Экономические науки/10. Экономика предприятия

Deyanira Iskakova

Master student, Shakarim State University of Semey, Kazakhstan

Government support SMEs in Kazakhstan in frame of EAEU

Small and middle size enterprises (SMEs) is a basis of a stable civil society and from SMEs depends how well Kazakhstani economic will be. SMEs not only carry out a huge social role of maintaining the economic activity of many people, but also it provides significant tax revenues to budget of country. In the current difficult situation SMEs can act as a stabilizer of our economy, and therefore should be highly supported by government. Today, while price of oil extremely low and as consequense our country fells serious difficulties, domestic business more than ever should increase production capacity and thereby increase exports rate. That is mean improve the quality of goods and to be competitive in terms of world trade. The main aim should be profitable participation in the WTO and EAEU, and to think about export-oriented production. For this aim Kazakhstan have indisputable priority is geo-economic location of the country, due our location in the junction of trade ways from Europe to Asia, we have a great benefits from trade between this markets and unique access to both regions.

Accelerating changes of the global business environment and internal changes, local business should upgrade ther business, and take all possible benefits from EAEU integration. Integration processes are expected to produce stability and positive effects on economic growth as well as labor, manufacturing, service and finance. For example, Arūnas Dulkys states, about more than twenty years of the EU existence shows that integration does not happen spontaneously merely driven by market forces: from time to time the need appears for new treaties and arrangements to stimulate the process, for programme actions and legal preconditions. Today economics of each country are changing, they try integrate to each other, to create the union where there would be free trade area.

International trader theory clearly shows the economic benefits of open economies, and these benefits are more readily available as improvements in transport, make the movement of goods cheaper and thereby reduce the friction of distance. The role of the Republic of Kazakhstan in the EAEU is huge. Economic integration in the EAUE has only economic roots it was long process first stage of which were creating customs union between Russian, Kazakhstan, Belarus in 2010. Since January 1st, 2015 EAEU operates which means free movement of goods and services, capitals and workforce. The main objectives of this Union are: creation of a single customs territory within the borders of the united country; the introduction of the regime, not allowing tariff and non-tariff restrictions in mutual trade, except as otherwise provided by special regulations; the total abolition of customs controls at the internal borders of the participating countries; use similar mechanisms to regulate the economy and trade, based on universal market principles of management and on harmonized economic legislation; functioning of the single EAEU authorities.

According to Molle, the economic logic of market integration is mainly based on welfare economics. Indeed, the free exchange of goods promises a positive effect on the prosperity of all concerned. It permits consumers to choose the cheapest good, generally widens the choice, and creates the conditions for further gain through economies of scale. Free movement of production factors permits optimum allocation of labor and capital. Sometimes certain production factors are missing from a place where otherwise production would be most economical. To overcome this problem, entrepreneurs are apt to shift their capital from place of low return to those which give more promising results. The same is true of labor: employees will migrate to regions where their labor is more needed and therefore possibilities which in turn permit new, more modern or more efficient uses of production factors (new form of credit, new occupations and so on).

Open internal borders also stimulate the improvement of the competitiveness of human resources. Improvement of business competitiveness, increasing trade with third countries, opening a new and joint ventures, increasing investment will lead for economic growth. The common market will stimulate Kazakhstan to develop its own industry, thereby reducing dependence on natural resources and modernize the economy.

On the other hand, vitally important issue for our government is protection own producers and the domestic market. It is not about to somehow protect all sectors of our economy, as in the context of trade liberalization under WTO rules, number of our industries and enterprises with low competitiveness of their products, have a risk to stop their existence, or will be redeveloped. In the context of trade liberalization under WTO rules a number of our industries and enterprises with low competitiveness of their products, or cease to exist, or will be redeveloped. Although this is not way of pure market economy at the same time, if we do not take protective measures, a number of vital sectors of economy will simply crushed by foreign competition. There are agriculture, light and food industry, machine building, construction materials and other industries.

If analyze developing private sector of economic in the last years. Dynamics of the number of active and registered SMEs has an overall positive trend. Since 2007, the number of registered SMEs increased by 49%, active - 19%. Together so, if we consider the dynamics of the data separately, it can be divided into three stages:

- 2007 - during this year, which is generally characterized by the rapid growth of the economy of Kazakhstan (at the level of 9-10% per year), the number of SMEs steadily increased on average by 12% per year;

- 2008-2009 - During this period the entrepreneurial activity of the population. It fell by a sharp slowdown in the economy rostrum, which resulted to reduce the number of SMEs;

- The period 2010-2012. - This period is characterized by reduction of growth the economy and the increase in the number of registered SMEs. At This level of active companies does not change.

In absolute terms, under the report on the effectiveness of the program "Map of the Business Road 2020", the number of registered SMEs from 2007 to the end of 2012 increased by 461 thousand units, the number of active SMEs - to 121 thousand units. The share of active SMEs in general, the number of registered SMEs, with a positive trend up end of 2009 and an increase from 69% to 71% in 2010, decreased to 55%. At the end of 2012, according to operative data, the level of activity SMEs operating in the number of registered and made 55%.

Protection issue was the main topic under discussion before the Kazakhstan‘s entry into the WTO. Yet now, in the question about maintains domestic business was timely made a decision to reform the legal framework and conditions for foreign direct investments, which should revived the sphere of production and will lead production process in a new level.

Also was made the moratorium to inspections of small and medium business, which was urgent introduced from 2 April 2014 to 1 January 2015. In comparison analysis of inspections between 2014 and previous 2013 year, according to the report form number 1-P "About the registration of the appointment of inspections carried out by the state bodies of Kazakhstan," the Committee on Legal Statistics and Special Records of the General Prosecutor of Kazakhstan shows:

- For 9 months of 2014 all registered acts of appointment checks was 70,967, or 33.0% from the previous year (in 2013 - 214 759);

- Inspections in private businesses is 28 109, the share - 39.6% (in 2013 -64.6%). Due to the realized moratorium on inspections of SMEs situation with inspections was change dramatically, if last year was registered 2/3 of inspections of private entrepreneurs in the current year, on the contrary, only one third;

- Including a small business -15 609, the share of 22.0% of all tests (in 2013 - 43.8%) or 55,5% of inspections of private business (in 2013 - 67.9%);

- Medium Business - 5509, the share of 7.8% of all tests (in 2013 - 15.3%), or 19.6% of inspections of private business (in 2013 - 23.7%);

- In general, among small and medium businesses - was 21118 tests, the proportion of 29.8% of all tests (in 2013 - 59.1%), or 75.1% of inspections of private business (in 2013 -91.7%) .

The moratorium allowed entrepreneurs to engage in the improvement of production and search new distribution channels. January 1st, 2015 was deadline for the moratorium on inspections by state bodies of subjects of small and medium-sized businesses, and were canceled the practice of routine scheduled inspections. Cancelations of scheduled inspections radically revised the format of audits and reduce the number of claims to business of more than 30%. Also was insert risk management system (RMS). RMS - a set of measures to assess the likelihood of default and (or) incomplete fulfillment of tax obligations by the taxpayer, which can cause budget deficit. RMS includes measures which apply the tax authorities to detect and prevent risk. Based on the results of risk assessment government carried differentiation application forms of tax control. The essence of this change is that the frequency of tax audits and the use of taxpayer's right to a simplified procedure for repayment of excess value added tax, is directly dependent from compliance by the taxpayer of tax policy. In case where a taxpayer has a significant number of violations and the minimum cost of taxes and other obligatory payments to the budget, such enterprise will be checked often. Was created the criteria for determining the risk of taxpayers and selection process of taxpayers by region for routine tax audits. All in all method of calculation defined seven risk criteria, which reveal unreliability of the taxpayers. All this modernizations was made to create transparent tax system and ease the pressure on business.

Currently were simplified conditions to opening SME and leading business. Recently Kazakhstan has shown significant growth in the several indicators "Registration of companies", "Resolution of insolvency", "Dealing with Construction Permits", "Connection to the grid", "International trade", "Enforcing Contracts", "Resolving insolvency" and "Loans". The measures are aimed primarily for increasing the number of registered and active SMEs, enlarge the number of employed, multiply the volume of output, productivity and other indicators of the development of SMEs, which ultimately will enhance the contribution of SMEs to the GDP of Kazakhstan.

According to the member of the committee on economic policy entrepreneurship and innovation development senate Askhat Kuzekov, “The contributions of small and medium-sized enterprises (SMEs) in Kazakhstan’s GDP for 2014 compose 17.5%. The share of the contribution of SMEs to the GDP for 2014 were 17.5%, and in 2013 it was 16.9%, increase was 0.6%”. The dynamics of the number of registered and active small and medium-sized businesses in 2014 showed a positive growth trend. According to statistics, as of 1 January 2015 in Kazakhstan registered 1,655,980 SMEs, as a result, compared to the same period in 2013 the increase was 7.3% - in absolute terms increased by 103 414 units.

World experience shows that if the government wants to develop sharply and steadily, socio-economic program must necessarily include measures to encourage small and medium-sized businesses. Today, in a number developed countries the share of SMEs account from 40% to 90% of gross domestic product (GDP). That is why the governments of these countries give priority to supporting business sector. Modern Kazakhstan situation in developing SME present positive moves in line with global trends, but its share in the economy is very different from the world's criteria. According to the international Doing Business rating which provide the World Bank's each country is assigned a corresponding position in the ranking of doing business conditions. Rating has 189 positions. As higher the positions of the country in the ranking ease of doing business, as more favorable business environment in exact country. The position of each country on the rating of favorable business conditions determined by ordering collective evaluation obtained from country to country by ten directions. Each of the areas is made up from several indicators which equal important for the indicator. Considering the ranking of countries compiled in June 2015, we see that countries with rapidly growing economies such as Singapore, Denmark, Korea, the US and the UK are in the top ten of the ranking which show that level of freedom of entrepreneurship and business in those countries are high. This rating such as a map to foreign investors in their decision making process.

At last Doing Business rating in 2016 Kazakhstan took the 41th place, and improved position by 12 points. Country is moving steadily on the way to innovation. In "Strategy Kazakhstan 2050" denotes a clear goal of our country to achieve the point number 30 of most developed countries of the world. According to a report, Kazakhstan takes place between Croatia and Hungary, leaving behind Belgium, Italy, as well as almost all CIS countries except Armenia. For comparison, the top three world economies are Singapore, New Zealand, and Denmark.

Kazakhstan economic policy is supporting and developing the small and medium size of business, that is why, government provide different programs to stimulate private business, like the loan guarantees for small and medium-sized businesses. In many countries, credit guarantees is a key tool of funding the entrepreneurs. Therefore, the mechanism of credit guarantees on the one hand makes it possible for small and medium-sized businesses draw financing, which is slightly higher than their existing mortgages, on the other hand it allows banks to share with the state risks associated with financing of SMEs and thus encourages banks to finance risky startup projects and projects of SMEs. This government’s activity works quite effectively, according to the official statistic database in 2010 when program just started only 3 entrepreneurs got the loan guarantees in 2014 their number was 533 units. It is prove that Kazakhstan’s business have a good potential and need real financial and law supporting for stable work in frame of EAEU. At this year, the World Bank has committed 12 world countries, which have been implemented more than four reforms for a year. First place took Kazakhstan as a country which implements seven reforms in different spheres. Also Kazakhstan hit the top ten world economies in the world where was real improvements and business process become easier.

Were noted reforms in such areas as:

- Start up projects (eliminated registration fees for small and medium-sized businesses, reduced registration time, abolished requirements for using the company seal);

- Construction permits (was simplified giving permits process, abolished surveying the land);

- Registering property (transfer of property takes place under the simplified procedure, in which for the issuance of technical passport is not required notarized documents of the seller and the founding documents of the buyer);

- Access to a loans (was created a special law on secured transactions, which clearly defined categories of assets provided as collateral);

- protection of minority investors (adopted specific changes in the law to ensure transparency of business);

- Enforcing Contracts (simplified contract enforcement procedures by introducing Fast Track program, which is designed to allow small claims);

- The resolution of insolvency (bankruptcy procedures was been simplified, allowing creditors to initiate reorganization or sale of assets easier).

SMEs are base of the economical grow, and build a stable working business sector is the main aim of each country. This process will not depend only from government or from entrepreneurs this development should be made by complex work between all members of this process. Today Kazakhstan should make a lot of work to achieve the level of economy where half of GDP will bring SMEs. It is mean, that government should continue to provide and stimulate business by low tax rates, minimize red tape for business creation, provide a soft lending and make a good investment climate. All this steps in future when the EAEU will be operated in full capacity will help to national SMEs not to lose the competitive advantage in the market. Kazakhstan considers the EAEU as expanding opportunities through the integration of our country gets the opportunity to enter to the major consumer markets (EU, North America). At the same time Kazakhstan has all chances to become a link between one of the most powerful economies in the world - China and the West.

Reference:

1. A. Dulkys “ Political economy of the EURO area enlargement: asymmetry and holistic viewpoint” Summary of doctoral dissertation Social science, economics (04 S) Vilnius, 2010

2. A. Kuzekov, VII Astana Economic Forum “Risk management in the era of challenges in the format of G-Global”, 2014.

3. W.T.M. Molle, Vermont “The Economics of European Integration Theory, Practice, Policy” 2006 5th edition p.9 (433)

4. Official statistic providing by Ministry of national economy of the Republic of Kazakhstan, official website http://economy.gov.kz/en/

5. The report on the effectiveness of the program "Map of the Business Road 2020" for the year 2012. Almaty, July 2013

6. World Bank Group, Doing Business official website http://www.doingbusiness.org/