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 KAZAKHSTAN International Business Magazine №2, 2009
 Opinion poll. Ten answers to questions about the crisis
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Opinion poll. Ten answers to questions about the crisis

For Kazakhstan, the year 2009 became the second year of crisis, indeed. To some extent, it now checks for the endurance of not only particular sectors of the national economy or companies, but the entire domestic business for its viability on the whole, its readiness to quickly and adequately change in today’s toughest and critical conditions. Unfortunately, not everyone was capable of withstanding this race. Some became disheartened at once and dropped out of the race. Some managed to optimize their business and tailored it to the new economic realities. For some the crisis was the point that opened new opportunities for growth. Somehow or other, all successes and failures depended (and depend now) on exactly what anti-crisis strategy was selected by companies. We applied to some of them with the request to give their appraisal of the current crisis, to share the anti-crisis experience gained, and to make a forecast of the possible situation development.

The interlocutors, the top managers of ten companies from various sectors of the economy, who hold leading positions on the Kazakhstan market, where asked three questions:

  1. Global economic collapse in the thirties of the last century was given the name of Great Depression. What short definition would you give to the current crisis? What challenge did it give to your company?
  2. What is your company’s strategy for battling the current crisis? What efforts is your company making to eliminate the crisis?
  3. Your forecast of the crisis scenario: When will it end? What changes in the system and new market trends can be expected after its ending?

The answers to these questions, in our opinion, showed that despite all these difficulties, the domestic business is not going to surrender its position. Moreover, it strives not only to keep its position, but to achieve a higher, relatively qualitative level. However, we give this chance to you as our readers to make your own conclusion about all that.



Interview with Felix Vulis, President of Eurasian Natural Resources Corporation, Kazakhstan, on the topic concerning the crisis

Global economic collapse in the thirties of the last century was given the name of Great Depression. What short definition would you give to the current crisis? What challenge did it give to your company?

Would it be right to draw an analogy between the current crisis and the Great Depression? I do not think they are identical, most likely, on the contrary. As today’s crisis is caused, in particular, by a failure in the financial system and, most of all, in the USA. This is the biggest distinction that distinguishes the current crisis from the Great Depression. Not derogating the seriousness of the situation, I would like to point out that there is exaggeration of how matters stand now. Of course, the crisis was provoked to some extent by certain players in order to make some corrections on the financial market. In our opinion, this crisis is more technical by nature, perhaps. The world economy is grouping at the lowest point of the new cycle, and now the global financial market is being revised.

What is your company’s strategy for battling the current crisis? What efforts is your company making to eliminate the crisis?

Our strategy of finding a way out of crisis is, in the first place, the reduction in expenses and maintaining the low cost of products. This remains our major advantage, which we will keep or, if possible, strengthen in the condition of the current recession. The key factor of our success is that our enterprises have support in a form of effective logistics and cheap electric power supply that ensures the low cost and competitiveness of our products.

We will revise our program of capital expenses and will give preference to those projects aimed at replacing equipment, increasing efficiency, and modernization of production.

We have cut expenses for personnel. Thus, emoluments to the top managers were cut by 10%. We started practicing the combining of jobs, and organized administrative leaves. We managed to implement these measures without layoffs. This will allow us reaching the previous production volume and improving the current state of affairs.

Your forecast of the crisis scenario: When will it end? What changes in the system and new market trends can be expected after its ending?

The realities are such that we never should forget, at any state of the market, that good times have a trend to change for bad times, and on the contrary. We should remember this at all times, and keep an eye on the work of our enterprises from the operating point of view. Concerning the global changes in the sector, on the whole, it’s most likely that consolidation will take place: Big companies will become even bigger, and smaller ones will disappear. The most interesting thing is that this move took place even before, however today we have much more opportunities for that.


Interview with Dmitry Kromsky, General Director of KarTel LLC on the topic concerning the crisis

Global economic collapse in the thirties of the last century was given the name of Great Depression. What short definition would you give to the current crisis? What challenge did it give to your company?

I would not call today’s crisis the “Great Depression”, as there are no signs of this event in the world at present. In my opinion, what is happening today can be called the «process of changing the world financial system», which naturally, cannot happen pain-free both for the real sector of the economy and the citizens.
Our
company faces new tasks, in its work. The most important of them is how in the condition of the current slowing down, or stagnation, to keep a high marginality of business. To implement this task, we have to revise investment projects, cut expenses, and more efficiently use the available resources.

What is your company’s strategy for battling the current crisis? What efforts is your company making to eliminate the crisis?

Our strategy is quite simple: We continue competing successfully in the new conditions, making interesting proposals to customers, increasing the quality of services, since the loyalty of the current subscribers becomes the priority to us. With this, we also cut expenses, which are not directed straight to attracting new subscribers and income increase, and revise our investment plans from the viewpoint of a quick return on investments. This will allow in the long-term finding a way out of the crisis in the form of a good solution. For the top management of the company, this is a good time for demonstrating their managerial skills to work in the new conditions.

Your forecast of the crisis scenario: When will it end? What changes in the system and new market trends can be expected after its ending?

I propose the current crisis is likely to continue till the mid of next year, and only then the recovery of the economy and its raising to a new quality level can be expected. Although no one is capable of making an exact forecast in this given case, as a great deal will depend on the efficient implementation of the anti-crisis programs. With the end of the crisis, in my opinion, the time will come when the financial system and the real sector of the economy will be operating jointly with a view to a long-term result and with minimum risks, since the crisis is most of all, a big lesson to all of us. Figuratively speaking, there will be “no feast in the time of plague”.


Interview with Alexander von Gleich, Financial Director and Member of Board of ATFBank JSC on the topic concerning the crisis

Global economic collapse in the thirties of the last century was given the name of Great Depression. What short definition would you give to the current crisis? What challenge did it give to your company?

«The casino is closed». This is how I would call this crisis. Why casino? Because in the last few years the financial sector was diverging, more and more, from the real sector of economy. The essence of hedging instruments, such as derivatives and futures, was so much distorted gradually that transactions with the real delivery of assets were only 5%. This is like in a casino: If someone receives big money, this means that others bear big losses at this moment. On the whole, UniСredit Group has managed to overcome the crisis with relative success, since we were not engaged in this sort of speculative transactions and staked on the traditional banking business. In Kazakhstan, the financial crisis has caused more serious consequences. Two or three banks announced their default. Naturally, this somehow affected us, as the investors, observing the overall situation, are worried about that. Although they realize that we are by 99% the participant of the UniCredit Group, ATF is, most of all, the Kazakhstan bank. I believe, bad times will be over soon. Even so, we have positive moments, as new customers come to the bank, and our deposit base is growing in all segments.

What is your company’s strategy for battling the current crisis? What efforts is your company making to eliminate the crisis?

Firstly, this is to work with our customers and the providing of support to them. They are also experiencing difficulties because of today’s economic recession and reduced earnings. We try to meet half-way here. This is the principle and ideology of our group to maintain loyal relations with our customers. Now we are practicing the increasing of limits on loans, extending their term, and so on. Secondly, today, we are prepared for all possible crisis development scenarios. Only in April of this year, we increased our own capital by KZT18 billion. Today we keep a bigger amount of liquid funds, some US$1 billion. Thirdly, we are cutting our expenses. Fourthly, we are in a sort of privileged position, as we have a strong banking group behind us, ready to provide a backup to us at any time. I think this is our competitive advantage.

Your forecast of the crisis scenario: When will it end? What changes in the system and new market trends can be expected after its ending?

Still the world economy is in the state of free fall. Perhaps, we can forecast that by the end of this year the economic recession will slow down. I believe that the world will have to wait for 2–3 years more in order to return to the level of 2008. It’s most likely that this process will be shorter in time for Kazakhstan. The oil price now is demonstrating an upward trend, and our customers, the foreign companies, are showing their assuredness in the prospects of the economy. They have not stopped their activities here, and, on the contrary, are going to invest in new sectors, such as retail and wholesale networks, processing, and foodstuff production.

Concerning the system changes, I think at the global level there will certainly be more control from the side of the financial sector regulators, and this will be coordinated as a world-wide control. Regarding Kazakhstan, we expect stabilization here. To some extent, the banking sector of the republic was swollen due to external loans. The second-level banks’ assets reached 80% of GDP. This is double that of, for example, in Russia, Czech Republic, Poland, or Hungary. I think there will be no such excesses any more. The banking sector is focused on the provision of services to Kazakhstan enterprises and its population, instead of swelling its assets abroad and creating banking empires. As they sayBack to the roots”. We are also planning to extend our business and increase our share on the market. Now we have 9%. In 2–3 years we want to reach the figure of 12–13%.


Interview with Oleg Novachuk, Chief Executive Director of Kazakhmys PLC on the topic concerning the crisis

Global economic collapse in the thirties of the last century was given the name of Great Depression. What short definition would you give to the current crisis? What challenge did it give to your company?

Let it be the scientists, who retain the right to decide how better to name this all. Our goal is to work with the reality in favor of our employees, stockholders, and the local population, and to achieve a success in our finding a way out from the crisis.

What is your company’s strategy for battling the current crisis? What efforts is your company making to eliminate the crisis?

Kazakhmys has a few advantages, allowing it to control the situation and manage the future production development. Firstly, we have sound long-term relations with our major customers. This cooperation helps us ensure a stable sales flow. All contracts for selling products in 2009 are already signed. Secondly, we are in a competitive position. The integrated structure and extensive assets base along with the proximity to the finite producer markets ensures the Group’s position as a relatively low-cost supplier of major products and the flexibility of production and selling. Thirdly, we are aimed at retaining funds and maximum effective production.

Your forecast of the crisis scenario: When will it end? What changes in the system and new market trends can be expected after its ending?

We do not give publicity to our forecast of the world crisis. Copper is still a lucrative business on the market, and although the copper prices went down, the demand for it remains relatively stable.


Interview with Dmitry Revin, Director for Finance and Business Development of EURASIA REDD on the topic concerning the crisis

Global economic collapse in the thirties of the last century was given the name of Great Depression. What short definition would you give to the current crisis? What challenge did it give to your company?

We support the opinion of our President, who said: «Through the crisis to rejuvenation and progress». Why? Because, as a matter of fact, the crises made strong companies even stronger. Those ones, which were inclined to excessive risk or had not enough strength or managerial talent, have left the market. Of course, this is painful, but henceforth everyone will have much more for-sight and practical knowledge in the building-up of their business models. The current crisis is a standard economic cycle, which is now being undergone by the entire world, and no one annulled these cycles. From the point of view of its effect on the economy, we see some positive aspects. It is obvious that it is necessary to strengthen government control in some sectors of the economy, since it is impossible to rely only on the “invisible market hand”. This was demonstrated by the falling of banking systems of Western countries. First, I experienced such crisis in 1999–2000 when the Internet-bubble in the USA burst. The companies portfolio, we were managing at that time, came down by 70% within three months. Now, the current crisis makes us think, most of all, of the fundamental things, because heretofore everyone feigned that we were growing far too quickly, while the banks succeeded in maintaining speculative demand due to foreign loans. Now, this bubble burst, and all fell back into place. The reality is now much too clear, and we had to re-evaluate many things. Nevertheless, the life goes on.

What is your company’s strategy for battling the current crisis? What efforts is your company making to eliminate the crisis?

For our company, this is the more sober evaluation of risks, related to projects implementation. This is the first thing. Building up a more serious system of internal control is the second thing. Selecting people more thoroughly, who will work for us, is the third thing. And the last thing is that we rolled up our sleeves and got down to work, working now 14 hours a day, six days a week, which we haven’t done for three-four years before.

Your forecast of the crisis scenario: When will it end? What changes in the system and new market trends can be expected after its ending?

There’s a good saying that crisis starts, first of all, in the people’s heads. So, by analogy, it must also end in the people’s heads. If to say this about the economic upturn, then, in our opinion, all prerequisites for it at the global level are already created. The URALS oil costs already more than 70 dollars. So, the budget can sleep well, as the income side of it will be in the plus. The gold and foreign currency reserves will be growing again. This is the first thing. At the government level, we can relatively easily afford to flexibly manage the balance of payments deficit, which is the second thing. The third thing is that GDP, in our opinion, can increase, starting from 2010, not by one or one and a half per cent, but an amount exceeding this indicator. This is because a number of markets, both resource ones and non-resource ones, have not yet attained their maturity. This means that they have prospects for future growth. From the point of view of the funds accessibility, all will depend on the sources of funding of companies, working in various sectors of the economy. External markets will most likely open not earlier than the mid of the next year, or in spring at the best. Thus, the next year must become a turning point, as the market must turn to an upward trend.


Interview with Pavel Beklemishev, General Director of JSC Joint Venture THE BELKAMIT GROUP on the topic concerning the crisis

Global economic collapse in the thirties of the last century was given the name of Great Depression. What short definition would you give to the current crisis? What challenge did it give to your company?

I would call the current crisis a “bubble crisis, or mania of profit”: Everyone wants easy money with the minimum effort. In developed countries, a share of companies producing real products, whether it is foodstuff, industrial products, household goods, or agricultural produce, i.e. all of what is produced by mankind, or also cars and mechanisms, is extremely low, compared to the share of those, which resell or provide various (information, financial, etc.) services, manage or distribute. Of course, this is not an appeal to refuse middlemen services, as full refusal from the existing sales and distribution structure would not be the “light at the end of tunnel”. The considerable limitation of middlemen services and stimulation of domestic producers will result in the necessity to develop local production, including the machine-building sector of the republic. Just go and ask competent people what share of the purchased process equipment manufactured by domestic producers is.

What is your company’s strategy for battling the current crisis? What efforts is your company making to eliminate the crisis?

The recipe is as such: To work, find new customers, convince them that our domestic produce is as good as the produce marketed worldwide, and prove this in practice. There are positive examples, such as Tengizchevroil, Karachaganak, Kazzinc, and others, but this is enough only for keeping the enterprise afloat. However, despite this, the enterprise little by little purchases new equipment in it’s aspire to minimize the human factor on the production processes. So, we have to get out of these difficulties, since the customers have tough requirements – the compliance with international standards. As a result, we purchase metal and completing parts, from the best, in Russia or abroad. So, you can make your own conclusion: What then the deadlines of manufacturing must be, the price, etc.

Your forecast of the crisis scenario: When will it end? What changes in the system and new market trends can be expected after its ending?

is not more than 2%. In the Soviet time, After dissolution of the former Soviet Union, the economy of Kazakhstan was in crisis – all established connections were lost. The machine-building enterprises, the share of which in the Kazakh SSR’s GDP structure was 15%, turned out to be in a vacuum, both in the raw material delivery terms and products marketing terms. We are speaking on only those, which, despite the situation in the post-Soviet area, managed to retain the existing connections. To date, the industrial enterprises share in the GDP structure of sovereign KazakhstanKazakhstan produced 22,000 tonnes of crude oil. Of this amount, the republic processed some 19,000 tonnes. At present, Kazakhstan extracts 70,000 tonnes of oil and processes only 12,000 tonnes. In the agricultural sector, the only export product is wheat. The greater part of foodstuff is exported from the CIS and abroad. Our neighbors, Kyrgyzstan and China, supply us with the production of light industry, household goods, and essential goods. In the given circumstances, getting out of the crisis, in which the economy of the country has been for the last 15 years, is possible only by making system changes in the said sectors of the economy. The economies of countries, oriented only to export of raw material, such as Kazakhstan, or high-tech machinery and equipment, such as Japan, will be relatively stable, while the prices for energy carriers stay high.


Interview with Mikhail Lomtadze, CEO of JSC Kaspi Bank on the topic concerning the crisis

Global economic collapse in the thirties of the last century was given the name of Great Depression. What short definition would you give to the current crisis? What challenge did it give to your company?

In my opinion, the crisis creates new opportunities. The global shifts in business approach and change of priorities, derived from the influence of the world economic crisis, forced companies to radically change their management systems and avoid the growth of production at any price. Today’s new accent is long-term planning and stability. This is exactly what kaspi bank has been doing in the last two years. While the competitors were rapidly growing, the international team of bank’s investors strengthened the foundation in order to grow qualitatively. The crisis gave us many opportunities: For instance, today, our bank is the only active player in the consumer loan segment. Throughout the last year we did not cut salaries and did not fire employees because of the crisis. We also actively invested in the promotion of our products, informing our clients about our advantages. We gradually move forward and our clients have an opportunity to independently estimate our development. Our task is not to make the sales volume grow through at any cost, but to build a long-term and stable business that will constantly improve its operations.

What is your company’s strategy for battling the current crisis? What efforts is your company making to eliminate the crisis?

In 2009 we continue doing what we planned and spoke about last year. The point is that we very actively develop our business and extend about 20 thousand loans every month and we are planning to raise this indicator to 40 thousand. I believe that on that figure our bank is the biggest player in the segment of consumer loans. We launched "Cash Credit", which are focused on clients with stable income, as well as a credit card that is distinguished by attractive conditions. Obviously, money is in demand by population. The main thing is to offer them a way where people can access money with the minimum documents. Therefore, our goal for 2009 is the development of these products.

Your forecast of the crisis scenario: When will it end? What changes in the system and new market trends can be expected after its ending?

Today, forecasting at global level is a thankless job. One and a half years ago it was possible to build plans for five years ahead. Following the current crisis, the strongest will survive and go ahead while the weakest will sink. You know, the economic situation is changing, and this is the most interesting period of history we are living in. Previous generations experienced much tougher times. Today, there is a revision of the world economy and basic values of doing business, since we have never faced such global and mass crisis before. There were large local recessions, but this is the first time when a crisis hit the entire world. There will be many scientific studies soon. For example, Harvard school of business is already working on the cases and the professors "have really got a job". I am affirmed that Kazakhstan will become one of the richest countries. If you estimate the amount of oil, available in the republic, per capita you will see that every person is quite wealthy. Speaking of the current situation, it is clear that things are complicated everywhere. Therefore, the only thing I can say is that measures, taken in Kazakhstan, are different from those in many other countries. The situation here is controlled way better. Today, the state must develop the infrastructure projects, i.e. create jobs through the investment of state budget funds. These will give two advantages: On the one hand, the governmental funds will be effectively employed and invested in long-term development, since we need the infrastructure anyway. We will need that in order to develop the republic when the global economy recovers. The second advantage is that there will be real jobs, created for population.



Interview with Mandiyev Erzhan, President of JSC ASIA AUTO on the topic concerning the crisis

Global economic collapse in the thirties of the last century was given the name of Great Depression. What short definition would you give to the current crisis? What challenge did it give to your company?

It is possible to give an objective estimate to the current crisis only after it is over. So far it is clear that the deficit of mutual trust in the financial markets turned into an impetuous loss of consumer appetite. From the viewpoint of the origins and the nature of what is going on, we are facing "the crisis of corporate egoism". This concept was born nearly half a century ago as the symbol of effective business. Time shows that the concept of "profit at any cost" led the world economy to the deadlock. I believe many would remain content if it was written in the history as "three-year crisis". However, I am afraid that we would not be able to make it within this deadline and will witness a few more false conclusions of today’s recession.

What is your company’s strategy for battling the current crisis? What efforts is your company making to eliminate the crisis?

In our industry in the short term we can talk only about minimization of impacts. The term "struggle" is appropriate for the long distance of 3-5 years, where it is possible to seriously change the structure of the family or cut the production costs. As in any other case of dropping revenues, we have faced the necessity to cut unnecessary costs, not related to ensuring the quality of the production processes. At the same time, despite the recession the plant is expanding the product line. The development vector motivates us to sacrifice current profitability to the benefit of the period, out of crisis. This way or another, we feel more confident than other Kazakhstani auto market players, essentially because we are the producers and, therefore, have a higher potential for price maneuvering. Moreover, the range of brands, we are representing, is quite diversified while by the end of crisis period it will be additionally expanded.

Your forecast of the crisis scenario: When will it end? What changes in the system and new market trends can be expected after its ending?

I am afraid that, today, it would be a quackery to attempt to forecast the end of crisis period. Nonetheless, already at this point the strong and weak sides of our market players are evident. The operations of the young and dynamically growing market do not require professionalism. Nonetheless, we do not have such an explosive market any more. It became clear that high growth rates produced the excess of "noted" professionals. Their disappearance will go along with the reinforcement of the strongest players. The significant factor will be access to the sources of financing – the affiliation to large financial and industrial groups is the ruff. Nevertheless, the extended crisis will force even those, named as market leaders, to lose both status and assets. The availability of capital does not compensate the costs of management, especially under a slowing market.


Interview with Askar Amirkhanov, CEO of JSC PPF AMANAT KAZAKHSTAN on the topic concerning the crisis

Global economic collapse in the thirties of the last century was given the name of Great Depression. What short definition would you give to the current crisis? What challenge did it give to your company?

I would name this crisis as "planned" because it was not totally unpredictable for us; rather, its depth became a real surprise. At the same time, given the crisis and stagnation of the investment market of pension funds we have faced the necessity to review the efficiency of investment portfolio management.

What is your company’s strategy for battling the current crisis? What efforts is your company making to eliminate the crisis?

We follow the intensive development direction that assumes the achievement of set goals without increase of attracted human and financial resources. This also includes a higher quality of management and level of performance discipline, and strict control over budget administration. One of the most important phases of implementation of selected strategy is the launch of the Euphrates electronic documents circulation system. Its successful accomplishment will allow us intensifying the performance control, increasing the speed of information processing and expediting the full cycle of the business process in addition to saving on expenses, related to paper-based records management.

Your forecast of the crisis scenario: When will it end? What changes in the system and new market trends can be expected after its ending?

Today, even prominent experts have various opinions on the end of crisis period – from V form to W or L. So far this is still unclear which of these types we are facing. Moreover, the methods and speed of overcoming the crisis will be individual for each country. Overall, the development of the world economy will shift towards strengthening the control over financial institutes.

KAZAKHSTAN International Business Magazine №2, 2009


Table of contents
Macroeconomy. May 2009  SigmaBleyzer Company 
· 2016 №1  №2  №3  №4  №5
· 2015 №1  №2  №3  №4  №5  №6
· 2014 №1  №2  №3  №4  №5  №6
· 2013 №1  №2  №3  №4  №5  №6
· 2012 №1  №2  №3  №4  №5  №6
· 2011 №1  №2  №3  №4  №5  №6
· 2010 №1  №2  №3  №4  №5/6
· 2009 №1  №2  №3  №4  №5  №6
· 2008 №1  №2  №3  №4  №5/6
· 2007 №1  №2  №3  №4
· 2006 №1  №2  №3  №4
· 2005 №1  №2  №3  №4
· 2004 №1  №2  №3  №4
· 2003 №1  №2  №3  №4
· 2002 №1  №2  №3  №4
· 2001 №1/2  №3/4  №5/6
· 2000 №1  №2  №3





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