Will We Import Business Landscape, Too?

In his “Presidential Address”, Nazarbayev names the “cardinal improvement and expansion of business landscape” the second priority of the third modernization of Kazakhastan. Let us see how practical this idea is given the current political and economic model of the Kazakh state.

 First, we would like to point out that here Nazarbayev once again describes the task in the “quantitative” format he understands. This happens because he does not, in fact, know how market economy works and why the normal business landscape can only appear in a balanced political system. Thus, Nazarbayev says in his address, “By 2050, the small and medium-sized businesses must provide not less than 50% of the country’s GDP. It is one of our main strategic goals”.

So, what really is a task of a qualitative change is presented as a task of a quantitative enhancement. Therefore, the president disorients the government from the very beginning. Now the Kazakh authorities, instead of addressing a very serious problem, will try and increase some arbitrary index-number. Imagine that a modernization progress in some industry sector is evaluated by a number of products manufactured by a certain method. And this when new technologies may appear in the near future or perhaps such volumes of output will no longer be necessary.

Nazarbayev’s attempt to translate the theoretically correct statement into the concrete assignments to his subordinates turns out to be an even more disastrous undertaking. The president gives an order to launch the “program of effective employment and the massive-scale entrepreneurship development”. This program will include “expanding the micro banking geography, actively using the means of supporting entrepreneurs” and “improving the ways of backing the massive-scale entrepreneurship”.  This being said, “Every region of Kazakhstan must propose a comprehensive set of measures for developing the massive-scale entrepreneurship (including family enterprises)”. Note that, up until now, not even one entrepreneurship development program has been implemented successfully in Kazakhstan.

The same fate awaits Nazarbayev’s assignment to the government and the National Chamber of Entrepreneurs to decrease business expenditures. Formally, the task will, undoubtedly, be completed, the processes of the state service provision will be “optimized to the maximum”, the time periods will be shortened, number of required documents decreased, double procedures eliminated and, by July 1, 2917, the “systematic measures to deregulate the business” will be proposed. And that’s will be the extent of it.

Nazarbayev’s order to “implement the best standards and practices of the developed countries” is, too, absolutely inexecutable, especially at the regional level. To complete this task, Kazakhstan will have to import not only the practices but also the business together with the population from the developed countries.

Anyway, these Nazarbayev’s orders will be completed, at least pro forma. His demand to decrease the state’s share of the economy to 15% GDP, however, will face pushbacks from the state apparatus and the quasi-state agencies. However, these difficulties will arise not only because of the ruling elite’s fear to lose some of its “nutritive base” but also because of some intrinsic factors.

The thing is that, given the weakness of the national business, the passivity of the population and the absence of civic society, the government has found itself burdened by the necessity to perform many unusual functions. In the normal countries, these functions are fulfilled by consumer demand, civil society, professional organizations, etc.

The government can fulfil these functions only by increasing the number of state officials or quasi-state employees because the profusion of authoritarianism in the political system, the inflexible management style, the low level of professionalism among the population and the absence of interest from the administrators hinder the labor effectiveness of the latter.

The order to reduce the state share of the GDP, decrease the number of the quasi-governmental agencies and state employees seems quite reasonable at the level of the national economy. However, it will lose all its reasonability at the levels below it because, then, the state will be bound to overlook certain spheres and functions.

So, ministries and departments, local governments and quasi-governmental agencies will find themselves is a position when the number of the tasks assigned to them is increasing but the number of instruments to complete them is decreasing. Note that, during the USSR’s last years, the state authorities were giving the same kind of orders. At the levels below, they found a way to complete them by converting the managerial personnel into the operational one and creating enterprises on a total cost accounting basis. De facto though these enterprises were nothing but the same old organizational units tightly incorporated into the technological process and the general management.

The same fate awaits the other presidential orders such as “to ensure the transparency and effectiveness of the privatization” and “to re-evaluate the role of the state holdings”. These assignments will be completed pro forma only.

The qualitative transformation of the Sovereign Wealth Fund “Samruk-Kazyna” will be limited to a complete revision of the organization and an optimization of the management and business processes. So, we once again will hear that the state holding is now “highly effective, space-saving and professional” and the “corporate management quality” has reached the international level. In reality, however, everything will remain the same because the economy will remain the same thus dictating the invariability of the operator on the part of the state. The same is true for the Joint-stock Company National Management Holding “Baiterek” and the National Management Holding Joint Stock Company “KazAGRO”.

The president suggests that “the expansion of the state-private partnership may kick-start the entrepreneurship development”. Unfortunately, as follows from the text of the Presidential Address, Nazarbayev seems to be unable to see the limitations for such a partnership in Kazakhstan today.

Undoubtedly, effective demand and welcoming environment are enough to form and fill some kind of a business niche just by a political will and restrictions easing. However, there are only few positive examples of it (one of them Nazarbayev mentions in his address).  This is because the state agencies’ administrative domination in the business is a product of Nazarbayev’s political domination over all and everything in Kazakhstan.

* Note that the “intensified technological modernization of the economy” is named the first priority of the third modernization– see On Nazarbayev’s Address to Nation


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