- About "manual control"
- About discriminatory support measures
- About the problem of low utilization of processing capacities
- On the export of finished products with high added value
- On foreign markets for agricultural products and products of its processing
- On the importance of an objective balance of supply and demand for sunflower seeds
About "manual control"
In recent years, it has become especially noticeable how government agencies, actively using "manual control", interfere in market relations. They are trying to solve the problems of providing the population with inexpensive products, the development of domestic agricultural engineering, enterprises for the processing of agricultural products. At the same time, they often do not compare the adequacy of the measures taken with the expected results, do not analyze the negative impact of such measures on other market participants, and do not try to correct previously made ineffective decisions.
It has become the norm that government agencies do not take into account the arguments of industry unions about the need to change the situation and restore the balance of interests of a huge number of agricultural entities and a limited number of industrial enterprises. Often, in order to substantiate their positions, state bodies refer to the instructions of the President of the country on the need for import substitution, the development of domestic industry, and an increase in the export of processed products. But for some reason they keep silent about the fact that these instructions, by definition, are about supporting and developing enterprises capable of producing products that are in demand and competitive on the domestic and foreign markets.
Since not all enterprises are such, objective questions remain unanswered: what to do with enterprises that have received state support for many years, but have not achieved the expected results? Continue to support them or apply bankruptcy proceedings against them? How to recover from them the resources spent by the state?
Today, it turns out that, without an objective assessment, government agencies continue to use the limited resources of the state to support all industrial enterprises: both efficient ones that can continue to work without state support and those that are no longer worth supporting further. And this is often done to the detriment of other market participants.
Do government agencies understand that such a policy in the interests of several industrial enterprises affects the well-being and solvency of Kazakh farmers - the main consumer of agricultural engineering products and a supplier of raw materials for processing enterprises?
About discriminatory support measures
In recent years, along with the adoption of objectively necessary measures of state support for industrial enterprises, decisions have been made that are of a discriminatory nature.
So, objectively, in the interests of domestic industrial enterprises, the rates of import duties and VAT have been zeroed, the rates on loans for replenishment of working capital are subsidized, investment subsidies are applied for capital costs, transport costs are subsidized when exporting processed products, etc. In general, with such state support measures, domestic industrial enterprises have every reason to increase their competitiveness against imported goods suppliers. Everyone expected that the government agencies, after a certain time, would evaluate the effectiveness of the implemented state support measures in the context of each industrial enterprise, and on the basis of this they would draw the necessary conclusions.
But we see that government agencies continue to support industrial enterprises, using, in addition to objective measures, other discriminatory ones. Their essence lies in the fact that due to the lack of demand for products manufactured by some domestic industrial enterprises, and huge resources spent over the years to support them, government agencies are trying to stimulate their sales by limiting farmers' right to freely choose to purchase goods used in agricultural production. .
On the example of agricultural machinery, it can be seen that government agencies have established an unreasonably high amount of the recycling fee by regulatory acts and, in addition, introduced such norms of subsidies for the purchase of agricultural machinery that many farmers are forced: either it is very expensive to purchase the imported agricultural machinery they need, or it is relatively cheaper to purchase domestic, which is not suitable them for any reason, including production.
Such discriminatory measures support a few factories, but, at a minimum, slow down the rate of renewal of equipment for farmers focused on imported equipment, and also limit their ability to increase labor productivity. And there are thousands of such farms that form the basis of the country's agricultural production!
About the problem of low utilization of processing capacities
You can often hear from the initiators of the introduction of restrictions, duties or a ban on the export of agricultural products about the existing problem of low utilization of processing capacities. But why are government agencies concerned about this problem? Isn't the issue of ensuring capacity utilization, first of all, the problem of the plants themselves? Especially in a situation where the introduced capacity, for example, for the processing of oilseeds, is 3 times higher than the annual production of sunflower seeds.
Why did some entrepreneurs, knowing about the existing systemic shortage of raw materials, still decide to build, while government agencies continued to support and report "to the top" on the construction of the next plant? Didn't they realize that they were exacerbating the problem of capacity utilization? Why should other market participants now be responsible for the consciously accepted entrepreneurial risks of plant owners and shortcomings of state bodies with their income? And the introduction of restrictions on the export of agricultural products to ensure the utilization of the capacities of factories is considered only as a restriction of the entrepreneurial activity of some market entities in the interests of others. But what if, after evaluating the effectiveness of the measures taken, it turns out that the expected results are not achieved? Will the persons who initiated and made such decisions bear responsibility? Considering that these decisions led to a significant decrease in business activity and commodity turnover in the market, a reduction in the income base of entrepreneurs, tax and foreign exchange earnings.
On the export of finished products with high added value
As for the statement about the need to support the export of flour and crude oil as products with high added value, it should be borne in mind that these are primary processing products and raw materials for the production of finished products (pasta and confectionery, refined oil, margarine and mayonnaise).
Refined oil in Kazakhstan is produced by 8 full-cycle plants out of 44 operating ones. The rest of the plants are still technologically tuned for primary processing and production of crude oil. The capacities of our 8 full-cycle plants allow us to meet the domestic demand for refined oil and take a worthy place in foreign markets. It is these factories that, first of all, need state support measures to promote their finished products to China, Uzbekistan, Tajikistan, Afghanistan and Kyrgyzstan.
But today the main supplier of refined oil to the countries of Central Asia and Afghanistan is the Russian Federation. Its share in the total supply volumes of the Russian Federation and the Republic of Kazakhstan ranges from 82 to 100%. At the same time, the opposite picture is observed for the supply of crude oil to these countries.
It turns out that Russia in the Central Asian markets specializes in the supply of refined oil, and Kazakhstan - raw. So, according to the customs statistics of the Republic of Kazakhstan (for September-December 2021), in the structure of Kazakhstani exports of sunflower oil to Uzbekistan and Tajikistan, crude oil occupies 76%, refined oil - 24%. Thus, due to the increase in the supply of crude oil, we are reducing the ability of 8 of our plants to increase the supply of refined oil there.
Interesting fact. One of the Kazakh plants with foreign participation, producing crude oil, is in no hurry to introduce a full-cycle plant in Kazakhstan with the production of refined oil. Perhaps this is not in the interests of its parent company, which can supply Central Asia with its finished products with high added value, and it does not benefit from competition from Kazakh factories.
On foreign markets for agricultural products and products of its processing
The fact that our neighbors are interested in their own production of socially significant food products is beyond doubt, since objectively (just like Kazakhstan or any other country) they are concerned about ensuring their food security. And it is impossible not to accept it.
Objectively, they want to use primarily wheat and oilseeds as raw materials, and not flour or crude oil. Our neighbors are completely dependent on Kazakhstan for the supply of primary raw materials. And if we do not provide them with such raw materials today, then tomorrow they will import it from other countries. And when they join the EAEU, we will have to compete with Russia for the markets of our neighbors. Obviously, in such a situation, the difficulties for our exporters of raw materials and finished products will noticeably increase. The markets of our neighbors are our main markets for almost all types of agricultural products and products of its processing. Is such a development of events taken into account in the strategic documents of our government agencies?
Therefore, it is extremely important for us not to spoil the existing ones, but for now there is time to build long-term partnerships with our neighbors and instill in them confidence that Kazakhstan is a reliable partner for them, providing them with stable supplies of primary raw materials, and not forcing them to purchase flour and crude oil, taking advantage of time.
On the importance of an objective balance of supply and demand for sunflower seeds
Every year, when forming the balance of supply and demand for sunflower seeds, it is proposed:
- Estimate the volume of production and import of oilseeds.
- Determine need:
- domestic full-cycle plants in raw materials for the production and supply of refined oil to the domestic market;
- for seed and fodder purposes;
- domestic full-cycle factories in the raw materials for the production and increase the export of finished products with high added value.
The volumes of sunflower seeds calculated in this way should not be exported from the country. And the export of finished products, provided that domestic needs are met, should not be limited.
Determine the export potential for sunflower seeds. Within this volume, constant market demand must be maintained by crude oil producers and grain traders. Only in this case, the purchase price formed by them will be the market price, which is necessary for farmers.
- Introduce export monitoring. Such a measure does not contradict the EAEU Agreement. Its essence lies in the monitoring of export shipments and, after the development of the export potential, the introduction of a complete ban on the export of oilseeds and crude oil.
- In the event of a total ban on the export of oilseeds and crude oil, establish a fixed purchase price for full-cycle plants in a “corridor” agreed with industry unions representing the interests of plants and farmers. If necessary, revise the “corridor” of prices.
The Grain Union of Kazakhstan once again calls on government agencies to accept the fact that the entire agribusiness and related industries depend on the well-being of farmers and the stability of their solvent demand: manufacturers and suppliers of agricultural machinery, seeds, plant protection products, fertilizers, enterprises for processing agricultural products and producing products food, grain traders, as well as transport companies and a large number of other service companies. Therefore, in all program documents and decisions of state bodies, it is necessary to adhere to the approach that the main beneficiary should always be a farmer!