Kazakhstan: Despite Many Opportunities, Logistical Issues Are Deterring Thai Investors

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Kazakhstan is seeking to attract foreign investors to explore business opportunities, including oil and gas exploration in its abundant petroleum reserves, Bangkok Post writes.

Energy Ministry Anantaporn Kanjanarat said members of both the public and private sector, including representatives from SET-listed PTT Exploration and Production Plc (PTTEP), are due to visit Kazakhstan during the Astana Expo 2017, being held by the Kazakh government from June 10 to Sept 10 to exhibit future energy concepts.

Mr Anantaporn said PTTEP’s officers were in Kazakhstan to explore future opportunities regarding Kazakhstan’s petroleum reserves.

“Since we have had a good relationship with Kazakhstan for many years, I think Kazakhstan is an interesting country to help secure energy resources in the future, especially if there are any petroleum shortages,” he said.

But PTTEP told the Bangkok Post it is reluctant to invest in Kazakhstan immediately, saying the company still needs to evaluate risks there.

PTTEP also has a clear investment policy of focusing on exploration and production (E&P) in Asean countries.

“Kazakhstan is a country with strong potential and plenty of petroleum reserves. But PTTEP needs to evaluate risks, particularly logistics costs and the company’s expertise in the region,” the company said.

“PTTEP will keep focusing on Asean countries, where the company has familiarity and strong expertise. But PTTEP will also monitor Kazakhstan closely to see if there are any opportunities to start investing in exploration and production in the future.”

A view of Ishim River, which runs through Kazakhstan’s capital city Astana. Despite many opportunities, logistical issues are deterring Thai investors from the country.

Apart from E&P business in Kazakhstan, Thailand also held a business matching event during the Astana Expo, with Kazakh firms expressing interested in Thai goods, including food, consumer products, cosmetics and other services.

As a former Soviet state, Kazakhstan is still struggling to develop many facets of its real economy decades after declaring independence. As a result, the country is revving up its own production sector by attracting new investment to boost the economy and become less reliant on petroleum.

A major problem deterring Thai firms from investing in Kazakhstan is logistics as it is the world’s largest landlocked country, making the export of goods there more expensive than to countries with sea ports.

Nat Pinyowattanacheep, the Thai ambassador to Kazakhstan, said Thai investors should explore further business expansion in Kazakhstan, as Thai products and food are popular there, although he said that transport costs remain a stumbling block that makes the cost of Thai goods unattractively high.

He said that while the Kazakh government is open to new foreign direct investment, they are still working at the legislative level to further streamline the ease of doing business there.

Due to its abundant oil and gas reserves, Kazakhstan’s GDP stood at relatively high level of US$133 billion in 2016, he said.

Trade value between Thailand and Kazakhstan is worth around $70-$80 million a year, according to the Commerce Ministry.

But after talking to other Thai investors, Mr Nat said that apart from geographical issues, the country’s relatively small population also implies smaller purchasing power.

“Looking at Kazakhstan’s population of around 17 million, it might be too small for some Thai or foreign investors to step in,” said Mr Nat.

But he said if investors look at Kazakhstan not as the world’s largest landlocked country, but as the centre of Central Asia, it could regarded as a more interesting country to invest in.

“We have raised this concern with the Kazakh government and they promise to tackle the problem,” said Mr Nat.

He added that some in the private sector had urged the Thai government to seek ways to sign a free-trade agreement (FTA) with the Eurasian Economic Union (EAEU), which has a combined population of 176 million.

The EAEU was established in January 2015 with the aim of integrating post-Soviet states, including Russia, into a new cohesive economic entity.

Mr Nat said the Thai Commerce Ministry is working out whether Thailand should sign an FTA with the EAEU in order to capitalise on growth opportunities in the trade block. Vietnam has already signed an FTA with the EAEU.

The chairman of the Federation of Thai Industries Chen Namchaisiri said another key negative factor that would deter foreign investors is the long winters.

“Since the country has winters spanning up to six months each year, it’s hard to evaluate the effects on purchasing power as long winters discourage people from going out to spend,” said Mr Chen.

He said Kazakhstan is still an interesting country to invest in, although many investors are still waiting for clearer investment policies from the government, as well as international cooperation on key transport projects, particularly with China.

The Thai government also sent a tourism-related team to Kazakhstan to help boost bilateral cooperation.

Mr Chen said around 60,000 Kazakhs travel to Thailand every year, while Kazakhstan has many tourist attractions worth being visited by Thais.