KAZAKHSTAN ECONOMIC AND ENERGY UPDATE

UNCLAS ALMATY 004047

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E.O. 12958: N/A
TAGS: ECON EIND ENRG EPET EFIN KZ ECONOMIC
SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE
October 30 - November 12, 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.

-- Forecast Inflation Rate 2005 Not to Be Reconsidered
-- Halyk Bank to Finance Projects in Russia
-- Amendments to Tax Legislation
-- TRACECA Members to Expand Shipment through Aktau
-- Economic Statistics
-- Kazakhstan to Become Leading Oil, Gas Exporter by 2012
-- MEMR, KMG Cooperate in Overcoming Gasoline Crisis
-- Kazakhstan to Pay for PKZ Stake out of Future Profits
-- The Third Kazakhstani Tanker Arrives
-- Gold Company Kazakhaltyn Plans IPO in London

Forecast Inflation Rate 2005 Not to Be Reconsidered
-------------- --------------


2. Chairman of the National Bank (NBK) Anvar Saidenov
admits the possibility of a slight rise in inflation over
the projected figures, but says that the NBK has no plans to
review the official inflation forecast. Inflation from
January to October 2005 reached 6%, the annual inflation
from October 2004 to October 2005 reached 7.9%. "Even on
the stipulation that the current price trend will be kept,
and the annual inflation will be beyond forecasted 7% by the
end of 2005, the inflation process would be controllable,"
Saidenov concluded. (Interfax - Kazakhstan, November 3)

Halyk Bank to Finance Projects in Russia
--------------


3. Halyk Bank of Kazakhstan is considering financing
programs valued at $20 million in Chelyabinsk and
Yekaterinburg, Chairman of the Board Grigoriy Marchenko
said. He did not give any specific information on the
projects at this stage, pending a final decision by the
bank. According to him, "the Kazakhstani banks have
competitive advantages over the Russian banks in terms of
crediting and marketing expertise." Pursuing its
development strategy, Halyk Bank plans to expand its
business into the Xinjiang Uygur Autonomous Region of China
and other Central Asian countries. (Interfax - Kazakhstan,
November 2)

Amendments to Tax Legislation
--------------


4. According to the press service of the Parliament, the
Senate (upper house) approved amendments to a number of
taxation regulations. The amendments anticipate
preferential taxation for investors who develop small and
medium-size oil fields; include textile and sewing
industries to the list of activities subject to preferential
taxation within special economic zones; and cut down the tax
rates for individual entrepreneurs from 7% to 5%, and for
legal entities from 4% to 3%. A new law contains some other
measures to soften the tax regime for small businesses.
(Interfax - Kazakhstan, November 4)

TRACECA Members to Expand Shipment through Aktau
-------------- ---


5. Representatives from Kazakhstan, Azerbaijan and Georgia
met at the Aktau seaport on October 28 and signed a protocol
on expanding cargo shipment within the TRACECA transport
corridor linking Europe and Asia. According to the press
service of the Aktau port, the parties reached an accord to
reduce the tariffs for rail transportation and port services
and discussed an issue of launching a pilot container train
on the route Poti-Baku-Aktau-Almaty. (Interfax -
Kazakhstan, November 2)

Economic Statistics
--------------

6. In words of President Nazarbayev, the growth rate of
investments in Kazakhstan's manufacturing sector is two
times higher than in the primary (petroleum) sector. "This
year, for the first time, investments in manufacturing
industry grew by 78% and crude (oil) investments grew by
43%," the President said at the presentation of the first
stage of the country's industrial-innovative development
strategy. (Interfax - Kazakhstan, November 2)


7. The National Bank of Kazakhstan reported that the
nominal devaluation of national currency (tenge) versus the
U.S. dollar in January-October 2005 stood at 3.24%. In
October 2005 the tenge revealed a trend of slowing down
against U.S. dollar. As a result, the tenge fell 0.28%
over the reviewed period, and at of the end of October the
tenge exchange rate stood at 134.21 tenge to the dollar.
(Press Service of the National Bank of Kazakhstan, November
2)


8. Total loans made by Kazakhstani banks to the economy
totaled KZT 2,118.5 billion (approximately $15.8 billion) as
of October 1, compared to KZT 1,484.3 billion (about $11.1
billion) as of January 1, 2005. Loans denominated in
domestic currency grew by 4% to KZT 1,079.5 billion ($8.1
billion); those in foreign currency - 4% up - to KZT 1,039
billion ($7.7 billion). The average interest rate on
national currency loans to companies fell to 13.7% from 14%
in September; however, the interest rate on loans to
individuals grew from 19.3% to 19.4%. (Press Service of the
National Bank of Kazakhstan, November 2)

Kazakhstan to Become Leading Oil, Gas Exporter by 2012
-------------- --------------


9. Kazakhstan plans to become one of the top ten
hydrocarbon exporters in the world by 2012, Kazakhstan's
President Nazarbayev said on November 1. Earlier, the GOK
had set a goal to rank among fifty most developed countries
in the world over the coming years. According to the
President, "the oil and gas sector and the entire extraction
industry will become the main engine to achieve this aim."
(Interfax - Kazakhstan, November 7)

MEMR, KMG Cooperate in Overcoming Gasoline Crisis
-------------- --------------


10. On November 4, Kazakhstan's Ministry of Energy, three
domestic refineries, the main oil suppliers, and oblast
administrations signed a memorandum on stabilization of
gasoline prices in the country. The action was taken in
response to a "gasoline crisis" - in the end of September
gasoline prices increased drastically in Kazakhstan,
especially in the Southern Kazakhstan Oblast. The document
expires on January 1, 2006, simultaneously with the ban on
fuel exports. (Rakhat TV - Kazakhstan, November 5)


11. In compliance with the memorandum, Trade House
KazMunayGaz (TD KMG, subsidiary of national oil and gas
company KazMunayGaz) announced the lowering of gasoline
prices at its gas stations to August 2005 levels. TD KMG
plans to shift its focus from wholesale to retail fuel
sales. The company plans to expand its own network of gas
stations from 55 (current) to 500, TD KMG's Deputy Director
General stated on November 5. According to the official, TD
KMG is establishing "strategic alliance and partnership with
large retail sales networks around the country to sell KMG
gasoline at KMG prices and eliminate profiteering."
(Interfax - Kazakhstan, November 7)

Kazakhstan to Pay for PKZ Stake out of Future Profits
-------------- --------------


12. On November 4, Energy Minister Shkolnik declared that
"if the transaction between PetroKazakhstan (PKZ) and CNPC
is closed [formalized as required: we have court actions and
many claims to PKZ], then Kazakhstan will pay for its stake
in PKZ inclusive of out of the company's future profit."
The Minister reiterated that, under the memorandum signed by
KazMunayGaz (KMG) and CNPC, KMG would acquire 33% of PKZ,
and the companies would set up a 50/50 joint venture to
operate the Shymkent refinery. The parties also are holding

negotiations on the acquisition of 67.5% of KazGerMunay by
KMG, Shkolnik said. KazGerMunay develops oil fields in
Kyzylorda Oblast. Shareholders are: PetroKazakhstan Kumkol
Resources (50%),RWE Dea AG (Germany) (25%),EEG-Erdgas
Erdoel GmbH (Germany) (17.5%),IFC (USA) (7.5%) (Interfax -
Kazakhstan, November 7)

Third Kazakhstani Tanker Arrives
--------------


13. At the end of October, the third 12,000 ton tanker
"Kazakhstan" arrived at the Aktau international seaport. It
was built at the Vyborg ship building plant (Russia) at the
request of Mobilex Energy, a subsidiary of European Mobilex,
for $17 million. The tanker has a more powerful engine, and
is more explosion-resistant, than the two tankers that were
previously built for the state merchant marine company
KazMorTransFlot. The tanker will transport oil to
Azerbaijan and Iran. The second tanker "Abay" for Mobilex
Energy will be built by the end of 2005. (Kazakhstan Today,
October 25)

Gold Company Kazakhaltyn Plans IPO in London
--------------


14. KazakhGold Group Limited, the indirect parent company
of Kazakhaltyn Mining-Metallurgical Concern, one of the
leading gold producers in Kazakhstan, plans to announce the
initial public offering (IPO) of 25% of its shares on the
London stock in exchange for $100 million. The IPO may
raise the capitalization of the company up to 500 million
($888 million). The lead manager of the offering is ING
Bank. Troyka-Dialogue (Moscow) will act as another IPO
manager, while Clifford Chance (Great Britain) and Denton
Wilde Sapte (Great Britain-Kazakhstan) were named legal
advisors for the flotation. Kazakhaltyn develops gold
deposits in Akmola Oblast. 100% of its shares belong to
Romanshorn LC AG (USA). (Interfax - Kazakhstan, November 3)

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