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For the third consecutive year, global FDI inflows rose in 2006 – by 38% – to reach $1,306 billion. This was close to the record level of $1,411 billion reached in 2000, and reflects strong economic performance in many parts of the world.
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Favourable price situation has prompted many governments to try to increase their shares in profits through changing mining legislation, tax regimes and contracts. Recent regulatory changes both in developed and developing countries point to the fact that historic regulations were perhaps too generous towards foreign investors. Kazakhstan is no exception in this regard.
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Our aim is to make PetroKazakhstan a recognized leader of the petroleum industry of the Republic of Kazakhstan. We want to be an exemplary corporate citizen and present value to our shareholders and the Republic of Kazakhstan by protecting health, safety and environment, - Mr. Bo Qiliang, President of PetroKazakhstan Inc.
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It is no secret that the downgrading of Kazakhstan’s sovereign and corporate ratings by the international rating agencies, Moody’s, Standard and Poor’s and Fitch Ratings, has significantly cooled down their relations with the Kazakh authorities and issuers. This fact gave a special edge to a conference that Fitch organised in Almaty in February 2008.
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According to analysts, global markets have stepped into the second phase of the financial crisis caused by the U.S. subprime mortgage crisis. For Kazakh banks this means more than an appreciation in external funds. The very opportunity of borrowing abroad and refinancing earlier debts is now questionable. Analysts say that, in this situation, domestic banks can only rely on domestic funds, their own non-core assets and government support.
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The year 2007 was unfavourable for a number of the world’s major grain producers. The situation was the reverse in Kazakhstan: the country reaped a record harvest of 20.1 million tonnes of grain at an average yield of 1,470 kg per ha. Inspired by such an achievement, Prime Minister Karim Masimov even said that “agriculture, and in particular grain production, is becoming a new locomotive of Kazakhstan’s development”.
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The continuing growth in food prices that started in summer 2007 has shown that Kazakhstan cannot guarantee enough food for itself. The prices of bread, vegetable oil, meat, dairy products and sugar that make up the basis of a standard food basket of Kazakhs went up all over the country. The government had to take administrative measures to stabilise food prices and saturate the domestic food market.
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Despite a stable growth in oil output, Kazakhstan has been regularly facing problems with domestic supplies of petroleum products, and, as a result, a constant hike in their prices. However, neither the government nor companies operating in the country are rushing to invest funds in oil refineries. In the current situation the game is not worth the candle: VAT, excise on petrol and problems with exporting domestically-produced fuel and lubricants make oil refining projects loss-making.
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In November 2007, the Adam Smith Institute held the ‘First CFO Summit Kazakhstan’ in Almaty. Today, chief financial officers are not only managers, but also the primary advisers for senior executives. The cost basis of a company depends on adequate planning and the disposition of financial assets which can enhance the company’s competitive ability.
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Kazakh big and rapidly-growing medium-sized companies are increasingly actively employing modern management methods. They are adopting management accounting, international financial accountancy standards, quality and risk management systems and internal auditing, and so on. As their interest in attracting investment is growing, above all, through initial public offerings, new instruments such as corporate governance are becoming more popular.
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