Gulbanu ABENOVA
ASTANA, Aug 23
(THE GLOBE)
“Kazakhstan does not need either investments, or foreign investors,” an Italian businessman, working in Astana announced to THE GLOBE, though he did not wished to mention his name. He came to this conclusion after his proposal to invest to the Kazakhstan economy was not responded to.
“For the time I am here, I have been constantly hearing over TV and reading in newspapers that the country needs a help and the government requests foreign companies to invest to Kazakhstan,” Mr. X (let’s name him so) started his narration. When he had a chance through an Italian state organisation to invest a great amount to the Kazakhstan economy, he sent some official letters to Kazakhstan ministries. “This is clear money, I am not going to legalise criminal money. Everything is legal,” he emphasised. However, two months have passed from that time, but there is no response. “What have I to think? This country needs neither anything nor anybody. Or the country’s position is so, that they do not want foreigners here. I will wait for another month and if there is no response, I will make an official announcement on behalf of the Italian organisation to the European community of investors regarding the real investment situation. I will do this to put a big and thick cross on Kazakhstan,” he stated.
He considers the action of ministries, namely ignorance of his proposal, a serious insult. In his opinion, even if they do not agree with conditions, or do not need investments, they could have written him and thanked him for the proposal. “Of course, nobody asked me personally, but I on behalf of my country propose them money. I am talking about a significant amount” Mr. X remarked.
He says, that once he knew from THE GLOBE about the fire in the Almaty airport and that there was a problem of financing its reconstruction, he sent an official proposal to the Ministry of Transport of RK. It was stated in the proposal, that they were ready to invest money to the reconstruction of the airport. On July 14 he talked over the telephone to the head of the department. “A month and a half have passed, but no response. Nobody takes care of that. I thought, once this thing happened, one of the urgent tasks would be to repair the airport. Nobody is interested in concrete conditions; I sent only the general information without any concrete details. They are completely ignoring me,” he says.
Why did the Italian man start his business in Kazakhstan
According to Mr. X, he learnt about Kazakhstan in 1993. He had top visit Kyrgyzstan on his business tour, and the plane flew via Almaty. This was on May 24. On that day in Moscow it was unbearable hot, while in Almaty it was snowing. This was unforgettable impression,” he says. In May 1995 he was suggested to work in Kazakhstan and he agreed. In January 1996 he arrived to Celinograd, “that time nobody in the world knew anything about this town.” One of the reasons for his arrival to the town, was that a big amount of money was lost here. He failed to return that amount. “I lost money, as those people disappeared. Maybe they had nothing to pay, as they had not invested anywhere, but just had spent money for restaurants and entertainment,” he said. That was not the first case, when local businessmen deceived him. Another very big businessman who is well known here also deceived him. “I trusted him, I considered him a honest person. But he is not a businessman, but a swindler. It seems to me that in the Central Asian region businessmen are proud that they can deceive,” Mr. X remarked.
To compensate money lost in Kazakhstan, he decided to invest money to the country and on February 1996 he settled here. “I tried to establish my own business here, as at that time it was known that Akmola would become the capital.”
Business in the new capital and about Astana
“At the present time Astana just cannot be called the capital. that means that Astana is considered the capital only officially,” the Italian businessman announced. In his opinion, until all foreign embassies and members of the government moved to this town, the President was constantly here, but not occasionally, and until all functionaries stopped to fly to Almaty every Friday (their families are still in Almaty, and it seems that they have to work in Astana temporarily), nobody will believe that Astana is the capital. the Central Bank and other leading banks are still in Almaty. The Finance Ministry is in Astana, but the head bank of the country is still in the former capital,” he emphasised. The businessman believes it abnormal.
Being in Astana for the fourth year, he affirms that he understands perfectly well problems regarding the shift of the capital. He says that at first the town began to develop at a fast rate and it was hopeful, but now the town has fallen into decay. “Today Astana is depressed and stagnated.” According to Mr. X., operations of many businessmen have just ‘collapsed’. He thinks it is unprofitable to do business in this town.
He is surprised, how the local population can survive here and not die, as most of them are unemployed, when prices in the town are equal to ones of European cities. ”At the same time salary of the population does not comply even with the ‘third world’ standards, but with ‘the thirteen’ one. He says that living here he himself weekly goes to the market to buy products and each time he has to spend about US$ 100. Monthly it comes to US$ 400, even if we do not take into consideration the rest expenses. “But I do not waste money. I buy everything which I need,” he emphasised.
He has noticed that there are a lot of unemployed people because people do not want to work, but not because there is a lack of working places. He shares his experience with local workers. When he hires somebody, he always wonders where and what this man worked after the university. In fact almost everyone has not worked at all, they have been sitting at home for 5 to 7 years. However, after he hires them, he watches the following. Having worked one day, a worker does not come the next day. Another worker asks a permission not to come, as he has to go the shop, hospital, or to take a child, etc. Nobody cares of his working place. The businessman emphasises that he pays salary to his personnel in time. And the salary, which he pays, is more than in another place for the same work.
He remarks that practically nothing is being produced in the republic. If you go along Astana streets, you may see a drugstore in every two-three steps, a cafe or a hairdressing salon, then again there will be a drug store, a hairdressing saloon and a cafe. He considers that products produced locally are not demanded in the country. “Here they say that if a product is manufactured in Kazakhstan, it is of a low quality.” He gave as an example his trial to manufacture bread, but nobody wanted to buy different types of bread. People wanted only local common bread. Though our bread was of better quality that bread produced by the local plant, he emphasised. We tried to open a pizzeria. Again people did not want to go there, as they have got used to a traditional food (meat or shashlik). People do not buy a glass of juice if it costs 100 tenge. They consider that drink is to cost 10 tenge, while a wine — not more than 300 tenge per bottle. They are not interested in the quality and usage of a natural fresh juice. People do not care that a wine was kept to mature for a long time. They are interested only in a price: the lowest it is, the better. The Astana population every day buys in a shop the same things: bread, milk, sometimes butter or sausage. Nobody buys different spices or flavourings for cooking. People have got used to the same common life.
In his opinion, the problem of Astana is that it is too small town, which was closed till 1992. It is a small town situated in the steppe, and local people considered a tour to Almaty as a big trip. Nobody knew about this town, everything was closed inside, that is the reason, the businessman believes.
A local businessman will never invest to the production, Mr. X affirms, as to make the production profitable it will take several years. While local businessmen wish to gain money even not today, but yesterday. That is why local businessmen do not want to deal with the production. Foreign businessmen would like to invest to the industry, but nobody permits them. For example, I am a foreigner and I want to lend a site of land to produce something. Let’s assume that this land cost one tenge, but a local businessman will get the land free of charge. Moreover, he will get different privileges and the best conditions, while a foreign businessman will have nothing, though there is a law on foreign investments.
Mr. X reminds how he appealed to a customs officer, trying to persuade him that he was wrong and infringing the law. The officer answered him: “It is Kazakhstan!” the businessman referred to an article of the law, but the functionary responded: “What’s this?”. In businessman’s opinion, every chief in Kazakhstan considers himself the absolute truth.
About the activity of the investment fund “Astana”
After repeated meetings with the President of this fund, Mr. X has come to conclusion that there are no real projects in the fund. They have just ideas, they understand that they have to do something and have different models. When the businessman asked, to what he could invest, the President of the fund replied: “bring your own projects, we will consider and decide whether we need them or not.” “Do they consider me a complete fool? Should I waste my time and money to prepare a project, when I am not sure whether it is necessary for the town or not? They do not have even an order. If I had been replied what they needed, I would have invested all my money and done my best to prepare the best project,” he says. “In fact, it is useless to work with this fund. This is my opinion. When people behave in such a way, that means either they are interested somehow to do this or something is behind this. It is not just a bureaucratic mentality, this is money,” he believes.
About the law “Protection of foreign investments”
Everybody who deals with investments in this country, arrived here relying on the law. Because there is the law in their motherland, while in Kazakhstan investors have nothing to do if they are not protected and have no references to high-rank functionaries. Foreign investors are not required here, if some definite people are not interested in them, Mr. X affirms. “I am nothing, I an ordinary man. Maybe, I am a mad man, but I have submitted an official inquiry. You are supposed just to check the inquiry, discuss it, and to invite me. But if you ignore me, that means…”, he does not complete the phrase, as he himself has not decided what this means.
By the way, as far as the law on protection of foreign investments is concerned, according to Mr. X, there are a lot of instructions enclosed to this law. These instructions contradict to the law, and functionaries are not governed by the law, but by instructions. In his opinion, Kazakhstan laws are fine, but why instructions are added to the laws, he cannot understand. In particular, the law on the Akmola free-economic zone, according to which investors have privileges is not observed at the customs, where the customs authorities calculated a big tax amount for their organisation. Functionaries replied that they were governed by an instruction of the Finance Ministry. To get this instruction you have to pay 5 ECU. It occurs so that the laws mean nothing, and you have to pay to learn what is stipulated in instructions attached to the laws. This situation is observed nowhere in the world, except Kazakhstan. Besides, you may be forced to pay a penalty as a punishment if you do not know these instructions,” the Italian businessman states. “This is the investment climate in Kazakhstan,” he emphasised.
There is a law or the President’s Decree, which has a law force, but instructions of a Ministry neglect this law. Neither the government, nor the President has a power in the country. Foreign investors face nothing, except problems in this country. Investors are called, they arrive, and in the result they face only problems.
About the policy, Mussolini and Nazarbaev
This country may have the future, but the President should control people surrounding him, the businessman thinks. “Probably, the President is to mild. He seems to resemble me: after he shouts, he forgives. As the country is young, the authorities are to be respected and rigid. This is the only way, because local people do not know what democracy is. To achieve real democracy, it will take at least 30 years,” Mr. X affirms. He has heard nothing about “2030” strategy, but when he was told about this Kazakhstan President’s program, he said: “That means, I am right.” He comes to this conclusion basing on the experience of Italy. During Mussolini’s period, till 1945 there was a dictatorship in Italy. When he was overthrown, there was anarchy and disorder in the country. This lasted for 30 years, and only now we have come to democracy, he says.
In his opinion, there is neither a regime nor democracy in Kazakhstan. It seems that the President has a personal power, but he is not a dictator. Regional akims are dictators, as they do whatever they want in the regions. The President is insufficiently strict, as he permits them to do this, Mr. X believes.
The Italian businessman supposes, that at the present time Kazakhstan needs a strong government and a leader similar to Mussolini, who significantly strengthened the economy and social system. Today Italy has the same social system that was established by Mussolini. Democracy will come, when people live well. At the present time it is just required that there should be a strong hand in the government.
I think, that the President Nazarbaev is guilty in that he permits and trusts too much to his people. He himself is not in a position to control everything, that is why, in businessman’s opinion, this is a betrayal of the President’ s people, who being appointed important state posts, are dealing with their personal business.
In his opinion, our President should trust less to ministries, to avoid such scandals as with locusts, when the Ministry of Agriculture reported that the situation was controlled, till locusts invaded the capital.
The problem is not the policy, but the economy. For example, Pinochet was a dictator in Chile for a long time, and it was that time when the economy developed fast in the country. “A system is not too significant, the main thing is that people live well.” Because people do not care what system is in their country, fascism or communism, or anything else. It is important for people that they live calmly and well.
The Italian businessman does not agree with the requirement of IMF representatives, who say: “if you give us democracy, we will give you a loan.” How they may demand democracy in the country, which had nothing and for several centuries was a outlying district of tsar’s Russia, and then became a dependent republic?” he asks.
Conclusion
In conclusion he said that he was going to wait another month, before he would appeal to the European community of investors. Then he will mention his name, as well as names of high-rank functionaries, with whom he associated and got in touch.
Astana, Aug 26
(THE GLOBE)
We have met the Italian businessman several times. Explaining that he has good connections with Italy, he talked about great amounts, which he was ready to invest, if he was given state guarantees. We told him that the process of granting state guarantees is not simple: they need proposals, a project, and technical-economic feasibility. He has not submitted any official proposals on investments. I (Mr. Firsov) have been dealing with similar things and I feel a person perfectly well. Maybe, he really has connection, but I also can boast and say something like that. But we got used to work with documents, and if there is a proposal, we should consider it.
As far as the state guarantees are concerned, first, we are not authorised to do this; second, we have the state requirements to do everything clearly and transparently. In connection to this, at the present time we are conducting a tender for 32 million to avoid rumours regarding other investors ‘that money is behind this’. First of all we are motivated by a commercial interest. We are going to realise only those projects, which will be break-even. If the businessman wants to take part in the tender, let him do this. Nobody forbids him. Moreover, we still have a guarantee limit.
Let’s take the project “Astana-City”. Our fund is the executor of this project, but this project is important for the whole town of Astana, and probably, for the entire republic. That is why the procedure is to be transparent, and we cannot give any exclusive authority, but he persisted on that. At the same time we did not receive proposals from those big Italian companies, which were mentioned by him. There is no letter, confirming that they entrust him to negotiate on behalf of these companies.
Here his letter-proposal is. I am quoting: “considering that one of the partners of the company is Italian, in order to thank the Kazakhstan authorities for the permission granted to work in the country, he activated his connections in the motherland, and wants to propose Kazakhstan investments of big Italian companies…” think yourself, whether we cant trust such businessman. We are not just beginners in this thing, and we are able to check persons by both official and unofficial channels.
All Over the Globe is published by IPA House.
© 1998 IPA House. All Rights Reserved.