Let’s Talk with Holger Wiefel

Holger Wiefel, the Head of European Bank for Reconstruction and Development regional program: "We are proud of working with the Kazakhstani entrepreneurs"

Holger Wiefel is the regional head of the European Bank for Reconstruction and Development’s (EBRD’s) Small Business Support Programme in Kazakhstan and Mongolia. Holger has lived in Kazakhstan for 3 years implementing EBRD initiatives in Kazakhstan. He was an exchange student at KIMEP in 2003/2004 and got the Best International Student award. Today, another KIMEP student - Mukash Khanym, Master Student of Business Administration program of Bang College of Business at KIMEP University speaks with Mr. Holger. They discuss the differences between the level of business support in Kazakhstan and in Germany, evaluate small business development in Kazakh regions and the opportunities available to entrepreneurs during the crisis.

Mr Wiefel, as far as we know, you are from Germany. What are the differences between Kazakhstan and Germany in terms of business support?

I want to start with things we have in common. I believe we have a similar structure – here and there government institutions and agencies support already existing small and medium-sized enterprises in various sectors of the economy. We have certain priority sectors and themes we have interest in, including technology, innovation and the green economy. In Kazakhstan we have made a great leap forward if we compare the country in 2003 and 2004, when I studied at KIMEP, and now. I came back to Kazakhstan in 2014 and was amazed by the support structure which developed during these years. I was pleased to see many support programmes that have already been adopted or are being drafted in Kazakhstan. The Damu fund has transformed into a perfect institution for developing and supporting entrepreneurs. Congratulations! They have done a fantastic job. They have launched the Baiterek project to support small and medium-sized businesses. They have also transformed the Ministry of Regional Development by merging it with the Ministry of National Economy. I can see that there are a lot of people with innovative ideas at Damu, who can further promote and push small business support to a new level. I’m pleased to be part of all of this and to see this progress. I believe this progress is ongoing and it will continue in the future. In our part at the European Bank for Reconstruction and Development, we are happy to make a contribution to the development of Almaty.

Where is it easier to do business – in Kazakhstan, in Ukraine (where you have worked), or in Germany?

I have to acknowledge that I have prepared for this interview. What we see is that, according to the World Bank’s Doing Business report, Kazakhstan ranked 35th overall, and in terms of starting a business it ranked 45th. Ukraine came 80th for ease of doing business, and 20th in terms of starting a business. Germany is in 17th place on the overall score of ease of doing business and in 114th place for starting a business. This shows that there is diversity in the ecosystems of small and medium-sized businesses. Moreover, Kazakhstan and Ukraine are different for other reasons. Only a few years ago, Ukraine was considered a country that could potentially join the European Union. Now they have declined and are experiencinga civil war. Kazakhstan is located in Central Asia and is very far away from the European market, but is close to the Russian and Chinese markets. Germany is a market of the old economy, which is basically trying to be cross-competitive and continuing to innovate. Compared to Kazakhstan and Ukraine, it is rather a saturated market. I have worked a lot in Ukraine and Kazakhstan, particularly as an adviser. The difference is that Kazakhstan is a super-dynamic country, and at the same time has a stable environment. Local entrepreneurs are very swift in reacting to developments in the global market and they have reacted well to the crisis.They have experienced the devaluation of the local currency but they are doing well despite all these economic difficulties. In terms of these facts, I do believe that Kazakhstan, with government support and support from multinational financial institutions, is managing to adapt well to the changing environment.

Usually Kazakhstan is considered as part of Central Asia. Based on that criteria can you combine Kazakhstan and Mongolia in your job?

That is a good question. Actually, there is no real answer to it. I believe it has happened historically. In different structures, these two countries are considered as part of Central Asia or of wider Asia. For example, the EU is running its operations in Mongolia from its Beijing office. We combine Kazakhstan and Mongolia with Central Asia because they have several things in common – resource wealth, models of economic development, geographic reasons and the fact that the western part of Mongolia is inhabited by ethnic Kazakhs. Probably, these two countries face the same challenges and perhaps they develop their economies in the same way.

You often visit different regions which need to be supported and promoted by EBRD programmes. How would you asses the level of development within these regions of Kazakhstan?

Obviously, we are not talking about Astana and Almaty, which are totally different from other regions in terms of development. Let me tell you about my latest trips. Two weeks ago we visited Kokshetau. It was the first time in 13 years I had visited this particular region as for the first time I went to Burabay when I was a student. We were surprised by the level of business sophistication and we were very happy to meet the regional deputy governor who is responsible for economic development. They are doing a great job. We met officials from the Damu fund, the National Chamber of Entrepreneurs and certain banks to learn about what’s going on with small and medium-sized enterprises. Kokshetau has well-developed agricultural and tourism sectors and they are also trying to establish an industrial zone along the road to Astana. A kind of belt around the capital seems to offer an impressive potential for further growth. Another point of growth is Shymkent. Two or three years ago the government and we launched an initiative to create five or six major cities with a population of over a million people. Shymkent is one of such cities with great success. Last year I went to Kyzylorda, a former capital of Kazakhstan, and found it to be a city of drive, where the right people in the right place are making a very positive impact on business in this particular region. I want to remind you that we have an office there. Kazakhstan is managing to manoeuvre well in these stormy economic waters.

These days Kazakhstan’s small business sector is demonstrating a high level of business performance compared to the other sectors of the economy. Could you please tell us why you think this is happening?

Small businesses, especially those which are on the verge of becoming medium-sized businesses, are developing much faster than big businesses. We would like to see small businesses in regions become active and start substituting imports. Kazakh entrepreneurs themselves know how to thrive in a very competitive and dynamic environment. It’s great to see how people start businesses, work for two or three years, grow, create marketplaces, find niche markets and develop from a buy and sell company into pure producers. It’s amazing to see the statistics of how many people in Kazakhstan actually would love to be entrepreneurs and start their own businesses. The share of these activists is very high – near 35% of labour force. But they need help and support when it comes to acquiring knowledge and sharing experience of setting up innovative processes, improving technology, finding the right marketing tools or new markets, taking your products to export markets, certificating these products in line with international standards and understanding company-building trends whereby business does not depend only on the owner.

Do you think Kazakh entrepreneurs perceive the current crisis as an opportunity for growth and development?

Absolutely. I think we have to perceive it in that way. Any crisis offer a lot of opportunities when it comes to the development of business. Two years ago the situation was in favour of importing goods from Russia. Kazakh entrepreneurs have had to look at cost competitiveness in terms of producing better-quality products and services. I do believe that the majority of Kazakh entrepreneurs are a step ahead in making things and they really want to improve in future and they justly treat the crisis as an opportunity. Definitely, the Kazakh economy was sensitive to economic shocks and it has suffered massively so many entities faced a prospect of bankruptcy and could not survive in the market. However, most of the EBRD’s customers, which are small and medium-sized businesses, are always looking for advice from us. They have maximised their profit and improved sales. That's why the last two years were perfect for us. We are proud of working with such people.