Kazakhstan's miners, planning a $16.5 billion drive to double metals output by 2015, are urging the government of Central Asia's largest economy to abandon plans for export tariffs that they say could harm productivity. The Association of Mining and Metallurgical Enterprises, which unites Kazakhmys, ENRC and more than 60 other Kazakh metal firms, would favour a profit-based tax, its executive director, Nikolai Radostovets, said in an interview.
"The experience of many countries shows that, where there is no domestic demand, export tariffs have negative consequences: a decline in production and, in the end, sales," he told Reuters. "We are now at the negotiating table. It's a very serious issue." Metals and their ores account for about one-fifth of exports from Kazakhstan, where almost 2 percent of the population works in the metallurgical sector. The government has unveiled plans to tax exports in 2011 after restoring a levy on oil shipments.
"Mineral resources belong to the people of Kazakhstan, and I believe the budget should collect a portion of these royalties in the form of a customs tariff," Prime Minister Karim Masimov told a government meeting this week. Radostovets said a tax on excess profits would be a more effective way to regulate Kazakh producers of copper, chrome, zinc, steel and precious metals. Export tariffs, he said, would simply confiscate working capital.
"Civilised countries levy taxes on excess profits, and such an effective mechanism exists in Kazakhstan," he said. The association's director also said an export levy would be unnecessary as Kazakhstan has no large domestic metal-processing industry to protect. Most of the country's metals are exported.
"Were we to have the companies to process our metal in large quantities, an export tariff might be justified," he said. Kazakhstan, which aims to channel income from oil and metals sales to diversify its resource-dependent economy, has shown a willingness to compromise before. It abandoned plans two years ago to introduce an export tariff as the economic crisis struck.
The government has not given details of the proposed tariffs, including their size or the specific metals affected. Masimov, speaking at the same government meeting, said: "We shouldn't kill the goose that lays the golden egg." President Nursultan Nazarbayev, who has ruled Kazakhstan for two decades, in June set the country's metals producers the task of doubling total production by 2015, compared with 2008 output. Radostovets said ENRC, which produces ferrochrome, iron ore and aluminium, planned to invest $5.3 billion and copper miner Kazakhmys $5 billion to reach their respective goals. Officials from both companies have previously confirmed these targets.
He said the Kazakh unit of ArcelorMittal, the world's largest steel maker, planned to invest $4 billion and zinc miner Kazzinc - controlled by Glencore - $2.2 billion. Both companies declined immediate comment. Growing Chinese investment would be a major source of finance for these projects, Radostovets said, while Kazakh and European banks would also supplement companies' own expenditure.
"The sector is emerging from crisis. We have returned to pre-crisis levels of production and fulfilled agreements with all regional leaders on retaining the workforce," he said. Nearly 300,000 people are employed in Kazakhstan's metals and mining sector. If their dependents are added, the number rises to nearly 1 million, or more than 6 percent of the country's 16 million population.