Kazakhstan: Capannelli (ADB), hub for Italian companies in Central Asia

Astana - Kazakhstan was becoming a regional leader for Central Asia and should take the full benefit from China's led One Belt One Road initiative becoming an attractive place for foreign investors, especially italian companies. AGI has interviewed Giovanni Capannelli, the Asian Development Bank Country Director for Kazakhstan, who was appointed to that position in September 2016. "Numerous Italian companies are interested in coming to the Kazakhstan's market, especially in the sectors of renewable energy and smart cities". Capannelli, an Italian national, joined ADB in 2002. Prior to this appointment, he was ADB's principal economist in the Central and West Asia Department and had held various other positions in ADB and the ADB Institute. During the interview, Capannelli noted that the ADB would establish regional knowledge hubs in Almaty that would promote regional cooperation in small and medium enterprise (SME) support and water management systems for the whole Central Asian region.

What are the prospects of future project of ADB in Kazakhstan?

Cross-integration with the Silk Road. "ADB plans to considerably expand its operations, from a focus on the transport sector and support to financing SMEs to a number of other sectors and areas such as water management systems, irrigation, agriculture, health, municipal services, and energy. Moreover, we plan to contribute to the production of knowledge in support of ADB operations and to assist the country in fulfilling its strategic targets. Kazakhstan has the ambition of becoming a regional hub. In security, for example. Kazakhstan tried to attract the United Nations agencies and to establish decision making on security in the country. Kazakhstan is an upper middle-income country and it can share its prosperity with other countries in Central Asia. One can see that extreme poverty is no more present in Kazakhstan. Why should ADB invest in Kazakhstan? By investing in Kazakhstan, we can generate positive externalities for other countries in the region through the provision of regional public goods. Kazakhstan can help to support and organize the region and generate positive spillovers for Central Asia".

Would you consider Kazakhstan to be a leader in Central Asia?

"In economic development, Kazakhstan is certainly a leader. The country is leader in terms of FDI (foreign direct investment) attraction focused on natural resources. But if you look at the SME competitiveness, Kazakhstan may be falling behind other countries in the region. I would say, for example, that the Kyrgyz and Uzbeks have SMEs which are more competitive than SMEs in Kazakhstan in a number of sectors. With regards to China, let me explain. First of all, this is a great opportunity for Kazakhstan to capture. China is investing a lot of time, money and resources and under this leadership of Xi Jinping and it will likely continue to expand its investments through the One Belt - One Road platform and other initiatives. In Central Asia China enjoys a friendly relationship. The only challenge for China is to find a good balance with Russia in Central Asia. The China's investments will help to solve some of the key problems of Kazakhstan's economy such as economic diversification. Kazakhstan's economy is too much concentrated on hydrocarbons. On another hand, China is having an excess capacity in various industries. They have an interest to relocate such industries in Kazakhstan. However, if you go to Kyrgyzstan and you ask them "Are you happy with the Chinese investment?" they may have a mix of responses because China is also exporting polluting industries. Kazakhstan should be wise enough to have a dialogue with China explaining its interest to promote sustainable growth and we the importance to care about the environment".

Do any Italian companies or entities participate in the ADB projects in Kazakhstan?

One Italian company Todini participated in the construction of one of the CAREC (Central Asia Regional Economic Cooperation) roads in 2013-2016. They did a great job, contributing to the overall success of the project. Kazakhstan is very keen in promoting renewable energy and ADB is assisting in this by project financing. I know there are several Italian companies in this sector are interested in investing in Kazakhstan. Another area is municipal services and creation of smart cities, where Italian companies have expertise and interest as well. I understand Italian companies are usually extremely happy of working in Kazakhstan. They are well integrated in the country: mentality-wise Italians seem to find Kazakhs to be good partners.

Do you think Kazakhstan is a good place for expats and foreign companies? Especially in the prospects of long-term investments and focus on manufacturing industry.

"Kazakhstan is a relatively small market of 17 million. But if you think that you can serve the market of the Eurasian Economic Union (EEU), the proposition to invest in Kazakhstan becomes more interesting. The EEU is making progress in many areas. If you produce manufacturing products in Kazakhstan you can easily export it across the Union. More investments are expected to contribute to the manufacturing sectors. To attract new foreign direct investment and retain existing ones, there should be proper government policies and focused intervention. Tourism potential is also strong in Kazakhstan, as well as agriculture and agribusiness, which ADB is planning to largely support in the next few years". "ADB - he added - started in 1994 in Kazakhstan. This year we are introducing a new 5-year country partnership strategy for Kazakhstan until 2021. We will support irrigation and the agriculture sector, water management systems, municipal services, including water management, waste management, district heating, urban transport systems, and so on. We will also promote the health sector development with a focus on primary healthcare by rehabilitating or creating new policlinics in the regions also through public-private partnerships. The energy sector is also interesting. And, as mentioned before, we are very focused on increasing knowledge support in Kazakhstan. We plan to establish regional knowledge hubs in the Almaty branch office and serve countries in region in support of our operations in two clusters: water management systems, irrigation, agriculture, and agriculture development; and Entrepreneurship and SME development".

The Asian Development Bank (ADB) began supporting the transitioning economy of Kazakhstan in 1994, providing much-needed assistance in agriculture, education, finance, and the delivery of social services.