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UNCLAS SECTION 01 OF 02 ALMATY 002887 
 
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E.O. 12958: N/A 
TAGS: ECON EIND ENRG EPET EFIN KZ
SUBJECT:  KAZAKHSTAN ECONOMIC AND ENERGY UPDATE, JULY 23 - 
August 5, 2006 
 
ALMATY 00002887  001.2 OF 002 
 
 
¶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. 
 
--   Vneshtorgbank Targets Kazakhstan's Market 
--   KazZhelDorTrans Plans IPO in 2007 
--   Economic Statistics 
--   EITI Reporting Forms to Be Approved in Kazakhstan 
--   Pavlodar Refinery to Produce Euro Standards Petroleum 
--   KMG to Participate in "Ventspils Nafta" Privatization 
--   Mobilex Receives Sixth Oil Tanker 
 
Vneshtorgbank Targets Kazakhstan's Market 
----------------------------------------- 
 
¶2.  President Nazarbayev met on July 25 with Andrei Kostin, 
CEO of Vneshtorgbank, a leading Russian bank.  According to 
the CEO, the company is seeking large investment project in 
various fields, including gas processing and oil refining, 
telecommunications, real estate, and power engineering. 
Vneshtorgbank is also planning to acquire a Kazakhstani bank 
by the end of the year as well as to finance the 
construction in Astana of a major commercial development. 
(Interfax - Kazakhstan, July 26) 
 
KazZhelDorTrans Plans IPO in 2007 
--------------------------------- 
 
¶3.  KazZhelDorTrans (KZDT), a freight service subsidiary of 
Kazakhstan's national railway company, Kazakhstan Temir 
Zholy, plans concurrent initial public offerings (IPO) of 
its shares on the London Stock Exchange and the Kazakhstani 
Stock Exchange.  In July 2006, Standard & Poor's assigned 
KZDT its "BB+" long-term corporate credit rating with a 
stable outlook.  (Interfax - Kazakhstan, August 4) 
 
Economic Statistics 
------------------- 
 
¶4.  The GOK's mid-term fiscal program, spanning 2007-2009, 
outlines a gradual reduction of budget spending from 25% of 
the GDP in 2007 to 23.2% in 2009.  Spending on law 
enforcement, the judiciary, and the penitentiary system will 
decrease from 2.3% to 1.7% of the GDP by 2009.  The GOK's 
spending on utilities will nearly halve from 1.4% of the GDP 
in 2007 to 0.8% in 2009.  However, social expenditures will 
be maintained at approximately the same level, according to 
the following 2009 targets: education - 4.1% of the GDP, 
healthcare - 3%, and social benefits/welfare - 5.1%. 
(Interfax - Kazakhstan, August 1) 
 
¶5.  Kazakhstan's commercial banks earned a profit of KZT 
66.9 billion ($566.3 million) in the first six months of 
2006, a 90.6% year-on-year increase.  According to the 
Financial Supervision Agency (FSA), as of July 1, aggregate 
equity capital of the banking sector was KZT 770 billion 
($6.5 billion), a 31.7% increase from January 1.  The 
banking sector's total amounted to KZT 5,508 billion ($46.6 
billion), a 22% increase from January 1.  (Interfax - 
Kazakhstan, July 24) 
 
¶6.  FSA reported that the capital accumulated in pension 
savings funds (PSFs) stood, as of July 1, at KZT 770.8 
billion ($6.5 billion), having grown by 18.8% over the first 
six months of 2006.  The average weighted nominal return for 
the funds amounted, over the period of June 2003 to June 
2006, to 23.3%, compared with the 25.6% rate of inflation 
for the same period.  Currently, 14 pension funds operate in 
Kazakhstan.  (Interfax - Kazakhstan, July 24) 
 
¶7.  According to an FSA press release, Kazakhstani insurance 
companies collected KZT 54.8 billion ($464 million) in 
premiums in the first half of 2006, a 75.6% increase over 
the same period of 2005.  Premiums on mandatory insurance 
 
ALMATY 00002887  002.2 OF 002 
 
 
coverage comprised KZT 5.7 billion ($48.3 million) or 10.4% 
of the total premium volume.  Claims paid by insurance 
companies totaled KZT 5.5 billion ($46.5 million), a 17.2% 
year-on-year increase.  (Interfax - Kazakhstan, July 25) 
 
EITI Reporting Forms to Be Approved in Kazakhstan 
--------------------------------------------- ---- 
 
¶8.  The National Council for Implementation of the 
Extractive Industry Transparency Initiative (EITI) in 
Kazakhstan plans to approve the reporting forms for 
extractive companies on August 11-12.  Initially, the 
Council considered adopting forms pioneered in Azerbaijan, 
but the NGO coalition "Oil Revenues - Under Public 
Oversight!" proposed forms which would require disaggregated 
data.  "We want companies to account for not only direct 
payments to the budget but also for indirect, including 
fines and social transfers," NGO coalition representative in 
the National Council Isabekov stated.  The first report on 
EITI implementation was supposed to be presented in October, 
but the date will likely be postponed because of 
disagreements over report forms.  The National Council is 
comprised of representatives from the Energy Ministry, the 
NGO coalition, private companies, and members of the 
Parliament.  (Interfax - Kazakhstan, August 4) 
 
Pavlodar Refinery to Produce Euro Standards Petroleum 
--------------------------------------------- -------- 
 
¶9.  The Pavlodar oil refinery will produce more 
environmentally-friendly fuels, which comply with the EURO-3 
and EURO-4 standards.  For that purpose a $40-million 
hydrogen-producing installation is being constructed and 
will be operational by the end of 2007.  The new 
installation is being constructed by the American company 
"Koch-Glitsch".  (Oil Review, August 1) 
 
KMG to Participate in "Ventspils Nafta" Privatization 
--------------------------------------------- -------- 
 
¶10.  According to press-service of national oil and gas 
company KazMunayGas (KMG), KMG is considering the 
possibility of participating in a tender for 38.62% of 
shares of Latvian "Ventspils Nafta" (VN).  On November 11, 
2005 the government of Latvia adopted a decision that 38.62% 
of VN shares owned by the state would be sold through the 
Riga stock exchange.  The tender is expected to take place 
before the end of summer.  (Oil Review, July 26) 
 
Mobilex Receives Sixth Oil Tanker 
--------------------------------- 
 
¶11.  On August 1, Vyborg Shipyard (Russia) set afloat the 
sixth, and last, 12,000-ton deadweight "Makhambet" tanker 
tailored for Kazakhstan's Mobilex Energy.  As previously 
reported, the first vessels in the set, "Astana" and 
"Almaty," were delivered to the customer in the first half 
of 2005; the second vessels -- "Kazakhstan" and "Abay" - at 
the end of 2005.  Currently, the shipyard is preparing the 
"Aktau" for transfer to the customer.  Mobilex Energy, 
established in 2002, is engaged in transportation of 
hydrocarbons from the Caspian port of Aktau to Makhachkala 
and Baku.  It transships 1.2 million of tons of oil monthly. 
(Interfax - Kazakhstan, August 2) 
 
ORDWAY