Tag Archives: economy

Kazakhstan to give state workers pay rise, stoking inflation

NOV. 10 2015 (The Conway Bulletin) – State workers in Kazakhstan will receive pay rises next year of 7-29% to offset the devaluation of the tenge, media reported quoting social development minister Tamara Duysenova. The figures show just how pronounced the anticipated devaluation-linked inflation is likely to be.

The tenge has fallen by 40% in value since its US dollar peg was ditched in August and analysts have warned of a corresponding surge in inflation.

This has already begun to seep through. The Central Bank said that annualised inflation jumped to 9.2% in October, double the rate in September. The announcement on the size of the state pay rises, though, suggests more price rises are likely.

Most of the state employees that Ms Duysenova said would receive a pay rise were doctors, nurses and teachers.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Business comment: A dangerous ripple effect

NOV. 13 2015 (The Conway Bulletin) — The whole post-Soviet region has faced a steep economic downturn over the past year, leading to regional trade imbalances that have travelled across borders.

Initially, the fall in the value of the Russian rouble hit the Kazakh tenge. Despite a 20% devaluation in Feb. 2014, the tenge’s peg to the US dollar made it increasingly expensive against the rouble. When the rouble started to lose double- digit value against the US dollar, the tenge held its US dollar trading point, making it increasingly expensive. For the first eight months of this year, cheap Russia goods flooded Kazakhstan.

Eventually, in August, the Kazakh Central Bank effectively ordered another devaluation by ditching a US dollar peg. The graph below illustrates this clearly. It shows the rouble/$1 rate and the rouble/tenge rate matching each other until August. The value of the rouble, according to the graph, halves against the US dollar and the tenge.

In August, though, there is a sharp correction in the trading rate of the rouble/tenge. It diverges, violently almost, with the rouble/$1rate. The graph shows that the tenge is still stronger than the rouble compared to June 2014, but the differential is reduced.

And this is where the ripple effect carried through to neighbouring Kyrgyzstan.

Thee blue line on the graph represents the rouble/som rate. It, broadly, matches the peaks and troughs of the rouble/$1 rate, suggesting an informal peg to the US dollar.

The Kyrgyz Central Bank, though, has clearly tried to devalue the som independently too, as the rouble/som rate diverges slightly from the rouble/$1 rate.

The yellow line shows the tenge/som rate, and clearly depicts the change in relative values of the two neighbours’ currencies. The som has been weaker against the tenge for most of the year, as shown by the fairly shallow but pronounced trough. This changes after the tenge devaluation in August.

A currency domino effect, although slower than analysts had predicted, is rippling through Central Asia. The rouble is an optimal benchmark to observe this phenomenon.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Georgia Healthcare Group completes London IPO

NOV. 9 2015 (The Conway Bulletin) – In what is likely to be the only IPO on an international market by a company from Central Asia and the South Caucasus this year, Bank of Georgia completed the listing of its subsidiary Georgia Healthcare Group on the London Stock Exchange.

It sold a 29% stake in Georgia Healthcare Group, raising around £63m ($96m) to invest into two hospitals it has bought in the past couple of years in Tbilisi.

Georgia Healthcare Group is the largest private healthcare provider in Georgia, owning 42 hospitals and medical centres.

Although the IPO came in below the initial price range, Nikoloz Gamkrelidze, Georgia Healthcare Group’s CEO, was upbeat.

“A public listing enhances our ability to take advantage of the significant market growth prospects of the Georgian healthcare sector,” he said. “The primary proceeds will be used to fund our immediate growth plans, aimed at helping us achieve at least a doubling of our 2015 revenue by 2018.”

Reports earlier this year also suggested new legislation introduced by the Georgian government had forced Bank of Georgia to sell a large stake in its healthcare unit.

Georgia Healthcare Group had targeted a price range of 215-315p but instead had to settled for 170p, perhaps a reflection of the poor economic conditions in Emerging Markets in general and in the South Caucasus in particular. Since announcing the IPO in August, Bank of Georgia shares have lost 13% on the London Stock Exchange, possibly setting its healthcare unit up for its lower-than-hoped-for IPO pricing.

Even so, the Georgia Healthcare Group IPO, gave Western investors a rare chance to buy into the former Soviet Union. Over the past couple of years, London IPO plans from Kazakh companies in particular, have been shelved as an economic downturn triggered by low oil prices, worries about Emerging Markets and a recession in Russia bite.

Both Kazakhstan and Uzbekistan have announced they want to carve up some of their main state-owned companies and that they will look for IPOs on major international stock markets but these sales are a long way off.

Georgia Healthcare Group joins its parent company Bank of Georgia as the only two Georgian companies listed on the London Stock Exchange.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Kazakhstan helps mortgage holders

NOV. 9 2015 (The Conway Bulletin) – Under a scheme designed to help people in Kazakhstan who hold mortgages in US dollars cope with the devaluation of the Kazakh tenge, the Central Bank said that it had refinanced 3,500 mortgages by Nov. 1. The programme will run until March or April 2016.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Uzbekistan says it wants foreign investment

NOV. 6 2015 (The Conway Bulletin) – Uzbekistan’s government said it wanted foreign investors to buy stakes in state-owned enterprises, part of a privatisation plan it said was designed to bring expertise into some of its biggest companies.

Deputy PM Rustam Azimov made the statement at an investment forum in Tashkent.

“[The plan is] to attract strategic investors who are able to bring new technology and equipment (and) organise the production of modern and competitive products,” Reuters quoted Mr Azimov as saying.

He cherry-picked three companies, seemingly as a teaser to pique foreign investor interest. These were cement maker Kizilkumcement, chemical producer Ferganaazot and electronics plant Foton.

For foreign investors, though, Uzbekistan has always been a complicated to do business in. It holds a high level of natural resources, mainly gold, gas and cotton, but is riddled through with corruption and intrigue. Western companies have previously had their assets taken by the Uzbek state too.

It remains to be seen if Uzbekistan is serious about opening up to foreign investors — and also whether these investors are Western, Korean, Chinese, Russia or from elsewhere.

The Uzbek government does need to raise funds though to deal with the current economic malaise.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Korea-Uzbek business to boost

NOV. 4 2015 (The Conway Bulletin) – South Korea wants to boost further its investments in Uzbekistan, local media reported quoting government officials. South Korea and Uzbekistan have developed close relations over the past few years. There are thousands of ethnic Koreans living in Uzbekistan.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Eurasian Dev Bank to give Armenia $300m crisis loan

NOV. 4 2015 (The Conway Bulletin) – The Almaty-based Eurasian Development Bank is close to agreeing a deal to lend the Armenian government $300m to help it through the economic malaise enveloping the Central Asia and South Caucasus region.

If it is agreed, the first $100m is due at the end of this year with the outstanding $200m handed over by the end of 2017.

Like other countries in Central Asia and the South Caucasus, Armenia has been trying to deal with the fallout of the drop in oil prices and a recession in Russia which have combined to tip the entire region into an economic depression.

“Current macroeconomic actions have been agreed with the Armenian government,” Dmitry Pankin, the EDB CEO, told the Armenpress news agency.

“The project has been approved by the expert council and is now being considered by the Eurasian Stabilisation and Development Fund. After the official decision, the final conditions will be agreed upon.”

The Eurasian Development Bank is an overtly political organisation. It’s membership mirrors the membership of the Kremlin-led Eurasian Economic Union — Russia, Kazakhstan, Belarus, Kyrgyzstan and Armenia — with the addition of Tajikistan.

It was set up before the Eurasian Economic Union to give the trade bloc extra weight.

It also acts as a kind of sweetener. Armenia is reliant on Russia for economic and political support. It joined the Eurasian Economic Union at the start of this year under duress from Russia but can now access cheap loans to keep its economy running.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Tajikistan reports on transparency in mining sector

OCT. 30 2015 (The Conway Bulletin) – The Extractive Industries Transparency Initiative (EITI), an intergovernmental organisation set up to improve transparency in mining and oil sectors, published its first report on Tajikistan which the authors said shone some light on the murky Tajik extractive sector.

Anti-corruption lobby groups have previously criticised the Tajik government for siphoning off cash from its metals sector and while the report was considered a step forward for transparency in Tajikistan, there were still many blank spots.

And the authors of the report made this clear.

“Three of the 14 companies in the EITI Report are partially state owned. Considerable details related to these companies are missing from the report due to the currently weak government systems for recording all company payments,” they wrote in the EITI report.

Tajikistan had been supposed to present its first report to the EITI in February, a deadline it missed.

A presentation on the report will be made in Dushanbe on Nov. 25.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Armenian trade with Russia falls

NOV. 5 2015 (The Conway Bulletin) – Armenia’s trade with Russia, its most important partner, has fallen sharply this year compared to the same period in 2014, official data showed. Exports to Russia were down 28% to $158.5m and imports were down over 10% to $712.7m between Jan-Sept. A recession in Russia has hit Central Asia and South Caucasus.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Inflation in Georgia rises

NOV. 3 2015 (The Conway Bulletin) – Inflation in Georgia hit 5.8% for the 12 months to the end of October, the Geostat statistics agency said, the highest rate of price increases since 2011. Geostat said that health care, electricity and various house- hold goods and furnishings had pushed up prices.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)