Kazakhstan Featurees - The Times Of Central Asia

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Foreign Companies Operating in Kazakhstan Double in Five Years

The number of foreign and joint venture (JV) companies doing business in Kazakhstan reached 52,000 as of January 2024, a number that has more than doubled in five years from 24,700 in 2019, according to a report by Energyprom analysts. At the beginning of this year, 43,400 companies were registered in Kazakhstan defined as legal entities or branches with a foreign form of ownership. Additionally, there were 8,700 JVs. In terms of types of activity, most foreign companies operate in the fields of trade and services, and are most often small businesses. That diverges from Kazakhstan's priorities for the economy to attract and maintain large organizations in industry, construction, and IT. In total, more than 11,000 going concerns, both foreign and JVs, are working in these sectors. At the end of last year in the Karaganda Region, workers completed the construction of Kazakhstan's first lime production plant, which a Belgian company invested in to build. Furthermore, foreign investment totaling $482 million is behind the construction of a copper smelting plant in East Kazakhstan with a capacity of 25 million tons of products per year. In Aktobe, thanks to investment from Italy, a plant will produce thermal insulation materials. Agreements on all of these projects have already been signed. According to the Bureau of National Statistics of the Republic of Kazakhstan, Russia holds the largest share among JVs and foreign enterprises, which stands to reason given that this northern neighbor is Kazakhstan's key partner in the Eurasian Economic Union (EAEU). In January of this year, 23,400 active Russian and Kazakh-Russian companies were registered in the republic. Following Russia's attack on Ukraine in February 2022, there was a sharp influx of those wishing to move their business from Russia to Kazakhstan. Rounding out the top five countries that are actively opening businesses in Kazakhstan are Turkey, Uzbekistan, Kyrgyzstan, and China. Chinese business leaders have registered not just trading companies, but enterprises in manufacturing and mining industries. About 450 Chinese or Kazakh-Chinese companies in the heavy industries sector are currently operating. Among them is an East Kazakhstan-located producer of fuel assemblies for nuclear power plants in China. In terms of regions, the East Kazakhstan and Atyrau regions - as well as the metropolises of Almaty and Astana - attract the most foreign investment. For example, foreign ventures invested $6 billion in Almaty in 2023, whilst the oil refining sector in the Atyrau Region received $5.5 billion.

Air Astana

Air Astana: LSE’s largest IPO of 2024 Set to Test Appetite of Investors

Shares of Central Asia's largest airline Air Astana are now for sale to the public in London, with the company's global depositary receipts (GDRs) trading on the London Stock Exchange (LSE). The GDRs were priced for this month's IPO at $9.50 a piece last week when conditional dealings in began on the LSE and Kazakhstan's Astana International Exchange (AIX). Today, Air Astana's local shares trading on the Almaty's KASE bourse are up 6.1% to 1,241 tenge, whilst dollar-priced GDRs trading on Astana's AIX are down 1.1% to $10.08 at an intra-day volume of just under 30,000 GDRs. The LSE's largest IPO of 2024 to date is set to gauge the demand of frontier and emerging market equity investors for exposure to Central Asian stocks in the aftermath of Russia's 2022 attack on Ukraine. Companies like Air Astana, and notably its low-cost carrier unit Fly Arystan, have in some ways benefited from the disruptions caused by the war and its consequent matrix of international sanctions as people and goods are re-routed through Kazakhstan. Conversely, the threat of more instability in the region and the risks of higher inflation, fuel and operating costs will undoubtedly remain on the minds of potential investors. The IPO in London and Kazakhstan represents a meaningful step for the latter's sovereign wealth fund, Samruk Kazyna, which plans to continue putting the shares of state companies on public markets. According to one former IPO manager from a European bank who declined to be named as the IPO process was underway, Air Astana's offering is the "clearest test in the IPO market to date of investor belief in Kazakhstan’s continued economic development." He also noted that it's "positive to see that four of the nine directors are independent, with three of those independent directors being from outside Kazakhstan" in terms of corporate governance. Air Astana's results for the first nine months of 2023, which were published on December 12th, showed positive top-line growth in revenue, operating profit, and passenger-kilometers flown metrics versus 2022, though the carrier did see a 1% dip in EBITDAR margin (operating profit as a percentage of its revenue) to 28% which investors may focus on going forward.

Time Zone

Kazakhstan Continues Countdown Ahead of Move to Single Unified Time Zone

In less than two weeks, the stroke of midnight will unify all of Kazakhstan in a single timezone. On the night of February 29th-March 1st, residents of twelve regions - as well as the cities of Astana, Almaty and Shymkent - will have to move their clocks back an hour unifying the country in a single timezone (UTC+5). But not all citizens are happy about it, with some arguing it will impact their health. Residents of the East Kazakhstan region are especially fierce in defending their perceived rights. Earlier this year, a lawyer from Ust-Kamenogorsk filed a grievance against then-Prime Minister Alikhan Smailov demanding compensation for damages due to the time change. For that reason, scientists were dispatched to the region to explain the benefits of the timezone change to local residents. Among the advantages they noted were the elimination of time barriers between residents of different regions of Kazakhstan, more favorable conditions for doing business, streamlining the work of government agencies and emergency services, and improved coordination of transport and communication. Professor Sultan Tuleukhanov, head of the Department of Biophysics and Biomedicine of the Kazakh State University, agrees with the residents of East Kazakhstan. "There is such a concept as desynchronises, a type of inconsistency. In particular, it's a change to the chrono-structural parameters of biological rhythms of the human organism," he noted. Desynchronosis causes irritability and fatigue while also reducing the efficiency of the body. However, according to other specialists, residents of most regions will experience this only in the short term. There is one more concern, however. In some cities, it will get dark earlier after the time change, meaning people will have to work under artificial lights and turn on electricity earlier, meaning expenditure on electricity will increase. Yeraly Shinasilov, the director of the national dispatching center of the system operator, KEGOK (Kazakhstan Electricity Grid Operating Company), said that the change of time zones will only affect the finances of residents slightly. "Our consumption grows about 2% every year. Due to the fact that our peak demand will move to an hour earlier, it will all dissolve into the natural growth of consumption during the year," he stated. Only time will tell how effective the single time zone will be for Kazakhstan.

Leadership

Bektenov Named as New Prime Minister of Kazakhstan

Olzhas Bektenov has been named as the new Prime Minister (PM) of Kazakhstan. His candidacy was presented to the President of Kazakhstan by the chairman of the ruling party, Amanat, Yerlan Koshanov. In accordance with the current legislation, President Kassym-Jomart Tokayev discussed Bektenov's candidacy with the heads of parties in the Mazhilis (lower house of Parliament). These were Yelnur Beisenbaev (Amanat), Magerram Magerramov (People's Party of Kazakhstan), Azat Peruashev (Ak Zhol), Askhat Rakhimzhanov (National Social Democratic Party), Serik Egizbaev (Auyl), and Aidarbek Hodzhanazarov (Respublica). Bektenov's candidacy was approved by Ak Zhol, Auyl and Respublica, whilst the People's Party of Kazakhstan and the Nationwide Social Democratic Party (OSDP) abstained from agreeing to Bektenov's candidacy as the head of the Cabinet of Ministers. Since April 2023, Bektenov has served as head of the Presidential Administration. Previously, he worked as chair of the Anti-corruption Agency, head of the Department of Public Procurement, and the National Anti-Corruption Bureau for the city of Astana. Political analysts noted that Bektenov has the qualities to become an effective leader, especially when Kazakhstan is de-monopolizing the economy. "Bektenov has experience in the regions - in the akimats of Astana and Akmola Region," stated political scientist Gaziz Abishev on his widely-quoted Telegram channel. "His main thing is his work in the anti-corruption service, where he carried out serious work to identify and fight corruption schemes. Last year, President Tokayev appointed him head of his Administration. Bektenov has resolutely embarked on management reform, streamlining processes and significantly reducing bureaucracy. At the same time, he actively coordinated the process of returning illegally acquired assets. "It seems that Tokayev looked at him for a long time and had the opportunity to make sure of his professional and personal qualities," Abishev continued. "Now, the economy needs a decisive manager capable of actively reconfiguring processes, while not being constrained by excessive fears and being focused on concrete results. Bektenov will benefit from his experience in the Anti-Corruption Service, and [undertake] a merciless anti-corruption clean-up." For the first hundred days as head of the Cabinet of Ministers, Bektenov will be granted wide-ranging powers to achieve results. Deputies also expressed their opinions today on who should be removed from their posts. Additionally, the head of state made by decree a number of other personnel changes. Murat Nurtleu was reappointed to the post of Minister of Foreign Affairs, and was also named as a Deputy Prime Minister. Defense Minister, Ruslan Zhaksylykov, and Interior Minister, Yerzhan Sadenov, meanwhile, were both reappointed to their respective offices.

Understanding the Changes in the Kazakhstan Government

On February 5th, President Tokayev dismissed the country's government by signing a decree on its’ resignation. The move was expected following weeks of discontent expressed by the president. On an aggregate level, the country has had a successful 2023. Significant reforms were passed and Kazakhstan made substantial diplomatic gains. Economic growth was near 5%, and $13.3 billion in foreign investment was secured in the first six months of 2023. This was achieved despite supply chain disruptions brought on by the Russia-Ukraine war. However, Smailov’s and his cabinet have failed to reel in inflation and attract additional investments to the country. The Ministry of Finance of Kazakhstan, did not succeed in preparing a new Tax Code of Kazakhstan. The Minister of Emergency Situations is also under fire for its dysfunctional earthquake early warning systems which became known during a recent quake that scared Almaty residents. While certain ministers are anticipated to retain their positions, others are expected to be replaced. The Presidential Administration, along with Tokayev, have consistently shown their willingness to make bold decisions when required.

Kazakhstan’s Government Resigns Amidst Sweeping Reforms

President Kassym-Jomart Tokayev has dismissed the country's government by signing a decree on its’ resignation. According to the Constitution of Kazakhstan, First Deputy Prime Minister Roman Sklyar will temporarily perform the duties of Prime Minister (PM). At the same time, all other ministers will continue to work in the same mode until the head of state approves the composition of the new government. The resignation of former Prime Minister Alikhan Smailov's government underscores a shift in Kazakhstan's political scene. Smailov assumed office on January 11th, 2022, following public discontent that erupted into riots. During his tenure, many events transpired, but the most memorable for the population were serious problems with municipal heating in a number of regions; forest fires in the Kostanay and Abay regions; explosions at mines in the Karaganda region, and the earthquake in Almaty. All this evoked plenty of criticism regarding the composition of the government. While the precise reasons behind the resignation remain undisclosed, it serves to highlight the dynamic nature of politics in Kazakhstan. Further details, including the process of this transition and potential candidates for the roles vacated, are expected in the next two days following an extended meeting of the government with the participation of Tokayev. Prior to the government’s resignation, Tokayev had increasingly expressed dissatisfaction with progress in addressing socioeconomic issues and stagnation in general. Over the past two years, Tokayev has implemented sweeping reforms aimed at democratizing the country and breaking up economic monopolies. "In Kazakhstan and in general, a change of government is perceived as a crisis phenomenon, but it is by no means a crisis phenomenon here,” said Director of the Eurasian Monitoring Center, Alibek Tazhibayev. “One should proceed from the fact that the economic and political situation is changing. Therefore, we can say that this government, which acted under the leadership of Alikhan Smailov for more than two years, coped with their key tasks. They had the main goal of passing deep-rooted reforms, holding a referendum, launching the mechanism of democratization, and implementing the concept of a 'Listening State'." In a post on his Facebook account, Smailov expressed his "gratitude to President Kassym-Jomart Tokayev for his trust in heading the Kazakh government in such a difficult time. These two years were a turning point for the society," he stated.