Investment Congress.Native and Foreign Prophets
The regional investment congress that was held in Astana on 19 October gathered local and foreign businesspeople, heads of major regional companies, advisers and top managers of state-owned enterprises in one place. The declared aims of the forum were to find new opportunities and mechanisms of attracting investment on domestic and foreign markets, analyse government regulation on the stock market and hold a constructive dialogue between the authorities and business. It should be noted that the format of the regional congress made it possible to achieve these aims through holding plenary sessions, discussions and master classes on various aspects of companies entering the stock market and increasing their market capitalisation. An informal, but no less important, part of the congress – meetings during coffee breaks – was also very successful: during coffee breaks, congress participants managed to establish their real potential and the strength of their rivals, find potential investors and discuss new projects and market niches.
The forum was organised by the VIPromotion corporate communications agency and its general partner was Renaissance Capital. This information and banking group, operating in Russia, Kazakhstan, Ukraine and other CIS countries, currently occupies leading positions on the M&A, equity and loan market. Another sponsor of the forum was the Basic Element group, which owns assets in the energy, machine-building, financial, construction and mining sectors. The group presented its new project at the forum. This company intends to build several cement plants in some of Kazakhstan’s regions.
It is worth noting that this event generated significant interest among Kazakh companies mainly because of foreign experts’ participation in it. For fully-fledged development of the domestic economy a glance from the outside is the best vaccine against developmental diseases, whose first symptoms have resulted in the latest changes in ratings assigned by international agencies to Kazakhstan. The congress also had to discuss forecasts and ratings. For example, participants asked why the ratings of Kazakhstan had been downgraded, while this had not taken place in Russia or Ukraine.
Jurgen Rigterink, the chairman of the management board of ABN Amro Bank Kazakhstan and a member of the Foreign Investors’ Council under the Kazakh president, believes that the Kazakh banking sector was largely impacted by the US subprime mortgages crisis, because it put its stakes on foreign loans. Russia and Ukraine used them to a smaller extent, mainly focusing on deposits. “This is an individual crisis of banks and it was expected,” he said. “Commercial banks’ foreign debts stand at $40bn. You were taught a lesson. I hope that the Kazakh banking system will learn it properly.”
Mr Rigterink thinks that the situation may lead to new foreign players appearing in the Kazakh banking field. A refinancing programme may lead to the sale of both part of assets and banks themselves. For example, Austria’s Reiffeisen Bank, which until recently thought that it was late to enter the Kazakh market, has a real chance of making this on more advantageous terms. The chairman of ABN Amro Bank Kazakhstan does not expect “hot” sales at any price, but he warned that growth rates would slow down as a result of the crisis.
“I believe that the situation is manageable, but there will be victims. Price conditions will be harsher, loaning will be more selective. When will the situation stabilise? If I had known this for sure, I would have definitely become rich!” Jurgen Rigterink joked, adding that ABN Amro predicted the situation would be back on track in the first quarter of 2008. The financial analyst is holding his personal savings in a Kazakh bank. “In the long-term (five years and more), I expect that the tenge will have an appreciation trend, it will be strengthening…” he said.
It should be noted that the congress was positive about Mr Rigterink’s role of oracle, grilling him about everything that concerned them, including the topical issue of the property and construction sphere. At the same time, Kazakh participants were concerned most about whether the row with ENI over the Kashagan oil field would undermine the positive investment climate that had developed in the country.
“We are advisers of one of the members of Kashagan. As co-chairman of the Foreign Investor’s Council’s working group on enhancing Kazakhstan’s investment image, I can say that we are working on this every day. This situation increasingly reminds investors of the situation around Sakhalin, although they can see that the Kashagan project does indeed have significant deviations on the budget and terms, and they should be discussed. The project is very large and important for Kazakhstan’s future and its economy. That is why investors are treating the situation around Kashagan as a one-off case.
“At the same time, I would like to focus on the Law On Subsoil Use, which has recently been adopted by parliament. Members of the Foreign Investors’ Council and other organisations have sent a letter to the Kazakh president, asking him not to sign it. The reason is simple – this law may influence contracts that had been signed earlier. The president has always stressed in the past that contracts should not be changed because this may have an impact on the future situation. I believe that the confidence of investors in Kazakhstan’s investment attractiveness has not been shaken yet. Kazakhstan is one of the countries that is still very attractive and will continue to attract foreign investment. There is no other country in the region that is as successful in conducting economic reforms,” Mr Rigterink said.
Gayrat Salimov, the director of Renaissance Capital’s analytical department, also expressed his opinion on this: “Indeed, the Kashagan project has had significant delays and budget overstretches. On the one hand, this can be explained by the fact that actually, the process is not linked to Kashagan alone. All over the world, investment projects on developing natural resources are revised upwards, because the main resources used in these projects have gone up in price. Nevertheless, the fact of such overstretch is obvious, as is the fact of a significant delay in the launch of the project and the extraction of first oil. That is why this discussion has been brewing for a long time. It is important to understand that Kazakhstan (like the entire Central Asian region and Russia) will need considerable foreign investment for future growth. This is mainly linked to the fact that capital is being created in Kazakhstan not as quickly as the economy demands. That is precisely why capital inflows from abroad are an important factor for its future growth. Foreign investors are now watching the situation. It is very important that they understand that if they observe contracts, their interests will also be observed and they will make profits from the investment. This is the main principle which should be taken into account while conducting talks and adopting new laws in the mining sphere.
“Each country has the right to manage its own natural resources and enjoy full sovereignty over them. On the other hand, stable legislation is the very medium whereby foreign investment comes. That is why we should be very careful while changing legislation not to ‘scare off’ the new investment that Kazakhstan badly needs in order to grow further.”
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