Page 22 - bne_newspaper_May_11_2018b

Eurasia
May 11, 2018 www.intellinews.com I Page 22
question, the answer to which remains unknown: by what criteria has the government structured its list of companies set for privatisation?
More importantly, the aforementioned goal
of decreasing the state’s role in the economy
is not achievable with such a minor scale of privatisation. Despite the formal reduction of the number of state entities, Kazakhstan has in fact seen an increase in the state’s presence in the economy, for example with the creation of large scale national companies such as Kazakh Invest and Kazakh Tourism in 2017, Konurov’s figures indicate. Both companies were established for
the sole purpose of attracting foreign investment into the country as the government recognised the need to push for economic diversification amid low world oil prices. Kazakh Tourism, for instance, is specifically geared towards drawing foreign investment into tourism development, though its plans remain vague aside from being tasked to help the authorities raise the share of tourism in Kazakhstan’s GDP to 8% by 2025 up from 1% at present.
Lack of transparency
The denationalisation efforts have also been generally marked by murky deals. Most tender offers in 2016, for example, mainly involved one or two participants, where often preferential rights for the purchase of a stake in a given company were held by an associate of the company, Aydin Bikebayev, founder of Kazakh legal firm Sayat Zholshy & Partners, was cited as saying by ZONA KZ news agency in 2016.
Nearly 75% of the 114 subsidiaries of national holding companies sold as of February 2018 were subject to sales without any competitive procedures or were sold in auctions at below the starting price. Only the remaining 25% (just 29 companies) were sold at above the starting price.
"The units should be sold only at public auctions, where the winner should be the one who offers the highest price,” Bikebayev said. “Targeted sales, e-tenders and tenders should only be used
in exceptional cases, because with these sales methods many potential buyers may [end up] not participating in the bidding process,” he added, noting that the winners of such sales are not
the highest and that “the procedure itself is not sufficiently transparent".
In the light of these details, some Kazakh analysts posit the programme is a facade designed to hand over the companies from official to unofficial state control. They allege that at least some of the private entities and individuals buying the stakes have a long history of receiving state support
or have been indirect owners of the properties
all along, though insufficient transparency concerning the deals would make it difficult
to confirm such allegations. If true, however,
this would mean that officially transferring the companies into private hands is unlikely to inspire a more competitive environment. As in all post- Soviet Central Asian countries, personal ties and familial associations often stand as a primary determinants in both business ownership and political power in the country.
Reports regarding the sales of stakes in specific government-owned companies have been rare. One of the latest examples featured the sale of 100% of Euro-Asia Air, an Atyrau-based Kazakh airline that operates passenger flights to Russia, Turkey and the United Arab Emirates as well as between Central Asian countries. No information about the buyer of Euro Asia Air, owned by state oil producer KazMunaiGas prior to the sale, was publicised. The company was sold for KZT11.8bn in a two stage bidding process — significantly lower than the KZT15.5bn price offered for the airline in 2016.
IPOs to perform better?
As part of the privatisation initiative, the authori- ties previously said they planned to sell stakes of at least 25% in 45 large state-owned companies, including the seven IPOs. The Kazakh government expects the IPOs to yield between $3.5bn-$5.5bn by the end of the drive. If successful, the amount would certainly surpass the funds raised from