Aidar Arifkhanov: ‘Baiterek has become a powerful holding’

Author: Sergey Domnin

Kursiv Newspaper

This May marks the 8^th anniversary of Baiterek National Management Holding, which unites twelve institutions focusing on the development of small and medium-sized businesses and non-resource sectors of the economy, increasing export sales, supporting agriculture, and providing people with affordable housing. These goals have been the government’s priorities during the entire period of independence.

In the last couple of years, Baiterek Holding has been undergoing a structural transformation – some social housing institutions have been optimized, portfolio organizations of the former KazAgro Holding have been merged into Baiterek Holding. In a conversation with Aidar Arifkhanov, Chairman of the Management Board of Baiterek Holding, we discuss the interim results of the Holding's work over the past 30 years.

– Aidar Abdrazakhovich, why was a new holding created eight years ago?

– It was the decision of Nursultan Nazarbayev, the First President of Kazakhstan. On May 22, 2013, a decree on the establishment of Baiterek Holding was signed. ​​Nursultan Nazarbayev planned to unite the national development institutions into a professional management company to increase their efficiency.

Eight years ago, ten development institutions were merged into the newly created Baiterek Holding. Some changed their governing organizations several times, some were transferred to the ministries, then taken away from them. Many of the Holding’s subsidiaries were going through hard times. The crisis of corporate governance, problems with loan portfolios, lack of a clear goal, and performing the same functions as other organizations – this is what Baiterek Holding had to face.

We have solved all these problems, and now all our subsidiaries are successful companies with unified corporate governance that meets international standards. This is what allows our companies to effectively develop the country's economy.

– Baiterek Holding’s development institutions aimed at developing national business. Have you achieved this goal?

– Our development institutions have to solve different problems, which divide into several groups. First of all, it is support for small, medium-sized and large businesses. I believe that the government has provided tremendous support over the years of independence. In 2014-2020, Baiterek Holding supported more than 116 thousand projects that were able to modernize their production facilities to increase labor productivity and expand sales markets. During this period, the supported enterprises produced goods worth 34 trillion tenge, having received 5.3 trillion tenge of export earnings.

About 90% of projects and 84% of production volume falls on clients of the Damu Entrepreneurship Development Fund, which is the main supporter of small and medium-sized businesses. Since 2013, the share of small and medium-sized businesses in GDP has increased from 17 to 32%, and it is partially to Baiterek Holding’s credit.

We strive to increase the export potential of Kazakhstan’s business. The Development Bank of Kazakhstan and KazakhExport are focused on achieving this goal. For the past 7 years, the export earnings from 66 investment projects implemented by the Development Bank of Kazakhstan amounted to 4.1 trillion tenge. The bank financed 19 exporters for 707 billion tenge. In the last 3 years, KazakhExport has increased the exporters' insurance by 3.4 times – to 135 billion tenge. In general, the number of export contracts supported over the past year, despite the pandemic, amounted to about 800 billion tenge.

The Holding’s Department for Ensuring the Financial Affordability of Housing implements the Nurly Zher Housing Program, having sponsored the commissioning of more than 5 million square meters of housing which is equivalent to 75 thousand apartments.

– In the past two years, the Holding has been transformed. What results do you expect from this process?

– Last year, we carried out a major reform on the instructions of President Kassym-Zhomart Tokayev. It was necessary to optimize the Holding’s housing department and increase the efficiency of the housing program. We have created a single operator of housing construction – the Kazakhstan Housing Company – by combining three subsidiaries – Baiterek Development, Kazakhstan Mortgage Company, and Housing Construction Guarantee Fund. This allowed us to raise capital on market conditions, mix it with current financial flows and reduce the cost of funding for private real estate developers.

In the future, the Single Operator will take on even more functions, supporting businesses on every stage – from planning to engineering, digital monitoring, and maintenance.

House Construction Savings Bank was transformed into Otbasy Bank, a new institution for development and support, which will carry out accounting, staging, and distribution of housing. To accomplish this task, Otbasy Bank will have to take over the akimats’ function – to form and maintain the waiting lists for homes. Otbasy Bank will provide a wide variety of services for families without housing.

It took us more than six months to implement another presidential order – to merge KazAgro Holding and Baiterek Holding. Baiterek Holding has acquired three subsidiaries of KazAgro – the Agrarian Credit Corporation, KazAgroFinance, and Fund for Financial Support of Agriculture.

Agrarian Credit Corporation continues crediting investment projects, funding credit partnerships, banks, microfinance organizations, and leasing companies. It also lends money for spring field and harvesting works.

KazAgroFinance is the largest leasing company, holding about 90% of the agricultural machinery leasing market. It helps farmers to lease agricultural machinery and equipment on preferential terms.

The Fund for Financial Support of Agriculture supports start-up entrepreneurs and small farms. It provides microloans and guarantees for loans from private financial institutions. In addition, the Fund helps subsidize insurance payments in agriculture.

After the acquiring of KazAgro in 2021, the Holding enters a new stage in the strategic development and gets new opportunities for supporting entrepreneurship, providing people with housing, and developing the agro-industrial complex. New activities and the latest changes in documents of the state planning system are reflected in the updated Development Strategy, which will be submitted for approval by the Board of Directors in May 2021.

– What is the Holding's relationship with the country's President and the government?

– We implement several state programs and also execute the President’s orders. For example, we support projects under the State Program for Industrial and Innovative Development, which was initiated by Nursultan Nazarbayev to diversify the national economy. Our task is to provide financing for large, export-oriented projects in the raw materials and manufacturing industries. By the instruction of Nursultan Nazarbayev, the supported enterprises must create new jobs for Kazakhstani people. Development Bank of Kazakhstan, the Holding’s subsidiary, supported projects for more than 0.5 trillion tenge in 2015-2019. Last year, the financing amounted to 105 billion tenge.

The commissioned 20 enterprises produced goods for 2.5 trillion tenge, their export earnings amounted to 1.8 trillion, 345 billion tenge of taxes were paid to the budget, and 5.5 thousand jobs were created.

One of the major projects that makes me and my colleagues proud is the construction of the Saryarka gas pipeline, which was one of the Five Social Initiatives of Nursultan Nazarbayev. This is a mega-project implemented in a short time with a huge economic, social, and environmental effect. Several million Kazakhstanis will be provided with gas. The ecological situation in our cities, including Nur-Sultan, will improve. Baiterek Holding accumulated financial resources to implement this project. Its total cost amounted to 267 billion tenge, with 51 billion provided by Development Bank of Kazakhstan, another 40 billion were provided by Baiterek Venture Fund – only 34% of the project cost. In addition, DBK was able to attract the Eurasian Development Bank to finance the project, which invested the same amount as our bank.

I would like to tell you about two programs that are being implemented on the initiative of Nursultan Nazarbayev and President Kassym-Zhomart Tokayev. These are “Bakytty Otbasy” and “Shanyrak” programs.

The Bakytty Otbasy Program is being implemented on behalf of Nursultan Nazarbayev through the Otbasy Bank. The program provides an opportunity to purchase an apartment for single-parent families, families with four or more children, and families raising children with disabilities.

The terms of the program are as favorable as possible: the loan is issued at a 2% annual rate for up to 20 years with a down payment of 10% of the apartment’s total cost. We have already issued more than 10 thousand of such loans, which means that 10 thousand Kazakhstani families have received the opportunity to live in their own apartments. This program has proven to be effective and will be continued.

The Shanyrak Program is being implemented on behalf of President Kassym-Zhomart Tokayev. With this program, we want to help those in need of housing who are on the waiting lists of local executive bodies. The terms of this program are also preferential – with a rate of 5% per annum for up to 20 years with a down payment of 10%. To date, loans under this program have been issued to almost 8 thousand families.

We also care about young people. Leaders of our country rely on them. The youth of independent Kazakhstan is well educated and full of creative ideas. Kazakhstani startups offer interesting projects. We are inspired by their perseverance and want their success to go beyond Kazakhstan. Over the past two years, we have been actively working on this.

As a result, we have established cooperation with the largest American and Singaporean venture capital funds – 500 Startups and Quest Ventures, and created joint funds with them. We launched the Kazakhstan Digital Accelerator, which helps our youth to promote their projects abroad. Recently, the results of the KDA’s second group of start-ups have been announced.

– What are the current goals for Baiterek Holding and how has the Holding's strategy been changed?

– In light of recent events, when hundreds of enterprises suffer large losses or even close down due to the coronavirus pandemic, when people lose their jobs, I believe that business and people need the support of the Holding now more than ever.

Baiterek Holding will continue to support the manufacturing industry and the economy of Kazakhstan, increasing labor productivity and creating jobs. We are very proud of our projects that are important for the country and the people of Kazakhstan. This year we started to work in a completely new way, we have become a powerful holding.

– In conclusion, I would like to wish you and Baiterek Holding to achieve all your goals. Thank you very much for the interview.