The agricultural industry of Kazakhstan will save its Trump

Kazakhstan’s agribusiness is like a giant on clay feet. With all the tremendous potential, with all the desire of ordinary farmers to work for the good of the country, the foundation of the industry, created by officials, is so unsteady and muddy that it does not provide an opportunity for confident development, writes

“Everything is rotten, everything is corrupt, everything is on bribes,” the farmers say with regret.

Only a leader who thinks like a businessman, and not as a corrupt official who has only one goal – to stick to a budgetary feeder can change the situation. Only the Kazakhstan version of Donald Trump, who came to power from business to make his country economically strong, will give Kazakhstan’s agribusiness a boost. And consistently upholding these plans.

Unlimited prices

Weaknesses and strengths of any system appear at the time of crisis. So the current situation with quarantine restrictions exposed all the weakness and stupidity of the agrarian state policy in Kazakhstan. First of all, we are talking about the introduction of marginal food prices and export restrictions. 

The first is prices. Having collapsed the tenge rate to please the already fattening oil industry workers and other exporters of raw materials, the country’s comprador government once again (which already counts!) Once knocked the ground out of those sectors of the economy where real production and processing is somehow developing. First, we are talking about the agro-industrial complex, which is completely and completely dependent on imported means of production – after all, for all the fake “five-year industrialization periods” in the country they have not learned how to produce either their agricultural machinery or agricultural chemistry. Even for grain seeds, Kazakhstan is already more than half dependent on supplies from abroad. That is what many years of neglect of national interests led to! And to put it bluntly – their betrayal.

So, overnight, spare parts for agricultural machinery jumped in price by 20 – 30%, as well as agricultural chemistry. The government turned a blind eye to this fact, in no way calling dealers to account.

But, it is very careful to ensure that the farmers themselves (trying to scrape up money to prepare for sowing) suddenly do not “overstate” the prices of their products. To do this, officials set limits for them, and now monitor the implementation of the rules, arranging raids on retail outlets. 

There is a feeling that statesmen do not understand the elementary thing – a business cannot operate at a loss, selling goods below cost. Therefore, now, when they are talking about lowering prices, they are simply killing our production. If the farmer realizes that he will not be able to sell his crops profitably in the fall, he will simply not sow in the spring.

Although, perhaps, officials understand all this very well – and simply want to return to Soviet times, when the store shelves were empty and speculators were selling food from under the floor – naturally, under the “roof” of law enforcement officers and officials. 

Quotas for sale

By the way, about the “roof”. The second crazy idea of ​​officials related to the restriction of exports is nothing more than an attempt to take control of trade. Naturally, with personal interest. We already wrote about how one of the exporters managed to get an export permit for $ 10 thousand. Surely, there will be more such cases. After all, agrarians are sure that all the restrictions were introduced by officials with only one purpose – to arrange quotas trading that is advantageous for their pockets.

That is why so many questions from market participants to the lists of those who received the quota – among them were unknown companies. It is they who will resell their permits to real exporters. And the demand will be – to the joy (and profit) of the creators of the system. Because the difference in prices between the domestic and foreign markets is now $ 50, and will soon be $ 70. Impressive money. And for the opportunity to earn, exporters will be willing to pay for the quota.

This, by the way, explains the most strange bias in favor of wheat exporters, not flour – 200 thousand tons per 70 thousand tons. The processors initially said that they were ready to grind all the grain themselves, suggesting, if anything, to ban, it was the export of grain (raw materials). And ship flour in any quantities, without restrictions. Because there are a lot of it, and the three months that remained before the harvest in the south (end of July), the country can hold out on only one stock of the Food Corporation – 600 thousand tons. Despite the fact that the country has about 4-5 million food wheat, the introduction of quotas for the shipment of flour from the point of view of common sense is not clear. But, it is understandable from the point of view of self-interest of officials. He also explains the unwillingness to ban grain exports: more quotas – more tools for enrichment.

Without help

At the same time, the government of Kazakhstan, tightening the screws, refuses to do at least something to support the peasants in these difficult conditions.

It’s time to think about Trump: the other day he announced that he would allocate $ 19 billion to support US farmers, who suffer losses due to lower demand for products. So, the government of America will spend this huge amount on the purchase of meat, grain and other things, as well as on direct support to farms suffering losses. After all, they well understand that the agro-industrial complex is the basis of the entire economy.

What are they doing in Kazakhstan? Issue an additional 100 billion tenge for sowing? It’s ridiculous! Indeed, this amount does not even cover the damage that the devaluation of the tenge caused to the financial stability of the industry! And in general, those 170 billion tenge that are allocated for field work account for approximately 30% of the real need for funding.

And the story with supposedly “cheapened” diesel fuel, which should have been allocated to farmers for 165 tenge (in February it was 177), looks absolutely indecent. Given the fall in oil prices, in America, fuel fell twice as naturally, without any government orders. In Kazakhstan, where the oil industry is tightly affiliated with the government, no one decides to them – neither the laws of the market, nor the direct order of the President. As a result, there is no diesel fuel for 165 tenge. Yes, and do not care – many so far have managed to buy it at 177, so that from the very beginning this “support” seemed to them a fiction.

That’s all – more than the authorities of Kazakhstan did nothing to support the agro-industrial complex. The industry remained in the position of a cash cow, from which officials and sellers of spare parts and fuel squeezed out all the juices.

Trading Priority

And what about non-monetary support measures? In the US, this is one of the main tasks that the authorities carry out. Namely – support for the export of their country.

All of Trump’s protracted trade war with China is tied to the desire of the United States to come to a trade balance. Indeed, today China sells to the United States much more goods than it purchases. The Americans, of course, do not like this – they think about the support of their manufacturers. And they use all possible political resources to facilitate their products entering the Chinese market. 

And Trump has such a policy in relation to all countries, despite the fact that they are partners in politics or not. The economy for the US president comes first. For this, ordinary people love him, for whom simple things are important – a stable salary and a permanent job. Trump defends US exports around the world, including in America-friendly Europe. Or, for example, hinted to Egypt – you need to buy American wheat, not Russian – otherwise you will not see humanitarian aid (and this is $ 2 billion a year).

The same Russia acts in a similar way. It is enough to recall how, in due time, by various measures, it redirected the transit of Kazakh grain from Ukrainian and Baltic ports to its Novorossiysk – in order to load its capacities.

In a word, everyone defends their trade interests – realizing that this is the basis of the economy. All except Kazakhstan. The most painful example is the lost world leadership (2007-2010) in the export of flour. Kazakhstan left the first place when neighbors began to put obstacles to Kazakh traders, setting import duties and increasing railway transit tariffs. Some people even came up with taxes like environmental fees for passing cars across the territory.

And the government of Kazakhstan, unfortunately, all this was silently demolished, without taking mirror measures. As a result, we were ousted and continue to oust us from the markets.

And this continues now, when Russian grain is being transited to Uzbekistan, working to develop its processing there. And Kazakhstan flour mills can only watch indifferently. After all, the government, instead of helping in the competition, introduced quotas for the export of flour, handing over cards to the Uzbeks and Russians.

Trade representatives of the Ministry of Foreign Affairs of the Republic of Kazakhstan could help Kazakhstani entrepreneurs find new markets in other countries, assist in the sale of products of Kazakh origin, but unfortunately this does not happen.

Strange games

Oddly enough, some Kazakh officials still understand how important exports are. But it does nothing to protect the position of Kazakhstani goods in foreign markets. 

So, the other day, the Minister of Trade and Integration of the Republic of Kazakhstan, Bakhyt Sultanov, posted a post on Facebook in which he talked about Kazakhstan’s plans to increase non – raw exports, mainly due to an increase in food shipments abroad.

The minister even answered those who condemn the increase in exports, emphasizing that this is beneficial to the domestic market. 

“Selling at competitive prices, including export, allows businesses to grow, invest in expanding production, and improving product quality. And further develop the industry as a whole.

I want to clarify: the prices of goods are formed by the market (the exception is socially significant food products, prices of which are regulated by the state). If we introduce a ban on exports of, for example, lamb, this does not mean that we will get cheap meat. Rather, we get, but not for long: as in the case of buckwheat, farmers simply stop growing goods that do not bring them income.

I will give a concrete example. In 2017, a kilogram of buckwheat, which was sown a lot that year, was sold at 100 tenge and, as a result, buckwheat sowing was halved in 2 years (and not only here, but also in neighboring Russia), and the price of buckwheat jumped several times. The main thing is to find a balance: when buckwheat will be planted so that the price inside does not rise, and there is something to sell at an affordable cost for export,” the minister wrote.

Further, the Minister designates 16 types of goods and services in which he sees the greatest export potential: vegetable oils, pasta, flour confectionery, lamb, pork, beef, pesticides, fertilizers and so on.

And it promises “maximum tools to support export-oriented industries, as well as assistance in the export of these products to foreign markets.

However, it is not clear – why talk about it, and at the same time destroy what has already been built? Indeed, so far it turns out that, speaking of one thing, the government of Kazakhstan is doing exactly the opposite – quotas for the export of flour and other food products are causing such damage to the country that even after they are canceled, it will take a long time to work at least to regain previous positions, not to mention plans to double export volumes over five years.

Batyr Alekperov

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