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Posted on Sustainabilitank.info on November 28th, 2009
by Pincas Jawetz (pj@sustainabilitank.info)

Kazakhstan is the ninth largest country in the world – equal in size to all of Western Europe, four times the size of Texas, five times the size of France, and has 16.5 million people. Its present GNP per capita is $6,140. It passed  a Sovereignty Declaration October 25, 1990 and became an Independent State December 16, 1991 claiming to be a fledgling secular democracy – true enough when one judges by it having become a hub where various religions can meet freely – that is like having at the same table leading Jews from Israel, Shiia from Iran, Sunni from Saudi Arabia, and every Christian Denomination, with further participants from the various religions of East and South Asia.

Kazakhstan attracted our attention early and our website has had several articles regarding Kazakhstan.

Mr. Nursultan Nazarbayev is elected President of Kazakhstan since independence, and after the Constitution reform of 1995, his first constitutional term started in 1999 and was then reelected for further 7 years term December 4, 2007.

Kazakhstan exports Oil. gas, uranium, ferrous and nonferrous metals, coal, chemicals, wool, meat and grain.

From our website’s angle, we are thinking of the terrible environmental problems that Kazakhstan inherited from the Soviet rulers, the awareness of its people of this environmental damage, and a high potential for the introduction of renewable energy to the country, while at the same time aiming at becoming a hub of peace in its region. Kazakhstan is an important US ally in that part of the world. A Kazakh woman is the head of the Asian Environmental Journalists group.

When we learned about the November 23-24, 2009 New York City, Harvard Club, Conference, we made it a point of interest that we wanted to participate. For those interested in further information beyond what we will be able to bring forward – please look up www.kazakhhembus.com and www.newsdeskmedia.com – organization headed by Alan Spence, that put together this conference – and www.kazakhinvest.com

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This was a pure economic encounter with many companies that already do business in Kazakhstan, in attendance, i.e. IBM, GE, CONOCO Phillips (the President and COO), and Federal Express, and with quite a few officials of Kazakhstan present – Galymzhan Primatov the Vice-President, Bolat Zhamishev, the Minister of Finance, Daniyar Akishev, Deputy Chairman of the National Bank, Nurbek Rayev, Vice-minister of Industry and Trade, Asset Magauov the Vice-minster of Energy and Mineral Resources, Erlan S. Kozhasbay the President of the Chamber of Commerce and Industry, Kairat Umarov, the Deputy Foreign Minister, Erlan Idrissov, the Ambassador to Washington and Richard Hoagland the US Ambassador to Kazakhstan. Also, Mr. Daniel Poneman, the US Deputy Secretary of Energy and Edward Chow, Senior Fellow, Energy and National Security Program at CSIS in Washington DC.

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In these days when everyone thinks about the economic crises first let us see what that meant to Kazakhstan:

“Kazakhstan has stepped into the global economic crisis together with the Western countries and taken steps to come out at the same time with the Western Countries” – told me one of the Kazakh officials.

Today, even in the most prosperous nations, the largest financial and industrial giants are distressed, hundreds of thousands of people lost their jobs, and many businesses are closed. Kazakhstan didn’t stay apart from the adverse effect of the crisis, however, it adequately has been coping with its impact.

Similar to the actions of Obama Administration, and earlier Bush Administration, leadership of Kazakhstan is fully aware of global vital risk affecting every single country without exception.
Since crisis is systemic, it is fought on a system basis, requiring program and target approaches.  The key factor is the effectiveness of anti-crisis policy successfully being implemented by the State. The impact of the crisis considerably reduced the possibility of Kazakhstani banks to attract external financial resources, thus, affecting the level of lending in the domestic economy. In addition, sharp jump in world prices of food significantly increased inflationary pressure on the economy.

In fact, in January 2009, immediately responding to the warning signals of global markets, President of Kazakhstan Nursultan Nazarbayev has developed and adopted  an anti-crisis program. Further, government has actively pursued its implementation.  The anti-crisis program is focused on five main directions:

– Stabilizing the financial sector;
– Solving problems in real estate;
– Support for small and medium business;
– Development of  the agro-industrial complex;
– Implementation of innovative, industrial and infrastructure projects.

Since the beginning of 2009 the Government of Kazakhstan has spent $15 billion for these purposes.  This amount equals 14% of GDP in Kazakhstan. Globally, the figure amounts 15% of GDP in many countries. So, Kazakhstan is implementing its anti-crisis measures at the level of the developed countries. It is important to draw attention to Kazakhstan’s “know-how” entitled Roadmap Program, which is already bearing fruits. The program contains around 5,000 projects addressing issues of unemployment –  creating new jobs, improving education, supporting youth, food security, etc.

2,203 projects have been implemented to date, and 70% of funds pledged to the anti-crisis measures have been absorbed. As the result of the project 256,000 jobs were created and 231,000 people were employed. Compared with last year the volume of social benefits has significantly increased. Government has signed 8,000 memorandums with private companies, saving jobs to a million people.

Agriculture is one of the priority sectors of the economy. Since the beginning of the year farmers have implemented development projects in amount of $420 million.  The area under cultivation has increased by 1.7 million hectares. The government has secured the country from  food crisis. 40,000 tons of grain are stored in the state granaries. These actions were directed to support macroeconomic stability, business activity in the economy, and the financial system of the country. Decrease in GDP because of worsening inflation, and unemployment, has been stopped.  It is fair to say that Kazakhstan has managed to avoid the worst-case economic scenario, and create the preconditions for post-crisis development.

International experts and analysts have agreed with the anti-crisis measures undertaken by the Government of Kazakhstan.  Rating agency Standard & Poor’s raised the outlook of the Republic of Kazakhstan from “negative” to “stable” followed by the ensuing public policy of banking system stabilization.  According to the analysts of the agency, outlook revision reflects the new strategy of the government to restrict the amount of potential contingent liabilities arising from problems in the banking sector, and providing adequate resources to maintain the confidence of customers, and to enable the banking system to function, supporting the economy, despite any difficulties that may arise in the nearest future.

Director of the Strategic Analysis at the Russian Consulting Company FBK, Igor Nikolayev, believes that timeliness played an important role in the effectiveness of the Anti-crisis Program in Kazakhstan.  “The fact that the program was adopted on 13 January, and not 19 June, as in Russia, already has a great significance as six months delay is fraught with many consequences,” – said the economist. Some of the positive directions of the Kazakh program are saving government investment in infrastructure, support of consumer demand, as well as establishment of a special fund which deals with the purchase of “bad” assets from lending institutions, noted Nikolaev.

Work of the Government of Kazakhstan to support the banking system of the republic has been frequently commended by the international expert community – Kazakhstani Anti-crisis Program is a milestone in the development of the economy. Thus, the current economic situation in Kazakhstan can be characterized by the process of overcoming the most acute phase of crisis, and the need to define a new range of problems – the transition from the rapid action to implementation of the activities in the long term.

It seems that Kazakhstan has stepped into the crisis together with the western economies, and will together come out of it. The current situation proves that the country, having tried for principles based on  values of  democracy, which can be attributed to the Kazakhstan experience, has proven itself.  Decisions of the Kazakhstani leaders in terms of ensuring stable growth of the country’s economy, as a factor in the global economy, were well-timed, helping to establish a positive image of Kazakhstan as a responsible developing country.

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Chris Robbins, a travel writer who likes to write as literature, authored “Apples from Kazakhstan” and pointed out the importance of the Silk Roads, and when these were replaced by ships it lead to 450 years that Kazakhstan vanished from the West’s eye. Yes, apples came from Kazakhstan, but then nothing happened until the 19th century British push into the region – followed by Russia and eventually the Soviet 90 nuclear tests that chewed up the country. The Scythian gold, Genghis Khan and the Mongols originated from these steps. Now they had 50 synagogues in this basically Muslim country.

On the panel moderated by the Kazakhstan ambassador to Washington was Evan Feigenbaum of the New York Council on Foreign Relations, who pointed out the two main topics for the Kazakh development (a) Developing the Energy Resources and bringing them to the market, and Economic Diversification in such areas as urban transit and highways.

We learned that President Nazarbayev will come to meet President Obama in February 2010, and then again for a major meeting on nuclear issues in April 2010.

But we also learned that the US has moved the five Central Asian States away from the Russian desk at the Department of State, first to their own desk, but now to South Asia. This is significant as we see the attempt to create for these States a joint policy rather with India – and not Russia or China.

This panel was about The Obama’s Administration’s Policy Towards Central Asia. Other members of the panel were the US Ambassador to Astana and the Deputy Foreign Minister – the Kazakh Ambassador’s boss – so above ideas – as well as questions about the SCO, Eurasia, Turkey threw light on the high interest the US has in the region – which was then amplified in the following panel that had its title: “Kazakhstan-US Energy Partnership: From Oil to Renewables.”

On that panel was the President of CONOCOPhillips, John Craig, the US Principal Deputy Assistant Secretary of Energy Jonathan Elkind, and others mainly involved in oil. I was shocked, when despite the mention of renewables in the topic, and others having spoken on DIVERSIFICATION, this panel had no word for anything but oil. I heard – “oil and gas is “center of our interest.” Fair enough – the US must diversify its dependence on oil from the Gulf area, but why not mention something also about the potential of renewable energy in Kazakhstan – and potential there is indeed?

So I had to raise the question to the panel – “As we heard of concrete examples of US proposals to Kazakhstan in oil & gas, what are the concrete proposals the US took to Kazakhstan in renewables?” The answer made it clear that this panel was not prepared to answer such a question at a time the US has on its own to answer also this sort of “alternate questions” in other locations i.e. Copenhagen, and we know that Washington is working hard on making right this sort of proposals.

GE is developing locomotives in Astana, they work on energy efficiency and electricity. Kazakhstan is destined to develop a rail bridge between Europe and Asia – probably over the Black Sea.

Another energy area is the development of Uranium mines in Kazakhstan – hopefully this time less polluting then in the Soviet days. The Kazakh Vice-minister of Energy and Mineral Resources did say that he found here interest in developing wind energy in Kazakhstan – “someone connected to the UN told him so.” In the South of the country there is up to 3,000 hours solar/year. They have selected sites and work with Ambassadors back home. They also have potential for small hydro in the mountains, he said.

That sounded fine, but why was there no emphasis on this by the US side of the panel? We heard rather about the structure of the oil market the various ways one gets out the oil from Kazakhstan to markets, and about a future that will need also the country’s Uranium. The moderator, Tim Gitzel, Senior VP and COO, Cameco Corporation – a publicly traded nuclear company with 11 operating sites in 3 countries is obviously interested in Uranium.

Then one of the Kazakh delegates asked the President of Conoco about the Caspian Sea being a lake, and the oil project is not insured – what if there is a spill? Good question – not much of an answer!

So, rather then having a well rounded meeting, the US side had its tunnel vision directed to Kazakhstan Oil and Uranium, like it did in the past in countries of the Gulf region, and all we can is to point out to Kazakhstan – beware and diversify according to what you seemed to want to say. The nice volume the Embassy made available has a chapter about the “Curse of Oil” and the effort to avoid it. Yes – this must be part of the furniture at any negotiation table.

Kenneth Mack, the President of America Chamber of Commerce in Kazakhstan, spoke about how the energy of Kazakhstan will turn it into a global powerhouse, but he also spoke of major infrastructure programs to be executed with the help of the World Bank and the US Export-Import Bank. He spoke of efforts at diversification and the creation of a trans-corridor from Western China to Western Europe.

He also mentioned high octane fuel but did not say the word ethanol – something I hope the Kazakhs will   carefully study some more. The Export-Import Bank of the US must by law allocate funds to small businesses also (20%) so, here, there is a way to do some good perhaps?

Doris Bradbury of the American Chamber of Commerce in Kazakhstan told me that only a single one of the 255 members is interested in Renewable Energy  he looks into solar panels.

Lancaster Holding presented a series of industrial parks that are being developed, and FedEx is establishing its hub close to Almaty for the lines Shanghai – Frankfurt and Guangjou – Paris.

GE plans for Kazakhstan are amplified by an Azerbaijan firm planning for a Caspian – Black Sea transshipment Corridor.

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