POTENTIAL FOR GROWTH

Kazakhstan 2017 | ECONOMY | INTERVIEW

TBY talks to Moazzam A. Mekan, Regional Manager for IFC in Central Asia, on IFC's recent projects, the country's potential in agriculture, and the challenges and opportunities for Kazakhstan.

Moazzam A. Mekan
BIOGRAPHY
Moazzam A. Mekan is Regional Manager for Central Asia covering IFC activity in Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan. He has over 20 years of experience in the field of infrastructure investments and public-private partnerships, having undertaken key projects in the transport, water, oil and gas, agriculture, and health and education sectors. He joined the World Bank Group in 1988 for its Latin America and the Caribbean Region.

What are IFC's most recent projects that have an impact on the country's long-term development?

IFC is the largest global development institution focused exclusively on the private sector. In this context, it has invested over a billion dollars in Kazakhstan in the last few years. Much of our work has been in the financial sector; we support the development of the sector by making investments and strengthening financial institutions to help them increase access to finance for SMEs and entrepreneurs. To support the country's infrastructure, IFC advises the Ministry of Investment and Development to structure and implement an international tender for the Big Almaty Ring Motor Road (BAKAD). The transaction, the first of its kind, is considered a model for future public-private projects (PPP) in the region. The project is part of the Western China-Western Europe International Corridor. However, setting aside these larger projects, we are involved in many other small projects, for example with microfinance, that target the poorest and give them access to finance. They may not be large loans, USD5-15 million, but they reach a large amount of households. Going forward, we see infrastructure, agribusiness, energy and resource efficiency, financial, and capital markets as key sectors for private investments in Kazakhstan. We also see great potential for broader use of PPPs and support the country's privatization program.

Many sectors in Kazakhstan, for example agriculture, have low penetration rates. What is your view on its investment potential?

Agriculture has great potential. Kazakhstan has the fifth-largest amount of arable land in the world and, in terms of availability of new land, it probably stands at number one. It is also located in a region with about 3 billion people within a few hours of flying time. This huge population has become affluent due to sustained high economic growth rates in their countries over many years and this population has changing preferences as incomes have grown. The most notable change has been a gradual shift away from vegetable-based diets toward a protein-rich diet. Also there is a modern trend toward organic production. It takes about 7kg of feed to produce 1kg of beef. The feed, which is mostly grain-based, requires good land. And here Kazakhstan has the advantage. Kazakhstan has no limitation on land. It can even focus on organic production, which many countries do not have the luxury to produce. Therefore, Kazakhstan has tremendous potential in agribusiness. However, there are hardly any international investors there. We need to get the right investors into Kazakhstan's agribusiness with the right technology, as the agriculture business has become technical.

What are your predictions on the opportunities and challenges Kazakhstan will face in the next few years?

There are some good news and some challenges. Oil prices have stabilized, which is good for Kazakhstan. In the immediate future, this will help the country build up its reserves and take some pressure off the government budget, allowing it to spend more, leading to more economic activity, and, therefore, higher growth rates. This is an opportunity for the country to reform and the challenge will be to keep the ship steady and maintain the policy for change. As oil prices go back up, there will be a temptation to not undertake difficult economic reforms and make it more efficient and resilient. Central to sustained improvements in productivity are strengthening the business climate, greater room for private sector expansion in an environment of neutral incentives, and progress on the governance agenda. A well-functioning financial sector and improved access to finance remains an important element of the growth and diversification agenda. An important challenge is further developing the credit infrastructure and deepening local currency bond markets to develop multiple sources of financing for the private sector at competitive prices.