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ATR sets up logistics base in Kazakhstan

JUNE 21 2017 (The Bulletin) — ATR, a British oil field services company, said it had set up a new base new near Aktau after winning a series of projects. ATR, which merged with Centurion Group last year, said that the base would initially employ 12 people, although it aimed to double the size of it within 12 months. ATR rents out oil field services equipment. The Kazakh oil and gas sector is beginning to show signs of a recovery after a downturn since 2014 linked to a collapse in energy prices.

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(News report from Issue No. 334, published on June 26 2017)

Kazakh airport to be named after Nazarbaev

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JUNE 21 2017 (The Bulletin) — Coinciding with the opening of a new international terminal with a capacity to process around 8.5m travellers a year, Astana airport was renamed after President Nursultan Nazarbayev. State-owned media announced the name change. Mr Nazarbayev has been accused of building a personality cult. A statue of Mr Nazarbayev sitting on a throne-like chair dominates a park in Almaty, the second city, and law- makers have also considered renaming Astana after him.

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(News report from Issue No. 334, published on June 26 2017)

Currencies: Kazakhstan’s tenge, Uzbekistan’s soum

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JUNE 19 2017 (The Bulletin) — Falling oil prices have dented the Kazakh tenge, pushing it down to 320/$1, its lowest level since mid- February. This is a fall of 1.5% for the week, matching the fall of Brent oil. Brent oil was down at $47.37/barrel, down 1.6% for the week.

Overall, though, the Kazakh tenge is still trading up around 4% from where it started the year, although it has fallen back from highs hit in May. In May, the tenge traded at 310.6/$1 and had looked at one point as if it was going to push through the barrier.

There was little other currency moves this week, with the Azerbaijani manat staying unaffected by the fall in oil prices, and the Uzbek soum continuing its steady weekly 0.7% tick down.

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(News report from Issue No. 333, published on June 19 2017)

Georgia’s CB keeps interest rate at 7%

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JUNE 14 2017 (The Bulletin) — Georgia’s Central Bank said that it was keeping its key interest rate at 7% because of stubbornly high inflation. It said that inflation in May was 6.6%, above its 4% annual target, although it also said that it expected the rate of price rises to drop in the second half of the year. Higher taxes and increased prices for imported goods have pushed up prices in Georgia this year. Georgia had slashed rates last year to 6.5% from 8% but started to raise it again in January.

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(News report from Issue No. 333, published on June 19 2017)

Stock market: Georgia Healthcare, KAZ minerals

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JUNE 19 2017 (The Bulletin) — It was a poor week for stocks in companies linked to Central Asia and the South Caucasus. All stocks were either stagnant or fell, with the notably exception of Georgia Healthcare, which is perhaps the standout performer of the year.

By the end of the week, Georgia Healthcare stock had risen by 12% to 394.5p, smashing past its previous all-time high of 373p hit in February.

As for the fallers, the heaviest tumbles were taken by KAZ Minerals and Centerra Gold. KAZ Minerals, the Kazakhstan focused copper producer, fell 11.4% to 471.5p. This, although it looks bad, was merely a correction to return to trading at a level it has been anchored around for the past month.

Centerra Gold’s shares are volatile. The Canada-based miner whose main asset is the Kumtor gold mine in eastern Kyrgyzstan is locked in a near permanent dogfight with the Kyrgyz government for control of its asset. This week, though, traders said that short-selling had knocked the value of its shares. It finished the week at C$6.72, a fall of over 8%, and its lowest level since the start of March.

Other notably fallers include Nostrum Oil & Gas, which lost around 4.7% of its stock price, more than the fall in oil, and TBC Bank, a Georgian bank, which also shed around 5% of its value, possibly because inflation data remained stubbornly high.

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(News report from Issue No. 333, published on June 19 2017)

Kazakh capital aims to lure investors with tax breaks and stability

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ASTANA, JUNE 16 2017 (The Bulletin) — Through the Astana International Financial Centre (AIFC), Kazakhstan wants to create a regional centre of excellence that will lure companies to its windswept capital with a combination of tax breaks and guarantees on stability and the rule of law.

In an interview with The Bulletin, Baurzhan Bektemirov, managing director of the AIFC, said that setting up a legal system with English common law at its heart was key to one of Kazakh President Nursultan Nazarbayev’s pet projects.

“We have our own regulatory framework and authority. They are completely new. We are writing new bylaws and there will be more flexibility,” he said.

The plans are ambitious. AIFC and Nazarbayev University will take over the giant site currently being used by EXPO-2017 until mid-September. AIFC will have its own courts, legal and tax systems, all of which needed tweaks to the constitution to impose.

Part of the challenge of creating a financial centre in Kazakhstan, commentators have said, is persuading companies that it is now a reliable place to invest, that their rights will be protected and that corruption, an ailment that Kazakh companies and officials have found hard to shake off, is not going to derail their plans.

Under the plans, financial companies that move to the AIFC will be given tax breaks and should benefit from a stable, investor friendly, regime at the heart of Central Asia that can be used as a launchpad into Russia and East Asia.

“There will be no income tax for 50 years but this is not the main issue, it’s more about stability and how to do business,” Mr Bektemirov said.

At the centre of the AIFC are plans for a stock exchange and the development of a liquid capital market. It will be given a boost by the IPOs next year of state-owned Air Astana, Kazmunaigas and Kazatomprom which are committed to having their primary listings in Astana, although they are free to open a secondary listing on an international market.

“The idea is to conduct IPOs in Astana. This serves two things. It is cheaper and gives local investors better access. It’s weird that local investors have to go to London and pay all these fees to invest locally. Secondly it is about creating a local capital market,” Mr Bektemirov said.

Of course, Kazakhstan already has a stock exchange in Almaty – Kase. It was set up in the early 2000s but the market and investors weren’t ready.

Mr Bektemirov shrugged when asked about it. There are lesson to be learnt but this time it will be different.

“It wasn’t successful because of institutional problems. If you want to build new business, new companies, you need to build new institutions. You can’t rely on old institutions which have their owns problems, are rigid and are used to doing business in a certain way,” he said.

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(News report from Issue No. 333, published on June 19 2017)

Kazakhstan’s Air Astana looks to London for IPO

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ASTANA, JUNE 15 2017 (The Bulletin) — Kazakhstan’s national airline, Air Astana, is likely to launch its international IPO on the London Stock Exchange, CEO Peter Foster said at the Astana Economic Forum.

Air Astana and other state-owned companies that the Kazakh government wants to privatise are legally bound to list on the new Astana Stock Exchange, which will open next year, but the destination of a secondary foreign listing has been the focus of debate. Stock exchanges in Shanghai, Dubai and Singapore have all been touted as possible venues for Air Astana, although London has always been favourite.

“The foreign exchange is likely to be London,” Mr Foster told an audience during an AEF session focused on privatisation.

“The window for an IPO will open in Q3 2018.”

Currently, the Kazakh sovereign wealth fund Samruk Kayna owns 51% of Air Astana and BAE Systems owns a 49% stake.

Mr Foster later told the Bulletin that BAE Systems wanted the foreign IPO in London. The aim of the IPO is to double the size of the fleet over the next decade to around 65 planes.

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(News report from Issue No. 333, published on June 19 2017)

Azerbaijan jails opposition activist

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JUNE 16 2017 (The Bulletin) — A court in Baku sentenced opposition activist Fuad Ahmadli to 16 years in prison for stealing people’s personal data when he worked at mobile phone operator Azerfon.

Ahmadli’s supporters have said that the allegations are fraudulent and part of a government crackdown against dissenters. Ahmadli was a activist for the main opposition group, the Popular Front Party.

European politicians have accused the Azerbaijan government of cracking down on opposition members and journalists. The Azerbaijani government has said that the EU is being naive and that it is rooting out people who are in favour of regime change.

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(News report from Issue No. 333, published on June 19 2017)

Comment: Ignore the corporate feel, EXPO-2017 is worth a visit

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JUNE 19 2017 (The Bulletin) — After a build-up lasting five years, Kazakhstan has finally opened EXPO- 2017. If you’re in Astana between now and mid-September when it closes, you should go. It feels excessively corporate and you’ll probably come out of the EXPO-2017 site none-the-wiser on what exactly its Orwellian-tinged ‘Future Energy’ means, but don’t dwell on this — it’s not the real point of the exposition.

EXPO-2017 is a source of national pride and a must-do event for most ordinary Kazakhs this summer, at least for the ones who live in and around Astana. And this pride and sense of fun is evident throughout EXPO-2017. The dozens and dozens of uniformed guides are courteous, speak excellent English and are genuinely helpful. The student volunteers beam with joy and are relishing the internationalism of the whole event.

As for the visitors, when I was there it must have been 95% Kazakh. These were groups of families and friends touring the pavilion, drinking in each country’s take on EXPO- 2017. This ranges from Britain’s glowing yurt to Iran’s focus on promoting its carpets.

The visiting Kazakhs, armed with selfie sticks and aging smartphones, weren’t the super rich who travel effortlessly around the world, these were Kazakhs who may never have left Central Asia, or been on a solitary trip to Europe. EXPO-2017 feels as if it has returned the international exposition series to its original mid-19th century Victorian era roots of bringing the world to a particular city.

The human rights lobby draws visitors’ attention to Kazakhstan’s poor record for tolerating dissent and media freedom, and there have been widely documented corruption issues around EXPO-2017, but push this aside for now and enjoy the spectacle.

And make sure you don’t miss out on the Caribbean pavilion, the least scripted section. The women from Belize, Haiti and Dominica will tell you how they are coping with four months in Kazakhstan, a country they hadn’t heard of until earlier this year.

By James Kilner, Editor, Central Asia & South Caucasus Bulletin

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(News report from Issue No. 333, published on June 19 2017)

Kazakhstan’s TCO reveals finance plan

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JUNE 15 2017 (The Bulletin) — Tengizchevroil (TCO), Kazakhstan’s biggest oil producer, has cut its dividend payment this year to part- fund an expansion project, the CEO of Kazakhstan’s state-owned oil and gas company Kazmuniagas, Sauat Mynbayev, said. Mr Mynbayev also said that TCO would also borrow $20b to fund the $37b expansion project. The TCO expansion is considered a vital step in extending Kazakhstan’s oil production. It will increase production to 39m tonnes per year from 27m tonnes per year by 2022.

ENDS

(News report from Issue No. 333, published on June 19 2017)