New methods of domestic products promotion in foreign markets proposed by experts

Kazakhstan’s export has been on the decline since 2013. The reason is that the main commodity that our country previously successfully sold abroad – raw oil – has ceased to be in demand in the new economic conditions. In this regard, in his regular message to the people of Kazakhstan, President set the task of reorienting to non-primary exports, doubling their share by 2025. Possible ways to achieve this were discussed by the representatives of the expert community at a round table in the Institute of World Economics and Politics under the Foundation of the First President of the Republic of Kazakhstan – Elbassy.

Seven export barriers

Development of Kazakhstan's export potential, according to representatives of the Center for Strategic Elaboration and Analysis of the Executive Office of the President of the Republic of Kazakhstan, should be considered in the context of the general business climate in the country. Deputy head of the center Olzhas Zhorayev made a report naming seven specific barriers that prevent domestic entrepreneurs from consolidating their positions not only in foreign markets, but also home.

The first is the imperfection of the tax policy. Despite the fact that the fiscal burden on business in Kazakhstan is significantly lower compared to many developed countries, generally, the state tax policy is far from ideal. In order to report to the tax authorities, domestic entrepreneurs spend a lot of time, which they could otherwise invest in developing their businesses.

"It takes Kazakhstan entrepreneurs 178 hours to collect, calculate, fill out and send all the tax forms. I think that with the right approach, it would be possible to conduct a good optimization of the procedure. For comparison, in Canada, entrepreneurs spend 131 hours on taxes, in Norway – 83, in Switzerland – 63, and in the Emirates – only 12 hours per year," said Olzhas Zhorayev, Deputy head of the Center for Strategic Elaboration and Analysis at the Executive Office of the President of the Republic of Kazakhstan.

The second is the complex permit obtaining procedures. In order to register a new enterprise, a new businessman in Kazakhstan needs to go through five licensing procedures. Theoretically, in terms of complexity, they are quite in line with OECD standards, which our country aspires to, and by the terms – officially no more than 9 days for registration – we are even ahead of some countries in Europe. However, in practice, it is often not always as simple.

"The inspections of the President’s Executive Office have revealed the facts of delays in registering of land plots in certain regions up to a year and a half or two," said the speaker.

The third is access to international markets and the quality of transport and logistics infrastructure. It, too, leaves much to be desired in Kazakhstan, according to the experts of the President’s Executive Office. Transport costs in some cases, as practice shows, reach 30% of the cost of the final product of exporting entrepreneurs, which in turn Does not allow them to compete in international markets.

The fourth is the imbalance between import-export operations. Whereas in developed countries the customs procedure is the same for both exports and imports, there’s often a situation in Kazakhstan where only imports are stimulated, and exports, on the contrary, are in some ways impeded.

The fifth is excessive state regulation of businesses. Despite the fact that the privatization of enterprises is in full swing in Kazakhstan at the moment, the number of companies with state participation does not decrease. State-owned enterprises in our country are present in more than 20 sectors, while in OECD countries this figure is no more than 15. In this respect, Kazakhstan is comparable to India, Indonesia, Venezuela and China in terms of the level of control over economic processes in the country.

"The second wave of privatization is underway, but there are also questions, because in parallel with the privatization there are new state enterprises being created. I will give examples. Within the scope of 2016 privatization, 151 objects were privatized, while in 2017, this figure has already reached 154. At the same time, the antimonopoly agency approved 192 new enterprises with state participation in 2016, and another 60 since the beginning of 2017," noted Olzhas Zhorayev.

The sixth is the availability and effective allocation of financial resources. Experts believe that promising start-ups in the country are insufficiently supported, while large companies now and then receive funding from the state.

"Since 2007, state-owned enterprises have received 15 times as much funding as all small and medium businesses in the country. At the same time, less than 1% of budget funds was allocated to the funding of the innovative projects for the entire period of the state program Business Road Map 2020," said the Deputy head of the Center for Strategic Elaboration and Analysis of the Executive Office of the President of the Republic of Kazakhstan.

The seventh is the informal extra burdens on business. International ratings, as well as surveys of the economic research institutions and the Atameken NPP show the problem exists.

Changing the strategy

Representatives of the Kazakhstan Public-Private Partnership Center propose to change the strategy. The experts studied the world experience and came to the conclusion that it is necessary to pay more attention, in the current economic conditions, to the correct positioning of both the country and its production sector.

"We are stuck in a functional approach, that is, we expect there must be functions of interconnection and structure everywhere, and this hinders us from going forward. We believe that the moment has come when some strategic matters have to be viewed from a different perspective. All the things that have recently occurred in the world economy are no longer functional, but behavioral," explained Azamat Oynarov, Chairman of the board of JSC "Kazakhstan Center for Public-Private Partnership."

As an example, he cites a number of Russian companies that present themselves to buyers in the form of a foreign brand and are thus in a great demand. Moreover, many of these manufacturers have successfully used this technique since the beginning of the 2000s.

"The trick is that these brands are Russian, but there is nothing Russian in their vision. For example, there are BORK appliances, which makes it look as if it were made in Germany, with a German quality. Or cosmetic brands: Faberlic and Letual – both Russian, but with a French message," the expert explained.

Something similar, but at the country level, was done in Italy at a certain time. Today it is considered a trendsetter in fashion, as if it had been so since time immemorial. However, until the 60-ies of the last century, all the fashion trends were dictated exclusively by France. Italy, not without the governmental support, created brands that allowed it to grab the biggest piece of the pie.

No less interesting is the example of South Korea. This country at a certain point, according to the experience of Sweden and Switzerland, began to actively finance the development of its own culture. As a result, Korea is known all over the world and its products are in great demand.

"Korea and Turkey are good examples of positioning on a global level. They reach markets of other countries through their TV shows. Not only that their soap operas are cheap, they also translate them into the languages of the countries they sell to at their own expense, including Kazakh translations. As a result, when our citizens see Korean or Turkish goods in the stores, they are ready to buy them, because they already have an idea of the country they came from," added the expert.

"If we at least repeat the experience of Georgia, we’ll benefit. They have the Ministry of Tourism actively promoting the image of the country as a tourist harbor for the middle class precisely using the process approach. Should you start looking for something about vacations, you’ll end up with multiple "go to Georgia" suggestions," - concluded Azamat Oynarov.

Gap analysis

After the first five-year industrial program, we need to analyze the mistakes, says Director of the Institute of World Economics and Politics under the Foundation of First President of the Republic of Kazakhstan - Elbassy. Yerzhan Saltybaev listed the main mistakes that must be avoided during the second five-year plan.

"The main mistake is that priorities have not been properly identified. The efficiency indicators of this program were rather blurred, that is, the program resulted in opening a large number of productions, which were not innovative or breakthrough. In general, the words "innovations" and "breakthroughs" are so worn out that even a brick factory was called innovative. Or, for example, production of tablets was organized in Kazakhstan. We must produce something  in which we are competent, something like, for example, metallurgy, petrochemistry, fertilizer production, where we have science, expertise," commented Yerzhan Saltybaev, Director of the Institute of World Economics and Politics under the Foundation of First President of the Republic of Kazakhstan - Elbassy.

As for the export markets of Kazakhstan, these are the countries of South-East Asia, such as Vietnam, Indonesia, Thailand in the first place. In South Asia, they are India, Pakistan, Bangladesh. In addition, our producers intend to ship grain, metals and petrochemical products to the countries of Southern Europe and the Caucasus via the Silk Road.