g nships. g value. - Newsdesk Media

INVES T IN 

Kazakhstan 

2011 

An offi cial publication 

of the government of the 

Republic of Kazakhstan

There’s more to Kazakhmys than mining. 

As one of the world’s few fully 

integrated copper producers, we also 

smelt, refine and transport the metal 

– in a single end-to-end process. 

In our hands, copper ore grows from 

a raw material into a much more 

valuable commodity. 

Not only that, we build, own and run 

much of the infrastructure that 

supports our business, including 

roads, railways and power stations. 

As well as creating jobs across 

Kazakhstan, this allows us to extract 

maximum value from our resources. 

And that means we can invest more in 

local communities – building schools, 

hospitals and housing. 

Find out more about the company 

that makes copper grow. 

Visit www.kazakhmys.com

First we dig it up. Then we grow it. 

Turning natural resources into national resources

INVES T IN 

Kazakhstan 

2011 

Editors Ben Aris and Nora FitzGerald 

Editor-in-chief Colette Doyle 

Chief sub-editor Barry Davies 

Sub-editor Clare Cronin 

Art editors Jean-Philippe Stanway, James White 

Designer Kylie Alder 

Production and distribution manager Karen Troman 

Sales director Martin Cousens 

Sales manager Laurie Pilate 

Sales executives Oku Egho, Tatyana Bondarchuk 

Managing director Andrew Howard 

Chief executive Alan Spence 

Chairman Paul Duffen 

Pictures: 123rf, Alamy, Corbis, Getty, NASA, Press Association, 

Photolibrary, Reuters, Thinkstock, UCL Library 

ISBN: 978-1-906940-43-0 

Printed by Buxton Press 

Published by Newsdesk Media Inc 

700 12th Street, NW, Suite 700, Washington DC 20005, US 

Tel: +1 (202) 904 2423 Fax: +1 (202) 904 2424 

www.newsdeskmedia.com 

Newsdesk Media Group publishes a wide range of business and customer 

publications. For further information please contact Andrew Howard, 

managing director, or Alan Spence, chief executive. 

© 2011. The entire contents of this publication are protected by copyright. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form 

or by any means: electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher. The views and opinions expressed by independent authors and 

contributors in this publication are provided in the writers’ personal capacities and are their sole responsibility. Their publication does not imply that they represent the views or opinions of the 

Government of the Republic of Kazakhstan or Newsdesk Media Inc and must neither be regarded as constituting advice on any matter whatsoever, nor be interpreted as such. The reproduction of 

advertisements in this publication does not in any way imply endorsement by the Government of the Republic of Kazakhstan or Newsdesk Media Inc of products or services referred to therein. 

I n v e s t i n K a z a k h s t a n 2 0 1 1 

I N V E S T I N 

Kazakhstan 2011 

An offi cial publication 

of the government of the 

Republic of Kazakhstan 

An offi cial publication of the government of 

the Republic of Kazakhstan 

Embassy of Kazakhstan to the United States 

of America, 1401 16th Street NW, 

Washington DC 20036, US 

Tel: +1 (202) 232 5488 

www.kazakhembus.com 

INVEST IN KAZAKHSTAN 2011 

5

Contents 

Forewords and interview 

10 Nursultan Nazarbayev 

President of the Republic of Kazakhstan 

15 HE Erlan Idrissov 

Ambassador of the Republic of Kazakhstan 

to the United States 

18 Samruk-Kazyna’s positive growth strategy 

Interview with Timur Kulibayev, head of 

Kazakhstan’s sovereign wealth fund 

Overview 

21 Transformation into a regional powerhouse 

The country has been turned around in the past two 

decades by the energy and industry of its population 

24 Bouncing back 

Kazakhstan is well on its way to a robust recovery 

28 Kazakhstan’s economic and 

investment policy 

How the government is deepening ongoing reforms 

and supporting entrepreneurship and efficiency 

30 Democracy, politics and society 

After securing 20 years of stability, Nursultan 

Nazarbayev won a landslide victory in April 

34 Future prosperity through diversification 

Encouraging non-resource sector growth; with a 

message from Asset Issekeshev, Deputy Prime 

Minister – Minister of Industry and New Technology 

38 Enhanced links boost trade opportunities 

Kazakhstan is attracting investment and growth by 

building stronger relations with other countries 

42 Leadership in conflict resolution 

The country has taken the lead on peace; with a 

message from Yerzhan Kazykhanov, Foreign Minister 

45 Evolution of role sees fund gearing up 

for ‘People’s IPO’ 

Samruk-Kazyna prepares to float some of its assets 

47 Minerals tax freeze is welcome news 

for investors 

The government will not raise mineral resource rent 

taxes, but is considering a distressed asset fund 

50 All for one, one for all 

Kazakhstan, Belarus and Russia form a customs 

union to eliminate trade and investment barriers 

Oil, gas and mining 

52 Increasing global presence in energy and 

mineral exports 

Kazakhstan enters the world stage; with a message 

from Sauat Mynbaev, Minister of Oil and Gas 

57 Standing on a wealth of resources 

Most of the country’s oil and gas reserves are 

onshore, allowing cheaper and safer drilling 

63 Tapping the hidden resources beneath 

the Caspian 

Huge hydrocarbon reserves are set to be revealed 

under the Kazakh section of the Caspian Sea 

66 Capitalizing on Caspian conduits 

Massive investment is boosting Kazakhstan’s export 

infrastructure as oil and gas output rises rapidly 

71 Gas: an increasingly important player in 

economic growth 

How the country plans to switch from being an 

importer to a global exporter of natural gas 

76 Taking the long-term view 

Kazakhstan tackles the problem of consumption of 

petrochemicals outstripping production 

81 ArcelorMittal’s safety investment pays off 

The multinational sees results from its efforts to 

tackle methane-associated accidents during mining 

84 Unearthing Kazakhstan’s metallic riches 

Investment in the country’s mining and metals 

production sector is back on track 

Invest In KAZAKHstAn 2011 

7

8 

89 Good things come in small packages 

Opportunities abound for extracting precious 

metals – and not just for big companies 

92 Keeping the nuclear faith 

The country maintains its commitment to nuclear 

power; with a message from Vladimir Shkolnik, 

Chairman of the Board of Kazatomprom 

Energy and infrastructure 

97 Building a grid that’s fit for purpose 

Kazakhstan addresses a north-south imbalance 

102 Renewable energy gathers momentum 

Industries are being encouraged by both the 

government and the UN to use ‘greener’ power 

105 Infrastructure – building a new backbone 

A nationwide framework for transportation and 

communication links is starting to take shape 

107 Stronger demand for 

construction materials 

As the economy improves, keeping up with the 

demands of building projects is proving tough 

110 Real estate rebuilds toward recovery 

Investors show more caution this time round 

114 A new hub for road and rail transportation 

Kazakhstan courts investment by promoting location 

118 Getting there 

New and enhanced air, road and rail facilities put 

the country on the international transport map 

121 Rail reforms will support diversification 

Resurgence of railway set to catalyze future growth 

Banking and finance 

126 Breaking the mold 

Recovery measures could provide a template for other 

economies; with a message from Grigori Marchenko, 

Governor of the National Bank of Kazakhstan 


129 Foreign banks poised for the upturn 

Kazakhstan’s banking sector looks likely to 

benefit from a flurry of international interest 

131 Support from the top for Islamic finance 

The country has embraced Islamic banking 

practices, aiming to build links with its neighbors 

Business centers 

133 Thriving city in need of further 

housing capacity 

Rapid growth leaves Almaty short of living space 

138 Capital on the steppe 

Businesses have flocked to relocate to Astana 

Industry and services 

142 Strong growth despite setbacks 

Both arable and livestock farming in Kazakhstan are 

benefiting from measures to boost productivity 

145 Fertile ground for ventures to support 

a growing economy 

A wealth of opportunities exist for foreign companies 

in the services sector to make their mark 

147 From triage to treatment: 

improving healthcare 

Kazakh citizens benefit from a focus on health 

152 Mass-market stores and malls gain ground 

The transition from bazaar to mall has been slow, but 

more mass-market brands are venturing eastwards 

155 The race is on to bring phone services 

to the masses 

Kazakhstan’s telecoms sector is pushing to extend 

its impressive investment track record 

158 Steppe out for world-class adventure 

The country prepares for a new breed of tourist 

162 Index of advertisers

Drilling 

Evaluation 

Completion 

Production 

Intervention 

Quality with responsibility 

Weatherford International Ltd (NYSE/Euronext Paris/ 

SIX: WFT) is is a Swiss-based, multinational oilfi oilfi eld 

service company. We are one of of the largest global 

providers of innovative mechanical solutions, technology 

and services for the drilling and production sectors of 

the oil and gas industry. We operate in over 100 100 

countries and employ employ over over 55,000 people worldwide. 

Our product offerings can be grouped into 10 service lines: 

• artifi cial lift systems • wireline and evaluation services 

• drilling services 

• re-entry and fi shing 

• well construction 

• stimulation and chemicals 

• drilling tools 

• integrated drilling 

• completion systems • pipeline and specialty services 

We are committed to balancing good business with sound, 

socially responsible engagement. This commitment includes 

applying effi cient resource-management methods and 

practicing sustainable development in the communities where 

our employees and clients operate and live. 

We also pursue the highest standards of excellence in 

all of our business processes and partnerships. This includes 

complying with all applicable laws and regulations in the areas 

where we do business; promoting safe work practices and 

minimizing risk to our employees, our communities and the 

environment; and implementing programs, training and 

internal controls necessary to achieve our goals. 

Traditionally, we have one of the highest growth rates in 

the industry: over the past six years, we outperformed our peers 

in percentage growth of revenue and EBITDA. We set ambitious 

growth targets, both top line and earnings, to continue on the 

same historical development path, and we prepared for it with 

supply chain and organizational commitments. 

Beyond operational improvements within our regions and 

our product lines, we launched three initiatives that are important 

for our next phase of growth as we mature into a world-class, 

multinational organization. These three initiatives included 

enhancing our ethics and compliance program, transforming 

our global supply chain and manufacturing organization, and 

streamlining our operational support functions. 

These changes have included reorganizing our 

compliance competency, recruiting experienced compliance 

professionals, and establishing and implementing new 

policies and procedures that make us better prepared to 

operate in today’s heavily regulated, diverse global markets. 

They make good business sense by maximizing compliance 

effi ciency and minimizing risk. 

We strive to increase the geographic diversity of our 

supply-chain capabilities, lower our overall cost structure, and 

improve our fl exibility and agility in response to market demand 

changes. In so doing, we will not compromise on quality or safety. 

Weatherford established its presence in Kazakhstan in 

1996 with the opening of a base in Aksai to support drilling 

operations in the nearby Karachaganak fi eld. We have been 

expanding our presence ever since to keep pace with the rapid 

growth of the country’s oil and gas sector. Our local infrastructure 

now includes bases in Aktau, Aktobe, Atyrau and Kyzylorda, Aksai, 

and Almaty. Atyrau serves as our country headquarters. 

Nearly 500 employees, 93 percent of whom are 

Kazakh nationals, support our operations in Kazakhstan. We 

provide our personnel with extensive training, both here and 

at Weatherford’s full-service training center, to ensure that 

they are well prepared to meet client objectives and maintain 

the highest quality, health, safety, security and environmental 

standards at our facilities and operations sites. 

Our local product and service portfolio spans the life 

cycle of a well—drilling, evaluation, completion, production 

and intervention. More recent additions include, surface 

logging and production optimization. In 2008, we expanded 

our local capacity in another area, wireline logging, through 

the acquisition of GIS, then the country’s largest domestic 

wireline company. 

We are established a state-of-the art, in-country 

core-sample analysis laboratory, a joint venture between 

Weatherford Laboratories and Aktau-based Caspian Energy 

Research. And, as our global track record illustrates, we are 

highly adept at drawing on our range of competencies to 

deliver total project-management services. 

With its prolifi c oil and gas fi elds, Kazakhstan is 

destined to remain a major hub of exploration and production 

activity for many years to come. We look forward to 

supporting your efforts to capitalize on the tremendous 

opportunities that the country holds. 

Visit us at www.weatherford.com or www.weatherford.ru 

to learn more about our capabilities and achievements. 

Our dedicated personnel in Kazakhstan are ready to 

assist you. Please do not hesitate to contact us: 

DLEUBDGroupKazakhstan@weatherford.com

10 forewords And IntervIew 

Nursultan Nazarbayev 

President of the Republic of Kazakhstan 


Now that Kazakhstan’s 

economy has resumed rapid 

growth, my task will be to 

ensure sustainable and 

balanced development for our 

country’s third decade of independence. 

International investment is vital to our 

government’s efforts to diversify the 

economy, and to increase productivity 

and competitiveness. 

In Kazakhstan’s 20 years of 

independence, we have built a stable and 

prosperous economy that is rapidly catching 

up with the developed world. We have 

successfully overcome several crises, from 

the aftermath of the Soviet Union’s collapse 

when the new country was struggling for 

survival, to the recent international economic 

crisis. Thanks to the government’s anti-crisis 

program and the strategy of sovereign wealth 

fund Samruk-Kazyna, Kazakhstan managed to 

avoid recession and was one of the first 

countries to emerge from the downturn. 

Today, Kazakhstan is back on a steady 

growth path. We achieved GDP growth of 

seven percent in 2010, and plan to maintain 

this pace of economic expansion. Between 

1994 and 2010, Kazakhstan made a massive 

leap in income per capita from $700 to 

$10,000. We have set ourselves the target of 

further raising annual income per capita to 

$15,000 by 2016, which will put Kazakhstan 

among the world’s high-income countries. 

To achieve this, we need to take the 

economy to a new level. In 2010, we 

launched the Country Development Strategy 

until 2020, setting out our main goals for the 

post-crisis decade. We are also implementing 

the State Program of Industrial-Innovative 

Development to modernize and diversify the 

economy. Broadening the economic base 

beyond the extractive industries will protect 

Kazakhstan from future crises. 

The policy of maintaining a high level of 

international reserves also contributes to 

Kazakhstan’s economic stability. Reserves, 

including those held in the National Fund, 

amounted to $73 billion. 

We must ensure that the benefits of 

Kazakhstan’s thriving economy are felt 

throughout the country, and that no one is 

left behind. We have already seen a drop in 

unemployment and made significant 

investments into public services and 

infrastructure, but we plan to do more. 

Recent events in North Africa, the Middle 

East and Central Asia have demonstrated 

the importance of socio-economic conditions 

as a contributor to stability. Following the 

April 2011 presidential elections, the 

government’s priorities are to develop a 

coherent social policy and to reduce 

development gaps within the country. 

The People’s IPO program is intended to 

allow more people to share in Kazakhstan’s 

prosperity, and to benefit from the growth of

our largest companies. Minority stakes in 

state-owned companies will be distributed to 

retail investors via the Kazakhstan stock 

exchange. This will have the dual benefits of 

stimulating the local financial market and 

giving the population a direct stake in the 

country’s economic performance. The Kazakh 

government and Samruk-Kazyna are working 

with international advisers to prepare the 

program, and the companies to be listed are 

due to be announced in the autumn. 

Kazakhstan is already a beacon of 

stability, with more than 100 ethnic groups 

and people of numerous religions living 

harmoniously together. We have also managed 

to establish good relations with our neighbors 

Russia, China and the Central Asian 

republics, as well as nations from Europe, the 

Americas, East Asia and the Islamic world. 

Our links within the Eurasian region have 

intensified recently with the launch of the 

Customs Union in July 2010. Alongside 

Russia and Belarus, Kazakhstan was a 

founding member of the bloc, which will give 

investors access to a market of more than 

160 million people. 

As a major exporter of both fuel and 

grain, Kazakhstan has another role to play in 

regional stability. Our planned increase in oil 

and gas production, with the launch of the 

Kashagan oilfield and other new capacity, 

will contribute to energy security. At the 

same time, we are investing in energy- 

efficient technology and renewable energy to 

minimize the environmental impact of the 

economic expansion. Rising global food 

prices have raised fears of food shortages. 

Kazakhstan is already an exporter of 

high-quality grain and has the potential to 

increase food production, including through 

our ambitious project to raise our exports of 

environmentally clean meat. 

For projects across the natural 

resources, agriculture, processing and 

high-tech sectors, Kazakhstan is seeking 

additional foreign investment. Already the top 

destination in the CIS in terms of foreign 

direct investment per capita, Kazakhstan 

wants to benefit further from additional 

investment – not just in financial terms, but 

in the introduction of new technologies and 

business practices. 

The Kazakh government’s efforts to 

encourage investment include the launch of 

a new Tax Code, creation of special economic 

zones and industrial parks, and reforms to 

the judicial system to ensure the rights and 

property of both individuals and businesses 

are fully protected. We aim to become one of 

the top 50 countries in terms of the business 

environment by 2020, and to become one of 

the top 10 financial centers in Asia by the 

same date. As we work towards these goals, 

and Kazakhstan enters a new phase of 

post-crisis growth, we want international 

investors to be with us every step of the way. � 

forewords And IntervIew 


11

Philip Morris International: 

Holder of the fi rst Foreign Investors’ License in Kazakhstan 

Philip Morris International (PMI), the world’s largest international 

tobacco company, is represented in Kazakhstan by its affi liate, 

Philip Morris Kazakhstan LLP (PMK). PMK operates a state-of-the-art 

factory in the Almaty region and has six regional branches throughout 

the country. These branches are focused on the sales and distribution 

of PMK’s products. 

Since 1993, PMI has invested over $320 million in Kazakhstan. 

The company was one of the fi rst investors in the country and is 

particularly proud of the fact that it holds Foreign Investor License 

No 1 from the state. A major portion of PMI’s investment went towards 

the construction of a greenfi eld factory in the Almaty region, which 

began operations in 2000. 

Currently, PMK manufactures a wide range of international brands 

(including Marlboro, Parliament, Muratti, Chesterfi eld, L&M, Bond 

Street, and others) for domestic sale in Kazakhstan and for export to 

other central Asian countries. 

In addition, six local heritage brands, including Kazakhstanskie, 

are produced in the country. 

PMK is the largest taxpayer among companies in the tobacco 

industry in Kazakhstan. Since the acquisition of Almaty Tobacco 

Factory in 1993 through the end of 2010, PMK has paid more than 

$1.1 billion in taxes and duties. 

Philip Morris Kazakhstan LLP 

Established: 1993 

Employees: Approx 1,000 

Business: Tobacco industry 

Parent Company: Philip Morris International 

Philip Morris International 

has always been committed 

to building the capacity of 

its local staff, as well as 

creating the best possible 

working environment in every 

country in which it operates. 

Kazakhstan is no exception. 

The company has invested 

more than $15 million in 

training and professional 

development of its 

employees. Each employee 

attends various on-the- Aibat Akhmetalimov 

Managing Director, PMK 

job and off-the-job training 

and educational seminars on an ongoing basis. This has allowed 

local talent to replace key positions formerly fi lled by expatriates. 

Today there are only three foreign nationals among PMK’s staff of 

approximately 1,000 employees. 

At the same time, there are more than 20 Kazakh citizens working 

in managerial and directorship positions at Philip Morris International 

affi liates outside of Kazakhstan. In 2010, PMK’s accomplishments in

employee professional development were recognized through an award 

given by the American Chamber of Commerce for “Most Innovative 

Development Program in Kazakhstan”. 

PMK is an active participant in charitable activities. Over the past 

17 years, the company has contributed more than $6 million to local 

charitable programs. 

Philip Morris Kazakhstan is proud of the Honorary Diploma it 

received in 2000 from the President of the Republic of Kazakhstan 

for “Charitable Contributions and Sponsorship of Humanitarian and 

Cultural Activities”. 

In 2007, the American Chamber of Commerce in Kazakhstan 

presented PMK with its Community Service award, recognizing PMK’s 

Corporate Social Responsibility programs as the best in the country. 

Social contributions in the Almaty Region are governed by the 

principles of annual Memorandums of Understanding between PMK, 

regional authorities, and local NGOs. PMI believes that socially 

responsible business should be based on a true partnership among 

business, authorities and institutes of civil society. 

The year 2010 marked the tenth anniversary of the completion of 

PMK’s greenfield factory. Philip Morris International is confidently 

opening a new chapter of its history in Kazakhstan, a country with vast 

economic potential and a bright future! 

1 Zhansugurov Street 

Ily district, Otegen Batyr Village 

040700 Kazakhstan, Almaty Oblast, 

www.pmi.com

XXXXXXXX 

114 

INVEST IN KAZAKHSTAN 2010

HE Erlan Idrissov 

Ambassador of the Republic of Kazakhstan to the United States 

I 

am delighted to present to you the 

sixth edition of the annual “Invest in 

Kazakhstan” guide. Published by 

Newsdesk Media Group, this book 

provides investors with an insight into 

the exciting opportunities in the Republic of 

Kazakhstan and up-to-date information on 

the economy and business climate. 

Kazakhstan, the largest economy in the 

Central Asia region, already has a stellar 

record of attracting international investment, 

receiving more than $120 million in foreign 

direct investment (FDI) in the past two 

decades. Within the CIS region, Kazakhstan is 

second only to Russia in the total volume of 

FDI attracted, and is the region’s top country 

in terms of FDI per capita. 

This achievement is a product both of 

Kazakhstan’s rich endowment of hydrocarbons 

and mineral resources, and of the 

government’s enduring commitment to 

supporting economic growth. Kazakhstan’s 

well-known strength in the natural resources 

sector is increasingly being matched by the 

emergence of other promising sectors 

including communications, agriculture, 

logistics and finance. 

Early investors, such as the oil and gas 

majors Chevron and ExxonMobil, have been 

joined in Kazakhstan by international 

companies from a range of sectors, among 

them GE Transportation, Intel, Microsoft and 

Baker & McKenzie. 


The expansion of the economy beyond its 

core sectors is being promoted by the Kazakh 

government. Last year, we launched the State 

Program for Industrial-Innovative Development. 

Even as Kazakhstan heads rapidly towards its 

‘golden age’ of oil and gas production, with 

major new capacity – including the offshore 

Kashagan field – due to become operational 

soon, the government is taking the long view: 

We are building a balanced and diversified 

economy, that will ensure sustainable growth 

for many decades into the future. 

The program will boost the creation of 

new industries and the modernization of 

existing sectors of the economy. We are well 

aware of the benefits that cooperation with 

international investors can bring, in particular 

in terms of cutting-edge technologies. 

Kazakhstan is advancing steadily on the 

World Bank’s Doing Business index, and was 

one of the top reformers globally in 2010. 

Kazakhstan’s government continues to explore 

ways of making the country more 

investor-friendly. The new Tax Code introduced 

in 2009 is designed to encourage investment 

outside the extractive industries, by gradually 

lowering corporate taxes. Value-added tax has 

also been cut to 12 percent. 

Kazakhstan’s entry to the Customs Union 

as a founder member, alongside Russia and 

Belarus, means that companies operating in 

Kazakhstan now have access to a market of 

more than 160 million people. � 


15

www.pwc.com/kz 

Building 

relationships. 

Creating value. 

Our Our ambition is to is to bring bring real real value value to to our our clients. We We recognise that that 

value value will will mean mean different things to to different people. That’s why why we we 

care care so so much much about about getting to to know know our our clients and and understanding 

what’s important to to them. them. And And over over 400 400 of of our our people have have been been 

doing doing this this in in Kazakhstan since since 1993. 1993. We We congratulate Kazakhstan 

on on 20 20 years years of of independence and and we we look look forward to to supporting 

the the local local community and and business here here for for many many years years to to come. come. 

To To fi nd fi nd out out more more about about us us visit visit www.pwc.com/kz or or get get in in touch touch 

with with our our Managing Partner Alper Alper Akdeniz on on +7 +7 727 727 298 298 0448 0448 

to to discuss how how we we can can help help you you achieve your your ambitions.

18 


Samruk-Kazyna’s 

positive growth strategy 

Timur Kulibayev 

took over as head 

of Kazakhstan’s 

sovereign wealth fund 

Samruk-Kazyna in 

April 2011. He outlines 

the role that the fund 

will play in growing 

and diversifying 

Kazakhstan’s 

post-crisis economy 


Q. What are your aims for 

Samruk-Kazyna? 

A. Kazakhstan’s emergence from the global 

financial crisis was a major achievement for 

Samruk-Kazyna, which proved itself as a 

successful crisis manager. We have now 

switched to a positive growth strategy. 

President Nursultan Nazarbayev has set 

the target of least seven percent annual 

economic growth. Our portfolio companies will 

be important contributors to this goal, 

because they are responsible for a significant 

share of Kazakhstan’s GDP. 

Samruk-Kazyna companies must 

become ‘national champions’, powerful and 

innovative businesses able to compete on a 

global scale. This is the key to transforming 

Kazakhstan into one of the world’s most 

competitive economies. 

Our priority is to diversify and modernize 

the economy. We have started a radical 

modernization of existing industrial assets and 

infrastructure. Samruk-Kazyna is also working 

to diversify production and increase added 

value, and export potential. Thirdly, our 

companies are building the infrastructure 

needed to ensure dynamic economic growth. 

This is a difficult path, and one that 

other countries have been pursuing for 

decades. However, in today’s fast-paced 

world, it is essential not to fall behind. 

Kazakhstan’s achievements in its first 20 

years of independence will determine the 

pace of future growth. 

Q. What are the priority 

sectors for investment? 

A. All key industrial sectors – including oil 

and gas, mining, electricity, transport and 

communications, chemicals and 

pharmaceuticals – are priorities for us. 

The oil and gas industry has a special 

position in Kazakhstan’s economy. We want 

to attract international investment for the 

construction of new production facilities and 

modernization of existing assets. Kazakhstan’s 

three largest oil refineries are being rebuilt 

and, in future, will produce high-octane fuel 

compliant with European standards. 

Kazakhstan’s chemicals industry 

has considerable potential, due to our 

abundant raw materials, and rising 

domestic and international demand for 

a range of chemical products. 

Power generation is vital to Kazakhstan’s 

development. Both consumers and industrial 

users need reliable electricity supplies, which 

will require investment into generation and 

transmission capacity. 

Due to Kazakhstan’s geo-strategic 

location, there are many opportunities in 

the transport and communications sectors. 

Kazakhstan’s transport infrastructure is 

expected to receive investments of around 

$26 billion in the next decade. 

As Kazakhstan has some of the world’s 

largest mineral reserves, the development of 

a mining and smelting industry is a priority. 

Samruk-Kazyna is creating new mining and

metallurgical enterprises based on the most 

advanced technologies. 

Kazakhstan is an industrial country, 

whose ‘growth points’ now include the 

transportation, energy, communications 

and high-tech innovative industries. These 

sectors are providing growth based on 

technology, rather than the production of 

raw materials. This emerging trend will 

drive investment demand in Kazakhstan 

in the long term. 

Q. What progress has 

Samruk-Kazyna made so 

far in diversifying the economy 

and creating new industries? 

A. Samruk-Kazyna is carrying out 20 projects 

under the State Program of Industrial- 

Innovative Development 2010-14. With a 

combined cost of $22 billion, these projects 

account for 51 percent of the total cost of 

the program and span nearly all the priority 

sectors of the economy. 

Our focus is on the chemicals industry. 

The Joint Chemical Company, set up in 

2009, made a thorough analysis of the 

chemicals market and identified investment 

priorities. Kazakhstan’s first integrated gas 

chemical complex is being built at Atyrau, 

at a cost of $2 billion. 

Reconstruction of the Stepnogorsk 

sulfuric acid plant is another key step in 

developing Kazakhstan’s chemicals industry, 

and will ensure that the uranium sector 

has a stable supply of sulfuric acid. 

We are also investing into the 

upgrade of a suspension-flotation phosphate 

concentrate plant to supply high-quality 

phosphate fertilizers. 

Q. What is the status of the 

people’s IPO program? 

A. The program will involve Kazakhstan’s 

population in the country’s economic 

development, and give all citizens the 

opportunity to become stakeholders 

in the largest and most promising 

Kazakh companies. 

We are preparing the program in 

cooperation with independent consultants, 

including investment banks Citi and UBS, 

big-four financial services company 

PricewaterhouseCoopers and law firm 

Cleary Gottlieb Steen & Hamilton. 

In fall 2011, we will announce 

the participating companies. At the 

same time, we will give information on 

the timing and conditions of the IPOs. 

Everything will be done to protect the 

interests of Kazakhstan’s citizens. 

Q. Where are the opportunities 

for foreign companies in 

Samruk-Kazyna’s 

investment projects? 

A. Most of Samruk-Kazyna’s investment 

projects are being carried out in cooperation 

with foreign partners. In the past, 

cooperation between Kazakhstan and 

international investors has been focused 

on the hydrocarbons sector, but now new 

areas are opening up. 

We have signed agreements with 

foreign companies, including General Electric, 

China Datang Overseas Investment Central 

Asia, CGNPC, Dae Jae, Finmeccanica, 

Chemieanlagenbau Chemnitz, Eurocopter, 

Çalık Holding and many others. We work with 

both international financial institutions and 

commercial banks. 

As Kazakhstan leaves the crisis behind, 

the economy is booming, and we need to 

stimulate investment. Government support 

for investment includes the introduction of a 

new tax code in 2009, giving advantages to 

enterprises in the manufacturing sector. 

In the first quarter of 2011, investment 

grew 7.4 percent, with the private sector 

responsible for almost the entire volume of 

direct investments. The share of foreign 

investments exceeded 30 percent. � 


In the past, 

cooperation 

between 

Kazakhstan 

and investors 

has been 

focused 

on the 

hydrocarbon 

sector, but 

now new 

sectors are 

opening up 


19

Transformation into a 

regional powerhouse 

Gas and oil have played a key role in 

allowing the republic to develop 

overvIew 

The energy and industry of Kazakhstan’s 

population have turned the country around 

during the past two decades, writes Ben Aris 

A 

huge country the size of Western Europe, 

Kazakhstan has vast mineral resources and 

enormous economic potential. But perhaps 

its biggest boon has been the energy and 

industry of its people, who in just two 

decades have transformed this country from an 

agricultural backwater in the middle of the Central 

Asian steppe to a regional powerhouse and a major player 

on the global energy markets. 

The varied landscape stretches from the mountainous, 

heavily populated regions of the east to the sparsely populated, 


21

22 overvIew 

Rapid action by the National Bank of Kazakhstan contained 

the damage from the global financial crisis of 2008, and by 

2010 the sector was already starting to recover 

The president’s residence in Kazakhstan, 

Central Asia’s wealthiest state 

energy-rich lowlands in the west; and from the industrialized 

north, with its Siberian climate and terrain, through the arid, 

empty steppes of the center, to the fertile south. 

Mineral wealth provides cash, but money alone is 

not enough to ensure the prosperity of a country. As the 

republic enters its third decade of independence, the 

combination of natural-resource wealth and liberal 

economic reforms are starting to bear fruit. 

With an average annual gross domestic product (GDP) 

growth rate of around 10 percent since 2000, the country is 

among the fastest-growing economies of the world and 

outpaces all other Central Asian states by far. By 2010, per 

capita GDP was estimated to have grown more than tenfold 

since the difficult transition period in the mid 1990s. In 

2002, Kazakhstan became the first country in the former 

Soviet Union to receive an investment-grade credit rating. 

Quick rebound 

As in many other nations, the global economic crisis resulted 

in a lot of damage, but the backdrop of political stability, 

heavy investment, lower taxes and a transparent business 

environment have combined to fuel a quick recovery. 


In response to the crisis, Kazakhstan’s authorities 

devalued the currency, the tenge, to stabilize the market, 

and injected $19 billion in economic stimulus. Rising 

commodity prices also helped to revive Kazakhstan’s 

economy, which registered seven percent growth in 2010. 

Barring a dramatic decline in oil prices, strong growth is 

expected to continue in 2011. 

Foreign investors are returning not only to the traditional 

extractive industries, but also to new areas such as train- 

building and the service sector, which are helping to diversify 

the economy. At the same time, the key sectors of energy and 

mining continue to receive investment to drive them forward. 

Oil and mineral wealth 

Kazakhstan is the most prosperous of the Central Asian 

states, and oil has played a key role in its development. 

The opening of the Caspian Pipeline Consortium link in 

October 2001, which connects the oilfields in western 

Kazakhstan with the Marine Terminal on Russia’s Black Sea 

coast, marked the start of the republic’s rapid growth. In 

2008, Kazakhstan began pumping some oil exports through 

the Baku-Tbilisi-Ceyhan pipeline as part of a drive to lessen 

its dependence on Russia as a transit country. A pipeline to 

China opened in late 2005. 

But the republic is also home to plentiful supplies of 

other minerals and metals, such as uranium, copper and zinc. 

Indeed, in the first years following independence in December 

1991 – Kazakhstan was the last of the 15 former Soviet states 

to declare independence – the republic initially earned most of 

its export revenues from exporting metals. It remains the 

world’s largest producer of uranium. 

New beginnings 

The economy remains geared towards the extractive 

industries, but the government, realizing that its economy 

suffers from an over-reliance on these, has been making 

concerted efforts to diversify and modernize the economy 

with the development of other sectors.

Kazakhstan’s main centres 

Caspian Sea 

Aqtau 

Russia 

Baikonur Cosmodrome is the launch 

site for Soyuz and other spacecraft 

Aral Sea 

Turkmenistan 

Baikonur 

Uzbekistan 

Over the past decade, the republic created arguably the 

region’s most liberal and sophisticated banking sectors. Its 

high exposure to the international debt markets meant that it 

was badly wounded when the credit markets started seizing 

up, as the mortgage crisis in the United States began 

unfolding and the global financial crisis struck in the fall of 

2008. However, rapid action by the National Bank of 

Kazakhstan contained the damage, and by 2010 the sector 

was already starting to recover. 

Kazakhstan has also embarked on an ambitious 

diversification program. This is the central goal of the 

National Strategy until 2030, adopted in 1998, and the 

State Industrialization and Innovation Program until 2015, 

which was launched in 2003. In 2006, Kazakhstan 

Shymkent 

Astana 

Tajikistan 

Karaganda 

Lake Balkhash 

Kyrgyzstan 

Almaty 

overvIew 

China 

additionally announced a major drive to enter the top 50 

most-competitive nations in the world within 10 years. 

With food prices increasing around the world, 

Kazakhstan will benefit, thanks to its large agricultural 

sector. The government has also launched programs that are 

aimed at developing targeted sectors, such as transport, 

pharmaceuticals, telecommunications, petrochemicals, 

and food processing. 

The future of the Kazakhstan economy will be fueled 

by further integration into the international economic 

community. To that end, the republic has been building up 

relations with its neighbors. In 2010, the Customs Union of 

Russia, Belarus and Kazakhstan was formally launched – the 

first stage in creating a regional common economic space. � 


23

24 

overvIew 

Bouncing back 

This year sees Kazakhstan well on its way 

toward a robust recovery. By Ben Aris 

Kazakhstan is rebounding swiftly from the 

worldwide economic downturn, with the 

country’s economy looking set to surge due 

to the advent of fresh oil and gas from the 

Kashagan offshore field. 

Kazakhstan went into the 2008 crisis early. The 

republic’s banks had been enjoying triple-digit growth for 

several years, largely funded by loans and bonds drawn from 

the international credit markets. So, as the US subprime 

mortgage crisis unfolded and the credit markets dried up in 

2007-08, the Kazakh banks were among the first to suffer. 

However, thanks to swift action from the National Bank of 

Kazakhstan (NBK) and more than $4 billion in liquidity support 

to the banking sector, Kazakhstan came through the storm. 

First in, first out. After commodity prices – particularly 

oil – started to recover in 2010, so too has the economy. But 

the republic is not out of the woods yet and a lot of clean-up 

work remains to be done. The banking sector still has a 

backlog of non-performing loans (NPL), though the strong 

performance of the country’s energy and mining sectors 

resulted in stronger-than-expected growth in 2010. 

Banking regains buoyancy 

The situation in the banking sector is gradually returning to 

normal after agreements on debt restructuring at BTA Bank, 

Alliance Bank and TemirBank. Having fallen hard during the 

crisis, Kazakhstan’s banking sector is now poised to outperform 

most of those in neighboring countries as it bounces back, 

according to investment banks such as Renaissance Capital. 

Thanks to a progressive reform program in the previous 

decade, the structure of the Kazakh financial sector is still one 

of the best in the former Soviet Union and should return to 

growth once the issue of debt restructuring is resolved. 

Analysts estimate it will take around another two years for the 

problems of NPL to be fully worked out. 


In the short term, commodity prices will determine 

exactly how the rest of 2011 pans out. But the unrest in 

North Africa in the first quarter of the year has already driven 

oil prices – the key contributor to Kazakhstan's financial 

health – higher than most had been forecasting at the start of 

the year. This boost buys the government more time to drive 

through its wide-ranging reform program. 

Kazakhstan’s economy grew by seven percent in 2010 

and is forecast to continue its recovery in 2011 in the four to 

five percent range. The services sector is estimated to account 

for 51.8 percent of the country’s GDP in 2010, with industry 

comprising 42.8 percent, and agriculture at 5.4 percent. 

The oil price is expected to average in the order of $90 

for 2011, and this will give a boost to budget revenues. 

Meanwhile, the government is maintaining its extremely 

conservative oil-price assumption of $65 in the budget, which 

will almost certainly give it plenty of room for maneuver. 

In general, as the economy begins to recover, so too 

should the public finances. Budget revenues totaled 

$30 billion in 2010 – up 46.5 percent from 2009, and 

6.5 percent above 2010 government projections – and the 

budget deficit was set at $5.5 billion (4.1 percent of GDP). 

A robust recovery is expected to lead to an improvement 

in the government’s fiscal position. The state budget for 

2011-13 has been adopted with a much lower deficit of 

2.8 percent in 2011, based on additional revenues of 

$2.8 billion from a doubling of the oil export duty in 2011 

to $40 per metric tonne. 

In the clearest sign yet of a return to economic normality, 

the NBK ended its control of the exchange rate in February 

and returned to a managed float system. The Kazakh currency, 

the tenge, is expected to remain relatively stable against the 

dollar throughout 2011, although there may be some slight 

appreciation, say analysts. 

One of the most difficult economic challenges that the 

country faces is coping with inflation. Consumer price inflation 

in Kazakhstan in 2010 was in line with Renaissance Capital’s 

7.7 percent forecast and was mostly driven by growing global 

commodity and food prices. The major driver was food prices,

overvIew 

The financial sector is one of the best in the 

former Soviet Union and should return to 

growth once debt restructuring is resolved 


25

26 

overvIew 

which grew 10.1 percent and contributed half of the increase, 

while services and non-food products grew 6.8 percent and 

5.5 percent respectively, with roughly equal contributions. 

On the back of the brightening economic picture, Fitch 

Ratings revised its sovereign rating on Kazakhstan to ‘positive’ 

at the start of 2011, while Standard & Poor’s raised its 

sovereign rating one notch to ‘BBB’. 

Kazakhstan is slightly behind countries such as Russia 

and China – where growth is expected to slow over the medium 

term – but in terms of development, it should continue to 

close the gap on its bigger cousins to the north and east. The 

medium-term prospects for strong growth are very good. “GDP 

was up more than we expected in 2010, owing to the recovery 

in prices for commodities including oil, gold, copper and 

uranium,” says Jean-Christophe Lermisiaux, head of research 

at Visor Capital. “And there is no reason to see this changing 

for the foreseeable future.” 

However, he adds that there are disparities between the 

natural resources sector and other sectors of the economy – in 

particular the banking sector, which is “still convalescing”. 

Energy potential 

Oil and gas remain the engine of the economy. Kazakhstan 

is already among the top 20 oil producers in the world, and 

production continues to pick up. Close on the horizon is the 

launch of the first phase of Kashagan Field – the world’s 

largest offshore oil-and-gas project – which is expected on, 

or possibly ahead of, schedule in the first half of 2013. The 

start of production from this field will be a game-changer, 

as it will massively boost the country’s production and 

increase its geopolitical standing. 

Country climbs World Bank’s ‘Doing Business’ rankings 

The government’s efforts to 

improve Kazakhstan's rating in the 

World Bank’s ‘Doing Business’ 

survey started in 2008 with the 

establishment of a working group 

headed by deputy prime minister 

Erbol Orynbayev, and these were 

rewarded in the 2011 report. 

Among the world’s economies, 

Kazakhstan improved its business 

conditions the most during the past 

year, moving up 15 places in the 


‘ease of doing business’ rankings 

to 59th spot among 183 countries, 

according to Doing Business 2011. 

The republic improved 

conditions for starting a business, 

obtaining construction permits, 

protecting investors and trading 

across borders. 

Reforms have been made easier 

to implement, thanks to the general 

rise in prosperity in Kazakhstan. 

Overall, macroeconomic stability 

However, the development of the extractive industries is 

shifting from simply lifting production levels to expanding 

distribution, increasing efficiency and adding more value. 

The major event in the oil-and-gas industry in recent 

years has been the opening of the Central Asia-China gas 

pipeline and new oil pipelines linking oilfields from western 

Kazakhstan to China. Arguably, building pipelines to new 

markets has a bigger impact on the economy than finding new 

and bigger fields – Kazakhstan’s eastern neighbor remains the 

primary market for its raw materials. 

As well as underpinning global demand for commodities, 

China accounts for 30 to 40 percent of Kazakhstan’s exports. 

Construction of the Western Europe-Western China highway, and 

the planned rail link from Zhetigen near Almaty to the Chinese 

border, will allow Kazakhstan to further increase its exports. 

The strong performance of the natural resources sector in 

2010 has not been matched by an expansion across the board, 

and the country is unlikely to see the kind of consumer boom 

that it enjoyed in the run-up to the global economic crisis – 

especially in the real-estate sector. 

Banks have remained cautious when making loan 

decisions, and clearing the backlog of unfinished real-estate 

projects is only now nearing completion. The collapse of the 

property market was painful and hit the financial sector hard, 

as it was heavily exposed to this market. However, helped by 

government funds allocated through the anti-crisis program, 

most of the lost ground has been recovered. As the sector 

slowly returns to health, property developers are likely to start 

considering the first post-crisis projects in 2011. 

“2010 was a transition year for Kazakhstan; 2011 will 

be the year of big decisions,” says Lermisiaux. � 

and high oil prices allowed 

Kazakhstan to achieve economic 

growth of around 10 percent 

annually over the past five years, 

according to the World Bank's 

‘Index of Economic Freedom’. 

Kazakhstan's ‘ease of doing 

business’ ranking also improved 

slightly in the 2010 report, 

reflecting improvements in three 

key indicators. The most notable 

improvement was in the ‘dealing 

with construction permits’ 

indicator, owing to a significant cut 

in the cost from $1,431 to $119. 

Kazakhstan cut its corporate tax 

rate from 30 percent to 20 percent 

in 2009. The corporate tax rate will 

be further reduced to 17.5 percent 

in 2013 and 15 percent in 2014. 

The country also reduced the rates 

for labor taxes and mandatory 

contributions paid by employers, 

and introduced a new tax code.

28 

overvIew 

Kazakhstan’s economic 

and investment policy 

The Government of Kazakhstan continues 

to pursue its economic priorities under its 

2030 Strategy and 2020 Strategic Development 

Plan. The outcome of the presidential elections 

last April provided a powerful impetus to 

deepen the ongoing reforms, enhance the 

Government’s institutional support for 

entrepreneurship and increase its efficiency 

In recent years, much has been done to create a favorable 

business climate in Kazakhstan. Today, the number of active 

small and medium-sized businesses exceeds 675,000, 

accounting for one-third of the GDP and providing jobs for 

more than 25 percent of Kazakh citizens. 

Even during the time of the worldwide financial crisis, 

the Government did not ignore domestic entrepreneurs, 

developing various tools of business stimulus, while the legal 

framework for business support is being improved all the time. 

Roadmap 2020, a large-scale initiative to spur 

entrepreneurship in modern Kazakhstan, has been 


The newly built Esentay complex in 

Almaty, which includes the highest 

tower in the city 

implemented since 2010. In 2011, under the program, a 

credit portfolio of domestic entrepreneurs will to be subsidized 

to the tune of $2.5 billion. 

With the operation of the Customs Union, extensive 

opportunities have opened for entrepreneurship. In 2010, 

bilateral trade with Russia increased by 27.2 percent, while 

trade with Belarus rose by 55.8 percent. Further increases are 

expected once internal borders are eliminated within the Union 

and progress is made in setting up a Single Economic Space. 

Kazakhstan aspires to become a trade, logistical and business 

hub for Central Asia. 

All these efforts come under one strategic task set 

forward by the President. His goal: to raise Kazakhstan’s GDP 

per capita to $15,000 and make it a high-income country. 

Such a task foresees seven percent economic growth over 

the mid-term, mostly through processing industries. This 

means that investments to fixed capital during the next five 

years will have to rise by at least 50 percent. 

The Government of Kazakhstan pursues a favorable 

investment climate, maximum openness and stability. Major 

joint projects have been launched with leading foreign

companies, with the level of foreign investment reaching 

$130 billion since 1993. 

A large portion of foreign investment, about 33 percent, 

goes to the mining industry, mainly concerning oil and gas. 

From 1993 to 2010, inward manufacturing investment 

amounted to $12.5 billion, or about 10 percent of the total. 

Kazakhstan has adopted the five-year State Program 

for Accelerated Industrial-Innovative Development, which is 

aimed at shifting investors’ focus from extractive industries 

toward the establishment of export-oriented and high-tech 

and innovative industries. 

The program is designed to ensure industrial growth 

through the implementation of 469 large investment 

projects and the opening new production facilities. 

The estimated total of direct expenditure for investment 

projects under the Industrialization Program is in excess 

of $40 billion. 

Of particular importance is the implementation 

of niche projects for manufacturing 

products that are not yet produced in 

Kazakhstan – investors who are interested 

in these industries and in such projects 

will be specially supported by the 

Government of Kazakhstan. 

The establishment of the Customs 

Union will create a free and unified goods 

market of 170 million consumers. Within 

the Union there are additional opportunities 

for business, including the reduction of transactional 

costs and transitory expenses, and the release of substantial 

working capital, which can be used for developmental 

purposes. Within the framework of the CES, the free 

movement of goods, investment capital, services and labor 

will be ensured. Economic integration will facilitate a 

coordinated macroeconomic policy to enable competition, 

while streamlining public procurements as well as 

government subsidies for industry and agriculture. These 

reforms are all aimed at creating favorable conditions for 

domestic exporters to access the transport infrastructure of 

partner countries, thereby reducing transport costs and 

improving competitiveness of Kazakh products both inside 

and beyond CES markets. 

The Customs Union and CES are designed to establish 

favorable conditions and encourage the development of new 

industries. It is designed to expand to include other states 

in the region and, if conditions warrant, even to establish a 

monetary union with a common currency. 

overvIew 

The Kazakhstan Government pursues a pro-business, 

yet equitable and predictable, corporate tax policy that 

allows businesses sufficient income for further growth and 

development while meeting the needs of our social policy. 

In light of the current economic situation, further gradual 

reductions are planned. 

The Government has also been taking significant steps to 

combat corruption and form an adequate legislative framework to 

meet the contemporary demands of free-market entrepreneurship. 

These reforms have brought about results. According to 

the World Bank’s Doing Business 2011 report (see page 26), 

Kazakhstan was listed in the top 10 countries for creating a 

favorable environment for entrepreneurship. 

Further reforms and measures aim to improve the business 

climate in Kazakhstan. The focus will be made on reducing 

administrative barriers and completing reform of the legal system. 

Kazakhstan also plans to improve its economic 

attractiveness by prioritizing much-needed infrastructure 

Kazakhstan was listed in the top 10 

countries for creating a favorable 

environment for entrepreneurship 

investment projects. In the transportation sector, these 

include: the modernization of airports in Semey and 

Ust-Kamenogorsk; the construction of modern port 

facilities in the Shulbinsk gateway; highway reconstruction 

and expansion; and several major railway projects. 

Another massive, but necessary, investment is 

needed in the country’s electrical power grid. 

Modernization, renovation and construction of new 

generating capacity will require more than $5 billion by 

2014 – more than $1.7 billion of that co-financed from 

the public budget. The development of ‘green’ energy 

projects is also of particular interest, with a plan to boost 

electricity production from renewable resources. In total, 

more than $7 billion will be invested in the electric 

power industry in the medium term. 

These much-needed infrastructure investments will 

help speed Kazakhstan’s overall development, trade 

integration and position our nation for further growth in 

the global economy of the 21st century. � 


29

30 

overvIew 

Democracy, politics 

and society 

According to the Central Elections 

Commission, 89.9 percent of the 

population turned out to vote in 

April’s election, as observed by many 

international monitors 

Invest In KAZAKHstAn 2011

After securing 20 years of economic 

and political stability for Kazakhstan, 

Nursultan Nazarbayev won a landslide victory 

in April. Some have questioned whether the 

democratic process has truly evolved, but 

there’s no denying the numbers that have 

turned out to vote. By Margot Linsky 

Incumbent Nursultan Nazarbayev easily and predictably 

won the April presidential election, brought forward from 

2012. Nazarbayev has been leading Kazakhstan since he 

deftly managed the country’s declaration of independence 

from the Soviet Union in December 1991. The latest 

election raised the president’s share of the vote from an already 

high 91.2 percent in 2005 to 95.5 percent in 2011. This figure 

was verified by many observers and human rights NGOs, 

inlcluding the International Republican Institute (IRI), which 

has its head office in Washington DC. In February 2011, the IRI 

together with the National Endowment for Democracy issued a 

report, the 2011 Poll Survey of Kazakhstan Public Opinion, 

which indicated a 90 percent approval rate for the incumbent. 

The elections paved the way for the government to make 

changes and continue the pace of reforms. Kazakhstan is 

experiencing an uptick in its standard of living, continued 

recovery from the global economic crisis, and relative 

freedom compared to neighboring states in Central Asia. 

The official turnout figure of 89.9 percent was also very 

high, given the low-key electoral campaign and the lack of 

any serious challenger to the president. None of his three rivals 

took more than two percent of the vote. The closest runner-up 

was Gani Kasymov, with just 1.9 percent. 

Most of the observers from the inter-governmental 

organizations, including the Commonwealth of Independent 

States (CIS), Collective Security Treaty Organization 

(CSTO) and Organization of Islamic Cooperation (OIC), 

announced that the elections were free and fair. 

The Office for Democratic Institutions and Human 

Rights (ODHIR) observer mission, which usually gives a 

more cautious assessment of the elections in 

Kazakhstan, acknowledged that “compared to the last 

presidential election, media provided more equality in 

covering candidates in the news programmes... Election 

day was calm.” 

At the same time, the ODIHR made a number of 

criticisms and suggestions for improvements to the electoral 

process, and issued a critical report on the elections. 

overvIew 

At an Astana press conference the day after the elections 

were held, Tonino Picula, head of the short-term OSCE 

observer mission to Kazakhstan, told journalists: “Kazakhstan 

should be praised for its economic growth, but unfortunately 

this election is a sign that its democratic processes have not 

grown at the same pace.” In particular, there was rather strong 

pressure within state institutions, such as universities, 

hospitals and military establishments, to go out and vote 

for the incumbent. 

The Council of Europe Parliamentary Assembly 

observation mission stated that “PACE has observed elections 

in Kazakhstan in the past and is pleased to state progress from 

one election to another in this country. The delegation is united 

in its view that despite certain imperfections that invariably 

Presidential election breakdown 

Nursultan Nazarbayev 

95.55% 

(7,850,958) 

Zhambyl Akhmetbekov 

1.36% 

(111,924) 

Gani Kasymov 

1.94% 

(159,036) 

Mels Eleusizov 

1.15% 

(94,452) 

Assembly of People of Kazakhstan, Daily Times 


31

32 

overvIew 

Kazakh leader Nursultan Nazarbayev won the 

country’s recent presidential election with an 

overwhelming 95 percent of the public vote 

mar all elections in any country, the outcome of this vote truly 

reflects the will of Kazakhstan’s electorate.” 

Some American experts and observers were less critical of 

the election, arguing that Nazarbayev truly has the trust of his 

people. Ariel Cohen, senior research fellow at Heritage 

Foundation in Washington DC, said after the election: “Nursultan 

Nazarbayev has a reserve of trust from the population. I, to be 

honest, am not surprised by such figures. 

“The people of Kazakhstan look at their neighbors such 

as Kyrgyzstan and Tajikistan, and they also look at the Middle 

East. They do not want to undergo any revolutions, they don’t 

want to have their houses burned or see private property 

destroyed. On the whole, I believe that President Nazarbayev 

is well supported.” 


Richard Weitz, director of the Center for Political- 

Military Analysis and senior fellow at the Hudson Institute in 

Washington DC, was one of a number of monitors invited to 

observe the April 3 election. “Like other monitors, I met with 

the leaders of Kazakhstan’s major political parties, discussed 

the ballot with officials, visited polling stations, and talked with 

dozens of voters,” wrote Weitz in The Diplomat newspaper. “I 

also exchanged views with monitors from the Organization for 

Security and Cooperation in Europe – which fielded the largest 

mission – as well as with other observer teams, foreign 

diplomats, and the media. At the precincts I visited in Almaty, 

for example, rules regarding the secrecy of the ballot and the 

exclusion of electioneering or other inappropriate behavior in 

voting areas were all followed scrupulously.”

Tassos Sitsas, general manager, Japan Tobacco International (JTI), Central Asia 

What prospects does Kazakhstan 

offer investors? 

Kazakhstan has created a good 

environment for foreign 

investment. For most FMCG 

companies, the Central Asian 

market is growing because of its 

demand for high-quality 

international brands. 

For JTI, Kazakhstan is 

considered an ideal export hub for 

Central Asia. Its political stability 

and efficient and predictable tax 

system underpin investors’ 

commitment to this country. 

What investments has JTI made in 

the country? 

Since 1993, JTI has invested around 

$120 million – a significant portion 

of this in the past three years – 

to create state-of-the-art 

manufacturing facilities and 

to develop our people. Additionally, 

the company has been one of the 

The city of Almaty had lower turnout figures than much of 

the country. Many people, especially those in their 20s and 30s, 

said before the poll that they did not plan to vote. But while the 

Almaty turnout was comparatively low, a respectable 68.5 percent 

of the electorate is still reported to have voted in the city. 

Meanwhile, at the town of Akkol in the Akmola region, 

where the regional turnout was 89.7 

percent, a crowd of around 40 residents 

was gathered outside the polling station at 

the Palace of Culture as a busload of 

foreign journalists arrived. “For 

Nazarbayev!” said one woman, when 

asked for whom she voted. 

“Because he is so good for the 

country. He keeps the peace and our 

standard of living goes up year by year. 

We want him to stay the president for another 20 years.” 

In the Palace of Culture’s lobby, a stand was set up to sell 

snacks, meat, and dairy products at discounted prices, a fairly 

common sight at polling stations. In other towns, voters left with 

small electrical appliances such as kettles and hand blenders. 

Nazarbayev himself voted early in the day at the National 

Library polling station on Astana’s left bank. Soon after the 

early elections were announced, Nazarbayev said that he did 

not plan to campaign actively, but would stand on his record 

most proactive international 

investors in the broader social 

sphere. JTI has supported veterans, 

the disabled, low-income farmers 

and other vulnerable sectors of 

society. 

JTI’s holistic approach to social 

programs was recognized in 

prestigious national awards, such 

as Paryz and Altyn Zhurek. 

What hopes does JTI have for its 

investments in Kazakhstan? 

JTI strives to maintain its status 

as a credible partner for the 

government. JTI’s operations are 

OVERVIIEW 33 

not only the source of significant 

investment in the country’s 

manufacturing and industrial- 

processing sector, but also provide 

significant revenues for the 

government – to date, totaling 

more than $400 million in taxes 

since entering the market. 

JTI also believes that 

establishing a sustainable dialogue 

and consultation mechanism 

between state authorities and 

the business community is 

instrumental in finding solutions 

to interrelated issues, and 

contributes to both parties. 

over the past 20 years. However, the presidential Nur Otan 

party mounted an effective campaign on his behalf. 

At his victory rally in Astana, Nazarbayev seemed 

untroubled by criticism of the election process as he prepared 

for his fourth term as president. “More than 90 percent for a 

candidate. Why, this is a sensation for Western countries,” 

Most of the observers from 

inter-governmental organizations 

agreed the elections were free & fair 

he said to supporters, the news agency RIA Novosti reported. “If 

polls usually divide a nation into various party blocs, we have 

united. While the word sees bloodshed and ethnic conflict, we 

– all the ethnic groups and religions of Kazakhstan – are one.” 

Timothy Ash, head of emerging markets research at Royal 

Bank of Scotland, writes in a note that Nazarbayev’s re-election, 

“will help reassure/reaffirm political stability in the country. 

The longer-term issue, though, remains around the succession 

to Nazarbayev, given he is currently 70 years of age.” � 

InVEst In KAZAKHstAn 2011

34 

overvIew 

Future prosperity 

through diversification 

Plans include the development of a 

domestic pharmaceutical industry 


In pursuit of diversification, the 

country has instigated initiatives 

to encourage the growth of 

non-resource sectors. By Ben Aris 

Oil is essential to the Kazakh 

economy, but to ensure 

long-term prosperity, the 

country must diversify away 

from raw material extraction. 

The Kazakh government is well aware of the 

problem and had already launched an 

extensive modernization program, even 

before the 2008 global economic crisis 

made diversification imperative. 

President Nursultan Nazarbayev laid out 

the main goals of Kazakhstan’s modernization 

program in his 2010 State of the Nation 

speech. The president said that a large part 

of the $8-billion-a-year transfers from the 

National Fund – a reserve fund created from 

oil revenues to the state – would be directed 

to industrialization programs. Kazakhstan will 

invest up to $20 billion in the non-resource 

sectors of the country over the next five years, 

but the goal is to use this investment to 

prepare the ground for bringing in more 

foreign direct investment, which, it is hoped, 

will then take the lead in diversifying the 

republic’s economy. 

Projects identified 

A list of priority projects has been drawn up 

by the state agency Samruk-Kazyna, which 

holds much of the state’s assets and has 

been consulted for much of the industrial 

reform policy. All in all, the industrialization 

program will include 162 projects, with a 

total budget of KZT6.5 trillion ($43 billion), 

and the state expects that more than 

200,000 jobs will be created. 

Samruk-Kazyna has adopted a 

two-pronged approach. First, the state agency 

will help existing companies to increase the 

value-added component of their production, 

and so drive the processing and associated 

overvIew 

manufacturing industries. The second line 

of attack is to build the infrastructure to 

support the creation of new businesses and 

technologies. For example, among the 

larger investments are: upgrading all three 

petrochemical plants in Kazakhstan by 2014; 

building a new gas-processing plant; finishing 

the Balkhash, Mainak and Ekibastus GRES-2 

power stations; and building a string of 

locomotive plants that can supply the republic 

and its neighbors with new trains. 

To assist with the sector-specific 

reforms, the president called for the 

simplification of the bureaucracy that 

surrounds setting up a business. Among other 

measures, the president said the costs of 

starting businesses in Kazakhstan should be 

cut by 30 percent in 2010, and another 

30 percent in 2011. 

A large part of this goal has already 

been achieved, and the World Bank says 

in its Doing Business 2011 report that 

Kazakhstan has made more progress than 

any other country in the world. 

Other initiatives to extend this progress 

include: accession to the World Trade 

Organization; ongoing integration with other 

Commonwealth of Independent States (CIS) 

countries, in particular via the new Customs 

Union with Belarus and Russia; developing a 

law for the country’s Special Economic Zones; 

and creating a roadmap for entrepreneurship 

development up to 2020. 

Michael Weinstein, director of the 

European Bank for Reconstruction and 

Development (EBRD) in Kazakhstan, which 

has joined the diversification effort and 

committed $1 billion in capital to support the 

drive, praises the government’s more 

pragmatic approach to carrying out reforms. 

“In the past, there have been various 

diversification programs that for one reason or 

another did not succeed,” he says. “The new 

program is more promising. Momentum is 

building. There is a window of opportunity to 

diversify – post-crisis, but before oil prices go 

through the roof again.” 


35

36 overvIew 

“Rather than looking at high-tech, the government is 

targeting the things that the country needs” 

Power generation is an important 

area for investment, such as at the 

nuclear reactor facility in Kurchatov 

This is not the state’s first attempt to remake the 

shape of the economy, but experts believe that the new 

program is a lot more likely to succeed. “The government 

has set its sights a bit lower this time – the priority sectors 

that President Nazarbayev has selected are the right ones,” 

says Weinstein. “Rather than looking at high-tech, the 

government is targeting sectors such as pharmaceuticals, 

chemicals, petrochemicals, metals, construction materials 

and fertilizers – the things that the country needs.” 

Key sectors that the government hopes to develop: 

• Agriculture The territory of Kazakhstan is the 

size of Western Europe and agriculture has huge 

potential. The basics are already there, but most 

of the supporting infrastructure is not. The state 

plans to increase productivity in agriculture and 

processing of agricultural products by a factor 

of two by 2014, through the application of new 

equipment and new technologies. At the same 

time, the state would like to increase exports of 

agricultural products to Russia, Belarus, Central 

Asia and Middle Eastern countries. “Building the 

value chain in agriculture is important. The 

agriculture sector is difficult to invest in, but we 

hope [the EBRD’s participation with] investment 

will encourage other companies to become more 

transparent,” says Weinstein. 


Agriculture is one of the 

key sectors with huge 

development potential 

• Infrastructure Support for infrastructure of all 

types is crucial. In the energy sector, the EBRD 

and other international organizations helped to 

finance the construction of a new north-south power 

line to address the imbalance between the ends of 

the country, while the state is also investing in 

additional power-generating capacity. 

• Industry The state will use various means to boost 

non-oil production and hopes to increase the share of 

non-oil exports to 45 percent from 27 percent in 2010. 

Three new locomotive plants are in operation, or close 

to it, and more engineering projects are in the pipeline. 

At the same time, the state will encourage investment 

to decrease energy consumption per GDP unit by 

25 percent, while increasing productivity in processing 

industries by a factor of two. The main focus will be on 

boosting the share of processing industries in GDP to 

at least 13 percent – from 11 percent in 2009 – and 

increasing the share of innovation-driven enterprises to 

20 percent from four percent. 

• Construction materials Construction and real estate 

were major economic drivers before the crisis, but 

development still relies heavily on imports. Another 

plank of the diversification program is to develop the 

domestic construction materials sector. The president 

called for raising the share of domestically produced 

construction materials to 80 percent by 2014.

The best is yet to come 

Message from Asset Issekeshev, Deputy Prime Minister – Minister of Industry and New Technology 

Blessed with bountiful natural 

resources and situated between 

several important trade routes, 

Kazakhstan is on the path to 

growth and has much to offer 

potential investors. 

Kazakhstan saw strong growth 

across most industrial sectors in 

2010. The government plans to build 

upon this in the future, increasing 

production, helping new sectors to 

emerge, and attracting more foreign 

investment and new technologies. 

Overall, industrial production 

grew by 10 percent in 2010, 

with increases in industries 

including manufacturing, mining 

and power generation. 

Last year was also highly 

significant in that it saw the 

launch of the Forced 

Industrial-Innovative Development 

Program, a four-year initiative 

designed to transform Kazakhstan 

into a modern, post-industrial 

economy. Another important step 

was Kazakhstan’s entry to the 

Customs Union, where it is a 

founding member alongside 

Russia and Belarus. 

The industrialization program 

focuses on four priority sectors of 

the economy: the areas where 

Kazakhstan has historically been 

strong – in particular the extractive 

industries; related areas such as 

machine building and construction; 

export-oriented sectors such as 

agribusiness and light industry; and 

advanced technologies, including 

IT, space technologies and 

nanotechnology. State holding 

company Samruk-Kazyna is working 

with strategic investors – both 

domestic and foreign – on 

large-scale industrial projects such 

as the expansion of Kazakhstan’s 

three refineries. These major 

projects will have a knock-on effect 

in providing new opportunities and 

markets for domestic small and 

medium-sized enterprises. 

Foreign investment and 

technology transfer is important for 

the success of the industrialization 

program. The government has made 

creating new partnerships with 

foreign companies and attracting 

foreign investment a priority. One 

success story so far has been the 

• Pharmaceuticals President Nazarbayev is keen to 

develop a domestic pharmaceutical industry and in 

early 2009, launched an ambitious program aimed 

at raising the volume of domestically produced 

medicines consumed to half of the total by 2014. 

This means building many new plants in a relatively 

short time, and the government is actively looking 

for foreign investment to facilitate the program. 

The furthest advanced project is that of Chimpharm 

– by far the biggest domestic player – to build a 

new tablet factory in Astana. This will be the first 

launch of the locomotive assembly 

plant by GE Transportation and 

Kazakhstan’s national rail 

company Kazakhstan Temir 

Zholy. To further encourage 

investment, six free 

economic zones have been 

launched with generous 

incentive packages 

for domestic and 

foreign investors. 

Kazakhstan attracted a total of 

$13.1 billion in foreign direct 

investment in the first nine months 

of 2010 – a 1.1 percent increase 

year on year. Investments outside 

the natural resources sector were 

2.5 times higher than in 2009. 

The first reason for Kazakhstan’s 

attractiveness as an investment 

destination is its endowment of 

natural resources, including oil, 

gas, coal, uranium and numerous 

metals. Overall, the country is 

sixth in the world in terms of 

natural resources. 

While Kazakhstan has a 

population of just 16 million, the 

launch of the Customs Union in 

2010 gives companies operating in 

overvIew 37 

the country access to a market of 

more than 170 million people. In 

addition to its historic closeness to 

Russia, Kazakhstan is positioned on 

a geo-strategic axis between 

Russia, China, Europe, the Middle 

East and South Asia. 

The Kazakh government has 

been working steadily to provide 

a good investment climate. This 

was reflected in the World Bank’s 

Doing Business 2010 ranking, 

where Kazakhstan was one of the 

top reformers, leaping 15 places. 

In 59th place, Kazakhstan is close 

to its goal of entering the top 50 

countries on the index. 

plant of any kind to be located in the new capital. 

The Kazakhstan Development Bank has already 

provided the funding and is also backing a second 

project to expand production facilities in Shymkent. 

Other players – including GlobalPharm, Nobel AFF 

and Romat – are reportedly planning new lines or 

new plants. 

“Industrial development is our chance in the new decade 

for new opportunities for our country,” said President 

Nazarbayev, in his State of the Nation speech. � 


38 overvIew 

Enhanced links boost 

trade opportunities 

By building stronger economic 

relations with other countries, both 

near and further afield, Kazakhstan 

is attracting more foreign direct 

investment and positive growth. 

By Tim Gosling 

Before independence, 

Kazakhstan’s trade of mainly 

metals and ores, wheat and a 

modest quantity of oil was 

dictated from Moscow, with 

most roads leading north. The border with 

China was sealed. Twenty years later, with 

commodities powering economic growth of 

eight to nine percent each year, the Kazakh 

government is working to diversify the 

economy, and the country now offers a 

spectrum of opportunities for investment 

and trade in non-energy sectors. 

Trade surplus 

Apart from a temporary setback in 2009, 

provoked by the global economic crisis, 

Kazakhstan has seen its foreign trade expand 

aggressively every year since 2000, when 

total exports were just $9.86 billion, 

according to the United Nations. By 2005, 

that figure had leapt to $30.5 billion, and 

then to $60 billion in 2010. That year, 

Kazakh exports and imports of merchandise 

totaled $90 billion – illustrating the strong 

trade surplus that the country enjoys. 

Due to Kazakhstan’s rapid development 

of its oil and gas deposits – as well as the 

infrastructure to export it – energy leads the 


country’s trade ties. Oil and oil products 

accounted for 59 percent of exports in 2009. 

The country’s traditional role as a supplier of 

metals and ores remains strong, too, with this 

sector making up 19 percent of exports. 

However, the government’s efforts to boost the 

chemicals industry are paying off, with the 

sector accounting for five percent of the 

export market. Foreign sales of machinery are 

weighing in at three percent, while grain is 

becoming a staple of foreign trade. 

Widening the net 

Powering this boom in foreign trade is 

Kazakhstan’s widening economic relations 

with countries both Asian and European, on 

top of the strong ties it retains with the other 

members of the Commonwealth of 

Independent States (CIS). 

China is a leading light, and last year for 

the first time became the number-one export 

destination for Kazakh goods. Kazakhstan’s 

eastern neighbor absorbed 17.1 percent of 

Kazakh exports, as it looked to Astana to help 

build the Xinjiang region into an industrial 

hub. The same year, Italy took 16.2 percent 

of Kazakh exports, with Russia the third 

biggest importer at 8.1 percent. 

However, there are many other countries 

increasing trade with Kazakhstan, as Astana 

looks to forge stronger commercial ties with 

Asian powerhouses such as India (0.4 percent 

of foreign trade in 2009) and South Korea 

(0.7 percent). Reflecting this strategy, Grigoriy 

Marchenko, chairman of the National Bank of 

Kazakhstan (NBK), said in January that the 

country was close to signing a currency swap

overvIew 

Tengiz oil and gas refinery plant 

in western Kazakhstan. Energy 

leads the country’s trade ties, but 

other sectors are expanding 


39

40 overvIew 

China becomes Kazakhstan’s leading trading partner 

With a superpower on its 

doorstep, Kazakhstan looks set to 

reap dividends from its partnership 

with its Eastern neighbor. 

China’s government has set high 

targets to develop its western 

Xinjiang region into an industrial 

hub, including $100 billion of 

investment in 23 new infrastructure 

projects. Kazakhstan will be a key 

supplier for this huge scheme. The 

country’s share of foreign trade in 

the Xinjiang region in 2008 reached 

40 percent, giving the Central Asian 

nation unrivalled exposure to what 

is expected to be one of China’s 

fastest-growing regions. 

Almost all Kazakhstan’s exports 

to China are raw materials, and 

China overtook Italy as the 

country’s leading export partner in 

2010, accounting for 17.1 percent 

of all Kazakh exports. Oil and oil 

products made up 45 percent of 

exports in 2009. Mining products 

– ore, slag and ash – accounted 

for 16 percent; iron-based metals, 

15 percent; copper and brassware, 

13 percent; and chemicals, seven 

percent. Kazakhstan’s share of 

imports varies from 10 percent to 

60 percent of total Chinese imports 

across different product types. 

Large-scale investment in 

Kazakhstan appears to be part 

of China’s global strategy to 

secure energy sources for its 

growing economy. China National 

Petroleum Corporation (CNPC), 

the state energy company, is the 

largest corporate investor in 

Kazakhstan, with investments 

amounting to around $7 billion to 

date. Total Chinese investment 


over 1991-2010 reached 

$13.5 billion, with the majority 

directed to the energy sector and 

energy-related services. Part of 

this funding was provided in the 

form of loans and credits, giving 

China access to Kazakhstan’s 

mineral resource base. 

Investment from Asia is not 

restricted to China, however. 

Japan, India and South Korea are 

becoming increasingly important 

partners. The state nuclear holding 

company, Kazatomprom, teamed up 

with Toshiba and Sumitomo in 2010 

to mine rare earths in ventures 

worth $300 million, while Japanese 

companies have been busy looking 

at Kazakh agribusiness. 

India has held state-level talks 

on civil nuclear cooperation, while 

PNB – which became the first 

Indian bank to enter the Kazakh 

market when it bought Dana Bank 

in December – plans to expand its 

network, and said in February 

that: “The close relationship 

between India and Kazakhstan is 

one of the factors in our decision 

to [come to Kazakhstan].” 

Meanwhile, in April, LG Chem – 

one of South Korea’s largest 

chemical manufacturers – 

announced plans to invest up to 

$1.3 billion in the second stage of 

an integrated chemical complex in 

the Atyrau region of Kazakhstan. 

When it comes to sectors, 

investment flows remain dominated 

by oil and gas projects, which took 

in close to half of foreign direct 

investment (FDI) in 2010. Mining 

took a large chunk out of the total, 

but manufacturing (including 

chemicals), retail and transport 

and communications infrastructure 

all attracted healthy volumes, too. 

This pattern reflects the 

government’s recognition that it 

needs to use the opportunity 

offered by energy-powered 

growth to diversify the economy. 

Kazakhstan launched a long-term 

project for Diversification of 

Kazakhstan’s Economy in 2004. The 

European Bank for Reconstruction 

and Development announced it was 

willing to invest $1 billion to help 

the program in 2010. 

This strategy should open further 

trade and investment opportunities. 

As the Organization for Economic 

Cooperation and Development says: 

“Kazakhstan has clear 

competitive advantages in 

non-energy sectors,” identifying 

agriculture, chemicals and 

information technology (IT) as 

among the most promising. 

Kazakhstan’s agricultural 

sector has extensive arable land 

resources, high regional demand 

prospects, growing domestic 

consumption and an absence of 

distorting government support in 

most agribusiness sectors. 

Specifically, the grain, meat and 

dairy subsectors are where 

Kazakhstan shows the greatest 

potential to successfully compete 

on global markets. 

The largest of the agrichemicals 

sectors in terms of volume and 

market value is the mineral 

fertilizers sector. Kazakhstan has 

all the basics in place for 

developing its fertilizer production: 

deposits of four billion to 15 billion 

tons of phosphate rock, significant 

reserves of natural gas and sulfur, 

and low-cost access to ammonia. 

Moreover, with a low current level 

of fertilizer use, the country’s large 

potential domestic market remains 

untapped. It also has major market 

opportunities in the growing 

neighboring economies of Central 

Asia, China and India. 

The IT sector in Kazakhstan is 

nurtured by domestic demand and 

global requirements, but is still 

relatively small. The country has 

strong potential for the provision 

of IT outsourcing. The government 

President Nursultan 

Nazarbayev with Chinese 

Premier Wen Jiabao 

of Kazakhstan has made a 

commitment to enhance 

education, particularly in IT. With 

the low cost of labor compared 

with key regional competitors such 

as Russia and existing skill levels, 

the IT sector is taking advantage 

of strong demand for its services 

from government, local businesses 

and foreign investors already 

based in Kazakhstan. A high level 

of broadband penetration and 

mobile connection compared with 

its neighbors also make 

Kazakhstan a potential platform 

for IT businesses in Central Asia.

Foreign direct investment in 2010 – top 12 originating countries ($m) 

Netherlands 

8,151.6 

France 

1,507.6 

Other 

1,495.4 

China 

1,221.6 

United Kingdom 

1,037.3 

Russia 

832.2 

British Virgin Islands 

715.7 

agreement with China to ease fi nancial transactions and trade 

between the two countries, and a similar deal with South 

Korea was in the works. 

At the same time, trade with the developed world is 

growing. The United States was Kazakhstan’s fi fth largest 

partner in 2009, accounting for three percent of imports and 

exports, according to the European Commission, while as a 

bloc, the European Union is by far Kazakhstan’s biggest trade 

partner, with 32 percent. 

Investment shadowing trade 

Not surprisingly, this boom in trade has sparked a similar 

dynamic in foreign direct investment (FDI) fl ows into 

Kazakhstan over the past decade, as investors have rushed 

to pump cash into the country’s developing sectors. In 2006, 

FDI infl ows totaled $6.3 billion, according to the UN, but 

had swollen to $15.8 billion by 2008, with the uplift being 

particularly driven by oil and gas investments. According to 

Italy 

609.8 

Japan 

603.3 

Switzerland 

479.4 

Canada 

436.5 

United States 

425.1 

OVERVIEW 

By far the largest slice of infl ows 

originated in the Netherlands, 

although a large percentage can be 

traced to corporates around Europe 

Source: National Bank of Kazakhstan 

the NBK, 2010 saw a huge rebound after a disappointing 

2009, with FDI of $20 billion. 

By far the largest slice of those infl ows ($8.1 billion) 

originated in the Netherlands, although a large percentage 

can be traced to corporates around Europe. Investments 

offi cially originating in the Netherlands include those by 

PricewaterhouseCoopers, AT&T and Unilever. In addition, 

Royal Dutch Shell has a large investment in the Kashagan 

oilfi eld, while Dutch banks such as ABN Amro also made 

signifi cant commitments. 

France leads investors from outside the Netherlands – 

a trend sealed by a meeting in October 2010 when French 

president Nicolas Sarkozy visited Astana to agree $6 billion in 

trade and investment deals with Kazakh president Nursultan 

Nazarbayev. Among the 24 deals announced were contracts 

with aerospace group EADS, engineering group Alstom and 

energy fi rm Areva, which will build a nuclear materials 

assembly plant in Kazakhstan. � 

INVEST IN KAZAKHSTAN 2011 

41

42 

overvIew 

Leadership in conflict resolution 

Kazakhstan’s stewardship of the Organization 

for Security and Cooperation in Europe (OSCE) 

reinvigorated the search for peaceful solutions 

to frozen conflicts. The country is continuing its 

leadership role as chair of the body’s Forum for 

Security Cooperation, which will carry on its 

work on conflict resolution – particularly in 

former Soviet countries. By Nora FitzGerald 

Kazakhstan has seen a banner year in foreign 

affairs after its successful chairmanship of the 

Organization for Security and Cooperation in 

Europe (OSCE), the premier regional security 

organization on the Eurasian continent. 

The country was the first post-Soviet republic to chair the 

56-nation organization and it went on to host the first OSCE 

summit in 11 years, which culminated in a two-day meeting 

held in Astana in December. Kazakhstan, as OSCE chair, also 

had a major role in alleviating a violent uprising in neighboring 

Kyrgyzstan, and brought some largely forgotten conflicts in the 

former Soviet Union back onto the international agenda. 

“We realize that the way to a true Euro-Atlantic and 

Eurasian community with united and indivisible security will be 

long and thorny,” said Kazakhstan president Nursultan 

Nazarbayev. “We intend to raise the level and quality of security 

and understanding between our states and peoples.” 

Kazakhstan’s push for the chairmanship of the OSCE was 

backed by Germany, Russia and Spain, despite some initial 

skepticism about the ability of a fledgling democracy of 

16 million people in Central Asia to handle the responsibility. 

By the end of 2010, as Kazakhstan was handing over the 

chairmanship to Lithuania, there were widespread plaudits for 

its skillful diplomacy, which came to the fore during the Kyrgyz 

crisis – a conflict that threatened to descend into civil war. 

Kazakhstan – working with the US and Russia – was 

critical to a negotiated settlement between the then-president 

Kurmanbek Bakiyev and Roza Otunbyeva, who led the revolt 

against him and subsequently became president. Kazakhstan 


also helped to organize the dispatching of a group of unarmed 

police officers, hailing from across the OSCE, to continue 

monitoring events on the ground in Kyrgyzstan. 

Julie Finley, a former US ambassador to the OSCE who 

initially opposed Kazakhstan’s bid, said she was impressed with 

the country’s stepping out as a major player in international 

affairs. “Kazakhstan has knocked my socks off,” she said at a 

conference at the Center for Security and International Studies 

in Washington DC. “It has been open and outgoing in its 

leadership. It has been centered on what has been going on in 

Kyrgyzstan. It has been solid and professional from the get-go.” 

Kazakhstan held more than 150 events associated with its 

chairmanship, and the country’s Foreign Minister and OSCE 

chairperson-in-office Kanat Saudabayev made more than 40 

visits to various countries and regions. 

The crowning glory of Kazakhstan’s chairmanship was the 

summit in Astana, the country’s glittering capital. The summit 

did not reach a final agreement on conflict resolution, an effort 

that Kazakhstan focused on the so-called frozen conflicts in the 

former Soviet Union. Before the summit, Chairman Saudabayev 

had visited the breakaway territories of South Ossetia and 

Abkhazia in Georgia, as well as the disputed territory of 

Nagorno-Karabakh between Armenia and Azerbaijan, and the 

separatist region of Transdniestr in Moldova. 

Despite Kazakhstan’s best efforts, the positions of some of 

the other member states were too intractable to allow for a 

diplomatic breakthrough. There were stand-offs between the US 

and Russia over Georgia, and between Armenia and Azerbaijan 

over Nagorno-Karabakh. Nonetheless, Kazakhstan’s efforts gave 

new life to the search for peaceful solutions to these protracted 

and debilitating conflicts. This year, Kazakhstan will build on its 

leadership role within the OSCE as chair of the body’s Forum for 

Security Cooperation, which will continue the country’s work on 

conflict resolution, particularly in the former Soviet Union. 

President Nazarbayev also tabled a series of less 

contentious proposals, such as creating an ecological forum 

and a body to help fight transnational crime – items that will 

form part of the OSCE’s agenda in 2011. Kazakhstan will 

remain deeply involved in the OSCE’s leadership group as a

“Kazakhstan has been open and outgoing in 

its leadership. It has been centered on what 

has been going on in Kyrgyzstan. It has been 

solid and professional from the get-go.” 

Julie Finley, former US ambassador to the OSCE 

overvIew 

President Nazarbayev welcomes 

US Secretary of State Hillary Clinton 

to the OSCE Summit in Astana 


43

44 

overvIew 

Yerzhan Kazykhanov, Foreign Minister of the Republic of Kazakhstan 

Kazakhstan has maintained 

excellent relations with its 

traditional partners, Russia and 

Central Asian countries, while 

forging new relationships with 

countries further afield, particularly 

in Europe, Asia and America. 

I am pleased to say that 

Kazakhstan’s international profile 

has soared recently, as it held the 

rotating presidency of the 

Organization for Security and 

Cooperation in Europe (OSCE) in 

2010, and this year is chair of the 

Shanghai Cooperation Organisation 

(SCO) and president of the 

Organization of Islamic 

Cooperation (OIC). 

Our contributions to regional 

security include the Kazakh 

government’s assistance to 

Afghanistan, supplying food and 

rebuilding infrastructure. We have 

also agreed to pay $50 million to 


fund the education of Afghans in 

disciplines needed in the country. 

Kazakhstan’s positive 

international image has helped us 

to demonstrate to investors what 

the country has to offer, both in 

terms of economic potential and 

the business climate. Since 

independence Kazakhstan has been 

open to foreign investors, and has 

seen major commitments by 

companies from the US, Russia, 

China, France, the United Kingdom 

and other parts of the world. 

Thanks to our good relations 

with our neighbors, we are an 

important state for transit. We 

are investing in new road and rail 

links, with new lines to China, and 

to Iran via Turkmenistan due to 

open in 2011. We also serve as a 

transit state for oil and gas 

exports from our Central Asian 

neighbors to Russia and China, 

member of the Troika, which also includes the current chair, 

Lithuania, and the 2012 chair, Ireland. 

President Nazarbayev says Kazakhstan’s chairmanship of 

the OSCE was a rich experience, not only for the country’s leaders 

and diplomats, but also for its people. “The OSCE summit in 

Astana has positively influenced Kazakhstan. It has united our 

nation, strengthened belief in our ability to resolve incredibly 

difficult challenges and achieve our highest goals,” he says. 

Kazakhstan also focused on security in Afghanistan, and 

increased its role in assisting the international coalition led by 

the US. Kazakhstan expanded its post-2001 grant of over-flight 

rights to include military supplies and personnel, not just 

non-lethal cargo. And in November, it agreed to send a 

contingent of troops and instructors to Afghanistan. 

This year, Kazakhstan is continuing its international 

leadership role as it assumes the chairmanship of the Ministerial 

Conference of the 57-member Organization of the Islamic 

Conference (OIC). This position again places the country in a 

as well as exporting our own 

oil and gas. 

Our links within the Eurasian 

region have intensified recently 

with the launch of the Customs 

Union in July 2010. Alongside 

Russia and Belarus, Kazakhstan 

was a founding member of the 

union, which will give investors 

access to a market of over 

160 million people. In future, the 

Customs Union is expected to 

expand geographically and, at the 

same time, to evolve into a 

Eurasian Economic Union. 

Kazakhstan has also been 

building links with countries in the 

Islamic world. The country has 

adopted the theme ‘Peace, 

Cooperation and Development’ for 

its chairmanship of the OIC, to 

reflect the priority issues of the OIC 

member states. Within Kazakhstan, 

legislation on Islamic finance was 

adopted in 2009, and Kazakhstan is 

well on its way to becoming a 

regional centre for Islamic, as well 

as traditional, finance. 

Perhaps most significant is 

our commitment to tolerance. 

Kazakhstan’s firm policy is to be 

open to all religions and ethnic 

groups, and we have three times 

hosted the triennial Congress of 

World and Traditional Religions, to 

promote peace and understanding 

among religious faiths. 

leadership position to help resolve some of the most contentious 

international debates in the period after the ‘Arab Spring’. As a 

largely Muslim nation, Kazakhstan will continue to stress – as it 

did during its OSCE chairmanship – the need for inter-regional 

and inter-faith dialogue. Therefore, at the OIC Ministerial 

meeting on June 28-30, 2011, the Organization changed its 

name to the Organization of Islamic Cooperation. At the 

meeting, President Nazarbayev shared his vision for the Islamic 

countries to stay on the path of peace, modernization, scientific 

and technological development and education. He said that to 

ensure long-term peace, the Islamic world should learn to 

confront religious fundamentalism as a political ideology and 

establish an open and honest dialogue with the West. 

Foreign Minister Saudabaev says international cooperation 

can only succeed through the “constant exchange of ideas” 

across borders. Indeed, as President Nazarbayev noted at the 

end of the Astana OSCE summit: “Winston Churchill famously 

said: ‘To jaw-jaw is always better than to war-war.’” �

Evolution of role sees 

fund gearing up for 

‘People’s IPO’ 

The heart of Kazakhstan’s economy, 

Samruk-Kazyna has, since its inception, played 

a crucial role in the country’s industry and 

economy. Now the fund is ready to float some 

of its assets at discounted prices to retail 

investors. By Clare Nuttall 

Kazakhstan’s sovereign wealth fund 

Samruk-Kazyna put to work billions of US dollars 

to support the economy during the global 

economic crisis. With Kazakhstan growing 

strongly, the fund’s role has evolved – it is now 

responsible for creating new industries and increasing 

efficiency in the economy’s most important companies. 

This year will see further dramatic changes, as minority 

overvIew 

A gas pipeline near Almaty. The state oil 

and gas giant is a fund subsidiary 

stakes in some of its largest and most attractive companies 

are floated on the domestic stock exchange. 

Samruk-Kazyna was created in the depths of the crisis 

through the merger of two existing organizations – holding 

company Samruk and investment company Kazyna – in 

October 2008, and its importance to the Kazakh economy 

cannot be overestimated. Its subsidiary companies include the 

national rail and postal companies, electricity grid operator 

Kegoc, state oil-and-gas giant National Company 

KazMunaiGas, nuclear company Kazatomprom, national air 

carrier Air Astana, and three of the top four banks. It is also 

the parent of the Damu small enterprise fund, private equity 

fund of funds Kazyna Capital Management, and other 

financial organizations. 

Overall, Samruk-Kazyna manages assets worth in excess 

of $70 billion, accounting for around 40 percent of the 


45

46 overvIew 

In addition to raising funds for expansion, the ‘People’s IPO’ 

is also intended to stimulate the domestic capital market 

economic activity in the country. It has a total of 404 

subsidiaries and affiliated companies. 

As of March 2010, Samruk-Kazyna announced it had 

invested KZT897 billion ($6.1 billion) from Kazakhstan’s 

National Fund to support the economy during the crisis. Its 

largest financial commitment was to the banking sector, 

where it invested some KZT486 billion. 

Other anti-crisis measures included supporting the 

real-estate sector (KZT360 billion), support for small and 

medium-sized enterprises (KZT120 billion) and implementing 

industrial and infrastructure projects (KZT121.5 billion). 

Samruk-Kazyna became the majority shareholder of 

BTA Bank and Alliance Bank, injecting liquidity when both 

were on the brink of collapse in February 2009. Today, a debt 

restructuring for the two banks has been agreed with creditors. 

At the same time, the fund took minority stakes in Kazakhstan’s 

other big-four banks, Halyk Bank and Kazkommertsbank. 

Now that GDP growth in Kazakhstan has returned to 

pre-crisis levels, Samruk-Kazyna is starting to divest some 

of the assets it acquired during the crisis. The fund has 

already exited its investment in Halyk, selling the stake 

back to the bank and its majority shareholder Almex. 

Kazkommertsbank could buy back its shareholding in the 

near future. A sale of BTA to Russia’s Sberbank is still on the 

cards and Samruk-Kazyna is also looking at potential exit 

routes for Alliance, but it is adamant that it will sell its 

shareholdings only if the price is right. 

Post crisis, Samruk-Kazyna is involved in raising the 

efficiency of its subsidiaries, and is the main conduit for big 

foreign investment projects. The emphasis within Kazakhstan 

has shifted toward production of processed and value-added 

products, rather than being purely a supplier of raw materials. 

Several of the priority projects within the 2010-14 

Accelerated Industrial and Innovative Development program 

are aimed at achieving this goal. 

Samruk-Kazyna is already working to diversify and 

industrialize Kazakhstan. The ‘breakthrough projects’ under 

the Samruk-Kazyna umbrella include reconstruction of the 

Atyrau refinery, modernization of the national electricity grid 

and construction of several new power stations. 


Within Samruk-Kazyna, two holding companies created in 

late 2008 are responsible for the chemicals and metals sectors, 

respectively. The United Chemicals Company was set up to 

develop a national chemicals industry and reduce Kazakhstan’s 

dependence on imports of products such as fertilizers. Tau Ken 

Samruk is the holding company for the Kazakh government’s 

stakes in metals and mining companies. While oil and gas still 

account for the lion’s share of Kazakhstan’s exports, metals 

and mining have been growing in importance in recent years. 

Soaring metals prices, and the steady growth in demand from 

neighboring China in particular, have provided an impetus for 

Kazakhstan to increase its output. 

The government stakes in two major London Stock 

Exchange-listed mining companies – Eurasian Natural 

Resources Company (ENRC) and Kazakhmys – are held within 

Tau Ken Samruk. Both companies have an immense presence 

in the Kazakhstan mining sector, as well as internationally. 

Kazakhmys is the largest copper producer in Kazakhstan and 

one of the top 10 producers worldwide. ENRC – a diversified 

natural resources group – has a presence in China, Russia, 

Brazil and Africa, as well as in Kazakhstan. 

This year has already seen significant changes for 

Samruk-Kazyna. On April 12, Timur Kulibayev was promoted to 

chairman as part of the post-elections reshuffle. Kulibayev, the 

son-in-law of Kazakh president Nursultan Nazarbayev, was 

previously the company’s deputy chairman. 

The fund’s main task this year will be to carry out the 

‘People’s IPO’ program, under which shares in companies that 

are wholly or partly owned by Samruk-Kazyna will be offered at 

a discount to retail investors and pension funds. In addition to 

raising funds for expansion, the program is also intended to 

stimulate the domestic capital market. 

At least some of the IPOs are due to take place by the 

end of this year. Companies expected to be part of the first 

wave of IPOs include power-generation company 

Samruk-Energo, electricity grid operator Kegoc, postal service 

Kazpost and KazMunaiGas Exploration and Production. In the 

following two years, IPOs of other companies – including 

Kazatomprom, National Company KazMunaiGas, and railway 

operator Kazakhstan Temir Zholy – are planned. �

Minerals tax freeze 

is welcome news 

for investors 

overvIew 

While the Kazakh government seeks an extra 

$2.9 billion to cover the 2008-09 bank bailouts, 

it won’t do so by raising mineral resource rent 

taxes. One ingenious scheme involves the 

setting up of a Distressed Asset Fund – to 

purchase bad loans from the banking sector 

and free up liquidity. By Nicholas Watson 

Kazakhstan has made steady progress in 

reforming its tax system for companies operating 

in the country over the past few years. However, 

the fallout from the global economic crisis has 

postponed further cuts in tax rates. 

In November, Finance Minister Bolat Zhamishev said 

that the government would not, as previously planned, cut the 

corporate income tax from its current 20 percent, but maintain 

that rate until 2013, as it needs to boost revenues in order to 

shore up the budget. In 2009, Kazakhstan slashed corporate 

tax to 20 percent from 30 percent, and at that time said it 

planned to lower it further over the next two years. 


47

48 overvIew 

The Distressed Asset Fund would allow use of the free 

liquidity from commercial banks to buy debt securities 

“We support continued decrease of the tax burden. But 

since the crisis, it has become obvious that it is impossible to 

cut taxes sharply,” Zhamishev told reporters after the 

legislature voted to approve the government’s tax bill. 

Positive response to revised plan 

As a result of postponing the corporate tax cut, the government 

has decided to leave mineral resource rent taxes unchanged 

instead of raising them as planned – news that was greeted 

warmly by investors and was considered crucially important to 

investors in oil and gas, as well as mining. “Because corporate 

income tax is not lowered, the rates of mineral resource rent 

tax will remain unchanged,” said Zhamishev. 

The US consultancy IHS Global Insight says the 

welcome news goes some way to dispelling the idea that 

the government is slowly increasing its share in companies’ 

profits, especially on the crucial oil and gas industry, to 

boost state income. 

In the summer of 2010, the government said it planned 

to introduce a further increase in export taxes on crude oil in 

2011. Zhamishev said that the new tax would be doubled from 

the current $20 per ton to $40 per ton, which analysts say 

would produce an extra $2.9 billion in taxes a year. 

There is no indication of whether any of the major 

foreign energy companies operating in the country under 

Ministers and officials from 

Kazakhstan and other Central 

Asian countries attended a 2008 

OECD/OSCE conference on 

competitiveness in the region 


production-sharing agreements (PSAs) – such as Chevron 

or Eni BG Group – will be excluded from the proposed tax 

increase. They are already attempting to negotiate over 

payment of the initial 20 percent export tax increase that 

was introduced in July 2010. 

However, these big companies’ efforts to invoke the ‘tax 

stabilization provisions’ of the PSAs signed with the Kazakh 

government in the 1990s or early 2000s are not likely to be 

successful, according to analysts. 

“The government certainly needs an extra $2.9 billion 

to cover costly bank bailouts during the 2008-09 

recession,” says a representative from Global Insight. 

In the banking sector, the National Bank of the Republic 

of Kazakhstan (NBRK) stated in April that it is aiming to 

introduce a mechanism to clean up the balance sheets of 

Kazakh banks – possibly as soon as July 1. Grigoriy 

Marchenko, the governor of the NBRK, said the new 

mechanism, which would clear bad loans from the banks’ 

balance sheets, is currently in a stage that requires 

amendments to the Tax Code. 

Marchenko also added that if, for some reason, the new 

model failed to start its work in July, then it would be launched 

in January 2012. The Financial Institutions Association of 

Kazakhstan, the Ministry of Finance, auditors and commercial 

banks are currently involved in the project. 

The NBRK and the Agency of the 

Republic of Kazakhstan on Regulation and 

Supervision of Financial Markets and 

Financial Organizations (AFN) are discussing 

the possibility of creating a special company, 

the Distressed Asset Fund. The Fund would 

buy out bad loans from commercial banks, 

thereby allowing use of the free liquidity from 

commercial banks to buy debt securities 

issued by DAF, while DAF would use the 

proceeds to buy out bad loans from banks. 

“We believe that if the mechanism is 

launched in 2011, it could possibly be a 

positive milestone for the sector,” says the 

Kazakh investment bank Visor Capital. �

50 

overvIew 

All for one, one for all 

By joining a single, regional market, 

Kazakhstan, Belarus and Russia aim to 

eliminate obstacles to trade and investment, 

and ultimately free up the movement of 

labor and capital. By Ben Aris 

One of the fastest ways to increase the wealth of 

a country is to concentrate on your comparative 

advantage and trade with your neighbors. In 

this way, a country will put most of its effort 

into what it is good at. 

On January 1, 2011, a new customs union between 

Kazakhstan, Belarus and Russia came into being – part of the 

grander plan to create a common economic space between 

the three countries. The customs union creates a single market, 

that will change the nature of trade in the region and accelerate 

growth in the member countries. 


The presidents of Kazakhstan, Russia 

and Belarus attended a customs union 

summit in Moscow in 2010. From left 

to right: Nursultan Nazarbayev, Dmitry 

Medvedev and Alexander Lukashenko 

The agreement is the culmination of almost two 

decades of work. Celebrated with much fanfare in the 

Kazakh capital of Astana, the union eliminates obstacles 

to trade and investment that went up after the collapse of 

the Soviet Union, as well as reducing the duties and 

documentation needed to trade between the three countries. 

Border controls in airports between the members have 

already been largely removed. 

However, getting this far has not been easy, and the 

agreement remains a work in progress. In 1994, the 

countries of the Commonwealth of Independent States (CIS) 

decided to create a free trade area, but the agreements were 

never signed. Still, this discussion did result in the creation 

of a Eurasian economic community treaty – signed by the 

presidents of the Republic of Belarus, the Republic of 

Kazakhstan, the Kyrgyz Republic, the Russian Federation and 

the Republic of Tajikistan in Astana on October 10, 2000 – 

which forms the basis of the new trade agreement.

A second attempt to create a customs 

union met with more luck. An agreement in 

principle to create a common economic 

space was announced after a meeting in the 

Moscow suburb of Novo-Ogarevo on February 

23, 2003. Initially, Ukraine was invited to 

join, but it pulled out after the Orange 

Revolution in 2006, leaving the other three 

countries – Belarus, Russia and Kazakhstan 

– to go ahead and sign the deal in 2009. 

The union is now a reality, and the 

participating states are due to remove the 

last of their customs borders on July 1, 

2011. By January 1, 2012, the integration 

of the three countries to create a common 

economic space will be complete. The first 

step is harmonizing customs rules, and the 

next will be a discussion on the free 

movement of labor and capital. 

At the signing ceremony at the start of 

this year, Russian president Dmitry Medvedev 

said that the three countries were committed 

to fully opening their economies by the 

beginning of 2012. “A lot of work remains 

before the formation of a common economic 

space, but, considering that it is a beneficial 

and interesting endeavor, I’m sure we can 

agree on everything.” 

Benefits of the union 

The economies of the three members of the 

union are very different, which means 

improving trade ties should deliver big 

economic benefits to all of them. 

Kazakhstan sells minerals such as ores, 

metal products and chemicals to Russia, 

while importing other minerals, chemicals, 

metals and machinery. Belarus imports 

Russian oil, gas and metals and machinery, 

and sells trucks, car parts, tires, dairy 

products, poultry, and meat to Russia. 

Initially Russian farmers could suffer 

from competition from Belarus, and Russian 

steel workers could suffer from competition 

from Kazakhstan. But in the long term, the 

exposure to competition will help both 

Kazakhstan and Russia diversify away from 

their dependence on natural resources – 

a goal that both countries have in common – 

by increasing the importance of value-added 

production, say experts. 

All three countries are struggling with 

issues of modernisation and reform, and the 

union will increase competition in their 

markets – the most effective force for 

pushing through reforms. 

“The establishment of a 

Belarusian-Russian-Kazakh customs union 

will enable the three countries to have GDP 

growth over 15 percent by 2015,” Kazakh 

president Nazarbayev has forecast. “There 

will be higher competition in the markets of 

all the three countries, which should affect 

the quality of goods produced,” he said in 

a speech in 2010. 

The president also predicts that the 

single market will prove attractive for 

investors. It offers a combined population of 

170 million, aggregate industrial potential of 

$600 billion, oil reserves of 90 billion barrels, 

and agricultural production of $112 billion. 

The trio’s aggregate GDP makes up $2 trillion, 

and aggregate trade $900 billion. 

One of the sectors that will see the 

most benefit is agriculture, and the president 

hopes that together the Customs Union 

countries could become the leader of the 

global grain market. “Our three countries are 

responsible for 17 percent of the world’s 

wheat exports,” he said. With European 

agriculture largely saturated, the majority of 

production growth in Eurasia in the medium 

term will come from this region. 

“We believe Ukraine, Kazakhstan, 

Russia, and Belarus have great prospects if 

they form a customs union,” said Russian 

deputy prime minister Igor Shuvalov at the 

end of 2010. “That will make them the main 

nucleus of food security in the world. Our 

countries will be a powerful food player.” 

This impressive potential is attracting 

new recruits even before the union is fully 

functional, with the likes of Kyrgyzstan and 

Tajikistan now lining up to join. � 

Single-market 

potential 

overvIew 

$600 billion 

Aggregate industrial potential 

90 billion 

barrels 

Oil reserves 

$112 billion 

Agricultural production 


51

52 

oIl, gAs And mInIng 

Increasing global 

presence in energy 

and mineral exports 


In recent years, Kazakhstan has become 

the world’s largest producer of uranium, 

of which it holds considerable deposits

Sitting on a wealth of minerals and energy 

resources, Kazakhstan’s star is ascendant as 

China’s appetite for oil and related products 

shows no sign of abating. By Nicholas Watson 

Forecasts for Kazakhstan’s GDP growth in 2011 are 

in the four to six percent range and most of this 

growth, just as in 2010, will come from the two 

sectors that dominate the Kazakh economy: The oil 

and gas, and metals and mining sectors. 

The world’s ninth largest country by territory, Kazakhstan 

sits on vast deposits of largely untapped energy and mineral 

resources, providing many investment opportunities. 

Kazakhstan’s main resource is crude oil, of which it has 

proven reserves of three percent of the world’s total. Oil 

accounts for 63 percent of exports and 50 percent of 

industrial production, and the influence of the oil 

price on economic performance is strong. The 

country is expected to increase its role as one 

of the key non-OPEC oil exporters: its 

reserves-to-production ratio is second only to 

Middle Eastern countries. Daily oil production 

amounted to 1.5 million barrels in 2009, 

which is more than Qatar or Indonesia, and 

with the Kashagan oilfield (considered the 

world’s largest discovery of the past 30 years) 

due to come on stream in 2013, Kazakhstan is 

poised to become a top-10 global producer. 

As well as oil, Kazakhstan also holds 20 percent of the 

world’s gold, 17 percent of its uranium (Kazakhstan overtook 

Canada as the world’s largest producer of uranium in 2009), 

7.6 percent of zinc and two percent of copper. 

Central to global recovery 

Strategically located between East and West, Kazakhstan is 

hardwired into the recovery of the global economy. However, 

it is the country’s role as one of the key suppliers to China, 

the roaring engine of the global economy, that makes it such 

an interesting investment prospect. 

For the first time in the trading history of Kazakhstan and 

China, the latter has become the number-one export destination 

for Kazakh goods. China increased its imports from Kazakhstan 

to more than $9 billion in 2010 from $5.9 billion in 2009, the 

highest import volume in their trading history. In the first 11 

months of 2010, China accounted for 17.6 percent of Kazakh 

exports, overtaking Italy (16 percent) and Russia (5.9 percent). 


Unsurprisingly, resources account for almost 100 percent 

of export volumes to China. Oil and related products comprised 

56 percent of Kazakhstan’s exports to China in the first 10 

months of 2010. Mining products – ore, slag and ash – made 

up 14 percent; copper and brassware for 13.7 percent; 

chemicals and isotopes for 7.3 percent; iron and steel for 

5.8 percent; and zinc and aluminum for 1.5 percent each. 

The surge in exports to China is due mainly to the opening 

of the Kazakhstan-China crude-oil pipeline, which in 2010 

reached its designed capacity of 10 million tons per year. Its 

capacity will rise to 20 million tons annually on completion of 

the second phase of construction in 2013. Construction of the 

Western Europe-Western China highway and the planned rail 

link from Zhetigen near Almaty to the Chinese border will allow 

Kazakhstan to further increase its exports to its neighbor. 

Most foreign investment in Kazakhstan is being directed 

towards oil- and gas-related activities, which constituted more 

It is Kazakhstan’s role as one 

of the key suppliers to China 

that makes it such an interesting 

investment prospect 

than half of total investment inflows in 2009. Foreign 

investment is expected to grow significantly when production 

in Kashagan begins. Development of the country’s export 

capacity and export routes are expected to bring in some 

$30 billion over the next five to seven years, according to 

estimates. The sources of foreign direct investment are 

increasingly diversified, with the main flows coming from 

Russia, China, the United Kingdom, Canada, South Korea, 

Poland and Sweden, with Russia and China dominating. 

A number of companies within the Samruk-Kazyna state 

holding company are expected to float initial public offerings 

(IPOs), starting this year – a potential boon for investors. Assets 

that Samruk-Kazyna has already indicated it may float include 

National Company KazMunaiGas, rail operator Kazakhstan 

Temir Zholy and the Development Bank of Kazakhstan. A list 

of those that will list shares is likely to be released later this 

year. “The government has a very low level of debt. Investors 

are looking at quasi-sovereign companies and anything owned 

by the state, as these look virtually risk-free and are quite 


53

54 


Export volumes to China 


5.8% 

Iron and steel 

7.3% 

Chemicals and 

isotopes 

13.7% 

Copper and 

brassware 

14% 

Mining products – 

ore, slag and ash 

Kazakhstan-China crude oil pipeline 

10 million tons 

per year in 2010 

20 million tons 

per year by 2013 

1.5% 

Zinc 

1.5% 

Aluminum 

56% 

Oil and oil 

products

Message from Sauat Mynbaev – Minister of Oil and Gas 

Kazakhstan is one of the 

countries that have strategic 

reserves of hydrocarbons and 

can impact world energy 

resources. Unrecovered, 

potential hydrocarbon resources 

in the Republic reach 17 billion 

tons. Kazakhstan is among 

15 leading countries with proven 

oil reserves more than five billion 

tons. Estimated gas reserves 

are about 3.7 trillion cubic 

meters, potential resources 

reach 6-8 trillion cubic meters. 

Therefore, Kazakhstan has 

significant reserves of 

hydrocarbons – 3.3 percent of 

the world stock. The volume of 

crude oil production in 2010 is 

80 million tons and it is expected 

to reach 81 million tons in 2011. 

Kazakhstan is one of few 

states in which the peak of oil 

and gas production has yet to 

come. At present, the North 

Caspian Project is one of the 

largest projects developing on 

the Caspian shelf and worldwide. 

To run this project, Kazakhstan 

reached an agreement with 

ExxonMobil, ConocoPhillips, Total, 

Shell, Eni, Inpex and KazMunaiGaz 

to form a new joint operating 

company, North Caspian 

Operating Company BV. Its assets 

include the giant Kashagan field, 

one of the largest petroleum 

developments in the world, which 

has recoverable oil reserves of 

1.5 billion tons, and is expected 

to produce 1.5 million barrels 

a day in the future. 

The plans for the oil and gas 

industry go far beyond production. 

Kazakhstan has upgraded and 

reconstructed three oil refineries 

in Atyrau, Pavlodar and Shymkent. 

These would increase production 

of light oil products, reduce any 

negative impact on the 

environment, improve the quality 

of oil products up to Euro-4 and 

Euro-5 standards and enable 

the nation to fully cover the 

domestic oil-products market 

through local production. 

Our country is of great 

interest to foreign investors. The 

reasons for this include access to 

natural resources, the large size 

of the market, the country’s 

strategic location and its stable 

political environment. Soon the 

country will be among the top 10 

exporters of hydrocarbons. The 

volume of export capacity would 

interesting yield wise,” said Milena Ivanova-Venturini, head of 

research at Central Asia at Renaissance Capital. 

The main purpose of the IPOs will be to raise money for 

capital expenditure, and only minority stakes are expected to be 

offered. Visor Capital estimates that to carry out all its mid-term 

plans, KMG alone needs to raise around $10 billion. This 

would cover building refineries, expanding the pipeline network, 

raising production at existing fields, and possibly buying further 

stakes in Karachaganak Field and other oil and gas projects. 

be increased through the 

expansion of the Caspian Pipeline 

Consortium (CPC) oil pipeline 

network from 28 to 67 million 

tons of oil a year. The maximum 

capacity should be reached by 

2015. Moreover, we work upon 

other export routes, including 

Transcaspian direction. 

Baku-Tbilisi-Jeyhun pipeline will 

help bring oil to the Black sea. 

With Azerbaijan, a joint venture 

will explore the feasibility of the 

Trans-Caspian route. 

The gas industry is an integral 

part of the fuel and energy 

complex of Kazakhstan. It includes 

extraction, processing and 

transportation of gas. The 

Kazakhstan-China trunk gas 

pipeline, which is a component of 

a Turkmenistan-Uzbekistan- 

Kazakhstan-China transnational 

gas pipeline, was put into operation 

in 2009. The first section of the 

Kazakhstan-China gas pipeline 

should reach the capacity of up to 

30 billion cubic meters a year by 

the end of 2012, with subsequent 

expansion up to 40 billion cubic 

meters a year. Construction of a 

linear part of the second section 

(Beiyneu-Shymkent) will start in 


August this year. This gas pipeline 

would provide energy security 

and increase reliability of gas 

supply to southern regions of the 

Republic through delivering gas 

from the fields located in western 

regions. The end of construction 

of the first stage of section two is 

planned by the end of 2012. 

The Government of Kazakhstan 

is committed to increasing the 

country’s investment appeal to 

support development of this 

sector, welcoming international 

oil-and-gas companies and, 

by doing so, expanding the 

economy. The major international 

companies that are working 

together with KMG include 

Chevron, CNPC, ENI and Shell. 

The oil and gas industry is the 

backbone of Kazakhstan’s 

economy. Revenues from the 

industry collected in the National 

Fund allowed the government to 

mitigate the impact of the recent 

international economic crisis. 

Post crisis, the success of this 

sector is helping related 

industries to grow and is 

contributing to sustainable 

economic growth and rising living 

standards for the population. 

Samruk-Kazyna will be the major source of IPOs going 

forward, but a handful of independent companies could also 

decide to list. Potash miner Satimola has said it is considering a 

$100 million IPO in London during 2011. Several mining 

companies have also indicated a desire to list in London. � 

Nicholas Watson is an award-winning journalist and published 

author. He is currently managing editor and co-founder of 

Almaty-based magazine Business New Europe. 


55

GE Oil & Gas 

GE International Inc. 

Kazakhstan Branch 

Astana Tower Business Center 

12 m/d Samal 

Astana 010000 

Kazakhstan 

T: +7 7172 591 407 

F: +7 7172 591 413 

GE Oil & Gas 

Working together 

with Kazakhstan 

to enhance the nation’s 

energy infrastructure 

GE Oil & Gas has been present in Kazakhstan 

since the 1970s, when the company initially supplied 

22 gas compressor units to the Uralsk and Chizha 

compressor stations which supported the Soyuz gas 

pipeline. The GE Oil & Gas installed base in Kazakhstan 

now includes over 50 gas turbines and 50 compressors 

of various capacities, including unique equipment for 

sour gas re-injection in the Karachagank, Tengiz and 

Kashagan gas fields. 

www.geoilandgas.com

Standing on a 

wealth of resources 

The Tenzig oil field in western 

Kazakhstan is one of the five main 

oil and gas reserves in the area 


The majority of Kazakhstan’s oil and gas 

reserves are onshore – avoiding the additional 

expense and risks that are associated with 

offshore drilling. By Nicholas Watson 

Although the giant Kashagan oilfield in the 

Caspian Sea attracts most of the attention, 

more than half of Kazakhstan’s proven reserves 

of 40 billion barrels of oil and 1.82 trillion cubic 

meters of mostly associated gas are to be found 

in onshore locations across Kazakhstan. 

The eight largest, currently producing oil and gas fields 

are located onshore, and account for about 80 percent of 

production. The main oil and gas reserves are in the western 


57

GMMOS KAZAKHSTAN LLP 

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the City-Port of Aktau, Mangistau Oblast. 

The state-of-the-art yard features a workshop with large doors of 20 meters wide by 10 meters high, which enable 

its two gantry cranes of 20 tonnes each to travel the full length of the 160 meters of rails. 

With equipment such as a vertical roll machine (capable of rolling plate up to 150mm thick), a guillotine, a 300-tonne 

press, a CNC plasma cutting machine, a profile-bending machine (capable of bending IPE 180 and many different 

shapes of profile), GMMOS Kazakhstan LLP is capable of servicing the oil and gas, water and mining industries 

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With the support and the help of its mother company and its two yards located in the UAE, employing more than 

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part of the country, where the five largest onshore fields – 

Tengiz, Karachaganak, Aktobe, Mangistau and Uzen – are 

located. The North and South Kumkol fields are in the south- 

central area, while the Akshabulak field is in the central area. 

Tengiz is currently Kazakhstan’s largest producing 

oilfield, with recoverable reserves estimated at between 

six billion and nine billion barrels, and it is the world’s 

deepest operating giant field at around 3,657 meters. 

Tengizchevroil (TCO), the Chevron-led consortium developing 

the field, said in February that it increased oil output by 

15 percent to 25.9 million metric tonnes in 2010. TCO – 

in which Chevron has a 50 percent stake, Exxon Mobil owns 

25 percent, KazMunaiGas (KMG) has 20 percent, and 

LUKArco owns five percent – provides no estimate for 2011, 

but is expected to submit an expansion plan for the project 

soon, according to the Kazakh Minister for Oil and Gas, Sauat 

Most of the international 

oil companies are present in 

Kazakhstan, although investors 

will find a growing number of 

independent players developing 

smaller oil and gas fields 

Mynbayev. The new expansion phase – called the Future 

Growth Project – should increase reserves by approximately 

150 million metric tonnes and boost production by 12 million 

metric tonnes of crude oil a year by 2016. TCO could 

reportedly invest a total of $15.2 billion in the expansion. 

The Karachaganak gas condensate field, close to the 

Russian border, holds reserves of almost nine billion barrels of 

oil and gas condensate, and 1.2 trillion cubic meters of 

natural gas, according to the Energy Information Agency (EIA). 

Karachaganak Petroleum Operating (KPO), the Western-led 

joint venture developing the field, said in February 2011 that 

its output fell four percent to 133.7 million barrels of oil 

equivalent (boe) in 2010, from 139.4 million boe in 2009. 

KPO said that last year it reached an overall gas 

utilization rate of 99.87 percent, meaning that 0.13 percent 


of total gas production of just over 15 billion cubic meters was 

flared. The consortium re-injects most associated gas into the 

ground to maintain crude wellhead pressure for liquids 

extraction, and also uses the extracted gas as a power 

generator for its facilities at Karachaganak. It also exports a 

small amount across the border to Russia. 

The consortium gave no reason for the fall in production, 

though it has been involved in a dispute with the Kazakh 

government over the last year concerning tax and 

environmental claims. In August, both sides confirmed they 

were also negotiating the sale of a stake in the project to the 

state-owned KMG (Karachaganak is the only major oil and 

gas project in Kazakhstan without the participation of KMG). 

KPO is a joint venture held by Eni and BG Group, both of 

which hold a 32.5 percent stake; Chevron, owns 20 percent; 

and Lukoil, has the remaining 15 percent. 

Most of the other major fields have a 

distinctly Chinese flavour, reflecting that country’s 

increasing clout in Kazakhstan. The Mangistau 

oilfield, which produced 115,000 barrels a day 

(b/d) in 2009 and has reserves estimated at 500 

million barrels, is operated jointly by KMG and 

China National Petroleum Corporation (CNPC). 

The Aktobe oilfield, which produced 120,000 b/d 

in 2009 and holds estimated reserves of more 

than one billion barrels of oil, is 85 percent 

owned by CNPC. North and South Kumkol each 

produced about 65,000 b/d in 2008. The South 

Kumkol fields are shared by CNPC (66.7 percent) 

and KMG (33.3 percent). The North Kumkol 

fields are shared equally by Lukoil and CNPC. 

Akshabulak and surrounding fields in central 

Kazakhstan produced 63,000 b/d in 2008 and are operated 

jointly by KMG and PetroKazakhstan, 67 percent of which is 

owned by Chinese interests. 

Clearly, most of the international oil companies are 

present in Kazakhstan, although investors will find there are 

a growing number of independent players developing smaller 

oil and gas fields in the country. 

In October 2010, the Canadian-listed Tethys Petroleum 

raised $100m through a share placement, the proceeds of 

which the company will use for exploration activities in 

Kazakhstan, Uzbekistan, and Tajikistan. Its main oil and 

gas assets are in Kazakhstan, in the North Ustyurt Basin 

to the west of the Aral Sea, and adjacent to the prolific 

Pre-Caspian basin – home to the giant Tengiz, Kashagan 

and Karachaganak fields. Then there’s the London Stock 


59

60 


Kazakhstan’s oil output could rise 

from 1.6 million b/d in 2009 to hit 

a plateau of four million b/d in 2025 

Exchange’s AIM-listed Max Petroleum, which acquired the 

exploration and production rights to the Blocks A&E license 

area in 2005, including two onshore blocks in the Pre-Caspian 

Basin. Out of 12,445 sq km, the company has covered 

5,000 sq km with three-dimensional seismic surveys. It has 

built an inventory of 13 shallow prospects, 10 deep prospects 

and five deep leads, ranging in size from 100 million to 

600 million boe of unrisked mean resource potential each, 

giving total potential in excess of four billion boe. 

AIM-listed Roxi Petroleum currently has interests in 

four exploration and production contract areas spread over 

three petroleum basins: the Pre-Caspian Basin and the 

Mangyshlak Basin in western Kazakhstan, and the Turgai 

Basin in central Kazakhstan. 


Largely on the back of increased production from the 

onshore Karachaganak and Tengiz fields, as well as the 

offshore Kashagan field, Kazakhstan’s output could rise from 

1.6 million b/d in 2009 to hit a plateau of four million b/d in 

2025. This means that the country will need to expand its 

export capacity significantly, because existing pipelines 

currently handle just 1.5 million b/d. The International Energy 

Agency suggests that a further two million b/d will be needed. 

In 2010, Kazakhstan had net oil exports of about 

1.7 million b/d, with current infrastructure delivering it to 

world markets by pipelines to the Black Sea via Russia; by 

barge and pipeline to the Mediterranean via Azerbaijan and 

Turkey; by barge and rail to Batumi, Georgia on the Black Sea; 

and by pipeline to China. �

Tapping the hidden 

resources beneath 

the Caspian 

OIl, gAs And mInIng 

The Kashagan field in the Caspian Sea holds 

reserves of more than 10 billion barrels 

The Kazakh section of the Caspian Sea is set 

to reveal the huge reserves hidden beneath 

its waters. By Nicholas Watson 

The Caspian Sea is estimated to be one of the 

largest oil reserve regions in the world, and 

Kazakhstan’s section of the Caspian Sea is 

estimated to hold the largest reserves of any of 

the littoral states. As such, the International 

Energy Agency (IEA) expects resources from the Caspian 

region, including Kazakhstan, to play an increasing role in 

securing and diversifying Europe’s energy supplies. 

The biggest field being developed in the Kazakh sector of 

the Caspian Sea is Kashagan, with approximately 35 billion 

barrels of oil in place and reserves of over 10 billion barrels, 

making it the world’s largest discovery of the past 30 years. 


63

64 

OIl, gAs And mInIng 

However, big does not mean easy – the project is late and 

overbudget because of the adverse operating environment 

and other challenges. The field contains a high proportion of 

natural gas under very high pressure, the oil contains large 

quantities of sulfur, and the offshore platforms require 

construction that can withstand the extreme weather 

fluctuations in the northern Caspian Sea. One advantage, 

however, is that the field lies in waters only three to five 

meters deep, and drilling and extraction operations will 

proceed from artificial islands. 

The latest estimate for the first production to start 

flowing from the field has been pushed back eight years 

from the original schedule to 2013, while costs have soared 

to $136 billion, from original estimates of $57 billion. 

This has inevitably strained relations between the 

international oil companies developing the field and the Kazakh 

government. The dispute over the delays and cost overruns 

was resolved in late 2008, however, when the 

shareholders – Eni, Shell, Total, Exxon Mobil, 

ConocoPhillips and Inpex – agreed to give 

up part of their stakes to KazMunaiGas 

(KMG), which saw the state-owned 

company’s interest rise from 8.33 percent 

to 16.81 percent. Furthermore, a new 

operating company called the North Caspian 

Operating Company replaced the previous 

operator, Eni subsidiary Agip KCO. 

Initial production from phase one of 

Kashagan is projected at 370,000-450,000 

barrels a day (b/d), with peak production of 

1.5 million b/d from phase two projected by 

2019. However, the Ministry of Oil and Gas 

rejected the development plan for that 

second phase, due to the high costs, at the end of March. 

According to reports, the Shell team planning the offshore 

facilities of the second phase have slashed $18 billion from 

the project costs to bringing them to an even $50 billion. 

However, even with this reduction, it is claimed that the 

second phase offers no more than a 9.3 percent return on 

investment, so the government is looking for further cuts. 

The best of the rest 

The Kurmangazy field – located in the Caspian Sea on the 

maritime border between Russia and Kazakhstan – is the least 

developed of the country’s oilfield projects. Its reserves were 

initially estimated at between seven billion and 10 billion 

barrels of crude oil equivalent, which, if proven, would make 


The ‘N’ Block 

could hold 

more than 

two billion 

barrels of 

recoverable oil 

Kurmangazy the country’s third largest field. That said, the 

first well – drilled in 2006 by project partners Rosneft and 

KMG – came up dry. In October 2010, the two sides agreed 

to extend the exploration contract and news is expected on 

when the second well will be drilled. 

Meanwhile, there has been growing excitement this 

year about the prospects for another potential mega-field: 

the ‘N’ Block, located 30km south-west of the port of Aktau 

and being developed by a consortium of KMG (51 percent), 

ConocoPhillips (24.5 percent) and Mubadala (24.5 percent). 

In January, KMG announced that the first exploration well 

detected hydrocarbons at several intervals before it was 

completed in December. KMG said the field could hold more 

than 4.6 billion barrels of oil, as much of two billion barrels 

of which could be recoverable. “This field has the potential to 

be the biggest discovery worldwide this year, if the pre-drill 

estimates are proved correct,” believes Dominic Lewenz, 

director of oil and gas research at the 

regional investment bank Visor Capital. 

Sources though, say the consortium 

cannot yet declare it a formal discovery 

because the engineers were forced to seal 

the well before completing a final conclusive 

test. As such, the consortium has decided to 

drill a second well in the same location later 

this year to confirm the result. 

BRIC arrivals 

Russia’s Lukoil is exploring three offshore 

fields with KMG – Tyub-Karagan, Atashsky 

and Khvalynskoye – while Oman Pearls and 

Shell are partners with KMG in exploring the 

Zhemchuzhiny field. In 2010, Lukoil started 

commercial production at the Korchagin field in Russia’s 

section of the Caspian. It is hoped that the launch of Russia’s 

first major Caspian offshore project will provide fresh impetus 

for developing the fields in the Kazakh sector of the sea. 

In December, Indian oil secretary, Shri Sundareshan, said 

Kazakhstan planned to transfer a 25 percent stake in the nearby 

Satpayev Exploration Block to Indian oil firm ONGC, and the 

agreement for the deal was signed in April 2011. The Satpayev 

Block, in the Pre-Caspian Basin in Kazakhstan’s section of the 

Caspian, covers 1,582 sq km, in waters just five to 10 meters 

deep. The IEA estimates that the block could hold 1.6 billion 

barrels – equivalent to around four percent of Kazakhstan’s total 

proven oil reserves in 2009. The field’s proximity to large fields 

such as Kashagan indicates Satpayev’s significant potential. �

66 

oil, gas and mining 

Capitalizing on 

Caspian conduits 

With oil and gas output rising rapidly, 

Kazakhstan is seeing massive investment 

that will boost its export infrastructure. 

By Nicholas Watson 

Without access to a seaport, Kazakhstan 

depends mainly on pipelines to transport 

its hydrocarbons to world markets. But 

with oil and gas exports set to rise 

dramatically as large producing fields 

come onstream over the next decade, the country will need 

to invest heavily to expand its export capacity. 

invest in KaZaKHstan 2011 

Existing pipelines can handle 1.5 million barrels per day 

(b/d), but the Kazakhstan government hopes to raise oil exports 

from 1.7 million b/d in 2010 to three million b/d by 2020 – 

largely on the back of production from the Karachaganak, Tengiz 

and Kashagan fields. The International Energy Agency (IEA) says 

that another two million b/d in export capacity will be needed. 

Expanding the Russian route 

The Caspian Pipeline Consortium (CPC) link – which routes oil 

1,410km from the Tengiz oilfield across Russia and to the 

Black Sea port of Novorossiysk – will account for much of this 

expanded capacity over the next decade. A signing ceremony 

in Moscow in December saw CPC – the four largest 

A Chinese worker of the Asian Gas Pipeline inspects 

the Kazakh stretch of the Turkmenistan-China 

pipeline at Otar gas station, 130km outside Almaty

shareholders of which are Transneft (24 percent), KazMunaiGas 

(19 percent), Chevron (15 percent), and LukArco (12.5 percent) 

– approve a plan to more than double the pipeline’s annual 

capacity from 28 million tons to 67 million tons by 2014. 

The cost of the expansion is expected to be around 

$5.4 billion, CPC said in a statement, and work began in the 

first semester of 2011. Under the plan, the partners will 

increase installed capacity to 35 million tons in 2012, 48 

million tons in 2013, and then to 67 million tons in 2014. 

“The expansion will de-bottleneck Kazakhstan’s export 

facilities and add around 30 million tons in export capacity to 

Kazakhstan,” said Ian MacDonald, a vice president of Chevron. 

MacDonald added that internal cash flow would be the primary 

source of funds, but added that there is the potential to 

finance a part of construction with loans. 

The new volumes to fill the expanded pipeline are to come 

mainly from Tengiz and Karachaganak, as well as new offshore 

projects in the Caspian Sea such as Russia’s Korchagin field – 

launched earlier this year – and Kazakhstan’s Kashagan, which 

is to be commissioned in 2013. 

Where the extra oil will go once it 

leaves the CPC link isn’t clear. The CPC 

expansion has been approved, despite 

delays to the Burgas-Alexandroupolis 

pipeline project, which Russia is 

developing with Bulgaria and Greece to 

ship oil from Novorossiysk across the 

Black Sea to Burgas and into a planned 

35-million-ton pipeline to Alexandroupolis 

on the Aegean Sea. At the same time, the Turkish Straits are 

currently at full capacity, which has limited increases in crude 

oil deliveries in the Black Sea region. 

MacDonald said that CPC would not significantly 

increase traffic in the Turkish Straits, as much of the crude it 

will transport currently reaches the Black Sea by rail, and also 

claimed that the pipeline can load larger vessels than other 

forms of shipment to the Novorossiysk terminal. “When 

completed, CPC will fill two tankers daily, or about 200,000 

tons per day, but since the CPC loads larger tankers [than 

many Black Sea shipments now], the traffic increase is not 

materially significant,” he said. 

Kazakhstan’s other major oil export pipeline, from 

Atyrau to Samara, is a northbound link to Russia’s Transneft 

distribution system, which provides Kazakhstan with a 

connection to world markets via the Black Sea. The line was 

upgraded in 2009 by the addition of pumping and heating 

stations, and currently has a capacity of approximately 

oil, gas and mining 67 

600,000 b/d. Before the completion of the CPC pipeline, 

Kazakhstan exported almost all of its oil through this system. 

Russian infrastructure already handles about 75 percent 

of Kazakhstan’s exports, and pumping more oil through CPC 

risks leaves the country overly dependent on a single transit 

country. Therefore, Kazakhstan is looking to hedge this risk 

by expanding other routes. 

Potential expansion 

The Kazakhstan Caspian Transportation System (KCTS) moves 

oil south by pipeline from Atyrau to Kuryk, before barging it 

across the Caspian Sea to Baku, Azerbaijan. From there it 

could travel through an expanded Baku-Tbilisi-Ceyhan (BTC) 

pipeline, which bypasses Russia and the Black Sea on its way 

to the Turkish Mediterranean. 

Oil shipments across the Caspian to Baku are to 

eventually reach 500,000 b/d under the terms of a 2009 

agreement between Kazakhstan and Azerbaijan. To facilitate 

exports of oil from the Kashagan oilfield during the next 

The Caspian Pipeline Consortium 

(CPC) link will account for much of 

the next decade’s expansion 

decade, Kazakhstan will develop the KCTS. This includes the 

construction of a 500,000 b/d onshore pipeline from western 

Kazakhstan to Kuryk on the Caspian shore, where a new 

760,000-b/d oil terminal will be built. The KCTS also includes 

a maritime link to Baku – with a fleet of new tankers – where 

crude oil will feed into an expanded BTC pipeline, which 

currently has a capacity of one million b/d. 

Under current plans, KazMunaiGas (KMG) will hold 

51 percent of the KCTS system, while the international 

companies developing the Kashagan field will hold the 

remainder. The maritime link will be held by a joint venture 

between KMG and Azerbaijan’s state-owned oil firm, Socar. 

On 25 January, however, KMG head Kairgeldy Kabyldin 

said the implementation of KCTS will be postponed at least 

until 2018, as the second phase of the Kashagan oil project 

has been postponed until 2018-19. “We are planning to build 

the oil terminal in [the port of Kuryk on the Caspian coast] 

within the KCTS in 2018-19,” he said. 

invest in KaZaKHstan 2011

68 


The Central Asia Gas Pipeline 

(CAGP) connects to China’s 

domestic pipeline system 

There are also plans to expand the Kazakhstan-China 

oil pipeline, which runs from the port of Atyrau in north-west 

Kazakhstan to Alashankou in China’s north-west Xinjiang 

region. The joint venture between CNPC and KMG currently 

transports 200,000 b/d of crude oil from the Aktobe and 

Kumkol fields. In 2009, China reportedly received 61 million 

b/d through the pipeline, or four percent of its crude imports. 

In October 2009, CNPC and KMG signed a framework 

agreement to double capacity to 400,000 b/d by 2013. Upon 

future expansion, it will also carry oil from the Kashagan field. 

Kazakhstan became a net gas exporter for the first time 

in 2009 and, together with its role as a major transit country 

for gas pipeline exports from Uzbekistan and Turkmenistan 

to Russia and China, the country needs to invest significantly 

in its gas transport system. 

Major gas pipeline route 

One of Kazakhstan’s major export routes is the Central Asia 

Gas Pipeline (CAGP), which pumps gas from Turkmenistan, 

Kazakhstan and Uzbekistan to Alashankou, China, where it 

connects to China’s West-East domestic pipeline system. In 

2010, the pipeline was pumping at a rate of around 13 billion 

cubic meters a year – about half of which came from 

Turkmenistan, with the rest from Kazakhstan and Uzbekistan. 

The partners in the project – China National Petroleum 

Corporation, KMG and Uzbekneftegas – are busy bringing 

the pipeline up to full capacity of 40 billion cubic meters a 

year by early 2014, when stage two, the Kazakhstan-China 

gas pipeline, is due to be completed. This second phase 


consists of a pipeline running from Beyneu in Kazakhstan’s 

gas-producing western region to Shymkent in its southern 

industrial region. This new pipeline will connect to the CAGP 

near Shymkent, enabling Kazakhstan to export gas from the 

Aktobe, Tengiz and Karachaganak fields to China, as well as 

shipping an expected 10 billion cubic meters a year to the 

Shymkent area for domestic use. 

There is also an agreement in place between Russia, 

Kazakhstan and Turkmenistan to renovate and expand the 

western branch of Kazakhstan’s other major gas export 

conduit, the Central Asia Center (CAC) pipeline. This 

is in addition to building a new Caspian gas pipeline 

paralleling the western branch, with a capacity of 20 billion 

cubic meters a year. In 2009, this work was put on hold, 

because Turkmenistan is considering diversifying its gas 

export options, while Russia is trying to cut its Turkmen 

gas imports due to lower European demand. 

The two branches of the CAC, controlled by Gazprom, 

meet in the south-western Kazakh city of Beyneu before 

crossing into Russia and feeding into the Russian pipeline 

system. The eastern branch, which has a capacity 60 billion 

cubic meters a year, originates in the south-eastern gas fields 

of Turkmenistan. The western branch originates on the 

Caspian coast of Turkmenistan. Almost all Turkmen and 

Uzbek gas is delivered via the eastern branch. Intergas 

Central Asia, a subsidiary of KMG, is the operator of the 

Kazakh pipeline sections and has been increasing its annual 

investment in repairing and modernizing the western branch 

of the CAC pipeline using internally generated funds. n

sponsored feature 

PM Lucas: committed to Kazakhstan’s future 

PM Lucas is a fully integrated service 

provider for the oil and gas exploration 

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solutions – from geological and geophysical, 

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and well intervention, to process and surface 

facility engineering. 

The company’s project experience 

includes: complete field development; welldrilling 

and intervention; field production 

management; facility engineering and 

construction; full field turnkey development; 

and complete oilfield management services. 

It also provides single consultant specialized 

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EPSCM, EPCC and BOOM solutions. As an 

integrated engineering solutions provider, PM 

Lucas provides solutions to the industry across 

the complete cycle, and it does not have any 

direct competitors. 

The company’s approach is very similar 

to Schlumberger’s IPM (Integrated Project 

Management), combined with Petrofac facility 

engineering and turnkey EPC solutions. The 

company combines and integrates all services 

into a single cycle. PM Lucas targets small and 

medium-sized projects that are too small for 

the big players and require integration of all 

services. PM Lucas has often been described as 

an oil company with an engineering heart, or 

an oil company without an oilfield that provides 

this capability as a service. The company is fully 

accredited by the TUV NORD CERT GmbH, 

from Germany with the following systems: 

• ISO 9001:2008 Management System; 

• ISO 14001:2008 Environmental 

Management System; 

• ISO 18001:2007 Occupational Health and 

Safety Management System; 

• ISO/TS 29001:2007 Requirements for 

Petroleum, Petrochemical and Natural 

Gas Industries. 

About PM Lucas in Kazakhstan 

PM Lucas has been operating in Kazakhstan 

since 1999, as an integrated engineering service 

provider. During this time it has provided 

multiple subsurface engineering services such 

as geological and geophysical assessment, 

reservoir, production and other petroleum 

engineering services. In the sphere of surface 

engineering, PM Lucas’s services range from 

conceptual design, basic design, detailed design 

for oil-handling, gas-handling, and waterhandling 

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PM Lucas has drilled and managed 

more than 1,200 wells, equivalent to one 

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or 300,000 meters were performed on a 

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Lucas has managed more than 15,000 well 

interventions. Furthermore, PM Lucas has 

engineered, designed or built hundreds of 

kilometers of roads, flowlines, and pipelines. 

The company has recently developed a 

complete oilfield development in Kazakhstan 

on a turnkey basis as the general contractor. 

The work started with the FEED (basic design) 

to complete turnkey EPCC development, 

operation and maintenance. 

About Kazakhstan 

PM Lucas believes that Kazakhstan is a much 

more progressive country right now than 

any other at a similar phase of development. 

While PM Lucas has worked in many oilproducing 

countries – including Algeria, 

Russia, Azerbaijan, Turkmenistan, and Syria 

– the working conditions in Kazakhstan are 

far better. Kazakhstan is very stable politically, 

and the President and government are doing a 

great job. Kazakhstan is a democratic country 

and open to foreign investment. We truly 

believe that Kazakhstan is years ahead of its 

neighbors. Working conditions in Kazakhstan 

are excellent, the industry is just starting to take 

off, and PM Lucas would recommend anyone 

to come and invest in this country. 

In the 11 years since we came to 

Kazakhstan, the country has grown to become 

ranked first in the Norway-based “Education 

for All” development index. The UNDP has 

also ranked Kazakhstan 15th in the world for 

literacy. PM Lucas believes that Kazakhstan is 

an example for many developing countries for 

having invested in its most valuable resource: 

the future of its young people. This is a rich and 

ambitious country, with an ambitious people 

and strong leaders. The successes in the past 10 

years in industry and agriculture, along with 

Dr Pavle Matijevic, Chief Executive Officer, 

PM Lucas, Kazakhstan, with family at AIS 

international day 2011, Almaty 

its vision of increasing the business class, are 

second to none. We love the country, and as a 

company are dedicated to its future. 

On 29 August 1991, one of the first 

decisions of Nursultan Nazerbayev as the 

president of an independent Kazakhstan was 

to issue a decree to close the Semipalatinsk 

nuclear test site and declare Kazakhstan a nonnuclear 

country. This commitment to the future 

not only demonstrated to the international 

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world’s nuclear powers. 

Pavle Matijevic 

A student of Prof Dr Z Heinemann, Pavle 

Matijevic had his first contact with the oil 

industry 34 years ago at the age of 13 when 

his family moved from Germany to Libya and 

enrolled him in the American Oil Companies 

School in Tripoli. He has a degree in Petroleum 

Engineering and a PhD in Petroleum Reservoir 

Engineering, from the Montan University 

Leoben, Austria. He founded RDS Austria, and 

has held multiple director positions with Rig 

Design Services, now the Engineering arm of 

KCA Deutag, before founding PM Lucas.

Gas: an increasingly 

important player in 

economic growth 

With the right planning and 

backing, Kazakhstan can make 

the switch from an importer of 

natural gas to a global exporter. 


Steadily rising natural gas production 

transformed Kazakhstan from being 

a net gas importer to a net gas 

exporter in 2009. According to 

BP’s Statistical Review of World 

Energy, production hit 32.2 billion cubic 

meters the same year, up 8.6 percent from 

2008, which translates as 1.1 percent of total 

global production. In 2010, Kazakhstan 

produced 37.4 billion cubic meters of gas. 

At the end of 2010, the country had 

three trillion cubic meters of current gas 

reserves, with almost all of them consisting of 

associated gas in fields located in the west 

of the country near the Caspian Sea. The 

two largest gas-producing fields are also the 

largest oil-producing fields – Tengiz and 

Karachaganak – where around 69 percent 

of gas production in 2009 was reinjected to 

enhance oil production. 

About 25 percent of proved gas 

reserves are located in the Karachaganak oil 

and gas field, which is being developed by 

OIL, GAs AnD MInInG 

Gas production for the 

Turkmenistan-China pipeline, which 

runs through Kazakhstan. The sign 

reads: “Dry and clean natural gas” 


71

72 


Gas production and transport 

Atyrau 

Tengiz oil field 

Karachaganak Petroleum Operating – a consortium that is led 

by Eni and BG Group, with each holding a 32.5 percent 

stake. Chevron owns 20 percent and Lukoil the remaining 

15 percent. Karachaganak is the only major oil and gas project 

in Kazakhstan that lacks participation from state-owned 

KazMunaiGas (KMG) – although the government is in talks 

with the partners about rectifying this, with the transfer of a 

10 percent stake under discussion. 

Karachaganak produced around 139 million barrels of 

oil equivalent (boe) in 2009 and about 15 billion cubic meters 

of gas – close to half of Kazakhstan’s total gas production 

that year. While phases one and two were focused on 

condensate production, phase three is geared to boost gas 

output significantly, and KPO expects to produce in excess of 

25 billion cubic meters in 2012. 

The bulk of Karachaganak’s gas output is exported north 

to Russia’s Orenburg gas-processing plant. An agreement 

between Gazprom and KMG in 2008 created KazRosGas, a 

joint venture that will purchase gas and expand the Orenburg 

plant by 2012. Deliveries of Karachaganak gas to the 


Russia 

Karachaganak oil field 

Major oilfield that also produces gas 

Major oilfield that also produces gas 

Turkmenistan 

Saman Depe 

Uzbekistan 

Kazakhstan 

Kazakhstan-China 

gas pipeline 

Will boost industrial area and exports 

Tajikistan 

Kyrgyzstan 

Almaty 

Alashankou 

China 

Turkmenistan-China 

gas pipeline 

Most gas used in the south 

is imported via this route 

Orenburg plant – located 84 miles from the field – were eight 

billion cubic meters in 2008 and are expected to exceed 

17 billion cubic meters by 2012. 

Kazakh gas production will get a further boost – and 

the country, which consumed 19.6 billion cubic meters in 

2009, will become self-sufficient – with the development of 

the Amangeldy field. Located in the south of the country, 

Amangeldy is being developed as a joint venture by KMG 

and Spain’s Repsol. It was reported to be producing just 

under one billion cubic meters in 2010 and has an estimated 

25 billion cubic meters of recoverable reserves. 

Gas pipeline shortage 

The development of Kazakhstan’s gas resources has lagged 

behind the oil sector, principally because of the lack of 

domestic gas pipeline infrastructure linking the fields in the 

west of the country with the industrial east, as well as 

insufficiency in export pipelines. The populous south of the 

country imports much of its gas from Uzbekistan – via the 

Tashkent-Shymkent-Bishkek-Almaty pipeline – even though

74 


“At least three companies are exploring for coal-bed 

methane in the Karaganda region, using experimental 

technology from Schlumberger. If they are successful, 

it would be fantastic for central Kazakhstan” 

Sauat Mynbayev, Kazakh Oil and Gas Minister 

Lakshmi Mittal, chief executive of 

ArcelorMittal, which is working on 

a coal-bed methane extraction 

project in Kazakhstan 

gas is exported from Kazakhstan’s own north-western regions. 

However, the Kazakhstan-China gas pipeline will enable the 

transport of gas to Kazakhstan’s industrial region, as well as 

increased gas exports, when it comes online in 2014. 

Non-conventional gas reserves 

Wherever there are hydrocarbons deposits, there is the 

potential for the discovery of shale gas, so Central Asia and 

Kazakhstan are expected to also locate and develop deposits 

of unconventional gas. In October, Kazakh Oil and Gas 

Minister Sauat Mynbayev said that the country is already 

searching for unconventional gas deposits – both shale gas 

and coal-bed methane. “At least three companies are 

exploring for coal-bed methane in the Karaganda region, using 

experimental technology from Schlumberger, and we are 

waiting to see whether they are successful. And if they are 

successful, it would be fantastic for central Kazakhstan, which 

is far from the western gas fields. We hope this will develop.” 


The Astana headquarters of 

KazMunaiGaz, which is interested 

in exploring for shale gas 

Mynbayev added that explorations for shale gas deposits 

in eastern Kazakhstan had begun. “Some companies have 

started to look there, but these projects are much less 

developed than coal-bed methane,” he said. 

KMG has expressed interest in developing this 

particular field of gas exploration, although it has not yet 

embarked on any specific projects. “Yes, we consider shale 

gas as part of our strategic plans for the future, but it’s a 

matter for the future – we are at the moment not involved in 

exploring for shale gas,” says Kenzhebek Ibrashev, head of 

KMG Exploration Production, the listed subsidiary of 

Kazakhstan’s national oil company. 

Meanwhile, ArcelorMittal – which owns the Temirtau 

steel complex around 50km from Kazakhstan’s mining 

capital Karaganda – is working on a project that is partly 

funded by the European Bank for Reconstruction and 

Development to extract the roughly 28 billion cubic meters 

of coal-bed methane from nearby coalfields. �

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76 


Taking the 

long-term view 

The Kazakh government has targeted sectors 

such as chemicals, petrochemicals and 

fertilizers as priority areas for development 


By adhering to a 20-year national 

strategy that focuses on areas of 

the greatest need, Kazakhstan 

aims to reverse the age-old 

problem of consumption 

outstripping production. 


Kazakhstan is making a big bet on 

the long-term potential of the 

downstream part of its energy 

business, and is making huge 

investments in the country’s 

refining and petrochemical industries. This 

marks it out from its Central Asian neighbors, 

which are pouring investment into only the 

most immediately profitable growth areas of 

energy, mining and raw commodities. 

This strategy is driven by government 

forecasts that the greatest profits and most 

lasting prosperity will come from downstream, 

as well as from value-added manufacturing, 

industrial and high-tech processes. As such, 

sustainable, long-term growth requires 

significant, continuous investment into high- 

level technical workforce training and high- 

tech infrastructure development – both 

of which are primary goals of Kazakhstan’s 

20-year national development strategy to 

the year 2030.This approach has won praise 


from many quarters including the European 

Bank for Reconstruction and Development. 

Almost all long-term forecasts show the 

growth rate for consumption of petrochemical 

products outstripping production, so it’s no 

surprise that investors are now paying greater 

attention to this segment. Industry players 

expect the growth in global demand for 

petrochemicals this year to match 2010 

levels, which hit around two percent in 

Europe, three percent in the US, and between 

four and five percent in the Middle East and 

other emerging markets. 

A sign of Kazakhstan’s confidence in 

the industry was the decision of state-owned 

oil company KazMunaiGas (KMG) in 2010 to 

press ahead with an ambitious plan to build 

a petrochemical complex in the Atyrau region 

close to the Caspian Sea, where major Kazakh 

oil reserves are located – including the giant 

Kashagan oilfield – despite foreign partners 

pulling out. On February 24, the Development 

Bank of Kazakhstan signed a $1.38 billion 

loan agreement with the Export-Import Bank 

of China to help finance the first phase of 

construction. According to an Oil and Gas 

Ministry plan published on March 15, the 

complex will be able to produce 800,000 

metric tonnes of polyethylene and 500,000 

metric tonnes of polypropylene a year when 

it reaches full capacity in 2015. 


77

78 


The Atyrau refinery is one of Kazakhstan’s 

three major oil refineries, each of which 

has a capacity of 345,000 barrels per day 

KMG’s Atyrau plant will not 

only be Kazakhstan’s first 

integrated gas and chemicals 

complex, but also the only 

one of its kind in Central Asia 

The complex will not only be Kazakhstan’s first 

integrated gas and chemicals complex, but also the only 

plant of its kind in Central Asia, giving the Kazakhs an 

enormous advantage and development lead-time over their 

neighbors. It will supply both the growing local market and 

compete on international markets, particularly next-door 

in China, which has emerged as the world’s biggest 

petrochemical market. 

Further progress on the complex was announced on 

March 25, when Deputy Oil and Gas Minister Aset Magauov 

said that Kazakhstan plans to choose a partner for the 

planned $4 billion polyethylene plant, the candidates being 

South Korea’s LG Chem and Abu Dhabi’s International 

Petroleum Investment Company. South Korea’s Hanwha 

Chemical, Japan’s Marubeni and China Petroleum & Chemical 

Corporation, known as Sinopec, also previously held talks 

on building the plant, the ministry said. 


Each year, the Tenzig oil refinery 

pumps billions of dollars into 

the Kazakh economy 

Kazakhstan has three major oil refineries – Pavlodar, 

Atyrau and Shymkent – which have a capacity of around 

345,000 barrels per day, but which operate below this level 

due to lack of demand on the local market for their products: 

fuel oil, diesel fuel, motor gasoline, jet fuel and liquefied gas. 

To bring them up to international standards and to start 

exporting their products, all three are set to modernized. 

The refinery at Pavlodar in northern Kazakhstan is 

supplied mainly by crude oil produced at Russian oilfields 

in western Siberia. On February 27, KMG denied reports 

that it is planning to close Pavlodar after 2014, when 

duty-free imports from Russia will cease. “KMG has no 

plans or intentions [to close the refinery],” the company said 

in a statement. “Moreover, all measures for the further 

modernisation of the Pavlodar plant are being carried out 

according to the government order from 2009 to develop 

refining capacity in Kazakhstan by 2014.” 

The Atyrau refinery is also being modernized. In October 

2009, KMG and Sinopec signed a contract for the construction 

of a new processing facility, scheduled for completion by 2013. 

The facility will allow the plant to extract benzene and other 

chemicals from oil, and improve the quality of gasoline output. 

The Shymkent refinery is operated by Petrokazakhstan, 

which is 33 percent owned by KMG and 67 percent owned by 

the China National Petroleum Corporation. Petrokazakhstan 

is the second-largest foreign-owned oil producer, and the 

largest manufacturer and supplier of oil products in the 

country. It is currently involved in projects aimed at increasing 

the refining capacity and range of products at Shymkent. �

www.condorpetroleum.com 

Condor Petroleum is committed 

to developing energy resources 

in a manner that respects the 

environment and communities 

surrounding us. 

Commitment 

Community 

Condor 

Condor is actively 

exploring in Kazakhstan’s 

Pre-Caspian and 

Chu-Sarysu Basins.

ArcelorMittal’s safety 

investment pays off 

Following several methane-associated accidents 

during mining in deep excavations, efforts by 

ArcelorMittal to tackle this problem have made 

a significant difference to eliminating accidents 

and mitigating risks, reports Christopher Pala 

Steel producer and mining company ArcelorMittal – 

after investing $342 million, and three years into its 

multimillion-dollar program in Kazakhstan to cut 

coal-mining fatalities to zero in five years – is finding 

that the accidents that had turned it into a magnet 

for controversy have fallen significantly. 

“This shows we’re taking the right measures,” says 

Frank Pannier, CEO of the Kazakhstani unit (Temirtau) of the 

world’s largest steelmaker. The number of accidents in 2010 


About 11,000 of ArcelorMittal’s 

employees work underground, 

where coal deposits are now 

degassed routinely beforehand 


81

82 


The investment to improve safety at coal mines has been 

undertaken in addition to a $1 billion program to raise the 

output of steel from four to six million tons by 2015 

Number of accidents 

179 

2008 

fell to 64, compared with 81 in 2009 and 179 in 2008; 

fatalities dropped from 42 to seven over the same period. 

Around 11,000 of the company’s 40,000 employees work 

underground in mines made dangerous by methane deposits. 

Pannier says 2,548 people died in accidents, mostly as 

a result of methane explosions, from the time the complex 

was built south of Astana in 1945 – an average of 50 per year. 

But since ArcelorMittal steel bought the complex of eight coal 

mines and two mills in 1996, a total 217 coal miners have 

died – an average of 14 a year. 

Still, when an explosion at the Lenina mine – south-east 

of the capital, Astana – killed 41 people in September, 2006, 

the staff went on strike. After another explosion at its 

Abaiskaya mine killed 30 workers in 2008, Kazakhstan’s 

government publicly threatened the company with pulling its 

license to operate if it did not improve safety. 

At the time, President Nursultan Nazarbayev – who 

began his career at the age of 20 at the steel plant when 


81 

2009 

2008 A drop in fatalities 

2010 

42 7 

64 

2010 

it was inaugurated in 1960 and had worked there for 

several years – was deeply upset by the events, according to 

a source who quoted his confidants. 

The high casualty rate is largely due to the fact that 

ArcelorMittal’s coal runs mostly at depths between 2,600 feet 

and 3,200 feet. That is very deep in comparison to other coal 

mining conditions worldwide. 

The coal seams are also some of the gassiest in the 

world, containing pockets of methane under pressure that are 

difficult to detect, says methane expert Clark Talkington, a 

senior vice president at Sindicatum Carbon Americas. In 

contrast, for the rest of Kazakhstan’s coal industry, which 

provides 80 percent of the country’s energy, open-air strip 

mining is the norm. 

In July 2008, the company embarked on a plan to 

eliminate methane explosions, a program that combined staff 

training and the importation of state-of-the-art gas detection, 

ventilation equipment and world-class degassing techniques.

One source for innovative solutions 

Since 1882, FLSmidth has been 

blazing new trails in the cement 

and minerals industries, helping it 

become leaner, greener and more 

profitable. With offices in over 

40 countries and more than 

11,000 employees, FLSmidth is 

recognised as a leading supplier 

of a comprehensive range of 

equipment, and is available to help 

with everything from strategic 

planning to overcoming everyday 

challenges. Its unmatched 

combination of proven technology 

and process know-how has 

provided innovative solutions for 

many of the world’s most 

successful plants – including more 

than 2,000 cement plants – in 

Kazakhstan and around the globe. 

The Republic of Kazakhstan is 

rich in natural resources and is 

one of the world’s most significant 

suppliers of minerals, oil, gas 

and other products. 

FLSmidth is proud that several 

companies in Kazakhstan – 

such as Central Asia Cement, 

Sastobe Cement and Kokshe 

Cement – have trusted it with 

equipment orders for production 

of the high-quality cement 

essential to the country’s 

continuing development. It looks 

forward to cooperating with 

these and other companies to 

supply engineering skills and 

equipment for existing and 

The investment to improve safety at coal mines is 

undertaken in addition to a $1 billion program to raise its 

output of steel from four to six million tons by 2015. The 

European Bank for Reconstruction and Development granted 

a $100 million loan for the safety program. 

The program for degassing is all about removing as much 

methane as possible from the mine before production begins, 

and removing the remainder during the mining process, 

Arcelor’s Pannier explains. Holes of varying diameters are 

drilled across the production unit in the coal seam and 

through the roof of the extracted area to capture the methane, 

which is brought up by suction pumps on the surface. 

“What we’re doing is doubling the number of ventilation 

wells,” says Pannier. “We also are installing more effective 

ventilation and degassing equipment, and more sophisticated 

equipment to detect gases.” 

A native of Dessau in Germany who has worked at 

various steel and mining companies in Germany, Ukraine 

and Kazakhstan, Pannier says that eliminating mortality 

from Temirtau’s eight mines represents “one of the most 

challenging jobs of my career. Many studies have shown that 

not all risks can be eliminated, but we can apply practices 

that mitigate this risk,” he says. 

greenfield cement plants, as 

well as for Kazakhstan’s 

minerals industry. 

The company would also like 

to congratulate the people of 


Kazakhstan on this year’s 

celebration of the 20th 

anniversary of Kazakhstan’s 

independence, achieved on 

December 16, 1991. 

Sindicatum’s Talkington agrees that Arcelor’s mines are 

among the most challenging in the world. “Management is 

clearly committed to improving safety, and I think they 

should be able to achieve that by bringing in the latest 

degassing technology developed in Australia and the US, 

and adapting it to the local conditions.” 

Although the worldwide recession has cut into the profits 

of the world’s largest steelmaker, the Temirtau operation, 

luckily, “is very cost-effective”, says Pannier. “We’re working 

at full capacity, we have captive iron, coal and energy, and we 

even managed to turn a profit in 2009,” he says. 

This year, steel output will be increased by 17 percent 

to 3.9 million tons as demand bounces back, he adds. 

There’s also hope of actually extracting a profit from the 

methane as well: in two of the mines, it is captured and used 

for heating, and an experimental two megawatt (MW) power 

station is being tested. If the technology proves successful, 

the company could use the methane to power a 50MW plant 

to replace that amount of power that the company currently 

purchases from the grid, Pannier says. � 

Christopher Pala, a former Central Asia correspondent for The New 

York Times, is a freelance journalist based in Washington, DC. 


83

84 


Unearthing Kazakhstan’s 

metallic riches 


With all the minerals in the 

periodic table, Kazakh investment 

in mining and metals production 

is back on track. By Clare Nuttall 

The rally in global commodities 

prices that started in late 2009 

and persisted through last year 

put Kazakhstan’s mining sector 

back on track after some severe 

setbacks during the international economic 

crisis. Now the sector’s giants – Eurasian 

Natural Resources Company (ENRC), 

Kazakhmys and ArcelorMittal Temirtau – 

are reviving their investment plans, as are 

the many smaller players in the industry. 

Kazakhmys is planning to spend 

$6 billion over the next three to four years 

to develop new deposits, modernize and 

expand its existing metals business, and 

launch new energy projects. ENRC has 

$7 billion of investment plans, and the 

country’s largest steel producer, ArcelorMittal 

Temirtau, is partway through a $1.2 billion 

program to modernize its plants and improve 

its safety record. 

Kazakhstan had already increased 

production of several of its key commodities 

since the crisis. According to the State 

Statistics Agency, in 2010 Kazakhstan 

produced 323,428 metric tonnes of refined 

copper in 2010, up 3.4 percent compared to 

the previous year, and production of ferroalloys 

was up 18.3 percent to 1.73 million metric 

tonnes. Kazakhstan also increased output of 

alumina by 7.6 percent, crude steel by 

1.8 percent and refined gold by 29.5 percent 

during 2010. Meanwhile, production of zinc 

concentrate and lead concentrate fell by 

3.3 percent and 8.4 percent respectively, 

compared to 2009 levels. 

China remains the largest consumer of 

Kazakhstan’s metals and minerals. Oil and oil 

products accounted for 45 percent of exports 

in 2009, followed by mining products, which 

accounted for 16 percent of the total, 


iron-based metals (15 percent), copper and 

brassware (13 percent) and chemicals (seven 

percent), according to Renaissance Capital. 

Chinese demand is a driving force for some of 

the largest investments in the sector. 

Kazakhmys said on announcing its 2010 

results in March 2011 that it expects the 

current strong demand for copper to continue. 

The company’s production is expected to 

remain relatively flat until 2014, when some 

significant new projects start to come online. 

Kazakhmys is developing two major copper 

deposits, Aktogay and Bozshakol, both of 

which are located in eastern Kazakhstan. 

In June 2011, the company announced 

that it had signed a memorandum of 

understanding with the China Development 

Bank to secure a $1.5 billion loan facility 

to develop the Aktogay copper project. 

Kazakhmys already has a $2.7 billion loan 

facility from the bank for Bozshakol and 

several medium-sized projects. 

“Our two major growth projects, 

Aktogay and Bozshakol, should produce 

around 200 kilotons of copper concentrate 

each year, equivalent to 60 percent of our 

current production, which is significant for 

Kazakhmys and for the growth of the metals 

industry in Kazakhstan,” said Kazakhmys 

CEO Oleg Novachuk in a statement issued 

following the latest agreement with the China 

Development Bank. 

In February this year, Kazakhstan’s 

President Nursultan Nazarbayev announced 

during his visit to Beijing that the China 

Development Bank also agreed to provide 

a $2 billion loan to ENRC. Of this total, 

$1.6 billion is expected to be used by the 

iron-ore division and $400 million for the 

ferroalloys division. Like Kazakhmys, ENRC 

has ambitious expansion plans, and at the 

beginning of this year the company’s then 

CEO Felix Vulis announced the company 

expects to invest up to $7 billion to develop 

its assets within Kazakhstan. 

Key projects in ENRC’s home country are 

the construction of a ferroalloy plant in the 


85

86 


The Zhezkazgan mining 

and smelting plant, 

operated by Kazakhmys 

Aktobe region and the expansion of the Sokolovsko-Sarbaiskoye 

Mining Association. ENRC may also invest up to $2 billion in 

the Zhairem polymetallic project. While firmly rooted in 

Kazakhstan, ENRC is also expanding overseas. It has made 

several investments in Africa and South America. 

Kazakhstan’s largest steel producer, ArcelorMittal 

Temirtau, announced at the end of 2009 that it was resuming 

all investment projects in Kazakhstan that had been suspended 

due to the crisis. The company is spending on new steel 

production facilities and mines, and on improving safety. 

Kazakhstan’s steel production was up 4.1 percent year 

on year in 2010, to 4.3 million tons, according to the World 

Kazakhstan metal production in 2010 


3.4% 

18.3% 

Steel Association. Consumption within the country was also 

up to around three million tons, as pipeline and new 

construction projects – many government funded – pushed up 

demand. Kazakhstan also exports steel, with its main markets 

being China, Russia, Iran and the European Union. 

Both ENRC and Kazakhmys are listed on the London 

Stock Exchange, and in June 2011 Kazakhmys successfully 

carried out a secondary listing on the Hong Kong Stock 

Exchange. There is currently speculation that part of the 

Kazakhstani government’s stakes in the two companies 

could be sold off as part of the planned ‘People’s IPO’ 

programme. However, the list of companies to be included 

in the programme has yet to be finalized. Meanwhile, 

commodity trader Glencore, which owns 50.7 percent of 

Kazzinc, carried out a $11 billion flotation on the London 

Stock Exchange in May 2011, with a secondary listing in 

Hong Kong. Glencore plans to use funds from the listing to 

increase its stake in Kazzinc, which is active in mining zinc 

and lead, and in metallurgy, as well as to finance capital 

expenditure and repay its debts. 

In addition to the giants of the Kazakh mining sector, 

numerous smaller companies are active in various branches 

of the mining industry. Kazakhstan prides itself in holding 

all of the minerals in the periodic table, and investors are 

looking beyond copper and iron to the lesser known, but 

valuable metals such as rare earths, which are increasingly 

in demand since China has reduced exports. � 

7.6% 1.8% 

29.5% 

Copper Ferroalloys Alumina Crude steel Refined gold Zinc concentrate Lead concentrate 

3.3% 8.4%

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The Ground Support Company 

100011 Минова Казахстан, Караганда | Октябрьский район | 018 Учетный квартал, 

строение 014 | Тел +7 7212 46 25 38 | Факс +7 7212 46 13 97 | www.minova.kz

We don’t just want to be the biggest steel company in the world, 

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That’s why this year we are investing $90 million to 

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transformingtomorrow 

www.arcelormittal.com

Good things come in 

small packages 

Opportunities for unearthing precious 

metals abound – and not only for mining 

behemoths. By Christopher Pala 

Most of the minerals in the periodic table are 

to be found in Kazakhstan, with plenty left 

in the ground for entrepreneurial smaller 

mining companies. Higher gold and silver 

prices benefit both the polymetal miners 

such as Glencore International and Ivanhoe Mines, and smaller 

gold players such as AIM-traded Hambledon and Frontier 

Mining, and phosphates miner Sunkar Resources. 

President Nursultan Nazarbayev has set a goal of more 

than tripling gold production to 70 metric tonnes a year by 

2015, paving the way for multiple opportunities for 

investment in the remaining two-thirds of the deposits. 

There are technical challenges, however. Most of the 

Kazakhstani gold is in polymetallic ore that requires 

complex processes, mostly refractory, to isolate. 


But there is a tantalizingly abundant supply of gold, 

which since 2000 has quintupled in price to $1,600 per 

ounce. The US Geological Survey estimates there are 

1,900 tonnes of gold in the country. This makes it the world’s 

ninth largest country in terms of reserves, yet in terms of 

production (20 tonnes a year) it ranks twentieth. Of those 

reserves, about a third is held by two companies. 

Around 360 tonnes are believed to be in the 

Vassilkovskoye deposit, located in northern Kazakhstan and 

owned by Kazzinc in Zyrianovsk, to the east. The former 

state-owned company – which has sold its controlling 

50.7 percent stakes to Switzerland-based Glencore 

International – is planning on doubling its capacity to 

15 tonnes a year. Kazzinc, which owns 100 percent of the 

Vasilkovskoye gold mine, is in the process of spinning off its 

gold assets into a separate company. 

Another 277 tonnes of gold reserves are in the Kyzyl 

Gold Project’s Bakyrchik mine, located in the industrial 

center of the country. It is operated by Altynalmas Gold, in 

which Canada-based Ivanhoe Mines raised its interest from 


89

90 


Requests for tenders have been circulated for the 

fabrication of long-lead items for the Bakyrchik operation 

A miner at Bakyrchik, one 

of the world’s largest gold 

deposits, located in the 

industrial center of Kazakhstan 

49 percent to 50 percent. Ivanhoe is controlled by billionaire 

Robert Friedland. The rest of the stake is owned by a group of 

investors headed by Goga Ashkenazi, the London-based, 

Kazakh-born socialite and businesswoman. 

In addition to Bakyrchik, the Kyzyl Gold Project contains 

the Bolshevik gold deposits and several satellite deposits. 

After a pre-feasibility study gave the green light, a definitive 

feasibility study on the Bakyrchik Deposit began in September 

2010 and is expected to be complete by this summer. 

Requests for tenders have been circulated for the 

fabrication of long-lead items for the mining operation, 

including an oxygen plant and dry-grinding mill. 

Altynalmas expects to begin construction of a 

1.5-million-tonne per year fluidized-bed roasting plant to process 

the project’s refractory ores in 2011. Targets are 12.5 tonnes for 

2014, the first year of full production, 15 tonnes by 2015 and, 

after developing a second mining front, 20 tonnes a year. The 

company is investigating financing options that include an initial 

public offering, strategic investors, project financing or continued 

financing from existing shareholders. 

UK-based Hambledon Mining, the dean of the junior 

internationals, has been operating in Kazakhstan since 1998. 


Its main focus is the Sekisovskoye deposit, an 

open-pit mine and underground development 

with a multifunctional processing plant 

located near Ursk Kamenogorsk in east 

Kazakhstan. So far it is producing 

0.85 tonnes a year, but expects to reach 

2.8 tonnes by 2013 when the company plans 

to process ore from underground, which has a 

grade that is around three times higher. 

“We have capacity to process up to one 

million tonnes a year of ore depending on its 

hardness,” Hambledon Director Nick Bridgen 

told the Journal of Engineering and Mining. 

Since this is more than its mines can 

produce, Hambledon plans to process other 

companies’ ore at plants at Sekisovskoye 

and possibly Ognevka. In addition, Bridgen 

explained that the company is looking to 

buy other deposits. In March 2011, the 

company announced its intention to raise £8.52 million 

($13.63 million) net of expenses through the issue of up to 

227,329,873 new ordinary shares. 

London-registered phosphate producer Sunkar, located 

near Aktobe in Western Kazakhstan, near the Russian border, 

was born from the takeover of Temir Services in 2006. The 

836-square-kilometer Chilisai deposit is one of the largest in 

the former Soviet Union, with a resource of around 

800 million tonnes of ore at 10 percent phosphorus 

pentoxide. The company extracted one million tonnes last 

year. It was developed during the Soviet era and it closed for 

several years when demand for fertilizers collapsed in the 

early 1990s. In March, Sunkar reached agreement with 

Gazprom’s Meleuzovskiye Mineralniye Udobreniya to supply 

5,000 tonnes of phosphoric concentrate. 

Frontier Mining, incorporated in the Cayman Islands, 

mines gold and copper deposits and is expected to produce 

3,000 tonnes of LME-grade copper from the Benkala mine 

by the end of 2011. Frontier owns half of Benkala and is in 

the process of acquiring the other half from Coville Intercorp, 

a private Kazakhstani mining group. Frontier also has one 

producing gold mine, Koskuduk. �

A partner 

of choice in 

metals and 

minerals 

Sun setting over Gobi Desert. D375A Digger 

used in the primary crusher open pit. 

Rio Tinto is a leading global business delivering value at each stage 

of metal and mineral production. Our diverse portfolio, high quality 

assets and expertise in technology and marketing give us the 

capability to supply a wide spectrum of customers and markets. 

Safe working and sustainable development are at the heart of 

everything we do. Our worldwide operations provide long term 

local benefits, including employment and training opportunities 

for our neighbouring communities. 

Rio Tinto is committed to growing our business in Kazakhstan 

and we are seeking large, long life mining projects at various 

stages of development. 

We’re looking forward to a long and successful relationship 

with Kazakhstan, and join Kazakhstan in the celebration of 

20 years of independence. 

Contact: 

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310G, Dostyk Avenue, 050020, 

Almaty, Republic of Kazakhstan 

T: +7 (727) 386 7521 

Find out more: 

www.riotinto.com

92 


Keeping the nuclear faith 

Uranium pellets cool after being baked at the Ulba 

Metallurgical Plant in Ust-Kamenogorsk, Kazakhstan 


With vast reserves of uranium, 

Kazakhstan stays strong on 

nuclear power. By Christopher Pala 

Kazakhstan – which holds the 

world’s second largest reserves of 

uranium after Australia – expects 

to produce 19,600 tons this year 

after more than doubling its 

output in just three years. By increasing both 

the number of its mines and the capacity of 

many of them, Kazakhstan became the 

world’s largest producer in 2009, leaving the 

other two giants – Canada and Australia – far 

behind. And that’s not all: production is 

scheduled to reach 25,000 tons by 2015. 

But ramping up output to satisfy the 

demand of a world increasingly turning away 

from carbon-intensive energy like coal and oil, 

is only one goal. The other is to harness the 

know-how of major international players to 

squeeze ever more value out of every kilo of 

the metal, by expanding downstream and 

mastering functions that in the Soviet days 

were performed in Russia. 

The ultimate plan is to take the nuclear 

cycle to its conclusion by building a nuclear 

power plant by 2020. 

While the reappraisal of nuclear 

energy’s safety in the wake of the nightmare 

at Japan’s coastal plants has cast a pall on 

uranium’s future, the World Nuclear 

Association still estimates that there will be 

at least 589 nuclear plants in the world in 

30 years, from 367 today. 

Still, there’s no question that the 

catastrophe could have an effect on global 

demand. “The nuclear renaissance has been 

called into question,” says John Mothersole, 

an analyst at IHS Global Insight in 

Washington, DC. “Now the outlook is 

anywhere between very good and uncertain.” 

Kazakhstan’s faith in nuclear energy’s 

safety was vividly illustrated by the reaction 

of Duisenbai Turganov, the Deputy Minister of 

Industry and New Technologies, at a 

oil, gas and mining 93 

conference on power engineering that took 

place after the earthquake raised fresh doubts 

about nuclear energy’s safety. 

“We believe that the construction of a 

nuclear power plant should take place in 

Kazakhstan because we have all the necessary 

conditions for this,” he said. “We hold the 

world’s second largest uranium reserves and 

we are in front of everyone in terms of 

production,” he added. ‘Of course, significant 

attention must be paid to security.” 

Dominating the uranium field is 

Kazatomprom, headed by Vladimir Shkolnik, 

a nuclear engineer and former president of 

the Academy of Sciences of Kazakhstan who 

has served as energy minister and trade 

Kazakhstan became 

the world’s largest 

producer in 2009, 

leaving Canada and 

Australia far behind 

minister. In 2009, Kazakhstan produced 

13.5 tons of uranium – almost 28 percent 

of global production. The following year, 

production volumes continued to grow 

and reached 17.8 tons. Expected profits 

are $366 million and the orders book 

amounts to $17 billion. 

In addition to increasing production, 

Kazatomprom is diversifying its activities 

across the entire nuclear fuel cycle through a 

growing number of foreign joint ventures. 

Shkolnik has stressed that more foreign 

investors are being sought for these activities. 

Last year, the company took a series of 

initiatives in uranium conversion, enrichment 

and fuel fabrication with international 


94 


Vladimir Shkolnik, Chairman of the Board of Kazatomprom 

Two years ago, Kazakhstan 

overtook both Australia and Canada 

to become the world’s largest 

producer of uranium. Kazakhstan 

further boosted production to 

17,803 tons in 2010, and we are 

aiming to reach 19,900 tons in 2011. 

With close to 19 percent of 

global uranium reserves, 

Kazakhstan is well positioned to 

take advantage of the ongoing 

nuclear renaissance. Governments 

around the world are increasingly 

turning their attention back to 

nuclear energy, due to high oil 

prices and concerns over future 

access to fossil fuels. 

The world was with Japan after 

the disaster at the country’s 

Fukushima power plant, which 

was severely damaged by the 

tragic earthquake on March 11, 

2011. Although some governments 

are rethinking their plans to build 

new nuclear capacity, the majority 

of projects, many of them in Asian 


countries, are expected to go 

ahead. The demand for uranium is 

still expected to be high. 

China, Russia and South Korea 

are all planning to build new power 

plants, while Kazakhstan is 

preparing to launch its own 

nuclear power industry, with the 

construction of a power plant in 

the western Mangystau region. 

Kazatomprom plans to invest 

341 billion tenge ($2.3 billion) 

between 2011 and 2015 on 

increasing production. But our 

ambitions are not limited to 

increasing uranium extraction. 

For several years, the company 

has been working to build an 

international, vertically integrated 

uranium industry spanning all 

stages from exploration and 

production of uranium through to 

processing. We employ more than 

25,000 people across all stages of 

the uranium product cycle and 

related activities. 

companies like Areva of France, Cameco of Canada, and 

Toshiba and Sumitomo of Japan. 

An agreement signed with Areva in October 2010 

during an official visit by Kazakh President Nursultan 

Nazarbayev to France allowed Ulba Metallurgical Plant 

(UMP) – which is 51 percent owned by Kazatomprom and 

49 percent owned by Areva – to build a 400-ton-per-year 

fuel fabrication line that is due to start operation in 2014. 

In 2010, UMP completed Areva’s certification process to 

produce fuel pellets made of uranium dioxide as per Areva’s 

specifications, used in many countries around the world. 

In addition, Kazatomprom works with Areva in the 

Tortkuduk and Southern Mynkuduk mines. 

In the field of uranium conversion, Kazatomprom 

signed a memorandum of understanding with Canada’s 

Cameco, covering the development of a refinery at its 

A contract between French nuclear giant Areva and Kazakhstan company 

Kazatomprom is signed at the Élysée Palace, Paris, in October 2010 

Building Kazakhstan’s nuclear 

industry has been a work of 

cooperation between Kazatomprom 

and several strong international 

partners. Joint ventures with top 

companies including Areva, 

Cameco and UraniumOne are 

enabling Kazatomprom to create a 

world-class uranium industry. On 

May 18, 2011, the Kazakh-French 

joint venture KATCO celebrated the 

production of its 10,000th ton of 

uranium production in south 

Kazakhstan oblast. Meanwhile, our 

company is also looking to invest 

$800 million to develop rare-earth 

metal mining in Kazakhstan. 

Finally, we are venturing into 

green energy. Green energy is 

clearly becoming a more important 

part of our future. To that end, we 

started building a $230 million 

solar-panel plant in Astana, and are 

researching other ventures. 

Ulba Metallurgical Plant subsidiary and the expansion of 

the uranium conversion capacity at the Springfields plant 

in the United Kingdom, where the latter company has a 

toll-processing agreement. 

In 2010, UMP successfully completed the certification 

of production of uranium fuel pellets at China Jianzhong 

Nuclear Fuel, a unit of the China National Nuclear Company. 

The uranium pellets will be used in fuel production for the 

largest nuclear power plant owner in China, the China 

Guangdong Nuclear Power Corporation. 

UMP is also working on the construction of a processing 

plant with Toshiba and an enrichment plant with Rusatom. 

Meanwhile, Kazatomprom is moving forward with plans 

to take a stake in the Ural Electrochemical Plant enrichment 

facility in Russia and expects to complete a deal to acquire 

shares in the plant during the coming year. �

Эффективные проекты Hambledon 

Hambledon Mining public limited company (HM plc) – это английская компания, владеющая компаниями ДТОО «Горнорудное 

Предприятие Секисовское» и ТОО «Алтай Кен-Байыту». Главный исполнительным директором является Тим Даффен. 

HMpIc - это сравнительно небольшая 

открытая акционерная компания, 

чьи акции котируются на фондовой 

бирже Лондона, тем самым имеет возможность 

привлечения как корпоративного, так и 

частного капитала. Местом проведения работ 

является с. Секисовка в Восточно-Казахстанской 

области, хотя в планах компании - расшире¬ние 

деятельности и развитие других проектов 

на территории Республики. Будучи чисто 

английской компанией, тактика управления у 

нас отличается от других иностранных компаний 

в Казахстане. Наем иностранных специалистов 

происходит в исключительных случаях, когда 

необходимы специализированные знания. 

Имея долгосрочные планы на будущее учас¬тие 

в экономическом развитии Казахстана, 

руководство компании обращает пристальное 

внимание на соблюдение норм и требований 

экологического законодательства, вносит 

посильный вклад в развитие социальной 

инфраструктуры района работ. Особый контроль 

со стороны предприятий - обеспечение 

безопасности на производстве. Внедрение 

новых, основанных на мировом опыте, 

методов разведки, отработки месторождений, 

совре¬менных способов извлечения золота 

- политика компании. Наши предприятия 

используют передовые методы финансового 

Tim Daff ern 

Hambledon Mining public limited company (HM plc) a Briti sh company, and owner of Sekisovskoye Mining Company SLLP 

and Altai Ken-Baiytu LLP. Chief Executi ve Offi cer of the company is Tim Daff ern. 

HM plc is a relati vely small, open 

joint-stock company, whose shares are 

quoted on the London Stock Exchange 

and which is capable of raising both corporate and 

private funds. The operati on site is located in the village 

of Sekisovka in the Eastern Kazakhstan Region, 

however the company’s plans envisage expansion 

of its acti vity and development of other projects 

in Kazakhstan. While sti ll a Briti sh company, our 

management approach is diff erent from that of the 

other foreign companies in Kazakhstan. Expatriate 

experts are hired in excepti onal cases when special 

knowledge is required. 

In its long-term plan for future parti cipati on in the 

economic development of Kazakhstan, the company 

management pays close att enti on to compliance 

with environmental standards and requirements, and 

makes a strong contributi on to the development of 

учета и управления. Внедрена программа 

бухгалтерско-финансового учета «Sun system», 

программа для учета кадров и расчета 

заработной платы HRB. Рабочий и инженерный 

персонал прошли обучение у иностранных 

специалистов и успешно работают на 

современном оборудовании, таком как буровые 

станки Roc-L7, Diamec, экскаваторы Hitachi. 

Инженерные работ¬ники овладели программой 

Data-mine. Главная задача HMpIc в сфере 

HR- стратегии, внедряемой на предприятиях 

компании - помочь каждому сотруднику 

стать максимально эффективным, расти и 

развиваться профессионально, воспи¬тать 

свои кадры, с длительным сроком работы на 

предприятии, назначение на руководящие 

позиции своих «доморощенных» специалистов, 

сокращение текучести кадров, при жесткой 

дисциплине. ДТОО «ГРП Секисовское» с июня 

2007 года приступило к отработке Секисовского 

месторождения золотосеребряных руд открытым 

способом. Ведутся подготовитель¬ные работы по 

доразведке глубоких горизонтов месторождения. 

Наличие высокопрофессионального инженернотехнического 

состава и опытных рабочих 

кадров, на 95% состоящих из жителей Восточно- 

Казахстанской области, позволяет решать 

любые задачи по разведке, проектированию, 

моделированию и отработке месторождений. 

the social infrastructure in the area of its operati ons. 

The company exercises strict control of industrial 

safety. Our policy of operati ons includes implementati 

on of methods of explorati on and gold recovery, 

based on internati onal experience. Our companies 

implement advanced accounti ng and management 

methods, such as Sun System and HRB – the human 

resources and payroll accounti ng soft ware. 

Mine operati ons and engineering personnel have 

been trained by expatriate experts and are effi ciently 

operati ng modern equipment such as Roc-L7 and 

Diamec drill rigs, Hitachi excavators etc. Also, mine 

design personnel have been trained in Datamine. 

The main objecti ve of the HM plc HR strategy is to 

assist every employee in achieving maximum selfeffi 

ciency. In June 2007, Sekisovskoye Mining Company 

LLP started development of Sekisovskoye gold and 

silver deposits by open-pit methods. At this stage, 

Основная деятельность ТОО «Алтай Кен - 

Байыту» - это переработка минерального 

сырья с получением золотосеребряного 

сплава «Доре». Технология переработки руд с 

малым содержанием золота, разработанная 

специалистами предприятия совместно с 

австралийскими партнерами, пред¬ставляет 

интерес для многих месторождений Казахстана. 

Ежегодно производится обновление 

Меморандумов о социальной ответственности 

бизнеса. С учетом уровня заработной платы 

местных жителей на наших предприятиях, в 

сельском округе усилилась конкурентность 

за трудовые ресурсы, что положительно 

сказывается в целом на жизненном уровне 

местных жителей. На наших предприятиях 

работает свыше 500 работников. 

Мы имеем уже более чем десятилетний опыт 

работы в Казахстане. На наших глазах идет 

укрепление и рост экономического потенциала 

страны, рост политического авторитета 

Республики на международной арене. Казахстан 

является одной из наиболее привлекательных 

на постсоветском пространстве стран 

для иностранных инвесторов. От имени 

Учредителей Hambledon Mining PLC, всех наших 

работников, поздравляем весь казахстанский 

народ с 20-летием независимости. Желаем 

счастья и процветания! 

further explorati on of deep levels is being carried out. 

The basic acti vity of Altai Ken-Baiytu LLP is 

mineral processing to produce gold-silver Dore alloy. 

The technology of processing low-grade gold ore, 

developed by the company specialists together with 

our Australian and Briti sh partners, is att racti ve for 

many deposits in Kazakhstan. 

On behalf of the founders of Hambledon Mining 

PLC and all our employees, we would like to 

congratulate all the people of Kazakhstan on the 

20th anniversary of the country’s independence and 

to wish them happiness and prosperity.

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Building a grid 

that’s fit for purpose 

As the southern half of Kazakhstan does not 

have the infrastructure to receive surplus 

energy from the north of the country, which has 

an abundance of amenities, efforts are being 

made to address this imbalance and make it 

self-sufficient – with enough electricity spare 

to sell to its neighbors. By Tim Gosling 

With Kazakhstan’s resumption in economic 

growth, electricity demand is booming 

once more across the country, and with the 

government committed to higher power 

tariffs, the incentives for investment in 

both electricity generation and the national grid system 

have never been greater. 

Investment in expanded capacity is a matter of urgency 

in Kazakhstan, as a deficit in the supply of electricity is 

growing. Power cuts, especially in the south, can be frequent, 

energy And InfrAstructure 

The electricity infrastructure of 

Kazakhstan has been stretched to 

capacity over the past eight years 

with electricity infrastructure stretched to capacity by the 

increase in industrial production over the last eight years. 

The situation was somewhat allayed by the financial 

crisis, but with industrial production expanding once more, 

the country is again hungry for power. At the same time, 

Kazakhstan has the opportunity to boost exports to China, 

Russia and its Central Asian neighbors, some of which offer 

wholesale prices significantly above Kazakh production costs. 

Thermal power plants account for 85.5 percent of the 

country’s generation, with the remainder being produced 

by hydropower (8.8 percent) and gas turbine stations 

(5.7 percent). As of 2009, there were 63 electric power plants 

in Kazakhstan, the major ones controlled by large industrial 

consumers, which acquired them during the boom years. 

Government plan to boost capacity 

The power industry is seen as a key factor in Kazakhstan's 

industrial development and economic growth, with generation 

accounting for around 10 percent of all industrial output. 


97

98 


Percentage of energy 

production in 

Kazakhstan 

85.5% 

Thermal power plants 

8.8% 

Hydropower 

5.7% 

Gas turbine stations 


Most installed capacity was built before 

1990. Until 2006, the sector suffered from 

underinvestment and as a result, the total 

operational capacity deteriorated to 14.6 

gigawatts (GW), a significant shortfall from 

installed capacity of 19GW. 

Overall, the power sector is projected to 

boost total capacity to around 125 billion 

kilowatt hours (kWh) by 2015. By comparison, 

82.3 billion kWh was produced in 2010, 

representing a 4.9 percent increase over 

2009 levels. However, consumption spiked 

at 7.4 percent the same year to 83.8 billion 

kWh, and the market is forecast to grow by up 

to a third over the next five years. 

The Plan of Energy Sector Development 2007-15 

sets out the government’s targets for the sector: 

• Reconstruction of existing 

power plants 

• To build additional capacity of 

2,430-2,550MW 

• Investment of up to $14.3 billion 

to 2015 (although industry figures 

suggest $20 billion plus) 

Investment is also planned for the 

transmission grid, which is limiting the transfer 

of excess power between regions and sees 

significant power losses during transmission. 

Tariffs to attract investment 

The leading edge to encourage investment in 

power generation is a framework to raise tariff 

ceilings for domestic electricity sales for 

2009-15. The ceiling prices are set by the 

Ministry of Energy on an annual basis, and 

are subject to generators meeting capital 

investment commitments. 

Government forecasts for certain power 

plants suggest increases of up to 60 percent 

over last year’s tariffs by 2015. Generally, 

the price ceilings are set in order that the 

required capital expenses are recovered within 

eight to 12 years. 

The power sector was one of the first to 

be privatized after Kazakhstan gained its 

independence in 1991. Up to 100 percent 

foreign participation is permitted in 

developing power projects in Kazakhstan. 

The Law on Electricity was adopted in 

July 2004. Another basic act regulating the 

market is the Law on Natural Monopolies, 

which was last amended in December 2004. 

The market regulator is the Agency for 

Regulation of Natural Monopolies. 

The risk to economic development 

The biggest motivation for the government 

push to attract investment is that the country’s 

limited capacity threatens to start restricting 

its accelerating economic development. 

Development of nuclear energy, which 

would make use of Kazakhstan's uranium 

resources, is one proposal favored by the 

government. Russia, Japan and China have 

expressed interest in working with Kazakhstan 

on a number of projects – including the 

construction of a nuclear power station. A 

feasibility study into the project is under way. 

In the meantime, Kazakhstan is likely to 

become increasingly reliant on imports of 

electricity from its neighbors, and the Kyrgyz 

Republic in particular. Kyrgyzstan, however, is 

a potentially unreliable source of energy, given 

persistent political instability and erratic 

water supplies to its hydropower plants. 

Businesses in other sectors are aware 

that electricity supplies risk becoming 

increasingly erratic, and that they might need 

to consider investing in their own generating 

sources, unless development of the power 

industry is accelerated. In one example, the 

West Kazakhstan authorities announced in 

2009 that construction of a new cement plant 

in the region had been postponed due to the 

lack of a reliable electricity supply. 

Another impetus for development of the 

sector is regional imbalance. While the north 

– studded with power plants surrounding its 

rich coal fields – exports electricity to Russia, 

a deficit in the south and west makes it 

necessary to import from southern neighbors 

Kyrgyzstan and Uzbekistan.

Strengthening the backbone 

One of the biggest investment 

opportunities in the Kazakh power 

sector is the upgrade and 

expansion of the national grid. 

Despite improvements in recent 

years, there is room for 

improvement, given that losses 

during transmission and 

distribution are estimated at 

approximately 15 percent. 

Kazakhstan Electricity Grid 

Operating Company (KECOG) has 

said it plans to invest in expansion 

through 2025. The company has 

prioritized transmission lines to 

Kyrgyzstan, and to connect existing 

and future hydropower facilities 

with significant load centers. 

At the same time, a new power 

line – funded by the European 

Bank for Reconstruction and 

Development (EBRD), Kazakhstan 

Development Bank and the World 

Bank – opened in September 2009, 

One of the biggest investment opportunities in the 

country, therefore, is the need to integrate a national 

transmission grid. The national power grid, largely built before 

1990, was not designed to transfer surplus between regions. 

Development of infrastructure in the west of the country is 

also geared to the energy-hungry Chinese market, while Russia 

and other Central Asian states are targets for exports as well. 

Kazakhstan is considering building a 900km transmission 

line to export power from Ekibastuz to Urumqi in China, while 

the Chinese side is reportedly mulling an investment in the 

construction of a large power station in Ekibastuz. 

Meanwhile, Kazakhstan’s coal-powered plants in the 

north export considerable volumes of power to Russia, where 

prices are expected to continue to rise as the economic 

recovery continues. Russian bank VEB is financing the 

construction of a third power plant at Ekibastuz GRES-2 

power station to the tune of $800 million. 

Renewable energy 

Kazakhstan possesses five operational hydroelectric plants, 

which provide roughly 12 percent of production – with most 

facilities sitting on the Irtysh River. Other renewables are 

largely undeveloped, although Kazakhstan has potential in 

renewable energy resources, which could be particularly 

attractive in isolated rural areas. In March 2011, Central Asia 

Green Power, an Italian/Turkish joint venture, agreed on a $1 

billion project to build two wind farms to help alleviate the 

shortage of power in the south of the country. 

In 2009, over KZT65 billion ($446 million) was 

invested in the electricity sector, not including funds 

and goes a long way towards 

solving regional imbalances by 

doubling the volume of electricity 

delivered to central and southern 

Kazakhstan from the north. 

Meanwhile, Hyundai Engineering 

Co. recently won a tender run 

by KECOG for a $100 million 

upgrade of substations. The 

contract is part of an ongoing 

$400 million modernization project, 

financed by another EBRD loan. 


India’s KEC International said 

in January that it has signed 

agreements to rehabilitate 

38 substations covering the 

north-east and the south. 

KECOG recently announced 

that the EBRD is considering 

a further loan of $166 million 

to finance rehabilitation of 

the Ossakarovka electricity 

transmission line, which supplies 

Astana and the Akmola region. 

The Kokaral Dam on 

Kazakhstan’s Aral Sea 

allocated from the central and local budgets. In 2010, 

investment of more than KZT85 billion was planned, solely 

in the renovation of power plants. 

Among the largest investments under way are the Moinak 

hydro power station (partly financed by the EBRD), the 

expansion and reconstruction of the Ekibastuz hydropower 

station-1, the third power unit of the Ekibastuz hydropower 

station-2 and the Balkhash thermal power plant – in which 

South Korea has agreed to invest $3.8 billion. � 


99

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M Lucas has been present in Kazakhstan since 1999 as an integrated engineering service provider. 

PM

...turning knowledge into value... 

PM Lucas Enterprises Congratulates HE President Nursultan Nazarbayev 

PM Lucas Enterprises Congratulates HE President Nursultan Nazarbayev 

PM Lucas Enterprises on Kazakhstan’s 

on Kazakhstan’s Congratulates OSCE 

OSCE HE Chairmanship 

Chairmanship President Nursultan in 

in 

2010 

2010Nazarbayev 

on Kazakhstan’s OSCE Chairmanship in 2010 

PM Lucas has provided multiple: 

s. 

• Subsurface engineering services such as Geological and Geophysical assessment, Reservoir, Production and other Petroleum 

, Drilling 

Engineering Services. 

• Surface engineering the services ranged from Conceptual Design, Basic Design, Detailed Design for the Oil handling, Gas handling 

gement; PM Lucas and has water provided handling multiple: system and Oil Receiving system. 

PM Lucas • Subsurface has PM provided Lucas engineering has multiple: drilled services or managed such as over Geological 1200 wells and or over Geophysical 1,000,000m assessment, of drilling Reservoir, with the wells Production ranging from and 500 other to Petroleum 5000m of 

tions. • Subsurface Engineering which engineering Services. 250 wells or services 300,000m such were as performed Geological on a and complete Geophysical turnkey basis. assessment, In addition Reservoir, to this Lucas Production managed over and 15,000 other well Petroleum 

Engineering • Surface interventions. 

Services. engineering the services ranged from Conceptual Design, Basic Design, Detailed Design for the Oil handling, Gas handling 

• Surface and water engineering The handling Company system the has services engineered and Oil ranged Receiving designed from system. or Conceptual built hundreds Design, of kilometers Basic of Design, roads, flowlines Detailed and Design pipelines. for the Oil handling, Gas handling 

and PM water Lucas PM 

handling has Lucas drilled has recently 

system or and managed the general 

Oil Receiving over 1200 Contractor 

system. wells of or a over complete 1,000,000m Turnkey of EPCC drilling Oilfield with development the wells ranging in Mangistau from Oblast, 500 to Kazakhstan. 5000m of 

The work started with the FEED (Basic Design) to complete turnkey EPCC development (Engineering Procurement Construction 

PM which Lucas 250 has wells drilled or or 300,000m managed were over performed 1200 wells on a or complete over 1,000,000m turnkey basis. of In drilling addition with to this the Lucas wells managed ranging over from 15,000 500 to well 

Commissioning) to Operations and Maintenance. 

5000m of 

which 

interventions. 

250 wells or 300,000m were performed on a complete turnkey basis. In addition to this Lucas managed over 15,000 well 

The Company has engineered designed or built hundreds of kilometers of roads, flowlines and pipelines. 

interventions. 

PM Lucas has recently the general Contractor of a complete Turnkey EPCC Oilfield development in Mangistau Oblast, Kazakhstan. 

The 

The 

Company Almaty, 

work started 

has engineered Kazakhstan • 

with the FEED 

designed Ivanilov str. 

(Basic 

or 

Design) 

built 63/A, hundreds Almaty, 050059 

to complete 

of kilometers • Tel: +7 

turnkey EPCC 

of 727 roads, 3410300 

development 

flowlines • Fax:+7 

(Engineering 

and 727 pipelines. 3410307 • www.pmlucas.com 

Procurement Construction 

PM Lucas Commissioning) has recently to Operations the general and Contractor Maintenance. of a complete Turnkey EPCC Oilfield development in Mangistau Oblast, Kazakhstan. 

The work started with the FEED (Basic Design) to complete turnkey EPCC development (Engineering Procurement Construction 

Commissioning) to Operations and Maintenance. 

Almaty, Kazakhstan • Ivanilov str. 63/A, Almaty, 050059 • Tel: +7 727 3410300 • Fax:+7 727 3410307 • www.pmlucas.com 

Almaty, Kazakhstan • Ivanilov str. 63/A, Almaty, 050059 • Tel: +7 727 3410300 • Fax:+7 727 3410307 • www.pmlucas.com

102 

eneRGY And InfRAstRuctuRe 

Renewable energy 

gathers momentum 



As well as producing hydrocarbon fuels, 

Kazakhstan is equally suited to generating 

‘green’ power, whether it is solar, wind or 

hydroelectric, although there is little uptake 

of this so far. However, the United Nations 

Development Program and the government are 

encouraging industry to pursue alternative 

energy, the latter via legislation. By Clare Nuttall 

The last few months have seen numerous steps 

towards generation of renewable energy in 

Kazakhstan. Major new projects in wind and 

solar power have been launched this year, 

hydro construction is going strong and a law 

on biofuels was adopted in late 2010. 

One billion dollars will be invested into two wind farms 

in the Zhambyl region of southern Kazakhstan in the next two 

years. An agreement was signed in March 2011, between the 

Zhambyl regional authorities, power companies KEGOC and 

ZhES, and Central Asia Green Power – a joint venture between 

Visor Group and the Turkish subsidiary of Italy’s Relight Group. 

The two wind farms will generate a total of 600 megawatts 

(MW) of electricity, helping to reduce the region’s dependence 

on power imports from neighboring Uzbekistan, the Zhambyl 

regional authorities said in a statement. 

In another stunning development, Kazakhstan’s national 

nuclear company Kazatomprom has started building a solar 

panel plant in Astana. Kazatomprom started laying foundations 

for the plant in March. The plant will cost around $230 million 

to build, President Vladimir Shkolnik told the Senate 

Committee on Social and Cultural Development on March 14. 

It will have an initial capacity of 50MW of solar-cell panels 

and may be increased to 100MW in the future. 


103

104 

eneRGY And InfRAstRuctuRe 

Reducing the use of fossil fuels, especially for the combined 

heat and power plants used for heating and hot water in 

many cities, will help to improve air quality in urban areas 

Kazakhstan is well-endowed with oil, gas and coal. 

The country also has high potential to reduce its dependence 

on fossil fuels, by investing in wind, solar and hydro power 

generation. The country has been generating hydropower 

since the Soviet times, but solar power, wind energy and 

biofuels have only recently been added to the energy mix, 

having previously existed on a very small scale. 

These days, exciting changes are taking place. The 

United Nations Development Program (UNDP) has been 

operating the Wind Power Market Development initiative, a 

full-scale project to promote the development of the wind 

energy market in Kazakhstan. The UNDP released results 

from a survey of wind power potential in Kazakhstan in early 

2011. Finnish company VTT presented its report on wind 

energy development in Kazakhstan, demonstrating the 

favorable conditions in the country. 

However, the percentage of electricity to be generated by 

wind power is still to remain quite low. “The foreseen wind 

power scenarios would mean about 250MW production in 

2015 and about 2,000MW production in 2030. The wind 

power penetration level is quite moderate: less than one 

percent of electrical energy in 2015 and about four percent 

in 2030,” according to a statement from the UNDP. 

There is also growing Chinese interest in wind-energy 

projects in Kazakhstan. In December 2009, Kazakhstan and 

China signed an agreement on cooperation in the renewable 

energy sector. China Guandong Nuclear Power Co (CGNPC) 

has agreed on a wind-power cooperation program with state 

fund Samruk-Kazyna. 

Kazakhstan’s climate is also highly suitable for solar 

power, especially in the south. In July 2010, a raft of deals, 

amounting to more than $2.8 billion, were signed during 

German Chancellor Angela Merkel’s visit to Kazakhstan. Among 

these was the announcement that German energy company Roth 

& Rau is planning to build Kazakhstan’s first solar power plant. 

Alternative energy received a boost in June 2009 when 

a law on support for renewable sources of energy was adopted. 

This will help Kazakhstan to use its abundant oil and gas 

reserves to generate export revenues, while it uses other forms 


of energy for domestic consumption. Reducing the use of 

fossil fuels, especially for the combined heat and power 

plants used for heating and hot water in many cities, will help 

to improve air quality in urban areas. 

Renewable energy is also a way to ensure that all areas 

of the country, including remote rural regions, have a reliable 

power supply. Kazakhstan’s coal mines and many of its power 

plants are in the north and center of the country, while oil and 

gas is concentrated in the west. Meanwhile, south Kazakhstan 

at times relies on exports from neighboring Kyrgyzstan and 

Uzbekistan to make up the energy deficit. Small-scale wind 

and solar plants could also be used to power areas of 

Kazakhstan not connected to the national grid. 

Of the KZT2.3 trillion ($15.6 billion) the Kazakh 

government is planning to invest into the power sector by 

2015, KZT107 billion has been earmarked for renewable 

energy projects, Duisenbai Turganov, Deputy Minister of 

Industry and Trade said in October 2010. 

New legislation specifically focused on biofuels has also 

been adopted. The law, which came into being in 2010, is 

intended to encourage the production of biofuels. It also seeks 

to balance the need for raw materials for biofuel production 

with Kazakhstan’s food security. 

As of 2010, there was only one biofuel plant in 

Kazakhstan, but the potential size of the market is considered 

to be large. The Kazakh government announced plans to 

produce 2.8 billion liters of biofuel this year, to be increased 

to 3.08 billion liters in 2012 and 3.22 billion liters in 2014. 

Meanwhile, hydropower continues to be an important 

component of electricity generation in parts of the country. 

When the Moynak cascade – being built with Kazakh and 

Chinese investment in south-east Kazakhstan – is completed, 

this will ensure a steady electricity supply for Almaty and other 

parts of south-east Kazakhstan. 

Other projects are planned. In November 2010, 

Samruk-Energo – a division of Kazakhstan’s state holding 

company Samruk-Kazyna – announced plans to seek Chinese 

investors to complete the expansion of the Shardarinskaya 

hydropower plant on the Syr Darya River in south Kazakhstan. �

Infrastructure – 

building a new backbone 

Necessity is the mother of invention, so it 

is said. Kazakhstan’s need for a nationwide 

framework for transportation and 

communication links will beget solutions, 

one way or another. By Tim Gosling 

Kazakhstan’s rapid economic development is 

provoking massive infrastructure spending across 

the sectors, as it races to build the new oil and 

gas pipelines, electricity generation capacity, and 

roads and railways needed to both expand and 

diversify the economy. As there is also keen need to upgrade 

existing infrastructure – much of which dates from Soviet 

times – builders and suppliers are at the core of the country’s 

future development and appeal. 

As the driving force of the economy, the still-developing 

oil and gas sectors are driving massive infrastructure 

investment, particularly for transit to export markets, while 

new electricity generating and transmission – which is at the 

core of government strategy to diversify the economy – calls 

for investment of at least $20 billion by 2015. Elsewhere, 


One of Kazakhstan’s latest 

completed projects – the 

Modern Bridge at Astana 

infrastructure investment requirements to 2030 are expected 

to top $25 billion, with roughly 40 percent going to the 

railways, 25 percent to telecommunications, 23 percent to 

roads, and 12 percent to water and air transport. 

However, alongside the headline projects is the ongoing 

development of the country at ground level. The deputy mayor 

of Almaty told a recent conference of city’s need for huge 

volumes of high-quality construction materials to drive city 

projects for the construction of over one million square miles of 

housing a year, as well as nearby hospitals and schools. The first 

section of the city’s metro system is also nearing completion. 

According to a report from Business Monitor International, 

the construction sector is expected to grow 5.5 percent year 

on year in 2011, to make the market worth $10.6 billion. 

Growth is then forecast to accelerate to an average rate of 

7.1 percent each year to 2015, when the sector could hit 

$24.4 billion. The construction and materials sector is 

almost completely privatized, with the government open to 

100 percent foreign ownership. Despite existing large 

investment from international companies, increased foreign 

investment – in the construction materials industry, in 

particular – is a government priority. 


105

106 


In 2009, many projects came to a 

standstill. The following year cement 

consumption increased 100 percent 

Oil and gas 

Not only does Kazakhstan’s rapid development of its oil and 

gas fields provide the gross domestic product boost to drive 

infrastructure investment across the economy, but it is directly 

responsible for many of the major construction projects. 

On the one hand is the large-scale expansion of its major 

oil and gas fields, such as Karachaganak and Tengiz, both of 

which target close to 100 percent production boost in the next 

few years. On the other, that output will need new pipelines to 

carry it to export markets, and new refining capacity to process 

it for the domestic market. 

Kazakhstan only started being a net exporter of natural 

gas in 2009, so development is nascent due to the lack of 

domestic pipeline infrastructure linking the western producing 

region with the eastern industrial province. 

Prime Minister Karim Massimov said in October that 

the country plans to boost its crude exports by almost 

200 percent by 2020. Both of these development targets 

will require major investment in infrastructure projects such 

as expansion of the Kazakhstan-China gas pipeline (set for 

completion by 2014), the $5.4 billion expansion of the 

Caspian Pipeline Consortium (CPC) oil link to Russia, and 

development of the Kazakhstan Caspian Transportation System 

(KCTS), which requires a 500,000-barrels-per-day (b/d) 

pipeline and 760,000-b/d terminal on the Caspian Sea. 

Meanwhile, the country still imports oil products due to 

a lack of refining capacity. However, KazMunaiGas has plans 

to invest up to $4 billion to modernize the country’s three 

refineries and boost output to meet domestic demand. 

At the same time, exports of mining products are also 

growing – especially to the rapidly developing regions of 

western China. These bulk products rely overwhelmingly on 

rail, water transport and roads, giving even more of a boost to 

investment in transport infrastructure. 

Transport 

With the aim of upgrading both the national transport network 

and knitting the Kazakh system into international networks 


that run from the Pacific coast of China through to Western 

Europe, the Strategy of Transport Sector Development to 2015 

calls for investment of $26 billion, the majority going to 

upgrade and expand the country’s railways and roads. 

Major projects include the South-West Roads project – 

a $7.5 billion scheme to build and upgrade 2,800km of 

highway to link China (at Khorgos) to Russia (at Zhaisan) as 

part of an International Transit Corridor running from Western 

China to Western Europe. Also in 2011, China signed up to 

construct a 1,000km high-speed rail line. Trains will be built 

to carry around 5 million passengers per year between 

Kazakhstan’s two major cities – the capital Astana and 

economic center Almaty – at speeds of about 350km/h. The 

project, which China’s vice premier labeled “a new highlight 

of cooperation” is forecast to be completed by 2015. 

Power 

Investment in expanded generating capacity is a matter of 

urgency in Kazakhstan, as a deficit in supply is threatening to 

drag on economic growth. The government’s Plan of Energy 

Sector Development 2007-2015, calls for investment of at 

least $14.3 billion to upgrade existing power plants and add 

up to 2,430-2,550 megawatts of new capacity. 

At the same time, the country needs to pump huge 

investment into its transmission grid, to smooth regional 

imbalances and raise its potential to earn revenue from 

exports in the future. 

Building materials 

With multibillion-dollar infrastructure projects both funded 

and in progress, as well as lining up in the pipeline, there 

is now an emphasis on raising domestic capacity for 

construction materials from cement to steel and glass. 

Foreign investment is welcome. 

Given the huge distances between cities and regions, 

local companies tend to dominate the national markets – 

Steppe Cement, for example, is closest to fast-growing Astana 

and industrial Karaganda, while Italcementi in Shymkent is 

well placed to supply the new highway to China. 

According to industry figures, Kazakhstan increased 

consumption of cement by 100 percent last year compared 

with 2009, for a total of six million tons. Domestic production, 

however, struggled to keep up, only managing to boost output 

from four million tons to 5.3 million tons in the same period. 

Consumption is expected to remain buoyant, thanks to the 

huge infrastructure investment drive, with consumption to hit 

6.5 million tons by 2013. �

Stronger demand for 

construction materials 

Building on the insatiable demand for 

manufacturing materials, Kazakhstan has a 

job and a half keeping up with the requirements 

of various projects as the economy improves. 

By Clare Nuttall 

Kazakhstan’s cement producers are investing in 

increased capacity to keep pace with demand, 

driven by major infrastructure projects. In 2011, 

the first post-crisis residential developments are 

also expected to start, further boosting 

consumption of construction materials. 

Cement consumption was twice as high in 2010 as in 

2009, to a large extent owing to the government’s anti-crisis 

program. Six million tons of cement were consumed in the 

country last year, according to industry figures. However, 

domestic production was unable to keep up, with local 

producers able to increase their output from four million tons 

in 2009 to only 5.3 million tons in 2010. Demand is expected 

to continue rising as Kazakhstan leaves the crisis behind, 

reaching 6.5 million tons by 2013. 


The growth potential for Kazakhstan’s cement market is 

substantial, Adal Issabekov, CEO of United Cement Group, told 

the BusinessCem conference in Almaty. Currently cement 

consumption per capita is just 317 kilograms a year in 

Kazakhstan, compared with 2,600kg in Saudi Arabia, 453kg 

in Germany and 3,978kg in the US. Consumption is even 

lower in the other Central Asian republics, so there is 

considerable scope for the growth of the regional market. 

“We reduced production volumes owing to the economic 

slowdown. However, now we can actively see and feel the 

economies improving and cement consumption climbing,” 

said Issabekov. “Due to the relatively low level of consumption, 

there is a niche for us to be able to increase consumption in 

the countries where we are present.” 

An important component of Kazakhstan’s multibillion- 

dollar anti-crisis program, adopted in late 2008, was a 

commitment to fund major infrastructure projects. These 

provided employment for tens of thousands of workers, thus 

keeping unemployment down, as well as the long-term benefits 

of improving transportation and other infrastructure. 

One of the largest projects ongoing in Kazakhstan is 

the Western Europe-Western China international transit 


107

108 


Annual cement consumption per capita 

corridor, which runs via Kazakhstan, and has been funded by 

several international financial organizations. The South-West 

Roads Project will see the reconstruction of the highway 

between Aktobe in west Kazakhstan and Shymkent in south 

Kazakhstan, and is due to be completed in 2013. 

Kazakhstan’s national rail operator, Kazakhstan Temir 

Zholy, embarked upon a $36 billion modernization and 

expansion program in mid 2009. More recently, in February 

2011, Kazakhstan and China signed an agreement to 

cooperate on the construction of a new high-speed rail link 

between Astana and Almaty. 

Numerous projects are also under way in the energy 

sector, including construction of the Moinak hydropower 

cascade, expansion of the Ekibastuz GRES-2 power plant 

(with funding from the Eurasian Development Bank and 

Russia’s Vneshekonombank – VNB), and the building of a 

new thermal power plant near Lake Balkhash. 

The construction of affordable housing in major cities is 

also being supported by the state. In May 2010, the head of 

the Residential Building Agency, Serik Nokin, announced 

that state-owned Zhylstroisberbank would finance residential 

construction projects where apartments would be sold at 

between $600 and $950 per square meter. The government 

is providing land and infrastructure for the buildings, while 

Zhylstroisberbank is drawing up lists of potential buyers. 

New residential developments have been put on hold for 

several years, as the government has decided to restrict the 

issuance of new permits until pre-crisis projects were 

completed. Real-estate professionals forecasts that 2011 will 

see the first post-crisis projects being launched. 

Meanwhile, several new cement plants in Kazakhstan are 

under construction and others are being expanded. While 

investment plans were put on hold during the crisis, the 


700 lb 

(317.5kg) 

Kazakhstan 

1,000 lb 

(453.6kg) 

Germany 

877 lb 

(397.8kg) 

United States 

5,732 lb 

(2,600kg) 

Saudi Arabia 

doubling of demand in 2010 compared with the previous year, 

and the expected increase this year and for the next few years, 

has encouraged cement producers to revive their plans. 

Six new cement plants with new capacity amounting 

to 5.3 million tons are being planned by Germany-based 

Heidelberg Cement CEE, said the firm’s general manager 

Roman Kempe, speaking at the BusinessCem conference 

in Almaty in October 2010. “The question is when they 

will be launched. The dates are not very realistic, but 

they will probably start operation in the next three to 

four years,” he said. 

The Kazakh government announced plans in 2010 to 

help develop the industry by supporting the construction of 

new production facilities. Those already in the works include 

the Italian Italcementi Group’s September 2010 decision to 

invest in dry-line clinker production at its Shymkent Cement 

plant. The new line will replace four existing wet lines, 

allowing the company to cut energy costs. Shymkent Cement 

would become the second plant in Kazakhstan to use dry-line 

production, which is more environmentally friendly than 

wet-line production. Steppe Cement was the first to introduce 

the technology, followed by Zhambyl Cement, which started 

operating its dry-line in December 2010. 

In May 2010, Moscow-based BaselCement-Pikalevo 

completed the reconstruction of the third production line at its 

Sas-Tobe cement plant. Following this $10 million project, 

BaselCement plans to continue further reconstruction work at 

the cement plant, the fifth largest in Kazakhstan. SAS-Tobe 

is expected to increase production by 26 percent to 

0.5 million tonnes in 2011. 

In addition to cement, production of other construction 

materials – ranging from steel to glass – is also expected to 

increase in Kazakhstan. �

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The fact is, no other company in the cement and minerals industries 

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profitable plants. 

For more information please visit us at www.flsmidth.com

110 


Real estate 

rebuilds toward 

recovery 

In the aftermath of the burst property 

bubble, investors are perusing Kazakh real 

estate again – though they are more cautious 

this time and have more realistic expectations. 

Clare Nuttall reports 

Kazakhstan’s troubled real-estate sector is 

recovering from the crisis. After an injection of 

government funds, projects started in the mid 

2000s are finally being completed, and those 

developers that survived the downturn are 

expected to start the first set of post-crisis projects in 2011. 

The problems in Kazakhstan’s real estate sector were 

ultimately due to the country’s underdeveloped financial 

market. When people became wealthier in the mid 2000s, 

the question for newly rich Kazakhs was where to invest their 

money. With the stock market still relatively illiquid, the 


Modern skyscrapers in Astana, 

Kazakhstan. New projects are expected 

to commence now that pre-crisis 

construction has been completed 

obvious answer was property. This created a speculative bubble 

in the real-estate sector, with prices in Almaty briefly soaring 

above those in London in early 2007. However, when the 

sub-prime crisis broke in the United States in mid 2007, 

Kazakhstan was one of the first countries to follow. The 

bursting of the real estate bubble had knock-on effects for 

the banking sector, where a high proportion of collateral was 

in property that had suddenly collapsed in value. 

As in many other countries, it has taken more than three 

years for the banks and property developers to work through 

these issues. Banks are quietly selling off collateral, as they 

tackle their portfolios of bad loans. In the real-estate sector, 

some projects were simply abandoned, leaving empty lots 

across Almaty. In other cases, future residents had pre-paid for 

their apartments in projects that were often little more than 

a hole in the ground when the bubble burst. 

Alarmed at the protests by angry ‘dolshiki’ (or ‘interest 

holders’), as they were known, the government was quick to be


The prospects for the real-estate and construction sectors 

are good. New investments are urgently needed to house 

a growing, and increasingly affluent, local population 

proactive, stepping in with a rescue package for the sector to 

ensure that projects would be completed. 

The government also decreed that no new construction 

licenses would be issued until ongoing projects were 

completed. Now, as the delayed projects in Almaty – and, 

to a lesser extent, Astana – near completion, developers 

are starting to consider their first post-crisis projects. 

In another sign of the market returning to normal, the 

number of transactions in the real estate market is increasing. 

According to Russian investment bank Renaissance Capital, 

the number of transactions was up 13.4 percent in January 

2011, compared to a year before. 

“The real-estate market is slowly starting to crawl out 

of the crisis,” says Peter Goranov, senior manager at CBRE 

Richard Ellis. “The crisis practically killed the mortgage 

market, but now we see signs it is recovering. People are 

making their repayments in a disciplined fashion, and some 

new mortgages are being issued.” 

Long term, the prospects for the real-estate and 

construction sectors are good. There is a very obvious need 

for more housing in Kazakhstan. In Almaty, living space per 

person is just 16 sq m, compared to 48 sq m in Western 

Europe. Across the country, much of the housing stock, 

inherited from the Soviet era, is outdated and in a poor state 

of repair. New investments are urgently needed to house a 

growing, and increasingly affluent, population. 

Part of the problem pre-crisis was that a lot of the 

projects were simply not realistic. Aimed at the small tranche 

of high-net-worth individuals, many of those that have been 

completed are still largely empty. However, there are 

exceptions, such as the AhselKent development on the 

outskirts of Almaty, which opened in 2010. 

At the other end of the spectrum, Capital Partners has 

continued to push ahead with landmark developments such as 

the Esentai Park mixed-use project and the infrastructure for 

the 2011 Asian Winter Games at the Shymbulak and Medeo 

winter sports resorts. Meanwhile, in the retail sector, Eurasia 

RED opened A’port, Central Asia’s largest mall, in Almaty in 

2009, and is planning a chain of malls across the country. 

The 2011 Asian Winter 

Games in Astana prompted 

new building investment 

There are hopes that post-crisis projects will be tailored 

to the needs of the population. Today, investors are much more 

cautious having had their fingers burned by Kazakh real estate 

once before. “Kazakh banks have been looking to re-enter the 

real estate sector, but only for intelligent schemes with the 

right end users,” says James Palmer, partner at global property 

consultant Veritas Brown Cushman & Wakefield. He forecasts 

that investment will increase significantly in 2011. 

Construction work has continued in Kazakhstan’s 

capital Astana. The most spectacular development in 

Astana is Khan Shatyr, a temperature-controlled biodome 

shaped like a massive tent, in which Astana residents can 

bask in summer temperatures – even when winter 

temperatures in the city plunge below minus 40°C. More 

prosaically, Astana has seen large-scale road rehabilitation, 

house and office building, new hotels and the construction 

of stadia for the Asian Winter Games. 

West Kazakhstan is also developing rapidly. The start 

of the next phase of the Kashagan project will see the influx 

of numerous workers this year. “We tend to look at west 

Kazakhstan as having more potential in the immediate future,” 

says Capital Partners managing director Matthew Bond. 

“We expect to see a rally in prices soon, especially as there 

is a shortage of high-quality residential space and class-A 

office space in both Atyrau and Aktau. The region has been 

largely immune to the crisis that affected the rest of the 

country since it is oil-focused.” � 


111

G4 City: better urban living 

to the power of four 

The Republic of Kazakhstan is a democratic, 

secular, rule-of-law and social state. According to 

the Constitution of the Republic of Kazakhstan, the 

fundamental principles governing the Republic’s 

activities are social accord, political stability, and 

economic development for the benefit of all. 

After 20 years of political independence, 

Kazakhstan has become a real independent 

state with a developed economy. Along with the 

social and economic achievements of the Republic 

of Kazakhstan over the last decade, thanks to 

the President of Kazakhstan, Nazarbayev N.A., 

the population group with income lower than 

the minimum cost of living has decreased by four 

times, while the average pension has increased 

by six times. Moreover, over this period, the volume 

of attracted foreign investments amounted 

to $122 billion, and one could observe a steady 

year-on-year economic growth at seven to eight 

percent on average, while the GDP has reached 

$9 per capita, with small and medium businesses 

accounting for at least 30 percent of this figure. 

Economic stability 

In 2009, in spite of the world financial and economic 

crisis, upward economic trends continued to be 

observed in Kazakhstan. From the very beginning, 

adequate measures were taken to stabilize the 

situation in different sectors of the economy. 

The year 2010 became a significant one for 

the Republic of Kazakhstan, as it became the first 

country from among the CIS countries to assume 

the duties of the Chairman of the Organization 

for Security and Cooperation in Europe, and the 

Customs Union between Russia, Kazakhstan and 

the Republic of Belarus was established. Also, 

importantly for the country, the State Program 

of the forced Industrial-Innovation Development 

was launched and, the following year, the 2011 

Asian Winter Games, Aziada, were held. 

Alongside improvement in the quality of life 

in Kazakhstan, one can observe a population 

upsurge, mainly in Almaty, the south capital 

of Kazakhstan. Almost every fifth resident of 

the Republic lives in the Almaty Region and 

the annual population growth rate in Almaty is 

2.2 percent, compared with a national average of 

0.8 percent. In Almaty, the problem of housing 

needs is especially acute, as the population is 

provided with housing at the level of 19.3 sq m 

per person. Overcrowded roads and a poor 

environment are also pressing problems. 

Modern cities for a growing population 

To tackle such problems, President Nazarbayev N.A. 

suggested to develop the satellite cities outside 

Almaty. On the basis of the President’s suggestion, 

it was decided to begin construction of the satellite 

cities of Almaty with the purpose of creating 

favorable living conditions for the population.

In recent years, the Akimat of the Almaty 

region, jointly and in cooperation with G4 City LLP, 

has been implementing the project of construction 

of four satellite-cities of Almaty in the Almaty 

region. For realization of the project, over the 

previous period $46 million was allocated from 

the State Budget, with an expected additional 

allocation of over $339 million. 

Integrated urban satellites 

Project G4 City is a development of four 

modern satellite cities, integrated into a single 

structure and satisfying all the requirements 

of a modern megalopolis, which will ensure 

steady growth for the next 40 years. At the 

start of 2008, for the purpose of project 

implementation, general plans of the cities were 

developed and approved by the Government of 

the Republic of Kazakhstan. 

The future satellite cities will make it possible 

to reach high living and well-being standards 

within a single urban infrastructure, facilitating 

social and economic development. The G4 

City concept provides for steady development 

by keeping a balance between the economic, 

social, environmental and dimensional spaces 

of the town’s growth. 

The satellite cities are unique due to the urban 

structure approach that is new to Kazakhstan – 

each of them has its own concept: 

The fi rst town, Gate City, is to be located 

the shortest distance from Almaty, and will 

include residential quarters and the business 

center at national and regional levels. In Gate 

City, more than 3.6 million sq m of comfortable 

residential premises will be constructed within 

a territory of 2,074.8 ha, and the population size 

will be about 130,000 people. 

The second town, Golden City, will be designed 

as a cultural, entertainment and education center 

of the Almaty region, located on territory of 

1,869 ha. New entertainment services and its 

proximity to Gate City and Almaty, as well as its 

location along the highway of Almaty-Kapshagai, 

will enable Golden City to attract visitors and 

guests and to become an entertainment center 

for the Almaty region. 

The third town, Growing City, will be a 

powerful and effi cient scientifi c, production and 

logistics center, covering a territory of 2,419.9 ha. 

Kazakhstan plans to further increase its transit 

potential because the Almaty Region is located 

on the trade artery between China and Russia, 

and Growing City will be positioned as an 

industrial and logistics center. To facilitate the 

logistics and trade operations in the future 

town, all its land will be allotted for a Free 

Economic Zone (FEZ). 

The fourth town, Green City, will be considered as 

a sport and recreation center, covering an area of 

1,144 ha, to be developed with due consideration 

for specifi c advantages of the beautiful shore of the 

Kapshagai water basin, which is a popular resort 

for people of Almaty and the whole region. 

Within the framework of the above plans, the 

General Project Designer, G4 City LLP, with the 

support of the Government of the Republic of 

Kazakhstan has recently completed a lot of work, 

such as topographic and geological engineering 

surveys, preparation of detailed and general 

plans of development for the four satellite 

towns, and approval of the Utility Networks 

Feasibility Study. Currently, within the framework 

of implementation of the project’s fi rst stage, the 

construction of approach roads and engineering 

infrastructure has started at the expense of the 

funds allocated from the state budget. 

Now the project’s fi rst stage – the “Koyankus” 

residential area, to be located in Gate City, which 

will lie 1.5km to the north of the Almaty border 

– is ready for development. On a plot measuring 

168.7 ha, a residential estate for 8,600 families 

will be constructed. Within fi ve years, it is planned 

to construct more than 605,000 sq m of residential 

real estate at the same site. 

New investment for further development 

Over three years, the G4 City Project has progressed 

from the creation of the concept of satellite towns 

to the commencement of construction of the 

engineering infrastructure. Today, G4 City LLP is 

holding negotiations with Kazakh and foreign 

investors concerning further development of 

the project. The total area of the four satellite 

cities will be 8,007 ha, where approximately 

13.4 million sq m of residential premises of 

different classes and categories and 5.1 million sq m 

of business premises will be constructed. 

The total amount of investment required 

for the project implementation will to $24 billion. 

The investments will include the resources 

allocated from the state budget, comprising 

26 percent of the expected total amount of 

investments, and private investments making 

up 74 percent of the above total amount. IRR on 

the project will make up 11 percent, including all 

the social facilities and utility networks. 

The project of construction of four satellite 

cities of Almaty is a unique idea that does not 

have any comparison either in Kazakhstan and 

central Asia. This project will play an important 

role in the development not only of the 

region, but also of the country as a whole. 

We are looking forward to partnership and 

cooperation with those who are as confi dent 

of future success as we are. 

Over a period of three years, the G4 City project 

has progressed from the creation of the concept 

of satellite towns to the commencement of 

construction of the engineering infrastructure 

The fi rst stage of the project includes construction 

of the gas supply networks and access roads 

050002, Republic of Kazakhstan, Almaty, 

50, Zhibek Zholy Str. 

Telephone: +7 727 273 85 11 

Fax: +7 727 273 16 73 

E-mail: info@g4city.kz 

Website: www.g4city.kz

114 


A new hub for road 

and rail transportation 

Kazakhstan stands at the 

crossroads of the Eurasian land 

mass, and is now promoting 

investment in its roads and rail 

to take advantage of its location. 

By Tim Gosling 

Standing at the crossroads of Asia, 

Russia, Europe and the Middle 

East, a revolution is under way in 

road and rail construction across 

the vastness of Kazakhstan. 

A modern highway linking China to Russia 

along the Caspian Sea and through to Europe 

mimics the energy infrastructure that is 

turning Kazakhstan into a linchpin of the 

region. New rail links to China and south 

through Turkmenistan to Iran connect with 

the Soviet-era north-south lines from central 

Asia to Moscow. 

All this pitches Kazakhstan at the center 

of trade ‘ley lines’ that stretch across the 

Eurasian land mass north to south and east to 

west. Essentially, there is no alternative for 

rapidly growing Asian exporters, such as 

China, to link to Russia and Europe across 

land, other than to pass through Kazakhstan. 

Starting in January 2013, Kazakh companies 

will be granted non-discriminatory access to 

rail routes in Russia and Belarus under the 

auspices of the Common Economic Space 

between the three. 

The country’s new and upgraded road 

and rail links will not only raise income from 

international transit traffic, but will also 


improve Kazakhstan’s internal links, which are 

needed to tie its rapidly developing economy 

together. The sheer size of this landlocked 

country – studded as it is with an uneven 

distribution of population clusters and natural 

resources – makes the transport sector a vital 

cog in the national economy. 

However, the country’s transport 

infrastructure – the majority inherited from 

the Soviet era – is in need of further 

investment to improve efficiency and reduce 

the burden of transportation costs on the 

economy, which at between eight and 11 

percent of the final cost of goods is around 

double the European Union (EU) average. 

Alongside other CIS countries, Kazakhstan 

hopes to attract a significant slice of cargo 

transit between the EU and Asia, a market 

worth in excess of $600 billion per year, 

according to the International Monetary Fund. 

A decade of transport investment 

The strategy for development of Kazakhstan’s 

transport infrastructure is set out by a 

government program approved in 2006: the 

Strategy of Transport Sector Development to 

2015. The program calls for investment of 

$26 billion across its 10-year span. 

Implementation of the program is 

expected to upgrade the regional networks, 

bringing Kazakhstan’s national transport 

system in compliance with worldwide 

standards. The plan is to boost the level 

of transit traffic across the country and, 

thereby, increase both the central government 

budget and transport company revenues.


Essentially, there is no alternative for rapidly 

growing Asian exporters to link to Russia 

and Europe across land, other than to pass 

through Kazakhstan 

Kazakhstan’s upgraded road and rail links will not 

only raise income from international transit traffic, 

but will also improve Kazakhstan’s internal links 


115

116 


The strategy covers road, rail, air and water carriage, as 

well as urban passenger transport, and provides for upgrades 

and new projects, as well as the renewal of all transport fleets. 

Investment 

The transportation and telecommunications sectors will need 

to grow in order to accommodate the needs of other industries. 

Growth here is likely to attract further investment in other 

sectors as these infrastructure changes improve the overall 

business climate. Although Kazakhstan has a basic 

transportation network and skilled labor force, investment 

will be required in the years ahead. Requirements for 

infrastructural investment through 2030 are expected to total 

more than $25 billion – and, of this, 40 percent will be needed 

for railway transportation, 23 percent for highways and motor 

transport, and 12 percent for air and water transport systems. 

Driving transport infrastructure investment 

With the transport sector a top priority, the government has 

been working on legislation, conditions and institutions to 

provide incentives for long-term investment. 

The concessions system in Kazakhstan has gradually 

been developed since the fundamental legislation was adopted 

in 2006, the first project being the Shar-Oskemen line that 

opened in December 2008. 

The government has learned lessons from an attempt to 

launch public-private partnership projects on four new roads in 

2009 – which fell through due to the financial crisis – and has 

been working for several years to get the legal framework right. 

It has set up the Kazakhstan Public-Private Partnership Center 

and developed a concept through to 2020, which will include 

a list of all projects to be put out to tender. Legislation now 

allows the government to offer guarantees, not only for 

infrastructure bonds and loans, but also on consumption of a 

percentage of the service provided by concessionaires. 

Major investment projects under way include: 

• The World Bank has committed $2.1 billion to building 

the 1,062km Kazakh stretch of an International Transit 

Corridor linking Western Europe to China. 

• In February, China signed up to construct a 1,000km 

high-speed rail line which will see trains carry around 

five million passengers per year between the capital 

Astana and economic center Almaty at speeds of up 

to 350km/h. The project, which China’s vice premier 

labeled “a new highlight of cooperation” is forecast 

to be completed by 2015. 


• In October 2010, a joint venture between 

France’s Alstrom and Russia’s Transmasholding 

won an order worth $1.3 billion from national 

rail company Kazakhstan Temir Zholy to supply 

295 new locomotives. 

Rail 

Railway services provide up to 70 percent of cargo and 

50 percent of passenger turnover in Kazakhstan. The 

total length of railway track in the country exceeds 

14,000km and connects all regions, as well as providing 

a backbone for international transportation services via 

three main routes: 

• The 1,507km Trans-Kazakhstan Railway runs from 

Petropavlovsk on the Trans-Siberian Railway through 

Kokchetav, Astana and Solonichki to the Karaganda 

coalfield. This was later extended to Chu, on the 

Turkestan-Siberian route, and Lugovoy where it 

connects with lines into Kyrgyzia and Uzbekistan. 

• The Turkestan-Siberian route runs 1,445km and 

forms part of a route from Beijing to Russia. This, 

the Trans-Asian route, provides a Japan-Western 

Europe link that is claimed to be 2,500km shorter 

than the Trans-Siberian route. 

• A third main line links Tashkent in Uzbekistan, with 

Orenburg in Russia, via Aralsk, Kandagach and 

Aktyubinsk, a distance of 1,854km. 

Roads 

Much of the road network in Kazakhstan was constructed during 

the Soviet era and has deteriorated since then, due to lack of 

adequate maintenance. Half of the roads in the country’s 

network need major maintenance or full rehabilitation. 

There are close to 89,000km of road in Kazakhstan, 

13,000km of which link to international routes in Asia and 

Europe. In terms of highway construction, it is these 

international connections that are the major focus, as the 

country looks to increase its role in transit between China, 

Russia and Western Europe. 

Under the South-West Roads Project, a $2.1 billion 

World Bank loan will go towards building and upgrading 

2,800km of Kazakh roads linking China (at Khorgos) to 

Russia (at Zhaisan). The government plans to spend a total 

of $7.5 billion to tie Kazakh routes into the International 

Transit Corridor linking China to Russia and on to Western 

Europe. The World Bank predicts that the project will “give 

a major stimulus to the Kazakh economy.” �

118 


Getting there 

The capital, Astana, is home to one of Kazakhstan’s two 

modern international airports. The country has seen a 

steady rise in international airlines serving the country, 

while the national carrier, Air Astana, has expanded rapidly 


New and enhanced air, road and rail 

facilities are helping to put Kazakhstan on 

the map in terms of international transport. 


Kazakhstan’s geographical location at the heart 

of the Eurasian land mass not only puts it in 

prime position to serve as a road and rail hub – 

it also makes it a perfect gateway for air travel, 

and investment in airports and associated 

infrastructure is starting to make this a reality. 

Kazakhstan has witnessed a steady increase in 

international airlines serving the country, while national 

carrier Air Astana has rapidly expanded since its launch in 

2002. A joint venture between Kazakhstan’s national welfare 

fund Samruk-Kazyna and BAE, Air Astana announced in 

November 2010 that it would spend $500 million on 

expansion of its fleet of aircraft by 2015. 

In April 2011, the airline took delivery of its first 

Embraer 190. There are also plans to purchase six Airbus 

A320 aircraft at a total cost of $250 million, Air Astana 

president Peter Foster announced. 

Between November 2010 and June 2011, Air Astana 

added seven new international routes to its network. The 

airline now operates flights from Almaty to new destinations 

including Dushanbe and Tashkent in Central Asia, the Georgian 

capital Tbilisi, and Samara in southern Russia. Launching the 

services is part of Air Astana’s strategic plan to significantly 

expand its Central Asia network, the airline said in a statement. 

It already serves Bishkek, Urumchi in western China, several 

Russian cities, and destinations in Europe and the Far East. 

Air Astana is the only Kazakhstan-registered airline 

authorised to fly to the European Union, as all other 

Kazakhstan-registered airlines are on the EU’s air safety 

blacklist. However, Kazakh authorities are currently in 

negotiations with the European Commission over this matter. 

International airlines such as KLM, Lufthansa and 

Turkish Airlines have long been present in the Kazakh market. 

But there have been more recent arrivals, including UAE-based 

Etihad Airways, which launched its first flight from Abu Dhabi 

to Almaty in December 2008, and others are expected to 

follow. On a visit to Astana in June 2011, Malaysia’s foreign 

minister Datuk Seri Anifah Aman indicated that a Malaysian 

airline – possibly Malaysia Airlines or AirAsia – might start 

operating flights between the two countries. The Almaty-Kuala 

Lumpur route is currently served by Air Astana. 


There are also high hopes in Astana that Kazakhstan 

could become an air freight logistics hub. Fedex and other 

freight companies increasingly use Kazakh airports for 

refueling and distribution within the region. However, 

Kazakhstan faces competition, as both Russia and 

Uzbekistan also want to establish their own Eurasian 

logistics hubs, based around the airports of Krasnodor 

and Navoi respectively. 

Kazakhstan already has modern international airports 

at its capital Astana and at Almaty, the country’s largest city 

and commercial centre. Air infrastructure is also being 

upgraded – air navigation service provider Kazaeronavigatsia 

is investing in new technology. 

The agency has signed a series of contracts with 

Lockheed Martin for air traffic control equipment and services. 

Most recently, in October 2010, Kazaeronavigatsia signed a 

$49.9 million deal with the US-based security firm to create 

Kazakhstan’s first national air traffic management system. 

For international business travelers, entry to Kazakhstan 

is usually by air. However, great efforts are being made to 

upgrade international road and rail links for freight transport, 

with the rebuilding of a modern version of the ancient Silk 

Road between Asia and Europe. 

The Kazakhstan section of the Western Europe-Western 

China international transit corridor is 2,715km long, and runs 

from the Russian border in the north west to the Chinese 

border in the southeast. Funds for the project are being 

provided by international financial organizations, including the 

Asian Development Bank and the World Bank. 

Meanwhile, Kazakhstan’s national rail company, 

Kazakhstan Temir Zholy, has launched an overhaul of the 

country’s railway network and rolling stock, intended to speed 

up transport within the country and facilitate international 

transit. The current most important international project is the 

construction of the Kazakhstan-Turkmenistan-Iran railway. The 

Kazakhstani section of the line will run from the oil town of 

Uzen in the western Mangystau region to the Turkmen border. 

Opening the line will cut the travel distance between 

Central Asia and the Persian Gulf by more than 360 miles, 

creating huge opportunities for the three countries and others 

in the region, Kazakhstan’s ambassador to Iran, Bagdat 

Amreev, told the Kazakhstan Islamic Finance 2011 

conference. The line “will significantly change the situation for 

trade and economic cooperation in the region”, said Amreev. 

Not only is new infrastructure being built, but there are 

also investments in locomotive and rolling-stock production, 

and in new vehicle-manufacturing capacity. In Astana, a cluster 


119

120 


Kazakhstan develops into China-to-Europe transit hub 


Airports: 97(2010) 

Country comparison with the rest of the world: 62nd 

Heliports: 3 (2010) 

Airports – with paved runways: 65 

More than 

3,047m 

10 

Pipelines: 

Condensate 

658km 

2,438 to 

3,047m 

26 

Railways: 15,082km 

Country comparison with the rest of the world: 19th 

Broad-gauge: 15,082km, 1,520mm gauge 

(3,700km electrified) (2008) 

Roads: 93,612km 

Country comparison with the rest of the world: 50th 

Paved 

84,100km 

1,524 to 

2,437m 

16 

914 to 

1,523m 

5 

Gas 

11,146km 

Unpaved 

9,512km 

(2008) 

Less than 

914m 

8 

(2010) 

of rail-related factories has grown up, with investments 

from international manufacturing companies Alstom, GE 

Transportation and Talgo. 

Demand for cars is also growing, following Kazakhstan’s 

emergence from the global economic crisis. In the car market, 

Asia Avto, operator of Kazakhstan’s largest car assembly plant, 

Airports – with unpaved runways: 32 

More than 

3,047m 

5 

2,438 to 

3,047m 

6 

Ports and terminals: 

Aqtau, Atyrau, Oskemen, Pavlodar, Semey 

Waterways: 

4,000km; on the Ertis River (80 percent) and 

Syr Darya River (2010). Country comparison 

with the rest of the world: 26th 

1,524 to 

2,437m 

3 

914 to 

1,523m 

5 

Oil 

10,376km 

Merchant marine ships: 8 

Country comparison with the 

rest of the world: 123rd 

Less than 

914m 

13 

(2010) 

Refined products 

1,095km 

(2009) 

By type: 

petroleum tanker: 6 

refrigerated cargo: 1 

specialized tanker: 1 

Foreign-owned: 

1 (Ireland) (2010) 

announced in April 2011 that it had achieved an increase of 

more than sixfold in production during the first quarter of 

2011, compared with the same period in 2010. Russia’s 

Sollers signed an agreement to set up an assembly plant in 

Karaganda in 2010, and plans to start producing SUVs (sport 

utility vehicles) in the second half of this year. �

Rail reforms will 

support diversification 

In an echo of the Industrial Revolution in 

western Europe, the resurgence of 

Kazakhastan’s railway system promises to be 

a catalyst for future growth. 

On June 5, 2010, the mayor of Kokshetau 

proudly cut the ribbon on a new high-speed rail 

connection linking his town with the capital 

Astana. The new link is the third high-speed 

rail service running the Spanish-made Talgo 

trains that cut the journey time in half and effectively shrink 

the country for much of the population. 

Of all the efforts to diversify the economy, modernizing 

the rail system is arguably the most advanced. Talgo Passenger 

trains already link Astana to Almaty and Shymkent as part of 

the state’s program to build a high-speed rail network that will 

eventually link up with destinations in surrounding countries. 


Almaty station. High-speed Alstom trains will 

reduce journey times to Astana by three hours 

The high-speed rail links are only the tip of the iceberg 

of a reform program that will transform Kazakhstan’s rail 

infrastructure. The Kazakh government is promoting the 

development of a domestic railway supply industry, and the 

national rail company Kazakhstan Temir Zholy (KTZ) has 

signed agreements with major foreign suppliers, including 

Alstom, Finmeccanica, Transmash and GE Transportation. 

Kazakhstan is the size of Western Europe and its rail 

network is the lifeblood of the country. With more than 

15,000kms of track, Kazakhstan has the 19th largest rail 

system in the world. But thousands of kilometers of new 

rail lines are needed, and obsolete Soviet-era locomotives 

and wagons are in need of replacement. 

In the days of the Soviet Union, Kazakhstan imported 

its rail network equipment from Russia. Now it will build its 

own, in a prime example of diversification. A string of deals 

has already been put in place, to add to the country's 

heavy-engineering sector. 


121

122 


The first new plant to assemble powerful General 

Electric (GE) designed American diesel-electric locomotives 

and shunting engines has already opened in Astana. During 

French president Nicholas Sarkozy’s official visit in 2010, 

the French high-speed rail specialist Alstom signed off on a 

$1.8 billion deal to build 300 electric freight locomotives in 

cooperation with Russia’s Transmashholding. 

Talgo says that the KTZ contract is part of an export 

strategy focused on tapping demand for “high-speed and 

high-performance” trains in Central Asia, India, China, 

the Middle East and US. 

GE’s close relationship with Kazakhstan 

GE Transportation has been working with the Kazakh 

government for more than 15 years. The US company started 

its operations in 2009 with a deal to supply more than 

400 locomotive kits to extend the working life of Kazakh 

rolling stock. Over the years, the relationship between the 

company and the government has grown ever closer and 

culminated in April 2010, when GE signed a memorandum 

of understanding (MoU) with the Kazakh state-owned JSC 

Locomotiv and Kurastyru Zaut to develop 1,520mm-gauge 

diesel-electric shunting locomotives for use in Kazakhstan. 

The MoU was a major deal that will create the basis to 

modernize the entire sector. Under the agreement, the joint 

venture will initially build 150 locomotives, of which the first 

five are to be manufactured at GE’s Erie plant in the US and 

will be ready for delivery in 2012. 

Then, after a period of testing, the remainder will be 

assembled from US-supplied kits at the Astana locomotive 

plant, which was opened by Kazakh president Nursultan 

Nazarbayev in July 2010 and rolled out its first locally built 

Evolution Series locomotive in December of the same year. 

“I am extremely pleased to mark another milestone in 

GE’s and Kazakhstan’s long and fruitful history of working 

together,” said Lorenzo Simonelli, president and CEO of 

GE Transportation, following the signing of the MoU. “The 

current collaboration to design and deliver shunter locomotives 

specifically designed for the Republic of Kazakhstan and 

the 1,520mm region is a great example of how globalization 

has opened up growth opportunities for GE.” 

The deal with the Americans was quickly followed by 

another agreement with French high-speed-train manufacturer 

Alstom. In October 2010, KTZ, Alstom and Russian 

engineering firm Transmashholding (TMH) set up a joint 

venture for the supply of295 electric locomotives to the 

Kazakh railway company. 


Kazakhstan’s relations with France have been improving 

steadily, and the $1.8 billion deal followed President Sarkozy's 

visit to Astana in 2010. The agreement was signed in Paris in 

the presence of the French president and his Kazakh 

counterpart, President Nazarbayev. 

The contract took effect in March 2011, and is the 

first to be won outside Russia by Alstom and Transmashholding 

as part of the strategic partnership initiated by the two 

companies in 2009. 

In all, a total of 200 double freight and 95 passenger 

locomotives have been ordered, both of which will incorporate 

Alstom’s modern technology. The double freight locomotives 

are among the most powerful in the world, with the ability to 

tow up to 9,000 tonnes, and to run at speeds of up to 

120km/h. The passenger locomotives are capable of running 

at speeds of 200km/hour, which will reduce the journey time 

between Almaty and Astana by three hours. 

Alstom’s Belfort plant will deliver the first freight 

locomotives in 2012, and the first passenger locomotives are 

slated for delivery in 2014. The remainder will then be built in 

Astana at a factory that is currently under construction and 

due to be completed in 2012, before reaching its annual 

production capacity of 50 double sections in 2016. 

Talgo production and export 

As well as conventional locomotives, Kazakhstan has also 

started producing the Spanish Talgo high-speed trains, 

both for use on its own network and for export across the 

rest of the region. 

The first Talgo train assembled at the Astana plant will 

roll out of the shed this year, after an MoU was signed in 

June 2010 to form a joint venture between KTZ and Talgo. 

Talgo announced an order to supply KTZ with 420 

coaches on November 11, 2010 as part of the agreement, 

that could see the national railway’s fleet of 3,000 inter-city 

vehicles replaced. The initial contract is worth more than 

$430 million for the Spanish firm, with further revenue 

expected from maintenance services and subsequent orders. 

The first coaches will be built in Spain until 

production moves to a factory in Astana, which is due to 

be completed in 2011 by the Tulpar Talgo joint venture 

between Talgo and KTZ. 

Askar Mamin, director of KTZ, said at the signing 

ceremony: “We have started to build an assembly plant with 

the Spanish company Talgo, which will produce 150 coaches 

per year. The total length of the high-speed rail network will 

grow from the current 1,300km to 2,700km in 2015.” �

Bright future, growing partnership 

As Kazakhstan celebrates the 20th 

anniversary of its independence there are 

many reasons for optimism. Not only does 

the Republic have vast natural resources, 

it has also been able to manage these 

intelligently, successfully attracting foreign 

investment without sacrificing ownership 

of key assets, and achieving sound 

economic management. The new Almaty 

Regional Financial Center provides a firm 

foundation for the future. 

The bright outlook is supported by 

Kazakhstan’s resilience during the recent 

global financial crisis. Unlike many economies, 

Kazakhstan’s GDP grew during 2008, 2009 and 

2010. We forecast strong, sustainable growth 

of 6-7% for 2011 and 2012, supported by 

robust exports and investments in infrastructure 

from abroad. 

Annual GDP growth in Kazakhstan 

16 

14 

12 

10 

8 

6 

4 

2 

* latest government estimate 

0 

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011* 2012* 

Real GDP growth (%) 

Increasingly attractive to 

foreign investors 

Such investment is possible thanks to 

Kazakhstan’s outward-looking attitude, clearly 

shown by the Republic’s warm relationship with 

China, which has loaned it over USD 14.5 billion 

for infrastructure projects in natural resources 

industries. That these loans have very low 

interest rates, with no ownership stakes in 

assets, is a great achievement. 

During President Nursultan Nazarbayev’s 

meeting with Chinese President Hu Jintao 

in June 2010, the two sides reaffirmed their 

2007 agreement to promote cooperation in 

non-resource sectors as well, and agreed to 

enhance bilateral cooperation in machinery 

manufacturing, transport infrastructure, power 

plant construction, pharmaceutical industries 

and other fields. They also agreed on the 

construction and long-term, stable operation 

of major cooperation projects, including the 

China-Kazakhstan gas and oil pipelines. 

But while China takes the majority of Kazakh 

oil exports by final destination, the sector’s 

capacity is well distributed: around 32.3% are 

local companies, 29.4% American, 8.52% 

European, 8.52% Russian, and 20.7% Chinese. 

Kazakhstan’s gas sector also attracts 

investment. The Republic has proven reserves 

of 1% of the world’s natural gas, and is ideally 

situated to transport gas from producers in 

Central Asia to Europe. With global demand for 

gas rising, the sector will continue to expand. 

Annual natural gas production in Kazakhstan 

40 

35 

30 

25 

20 

15 

10 

5 

0 

2002 2003 2004 2005 2006 2007 2008 2009 2010 

Gas production, bn cbm Gas consumption, bn cbm 

Uranium is also important. Kazakhstan’s 

reserves are around 15% of the global total; it 

is the world’s largest uranium producer. There 

are 21 uranium fields in development, and 

with projections of a 30% increase in global 

demand for nuclear fuel by 2020, Kazakhstan’s 

uranium industry should continue to grow. As 

with gas and oil, the industry’s ability to attract 

international investment makes it a major 

contributor to the nation’s economy. 

Kazakhstan’s economic growth will clearly be 

powered by its relationships around the world. 

This is exactly where UBS, which combines 

global reach with profound knowledge, can 

help. In recent years, we have guided many 

Kazakh companies in the global capital markets, 

raising billions in both equity and debt. 

UBS is a trusted partner in the 

international capital markets 

One example is our advisory role in the 

landmark USD 16.7 billion debt restructuring 

for BTA Bank. Our strength in the debt capital 

markets is demonstrated by our trading of 

almost USD 5.5 billion in Kazakh Eurobonds in 

the twelve months to August 2010. And our 

ability to help Kazakh companies reach global 

equity investors is illustrated by the London 

IPOs of Alliance Bank (in 2007, worth USD 704 

million) and Kazkommertsbank (in 2006, worth 

USD 846 million). 

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Banks global initiative. We remain committed 

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UBS congratulates Kazakhstan on its 

transformation to a thriving market economy 

in the 20 years since independence, and looks 

forward to helping it realize even greater 

potential in the next 20 years and beyond. 

ab 

UBS is a premier global financial firm offering wealth management, asset management and investment banking services from its headquarters in Switzerland and its authorised 

operations in over 50 countries worldwide to individual, corporate and institutional investors. UBS is not authorised to offer wealth management, asset management and investment 

banking services in Kazakhstan. UBS services are governed by non-Kazakhan law. © UBS 2011. All rights reserved.

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126 

BAnKIng And fInAnce 

Breaking the mold 

Kazakhstan’s stance following the global 

economic downturn not only kept it in 

good stead in the long term, it could 

provide a template for other economies. 

By Marcia Favale-Tarter 

The 2007 financial crisis was a challenge for 

Kazakhstan. The easy money conditions of the past 

evaporated, as the global credit crunch that 

followed the Lehman Brothers collapse caused 

liquidity shortages that – combined with 

deteriorating banking-sector asset quality – caused balance- 

sheet pressures and reduced credit-intermediation activities. 

Kazakhstan was also dealing with pressure on its international 

reserves, given the neighboring currency devaluations. The 

needed devaluation of the tenge currency further pressured the 

balance sheets of the banking sector that relied on international 

capital markets for a substantial part of its funding. 

Kazakhstan was proactive in response to the financial 

crisis. On October 23, 2008, the government passed the 

Financial Stabilization Law to support the stability and 

resilience of the financial system, and strengthened the 

powers of the financial authority. In addition, an 

Anti-Crisis Plan ($10 billion) was devised and adopted 

to support the financial sector, SME, real-estate market, 

agriculture and industrial-infrastructure sector. 

In February 2009, it was clear that Alliance Bank and 

BTA Bank would be unable to meet regulatory requirements. 

At that point, Samruk-Kazyna – acting according to the new 

law – took over control of these two entities to prevent a 

disorderly collapse of these banks. Samruk-Kazyna also 

acted to support KKB Bank and Halyk Bank. Liquidity – 

through a mixture of capital injections, debt, and the 

channeling of state-owned enterprise deposits – was directed 

into the operations of these banks, allowing them to continue 

to perform routine liquidity transactions. 

The restructuring of the Kazakh bank had four pillars: 

liquidity support, preservation of the sovereign’s fiscal profile, 


curtailment of moral hazard, and improvements in corporate 

governance. In addition – and a driver of value given the 

alleged fraud – asset recovery was enveloped into the 

restructuring strategies of Alliance and BTA Bank. As a 

result, asset-recovery notes were issued that allow, among 

other things, for the banks and creditors to benefit from a 

successful asset-recovery process. 

Kazakhstan did not set out to create a global 

benchmark when it undertook its bank restructuring. However, 

its success is being analyzed as a possible framework for 

other restructuring cases, which raises the question of 

transferability of the Kazakhstan model. 

What makes the Kazakh bank restructurings of note is 

that most European banks that have restructured favored a 

sovereign bailout. As a consequence, sovereigns have been 

laden with debt, and have had to implement unpopular 

austerity programs. Instead of following this model, in 

February 2009 the Kazakh government took a decisive step 

in restructuring its banks. Kazakhstan rejected the bailout 

strategy, and also rejected a ‘bad bank-good bank’ 

framework. Instead, it imposed a burden-sharing and a 

‘true trade finance’ approach. Of the $15.74 billion in 

recapitalization needs, $10.22 billion was the total 

creditor support exacted through debt reduction (also 

known as ‘haircuts’). 

As part of the restructuring package, creditors were 

offered, according to their asset class, a mixture of cash, 

debt, equity and asset-recovery notes – and Samruk-Kazyna 

maintained majority ownership of each bank. What remains 

to close the restructuring chapter is for the three banks to be 

sold either through a strategic sale or through a capital market 

transaction, or a combination of both. 

As a result of the successful implementation of the 

burden-sharing restructuring strategy, Kazakhstan avoided 

the ‘beggar-thy-neighbor’ situation that often favors creditors 

to the detriment of expansionary fiscal policies. Given the 

burden-sharing approach, debt holders became partners in 

the process of recapitalizing the banks. This allowed funds 

to be channeled to the more productive activity of providing

Grigori Marchenko, Governor of the National Bank of Kazakhstan 

In 2010, the economy of the 

Republic of Kazakhstan 

demonstrated quite high 

development rates. According to 

estimates, the real GDP growth in 

2010 was seven percent. Industry 

grew by 10 percent, transport by 

13.1 percent, domestic trade by 

12.3 percent, communications by 

5percent, foreign trade by 

24.3percent and construction by 

one percent. The unemployment 

rate fell from 6.3 percent in 

January 2010 to 5.5 percent in 

December 2010. 

The main objective of the 

National Bank of Kazakhstan in 

2011 is price stability in the 

country. It is determined to ensure 

this, aiming to keep inflation within 

the range of six to eight percent by 

the end of the year. 

The fundamental factor 

underlying inflation in 2011 is an 

imbalance of supply and demand in 

the economy. The influence of 

monetary factors is minimal. 

From February 28, 2011 the 

National Bank moved to the 

managed floating exchange rate 

regime. This is stipulated by 

domestic currency stability, 

promoted by a favorable pricing 

environment for major items of 

Kazakhstan’s exports in the global 

markets and the balance of 

payments position. 

However, the transition to the 

managed floating exchange rate 

regime doesn’t release the National 

Bank from its responsibility to 

maintain domestic currency 

stability. Measures by the National 

Bank will focus on preventing 

significant fluctuations in the real 

exchange rate of the domestic 

currency, that might have a 

negative impact on the 

competitiveness of domestic 

production in an ever-changing 

global environment. The National 

Bank will look to further reduce its 

involvement in the foreign 

exchange market, in order to 

increase the flexibility of the tenge 

exchange rate. 

Despite the minimum effect of 

monetary factors on inflation, the 

National Bank pays special 

attention to an anti-inflationary 

policy, implemented jointly with 

the Government and local 

executive bodies. 

The National Bank regularly 

monitors and analyzes the 

dynamics of change in money 

supply in the economy. With the 

help of its instruments and 

liquidity to the banks, allowing for operations to be maintained 

without impairing the sovereign. 

The strategy is deemed successful, not only for alleviating 

sovereign fiscal pressures and hard-currency external liabilities 

in the system, but because it also addressed balance-sheet 

weakness. Furthermore, moral hazard was mitigated and 

corporate governance improved, as charters were modified and 

board membership granted, and supervisory committees 

operations, the National Bank can 

quite rapidly influence the situation 

in the money market and, in the 

case of necessity, increase its 

operations to absorb excess 

liquidity from the economy. 

Against the background of 

strengthening inflationary 

pressures in 2011, the National 

Bank began to take measures to 

tighten monetary policy. In March 

2011, the official refinancing rate 

of the bank was increased to 7.5%. 

In May, the National Bank 

increased the reserve 

requirements on both local and 

other liabilities, to 2.5 percent and 

4.5 percent, respectively. 

Fulfilling the function of 

ensuring financial stability, the 

National Bank in 2010 developed 

the concept of financial sector 

development in the post-crisis 

period. Thereafter, the role of the 

National Bank in providing the 

financial stability will rise. 

The main purposes of financial 

sector development in the 

post-crisis period are: 

• providing stability for the 

financial sector; 

• creating the conditions 

to prevent the effects of 

the instability factors and 


negative events that were 

detected during the current 

financial crisis; 

stimulation of investment 

activity in the post-crisis 

period; and 

restoration of trust and 

confidence in the financial 

sector in both investors and 

consumers of financial 

services. 

strengthened. Although investors initially threatened Kazakhstan 

with closed international capital markets and a ‘pariah-state’ 

status, the restructuring strategy received more than 90 percent 

creditor approval for each of the three banks, and Kazakh 

issuers such as Halyk Bank, Kazatomprom and KMG have 

received a warm welcome from international investors. 

The restructuring success is attributed to a series of 

decisive steps taken by the government. While devising its 

• 

• 

Work will continue on developing a 

modern, stable and competitive 

financial system for sovereign 

Kazakhstan. 

The realization of planned 

measures will attract financial 

resources for further economic 

development of the country, 

establish conditions for stable 

development of the financial 

sector, and restore confidence. 


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128 


own restructuring strategy, the government was committed to 

a fair and transparent restructuring process. Early on, 

independent advisors were hired to provide unbiased 

restructuring and asset-recovery advice that served to form 

the restructuring strategy and framework, which was a 

burden-sharing approach that rejected guarantees or bailouts. 

To ensure that the execution process adhered to market 

best practice, teams of financial and legal advisors were 

assembled. For process transparency, a ‘cram-down’ law 

was passed that adhered to the United Nations Commission 

of International Trade Law framework and has been 

subsequently recognized, on a case-by-case basis, in the 

United States and United Kingdom. 

As part of the process, no bilateral agreements were 

entered, and all creditors were treated equitably and fairly 

within their asset classes. Essential to the process, and an 

Kazakhstan did not set out to create 

a global benchmark with its bank 

restructuring. However, its success is 

being analyzed as a possible 

framework for other cases 

imposition from Kazakhstan, was the active participation of 

the debt-holders through a steering committee process 

representing all categories of creditors. 

Engaging creditors as partners was an essential and 

fundamental part of the successful restructuring process. Not 

only did the steering committee process arrive at a consensual 

agreement, but also it maintained the creditors as partners in 

the banks’ futures through their exposure to debt and equity, 

and board-member representation. By actively encouraging 

investors to remain invested in the banks, corporate governance 

improved through charter enhancements, board representation 

and committee supervision. 

During the Kazakh restructuring, Alliance Bank and 

BTA Bank working with the relevant members of the Steering 

Committee of Creditors, created specific eligibility criteria for 

the election of ‘true trade finance’ debt from the total trade 

finance stock. Documentation underlying trade-related 


transactions had to be proven in order to qualify as trade 

finance debt. Where there were no specific underlying import 

or export trade transactions, these were excluded from the 

trade finance debt portfolio. 

To ensure a transparent process, Alliance Bank and BTA 

Bank appointed an Independent Adjudicator to adjudicate 

trade finance claims. The result was that Alliance Bank, 

which had an initial $293 million of claims, after the 

adjudication process saw its trade claims confirmed at 

$97 million to be repaid over a 12-month period. In BTA 

Bank’s case, of the nearly $3 billion of trade finance claims, 

$1.1 billion private-sector trade claims were confirmed. Of 

the adjudicated amount, $700 million is to be repaid over a 

36-month period, without a haircut, and $400 million in 

private-sector trade claims is restructured pari passu with 

other senior claims. 

As mentioned earlier, Kazakhstan’s 

successful restructuring is being analyzed 

as a possible framework for other 

restructuring cases, which raises the 

question of transferability of this 

restructuring model. To address this 

question, one must consider the peculiarities 

of each country, such as the size of the 

banking sector, contagion risks and even the 

political construct. The latter was one of the 

main strengths benefiting the process. 

A key to the Kazakh restructuring 

success was its unwavering commitment to 

a sensible restructuring strategy and 

the commitment to a transparent restructuring process 

that adhered to best market practices. The restructuring 

strategy was a domestic-led effort, rather than an 

international imposition, that relied on the strength and 

vision of Prime Minister Karim Massimov, the support 

from Samruk-Kazyna and the Financial Supervising Agency, 

and the expertise and reputation of the National Bank 

Governor Grigori Marchenko. � 

Marcia Favale-Tarter has nearly two decades of emerging market 

finance experience. Through her company, M Favale-Tarter LLC, 

she was an independent advisor to BTA Bank and Alliance Bank, 

and currently advises Astana Finance, a subsidiary of 

Samruk-Kazyna. 

Ms Favale-Tarter is a senior advisor to the Prime Minister 

of Kazakhstan, responsible for matters relating to the financial 

sector and debt restructuring.

Foreign banks poised 

for the upturn 

In the Central and East European 

banking market, foreign ownership is 

as high as 90 percent in some cases 

bAnKIng And fInAnce 

Not restricted by national protectionism, 

Kazakhstan’s banking sector looks to benefit 

from the flurry of interest from the international 

community. By Clare Nuttall 

Kazakhstan’s banking sector is still mainly 

under domestic ownership, but foreign 

investment in the sector has been creeping 

slowly upwards year by year. 

International players including HSBC, 

Citibank and Russia’s Alfa Bank have had a presence in 

Kazakhstan for a decade. In recent years, banks from a 

growing range of locations including Russia, China, Western 

Europe, the Middle East and East Asia have entered the 

market. Newcomers to the market include Russia’s VTB, 

Sberbank and United Arab Emirates (UAE)-based Al Hilal. 

Kazakhstan’s expanding trade and investment network is also 

attracting investment banks from London, New York and the 

European Union. However, until recently, the market share of 

foreign banks has remained relatively small, unlike in the 

Central and East European banking market where foreign 

ownership is as high as 90 percent in some cases. 

Foreign ownership in the Kazakh banking sector took a 

leap forward in June 2007, when Italy’s Unicredit Bank agreed 

to buy a majority stake in Kazakhstan’s fifth largest bank, ATF 

Bank. The deal valued the bank at $2.18 billion. A few 

months after the Unicredit deal, South Korea’s Kookmin Bank 

acquired a 30 percent stake in BankCenterCredit in a 

$623 million deal agreed in March 2008. Kookmin, which 

said it had made the investment to get a foothold in the CIS 

market, later increased its stake to 42 percent in early 2010. 

The International Finance Corporation, part of the World Bank 

Group, took a 10 percent stake in the bank at the same time. 


129

130 

bAnKIng And fInAnce 

New entrants are coming from different parts of the globe. 

India’s Punjab National Bank plans to expand its operations 

Both Unicredit and Kookmin have endured a rocky ride 

in the Kazakh market, since they bought in immediately before 

the crisis. The deal was a less-than-brilliant one for Unicredit. 

Three years after making the investment into ATF, Unicredit 

announced in August 2010 that it had written down the value 

of ATF Bank by €162 million. This followed a write-down of 

€417 million in the third quarter of 2009. Unicredit also 

reported an unexpected 70 percent drop in net profits in the 

second quarter of 2010, partly due to the write-down. 

However, both banks have steered their Kazakh 

acquisitions through a difficult three years, and are now 

hoping to benefit from their presence in one of the CIS’s 

largest and fastest-growing economies. 

Meanwhile, HSBC has been ramping up its presence in 

Kazakhstan. HSBC Bank Kazakhstan agreed to buy Royal Bank 

of Scotland’s retail business in the country. The British bank, 

which was nationalized during the crisis, had been seeking to 

divest assets in countries – including Kazakhstan, Russia 

and Romania – to focus on its core business. The $52 million 

deal delivered RBS Kazakhstan’s personal customer loan and 

credit card portfolios, four branches and 80 automated teller 

machines to HSBC. 

“This acquisition reflects HSBC’s positive view of 

Kazakhstan’s long-term prospects, not least because of its 

trade flows with China,” Simen Munter, HSBC’s CEO in 

Kazakhstan said at the time of the acquisition. “We 

have been in Kazakhstan for 12 years and today’s deal 

significantly increases our platform for growth by doubling 

our network and growing our customer base fivefold.” 

State Secretary Kanat 

Saudabayev and EIB 

President Philippe Maystadt 

sign a framework agreement 

in Brussels 


New entrants are also coming from different parts of the 

globe. The adoption of legislation on Islamic banking and 

finance in early 2009 opened the way for the UAE’s Al Hilal 

Bank to enter the market. The bank obtained its license in 

March 2010 and, depending on how successful it is, may be 

followed by other banks from the Islamic world. 

India’s largest state-owned bank, Punjab National Bank 

(PNB) – which has had a representative office in Kazakhstan 

for over a decade – took over Dana Bank in December 2010 

and now plans to expand its operations in the Kazakh market. 

PNB paid around $23.7 million for the 63.64 percent holding 

in Dana in December 2010. Dana is one of Kazakhstan’s 

smaller banks, with a business worth around $60 million. 

It currently has five branches. 

“In our view, the Kazakhstan economy is growing and 

improving day by day. The banking sector is out of the crisis 

and is now more stable than previously,” says Bhushan Bhatia, 

chief representative of PNB in Kazakhstan. “I believe there is 

a great future for trade between India and Kazakhstan. Indian 

businesses are very much interested in Central Asia, especially 

Kazakhstan. Investors have found Kazakhstan to be stable, 

growing and hospitable. Indian companies are ready to look at 

all sectors – not just oil and gas, but also sectors including 

agriculture and pharmaceuticals.” 

The biggest question today is whether BTA Bank – 

Kazakhstan’s largest bank by assets until its near collapse 

and nationalization in 2009 – will be sold to a foreign investor. 

A potential sale to Russia’s largest bank, Sberbank, has been 

under discussion since February 2009, although even with the 

restructuring of BTA’s debt completed, no deal has yet been 

announced. It is understood that the Kazakh government’s 

need to be seen to recoup the $6 billion it ploughed into BTA 

to shore it up in the crisis may mean the price tag for the bank 

is too high for Sberbank. 

If the deal does go ahead, it will signal a significant 

change in a market where Western banks have, until recently, 

been more warmly welcomed than Russian banks. Alfa and 

Sberbank are both long-established in Kazakhstan, but on a 

relatively small scale, even after Sberbank’s acquisition of Texaka 

Bank in 2006. VTB, Russia’s second largest bank, entered the 

market after finally receiving its license in May 2009. �

Support from the top for 

Islamic finance market 

In its quest to diversify, Kazakhstan has 

embraced Islamic banking practices, with the 

goals of establishing economic stability and 

building links with neighbors. By Clare Nuttall 

Over the past two years, Kazakhstan has rapidly 

established itself at the vanguard of Islamic 

finance in the Commonwealth of Independent 

States (CIS) region. Since the adoption of new 

legislation on Islamic banking and finance in 

early 2009, one Islamic bank – Al Hilal Bank – has already set 

up operations in Kazakhstan and two others are planned. 

Several specialist investment houses and consultancies have 

also been established. A roadmap for the development of 

Islamic finance in Kazakhstan was drawn up in cooperation 

with the Islamic Development Bank and approved in 2010. 

The rapid rise of Islamic finance has occurred thanks 

to pressure from the top. Kazakhstan’s President Nursultan 

Nazarbayev is firmly behind the idea. 

Not only did President Nazarbayev encourage the 

speedy adoption of legislation and issuing of a license for 

Al Hilal, but the links he has forged with leaders in the 

Islamic world have also persuaded firms such as Al Hilal 

to enter the nascent Kazakh market. Overall, the aim is to 

turn Kazakhstan into a regional hub linking Central Asia 

and the CIS to the Islamic world. 

BAnKInG And fInAnce 

A receptionist at Al Hilal in Almaty. 

The bank also has an Astana office 


131

132 

BAnKInG And fInAnce 

Amendments to Kazakhstan’s legislation affecting the 

Islamic banking finance sector will enable the Kazakh 

government to issue its debut sukuk, or Islamic bond 

Kazakhstan’s population has a Muslim majority, but the 

country is largely secular, in part owing to its Soviet heritage. 

However, Astana was encouraged by the success of London as 

an Islamic finance center. The incentive to look at alternatives 

to the Western financial model also became stronger with the 

onset of the international financial crisis. 

“The tone from the top is clear: Islamic finance should 

be encouraged to grow and blossom. The president and the 

Kazakh government are keen to establish Islamic finance in 

this country,” says Prasad Abraham, the CEO of Al Hilal 

Kazakhstan, which obtained its license in March 2010. 

“There is a strong desire that Kazakhstan should become the 

regional Islamic finance center by 2020.” 

In early 2011, Al Hilal had extended facilities amounting 

to $25 million in total, with 42 employees in its Almaty and 

Astana offices. There are plans to open a third office in the 

populous south Kazakhstan region. 

Bridge with UAE investors 

The bank’s main focus is on large-scale, government-related 

projects, says Abraham. “Several projects are under discussion,” 

he says. “Separately, we have a mission to identify opportunities 

for UAE investors in Kazakhstan. We will act as a bridge to bring 

Kazakh projects to the attention of UAE investors.” 

An agreement on the creation of a second Islamic 

bank was signed in July 2010 by Almaty-based investment 

house Fattah Finance, the Development Bank of Kazakhstan 

and Malaysia’s AmanahRaya Financial Group. Fattah is 

working on a feasibility study for the bank. At the same 

time, Fattah signed an agreement to set up the first hajj 

fund in Kazakhstan, and a memorandum of understanding 

on the creation of a halal hub in Kazakhstan, with 

AmanahRaya and KazNex Invest. 

Fattah’s chairman, Zaratkazy Nurpiissov, agrees that 

the government has supported the creation of the market. 

“Government support is available – it’s more than enough,” 

he says. “After the international economic crisis, Kazakhstan, 

like many other countries, started to search for alternative 

ways to invest, to diversify, to develop the economy. We are 


an Asian country, so we turned to Asia and to Islamic finance. 

Once we were part of the Silk Road, and now a modern Silk 

Road is being built. Also, it’s important to note that no Islamic 

bank has ever gone bankrupt.” 

While progress has been rapid, there are still important 

steps that need to be taken. First, the legislative base needs 

to be improved. Some amendments to Kazakhstan’s 

legislation affecting the Islamic banking finance sector are 

expected to be finalized in 2011. 

These measures will not only pave the way for a wider 

range of Islamic financial services to be offered in the country, 

but will also enable the Kazakh government to issue its debut 

sukuk, or Islamic bond. The issuing of the bond will be highly 

important for Kazakhstan to achieve its main goal in creating 

Islamic finance – to attract finance from the Islamic world for 

the country’s ambitious industrialization program and for the 

diversification of the economy. 

“Within the next five to 10 years, we hope to attract up 

to $10 billion – equivalent to 10 percent of all banking 

assets in Kazakhstan,” Arken Arystanov, chairman of the 

Regional Financial Centre of Almaty (now part of the National 

Bank of the Republic of Kazakhstan) and one of the key 

proponents of Kazakhstan’s Islamic finance market, told a 

conference in March. 

“We have high hopes that the government will issue a 

sovereign sukuk soon. This will be a benchmark for corporate 

issues and will demonstrate Kazakhstan’s long-term 

commitment to developing Islamic finance instruments.” 

“We hope a sovereign sukuk will be issued in the near 

future, because it is important as a benchmark and will create 

liquidity for the market,” agrees Fattah’s Nurpiissov. 

In the future, a wider range of Islamic financial services 

is also likely. A third Islamic bank could be set up in 2011. 

The government and financial regulators are looking in 

particular at takaful – Islamic insurance – which would be an 

interesting prospect in a market where insurance is currently 

underdeveloped. Kazakhstan will also have the chance to grow 

the market this year, as it takes over the rotating presidency 

of the Organisation of Islamic Cooperation in 2011. �

Thriving city in need of 

further housing capacity 

Almaty is the business and financial 

capital of Kazakhstan. Almost all 

major companies outside the oil and 

gas sector are based in the city, as 

are the Central Bank and the 

Kazakhstan Stock Exchange 

busIness centers 

Almaty is the most Westernized of Kazakhstan’s 

cities. As its reputation as a cultural and 

financial hub grows, its popularity goes from 

strength to strength. But to accommodate the 

influx of inhabitants, it requires more living 

space. By Clare Nuttall 

Kazakhstan’s largest city and business 

center, Almaty, is renewing its bid to become 

a regional financial center as neighboring 

economies recover. The preferred location 

for banks and financial institutions, the city 

still faces challenges in terms of accommodation 

and environment. 

With a population of around two million, Almaty is 

the most populous city in Kazakhstan. Despite the removal 

of government offices after the capital was moved to Astana 


133

134 


Independence Square. The city was 

built on a nomadic settlement site 

a decade ago, Almaty remains the undoubted business 

and financial center of the country. It accounts for 

one-fifth of Kazakhstan’s total GDP and around 40 percent 

of budget contributions. Almost all major companies 

outside the oil and gas sector are based in Almaty, as 

are the Central Bank and the Kazakhstan Stock 

Exchange (KASE). 

In 2006, the Kazakh government set up the 

Regional Financial Centre of Almaty City (RFCA), an 

organization tasked with turning Almaty into a financial 

hub, not just for Kazakhstan, but for the entire Central 

Asian region. In April 2011, the RFCA was taken over by 

Kazakhstan’s Central Bank. 

The KASE is expected to get an additional boost when 

the government’s program of “People’s IPOs” – domestic 

listings of minority shares in large state-owned companies – 

starts later this year. 

Kazakhstan was one of the first countries worldwide 

to feel the impact of the international economic crisis, 

and forecasts of the country being “first in, first out” 

have proved largely correct. With oil prices back to 

healthy levels, Kazakhstan’s attractiveness as an 

investment destination has been restored. Now new 


companies and financial houses are looking to establish 

themselves in Almaty. 

The international banks that have remained in the 

country during the crisis, among them HSBC and Russia’s 

Sberbank, are stepping up their activities. They have been 

joined in Almaty by several newcomers. Russia’s VTB 

obtained its license in mid 2009; Punjab National Bank has 

had a representative office in Almaty for 10 years, but in 

December 2010 took over the local Dana Bank and plans to 

expand; and Kazakhstan’s first Islamic bank, Al Hilal, has its 

main office in Almaty. In addition to local investment bank 

Visor Capital, Russia’s Renaissance Capital and Troika Dialog 

are also based in Almaty, and international investment banks 

such as Credit Suisse and Citibank have offices in the city. 

These businesses, and many of the larger local banks, 

are concentrated in what has become the new business 

district in the south of the city. The two key developments are 

the Esentai Tower and Almaty Financial District, both 

constructed by Capital Partners, and providing the first true 

‘Class A’ office space in the city. 

The city authorities are also working to attract new 

manufacturing companies to Almaty, with the launch of 

new industrial zones outside the city limits to minimize

usIness centers 

Thanks to a large extension to an influx of government 

funding, most of the buildings started before the global 

economic crisis are now finished or close to completion 

pollution. The Alatau district now hosts a 340-hectare 

industrial zone, with manufacturing, food processing and 

pharmaceuticals plants. 

Almaty’s residential property boom came to an abrupt 

halt with the onset of the economic crisis in mid 2007. 

Many buildings were abandoned, leaving a city skyline 

punctuated with half-finished tower blocks and stationary 

cranes. Other lots were simply boarded up and abandoned, 

eventually becoming parks or parking lots. This situation 

has changed, thanks to a large extension to an influx of 

government funding. Most of the buildings started before the 

crisis are now finished or close to completion, and developers 

are starting to think about the next generation of projects. 

Despite the large number of high-end residential 

buildings that mushroomed before the crisis, there is still a 

pressing need for more living space in Almaty. Originally 

founded as an outpost for the Russian empire, Almaty was 

built on the site of a nomadic settlement. Now that it is 

home to around two million people, the city’s room for 

expansion is limited. It is hemmed in to the south and east 

by the Tian-Shan mountains, which curb the potential for 

construction near the city’s historic center. 

To the north and west, new residential developments are 

spreading out onto the steppe. Back in 2008, ambitious plans 

were devised to build four satellite cities to the north, between 

Almaty and Lake Kapchagai, around 100 kilometers away. The 

plans were put on hold during the economic crisis, but the G4 

City project may now be revived. 

Meanwhile, within the city, quality of life continues to 

improve. Almaty’s temperate climate, proximity to ski resorts 

and cosmopolitan downtown area with a growing number of 

international retailers, coffee shops and restaurants has made it 

the preferred location for expats in Kazakhstan. After a gloomy 

start to 2009, the past 18 months have seen the opening of 

numerous shopping malls, supermarkets, cafes and bars. 

In addition to the long-established Hyatt and 

Intercontinental Hotels, three other big brands – Holiday Inn, 

Rixos and Royal Tulip – launched in the past two years, as 

The Tian-Shan mountains curb 

development to the south and east 

Almaty prepared for an influx of visitors attending the Asian 

Winter Games in February 2011. An increasing number of 

airlines serve Almaty, and local carrier Air Astana has been 

expanding its routes to provide direct flights to Europe, the 

Middle East and Asia. 

Almaty co-hosted the Asian Winter Games in February 

2011 along with Astana. The games were a triumph for 

Kazakhstan, which took the lion’s share of the medals. They 

were also the driving force behind the construction and 

renovation of numerous stadia, and of other facilities in both 

cities. The improvements included the renovation of the Medeo 

skating rink and Shymbulak ski resort, which will have 

long-term benefits for the population of Almaty, especially as 

the construction of a cable car means that Shymbulak is now 

accessible by public transport for the first time. 

Within Almaty, the city authorities are focusing on 

improving public transport services. There are more than 

150,000 private cars in the city, leading to severe rush-hour 

traffic jams and adding to the smog that is a growing problem. 

In an attempt to reduce the number of cars on the roads, 

further bus and trolleybus routes are being launched, while the 

long-awaited Almaty metro train service is scheduled to open 

in December 2011. � 


135

Ak Orda, Kazakhstan’s Presidential Palace, 2002 

3,500-seat Theater and Concert Hall, 2009 

Velodrome seating 10,000 spectators, 2010 

Radisson hotel and shopping center, Arman, 2004 

Mabetex Group in 

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Headquarted in the city of Lugano, 

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is among the world‘s leading design, 

management and construction 

companies, located in over 22 

countries. The recognized Mabetex 

masterpieces are the Presidential 

Palace, the Olympic Ski Jumping 

Center and the magnifi cent Theatre- 

Auditorium, all located in Astana. 

Mr. Behgjet Pacolli, Thanks to effi cient organizational 

founder of 

methods, its professional manage- 

Mabetex Group 

ment, its design and production 

facilities and the great dedication towards each project, 

Mabetex expanded from a construction company to a 

group including hotels, travel agencies, mass-media ventures, 

insurance, banks, etc. The Mabetex Group has a unique 

ability to deliver projects in rapid, record time with assurances 

of the highest quality. The Mabetex Group focuses on projects 

which are prestigious and presidential, concentrating on 

the specifi cations, size and scope of work, all the while 

respecting and incorporating the country’s identity in each 

of the projects. At Mabetex, we believe that by managing 

the knowledge and intellectual capital of our expertise, 

innovation is the main success factor of our organization. The 

Mabetex vision for our customers, people, communities and 

citizens is based on our values to help build a better world 

through ethical practices, excellence in our standards, fair 

return, mutual respect, sustainability and safety. 

At Mabetex, there are more than 2,000 workers who are 

working as subcontractors and 5,000 seasonal construction 

workers for the group. Our strategy is always to engage the 

same subcontractors to guarantee the quality and continuity 

of work. Mabetex specializes in working on projects from 

conception to completion, mostly on a turnkey basis. 

Our overall planning, coordination and control of a project 

from conception to completion is aimed at meeting a clients 

requirements in order to produce functionality with innovation, 

all the time ensuring the project is fi nancially viable for all parties 

and completed ahead of schedule. Mabetex ensures through 

its vast network of management professionals that projects 

are completed on time, within the authorized budget and

Astana since 1996 

specifi ed to the required quality standards. Major construction 

projects are a complex undertaking, often involving dozens of 

subcontractors and suppliers, thousands of workers, millions 

of dollars in material, equipment, and services. Orchestrating 

such an operation demands a fi rst-rate construction project- 

management system, which Mabetex has provided for many 

years on projects large and small around the globe. Mabetex 

also assures oversight of materials management, including fi eld 

procurement, receipt of materials, inspection, warehousing 

and issuing materials to contractors. 

The Mabetex standard is apparent in its vast array of 

projects, however oversight must always be maintained in 

the construction, fi eld administration, commissioning and 

maintenance of operations to ensure continued success. 

Each project shall follow strictly the formulation of concept 

design and scope of work to the standards in force in the 

nation where it has been commissioned. 

The Mabetex Group also prepares, monitors and organizes 

the labor force for construction work, which is handled 

directly on the site by group personnel. Mabetex frequently 

entrusts the practical execution of the works to the most-skilled 

labor work force available on site. The advantages offered 

by the Mabetex Group are obvious, and are expressed in 

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Ministry of Sport and Tourism building, 1996 

Shopping Center “Sine Tempore” ZUM, 2004 

The 1,250-seat Classic Theater, to be inaugurated in 2012 

Mother & Child Hospital and Diagnostic Medical Center, 2006 

Olympic Ski Center (under construction)

138 


Capital on the steppe 

Astana’s status as Kazakhstan’s capital is 

assured, with the city experiencing 50-fold 

GDP growth in the past 10 years. A steady 

flow of businesses has relocated there, 

reflecting confidence in the local economy. 


Astana, which has been Kazakhstan’s capital for 

the past 13 years, is sometimes dubbed ‘Dubai 

on the steppe’. The city’s importance is growing 

as more businesses relocate there to be closer 

to the government. 

Astana’s growth also reflects Kazakhstan’s rising 

international status. In February 2011, it co-hosted the Asian 

Winter Games, which required the construction of new stadia 

and other facilities. Construction of new government offices, 

and of the infrastructure needed to sustain a growing city of 

around 700,000 people, is ongoing. 

Kazakhstan’s good international relations, and the 

government’s aspiration to play a greater role on the world 

stage, have seen the country take the presidency of a number 

of international organizations recently. In 2010, the country 

held the rotating presidency of the Organization for Security 

and Cooperation in Europe, which culminated in a summit 

meeting in Astana in December. In 2011, Kazakhstan is 

chairing both the Organisation for Islamic Cooperation and the 

Shanghai Cooperation Organization. The Shanghai Cooperation 

Organisation summit, the European Bank for Reconstruction 

and Development annual meeting and the World International 

Economic Forum all took place in Astana this year. 

Astana’s appearance has changed dramatically in the past 

decade – more so than that of any other city in Kazakhstan. 

When the decision was made to relocate the capital from 

Almaty, ostensibly because of the former capital’s location in an 

earthquake zone, Astana (then named Akmola), was a minor 

city in the northern steppe. The Soviet town of Tselinograd – 

the center of Nikita Khrushchev's ill-fated ‘Virgin Lands’ 

campaign in 1953 – was renamed Akmola after independence. 


But because of the name’s alternate meaning of ‘white tomb’, 

the city was understandably renamed again when it was 

made the capital. ‘Astana’ simply means ‘capital’ in Kazakh. 

Government offices have been gradually relocated to 

Astana over the years, and have been followed by an increasing 

number of domestic and international companies that 

appreciate being close to the seat of power. Ambitious young 

Kazakhs are also being drawn to the city in greater numbers. 

The growing population, and the influx of businesses and 

government offices, has caused a spectacular building boom 

in Astana. Around 40 percent of all construction work in 

Kazakhstan is taking place in Astana. While some new 

constructions have grown up on the city’s historic right bank, 

which is composed mainly of Imperial Russian and Soviet 

housing, the left bank, which has largely been built from 

scratch and is the location of most government offices, has 

seen the construction of numerous wildly exotic buildings. 

In 2010, on the city’s 12th anniversary as capital, the 

Khan Shatyr pleasure dome opened. This giant, tent-like 

structure, designed by Sir Norman Foster, houses shopping 

and entertainment centers. There is also an indoor lake where 

Astana residents can bask in winter when temperatures drop 

below minus 40ºC outside; Astana competes with Toronto and 

Ulan Bataar for the title of the world’s coldest capital. 

“In Astana, it’s too cold to walk outside. Now, when it’s 

minus 40ºC, people can swim in indoor pools, enjoy the 

aquapark and stroll among trees and plants,” says Cholponbek 

Akdekov, an Astana-based representative of Turkish construction 

company Sembol, which built the Khan Shatyr. “Owing to the 

high winds, we had to change the design to make it more 

aerodynamic. Now we plan to build eight towers full of serviced 

apartments, linked to the Khan Shatyr by indoor tunnels.” 

Other new structures include the triangular Palace of 

Peace, buildings dubbed ‘the lighter’ and ‘the wedding cake’, 

and the Baiterek Tower – a tall, white structure, cradling a 

golden egg, that has become the symbol of the city. The city’s 

status has also been enhanced with the opening of Nazarbayev 

University in summer 2010. The aim is to attract talented 

academics to create a world-class university in the capital.

The growing population, and 

the influx of businesses and 

government offices, has 

caused a building boom, with 

the construction of numerous 

wildly exotic buildings 


A new skyscraper on the 

left bank, where most 

government offices are based 


139

140 


The city’s exotic structures include the triangular Palace 

of Peace and the Baiterek Tower, cradling its golden egg 

The government and city authorities are also working 

to turn Astana into an industrial hub, as well as an 

administrative city. Astana’s importance in the Kazakh 

economy has grown significantly in the last decade. The city’s 

GDP increased more than 50-fold in 10 years – fast even by 

Kazakh standards. As of 2010, Astana accounted for 

10 percent of Kazakhstan's total GDP, compared with just 

1.5 percent in 2000. Industrial output is up sevenfold since 

2000 and investment is 22 times greater. 

To attract new businesses to Astana, the city authorities 

have launched a 6,000-hectare special economic zone – 

Astana New City. Incentives have been successfully offered to 

manufacturing and service companies to set up in the zone, 

with the result that an extension is now planned to keep 

pace with demand. In addition to domestic companies, the 

zone has attracted investors from China, Korea, Turkey and 

the US. “Astana New City is composed of two zones – 

a construction zone, and an industrial and high-tech zone,” 

says Meder Masselov, managing director of the department for 

the administration of Astana New City within the Astana city 


New housing in Astana, where 

young people are flocking to work 

Co-hosting the Asian Winter Games 

this year meant building new stadia 

akimat (city hall). “We have a wide range of incentives, 

including exemption from customs duties, VAT, land tax and 

several other taxes. The project has proved so popular that 

we now need to build a second industrial park because the 

first one is full.” 

One company to set up in Astana was General Electric 

(GE) Transportation, which has built a locomotive assembly 

plant in cooperation with Kazakhstan's national rail company, 

Kazakhstan Temir Zholy (KTZ). The plant opened in July 2009 

and will produce up to 100 locomotives a year to supply KTZ, 

and serve other CIS railway operators. As KTZ’s expansion plans 

gather momentum, a second plant – this time in cooperation 

with France’s Alstom – is due to be set up in Astana. 

Meanwhile, a national space center is being built in 

Astana by Kazakhstan Gharysh Sapary, part of Kazakhstan’s 

space agency. Construction of the center, which will focus on an 

assembly, integration and testing complex, started in July 2010. 

It will cost around $185 million to construct, and will allow 

Kazakhstan to build up its domestic space industry while the 

Baiterek Cosmodrome remains under lease to Russia. �

SCHALLER LEBENSMITTELTECHNIK ® 

is privileged to congratulate the Republic of Kazakhstan on the 20 th anniversary of its independence 

Elena Parlayan, General Director of 

TOO “SCHALLER-KAZAKHSTAN” 

SCHALLER LEBENSMITTELTECHNIK ® is a leading European provider of spices, ingredients, equipment 

and supplies for the meat, poultry and fi sh processing industries, as well as a supplier of equipment for 

slicing, packing, weighing and labeling for many other industries. The company’s head offi ce is located 

in Vienna. 

During 20 years of company activity, we have successfully fulfi lled many projects for the delivery of 

standalone machines, processing lines and turnkey projects at meat processing plants. 

According to 2010 results, Kazakhstan took fi rst place among CIS countries in its reforms for business 

simplifi cation for enterprisers. This resulted from the stable political situation, the introduction of laws 

directed at developing an attractive investment climate in Kazakhstan, and also from a big market 

potential. We have witnessed this in practice since SCHALLER LEBENSMITTELTECHNIK ® founded 

its offi ce in Kazakhstan in 2003. 

INTRODUCING INNOVATIONS 

We are pleased that the meat processing market in Kazakhstan has appreciated our innovative 

technologies, equipment, knowledge and many years of experience. As well as selling and delivering 

single machines or complex solutions, we also educate the client’s personnel on how to work with the 

equipment – both from a technical and technological aspect. We have the latest developments in meat 

processing equipment, and their operation therefore requires highly skilled professionals who are able 

to utilize the equipment’s full range of services. With this, our customers can produce a high-quality 

product in an attractive package for a good price. 

OUR PLANS FOR BUSINESS DEVELOPMENT IN KAZAKHSTAN 

Focusing on our high competence, wide knowledge base and experience in meat processing, we will 

continue to increase the effi ciency and profi ts of our clients with our innovative instruments and 

technologies. This has been our goal since we founded our company, and we will continue to do this 

in the future. As a market leader, we offer the most attractive price-capacity ratio to our customers. 

Finally, I would like to express my gratitude to everybody we have been fruitfully cooperating with in 

Kazakhstan; our clients and partners, and also to the Kazakhstan government for creating favorable 

conditions for business. We hope to continue this cooperation between all market participants.

142 

Industry And servIces 

Strong growth 

despite setbacks 

Loading up with wheat grain near 

Birlik village. The country produces 

high-quality durum wheat 


Prone to some of the most extreme temperatures 

and weather, Kazakhstan has taken measures 

to boost its productivity in arable farming and 

livestock. By Clare Nuttall and Nora FitzGerald 

It is not uncommon these days for 200 or so of North 

Dakota’s best breeding cattle to be loaded on a Boeing 

747 aircraft bound for Kazakhstan. More than 2,000 

cattle have been airlifted so far from Fargo to Astana. 

Several thousand more cattle, the finest of breeders, are 

also expected to make the trip. 

The North Dakota Trade Office (NDTO) now has a satellite 

office in Astana. According to NDTO executive director Dean 

Gorder, the office is acting as a kind of matchmaker between 

American companies in North Dakota and Kazakh agricultural 

officials eager to quicken the pace of modernization for farming, 

food processing and, ultimately, food export. American 

companies are offering new cattle, equipment and expertise. 

“Kazakhstan needs to rebuild its herd,” Gorder said. 

“It tried to buy cattle from Australia and Texas, but they didn’t 

thrive. In the state of North Dakota, at any given time, we have 

a million breeding cattle. They live outdoors during long cold 

winters and hot summers.” 

Bismarck, North Dakota-based Global Beef Consultants, 

through its joint venture partnership with the government of 

Kazakhstan, is supplying Kazakhstan with Angus and Hereford 

cattle. KazBeef Ltd, the joint venture corporation, involves a 

$50 million project to develop two 2,500-head cow-calf 

operations and a 5,000-head feedlot near Akmola Oblast, 

Kazakhstan, says Bill Price, president of Global Beef 

Consultants. The project marks the most ambitious and 

largest scale upgrade of Kazakhstan’s cattle herds – depleted 

in the years after the collapse of the Soviet Union – to date. 

Kazakhstan harvest (in tons of grain) 

2007 

20.1 million 

2009 

20.8 million 


Kazakhstan has seen strong growth in agricultural 

production, as modern farming methods have been introduced 

in the last decade. Even after last year’s drought, which was a 

setback for grain production, Kazakhstan is well-positioned to 

take advantage of rising global food prices. 

The drought that devastated Russian farms in 2010 

also had an impact on the grain-producing regions of north and 

west Kazakhstan. In parts of the country, up to 70 percent of 

the crop was destroyed, as temperatures soared above 

50ºC for several weeks. According to the national statistics 

agency, Kazakhstan harvested just 13.4 million tons of grain 

in 2010 – considerably below the record 20.8 million tons 

of grain harvested in 2009, which had beaten the previous 

record of 20.1 million tons in 2007. 

Detrimental weather conditions have affected crops 

not only in Russia and Kazakhstan, but also in other world 

regions, helping to drive a hike in food prices. Globally, “in 

2010-11 we are seeing a return of the punishingly high 

food prices seen in 2008”, says a report from IHS Global 

Insight’s Agricultural Service. However, this upward pressure 

on prices is not expected to continue through the year. 

“Easing production and supply constraints should see most 

key prices moderate in 2011, but there are many 

unpredictable factors such as extreme weather that may 

intervene,” says the report. 

Agricultural fairs 

In Kazakhstan, measures are being taken to ensure that 

food prices remain at reasonable levels. The Almaty city 

authorities, for example, have organized regular agricultural 

fairs in the city, where farmers from south Kazakhstan sell 

their fruit, vegetables and meat directly to consumers. 

Subsidies for these products bring prices down by between 

20 and 30 percent. 

2010 

13.4 million 


143

144 


A shepherd near Ashibulak village. 

Rural development is a priority 

With Russian grain exports embargoed until 

September 2011 at the earliest, Kazakhstan is also facing 

increasing international demand, especially for grain. The 

main markets for Kazakh grain are the Central Asian 

republics: Kyrgyzstan, Tajikistan and Uzbekistan. In the 

aftermath of Kyrgyzstan’s April 2010 revolution, which 

disrupted last year’s sowing season, Kazakhstan has pledged 

to keep supplying its neighbor. 

Eyeing new markets 

However, Kazakhstan is also looking at a wider range of 

markets for its grain exports. In recent years, the share of 

exports to the Commonwealth of Independent States (CIS) 

has fallen, and sales to Middle East and South and East Asia 

have increased. The highest leap in demand has been from 

Afghanistan, Iran and Turkey. 

This year’s harvest is expected to be higher than that 

of 2010. A total of 21.3 million hectares (ha) has been 

sown this year, agriculture minister Akhylbek Kurishbaev 

told a government session on March 11. This total includes 

16.5 million ha of grain and legumes, 1.7 million ha of 

oilseeds, 2,500ha of fruit and vegetables and 1,700ha 

of sugar beet. 

Kazakhstan’s agricultural sector has developed strongly 

in the past decade. Even the poor harvest of 2010 was 

considerably higher than in the late 1990s, when yields 

plummeted owing to the collapse of the Soviet-era kolkhoz 

system and a lack of investment. 

With the exception of cultivated areas in the south, the 

country’s rural population was largely nomadic until the Soviet 

collectivization drive in the 1920s and 1930s when the rural 

population was forcibly settled into collective farms. Two 


decades later, Nikita Krushchev’s ‘Virgin Lands’ campaign in 

north Kazakhstan failed miserably in 1953 when the soil’s 

fertility was quickly exhausted. 

However, with modern farming technologies, the 

government is keen to put some of the country’s unused lands 

to use. An additional two million ha of land were put into use 

for grain cultivation between 2006 and 2008. President 

Nursultan Nazarbayev has instructed the Ministry of 

Agriculture and the Agency for Land Management to draw up 

plans for putting more of the 24 million ha of arable land in 

the country into circulation. 

Kazakhstan is already the third largest producer of grain 

in the CIS after Russia and Ukraine, and has specialized in 

producing wheat, which accounts for around 82 percent of 

total grain cultivation. The country produces high-quality 

durum wheat suitable for products such as pasta. 

However, much of Kazakhstan, including the 

mountains, deserts and semi-desert areas, are unsuitable 

for farming. Unpredictable weather is also a problem, with 

droughts striking two years out of five. The Siberian climate 

in the north means winters are harsh and the growing 

season short. 

The international economic crisis also took a toll on 

agriculture. But, as part of the anti-crisis program in late 

2008, the government announced a $1 billion allocation for 

state agricultural holding company KazAgroHolding. This 

money was directed into new projects including construction 

of greenhouses and poultry farms, feedlots, meat-packing 

factories, milk farms and infrastructure for grain exports. 

Rural development is a priority for the government, which 

has allocated KZT670 billion ($4.6 billion) to rural programs 

over the past five years. �

Fertile ground 

for ventures 

to support a 

growing economy 

While some of Kazakhstan’s sectors are still 

striving to meet international standards, 

there are plenty of opportunities for savvy 

non-domestic companies to take the initiative 

and make their mark in this nascent economic 

landscape. By Tim Gosling 

The rapid pace with which Kazakhstan’s economy 

has been growing over the past decade has left 

the services sector somewhat underdeveloped in 

comparison with demand. While international 

accounting and legal companies arrived some 

time ago to serve the country’s huge energy and mining 

operations, foreign banks have been slower to provide a 


A worker at the Temirtau steel plant. Industrial safety 

standards are being upgraded, but there are still plenty 

of opportunities for health-and-safety service providers 

full complement to the local financial institutions that 

dominate the sector. 

Although great strides have been made since 

independence to build institutions, a legal framework for 

starting and running businesses, and the infrastructure 

needed to support them, Kazakhstan is continuing to develop 

systems of business law, taxation, banking and external links 

to the international business community. This means that 

professional service providers in these areas are even more in 

demand for companies operating in Kazakhstan. 

Meanwhile, information technology (IT), consultancy 

and human resources (HR) services offer significant 

opportunities to investors, with both the Kazakh authorities 

and companies on the ground looking for foreign proposals 

and partnerships that can improve these segments. 


145

146 


The IT sector is taking advantage of strong demand for its 

services from government, businesses and foreign investors 

Accounting 

All the ‘Big Four’ accounting companies (Deloitte, 

PricewaterhouseCoopers, Ernst & Young and KPMG) are 

present in the Kazakh market. Kazakhstan was among the 

first of the countries in the Commonwealth of Independent 

States (CIS) to promulgate accounting and auditing 

standards. As a result, services are more advanced than in 

most other CIS countries. But much remains to be done if 

Kazakhstan wishes to raise the quality of accounting and 

auditing practices to a level that is in line with more 

developed economies. 

According to the World Bank, HR and training remain 

one of the big issues in accounting in Kazakhstan. The 

institution says that the business community is reporting 

difficulties in recruiting accounting and finance graduates of 

suitable quality, and that there remains a chronic shortage 

of qualified instructors. However, given the transition toward 

international standards required by international financing, 

the opportunities for established and recognized services 

providers are enormous. 

Banking 

Kazakhstan’s banking sector is still mainly under domestic 

ownership, but foreign investment in the sector is 

creeping slowly upwards. 

International players such as HSBC and Citibank have 

been in Kazakhstan for a decade. In recent years, peers from 

fellow emerging markets have entered, including those from 

Russia, China, the Middle East and East Asia. Kazakhstan’s 

expanding trade and investment network is also attracting 

banks from London, New York and the European Union. 

Entries into the sector during the last five years 

include Italy’s UniCredit Group, United Arab Emirates- 

based Al Hilal and South Korea’s Kookmin Bank – all 

illustrations that investors from both east and west are 

seeking to take advantage of the potential in the market. 

The latest to take the plunge is Punjab National Bank. 

India’s largest state-owned bank was bought by Dana Bank in 

December, and has announced plans to grow its operations 

in the Kazakh market. 


Not surprisingly, Russia’s financial giants are also active 

on the market, with Sberbank, VTB Group and Alfa Bank all 

present. Perhaps the biggest question today is whether BTA 

Bank – Kazakhstan’s largest bank by assets – will be sold to a 

foreign investor. A potential sale to Sberbank has been under 

discussion since February 2009. 

IT and business services 

Kazakhstan has strong potential for provision of IT outsourcing, 

with reports saying that the government has made a 

commitment to enhance this area. With the low cost of labor, 

in comparison with key regional competitors such as Russia, 

and existing high skill levels, the IT sector is taking advantage 

of strong demand for its services from government, local 

businesses and foreign investors already based in Kazakhstan. 

High levels of broadband penetration and mobile phone 

connection compared with its neighbors also make Kazakhstan 

a potential platform for IT businesses in Central Asia. 

Legal and tax services 

Kazakhstan’s dynamic development means that the country 

still experiences regular changes in legislation and tax 

regulation. The market for legal and tax services is competitive 

in Kazakhstan, with companies such as Chadbourne & Parke, 

Grata, Salans, and White & Case all present, having arrived to 

focus on the Kazakh legal framework for mining. However, the 

rapid expansion and diversification of the economy is seeing 

overall demand for services rise accordingly, while the range of 

expertise needed is also growing. 

Health and safety 

As international financing requirements increasingly influence 

Kazakhstan’s companies, opportunities abound for service 

providers in markets such as health and safety. Current safety 

standards fall short on certain levels compared with recognized 

international standards, most notably in the coal-mining 

sector. However, that is changing, with Kazakhstan’s safety 

standards increasingly being addressed by services and 

consultancy companies, often via cooperation agreements 

between international and local partners. �

From triage 

to treatment: 

improving 

healthcare 

Maternity ward in Aktau’s 

main hospital. Improving 

maternity services is a 

priority for the country 


Kazakhstan’s focus on healthcare is already 

having an impact on its citizens for the better, 

from lessening the ravages of disease to 

improving the atmosphere for birthing mothers. 

By Nora FitzGerald 

Adil, an adorable toddler, was less than a year 

old when he was diagnosed with tuberculosis 

(TB). When he was brought to an Almaty 

clinic in 2005, he weighed less than 6kg, 

and his parents feared the worst. 

However, an effective treatment strategy and high-quality 

services helped him recover. More than 18,000 Kazakhs such 

as Adil have recovered from TB. The Kazakh government has 

been fighting the resurgence of this intractable disease with 

directly observed, short-course treatments. The government 

has also committed to providing free medication, and has been 


147

148 


Doctors test an 

astronaut before a 

space mission 

from Baikonur 

working with non-governmental organizations and Western 

governments to train Kazakh doctors and specialists in the area 

of infectious diseases. 

But according to President Nursultan Nazarbayev, “Our 

system of medical education has many problems. It must be 

reformed.” The first years of independence were a time when 

the Kazakh health system and its infrastructure fell apart, 

but in recent years the government has been rebuilding a 

healthcare system to help its people thrive. 

As part of that effort, the government wants to make the 

capital, Astana, a center of medical training and research. 

Government officials have said the development of technical 

and management expertise is as important to the improvement 

of health outcomes as investments in infrastructure. 

Astana Medical University – which is at the forefront of 

that effort – has formed academic partnerships in public health 

and clinical medicine with Columbia University in New York, 

Hiroshima and Nagoya Universities in Japan, and the Vienna 

Medical University in Austria. The recently opened Nazarbayev 

University in Astana, which was formed on the initiative of 

President Nazarbayev, has formed an alliance with Partners 

Harvard Medical International to build a medical school. 

In conjunction with the World Bank, the government is 

building an independent accreditation system with formal 

standards, trained staff and trained assessors, and 


A specialist in 

Almaty examines 

a medical 

test sample 

evidence-based clinical practice guidelines. It is also 

introducing and promoting a system of voluntary blood 

donorship, and supporting the introduction of international 

standards for laboratory and blood transfusion systems. 

Mothers and children first 

Kazakhstan has embarked on the creation of a single 

healthcare system that will see major investment by the 

government in new hospitals and clinics, and the promotion of 

better healthcare for women and children in particular. 

“I always dreamed of giving birth with my husband 

present, and here I was allowed to,” said Olessya Mikhereva, 

who recently gave birth at the Astana City Maternity Hospital 

Number One in Kazakhstan’s capital city. “The medical 

personnel helped us through it all.” 

Many Kazakh mothers now have the support of family 

members in the delivery room – up to 20 percent in Astana. 

Improved health and family support for mothers and infants is 

a priority for Kazakhstan. 

Bolstering medical research 

To achieve its goals, the government has committed to spend 

at least four percent of GDP on public health expenditure and 

will spend more than $3 billion on improvements to the system 

by 2015. Major outlays will include the creation of a unified

WÖRWAG PhARmA 

Success through specializing in variety, high quality and 

investment in further growth 

The history of WÖRWAG Pharma dates back to 1965, 

when Doctor Fritz Wörwag founded a small pharmacy 

in Zuffenhausen, an urban district of Stuttgart. In just 

six years, he expanded the business and founded 

WÖRWAG Pharma, where he started selling his own 

pharmaceutical products. Since then, the company has 

been focused solely on the prevention and treatment 

of diabetes and its associated disorders – one of the 

most sought-after fields in medicine. Like any pharmaceutical 

producer, WÖRWAG Pharma is engaged in 

the research and development of new products. 

By actively investing in research activities, the company 

has made a considerable contribution in the successful 

treatment of complications from diabetes, such as 

polyneuropathy. This was possible due to a substance 

called Benfotiamine, which was originally discovered 

60 years ago by Japanese scientists. It was not until 

Dr Wörwag utilized the substance that Benfotiamine 

became known as a turning point in the treatment of 

diabetes. Today, Benfotiamine is in high demand and is 

being used in the form of Milgamma tablets. 

WÖRWAG Pharma began its international expansion 

in 1993 when its first office opened in Hungary. Within 

the next 10 years, 12 new locations were established 

in Russia,Romania, Bulgaria and many other Eastern 

European countries. Today, WÖRWAG Pharma is 

growing its presence in Asia and Latin America 

with great success. To date, more than 700 

employees work in 30 countries across 

the world. 

In September 2005, WÖRWAG 

Pharma opened its 

first representative 

office in Kazakhstan – a country with political stability 

and ongoing economic growth. Due to numerous 

social and economic reforms, Kazakhstan has skillfully 

transformed itself into a market economy with 

constantly improving conditions for foreign investors. 

The representative office in Kazakhstan serves 

as a regional business centre for other countries 

in central Asia, such as Kyrgyzstan, Uzbekistan, 

Tajikistan and Turkmenistan. 

Produced in Germany and meeting the requirements of 

the GMP standard of the European Union, all WÖRWAG 

Pharma’s products are well known among pharmacists 

and medical staff in Kazakhstan. The product span 

includes Thiogamma, Milgamma, Gabagamma, 

Magnerot Ferro-Folgamma, Metfogamma, Bisogamma 

and Zinkit. The company is constantly engaged in 

informing patients about the development and main 

ways of preventing diabetes-associated disorders and, 

specifically, diabetic neuropathy. The company also 

supports the diabetic schools program and has opened 

the country’s first neuropathy diagnostics centre. 

Successful cooperation with the Diabetic Association 

of the Republic of Kazakhstan, and the Association of 

Endocrinologists, the Republic’s leading medical centers 

in progressive therapeutic programs in diabetology, 

cardiology and neurology, proves that WÖRWAG 

Pharma is a competent partner both in scientific 

research and practice. A family-run company, 

WÖRWAG Pharma is aimed at 

further developing its business on a 

global scale. A continuously growing 

business enables the company to 

look into the future 

with optimism.

150 


An integrated health information system is being 

implemented and tested in a few regions and cities 

before being expanded across the country 

healthcare information system, the construction of new 

medical facilities across the country, the fostering of a 

domestic pharmaceutical industry, and the bolstering of 

medical education and research. 

The effort to create an effective single healthcare system 

stems from the desire to reverse the decentralization and fall 

in standards over the last two decades. After the collapse of 

the Soviet Union, the existing infrastructure fell apart and was 

accompanied by a rise in corruption. 

The government’s ultimate goal is to dramatically lower 

high rates of TB, cancer and other diseases, many of which are 

associated with poverty and lifestyle choices, including alcohol 

consumption and smoking. 

There are more than 1,000 full-service hospitals in 

Kazakhstan and almost 4,000 short-stay clinics, most of them 

state-owned. The government is intent on increasing both the 

quality and quantity of the network. 

A key element is the introduction of a health information 

system that will improve the quality and efficiency of the 

health sector and of healthcare facility management. The 

integrated system is being introduced gradually – implemented 

and tested in a few regions and cities before being expanded 

across the country. 

Up to 12 percent of drugs used in 

Kazakhstan are produced locally 


A domestic pharmaceutical industry 

Foreign producers continue to dominate in both 

pharmaceutical and medical products, with representatives 

from dozens of countries working in Kazakhstan. The 

pharmaceutical market, which was valued at $1 billion in 

2009, continues to grow at rates of 15 to 20 percent annually. 

Local pharmaceutical production now accounts for 12 percent 

of all drugs. Last year, the government adopted its 

Pharmaceutical Industrial Development Program for 2010-14, 

which provides incentives – including loans – for local 

producers to increase production, and to attract foreign 

investment into the sector. 

The government is also seeking to bring its pharmaceutical 

regulations into line with Russia and Belarus as part of the 

Customs Union created by the three countries last year. 

The medical equipment market is also dominated by 

foreign producers, and is growing rapidly as government 

investment creates demand for diagnostic equipment, medical 

lasers and dental equipment, in particular. 

There are almost 60,000 doctors and more than 125,000 

other medical personnel in Kazakhstan, and the government 

wants to foster continuing education. Through exchanges and 

cooperation with medical colleges in other countries, the 

government will promote the adoption of internationally 

recognized standards and practices across Kazakhstan. 

The government’s endeavors into health infrastructure 

have achieved some early successes, such as the creation of a 

large medical complex with several centers in Astana. More 

than 500 Kazakh personnel, including specialists, have 

already been trained in Astana. 

President Nazarbayev’s administration is also focusing 

its concern on the state of neurology, and more specifically, 

the treatment of epilepsy in Kazakhstan. The country lacks 

specialized neurologists in this area. Until the recent opening 

of the faculty of post-graduate education, the country’s 

doctors had no access to modern approaches or international 

associations. The country hopes to train more doctors to be 

able to treat epilepsy and related neurological diseases. �

152 


Mass-market stores and 

malls gain ground 

The bazaar in Almaty. The sector has 

until recently been polarized 

between traditional open-air 

shopping and designer boutiques 


The transition from bazaar to 

shopping malls in Kazakhstan has 

been slow to begin with, but 

younger shoppers are likely to 

embrace Western-style retail as 

more mass-market brands venture 

eastwards. By Clare Nuttall 

International retail chains have been 

slow to enter Kazakhstan, but 2010 

saw a large influx of new brands to 

the market. And as consumer 

confidence returns and disposable 

incomes resume their upward trend, more 

companies are expected to enter the 

rapidly growing retail sector. 

In recent years, stores and shopping 

malls targeting Kazakhstan’s growing 

middle class have mushroomed. Despite 

the crisis, mass-market retail has finally 

started to take off, filling the yawning gap 

between traditional open-air bazaars and 

top-end designer boutiques. 

As Kazakhstan emerges from the crisis, 

the past two years have seen the opening of 

the country’s first hypermarket – Ramstore’s 

flagship store at the A’port mall in Almaty – as 

well as the entry of high street brands such as 

Zara and Monsoon to the Kazakh market. 

Average salaries in Almaty are now 

around $800 a month. But despite almost a 

decade of growing purchasing power, the 

international mass-market brands have been 

reluctant to come to Kazakhstan, with a 

handful of exceptions. During the boom 

years of the mid 2000s, the moneyed elite 

would fly to London or Dubai on shopping 

sprees, while the rest of the population 

had little choice but to continue shopping 

at the bazaars. 

Logistics were one deterrent; 

Kazakhstan has a population of just 

16 million spread over an area the size 

of Western Europe. Initiatives such as the 

Western Europe-Western China highway and 

the planned modernization of Kazakhstan’s 


railway network will make things easier, but 

this will take time. 

The lack of suitable retail space has also 

held back the sector, but this too is changing. 

The new wave of brands have partly been lured 

to Kazakhstan by the opening of modern malls. 

A’port, which opened in September 

2009, is already the largest mall in Central 

Asia. An extension, due to open in autumn 

2011, will increase its size to 80,000 square 

meters. Eurasia Red, which developed the 

mall, is planning to open another mall in 

Almaty and one in Astana within the next five 

years. Another property developer, Mega, has 

malls in the country’s largest cities including 

Almaty, Astana, Shymkent and Aktobe. 

Meanwhile, at the upper end of the 

market, the Esentai Park mall, part of a 

mixed-use development in Almaty’s financial 

district, is due to open later this year. 

Matthew Bond, managing director at 

Esentai’s developer Capital Partners, says the 

floor plan has been amended in response to 

demand, to allow more room for retailers, 

including mass-market brands. 

Almaty remains the retail hub of 

Kazakhstan, accounting for around 60 percent 

of total turnover, but numerous malls have 

also opened in Astana. Among them is a mall 

housed in the Khan Shatyr – a giant, 

temperature-controlled tent containing shops, 

restaurants and other leisure facilities. 

“Kazakhstan is an undiscovered, yet 

very lucrative, market for international 

retailers,” says Dmitry Revin, Eurasia Red’s 

director for finance and business 

development. “Kazakhstan’s entry into the 

customs union alongside Russia and Belarus 

has caused a number of retailers – both 

Russian companies and international 

companies present in Russia – to look 

again at Kazakhstan.” 

But retailers are also entering 

Kazakhstan from another direction. 

“Franchises of international brands that are 

active in the GCC [Gulf Cooperation Council] 

find these markets are now mature and 


153

154 


The Promenade mall in Almaty 

oversaturated. They are looking to Kazakhstan and Azerbaijan 

to get a foothold in the CIS (Commonwealth of Independent 

States) and capitalize on market expansion.” 

Among the food retailers in Kazakhstan, Ramstore – which 

is owned by Turkey’s Migros Group – has established itself in the 

number-one position, despite competition from local retailers 

such as SM Market and Green, and Russia’s Vester. 

As with fashion retail, the food market is also 

modernizing rapidly. Germany’s Metro Group set up its first 

cash-and-carry outlet in Astana in late 2009, and opened 

four more stores in just 16 months. “Kazakhstan looks good 

to us. It’s premature to be ecstatic, but the macro indicators 

are positive,” says Stephen Kreeger, managing director of 

Metro Kazakhstan. Metro plans to open three new stores in 

northern Kazakhstan this year. 

The entry of wholesalers such as Metro to the Kazakh 

market are hastening the transition from the bazaar system 


Leisure activities at Astana’s Khan 

Shatyr complex, which also 

contains shops and restaurants 

People have gone from shopping in kiosks in the late 

1990s to shopping at hypermarkets today. While some of 

the older generation still prefer to shop at bazaars, the 

younger generation has embraced modern retail 

– which blossomed after the breakup of the Soviet Union – to 

a modern retail sector. 

Revin estimates that around 55 percent of retail turnover 

now goes through formal channels – though it is difficult to 

estimate since much of the bazaar trade is cash in hand – and 

he expects the transition to be fairly quick. 

“The move from bazaars to formal retail is not a slow 

process,” he says. “People have gone from shopping in kiosks 

in the late 1990s to shopping at hypermarkets today. While 

some of the older generation still prefer to shop at bazaars, 

the younger generation has embraced modern retail. The 

proportion of goods sold through the bazaars is falling. I think 

the shift will be completed in the next eight to 10 years.” 

“I think in future there will be a move away from 

markets,” agrees Kreeger. “The elimination or reduction in 

markets could come about simply owing to market forces or 

from an effort to upgrade sanitary and hygiene standards.” �

The race is on to 

bring phone services 

to the masses 

Kazakhstan’s telecoms sector 

is pushing to extend its 

impressive investment track 

record. By Tim Gosling 

Kazakhstan has a booming 

telecommunications market, on 

the back of a growing economy 

and a program of positive 

regulatory reform in the 

telecommunications sector. Legislation 

adopted in 2004 laid the foundation for the 

liberalization and development of the 


telecoms sector, and put an end to the 

monopoly enjoyed by Kazakhtelecom, the 

state-controlled telecoms operator. 

However, relatively limited 

competition in the fixed-line segment has 

seen development lag somewhat, whereas 

the early opening of the mobile (cellphone) 

and broadband segments to private investors 

had, by contrast, provoked rapid 

infrastructure development. 

Overall, international operators and 

manufacturers are well represented in 

provision of services and installation of 

state-of-the-art equipment. Companies such 


155

156 


Baikonur Space Center – the world’s telecommunications launch pad 

Located in central Kazakhstan, 

Baikonur is the largest operational 

space launch facility in the world. 

Leased to Russia until 2050, it is 

managed jointly by the Russian 

Federal Space Agency and the 

Russian Space Forces. Under the 

current Russian space program, 

Baikonur remains a busy space 

port, with numerous commercial, 

military and scientific missions 

being launched annually. 

as Motorola, Lucent, Siemens, Alcatel, Nokia, Daewoo and 

Nortel Networks have all been active in the market. 

By 2005, four private operators had been licensed 

to provide international and long-distance services in 

competition with the incumbent, Kazakhtelecom. They 

were state-railway subsidiary TransTelecom, KazTransCom 

(a subsidiary of the national oil company), Ducat and Astel. 

Up to 1,500 new telecoms service providers of various kinds 

had been licensed by the end of 2005. 

The key drivers in the fixed-line and internet sectors 

include the deployment of Kazakhtelecom’s fully digital 

national telecom network, based on local and long-distance 

switches, and the presence of fiber-optic lines linking all 

major cities in the country. 

Kazakhstan has relatively strong fixed-line penetration 

– 24 telephone lines per 100 inhabitants by the end of 

2009 – with six operators providing fixed-line telephone 

services to about 3.8 million subscribers. Analysts expect 


Baikonur launched several 

foreign-owned satellites in 

2010, including the Ka-Sat – 

a new-generation satellite built 

by EADS Astrium. The first of its 

kind, Ka-Sat can transfer up to 

70 gigabytes of data per second, 

and will provide wireless 

broadband internet coverage 

across Europe. 

As for Kazakhstan itself, the 

country is set to launch its second 

telecommunications 

satellite - KazSat-2 – from 

Baikonur in summer 2011. 

It will replace KazSat-1, 

which was lost owing to 

technical failure. 

KazSat-2 will be a 

serious upgrade from its 

predecessor, and feature 

the latest technology from 

Western Europe in place of 

the Russian equipment used 

previously. The new satellite 

features 12 Ku-band transponders 

for fixed communications and four 

Ku-band transponders for TV 

transmissions, and is intended 

for telecast, fixed satellite 

communication and data 

Baikonur is used for commercial, 

military and scientific space missions 

transmission for Kazakhstan 

and Central Asia. 

Meanwhile, KazCosmos is 

already working on putting a 

third-generation telecoms 

satellite into orbit, with a tender 

under way to choose a company 

to build and launch KazSat-3. 

sustainable, above-inflation growth in local voice tariffs 

over the next few years. 

However, as in many post-Soviet states, the country has 

had a history of long waiting lists for fixed-line telephone 

services over the years, and this has helped to boost rapid 

development of the cell-phone market. Meanwhile, market 

players are now also accelerating development of broadband. 

The early opening of the telecoms sector, and especially 

the healthy competition in the mobile segment, has made it the 

biggest draw for foreign investment. The sector saw by far the 

largest total private investment of any infrastructure sector 

between 1990 and 2009, according to the World Bank. Of 

a total $8.35 billion that private investors put into Kazakh 

infrastructure, $5.98 billion went into the telecoms sector. 

Operators invest as competition rises 

Legislation in 2004 opened the way for liberalization of the 

sector and ended Kazakhtelecom’s monopoly. It was followed by

Following liberalization in 2004, the ownership of 

major operators by foreign investors helped to boost 

subscriber growth as operators expanded their 

networks and offered competitively priced tariffs 

rapid growth in telecoms and internet services. Cellphone 

subscribers soared from just 260,000 in 2000 to 14.9 million 

in 2009 – equivalent to mobile penetration of 95.5 percent. 

The ownership of major operators by foreign investors helped to 

boost subscriber growth as operators expanded their networks 

and offered competitively priced tariffs. 

Now, the race is on to cover as much of the country as 

intensively as possible. GSM Kazakhstan (trading under the 

KCell brand), with a market share of just under 50 percent, 

invested $250 million in expanding its infrastructure in 2008. 

KCell’s main competitor is KaR-TeL, which operates under the 

Beeline and K-mobile brand names. And a competitive tender 

process in 2007 saw Mobile Telecom-Service launch the 

country’s third mobile service. 

Saturation driving innovation 

With the market close to 100 percent saturation, mobile 

operators are moving to upgrade existing services and 

introduce new ones. A focus for companies to base their 

investments on has been provided by international events 

in Kazakhstan last year and this year – the 2010 

Organization for Security and Cooperation in Europe 

(OSCE) conference, and the Seventh Asian Winter Games 

which took place in February this year. 

KaR-TeL announced on December 1, 2010 that it had 

launched a pilot 4G network in Astana to serve the OSCE 

meeting while GSM Kazakhstan launched 3G networks in 

Astana and Almaty on the same day, to allow delegates to the 

conference to take advantage of the improved quality and 

speed of data transfer services. 

These launches have kicked off rapid development. 

In February, the Kazakh Ministry of Communication and 

Information announced that GSM Kazakhstan had rolled out 

3G in 27 cities, with another four planned by the end of the 

first quarter of 2011. Meanwhile, KaR-Tel had launched 3G 

in 39 cities, as well as in several rural areas. 


Down in the ground 

Not everything is up in the air in Kazakhstan. The country’s 

national telecoms operator is also rolling out hardwired 

communications networks, to support the country’s economic 

development and satisfy the growing demand for high-speed, 

high-capacity information channels. 

In January, Kazakhtelecom announced that it had 

completed the deployment of the new-generation, high-speed, 

fiber-optic gigabit passive optical network (GPON) network in 

Astana. Kazakhtelecom will use the new network to deliver – 

to individual subscribers and corporate clients – modern 

broadband services, such as internet protocol television (IPTV), 

video on demand and high-speed internet. 

This network rollout is the first step in Kazakhtelecom’s 

strategic plan to replace the country’s existing xDSL 

infrastructure with fiber-optic technology. GPON technology will 

allow Kazakhtelecom to expand its capacity in providing 

broadband internet services in Kazakhstan, while implementing 

a wide range of new high-quality, triple-play services. 

Booming broadband 

As the move to broadband accelerates, the broadband segment 

will be the major growth driver for Kazakhtelecom, given its 

relatively low penetration (17 percent). Broadband subscribers 

as a proportion of the population had reached 10 percent by 

early 2010, with the market likely to continue its expansion 

by 100 percent annually. 

Despite the considerable presence of the incumbent, 

Kazakhtelecom across the market, Kazakh internet surfers are 

benefiting from a diversified market, which offers an energetic 

and competitive environment. 

That competition is also pushing rapid development. 

In February 2011, the Minister of Communications and 

Information announced that Kazakhtelecom would boost the 

average broadband speed rate in the country by 100 percent 

this year, while subscription fees would remain fixed. � 


157

158 Industry And servIces 

Take the scenic 

route for world-class 

adventure 

From sports stadiums to steppe 

packages, Kazakhstan is training 

hospitality workers, building 

infrastructure and renovating 

hotels for a new breed of tourist. It 

also has its eyes on an Olympic bid. 

By Nora FitzGerald 

Kazakhstan showed itself to be a 

world-class venue for sports 

competitions with its successful 

showcase of the Seventh Asian 

Winter Games in 2011. 

Kazakhstan seemed to dominate in every way 

possible, earning 70 medals: 32 gold, 21 

silver and 17 bronze, well ahead of its closest 

rivals. It was the first event of this size hosted 

by Kazakhstan, and its success plays a key 

role in raising confidence for an Olympic bid. 

Kazakhstan already has high hopes of hosting 

the Winter Olympics in 2022. 

The Asian Games were held in 

Astana and Almaty, and in preparation for 


its role as host, Kazakhstan invested 

$1.5 billion in tourist infrastructure, from 

upgrading ski facilities to renovating hotels 

and other accommodation. 

“We have learned to understand each 

other better. I believe this is the main 

achievement of these games,” said President 

Nursultan Nazarbayev at the closing 

ceremony in Almaty. He added that the 

sporting event also offered an opportunity 

to unveil the country’s improved 

infrastructure and facilities. 

Business travel has been the dominant 

feature of Kazakh tourism over the past 

20 years, accounting for 80 percent of the 

4.5 million annual visitors to the country. 

But now Kazakhstan is targeting a new breed 

of tourist, beyond the business executive. 

The country is beginning to develop a 

broader tourism industry, as the government 

and local entrepreneurs showcase the 

country’s diverse attractions in sports, 

culture and ecotourism.


Big Almaty Lake. A growing number 

of tour operators offer trekking vacations 

in the Kazakh wilderness 


159

160 Industry And servIces 

Space tourism ranges from real space 

trips to tours of Baikonur’s launch pad 

Space tourism for everyman 

Fifty years ago, Russian cosmonaut Yuri Gagarin changed 

the world with the first manned space flight – from 

Kazakhstan. Many Western tourists still don’t realize that 

the core space port for the Soviet and Russian space program 

is in Baikonur, Kazakhstan. 

Websites already offer tours of Baikonur’s facilities. And 

while most tourists cannot afford the price of becoming a bona 

fide space tourist, intrepid travelers from abroad can soak up 

the Sputnik atmosphere. There is a proposal to create more 

modern facilities – similar to those at the US’s Cape Canaveral 

– at the launch pad of Sputnik, Luna I and Yuri Gagarin. The 

new facilities are slated to include a mini-mission control 

center simulating space flight, a planetarium and a cosmic 

café. As Gagarin said when he took off, “Poekhali!” (Let’s go!). 

Intimate venues: ecotourism 

and indigenous culture 

Across the country, there is an increasing amount of farmhouse 

accommodation and bed and breakfasts. The government has 

offered training for village families on how to get into the 

business and offer hospitality services, and recent investments 

in community and rural tourism are beginning to pay off with 

Tour operators in Kazakhstan offer a range of trekking 

vacations, where the traveler can experience the country’s 

beautiful lakes, gorges and glaciers in a true wilderness 


Sports facilities such as golf courses 

are being promoted by the government 

increasing numbers of visitors. More tourists are also coming 

to experience Kazakhstan’s indigenous culture, such as the 

mysterious underground mosques near the Caspian Sea. 

In the 20 years of its independence, Kazakhstan has 

been a popular choice for Russian, Chinese and other Central 

Asian visitors, and the country’s tourism authorities are now 

focusing on attracting more Western vacationers. There is 

every reason to believe that Western tourists will find the 

country an exotic and tempting destination. 

A growing number of tour operators in Kazakhstan offer 

a range of trekking vacations in the Kazakh wilderness, where 

the traveler can experience the country’s beautiful lakes, 

gorges and glaciers in a true wilderness. For the more 

adventurous, these packages can include horseback riding, 

whitewater rafting and mountain climbing. 

As well as ecotourism, the country has long had a 

singular reputation among hunters for the diversity of its 

wildlife. Foreign hunters come in search of rare antlers 

from the giant deer inhabiting the Jungar Alatau at the foot 

of the Dzhongar Alatau mountain range, which borders China. 

The area is alive with bear, wolf, snow leopard, eagles and 

hawks, and is also an increasingly popular destination for 

hiking and horseback holidays.

Hunters also come to Kazakhstan for the Tian Shan 

maral deer, whose giant antlers are similar to those of the 

North American wapitis. The Tian Shan – literally ‘celestial 

mountains’, stretch across Central Asia. 

Most visitors travel to the commercial capital Almaty, 

taking in its bustling charm and chic cafés, or to the political 

capital Astana, a largely new city of arresting architecture that 

has arisen out of the steppe since President Nazerbayev 

designated it as the capital in 1997. Both cities are infused 

with the country’s new wealth, and are dotted with hip 

nightclubs, fine restaurants and first-rate shopping. 

Yet niche tourism for the adventurous traveler looking 

for something a little different has begun to see significant 

growth as Kazakhstan – the ninth-largest country in the 

landmass – capitalizes on its cultural heritage and geographic 

wealth. Destinations for niche tourism include the Singing 

Dunes, where the shifting sands create a resonant, organ-like 

sound, and the Charyn Canyon on the Charyn River, with its 

startling lunaresque landscape that can justifiably be 

compared to the Grand Canyon in the US. 

The government has begun to aggressively promote 

tourism in Kazakhstan, with exhibitions or presentations in 

New York, London, Beijing, Berlin, Madrid, Moscow, Paris, 


Transport in the Tian Shan mountains, 

where hunters seek out the maral deer 

Seoul, and Tokyo in recent years. “Right now, our number 

one priority is to transform the reputation of Kazakhstan 

into the tourism hub of the Central Asian region in 2011,” 

said Raushan Yesbulatova, the Consul General of the 

Republic of Kazakhstan in New York, speaking at a 

tourism fair in Manhattan. 

In 2010, the Ministry of Tourism and Sports unveiled 

Kazakhstan’s first official website to promote the country as a 

tourist destination (www.visitkazakhstan.kz). “Our site meets 

all international standards,” says Karlygash Kaken, the 

chairman of the Tourism Industry Committee of the Ministry of 

Tourism and Sports. “Firstly, it is in three languages – Kazakh, 

Russian, English. Secondly, there is now an opportunity, 

having opened the Kazakhstan tourist site, for tourists on any 

continent of the world to book a hotel, to visit tourist 

attractions and virtually travel to our country.” 

And revenue from tourism is experiencing robust levels of 

growth, seeing increases of almost 20 percent year-over-year. 

Tourism has been designated a priority sector in the 

government’s economic development plan, and the government 

has created tax incentives to encourage investment in tourist 

infrastructure. Kazakhstan expects tourism revenue to reach 

KZT66.6 billion ($460 million) by 2015. � 


161

162 

Index of advertisers 


ArcelorMittal ...................................................................88 

Atlas Copco .....................................................................80 

CB&I ..............................................................................69 

Chagala ............................................................................4 

Condor Petroleum Inc ......................................................79 

Cross Caspian ..................................................................61 

Deloitte ..........................................................................49 

FLSmidth......................................................................109 

G4 City .........................................................................112 

GE Oil & Gas ...................................................................56 

GE Transportation ..........................................................123 

Gmmos Kazakhstan LLP ...................................................58 

Grundfos .........................................................................96 

Hambledon Mining plc .....................................................95 

InterContinental Hotels & Resorts ......................................20 

Japan Tobacco International (JTI) ......................................27 

Kazakhmys........................................................................2 

Kimberly-Clark ..................................................................6 

Mabetex Group ..............................................................136 

Minova ...........................................................................87 

MRC Transmark Kazakhstan LLP .....................................163 

Nokia ...........................................................................164 

Olympex Advisers ............................................................62 

Partex Oil and Gas ...........................................................65 

Petrolinvest .....................................................................73 

Pfizer............................................................................151 

Philip Morris International ................................................12 

PM Lucas Enterprises Ltd ...............................................100 

Pricewaterhouse Coopers (PwC) .........................................16 

Rio Tinto .........................................................................91 

Schaller Lebensmitteltechnik ..........................................141 

Scot Holland – CBRE .......................................................14 

Spiecapag .......................................................................75 

Turkish Airlines..............................................................117 

UBS .............................................................................124 

Weatherford ......................................................................9 

Wörwag Pharma .............................................................149

Celebrating Our 

Anniversary 

1992221~2011 

TH 

MRC Transmark collaborates with our 

customers to develop innovative solutions 

tailored to fit your needs. 

With inventory coverage across the globe, 

MRC Transmark strives to be the global 

supplier of choice to the markets we serve 

including: refining, chemical, petrochemical, gas 

distribution & transmission, oil / gas exploration 

and production, pharmaceutical and utilities. 

Wherever you operate you can be assured that 

MRC Transmark has the expertise, products 

and systems to fully support your business. 

We are committed to meeting the needs you 

have for performance critical products today 

and in the future. 

International Coverage 

from local offices 

Australia 

Belgium 

Canada 

China 

Dubai 

Finland 

France 

Germany 

MRC Transmark Kazakhstan LLP 

302, 48 Azattyk Ave., 

Atyrau Kazakhstan, 060005 

kazakhstan@mrctransmark.com 

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