Abstract
On May 25 2009, Kazakhstan’s security service, the KNB – successor
to the Soviet-era KGB – arrested
the head of the country’s
state uranium company. Mukhtar Dzhakishev, the long-serving head of
Kazatomprom (one of the world’s largest uranium producers), has been
detained on allegations of theft. A
KNB spokesman stated that a number of
other Kazatomprom executives have also been arrested, and that
investigations are ongoing. While the extent of the evidence against
Dzhakishev has yet to become clear,
we caution that this move could be
another concerning sign of divisions and factional power-plays within
the
Kazakh elite. These detentions are the latest in a series of high-profile
industrial and government
arrests, and we expect these divisions to
sharpen further as the economic crisis bites harder.
With mining
accounting for 20% of industrial employment, BMI believes that a further
deterioration in
economic situation could result in significant unrest and
could even jeopardise the rule of President
Nazarbavev. In general, the
Kazak population is considered to be relatively benign when it comes to
social issues, but quick to hit the streets in protests on economic matters.
According to local reports,
unrest is already stirring in the coal mining
region of Karaganda as well as the major copper producing
area of
Zhezkazgan. The current situation is not without precedent. In the 1990s
falling living standards
and disputes over wages resulted in riots in
Karaganda.
It seems that the government is taking measure to avert a
crisis. Tax cuts are to be offered to mine
companies that do not sack
workers. Meanwhile, the fiscal stimulus package should increase stability
and
liquidity in the sectors such as mining, and provide the authorities
with extra funding to spend creating
jobs. Oil revenues, despite the
collapse in prices, are continuing to grow as more output comes on-stream.
This is providing some protection for the economy, while the depreciation of
the tenge should also help to
boost exports.
An industry that was in
disarray due to the break-up of the Soviet Union, Kazakh mining witnessed
widespread technological upgrades and privatisations in the 1990s. This was
further fuelled in recent
years by spiralling international metal prices,
rapidly expanding demand from China and India, and
streamlined procedures
for obtaining permits and foreign investment. The country’s current
reserve of
copper is estimated at 36mn tonnes. Further, it ranks second
globally in terms of manganese ore reserves,
which are estimated at 600mn
tonnes. Kazakhstan also hosts 30% of the worldwide chromite ore deposits,
as well as 95% of the total chromium reserves within the Commonwealth of
Independent States (CIS).
Industry Forecast
By 2013, BMI forecasts
that the market will be worth US$18.9bn, up from a level of US$15.38bn in
2008. However, in the short-term the sector is set to suffer, as the collapse
in metals prices and slumping
demand has forced the country’s
leading producers such as ENRC and Kazakhmys to cut production. In
2009,
we expect the US dollar value of the market to contract by 14.4% in real
terms, while in 2010
similar levels of negative growth will be recorded.
Recovery of any sort will not occur until 2012 at the
earliest
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