Private Equity are beneficial to everyone: QIC Chairman on the development of the Private Equity market in Kazakhstan
Qazaqstan Investment Corporation (QIC) is the only state institution in Kazakhstan that develops the Private Equity market. The corporation attracts foreign capital and contributes to the economic diversification of the country. Thanks to the activities of QIC, 23 thousand jobs were created and supported throughout Kazakhstan. Chairman of the Board of QIC Yerbolat Zholat told the correspondent of Kazinform agency about the work of QIC and further prospects for the development of Private Equity.
QIC is the only state institution that develops the Private Equity market in Kazakhstan. What is the importance of developing Private Equity? What is the international experience? How has this market been developing in recent years?
QIC has been operating in the market since 2007, fulfilling an important mission to attract foreign investment to Kazakhstan. Private Equity (PE) or direct investment is not yet fully appreciated in Kazakhstan, although international experience shows a significant contribution of PE to economic growth and job creation in those countries in which it is actively used. Private Equity are beneficial for both the state and business, accelerating its development through access to capital.
The Private Equity market in Kazakhstan is growing thanks to international partnerships and investment funds. QIC uses the best international practices to attract foreign capital. One of the key objectives of QIC is to promote economic diversification through the creation of private equity funds.
As of today, there are 17 funds in the QIC portfolio. At the same time, for every dollar of its own funds, QIC attracts over $2 from international partners who invest in Kazakhstani projects. In total, QIC has implemented 120 projects, creating and supporting 23 thousand jobs.
Based on the experience of which countries was the corporation created?
International examples of successful investment companies such as Mubadala from the UAE and the American IFC demonstrate the importance of public institutions in stimulating sustainable economic development. These structures, like QIC, play the role of catalysts, attracting resources, providing expert advice and contributing to the creation of a favorable investment environment.
QIC strives to follow the best international practices, attracting foreign investment, and contributing to the sustainable development of the economy of Kazakhstan.
As far as I understand, similar Arab funds were created to diversify the economy in order to invest in some third-party projects that can make a profit there, except for oil. And in which industries does QIC have priority?
QIC is a subsidiary of the Baiterek Holding, one of the key tasks of which is the development of the economy of Kazakhstan. In turn, QIC contributes to these goals by focusing on the development of key sectors of Kazakhstan's economy.
The investment projects that QIC is considering include those implemented by strong teams with leading positions in the market. Priority is given to export-oriented companies with high growth rates and margins, as well as projects with low sales risks. Important conditions are a high degree of project development and potential stability in the market.
Among the priority sectors in which QIC invests are manufacturing, energy, infrastructure and agriculture.
The terms of investment from QIC provide for amounts of up to 15 billion tenge with an investment period of up to 10 years. QIC offers flexible financing tools, with a capital participation rate of up to 49%. These conditions make QIC an attractive partner for long-term projects.
In addition to the private equity market, QIC is actively developing the venture capital market. Tell us, what kind of work are you doing in this field?
QIC is focused on the development of the venture capital market in Kazakhstan, supporting startups, business angels and management companies. In 2022, QIC established a subsidiary, BGlobal Ventures, to support startups and develop technology entrepreneurship. Through training programs such as Kazakhstan Digital Accelerator, the company cooperates with promising startups, providing them with access to financing and international experts.
It is worth noting that three of the 17 QIC funds are venture capital funds. Among them, Quest Ventures Asia Fund II, 500 Startups Global fund V and Da Vinci Emerging Technologies Fund III. These funds finance, among other things, Kazakh startups at early and late stages, supporting their growth and scaling.
QIC is also actively cooperating with Astana Hub and private players to strengthen the regional startup ecosystem. We support export-oriented IT projects and plan to participate in new venture funds, focusing on Central Eurasia and attracting international investors.
These initiatives are aimed at supporting domestic technology startups at all stages of their development, contributing to the growth of the venture capital market and strengthening the economy of the region.
How do you assess the current level of awareness and interest of entrepreneurs in Private Equity in Kazakhstan?
The current level of awareness and interest of entrepreneurs in Private Equity in Kazakhstan is gradually increasing, but it remains heterogeneous depending on the sector of the economy and the level of maturity of the business. By the end of 2022, Kazakhstan demonstrated a record inflow of foreign Private Equity (FPE) — 28 billion USD, which is 17.7% more than in 2021. This indicates an increased interest in the Kazakh market from international investors, but the level of awareness of Kazakhstani entrepreneurs about the possibilities of attracting Private Equity requires further improvement.
The main factor limiting the interest of small and medium-sized businesses (SMEs) in Private Equity is a lack of awareness. In the regions, entrepreneurs are more likely to rely on traditional sources of financing, such as bank loans, and rarely use Private Equity opportunities due to a lack of information about the mechanisms and benefits of this tool.
FPE in Kazakhstan is mainly concentrated in large projects such as mining, energy and infrastructure. These industries are actively attracting international capital due to their stability and high profitability, which limits SMEs' access to Private Equity.
What are your development plans? Which industries will you give priority to?
In the coming years, QIC plans to strengthen its role as the leading Private Equity institution in Kazakhstan, contributing to the economic development of the country. The main focus will be on expanding the investment portfolio. QIC will continue to attract international institutional investors and work on projects in key sectors such as processing, infrastructure, agro-industrial complex, energy and technology.
Support for small and medium-sized businesses will remain a priority. QIC intends to provide capital to create jobs, stimulate the growth of SMEs and increase their competitiveness in domestic and international markets. It is planned to create new funds with the participation of international partners and expand existing SME financing programs.
Special attention will be paid to the integration of ESG standards into investment policy. QIC will continue to develop green projects and contribute to the sustainable development of companies in its portfolio. This will support Kazakhstan's national goals to reduce its carbon footprint and transition to an environmentally sustainable economy.
