KBCC in the news

July 17, 2009

Kazakhs seek foreign interest in more than mining

Reuters, Thursday July 16 2009





* Foreign firms should look to add value to products

* Technology, not gas supply, key to Nabucco for Kazakhstan

* Global financial crisis hits investment

By Karen Norton

LONDON, July 16 (Reuters) – Foreign companies in Kazakhstan should look beyond investing purely in the extraction of its rich resources and use their technological expertise to add value to those products, a Kazakh business lobby group chief said. Kazakhstan ranks in the top 10 for key resources such as oil, coal, iron ore and uranium. It has the world’s largest reserves of chromium, used in stainless steel. Mineral resources make up almost three quarters of exports.

“Kazakhstan is seen as an extractive country, we’re trying to show there are other sides to us,” said Artur Krivov, managing director of the Kazakh-British Chamber of Commerce (KBCC). ”In metals, for example, there is potential to produce final goods rather than just mining ore,” he said. Abundant resources and proximity to vast markets mean it is well-positioned as a convenient base for the development of export-oriented manufacturing, KBCC has said. Kazakhstan has borders with China and Russia. Other advantages include a favourable tax regime and laws and government decrees guaranteeing the rights of foreign investors and security of their investments, Krivov said.

Aside from metal products, downstream opportunities could include petrochemicals and high-tech electronic components. One of KBCC’s aims is to encourage investment from firms with technological expertise in key trading partner Britain. ”We have a lot to learn from UK technology and know-how in different sectors,” Krivov said in an interview on Tuesday. The Nabucco gas pipeline could be one such example. On Monday, EU countries and Turkey signed a transit deal for the project, which aims to cut Europe’s energy dependence on Russia, supplying gas from the Caspian and Middle East. Some doubt whether Kazakhstan has enough gas for Nabucco. But Krivov did not think supplies were the issue. ”It’s down to companies like British Gas and other big gas companies in Europe to provide Kazakhstan with the necessary technology to utilise the reserves of gas.”

Foreign direct investments (FDI) in Kazakhstan averaged 8 percent of gross domestic product (GDP) in 2002-2008, half that of Azerbaijan, but it compares favourably with 5 percent in Ukraine and 4 percent in Poland. Krivov said several Scottish firms were working on one key FDI project –the giant Kashagan oilfield due on stream in 2012. KBCC is also keen for companies such as mining giant Rio Tinto, which has had a presence there for eight years, to put down some roots. ”The relationship is there, it needs to be put into more concrete things.”


Krivov said the global economic crisis had knocked investment in Kazakhstan, but he saw it recovering. ”Kazakhstan has been heavily hit, especially on the side of greenfield projects. A lot have been scrapped altogether.” But some overseas investors were returning to look at projects again, such as wind energy and trains.

Krivov said foreign mining firms had been unsettled by the dismissal and arrest in May of the head of uranium company Kazatomprom after he was accused of illegally taking over state owned uranium deposits and selling them to foreign firms. They feared all mine licences would be reviewed and revoked. ”That’s not the case,” Krivov said, adding that this had been a specific incident. The whereabouts of Kazatomprom’s ex-president, Mukhtar Dzhakishev, remain unclear and Reuters has been unable to reach him for comment. The KNB security service said at the time of his arrest that he denied any wrongdoing.

Kazakhstan has the world’s second largest reserves of uranium and wants to become the top producer as the nuclear fuel becomes ever more important to countries that are turning to atomic energy to replace fossil fuels and cut carbon emissions. Krivov also saw opportunities to exploit rare earths in Kazakhstan for use in high-tech applications.

KBCC, a non-profit organisation funded by its members, came into being last December. It also promotes Kazakh investment in Britain. Current members include the world’s biggest ferro-chrome producer ENRC and Kazatomprom. (Edited by Anthony Barker)