ASTANA. KAZINFORM - In June, Head of State Kassym-Jomart Tokayev chaired a meeting of the Supreme Economic Council, during which he criticized local economists. As part of his working visit to Pavlodar region next month, Tokayev stressed the importance of a new economic model, the vision of which he will announce in his upcoming State-of-the-Nation Address. Below is what well-known Kazakhstani experts say on the failures in the work of economists and what the strategy of Kazakhstan's economic development should focus on.

What happens with Kazakh economy today?

Despite the World Bank's forecast of Kazakhstan’s economic growth at 3.5%, the country’s economy accelerated to 4.9% in Q1 2023, the Government says. The rise stood at 4.8% in H1 2023. The country saw the real sector growing by 4.6%, and the service sector by 4.7%. According to the Government, growth was achieved due increase in construction, trade, transport, manufacturing, data communication, and a 12.4% rise in fixed capital investments.

Expert-economist Olzhas Kudaibergenov's says, the country's real economic growth is most likely below the reported indicator. According to him, the economic situation got worse, requiring a new economic course.

«First, there are high expectations of the population, that after January 2022 events, all the problems accumulated in 30 years will be resolved. However, the situation remains the same; no significant reforms are carried out by the Government. Secondly, the economic growth and well-being of the citizens have worsened, especially against the backdrop of inflation. Amid man-made accidents, the understanding of the need for drastic measures, including public administration reform and staff renewal, becomes more acute,» says Kudaibergenov.

Is it high time to renew personnel?

Another well-known economist Rasul Rysmambetov agrees on the need for personnel renewal and believes that it is the executors that need to be replaced.

«There are a lot of good programs, and the question is whether they're implemented well. We often target on the Government - the Prime Minister, the economy minister, and the President's Executive Office. However, in reality, the entire economic policy is in the hands of the quasi-public sector, regional governors, and local authorities. Therefore, we need to change those who fulfill the plans set, but not those who offer these plans,» says Rysmambetov.

According to him, in a deeper sense, the issue is that there is no clear distribution and assignment of functions to the bottom.

«The last strategies are sound and well-written. However, their implementation is at the zero level. To my mind, the reason is lack of key performance indicators» says the expert and adds that there is often no clear understanding of who performs it [strategy - editor].

In general, he believes that a lot of laws and programs need to be completely rewritten. Half of the projects launched have no correct business plans or financial model; working places are created within two or three days.

«A lot of what we did previously - programs, instructions, laws, many of these need to be revised. Many of our laws are outdated. Instead of writing new laws, what we do is creating bad and ineffective laws based on old ones that are perceived differently in the regions and which are not performed... So, many basic laws need to be changed,» says the expert.

What to focus on?

As another economist Arman Baiganov says, the new economic policy needs to focus on two areas, with human capital as the first one.

«In my opinion, the new economic policy shall focus on human capital development, achieving greater productivity and efficiency of labor in different sectors. Speaking of sectors, first of all, I mean agriculture with a transition from extensive to intensive production through increased productivity, implementation of modern agricultural technologies, and development of a cluster approach. In addition, we need to develop agricultural processing to receive a high value-added end-product. Our country (and other states) face high food inflation, high imports from neighboring countries, and displacement of our major sale markets,» says the economist.

The second area of focus, in his opinion, is digitalization.

«This is, first of all, digitalization of goods-money relations. Here I mean gradual transition to the digital tenge, which will let us tackle many problems in fiscal policy, fight with grey economy and corruption,» Arman Baiganov says.

Candidate of Science in Economy Marat Kairlenov expects that the new approach will let reduce excessive involvement of the state in economy.

«This is going to become a new approach. We should change the functions and the role of the state and maintain this change of structure in economy in a right direction. We need to focus on private sector. Previous attempts to modernize this approach in 2014-2015 were not enough. Therefore we need to take drastic measures – to abolish state holdings and eliminate Government’s excessive involvement in the economy, because economy has got into a tailspin. The volume of GDP in US dollars has been falling in the past 10 years. The economy is being restored, but we can say that it was a lost decade,» the expert complaints.

By the way, in his latest State-of-the-Nation Address as of September 1, 2022, President Kassym-Jomart Tokayev noted that the Government would continue reducing its involvement in the economy.

Marat Kairlenov spoke also on some issues requiring utmost attention.

«First of all, this is monopolization of markets. Some companies have de-facto monopolized numerous markets, so there is no competition there. These monopolies should be destroyed to create conditions for normal competition. In my opinion, this is a key issue we should focus on. Secondly, this is protection of entrepreneurs’ rights, fight with illegal takeover, compliance with law – these are very important issues which contribute to the investment attractiveness of a country and business development opportunities. These issues are of paramount importance,» notes Marat Kairlenov.

Economist Zhanybek Aigazin believes that the problems in economy are linked to its structure and orientation.

«Our economy is oriented on the use of the so-called natural resource rent (natural resources). We export raw materials and earn money. The added value is obtained from further processing – this is an axiom, but we do not process raw materials deeply. We have no large processing capacities. It’s cheaper for us to export. Due to this we have more or less provided the domestic market with foodstuffs,» the economist explains.

On the other hand, he says, it is uneasy to set up a new production.

«After all, we border two economic giants with a lower net cost of production, which is explained by the scale of production, conditioned, in turn, by solvent demand. The population of Kazakhstan is approximately seven times less than in Russia, in terms of GDP – it is 10 times less. Correspondingly, the unit cost per unit of production is higher in our country. Any investor, when launching production, is guided by the satisfaction of demand in the domestic market and solvent demand of the population, which in turn impact the net cost and the final price. There is a hundredfold difference with China. In this regard, mass-produced goods will never be profitable in our country, I'm talking about B2C. It is cheaper for us to import,» the speaker notes.

According to him, per capita GDP in Kazakhstan in nominal terms is about 10,000 US dollars, as it was 5-7 years before. In 2013, per capita GDP was 13,800 US dollars, due to surging oil prices and high tenge rate. Aigazin says, the peak period when the country earned from high oil prices has already passed.

The experts note that over these years the country has adopted numerous programs on forced industrialization, but they turned out to be ineffective.

«In fact, the state provides tools and support. But a few goods only are exported. We need to work according to a plan and constantly. All legislative acts must be implemented, and nepotism shall be eliminated. In the book How Asia Works Joe Studwell describes how Japan, Korea and other countries of Southeast, East Asia raised their industrialization and what they put stakes on. They constantly selected, increased support and put stakes on some certain enterprises. Our decision makers probably read this book; it is quite simple to implement its main principles. But to fully implement all the reforms, we need electivity of executives, even judges and governors of districts and regions. They are the links in one and the same chain,» the expert emphasizes.

He adds that laws must be inclusive and proactive, and privacy protection must work in the country. The so-called principal-agent contract must be implemented, where the people is the principal, and the agent is the executives employed by the state. This agreement must be implemented fairly, without corruption, because the agent has an access to resources. He has more information than the principal.

According to experts, until the key issues are solved, the current situation will keep negatively impacting the country’s investment attractiveness, which in turn will limit the opportunities for economic growth.

By Rabiga Nurbay,inform.kz