Thursday, 02 July 2020, 23:50:51
On the second and third days of the Astana Finance Days online conference, experts discussed issues related to financial technologies, the state of the global economy in the context of the COVID-19 pandemic, issues of financial regulation and commercial law. There were also conferences on the economic prospects of Kazakhstan and capital market trends, panel sessions on education organized by the AIFC Law Academy, the AIFC forum of companies, webinars on supporting the sustainable development of small and medium-sized businesses in post-Soviet countries.
New Opportunities for Corporations and Startups in Realities of COVID-19 Post-Quarantine
During this pandemic, the technological environment is developing more dynamically, whole markets and business models are changing. It is difficult for corporations, which are mostly strictly regulated, to manage innovation, but it is very important for survival. The solution to this problem is in the area of corporate innovation. Experts discussed and gave practical advice on plans to launch and restore innovative activity within companies. Corporations can introduce new technologies in collaboration with startups. This will help increase profits and reduce costs.
Head of the Corporate Direction at GenerationS accelerator Irina Martynova believes that for any innovation-oriented company it is important to understand where to begin the restoration of innovative activity, how to correctly plan and get the expected results. There are a few things that have been observed in corporate innovation.
“There is a reduction in budgeting, because companies are now focusing on their core business, where innovation and digitalization play an important role, online negotiations, startups have reorganized and found new benefits and new targeted opportunities for themselves that allow them to maintain cooperation. This is probably what can be distinguished first of all, as the things that we face every day, convincing corporations that we need to continue to work with innovations and change focus,” Martynova said.
In her opinion, today the focus of innovation has changed a bit from long-term innovations to short-term ones, that is, something that can give a tangible effect right now.
“During the pandemic, we had the first experience of negotiating completely remotely, we managed to find joint intersection points and conclude the first commercial contract. But in general, indeed, it has become more difficult because the focus has changed, which is now not entirely on innovation. Now innovation is a support mechanism. But after a while, people will realize that innovation will help overcome the crisis,” the expert said.
According to her, the global challenges of digitalization and diversification have not gone anywhere.
“We see a focus on more mature companies, not startups in a literal sense, more mature players are making first sales. Investing is not what the market is currently focusing on. We are optimistic, banks are working great remotely, this can be seen on cases that are already working. People who have suspended programs should understand that innovation helps the crisis, helps the company exit. Now medicine, customer service and entertainment are in high demand. This area is actively growing,” the expert said.
As the speaker assured, startups do not need to focus on countries, this will lead not to development, but to death. They should look beyond trying to find out in which country there is demand.
“And you should not focus on investments, because this is not something that can lead the company to develop a startup on the international market. If you can’t enter the corporation and conclude the first international agreement, you need to look at the international accelerator programs. Russian companies passed the accelerator. If you can’t get into the accelerator, but there is confirmation that the project is interesting in the foreign market, you can use an opposite strategy — go to a conference, find contacts and go online,” explained Martynova.
Head of Venture Scouting at Accelerace Jack Peters noted that the startup community is actively developing in Scandinavia and Northern Europe, and corporations, in turn, are gradually developing a clear understanding of how they want to work with startups. In some cases, corporations paused and took a break, focusing on their core business.
“Those companies that already allocated a budget for innovation last year just changed their focus. Some corporations have become customers just recently, this is inspiring. There are opportunities in the world of a pandemic, for corporations now there are convenient, good opportunities for cooperation with startups. It is necessary to support startups in these difficult times, and not focus only on their development issues,” Peters said.
There is wide government support throughout northern Europe, there is preferential financing, grant-based financing. The government is allocating money to produce the first product or to help a startup run a year and gain strength.
CEO of Bitfuri Kazakhstan, founder and co-shareholder of Bridge Group, a group of companies developing corporate innovations in Kazakhstan, Ukraine, Belarus, Austria, independent director of several private and state-owned companies, including Astana Hub, Timur Bairov believes that the pandemic has changed hiring system and HR work.
“The world has changed a lot over the past six months, the year. The situation in the world of startups and finance was different before the pandemic. There was a venture fever, corporations hunted for teams. Corporations boasted who would buy startups faster and more. The main HR focus was to find faster technical workers, technical geniuses, sales people in the corporation. Corporations played the role of vacuum cleaners when they assembled more or less interesting startups as a harvester. The main task of HR was to find, make a conveyor. Ideology was associated with startup romance. Everyone dreamed of becoming Zuckerberg,” the expert explained.
Now, according to Bairov, in terms of finance, they save everything and on everything. Corporations stopped hiring workers. The main task of HR is how to identify and find those employees who are critical to the company.
“The second task is how to properly lay off or reduce workers. The ideology is maintaining a stable place of work around the world, in all companies. Workers in all companies turned off the daffodil phenomenon when an employee knows that they will find him and invite him to the company. The main agenda is medicine and a way out of the crisis,” he said.
“The theme of corporate innovation development is gaining momentum in the market not only in Kazakhstan, but throughout Central Asia. Within the framework of the Corporate Innovation Department and the entire FintechHub AIFC, we are creating an expert attraction point and networking platform for companies, startups and government agencies. This is how we can launch joint pilot projects, corporate programs for developing cooperation between IT companies and start-ups with real business,” said Alim Khamitov, director of Corporate Innovation Department at AIFC Fintech Hub.
During the pandemic, it’s critical for startups to expand their networking, confirm demand among the partner and expert communities, interact with the market and show practical cases that the startup has the tools and resources to work.
Post-Covid-19: Will the course of the game in the field of financial technology change?
According to experts, the pandemic has greatly affected the financial structure of the global economy. Life will no longer return to its former course.
According to Ann Neidenbach, global head of LSEG technology and chief information officer, capital markets, for London Stock Exchange Group, despite the extremely high volatility and increased risks, the exchange worked smoothly. Technologies provide certain opportunities.
“The biggest impact is customer engagement. Many customers turn to banks for financing. The exchange is one of the ways of financing, we have the proper structure and all the necessary technological capabilities. Technologies help ensure the profitability of many economic projects, help make our community more democratic,” Neidenbach said.
According to her, on the stock exchange you can see the advantages of using digital technologies, for example, bond trading. When working with different technologies, you need to understand how effective they are, how much they can increase productivity. Also, working with technology involves certain risks associated with cybersecurity.
In turn, the Founder and Chair of the Board of IKapitalist LTD Nurbek Rayev emphasized that the pandemic has almost completely translated all operations related to investing into electronic format.
“During the pandemic, we had to change the approach to organizing meetings, and we went online. We underwent a restructuring in March and all the contracts that we signed in May after quarantine were signed with electronic signatures. There were suggestions that investors were not ready for such an investment format, but investors had a very active interest in our platform. Investors turned to banks for loans, provided security,” Rayev explained.
According to him, investors, having lost part of the money, began to better evaluate the methods of investment. Despite the fact that in Kazakhstan bank deposits is much more popular than investments, many, having lost their regular income, are looking for an additional source of income.
“Today's times and investing at this time are associated with serious risk. If we previously interacted with different organizations and provided funding, now we have narrowed the point of application of our efforts and expect that after quarantine is lifted, this situation will change for the better. But we also understand that many companies are unlikely to have to reach the last year’s income level. They will lose from 30 to 40% of their income compared to last year,” Rayev explained.
What place will blockchain occupy in the modern world?
According to experts, blockchain is a serious technological turn, which has great potential.
“The meaning of this turn should be the need to use this technology, we need to understand what problem it will help to solve and how it will make the lives of our customers easier. We must very clearly explain to our customers that they will benefit from our actions. Our platform cannot use blockchain yet, but we believe that the future belongs to these technologies. It makes it possible to record data on all transactions, to increase the transparency of transactions,” said Rayev.
Digitalization of education on the background of social isolation
During the Kazakhstan forum of educational technologies EdTech, as part of an online conference, the Vice Minister of Education and Science Rustem Bigari spoke about the experience of the transition of the education system of our country to distance learning.
“We are faced with the fact that most of the students had to be transferred to distance learning. For this, probably not only Kazakhstan, but the whole world was not ready. All countries were not ready and faced great difficulties. In mid-March of 2020, tremendous work was done by the ministry and IT companies, educational institutions. An operational headquarters, a project office was created inside the ministry, where the world experience was studied daily, how people around the world are switching to distance education. An operational contact center, support service in all organizations of Kazakhstan was created,” said the vice minister.
One of the difficulties, as noted by Bigari, was to teach teachers technologies and skills so that they could use their knowledge to pass on and conduct lessons. It should be noted that the state provided support to domestic educational resources. Further, guidelines for schools were approved — a step-by-step algorithm of what teachers should do. Over 3 thousand lessons were created.
There are about 7 thousand schools in secondary education — 3 million schoolchildren, 335 thousand teachers, 790 colleges, 40 thousand teachers of these colleges, 469 thousand students. In higher education, 116 out of 131 civil universities were transferred to the distance learning system. Higher educational institutions were the first to visit us since March 16.
“I must say that they are the most prepared. A lot of IT companies are present, a fairly developed infrastructure and, in general, universities have gone over without serious consequences. Colleges had difficulties and challenges because of the 790 colleges, only 30% of us had readiness. Here it is necessary to give credit to both the akimats and the colleges, which within 10-14 days prepared and implemented the platform, switched on time to the distance learning,” Bigari said.
In secondary education, electronic journals and diaries, digital educational resources have long been used. In general, more than 90% was covered by electronic journals and diaries and more than 6 thousand digital educational resources were available. Domestic companies such as Daryn Online, BilimLand provided free open access for working with educational resources.
A situation center was created at the Ministry of Education and Science, where experts and educators made adjustments to the work.
“We studied how in the USA, Mongolia, Russia and other neighboring countries we switched to distance learning. The experience was used and in our opinion we found a middle ground and used all the communication channels possible in the education system,” the vice minister assured.
Will the education system return to normal or will we consolidate this foundation and continue in the coming years?
As the vice minister noted, there is definitely a certain experience that will remain and will continue to develop.
“Teachers in a short period of time, as you see, have adapted, learned to use technology. If we take into account the international studies of the OECD last year, we know that Kazakhstani citizens from 16 to 34 years old showed insufficient levels of computer literacy. But the last quarter of 2020 rallied and people learned to use technology. Surely, they will not give up most of the advantages that we have today. This is noted by both teachers and parents,” said the vice minister of education.
According to the Deputy Chair of the Board of the AIFC Administration Yernur Rysmagambetov, last year there has been an attempt and preparation for the transition from the classical model of the financial center to the digital financial platform. The pandemic in this regard has accelerated many processes.
“It seemed to us that the pandemic gave us the opportunity to retrain, regroup and enter the market with a new business model. I would say that this is a challenge that gives us many opportunities. First of all, digitalization gives us access to those students who are in regions that, due to their remoteness, cannot attend our classes. Secondly, it seems to us that the model of education itself is changing,” said Rysmagambetov.
In turn, UNICEF Representative in Kazakhstan Arthur van Diesen also believes that the pandemic has changed the rules of the game in the field of education.
“The pandemic has forced us to completely reformat the education sector. At some point, we have more than 1.5 million students and their educational process is affected by this epidemic. In 36 countries, schools were completely closed. Only a few countries of the school remained open and continued to work. The model by which we teach our children has not changed for decades. We have a school, teachers, students come to the class, students work with the teacher five days a week. We add innovative things to this process. Now this model does not work in many countries, because it is very difficult to provide access to schools. Therefore, we are wondering if this concept of education, which does not work, should now be reviewed. We are seeing that digital learning is becoming increasingly important,” said Diesen.
How ready we were for distance education?
According to the head of UNICEF, Kazakhstan is well prepared for digital education.
“78% of the population has access to the Internet. Kazakhstan has very cheap rates for mobile data transfer. Kazakhstan is one of the five countries with the lowest data transfer rates. Most schools are connected to the Internet. We are located in a country where there is a large number of digital educational platforms,” said the expert.
It should be noted that no country in the world was fully prepared for a full-scale transition to the concept of distance learning. A variety of different learning methods must be planned. This planning should be tailored to the needs of students.
In addition, according to the Deputy Chair of Atameken National Chamber of Entrepreneurs Olzhas Ordabayev, the education system is directly related to business development. At the same time, the National Chamber has been ranking universities for four years.
“We also work with the unemployed. At the peak of employability, 59.2% of the unemployed population have higher or specialized technical education. 25% of the reasons why people were without a source of income was due to the fact that they did not have a sufficient level of qualification, there were no necessary competencies. Considering that 586 thousand people are students in Kazakhstan, it is important enough that they are taught in a timely manner,” Ordabayev said.
Education Lead for Microsoft Kazakhstan and CIS Nurlan Zhanybek shared what skills an employer should require from employees, as well as how the company should support employees.
“We know that any employer requires a new employee to already own office products. For example, experts said that teachers should have several skills such as "blind typing,’’ when you need to type text without looking at the keyboard, the ability to work with information and the ability to search for information. I think that any company that wants to be flexible should invest in training. Inside the company, we learn something new every quarter. When difficult times came, many countries were faced with the choice of what is on the market,” the expert noted.
Speaking about the impact of distance learning, Nurlan Zhanybek believes that the approach to the new format should be very serious.
Maxim Spiridonov, co-founder and CEO of Netology Group educational holding also noted the role of distance education.
“Online education is not an enemy or an opponent of offline. This is a set of tools that can help in cases where it is impossible to study offline,” says Spiridonov.
At the same time, Svetlana Mironyuk, Dean for Coordination and Development of Moscow School of Management SKOLKOVO, emphasized that the organization has gone through a serious process of digital transformation since the pandemic was announced.
“With the advent of the coronavirus, everyone was forced to do in combat mode and, in fact, urgently switch to the online format. I think that the coronavirus will ‘kill’ the format that we, the older generation, have brought up (lecturing). The school launched the first virtual classroom in Eastern Europe just a week before the pandemic. Because of the pandemic, we had to do everything remotely. We believe that the future lies with mixed formats — with a very flexible, smart and consistent combination of online formats and still lively interaction between people,” Mironyuk notes.
University of East Anglia Emeritus Professor David Bridges believes that technology in Kazakhstan plays a very large role. There is a problem with connecting to the Internet in schools and educational institutions. Some schools have telephone lines, which even some schools cannot afford. There are a number of interesting distance learning programs related to the use of television resources and correspondence courses.
“It is worth looking at the experience of such countries as Canada, Australia, where there is also a vast territory and for many years mechanisms for online learning have developed already. It is very important to provide Internet access throughout the country,” said the professor.
However, according to him, online education has its drawbacks.
“It should be noted that online learning can isolate children and teachers. In addition, students do not receive appropriate support for online education. There is some evidence regarding declining student achievement. Only 6% of students can fully understand the curriculum. The most important thing here is to support students, help them understand how to study remotely,” said Bridges.
The professor noticed that the crisis associated with the coronavirus caused humanity to change its approach. Therefore, people need to learn new skills and continue to gain knowledge.
How to benefit from AIFC right in this difficult time?
Aigoul Kenjebayeva, managing partner of Dentons in Kazakhstan and Central Asia, believes that AIFC can seriously help Kazakhstan improve its own system in regulating legal professions.
“The AIFC was created less than 5 years ago; initially, legal structures began their activities about 2 years ago. The result is already obvious and the AIFC has already gained some experience. Initially, I did not welcome this idea, why we should create something beautiful only for investors, why we cannot create reforms for the entire system of Kazakhstan. However, then it became clear that a framework system was created, which is provided by the Constitution of the country. The main advantage of the AIFC is that it is a vivid example of business decisions and regulation of organized procedures,” Kenjebayeva said.
According to her, until recently, the legal profession in Kazakhstan was associated only with the regulation of lawyers. Other lawyers in the commercial sphere are not lawyers and are not regulated in any way, only lawyers working in court should be members of a professional organization called the Chamber of Legal Advisers.
“The problem with this regulation is that there are no restrictions on the number of such chambers. Now we have 86 such chambers and each chamber sets its own professional standards, rules of ethics and moral conduct, so these standards may differ. We propose that the AIFC and the AIFC court should adopt rules for Kazakhstani lawyers who must be accredited. Such an accreditation process may include examinations on a code of conduct that will affect the general level of professionalism of lawyers in Kazakhstan,” Kenjebayeva said.
Member of the Board of AIFC Financial Services Regulatory Committee Marc Holtzman believes that the AIFC is the cornerstone for transforming Kazakhstan in the direction of a real mature capital market.
“I have been working in Kazakhstan since 1994, almost from the beginning of the country's independence. We tried to apply Western legal practice, I have great respect for the work that was carried out. I am sure that there are great prospects for the further development and promotion of these initiatives,” said Holtzman.
During the webinar, the Founder and Chair of the Board of iKapitalist Ltd Nurbek Rayev spoke about how the company offers investment tools.
“IKapitalist Ltd is interesting for entrepreneurs in that, first of all, we do not build on collateral, we evaluate the maturity and sustainability of the business itself. We also insist that the founder of the company provide a personal guarantee. Investors are in great demand, because most have realized that many lost their jobs, and someone switched to a shorter working day and you need to think about additional alternative sources of financing. The bulk of our investors are Kazakhstanis. By the way, foreigners began to appear who live in the territory of the Republic of Kazakhstan and who have a tax identification number,” Rayev said.
According to him, the average age is 38 years. The youngest investors are 23-35 years old. The age of the oldest investors is 61 years old.
“It’s interesting for us, because we assumed that our audience would be much younger. As a result, it turned out that this is a fairly mature audience. We place great emphasis on communication between investors and entrepreneurs. If you invested in a deal, then we try to organize an online meeting once a month with the founders and investors. During online communication they can also ask questions, communicate, see the problems that the entrepreneur faces,” Rayev noted.
The company initially focused on transactions for the provision of working capital, the execution of contracts and business development, but today, of course, there can be no talk of business development. It is planned to offer a new instrument debt securities (debentures), which will activate the secondary market.
Deputy Chair of the Board of Kazyna Capital Management JSC Asset Sagimbekov assured that the mission of Kazyna Capital Management is to develop the infrastructure of direct investment in capital in order to promote sustainable development of the economy of Kazakhstan. The company currently has 15 private equity funds with a capitalization of $2.7 billion.
Wang Songhua, CEO of China Construction Bank Corporation, emphasized that the bank’s main strategy is to provide comprehensive financial services and products based on the highest standards.
“We strive to support the AIFC, implement the three main strategies of the head office, pay attention to the fintech sector, and also strive to support small and medium-sized enterprises. We are conducting research to understand whether we can conduct business in one direction or another,” he said.
According to him, the first bonds in Chinese currency are already being issued. It is planned to further develop financial cooperation between China and Kazakhstan.
Startups as solutions for implementing financial technologies
In addition, the Fintechstars Innovation Day startup marathon was held as part of the online conference, where the fintech hub of Astana International Financial Center selected 15 startups from 8 countries that presented their solutions to corporations from Central Asia: KPMG, Sberbank, VTB, Al Hilal Bank, Microsoft , Beeline, Halyk Bank, etc.
Among startups were presented:
Multis (Kazakhstan) — search for the best loan offer.
ARNI.io (Russia) — conversational artificial intelligence with a smart search system that communicates as a person.
Boollo.Safe (Hong Kong) — an insurance platform that allows you to choose the best offer among insurance companies.
Upswot (Ukraine) — helps banks gain access with API support to small and medium-sized business systems.
eCredit (Russia) — platform for managing sales of credit and insurance products for car manufacturers and car dealers, etc.
Meetings with banks, insurance, mobile operators and retail from Central Asia will be organized for startups.
“In preparation for the event, we received 65 applications from startups from 15 countries, which in itself indicates the high attractiveness of the region. We see many opportunities for implementing fintech startups solutions in banks, insurance, telecom companies and retail. Therefore, one of our goals is to attract as many leading startups from around the world as possible to work in the region,” he said.
It is worth noting that events of this nature give impetus to the development of the fintech sector in the region. The FinTech Hub of the AIFC has more than 120 fintech startups that receive expertise, networking with corporations, access to events, etc. Moreover, the AIFC provides a multifunctional legal platform based on English law, a favorable tax regime and incentives for operating activities for resident companies Center.