Tag Archives: business

Car sales in Kazakhstan, a leading economic indicator, fail to pick up

ALMATY, OCT. 18 2016 (The Conway Bulletin) — Kazakhs bought just under 31,000 cars in the first nine months of the year, a drop of 59% compared to the same period last year.

The car market is a key indicator of Kazakhstan’s economic health and its collapse since an oil price crash in mid-2014 has mirrored the Kazakh economy. In Q1 2014, by comparison, Kazakhs bought 35,000 new cars, easily outstripping total sales for the first nine months of this year.

Analysts have said that consumers are not buying cars because of a 50% cut in the value of the tenge and higher inflation which have made them vastly more expensive.

Putting a positive spin on the news, Oleg Alfyorov, president of Kazavtoprom, the car industry union, said that he thought the market had bottomed-out and that sales would start to rise again soon.

“Kazakhstan’s car market has been in a state of recession since the second half of 2014. But this year, sales have reached a market plateau, from which retailers can start moving upwards,” he said.

Mr Alfyorov also pointed out the increased share of locally produced cars in total sales, which grew to 24%, almost double the share in 2014.

“Quarterly Kazakhs bought about 10,000 new cars. This figure has been stable since the beginning of the year.

At the same time, an increasing number of buyers preferred locally- assembled cars,” he said.

Still, this is a long way from where the industry was a few years ago when foreign car makers were eager to get a foothold in Kazakhstan’s growing manufacturing sector to launch into what they thought would be a lucrative Central Asian market.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)

Arcelormittal’s troubles in Kazakhstan

OCT. 17 2016 (The Conway Bulletin) – ArcelorMittal, the world’s largest steelmaker, has shown signs of trouble in its operations in Kazakhstan due to the fall in commodity prices.

In early 2014, it laid off around 1,000 workers. The subsequent devaluation of the tenge currency seemed to have fixed its cost problems but as the US dollar strengthened against all commodities, effectively pushing prices down, the company felt the bite of lower revenues.

In 2015, it cut worker salaries by 25% only to later face a court order that deemed the move illegal. Later in 2015, when the tenge sank after the Central Bank ditched the peg to the US dollar in August, ArcelorMittal Temirtau’s former boss Vijay Mahadevan said that the tenge value needed to be even lower for the company to effectively cut costs.

But exchange rate fixes are only one-off solutions that cannot ensure long-term stability.

Earlier this year, the company predicted a 13% drop in net income and cancelled a promised pay raise to its employees, lowering their benefits instead. And in September, the government lodged a veiled accusation against ArcelorMittal Temirtau for allegedly slowing production to keep revenues low and avoid a higher tax bill. The company said this week it had resumed full production, to avoid further problems.

But the headaches are still there, despite the potential growth of the Iranian market, vital for ArcelorMittal, after most sanctions were lifted this year.

Besides the thousands that it currently employs, the plant in Temirtau holds symbolic value, as President Nursultan Nazarbayev worked there in his youth.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)

EBRD eyes up Tajik Bank

OCT. 15 2016 (The Conway Bulletin) – Neil McKain, regional director of the EBRD, said that the Bank is ready to put $100m into the ailing Tojiksodirotbank (TSB), which has been under temporary administration since May. Rumours about the EBRD buying a stake in TSB have lingered for months. Should the investment be confirmed, it would be lower than the $165m previously rumoured. TSB is Tajikistan’s second-largest lender.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)

EBRD gives loans to Tajik farmers

OCT. 18 2016 (The Conway Bulletin) – The EBRD and the EU will partner to implement a 42m euro ($46.5m) programme to support farming in Tajikistan. A first tranche of 15m euros was provided to Arvand, a microfinance organisation, to make available to small agri- business borrowers. The EBRD, which is contributing 20m euros to the project, said that another development bank will soon join the project. Despite being the largest employer, the agricultural sector in Tajikistan is lacking investment and planning.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)

Comment: Russia eyes entry into the West’s CASA-1000, says Kilner

OCT. 21 2016 (The Conway Bulletin) — It appears as if Pakistan is losing confidence in the West’s headline power transmission project in Central Asia — CASA-1000. It’s been talking to Russia and Turkmenistan about covering an anticipated shortfall in electricity from Tajikistan and Kyrgyzstan, undermining a core pillar of the project.

CASA-1000 is the World Bank funded project that will, when it is built in 2018, send electricity generated by hydropower stations in Kyrgyzstan and Tajikistan to consumers in Pakistan via Afghanistan.

The $1.2b project was supposed to spearhead what Hillary Clinton, when she was US Secretary of State, had described as a new north-south Silk Road. The West has disengaged from Central Asia to a large extent since the drawdown of it militaries from Afghanistan in 2013 and 2014, making new projects like CASA-1000 so important. The aim was to empower Tajikistan and Kyrgyzstan, tie both Pakistan and Afghanistan into a wider Central Asian economic sphere and restore confidence in the West’s commitment to the region.

But it may not be going to plan.

Leaders from Tajikistan, Kyrgyzstan, Afghanistan and Pakistan gathered earlier this year to mark the start of CASA-1000’s construction. They shook hands and smiled. Now it seems that Russian and Turkmen leaders should also have been there.

Pakistan has, openly, been courting both Russia and Turkmenistan as back up energy suppliers. Its leaders appear to doubt the ability of both Kyrgyzstan and Tajikistan to produce enough power during the freezing winters when their domestic demand spikes and water levels in their reservoirs, which feed the hydropower plants, fall.

There are also question marks over whether the Soviet-era infrastructure that both Kyrgyzstan and Tajikistan are relying upon can cope with the demands of CASA-1000. The World Bank has promised funds to both Tajikistan and Kyrgyzstan to boost power production but it may not be enough and it may come too late, in any case.

Russia has already told Pakistan that it will happily feed its power into CASA-1000 to make up the shortfall but, and this is the point, this would undermine the ethos of the project.

With Russia riding to the rescue, CASA-1000 risks making the West’s strategy in Central Asia look muddled.

By James Kilner, Editor, The Conway Bulletin

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(News report from Issue No. 301, published on Oct. 21 2016)

Armenia approves missile deal with Russia

OCT. 14 2016 (The Conway Bulletin) – Armenia’s parliament approved a missile defence deal with Russia that will mean it relies increasingly heavily on the Kremlin for its defences, media reported. Russia already maintains a large military base in Armenia, seen as essential for keeping its various enemies (mainly Azerbaijan and Turkey) at arms length. Importantly, officials also said that the missile defence deal with Russia did not cover the region of Nagorno-Karabakh which Armenia disputes with Azerbaijan.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)

Oil output stagnates in Azerbaijan

OCT. 17 2016 (The Conway Bulletin) — Azerbaijan produced 31.27m tonnes of oil and gas condensate in the first nine months of the year, the State Statistics Committee said, a drop of 0.3% from last year. Oil is the mainstay of the Azerbaijani economy and the government has been urging oil companies, in particular BP, to increase the amount of oil they produce. Gas production, the statistics committee said, has risen.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)

Kazakh energy company drills wells

OCT. 19 2016 (The Conway Bulletin) – Roxi Petroleum, a Kazakhstan-based oil and gas company, said it had successfully drilled new wells at its BNG Contract Area, a group of oil fields in western Kazakhstan. Roxi said the drilling of the A6 deep well had been challenging, but that the expansion of the field was continuing as planned. On the day of the announcement, its stock price increased by 18% to 10.5p in London.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)

Turkmenistan signs $700m loan deal for TAPI with IDB

OCT. 14 2016 (The Conway Bulletin) – Turkmenistan and the Islamic Development Bank (IDB) signed a $700m loan deal for the construction of the so-called TAPI gas pipeline that will pump Turkmen gas to India via Afghanistan and Pakistan.

This is an important deal, not just because of its size, but also because it brings a second major international institution into the project. Turkmenistan has been powering the project, kicking off construction in December, but, up until now, Western companies and financial institutions, other than the Manila- based Asian Development Bank, have steered away from joining it.

Now, though, after months of negotiations, the normally publicity shy Turkmen Bank for Foreign Economic Activities met up with the IDB in Washington DC to agree the loan.

Through its official news website, Turkmenistan lauded the deal.

“The construction of the transnational gas pipeline will ensure the long-term supply of energy in the countries of Southeast Asia and will ensure further economic development in the region,” it said.

For months, Turkmenistan has negotiated with IDB and other international financial institutions for loans and grants. The Asian Development Bank, adviser to the project, agreed a $200m loan in April, when it also said the project was ‘doable’.

Others have been less impressed, calling the project, literally, a pipe- dream that couldn’t be done.

And it is certainly a challenge. The plan is to build a 1,800km pipeline from Turkmenistan across Afghanistan to Pakistan and India. The cost of the pipeline is estimated at $10b.

The IDB, which is headquartered in Jeddah, has not commented on the $700m loan for TAPI.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)

Kazakh oil pipeline operator to allocate its route

OCT. 18 2016 (The Conway Bulletin) – KazTransOil, Kazakhstan’s state owned oil pipeline operator, said that the first shipments of oil from Kashagan will be allocated to the Atyrau-Samara pipeline and sold at the Russian port of Ust-Luga, near St. Petersburg. Production at Kashagan re-started last week after years of delay. In October, the consortium plans to pump at 90,000 barrels/day. The Kazakh government is banking on Kashagan to propel it into the Premier League of oil producers.

ENDS

(News report from Issue No. 301, published on Oct. 21 2016)