A COMPLEX WEB
TBY talks to Bolat Zhamishev, CEO of the Development Bank of Kazakhstan (DBK), on the role that the bank is playing in diversifying the economy and what the New Silk Road project will mean for Kazakhstan's producers.
BIOGRAPHY
Bolat Zhamishev graduated from the Kazakh Agricultural Institute in 1981. He began his career as a postgraduate and researcher and scientific secretary at the Kazakh Research Institute of Economics and Organization of Agro-Industrial Complex (1984-1992). He has since held executive positions in the Congress of Entrepreneurs of Kazakhstan, National Bank of the Republic of Kazakhstan, National Pension Agency of the Ministry of Labour and Social Protection of Population, the Ministry of Finance, the Ministry of Internal Affairs, and the Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Institutions.What are the main reasons behind the 26.8% increase in profits between January and June 2016 compared to 2015?
We are a government-owned development institution and acquisition of high yield is not our major goal. As a development bank, our major role is to promote the diversification of the economy in Kazakhstan and implement a new economy industrialization program of the government. Therefore, the indicator that would characterize the contribution of the DBK in this direction is an increase in our loan portfolio through increase in financing of sectors other than raw material-based ones, such as processing sectors primarily, which provides for the diversification of the economy. Our consolidated credit portfolio as of August 1, 2016 was KZT1.394 trillion versus KZT843 billion in August 2015. The visible increase is about 65%; however, if we exclude the devaluation effect, the gross increase will be about 20%. As for net profit, it should be noted that steps taken by DBK affected this indicator in some way. This spring we conducted stress testing on all our projects and realized the volume of credit portfolio is more sensitive to foreign exchange risks. About 15% of our projects seemed to be exposed to this risk and we thus decided to restructure these loans. Thus, we have diverted the financing from foreign exchange to tenge. These measures resulted in a good quality credit portfolio as of today, excluded the formation of any additional provisions, and, certainly, had an effect on net profit.
What are your expectations of the prospects in Kazakhstan's economy for the next five years alongside the New Silk Road Project implementation?
After the initiative of China to create the “New Silk Road Economic Belt," this program has been further developed. Now it is not only about leveraging the transit potential of the countries that the Silk Road passed though historically, but also the implementation of investment projects that would economically link the countries of the “New Silk Road." At present, the Kazakhstan-China Program on development of productive capacity is being implemented in Kazakhstan; it includes 51 large investment projects. The DBK plans to participate in financing part of these projects. All these programs such as the revival of the Silk Road, the government's industrial development program, and the creation of the economic union are all measures that are supposed to promote and continue the efficient diversification of the economy of Kazakhstan and further develop our partnerships with neighboring countries.
What are some of the bank's ongoing and planned projects that will have the biggest impact on Kazakhstan's economy?
We invest in large projects relative to the size of Kazakhstan. There was a standard that the loan amount should be not less than USD20 million, which was then raised to USD30 million. For the processing sectors of our country such projects are considered large ones. Currently, we have 36 investment projects in our portfolio and 11 export loans. This year we took the decision to invest in poultry farm construction in Akmola region with the capacity of 60,000 tons per year, the construction of transport logistical center in south Kazakhstan regarding the infrastructure, the construction of Turgussun hydro power station in east Kazakhstan, expansion and modernization of plant on nitrogenous fertilizer manufacturing in west Kazakhstan for the chemical industry, as well as construction of the plant for sodium cyanide production in south Kazakhstan. The DBK has also invested in a project for the complete production cycle of railway wheels in the Pavlodar region. At the same time, we continue to finance important and significant projects to modernize the Atyrau and Pavlodar refineries, and to invest in greenfield projects such as the construction of a rail and structural steel plant in the Aktobe region. Rails have never been produced in our country before now. In total, 83 new plants were put into operation thanks to the DBK's funding.
A COMPLEX WEB
TABLE OF CONTENTS
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Rt Hon Sir Alan Duncan, State for Foreign and Commonwealth Affairs, United Kingdom
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