National bank of Kazakhstan is ready to discuss the subject of transfer of pension funds into management of private companies. This has been announced once again by the chairman of the main bank of the country Daniyar Akishev. This time the announcement was voiced during an informal meeting with representatives of domestic media agencies in Almaty.

In the words of the chairman of the National bank, the level of financial education of Kazakhs lets them determine, which companies will be better at managing their pension savings, plus separate palyers of the financial market have preserved an interest for this sector. So its up to governmental decisions.

“We cannot talk in detail about the parameters, since the concept is at the discussion stage. None of the government bodies has voiced their position. As for us we are ready to have substantiated talks with all participants of the process” – said Akishev and added that “abovementioned proposals of NBRK were examined by interested government bodies and business community and are currently are at the examination stage in the government of the republic of Kazakhstan. After making a final decision a legislative base will be prepared for implementation of procedures for transferring of pensions assets into management of private firms.”

By our estimates, aforementioned proposal of Akishev, which fundamentally contradicts previous policy of the regulator on the issue, is a forced one and pursues two goals which are far from the economy:

• In the present – to soften the criticism from society and the press
• In the future – to transfer responsibility for low profitability of pension assets on private managing structures.

The things is that to secure a high profitability of portfolio investments and at the same minimize the risks is impossible by definition. For now the National bank is solving this problem through investment of ENPF funds into its notes and government bonds, the profitability of which, is relatively high. However, such state of affairs cannot continue forever.

Plus, the president has ordered to place part of the funds of ENPF abroad, evidently, in order to lower the losses in case of another devaluation of national currency. Under this conditions, the National bank of RK, as the manager of assets of ENPF will have a tough time securing the funds of the former. The transfer of the part of pension savings of Kazakhstani into management of private structures, will not achieve the goal of providing high (enough) profitability of pension assets. If only because Kazakhstani is still stagnating and isn’t competitive and such state will continue for a while; however, it will let the National bank of RK solve its own private goals.

Profitability that in the future will be provided by private management companies due to objective reasons, will turn out lower, on average than that of the structures under control of National bank. Lower, due to factors of the scope of operations, access to information, administrative capabilities, etc. Bu the regulator will get an opportunity to put blame on others, when it gets critiqued. The same goes for possible losses associated with investment – the private managing companies will have higher ones.

Thus Akishev’s proposal to transfer part of Kazakhstani’s saving into management of private companies is far from rational following of the market demands but a sly bureaucratic maneuver to lower critique and move responsibility on others. Also it is doubtful that private sector will be trusted with large sums; by our estimates, it will be a sensation if they receive 5-10% from ENPF.