Summarising a cabinet meeting on Friday, July 10, on the country's economic performance in the first half of 1998, President Nursultan Nazarbaev defined a number of tasks for the Government. One major task will be to select 10 to 12 processing enterprises by September 1 capable of producing competitive products. Assistance will be provided to find investors for these enterprises. Another task to be completed by August 1 will be the decrease and freeze until the year's-end of the tariffs of natural energy and transportation monopolies. Nazarbaev noted that GDP had grown by 3.3% during the first five months of 1998. However, if booming construction in the new capital is excluded, the real growth would only be 1.2%. Machine building reduced production by 63% from January to June, while the chemical industry declined 42%, and transport 73%. President Nazarbaev demanded that the government work out a programme by September 1 to minimise dependence on world markets.

Though displeased with its performance, President Nazarbaev did not dismiss the government of Prime Minister Nurlan Balgimbaev as had been rumoured. However, he told the cabinet members "I am warning you, perhaps for the last time." (Interfax & Reuters).

Chairman of the National Bank (NB) of Kazakhstan Kadyrzhan Damitov said at a press conference last week that the optimistic forecasts with regard to the impact of the financial crisis in South Eastern Asia and Russia are now being revised in Kazakhstan. A preliminary estimation of the Kazakhstani balance of payments in the first quarter of 1998 shows a 10% decrease in export revenues. With the same inflation rate as in the first quarter of 1998, the consumer price index may be expected at an 8% level (with targeted 9.5-10%). In such a case, the Tenge devaluation will be between 4% and 8%. At the same time, according to Mr. Damitov, Kazakhstan compares favourably to Russia in terms of macroeconomic indicators. Kazakhstan, in particular, has the ratio of gold and foreign exchange reserves (GFER) to GDP equal to 6.2% while Russia has 3%. Kazakhstan has the GFER-to-monetary base ratio of 117%, Russia—60%. In Kazakhstan the GFER-to-total bank assets is about 60% while in Russia it is around 15%. Unlike Russia where foreign investment in securities are practically equal to the GFER, in Kazakhstan money of non-residents circulating in the securities market makes up only 4% of the GFCR. He reaffirmed that the NB would not change the refinancing rate. (Panorama)

On July 6, Kazakhstani President Nursultan Nazarbaev and his Russian counterpart Boris Yeltsin met in Moscow to sign an agreement on the division of the northern sector of the Caspian Sea bed while leaving the water itself in common use. Interfax quoted Nazarbaev as saying that the agreement "will work for future generations" and excludes "the Balkanisation of the North Caspian". (Interfax).

World Bank country director for Kazakhstan, Kyrgyzstan and Turkmenistan Kiyoshi Kodera said at a press conference in Almaty on 9 July that the World Bank has already disbursed the first US $100m trenche of a US $300m loan for the implementation of the pension reform in Kazakhstan. According to Kodera, the loan is generally intended to back up the macroeconomic situation with relation to the pension reform though it will also support repaying pension arrears.(Reuters)

Kazakhstan has recently adopted a number of new laws and made amendments to several existing laws.
A new law "On Payments and Money Transfers" was worked out by the National Bank of Kazakhstan and aims at bringing the Kazakhstani banking legislation in accord with international standards. According to Chairman of the NB Kadyrzhan Damitov, the new law will also help to resolve non-payment crisis. The law "On Introduction of Some Changes and Complements to Some Laws" which amends the laws "On the National Bank of the Republic of Kazakhstan" and "On Banks and Banking Activities" introduces penalties for banks and bank officials end doubles the authorised capital of the National Bank to KZT20bn (about US $260m). The new law "On Registration of Movable Property Pawn " regulates the registration of pawning movable property and protection of property owners rights. The amended law "On Bankruptcy" defines bankruptcy as a "recognised by court debtor insolvency which lays the ground for its liquidation". This law is complemented by provisions related to the rehabilitation manager, administrator and creditor committee. Amendments to the law "On Taxes and Other Compulsory Payments to the Budget" exempts pension funds from withholding tax on investment revenues. Also exempt from taxes are the incomes of construction companies in Astana as well as some other incomes.