Embassy of India Astana, Tel:(007-7172) 925700-703 Fax:(007-7172) 925717

No.Ast/Com/202/09/2009 July 1, 2009

Economic & Commercial Report for May, 2009

1. GDP Growth Rate:

2004 9.6 2005 9.5 2006 10.6 2007 8.5 2008 3.0

As per the statistics released by Kazakh National Bank, the GDP growth for year 2008 was 3%. In first quarter of 2009, there was decline in the production sector by 11.8 per cent, electric power generation by 6.7 per cent. However, in contrast to this, agricultural output grew by 3.6 per cent.

2. Rate of Inflation (Consumer Price Index):

Year %age 2006 8.4 2007 18.8 2008 9.5 January-March, 1.9 2009 April, 2009 0.8 May, 2009 0.7

¾ Year on year inflation till May, 2009 was 8.4 %.

3. Total External Trade of Kazakhstan to CIS and non-CIS countries (In USD for January – April 2009)

2009 January-April(in Share %age of trade mln dollars) External trade turnover 19,241.40 Exports 10,805.17 CIS countries 1,973.57 18.27 Non-CIS countries 8,831.60 81.73 Imports 8,436.23 CIS countries 3,556.87 42.16 Non-CIS countries 4,879.36 57.84

4. Foreign Trade of Kazakhstan (January to April, 2009)

Items January- April 2009 (in mln USD) Import 8,436.23

Export 10,805.17

Total Foreign Trade (in USD) 19,241.40

Trade Balance (in USD) (+)2,368.94

5. Total trade and share of 10 major countries:

Country January- April 2009 (in Share %age of total mln USD) trade Russia 3,497.37 18.17 China 2,863.77 14.88 Italy 1,842.76 9.57 Switzerland 1,424.77 7.40 Ukraine 1,043.20 5.42 France 984.23 5.11 Germany 709.18 3.68 USA 626.26 3.25 Great Britain 536.50 2.78 Netherland 514.08 2.67

6. Principal ten Export Destination: (Export in USD for January- April 2009)

Country January- April 2009 (in Share %age of total mln USD) trade Italy 1,570.98 8.16 China 1,440.05 7.48 Switzerland 1,364.40 7.09 Russia 976.92 5.07 France 853.05 4.43 Netherlands 448.30 2.32 Great Britain 345.85 1.79 Ukraine 324.02 1.68 Israel 321.36 1.67 Iran 301.41 1.56

7. Principal ten Import Sources of Kazakhstan:

(Imports in USD for January-April 2009)

Country January- April 2009 (in Share %age of total mln USD) trade Russia 2,520.45 13.09 China 1,423.73 7.39 Ukraine 719.18 3.73 Germany 645.16 3.35 USA 493.79 2.56 Italy 271.77 1.41 Japan 219.86 1.14 Great Britain 190.64 0.99 Turkey 138.99 0.72 France 131.18 0.68

8. The principal five export items from Kazakhstan to India for the period of

January- April, 2009 (in thousands USD)

Items Thousands USD 1 Iron and plain steel slabs 37,149.20 2 Petrochemicals 24,069.90 3 Leather 6,811.20 4 Asbestos 3,723.80 5 Dyes 27.20

9. The principal five items of Import from India to Kazakhstan for the period of January- April,2009 (in thousands USD)

Items Thousands USD 1 Pharmaceutical and medical products 15,247.80 2 Tea 10,732.50 3 Industrial machinery, equipment, milling 5,468.15 machinery and spare 4 Electrical equipment and spare parts 3,856.69 5 Cosmetics and Detergents 1,779.30

10. Kazakhstan’s trade with India for January – April 2009

Overall trade with India has increased from USD 76.9 (from January to April, 2008) to USD 119.26 million (from January to April, 2009) resulting in an increase of 55.08% in total trade. In comparison with period from January to April, 2008, imports from Kazakhstan have increased by 324.9% (from USD 16.9 mln to USD 71.81 mln) whereas India’s exports to Kazakhstan have decreased by 23.75% (from USD 60.0 mln to 47.45 mln).

(In million USD) Particulars 2007 % 2008 % 2009 2008 % Jan- Change Jan- Change Jan- Jan- Change Dec. from Dec. April April 2006 India’s 48.10 -19.4 164.04 +241.03 71.81 16.9 324.9 Imports India’s 147.65 -1.87 203.82 +38.04 47.45 60.0 (-)23.75 Exports Total 195.75 -6.90 367.86 +87.92 119.26 76.9 55.08 Trade

11. Major Developments/High level visits:

The World Bank will give Kazakhstan a loan worth 2.125bn dollars for a period of 25 years to implement a project to develop roads connecting the South- West borders. The project is part of the Kazakh government's 7.5bn dollar Western Europe-Western China International Transit Corridor development programme to upgrade approximately 2,800 km of roads from Kazakhstan's border with China (Khorgos) to its border with Russia (Zhaysan),. World Bank will finance and rehabilitate a 1,062 km stretch of road between Shymkent (the administrative centre of South Kazakhstan Region) via Kyzylorda Region (in the south) to the border with Aktobe Region (in the west). The remaining 1738 kms stretch of roach will be financed by International Bank for Reconstruction and Development (IBRD), Eurasian Bank for Reconstruction and Development (EBRD) and Asian Development Bank(ABD).

A telephone conversation between the Presidents of Russia and Kazakhstan was held on 4th May, 2009. After congratulating each other on the occasion of the Victory Day (May 9) marking victory over Nazi Germany in the Second World War, the heads of state spoke about the soonest launch of the Russia-Kazakhstan- Belarus Customs Union and discussed topical issues of multidimensional bilateral cooperation and interaction within the framework of regional integration organizations. A special mention was made about further extending the Russian- Kazakh strategic energy dialogue, as well as forming the Customs Union within the framework of the Eurasian Economic Community. Kazakh Foreign Minister held talks with US National Security Adviser General James Jones on May 4, 2009 in Washington and discussed global issues such as strengthening the non-proliferation regime, ensuring security and stability in Central Asia, as well as topical issues relating to the development of strategic partnership between Kazakhstan and the USA. He also met with US Secretary of Energy Steven Chu and discussed the issues of global energy security, strengthening the non-proliferation regime, prospects for collaboration in the sphere of renewable energy sources and other issues. He also met the US State Secretary Hillary Clinton. The meeting with Mrs. Clinton was focused on bilateral relations and Kazakhstan’s role in the USA's activities in Afghanistan.

Italian Deputy Foreign Minister Alfredo Mantica called on Kazakh State Secretary Kanat Saudabayev in Astana on May 6, 2009 and discussed the current state and prospects for bilateral cooperation including preparations for Kazakh President 's official visit to Italy planned for autumn in 2009 as well as Kazakhstan’s OSCE presidency and developing trade and economic cooperation. Kazakhstan State Secretary said that cooperation between Kazakhstan and Italy is developing in an atmosphere full of mutual understanding and trust.

Kazakh Foreign Minister, Marat Tazhin paid a visit to Germany on 7 May 2009 and held talks with Vice-Chancellor and Federal Foreign Minister Frank- Walter Steinmeier. The Foreign Ministers discussed future joint actions in all areas of mutual relations and signed "Action plans as part of partnership for the sake of the future between Kazakhstan and Germany". The action plan is a "road map" for implementation of specific joint projects between the two countries. They agreed to implement joint innovative and investment projects within the framework of a joint agreement on cooperation between the Kazakh Ministry of Industry and Trade and the German Federal Ministry of Economics and Technology until 2011, which was singed in Astana on 3 September 2008.

South Korean President Lee Myung-bak arrived in Kazakhstan on 12th May, 2009 on a three-day state visit at the invitation of Kazakh President Nursultan Nazarbayev aiming to improve ties with the Central Asian nation and also win support for Seoul's energy security. South Korean President affirmed that his country will actively support the Kazakh government's efforts to diversify its economy, in addition to support for energy cooperation between the two countries. President Nazarbayev emphasized that Kazakhstan will begin negotiations with South Korea on adoption of Seoul's wireless broadband, or WiBro Internet technology in his country which is potentially worth over US$1 billion. He also invited Seoul to take part in the development of Kazakhstan's natural resources, including uranium. South Korea purchased nearly 40 per cent of its 4,000 tons of uranium exports last year from Kazakhstan. Seoul and Astana also signed a number of agreements following the meeting of the two Presidents which includes: An Action Plan on deepening cooperation between the two countries inked by Minister of Industry and Trade of Kazakhstan and Minister of Foreign Affairs and Trade of South Korea Yu Myung-hwan, an Agreement on cooperation in construction of Balkhash Thermal Power Plant signed by Chairman of Samruk-Kazyna National Welfare Fund, and President of Korea Electric Power Corporation, Kim Ssang Su and President of Samsung Corporation, Chi Seong Ha. The volume of the investments into the project will be USD 4.5 billion. The South Korean President later held talks with Kazakh Prime Minister Karim Masimov and discussed issues of mutual concern.

At its plenary session on May 13, the Kazakh parliament's Senate [upper house] approved a bill "On ratifying amendments to the agreement between Kazakhstan and the USA to destroy launchers of intercontinental ballistic missiles in mines, tackle emergency situations and prevent the proliferation of nuclear weapons". The bill will be submitted to President Nazarbayev to be signed into law.

Secretary-General of the Eurasian Economic Community [EAEC] Tair Mansurov met Kazakh Prime Minister Karim Masimov in Astana on May 14, 2009 and discussed several issues on the agenda of the EAEC Interstate Council's 23rd summit at Prime Ministers' level to be held in Moscow in June 2009.

At a government meeting in Astana on May 14, 2009 Kazakh Minister of Economy and Budget Planning said that Business and investment performance figures and unemployment in industries show that threat of recession exists in the country. He also said that the country's social and economic development tendencies since the beginning of 2009 testify an increase in the negative impact of the global crisis. There are plans to channel at least 2.2 trillion tenge (USD 14.67 billion, about 20 per cent of the country's GDP) of state funds and also from other sources into the implementation of the anti-crisis programme. The unemployment level in Kazakhstan stood at 7.2 per cent in April 2009.

At an extraordinary session of the ruling People's Democratic Party on May 15, 2009 in Astana, Kazakh President Nursultan Nazarbayev announced that Kazakhstan will start implementing a five-year action plan of rapid industrial-innovative development from 1st January, 2010. He stressed that Kazakhstan's industrialization should be consistent with the current world economic order.

Deputy Kazakh Agriculture Minister, Arman Evniyev announced on May 18, 2009 that Kazakhstan was ready to rent 3.5m hectare of land to foreign investors including Saudi Arabian businessmen. He said that land areas which are not being used for various reasons, could be used for livestock and grain growing under the lease. Kazakh-Arab businessmen have shown interest in leasing these agricultural areas from Kazakhstan. Under the Kazakh legislation, foreign businessmen can lease land for 10 years only.

In an interview to the state-owned Kazakh Khabar TV on May 20, 2009 President Nazarbayev expressed hope that the country’s economy will revive in the second quarter of 2009. He gave this prediction on the basis of improvement in world economy, increase in oil prices etc. He said that the government has taken anti-crisis measures to deal with recession and Kazakhstan will be able to straighten out the economy in the first half of the year and that there will not be severe economic crisis like in the last year.

Dr. Vladimir Shkolnik, Industry & Trade Minister has been appointed as President of the National Atomic Company, KazAtomProm on 20th May, 2009. has been appointed Kazakh Minister of Industry and Trade in place of Vladimir Shkolnik. Before the appointment, 37-year-old Issekeshev was Economic Advisor to President Nazarbayev.

Following a government meeting on May 19, Kazakh Finance Minister informed journalists that Kazakhstan will not borrow huge amounts from abroad in 2009. In his opinion, borrowing money from abroad is not worthwhile this year because loans in dollars will cost the country dearly. However, the budget deficit will be met with borrowings in Swiss francs and Japanese yen. The Finance Minister said that the amount of state loans and loans obtained under state guarantees in April totalled 1,370bn tenge [over 9.1bn dollars].

Russian Prime Minister, Vladimir Putin paid a visit to Kazakhstan on May 21-22, 2009 to attend the meeting of the Heads of Government of the CIS member states. During this meeting delegations from 11 states were present. The agenda of the meeting included 18 issues relating to cooperation between CIS states in trade, economic and humanitarian spheres. He also met with President and Prime Minister of Kazakhstan on May 21, 2009. In the meeting with Russian Prime Minister, Kazakh President, Nursultan Nazarbayev said that the Council of the Prime Ministers of the CIS member countries should draw up joint measures to find a way out of the global financial crisis. In turn the Russian Prime Minister said that Russia is taking consolidated actions at all levels of government and that Russia's economic situation concerning the consequences of the global financial crisis is complicated but manageable.

Kazakhstan and Russia signed six agreements in the presence of the Russian and Kazakh Prime Ministers, Vladimir Putin and Karim Masimov respectively which includes an intergovernmental memorandum on setting up the Customs Union signed by the First Deputy Prime Ministers of Russia and Kazakhstan, Igor Shuvalov and Umirzak Shukeyev respectively. Other documents related to the Baykonur space complex which Russia rents from Kazakhstan; an intergovernmental agreement on the procedure of visiting Baykonur signed by the head of Russian space agency Roskosmos, Anatoliy Perminov and the chairman of the Kazakh National Space Agency, Talgat Musabayev; an agreement on joint actions in the field of cargo clearance as well as a memorandum on cooperation in tariffs on goods shipments and railway transportation signed by the heads of the Russian Railways Rossiyskiye Zheleznyye Dorogi open joint-stock company and the Kazakh railways Kazakhstan Temir Zholy national joint-stock company.

The Committee for National Security (KNB), Kenzhebolat Beknazarov announced on May 25, 2009 that the former President of the KazAtomProm National Atomic Company, Mukhtar Dzhakishev was arrested on May 21, 2009 along with three Vice-Presidents, Dmitriy Parfenov, Askar Kasabekov and Malkhaz Tsotsoriya and four managers of subsidiary companies on chargers of large-scale embezzlement of funds. Those Vice-Presidents were overseeing finances, uranium extraction and strategic issues of the nuclear giant’s economic policy. The KazAtomProm management is suspected of misappropriation of funds at a large-scale. Commenting on arrest, Prime Minister Karim Masimov noted that the development of the nuclear power industry has greater significance for Kazakhstan and due to this reason, a close scrutiny on activities of the KazAtomProm was being kept. In first week of April, 2009 Ex-Member of Parliament and Member of the Nur Otan Party Tatyana Kvyatkovskaya had accused Mukhtar Dzakishev of selling the largest uranium deposits of Kazakhstan “Akdala”, “South Inkay”, and “Kharasan” for a pittance to ‘Canadian Uranium Ore’ company and demanded that the investigation of the company’s activity that had been undertaken in 2007 be re-opened and a criminal case be filed against him.

A Kazakh-German Business Forum was organized by the Kazakh Industry and Trade Ministry, the Kazakh-German Association of Entrepreneurs and the Kazakh Chamber of Commerce and Industry at the Rixos President Hotel in Astana on May 29, 2009. Opening the forum the German Ambassador to Kazakhstan, Rainer Eugen Schlageter said that the forum was being held during a turbulent time when all countries including Germany and Kazakhstan are affected by the global crisis and that both countries need to make joint efforts to solve a number of existing issues.

Chairman of the Board of Directors of General Electric International(GEI) Jeff Immelt met Kazakh Prime Minister Karim Masimov on May 29, 2009. They discussed the company's future work in Kazakhstan including investment projects. The Prime Minister welcomed the initiatives of the US company and added that Kazakhstan was interested in implementing mutually beneficial projects. A locomotive assembled under the GEI technology will be produced in Kazakhstan by the end of this year. The Samruk-Kazyna National Welfare Fund and the GEI company signed a 500m-dollar contract on GEI services.

12. Intergovernmental Commission Meetings:

The Russian-Kazakh Joint Commission for the Demarcation of the State Borders held its 12th session in on May 2, 2009 and agreed to continue the work on designating places for border signs and stated their mutual readiness to start field demarcation work on 18 May.

13. Energy Sector:

President of the Carlyle Oil Group, David Rubenstein called on Kazakh President Nursultan Nazarbayev on May 21, 2009. After the meeting, the head of the Carlyle Oil Group company said that regardless of the current financial crisis, Kazakhstan is the most convenient country for making investment and that his company was ready to invest funds in Kazakhstan and ready to cooperate with Kazakhstan in developing petrochemical industry.

China signed a loan for oil deal of USD 10 billion with Kazakhstan on May 29, 2009 for financing oil and other projects in Kazakhstan. The deal involves a $5 billion loan to be given by the state-owned China National Petroleum Corp to Kazakhstan's KazMunaiGas for the joint purchase of MangistauMunaiGas and gas fields. China will invest another $5 billion in other projects in Kazakhstan. The present pact follows deals signed by China with oil producing Russia, Venezuela and Brazil over the past two months totaling USD 46 billion. China offered to buy 300,000 barrels of Russian oil per day for 20 years in exchange for $25 billion in loans. Brazil also agreed to supply 100 million barrels of crude to China in exchange for loans of $10 billion. Another oil producing country Venezuela recently accepted a Chinese offer of $6 billion for financing oil projects while promising to triple oil supplies to one million barrels per day to China by 2015. The four agreements showed China was making long term plans for energy supplies by leveraging on its vast foreign exchange reserves of $2 trillion.

According to the Statistics Agency of Kazakhstan, the extraction of crude oil increased by 4.4% to 20.29 million tons in January - April 2009, including oil from bituminous minerals. Oil production including gas condensate increased by 2.4% to 24.35 million tons over the period. Extraction of gas condensate decreased by 6.6% to 4.06 million tons, natural gas in liquid or gaseous state increased by 4.2% to 11.66 trillion cubic metres.

14. News of Interest to India:

A memorandum of understanding was signed in Astana by Korea Railroad Corp. (KORAIL) President Huh Joon-young and his Kazakh counterpart, Mamin Askar for the joint development of transcontinental railway lines and modernization of Kazakhstan's logistics infrastructure. It also makes provisions for KORAIL to participate in railroad construction and operations in Kazakhstan, as well as mutual development of information technology systems that can improve rail operations. The MoU states that KORAIL plans to carefully examine the feasibility of various projects and gauge the fund-raising capability of the country and engage in a package deal with other South Korean companies to bid for business projects. Kazakhstan has released a plan to acquire 23,000 rail trucks, 500 locomotives and refurbish 3,000 km of existing railways by 2013.

15. Bilateral visits that took place in May, 2009:

Shri Haroon Yusuf, Hon’ble Minister of Food & Civil Supplies and Industries, Government of NCT Delhi visited Astana as representative of Indian National Congress to attend the 12th Congress of the ruling Nur Otan Pary held on 15th May, 2009.

The India Trade Promotion Organization (ITPO), New Delhi in collaboration with the Embassy of India in Kazakhstan and India-CIS Chamber of commerce and Industry organized a three-day “Made in India” mega trade exhibition titled ‘India Expo 2009 Almaty’ at the Atakent Exhibition grounds in Almaty, Kazakhstan from 21-23 May 2009. Seventy-one premier Indian companies in the fields of Oil and Gas, Thermal Power, Nuclear Energy, Petrochemicals, Power Generation and Distribution, Mining Machinery, Printing, Packaging industry, Pharmaceuticals, Small and Medium Scale Enterprises, Agriculture & Food Processing Sectors, Agricultural Machinery, Infrastructure Projects & Machinery, Trading corporations, Jewellery, Garments, Fashion Designing, Tea, Coffee, Engineering Services, and many other areas participated in the India Expo Almaty. Leading participants were (i) ONGC, (ii) Nuclear Power Corporation of India Limited (NPCIL), (iii) National Thermal Power Corporation of India (NTPC), (iv) Gas Authority of India (GAIL), (v) Indian Oil Corporation (IOC), (vi) Power Grid Corporation of India, (vii) Bharat Earth Movers Limited (BEML), (viii) Metals and Minerals Trading Corporation of India (MMTC), (ix) State Trading Corporation of India (STC), (x) APEDA, (Xi) Tea Board of India, (xii) Coffee Board of India, (xiii) National Small Scale Industries (NSIC), (xiv) Fashion Design Council of India (FDCI), (xv) Kalpataru Power Transmission Limited, (Xvi) Atlas Cycles, (Xvii) Punj Lloyd, etc. The Expo was jointly inaugurated by Shri Ashok Sajjanhar, Ambassador of India, Dr. Sheela Bhide, Chairman and Managing Director of ITPO, Mr. Serik Seydoumanov, Deputy Governor of Almaty City and Mr. Rajan Madhu, President of India-CIS Chamber of Commerce and Industry on 21st May 2009. A glittering Fashion Show by leading Indian fashion designers presented by professional models from India and Kazakhstan under the FDCI and Music programme choreographed by famous Kazakhstani artistes entertained the audience and media.

India Expo 2009 presented an ideal opportunity for Indian and Kazakhstani businessmen to promote and enhance economic cooperation. Kazakhstan is rich in mineral resources and India is rich in technology and highly skilled manpower. Thus, this exhibition drove home the message that India is ready to collaborate with Kazakhstan not only in the area of natural resources but also to upgrade its industry through value addition and innovation, human resource development and manufacturing. India Expo Almaty drew huge, flowing crowds on all the three days. Pavilions of APEDA, Tea Board, FDCI, garments, jewellery and leather attracted huge queues. Many exhibitors utilized this occasion to explore the market and familiarize the local requirements. Several constructive negotiations for purchase of rice, garments, tea, processed foods, medicines and machinery were took place. Agreements for purchase of printing and packaging machinery were also signed. The India Expo 2009 was a resounding success. It was able to achieve its objectives by exposing the Kazakh business, industry and consumers to the capabilities and expertise of Indian industry; to inform the Indian industry about the immense potential of their products in the Kazakh market and to establish useful business and commercial contacts between the two sides.

A delegation led by Shri I.C. Jaiswal, Executive Director in-charge of International Business Development Division of Power Grid Corporation of India Limited who came to attend India Expo 2009 Almaty, visited Astana and met with Mr. Vladimir G. Osochenka, Vice Electricity Grid Operating Company JSC on May 22, 2009 and discussed prospects of collaboration in the field of the Power Generation and Distribution.

Shri Chandresh Jajoo, Managing Director, Shri Sunil Khanna and Anil Kumar Wahi, Senior Executives of Eurotherm Hema Group visited Kazakhstan from May 26 to June 1, 2009. During their visit, they met with President and Vice-President of Atameken Union, Responsible Secretary of Ministry of Education & Science, Vice President of Temir Zholy, President of JSC KazAgro Holding and Rector of Eursian National University to discuss the issues related to mutual concern in various fields like Agriculture, Education etc. They also signed a Memorandum of Understanding for manufacture of radiators with a local Kazakh company to supply to the local market and for export to neighbouring countries.

16. Calendar of forthcoming events/Trade fairs, exhibitions in Kazakhstan:

A copy of the same is enclosed.

(George Raju) Second Secretary (Commerce)/ Head of Chancery 01.07.2009

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