World Trade
Organization RESTRICTED WT/ACC/KAZ/35
31 May 2001 (01-2718) Working Party on the
Accession of Kazakhstan Original: English

accession of Kazakhstan

Communication from Kazakhstan

Summary of Current Economic Trends

The Chairman of the Inter-Ministerial Commission on WTO Issues of the Republic of Kazakhstan has submitted the following Summary of Current Economic Trends with the request that it be circulated to members of the Working Party.
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After the financial crises in South-East Asian countries and Russia, and the abrupt fall of prices on oil which resulted in economic crises in the second half of 1998 and the first half of 1999, the positive tendencies can be currently observed in the economy of the country.
Devaluation of the tenge, which was undertaken in April 1999, as well as a favorable situation in the world commodity market substantially facilitated the increase of exports and improvement of the balance of payments.
The Government managed to expand domestic demand for goods and services and to increase the money incomes of the population which resulted in the growth of domestic production of goods and services.
6 increase of production volumes in the manufacturing industry occurred due to a significant increase in machine building output (1.
Due to the improvement of the macroeconomic situation in Kazakhstan a rating agency (Standard & Poor's) raised the long-term currency credit and borrowing rating of Kazakhstan in the national currency by one point to "BB-" and "BB" respectively.
In May 2000, Kazakhstan appeared to be the only country among CIS and Eastern European countries, which had repaid the loans granted by the International Monetary Fund (STF (1993), Standby 1 (1994), Stand-by 2 (1995), EFF (1996) ahead of schedule.

As of 1 January 2001, the total number of banks operating in Kazakhstan was 48, including one bank with 100 per cent Government participation, one interstate bank, and 16 banks with foreign participation (one-third of shares are in the possession, ownership or management of non-residents of the Republic of Kazakhstan).

The following credit ratings have been given to this issue of Eurobonds: "B1" from Moody’s Investor Services, "B+" from Standard and Poor’s Rating Services and "BB-" from Fitch IBCA.
the basic direction of budgetary policy is medium-term budgetary planning, within the framework of which priorities for long-term and medium-term periods and for an appropriate fiscal year will be determined.
6
per cent of GDP, tax proceeds constitute 20.
5 per cent and revenues from capital transactions 0.
Currently, the Majilis of the Parliament is considering a draft Tax Code, which is the codified law of direct application, combining many provisions of current normative and legal acts on taxes and other obligatory payments to the budget.

The purposes of improvement of the tax legislation are as follows: ordering and reducing of current tax privileges, systematizing of numerous fees and payments of non-tax nature, improving of tax administration.
Amendments in the budgetary legislation are aimed at restructuring of the budgetary system, namely:

- the draft annual republican budget and forecasted indicators for the forthcoming three year period to be submitted by the Government and simultaneously to be considered in Parliament;
- the right of borrowing within the limits,
established by the Law on state budget, for an appropriate year to be granted to local executive bodies;
- the allocation of budgetary programs, tax and non-tax proceeds between the republican and local budgets to be approved legislatively; and
- the balancing of local budgets on the basis of long-term amounts of official transfers between the republican and local budgets.
Investment activity
According to the data of the National Bank of the Republic of Kazakhstan, in 1999, foreign direct foreign investment amounted to US$1,795.

In 1999, the total volume of investments, including investments in fixed capital, was allocated between the following sectors of the economy: mining industry (57 per cent), manufacturing industry (12 per cent), transport (four per cent), companies, real estate transactions (nine per cent).
encouraging the population to insure life, health, and ability to work, as well as on the improvement of tax legislation in the area of insurance, and on further development of the mortgage forms of credits and securities market.

Under implementation is the three-year annually revised Program of State Investments (PSI) on investing of the state funds, as well as the funds attracted to priority sectors of the economy under Governmental guarantees.
The main purpose of the Program is the implementation of complex measures on selection and realization of priority investment projects and institutional development.
in particular transport and water supply systems;
- support of social reforms and development of human potential;
- protection of the environment;
- institutional strengthening of state administrative bodies;
- objects of national interest;
- support of domestic commodity producers, including assistance to small and medium business subjects development; and
- development of the city of Astana.
Anti-monopoly and price policy
By way of adoption of the Laws of the Republic of Kazakhstan "On Natural Monopolies" and "On Unfair Competition" in 1998, the rules of conduct in the natural monopolies market have been established on a legislative basis, the protection of entrepreneurs against anti-competitive actions of the market subjects has been ensured, and the conditions of formation of a competitive environment have been created.
Control over the procedures for the formation of costs, which are accounted by natural monopoly subjects, is being performed through compliance with rules of procurement of material and financial resources on a tender basis, and the application of economic sanctions for infringement of state price discipline.
stipulating the procedures for adoption, appeal and fulfilment of instructions and decisions of the anti-monopoly agency have been introduced, and the types of penalties for admitted violations have been diversified.
In this connection, the basic purpose of the agricultural policy of the Republic of Kazakhstan is to ensure rehabilitation of the agricultural sector and to increase sales volumes in competitive subsectors of the agricultural production.
The Government has granted the domestic subsidies mainly via:
- subsidies from the agricultural sector support fund;
- State procurement of grain;
- credits of ExIm Bank of Kazakhstan; and
- delayed debts.
5 per cent growth of exports of products allowed Kazakhstan to achieve a favorable trade balance of US$4.
The geography of trade was not considerably changed: the Russian Federation, European Union, United States, China, Turkey and other countries are the main trade partners of Kazakhstan.
In general, the economic situation in the main country-partners of Kazakhstan, as well as favorable world commodity market conditions, resulted in the further increase of exports to these countries.
Mandatory documents and analytical materials have been submitted to the members of the Working Group on accession of Kazakhstan to WTO, and the offers on access of goods and services to the Kazakhstani market have also been submitted.
For the purposes of the expansion of measures to protect domestic producers from the importation of dumped goods or goods subsided by a foreign state, appropriate legislation to introduce these measures was adopted, a preferential tariff rate is applied in order to shorten the list of goods while importing thereof, and a review of the scheme on the granting of preferences for developing and least developed countries was initiated.
It contains 60 per cent of codes of the commodity nomenclature of foreign economic activities of the CIS, in respect of which the parties undertake obligations not to change import customs duties every single six months and to be reviewed upon the consent of all countries.
Expenditure General state spending 34,827 28,517 32,291 29,441 Defence 20,478 17,192 21,830 17,860 Law and order 46,873 32,258 28,654 28,156 Education 84,624 77,911 70,592 73,375 Health 54,218 44,474 36,409 46,123 Social insurance and security 171,046 158,942 16,5862 169,423 Housing and public utilities 22,021 5,662 4,325 5,676 Sports, mass media, cultural and religious activity 17,485 12,056 12,482 11,030 Environment, agriculture, forestry, hunting and fishing 11,385 6,828 6,691 10,559 Industry, construction and subsurface use 7,191 2,782 2,368 6,829 Transportation and communication 33,261 12,605 10,236 10,309 Other expenditure 31,162 25,586 13,493 21,201 Debt servicing 35,541 19,442 13,906 9,454 Government transfers 0 0 0.
038 Total expenditures 570,112 444,256 426,142 439,475 Total lending 25,691 20,948 27,156 31,860 Repayments 0 3,013 1,704 1,714 Net lending 25,691 17,935 25,452 30,147 Budget deficit 2,331 66,606 72,073 63,998 Financing of budget deficit 2,331 66,606 72,073 63,998 External 28,547 19,049 20,504 17,170 Internal 26,236 47,557 51,569 46,828 Total expenditure (including net lending) 1,251,051 1,130,225 451,594 469,621

Table 4: Balance of payment
(US$ million)
2000
(nine months) 1999 1998 1997 1996 Current account (655.
0

Table 5: Export structure by the increasing total on groups of the commodity nomenclature and countries
(per cent)
Commodity code* Commodity group 1994 1995 1996 1997 1998 1999 2000 year year I I-II I-III year I I-II I-III year I I-II I-III year I I-II I-III year I II III Nov 27 Fuel,
2 74 Copper and copper products 13.
0 According to the harmonised system
** Including precious and semiprecious stones
Source: Agency of the Republic of Kazakhstan for Statistics (ARKS, formerly NSA).
Table 6: Import structure by the increasing total on groups of the commodity nomenclature and countries
(per cent)
Com-modity code* Commodity group 1994 1995 1996 1997 1998 1999 2000 year year I I-II I-III year I I-II I-III year I I-II I-III year I I-II I-III year I II III Nov 27 Fuel, oil products 29.
2 40 Rubber, rubber products 1.
0 *According to the harmonised system
Source: Agency of the Republic of Kazakhstan for Statistics (ARKS, formerly NSA).
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Preliminary

Reflecting a revised central Government budget adopted in June 1999 following the flotation of the tenge in April 1999
Included extra-budgetary funds

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