Why Does Umirzak Shukeyev Need to Transform Himself?

Any system is a set of subsystems, and the way the larger system works is the way the systems within it work. Even where there are exceptions, in time the upstarts fall into line with the overall system. That is roughly what is happening here.

The transformation of the Samruk-Kazyna National Welfare Fund is a telling example. But the problem is not even that. The problem is that we are spending huge sums on empty activity: creating special transformation companies with enormous staffs and hiring large numbers of consultants. The money spent on consultants and expensive expatriates, who look more like lightning rods than advisers, could have built more than one plant or piece of infrastructure.

I am not against transformation, but I have a few very simple and logical questions:

1. Under the privatization plan, many of the Fund's companies will move to the private sector. The results of the transformation will not take effect for three to four years at the earliest, and by then the state's participation in the national welfare fund should have shrunk considerably. Why undertake a transformation at all? It would be better to focus on privatization and speed up the sales. When private investors arrive, the companies that have been sold will in all likelihood be transformed all over again.

2. The simplest and most effective way to transform is to create a proper, elected management with a sound system of rewards and penalties, and to ensure that independent directors form a majority on the companies' boards. Good management will do everything itself, without any consultants or specially created companies.

3. What is the purpose of Samruk-Kazyna? Can anyone tell me? KazMunayGas, Kazakhstan Temir Zholy (KTZ), Kazatomprom, Air Astana, Samruk-Energo, KEGOC and Kazakhtelecom are fairly independent companies that do not, in principle, need the Samruk-Kazyna fund. Their weight and influence are so great that they are masters of their own house, no offense to anyone. For them, Samruk-Kazyna means a bigger role for bureaucracy, an additional superstructure and, as a consequence, lower efficiency. The remaining companies are small fry: they are unprofitable and carry no such significance.

Go to the Samruk-Kazyna website and open the section on subsidiaries, where you would expect information on assets, profit and other key indicators. In fact, the data is filled in for only a few companies; for the rest, there are zeros.

The consolidated statements for the first three months of 2016 show that consulting expenses alone across the Fund's group of companies came to KZT 4.6 billion or more, up 35% from the same period last year. For the whole of 2015, total consulting expenses there came to KZT 26.5 billion! If we extrapolate the growth in expenses to this year, the 2016 figure will be even larger. Yes, the effect of the devaluation must be taken into account, but even so, growth for 2016 can be forecast at around 20%, which is roughly KZT 32 billion, or $92 million!

That kind of money could build three modern greenhouse complexes of 15 hectares each, or several plants, or about 180,000 square meters of housing.

Of course, criticizing is the easy part. So let me note that there are good things in Samruk-Kazyna's work as well. I consider the Fund's most significant achievement to be the creation of a system for collecting and preparing financial statements. It is at a very high level at the Fund and is published fairly promptly.