By Camilla Hagelund,Verisk Maplecroft
In the face of his country’s ongoing economic turmoil, Kazakh President Nazarbayev is engaging in fast-paced diplomacy to boost his country’s growth prospects. Hot on the heels of high-level bilateral meetings with the US, Japan and Qatar, he has attempted to position Kazakhstan as a land of opportunity for British business during his official visit to the UK this week.
However, while the Kazakh government is actively working to improve the environment for foreign investors, deep-seated deficiencies in the rule of law remain a serious barrier to investment.
Nazarbayev’s roadshow is an attempt to diversify the economy and shore up investment to offset the impact of persistently low oil prices, which have cut the country’s foreign trade surplus by more than 60 per cent and caused budget revenues to plummet by 40 per cent this year. As a result, GDP is projected to expand by just 1.3 per cent in 2015, down from 4.3 per cent last year and 6 per cent in 2013. Read more
The global economy faces a severe chill. Demand is shrinking, prices are falling, currencies are struggling and credit is scarce. The scale of the economic turbulence ahead, for many countries, dwarfs the impact of the crisis of 2008-09. Yet the dangers this poses for the global economy and the prosperity and stability of all countries have not been thought through. We must act now, before the chill turns into a long, fierce winter.
In a truly globalised economy, no country can hope to weather these difficulties alone. Raw economic self-interest demands that we reach out to our partners around the world. Creating new business links, expanding markets, boosting trade and investment are all essential. Now is the time for all nations to look outward with courage rather than retreating inwards. Read more
Wherever we look in the world, there are dark clouds overhead. The global economy remains fragile. Violent extremism is putting lives and stability at risk. Old tensions and divisions between nuclear powers have been re-awakened.
These divisions have again brought into sharp focus the terrible dangers that nuclear weapons pose to our world’s survival. Despite recent welcome reductions in the number of warheads, those that remain could destroy humanity many times over. This threat has been made far worse by the active pursuit of weapons of mass destruction by violent extremists who would not hesitate to cause unimaginable death and destruction.
It is against this sombre background that there have been, in recent weeks, two powerful signs of hope. Read more
The increased tensions between Russia and the west, the continuing problems in the global economy and the rising threat from extremism have rightly caused concern in capitals around the world. The crisis of confidence in international relations has further weakened the abilities of all states to deal with modern challenges and threats. Viewed from Kazakhstan and Central Asia, however, these shadows over our collective hopes seem even more menacing.
Ukraine is a country with which we have deep historical and personal ties. The continuing conflict there has had a deep impact on us and the wider region. We have responded by working tirelessly to help settle the Ukrainian crisis. The Minsk agreements have created conditions for a long-term solution. Read more
By Diana Gapak, Daniyar Kosnazarov and Gavin Bowring
Often likened to being “between a rock and a hard place”, Central Asia’s relatively isolated position has required it to maintain consistent and balanced good relations with two giant neighbours, China and Russia.
Nevertheless, its high degree of integration with Russia has jolted the region’s local economies, the result of their twin exposure to the protracted Ukrainian crisis and the slump in commodity prices, manifested through tanking local currencies and reduced inflows of remittances from workers abroad.
Anxiety has further gripped post-Soviet states in recent months, with the recent 35 per cent slump in the Azerbaijan manat and a 34 per cent devaluation in Turkmenistan, often considered the economy with the least direct exposure to Russia. Concerns are spreading in Kazakhstan of an additional devaluation of the tenge (following last year’s 20 per cent decline) amid calls for early presidential elections. Read more
Pressure for a devaluation of Kazakhstan’s beleaguered currency is building as the country adjusts to weaker oil prices and a crumbling Russian rouble, analysts said.
Futures markets are pricing in a sharp depreciation, with the 6-month forward contract trading at over 225 tenge per US dollar – almost 40 tenge above the official fluctuation corridor of 170 to 188 tenge per US dollar. The 12-month contract changes hands at 240 tenge per US dollar.
The mounting pressure on the tenge is echoed in other oil-rich post-Soviet states. Azerbaijan is planning to abandon its currency peg to the dollar as the oil price tumble strains its energy-dependent economy, the central bank governor told the Financial Times. Read more
As anyone who has tried to drive across Almaty at 6pm knows, Kazakhstan’s financial capital is no sleepy city on the steppe.
Car ownership in Almaty city and the surrounding region has soared on the back of Kazakhstan’s growing oil wealth, rising from 617,000 in 2007 to 936,000 in 2011. At rush hour, police regulate the number of vehicles entering the city and traffic on the glitzy Al-Farabi avenue grinds to a halt.
On Tuesday the Kazakh government will attempt to address the gridlock, launching a roadshow in London for tender to build a ring road around the city. Read more
By Gavin Bowring, Asean Confidential
Kazakhstan announced last week a major government reshuffle, streamlining its ministries from 17 to 12. Most significant was the creation of a new Ministry of National Economy, merging a number of different agencies and oversight bodies under one roof to improve efficiency, and a revamped Ministry of Energy that follows President Nazarbayev’s reported criticism of the country’s energy sector as being “in disarray”. Read more
“When eating an elephant, take one bite at a time”, US Army officer and Vietnam veteran Creighton Abrams once said.
In his new book, The Rise of the New East, Ben Simpfendorfer does just that. His elephant is “The East”, the group of almost 50 emerging markets ranging from Turkey to China that is home to well over half of the world population.
Simpfendorfer gives his topic a thorough treatment. While his insights seem logical and intuitive, taken together they give an impressive oversight of into key trends shaping the region. beyondbrics noted five insights that particularly stood out. Read more
Lukoil has agreed to sell its stake in several oil projects in Kazakhstan to Sinopec for $1.2bn, in the latest of a string of Chinese investments in the country’s energy sector. The Russian company – the country’s largest private-sector oil producer – said the purpose of the sale was to “optimize Lukoil’s overseas hydrocarbon asset portfolio”.
But the deal is also symbolic of China’s rapid expansion in Central Asia, part of Russia’s traditional “sphere of influence”. Read more
Kazakh tenge slumps by over 18 per cent in morning trade
By Claire Nutall of bne in Astana
Kazakhstan became the latest emerging market to succumb to competitive devaluation pressures as the Tenge plummeted against the US dollar on Tuesday, following Astana’s decision to allow a 19 per cent depreciation to shore up the country’s export competitiveness. Read more
Merger this way
Two of Kazakhstan’s largest banks are merging to create Central Asia’s largest lender. The $1bn deal will return the stricken BTA Bank to private sector ownership five years after it was nationalised in a government bail-out.
Kazakhstan’s banks were once a darling of western investors, but the financial crisis led to a string of writedowns and defaults that damaged the country’s image among international investors. Read more
Something strange is happening in Kazakhstan. Over 12 per cent of consumer loans are non-performing and yet the banks are dishing out more consumer credit than ever.
Lending increased 37 per cent between July 2011 and November last year. It was over four times greater in November 2013 than at the beginning of 2006. Read more
Scheme of the ESPO oil pipeline route | Source: Centre for Eastern Studies
Rosneft’s plans to step up oil deliveries to China will strain Russia’s new eastern oriented export pipelines to the limit. A preliminary deal struck on Monday will see Kazakhstan come to the rescue shipping oil on Rosneft’s behalf through its own pipeline to the Chinese frontier.
It’s a set back for Transneft, but the Russian state oil pipeline monopoly will probably have to lump it. Read more
Martchenko: out the door
By Clare Nuttall of bne
Grigory Marchenko has been replaced by former deputy prime minister Kairat Kelimbetov as governor of the National Bank of Kazakhstan (NBK). The sudden move, announced on October 1, comes four years into the second term of the respected Marchenko, and just ahead of the central bank’s takeover of the country’s pension assets.
A statement from the presidential press office said Marchenko has been relieved of his post at the bank for “family reasons”. No further explanations were offered for the dismissal of Marchenko, who returned to the post for a second time in 2009 during the depths of the recent financial crisis. Read more
A big day for big oil and an even bigger one for Kazakhstan. After twelve years work and $49bn of investment, an international group led by Eni has finally turned on the tap at Kashagan, launching test production at the giant Caspian Sea field.
The Eni-led North Caspian Operating Company began test production at Kashagan on Wednesday, marking the end of more than a decade of delays and cost overruns at Kazakhstan’s flagship oil field. Read more
Xi Jinping of China and Nursultan Nazarbayev of Kazakhstan in Astana, Sept 7, 2013.
By Usen Suleimen of the Kazakh foreign ministry and Xiaojiang Yu of Hong Kong Baptist University
The visit of Xi Jinping, China’s president, to Kazakhstan last weekend and the signing of $30bn of new agreements is another symbol of the growing closeness between two of the world’s largest countries. It is a relationship built on mutual challenges, geographic proximity and energy, as China increasingly looks to central Asia to power its growing economy.
But these links have also raised alarm bells in the west. Read more
Xi Jinping, China’s president, wound up a two-day official visit to Turkmenistan on Wednesday night by bagging a package of natural gas deals that will strengthen China’s grip on central Asia’s energy resources. He has since arrived in St Petersburg where, as well as attending the G20 summit, he’s expected to be talking gas co-operation again – this time with Russia’s Gazprom.
Gazprom is eager to clinch a long-delayed gas contract with China that would open up a vast new export market on Russia’s eastern flank. But after his success in Turkmenistan, Xi may decide to play hard to get. Read more
Champagne corks may be popping in Astana following the arrest of Mukhtar Ablyazov, the fugitive former chairman of Kazakhstan’s BTA Bank and opposition leader in France on Wednesday. However, as the Kazakh authorities know only too well, the financial problems at BTA, and indeed many other Kazakh banks, are no laughing matter.
Kazakhstan’s banks are staggering under 3.7 trillion Tenge ($23.9bn) of bad debts that account for almost one third of their combined credit portfolios, according to a study released by Kursiv, the Kazakh business daily this week. Read more
So, Kazakhstan has restated its intention to issue a $1bn eurobond, Reuters reported on Monday. The oil-rich nation has been talking about this for years but has been reluctant to pay interest for money when it is flush with cash already.
When the issue was last mooted in May, analysts said Kazakhstan could have expected to pay about 3 per cent a year, on a par with Russia. Perhaps the government has been prompted to get moving on a deal by Ben Bernanke‘s suggestion that the days of easy money may be drawing to an end. Read more