Chairman of the Board of JSC Socio-Entrepreneurial Corporation Tobol Arman ALIYEV:
THE CURRENT ECONOMIC SITUATION MUST NOT HINDER THE CREATION AND DEVELOPMENT OF BUSINESS
Amid growing negative events in the economy the socio-entrepreneurial corporations are still capable of supporting effectively business entities. This is proved by figures and time. Currently the investment portfolio of Socio-Entrepreneurial Corporation Tobol includes 44 projects worth a total of over 330 billion tenge (329.21tenge/$1). The most of them involve the mining industry. In the last five years the corporation has helped 20 investment projects worth nearly 3.5 billion tenge reach the “stage of self-implementation,” where Tobol invested about 900 million tenge. Now they are independent full-fledged projects. Chairman of the Board of JSC Socio-Entrepreneurial Corporation Tobol Arman ALIYEV talked in an interview with Interfax-Kazakhstan on how businessmen do their business in uneasy economic conditions, what ways out the corporation offers.
- Last year, as expected, proved to be uneasy. Not everything what we had planned was achieved.
First of all, the decrease in entrepreneurs’ business activity affected, who began approaching new undertakings more cautiously. Now they work out all aspects of future business starting from possible sources of financing and finishing with the end consumer cost before implementing the nurturing idea. Only after weighing the pros and cons entrepreneurs are ready to sit down at the negotiating table and discuss terms of joint cooperation. Earlier Tobol was regarded as a source for cheap money and a consultant for doing business and our experts used to finalize projects.
Secondly, the purchasing power of households declined. Under these circumstances the only way out for our partners would be re-orientation towards other consumers. E.g. the Fedorov Linseed Oil Production Plant in Fedorov district of Kostanai region failed to find a consumer on the local market but this food product is in great demand in China due to oil useful properties and its relatively low cost. Currently we examine together with partners the issue of obtaining an international certificate for the plant to reach the international market, in particular, China’s market. Against all odds joint cooperation has been allowing us to make profit for the fifth year which we handover for partners to reinvest in order to support current business operations.
- How many projects did you manage to implement and what is their amount?
- I would like to note straight away that Socio-Entrepreneurial Corporation Tobol does not pursue the project implementation as a main objective in its activity until it is finalized. Moreover, we try to work in an area that is occupied or not heavily occupied by the private sector. First of fall, our interest is to help a project reach a design capacity and only thereafter we pull out of it. Since the transfer of the [corporation] to public ownership in 2010 twenty investment projects worth a total of 3.48 billion tenge have reached the “stage of self-implementation,” where Tobol’s investments totaled 862.6 million tenge. Now this is independent projects aimed at boosting production capacities and growing them further. Some partners contact us for the purpose of getting advisory and financial assistance. We assist in searching for potential partners, opportunities to sell products. In addition, with the aim of stabilizing prices for core food products for five years Tobol has been working on creating and using a stabilization fund of most necessary food items.
- How did the year 2015 start for you?
- Given the uneasy financial and economic situation in the country as a whole the start of 2016 was predictable. We have had an objective not to create new projects but maintain the current ones and attract investments. Understanding this the corporation works on increasing further production facilities which were created with our participation. So we managed to attract an investment of 6 billion tenge from a Chinese company for the manufacture of cars in the city of Kostanai which will be allocated for JAC and Peugeot production in the form of completely knocked down units.
-You work directly with businessmen. Tell us what are their plans, mood , did business change in general?
- The current economic situation must not hinder the creation and development of business, entrepreneurs should take into consideration current trends but don’t’ have to give up their ideas. As an example I can point out Lisakovsky Cardboard and Paper Production Plant. The idle corrugated cardboard and egg pallet facility didn’t look quite attractive for investors but at first after working out the issue of raw material deliveries, sale of finished products, recruiting qualified staff a new partner directed all efforts at the re-launch of the enterprise. Currently, production resumed with 60 staff and by the beginning of the summer it will be fully restored and the total headcount will reach 95. Lisakovsky Cardboard and Paper Production Plant is instrumental in socio-economic terms as the city’s backbone enterprise and by the end of this year the enterprise is to reach its full production capacity.
- Have any changes taken place in your activity in the past year?
- Some adjustments have been made to the activity. Some companies are in quest of new markets, literally they failed to fulfill their commitments undertaken. Given such factors we met them halfway and provided a short-term reprieve in order to decrease the financial burden, preserve jobs and maintain production. The shortfall in revenue affected the possibility of embarking on new investment projects, some of them are moved into this year. E.g. Kostanai Felt Products Factory belongs to such [projects], which couldn’t find the market to sell in early 2015. However the joint search for partners and the current trend towards leveling the forex differences allowed the enterprise to enter the Russian oil and gas sector, where these products are in strong demand.
- What plans does Socio-Entrepreneurial Corporation Tobol have? What projects are planned?
- We have lots of plans and hopes for 2016. We are working with Aktobe and West-Kazakhstan regions on setting up a meat cluster. We plan to increase cattle to 20.000 head, create new jobs and boost exports 2-3 times on the basis of a feeding farm of Terra LLP in Kostanai region. Tobol will invest 400 million tenge in the project. It’s also necessary to build an access rail road for the planned launch of a cement plant in the city of Rudny with the aim of organizing efficient logistics. The planned investment will not exceed 250 million tenge. The quest for projects for their implementation on the industrial zone territory in the city of Zhetikara remains one of [our] activity aspects, Both local goods manufacturers and foreign investors are taking interest.
It should be noted that Socio-Entrepreneurial Corporation Tobol focuses its efforts in the first instance on building up constructive interaction with entrepreneurs at all project implementation stages. That’s why cooperation terms, proposed by us, are flexible enough in order to meet the partners’ demands at maximum level. E.g. creating joint business we confine ourselves to project support and non-supervisory participation leaving an opportunity for an entrepreneur to manage all operations on his own and in the event of difficulties we provide all-out support to reach a design outcome.
[Corporation’s] such attitude to the partners reflects their interest in cooperation with Tobol. Currently our investment portfolio includes 44 projects worth a total of 337.4 billion tenge and the most of them involves the mining industry.
There’s nothing surprising there. Given the capital capacity and project implementation lengthy period in the subsoil use sector Tobol actively participates in their implementation. Our participation is driven by the fact that procedures for obtaining contracts are facilitated for the national company as we are classified as a strategically important partner for businesses. The implementation of these projects would give impetus for the development of the manufacturing industry.
Also given the region’s industrial and agrarian orientation, projects are implemented in the agro-industrial and industrial sectors. Needless to say, the corporation has a number of strong points, which can and must be used as a springboard for securing further growth and development. By participating in the investment project implementation jointly with businesses, by attracting foreign investors the corporation plans to focus efforts and resources on developing the priority economic sectors, including the agro-industrial and agro-processing sector. Here the development of deep processing of grain, livestock, poultry products and crops is an important segment for us. As for machine building the main objective is to increase the localization level of assembly facilities. As far as the mining and metallurgical sector is concerned this sector is the region’s main export earner and main currency revenue source and special attention needs to be paid to it. Manufacture of high value added competitive, energy saving construction items; articles and elements will underpin the development of the construction industry and production of building materials. Meeting the domestic market demand for the light industry products will be through the processing of raw materials, modernization of engineering equipment at current facilities, manufacture of products with their prospect of being sold on the international market.
- How can one characterize your work these days?
- So far many people don’t understand what socio-entrepreneurial corporations are. Currently they are national companies, the mission of which is to assist with the socio-economic development of the regions on the basis of public-private partnership principles. The activity of Socio-Entrepreneurial Corporation Tobol, which represents Kostanai region, is aimed at creating favorable conditions for entrepreneurship development, creation of new production facilities and modernization of current production facilities, investment attraction, and implementation of government initiatives in close conjunction with the local executive authorities. With the aim of assisting the region’s industrial and innovation development the Investment Attraction and Innovation Support Center is set up at part of Tobol, which is the front office for working with domestic and foreign investors, local innovators and rationalizers offering a full range of services based one the one stop shop principle. In addition, the Public-Private Partnership Center is created for the project advisory support. Eventually the project implementation within the public-private partnership will help involve private businesses in implementing state programs, rehabilitating idle state-run assets and boosting product competitiveness thereby improving the region’s economy.
- Thank you for the interview.
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