Transcript National Innovation Fund

NATIONAL INNOVATION FUND
KAZAKHSTAN
Financing Innovation
March 25, 2004
Knowledge Economy Forum III
Budapest, Hungary
Agenda
Republic of Kazakhstan
 National Innovation Fund
 Investment Strategy of the Fund

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Republic of Kazakhstan
Real GDP Growth
Current account and foreign
direct investments
CA
Industry is the main driver of GDP growth
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FDI
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Republic of Kazakhstan
Successfully managing transition to market economy:

Leading producer and exporter of natural resources,
including oil, gas and minerals.

Highest GDP growth among CIS and CEE countries
for the last three years.

Strong FDI inflows and FX reserves.
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Challenges for the country
Lopsided extraction-oriented economy
 Weak integration into the global economy
 Technical and technological
obsolescence of enterprises
 Lack of efficient connection between
science and production
 Low expenditures on R&D

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Strategy for 2003-2015
Kazakhstan adopted Innovative and Industrial
Development Strategy for 2003-2015 aims to:
achieve sustainable development through diversification
of economy
create favorable investment climate for manufacturing
industries, including high-tech
foster further development of the financial sector
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Development Institutions
To address challenges the following institutions
were established:
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Kazakhstan Investment Fund
Export Insurance Corporation
National Innovation Fund
Center for Marketing and Analytical Research
Engineering and Technology Transfer Center
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Working together towards innovative and industrial
development
Database of
leading
experts
Science
Fund
Financing of
basic and
prediscovery
research
National
Innovation Fund
Assessment of investment
potential of industries,
marketing
Patenting of innovations and engineering
National Academy
of Science
Research institutes
Private financial
institutes and
investors
Universities
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Center of Marketing
and Analytical
Research
Center of Engineering
and Technological
transfer
Kazakhstan Investment
Fund
Project Database
At the stage of project expansion
Industrial and service
enterprises
Kazakhstan Bank of
Development
Loans at project
expansion stage
Creation of
technopolises, techno
parks and business
incubators
Financing of applied
R&D
Creation of venture
funds
Financing of enterprises
that realize investment
projects
National Innovation Fund
Joint Stock Company “National Innovation Fund” was
established by the Government of RK on May 31, 2003 as one
of the governmental instruments for:
stirring up innovation activity,
attracting private capital in innovation process,
developing high tech industry
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National Innovation Fund
Challenges – linking:
Finance
Science
Entrepreneurship
Industry
How we respond:
Provide capital
Retrieve, assess and advance projects to private investors
Deliver projects to the industry level
Finance R&D
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The development of institutes of venture financing in the world
Canada (1960s)
Russia (1993)
Europe (1980s)
US
(1950s)
Israel (1992)
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2003
Kazakhstan
Japan (1970s)
S.Korea (1980s)
Hong Kong (1980s)
Malaysia (1984)
Singapore (1980s)
Australia (1970s)
Achieving objectives
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Establishing Venture funds
with private investors
Financing projects aimed to apply R&D results
and transfer technology into industry
Building elements
of innovation infrastructure
Applied R&D financing
International cooperation
in technology transfer
Staff management
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Achievin
g
objectives
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Investment Strategy
Investment directions
for 2004-05
50%
35%
Venture Funds
Investment projects
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10%
Elements of innovation
infrastructure
5%
Applied R&D
financing
Investment strategy
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Sources of investments:
Chartered capital,
Profits of the Fund,
Grants, awarded by international financial institutions and
foreign governments
Investments of the Fund:
Investments at seed and start up stages of projects
Also grants to R & D
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Project financing
Commercial
product
Management
Equity
financing
Access to capital
Private
investors
Major requirements
Project is aimed to create new or advance existing product/technology
Project is commercially viable
Minority interest of the Fund (up to 49% of chartered capital)
Well defined time-horizon of investments
Staged financing
Qualified management
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Funding strategy
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Priority stages of financing for National Innovation Fund
seed
start-up
early
expansion
exit
Investments into companies
Installation of
innovation,
structuring of
technology market
Development of innovative
management in
enterprises
Equity
financing
of innovation
Provision of access to
capital for realization of
innovative projects
Attraction of private
equity into innovative
activity
Main conditions for investment:
investment project in-line with industrial and innovative policy priorities of Kazakhstan
project to create new scientific product/service or innovate, install new technologies
project should be commercially viable (including market potential of innovation),
minority holding (not more than 49% of chartered capital),
participation of the fund in management of the company that realizes the project,
well defined time-horizon of investments
staged financing of the project.
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Innovation infrastructure
Financial
support
Ideas
Innovation
infrastructure
Industry
Management
Main concentration for the Fund
Management (including consulting: legal, financial etc)
Selecting and financing ideas
Government
Financing infrastructure: buildings, laboratories and equipment
Special Economic Zones
Tax Incentives
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R&D financing
commercial
potential
new technology
R&D
financing
intellectual
property
time horizons
Main requirements
Research and Development process should not exceed 18 months
Product should have feasible competitive advantages
Corresponding market must exist
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Project Assessment
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Assessment of projects:
Stage I – internal assessment by Fund’s Investment Committee
Stage II – assessment by external independent experts (expert
organizations) and Expert Committee of the Fund (unbiased
and independent experts)
Risk management:
Private equity participation
Investment portfolio diversification
Upper Bounds (limitation) of investments
Qualified management
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Proposals received
As of February, the Fund has received around 162 projects in
terms of business proposals for a total of about $500 mln.
Proposals by industry (“other” includes industries with less
than 5 projects each):
Mechanical engineering
19,1%
Metallurgy
41,4%
Energy
12,3%
7,4%
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7,4%
6,2%
6,2%
Oil & Gas
Agriculture
Minerals
Other
National geo-stationary satellite
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On 7 January 2004 the Fund has signed an agreement of creation and
provision of a telecommunication satellite with Russian Khrunichev State
Research & Production Space Center
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The Fund has created a daughter enterprise JSC “KAZSAT”. Its main
task is financing of works and services for the creation of geostationary
telecommunication satellite.
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The total cost of the project is more than $65 mln.
NATIONAL INNOVATION FUND
JSC “National Innovation Fund”
111, Gogol’ street, Almaty,
Republic of Kazakhstan
Tel: +7 3272 78 05 09
Fax: +7 3272 78 05 71
E-mail: [email protected]
Thank you for your attention.
NATIONAL INNOVATION FUND