CPC's new feature, QR Briefing, is a summary and analysis of events and trends in the Republic of Kazakhstan (RK). With the decision to switch Kazakh language to a Latinized alphabet, which will be implemented in stages from 2023-2031, the country's name is now being rendered as Qazakstan, and Qazak Republic (QR) is gaining momentum, especially among young people, as a new acronym for the country, replacing RK, to resonate with President Tokayev's rebranding of the country as Jana (new) Qazakstan.
Rail Exports Increase Modestly while Economic Growth Forecast Dips Slightly
Kazakhstan’s Ministry of Trade and Integration reports that Kazakhstan’s national rail company, KazTemirZholy, saw a modest 4% growth in rail exports through Russia in 2022. Around 70% of rail cargo currently exported from Kazakhstan moves on Russian railways. Meanwhile, rail exports to Iran via Turkmenistan in 2022 were 8.5 times greater than the previous year, while exports by rail and sea via the Trans-Caspian International Transport Route (TITR) increased 6.6 times over 2021.
To the east, Kazakhstan plans to build a third railway station and dry port on its border with China. According to the Ministry of Industry and Infrastructure Development, a 270 km rail spur will be constructed in 2024-2025 from Ayagoz in Eastern Kazakhstan Region to the border at Bakhty to reduce bottlenecking at the current Dostyk and Altynkol railway crossing points and increase overall capacity for rail shipments between Kazakhstan and China.
The International MONETARY FUND (IMF) now predicts Kazakhstan's economy will grow by 4.3 percent in 2023, which is 0.1 percent less than forecast in October, while in its July World Economic Outlook, the IMF predicted a 2023 rate for Kazakhstan of 3.9 percent. These figures for GDP growth are given in nominal terms, i.e., they do not reflect anticipated increases in prices. Leading international financial institutions and most governments use nominal calculations. In real terms, Kazakhstan’s economy grew by 12.1 percent in 2022, according to website www.statista.com, a leading data clearinghouse company based in Hamburg, Germany, and founded in 2007.
EDB to Invest $1.1 billion in Kazakhstan in 2023
This investment news was announced at a meeting in Astana between President Kassym-Jomart Tokayev and Eurasian Development Bank (EDB) CEO Nikolai Podguzov. As reported on the presidential website, Akorda, Podguzov cited transportation infrastructure, the agro-industrial complex, green energy, and water resources as key areas of focus. Among the projects mentioned by Podguzov were two cross-border initiatives – modernization of the Astrakhan-Mangyshlak water canal (Russia/Kazakhstan) and construction of the Ayagoz-Bakhty railway line and customs station (Kazakhstan/China). Last year, EDB investments in Kazakhstan amounted to $1.2 billion, a five-fold increase over 2021.
Young Kazakh Techie Residing in United States Develops Software that Detects Violations of Russian Sanctions
The name of Almaty-born techno-entrepreneur, Elisar Nurmagambet, who has been living in the United States for a little over 10 years, first flashed in the media in 2021, when he appeared in the annual Forbes’ Next 1000 listing, which shines a light on unique companies and startups with an annual income of less than $10 million.
“We provide a platform that is able to analyze a variety of sources and data – movable and immovable property, its owners around the world, beneficiaries of companies, lawyers, accountants, agents, and many others. The platform is capable of processing billions of records relating to people, companies, ships, planes, and cars – in any language and from any country,” Elisar explains.
His company, Black Ice AI, developed software designed to identify signals of sanctions evasion related to the Russian war in Ukraine, tracking possible instances of money laundering and fraudulent arms financing by extracting and examining data from various sources, including supply chains and cash flows.
Last April, Black Ice AI, which Nurmagambet created a year earlier in 2021, was invited to the FBI to demonstrate its programs. “It must be emphasized here that we ourselves do not investigate, we only provide software. The system is installed on the client's closed servers, where we do not have any access. This guarantees information security, complete confidentiality, and integrity of data and technologies,” he explained.
As Elisar noted in an interview with Forbes Kazakhstan (No. 6, 2021), entering the U.S. security industry is extremely difficult for an American specialist, let alone a young visitor from distant Kazakhstan. Many players engage in this business only after accumulating significant experience, he stated, usually in the intelligence services. Nonetheless, he said, financial, law enforcement, and government organizations in the United States are using the system to identify suspicious transactions.
“Another native of Kazakhstan is responsible for our scientific research, a leading artificial intelligence scientist at Texas A&M University with experience in creating AI for satellites, large banks, and even U.S. Navy rocket launchers. And our CTO is an American, a former NASA chief software engineer for the Houston Space Center and the International Space Station,” Elisar proudly says, adding that the team worked on two new products during 2022 – one for the U.S. government, the other for the banking sector. “The product for banks has grown into a whole separate company. I can tell you more about that another time."
TCO to Boost Crude Export to Georgian Black Sea Port?
Without identifying its source, Moscow Reuters states that Kazakhstan’s top oil producer, Tengizchevroil (TCO), plans to boost oil deliveries from the Tengiz field in western Kazakhstan to the port of Batumi, located on the Black Sea about 650 km south of the Russian Black Sea port of Novorossiysk, where the Caspian Pipeline Consortium delivers crude from the Tengiz field, operated by U.S. giant Chevron through its joint venture with the Government of Kazakhstan, TCO.
According to Reuters, in 2022 TCO delivered an average of just 21,000 tons per month to Batumi by rail, whereas it in the coming months it would send 100,000 tons in January and another 50,000 tons to that destination in February. However, Reuters reports that the actual amount delivered in January is unknown, and traders, according to Reuters, have not seen TCO barrels in Batumi.
Tax Revenue Stats for 2021
The removal of COVID-19 restrictions, coupled with rising prices for oil and metals, led to a 25.35% increase in tax payments to Kazakhstan’s budget in 2022 on income earned in 2021, according to statistics released on January 23 by the Ministry of Finance. Moreover, the top 25 foreign private companies operating in the country accounted for around 36% of all tax revenues, while for 2020, their share was 28%.
The oil sector remains the leader here. The Tengizchevroil joint venture retains its top spot in the ranking with payments of 1.7 trillion tenge*, which is 70.4% more than it paid to the budget for 2020. Karachaganak Petroleum Operations held onto second place, having paid 758.5 billion tenge, or 77.6% more than a year earlier.
The mining and metallurgical industry, as in 2020, was represented in the top 25 by six companies. The total amount of taxes paid for 2021 amounted to about 483 billion tenge, which is 44% more than for 2020. KazZinc remains the leader among mining companies and third in the overall rating with payments of 168.6 billion tenge. Next comes ArcelorMittal Temirtau JSC with 146.8 billion tenge.
The third industry in terms of payouts in the top 25 is tobacco. As before, the sector is represented by subsidiaries of three international giants: JTI, Philip Morris, and British American Tobacco. Their total taxes in 2021 increased by 10.2 percent and amounted to 299.3 billion tenge. At the same time, while JTI and Philip Morris saw an increase in payments, by 23.7% and 12.4%, respectively, the Kazakh subsidiary of British American Tobacco has lost ground, paying 36.6 billion tenge, which is 25.5% less than for 2020.
Toyota Motors Kazakhstan paid 60.6 billion tenge in 2021 taxes against 35.3 billion a year earlier; Samsung Electronics Central Eurasia paid 39.3 billion tenge against 33.9 billion for 2020.
Representatives of the construction industry inside the top 25 in 2021 paid more than 59 billion tenge to the budget. Food industry players paid over 55 billion tenge, and the telecommunications sector paid over 43 billion in taxes for 2021.
It is interesting that in recent years, the number of oilfield service companies in the ranking of the largest foreign taxpayers has become smaller and smaller, and this year there were no such entities in the list, with the departure of Kazakhstani subsidiaries of Schlumberger and Fluor Corporation. For 2021 income, their payments amounted to 17.4 billion and 11 billion tenge, respectively, which is 20.8% and 36.8% less than was paid for 2020.
* $1 = 460.52 tenge on February 1, 2023
Sources:
https://lsm.kz/kazahstan-uvelichil-zheleznodorozhnye-gruzoperevozki-cherez-rossiyu
https://lsm.kz/u-kazahstana-poyavyatsya-novyj-suhoj-port-i-punkt-propuska-na-granice-s-kitaem
https://kz.kursiv.media/2023-01-31/lsbs-vvprk/
https://vlast.kz/novosti/53609-eabr-investiruet-v-kazahstan-v-etom-godu-bolee-11-mlrd.html
https://forbes.kz//life/hero/operatsiya_chernyiy_led_1674700210/?
