OCT. 22 2014 (The Conway Bulletin) – A report by the Open Society Foundations, funded by US billionaire George Soros, on Uzbekistan’s cotton industry concluded that most of the profits from the sector goes to hidden funds that only a handful of top officials can access. Western companies are boycotting Uzbek cotton because of its alleged use of child labour.
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(News report from Issue No. 206, published on Oct. 29 2014)
OCT. 28 2014 (The Conway Bulletin) – Houses prices in Kazakhstan rose by nearly 10% last year, media quoted the IMF as saying, one of the biggest rises in the world. The spike was far higher in Almaty. Economists have warned of a bubble in Kazakhstan’s housing market.
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(News report from Issue No. 206, published on Oct. 29 2014)
OCT. 28 2014 (The Conway Bulletin) – Kazakhstan’s finance minister Bakhyt Sultanov announced cuts of $1.5b to the national budget over the next two years, a sign of tough economic times driven by sanctions on Russia and lower oil prices. The main cuts will focus on procurement and debt servicing.
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(News report from Issue No. 206, published on Oct. 29 2014)
OCT. 17 2014 (The Conway Bulletin) – With the price of a barrel of oil falling to a four-year low, the Kazakh government has said it will review its national budget. Kazakhstan’s economy is propped up mainly by oil revenues. With oil revenues falling and with sanctions hitting Russia, Kazakhstan’s disposable income has shrunk.
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(News report from Issue No. 205, published on Oct. 22 2014)
OCT. 19 2014 (The Conway Bulletin) – Kazakhstan’s ministry of sport said that if it was to win the right to host the Winter Olympic Games in 2022 it would expect advertisers and investors to fund around 66% of the costs. Kazakhstan is desperate to host the Winter Olympics but observers have said that it might not be able to afford it.
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(News report from Issue No. 205, published on Oct. 22 2014)
OCT. 17 2014 (The Conway Bulletin) – Kyrgyzstan and its Canadian mining partners once again clashed over ownership of the Kumtor gold mine in the mountains on the east of the country.
Kumtor is the main economic engine of Kyrgyzstan, generating around 10% of its GDP. The problem is Kyrgyzstan wants to own more of the mine which is mainly owned by Totonto-listed Centerra Gold.
Now, Kyrgyzstan president Almazbek Atambayev has threatened to force Centerra Gold to delist from the Toronto stock exchange after a court in Canada suspended its shares.
Kyrgyzstan owns a third of the company but Stans Energy, a Canadian company, has taken out a court injunction preventing Kyrgyzstan from trading its stake. Stans Energy says it is looking for payment from the Kyrgyz government after losing its licence to develop the Kutessay II rare earth mine.
The row between Kyrgyzstan and its foreign investors has been rumbling along for years. It shows no sign of slowing.
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(News report from Issue No. 205, published on Oct. 22 2014)
OCT. 17 2014 (The Conway Bulletin) – With the rouble under increased pressure it has become likely, analysts have said, that the Kazakh government will devalue its currency for the second time this year.
Halyk Bank placed the tenge on a negative watch. The report, no longer available on the website of Halyk’s Financial Department, said the tenge would be around 210/$1 by the end of the year compared to 183/$1 currently. That’s a drop of around 10%.
“In the last three days conditions in Tenge-denominated money markets deteriorated sharply,” Halyk Bank wrote.
“Such changes usually happen before devaluations: demonetization, declining demand for Tenge- denominated assets, the rising cost of holding Tenge mirrored by the rising costs of borrowing, all illustrating a loss of confidence and the deepening of the currency crisis.”
Sabit Khakimzhanov, head of research at Halyk Bank and author of the report, attributed the weakening of the tenge to rising interest rates, rouble trouble, and oil prices below $95 per barrel.
The note will have irritated the Kazakh Central Bank which has been denying that it is planning a second devaluation of its currency. Khakimzhanov said that, unusually, an unnamed party had been buying $200m worth of tenge every day. This, analysts suspected, was the Central Bank trying to shore up its currency.
And, rather mysteriously, a few days after it was put up on its website, the currency note disappeared. Analysts at Halyk Bank told the Conway Bulletin that it was a management decision to take down its report.
Earlier this year, the government devalued the tenge overnight by 20%.
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(News report from Issue No. 205, published on Oct. 22 2014)
OCT. 21 2014 (The Conway Bulletin) – Tajikistan is deeply concerned about the impact that Russia’s slowing economy will have on its own economic prospects, the deputy economy minister Jamoliddin Nuraliev told the FT in an interview in his office in Dushanbe.
As reported previously in the Bulletin, Tajikistan’s economy is already showing warning signs linked to an impending recession in Russia. Sanctions, imposed by the West because of Russia’s alleged involvement in arming rebels in Ukraine, have started to strangle the Russian economy and those closely linked to it. This includes Tajikistan which is reliant on Russian imports and remittances from Tajiks working in Russia to prop up its economy.
“We are very much concerned about things happening in the Russian economy. We hope it will find a way to stabilise over the next year,” Mr Nuraliev said.
Earlier this month, the Tajik Central Bank raised interest rates to its highest level in two years to battle creeping inflation.
As a substitute for Russia investment Mr Nuraliev said that Tajikistan was counting on large infrastructure projects paid for by China which is looking to increase its influence in the region.
The concern with large Chinese-funded infrastructure projects is that the cash fails to trickle down fully to ordinary Tajiks. Instead, the ringmasters cream off decent proportion of the cash.
Remittances is a more effective way of pushing much needed cash lower down the chain.
Whether China’s large projects materialise or not, Tajikistan is due a rocky period, economically.
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(News report from Issue No. 205, published on Oct. 22 2014)
OCT. 13 2014 (The Conway Bulletin) – Kazakh officials have earmarked four cities — Almaty, Astana, Aktobe and Shymkent — to develop as mega cities. The plan to create four hubs, which has overtures of Soviet economic planning, will cost an estimated $4b and run through to 2020.
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(News report from Issue No. 204, published on Oct. 15 2014)
OCT. 8-9 2014 (The Conway Bulletin) – Kazakh president Nursultan Nazarbayev flew to Brussels to sign a deal that will bring Kazakhstan, economically, closer to the European Union.
Concerns, though, over Kazakhstan’s human rights and corruption records threatened to overshadow Mr Nazarbayev’s trip. He is also facing increased pressure over Kazakhstan’s alliance with Russia which is accused of aiding separatist fighters in Ukraine.
European Union and United States sanctions on Russia have hit linked-in economies, including Kazakhstan.
“Sanctions, especially economic ones, are not helpful to anyone neither Europe, nor Kazakhstan or Russia,” Mr Nazarbayev said at a joint press conference with Jose Manuel Barroso, the EU’s outgoing chief.
The EU-Kazakhstan agreement, which took nearly four years to sign, will boost Kazakhstan’s application to enter the World Trade Organisation, enhance energy and security cooperation and air travel links.
The so-called Enhanced Partnership and Cooperation Agreement also makes Kazakhstan the European Union’s most important partner both in Central Asia and the Russia-led Eurasian Economic Union.
Importantly tariffs remain unchanged as they are central to the Eurasian Economic Union that Kazakhstan is a member of alongside Russia and Belarus.
And this is important. Kazakhstan is trying to play both Russia and the European Union with its self-described multi-vector foreign policy. While Mr Nazarbayev talked with the European Union, Kazakh senators in Astana ratified a new Eurasian Economic Union treaty.
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(News report from Issue No. 204, published on Oct. 15 2014)