Effective import substitution in the market of agro-food products and the development of export potential

The article considers issues of providing the economic and social security which are consequence of import substitution. As stated in the article, import substitution enhances the competitiveness of different sectors of the national economy and, in finally, allows to take own place on the world market for goods and services. The content of definitions such as import substitution, import substitution policy, export potential was considered. The authors consider various interpretations of these concepts, give their assessment. Different methods for dealing with this problem were cluster-by-cluster described. Particularly issues of import substitution in sphere of APC, ways of its solving both in the republic and CIS countries were detailed analyzed. It was pointed out that one of the most powerful methods to solve this problem is improvement to the system of the regulation and support of agricultural production. Conditions and drivers of supporting APC in the republic were considered. It was indicated that capacity-building should be provided taking account of all regions. Was noted that it is necessary to form the export food potential of the country and its regions, which implies the possibility of carrying out an active export policy in the future, both at the state level and at the level of a separate region, supported by economic diplomacy, internal institutional measures, and a comprehensive regulatory mechanism.

The development of interstate economic relations is based on the evolutionary process of the international division of labor. The active participation of the economic complex of the country and its regions in the international division of labor is a necessary condition for the formation, development and rational utilization of the potential of the national economy. In the economic literature, import substitution is seen as a model of the country's entry into the system of world economic relations, oriented to the economic growth of the state. Import substitution was proclaimed as one of the goals of economic development in theoretical models developed by such representatives of the neokeynesian school as H. Chenery, M. Bruno, A. Straoug, N. Carter. The ultimate goal of import substitution as a factor of integration of the state with segments of the global market is the growing competitiveness of national industries and the further export of national goods to the world market.

The need for import substitution for certain groups of goods is especially acute during times of economic instability. In such periods, the problem of replacing imported goods with cheaper domestic ones becomes not only actual, but a priority, especially if it concerns food products. At the same time, the problem of the possibility and economic feasibility of replacing imported products with domestic counterparts is multifaceted and includes a level of quality that can ensure domestic enterprises, difficulties with finding markets, the need to protect the domestic market from foreign competition, etc. The effectiveness of import substitution is quite complex economic category. It combines the parameters of domestic economy and world economy. According to the theory of A. Smith, imports should not only be more reasonable, but also a more profitable way of meeting the domestic needs of the country. According to a number of scientists, the need to ensure economic security as an integral part of national security significantly increases in the context of the crisis phase of the development of society, because «the inevitable economic and social costs of this phase largely distort the factors and safety criteria and at the same time further burden all the mechanisms for maintaining stability in society, reduce its ability to develop and implement programs of economic compensation and stabilization [1-4].

One of the components of economic security is food security. The food sector of the national economy is one of the key sectors, and therefore should be maximally protected [5-6]. Significant experience in protecting the domestic commodity producer is accumulated by all developed countries. The OECD countries allocate up to 60 % of their budget to support agriculture. This is not considering what is allocated from the budget of the countries entering the organization. According to the OECD methodology, the state support of agriculture in the value of realized products is 50-70 % in self-sustaining countries.

The vastness of the territory of Kazakhstan and its regions affects the territorial specialization of agricultural production, its results and, consequently, the uneven distribution of food. The country's regions have different internal development and self-sufficiency potentials, while spatial differences are key factors for the progressive development. It is important to note that in recent years, the regions of Kazakhstan have faced the economic challenges of the global crisis, which necessitated a review of the policy on import substitution of agro-food products and strengthening of measures of state and regional policy. Conceptual approaches should be developed in addressing the import substitution problem at the country and region level. Import substitution policy should be defined as a kind of transition to the export orientation of the agro-food system.

The urgency of the solution of this problem is also due to the presence of a number of the following principal points reflecting the essence and specific features of the processes of spatial polarization: the existence of a territorial differentiation of the country's economic space due to various internal development potentials and regions' self-sufficiency and the availability of different starting conditions for the development of regions caused by a variety of natural-climatic and socio-economic conditions of management.

Studies on the direction of the project in Kazakhstan, Russia were conducted by scientists such as A.Altukhov, V.Boev, N.Borkhunov, I.Buzdalov, A.Gataulin, V.Klyukach, V.Nazarenko, I.Ushachev, Logacheva, C. Maksimenko, E. Gusakova, S. Borisov, G. Kaliev, O. Sabden, A. Makarov, R. Myrzabaeva, A. Moldashev, N. Nurlanova, G. Nikitina.

Despite the close attention of scientists to the potential of import substitution, it seems that until now there is insufficient substantiation of theoretical and methodological provisions, the absence of certain basic concepts, and the concept of effective agro-food import substitution potential itself.

The transition to import substitution and the building up of export potential should be based on the principles of differentiation of food products and agricultural raw materials in terms of the degree of complexity of achieving sustainable production within the framework of the implementation of the Food Security Doctrine. For different types of goods, the following types of strategies can be implemented: export-oriented production, outstripping import substitution or targeting domestic demand. Export-oriented growth in the production of agricultural products is characteristic of the food donor regions. Import-substituting production, in turn, can be carried out both in the conditions of donor regions and recipient regions.

In our view, the most significant problems that need to be addressed are: a comprehensive assessment of the potential for the formation of import substitution and export orientation, forecasting the parameters of food self-sufficiency in the domestic market, identifying potential niches for effective import substitution in the agro-food market, and structuring the institutional space for import substitution in the industry , the definition of the stages of import substitution and the determinant of export orientation in agricultural sectors; development of a mechanism for implementing the policy of effective import substitution and increasing the export potential of agro-food products with the rationale for integrating regional agro-industrial entities into clusters, proposing an indicative model for the development of agricultural production and processing industry, and a methodological tool for differentiated regional agrarian policy of import substitution; development of regional models of import substitution in the market of agro-food products, taking into account the specificity of its transformational and structural problems, as well as territorial provisions of regions that ensure the priorities of inter-branch and cooperation ties both within and outside regions.

In the current conditions of instability of global economic processes, effective import substitution and increasing the country's export capabilities are priorities of effective replacement of the national economy in the process of its integration into the world economy. This is the path chosen by Japan, the newly industrialized countries of Asia, as well as by a number of countries using the potential of their territories (Germany, USA, Switzerland, Canada). A logical way to develop the economy after increasing production, import substitution and ensuring domestic demand is the development of export potential and its implementation. However, the process of building this capacity is quite long. Therefore, it is advisable that measures to increase production volumes for effective import substitution and formation of export potential would be carried out simultaneously.

Today, following the principles of transferring foreign trade to the system of WTO principles and mechanisms with protectionist measures in accordance with international practice are especially topical; attraction and effective use of foreign and domestic investments to enhance the competitiveness of export potential; multi-vector foreign economic relations and participation in the development of international regionalintegration [7]. These principles allow combining elements of a free trade policy and selective protectionism, which corresponds to a country that solves the problems of openness of its economy.

The implementation of the goals of modern foreign economic policy predetermines the implementation of a mixed development strategy - the construction of an export-oriented and import-substituting economy model that allows to preserve the national economic complex, to form an internal market, to build high-tech production, to create exported clusters, to expand exports, rationalize import flows, ensure economic security, realize selective and controlled entry into the world market [8-9]. The strategy for combining export- oriented and import-substituting development is explained by the fact that the development of the economy by import-substituting model is justified in the period of industrialization, when countries, having solved the tasks of catching-up development, get the opportunity to use the world experience of technological reconstruction of national production. However, in the future, the predominant policy of import substitution, as evidenced by world experience, is accompanied by a deterioration in the main macroeconomic indicators, a reduction in exports, a decrease in the competitiveness of resources and goods. In this regard, in the future, import-substituting policies should, in our view, contain a focus on the development of exports of importsubstituting products and access to foreign markets, which can stimulate economic growth, strengthen the balance of payments, and the national currency.

Thus, it can be concluded that import substitution in Kazakhstan is a particularly important strategy for creating the basis for sustainable innovative development of the industry and ensuring the growth of production of competitive agri-food products. Moreover, Kazakhstan has a good export potential in agriculture and food industry. However, in the conditions of the international division of labor and the globalization of economic ties, it is almost impossible to have a completely self-sufficient economic system within one particular territory of the region. On the contrary, the links between different countries allow achieving higher rates of economic development. Thus, we see that the efficiency of import substitution should be taken into account not only at the micro-level and in the short term, but also in the system of world economic relations.

The agrarian sector of Kazakhstan's economy has great potential. For example, the total area of agricultural land in the republic is 223 million hectares, including arable land - 21 million hectares. 84 % of land can be used for livestock.

However, according to the World Bank estimates, at present, labor productivity in domestic agricultural production is 5 times less than, for example, in Eastern Europe.

This situation is associated with a number of factors that negatively affect the effectiveness of agricultural entrepreneurship. Some of these factors are: low productive properties of the soil; developing desertification process, covering up to 66 % of the country's territory; deterioration of the quality of land as a result of the use of mineral fertilizers.

At the same time, the high level of agricultural production in the economically developed countries of the world is the result of long and hard work. For example, US agricultural producers needed about 20 years to increase their milk yield to 3,200 kg and to 10,400 kg for another 10 years.

During the 60-90s of the last century, world grain production increased almost threefold, milk production doubled, milk powder tripled, grain yields doubled. From 1965 to 1975, the world production of beef increased by 47 %, lamb and pork - by 80 %, poultry - 5 times.

During the same time, world cotton production almost doubled without expansion of crop areas. It should be noted that over the past decades, the doubling of agricultural output in the EU countries occurred with a decrease in agricultural land by more than 10 %. In addition, the growth in agricultural production is associated with an increase in the level of intensification of production.

For example, from 1950 to 1991 the increase in the yield of winter wheat in Germany is almost 3 times; rye and barley - in 2 times occurred due to the increase in the technical equipment of agriculture. During the same period, the number of tractors increased 11 times, combine harvesters - 100 times.

In recent years, agriculture has supported commodity production in the Republic of Kazakhstan.

The Ministry of Agriculture of the Republic of Kazakhstan, in accordance with the formalized agricultural specialization of the regions, recommends the following amount of acreage (Table 1).

Table 1

Crop area for crops, thousand hectares

Name of culture

Crop area in 2013

Recommended acreage in 2020

Wheat

13 090

11 500

Barley

1 877

3 030

Buckwheat

83,5

170

Oats

223

320

Millet

58

80

Rye

36

50

Corn for grain

109

140

Rice

90

80

Other grains and legumes

226

620

Soya beans

103

150

Sunflower

878

680

Safflower

295

295

Rape

264

400

Linen

410

460

Cotton

140

105

Vegetables

133

132

Melons

82

82

Note. Source: [10].

Summarizing the experience of supporting agriculture by various countries of the world has shown that most countries use subsidies as a key tool for supporting agricultural production.

In terms of the level of support for the agrarian sector of the economy, Kazakhstan is at an average level. General support for agriculture in this case includes both payments to agricultural enterprises from the budget, as well as indirect support measures (for example, tariff protection).

To convert the potential of the AIC into an actual advantage, a significant amount of state support is required. In accordance with the Message to the people of Kazakhstan from 2012 STRATEGY «Kazakhstan- 2050» The new political course of the state, it was commissioned by the President to increase the volume of state support to the agro-industrial complex by 4.5 times by the year of 2020 (Table 2).

Table 2

Volumes of state expenditures, billion tenge

2016

2017

Approved by the program Agribusiness 2020

Proposed

MA

Deviation

Approved by the program Agribusiness 2020

Proposed

MA

Deviation

345

266

79

383

286

97

Note. Source: [10].

It should be noted that, despite Kazakhstan's accession to the WTO, an agreement was reached to apply government support to agriculture, in the form of direct subsidies - the «yellow basket» at 8.5 % of gross agricultural output (Table 3).

Table 3 Permitted level of government support measures for agriculture in the form of direct subsidies

Kazakhstan

Russia

Kyrgyzstan

Ukraine

8,5 %

5 %

5 %

5 %

Note. Source: [10].

Analysis of current trends in the development of leading countries showed that further development of Kazakhstan's agrarian business should proceed as follows:

  1. We need to focus on increasing the competitiveness of agricultural products by increasing the effectiveness of state support and creating equal favorable conditions for the development of agricultural business.
  2. In addition, developed countries have formed a separate area of agriculture - the production of organic products. The development of the organic market in the world shows quite high growth rates, despite higher prices.

As the results of the research show, today one of the main tasks of the country's economic development is the improvement of the system of regulation and support of agricultural entrepreneurship. Therefore, in our opinion, it is necessary to improve the conditions and factors for the development of agricultural entrepreneurship in the following areas:

Firstly, we need financial rehabilitation of the subjects of agricultural entrepreneurship.

Secondly, it is necessary to increase the economic accessibility of goods, works and services to the subjects of agrarian business (increasing the availability of grain storage services, financial services, educational services, the results of agrarian science and consulting services).

Thirdly, it is necessary to develop the state system of providing the subjects of agrarian business (to develop the phytosanitary and veterinary safety system).

Fourth, it is necessary to improve the efficiency of the state regulation of the agrarian business (increase the efficiency of agrochemical services in agriculture, develop a system of information support for agrarian business entities, develop a system of technical regulation, create conditions for the development of production and turnover of organic agricultural products, develop agricultural cooperation and international cooperation in the field of agricultural entrepreneurship).

Import substitution and increasing the export opportunities of agriculture as priority development goals of the agro-industrial complex were proclaimed by the State Program for the Development of the AgroIndustrial Complex of the Republic of Kazakhstan for 2017-2021 [10]. So in 2016 the GDP of agriculture increased by 5.5 % compared to 2015, and in 2015 in real terms - below the level of 2011 by 4.1 %. The growth rates of food production in general do not keep up with the rate of growth in consumption, as a result of which the free niche in the market is replenished by imports and its share in domestic consumption remains very significant.

On average, over the last five years, cheese and curd (51 %), sausages (46 %), meat and canned meat (40 %) and butter (36.4 %) account for the largest share of imports for livestock products. By products of processing of plant products, the largest share of imports is recorded for sugar (42 %), and taking into account the import of cane sugar, imports reach 97 %, while the production capacity of sugar refineries is loaded by 37.1 %. The import of canned fruits and vegetables amounted to 84 % of domestic consumption (27 % at processing companies). The share of imports in domestic consumption of oil and fat products reaches 3040 % (with the workload of enterprises at 45-50 %). This means that today the acute issue is the lack of quality raw materials for loading production capacities for the processing industry as a whole.

Today, we often face the facts of selling poor-quality products. One of the main reasons is the underdevelopment of the system of harvesting and promoting agricultural products from producers to markets, including enterprises for processing agricultural raw materials. Among the main reasons for the insufficient level of food security are the following: limited material and financial resources; low labor productivity, insufficient investment in the industry.

The development of the agricultural processing and food processing industries should be directed to the production of priority products for saturation of the domestic market with food products and the realization of export potential. An objective national competitive advantage of the agricultural sector of Kazakhstan can also be the production and sale of organic agricultural products.

Modernization of the national agriculture in the context of import substitution has been practiced for a long time in many countries. In some countries, such as the USA, Germany, Great Britain, France, Japan, the problem of food security has been practically solved. At the same time, there remain a large number of countries for which this problem has not yet been resolved, including Kazakhstan.

The development and implementation of the policy of import substitution in sensitive areas today is of great importance for the EEA countries. To date, 61 % of the total trade turnover of the EEA countries is made up of imports. And again, the products that can be produced in the territory of the Union are imported. The purchase of goods expends about $ 26.5 billion ∣11]. For comparison, the total annual state support for all participating countries is almost three times less. In this regard, it is especially important to develop proposals for the formation and implementation of directions and mechanisms for integration in the field of agricultural development and food industry in the EAEC.

Today, the formation of new mechanisms for effective import substitution in the market of agro-food products and increasing the export potential in an open, market economy and taking into account the specifics of the development of individual regions and Kazakhstan as a whole is of great importance. As the analysis showed, annual inflation in 2016 was 8.5 %. And the main contribution to inflation was made by the rise in price of food products by 9.7 %. Also in 2016, Kazakhstan's foreign trade turnover decreased by 18.9 % compared to 2015, including exports - a decrease of 20.0 %, in 2015 - by 42 % and imports - a decrease of 17.6 % %, in 2015 - by 26.9 %.

Formation and implementation of the mechanism of effective import substitution and export potential development - the totality of the elements of this system will allow developing and implementing targeted actions and procedures for changing its parameters, structure and functions in response to the influence of external and internal environmental factors. On the basis of this definition, it can be concluded that it is necessary to develop an adaptive mechanism that allows taking into account the influence of internal and external environmental factors.

The problem of import substitution in agriculture is among the most relevant in modern economic policy and economic practice. Its urgency is caused, first, not only by political reasons, but also by economic ones. Secondly, it is not limited to the sphere of economic practice, but it is also scientific, theoretical, and third, it is not a local and country, but a universal international character, meaning that all countries sooner or later face the problem of import substitution.

Today, it is necessary to form the export food potential of the country and its regions, which implies the possibility of carrying out an active export policy in the future, both at the state level and at the level of a separate region, supported by economic diplomacy, internal institutional measures, and a comprehensive regulatory mechanism. This is especially important in relation to agricultural production, which has a significant export potential. We are talking about the possibility of a significant expansion of both commodity and geographical structure of foreign economic relations of Kazakhstan and its regions, a multiple increase in the export of food products and agricultural raw materials.

 

References

  1. Ushachev, I.G. (2014). Perspektivy razvitiia APK Rossii v usloviiakh hlobalnoi i rehionalnoi intehratsii [Prospects for the development of the AIC of Russia in the context of global and regional integration]. Ekonomika selskokhoziaistvennykh i pererabatyvaiushchikh predpriiatii – Economics of agricultural and processing enterprises, 1, 9-15 [in Russian].
  2. Altuhov, A. (2014). Prodovolstvennaia bezopasnost Rossii v usloviiakh zarubezhnykh sanktsii [Food Security of Russia in the Conditions of Foreign Sanctions]. APK: Ekonomika, upravlenie – AIC: Economics, management, 12, 19–29 [in Russian].
  3. Ushachev, I.G., Altuhov, A.I., Bespahotnyj, G.V., & et al. (2015). Importozameshchenie v APKRossii [Import substitution in the agrarian and industrial complex of Russia]. Moscow [in Russian].
  4. Myrzabaeva, R. (2011). O realizatsii prohrammy importozameshcheniia [On the implementation of the import substitution program]. Kazakhskii ekonomicheskii vestnik – The Kazakh economic bulletin, 2, 43–47 [in Russian].
  5. Moldashev, A.B. (2016). APK Kazakhstan: Problemy razvitiia i poisk ikh resheniia [Development problems and solutions]. Problemy ahrorynka – Problems of the agro market, 7–13 [in Russian]
  6. Maksimenko, S.R. (2017). Realizatsiia importozameshcheniia v RF i narashchivanie eksportnoho potentsiala [Realization of import substitution in the Russian Federation and increase of export potential]. Mezhdunarodnyi zhurnal prikladnykh i fundamentalnykh issledovanii – International Journal of Applied and Fundamental Research, 7 (part 2), 288–292 [in Russian].
  7. Kaliev, G.A. (2013). Vliianie edinoho ekonomicheskoho prostranstva i vstupleniia v VTO na prodovolstvennuiu bezopasnost Kazakhstana [The impact of a single economic space and WTO accession on Kazakhstan's food security]. APK: Ekonomika, upravlenie – AIC: Economics, management, 2, 71–82 [in Russian].
  8. Sabden, O. (2007). Natsionalnaia konkurentosposobnost Kazakhstana [National competitiveness of Kazakhstan]. Tsentralnaia Aziia i Kavkaz – Central Asia and the Caucasus, 6 (54), 166–176 [in Russian].
  9. Logacheva, E.V. (2009). Aktualnost problemy importozameshcheniia nekotorykh hrupp tovarov v sovremennykh usloviiakh rossiiskoi ekonomiki i mezhdunarodnoi ekonomicheskoi koniunktury [The urgency of the problem of import substitution of certain groups of goods in the current conditions of the Russian economy and the international economic situation]. Mirovaia ekonomika i mezhdunarodnye ekonomicheskie otnosheniia – World economy and international economic relations, 1 (50), 360–363 [in Russian].
  10. Hosudarstvennaia prohramma razvitiia APK Respubliki Kazakhstan na 2017-2021 hh. Ministerstvo selskoho khoziaistva Respubliki Kazakhstan [The State Program for the Development of the Agroindustrial Complex of the Republic of Kazakhstan for 2017-2021]. mgov.kz. Retrieved from http://mgov.kz/ru/aza-stan-respublikasyny-a-k-damytudy-2017-2021-zhyldar-a-arnal-an- memlekettik-ba-darlamasy [in Russian].
  11. Ofitsialnyi sait Komiteta statistiki SNH [Official site of the CIS Statistics Committee]. cisstat.com. Retrieved from http://www.cisstat.com/ [in Russian].
Year: 2018
City: Karaganda
Category: Economy