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ANALYSIS Author: KazakhSTAN 2.0 - 17.07.2018
Privatization in Kazakhstan: Cui Bono?
The Kazakhstan authorities has proclaimed the state property privatization one of the key destinations of the current economic policy. However, with all the stated positives, the program has become a folding screen for the elite clans that have gotten the opportunity to buy the things that, only yesterday, were unattainable for them.
In theory, the state property privatization will decrease the share of the state sector in the economy, lessen the budget expenditures on its support and development, ensure the improvement of the privatized enterprises' efficiency via placing them in the competitive environment and help up the domestic business. And so on, and so forth.
The Ministry of Finance is the agency responsible for carrying out the privatization in the country. On its website, there is a special section devoted to the issue.
According to the data presented on the website, as of June 24, 2018, 1177 enterprises were included in the «second wave of the privatization». Of those, 749 have already been put up for sale: 646 enterprises have been sold, 103 are at the trading stage.
Based on the official data, we have compiled a table showing the average price for the sold objects in all the chosen categories. The numbers show that, despite the grand scale of the «second wave of the privatization» (the stonking 1177 units and 646 sold objects), the program has not been implemented successfully. And not only because 317 enterprises were excluded from it (which is normal since most of them had not been in demand on the market and, as a result, were liquidated). The thing is that it is primarily small and middle enterprises that are being privatized.
For instance, for the republican property enterprises, the selling price constituted 748 mln tenge, for the communal property enterprises, the selling price constituted 152 mln tenge, for the national companies — 66 mln tenge. With that, out of the 646 privatized objects, 508 fall into these categories.
Therefore, Kazakhstan is de-facto conducting not so much a privatization of the state property as the elimination of the unwanted objects.
The situation with the national holdings is a little better. Here, the average selling price is noticeably higher — 1366 mln tenge. However, in an authoritarian political system with the «super-presidential» form of state management, the state property privatization oftentimes transforms into the ever-greater monopolization of the sectors. And this is unavoidable since it is practically impossible to sustain a relatively big business without the support from the above.
As a result, within the twenty plus years of the sovereignty and independence, all the relatively profitable businesses in the country ended up under the direct or indirect control of certain elite clans that, as a rule, are led by Nursultan Nazarbayev's close relatives or allies. And now, thanks to the state property privatization program, the latter have also gotten an opportunity to buy the things that, only yesterday, were unattainable for them.
We will confirm our statement by presenting a specific example.
On April 6, 2018, Prime Minister Bakytzhan Saginyayev signed Governmental Decree #176 on the strategic assets disposal.
In this Decree, citing Article 193 of the Kazakhstan Civil Code (General Part) of December 27, 1994, the Government allowed Kazakhstan Temir Zholy NC to sign a contract for the sale of 26% equity stake (minis 1 share) of Transtelecom JSC to Mukhanov Marlen Savitivich who paid 9.45 bln tenge for the shares.
According to the information in the Kazakhstan media confirmed by our sources, Marlen Mukhanov is a person close to Nurali Aliyev, the eldest son of Senate Deputy Dariga Nazarbayeva and the eldest grandson of President Nursultan Nazarbayev.
To confirm this, we will cite a publication of the analytic agency under the authority of the Atameken National Chamber of Entrepreneurs (text in bold by kz.expert).
«Kazakhstan Temir Zholy JSC (KTZ) has signed a contract for the sale of 26% shares minus one share of Transtelecom JSC in the amount of 9.45 bln tenge, reports the Samruk-Kazyna National Welfare Fund press service. As discovered by abctv.kz, the buyer was the owner of 49% of the company».
«The sale of the shares of Transtelecom via the open two-step bid was approved by the State Commission on the Issues of Modernization of the Economy. First, potential buyers went through the qualifications-based selection process. Second, the selected contenders presented their pricing proposals. The selling-purchasing deal has been signed and the buyer is to pay the agreed amount during 90 calendar days, says the Samruk-Kazyna press-release.
Little known Mukhanov Marlen Savitovich has become the owner of the share, according to the Governmental Decree. It is also confirmed by the information on the state-owned enterprises registry website. However, according to the official KASE stock data, Mr. Mukhanov had earlier been mentioned as a fiduciary for the President's grandson Nurali Aliyev when the latter owned 6,4% of the Nurbank shares (April 2009).
Prior to the deal, Marlen Mukhanov had already owned 49% of the Transtelecom shares that he privatized in February 2016, according to the Governmental Decree on the telecommunication operator's shareholders data. Thus, now he owns 75% of the company minus one share. In other words, it looks like KTZ has retained the Transtelecom blocking stake.
The sum of the deal is of interest as well — 9.45 bln tenge for 25% minus one share. Earlier, as reported by the Samruk-Kazyna Contract press service, 49% of the Transtelecom shares was purchased by Mr. Mukhanov for 8.94 bln tenge. It is indicative that the sum of the deal was revealed in May 2015, however, the Governmental decision on approving the purchase was dated by February 25, 2016, in other words, after the August tenge crash».
«The company's net profit for 2015-2016 constituted 4.52 bln and 4.42 bln tenge, correspondingly, according to the auditors' reports and reflects the stability of the situation. In 2017, the indicator grew by 23% to 5.33 bln tenge.
The company intends to participate in the Digital Kazakhstan program and will take part in the Ministry of Information and Communication's tender procedure on providing the broadband internet access for more than 400 residential places and 1.2 thousand state agencies in rural areas. The bid, by the way, is divided into two lots priced at 140.6 bln and 68.3 bln tenge, correspondingly.
The project must be delivered in the timeframe of 2018 — 2031. Kazakhtelecom JSC will participate in the bid and will probably win the bigger lot while Transtelecom will end up with the smaller lot».
In the meantime, based on the insider information, 2672592 of Kazakhtelecom's ordinary shares (in other words, 24,96%) belonging to Sobrio Limited (Ras al-Khaimah, UAE) are in fact controlled by Dariga Nazarbayeva. Therefore, their nominal owner, famous Kazakhstan entrepreneur Alexander Klebanov, in this particular case, only represents her interests in the same way that Marlen Mukhanov represents Nurali Aliyev's interests.
Thus, the communication sector of Kazakhstan has de-facto fallen under the control of the President's eldest daughter and her son. And this hidden monopoly will only strengthen since Kazakhtelecom is planning to buy the Kcell mobile operator. Also, together with Transtelecom, it is likely to win the bid to provide the broadband internet access for more than 400 residential places and 1.2 thousand state agencies in rural areas.
Author: KazakhSTAN 2.0
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