Head of the German Economy Representative Office for Central Asia Yorg Hetch answers questions of The Kazakhstan magazine.
Mr. Hetch, how would you explain the increasing interest of German companies to Kazakhstan?
Among the major reasons I would recall the following ones: Your country is richly endowed with common minerals, and the high prices of raw materials in the recent past greatly added to the country’s well-being. This is also the moderate economic policy, political stability, and persistent urge to introduce democratic principles. Kazakhstan adheres to the equitable policy in its relations with the West and the East; here, there are no religious or other extremism. Also the republic is the transport corridor between China and Europe.
All this has a positive effect on the economic relations between our countries, which are at a good level today. Compared to the other Central Asian countries, here there are the largest number of German companies operating in Kazakhstan. There are about 200 German representations and branches, about 400 legal entities, about 600 companies presented by local partners, and about 1,500 firms in Germany itself, which maintain continuous trade relations with Kazakhstani companies.
In the overall trade turnover of FRG with the five Central Asian countries, the share of Kazakhstan is 90%. The volume of trade in the recent years was constantly increasing, although in the last year we observed a certain decline, caused by the world’s economic recession. In particular, the foreign trade turnover in 2008 was 6.1 billion Euros, while in late November of 2009 it was only 3.3 billion Euros. Mainly, this decline resulted from reduced German exports to Kazakhstan. For Germany as the exporting nation No.1 this was quite painful.
Nevertheless, despite today’s crisis and reduction in trade turnover, the interest of German companies to Kazakhstan is not reducing. The number of Kazakhstan-based German companies remains stable. There are almost no firms which left the country in the last year. This can be related to the commonly known fact of faithfulness of German companies: if one day they decide to enter a foreign market, they will stay there even in hard times. Also the German business realizes clearly those opportunities which are available in Kazakhstan.
We see great chances in the aspiration of the Kazakhstan government to pursue the economy diversification policy in order to avoid the raw material trap, which had led Kazakhstan to the second wave of crisis in the last year. To German companies, the interesting directions here will be the development of the chemical industry and pharmacy, power supply sector, metallurgy, the construction sector, environmental protection technologies, agriculture and agricultural products processing etc.
Can Kazakhstan rely on German companies to invest in the production facilities in the given sectors?
In the first place, of course, the Kazakhstan side is expecting an investment in the given sectors in the form of FDI. This is clear, since every country– and Germany is not the exception – seeks foreign investments. German investors are already available in Kazakhstan. I would like to recall some of the German investors (this is not the complete list of those known). They are Metro, HeidelbergCement, Knauf, ThyssenKrupp, and others.
Along with that, it is not always easy and simple to convince German companies to make direct investments. There are a number of reasons for that. One of them is the structure and size of the German companies that enter the Kazakhstan market. If we study this subject more closely, it will become evident that, as a rule, these are the representatives of small- and medium-scale business in Germany. These are the firms, which, in the first place, have an interest in selling their goods and services in Kazakhstan and which have no capability for large investments in Kazakhstan.
On the other side, experience shows that if German companies successfully operate for a long time in Kazakhstan, they have to think about investments in production in order to reduce the costs.