DR. NK CHOUDHARY General Director CEO Mittal Steel Temirtau

This country truly is a unique combination. On one side we have oil and gas and the other side coal. It's a unique combination. Basically any mineral is available in this country. This country is the 9th largest landholder in the world. These are the two great things. The third thing, which is unique here, is the people. Though there are only 15 million of them, they are highly qualified, technically competent and committed. I still remember that when I came to work in this country several years ago we thought of it as part of the old Soviet Union, I was really afraid to work as a manager there, to take the responsibility to manage so many people. But when I came here I found that the picture was different. The people were highly committed and highly qualified. I was really surprised to find out that we had about 3000 metallurgists with Doctorate and Bachelor degrees in this company. Even my human resources head is a metallurgist; the head of the security is a metallurgist. This is not shown in other parts of the world today.

Kazakhstan is performing extremely well: Since its independence in '91 it successfully embarked on a political and economic reform. It has enormous potential for foreign investment and long-term economic growth. All macro-economic Indicators confirm and this is being acknowledged more and more internationally: Kazakhstan's entrance in WTO is imminent; it has joined the WEF-list of competitive economies. The United States considers Kazakhstan as a strategic partner in the region: "It is pulling the whole Central-Asian region forward, both economically and politically", US Secretary of State Ms. Condoleezza Rice. Why is Kazakhstan standing out when compared to other CIS-countries?

The most important thing is undoubtedly the leadership. He is a man of the masses because he has grown from the roots. He has the feel of the people of the ground and that is very important. The second thing is that he understands the competitive advantages this country has, the manpower, and he's a great harmonizer in a sense that this country has a lot of different nationalities, and these 15 million people considering the size of this country, is not a great population. But there is a consensus between these different nationalities, they live together peacefully. At that level he keeps and understands the strength of different people from different nationalities. Externally, he is keeping the balance between the old regime connections and the new U.S. and Western connections very well.

Third he feels that he can keep a leadership position within the region and that's what he is doing: leading the CIS. There should be something equal to NAFTA for Central Asia, because Central Asia has a unique position in the world today

In addition to this are the natural resources. There are many other countries with that, but there sometimes is a lack of leadership there, a lack of vision. It's already unique that after he took over the rein of this country, he immediately decided on the Strategy 2030 Almost all CIS countries are headed by the old Soviet Block leaders, but he started taking this land to the market economy from the very first day and tried to integrate Kazakhstan, in addition to the CIS, in international communities, like the WTO, or the United Nations and OSCE. He wanted to take the best of everything, and make something unique for Kazakhstan. We'll see the impact of all these things in 10 to 15 years from now. The amount of development and the progress Kazakhstan has done in the last 14 years is amazing. And that has happened because of the amalgamation of the control of the Soviet system and the market-oriented economy of the western parts.

Why did Mittal Steel decide to come here in 1995? The business environment back then wasn't at all what it is today. So, I imagine it was a leap of faith, a courageous decision?

That is the strength of Mr. Lakshmi Mittal. This group was formed in 1978, 27 years ago. He is an Indian, but he does not have any operations in India. He only has the Indian passport. He started his enterprise in Indonesia, a steel plant of 60 000 tons capacity per year. Today the group has the capacity of 80 mln tons per year and is spread over 16 countries and is employing 210 000 people across the world, with 45 different nationalities. It's not an Indian company; it's a Netherlands-based company. The company has grown tenfold over the past decade, through both organic internal growth and via a series of strategic acquisitions in both developed and developing growth markets that we saw as bringing long term value addition. Today we are the world's largest steel producer with unrivalled scope and scale and a position of significant strength across all key geographical markets, supplying a variety of both higher value added and construction steel to all market sectors. Up to now he has not done any green field project. Actually, the first green field project which is announced is going to be in India. His strength was to identify steel assets with high potential and then bring in good management system for further improvement. The main strength of his strategy lies leveraging the global presence in marketing, leveraging the technology from one place to other places, respecting the local sentiments, thereby creating a competitive advantage, that is how he has brought things where they are. Also, he has been selecting people, the best man for the job, able to work for him in different countries.

How does Mittal Steel Temirtau fit in there? How would you describe the position you take within the whole group?

Mittal Steel Temirtau is one the most important operations of Mittal Steel along with Poland and South Africa. Every company has its own strength: some have the strength in technology, some have the strength in the quality, others have strength in low costs, and some have the strength in volumes. Mittal Steel is the largest steel producer in the USA; the second largest producer of steel in Europe. Every third car in the USA is fabricated with the steel of Mittal Steel

The model, which we implemented in many places, the management model of this place, was successful. The model is like this: wherever we go we initially don't disturb the local management. We consider local sentiments a lot. We find out what the strengths of the local management are. We found these people are technically very strong and that their commitment is very strong. The only problems were within the finance and marketing department. The lack of commercial approach is not their fault, because they were working in the Soviet system. These units were supposed to be employment generators. One of the major reasons why the total Soviet system got disintegrated was that the model wasn't workable. So, that's what we have been doing. We bring a lot of qualified people from outside. Fortunately we have some people from India who had worked at the Soviet plants. We have many people who speak Russian, who have worked at the Soviet plants; we brought them here to coordinate with local people, but also having market-oriented economy experiences. And very slowly we could build up and now you see the result is there. Over the last ten years the production has doubled. We had that advantage because we were working across the globe at that time. So, we knew the market. In the last 10 years our market has grown to 68 countries. The biggest disadvantage of this region is that we don't have a developed domestic market. This is mainly due to the small population. That was one thing. Second issue was the lack of backlog: the upgrading of the assets, both technologically and physically, was not done. The financial needs where not there, but our growth finally came and it could immediately be brought in and we are all happy to know that in the last 10 years we invested about $1.5 bln in upgrading the technology and bringing in different products. We started with assessing what the requirement in the market are, what products they need, what their quality requirements are. This was totally missing and it took us time to change the mindset of the people, make them understand the importance of customer satisfaction in order to be able to compete in a global market. That we did, and since we have the advantage of the cost factor, the only disadvantage was that we are at a landlocked location. Our customers are far off so our products have to travel over 3000 km. Many of the local advantages negate when bringing in these transportation costs. But we still are very competitive. A major concern has been to deliver on time, and we have.

After that we added many new assets into this one. The process efficiency also improved tremendously and we implemented many new technologies. We started training our manpower. The training of the manpower was another area where we had to make improvements, like learning about technologies, new management skills, exposing people to the international field. Then we started leveraging with the best practices in operations in our different areas. People from different plants come together and they exchange their knowledge and learn from each other. They deliver a strong marketing system from our central office every week on the market and plant operations where all the managers are put together and they exchange what has happened during the week, how the market is moving, what is being done. These are the good things that we have brought in. Normally we do not compete with each other. We export some things to the USA but not to compete with each other. But before we decide to compete in a market, we determine, which unit/plant is most suitable. There are many markets for all the plants, and fortunately for us all the plants are supplementing each other in product basket.

You have been here for 10 year. And this year you are celebrating your 10th anniversary. What did Mittal Steel bring not only business-wise but to the community of Temirtau? How did Temirtau evolve after Mittal Steel came here and changed the whole face of the city?

The very first thing is that when we came, the payment of the workers' salaries was a big issue here. They had not got their salaries for 6 months. When we came we immediately cleared all these issues, which were due from the previous owners. We brought in the monthly payment system so that they would get their salaries on the first of each month. That was a new thing for them. And then their salaries increased, if you see our salary increase in the last ten years it has increased 2-2,5 times and we are one of the best paying companies in this. We had some reduction in the number of employees, but all of them were voluntary, voluntary retirement schemes, which is the international practice we brought in.

The second thing was that in the Soviet system the responsibility for an employee was from the cradle to the grave. We have our budget for all of that, for the development of community life. The only thing we did not want was to get involved in running social services. We asked the government to do that and we would then support them. This town had no electricity, no heating, so we supplied them with all those things, step by step. We have it run by a subsidiary, we don't run it ourselves, we support it. At one time the population of this place was decreasing, people were flying away from here, but in the last few years the number of people have been increasing again, people were immigrating to other places but now they find this place more lucrative to work, so a lot of people are returning, and the pressure on the social services is increasing. The township is growing. In the social services we have focused on the different aspects of the social life, the culture. We support all the cultural activities. We do not support only one town, there are 7-8 towns like that. We mainly focus on sports because sports are of importance in the social life. We have created a sports complex here. We have spent about $ 5 ml on that one. While going to Karaganda you'll see a tennis complex that is considered the best in the whole CIS and we spent 4 mln USD on that one. In the Soviet system there were centers of rest, which are called resorts, for the workers, etc. They are very well equipped. We are still maintaining them. Social life of children is also important, in terms of their education and development. So we are also working on that.

Did you outsource a lot of your activities?

If you have to be competitive internationally, everybody will ask about your productivity. And today the guidelines are with the European norms and if we compare us with the European norms, our productivity is much lower. Now the question is why is the productivity much lower? When comparing we find out that we are doing a lot of jobs that the steel-makers usually do not do, for example this plant has a laundry service, and there are about 100 people working there. These are not the things any steel-maker actually does. There is a textile mill making the garments. And all this is part of the old Soviet system. Now all the people understood that yes we mean business, and we are an international company, so we would like to work internationally. The economy of Kazakhstan is also growing. There are people who want to work for the company, but there are also people who want to be entrepreneurs, to have their own business, to be independent, to run their own shop which will be serving the company. Keeping that in mind all these other services, which are not in our business, we believe should gradually be done by someone else. It will also increase the employment at this place. So with the help of the World Bank we have formed a company called Ispat karmet SME Resource. Mittal Steel has a 51% share and 49% share is that of IFC. We have started training the local entrepreneurs, we help them how to identify the business, how to run it etc…So small businesses develop, and we support them financially. Whatever material they produce, whatever we need, we will buy it back to balance the market, their market can also grow. The decision is basically to move a certain part of the population from steel. If there is growth of the population we won't be able to employ them all, even if the capacity of the plant is increasing. We have done that one and it's getting along but it'll take time. 8-9 units have been set up and there is also a lot of support from the government. The government is supporting this initiative in many places, in many other places. We feel it's our social responsibility.

A lot of attention is also being put into environmental safety.

Yes, the environmental standards have improved and all the emissions are now meeting Kazakhstan and international requirements and standards. But still, as these assets are old, every year the investment is going on and we have funds for the further improvement of those assets. Since we have investments from the IFC and EBRD and since they have investments on the social front and on the environmental front, they keep a lot of attention on what is happening. They come every six months and audit what is happening, and we meet their requirements. For a global company like ours safety, health and environment are important aspects and we'll continue to move forward in that direction.

Our first aim is to facilitate the development of business with the United States. What are the main opportunities our readers should be aware of in the metallurgical field?

Yes, there are a lot of opportunities in the metallurgical field. There are lots of them in this area, and especially in the Karaganda region. It's the most important metallurgy related business region because the Karaganda region is the one of mining, metallurgy and coal and it's the most industrialized place in the whole of Kazakhstan. There are many processing industries that use steel. There are a lot of people coming already. Now our steel goes to Italy and then gets converted into world-class furniture, it also goes from here to China, gets converted into a component form. They can come here, set up the industry here, make the furniture here. The cost of manufacturing is low, and they can export the products.

What can be expected in the next ten years? Where do you want to take this company?

If you have a look at our brochure, you'll understand what has been achieved so far. The very first reason was to establish the base of the group in this region, because we had to establish ourselves as Mittal Steel. We proved that we are a company that can manage the challenges in this type of the regions and which we did from 1995-2000. The second phase was the phase of growth. We had to grow because if you do not have the critical mass in your operations you cannot compete and competition in this sector is very high. We have grown by 80-85%. The entire plant is fully operational now. Now we have started the third phase, which we see from 2004 onwards, and this stage is called the stage of growth with value addition. It will be more focused on the quality of products, new products and also the size. We are focusing on three areas at this moment. The first one is focusing on the improvement of the workplace and work practices. We are training and re-training people who understand and import the best practices in the steel-making industry. The second area is the manufacturing excellence that we have to get by the best practices. We also have to grow in terms of market share. The customer-focus has to be developed since we have made investments for the last ten years. The steel plants are divided into two layers, we are now between the first and second layer of end-user industries. Something like the automotive appliances which we were not selling before because of the quality of the product. Now since the updating of the quality has been done and the technology has been improved it is possible that we will be entering those markets and we have the advantage since we are sitting next to China. China is the most rapidly growing market and we have to take advantage of that and the relation between the government of Kazakhstan and China is excellent. China is not just one country; it is a subcontinent, just like India. I'm referring mainly to the Western part of China because that market cannot be served even by the domestic mill structure. Their transportation costs would be too high so we have to come because we can deliver our materials from here for $17-18. And last but not least is the initiative on the human resource development. If you go to our training centre you will see that we have one of the best training centers that you can find in the steel industry. Every three years the total work force gets retrained. Every year we give them a training of some sort and about 38% of our employees go to the training centre. We have to focus on the productivity of the manpower and their skill development. What you find is that there is the possibility of growing a band of dedicated international managers here who can serve in our other units. It again refers to the question of getting good quality management with the commitment of the people. These are the areas where we are working for, for the future growth because, possibly in the next 2-2,5 years, we'll increase capacity by 2mln tons. Now we have about 4.5 ml tons of crude steel and we should go to about 5.8 ml tons in the next 2.5 years. It also depends on how the world economy develops because we are totally dependent on it. At one point Kazakhstan was consuming 4% of the production here and now it consumes over 8%. Especially the domestic market has been growing tremendously in the past years. We also keep watching our competition in CIS and Russia, as it is the biggest steel producer. We have bought a plant in the Ukraine where we produce different things as in Kazakhstan.

How would you like to use this platform to address our readers in the United States?

I would like to tell them that there are a lot of opportunities in this part of the world, you only have to explore them and then use them. There is nothing to be afraid of here. Even myself when I came here 4 years ago I did not know where Kazakhstan was. In the last three years people started looking at Kazakhstan. The government, the leadership has done quite a bit of work. A lot of international companies are working here today. Many people come. My message is that this is a country of opportunities and the second thing is that the people are very warm. They will welcome you if you come here; We employ Kazakhstan people and we are very integrated socially here and that is possibly one of our main strengths.