Tag Archives: business

US start investigation into Kazakh titanium sponge exports

SEPT. 15  (The Bulletin) — The US authorities have started an investigation into Kazakh titanium sponge exports, the US Commerce Department said. They suspect that titanium sponge from Kazakhstan, and Japan, is being dumped in the US. They have also said that Kazakh producers may be receiving unfair subsidies. In 2016, Kazakhstan’s titanium sponge exports to the US were valued at $375,000. Titanium sponge is part of the process used to strengthen the metal for various building uses.

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— This story was first published in issue 344 of The Conway Bulletin, now called the Central Asia & South Caucasus Bulletin, on Sept. 24 2017.

— Copyright the Central Asia & South Caucasus Bulletin 2017

Uzbekistan to scrap excise duties on several products

SEPT. 10 2017 (The Conway Bulletin) — In line with a general liberalisation policy, the Uzbek authorities said that they were scrapping excise duties on several imported products. These included natural resin, wire of non-alloy steel, non-woven fabric, drops and solutions for contact lenses, video recording equipment and other products, Azerbaijan’s Trend news agency reported.
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— This story was first published in issue 343 of The Conway Bulletin on Sept. 15 2017

COMMENT: Kazakh government is messing with its financial system

>Kazakh Central Bank remedies are unlikely to tackle fundamental supervision problems in Kazakhstan’s banking sector. Political influence will still trump formal oversight, writes Camilla Hagelund.

SEPT. 15 2017 (The Conway Bulletin) — After bailing out Kazakhstan’s biggest lender, Kazkommertsbank (KKB), the National Bank of Kazakhstan (NBK) is now attempting to “reset” the country’s financial sector through a new financial support package and by boosting its own regulatory powers.

The measures introduced by the NBK are designed to improve reporting on and auditing of banks. They will also strengthen the NBK’s ability to act on its own accord. Political interference and past tendencies to bury bad news mean dramatic changes are unlikely to materialise though.

Kazakhstan’s banking troubles began with a build-up of toxic debt during the 2007-2009 crisis. These remain a burden for many Kazakh banks.

The NBK now readily admits that official statistics do not reflect the full scale of the problem. The NBK estimates that the share of non-performing loans could be as high as 25%, contrasting dramatically with the official figure of 12.8%. One of the limitations the regulator seeks to address with further regulatory powers is its current reliance on bank-reported data.

But because of the political connections of major bank shareholders, further regulatory powers are unlikely to improve the effectiveness of supervision. The biggest, KKB and Halyk Bank, are now controlled by President Nursultan Nazarbayev’s immediate family, while Tsesna Bank, the country’s third largest, is owned by the head of the Presidential Administration, Adilbek Zhaksybekov.
KKB provides an apt illustration of the restrictions on the regulator and auditors alike. According to our sources, the NBK unofficially acknowledged that KKB was bankrupt at the end of 2015 but, despite knowledge of this, the auditor approved the bank’s accounts.

Auditors likely fear that too much honesty will hurt their lucrative contracts with the government, and though the NBK may not have felt empowered to initiate a restructuring of KKB, its total lack of action indicates that political influence was exerted over the regulator.

As control over important banks remains in the hands of elite insiders, it is implausible that additional regulatory powers will overcome the ineffective oversight and moral hazards characterising the banking sector. It appears the country’s institutions unfortunately remain subject to the informal rules of the game in Kazakhstan.

Camilla Hagelund, Principal Central Asia Analyst at risk consultancy Verisk Maplecroft

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— This story was first published in issue 343 of The Conway Bulletin on Sept. 15 2017

Uzbek farmers encouraged to diversify

SEPT. 12 2017 (The Conway Bulletin) — Farmers in Uzbekistan are being given subsidies to diversify their crops away from cotton, Eurasianet reported by quoting local officials and farmers. Uzbek President Shavkat Mirziyoyev wants to stabilise fruit and vegetable price and this means encouraging farmers to ditch cotton. This year, Eurasianet reported, 400sqkm of cotton fields are being taken out harvest and another 1,000sqkm next year. Uzbekistan currently has 13,000sqkm of cotton fields and is one of the world’s biggest producers.
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— This story was first published in issue 343 of The Conway Bulletin on Sept. 15 2017

Central Asia Metals says in talks on reverse takeover

SEPT. 9 2017 (The Conway Bulletin) — Central Asia Metals (CAM), the Kazakhstan and Chile focused copper producer, suspended its share trading on London’s AIM after it said that it was in advanced talks over a potential “reverse takeover”. CAM didn’t specify which company it may be talking with over a deal. Its main asset is the Kounrad copper dump in Kazakhstan.
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— This story was first published in issue 343 of The Conway Bulletin on Sept. 15 2017

UN investigates fire at chemical factory

SEPT. 11 2017 (The Conway Bulletin) — UN investigators have flown to Armenia to help local teams look into the causes of a fire that engulfed part of the Nairit chemical plant in August, Armenian media reported. The fire was one of the biggest at an Armenian industrial site in recent years and burnt for two days. The UN, under its OCHA unit, is particularly concerned about chemical leaks and spills.
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— This story was first published in issue 343 of The Conway Bulletin on Sept. 15

Foreign direct investment into Georgia falls in H1 2017

SEPT. 11 2017 (The Conway Bulletin) — Foreign direct investments into Georgia, a vital part of its economy, fell by 5.5% in the first half of 2017, compared to the same period in 2016, data showed. FDI between January and June measured 751m, down from $794.4m. This was the lowest H1 result since 2014. Construction is the biggest driver of FDI and this fell by nearly a third from 2016 to $272m.
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— This story was first published in issue 343 of The Conway Bulletin on Sept. 15 2017

Kazakhstan wants improved offer from Karachaganak partners

ALMATY/SEPT. 15 2017 (The Conway Bulletin) — — Kazakh officials want an improved offer from Shell and ENI to end a long-running dispute over a $1.6b profit sharing claim at the oil and gas Karachaganak project in the north of the country.

They told the Reuters news agency that the Shell-led consortium operating the plant, Kazakhstan’s biggest gas producer, had offered to build a gas processing plant in exchange for dropping the profit sharing claim.

Kazakh Energy Minister Kanat Bozumbayev declined to confirm this but did say that the offer fell short of his expectations.

“We have calculated the value of the offer to Kazakhstan and it does not meet our demands and we have already told that to consortium members,” he said told Reuters.

“We have asked the consortium to offer something in addition.”
Kazakhstan has said that it is owed an additional $1.6b from a profit sharing scheme. The tax authorities have also investigated Karachaganak and some Western commentators have said that they are simply looking to squeeze extra cash out of their partners.

The consortium operating Karachaganak has not commented.
Shell and Italy’s Eni are the field’s operators and largest shareholders with a 29.25% stake each. Chevron (18%), Lukoil (13.5%) and state-owned Kazmunaigas (10%) own the rest.

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— This story was first published in issue 343 of The Conway Bulletin on Sept. 15 2017

Centerra Gold and Kyrgyzstan agree deal to end Kumtor dispute

BISHKEK/SEPT. 12 2017 (The Conway Bulletin) — Kyrgyzstan and Toronto-listed Centerra Gold said they had agreed a deal to end their dispute over ownership of the Kumtor gold mine in the east of the country.

The news propelled Centerra Gold’s shares to a 4-1/2 year high on the Toronto stock exchange. It will also give Kyrgyzstan’s ruling Social Democratic party a boost ahead of next month’s presidential election.

Under the deal, Centerra Gold will retain its 100% ownership of Kumtor in exchange for a one-off $50m payment to a new environmental protection agency. It will also pay the agency $3m every year and make another one-off payment of $10m to a cancer centre. Centerra Gold will also pay $6m a year into Kumtor’s reclamation fund, up to a total of $69m.

The Kyrgyz state owns 26.6% of Centerra Gold.

After signing the deal, Kyrgyz PM Sapar Isakov said: “This will be the basis for restarting our relations based on mutual trust and joint efforts to further effectively implement the project in the interests of the people of Kyrgyzstan and all the shareholders of Centerra Gold.”

Kumtor is Centerra Gold’s most important asset and also the biggest industrial site in Kyrgyzstan. It produces 10% of Kyrgyzstan’s total GDP.

As well as suppressing Centerra Gold’s share price, the row has damaged Kyrgyzstan’s reputation as a place to do business.

Western analysts have accused Kyrgyz officials of trying to make life difficult for Centerra Gold by denying key workers permits, launching claims for environmental damage and chasing back tax payments.

Centerra Gold retaliated last year by taking the dispute to an international arbitration court.
This action will now be dropped.

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— This story was first published in issue 343 of The Conway Bulletin on Sept. 15 2017

Kazakhs talk to OPEC about output

SEPT. 7 2017 (The Conway Bulletin) — Kazakh officials are in talks with OPEC to try and arrange a separate output deal that would allow it more flexibility to ramp up output from its Kashagan field, media quoted officials as saying. OPEC has been looking to restrain global oil production to increase prices, a plan that Kazakhstan, which is not an OPEC member, has gone along with. It, though, has said that it needs to extract oil from its giant Kashagan field, which started operations last year, to repay shareholders.
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— This story was first published in issue 343 of The Conway Bulletin on Sept. 15 2017