SOCIAL ENTREPRENEUR CORPORATIONS (SEC) REFLECTION OF OUR REALITY

Abu Aliyev

For the last five years figuratively expressed Kazakhstan gush forth with reformatory ideas goal of which is to enter the club of advanced economies of the world. Some even have hastened to declare similar Kazakhstan projects as the «know-how». But while the majority at first sight good undertakings, in reality cannot withstand the tests for durability, at least for now.

Let’s take for example the Program about entry of Kazakhstan «to 50 the most competitive countries of the world». And so, three years back when the first persons of the state solemnly presented the plan our republic occupied 51st line in global tables of ranks. It was required to just make a step - and precious dream would be achieved. But considering 2006 report Kazakhstan was lowered five positions downwards, 2007 we have fallen up to 61 place, and this year even below - 66th line.
Similar stamp over time is observed on another widely advertised but absolutely stupid project as the “30 Corporate Leaders”. It is remembered, replying to the question - why 30? - Our Prime Minister could not answer anything but: “because 20 - is not enough and 40 - is too many”.
Why this happens? To whom it is all needed? Who whispers such innovative ideas to the President? Or, perhaps, someone sabotages the instructions lowered from above? We shall try to understand a situation using example with social - entrepreneur corporations (SEC). First time this promising idea was sounded in the message of the president dated March, 1, 2006 and later put into the basis of strategy of RK territorial development till 2015.

PLAN IS NOT ENOUGH
In the original, birth to the new child of the market was given for revival of economic development of regions and gone through three stages. First – capitalization on what the State gave 14 billion tenge. The second - transfer of right to deposits, land, objects of the movable and immovable property and search of potential investors. Third - an output on a profitable level and earning money on realization of projects, first of all - social. As a whole, corporations were called to promote increase of competitiveness of regions by introduction of mechanisms of self-organizing and resources mobilization. Advantage of the SEC appears that they can together with private business get into various projects using state actives, mostly: money, state objects, the land and bosom. Thus, the mechanism of state-private partnership would be started.
It was solved that first heads SEC will be appointed directly by the President. According to the plan of developers, it would increase weight of the corporation meaning closely cooperation with oblast Akims. The unique founder of new formations became the government through which decisions all actives should be transferred directly to authorize SEC capital. «One of the basic moments is SEC status as the status of the national company. Simultaneously they carry the status of holding on management of the state actives and regional institute of development», - said one of SEC «parent» Vice-minister of the industry and trade Askar Batalov.
As a matter of fact, formation of social – entrepreneur corporations became logical continuation of the introduction of «corporate management» to the Government. First key of economy management were concentrated in State Holdings hands, and the following step became introduction of the same principles to the local authorities. If «Samruk Kazyna» is doubling role of the central government, SEC by analogy turned to the alternative Akimats which, as well as State companies and State Holdings pick up the functions on management of business in branches, and the regions as well.
In other words, the government and akimats cut themselves from the economic block of questions for the reason to do all the rest.  
Since it passed two year and what we have now? From the seven created SEC only three are proper formed («Sary Orka», “Batys”, “Ontustyk”, and the others («Tobol», «Ertys») just on the way. And there are many reasons for that.

MORE QUESTIONS THAN ANSWERS
The majority of officials, state employees, and representatives of enterprise circles are not clear about essence and the purposes of these regional institutes of development. First, what is the difference from the akimats and what they can improve in interaction area of the state and private business in details?
SEC already got the part of the property of a society and Akimats powers. Factually, those from State Bodies went to the state legal person. But whether it is made uniformly with all 7 or each of these cases goes differently is the big question. It is no secret, what much in realities of Kazakhstan depends on as far as «influential» Akim and pro active the head of the appropriate SEC? Anyway, large powers of the SEC, in particular, the finance control, distribution of the lands areas, negotiations with investors, and the analysis of economic programs should disturb Akims. If the corporation will make so important decisions what remains to the local authorities? Even transfers which the government directed to the Akims earlier now will be under SEC control. What is the Akims role now?

The problem is not the SEC idea, and that it is not worked out properly and does not take into account mentality of our officials or, vice versa? All goes under the plan?

WEAK LEGAL BASE
To the moment SEC creating mostly in all regions - legislative bases have not prepared that. There are questions of alienation of the state property to the private property, regulations of the mechanism of distribution of SEC profit and further investment in social projects, accumulations of monetary resources of corporations with the help of establishment of corporate social fund till now are solved as the noncommercial legal person with the appropriate structure of management, modification in RK Tax code about introduction of concessionary terms of the taxation for SEC projects. And such list the law questions is very long. Cart has been put ahead of the horse. 

When corporations are created artificially and one of the sides does not want to work with another – there is not any positive result from such cooperation.

PULLING OF THE ROPE
Clearly, that idea SEC already on a stage of development has programmed painful conflicts between Akimats and corporations. In the ministry of the industry and trade ascertain the numerous facts against SEC steady development. According to the Ministry, the basic difficulties at the present stage are connected to misunderstanding principle of division of fields of akimats activity and corporations, though both those – directly nomination of head of the state.
As a whole, SEC from the point of view of regional governors - an alien body which applies for a role of the second and may be first economic authority in the region. Because, those assets and financial streams on which the local elite was traditionally fed there depart, thus but also opportunities operatively to fill up local budgets. Second, personnel SEC was formed in the centre that conducts to that local elites again feel like restrained and deprived channels of promotion.
The government considers, that basic SEC mission is the realization of investment projects on which there is not enough funding in the regions. Missing means are supposed to be taken from business. And the part of the profit will go to the social projects. And these purposes become also a source of conflicts.
At last, it is available complexities because of «incompatibility» of SEC borders and local authorities as many SEC territorially cover some regions - areas. And each area got own priorities and the «painful points «. Who is charge here?
The idea of creation «above» administrative-territorial structures is not new.  In particular, Soviet time got the sovnarhoz. They were called «to moderate» social and economic authority of administrative and territorial units. And precedent with a rising of virgin lands when under pretext of economic feasibility and some areas of Northern Kazakhstan hardly did not go under jurisdiction of RSFSR? And we shall recollect the recent past when at branch of city of Almaty from area there were many problems with that to whom that is due at whom what circle of powers. Now it is necessary to solve even more complex problem meaning contents and task.   

SHORTAGE OF THE CAPITAL
For regional companies successfully to solve the problems effectively should become large players on a home market and in the short terms. But the main precondition - capitalization chronically does not get. Partly it is connected to cost of those actives which are transferred SEC directly on places, partly - financing from the budget. Two more problems appear here?
So, at sharing of the state actives many Akims have providently removed liquid objects, for example, objects of the real estate, before SEC transfer that has resulted in impossibility of stable and profitable business dealing by these enterprises. Besides, local agencies create the enterprises with the functions similar to SEC functions. Here, the cost of state active, transferred SEC was overestimated.
There are many investment projects which could enter to SEC projects, but domestic business requires first of all not the ground or lands but financing. The majority of SEC heads complains, that have received from the centre 1-2 billion tenge by accommodation of shares, on realization of large objects of such sums obviously not suffices and to spend them for a plenty of small projects economically short.

The deputy director of the Centre of the analysis of public problems, the economist Kanat Berentaev: Such amount of defects in many directions is conducted privately, without attraction of experts and without any scientific - methodical maintenance. Besides, acceptance of such program documents about future of the country passes without discussion in Parliament. The Government puts Parliament before the fact when any modification in these documents practically is already impossible.

WHEN THERE ARE MANY SHEPHERDS, THE CATTLE DIES FOR NOTHING
Something similar happens in small business area in the regions when the former duet «Akimats – Small Business» has now developed into trio «Akimats – SEC – Small Business». Certainly, mutual relation of the state with businessmen was not ideal even before. However with SEC creation any essential decisions on simplification of activity of business, restriction of red tape were not be accepted. Even if we look at structure of board of SEC directors in the form of joint-stock company, there are no representatives of business circles. Speech while goes only about redistribution of powers inside a management system, instead changing of rules of game between state bodies and businessmen.
A number of experts have assumed that SEC can be additional element of corruption and washing up of capitals at all level of regions. Is there some positive feedback for small and average business from SEC?
Let’s present only one small episode: For example, if the legal or physical person required the ground area, it addressed before with the appropriate inquiry in local authorities. It was rather bureaucratic procedure with a lot of nerves and time. And now, with SEC creation it became even more complex and unpleasant. The matter is that Akimats earlier independently considered decisions like that. Now local officials preliminary are obliged to consult with SEC. And only in case the required ground area is not necessary akimats have the right to comply the request of the applicant. In general, this is a diarchy - a piece which at all times gives negative result, especially, if to add here corruption tendencies in sphere of allocation of the grounds and uses of resources.
There are also others spheres of SEC interaction and akimats, as education, public health services, culture, affairs of youth, employment. For the part overwhelming them by definition can not be solved, without the appropriate economic and financial levers. And as far as local authorities to deprive with similar tools and SEC will be engaged in the direct duties - rise by growth of regional economy, who will be responsible for everything else?

WHAT IS THE RESULTS?
Perhaps, authors of idea on creation of social – entrepreneur corporations were guided by noble purposes to give development of regions, to promote small and average business, and thus start to solve social and other problems. But one thing is the theory, and absolutely another realization in life. Practice shows, that the ideas which have been given in calm official heads and separately from the process of the real economy, without taking into consideration opinion of all interested sides, do not bring frequently desirable results. And sometimes leads for the big cataclysms. These are only few examples so far: collectivization 1930, «a corn epopee» Hrushev, an irrigation of the rice and cotton plantations, turned for Aral Sea exhaustion and many other things. Everybody knows results of that.
Thus the fact of birth of the SEC initiative naked deep problems of executive authority-  both, central, and local which are not capable to solve the problems facing to them. The first question is chronic deficiency of qualified personnel, backward mechanisms of regulation and management of a regional economy, often akims change with traditional staffs changing, etc. And instead of solving these akimats issues, they raise the additional bureaucratic device that hardly corrects real affairs.    
Speaking on a recent Anticorruption forum in Astana, President Nursultan Nazarbayev has complained, that now struggle against corruption holds severe bodies like the Ministry of Internal Affairs, Agency on struggle against corruption, Office of the Public Prosecutor, Financial police, but real results still  is not visible. And what the main state body to ask? Whether will comprehend the same fate with the regions when SEC and akimats start to push each other? To adhere the logic of former decisions there is a time to create some new body.