Wed. Jul 17th, 2024

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I n s p I r a s I p e r c u t I a n k u

REB: Malaysian investment leading in the O&G sector in Kazakhstan

5 min read

As Kazakhstan is celebrating its 29th anniversary of Independence on this month it is worth to emphasize remarkable achievements have been made by country. Thanks to the considerable efforts of many, Kazakhstan has developed into the leading economy of the region with a high profile on the global stage.

From only 22,1 bln dollars in 1998 to 177,9 bln in 2018, Kazakhstan’s GDP increased eight times while the GDP per capita saw a rise from 1,5 thousand USD in 1998 to 9,5 thousand USD in 2018.

These numbers are not just mere statistics, but more of a firm proof of the revolutionary reform the country’s economy achieved in the last two decades. A reform that made Kazakhstan a central-Asian and global hub for investments from all over the world.

So, what makes big investors from Asia, Europe, United States, Russia, and more put their money and investments in the Kazakh Market?

One thing is natural resources and commodities. Kazakhstan is the world’s number one producer of uranium, zinc, wolfram, and barite reserves. The country is the 2nd producer of silver, lead, and chromite, and the world’s 6th largest producer of gold reserves.

On the other hand, the tax regime in Kazakhstan is a very attracting factor for investors, as the total tax and social security rate in Kazakhstan is 28,4% compared to 46,2% in Russia, 62,6% in China, and 31,6% in neighbouring Uzbekistan. 

In terms of human capital, Kazakhstan holds the 29th place in the world on the human capital development index, with straightforward and flexible employment procedures that offer a non-visa system for citizens from more than 65 countries including all OECD member countries.

Through the last decade, Kazakhstan’s government worked intensively on improving the investment and business environment in the country, leading to Kazakhstan holding the 25th place in the world in the World Bank Flagship Rating in doing business, out of 190 countries included in the global ranking.

Along with that high rating in doing business, Kazakhstan holds the 4th place worldwide in having contracts for companies and investments and ranks 22 globally in terms of starting a business, with many opportunities and facilities offered for new companies and investments.

The country offers many facilities in terms of the protection of minority investors, registering property, and dealing with construction permits, making it one of the top investment hubs in central Asia.

Kazakhstan’s investment environment and all its’ facilities helped the country attract and grow the Foreign Direct Investment by large numbers since 2015.

While FDI in Kazakhstan recorded 15.1 bn Us dollars in 2015, the Kazakh economy kept a remarkable growth reaching 24.1 bn Us dollars in 2019, and a total of 340 bn Us dollars of FDI.

The Netherlands was and still the number one foreign investor in Kazakhstan with investments worth 7.2 bn Us dollars in 2019, followed by the United States which invested 5.5 bn Us dollars in Kazakhstan in 2019. Other top investors in Kazakhstan are Switzerland, China, France, Russia, Belgium, the U.K., Turkey, and Japan.

All these massive investments in the country are protected by different certified public and private bodies and organizations, like the Foreign Investors’ Council chaired by the President of Kazakhstan, Coordination Council chaired by the Prime Minister of Kazakhstan.

The central Asian country has More than 20 financial institutions with government participation for the financing of the priority sectors in Kazakhstan. Finance includes Kazakhstan Investment Development Fund which helps with equity financing for investment projects with foreign participation and Development Bank of Kazakhstan that engages with debt financing for investment projects, project financing, lending for export operations, leasing financing.

On the other hand, there are many opportunities to obtain financing from international institution working with Kazakhstan such as The World Bank, European Bank, and the U.S. International Development Finance Cooperation (DFC).

Among the most significant FDI investors in Kazakhstan, the South East Asia region saw a growing positive trend in the last couple of years, specifically with Malaysian businesses taking over investments in Kazakhstan.

Reach Energy Bhd. (REB) was one of the leading Malaysian businesses to invest in Kazakhstan. Reach Energy Bhd (REB) was listed as a Special Purpose Acquisition Company (SPAC) on the main board of the KL Stock Exchange (Bursa Malaysia) in August 2014 to acquire qualifying oil and gas assets and has raised RM 750 million (US$ 230 million) at the listing. REB had three years to find their qualifying asset (QA) with the stringent criteria set by the Securities Commission Malaysia

According to a rep from (REB), After screening 50 over assets for the QA (including 20 assets from Kazakhstan) and conducted the due diligence, REB found that the investment on Emir-Oil Concession Block was the most attractive offer (balanced portfolio of producing, development and exploration assets).

In November 2016, REB completed the acquisition of a 60% equity interest in Palaeontol B.V. (PBV) from MIE Holdings Corporation (MIEH) for USD175.9 million.

Emir-Oil Concession Block consists of several discovered oil fields and prospects. It comprises of 4 production contracts (Aksaz, Dolinnoe, Emir and Kariman) and the exploration contract up to the year 2036 at the time REB bought the assets in 2016 and had subsequently expand the acreage to 6 production contracts during 2020. REB is the operator of Emir-Oil Concession Block.

“We chose Kazakhstan is a well-established hydrocarbon territory with a concessionary fiscal regime for O&G exploration and production.

“Kazakhstan is strategically placed between the two O&G demand centres of Europe and Asia. We believe that investing in Kazakhstan’s O&G industry will prove beneficial to us in the long run as the country’s exports will likely to increase soon.” He said.

From the point of view in (REB), mutual trade and relations between Kazakhstan and Malaysia can play a vital role in attracting more investments from Malaysia, one of Kazakhstan’s biggest trade partners in South East Asia.

Currently, Kazakhstan, together with Malaysian companies and investors, is implementing many projects in the oil and gas, agricultural and construction industries totalling about US$1 billion.

As Kazakhstan is celebrating its 29th anniversary of Independence on this month it is worth to emphasize remarkable achievements have been made by country. Thanks to the considerable efforts of many, Kazakhstan has developed into the leading economy of the region with a high profile on the global stage.

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