KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, APRIL 5 - APRIL 18,

UNCLAS SECTION 01 OF 02 ASTANA 000782 SIPDIS DEPT FOR SCA/CEN (O'MARA) DEPT PASS TO OPIC - BALLINGER DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER DEPT PASS TO AID - EE-PHILLIPS/RUSHING TREASURY FOR OASIA/VELTRI USDOC FOR 4231/ITA/MAC/MLONDON, 4201/BISNIS USDOC FOR 6110/ITA/TD/BI/RHALPERN ANKARA FOR CFC SIPDIS E.O. 12958: N/A TAGS: ECON EIND ENRG EPET EFIN KTDB KZ SUBJECT: KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, APRIL 5 - APRIL 18, 2008 ASTANA 00000782 001.2 OF 002 ¶1. Summary: This information is drawn primarily from the Kazakhstani local press, and has not been verified for accuracy. -- Temporary Ban on Wheat Exports -- First Hearings on New Competition Law -- Social Security of Bazaar Workers to Be Ensured -- Economic Statistics for January-March 2008 -- Crude Export Duty Introduced -- Metals Export Duty Proposed -- National Sulphur Storage to Be Built -- Caspian Energy Hub to Be Built -- Energy Statistics for January-March 2008 Temporary Ban on Wheat Exports -------------- ¶2. To better ensure the country's food security, the Government of Kazakhstan has banned wheat exports until September 1, 2008. Flour exports are not affected. In 2007, Kazakhstan harvested over 20.1 million tons of wheat. Of the 10 million tons of wheat intended for export this year, 7 million tons have already been exported. (Interfax-Kazakhstan, April 15) First Hearings on New Competition Law -------------- ¶3. The recently formed Competition Agency presented the government with the first draft of a new competition law, which will be submitted to parliament in November 2008. According to Competition Agency chairman Mazhit Yessenbayev, the new law stipulates the agency's statutory independence, a general reduction of state interference in market competition, and the substitution of regular inspections with market analysis to determine whether company practices can be considered fair. (Kazakhstanskaya Pravda newspaper, April 14) Social Security of Bazaar Workers to Be Ensured -------------- -- ¶4. Minister of Industry and Trade, Vladimir Shkolnik suggested amending the Law on Trade Regulation to add provisions imposing social taxes and pension payments on bazaar vendors. According to official statistics, as of January 1, 2008, more than 1 million people, or approximately 15 percent of the Kazakhstani labor pool, are employed in bazaars. Shkolnik, however, also made reference to TASIS survey results indicating that as many as 27 percent of the Kazakhstani labor force works in bazaars. (TV Channel 31, April 8) Economic Statistics for January-March 2008 -------------- ¶5. According to Economy and Budget Planning Minister Bakhyt Sultanov, Kazakhstan's GDP grew at an annual rate of 5.3% during January-March 2008. The unemployment rate dropped to 6.9%. (Interfax-Kazakhstan, April 15) ¶6. According to the Financial Supervision Agency, Kazakhstan's 35 commercial banks earned a net profit of 27.6 billion tenge ($229.1 million) during January-March, a decrease of 46.8% year-on-year. Meanwhile, deposits grew 2.3% and loans dropped 0.1%. (Press Release of the Financial Supervision Agency, April 15) Crude Export Duty Introduced -------------- ¶7. Kazakhstan will introduce a $109.91 per ton crude export duty on May 17. However, companies that pay rent tax will be charged just $27.43 per ton. The new duty does not apply at all to projects enjoying a fixed tax regime under their subsoil use contracts (this includes TengizChevrOil, Kashagan, and Karachaganak). Minister of Industry and Trade Vladimir Shkolnik said that he does not rule out the possibility of repealing the crude export duty in the new tax code that is expected to go into effect January 1, 2009. In view of the new crude export duty, KazMunayGas Exploration & Production, a KMG subsidiary, will revise its production, finance, and investment ASTANA 00000782 002.2 OF 002 plans. (Interfax-Kazakhstan, April 17; Liter newspaper, April 9; Press Release of EP KMG, April 8) Metals Export Duty Proposed -------------- ¶8. Vice Minister of Finance Daulet Yergozhin announced that the Government of Kazakhstan will establish a new metals export duty by the end of April. It will be lower than that of the new crude export duty. (Interfax-Kazakhstan, April 18) National Sulphur Storage to Be Built -------------- ¶9. In 2008, the Caspi Social Entrepreneurial Corporation, the Kazakhstan Oil and Gas Institute (KOGI),and TengizChevrOil (TCO) plan to launch a national sulphur storage project in Atyrau province (West Kazakhstan). TCO and Caspi will provide technical support, and KOGI will design an economic model. TCO, the largest producer of sulphur in the country, is currently maintaining approximately 9 million tons of sulphur in open storage. (Panorama newspaper, April 11) Caspian Energy Hub to Be Built -------------- ¶10. The Gulf Finance House (a Bahrain-based Islamic investment bank),PFC Energy International, Dunie Stock Energy, the Samruk State Asset Management Company, the Kazyna Sustainable Development Fund, and the Mangistau Investment Company signed a memorandum to build in Aktau a center for training technical personnel for oil companies. The center will include a science and technology park, a geophysical laboratory, a renewable energy center, and facilities for information technology development and environmental research. (Interfax-Kazakhstan, April 10) Energy Statistics for January-March 2008 -------------- ¶11. According to the National Statistics Agency, Kazakhstan produced 29.45 million tons of coal during January-March 2008, an increase of 19% year-on-year. Electricity generation grew 7.6% to 22.85 billion kilowatt-hours. (Interfax-Kazakhstan, April 17) ORDWAY