Investigation by
How to go bankrupt. The leading national company of Kazakhstan accused of raiding
By: Khadisha Akayeva
Cover photo: the city of Nur-Sultan/Sputnik news agency
In July 2020, some Kazakhstan entrepreneurs who took loans from the Bank of Development of Kazakhstan (BDK) wrote a letter to the president, in which they tell how BDK and the investment fund of Kazakhstan (IFK) "destroyed" their enterprises.
Message of Kazakhstan economist Arman Baiganov
The video is taken from the Facebook account of Arman Baiganov
What's going on?
In 2013, a key national holding 'Baiterek' was established in Kazakhstan. Its mission was to support independent business. The new agency drew public response: why create an organisation with doubtful efficiency but tremendous administrative expenses?

The current analysis of performance creates an impression that 'Baiterek' was created to governmentalize the independent business and to remove potential competitors.
Video of KTK TV channel
Hyperactive subsidiaries
In fact, the holding is just an agent that controls the flows of budget money. It has, inter alia, two subsidiaries – 'Bank of Development of Kazakhstan' (BDK) and 'Investment Fund of Kazakhstan' (IFK).

If the mission of BDK is to finance large-scale projects for economy diversification, the goals of IFK are to return previous investments and rehabilitate suspended enterprises. These organisations work together.
Information from
If a credited enterprise fails to return money to BDK, the latter transfers the debtor to IFK for rehabilitation measures or for the return of the debt. The scheme seems simple except for numerous suspicions of raiding.

One of such accusers is Yerzhan Zharylkasyn, the founder of the tyre recycling plant Kazakhstan Rubber Recycling. In the troubled year of 2008, the company took a special-purpose loan from the Bank of Development of Kazakhstan for 5.6 million dollars to buy equipment. They gave real property in the amount of 12 million dollars as collateral.
Illustration by Pavel Ukolov
- They gave us one year of tax holiday during which we received almost 40 containers of equipment and we started working. When the tax holiday period expired, we asked for another holiday and we showed that we launched the line. It was also provided as collateral. Altogether, the collateral value was 17.5 million dollars, although the loan was 5.6, Zharylkasyn said to CABAR.Asia.

Difficulties with the loan return are obvious: the year of 2008 was the year of the global recession, devaluation of the national currency by 25 per cent, tremendous debts of the banking sector. Even given such force majeure and the collateral value that exceeds the loan amount many times, BDK did not want to make concessions.

According to the head of Kazakhstan Rubber Recycling, the bank asked for unprecedented guarantee – to estimate shares in the authorised capital as tokenistic 1 tenge, while their real value was almost 120 million tenge.

In response to the request, IFK said it "cannot affect the results of estimation of a share in the authorised capital".
"And we gave these awful personal guarantees as founders to have the bank approve the restructuring. They took them all and at the last moment they denied restructuring. This is how they treated all businessmen at that time," Zharylkasyn said.
Yerzhan Zharylkasyn
Founder of Kazakhstan Rubber Recycling
He is sure that this is a proven corporate raiding scheme as there cannot be one hundred troubled projects out of one hundred projects.

- The collateral value allowed granting us more money, while we were estimated at 1 tenge. In criminal code, it is called fraud. We believed the state, took the loan, encumbered our property, launched the line and worked. Of course, we had some problems, but the investment fund was supposed to support us instead of waiting for us to have problems and to beat us completely. They call all entrepreneurs fools, criminals, and those who gave money were good, the entrepreneur said indignantly.

He called attention to one more moment: at first, loan interest rates were fixed in dollars. But when Kazakhstan shifted to transactions in national currency, the loans were not recalculated. When BDK saw that no one can pay such loan interest rates, all enterprises were found troubled and transferred to IFK. The fund linked the majority – 55 per cent – to the floating dollar rate.
"The first president told about dedollarisation, where is it now? Even 55 per cent of the floating rate is impossible," Zharylkasyn said.
Yerzhan Zharylkasyn
Founder of Kazakhstan Rubber Recycling
The plant has been suspended for one year already. All collaterized property was seized, no income, debt restructuring was withheld, therefore the plant launched the insolvency proceeding. The judge who refused rehabilitation refused the bankruptcy.

"In total, we took 900 million tenge only, paid out to the state 1.8 billion tenge, and now IFK wants us to pay 300 million tenge more. Therefore, we applied for bankruptcy. The first instance court refused, we appealed against it, and now are waiting for the decision of the court of second instance," the businessman said.

Bank of Development of Kazakhstan provided the following data to CABAR.Asia: "In 2008, 43 investment projects and 14 export transactions were funded. Of them, 19 investment projects and 9 export transactions were recognised as troubled due to decline of the borrower's ability to pay.
Inside companies
Subsidiaries of 'Baiterek' had in-house scandals.

In 2010, it was found out that the ex-head of IFK, Sergei Yeltsov, made contracts with entrepreneurs, which did not allow returning invested money. He confessed that the Stepnogorsk Mining and Chemical Plant that was invested was sold to an offshore company. The court found his activities illegal.

Another scandal was with BDK that used pensions of Kazakhstanis to build the MEGA Silk Way shopping mall at Astana. The head of the government invoked the devaluation then. It has caused a burst of outrage among people who did not want to have their savings spent without approval.
Covered back
One of the problems in the economy of Kazakhstan is the kinship between people in the top echelons of power. They are available in 'Baiterek', too. For example, the judge of the Supreme Court of the Republic of Kazakhstan is the mother of the chairperson of the Investment Fund of Kazakhstan Yermek Sakishev. And IFK is known to litigate a lot.

The brother of the chairperson of BDK Abai Sarkulov is Ulan Sarkulov – the state inspector of the presidential administration.

They might not help their relatives, but such relations raise questions.

Indifferent assistants
BDK and IFK have many accusers in different spheres of business. For example, Investment Fund of Kazakhstan once decided to support the promising 'Myrzabek' LLC, which quarried building stone and chippings in Mangistau region. As a result, the enterprise was declared bankrupt, the quarry was leased out to another entrepreneur, and the owner was left without the apartment and with a billion-tenge debt.

Former founder and head of the company Kuanyshbek Munatov said to 'Caravan' Kazakhstan-based newspaper that representatives of IFK came to him and offered cooperation. The Fund gave 6.4 million dollars for development and joined shareholders with 49 per cent of shares. 'Myrzabek' had to redeem these shares within three years.

Then difficulties began – customers did not pay for deliveries, broke deadlines, accumulated debts to 'Myrzabek' LLC.

"The Fund did not provide any support, it only demanded money back. Once I asked IFK to help me return the debt as they are a large national company and they have more opportunities. The Fund was interested with me having money to redeem shares. This is what I thought back then. The Fund said nothing again," Munatov said.

- There was one more thing: Murat Karimsakov, the employee of IFK, joined the founders of 'Myrzabek' LLC as an individual. I believe he was the assistant chairperson of the Fund's board of directors, said Kuanyshbek Munatov to the newspaper.

The things went wrong. The result of cooperation is as follows: the shares could not be redeemed and the loan was not paid out.

By 'Caravan' newspaper

The company was found bankrupt; the businessman was deprived of his personal assets and membership as a founder member, according to him, he was expelled without his knowledge.

Recently, a bankruptcy receiver notified that the former head of the successful company owes to IFK 1.2 billion tenge. Now he is unemployed.
One more bankrupt
Investment Fund of Kazakhstan was accused of bankruptcy by the founders of the company that owns textile factories 'Melange' and 'Yutex'.

In the crisis year of 2009, the company failed to make payments in time due to the sharp increase in cotton prices. IFK appointed its subsidiary 'Capital Logistics' as an operator to distribute sale proceeds between supplies of raw materials and BDK/IFK. Things were fine for a year, but 'Capital Logistics' began to exceed the period of raw material supplies, and then refused to buy spare parts for equipment. All operations were suspended.

Co-founder of 'Melange' JSC Sholpan Dzharasova said to 'Caravan' newspaper that in March 2016 the Fund suggested the following option: to sign three companies off to IFK so that the Fund could consolidate the assets and give them back.
"Given the status of the Fund, no one suspected that we could be deceived. When we started litigation, we learned that at the same time IFK applied for the cancellation of rehabilitation procedures for 'Melange' JSC and 'Yutex' JSC. They were planned by the bank back in 2012 and fixed by court – long before our obligations to IFK were created. As it seems to us now, the sequence of actions of the Fund, namely a letter sent to us and at the same time the decision received by it on a cancellation of rehabilitation of companies in February 2016, meant to receive an attractive asset by means of fraud with a letter, which contained assurances they were never going to implement," Dzharasova said.
Sholpan Dzharasova
Co-founder of 'Melange' JSC
She emphasised specifically: relations with the Fund and obligations emerged back in 2014, but the schedule for the repayment of debts was about to have started in seven years only, in 2023.

On February 16, 2016, at IFK's request, rehabilitation of 'Melange' and 'Yutex' was cancelled, although the fund was unrelated to the obligations to BDK. This decision was made without participation of the company's founders. They learned about it only two years later.

There are many cases like that: the glass factory because of which former economy minister of Kazakhstan Kuandyk Bishimbayev was convicted, arrest of owners of Iliysky paperboard plant, with which IFK had worked, destruction of the steel production plant, problems with a rail car factory, involvement in a strange story of a corporate raid of 'Biokhim' and 'Silicium' plants.

Legal proceedings regarding the Semipalatinsk leather and fur integrated plant are pending now. Its director accuses IFK of corporate raid.
Video from Sanzhar Rakhimgaliyev's channel
Back in 2013, former deputy chair of the National Welfare Fund 'Samruk-Kazyna' Aidan Karibzhanov said:
"So many "development institutions" were created in the past. The first ones were BDK and IFK. Up to a certain time, these organisations were free as Kuban Cossacks, they were accountable to prime minister only. Only in 2008, they were transferred under control of 'Kazyna' and then 'Samruk-Kazyna', and now 'Baiterek'. Until 2008, they were managed in an unusual way, to put it mildly."
Aidan Karibzhanov
Former deputy chair of the National Welfare Fund 'Samruk-Kazyna'
7 years have passed since the establishment of 'Baiterek', but suspicions and scandals are still there. Last year, the officials of the holding were suspected of embezzlement of 197 million tenge from the state budget. The anti-corruption service of the Republic of Kazakhstan ordered to perform an inspection. The inspection was performed by the Internal Audit Service and compliance service of the holding. They found no violations.

What is the outcome? Even members of parliament and other national companies have claims to 'Baiterek', which is a rare phenomenon in Kazakhstan. Economists call holding 'Baiterek' a structure that survives only at the cost of government grants.

Subsidiaries who should be controlled by 'Baiterek' are accused of studying their own interests.

According to entrepreneurs, loans that were granted in the crisis year of 2008 were to some extent linked to dollar, which led to inevitable debts; collateral amounts greatly exceeded the amounts of loans received by entrepreneurs; founders were removed from their offices without notice; managers eventually remained without jobs and apartments with billion-tenge debts.

All of it happened and happens contrary to the mission of "support of domestic business."

Данное расследование подготовлено в рамках проекта «Giving Voice, Driving Change — from the Borderland to the Steppes Project»