Thursday, December 01, 2005

Investors needed.

This is a picture of a rightside view of Semey from our hotel window. That 2nd tiny looking smokestack in the upper center of photo, is accross the street from the orphanage. The closest building used to be a bread factory plus other semi used and abandoned apartment buildings. We had Thanksgiving in the tallest building in the picture. 16 stories is as tall as they get here.
I promised you I would talk about the economics of Semey and Kazakhstan. Have you heard of the pioneers? Kazakhstan became a country in 1993 since then there has been a tremendous amount of people moving. In Semey the Russian military, Russian nationals, Germans and Ukrainians have gone back to their respective countries. This has left a city of about 500,000 people with a current reading up to about 300,000. There is investment opportunity if you are willing to take the risk. What can you get cheap? Food, drink and cigarettes. We eat dinner of two small salads, 2soups, 2 small entrĂ©es and 2 beers for 1300 tenge (ten-gay). That is $10. We went to one place for the same price we fed 4 people. You can get 2 beers for $1. A pack of cigarettes cost .35 cents. We would fill our suitcases with cigarettes if we thought we could get past customs. What does the city need? Steel, road repair works, fleece sweatshirts, postcards and cash and much. Semey was a major producer in Soviet times. They had the biggest meat packing plant in the Empire they had bread factories, shoes and clothing factories. All of that is gone. Now all anyone wants to do is import cheap clothes and shoes and sell them in small crowded booths. Everyone sells the same stuff. Every 3rd booth is for kids clothes or toys. Then there are women’s cloths and bags. There are some electronics booths and cell phone booths. The all look the same. What they are missing is manufacturing. In our hotel we see the bread factory that used to employ about 500 people. Now the roof is collapsed. People work a number of jobs, like teach English and then interpret for adopting families. During the transition from the Soviet times there was a time of land grabbing. The people in power took everything. But they didn’t know how to run it. Every time there was a conflict the owners just shut the factories down. Now there are empty buildings every where. The people of the city are very proud of what they have and things are improving. That is why it is time to act. You can get an apartment building for a song. You can get workers to maintain it. You just need renters. If you are willing to lose some rent money early you will make it back in the long run. If you can restart a factory that will hire workers that rent in your buildings things will move faster…It’s a whole economic theory. You need to be in an MBA program to understand it. My brother Michael can explain it if you need helpJ(sorry, inside joke to half of the readers.) Anyway, the city is growing again and they are looking for investors.

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