SIGNPOST: Kazakhstan prime minister resigns

By bne IntelliNews January 9, 2007

Ben Aris in Berlin -

Kazakhstan Prime Minister Danial Akhmetov resigned Monday, triggering the resignation of the entire Cabinet.

Akhmetov offered President Nursultan Nazarbayev his resignation without giving a reason. According to the Kazak constitution, if the prime minister resigns, the entire government must be replaced or reappointed by the incoming prime minister.

Akhmetov's departure comes after Nazarbayev, who has an almost complete monopoly on political power, has increasingly criticised the government's work in recent months and so the move was not entirely unexpected.

"Rumours of [Akhmetov's] impending resignation had circulated in Kazakhstan following Nazarbayev's criticism of the cabinet on numerous occasions, for slow progress in implementation of economic, social, and administrative reforms, including anti-inflationary measures, restructuring of state monopolies and budgetary planning," Moscow brokerage Aton Capital said in a research note.

The most likely man to replace Akhmetov, who has served as prime minister since 2003, is Karim Masimov, according to reports by the Kazak Today information agency. Masimov, 41, served as deputy prime minister and minister of economics of budget planning between April and October last year.

Previously he held the positions of Nazarbayev's aide, industry and budgeting minister, and transport and communications minister. A Columbia School of Business graduate, Masimov also headed two large Kazakh banks - Halyk and ATF. As deputy prime minister, he was responsible for the implementation of development and investment policy, coordinating Kazakhstan's WTO entry and managing relationships with other CIS countries. He is considered one of Nazarbayev closest confidantes.

Nazarbayev is expected to formally propose Masimov as candidate for the post of prime minister's at a parliamentary session Wednesday and he should be approved without difficulty.

"Although the degree of the government's influence on state policy is rather limited and ministers are often reshuffled by Nazarbayev, the resignation of the longest-serving prime minister in Kazakhstan's history may signal a shift towards accelerating market reforms, especially if Masimov, sometimes called the 'Kazakh German Gref,' is appointed as Akhmetov's successor," says Aton. "Because of the high level of state involvement in economy, there may be higher volatility in Kazakh stocks in the coming days."

Despite some criticism about democratic reform, Kazakhstan has been on a roll in the last few years and almost all of Moscow's investment banks have started covering the country; a few, such as Renaissance Capital, have also opened offices there. The country's banks have attracted the most interest.

Ratings agency Fitch Ratings changed the outlook for the country's sovereign rating of 'BBB+' to positive on December 22, which analysts construe as an indication the country is due for another upgrade soon.

Alfa Bank said in a note: "In terms of risks, Fitch has cited concerns that Kazakhstan's fast growth could make the economy overheat and be unable to keep inflation under control. That banks are seeing rising exposure in the ballooning property sector is another concern for the agency, though we believe this is justified as a short-term risk. Longer term, however, our main concern from an investment case perspective is whether Kazakhstan will be able to deliver on its plans to boost oil output in coming years. Oil and related industries are still directly contributing over 40% of GDP."

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