Kazakhstan’s government will invest in start-ups across south-east Asia as part of efforts to diversify central Asia’s largest economy away from oil and gas, where prices have been slammed by the coronavirus pandemic, Financial Times writes in the article Kazakhstan eyes Asia start-ups as coronavirus hits oil price. The country’s state wealth fund, Baiterek National Managing Holdings, will be the anchor investor in a vehicle run by Singapore-based Quest Ventures. The fund has also been backed by Pavilion Capital, which is owned by Temasek Holdings, Singapore’s state investment company.
At $50m, the fund is small but it forms part of a broader push to create an economic corridor between central and south-east Asia. Adil Nurgozhin, chairman of Baiterek subsidiary QazTech Ventures, called the deal an “important step” in connecting the regions’ economies.
Kazakhstan, sandwiched between regional powers China and Russia, is looking to diversify its portfolio investments into different parts of the world, according to people familiar with the situation. The move into venture capital comes as oil-rich economies, such as those in the Middle East, have sought to broaden their revenue sources against a backdrop of volatile crude prices and a broader shift away from fossil fuels.
Oil and related industries make up about 40 per cent of Kazakhstan’s gross domestic product and its economy has been hit by a recent slump in crude prices and the coronavirus outbreak.
Kazakhstan’s government was previously linked with an investment in Japanese conglomerate SoftBank’s second Vision Fund, which could have given the country exposure to technology start-ups across the globe. However, that vehicle was permanently frozen this week after SoftBank warned of a $16.7bn loss for its first Vision Fund. Kazakhstan also held talks about an investment in SoftBank’s planned multibillion-dollar hedge fund-style vehicle.
“Digital transformation has been greatly accelerated by the Covid-19 outbreak” Jeffrey Seah, Quest Ventures SoftBank’s woes, coupled with a fall in start-up valuations following the failed initial public offering of office sharing company WeWork last year, have prompted some big investors to turn to alternative venture capital players. “Post WeWork, investors are turning to experienced operators to identify and guide start-ups,” said Quest Ventures partner Jeffrey Seah.
The Quest Ventures fund will invest in start-ups in countries including Vietnam, Indonesia and the Philippines. “It will be about building a quality business rather than [attracting] high valuations,” he added. The fund has been backed by Pavilion Capital, which is owned by Temasek Holdings, Singapore’s state investment company.
Mr Seah said it was the “right time” to invest in start-ups in the region, given many were being forced to boost their online offerings because of coronavirus stay-at-home measures. “Businesses’ digital transformation has been greatly accelerated by the Covid-19 outbreak — when the virus is over these new habits will remain,” he added.
Baiterek’s assets equalled about $15bn, or 8 per cent of Kazakhstan’s 2018 GDP, according to Fitch Ratings.