Israel and Kazakhstan: on the Way to Innovative Economies
Mr Ran Ichay, Ambassador of the State of Israel to the Republic of Kazakhstan replies to questions from the International business magazine Kazakhstan
Your Excellency, what is your opinion of the current trade and economic cooperation between our two countries?
I guess it is necessary to look first of all at statistical data. In 2006, the bilateral trade volume valued $697.7m. Exports from Kazakhstan to Israel valued $622.4m and imports from Israel to Kazakhstan valued $76.2m. Kazakhstan has been an exporter of oil, wheat and cotton and an importer of equipment, agriculturals and plastic-wear.
Based on the results of the first quarter, a minimum 30% growth of the bilateral trade turnover can be expected this year.
The establishment of a regular air service from Almaty to Tel Aviv after a 6 year-long break was a major economic event. The activities of the ministries of transport in both states played an important role in this. Additionally, the agreement on cancellation of double taxation and the space cooperation agreement are currently under consideration. These agreements are expected to be signed during the next meeting of the Joint Kazakhstan-Israeli Commission; the sides will also renew the general intergovernmental agreement on trade and economic cooperation. All these factors will impart a new impetus to economic relations between Israel and Kazakhstan.
Which of Kazakhstan’s industries are the most attractive for Israeli business?
Today Kazakhstan has 105 registered enterprises with the participation of Israeli capital. They are operating mostly in the oil and gas industry, metallurgy, mining, and manufacturing and building industries; they deal with cable production and trade; they perform real estate operations and provide enterprises with services. The total Israeli investments in Kazakhstan economy exceeded $300m.
It should be noted that the range of bilateral interests of Israeli and Kazakhstan’s businesspeople has greatly expanded of late. In the past they were interested mostly in oil and gas; today they make regular contact in spheres like agriculture, medical services and equipment, telecommunications and all hi-tech lines. This is a very positive trend, which means that both Kazakhstan and Israel consider each other not only as a supplier and a customer of hydrocarbons. Being a country that possesses advanced technologies and being aware of Kazakhstan’s desire to develop this sphere, Israel accords top priority to these spheres of cooperation.
What are the most significant joint economic projects?
The latest example is Hapoalim Bank entering the Kazakh market; it is one of the largest Israeli banks and has bought a local Demir Bank and established its branch in Almaty.
In the west of Kazakhstan, our company Bateman Engineering is implementing a multi-million contract for construction in the power sphere. This company is carrying out a unique project from the viewpoint of technologies and scale; there are no projects like this in Israel itself. To my mind, Bateman today is the most advanced and progressive contractor in Atyrau, including with regard to the compliance with the dates of construction.
The Governor of Mangistau Oblast has signed an agreement of understanding with another Israeli building company, Hakmi Group, during his visit to Israel. Under this contract, the company has started construction of a desalination plant in this region of Kazakhstan. The company is planning its future participation in the construction of a seaport and an airport, the expansion of Aktau and establishment of a high-tech industrial zone in the vicinity of Aktau.
Over the past few months, five delegations of the world-famous Israeli medical centres such as Herzlia and Horev visited Kazakhstan to explore the possibilities for cooperation in the sphere of health protection.
For its part, your country also started making investments in Israel. The National Innovation Fund of Kazakhstan, in particular, intends to expand its participation in Israeli venture funds and hi-tech companies including start-ups. The capital investments already value $50m.
Israeli authorities devote special attention to innovative branches. What mechanisms are used to that end?
Israel has scarce natural resources, and therefore Israel in its early years staked its economy on the development of high technologies and innovations. The inflow of immigrants from all over the world including the former USSR (many competent engineers and researchers were among them) played an important role in this process. Thus, we gained access to intellectual capital and started its intensive development. Our country has established a vast network of universities such as Tehnion, a strong school in the sphere of natural and exact sciences. We make efforts to urge our young people to choose this kind of education. The state grants subsidies for training of students in priority specialised fields. As a matter of fact, the fundamental science and effective educational system is a basis for the development of innovations.
Today, Israel’s level of capital investments per capita in R&D is the highest in the world. Our Ministry of Science and Technology, in particular, is implementing the so-called “Program of Infrastructure” which is a bridge between fundamental research and applied science. This is a unique programme which serves as a fund for financing research in spheres like microelectronics, nano technologies, bio-technologies, medicine, electron-optical materials and so on. I once headed the International Cooperation Department of this ministry and I know that all the countries with which we held negotiations showed a particular interest in this programme and there is no similar programme. Every year we allocate tens of millions of sheqels for financing private enterprises within this programme, namely, universities, research centres and other research institutions.
The Ministry of Industry allocates much more funds to applied research. It allocates hundreds of millions US dollars to the companies involved in innovation development in Israel’s priority spheres. At the same time, the state does not dictate to them what to do; the state only chooses and supports those companies whose R&D projects are of interest.
As for the further commercialisation of the results of research, this is a task for the venture funds. At the initial stage, the state was deeply involved in the development of venture industry: the first funds were established together with private investors on a fifty/fifty principle. It became of lesser importance with time. The private sector became stronger and more stable and its resources were increased. Besides, we attracted foreign investments. We continue assisting private companies to succeed in their endeavours, but today the participation of state is confined to assistance at the initial stage.
Is Israeli experience suitable to Kazakhstan?
Our two countries share much more common values than it may seem at first sight. Yes, our countries differ in geographical size, but we are similar in the structure of society. Our nations are rich in traditions, culture and history and at the same time both Kazakhstan and Israel are very young countries. Our societies are multilingual and pluralistic; they are open to new ideas, opinions and approaches. I must also say that I have never seen such an open and tolerant country as Kazakhstan from the viewpoint of religion. The main thing is that this is natural; this is not just the position of the authorities, but it is the position of the ordinary people. It is of great importance because if your mind is open, you are able to put any idea into life.
Many of Kazakhstan’s political figures and businesspeople more than once said to me that Israel could serve as a good example for your country. These steps that you take today in the sphere of innovation, hi-tech and technologies, Israel has already taken a few years ago. We are moving in one direction and our ways cannot help but come together. Right away this is reflected in day-to-day contact between our countries. At the moment, the ex-minister of Israel is involved in the activities of the Innovation Fund of Kazakhstan. Recently, an expert of one of the best Israeli incubators visited Kazakhstan to share their experience in the implementation of similar projects in Israel. There is also a lot of potential in the educational field. Thus, an agreement of understanding for vocational training is under consideration.
What about the cultural and social relations between our two countries?
A number of ideas are being put in life in these spheres. I will give a few examples. Under the social project Dostyk we have arranged a visit of Israeli physicians and nurses in order to render assistance to HIV-infected children in South Kazakhstan Oblast. There are many Russian-speaking people in Israel and therefore the Russian film industry is highly developed in our country. That is why we have held an Israeli film festival for several years in succession. For its part, Kazakhstan’s film Nomad was a success in Israel a few months ago; the Embassy of Kazakhstan in Israel supported this showing. I was really encouraged by the possibility of cultural exchanges between our two countries without the participation of state bodies. Last week, I was back from Israel where I had bought a philosophic book by Al-Farabi in Hebrew. It was issued by one of our universities and translated by an Israeli Arab student. This initiative indicates that our people are interested in the study of the culture and history of Kazakhstan.
Ran Ichay was born in Petah Tikva. In 1995, he graduated from the Geopolitics Department of Bar-Ilan University (Bachelor). In 1995, he became an employee of the Foreign Ministry, and in 1997 Vice Minister for Foreign Policy. He worked for the following diplomatic missions: the Second Secretary of Diplomatic Mission in Brussels (1999), and the Second and then the First Secretary of the Israeli mission to the European Commission (2000). Between 2001 and 2003 he worked at the Political Planning Department of the Foreign Ministry and headed the Staff of the Foreign Ministry for Foreign Policy. In 2003-2005, Mr Ichay was the Adviser to the Minister of Finance for Foreign Policy. In 2005, he was the Director of International Relations Department of the Ministry of Science and Technology. Since 2006, Mr Ichay has been the Ambassador of the State of Israel to the Republic of Kazakhstan.
Table of contents
The Brand of Kazakhstan is Being Created Today Birzhan Kaneshev
Where Does the Brand Start? Yevgeniy Zharkin
The Tree of Diversification: Prescriptions for Growth Sergey Gakhov
Our Telecoms Charge Ahead; Kaznet Grinds to a Halt! Alexander Vassilyev
Civil Aviation: Takeoff or Letdown? Sergey Smirnov
Railways. The Quadrature of a Wheel Pair Sergey Smirnov
Atlas Copco. Growth Strategy Hans Hedensjö
Pension Funds. Re-assessing Values Editorial
Securities Market: Six Months’ Figures Tatyana Kudryavtseva
Second Advent. Scheme for Placing SPO Yuliya Feller
