Investments not a luxury, but means of implementation

Is Kazakhstan attractive in terms of investment? How to interest foreign investors and convince them that investing in our country is profitable for them? Do we have projects that are not ashamed to bring to the market? The correspondent of the public-political newspaper of Kazakhstan “Time” spoke about these questions and many other things with the head of the national company “Samruk-Kazyna Invest” Nurzhan ABDYMUNOV.

- Has the geography of investments in our country changed in recent years? Companies from which countries come and which leave?

- Traditional markets remain with us. These are the USA, China, Europe, Russia, and Southeast Asia. According to SK Invest, we have activated Southeast Asia, in particular Hong Kong and Singapore. Among the new investors who are willing, there are companies from Canada, there is a project for cooperation with India. There are groundworks with the Netherlands and the UK.

- In what areas are the distribution of investments?

- We are now working on the issue of alternative energy, we already have a benchmark - a positive experience with British investors. We launched two stations, they work - this are “Burnoye Solar-1 and 2”. As for Southeast Asia and India, investors from there come to us in agriculture. The proposed project in the food industry. There are several projects proposed by the Shymkent Akimat. In particular, entertainment cluster. We are not participating in this project yet, but we are studying it. Investors already want to enter there, although their origin is Indian, but physically they are in Nepal. They have a great interest in the project.

- And what is the benefit if do not control the whole business?

- For foreign investors, it is important to level regulatory and political risks. For investors, the business partner in the country where they plan to invest is important. There is an expression "smell the country". The local partner helps to “smell” and figure out what's what. In this regard, our company is a guide and reliable partner. We are not a bank, we also participate in the share capital. Thus, we share the joint risks.

- But somehow it is necessary to influence management - otherwise how?

- For this, there is an agreement on the joint implementation of the project, which governs relations between investors.

- Last year, Samruk-Kazyna Foundation adopted a new development strategy. Have you changed it too?

- Indeed, by the initiative of Akhmetzhan Smagulovich, the Fund began active work on a new development strategy and in attracting investment in new industry segments. Our strategy has also changed significantly, we are becoming more active in terms of attracting investment in new projects. Our company has existed since 2007, already has its own history. The management has changed several times. We were, in fact, a kind of investment committee of the Fund. Samruk-Kazyna Invest expertised all previous projects of the Fund. After that, the mandate changed. In 2012, it was decided that we could enter into the authorized capital of projects, which means, to deal with implementation. Today, the strategy of the Fund has changed, a new management has come. There are examples of best practices, as Mubadala (UAE) and Temasek (Singapore), we have studied their strategies and trying to adopt best practices. However, as an investment subdivision of the Fund, Samruk-Kazyna Invest is limited in investing money inside the country yet. Quite a lot of unoccupied niches and projects that need to be mastered. Yes, there is a group of companies in the Fund, where there is a place for our investments, they can give impetus to the development of new individual directions. For example, “Tau-Ken Samruk” is engaged in mining, we can attract investments for the further deep redistribution of the initial raw materials in order to create new plants for new industries. Under the new strategy, we can enter those projects where the total cost should not exceed $ 150 million. What goes beyond this, the Fund participates itself.

We have such a division with the Fund. We undertake small pilot and medium-sized projects in various industries.

Moreover, the new strategy introduced mechanisms to work more effectively with foreign investors, providing them with a full package of investment support services to attract more investors. For this purpose, the principle of one window has been implemented in the Fund, a vertically integrated structure of work with the investor from foreign representative offices to regions has been created.

There are representative offices of Samruk-Kazyna Invest in Moscow, London and Beijing. They are greatly intensified.

- Does the strategy already bring results? How is it expressed in numbers and projects?

- Yes of course. We are currently running six of our projects. We did optimization. First, we applied anti-crisis methods. Cleaned up, in other words. Recently, we completely exited from one project - which is “Kaztechmash”, it is located in the North Kazakhstan region. This is a plant for the assembly of the Finnish combine “Sampo”. Unfortunately, these combines could not capture their market share. There are big companies with famous brands. Farmers prefer them. However, we exited with the same denomination as we had entered, thank God, we did not lose anything. There are several other projects where partners have changed, they are all developing: there is a coal processing plant in the Karaganda region, there is a leasing company. Since the new year, we have begun to actively engage in new projects: this is the construction of a private school, the creation of an international diagnostic center, the akimat of the city of Nur-Sultan helps us in this.

- Are you not afraid that later all akims will ask you for money for such projects as a school?

- Why do we need to be afraid? We must show everyone a positive and successful example. Show that this model works. We give a signal to the market. In addition, the Akimat helps us, does not ask for money. It helps with the land, communications, project design.

- Does Samruk-Kazyna Invest have unprofitable assets?

- We have no unprofitable projects. There are only those projects that have not yet reached their design capacity. We can consider unprofitable only those projects that we are forced to exit when a loss is fixed. We have them at the stage of development. We are not in a hurry, there are deadlines, and everything is in planned condition. We changed partners somewhere, tightened requirements, corporate governance, introduced financial controllers. All risks were leveled.

- Are foreign investors interested in investing big money in the country and in which projects?

- There is money in the world. And now everyone is interested in investing in IT-technologies. Not so long ago, I participated in a major international forum in Portugal. There were 500 investing companies that were “hunting” new startups. Literally, they were bought on the spot. We also look at it. My personal interest is to go for the projects of the future. Yes, we are still an attractive country for raw materials, there are traditional areas, but we need to develop further. Kazakhstan can jump ahead only through modern technology. Therefore, we are now considering projects in telemedicine, biometrics, and distance learning using IT technologies. There are also projects with the use of IT technologies in the field of water resources. The main thing is to have a good project and a good product.

- Is there potential in these areas in our country?

- I believe that demand creates supply. There is a potential. For six months we have considered through 156 projects. We have 12 projects in the long list, and for another 19 projects we develop concepts. The main thing is that the project was, as, for example, those that we consider to be successful - “Burnoye-1”, “Burnoye-2” -solar power plants. For their development, we are grateful to the Ministry of Energy, which supports us. The government is doing everything necessary. There is interest and money. The only thing that still lame - the quality of the project and products. Investors are preparing damp projects, in the style of the 90s. The requirements are changing, the standards are different, investors in the world have stepped forward long ago, and our investors are only mastering these standards. Nevertheless, we are not only pushing investors to new design standards. We are also ready to provide already developed projects in specific areas and industries. To start with the ideas and wishes of the investor and submit the project in full packaging, including government support measures. Still, there is another point: often investors want to come in order to sell a project with equipment for our own borrowed money. To be precise, they earn money on equipment and service, and then it is no longer their concern, it is the headache of the Kazakh partner - the sales market, product quality, and so on. This is the problem.

“Good, but the group of companies of the Fund also has money, they can invest in your projects.” Is it how it can be done?

- Obviously, each portfolio company has its own investment plans. But we are not interacting with them. We have a slightly different strategy. Our source is the Fund itself, we are the investment subdivision of the Fund. The only thing we can do is start the project, go through the investment phase and then exit the project, passing to the profile national company.

- You are engaged in attracting investment within the country. But is there any desire to invest abroad in promising projects?

- This is not even a desire - this is the objective of the Fund, about which the Chairman of the Board of the Fund, Akhmetzhan Yesimov, has constantly spoken. Nevertheless, this is the objective of the next stage. It will be correct, but we need to consider this issue not only as an investment of money, but also as an opportunity to drag technologies into the country. Until you are a shareholder of a project, you will not bring modern technologies from this production into the country. It is necessary to invest not only in business, but also in personnel training and technology transfer. This costs a lot. Fund management have plans for entering the international investment market. Nevertheless, this work is not for one day.

Marat Koshkeev, photo courtesy of Samruk-Kazyna Invest LLP, Nur-Sultan


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