Government measures to further stimulation of small entrepreneurship

Production output by the SE subjects

Production output by the SE subjects in the republic for January 1, 2013 was 2 819 billion tenge, including by legal entities of SE – 1551, 8 billion tenge (50% of the total), by individual entrepreneurs - 741.5 billion tenge (26.3%) and by farms - 525.8 billion tenge (23.7%).

 

 

Picture 5. Production output by the SE subjects from 2008 to 1 January 2013 (billion 

tenge)

Note – made by the author on the basis of Statistics Agency

 

The indicator of production output grew significantly until 2007, but in 2008 this figure dropped slightly due to the global crisis. So in 2007 the figure was - 2 066,3 billions tenge, and in 2008, fell to 1905,5 billion tenge. In 2012, compared to 2008, this figure increased significantly by 32.5%. It can be concluded that there is a gradual increase in production output by SE subjects from year to year.

The greatest number of products produced SE subjects operating in Almaty - 478.3 billion tenge. (17%), Astana - 283.5 billion tenge. (10%), Almaty Province- 239.7 billion tenge. (8.5%) and East-Kazakhstan Province – 226,8 billion tenge (8%). The worst of this indicator are Kyzylorda Province – 62.7 billion tenge(2.2%) and Zhambyl Province - 86.2 billion tenge (3.1%).

There was increase in production output (in comparable prices) by SE subjects in almost all areas in 2012 compared to 2011. So, in Akmola (1.2%), Aktobe (by 0.1%), West Kazakhstan (0.1%), Zhambyl (0.2%), Kostanai (0.4%), Kyzylorda (2.3%), North Kazakhstan (0.5%), South Kazakhstan (0.2%) Provinces and Astana (by 0.1%). The decrease observed in Atyrau (0.6%) and Mangistau (1.0%) Provinces. In Almaty, Karaganda, Pavlodar and East Kazakhstan and Almaty changes were observed.

 

 

 

 

 

 

Increase (decrease) of the main indicators, characterizing the development of SE (by region).

Picture 6. Increase (decrease) of the main indicators, characterizing the development of SE on 1 september, 2012 to the same period of 2011 in % (by region).

Note – made by the author on the basis of Statistics Agency

 

According to the Statistics Agency, the distribution by industry share of total products produced SE subjects for the year 2012 is as follows: the industry accounts - 6.7%, wholesale and retail trade, repair of motor vehicles and motorcycles - 28.2 %, construction - 13.6%, agriculture, forestry and fisheries - 20.2%, real estate - 4.8%, and other industries - 26.5%.

Comparative analysis of small entrepreneurship in Kazakhstan with the developed countries shows noticeable lag in such indicators like the contribution to GDP and employment, despite the fact that, in Kazakhstan subjects of small entrepreneurship (SSE) represent more than 95% of all businesses, as in developed countries. Thus, the share of annual production volume of SSEs in developed countries ranges from 43% (Canada) to 57% (Germany) of GDP. In Kazakhstan, this indicator  is lower in 3 times and comes to 15%. What about the share of the population employed in the SSE sector in total employment, in our country this indicator is also much lower than in developed countries. From 47% (Canada) to 75% (Japan). When it’s compared with indicators in Russia, they are about the same. Datas are presented for 2011 year.

 

Picture 7. Comparison of SSE macroeconomic indices between developed countries, including Kazakhstan

Note – made by author on the basis of worldbank.org

 

The structure of the SSE sector in Kazakhstan is as follows: 41.1% are employed in the trade, while in developed countries the share of trade at the level of 18% (Canada), 16.4% (Norway). It can be concluded that existing structure is not conductive to large-scale diversification of the economy. There is a discrepancy with the developed countries in agriculture and industry: in Kazakhstan, 23.4% and 2.2% in Canada - 4.62% and 6.1%, Norway - 1.46% and 6.6%, respectively (Figure .7).

Picture 8. The share of SE in term of industries in comparison with foreign countries on December 1, 2011

Note – made by the author on the basis of  GEP (General Entrepreneurship Monitoring) data  and Statistics Agency

 

The causes of industry disproportion:

• quick returns from investment in trade is guaranteed (the payback period of investment in the trade is between 0.5 and 1 year in the industry from 3 - 10 years);
• high level of initial capital in the industry (according to GEM, it is about above 5 mln tg, while in the trade it starts from 20 thousand tg);
• Lack of sufficient own resources;
• High risk of capital investments in the industry.

Thus, we can conclude that in all the figures, and in particular the proportion of contribution of SE in the country's GDP, the number of active SE subjects, number of active working population in SE and the production output of the subjects, there was dynamic growth over the last 5 years. It is also important to mention about the global financial crisis (2008 - 2010), which hit the economies of many countries, including the economy of Kazakhstan. This explains the slight reduction indicators relating to this period, as under the influence of the crisis has decreased the activity of entrepreneurs. But as we see from the graph 1,2,3, there is a gradual increase in the number of subjects of the MP, the number of employed in the magnetic field, and the output of  SE subjects from year to year.

 

2.3 Government support of small entrepreneurship in Kazakhstan.

Formation and development of entrepreneurship has always enjoyed great attention and support from the President of the Republic of Kazakhstan Nursultan Nazarbayev. Government support of small entrepreneurship in Kazakhstan began in the period of formation market economy in country. First regulatory document, laying the foundations of formation and establishment of private enterprise in the Republic of Kazakhstan is the Law of the Republic of Kazakhstan dated July 4, 1992 N 1543-XII. " On protection and support of private enterprise." This Act provided for the basis forms and methods of protection and support of private enterprise. It fixed policy of refusing direct government intervention in private business, the maximum freedom of private entrepreneurs, protection of trade secrets. Under this law, state support  realized by force of favorable taxation , the creation of favorable conditions in the foreign economic activities, public information support, funding for the development of private enterprise from the fund support.

Implementation of state programs of development and support of SE in the period from 1992 laid the foundation for the formation and development of private enterprises in the Republic of Kazakhstan. These programs include: the Law of the Republic of Kazakhstan dated July 4, 1992 N 1543-XII “On protection and support of private enterprise”, the State program of support and development for 1992-1994 and 1995-1996, the Law " On state Support of Small Business" by 19.06.1997, the Law " On amendments and additions to some legislative acts of the Republic of Kazakhstan, on the simplification of registration of small businesses" from 19.06.1997, and others. Their implementation laid the basis for the formation and establishment of small business in the Republic of Kazakhstan.

Currently, all business activities regulated by Law "On Private enterprise" from January 31, 2006, which systematize the rules adjusting business activities, and combined them into a single legislative act. In place of the numerous acts that regulated entrepreneurial relations, was passed one legislative act, which established general principles of the private sector in Kazakhstan.

Since Kazakhstan gained independence, there has been developed and implemented five state program of development and support: 1992-1994., 1994-1996., 1999-2000., 2001-2002., 2004-2006., for given instant the program realized by the state is called "Road Map - 2020". Analysis of government support programs and business development 1992-1994., 1994-1996., 1999-2000., 2001-2002. showed, that their implementation had a positive effect on the formation and development of the business sector in the country. Was created a competitive market of  goods and services and was identified institutional measures for support and development of small business. During the market reforms the business sector took a prominent place in society. Reached the main strategic goal: the ability to engage in business became a real part of the constitutional rights of the citizens of the republic, for which the state made indispensable conditions. [34]

Small entrepreneurship has a major impact on the development of the national economy, social development, and increase the number of employed workers. Subjects of small business in certain areas play a major role in the number of employees, volume produced and sold products, works and services. As a result, small business was defined in Kazakhstan as an important sector of the economy. Comprehensive support of small business is a priority of the government policy.

Sequence and systemacy of adopted laws of support and develop the business in the Republic of Kazakhstan helped to create a positive environment for the dynamic development of entrepreneurship and stimulate it, for taking it in a decent niche in the economic sector of the country.

The following main stages of formation of legislative support of small business in Kazakhstan:

• December 11, 1990, the Law of the Kazakh SSR "On freedom of economic activity and business development in the Kazakh Soviet Socialist Republic," which was one of the first acts, which defined the basic legal, economic and social conditions for free enterprise.
• July 4, 1992, the Law of the Republic of Kazakhstan "On the protection and support of private enterprise", which found that the government provides maximum freedom of private entrepreneurs, protection of trade secrets and responsibilities of government agencies for violations of the rights of private entrepreneurs. The law confirmed the position, on the refusal of the state to intervene directly in a private business.
• Government program of support and development for 1992-1994;
• Government program of support and development for 1995-1996;
• March 6, 1997, was passed the Decree of the President of the Republic of Kazakhstan "On measures to strengthen government support, and the development of small business." Support and development of small business proclaimed a priority area of government economic policy. The main tasks of small business named in the first place, employment, the solution of their social problems and development of labor, filling the consumer market with a wide range of goods and services. The decree set out specific measures to support small businesses: creation of small business development fund;  construction the centers and incubators of a small business, benefits in the field of tax and customs duties, etc.
• - June 19, 1997, was adopted the Law of the Republic of Kazakhstan "On Private Entrepreneurship" and the Law of the Republic of Kazakhstan "On government support of small business," which defined the subjects of small businesses with number of employees not more than 50 persons, and the total amount of assets on average for the year up to 60000 - times the calculated index, as well as the basic principles and measures of government support of small business;
• - July 7, 1992 Decree of the President of the Republic of Kazakhstan "On  priorities and regional programs of support and development of small business in the Republic of Kazakhstan": set priorities in the development of small businesses by type of goods and services: the creation of new and development of existing production of consumer goods, substitute imports of construction materials, small items of equipment, the development of services, etc.
• December 31, 1998, was approved the Government program of development and support of small business in the Republic of Kazakhstan for 1999-2000. The main results of the program by the end of 2000 defined: the growing number of subjects of small businesses by the end of 2000 to 500,000, an increase in the number of employees in small businesses up to 2 million people, the percentage of small businesses in the country's GDP by the end of 2000 - 15% ;
• January 19, 2001 N 77 Resolution of the Government of Kazakhstan on the Concept of development and support of small business in the Republic of Kazakhstan for 2001-2005. [35]

Sustained actions to support small businesses nowadays is one of the priorities of the government policy of Kazakhstan. In January 31, 2006 in the Republic of Kazakhstan was adopted a completely new law "On private enterprise”. This Law has opened a new page in the reform processes of relations, arising in connection with the physical and non-state legal entities of private enterprise, defined the basic legal, economic and social conditions and guarantees for the freedom of private enterprise. The law, for the moment, is the main normative document, which regulate the small business in Kazakhstan.

Also, one of the most important normative document is “The Tax Code of the Republic of Kazakhstan”, which was entered into force on 1 January 2002. There is a section for the small business “Special tax treatment”, which determinate simplified procedure for the calculation and payment of social tax and corporate or individual income tax.

Thus, in the Republic of Kazakhstan, the legislative base for the development and operation of small businesses, in general, is formed. At the present stage, one of the main problems is the full realization the established regulations in practice.

The realization of these measures of government support made it possible to achieve some results: increased the number of subjects of small business, increased the production of their products, appears new work places, etc.

It can be concluded that the government and various public organizations do a lot to develop small business, and to satisfy  the needs of potential and existing entrepreneurs. "A strong business - a strong state," this is the thesis of all the Messages of President Nazarbayev, the majority of his speeches devoted to the economy.

In the early days of independence, when the SE representing the majority of the population is something far removed from their everyday reality, President Nazarbayev was the first, who laid the foundations of policy of this sector. The leader's decisions actually made diversity of goods and services, which we see today. Strengthening the role of non-governmental organizations in the support and protection of small business; priority development of the manufacturing sector, a gradual transition from state regulation to  small business self-regulation, the establishment of partnership "state - business associations" - such theses were heard in the fundamental speeches of the national leader . Message of the President of Kazakhstan on September 30, 1998, the program "Kazakhstan - 2030" President's Message "The stability and security of the country in the new century," Message "to the free, efficient and safe society" on October 24, 2000, the Message from September 3, 2001 - these and many other documents laid the foundation of our relationship to the SE.  

Head of state paid special attention to support and development of small business in the years of crisis. For example, in the President's Message from 2009, "Through Crisis to Renovation and Development" assigned the task of increasing the economic activity of small and medium-sized businesses by providing financial support to businesses, elimination of administrative barriers. "We face great challenges to overcome the crisis and preparing future economic growth," - said the president. In the Message in 2010 he Head of State marked an ambitious but achievable goal - to bring the level of small businesses in the total gross domestic product to 40% by 2020. In the last message to the people of Kazakhstan, Nursultan Nazarbayev also noted the need to strengthen the SE in every way, gradually solving the following key tasks. Among them, he called the decline in the tax burden, the legalization of property and assets, facilitating access to credit, simplification of administrative procedures and sanctions; protection from bureaucratic discretion and control inspection agencies, the creation of regional centers to support small and medium-sized businesses, advanced training, creation of a centralized accounting.

In 2010 - 2011 years the legislative and financial support of theses of President significantly  become stronger due to a number of programs and initiatives. First of all, in January 6, 2011, Nursultan Nazarbayev, signed the law "On Government Control and Supervision in the Republic of Kazakhstan." Henceforth controlling units are prohibited to interfere in the activities of SE without reason. The new law directed to reduce the administrative burden on businesses. [36]

Main coordinator of government support SEs in the Republic of Kazakhstan is the Ministry of Economic Development and Trade through the Department of Business Development and the Ministry of Industry and New Technologies. The line of organizations function on the base Ministry of Industry and New Technologies, which are in charge of different areas of science and technology and innovation development of SMEs. They are the National Innovation Fund (concerned with innovation and venture capital), Center for Engineering and Technology Transfer (responsible for the transfer of technology), the Investment Fund of Kazakhstan (in charge of public investment in the high technology sector) and the Corporation for export Development and Promotion.

In addition, the Government of Kazakhstan has developed and implemented a large-scale Government Program on forced industrial-innovative development of Kazakhstan for 2010 - 2014 years. One of the mechanisms for the implementation of this strategic project is the budget program for the development of entrepreneurship "Business Road Map - 2020", which was developed and approved April 13, 2010. The purpose of the program is to ensure sustainable and balanced growth of the regional business in non-oil sectors of the economy, the preservation of existing and creation of new work places. The document is implemented in four areas: support for new business initiatives, improvement of the business sector, support for export-oriented enterprises and strengthening entrepreneurial capacity.

During the implementation of the program in 2010, by the first three areas of the Program, as at 11 November 2012, to backing were approved 2266 projects for a total sum of 615.304 billion.

In the first area were approved 1875 projects totaling $ 248.38 billion. Sponsorship Agreements signed (hereinafter - SA) for 1535 projects for a total sum of 214.11 billion.

The second direction - 223 projects totaling 167.497 billion. Signed AS to 176 projects for a total amount of loans 144.07 billion.

In the third direction - 168 projects totaling $ 87.19 billion. Signed AS to 136 projects for a total amount of loans 91.26 billion.

The regions with the highest number of approved for backing projects  in the three directions of the Program include: Pavlodar, Karaganda, Almaty and Aktobe region, accounting for about 35.1% of the projects (795 projects).

The smallest number of approved projects are in Atyrau (75 projects) and Mangistau (57 projects) area. [37]

 

 

Picture 9. Realization the program “Business Road Map - 2020” by areas, by regions (projects)

Note – made by the author on the basis of Statistics Agency

 

The greatest number of projects of the "BRM - 2020" is implemented in the manufacturing industry (48.7%). Health care and social services accounted for 17.9%, transport and storage-12, 8%, agriculture, forestry and fisheries, 10, 3%, education and services for accommodation and meals accounting for 5.1%.

 

Picture 10. Realization the program “Business Road Map - 2020” by industries (%)

Note – made by the author on the basis of Statistics Agency

 

Socio-economic impact of the Program conclude in following points: 

• saved 132 thousand work places
• created more than 35 thousand new jobs.

It should be noted that the fourth line of the "Business Road Map - 2020", which is called "strengthening entrepreneurial capacity" includes "support for new entrepreneurs (start-up projects)," "support service business", "training top Management ", project" Business Communication "," training labor on qualifications in the labor market, which will be in demand". In the context of the fourth direction was trained over 30,000 new entrepreneurs, more than 20 thousand businessmen were provided 80,000 services, 420 managers of SEs have been trained in the "Nazarbayev University". 1123 people have been trained under the project "Business Communication", of which more than 64 entrepreneurs received training in enterprises in Germany, 58 - in the U.S. [38]

It should be noted that from 2012, introducing new components, "superior seniors", "Business Nasihat" and training of employees of banks and akimats.

The realization of component "superior seniors" is aimed to attract  highly skilled foreign professionals with experience, both in the process of conducting business training in the first phase of the Project "Business Communication" on the territory of Kazakhstan, as well as to consult the participants of Program at the enterprises to implement new management , technologies of production and equipment, and staff training.

The component "Business Nasihat" is directed to carry out the informational and explanatory work, popularization of success stories of entrepreneurs and successful projects in the context of Program, explanation in legislation and regulation in the entrepreneurship sphere, propaganda of entrepreneurship ideas, realization of informational activities, etc.

The component "Training of employees of banks and akimats" suppose, carrying out of trainings under the terms of the Program "Business Road Map-2020" and the practical skills of financial analysis of the projects.

Ultimately, it is believed in the government, "Business Road Map-2020" will lead to reduction of prices of the loans for a total sum not less 400 bln tg annually. It is expected that the share of non-oil exports will increase to 40% of total exports.