Kazakhstan Chamber of Commerce in the USA

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Samruk-Kazyna announces six agreements totalling $4 billion 0

Posted on January 05, 2016 by KazCham

Colibri Law Firm BI@colibrilaw.com

Samruk-Kazyna, the sovereign wealth fund of the Republic of Kazakhstan, has announced memorandums of understanding and agreements for five projects totalling $4 billion at the meeting of the Kazakhstan-China Business Council (KCBC).

The event was attended by more than 350 representatives from governments and businesses from both countries and included keynote remarks from Kazakhstan’s Prime Minister Karim Massimov and Samruk-Kazyna’s CEO Umirzak Shukeyev.

Key announcements at the KCBC meeting included:

  • Agreement between KazMunayGas and Sinopec in oil exploration and production, petrochemicals, engineering and renewable energy.
  • Agreement between Kazakhstan’s national atomic company, Kazatomprom, and China General Nuclear Power for the design and construction of a plant for the production of fuel assemblies in Kazakhstan and the joint development of uranium deposits in Kazakhstan.
  • Agreement between Kazakhstelecom and China Telecom to roll out fibre optic communications lines in rural Kazakhstan.

Kazakh National Fund to implement new projects worth almost $6 billion 0

Posted on August 18, 2015 by KazCham

Colibri Law Firm

In 2015, the Kazakh National Welfare Fund Samruk-Kazyna plans to commission 20 projects worth $5.9 billion, according to Berik Beisengaliyev, Chief Business Development Director of “Samruk-Kazyna” JSC.

The fund’s investment portfolio currently consists of 161 projects worth approximately $121 billion and the overall structure of the financing of investment projects of the fund’s internal capital totals 27%.

A number of important agreements on development are signed during Astana Economic Forum 0

Posted on June 05, 2015 by KazCham

Samruk Kazyna

Astana Economic Forum has become a platform for partners to conclude talks and sign agreements.

On May 22, 2015 «Samruk-Energy» JSC signed a number of bilateral documents aimed at development of cooperation in elaborating innovative technologies during VIII Astana Economic Forum. The agreements have been made possible as a result of “Samruk-Kazyna” Fund visit to the Silicon Valley in California (USA).

The participants of the signing ceremony were the CEO of Primus Power Corporation Tom Stepien, professor of the Stanford University Friedrich Prinz, Professor of the University of California at Berkeley Daniel Alden Fletcher.

The bilateral agreements comprised an agreement with Stanford University in power industry; an agreement with the University of California in Berkley in the field of biomedicine; and an agreement with Primus Power Corporation on the development of electricity storage devices.

Primus Power Corporation and “Samruk-Energy” JSC agreed to establish a joint venture for  production and supply of energy storage systems  EnergyPod®  in the Republic of Kazakhstan. The joint project aims at development of renewable energy sector.

On the margins of the Astana Economic Forum, another agreement with the EBRD on loan was signed to modernize the tramway system in Pavlodar city. The EBRD-supported project will modernise a third of the tram fleet by purchasing 25 new tram cars, fix rail junctions and upgrade other related infrastructure. The EBRD will lend up to 2.5 billion tenge (€10 million equivalent) to the municipal tram system operator, JSC Pavlodar Tram Management Company, which will also receive a capital grant from the government of Kazakhstan of up to 910 million tenge (€3.71 million equivalent).  Additional support to the project will be provided by the regional government (Akimat).

At the signing ceremony, EBRD Managing Director Natalia Khanzhenkova said: “The modernisation programme will include not only physical upgrades but also introduction of a Public Service Contract, a mechanism to boost performance, cost effectiveness and transparency”.

Kazkommertsbank to buy part of the Bank’s common shares owned by JSC Samruk-Kazyna 0

Posted on August 13, 2014 by KazCham

Business Intelligence from Colibri Law Firm: Issue #91

Joint-Stock Company Kazkommetsbank (“KKB” or the “Bank”), one of the largest banks in Kazakhstan and Central Asia, today announces that in accordance with the Option Agreement in respect of JSC Kazkommertsbank as of 15 January 2009 signed between JSC Samruk-Kazyna, JSC Central-Asian Investment Company, Mr. N.S. Subkhanberdin, JSC Alnair Capital Holding and the Bank (the “Option Agreement”), the Bank intends to exercise its right to buy part of the Bank’s common shares owned by JSC Samruk-Kazyna based on the terms of the Option Agreement and in accordance with the legislation of the Republic of Kazakhstan.

The Bank also extends the offer to other minority shareholders (holders of common shares), to buyback common shares of the Bank at the following terms.

The total amount of the Bank’s common shares announced for buyback (the “Shares”) will not exceed 79,198,025 common shares at the price of 475.3667 tenge per one common share. One Global Depositary Receipt (“GDR”) equals to two common Shares. The price for one GDR is fixed at 950.7334 tenge.

New Opportunities for Investors in Kazakhstan 0

Posted on May 22, 2014 by KazCham

Linkage & Mind Law Firm – http://blog.linkagemind.com/en/new-opportunities-for-investors-in-kazakhstan/#more-7

 

The President of the Republic of Kazakhstan voiced, in his Message as of 15 January, several important issues and tasks which should be solved in the nearest future. We believe that there are a few tasks which may be of interest for investors.

First of all, the matter concerns the instruction assigned to the Government and Samruk-Kazyna National Holding to carry out analysis of all PPP companies in order to draft the list of companies which are subject to privatisation and approve the full privatisation programme for 2014-2016. A number of national companies have been commenced working on this matter a few years ago however, these coming years promise to be the years when real steps and arrangements will be undertaken. It is also expected that the programme, containing the list of companies for privatisation, will be made public in the first quarter of 2014.

It is known, that many entities, including former public undertakings after mass privatisation in nineties as well as national companies after public assets restructuring in early 2000s, were found owning health resorts, housing, service centres, lands, secondary production, numerous subsidiaries – so called, non-core assets. Non-core assets, per se, are assets involved in company’s accessory activities. But, the notion of non-core assets through the lenses of the assigned task is much broader – covering activities which must not be operated in a public or “quasi-public” sector. Such activities must be “in the market” in every sense of the word.

For instance, Samruk-Kazyna Group holds companies specialising in construction, IT, services, social sphere (kindergartens, sport centres, health resorts), housing, transportation and logistics and even ore and subsoil use along with other areas.

Thus, the Committee on State Property and Privatisation of the Ministry of Finance of the Republic of Kazakhstan, and all national companies (Samruk-Kazyna, Baiterek) are completing the monitoring process and they are about to list the assets (companies, objects) subject for disposal. Terms and conditions of privatisation (direct sale to investors, public auction, or trust managing transfer with subsequent disposal) will be made public very soon. Experts, therefore, are expecting interesting deals within 2014-2016.

Another task, that promises a significant investment inflow, is the instruction to build the fourth petroleum refinery and a nuclear power plant. Such topics had been hovering in the “corridors of power”, and the issue has already been resolved if judging by the tone the instruction voiced in the President’s Message. Another matter at issue is the time, place and sources of investment. Some investors (India, China) have already expressed their interest and proposals.

The Government of the Republic of Kazakhstan at the meeting on 29 April 2014 approved a list of companies of Samruk-Kazyna (the National Welfare Fund), which will be sold to the private sector within the privatization framework.

According to Nurlan Rakhmetov, CFO and a member of the board of Samruk-Kazyna, the government of Kazakhstan and JSC “Samruk-Kazyna” over the past few months have analyzed all 599 companies owned by the Fund and have identified companies that can be transferred to the private sector. Thus, shares in 106 different companies of Samruk-Kazyna will be sold to the private sector, mostly in 2014.

Madina Sypatayeva

Mukhtar Ablyazov: a saucerful of lies, a containerful of evidence 0

Posted on December 28, 2011 by Alex

By Charles Van Der Leeuw, KZW senior contributor, Dec 14, 2011

While the quest by now state-controlled BTA bank, Kazakhstan’s one-time blue chip banking corporation, to get its one-time top man Mukhtar Ablyazov to Pentonville first, to Motroskaya later and eventually to the Kazakh gulag rages on, new evidence has been found in the form of a container full of documents which indicate all details concerning the web of more than 600 mailbox companies all over the world Ablyazov and his accomplices used to divert loans from their collateral and the collateral from the lender – meaning BTA – to their own benefit. The documents, or rather the fact that Ablyazov has lied in court over them which makes him liable to be condemned to a mid-range prison term, are at stake at an ongoing trial in London. The real issue is only due to come on the agenda a year from now. A race against time – which given the worsening situation BTA finds itself in, it is far from certain to win. The bank’s capital shortage is growing by the month, and whether provisions to pay the upcoming bond maturity term this coming January will be sufficient looks uncertain, according to news reports.

It looks very much like a soap story indeed. The sneaky business spy jumps out of his fancy car, and hides, equipped with camera and field glasses, near a fenced luxury villa, where the bas business guy is lurking. After hours, a black-windowed car slides out past the armed gorillas at the entrance. Our hero jumps in his car and pursues his prey. Vroom-vroom, zoom-zoom – in the movies boom-boom often follows but that has been avoided so far. The man in the pursued car, apparently having noticed nothing, stops at the gate of a warehouse complex. The camera zooms in on the name: Big Yellow Box. From his car, our master spy waits with his camera till his prey returns, with piles of documents (a variant to a bag full of drugs, gold or cash) under his arm. The photo camera clicks. Those documents are not just documents – they represent billions of dollars and the direction of their destination. This is where the story takes a twist: rather than in a deserted parking garage or on some spooky dock side, the continuation of the thriller is to take place in a courtroom.

The man in the villa is of course fugitive banker and master-swindler Mukhtar Ablyazov, now in court facing up to two years behind bars if convicted – not for the estimated dozen billion US dollar he diverted to accounts under his direct or indirect control from the bank, Kazakhstan’s BTA, which he once controlled, but for lying to the honourable British judge about the amounts and where on British territory and beyond they are supposed to be located these days. “Ablyazov, who fled Kazakhstan to escape prosecution and lives in the U.K., violated a 2009 court order freezing his assets by failing to reveal ownership in a Moscow skyscraper project and more than 600 shell companies used to conceal his wealth, Bloomberg wrote on November 30 quoting BTA’s lawyer as stating at the start of a two-week trial in London. “Ablyazov attended the hearing with an interpreter. “There hasn’t quite been a case like this before,” the lawyer declared at the hearing. “The bank’s primary purpose is to coerce Ablyazov into complying with the court order.”

It goes without saying that the ultimate goal of the bank, though, is to get at least part of the stolen money back on one side and get its right to the collateral covering it acknowledged by courts from Kazakhstan to the UK – including those in the Russian Federation, Ukraine, Georgia and other places where the collateral is located. Getting stolen property back, however, seems to be low on the agenda for those who are supposed to contribute to justice having its way – at least in Britain, that is. “Ablyazov has been made the subject of a worldwide freezing order on a non-proprietary basis and has also been required to state the source of the funds being used to pay his legal expenses,” The Lawyer wrote on December 9 this year. “The bank is, of course, keen to trace or follow the bonds or their proceeds. To that end it has sought and obtained wide-ranging ancillary relief in the form of disclosure and other orders. Applying an earlier decision of the court, Mr Justice Christopher Clarke said that if the defendant were to have the benefit of spending money that would otherwise be frozen, he must show that there is no possibility of the money being the subject of a claim by the bank from a tracing point of view. Notwithstanding the fact that this is a case in which judges have repeatedly said there is strong evidence of wrongdoing and a series of orders that have not been complied with, this is almost tantamount to a reversal of the burden of proof and thus a powerful order to make. Ablyazov was also ordered to answer a list of questions about his funding arrangements, it being suspected that nominees were making payments out of assets that were, in reality, his. One of Ablyazov’s colleagues, Syrym Shalabayev, is said to have concealed the proceeds of the realisation of missing bonds.”

The point the comment tries to make looks pathetic. Apart from hair-cleaving concerning the culprit’s legal rights, which are subject to abuse to begin with, the author of the article clearly misses the point where the structure of the charges is concerned. On the judge’s table are not bonds – which have been hit, as has been widely publicised for well over two years now, by Ablyazov’s diversion schemes whereas the tools he used were not bonds but loan sum and loan liability transfers as well as chain schemes diverting assets which served as their collateral in a different direction. As far as known, Ablyazov never used BTA’s own debt paper as tools to transfer either assets or liabilities to “invisible” connected parties. Any excuse for a lawyer should be able to distinguish such a thing. And the worst thing of it all is that time is too pressing for such futile and erroneous exercises. Shadows are growing longer – not just for Ablyazov but hardly less for BTA and in the process for its Kazakh peers as well.

According to news reports by Bloomberg, BTA is stuck with a capital shortage in the order of 1.1 billion US dollar. In order to prevent BTA’s dire straits from rippling through the entire sector, Kazakhstan is setting up an emergency fund to keep liquidity up at banks in the country. “The share of bad credits will decrease next year as the fund transfers some of the non-performing loans off bank balance sheets and lending grows,” Bloomberg wrote on December 8, paraphrasing the governor of the National Bank of Kazakhstan Grigory Marchenko. “Total loans may grow between 12 percent and 15 percent next year. Loans overdue by more than 90 days at Kazakhstan’s 39 banks reached 3.17 trillion tenge ($21.5 billion), or 31.4 percent of total holdings, led by BTA Bank with 1.42 trillion tenge, central bank data show. BTA may ask the Kazakh government to back its second debt restructuring or provide additional state funds to help avert bankruptcy, according to two people with direct knowledge of the matter.” This and other signs on the wall indicate little more and little less than the fact that BTA’s near future spells gloom and doom. It also looks all the more grim for it now that it has appeared that the only foreign party possibly interested in buying it out has backed off. “OAO Sberbank scrapped a plan to buy BTA Bank (BTAS), Kazakhstan’s biggest before its default in 2009,” Bloomberg wrote in a recent report, quoting Russia’s former finance minister and now Sberbank’s CEO German Gref. “For now we don’t see an opportunity to acquire this bank,” the agency quoted Gref as telling reporters in a visit to Astana on November 30. “There’s a set of reasons for it. Primarily it’s linked to how we see our strategy on the Kazakh market.” The observation’s timing was all the worse for it since the main reason for Gref’s visit appeared to be the signature of a $3 billion loan by Sberbank to the National Railway Company of Kazakhstan – something apparently no domestic bank can afford to do.

What makes it worse for BTA’s eventual fate is that a new capital injection, said to require over another 4 billion US dollar in taxpayers’ money reserves, might well draw its owner, the $80 billion Sovereign Welfare Fund of Kazakhstan Samruk-Kazyna, into financial trouble. “BTA Bank (BTAS) may ask the Kazakh government to back its second debt restructuring or provide additional state funds to help avert bankruptcy,” Bloomberg reporte on December 6 – anonymously quoting whom it dubbed “two people with direct knowledge of the matter”. “BTA may seek a capital injection of more than $4 billion, said the people, who declined to be identified because the information isn’t public. Lazard Freres & Co., which acted as an adviser to BTA during its debt reorganization in 2009, assessed the cost of another restructuring last month, the people said. Investors may be asked to absorb an estimated loss of about 80 percent on BTA bonds, the people said. The bank is preparing to submit a bailout plan to a new government that will be formed following parliamentary elections set for the middle of January, the people said, adding that BTA is considering either a restructuring or a capital increase or both. […] BTA has a $150 million coupon payment due in January, Deputy Chief Executive Officer Berik Otemurat said in a Sept. 1 interview. The people familiar with the situation didn’t say whether the bank will make the coupon payment. The Almaty-based lender faced a capital shortage of 162 billion tenge ($1.1 billion) under international accounting standards as of Nov. 1 after it set aside more money to cover souring loans, according to a statement e-mailed Nov. 28. The bank has a total of $5.2 billion of debt, Bloomberg data show.”

According to Bloomberg, BTA so far has swallowed up the staggering amount of $8.49 billion in various forms of funding from public resources. Its stock and bonds, which represent the bulk of the compensation external creditors took in exchange for a cash “haircut” through which they had to write of more than 80 per cent of the money they are owed by BTA, are currently trading at a mere fraction of their face value. For the Kazakh state, the burden is hardly less painful. Looking at the annual results of Samruk-Kazyna, the rather shocking picture shows that BTA is eating up the bulk of the Fund’s returns on all the corporate assets it manages on behalf of the state. In 2009, the situation was at its worst, with Samruk-Kazyna losing the sum of 732 billion Kazakh tenge – in the order of 5 billion US dollar or 3.5 billion euro according to current exchange rates- on BTA alone, which inflicted an overall loss of 627 billion tenge on the entire Fund. In 2010, Samruk-Kazyna was back to profit amounting to  634 billion tenge – mainly thanks to a boost in profit from the state oil and gas company of Kazakhstan, KazMunayGaz, on the back of higher oil prices on world markets, up from 182 billion tenge in 2009 to 391 billion through 2010, along with a reduction in losses for BTA to 137 billion tenge.

It indicates that the breathing space Samruk-Kazyna thus got in 2010 could well result in a reverse in the upcoming year if the Fund would be forced to allow another blood-letting operation topping $4 billion, with external creditors’ breath getting hotter at the same time. Even if all the money that could be recovered under the authority of Britain’s courts of law should be returned, $5 billion is the best BTA could hope for. Part of it, though, will have to be written off against the loss of rights to collect loans’ collateral, most of which is located on Russian territory with minor assets scattered over other former Soviet republics. Meanwhile, the trial with the aim to settle the frozen assets’ ownership rights is only set to start in November 2012 and expected to last for at least four months. Following appeals against any verdict by any party involved is likely to cause at least another full year of delay for the verdict’s eventual execution. By that time, even if convicted for contempt of court momentarily, Ablyazov will be out of prison again – and the containerful of evidence discovered by our brave investigator might will have changed location more than once.

SOURCE: http://www.kazakhembus.com/index.php?mact=News,cntnt01,detail,0&cntnt01articleid=823&cntnt01origid=15&cntnt01returnid=201

Evolution of role sees fund gearing up for ‘People’s IPO’ 0

Posted on December 25, 2011 by Alex

The heart of Kazakhstan’s economy, Samruk-Kazyna has, since its inception, played a crucial role in the country’s industry and economy. Now the fund is ready to float some  of its assets at discounted prices to retail investors. By Clare Nuttall

Kazakhstan’s sovereign wealth fund Samruk-Kazyna put to work billions of US dollars to support the economy during the global economic crisis. With Kazakhstan growing strongly, the fund’s role has evolved – it is now responsible for creating new industries and increasing efficiency in the economy’s most important companies.

This year will see further dramatic changes, as minority stakes in some of its largest and most attractive companies are floated on the domestic stock exchange. Samruk-Kazyna was created in the depths of the crisis through the merger of two existing organizations – holding company Samruk and investment company Kazyna – in October 2008, and its importance to the Kazakh economy cannot be overestimated. Its subsidiary companies include the national rail and postal companies, electricity grid operator Kegoc, state oil-and-gas giant National Company KazMunaiGas, nuclear company Kazatomprom, national air carrier Air Astana, and three of the top four banks. It is also the parent of the Damu small enterprise fund, private equity fund of funds Kazyna Capital Management, and other  financial organizations.

Overall, Samruk-Kazyna manages assets worth in excess of $70 billion, accounting for around 40 percent of the economic activity in the country. It has a total of 404 subsidiaries and affiliated companies. As of March 2010, Samruk-Kazyna announced it had invested KZT897 billion ($6.1 billion) from Kazakhstan’s National Fund to support the economy during the crisis. Its largest financial commitment was to the banking sector, where it invested some KZT486 billion.

Other anti-crisis measures included supporting the real-estate sector (KZT360 billion), support for small and medium-sized enterprises (KZT120 billion) and implementing industrial and infrastructure projects (KZT121.5 billion).

Samruk-Kazyna became the majority shareholder of  BTA Bank and Alliance Bank, injecting liquidity when both were on the brink of collapse in February 2009. Today, a debt restructuring for the two banks has been agreed with creditors.

At the same time, the fund took minority stakes in Kazakhstan’s other big-four banks, Halyk Bank and Kazkommertsbank. Now that GDP growth in Kazakhstan has returned to pre-crisis levels, Samruk-Kazyna is starting to divest some of the assets it acquired during the crisis. The fund has already exited its investment in Halyk, selling the stake back to the bank and its majority shareholder Almex.

Kazkommertsbank could buy back its shareholding in the near future. A sale of BTA to Russia’s Sberbank is still on the cards and Samruk-Kazyna is also looking at potential exit routes for Alliance, but it is adamant that it will sell its shareholdings only if the price is right.

Post crisis, Samruk-Kazyna is involved in raising the efficiency of its subsidiaries, and is the main conduit for big foreign investment projects. The emphasis within Kazakhstan has shifted toward production of processed and value-added products, rather than being purely a supplier of raw materials.

Several of the priority projects within the 2010-14 Accelerated Industrial and Innovative Development program are aimed at achieving this goal. Samruk-Kazyna is already working to diversify and industrialize Kazakhstan. The ‘breakthrough projects’ under the Samruk-Kazyna umbrella include reconstruction of the Atyrau refinery, modernization of the national electricity grid and construction of several new power stations. Within Samruk-Kazyna, two holding companies created in late 2008 are responsible for the chemicals and metals sectors, respectively. The United Chemicals Company was set up to develop a national chemicals industry and reduce Kazakhstan’s dependence on imports of products such as fertilizers. Tau Ken Samruk is the holding company for the Kazakh government’s stakes in metals and mining companies. While oil and gas still account for the lion’s share of Kazakhstan’s exports, metals and mining have been growing in importance in recent years.

Soaring metals prices, and the steady growth in demand from neighboring China in particular, have provided an impetus for Kazakhstan to increase its output. The government stakes in two major London Stock Exchange-listed mining companies – Eurasian Natural Resources Company (ENRC) and Kazakhmys – are held within Tau Ken Samruk. Both companies have an immense presence in the Kazakhstan mining sector, as well as internationally.

Kazakhmys is the largest copper producer in Kazakhstan and one of the top 10 producers worldwide. ENRC – a diversified natural resources group – has a presence in China, Russia, Brazil and Africa, as well as in Kazakhstan. This year has already seen significant changes for Samruk-Kazyna. On April 12, Timur Kulibayev was promoted to chairman as part of the post-elections reshuffle. Kulibayev, the son-in-law of Kazakh president Nursultan Nazarbayev, was previously the company’s deputy chairman.

The fund’s main task this year will be to carry out the ‘People’s IPO’ program, under which shares in companies that are wholly or partly owned by Samruk-Kazyna will be offered at a discount to retail investors and pension funds. In addition to raising funds for expansion, the program is also intended to stimulate the domestic capital market.

At least some of the IPOs are due to take place by the end of this year. Companies expected to be part of the first wave of IPOs include power-generation company Samruk-Energo, electricity grid operator Kegoc, postal service Kazpost and KazMunaiGas Exploration and Production. In the following two years, IPOs of other companies – including Kazatomprom, National Company KazMunaiGas, and railway operator Kazakhstan Temir Zholy – are planned.

SOURCE: Invest in Kazakhstan, 2011, p. 45-46

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

Kepco, Samsung May Build Kazakh Plant From 2013, Official Says 0

Posted on November 12, 2011 by Alex

Nov. 1 (Bloomberg) — A venture between Samsung C&T Corp., Korea Electric Power Corp. and Kazakhstan may begin building a $2.2 billion power plant near the financial capital of Almaty as early as 2013, a deputy industry and technology minister said.

Construction may be completed by 2018 or 2019, Bakhytzhan Dzhaksaliyev said in the city. The venture may hold a tender for an engineering, procurement and supervision contract next year, ensuring purchases of Kazakh goods and services, he said.

The partners are in talks over their shares in the venture, Dzhaksaliyev said today, adding the government will own the plant and the venture recover its costs by selling the power.

The plant is part of the venture’s $4.5 billion plan to develop electricity operations in the country. Kazakhstan’s sovereign wealth fund was seeking to increase its stake in the venture to 51 percent by persuading Kepco and Samsung to reduce their ownership, Interfax reported in August.

In March 2009, Kepco and Samsung said the coal-fired plant would be built by 2014, in Balkhash, 370 kilometers (230 miles) northwest of Almaty, with a 1,200 to 1,500 megawatt capacity. They would build, own and operate the plant, the companies said.

The energy unit of the state-run National Wellbeing Fund Samruk-Kazyna would hold 25 percent plus one share of the power plant, the fund said in September 2009. Kepco and Samsung C&T Corp. would have 70 percent minus one share, and Kazakhmys Plc get a 5 percent stake in the venture, the fund said.

–Editors: Tony Barrett, Torrey Clark

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net

To contact the editor responsible for this story: StephenVoss at sev@bloomberg.net

SOURCE: http://www.kazakhembus.com/index.php?mact=News,cntnt01,detail,0&cntnt01articleid=793&cntnt01origid=15&cntnt01returnid=201

 

 

 

Kazakhstan Daily News Roundup – November 10, 2011 0

Posted on November 10, 2011 by Alex



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