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Azamat Zhangulov, Vice-President of KMG International: „We are 7 % of Romania’s foreign direct investment”

Young, handsome and successful! Azamat Zhangulov, Vice-President of KMG International (formerly The Rompetrol Group), the company that represents Kazakhstan’s greatest investment in Romania is an excellent portrait of the businessman as a young man. Highly energetic, despite of the early hour, Mr. Zhangulov seems to look forward to each day as a new opportunity for an achievement and enthusiastically declares that his company is the best in its domain.

 

There are permanent discussions about your offer to buy the shares owned by the state – 26.69 per cent, at Petromidia in Navodari. How are things going?

 

We, as buyers, expressed all our commitment and our firm decision to acquire the shares. The Romanian Government, though, has a lot of procedures to pursue. There are several steps to be followed by the Government, starting with approving a strategy for privatization, then approving the tender for consultancy, then approving the launch of the privatization procedure. And all of these need constant involvement from all the Government. And, due to the elections, all of these got delayed, because they had other priorities in the campaign. But there is progress on their side as well. We are now looking forward to the privatization decision to be published.

 

How long do you predict it will require them to publish that decision?

 

There are many things that are difficult to predict. Such as the formal steps of the procedure or the oil prices. But technically, each step requires from a few weeks to a few months. After the privatisation is published, we have 30 days to place our bid and we intend to do it immediately.

 

By buying Rompetrol seven years ago, you have become quite familiar with the Romanian market. How did you find this market at the time of the acquisition?

 

If we ran an analysis of different markets around the Black Sea region, I think that Romania is one of the best markets possible. There are a few arguments to support this statement. First of all, Romania has perhaps the biggest potential of economical growth in Central – Eastern Europe. Also, Romania has natural resources, worth exploiting, and human resources, educated, young and reasonably paid, unlike the rest of Europe. There is also infrastructure potential, as well as energy-producing potential. Therefore, Romania gives us plenty of opportunities, compared to other countries, as, despite the low rate of foreign investment, Romania shows stable growth and was not crushed by recession like

 

How does Kazakhstan relate to Romania?

 

We have identified Romania as an important partner, not only because of these factors, but also because of the direct access to the Black Sea, which gains us access to sea ports and other facilities. We see that this country will grow, and this also means a growth in consumption. We identified the necessity to build new gas stations as new roads are built and the transportation, underdeveloped so far, has started to show its potential. A huge development opportunity is also represented by the building of a road that connects Europe to China and that passes through Kazakhstan and Azerbaijan. Romania may be placed on this route and represent an access way to Europe, but it has to use its potential. This transportation potential could be a considerable point of growth and regeneration for Romania’s economy.

 

What are the challenges of the Romanian market, from your point of view?

 

The main challenge relies on the low rate of foreign investments. Awareness should be raised regarding Romania’s investment potential. There is the need for a strong investment policy, clear and understandable for any investors. In Kazakhstan, by example, we have a Foreign Investment Council, chaired by the President of the country, and it is working efficiently with companies all over the globe. They meet two times a year to discuss any issues that may have been appeared in the foreign investment policy. This is why the foreign investment rate is quite high.

Other issues are related to taxes, efficiency of different bodies of the Government and of the legal system. These can be improved, in my opinion, to immediate positive effect in foreign investments in Romania.

 

One year ago, you announced the intention to open 100 new gas stations in Romania. How are things going on?

 

Our investments depend on the memorandum we signed with the Government, as all these plans depend on the Government. Our slowdown depends on them. For this year, we will be launching this year four or five gas stations, on our own. We are also working on two new projects, the cogeneration plant and the Midia facilities, with an investment of USD 130 mln. These projects are in the stage of design, not in that of implementation yet.

 

Which are your financial results for this year?

 

The year is not accomplished and we are still waiting for the data, but I estimate an increase of 50 % compared to last year. We have reached the highest figures in the entire history of Rompetrol. This is the result of our heavy investment, made a few years ago. This year, despite of all issues, our investment was about USD 130 mln. If we consider that the total value of foreign investments in Romania is about USD 2 bln, we may say that we are 7 % of Romania’s  foreign direct investment.Also, we have launched a few performance-enhancing programs for our retail. We simplified our procedures to provide the best practices and the results are obvious.

 

What is the company’s position regarding social responsibility?

 

We have one of the best platforms in Romania for CSR programs. There is an open and very transparent selection procedure for causes that need help. Many projects have been launched this way. There is a list of all our projects on the site impreunapentrufiecare.ro, and they are all important, not just moneywise, but also due to the benefit we may offer simple people, by sponsoring programs such as OvidiuRo or SMURD. We also assume social responsibility to our employees, providing them some of the best social packages in Romania, much better than the national legislation requires.

 

Is the drop in the price of oil good news for you, or is it bad news?

 

There is no direct link between the price of oil and the profitability of the refining industry. It may seem so at first sight, but given the complexity of the processing, it is not. Yet, quotations for oil products are going sometimes lower than the quotations for oil, which is a risk. A massive drop in the oil price can create a huge fluctuation on the market, and this makes us very cautious. These periods of low prices give us the opportunity to review our portfolio and postpone certain projects. I compare it to fasting. Fasting is very healthy.

 

Has the Ukrainian crisis affected your business in Romania?

 

KMG was not directly affected by problems in Ukraine. We had no participation in Ukrainian refineries either. There were no exports of crude oil to Ukraine, because Ukrainian refineries were not working at full capacity and needed small amounts of imported oil. Rompetrol exported oil products to Ukraine, and these exports have not changed in amount after the crisis started. On the contrary, due to the decrease of production, the country will need to import and will consume. And we are confident that we will be a key supplier. So, I do not see the crisis affecting us in any way.

 

How do you think your presence in our country influenced the relations of Kazakhstan and Romania?

 

Very positively, I think. The level of diplomatic relations has systematically improved, and also has the number of diplomats present in both countries. Second, there’s a constant exchange of visits at high level. Third, a Kazakh – Romanian Business Council was launched last year, actively supporting mutual investments. And, economically, a whole new world of investing possibilities is opening up right now.

 

 

 

 

 

 

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