Tag Archives: economy

Kazakhstan’s GDP shrinks

MAY 19 2016 (The Conway Bulletin) – Kazakhstan’s GDP shrank by 0.2% in the first quarter of 2016, the first dip in seven years, according to the Statistics Committee. Trade, telecoms, and industrial production slowed significantly. Analysts at Halyk Finance forecast that Kazakhstan’s GDP will grow by just 0.2% this year, the lowest growth since the 2008 Global Financial Crisis. Kazakhstan, like the rest of the region, is struggling to deal with the knock on effects of a recession in Russia and collapse in oil prices.

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(News report from Issue No. 281, published on May 20 2016)

Currency woes in Uzbekistan, Georgia and Armenia

MAY 16 2016 (The Conway Bulletin) – An IMF paper on the state of money markets across the South Caucasus and Central Asia said that most currencies are still overvalued against the US dollar, despite depreciations that have taken place over the past 18 months. The IMF highlighted that in January the Uzbek sum was 30% above its market value, and the Georgian lari was around 15% overvalued. The Armenian dram was the only currency that, according to the IMF, traded below its value.

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(News report from Issue No. 281, published on May 20 2016)

Kazakh Pension Fund loans cash

MAY 17 2016 (The Conway Bulletin) – Kazakhstan’s Central Bank said it had given 62b tenge ($186m) in loans from the state’s Pension Fund to around 30 commercial banks, in an effort to boost their liquidity. Kazakhstan’s Pension Fund, previously held at commercial banks, was nationalised between 2013 and 2014. It held up to $20b. Last month, the Central Bank opened a credit line from the Fund for commercial banks.

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(News report from Issue No. 281, published on May 20 2016)

Is Tajikistan preparing to unleash its Nashi?

MAY 20 2016 (The Conway Bulletin) — So, it’s becoming increasingly clear that the authorities in Tajikistan are using students to promote their causes.

Excellent reporting from our ‘Man in Dushanbe’ has exposed this practice. He has spoken to several students who have said their universities and teachers have forced them to either march in favour of government policies or demonstrate outside the embassies of countries which have irritated President Emomali Rakhmon by giving his enemies sanctuary.

This is a well-worn strategy in the former Soviet Union. When I was a correspondent in Moscow between 2006-9 I reported heavily on the growth of a youth group called Nashi and its various offshoots. Nashi was effectively a massive mobilisation of Russian youth, often whipped up into a frenzy to support various policies promoted by Vladimir Putin and Dmitri Medvedev, who was the Russian President at the time.

Their summer camps, set up in the dense forests of northern Russia, were an eye-opener. Pictures of opposition activists dressed up as prostitutes were placed around the site. In Moscow, Nashi rallies were rowdy affairs, nationalistic and with a violent undercurrent.

The movement in Tajikistan hasn’t reached these proportions yet and is less sophisticated but the authorities are still unleashing, while trying to control, the same forces.

It’s a crude, dangerous technique.

BANKING ISSUES

Sticking with Tajikistan, news that the country’s second largest bank has been placed under administration doesn’t come as a surprise. TSB has been listing heavily for a while. The strains on the Tajik economy have just become too great and it was only a matter of time before something gave. The important issue to monitor now is whether this is contagious and other Tajik banks also cave in.

It’s also important to keep the banking failure in context. The Tajik banking system may be weaker than its neighbours but all the Central Asian economies have been under the same pressures. Remittances from Russia have dried up, currencies have halved in value and GDP growth rates are being revised down. These banks were giving out soft loans for years and many of these will have turned bad.

If a bank in Tajikistan effectively says it doesn’t have any more money left, could banks in neighbouring Kyrgyzstan and Kazakhstan be experiencing the same problem?

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(News report from Issue No. 281, published on May 20 2016)

Tajik migration slows by 10%

MAY 18 2016 (The Conway Bulletin) – The Tajik ministry of labour said that outbound migration decreased by 10% in the first four months of 2016, compared to the same period last year. Around 200,000 Tajik labour migrants left the country in Jan.-April 2016. Around 87% of the migrants are men. Most of them head to Russia for work. Remittances from migrants are an important part of Tajikistan’s economy.

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(News report from Issue No. 281, published on May 20 2016)

Export rate falls in Kyrgyzstan

MAY 13 2016 (The Conway Bulletin) – Kyrgyzstan’s Statistics Committee said that revenues from exports fell by 25.8% to $287.1m in Q1 2016, compared to the same period last year. Notably, revenues from gold exports shrank by 2.6 times. Centerra Gold, the Canadian company exploiting the Kumtor gold mine, had said that delays in shipments had hit sales. Kumtor is Kyrgyzstan’s largest asset.

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(News report from Issue No. 281, published on May 20 2016)

Georgia’s trade shifts west

MAY 19 2016 (The Conway Bulletin) – Georgia’s trade flows are increasingly shifting westwards, data from the Statistics Committee showed. Trade turnover with EU countries grew by 11% in Jan.-April 2016 compared to the same period in 2015. Georgia’s trade with CIS countries, on the contrary, fell by 15%. Importantly, overall exports decreased, while imports grew.

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(News report from Issue No. 281, published on May 20 2016)

Tajik government steps in to save bank from going bust

DUSHANBE, MAY 18 2016 (The Conway Bulletin) — Tajikistan’s Central Bank placed Tojiksodirotbank (TSB) under its administration after the bank said it was on the brink of going bankrupt, the first major banking casualty of the current economic downturn.

TSB is the second-largest lender in the country and manages around a third of all loans in Tajikistan. Its collapse has shaken policymakers.

A senior official at the Central Bank, Mirzokhayota Yodgorov, replaced the bank’s chairman, Tojid- din Pirzoda. Sources in the banking sector also told local media that the EBRD could step in and inject vital cash into TSB.

“The question as to whether the EBRD will enter TSB’s capital will be resolved in June,” the source, quoted by Asia Plus, said.

According to the latest, unconfirmed, updates, the EBRD plans to buy a majority stake in the bank for $165m. The Tajik government could also step in and buy a 25% stake.

Earlier in May, TSB had said it was in talks to sell half of its shares to the EBRD.

Neither the EBRD nor the Tajik Central Bank commented but Tojiksodirotbank did release a fairly oblique statement confirming it had been placed under administration.

“The National Bank of Tajikistan Board in accordance with Articles 48, 49 and 50 of its Laws, to improve the financial situation of Tojiksodirotbank and protect the rights of its depositors and creditors on 18th May 2016 appointed a temporary administration in the bank for three months,” it said in a statement.

The banking sector in Tajikistan, hit by a deep economic downturn, has accumulated overdue loans and is faced with cash shortages. An IMF delegation earlier this year said that some of Tajikistan’s biggest banks were on the brink of default.

Tajikistan’s financial sector is under stress because the value of remittances from migrant workers has shrunk significantly over the past two years, undermining the economy and, crucially, hitting customers’ ability to pay back their loans.

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(News report from Issue No. 281, published on May 20 2016)

Turkmenistan to discuss WTO membership

MAY 14 2016 (The Conway Bulletin) – A WTO delegation travelled to Ashgabat to hold talks with Turkmen officials on strengthening cooperation. Turkmenistan has been negotiating its future WTO membership since 2014. Turkmenistan is the only Central Asian state which is neither a member or an observer country in the WTO.

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(News report from Issue No. 281, published on May 20 2016)

Business comment: Corporate Governance in Central Asia

MAY 13 2016 (The Conway Bulletin) – These are tough times for corporate governance and the general business climate in Central Asia.

In rapid succession, news of a raid at a gold company in Kyrgyzstan, the seizure of a Kazakh refinery in Romania, an allegedly fraudulent scheme to fake sales of Uzbek cars and the freezing of a murky hotel sale linked to two exiled Kazakhs in New York came to our readers’ attention over the past two weeks.

Since the raid at its subsidiary’s office in Bishkek, Centerra Gold has reiterated its readiness to cooperate with the authorities and the government to negotiate a solution. We think the raid was a way for the government to flex its muscles.

A bizarre scheme to fake car sales from Uzbekistan to Russia was unearthed this month, perhaps reminding us of how two plus two is not always equal to four in Central Asia. Undoubtedly, the current economic crisis has sparked more corruption.

The seizure of KMG Romanian refinery allows us to look back into the murky deal that first brought Kazakh state-owned business into Romania. Authorities didn’t seem impressed with acrobatic financial manoeuvres performed by former managers at Rompetrol. They’re now seeking damages and a court sentence might negatively affect China’s CEFC, which just bought into the venture.

Lastly, it’s not a surprise that a US court froze the sale of a hotel owned by Mukhtar Ablyazov and Viktor Khrapunov, two Kazakh businessmen and arch-rivals of President Nursultan Nazarbayev. They seemed to be needing some cash but their involvement in court cases in Kazakhstan, the US and Europe turns their transactions into red flags.

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(News report from Issue No. 280, published on May 13 2016)