Kazakhstan Determined to Reclaim Business in Georgia


By Madona Gasanova

Kazakhstan Determined to Reclaim Business in GeorgiaBaku-Tbilisi-Kars, New Silk Road and Kashagan Field are huge economic projects linking Georgia and Kazakhstan and promising great benefits to both countries.

Kazakh investors however remain cautious about Georgia while the future of KazTransGas, regarding its return to Kazakhs, hangs in the balance.

“Generally speaking, the government change in Georgia following the October 2012 elections has proved to be a very positive sign for Kazakh investors. We are waiting to see how the new government will deal with the problems that we want solved though,” Adil Tursunov, Charge d’Affaires of Kazakhstan to Georgia, told The FINANCIAL.

“Six months have passed since the elections but there has been no progress in the KazTransGas case. After the confiscation of KazTransGas all Kazakh investors lost interest in investing here,” Tursunov said.

“We had problems with the previous government. The new government has not yet created any problems and we are optimistic about having productive cooperation with the new government therefore. This is bilateral interest. We are almost certain that the new government will not generate the same problems that the previous one did.”

The Georgian Government confiscated KazTransGas from Kazakh management in 2009 due to its arguable debt. Tursunov said that this is a problem inherited from previous officials. He said that the debt issue will be resolved after the company is returned to Kazakh ownership. “Our stance on this issue is that we demand to have the company returned to us as soon as possible,” he added.

“What if you do not manage to get KazTransGas returned to you?” proved a question that Tursunov was unable to answer, refusing to imagine such an outcome.

Bilateral relations between Georgia and Kazakhstan deepened in 2005, when President Nursultan Nazarbaev visited Georgia. “He gave the green light to our investors. It was a very difficult time for Georgia. It was not like it is today, when everything runs like clockwork: tax service, customs house and border service. Nevertheless, in 2006 many Kazakh companies entered the Georgian market,” said Tursunov.

It was in 2006 that Georgia attracted the largest volume of FDI from Kazakhstan. The volume amounted to USD 152,310,500. The next year’s was USD 88,486,200, followed by USD 65,941,700 in 2008. The year 2012 showed an increase in Kazakh investments. They amounted to USD 11,797,000, almost 6 million more than in 2010.

“Due to the global recession and August War in 2008 the amount of Kazakh investments in Georgia stagnated. In 2009 the KazTransGas case was the latest development in the situation that we have now. No Kazakh companies have left Georgia since. We have no reason to be pessimistic, all projects are in the process of development and Kazakh companies are increasing their turnover. In 2012 we had a reduction in commodity turnover but from 2009 till 2012 it increased almost ten times, from USD 27 million to USD 250 million. The reason for the 2012 decrease was caused by a slump in exporting cars to Kazakhstan,” Tursunov said.

There are currently seven large Kazakh companies operating in Georgia: Kaztransgaz, Kaztransoil which owns Batumi Port, Kazmunaigas service, Rompetrol, BTA and Halyk Bank, and the airline Air Astana.

“We have visa free relations, which is very important. Kazakhstan is the only country from Central Asia that has an embassy in Georgia. We are very proud of this fact,” said Tursunov.

On 25-26 April we will be holding the 6th meeting between the two countries’ governments regarding trade-economic cooperation. “At the meeting we will discuss issues that will serve as the new push for further cooperation. We hope to solve all the existing problems. Unfortunately these have stretched out over a long period of time, but we are seeing positive approaches from both sides. Historically Georgia and Kazakhstan have always had close relations and we are optimistic that things will continue in this way,” said Tursunov.

“This year we are starting the production of oil from Kashagan Field, huge oil field in Kazakhstan’s zone of the Caspian Sea. If the cost of transport by rail from Baku to Batumi is reasonable, then we are ready to start transporting oil and other products this way. The opening of the new road Baku-Tbilisi-Kars will also be significant. We see good prospects and are optimistic due to our bilateral cooperation,” he said.

According to Tursunov, the Borjomi-Likani project will be completed this year. It will be run by the management of Rixos. “There was just was a temporary delay, but it is now following its proper schedule. Kazakh investors have not left the Likani complex. Talk of them having sold the Likani complex and left Georgia is just rumours.”

Tursunov said that they expected Kazakh investors to receive big support from the Government. “As the cost of transport by rail from Baku to Tbilisi has been constantly increasing we did not manage to load Batumi Port as we had planned.”

“Last year President Nazarbaev initiated a new project called New Silk Road. It is aimed at transporting goods from China to Europe through Kazakhstan, Azerbaijan and Georgia. The volume of trade last year amounted to USD 500 billion; if we attract even the smallest share we will see big profit. This road is shorter than any sea route. At the moment we are close to launch a new project – Silk Wind. It is container transportation via railway from China to Kazakhstan through the Caspian Sea, Azerbaijan and Georgia. We are now waiting for the opening of the Baku-Tbilisi-Kars railroad. We have big plans and we are sure that with the cooperation of the new Georgian Government we will accomplish them.”

“After the April meeting we will be able to more clearly name the volume of Kazakh investments in Georgia. Solving the existing problems will serve as an additional signal to our investors, which are at present optimistic but cautious. In the direction of commerce, Georgia and Kazakhstan can really succeed.”

Energy, tourism, agriculture, infrastructure and financial services are various sectors named by Tursunov that could prove attractive to Kazakh investors in Georgia.

“Kazakh business is not present in other countries on the same scale as it is in Georgia. We should appreciate this fact and take care to develop the situation here accordingly,” Tursunov told The FINANCIAL.