The Kazakh state tries to get involved in anything it can. And it often does so not for the benefit of the country but in the best interests of oligarchs and elite clans. And even though the Republic attempts to limit and divide the authorities of state agencies on a regular basis, it doesn’t do much good to anyone.

As a result, the «super-presidential» vertical is responsible for everything and, at the same time, nothing. This, by the way, serves as one of the main causes of the problems currently experienced by the Kazakh citizens that are having a life and death struggle with coronavirus while fighting the indifference and inefficiency of the state apparatus and officials.

To those working at the state agencies especially of the high and medium echelons, it has long stopped being a secret that a significant part of the «super-presidential» vertical is engaged in Sisyphean labor. The only thing that changes is the sphere of its application. For instance, there was a period when the police were vigorously persecuting prostitutes in order to stop them from disturbing the public order and, at the same time, to increase the morals of the Kazakh citizens. Now they are actively hunting the resellers of drugs and the means of coronavirus protection. Probably in order to make the latter more accessible for the Kazakhs in terms of the pricing.

On the other hand, one should note that, in terms of the state budget expenditures and efforts, the police emergency measures do not coats much. Since the salaries of the staff of the Ministry of Interior are included in the budget, the only thing they probably have to pay for is gasoline. However, this is not always the case. For instance, as far as the project called «the commodity distribution system» is concerned, the losses of the Kazakh citizens both as consumers and taxpayers are going to be much more serious.

The recent opening  of the country’s first wholesale distribution logistics centre in Karaganda serves as the cause for our concern (the text of the press-release available in Russian and Kazakh). The idea to create this kind of wholesale structures in and of itself is good and worthy of support but only if it’s implemented not on taxpayers’ money. Why do we think so?

The thing is that Kazakhstan’s market economy in the commercial sphere is seriously distorted and experiencing difficulties, first of all, due to the low purchasing power of the population and, second, because of the serious pressure on the part of the state and officials.

To confirm this, we will cite some passages from the aforementioned press-release (text in bold hereinafter by kz.expert).

«On the eve of the Day of the Capital, Karaganda opens Kazakhstan’s first wholesale distribution logistics centre Global City. It will connect the „North-South“ flows of agricultural trade. Thanks to direct deliveries and selling, the Karaganda citizens will be able to buy goods wholesale and retail at a below-market price, reports NUR.KZ. The project has gained support as part of the „Business Roadmap“ and the „Economy of Simple Things“ state programs».

«The wholesale distribution logistics centre is to become a large hub where goods can be stored, sorted out and sold. Most importantly, however, it will sell fruits and vegetables directly which will allow to reduce prices not only on the Karaganda market but in other regions of the country as well. The complex was built for the purpose of creating the best conditions for entrepreneurs and agricultural producers as well as of excluding resellers from trade operations which should result in the reduction of the prices for the end consumer as well as in the provision of the city residents with fresh products at affordable prices».

«For retail business, they have built a shopping-entertainment centre of 42 thousand square meters that includes 149 free-standing concession stands and a special meat stand of 2 thousand square meters. For large wholesale companies, the centre offers a climate-controlled storage with different temperature regimes, a dry storage, a temporary storage warehouse, a railway siding, a container yard with an overhead crane, a zone of customs processing, freight equipment».

«You will recall that the Global City Alfarukh LLP wholesale distribution logistics centre project is being implemented on the orders of the Elbasy Nursultan Nazarbayev. The cost of the project constitutes about 24 bln tenge. Five thousands jobs will be created as part of the project implementation».

The business-design of this kind of wholesale distribution logistics centres lies in the idea that it will unite all the links of the trade chain in space and time — big, medium-sized and small wholesale and retail. This should enable them to become commercially viable in the most competitive sector of the national economy (retail) while saving on the entire trade chain. And, therefore, make more profit while pushing competitors off the market.

Clearly, for small and partially medium-sized businesses, the appearance of this kind of wholesale distribution logistics centres poses a serious threat if not a gut-punch. However, nothing can be done about it in the conditions of the market economy — such models are successfully existing in many countries around the globe. So one can certainly oppose it but one’s efforts will be in vain. However, the most important thing here is that this business in conducted by independent entrepreneurs even if they are related to influential people as the case may be with the Elbasy’s brother Bolat Nazarbayev.

But it is a completely different matter when this business is conducted by the Kazakh state. And the fact that this is going to happen soon can be confirmed by the governmental press-releases.

Here is a quote from one such document called «Kazakhstan Is Entering a New Stage of the Food Security Governance — A. Mamin».

«At the governmental teleconference chaired by Prime Minister of the Republic of Kazakhstan Askar Mamin, the Government has discussed the issues of the food security governance and of creating a commodity distribution system. Minister of Trade and Integration B. Sultanov and Minister of Agriculture S. Omarov as well as Governor of the Turkestan region U. Shakeyev, Governor of the Almaty region A. Batalov and Governor of the Pavlodar region A. Skakov have reported on the project implementation roadmap.

Kazakhstan is entering a new stage of the food security governance and the price control via creating a national commodity distribution system — a complex of wholesale distribution centres (WDC). This kind of systems are successfully operating in developed countries; the practices of France, Spain and other states have been studied in detail.

The project of creating the national commodity distribution system will be implemented in three stages before 2022. More than 24 WDC are to be built. This will allow to store, process and distribute about 4.8 mln tons of agricultural goods. This infrastructure will allow to completely secure collected harvests and minimise losses thus increasing the interest of agricultural producers in ramping up their production. As of today, the shortage of vegetable storehouses constitutes 70%. This year, 5 WDC will be open in the Pavlodar, Almaty and Turkestan regions which will allow to store additional 600 thousand tons of agricultural products».

The cited document underscores — the Kazakh Government is hopeful that the implementation of this project «will solve the problem of the food shortage during inter-seasons when sufficient supply of the goods on the market will prevent prices from growing», «allow to control retail margins at every trade link via adopting digital technologies and eliminating the unnecessary intermediate sellers» and reduce the prices for «agricultural goods to 25% thanks to the transparency of the price setting and the new efficient trade mechanisms».

Those who wish to learn more about this initiative, may also read another press-release called «Creating the WDC Network Will Reduce Agricultural Goods Prices To 25% — MTI» which presents the speeches of Minister of Trade and Integration Bakhyt Sultanov and Minister of Agriculture Saparkhan Omarov in detail (text available in Russian). 

Why are we being so unsympathetic to this initiative?

Because experience tells us that state-owned and quasi-governmental businesses always include those who can abuse their powers and authorities. Of course, this happens in private industries too but since, in the latter, the end owner is much closer to «the ground» and, most importantly, always controls costs and revenues, it is not as critical.

Apart from that, we have already witnessed the cases that demonstrate clearly — the state is a poor entrepreneur. Therefore, we are certain that the 24 WDC that will be built in the country before 2022 are going to cost a bundle to the taxpayers. And a big one at that. Both at the time of the construction and during the operational use as well.