The article describes the author's view about the main stages of activity of the light industry in Kazakhstan since 1990 to the present, investigates the features, clearly identifies the main challenges faced by the industry during this period. The aim of this article is to consider the history of the production of the clothing and shoe industry in Kazakhstan during 25 years of the Independence. We are trying to analyze the reasons of the decline of production and to identify effective ways to improve the organization of production of enterprises. This article describes the history, the current state and perspectives of the development of this industry in Kazakhstan and we hope to offer effective ways to improve the state of the production of the clothing and shoe industry in Kazakhstan. In addition, in this work we have been made several proposals and recommendations on the need for drastic and urgent measures to improve the situation in the industry, in particular, were proposed measures to enhance the work on the promotion of Kazakhstani brands of light industry.
A huge role in ensuring the economic and strategic security of any country is played by the development of such an industry as clothing and footwearindustry (the light industry). It has always provided employment of the population, especially the female part, which proves its high social significance. Light industry has always occupied an important place in the production of the gross domestic product of Kazakhstan, both in terms of filling the domestic market of import-substituting products, and from the perspective of the development of exports of finished products.
At the stage of implementation of the second five-year period of industrial and innovative development of Kazakhstan, the development of the industry remains one of the key directions for the growth of economy. In the Government Program of Industrial and Innovative Development of Kazakhstan for 2015-2019 years the light industry is not defined as a priority. The program stipulates that 80% of funds allocated for the processing industry should be focused on the support of 14 priority sectors. The remaining 20% of the funds can be allocated to help other projects in the manufacturing industries, including light industry [1, p.10].
Tracing the changes in the economic situation of the industry over the 25 years of Kazakhstan's independence, the author of this work tried to make a short historical digression. The author has tried to assess industry’s trends, to identify certain errors and mistakes that were made in the activities of light industry.
The beginning of the reforms in Kazakhstan's economy, which began in the 90s, led to a radical change in economic conditions of enterprises. All branches of the light industry were in a state of crisis. In Kazakhstan there was rates of decline of production and productivity.
Thus, in 1990-1991, the share of light industry products increased from 15.6% to 18.5%. But, since 1992, its annual decline occurred. In 1999 it occupi1.6%. (Figure 1) [2, p.11]. In the light industry, the capacities were only used by 14%.
Having lost working capital during hyperinflation in 1993-1995, without having loans from banks, the light industry had to reduce production volumes. Because of the low financial status of enterprises virtually no measures were taken to operationalize the advanced production lines, reconstruction and modernization of production. The clothing and footwearindustry was technically backward, unable to produce products at the level of the best world standards, because it focused on the mass market. Some of the products were at the fashion level of the 40-60 years.
Thus, the volume of output of the light industry of Kazakhstan has decreased almost 13 times. By the end of 1999, more than 60% of enterprises were unprofitable and did not work.
The transition of many enterprises to the joint-stock company did not improve the living standards of their employees. The financial position of such enterprises also worsened. The result of all this was the social tension at the enterprises: not the payment of wages, the alienation of the participants in production from the means of production and the results of labor, despite the change in the forms of ownership.
Figure 1. Kazakhstan's share of light industry of the total industrial production from 1990 to 2000,%
*Sources- stat.gov.kz- Agency for Statistics of the Republic of Kazakhstan
The decline of production at the enterprises of light industry in Kazakhstan in the 90 years of the 20th century was the result of the influence of many factors, such as:
- the openness of the borders of the domestic market in conditions of insufficient protectionism resulted to the displacement of Kazakhstan goods by import;
- liberalization of overseas trade, and as a result of this, a large-scale invasion of imported goods into the country;
- inflationary processes affected the growth of prices of materials, electricity, raw materials;
- competitiveness of products due to low technical and technological level;
- lack of investment and, consequently, inability to update production and to improve quality of
For example, if we analyze the decline of production in the footwear industry, we can say that in this industry was the greatest crisis (table 1).
The liberalization of prices for raw materials and materials, which began in 1992, had a negative impact on the production of footwear. To achieve profit, the majority of tanneries began to significantly increase the price of sales and reduce the output of leather goods. This decrease was influenced by the large export of tanning raw materials. So, according to the Agency for Statistics of the Republic of Kazakhstan, the export of leather raw materials in 1995 amounted to $ 34.9 million, in 1996 - it increased to $ 58.6 million, in 1998 it already amounted to $ 65 million [2, p.10].
Table 1
Dynamics of production of footwear industry of the Republic of Kazakhstan for 1990-1999 years
With the liberalization of foreign trade, a large-scale offensive of foreign commodity producers began on the Kazakhstani market. Commercial, intermediary companies and private individuals started unorganized deliveries of imported goods, as a result of which, the share of these goods in the Kazakhstan market increased. As a consequence, in those years the "shuttle" business was widely used. For many goods, imports (customs, shuttle trade, nonequivalent barter transactions, settling transit) did not take into account customs statistics, significantly influenced both import volumes and retail prices. Transparency of borders and insufficient level of customs created the preconditions for large volumes of smuggling and entry of non-certified and low-quality products from China, which was sold at dumping prices.
The beginning of reforms led to a deterioration of the situation of the real sector of the economy, due to:
- the termination of the government crediting of the enterprises under circulating assets has caused crisis of non-payments;
- a sharp rise of the cost of credit made it impossible for enterprises to begin work on changing their production profile and updating their products;
- the disintegration of the system of commodity circulation and the absence of a new system of wholesale and retail trade in the 1990s deprived the enterprise of stable sales
Since the beginning of 2000, Kazakhstan's light industry has been gradually raising its "head" from the ruins. In connection with the state support of small business, which began in these years, more than 80% of enterprises in the industry became subjects of small and medium-sized businesses, while they were equipped with outdated equipment, the workload of which was 40%.
In the structure of the output, along with the production of textiles, clothing, footwear, knitwear, hosiery and fur products, headgear, there was a high proportion of cotton fiber production, clothing for power departments. The light industry began to meet the needs of the population in medical clothes, as well as in special, work clothes and shoes, in personal protective equipment.
The share of Kazakhstan in the world market of textiles, clothing and knitwear has always remained very low. The domestic market was also formed due to imports, imported "shuttles" or smuggled. In consumer goods of light industry, the share of domestic products did not exceed 8%.
The insecurity of the domestic market from unscrupulous imports, the lack of working capital, the growing debts of enterprises to the budget and suppliers, the lack of interest of entrepreneurs to invest in light industry hampered the development of the industry. In those years, high lending rates did not allow enterprises to use bank loans, and banks did not want to lend to light industry’s enterprises because of risks.
In the industry there has always been a problem with ensuring the employment of workers. If, in 2005, the number of employees in the light industry was 20,0 thousand people, as of January 1, 2010, it was reduced to 13,7 thousand people. The protracted crisis, which can be characterized by the situation in light industry, was accompanied by a drop in production volumes. Only for the period from 2005 to 2009 the share of the light industry in the structure of the industry of the republic decreased from 2,2% to 0,8%, while the share of industry in the domestic gross product decreased from 0.62% in 2005 to 0.27% in 2009 Year [3].
In December 1, 2015, 1492 legal entities and individual entrepreneurs were registered in the light industry, of which 58.9% or 879 enterprises were active [4].
In July 1, 2016, the number of operating enterprises of light industry was 933, the main share (58% or 538 enterprises) of which are sewing enterprises, 31% or 289 enterprises are textile enterprises and 11%, or 106 enterprises - for the production of leather products. In the light industry, a sufficiently large number of small enterprises operate - 95% or 872 of the total number of enterprises.
At the end of 2015, the domestic market for consumption of light industry products amounted to 1.4 billion US dollars, of which domestic production was 7.3%, imports 92.7% [5].
In January-June 2016, compared with the same period in 2015, imports of light industry products fell 1.6 times to $ 441.2 million, exports amounted to $ 149.2 million, which is higher than the same indicator for 2015 Year in 2,2 times.
One of the reasons for the predominance of imports over exports is that exports are mainly represented by low- value commodities, and imports mainly consist of finished products with high added value. Significant volumes of imports of light industry products create competition for domestic goods [5].
If we consider the dynamics of industrial production in the light industry (Table 2), starting in 2009, we can observe a trend towards a gradual increase in the volume of its production.
Table 2
Dynamics of industrial production volumes of light industry by types of economic activity, (million tenge)
In my opinion, based on the analysis of the light industry, in the industry there are the following trends that hamper to the development of the light industry of Kazakhstan:
- The high share of import, which has become the reason for strengthening the commodity dependence of the
A large number of imported products from the countries of near and far abroad put domestic commodity producers in a weak position. The imported products, from the countries of South-East Asia and China, are much lower in price and quality, but, at the same time, fashionable, was always more competitive.
- Staffing the
One of the threats to the growth of almost all companies is the shortage of qualified personnel. We have a tendency to reduce the number of students studying engineering and technology for light industry in the Universities, as in Kazakhstan these specialties were not in demand. Another reason is the poor training of workers, due to the fact that the equipment on which the students were trained is morally obsolete.
- Lack of guaranteed sales markets for
Enterprises have a problem selling their finished products, because import supplants us.
A set of measures developed in the Government’s Program on Forced Industrial and Innovative Development of the Republic of Kazakhstan for 2010-2014 was a saving step for raising the sector. In this program it was stated that "for successful development of light industry in Kazakhstan there are favorable factors and prerequisites: in the South Kazakhstan region, 400,000-450,000 tons of raw cotton are annually harvested, the country produces natural raw materials - cotton fiber (130-170 thousand Tons / year), wool (15-20 thousand tons / year) and more than 7.5 million pieces of leather raw materials, the possibility of exporting fabrics and yarn, clothing to the world commodity markets, where there is a demand for these products from natural raw materials " [6].
The program has put forward the implementation of several ambitious projects of light industry, another question - was it actually implemented?
The main expert of the Center for Industrial Analysis of the JSC "Kazakhstan Institute of Industry Development" AizadaIlyasova said: "Over the years of implementation of the GPFIIR has achieved the following results:
- volumes of production of light industry products increased from KZT 27.5 billion in 2008 to 9 billion in 2014 or by 10.2% in real terms;
- for the year 2014 the labor productivity index increased 1.5 times compared to the base year 2008 and amounted to 2 thousand dollars.
In the framework of the Industrialization Map, about 3.7 thousand new jobs were created in the light industry. All the systemic measures taken by the government in the first five-year plan helped restore the level of development of the pre-crisis period and ensured production growth "[7].
The results of the program, as the experts of the Center say, are visible. The light industry was able to restore previously lost positions and achieved growth of almost 10%.
Thus, in my opinion, the light industry of Kazakhstan has a huge potential that can provide the population with all kinds of goods. But many enterprises are little known, which is due to their weak advertising activities.
At the same time, Kazakhstan has exemplary business examples, which include «Kazakhstan Textileline» companies with children's clothing brand «Mimioriki», «Kaz SPO-N», which clothes foreign athletes, «ZIBROO» sports suits are exported to the countries of the EEMP and the EU, “Semiramid”- produces outerwear with the brand" SMD "," Glasman "- has opened a number of boutiques in the RK and supplies its products to selected countries of the EAEC and the CIS (men's suits and school uniforms), etc.
Kazakhstan designers AidaKaumenova, AigulKassymova, Kamila Kurbani are also developing domestic light industry. Successful companies are“AZALA Textile” LLP, which produces textiles, the “Bal Textile” factory is producing carpets, and it has started cooperation with the world-famous IKEA [5, р.3].
In our country the action "Buy the Kazakhstan's goods " or "Made in Kazakhstan" gave a great incentive to attract buyers. And within the framework of this action, the movement for organizing fairs and exhibitions of Kazakhstan's goods began in the country.
At present, the government is carrying out a large-scale ideological work to promote Kazakhstan’s goods. The National Agency for the Development of Local Content together with the Association of Light Industry and the Union of Light Industry Products Manufacturers of Kazakhstan held a number of actions to attract customers in social networks. All these events gave impetus to the opening of special stores "Made in Kazakhstan" in all cities of the country. For example, in Astana a shop "UniversMAG.KZ" was opened, where only Kazakhstan’s clothes are sold [8р.9].
Recently, within the framework of the major government’s programs, the state-owned enterprises received substantial government’s support. For example, under the "Business Road Map-2020" program for the period from 2010 to 2014, more than 109 projects on light industry for the amount of 422.9 million tenge were financed. And in the first half of 2015, 115 projects were supported to the amount of 23.6 billion tenge. All major projects of the light industry were realized and financed by the Government Program of Forced Industrial-Innovative development. Many enterprises received service support. Within the framework of the "Productivity-2020" program, the National Agency for the Development of Local Content of the RK reimburses part of the costs for product certification and quality management systems for improvement of quality of products, and also, for satisfy to standards of international quality [8, р.10].
All these actions undoubtedly already give results, but, in my opinion, it is still insufficient, because, still the share of the light industry in the total volume of industrial production in the Republic of Kazakhstan so far does not exceed 1%, which indicates that there are acute problems in the light industry.
Firstly, the entire light industry, especially its sewing and shoe industries, operates on government's orders. And when receiving government orders, corruption schemes with informal payments for speeding up procedures for obtaining services can always be used.
Secondly, the prices of domestic sewing products are relatively more expensive compared to similar imported products, because all products of the light industry of Kazakhstan are subject to high taxes.
In Kyrgyzstan manufacturers of clothing products pay only an annual one-time payment from each sewing machine, it calls patent fee, which is not tied to the products. In this country the customs duty for the import of fabrics is 5%, and in Kazakhstan - from 12 to 20%. [8, р.10] Thus, a large tax burden, customs duties on imported raw materials raises the cost of manufactured products, which affects to price and reduces the demand.
The problem of the revival and development of light industry is the restoration of the interrelation between the raw material base and manufacturing enterprises, which are represented by small enterprises engaged in tailoring of individual clothes and footwear from imported materials. As a result, in the presence of cotton, wool, Kazakhstan is forced to export raw materials to the countries, where its processing exists. And then, Kazakhstan is forced to import leather, woolen, cotton and knitted fabrics, fabrics for production of overalls, accessories - and this greatly increases the cost price of the products.
Thirdly, there is the problem of unfair competition through the use of counterfeit products and "gray" schemes associated with avoiding taxes and payments.
By the end of the 2016, the physical volume of output in the industry fell by 1% against growth of 3,4% in 2015. All textile and footwear products, consumed by Kazakhstan’s people, are imported. The rise of the cost of raw materials and the decline of purchasing demand are pressing the production in the light industry. The situation in the leather goods manufacturing sector is most dramatic. In 2016, the enterprises of the sector produced 13% less than in 2015. Also, the output of clothes decreased by 0.8% [9, р.3].
The reduction of the actual volume of output occurs against the backdrop of an increasing of its value.
Over the past year, the number of active producers in light industry has significantly decreased - by 27%, from 79 enterprises to 58. The fall in production is a consequence of the deterioration of the situation in the industry. Over the past year, the number of active producers in light industry has significantly decreased - by 27%, from 79 enterprises to 58.
The number of Kazakhstan's clothing manufacturers in 2016 decreased by 8 enterprises, or by 22%. In the production of leather goods, only 6 enterprises remained, compared to 7 years ago. Producers of Kazakhstan decreased due to a double devaluation in 2014-2015. In 2016 some enterprises left the market [9, р 4.].
Conclusion
In my opinion, for the development of light industry in Kazakhstan needs the following measures:
Firstly, it is necessary to limit the import of goods, introduce flexible special protective measures and to increase tariffs on exports of raw materials.
Secondly, to exempt from duties and value-added tax the purchased abroad technological equipment and to create all favorable conditions with the state for the purchase of this equipment on favorable terms.
Thirdly, to protect the domestic market from unfair competition the government needs to take measures to ban imports of smuggled goods and to create equal competitive conditions in the country for all the participants of foreign economic activity.
Fourthly, annually to hold fairs of the goods of the Kazakhstan manufacturers in all cities of Kazakhstan for the purpose of attraction of consumers and expansion of demand.
Fifthly, to intensify the work of popularization of Kazakhstan brands of light industry by holding various actions for the support of the domestic commodity producer.
For Kazakhstan, light industry is a strategically important industry both in point of view of increasing the domestic market with its products, and from the point of view of the development of the export of products.Therefore, the transition to industrial-innovative development of light industry is becoming a major focus of economic recovery, as the protection of its own market - an objective necessity, ensuring economic security of the country.
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