Unlocking the potential: Small and mid-sized businesses grow in Kazakhstan
In his address at the Parliament, President Tokayev emphasized Kazakhstan needs to shift to a «new economic paradigm,» where SMEs will be a key driving force.
Indeed, SMEs are a significant source of employment, particularly in emerging economies like Kazakhstan.
According to the Bureau of National Statistics, the number of people employed in SMEs reached 3.9 million as of October 2022. The highest is in Almaty (799,153) and Astana (457,479).
«Overall, creating an open and self-sufficient market economy remains the main priority. Small and medium businesses should become the driving force of the economy and the labor market. Much has been said about this, but no significant shifts in this direction have been made. Therefore, we need to change the emphasis in our economic policy. We need to launch a full range of measures to support small and medium-sized businesses, which should fully feel their significant role in the development of the country,» he told the deputies.
Kazakhstan also needs a «new wave of entrepreneurs able to take responsibility for the economic progress of Kazakhstan.»
«Businesspeople who can build a successful business without access to administrative resources, utilizing entrepreneurial talent and diligence, should become its core,» he added.
How many SMEs are in Kazakhstan?
According to the latest data from the Bureau of National Statistics, there are 2,097,519 SMEs in Kazakhstan and 1,904,656 of them are active.
Of these, there are 1,839,108 small businesses, including 1,653,680 that are active.
There are 2,992 medium size businesses and 2,910 of them are active. Depending on the average annual number of employees and average annual income, business entities have several categories - small entities, including micro entrepreneurship subjects, medium entrepreneurship entities and large entrepreneurship entities. The state statistics uses only the criterion of the average annual number of employees.
In terms of economic activities, the largest share of registered SMEs – 35.5 percent - is in wholesale and retail trade, repair of motor vehicles and motorcycles. Other spheres employing large numbers of people include construction, industry and administrative and support services activities.
Kazakhstan seeks to bring the share of SMEs in its GDP to 35 percent by 2025, envisioned in its national project for the development of entrepreneurship. Based on the current values, there is already high probability that this target can be reached ahead of time.
According to the report on entrepreneurial activity in Kazakhstan presented to the President on January 24, the share of SMEs in the nation’s GDP was 33.5 percent at the end of 2021. Small businesses were the key contributors with their share in the GDP amounting to 26.8 percent.
The government reported on December 29, 2022, the share of SMEs in the GDP reached 35.7 percent as of the second quarter in 2022.
In 2021, labor productivity in SMEs increased by 20 percent and reached 8 million tenge ($17,917) per person.
In terms of regions, in 2021, the biggest contribution from SMEs to gross regional product was recorded in the cities of Astana (59 percent of gross regional product), Almaty (47.5 percent) and Shymkent (40.5 percent).
Between January and September 2022, SMEs had a value added of approximately 23.6 trillion tenge to the country’s economy.
Women entrepreneurship is also booming in Kazakhstan. According to the Kazakh Ministry of National Economy, women lead 44.6 percent of active SMEs or 638,089. These enterprises employ more than one million people, or one-third of those employed in SMEs.
Wholesale and retail trade is the most popular among both men and women executives. Women run 252,230 businesses, while men run 206,312.
The biggest difference between women-led SMEs and male-headed SMEs is in education. Women lead 70 percent of all SMEs in education.
At the end of 2022, there were almost 400,000 business entities in Kazakhstan led by young people under 30. Among sectors, trade (41.9 percent) is leading.
What kind of support does Kazakhstan provide to SMEs?
The Kazakh government's supportive policy environment was one of the factors driving the growth in the number of SMEs. Whether it is the 2008-2009 financial crisis, the COVID-19 pandemic, the January events or the current situation in Ukraine, SMEs have consistently struggled to survive. The government had to launch a new set of measures to counter each of these shocks, including lending to the affected sectors of the economy, a three-year moratorium on inspections, and deferral of loans to SMEs in the affected sectors.
The national project for the development of entrepreneurship provides financial and non-financial measures to support SMEs. In 2021, under these programs, more than 51,400 projects received concessional financing of more than 1.9 trillion tenge.
In 2021, compared to 2020, the total loan portfolio covered by the measures of state support increased by 57 percent and amounted to 3.4 trillion tenge.
The 2021 report indicates as of October 1, 2022, the measures of state support resulted in the opening of 5,200 new enterprises. 16,900 entrepreneurs expanded their businesses.
Among other measures of support, the government and the Atameken National Chamber of Entrepreneurs work together to reduce the bureaucracy in the regulatory policy. 9,560 requirements, which do not comply with basic conditions of the new regulatory policy, were identified.
The bureaucratic hurdles and red tape involved in starting and running a business in Kazakhstan can be overwhelming for SMEs. The process of obtaining necessary permits and licenses can be time-consuming and complex, making it difficult for small businesses to operate efficiently.
The so-called «regulation from scratch» mechanism is expected to significantly reduce the burden on business by an average of 30 percent and form an optimal and understandable regulatory environment. It will be launched in 2024. The need to introduce a new regulatory policy was voiced by President Tokayev in his address to the nation in September 2020, who signed the relevant law in December 2020.
The key message of the law is that state regulation should take place only if there is a risk to human life and health, the environment, law and order and morality. Any requirements for business should be with understandable motives of state regulation, practically executable, stated in accessible form without double interpretation, convenient and not burdensome. The level of strictness of state regulation will depend on the level of risk.
Kazakhstan also extended the moratorium on inspections of SMEs until the end of 2023. The moratorium on inspections came into force on January 1, 2020 and was scheduled to expire on January 1, 2023.
At the April 4 government meeting, Minister of National Economy Alibek Kuantyrov said a comprehensive plan will be developed for SMEs, including the stimulation of medium-sized businesses, following the task set by President Tokayev. The key directions include providing measures of financial, non-financial support for SMEs, stimulating the development of SMEs, removing barriers to their development in the framework of regional programs, simplification of public procurement procedures and expansion of sources of financing for SMEs.
«All the set tasks will be implemented as part of the new Tax Code. New approaches will be aimed at forming a clear and predictable tax policy,» said Kuantyrov.
SMEs in Kazakhstan continue to face a range of obstacles, including limited access to finance, a lack of skilled workers, and a relatively weak culture of entrepreneurship. Many small businesses struggle to secure the capital they need to start and grow their businesses. Yet, the challenges faced by SMEs in Kazakhstan are not unique to the country, and are similar to those faced by small businesses in many other countries.
Nonetheless, the progress made in recent years suggests that Kazakhstan is on the right track when it comes to developing a thriving and dynamic SME sector.
