KAZAKHSTAN SPOTLIGHT #1

Distributed with The Daily Telegraph

Kazakhstan Spotlight Customs Union Boosts Kazakh Energy Leverage

By Ambika Behal

W

Kazakh President Nursultan Nazarbayev addresses 2,000 participants of the 7th World Islamic Economic Forum in Astana on June 8

Nazarbayev Presents Plan for Renewed Global Islamic Progress This eight-page pull-out is produced and published by Coast to Coast Communication Ltd, which takes sole responsibility for the contents.

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INSIDE page 2

Astana Achieves Economic, Architectural Success Kazakhstan to Build Bridges During Islamic Body Chairmanship page 3

New Term Charts Path to Continued Progress Astana Forum to Broaden Global Nuclear Security Efforts page 4

Customs Union Success Attracts Interest of Central Asian Neighbours page 5

Kazakhstan WTO Accession on Track for 2012 Labour Camp Museum Is Reminder of Past Repression

President gives keynote speech at the 7th World Islamic Economic Forum

By Joe Watson

K

azakhstan seeks to establish itself as a leader within the Muslim world and a bridge between Islam and the West.

The latest evidence was its hosting of the Seventh World Islamic Economic Forum in Astana this month, where President Nursultan Nazarbayev offered proposals for Muslim nations to modernize and progress. Kazakhstan this month will also become chair of the Organization of the Islamic Conference.

The country also showed it was capable of becoming a leader within the Islamic world when in 2010 it became the first Muslim nation to chair the Organization for Security and Cooperation in Europe. During that chairmanship, it convinced the 56 participating states to hold

the organization’s first summit in 11 years, in Astana.

In addition, Kazakhstan has taken steps to become a force in Islamic banking and to begin making food and other products that comply with Shariah Law. It is also urging Muslims to practice ethnic and religious tolerance.

Nazarbayev opened his address at the World Islamic Economic Forum by reminding participants of Kazakhstan’s Islamic credentials.

“Islam came to our lands more than a thousand years ago,” he said.

But he quickly jumped from history to one of the biggest challenges facing the Muslim world: development.

There are three models of Islamic development today, he said.

The first is what he called “inertial development” – development that is so slow or

so limited that it fails to meet the population’s needs.

“Unfortunately, recent developments have clearly shown that this conservative approach will unavoidably sooner or later lead to outbursts of protests,” he said.

The second development model is based on a “radical return to the past and a com-

plete denial of the institutions of modern society,” the president said.

The third model, he said, is the “modernization of Islam.”

Kazakhstan has chosen modernization, which Nazarbayev said does not conflict with Islam’s core principles.

Kazakhstan’s First Female Airline Captain Commands Region’s Skies page 7

Kazakhstan’s Banking Sector Rebounds, Progress Mixed Aircraft Manufacturing Takes Off in Kazakhstan page 8

Kazakhstan Invests in a Renewable Future Kazakh Agro Sector Defies Drought

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Today, however, the Muslim world has fallen behind, he said.

To start with, Islamic countries have far less economic clout than their combined population -- a fifth of the world’s total – would suggest, Nazarbayev said.

“For instance, there is no member of the Group of

Eight representing the Ummah (Muslim society),” he said. The G8 are the countries with the world’s top economies.

As for other indicators of Islam’s stature today, Nazarbayev asked these questions of the forum participants: How many Islamic universities are in the world’s top 100? How many Nobel Prize winners in science and technology have Muslim countries produced? How many important technological breakthroughs have come from Muslim researchers?

(The answer to all: none.)

Muslim countries need to make a major effort to modernize, Nazarbayev asserted.

Otherwise, the Islamic world may lag much of the rest of civilization for another century, he said.

He offered five proposals for modernization:

Nazarbayev... see p.4

The new Customs Union will encourage Kazakhstan’s light manufacturing sector

Between 2000 and 2007, Kazakhstan enjoyed a boom and it had been the first exSoviet Union country to receive an investment grade credit rating. The country saw economic growth balloon at over 9 percent each year. Then, in 2007, the global credit crunch hit, and Ka-

states are world leaders in oil and wheat production, and have an annual agricultural output worth $112 billion.

At the time of signing, Kyrgyzstan and Tajikistan had also expressed consideration of possibly joining at a later stage. The two countries Customs union... see p.4

Kazakhstan Can Be Gateway to Kazakhstan Rides Rare Central Asia, Foreign Minister Says Earths Mining Boom

page 6

Images courtesy of the Government of Kazakhstan unless otherwise noted.

He noted that for centuries much of the world’s progress came from the Muslim world. “Islamic cultural expansion in the Middle Ages gave the world its greatest achievements in mathematics, chemistry, astronomy, medicine, architecture, philosophy and poetry,” he said.

For centuries much global progress came from the Muslim world

Shanghai Security Group Holds Summit in Astana

This report was sponsored by the Government of Kazakhstan.

hen Kazakhstan, Russia, and Belarus agreed to set up their Customs Union in July 2010, critics said it would be a death knell for Kazakh trade and business. But one year on, just days before the removal of all of its customs borders, the fossil-fuel rich nation has defied the pessimists.

In the first three months of this year, trade with Russia soared by 57 percent compared with the same period in 2010.

Also, the Customs Union has already confirmed Kazakhstan’s success in attracting investment from companies in other countries that would take advantage of Kazakhstan’s favourable business climate to use it as a base to sell their products in Russia.

zakhstan took a beating from a loss of capital inflows. The American Chamber of Commerce in Kazakhstan reported 2009 economic growth for Kazakhstan at 1.2 percent.

Kazakhstan, Russia, and Belarus, representing the heart of Central Asia’s historical Silk Trade Route, accelerated their longstanding talks over joining together to form a CU in 2007. In 2010, the agreement came together and steps towards implementing economic integration were taken, with removal of customs borders to follow in July 2011. Export duties are to be abolished after the creation of the Single Economic Space in January 2012.

The aim of the CU was to connect the 170 million people of the region together, into a single market economy.

The combined GDP of the three nations is $2 trillion a year. The three combined

Kazakh Minister of Foreign Affairs Yerzhan Kazykhanov

Q: What opportunities do you see to expand Kazakhstan’s trade and other relations with the European Union and its leading nations?

A: The European Union is the biggest partner of Ka-

zakhstan in terms of trade volume. Our trade volume with the European Union has reached $40 billion already and certainly we consider the European Union as a potential partner, and we are planning to expand our co-

operation in this respect.

Over the last several years our relations have been expanding and we took positive note of the decision of the European Union to adopt, during the German Presidency in 2007, a spe-

cial program toward Central Asia until 2013. It’s a strategic program aimed at Central Asia and this program embraces all areas of possible cooperation starting with security, development and humanitarian fields.

We also are very much interested in expanding our industrial exchange especially involving new and innovative technologies from the European Union to Kazakhstan.

We always said Kazakhstan can play the role of a gateway to Central Asia because our economy is the most advanced in the region.

In 2008, the government of Kazakhstan adopted a special program called “The Path to Europe” and we have already achieved good results with it.

Q: How do you assess the future development of energy relations between Kazakhstan and the European nations?

A: Kazakhstan is the third largest oil supplier to the European markets after Russia and Norway. We proved to be a very reliable oil supplier to the European markets and we would like to continue to do so.

Some 30 percent of oil Gateway... see p.4

By Colin Berlyne

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are earth mining is the latest boom industry in Kazakhstan. China’s decision to slash exports and prioritize domestic use of the rare industrial metals crucial for many technology products set off a global hunt for new sources, and Kazakhstan has proven to be rich in many of them.

Kazatomprom, Kazakhstan’s state-owned uranium mining company, plans to invest $800 million to develop rare-earth metal mining in Kazakhstan.

A joint venture with Russia’s Rosatom company may invest up to $500 million to mine rare earths, and joint ventures with Japanese Toshiba Corp. and Sumitomo Corp. plan to invest additional $300 million.

Kazatomprom’s joint venture with Sumitomo, set up in 2010, aims to extract molybdenum and rhenium from uranium ore, while the joint project with Toshiba may produce niobium, rhenium, wolfram, tantalum and beryllium.

Kazakhstan plans to increase its output of beryllium to around 2,000 tons in

2014 from 712 tons in 2009, according to the country’s Ministry of Industry and New Technologies. Its production of tantalum, meanwhile, will rise to 297 tons in 2014 from 137 tons in 2009.

Kazakhstan is also one of the world’s two main producers of rhenium. At seven parts per billion, rhenium is one of the rarest elements in the earth’s crust. Kazakhstan and Chile together provide 86 percent of the world’s supply.

Rhenium has an exceptionally high melting point of 3,186 degrees Celsius, making it invaluable in the

Germany, Japan and South Korea into a hectic search for new supplies. Rare earths are exceptionally rare elements and minerals that are essential for many high-tech industrial processes. They are vital, for example, to produce Blackberrys, televisions and hybrid cars.

Rare earths can be produced from uranium tailings, which means countries rich in uranium are the most likely places to find them, or the minerals and elements from which they can be extracted. And that automatically moves Kazakhstan to the top of the list.

In the second half of 2010, rare earth prices soared by 700 percent construction of jet engines for aircraft. Its price has risen 700 percent since 2005 making it one of the most expensive industrial metals in the world.

China has dominated the rare earths global supply, but is drastically curtailing exports, throwing high-tech economies and major corporations in the United States,

It is already the largest uranium producer and exporter in the world, and as the ninth largest country in the world with a territory of 1 million square miles, there are plenty of places to look for rare earths.

Also, as China’s dominance of the global market to this time confirms, Rare Earths... see p. 3

Distributed with The Daily Telegraph

Kazakhstan: International leadership and perspective

Astana Achieves Economic, Architectural Success Capital Marks its 13 Anniversary on July 6 with Major Celebration

By Joe Watson

A

stana, Kazakhstan’s progressive capital in the steppe, has plenty to celebrate as it approaches its 13th anniversary. The city recently revised its master plan to better manage Astana’s rapid growth.

And the futuristic capital will complete a number of key structures in time for the 20th anniversary of Kazakhstan’s independence on December 16.

It is also planning a huge 13th anniversary celebration on July 6 with almost 100 events and headline performers such as Britain’s Sarah Brightman, Sting and Canada’s Lara Fabian.

The main changes in the master plan are aimed at ensuring a seamless transition of architectural and streetlayout integrity between the city and its surrounding areas.

Thus the main feature of the revised master plan is “that much attention will be given to an indivisible development of the city and its suburbs,” said the plan’s chief architect, Bakhtybay Taytaliev. “The suburban area of 30 to 60 kilometres around the city is viewed as an integral part of the city (in the revised plan) to make sure that there is no uncontrolled urban sprawl.”

Taytaliev’s team’s revision of the master plan is the latest tweaking of the 30-year blueprint that renowned Japanese architect Kisho Kurakawa drew up in 1998 after winning an international competition to design the city.

The first phase of the plan, between 1998 and 2001, laid the groundwork for converting a provincial city of 200,000, once known as Akmola, into a modern capital.

That work focused on revitalizing existing administrative buildings for government ministries and building housing for government workers moving from the old capital of Almaty.

The second phase, between 2001 and 2006, involved establishing a new city centre

The KazMunayGaz headquarters is one of Astana’s Iconic structures

on the left bank of the Ishim River and rebuilding the old city centre on the right bank in a way that complied with Kurakawa’s master plan. The heart of the new city centre is an array of government buildings -- for ministries and agencies, for Parliament and for the Supreme Court.

have been built. All that’s remaining are premier cultural and arts facilities, he said – and they will be in place by December.

Among the government-financed additions to Astana’s skyline that will be completed this year are an Opera and Ballet Theatre, a Stu-

Astana’s futuristic look has garnered international attention President Nursultan Nazarbayev, who came up with the idea of moving the capital from Almaty to Astana in the early 1990s, said recently that most of the administrative, educational and sports facilities in the master plan

dents’ Creativity Palace and new components of a national medical complex.

The new National Library, the centerpiece of whose design is a Mobius strip, is scheduled to be finished next year.

Privately financed projects that will be finished this year or in the near future include a mosque that can accommodate 5,000 worshippers; the 382-meter-tall Abu Dhabi Plaza, which will be Kazakhstan’s tallest building; and a domed city within a city that will contain housing for 20,000 people and include shopping, dining, entertainment and recreational facilities, including a mini-golf course.

The 45,000-square-metre Student’s Palace will consist of a Kazakh history museum, a planetarium, libraries, sports facilities and dancing halls.

Two major infrastructure projects that Astana plans this decade are a larger airport and a larger central train station.

The new airport, which

will be about 20 miles from the city, will be dedicated to international travel. The current airport will handle domestic flights. The existing airport is only a decade old but is straining to keep up with the increase in passenger volume resulting from the city’s population growth and the capital’s growing international political and economic importance.

The new Chrystal Rainbow train station will be near the intersection of Akzhol and Musrepov Streets. In 2014, Astana will start building a 42-mile light rail line with 42 stations. The line will link the existing central train station with the existing airport.

Astana has progressed greatly since Parliament agreed to Nazarbayev’s proposal to move the capital in 1994.

Its futuristic look has garnered international attention.

Centerpieces of Astana’s architecture include the Baiterek statehood monument, the Palace of Peace and Harmony and the Khan Shatyr shopping and entertainment centre.

The Baiterek consists of a gold, egg-shaped dome sitting on a tall tower depicting a tree of life described in Kazakh legends. The pyramidshaped Palace of Peace and Reconciliation and the Khan Shatyr -- which is billed as the largest tent in the world because of a vinyl covering that converges to a point at the top – were both designed by heralded British architect Norman Foster. Lord Foster’s firm are now designing the Abu Dhabi Plaza.

Astana’s progress over the past 13 years has been more than architectural, however.

The third phase of the master plan, whose implementation began in 2006, is aimed at ensuring that Astana, which has 700,000 residents, can handle an anticipated 1.2 million people by 2030. Because the hundreds of thousands of newcomers will need jobs, part of the third-phase challenge involves using city planning

to foster additional business opportunities.

Astana’s economy has grown an astonishing 50-fold the past decade, Mayor Imangali Tasmagamgetov said at the Astana Invest 2011 forum in April. That has led to the city accounting for 10 percent of Kazakhstan’s gross domestic product – more than six times the 1.5 percent it accounted for in 2001.

Almost every month Astana officials announce a new business coming to the city.

Two of the most high-profile in recent years were a joint venture with General Electric of the United States to assemble railroad locomotives and an Astana Space Centre that is a joint venture with EADS Astrium of France.

The new businesses have led to Astana’s industrial production increasing sevenfold over the past decade, Tasmagamgetov said. Investment is needed to start new enterprises, of course, and that investment has increased 30-fold since 2000, the mayor said.

The investment surge demonstrates “the competitiveness of our city and the value it presents,” he said.

A spurt in convention business the past few years has

also been one of the contributors to Astana’s economic growth.

The city has shown it can handle world-class events such as last year’s summit of the Organization of Security and Cooperation in Europe and this year’s Asian Winter Games, which Astana hosted jointly with Almaty.

Astana also has developed a reputation for holding important economic conventions. One is the annual Astana Economic Forum, which this year attracted seven Nobel Prize winners, heads of state, international business leaders and academics.

Other major economic events include the yearly KazEnergy Forum oil and gas convention and the Minex international mining industry conference.

Astana is also seeking to host both an international Expo and a Winter Olympics in the next decade.

The city has also become home to a cutting-edge educational centre and major medical facilities.

Nazarbayev University opened last year in Astana with a mandate of becoming Kazakhstan’s higher-education flagship.

President Nazarbayev, who has a metallurgy background, asked that the university that bears his name become a force in applied science.

Its mandate also includes being an experimental generator of ideas that the rest of Kazakhstan’s universities can use to improve their programs, university Vice President Kadisha Dairova said.

In just a few short years, Astana has also developed the best medical complex in the country.

It includes a National Scientific and Health Centre, a National Neurosurgical Centre, a National Cardiac Surgery Centre, a National Emergency Care Centre, a National Diagnostic Centre, a National Maternity Care Centre and a National Children’s Rehabilitation Centre, as well as a National Medical Academy.

Astana’s progress in creating an eye-catching skyline, a thriving business environment, and quality educational and health-care establishments has exceeded domestic and international expectations. On the eve of its 13th anniversary, it looks as if that progress is likely to continue.

Sting’s upcoming concert in Astana excites locals and guests with tickets going out fast

Kazakhstan to Build Bridges During Islamic Body Chairmanship

By Alex Walters

A

t the end of June Kazakhstan takes over the rotating annual chairmanship of the world’s largest and most representative organization of predominantly Muslim states, the Organization of the Islamic Conference. Astana has already drawn up plans to advance the OIC’s goals of peaceful development and cooperation with the rest of the world.

“Kazakhstan attaches great importance to cooperation with the OIC countries based on mutual respect and our commitment to shared values. Taking over the OIC chairmanship, Astana aims to further boost relations with the Muslim world and become more actively engaged in the OIC activities,” Bakhyt Batyrshayev, Kazakhstan’s permanent representative to the OIC, said in a recent interview.

The 57 nations of the OIC contain 1.4 billion people, 20 percent of the world’s population of nearly seven billion, and are its fastest growing segment. They control 70 percent of global energy reserves and 40 percent of the world’s raw minerals.

In terms of the countries that are its members, the OIC is the world’s second most populous international organization after the United Nations.

Kazakhstan will take over the chairmanship following a major OIC conference in Astana June 28-30 after which the OIC name will change to the Organization of Islamic Cooperation to reflect the changed nature of the group which has been in existence for more than 40 years.

“Recognising the meeting

as a major political event, Kazakhstan is carrying out a comprehensive preparation,” Batyrshayev said. “We are preparing for a top-level meeting with meaningful discussions that will reach concrete decisions.”

Kazakhstan’s presidential, prime ministerial and foreign ministry officials are experienced and confident coming off their successful year of leading the 56-nation Organization for Security and Cooperation in Europe (OSCE) through 2010 and the six-nation Shanghai Cooperation Organization (SCO) whose summit meeting concluded in Astana earlier in June.

Kazakh officials were praised for the resources and care they put into achieving consensus among OSCE delegations and foreign ministries for new initiatives. Batyrshayev said they would bring that same expertise to their efforts to revitalize the OIC. “Kazakhstan has the appropriate tools and ample experience gained from hosting the Organization for Security and Cooperation in Europe (OSCE) Summit in December 2010,” he said. “Kazakhstan opened its Permanent Mission to the OIC in March 2010. This office is responsible for the organizational aspects of our chairmanship and for strengthening the country’s cooperation with the OIC.” Kazakhstan assumes the OIC leadership having already established relationships that position the country as a bridge between north and south, east and west.

“Following the OSCE chairmanship, our presidency in the OIC will be a logical continuation of mul-

Kazakhstan’s Permanent Representative to the Organization of the Islamic Conference Bakhyt Batyrshayev

tilateral diplomacy,” Batyrshayev said. “At the helm of the OSCE, we seized an opportunity to bring the interests of the Central Asian countries to the fore of the

Vienna-based organization’s agenda.”

“As the chair of the OIC Council of Foreign Ministers (CFM), Kazakhstan will encourage the inter-institu-

tional dialogue between the OSCE and the OIC on issues of security, economic and humanitarian cooperation, thus paving the way towards a rapprochement between

the West and the Muslim world,” he added.

The Kazakhs have made clear that they want to launch new programs and strengthen the institutionalized cooperation between the OIC and other major inter-governmental organizations such as the OSCE, the Conference on Interaction and Confidence-Building Measures in Asia and the Shanghai Cooperation Organization.

Strongly religious Muslim nations like Iran and Saudi Arabia enjoy good relations with Kazakhstan. They know that Kazakhstan shares their devotion toward deepening Islamic cooperation.

“The continued growth of Kazakhstan’s economic relations with other Muslim countries is of great importance,” Batyrshayev said.

“Kazakhstan has already developed mutually beneficial cooperation with Turkey, the United Arab Emirates, Saudi Arabia and many other Muslim nations many of them in the key areas: economic cooperation, trade, transport, travel and finance.”

Special importance is attached to cooperation with the Islamic Development Bank and other financial and consulting institutions. At present, the IDB financially backs the implementation of several economic and infrastructure projects in Kazakhstan totalling $500 million.

Among the projects are building the Karaganda-Astana highway and assisting the development of Astana’s infrastructure and small to medium-sized businesses.

But at the same time, the nations of North America, Europe and Northeast Asia also know that the Kazakhs are moderates and constructive players in the global

community and that they are sincere in their commitment to launch new initiatives of mutual engagement.

Kazakhstan also has a large infrastructure of organizations dedicated to inter-religious and inter-civilization bridge-building.

The upheavals across the Middle East in Tunisia, Libya, Egypt, Syria, Bahrain

That offers the prospect of reinvigorating the international sukuk market, which has remained small and flat in recent years.

The country’s OIC economic plans, however, are only one facet of its agenda for the OIC chairmanship.

“Before and during its chairmanship of the OIC, Kazakhstan intends to hold

The OIC chairmanship will be a logical continuation of Astana’s multilateral diplomacy and Yemen against long-established governments have also raised question marks about the future of the region. Fears of possible U.S. or Israeli attacks on Iran’s nuclear facilities are widespread.

In this strained and fearful atmosphere, Kazakhstan’s efforts to launch business initiatives from the platform of the OIC are likely to be welcomed by its member nations.

Kazakhstan’s OIC leadership is also likely to accelerate the integration process between the five former Soviet republics of Central Asia and the core Arab Muslim nations of the Middle East.

Kazakhstan’s growing financial ties with Qatar and the United Arab Emirates in particular provide a significant conduit to step up banking and general financial coordination.

During the year of its OIC chairmanship, Kazakhstan is widely expected to issue its first sukuk, or Islamic bond, for around $500 million, in accordance with the principles of Sharia Islamic law.

such large-scale events as the 7th Session of the World Islamic Economic Forum, the Third Conference of the OIC Health Ministers, research and practice conference on “The Role of Islam in the CIS countries”, and the Ministerial Conference on Women’s Role in the Development of OIC Member States and some other events still awaiting approval,” Batyrshayev said.

“Other meetings concerning the issues of ecology, nuclear disarmament, global and regional security, and sustainable development are to take place,” he added.

The OIC countries adopted a document titled “Ten Year Programme of Action” at their Mecca Extraordinary Summit in 2005. Based on this plan, the new OIC charter adopted in 2008 engaged the organization in an unprecedented internal reform process with the aim of making it effective and capable of meeting new challenges.

“Kazakhstan wants to continue the process of redirecting the OIC’s activities to correspond to new global realities,” Batyrshayev said.

Distributed with The Daily Telegraph

Kazakhstan: International leadership and perspective

New Term Charts Path to Continued Progress

By Colin Berlyne

the Islamic world.

Domestically, the government is looking to financially strengthen the middle class.

The government this year launched plans for initial public offerings (IPOs) for the Kazakh public to buy minority stakes in major national companies, particularly in the energy sector. This program will increase the scale of popular participation in the national economy and provide the public, especially the growing middle class, with an increased share in the benefits of Kazakhstan’s economic development.

The strengthening of the power and wealth of the middle class through these economic initiatives will also progress the country’s democratic maturity. That maturity will be strengthened further by plans to expand popular involvement in non-governmental organizations (NGOs) and to expand and strengthen the institutions of democracy at the grassroots level.

The 2010-2014 National Program also lays out a series

K

azakhstan’s President Nursultan Nazarbayev followed his re-election victory in April by implementing changes to the government that point to the priorities Kazakhstan will pursue over the coming decade.

Kazakhstan intends to become an international trade, logistics and financial hub by 2016, Nazarbayev announced on May 18 while speaking to the 24th session of the Foreign Investors Council (FIC) in Astana.

Current plans envisage achieving a 50 percent rise in labor productivity and a 100 percent rise in the manufacturing sector by 2014.

The country will also push ahead with its 2030 Development Strategy to create a strong and diversified light industrial sector, including a large food processing industry.

Agricultural production, especially in wheat and beef, will also be expanded to make Kazakhstan a global food exporting power comparable to Argentina, Canada and Australia.

The heat wave and drought that swept Central Asia in 2010 slowed the implementation of that agricultural expansion but also underlined the wisdom of pursuing it.

Despite a drop of 7 million tonnes in grain production last year compared with the record harvest of 2009, Kazakhstan became the key “swing” producer of grain in the former Soviet republics. It was able to replace Russia as the main

in transportation costs.

Kazakhstan also hopes over the coming years to expand the number of foreign-expertise training programs in its oil, chemical, high-technology, engineering, spacecraft manufacturing and IT sectors.

It will also seek more technology, expertise, and funding for small and medium-sized entrepreneurs (SMEs).

Will encourage increased NGO participation to strengthen democracy A new series of pro-business tax and other incentives will also be created to encourage and protect foreign investment in critical projects.

Joint educational and research projects between domestic and foreign institutions with funding from major corporations are also on the country’s agenda.

The new presidential term has also brought a series of changes to government ap-

Kazakhstan intends to become an international trade and financial hub President Nursultan Nazarbayev was elected to a new term on April 3

wheat exporter to nations such as Azerbaijan and became an important back up supplier of specialized grain to Russia to compensate for grain shortfalls there.

A new customs union with Russia and Belarus will also come into full implemen-

tation during the president’s new term. In the first quarter of 2011, the new CU boosted Kazakhstan’s trade volume with the other two member nations by 57 percent over Q1 2010.

The union will also help increase Kazakhstan’s growing

trade relationship with China.

Kazakhstan also looks certain to expand trade and diplomatic relations with the nations of Western Europe, while at the same time seeking to raise funds for investment in the Middle East and East Asia thereby reducing

the country’s dependence on Western stock markets.

Kazakhstan will also use its chairmanship of the Organization of the Islamic Conference starting at the end of June to strengthen its cooperation with major Muslim nations and to raise its profile in

of development target goals including a 12.5 percent increase in the manufacturing industry’s contribution to GDP, a 43 percent increase in nonprimary export volume to total volume produced in manufacturing, a 10 percent increase in innovative enterprises and at least an 8 percent decrease

over in the foreign ministry just before Kazakhstan begins its year-long chairmanship of the 57-nation Organization of the Islamic Conference, the Islamic world’s largest and most influential international organization. Prime Minister Karim Massimov retained his position.

Nazarbayev also appointed six new ministers to the

pointments.

Secretary of State Kanat Saudabayev retained his position but gave up his other job as the foreign minister to concentrate on major national issues. His deputy Yerzhan Kazkykhanov, an expert on relations with the Middle East and the Arab world, took

government: Kalmukhanbet Kassymov as Minister of Internal Affairs, Kairat Kelimetov as Minister of Economic Development and Trade, Assylzhan Mamytbekov as Minister of Agriculture, Berik Kamaliyev as Minister of Transport and Communications, and Talgat Yermegiyayev as Minister of Tourism and Sports. The Harvard-educated Zhanar Aitzhanova was appointed to a new position of the Minister for Economic Integration, to continue to spearhead Kazakhstan’s accession to the World Trade Organization and coordinate efforts within the Customs Union. Timur Kulibayev took over as Chairman of the Samruk Kazyna National Welfare Fund.

Nazarbayev’s significant reelection victory in April was an affirmation of the prosperity the country has enjoyed since gaining independence nearly 20 years ago. The new initiatives seek to build on that progress.

Astana Forum to Add Momentum to Global Nuclear Disarmament Efforts

The monument “Stronger than Death” in Semey remembers the more than 1.5 million people who suffered from radiation from 500 Soviet nuclear tests in eastern Kazakhstan

By Colin Berlyne

K

azakhstan will host an International Forum for A Nuclear Weapons-Free World in its capital Astana October 11-13.

The meeting is designed to be an important step towards creating greater momentum in moving ahead the global nuclear disarmament agenda. It will also come on the heels of the April 2010 non-proliferation summit in Washington, in which President Barack Obama hosted 47 nations.

It will point the way to the scheduled full nuclear summit to be held in Seoul, the capital of South Korea, in 2012.

Kazakhstan Secretary of State Kanat Saudabayev announced the Astana gathering during a visit to London in May 2010 to attend a conference on “Deterrence: Its Past and Future.”

“Kazakhstan, which voluntarily renounced the world’s fourth largest nuclear arsenal, has been, is and will be a reliable partner of the international community in nonproliferation, disarmament

and peaceful use of atomic energy,” Saudabayev said.

Speaking to Kazakh reporters outside Lancaster House in London, where the conference took place, former U.S. Senator Sam Nunn, one of the world’s most respected experts on nuclear non-proliferation issues, said, “Kazakhstan has contributed [to nuclear disarmament] not only by getting

deterrence in addressing those threats.

Second, to develop a common language on nuclear disarmament that can facilitate short-term steps to move toward a safer and more stable form of deterrence.

And third, to identify and discuss short-term steps applied regionally and globally to facilitate the transition

Meeting marks the 20th anniversary of the closing of the Semipalatinsk test site rid of nuclear weapons, which was an example for the world, but also by working diligently over the last few years and blending down the highly enriched uranium, the weapon grade material.”

The London conference focused on three objectives: First, to stimulate an international dialogue on deterrence, including a better understanding of regional perspectives on threats to international security and the role of nuclear

from mutual assured destruction (MAD) toward a new and more stable form of deterrence with decreasing nuclear risks.

“If the international community fails to discontinue the growth in the number of states possessing nuclear weapons in the foreseeable future, the concept of nuclear deterrence may completely lose its meaning,” Saudabayev warned. “In this regard, we believe that the steady decline in the number

of nuclear arsenals, the unconditional refusal of all members of the international community (to support) horizontal and vertical proliferation, control over proliferation and the non-discriminatory usage of nuclear energy and technology for peaceful purposes under the absolute IAEA supervision is the way that has no alternative.”

The Astana gathering is scheduled to mark the 20th anniversary of the closing down of the notorious Soviet nuclear testing site at Semipalatinsk in eastern Kazakhstan.

The Soviet Union conducted almost 500 nuclear tests at the test site for 40 years until the site was shut down by the president of Kazakhstan, Nursultan Nazarbayev, in defiance of the Soviet leadership in August 1991.

Kazakhstan President Nursultan Nazarbayev proposed, at the Nuclear Security Summit in Washington in April 2010, an initiative to adopt a Universal Declaration of a Nuclear-Weapons Free World, which would stipulate the commitment of all states to move towards a nuclear weapons-free world.

“We intend to actively and consistently work on promoting this initiative,” Saudabayev said.

The Washington nuclear summit of April 12-13 achieved no binding agreements. Nor did it attempt to.

But it nevertheless marked a significant step forward in global nuclear security, nonproliferation and international cooperation against terrorists and rogue states seeking to acquire nuclear weapons.

Leaders of some 47 nations as well as top officials of the United Nations, the International Atomic Energy Agency and the European Union attended the summit in Washington hosted and organized

by Obama.

The Obama administration prepared a detailed list of measures that were already being taken by each country to ensure the security of its nuclear installations and material. It also drew up a detailed list of the additional measures that administration experts regarded as necessary and practical for each of those nations to ramp up its nuclear security.

President Obama discussed these issues with each Nuclear Summit... see p.6

From left: CNN founder and nuclear disarmament activist Ted Turner, former U.S. Senator Sam Nunn, Kazakh and international experts examine expansion plans for a plant in Ust Kamenogorsk, the site of Kazakh rare earth metals production Rare Earths... from p.1

rare earths appear to be concentrated in their geological distribution in the heart of north-Central Asia. That makes the neighbours of western China -- Kazakhstan and Kyrgyzstan -- the prime locations to look for them.

The Sumitomo Corporation, the third largest trading house and a major corporation in Japan, certainly thinks so. In 2010, they announced a new joint venture (JV) -- the Summit Atom Rare Earth Company -- with Kazatomprom, Kazakhstan’s national nuclear corporation, to make rare earths from uranium tailings.

Up to now, China has not only dominated the global rare earths supply, it has effectively monopolized it.

More than 90 percent of rare earths produced and sold every year come from there.

But the hunger of China’s own rapid and colossal industrial expansion and high-tech progress is now swallowing up most of that production. In July 2010, China rocked the world market by announcing it was withholding nearly threequarters of its previously announced export quota of rare earths for the second half of this year to supply its own domestic requirements. The quota figures were slashed by 72 percent.

As a result in the second half of 2010, global prices for rare earths soared by 700 percent. In response, corporations such as Glencore International AG, Stans Energy Corp and Greenland Minerals & Energy Ltd., have led the rush to prospect and open new rare earth mines, or reopen old ones.

The term “rare earths” refers to 17 chemically similar elements, including neodymium and dysprosium.

Neodymium oxide is vital

the entire world’s annual demand today. And global demand is anticipated to almost double to an estimated 225,000 tons by 2015.

But if Kazakhstan does succeed in becoming a major global producer of rare earths, as seems likely, will that propel it into a potentially tough trade rivalry with China? After all, Japan’s relations with China have soured over this issue alone over the past six months.

Kazakhstan’s state-owned uranium mining company plans to invest $800 million in rare-earth mining for mini-hard drives in laptops and headphones in Apple’s iPod. Its price was just over $19 per kilogram a year ago. Now that has risen to $80 per kilogram.

This is good news for Summit Atom and the Kazakhs. They hope within 18 months to two years to mine up to 1,100 tons of rare earth concentrates per year for Japanese customers, Bloomberg reported this month.

It could boost its supplies to a massive 10,000-15,000 tons by 2014-2015, the report said. That would be the equivalent of 10 percent of

That is unlikely to happen between China and Kazakhstan. The two countries enjoy excellent trade and diplomatic relations and they are improving all the time. Kazakhstan just signed a new far-reaching deal to supply high-grade uranium oxide to China to fuel its next generation of civilian nuclear reactors. China plans to build 500 of them in the next 30 years.

It is much more likely that Kazakhstan’s current coordination of its oil exporting policy with neighbouring Russia will frame Kazakh-

stan’s future dealings with China on rare earths production and exports.

Kazakhstan formed a new Customs Union with Russia and Belarus last summer and quickly imposed an export tax on its own oil production as the Russians wanted -- although it was only around 8 percent of the far higher tariffs the Russians impose on their own oil exports. But this relatively mild measure alone will net well over $1 billion extra per year in revenues for Kazakhstan.

Similarly, Kazakhstan looks likely to carefully coordinate its own rare earth exports to the global market with Beijing. The Chinese did not impose their latest rare earth export restrictions to destroy high-tech production of industries around the world, but just to give their own industries the first bite at the raw materials they need. They are likely to welcome the Kazakh increase in production as a way to ease international complaints about their export cutbacks.

The Kazakh move will also create a new potential supply that the Chinese can look to in the event of shortfalls in their own production.

With rare earth commodity prices rising around the world, Kazakhstan appears well positioned to capitalize on the boom.

Distributed with The Daily Telegraph

Kazakhstan: International leadership and perspective

Customs Union Success Attracts Interest of Central Asian Neighbours

By Alex Walters

K

azakhstan’s Customs Union with Russia and Belarus is attracting the interest of Tajikistan and Kyrgyzstan while Turkmenistan and Uzbekistan have not expressed an interest to join.

The Customs Union, which came into being in mid-2010, will create a common economic space with the free movement of goods, services and labour starting in full force January 1, 2012.

The new Customs Code introduces a single standard for the goods of the Customs Union member states, which allows free movement of goods throughout the territory of the three countries.

The overall gross domestic product of its three founding states is $2 trillion per year with combined annual industrial output of $600 billion. The oil reserves of the three states amounts to 90 billion barrels and total annual agricultural output is $112 billion.

Together they produce 12 percent of the world’s annual production of wheat and 17 percent of annual global wheat exports.

The union has gotten off

to a good start with trade volumes doubling year-onyear between Kazakhstan, Russia and Belarus and customs procedures between them have become more tangible and transparent.

The three CU states have a total combined annual trade volume of $900 billion.

These factors have attracted the attention of at least two of Kazakhstan’s Central Asian neighbours.

ity, but costly agricultural production to the growing, prosperous markets of Kazakhstan.

But the new Customs Union, with its tariff protection against imports, freezes out small exportdependent economies that lack the capital, populations or markets to independently sustain their own growth.

That means Kyrgyzstan and Tajikistan must either try to

Kyrgyzstan and Tajikistan need to export to the markets of Kazakhstan Kyrgyzstan and Tajikistan do not have direct access to the oil and natural gas riches of the Caspian Basin and are the two least developed nations in the region.

Their labour forces also are increasingly flocking to Kazakhstan’s emerging industrial economy to fill a growing need for workers.

And that need is likely to increase even further as Kazakhstan plans to expand its agricultural sector.

Kyrgyzstan and Tajikistan need to be able to export their relatively high qual-

join the Customs Union or go under.

Both these countries are also plagued with internal unrest.

Therefore, Prime Minister Almazbek Atambayev of Kyrgyzstan and President Emomali Rahmon of Tajikistan have recognized that their long-term political survival rests heavily on the economic benefits of joining the Customs Union.

Immediately after becoming prime minister in December, Atambayev flew to Moscow to establish warm

relations with Russian Prime Minister Vladimir Putin and make clear his desire to join the CU. He reiterated that desire in May. Tajikistan’s government is also signaling clearly to Moscow and Astana that it wants to join the CU quickly. It wants to enter the CU right after Kyrgyzstan, a top Tajik official told a customs chiefs meeting in Russia on June 10.

“We will join to the union after Kyrgyzstan, which has already made a decision,” the AsiaPlus.tj news agency reported Tajik Customs Service chief Gurez Zaripov as saying at a Customs Services Council meeting in the Siberian city of Irkutsk.

Russian customs head Andrei Belyaninov gave a cautious nod of approval to the Tajik statement.

Belyaninov noted that the current CU leaders have the power to decide which nations are admitted, but said he saw no insurmountable difficulties in Tajikistan’s desire to join.

“We must have a political will,” Belyaninov said.

“If the customs officers are charged with such problem, I think we will have enough professionalism to realize it.”

Leaders of current and potential customs union member nations. Pictured from left: Tajik President Emomali Rahmon, Russian President Dmitry Medvedev, Kazakh President Nursultan Nazarbayev, Kyrgyz President Roza Otunbayeva, Armenian President Serzh Sargsyan, Belarus President Alexander Lukashenko Nazarbayev... from p.1

First, the 10 largest Muslim economies should form a group similar to the G8 “with the aim of creating a new dimension of economic cooperation.”

Second, Islamic countries should create an “international innovation hub” to help close the technology gap with the West and the rest of the world’s top innovators, such as Japan, China and South Korea.

Third, the World Islamic Economic Forum should work with the Islamic Development Bank to create a fund for financing small and medium-sized Muslim businesses.

Fourth, the development bank should consider increasing its financing of the $1.5-billion KazakhstanTurkmenistan-Iran railway, which will increase trade between Central Asia and the Persian Gulf region.

Fifth, a food-assistance fund should be established to help Muslim nations in need. Kazakhstan would be a good place to locate the fund’s headquarters since the country is a major food exporter, Nazarbayev said.

The president said Kazakhstan’s rapid progress since independence two decades ago is an example of what a country can achieve by following a policy of enlightened Islam.

“Today, Kazakhstan is trying to prove to the world

that a nation with a predominantly Muslim population is capable of making major strides in socio-economic and democratic reforms,” he said.

The keys to Kazakhstan’s success have been political stability, a comprehensive economic strategy and accord among the country’s 140 ethnic and religious communities, Nazarbayev said.

Part of Kazakhstan’s economic strategy has been to facilitate Islamic banking, a move that will both help with the country’s devel-

We must build an image of Islam as a religion of peace opment and benefit consumers. Kazakhstan is committing billions of dollars of its own money and raising additional billions overseas to modernize its industry and build infrastructure such as highways, railroads and oil pipelines.

It was the first former Soviet country “to have adopted laws regulating Islamic banking,” Nazarbayev said.

Putting the legal framework in place led to the opening of the country’s first Islamic bank last year, he noted.

Although Nazarbayev

didn’t mention it in his speech, Kazakhstan also is developing halal products, such as food and cosmetics, to serve the huge Muslim market in Central and Southwest Asia and the Middle East. The country set up a halal certification system to ensure that products comply with Islamic law.

Nazarbayev, who has pushed for years for the world’s religious communities to come together for dialogue, noted that for centuries “it was Muslims who demonstrated tolerance” and a “remarkably relaxed attitude to dissent.”

Yet today, he said, much of the world’s media demonizes Islam as a “threat to global security” and to other cultures and religions. “Islam is shown as a religion endorsing political violence, extremism and terrorism,” he said.

The Muslim community needs to do something about this “painful issue for all of us,” Nazarbayev said.

“We must work together to build a positive image of Islam as a religion of peace, kindness, tolerance and justice.”

Part of the solution could be a “major media project” against “the discrediting of the great teaching,” the president said.

The theme of the World Islamic Economic Forum at which Nazarbayev spoke

was “Globalizing Growth: Connect, Compete, Collaborate.”

It was chosen partly to encourage Muslim and nonMuslim nations to work together on economic development, organizers said.

The theme also was chosen to remind participants that “globalization has also thrown up new challenges, like growing inequality across and within nations.”

Those challenges “can and should be addressed through empowering people through business opportunities and creating a support network to make the Muslim world a more attractive trading partner to the rest of the world,” it said.

The forum featured 150 speakers and panelists from government, business, academia and other professions.

Malaysian Prime Minister Datuk Seri Najib Tun Razak gave one of the most provocative addresses. He called on the Islamic community to clean up corruption so that more rank-and-file Muslims enjoy the fruits of economic development.

The topics that forum sessions dealt with included innovative technologies, infrastructure development, alternative energy, food security, Islamic banking, halal, and small and medium-sized businesses.

Gateway... from p.1

coming to Austria and some European countries is produced in Kazakhstan and we will be expanding our oil production. Of course, European markets need more oil and Kazakhstan will continue to provide more.

Q: Do you see opportunities to diversify Kazakhstan’s trading relations with the European nations?

A: During the visit of our President to France last year a large number of contracts were signed between the two countries and the volume of those contracts exceeded six billion dollars. Similarly we are very closely working with Italy. There are a number of Italian companies present here, as well as companies from Germany and Spain as well. They are big European players who have strong relations with Kazakhstan these days.

But now we’re trying to diversify our trade and economic cooperation from the energy sector to a more industrial sector. We are working on the important issue of industrialization of our economy and certainly in order to do that we need new technologies, we need expertise, we need support and investment.

We are asking our European partners: “Try to have a second look, a different look at the Kazakhstan economy not just as an energy source country but also as an industrial hub for the potential markets in our region, including Southern Russia, Western China or Central Asia.”

Q: What are Kazakhstan’s main objectives when it assumes the chairmanship of the Organization of the Islamic Conference at the end of June?

A: Our first and foremost thinking is that member countries of the OIC have to have a chance to assess the situation in the Middle East and then to see what can be done in order to move forward, in order to bring this organization up to date, in order to make the Islamic world more suitable for current economic and political conditions.

We will concentrate on other important areas. First is the political and security area.

Second is the economic and development issues; the third is the humanitarian.

Q: Will Kazakhstan use its chairmanship of the OIC to promote the nuclear nonproliferation agenda?

A: We are planning to put priority on our well-known and well-developed issue which is the strengthening of the nonproliferation regime and also the facilitation of the entry into force of the Comprehensive Nuclear Test Ban Treaty. This is also very closely linked to the initiative of Kazakhstan to mark this year the 20th anniversary of the closure of the Semipalatinsk nuclear test site in Kazakhstan. We have already received wide support on the part of the Islamic countries in this respect and we are strong advocates for banning any nuclear testing anywhere in the world.

Q: What other security issues does Kazakhstan want the OIC to focus on during the coming year?

Customs Union... from p.1

wanted to see how the other nations fared in achieving independent economic prowess whilst remaining simultaneously unified as a common state in regard to trade. Since then, the success of the CU has already made it attractive to other CIS nations.

However, the CU ratification process wasn’t an easy one. Delays to the signing had included Minsk wanting Russia to drop its export duty on oil and oil products.

However, Belarus eventually signed the treaty despite this unresolved concern.

The volume in trade growth in the first quarter of 2011 was especially welcome to the CU nations as it came after Russia and Kazakhstan were both hit by one of the hottest and driest summers the Eurasian heartland had seen in 130 years.

The severe drought that followed forced Russia, one of the world’s largest wheat producer and exporters, to stop exporting grain in August of that year.

Russia also had to ask its CU partners, Kazakhstan and Belarus, to also halt grain exports, worried that Russian grain would be exported via

Kazakh Minister of Foreign Affairs Yerzhan Kazykhanov

A: The other issue that is of grave concern to us in our immediate neighbourhood is the illicit drug trafficking originating from Afghanistan. We are trying to bring more attention of the Islamic countries to the problems and needs of Afghanistan, to the economic rehabilitation of this country and we are tabling a relevant resolution on this issue which will receive some good support.

There are a number of other issues relating to security. Unfortunately, the Islamic world is not immune to protracted conflicts. We will be discussing these issues during the meeting. The other important area is social and economic stability in the region.

One of the important issues will be food security and we are planning to concentrate on that. Food security was one of the topics discussed during the World Islamic Economic Forum that took place at the beginning of June in Kazakhstan as well.

lamic Conference. According to that program, Central Asian countries are coming up with a number of projects in the economic and social area which will be supported by the Islamic world and that would also be helpful given the fact that we have underdeveloped countries also in Central Asia.

Kazakhstan and the other Central Asian countries also belong to the group of the socalled land-locked developing countries. We all need better access to world markets, we need greater support because of the dependence on the transit countries and certainly we will raise this issue during the discussion.

We will try to facilitate South-South cooperation between the Islamic countries, exchange of technologies, exchange of expertise, exchange of knowledge, trying to facilitate economic interaction between the Islamic countries.

Q: How do you view the state of Kazakhstan’s relations with its two giant neigh-

Q: Will Kazakhstan present its own economic strategy for the OIC during its year of chairmanship?

A: In the area of economic cooperation, Kazakhstan is very much interested in raising the issue of investment opportunities in the Islamic world.

First, we would like to raise the awareness about the potential economic opportunities in Kazakhstan and in Central Asia. We introduced new legislation allowing us to develop the Islamic banking in Kazakhstan. We are planning to also unite our efforts with the Islamic world in promoting the so-called Special Program on Central Asia that has been initiated by the Secretary General of the Is-

bours, Russia and China?

A: Cooperation with Russia is one of the main priorities of Kazakhstan’s foreign policy, and Russia is our strategic partner. Kazakhstan and Russia steadfastly deepen mutually beneficial cooperation across the entire spectrum of bilateral relations, make joint efforts to overcome the crises in the region, coordinate economic policy in the interests not only of the two countries, but the entire region as well.

Kazakhstan and Russia cooperate in a coordinated and consistent manner.

The People’s Republic of China is also our strategic partner. The outcomes of the recent state visit of President Nazarbayev to Beijing

on February 21-23 this year and of the state visit to Astana

by President Ju Jintao earlier in June reaffirmed our mutual desire to enhance the strategic cooperation.

Today, China is Kazakhstan’s second (after the EU) largest trade partner. The share of Kazakhstan’s trade with China has exceeded 17 percent in our total foreign trade. Similarly, Kazakhstan is the second trading partner for China among the CIS countries, after Russia.

Following the 2010 results, the trade turnover between our countries exceeded the pre-crisis figures and reached $20.4 billion.

Interaction in the oil and gas industry continues to play a key role in shaping these record levels of trade and economic cooperation. According to the results of 2010, 10.92 million tons of oil were exported to China. At present, the work on expanding the capacity of the existing pipelines by 20 million tons per year.

Partnership in the gas industry seems promising. Last year, our supplies of natural gas to China totaled 4.4 billion cubic meters.

Currently, the parties attach high priority to diversification of trade. It is possible to achieve it by increasing trade in products with high added value and enhancing cooperation in non-extractive sectors of the economies. The implementation of the Action Plan to the program for intergovernmental cooperation in the non-extractive sectors will contribute to it. The plan covers 20 projects in the spheres of agriculture, new technologies, cross-border trade, transport and communications.

The innovation and technological cooperation has high potential. The agreement with China on construction of the 1,050 km Astana-Almaty high-speed railroad reached during the state visit of President Nazarbayev to China earlier this year was a breakthrough in this direction.

the two countries.

On July 1, Kazakhstan and China will open a major transit centre for trade at Horgos in China’s Xinjiang province near their common border, giving Chinese exporters an easy way into Central Asia and on to Europe – and Kazakh exporters, a road into Asia. Horgos will essentially also become China’s gateway into the Russian market, thanks to the CU. It is anticipated that as much as 80 percent of the goods that enter Kazakhstan through Horgos from China will end up in Russia. But the black market activity has been on Russia’s mind, for these concerns have dominated talks between Russian Prime Minister Vladimir Putin and Kazakhstan’s Prime Minister Karim Massimov.

Kazakhstan, however, topped the World Bank’s 2010 survey of 183 countries for introducing pro-business reforms. It has focused on its attractiveness as an investment destination.

“A positive result of the CU is growth of Russian direct investments by 0.5 percent and a registration of over 400 Russian enterprises in Kazakhstan for the last

few months,” Kazakh Minister for Economic Integration, Zhanar Aitzhanova, said in May. These figures make the nation the most popular relocation point for Russian industry – due primarily to the fact that Kazakhstan has the lowest tax structure in Central Asia.

Furthermore, Kazakhstan intends to set up a 6,000 hectare Special Economic Zone at Horgos, drawing industry and manufacturers to create a larger market of “Made in Kazakhstan” products for export.

The Agency for Statistics in Kazakhstan reported that its exports to CU states in Q1 2011 grew by 57.2 percent as compared to the same period in 2010. Exports totaled $1.9 billion during that time. Kazakh imports from the CU grew by 46.7 percent, reaching $3.2 billion.

The Customs Union has increased the combined clout that Russia and Kazakhstan can now exert on global energy markets.

Right after the Customs Union started operating, and to the alarm of Western oil majors, the Kazakhs imposed a tariff of $20 per tonne on their oil exports that is still

in effect.

With global oil prices high and looking likely to head higher, the Kazakhs, working in coordination with the Russians, have now re-established the precedent of imposing a tariff, or export tax, on oil pumped out of the country. And they will have the option of raising it further if they think market forces can stand it.

One of the main benefits of the Customs Union, therefore, looks likely to be the establishment of a miniOPEC, or sub-cartel between Russia and Kazakhstan in oil and natural gas exports.

The fact that Kazakhstan is the dominant economy of Central Asia automatically also puts pressure on the least developed economies in the region – Tajikistan and Kyrgyzstan – to join the CU as quickly as possible or forfeit the loss of much of their biggest local export market.

Uzbekistan and Turkmenistan, with their own wealthy energy economies, are far less affected.

The CU has certainly opened new borders for Kazakhstan – with increased trade likely from north, south, east and west.

The European Union is Kazakhstan’s largest trade volume partner

Distributed with The Daily Telegraph

Kazakhstan: International leadership and perspective

Kazakhstan WTO Accession on Track for 2012

By Colin Berlyne

K

azakhstan’s leaders are optimistic that their country will be able to join the World Trade Organization (WTO) by the end of 2012.

Negotiations with the United States, the European Union and other major nations in the WTO are going well despite complications and additional reviews caused by Kazakhstan’s entry into a Customs Union with Russia and Belarus starting in July 2011.

Kazakhstan hopes to complete its review of trade and labour laws to win U.S. approval for its accession to the WTO by the end of 2012, Economic Integration Minister Zhanar Aitzhanova told a press conference in Washington on May 26.

“I have learned not to make predictions of specific dates,” Aitzhanova said. “(However) we really hope everything goes smoothly to finalize (the agreement) in the course of the next year.

“We still have multilateral issues on customs formalities and trade regimes (to complete). Therefore, it’s taking time. … (But) we’re really hoping to complete the process by the end of next year.”

Aitzhanova said no major areas of disagreement re-

mained between Kazakhstan and the United States and the European Union about Kazakhstan’s accession to the WTO. She acknowledged Kazakhstan’s membership in the new Customs Union with Belarus and Russia required a thorough review and revision with U.S. officials of regulations. But she said the process was going smoothly and at a fast rate.

“We (still) need to finalize these negotiations and put the technical details in order,” Aitzhanova said. “(But) U.S. experts are working vigorously day and night.”

We have agreed in principle on our commitments “Overall, the work is going well on the examination of Customs Union regulations (to ensure their compatibility with WTO accession requirements),” the minister said. “We need to undergo this process.”

The accession to the WTO of a united market of three nations is unprecedented.

Therefore, the three member states of the Customs Union

have agreed to continue their individual track accession negotiations and simultaneously coordinate among each other the issues related to the Customs Union.

Aitzhanova said U.S. trade negotiators had been very cooperative in her Washington talks.

“We have had very constructive discussions with the U.S. Trade Representative (Ron Kirk),” she said. “We have agreed in principle on our commitments.”

Aitzhanova said Kazakhstan still had “issues of substance in the agricultural sector” to negotiate with the United States in the WTOrelated trade talks. However, she emphasized, “We didn’t see (any) large differences on agriculture.”

“It is mostly (on matters of) technical assessment on the figures we are presenting,” Aitzhanova said. “(And) we didn’t have an adequate regulatory framework in place for many of the services such as telephones, transportation, energy and financial services that are being reviewed.”

Aitzhanova said Customs Union operations would continue normally during the WTO accession process.

“The (operation of the) Customs Union will not be interrupted by the accession

Kazakh Minister for Economic Integration Zhanar Aitzhanova

of its member states to the WTO,” she said.

The Group of Eight (G8) major industrialized nations announced at a gathering in Deauville, France, on May 27 that they hoped Russia, the largest of the three Customs Union member nations, would complete its WTO accession process and become a full WTO member before

the end of 2011.

Kazakhstan first submitted its application to join the WTO in 1996. Its bilateral negotiations with the United States are now in their final stage.

Kazakhstan’s First Deputy Prime Minister Umirzak Shukeyev visited Washington in September and then met with Trade Representative

Kirk and senior White House officials. As a result of those meetings, Kazakhstan and the United States finalized their negotiations on access to Kazakhstan’s goods market. The bilateral negotiations were officially concluded after Aitzhanova signed a document with U.S. Representative to the WTO Michael Punke in Geneva in November 2010.

Kazakhstan has also already brought its national legislation into compliance with the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) by passing amendments to its Customs Code.

The government and legislature of Kazakhstan have also approved amendments to national legislation on veterinary, plant quarantine and sanitary-epidemiological measures. These measures are of especial importance to the Kazakhs because of their ambitious program to expand their agricultural base and make their country a global grain and meat producing nation comparable with Argentina, Canada and Australia.

Aitzhanova said Kazakhstan was also pushing ahead with more measures to streamline its government regulations of industry and foreign investments in the country to improve its already favourable climate for business and foreign direct investment.

She said the complexity of the systems to issue licenses and permits for investors has been significantly reduced.

“This year, another 30 percent reduction (in licenses and permits is scheduled) to be completed. These changes will enhance our investment climate,” she said.

Kazakhstan has already completed its accession negotiations with 24 WTO nations including Oman, Pakistan, Turkey, China, Georgia, Kyrgyzstan, South Korea, Cuba, Mexico, Japan, Norway, Honduras, India, the Dominican Republic, Bulgaria, Switzerland, Egypt, Israel, Brazil, Malaysia, Canada, Australia, Mongolia and Ecuador.

It is now close to completion in its WTO negotiations with the 27-nation European Union, Saudi Arabia and Taiwan, along with the United States.

Kazakhstan is attractive to foreign direct investment (FDI). It has attracted $126 billion in FDI in its nearly two decades of independence. But it is now expanding its major export industries to add rare earths mining and agriculture to its established basics of oil, uranium, natural gas, copper and other precious metals.

The country also wants to attract specific foreign investment to expand its light industrial base, including food processing, to take advantage of the opportunities opened up in the Russian market by the creation of the Customs Union, and across the less well developed nations of Central Asia. WTO membership could greatly expedite these goals.

Labour Camp Museum Is Reminder of Past Repression

Wax figures of inmates recreate the horrific conditions of the camp

By Joe Watson

A

nna Fedenchuk was 17 when the Soviet secret police arrested her in 1945.

At the time, western Ukrainian nationalists were taking advantage of World War II to start a fight for independence against the Soviet Union.

The secret police, the infamous NKVD, accused Fedenchuk, a Carpathian Mountain village girl, of being part of the Bandera independence movement.

“I’m not with Bandera,” she protested – but the NKVD had already made up its mind.

It shipped her off to a labour camp in Moldova, then transferred her to a similar facility in Kazakhstan.

Kazakhstan recently marked the reopening of a museum in the Karaganda area dedicated to the hundreds of thousands like Fedenchuk who spent years in the Soviet labour camps in what was then the Kazakh Soviet Socialist Republic. The national government and the Karaganda Province government put up the money to modernize the museum, which is the onetime headquarters of the Karaganda Labour Camp.

Kazakh President Nursultan Nazarbayev supported the modernization of the museum, saying that Kazakhs need to remember the repression in the camps so history will not repeat itself. The country has launched similar initiatives to ensure that Kazakhstan does not forget the victims of four decades of Soviet nuclear testing in the Semipalatinsk area.

A notable success was convincing the United Nations to proclaim August 29 of each year as the International Day against Nuclear Testing.

The Karaganda labour camp’s commonly used abbreviated name of Karlag comes from the first three letters of Karaganda, the location of the camp’s headquarters, and the first three letters of “lager,” which means “camp” in Russian.

Fedenchuk lost the best 10 years of her life – from the ages of 17 to 27 – in the Karlag and other labour camps in Kazakhstan for a crime she nev-

er committed. Her mother and sister suffered the same fate.

Fedenchuk recalls arriving from the Moldova labour camp weighing only 92 pounds. Her weight improved very little in the Kazakh camps. The labourers got a meager ration of bread and occasionally other food, and were constantly hungry.

Fedenchuk and her mother and sister were declared “rehabilitated” and freed from the camps in 1956. Her mother and sister returned to Ukraine, but Fedenchuk had been in Kazakhstan so long that it seemed home. So she stayed on, taking a job as an equipment operator in a coal mine.

Karlag, which opened in 1931 in Dolinka, was one of the largest of the labour camps that the NKVD operated across the Soviet Union from the 1920s until Premier Niki-

Union’s network of labour camps in his book “The Gulag Archipelago,” and anthropologist Lev Gumilev, whose studies of nomad civilization have made him a revered figure in Kazakhstan.

The repression that the Soviet system visited on Kazakhstan occurred both inside and outside the camps.

One of the darkest chapters in Kazakhstan’s history was the Soviets’ forced collectivization of agriculture beginning in the late 1920s.

NKVD officials and Red Army troops swooped onto the steppe to force hundreds of thousands of nomads to give up their wandering existence in favour of life in one place – a collective farm.

The Karlag museum shows a scene of the terror that the Soviets inflicted on the nomads. It depicts Red Army

People need to be reminded of past repression so history doesn’t repeat itself ta Khrushchev ordered the facilities closed in 1959. Karlag occupied lands and facitilies across an area 290 kilometers long and 193 kilometers wide.

Most Karlag labourers worked in agriculture or in coal mines – mainstays of the Karaganda-area economy even today.

In addition to sending tens of thousands of people to Kazakhstan’s labour camps, Soviet leader Josef Stalin ordered millions of members of ethnic groups whom he distrusted exiled to Kazakhstan from the 1930s to the 1940s. They included Koreans, Chechens, Germans, Ukrainians and many others.

Although Karlag residents included criminals such as thieves, many were dissidents or were there simply because they belonged to professions or socio-economic groups that Soviet leaders were suspicious of. They included clergy, intellectuals and anyone of even modest means, including farmers and merchants.

Karlag’s intellectuals included Alexander Solzhenitsyn, who portrayed the Soviet

troops taking the possessions of a nomad family and forcing them to go to a farm. The family members are wax-museum-type, lifelike depictions, and they clearly show the fear etched on a little nomad girl’s face.

The forced collectivization of Kazakhstan’s agricultural and livestock sectors led to more than 1 million Kazakhs starving during the early 1930s, historians say.

Half of the country’s nomads – an estimated 1.3 million people – fled with their livestock to surrounding countries such as Mongolia and China rather than be collectivized.

Anyone who resisted collectivization was sent to a labour camp or prison, or shot.

Kazakhs rose up to resist collectivization in major rebellions in 1929 and 1931.

But their crude arms were no match for the Red Army’s modern weapons, which included machine guns. Many of the rebels were killed.

Like all of the Soviet gulags, Karlag was a state within a state. It had its own judicial and postal systems, for exam-

ple. Local officials had no say in its operation. The NKVD was its one and only master.

The Karlag museum has three floors. The first focuses on the history of Soviet repression in Kazakhstan from the 1920s to the 1950s. It depicts forced collectivization of agriculture and what life was like in the camps.

One display is of a typical labourer’s room. It looks like a rough-hewn cabin, and the only furnishings are a tiny wooden table, a chair and a few tools.

Another scene shows a white-robed scientist at work with basic laboratory equipment, including a microscope and vials.

Many of the biologists, botanists, animal-husbandry experts and other scientists at the camp conducted research that improved agricultural and livestock production. Scientist Anna Lanina, for example, developed a cattle breed known as the Kazakh Whitehead.

The museum’s second floor is devoted to the labourers themselves, with records of camp residents ranging from agricultural workers to intellectuals. Altogether, the museum’s three floors include records and mug-shot-type photos of 146,000 residents.

The museum’s basement floor depicts the jails and prisons where labourers were sent when they crossed the camp masters. It didn’t take much to be put into confinement.

Labourers were forbidden to contact relatives or friends outside the camps. So one day, when Fedenchuk was being transferred from one camp to another, she purposely dropped a letter on the road. Her hope was that someone would find it, and mail it to her brother.

Instead, another labourer saw what she’d done and reported her.

“I was kept in a jail cell for five days because of the letter,” she said. During the confinement the total amount of food she received was 300 grams of bread.

One of the saddest features of camp life was what happened to the labourers’ children. Mothers were allowed to raise babies until the children were 3 years old.

“After that, the children were taken to orphanages,” said Marly Maskill, an American Peace Corps volunteer from Ann Arbor, Michigan, who gave English-speaking visitors a tour of the Karlag museum on its dedication day, May 31. “The conditions in the orphanages were very poor, and many of the children died.”

When orphans became 15, Maskill said, they could be given the same “enemies of the state” designation that their parents had been given.

Many did receive the designation and were forced to work

in the camps as well.

Dolinka has a children’s cemetery where a lot of the labourers’ youngsters are buried. In a stark reminder of Soviet indifference toward the labour-camp system, many of the grave markers identify the dead not with names but numbers.

Fedenchuk was one of a number of camp residents and children of residents who attended the museum dedication ceremony, but she couldn’t bring herself to enter the museum.

“I don’t need to see the mu-

seum to learn about life in the camps,” she said. “I was in them for 10 years. I don’t need to be reminded of what I went through.”

A speech written by Nazarbayev and read at the dedication ceremony by the deputy chairman of the Assembly of Peoples of Kazakhstan, Yeraly Tugzhanov, seemed to have Fedenchuk and millions like her in mind.

“The memory of millions of people of different ethnicities and religious beliefs, who suffered from the totalitarian system” yet did nothing wrong,

“has always been and will be sacred,” Nazarbayev wrote.

Kazakhstan has worked hard for justice for them – and for those who have come after them, he said.

In addition to Tugzhanov, other dignitaries at the dedication included Deputy Minister of Culture and Information Gaziz Telebayev; Dukuvakh Abdurakhmanov, chairman of the Parliament of the Russian Federation’s Chechen Republic; Professor Mambet Kulzhabayuly, a prominent researcher on Stalinist repression, and Tamara Lavrenenko,

president of the Astana-Baiterek women’s club.

Many of those attending the dedication went on to a flower-laying ceremony at the Spassky Memorial Complex, which marks the graves of prisoners of World War II whom the Soviets forced into labour during and after the war. More than 5,000 prisoners died and were buried at the complex’s cemetery.

Many Kazakhs want such events to continue annually so that the lessons of the past are not lost on the younger generation.

KazaKhstan Promoting Stronger Dialogue and Better Understanding

On June 28, 2011, Kazakhstan will assume the Chairmanship of the Council of Foreign Ministers of the Organisation of The Islamic Conference, a 57-nation organization representing 20 percent of the world’s population.

During its chairmanship, Kazakhstan will work to improve security for all, address social and economic problems and champion the development of science, technology and environmental protection.

At this critical moment in history, when the world faces unprecedented challenges and remarkable transformations, Kazakhstan will work tirelessly to promote a greater dialogue and better understanding between cultures and civilizations.

Kazakhstan’s experience as a multi-ethnic and multi-religious tolerant society can facilitate this critical dialogue, helping to foster peace, mutual understanding and a safer world. www.oic2011-2012.kz www.mfa.kz

Distributed with The Daily Telegraph

Kazakhstan: International leadership and perspective

Shanghai Security Group Holds Summit in Astana

Presidents of the six SCO member states pose for a family photo at the Astana summit on June 15. From left: Islam Karimov of Uzbekistan, Hu Jintao of China, Nursultan Nazarbayev of Kazakhstan, Dmitry Medvedev of Russia, Emomali Rakhmon of Tajikistan, and Rosa Otunbayeva of Kyrgyzstan

By Alex Walters ASTANA – There were no surprises but many significant developments when the leaders of the world’s most populous international security organisation met at their annual summit in Astana, the capital of Kazakhstan, on June 15.

The Shanghai Cooperation Organisation (SCO) contains Russia, China and four of the five former Soviet republics of Central Asia – Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan. (Only Turkmenistan of the five Central Asian states has never joined it). The Astana summit was held on the 10th anniversary of its founding on in the Chinese city of Shanghai on June 15, 2001.

Hosting the summit, Kazakhstan’s President Nursultan Nazarbayev urged the SCO to create a new regional security group within it.

“I propose creating a conference on the resolution of territorial and regional conflicts to take preventive action in potential trouble spots within the SCO area of responsibility,” he said.

This body would focus on

decision-making and deciding on appropriate action to head off the kind of violence that rocked Kyrgyzstan, one of the smallest and least developed nations in the SCO, a year ago.

Several hundred people were killed in ethnic clashes between majority Kyrgyz and minority Uzbek communities in the southern Kyrgyzstan cities of Jalalabad and Osh then. The SCO, for all its success in maintaining peace and external security across Eurasia over the past decade, was reduced to the role of being a passive observer.

Nazarbayev said the new conference body was necessary to head off and respond to similar crises in SCO member states in the future.

“We observed conflicts and coups in neighboring Kyrgyzstan and our organization was unable to do anything,” he said.

The six SCO presidents also focused on issues of regional stability and security, as well as the ongoing transnational struggle against terrorism, human trafficking and the drug trade.

On June 14, the day before

the summit, the SCO and the United Nations signed a new agreement to boost their partnership in fighting the drug trade cross Eurasia.

The signing ceremony was attended by SCO Secretary General Imanaliev and Executive Director of the UN Office on Drugs and Crime Yury Fedotov.

The new SCO drug war strategy will be framed as a five year plan from 2011 to

All three countries have enjoyed observer status with the SCO since 2005. The process of starting consultations with them will start after the summit, but it is expected to be a long-drawn-out one.

Iran is currently precluded from joining the SCO as a full member because it is still under United Nations sanctions over its nuclear development program. India and Pakistan have fought several wars and

The six SCO presidents focused on regional security and combating terrorism, human trafficking and drugs 2016, SCO Secretary-General Muratbek Imanaliev told a press conference in Beijing on June 2. He said the drugs scourge remained the biggest threat to peace and prosperity in the region The SCO leaders at the summit approved a new memorandum that allowed them to launch talks with three nations – India, Iran and Pakistan – about joining the organization as full members.

tensions between them remain high. That would make the accession of either major nuclear-powered nation, or of both of them, to the SCO potentially difficult.

In a summit communiqué, the SCO nations promised to boost their cooperation with observer states and dialogue partners, further expanding their already great joint influence across Eurasia.

Indian External Affairs

Minister S. M. Krishna represented India at the summit.

Pakistan’s President Asif Ali Zardari expressed his optimism that his country could soon become a full SCO member nation.

“We hope that our membership application will be put on a fast track,” he told SCO leaders. “In the meantime Pakistan will participate in all of the SCO’s peace and development programmes.”

“We would like to cooperate with regional countries in the financial and banking sector, the setting up of joint ventures, educational, infrastructural and theological programmes,” Zardari said.

The future in that area looks bright. Russian President Dmitry Medvedev said the group should create an economic cooperation “road map” by the end of this year to launch major cooperative regional initiatives.

“I think that this document should be worked out and approved by the end of the year and implemented without delay,” he said.

These programmes are expected to include the creation of a new joint venture fund,

Kazakhstan’s First Female Airline Captain Commands Region’s Skies

By Joe Watson

T

ota Amirova, Kazakhstan’s only female airline captain, was born with an apt first name for her profession.

“Tota” is a nickname for “Toty” (pronounced as Toetyh) -- which means “firebird” in Kazakh -- and from the time Amirova was a girl, piloting was all she wanted to do.

In 2007, Kazakhstan’s flagship carrier Air Astana gave her the ultimate recognition for her 20 years of cockpit experience: It made her first pilot, or commander of the ship. That means she’s in charge of every flight she’s on, making the crucial decisions that keep the journey comfortable and safe.

Not only did she become the first female airline captain in Kazakhstan, she also became the first in all of the former Soviet Union.

And last year she was one of only two women captains of big passenger planes in the world, according to international airline records.

The number of female Kazakh pilots is likely to increase, however, as an Air Astana program to train more Kazakhs as commercial-airline pilots enrolled its first woman in 2009, Polina Pavlova.

The fact that the 42-yearold Amirova could rise from humble circumstances in the eastern Kazakhstan village of Besterek to a prestigious profession dominated by men is a testament to her determination.

Amirova remembers 2006 as the year she went all out

Air Astana Pilot Tota Amirova is Central Asia’s first female commercial airline captain

to become a captain. She said she was flying so much to ensure that she could meet the rigorous qualification criteria “that I was virtually living on the plane. I barely had enough time to go to fitness centers and swimming pools in hotels to lift the physiological stress with physical exercise.”

Her commitment not on-

ly earned her a captain’s rank but also a top-pilot award.

The Commonwealth of Independent States’ International Aviation Committee named her one of the three best pilots in the former Soviet Union in 2007.

Amirova said many men have raised their eyebrows over the years about the field she’s chosen. But they’ve all

been non-pilots.

“Pilots are a special category of people,” she said.

“Their reaction depends only on whether you can fly or you can’t.”

Amirova, who flies both Boeings and AirBuses, said becoming a pilot isn’t easy, whatever your gender. “Only six to seven percent of men are theoretically capable of becoming pilots,” she said.

Because it’s so important to license only pilots who can react to any contingency, the weeding-out process is most intense in the early stages of training, Amirova said.

The thousands of hours of practice occur in all kinds of weather. And the constant responsibility takes a toll not only on the mind but on the body, Amirova said.

Flying a plane requires incredibly fast thinking, she said. And “one must not think ahead of the plane or lag behind it.” The thinking must coincide only with what’s happening at the moment.

All of Amirova’s flying has been for Kazakhstan airlines.

In addition to Air Astana’s predecessor, Air Kazakhstan, she was a pilot at Kazakhstan Aue Zholy and Euro-Asia Airline.

She’s turned down higher salary offers at carriers in other countries to continue blazing a trail in her homeland.

One question she’s been asked over the years is whether she’s an extremesports type. The implication behind the question is she became a pilot because she’s a thrill-seeker.

Her reply is that she doesn’t go in for extreme sports – and

in her opinion extreme-sports types shouldn’t be allowed in a cockpit.

“No one has a right to put the lives of passengers at risk,” she said. “One can do with his own life what he likes. But not when there are passengers behind your back.

In this cabin you have no right to take any risks whatsoever.”

Amirova trained early-on at the Institute of Civil Aviation in Riga, Latvia. She’s subsequently trained in many other countries, including Britain, Germany, France, Greece, Turkey and the United Arab Emirates.

There are pilot training schools in the Kazakh cities of Almaty and Aktobe, but they fall short of overseas programs, Amirova noted in an interview a few years ago.

A key problem is that the schools lack the modern aircraft and training equipment that students need for mastering today’s skills, according to those familiar with the situation.

The Soviet Union had excellent pilot training schools, Western experts have noted, but many have deteriorated since it broke up.

Air Astana began sending young Kazakhs to the Pilot Training College in Melbourne, Florida, some years ago as a way of developing home-grown talent.

A major reason for the carrier’s decision was a pilot shortage affecting airlines throughout the former Soviet Union. It stemmed from the fact that many fliers who had earned their wings during Soviet times were retiring.

Female Pilot... see p.7

a United Business Cooperation Center and the creation of a special account for funding project feasibility studies, Medvedev added. “I think the issue is overdue and almost all the states are ready for a decision,” he said.

Nazarbayev praised the progress the regional security organization has made over the past decade. Kazakhstan oversaw the SCO in the second half of 2010 and the first half of 2011.

“We have built a solid contractual base and the Regional Anti-Terrorist Structure, maintained close contacts between the competent bodies, conducted counterterrorism exercises, and exchanged corresponding information on persons and organizations accessory to extremist, terrorist and separatist activities. Besides, we witness enhanced cooperation in the fight against drug and arms trafficking, transnational crime, and illegal migration,” he said.

In his speech at the summit, Chinese President Hu Jintao set the stage for his country’s 2011-12 role of chairing the organization. He said the SCO member states needed to step up their fight against “the three evil forces” of separatism, extremism and terrorism, as well as keeping up the

fight against organized crime and drug trafficking.

Hu Jintao also re-emphasized the importance of expanding economic cooperation between the SCO member nations.

“China will continue delivering preferential loans to other SCO members and try to turn the Euro-Asia Economic Forum and the China-AsiaEurope Expo into regional economic cooperation platforms so as to better promote regional economic development and prosperity,” he said.

On June 15, Kazakhstan formally handed over SCO leadership to China.

Afghanistan has also applied for observer status with the SCO. The summit stopped short of approving that, but Russian President Medvedev gave the Afghans an encouraging message. “Russia is calling for more intensive and deeper cooperation between the SCO and Afghanistan,” he said.

Medvedev emphasized that all of the participants of the summit endorsed his viewpoint.

“Eventually, the process of political stabilization in Afghanistan depends on this [extended cooperation with the SCO], and the security of our states on a great degree de-

pends on the situation in this country,” the Russian president said. Afghanistan has formally filed an application for the observer status and it is expected he will be granted that soon.

The summit positioned the SCO to take major steps towards increased economic integration between its member states. The six presidents even discussed the possibility of creating a new reserve currency to boost trade between them. That issue will be explored further by the time the prime ministers of the six countries next convene in Moscow in half a year’s time.

Speaking in Moscow on June 2, SCO Secretary-General Imanaliev assessed Kazakhstan’s year-long chairmanship of the SCO as a successful and substantial one. He said during those 12 months, the organisation had made significant progress in the fields of security cooperation, defence, foreign affairs, internal affairs, health, and culture.

The SCO “has become an important factor for security and stability in this region”, Imanaliev concluded.

The 10th anniversary summit built on that foundation. The SCO is here to stay, and its regional clout is still growing.

SCO Secretary General Muratbek Imanaliev

Nuclear Summit... from p. 3 leader and took the initial steps to providing U.S. assistance where necessary to help achieve them. The summit, therefore, while not producing any sweeping diplomatic agreements, laid down the template for a new structure of international cooperation on improving nuclear security with the United States at its centre.

Obama intended the Washington gathering to be the first step on what he recognized would be a long and complex path for the major nuclear nations of the world. With his approval, U.S. planners of the summit arranged that every participating nation appoint one key official (a Sherpa) to arrange and coordinate their involvement in the meeting and to direct the measures that their individual governments would undertake to achieve the conference’s goals.

Together, the Sherpas from the 47 participating nations now have created their own global network to further the cause of nuclear non-proliferation.

The Sherpas will also work towards achieving another diplomatic milestone that President Obama has planned: a second global non-proliferation and nuclear summit to be held in South Korea in 2012 before the end of his first term of office. At that meeting, world leaders will assemble again to see how far they have come since their Washington meeting to present their own governments with the next round of goals to boost global nuclear security.

Kazakhstan, the world’s ninth largest country with a population of 16.5 million, is far smaller in population than the United States, Russia or India. But Nazarbayev played a prominent role at the summit with the full approval and encouragement of Obama because the U.S. government wanted to present Kazakh-

stan as a model nation for the cause of unilateral nuclear disarmament.

President Nazarbayev advanced proposals at the Washington summit to create an international nuclear fuel bank, strengthen the legal norms for nuclear weapon free zones, and create new nuclear weapon free zones, including in the Middle East. He also pushed for the prompt signing of a Fissile Material Cut-Off Treaty and the swift entry into force of the Comprehensive Nuclear Test Ban Treaty.

“It is time already to start discussing the adoption of a Universal Declaration of a Nuclear-Weapons Free World,” President Nazarbayev stressed.

Affirming that Kazakhstan supported fully the summit and its goals, the Kazakh leader said that in June 2010 Astana was to host a conference on the Global Initiative to Combat Acts of Nuclear Terrorism, which it did. The conference became an opportunity to discuss developing measures and mechanisms to respond to terrorist efforts to acquire nuclear materials across the board, including all the way up to establishing a special body under UN auspices.

More importantly, in November 2010, Kazakhstan and the United States announced the successful completion of a joint project to secure almost 800 nuclear bombs worth of uranium and plutonium in spent fuel.

The ambitious and laborious project, co-financed also by the United Kingdom and carried out under the safeguards of the IAEA, consisted of shutting down Kazakhstan’s BN-350 plutonium production reactor in Aktau on the Caspian seashore, securing the spent fuel produced by it, and safely transporting the depleted fuel to the new long-term storage facility at the former Semipalatinsk nuclear test site.

In Washington, DC, U.S. Senator Richard Lugar, a prominent authority in nuclear disarmament matters and the co-founder of the Nunn-Lugar Cooperative Threat Reduction programme, hailed the completion of the project as another example of the strong cooperation between Kazakhstan and the United States.

Former U.S. Senator Sam Nunn called this project “a significant achievement that will make the world safer and reduce the risk of nuclear terrorism,” He added that in 2005, the Nuclear Threat Initiative worked with Kazakhstan to complete a project at the same reactor, removing and blending down the fresh fuel containing 2,900 kilograms of weapons-usable highly enriched uranium. That blending down was done at Kazatomprom’s Ulba Metallurgical Plant in Ust-Kamenogorsk.

“Kazakhstan has a solid history of nuclear non-proliferation and disarmament.

The country showed courage and leadership when it renounced the nuclear weapons remaining on its territory, after the dissolution of the Soviet Union. Kazakhstan’s leadership understands that the essential steps required to reduce nuclear dangers must be accomplished with the cooperation of all nations,” Nunn added.

Kazakhstan and the USA, along with partners across the world, are now working to secure vulnerable nuclear material by the end of 2013 in order to prevent a possibility of terrorists’ acquiring them.

The Astana gathering in October will have a wider goal, beyond securing vulnerable nuclear materials. By inviting the top international leaders from countries such as Russia, the United States, the United Kingdom and others, Kazakhstan hopes the October forum will help generate and maintain the global momentum towards nuclear disarmament.

Distributed with The Daily Telegraph

Kazakhstan: International leadership and perspective

Kazakhstan’s Banking Sector Rebounds, Progress Mixed

By Joe Watson azakhstan’s banking sector continues to recover from the global financial crisis of 2008 and 2009, but the rebound hasn’t been fast enough to suit many experts and its strength has varied from bank to bank.

The main problem is a continuing increase in banks’ bad loans. The face value of loans on which no principal or interest has been paid for three months has jumped 12.8 percent this year -- from $14.9 billion on January 1 to $16.8 billion on May 1. Bad loans now make up 26.4 percent of banks’ $63.4 billion portfolio.

On June 15, Daniyar Akishev, deputy governor of Kazakhstan’s National (Central) Bank, announced in the country’s Parliament that the National Bank has set up a Problem Loans Fund. Such a fund would buy out bad loans as a way of giving the most debt-ridden banks a fresh start.

“We hope this company will start working, amendments to the tax law are needed, and if approved, this company, we think, will be successful.

It will allow cleaning up the banks’ loan portfolio allowing them to restart giving loans,” Akishev told the members of Parliament’s lower house, Majilis, as he presented a bill to regulate the work of second-tier banks and minimize the risks of bankruptcy.

But many questions need to be answered about the size, scope and workings of such a fund. So it may be some time before it fully emerges.

Kazakhstan’s banking picture is not all gloom, however.

Here are some positive signs: -- Banks are profiting from the resurgence of two engines of the economy, petroleum and minerals companies, which are cashing in on high commodity prices.

-- The amount of money that Kazakh banks owe overseas financial institutions is plummeting. Last year alone the total fell by 33 percent to $20 billion, half of the figure at the height of international borrowing in 2008.

-- Restructurings are restoring the profitability of BTA

Bank, Alliance Bank and Temirbank, which the government had to take over during the financial crisis.

-- A few domestic banks have turned around losses or are achieving higher profits than other financial institutions because of sound business strategies and solid management.

-- Most foreign-owned banks in Kazakhstan are doing well.

-- Islamic banking has come to the country, thanks to an aggressive government promotion effort.

Balanced against the positives, however, are a number of problems besides bad loans: -- Foreign banks, once the main source of capital for Kazakhstan banks, are sending little money to the country’s financial institutions after being burned during the financial crisis.

-- Banks’ loan portfolios for 2011 are forecast to be flat.

That’s a negative sign because loan income is a key source of banks’ revenue.

-- The recovery of the three restructured banks – BTA, Alliance and Temirbank – is expected to be slow.

The reason that bad loans are such a drag on banks is that regulations require financial institutions to set aside money to cover losses stemming from loans becoming unrecoverable. Since banks can’t use the set-asides to generate cash, the “provisionings” limit their profits.

What to do about bad loans is a vexing problem for any country whose banking sector is weighed down with them.

The International Monetary Fund, the European Bank for Reconstruction and Development and other global financial institutions have urged Kazakhstan to create a toxicassets fund. Earlier this year, the governor of the country’s central bank, Grigory Marchenko, has pledged to do so.

In fact, Marchenko said, the fund may issue more than $1 billion in bonds to buy bad loans from banks.

But, according to an international financier familiar with Kazakhstan, there are practical problems with creating a toxic-assets fund,

Female Pilot.. from p.6 Air Astana had to hire lots of foreign pilots to fill the gap.

The carrier decided to come up with initiatives not only to address the domestic-pilot shortage but also to improve its in-house pilottraining capability.

An initiative besides the Florida training program for new pilots was sending experienced pilots for instructor training with Delta Air Lines in Atlanta. The idea was that Air Astana pilots with instructor ratings could train some of the airline’s less ex-

tude test that includes math, physics, psychology and knowledge of English, the global language for communication between pilots and the ground.

Phase three is a teambuilding operation in which candidates work together to solve a problem. There is also a second, more comprehensive interview.

Phase four involves a run through a flight simulator.

Those selected for the Florida program go through 12 weeks of intensive English before heading for the

K

Air Astana is home to Central Asia’s first female commercial airline captain

perienced fliers.

Another training initiative was purchasing a sophisticated flight simulator -- the Aerosim Enhanced Virtual Procedure Trainer for the Airbus A320. That aircraft is a key component of the Air Astana fleet.

The simulator at the airline’s Almaty headquarters is expected to save $375,000 a year in overseas training costs.

The young Kazakhs whom Air Astana selects for the Florida training program go through a rigorous selection process.

The first phase is a physical examination, a psychological evaluation and an interview.

The second is a pilot apti-

training school in Melbourne, which is affiliated with Florida International University.

The reward for those who complete the training is a first-officer position.

Each of the new pilots repays Air Astana half of their flight-training costs through deductions in pay over time.

Although the cost of training young Kazakhs overseas is high, the payoff is expected to be a stable domestic pilot corps for years to come, industry observers say. Such stability should help keep pilot costs in check, they say.

The more Kazakhs that are trained for the national carrier the better chance that some will be women. And that will be just fine with Kazakhstan’s flying pioneer Tota Amirova.

Kazakhstan’s BTA Bank successfully restructured following the global financial crisis

announced by Marchenko’s deputy, Daniyar Akishev, earlier in June. “For example, how much of a discount will the fund buy bad loans for?

Banks will want the smallest discount they can get -- say, 50 percent of the face value of the loan. But those buying the bad loans will want a

that write off bad loans.

Marchenko, whose effective stewardship of the central bank has led to his being mentioned as a contender for IMF managing director, has said publicly that no toxicassets fund can be created until Kazakhstan’s banking laws change.

Some Kazakhstan banks are expecting a banner year in 2011 much higher discount – say, 80 percent.”

In addition, as Akishev rightly pointed out, Kazakhstan needs to change its laws before creating a toxic-assets fund, said the banker, who asked not to be identified.

That’s because current laws provide no tax breaks to banks

Since a revision could take months, Kazakhstan may be unable to address the bad-loan problem the rest of the year.

That means banking-sector improvement in 2011 is likely to be incremental, the international financier said.

His prognosis echoes what others are saying.

Yelena Bakhmutova forecast in February that there would be no growth this year in Kazakhstan banks’ loan portfolios, normally an important profit point. She made the prediction as head of the now-disbanded Financial Supervision Agency, whose regulatory duties the central bank has absorbed.

Bakhmutova said that “with regard to profitability, the situation (in 2011) will be better than last year,” when many banks lost money or had meager profits.

The implication is that Bakhmutova, who was viewed as one of the candidates to head any toxic-assets fund that Kazakhstan creates, anticipates only moderate earnings increases at most financial institutions.

The fact that Kazakhstan banks are no longer able to acquire overseas loans has

made it much more difficult for them to generate working capital, experts say. During the go-go years preceding the financial crisis, Kazakhstan banks borrowed heavily from overseas banks at low interest rates, then loaned the money domestically at much higher rates.

But “credit flows into the country are unlikely to return to pre-crisis levels,” Business Monitor International said.

That means “the onus for growth (of the banking sector) will lie increasingly on domestic sources of financing,” it concluded.

Some Kazakhstan banks are expecting a banner year in 2011, however.

The country’s second-largest, Halyk Bank, sees earnings soaring 24 percent to $310 million as it issues more loans and the quality of its loan portfolio improves.

Kazakhstan’s Samruk Kazyna sovereign wealth fund took a 27 percent stake in Halyk during 2009 when the bank appeared financially shaky. Halyk rebounded so nicely during 2010 that it repurchased the shares this year.

Another financial institution that is poised for a profit surge this year is Eurasian Bank, which turned an $8.9 million loss in 2009 into a $5.3 million profit last year under a new management team.

The turnaround came during Chairman Michael Eggleton’s first full year on the job.

Eggleton, an American who is the only non-Kazakh to head a Kazakh bank, began overseeing Eurasian Bank in October 2009.

Kazakhstan’s largest bank, Kazkommertsbank, expects a 2011 profit 5 to 10 percent larger than last year’s $149 million despite a flat loan portfolio. Earnings were in the forecast range in the first quarter, coming in at $40.6 billion or 6 percent more than in the first quarter of 2010.

A worrisome sign, however, was that the percentage of bad loans in Kazkommertsbank’s portfolio rose from 25.2 percent at the start of the quarter to 27.7 percent at the end.

Most foreign financial institutions in Kazakhstan are performing well, benefiting from the ability of cheap capital from their home operations, experts say.

One of the leaders is Russia’s Sberbank, which expects profit from its Kazakhstan operation to rise 15 percent to $21 million this year. Sberbank is planning to triple its investment in Kazakhstan to $1 billion as it tries to increase its market share from the current 2 percent to 5 percent in 2015.

Kazakhstan officials have been trying for months to convince Sberbank to take over BTA, the largest domestic bank to default in 2009. But Sberbank has been cautious.

The recovery of BTA, which was once Kazakhstan’s top bank, is a work in progress, although it posted an $11 million profit in the first quarter of 2011. It went through a restructuring in 2010 that re-

duced its debt by 75 percent from $16.7 billion to $4.2 billion, stiffing lenders in Europe and the United States.

BTA is suing its former chairman, Mukhtar Ablyazov, who is now avoiding prosecution by living in Britain, to try to recover $4 billion. The now government-owned BTA says Ablyazov loaned the money to himself, then used it to buy overpriced property in Russia that subsequently crashed.

The outcome of the case is one of the issues clouding BTA’s future, along with a recent report that the bank may have underestimated its badloan total by up to 10 percent. The report came from Nick Dove, director of London-based John Howell and Co., which BTA hired as a consultant.

Alliance Bank, Kazakhstan’s second-largest financial institution to fail in 2009, lost $11 million in the first quarter of 2011. Its restructuring last year eliminated $3.8 billion or 57 percent of its $6.7 billion debt.

Islamic banking has given Kazakhstan officials who have watched the sector struggle something to smile about – although its impact in the country is expected to be limited for some time.

Kazakhstan revamped its financial laws recently to facilitate the introduction of banking that complies with Islamic law. That led to the opening of Kazakhstan’s first Islamic bank – Al Hilal of the United Arab Emirates – in March of 2010. Other Islamic banks have signaled they will set up shop in Kazakhstan, too.

President Nursultan Nazarbayev spearheaded the effort to attract Islamic banks.

He thought they would be another good source of financing for Kazakhstan’s ambitious program of industrial and infrastructure development.

As with any industry, a close look at Kazakhstan’s banking sector reveals a complex tapestry of things going right and things that could be improved. Bankers and those who regulate the industry are working through the problems with an eye toward long-term stability and prosperity.

Aircraft Manufacturing Takes Off in Kazakhstan

By Joe Watson

K

azakhstan has entered the lucrative aircraft-manufacturing business.

Partnerships have already been established with Russian and French companies, and talks are under way toward the creation of a joint venture with a Ukrainian company.

The partnership with the Russians will produce cropdusting planes, the venture with the French – helicopters, and the partnership with the Ukrainians -- short- and medium-range passenger planes.

The crop-duster venture will be a manufacturing operation from the start. The other two will likely begin with assembly, then gravitate to manufacturing.

Because aircraft are such high-tech products, the beginning of their manufacture in Kazakhstan will help meet two government goals: creating more value-added products at home and having more Kazakhs working in high-tech and innovative jobs.

All of the ventures will produce aircraft for the domestic market, but plans are for production to be exported as well.

The KazAviaSpektr joint venture with MVEN of Kazan, Russia, will produce Sunkar Farmer 2 and Farmer 500 planes that spray insecticides and herbicides on fields.

A $25 million plant being built in the village of Novouzenka, near Karaganda, will help Kazakhstan replace hundreds of its aging Antonov An-2 crop-dusters.

“This will not be just assembly work, but full-cycle production,” Kazakhstan’s Transportation Ministry said in announcing the partnership last fall.

The facility is expected to produce 50 aircraft in its first

Kazakhstan has recently signed deals to manufacture helicopters and other aircraft

year – 2012 – and up to 500 a year by 2015.

Sunkar aircraft can spray up to 120 hectares in an hour at a cruising speed of 130 kilometers an hour.

Alexander Vaschenko, the director of KazAviaSpektr, said Kazakhstan took into account the country’s geography and climate in choosing Sunkar aircraft over lots of competing models.

A bonus, Vaschenko said, is that the Sunkars’ advanced reciprocating engines allow them to burn “car petrol, which is very important when there’s an insufficient amount or lack of aviation fuel.”

The Sunkars will sell for a relatively modest $145,000 apiece, the joint-venture partners said. That’s less than the cost of a new tractor, so many farming operations will be able to afford the planes, according to agricultural officials.

Kazakh President Nursultan Nazarbayev said when the crop-duster venture was an-

nounced that the Sunkars will be vital to the country’s effort to increase its agricultural production.

The country has become one of the world’s top grain exporters, but wants to increase its output even further.

That will require top-flight equipment, such as a new generation of crop-dusters, Nazarbayev said.

the helicopters that are produced domestically within six years of the start of assembly.

They will be used for government missions, according to Kazakhstan officials.

The first six choppers are expected to roll off the manufacturing line before this year is out.

The EC 145 is at the top of its class in the medium-sized,

This will not be just assembly work, but full-cycle production As for the helicopter joint venture, Kazakhstan Engineering’s partnership with France’s Eurocopter will assemble the EC 145 models at a new facility in Astana.

The agreement also provides for training and a maintenance facility in the Almaty area.

As part of the deal, Kazakhstan agreed to buy 45 of

twin-engine helicopter category, according to experts.

Eurocopters boast an advanced cockpit design plus state-of-the-art avionics and rotor systems.

And the chopper is designed to work in challenging environments, including the minus-45-degree temperatures seen in Kazakhstan’s winters.

Eurocopter said it has sold about 400 of the EC 145s worldwide.

“Eurocopter, together with its joint-venture partner Kazakhstan Engineering, will develop a major aeronautical industry capability in Kazakhstan” that creates several hundred high-tech jobs, Eurocopter President and Chief Executive Lutz Bertling said in announcing the partnership late last year.

“Moreover, this project will foster helicopter usage in Kazakhstan, making this country the Commonwealth of Independent States’ showcase for government helicopter operations,” Bertling said. “The joint venture also positions Eurocopter for future business development in Kazakhstan, Central Asia, Russia and Belarus, providing helicopters that are well tailored for applications” in the oil and gas industry, in government and in other sectors, he said.

The joint venture that Ka-

zakhstan and Ukraine are negotiating will manufacture Antonov An-140 regionalflight passenger craft.

Kazakhstan is a huge country, and planes that connect its different regions could be an impetus to its development. The country needs at least 100 such craft, officials said.

Kazakhstan has proposed that a new facility be built in the Almaty area to produce the turboprops.

The typical An-140 configuration can carry 52 passengers, Antonov said. The company, whose operations are based in Kharkov, Ukraine’s second-largest city, also produces a higher-end version of the plane that can carry up to 30 passengers.

The An-140 is a relatively new aircraft, with production starting in 1997. It carries a modest price tag of $9 million.

Antonov has sold several dozen of the aircraft worldwide. In addition to its Kharkov operation, it has another manufacturing operation in Russia and licenses Iran to produce the An-140.

In addition to being used as an airliner, the An-140 can be used as a military plane, for maritime patrolling, for medical flights, for aerial photography, for geological exploration and other purposes.

The Antonov company is probably best known in the West for building three of the largest cargo planes that have ever been manufactured – the An-22, the An-124 and the An-225.

Kazakhstan officials hope that the country’s initial foray into aircraft manufacturing represented by its Russian, French and Ukrainian joint ventures is just the start of an aviation industry that develops into a sparkplug of the economy.

Distributed with The Daily Telegraph

Kazakhstan: International leadership and perspective

Kazakhstan Invests in a Renewable Future

By Susan Goodman

E

stablishing green credentials is a good move for emerging nations. It helps win friends and attract investment. But for Kazakhstan, celebrating its twentieth anniversary of independence this year, a commitment to renewable energy could provide a whole new dynamic for the country’s economy.

Spreading across Eurasia, the world’s largest landlocked country has vast reserves of fossil fuels and minerals. Its oil reserves alone place it eleventh among the world’s oil producers, and last year it became the world’s largest exporter of uranium. The government cites as a major goal of structural policy the “diversification and the strengthening of the non-oil sector.”

The sheer enormity of this land mass, however, poses particular challenges to the energy industry. Most power is being generated by old coal-fired plants that were built during the Soviet era and sited to provide the energy requirements of industries involved in mining and processing metals to satisfy Soviet needs. Even where transmission lines were built into remoter areas, the costs have been exorbitantly high

and the line losses over such great distances mean power is often wasted.

The age of the coal-fired plants means their systems need replacing to increase efficiency and reduce carbon emissions. At present about 90 percent of the country’s electricity is generated by coal; about another 10 percent comes from hydropower (HP).

Jacquelin Cochran of the Kazakhstan Institute of Management Economics and Strategic Research says the time has come for the government to consider diversifying its energy supply to include non-carbon sources.

In a country renowned for its cold winters, with temperatures in some areas dropping below 40 degrees Celsius, it’s easy to overlook the role that solar power can play. However, maps of solar insolation – which measure annual solar radiation energy -- show that much of Kazakhstan has the same values as central Spain. This makes it ideal for the installation of concentrated solar thermal plants, where surrounding mirrors (heliostats) focus the sun’s rays on a receiver in a central tower.

A hybrid model, developed by world leaders in this field EZKlein, can also op-

lot of land and can be placed on rooftops or beside homes.

With vast wind-swept steppes stretching across much of the country – the ninth largest in the world by land mass – wind power is also a viable energy option.

A glance at the wind maps produced by the United Nations Development Program shows there are a large number of locations with wind speeds well above the 4 metres per second minimum required for the efficient operation of wind turbines.

Gennady Doroshin, head of the Kazakhstan Government Project on Wind Energy in combination with the UNDP says expert assessment indicates that Kazakhstan’s wind power potential exceeds 1.8 trillion kilowatt hours a year.

In March, it was an-

Renewable energies, such as wind and solar power, offer ideal solutions Kazakhstan is turning to solar and other eco-friendlier ways to produce its electricity

erate on any alternative fuel source -- fossil fuel, bio fuel -- thereby guaranteeing an uninterrupted power supply, 24 hours a day. The company is now considering Ka-

zakhstan as an ideal market for this highly efficient, cost effective system, especially as the parts can be manufactured locally. This is a cost effective option compared to

Kazakh Agro Sector Defies Drought

Kazakh agricultural exports remain strong despite 2010 drought

By Jane Josephs

K

azakhstan remains on track to fulfill ambitions of becoming a leading global food provider despite a drought which decimated its harvest last year.

Last year, Kazakhstan and much of Central Asian was hit by one of the worst droughts in its history, with up to 70 percent of Kazakh crops compromised in some wheatgrowing regions. According to data from the Agency of Statistics of Kazakhstan, the country produced only 9.6 million metric tons of wheat – a record low for the previous 10 years and a 52 percent fall in yield from the 20 million metric tons harvested in 2009.

However, in a world where growing demand has pushed food prices up 37 percent compared to last year, according to UN data, Kazakhstan is still in a strong position to wield clout as a global food exporter.

First, Kazakhstan has a small population of only 16 million to feed, unlike neighbouring Russia, which last year introduced a grain export ban in an attempt to protect domestic markets and feed its population of 150 million.

Indeed, Kazakhstan actually benefited from the ban, as it stepped in to supply the markets which previously imported from Russia.

“Those countries that traditionally buy from Russia – mainly countries in the Caucasus region, such as Armenia, Georgia, parts of Turkey and Azerbaijan – have found Kazakhstan to be their next closest market,” the country’s agriculture minister Asylzhan Mamytbekov told Reuters in May. According to Kazakh customs data, Azerbaijan was the largest buyer of Kazakh grain in the 2010 calendar year, purchasing 1.4 million

metric tons at a cost of $242 million.

The lifting of Russia’s grain export ban, due to come into force July 1, is not expected to affect sales of Kazakhstan wheat, or world trade in general, according to analysts.

Some Russian officials say there may be further restrictions on exports this year.

Sergei Ignatiev, head of the Russian Central Bank, has called for an introduction of grain export duties linked to prices on the domestic market, and Arkady Zlochevsky, president of the Russian Grain Union, says there may be fresh restrictions in the autumn once the harvest has been gathered, reports the Financial Times.

The wheat that Russia exports is generally of lower quality, so it does not fulfil the criteria of food quality mill-

tons, and Saudi Arabia may import more foreign wheat following a decision to combat water scarcity by reducing domestic production, said the report.

In June, Kazakh President Nursultan Nazarbayev proposed creating a food reserve, with Kazakhstan at the helm, to improve food security and guard against shortages in Islamic countries.

Speaking at the World Islamic Economic Forum in Astana on June 8, Nazarbayev said the fund would act as a Muslim counterpart to the United Nations’ Food and Agriculture Organisation (FAO) and would involve the Saudi Arabia-based Islamic Development Bank.

Looking beyond Asia, Kazakhstan will also play a leading role in global wheat exports, helping offset falls in

Kazakhstan will play a leading role in global wheat exports ing wheat, and the crop yield will be further hindered by the end of last year’s drought.

Furthermore, the forecast for this summer is for more hot and dry conditions.

As well as continuing to supply other nations in the Commonwealth of Independent States (CIS), Kazakhstan has increasingly looked at exporting beyond the region to countries such as Iran, Turkey, Egypt, Afghanistan and Saudi Arabia.

This trade is likely to continue, as a Food Outlook report from the UN Food and Agriculture Organization (FAO), released in June, said that several of the countries supplied by Kazakhstan will increase wheat imports over the coming year.

Imports in Egypt, the world’s largest importer, for example, will remain steady at around 10 million metric

ty of a community’s power, the electricity provided by a small wind turbine can be used whenever it is operating to provide the power need for agricultural activities, such as pumping water and operating machinery for processing grain into flour.

And in other alternative energy efforts, the Kazakhstan government recently published a list of small-scale hydropower plants that will be built over the next five years in the south and southeast of the country, several in collaboration with Russia’s biggest hydropower company, RusHydro.

RusHydro noted that Kazakhstan has considerable potential for small hydroelectric plants, according to a report by RIA Novosti.

These facilities would utilize the natural flow of the

wheat production in the United States, France and Germany, which are anticipating lower yields because of dry weather conditions, according to the FAO. Shipments from the five major traditional wheat exporters (Argentina, Australia, Canada, the EU and the U.S.) are expected to reach 88.5 million metric tons in 2011-12. This will make up 70 percent of the global total, down from 77 percent in 2010-11.

By contrast, exports from the leading CIS exporters (Kazakhstan, Ukraine and Russia) will represent 19 percent of world trade in 2011-12, up from 6.5 percent in 2010-11.

According to analysts at JSC KazAgroMarketing, the potential grain production in 2011 will allow Kazakhstan to export about 7 mil-

lion tons of wheat (excluding flour) in 2011-12.

Furthermore, Kazakhstan’s leaders are investing in new farming methods and infrastructure.

The country has invested heavily in improving crop cultivation ever since having to battle soil erosion, which was caused by excessive mono-crop cultivation during the Soviet era. Over the past decade the country has also taken care to study and apply new contour plowing methods.

At the Kazakhstan-U.S. investment forum in New York last year, Kazakh deputy minister of industry and new technologies Nurmuhambet Abdibekov emphasized that a major part of the country’s development plan up to 2020 involves adapting new technologies – including agribusiness - that will make farm water use more efficient.

Farmers will use capillary irrigation systems that require less water to feed crops, he said.

The country also often shows a willingness to engage with other nations in terms of agricultural practices, as demonstrated by the-then agriculture minister Akylbek Kurishbayev’s meeting with US Agriculture Secretary Tom Vilsack in North Dakota, the U.S., last year.

To transport food exports, Kazakhstan has the best road and rail transportation systems in Central and Northern Asia and is pushing through a number of maritime developments, including a joint venture terminal in the port of Amirabad, designed to allow Kazakhstan to ship more wheat to Iran via the Caspian Sea. Exports to Asia have also received a huge boost from China’s lifting of a ban on grain transit through its territory, allowing Kazakhstan to trade with South Korea and other Asian nations on the Pacific Rim. To supply these territories, Kazakhstan has announced plans for a grain rail terminal on the border with China, due to be built in 2011-12, with a capacity of 500,000 metric tons.

Ultimately, Kazakhstan’s embrace of globalization and investments over the past few years have given the country the resilience to battle the record drought conditions of last year. Improved infrastructure and farming methods may well ensure Kazakhstan will remain a leading powerhouse in terms of food exports, especially at a time when other nations may struggle to keep crop yields high.

traditional solar power that relies on expensive, imported photovoltaic cells.

Kazakhstan is also working with the United Nations in a program begun seven years ago to increase its energy efficiency through alternative energy sources, including solar.

As part of the first steps of the project, solar panels were installed on the roof of the AlmatyTeploKommunEnergo heating company offices in Almaty.

The Hotel Almaty also placed 210 square metres of solar panels on its roof – the largest photovoltaic array of its kind in Kazakhstan at the time.

Another initiative in Almaty, Kazakhstan’s largest city, was placing solar-powered street lights in a city park. The solar panels cap-

ture and store energy during the day to light the park at night.

And Kazakh-based entrepreneur Nurlan Dzhiyenbayev and his ND & Co firm are now making a living selling small solar power cells to rural villages that are either off the main power grid or suffer from unreliable power supplies.

“Kazakhstan’s territory is huge, and in the 1990s a lot of people” lost electricity when the grid deteriorated after the break-up of the Soviet Union, he said.

That’s why “our company is primarily targeting rural areas and mountainous areas.”

Dzhiyenbayev’s products utilize a passive energy system which converts sunlight directly into electricity. That means they don’t require a

nounced that the southern Kazakh province of Zhambyl will invest $1 billion to build two electricity generating wind farms in Kazakhstan with one generating 200MW and the other 400MW. Several energy partners will be involved in this project, including the Kazakhstan Electricity Grid Operating Company and Central Asia Green Power, which is a joint venture (JV) between a Turkish subsidiary of the Italian Relight Group and the Kazakh private equity firm Visor Group. The project is scheduled to be operational within two years. It will be immensely important in a region where electricity is often imported to prevent blackouts.

Though wind farms cannot yet provide the majori-

rivers, rather than require dam construction.

Almost half of Kazakhstan’s population of 16 million is designated as rural and they can best be served by establishing distributed, off-grid electricity supplies.

Renewable energy sources, such as wind power and solar power, offer ideal solutions for the provision of electricity to these dispersed, largely agricultural communities.

It is anticipated that Kazakhstan will surge ahead of its neighbours in the production of electricity from renewable energy sources and will become a net exporter of clean electricity. Its outdated, Soviet-era coal-fired power plants may just provide the impetus needed to shift the energy balance towards renewables.