Business supports social initiatives of President
President of Kazakhstan Nursultan Nazarbayev set specific tasks for the executive authority, party and the Atameken at Nur Otan Party's XVIII Congress in Astana. Chairman of the Atameken Presidium Timur Kulibayev told about the plans for their implementation.
We, as the National Chamber of Entrepreneurs, are ready to implement these initiatives.
President has given specific instructions on the allocation of the necessary funds to provide support in education, health and social protection sectors.
If we consider the employment issues and the growth of incomes of our citizens by developing SMEs and mass entrepreneurship I believe that students should be taught to do business since school and upgrade their business skills at the university.
At the initiative of the Atameken, Basics of Entrepreneurship will be introduced for high school students since September 1, 2019. We also proposed to carry out career guidance work in schools since 7th grade. These offers will enable schoolchildren and their parents to have an idea about the business and make an informed choice of profession.
There are more than 800 state and private colleges in the country with about half a million students and an annual budget worth more than 100 billion tenge.
It is necessary to evaluate colleges by the real level of graduates’ employment. We propose to introduce an employers’ rating of colleges and the state will place order on the basis of the aforementioned rating. The Atameken has introduced a similar rating of universities since 2018.
In addition to the proposed rating, it is necessary to develop economic incentives for employers in order to actively engage them in dual education. It is advisable to reimburse the expense of employers when providing students’ industrial training at enterprises. At our initiative, this approach is used for short-term training (up to 6 months) for apprenticeship training in an enterprise. More than 200 enterprises have already been included in our register.
The results of the university ranking 2018 revealed that only half of 130 universities performed 60 per cent of graduates’ employment. The rating should be a guide when applicants and their parents choose a university, as well as the main criterion for placement of government orders.
President has been instructed Atameken together with the Ministry of Education and Science to train 180 thousand graduate students of colleges and universities for the basics of entrepreneurship for three years. We have developed the Atameken Academy online platform, which brought together our educational projects, including the Bastau Business. Thus, graduate students will have the opportunity to learn the basics of entrepreneurship from our business trainers at their educational institution and via an online platform. After training, students will be able to receive grants or microcredit to start their business.
I summarized our approaches in the education system. I want to bring your attention to the Bastau business project for rural residents, mostly self-employed and unemployed.
As part of this task, in 2016 the Atameken launched a pilot training project, the Bastau Business, in conjunction with microcredit in several regions at the expense of sponsorship. The pilot showed its efficiency, we have a positive feedback from the project participants.
As a result, since 2017 the Bastau Business project became a key part of the Program of productive employment and mass entrepreneurship.
In 2018, 28,000 people in all regional centers of the country studied business basics within the Bastau Business project, including 19,500 people defended business projects, that is 60 per cent of all students. The allocated funding was enough to provide loans for less than 8 thousand people for implementation of the projects. The data shows that almost 95 per cent of Bastau graduates become taxpayers.
This year the Bastau Business project will increase the number of villagers for training up to 40,000 people as it was instructed by the Head of State. Taking into account the high demand, we propose to increase the indicative of financing from 20 per cent up to 30 per cent of those trained within the Bastau Business program, which will require an increase in budget expenditures on microcredit up to 63 billion tenge.
On behalf of the Head of State, the state will create home-based works and allocate a separate quota of grants and microcredit for large families. The Atameken is ready to train and engage them in entrepreneurship by proposing simple business projects (handicrafts, tailoring, confectionery, etc.) that will give opportunity for parents to combine childcare and work, ensuring sales and receiving stable income. It is necessary to introduce a separate component of financial support for large families into the Program of productive employment and mass entrepreneurship.
Addressing the issue of ensuring real incomes of the population it is necessary to elaborate special regional development programs.
The relevant instructions to the Government, akimats and the Atameken were given by the Head of State at an enlarged meeting in February 2019.
Regional programs will determine the specialization of each region and help to identify new niches for business development and create new jobs.
Last year the Atameken launched an economic study in the Atyrau region. The study revealed that the region imported goods worth more than 100 billion tenge that can be substituted. Based on this demand, it is possible to launch up to 700 small and medium-sized projects and create more than 8,000 jobs in the region. I am sure that the same situation is in other regions.
This work can be completed by the end of the year in all regions whether the funding is appropriate.
The issue of growth of real incomes of the population is directly related to increase in prices. The official inflation is calculated on 510 positions. However, the prices of food, clothing and shoes are most important for the majority of the population; their share exceeds 60 per cent of the total expenses of the average Kazakhstani family. In many commodity positions, we are still dependent on imports, and each weakening of tenge entails inflation. For example, over the past 5 years, the share of imports in clothing was 85 per cent, in food — 36 per cent, in beverages — 20 per cent, in furniture — 65 per cent.
President instructed dealing with this issue that is to substitute import and develop the economy of simple things.
There is also a large potential in import substitution in the construction of housing and roads under the Nurly Zhol and Nurly Zher programs. On behalf of the Head of State, more than 40,000 rental apartments for low-income families will be additionally built and the network of local roads will be expanded.
Until July 2019, it is necessary to develop and deliver clear indicators to each state authority and akimat on share of the local content in the construction of housing and roads for the next 3 years.
Kazakhstan should have a predictable exchange rate policy to control price increases. Last year the tenge exchange rate weakened by 20 per cent despite stable oil prices.
Amid this unstable situation the reduction in lending to the business sector continues. By the end of 2018, lending to legal entities decreased by 4.6 per cent, while loans to small businesses fell by 15 per cent. As a result, at the beginning of this year loans to GDP amounted to only 22 per cent, whereas in 2015 they exceeded 30 per cent of GDP.
The new leadership of the National Bank faces a difficult task of launching loans to the economy. This requires a constructive dialogue between the National Bank, the Government and the real sector represented by Atameken. The platform for such a dialogue could be the Economic Policy Council under the Government.
It is time for the banks to get rid of the idea that “there are no high-quality borrowers in business” and start developing new banking products for SMEs. Today, 80 per cent out of over 1.2 million entrepreneurs do not use bank lending. The Atameken is ready, together with banks and development institutions, to nurture new borrowers, by developing an ecosystem for the consolidation and cooperation of start-ups and existing entrepreneurs.
It should be noted that, despite the general decline in bank lending, the consumer loans sector is actively developing. In 2018, bank lending to individuals increased by almost 17 per cent. At the same time, the segment of non-bank lending to individuals is growing rapidly through various online companies and pawnshops, which are not registered as microfinance organizations and are not limited by the marginal rate of 56 per cent per annum. As a result of this uncontrolled growth in consumer lending, the population falls into a debt trap.
The Atameken will make proposals to the legislation aimed at protecting the rights of borrowers.
In addition to the National Fund, an additional source to increase social spending will be an effective fight against the shadow economy and corruption. The share of the informal sector is almost 26 per cent of GDP.
The head of state has already designated reserves in customs administration. The discrepancy in the mirror statistics of customs of China is more than 7 billion USD. This means that the state budget did not receive more than 300 billion tenge per year. Moreover, gray imports are the main reason for the shadow trade, which serves suppliers of counterfeit goods and does not allow developing domestic production of basic consumer goods. Progress in this direction can be achieved already this year through tough measures by blocking the shadow channels and digitization of all customs procedures. The focus should be on improving the customs administration of imports from China.
At the same time, it is necessary to exclude the practice of tightening the control over conscientious entrepreneurs.
The effectiveness of the public procurement system is to be improved. Last year the total amount of public procurement amounted to 4.4 trillion tenge, including 75 per cent that was purchased without competition from one supplier. According to our Monitoring Center, the price difference for some commodity items between purchasing by competition and purchasing from one supplier comes to 30 per cent. We propose to optimize the amount of public procurement by 10 per cent, the optimization will save up to 300 billion tenge. The same work can be carried out in the procurement of the quasi-state sector. Under these conditions, it is crucial to increase transparency by digitizing the procurement sector and strengthening public control.
The key problem concerning the land is the lack of information about land plots. This sphere is opaque and corrupt.
More than 17 thousand land plots were granted to private property in populated areas, but only one thousand of them were purchased at auctions last year. According to surveys from the regions, every third entrepreneur faces corruption.
Akimats are obliged to post information on the provided land plots on Internet resources, but not all regions comply with these requirements.
The Atameken proposes to complete digitization of information on land plots together with the akimats by the end of 2019.
Business needs a plan of agricultural land, the location of arable land, hayfields, pastures, etc. Each district should have digitized information on free land plots and data on the activities of land commissions for consideration and distribution of land plots. Then, the business will be able to make all decisions remotely.
Business Service Center of Kyzylorda region performed a good example, when an entrepreneur can get information about land plots, their technical conditions for connecting to utility networks in three working days. This experience should be replicated in all regions.
Institutional and structural reforms should be a strategic priority.
Therefore, the next step towards the eradication of corruption will be the complete digitization of public services, as well as the creation of a compact, professional and highly paid government apparatus. Entrepreneurs pay taxes and want to get quality services for it.
In 2018, within the framework of a large-scale reform of business deregulation, 137 out of 540 control and supervisory functions of state bodies were eliminated, 17,000, or 56 per cent of the requirements for checklists were reduced, and about 1,000 full-time inspectors were eliminated.
Further steps in this direction will be made to automatize control, focusing only on violators. Work is also underway to transfer state functions to the competitive environment and to self-regulating organizations.
As a result, the number of state bodies’ staff will continue to decline. As of today 14 ministries have 45 committees and each akimat has up to 26 offices.
This is a painful, but important measure. However, it will significantly increase the salaries of effective and professional employees in ministries and akimats, reduce formalism and bureaucracy and fight corruption. Many developed countries have gone the same way. For example, Sweden and Singapore began a large-scale fight against corruption by a significant increase in civil servants' salaries, which exceeded the salaries of working professionals.
It is also worth considering the introduction of criminal liability for illegal enrichment of civil servants, as recommended by the UN Convention against Corruption. If a civil servant or his family members cannot prove the source of their income, this should be regarded as a sign of corruption.
In addition to creating a compact state apparatus, there should be a decline in state participation in the economy.
Privatization announced, but the task is not solved. Within the framework of the second wave of privatization the objects were sold for 321 billion tenge, while the assets of Samruk-Kazyna amount to about 25 trillion tenge. At the same time it should be understood that the sale of only a small part of state-owned shares to private investors cannot mean a decrease in their role in the economy, since the controlling stake remains with the state.
The state-owned companies can legally carry out 348 types of activities. The state-owned enterprises are represented in such competitive sectors of the economy, as transportation, logistics, and trade. Due to this fact the public sector continues to accumulate inefficient assets even after privatization, as it was before. According to the Ministry of Finance, 6.6 thousand quasi-state entities (state enterprises, LLP, JSC) are engaged in entrepreneurship.
It is necessary to reduce the list of legally permitted activities for the state at least 2 times.
On its basis, it is necessary to compile a complete list of republican, municipal, quasi-state organizations with state participation, which must be kept in state ownership, by July 2019. Everything that a private business can do must be transferred to a competitive environment. It is necessary to develop a privatization plan with specific dates for each object for the remaining organizations.
At the congress the Head of State focused on the need for comprehensive control by state and public institutions over the effectiveness of the implementation of state programs and the spending of budget funds and the National Fund.
President commissioned to create a Center for evaluating the effectiveness and monitoring the implementation of state programs and reforms.
The Atameken, as a non-governmental organization, is ready to actively participate in the work of this center.
We are ready to implement a set of proposed measures in conjunction with the Government and regional authorities at all levels. We all have a common agenda, the ultimate goal of which is to increase the income of Kazakhstani citizens, create new jobs and develop SMEs.
I am confident that our joint actions will have a positive effect on the economy and social well-being of the population.