Outside the Box

Can you elaborate on the evolution of Kazakhstan Kagazy from its inception in 2001? What are the main highlights and milestones that the company has achieved over a decade of activity?

Our company has been a leader and the most innovative company in its sector. Kazakhstan Kagazy was established in 2001 following an import substitution program and was financed by the Kazakhstani government. It was the first paper factory to be installed in Kazakhstan. Our factory was also the first to move to paper production from waste paper. Kazakhstan Kagazy takes waste paper, regenerates it, and then we make boxes; we were the first to establish a modern corrugated factory, and we are the leading factory in terms of size and the quality of the technology we are using. We were the top company in our sector, and the only one to be listed on the London Stock Exchange (LSE). Kazakhstan Kagazy was the first company to produce mottled bleached cardboard out of waste paper in the country, and we are the first company that produces “green” boxes, which are made from 100% recycled paper.

What is your market share within Kazakhstan?

In terms of paper production, we have a 90% market share in Kazakhstan. In corrugated paper products we have a 50% share of the Kazakhstan market. In waste paper it is hard to say, because there are no solid statistics; it is still a market that is under development. A lot of waste paper in Kazakhstan is used for heating in the winter. I estimate that out of the entire collectable market, we have around a 70% market share.

What is the potential for the green economy and specifically for recycling businesses here in the region and in Kazakhstan?

There are several positive developments, with even more room for progress. What is critical is that we are operating in a relatively rich economy that has money to reinvest; Kazakhstan is a wealthy country. And the country is doing well compared to its neighbors. The government, and specifically the President, has made it an objective that by 2050 Kazakhstan will no longer rely on oil and gas as the mainstay of its economy. What is still missing is public consciousness about recycling and the treatment of waste. The development of a green economy has to be a partnership between the government, the general public, and the private sector. One does not simply impose a green economy without public awareness. And currently, this awareness is still insufficient. This is critical for our company, as we are pioneers in certain areas of recycling. In addition, there is complex legislation that is not always properly executed at the municipal level. Through international conferences, we try to educate the industry about different ways of packaging, and we show how green packaging actually can provide long-term savings.

What has to be done to increase the attractiveness of this sector to international investors?

Right now, Kazakhstan is a small market. However, Russia is investing more into this area. Normally, international companies make an entry when the market has already evolved to a certain point. They stay away for the early stages, and thus our role is to move toward this point. Kazakhstan Kagazy must bring these recycling opportunities to the national stage and then partner with the international community and large international investors.

How is the group promoting the social development of the country?

Kazakhstan Kagazy pays close attention to the issues of ecology, education, and charity. We have several long-term corporate social responsibility (CSR) projects underway, and we also support a number of social initiatives. Among our long-term social initiatives are the recently opened Kazakhstan Center for Peace and Accord, the educational Young Leaders Program, and the eco-social projects “From Recycling to Donation” and “Going Green.” The Kazakhstan Center for Peace and Accord (KCPA) was opened in August 2014 in London through cooperation with the People’s Assembly of Kazakhstan. The center will focus on several important projects grouped around language, security, and education as a way to foster peace and stability in the region. The center has close partnerships with leading British universities and prominent academics, so education will be a central focus of the KCPA. For instance, we plan to establish a scholarship program that will sponsor non-Kazakhstani students who are interested in researching Kazakhstan-focused topics that will further promote peace and international accord. Through its Young Leaders program, the UK-based charitable organization Foundation K provides opportunities to gifted children of Kazakhstan Kagazy employees, and their relatives and friends, to receive a high-quality education in Almaty and, eventually, to study abroad. Six children have already received this scholarship. By partnering with large companies through an initiative called From Recycling to Donation we achieve two goals: promoting the idea of recycling, and supporting children with disabilities. And through the Going Green initiative, we educate people on environmental issues and encourage them to sort and recycle waste.

What are your priorities and goals for 2015?

We have an ambitious development plan for the years 2014—2017. Now that we have finished our financial restructuring with Alliance Bank, we can direct our full attention to growing and expanding our business. Through this strategy, we are going to expand recycling to other types of recyclable materials, including plastic. This niche has not yet been filled in Kazakhstan, so we see growth potential here. We will also expand geographically to the north, both by opening new waste paper collection points and by entering the Russian market. This entails building a recycling plant and diversifying our product range. To support these plans financially we will reinvest our profits into the future business.

What is your long-term outlook for Kazakhstan’s transition to a green economy, and what amendments should be introduced into the national legislation related to the waste management sphere?

Kazakhstan has all of the prerequisites for a successful transition to a green economy. The government of Kazakhstan has given its full support to the plan and has made it a top priority for the coming decades. The economy is growing and is in constant need of new technologies and more efficient practices. One major amendment that should be introduced to the existing legislation concerns waste management. We suggest that there should be and obligation of all companies and the general population to sort and recycle all types of waste. Every city dweller generates 330 kilograms of household waste per year. This statistic is frightening if you multiply it by the population of Kazakhstan, of more than 17 million people. While in developed countries there is an integrated waste management system that helps to cope with growing amounts of waste, much still has to be done in Kazakhstan in this regard, from the development of infrastructure to the education of the country’s population.

© The Business Year – November 2014