Kazakhstan: A hidden hive of entrepreneurial innovation

Business Leader was recently invited to the Central Asian nation of Kazakhstan, to discover how over the last 30 years of independence, it has become a beacon for innovation and post-Soviet-era prosperity.

Throughout the three-day tour at the country’s capital Nur-Sultan, there were several key themes that are abundantly clear – including the public’s immense pride in being an independent nation, and their collective thanks for the influence of Kazakhstan’s First President, Nursultan Nazarbayev. He was the leader of the nation from the fall of the Soviet Union in 1991 until April 2019.

Despite years of secrecy and controversies since it claimed independence, Kazakhstan has established itself as a modern, more progressive nation when compared to many of its neighbours – many of whom are in financial difficulty and fractured by war and political instability.

This has largely been down to its abundance of natural resources – primarily gas and oil – which makes up 80% of its economy.

The trip was organised by the Nursultan Nazarbayev Foundation, which was an initiative of the First President to highlight the innovation, educational and economic potential of the country. The Foundation is active in showing how the nation is trying to move away from its reliance on its natural resources.

Following 30 years of independence, the country’s goal is to establish itself as a top 30 nation by 2050 – highlighting its drive to change its current global perception as ‘one of the Stans’ to a home for international business.

The UK-Kazakh relationship

Kazakhstan is the largest country in Central Asia and is the world’s largest land-locked nation. Since 1991, the country has established itself as the 42nd biggest economy in the world, but its primary trade partners have been its surrounding nations, members of the Commonwealth of Independent States (CIS) and Eurasian Economic Union (EEU).

However, one of the main goals of the Foundation was to showcase to the West, that the country is open to the world of business and is hoping to establish itself on the global stage.

Total trade in goods and services (exports plus imports) between the UK and Kazakhstan was £1.3bn in the four quarters to the end of Q1 2021. UK exports to Kazakhstan amounted to £664m and UK imports from Kazakhstan amounted to £641m.

During the trip, the Foundation aimed to highlight the economic growth and the potential to develop international trade partnerships – with a focus on tech, ‘green’ alternatives, and its focus on education.

Throughout the tour, we visited some of Kazakhstan’s key accelerators such as Astana Hub which is the largest international technology park for IT start-ups in Central Asia and incubators including the ones at Nazarbayev University.

British business in Kazakhstan

For many British businesses, not much is known about Kazakhstan, and while it has taken three decades, the nation is now open for business to the rest of the world.

While on the tour, Business Leader spoke to the CEO of Air Astana, Peter Foster, who shared his views on how it was for him when he started entering the business world of Kazakhstan.

The airline is the largest in the country, and is 51% owned by the Kazakh state, and the other 49% by BAE Systems.

Read the full interview here.

When explaining what it is like being a British-centric company in Kazakhstan, Foster comments: “A lot of Kazakh businesses operate similarly to UK corporate governance standards, which has helped us on our growth journey. As a result, we have been able to become a very successful business.

“When I am asked about what British companies should know about this emerging nation, is that my simple answer is that Kazakhstan is open for business, and it is very Anglophile in its approach to how it operates.

“For example, the Astana Stock Exchange was set up with the UK legal code. The Court of Appeal of the Astana Stock Exchange is a UK-style court with UK judges

“A huge number of the Kazakhstan elites have the have their children educated at UK schools and universities – and many of those people are now coming back into the workforce here and working their way into some very senior positions, both in government and in the private sector.”

So, although the nation is now only making its first steps into becoming a global player within the business community, its strong UK-focus is appealing to those making the move into Kazakhstan.

However, Foster does warn that although there are opportunities, there are several challenges to overcome too.

He continues: “Our strong recommendation to any UK company thinking of thinking of setting up an operation in the country, is that it is an emerging market, and there is still a degree of post-Soviet era legislation and custom, meaning that it is not an easy place to do business. There are significant challenges that cannot be underestimated.

“Also, you cannot run a business in Kazakhstan from an office in London – you have to be here with the people on the ground. You have to be all in, in Kazakhstan – because otherwise you’re not in at all.”

Future global financial hub?

It’s clear that although many challenges are facing foreign nations looking at expanding into Kazakhstan, there are also many new opportunities available.

And as part of the nation’s move to make it more open and hospitable to the wider world, Nur-Sultan is aiming to become ‘the financial hub of Central Asia’ – as was explained to the tour group when visiting the Astana International Financial Centre (AIFC).

Across the three days, it was stressed to the tour that the influence of the First President reached many areas of the countries move to modernise itself – including the AIFC. Prior to its creation, there was nothing like this in the country.

Based in an impressive new building in the centre of the capital, AIFC was launched in 2018, making it the newest financial centre in the world.

In order to appeal to a Western – and predominantly British – company looking at expanding into Central Asia, the Centre operates independently from Kazakh law, and has its own set of legal rules and regulations. These are based on traditional English law – which is taught in English to Kazakh students looking at making a career in finance. As a result, it has own court and arbitrage.

During the meeting, they explained that the goal is to create its own stock exchange that can rival the Nasdaq, London Stock Exchange, or its equivalents across Eastern Asia.

So far, more than 1,000 companies are registered on the AIFC from more than 50 countries – including some from the UK.

Over the next decade, they are looking at becoming a hub for many businesses to work with the AIFC, but predominantly in FinTech, Green Finance and Islamic Bonds.

Also, within the AIFC, there is a Tech Hub, which works within the framework of the financial centre – meaning that it works within the framework of British Common Law.

As the nation looks to move away from its over reliance on natural resources, one of the main goals of the First President and many of its business-focused initiatives is to drive tech and innovation.

These ‘new economic streams for the brighter future of Kazakhstan’ include various business development initiatives that focus around supporting and funding start-ups and fat-growing companies within the tech space.

One of these examples includes the launch of Venture Rocket Eurasia – the nation’s first crowdfunding campaign to help start-up businesses get their initial funding. Much like the AIFC – this is the first of its kind in Kazakhstan.

No matter who we met on the tour, there was a collective excitement and drive to move away from fossil fuels and expand the nation’s tech sector, with the aim of becoming a global centre for innovation – and the AIFC has made it clear that they are open for new companies to join and learn about the successful methods of the West regarding innovation, funding and finding new streams of income that can be exported – or used to make the lives of its people better.

One of the advantages it has over the West, according to the Tech Hub, is that it describes itself as a ‘regulatory sandbox’ and is open to new ideas, and due to it having its own set of rules and regulations, many new changes can be implemented relatively easily – making it easier for innovators to have the necessary funding, knowledge and platform to grow.

British tech giant OneWeb was one of the first foreign firms to use this new Hub to develop new technologies – as part of a joint venture with a Kazakh company. AIFC also revealed that many Asian subsidiaries of Western companies had also enquired about being a part of the Hub – highlighting its initial steps into it becoming a financial and tech centre for the region.

And the future of the Kazakh financial system is also looking at accelerating the move away from fossil fuels through its launch of ‘Green Finance’.

As a subsidiary of AIFC that was launched in August 2020, the aim is to focus on sustainable investment – and a week before the tour, they released their first green loan and created the nation’s first ESG framework.

In the words of the AIFC, ‘renewable energy is a big step and an obligation for Kazakhstan’. The nation has a goal of carbon neutrality by 2060.

However, they did explain that as it is such a new concept to the nation, there has been a reluctance to shift away from its reliance on gas, oil and natural resources – but that educating investors at the AIFC, and teaching aspiring entrepreneurs at universities about the importance of green tech, sustainable developments and global net zero goals are a part of the national curriculum to change the way the country thinks about its global role in tackling climate change.

AIFC and many other start-ups that presented their business goals on this trip, understood the nation’s role in tackling climate change, the need to debate social/political challenges in the region, and the introduction of an ‘inclusive economy’, should they want to achieve their goal of becoming a ‘top 30 nation in the world’.

Social entrepreneurship

As part of its drive to establish itself on the global stage, Kazakhstan is making steps to be a more inclusive economy – unlike many of its neighbours.

On the tour, we visited offices, warehouses, Nazarbayev University, educational facilities, and other working environments, where they stressed the importance of giving women and disabled people more opportunities to have a career.

This was evident in the first meeting of the tour, where we visited Emin Askerov from the GreenTal Project who employees disabled people to work in his factory – after being inspired by what he saw in the UK during a visit in 2017.

He comments: “This all started after I learned what the UK has been doing with social entrepreneurship over the past 40 years. However, this is a new concept in Kazakhstan. However, we acknowledge and understand its importance for the future of our country to help tackle societal challenges we face.”

In the new year, there will be a launch of the Social Innovation Hub, where social entrepreneurs can receive grants to help mentor people with the aim of fostering a culture of collaboration for the future of social entrepreneurship across the 14 regions of the country.

Keeping the peace

Despite its progressive social actions and hopes of shifting its economy away from the overreliance on natural materials, the larger picture is that the country sits in one of the most politically challenging places in the world.

However, as part of its international display to end hostilities in the region, the country made the announcement that it would end all nuclear activity following its independence.

In the 30 years since that announcement, the world has drastically changed.

On the tour, Erzhan Saltybayev, Director of IWEP for World Economy and Politics, shared his thoughts on nuclear disarmament and what it has meant for Central Asia.

Describing Kazakhstan as ‘leaders of a new movement’ to end nuclear testing and shift to a more collaborative area between Eastern Europe, former Soviet states, and China.

He stated that ‘we need peace for the region to truly prosper in the future’ – and said the country was ‘the Switzerland of Eurasia’. This is due to the nation’s work in minimising geopolitical tensions between the surrounding nations, while also hoping to work more closely with the West in the years to come.

Educating the next generation

Alongside its public denouncement of nuclear testing and its focus to shift away from fossil fuels, the nation has also started to help create a platform for new leaders to accelerate the country’s plans for a brighter and more globally renowned future.

To demonstrate this, Shigeo Katsu, President of Nazarbayev University provided a tour of the school’s modern facilities in the centre of Nur-Sultan.

He told the tour: “Innovation and risk-taking business ideas were not encouraged in Kazakhstan until recently. This is our last chance to create a global, world class university, that can offer something incredible for the country. We expect to create the future leaders for Kazakhstan and aid in the transition to an innovation-led economy and drive change in society.”

The university has a strong focus on tech and innovation, with the aim of aiding the move away from fossil fuels and natural resources. Artificial intelligence, machine learning and renewable tech students, start-ups and entrepreneurs were using the facilities to innovate new ‘value-driven partnerships with industry’ that will enable the nation to build a new ‘identity’.

With more than 6,000 students, it is a large educational facility, but it aims to keep growing and receive applications from Western students. In order to achieve this, the language of instruction at the university is English.

And due to its tight connection to the legal, banking, and financial institutions that are also taught and practiced in English, there is the hope that more collaboration across the economy in the future.

The other target for Katsu and the university is to reverse the ‘brain drain’ of graduates and valuable start-ups moving to Russia and China by promoting a more modern entrepreneurial approach to business. This is because previously ‘people were scared to fail’ but now with the university and the nation’s switch to a more innovative business approach – the hope is that tech clusters, grant funding, and a more open economy can lead to a shift in where these companies will grow.

Tech and innovation

It is the emergence and rapid growth of the Kazakh tech sector that the nation seems to be relying on to help establish itself as a global leader.

According to AIFC, there are 700 start-ups in the country, and with the influence and funding now available, the potential is starting to result in business success – showing the way for future companies and the many spin outs coming out of the university.

And throughout the tour, several programmes, and start-ups themselves spoke of their pride in being a part of a ‘new’ Kazakhstan that is both fiercely independent, but also opening themselves up to the world for business.

One example of this is the ‘Astana Hub’, an impressive, modern ‘technopark’ for IT start-ups.

Another idea officially launched in 2018 by the decree of the First President of Kazakhstan, Nursultan Nazarbayev, the tech cluster aims to develop an innovation-led start-up community and culture that supports high-tech and fast-growing projects that can strengthen the country’s economic position.

Astana Hub is the largest park of its kind in Central Asia and is available to provide the conditions for free development of Kazakh tech companies.

Chief Operating Officer Absamet Abay comments: “The Technopark provides multi-faceted support to start-ups through financing, incubation, and acceleration programmes for start-ups, training for IT specialists and investors, as well as cooperation with large domestic and foreign Big Tech companies.

“Astana Bub seeks to contribute to the strengthening of the country’s macroeconomy through large IT businesses. However, it is impossible to create IT businesses without appropriate talents who are operating in a market environment. Therefore, entrepreneurs are of particular importance.

“Accordingly, Astana Hub puts its special attention and resources into the creation of a favourable environment for entrepreneurs as well as other participants of the innovation industry.”

To showcase the success the incubator has had in recent years, three spin-outs shared their successes.

Doszhan Jussapov, CEO of Cerebra, shared his company’s plans to use AI-powered software to the early diagnosis of a stroke to reduce the impact it could have of people. Zhandos Kermkulov, CEO of Egistic, showcased the firm’s farm management system that uses AI to help increase crop production and save on fuel and resources. Finally, Ilyas Bakirov, Business Development Manager for parking access and revenue control solution firm Parqour, explained how the company’s parking control system could be the future of a ‘smart city’.

What does the future hold?

On the 16th, the country celebrates 30 years of independence, and as demonstrated on this tour – the nation is rapidly changing and adopting a tech-focused and greener future. With exciting innovation happening across the 14 regions, and a growing Western influence, will your business be looking at expanding into the country of Kazakhstan?