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PwC
Highlights:
• 25 k USD per capita
• 18 million people
• 70 million people in Central Asia
Overview of Kazakhstan
2
PwC
ForecastForecast
Real GDP per capita PPP is expected to stay about 25k USD per capita
3
16 17 17 17 17 18 18 18 18 18 19 19 19 19 19 19
’12 ’18 ’25’20 ’23’15’14 ’22’11’10 ’13 ’17 ’24’19’16 ’21
Population of Kazakhstan
million
Source: stat.gov.kz, University of Denver
GDP of Kazakhstan
Billion USD 2011 prices, PPP
342 366384 407 424 429 420 423 429 434 445 461 469 480 491 503
2122 23 24 24 24 24 23 23 24 24 24 25 25 25 26
’14 ’15’12 ’21 ’22’19 ’23’20’18’16 ’17’13 ’25’24’11’10
GDP per Capita
Thousand USD 2011 price, PPP
÷
PwC
The key growth driver of eCommerce spend is Oil revenues
• Oil prices recovered from early 2016 lows and have stabilized around $50/barrel
• Future Growth Project and other large-scale projects were announced in 2016
• State-owned downstream and petrochemprojects lagged due to mismanagement
4
Performance
78
17
(22%)
85
17
(20%)
6168
Due to its smaller size, Kazakhstan cannot influence prices, but its Government is taking steps to improve the production levels and value-add processing
Crude Oil Production and Refining
mt
Policy Outlook
Helpful
• Energy Ministry announced its plans to max up crude production before fossil fuels become obsolete
• Effort on behalf of both Gov’t and SK to reduce oil losses
• Small-scale refineries have received the permission to operate and scale up
• Retail petroleum-product prices were deregulated
• Discussions of sovereign guarantee to investors into petrochem projects
• Digitalization
But:
• Privatization of the Big 3 refineries was announced in early 2016 and then postponed
• Privatization of KMG mulled to be delayed by another year into 2020
• Key focus: Tengizchevroil, Kashagan, KPO
• Similar-scale oil projects likely if:
- Discovery of new oil reserves
- Cooperation among large players in North Caspian
• Demand for smaller-size technologies:
- Oil transportation
- Refineries
- Add-on petrochemical solutions
• Large-scale ‘simple’ solutions to reduce losses and pilferage
• Limited modernization efforts at refineries
Source: TCO, KPO, NCOC, Ministry of Energy of Kazakhstan
PwC
By 2050 Kazakhstan strives to become one of the 30 most developed countries
Within region (182.7 mln people)
• Free movement of labour
• No custom duties, free customs declaration, customs control
• Free movement of goods, services, capital
5
World Trade Organization (WTO)
• Advices in public governance, fiscal affairs
• Increase of competitiveness and business climate
• Projects in education, health, employment and social inclusion
• Increased transparency
• Decreased customs tariffs (from 10.6% to 6.1%)
• Increased trade quality standards
• Liberalisation of financial and communication services
• Increase of KZ export
Membership in following organisations will result in:
Source: Ministry of Economy, Ministry of Finance
PwC
Kyrgyzstan
Kazakhstan
Tajikistan
The Central Asia
UZ
33 mln people
447 thd km2
TM
6 mln people
448 thd km2
KZ
18 mln people
2,725 thd km2
KG
6 mln people
200 thd km2
TJ
9 mln people143 thd km2
6
Source: World Bank
PwC
18
6
6
9
25
21
7
4
10
10
15
2
2
Real GDP in the greater Central Asia is growing, internet penetration is uneven
TJK
TKM
KGZ
UZB
KAZ
Internet Users (mln)
Mobile Subscriptions (mln)
Population (mln)
• Multiple mobile subscriptions per person causes larger number of number of mobile
subscriptions than population
• Thus, we assume full coverage of mobile users in KAZ, KGZ, TJK
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
2.6
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
UZB
TKM
KAZ
KGZ
TJK
CAGR
%
10.0
8.4
6.8
4.7
4.5
10,0%
8,4%
6,8%
4,7%
4,5%
Real GDP growth in 2006-2016
billion USD in 2010 prices
Population, mobile and internet penetration, 2016
Million people
31
Source: internetworldstats.com, wearesocial.com
7
PwC
Highlights:
• 1 billion USD in 2016
• 2 billion USD by 2020
Size of eCommerceMarket in Kazakhstan
8
PwC
Inferred from comparison of:
• Official stats
• Survey of Entrepreneurs by the National Chamber
• Tax filings
• Analytical reports
Current eCommerce market is around 1 billion USD
9
68
58
54
49
43
MusicNewsFilmsSearchEmail
28
20
14
13
13
7
6Others/
unemployed
Students
Specialists
Managers
Housewifes
Civil servants
Workers
1 bln USD KZ e-Commerce market in 2016
Most popular uses
% of users
Occupation profile
% of users
Source: National Chamber of Entrepreneurs, Satu.kz, Forbes.kz
PwC
Top e-Commerce retail and service companies
10
66
30
29
16
14
12
63
27
17
Sulpak.kz
Wildberries
Otto-trade.kz, Quelle-kz.ru, Bonprix.kz
Lamoda
Epay.railways.kz
Aviata.kz
Airastana.com
Shop.kz (Bely Weter)
Technodom.kz
TicketsElectric goodsClothing
47
7
5
7
4
3
28
11
3Blizzard.kz
BeSmart.kz, Shop.besmart.kz
Сhocofamily
hh.kz (headhunter)
Olx.kz
Kolesa.kz, Krisha.kz, Market.kz
AdNet.kz
Olimp.kz
Egov.kz (state penalties)
Electric goods TicketsClothing
Online retail — Revenue 2015
Million USD
Online services — Revenue 2015
Million USD
Source: Forbes.kz
PwC
’17’16
10.3 10.9
’12
9.2 11.2
’19’15 ’20
10.0
’13
+3%
’14
9.59.0 9.8 10.6
’18
+20%
8.1
’19’18
5.6
’17
1.9
’13
2.4
’12 ’14 ’16
2.4
’15
4.72.3
3.9
’20
6.7
6.0
2025
4.6
2016
77 79 77 90
"18"17 "20"16
Source: tradingeconomics.com, wef.com, worldbank.com
KZ eCommerce market is expected to grow due to following factors
Internet penetration is expected to grow Consumer sentiment is expected to stay stable
Network Readiness Index
7 - max
Consumer Confidence Index
100 - max
Number of internet users will grow by 3% Internet payments will grow by 20 %
Internet Users
Million people
Internet payments
Billion USD
11
PwC
Mail is becoming replaced by parcels as key source of revenue for Kazpost
• Since 2009, parcel business has grown with reliable stability; mail business has declined before recovering
• Growth in parcels due to E-commerce;
• Physical volumes grow (CAGR 6%) but average revenue per parcel has declined;
• Electronic payments outplace traditional payment business
12
312 295 288 275 270 266
315 320
20162013201220112010 201520142009
2013
17.6
2012
16.9
2016
20.419.5
2014 2015
18.5
2009
13.7
2011
16.0
2010
14.7
Kazpost estimates growth of E-Commerce
to exceed 2 bln USD by 2020
Mail volume, 2009-2016
In millions
Comments
Parcel volume, 2009-2016
In millions
+49%
Source: Forbes.kz
PwC
Highlights:
• Only Almaty and Astana are well connected
• Roads are poor, railways ok
• No broadband yet in rural areas
Network readiness
13
PwC
Retail Trade 2016 above 20 billion USD, but concentrated in two largest cities
14
Source: stat.gov.kz
10.4
(46%)
Corporations12.1
(54%)
22.5
Sole Proprietors Food
Non food
22.5
8.0
(36%)
14.5
(64%)
The Old and New capital cities make 40% of all trade
11
9
9
East Kz
Karagandy
Astana
Almaty 28
By type of traders
Billion USD
By type of goods
Billion USD
Largest retail regions
%
PwC
The rest of the country is not entirely ready for eCommerce
Public
Institutions
4.1
3.8
Roads
4.2
3.6
Internet
4.1
3.92013 2017
• ChinaTelecom is partnering with KazakTelecom to extend broadband in villages
• 4G coverage is being extended to smaller cities
Global Competitiveness Index
7- max
Comment
• There is development in railroad infrastructure, it is at par with global peers
• Automotive roads are poor. KZ roads rank 108th out of 138 states
• ADB, EBRD and WB are sponsoring major road renovation
• There are significant improvements in online identification and proof of purchase, and electronic signature
• Astana International Finance Center is also covering the legal infrastructure for eCommerce
Source: World Bank, internetworldstats.com, wearesocial.com
15
PwC
Logistics developing, but weak relative to maximum achievable
2.6
2.1
Customs Infrastructure
2.8
International
Shipment
1.9
Logistics
quality and
competence
2.8 2.9
Tracking and
tracing
2.1
3.1
Timeliness
2.2
5.0
Max
achievable
2.7
5.0
2.5
1.9
Kazakhstan (2016)Kazakhstan (2007)
Current logistics system consists of 88,400 km of roadways; 14,205 km of railways; 3,900 km of waterways; and up to 61,000 km of air routes.
Road and rail systems carry nearly 90% of its total cargo load.
There are certain developments of roads, but slow and weak relative to benchmark
30%Increase of Logistic Performance Index
in 10 yearsLPI
2.8
2.1
Logistics Performance Index
5- max
16
Source: World Bank
PwC
• Create unified electronic platform, on basis of Chinese cross-border e-commerce platform “Jumore” (Zhejiang «Jumore» E-Commerce Co. Ltd)
- Integrated transport infrastructure, customs and postal services
- Support in finances, logistics, Big Data, Technology, Consultancy and certification
• Practice of English Law, international arbitrage, taxation exemptions, simplified visa and control regimes
Channels Actions Agencies
Logistics Reduce delivery times of goods Kazpost
Ecommerce Creation of e-commerce and
Fulfillment centers
Kazpost, Ministry of
Energy, Ministry of Finance,
NPP
Review regulation of ecommerce
(including indirect budget financing)
Ministry of Energy,
Chamber of Entrepreneurs
Eco-system Remote ID and verification National Bank, Ministry for
IT, Ministry of Justice, MIA,
Ministry of Finance, AFK,
banks
Online sale of insurance National bank
… and the Government is addressing it through investment and institutional reform
Government initiative “Digital Kazakhstan” Astana International Financial Centre (extrajudicial body)
17
Source: Government of Kazakhstan
PwC
China’s big players already demonstrate interest in the sectors relevant to eCommerce in Kazakhstan
The interest
18
PwC
Recent interest by Chinese companies in Kazakhsta: Kerry logistics
• Kerry Logistics is a large Chinese transportation and logistics company
• In 2017, Kerry Logistics completed acquisition of one of the largest logistics company in Kazakhstan and neighbouring countries
• The opportunity was enhanced as the Target had gone through a turmoil caused by devaluation and hostile economic environment, and that allowed attractive valuations
• PwC Conducted a robust analysis of the company and helped the client to build solid negotiation position:
- valuation;
- secure protection against risks
• Our client was able to renegotiate terms substantially to own benefit and proceed to deal closing
19
“We are very excited about this joint venture, part of our strategy to take advantage of the Belt and Road Initiative. The new partnership will provide new options and cost-efficient multimodal solutions to access to the strongest network in Asia.”William Ma, Group Managing Director of Kerry LogisticsSource: Kerry Logistics
PwC
Case Agreement Results
20
Recent interest by Chinese companies in Kazakhsta: China Telecom
• Currently, the broadband penetration is very low in rural areas
• Speed of internet in rural areas is 30 times slower than in cities
• 6700 villages
• Almost a million households
• A new partnership between China Telecom and Kazakhstan's largest telecoms firm JSC Kazakhtelecom
• Helping high-capacity route from Hong Kong to Europe
• Fiber optics connections
• Increased connectivity of rural areas
• New options for setting eCommercelinks between producers and consumers in remote areas and trade centers
Source: Kazaktelecom, China telecom
Contact
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
© 2017 PricewaterhouseCoopers Limited. All rights reserved. PwC refers to the Hong Kong member firm, and may sometimes refer to
the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
Kostya YeliseyevPartner, PwC Eurasia Deals Leader