and gas will remain an important export earner, helping to bolster domestic demand. Indeed, it will be the recycling of energy export revenues to the non-oil sectors that will be key to broadening the economy. Moreover, although experts believe that Astana will remain reliant on Moscow purchasing its energy output over the medium term, Kazakhstan’s growing economic and political clout may allow it to expand export routes away from Russia further down the line. In this respect, Kazakhstan is the most likely of the Central Asian states to supply energy to European markets over the long term. While BMI does not believe this will mean a shift in Kazakhstan’s foreign policy agenda towards euro-Atlantic institutions, it expects to see new trade relations emerging, with the EU likely to take a greater share of Kazakh exports.

Despite maintaining a long-term favorable outlook for the economy, BMI cautions that there are risks to Kazakhstan’s ability to meet its growth potential. For one, much will depend on the government’s ability to attract foreign investment – and investment into the right sectors, too. To this end, the government’s ongoing squabbling with the international consortium developing the Kashagan oil field, as well as its increasing influence over the energy sector through equity acquisitions, may deter the more risk-averse long-term strategic investor. Nevertheless, oil exports may provide some of the hard cash Kazakhstan still needs to import technical expertise and more sophisticated management practices.


If you are interested to learn more about “Kazakhstan and Central Asia Business Forecast Report” or any Country/Industry reports by BMI please contact Matthew Thompson, Business Development Manager, “Business Monitor International” T:+44 (0)20 7246 1433 M:+44 (0)7983 473 767 Email: mthompson@businessmonitor.com)


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SOURCE: http://www.kazakhembus.com/index.php?mact=News,cntnt01,detail,0&cntnt01articleid=758&cntnt01origid=90&cntnt01category_id=6&cntnt01returnid=90


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