Finance In Brief

Issuance and repayment schedule for State Securities of the Ministry of finance of Kazakhstan for next week

/IRBIS, Jan.14, 00/

From January 17 to 23 on primary market for State Securities of Kazakhstan for papers of the Ministry of Finance:

� Issuance, January 17 � 500 mln tenge, MEKKAM-6 #120 (KZ46L2007A03).

� Issuance, January 18 � $4 mln, MEKKAM-9 #3 (KZ49L1910A08).

No repayment of the Ministry of finance�s SS is planned for this week.

Weekly Ministry of Finance of Kazakhstan balance on State Securities - Plus 1,537.0 million tenges

/IRBIS, Jan.14, 00/

The Ministry of Finance of Kazakhstan has finished 3nd week in the State Securities primary market with the following results. The emitter attracted on two auction 1,537.0 million tenges.

The indicated figure is equal to the net-borrowing, because there is no redemption this week.

Week volume of transactions in Non-state Securities on KASE - $1,190,800

/IRBIS, Jan.14, 00/

Within the third calendar week (January 10 - 16) on the Kazakhstan stock exchange (KASE) 4 transactions to the sum of $1,190,800 were made in Non-state Securities. In the previous period (January 03 - 09) the appropriate parameters were: 7 transactions, $601,000. For one week the turn-over grown by 98.2% or by 589,900 tenges.

The volume of deals in securities decreased by 11.4% or by 9,824 shares to 95,700 shares against of 85,876 shares in the last week.

The transactions were conducted in 3 tools. Most liquid from them werethe preferred shares of JSC �KAZAHTELEKOM� (KZTKp, official list of securities, category �A�). Simple registered stocks of JSC �Bank TuranAlem� (BTAS, official list of securities, category �A�) and bonds of JSC �KAZKOMMERTSBANK � (KKGBb, official list of securities, category �A�) were traded also.

From 4 transactions 2 were direct, that is they were conducted by the brokers in the KASE a quoted system excluding automatic satisfaction of the counter auction applications. 2 transactions were conducted in the main mode of KASE trade system.

Capitalization of the market of Non-state Securities of Kazakhstan at the end of the week - $2,240.7 million

/IRBIS, Jan.14, 00/

On January 14 capitalization of the exchange market of Non-state Securities of Kazakhstan (A + B + N without the State Block of Shares) has amounted to $2,240.7 million.

For one week capitalization has decreased by $13,300, that is stipulated by exclusion from the exchange trade lists of common registered and preferred registered stocks of JSC �HIMFARM� (sector �Non-listing securities�); common registered stocks of JSC �Karagandy-Nan� (sector �Non-listing securities�). Besides by 20% the price of common registered stocks of JSC �Bank TuranAlem� has decreased.

Triple growth of �KAZAHTELEKOM� preferred registered stocks partially compensated ��� capitalization reduction.

The deals can be made on KASE today in 85 tools of the 64 companies and 4 state blocks of shares.

Week volume of USD transactions on KASE � $42.125 million

/IRBIS, Jan.14, 00/

US dollar: within the 3nd week (January 10 - 16) on the Kazakhstan Stock Exchange (KASE) 488 transactions totaling $42.125 million were made at average session volume of $8.425 million.

Tenge devaluation, calculated at the average weighted exchange rate, is evaluated by the one week trend of 23.9% p.a.

In the previous week 489 deals totaling $21.2 million at average session volume of $10.600 million were made. During that period tenge revaluation rate has made 17.8% p.a.

Devaluation of tenge towards US dollar, calculated at average weighted exchange rate on January 14 for the last 30 days is 10.9% p.a.

There vere no deals in Euro and Deutsche mark.

The National Bank of Kazakhstan for January 15 � 18: 1USD/KZT = 139.40, 1DEM/KZT = 75.18, 1RUR/KZT = 4.81, 1EUR/KZT = 147.03

/IRBIS, Jan.17, 00/

For January 15 � 18, 2000 the National Bank of Kazakhstan has established the following exchange rates for accounting, customs and tax purposes:

� For 1 USD 139.40 (+0.45) tenge;

� For 1 DEM 75.18 (+0.58) tenge;

� For 1 RUR 4.81 (+0.01) tenge;

� For 1 EURO 147.03 (+1.12) tenge.

Total of 33 currencies are in the list.

At KASE dollar exchange rate keeps growing under unchanged market conjuncture

/IRBIS, Jan.17, 00/

The morning trades in US dollar, Deutsche mark and Euro were held at Kazakhstan stock exchange (KASE) with TOD payment terms. 14 banks participated in the trades.

Today the trades in US dollars opened at 139.70 tenge per unit. Total of 35 deals were made. Weighted average dollar exchange rate equaled to 139.60 (+0.24) tenge per unit. Volume of the session � $4,550 mln (-$3,510 mln). Exchange rate fluctuation during the trade �0.09%. The trades were closed at 139.61/80 tenge per dollar.

Like on last trades of previous week strong opening of the session did not receive dealers� support. After the first deal (actually, 20 minutes later) the market found equilibrium level at 139.60 tenge per dollar, that is a little higher than the compromise reached on Friday.

In general, no changes in the market conjuncture has been observed. Demand is created by a market-maker, who, due to the benefits given to it on commission, tries to buy as many dollars as possible for further sale out of the Exchange at a higher rate. And demand, as on last trades, was mainly satisfied by an another participant. Such �duel� is being observed on the floor from the beginning of the year, other traders join it just to fulfill customers� orders as they get collected.

At the same time, at KASE volume of dollar purchases by a market-maker objectively depends on the demand in currency market of Kazakhstan. If at KASE the dollar exchange rate grows under the pressure of the market-maker�s demand, then the demand exists in the whole market and it is quite high. Thus, only the pattern of the banks working in the currency market has changed since the beginning of the year, nothing more.

Foreign Investments: the Amendments to the Law of the Republic of Kazakhstan

Global Corrections Required

K.V. Mukasheva

Coudert Brothers lawyer

ALMATY, Jan 16

(Specially for THE GLOBE)

The Law On Amendments and Additions to Certain Legal Acts of the Republic of Kazakhstan on the Issues of Investments as of August 2, 1999 made quantitatively small but, in our view, rather significant amendments to the Law of the Republic of Kazakhstan OnForeign Investments dated December 27, 1994.

The Law On Foreign Investments regulates certain relations involving foreign investors, and foreign investment is the object of such relations. Under the old Foreign Investment Law, foreign investment implied any investment made by foreign investors. Theconcept of �investment�, in its turn, includes all kinds of property values and intellectual values invested in the objects of entrepreneurial activities for the purpose of deriving income, with the exception of imported goods to be sold without additional processing, and, given the recent amendments to the Law, excepting any profit received and reinvested in the territory of theRepublic of Kazakhstan. The new Law defines �foreign investment� as �any investment made in the form of participation in the charter capital of Kazakhstani legal entities and also in the form of loans (credits) to Kazakhstani legal entities in relation to which the foreign investors are entitled to determine decisions made by such legal entities.�. Thus, the concept of �foreign investment� was narrowed substantially. In particular, the current foreign investment regime does not cover loans to unaffiliated legal entities, additional contributions to the property of business partnerships and not to their charter capital, as well as financing entrepreneurial activities conducted through branches opened in Kazakhstan, through bond purchase transactions, etc..

Obviously, the norms of Art. 4 (Legal Regime for Foreign Investment), Art. 6 (Guarantees against Change in Law), and Art. 7 (Guarantees against Expropriation) of theLaw do not apply to the relations connected with the investments which do not fall into the concept of �foreign investments�. As long as, according to Art. 1 of the Law, aninvestment dispute means any dispute between a foreign investor and the Republic of Kazakhstan arising in connection with foreign investment, the applicability of Art. 27 of theForeign Investment Law to the relations under review is also doubtful. However, by virtue of Art. 6 of the Law, the above norms must also apply to the relations that had arisen before said amendments were made to the Law.

From the new definition of �foreign investment�, it follows that this concept includes loans (credits) granted only to those Kazakhstani legal entities in relation to which the respective foreign investors may determine the decisions made by such entities. However, we may not state definitely that the foreign investment regime applies to foreign investors� contributions to the charter capital only of such legal entities, i.e., it is unclear whether thecriterion of affiliation applies to loans only or it also covers contributions to the charter capital.

A range of persons termed as foreign investors was made broader. In particular, this category now includes those Kazakhstani legal entities in relation to which foreign investors are entitled to determine their decisions. First of all, we should clarify the instances when the investor �is entitled to determine decisions� made by a legal entity, as some decisions may be made by simple majority vote of the participants, while others require qualified majority. Certain decisions, either by virtue of law (Art. 43, Para 2(10) of the Law On Limited Liability and Additional Liability Partnerships) or on the basis of a legal entity�s charter, must be made unanimously by the highest body of the entity. Is a single criterion possible in such cases (for example, over 50% (or over 34%) ownership in a JSC or a corresponding participatory interest in a business partnership)? Or such right of a foreign investor must be determined in each particular case on the basis of the charter of the legal entity? In some cases, in order to make its decision, a legal entity has to obtain consent thereto from a foreign investor that is not a participant (shareholder) in such entity. For instance, such action must be taken when a foreign investor grants a loan secured by the property which may be disposed of only with the creditor�s (the pledgeholder�s) consent. In this case, we believe, we may speak about the right to determine decisions made by the legal entity under question.

At the same time, we note that the norm included in Art. 4 (5) of the Law was not deleted, which norm says that the guarantees stipulated by Articles 6-10, 12, 13, and 27 shall also apply when protecting the interests of enterprises with foreign participation in which the foreign investor� interest in the charter capital amounts to either, at least, 35% or, at least, is equivalent to United States Dollars One Million.

Also, the August 2, 1999 Law introduced the concepts of �direct foreign investments� and �portfolio foreign investments�. It would be logical if we concluded that the above concepts are simply subdivisions of foreign investments, however, such conclusion does not follow from their definitions. We note that the concept of �direct foreign investments� is not used anywhere else in the text of the Law, and �portfolio foreign investments� are only mentioned in Art. 3 of the Law as �portfolio investments� defined as �other types of investments made by the foreign investor�. It is unclear what �other� types of investments are meant: those that do not fall into the definition of �direct foreign investments� or those not included in the concept of �foreign investments�. Considering that the relations connected with portfolio investments were, in fact, deleted from the Foreign Investment Law1 and the concepts of �foreign investment� and �direct foreign investment� do not coincide in their scope2 , it is unclear what relations must be regulated by the Foreign Investment Law and what relations must be regulated by special legislation. Generally speaking, the purpose of introducing the above concepts and, in general, the amendments to the Law is also unclear.

1. According to the new wording of Art. 3(2) of the Foreign Investment Law, the relations connected with granting loans, credits, targeted banking and financial contributions, portfolio investments, as well as those connected with investments made by national investors abroad, must be regulated by special legislation.

2 . Direct foreign investment implies any investment in an affiliated company in the RK and not only contributions to the charter capital or loans granted to such company.

Kazakhstan Petroleum Association Changes its Administration



At the monthly meeting held in December 1999 the Kazakhstan Petroleum Association (KPA) elected the new Board of Directors for 2000. Edward Verona, the Texaco International Petroleum Company representative was elected the chairman of the Board.

�The Association Kazakhstan Petroleum unites about 30 companies dealing with oil and gas production in Kazakhstan,� Edward Verona said to journalists on January 14.

Companies-KPA members employ over 50,000 Kazakhstani people. Verona mentioned main KPA objectives for 2000, including creating more favorable investment climate in the oil and gas sector of Kazakhstan. To achieve this purpose it is necessary to further develop the cooperation between KPA and the Kazakhstani government.

Mike Kangars, the head of the KPA subcommittee stated that at present 32 Kazakhstani and foreign companies are members of the Association. KPA subcommittees do a lot, he added. In particular, there are subcommittees dealing with security, protection of health and preservation of the environment, tax and fiscal, avia, law and manpower.

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