The Asia Financial Crisis: 20 Years Later Talking Business


The Asia Financial Crisis: 20 Years Later

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Now on BBC News it's time for Talking Business.

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Kazakhstan, Central Asia's largest economy, blessed with natural

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resources like coal, oil and uranium, but when global

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oil prices fell, this country's fortunes fell, too.

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Now, it's looking to renewable energy for its next phase of growth,

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Welcome to Talking Business, and welcome to the Astana

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This Expo is all about showcasing Kazakhstan's vision for itself.

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By 2050, the government wants half of this country's energy needs

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to come from renewable energy, like wind, water and solar power.

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The man behind this vision, President Nursultan Nazarbayev.

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He has led Kazakhstan for more than two decades, the capital

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This Expo is his initiative, the renewable energy

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Sure, Kazakhstan has lots of wind, water and sunshine, but what it has

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more than anything else is oil, and coal, so how is that

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The question I put to Kazakhstan's minister of energy.

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TRANSLATION: We've created regulations to attract investors

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into renewable energy and it is working.

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The sector is becoming more attractive for foreign investors.

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We've signed an agreement with one of the biggest wind and solar

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And Chinese companies, all of them want to work with us.

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But foreign investors tell us that the legislation is not clear,

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and they are worried about long-term viability of their business

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operations because of the volatility in the currency and they are

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concerned that there are not enough incentives being

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provided by the government for them to invest.

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TRANSLATION: We understand that foreign companies face certain risks

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because they will earn their profits in our local currency.

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We are trying to take the risks away from them by tying

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So, if the local currency drops, then tariffs will rise.

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When we speak to local people they said that as admirable as these

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renewable energy targets are, how are they going to boost

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Because many people feel it is just boosting the image of Kazakhstan.

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TRANSLATION: The cost for renewable energy production

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has fallen by 40-60% and by the year 2020 it

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We're saying within a few years the cost of renewable energy will be

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close to the cost of electricity which today we can generate

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There will always be pessimists, and there will be optimists

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How are you going to look after the people who are employed

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in old fuel economies like the coal sector and the oil and gas sector,

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TRANSLATION: The transition will happen step-by-step,

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Within this time we can diversify our production.

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Professions can be changed, lives can be changed.

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We don't expect it to be easy, we need to change the culture.

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It's important for our people to understand the benefits of using

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I'm in the energy best practices area.

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This is where foreign and domestic companies are showcasing their ideas

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and solutions for innovation in this sector, there's a reason

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they are here, the potential in Kazakhstan is huge.

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Joining me now to talk about this is the governor

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of Astana International Financial Centre.

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The managing director of energy and natural resources at the EBRD.

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And the CEO of GE Central Asia and Azerbaijan.

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I want to start with you, why the urgency for Kazakhstan

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to get to these renewable energy goals and targets?

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We are known as an oil-rich country and we produce 1.6 million barrels

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per day and we are going to double it in the next 15-20 years.

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But the recent events and the dramatic shift

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in our commodities prices, especially in the oil sector, even

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with the new technology factors, like Shell oil for example,

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It gives us ideas that probably the era of high

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prices for oil is over, from one side.

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And from the other side, the other disruptive technologies,

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for example, like new automobile tendencies, like driverless cars,

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I think that this is a paradigm shift and everyone realises

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the technology is shifting and changing and disrupting.

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And in Kazakhstan we understand it and we should be preparing

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And for the other side it was a business model

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Is that your sense, working here with the EBRD, there is a desire to

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move into this direction? Absolutely. If I can add there is a

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big commitment here under Paris to reduce emissions, and while this is

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an oil producing country, 70% of the electricity system here runs on coal

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and the power sector which is electricity and heat contributes 80%

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of the carbon emissions to this country, so if, in tandem with the

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paradigms shift, it is essential that Kazakhstan will have two

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transition away from coal, and really gas and renewables is the

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only way that they can do this in a substantial material way, and I

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think also the sharp decline that we have seen in the cost of renewables

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recently in particular solar. Kazakhstan adopted in 2013 the Green

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economy transition concept, and between then and now, so the prices

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have dropped almost 80%, so there is also an economic imperative to

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launch into this next phase. From a corporate perspective, what kind of

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opportunities are you seen in Kazakhstan, given there is this push

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in this direction? The strategy is very well thought through. It is

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very ambitious, it sounds today very ambitious but this is a very

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long-term strategy. If we continue to work towards that actively, all

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the participants, the government, investors, and producers, we can get

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there, so I see this as realistic. In terms of renewables in the

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overall development of Kazakhstan, I understand that this Expo will turn

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into a massive financial centre at once it has been completed, but how

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much will renewables make up as part of the overall strategy for

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Kazakhstan in the future? First of all it is a change in mind, in the

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country, the level of central government and local government, and

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the people of Kazakhstan, so I think the idea of this Expo is the future

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of energy, and from one side this is the message to the external

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communities that Kazakhstan understands and wants to adopt any

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renewable technologies in Kazakhstan, and the deep place for

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this in Central Asia. -- the place. But also to say to the people of

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Kazakhstan, a new way of thinking, about how to use the energy and how

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to think about the future energy. And our strategy until 2050,

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renewable energy reach should be 50%, which is a very ambitious goal,

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but I think this is like the way which we will start from now. We

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would like to use this opportunity in terms of this Expo to create a

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legacy, and the legacy of Expo will not just be the physical

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infrastructure, but kind of the new understanding and new perception of

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Kazakhstan in terms of the development of green technologies.

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From your experience of overseeing these projects in Kazakhstan, do you

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get the sense that these targets are achievable? Absolutely. They are

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achievable, but as he said very correctly, this will lead a

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coalition of interests, public and private. We really need the

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policymakers in Kazakhstan to set the framework that will make these

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projects viable. Credible. We need the investors and to be honest I

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think the Expo has been fantastic in that regard, just between breakfast

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and hey, I ran into three different investors that I would not have

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expected to see in Kazakhstan, and it is very clear that this is going

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to be a message to the internal policymakers, time to get the act

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together, to put the frame work together, and also the external

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investing community to say that Kazakhstan is open for business, and

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for people like ourselves, this is music to our ears. This project will

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be doable if you have a real kind of financial institution to implement

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it. Talking about green credits, emission trading system, these

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ingredients will be part of the new green financial system in Kazakhstan

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which will allow us to bring global and regional investors. Looking into

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Kazakhstan, what is your sense of what else needs to be done? We did

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our share in the form of legislation, as much as we can. And

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consulted the government. It is very important, what was said, because

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this strategy but this is more of a vision. The vision doesn't need to

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have all the steps. What has been done in the last three years, in

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some cases it seemed to be investors, and for us as producers,

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slow, it a much longer term game which we are in. What I would say,

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we have a clear vision for the 3%, that is doable and that, with all of

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these things coming together finally, I think we will get to the

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finishing line. That is a good point, we will get back to our

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discussion but now I want to show you some of the challenges that we

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have seen with trying to get to the renewable energies vision here in

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Kazakhstan. This is a report from outside of Astana. This is what

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Kazakhstan says it wants power generation to look like. Massive

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wind turbines, rotating above the Central Asian steps, powering homes

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and offices and schools. This into this, that is the sound of wind

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going at 60 kilometres per hour and that is not even at full speed. I'm

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not even sure I can keep standing, I'm worried about being blown away.

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But this wind is one of the key reasons why Kazakhstan is so well

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suited for new oval energy. This wind farm is the first of its kind

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in the country, run by state-owned firms, and right now renewables make

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up less than 1% of Kazakhstan's energy production, and there is room

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for growth, but are unlikely to come from local companies. The main

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problem for the renewable energy equipment is from foreign countries,

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because from Germany and China, we cannot buy much of them because of

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the financial crisis, but foreign investors can bring this equipment.

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And that is what the Astana Expo is for, the grand show that Kazakhstan

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has put on for foreign investments. But that doesn't mean they find it

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any easier as I found out from California -based Primus power which

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builds energy storage solutions. The local currency devalued in 2016 more

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than 65% which gives very negative effect on renewable project because

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all the equipment, even small bolts, are imported, and when in the

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investor comes there is too much uncertainty, the government did not

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set up proper rules. This is where you live? It is not just investors,

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many locals also feel the strategy is not well thought out but few dare

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to speak out. This is when they sentence you to three years of no

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public speaking and not being able to organise a protest? This lawyer

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and activist tells me it is all the show. TRANSLATION: They've built a

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few power why not everywhere? And why not cheaper so that people can

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actually use it? But none of this is changing everyday life, 80% of

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Kazakhstan still uses coal because it is cheap, and until there is a

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clear road map, Kazakhstan's lofty vision may remain out of reach. So,

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as you have seen, there is still perhaps a long way to go before

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Kazakhstan fully realises some of these ambitious goals and the vision

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it has set for itself. To discuss the challenges we can get back to

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our panel. I'd like to pick up with you again,

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in some of our travels across the country, we have consistently heard

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from foreign and domestic companies, looking to invest in the renewable

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energy sector, that it is a very noble goal but it is still very

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difficult on the ground. One of the things they pointed out, the

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volatility in the currency makes it very difficult for businesses to

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have a firm plan about how they go about doing this autumn they want to

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do it but it is very challenging. What would you say to foreign and

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domestic companies are keen to invest? Kazakhstan is very

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well-prepared to absorb any external shocks and we have created a

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national fund which consists from the oil revenues produced in

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Kazakhstan, from one side, and we have over 62 US billion dollars. The

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exchange rate policy, we have consistent monetary policy and we

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moved to the restructure all forms and that means a change in mind and

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in legislation, and we move to English, laws for example. From the

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other side, a lot of privileges and tax exemptions for renewable energy,

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and all of these key ingredients will help really to do the

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investment to make commercially viable. Is the short-term pain worth

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the long-term five Velotec? Is it viable? Absolutely, we have learned

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lessons from the short-term pain, one of them is the challenges of

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foreign exchange risk and the devaluation of the currency which

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was the right way in light of the shuttle reforms which were described

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ash structural. It caught some of our projects quite unawares and with

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some costs. The foreign exchange risk is a very valid one, especially

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when you have foreign investors coming in investing in a product

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which is really a local revenue. There are a few ways to solve this

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issue, and this is not unique to Kazakhstan, we have seen this in

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many other countries. One of the ways is index eight, and I think the

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government is ready, especially if they move to a competitive auction

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process, for the next renewable projects, where they feel

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comfortable that they are getting the best possible market price and

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that there will be more open to indexing is, say, the dollar. There

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is also reshaping the local capital markets, this is something we are

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focused on. We want to do more lending and we believe that projects

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that are generating local currency and local revenues should be

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financed with local currency and this is another area we are focusing

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on here. It is expensive, in terms of the tariffs in wind power

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compared to fossil fuel power, is far cheaper to consistently get your

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power and electricity from fossil fuels. You can see the hesitation.

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The economy is very energy intensive, the goods produced here

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need electricity, and it is very cheap today, so you can't compete

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with the electricity centre and coal -based things. With wind -based

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production. It is a very difficult equation to convince the investor in

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that environment but this is going to be, as we said, going into macro

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directions, from one side of gradually the tariffs will be going.

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We have no other choice. To make sure that it fits the economy and

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the challenges of the economy, and at the same time, the other side, as

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producers we are doing everything to make it cheaper. It should not just

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be like a financial comparison to say this is cheap and this is more

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expensive. Everyone realises that it will be kind of a global

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requirement, to any industrial production, if you produce it with a

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not very green technology, you will be punished anyway from one side,

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that is unavoidable. It should be done like this. On the other side,

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let's see inside of Kazakhstan. If we are still using not very

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environmentally friendly technology it means a cost to the social

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inclusion and to the different diseases and the problems of health

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scares and if you can collate everything then we will see that it

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is really costly. 75% of the economy is based on fossil fuels and people

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are worried about losing jobs in the coal sector and they hear this

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vision that is coming from a top-down approach, and they are

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wondering what does this actually mean for them and their livelihood.

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That is what I'm trying to get from you, to understand, how do you

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manage the expectations of the local people and make sure that the vision

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actually benefits everyone? That is why we are talking about this

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commitment for the long-term, we can't do it overnight. In the first

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phase, definitely, we have to use our competitive advantage. We have a

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high carbon energy here and we can use nuclear energy and we can use

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the clean tech. With the coal industry, we have new destructive

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clean technology and we are going to use it. You energy is new

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opportunities, there will be opportunities for new jobs and

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different kinds of jobs, but there will be opportunities for jobs and

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what is important, the government is focused on vocational training and

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skills development, these economic inclusion actions which need to be

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taken and I think Kazakhstan is very progressive in that way, one of the

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few countries that we know amongst our countries that has adopted a

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gender action plan, which has a very large component of skills

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development, access of jobs for women. I'm confident that Latimer --

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Kazakhstan will be able to make the transition. What else to you think

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companies need to see from the government, policymakers, to help

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make this vision a reality? We need to have the guarantees, the

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long-term financing in place, to achieve that goal, that is obvious

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for everyone. The most important thing is that people who understand

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what they are doing in the government, and it was mentioned at

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the beginning that this is a well thought strategy. The fact it goes

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in a Evolution, not jumping through certain stages, it takes longer, but

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we will get there. 21st-century is about efficiency. It is not about

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selling more things into Kazakhstan, if Kazakhstan has reserves

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technically speaking, they do not need extra capacity for a short-term

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or mid-term future, but at the same time there are ways to improve the

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efficiency of existing assets. Thanks for joining us. That is it

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for me. We are leaving you with shots of the Astana Expo. Enjoy.

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A very good afternoon. Damages have been climbing, the

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