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48 I Eurasia bne June 2018
formal reduction of the number of state entities, Kazakhstan has in fact seen an increase in the state’s presence in the economy, for example with the creation of large scale national companies such
as Kazakh Invest and Kazakh Tourism in 2017, Konurov’s figures indicate. Both companies were established for the sole purpose of attracting foreign investment into the country as the government recognised the need to push for economic
ing price. Only the remaining 25% (just 29 companies) were sold at above the starting price.
"The units should be sold only at public auctions, where the winner should
be the one who offers the highest price,” Bikebayev said. “Targeted sales, e-tenders and tenders should only be used in exceptional cases, because with these sales methods many potential
Reports regarding the sales of stakes in specific government-owned compa- nies have been rare. One of the latest examples featured the sale of 100% of Euro-Asia Air, an Atyrau-based Kazakh airline that operates passenger flights to Russia, Turkey and the United Arab Emirates as well as between Central Asian countries. No information about the buyer of Euro-Asia Air, owned
by state oil producer KazMunai-
Gas prior to the sale, was publicised. The company was sold for KZT11.8bn in a two stage bidding process – sig- nificantly lower than the KZT15.5bn price offered for the airline in 2016.
IPOs to perform better?
As part of the privatisation initiative, the authorities previously said they planned to sell stakes of at least 25% in 45 large state-owned companies, including
the seven IPOs. The Kazakh govern- ment expects the IPOs to yield between $3.5bn-$5.5bn by the end of the drive. If successful, the amount would certainly surpass the funds raised from sales of smaller state-owned entities.
While what happens to the smaller companies earmarked for sale should not impact the IPOs, the lack of clear direction demonstrated within the privatisation plan does not bode well for them either. Signs of disorganisa- tion have already been clear for a while now. The IPOs were originally set to launch in 2017, but Kazakhstan’s sover- eign wealth fund Samruk-Kazyna has continuously postponed its goals or has been unclear about its future deadlines. It seems to have settled on floating two companies in the fourth quarter of 2018 – national carrier Air Astana and the world’s second largest uranium miner Kazatomprom, though reports citing anonymous sources suggest interna- tional listing for the latter company might get postponed again.
Other IPOs of large state-run com- panies possibly planned for this year include Kazakhtelecom, the country's largest telecom operator. The rest of the IPOs – namely of KazMunaiGas, Kaz- post, Samruk Energy and Kazakhstan Temir Zholy (KTZ) railway operator – are tentatively set for 2019-2020.
“Kazakhstan has in fact seen an increase in the state’s presence in the economy”
diversification amid low world oil prices. Kazakh Tourism, for instance, is specifi- cally geared towards drawing foreign investment into tourism development, though its plans remain vague aside from being tasked to help the authorities raise the share of tourism in Kazakhstan’s GDP to 8% by 2025 up from 1% at present.
Lack of transparency
The denationalisation efforts have also been generally marked by murky deals. Most tender offers in 2016, for example, mainly involved one or two participants, where often preferential rights for the purchase of a stake in a given company were held by an associate of the company, Aydin Bikebayev, founder of Kazakh legal firm Sayat Zholshy & Partners, was cited as saying by ZONA KZ news agency in 2016.
Nearly 75% of the 114 subsidiaries of national holding companies sold as of February 2018 were subject to sales without any competitive procedures or were sold in auctions at below the start-
buyers may [end up] not participating in the bidding process,” he added, noting that the winners of such sales are not the highest and that “the procedure itself is not sufficiently transparent".
In the light of these details, some Kazakh analysts posit the programme is a facade designed to hand over the companies from official to unofficial state control. They allege that at least some of the private entities and individuals buying the stakes have a long history of receiving state support or have been indirect own- ers of the properties all along, though insufficient transparency concerning the deals would make it difficult to confirm such allegations. If true, however, this would mean that officially transferring the companies into private hands is unlikely to inspire a more competitive environment. As in all post-Soviet Central Asian countries, personal ties and familial associations often stand as a primary determinants in both business ownership and political power in the country.
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