In for the long haul – 10 years of the IBC
The International Business Council, (IBC), publishes a journal called “Investment Now, which is subtitled “In for the long haul”. This can be understood in several ways, some of which are positive, but others are negative.
On the positive side, for example, it implies that investors take a long term view and enter into a commitment over a period of time. This is welcome to the Kyrgyz Republic – a country that since independence in 1991 has been in transition from a Central Command Economy, where strategic decisions were typically made in Moscow but implemented in the far flung corners of the former Soviet Union, to one wish represents what we call a Free Market Economy. The commitment is not just in capital terms, but also in human terms, investing in the education and training to help the population acquire the knowledge, skills and experience necessary to survive and thrive in cut and thrust that they are now exposed to in the global economy.
This is indeed the case where the investors enter the country intending to operate a company. Unfortunately, however, that is not always the case. Some investors, banks and venture capitalists concentrate on the start-up of new ventures and have an exit strategy which aims to sell-up and leave the actual operation of the investment to specialists in that particular field as soon as the business proves valuable enough for them to recoup their investment and make a profit. That is a criticism often levied here, in particular, at the mining industry where exploration can lead to the discovery of, for example, gold deposits – increasing the value of the company on stock exchanges without actually producing any of the precious mineral, (and a number of licenses have been revoked because, it is claimed, the company concerned has not moved to production in accordance with the license agreement.)
On the other hand, on the negative side, the use of the word :haul” implies a heavy load being dragged or carried. There is certainly an element of that in the case of doing business in the Kyrgyz Republic – as there is anywhere. One survey suggests that something like 80% of new businesses fail within the first five years, (but that figure varies – the one representing the timescale that is – in some surveys it is three years … and in others just one year!, (see www.moyak.com/papers/small-business-statistics.html).
Back in the year 2000, the IBC, (which yesterday celebrated its tenth anniversary), entered on the “long haul” of trying to improve the business environment – for both existing investors in Kyrgyzstan and in order to attract new investment – as well as representing the interests of its members in lobbying the government and international donor community on business matters.
The idea emanated from the German Embassy. The ambassador at the time envisaged a German Chamber of Industry and Commerce as exists in many countries around the world. The trouble was that there weren’t that many German investors in the republic at that time – not enough to make a viable organization. So he widened his scope and thought of a body that would represent European business interests in the country. To be fair, there weren’t that many of those, either, and such a concept would also exclude the largest foreign investor in the country, the Kumtor Gold Mine, which was operated by a Canadian parent company. So the brief widened even further to a multi-national, or “international” business club,
The idea proved to be a popular one amongst the foreign investors, and an inaugural meeting was organized in December, 2000. It was held, as it happens, in the conference room at the Silk Road Lodge. The Celestial Mountains Tour Company joined at that meeting – one of 14 companies that made up the membership in 2001.
It was obvious at that meeting that the foreign community felt that such a body was needed. About 60 people crowded into the meeting and it was obvious that our conference room was going to too small to host such a large meeting and so it was a welcome relief when we were offered facilities to hold meetings in the, as yet unfinished, Hyatt.
At first the IBC was an informal association of companies, supported by, in particular, the German Embassy and the Bishkek representative office of the European Bank for Reconstruction and Development, (EBRD, or simply the “European Bank”). Even as an informal body, it was able to gain the ear of the government – which was eager to listen, and learn, from those that had already committed to the Kyrgyz Republic and “put their wallets where their mouth was”. The government’s “investment supreme”, Djoormat Otorbaev, was a strong supporter of the organization and attended most of the IBC’s activities. He later went on to become a Minister and Deputy Prime Minister, but is now working with one of the international donors and is based in London.
In due course, however, it was decided that if IBC was to be really effective in its role, then it needed to grow and develop as an independent organization. So it was decided to register with the Ministry of Justice and become a formal, “legal entity”. We needed three “founders” to do so and that’s how it came about that the original “Public Association” was “founded” by three “Brits”: the chairman at the time, the IBC legal advisor and me.
The British hadn’t taken over completely, however, and the Germans maintained their interest – despite the regular change of ambassadors as part of the normal rotation of diplomatic personnel. The Centrum für international Migration und Entwickerlung, (the human resources placement organization for the German Development Corporation – CIM), agreed to provide funds to help establish a separate office and staff for the IBC, so that the organization could be more effective. (The management of the Hyatt Regency agreed to provide office accommodation in lieu of membership fees – which proved to be beneficial to IBC.) British interest and influence, however, was further strengthened when a “Brit” was appointed as the first Executive Director.
The 14 original members were mainly the largest foreign investors in the country – which led to the two main criticisms that have bedeviled the organization throughout its history: that it represents “foreign interests and that it represents “big business”. Over the course of time, however, the membership grew and diversified. Most of the membership now represents companies with local investors and there are a small, but not insignificant number of smaller companies. It’s true however, that most of the businesses in Kyrgyzstan are SMEs, (Small and Medium sized Enterprises), and the IBC is still comparatively “top heavy” with the larger companies taking a greater role in it.
There are reasons for that, of course. The membership fees are not small, and many companies choose to belong to a business association which represents their particular business activity – such as KATO, (The Kyrgyz Association of Tour Operators).
Slowly but surely, however, new members joined the organization which was becoming a well known voice for the business community and was often consulted on measures to be undertaken which affected the business environment and the attraction of potential investment.
IBC activities include the regular monthly open meetings which tackle a topic of importance to the business community either as a whole, (such as tax reform or the impact of the Customs Union or leasing), or for one particular sector, (such as the development of tourism or regulation of the mining industry). They also participate in conferences, “Round Tables” and seminars organized by a variety of different organizations. They are represented on many official bodies as a representative of the private sector and the business community, where they can lobby particular points. (Ministers and representatives of the main donor organizations often participate at IBC events.) In addition to the Investment Now journal they also produce a variety of other publications such as Law and Reality – a newsletter that highlights proposals and actual changes in the legislation and how it may impact on businesses, weekly and monthly newsletters covering their activities and a newsletter about doing business with the World Trade Organization, (WTO). They have carried out a number of important surveys including the regular “Investment Survey” where respondents rate the current business climate and how they envisage in the nearest future. Lobbying is an important part of their work which can take place either in the form of meetings with Ministers, officials and deputies, In order to get their message across, as a form of both lobbying and Public Relations, they also issue press releases on important issues, taking part in press conferences, give interviews and appear on TV and Radio discussion programmes.
And, of course, there are occasional social events when people can either simply relax or utilize the opportunity to “network”.
Perhaps, one of the most important and influential aspects of their work was when they adopted the seven point “Business Agenda” in order to tackle what was seen as priority themes for the business community:
- Safety and security
- Transparent government
- Independent courts
- Quality Education
- Fair Taxation
- No corruption
- Effective regulation
IBC is now on its fourth Executive Director, and about to appoint our fifth. Each has brought something different to the role and to the organization, helping it to grow from strength to strength and seen it through difficult times such as the 2005 and 2010. revolutions. It now has over ten times the number of original membership, which is no mean feat, especially in these difficult times.
Although his is an important role and plays an vital part in the success, (or otherwise), of the organization, the Executive Director is just one member of a much wider team, which comprises the other staff, the Management Board which defines priorities and sets the agenda for the organization and its activities and, not forgetting, the members who not pay their annual fees but also take an active role in the Association’s activities.
There are too many members and characters that have made valuable contributions to both the development and work of the IBC over the years and it would be difficult to mention them all, but I think it would be wrong not to mention one person: Eddie Rausch, a larger than life character whose personality, drive and enthusiasm over the first nine years of its existence was instrumental in helping to shape the development of the IBC and made it into what it is today, one of, (if not the), leading business association in Kyrgyzstan,
Last night’s reception was a chance for IBC to showcase itself and its activities over the last ten years.
To be honest, I not very good at “small talk” and don’t really like these events, but I felt that this was one where I had to attend – not just because I am a member of the management Board, but in order to mark the anniversary and say a collective “Thank you” to all of those who, like Eddie, have contributed over the years to the success that is the IBC.
Bishkek