SOCIAL AND ECONOMIC DEVELOPMENT
OF THE REPUBLIC OF KAZAKHSTAN IN 2000
Report by Ministry of Economy and Trade of the Republic of Kazakhstan
Astana, 2001
Major macro-economic indicators
Kazahstan is undergoing a period of economic tranformation ever since the national currency, the Tenge, was introduced in November 1993. During the years past, structural reforms implemented by the Goverment brought considerable results in terms of stabilization of main branches of economy.
Sinse the beginning of the year 2000 the social and economic situation in the Republic of Kazakhstan is characterized by further strengthening of trends of stable economic growth against the background of balanced budget and tax policies, positive trade balance and effective level of monetary conditions.
Macro-economic growth is being sustained under the conditions of low inflation and stability in natural monopolies' service tariffs, continuous growth in volume of production of goods and services, increasing investment activity, continuing favorable conjuncture on the world markets, as well of relatively stable exchange rate of the tenge.
According to the preliminary estimate of the Ministry of Economy, in 2000 the main macro-economic indicator, the GDP, grew by 9.6% compared to 1999, which was due to the growth of production volumes almost in all spheres of production. The industrial production is estimated to have grown by 14.6%. Growth in mining and extracting industries amounted to 21.5%, and in processing industry the growth was 15.6%. Electricity production and distribution increased by 9.6%. Spheres of the economy linked to oil and gas are becoming the more important component of the industrial base of Kazakhstan.
Agriculture traditionally ranked the second in the country economic sector both from the point of view of jobs and GDP share. The agrarian sector is seeing decrease by 4,5-5% in comparison to 2000 though this tendency is mainly attributed to the fact that in 1999 the increase of agriculture production reached its peak at 121% compared to1998. The gross volume of plant growing decreased by 11% compared to 1999, in animal husbandry it has reached growth of 2%. Cereals make an important agricultural component of the country and Kazakhstan is considered to be a large supplier of hard wheat grades. Despite some decrease in plant growing, 2000 saw a good harvest of grains at 13 million tons.
In 2000 the country's gross domestic product has undergone significant changes. Thus, the share of industrail output has increased and in 2000 it has made 45,3% while in 1998 it reached 37,9%.
Inflation
By the year-end of 2000 the inflation level has reached 9,8%. This indicator in 2000 has averaged 13,2%. According to the estimates of the National Bank of Kazakhstan (NBK) the exchange rate of tenge to US$ by the end 2000 was 146 t/$. The increase of the money base in 2000 compared to 1999 was 51,9%, says NBK statistics.
Investment
Kazakhstan is one of the most attractive CIS countries regarding forieng direct investments (FDI). Since 1992 the country has been carrying out step-by-step market oriented economic reforms through privatizatiion of state-owned enterprises. In this regard Kazakhstan has gone one step further than other CIS counties. The geographic position of the country assumes its dependence on neighboring states in terms of reaching the world market, particularly the oil market. The Republic of Kazakhstan has initiated and has undertaken some important steps towards regional economic integration with CIS countries. Under the EBRD estimates according to the FDI flow Kazakhstan in the last decade was the second after Russia among CIS countries and according to the level of investments per capita it was the first. About 80% of unvestments have been made in oil and gas sector, metallurgy and mining. The Tenghiz oil field can attract approximately US$ 20 billon within the next 40 years. Since the signing of agreement on the Caspian Pipline Consortium the growth of direct investments, namely into oil and gas projects, has significantly increased. A number of multinational companies such as AES Corporation, Agip, Arco, British Gas, Central Asia Petroleum, Chevron, China National Petroleum, Ispat , Mobil Oil, Philip Morris, Texaco, etc. have invested into Kazakhstan.
As of January 1, 2000 the deposits of the natural gas were estimated at 2,96 trillion cubic meters. In 1999 gas extraction has surpassed 8,3 billion cubic meters, mainly from the Mangystau and Karachaganak fields. At the same time the country was forced to import gas due to the lack of gas piplelines connecting Kazakh fields with main consumers in the South and North of the county. Kazakhstan exports crude gas to Russia and imports processed gas at a higher price, which contributes to the gas trade deficit. To eliminate this phenomenon, programs on increasing industrial output to process natural gas and to expand the internal system of gas pipelines connecting the Karachaganak field with industrial hubs in the West and East, have been developed in 2000.
There are 3 refineries in the Republic of Kazakhstan - in Atyrau, Shymkent and Pavlodar with a total output of 18,6 million tons or 135,78 million barrels of oil per year. The Caspian Consortium was set up in July 1992 with a view on constructing 1500 km. oil pipeline to the Russian Black Sea port of Novorossiisk. The main Consortium participants are: Russia (24%), Kazakhstan (19%), Oman (7%). Among other shareholders are such big and well-known companies as Chevron, Lukoil, Shell, Agip, etc. The first constructon phase of the pipeline will be finished by July 2001. The total yearly throughput of this pipeline component will be 28 million tons (204 million barrels) of oil. The second phase , which is scheduled to begin in November 2001 and to be completed within three years, provides for the reconstruction of the present system and constraction of new facilities. After the completion of the second phase the oil pipeline throughput will increase to 67 million tons (or 490 million barrels) of oil per year. Since the conclusion of the Protocol on Caspian Consortium, Mobil Corporation has gained 50% of the share of Kazakhstan in the TenghizChevron Co. The pipeline constraction will make it possible to increase the extraction on the Tenghiz field from 120000 to 700000 barrels per day. In June 1999 the members of the Caspian Consortium signed the Memorandum of Understanding on the pipeline constraction to connect the Karachagnak field with the Caspian oil pipeline. The Agreement envisages the receipt by Kazakhstan of approximately 80% out of the share profit, including taxes and other payments into the budget, to be received during the period of concession and granting unvestments in the amount of US$ 280 million within three years starting 1999. To supplement direct investments into transportation, exploration and manufacturing, foreign invesotrs have acquired large oil and gas enterprises. The Covernment has sold 60% shares of the Mangystaumunaigas to the Central Asa Petroleum (Indonesia) and 60% at the Aktobe Munaigas to China National Petroleum.
Apart from oil and gas Kazakhstan possesses significant deposits of other mineral products which are utilized in the energy production. Kazakhstan ranks the tenth in the world according to the coal production. According to the estimates the country to date has utilized less than 35 of its coal resources. Of great importance are uranium mining deposits, exceeding 1 million tons. Only 469777 tons have been explored so far. Kazakhstan is rich in precious metals, for example, gold (more than 1000 tons).
Significant deposits of nonferrous metals are also available: lead (ranks the second in the world according to the deposits), zinc (the first position), copper (the fifth), manganese (the third).
Apart from that, foreign investment was made in such branches as energy, food processing, telecommunications and banking.
State finances
The dynamics of revenue into the budget improved significantly. Growth of revenues into the budget of all levels in 2000 allowed to introduce quality amendments in Law on Republic Budget for 2000. The maximum level of state budget deficit was reduced from 3% to 2.7% of GDP.
As of the beginning of 2000 the plan for revenues of the state budget was set at 481.6 billion tenge. During the year this indicator was increased 18 times. Ministry estimates that the revenues of the state budget, under the continuing trends of tax and non-tax collection, amounted to 600 billion tenge. Tax revenues amount to more than 550 billion tenge.
Considerable increases in budget revenues are explained by the favorable price conjuncture for main export positions, improvement in financial position of the majority of enterprises, as well as by the changes in tax legislation eliminating a number of taxes. Kazakhstan's tax system has been considerably reformed and streamlined during recent years. The introduction of monitoring procedures for the biggest taxpayers activity and improvement in tax administration played their own role in raising the revenues.
Foreign trade balance
Ministry of Economy estimates the foreign trade balance in 2000 to amount to USD 15.7 billion, an increase of 35% over the previous year. Exports were worth USD 8.9 billion, while imports were registered at USD 6.8 billion. The foreing trade surplus was therefore estimated at USD 2.1 billion. (In 1999 the surplus, at USD 343.7 million, was achieved for the first time in last years.)
Floating exchange rate of tenge introduced in April 1999 coupled with improving world economic situation favored the improvement of competitiveness of kazakhstan's export. During 2000 the bulk of exports was accounted for by the production of the oil and gas industry (43%) as well as of ferrous metallurgy (10%).
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