Michael Paterson
Almaty, June 4
(THE GLOBE)
The relatively small attendance at this year�s Almaty Investment Summit, held on June 3-4 at the Regent Ankara Hotel, should not be surprising considering the continued low prices of commodities, unresolved transportation routes for oil, and the lingering aversion of investors to emerging markets.
Organized by the International Herald Tribune, the list of speakers including the President was impressive. Unfortunately, the 15 to 20 minutes allotted for each presentation did not allow for in depth discussions.
For the international economic organizations, Kazakhstan continues to be at a �key juncture�. Government officials repeatedly stressed the number of possibilities offered by the Republic, though there remained �room for improvement.� Investors meanwhile talked about the inflexibility of tax inspectors, bureaucratic difficulties, the need for better laws, and corruption. Of course, most of the information presented is well known and freely available on the internet, or many government and business organizations.
The US$2000 entrance fee would be more justified and fruitful if a �frank� discussion about the unofficial costs of business was offered. For example how much one should expect to pay for the various costs of licences, permits, and other paperwork, how much to speed up the process, how much to pay to employee and support officials� relatives, etc.
The highlight of the summit (at least for me) was the Discussion panel on tax and customs procedures for investments. The presentation of B. Keith Byer, Managing Director, Central Asia, Deloitte and Touche on financial accounting and reporting, the recoverability of assets, contingencies and particular Kazakhstani tax considerations was especially pertinent. Minister of State Revenues, Zeinulla Kakimzhanov, straightforwardly confirmed that budget strains do not allow the government as much flexibility as it would prefer. Nevertheless, Kazakhstan has improved its legislation, and according to Daniel A. Witt, International Tax and Investment Center, compared to some other CIS countries is quite good.
The problem, Witt repeatedly stressed, is that the government has yet to ensure that the legislation is properly and fairly implemented. This is absolutely necessary in order to ensure the continuation of investment.
In order to improve the quality of investment, the government must also reinvest in the people and infrastructure. A large percentage of Serik Burkitbaev, Minister of Transportation, Communication and Tourism�s presentation was about the costs of Kazakhstan�s inadequate transportation system. Holger Ronquist, Regional Director of Eastern Europe and Central Asia, Ericsson, unsurprisingly outlined the returns of investing in telecommunications.
Though touched upon by Horst Kohler, President of the European Bank for Reconstruction and Development, beyond the obligatory statements that Kazakh workers were well educated and cost competitive, there was very little discussion about the importance of investing in the people of Kazakhstan. Perhaps next year a session could be devoted to the development of the Kazakh workforce, and what training and educational programs have been set up. Just as importantly, what has been done to support the highly trained non-business sector, such as doctors and teachers, essential for providing and maintaining an educated and healthy workforce.
Unfortunately, the budget will continue to be strained and the aforementioned impossible, until Kazakhstan is emancipated from the anti-productive class. As long as formerly communist bureaucrats, managers, and government officials continue to strip factories, transfer money from natural resources to Switzerland or Cyprus, and impede business with overwhelming tax and bureaucratic demands, neither domestic nor (outside of the natural resource sector) foreign interests will have much incentive to invest.
Dear Mr. Editor,
I read Mr. Jack Enen�s story of investing and working in Kazakhstan with a great deal of interest in The Globe special issue #44. As a former businessman and teacher of public administration, I can relate to his experience on two accounts. First, Mr. Enen made the same mistake of many business persons around the world, that is, extending too much credit to �deadbeat� customers. Credit properly used can enhance any business but when trusting business relationships fail, credit is the bane of business. I learned this lesson quite early in my business career, fortunately not the same way as Mr. Enen.
My second comment deals with the government and the need for education of bureaucrats, viewed through the prism of being both a businessman and teacher. My impression of the Kazakhstani government, based on two years of living and working with so many wonderful people in this country, is that most government officials do not have a clue how a business and jobs contribute to a nation�s economy and society. In my capacity as a teacher, I have long advocated to my public administration students at KIMEP that they need to understand how the private sector works (i.e., they should start a business for themselves) if they hope to become effective bureaucrats for their country. A nation that does not indulge the private sector and over-taxes it is doomed to certain failure; a business without a net profit cannot operate and therefor must close its doors, like Mr. Enen is doing.
Do I have a solution? Yes, but it is very protracted and not easy. It is an education process for government bureaucrats, especially the aspiring ones in the universities. Universities need to teach a new cross-disciplinary curriculum that addresses the concerns of the private sector as well as the public domain. Courses on the order of �Introduction to Public-Private Cooperation 101� would be a good start to bridge this chasm.
In Kazakhstan, current civil servants need retraining, not only in Astana and Almaty, but in the Oblasts as well. And this training needs to incorporate how the public sector must work with private business, just as Mr. Enen so vividly describes the need. I believe the civil service retraining programs currently sponsored by TACIS and others are too narrow, since the only concern is about reorganizing Kazakhstan�s civil service in the image of western bureaurcracies, some of which lack progressive thought as well.
Moreover, finding qualified people to teach the new cross-disciplinary curriculum that I am proposing is not an easy task; it is a subject that cannot be taught from a book by academics or even by professionals with only experience in one sector or the other. Ideally it must be taught by people with prior professional experience in both sectors. To my knowledge such curriculm does not even exist in western institutes, but they should.
Obviously more work needs to be done. In Kazakhstan, I would start in the Mangistau Oblast with the bureaucrat who, according to Mr. Enen, took gleeful pride in eliminating the hundreds of jobs in the Aktau and Zhambyl areas with his power. This bureaucrat needs to know that it is the private sector that pays his government salary.
In conclusion, I would challenge the western donors to do more. Soros, TACIS, USAID, the Japanese, the Koreans, and other country and NGO donors need to bridge this cross-disciplinary gap and advance the concept of public-private sector cooperation. Bureaucrats, young and old, need to understand how wealth is created. Such an effort can only be a win-win situation for everybody, and perhaps obviate the experiences of the likes of Mr. Enen while contributing to the economic and social development of Kazakhstan.
Thank you very much for giving me the opportunity to voice my opinion. Sincerely, Marvin E. Nowicki
For Nurlan: I hope you will print this letter. Of course, the last time I wrote you a letter, which was in 1996, you called me a communist (smile). Remember?
I leave Kazakhstan in less than two weeks, having arrived last September on a Fulbright Scholarship. MEN
- Marvin E. Nowicki, Ph.D. Director of Research Policy Research Center (rm. #224) Kazakhstan Institute of Management, Economics and Strategic Research (KIMEP)
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