Business & Financial News Digest

ASTANA. Sept 2 (Interfax) - Kazakh President Kassym-Jomart Tokayev has called for a new banking law to bolster economic activity and support fintech development. "We need a new banking law that promotes economic activity and supports dynamic fintech development. The current law, nearly 30 years old, was adopted under very different conditions," Tokayev said in his annual address to the people of Kazakhstan in a joint meeting of the parliament's chambers on Monday. He said international experts considered Kazakh banks to be among the most profitable in resource-rich countries. "Taxation should be fair and proportional to the dividends of bank shareholders. This approach is especially relevant given the state aid banks have received. It's also important to create a stable regulatory environment for digital assets and the safe adoption of innovations in banking," he said. Tokayev also said lending to the real sector was still insufficient, and there were unresolved issues with funding for small and medium-sized businesses. "This negatively affects business activity, economic stability and growth. The government and the National Bank need to find the best solution to this problem and encourage banks to invest more in the economy," he said. Kazakhstan has 21 banks.?

Use of budget funds?

President Tokayev has ordered the Kazakh government and National Bank to take measures to effectively use budget funds. "One needs to say directly that non-fulfilment of the revenue-part of the republic's budget is a big flaw in the work of the previous and current governments. It's unacceptable for this problem to become systemic and to restrain the country's development. The government and the National Bank need to take effective measures to ensure the effective use of budget money, [and] the restriction and tough control over expenditures," Tokayev said during the meeting. The only way to ensure stability of state finances is to live within one's means, and therefore it is necessary to rule out excessive expenditures on tasks that are not an essentially priority or strategic, he said. The president also ordered that inter-budget relations be put in order. "The decision to keep tax proceeds from small and medium-sized businesses in the regions was right and timely. It gave a considerable impetus to the development of enterprise and boosted the independence of heads of local administrations. However, some heads of regions, having received an additional source of income, started using it extravagantly, without practical use for the state, on secondary tasks and projects. The government should come up with rational compensation mechanisms to look for sources to cover budget deficits," Tokayev said.

Differentiation of individual income tax rates?

Kazakhstan needs the total digitalization of tax administration, including revision of tax rates, Tokayev said. "To neutralize corruption risks and to ensure transparency, it is necessary to accelerate the transfer of processes in the tax sphere to an electronic format. It is desirable that all tax policies should be adapted to the changing fiscal conditions, including revision of tax rates [...] There is a need to introduce differentiated individual income tax rates," Tokayev said in his state of the nation address. The fiscal authorities should give up the punitive approach in tax administration, he said. It is necessary to increase the tax arrears threshold for notification without enforced recovery, he said. "If the tax arrears threshold is exceeded, restrictions should be introduced only within the limits of the debt; that is, the entire bank account will not be frozen. In situations involving large tax arrears, installment should be granted for payments without security. It is necessary to work to fully discontinue planned tax inspections. To do this, the risk management system will need to be improved," he said. Tokayev also spoke about the need to increase the effectiveness of tax concessions, saying that tax reports should be filed for all concessions. Only those concessions that really stimulate businesses should stay, he said. "For example, one can envisage preferences to investors who are committed to production development. We are talking about one-time deductions for construction, acquisition, modernization and refurbishment of assets. It is important to envisage concessions for exporters of high value-added goods; they should receive more support than any other businesses," he said.?

Mandatory condition for capital amnesty?

Investment in the economy should become a mandatory condition for capital amnesty, Tokayev said. "We need to bring clarity to interaction between the state and capital owners in the work to return assets. I stated my firm position on this matter at a meeting with businessmen last year. We agreed that investing funds in the Kazakh economy will become a mandatory condition for capital amnesty. The main thing is that they should work for the good of the country. This issue should be envisaged in legislation," Tokayev said in his annual address to the nation. At the same time, the president believes that "entrepreneurs included in the relevant register can be allowed to sign agreements without recognizing the illegality of the transferred assets." "It's a big step in the interests of big entrepreneurs. But entrepreneurs themselves should meet the government and the Prosecutor General's Office halfway in terms of sending funds to the republic's budget. And do that in good faith, without bargaining for every tenge," he said. "At the same time, these people as citizens of our state are obligated to invest considerable funds in the construction of schools, hospitals, stadiums, museums and other social and cultural facilities," Tokayev said. "The names of such people can remain on the 'golden list' of charity givers. In the event of a refusal or delay in the process, the discussion with such entrepreneurs will be different. In the meantime, it's necessary to set all of the information on assets returned to the state and their target use in order," he said.

Construction of Kashagan, Karachaganak GPPs

President Tokayev has asked the government to speed up the construction of gas processing plants at the Kashagan and Karachaganak fields to boost the development of the gas sector. "The government must speed up the construction of gas processing facilities in Zhanaozen, Kashagan, and Karachaganak. This is a top priority, and we need to quickly implement effective incentives, such as appropriate tariffs and wholesale prices, to ensure a return on investment," Tokayev said. He said these measures are essential to attract new investments in gas exploration and to meet the country's gas needs. Tokayev also pointed out the importance of expanding capacity and diversifying gas transportation routes. "Last year, several gas fields began operations, and new gas deposits are expected to produce one billion cubic meters per year. However, until these projects are fully operational, we must manage gas supplies carefully and plan the transition of power plants and residential consumers from coal to gas," Tokayev said. Construction has already started on a gas processing project at Kashagan with a capacity of 1 billion cubic meters. By 2030, a gas processing plant with a capacity of 2.5 bcm per year is expected to be operational. At Karachaganak, a new gas processing plant with a capacity of 4 bcm per year is anticipated to be completed by 2028.?

Optic fiber communication line via Caspian Sea?

Kassym-Jomart Tokayev has ordered that the project to build an optic fiber communication line via the Caspian Sea be completed in 2025. "The project to build an optic fiber communication line via the Caspian Sea will be completed in 2025. It's extremely important to our country in terms of creating digital infrastructure connected to international corridors and transborder data flows. Generally, it's necessary to continue the active development of telecommunication networks, data centers, to introduce global cybersecurity standards, [and] to increase our specialists' competencies," Tokayev said in the address to the nation. According to earlier reports, Kazakhtelecom and AzerTelecom signed a shareholder agreement on creating a joint venture in charge of constructing and operating the Trans-Caspian optic fiber communication network on the Kazakhstan-Azerbaijan route on the Caspian Sea floor during Kazakh Prime Minister Alikhan Smailov's visit to Azerbaijan in June 2023. The document also provided a detailed distribution of the parties' actions during the implementation of the TransCaspian project. In August 2023, Kazakhtelecom became the owner of a 50% stake in Caspinet B.V., a joint venture with AzerTelecom, created for implementing a project to build an optic fiber communicaiton line on the Caspian Sea floor. The project to build an optic fiber communication line through the Caspian Sea will be co-financed by Kazakhtelecom. The total investment with AzerTelecom will exceed 23 billion tenge. The cable line will be 380 kilometers long. Its capacity will be up to 400 terabit per second.

Tariffs on rail transportation?

It is necessary to revise tariffs for rail transportation, which will not only help maintain the proper state of the railway network, but also expand its capacity, Tokayev said. "The reform of the railway sector should be accompanied by revision of the tariff system. This is an obvious fact. New tariffs will help maintain the proper state of the railway network and expand its capacity," Tokayev said in the annual address. Kazakhstan's national railway operator Kazakhstan Temir Zholy (KTZ) is implementing three large infrastructure projects to build railways that are in total more than 1,000 kilometers long, he said. "These projects should be implemented within the established periods of time and at a high qualitylevel," Tokayev said. Alikhan Smailov, chairman of the Kazakh Supreme Audit Chamber, said in June 2024 that KTZ was not capable of fulfilling its obligations and was on the verge of default. The company's debt was 2.9 trillion tenge at the start of 2024, and it continues to increase, and 45% or 1.3 trillion tenge of the total debt has been used to refinance earlier debt, he said. Smailov also said 73% of the entire cargo turnover of KTZ in 2020-2023 was transported at tariffs below cost. The losses on regulated tariffs reached 907 billion tenge, of which more than half accounted for exports. The level of some regulated tariffs on exports is below the tariffs on transporting socially significant food products within the country. Nurlan Jakupov, board chairman of the Samruk Kazyna state fund, later said a smooth increase in tariffs without shock steps would reduce KTZ's debt. Kazakhstan Temir Zholy is a transport and logistics company controlled by the state. The company manages rail, sea port and airport infrastructure and transport and logistics centers. The official rate on September 2 was 481.63 tenge/$1.

KYZYL. Sept 2 (Interfax) - Turkey is showing its interest in becoming a BRICS member, Russian presidential press secretary Dmitry Peskov said. "Yes indeed, Turkey has been demonstrating its interest in joining BRICS. They declared that a long time ago," Peskov told journalists after being asked whether Turkey has applied to join the group. The Bloomberg news agency said earlier, citing its sources, that the Turkish authorities had officially asked to join BRICS. This decision reflects Turkey's aspirations to forge ties within a multipolar world, while still remaining a NATO member, Bloomberg's sources said. Ankara believes that "the geopolitical center of gravity is shifting away from developed economies," they said. Turkey's bid is also partly a result of its disagreements with other NATO members after Turkey maintained relations with Russia after the start of the crisis in Ukraine in 2022, they said. The Turkish authorities are also frustrated over a lack of progress in their previously submitted bid to join the European Union. The Turkish authorities also believe that the country's accession to BRICS will help improve economic cooperation with Russia and China and become a conduit for trade between the EU and Asia, the sources said. In addition, Turkey hopes to become a hub for gas exports out of Russia and Central Asia. The Turkish Foreign Ministry and the presidential administration have not confirmed this information.

MOSCOW. Sept 2 (Interfax) - Moscow and Tehran will complete preparations for signing a treaty on a comprehensive strategic partnership in the near future, Russian Foreign Minister Sergei Lavrov said on Monday. "It's symbolic that we should complete the final preparations shortly, there are still technical details, the preparations for a new interstate treaty on a comprehensive partnership between Russia and Iran. And it will be a symbolic step in our relations with the new Iranian leadership," Lavrov said in a speech to students and professors at MGIMO University. "Our relations are developing rapidly. There are a lot of projects, including projects that are part of one of the most promising logistics routes. That's the North-South Corridor, which makes it possible to reach the Persian Gulf directly from St. Petersburg, and then reach the Indian Ocean. It considerably reduces transit time and transportation costs. One can't name everything," Lavrov said. "And of course, Caspian cooperation. We are littoral states, and this is also a very important area of our interaction," he said. "Besides the fact that a lot of bilateral projects are already working, both the nuclear power plant and other joint investment projects. I believe that the figures that characterize the increase in trade and volumes of investment speak for themselves. These figures are constantly increasing. So our future looks good," Lavrov said.

No need for barter trade between Russia, China

There is no need for barter transactions in Russian-Chinese trade for the time being, although there is nothing wrong with them as such, Lavrov said. "Barter arrangements with China? I don't see the need for them, although there's nothing objectionable in them. If this is convenient and allows you not to depend on bank transactions that the United States and its allies are trying to curb in any possible way, then why not?" Lavrov said at MGIMO University, when asked by a student whether barter arrangements could be used in Russia's trade with China. Russia and China use the ruble and the yuan to service 95% of their trade transactions, he said. "We and China have the highest level of relations in their entire history," Lavrov said.