PROBLEMS OF CREDITING AGRICULTURAL FIELD IN kAZAKHSTAN

Aigul Nurasheva, senior teacher of economics department

MIRAS University, Shymkent, Kazakhstan

With getting the independence of Republic of Kazakhstan, the necessity of forming the agricultural field appeared which is based on market relations, since the existing in administrative economics structures cannot meet the demands of market. Agricultural production provides the essential thing for the humans – food, and this makes each country build their activity so that foodstuff was in prosperity. Manufacturers of agricultural production are not in equal conditions related to other subjects of economic life of society, especially with the partners of market relations. They experience the lack of information, since they are situated far from each other. Their fate mainly depend on natural conditions, that why independent of government and socioeconomic conditions, each government should carry on active support of agricultural production.

In period of transition to market (1995-2000 years) production growth in agriculture slowed down, and even went back. The reasons for that are different. The technical availability of equipment in agriculture was at low level, the infrastructure wasn’t developing – bad conditions of roads, high energy intensity, huge expenses to transportation and maintenance of objects storing the agricultural products. Basis of agricultural field – collective farms and state farms – were under close control of administrative system.

During first five years of reform, out government addressed their efforts to the realization of structural transformations on villages and privatization, government practically fully stopped investing into agriculture, reformation of collective farms was started. In the same time, with the improvement in fields of industry, and in the sphere of services, there was also improvement in agriculture. To the end of 20^th century by the amount of livestock, by the indicators of plant growing we reached the level of 1990 – beginning of transition to market economics. Development of agricultural complex was stabilizing gradually. Lowering the level of food import, increase in the technical availability of equipment.

As the result of forming the management market mechanism in agriculture the effectiveness of production increases. Crop capacity of crops, livestock yield, and production of main types of agricultural products increased. That’s why currently one of the main goals of reforming the national economy is activation of crediting and development of new mechanism of stimulating, that meeting the requirements of overcoming the difficulties and sanitation of rural economics. Decay in crediting activity is very important indicator of economics of country entering the state of crisis, and the liveliness of crediting process in agricultural complex – main condition of going to constant trajectory of economic growth

If we consider that from the steady functioning of agriculture significantly depends material condition of society, then agriculture is one of the main sectors of country’s economics, which is in charge of food safety. But this kind of capital-intensive sector cannot function without high rates and significant levels of capital accumulation. That’s why problem of crediting becomes one of the most important problems for agrarian economics not only for next few years, but also for perspective. Together with that statistical data shows that in last 15 years there is constant decrease of capital investment into agriculture. As the reason for that we can identify:

1. Reduction of portion of internal funds (capital allowances, gain from the realization of discharged property, surplus earnings and other monetary savings). At abrupt decrease of budget financing of agriculture in the years of reforms the portion of internal funds of agricultural manufacturers as one of the most important off-budget investment sources grew insignificantly. Simultaneously with that systematic delay of state payoffs for the products sold happens, prices increase, production lowers, problems of realization and distribution of agricultural products sharpens. All these resulted in aggravation of financial condition of agricultural complex and appropriately to decrease of taxable base, and therefore profitable part of budget. As the result of this, agricultural manufacturers lost their own sources of investment.

2. One of the main reasons of contracting the budget financing is the abrupt change of state’s politics of financing the agricultural complex, related to reformation of economics in whole and considers the change of state system of distributing investment resources by the market mechanism spillover of capital, also the increase of role of off-budget sources of capital investments related to budgetary funds. Modern condition of state budget doesn’t allow counting on the significant participation of budgetary funds in the investing of agriculture. Most important function of government in transitional economics, along with direct financing at the expense of budgetary funds, is the creation of motivational mechanism involvement of credit resources for the formation of financial base investing repayable basis. Under own branch-wise peculiarities agricultural production even in conditions of stable economics cannot function normally without borrowed current assets. Agricultural credit always is the subject of special attention of government. In developed countries bank credits cover more than one third of agricultural company needs in investment resources. Bank credit on common basis as a result of high percent rates in the conditions coming inflation once again becomes inadmissible for agricultural borrowers.

3. Other alternative to governmental crediting is leasing supplies of different equipment to village, supported by the government. Initially they rather improved the situation of agriculture provision with material and technical assets. Unfortunately, the very small portion of tractor and agricultural products selling by leasing is decreasing with years. This is interpreted by the several circumstances: absence of sufficient means in government for the formation of leasing foundation, limitation of participation in leasing operations of business banks because of long-term character of these operations and absence of guarantees in timely return of embedded means. Usage of those minor resources, which the government allocates for this goals, is implemented insufficiently effectively and not by assignment. In the same time, leasing – not only powerful financial instrument, but also one of the efficient levers of activation of investment activity.

4. Import of agricultural products also didn’t stimulate the activation of investment into agriculture. Liberalization of foreign-economic activity, increase of food import, undeveloped condition of market infrastructure, insufficient level of customs protection of domestic manufacturers and significantly reduced effective demand of population lead to volume drop of all types of food production. Narrow assortment, unsatisfactory design of goods, outdated equipment and technologies didn’t allow the businesses rapidly restructure to production profitable competitive food products. In addition, most businesses feel the disadvantage circulating capital, ageing of basic assets.

5. Very important source of investment is involvement of foreign capital. Concerning the involvement of foreign investments into agriculture, expectations won’t be justified in near future, because agriculture by its peculiarity has risk character, efficiency here is less then in industry, thereupon agriculture is less attractive for investments. All recited moments: abrupt reduction of governmental financing, absence of effective credit system in agriculture, operative politics of taxation, increase of agricultural production import encourages domestic agricultural manufacturers to lose their sources of formation and accumulation of capital, which in turn negatively influenced on functioning of fields, technologically coherent with agriculture.

That’s why government passed “The State Agricultural Program of Republic of Kazakhstan for 2006-2008”, “The State Program of Developing the Rural Territories of Republic of Kazakhstan for 2004-2010”. Agricultural program is directed to provision of food safety of country, for the formation of effective system of stimulating the agricultural complex and production competitive goods. It considers the solution of following tasks: formation of effective system of agriculture; increase of sales volume of agricultural production and goods, its reprocessing on domestic and foreign markets; rationalization of governmental support of agriculture, bringing the manufacturers into world markets. “The State Program of Developing the Rural Territories of Republic of Kazakhstan for 2004-2010” considers the realization of following measures: execution of first-priority activities on the development of economical activity, investment of rural construction activity, repair and reconstruction of objects of social and engineering infrastructure; organization of monitoring socio-economic development and economical safety of rural territories; assessment of land resources; development of standards and guidelines provision of rural people with the services of social and engineering infrastructure; realization of programs of stimulating the relocation of rural people; identification of effective model of rural colonization and execution of activities for its realization.

These tasks are assumed to be realized in two stages on the basis of capabilities of resources from republican and local budgets. On the first stage of program realization (2004-2006) provides the preparation and adoption of national standards social and engineering provision of rural population; identification of ways of state regulation of optimized migratory flows and support of rural migrants (it is needed to develop normative legal documents). On the second stage (2007-2010) assessment of each rural population aggregate will be held; actualized ways to optimize rural population and provision of high level of population life.

Currently the agricultural manufacturers of work in the conditions of preferential tax treatment, special tax treatment is applied on them; for farms applied the payment of integrated land tax at the rate of 0.1% from the value of land (instead of taxes: land, individual income tax, value-added tax, for transport, for property); for legal persons – patent system at the rate of 20% (instead of taxes: corporative income tax, social, land, property, transport, value-added tax). Application of this tax system allowed increasing the unit weight of taxes and payments into budget in general volume of gross domestic product of republic’s agriculture to 5%, at the unit weight of taxes on all fields of economics 19.4%. During this the decrease of tax base of agricultural manufacturers became 25 billion tenge in 2006. Decline of taxation of manufacturers will happen through the decrease of value-added tax from 16 to 15%, rates of social tax – from 20 to 7%, individual income tax from 30 to 20%.

When supporting the agriculture by government growth of agricultural production with relation to last year in 2003 and 2004 became 8.2%, in 2005 – 17.9%, 2006 – 7.6%. Agriculture is developing with paces corresponding to paces of consumer demand. Volume of investments into agriculture in 2006 increased related to 2000 3.4 times. Introduction of organizational-technical and economical activities increased effectiveness of production in agriculture at the expense of producing competitive products, that is own source of financing appeared – income.

Experience shows, that suitable to conditions of Kazakhstan major agricultural formations more effectively run their business. They use scientific basics to get stable crop yield of agricultural cultures and productivity of animals (adhere crop rotation, livestock breeding and seed farming organized on proper level, soil fertility increases), industrial infrastructure improves, in which attendant agro-service, procurement, processing businesses function, which allow rational usage of industrial potential. These businesses are dedicated, they have industrial housing, technological equipment, they are provided by material, technical and labor resources, forage resources are developed. Field, by conventional standards, is considered competitive, if it can take at least 3.25% of world export: portion of Kazakhstan in world export by agricultural products is 0.25%. That’s why while preparing to enter WTO it is needed to increase volume of state provision of agriculture and stimulation at the expense of other sources for the replacement of outdated equipment, support of livestock breeding, plantation cotton-textile cluster.

Existing circumstances in village are influenced by economical dependence of agriculture on related branched, that supply means of production, diesel-fuel oil and energy resources, low development of reprocessing, storing, transportation base. In connection with this agricultural production is unattractive for investments. Portion of agriculture in production of gross domestic product in 2006 became 9.7%, and volume of investments into agriculture in total volume of investments into economics – 2.7%. In structure of investments unit weight by all fields of economics composes: nonfinancial assets – 57.8%, into construction – 30%; by agriculture – nonfinancial assets – 80.5 and construction – 16.3%.

By the predictions of specialists, production volume of agrarian sector should increase in 2010 relative to 2002 2.2 times, unit weight gross production of agriculture into GDP will be in the range of 10%. World experience shows that optimal structure of economics achieved when the portion of agriculture is 10-11%. With the growth of agricultural gross product and development of rural territories flow of investments also increases from all sources and by all directions of field and will attain 190 billion tenge. Investments directed to agriculture relative to GDP in whole will increase from 12.3 to 28.9%. In agrarian sector of republic during execution of state activities it is necessary to include many accompanying factors, directly of indirectly influencing the effectiveness of executed state politics. Direct state support should be directed to stimulation of effectiveness of agricultural production. Budget grants and compensations should be paid to effectively functioning manufacturers, independent of forms of economic management. In the regions of mass and stable agricultural production state measures of support should be directed to increase of it’s effectiveness, and in regions of depressive agriculture subventions should be reoriented to creation of additional sources of income for rural population.

One of the problems of crediting through the banks – absence of marketable mortgage, and first of all mortgage of land from agricultural manufacturers. Approach to solution of this problem became the creation of close corporation “Agrarian credit corporation”, objective of which is the crediting of agriculture at the rate of 35-50% assessed capital of credit fellowships and allocation of short-term credits (1 year period) with payment of 3% reward yearly and long-term – 5% yearly. Corporation consults and takes measures of stabilizing financial condition of credit fellowships. In future corporation, leaving the composition of founders, will sell them its part of portion of capital, which will allow execution of independent financial activities. Credit fellowships serve as the sources of circulating assets, necessary for the development of village’s infrastructure, employment of rural population and attraction of labor force in villages.

Close Corporation “KazAgrofinance” was created, with branched network of chapters, with 100% participation of government in capital, state leasing foundation was created. However, by the same reason – deficiency of manufacturers’ financial resources and absence of debug mechanism of leasing operations – realization of state program for buying equipment needs modernization. In connection with this, in 2006 10.3 billion tenge was allocated from republican budget for buying agricultural machines, increase of assessed capital of Close Corporation “KazAgrofinance”, creation of service centers for rendering services, repair, realization of spare parts and equipment.

To decrease the expenses in service activities it is offered to broaden network of machine-tractor stations (MTS), service centers, which will need significant capital holdings. Sources of means for the formation of these subdivisions should be: long-term credits of business banks for preferential percent, which is compensated from state budget; involvement of means of domestic investors, as well as under guarantee of government of foreign bank credits. It is planned to decrease customs duties and taxes for the operations of leasing, for leasing of property, including value-added tax of leasing lenders, and exempt from paying income tax, received by contracts for the period of at least 3 years, do not charge taxes for acquest. Mechanism of agricultural formations functioning should be directed to saving of all types resources. Their activity needs to be built on intra economic relations, negotiate with property to land, with application of intensive technologies, with specialization of industry.

Financial provision of agricultural businesses is in need of state support intension. It is needed to prepare offers and recommendations for the modernization of methods, principles and arrangement of governmental financial help with a glance of compliance agro-technical conditions and technologies of cultivation agricultural products. When creating sterling system of crediting the need of population in saving and increase of internal funds will be fulfilled, as well as in the consumer credit prerequisites for industrial growth will be created by the way of accumulating temporary free money of population and redistribution of them into different spheres of agriculture and non-agricultural business. Thanks to availability and cheapening of consumer credits, buying power of population will increase.

Bibliography cited:

1. R.S. Gabdualieva. Taxation of agriculture of Republic of Kazakhstan //International agricultural journal.-Moscow.-2006.- #6.

2. Conception of steady development of agro-industrial complex of Republic of Kazakhstan for 2010-2014. – Astana, 2005.

3. Web-page of Ministry of Agriculture (online materials).