Kazakhstan : New Frontier for Investments · which only 2/3 are active traders. Scott Osheroff, of...

Singapore, July 9th, 2018 PR Squared Worldwide Eurasia Bridge www.prsquaredweb.com Finding Synergies. Bridging Gaps.

Kazakhstan:

NewFrontierforInvestmentsSingapore,July9,2018China’s One Belt One Road Initiative is making waves worldwide, changing economies and reshapingcountriesthatareinvolvedinthisgigantic“planofthecentury”.BeingaRussianlivingintheheartofAsiasincenumerousyears,IamparticularlyinterestedinandhavebecomeintrinsicallyinvolvedinEast-WestInvestorRelations,buildingbridgesbetweenthetworegionsineconomic,financialandculturalways.OneoftheaspectsofmyworkatPRSquaredWorldwideEurasiaBridgethisyearwasorganisationofmyfirstInvestorTourtoKazakhstan,whichIamgoingtospeaktoyouaboutindetailinthisarticle.MoreInvestorTours are to come, next one being in September 2018. You are welcome to contact me atyvz@prsquaredweb.comifyouwishtoparticipateortoknowmore!AmidstaverypositivevibethatsurroundsKazakhstanasitappearsmoreandmorefrequentlyinthenewswith its World Expo and democratic economic reforms as well as KASE being among the top 5 bestperformingmarketsyear-to-datein2018,aninternationalgroupofinvestorsvisitedAstanaandAlmatyandmet with prominent government bodies, exchanges, brokers, media and major business leaders ofKazakhstan.Forthemostpart,theintentionwasadiscoveryofthecountryanditsinvestmentclimateinlightofabigwaveofprivatisationandgovernment’sattempttodemocratisepublicaccesstotradingaswellasattractingforeigninvestors,FDI.

During the course of the tripwemetwithAstana InternationalFinancial Centre, AIFC, created based upon the Dubaimodel tofacilitateforeignaccessintoKazakhstan’sfinancialmarkets.Aftera lengthy discussion with Temirlan Mukhanbetzhanov, CFA,Managing Director, and Timur Onzhanov, Deputy Director ofAsset andWealthManagementDepartment atAIFC, a coupleof

participants are contemplating to open an office in Astana as a basis for their Central Asian businessactivities.Assuch,ChristopheNuma,DirectoratBunkerGold&Silver,subsidiaryofBunkerGroup,offeringinvestmentsinPreciousMetals,iscurrentlyindiscussionwithAIFCtoopenanewbranchinordertooffercloserservicetoitsRussian-speakingclients.

Singapore, July 9th, 2018 PR Squared Worldwide Eurasia Bridge www.prsquaredweb.com Finding Synergies. Bridging Gaps.

A few facts about AIFC: opened on January 1, 2018, it currently employs 150 people and is now goingthrough a pitch and acquisition stage. If a company is registered at AIFC, 100% foreign ownership ispossible.TheCentre focusesonWealthManagement,whichdrastically increased in the last10-15years,and Alternative Asset Management. One must recognise Government’s long-term commitment to AIFCestablished as a one-stop shop with visa-free entry and tax exemption until 2050. Licencing takesapproximately1monthafterthebasicdocumentshavebeensubmitted(businessplan,CVs,passportsofthekeypersonnel).Allproceduresaredescribedatwww.afsa.kz.

WhilemeetingwithKazakhstan’sSovereignWealthFundSamrukKazyna, Zhanbolat KAKISHEV, Director of Investor RelationsDepartment, mentioned the immense scope of upcomingprivatisation in the country: by 2021 government participationshouldbedecreasedby55%, from the current 70%ofGDP to afinal target of 15%. This yields a great opportunity for foreigninvestorstocomeinandparticipateinKazakhstan’sgrowthstory.

2018willseetheIPOofAirAstana(country’smajorairwayscompany)andKazakTelecom,Kazatomprom(theworld’sbiggesturaniumproducer)sometimein2019,andby2020another4bignationalcompanieswill go through the dual listing process. According to Dauren TASMAGAMBETOV, Head of AssetsPrivatisationandRestructuring,140companieshavealreadybeensuccessfullydivested,53morebigonesare for salenowoutof the listof902 total. SamrukKazyna isoneof theworld’smost transparentSWFsinspiredbyTemasek’smodel. Its10yearoutlook includes focusonprivatisationandrestructuring in theshortterm,co-investmentinthemidtermandinvestmentinthelongterm.

Marat Birimzhan, Deputy Chairman of KazakhInvest, InvestmentSupportandPromotionAgencyof Kazakhstan, underlined that Kazakhstan isactivelylookingnotonlyforFDIbutalsoforhumancapital, technology, expertise and developmentcapabilities. Therefore, in many cases, they are

searching a co-investor or a business partner on deals. The Agency helps the government with dealnegotiationandthereafterwithdealexecution.KazakhInvest’sKPIfor2018isanimpressiveUSD17billionfrom a diversified international investor pool. Major sectors of the economy are Oil & Gas, Mining,TransportationandLogisticsandlastbutnotleastAgriculture,whichhasbiggrowthpotential.Inadditionto foreign investors, the Agency works with local investment groups, such as VERNY CAPITAL, the topinvestmentholdingcompanyinthecountry,aswellasNazarbayevUniversityintermsofresearch.Oneoftheothergoals is tobring topbrands, like IKEA, toKazakhstan.A fewof theparticipantsof the InvestorTour have expressed interest to work with Kazakh Invest with the potential to invest in several nicheprojects.

Singapore, July 9th, 2018 PR Squared Worldwide Eurasia Bridge www.prsquaredweb.com Finding Synergies. Bridging Gaps.

Bytheendof2020-2021,902companieswouldhavebeenprivatised;wewerealsotoldduring our discussionwith the Privatisation Committee inAstana. Each company goesthroughavaluationprocessbyanindependentadvisorbeforebeingtakenthroughuptothree rounds of auction (the first one being British auction, followed by two Hollandauctions). If no interest is shown in the company, it will be put in liquidation. Allenterprisestobeprivatisedarelistedonwww.gosreestr.kz.

Meeting with KASE, Kazakhstan’s Stock Exchange in Almaty, 100%ownedbytheCentralBankofKazakhstan,hasbeenequallyinteresting.Theliquidityonthemarket(dailyturnoverislessthanUSD1million),aswell as thenumberofparticipatingcompanies (57at themoment)arebothquitelow,andlocalpopulationparticipationisamere0.6%,outof

whichonly2/3areactivetraders.ScottOsheroff,ofAsiaFrontierCapital,raisedaquestion,regardingwhatarethemaindifferencesbetweenAIFCandKASE.KairatTurmagambetov,ManagingDirectorandMemberofManagementBoardofKASE,explainedthatwhileAIFCisprimarilyorientedtoserviceforeigninvestorsandforeigncompanieswishingtoconductbusinessinKazakhstan,KASEontheotherhandisalocalmarketwith the major industrial, oil & gas, mining companies present. Deepening the market liquidity is thenumberonepriorityatthismoment.Asanillustration,itappearsthatthereareasmuchasUSD25billioninbank deposits belonging to the 100 wealthiest people in Kazakhstan, and only 10% of this amount isinvested in stock market. Equally worrying is that 15% of population ownsmore than 50% of pensionfunds. One of the ways to resolve the lack of liquidity is to free up trading across borders within theEurasian Economic Union with its 250 million people. One other way is either to increase number ofbrokers (20asof today)orencourage theirparticipation (only12areactive).Except liquidity,oneothertargetofKASEistodevelopSMEs,whichareonly26%ofGDPcurrently.Finally,onthetechnologyside,astrategicpartnershiphasbeenconcludedwiththeMoscowStockExchangewiththegoalofimprovingtradesoftware and trade settlement systems. Check http://kase.kz/en/documents/marketreview/ for moreweeklyinformationaboutKASE.

Speakingaboutachievements,intermsofminorityinvestorprotection,Kazakhstanisrated3rdintheworldbytheGlobalCompetitiveIndex.Morecompaniesare interestedto listwithgrowinginfrastructure inthecountry.Formarketparticipantsthereisneitheracapitalgainsnoradividendtaxforinvestmentsover3years of tenure. Alek Trpkoski, Senior Investment Associate fromBlackPearl Capital Partners in Sydney,Australia, is currently indiscussionwithKASE tobringmoreawareness to themarketbothdomesticallyandinternationally.

Singapore, July 9th, 2018 PR Squared Worldwide Eurasia Bridge www.prsquaredweb.com Finding Synergies. Bridging Gaps.

WithUSD58billionundermanagement,theNationalBankofKazakhstanisabouttoalteritsallocationmodelfrom80%bonds,20%equitiesto60%bonds,35%equitiesand5%inalternativesby2020.5%inalternativemandateswillbesplitbetweenNationalInvestmentCooperationSubsidiaryofNationalBankandexternalfundmanagers.Followingaquestionof Christophe Numa, Director at Bunker Gold and Silver, in terms of gold reservesKazakhstan’sNationalBankbuysallnationallyproducedgold,whichwas40tonslastyear

astheyfindittobeanattractiveassetforstoringvalue.TheBankdoesnotpurchaseanyforeigngold.Alek Trpkoski, Senior Investment Associate with BlackPearl Capital Partners, who runs a multi-strategyFund of Hedge Funds, discussed with the National Bank of Kazakhstan, how an increased allocation toalternative investments such as the BlackPearlMasters Fund can improve Kazakhstan SovereignWealthFund’s risk and return profile. The National Bank is currently in talks with BlackPearl Capital PartnersregardingapotentialinvestmentintotheBlackPearlMastersFund.

In Almaty we met with Freedom Finance, a broker serving retailaudienceinKazakhstan,Russia,Uzbekistan,UkraineandKyrgyzstan.They are extremely competitive with 0.1% - 0.2% margins ontransactionstoattractmaximumnumbersofsmall investorsacross14cities inKazakhstan.Custodyofallaccounts isassuredbyHalyk

Bank,whichwasfoundedin1923inAlmatyasanequivalenttoSberbankinRussia.Inanefforttoincreaseitsreachandarrayofservices,in2017FreedomFinanceacquiredAsylInvest.

Wehavealsohadameetingwith theEditor inChiefofForbesKazakhstanAskarAukenovwhowasquiteopentotheideaofforeigninvestorswritingacolumnabouttheirthoughtsoninvestmentsinCentralAsiaandKazakhstaninparticular.RainerMichaelPreiss,ExecutiveDirector,ClientInvestmentsatTaurus Family Office and one of the investors on the trip, is the first

contributortothecolumn.OneofthetangibleimmediateresultsofthetripwasthesigningofaMemorandumofUnderstanding(MOU)between the republican state entity “National center for technological foresight” under the Ministry forInvestments and Development of the Republic of Kazakhstan and (1) PR Squared Worldwide EurasiaBridge’sYelenaV.Zemtsova,CFA,CEO,forSingapore,and(2)BlackPearlCapitalPartners’AlekTrpkoski,Senior InvestmentAssociate, forAustralia in termsofofficial representation in therespectiveAustralasiaregionswiththegoalofspreadingtheawarenessaboutKazakhstanaswellasspurringFDIintothecountry.Morenegotiationsonothersubjectsareinprogressandwillbeannouncedatalaterstage.

Singapore, July 9th, 2018 PR Squared Worldwide Eurasia Bridge www.prsquaredweb.com Finding Synergies. Bridging Gaps.

Conclusion:The vibrant economic prospects of Kazakhstan are increasingly attracting a new generation of investorsintothecountry,andthistrendisonlystartingasthecountrycontinuestoopenandmodernise.NextInvestmentTrip:Next trip is currently being organised for September 2018, andwill includeMongolia,Ulaanbaatar (4-8Sept), Kazakhstan,Astana andAlmaty (9-16 Sept) and Uzbekistan, Tashkent, Jizzax (free trade zone) andSamarkand(16-22Sept).ProgramwillbesimilartotheonewehadinApril inKazakhstanbutwithmorebusiness,import/export,industryandfinanceaccent.Forallinterestedparties,youarekindlyrequestedtoenquirewithYelenaV.Zemtsova,CFA,CEOofPRSquaredWorldwideEurasiaBridgeat+6590106943oryvz@prsquaredweb.com.For those seeking adventure, a touristic extension is possible for oneweek prior to arrival in Astana inKazakhstanonSundaySeptember9th.AsmallgroupofindividualsisplanningatriponTrans-SiberiantrainfromUlaanbaatarwitha3day-stopinSludyankanearIrkutskonLakeBaikal.Youarewelcometojoinus!AbouttheAuthor:Yelena V. Zemtsova, CFA, an international financeprofessionalbeing stationed inSingapore since2010withadeep InvestorandPublicRelationsexpertiseandexperiencegainedacross the industry inEurasiaand the U.S.A.: asset management companies, investment banking boutiques, wealth management,investment funds/HF/PE/VC, ING Private Bank, brokerage and trading firm, internal and external auditfirms.AboutPRSquaredWorldwideEurasiaBridge:AtPRSquaredWorldwideEurasiaBridge,wehelpGloballyMindedCompaniesandInvestmentFirmstoIdentify, Meet and Develop Sound Relationships with Strategic Partners, Clients and Investors, BridgingCulturalGapsandFindingWorldwideSynergiesforCross-BorderNegotiationsandTransactions.