Moscow Almaty Kiev Minsk Where Next?
«What we bring is not merely people, but the spirit of modern management», says Alexandr Dilbazi, President of the PROMTEK GROUP
Alexandr Dilbazi, President of the PROMTEK GROUP, answered some questions from our magazine
The PROMTEK GROUP was founded in October 1997 as an international trade operator between Russia and Ukraine. The name PROMTEK, derived from «industry» and «energy sector» in Russian, reflected the company’s major field at the time of its inception.
Today, the PROMTEK GROUP is a privately owned transnational holding company, which is active and seeking to expand its presence in the whole of the post-Soviet arena. Its core business is trade in Russia and the CIS, with logistics services for large energy, oil, gas and metallurgy companies being the main activity.
The PROMTEK GROUP is based upon fair partnership principles, and comprises independent regional entities. This structural composition facilitates efficient and well co-ordinated commodity and cash flows within the company. PROMTEK’s special feature is its regional policy of a stepwise delegation of responsibilities for business management to the company’s regional branches and affiliates.
The holding is open for the entry of new partners. The management of the PROMTEK GROUP believes that pulling together the efforts of all the holding’s companies is ultimately beneficial for their individual development and sustained expansion. The PROMTEK GROUP has been operating in Kazakhstan since December 1999; in February 2000 a branch was founded in Kustanai, and another branch in Aktau is in the pipeline.
The short-term goals of the PROMTEK GROUP are: to expand its regional structure through the attraction of new members and provide them with all the corporate resources necessary for successful performance; to approach new investors, including foreign capital; to enhance operations in target markets; to set up a comprehensive logistics chain covering the whole of the CIS.
The PROMTEK GROUP has four main offices in Moscow, Almaty, Kiev and Minsk. Operator companies belonging to the PROMTEK GROUP are present in all the CIS countries. In their work they follow a customer-provider pattern, and can supply industrial products to any degree of complexity, provided that the order is precisely defined and negotiated beforehand.
What businesses do you serve?
Large ones. For such companies, it is more economic to deal with a limited number of suppliers able to offer a range of various commodity groups. A typical example is Norilsky Nikel.
Isn’t it more economic for companies to deal directly with manufacturers?
At present, manufacturers are not marketing their produce themselves, leaving this task with their own dealers or trade houses. There are instances where a manufacturer’s price or payment terms might appear unattractive for the buyer. As for product delivery, many companies are not in a position to observe timing schedules strictly. Another consideration is quality. Finally, imagine how huge the number of providers could be, given the hundreds of input items required by a company. Dealing with all of them separately would be an enormous waste of money and time.
What alternative can you offer?
Our message is that a company should first decide on an optimal stock of input for a one-year operation. This assessment should be finalised at least three months prior to the beginning of the year. Next, input provisioning should be contracted to a few provider companies, who will then assume full responsibility for the agreed quantity, quality and timing of supplies. That is, basically, the key rule of logistics.
But isn’t it marketing, not input provisioning, which is reportedly the major concern of many businesses?
Exactly, and there lies the key to the problem. Whenever we are approached with marketing issues, our analysis shows that the end product gains in cost as a result of inept logistics.
Do you mean overpaying for raw materials?
Yes, but not only that. Adverse influences might also include the inefficient use of production capacity or the failure to plan input provisioning on a regular basis. We were the first in the CIS to consolidate the «right-on-time» shipment as a top requirement. By that we mean the delivery of goods straight to production facilities, without increasing the remainders in stock. Usually, companies obtain loans secured by their stocks, which represents an additional item of production costs. All these work to augment the cost of the finished product. Logistics is the heart and veins of a business. If they are diseased, the whole of the company suffers.
Is there a lot of consultancy in what you are doing?
Yes, we do provide consulting services. However, unlike other consulting companies, we not only diagnose the customer’s weaknesses, but also take remedial measures. If there are shortcomings in input provisioning, we offer supplies on our terms via PROMTEK GROUP partner companies, and a customer can calculate a realistic amount, which might be saved as a result. So a customer has to be specific in his order. We widely accept payment by bill. If a company’s bill is not quoted on the security market, the bank’s surety is required. The same applies to shares and bonds. In the provision of equipment and vehicles we often resort to leasing arrangements.
Don’t you feel that PROMTEK is late in penetrating a market, which has effectively been shared between other players?
My view is quite the opposite. Those you are talking about need us. PROMTEK’s modus operandi is not about how much property you control, but how efficient you are in using your capacity. Our job is to provide large holding companies with technical wares and materials that are vital for their operation. That is, the promotion of finished products in other countries, managing the whole of an enterprise - simply termed, logistics of all processes. Using advanced management methods, we minimise company’s expenses and increase its income. Our principal asset is not tangible - it is the intellectual potential.
Do you mean that those who possess property cannot manage it properly without your assistance?
The paramount owner’s concern is to secure and enhance the commercial value of his property, and to expand it. Any other tasks, such as logistics, marketing, transportation, etc., should be handled by professional companies. The owner should concentrate on the financial and production issues. Then, the finished product will be competitive.
Who occupies the managerial positions in your company in Kazakhstan?
In the early stages we were employing specialists from our Moscow office. At present all of them, except the managing director, have been replaced with Kazakh residents.
Most foreign companies that arrive in Kazakhstan bring their own specialists…
What we bring is not merely people, but the spirit of modern management, best embodied in the corporate management concept. There is a pool of managers in Kazakhstan who, through appropriate corporate training, might be upgraded to the standards required by our company.
Who are PROMTEK’s partners in Kazakhstan?
Our principal partner is Kazkontrakt, with whom we have several joint projects.
The PROMTEK GROUP is known for having brought many Russian and Ukrainian companies to the Kazakh market. What service package do you offer to your customers?
First, we offer permanent representation through the PROMTEK GROUP; we also assist in founding joint ventures in Kazakhstan, submit tenders on behalf of our customers, and conclude agency contracts.
How do you manage to co-ordinate the operations carried out in different cities?
In the first turn, of course, we use Internet technology. I believe that in the near future industrial products will comprise the core of Web-based trade. Even now, some of our corporate clients deem the ongoing personal contacts unnecessary, since a single annual contract provides an adequate basis for ordering supplies via the Web. The PROMTEK GROUP is on-line 24 hours a day. If you are a corporate client of one of our offices, you have access to the whole of PROMTEK’s network.
Which industry in Kazakhstan needs logistics most?
It is the oil and gas sector, which is growing rapidly as international pricing trends are pushing financial institutions to invest in this industry. Many oil and gas projects in Kazakhstan have just started and will require a great deal of input in the near future. At the moment, the delivery of Kazakh oil and gas to their export destinations is proving to be too costly. Therefore, investments should be encouraged in transport terminals, oil and gas pipelines, railways, highways, rolling-stock, high-capacity lorries, and storage facilities in production sites. This might be achieved through the formation of large joint stock companies involving both public and private sector resources. Our company is prepared to take part in such ventures and actively promote them among its partners.
What is your assessment of the current state of Kazakhstan’s economy?
The economy is inseparable from politics. Kazakhstan is distinguished among other CIS countries by its political stability, which in itself is a basic precondition for investments. Having read the presidential programme Kazakhstan 2030, I believe that in some 20 years Kazakhstan’s advance will be even more striking.
Table of contents
The Corporate Bonds Market in Kazakhstan Damir Karassayev
Moscow Almaty Kiev Minsk Where Next? Alexandr Dilbazi
Financing of the Kazakh Mining Iindustry by Banks Asyl Khamitov, Valery Nalobin
