How successful has the company been in establishing itself as one of the major holding groups in the country?
When we began developing the company's strategy about 20 years ago, we worked with many consultants and chose an initial strategy that would allow us to work on low-competitive markets. We were unsure if our managers could compete in markets that were saturated. We chose markets such as the oil and gas sector, where we focus on production, especially in the energy market, i.e. electricity and heat supply, as well as real estate. For example, we now own a large industrial zone that we rent in order to avoid dealing with competitors in production release, promotion, and marketing. This strategy has been beneficial, as we carefully monitor trends in the oil market and have managed to sustain continual growth for 10-15 years up until last year. We operated similarly with energy markets, as we entered at a difficult time when many agents were on the verge of bankruptcy. Currently, energy is leading our portfolio, and we are standing firm. We have been operating in competitive markets for the last three or four years, entering the retail sector, where our pharmacy chain is now rated number one in Kazakhstan, as well as the banking sector—a competitive area as well, but one we are now able to compete in. We also have purchased ALMA-TV, which is in a challenging but promising market. We have been working with the Boston Consulting Group for six months now, and we will soon finish developing the strategy for the next five years.
What opportunities will the purchase of ALMA-TV bring your company, and how does does media fit into your growth strategy?
We are going to make ALMA-TV an internet-provider and compete with Kazakhtelecom. This will also create synergy with our bank, which will be more involved with connectivity in the future. Along with ALMA-TV, we have a share in the advertising market, which will create relationships with our other companies and help promote their products. Now we are in talks with Kcell, which should lead to an increase of our product values and to future partnerships. We bought ALMA-TV because we saw great potential in this field; we hold around 60% of Kazakhstan's cable TV market and we are present in every city with a population greater than 100,000. If we join efforts with Kcell, we will be present in every household, even in the rural areas. Providers all across the globe agree that fiber-optical cables ensure much better connectivity than satellites.
Economic diversification is a very strong feature for Ordabasy Group. How important it this trend on a national level?
It is crucial for Kazakhstan to have a diversified economy, not only to sell raw materials, but to process them into end products as well. We try to diversify our business by entering the fields where our management is strong, but if we cannot rely on our own skills, we prefer to hold our shares and delegate the management to third parties. For example, we do not interfere with the banking management as the other shareholders have it under control. This is also applied for pharmacies, as we entrust the management to the original shareholders, who continue to hold 51% of the shares. In the oil and gas and energy sectors, however, we feel confident, and act as the controlling and managing company. As the country's resources represent the entire periodic table, it is important that we develop the mining of gold, copper, and other metals. We recently entered this market by buying a gold and copper company and we will soon start to produce those metals. Of course, selling them for foreign currency eliminates the devaluation risks, but the most important business for Kazakhstan is logistics and transit. While we do not have access to large bodies of water, we have both China and Russia as neighbors, which will help us maximize our transit potential. Agriculture is the other important sector: we have vast tracts of land suitable for farming and animal husbandry, and we can export organic products. For example, while China exports its apples worldwide, it imports organic apples from Kazakhstan for domestic consumption.
We have seen government initiatives trying to boost potential for agriculture. How does Ordabasy Group intend to get involved?
We have a small milk farm in Shymkent Region with Canadian cows. Currently, we are also planting 500ha in Zharkent city, near the border with China, and starting next year we hope to start exporting apples to China. We have a joint venture with the Abu Dhabi Falah Fund, an egg farm near Almaty, which we have been working with for almost nine years and have learned how to properly manage and structure an agriculture business in management and structure.
What are your expectations for the year ahead?
In general, budget revenues have decreased and oil and gas prices have dropped throughout the entire country. There are many positives as well, however, as the government is implementing a structural reform through wide-scale privatization. Next year will be busy: privatization will be massive, and foreign companies will be encouraged to enter the market. That will give great momentum to Kazakhstan's development, especially in terms of the energy sector, as we plan to participate in privatization of the powers plants and of the Almaty power supply system. With the governmental and the business aspirations in accord, the next year will be favorable for investors and businesses alike, and not just within Kazakhstan. We are now in talks with two Russian companies regarding the purchase of a cable operator in Russia, and we have ambitious plans of expanding our Europharma pharmacy chain to China. It is a difficult task, but we are working hard for it.