Pragmatism vs. ideology: how Kazakhstan overtakes Russia
The Russian authorities are full of optimism and are not taking concrete steps to change the country's industrial landscape. Another thing is Kazakhstan, where economic diversification is already bearing fruit.
Searches for the bottom
About the fact that the bottom of the crisis has already been passed, only a lazy official did not say. However, something prevents divide rainbow expectations. First, there is no reason to hope for any lasting sustainability of today's oil prices, not to mention their possible growth to the pre-New Year level. On the contrary, there are increasing signs indicating a very likely reduction in the cost of hydrocarbons on the world market. And then our recession, as well as inflation (as a result of a new devaluation push) will receive another acceleration.
Secondly, even if the government's assumptions prove more or less accurate, we will not have to rejoice in this, if only because neither the government’s anti-crisis plan, nor the monetary policy of the Central Bank is aimed at changing the country's industrial landscape and the structure of export revenues. But without this, the country sooner or later (rather sooner) will again be defenseless before the next failure of oil prices, with all the well-known consequences for the state budget, the ruble exchange rate, inflation rates and the dynamics of real incomes of the population.
It cannot be said that the authorities completely ignore such a perspective. From time to time, the first persons of the state publicly declare the exhaustion of the previous model not only of the economy, but also of economic policy. It even speaks of the need for a new paradigm in the management of the national economy. However, it does not go further than words.
Primitivization of the economy continued in obese and lean years, despite periodic ritual spells about its harm for positioning the country in a harsh global world. Even today, it is impossible to get rid of the feeling that the government does not know any other ways of getting rid of the notorious oil needle, except for improving the investment climate, reducing inflation to 4% and issuing federal target programs on a fire order according to the “all sisters by earring” principle. But after all, it cannot but know that even with an ideal investment climate and zero inflation, the desired structural changes in the economy have not been carried out anywhere in the world without strong systematic state support and the same powerful stimulation of private entrepreneurial activity.
The neighbor is better
You can, of course, declare that we are still hostage to the Soviet understanding of the economy and post-Soviet powerlessness. And not only we, but also everyone around us with the same baggage cannot move.
But this is not so. Let's look at one of our neighbors - Kazakhstan, a country that is also heavily dependent on the vagaries of the global hydrocarbon market. Here we are really ready to move from rhetoric about the so-called raw materials curse to systematic actions in the direction of real, rather than simulated, modernization of the national economy.
You can evaluate all the work that Kazakhstanis have already done to integrate into the global economy, according to several generally accepted indicators. Primary: Are investors, both domestic and foreign, ready to invest in the country? In Kazakhstan, in the first half of 2015, investments in new projects increased by 250% compared to the same period last year (fDi Markets, Financial Times). For comparison: in Russia over the same period, direct investment fell by 50%. Kazakhstan has become a recognized leader in the CIS in attracting foreign investment per capita. This directly affects the quality of life of people: over 2001 – 2013, the average nominal money income per capita per month in the republic increased 5,3 times.
The model, due to which international finance comfortably feels in Kazakhstan, is simple and is based on the active role of the state in attracting investments. In particular, it does everything in order to provide investors - their own and visitors - with the most comfortable working conditions. The country has a fairly low taxation, for example, income tax - 15%, VAT - 12%, personal income tax - 10%, insurance payments - 15%; In the Russian Federation, all this is 1,5 – 2 times higher.
The state does not throw everything and everyone into the market, but guarantees support. Further optimization of the tax regime, simplification and unification of licensing procedures, attraction of anchor investors in construction, agriculture, oil refining, energy - all this state undertakes.
Further more
Judging by the plans voiced by Nursultan Nazarbayev in the “100 Steps” program pre-election document, countries are planning not only to diversify the economy within the existing framework, but also to push them apart, creating completely new opportunities for growth. This is a risk, but it is most likely justified. So, in 2016, the International Financial Center in Astana (AIFC) should start work.
I foresee the remark of skeptics. After all, the same intention was recently declared with fanfare in Russia, when the upcoming creation of the International Financial Center in Moscow was announced. And what came of it? Another idea in the spirit of words without consequences. The Kazakhstan project has more chances for implementation. For me, the fact that under this initiative the relevant legislative framework was immediately brought is very important. The other day, the Parliament of Kazakhstan adopted a bill, in accordance with which the International Financial Center in Astana is being created according to the model of Dubai as a financial hub for the Eurasian region. Of course, it is unlikely that it will take off in the same way as Dubai, which in ten years has become the leading Asian center of gravity for finance. But it can occupy a niche in the region, ensuring the interaction of regional stock markets of the countries of Central Asia, western China, and the CIS.
The AIFC is ready to provide the most important thing the business now craves - protection from arbitrariness. The legislation of the financial center will be built on English law, will open independent commercial arbitration, whose decisions will have priority over the decisions of the court of Kazakhstan. For residents of AIFC, Class A offices will be provided free of charge for two years, exemption from all taxes on 50 years. In the short term, this is, of course, budget risks, but in the long term, Kazakhstan, becoming an even more reliable partner of international business, is becoming a platform for the implementation of modern industrial projects. On a national scale, a multiplier effect should work, new productions and additional jobs will appear. It is especially important to emphasize that the new financial center, which should become a financial hub for the CIS countries, as well as the entire region of West and Central Asia, will be coupled with the implementation of a gigantic real economy project called the Eurasian Transcontinental Corridor, which will transport goods from Asia to Europe
As a result, Kazakhstan will be able to increase annually to GDP at least 1% due to non-oil production, and enterprises of the republic expect to attract more than $ 100 billion in investments up to 2025 of the year. And all this is due to public administration, which in Kazakhstan, unlike its northern neighbor, is not a subject of ideological debate. They do not argue about the relationship between public and private in the categories of good and evil, but in fact they care about improving the quality of the first and encouraging the second. It is clearly aware that the success of economic policy implies a dynamic equilibrium of state activity and self-regulatory forces.
Searches for the bottom
About the fact that the bottom of the crisis has already been passed, only a lazy official did not say. However, something prevents divide rainbow expectations. First, there is no reason to hope for any lasting sustainability of today's oil prices, not to mention their possible growth to the pre-New Year level. On the contrary, there are increasing signs indicating a very likely reduction in the cost of hydrocarbons on the world market. And then our recession, as well as inflation (as a result of a new devaluation push) will receive another acceleration.
Secondly, even if the government's assumptions prove more or less accurate, we will not have to rejoice in this, if only because neither the government’s anti-crisis plan, nor the monetary policy of the Central Bank is aimed at changing the country's industrial landscape and the structure of export revenues. But without this, the country sooner or later (rather sooner) will again be defenseless before the next failure of oil prices, with all the well-known consequences for the state budget, the ruble exchange rate, inflation rates and the dynamics of real incomes of the population.
It cannot be said that the authorities completely ignore such a perspective. From time to time, the first persons of the state publicly declare the exhaustion of the previous model not only of the economy, but also of economic policy. It even speaks of the need for a new paradigm in the management of the national economy. However, it does not go further than words.
Primitivization of the economy continued in obese and lean years, despite periodic ritual spells about its harm for positioning the country in a harsh global world. Even today, it is impossible to get rid of the feeling that the government does not know any other ways of getting rid of the notorious oil needle, except for improving the investment climate, reducing inflation to 4% and issuing federal target programs on a fire order according to the “all sisters by earring” principle. But after all, it cannot but know that even with an ideal investment climate and zero inflation, the desired structural changes in the economy have not been carried out anywhere in the world without strong systematic state support and the same powerful stimulation of private entrepreneurial activity.
The neighbor is better
You can, of course, declare that we are still hostage to the Soviet understanding of the economy and post-Soviet powerlessness. And not only we, but also everyone around us with the same baggage cannot move.
But this is not so. Let's look at one of our neighbors - Kazakhstan, a country that is also heavily dependent on the vagaries of the global hydrocarbon market. Here we are really ready to move from rhetoric about the so-called raw materials curse to systematic actions in the direction of real, rather than simulated, modernization of the national economy.
You can evaluate all the work that Kazakhstanis have already done to integrate into the global economy, according to several generally accepted indicators. Primary: Are investors, both domestic and foreign, ready to invest in the country? In Kazakhstan, in the first half of 2015, investments in new projects increased by 250% compared to the same period last year (fDi Markets, Financial Times). For comparison: in Russia over the same period, direct investment fell by 50%. Kazakhstan has become a recognized leader in the CIS in attracting foreign investment per capita. This directly affects the quality of life of people: over 2001 – 2013, the average nominal money income per capita per month in the republic increased 5,3 times.
The model, due to which international finance comfortably feels in Kazakhstan, is simple and is based on the active role of the state in attracting investments. In particular, it does everything in order to provide investors - their own and visitors - with the most comfortable working conditions. The country has a fairly low taxation, for example, income tax - 15%, VAT - 12%, personal income tax - 10%, insurance payments - 15%; In the Russian Federation, all this is 1,5 – 2 times higher.
The state does not throw everything and everyone into the market, but guarantees support. Further optimization of the tax regime, simplification and unification of licensing procedures, attraction of anchor investors in construction, agriculture, oil refining, energy - all this state undertakes.
Further more
Judging by the plans voiced by Nursultan Nazarbayev in the “100 Steps” program pre-election document, countries are planning not only to diversify the economy within the existing framework, but also to push them apart, creating completely new opportunities for growth. This is a risk, but it is most likely justified. So, in 2016, the International Financial Center in Astana (AIFC) should start work.
I foresee the remark of skeptics. After all, the same intention was recently declared with fanfare in Russia, when the upcoming creation of the International Financial Center in Moscow was announced. And what came of it? Another idea in the spirit of words without consequences. The Kazakhstan project has more chances for implementation. For me, the fact that under this initiative the relevant legislative framework was immediately brought is very important. The other day, the Parliament of Kazakhstan adopted a bill, in accordance with which the International Financial Center in Astana is being created according to the model of Dubai as a financial hub for the Eurasian region. Of course, it is unlikely that it will take off in the same way as Dubai, which in ten years has become the leading Asian center of gravity for finance. But it can occupy a niche in the region, ensuring the interaction of regional stock markets of the countries of Central Asia, western China, and the CIS.
The AIFC is ready to provide the most important thing the business now craves - protection from arbitrariness. The legislation of the financial center will be built on English law, will open independent commercial arbitration, whose decisions will have priority over the decisions of the court of Kazakhstan. For residents of AIFC, Class A offices will be provided free of charge for two years, exemption from all taxes on 50 years. In the short term, this is, of course, budget risks, but in the long term, Kazakhstan, becoming an even more reliable partner of international business, is becoming a platform for the implementation of modern industrial projects. On a national scale, a multiplier effect should work, new productions and additional jobs will appear. It is especially important to emphasize that the new financial center, which should become a financial hub for the CIS countries, as well as the entire region of West and Central Asia, will be coupled with the implementation of a gigantic real economy project called the Eurasian Transcontinental Corridor, which will transport goods from Asia to Europe
As a result, Kazakhstan will be able to increase annually to GDP at least 1% due to non-oil production, and enterprises of the republic expect to attract more than $ 100 billion in investments up to 2025 of the year. And all this is due to public administration, which in Kazakhstan, unlike its northern neighbor, is not a subject of ideological debate. They do not argue about the relationship between public and private in the categories of good and evil, but in fact they care about improving the quality of the first and encouraging the second. It is clearly aware that the success of economic policy implies a dynamic equilibrium of state activity and self-regulatory forces.
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