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Library of Congress – Federal Research Division

Country Profile: Kazakhstan, December 2006

overhaul in the early 2000s, including a major new line connecting power plants in the north with centers of consumption in the south. The main fuel for thermoelectric power generation is coal from the Ekibastuz mines in the northeast.

Because of an inefficient domestic delivery system and the failure to utilize natural gas obtained in oil extraction operations, Kazakhstan also imports natural gas from Uzbekistan, incurring power cuts when payments lag. In 2004 infrastructure improved sufficiently for domestic output to equal consumption, at the level of 16 billion cubic meters. In the first half of 2005, Kazakhstan became a net exporter of natural gas for the first time, as production continued to increase. According to an official forecast, in 2015 gas output will reach 50 billion cubic meters, compared with 20.5 billion cubic meters in 2004. In 2005 China and Kazakhstan discussed a major gas pipeline connection from Kazakhstan to China’s existing transnational line reaching Shanghai. Beginning in the late 1990s, foreign investment has stimulated rapid development of the oil industry. The state-owned oil and gas company, Kazmunaigaz, provides 20 percent of output, with the remainder accounted for by three major foreign consortia: Tengizchevroil, the Karachaganak Integrated Operation, and the Agip Kazakhstan North Caspian Operating Company. In the early 2000s, the government attempted to improve the terms of foreign ownership in the oil and gas industries, although substantial restrictions remain on ownership of Caspian operations. Plans call for development of an ethanol industry to supplement conventional fuels, using grain from the agricultural region of northern Kazakhstan. Kazakhstan would be a member of the Asian Energy Club, which Russia proposed in 2006 to unify oil, gas, and electricity producers, consumers, and transit countries in the Central Asian region in a bloc that is self-sufficient in energy. Other members would be China, Kyrgyzstan, Tajikistan, and Uzbekistan.

Services: Since 1995 Kazakhstan’s banking system has been consolidated, partially privatized, and streamlined. Three banks dominate the system, which is overseen by the National Bank of Kazakhstan and the Financial Supervision Agency: the privately owned commercial bank Kazkommertsbank; the Turan-Alem Bank, which specializes in foreign exchange; and the state- owned Halyk savings bank. Particularly after 2004, the financial services sector has played an increasing role in providing credit to companies and individuals. In 2005 the value of bank credits increased by 75 percent. However, bank credit remained scarce for small business enterprises. Between 2004 and 2006, individual and corporate bank deposits grew from US$6.5 billion to US$15.5 billion. During this period, the proportion of deposits in tenge rather than foreign currency increased substantially. Most industrial lending goes to the fuels industries.

Other service industries have grown rapidly from the low level of the Soviet era. Because they are small-scale, however, the value of these services often is not reflected in official statistics. Services often are targeted by protection rackets and corrupt officials. The retail sales sector is dominated by small shops and kiosks. The tourism industry has been minimal because Kazakhstan lacks sites of interest, and the infrastructure is undeveloped. Hotels serve mainly businesspeople. Because of the oil boom, the real estate industry increased rapidly in the early 2000s.

Labor: In 2005 the total labor force was estimated at 7.85 million. Of the estimated 7.24 million (92 percent) that were employed, some 2.6 million were classified as self-employed. Between

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