Expert wants Kazakhstan's government to reduce its share in quasi-public companies

The government was suggested to reduce its share in quasi-public companies to 50% or less / Kursiv.Media

According to Kuandykov, head of the Jusan Analytics research center, the state’s share in quasi-public companies should be reduced to 50% or less, with the exception of natural monopolies.

«The government has to cut its share in the national economy. The recipe for this is quite simple. We need to cut the state’s share in quasi-public companies to 50% or even less, except natural monopolies,» the expert said.

There are 29 institutions that have been established with the aim of supporting small and medium-sized businesses in Kazakhstan. As a result, this has led to a distortion of market realities, Kuandykov noted. He suggested that the state should cut subsidies to the economy as much as possible and just facilitate small and medium-sized businesses in receiving loans through express bank guarantees. At the same time, any business that is going to get a loan should apply to commercial banks for that.

In order to simplify the lending process, the expert suggested creating a national scoring system, which would improve the interaction between companies and banks when there is no need for businesses to pass through the credit review process over and over again.

This system, if created, must be focused on the assignment of credit ratings to small and medium-sized businesses.

«This system should rely on credit history, which is already the main source of information, companies’ transactions, information from the databases of the state revenue committee and fiscal data operators, as well as any other information that might be useful for a credit rating of a certain business. This may also include financial reporting, the way how a company treats its business obligations and so on,» Kuandykov highlighted.

Jusan Analytics has analyzed the lifecycle of 38,800 small businesses in Kazakhstan that were opened in 2017. About 3,200 of these companies were closed within the first year of operation, followed by 75% more businesses during the second year of operation. As a result, just 18% (7,000 businesses) of companies opened in 2017 survived the hardship of reality. On the other hand, about 1,200 of these companies decreased in size and only 497 companies reported some growth. The survival rate for businesses in Kazakhstan is quite low when compared to the world on average, where 50% of companies stay afloat after five years of operation in the world on average, according to the expert.

Kuandykov believes that this situation isn’t good for those who are just going to join the labor market in the future. This is the result of a baby boom in the early 2000s. At the time, the government reported a higher birth rate throughout the country with 400,000 babies born per year over the past five years in a row. In the next five years, about 1.3 million people will need to be employed, and in the 2030s more than two million young people aged 20 to 25 years will be seeking jobs. According to the expert, creating new jobs for all these people is the biggest challenge small and medium-sized businesses must be ready to address.