Anti-Geracles Mamytbekov: 12 “labors” of the former minister who ruined Kazakhstan’s agricultural sector

The arrival of Asylzhan Mamytbekov in the agricultural sector of Kazakhstan took place exactly 11 years ago. In November 2008, when he headed the KazAgro holding company. During this time, he managed to make “labors” no less than the ancient Greek Hercules. And if the ancient hero for his 12 great achievements fell into the group of gods of Olympus, our antihero – in the group of meat oligarchs of the country, heading the Meat union of Kazakhstan.

 Let’s remember all those steps that led the agricultural industry deeper and deeper into hell, and Mamytbekov himself was raised higher and higher.

Currency bomb

Let’s start with the first place of work of anti-Heracles – KazAgro. In 2008, the holding received the first serious money, 120 billion tenge, allocated from the National Fund to support the agricultural sector during the crisis. And then Asylzhan Mamytbekov was at the head of this tidbit.

 What is the result of 11 years of existence of the quasi-state monster? In the first half of 2019, the Accounts сommittee conducted an audit of the holding KazAgro. The results are discouraging and make us conclude that the holding’s management purposefully “squandered” the funds generously allocated by the state to support agriculture. As a result, the holding company is in the red.

Obviously, Asylzhan Mamytbekov, who laid the foundations of this “curve” scheme, should be responsible for this. From 2008 to 2011, he was directly in charge of the scheme, and in subsequent years (2011-2016) he influenced policy as the country’s Minister of Agriculture.

Since its establishment, the state has been generously replenishing the assets of  KazAgro Joint Stock Company. As a result, they were formed at the expense of the republican budget, as well as at the expense of debt securities issued. In particular, in order to finance the project of “support for the elected” (Financial Rehabilitation Program), in 2013 – 2014 KazAgro JSC issued Eurobonds in the amount of $1 billion (maturing in 2023, interest rate 4.625%) and 600 million euros (maturing in 2019, interest rate 3.255% per annum).

It was eurobonds (loans in foreign currency) that became a time bomb, which worked in 2015, after a double devaluation of the tenge. Servicing the foreign currency debt became a burden that plunged the holding into astronomical losses. In general, the amount of “burned” money in the holding is estimated by auditors at 400 billion tenge!

Money for banks

In addition to currency risks, another mine under the stability of KazAgro holding was the funds actively placed in second-tier banks. Why? Let’s remember that Mamytbekov did not get tired of repeating that the holding should earn, as if forgetting about the mission of KazAgro, its main task, designated at the time of creation – the financing of the development of agro-industrial complex of Kazakhstan. So he placed billions of tenge on deposits.

Thus, over the period 2016-2018, 261 billion tenge of KazAgro Holding were “burned”, placed in troubled banks! Including:

 1. In Delta Bank JSC for the amount of 61 billion KZT, it is both the amount of loans issued as part of the financial rehabilitation of troubled agricultural holdings (49 billion KZT), and the funds simply lying on the bank’s accounts (12 billion KZT).

2. In KazInvestBank JSC for the amount of 6 billion KZT, which were held in the bank accounts.

3. In QazaqBanki JSC in the amount of 4 billion KZT. Including loans under the financial rehabilitation of agricultural holdings ( 315 million KZT), as well as loans in the bank’s accounts (4.6 billion KZT).

4. In Bank RBK JSC – 49.6 billion KZT – loss from securities depreciation.

5. In Bank of Astana JSC – for the amount of  5.8 billion KZT in loans issued as part of the financial rehabilitation of agricultural holdings.

6. In TsesnaBank JSC – 172 billion KZT issued as loans within the framework of financial rehabilitation of agricultural holdings.

How decisions were made to place the holding’s funds in one bank or another, one can only guess. But we may be prompted by this fact: it was Asylzhan Mamytbekov who left the position of independent director in the bank of Astana in 2016… There are close ties.

“Prodcorporation” speculations

Despite Mamytbekov’s attention to banks, the involvement of BVI in lending to agriculture in Kazakhstan has always been insignificant. Thus, the maximum volume of lending was recorded in 2014 – KZT 10 billion (share of 5.8%), the lowest – 5.5 billion KZT in 2015 (share of 3.3%).

Therefore, the republican budget began to allocate funds for crediting spring field and autumn harvesting works through KazAgro. In recent years, the amount of financing for the season is 60 billion tenge.

The main claim of farmers is that these funds are too expensive for them (about 14% per annum), while the holding KazAgro receives them almost free of charge, at 0.1% per annum. That is, instead of supporting farmers, the holding simply earns money from them.

Another unsolvable issue that cannot be solved for years is the term of repayment of the loan issued for spring field and cleaning works. According to the current situation, the peasants have to pay off by the 1st of December. “KazAgro explains this requirement by the need to meet the financial year.

However, this procedure causes losses to farmers, as it forces them to sell their crops in autumn, when the price of agricultural products drops due to seasonal factors. The difference in the price of grain in autumn and at the end of winter – beginning of spring may be 50% or more.

This fact has been cleverly used by ProdCorporation, another daughter of KazAgro. Buying grain from peasants for nothing in the autumn, it resells it at a higher price in spring, earning huge sums of money on the flat spot – to the detriment of the profitability of the peasants themselves.

Mamytbekov – the friend of the oligarchs

At the same time, the main amount of funds from KazAgro was allocated to “agrarians” close to the Ministry of agriculture of the Republic of Kazakhstan. Such oligarchs from agriculture, becoming rich at the expense of state support, but not at the expense of competent work. For example, in 2015, 203 billion tenge was issued through KazAgro holding structures to 15,000 borrowers. At the same time, 50% of direct financing accounted for 1% of borrowers!

The result of this approach was the well-known problems of grain holdings, which were collecting debts while their owners were collecting fabulous fortunes.

In February 2017, the President of Kazakhstan Nursultan Nazarbayev expressed his opinion on the large debts of the country’s agricultural holdings and instructed to solve the problem.

“In the red. How will they work next? What should we do? Consider this issue and take measures,” Yelbasy instructed.

Soon the holdings were taken over by new managers, who have not yet managed to solve all these multimillion (in dollars) problems.

Terminal for their own.

In addition to direct losses recorded in the financial statements, there are those that cannot be estimated. Let’s denote it as a loss of profit, which, because of the schemes created by Asylzhan Mamytbekov, flowed past the state budget into someone else’s pockets. An example is the grain terminal “Ak Bidai” of Aktau International sea port.

Grain producers in 2011 faced the problem of overloaded grain terminal “Ak Bidai”. The capacity of shipment in different years was from 600 thousand to 700 thousand tons per year. And this is with the export capacity of the country about 10 million tons. It is clear that applications from traders wishing to sell grain exceeded the limit.

Did this fact upset the Minister of agriculture? Did he try to increase the terminal’s capacity? Not at all. As in many other cases, the deficit played into the hands of those who controlled the situation.

That is, there was no transparent order of priority for shipment. The companies that applied to the terminal with export contracts in their hands had no chance to ship – if they did not get the good from Asylzhan Mamytbekov personally.

How exactly did they get this? This is the reason for the investigation by the competent authorities.

Rusty machinery

Another “friend” of Asylzhan Mamytbekov is a dealer of imported equipment in Kazakhstan. Instead of developing domestic machine-building, the minister put all the country’s farmers on foreign tractors and combine harvesters, which was very expensive (and still costs – for Kazakhstan.

Today, Kazakhstani farmers are almost entirely dependent on foreign producers. And, therefore, they are most painfully affected by the depreciation of the national currency. Even large agricultural enterprises cannot afford a full-scale renewal of the equipment fleet.

For example, as of 2012, 71% of grain harvesters, 93% of tractors and 95% of seed drills in Kazakhstan were subject to write-off. Overall, depreciation of the agricultural machinery fleet was estimated to be in the range of 87%.  According to the analysis of the Ministry of agriculture of the Republic of Kazakhstan for 2012-2016, the energy-to-energy ratio of agriculture in the country was estimated at 30-40 horsepower per person by different types of machines. While in the USA, for example, this figure is 300 hp/person, in Germany it is 500 hp/person.

The current situation forced (and forces) agricultural producers to incur huge annual costs for overhaul and maintenance of the equipment fleet. Thus, in 2014, the cost of repairing tractors and combines amounted to 12 billion 393 million tenge. On average, experts estimate the annual increase in the cost of repairing agricultural machinery at 30%.

Experts believe that due to outdated equipment Kazakhstan annually loses up to a quarter of its harvest. That is, about 5 million tons!

Mills betrayal

Another issue related to the development of domestic production is the milling industry. As minister Asylzhan Mamytbekov forgot about it, as well as about mechanical engineering.

It should be reminded that for four years in a row Kazakhstan held the leading position in the world in flour export: in 2007 Kazakhstan took the first place in the world in flour export with the volume of 1 million 454 thousand tons, ahead of Turkey and the European Union. Volumes continued to grow, reaching a peak of 2,296.7 thousand tons in 2010. However, since 2011, when Asylzhan Mamytbekov took up his ministerial post, the decline has begun and Kazakhstan has lost its global leadership.

The fact is that in his new position Mamytbekov immediately began to look for opportunities to maximize the profits of grain holdings, with which he had close ties since his work in the Kostanai region. He came up with the idea… to subsidize the transportation of wheat to the Black Sea ports! The subsidy on transport costs per ton of wheat was $40. In total, for 2011 – 2012 the Ministry of Agriculture requested 15 billion tenge, later it decided to ask for the same amount for the marketing year 2012-2013.

It should be noted that this decision ran counter to the instructions of the President of the Republic of Kazakhstan to develop agricultural processing and try to sell finished products, not raw materials. This did not stop Mamytbekov from driving grain abroad.

At some point, grain producers decided to bring grain to Central Asia, just in the direction where only Kazakhstani flour used to go. Having gone in one direction, the two goods created a competition with each other. And importers faced the choice that it was more profitable for them to buy. It is quite logical that they made a choice in favor of grain, at the same time starting to actively develop their own flour-milling industry.

This is how Asylzhan Mamytbekov, in fact, betrayed the national interests of the country in order to support the business of grain producers close to him.

Meat policy failure.

The most ambitious project by Asylzhan Mamytbekov “Development of export potential of cattle meat in the Republic of Kazakhstan” was launched in 2010. To fulfill the task of development of animal husbandry in the Ministry of Agriculture decided to improve the genetic potential of the domestic herd. The then team of the Ministry headed by Asylzhan Mamytbekov promised that the import of breeding bulls and heifers from abroad will solve all the problems of the industry. At the same time, farmers were “forgotten” about the provision of feed and pasture for them.

During the first two years of the project, in 2012 and 2013, the country imported 40.5 thousand heads of cattle (112% of the plan) from abroad. The costs were estimated at tens of millions of dollars, as imported livestock cost many times more than local ones.

The main objectives of the project are to increase the number of cattle by 2020 by 61% compared to 2010, as well as to increase beef exports to 60 thousand tons in 2016 and 180 thousand tons in 2020. All these goals have been failed, and the millions of dollars spent on the project have not brought any effect to the agar industry. On the other hand, it was this project that dragged Mamytbekov himself into the ranks of meat oligarchs – and the chair of the head of the Kazakhstan meat union.

“Grey” scheme

The failure of the meat project was one of the reasons for Mamytbekov’s dismissal from the post of minister. However, soon after Umirzak Shukeyev took over the post of the head of the Ministry of Agriculture of the Republic of Kazakhstan, Asylzhan Mamytbekov also returned to the agrarian department, and now – to the post of executive secretary. He immediately decided to revive the meat program, inventing a new way of enriching cattle breeders at the expense of the state.

This time the money from the budget flowed into the pockets of the members of the Meat Union through subsidies. The scheme was ideal: the rental of bulls – the same angus, which they had previously imported into the country during the first meat project.

So, the breeding reproducer leases its pedigree bull to the farmer free of charge. For this he gets the right to buy the young (which is already considered pedigree) for 350 thousand tenge. The government subsidizes 150,000 tenge to buy a pedigree bull, and another 100,000 tenge to pay for the maintenance. In total, 250 thousand state support – and the bull costs the breeding reproducer only 100 thousand tenge of its own funds. At the same time, there are practically no costs. Having kept the bull fattened for a couple of months, the breeding reproducer sells it for meat for more than 400 thousand tenge. That is, a profitability of 300 percent!

Everything ended up with the fact that the entire team of the Ministry of agriculture of the Republic of Kazakhstan was replaced (we hope that now it is forever), and the government refused to allocate tens of billions of additional subsidies, which were expected by cattle breeders.

Qoldau’s “jambs”

Asylzhan Mamytbekov’s second coming to the Ministry of agriculture of the Republic of Kazakhstan was marked by another innovation – a hasty creation of a new system of distribution of state support using the portal The  portal was launched in February 2018.

Only the creators themselves benefited from this system, and ordinary farmers still cry today – because of the numerous technical “jams” and unresolved system issues, they are unable to apply in time for subsidies and other government support tools.

In addition, the additional risk is that Kazakhstani agricultural producers upload full personal data, data on their business and property into the system. In fact, someone can get full access to all the information about the state of Kazakhstan’s agribusiness sector at the touch of a button: arable land and pastures, loans and insurance, distribution of diesel fuel and wheat purchase, transport logistics and tax accounting, and so on! The total capacity of the databases presented on as of February 2019 is 60 terabytes! It is terrible to imagine what can be done with this amount of information, if it falls into the wrong hands.

Land to latifundists

Asylzhan Mamytbekov, the head of the agrarian department, left his post in May 2016 on a wave of land rallies across the country. Residents of Kazakhstan protested against officials’ plans to start selling the country’s agricultural land, including to foreigners.

Mamytbekov’s role in this was overshadowed. But in fact, it was Mamytbekov who was preparing for the mass dispossession of the country’s peasants of the land that fed them. And they, for some reason, liked the latifundists. If Mamytbekov’s plans had come true, we would have gotten such a situation very soon: most of the pastures and arable land in Kazakhstan is owned by a bunchof land oligarchs. At the same time, they wouldn’t do anything on the ground themselves, but only rent it out to those who are now forced to spend money on yesterday’s officials.

Mamytbekov and his comrades-in-arms prepared a whole mechanism (increase in tax, redemption obligations, prohibition of rent, etc.) that would allow to take away land from any farmer if this land plot was liked by the strongest of the world.

The corruption leader

In 2012, the “Nur Otan” party ranked the Ministry of Agriculture of the Republic of Kazakhstan second among corrupt officials, immediately after the Ministry of internal affairs of the Republic of Kazakhstan. Oralbai Abdykarimov, chairman of the “Nur Otan” Republican public council for combating corruption, said:

“You witnessed the prosecution of heads of key departments who were convicted of corruption offences 2-3 years ago, not to mention how many were transferred in the regions and districts”.

The statistics was as follows: in 2011, 35 employees of the Ministry of agriculture were convicted. Criminal proceedings were initiated against 45 employees. Disciplinary action was also taken against 80 employees for corruption offences. Among these individuals, 25 were managers of various levels.

The most notorious scandal was the detention in 2014 of Vice Minister of Agriculture Muslim Umiryaev, who was accepted by the finance police directly in his office when an entrepreneur gave him a bribe to assist him in obtaining government orders. Asylzhan Mamytbekov said he did not believe Umiryaev was guilty. And he vowed that if the court did recognize him as a corrupt man, he would voluntarily resign.

Soon Umiryaev got 10 years, but Mamytbekov forgot about his promises. That’s how they were sitting – the former vice-minister in prison, and Mamytbekov – in the minister’s chair. Although, given all the above “labors” of anti-Herakl Mamytbekov, the correctness of this disposition raises questions. Moreover, everyone knows that the fish begins to stink at the head.

I gave birth to a mouse

Well, the bonus is the thirteenth anti-Heracles feat – the birth of a mouse. Since 2012, Asylzhan Mamytbekov has been firmly glued to the nickname of MGBM- the first letters of the phrase “Mountain Gave Birth to a Mouse“, which Nursultan Nazarbayev characterized as the result of the work of the Minister of Agriculture in the main areas identified by the President.

According to the Accounts committee, under Mamytbekov’s leadership, the agency allowed the misuse of several billion tenge. Nursultan Nazarbayev recalled this “work” to minister Mamytbekov: “You, Mamytbekov, have ruined everything in KazAgro. Do you want to fail at the Ministry of Agriculture, too“, the president was outraged.

In a good way, this phrase should have been enough for the collapse of the political career of the unsuccessful top manager and politician, but the public intercession of Umirzak Yestayevich, who actually covered his ward with breasts, slightly delayed the high anger.

“All over the world, agriculture does not exist in isolation from processing. Such a structure has not yet been built in Kazakhstan. This is a traditional, historical disadvantage. We are doing something, but the Ministry of agriculture does not yet carry out a comprehensive, concrete work. In addition, the Ministry of agriculture has been instructed to take measures to transfer veterinary science to international standards. Without this export of meat there can be no quality. At the beginning of 2012, only 27 out of 126 veterinary laboratories were built out of 126 planned last year. The mountain gave birth to a mouse as a result of your work,” – the President of Kazakhstan criticized the Minister of Agriculture at a government meeting. That’s the best you can do.

Myrzabek Smagulov

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