US embassy cable - 05ALMATY2122

UNCLAS  ALMATY 002122 
 
SIPDIS 
 
 
DEPT PASS TO EUR/CACEN MUDGE 
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 
 
E.O. 12958: N/A 
TAGS: ECON, EIND, ENRG, EPET, EFIN, KZ, ECONOMIC, Energy 
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) 
 
ASQUINO 
 
 
NNNN