Patience pays off in Kazakhstan

When Canada established diplomatic relations with Kazakhstan in 1992, Saskatchewan uranium giant Cameco Corp. arrived the same year to pursue ties with the resourcerich former Soviet state.




A corporate pioneer in the Central Asian country, Cameco has invested more than $400million (U.S.) at its Inkai mining operation, owned 60 per cent by the company and 40 per cent by state-owned KazAtomProm. In 2012, the joint venture partners deepened ties with an agreement that extends production to 2045 at the significant uranium deposit in southeast Kazakhstan.


Cameco's strategy combines patience, long-term investments and partnerships, ingredients seen by many as vital to success in this emerging market.


"Our experience in Kazakhstan has been a very good one," says Ken Seitz, senior vice-president and chief commercial officer at Cameco. "What we have found is we need to take a very long-term view, establish local partnerships and relationships and obviously conduct ourselves in the way we would in any other part of the world as it relates to corporate social responsibility, health and the environment."


Beyond direct investments, Cameco has earmarked $5-million for corporate social responsibility initiatives at Inkai, which accounts for 12.5 per cent of the company's global production of uranium.


Others with long experience in Kazakhstan echo the value of patience and partnerships.


"If you do it right, it works and if you don't do it right - by the seat of your pants - then you pay for it at the end of the day," says Paul Drager, a Calgary-based law partner at Norton Rose Fulbright. The former Canadian diplomat was appointed honorary consul in Western Canada for Kazakhstan in 2013.


His links there date to the early 1990s when his previous law firm (which later merged with Norton Rose Fulbright) opened an office in the southeastern Kazakh city of Almaty. That office now has two partners and a staff of 10 people.


Geographically larger than Western Europe, the country of 1.7-million people is politically dwarfed by its superpower neighbours, Russia and China. Led by President Nursultan Nazarbayev since gaining independence from the former Soviet Union in 1991, Kazakhstan scores ahead of its regional neighbours in a 2014 World Bank comparison of the ease of doing business in selected countries.


Still, operating in Kazakhstan is not without risk.


A recent country profile by Export Development Canada praises Kazakhstan's modernization efforts but warns that "the operating environment remains characterized by high levels of corruption" with volatile contractual conditions, heavy bureaucracy, a weak banking sector and increased government involvement in strategic sectors.


When difficulties arise, says Mr. Drager, they often relate to tax and regulatory changes.


He recommends Canadian companies mitigate risk by working with government agencies, such as Export Development Canada and the London-based European Bank for Reconstruction and Development, which assists countries in central Asia and Europe in making the transition to market economies.


As an export credit agency, EDC provides insurance to Canadian companies on shipments sent abroad. That assistance helped Bourgault Industries Ltd. to develop Kazakhstan as a top export market, says John Batiuk, director of export sales for the Saskatchewan seeding equipment manufacturer.


The agency "takes a lot of the uncertainty and risk out of the equation," he says. "We wouldn't be doing business without them there, that is for sure."


In the early 2000s, when Kazakhstan modernized its agriculture system by turning staterun farms into private operations, Kazakh farm implement dealers approached Bourgault as a potential supplier. In 2002, after a year's worth of research, Bourgault selected its local partners who assemble the equipment shipped from Saskatchewan.


Mr. Batiuk describes his company's experience in Kazakhstan as "a success story." In 2005, when a killing frost damaged wheat crops in Canada and the United States, sales to Kazakhstan enabled Bourgault to retain staff in a downturn.


Machinery for agriculture, oil, gas and mining dominate the list of current Canadian exports (stalled since the 2008 recession), with aerospace, industrial and civil infrastructure and health care seen as promising sectors.


Associated Graphic


John Batiuk, director of export sales for Saskatchewan-based Bourgault Industries Ltd., with seeding equipment parts headed for foreign markets. Bourgault works with local partners in Kazakhstan who assemble the equipment.



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