KAZAKHSTAN ECONOMIC AND ENERGY UPDATE

UNCLAS ALMATY 002122

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E.O. 12958: N/A
TAGS: ECON EIND ENRG EPET EFIN KZ ECONOMIC
SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE
May 15 - May 28, 2005



1. Summary: This information is drawn primarily from the
Kazakhstani local press, and has not been checked for
accuracy. The opinions and policies expressed in this
report are those of the authors, not the U.S. Government.

-- Government Submitted Draft Amendments to Tax Code
-- Pension Assets to Finance Infrastructure Projects
-- Ablyazov Becomes New Chairman of Bank Turan Alem
-- Kazakhstan Negotiates WTO Accession with China
-- Growth of Kazakhstani Communication Services
-- Mazhilis Approves PSA Draft
-- Kazakhstan to Acquire More Tankers
-- International Standards for Oil and Gas Industry
-- New Association of Kazakhstani Mining Companies

Government Submitted Draft Amendments to Tax Code
-------------- --------------


2. Minister of Economy and Budget Planning Kairat
Kelimbetov presented draft amendments and additions to the
Tax Code to the Parliament. The package contains a
"flexible scale" of taxation for subsurface users developing
"small and mid-sized deposits" under production sharing
agreements (PSAs),a special tax regime for the launch of
the "Ontustik" special economic zone in Southern Kazakhstan
Oblast and preferential tax treatment for small and mid-
sized business enterprises. (Interfax - Kazakhstan, May 16)

Pension Assets to Finance Infrastructure Projects
-------------- --------------


3. "It is necessary that the whole infrastructure
development of the country, in particular (that) related to
development of railways, energy, and infrastructure of
hydrocarbons rests on the use of assets of domestic saving
pension funds (SPF)...The legal framework is available in
this respect," Prime Minister Danial Akhmetov announced on
May 17. The competent agencies "should prepare a set of
measures related to use of pension funds." The construction
of the Charsk - Ust-Kamenogorsk railway in Eastern
Kazakhstan will be the first project financed by SPFs.
(Interfax - Kazakhstan, May 18)

Ablyazov Becomes New Chairman of Bank Turan Alem
-------------- ---


4. Mukhtar Ablyazov was elected chairman at the May 20
session of Bank Turan Alem (BTA)'s Board of Directors.
Ablyazov, who turned 42 this May, was the head of the
national electric grid company, KEGOC in 1996-97, and served
as the Industry and Trade Minister in 1998-99. In 2002
Ablyazov was sentenced to a six-year prison term for abuse
of office while he was a public official, but he was
pardoned following an appeal to the President. After his
release, Ablyazov said he would no longer engage in
politics. He opened a business in Moscow where he
successfully implemented high-rise construction projects.
Top managers at BTA believe that the bank will gain
significantly with the appointment of Ablyazov. (Interfax -
Kazakhstan, May 20)

Kazakhstan Negotiates WTO Accession with China
-------------- -


5. The first round of bilateral negotiations with China on
Kazakhstan's accession to the World Trade Organization was
held May 23-24 in Beijing, the Ministry of Foreign Affairs
press service reported. Both sides positively evaluated the
development of economic relations and the dynamic growth of
mutual trade that hit $4.5 billion last year. PRC Commerce
Minister Bo Xilai confirmed China's readiness to assist
Kazakhstan's efforts to enter the WTO. (KazInform -
Kazakhstan, May 25)

Growth of Kazakhstani Communication Services
--------------


6. Over the first four months of 2005, national
communication enterprises rendered services valued at KZT 60
billion (approximately $454.5 million),a 24.6% increase
over January-April 2004. 23.9% of revenues came from
international communications services, 37.2% were from
wireless communications, and 9.2% originated from local
telephone communications services. Compared to January-
April of 2004; the volume of mobile phone communication
increased by 49.3%, and revenues from Internet services
doubled. (Golden Eagle Service, May 27)

Mazhilis Approves PSA Draft
--------------


7. On May 18 the Mazhilis (lower chamber of the Parliament)
approved the draft law on Production Sharing Agreements
(PSAs) for offshore oil operations. The document has been
submitted to the Senate (upper chamber) for approval. The
draft spells out PSA parties' rights and responsibilities in
the Kazakhstani sector of the Caspian (KSCS) and Aral Seas.
The state oil and gas company KazMunayGaz will have at least
50% in KSCS projects. The draft entitles investors
operating under offshore exploration contracts to choose the
type of contract to governing oil recovery - either a PSA or
a contract with other terms. (Interfax - Kazakhstan, May
23)

Kazakhstan to Acquire More Tankers
--------------


8. The Vyborg shipyard (Russia) plans to sign an agreement
with Kazakhstani "Mobilex Energy Ltd." for construction of
five 12,000 ton tankers. The contract is a part of the GoK
program for the construction of the Kazakhstani tanker fleet
through 2010. The total deadweight tonnage of the Caspian
fleet is to be 300,000 tons. The approximate cost of the
project is $250 million. (Interfax - Kazakhstan, May 28)

International Standards for Oil and Gas Industry
-------------- ---


9. Galymzhan Dugalov, Director-General of the Kazakhstan
Institute of Standardization and Certification, stated
during an international seminar on standardization in the
oil and gas industry that "prior to admission to the WTO,
Kazakhstan needs to unify its standards. This will (enable)
the access of Kazakhstani companies to the world oil
market". He noted also that, "the degree of coordination of
Kazakhstani standards to international ones in the real
sector of Kazakhstani economy was 54% as of January 1,
2005." (Interfax - Kazakhstan, May 25)

New Association of Kazakhstani Mining Companies
-------------- --


10. A constitutive congress of the Association of Mining
and Ore Mining Companies of Kazakhstan took place on May 27
in Astana. Nikolai Radostovets, the president of the Union
of Kazakhstani Manufacturers and Exporters, who was elected
to chair the Association, announced that the "key task of
the established association consisting of thirty-two mining
companies is to defend their interests at the government
level." The Association's members included Kazakhmys (a
copper mining corporation),Bakyrchik Mining Company, the
Eurasian Industrial Association, Bogatyr Access Komir, NOVA
Zinc, Charaltyn (a gold mining company) and Vasilkov GOK.
(Interfax-Kazakhstan, May 27)

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