Page 37 - bne_Magazine_June_2017

bne June 2017 Special focus I 37
Overall, Kazakhstan removed 60% of its administrative barriers to conducting business in 2016, deputy director of the Kazakh Chamber of Entrepreneurs Kai- rat Kudaibergen said in May. Up to 125 changes to laws and regulations were put through last year in order to improve Kazakhstan’s business climate.
The improvements should support
the Kazakh privatisation programme launched in 2014. It aims to cut the gov- ernment’s participation in the economy to 15%. Kazakhstan has to date sold at least 310 state-owned enterprises under the privatisation drive and officials are priming a full or partial sell-off of more than 1,000 by 2020.
On the sales block will be 217 units owned by the $67bn sovereign wealth fund Samruk-Kazyna or its subsidiar- ies. But there is still real doubt over
the exact timing in terms of the plan to offer stakes in the fund’s eight largest assets – including oil and gas group KazMunayGas, Air Astana (part-owned by BAE Systems) and uranium producer Kazatomprom – under initial or second- ary public offerings.
Amid the optimism that Kazakhstan’s economic reforms could deliver, there remain a number of uncertainties. Some are tied to Kazakhstan’s growing reli- ance on Chinese investment. China is
Kazakhstan, meanwhile, is dealing with its own slew of non-performing credits. The ever-expanding bad loan bomb in its banking sector could very well explode into view.
"Asset quality remains weak across Kazakhstan's banking sector as the depreciated tenge, combined with challenging operating conditions and declining real incomes, has fuelled a rise in problem loans in 2016 to 37% of total loans, on average, among our rated banks in Kazakhstan," Semyon Isakov, vice president at Moody's Investors Ser- vice, said in February.
The figures, however, are likely under- stated. Other ratings agencies such
as Fitch have calculated that the true level of problematic exposure at largest Kazakh lender Kazkommertsbank (KKB) is 60% of loans.
The consolidation of the Kazakh banking sector centred on the planned merger
of KKB and second largest lender Halyk Bank can be seen as a mere exercise in postponing a greater reckoning, the threat of which has persisted since the 2008 financial crisis.
But until reforms and privatisation lead to greater economic diversification,
the country will always have to rely on hydrocarbons to drive expansion.
“The relaunch of the giant Kashagan oil field last October has helped to strengthen the economy”
very much moving to replace Russia and the international financial institutions (IFIs) as a provider of capital.
Kazakhstan is very open to becoming a trade shipping crossroads at the heart
of Eurasia under China’s trillion dol-
lar One Belt, One Road infrastructure programme. Yet it is wary of tying too many of its fortunes to what could turn out to be a holed ship. China, of course, is contending with a real estate bubble and industrial credit binge that bears say could cause it to go belly-up.
Oil and gas production declined by 1.7% to 79.6mn tonnes in 2015 and then fell to 78mn tonnes in 2016. But the restored Kashagan production is now coming
to the rescue; thus between 4mn-7mn tonnes of extra oil output might this year lead to a production figure of 85mn tonnes. Add in the expected further world oil price rebound, and the EBRD, for instance, predicts Kazakh growth of 2.4% in 2017 and 3.8% in 2018. ”
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