Archive for September 2010
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Luzhkov: Thus Spake the Commentariat (part 1)
3 Comments · Posted by Adrian in Uncategorized
Photo source: RIA Novosti.
Since President Dmitry Medvedev announced the dismissal of Moscow mayor Yuri Luzhkov, Western media, observers and commentators have mainly focused on the larger questions of what this decision means for the Putin-Medvedev tandem or the 2012 presidential elections. Indeed, Luzhkov was a titanic figure on the Russian political stage as a founding member of the ruling United Russia party. Less attention, however, is being paid to what Luzhkov’s removal means for the city of Moscow and for the business climate of Russia’s center of business and political power. Now that Luzhkov’s mayoral machine has ground to a halt, The Pipeline will assess the impact of Luzhkov’s exit from the Russian political arena and address key issues to watch.
Under the current government policies and the activity of the RFCA (the Agency for a Regional Financial Center of Almaty), the stock market is beginning to develop into a respectable exchange. Unfortunately Kazakhstan in contrast to foreign countries is just beginning to establish a functional stock exchange. According to statistics, 93% of turnover on Kazakhstani securities is held in foreign markets.
Why do local companies prefer foreign markets? Kazakhstan is known for having relatively few investors. For the development of domestic investment, the state needs to improve its infrastructure, legal framework, markets, trading mechanisms. In fact, if local financial markets are sparsely populated, Kazakhstani companies wont receive the type of positive gains as they would on foreign exchanges. On this basis, the Chairman of the RFCA, Arken Arystanov said, “that to create a liquid market in Kazakhstan it needs to be comprised of one hundred thousand retail investors.”
A few years ago on the stock exchange there were only two thousand retail investors. But thanks to targeted government policies and the launch of a financial literacy education program for the public, the amount of active participants increased to 10,000. In further attempts to boost their active stock exchange participant levels, this year the Kazakhstan Stock Exchange (KASE) announced that it had finalized an internet portal. Also introduced was digital signature technology, which will soon be operational.
KASE · Kazakhstan · RFCA · stock market
27 June. Traffic chaos as Leningradskoe Shosse, the main motorway to Sheremetyevo Airport, is suddenly reduced from 12 lanes to 2 for mysterious road works. Luzhkov is not seen to act; in fact, there are rumors that he instigated the chaos to encourage passengers to fly from Vnukovo Airport instead. Vnukovo is owned by Moscow City.
July, August. Peat fires in the countryside outside Moscow and the worst heat-wave in decades created hellish conditions in the capital. The mayor chose summer for an untimely vacation and prioritized tending to his prized bee hives.
23 August. 2,000 protesters gather on Pushkin Square in central Moscow to oppose the construction of a new motorway through the 2,500 acre Khimki Oak Forest in the northern outskirts of Moscow.
Both the rhetoric and actions coming out of Moscow regarding Russia’s WTO accession process indicate that President Medvedev wants to enter the WTO as soon as possible. According to an article in Kommersant, the Russian government has started a campaign to “storm” the WTO. The Kommersant source states that in August, Medvedev instructed the government to complete all WTO talks in September. Last week, First Deputy Prime Minister Igor Shuvalov stated that Russia will successfully complete all of its WTO talks in the next few weeks. The events of the past two days seem to indicate that the government has taken Medvedev’s instructions seriously. Or that, as Kommersant notes, they are worried that Kazakhstan, who sent negotiators to the U.S. earlier this month, might surpass them in the WTO accession process.
Regardless of the motives, the news is positive. Yesterday, Agriculture Minister Elena Skrynnik announced that all questions regarding the import of American poultry had been “resolved” and that U.S. chicken was expected to arrive in St. Petersburg tomorrow. This will, ideally, finally end the chicken issue between the two countries. In the past three months, U.S. chicken imports have been allowed, then subsequently banned, in Russia.
Today, Minister Skrynnik announced that state support for agriculture would remain at $9 billion a year through 2012 and then would drop to $4.4 billion between 2013 and 2017. This concession removes a major issue for Russia’s WTO accession and, according to Skrynnik, “the WTO’s issues concerning the agricultural sector are settled.”
agriculture · Medvedev · Russia · WTO
Hu wants to launch more pipelines?
On September 26, President Medvedev visited his Chinese counterpart Hu Jintao for the fifth meeting in the past year. Amidst a blitzkrieg of deals signed, Hu called the meetings a “new start” in relations, while Medvedev described them as “strategic partnership.” Medvedev had a productive trip; aside from dismissing Moscow’s power mayor, he inaugurated the Skovorodino-Daqing (a.k.a. East Siberian Oil Pipeline), touted as Russia’s first breakthrough in diversifying its oil exports to the hungry Asian market. Hu also said that China will support Russian proposals for yuan-ruble direct trading on the interbank foreign exchange market.
China · deals · foreign investment · Medvedev · oil & gas · Russia
Kairat Kelimbetov, head of the national welfare fund Samruk-Kazyna, participated in the “Summer Davos” in Asia in China. Such topics as post-crisis development, new markets in Asian region, new tendencies on international capital markets and other important questions of global economic growth were all discussed at the forum.
In Beijing, Kelimbetov opened a representative office of Samruk-Kazyna and conducted talks with the heads of Chinese national companies and representatives of international corporations. During his visit, Kelimbetov held a series of talks with the representatives of Chinese ministries and state companies on China, including the State Bank of Development of China, Eximbank and several companies working in the energy sector. Several agreements on collaboration in realization of projects in railway, oil and gas, atomic energy and others sectors of Kazakhstani industry were signed.
In the past few years China and Kazakhstan have intensified investment and financing ties. State Bank of China and Eximbank gave a $10 billion loan for investment projects in Kazakhstan. A joint Kazakhstani-Chinese investment fund, CITIC Kazyna, was created last year aimed at infrastructure and non-commodity sectors of economy with capitalization of $200 million.
Deputy Prime Minister and Finance Minister Alexey Kudrin announced on September 20 that the Russian government would cut its bureaucracy by 110,000 by 2013, saving the government approximately $1.5 billion. Kudrin drafted an agenda and methods for trimming down the bureaucracy after President Medvedev asked the government to create a plan to cut government workers by 20%. According to his schedule for letting go of workers, each government ministry and agency must cut 5% of its employees in 2011 and 2012 and 10% in 2013.
The Federal Statistics Service estimates that there are almost 870,000 civil servants, a number that has doubled in the past ten years. In addition to saving money, cutting these workers is expected to reduce corruption and reduce redundancies within the government. According to a government commission, 1,468 existing government positions were redundant, 263 were duplicates and 868 positions seemed to lack reasons for their existence.
These cuts are part of Medvedev’s plan to decrease corruption and make Russia a more welcoming place for foreign investors in light of the perception that Russia’s bureaucracy is notoriously corrupt. According to Transparency International, public officials and civil servants are perceived Russia’s most corrupt institution and businesses must pay numerous bribes and bear lengthy approval just to open an office or start a company. Ikea halted all new investments in Russia last year because it was fed up with the corruption.
bureaucracy · corruption · foreign investment · Kudrin · Russia
The seventh meeting of Presidents of Kazakhstan and Ukraine, marked by Kazakhstan President Nursultan Nazarbaev’s visit to Ukraine, was to deepen economic relations and promote trade turnover between the two countries.
Nazarbaev’s official visit to Ukraine saw a number of documents signed, including protocol on amendments to the Action Plan Kazakhstan-Ukraine for 2011-2013. In this bilateral plan, cooperation in the oil and gas sector, nuclear energy, transport and transit, engineering, space and agro-industrial complex were highlighted as the most promising for business development. Several agreements on mutual allocation of land plots for the construction of diplomatic representations, cooperation on education, and strengthening bilateral human rights commissions were signed.
President Nazarbaev visited the Taras Shevchenko National University in Kyiv, where he was awarded a title of Honorary Doctor of the university and praised the scientific and educational potential of Ukraine. He emphasized the current multilateral cooperation between Kazakh and Ukrainian universities and science academies. “The biggest project in this area we have now is the New University of Astana. I invite Ukrainian students to come to our country and study there. I believe that professors from Ukraine will also lecture at the New University of Astana,” Nazarbayev added.
Kazakhstan · Nazarbaev · strategic partnership · Ukraine · Yanukovych
Russia and Kazakhstan signed a series of agreements on customs regulation, realization of transportation projects, development of direct supplies between regions, trans-border water area protection as well as cultural and educational exchanges during the VII Interregional Cooperation Forum held in Ust-Kamenogorsk this week.
It must be mentioned that 70% of the total trade volume between Kazakhstan and Russia is carried out in the Russian regions. More than 300 joint ventures are located in the near-border zone alone. Nazarbaev also pointed out that the forum is taking place within the Customs Union for the first time, which will give a new momentum to interregional cooperation. The turnover of commodities for the first half a year of 2010 increased by 40% and exceeded $8 billion compared to similar period last year. It is expected to increase even more in the near future.
Medvedev and Nazarbaev also discussed several topics behind closed doors, including cooperation in high technologies, economy, space exploration, fuel and energy sector and nuclear energy.
customs union · Kazakhstan · Medvedev · Nazarbaev · Russia · strategic partnership · technology · trade
On September 9, the Government of Kazakhstan approved a draft program for transportation infrastructure for 2010-2014. Due to the low sophistication but fast growth transportation was included to the forced industrial-innovative program as a priority value-added sector. At present, the transport industry’s plans envisions thorough modernization, qualified specialists, better service, more competition, improved technical conditions of highways, and construction of railways and airports. The main goal of the program is to develop the transport complex to satisfy the economic and public requirements of transportation services.
Presenting the program, Minister of Transport and Communications Abelgazy Kussainov noted that the project was developed within the state program of mandated industrial-innovative development and consistent with key aspects of the Kazakhstan Development Strategy 2020. “At the core of the program are the main components of financial resources to allow to implement 58 infrastructure projects. The total budget for the implementation of the program is 2.7 trillion tenge [$18 billion], including 1.1 billion tenge from the national budget,” said Kussainov.
As part of the the draft program, oil transport through the port in Aktau will be transferred by 40% of their own tankers, the Ministry of Transport will construct a new airport, and reconstruct around 5,500 kilometers of roads.
