KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, FEBRUARY 23 - MARCH

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TAGS: ECON EIND ENRG EPET EFIN KTDB KZ
SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, FEBRUARY 23 - MARCH
7, 2008


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1. Summary: This information is drawn primarily from the
Kazakhstani local press, and has not been verified for accuracy.

-- Quota for Sugar Imports
-- Financial Sector News
-- Results of 2005 EITI Report
-- KazMunayGas To Explore Zhambyl Block of Caspian Shelf
-- Kazakhstan-China Joint Venture To Build Gas Pipeline

Quota for Sugar Imports
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2. The Government of Kazakhstan (GoK) introduced a quota of 47,000
tons on the import of sugar to be effective through October 1, 2008.
According to officials at the Ministry of Agriculture, this
decision was initiated at the request of local sugar producers
seeking protection from Russian dumping practices. In return,
Kazakhstani sugar producers promised the GoK that they would
stabilize sugar prices, satisfy local demand, and support domestic
sugar beet producers.


3. According to Andrey Bodin, Chairman of the Union of Sugar
producers of Russia, the decision to create a quota on sugar imports
directly contradicts the purposes of the newly proposed customs
union between Russia, Kazakhstan and Belarus. Bodin also claims this
move contradicts generally existing agreements and trade practices
amongst CIS countries. "Any restrictions should be preceded by
preliminary investigations, and Kazakhstan should have proven the
need for this quota with its trade partners. Unfortunately, it has
not been done. This decision may impact the prospects of bilateral
Russian-Kazakhstani trade" concluded Bodin.

Financial Sector News
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4. Troika Dialog, Russia's No.2 investment company, plans to buy
100% of the Kazakhstani brokerage firm Almex Asset Management.
Troika Chairman Ruben Vardanian declined to comment on the price of
acquisition. Troika bought the Kazakhstani company from Almex
Holding Group, which controls Kazakhstan's third-largest bank, Halyk
Bank. Dinara Kulibayeva, President Nazarbayev's daughter, and her
husband Timur Kulibayev, jointly own the Almex Holding Group. Almex
Asset Management, set to be soon renamed Troika Dialog Kazakhstan,
will provide brokerage, investment banking, asset management,
private equity and other financial services.


5. Halyk Bank has reshuffled its Board of Directors. Shareholders
recently elected to its Board of Directors for three-year terms
Kamilya Arstanbekova, Askar Yelemessov (the current head of the
Almex Asset Management),Christof H. Ruhl, Grigoriy Marchenko (the
CEO of Halyk Bank),Alexander Pavlov, and Kairat Satylganov. Pavlov
and Ruhl were elected as independent non-executive directors.
Yelemessov and Satylganov were elected as non-executive Directors,
representing the interests of the Almex Holding Group.


6. According to the official website for the Kazakhstan Stock
Exchange (KASE),assets of Kazakhstan-based Kazinvestbank(KIB) in
early 2008 reached 57.936 billion tenge (about $480.6 million),
which is a 129% increase over their assets of 25.267 billion tenge
(about $200.9 million) a year ago. KIB's equity capital totaled
9.591 billion tenge (approximately $78.3 million) as compared to
4.706 billion tenge (approximately $37.3 million) in 2006.
Registered capital increased 88.5% over the last year reaching 8.49
billion tenge (about $69.3 million). In 2007, KazInvestBank's net
profit stood at 936.774 million tenge (around $7.644 million) as
compared to 115.098 million tenge (approximately $912.8 thousand) in

2006. In the summer of 2007, both the EBRD and Citigroup Venture
Capital International acquired shares in Kazinvestbank.


7. The board of directors of Alliance Bank elected Yerik
Sultankulov as the new CEO of Alliance Bank. Sultankulov replaced
Dauren Kereybaev, who was appointed deputy CEO of Seimar Alliance
Financial Corporation, a major stockholder in Alliance Bank.

Results of 2005 EITI Report

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8. The 2005 Extractive Industries Transparency Initiative (EITI)
report audited by Deloitte was presented in Astana at the first EITI
conference on February 29. Thirty-nine oil and gas companies that
presented their financial reports declared $2.588 billion in taxes
paid to Kazakhstan, while the Finance Ministry showed $2.596 billion
of proceeds received. According to Vice Finance Minister Daulet
Yergozhin, the difference reflects exchange rate changes and
incorrect data presented by some companies.

KazMunayGas To Explore Zhambyl Block of Caspian Shelf
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9. Kazakhstan's national oil and gas company, KazMunayGas (KMG),
will explore the Zhambyl Block of the Caspian Shelf, a block with
120 million tons of oil in probable reserves. According to Energy
Minister Sauat Mynbayev, KMG will transfer a 73% stake in the
project to its subsidiary, KazMunayTeniz, and 27% to the Korean
National Oil Company.

Kazakhstan-China Joint Venture To Build Gas Pipeline
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10. KMG subsidiary KazTransGas and Trans-Asia Gas Pipeline Company
Ltd, which is affiliated with the China National Petroleum
Corporation, have established a joint venture, Asian Gas Pipeline
LLP, to build a Kazakhstan-China gas pipeline. The first section of
the pipeline with an annual transit capacity of 40 bcm of gas will
extend from the Uzbekistan-Kazakhstan border via Shymkent (South
Kazakhstan) to China's Khorgos. The second section,
Beineu-Bozoy-Kyzylorda-Shymkent, will have a 10 bcm annual transit
capacity.

ORDWAY