SECs dissipate forces and nullifies efficiency.

In the first half of this year, the Office of the Business Ombudsman analyzed the activities of social and entrepreneurial corporations (SECs) for the effectiveness of their activities. Its results showed that at the end of 2018, 11 out of 17 SPKs operating in the country (65%) remained unprofitable. Only SEC “Taraz,” Shymkent, “Almaty,” “Pavlodar,” “Tobol” and Astana managed to get net profit after deducting costs. The issue of the low efficiency of the SECs on his Facebook page was raised by the Ombudsman for the Protection of the Rights of Entrepreneurs of Kazakhstan, Rustam Zhursunov.

The indicators of the financial result of SEC activities for the period 2017-2018 indicate extremely volatile profitability. The ratios of their current liquidity, turnover, profitability of the majority do not reach standard values.

At the end of 2017, 17 SECs in aggregate generated losses in the amount of 2,348,048 thousand tenge, at the end of 2018 - 15,609,260 thousand tenge.

“These circumstances are due to the failure to resolve the problems specified in the previously approved concept for the development of the SEC until 2020, such as mixing commercial and non-commercial tasks, which does not allow giving priority to the SEC; lack of development plans and, as a result, unsystematic implementation of investments, lack of clear specialization; un-profitableness of the majority of SECs, etc.

In addition, the majority of SECs and their subsidiaries operate in violation of the Government Decree of December 28, 2015 No. 1095 “On approval of the list of activities carried out by legal entities, more than fifty percent of shares (stakes in the authorized capital) of which are owned by the state, and persons affiliated with them,” - said the Business Ombudsman.

For example, under the jurisdiction of the SEC, LLP “Orken Kala,” which is engaged in the construction of buildings and structures, carries out its activities, LLP “Astana-Tazalyk” - sanitary cleaning of the city and improvement, LLP “Astana-Zelenstroy” - gardening of the city of Nur-Sultan and adjacent territories.

In addition, this SEC in the period from 2016 to 2019 signed contracts through a direct conclusion from one source with the local authorities for the amount of more than 2 billion tenge for the provision of services for the maintenance of sports buildings, facilities, holding forums, Rustam Zhursunov drew attention.

Similar agreements, according to him, were concluded between the local executive bodies and SEC “Pavlodar” in the period 2018-2019 for the amount of more than 1 billion tenge.

There are facts of granting privileges by state bodies to individual enterprises in the process of granting land plots in which the SEC is used as a tool, said the Ombudsman for the Protection of the Rights of Entrepreneurs.

“The mechanism is to provide the SEC with land plots bypassing the competitive procedures in accordance with the Land Code, which are subsequently transferred as authorized capital in a joint venture. Subsequently, the specified share of the SEC is redeemed by a private co-owner, which in fact makes it possible to acquire land plots out of tender at prices prevailing in non-market conditions.

For example, from the side of SEC Taraz JSC, 27 land plots were contributed to the authorized capital of SPK-Qyzylsha LLP on the right of temporary paid land use with a total area of ​​2000 hectares in the amount of 27 pieces. On November 22, 2019, the share of SEC Taraz JSC was redeemed, the value of the share amounted to 6,225,924 tenge,” wrote Rustam Zhursunov.

Similar circumstances of granting privileges and advantages to individual enterprises to local executive bodies with the help of SECs exist in other regional sectors of the economy (lending, purchasing foodstuffs, housing and communal services, etc.).

“In fact, at present, the function of the SEC is to solve the current short-term regional problems of the local executive power - curbing the rise in prices for foodstuffs, modernizing housing and communal services, landscaping, maintaining facilities, and so on.

This circumstance is confirmed by the “inflatedness” of the number of subsidiaries of the SEC, where more than a third of enterprises are inactive, since a large number of projects of Akimats have not been fully implemented,” the Business Ombudsman stated.

Out of 235 SPK subsidiaries, 80 are not active and do not make tax deductions.

“From the above, we can conclude that SECs currently do not have a single direction and specialization of activities, that is, SECs are trying to be realized in the construction market, stabilizing prices for socially significant food products, managing sports facilities, and so on. The result of this dispersion of forces is the aggregate negative indicator of the contribution to the economy of the Republic of Kazakhstan. Shortcomings in the activities of the SEC are the result of the lack of clear control on the part of the local executive bodies and the absence of a unified policy,” the speaker noted.

In his opinion, the analysis of the activities of the SEC should be carried out on a systematic basis. An independent assessment of the activities and, possibly, maintaining a rating of the SEC would contribute to the development and achievement of the set goals during its creation.

The Office of the Business Ombudsman applied to the government with a proposal for joint work with the Ministry of National Economy (MNE) and NCE “Atameken” on the SEC, which should allow restarting the activities of the latter:

• to conduct a detailed analysis of the activities of each individual SEC and give an appropriate assessment of their activities;
• based on the analysis of activities, form and approve a new concept for the activities and development of the SEC for 2021-2025 (it is possible to form a package of amendments to the legislation of the Republic of Kazakhstan aimed at establishing clearer control over the activities of the SEC);
• to determine the central state body responsible for the activities of the SEC in general, in accordance with the approved concept of the SEC's activities and development;
• to get rid of non-core assets based on the new concept, including them in the list of privatized objects.

“However, the MNE, recognizing the existing problems in the activities of the SEC, did not accept our proposals to carry out systematic work to reboot the SEC, referring to the responsibility of the LEB for the activities of the SEC,” said the Ombudsman for the Protection of the Rights of Entrepreneurs.

The Business Ombudsman’s Office has launched a survey on this topic. The questionnaire is available here.

Sayan Abaev

More details: https://inbusiness.kz/ru/news/socialno-predprinimatelskim-korporaciyam-neobhodima-perezagruzka