Ten Years Too Late for the Reforms

Will Nazarbayev, Akorda and the current ruling elite be able to provide employment for the “superfluous” half of the population and ensure the accelerated growth of the non-resource economy? I answered this question six years ago in the article published in The Respublika on March 26, 2013 and adduced some arguments on the topic.

The reason why I am recalling this publication now is because several articles have been published in the Kazakh press that give a chance for hoping that the next generation of the local elite is capable of not only stealing, taking bribes and abusing the authority but also of, if not sowing the reasonable, the good and the eternal, then at least running the normal business and earning honest money on it.

Among these numerous publications, I would select the following -
“The Meat Kings” of Kazakhstan – Who Are They, The Non-Halal Export. How Kazakhstan Is Developing Pig Farming and Let’s Return to Our Muttons!

Unquestionably, one can and must argue with the people whose opinions and plans are presented in these articles but the point is that they, first, are professionals (and quite successful ones at that), second, have the possibilities to build up, develop and promote their business without looking over their shoulder at the government and other persons, third, if they will be heard and supported, and not so much by the state as by the business colleagues and bankers, it will provide the country with the opportunity to form the national agricultural policy in the sphere of animal farming not only from the above but from the below as well. And this is critically important in the context of the existing authoritarian political system when the feedback mechanism either does not work at all or operates with great difficulties.

This hope (a futile one perhaps) that the Kazakh contemporary ruling elite can not only consume and over-indulge but also produce and create has prompted me to recall the 2013 article as my own contribution into the discussion on the subject of the animal farming development that is now going on in the country.

This article is about whether Nazarbayev, Akorda and the current ruling elite will be able to provide employment for the “superfluous” part of the population and ensure the accelerated growth of the non-resource economy of the country. In my opinion, they will not. Not today, not tomorrow, not in the near future.

Let me explain to you why.

First, had they been able to do that, they would have done that already. Note that, after the first difficult decade, Kazakhstan was experiencing the “rich years” thanks to the jump of the world prices for hydrocarbons and the other resources. And indeed, the current economic situation is not that bad either. Add to that the foreign investments, the significant amount of the resources accumulated in the National Fund – and the state power is in your hands. But, at the output, there is bubkis.

Second, the objective factors that hamper the development of the Kazakh non-resource economy (I wrote about them in the previous materials) automatically devalue any state initiative, all the state investments and projects by making them attackable. If for no other reason than the fact that they have no end owner interested in their successful implementation. As for the state agencies and the quasi-governmental companies, they are like the infamous many physicians that have killed the king.

Third, because the business in our country possesses a secondary, subordinate nature vis-à-vis the bureaucratic apparatus. Given the fact that corruption is growing from the above and serves as not only a means of obtaining shadowy earnings but as a political tool with whose aid Nazarbayev ensures the loyalty of the ruling elite and controls it, the entrepreneurs have no choice but to become the sheeple that are being “clipped”. And since it is not they who determines the degree of the “clipping”, the sheeple have no choice but to live for today. 

Fourth, in Kazakhstan, the state economic policy including the investment policy, is developed as a range of individual projects and not as a one-piece program that is aimed to achieve a definitive result and is adapted to the individual socio-economic conditions; the one that encompasses all the groups affected by it and/or participating in it on the basis of acknowledging and satisfying their economic demands.

Fifth, while our country has the state economic policy (albeit a poor and a good-for-nothing one), it has no national economic policy. The latter is different from the former because it’s wider and includes, apart from the state’s investments, initiatives and projects, all kinds of the private ones. To prove it, it is enough to recall the fact that we have no venue where the state and the private business could, if not cooperate (from that, we are as far as we are from Jupiter), but at least communicate as equals.

There are other reasons, but these five are enough to understand – no matter how much Nazarbayev promises to do for us, how well these promises and Nazarbayev himself are promoted by Akorda, how loudly the Prime Minister and the Cabinet members are banging the table with their fists, all this is but soldiering, the imitation of heavy activity.

And, unfortunately, I must disappoint the reader again, the chances for changing the situation for the better are nil. Why? 

Let us start with the President. He is old school and knows full well how the Soviet economy had been modernized and developed. Moreover, he used to be the Secretary of the Karaganda Regional Party Committee and the Secretary of the Central Committee of the Communist Party of Kazakhstan and was responsible for the sphere of industry. Then, for a long time, he had been in charge of the Cabinet Council of the Kazakh SSR (albeit mostly during the times of the “standstill”, the zastoy).

But the Soviet economy was self-contained and self-reliant; thus, in its development, the ruling authorities represented by the Communist Party Central Committee, the Cabinet Council, the Military-Industrial Commission, the Gosplan etc. had stressed the physical data – tons, items, units and not the price, production cost, profit. Yes, these data were calculated and reviewed but these indicators were secondary since the state could, to a large extent, control them via the external trade monopoly, the directive forming of the prices and tariffs, the direct distribution of the material, labor, credit and financial resources.

As a result, Nazarbayev, even though he does have the Ph.D. degree in economics, is no economist. Moreover, he hasn’t created one single business with his own hands and, therefore, for him, such things as market, competition, market price, production cost etc. remain obscure. It is as if he was above them. And, given his age and a high sensitivity to flattery, he has become an expert in opening new industries but not in understanding their viability. And the chances for the President to grow up, as everyone realizes quite well, are zero.

Next. More often than not, in our country, any more or less big business-project is organized and funded by the state or a quasi-governmental company. Not so often – by the participants of the projects and even then, it usually happens with the approval of the state. But here, there is a trap that cannot be escaped given the current level of the full-on corruption, the low professional qualifications of the state apparatus, the complete moral decay of the officialdom, the domination of the clans and elite groups, the lack of responsibility at all the levels of the state governance – from the President himself to a local village-level authority.

The trap lies in the fact that the officials and/or the clerks working at the quasi-governmental companies do not personally care whether the project is successful and if it brings profits to the investors, in other words, the state or private parties. They only care about making money for themselves. There is no need to explain how it is done in our country. As a result, only a big investor with an access to Akorda’s very top can avoid the corruption at top of the vertical but will still be defenseless against the corruption at the bottom.

This means that a lot of people that can affect the fate of a given business-project (whether it will be launched, in what form and how soon) and, quite often, its funding, state supervision and state approval are interested, first and foremost, in making their own packet. And everything else can go to hell. As a result, we have Besoby, and consider that the fallen and demolished houses were, as they say, a lucky escape. But if it is a nuclear reactor or a chemical plant that goes up in flames, then perhaps we will finally understand that is at stake here.

Finally, since the business in our country is secondary vis-à-vis the bureaucratic apparatus and, for the latter, serves as a source of shadowy earnings and/or a place for investing dishonestly accumulated capitals, then all the state vertical, from Nazarbayev himself to the least important local governor, is trying to keep this business under their control. All the more so when it comes to the state funds given for its support and development and/or the new projects.

For this reason, the state economic policy is invariably formulated as a corpus of the state agencies’ and the quasi-governmental companies’ intentions. With that, this corpus is of a low quality since no one cares to build, on its basis, any kind of even remotely implementable program that will be able to successfully compete at the open market and bring a stable and adequate return. As a result, all the moves made by the state are reminiscent of the behavior of a person who have lost their wallet in the dark but are looking for it under skylight simply because there is visibility there. It is not surprising that, given the situation, all the state development programs, especially during the last decades, successfully fail and Nazarbayev and Akorda has had to move the deadline for the all-encompassing future prosperity that awaits all the Kazakh citizens from 2030 to 2050.

In the meantime, nothing precludes our country from making an effort and implementing several national programs of economic development that may be able to help us become a new Asian “tiger”. To do so, we must simply put together all the ideas, theories and intentions that the economy “generals” had announced earlier and on numerous occasions but were unable to put into practice. Granted, they had tried many times.

As it happens, I have had an opportunity to launch new structures four times in my life. First, when I was put in charge of the Employment Fund at the Ministry of Labor of the Republic of Kazakhstan. Second, when I became the Vice President of Astana-Holding. Third, when I became the Vice President of the Food Contract Corporation. Fourth, when I occupied the same position at KEGOC (Kazakhstan Electricity Grid Operating Company).

I was asked to become the Vice President of the Food Contract Corporation by Nurlan Smagulov whom Nazarbayev had literally forced to lead this state company or, to be precise, the company that had been its successor. What we had found there was practically ruins – they had the apparatus, the representations in every region, hundreds of millions of dollars of debt and more than a million tons of grain that existed only on paper. It was the grain that the governors and the grain elevators’ heads had given away, sold and granted as loans.

On the other hand, the work itself was very interesting, all the more so since I had moved there from the position of the Minister of Economy where I could do little to influence things. To add to this, if happned after several conflicts with the management of the State Property Committee where I was a member of the inter-agency privatization commission and the unpleasant talks on different subjects with Vice President on the Republic of Kazakhstan Zhanybek Karibzhanov and the other bureaucratic troubles.

I left the Corporation in seven months when it was standing firmly on its own two feet having 1.2 mln tons of grain and not just on paper, the paid debts and good prospects. I left for KEGOC at the invitation of Mukhtar Ablyazov because the tasks there were much more ambitious.

And so, the secret of our success lied in the fact that we did not theorize but employed the effective instruments we had at our disposal at the time. I hope the supporters of the liberal economic views will forgive me, but we used that same administrative arm that, earlier, had enabled the regional governors to fritter away the grain state resources. And, by the way, thanks to the then Vice Prime Minister Akhmetzhan Esimov, the firm resolutions of Nazarbayev that Nurlan Smagulov was brilliant at obtaining we had been able to get back a large part of the lost grain.

There was a lot of shouting, hurt feelings, complaints, but we got the grain back. After which, we decided to put emphasis on the two groups involved in the grain production – the grain elevators’ owners and big grain companies. Of course, oftentimes, these were the same structures and/or the same people that stood behind them. The former were interested in keeping the state grain and receiving the stable income, the latter were able to produce grain with the minimal state support, first of all, the loan support.

As far as I can tell, this policy has remained unchanged until now even though the management of the Corporation has changed several times since then. So, after the state structure we had created was able to stand on its own two feet, I as the vice president responsible for the reforming of the sub-sector and the organizational issues was planning to create a state corporation for the purpose of meat production. Perhaps my suggestions are still kept in the archives even though 15 years has passed since then.

The idea was simple. The Kazakh grain had the limited number of market outlets and, due to a huge delivery distance, its transportation was quite cost-intensive. Therefore, it was supposed that a part of the grain, especially the low-quality grain which we had a lot of at the time, would be used for the production of animal feedstuff that would become the basis for the cattle industry development and the subsequent meat export.

From today’s standpoint, this idea which, by the way, is now trying to be implemented (albeit crookedly) by the Ministry of Agriculture and its leader Asylzhan Mamytbekov seems all the more attractive and reasonable. It is especially so in the context of China’s economic development that is based on increasing the domestic demand. And in the context of the neighboring Russia that has become a traditionary meat importer.

Only I would have started not with importing the breeding stock but with something else. I would have allocated a hundred million dollars for developing the industrial technologies of the meat and the processed meat production in the specific local environment. I would have employed the Kazakh and foreign research centers that have the required experience and achievements. The end product would have to fulfill the two requirements – the optimal wholesale price and the minimal required quality. I know of several such technologies suitable for different climates, nutritive bases, animal farming practices, potential buyers and so forth. There is perhaps more than a dozen of such technologies but all of them must fulfill the said requirements.

Then, after trying them out, I would have started to implant these technologies following the fast food mode – the standard equipment, the standard technologies of cattle raising, butchering and processing, the standard personnel instructions and requirements, the standard marketing policy etc.

With this approach, all the previously announced intentions of Akorda can be realized without much difficulty. After all, this scheme of the sub-sector development allows to create a cluster since it helps forming the effective demand chain that can be easily extended in all directions.

They will need the standard engineering structures and equipment that will allow to make the production inside the country more efficient than the importing due to the scale and the stability of the demand.

The mass cattle processing will produce not only meat but a lot of waste and sub-products (from jackets to hooves) that will be profitable to process as well.

The large-scale demand for labor force will allow to rebuild the system of the professional and highest education in the non-humanities, to make it more market-oriented and adapted to the individual requirements. Moreover, it will allow, if not to solve, then avoid the problem of the labor quality decrease in our country because it will create a “social ladder” for the rural (and not only rural) folk – from animal farm workers to the directors of the agricultural complexes.

For the distant-pasture cattle tending technologies, we will need wagons for the sheep keepers and their families and wind turbines for electricity production and water lifting.

For the development of the nutritive base, we will need the new technologies of feeding-stuff production and storage, of haymaking, of micro-element preparations and so forth.

The industrial animal farming will help to start reviving the sanitary and veterinary inspection in the rural areas instead of wasting the resources around the entire gigantic space of the country.

We will even be able to solve such a distant from animal farming problem as the underdevelopment of the Kazakh stock market. Unfortunately, our good-for-nothing reformers such as Marchenko and Kelimbetov have failed to understand that the stock market starts not with the state passing the right laws and controlling the financial sector in all ways possible but with the people massively entrusting their money to others. And trust is exactly what we are lacking.

So, if the state develops and offers to the market the standard cattle raising, butchering and processing technologies that will ensure the optimal wholesale price and the required quality of meat, support the export and, if the external demand decreases, guarantee the purchasing of the superfluous product, the population will be interested in investing their money as well.

And then the state will only have to ensure the development of the already existing forms of business organization. I am talking about the businesses led by those in whom the citizens of a given city or town have put their trust. These businesses will have to undergo an annual efficiency review when paying the dividends and be placed under a much stricter control since the Kazakhs are born farmers and the entire production process is happening right before their eyes and with their participation.

With this approach, everyone becomes interested in the production and in the increase of its efficiency and profitability. I am talking about the local people who will get jobs in their home area. I am talking about the local authorities that will receive a part of the profits. I am talking about those who have privatized the agricultural lands for they will get an opportunity to receive rental income or become investors. I am talking about a wide circle of investors. And finally, I am talking about the state that will be able to solve the problem of the “superfluous” population, revive the rural areas, increase the quality of life or slow down the migration to the urban areas.

Now then, one can find about a dozen of such projects. Understandably, they will be inferior to industrial animal farming in terms of the scale and the socio-economic effect but still be much more efficient from the national economy standpoint than the increasing of the hydrocarbon extraction and the large-scale projects on resource-processing. If for no other reason than the fact that, thanks to a lower “funding intensity”, they will provide jobs to a much greater number of the Kazakh citizens.

Now, the paradox is that neither Nazarbayev nor his environment is interested in the successful implementation of such large-scale nation-wide projects. Why?

Simply because, to a large extent, they are now holding on to the power due to the existence of the surplus population that is fiercely fighting to survive and hence is vulnerable and unresisting.

Because the entrepreneurs who can successfully realize such large-scale projects will not be afraid of officials and won’t give bribes – behind them, there will be hundreds of people interested in the success of the business and it will not be possible to take anything away from them.

Because these entrepreneurs will unite since, together, it will be easier and safer to enter the export markets and to defend their interests. Therefore, they will be able to withstand the unlawful demands of not only the state agencies but the President himself.

This is exactly why they are feeding us the promises to make us happy and prosperous by the year 2050 instead of taking a reality check and making some elementary steps that needed to have been made 10 years ago. And then perhaps we would be able to become the main meat supplier for China where the per capita meat consumption is more than two times lower than in the developed countries. And where the per capita annual consumption growth by one kilo provides an additional demand of 1.3 mln tons.



Muratbek Ketebayev is a Kazakh civil activist and holds a degree in economics. He was the Head of the State Employment Assistance Fund.

He held the position of a Vice Minister of Economy in the Kazakh government. He worked in the national companies – as a Vice Minister of the Kazakhstan Electricity Grid Operating Company (KEGOC) and the State Food Contract Corporation. He has experience in working in private business-structures.  

He is one of the initiators of the Democratic Choice of Kazakhstan civil movement (2001).

In 2013, he received the refugee status in Poland and resides permanently in Warsaw.


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