Abstract
Kazakhstan is not invulnerable to the global financial crisis or to slippage
in the prices of oil and gas – of
which it is a major producer. At
this stage, BMI envisages that real GDP growth slow from 8.5% in 2007
to
3.4% in 2008 to just 1.7% in 2009. However, we are looking for growth to
accelerate again from 2010.
In line with the overall deceleration in
economic activity, we believe the infrastructure sector will also be
affected, though there are some major projects that should help the
sector’s swift recovery. In BMI’s
Q209 Kazakhstan
Infrastructure Report we forecast that construction industry value will be
KZT1.54bn
in 2009. This is based on a revised and updated set of data from
the national statistics agency. The high
inflation that has plagued the
economy is seen subsiding in 2009, though at 4.4% it still pushes industry
value real growth to -1.2% (nominal growth is 3%).
For many years
Kazakhstan represented something of an infrastructural bonanza. Kazakhstan is
a sparsely
populated, increasingly wealthy, landlocked country, which has
a government committed to developing
road links to countries that provide
access to major export markets. Kazakhstan is a crucial part of the
Silk
Road terrestrial trading routes between the Asia-Pacific region (and China
especially) and Europe
(and Russia especially). The crucial hydro-carbons
industry needs substantial new investment if
production and exports are to
increase as planned. Further, the USSR-era has left Kazakhstan with a
curious legacy: the need to import electricity and gas to supply the major
cities in the south and the
southeast of the country (including Almaty,
which is the former capital and still by far the most populous
city in
Kazakhstan). The government has a vested interest in promoting pipelines and
power distribution
networks that will enable Kazakhstan to meet its
requirements with locally produced energy.
For most developing countries,
growth and foreign investment depends on improving governance,
improving
transparency and a reduction in political/policy risk. Kazakhstan is in the
unusual position
where its low ranking on many surveys of transparency and
good governance has not deterred
investments. The latest of which was the
announcement of South Korea’s KEPCO to invest US$2bn for a
power
generation project in the country.
State-owned Kazakhstan Development
Bank, together with the World Bank and the European Bank
for
Reconstruction and Development, has financed the development of
Kazakhstan’s electricity
infrastructure. State-owned energy company
KazMunayGaz’s annual capital expenditure – which
generally can
be thought of its contribution to infrastructure development in the country
– amounts to
well over US$2bn annually. This report includes a
lengthy profile of this important company.
The global financial crisis has
forced the government to nationalise several of the largest banks. For the
time being, the country’s real estate developers are finding it hard
– or impossible – to access the funding
they need.
Construction in Almaty and Astana has – if temporarily – ground to
a halt.
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