Kazakhstan Chamber of Commerce in the USA

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EBRD forecasts economic growth in Kazakhstan 0

Posted on May 15, 2017 by KazCham

Kazakhstan Embassy in Washington, D.C.

Baku, Azerbaijan, May 10
By Elena Kosolapova – Trend:
The European Bank for Reconstruction and Development (EBRD) forecasts economy growth rate in Kazakhstan to increase to 2.4 percent in 2017 after 1 percent in 2016, Regional Economic Prospects report of the bank said.

The growth will be supported by stronger exports from the improved oil price outlook, targeted public investments and higher foreign direct investment inflows.

EBRD noted that monetary conditions have been eased in Kazakhstan, the exchange rate has stabilized and inflation is on a downward trend (inflation decreased from 17.7 percent year-on-year in July 2016 to 7.7 per cent in March 2017).

Meanwhile the legacy of high non-performing loans (around $9.6 billion, or 16.4 percent of the loan portfolio as of end-March 2017) continues to weigh on the banking sector, given the presence of off-balance sheet structures that have absorbed the legacy NPLs.

The bank noted that Kazakh government has allocated $6.5 billion to support banks facing insolvency risks, and a possible merger of several banks is being discussed.

“Continued implementation of the government’s reform agenda is likely to lead to further improvements in the country’s institutional capacity and its business climate,” the report said.

According to the EBRD, in 2018 growth in Kazakhstan is expected to increase to 3.5 percent, driven by accelerated production at the Kashagan oil field, boosting oil exports, and higher foreign direct investment from China and other countries.

The bank also noted that large state support programs, backed by significant fiscal buffers, will continue to drive growth. Inflation is expected to remain within the 6-8 percent range set by Kazakh National Bank in 2017, and decline further in subsequent years.

Follow the author on Twitter: @E_Kosolapova

EBRD helps Kazakh city of Taraz upgrade water infrastructure 0

Posted on December 08, 2015 by KazCham

EBRD

EBRD loan and grants from central and local governments will help improve drinking water, cut waste.

The EBRD and the government of Kazakhstan are continuing to support water and wastewater modernization in the country with a financing package to upgrade the water supply in Taraz, a city of over 300,000 people and a provincial capital of the Jambyl region in the south of Kazakhstan. The project will also be supported by the city.

The EBRD will lend 1.05 billion tenge (€3.2 million equivalent) which will enable the municipal water and wastewater company SCE Taraz Su to modernize the water systems in the city to make them more energy efficient and reduce water losses.

The government of Kazakhstan is providing an investment grant of up to 945 million tenge (€2.9 million equivalent) and the local government – the city of Taraz – is extending a grant of up to 105 million tenge (up to €320,000 equivalent).

The project will be carried out under the umbrella of the Enhanced Partnership Arrangement between the EBRD and the government of Kazakhstan. Under that agreement, the government and the Bank are joining forces to modernize municipal and environmental infrastructure across the country.

The regional authorities – the oblast and city akimats –also intend to sign a project support agreement to facilitate the municipal company’s corporate reform plan, which is part of the EBRD-financed project. The company will aim to improve cost recovery for its services, promote water meters, improve internal audits and introduce an environmental and social action plan.

Janet Heckman, EBRD Director for Kazakhstan, said: “The EBRD and the government of Kazakhstan support a range of public utilities, from district heating to transport, in over 10 regions but we believe water and wastewater modernization, which directly benefit the lives of citizens, are of special importance.”

To date, the EBRD has invested over US$ 7 billion in Kazakhstan’s economy. In 2015 the EBRD is planning to invest close to US$ 1 billion in various sectors, with a focus on diversification.

EBRD and Kazakhstan’s National Bank to provide $1billion tenge in loans to local businesses 0

Posted on June 05, 2014 by KazCham

The Astana Times

Kazakhstan’s National Bank has signed two agreements that will make $1billion tenge available to the European Bank for Reconstruction and Development (EBRD) for giving loans to local institutions.

The first agreement makes $400 million tenge available to the EBRD, while the second agreement will provide $600 million over a three-year period.

The National Bank’s Governor Kairat Kelimbetov and EBRD’s Managing Director Olivier Descamps signed the agreement during the Astana Economic Forum. Descamps said, “Our strategic priorities in Kazakhstan focus on diversification, development of the regional infrastructure and strengthening the role of the private sector. These priorities require us to lend more to local businesses in local currency. Today’s agreements open the door for us to significantly increase and improve our lending in tenge.”

The EBRD will lend to Kazakh banks, non-banking financial institutions and corporate clients as well as to micro, small and medium-sized enterprises. EBRD has recently funded projects like energy-efficient buses and a project to modernise home heating systems.

Kazakhstan, which has received nearly $6.5 billion in investment from the EBRD, became a donor to the EBRD in 2013.

Future prosperity through diversification 0

Posted on December 18, 2011 by Alex

In pursuit of diversification, the country has instigated initiatives to encourage the growth of non-resource sectors. By Ben Aris Oil is essential to the Kazakh economy, but to ensure long-term prosperity, the country must diversify away from raw material extraction.

The Kazakh government is well aware of the problem and had already launched an extensive modernization program, even before the 2008 global economic crisis made diversification imperative.

President Nursultan Nazarbayev laid out the main goals of Kazakhstan’s modernization program in his 2010 State of the Nation speech. The president said that a large part of the $8-billion-a-year transfers from the National Fund – a reserve fund created from oil revenues to the state – would be directed to industrialization programs. Kazakhstan will invest up to $20 billion in the non-resource sectors of the country over the next five years, but the goal is to use this investment to prepare the ground for bringing in more foreign direct investment, which, it is hoped, will then take the lead in diversifying the republic’s economy.

Projects identified

A list of priority projects has been drawn up by the state agency Samruk-Kazyna, which holds much of the state’s assets and has been consulted for much of the industrial reform policy. All in all, the industrialization program will include 162 projects, with a total budget of KZT6.5 trillion ($43 billion), and the state expects that more than 200,000 jobs will be created.

Samruk-Kazyna has adopted a two-pronged approach. First, the state agency will help existing companies to increase the value-added component of their production, and so drive the processing and associated manufacturing industries. The second line of attack is to build the infrastructure to support the creation of new businesses and technologies. For example, among the larger investments are: upgrading all three petrochemical plants in Kazakhstan by 2014; building a new gas-processing plant; finishing the Balkhash, Mainak and Ekibastus GRES-2 power stations; and building a string of locomotive plants that can supply the republic and its neighbors with new trains.

To assist with the sector-specific reforms, the president called for the simplification of the bureaucracy that surrounds setting up a business. Among other measures, the president said the costs of starting businesses in Kazakhstan should be cut by 30 percent in 2010, and another 30 percent in 2011.

A large part of this goal has already been achieved, and the World Bank says in its Doing Business 2011 report that Kazakhstan has made more progress than any other country in the world.

Other initiatives to extend this progress include: accession to the World Trade Organization; ongoing integration with other Commonwealth of Independent States (CIS) countries, in particular via the new Customs Union with Belarus and Russia; developing a law for the country’s Special Economic Zones; and creating a roadmap for entrepreneurship development up to 2020.

Michael Weinstein, director of the European Bank for Reconstruction and Development (EBRD) in Kazakhstan, which has joined the diversification effort and committed $1 billion in capital to support the

drive, praises the government’s more pragmatic approach to carrying out reforms.

“In the past, there have been various diversification programs that for one reason or another did not succeed,” he says. “ The new program is more promising. Momentum is building. There is a window of opportunity to diversify – post-crisis, but before oil prices go through the roof again.”

This is not the state’s first attempt to remake the shape of the economy, but experts believe that the new program is a lot more likely to succeed. “The government has set its sights a bit lower this time – the priority sectors that President Nazarbayev has selected are the right ones,” says Weinstein. “Rather than looking at high-tech, the government is targeting sectors such as pharmaceuticals, chemicals, petrochemicals, metals, construction materials and fertilizers – the things that the country needs.”

Key sectors that the government hopes to develop:

  • Agriculture. The territory of Kazakhstan is the size of Western Europe and agriculture has huge potential. The basics are already there, but most of the supporting infrastructure is not. The state  plans to increase productivity in agriculture and processing of agricultural products by a factor  of two by 2014, through the application of new equipment and new technologies. At the same  time, the state would like to increase exports of agricultural products to Russia, Belarus, Central  Asia and Middle Eastern countries. “ Building the value chain in agriculture is important. The agriculture sector is difficult to invest in, but we  hope [the EBRD’s participation with] investment  will encourage other companies to become more transparent,” says Weinstein.
  • Infrastructure.  Support for infrastructure of all types is crucial. In the energy sector, the EBRD  and other international organizations helped to finance the construction of a new north-south power line to address the imbalance between the ends of  the country, while the state is also investing in additional power-generating capacity.
  • Industry.  The state will use various means to boost non-oil production and hopes to increase the share of non-oil exports to 45 percent from 27 percent in 2010. Three new locomotive plants are in operation, or close to it, and more engineering projects are in the pipeline. At the same time, the state will encourage investment to decrease energy consumption per GDP unit by 25 percent, while increasing productivity in processing industries by a factor of two. The main focus will be on boosting the share of processing industries in GDP to  at least 13 percent – from 11 percent in 2009 – and increasing the share of innovation-driven enterprises to 20 percent from four percent.
  • Construction materials. Construction and real estate were major economic drivers before the crisis, but development still relies heavily on imports. Another plank of the diversification program is to develop the domestic construction materials sector. The president called for raising the share of domestically produced construction materials to 80 percent by 2014.
  • Pharmaceuticals. President Nazarbayev is keen to develop a domestic pharmaceutical industry and in early 2009, launched an ambitious program aimed at raising the volume of domestically produced medicines consumed to half of the total by 2014. This means building many new plants in a relatively short time, and the government is actively looking for foreign investment to facilitate the program.  The furthest advanced project is that of Chimpharm – by far the biggest domestic player – to build a new tablet factory in Astana. This will be the first plant of any kind to be located in the new capital. The Kazakhstan Development Bank has already provided the funding and is also backing a second project to expand production facilities in Shymkent. Other players – including GlobalPharm, Nobel AFF and Romat – are reportedly planning new lines or new plants.
  • “Industrial development is our chance in the new decade for new opportunities for our country,” said President Nazarbayev, in his State of the Nation speech.

SOURCE: Invest in Kazakhstan, 2011, p. 35-37

Kazakhstan Daily News Roundup – October 6, 2011 0

Posted on October 06, 2011 by Alex

Kazakhstan Daily News Roundup – April 27, 2011 0

Posted on April 27, 2011 by KazCham

ENERGY:

Former Deputy Minister named head of MangistauMunaiGas
(SRI) – Asset Magauov, former Deputy Minister of Oil and Gas, has been appointed the new head of MangistauMunaiGas, a subsidiary of Kazakhstan’s national oil and gas company KazMunaiGas.

BUSINESS AND ECONOMY:

BTA wrote off $3.3 billion in last 12 months
(SRI) – BTA Bank, Kazakhstan’s third-largest by assets, wrote off KZT481 billion ($3.3 billion) of loans in the 12 months to April 1, Bloomberg reported on Tuesday.

Sberbank aims to triple investment in Kazakhstan
(Reuters) – Sberbank’s Kazakh unit aims to grow net income this year by carving a larger niche in the local market and together with its Russian parent plans to boost investment in the country to almost $1 billion.

Kazakhstan said to seek sale of Alliance Bank stake to EBRD after bailout
(Bloomberg) – Kazakhstan wants to sell a stake in Alliance Bank to the European Bank for Reconstruction and Development (EBRD), potentially making it the first of the Kazakh banks that defaulted during the financial crisis to attract an international investor, said three people familiar with talks.

Kazakhstan’s ATF Bank plans $276-million stock issue
(Reuters) – Kazakhstan’s ATF Bank , majority owned by Italian bank UniCredit SpA , plans to raise $276 million by issuing 7.66% of its ordinary shares.

EBRD extends trade finance guarantee facility to VTB Kazakhstan
(SRI) – The European Bank for Reconstruction and Development (EBRD) has extended a $20-million trade finance guarantee facility to VTB Kazakhstan.

Halyk Bank allocates $37.8 million for 2010 dividend
(SRI) – Halyk Bank, Kazakhstan’s second largest lender by assets, said on Tuesday it would allocate KZT5.5 billion ($37.8 million) from its 2010 net profit to pay dividends on its preferred shares.

Kazakh 2011 GDP growth may accelerate to 7% – Kelimbetov (Reuters)

National Bank of Kazakhstan: Exchange rates April 27, 2011 (Kazakhstan Today)

Indicators – April 26, 2011 (Reuters)

METALS AND MINING:

KazakhGold reduces net loss by 60% in 2010
(SRI) – KazakhGold, the Kazakhstan-focused subsidiary of Russian miner Polyus Gold, reported a net loss of $57.3 million in 2010, compared with a loss of $143.7 million in 2009.

SOCIETY:

High rollers hit Kaz Vegas, a far cry from Las Vegas (EurasiaNet)

REGIONAL:

Energy-rich Central Asia, Gulf states plan new rail route (Reuters)

Disappointed by West, Uzbekistan turns to China (AFP)

Turkmen president hosts horse beauty contest (AFP)

SOURCE: http://silkroadintelligencer.com/2011/04/27/kazakhstan-daily-news-roundup-april-27-2011/

Kazakhstan Daily News Roundup – March 2, 2011 0

Posted on March 02, 2011 by KazCham

HEADLINES:

Kazakhstan to offer 5% stake in KMG EP in “people’s IPO”
(SRI) – Kazakh citizens will be offered 5% of shares in KazMunaiGas Exploration Production (KMG EP) when the state launches the so-called people’s IPO later this year, President Nursultan Nazarbayev announced on Tuesday.

ENERGY:

EBRD extends energy efficiency investments in Kazakhstan (The FINANCIAL)

BUSINESS AND ECONOMY:

Eurasian Bank to issue $200-300 million bonds (Reuters)

Monthly inflation 1.5% in February (SRI)

Kazakhstan expects $10 billion of industry investments this year (Bloomberg)

Alstom-TMH, Kazakhstan Temir Zholy finalize locomotive supply contract (Dow Jones)

Indicators – March 1, 2011 (Reuters)

POLITICS:

Global Insider: China-Kazakhstan relations (World Politics Review)

Farce gains ground in Kazakhstan’s lackluster election (EurasiaNet)

EBRD to lend $50 million to Kazakh railways operator 0

Posted on March 31, 2010 by KazCham

“The EBRD loan will support Kaztemirtrans’ investment program and will finance the acquisition of 1,000 new freight wagons, helping the company to improve its efficiency and reduce maintenance costs. The project is supported by grant financing from the Bank’s Shareholder Fund to help KTZ strengthen its corporate governance,” EBRD said in a statement.

SOURCE: http://silkroadintelligencer.com/2010/03/31/ebrd-to-lend-50-million-to-kazakh-railways-operator/

EBRD puts up $1 billion to help Kazakhstan diversify 0

Posted on March 24, 2010 by KazCham

There is a window of opportunity to diversify Kazakhstan’s economy as the crisis ebbs and before commodity prices shoot up again, the European Bank for Reconstruction and Development’s country director for Kazakhstan tells bne, and the EBRD plans to invest up to $1bn to support the government’s development plans.

Michael Weinstein believes that the recovery has already started in Kazakhstan, and forecasts modest growth in 2010. “We think Kazakhstan has turned the corner. The price of oil is increasing, as is demand for goods,” he says.

Even so, the recent crisis has highlighted some major problems that need to be fixed, namely a heavy reliance on primary industries and commodity exports, the banking sector’s dependence on foreign capital markets, and the need for investment in energy and transport infrastructure.

3-year strategy

The EBRD’s new three-year strategy for Kazakhstan, approved in February, will focus on these areas. The bank has also signed an agreement with Kazakhstan’s state holding and investment company Samruk-Kazyna and the Industry and Trade Ministry to invest up to $1bn in projects to diversify the Kazakh economy.

A list of priority projects is being drawn up by Samruk Kazyna and the Kazakh government after President Nursultan Nazarbayev set out the country’s medium-term development priorities in his annual address to the nation. “In the past, there have been various diversification programmes that for one reason or another did not succeed,” says Weinstein. “The newly announced programme is more promising. Momentum is building, and there is a window of opportunity to diversify post-crisis, but before oil prices go through the roof again.”

Weinstein considers the government’s new plans to be more realistic than some of those outlined in the past. “The government has set its sights a bit lower this time,” he says. “The priority sectors Nazabayev has selected are the right ones. Rather than looking at high-tech sectors, the government is targeting sectors such as pharmaceuticals, chemicals, petrochemicals, metals, construction materials and fertilisers – the things the country needs.

Agriculture is another sector with huge potential for development, but with considerable problems as well. In December, the EBRD lent $35m to agro-industrial holding company Kazexportastyk, its first investment into the sector after a long hiatus. “Building the value chain in agriculture is very important. However, the agriculture sector is difficult to invest in because it is dominated by companies that are non-transparent,” explains Weinstein. “We hope this investment will encourage other companies to become more transparent.”

He points out that within the agricultural sector, Kazakhstan needs to develop related infrastructure such as logistics centres and warehouses. “We are interested in supporting the development of agricultural infrastructure – provided it is a bankable project,” he says.

Support for infrastructure of all types, including transport, energy and municipal utilities, is crucial. In the energy sector, the EBRD and other international organisations helped to finance construction of a new north-south power line to address the imbalance between the ends of the country, while the state is also investing in additional generation capacity. “Coal is likely to be the dominant source of energy in Kazakhstan for the foreseeable future,” says Weinstein. “We are happy to work with coal-fired generators, but we would never finance sub-optimal technology. We would like to help rehabilitate existing coal-powered generation facilities and develop new facilities through the use of the best available technologies.”

Municipal infrastructure has also suffered from a lack of investment in Kazakhstan. Under Kazakhstan’s budget code, most municipalities, except Astana and Almaty, are restricted from borrowing or guaranteeing municipal companies’ debt, making the raising of finance difficult. The EBRD has already made a loan to Shymkent Vodokanal, a private water company in Shymkent. A planned investment into a municipal water and heating company in Aktau is currently at the final review stage. If approved by the board of directors, it would be the first time the bank has financed a municipal company in Kazakhstan.

Raising cash

For the country as a whole, resolving the problems currently besetting the financial sector is key to channelling money into the various parts of the economy that need it. According to Weinstein, “the single biggest problem for Kazakhstan-based companies is access to financing.”

The EBRD wants to help create a more sustainable financial model – without the excessive reliance on foreign capital markets seen in the past – as well as supporting alternatives to bank finance. “In the banking sector, the worst is behind us. Problems with non-performing loans continue to haunt us, but in general risks are down, as shown by the lower [credit default swap] bands. The restructuring of BTA Bank and Alliance Bank has so far progressed better than expected. Investors are now able to breathe a little easier,” Weinstein says. “However, for the banking sector to develop in the long term, it must learn the lessons from the crisis, namely more reliance on local currency deposits, increased capacity for local currency lending, less foreign currency lending and a raising of core competencies.”

He adds that the EBRD could in the future play a role in a restructured BTA or Alliance. “It’s not something we would consider right now, but might after the restructuring is completed,” Weinstein says.



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