US embassy cable - 05ALMATY4047

UNCLAS  ALMATY 004047 
 
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 
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) 
 
ORDWAY 
 
 
NNNN