The Foreign Investors Council is a model of co-operation between young democracy and transnational companies
Askar Yelemessov, President DB Se?urities (Kazakhstan), David Skeels, Country manager BG Kazakhstan
The country really needs major efforts for re-building its manufacturing sector, especially in food and beverages, services, tourism, infrastructure and transportation. An Economy heavily relying on one sector is like a stool with one leg, and everyone recognizes this. As a group of foreign investors we really would like to see booming production volumes in non-commodity related sectors of the economy, as well as local investment.
The Foreign Investors Council under the President of the Republic of Kazakhstan (FIC) was established in 1998 with the EBRD and President Nazarbaev as main sponsors of the idea. The major goal was to support Kazakh reforms with advice from top executives of companies – selected from the largest and most responsible investors in the country.
Meetings are arranged regularly (at least once a year) and are co-chaired by President Nazarbaev and the President of the EBRD with high-level executives of major investors and local country managers attending. Important issues related to investment climate of the country are discussed in those closed meetings in a very sincere and productive way.
On a day-to-day basis four working groups: Taxation, Legal, Operations and Image Enhancement are trying to develop recommendations for these regular sessions and follow up on decisions made. As it obviously follows from the names of the groups, two of them handle very narrow range of issues; as for Image Enhancement and Operations groups; they largely pick up what does not fall under either of the above subjects.
In our understanding, the impact of activities of the FIC on the investment climate is far beyond resolving the problems that face investment community as a whole and brain-storming aimed at going about complex and sensitive situations. FIC is a model: model of co-operation between large, responsible multinationals and Kazakhstan’s government machine; between the country’s young democracy and established corporations with mature corporate cultures representing almost every major nation and industry in the world. People with various cultural and professional backgrounds learn from each other over friendly and sometimes heated discussions in the working group meetings. What we like about it is that disputed questions are of general character and never really involve commercial interests of a single corporation; there is some sort of taboo on raising concerns about anything if it is not of use to broad public.
In addition, having said that people learn from each other we really mean that expatriates learn from their Kazakhstani colleagues as much as the opposite. Visible progress is being made as a result, and there are few success stories that we perhaps can share with the readers.
First is the Official Gazette (Newspaper). For a number of years the foreign community has requested official publications from the Kazakhstani Government in English. The issue was raised in one of the meetings of the FIC, chaired by President Nazarbaev. The Image Enhancement working group has been mandated to co-ordinate the open bid process with assistance of various ministries and Government agencies of the Republic of Kazakhstan. It has been quite a challenge even to determine rules and conditions for competition, exacerbated by need to meet quite diverse requirements proposed by international and Kazakhstani members of the Image Enhancement Working Group (IEWG). Country managers of multinationals presented in the IEWG were primarily concerned with economic viability of the project, as the decision was made earlier to spend no money for this project from the budget. The Kazakhstani side was mostly concerned with the style and content, as well as with limiting the participants to companies registered in Kazakhstan. Perhaps this demonstrates well enough the difference in approaches that we had. Nevertheless, an amicable solution was found and the IEWG has formed a joint tender commission with the Ministry of Culture, Information and Public Accord. As a result of the tender held in the most transparent and open manner publishing house named BIKO has won the bid.
Now, for this story to be a real success story with so much needed for everyone’s “Happy end” the Government must sign the relevant contract with the bid winner and propose to the Parliament necessary changes to national regulations. We sincerely hope that this will take place as soon as possible.
Nevertheless, there is another example of how various agencies and ministries may co-operate when the issue involved cannot be resolved within the framework of just one of them. The Almaty International Airport for a long time was criticised by travellers who did not use a VIP service. FIC has strongly advised on major efforts to be undertaken in order to improve the first impression of the country that visitors get in the airport.
As a result of one year of writing letters, disputing various options and trying to find the most efficient way of interaction between numerous agencies, Ministry of Transport & Communication, Customs Committee under Ministry of State Revenue and couple of other Government bodies recently issued a joint Memorandum/Resolution (??????). Such a joint «??????» is a very rare thing, if not a precedent at all. We hope that it will be implemented by airport authorities and as local country managers involved in FIC activities we are quite proud of being those people who have contributed to this progress.
One may get wrong impression that everything is fine with FIC and whatever they touch turns into an immediate success story. There are plenty of complicated problems, which are too perplexing to handle alone for anyone, would it be the President, Government or large international investors. Complexities of such challenges make them directly related not only to investment climate, but also to politics, economics and even to national security.
We can give an example of an issue of the scope far exceeding in its importance both lack of information from the Government in English or bad service in airport. The Share of oil & gas sector in Kazakhstan’s economy is increasing quickly, measured both as contribution to GDP and proportion in export. Everyone is very pleased to hear of the major offshore discovery and successful completion of laying CPC pipes, nevertheless, we are worried about the lack of adequate rise in activity of local entrepreneurs, small and medium size businesses. Oil industry is very capital intensive; there are only a handful of directly jobs created per each million of dollars spent on drilling or extracting crude. The country really needs major efforts for re-building its manufacturing sector, especially in food and beverages, services, tourism, infrastructure and transportation. An economy heavily relying on one sector is like a stool with one leg, and everyone recognizes this. As a group of foreign investors we really would like to see booming production volumes in non-commodity related sectors of the economy, as well as local investment. There are more than few ways of reaching this objective, though real brainstorming is needed to come up with some solid recommendations. One of the obvious advises is that there should be very little or no difference in the way authorities treat investors of both local and foreign origin (of course outside already signed contracts). This is our private opinion; nevertheless we are quite positive about many of my colleagues from FIC to support us on that. Kazakhstan with its rich endowment of natural resources and talented well-educated workforce under strong political leadership has very good chances to face and overcome this challenge.
In conclusion, we would like to express our gratitude to the magazine for this excellent opportunity to address public.
The Foreign Investors Council is a consultative-advisory body under the President of the Republic of Kazakhstan.
The legal basis of the operation of the Council consists of the Constitution and the laws of the Republic of Kazakhstan, the legal acts of the President of the Republic of Kazakhstan, other normative acts of the Republic of Kazakhstan, and Regulations on the Foreign Investors Council.
The Council is established to pursue the following ends:
• to submit to the President of the Republic of Kazakhstan for his consideration proposals for the improvement of legislation concerning investment issues, proposals for issues concerning the implementation of large internationally-important investment programs and projects of the Republic of Kazakhstan;
• to prepare recommendations for the improvement of the investment climate, and also for the strategy to attract foreign investment to the economy of the Republic of Kazakhstan;
• to produce proposals for the integration of the country’s economy into global economic processes.
From Regulations on the Foreign Investors’ Councilchaired by the President of the Republic of Kazakhstan
Table of contents
The Foreign Investors Council is a model of co-operation between young democracy and transnational companies Askar Yelemessov
Kazakhstan Investment Policy: Time to Change Priorities Dulat Kuanyshev
The Association of Investors of Kazakhstan: Our might is in unity, and the path to success lies in our solidarity! Serik Tulbasov
Fundamentals of the Legal Regulation of Production Sharing Agreements in the Russian Federation Sergei Gudkov
Production Sharing Agreements: The Legal Aspects Aigoul Kenjebayeva