Economic Developments - June 2018

Exchange-rate stability is helping tame annual inflation in Kazakhstan. Inflation rose to 18% in mid-2016 after devaluation of Kazakh currency but is now down to 6.5%. These trends have improved Kazakhstan’s economic risk profile. However, Kazakhstan is far from a convincing long-term prospect, with, according to experts, no improvement in political or structural risk indicators and deteriorating capital access. Kazakhstan’s risk score has fallen by more than 10 points since 2007, despite periodic improvements. In their most recent economic-outlook reports, both Asian Development Bank (ADB) and International Monetary Fund foresee GDP growth slowing to 3.2%, primarily due to a weaker industrial sector and lack of progress on the USD9 billion diversification and modernization programme known as Nurly Zhol, devised to wean the country off its oil and gas dependency.

Russian Prime Minister met his Tajik counterpart in Dushanbe and discussed issues of economic cooperation and Tajikistan’s integrated development, as well as work on ongoing projects such as Sangtuda HPP-1.

A group of militants killed five workers of Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline and kidnapped another in Afghanistan's Kandahar province. First phase of construction of TAPI project to transport gas from Turkmenistan through Afghanistan to Pakistan and India by 2019 has been completed. Second phase began in February and involves construction of 816 km of pipeline through five troubled Afghan provinces including Kandahar to Quetta in western Pakistan.

Turkmenistan is hopeful of securing all necessary funding to complete construction of the USD8 billion TAPI pipeline within the next few months. Turkmenistan is building the pipeline to diversify its gas exports which mostly go to China. Turkmenistan hopes to open the pipeline next year, although security risks have raised doubts about its completion on time.

European Bank of Reconstruction and Development (EBRD) and ADB are extending finance of USD50 million to construct a 50 MW solar photovoltaic (PV) project in Kazakhstan’s Baikonur region. Chinese company Risen Energy signed a deal recently with EBRD for financing a 63 MW solar project in Kazakhstan.

International Finance Corporation (IFC), a member of World Bank Group, has signed a mandate with Uzbekistan to increase its renewable power capacity and encourage private sector investment in this sector. IFC will advise Uzbekistan and state-owned national power utility, Uzbekenergo, on structuring a public private partnership model to mobilize private sector experience and capital to construct and operate a 100 MW solar PV project. This will be first phase of a larger initiative to generate up to 1 GW energy from solar projects.

Implementation of the regional CASA-1000 project can bring Tajikistan an annual income of more than USD150 million. In addition, Tajikistan will receive income from transit of Kyrgyz electricity through its territory. Under the project, Tajikistan will export 70% electricity to Pakistan, and 30% to Kyrgyzstan. It will provide transit of 5 billion kWh of electricity from Kyrgyzstan and Tajikistan to Pakistan. Share of Tajik electricity exports will be 3 billion kWh. Analysts are not hopeful about implementation of project due to lack of cooperation between countries involved. Insecurity in Afghanistan is another hurdle for the project.

Regions of Uzbekistan and Turkmenistan were struck by a severe salt storm that lasted for three days. Winds lifted salt and toxic dust from the dried-out Aral Sea, leaving a layer over a large stretch of land. Aral Sea was dramatically drained by Soviet irrigation projects launched in the 1960s. Waste from weapons testing, plus pesticides and fertiliser have created toxic dust that causes many health problems in the area. Mortality rates are high as respiratory diseases, including drug-resistant tuberculosis, and various cancers are common.

Kazakh-Uzbek trade grew 50% in first quarter of 2018 compared to same period last year. The countries are working to increase trade to USD3 billion by end of 2018 and to USD5 billion by 2020. In 2018, the first Kazakh-Uzbek Interregional Forum will take place in Astana and first meeting of Business Council in Shymkent.

In a bid to facilitate Pakistani business community, Uzbekistan has simplified the visa procedure. Now it will provide visa to entrepreneurs within one day after submission of an online request.


June 27, 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.