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Mrs. Temirbekova A.B., Doctor of economic science, Professor 

 IAB, Kazakhstan

Problems on the way of innovational development of agro-industrial in Kazakhstan

 

The basis of accelerating scientific and technological progress are innovation processes which allow to maintain a continuous updating of production based on development of science and technology. The development of a market economy requires new approaches of providing the relationship between science and industry to enhance the competitiveness of the state in the global market. A competitive factor is an innovation policy.

Previously, the government took measures for supporting the agro-industrial complex such as the State agrofood program of the Republic of Kazakhstan for 2003-2005, which have not created conditions for stable development of the agrarian sector. In 2009, the agricultural production grew by 13.8% compared with 2008, while in 2010 the index of the physical volume of gross output of the industry was 88.3%.  In many ways, the agricultural sector has not still achieved the level of two decades ago (Table 1).

 

Table 1 – Main indicators of AIC in Kazakhstan for 1990-2010.

 

Indicators

1990

2010

Reduction

Gross grain harvest (thousand tons)

28487,7

12185,2

 2.3 times

Sugar beet (thousand tons)

1043,7

152

6.9 times

The cultivated area of major crops (thousand hectares)

35182,1

21438,7

1.6 times

Crop yields (hundredweight per hectare):

Grains and legumes

Sunflower

Sugar beet

 

12.2

9.2

239

 

8

4.4

174.3

 

1.5 times.

2.1 times

1.4 times

Livestock:

Cattle (thousand units)

Sheep and goats (thousand units)

Pigs (thousand units)

Poultry (million units)

 

9757.2

35660.5

3223.8

59.9

 

6175.3

17988.1

1344

32.8

 

1.6 times

2 times

2.4 times

1.8 times

Production of main types of products of animal husbandry:

Meat (thousand tons)

Milk (thousand tons)

Eggs (million units)

 

 

1559.6

5641.6

4185.1

 

 

937.4

5381.2

3720.3

 

 

1.7 times

1.05 times

1.1 times

 

There are also other serious problems:

1.         Labour productivity in agriculture is the lowest and equals about 3 thousand dollars per an employee a year. While in developed countries this figure is 50-70 thousand dollars.

2.         In agriculture, an average monthly nominal wage is almost of the lowest level – 34,171 KZT, lower is only in the fishing industry - 29 638 KZT (in industry - 80 909 KZT, construction - 89 780 KZT, financial activities - 135 653 KZT) (2009 data).

3.         The agricultural sector experiences an investment crisis. Investment in fixed assets in the industry equals 79 574 mln. tenges.  This is 1.7% of the total investment in fixed assets in the country (industry - 2,232,145 million tenges or 48.7%). This is particularly unattractive industry to foreign investors. Only 0.031% of the total foreign direct investment into economy  is in agriculture, while the mining industry attracts 24.6%.

4.         Compared to industry and some other sectors, the low level of commissioning of fixed assets - 63141 million tenges is in agricuture (in the industry - 1,065,221 million tenges, in transport and communications sector - 463 884 million tenges). Provision of agriculture with equipment is unsatisfactory, the depreciation of the machine and tractor fleet is 80% and requires complete replacement. The average age of the current fleet of tractors and combines is 13-14 years, while the normative operating life is 7-10 years.

5.          The industry is characterized by high production costs, high capital intensity, long payback period, low capital productivity. In the U.S.A. the cost of 1 ton of grain is about 25 dollars, while in Kazakhstan is from 40 to270 dollars.

6.          According to the World Organization for research and food distribution to the FAO, the safe level of food import should not exceed 17% of the consumption level. In Kazakhstan, the import share in the markets of products of deep processing of meat, dairy products, fats and oils of animal and vegetable origin, confectionery, processed fruit and vegetables ranges from 40% to 60% and demonstrates high level of dependence of the domestic market on imports.

7.         Currently, domestic production of agricultural products and its processing do not meet the international and often national quality standards. The main fraction (40 to 80%) of defective products is of food products supplied by domestic producers.

8.          The level of profitability from the sale of agricultural products is 16-17%, while in the industry it is on an average 62%.    

In this situation there should be new methods of management and support of the agrarian sector on the basis of innovation. However, innovation processes in the sector fall behind those in other sectors of economy.

According to the program of forced industrial-innovative development of Kazakhstan, adopted by the Government of RK for 2010-2014, the aimed indicators of agricultural development are the following:

1. Provision of food independence of the domestic market.

2. The increase in gross value added of agriculture by no less than 16%.

3. Increasing labor productivity in the agro-industrial sector from 3000 U.S. dollars per person employed in agriculture by 2 times at least.

4. Building export capacity of the industry in total export volume to 8%.

 “For the period till 2015 the main priority of the policy of forced industrialization will be the implementation of major investment projects in traditional export-oriented sectors of economy, which will create new business opportunities for small and medium-sized businesses through targeted development of local content, the subsequent processing and redistribution.” In 2008, 31.5% of the population employed in the agricultural sector produced only 5.8% of GDP. Development of agro-industrial complex is defined as one of the main directions of the program on which the state efforts will be focused. According to the program,
industrial and innovative development of agro-industrial complex will be achieved through implementation of high-tech investment projects, as well as by implementing the principles of integrated water resources management.

At least 20 major projects are planned to be carried out, including the construction of 8 livestock farms, 2 poultry farms, 3 greenhouses, 3 dairy farms, a meat processing plant, a bakery plant and a cotton seed plant. Conditions for attracting major investments will be created.

Stimulating measures will involve such traditional instruments as subsidies, soft lending, microcredit, the development of leasing of agricultural machinery, special machinery and technological equipment, the development of insurance system in agro-industrial complex, information and marketing support, increasing the share of local business in government procurement.

Subsidization of agro-industrial complex will continue in the following areas:

- lowering interest rates for lending to agro-industrial subjects and the providing with  agricultural machinery and equipment;

- seed development;

- increasing productivity and quality of livestock products;

- increase productivity and quality of crop production, lowering fuel costs and other inventory items required for the spring field works and harvesting by subsidizing the production of priority crops;

- lowering the cost of fertilizers (except organic) to the domestic agricultural producers;

- lowering  the cost to agricultural producers for treating agricultural crops with herbicides produced (formulated) by domestic producers.

- development of production management systems and market of agricultural products;

- development of livestock breeding.

Thus, the government has taken some concrete measures for the development of agricultural industries. However, there are many problems left even in subsidizing areas. For example, how are costs of treating agricultural crops with herbicides produced (formulated) by domestic producers lowered to agricultural producers in practice? The mechanism of such cost reduction involves the tender for supplying herbicides to agricultural producers. The tender winner usually tries to buy the cheapest chemicals. This is not a secret to anyone. This happens not only in agriculture but also in all other sectors of the economy. Such a person is not interested in the quality of purchased goods. It is important for him to save money and get more profit. For example, Karasai districy of Almaty region has always been famous for its apples and was a major supplier of fruit to Almaty markets. In spring 2011, the farm apple orchards of Dzhandosov villages were sprayed with chemicals by the village akimat. A month later, all apple trees were covered with cobwebs and the harvest was lost because cheap not-tested chemicals of bad quality were used. As a result of the fact that someone has saved the state money in their favor, first farmers will not receive any income in the fall (which productivity is it all about?). This means that the standard of living of farm families will fall dramatically as their entire annual income comes from the sale of the harvest in the fall. Second, the population of the country will consume a genetically modified Chinese apples again. This may not be now, but in the near future will affect the health of Kazakhstan’s citizens. This is genocide against the entire nation. Third, the land and multiyear apple orchards were damaged at great scale.

This is one of reasons which restrains acceleration of the process of developing scientific and technical, innovative activities in the agrarian sector. There are also other reasons:

- insufficient financing scientific, technical and innovative activities;

- decreasing number of scientific personnel and specialists in the agrarian sector and agroservice structures;

- loss of the qualification level of scientific and productive personnel;

- lack of software provision of agro-industrial enterprises and research institutions;

- lack of scientific reserves for accelerating innovations in the agriculture and processing industries;

- lack of efficient forms of interaction of a science, educational institutions and agro-industrial production in areas of research, elaboration and implementation of innovation results, and etc.

          At the present time it is necessary to develop and introduce effective forms and methods of organizing management and stimulating innovative activities, legal and financial support for the development of innovation, organizational and economic mechanisms of innovative functioning of the sector.      

          Agro-industrial complex is a complicated multi-faceted system. Therefore, innovation processes have their own specifics. The aim of innovation policy in agro-industrial complex is to create most favorable conditions for successful and effective innovation activity at all levels while taking into consideration all stages of innovative cycle from starting with creation of innovation and ending with introducing them in the agro-industrial production. There are a lot of methods of implementing innovation policy in agro-industrial sector as well as in other sectors of economy. In our opinion, they could be classified as organizational, economic, legislative and socio-psychological.

          Organizational methods of implementing the innovation policy involves creation of organizationally-managed innovation system, each element of which will have specific functions, internal and external ties, and begin to work in accordance with common goals and tasks of the whole system. Therefore, it is necessary to build innovation infrastructure in a form of different formations: scientific, scientific and technical and scientific technological centers, technoparks, technopolis, scientific and production associations and systems, special formations for producing knowledge-intensive products.   

          Institutional transformations of scientific-technical sector of the agro-industrial complex, besides formation of innovation infrastructure, must be directed on integration of scientific organizations with agrarian and supporting companies of the industry and on creation of structures of smack business to support programs of regional and interregional innovation-technological centers.

          The following methods are considered to be economic methods of implementing the innovation policy: creation of economic conditions for implementation of innovation programs and projects, state financing of innovation activities, mass investment attraction into the innovation sphere, development of entrepreneurship and commercialization of innovation projects.

          Legislative and normative legal mechanisms of the innovation policy regulate innovation activity in the AIC and involve elaboration and adoption of laws and other normative documents, which should determine the state attitude to development of innovation processes in the industry, responsibility of state organizations, directions and measures of state support to creation of favorable conditions for investments in innovation activity.

          Implementing socio-psychological methods promotes formation of public understanding and approval of the meaning and the role of innovation processes as one of the most important factors of economic development of the industry. The supporting factors could be clearly organized information and propaganda of achievements of the domestic and world science.

          There should be the appropriate personnel to implement all above mentioned methods of the innovation policy in the AIC    Specialists and managers must have good knowledge of the innovation process features and work successfully under conditions of forced development of scientific and technical progress. Therefore, specialists must be well trained on the problems of development of innovation processes  in universities and colleges of AIC.

       The innovation policy might be successfully implemented if the following measures are taken: encouraging investments into high-tech production, replication of which accelerates development of innovation processes in the agricultural sector; adoption of tax benefits for subjects implementing new methods; improvement of the depreciation policy with the aim to create opportunities for enterprises and organization to increase depreciation funds as a source of investments; development of leasing of the unique high-tech equipments, and etc.