No 17 November 21, 2007
•Kazakhstan’s president to visit Slovakia, Romania and Hungary •Kazakh government, UNHCR sign agreement on cooperation in protecting refugees
•Kazakhstan sets up $4bn fund •Bank Hapoalim acquires Kazakhstan Bank
•Kazakhstan to enjoy 14 new domestic flights •Kazakh success means Armenia misery
Kazakhstan’s president to visit Slovakia, Romania and Hungary
On November 20-24 President Nursultan Nazarbayev will pay official visits to Slovakia, Romania and Hungary.
President Nazarbayev plans to meet Presidents of these countries as well as Prime Ministers and Speakers of Parliament.
The talks will demonstrate Kazakhstan’s increasing role in Central and Eastern Europe and fully comply with one of the priorities of the country’s foreign policy, namely further development of cooperation with the European Union.
Bratislava, Bucharest and Budapest fully support Kazakhstan’s genuine interest in entering European markets not only as a hydrocarbon supplier but also as an alternative transit route for goods shipments from Asia.
Kazakh government, UNHCR sign agreement on cooperation in protecting refugees
Kazakh Foreign Minister Marat Tazhin and UN High Commissioner for Refugees Antonio Guterres signed a cooperation agreement to protect rights of refugees in Astana on November 14, reports the Embassy of Kazakhstan with reference to the Interfax-Kazakhstan news agency.
“This document will serve as a basis for the regulatory framework of relations between our country and relevant UN office. The agreement governs activities of the UNHCR mission in Kazakhstan, sets out rights and obligations of its staff and clearly defines parties’ obligation to implement the agreement,” Minister Tazhin told at a press briefing after the signing ceremony.
Minister reminded that the UNHCR mission had been active in Kazakhstan since 1995. He added that independent Kazakhstan had provided shelter for about 15,000 refugees.
Tazhin indicated that Kazakhstan had joined the UN Refugee Convention adding that currently a law on refugees was being drafted in the country.
Kazakhstan sets up $4bn fund
By Isabel Gorst, Financial Times, November 21, 2007
Kazakhstan has put together a $4bn (€2.7bn, £1.9bn) stabilisation fund to help its economy weather the credit squeeze stemming from the US subprime mortgage crisis, the Kazakh central bank governor has told the Financial Times.
The fund, $1bn of which will be dispensed this year, will be available to commercial banks at favourable interest rates set by the government.
It will focus on helping small- and medium-sized businesses and the construction and property sectors, where a prolonged recession could unleash popular discontent, Anvar Saidenov, chairman of the National Bank of Kazakhstan, said in an interview.
A liquidity shortage, accompanied by rising inflation and a sudden currency devaluation, had come as a shock after seven years of growth driven by rising oil prices, Mr Saidenov said.
“It is like balancing between three very shaky stools all directly and indirectly connected to one another,” he said.
Construction has been hit particularly hard – companies in the sector are reducing investment after lending from over-leveraged Kazakh banks dried up. Property prices, which have risen by 900 per cent in big cities in the last four years, have begun to fall in some areas.
Mr Saidenov said: “It is clearly a bubble and it has to burst but we are trying to control the way the burst happens.”
Government funds will aid the completion of some construction projects, although there will be “no 100 per cent bail-out of construction companies”, he said.
Kazakh banks, facing $12bn worth of international debt repayments next year, can turn to the government for short-term assistance in refinancing loans. Kazakhstan’s state mortgage company is also prepared to buy the obligations from struggling banks.
Mr Saidenov said: “The overall message to the banks is they should stand on their own feet. These are difficult times for them and next year will be difficult too.”
Kazakh banks are being encouraged to increase their capitalisation by divesting foreign assets and selling shares. Although bond markets will probably be closed to Kazakh banks for a year, some syndicated loans and bilateral deals are still forthcoming from foreign banks.
Arman Dunaev, chairman of Kazakhstan’s Agency for Regulation and Supervision of the Financial Market, said restrictions on foreign borrowing would be tightened in January.
He said the credit squeeze would provide Kazakh banks with a valuable lesson in risk management. “There have always been crises and always will be.”
Officials said the acquisition by UniCredit, an Italian bank, of ATF, a mid-sized Kazakh bank, last week would increase public confidence in the banking sector.
Mr Saidenov said the tenge, the Kazakh currency, which fell sharply in August amid a sudden exit of foreign speculative funds prompting the national bank to intervene, appeared to have stabilised in recent weeks. The sale of dollars by oil companies at the end of the year to pay taxes would buoy the tenge, he said.
Officials said the government’s decision last week to downgrade its forecast for economic growth next year was possibly over-cautious given Kazakhstan’s record oil export earnings.
Bank Hapoalim acquires Kazakhstan Bank
Bank Hapoalim has completed the acquisition of control of Demir Kazakhstan Bank (DKB), the first bank in Kazakhstan and in all of Central Asia to be purchased by an Israeli bank.
The acquisition of DKB was performed through BankPozitif, a Turkish bank in which Bank Hapoalim acquired a 57.55% stake last year, and is an additional step in the Turkish bank's development and in the implementation of Bank Hapoalim's international strategy.
Bank Hapoalim Chairman Dani Dankner commented, "The acquisition of DKB in Kazakhstan is another step in the realization of the long-term strategy of Bank Hapoalim, which aims to significantly expand the percentage of our total activity represented by international operations. This further strengthens Bank Hapoalim's position as a global bank with worldwide operations, including in emerging markets. Kazakhstan is one of the largest and most important countries in the Central Asia region. Our investment in DKB is based on our perception of the needs and opportunities facing Bank Hapoalim, as well as a general view of Israel's strategic and economic needs."
Demir Kazakhstan Bank (DKB) is ranked 21 in size out of the 33 banks operating in Kazakhstan in terms of its total assets and shareholders' equity, which totaled USD 120 million and USD 25 million, respectively, at the end of the third quarter of 2007. The bank's assets grew by 95% in 2006 (in dollar terms) and increased by an additional 13.5% in the first three quarters of 2007.
The bank's net profit for the first three quarters of 2007 reached USD 2.3 million, reflecting an annualized return on equity of 12.3%. The expected net profit for 2007 reflects more than 100% growth compared to 2006 and 245% growth compared to 2005.
The total cost of the investment in DKB is approximately USD 70 million, of which USD 56 million will be paid to the sellers, while the additional USD 14 million will be used to increase DKB's capital to USD 40 million immediately following the acquisition.
DKB currently focuses on servicing small and mid-sized enterprises (SMEs) through three branches in major Kazakh cities: Astana (capital of Kazakhstan since 1997), Almaty (the former capital), and Atyrau. The bank plans to open additional branches in several locales and to considerably expand its activity in the oil and gas, construction, metals, transportation, and food industries.
Bank Hapoalim CEO Zvi Ziv commented, "The acquisition of DKB is a milestone marking Bank Hapoalim's first foray into the promising markets of the CIS region in general, and Central Asia in particular. The knowledge, experience, and professional expertise of Bank Hapoalim and its employees and managers ensure a relative advantage in Kazakhstan, where growth rates have been among the world's highest in the last decade. We will develop our activity in Kazakhstan in all areas of corporate and retail banking, and help companies and businesspeople from Kazakhstan and from Israel forge economic relationships for the good of both countries."
Kazakhstan is the second-largest country in terms of size, after Russia, of the states formed following the dissolution of the USSR. It is the ninth-largest country in the world, at 2.7 million square kilometers, and has a population of 15 million.
Most residents of Kazakhstan are still employed in agriculture, but the country is very rich in minerals and natural resources, including oil, gas, coal, and various metals and minerals; exploitation of these resources has developed rapidly in recent years. Subsequent to steps taken to liberalize the economy and large-scale privatizations starting in the mid-1990s, the Kazakh economy is growing at an extremely rapid pace, reaching 10% on average in 2000-2006, mainly thanks to its rich energy resources. The International Monetary Fund predicts continued rapid growth in Kazakhstan in 2007-2011. GDP grew by more than 10% in the first ten months of 2007. The high growth rate led average per-capita GDP in Kazakhstan to soar from USD 1,400 in 2001 to more than USD 4,000 in 2006, accompanied by a large decrease in the unemployment rate, now at 7%.
Kazakhstan enjoys large-scale inflows of foreign investments which are expected to continue in the coming years. Reasons include the economic policy of the government, which continues to carry out structural reforms and improve Kazakhstan's legal and regulatory systems, with the explicit aim of admission into the World Trade Organization.
Structural reforms in the Kazakh banking system were initiated in 1995, with the objective of attaining international standards. These reforms include maintaining capital and liquidity ratios, improving transparency, adapting accounting methods to generally accepted international standards, establishing risk-management systems, reducing exposure to individual borrowers, offering deposit and investment insurance, and more. The rapid growth of the national economy has brought about considerable growth of the financial sector, while concurrently the number of banks has decreased as a result of mergers and acquisitions. While in 1996 there were no less than 184 banks in Kazakhstan, today there are 33, of which 14 are foreign banks. The profitability of banks in Kazakhstan has greatly improved recently, with average return on equity reaching 14% last year, up from 10% in 2005.
International economic entities, including the World Bank and the International Monetary Fund, see Kazakhstan as one of the most important, outstanding countries among the emerging economies and predict it will show high growth in the coming years along with rapid development in the areas of banking and finance, such as credit, mortgages, etc. Bank Hapoalim believes its accumulated international experience and the skill and expertise of the Bank's staff position it to leverage its relative advantages in Kazakhstan.
Kazakhstan to enjoy 14 new domestic flights
14 new domestic flights will be launched in Kazakhstan in several months time.
The Government plans to extend its financial support to the new flights seeking to speed up development of air services and expansion of air flight coverage in Kazakhstan.
Two pilot flights – from Karaganda to Ust-Kamenogorsk and from Karaganda to Kyzylorda – are scheduled for November 20, 2007. Previously the flights were scheduled for January 2008.
In the meantime Kazakhstan’s Transport Ministry will outline a number of steps in order to improve regional air transportation. In July new local flights were launched in the East-Kazakhstan region linking Semey and Ust-Kamenogorsk with five other regional destinations.
Kazakh success means Armenia misery
Sergey Ostapenko's first international goal earned Kazakhstan a victory in Yerevan which took the visitors above Armenia in UEFA EURO 2008™ Group A.
The 21-year-old's second-half strike came against the run of play and gave Kazakhstan only their second win of the qualifying campaign.
Armenia had threatened to take control early on when Robert Arzumanyan shot wide following an Artur Voskanyan free-kick. Although Ostapenko tested Armenia keeper Roman Berezovsky's reflexes soon after, the home team continued to dictate matters. Karen Dokhoyan fired over when well-placed before an effort from Levon Pachajyan skimmed the top of the crossbar close to half-time.
The traffic carried on towards the Kazakhstan goal at the beginning of the second period, with a Samvel Melkonyan attempt flying just the wrong side of an upright. Ostapenko provided the perfect response for Arno Pijpers' men, first by demanding a save from Berezovsky following a Sergey Larin centre, then by blasting the ball beyond the Armenia keeper from the edge of the area.
Armenia came close to equalising soon after through an Artavazd Karamyan free-kick. However, the team now led by Vardan Minasyan following the death of coach Ian Porterfield could not prevent their campaign ending on a glum note. Armenia, who had won 2-1 in Kazakhstan in June, finished on nine points from 12 matches – having been unable to fulfil their two fixtures against Azerbaijan. The Kazakhs have ten points and a game still to play in Serbia.
News Bulletin of the Embassy of the Republic of Kazakhstan
Contact person: Zhanbolat Ussenov
Tel.: 202-232-5488 ext 104; Fax: 202-232-5845