A Warmer Climate

What have been the major initiatives and programs launched by the IFK to improve the business climate in the country?

Three years ago, our shareholder, Baiterek Holding, made a major decision for the IFK to acquire all the distressed assets that had been amassed at the Development Bank of Kazakhstan. We acquired about 36 depressed companies with a total debt of around USD800 million. We are now considering ways to make these companies attractive for investment. We have also developed our own strategy and have approached leading investment groups operating both locally and globally. The IFK partners with leading Kazakhstani investment companies and is in touch with nearly all the market players. Our final goal is to sell our portfolio when the problematic companies in it start showing some positive dynamics, generating some profit, and providing jobs. To date, we have created around 1,800 jobs. We understand that no one is willing to acquire a depressed portfolio. Therefore, we develop attractive investment tools that can satisfy our needs as sellers and the needs of investors buyers. That has been our main contribution to the development of an attractive investment climate in Kazakhstan.

The IFK has strong ties with international investors. What areas and countries do you establish partnerships with?

Alongside our work on depressed portfolio, we also work on new projects. One of them is a float glass factory in Kyzylorda that we are building in partnership with Stewart Engineers, an American company that offers floating glass technology services, and a local private investor. This was our first experience working with a foreign investor and we plan to expand it. However, in line with priorities set by the government, we seek investors from neighboring countries, mainly CIS. Russia is a major partner; however, it depends on the industry. The portfolio of IFK comprises companies across various sectors. For example, we have projects in the construction industry and most of our partners there are local; we also have textile projects in the south with Uzbek partners, with whom we will establish a consortium in 2018. We also run large projects in agriculture in the north, together with Russia. Our possible partners include China; we are now in the initial stage of negotiations.

Within the government’s diversification program, which sector will the fund focus on the most? Where do you see the most action in terms of investment?

It is impressive that Kazakhstan has managed to create an investment climate that is attractive in any industry. This is because we have close relationships with China and Russia, which are now large markets. Many Russian and Chinese investors have moved their production lines to Kazakhstan and sell the products back home. Kazakhstan can offer attractive production costs across all the industries; however, agriculture is particularly attractive because of our vast territory, great soil quality, and close proximity to large international markets such as China and Russia. A total of 1 billion people willing to buy products made in Kazakhstan beat the odds of being a landlocked country.

What challenges will Kazakhstan’s business climate face in the coming years?

One of the challenges will be the country’s monetary policy. Its proximity to large markets comes with the understanding that these economies have their own currencies and will continue to have a great impact on Kazakhstan’s economy, even greater than global trends. Our country is building an export-oriented economy. If the Chinese or Russian economy is struggling, that will have a nearly immediate impact on Kazakhstan because these are our major export markets. It will be difficult to immediately redirect our exports; transportation costs will increase and we may not be able to offer competitive prices in Europe, for example.

What are your expectations for 2017?

We need to stay positive; 2017 will be a good year for us. In order to do business in a country, a company needs to visit it. In this instance, Expo 2017 will be of great help there. We look forward to completing projects we started in 2013 and starting new ones.