This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 ALMATY 000897 
 
SIPDIS 
 
DEPT FOR SCA/CEN MUDGE 
DEPT PASS TO OPIC - BALLINGER 
DEPT PASS TO TDA FOR STEIN, EXIM FOR GLAZER 
DEPT PASS TO AID - EE-PHILLIPS/RUSHING 
TREASURY FOR OASIA/VELTRI 
USDOC FOR 4231/ITA/MAC/MLONDON, 4201/BISNIS 
USDOC FOR 6110/ITA/TD/BI/RHALPERN 
ANKARA FOR CFC 
 
E.O. 12958: N/A 
TAGS: ECON EIND ENRG EPET EFIN KZ ECONOMIC
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE 
February 19 - March 4, 2006 
 
¶1.  Summary: This information is drawn primarily from the 
Kazakhstani local press, and has not been checked for 
accuracy.  The opinions and policies expressed in this 
report are those of the authors, not the U.S. Government. 
 
--   Quality of Economic Growth in Kazakhstan in 2005 
--   Foreign Labor Quota for 2006 
--   Murabah Islamic Financing in Kazakhstan 
--   Halyk Bank to Boost Retail Deposits 
--   A Fiber Link between Baku and Aktau 
--   Forecast 2006 Mineral Resources Production 
--   GOK Discusses Nuclear Power Industry Program 
--   Atasu-Alashankou Pipeline to Start Exports in May 
--   Farmers to Get 700,000 tons of Subsidized Diesel Fuel 
 
 
 
Quality of Economic Growth in Kazakhstan in 2005 
--------------------------------------------- --- 
 
¶2.  "We have economic growth, and we cannot deny it.  GDP 
growth amounted to 9.4%; GDP per capita grew to $3,620; 
salaries and pensions increased; the housing construction 
stepped up.  But the point is in the quality of this growth, 
investments, and fiscal and budgetary policy," the chairman 
of Kazakhstan's Economists Association, Arystan 
Yesentugelov, said to Interfax.  "GDP growth was fueled not 
by industry, where growth declined to 4.6% from 10.9% in 
2004, but mainly due to construction and the real estate 
sector," he explained.  In Yesentugelov's words, "we are 
losing production and moving toward speculative profits," 
and this trend will "manifest itself in a few years."  In 
his opinion, a weakening of domestic demand, degradation of 
investment quality, and increase of latent budget investment 
(i.e. investment spending by national companies and 
development institutions not directly reflected in 
government spending figures) in fixed capital are leading to 
the deterioration of economic growth.  (Interfax - 
Kazakhstan, February 28) 
 
Foreign Labor Quota for 2006 
---------------------------- 
 
¶3.  Prime Minister Akhmetov signed a decree on February 13 
increasing the foreign labor quota for 2006 from 0.45% of 
the economically active population to 0.55%.  For the first 
and second categories (managers and specialists with higher 
or special education), the quota is raised from 0.21% to 
0.24%; for the third category (qualified workers), the quota 
is raised from 0.11% to 0.18%; and for the fourth category 
(seasonal farm workers) the quota remains unchanged - 0.13%. 
(Interfax - Kazakhstan, February 27) 
 
Murabah Islamic Financing in Kazakhstan 
--------------------------------------- 
 
¶4.  "On February 27, 2006, Bank CenterCredit (BCC) signed a 
loan agreement raising $38 million from Murabah Islamic 
Financing for one year," BCC press service announced on 
March 2.  Ten Islamic financial institutions, including Abu 
Dhabi Islamic Bank, Commercial Bank of Qatar, Boubyan Bank, 
Dubai Bank PJSC, and Habib Bank, are participating in the 
transaction along with Murabah Islamic Financing.  BCC is 
among the six largest banks of Kazakhstan, with assets of 
KZT 333 billion (approximately $2.5 billion) as of January 
1, 2006.  (Interfax - Kazakhstan, March 2) 
 
Halyk Bank to Boost Retail Deposits 
----------------------------------- 
 
¶5.  Financial group of Kazakhstan-based Halyk Bank plans to 
increase its retail deposits up to $3 billion by the end of 
¶2006.  As Halyk Bank chair Grigoriy Marchenko highlighted, 
the question is about the aggregate retail deposits of the 
Bank itself and its subsidiaries: Halyk Bank Pension Fund, 
Halyk Finance, Kazinstrakh and life insurer Halyk Life. 
Marchenko also specified that retail deposits with Halyk 
Bank stood at KZT 138.3 billion (about $1.06 billion) as of 
March 1, 2006, which proves the bank's leading position in 
retail banking.  (Interfax - Kazakhstan, March 2) 
 
A Fiber Link between Baku and Aktau 
----------------------------------- 
¶6.  Kazakhstan and Azerbaijan are considering putting on the 
Caspian seabed a fiber link between Baku and Aktau.  "This 
project will link the Central Asian region with Azerbaijan, 
Turkey and European countries on a new route and promote the 
transit capability of Kazakhstan," Rizata Nurshabekova, vice 
chairwoman of the Kazakhstani State Agency for 
Informatization and Communications, announced on February 16 
in Astana.  (Interfax-Kazakhstan, February 20) 
 
Predicted Mineral Resources Production for 2006 
--------------------------------------------- -- 
 
¶7.  According to Kazakhstan's Energy Ministry, in 2006 
Kazakhstan plans to produce 62.5 million tons of oil and gas 
condensate, 1.6% higher than 2005, and 27.6 billion cubic 
meters of natural gas, up 6% year-on-year.  The Republic's 
coal production is targeted at 87.3 million tons, up 1%, and 
electricity generation at 73 billion kWh, up 8%.  (Interfax 
- Kazakhstan, February 27) 
 
¶8.  Kazakhstan anticipates a 30% increase in oil production 
by 2010 compared to 2005, mainly due to increased oil 
recoveries at Tengiz oil deposit, Energy Minister 
Izmukhambetov stated.  By 2010, the country plans to 
increase gas production by more than 40 billion cubic meters 
and gas exports by 15 billion cubic meters.  The remaining 
volumes will be reinjected and used for domestic 
consumption, including power generation needs.  (Interfax - 
Kazakhstan, February 27) 
 
GOK Discusses Nuclear Power Industry Program 
-------------------------------------------- 
 
¶9.  On February 20 Prime Minister Akhmetov chaired an inter- 
ministerial discussion of nuclear power industry development 
issues.  A working group under the Prime Minister is to be 
created.  According to the Prime Minister, "the peaceful 
application of nuclear power using advanced technology to 
stimulate nuclear cluster development."  The Ministry of 
Energy started working on a "Nuclear Power Development 
Program through 2030."  In 2005 Kazakhstan produced 4,360 
tons of uranium.  (Interfax - Kazakhstan, February 20) 
 
Atasu-Alashankou Pipeline to Start Exports in May 
--------------------------------------------- ---- 
 
¶10.  According to KazTransOil, the oil transportation 
subsidiary of KazMunayGaz, as of February 23, Atasu- 
Alashankou oil pipeline was 12.6% filled with oil.  The GOK 
expects that the pipeline will begin delivering oil to China 
in May.  Russia's Rosneft confirmed its "serious interest to 
this route", according to Rosneft President Bogdanchikov. 
Rosneft can ship oil to Atasu-Alashankou by means of the 
Omsk-Pavlodar pipeline.  (Interfax - Kazakhstan, February 
27) 
 
Farmers to Get 700,000 tons of Subsidized Diesel Fuel 
--------------------------------------------- -------- 
 
¶11.  Kazakhstan's Energy Ministry has reached an agreement 
with major oil products suppliers to ensure a supply of 
700,000 tons of diesel fuel for sowing and cropping 
campaigns.  Under the agreement, the fuel will be provided 
at a price of not more than $400 per ton.  A corresponding 
"Memorandum on Social Partnership" was signed by oil product 
refiners on February 9, and a subsequent protocol on 
"Stabilization of the Oil Product Market" was signed later 
on February 17.  (Interfax - Kazakhstan, February 27) 
 
ORDWAY