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SEC: experts' opinion
Askar Shokanov
Aigul Solovyeva, deputy of Kazakhstan Parliament Majilis
- I know about the existence of Social Entrepreneur Corporations (SEC), but I am not quite clear with their concept. When it is told that corporations provide resources and land but businesses must invest in them, I do not understand how they divide the property? And then for business people this is not a big motivation. If only for start-ups that have some great ideas, will develop a career, build roads and do something on this land…
In principle, I think that the interests of the parties represented bit contradictory. Indeed Akimats give SEC land and facilities, which belonged to the state. The entrepreneur is coming there, earns profits, which then shares with the socio-entrepreneurial corporation; part of this is given for social projects in the region. Part of their income is taken by businessman. While his main goal - to get maximum benefit. First of all he is the owner and he should clearly understand under what conditions he is invited to become a partner. Maybe this perception is more clearly defined by the law «About concessions», rather than by the bill «On the socio-entrepreneurial corporations» because there are different forms of state and business relations now. For example, privatization or concession and moreover the interest may be either public or private.
And then businessmen should have a clear understanding for rules of the game, according to which they could calculate potential income. Otherwise, they would be afraid that at some point they just will lose all profits because SEC managers are monitoring all their activities.
For me SEC is artificial mix. In fact, these corporations perform the role of intermediaries. It is hard to understand: whether they are project managers, or government representatives, or entrepreneurs. This structure is located somewhere in the middle; it is not public and not private. By all the laws of nature and other scientific formulas such conglomerates can not work. In any case they will soon collapse.
I think that the control over SEC income can be fixed for the maslikhats in the context of «About local self-government» bill, in order to ensure that the funds received are passed through the budget but they would pay taxes at the local level. Therefore, there is an interest from maslikhats deputies that the corporation will work well and pay good taxes that they could manage in the future. When the bill will be considered in Parliament, it is very important to be clear who is responsible for what, what authority every party has and who gets what money, where they go and by how much, this all is appropriate. Be sure to specify which lands belong to the regions and which - the centre. The bill has already resigned from the government. Now all these nuances will be discussed fully in parliament.
Serik Ospanov, deputy of Kazakhstan Parliament Majilis
- SEC is fine structure, they are working full second year and now, I think, are at the stage of their development. But I cannot say that everything is going well with them and this will go on until I personally see how they cut ribbons opening the commodity and sturgeon farm or base of technical support for fleet and many other enterprises in Caspian region, development of which is in hands of socio-entrepreneurial corporation.
Their work is going alright; SEC is establishing good dialogue with Mangistau and Aktau regional akimats, although their performance today is affected by financial crisis. But perhaps most importantly, that they all are hampered by lack of legal status. In their case, the cart is put before the horse. The bill «On the socio-entrepreneurial corporations» is still in Parliament. It is declared as priority and urgent, but was suspended due to merger of «Samruk» and «Kazyna» government holdings to the National welfare fund. Now SEC will be governed by this Fund.
I think the law would correct all the legal conflicts. Its adoption would add SEC credibility in the eyes of the authorities and society. It is not a secret that there were big problems with transfer of main assets by akimats to socio-entrepreneurial corporations. Local authorities felt the rivalry; this issue was even discussed on the government meetings.
Yerkanat Abeni, editor in chief of financial-investment magazine “LS-personal account”
- In different regions SEC feel themselves differently. In some areas there is an understanding by akimats that corporations - are not competitors, but aides to attract investment, launching new projects and thus creating additional jobs. After all, they remove part of the load. In many regions there are rich land resources, but they are in the province and regional Akims who are often not able to attract serious investors and ensure their participation in certain projects. If foreign company comes to region opening business in which local residents will be able to work, basically this is salvation for Akim, and then he willingly helps SEC. A misunderstanding often occurs only at the level of executers.
SEC is often suspected of corruption schemes, although it is hardly possible since the process of agreeing the drafts are very difficult. None of them could be approved without action by the Board of Directors, made up of independent directors, representatives of ministries, akimats and other agencies. All business applications are considered in terms of efficiency, many in the process are eliminated. SEC executives often complain that on the one hand they are required to fulfil many projects but on the other, Board of Directors does not approve them.
Unconditional advantage of the SEC is that in the joint venture they may own no more than 49% of its shares. That is a controlling stake and management remains with the entrepreneur. For corporations it is important not only to give orders; they have care for the effectiveness of the project. As indicators of profitability they are accountable to the Government, the Ministry of Industry and Trade, and now to «Samruk-Kazyna» government holding. That is why pushing forward unprofitable projects does not make sense.
During the liquidity crisis, when access to credit is limited, cooperation with government companies has become almost the only option for entrepreneurs. Allowing SEC purchase part of the shares, a businessman draws public funds for the implementation of the project and once he will succeed and become strong enough he could repurchase shares from SEC.
Certainly SEC needs legislative base because then the entrepreneurs will be more confident. In a meanwhile, the partnerships often arranged by private agreements. Given the frequent rotation of personnel, there is a risk that even when there will change of department director there could change in terms of contract for businessmen even though most of them are long term projects.
