State regulation of agriculture in Kazakhstan within the framework of the Eurasian Economic Union (EAEU)

State regulation of agricultural production of any country, including Kazakhstan, in modern conditions is and will be quite a relevant topic. The aim of the article is the theoretical substantiation of this thesis and its confirmation by the example of the agricultural production of Kazakhstan. In this case, it is necessary to take into account the peculiarities of the agrarian production itself when Kazakhstan joins the world economic community as an independent state. In modern conditions, competition in the EAEU is increasing, which provides an objective basis for considering the state regulation of the agricultural sector. When writing the article, the method of scientific abstraction, the method of comparative analysis, as well as other research methods that made it possible to identify the need for state regulation of agricultural production, were used. A retrospective analysis of the agrarian production of Kazakhstan was carried out, contradictions that persist as part of the development and implementation of a Single agrarian policy of the EAEU countries were identified, and proposals were made to resolve these contradictions. The results of the work will ensure adequate efficiency in the implementation of agricultural support programs for the country, and the implementation of the principles of protectionist agricultural production policies in Kazakhstan will create the agro-economic basis of its food security.

The question of the relationship between the state as a subject of regulation of the agrarian sector and the state as a business entity, as well as the problem of the relationship of this subject with other subjects, is still the subject of heated debate. Unity in its consideration has not been achieved either among theoretical scholars or among practitioners of agriculture, or among politicians. At the same time, it cannot raise doubts that both of these state roles have no symbolic meaning at all. This convincingly demonstrates the practice prevailing in various countries.

A retrospective analysis of these relations shows that generally government regulation of the economy has served as the basis for Keynesian theory the relevance of which does not disappear even now. «My criticism is directed against the failure of the theoretical foundations of the laissez-faire doctrine,... and also against the statement that the interest rate and the amount of investment are automatically set at the optimal level, and that therefore concern for the trade balance is only a waste of time. We, academic economists, turned out to be too self-confident, mistakenly considering as childish stubbornness that for centuries has been the primary concern of public administration» [1; 127].

At the initial stage of development of transitional processes in agriculture in Kazakhstan, the point of view of free development of market relations was decisive. It was believed that agriculture as a branch of the national economy is most adapted to the market of perfect competition and can do without a system of state regulation. But the practice of management quickly showed the inconsistency of this approach [2; 527–530]. Now in Kazakhstan there is a clear understanding that the formation and functioning of market relations is impossible without government intervention and regulation.

Analyzing the economic theory of the transition period and state intervention in the economy, Professor A. Nouv notes: «Should the government adhere to a certain policy and strategy, take measures to stimulate investment and technical progress? Here, Japan, South Korea, and Taiwan can serve as examples of a positive government strategy, including selective protectionist measures, soft loans, etc. It is useful to draw the attention of our «eastern» colleagues to the role of the government in the post-war reconstruction of Western Europe, for example, in the implementation of the Marshall Plan. Then the economy of these countries was not left to the mercy of market forces» [3].

In Kazakhstan, from the 90s to the present, there are still very few sources of private financing and the capital market is not developed, and if the state leaves the investment sphere, the level of investment will fall below the recovered, and net investment will become negative.

The agrarian crisis and the ongoing reform in Kazakhstan had a structural focus. In the pre-reform period, the state was the defining form of regulation of the entire economy. The state embraced all spheres ofeconomic and social life, and the degree of nationalization was practiced as one of the most important indicators of the socio-economic maturity of the production and economic process.

In this regard, A. Modin rightly notes that «there is an urgent need for «implanting» the actual organizational principle in the process of establishing market relations, to a large extent the revival of the regulatory influence of the state on the development of production and ensuring its social orientation, on integrating the economy into the international division of labor, on the formation of cooperative relations, investment and scientific and technical resources» [4; 41].

The first stage of the reform showed that the implementation of the socio-economic transformation to the market has a long-term character. In the conditions of an unstable economic situation, not only foreign investors refuse to invest their capital in the agricultural production of the republic due to its low profitability, but the villagers themselves are not particularly keen to create independent farms.

In addition, the implementation of the reform by monetarist methods aggravated the previously existing monopoly «at the entrance» to the agrarian sector of the industry producing agricultural machinery. This monopolism was expressed primarily in the disparity of prices.

The most important aspect of creating a competitive environment is overcoming the monopolism of the processing industries. On the one hand, the market for agricultural raw materials is developing, although weak, but market competition between producers of agricultural products, and on the other, practically all raw materials are purchased by a monopolized processing industry with a developed network of production and social infrastructure, procurement organizations, storage facilities, etc. A situation arises when the processing industry branches, having made a minimum of expenses, «winds up» the final price of the agricultural product, taking the lion's share of income from agriculture.

In addition to this monopoly «at the exit», there is a monopoly «at the entrance», when business entities do not have the choice of the necessary agricultural equipment, in this case because of the monopolism of industrial industries. The latter dictate the conditions to agricultural producers, constantly overestimating the prices of their products. The disparity in prices between industrial and agricultural goods that has developed under monopoly conditions hinders the realization of the very idea of agrarian reform and the formation of market relations in agriculture. That is why, in our opinion, it is necessary to state regulation of these relations in the agricultural production.

The experience of developed countries showed that market relations alone are not able to carry out structural changes in the economy, as well as provide strategic changes in science and technology. The market does not give the desired effect in situations where there is a need to implement large investment projects with long payback periods. Here it is impossible to do without the help and participation of the state, which stimulates the scientific and technical progress (STP) and determines the structural policy. The experience of these countries shows [5; 519-551] that in the conditions of crisis and aggravation of problems of agricultural production, the state applies fairly rigid direct administrative methods agreed with economic entities.

The transitional state of the economy of Kazakhstan as a whole, the crisis experienced by agriculture in particular, require not only indirect, but also direct government intervention. However, here it is necessary to especially emphasize that the decisions taken by the state in the person of its economic bodies are thoroughly thought out, taking into account the specifics of various agricultural regions of the republic, and actually influencing the processes of formation of market structures.

The main task of state regulation of market relations in agriculture is the creation of a competitive environment that ensures the transformation of the agricultural sector itself into market rails. The whole set of problems of the analyzed sector of the economy of Kazakhstan defines the basic principles of this regulation.

Agrarian Protectionism. The protection of national agricultural production was carried out by various developed and less developed countries at various times. The implementation of this principle is carried out in two directions.

The first is to protect market relations in agriculture from other sectors of the economy. The second is to protect national agricultural production from the expansion of foreign agricultural goods. Imports of foreign agricultural products, even less cheap and of higher quality, adversely affect the financial and economic condition of local economic entities and divert limited national currency resources from investing in the agricultural sector of the economy. The growth of imports of foreign agricultural products and foodstuffs will limit the development of the agrarian sector, as well as enterprises processing agricultural raw materials. In addition, the import of these products threatens the food security of Kazakhstan.

The competitive struggle within the ЕАЕÙ will also increase. This is due not only to the operation of objective economic laws, but also to the tendencies of the economic development of countries included in theEurasian Economic Union. It is no coincidence that the International Conference «Legal Aspects of Ensuring Equal Conditions for Competition in the Territory of the Single Economic Space», held in Kostanay on October 2, 2014, confirmed this process and revealed a number of serious contradictions within the SES. At this conference, it was announced that state subsidies in percent in the cost of 1 centner of milk (100 %) for Russia is 6.9, Belarus — 18.9, Kazakhstan — 4.9 [6; 11].

Accordingly, taking into account the real natural and climatic conditions, which are different in these countries and more favorable in Belarus, and also with such a sufficiently high state support, the competitiveness of Belarusian products will be much higher.

Currently, more than half of dairy products in the northern regions of Kazakhstan are represented by Belarus products, which clearly reduces the competitiveness of local producers. Ultimately, this undermines the food security of Kazakhstan. If this situation continues for the next 5 years, local producers, without increasing government support, can be ousted from the dairy market.

Competition in the framework of the EAEU will also increase. This is connected not only with the operation of objective economic laws, but also with the trends of economic development of the countries belonging to the EAEU. The international conference «Legal Aspects of Ensuring Equal Conditions of Competition on the Territory of the Common Economic Space», held in Kostanay on October 2, 2014, confirmed this process and revealed a number of serious contradictions within the then Common Economic Space (CES). Until now the states have not worked out a single agrarian policy and the concept of collective food security [7; 753–771]. In addition, the entry of Kazakhstan into the World Trade organisation (WTO) will exacerbate internal contradictions in the sale of agricultural products, in the establishment and development of small and medium-sized domestic business.

If in previous crises a decline in exports of one type of raw material was compensated for by an increase in exports of another, then this crisis will not provide such an opportunity for Kazakhstan, since it itself is structural in nature. It is the raw material orientation of the country's exports that becomes the worst prerequisite and condition for the worsening of the crisis relations in the country. Analyzing the model of R. Solow, economists drew attention to the fact that «other things being equal», a country with a smaller amount of per capita capital should grow faster — an effect resulting from a diminishing return on capital. However, another major growth factor — the level of technology — is characterized by increasing returns: the higher it is, the faster the growth. In addition, a lagging country risks falling into a trap of poverty or an industrial trap; in these cases, it moves along equilibrium (supported by the market) trajectories of slow growth [8]. And the law of R. Solow will now act in reverse or not work at all.

The most important principle of state regulation, which is of particular relevance in the conditions of formation of market relations in agriculture in Kazakhstan, is the principle of combining economic and social goals [9; 21].

One of the defining principles of state regulation is the responsibility of all economic entities before the society (state) for the production of necessary agricultural products and their quality, payment of taxes for land and others, as well as the strict implementation of the necessary regulatory requirements for land use and land tenure. It should be noted that this principle of regulation is effective in countries with developed market economies and contributes to the creation of a progressive socio-economic structure of agricultural production.

The following principle is the social security of peasant farms. The state regulates the market prices for agricultural products in order to maintain producers' incomes at a certain level. It is known that in many countries in agricultural production a structural policy is pursued aimed primarily at increasing the profitability of farm (peasant) farms.

A characteristic feature of the current state of agricultural production in Kazakhstan is the coexistence and combination of elements of heterogeneous control systems. On the one hand, the directive methods of regulation in the conditions of transitional economy, which apply to the newly formed economic entities in order to preserve the food security of the republic, remained. On the other hand, as the real competitive environment between them and the previously mentioned monopolism «at the entrance» and «at the output» of the agrarian sector is created, the principle of indicative regulation will become increasingly important as the most adequate to the emerging market relations (Table 1).

The principle of programmed regulation, carried out at the macroeconomic and microeconomic levels, acquires special significance in the establishment and functioning of market relations in agriculture of Kazakhstan. Macroeconomic programs determine the basic proportions of the economy as a whole and its various industries.

Table 1 State funds for the development of the agro-industrial complex of the Republic of Kazakhstan


Amount (billion tenge)

Amount (mln. USD)

Growth for the next period in%

Objectives of the program





Ensuring food security. Kazakhstan based on the formation of an effective system of agro-industrial complex and the production of competitive products





Creation of normal conditions for the livelihood of the village (village) based on the optimization of rural settlement

2006-2010[3] [4]




Ensuring the sustainability of the agroindustrial complex based on the growth of productivity and profitability of its industries and the development of national competitive advantages of domestic products





The development of a competitive agroindustrial complex of the country, ensuring food security and increasing exports





Creating conditions for increasing the competitiveness of the subjects of the agroindustrial complex of the Republic of Kazakhstan





Ensuring the production of competitive agricultural products in demand in the markets

Note. The US dollar exchange rate in January of the corresponding year.

They affect the mechanisms of competition and are aimed at overcoming the monopoly of individual sectors of the national economy, as well as the elimination of the dictates of the former administrative- command methods of economic regulation. At the macroeconomic level, the program determines the main proportions within the industry and the economic conditions of management between direct producers of agricultural products. Naturally, the implementation of the principle of program regulation at the macroeconomic and microeconomic levels should not contradict each other.

The financial resources of the state were directed to the fulfillment of the triune task: a) strengthening the competitiveness of local agricultural producers; b) increase the export potential of the agricultural production of Kazakhstan; c) strengthening the food security of the country.

To accomplish this task, Kazakhstan adopted a number of specific programs for the development of agrarian production. There was a logical connection between these programs, as well as continuity. Unfortunately, these programs were not implemented to the end, due to the fact that the funds allocated by the state were not utilized during this period.

Table 2 Financing of existing programs for the development of agrarian and industrial complex (AIC)








million USD

million USD

million USD

million USD

million USD

million USD

Republic of Belarus[7] [8] [9]







Republic of Kazakhstan






1660.9 '

Russian Federation







Note. The US dollar exchange rate in January of the corresponding year.

The President of the country set the real task «to increase by 2.5 times the labor productivity and export of processed agricultural products by 2022»[10].

The Table 2 shows that the volume of state financing of agriculture in Kazakhstan is quite high. This follows from the three-pronged task of developing the country's agricultural production. Taking into account the peculiarities of agricultural production in Kazakhstan, as well as the factors mentioned earlier, the Ministry of Agriculture plans to get the effect of state financing by 2022.

Kazakhstan is an agro-industrial country. In our opinion, it is very difficult for the republic to compete with economically developed countries in the production of high-tech products in the near future. However, it is quite realistic to use your agricultural potential in the production and sale of agricultural products.

Today our republic is among the first ten countries in the world exporting wheat grain and flour. This niche in the international market is important, since «food production is the very first condition for the life of direct producers and of all production in general» [10]. In this sense, the republic has everything necessary to strengthen its position in the international market, where organic Kazakhstani agricultural products are in demand [11; 884–891]. Moreover, according to the forecasts of the UN Commission on Food and Agriculture, in the next 3 years, the production of grain crops will be reduced due to unfavorable climatic conditions and a decrease in acreage. Global grain consumption in the season 2018–2019 is projected to be 2,649 million tons, which is slightly lower than the November forecast, but still 1.3 % higher than in the season 2017– 2018. The adoption of Conservation Agriculture (CA) in Europe varies according to the ecological regions of the continent. Although Europe is behind other countries in adoption of CA, the indicators for future progress are encouraging.

Two major factors will contribute to this: the growth of grain consumption in developing countries due to the constantly growing population and the increase in grain processing for technical purposes [12; 1–13]. Kazakhstan is able to put into circulation another 6 million hectares of sown area.

Program regulation at the forefront puts the principle of a combination of voluntariness and mandatory participation of economic entities in it. Secondly, in the course of program regulation, these entities take a share in the financing of program activities. The state compensates only part of the costs incurred by direct producers of agricultural products in the implementation of program activities. Ultimately, this stimulates a more efficient use of financial support from the state with one-time operational mobilization of the resources of individual economic entities. Guaranteed state support in the provision of financial resources, agricultural equipment, fertilizers, etc. carried out only under certain conditions specified in the contracts. Thus, the state provides substantial assistance to those groups of agricultural producers that fulfill the conditions of the program.

The impact of any mechanism, including state programmatic regulation, has its positive and negative sides on the formation of market relations in agriculture. The blocking of negative consequences is correlated by the target orientation of state support to economic entities.

Direct regulation of agricultural production consists in drawing up long-term programs and mandatory production plans for economic entities. The objects of planning and forecasting are only a certain part of the volume of agricultural production produced, its quality, the most likely buyers, and guaranteed prices by the state. Unlike the previous administrative-command methods of managing agriculture, there is no complete dictate over agricultural producers; it is given complete economic freedom.

Thus, the above-mentioned features of agricultural production cause more active state regulation.

The principles of state regulation of market relations in agriculture are carried out by certain methods and specific tools aimed at fulfilling the tasks set.

The state can regulate these relations legally. It establishes the legitimate «rules of the game» governing relations between enterprises, resource providers and consumers. On the basis of legislation, the government is able to perform the functions of an arbitrator in the field of economic relations, identify cases of dishonest practices by economic agents, and use power to impose appropriate penalties. These provisions are very relevant for the organization of broken inter-farm relations between industrial and agricultural enterprises in Kazakhstan.

The main functions of state regulation of market relations in agriculture are:

  • ensuring sectoral restructuring of the national economy;
  • creation of a competitive environment for various economic entities;
  • overcoming monopoly «at the entrance» and «at the exit» from the agricultural sector;
  • the establishment of price parity between the products of industry and agriculture;
  • regulation of supply and demand for agricultural products;
  • support of incomes of newly formed economic entities;
  • protection of the ecology of the environment as a living environment for a person and the sphere of capital investment in agriculture;
  • introduction of the achievements of STP;
  • ensuring socio-economic transformations in the agrarian sector itself;
  • preservation of the national food security of the republic as one of the most important factors of social stability of Kazakhstan;

The following basic tools are used to accomplish these tasks:

  • government procurement, storage and sale of main types of agricultural products;
  • guaranteed prices with surcharge above the market price;
  • guaranteed state accelerated depreciation of fixed and circulating assets of agricultural enterprises, including the cost of maintaining the economic fertility of the land;
  • full state financing of the most priority directions of development of agricultural production;
  • a share subsidizing of investments of economic entities focused on the implementation of the main tasks of the state regulation of the agro-industrial complex;
  • quota arrangement for production and sales of a number of types of agricultural products;
  • quota arrangement for agricultural areas;
  • payments per unit of production or consumed resources;
  • guaranteed state loans with solid bank interest;
  • preferential loans for newly formed business entities;
  • their preferential taxation;
  • state insurance of agricultural producers.

A retrospective analysis of agricultural production in Kazakhstan shows that the set of tools designed to regulate market relations in it is very limited.

It should be noted that various tools are used to perform a certain function of state regulation. There is a certain close relationship between the individual functions of state regulation. And the tools aimed at performing these functions often complement each other, contribute to a more rapid and effective achievement of the goal.

In modern conditions, when the domination of international monopolies in the economic life of society is indisputable, and 80 % of the export of capital and goods is carried out under their control, it is practically impossible for Kazakhstan to pursue an independent economic policy.

At the same time, even the limited resources available can significantly improve the mechanism of state regulation, increase the efficiency of funds allocated to support agricultural production, and also mitigate the recession. Directly in agriculture, a gradual competitive environment is already emerging for various economic entities. Here the state should influence mainly indirectly, by economic methods, without administrative means of influence. The economic regulators themselves should be applied carefully, without weakening and, especially, not replacing market incentives, which should be given priority, i.e. the principle of laissez- faire noted earlier should prevail. Ignoring this requirement will lead to the fact that the still fragile market mechanism will falter, and its very functioning «slip». The use of such state regulation tools as tax policy, quotas of production and sales, and others without any restrictions, can negate the market mechanism, and production in the industry can «move out» again to centralized planning. It should be borne in mind that among economic regulators neither economic science nor real economic practice as a criterion of economic truth revealed the ideal, which, having a positive effect on one commodity market, would be just as useful on another.

The most important instrument of state regulation of market relations in agriculture are prices. Earlier it was noted that the tools complement each other, and the impact of this turns out to be more effective. Under these conditions, the role of this regulatory mechanism is especially increasing. The latter should be complemented by income support for agricultural producers.

Under the conditions of the functioning of the EAEU, the role and importance of the Kostanay region have significantly increased, since it is still the largest region producing high-quality grain varieties, which is exported abroad. The production of this type of product requires a smaller share of government support.

Contradictions of state support (subsidies) to milk producers, indicate that a Single agrarian policy is not fully implemented within the framework of the EAEU. Ultimately, the current situation leads to the fact that each country conducts its protectionist agricultural activities.

The experience of recent years has shown that the material direction in the development of the farmers' movement is the cooperation of farmers in sales, supply, processing and storage [13; 651-662]. Without joint efforts, it is almost impossible to ensure the profitability of these farms.

In modern conditions, the solution of most of the problems of farms rests on the issues of financing and lending. Due to the underdeveloped infrastructure, farms are currently unable to reach their potential and make a significant breakthrough in agricultural production [14; 71-75, 15; 495].

For all the importance of state support to farms, which has been much and interestedly discussed lately, in our opinion, the most urgent now is to reform and improve the efficiency of large agricultural structures that form the core of the agricultural production system historically established in Kazakhstan. The choice of priorities is crucial if only because the limited resources available to the state are quite obvious. Spraying them will inevitably reduce the effectiveness of reforms. Under these conditions, it is necessary to develop programs for reorientation and technological re-equipment of farms aimed at improving the competitiveness of products.

The question is not whether or not to allow the state into the sphere of market agrarian relations, but to determine the extent, boundaries, directions and mechanisms of its participation. To what extent is direct centralized regulation of agrarian relations permissible, in which cases it is advisable to influence the agrarian sector through a system of indirect economic levers? These very specific questions are the subject of controversy.

But the answers to these questions rest on the choice of an economic model of agricultural development that allows for a greater or lesser level of liberalism.

The assumption of a significant level of liberalism means the scope of market relations and, accordingly, a decrease in the regulatory impact of the state on the agricultural sector. Otherwise, the state plays a much more active role, including in the development of social relations and the social sphere in agriculture.

At the same time, in the case of the second model, the danger of a decrease in efficiency due to the suppression of market principles increases significantly. Yet for the current stage, despite this threat, there is a tendency towards an increase in centralized regulation of the agricultural sector. In this case, it is not about extensive expansion of the spheres of state influence, but about improving the mechanisms of its impact, developing a system of indirect regulatory tools, information and consulting services. This system does not block the market, but contributes to its more efficient functioning.

Therefore, the growth of state influence is not at all identical to the weakening of market principles and the infringement of the rights of independent economic entities of the agricultural sector. The role of these subjects in the decision-making process in modeling the development of their farms and the economic situation as a whole is not only not weakening, but, conversely, becoming more active.

State regulation of business entities, figuratively speaking, creates a kind of infrastructure that creates the necessary conditions for the social orientation of market relations.

Meanwhile, it is precisely the problem of linking these diverse interests, the development of the economic freedom of each of the subjects while maintaining and consolidating common interests is key in the formation of an effective socially oriented market economy. In the absence of centralized state regulation and orientation exclusively on the laws of the spontaneous market, as a panacea for all ills, the result can be no less pitiable than when hypertrophied a centralized state.

The rigidity of market relations based on the right of the strongest inevitably leads to the suppression of the economic freedom of a larger number of economic agents, the emergence of monopolization of economic life. The emergence of monopolies, as is known, leads to twofold consequences, to a decrease in economic efficiency, firstly, and to an increase in unfair social and economic privileges, to the exacerbation of inequality and intensification of conflicts in the social sphere, secondly.

Naturally, in industrialized countries with strong democratic traditions, in the political and institutional system of which there is a desire to take into account and respect the interests of each individual, market principles in the economy are certainly linked to government regulation. The development of the latter occurs in various and complex forms. The complexity of the subjectivity of this process, the differentiation and differentiation of the functions of various subjects and levels of regulation are traced. In different Western countries, where government regulation of economic entities is based on a developed system of flexible economic incentives and levers, the goal of government regulation is to harmonize market relations based on encouraging healthy competition, as well as ensuring social balance in society.

Thus, state regulation does not mean the elimination of the state from the economic sphere and not even in diminishing its role, but only a qualitative change in the nature of its economic activity, mechanisms regulating the behavior of economic entities.



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Year: 2019
City: Karaganda
Category: Economy