KAZAKHSTAN OFFERS MORE MIXED SIGNALS ON FOREIGN INVESTMENT.

Fears that last month’s departure of former prime minister Akezhan Kazhegeldyn would lead to a reversal in Kazakstan’s foreign investment policies have been confirmed in part by a recent decision to scale back public offerings in some of Kazakhstan’s most attractive firms. The government announced on November 21 that the number of "blue-chip" companies in which shares would be floated on the Kazakstan Stock Exchange (KSE) would be pared back to five, down from the 13 that had been expected. (Reuter, November 21) According to a press release issued by Kazakhstan’s new prime minister Nurlan Balgimbaev, the government is ready to begin negotiations with investment banks on the primary placement of state-owned equity in the Zhezkazgantsvetmet copper firm, the Mangistaumunaigaz and Aktobemunaigaz gas companies, the Kazakhtelekom telecom monopoly, and the Ust-Kamenogorsk Titanovo-Magnievy Kombinat. However, no date was given for these firms’ KSE flotation.

While these sales will be a boost for the KSE, which was launched in September, investors may be disappointed by the fact that equity sales in eight other companies will apparently not take place. These include the 100-percent state-owned Halyk Savings Bank (Kazakhstan’s largest bank), the Alyuminii Kazakstana aluminum company, the Kazkhrom chrome company, the Borly coal mining company, the Atakent exhibition center, the Sokolovsko-Sarbaiskoye iron company, the Yuzhno-Toparskoye mining company, and Shymkentsky lead plant. Moreover, only minority stakes — ranging from as little as 2 percent of Kazaktelekom to a possible high of 20 percent for Zhezkazgantsvetmet — will be offered in the five companies slated for KSE flotation.

Such policies regarding foreign investment in the energy sector are not out of line with those pursued in many other transition economies. They do, however, contrast with Kazhegeldin’s privatization program, which emphasized the relatively rapid transfer of Kazakhstan’s energy-sector assets to multinational corporations in exchange for cash on the barrel and (it is hoped) the transfer of technology and expertise. Many observers have suggested that Kazhegeldin’s departure and his replacement by Balgimbaev (who had been Kazakhstan’s oil minister) would mean the end of these relatively liberal investment policies. The latest information indicates that these suggestions are correct.

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