Smagulova D.S., Mukhametkhan D.R.
Al-Farabi Kazakh National University,

LL.M., Senior lecturer Department of Customs, financial and environmental law,  the Faculty of Law, Republic of Kazakhstan, Almaty,

E-mail: smgdana@mail.ru

Target transfers from the National Fund of Kazakhstan

National Fund of the Republic of Kazakhstan was established in 2000 and during its existence, not once became the subject of public debate. At the same time, the number of analytical materials on the work of the Fund is insufficient for such an important financial institution. Kazakhstan's economy is highly dependent on world oil prices. In this regard, the issue of preservation of the Fund and its effective use will continue to be relevant. In turn, the Fund's size also depends on the oil price. According to the simulation results, conducted in the framework of this study, the increase in oil prices to US $ 1 leads to an increase in the Fund's income to 282 million US dollars. The minimum price for oil for growth of assets of the Fund is US $ 30 per barrel. Another important factor in determining the size of the Fund, is the extent of the use of its funds. Currently, there are three channels for use by the Fund: guaranteed transfers, targeted transfers and expenditures on maintenance fund. This targeted transfers are the least regulated channel for the allocation of funds from the Fund. The decision on the allocation of funds was adopted without public debate and does not require the consent of Parliament, and the purposes for which the allocated target transfers, are not spelled out in the legislation and are subject to change depending on the current economic and political situation. This study was conducted in 2014-2015. In late 2014, it was decided to allocate additional targeted transfers in the amount of 1.5 trillion tenge in 2015-2017. The aim of the Foundation is "to prevent the accumulation of replacement of the National Fund to government borrowing. In 2006 entered into force "concept of formation and use of the National Fund of the Republic of Kazakhstan in the medium term", which changed the order of formation and use of the Fund. The main achievement of this document was a more precise definition of the Fund's formation sources, thus reducing the influence of the Government on the distribution of revenues from the extractive sector. Also it was first limited to a maximum size of withdrawals from the Fund at a level of no more than one-third of the Fund's assets. In 2010 it adopted the "Concept of formation and use of funds of the National Fund of the Republic of Kazakhstan" (hereinafter - the Concept). The main change is to fix the volume of the guaranteed transfer to the national budget in order to ensure intensive accumulation of the Fund in the long term.

The objects of state ownership right legally subdivided into republican and municipal property. The National Fund is, of course, the category of national importance. The property is related to the republican property, intended to ensure the needs of the entire state as a whole. In accordance with para. 2 of Art. 192 of the Civil Code is the republican property from the state treasury and property assigned to the republican state legal entities in accordance with the legislative acts. Since the funds of the National Fund has not fixed any of what government entities, the process of elimination, we can conclude that this kind of state-owned property is included in the concept of "state treasury". The correctness of that conclusion is also confirmed by the State Treasury concept. Thus, the second part of para. 2, Art. 192 of the Civil Code, with reference to article 193 of the Civil Code provides that the state of Kazakhstan's treasury account for the means of the republican budget, gold reserves and Diamond Fund, the land, its mineral wealth and water, flora and fauna, other natural resources and other state property, not assigned to the state legal persons [1].

Legal regime of most of the objects of the republican property rights are dedicated to specific laws: budget, land, mineral resources, currency. In a separate legislative regulation also need the relations connected with the National Fund. One only of its scope reflects the potential of the National Fund for the economy of the republic. As approved by the Presidential Decree of 1 September 2005, a report on the formation and use of the total volume of the National Fund for 2004 RK National Fund totaled 528,233,521 thousand. Tenge. In 2005, the National Fund has received $ 2.9 billion, or about 385.4 billion tenge, ie in fact 18.4% of the revenue budget. In 2005, the Fund increased from 5.1 to 8 billion US dollars, ie 1.71 trillion KZT, or 156.9%. For comparison, you can call these numbers: spending on education amounted to 66,384,355 thousand tenge. the judiciary expenses - 9,775,553 thousand tenge..

In accordance with the objectives of the Fund performs the following functions: Saving function. To perform the saving function is set the minimum balance in the Fund (30% of the forecast of GDP at the end of the financial year), and is not limited to its maximum size. The stabilization function. The implementation of the stabilization function involves ensuring the guaranteed transfer to the national budget. Since 2011, its size is fixed at $ 8 billion, or in the range of $ 6,8-9,2 billion, depending on the implementation of the forecast of economic growth. In accordance with the Concept Foundation funds can be used for three purposes:

1. The guaranteed transfer to the national budget,

2. The costs related to the Fund's work,

3. The target transfers.

An important issue is the effectiveness of the Fund policy implementation (in particular, the lack of clear criteria for the use of its resources in the form of targeted transfers) and administrative and institutional issues related to improving the efficiency of use of the Fund in the form of targeted transfers. This problem seems to be important, as it can lead to misuse of the Fund to address urgent current problems, as well as to reduce the effectiveness of economic policy. At the same time the original purpose of establishment of the Fund was to ensure economic stability in the long term and reducing the economy's dependence on world oil prices. 16 16 Decree of the President of the Republic of Kazakhstan "On the Concept of formation and use of funds of the National Fund of the Republic of Kazakhstan" dated April 2, 2010 # 962 [2]. Initially clearly prescribed in the Concept of the conditions for use of the Fund in the form of targeted transfers have led to a lack of specific criteria for the purposes for which these funds can be released. Another problem may be the government's desire to have an opportunity for emergency borrowing from the Fund in the event of crisis situations without the need for approval of the Parliament and the amendments to the existing legislation. Important potential risks and negative effects of this problem for the society may include the following: Rapid use of the Fund create a risk when performing tasks on the size of its assets, which are indicated in the Concept. So, instead of US $ 180 billion by 2020, the Fund's assets, estimated to be from 86 to 133 billion US dollars (provided that in 2018-2019 of the Fund will not be allocated funds in the form of targeted transfers). The Fund is directed at solving the problems that have been caused by the low efficiency of ongoing financial and economic policy. Over the history of the Fund, two targeted transfers have been allocated. First - 10 billion dollars - was isolated in 2009 due to lower economic growth caused by external factors (decline in oil prices and the closure of the world's capital markets). The second - 5.5 billion dollars (1 trillion tenge) - was allocated in 2014, driven by a sharp increase in imports (caused by the entry into the Customs Union) and the low volume of foreign investments due to a lack of a favorable investment climate. These factors have led to the devaluation of the national currency in February 2014. Task transfer was aimed to mitigate its consequences and, above all, to support the banking sector, one third of which loans denominated in US dollars. The main reason for the selection of the target of the transfer was the fact that the state has failed in dealing with problems of bad loans in 2010-2013, when these have been favorable external and internal conditions (high world commodity prices and economic growth). Use of the Fund in the long term, reduces the effectiveness of the government's economic policy by the appearance of "habits to break the piggy bank" for a variety of current issues. There is a risk that the government in the event of a crisis situation would be to assume that will always be able to use the fund. In this case, it increases the likelihood of the so-called "moral hazard" is not only the state but also from commercial banks and enterprises, which, instead of increasing its effectiveness will rely on government subsidies. The population will also consider themselves entitled to state assistance (through the Fund) for solving specific problems - as it was in solving the problems of unscrupulous developers or travel agencies.

The problem is urgent, as the special-purpose transfers provide an opportunity for the Fund to finance the solution of current economic and social problems. In addition, targeted transfers can contribute to the postponement of reforms needed to address them, as well as to stimulate the financing of inefficient projects. A more precise definition of the purposes for which purpose transfers, will increase the transparency of the use of the Fund and the level of public confidence in the Fund, and will also enhance the efficiency of use of budgetary funds in terms of their limitations can be used.

The main task of the formation and use of the Fund in accordance with the Concept is to bring its assets up to US $ 180 billion (32% of GDP) in 2020. The main conditions to achieve this goal claimed a reduction of non-oil deficit (less than 3% of GDP by 2020) and the full transition from the financing from the Fund current budget to finance only the development budget. According to calculations, in order to achieve this objective will need to comply with all the following conditions: џ average size of annual growth of the Fund's assets (revenues minus costs) for the 2015-2019 biennium. should reach US $ 20.6 billion (as compared with the maximum increase in the $ 14.3 billion, was recorded in 2012); the average size of annual income should reach over $ 29.7 billion (as compared with the maximum amount of revenues to US $ 25.5 billion in 2012); џ annual guaranteed transfer in the years 2015-2019 should be in the amount of not more than $ 9.2 billion; annual target transfers in the years 2015-2017 should be in the amount of not more than US $ 3 billion; Thus, the likelihood of achieving the fundamental objective of formation and use of the Fund - bringing its assets to US $ 180 billion by 2020 - is extremely low. The main condition for the implementation of this task is a consistently high level of income of the Fund, which in the years 2015-2019 should be at least one and a half times higher than the maximum value of 2012 [3]. There are three main risk to achieve this task:

1. The decline in revenue due to falling prices on the Fund's main export natural resources (first of all - oil). This risk can be reduced only at the expense of compensating growth of physical volumes of exports or increase the volume on other items of income to the Fund (such as the sale of state property).

2. Allocation of the guaranteed transfer in excess of the maximum specified level of $ 9.2 billion. The risk may be implemented, if the actual pace of economic growth will be significantly lower than forecast. The risk can be reduced by improving the effectiveness of economic policy.

3. The increase in seizures of the Fund in the form of targeted transfers to reduce the impact of social and economic crises. In accordance with the concept of saving function requires the Fund to the Fund's size does not fall below 30% of GDP. Nevertheless, there is a possibility that this provision could be modified in the event of serious socio-economic crisis and the need to take critical steps to stabilize the economy, as it was in 2009.

Problem №1. The ineffectiveness of the current legislation is not enough effective use of target transfers from the Fund in the amount of 10 billion dollars, dedicated in 2009, was the basis for changes in the mechanism for using the Fund. Thus, adopted in 2010. The concept provides a new approach to the use of Fund resources, and eliminates the possibility of involvement of bonds of quasi-public sector of the Fund. At the same time to ensure the transparency of the use of funds allocated target transfers from the Fund should go through the national budget. To improve fiscal discipline and prevent the replacement of the Fund the following restrictions imposed government borrowing Concept: the annual cost of servicing government debt must not exceed the annual conditional fixed investment income of the Fund is 4.5%; the costs of servicing and repayment of government debt must not exceed 15% of the national budget revenue, including transfers from the Fund. However, these restrictions do not affect the size and rate of formation of target transfers. 28 28 Decree of the President of the Republic of Kazakhstan "On the Concept of formation and use of the National Fund of the Republic of Kazakhstan" dated April 2, 2010 # 962. 24 Target transfers from the National Fund of Kazakhstan: the short-term concessions to the detriment of long-term development? Also, to prevent a repeat of 2009 in Conception ban on financing the purchase of Kazakhstani securities of subjects of public, quasi-public and private sectors, the purchase of blocks of shares, shares of participation of Kazakhstani companies, funding of second-tier banks, lending to legal entities and individuals, the use of assets as collateral performance of obligations. However, this prohibition does not apply to resources allocated in the form of target transfers from the Fund to the republican budget for purposes defined by the President. This provision is used in the allocation of target transfers from the Fund in 2014, which was mainly aimed at funding of commercial banks and lending to legal entities.

№2 problem. Since the Fund's inception and throughout its activity all the major issues of its creation and activity were determined not by laws and acts of the President and accountable to the executive bodies. Thus, the president has virtually unlimited possibilities for disposal of the Fund (until its abolition) without the need for coordination with other authorities and representatives of society. It is important to note that the great and almost unlimited possibilities for political interference in the activities of the Fund by the President due to the lack of control over the Fund's activities on the part of Parliament and the public and are a risk factor for inappropriate use of the Fund. For comparison, the activity of the State Oil Fund of Norway and its asset management (before its transformation into a part of the Government Pension Fund in 2006) was regulated by a number of regulations and rules. The main of them - the Law "On the State Oil Fund", which determines the objectives of the Fund and the basis for the development of further guidelines for its management (1990), and the Ordinance on the management of the Oil Fund, carried out by the State Bank of Norway (1997). The objective reality of economic and political development of Kazakhstan at this stage leads to a low probability of changes in the above order of things in the short term and make inappropriate attempts to change the main provisions of the formation and use of the Fund. A more realistic and productive to concentrate efforts on the introduction of amendments to the existing legislation in terms of clarifying the criteria for the selection of target transfers from the Fund. Targeted transfers are the last opportunity for the Fund to address the current economic and social problems and are an obstacle to increasing the efficiency of economic policies [4].

Resolved issues:

 The first solution - the preservation of the status quo, no making any changes to the current procedure of the Fund. The relative advantage of this solution is the predictability of the consequences if the current situation. The downside is that if the current situation increases the risk of inefficient and excessive use of the Fund and, as a result, reducing its size.

The second solution - an exception to the provisions of the current legislation on targeted transfers. In this case, the Fund will be directed by only two goals - guaranteed transfers to the budget and to cover the costs related to the management of the Fund. The advantage of this solution is the ability to more accurately predict the growth of the Fund's assets and increase control over its spending. The downside is to reduce the flexibility of economic policy at the urgent need for borrowing money and, therefore, low probability of such a decision in the current situation.

References

1. The official site of the President of the Republic of Kazakhstan, http://akorda.kz/

2. The official website of the National Bank of the Republic of Kazakhstan, http://nationalbank.kz/

3. The official website of the Ministry of Finance of the Republic of Kazakhstan, http: //www.minn.gov.kz/

4. The official website of the Committee on Statistics of the Ministry of National Economy of the Republic of Kazakhstan http://stat.gov.kz/

5. The official website for the US Energy Information Administration http://www.eia.gov/

6. The official website of the International Working Group on Sovereign Wealth Funds http://www.iwg-swf.org/index.htm

7. http://tengrinews.kz/

8. http://panoramakz.com/

9. http://forbes.kz/

10. http://newsite.kazpravda.kz/