How is the Chamber supporting the development of the business climate here in Kazakhstan?
AmCham was founded in 1999, although the American business community began meeting several years earlier. Since then, AmCham has become a truly international business association in which businesses from every part of the world, including Kazakhstan, work together on a broad variety of initiatives. It is sometimes assumed that we are an exclusively US business association or that we are a branch of the US government, but this is not the case. We represent the entire spectrum of the investor community, including all sectors and all national affiliations. This is our strength. In recent years, advocacy to reform the business environment has become an AmCham priority, and we have developed a close relationship with the government of Kazakhstan for this purpose. Six years ago, we started meeting directly with the Deputy Prime Minister, providing recommendations on crosscutting policy issues in Kazakhstan's business environment. Then, in 2013, Prime Minister Massimov suggested creating a council for AmCham and its members to meet monthly on issues of our choosing with cabinet ministers. The Prime Minister always attends and chairs these monthly meetings, and we are always encouraged to speak out frankly on all issues. The Council to Improve the Investment Climate is composed of 10 corporate leaders from among AmCham members and 10 ministers and deputy ministers. Depending on the topic for the meeting, we can specify the presence of a minister responsible for this portfolio. For instance, the December council session was devoted to the telecommunications industry, with the CEOs of Kazakhstan's three leading foreign telecoms firms presenting their ideas about the future of telecommunications in Kazakhstan. The Chairman of Kazakhtelecom, along with ministers responsible for industry and technology, attended on the government side, and the Prime Minister spoke at length about the government telecommunications strategy for the year ahead. Prime Minister Massimov has been extremely supportive and we consider ourselves very fortunate to be able to speak directly to him each month. In June, AmCham presented a White Paper, namely the Top Ten Barriers to Foreign Investment, to the Prime Minister, and this became an action plan for the Government. Beginning in July, AmCham has been regularly invited to attend Cabinet meetings to take part in discussions on this top ten items, with ministers assigned to create working groups for each of the ten problem areas. This is a rare honor, and we are very grateful to Prime Minister Massimov for his attentiveness to business and to the AmCham business community.
Future economic growth relies on improving the business environment by changing or eliminating policies and regulations that discourage investment. What are the main obstacles and challenges that international companies face in Kazakhstan?
AmCham started by focusing on the courts and judicial reform. Kazakhstan still has a way to go in creating a judicial system that can handle investor cases competently and equitably, although there has been improvement with a variety of judicial training programs. The Supreme Court is able to handle complex cases, but the lower courts are less reliable. This is a post-Soviet problem of course, and one that afflicts all of the countries whose judicial systems were once Soviet. It will take time, as it requires a change in mentality. Judges still feel they should automatically side with the government in tax cases, for instance, and this is discouraging to investors. Investors need a stable environment with rules and regulations that do not change constantly. Taxes are constantly in flux, and companies must work hard to keep up with the latest changes. Government priorities also change, and despite much talk of economic diversification, this is not really happening. Visa and work permit regulations also need updating so that companies can bring in senior foreign staff when local staff capacity is insufficient. This past year has been difficult for Kazakhstan with complex external factors affecting the investment climate, including geopolitical crises, notably the Ukraine-Russia conflict, the resulting economic sanctions against Russia, the rapidly declining Russian ruble (the Kazakhstani currency is very sensitive to any change in the ruble), and the sharp decline in the price of oil. The tenge underwent a 20% devaluation in early 2014, and there is expectation of a further devaluation in early 2015. We have adopted a wait-and-see attitude, but all these pressures point to an uncertain year ahead.
Kazakhstan is witnessing the rapid development and reshaping of the energy system. Green energy and renewables are a priority for the government. What opportunities are presented for international companies operating in this sector?
There are many companies and the government itself is involved in renewable energy projects. The Minister of Environment up until recently was a strong environmental activist who raised a green energy platform to a top government priority. The government adopted Green Energy as a slogan, planning to draw on the private sector to finance projects. However, in September the Environment Ministry was absorbed into the Energy Ministry and the Minister moved to a new position, so this may presage a change in government environmental policy. It will be good if the green economy platform is pursued. It was and is a visionary strategy that could benefit Kazakhstan greatly.
Is there room for non-conventional approaches to finance?
Yes. For instance, there is an Islamic bank from the Gulf, namely Al Hilal Bank, in Kazakhstan at the invitation of the government. However, time is required to educate the population about Islamic finance and banking, which is still not well understood. The major Western banks that used to provide retail-banking services have exited the market, including HSBC, UnitCredit, and RBS. Now, banking is entirely dominated by local banks, most of which still have a very high proportion of non-performing loans (NPLs) remaining from the 2008 financial crisis. The National Bank of Kazakhstan performs its regulatory functions well, but there are still serious problems requiring resolution. Before non-conventional banking can thrive, conventional banking needs to find a firm footing.
What is the objective of AmCham for 2015?
To continue to intensify our relationship with the government, because this is how we can improve the investment climate. The best thing we can do for our members and the country is to work at resolving those top ten barriers affecting perceptions of Kazakhstan and restricting foreign investment. Kazakhstan has great economic potential that extends beyond the oil sector. It also benefits from good leadership, but it still needs to work at creating a true market economy, one that is free of government influence. The year ahead will be a test for Kazakhstan to see how it handles and bears up in difficult economic conditions not under its control. I am confident it will show its true mettle and continue along the path it has chosen for itself. AmCham and its members are always ready to provide whatever advice and support is needed.
© The Business Year - January 2015