Category Archives: Central Asia & South Caucasus News

Institutional loans

DEC. 23 2016 (The Conway Bulletin) — It’s been a good couple of weeks for inter-governmental banks’ Central Asia and South Caucasus portfolios. They have lent heavily in the region, supporting infrastructure projects from gas pipelines in Azerbaijan to solar and wind power projects in Kazakhstan.

It’s a win-win situation. The institutional banks want to lend the money that their shareholders – nation states – and their constitutions require. Demand may be a better way of putting it.

For Kazakhstan and Azerbaijan, the funds are a welcome source of cash at a time of economic constraint. Their economies are under huge pressure at the moment from the sustained low oil prices. Azerbaijan’s GDP has shrunk this year and Kazakhstan’s is stagnant.

They were once attractive options to lend to for commercial banks looking for decent exposure in Emerging Markets. Now they would find it difficult to raise the cash without paying prohibitively expensive interest rates.

That’s where the loans from intergovernmental banks come in. They are cheap and chunky.

The latest round of loans came with the involvement for the first time of the Asian Infrastructure Investment Bank (AIIB).

This it the China-based bank that was set up on Christmas day last year but only started operations in January this year. It has now invested $600m in a loan to Azerbaijan’s Southern Gas Corridor company which is helping to build the TANAP gas pipeline from the Caspian Sea to Europe.

The AIIB has put down a major marker, then, and potentially set itself up as a challenger to the traditionally West-based intergovernmental banks that have previously dominated.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

Kazakh President unveils new monument

DEC. 16 2016 (The Conway Bulletin) — Kazakh president Nursultan Nazarbayev unveiled a new monument in Astana to mark the 25th anniversary of independence from the Soviet Union. He ignored the fifth anniversary of the shooting dead of at least 15 people by police during riots in the western city of Zhanaozen.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

Kazakhstan to host Syria peace talks

DEC. 16 2016 (The Conway Bulletin) — Kazakhstan is being considered as a neutral territory to hold peace talks between Syrian rebels and pro-government forces, Turkish Foreign Minister Mevlut Cavusoglu said. Kazakh president Nursultan Nazarbayev wants Kazakhstan to play the role of global peace- maker and has previously said that Syrian peace talks could be held in Astana or Almaty. Kazakhstan has previously held two rounds of Syrian peace talks.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

Comment: Kazakhstan wants to stimulate mortgages, explains Toleukhanova

DEC. 23 2016 (The Conway Bulletin) — Land has been an emotional issue in Kazakhstan.

In the spring, Kazakhstan saw some of its biggest ever protests with thousands of people demonstrating over plans to give foreigners more rights to land. The protests worried the government and also drew attention to existing laws which granted 1kmsq of free land to every Kazakh. Land is cheap in Kazakhstan, the ninth largest country in the world with a population of just 17m.

Since then hundreds of thousands of people have applied to receive their free slice of Kazakh steppe. This is rough land with no infrastructure, exposed to some of the harshest weather conditions south of the Arctic.

Faced with a sharp economic downturn, Kazakh President Nursultan Nazarbayev has been eager to please. He’s promised to build the infrastructure needed to make the land liveable. The problem is the Kazakh government doesn’t have much money.

Instead, the Kazakh government wants to attract private investment. Primarily, it aims to encourage private construction companies to stimulate construction with affordable loans and to trigger a house-buying boom by subsidising mortgages.

The new government program is called Nurly Zher, which means Bright Land in Kazakh.

Economy minister Kuandyk Bishimbayev has said that the government expects GDP to increase by 7.7% during the whole period of the programme and create annually 25,000 jobs.

But experts are doubtful. Kazakhstan needs comprehensive structural economic reforms rather than government handouts.

Representatives from business and the economy say people can’t even afford subsidised mortgages. Commercial banks are also wary of handing out mortgages. A 50% devaluation of the tenge has triggered a lack of confidence. Bad debt levels are approaching danger levels. This is coupled to a lack of political will. Ministers usually implement government programmes initiated by the President but rarely initiate something of their own. The price of failure would be too great. The unwillingness to dig deep into problems and concentrate only on surface issues is typical of the Kazakh government and reflect a political stagnation .

By Aigerim Toleukhanova, the Bulletin’s Almaty correspondent

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

Qatar starts flying to Georgian capital

DEC. 20 2016 (The Conway Bulletin) — Qatar Airways said that it was starting up a new four-times-per- week direct flight between Doha and Tbilisi. Qatar already flies direct from Doha to both Yerevan and Baku. Linking Tbilisi directly to the Qatar Airways network is important as it should increase Tbilisi’s ability to pull in international investment and tourism.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

Georgia increases tax on cigarettes, imported cars and petrol

TBILISI, DEC. 16 2016 (The Conway Bulletin) — Georgia’s Parliament has passed a bill that will increase tax on tobacco, imported cars and oil products, media reported, price rises that have irritated people already coping with a drop in economic conditions.

MPs endorsed the long-trailed tax rises when the Georgian Dream coalition government presented its 2017 budget. The extra revenue raised will help fill a gap in the government’s budget created by reforms to corporate income tax which the government approved in May. From Jan. 1 2017, tax on undistributed profits, both reinvested or retained, will be abolished, creating a 500m Lari ($178m) gap in the state budget.

The government hopes that the reduced corporation tax burden will boost foreign direct investment, an important part of the economy. The opposition, though, said the tax rises would add extra burden on families.

Zurab Chiaberashvili, a senior MP in the United National Movement said: “We have offered the government an alternative plan that would cut costs. We are trying to persuade them that their plan would impoverish hundreds of thousands of people.”

Different criteria will determine the tax increase rate for each category. The type of oil product, the age of the vehicle and type of cigarettes, filtered or unfiltered, will be the main determiners.

An extra tax for car owners, whose family’s combined income exceeds 40,000 Lari ($14,600), will be introduced.

Taxes on gambling, both real and online, will be increased too.

Zurab, a 32-year-old Tbilisi resident who owns a wine shop said the tax rises would be a problem. “The rise in the price of oil products will lead to higher prices in all sectors and people pay the consequences,” she said.

“However, our country is full of polluting and inefficient old cars. Maybe the move will push people to buy new cars in order to pay less taxes.”

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

ABD gives ‘critical’ loan to Azerbaijan

DEC. 22 2016 (The Conway Bulletin) — The Asian Development Bank said that it had a approved a loan of $500m to help support Azerbaijan during the economic downturn that has hit the region. Azerbaijan has been particularly hard hit by the collapse in oil prices. Over 75% of the government’s revenues come from oil sales. Its economy has shrunk by 4% this year. The ADB described the loan as “critical”.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

EEU customs code to be ratified in Armenia

DEC. 22 2016 (The Conway Bulletin) — Armenia’s parliament ratified an agreement on introducing the Eurasian Economic Union’s customs code into law. The EEU has developed a customs code to increase integration within the group. Russian officials have previously said that the code will be finalised at the end of December.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

Uzbekistan develops ties with Pakistan

DEC. 22 2016 (The Conway Bulletin) — On a trip to Pakistan, Uzbekistan’s deputy PM Ulugbek Rozukulov agreed with Pakistani business minister Khurram Dastgir Khan to set up a joint business council to improve ties between the two countries. Since former president Islam Karimov died in September, Uzbekistan has worked to improve relations with its neighbours. Pakistan has also invested more time into developing ties in the Central Asia region. It is part of both the CASA-1000 project to import electricity from Tajikistan and Kyrgyzstan and also part of the TAPI gas pipeline project to import gas from Turkmenistan.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

Azerbaijani government cuts spending

DEC. 16 2016 (The Conway Bulletin) — Azerbaijan’s parliament passed a government budget for 2017 which cut spending to 16.9m manat from 18.5m manat in 2016. Azerbaijan has had to slash its spending because of a sharp fall in the price of oil which has hit government revenues hard. Oil revenues make up 75% of the government’s income. It based its 2017 budget on oil at $40/barrel.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)