In Kazakhstan,
in 1999, the banking system accounted for
only about 7% of the country's GDP; today,
however, that figure has increased to 20%.
Since then, the banking system has tripled
in terms of assets. What, according to you,
explains this boost of the banking sector
in Kazakhstan?
Developments are quite impressive if you
look at what the Central Bank has done to
solidify the financial sector. It is not
a surprise that the growth has been there
as it has been. Of course we have the insurance
that has been put in place for deposits,
private deposits in a banking sector. So
there is insurance for a lot of private
deposits when there will be a collapse of
the banking system. That is one thing. Secondly,
there is a general consolidation in the
market. So you see a lot of banks, around
400 banks, back in 1998, today we have,
maybe, 43. That is the result of many mergers,
which they can see as a result of consolidation.
Banks are much better capitalized. They
are much better regulated. There is more
money in the country.
I think that the Central bank also has made
sure that the money is coming back to the
country as a result of one of amnesty that
was given to tax evasion. I think about
$800mln. has come back to the country in
one year. That was back in 2001. These things
altogether have resulted in a much larger
and more substantial and more effective
banking sector. Ratios at the banks are
more or less in compliance. There are a
limited number of defaults in the loan books
of the banks today. If look at the growth
of the loan books of different banks even
we are quite surprised. I mean that the
local banks have tripled their loan books
over the last two years. That is quite unique.
You can question whether that is a good
thing. It is difficult to say, because we
do not see the growth as maybe local banks
would see in terms of crediting local companies
that we would like to credit too.
We have maybe different credit standards
or different ways to exercise the rights
on our loan agreements. We are more conservative
and more careful, as the most foreign banks
are here. But the local banks are really
seeing the growth and they have taken it.
And I hope they will be successful in maintaining
it, because nobody would like to see the
banking sector to be hurt by defaults or
by weakening of certain sectors, which as
a result would lead to the insecurity in
the system again. Then we would jump back
to the 90s and we would have an outflow
of deposits and even liquidity outflow of
the country, which nobody would like to
see happening. But yes, it is incredible
how the market is stabilized and how we
are positioned macro economically today.
Also the financial system is driving the
economy forward. I think that in comparison
to other sectors the financial system is
much better regulated, much better managed
and better equipped to deal with these challenges,
than many other sectors in the country.
ABN AMRO is a global player. You also have
a branch in Uzbekistan, if I am correct. Could
you highlight to our readers your strategy
in Central Asia and what particular role does
Kazakhstan play in it?
Our business in Uzbekistan so far has been
very small compared to what we have done
here. That is nothing to do with ambitions,
but more with the environment. I think that
Uzbekistan has a more difficult investment
climate than Kazakhstan has. I think that
we are the only foreign bank there today,
which is active. Although, there is a lot
of progress in terms of the results, we
do not see any of those reforms that we
have seen here in Kazakhstan. If you talk
about the Central Asian strategy I have
to disappoint you, because it is very much
dependant on the individual country that
we discussed. There is limited cross trade
between some of the countries between Uzbekistan
and Kazakhstan the trade flows are pretty
small. So we cannot really work with them
more than we would like to. So we are still
isolated in terms of Central Asian region.
We could maybe talk more about Russian-Kazakh
relationships. That discussion is more interesting.
Kazakhstan was the last CIS country to become
independent. That signifies also their traditional
relationships with Russia - economically,
physically. They are, let us say, a smaller
brother of Russia. They have always been
striving not too distinct itself from Russia
too much. If you at the current geopolitical
discussion Kazakhstan and Russia seem to
be quite in harmony in how to approach the
oil policies, but if you look at their relationships
with the Southern countries, like Tajikistan,
Kyrgystan and Uzbekistan, Kazakhstan has
maybe more reserved relationships with them.
This is something to do with egos, maybe,
and with individuals, but for sure Russia
is of key importance to this country. And
if you look at the investment that are going
out of the country to Russia, particularly
from the financial system, it is surprising,
because the financial system in Russia is
very much behind the one in Kazakhstan.
The latter means that local banks that have
liquidity spare are now keen to invest in
Russia, which is not the other way round.
So you see Kazakh banks now investing in
banks in Russia, opening up offices there,
investing in papers in Russia and creating
more interaction between two countries.
This will lead to more integration over
time between the two countries. I do not
see that there will be more hurtles being
created to make the states more independent.
However, at the same time that is also creating
problems for Kazakhstan economy as it was
in 1998, when the Russian crisis took place
and Kazakhstan was the first country to
go with Russia. And when that would re-emerge
that would again happen. Kazakhstan is very
well known through Russian environment.
Whereas the other way around, it is not
the case.
Earlier you have mentioned the local
investment climate. Could you indicate to
our readers how over years ABN AMRO has
become a part of this investment climate
itself? How did it developed?
We were at that time the first foreign bank
to come in 1993 -1994. We are a joint venture
bank with the World Bank and Kazkommertsbank.
It was a bit of a lucky shelter, I think,
at that time, since nobody really knew Kazakhstan
very well in our organization. Of course,
there were a lot of discussions about the
potential, about the oil and natural resources
here. Nobody would have expected, I think,
the success that we have seen over the last
years and that is largely to do with a fact
that we were able to come early, to help
the majority of foreign companies acting
in this country to establish working relationships,
to learn ourselves on the country and to
find the right people to work with us. I
think that these three things were a key
for that.
Lending has never been a key priority because
of the conservative nature of this bank,
but over time, if you look at our loan book
today it has also grown substantially. We
have now doubled where we were last year,
for example. That is significant itself,
because that embodies basically the trust
that our bank has in the economy and the
creditworthiness of the companies, that
we see compared to what we saw at the beginning,
when it was difficult to keep the standards
that we usually apply in the market. So
we are growing our lending business. It
must be done, because it is important for
our revenues. But at the same time we were
forced to bring other products to make ourselves
an interesting partner.
So we were forced to diversify. We brought
new ideas, new products - custody, pension
fund business. We have an asset management
company. We have mega transaction services,
if I may say so. We have opened an operation
in Atyrau to help our oil and gas clients
over there. We are now the forth player
in the pension fund business in the country.
We have about one hundred thousand contributors
in our system. And we are, let us say, a
serious player in the top market of national
companies and the internationals and multinationals.
This is our natural clients' base. Everything
that has to do with the retail business,
like card business or mortgages and this
kind of things are closely linked to the
strategies of these companies. We do not
see ourselves as Kazkommertsbank or Halyk
bank, being everywhere for everybody. We
do not want to be a retail bank, we want
to be, let us say, a player for the top
national companies, some middle market clients
and for the multinational corporations that
are here.
ABN AMRO's main shareholder (51%) is ABN
AMRO N.V. (Netherlands) with the remaining
shares divided between the International
Financial Corporation (IFC), the private
industry division of the World Bank and
Kazkommertsbank. How does the bank benefit
from this group of shareholders?
We always had very good relationships with
our shareholders. I mean IFC being in Washington
is a bit further away. I would say they
are more supportive from the outside. Kazkommertsbank
is, of course, a local player. We have very
good working relationships with them. We
are also competitors, of course, that is
why we are in a bit strange situation sometimes.
A chairman of the Supervisory Board is also
a Chairman AB of Kazkommertsbank, but they
have given us all the freedom to develop
our business. When we ever encounter real
issues, they support us and they give us
good advice. I think that was more relevant
in the early years, when our management
was not really comfortable yet with the
environment and we had to make our way through
some maybe bureaucratic issues. They have
always been very helpful in advising us
then. Today we have good relationships because
the results are quite OK. So there is no
reason to complain on the investments. For
them it is also an opportunity to work with
us as a global player. We have worked with
them on the Euro bonds recently. For them
it gives an insight in the capital markets
and other global businesses that they have
not yet established themselves.
In the previous answer you mentioned
that you have been very successful, in this
last answer you said that you have doing
quite OK. Could you give to our readers
an indication more in figure and numbers
of what we are talking about?
You can look at the return on assets; you
can look at return on equity. I think that
on return on assets we are the best in the
market today. That is an indication. That
also indicates that our growth in the balance
sheet in itself is not a purpose on its
own. Of course, the first reflex when we
look at the banking sector is the look at
the size of the balance sheet and sometimes
we look at the importance in the business
and at the market share. But if you look
again it is difficult, because it identifies
maybe some of your deposits and the lending
you do, but if you look at all our activities
- we are much more diverse than that. We
look at the advisory work. We are very much
involved in transactional business that
is generating commissions for the bank,
which you do not see as the size of the
capital of retained earnings.
As a shareholder you would be interested to
look at the return on the investment, and
I think we are a top player here. We have
about 25 % today, which is quite OK. We would
like to grow the business. We would like to
do more lending. We would like to see us expanding,
but not in the way that we are stretching
ourselves. We do not need to throw money at
the clients to grow. It is a challenge for
our managers here to host our clients, to
see what we can do beyond the lending, to
use the lending product as a tool to understand
the business better, to understand the sector's
and challenges and to see what other products
we have even beyond the Kazakh environment,
from head office or from London - what we
can bring to the market to support it. We
are very active in the capital markets. On
the Euro bonds, we have actually quite (?)
a few here, at this market. We are active
at the corporate finance advisory sphere.
We do custody for the National Oil Fund. All
these things are done in a close cooperation
with our friends in the network. And that
strategy works well for us. With the crisis
in the international financial markets we
see more and more investment bankers coming
to Kazakhstan, because there is business here.
If you look at GDP growth it is substantially
different from the global trends. So, of course,
Kazakhstan attracts attention. And we have
to compete now with many more players. But
that is good. It gives to the clients the
best options and keeps us very much on our
toes. |
Increased competition
is a global trend and can of course also be
seen in Kazakhstan. What do you think is the
competitive advantage of ABN AMRO in comparison
with HSBC or other big players coming to the
market here?
HSBC and Citibank are here, Drezdner and
Deutsche and Commerce bank are here. ING
is here. All these banks have different
profiles and different philosophies. It
is difficult to answer this question in
one go. I think that for Citibank if you
look at their business - it is very successful.
They are growing, but they are very much
lending based. That is the way for them
to develop their business. We have, as I
mentioned earlier, a less explosion on lending
business, but we feel that we are very much
diversified and we have maybe many more
things to offer in terms of products and
in terms of expertise. And because of that
and because we have been involved with the
country so early on, we were also in a position
to help the country to modernise the financial
system. We were always asked to support
the regulations and the legislation in the
country. So our expertise that we had here
or we were able to transfer from abroad
has always been an important factor for
us to keep the credibility and also to maintain
the support from the Central Bank. They
have valued that support over the years
very much. And I feel that today that gives
us the credibility and also the image that
we have. It is not a short-term investor
but more or less an integrated player in
the market who has always been very keen
(and still is) to support a country's development
beyond our day-today business.
In 1998, the National Bank of Kazakhstan
and the Ministry of Finance approved the
tripling of authorised capital for ABN AMRO
with a view on new branches, e.g. in Atyrau.
Could you elaborate on this strategy of
the bank to increase its branches?
We have an office also in TCO at Tengiz.
That is a cash office. That is very nice
way to help our business and to help our
clients, but it is very much cash based
service. I can imagine that we will repeat
this elsewhere, although it is not always
feasible. I mean, we have to pinpoint the
opportunities. But in terms of full-fledged
branch like we have in Atyrau, I do not
see at this point that we will do the same
very soon. Astana, of course, is gaining
more and more importance. We think about
setting up a representative office there
to be closer to the centre. But in terms
of clients coach, we are still trying to
do as much as possible from Almaty. Because
if you set up a network you create a lot
of costs and in this time of age the electronic
means are there. Our clients are all over
the country and we help them from here through
electronic means, and that works very well.
Beyond psychology of being present and psychology
of having someone to talk to close by there
is no real need to be in all the major towns
of Kazakhstan, also because we are not a
retailer. We are a corporate banker.
Now there have been a lot of talk and
maybe surprise about the success of asset
management in Kazakhstan. Could you indicate
to our readers about the specifics of this
project and how do you see the developments
in the future?
It is a very exciting business. It has
been seen in our bank as one of the success
stories in this business. Because we were
the first foreign player and I think that
we are still the only foreigner in this
business - to establish a subsidiary, which
is focused on the pension fund business
and next to that we have set up a subsidiary,
which is purely focused on asset management.
Both companies have seen a growth and the
success. Although local banks are doing
exactly the same that we have done. So we
are in competition with them.
Our advantage, of course, is that, first
of all, we have no foreign competitor that
can claim the credibility that we have globally
in terms of the expertise. People feel more
comfortable in depositing funds with the
international bank like ours than maybe
they would do elsewhere today.
We have a very professional team that presents
itself very professionally and I think that
they have been very effective and growing
the business - I am talking about the pension
fund - by acquiring the CaspiyMunayGaz pension
fund. Last year this time we completed a
transaction. There is a large pension fund
based in Aktau, in a western part of the
country, which merged with us. It was basically
taken over, but we call it a merger. In
one go we were able to add about sixty thousand
contributors. In that region we have a very
strong footprint now, but it is challenging
to compete, because there is sill a lot
of insecurity and unawareness from the general
public about what the pension system really
does, who is really deciding on where the
money really goes. Sometimes companies use
these pension funds to negate that the person
deals with the banks elsewhere. The law
tells us that it is up to the individual
to decide on where his pension funds money
goes. But, unfortunately, today still we
see, that a lot of pressure has been put
on the individual and staff to put the money
at a certain pension fund, which is not
maybe a pension fund we would advice. Yes,
the legislation is there, but the enforcement
of the law today is still sometimes is weak.
You mentioned the professional staff
and the professional conducts. It is sometimes
the fact that people can be the best company's
competitive advantage. How do you see this
in Kazakhstan? Are you satisfied with the
level of education, for example? Are you
satisfied with the level of performance
within ABN AMRO?
I would say that the bank is not more than
a few computers and its staff. That is what
it is. You have the people that work with
you and you have a nice logo and that is
it. You have to work with them. This country
has an excellent education basis that comes
from the Soviet times. I think that my predecessors
and my colleagues from abroad they are always
very impressed by people they meet here,
their expertise. Moreover, I think it is
about the energy and the drive towards things.
And that comes maybe from a feeling of the
opportunity that this young generation has
to make something out of life. When you
look around this organization I recommend
you to talk to people if you have a chance.
A lot of them have studied in the States
or in UK. We have Excellent MBAs, top schools,
best of class. We do not have to tell them
much. They are very independent and very
energetic, but they are very young and inexperienced.
So, what you would say is - yes, there is
potential, a lot, there is a hard work,
a lot, but the experience is limited. And
the enthusiasm sometimes - I do not feel
so old yet, but sometimes I have to bring
some realism in again. However, in a way
the thing goes by itself, because people
really want to do something and there is
a lot of competition among them.
And when it comes to experience, you
have quite a lot of experience yourself:
graduated from Leiden first, then you went
to London, Paris, there was Aruba and finally
you came to Kazakhstan. How has this experience
help you so far at your current position
here in Kazakhstan?
I think I was very lucky to have my experience
in the Caribbean before I came to Kazakhstan,
because I was very much involved in the
product issues very much on my own, so to
say. Also I had to manage this operation
in Aruba and that was the managerial responsibility.
And here I have the opportunity to mix both
sides - the product development side, the
expertise side together with the managerial
issues. And this is a wonderful opportunity
for me to be in an environment that is developing
itself, where we are an important player,
where we add value and where we see successes.
So I can only be very happy and grateful
for that. Although I must say, that when
I came I did not know what to expect. I
had no particular image of what the country
looked like or what our position was here
at this market. I was happily surprised
over the time to be here, to learn about
this part of the world, to learn about this
culture, to see the history of the place,
to educate myself and to pick up on that.
I think it is a very privileged job.
At the same time we have gone through major
reorganization over the last one-year and
a half. Maybe you have read about it in
the press. That has taken a lot of energy
from a lot of people and also here. It was
a challenging start for me. I think if you
look at the organization today and compare
it to what it has been when I came, you
would not probably be able to see how it
could have changed so quickly. And that
is not because I was so forceful. I had
so much force and that was in compliance
with the global restructuring. We were so
much on par with that. Maybe we had some
questions about how would it work in our
business. Would it harm our business if
we would be too focused on the too small
number of clients? This market is not like
Germany or Belgium, where you have, let
us say, a critical mass of clients available.
The banks that are here usually fight for
the same clients and we do not want to loose
them if that somehow is maybe not completely
in compliance with the global strategies.
We have gone to the one extreme last year
when the bank said: "We want to organise
alongside sectors, alongside client segments
and alongside groups unless in terms of
countries" In the past we were very
much independent. We were free to do anything
here as long as there was a return equity
and there were enough revenues. We had no
real problems managerially. Today, we are
much more locked in into a global matrix,
where we have to comply. I mean we cannot
turn our backs to them. That creates sometimes
a challenge for people that were used to
work in the old way. And today we have to
be a bit more sensitive to what I have said
above and all the wisdom that is elsewhere.
It also helps us to learn and our people
learn how to be more integrated into what
is happening in the world and beyond Kazakhstan.
So we paid the price in terms of maybe local
independence, so to say, but at the same
time in terms of business development, I
think there is enormous drive. We end up
somewhere halfway, I think.
We were talking about this critical
mass of companies. I am sure with the development
of Kazakhstan it will improve itself. With
this in mind and as a final message would
have some advice to our readers, who are
thinking of coming to the country and may
be part of tomorrow's critical mass in Kazakhstan?
Kazakhstan is the centre of this region.
It is a place, where many opportunities
present themselves. The country has already
made a lot of steps forward during ten years
of its independence. That is evidenced by
FDI that you have seen here. The country
is by no means ready. I mean that there
is still a lot of work to be done. Oil and
gas wealth may have somehow slow down the
emphasis on that. And maybe also have taken
away some of the pressure on the government
to push forward at the same base. We would
like that push to be there again as it used
to be in the 90s. Why? Because oil and gas
is not the only sector that needs development.
We need to drive an economy that is diversified,
that offers a spread variety of activities
in the consumer area, in the telecommunications,
in the infrastructure, in metals and mining,
in all the sectors that are there, but have
still a lot of development to do. If you
look at the macroeconomics of the country
today, the picture is quite rosy. Rating
agencies are happy to down grade. Foreign
banks are coming and running over the place.
Everybody is very happy.
However, for foreign investor coming here
I would recommend to do his homework, not
to rush to conclusions. If you want to work
with a local partner it can be very beneficial.
Make sure that you not only interested in
a short term game. Make sure that you are
presenting yourself as a good corporate citizen
that you look at yourself as a contributor
to the country. Kazakhstan is very sensitive
to this and rightly so. You cannot just come
here and think that you can set the standard.
You have to be part of it and only then you
have the support and the credibility and the
respect that you would like to see. I think
that these are very important parts of anyone
coming to this country. And maybe the challenge
is bigger for, let us say, smaller companies
that have maybe less political cloud, than
we would have, being a member of foreign investors
council, being a part of so many things here.
Of course, for smaller companies coming here
it can be sometimes difficult, because if
you entering a certain market you could be
a competitor to someone else. And that can
create certain problems. So you have to make
sure that you are at least aware of that.
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V.I.P. INTERVIEWS 
