Interview with Lord Renwick of Clifton KCMG, Vice-Chairman, Investment Banking, JP Morgan

What should Kazakhstan do to increase the attractiveness of its non-extractive sectors of economy for investments?

Over the past ten years, JPMorgan has had a lot of experience in helping Kazakh companies from both the extractive and non-extractive industries to raise capital internationally. There has been a very good response from the main international investment institutions, which are much better informed about Kazakhstan, its natural resources and the increasing potential of other sectors of the economy than they were a few years ago. International investors recognize that much has been accomplished by the Government of Kazakhstan in terms of developing a favorable business environment in the country.  This is very important as investors above all are seeking continuity and consistency of government policies. For example, investors have welcomed a series of reductions in key tax rates, including value-added tax and corporate income tax. This is a major stimulus for investment activity in the private sector. But the application of tax rules remains complex.  It is no less important, therefore, that the application of tax rules should be predictable from the point of view of investors, including in areas and projects that fall below the definition of ‘strategic’.  Many such projects are found in the non-extractive sectors of the economy.

We also believe that the government can itself become a more active player in the investment field, for instance by co-investing alongside the private sector in projects that help to diversify the economy. Through various institutions, the government can help to deliver more cost-effective and long-term financing to such projects.

JPMorgan is in close touch with most of the large project sponsors in Kazakhstan. Thanks in part to our efforts, a number of companies have been able to raise hundreds of millions of dollars of capital internationally. In many examples, these funds were used for capital-intensive projects with high value-added and substantial technological expertise. Going forward, we will be continuing to help to facilitate contact between the global industrial players and the Kazakh authorities and business leaders.

Finally, we see our role as an innovator in the development of new financial instruments fitting the requirements of the Kazakh businesses. We are often able to unlock pockets of investor demand for Kazakh risk by offering new solutions to investors, which reflect our wide international presence as well as good understanding of domestic practices.  An example of this was the recent very successful $500 million Eurobond issue for the Eurasian Development Bank, which mobilized a large amount of funding for development without recourse to guarantees by the Kazakh authorities.