Kazakhstan's Big Business Is Resource-Based and Lobby-Driven
Translated from Russian with the help of AI. Original: Russian version
Kazakhstan's large businesses are largely resource-based, oligopolistic and closely tied to the state, and they lobby skillfully for their own interests. The author argues for equal access to state benefits and for stronger protection of competition.
Looking at Kazakhstan's big business in broad strokes, one major conclusion emerges: much of our business is resource-based, lobby-driven, oligopolistic and closely tied to the state. Let me try to explain why. Unfortunately, among our large companies there is none that grew from scratch and was built on creating a genuinely unique product. The country's leading businessmen made their fortunes on natural resources, on the privatization of the Soviet legacy, or through state tenders and preferential state loans, which gave them a substantial advantage over everyone else. This is, in principle, typical of any developing country. But there is one important caveat: the state itself should minimize the growth of this kind of business, and in our case, regrettably, it does not yet do so. The state declares the right goals, aimed precisely at combating such businesses, but in practice the result is the opposite. Businesses with significant connections inside state bodies at every level lobby for their interests very skillfully, and the lobbying happens in the details, which you will not see from the top. Setting aside cases of direct vested interest, it is important to understand that the level of expertise among business specialists is an order of magnitude higher than among civil servants. In a direct debate, a businessman will always prove his case for developing this or that sector, showing how supremely important it is for the state itself. Of course, in time all of this comes to light and is corrected, but by then it is too late, because a monopoly position has already formed.
Lobbying for the interests of individual companies sharply reduces competition, leads to the monopolization of markets and, as a consequence, stunts the development of the sector as a whole. In our country the notions of a sector and of a company are conflated: the growth of a company does not mean the growth of its sector, because, as a rule, the growth of such companies comes with the exit of other players from the market.
There are many examples of such distortions: tax breaks for the mining sector, the construction of shopping and entertainment centers with the help of cheap state programs, the recycling fee justified by environmental goals, the development of e-government services through selected banks, various restrictions on consumer lending, loan write-offs, the distribution of pension money, bank bailouts, and so on.
It is therefore important to build a mechanism that protects against this kind of protectionism for selected companies.
The first principle that should govern state programs is equal access to state benefits and preferences. If equal access is not possible, such benefits should simply not exist. Suppose, for example, we want to develop a particular sector, but only two companies operate in it. Clearly, those two companies will receive all the preferences, and the sector will become even more closed to everyone else. Telecoms, the automotive industry, construction and many other sectors are in exactly this position. With limited resources, the state cannot know which sector matters most for the country, and so programs should be designed for all sectors.
The second principle should be consistency between the decision and the strategic goal. If a short-term measure does not serve the long-term objective, it should not be adopted. For example, the recycling fee has nothing to do with protecting the environment. It has become a prohibitive barrier to buying cars that are not that old but are cleaner than very old ones, and it has raised the price of cars already imported into the country, while domestically produced cars have not become any cheaper.
Third, the programs themselves should aim to create free competition, freedom of doing business and a more liberal economy. As the saying goes, animals do not breed in captivity; in the same way, business grows only where there is freedom.
Businessmen are always looking for ways to make easy money, so lobbying, cartels and monopolies are a natural path of development. The point is that the state must restrain such behavior and steer businessmen toward creating added value.