Economic Developments - July 2018

Kazakhstan currently produces 1.8 million barrels of oil per day and does not intend reducing its production in spite of its obligations to Organization of Petroleum Exporting Countries (OPEC). International Energy Agency (IEA) stated in April, 2018 that Kazakhstan had broken its obligation to reduce oil production by 20,000 barrels per day (bpd) and had instead increased its daily production by 80,000 bpd since October 2017. The giant field Kashagan which produced 170,000 bpd in April, 2018 is expected to increase production to 360,000 bpd.

IMF has stated that driving force of economic growth in Kazakhstan will be technological modernization of the economy, taking into account the introduction of elements of Fourth Industrial Revolution and large-scale digitization. Main recipients of innovation will be manufacturing industry, agriculture, transport and logistics, as well as construction. Recovery of Kazakhstan’s economy is continuing from shocks that began in 2014. After two years of subdued activity—with lower oil prices and slowdown in key trading partners—real GDP increased by 4 percent in 2017. Growth was driven by strong exports, especially oil and metals, reflecting both favorable external conditions and new supply from large Kashagan field. Going forward, growth is expected to remain robust, but there are risks.

Intergovernmental agreement between Russia and Uzbekistan on construction of nuclear power plant (NPP) in Uzbekistan is in the final stage. Russian company ‘’Rosatom’’ will build a station of two modern blocks of the “three plus” generation VVER-1200 in Uzbekistan. A specific site for construction of NPP has not been identified so far.

Uzbekistan plans to commission the Tuyabuguz hydro power plant (HPP) by end 2018. About 73% of planned work on project has been completed. The plant's capacity will be 12 megawatts, height of reservoir is 30 meters, and volume is 250 million cubic meters. HPP will pay off within four years, as it will produce electricity 11 months a year without a break.

Three of Uzbekistan’s state channels reported on shortages of bread in Turkmenistan’s provinces and said there were long lines to purchase bread when it was available. Turkmenistan previously subsidized basic goods like flour, sugar, and cooking oil, but is suffering through the hardest economic times in its nearly 27 years of independence.

Uzbekistan has started transmitting electricity from Tajikistan to Afghanistan. 140 million kilowatt-hours of electricity has already been supplied. An additional agreement has been signed to increase this volume.

Tajikistan’s state-owned aluminium smelter Talco launched a USD200 million joint venture (JV) with a Chinese firm to explore for gold and antimony in Tajikistan. The mine is expected to produce 1.5 tonnes of gold and 16,000 tonnes of antimony per annum and become operational by 2020. The mine was reportedly awarded in exchange for the Chinese company’s construction of a power plant in Dushanbe. Tajikistan is heavily dependent on Chinese investment for its largely agrarian economy. Much of Chinese investment has been facilitated by state-owned Export-Import Bank of China, to which Tajikistan reportedly owes more than USD1.2 billion, equivalent to nearly a fifth of its GDP.

Intergovernmental agreement on construction of China-Kyrgyzstan-Uzbekistan railway, discussions on which have been going on for past 20 years, is expected to be signed by autumn 2018. Cargoes will be shipped from China via Kyrgyzstan and Uzbekistan to Eastern Europe and Middle East by this railway. Kyrgyzstan insisted on a route that would connect the north and south of the country to obtain maximum advantage for the country's economy. Railway is beneficial for Uzbekistan because it will reduce cargo transit costs to half, and speed of cargo transit will increase. For Kyrgyzstan, the Ferghana Valley will be linked to China, there will be an opportunity to develop mineral deposits, and trade will expand - both regionally and with neighboring countries.

Asian Development Bank (ADB) approved a loan of USD300 million to improve economic management in Uzbekistan. This aims to support government's efforts to ensure fiscal sustainability, improve administration of state-owned enterprises that dominate almost all key sectors of Uzbek economy, and ensure their financial activities in a more efficient way. Earlier, ADB announced plans to provide Uzbekistan with USD2.6 billion in sovereign loans in 2017-2019 to continue development of infrastructure in energy, transport, utility sectors, to strengthen support for housing construction in rural areas, and improve access to financial resources for small and medium-sized enterprises and agribusiness.

Kazakhstan is keen to step into the void created by reduction in import of soybean by China from USA as a result of recent ‘’trade war.’’ Exports from Kazakhstan were derailed over last many years due to local protests over leasing of land to Chinese agribusinesses. China imports nearly 100 million tonnes of soybean annually, half of which comes from Brazil and a third from USA. Russia, Ukraine and Kazakhstan together contribute less than 1% of total.

Kazakhstan has introduced a new Visa Regime from July 1, 2018. Time for submission of invitations to enter the country for foreigners has been shortened to 5 working days prior to expected date of entry. Earlier this term was 14 days.


July 18, 2018 



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About the Author

Ambassador Ashok Sajjanhar

Former Ambassador of India to Kazakhstan, Sweden and Latvia; President, Institute of Global Studies and Distinguished Fellow, Ananta Centre

Ambassador Ashok Sajjanhar belongs to the Indian Foreign Service and has acquitted his responsibilities in the diplomatic service for 34 years. He was Ambassador of India to Kazakhstan, Sweden and Latvia and has worked in senior diplomatic positions in Indian Embassies/Missions in Washington DC, Brussels, Moscow, Geneva, Tehran, Dhaka and Bangkok and also at Headquarters in India. He negotiated for India in the Uruguay Round of Multilateral Trade Negotiations and in negotiations for India-EU, India-ASEAN and India-Thailand Free Trade Agreements.

He contributed significantly to strengthening strategic ties and promoting cultural cooperation between India and USA, EU, Russia and other countries.Ambassador Sajjanhar worked as head of National Foundation for Communal Harmony to promote amity and understanding between different religions, faiths and beliefs. Ambassador Sajjanhar has been decorated by Governments of Kazakhstan and Latvia with their National Awards and by Universal Peace Federation with Title of ''Ambassador of Peace.'' Currently Ambassador Sajjanhar is President of Institute of Global Studies, New Delhi. He writes, travels and speaks extensively on issues relating to international relations, foreign policy and themes of contemporary relevance and significance. He appears widely on TV panel discussions. Ambassador Sajjanhar is interested in reading, music and travelling. His wife Madhu is an economist and an educationist. They have a son and a daughter both of who are accomplished singers. Their son passed out of Yale University and their daughter is pursuing her PhD at University of Minnesota.