Financial sustainability and mechanism of participation of investors

in financial support of agri - industrial complex of Republic of Kazakhstan

Zhenisbek Zh. Suleimenov

doctor of economical sciences, professor

Kazakh National Agrarian University, Almaty, Kazakhstan

Aliya M. Arynova , PhD student

Kazakh National Agrarian University, Almaty, Kazakhstan

Sustainable and balanced development of the republic should be achieved due to the rapid diversification and increase of the competitiveness of national economy. In this context, production of agri - industrial complex (AIC) products should ensure food security of the country, realization of export potential, especially in the markets of the Customs Union, and Central Asia.

Investments - the foundation of the process of expanded reproduction and the possibility of reducing disparities in agricultural development. For establishing the investment mechanism for ensuring innovative development in agricultural sector of economy the following is necessary: growth of the volumes and efficient use of investment sources; development of investment policy; improvement of the legal framework for favorable investment regime, which will allow the development of the logistic base of agriculture; promote innovative development of industry; increase the financial stability of agricultural sector; implement export opportunities of the industry.

Agriculture of the Republic of Kazakhstan at the present stage of transformations is characterized by unstable and low production incomes. Structural changes of the market economy and the natural conditions have a significant impact on the sustainability of agricultural production.

In order to develop the system of ensuring the financial sustainability of the agricultural sector, it is necessary to monitor the financial indices: continuously monitor and analyze the factors determining the financial condition of agricultural units, that is their sustainability.

The sustainability of the operation and development of agricultural production, the interaction of economic entities in agricultural sector determines the possibility

of realizing their strategic and current objectives, and, consequently, the nature and direction of their actions.

Among the components of the agricultural sector of Kazakhstan ensuring its sustainable development, the main ones are as follows:

- Overcoming the crisis and creating conditions for its stable and sustainable development aimed at the supply of the domestic market;

- Ensuring sustainable operation of agricultural entities for export orientation of production.

Factors determining the stability of the operation and development of agricultural production are divided according to: the nature of the impact on production processes; time feature; character; feasibility and impact; causes of occurrence; functional and substantive features.

Also internal and external factors can be outlined which influence on the financial sustainability of agricultural production. The internal factors include those that define the operation of the entity and are themselves dependent on its activity. Their effect is conditioned by the professional qualities of the staff, efficiency of organizing production and management processes, the level of control over the implementation of managerial decisions, etc.

External factors - are those that do not depend on the activities of the entity, but influence on the level of its production and financial resources. External factors can be divided into State and local. The State factors of ensuring financial sustainability of agriculture include: legal framework, resource, economic and financial policy. The local external factors may include logistic base, trademark or brand, the availability of economic relations, strategic planning, including marketing strategy, advertising, management, etc. They can also be divided into the factors of direct impact and factors of indirect effect. Considering the issues of ensuring sustainable functioning and development of agricultural production it should be noted that the assessment of certain aspects of its operation is based on system of parameters, including the following three sections:

- Performance (in production activity, innovation sphere, demand management);

- Economy (economic efficiency of using production resources, share production costs);

- Profitability ( financial efficiency).

Requirements for this system of indices of the performance of agricultural production are as follows:

- It should be based on the principle of possibility of analyzing the cause-consequence relations;

- It should reflect the quality of performance of various functions, as it represents the assessment of agricultural sector of social element.

In terms of economic transformations, as it is observed in Kazakhstan, the most important among many factors is also the component of sustainability of functioning and development of agricultural production, financial stability should be considered as an integrated final index of the operation of a particular object.

Besides analyzing the financial condition of agricultural enterprise it is necessary to investigate the performance characteristics of technical resources: condition of the equipment, its age, level of technology, the nature of wear, quality of service, the potential opportunities and also it is important to examine the issues directly related to the use of technical resources. It is necessary to analyze fuel suppliers, prices for essential materials and fuel, identify opportunities for their continuous supply, delays in payments, readiness of suppliers to work in the future. After analyzing these issues it is necessary to identify the position of agricultural enterprise in the market, the nature of demand for products, its dynamics, etc.

Government regulation of agri-industrial production in foreign countries is one of the tools of conducting agrarian and fiscal policies in agriculture. Increase of profitability of agricultural production is achieved in two ways: by increasing the prices for products in order to payback the costs of producers and artificial lowering of the cost of agricultural production through direct subsidies.

The price measures include various kinds of price subsidies, payments for the difference between market and target or intervention (collateral) prices. In world practice, they have different names- compensation payments for cereals, oilseeds, cotton and a number of products. Thus the price mechanism in foreign countries, including the EU countries, aims at protection of the interests of consumers and producers. This is done by setting the limited upper and lower prices. Support prices have many forms, depending on the type of production. The most common are two forms of price: target (control or approximate) and interventional (intervention price).

On the basis of target, collateral and market prices the rates of compensation payment are calculated. The difference between target price and the declared collateral price provides the maximum rate of compensation (missing) payment. Its real size is dependent on market condition. When the market price is higher than the main collateral rate, the level of compensation (missing) payment is determined based on the difference between the target price and market price. When the market price is below the main collateral rate, the level of payment is calculated as the difference between target price and the average seasonal or declared collateral rate.

Incomes insurance. Income support program includes various types of payments, insurance programs or stabilization of producers' incomes.

Production insurance. Insurance reimbursement which the producers of commodities can expect in a bad year, gives him the opportunity to fulfill their financial obligations, to buy a stock of seeds and purchase material and technical means, thus ensuring the continuity of the reproduction cycle of agricultural production. Factors that cause risks in the industry and cause irreparable damage to agriculture, as well as the level of their impact, significantly reduce the sustainability of business entities, which significantly reduces the reserves of financial sustainability.

Conclusions

1. In Kazakhstan the efficiency of agricultural production increases. However, the issue of food supply of the population with domestic food products is not fully resolved.

2. Share of investment in innovative development of agricultural production remains the lowest in the CIS countries.

3. Special importance of the agricultural sector for stimulation of investment activity is conditioned by the fact that, firstly, this branch has inter-branch linkages with processing complex, as a result of which the investments in their development create the biggest cumulative effect, stimulating the demand for production of related industries, and creating their own investment potential. Second, the production of these industries is characterized by massive and sustained demand in the domestic market. Third, most of the products of light and processing industries are compatible not only in domestic but also in some foreign markets.

4. This direction of the State structural policy can be implemented with relatively less strain on the budget, because, except for direct investments, is to develop organizational and legal measures which provide to open this sector to credit resources and private investment, including foreign ones. These investments should be supported by tax and other privileges in such way that the emerging investment demand is focused primarily on domestic producers.

5. The main factors stimulating investment processes are: the availability of scientific and technical developments, a stable return on investments in fixed capital; increased demand for production; the corresponding logistic base.