Recently, the president signed a decree "On Measures for Economic Liberalization." The director of the Talap Center for Applied Research, Askar Kysykov, discussed which norms are the most important and the risks of non-compliance with the decree in an interview with inbusiness.kz.
– Askar Baurzhanovich, what significance does the adoption of this decree have in the current situation in Kazakhstan?
– The decree on economic liberalization has been awaited for a long time. The president tasked the development of this document back in February. During this time, it underwent a lengthy and thorough elaboration, including expert discussions. As a result, a balanced version was adopted.
A key point is the definition of the basic principles of liberalization, which demonstrates a systematic approach to reforms. The decree outlines the inviolability of private property, freedom of entrepreneurial activity, and freedom of competition – fundamental principles of a market economy.
In other words, the decree emphasizes Kazakhstan's commitment to a market economy and confirms the implementation of consistent market reforms.
This is especially important in the current conditions, where there is some erosion of the investment climate related to asset recovery activities, the excess of the quasi-state sector, regulation, and other factors. The decree returns to the fundamentals of our economy – market relations and confirms that the market is the foundation for the future economic development of Kazakhstan.
– What areas of liberalization do you consider the most important?
– One of the pressing issues concerning both the population and businesses is tariffs. The existing tariffs are not market-based and are largely directly or indirectly subsidized by the state. According to estimates from “Samruk-Kazyna,” direct and indirect subsidies from the fund amount to about 1.2 trillion tenge. In fact, we are underpaying for some goods and services, such as fuel, public transport, mail, utilities, and so on, which has led to the infrastructure being in a deplorable state with high wear and tear. The decree proposes a gradual transition to market tariffs and a refusal of cross-subsidization of the economy over 4-5 years. The transition to market tariffs will be carried out in stages, which will help avoid sharp price jumps. Alongside this, it is important that social support measures for the population, including targeted social assistance, are reviewed in parallel with this decree. This is necessary so that those categories of the population who will feel the main impact from the increase in tariffs receive the necessary assistance from the state.
– And what about reducing the state's participation in the economy?
– For many years, there has been much talk about denationalization, but now a clear algorithm for its implementation has been defined. In fact, we are entering a new wave of privatization.
A National Privatization Office will be created, which will involve independent experts. This is an important step, as privatization is currently carried out by the government without external expertise.
It is planned to conduct an analysis and audit of all state enterprises and assets to select those that will be privatized based on certain criteria. Mass privatization will be completed by 2029.
It should be understood that privatization is not conducted for the sake of privatization itself. The goal is to conduct a real analysis of state and quasi-state enterprises to improve their operational efficiency.
– Does privatization solve the problem of efficiency in quasi-state companies?
– Privatization itself does not solve the problem of management efficiency. This is especially true for IPOs, when a small share of shares (10-15%) is brought to the market. However, this does not improve the quality of management because the board of directors mainly consists of officials.
In fact, “Samruk-Kazyna” and large national companies are managed by civil servants who do not have experience in private business management.
According to the decree, the criteria for selecting directors for the board of directors will be revised, and its composition will be updated. This means that within the framework of this reform, professional independent directors will be involved, and their share will be expanded.
When a company is managed by the government, as is the case with “Samruk-Kazyna,” a conflict of interest arises when making management decisions. Board members from the government pursue goals that the government implements. Therefore, state companies perform many non-market social tasks to the detriment of economic interests.
– For decades, foreign directors have been present on the board of directors of the holding “Samruk-Kazyna” and its subsidiaries, but their work has not always been effective. There have been complaints about remuneration and low work efficiency.
– The selection of competent directors depends on the selection criteria. Kazakhstan has enough specialists with management experience who can be involved in the board of directors.
To achieve balance, foreign directors with experience in international companies can also be involved, as there is much to learn from them. Because finding such a director within the country can be challenging.
– In your opinion, which measures included in the decree will be the most effective for increasing investment attractiveness?
– In this aspect, the digitalization of interaction between the state and business can be highlighted. The creation of a digital ecosystem, which has been talked about for a long time, is planned. There were attempts by the National Chamber of Entrepreneurs “Atameken” to create a “Government for Business.” However, this project has not yet been launched. The president has again tasked the implementation of this project with an emphasis on digitalization. This concerns state support measures, the provision of public services, and the fulfillment of reciprocal obligations by businesses.
As part of improving the business climate, attention has been paid to the protection of entrepreneurs' rights. It is proposed to decriminalize criminal offenses in the field of economic activity. Often, entrepreneurs who have committed economic crimes face harsh detentions and are held in pre-trial detention. Although the crime is economic. It cannot be compared to socially dangerous acts or crimes against individuals. For economic crimes, entrepreneurs should receive economic penalties in the form of fines and compensation for damages. It makes no sense to deprive a person of freedom.
In international practice, collateral is widely used, allowing a person to stay at home, or electronic bracelets. Entrepreneurs should not be locked up in pre-trial detention, especially when their guilt has not yet been proven during the investigation or trial. This is an incorrect approach, and the decree in this direction takes a correct step by proposing the decriminalization of economic crimes.
– We have quite good programs, including “100 Steps” and others, which describe sound measures. However, the problem lies in the implementation of these programs. Do you think that mechanisms for control and accountability are laid down in the decree as a whole?
– There is a risk that this decree will not be fully implemented, as it is designed for 5 years. Usually, the government and state bodies do not have enough “stamina” to implement programs and projects over such a long period. Often, after a year or a year and a half of program implementation, they are left to their own devices, and new ones are invented instead.
In this context, the risk of non-implementation of the decree remains. Control over its implementation remains with the president's administration. The president emphasized when announcing the new economic model that the powers for its implementation lie with the government. The implementation of the upcoming changes will largely depend on the organization of work within the government. I hope that privatization will be implemented well, as a national office will be created with the participation of external experts.
As for other points, unfortunately, in the past, we had many good initiatives, promises, and programs, but their implementation has lagged. The key to success lies in the personal involvement and responsibility of each minister. In their understanding of the importance of these reforms.