Prerequisites for the formation of small and medium business policy in Kazakhstan

The article describes the main stages of small and medium business development, as well as the formation periods of institutional basis of small and medium business in Kazakhstan. These periods of the formation of the institutional basis of small and medium-sized businesses, we divided into 5  main  periods (five-year plans), from 1991 to 2016. The article analyzes the main events that occurred during these periods. Small and medium business is very important for the economy of the country, namely for the stability of the economy, preservation and the emergence of jobs, economic growth. Small and medium business includes almost all sectors of the economy, therefore there are many organizations that influence the development of small and medium business, and are also important for its development. Stakeholder analysis, which was used in the work, allowed us to establish such organizations and analyze their impact on the development of small and medium-sized businesses in Kazakhstan. In the work were identified stakeholders of the small and medium business sector of Kazakhstan, the degree of influence and importance of stakeholders in the small and medium business sector of Kazakhstan by conducting interviews and work in focus groups. 

For the beginning of 2017 the SME share in GDP of Kazakhstan is around 25 %. The government of  the country considers the SME as the main driver of economic growth. The policy of the country is aimed at the industrial development which relies on entrepreneurial potential all over the world. The integrated companies give way to multi-level systems of supply organizations in many sectors, the SME role increases. The countries possessing the developed SME have maximum chances to develop new segments of global industry chains successfully within its borders [1].

The SME development in Kazakhstan began on the moment of receipt of independence by the country in 1991. The Program of Denationalization and Privatization of the State Property in the Kazakh SSR (19911992) [2] became the beginning of the first entrepreneurs possessed of a private property. Many economists consider this program to be unorganized and as a result of that the country lost a set of the entities and a qualified personnel on account of disorder of these entities as the people far from production became their owners. The following steps of the legal framework creation and further SME development are considered: The State Program of an Entrepreneurship Support and Development in the Republic of Kazakhstan for 1992-1994 [3] and the first Law of the Republic of Kazakhstan of July 4, 1992 N 1543-XII. «About the protection and support of a private entrepreneurship» [4]. Due to these documents the main forms and methods of a private entrepreneurship protection and its support are determined for the first time. Therefore the following points are being consolidated:

• the policy of refusal of the state direct intervention in private entrepreneurial activity,
• the maximum freedom for private entrepreneurs,
• the protection of a commercial secret and responsibility of state bodies and officials for the violation of the business owners' rights,
• the creation of preferential terms in external economic activity to a private entrepreneurship,
• the creation and development of the state system providing the private business activity subjects with the information

Figuratively we divided the periods of an institutional basis of the SME establishment in Kazakhstan into 5 main periods (five-years periods), since 1991 until 2016. Shortly considering the main events which  took place during these periods, one may say, that there was a rough forming of the SME legal base and development of a bank system during the first period (1991 1995). The second period (1996-2000) is characterized by further the legal base development and nascency of the first institutes of the SME financial and information support. They include creation of the Small Enterprise Fund (SEF) and the Republican Information and Exhibition Center of a Small Entrepreneurship (RIECSE). The SEF acted as the operator of average and long-term lending of a small entrepreneurship through the European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB) which loans were attracted under the state guarantees. The RIECSE carried out scientific research on the SME problems, was engaged in creation and development of information network for the SME subjects, the organization of exhibitions, the creation of technological parks, business incubators, centers of excellence and training of entrepreneurs. The third period (2001-2005) is characterized by the financial institutions the SME support creation, such as JSC Development Bank of Kazakhstan (DBK), JSC National Innovation Fund (NIF), JSC Investment Fund of Kazakhstan (IFK). By means of these organizations the following instruments of the SME state backing were implemented: the SME long-term lending from 5 to 20 years, export crediting, guaranteeing for the clients of  the DBK, extension of current capital for the DBK clients, mezzanine and lease financing, innovative projects financing by noncontrolling share participation, the venture investment institutes creation with the Kazakhstan and foreign capital by making investments in technological innovative business, etc. The fourth period (2006-2010) is characterized by the state program The business Road Map 2020 nascency. Its first stage was planned to be realized from 2010 to 2014. This program was supported with allocation of considerable funds from the budget for the SME support, and the nascency of such popular state support instruments as subsidizing of a loan interest rate of banks of the second level for the SME, guaranteeing the facilities for the SME, training of entrepreneurs, consulting support. There were also a large number of institutes of the SME state support during this periodJSC National Management Holding Kazagro, JSC Kazakhstan Institute of Industry Development KIID, JSC KAZNEX INVEST, JSC Kazakhstan Public-Private Partnership Centre (KPPPC). The fifth period (2011-2016) can be characterized as the period of decrease in administrative barriers for the SME development, the generalized Commercial Code of the Republic of Kazakhstan is created, the analysis of regulatory impact on business procedure implements, the NCE for the business interests protection appears.

The SME sector and its development has great importance for many groups of interests: government institutions (population employment increase, taxable basis increase), institutes of development and banking sector (increase of enterprise profitability), entrepreneurs (income sources).

The basis development for the SME sector stakeholder analysis in Kazakhstan is based on scientific concepts and methods of stakeholder analysis. Edward Freeman is considered to be the «father of stakeholder theory» which is described in his book «Strategic Management: A Stakeholder Approach» published in 1984. He determined stakeholder groups as «any groups or individuals who can influence or be subjected to influence of organizational purposes achievement» [5]. Further the expression «stakeholder» was expanded by inclusion in it of all groups interested in the institute or the industry development concerning their activities.

The stakeholders’ analysis is a process of systematic collection, generalization and the high-quality information analysis in order to establish whose interests should be taken into  account  during  the  formation, development and implementation of policy. The analysis includes: the determination of stakeholders’ characteristics, interests concerning policy, a viewpoint in favor or against implementable policy and potential alliances capable to emerge with other stakeholders as the instrument of pressure on the political process. 

The stakeholders’ analysis is the methodology of getting the system understanding, and for the impact estimating of changes on this system, it means the determining of key stakeholders and their interest assessment [6].

The purpose of the stakeholders’ analysis is the development of strategic vision of human and institutional interaction, by means of communication establishment between various stakeholders.

Grimble and Wellard (1996) notify applicability of stakeholders’ analysis while determining the problems of complexity and compatibility, arising between objects and stakeholders. Freeman and Gilbert (1987) offer the concept of «stakeholder management» as a basis for determinations of turbulence and complexity of a business environment by managers. Therefore, the term «stakeholder» is often associated with corporate management. According to Freeman, the important assumption is the manager's capability of conducting the stakeholders’ interaction.

The structure includes two basic modules, the second module consists of two categories. The first module the «Stakeholders' determination» is responsible in defining and choosing of the corresponding SME sector stakeholders. The second module «stakeholders' analysis and estimating» includes the detailed stakeholders' description, its influence determination in the SME sector policy and stakeholders' importance. The first category «stakeholders' characteristics and motivation» displays the basic stakeholders' characteristics, such as pattern of the organization, its purposes and key business lines.

There are various approaches of stakeholders' classification in literature. Several subcategories were collected from references of N. Kakabadze, etc., for example, the voluntary and involuntary stakeholders, public and non-public stakeholders defining and action-oriented stakeholders [7, 8]. Four levels of existence were considered by J. Lantos where stakeholders can exist: external macro-environment, external microenvironment, level of the business organization and personal level [9].

The most general form of classification is the stakeholders' division on primary and secondary, according to direct perception (positive or negative), or to direct influence on system. Stakeholders beyond participation of which the organization cannot survive as the operating enterprise deal as primary stakeholders. Social status groups which mutual influence is in direct or indirect dependence on actions or decisions of the company can be referred to the secondary stakeholders group [10]. However, some groups can be involved  in the process of resources managing in both ways passive and active (for example, the local public).

Other classification of stakeholder groups is based on internal, interface and external interaction [11]. Internal stakeholders operate completely within the organization borders. External stakeholders are divided into 3 categories which are based on their relations with the organizations: stakeholders who provide input parameters of the organization, stakeholders who compete with the organization and stakeholders whose interests are in the area of the organization's functions. The interface stakeholders have both internal and external relations.

Thus, there are several conceptual approaches which can be used for the analysis and the strength and weaknesses map, connections and the possible conflicts' field: matrixes Importance/influence, Contravention / Consistency, the Interaction of actors matrix.

Influence is the stakeholders' capability of making impact on policy in the field of an entrepreneurship, by means of control over the made decisions, implementation process of policy in the field of an entrepreneurship or positively or negatively affecting on policy forming in the field of an entrepreneurship. Thus, influence is a measure which helps stakeholders be able to convince persons making the decision to act this or that way.

Importance concerns to stakeholders whose needs and interests are of priority for the policy which is being implemented in the field of business. Not all the stakeholders are of equal importance, they possess unequal degree of impact on decision-making process.

Methodologically the research uses socio-political high-quality approach of the data collection and analysis.

The research uses approach offered by Grimble, etc. [12] for the stakeholders' determination, starting with micro to macro level, based on the reference review and discussion with experts. This method offers making the multilevel list in which stakeholders can stand: local, regional, national, international and global (Fig. 1).

Figure 1. The stakeholders' reference according to the interaction level with economy of Kazakhstan (compiled by the author on the basis of source [6])

There are a lot of methods for collection of information concerning the stakeholders' interests and analysis for various groups which they refer to [6].

The information collection made by us was carried out in 2 steps. The first step – the initial identification of the subjects making decisions and the SME sector stakeholders, executed on the basis of the literature review including the secondary sources use.

The second step of the stakeholders' analysis was carried out by the aid of a interviewing technique (indepth interview with the main actors and key experts). 20 candidates who were the main stakeholders of the SME sector were selected for the interview holding. Besides, in addition to the in-depth interview method with experts from various areas (government staff, bank employees, social organizations, entrepreneurs), the focus group method (bank employees, government stuff, social organizations, development institutes, entrepreneurs) was used.

The comparative research for stakeholders' identification was conducted using the above-stated approaches and based on the following questions: Who was involved in forming of policy and development strategy for the business sector in Kazakhstan? What groups are the most interested in management, use and receipt of benefits from development of the business sector in Kazakhstan? What groups are the most dependent on the entrepreneurship development in Kazakhstan?

After the SME sector stakeholders' identification in Kazakhstan, the second phase of stakeholders' analysis is estimating of their influence and importance as the result of their impact on forming and implementing of state entrepreneurship development policy. In order to analyze the data the established stakeholders were grouped according to the classification found in literature.

The matrix influence/importance is used for relative importance and influence determination of the main stakeholders.

The matrix diagram is used for determination of importance and influence degrees, stakeholders are divided into four groups: high importance / high influence, high importance / low influence, low importance / high influence and low importance / low influence [13].

The matrix Conflict/Consistency is used for creation of a scenario of conflict between interests and cooperation of the main stakeholders' efforts. It is the convenient tool for the determination of consensus area and therefore is a reference point for effort cooperation.

The Interaction of actors matrix is pertinent for creation of communications and information flows between the main stakeholders for the purpose of the main institutional communications determination [14].

The respondents at this stage were asked the following main questions: Who is directly responsible for the business sector policy nascency? Who has greater influence on forming of the SME sector policy? Who  is the most dependent on policy in the SME sector? Who will support and stimulate the policy improvements in the SME sector?

Stakeholders’ identification

Grimble and others [12, 15] offered to make stakeholders' identification, starting with micro to macro level. Stakeholders of the SME sector in  Kazakhstan are figured in Table.

We shall distinguish key stakeholders and itemize them below:

• The World Trade Organization (WTO);
• The Organisation for Economic Cooperation and Development (OECD);
• The Eurasian Economic Union (EEU); 
• The Government;
• Parliament;
• The Ministry of National Economy (MNE);
• The Ministry for Investments and Development (MID);
• The Ministry of Agriculture (MA);
• The Business Development Department under the MNE (BDD);
• «Damu» Fund;
• The National Chamber of Entrepreneurs Atameken (NCE);
• Development institutes (KazAgro, KAZNEX, NIF, IFK, NATD, PPP, Kazyna Capital  Management, etc);
• Large business;
• Regional Administrations (Akimats).

T a b l e

The SME sector stakeholders in Kazakhstan 

T a b l e   c o n t i n u a t  i o n 

Note. Compiled by the author on the basis of source [12,15]. 

Analysis and evaluation of stakeholders

The stakeholders' analysis is implemented in order to estimate the degree of their involvement into the entrepreneurship management.

The SME sector stakeholders' motivation and characteristics of Kazakhstan are reported below, their functions and aims are shortly described:

• The World Trade Organization (WTO). The international organization is created for the purpose of the international commerce liberalization and regulation of the trade and political relations of member countries. The WTO is responsible for development and implementation of new trade agreements, and it monitors observance by organization members of all the agreements signed by the majority of the world countries and ratified by its parliaments. Kazakhstan is a member of the WTO. Observance of agreements and accountancy when forming the regulatory framework;
• The Organization for Economic Cooperation and Development (OECD). The international economic organization of the developed nations homologating the principles of representative democracy and free market economy. The considerable proportion of the OECD activities is connected with anti-money laundering, evasion of taxes, corruption and bribery. This organization conducts the researches of Kazakhstan, gives policy and economy recommendations to the government. As Kazakhstan is aimed at receiving the OECD membership, all the recommendations and notes of this organization are taken into account by the country government in the process of policy implementing;
• The Eurasian Economic Union (EAEU).Tthe international organization of regional economic integration. The freedom of the products movement, the services, the equity and the labor power, and adopting of coordinated, systematic or single policy in economy industries is provided in EAEU. Kazakhstan, being a member of this organization, it is obliged to adjust the legislation according to the set requirements. Considering that the Russian Federation (the member of EAEU) is the main outer marketing outlet of the Kazakhstan production, taking this organization's requirements into account is vital for the entrepreneurs of Kazakhstan; 
• The Government, President, Prime minister, central governmental authorities. The main goal of the government is to realize the laws adopted by the supreme legislative body of the state (parliament). For this purpose the government and other state administration bodies produce bylaws which have the force of law;
• Formation and adoption of laws;
• The Ministry of National Economy (MNE). The central state authority, carries out management in the following spheres:

1. PPP, state investment projects, protection of the competition and the monopolistic activities restriction, natural monopolies and regulated markets, international economic and financial relations, including regulation of the international economic integration, regulation and development of foreign trade activity, regulation of a trading activity;
2. development and supports of a private entrepreneurship, self-regulation;
3. consumer protection, sanitary and epidemiological safety of the population, control and supervision of requirements observance stated by technical standards of care and regulatory documents on goods and services, and in the areas of food products safety at the stage of its implementing and producing of organic production performing cross-industry coordination, strategic, regulatory, control and supervising, realizable and allowing functions;

• The Ministry of Investments and Development (MID). The central state body, performs management in the sphere of industrial and innovative activities and investment attraction. Development of policy according to investment preferences, export, import, technological entrepreneurship (innovative grants, design departments, technological parks, free economic areas, );
• The Ministry of Agriculture (MA). The central state body, performs management in the sphere of agricultural industry development (peasant or farm enterprises). Export of agricultural production, state support for agricultural producers (ACP);
• The Business Development Department of the MNE (BDD). The department exercising functions of control and realization in the field of business activity development within the SME competence and according to the legislation of the Republic of Kazakhstan. The analysis of the SME development condition, availability of financial instruments to the subjects of a private entrepreneurship and activization of a regional entrepreneurship, forming of training systems and infrastructure of the private entrepreneurship support and regional entrepreneurship activization, improvement of entrepreneurial climate and favorable conditions for the entrepreneurship development providing;
• «Damu» Fund . The institute of development, the organization, takes part in the SME researches on a republican scale, gives suggestions for the SME state support mechanisms improvement. By means of the second-tier banks and branches gives a financial support to SME in regions of the country;
• The National Chamber of Entrepreneurs «Atameke» (NCE). The nonprofit organization which unifies all the representatives of business, stands guard over the entrepreneurs' rights, represents business at all levels of the government in the process of rule-making, in EAEU. Realizes the program of the entrepreneurs training;
• JSC Kazagro. Institute of development, the organization giving support to the agricultural producers (financial, consulting, )
• Large business. It exerts influence on the legislation forming, infringing upon the SME interests by means of NCE, Parliament, the Government, interacts with SME;
• Regional akimats. Implementation of state policy in regions of the country, legislation forming, creation of coordination councils on the SME

We shall go further to the stage of the stakeholders' importance and influence degree identification on forming and implementing of policy in the field of entrepreneurship in Kazakhstan.

Following on from the results of substantial analysis of information obtained during the interview, stakeholders were classified by their influence and importance (Fig. 2).

The A quadrant accommodated the stakeholders having high influence on decision-making process and being of high importance in the SME sector of Kazakhstan, for example, the Government and Parliament of the Republic of Kazakhstan, the National Chamber of Entrepreneurs Atameken (NCE), the Damu Entrepreneurship Development Fund, the second-tier banks. These subjects are the most involved in dialogue, work together and have possible forms of cooperation. In practice, all determining decisions created by the Business Development Department under the Ministry of National economy are accepted by the government. The proposals of NCE, the Damu Entrepreneurship Development Fund are taken into account while forming these decisions.

Figure 2. Stakeholders' analysis grid (compiled by the authors)

While forming state policy opinions of quadrant B subjects, but in a lesser extent are taken into account: regional akimats, institutes of an entrepreneurship development, small and medium-sized business, industry associations, etc.

Subjects of the D quadrant are the actors providing information, they are of low importance for an entrepreneurship, but their opinion is factored into decision making.

In the C quadrant the subjects having low influence and importance for the SME sector are located.

Conceptually the analysis contents showed the following: the Government, Parliament and the central state authorities are the most influential and important elements among all stakeholders in the process of forming of the entrepreneurship development policy. Though it should be noted that the National Chamber  of Entrepreneurs Atameken, «Damu» Entrepreneurship Development Fund, industry associations are important elements of the SME sector, but their influence on decision-making process isn't so great. The similar situation is observed also with the research organizations, the international organizations and other development institutes, including the second-tier banks.

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