2000-01-24 Kazak Politics & MacroEconomics

Kazakhstan Weekly

Politics & Macro Economics

Monday January 24, 2000

Deputy PM Unveils Economic Forecast for 2000

According to international experts, Kazakhstan’s gross domestic product (GDP) will equal nearly USD 1,000 per capita in the year 2000, Interfax reported, quoting a speech by Deputy Prime Minister Erzhan Utembaev. The number, equivalent to about USD 15 billion, is “a bad figure”, according to Utembaev.

Utembaev also noted that, using the methodology of the International Monetary Fund (IMF), the republic’s budget deficit in 2000 will reach 5.8% of the GDP. However, the government’s 2000 budget forecasts a deficit of 3% of the GDP, or KZT 63.8 billion. The deputy prime minister stated that “a nation is deemed bankrupt” if it hits a budget deficit of 6% of the GDP, according to the IMF’s methodology.

Concerning Kazakhstan’s foreign debt, Utembaev said that payments on outstanding foreign debts for 2000 would be “greater than last year”. As a result, the ratio of the nation’s foreign debt to GDP “has reached an uncomfortable level”. With this in mind, the deputy prime minister predicted that “the republic will have a quite tense period” in 2000-2001.

Nevertheless, Utembaev expressed confidence that the nation would meet its foreign debt obligations. (Golden Eagle Partners)

Chinese Oil Company Unveils Its Plans

The Chinese National Petroleum Corporation (CNPC) plans to invest USD 120-130 million in 2000 to modernise the Aktobemunaigaz oil production company in Kazakhstan, which it controls. A top official at Aktobemunaigaz said that the Chinese concern has no intention of leaving the Kazakhstani market. The company will produce 2.5 million tonnes of oil this year, 200,000 tonnes more than in 1999, he said.

The company has managed to pay all wage arrears. However, the majority of the 2,000 workers who were laid off in April last year remain jobless. The workers were laid off when Aktobemunaigaz spun off its drilling, transportation and construction divisions. The management had promised the displaced workers jobs at successor companies and pledged to make unemployment payments equal to 30% of the previous wages until the workers were rehired.

In the summer of 1997, Kazakhstan and China concluded an oil production and pipeline construction deal worth a total of over USD 9.5 billion. In 1998 joint development began at the Uzen oil field and at the Aktyubinsk oil and gas field. CNPC acquired a 60% stake in Aktobemunaigaz for USD 325 million and agreed to invest USD 4 billion in the company over the following 20 years.

At the same time, according to figures announced in mid-December at a meeting of the local executive body in the Aktyubinsk region, CNPC only made 85.4% of the investment planned for 1998. Investment for 1999 was to total USD 117.4 million, but no more than USD 70 million was made. (Interfax, Bloomberg)

Income Minister Says Tax Rate Decrease a Possibility

“We can now speak about a possible decrease in rates” of the three types of taxes in Kazakhstan – VAT, individuals’ income tax and social tax, said Zeinulla Kakimzhanov, the Minister of State Income. Kakimzhanov was speaking at a conference on developing Kazakhstan’s new tax code.

The Minister believes that the current structure of individuals’ income tax is generally correct but he admits that the scale of rates within this tax should be reviewed. High inflation rates, the tenge’s devaluation, and “the absolute volume of salaries” should be taken into consideration.

Mr Kakimzhanov said that the government agrees, in principle, that the social tax rate should be decreased to its previous level, but only if the budget can be fulfilled. He said this tax can be differentiated.

As for the existing 20% VAT rate, the Minister said it is unacceptable considering the high value of money in the country, the low effectiveness of the economy, and the long term of capital turnover. However, he did not specify a new VAT rate, saying that it is a “very hot issue”. (Interfax)

Output of Oil Products Falls by 28%

In 1999, the production of oil products in Kazakhstan dropped by 28% year-on-year to 5,732,000 tonnes, the National Statistics Agency reported.

The republic’s three refineries turned out 1,297,000 tonnes of gasoline (including aviation fuel), three-fourths of their 1998 level. Kerosene output fell by 69% to 71,300 tonnes, diesel fuel totalled 1,829,000 tonnes (73% of 1998), and mazut production dropped to 2,132,000 tonnes (70% of 1998).

According to Statistics Agency data, the production of oil coke, oil bitumen and other residues from oil processing decreased by 49% last year. (Golden Eagle Partners)

Statistics Agency Reports on Bank Deposits

Deposits in Kazakhstan’s banking system totalled KZT 137.9 billion in the first eleven months of 1999, including KZT 46.2 billion (33.5%) in individual deposits, Interfax reported, citing the Statistics Agency.

Of the total, KZT 23.3 billion (50.4%) of all individual deposits were held by Halyk Savings Bank. KZT 23.2 billion (50.2%) of citizens’ savings were held in the national currency, the tenge.

From January through November, commercial banks provided loans and credits totalling KZT 145.3 billion, 47.5% of which were short-term loans. KZT 40.7 billion (28% of all credits) were concentrated in trade, KZT 35.4 billion (24.4%) went to industry and KZT 13.1 billion (9%), to agriculture. About 79% of all credits, amounting to KZT 114.8 billion, were invested in Almaty. (Golden Eagle Partners)

1999 Gold, Silver Production Rises

Kazakhstan saw an increase in gold and silver production in 1999, Interfax reported, citing the Statistics Agency. Last year, the refined silver output reached 645,606 kg, a 20% increase over 1998. December’s refined silver production totalled 60,850 kg, an increase of 8% from November and up 28% from December 1998. The output of refined gold in 1999 totalled 9,604 kg, an 8% increase as compared to 1998. Gold output in December was 1,147 kg, a 40% increase from November and up 74% from December 1998. (Golden Eagle Partners)

PM Tries to Allay Fears about Pension Funds

Prime Minister Kasymzhomart Tokaev led a discussion on pension reforms at a government session in Astana. The Kazakhstani prime minister attempted to abate public worries about the future of the pension system by saying that “the government will make no changes to, or retreats from, the ongoing pension reforms.” He further noted that the government would continue to co-operate with the World Bank on the matter.

Tokaev stated that the State Pension Fund will retain its officials status and may be privatised only after several years, provided that its share of the pension savings market drops below 30%. He asserted that a decrease in the market share of the state fund is natural, as depositors are entitled to take their pension savings to private funds. The prime minister insisted that the government is committed to making sure that all pension deposits are placed into stable investments. He reminded officials that pension savings can only be invested upon the consent of depositors.

After coming down on the Minister of Labour and Social Protection, Nikolay Radostovets, for his recent comments about the pension system, the Cabinet of Ministers praised him for his efforts to straighten out the process of giving individual social codes to individual holders of pension funds. They noted that this had been done in the interest of the depositors. (Golden Eagle Partners)

But Private Pension Fund Official Says the Damage Is Done

The Chairman of the Association of Non-State Pension Funds, Aidar Alibaev, lamented at a press conference that a recent statement by Nikolay Radostovets was causing private pension funds to “incur losses” and lose depositors. Radostovets said late last year that pension funds might channel their capital into projects in the real economy, such as the Atyrau-Samara pipeline. The idea was later soundly rejected by the National Securities Commission.

Alibaev says that he has heard about depositors withdrawing from the Ispat-Karmet, Kazakhmys, Valyut-Tranzit and Ular private pension funds. The depositors requested that these pension
funds transfer their deposits to the State Pension Fund. (Golden Eagle Partners)

Kazakhstan Increases Metals Output

Kazakhstan increased its output of metallic ores in 1999, with iron ore extraction rising by 3% to 9.607 million tonnes and copper concentrate output increasing 11% to 1.402 million tonnes, according to the National Statistics Agency.

Last year, Kazakhstani metallurgical plants produced 58,200 tonnes of lead concentrate and 587,100 tonnes of zinc concentrate, increasing the output of both metals by 8% and 26%, respectively. Compared to 1998, the quantity of manganese ore mined grew by 55% to 982,400 tonnes, and concentrate output rose by 53% to 536,000 tonnes.

Barite concentrate production was 13,300 tonnes last year, 49% higher than in 1998, and chromate ore extraction doubled to 2.405 million tonnes in 1999. (Golden Eagle Partners)

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