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Meg Munn MP - Sheffield Heeley's voice in Parliament | Welcome
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UK Kazakhstan: a business partnership for growth

Monday, July 7, 2008

At the recent “Kazakhstan Growth Forum” Meg made the following remarks. The Forum was supported by the Foreign Office, UK Trade & Investment (UKTI) and the Embassy of the Republic of Kazakhstan. It provided a platform for potential British investors to acquaint themselves with Kazakhstan’s strategy for investment and transformation of key strategic sectors.

 

I’m pleased to be able to make some remarks at the opening of this forum. It’s clearly a major event in the Kazakhstan - UK commercial calendar, and one that I know the UKTI is glad to be involved with as one of the sponsoring organisations.

 

I will address why the UK can be an important partner for Kazakhstan a dynamic, fast-developing, economy. I have three main themes, the first being that Kazakhstan is eagerly seeking business investment.

 

President Nazarbayev places the economic growth and development of Kazakhstan at the top of his agenda. In his annual address earlier this year he emphasised that the diversification policy will continue to intensify, supported by the growing hydrocarbon and mineral sector revenues. This is in the context of a country that has regularly achieved growth rates of over 10% a year, and even after the sub-prime crisis is enjoying growth around 6 7 %.

 

The President said that this would demand increasing engagement with foreign enterprises. Implicit in this invitation was the reality that these companies would have to bear in mind Kazakhstan’s need to develop its people and its skills base. Companies establishing themselves would be expected, for instance, to offer jobs and development opportunities to indigenous workers. This is right and proper, and I am convinced that British firms already engaged in Kazakhstan take these responsibilities seriously.

 

Kazakhstan has few restrictions on the type of business that can be established there or the structure of the enterprise. Capital can be repatriated. The tax code treats Kazakh and foreign enterprises equally, and there is no shortage of Kazakh businesses willing to enter into joint ventures. So the invitation by the Kazakhstan Government is backed up by a business regime that allows businesses to decide how they wish to set up, operate and develop. This is good news for both UK companies and their Kazakh business partners.

 

A close business engagement

That leads me to my second point; that our two countries already enjoy a close business engagement and one that is important to the UK.

 

The United Kingdom embraces open commercial relationships. We are a trading and investing nation with a strong economy and a business climate that observes the principles of liberalisation, the free market, and low taxation and regulation. We are also a prime destination for foreign direct investment, and recognised by the OECD as having the lowest barriers to inward foreign investment in the industrial world.

 

London is, of course, a major centre for international business and commerce. It is the world’s largest financial centre with the London Stock Exchange, the London International Financial Futures and Options Exchange, and the Lloyd’s of London insurance market all based here. It also has the largest concentration of foreign bank branches in the world. It is clear that an increasing number of Kazakh companies, looking to develop their activities internationally, are turning to the City of London as the place to secure the expertise and investors to facilitate this.

 

Our commercial relationship with Kazakhstan is supported by regular exchanges at very senior levels. His Royal Highness the Duke of York is a regular visitor to Kazakhstan. He was last in the country in his official capacity as the UK Special Representative for International Trade & Investment in October last year when he delivered a well received keynote address at the KIOGE Conference and met the British exhibitors, the Energy Minister and the President of KazMunaiGaz .

 

The highly successful guest-of-government visit to London by President Nazarbayev in November 2006 directly stimulated the relationship at the highest level. Five months later the Lord Mayor of London at that time, the Conference Chairman Alderman John Stuttard, visited Almaty and Astana at the head of a large and distinguished business delegation, including the Chairman of the London Stock Exchange. Meetings with the President, the Prime Minister and other key government and industry leaders confirmed the potential to further develop an already high level of activity across the whole range of financial services. Contacts between the Almaty Regional Financial Centre and the London Stock Exchange are already well developed as a result of a memorandum of understanding signed during President Nazarbayev’s London visit.

 

UK businesses already involved in Kazakhstan enjoy an excellent reputation as reliable business partners. They offer a range of good quality products and services appropriate to Kazakhstan’s needs, as well as investment in key areas such as oil & gas exploration and production, mining and steel. Our ‘blue chip’ corporations engaged in oil & gas projects in west Kazakhstan, such as BG, Shell and Amec, are obvious examples.

 

Skills development

I know that skills development in this vital sector features highly in Kazakhstan’s priorities. The UK has an outstanding education and training capability for the oil and gas sector and this expertise has been deployed in every major oil and gas-producing region of the world. Operators already use institutions such as Aberdeen’s Robert Gordon University and its various commercial training ventures, as well sending staff to Scotland for offshore safety and survival training.

 

In November 2007 KazMunaiGaz sent human resources personnel to the UK for a nation-wide road show organised by UK Trade and Investment to meet many of our training providers. UK universities, institutions and training companies offer a broad range of courses that can be adapted, as needed, to meet the specific needs of national and international operators, service companies, government and non-government organisations.

 

This close engagement covers companies of all sizes, in the energy sector and also in other sectors of the economy. This approach supports the economic diversity priorities of Kazakhstan. Examples include:

  • the provision of skills training for developing middle and senior managers in both business and government, using the latest modular, distance and e-learning techniques,
  • the supply of electronic white boards for over 1000 of Kazakhstan’s schools and,
  • the provision of affordable modular housing for communities.

 

The important financial and business services sector is a good example of our close co-operation and involvement; with strong engagement from, amongst others; HSBC, RBS, Marsh Insurance Group, PWC, Ernst Young, KPMG and Denton Wilde Sapte.

 

Trade and investment

Let me mention some broad trade and investment figures that demonstrate the scale of Kazakh UK engagement. Last year Britain sold Kazakhstan 297 million of goods, and products worth 200 million came in the other direction. Therefore the trade in goods alone between the two nations totalled just over US $1 billion; if you are feverishly doing the calculation please remember that sterling was worth over $2 for much of 2007.

 

The trade in services between the two nations is very significant. The latest official figures are for 2006 when the UK provided 886 million in services to Kazakhstan, which in turn supplied us with services to the value of 468 million. Combining goods and services puts the annualised value of two-way trade in the region of US $3.5 billion.

 

Investment figures also tell a good, and well-balanced, story. Historically the UK is one of the largest investors in Kazakhstan; speculation has usually concerned whether its position in the league table was number two or three.

 

The roll call of Kazakh companies listing on the London stock Exchange is impressive. In 2005 Kazakhmys made a stunning debut at the Exchange, raising US$1.2 billion, making it the first company in the Commonwealth of Independent States to list on the main market. Very quickly afterwards it entered the FTSE 100. Since then KazakhGold, Kazkommertsbank, KazMunaiGas Exploration and Production and ENRC have all listed. ENRC, raised $US 7 billion at the end of 2007, before the group’s entry at around number 47 in the FTSE 100. The total value of these Initial Public Offerings has been of the order of US$14 billion.

 

Future challenges and opportunities

Given the strength of our existing commercial ties what future challenges and opportunities do Britain and Kazakhstan share? This is my third theme.

 

Yesterday, His Excellency Minister Shkolnik took part in a meeting of the Kazakhstan-British Trade and Investment Council. The Council has a very important role, and one that expands as Kazakhstan’s growth accelerates. It represents a senior business voice from both countries, with access to key Government decision-makers. It is responsible for identifying significant trading and investment opportunities and adding to our commercial relationship as well as having the clout to address any problems being experienced by investors or exporters.

 

Specifically for the near future it was agreed that the two sides would aim to help co-operation in three of Kazakhstan’s key sectors, namely; petrochemicals, financial services; and skills development in the oil and gas sector.

 

As Council Chairman on the Kazakh side Minister Shkolnik has given a most valuable personal commitment to the role of the Council, and particularly to reshaping and reinvigorating its focus for the future. My thanks to him.

 

It is clear that Kazakh organisations are increasingly coming to appreciate Britain’s expertise as a centre of professional skills development and vocational training. We are seeing increasing numbers of British education and skills providers, educational supplies companies, accreditation bodies and educational institutions engaging individually with Kazakh partners in this important area.

 

At the beginning of May, the one-stop-shop for British vocational training expertise, ‘Technical & Vocational Education & Training UK’ organised a delegation of colleges and accreditation bodies on a visit to Astana and Almaty. The group was warmly received at the Education and Science Ministry by Vice Minister, Farkhad Kuanganov and his Vocational Education team who organised a varied and fruitful programme. A memorandum of understanding is currently under preparation to facilitate collaboration in Kazakhstan’s development of its technical and vocational education system. I believe this is the beginning of a wider long-term and significant bilateral partnership in an area vital to Kazakhstan’s future growth.   

 

There are clearly considerable further opportunities for UK companies to assist in areas vital to Kazakhstan’s requirements. The energy sector will continue to remain important. But increasingly as Kazakhstan pursues its desire to diversify, these opportunities will also arise in other sectors. Kazakhstan’s well-publicised ambitious plans for investment in power generation and transmission, telecommunications, transport and education and skills training give a strong steer on the sectors where future partnerships will be particularly welcome. It’s pleasing that British enterprises in these sectors, as in others mentioned earlier, are capable of significant engagement.

 

They will most certainly receive strong encouragement and support from the UK Government in developing close ties with Kazakhstan.

 

I wish you well with the rest of your conference. 

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