People’s IPOs Require Efforts to Improve Small Investors’ Financial Skills
First trading can take place in autumn, special education programmes are relevant
EBRD Marks 20th Anniversary, Committed to Work in Region, Kazakhstan
Achievements, plans reviewed ahead of EBRD Annual Meeting in Astana in May
Industrialisation Programme is Set to Benefit Regions of Kazakhstan
Gov’t must select best projects from an increasing number of applications
Cultural Events in Astana, Almaty Launch Year of Korea in Kazakhstan
Two countries cooperate actively in political, economic, cultural spheres
People’s IPOs Require Efforts to Improve Small Investors’ Financial Skills
The selection of national companies whose stock will be partially listed under the people’s IPO programme will be announced in the autumn of 2011, Chairman of the Samruk-Kazyna National Welfare Fund Timur Kulibayev said on April 28.
“We have selected consultants for the IPOs. These are the largest international banks, and the largest auditing firm. The preparation for the IPO is being carried out. I hope this autumn we will provide a more detailed information on which companies will go public, what will be the terms of issuing and when,” Kulibayev said.
To illustrate work being done in this regard, on May 5 Prime Minister Karim Massimov announced the names of the consulting companies for the IPO that have been approved by the Samruk Kazyna’s Board of Directors. These will include Citibank and UBS Bank as international investment banks, Visor Capital and KKB Securities as local investment banks, PricewaterhouseCoopers as an international company of the big four consultancies, Cleary Gottlieb Steen and Hamilton together with GRATA as law firms, and Merlin as a public relations company.
It is expected that the initial public offerings (IPOs) involvingKazakhstan’s citizens, better known as “People’s IPO” will contribute to facilitating the dynamics of the domestic stock market. Among a few obstacles, however, expert cite financial illiteracy of the large groups of population in Kazakhstan.
Considering the engagement of a population in a stock market, the first example to be taken, according to the article published in Expert Kazakhstan magazine in late April, is usually the USA, where population accounts for 55 percent of all investors. However, what should be noted is that there are non-professional investors who often make wrong decisions and lose money instead of earning.
President Nazarbayev first announced the initiative to carry out IPOs of several national companies of Kazakhstan at the domestic stock market in February 2011.
The exact list of companies has not been defined yet, but the head of state named a number of joint-stock companies in his speech, including Kazakhstan Electricity Grid Operating Company (KEGOC), Samruk-Energo, KazPost, KazMunayGas, Kazakhstan Temir Zholy (Railways), KazZync, Eurasian Natural Resources Corporation (ENRC), Kazakhmys, and Kazatomprom.
According to Nazarbayev, the first shares to go onto the market could be those of JSC KazMunaiGas Exploration and Production (KMG EP).
“The work will undergo several stages. KazMunaiGas Exploration Production is to put up five percent of its shares worth US$ 500 million (KZT 145.5 = US$ 1). One person may purchase no more than 50 shares. Sales will be carried out via KazPost offices. The unsold shares are to be put up for sale to pension funds,” the President said at the meeting with journalists of the nation’s leading mediaon February 28.
According to Head of Industry Analyses of BTA Securities Nurlan Rahimbayev, the success of the People’s IPO depends on the effectiveness of community outreach and media coverage. He believes people must understand what the IPO is, why they should participate in it, what national companies’ activities are, whose stocks they will invest in, what the mechanisms of acquisition and sale of shares are, and what gains can be extracted from the stock ownership.
Director of Asset Management Department ofTroika Dialog Kazakhstan Eugene Popov believes that one of the main tasks of the People’s IPO is to show everyone that the stock market in general and stocks in particular provide an opportunity to earn additional income.
Associate Director of Governance Services of Standard and Poor’s Oleg Shvyrkov, in his turn, believes that it is very important to understand that investing in the stock market is not for everyone, because many may not realise the risks associated with investments in stocks, as well as the principles of managing such risks.
“They (IPOs) may be of interest to private investors who, first of all, are prepared to invest for a long period of time and, secondly, use a systematic approach by spreading investments among a significant number of diverse issuers, the principle of diversification,” Shvyrkov commented.
To tackle the challenge of low financial skills among the population, the authorities regulating Regional Financial Centre of Almaty City have launched a large programme involving special courses, seminars, and a website to teach those willing to learn the basic skills of investment and management of personal incomes, As their representatives explained to ExpertKazakhstan, around 360,000 people have been trained in educational centres over the past three years. According to their estimates, there are at least 50,000 people who can be considered potential investors in securities of domestic companies.
“Promotion of the People’s IPO in the first stage will be quite a challenge. Because it is a more complex tool, and it employs more complicated laws,” Popov said. “If the practice of the people’s IPO is successful, transparent and public, including good publicity and educational work, I think we can increase the number of active stock market participants,” the expert concluded.
EBRD Marks 20th Anniversary, Committed to Work in Region, Kazakhstan
This year one of the world’s largest financial organisations, the European Bank for Reconstruction and Development (EBRD) celebrates its 20th anniversary. The Bank was established at a time when a number of states turned to democracy and open economy as the Soviet Union collapsed. Since its inception, the main task of the EBRD has been to promote a market economy in countries in transition.
In two decades, the Bank has provided invaluable support to post-Communist countries, Kazakhstan being one of them.
The EBRD is Kazakhstan’s largest investor outside of its oil and gas sector. In the Central Asian country, the Bank works to facilitate economic diversification by supporting the development of such various sectors as corporate, financial, power and energy sectors, while emphasising energy efficiency, as well as infrastructure.
As of January 2011, the EBRD has signed a total of 140 projects worth EUR 10,345.7 million with net business volume worth EUR 3,941.5 million. Kazakhstan is thereby the fifth largest field of Bank’s operations, surpassed only by Russia, Poland, Romania, and Ukraine.
Since 1992, the EBRD regularly organises Annual Meetings in its countries of operations, bringing together the Bank’s Board of Governors in order to assess topical political, economic, and social issues in the region. The next such annual meeting will take place in Astana on May 20-22, 2011.
Alongside the Annual Meeting, the host country and the Bank will organise a Business Forum entitled “Supporting Markets – Asia Meets Europe.” A series of high-level panel discussions on key topics such as fostering entrepreneurship, role of women in business, food security, and other, as well as country presentations and networking and social events are planned for the Annual Meeting.
In association with the EBRD 2011 Annual Meeting, the Host Country Investment Forum will take place on May 19. The Investment Forum will provide the participants with an opportunity to review Kazakhstan’s investment climate and potential, and will present its exciting investment opportunities.
In addition, Kazakhstan and the EBRD will provide a forum for civil society organisations under a Civil Society Programme. The Programme will enable social activists to engage directly with EBRD staff and look at how the Bank’s policies, strategies, and projects are developed. Panellists from the EBRD region, together with EBRD representatives, will discuss the role of civil society in building market economy and developing democratic policies in addition to other topics. In general, the Civil Society Programme will give an opportunity to review the way transition to market economies and financial crisis have affected people’s lives.
On April 15, the EBRD and the Mangystau region administration (west Kazakhstan) signed a Mandate Agreement to develop a project, worth KZT 2.2 billion, on the modernisation of the osmotic plant in Aktau. The joint project will not only ensure better drinking water supply for the region’s population, but also reduce tariffs on consumption and form prerequisites for attracting investment and new technologies to the city.
On January 26, 2010, the Bank’s Board of Directors approved a new strategy for Kazakhstan, which will continue to work towards the development of domestic capital markets, agribusiness, general industries, sustainable energy and infrastructure, natural resources, and municipal projects.
In the financial sector, at present, the Bank continues to support its existing partner banks. In addition, it started to co-operate with the National Bank of Kazakhstan to assist with building domestic capital markets.
In infrastructure, the EBRD remains actively engaged with the railway sector. The Bank continues to work with the Kazakhstan Temir Zholy national railway company to help it with reforming and restructuring. Also, the Bank provides technical assistance to the Ministry of Transport and Communications.
The new strategy’s secondary priority areas include telecommunication, informatics, and media, property and tourism, as well as maritime and aviation segments of the transportation sector.
Over the past few years, the EBRD has used various opportunities for cooperation with Kazakhstan’s Samruk-Kazyna National Welfare Fund at the individual project level, including the finance, corporate, transport, and power sectors. The Bank also actively cooperates and coordinates with other international financial institutions active in the country, such as the World Bank, the International Finance Corporation, the Asian Development Bank, the Islamic Development Bank, and others.
The EBRD is owned by 61 countries and two international organisations, the European Union and the European Investment Bank. At present, the EBRD is implementing projects in different sectors of economy in 29 countries of Central and Eastern Europe, the Commonwealth of Independent States (CIS), and Central Asia.
As its main activities, the EBRD considers the participation in share capital of private sector companies and business lending, including in local currencies. From the beginning, the Bank has supported industries such as infrastructure, transportation, housing and communal services, banking sector, as well as energy efficiency projects.
In 20 years, the Bank invested around EUR 60 billion in the modernisation of its recipients’ economies and also helped attract funding from other parties worth around EUR 180 billion.
This year the EBRD started its new five-year business strategy, under which it plans to increase its share capital from EUR 20 billion to EUR 30 billion.
Industrialisation Programme is Set to Benefit Regions of Kazakhstan
More than 70 projects worth KZT 715 billion (KZT 145.6 = 1 USD) are to be launched in 2011 within the State Programme for Accelerated Industrial and Innovative Development (PAIID). The final list, however, could still expand.
According to Tsentr Azii (Centre of Asia) magazine, the Ministry of Industry and New Technologies (MINT) of Kazakhstan by the end of the Q1 2011 has received over 300 applications from various companies for their projects to be considered for the PAIID. Notably, the vast majority of these projects come from oblasts (separate regions) of the country.
The potential of the country’s industrial landscape makes it possible for some areas, which used to be considered economically unfavourable, to revive. In the 1990s, a lot of skilled workers left the places for larger cities, but now the reversed process can be observed where many specialists travel back to their homes to build there future there, the magazine reports.
The approval procedure for the applicants consists of two main stages. Firstly, the Regional Coordinating Council of the PAIID would choose and approve a project. Secondly, a thorough analysis by a special commission of the Ministry of Industry and New Tehcnologies (MINT) is carried out. It evaluates the projects not only from the standpoint of the region’s economy but also with regard to the location of the new business in the overall nationwide structure of the modernised industry, prospects in terms of exports, and the demand for products. As a result, only applicants which meet all the modern standards of production, and products in demand both on domestic and foreign markets, get the final approval.
“The President has identified four directions to modernise the industry,” Deputy Chairman of the Industrial Commission of MINT Daulet Bekbergen said. “The State Programme “Performance 2020”, implemented by the agency, includes all the instruments of the state to ensure a rapid modernisation and creation of new manufacturing facilities in each of these directions. The facilities have to meet highest modern standards in terms of productivity and preservation technologies,” he continued.
The programme of modernisation is based on long-term analysis and understanding which industries are more promising for every single region, which products are better developed in that region, and what intellectual and workforce potentials are there. Those meeting the criteria will also stimulate the service industry and attract skilled labour.
In accordance with the state planning, in 2010 an individual five-year long programme of growth was developed in every region, according to Tsentr Azii.
“The state has to solve a set of the most pressing regional problems,” Doctor of Economic Sciences and President of Institute of Economic Research Zhamilya Bopieva commented. “It is the concentration of production and labour in the so-called “growth points”, economically promising and favourable areas. (...) One of the problems is the formation of the so-called “axis” system which would allow to internally connect the labour markets of the country, and to ensure the removal of infrastructural constraints in developing regions. In addition, the regional policy of Kazakhstan should promote the mobility of labour, it is important for the industrialisation of the economy, and forming of the best possible structure for positioning of the social objects,” Bopieva said.
The three main tasks of the PAIID are the radical modernisation of industrial assets, economic diversification, and creating of a modern infrastructure capable of supporting the dynamic growth of the economy. Currently, the implementation of these tasks is being supported with resources provided by the Samruk-Kazyna National Welfare Fund, along with numerous private and portfolio investors. As the programme expands, the share of public investments will be reduced, and private investments should grow, which is linked to expensive infrastructure projects with a long-term payback periods.
According to Vice President of the Kazakh Chamber of Commerce and Industry Bekzat Kaliyev, the increasing number of projects under PAIID may result in the problem of underfunding, and for this reason a strict selection of projects and thorough analysis is essential.
“At the start of the Map of Industrialisation (in 2010), there were 237 projects, but this year a number of new applications have been received by the Ministry of Industry and New Technologies. Currently, there are 294 projects, and the number will grow every year, while the update of the Map of Industrialisation will take place at least twice a year,” Kaliyev explained.
“We’ve had situations when several similar plants producing same products were located in the same region. One area could locate either three plants for the extraction of gravel, or three plants for production of bricks. Yes, competition is needed. However, it is a post-crisis period now, and the construction boom is over in Kazakhstan. If today we support all that, then tomorrow we will face the problem of overstocking,” he added.
In conclusion, one must note, that the government sponsoring a particular project is surely responsible for it, however, what happens to the project tomorrow depends not only on public investment but also on the professionalism of the developers, which is certainly another greatly important aspect which is being taken into account, the Tsentr Azii magazine warned.
Cultural Events in Astana, Almaty Launch Year of Korea in Kazakhstan
Kazakhstan and Republic of Korea have developed a diversified relationship ever since the establishment of diplomatic ties in 1992. Year after year, the countries strengthen political and economic cooperation and promote cross-cultural interaction. To bring the two peoples even closer 2011 is dedicated as the Year of Korea in Kazakhstan.
The opening ceremony of the Year of South Korea in Kazakhstan took place in Astana on May 5. A concert programme entitled “Korean Wave” was held in the “Kazakhstan” concert hall and gathered more than 3,500 people.
Vice-Minister of Culture, Sport and Tourism of South Korea Mo Chul-min and Vice-Minister of Culture of Kazakhstan Askar Buribayev officially opened the event.
“We are pleased to perform today in this beautiful concert hall in the centre of the new capital,” Mo Chul-min said. “The Year of Kazakhstan in Korea allowed us to get to know your country, its traditions, and culture better. Today’s concert is only the prelude to a whole series of events designed to tell you about our country.”
“We are a part of an important event for the development of the entire spectrum of inter-state relations between Seoul and Astana,” Askar Buribayev said in his address. “Kazakhstan people well know Korean culture thanks to the State republican Korean theatre of musical comedy and cultural centres of the Korean Diaspora operating in the country. Korean TV series are watched with great interest,” he said.
Popular South Korean actors took part in the opening concert, including the leading actor of the Korean TV series “Jumong – Prince of the Legend” Song Il Gook. Both the drama and the actor are favourite among many in Kazakhstan. The appearance of the actor on the stage was accompanied by loud ovation, which showed how popular he is.
“I am grateful to people of Kazakhstan for the warm welcome,” Song Il Gook said. “I like your great country. In Almaty, I was fascinated by the white mountains, while Astana surprised me with its spaciousness and sun.”
The traditional Korean Chongdong Theatre and music bands JQT and T-MAX, all very well-known among Kazakhstan public, also performed that day.
Kazakhstan is planning to host a series of cultural events within the framework of the Year of South Korea. Thus, on May 6-9, a festival of Korean cinema and a photography exhibition were held in the Khan Shatyr entertainment centre in Astana. During several days, Astana citizens were able to enjoy four new films, as well as pictures on the development of tourism in the Republic of Korea.
The related events took place in Almaty as well. Within the “Korea Week,” which has begun this week, the South Korean filmmakers are demonstrating new TV series and movies, some of them in 3D format, to local residents. The emphasis is placed on historical dramas. A concert “Beautiful Soul,” an exhibition of Korean advanced technologies, and more events are planned for Almaty.
Korean film festivals will be held in several other cities of Kazakhstan as well. More Korean events will take place across the country this year, the Ministry of Culture of Kazakhstan shared in a press release on May 6.
The decision to hold the Year of South Korea in Kazakhstan in 2011 was a result of the state visit of the President of the Republic of Korea Lee Myung-bak to Kazakhstan in May 2009. The two countries then agreed to hold first the Year of Kazakhstan in South Korea in 2010. The opening ceremony of the latter took place on April 21 last year during the official visit of Kazakhstan’s President Nursultan Nazarbayev to South Korea. In connection with this, the Ministry of Culture of Kazakhstan organised and held various events in the partner state throughout 2010.
The cooperation between Kazakhstan and South Korea is bolstered by mutually beneficial interests in economy, trade, and security, and supported by the presence in Kazakhstan of a sizable and very active Korean Diaspora. Today, Kazakhstan is home to more than 100,000 ethnic Koreans, many of whom occupy visible positions in business, government, culture, and sports.
The two states maintain strong political cooperation by regularly arranging visits and meetings at a high level. As a result of Lee Myung-bak’s official visit to Kazakhstan, a Joint Declaration of Kazakhstan and South Korea was adopted, reflecting the transition of their relations to the level of strategic partnership. During the visit, the sides also signed a package of documents, including an Action Plan to deepen cooperation. The countries have established effective inter-parliamentary and inter-ministerial ties as well.
Numbers on bilateral trade reflect the growing strength of trade and economic cooperation between the two countries. In 2009, the trade turnover amounted to US $ 505.6 million, while in the period of January to December 2010 it grew to US $ 760.1 million.
South Korea’s exports staples to Kazakhstan include automobiles, electronic goods, equipment, and other manufactured products, while Kazakh exports to South Korea primarily consist of uranium, ferro alloys, steel, iron, gold, and copper.
An Inter-governmental commission on trade-economic and scientific-technical cooperation facilitates the ties between the two countries. The fifth. most recent, meeting of the Commission took place in March 2010 in Astana.
Kazakhstan and South Korea are working on cooperation in the energy field. In 2002, the sides established the Kazakhstan-Korean Committee for cooperation on energy and mineral resources. The sixth meeting of the Committee was held in Astana on 12 October 2010.
Currently, there are more than 300 joint enterprises with the participation of the Korean capital operating in Kazakhstan.
Also in the News:
OnMay 5, President Nazarbayev appointed Amangeldy Zhumabayev as a new Deputy Minister of Foreign Affairs. He previously served as Kazakhstan’s Ambassador Extraordinary and Plenipotentiary to Ukraine and Moldova.
The Government of Kazakhstan will allocate KZT 6.7 billion (KZT 146 = US$ 1) to assist the post-flood rehabilitation of the West Kazakhstan Oblast, Prime Minister Karim Massimov announced in his Twitter blog on May 10. According to Massimov, KZT 3.9 billion of the above sum have been provided by the National Company KazMunayGas, and KZT 1.1 billion by the National Railways Company Kazakhstan Temir Zholy. The government of Kazakhstan has earlier allocated KZT 870 million to assist victims and aid recovery of the region, and more than KZT 460 million have been transferred to assist victims from organisations and individuals of the country.
The Ministry of Economic Development and Trade forecasts Kazakhstan’s GDP growth in 2011 at the level of seven percent, Minister Kairat Kelimbetov announced on May 10 at a government meeting in Astana. According to the Minister, in 2012 the GDP growth will make 6.9 percent, in 2013 - 6.5 percent, in 2014 - 7.1 percent, and in 2015 - 7.4 percent. The volume of gross agricultural production in 2011-2015 should grow by an average of 4-5 percent annually, while the growth rate of industrial production in general is expected to increase from 6 percent in 2011 to 9.1 percent by 2015.
In order to facilitate the process of Kazakhstan’s businesses entering the EU markets and to help businessmen and government officials to achieve the expansion and diversification of their exports, Head of the Trade Section at the EU Delegation to Kazakhstan Mushtaq Hussain and Ines Escudero from the European Commission’s Trade Department presented the Export Helpdesk at the Astana Economic Forum which was held on 3-4 May. According to Hussain, the Export Helpdesk (www.exporthelp.europa.eu) is the “one-stop-shop” for Kazakhstan’s exporters to obtain the necessary information to access the European markets. It is a useful internet-tool that allows searching specific information country-by-country and product-by-product, as well as find out which requirements apply to a particular product, which forms are needed to be filled in, and how much duties have to be paid.
A list of Kazakhstan’s most expensive brands KazBrend-2011, which includes 50 domestic producers of goods and services, has been published in the country, Tsentr Azii magazine reported referring to MPP Consulting. The selection procedure includes an assessment of financial elements of companies’ activities, takes into account the public market factors in the brand development, as well as possible threats and prospects of industry development, and other issues. The top ranked brand is Karagandinskoye beer which is estimated at US$ 95 million, second and third are BTA Bank and confectionary factory Rakhat which are worth US$ 90 million and US$83 million respectively. In addition, the top ten includes three mobile operators, two banks, and food producers.
Almaty has tabled bids to host the 2017 winter Universiade, sportbusiness.com cited the International University Sports Federation (FISU) on May 9. Kazakhstan’s largest city will compete with Trentino, Italy.
Astana Arlans (Wolfs) of Kazakhstan won silver at the pioneering World Series of Boxing, a major international competition among professional boxing clubs, after losing to Paris United of France 4:6 in the two-leg final in Guizhou, China, on May 7-8.
ThingstoWatch:
Foreign Ministers Council of the Shanghai Cooperation Organization will take place in Almaty on May 14.
Minister of Foreign Affairs of Russia Sergey Lavrov will pay an official visit to Kazakhstan on May 13-14. During the visit, meetings with President Nursultan Nazarbayev and Foreign Minister Yerzhan Kazykhanov are scheduled. A wide range of issues including the current state and prospects of relations and cooperation in various sphere is to be discussed, and a Joint Communiqué is planned to be signed after the talks of the two foreign ministers.
NATO Secretary General’s Special Representative for the Caucasus and Central Asia James Appathurai will pay an official visit to Astana on May 12-14. Cooperation under the Individual Partnership Action Plan and the situation in Afghanistan and Central Asia are to be discussed. During the trip, Appathurai is expected to hold meetings with senior officials in the Prime Minister’s office, ministries of foreign affairs and defence, and other government agencies.
On May 11-13, New Delhi will host the Days of Kazakhstan’s Culture. The programme includes exhibitions of historical and modern art, and concerts of folklore and classical music.
With the assistance of the Embassy of Kazakhstan in England, the Zhurgenov Kazakh National Academy of Arts for the first time will organise a demonstration of student diploma projects at the London’s Arts Theatre. A performance of William Shakespeare’s Macbeth will be held at the Greenwood Theatre, London, at 18.00 on May 14.
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