:00:00. > :00:00.Now on BBC News it's time for Talking Business.
:00:00. > :00:09.Kazakhstan, Central Asia's largest economy, blessed with natural
:00:10. > :00:21.resources like coal, oil and uranium, but when global
:00:22. > :00:23.oil prices fell, this country's fortunes fell, too.
:00:24. > :00:26.Now, it's looking to renewable energy for its next phase of growth,
:00:27. > :00:46.Welcome to Talking Business, and welcome to the Astana
:00:47. > :00:56.This Expo is all about showcasing Kazakhstan's vision for itself.
:00:57. > :00:59.By 2050, the government wants half of this country's energy needs
:01:00. > :01:06.to come from renewable energy, like wind, water and solar power.
:01:07. > :01:09.The man behind this vision, President Nursultan Nazarbayev.
:01:10. > :01:16.He has led Kazakhstan for more than two decades, the capital
:01:17. > :01:25.This Expo is his initiative, the renewable energy
:01:26. > :01:31.Sure, Kazakhstan has lots of wind, water and sunshine, but what it has
:01:32. > :01:34.more than anything else is oil, and coal, so how is that
:01:35. > :01:37.The question I put to Kazakhstan's minister of energy.
:01:38. > :01:39.TRANSLATION: We've created regulations to attract investors
:01:40. > :01:42.into renewable energy and it is working.
:01:43. > :01:47.The sector is becoming more attractive for foreign investors.
:01:48. > :01:51.We've signed an agreement with one of the biggest wind and solar
:01:52. > :01:56.And Chinese companies, all of them want to work with us.
:01:57. > :02:03.But foreign investors tell us that the legislation is not clear,
:02:04. > :02:07.and they are worried about long-term viability of their business
:02:08. > :02:15.operations because of the volatility in the currency and they are
:02:16. > :02:17.concerned that there are not enough incentives being
:02:18. > :02:19.provided by the government for them to invest.
:02:20. > :02:21.TRANSLATION: We understand that foreign companies face certain risks
:02:22. > :02:24.because they will earn their profits in our local currency.
:02:25. > :02:30.We are trying to take the risks away from them by tying
:02:31. > :02:42.So, if the local currency drops, then tariffs will rise.
:02:43. > :02:45.When we speak to local people they said that as admirable as these
:02:46. > :02:47.renewable energy targets are, how are they going to boost
:02:48. > :02:51.Because many people feel it is just boosting the image of Kazakhstan.
:02:52. > :03:04.TRANSLATION: The cost for renewable energy production
:03:05. > :03:06.has fallen by 40-60% and by the year 2020 it
:03:07. > :03:13.We're saying within a few years the cost of renewable energy will be
:03:14. > :03:15.close to the cost of electricity which today we can generate
:03:16. > :03:22.There will always be pessimists, and there will be optimists
:03:23. > :03:35.How are you going to look after the people who are employed
:03:36. > :03:38.in old fuel economies like the coal sector and the oil and gas sector,
:03:39. > :03:41.TRANSLATION: The transition will happen step-by-step,
:03:42. > :03:48.Within this time we can diversify our production.
:03:49. > :03:53.Professions can be changed, lives can be changed.
:03:54. > :03:59.We don't expect it to be easy, we need to change the culture.
:04:00. > :04:04.It's important for our people to understand the benefits of using
:04:05. > :04:09.I'm in the energy best practices area.
:04:10. > :04:12.This is where foreign and domestic companies are showcasing their ideas
:04:13. > :04:17.and solutions for innovation in this sector, there's a reason
:04:18. > :04:19.they are here, the potential in Kazakhstan is huge.
:04:20. > :04:25.Joining me now to talk about this is the governor
:04:26. > :04:31.of Astana International Financial Centre.
:04:32. > :04:36.The managing director of energy and natural resources at the EBRD.
:04:37. > :04:38.And the CEO of GE Central Asia and Azerbaijan.
:04:39. > :04:47.I want to start with you, why the urgency for Kazakhstan
:04:48. > :04:49.to get to these renewable energy goals and targets?
:04:50. > :05:03.We are known as an oil-rich country and we produce 1.6 million barrels
:05:04. > :05:06.per day and we are going to double it in the next 15-20 years.
:05:07. > :05:08.But the recent events and the dramatic shift
:05:09. > :05:12.in our commodities prices, especially in the oil sector, even
:05:13. > :05:15.with the new technology factors, like Shell oil for example,
:05:16. > :05:23.It gives us ideas that probably the era of high
:05:24. > :05:25.prices for oil is over, from one side.
:05:26. > :05:32.And from the other side, the other disruptive technologies,
:05:33. > :05:36.for example, like new automobile tendencies, like driverless cars,
:05:37. > :05:43.I think that this is a paradigm shift and everyone realises
:05:44. > :05:49.the technology is shifting and changing and disrupting.
:05:50. > :05:51.And in Kazakhstan we understand it and we should be preparing
:05:52. > :05:55.And for the other side it was a business model
:05:56. > :06:04.Is that your sense, working here with the EBRD, there is a desire to
:06:05. > :06:12.move into this direction? Absolutely. If I can add there is a
:06:13. > :06:18.big commitment here under Paris to reduce emissions, and while this is
:06:19. > :06:21.an oil producing country, 70% of the electricity system here runs on coal
:06:22. > :06:27.and the power sector which is electricity and heat contributes 80%
:06:28. > :06:31.of the carbon emissions to this country, so if, in tandem with the
:06:32. > :06:35.paradigms shift, it is essential that Kazakhstan will have two
:06:36. > :06:38.transition away from coal, and really gas and renewables is the
:06:39. > :06:43.only way that they can do this in a substantial material way, and I
:06:44. > :06:49.think also the sharp decline that we have seen in the cost of renewables
:06:50. > :06:52.recently in particular solar. Kazakhstan adopted in 2013 the Green
:06:53. > :06:59.economy transition concept, and between then and now, so the prices
:07:00. > :07:02.have dropped almost 80%, so there is also an economic imperative to
:07:03. > :07:07.launch into this next phase. From a corporate perspective, what kind of
:07:08. > :07:15.opportunities are you seen in Kazakhstan, given there is this push
:07:16. > :07:20.in this direction? The strategy is very well thought through. It is
:07:21. > :07:26.very ambitious, it sounds today very ambitious but this is a very
:07:27. > :07:33.long-term strategy. If we continue to work towards that actively, all
:07:34. > :07:37.the participants, the government, investors, and producers, we can get
:07:38. > :07:44.there, so I see this as realistic. In terms of renewables in the
:07:45. > :07:49.overall development of Kazakhstan, I understand that this Expo will turn
:07:50. > :07:54.into a massive financial centre at once it has been completed, but how
:07:55. > :08:00.much will renewables make up as part of the overall strategy for
:08:01. > :08:04.Kazakhstan in the future? First of all it is a change in mind, in the
:08:05. > :08:09.country, the level of central government and local government, and
:08:10. > :08:14.the people of Kazakhstan, so I think the idea of this Expo is the future
:08:15. > :08:18.of energy, and from one side this is the message to the external
:08:19. > :08:24.communities that Kazakhstan understands and wants to adopt any
:08:25. > :08:31.renewable technologies in Kazakhstan, and the deep place for
:08:32. > :08:36.this in Central Asia. -- the place. But also to say to the people of
:08:37. > :08:40.Kazakhstan, a new way of thinking, about how to use the energy and how
:08:41. > :08:48.to think about the future energy. And our strategy until 2050,
:08:49. > :08:52.renewable energy reach should be 50%, which is a very ambitious goal,
:08:53. > :08:58.but I think this is like the way which we will start from now. We
:08:59. > :09:03.would like to use this opportunity in terms of this Expo to create a
:09:04. > :09:10.legacy, and the legacy of Expo will not just be the physical
:09:11. > :09:12.infrastructure, but kind of the new understanding and new perception of
:09:13. > :09:18.Kazakhstan in terms of the development of green technologies.
:09:19. > :09:22.From your experience of overseeing these projects in Kazakhstan, do you
:09:23. > :09:28.get the sense that these targets are achievable? Absolutely. They are
:09:29. > :09:31.achievable, but as he said very correctly, this will lead a
:09:32. > :09:36.coalition of interests, public and private. We really need the
:09:37. > :09:40.policymakers in Kazakhstan to set the framework that will make these
:09:41. > :09:44.projects viable. Credible. We need the investors and to be honest I
:09:45. > :09:49.think the Expo has been fantastic in that regard, just between breakfast
:09:50. > :09:52.and hey, I ran into three different investors that I would not have
:09:53. > :09:56.expected to see in Kazakhstan, and it is very clear that this is going
:09:57. > :10:01.to be a message to the internal policymakers, time to get the act
:10:02. > :10:05.together, to put the frame work together, and also the external
:10:06. > :10:08.investing community to say that Kazakhstan is open for business, and
:10:09. > :10:14.for people like ourselves, this is music to our ears. This project will
:10:15. > :10:23.be doable if you have a real kind of financial institution to implement
:10:24. > :10:26.it. Talking about green credits, emission trading system, these
:10:27. > :10:29.ingredients will be part of the new green financial system in Kazakhstan
:10:30. > :10:36.which will allow us to bring global and regional investors. Looking into
:10:37. > :10:41.Kazakhstan, what is your sense of what else needs to be done? We did
:10:42. > :10:46.our share in the form of legislation, as much as we can. And
:10:47. > :10:49.consulted the government. It is very important, what was said, because
:10:50. > :10:54.this strategy but this is more of a vision. The vision doesn't need to
:10:55. > :11:00.have all the steps. What has been done in the last three years, in
:11:01. > :11:04.some cases it seemed to be investors, and for us as producers,
:11:05. > :11:11.slow, it a much longer term game which we are in. What I would say,
:11:12. > :11:17.we have a clear vision for the 3%, that is doable and that, with all of
:11:18. > :11:24.these things coming together finally, I think we will get to the
:11:25. > :11:27.finishing line. That is a good point, we will get back to our
:11:28. > :11:31.discussion but now I want to show you some of the challenges that we
:11:32. > :11:36.have seen with trying to get to the renewable energies vision here in
:11:37. > :11:42.Kazakhstan. This is a report from outside of Astana. This is what
:11:43. > :11:46.Kazakhstan says it wants power generation to look like. Massive
:11:47. > :11:54.wind turbines, rotating above the Central Asian steps, powering homes
:11:55. > :11:58.and offices and schools. This into this, that is the sound of wind
:11:59. > :12:03.going at 60 kilometres per hour and that is not even at full speed. I'm
:12:04. > :12:07.not even sure I can keep standing, I'm worried about being blown away.
:12:08. > :12:15.But this wind is one of the key reasons why Kazakhstan is so well
:12:16. > :12:21.suited for new oval energy. This wind farm is the first of its kind
:12:22. > :12:24.in the country, run by state-owned firms, and right now renewables make
:12:25. > :12:28.up less than 1% of Kazakhstan's energy production, and there is room
:12:29. > :12:34.for growth, but are unlikely to come from local companies. The main
:12:35. > :12:41.problem for the renewable energy equipment is from foreign countries,
:12:42. > :12:45.because from Germany and China, we cannot buy much of them because of
:12:46. > :12:50.the financial crisis, but foreign investors can bring this equipment.
:12:51. > :12:55.And that is what the Astana Expo is for, the grand show that Kazakhstan
:12:56. > :12:59.has put on for foreign investments. But that doesn't mean they find it
:13:00. > :13:04.any easier as I found out from California -based Primus power which
:13:05. > :13:14.builds energy storage solutions. The local currency devalued in 2016 more
:13:15. > :13:19.than 65% which gives very negative effect on renewable project because
:13:20. > :13:26.all the equipment, even small bolts, are imported, and when in the
:13:27. > :13:30.investor comes there is too much uncertainty, the government did not
:13:31. > :13:38.set up proper rules. This is where you live? It is not just investors,
:13:39. > :13:44.many locals also feel the strategy is not well thought out but few dare
:13:45. > :13:48.to speak out. This is when they sentence you to three years of no
:13:49. > :13:54.public speaking and not being able to organise a protest? This lawyer
:13:55. > :14:03.and activist tells me it is all the show. TRANSLATION: They've built a
:14:04. > :14:07.few power why not everywhere? And why not cheaper so that people can
:14:08. > :14:12.actually use it? But none of this is changing everyday life, 80% of
:14:13. > :14:17.Kazakhstan still uses coal because it is cheap, and until there is a
:14:18. > :14:24.clear road map, Kazakhstan's lofty vision may remain out of reach. So,
:14:25. > :14:28.as you have seen, there is still perhaps a long way to go before
:14:29. > :14:31.Kazakhstan fully realises some of these ambitious goals and the vision
:14:32. > :14:34.it has set for itself. To discuss the challenges we can get back to
:14:35. > :14:50.our panel. I'd like to pick up with you again,
:14:51. > :14:54.in some of our travels across the country, we have consistently heard
:14:55. > :14:58.from foreign and domestic companies, looking to invest in the renewable
:14:59. > :15:04.energy sector, that it is a very noble goal but it is still very
:15:05. > :15:07.difficult on the ground. One of the things they pointed out, the
:15:08. > :15:12.volatility in the currency makes it very difficult for businesses to
:15:13. > :15:16.have a firm plan about how they go about doing this autumn they want to
:15:17. > :15:20.do it but it is very challenging. What would you say to foreign and
:15:21. > :15:26.domestic companies are keen to invest? Kazakhstan is very
:15:27. > :15:31.well-prepared to absorb any external shocks and we have created a
:15:32. > :15:37.national fund which consists from the oil revenues produced in
:15:38. > :15:46.Kazakhstan, from one side, and we have over 62 US billion dollars. The
:15:47. > :15:51.exchange rate policy, we have consistent monetary policy and we
:15:52. > :15:56.moved to the restructure all forms and that means a change in mind and
:15:57. > :16:06.in legislation, and we move to English, laws for example. From the
:16:07. > :16:09.other side, a lot of privileges and tax exemptions for renewable energy,
:16:10. > :16:13.and all of these key ingredients will help really to do the
:16:14. > :16:21.investment to make commercially viable. Is the short-term pain worth
:16:22. > :16:27.the long-term five Velotec? Is it viable? Absolutely, we have learned
:16:28. > :16:31.lessons from the short-term pain, one of them is the challenges of
:16:32. > :16:33.foreign exchange risk and the devaluation of the currency which
:16:34. > :16:39.was the right way in light of the shuttle reforms which were described
:16:40. > :16:45.ash structural. It caught some of our projects quite unawares and with
:16:46. > :16:50.some costs. The foreign exchange risk is a very valid one, especially
:16:51. > :16:54.when you have foreign investors coming in investing in a product
:16:55. > :16:58.which is really a local revenue. There are a few ways to solve this
:16:59. > :17:01.issue, and this is not unique to Kazakhstan, we have seen this in
:17:02. > :17:05.many other countries. One of the ways is index eight, and I think the
:17:06. > :17:10.government is ready, especially if they move to a competitive auction
:17:11. > :17:12.process, for the next renewable projects, where they feel
:17:13. > :17:16.comfortable that they are getting the best possible market price and
:17:17. > :17:23.that there will be more open to indexing is, say, the dollar. There
:17:24. > :17:28.is also reshaping the local capital markets, this is something we are
:17:29. > :17:33.focused on. We want to do more lending and we believe that projects
:17:34. > :17:37.that are generating local currency and local revenues should be
:17:38. > :17:41.financed with local currency and this is another area we are focusing
:17:42. > :17:47.on here. It is expensive, in terms of the tariffs in wind power
:17:48. > :17:51.compared to fossil fuel power, is far cheaper to consistently get your
:17:52. > :18:00.power and electricity from fossil fuels. You can see the hesitation.
:18:01. > :18:04.The economy is very energy intensive, the goods produced here
:18:05. > :18:14.need electricity, and it is very cheap today, so you can't compete
:18:15. > :18:21.with the electricity centre and coal -based things. With wind -based
:18:22. > :18:25.production. It is a very difficult equation to convince the investor in
:18:26. > :18:31.that environment but this is going to be, as we said, going into macro
:18:32. > :18:36.directions, from one side of gradually the tariffs will be going.
:18:37. > :18:42.We have no other choice. To make sure that it fits the economy and
:18:43. > :18:46.the challenges of the economy, and at the same time, the other side, as
:18:47. > :18:50.producers we are doing everything to make it cheaper. It should not just
:18:51. > :18:54.be like a financial comparison to say this is cheap and this is more
:18:55. > :18:59.expensive. Everyone realises that it will be kind of a global
:19:00. > :19:05.requirement, to any industrial production, if you produce it with a
:19:06. > :19:08.not very green technology, you will be punished anyway from one side,
:19:09. > :19:14.that is unavoidable. It should be done like this. On the other side,
:19:15. > :19:20.let's see inside of Kazakhstan. If we are still using not very
:19:21. > :19:26.environmentally friendly technology it means a cost to the social
:19:27. > :19:30.inclusion and to the different diseases and the problems of health
:19:31. > :19:36.scares and if you can collate everything then we will see that it
:19:37. > :19:39.is really costly. 75% of the economy is based on fossil fuels and people
:19:40. > :19:43.are worried about losing jobs in the coal sector and they hear this
:19:44. > :19:46.vision that is coming from a top-down approach, and they are
:19:47. > :19:50.wondering what does this actually mean for them and their livelihood.
:19:51. > :19:56.That is what I'm trying to get from you, to understand, how do you
:19:57. > :20:01.manage the expectations of the local people and make sure that the vision
:20:02. > :20:04.actually benefits everyone? That is why we are talking about this
:20:05. > :20:09.commitment for the long-term, we can't do it overnight. In the first
:20:10. > :20:13.phase, definitely, we have to use our competitive advantage. We have a
:20:14. > :20:22.high carbon energy here and we can use nuclear energy and we can use
:20:23. > :20:26.the clean tech. With the coal industry, we have new destructive
:20:27. > :20:31.clean technology and we are going to use it. You energy is new
:20:32. > :20:35.opportunities, there will be opportunities for new jobs and
:20:36. > :20:39.different kinds of jobs, but there will be opportunities for jobs and
:20:40. > :20:43.what is important, the government is focused on vocational training and
:20:44. > :20:47.skills development, these economic inclusion actions which need to be
:20:48. > :20:50.taken and I think Kazakhstan is very progressive in that way, one of the
:20:51. > :20:57.few countries that we know amongst our countries that has adopted a
:20:58. > :20:59.gender action plan, which has a very large component of skills
:21:00. > :21:09.development, access of jobs for women. I'm confident that Latimer --
:21:10. > :21:14.Kazakhstan will be able to make the transition. What else to you think
:21:15. > :21:19.companies need to see from the government, policymakers, to help
:21:20. > :21:24.make this vision a reality? We need to have the guarantees, the
:21:25. > :21:29.long-term financing in place, to achieve that goal, that is obvious
:21:30. > :21:35.for everyone. The most important thing is that people who understand
:21:36. > :21:38.what they are doing in the government, and it was mentioned at
:21:39. > :21:45.the beginning that this is a well thought strategy. The fact it goes
:21:46. > :21:49.in a Evolution, not jumping through certain stages, it takes longer, but
:21:50. > :21:57.we will get there. 21st-century is about efficiency. It is not about
:21:58. > :22:00.selling more things into Kazakhstan, if Kazakhstan has reserves
:22:01. > :22:06.technically speaking, they do not need extra capacity for a short-term
:22:07. > :22:11.or mid-term future, but at the same time there are ways to improve the
:22:12. > :22:18.efficiency of existing assets. Thanks for joining us. That is it
:22:19. > :22:56.for me. We are leaving you with shots of the Astana Expo. Enjoy.
:22:57. > :22:57.A very good afternoon. Damages have been climbing, the