Kazakh Developers Warned Over Debt

BloombergCranes working above residential buildings in Almaty last year. Kazakh developers are struggling to finish projects.
ALMATY, Kazakhstan -- Prime Minister Karim Masimov has warned construction companies that they may face bankruptcy and their owners punishment if they fail to work out agreements with creditors within two weeks to complete stalled projects.

Masimov said that if cash-strapped builders handed control of projects to banks, the government would help them.

But if they will not work with their creditors, "let the banks apply to have the companies declared bankrupt, and we'll send the people responsible, who didn't solve the problem, where they belong," he was quoted as saying Tuesday by the state-run Kazinform news service.

The Kazakh economy grew more than 10 percent annually from 2000 to 2006, sparking a building boom. Growth slowed to 8.5 percent last year as banks curtailed lending amid the global credit crunch, leaving builders short of cash.

Around 200 residential construction projects have been halted around the country since last fall, prompting the government to announce $4 billion in funding to support the real estate market and small and medium-size businesses.

Roman Solodchenko, head of BTA Bank, said he had encountered "active opposition" from Corporation Kuat, one of Kazakhstan's largest builders, Kazinform reported. The bank created firms to build two projects, "but the issue of transferring assets hasn't been resolved."

Solodchenko said Kuat used $134 million in government funds for purposes other than finishing the projects, Kazinform said.

BTA plans to settle its dispute with Kuat within two weeks, bank spokeswoman Viktoria Shen said. She declined to comment on Solodchenko's comments. Repeated attempts to reach Kuat officials were unsuccessful.