Shaimerden Chikanayev, Partner at GRATA International, Shared His Expert Opinion in an Interview with Inbusiness.kz

1) You criticize the PPP system in Kazakhstan, indicating that most of them are represented by small projects: kindergartens and the service sector. Meanwhile, the largest PPP project is the construction of BAKAD, where obligations to concessionaires are presented in foreign currency. In light of recent events that have led to an increase in the dollar exchange rate, only for this project the state's obligations have increased in proportion to the dollar exchange rate. Perhaps, on the contrary, it is worth implementing small projects with local investors without being tied to the dollar exchange rate?

-PPP as a special mechanism for attracting private capital and competences is not initially intended for small projects, since the labor and time costs for selecting a suitable project, holding a competition, and agreeing on a balanced PPP agreement suggest that PPP makes sense only for the implementation of large projects. PPP is like a high-precision and expensive tool that cannot be used to hammer nails. Kindergartens, the service sector and other projects that do not involve the investor actually investing not only money, but also rare technologies and competencies to create and operate a new public infrastructure facility, can and should be implemented within the framework of the Public Procurement Law, and not the PPP Law. The fact that in BAKAD the state took on the currency risk does not mean that PPP is bad. PPP assumes that the parties agree on each specific project who will take on what risk. If the state in this case took upon itself the currency risk, then this was either required and justified taking into account the balance of risks, or it was a shortcoming of the state representatives. That is, we need to look at each specific case, and not all PPP projects with the same brush.

2) Generally speaking, after the January events, to what extent has Kazakhstan lost its investment attractiveness for large investors, in your opinion?

-Kazakhstan has definitely lost a lot of its “gloss” due to the January events, plus the war in Ukraine creates a bad image for the entire region of the former USSR, but it can still be corrected and attract foreign investors if the country’s leadership finally starts political and economic reforms in deeds, not in words, and also ensures truly independent justice. The message of the President of the Republic of Kazakhstan dated March 16 gives grounds for optimism.

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Author: Shaimerden Chikanaev, partner at GRATA International, Almaty.