KIMEP University
Bang College of Business
IX KIMEP International Research Conference
(KIRC -2012)
“Central Asia: Regionalization vs. Globalization”
April 19-21, 2012
PROCEEDINGS
IX Международная научно-исследовательская конференция
(МНИС- 2012)
“Центральная Азия: регионализация и глобализация”
19-21 апреля 2012
МАТЕРИАЛЫ КОНФЕРЕНЦИИ
Almaty 2012
Preface and acknowledgements
It is our pleasure to welcome you to the 9th KIMEP International Research Conference (KIRC 2012) at
Almaty, Kazakhstan. This year’s conference theme is “Central Asia: Regionalization vs.
Globalization,” and more than 50 sessions and close to 300 papers in five different tracks including
Business, Social Sciences, Language, Law, and Continuing Education are presented based on the
conference theme. We sincerely thank to all the participants and paper presenters including external
and internal faculty members and students in this conference. There are special sessions in Russian and
Kazakh languages to provide papers written in these languages. Also, timely issues such as banking
and financial services, taxation, and violence related issues are discussed in several parallel special
sessions. In the regular sessions, various topics related to the integration and globalization issues
including banking, capital market, international cooperation, business ethics, tourism, water and
environmental management , geopolitics, trade, technology changes, economics, education, public
policy, social and communication are discussed. Proceedings include the full paper, extended abstract
and abstract submissions, which are the outcome of authors’ research and writing, reviewers’
constructive feedback, and subsequent responsive revisions by the authors under time constraints.
In the name of all the people directly involved in organizing KIRC 2012 and preparing the Proceeding,
we would like to express our deepest gratitude to all for their joint work! In this context, special thanks
to Dr. Razzaque Bhatti of Bang College of Business and his team for their review work of all submitted
papers and designing the program. Also, our sincere thanks go to Drs. Kassenova and Harvey of the
College of Social Sciences, Dr. Rueckert and Ms. Yessimzhanova of the Language School, Dr.
Alimanov of the Law School and Ms. Gimranova of the Continuing Education Center for their hard
works in promoting, organizing and programming all activities. We should give our highest
appreciations to Ms. Elmira Rayeva, the Conference Coordinator, for her continuous unwavering work
on all aspects of the conference, including compiling and formatting the Proceedings. Without her
superior management ability, this conference would not be able to realize on time
We would also like to acknowledge that in spite of the financial crisis, LG Company was able to make
in-kind and financial contributions to KIRC 2012, and we hope that this type of cooperation would
expand throughout the business community in Almaty to help improving the quality of academic
conferences such as KIRC in the future. Dr. Hajin Hwang of Bang College and Mr. Stanley of
Corporate Development Center provided their time and effort for attracting the corporate contributions.
We would like to thank all the members of various committees for this conference, and especially Dr.
Adams, Vice President of Academic Affairs, for arranging the main budget for various expenditures of
this conference. Of course, we fully appreciate Dr. Haque who initiated all the beginning processes
early from the last year and provided continuous support and help until the last moment.
Finally, our thanks to the office of the President for their support in promotion, contact with external
sponsors, and internal resources.
Sang H. Lee, Ph.D.
Jiri Melich, Ph.D.
Co-Chair of Organizing Committee
Co-Chair of Organizing Committee
KIRC 2012
KIRC 2012
2
KIRC 2012
“Central Asia: Regionalization vs. Globalization.”
Conference Committee
Organizing Committee:
Sang Lee, Associate Professor, Bang College of Business
M Mujibul Haque, Associate Professor, Bang College of Business
Jiri Melich, Associate Professor, College of Social Sciences
Nargis Kassenova, Associate Professor, College of Social Sciences
Tomas Balco, Associate Professor, School of Law
George Rueckert, Assistant Professor, Language Center
Maria Yessimzhanova, Candidate of Sciences, Language Center
Bakytgul Tundikbayeva, Administrative Director, Executive Education Center
Promotion Committee:
Ken Harvey, Associate Professor, College of Social Sciences
Zhanat Alimanov, Assistant Professor, School of Law
Zhamilya Gafur, Director of Marketing, Communications and Public Relations
Finance Committee:
Ha Jin Hwang, Professor, Bang college of Business
Stanley Currier, Director, Corporate development Department
Balzhan Suzhikova, Associate Director, Corporate development Department
Program Committee:
Business Tracks
Zhanel Mailibayeva, Assistant Professor, Area of Accounting
Mira Nurmakhanova, Assistant Professor, Area of Finance
Razzaque Bhatti, Professor, Area of Finance
Monowar Mahmood, Associate Professor, Area of Management
Elmira Bogoviyeva, Assistant Professor, Area of Marketing
Jung Lee, Assistant Professor, Area of Information System and Operations Management
Social Sciences and Humanities Tracks
Golam Mostafa, Associate Professor, Department of International relations and Regional Studies
Jiri Melich, Associate Professor, Department of International relations and Regional Studies
Nargis Kassenova, Associate Professor, Department of International relations and Regional Studies
Alessandro Frigerio, Assistant Professor, Department of International relations and Regional Studies
Ajab Amin, Professor, Department of Economics
Shahjahan Bhuyan, Associate Professor, Department of Public Administration
John Couper, Associate Professor, Department of Journalism and Mass Communications
Kristopher White, Associate Professor, Department of General education
Law and Taxation Tracks
Zhenis Kembayev, Associate Professor, School of Law
Christopher Nguyen, Assistant Professor, School of Law
Tomas Balco, Associate Professor, School of Law
Literature and Linguistics Tracks
George Rueckert, Assistant Professor, Language Center
Elise Ahn, Assistant Professor, Language Center
David Landis, Associate Professor, Language Center
Maira Yessimzhanova, Senior Lecturer, Language Center
Juldyz Smagulova, Senior Lecturer, Language Center
Zauresh Yernazarova, Coordinator, Language Center
Shyrynkhan Abdiyeva, Lecturer, Language Center
Raushan Smagulova, Lecturer, Language Center
Executive Education Tracks
Dilbar Gimranova, General Director, Executive Education Center
Raushan Zhaparova, PDCP Director, Executive Education Center
Bakytgul Tundikbayeva, Administrative Director, Executive Education Center
Conference Coordinator:
Elmira Rayeva, Assistant to the Research Director
3
Contents:
Session on Finance and Banking
Olga Pak /Sang Hoon Lee
“Bank stock returns, loan growth and bank fundamentals: the
evidence from Kazakhstan”
7
Maya Katenova
“Procyclicality and Bank Capital”
12
Yuliya Frolova /John Dixon
An Epistemological Challenge for Fair Value Accounting:
The Classification of Financial Instruments for the Purpose of
the Fair Value Estimation by Kazakhstan’s Banking Industry
“The Impact of Global Financial Crisis on the Profitability of
Islamic and Conventional Banks in Asia and the Middle East”
19
“Do Financial Frictions Propagate Economic Disturbances in
Emerging and Less Developed Countries?”
25
Dennis Olson
Sang Hoon Lee /Mujibul Haque
Session on Agricultural Business
Juraev Farruh
“Some formation issues of market relations in agrarian sector
of Tajikistan”
Sholpan Gaisina /Zhanel
Mailibayeva/Chris Nquyen
Khaitiboyeva Nargis
25
29
“Agricultural land as collateral, Kazakhstani experience”
33
“Территориальная специализация - фактор устойчивого
развития регионального аграрного сектора”
“Мировой опыт регулирования цен на сельхозпродукцию
и ситуация в Казахстане”
40
Zhaparova E.
“К вопросам устойчивого развития аграрного сектора
экономики Кыргызстана”
49
Ibrayeva N
“Проблема качества подготовки специалистов высшей
квалификации для аграрного сектора”
53
Temirbekova Alma
Session on Marketing/Branding
Elmira Bogoviyeva
“The effects of reward type and its likelihood in customer
brand co-creation activity on self-brand connection”
45
58
Bulent Dumlupinar/Mansur
Khamitov
“Online purchasing in Kazakhstan”
61
Aliya Khamzina/Elmira
Bogoviyeva
“Development of Branding in Kazakhstan”
63
Alexandr Ostrovskiy/Liza
Rybina
“The effects of consumer ethnocentrism and country of origin
on consumer’s preferences in Kazakhstan”
66
Aizere Akimbay/Elmira
“Perception of city brands in KZ”
Bogoviyeva
Session on Management and Business Ethics
Gregory Dunn
“The Impact of Inter firm Behavior on Foreign Subsidiary
Performance: Social Capital, Resource Sharing and Market
Dominance”
Farikha Yerzhanova
“Reports as Business Tools in Kazakhstani Companies “
Maya Katenova/Monowar
Mahmood
“Job satisfaction and organizational commitment in
Kazakhstan”
Dilbar Gimranova/
“Major forces affecting the pharmaceutical industry
development in Kazakhstan”
Session on Management/Organizational Behavior
Olga Pak /Monowar Mahmood
“Personality, risk perception and investment decisions: a study
on potential investors of Kazakhstan”
Gulnara Moldasheva
“Academic motivation and personality traits among BCB
students”
Paul Davis/Fatima Abdiyeva
‘Self-Employment in a Post-Soviet Economy:
Entrepreneurship and Gender Differences in Kazakhstan”
4
75
76
80
86
86
88
88
91
Khuan Wai Bing/Omar Abdull
Kareem
Session on Capital Market
Razzaque Bhatti
“Challenges and enterprising strategies of small school
leadership and management”
100
“On the Profitability of Carry Trades in Five CIS Countries”
109
Aizhan Syrgayeva
116
Dronin Alexandr
“Long-Term Strategic Benefits for Kazakhstan from “The
People’s IPO”
Possibilities of Institutional Control of Globalizing Financial
Markets on National and Supranational Level – Are Emerging
Markets Different?
“Corporate Governance influence on capital structure of
Kazakhstan listed companies “
“Portfolio management: a new glance at the risk evaluation”
Mujibul Haque/Snag Hoon Lee
“Test of weak efficiency of the Kazakhstani Stock Market”
140
Bakhyt Baideldinov
Special Session in Russian 1
Satybekova A
“KASE Efficiency”
141
“Стратегия обеспечения конкурентоспособности
компании на рынке сотовой связи.”
Влияние международных финансовых организаций и
иностранных инвестиций в развитие экономики
Кыргызстана.
“Влияние асимметричной информации на регулирование
банковской деятельности в условиях финансовой
глобализации.”
152
Session on Business Education
Nadezhda Fidirko
“Distance learning in a teaching process”
154
Luara Sergeyeva
“Using new methods in teaching future engineers”
155
Olga Dzhilinska
Gulnara Moldasheva
Aigul Arziyeva
Sadvokasova Zh.
Aisham Seitova/Maganat
“A Comparative Research Study on Malaysian and
Kazakhstani Perceptions of Educational Leadership and
Shegebayev
Culture “
Michael Quinn/
“Knowledge, Culture and the World-Class University: The
EwanSimpson
Case of KIMEP”
Session on Information technology/Communication
Dana Baizyldayeva
“ IBM SPSS Decision Tree procedure for effective Decision
making”
Maxut Gaini
“Neuro-linguistic programming techniques and their
application in management”
Yevgeniya Kim
“Interaction between Personality, Social networking sites,
leisure activities and Academic performance in Kazakhstan”
Chekembayeva Gaukhar
“Need for sustainability in mobile phone consumption
behavior”
Nino Paresashvili/Rusudan
“Role of Information Technologies in Operational Risk
Setirudze
Management”
Session on Business Economics
Callahan / Mira Nurmakhanova
“The curse of natural resources: “
Rusudan Seturidze
“About the realization of the econometric method to determine
the trade potential (on the example of Georgia)”
Abdulla Alikhanov
“The causes and preventative solutions for European debt
crisis: Testing for fiscal sustainability hypothesis”
Orazalin Rustem
“Firm’s profit maximization problem: from theory to practice”
Session on Marketing/International Cooperation
Liza Rybina/Alexandr
“Gender differences in negative expectances of smoking
Ostrovskiy
among youth in Kazakhstan.”
Kim Choy Chung
“Determinants of behavioral intent to adopt M-commerce in
Kazakhstan”
Bulent Dumlupinar
“Globalization or Regionalization: where Kazakhstan is
going?”
Kim Choy Chung
“Expectation of international university experience”
5
121
124
135
148
144
161
163
174
178
180
184
187
190
191
193
194
197
200
202
204
David Dickerson/William Pore
Session on Tourism 1
Mamadrizokhonov Akbar
Nogaibayeva Aliya
Bulent Dumlupinar
Session on Tourism 2
Giullaume Tiberghien
Jamilya Aubakirova/Vladimir
Garkavenko
“Winning the ‘Co-Opetition’ Game in Central Asia: South
Korea and Kazakhstan”
207
“Steady development of mountain regions of Central Asia by
development of tourism”
“Clusters development in tourism industry of Kazakhstan
using Michael Porter’s Diamond Theory”
“Tourism Clusters: case of Kazakhstan”
218
“Eco-cultural tourism development and perception of
authenticity in Kazakhstan: a supply side analysis”
Tourism Development in Central Asia from Potential to
Tourism Product: Marketing Issues
Dace Kaufmane/Aija Eglīte
221
222
228
230
“Research on the Multiplicative Effect of Rural Tourism in
Latvia”
Vladimir Garkavenko
“Kazakhstan’s travel industry: past and future - perspective for
global integration.”
Session on Accounting/Taxation/Auditing
Yass Alkafaji
Toward a Global Solution to International Tax Inequality: A
Defensive Income Tax Strategy for the GCC Countries”
Yoon Shik Han
“Audit Quality in Kazakhstan: Does Big 4 Provide High
Quality Audits?
Vladimir Tyutyuryukov
“Tax rules in the agreements on cooperation in mineral
extraction and related activities”
231
Nikolay Tyutyuryukov
“Tax policy of Customs Union Member States under creation
of Common Economic Space”
“Financial Reporting Practices in Emerging Economy:
Determinants of Cash Flow Reporting Methods in
Kazakhstan”
Electronic commerce: impact on cross-border business
activities
244
Timur Turkpenov
Special Session in Kazakh
Nurpeisova L.
Tax implications of import into Kazakhstan
254
“Банк саласындағы маркетингтің ерекшеліктері”
256
Azhar Beisenbayeva
“Электрондық сауда жəне ондағы төлемді жетілірудің
еліміздегі іс-шаралары”
“Инновациялық қызметтегі тəуекелдерді басқару”
260
“ҚР ИННОВАЦИЯЛЫҚ КӨШБАСШЫ АЙМАҚТАРДЫҢ ҚАЗІРГІ ЖАҒДАЙЫ”
267
“Қазақстанда туристік кластерді дамытуда жергілікті
басқарудың ролін жетілдіру”
271
“Инвестиционная политика Республики Казахстан:сегодняшнеесостояниеи
возможности”
“Особенности управления финансовыми активами,
эффективность их использования в деятельности
компании”
“THE IMPLEMENTATION OF ISLAMIC BANKING IN KAZAKHSTAN”
“ Инновационные технологии подготовки будущего
специалиста на основе создания образовательных
порталов как средство систематизации и
структурирование информации ”
“ Значение маркетинга в ресторанном бизнесе”
“Loan quality and deposit insurance in Post Soviet Countries –
an evaluation of moral hazard effect”
274
Zhanel Mailibayeva
Darkhan Nurakhmetov
Тажиева Самал/Туменбаева
Меруерт
Тұрғынбаева
А.Н/Белғожақызы М,
Тажиева Самал
Special Session in Russian 2
Шарапиева М.Д.
Талгат А.
Ornaldina Aiym
Баймулдина Н.С
Abenova A.
Aiman Issayeva
6
234
235
237
241
246
253
263
279
285
288
291
294
Bank stock returns, loan growth and bank fundamentals:
the evidence from Kazakhstan.
Olga Pak
KIMEP University
[email protected]
Sang Hoon Lee
KIMEP University
[email protected]
Abstract: The paper investigates the impact of specific bank fundamentals on the bank stock returns
and loan growth using the panel data for 9 Kazakhstani commercial banks listed at Kazakhstan Stock
Exchange since April 2007. The major purpose of this research work is to examine to what extent the
stock prices are driven by the balance sheet information rather than the income statement information
such as net income at the developing capital market of Kazakhstan. Another aim of the study is to
define the major bank-specific factors that impact the loan growth in the time of the economic crisis.
We also look at the role of bank capital in determining the bank stock returns as well as facilitating
loan growth during the sample period. The results indicate that the market considers only the change in
Net Income growth in determining the bank stock returns and the market’s response was within one
month time period. The effect of capital changes is insignificant but consistently negative. Our findings
also reveal that loan growth was primarily driven by the deposit rather than external funding growth
since the sample period represents the market liquidity dried-up time. These results are consistent with
our expectations on the importance of the internal sources of funds in the time of economic downturn.
Key words: Bank Stock Return, Bank Capital, Loan Growth
1. Introduction
The recent financial crisis has revealed many problems of the global banking system including
Kazakhstani banks. Aggressive business strategy, reliance on non-deposits funding, increase in noninterest income through securitization structures, speculation with derivative instruments and
engagement with other non - traditional banking activities have contributed to the increasing risk in the
banking industry. Why did regulators oversee the fact that the increase in banks’ returns was associated
with the rapid rise in banks’ risks? Were these risks hidden by the accounting numbers or obvious for
the market? Were the Basel 2 capital requirements really helpful during the crises time? All of these
and many other questions are left for researchers and regulators. In this paper we are trying to find
some answers for the above questions by analyzing bank stock returns, loans’ growth and effect of
bank capital during the time of financial distress.
It is known that stock prices contain important information for market participants and
regulators. Bank stock prices do not only include all public information, but also incorporate the future
expectations banks’ cash flow, earnings and risks.
The major purpose of the paper is provide better understanding to what extend the
Kazakhstani banks’ stock returns are driven by a specific bank balance sheet components rather than
the net income statement components. We argue that the bank stock returns should have a direct
response on the income statement items such as Net Income and Loan Loss Provisions. However, the
changes in income statements are the consequence of bank balance sheet activities. If stock investors
are forward-looking and stock market functions efficiently, then stock returns should reflect the
changes in the balance sheet items rather than income statement items. It is the first study in
Kazakhstan that will try to investigate whether the accounting information is reflected in the bank share
prices. Many previous research studies for developed capital markets reveal the existing relationships.
The structure of banks’ assets and liabilities differs considerably from non-financial firms.
There are at least three major reasons of why “banks are different” (Castren et al., 2006). First, the
majority of long term illiquid banks’ assets are financed mainly by short term liquid financial claims. It
leads to the high interest rate as well as liquidity risk of bank firms. Second, banks are highly
leveraged and, hence, easily subject to runs. Third, banks are heavily regulated with the purpose to
promote the better transparency and to reduce the social costs of bank failures (Castren et al., 2006).
All above banks’ peculiarities lead to other research questions investigated in this paper. We argue that
banks with lower level of capital, greater reliance on market rather than deposit funding facilitate less
loan growth in the time of economic distress compare to bank with greater capital and deposit base.
The research work contributes to the existing literature in the following way:
7
- provides the better understanding of the bank specific factors that may influence the stock returns of
Kazakhstani banks;
- analyzes whether better capitalized banks experience a smaller decline in return during the financial
crises;
- investigates which factors are the primary drivers of loans’ supply during the time of financial
distress;
- contributes to the scare scope of the research related to the Central Asian region with poorly
developed capital markets.
The remaining part of the paper is organized as follows. The second part discusses the
previous findings related to the research questions. The third part describes the methodology,
dependent and independent variables. The forth part provides the major results and their interpretation.
The fifth part concludes.
2. Literature review
There are extensive empirical research works that provide the evidence between stock returns and
accounting information. Leledakis and Staikouras (2004) used a panel study of European banks for the
period 1997 – 2004 and found that the book to market ratio and the loan quality are the most important
in explaining of bank stock returns. The analysis was extended by Drobetz, Erdmann and Zimmermann
(2007) who identified other financial variables that account for the cross-section of European bank
stock returns during longer period of 1991 -2005. They found that loans, equity and off-balance sheet
items have a positive impact on stock performance, whereas leverage and level of loan-loss provisions
have a negative effect. Beltratti and Stulz (2009) investigated how banks’ stock returns during the
crises 2007 were affected by the regulation, governance and balance sheet characteristics of banks
before the crises. Their results show that banks with more tier 1 capital, more deposits and loans before
the crises performed better during the crises. Additionally, the banks from countries with larger
supervisory power had lower returns whereas the stronger capital supervision contributes positively to
the stock performance. The similar results were obtained by Berger and Bouwman (2011). They tested
the relationships between the bank capital and different bank performance measures both in banking
and market crises over 1984 - 2009 period. According to their study, better capitalized banks
performed significantly better in the early 1990s, but not in the recent financial crises. Moreover, it was
concluded that the level of capital affected the stock returns of large banks by the greater extent.
There are controversial opinions related to the effect of capital on stock returns. Thus, some
theories predict that the higher bank capital should lead to the higher survival probability. At the same
time, the higher capital reduces the banks’ profitability. For example, in contrast to the findings in
above studies, Rouwenhorst (1998), Berger and Di Patti (2006) reported that the bank firms with higher
leverage tend to outperform firms with lower leverage.
Cole, Moshirian and Wu (2007) found that much of the predictive power of bank stock returns
was captured by the series of country specific and bank-specific characteristics, particularly by banking
crises and the enforcement of insider law trading. They also argued that the banking industry stock
returns may serve as a complimentary measure of financial development because they reflect the
quality of bank loans which is as important as the size of bank loans.
Baele, De Jonghe and Vennet (2007) examined how a bank’s share of non-interest income
affects bank risk, as reflected in bank stock returns, for a sample of European banks over the period
1989 – 2004. They found that the systematic risk, measured by a market beta, rose with the increase in
the bank’s non-interest income share. Demirguc-Kunt and Huozinga (2009) investigated the effect of
increasing non-traditional banking activities on banks’ risk and return. It was found that the fee income
share had a positive and significant effect on the bank rate of return, whereas the estimated coefficient
for the non-deposit funding share was not significant.
Another study, conducted by Castren, Fitspatrick and Sydow (2006), has reported the
existence of the lag effect in the short term expected returns. The authors have pointed out that the
market tends to initially under-react the positive news on bank-specific fundamentals and only
gradually incorporates such information into the prices. They also found that cash flow news is the
main driving force of bank level stock returns and is relatively more important for small banks than for
large banks.
Baccali, Casu and Girardone (2006) investigated the changes in stock performance with
respect to the changes in bank operating efficiency. Their results suggest that stocks of cost efficient
banks tend to outperform their inefficient counterparts.
The recent research works evidence that the loan growth during the crisis is significantly
dependent on the bank-specific characteristics. Gambacorta and Marques-Ibanez (2011) found that
banks with lower capital and higher reliance on market funding have restricted their loan supply to a
8
greater extent than banks with higher capital and larger deposit base. Berrospide and Edge (2010),
Santos and Winton (2010) also examined the effect of capital on lending supply during the crisis years
and found very weak impact of bank capital on lending.
All above literature has evidenced that there have been relationships between the bank-specific
accounting information, bank stock returns and loan growth. However, most of studies were performed
for the cross-section samples and the samples for developed economies. It would be interesting to see
whether the same relationships exist in the developing economies where the capital market has not
been so efficient.
3. Data, Variables and Methodology
The choice of the sample period and bank variables is largely dictated by data availability and covers
the period from April 2007 to September 2010. Nine banks that have been listed at Kazakhstan Stock
Exchange (KASE) since April 2007 are included in the panel study. The data for other banks listed at
KASE are removed from the sample due to the lack of consistency.
The dependent variable is a one-month bank stock return assuming one month buy and hold
strategy. Demirguc-Kunt, Detragiache and Merrouche (2010, p.5) said that the stock return is an
imperfect proxy for bank performance during the crises because “it captures the change in the value of
owners only and does not reflect the changes in the value of debt”. In addition, the availability of
government support packages may influence the stock prices and bank values significantly. We
recognize these limitations and still believe that the banks’ stock return is an appropriate performance
measure that incorporates market information as well as accounting information.
The independent variables include bank specific variables that may contribute to the stock
performance at most. The independent variables include bank equity capital growth, loan growth, debt
growth, past due loans’ growth, net income growth. Along with the above independent variables, two
additional variables are introduced. The first variable is a monthly Industrial Production Index (IPI)
that serves as proxy for an economic activity in the country. The second one is a dummy variable that
captures the impact of global financial crises. Dummy variable is defined as “0” for the period before
the crises, or “1” otherwise. There is a controversy about the definition of the crises periods. We will
use the Lehman bankruptcy in September 2008 as a starting point of panic and turbulences at the
capital markets. The description of each variable and its expected effect on bank stock returns are
summarized in the table below:
Table 1. Variables’ definitions.
Variable and its
Description
measurement
Equity growth (EQY) =
Bank capital is the major cushion to absorb unexpected losses.
LN (Equityt/Equity t-1)
However, the larger level of capital increases the bank costs
and reduces its profitability
Loan growth rate (LON) =
Loan growth is usually rewarded by the market because loans
LN (Loanst/Loanst-1)
are the major assets for a bank to expand and boost
profitability.
Past-due loans (DUE) =
The quality of loan portfolio is account for the long-term
LN (PDLoanst/PDLoanst-1)
sustainability of a bank. The previous studies document weak
or negative effect of these ratios on the banks’ stock returns.
Debt growth (DEB) =
Banks with lower level of Debt have more stable funding base
Liabilities growth – Deposits and are less sensitive to the interest rate volatility.
growth
Net Income growth (NIC) = Net income is the most closely watched variable. All previous
LN (Income t/Income t-1)
studies report the positive effect of bank profitability on stock
performance.
Expected
effect
Positive or
negative
Positive
Negative
Negative
Positive
We utilize the panel study framework to assess the relationships between the monthly banks’ stock
returns, banks’ loan growth and bank - specific variables constructed from the accounting information.
The explanatory variables related to the bank financial fundamentals as well as the Industrial
Production Index are lagged by one period because at least one month is required to report the
information officially. Collins, Kothari, Shanken and Sloan (1994) found that accounting earnings
typically explain only a small fraction of stock return variability due to the lack of timeleness of the
earning data. Castren, Fitspatrick and Sydow (2006) also pointed out that there is a lag effect between
the accounting information and bank market information.
9
Model 1.
Stock Returni,t = β0,i + β1 EQY i,t-1 + β2 LON i,t-1 + β3 DUE i,t-1 + β4 DEB i,t-1 + β5 NIC it-1 + β6 IPI i,t-1 +
β7 Crises i,t + ε i,t
Model 2.
LON,t = β0,i + β1 EQY i,t-1 + β2 DUE i,t-1 + β3 DEP i,t-1 + β4 NIC it-1 + β5 IPI i,t-1 + β6 Crises i,t +
β7Crisisi,t x DUE i,t-1 + ε i,t
The subscripts i and t denote a bank and a time period respectively. ε it is a random error term
of the regression and assumed to be i.i.d. The intercept term in each model assumes the fixed effect
model where each bank has its own intercept.
4. Results
The summary results in table 1 and 2 below report only the models with one lag in the right-hand side
(RHS) variables. Three lagged are used also for these RHS variables, but the results are similar to the
one with one-lagged models and not reported here. The regression results reveal that all variables,
except net income growth, do not impact the bank stock returns.
Table 1 The Result of Panel Study when the Dependent Variable is Stock Return
(Sample Period: April 2007 - September 2010)
Basic Model
Fixed Effect
Random Effects
PValu
e
0.96
0.58
0.40
0.44
0.10
0.94
0.19
0.50
Est.
Est.
PEst.
Coefficient
Value
Coefficient
Variables
P-Value Coefficient
EQY(-1)
-0.0030
0.82
0.0002
0.90
-0.0001
LON(-1)
0.1107
0.55
0.0960
0.61
0.1011
DUE(-1)
-0.0157
0.39
-0.0146
0.43
-0.0152
DEB(-1)
0.1189
0.49
0.1383
0.42
0.1322
NIC(-1)
0.0141
0.12
0.0167 *
0.07
0.0151 *
IPI(-1)
-0.0022
0.99
-0.0251
0.89
-0.0136
Crisis
-0.0353
0.20
-0.0342
0.21
-0.0351
Constant
-0.0184
0.41
-0.0171
2
R
0.0228
0.0809
0.0226
F-test (8,269) on H0 : αi = α
2.12
0.03
7.7311
Hausman Test (Chi-Sq (7)
In table 1, the Fixed Model and Random Effects Model show significant positive coefficients
for NIC(-1) both at 10% level. Compared to the Basic model, the hypothesis on a common intercept is
rejected at the p-value of 3% in the F-test in the Fixed Model. The result that an Income Statement item
such as Net Income growth is significant whereas items probably causing the changes in Net Income
are not significant is puzzling. The Balance Sheet items such as Equity Growth, Loan Growth, Liability
Growth, Overdue Loans and the items representing overall economic environment such as Industrial
Production Growth and Crisis should impact the Net Income growth, and investors should have
information on the changes in these variables long before the Net Income changes. The effect of capital
changes is insignificant, but negative in the Basic and Random Effects Models. These results are in
contrast to the previous research findings that banks with more Tire 1 capital perform better during the
crisis compare to banks with less level of capital (Beltratti and Stulz, 2009; Berger and Bouwman,
2011).
0.36
Table 2 The Result of Panel Study when the Dependent Variable is Loan Growth
(Sample Period: April 2007 - September 2010)
Basic Model
Est.
Fixed Effect
P-Value
Est.
10
Random Effects
P-
Est.
P-
Variables
Coefficient
EQY(-1)
-0.0001
DUE(-1)
-0.0016
DEP(-1)
0.1305
NIC(-1)
-0.0022
IPI(-1)
0.1014
Crisis
-0.0169
Crisis x Due
0.0030
Constant
0.0239
R2
0.0821
F-test (8,314) on H0 : αi =
α
Hausman Test (Chi-Sq (7)
Coefficient
***
**
**
***
0.90
0.78
0.00
0.28
0.04
0.03
0.86
0.00
0.0000
0.0035
0.1253
-0.0022
0.1056
-0.0170
0.0081
Value
***
**
**
0.94
0.55
0.00
0.30
0.04
0.03
0.64
0.0963
0.62
Coeffici
ent
0.0000
-0.0023
0.1287
-0.0022
0.1028
-0.0170
0.0048
0.0241
0.0820
***
**
**
***
Valu
e
0.92
0.69
0.00
0.28
0.04
0.03
0.78
0.00
0.76
1.3128
0.99
With respect to the determinants of loan growth in table 2, our findings reveal that loan growth
was primarily driven by the deposit growth and industrial production growth in positive ways, and
crisis dummy in negative way. The results are significant at 1% for the deposit growth in all models
and at 5% for industrial production and crisis, respectively. These results are consistent with our
expectations on the importance of the internal sources of funds in the time of economic downturn and
previous findings of Demirguc-Kunt et. al. (2010), Berrospide and Edge (2010), Gambacorta and
Marques-Ibanez (2011). In the Loan Growth model, the Basic Model may be the best representation
compared to others since the F-test in Fixed Model and the Hausman Test in the Random Effect Model
are not significant.
5. Conclusion
This is the first study that attempts to discover how the accounting information is reflected in the bank
stock returns. It was found that the first lag Net income change is the only variable that is valued by the
market in determining the stock returns.
The research empirically supports the current policy of the regulators that facilitates banks to
develop bank-customer relationships and use deposit funding as the primary source of loan growth. The
level of bank capital has no effect on the loan growth during the sample period. This is consistent with
previous results of Berrospide and Edge (2010), Santos and Winton (2010). We explain the absence of
capital effect by two reasons. First, it is more expensive source of funds for banks. Second, in spite of
low level of capitalization of the banking industry in Kazakhstan, the banks have preferred simply to
meet the required level of capital and probably have not considered the bank capital as a primary
source to provide loans.
6. References
1.
2.
3.
4.
5.
6.
7.
8.
Baccali, E., Casu, B., and Girardone, C. (2006). Efficiency and Stock Performance in European
Banking. Journal of Business Finance and Accounting, 33, 245 – 262.
Baele, L., De Jonghe, O., and Vennet, V. (2007). Does the Stock Market Value Bank
Diversification. Journal of Banking and Finance, 31, 1999-2023.
Beltratti, A. and Stulz, M. (2009). Why Did Some Banks Perform Better During the Credit Crisis?
A Cross Country Study of the Impact of Governance and Regulation. NBER Working paper
№15180.
Berger, A., Bouwman, C. (2011). How Does Capital Affect Bank Performance During Financial
Crises? University of South Carolina, Wharton Financial Institutions Center.
Berger, A. and Di Patti, E. (2006). Capital Structure and Firm Performance: a New Approach to
Testing Agency Theory and an Application to the Banking Industry. Journal of Banking and
Finance, 30, 1065 – 1102.
Berrospide, J., and Edge, R. (2010). The Effect of Bank Capital on Lending: What Do We Know,
and What Does it Mean? FEDS Working Paper 2010-44, Federal Reserve Board, Washington, D.C.
Cantor, R., and Jonson, R. (1992). Bank Capital Ratios, Asset Growth, and the Stock Market.
Federal Reserve Bank of New York, Quartely Review, 10-24.
Castren, O., Fitspatrick, T., and Sydow, M. (2006). What Drives EU Bank Stock Returns?
European Central Bank, Working Paper № 677.
11
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
Chen, S. (2011). Capital Ratios and the Cross-section of Bank Stock Returns: Evidence From
Japan. Journal of Asian Economics, 22, 2, 99-114.
Cole, R., Moshirian, F. and Wu, Q. (2007). Bank Stock Returns and Economic Growth. MPRA
Paper № 29188.
Collins, D., Kothari, S., Shanken, J., and Sloan, R. (1994). Lack of Timeliness versus Noise as
Explanation of Low Contemporaneous Return-Earnings Association. Journal of Accounting and
Economics, 18, 289 – 324.
Curry, T., Fissel, G., and Ramirez, C. (2008). The Impact of Bank Supervision on Loan Growth.
The North American Journal of Economics and Finance, 19, 2, 113-134.
Demirguc-Kunt, A., Detragiache, E., and Merrouche, O. (2010). Bank Capital: Lessons from the
Financial Crises. IMF Working Paper WP/10/286.
Demirguc-Kunt, A. and Huozinga, H. (2009). Bank Activity and Funding Strategies: the Impact of
Risk and Return. World Bank. Policy Research Working Paper 4837.
Drobetz, W., Erdmann, T., and Zimmermann, H. (2007). Predictability in the Cross - Section of
European Bank Stock Returns. University of Basel, Working Paper № 21/07.
Gambacorta, L., and Marques-Ibanez, D. (2011). The Bank Lending Channel: Lessons from the
crisis. BIS Working Paper # 345.
Lancaster, C., Hatfield, G., and Anderson, D. (1993). Stock Price Reaction to Loan-Loss Reserves:
a broader perspective. Journal of Economics and Finance, 19, 29-41.
Ledakis, G., and Staikouras, C. (2004). The Stock Return Predictability of the European Banking
sector. Working Paper, Athens University of Economics and Business.
Naceur, S. and Mojammed, O. (2011). The Effects of Bank Regulations, Competition, and
Financial Reforms on Banks' Performance. Emerging Markets Review, 12, 1, 1-20.
Rouwenhorst, K. (1998). International Momentum Strategies. Journal of Finance, 57 (1), 267-284.
Santos, J., and Winton, A. (2010). Bank Capital, Borrower Power, and Loan Rates. Working
Paper. Federal Reserve Bank of New York.
Procyclicality and Bank Capital
Maya Katenova
KIMEP University
[email protected]
Abstract:The purpose of this paper is to establish what type of relationship exists between the assets
and bank capital from one side and main economic indicators – GDP and GNP from the other.
This study used data which was collected from the National Statistics Agency of the Republic of
Kazakhstan and the data obtained from the World Bank. The absence of reliable data that goes back far
enough is an obvious drawback for any empirical research of Kazakhstan. In order to partly counteract
these problems the method of partial extrapolation is usually employed. The application of this method
to this study allowed me to get a reliable enough set of data. The data set consists of monthly
observations starting from January 2006 and ending in October 2011 (70 observations in total). Four
sets of time series were collected: assets, equity, GDP, and GNP. Annual data of considerable variables
have also been used to analysis.
The presence of positive autocorrelation among disturbance terms was found in all regression
equations. It means that the obtained coefficients are not BLUE (best linear unbiased estimator).
Although OLS estimators remain unbiased as well as consistent in the presence of autocorrelation, they
are no longer efficient. Then usual t and F statistics became insignificant. There are some reasons that
can explain the existence of autocorrelation:
•
Inertia and slowness of economic time series
•
Misspecification resulting from excluding important explanatory variables
•
Incorrect functional form
•
Data manipulation and etc.
1. Introduction
The movement of money from lender to borrower and back again is called the cycle of money. (Brooks,
2010). Banks play a role of intermediaries, which borrow in order to lend. During recessions, cycle of
money slows down while economic boom creates favorable conditions for this process to work. Shin
(2011) claims that retail deposits of household savers is the most important source of funds available to
the banking sector. He mentions the idea that credit increases rapidly during boom and increases less
12
rapidly or even decreases during recession in South Korea. Therefore, during boom we can notice high
demand on funds.
The linkage between the financial system and the business cycle has been the subject of much
investigation. Arguments that the financial system is procyclical are quite consistent with economic
events, such as the credit crunch in the U.S. during the early 1990s, the Russian and Asian financial
crises in the late 1990s, and the large corporate bankruptcies of the early 2000s.(Berger, Udell, 2004).
Levine, R., Zervos, S. (1998) claim that stock market liquidity and banking development both
positively predict growth, capital accumulation, and productivity improvements when entered together
in regression. In the article, it was said that historically banks were the most important financial
institutions. They were always at the center of attention. Banks can spur innovations and promote
economic growth by funding productive investment opportunities.
Macroeconomic conditions affect firm performance. But firm performance reflects on banks’
performance through banks’ loan portfolios. In the presence of adverse loan performance, bank
regulators may order banks to slow lending and pursue recoveries from defaulted firms. (Chen, Higgins,
Mason, 2005)
Archarya, Gujral, Kulkarni, Shin (2011) mention the fact that during crisis period 2007-2009 financial
intermediaries everywhere were at the center of the financial crisis. The capacity to lend suffered
worldwide. Archarya, Gujral, Kulkarni, Shin (2011) also present the fact that credit losses between
2007 and 2009 were around $ 1.73 trillion worldwide. Favorable economic conditions create numerous
opportunities for small and medium size businesses to obtain funds. Banks stand ready to lend and
support all types of businesses. While, during economic recession it becomes problematic for
businesses to obtain any funds. The procyclicality and banks’ performance was deeply analyzed by
Shin, Shin (2011) in their working paper, which is devoted to procyclicality and monetary aggregates.
The fact that banks’ performance is procyclical was proved and presented in their working paper.
Mendoza and Terrones (2008) wrote about credit booms, time periods when credit to the private sector
grows by more than during a typical business cycle expansion. They analyzed 48 countries between
1960 and 2006 years and found 27 credit booms in developed countries and 22 in emerging economies.
Credit booms in emerging and industrial economies differ.
Procyclical behavior of banking might threaten macroeconomic stability. Bikker and Hu (2002) proved
the fact that bank profits appear to move up and down with the business cycle, allowing for
accumulation of capital in boom periods. Bikker and Hu (2002) also mention cyclical patterns of
lending, profits and provisioning in their working paper. According to them, capital and reserves
include paid-up capital, reserved funds, retained profits and other capital funds.
One of the interesting facts about banks’ performance was also mentioned by Kevin J. Stiroh (2004) in
his article, which is devoted to the problem of noninterest income. He found out that majority of banks
in the US shift away from traditional sources of revenue such as loan making toward activities that
generate fee income, service charges and other types of noninterest income.
Chen, Higgins and Mason (2005) mentioned that during recession, bank regulators may order banks to
slow lending and pursue recoveries from defaulted firms. Anyway, amount of bad loans increases
during recession. Such an idea was promoted by Salas and Saurina (2002), who analyzed the relation
between problematic loans and the economic cycle in Spain, over the period 1985-1997. Therefore,
there should be strict rules for borrowers during recessions. But cutting off loans would not be wise
decision. La Porta, Lopez de-Silanes, Shleifer (2002) analyze the role of government in the sphere of
banking. In the article, the problem of government ownership of banks is shown from all aspects.
Probably, theoretically government may encourage lending to the private sector. La Porta, Lopez deSilanes, Shleifer (2002) argue that government regulation slows down economic development. In their
article, large banks of 92 countries were analyzed. For each country in the sample, they identified 10
large banks. They proved the fact that such strong ownership not only weakens economic development
but also politicizes resources and as a result such ownership decreases efficiency.
Quite an interesting fact was presented by Archarya, Gujral, Kulkarni, Shin (2011). It was mentioned
that bank capital increased during crisis due to the fact that government sponsored financial institutions
and gave an opportunity to raise funds through preferred stock and subordinated debt in the US, UK
and Europe. Despite the fact that economic recession affected all financial institutions negatively, the
role of government in such circumstances was supportive. Boyd, Kwak and Smith (2005) found a
relationship between business cycle and banks’ performance. In their analysis, they took 23 sample
countries including developed and mature countries and countries of third world. They point out that
every recession in the USA is somehow connected with some kind of banking panic. So called
“banking system safety net” in the form of deposit insurance systems or lenders of last resort were
created in order to support depositors.
13
2. Objectives
In my paper, I investigated whether there is a correlation between economic indicators and bank capital
and bank assets I took a sample of 20 Kazakhstani banks, their bank capital and their assets in total
since 2006 till 2011. Thirdly, I presented economic indicators, which were obtained from the National
Statistics Agency of the Republic of Kazakhstan and some data from the World Bank.
3. Methodology
The absence of reliable data that goes back far enough is an obvious drawback for any empirical
research of Kazakhstan. In order to partly counteract these problems the method of partial extrapolation
is usually employed in most of statistical analysis of the country. The application of this method to this
study allowed us to get a reliable enough set of data.
The data set consists of monthly observations starting from January 2006 and ending in October 2011
(70 observations in total). Four sets of time series were collected: assets, equity, GDP, and GNI.
Annual data of considerable variables have also been used to analysis.
3.1 Assets
The Assets variable was measured in current market prices in billions of KZ tenge. These data were
collected from 20 the greatest Kazakhstani banks. According to data
Diagram.1. The values of Assets 2006-2011yy.
The diagram 2 represents percentage change of assets value. Despite the fact that the value of
assets increased during the 2006 – 2009 years the growth has slowed significantly.
Diagram.2. Assets’ Growth
Before the financial crisis of 2008 equity of banks increased steadily. If in 2006 year it was a little
more than 6.5 billion. Tenge, in 2008 equity has grown almost three times till 17.85 billion tenge.
Diagram.3. Equity, 2006 – 2011yy.
3.2 Equity
During the 2009 shareholders' equity of banks fell by 15.8 billion tenge. In 2010 the
situation deteriorated further and the total capital of banks fell to a negative value of – 0.6565 billion
tenge. In should be noted that after the state has purchased 25% stake in the four largest banks, banks’
capital increased to 16.676 billion tenge.
14
If we consider the dynamics of the equity of banks in general, it should be noted that before the
crisis, even though it was small, but still the growth of capital was noticeable. During the crisis and
after that the capital turned out to be negative. Considering the picture at whole it can be noted a
strong instability of the banks' own capital. After the intervention of the government, problematic
issues were solved and banks’ capital has increased.
Diagram. 4. Equity Growth
3.3 Main economic indicators
Gross Domestic Product (GDP) - macroeconomic indicator that reflects the market value of all final
goods and services (that is intended for direct consumption) produced per year in all sectors of the
economy in the state for consumption, exports and savings, regardless of the nationality of the factors
of production used.
Diagram.5. GDP and GNP of the republic of Kazakhstan from 2002 to 2010 years, bill. $
Throughout the period between 2002 – 2010 years GDP of Kazakhstan showed a steady increase. To
check the tightness of the statistical relationship among considerable variable the correlation
coefficients were estimated and represented in the table below.
Table.1. Correlation among variables
ASSETS
EQUITY
GDP
GNP
ASSETS
1.000000
0.163845
0.361756
0.660552
EQUITY
0.163845
1.000000
-0.499055
0.103887
GDP
0.361756
-0.499055
1.000000
0.219680
GNP
0.660552
0.103887
0.219680
1.000000
The pair correlation coefficient shows a significant relationship between Gross National Product (GNP)
and Assets with correlation coefficient that equal 0.660552. The relationship between Assets and GDP
(Gross Domestic Product) is considerably less significant, the correlation coefficient slightly more than
0.36. At the same time the link between Equity and Assets is not important, the coefficient of pair
correlation is only 0.16.
3.4 Regression analysis
The purpose of the empirical analysis is to determine what kind of relationship, if any, exists between
Assets and GDP, Assets and GNP, Equity and GDP, and Equity and GNP.
The least square method (LS) was applied to check relationship between dependent variables Assets
and Equity and independent variables GDP and GNP. Two variables linear regression model was
constructed. The basic regression models have a following form:
1. Assetst = β 0 + β 1 × GDPt + u t
2.
Assetst = β 0 + β1 × GNPt + u t
15
3.
4.
Equity t = β 0 + β1 × GDPt + u t
Equityt = β 0 + β1 × GNPt + u t
where
Assetst – total sum of 20 largest banks in Kazakhstan for the period t,
Equityt - Equity's 20 largest banks in Kazakhstan for the period t,
GDPt - gross domestic product for the period t,
GNPt - gross national product for the period t,
ut - stochastic error term
ASSETS = 8701191134.38 + 1957110.94384*GDP
Obtained coefficient has an expected “plus” sign, which implies positive influence on Assets. The
regression results show that change of GDP by one unit will lead to increase of the Assets value by
1957110.94 units.
Table. 2. The LS model results. Assets and GDP
Dependent Variable: ASSETS
Method: Least Squares
Date: 03/14/12 Time: 01:24
Sample: 2006M01 2011M12
Included observations: 72
GDP
C
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
F-statistic
Prob(F-statistic)
Coefficient
Std. Error
t-Statistic
Prob.
1957111.
8.70E+09
602827.6
7.10E+08
3.246551
12.26016
0.0018
0.0000
0.130868
0.118452
2.38E+09
3.98E+20
-1655.806
10.54010
0.000194
Mean dependent var
S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
Durbin-Watson stat
1.08E+10
2.54E+09
46.05018
46.11342
46.07536
0.079219
The regression above has the right functional form that confirms F-statistic coefficient (10.54010) with
small p-value (0.000194). At the same time R-squared, this measures the proportion of the variation in
the dependent variable – Assets accounted for by the explanatory variable GDP, equals to 0.130868. It
means that regression model describes insignificantly than 13% of the pattern in the Assets. The
regression also has positive autocorrelation in residuals according to Durbin-Watson statistic
(0.079219). Residuals of the regression have no normal distribution with Kurtosis 3.0 and Skewness 1.11. Although the obtained coefficient is statistically significant in keeping with large t-statistic
3.246551 and small p-value, it cannot be reliable because of autocorrelation in residuals.
The next step in the study was to analyze the relationship between assets as dependent variable and
GNP as explanatory variable. The equation of simple linear regression has the following form:
ASSETS = 79023538.9114 + 3628495.20811*GNP
The regression results showed positive influence of GNP change on Assets – an increase of GNP by
one unit will raise Assets value by 3628495.21 units.
Table.3. The LS model results. Assets and GNP
Dependent Variable: ASSETS
Method: Least Squares
Date: 03/14/12 Time: 01:26
Sample: 2006M01 2011M12
Included observations: 72
16
GNP
C
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
F-statistic
Prob(F-statistic)
Coefficient
Std. Error
t-Statistic
Prob.
3628495.
79023539
492928.0
1.48E+09
7.361105
0.053532
0.0000
0.9575
0.436329
0.428276
1.92E+09
2.58E+20
-1640.218
54.18587
0.000000
Mean dependent var
S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
Durbin-Watson stat
1.08E+10
2.54E+09
45.61715
45.68040
45.64233
0.890701
The results of the second regression are fully consistent with the results of the first one. The regression
has right functional form with large F-statistic – 54.18587 and small p-value (0.000000). The
coefficient of determination R2 equals 0.436329. The value of this coefficient characterizes the
fraction of variance in the dependent variable Assets that can be explained by regression, i.e. of the
independent variable GNP. Accordingly, the value of 1 – R2 characterizes the proportion of variance of
the variable Assets, caused by the influence of all the others taken into account in the econometric
model explanatory variables. The calculation showed that the proportion of unaccounted for in the
resulting econometric model of explanatory variables is approximately 1 - 0.436329 = 0.56371,
or 56.3%. Such a low ratio of the determinant shows a marginal statistical significance of the model.
The regression also has got positive autocorrelation of residuals that confirms small Durbin – Watson
statistics (0.0890701). Therefore, we cannot rely on the results of the regression.
The econometric model which describes the relationship between explained variable Equity and
explain variable GDP was constructed. The following equation was obtained after run the regression:
EQUITY = 1743123976.13 - 893447.6395*GDP
The results showed negative influence of GDP on Equity. When the GDP will chance by one unit the
value of equity will decrease by 89 3447.6395 units.
Obtained coefficients are statistically significant with large t-statistic (-4.818299) and small p-value
(0.00000). The model also has right functional form which confirmed by sufficiently large F-statistic
value - 23.21601 and small p-value (0.000008).
Based on the analysis of the numerical values of the determination coefficient R2 = 0.249056 it was
found the insignificance of the statistical relationship between the magnitude of the value GDP
and Equity. It was also shown that the percentage of unaccounted for in the resulting econometric
model of explanatory variables is approximately 75.1%, i.e. more than three fourth. It proves the
statistical insignificance of the model.
Table. 4 The LS model results. Equity and GDP
Dependent Variable: EQUITY
Method: Least Squares
Date: 03/14/12 Time: 01:28
Sample: 2006M01 2011M12
Included observations: 72
GDP
C
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
F-statistic
Prob(F-statistic)
Coefficient
Std. Error
t-Statistic
Prob.
-893447.6
1.74E+09
185428.0
2.18E+08
-4.818299
7.984789
0.0000
0.0000
0.249056
0.238328
7.34E+08
3.77E+19
-1570.921
23.21601
0.000008
Mean dependent var
S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
Durbin-Watson stat
17
7.77E+08
8.41E+08
43.69225
43.75549
43.71743
0.278177
The same conclusion can be drowning when the Durbin – Watson statistic will be considered. This
coefficient clearly shows the presence of positive autocorrelation of the disturbance terms.
The last regression model reveals the relationship between Equity and GNP. The results look like
following: EQUITY = 218421262.941 + 188843.026957*GNP
In this case, all coefficients show full statistical insignificance of the model. Coefficient of
determinations R2 is only 0.010792 which means that the regression describes only one percent of
the economic phenomenon. F-statistic confirmed wrong functional form of the regression model and
Durbin – Watson statistic showed the presence of positive autocorrelation among disturbance terms.
According to t-statistics variables coefficients are also statistically insignificant.
Table.5. The LS model results. Equity and GNP
Dependent Variable: EQUITY
Method: Least Squares
Date: 03/14/12 Time: 01:29
Sample: 2006M01 2011M12
Included observations: 72
GNP
C
R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood
F-statistic
Prob(F-statistic)
Coefficient
Std. Error
t-Statistic
Prob.
188843.0
2.18E+08
216090.5
6.47E+08
0.873907
0.337521
0.3852
0.7367
0.010792
-0.003339
8.42E+08
4.96E+19
-1580.842
0.763714
0.385157
Mean dependent var
S.D. dependent var
Akaike info criterion
Schwarz criterion
Hannan-Quinn criter.
Durbin-Watson stat
7.77E+08
8.41E+08
43.96782
44.03106
43.99300
0.150240
4. Conclusions
First of all there are weak statistical relationships among considerable variables. This conclusion is
supported by low coefficients of determination which ranged from 0.010792 till 0.436329.
Second, using the F-test it was revealed that the equations of simple regressions as a whole are
statistically significant (with except for Equity and GNP regression), but nevertheless the constructed
models described the phenomenon under investigation not adequate.
Third, the presence of positive autocorrelation among disturbance terms was found in
all regression equations. This means that the obtained coefficients are not BLUE (best linear unbiased
estimator). Although OLS estimators remain unbiased as well as consistent in the presence of
autocorrelation, they are no longer efficient. Then usual t and F statistics became insignificant. There
are some reasons that can explain the existence of autocorrelation:
•
Inertia and slowness of economic time series
•
Misspecification resulting from excluding important explanatory variables
•
Incorrect functional form
•
Data manipulation and etc.
The lack of reliable information is a serious drawback for Kazakhstani researchers.
All above mentioned facts do not allow drawing any serious conclusions about the
relationship that possibly exist between the assets and equity on the one hand,
and GDP and GNP on the other.
5.
1.
References
Archarya, V.V., Gujral, I., Kulkarni, N., Shin, H.S. (2011, March), “Dividends and Bank Capital
in the Financial Crisis of 2007-2009”.Working paper, In NBER working paper series, Cambridge,
UK.
18
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Berger, A.N., Udell G.F., (2004) “The institutional memory hypothesis and the procyclicality of
bank lending behavior”, Journal of Financial Intermediation, Vol 13, Issue 4, pp. 458-495
Bikker J.A., Hu H. (2002) “Cyclical patterns in profits, provisioning and lending of banks”, DNB
Staff Reports 2002, # 86, De Nederlandsche Bank.
Boyd, J.H., Kwak, S., Smith, B., (2005), “The Real Output Losses associated with modern banking
crisis”, Journal of Money, Vol 37, pp. 977-999.
Brooks R.M. (2010), “Financial Management”, Pearson Education
Chen Y., Higgins E. J., Mason J.R. (2005) “Is Bank efficiency cyclical? The relationship between
economic and financial market conditions and bank performance”. Draft. National University of
Kaohsiung, Higgins, Kansas State University, Mason: Drexel University and Wharton Financial
Institutions Center.
La Porta, R., Lopez-de-Silanes, F., Shleifer A. (2002), “Government Ownership of Banks”,
Journal of Finance, Vol.57, pp. 265-301.
Levine, R., Zervos, S. (1998) “Stock Markets, Banks and Economic Growth”, The American
Economic Review, Vol.88, pp. 537-558.
Mendoza, E.G., Terrones, M.E. (2008), “An anatomy of credit booms: Evidence from macro
aggregates and micro data”, In NBER, working paper, IMF conference on Financial Cycles,
Liquidity and Securitization, Cambridge, UK.
Shin, H.S., Shin. K. (2011, June), “Procyclicality and Monetary Aggregates”. In NBER, 2010
Bank of Korea Research Conference, Cambridge, UK.
Stiroh, J. (2004), “Diversification in Banking: is noninterest income the answer?” Journal of
Money, Vol. 36, pp.853-882.
Quagliarello, M. (2004) “Bank’s Performance over the Business Cycle: A Panel; Analysis on
Italian Intermediaries”. Discussion paper in Economics, University of York, Heslington, York,
Y0105DD
www.afn.kz, viewed February, 14, 2012
www.nationalbank.kz , viewed January, 5, 2012
http://www.worldbank.org, viewed January, 5, 2012
An Epistemological Challenge for Fair Value Accounting:
The Classification of Financial Instruments for the Purpose of the Fair Value Estimation
by Kazakhstan’s Banking Industry
Yuliya Frolova
KIMEP University
[email protected]
John Dixon
KIMEP University
[email protected]
Abstract: The objectives of this paper are (1) to describe the fair value asset classification criteria that
guide accountants to classify assets by the three-level hierarchy of inputs under International Financial
Reporting Standards; (2) to identify the anomalies created by the application of these asset
classification criteria; (3) and to identify the implication of these anomalies for the reporting entity’s
chief financial officer (CFO), chief executive officer (CEO), board of directors, and stakeholders – at –
large. The research involved a review of the notes accompanying financial statements for the year 2010
of Kazakhstani banks to identify how they classified their financial assets. This paper raises serious
issues about the accounting profession’s treatment of the fair value estimation of level 3 financial assets
for the purposes of assessment. The profession is currently experiencing a crucial epistemological
change by giving priority to relevance over reliability in asset value estimation. The practical
implication is to show through the adoption of fair value that board of directors of a reporting entity
needs to be well-informed about the fair value classification of financial assets, so that it can assess the
level of risk of material misstatement associated with the fair value estimate.
Keywords: bank industry, corporate governance, fair value, IFRS, Kazakhstan
1. Introduction
Reform in International Financial Reporting Standards (IFRS) related to fair (market) value has led
accounting to a move from a focus on verifiable accounting facts to a focus on defensible accounting
19
estimates1. This reform has created the epistemological challenge, for independent external auditors,
management and board of directors, of verifying, attesting, and certifying financial statements. It has
become riskier now to conclude that these statements are free from material misstatements.
The objectives of this paper are three-fold. The first is to describe the fair value asset classification
criteria that guide accountants to classify assets by the three-level hierarchy of inputs under
International Financial Reporting Standards. The second is to identify the anomalies created by the
application of these asset classification criteria, illustratively drawing upon the notes accompanying
financial statements for the year 2010 for Kazakhstani banks, for which such statements are available
on KASE (Kazakhstan Stock Exchange). The third is to identify the implication of these anomalies for
the reporting entity’s chief financial officer (CFO), chief executive officer (CEO), board of directors,
and stakeholders – at – large.
2. Challenges of Fair Value Estimate
The classification of financial instruments at fair value is determined by making reference to the source
of inputs that are used to estimate the fair value. This three-level classification, which guides
accountants on the selection of the appropriate fair value estimation methods, is provided in
International Financial Reporting Standard (IFRS) #7. This classification of inputs assists the users of
financial statements to “assess the reliability and market observability of the fair value estimates
embedded in the financial statements” 2 . However, it requires professional judgment in its
implementation. As a result, comparability of financial statements prepared by different entities within
the same industry may be diminished. This is illustrated by the reporting practices used by the banking
industry of Kazakhstan.
In Kazakhstan, the procedure of fair value estimation of marketable securities (except for equity
investments in affiliated and subsidiary entities) for the purposes of accounting, valuation, and
disclosure of information about financial instruments and management of marketable securities
portfolio in organization is regulated by KASE’s “Principles of Fair Value Estimation”. These
Principles were developed in accordance with the requirements of International Accounting Standard
(IAS) #393 and are available at http://www.kase.kz .
3. Case Study
This case study relates to the reporting practices of banks whose securities are included in the KASE
official list as at February 2012: JSC Alliance Bank, ATFBank JSC, Development Bank of Kazakhstan,
BTA Bank JSC, Centercredit JSC, JSC Kaspi Bank, Subsidiary Bank “Punjab National Bank” –
Kazakhstan JSC, Eurasian Bank JSC, Eximbank Kazakhstan JSC, Halyk Savings Bank of Kazakhstan
JSC, Kazinvestbank JSC, Kazkommertsbank JSC, Delta Bank JSC, Nurbank JSC, SENIM-Bank JSC,
Temirbank JSC, Tsesnabank JSC, and Subsidiary Bank Sberbank of Russia JSC.
A review of all these 18 banks’ financial statements for 2010 reveals that only 8 specifically noted
either explicitly or implicitly their classification assumptions with respect to KASE-listed financial
assets. This non-disclosure is contrary to international professional best practices. IFRS #7 requires
“information about the fair values of each class of financial asset […], along with: […], the level of
inputs used in determining fair value, […]”4 to be disclosed. These 8 banks acknowledged that their
KASE-listed financial assets did not have an active market upon which to base estimations. Giving this
acknowledged lack of an active market, it is logical to expect banks to classify such assets in the level 3
category. However, banks chose to classify them explicitly or implicitly as level 2 assets, which has
significant implications for the method of estimation of their value. To explore this, the notes to the
financial statements of each bank on this issue have been examined:
1
Dixon, J. and Frolova, Y. There is no Accounting for Facts: The Fair Value Measurement of
Unobservable and Unknowable Financial Transactions. Philosophy of Management (pending).
2
Mackenzie, B., Coetsee, D., Njikizana, T., Chamboko, R., and Colyvas, B. (2011), Interpretation and
Application of International Financial Reporting Standards, John Wiley & Sons, p. 152.
3
“Методика оценки справедливой стоимости ЦБ” (“Principles of Fair Value Estimation” – authors’ translation
from Russian), available at http://www.kase.kz.
4
International Financial Reporting Standard (IFRS) #7, paragraphs 7.25-30, viewed 1 February, 2012,
http://www.ifrs.org.
20
•
Tsesnabank JSC: It clearly indicated that “securities, which are listed on the Kazakh Stock
Exchange but which do not have an active market as at December 2010, are classified as level 2
in the fair value hierarchy.”5 However, the methodology used was noted only as a general, rather
than specific description.
•
JSC Alliance Bank: It limited itself by indicating in its annual reports for 2010 that the market
for the instruments included in KASE listing was inactive: “Although all the instruments are
listed on the Kazakhstan stock exchange, management believes that the market for these
identical instruments is not active.”6 This implies level 2 classification of these financial assets.
Moreover, the methodology used was noted only as a general, rather than specific description.
•
ATFBank JSC: It noted that the market for the instruments included in KASE listing was
inactive: “Due to changes in market conditions, quoted prices in active markets were no longer
available, including government securities listed on Kazakhstan Stock Exchange. Accordingly,
as at 31 December 2010 and 2009 the estimated fair value of financial instruments has been
based on the results of valuation techniques involving the use of observable market inputs.”7
This implies level 2 classification. Moreover, the methodology used was noted only as a general,
rather than specific description.
•
Eurasian Bank JSC: It also made the same note: “Due to changes in market conditions, quoted
prices in active markets were no longer available, including for government securities listed on
Kazakhstan Stock Exchange. Accordingly, as at 31 December 2010 and 2009 the estimated fair
value of these financial instruments is based on the results of valuation techniques involving the
use of observable market inputs.”8 However, the methodology used was noted only as a general,
rather than specific description.
•
BTA Bank: It used the amendment in IAS 39 – made by the International Accounting Standards
Board (IASB) – that permits reclassification of financial instruments under certain
circumstances (such as the current financial crisis, which started in 2008) and made notes in its
annual reports for 2010 about reclassification of marketable securities valued at fair value from
category of Level 1 to category of Level 2 that they made during 2009 and 2010: “In 2010 there
were no transfers between level 1 and 2. The following table shows transfers between level 1
and level 2 in 2009, of the fair value hierarchy for financial assets and liabilities which are
recorded at fair value: […] The above financial assets were transferred from level 1 to level 2 as
they ceased to be actively traded during the year and fair values were consequently obtained
using valuation techniques using observable market inputs.”9
In Note 32, BTA Bank JSC makes “a comparison by class of the fair values of the Group’s financial
instruments that are carried in the financial statements by level of the fair value hierarchy”10:
Financial assets
Trading securities
Derivative financial assets
Available-for-sale investment securities
Financial liabilities
Derivative financial liabilities
5
2010
Level 1
Level 2
Level 3
82,257
-
4,795
-
-
1
-
Tsesnabank JSC: Consolidated Financial Statements for the year ended 31 December 2010, Note 36, viewed 1
February, 2012, http://www.kase.kz.
6
Alliance Bank JSC: Consolidated Financial Statements for the year ended 31 December 2010, Note 33, viewed 1
February, 2012, http://www.kase.kz.
7
ATFBank JSC: Consolidated Financial Statements for the year ended 31 December 2010, Note 36, viewed 1
February, 2012, http://www.kase.kz.
8
Eurasian Bank JSC: Consolidated Financial Statements for the year ended 31 December 2010, Note 38, viewed 1
February, 2012, http://www.kase.kz.
9
BTA Bank and subsidiaries JSC: Consolidated Financial Statements for the Year ended 31 December 2010
Together with Independent Auditors’ Report, Note 32, viewed 1 February, 2012, http://www.kase.kz.
10
Ibid. 9.
21
“Trading securities” included “Treasury bills of the Ministry of Finance of the Republic of
Kazakhstan”, “Bonds of Kazakhstan financial institutions”, “Bonds of Kazakhstan non-financial
institutions” and other securities (Note 10) for which the market was inactive. Moreover, the
methodology used was noted only as a general, rather than specific description.
•
Nurbank JSC: It took the advantage of IAS 39 as well: “During 2009 the above financial assets
were transferred from level 1 to level 2 as available-for-sale securities of defaulted organizations
ceased to be actively traded during the year and fair values were consequently obtained using
valuation techniques using observable market inputs. During 2010 there were no transfers from
level 1 to level 2.”11 However, the methodology used was noted only as a general, rather than
specific description.
•
Temirbank JSC: It also took an advantage of the standard: “The following table shows transfers
between level 1 and level 2 of the fair value hierarchy for financial assets and liabilities which
are recorded at fair value: […] The above financial assets were transferred from level 1 to level
2 as they ceased to be actively traded during 2010 and fair values were consequently obtained
using valuation techniques using observable market inputs.”12 However, the methodology used
was noted only as a general, rather than specific description.
•
Senim Bank JSC: It indicated in Note 17 to its annual report for 2010 that equity securities are
not quoted and, therefore, are shown at their original value minus reserve for impairment,
according to accounting policy of the bank13. This practice, however, is not endorsed by IFRS.
4. Criticism: From Historical Cost Accounting to Fair Value Speculative Accounting
Fair value accounting has moved the accounting profession away from objectivity, reliability, and
verifiability, which were almost guaranteed in the past by historical cost accounting. On the other hand,
fair value accounting provides users of financial statements with more relevant information than
historical cost accounting. However, it also involves more judgment that may deteriorate faithful
representation because “no matter how relevant, if information does not fully represent the appropriate
economic phenomenon, it is useless”14, which is difficult to justify given a lack of an active financial
market.
From the notes to the audited financial statements for the year 2010 of Kazakhstan banks, it is clear that
they treated investments in marketable securities of the same issuers differently. One bank declared
level 1, most banks declared level 2, and one bank adopted historical cost accounting. These treatments
of financial assets are not justifiable under IFRS. Level 1 inputs imply an active market, which the
banks acknowledged did not exist. Level 2 requires observable inputs such as “quoted prices for
similar assets or liabilities in active markets”15, “quoted prices for identical or similar assts or liabilities
in markets that are not active”16, “inputs other than quoted prices that are observable for the asset or
liability”17, and “inputs that are derived principally from or corroborated by observable market data that,
through correlation or other means, are determined to be relevant to the asset or liability being
measured (market-corroborated inputs)” 18 . One possible implication of this unwillingness to place
financial assets to category 3 is to add the appearance of reliability to the value estimates. The adoption
of historical cost accounting to measure the value of financial assets in a non-active market is contrary
to IFRS and makes comparability with other banks impossible.
It is also noticed that no bank disclosed what specific methods and formulas for fair value valuation
they used or whether they used KASE’s “Principles of Fair Value Estimation”. This practice does not
facilitate to comparability, that is, an accounting qualitative characteristic that “helps users see
similarities and differences between events and conditions”19. Comparability implies that “accounting
11
Nurbank JSC: Consolidated Financial Statements for the Year ended 31 December 2010 Together with
Independent Auditors’ Report, Note 27, viewed 1 February, 2012, http://www.kase.kz.
12
Temirbank JSC: Financial Statements for the Year ended 31 December 2010 Together with Independent
Auditors’ Report, Note 29, viewed 1 February, 2012, http://www.kase.kz.
13
«Сеним Банк» Акционерное Общество: Финансовая отчетность за год, закончившийся 31 декабря 2010
года и Отчет независимых аудиторов №5, viewed on 1 February, 2012, http://www.kase.kz.
14
Spiceland, J. D., Sepe, J. F., and Nelson M. W. (2011), Intermediate Accounting, McGraw-Hill, p. 23.
15
Ibid. 2, p. 151.
16
Ibid. 2, p. 151.
17
Ibid. 2, p. 151.
18
Ibid. 2, p. 151.
19
Spiceland, J. D., Sepe, J. F., and Nelson M. W. (2011), Intermediate Accounting, McGraw-Hill, p. 24.
22
information should be comparable across different companies and over different time periods”20, so
that investors and creditors are able “to compare information among companies to make their resource
allocation decisions”21.
5. Implications for corporate governance
Fair value accounting has its implication for corporate governance because it creates challenges of
verifying, attesting, and certifying financial statements of a reporting entity as identifying the risk of
unintentional material misstatement for its CFO, CEO, auditors, and board of directors22. The issue is
that how management classifies financial assets in terms of the three-level hierarchy determines the
selection of asset valuation estimation methods. It is noted that management is “responsible for the
making of financial estimates included in financial statements”23. Under now broadly internationally
accepted Sarbanes-Oxley Act, it is CEO or CFO who are to certify, subject to criminal penalties for
non-compliance with all requirements that he or she, among other things “… (1) has reviewed the
[financial] report; (2) based on the officer’s knowledge, the report does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order to make the statements
made, in light of the circumstances under which such statements were made, not misleading; (3) based
on such officer’s knowledge, the financial statements, and other financial information included in the
report, fairly present in all material respects the financial condition and results of operations of the
issuer as of, and for, the periods presented in the report …. ”24 The board of directors, in its turn, must
approve a reporting entity’s audited financial statements.
However, if there are anomalies in the way management had classified the assets, which require fair
value estimation, then its ability to affirm the correctness (truthfulness) of the fair value accounting
estimates or to attest to the absence of unintentional financial misstatements in audited financial
statements becomes problematic. Managers are required to attest to the fair value accounting estimates
being calculated in good faith and in a manner they reasonably believe to be in the best interests of the
reporting entity, while external auditors are “responsible for testing and evaluating the [management’s]
fair value measurements and disclosures”25.
Under these circumstances, boards of directors, not to mention stakeholders (including shareholders,
creditors, and regulators), cannot take for granted that those statements fairly present the financial
condition of the reporting business entity. The important implication for corporate governance is that
boards of directors need to be well-informed about and fully engaged in the classification decisions, as
well as the fair value estimation process, so as to be able to assess the level of associated risks of
material misstatement.
6. Conclusion
Accounting has been a very conservative profession for a long time, where every piece of information
could be verified by reference to original supporting documents. Due to a recent shift from historical
cost to fair value accounting, however, relevance of accounting information became more important
than its reliability. It created challenges for management and boards of directors since it became riskier
to state that the financial statements of reporting entities are free from material misstatements. This
challenge was illustrated using an example from the banking industry of Kazakhstan – a country with
emerging market economy. The paper raise concerns that due to financial assets classification
anomalies, which impact on the choice of the fair value estimation methods, neither the correctness
(truthfulness) of the fair value accounting estimates nor the absence of unintentional financial
misstatements in audited financial statements can be taken for granted by boards of directors and all
stakeholders. Thus, the fundamental issue is whether those statements fairly present the financial
condition of the reporting business entity, especially when a reporting entity is in a country with not
enough active markets.
20
Ibid 14
Ibid 14
22
Dixon, J. and Frolova, Y. There is no Accounting for Good Governance: The Fair Value Challenge. Corporate
Governance (under review).
23
Generally Accepted Auditing Standards (GAAS), AU Section 342: Clause 02
24
Sarbanes-Oxley Act, Section 302
25
Georgiades, G. (2005), “Audit Considerations in the Current Economic Environment (PCAB Staff Audit
Practice Alert No. 3)”, GASS Update Service, Vol. 9, No. 03 (emphasis added).
21
23
References:
1. Alliance Bank JSC: Consolidated Financial Statements for the year ended 31 December 2010,
viewed 1 February, 2012, http://www.kase.kz.
2. ATFBank JSC: Consolidated Financial Statements for the year ended 31 December 2010, Note 36,
viewed 1 February, 2012, http://www.kase.kz.
3. BTA Bank and subsidiaries JSC: Consolidated Financial Statements for the Year ended 31
December 2010 Together with Independent Auditors’ Report, Note 32, viewed 1 February, 2012,
http://www.kase.kz.
4. Centercredit JSC: Consolidated Financial Statements for the year ended 31 December 2010,
viewed 1 February, 2012, http://www.kase.kz.
5. Delta Bank JSC: Financial Statements for the year ended 31 December 2010, viewed 1 February,
2012, http://www.kase.kz.
6. Development Bank of Kazakhstan: Consolidated Financial Statements for the year ended 31
December 2010, viewed 1 February, 2012, http://www.kase.kz.
7. Dixon, J. and Frolova, Y. There is no Accounting for Facts: The Fair Value Measurement of
Unobservable and Unknowable Financial Transactions. Philosophy of Management (pending).
8. Dixon, J. and Frolova, Y. There is no Accounting for Good Governance: The Fair Value
Challenge. Corporate Governance (under review).
9. Eurasian Bank JSC: Consolidated Financial Statements for the year ended 31 December 2010,
Note 39, viewed 1 February, 2012, http://www.kase.kz.
10. Halyk Savings Bank of Kazakhstan JSC: Consolidated Financial Statements for the Years Ended
31 December 2010, 2009 and 2008 and Independent Auditors’ Report, viewed 1 February, 2012,
http://www.kase.kz.
11. International Accounting Standard (IAS) #39, viewed 1 February, 2012, http://www.ifrs.org.
12. International Financial Reporting Standard (IFRS) #7, viewed 1 February, 2012,
http://www.ifrs.org.
13. Kaspi Bank, АО: Консолидированная финансовая отчетность за год, закончившийся 31
декабря 2010 г., viewed 1 February, 2012, http://www.kase.kz.
14. Kazkommertsbank JSC: Consolidated Financial Statements for the Years Ended 31 December
2010, 2009 and 2008, viewed 1 February, 2012, http://www.kase.kz.
15. Mackenzie, B., Coetsee, D., Njikizana, T., Chamboko, R., and Colyvas, B. (2001), Interpretation
and Application of International Financial Reporting Standards, John Wiley & Sons, p. 131.
16. Nurbank JSC: Consolidated Financial Statements for the Year ended 31 December 2010 Together
with Independent Auditors’ Report, Note 27, viewed 1 February, 2012, http://www.kase.kz.
17. Subsidiary Bank “Punjab National Bank” – Kazakhstan JSC (Danabank JSC): Financial
Statements for the Year ended 31 December 2010, viewed 1 February, 2012, http://www.kase.kz.
18. Subsidiary Bank Sberbank of Russia JSC: Financial Statements for the Year ended 31 December
2010 Together with Independent Auditors’ Report, viewed 1 February, 2012, http://www.kase.kz.
19. Temirbank JSC: Financial Statements for the Year ended 31 December 2010 Together with
Independent Auditors’ Report, Note 29, viewed 1 February, 2012, http://www.kase.kz.
20. Tsesnabank JSC: Consolidated Financial Statements for the year ended 31 December 2010, Note
36, viewed 1 February, 2012, http://www.kase.kz.
21. Spiceland, J. D., Sepe, J. F., and Nelson M. W. (2011), Intermediate Accounting, McGraw-Hill, p.
24.
22. “Казинвестбанк” АО: Финансовая отчетность за год, закончившийся 31 декабря 2010 года,
viewed on 1 February, 2012, http://www.kase.kz.
23. “Методика оценки справедливой стоимости ЦБ” (“Principles of Fair Value Estimation” –
authors’ translation from Russian), available at http://www.kase.kz.
24. “Сеним Банк” АО: Финансовая отчетность за год, закончившийся 31 декабря 2010 года и
Отчет независимых аудиторов №5, viewed on 1 February, 2012, http://www.kase.kz.
25. “Эксимбанк Казахстан” АО: Финансовая отчетность за годы, закончившиеся 31 декабря
2010б 2009 и 2008 годов, viewed on 1 February, 2012, http://www.kase.kz.
24
The Impact of the Global Financial Crisis on the Profitability of Islamic and Conventional Banks
in Asia and the Middle East
Dennis Olson
American University of Sharjah
[email protected]
Taisier A. Zoubi
American University of Sharjah
[email protected]
Abstract: This study compares accounting-based components of the profitability of Islamic versus
conventional banks in countries having a significant Islamic component in their banking sector.
Such banks are located primarily in Northern Africa, Asia, and the Middle East. Previous research,
such as Srairi (2010) and Olson and Zoubi (2011), has suggested that Islamic banks are less cost and
profit efficient than conventional banks in the Middle East. In contrast, however, Islamic banks in the
Middle East have been more profitable in terms of return on assets or return on equity than
conventional banks. A recent International Monetary Fund working paper by Hasan and Dridi (2010)
suggests that Islamic banks weathered the global financial crisis better than conventional banks in the
Middle East and Central Asia—at least in 2008 and 2009. We believe that the possible reasons for
such a result should be further examined, but that a short two year timeframe may not be long enough
to draw robust conclusions about the reasons behind the possible better performance during this time of
crisis. Hence, this study examines the determinants of profitability, as indicated by various bank
financial ratios during the years 1997 – 2011. Profitability and performance are measured by return on
assets, return on equity, net interest margin and net non-interest margin. Fixed and random effects
panel estimators are used to identify significant financial ratios contributing to bank performance. We
show that performance varies over time and that the noteworthy relatively favorable profitability results
for the Islamic banks are stronger in 2008 than in many other years. Over the entire 15 year period,
Islamic banks appear to be somewhat more profitable than conventional banks in the same country.
However, the profitability differential has declined after 2008, and in some countries even disappeared.
Financial Frictions and Propagation of Economic Disturbances through Bank Lending Rate
Spread in Developing Countries
Sang H. Lee,
KIMEP University
M. Mujibul Haque,
KIMEP University
Abstract: A significant number of recent papers have argued that financial market frictions due to
informational asymmetry may help to amplify initial disturbances in economy through rationing credits
by lenders and increasing the marginal cost of external funds to borrowers. The premium for external
funds reflects a “lemons” problem, and has an inverse relationship with the net worth of borrower
whose quality is not readily observable. The lower the credit rating of a borrower and the higher the
degree of information asymmetry between the lender and the borrower, the lower is share of credit
extended to the borrower due to flight to quality. In an emerging or underdeveloped financial market,
commercial banking is typically the only major form of intermediation, and the added risk premium
will be reflected mainly in the bank lending rate. This implies that the lending rate spread over the
bank’s opportunity cost of fund could be an indicator of future real economic activities, and the size of
the spread may have a negative relationship with real outputs in aggregate. A panel study on 50
emerging market and underdeveloped countries is performed with the Generalized Method of Moments
(GMM) framework using 8 years of annual data to investigate this relationship. Indeed, the lending rate
spread has a significant negative relationship with real GDP growth rate in aggregate, and this negative
relationship is mainly due to the countries characterized with higher inflation rates which may indicate
higher levels of uncertainty and information asymmetry in these countries.
25
1. Introduction
Why developing countries often exhibit dramatic shifts in their economic growth from high and
accelerating path to economic crises upon relatively mild shocks? Mishkin (1996) outlines an
asymmetric information problem in credit markets of those countries and points out that a “lemons”
problem occurs in the external funding markets when the borrower’s quality is not readily observable.
Gertler and Gilchrist (1993) present “Excess Sensitivity Hypothesis,” which characterizes how credit
market frictions may help propagate disturbances, including shifts in monetary policy. The information
asymmetry and the resulting credit market imperfections force borrowers of less creditworthy to be
excessively sensitive to fluctuations in external funding markets. In general, the developing countries
suffer more from lack of liquidity and higher volatility in financial markets. And higher level of
information asymmetry problem in these countries help precipitate a financial crisis even though the
initial disturbance in the economy could have been a modest one. Borrowers in these countries rely
primarily on bank credits for external financing since banks are better suited than capital markets to
reduce the information asymmetry problems. Therefore, the bank lending channel and the change in
lending rate could be one possible transmission mechanism for excess sensitivity of financial frictions
to be reflected on economic activities with excess sensitivity.
In this study, annual data for a total of 50 developing countries are analyzed in a panel study with the
Generalized Method of Moments (GMM) framework to investigate the evidence of the economic
propagation through bank lending rate which may incorporate financial frictions. The results show that
the countries with extraordinarily high or low lending rate spreads exhibit the excess sensitivity on real
output growth showing a significant negative relationship between these two variables.
2. Literature review
Gertler and Gilchrist (1993) present “Excess Sensitivity Hypothesis,” and show that credit market
frictions drive a wedge between the cost of internal and uncollateralized external funds. The size of this
wedge depends on a borrower’s creditworthiness, which in turn depends on partly on macroeconomic
conditions. Aggregate disturbances, including shifts in monetary policy, potentially alter the size of this
wedge, and typically in a way that magnifies the overall impact of the shock. Bernanke and Blinder
(1992), however, argue that banks may not be able to reduce lending immediately upon facing the
tightening of credit market because they may force many borrowers prematurely into bankruptcy.
Credit demand for a substantial fraction of borrowers may actually be rising in order to smooth the
impact of declining revenues, and banks initially meet the decline in deposits in part by selling
securities. Kashyap, Stein, and Wilcox (1993) show that the ratio of bank loans to commercial paper
tends to decline sharply following period of tight money, and it contains considerable predictive power
for real activity, particularly for the behavior of inventories. Gertler and Gilchrist (1993) exploit the
idea that small firms are more likely sensitive to credit market frictions than are large. The evidence
suggests that monetary policy appears to have a larger impact on small firms. Small firms also respond
more than large to lagged movements in GNP, in keeping with the theory that predicts credit market
frictions make small borrowers excessively sensitive to disturbances.
Credit market imperfections may make certain class of borrowers, such as developing countries,
excessively sensitive to movements in interest rates, as well as to demand disturbances. Everything else
equal, the overall fluctuations in economic activities should reflect more sharply to an initial demand
disturbance for countries with more volatility and uncertainty in financial markets.
3. Data and Methodology
Annual data from 2003 until 2010 (8 years) for real GDP growth, bank lending rate spread, inflation
rate are collected for 50 developing countries from International Financial Statistics (IFS) series. The
lending rate spread is acquired by subtracting the money market rate from bank lending rate. For a few
countries, the government bond rate is used instead of money market rate due to lack of information.
The countries included in this study represent different regions: 10 from Central America, 9 from South
America, 9 from Central and Southeast Europe, 6 from Southeast Asia, 5 from Africa, 4 from Middle
East, 3 from Baltic, 3 from Eurasia regions, and 1 North America, respectively.
The following estimation model is used:
q
Yi, t = ∑βj·Xi, j, t-1 + εi, t ………………………………………………..(1)
j=0
Where,
26
Y is the real growth rate in GDP
Xi, t is the column vector of right-hand-side variables, [1, Yi, t-1, Si, t-1, Pi, t-1, Di, t-1]’
S is bank lending rate spread
P is inflation in consumer price
d is [0, 1] dummy variable, and 1s represent countries with extraordinary spreads
D is a product of S and d
ε is error term
i and t are country and year indexes, and
j represents an index for q different independent variables including the column vector of 1s
For a single country, the model (1) can be rewritten as:
Yt = β0 + β1·Yt-1 + β2·St-1 + β3·Pt-1 + β4·Dt-1 + εt ………………..(2)
The equation (2) is a dynamic regression model, and N similar equations which are restricted to have
the same coefficients (β1 – β4) are known as a dynamic panel. In this case, it is convenient to treat the
constant, β0, as a fixed effect because the lag dependent variable, Yt-1, is predetermined but not strictly
exogenous. In Arellano and Bond (1991), Keane and Runkle (1992), Ahn and Schmidt (1992), they
advocate the use of GMM methodology for the estimation of dynamic panel models or panel data
models with predetermined rather than exogenous right-hand side variables. Unlike other panel study,
GMM does not make strong assumptions concerning the disturbance term, and the disturbance term
can be both serially dependent and conditionally heteroskedastic.
4. Summary of the Results
The all-periods mean level of the Lending Rate Spread was 7.69%, and the extraordinary spread is
defined any spread beyond 5% from the mean level (i.e. below 2.69% and above 12.69%). The
following table 1 summarizes the results of the analysis:
Table 1
Estimates of the Model (1): Dependent Variable = Y t
(Anaul data for 2003 - 2010)
Estimation with Constant
Coefficient
t-Stat
Estimation without Constant
p-Value
Coefficient
t-Stat
p-Value
C
0.0064
0.7435
0.457
Y t-1
0.0797
1.8241
0.068 *
0.0878
2.0364
0.042 **
St-1
0.4651
4.0205
0.000 ***
0.5287
6.1596
0.000 ***
Pt-1
0.0752
1.4711
0.141
0.0886
1.8417
0.066 *
Dt-1
-0.3480
-2.8430
-0.3824
-3.2856
0.004 ***
0.001 ***
Test of H0: C = 0 is rejected with 5% significance level. ChiSq value = 6.319
The significance levels are marked as * (10%), ** (5%), and *** (1%).
Both in the estimation with or without constant, the coefficients of the lag dependent variable, Yt-1, are
significantly positive with 10% and 5% significance levels, respectively. Approximately 8-9% points
increase (decrease) in current year’s GDP growth rate from the previous year’s 1% (-1%) growth rate.
One interesting result for these countries is the positive reaction on real GDP growth by inflation.
Phillip’s curve may have been working in these countries. A 1% increase (decrease) in consumer
inflation results in close to 0.1% increase (decrease) in real GDP growth rate. The coefficients for
lending rate spread are both significantly positive with 1% level. The 1% increase (decrease) in lending
rate spread impacts positively (negatively) on the next year’s GDP growth rate by approximately 0.5%.
This means that, in the countries with the normal range of lending rate spread (2.69% - 12.69%), the
change in lending rate reflects more or less the demand factor. The expansion (contraction) in real
economic activity causes an increase (decrease) in credit demand, and these changes in demand may be
reflected positively in the changes in lending rates. On the other hand, countries with the extreme levels
of lending rate spreads (below 2.69% or above 12.69%) show significant negative coefficients in both
cases with 1% significance levels. For these countries, when the lending rate spread increases
(decreases) by 1% the next year’s GDP growth rate decreases (increases) by 0.3% - 0.4%. Therefore,
27
we can conclude that these countries suffer from excessive sensitivity of the uncertainty and volatility
of the lending rate, and the lenders tend to incorporate additional premium on the lending rate to cover
both intrinsic risk and added agency cost to compensate probable costs of adverse selection problem
upon initial disturbance on economy. This excess sensitivity may propagate the initial disturbance by
impacting negatively to the next year’s growth rate. Once the economy is contracted, the monetary
authority may react to the situation by reducing target rate or force to lower the bank lending rate
beyond the normal range. This monetary action may help promote demand and GDP growth rate for
the following year.
5. Conclusion
In this study, the “Excess Sensitivity Hypothesis” is tested for 50 developing countries using the bank
lending rate spread. The rationale for using the lending rate spread is that individuals and firms in these
countries are heavily dependent on bank lending for external financing and there are not enough
substitutes to raise external money through capital markets. The hypothesis says that upon initial shock
in the economy including monetary contraction the lenders tend to incorporate added premium in the
lending rate to compensate both the intrinsic risk and agency cost due to adverse selection problem.
This added premium may amplify the initial shock since the premium may not discriminate good
borrowers from bad ones. Therefore, due to asymmetric information in financial markets, the financial
frictions reflected in the lending rate spread as an added premium may propagate the real economic
disturbances. The results of the empirical analysis show that those countries with extreme level of
lending rate spread exhibit negative response in real GDP growth rate due to changes in the spread.
These countries may suffer from excess sensitivity in credit markets due to high interest rate and
volatility which may worsen the adverse selection problem and help propagate economic disturbances.
References
1. Ahn, S. and P. Schmidt, 1995, “Efficient Estimation of Panel Data Models with Exogenous and
Lagged Dependent Regressors,” Journal of Econometrics, 68, 5-27.
2. Arellano, M. and S. Bond, 1991, “Some Tests of Specification for Panel Data: Monte Carlo
Evidence and an Application to Employment Equations,” Review of Economic Studies, 58, 277297.
3. Bernanke, B. and A. Blinder, 1988, “Credit, Money, and Aggregate Demand,” American
Economic Review, 78, 439-439.
4. Bernanke, B., M. Gertler, and S. Cilchriat, 1996, “The Financial Accelerator and the Flight to
Quality,” The Review of Economics and Statistics, 78, 1-15.
5. Gertler, M., 1992, “Financial Capacity and Output Fluctuations in an Economy with Multi-Period
Financial Relationships,” Review of Economic Studies, 59, 455-472.
6. Gertler, M. and S. Gilchrist, 1993, “The Role of Credit Market Imperfections in the Monetary
Transmission Mechanism: Arguments and Evidence,” Scandinavian Journal of Economics, 95, 4364.
7. Hansen, B. and K. West, 2002, “Generalized Method of Moments and Macroeconomics,” Journal
of Business and Economic Statistics, 20, 460-469.
8. Hansen, L. and K. Singleton, 1982, “Generalized Instrumental Variables Estimation of Nonlinear
Rational Expectations Models,” Econometrica, 50, 1269-1286.
9. Kashyap, A., J. Stein, and D. Wilcox, 1993, “Monatary Policy and Credit Conditions: Evidence
from the Composition of External Finance,” American Economic Review, 83, 78-98.
10. Keane, M. and D. Runkle, 1992, “On the Estimation of Panel-Data Models with Serial Correlation
When Instruments Are Not Strictly Exogenous,” Journal of Business and Economic Statistics, 10,
1-29.
11. Mishkin, F., 1996, “Understanding Financial Crises: A Developing Country Perspective,”
Working Paper 5600, National Bureau of Economic Research, 1- 49.
12. Patti, E. and E. Sette, 2012, “Bank Balance Sheets and the Transmission of Financial Shocks to
Borrowers: Evidence from the 2007-2008 Crisis,” Working Paper 848, Banca D’Italia, 1-47.
13. Rousseau, P. and J. Kim, 2007, “Credit Markets and the Propagation of Korea’s 1997 Financial
Crisis,” Southern Economic Journal, 74(2), 524-545.
28
Some formation issues of market relations in agrarian sector of Tajikistan
Juraev Farruh Marufjanovich
Tajik state university of law, business and politics
[email protected]
Abstract: This article considers the problem of formation of market relations in the agricultural sector.
Timely emphasized that the low profitability of agricultural producers in the continued disparity in
prices, unstable operation of the agri-food market and its individual segments, the sharp fluctuations in
prices for agricultural products, raw materials and food, which weakens the incentive to increase
agricultural production requires the adoption of serious measures.
Agriculture in ensuring parity prices can be developed independently, without government support. To
achieve such equality is not possible mainly due to subjective reasons, primarily due to violations of
the state of the universal law of value, establishes a definite relationship between the amount of
circulating money and the total amount of goods and services and providing scale through the
formation of prices of commodity-monetary equilibrium in the economy . Agricultural producers can
not raise prices to adequately increase in production costs, while consumers watched monthly increase
in food prices, largely due to the uncontrolled growth of trade tariffs.
This article analyzes the main indicators of the index and the index of prices of foodstuffs in Sughd and
imports of basic foodstuffs from Russia and Kazakhstan in Sughd. In addition, special attention is paid
to the price disparity between agriculture and industry.
Key words: market relations, agriculture, disparity of prices, food security, index of prices, agriculture,
agro-industrial production.
1. Introduction
Volume of gross agricultural output in 2010 as compared to the year 2009 increased by 6.8 percent,
including crop production - 6.4%, livestock - 7.7%. Although in recent years in the agricultural sector
could reverse the situation for the better and provide a market increase in production, but there are still
risks to ensure safe food for the population. This situation confirms the ever-increasing volume of
imports of food products in the country. Low profitability of agricultural producers in the continued
disparity (несоразмерности) in prices, unstable operation of the agricultural product market and its
individual segments, the sharp fluctuations in prices for agricultural products, raw materials and food,
which weakens the incentive to increase agricultural production requires the adoption of serious
measures. Thus, because of the relatively low incomes of almost three quarters of the agricultural
organizations cannot use existing mechanisms and economic incentives provided by the state. Despite
the fact that during the period from 2005 to 2009 the volume of agricultural production in the region
increased by 1.7 times, many agricultural producers are not in a position to not only expanded, but a
simple reproduction. In addition, 26% of agricultural enterprises in Sugd region are unprofitable26.
Here, the main reason - to preserve and multiply the price disparity. Agriculture survived, fed the
people, raised the industrial sectors of the economy of the country through the redistribution of income
from agriculture to industry, based on the price disparity. But if the Soviet period, price disparity still
more or less regulated by the state, but now because of «rampant» liberal alternative, unrestricted
market, it has reached unimaginable dimensions, in fact, completely put the village on it knees,
bankrupted it. We believe that agriculture, while ensuring parity prices can be developed
independently, without government support. To achieve such equality is not possible mainly due to
subjective reasons, primarily due to violations of the state of the universal law of value, establishes a
definite relationship between the amount of circulating money and the total amount of goods and
services and providing scale through the formation of prices of commodity-monetary equilibrium in the
economy. Money supply in the economy is under the inflow of foreign currency. In this connection a
question arises about the role of government in the development and effective regulation of market
economy.
2.
Analysis of the index of the main indicators of Sogd region
In the present conditions was impaired balance the economic interests of producers,
consumers and trade organizations. Almost 92% of retail turnover is unorganized market, control much
of the domestic market. «Tajikpotrebsoyuz», as in any way which earlier defended the interests of
farmers, and now their share of the volume of retail trade, it takes only about 2%. Moreover, all
26
Statistical Yearbook of Sughd region, Khujand, 2010, page 211.
29
retailers make their economic relations with domestic suppliers of food, as a rule, are often not
relevant, not only the ethics of normal partnership, but also the law. In addition, resellers, setting a high
level of trade margin, reaching 40 - 50%, reduce the affordability of food for a large part of the
population. Under these conditions, forms and methods of government involvement in the regulation of
economic and social processes are well known. It should enact, especially during the transitional
period, an important role in adjusting the market, and ensuring social justice.
Table 1.
The price index of food products in Sugd region (in % to previous year)
Food products
2005
2006
2007
Meat and meat products 103,8
119,7
124,1
Butter
102,3
112,7
115,2
Vegetable oil
101,6
108,0
159,1
Milk and milk products 115,1
114,9
123,3
Eggs
112,3
105,6
133,9
Flour
100,3
102,5
134,8
Potato
2 раз.
194,9
96,4
Vegetables
111,9
127,8
116,0
Fruits and melons
108,6
95,8
110,4
Source: Statistical Yearbook of Sughd, Khujand, 2010, page 81.
2008
123,0
134,7
140,9
131,2
112,5
142,3
98,6
122,4
116,9
2009
106,6
103,5
80,7
105,6
100,8
78,3
98,1
104,4
92,4
2010
121,6
109,6
122,9
106,3
101,0
131,0
100,0
106,3
106,0
It should be emphasized that in recent years in the domestic market of food products registered a sharp
rise in retail prices (see table 1). This is due to several external and internal (endogenous and
exogenous factors) causes: rising world food prices, the cessation of export subsidies on dairy products
in some countries, the expansion of biofuel production, higher rates increase the cost of production for
domestic products, compared with an increase in revenue from its implementation out of the circulation
of many agricultural lands, etc. In addition, because of the lack of development of market infrastructure
in the process of moving from direct agricultural producer to the consumer it costs almost doubled. For
example, an intermediary, buying onions from the manufacturer on a somoni, then sell them for two
somoni, so it assigns a significant portion of revenues both producer and consumer. Agricultural
producers cannot raise prices to adequately increase in production costs, while consumers observing
monthly increase in food prices, largely due to the uncontrolled growth of trade tariffs.
In 2007, the first time in many years, the prices for domestic agricultural produce increased by
147.8, that is, more than a commercial. From the beginning, the prices of agricultural products rose by
25.4%, including the crop - 26, livestock - 21%. (see table 2).
Table 2.
The index of the main indicators of Sughd region (in% to previous year)
2005
2006
2007
2008
2009
Gross Regional Product
104,5
106,9
107,6
107,7
106,6
Industrial production
106,0
101,0
108,7
104,3
104,8
Products of agriculture
105,3
106,4
147,8
98,0
110,4
Source: Statistical Yearbook of Sughd region, Khujand, 2010, page 21.
In most rose milk and dairy products - by 23.3%, vegetable oil - for 59 and wheat (flour) - by 34.8%.
However, this was not enough to reduce the import of agricultural products, raw materials and food.
The most heavily promoted in the field of agricultural product import market for butter and dairy
products, fish. In recent years, expanding production of grain and, therefore, for the period from 2005
to 2009 grains in the product structure of retail trade turnover increased by 2.2 times. Higher prices for
flour reduced domestic consumption of grain for fodder and, therefore, conditioned on the rise in prices
of livestock products. In countries with developed grain farming, on the contrary, increasing the
consumption of grain for fodder purposes, and then exporting livestock products receive sufficient
income. Assuming forecasts to 2013 the share of food imports on the domestic market still exceeds the
threshold increases the level of food security, despite the fact that the agricultural potential of the
country is sufficient. The difference in the dynamics of various price indices - is evidence of the
ongoing process of many years of changes in relative prices. Distortion of the price structure of the
planned economy is still not completely eliminated. In addition, there are technical differences in
methodology for assessing the wholesale and retail prices used by the body of the statistics. The main
reason for the increase in wholesale prices was the increase in energy prices.
30
It should be emphasized that the discussion on the global competition for agricultural raw materials
directly related to ongoing price rise for it and the chain - for food products. It was a surprise to the
governments of many countries. Among the two main causes are said to: increase food consumption by
raising the standard of living in the newly industrializing countries, especially China and India,
strengthening the imbalance between production and consumption of food because of the sharp
increase in the processing of traditional agricultural commodities - corn, sunflower and rapeseed - for
biofuels. There is a pattern of price increases on certain products while reducing their level of reserves
relative to the volume of annual sales. Only one of this decrease can cause a jump in prices by 25-30%.
Last year, the U.S. expanded the acreage by 2 million hectares of maize from other crops, and at the
same time in many European countries and in the same U.S. and Canadian wheat yields declined
sharply due to the meteorological conditions of summer 2007 course, world prices react to this abrupt
increase in the 50-70 - 100%. So taken by the Government of the Russian Federation, including the
regulation of exports of major crops and commodities intervention could halt the growth of domestic
prices for wheat and bread, and thus increase the price of flour to other importing countries of the
Commonwealth of Independent States (CIS), particularly in our country. Note that in general in recent
years domestic grain prices in Russia rose by half, which actually corresponded to the global trend.
3. The role of imports in the country's economic security
The strong dependence of the republic on imports for certain types of food significantly reduces the
economic security and greatly prejudices the national interest. Importing food in large quantities from
the sale of its natural resources, we are not funds of domestic and foreign producers, helping them
capture the domestic agricultural product market. Millions of somoni spent on the purchase of imported
food - is, in fact, unrealized investment in agriculture of the country.
Table 3.Imports of major food commodities from Russia and Kazakhstan in Sughd region
(thousands of dollars)
Products
2005
2007
2009
Flour
13637,5
19893,5
27183,7
Wheat
12802
22770,3
53689,3
Butter
468,2
1985,1
4215,6
Source: Statistical Yearbook of Sughd region, Khujand, 2010, page 195.
In 2009, imports for flour increased in comparison to 2005 by almost 2-fold, 4.8-times wheat,
oil - 9 times. At the same can be said that the increase in food imports about 60% was due to price
increases and only 40% - increase in the volume of imports (see table 3).
Thus, amid the tense situation on the world food market crisis has led to high rates of growth of prices
for agricultural raw materials and finished products, a trend that, according to several international
organizations, can continue for decades. That is why it is necessary to establish clear criteria for
national food security, to make it an integral part of national economic security. For the recovery and
sustainable development of agricultural production, the total return of the peasant on the land, restoring
his faith in the government needed huge financial and material resources. More work is needed and to
create social incentives to improve productivity and economic growth. The impulse here may serve as a
strengthening and expansion of domestic consumer demand. We can say that the accumulation of
capital in an alternative form of investment real sector and the use of savings in this country. In recent
years our economy has not only faced with limited opportunities to raise capital on the domestic
market. But there is an urgent need to develop institutions and technology transformation of domestic
savings, businesses and people in productive investment. The state should initiate further institutional
reforms. Macroeconomic policy adjustments will be blocked if state do not make changes to the
existing system of credit and banking institutions. In its present simplified form, it does not meet the
conditions of transition to economic growth in a country with such a variety of interests, forms of
management, with such a complex industrial structure and regional economy. The most important
condition for institutional change - promoting the reorientation of banks (which would be long and
complicated was this work), with financial speculation, actively supported by the State, to address
urgent problems of the real sector of the economy. The State will support the new line of banking,
growing spontaneously on the ground - the formation of a nationwide network of credit cooperatives,
cooperative banks, as well as to create a National Land Bank. It can be considered the revival of the
historical tradition of mutual credit societies, which provide reliable financial support to small and
medium enterprises, rural workers. In this area, serious legislative work, especially the creation of new
laws and the relevant amendments to existing legislation on banking activities. To begin such work
should be done, without delay. Simultaneously, the State must establish a system of property
31
management, not only to possess it, but also to manage it effectively. Need to invest, and return on
investment would be more cost tenfold.
The peasants have always been a donor society, but if the government will support (them) on this very
complicated crisis phase, the peasantry will receive a strong impetus to the revival. To solve such an
important task, of course, must be gradually moving in all directions of the development strategy of
agriculture of the country? Need quickly develop and adopt a law «On the development of rural areas».
The law must be direct and maintain effective mechanisms for economic revival strategy of the village.
Of course it is not an easy task, but it is feasible, both for the country and its peasantry it’s vital.
According to the State Agriculture Development Programme and the regulation of markets for
agricultural products, raw materials and food for years 2008 - 2012, the share of domestic food
products in the retail food trade should be at least 70%. The increase in production of meat and milk
will increase the share of domestic production of meat in the formation of resources to 70%, milk - up
to 80%. However, the program does not solve all the problems in the area of food security. For the
transition of agriculture and particularly agricultural innovation model of development requires
scientific support. Although the program provides new forms of state support for the industry, but
mostly kept current economic conditions for agriculture, and allocated resources is not enough.
Breakthrough in understanding of the role and place of the agricultural sector in the economy, society
is associated with the development of a new conception of agrarian policies of the state in the near and
distant future with the development of market relations. Events in recent years for many farmers turned
a huge disappointment, destruction of normal life, often a loss of confidence in the future.
Consciousness farmer, was, is and probably always will be communal and collectivist. That is why,
although the history of agrarian reforms in the country for several decades had a dramatic character. In
addition, agriculture, more than any other sector of the economy, has been exposed to politics.
4. Conclusions
In generally, the country has become customary. The past two decades time of profound political and
economic reforms, which is true. At the same time it should be noted that everything that happens in
the entire national self – identity of specificity and uniqueness - it is only a link in the development of
human civilization. Today, humanity has come to the next turn of the problems requiring urgent
solutions. We say that the most urgent among them: lack of renewable natural resources, especially,
ecological crisis, overpopulation of certain regions of the planet, increasing the gene pool of human
failure and the apparent need for genetic «repair», the exhaustion of traditional methods of production
of scientific knowledge, the need for new interdisciplinary research directions, increasing demands on
the reliability of psychological and social rights as a subject of production systems. With a reasonable
pragmatic approach all these problems can be solved. In the popular consciousness has to mature and
consolidate understanding of the serious and profound changes in the economy of the country and
society as a whole, which are due to the increasingly close integration of the country into a unified
system of world economy. Meanwhile, for the mechanisms of functioning of our economic impact of
such integration is not less important than the consequences of a purely internal change: the revival of
the private sector of the economy and entrepreneurship, expansion of economic freedom, privatization
economy. The reality is that the internationalization of the economy, its state is determined largely by
the decisions, not only domestically, but also the decisions taken by economic and politician outside
the country, as well as the general economic situation in the world.
In general, today the country has developed an economic system in transition, with the beginnings of
the market. The market mechanism cannot be «run» by order or regulation. This is a complex and
difficult to control process that requires time-consuming and tedious work, because there are many
objective and subjective obstacles. To eliminate them should be used, additional market mechanisms to
strengthen the state action. It is important to be guided by the criterion of preservation of market
freedoms.
5. References
1. Инфяции и ценообразование в АПК РФ: влияние государства, бизнеса кооперации (по
материалам выступлений участников круглого стола СИЭ РАН)/ Вопросы экономики, 2008
№ 8 С.155.
2. Ершов М. Экономический рост: новые проблемы и новые риски // Вопросы экономики .
2006, №12 С. 23.
3. Статистический ежегодник Согдийской области, Худжанд 2010, С. 211.
4. Мадаминов А.А.
Производства конкурентоспособной продукции – основа устойчивого
развития АПК //Кишоварз, ТАУ. – 2003. –с. -35.
5. Джураев Ф.М. Издержки производства как основной фактор ценообразования. //Вестник
Таджикского Национального университета,-2009.
32
Agricultural land as collateral, Kazakhstani experience.
Sholpan Gaisina,
KIMEP University
[email protected]
Zhanel Mailbayeva,
KIMEP University
[email protected]
Chris Nguyen
KIMEP University
[email protected]
Abstract: The paper considers one of the keenest problems in the agricultural sector of Kazakhstan –
using agricultural land as collateral for credit purposes. For agricultural producers land is the most
appropriate type of collateral, as it meets all the requirements. When land is mortgaged, it has the
attributes of appropriability, sale ability, and existence over time and creating a great sensation of loss
to the borrower, especially since land is generally the main and often the only means of production for
the small rural producer.
In Kazakhstan the law regarding private ownership of agricultural land came into force in 2003.
However, a very small proportion of land users bought their land plots from the state, most of
agricultural producers have long-term land rental. Despite the fact that the law allows for the use of
land-use-rights as collateral by commercial banks, this practice is not popular. Thus, our paper
considers what approaches should be used in the appraisal of agricultural land-use-rights.
Keywords: agricultural land, appraisal, collateral
1. Introduction
1.1 Overview of Land Reforms in the Former Eastern European, Former Soviet bloc nations, and
Balkans.
Many of the former communist countries (Eastern Europe, former Soviet Union nations and the former
Yugoslavia) have a shared history of socialism and a common view on private property ownership.
This view of private property and land ownership still retained many of its core principles, despite the
fall of Eastern Europe; the break up of the Soviet Union and the disintegration of Yugoslavia. As these
former allies went their different political ways over the past 20 years, the development of private
enterprise and private ownership also developed along different paths. Many of these countries are still
primarily farming through large collective-style farms vs. smaller individualized farms, which are more
common in Western Europe and to a lesser extent, North America. As a result of this collective view,
few benefits are passed on to the individual landowners. Collective farming is generally understood to
mean a group of farms organized as a unit and managed and worked cooperatively, by a group of
laborers, under the supervision of the state.
1.2 Land Privatization
In the western Commonwealth of Independent States (CIS - Belarus, Moldavia, Ukraine and Russia),
much of the land has been privatized under a “land share” system in which a large potion of the private
owners still own their rights in common. This method of ownership offers little value because of the
lack of meaningful control over the land itself. This model is a reflection of the states’ struggle over
the proper role the state itself should have over the use of agricultural land and its productivity.
The Transcaucus region (Armenia, Azerbaijan, and Georgia) however, took a different view on land
ownership by quickly privatizing agricultural land and allowed farms to be small family farms. The
Balkan countries (Albania, Macedonia, Bosnia and Herzegovina, Croatia, Federal Republic of
Yugoslavia (Serbia and Montenegro), and Kosovo) initially flirted with collective farming, but
ultimately settled on private farming. This is still the main goal, although the Bosnian War of 19921195 and the aftermath regarding the political stalemate have slowed down this effort in some parts of
the former Yugoslavia.
Closing out this summary are the countries that are attempting to ascend to the European Union.
Because of this choice, these countries have developed land ownership more aligned to Western
Europe. These countries are: Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland,
33
Romania, Slovakia, and Slovenia. Here, the development is uneven, but all these countries are moving
toward individual ownership and smaller farm units.
1.3 Land Transaction
In some parts of the CIS, land transactions are not clearly defined and allowed by the government; in
fact some former CIS countries makes land transaction difficult with requirements such as bureaucratic
approval, notarization and registration of the transaction.
Mortgages of agriculture land cannot take place without secure land rights and land markets. Few
landowners are using their land as security for loans.
1.4 Farm Structures
Some structures needs to set forth regarding different farms. There are corporate farms (includes
cooperatives), family farms (both registered and unregistered). The average land ownership is less than
7 hectares (1,000 square meters) for much of Eastern Europe and the Balkans, however, in Kazakhstan,
it is 20 hectares for unregistered farms and over 500 hectares for registered, legal family farms. For
corporate farms, many are still renting from households and the 2003 land code transferred all lands
used by the corporate farms into ownership of the corporate farms.
Renting is widespread in many CIS countries. In Kazakhstan, between 50% and 60% of the lands are
rented, however, in other countries such as the Czech Republic, about 90% is rented. Contrast this with
a country such as Slovenia where rented land is about 25%.
1.5 Issues with Renting Land
In Kazakhstan, the main problem for family farms is not knowing what authority has jurisdiction over
land rental (lack of transparency). In other countries such as Bulgaria, access to credit is an
impediment.
2. Land reform in Kazakhstan
Land reform is the most important and determining component of agricultural reforms in Kazakhstan.
Because 44% of population is still highly dependent on agriculture and land, the issues concerning land
relations and, in particular, private ownership on agricultural land are keenest among both politicians
and agricultural economists. Despite recognition of the private ownership of land in Kazakhstan, this
issue is still a widely debated one. Land privatization in the country started when land share certificates
were issued in order to reorganize state and collective farms. This first stage of land reforms from 1991
to 1995 is characterized rather by changing the land use rights but not changing the land ownership.
Agricultural land at this time remained state-owned land. The presidential decree “About further
improvement of land relations” (05/04/1994) sets main principles of land tenure and land use rights:
citizens and legal entities are allowed to sell, lease and mortgage land use rights; however, the physical
land plots may not be sold, gifted, mortgaged, and even exchanged. It was a first step in the creation of
legislative basis for land market functioning. In 1995, the Law on Land was passed and specified that
land plots of restructured corporate farms have to be divided among members of production
cooperatives. Land plots have been granted in a long-term lease for 99 years (later this term was
changed to 49 years). Workers and members of former state and collective farms received land
certificates entitling them to a share of farm’s land. However, this distribution of land was only in the
form of usufruct rights (Spoor, 1999). Thus, physical land plots continued to be held by collectives
(partnerships, production cooperatives) and have been only distributed “in kind” if a person decided to
leave a parent farm and start own private farming. Land plots certificates have been distributed not only
among agricultural workers of collective farms, but also among those who were engaged in nonagricultural activities in the former collective and state farms (teachers, physicians, service personal
etc.) and among retirees. These land certificates did not define physical borders of distributed land plots,
in other words, certificate holders were not informed of the location and shape of “their” land plots. By
1996, about 119 million hectares of agricultural land in Kazakhstan had been divided among more than
two million certificate holders; it is an average about 60 ha per worker.
The second stage of land reform between 1996 and 2003 is characterized with permission in 1998
private ownership of agricultural land for subsidiary households, whereas the rest of agricultural
entities continued to operate land plots as tenants. The Law on Land of 2001 contributed insignificantly
into regulations of land relations. This Law failed to adopt measures reinforcing tenure rights in land or
creating favorable conditions for the land market development. The land-use-rights have been the only
way to possess agricultural land; the rights were granted up to 49 years with an opportunity of subleasing. The third stage of land reforms in Kazakhstan started in 2003 and lasts up to present days. New
34
Land Code formally recognized private ownership of agricultural land. According to the Code, physical
and non-state juridical persons received rights to purchase agricultural land from the state; agricultural
land now may be sold, mortgaged, gifted, and exchanged. The government declared that a main reason
of this Law was to establish a clear title over the land for the purposes of using land as collateral.
Additionally the new Land Code creates favorable conditions for further reforms in agriculture (UNDP,
2001). The Code sets that owners of land shares should either contribute the shares to the authorized
capital of a farming enterprise or have their shares delineated on the ground for the purposes of starting
a private individual farm.
Thus, by 2007 after a series of land reforms in the agriculture of Kazakhstan the distribution of land
among agricultural producers has changed significantly (see Table 1).
Corporate
farms
Individual
farms
Subsidiary
households,
thousand units
1949
n/a
Number of entities
5941
3333
1000 ha
216743
1615
1991
Agricultural
Share
of
total
99
1
n/a
land
agricultural land, %
Number of entities
4516
148011
2134
1000 ha
42223
32017
n/a
2004
Agricultural
Share
of
total
57
43
n/a
land
agricultural land, %
Number of entities
5282
169326
2207
1000 ha
40792
38341
593
2007*
Agricultural
Share
of
total
51
48
1
land
agricultural land, %
Table 2.1 Organizational structure and distribution of agricultural land.
Source: Agency of Statistics of the Republic of Kazakhstan www.stat.kz
USAID, 2005 Agriculture of Kazakhstan (2007)
Note: * Data from Agricultural census 2007, www.stat.kz
It is estimated, that in 2007 about two million subsidiary households operated less than one percent of
total agricultural land with an average size of land plots about 0.2 ha. In addition to subsidiary
households, about 200 thousand individual farms operated 48% of total agricultural land and an
average size of land plots accounted for about 200 ha. Corporate farms accounted for 9545 units and
operated about 50% of agricultural land in Kazakhstan with an average 5000 ha per corporate farm.
Despite the new Land Code recognizing private ownership of agricultural land in Kazakhstan,
agricultural producers mostly rely on land leased from the state (Lerman, 2008). During 2004-2005
purchased land jumped from 32,253 to 109,357 ha, an increase of 339%, however, it accounts for less
than one percent of total agricultural land in the country.
Additionally, there is a great difference in land purchases between the south and the north of
Kazakhstan. By July 1, 2005, only 38 ha were sold in the north of Kazakhstan.
In the South Kazakhstan because of climate conditions and higher soil quality, land values are higher
and more vivid interest in the private farming has been demonstrated. In the Eastern and Northern
Kazakhstan, in the so-called grain region, where land is cultivated mainly by large-scale corporate
farms and land plots have enormous size (up to 100 thousand ha) agricultural producers prefer to rent
land from the state directly or through tenants contributions.
Thus, despite private ownership of agricultural land, which is in force about seven years, the
agricultural land market is still underdeveloped. The main reasons of this situation are a very small
portion of privately owned agricultural land and an unclear regulating mechanism of land-use-rights
3. Agricultural land as collateral
According to Stiglitz and Weiss (1981, 1983) loan contracts may result in adverse selection and moral
hazard, if information of borrowers’ the characteristics or their behaviour is imperfect from the lenders
point of. Adverse selection occurs when borrowers differ with respect to the probability of repaying
their loan. Therefore, the terms of a credit contract may affect the average quality of loan applicants.
Despite in some cases lenders may provide unsecured credit with the significantly less amounts and
higher costs, still credit institutions would prefer to lend – and at better rates – such a borrower who
35
can offer collateral to secure the loan (Fleisig and de la Peña, 2002). In this context collateral appears
as a factor that helps to solve the problems created by imperfect information. Thus, on the one hand,
collateral increases access to credit because it reduces lenders’ costs and risks of lending. For example,
in Romania, interest rates have dropped by 20% since the new collateral system was introduced in 2000
(Mehnaz et al., 2006). On the other hand, collateral requirements can reduce borrowers’ ability to get
credit due to noncompliance with five basic attributes of collateral: (i) be appropriable; (ii) be saleable
or able to be converted into money in order to cover the loan obligation; (iii) create a sense of or
constitute a loss to the borrower; (iv) be durable or sustainable during the loan contract time; and (v)
have transaction costs that are accessible to borrowers, both with regard to the loan amount and the
terms of the loan (FAO, 1996). In other words, not any asset is able to serve as collateral for a loan.
It is obvious, the larger the value of collateral, the greater the expected payment capacity. However, in
this way, collateral acts as an element that discriminates against small producers or producers from the
specific sectors of economy. Whenever such borrowers are able to provide collateral, either the value
of their collateral is not very large or there is no well developed market where this collateral could be
sold without any difficulties.
For agricultural producers land is the most appropriate type of collateral, it meets all the requirements.
When land is mortgaged, it has the attributes of appropriability, sale ability, and existence over time
and creating a great sensation of loss to the borrower, especially since land is generally the main and
often only means of production of the small rural producer.
Those farmers who have their land in the private ownership or even if they have only titles, they may
be understandably hesitant to risk their newly titled holdings to secure loans and would be in need to
use other assets as collateral. In the same circumstances are the farmers who may only rent land or hold
land-use rights, which are generally not accepted as collateral. In Kazakhstan, the most agricultural
producer has the right to use, but not to transfer land; moreover, the process of securing land titles is
long and costly. Thus, more options are needed to expand access to secured lending in the agricultural
sector (USAID, 2005).
In economies with underdeveloped agricultural sector, credit is always rationed according to the ability
to offer collateral. The amount of capital the agricultural producer can mobilize depends on the amount
of land he owns or rents, which could be a good proxy for the overall wealth and, thus, his ability to
offer collateral (Eswaran and Kotwal, 1986, p. 484). Agricultural land in Kazakhstan had not been
accepted as collateral for bank loans during the 1990s due to an absence of clear ownership rights.
However, even when property rights were established by the new Land Code of 2003, banks are still
often refusing to accept agricultural land as collateral because of the absence of a functioning land
market. Typically banks require residential property in urban as collateral.
4. Agricultural land appraisal methodologies
There exist three main methods of agricultural land appraisal: the cost approach, the sales comparison
approach and the income approach. Let’s consider how these approaches could be used in appraisal of
agricultural land-use right, which is a non-material asset by its nature. The choice of approach should
be determined by specific properties of the property, characteristics of the market and availability of
data.
The cost approach determines the value of land to be no greater than the cost to produce a substitute
land lot with the same utility as the appraised land. This method can be used when agricultural land,
which is being appraised, has certain specialized improvements on site, such as buildings,
infrastructure, existence of well-developed vegetation, that takes a long time to grow, e.g. apple
orchard, and for which there exists no comparable properties on the market. However, the use of this
appraisal method for obtaining credit based on land-use-rights is questionable, given that the
improvements are located on the land that is not in the possession of the borrower and thus cannot be
utilized outside of the site upon the expiration of the long-term rent.
Under the sales comparison approach the appraiser analyzes prices actually paid for similar properties
in the recent past and makes adjustments to arrive to the appraisal value of the site. The key here is to
base the analysis on truly comparable properties using the time period that still reflects current market
conditions. This method could be used in appraising agricultural land-use-rights if such market sales
data was available. Therefore, its use would be possible only after the appropriate agricultural land
market is established in Kazakhstan. Another impediment is that current law doesn’t allow re-sale of
land-use-rights. This makes their value not very comparable to owned land lots. Adjustments would
have to be made to take into account the terminal nature of land-use-rights.
36
The third approach - the income approach is probably the most applicable method to appraise the landuse-rights in agricultural sector in Kazakhstan. It is used to value properties which could bring future
income for a certain period of time. There are several methods of evaluation within the income
approach, such as method of capitalization of land rent, the option method, etc. The choice of particular
method depends on the availability of reliable data. If more than one method is applicable, then the
final appraisal value can be calculated as a weighted average of the values produced by different
methods.
Appraisal of land-use-rights by method of capitalization of land rent.
Let’s focus on one of the most common methods that is highly applicable to valuation of land-userights in agricultural sector – method of capitalization of land rent. This method is used for appraisal of
land-use-rights of land lots with buildings and without. The main condition for application of this
method is the possibility of earning periodic (e.g. annual) income from the use of rental rights for
property. The assumption is that income amounts are equal or growing at a constant rate. The following
steps have to be conducted:
1)
estimation of the periodic income assuming best use of the property by the renter;
2)
calculation of the appropriate income capitalization coefficient;
3)
calculation of appraisal value of land-use-right.
Let’s illustrate step-by-step application of the income capitalization method using the following land
lot that is used for growing wheat and sunflowers (see Table 2 for features).
Total area, ha
508.1
Arable area,
ha
507.0
Pastures, ha
Other, ha
Average grade
0.0
1.1
33.5
Annual
rent
payment, tenge
2760
Table 2. Characteristics of appraised land lot.
1) Net income calculation
To calculate the net income that the land lot is able to produce we will use the following data presented
in Table 3.
Parameters
Total arable area
Average Productivity of wheat crops
Units
ha
cwt/ha
Amount
Average Productivity of sunflower crops
cwt/ha
11.5
6.5
Price per ton of wheat (before taxes)
tenge
23,008.8
Price per ton of sunflower seeds (before taxes)
tenge
35,000
Yield loss
%
4
Cost of growing wheat as a percentage of sales revenue
%
56.1
Cost of growing sunflowers as a percentage of sales revenue
%
48.0
Land rent (based on the land tax payable)
tenge
Income tax rate
%
507
2,760
10.0
Table 3. Data sheet for calculation of net income.
Calculations of net income (land rent) is shown below. We use equation (1) to calculate the net income
(FCF) that could be generated on the appraised land lot.
FCF0 =[Sarable ×Q × P× (1-Yield loss )– COGS – Rent] × (1 – T) (1)
Where:
Sarable
is the arable area,
Q
is the productivity of the crop,
P
is the selling price of the crop,
T
is the effective tax rate.
All revenues and costs are summarized in Table 4.
37
Sales revenue (adjusted for yield loss)
Rev
Amount,
thousands
tenge
11,976
Cost of Goods Sold
COGS
6,531
Land Rent Payment
Income before taxes
Rent
2,8
EBIT
Income Tax (at 10% rate)
T
5,442
544
Net income
FCF0
Revenues/expenses
in
4,898
Table 4. Calculation of free cash flow
2) Calculation of income capitalization coefficient (discount rate)
Following factors are included in calculation of capitalization coefficient for land-use-rights:
risk-free rate;
risk premium associated with the investment in the land-use-right;
the most realistic rate of income growth from rent of the land lot and the most likely change of
its value.
In case of availability of reliable information about income generating capacity of the appraisal object
and its price, income capitalization coefficient can be calculated by dividing net income by price. If the
price is not available, CAPM-based or cumulative method can be used as an alternative.
Let’s consider calculation of income capitalization coefficient for our example. The discount rate value
using CAPM method could be determined based on the following formula:
re = rrf + βL· RPA + RPB + RPC = 10.5+2.05· 4.37 +4.02+2 = 25,5% (2)
where:
rе –the discount rate of the land-use-right;
βL – beta coefficient adjusted for leverage27;
rrf - risk-free rate as established by National Bank of Kazakhstan (rate of re-financing);
RPA – market risk premium for the industry (4.37% for agricultural sector);
RPB – risk premium for company size (for small business it is estimated to be around 4.02%);
RPС – business-specific risk, non-diversifiable risk (in our example it was estimated to be
equal to 2%).
The basic assumptions for calculation of discount rate components using cumulative method are
presented in Table 5.
Cumulative Factors
%
Risk-free rate
10.50
Industry risk premium (risk of investment in similar enterprises)
Risk premium for small size
Risk premium for management quality
Risk premium for capital structure
Risk premium for diversification of clientele
Risk premium for the stability of income generation
Discount rate
2.00
4.02
1.00
1.00
2.00
4.00
24.52
27
Beta coefficient is calculated based on the data from US stock market and adjusted for Kazakhstan
conditions using the following formula:
β =
2
σ Industry
2
σ Market
=
41.7
= 2.09
20
38
Table 5. Calculation of discount rate using cumulative method.
To calculate the coefficient of capitalization of land rent we will use average discount rate:
rL = (25.5+ 24.5)/2 = 25.0 %
Rent multiplication coefficient for 49 years is calculated using Inwood method of capitalization:
1−
М=
1
1
1−
(1 + r ) n
1.2549 = 4.0
=
r
0.25
(3)
3) Calculation of appraisal value
Final calculation of the land-use-right’s appraisal value is as follows:
V = FCF0 ⋅ M r = 4898 ⋅ 4.0 = 19590.8
(4)
where:
V– appraisal value of the land-use-right, in thousands of tenge;
Мr – rent multiplication coefficient from equation (3).
Therefore, our final appraisal value of the land lot is 19.59 mln tenge.
6. Conclusions
Effective agricultural land appraisal process in Kazakhstan is one of the main pillars which sustains an
efficient and effective land market and should meet a number of requirements:
1) be clear and well understood, based on market prices,
2) be accepted and used as basis for calculation of asset value,
3) a mechanism for offering land for sale is clear,
4) the quality of data held by land regulators is good.
Choice of method is greatly determined by the property type and the purpose of valuation. Although,
agricultural land, in its purest form, can be valued as a non-specialized asset, often the agricultural land
market in transition economies is distorted by the governmental policy. Thus, agricultural land
valuation process in such economies requires to be determined by a special method including all
relevant distortions and particularities.
The valuation procedure corresponds to calculating the potential productivity of each land plot with
subsequent derivation of its income potential. Usually, this means an establishment of the official
system of land quality classification, where land categories (from very good soils to very bad soils) are
determined according to soil characteristics and agronomic conditions.
Despite the value of income being a key determinant of agricultural land buying/selling prices, other
factors such as access, utilities, distance to a city, policy changes actually have an increasingly
significant impact on land buying/selling price. As a result productivity-based land values have
progressively become “virtual” values totally disconnected from fair market values. However, marketbased approach suffers from unreliable land market data due to underdeveloped agricultural land
market in Kazakhstan. Also a number of factors causes a considerable difference between market–
based and income-based prises. These factors include so-called attitude factors such as purchasing land
for security purposes, as insurance against bad times, and also for the social prestige (McConnell et. al.,
1997).
Thus, it is necessary to establish a uniform approach that could apparently solve some shortcomings of
existing methods and contribute significantly not only to methodology of land appraisal in Kazakhstan,
but also be of use and interest to other transition economies.
7. References
1. Eswaran M. and A. Kotwal (1986), “Access to capital and agrarian production organization”, The
Economic Journal, Vol. 96 (June), 482-498.
2. FAO
(1996),
“Collateral
in
rural
loans”,
viewed
3
February
2008,
<www.fao.org/ag/ags/subjects/.../ruralfinance/.../collateralreport_e.pdf>
3. Fleisig H. and N. de la Peña (2002), “Microenterprises and collateral”, Center for economic
analysis of law (CEAL). Issues Brief, No. 2, Washington, D.C., viewed 3 February, 2008,
http://www.ceal.org/publications.asp
39
4.
5.
6.
7.
Lerman Z. (2008), “Agricultural recovery in CIS: lessons of 15 years of land reform and farm
restructuring”, in: Csaki, C. and C. Forgács (eds.), Agricultural economics and transition: What
was expected, what we observed, the lessons learned, Studies on the Agricultural and Food Sector
in Central and Eastern Europe, Vol. 44, Halle (Saale), p. 205-207.
McConnell D. J., Dillon J. L. (1997), “Farm management for Asia: a systems approach”. FAO
Farm
Systems
Management
Series
–
13,
viewed
3
February,
2012,
http://www.fao.org/docrep/w7365e/w7365e00.htm
Mehnaz S., Fleisig H. and J. Steinbuks (2006), “Unlocking dead capital: how re-forming collateral
laws improves access to finance”, World Bank, Public Policy Journal, Note No. 307, March 2006.
viewed 18 August.2008, http://rru.worldbank.org/PublicPolicyJournal
Spoor M. (1999), “Agrarian transition in former Soviet Central Asia: A comparative study of
Kazakhstan, Kyrgyzstan and Uzbekistan”, Working Paper 298, Institute of Social Studies,
University Rotterdam, viewed 25 June, 2010, www.ideas.repec.org/p/iss/wpaper/298.html
8.
Stiglitz J.E. and A. Weiss (1981). “Credit rationing in markets with imperfect information”,
American Economic Review, 71, 393-410.
9. Stiglitz J.E. and A. Weiss (1983). “Incentive effects of terminations: Applications to the credit and
labor markets”, American Economic Review, 73, 912-927.
10. UNDP (2001), “Kazakhstan: accelerating growth in the non-oil sectors of the economy. Poverty
Reduction and Economic Management, Europe and Central Asia Region”, viewed 25 June 2010,
<www.undp.kz/library_of_publications/files/382−15691.pdf>
11. USAID (2005). Assessment of the implementation of the interim provisions, Land Code, Final
Report.
viewed
June
2006,
http://pdf.usaid.gov/pdf_docs/PNADF080.pdf#search=%22PNADF080.pdf%22
Территориальная специализация - фактор устойчивого развития регионального аграрного
сектора
Хайитбоева Наргиза Аликуловна,
Таджикский государственный
университет права, бизнеса и политики
[email protected]
Аннотация: Эффективная региональная политика требует разумного использования природноклиматических условий территорий, минеральных запасов и трудовых ресурсов, формирования
рыночных механизмов, увеличение темпов экономического роста, обеспечения стабильности,
ликвидация диспропорции в размещении производительных сил, осуществление структурных
преобразований для обеспечения развития региональной экономики. Изучение настоящего
положения, оценка размещения и развития агропромышленного комплекса требует анализа
структуры объема продукции и динамику производства, размеры инвестиций и основных
средств, количества работающих, структуры и других показателей. Изменения в территориально
– отраслевой структуре производства характеризуется его эффективной специализацией и
размещением, положительные изменения в производстве и потреблении характеризуются
обеспеченностью района за счет своего производства и обмена между территориями. При этом
основное внимание исследования необходимо направлено на изучение факторы,
препятствующие развитию отраслей аграрного сектора. К ним относятся дефицит водных
ресурсов, эффективность их использования, использование природных возможностей зон,
преодоление экологических препятствий.
Ключевые слова: региональная политика, территориальная специализация, размещения,
урожайность сельскохозяйственных культур, продуктивность животных.
1. Введение.
Для интенсивного развития сельского хозяйства и получения высоких урожаев требуется
территориальная организация региональных производств на основе научного подхода к
данному вопросу. То есть, необходимо развивать те отрасли, которые несмотря на
всевозможные капризы природы исходя из реальных условий каждого района и местных
условий каждого хозяйства, могут давать высокие урожаи. Поэтому, необходимо в первую
очередь глубоко изучить природный и экономический потенциал (особенности климата,
40
материальные и трудовые ресурсы) каждого региона, и развивать имеющиеся возможности
региона до достижения необходимых уровней развития объемов экономики и степени
соответствия поставленным задачам. Кроме того, необходимо определить урожайность земель
каждого региона, виды имеющихся почв и виды выращиваемых растений. При этом
специализация осуществляется с учетом имущественных форм и происходящих в дехканских
(фермерских) хозяйствах изменений.
2. Развитие территориальной специализации с учетом биоклиматических
возможностей
Специализация и развитие сельского хозяйства является одним из актуальнейших вопросов
современности. Особенно он важен с точки зрения размещения, особенно для районов с
плотной заселенностью, где наблюдается постоянный и неуклонный рост спроса на продукцию
сельского хозяйства. В условиях рыночной экономики необходимо создавать
сельскохозяйственные предприятия таким образом, чтобы для удовлетворения потребностей
населения в продуктах питания требовало как можно меньше транспортных затрат, то есть в
труднодоступных зонах организовывать свое сельскохозяйственное производство,
специализированное на выращивание той продукции, которая соответствует местным
климатическим условиям. Выбор долгосрочных путей развития аграрной промышленности и
повышение его эффективности должен осуществляться с одновременным увеличением
количества продукции, в широком смысле слова, и продуктов питания в частности, с учетом
повышения качества выпускаемой продукции. При определении путей развития сельского
хозяйства, прежде всего, очень важно необходимо проанализировать степень его социальноэкономического и научно-технического развития, а также имеющиеся проблемы, оценить
возможности эффективного использования имеющихся условий, изучить направления
специализации аграрного производства.
Каждый регион должен иметь реальные возможности для повышения благосостояния своего
населения за счет максимального использования своих способностей. Одновременно с этим, в
республике должна проводится эффективная территориальная политика содействия
самостоятельному ведению хозяйственной деятельности и перевода управленческих функций с
централизованного уровня на местный уровень.
2.1. Условия формирование рыночного отношения
Для достижения конечных целей социально-экономического развития, определенных
территориально-экономической политикой Таджикистана под главенством и задачами
углубления экономических реформ необходимо направить использование территориальных
ресурсов, условий и факторов в эффективное русло.
Основные характеристики аграрных отношений в современных условиях должны быть
следующими:
•
разнообразие форм использования земельных ресурсов на основе индивидуального,
семейного и коллективного пользования;
•
многоукладная аграрная экономика, свободный выбор дехканами формы ведения своего
хозяйства;
•
рыночные механизмы распределения ресурсов и связей между производителями
продукции сельского хозяйств и их потребителями;
•
обеспечение свободы хозяйственной деятельности;
•
выравнивание доходов, получаемых в сельском хозяйстве с доходами в промышленном
секторе, а также одновременное развитие экономических методов за счет государственного
регулирования;
•
развитие города и села в качестве взаимосвязанных и дополняющих друг друга в
осуществлении экономических функций социально-территориальных объединений
2.2. Роль и место аграрного сектора Согдийской области в экономике республики
Сельское хозяйство Согдийской области представляет составную часть единого
агропромышленного комплекса республики.
В настоящее время в Согдийском регионе производится 266,6 тысяч тонн зерна и 92,1
тысяч тонн хлопкового сырья, а это составляет 21,1 и 29,7% произведенной в республике
продукции соответственно. За период с 2002-2010 годы производство зерна возросло в области
41
на 54,3%, картофеля – на 126,4%, овощей на 81,9%, однако производство хлопка сократилось на
40,5%. Основной причиной стало резкое изменение климата области28.
Удельный вес хозяйств в валовом производстве продукции в Согдийской области сильно
варьирует.
В 2010 году во всех категориях хозяйств республики производства всех видов продукции,
за исключением хлопка-сырца намного увеличилось по сравнению показателями 2002 года.
Существенное увеличение производства продукции наблюдается в дехканских (фермерских)
хозяйствах и ЛПХ. Однако, в 2010 году в сельскохозяйственных предприятиях республики
производства всех видов продукции уменьшилось от 20% до 4,0 раза, нежели показатели 2002
года. Аналогичное положение в производстве продукции наблюдается в хозяйствах Согдийской
области.
Удельный вес производства вышеназванных продуктов сельского хозяйства в Согдийской
области за анализируемый период (2002 и 2010 гг.) неоднозначен. Так, в 2010 г. По сравнению с
2002 годом удельный Согдийской области к общему объему производства зерна в республике
сократились на - - 3,6%; хлопок – сырец – 0,3%; плоды и ягоды – в 1,6 раза, а производства
овощи 9,5%, картофеля и винограда увеличилась на 2,2 и 1,5% соответственно.
В последние годы становится актуальным изучение агропромышленного комплекса
региона с территориальной точки зрения. Это в свою очередь связано с необходимостью
совершенствования территориальной специализации сельского хозяйства и связанных с ним
отраслей, последовательного выравнивания социально-экономического развития отдельных
территорий, а также, с необходимостью изменения роли некоторых территорий в решении
крупных экономических проблем, существующих в агропромышленном комплексе.
Следовательно, исходя из вышеизложенных соображений, необходимо разработать
территориальную структуру, для эффективного решения поставленной задачи перед АПК.
3. Место области в производстве продукции животноводства
Наряду с хлопководством в области развивается зерновое хозяйство, овощеводство,
плодоводство и животноводство.
Развитие животноводства в Согдийской области зависит от структуры орошаемых земель
и использование неполивных земель.
В Согдийской области 88,6% крупного рогатого скота находится у населения, а овец и
коз-81,6%.
Анализ показывает, что в разрезе категорий хозяйств 91,8% крупного рогатого скота,
82,7 % овец и коз находятся в распоряжение хозяйств населения. Удельный вес крупного
рогатого скота и овец и коз в сельскохозяйственных предприятиях составляет 3,7 и 11,5%
соответственно. (Диаг. 1)29
28
Сельское хозяйство Республики Таджикистан. Статистический сборник. - Душанбе, 2010.С.23
29
Сельское хозяйство Республики Таджикистан. Статистический сборник. - Душанбе, 2010.С.23
42
1400
1192,1
1200
973,9
1000
800
600
510,7
452,3
400
81,7
200
36,5
9,7
136,3
0
Во в сех категориях С/х предприятия
Хозяйств а
хозяйств
населения
Диаграмма 2 Поголовье скота, овец и коз во всех категориях
хозяйств Согдийской области, тыс.гол.
Дехканские
(фермерские)
хозяйств а
КРС
Овцы и козы
4000
1741,9
500
310,2
1000
38,8
1500
1896,9
2000
448,2
2500
116,2
3000
3635,9
4394,2
3500
0
С/х
Хозяйств а
Дехканские
Во в сех
предприятия
населения (фермерские)
категориях
Диаграмма 3 Поголовья крупного рогатого скота, овец и коз во
хозяйств а
хозяйств
всех
категориях хозяйств Республики Тадж икистан, тыc.гол.
КРС
Овцы
и козы
Анализы свидетельствуют о том, что систематический рост поголовья крупного рогатого
скота и других видов животных способствовали значительному увеличению производства
продукции животноводства.
В 2010 году во всех категориях хозяйств Республики Таджикистан и Согдийской области
производства мяса и молока по сравнению с 2003 годом увеличилась на 60,3; 43,9 и 32,9; 14,1%
соответственно. Значительное увеличение производства этих видов продукции наблюдается в
дехканских (фермерских) хозяйствах, где рост по мясу составляет 3,4 раза, а по области 17,6, а
по молоку 2,7 и 2,3 раза соответственно.30 Относительно низких рост уровня продуктивности в
Согдийской области привело к снижению удельного веса региона по производству
вышеприведенных видов продукции. Например, удельный вес хозяйств Согдийской области по
30
Статистический ежегодник.- Таджикистан: 20 лет государственной независимости.- 2011.С.472
43
производству мяса и молока соответственно уменьшился на -0,3-1,6% соответственно, нежили
показатели 2003 года.
Исходя из вышеизложенной информации, территориальная специализация в
агропромышленном комплексе проявит себя в распределении и размещение отраслей сельского
хозяйства, то есть в сосредоточении предприятий, организованных на отдельных территориях,
имеющих пригодные для возделывания сельскохозяйственной культуры, с целью
удовлетворения потребностей населения в продуктах сельского хозяйства и экспорта части
произведенной продукции. Кроме того, территориальное распределение труда также приводит к
социально-экономическому развитию каждого региона, что приводит к формированию
структуры регионального производства и обеспечению занятости местного населения.
4. Перспективные направления совершенствования территориальной структуры
экономики региона
При разработке оптимальной стратегии развития в условиях формирования новой
экономической среды большое значение приобретают методы определения будущего
территорий и разработки подходов к ней. В территориальном планировании и экономическом
районировании использование биоклиматического потенциала станет настоятельной
необходимостью научная оценка биоклиматических факторов обеспечивает следующее:
• определение научной комплексной основы оценки различий природных особенностей
экономических районов и их сравнение;
• разработка принятого районирования природных ресурсов;
• определение с научной точки зрения законодательных основ для формирования
районов и одинаковых для всех районов одного региона характерных чертей;
• распределение районов в зависимости от природно-экономических условий, структуры
производства и специализации;
• эффективное использование природной среды в рамках прогнозов социальноэкономического развития территорий, создание научной основы для разработки
территориально-дифференцированных мероприятий по охране окружающей среды и
оптимизации.
Природные условия Согдийской области - плодородность почвы, развитая система
искусственного орошения, количество теплых и солнечных дней позволяют получать обильный
и качественный урожай овощей, фруктов и винограда. Климат Согдийского региона отличается
сухостью, малым количеством осадков, высокой температурой в летний период, благоприятный
для выращивания теплолюбивых растения, такие как хлопок, виноград, лук и другая
потребительская продукция. В отдельных же районах области рельеф и климат отличается, в
связи с чем, здесь выращиваются фрукты и ягоды, картофель, морковь, также развито
животноводство.
Структура посевных площадей Согдийского региона зависит от специализации хозяйств и
размещения отраслей. 25-30% площади земель занимает рассада помидора. Это связано не
только с большим спросом на данный продукт среди населения, но и с наличием в
Таджикистане развитой перерабатывающей отрасли, поставляющей продукцию на экспорт.
Больше половины овощей выращивается в дехканских хозяйствах области. Особенностью
Согдийской области является то, что в ряде районов области очень плотный уровень
заселенности, высокая культура ведения хозяйства обеспечивает получение обильного урожая.
Для развития овощеводства необходимо эффективное использование новых технологий. Для
этого необходимо увеличить выращивания овощей в открытом грунте, а также долю овощей в
закрытом грунте. Для этого в области имеются большие возможности.
5. Заключение
Согдийская область может стать базой круглогодичного выращивания отдельных видов овощей,
капуста, морковь и помидоров.
Климатические условия региона свидетельствуют о больших возможностях аграрного
сектора по производству и поставки экологически чистой продукции, имеющих особый спрос
на мировых рынках и значительно дополняющих казну области.
Установлено, что разумное использование особенности организации регионального
аграрного сектора позволить значительно повысить урожайность сельскохозяйственных
культур и продуктивность животных, увеличат доходность хозяйств и улучшить уровень жизни
населения.
6. Литература
44
1.
2.
3.
4.
5.
6.
Гафуров Х. и др. Модель аграрной экономики Таджикистана в XXI веке.- Душанбе, АОО
Экспресс, 2004
Мадаминов А.А. Влияние экономической обстановки на устойчивое развитие сельского
хозяйства.- Душанбе, НПИ. Центр.- 2001.- 2-4
Пириев Д.С. Научные основы перспективного размещения отраслей сельского хозяйства
Таджикистана в рыночных условиях.- Душанбе, 2003.- 246 с.
Статистический ежегодник.- Таджикистан: 20 лет государственной независимости.- 2011.С.472
Сельское хозяйство Республики Таджикистан. Статистический сборник. - Душанбе, 2010.С.23
Бабаджанов Д. Д. Развитие фермерского движения в Согдийской области: проблемы и
перспективы.- Худжанд, 2005.-С. 80
Мировой опыт регулирования цен на сельхозпродукцию и ситуация в Казахстане
Темирбекова А.Б.
Международная Академия Бизнеса
[email protected]
Байтубаева А.К.
Международная Академия Бизнеса
Аннотация:Центральной проблемой, решаемой аграрной политикой, является обеспечение
сельхозтоваропроизводителей необходимым доходом, достаточным для ведения расширенного
воспроизводства. Многие проблемы аграрного сектора связаны с нарушением экономических
интересов различных субъектов, снижением стимулов к ведению и расширению производства.
Доходы фермеров во многом зависят от условий ценообразования на их продукцию, поскольку
именно цены позволяют соизмерять затраты индивидуального труда с общественно
необходимыми, обеспечить эквивалентность обмена, стимулировать производство. Поэтому
важной задачей аграрной политики является регулирование цен, недопущение их
необоснованного роста или снижения.
Ключевые слова: Диспаритет цен, ценообразование, аграрная политика, государственные
закупки.
1.Введение
Несмотря на наблюдаемое возрождение традиционной для республики отрасли, многие
проблемы еще остаются. Особенно это касается рентабельности новых сельхозформирований,
эффективности аграрного производства, состояния основных фондов, инвестиционных
возможностей производителей и т.д.
Сельские производители не стали реальными собственниками, низка мотивация их труда.
Анализ теоретических работ по проблеме развития и реформирования аграрного сектора
показывает, что многие ее аспекты недостаточно разработаны, носят дискуссионный характер.
В опубликованных к настоящему времени работах отечественных ученых рассматриваются
отдельные вопросы аграрного реформирования (приватизация, налогообложение, кредитование
и т.д.). Однако фундаментальной, комплексной, целостной разработкой всех аспектов
исследуемой проблемы до сих пор никто не занимался. Отсутствуют работы по формированию
общей концепции экономического роста сельского хозяйства республики. Не получили
достаточной проработки проблемы соотношения цен на сельскохозяйственную и
промышленную продукцию, фермерских доходов и объемов производства, охраны и
правильного использования почв, фермерского кредита и страхования урожаев, введения
частной собственности на землю.
2. Особенности политики ценообразования на сельхозпродукцию в разных странах
В странах с развитой рыночной экономикой проводится активная политика государственного
вмешательства в ценовой механизм аграрного рынка. Государство управляет ценами в целях
выравнивания условий для всех товаропроизводителей, устранения монополистического
ценового диктата, ослабления ценовых диспропорций, в конечном счете, в целях защиты
интересов производителей и потребителей сельскохозяйственной продукции.
45
Во второй половине ХХ-го века одним из основных направлений аграрной политики развитых
стран стало поддержание доходов сельскохозяйственных товаропроизводителей
путем
активного
государственного
вмешательства
в
ценовой
механизм.
Проводилась
экспансионистская политика расширения спроса на сельхозпродукцию
за счет
соответствующего поддержания цен. Необходимость проведения такой политики диктовалась
диспаритетом цен и доходов в сельском хозяйстве и несельскохозяйственных отраслях. Причем
этот диспаритет сохранялся даже при тех больших субсидиях, которые предоставлялись в этих
странах государством. Так, за 1910-1988 годы, несмотря на государственную поддержку,
покупаемые фермерами товары подорожали в 12 раз, тогда как продаваемые – в 6 раз [1, с. 33].
В практике США система поддерживаемых цен на продукцию фермеров была введена после
Великой депрессии 1929-1933 годов. В принятом в 1933 году Законе о регулировании сельского
хозяйства краеугольным камнем сельскохозяйственной политики была определена концепция
паритета. Эта концепция имеет реальное и номинальное содержание. Реальный паритет
предполагает, что «каждый год данный объем производства сельскохозяйственных продуктов
должен позволить фермеру получить данное общее количество товаров и услуг». В
номинальном выражении «концепция паритета предполагает, что соотношение между ценами
на продукцию фермеров и ценами на товары и услуги, которые потребляют фермеры, должно
оставаться постоянным» [2, с. 248]. Данная концепция обосновывает необходимость проведения
государством политики поддерживаемых цен, которые в США делятся на целевые и залоговые.
Целевые (или гарантированные) цены распространяются на наиболее важные виды
сельхозпродукции и ориентированы на возмещение затрат и получение определенного дохода.
Залоговые цены – это цены, по которым фермер сдает в залог свою продукцию ТоварноКредитной Корпорации, если цены на рынке устанавливаются на низком уровне. В целом в
США «фермерская политика предназначена для того, чтобы повысить и стабилизировать цены
на продукцию фермеров и их доходы» [2, с. 248].
В странах Общего рынка система поддерживаемых цен включает:
целевые, или ориентированные цены, гарантирующие определенный доход;
пороговые цены для импортируемой продукции;
экспортные субсидии для экспортируемых товаров;
цены вмешательства, или минимальные цены, по которым государственные закупочные
организации скупают продукцию у фермеров.
Гарантии соблюдения минимальных цен в странах Общего рынка обеспечиваются закупочными
товарными интервенциями государства на продовольственном рынке. Механизм здесь такой:
государство скупает излишки продукции в тех регионах, где цены опускаются ниже
минимального гарантированного уровня, и поставляет на те рынки, где сложился дефицит
соответствующего вида продукции. Важным индикатором для товаропроизводителей при
планировании объема своего производства выступают заранее объявленные ориентировочные
цены. Они формируются на основе консенсуса между правительством и организациями,
представляющими интересы сельхозтоваропроизводителей, посреднических сфер и конечных
потребителей. Система регулирования цен на сельскохозяйственную продукцию направлена на
защиту интересов как потребителей, так и производителей. При этом свободное колебание цен
допускается только в пределах «коридора» между верхним и нижним пределом. Верхний предел
защищает интересы потребителей, нижний – интересы производителей, чтобы гарантировать им
минимальный доход для ведения расширенного воспроизводства. Согласованное
государственное регулирование цен в странах ЕС охватывает около 90 % сельскохозяйственной
продукции [3, с. 64].
В Японии, в результате проводимой государством ценовой политики, темпы роста цен на
сельскохозяйственную продукцию опережают темпы роста цен на промышленные товары в 1,5
раза, то есть осуществляется сверхпаритет цен для сельского хозяйства [4, с. 42]. Данная
система позволяет фермерам получать необходимый доход для расширенного воспроизводства
В целом регулирование цен государственными органами в странах с развитой рыночной
экономикой направлено на выравнивание условий для всех товаропроизводителей, устранение
ценовых диспропорций и монополистического ценового диктата.
В российском федеральном Законе «О государственном регулировании агропромышленного
производства», принятом 14 июля 1997 года, основой экономических отношений на рынке
сельхозпродукции определяются рыночные (договорные) цены, складывающиеся под влиянием
спроса и предложения. В то же время Законом вводятся целевые цены или нормативные
индикаторы, которые должны способствовать обеспечению паритетного соотношения цен на
промышленную и сельскохозяйственную продукцию, возмещению расходов, вызванных
46
взиманием налогов и других платежей, уплатой процентов по кредитам,
получению
работниками сельского хозяйства доходов на уровне среднего значения по отраслям экономики
и получению прибыли, достаточной для ведения расширенного воспроизводства. Целевые цены
используются в качестве основы для установления гарантированных цен, которые применяются,
когда средние рыночные цены ниже гарантированных, при реализации сельхозпродукции
государству, залоговых цен, расчета дотаций и компенсаций [5, с. 15]. Гарантированные цены
должны обеспечить сельхозтоваропроизводителям получение доходов, достаточных для
расширенного воспроизводства. Они являются разновидностью государственных тарифов и
должны включать затраты по производству и реализации отдельных видов
сельскохозяйственной продукции и нормальную рентабельность предприятий.
Однако
Министерство финансов и Министерство экономического развития и торговли Российской
Федерации возражают против применения целевых цен в качестве, предусмотренном
действующим законодательством. В результате целевые цены используются только как
инструмент для различных расчетов. По мнению российских экономистов, «целевые цены – это
желаемый уровень эквивалентных цен. Они не гарантируются государством и не
функционируют на рынке, а служат для определения уровня паритетных цен, то есть цен,
обеспечивающих эквивалентный обмен между сельским хозяйством и другими отраслями
экономики, а также для расчета сложившегося диспаритета» [5, с. 15].
Из-за большой зависимости от складывающихся природно-климатических условий для
товаропроизводителей важны не столько высокий уровень рыночной цены в какой–либо
отдельный год, сколько ее стабильность во времени. Поэтому государственным органам
республики необходимо установить минимальные гарантированные цены на отдельные виды
сельхозпродукции, закупаемые в государственный фонд, а также проводить государственные
товарные и закупочные интервенции. Товарные интервенции – это распродажа
сельскохозяйственной продукции из государственных продовольственных фондов. Они
осуществляются в случае дефицита на рынке сельхозпродукции или чрезмерного роста цен на
них. Закупочные интервенции – это закупки и залоговые операции с сельскохозяйственной
продукцией. Они осуществляются в случае чрезмерного снижения цен на продукцию фермеров
или сокращении спроса на нее.
Нельзя отбрасывать то положительное, что было наработано в советский период в республике, в
частности, в плане поддержки цен на сельскохозяйственную продукцию. Например, для
стимулирования сельскохозяйственного производства в 1986 году были установлены
стопроцентные надбавки к закупочным ценам на зерно, проданное сверх среднегодового уровня
одиннадцатой пятилетки, при условии выполнения государственных планов продажи зерна. До
1990 года была продлена выплата существующих надбавок к закупочным ценам на
сельхозпродукцию, продаваемую государству низкорентабельными и убыточными колхозами,
совхозами и другими сельскохозяйственными предприятиями, работающими в худших
природно-экономических условиях, что являлось существенной поддержкой их деятельности.
По другим продуктам, кроме зерна, выплачивались надбавки в размере 50 % к закупочным
ценам за продажу их государству сверх среднего уровня, достигнутого в одиннадцатой
пятилетке. Использовались и другие виды надбавок к ценам [6, с. 15].
Стимулирование деятельности сельских товаропроизводителей с помощью поддерживаемых
цен постепенно вводится в нашей республике.
В Казахстане ежегодно проводится закуп зерна в государственные ресурсы по установленным
ценам. С 2001 года вводится система фьючерского двухуровневого закупа зерна, суть которой
состоит в проведении государственных закупок зерна в два уровня: весенне-летнее
финансирование зернового производства (фьючерсный закуп) под гарантии банков второго
уровня, выполняющих пруденциальные нормативы Национального банка РК, и осенний
(фактический) прямой закуп. Закуп зерна пшеницы и других сельскохозяйственных культур
может осуществляться через товарные биржи. Эта система должна позволить обеспечить
авансирование проведения весенне-полевых и уборочных работ, предотвратить демпинг на
зерно. Реализация системы возложена на государственную «Продовольственную контрактную
корпорацию», отвечающую за закупку зерна у крестьян в государственные ресурсы. Однако
данная система находится только на стадии становления. Установление закупочных цен
правительством республики в пределах окупаемости затрат экономически крепких хозяйств,
которые производят только одну пятую часть требуемого количества продуктов, не решает
проблемы более слабых производителей, издержки которых намного выше.
47
При осуществлении госзакупок зерна на практике были выявлены негативные моменты в плане
приобретения продукции не у сельхозпроизводителей непосредственно, а у посредников.
Поэтому государственной поддержкой в виде установления закупочных цен на
сельхозпродукцию смогли воспользоваться не все хозяйства. Кроме того, в отдельные годы
объем государственных закупок не был выполнен из-за отвлечения финансовых ресурсов на
реализацию других программ. В силу этих причин сельским предприятиям не удалось решить
свои финансовые проблемы.
26 октября 2010 года постановлением Правительства РК №1118 были утверждены следующие
закупочные цены на зерно:
1) для государственных реализационных ресурсов зерна на
пшеницу мягкую в размере 33 100 тенге за одну тонну; для государственных ресурсов
фуражного зерна на пшеницу мягкую в размере 27 200 тенге за одну тонну; на ячмень 2 класса в
размере 25 000 тенге за одну тонну [7]. В 2011 году по решению Государственной комиссии по
модернизации экономики РК от 22 августа 2011 года, Продкорпорация производит закуп
продовольственной пшеницы урожая текущего года в размере 5 миллионов тонн по цене 25 000
тенге за одну тонну [8]. Для сравнения: на Чикагской бирже (СВОТ) пшеничные котировки в
декабре 2011 года поднялись на 2,75 центов, с 6,1925 до 6,22 долларов за бушель, или на 0,4%
(227,8 долларов за тонну). На бирже в Канзас-Сити (КСВТ) пшеница повысилась на 4 цента, с
6,71 до 6,75 долларов за бушель, или на 0,6% (247,2 доллара за тонну). В Европе 23 декабря
ближайшая пшеница на бирже LIFFE в Лондоне составила 145,75 фунтов стерлингов за тонну
($228,3), а на бирже MATIF в Париже январские контракты снизились с 195,25 до 195 евро за
тонну, или на 0,1% ($254,3). В России на Национальной товарной бирже 21 декабря пшеница 3
класса с поставкой в январе повысилась с 5150 до 5200 рублей за тонну ($165,3), а 4 класса - с
4960 до 5000 рублей за тонну ($159) [9]
3. Результаты
В целом в Казахстане закупочные цены на сельскохозяйственную продукцию складываются
значительно ниже фермерских цен в странах с развитой рыночной экономикой с подобными
природными условиями. Ценовая политика до сих пор не поддерживала сельхозпроизводителей.
Уровень цен на большинство видов сельхозпродукции не обеспечивал возмещение затрат и
получение прибыли для ведения хотя бы простого воспроизводства. Система гарантированных
цен не действовала. Ценовая политика в республике не имеет определенной концепции, что
крайне важно для производителей сельскохозяйственной продукции и страны в целом. Поэтому
концептуальной основой государственной политики должно быть использование механизма
регулирования цен. Конечно, государство не может устанавливать закупочные цены на весь
ассортимент сельскохозяйственной продукции. Поэтому нам представляется возможным
помимо прочего установить временный режим государственного контроля над отпускными
ценами предприятий перерабатывающей промышленности и контроля над розничными ценами
на продовольствие. Последнее можно сделать путем введения прогрессивной ставки
подоходного налога для предприятий торговли, реализующих продовольственные товары.
Казахстанскими учеными предлагается компенсационный механизм цен на промышленную
продукцию, приобретаемую фермерами. Для сельских товаропроизводителей рекомендуется
установить минимальные цены на ГСМ и сельхозмашины, «а на разницу между рыночной и
минимальной ценой снизить соответствующим промышленным предприятиям налоговые
платежи в бюджет» [10, с. 9].
4. Заключение
Таким образом, повышение цен на сельскохозяйственную продукцию является важнейшей
задачей аграрной политики, без решения которой экономический рост в отрасли практически
невозможен, поскольку динамика цен предопределяет масштабы инвестиций, качественное
совершенствование технической базы производства, задает темпы интенсификации
производства. Именно цена создает такие рыночные условия, при которых создаются
возможности для наращивания производственного потенциала отрасли.
Кроме того, государство устанавливает закупочные цены на ограниченный ассортимент
сельхозпродукции (пшеница, соя, ячмень). По существу, происходит лоббирование интересов
зернопроизводящих предприятий, особенно крупных картелей. Животноводческая продукция,
овощи, фрукты и многое другое остается вне такой поддержки со стороны правительства. Это
опять же приведет к однобокому развитию отрасли. Необходимо расширить номенклатуру
продукции, попадающую под госзаказ и госзакупки. Нужна реальная помощь всем
сельскохозяйственным товаропроизводителям. В странах ЕС государством регулируются цены
более чем на 270 видов сельскохозяйственной продукции [11, с. 86].
48
5. Список литературы:
1. Гайсин Р. Государственное регулирование рыночной конъюнктуры в агросфере //
Российский экономический журнал. – 1997. - № 7. - С. 33-39.
2. Макконнелл К.Р., Брю С.Л. Экономикс: Принципы, проблемы и политика// В 2 т. –
Баку: Азербайджан, 1992. - Т. 2. - 404 с.
3. Абиров Ж.А., Сигарев М.И., Курьяков И.А. Экономический механизм хозяйствования в
аграрном производстве Казахстана (Опыт и проблемы) / КазНИИЭО АПК. – Алматы:
«Бастау», 1997. - 281 с.
4. Организация агробизнеса./ Под ред. С. Абдильдина. – Алматы: Казгосагру, 2001. - 456
с.
5. Глазунова И.А., Вострухин К.А.
О
проблеме диспаритета цен между сельским
хозяйством и другими отраслями экономики // Экономика сельскохозяйственных и
перерабатывающих предприятий. – 2000. - № 11. - С. 14-15.
6. Куватов Р.Ю. АПК: новые требования, новые подходы. – Алма-Ата: Кайнар, 1989. - 400
с.
7. Постановление Правительства Республики Казахстан «Об утверждении закупочных цен на
зерно, поставляемое в государственные ресурсы зерна» от 26 октября 2010 года № 1118//
Казахстанская правда. – 2010.
8. Казахстан:Продкорпорация начала закупать зерно нового урожая.Kazakh-zerno.kz.
9. Экспортные цены на зерновые культуры и муку в долларах за тонну, в т.ч. НДС 0 %
(франко-граница) на 30.12.2011 года. - Kazakh-zerno.kz.
10. Сабден О. Приоритеты экономического развития Казахстана в среднесрочной
перспективе // Саясат. – 2002. - № 9-10. - С. 6-9.
11. Павлова Г. Стране нужна новая аграрная политика // Экономист. – 2004. - № 4. - С. 83-88.
К вопросам устойчивого развития аграрного сектора
экономики Кыргызстана
Джапарова Э.С.
Института экономики им. акад. Д.Алышбаева
Национальной академии наук
Кыргызской республики
[email protected]
В современных условиях множественность форм земельной собственности становится главным
фактором дифференциации производственно-экономических и социальных функций
хозяйствующих на земле субъектов и закрепления за ними специфической роли в процессе
укрепления системных начал многоукладного землепользования. Крупнотоварные, частные и
государственные предприятия должны образовывать каркас этой системы, обеспечивающей ее
устойчивость и стабильность. Мелкотоварные индивидуальные частные землевладения, в
частности крестьянские (фермерские) хозяйства и личные подсобные хозяйства населения,
служат дополнением. Они призваны занимать ниши, недоступные или неэффективные для
крупнотоварного производства.
Структура субъектов земельной собственности свидетельствует о том, что в ходе
перераспределения земли сложилась многоукладная экономика с различными организационноправовыми формами. В то же время сельскохозяйственные предприятия с частной формой
собственности и коллективной организацией труда составляют основу сельскохозяйственного
производства.
Однако следует подчеркнуть, что приватизация земель и реорганизация колхозов и совхозов в
Кыргызстане, с одной стороны - произошла, с другой - все изменения носили формальный
характер. В ходе реформы крестьяне получили земельные доли за счет деления
государственных земель. Во многих случаях колхозы и совхозы лишь изменили вывески. А
производственные отношения, система управления — остались на прежнем уровне.
Незавершенность и неопределенность процесса реорганизации служат главной причиной
неустойчивого сельскохозяйственного землепользования. Они отрицательно сказываются на
процессе производства, эффективности использования земельно-ресурсного потенциала
различных территорий. Преобразования привели к разрушению режима территориального
функционирования прежней системы, создали дисбаланс в территориальной и организационной
структуре сельскохозяйственного земледелия. В земельных отношениях важную роль играет
49
институт частной собственности на землю. При этом необязательно, чтобы земля находилась
только в частной собственности. Вот некоторые примеры стран, где отсутствует частная
собственность на землю, но успешно развиваются рыночные отношения.
Здесь сельское хозяйство находится на высоком уровне. В Китайской Народной Республике,
например, проживает более одного миллиарда трехсот миллионов человек. Темпы роста
экономики за период реформы (1979-2007 гг.) составляют 10-15%.
В КНР решена
продовольственная проблема. Она из импортера сельскохозяйственной продукции превратилась
в крупного мирового экспортера. Израиль только в конце 50-х годов ХХ века отменил
карточную систему. В настоящее время экспортирует сельскохозяйственную продукцию в
огромном количестве и
входит в двадцатку самых развитых стран мира. Валовой
национальный продукт на душу населения составляет 17 тыс. долларов США31.
Анализ проводимой реформы в аграрном секторе экономики Кыргызстана свидетельствует о
том, что агропромышленный комплекс практически утратил свои позиции. Фермерские
хозяйства, созданные на основе реорганизации низкорентабельных колхозов и совхозов, имеют
низкую эффективность.
Это обусловлено следующими факторами: недостаточное количество земельных угодий и
сельхозтехники, крайне низкая обеспеченность средствами механизации, высокая изношенность
машинно-тракторного парка, острый дефицит финансовых средств, минеральных удобрений,
зооветеринарных услуг и др.
Из-за неплатежеспособности сельхозтоваропроизводителей оказалась парализованной
деятельность предприятий транспортного и сельскохозяйственного машиностроения, ряда
других отраслей, связанных с сельским хозяйством. Поэтому можно сказать, что улучшение
показателей развития агропромышленного комплекса республики – это результат личной
инициативы сельских товаропроизводителей.
Но в современных условиях для обеспечения продовольственной безопасности и повышения
уровня жизни населения необходимо перейти от преимущественно эволюционного типа роста
сельхозпродукции к интенсивному и расширенному воспроизводству.
Для того, чтобы реально поднять агропромышленный комплекс, жизненно важно углублять
рыночные преобразования в сельском хозяйстве страны, широко опираясь на накопленный опыт
зарубежных государств по развитию сельского хозяйства на основе достижений аграрноэкономической науки.
В 2011 году на кредитование среднего хозяйства, по словам министра сельского хозяйства
Бекова Т., направлено 23,8 млн. долларов, в сельское хозяйство вложено около 6 миллиардов
сомов. Около 1,5 тысячи семей трудовых мигрантов Кыргызстана приняли участие в программе
по сельскому хозяйству. В Кыргызстане разработаны проекты по развитию сельского хозяйства
на 16 млн. долларов, оказана государственная поддержка в уборке урожая 2011 года. Экспорт
зерна в 2011 году, по данным Минсельхоза, составит более 10 млн. тонн.
Агропродкорпорация по новой системе окажет содействие в закупке и хранении зерна
крестьянам. Правительство Кыргызской Республики разработало проекты по созданию 7
семеноводческих и 7 племенных хозяйств на 14 млн. долларов. Принята национальная стратегия
развития племенного животноводства на 2011-2015 года. Несмотря на это, ситуация в сельском
хозяйстве
осложняется
отсутствием
механизма
страхования,
наиболее
частым
конфликтогенным фактором является неэффективное государственное управление.
В 2012 году на развитие отраслей сельского хозяйства будет выделено 546 тысяч долларов, в
бюджете 2012 года заложен 1 млрд. сомов на финансирование сельского хозяйства. В 2012 году
дефицит бюджета составит 22,3 млрд. сомов, инфляция прогнозируется на уровне 10
процентов32.
Развитие отраслей агропромышленного комплекса и его главного звена -сельского хозяйства в
решающей степени зависит от выбора научно обоснованных методов хозяйствования. Отход от
научных основ ведения сельского хозяйства, нарушение экономических законов развития
общества, как свидетельствует практика современных реформ, наносит непоправимый ущерб
всему хозяйственному комплексу.
Кризисное состояние сельского хозяйства обусловлено рядом причин. Диспаритет цен и
неплатежи привели к сложному финансовому положению. В результате сельскохозяйственные
товаропроизводители не могут вести расширенное воспроизводство за счет собственных
ресурсов.
31
Орузбаев А. У., Идинов К.И. и др. «Формирование и развитие многоукладной экономики на селе в
условиях перехода к рынку». Бишкек 2000г. с. 23.
32
WWW.NEWS.NAMBA.KG
50
Другая важная причина спада сельскохозяйственного производства заключается в том, что с
переходом к рыночном отношениям перед руководителями и специалистами хозяйств возникло
множество организационно-экономических проблем, которые они не могут решить
самостоятельно. Реорганизация колхозов и совхозов привела к многоукладности, появились
предприятия разных форм хозяйствования и собственности.
Причем, преобразование существующих типов хозяйств, в которых за длительное время
сформировалась определенно устойчивая организационно- организационно-технологическая
структура производства, нарушило севообороты, систему земледелия и животноводства, их
специализацию.
Сейчас в каждом из них закладываются свои внутрихозяйственные структуры и экономические
отношения. Поскольку отношения собственности изменились, в той или иной степени должен
измениться весь внутрихозяйственный механизм, а эти преобразования проводятся методом
проб и ошибок.
Еще хуже с фермерскими хозяйствами. Большинство фермеров не знают, как организовать свое
дело, превратить производство сельскохозяйственной продукции в товарное. Между тем они
должны владеть научной системой ведения крестьянского хозяйства. Использовать севообороты
при разной специализации на небольших площадях, систему машины для растениеводства и
животноводства и решить другие организационно-экономические проблемы.
Все эти и многие другие вопросы требуют детальной разработки, научного обоснования
современного размещения и специализации сельского хозяйства на всех уровнях, обоснования
новой системы ведения хозяйства.
Какие же проблемы требуют первоочередного решения, чтобы хоть частично снять эти
противоречия и перевести сельскохозяйственное производство на стратегию устойчивого
(адаптивного) земледелия?
С точки зрения агроэкологии, устойчивое сельское хозяйство призвано предотвратить
использование возобновляемых ресурсов темпами, превышающими темпы их восстановления и
загрязнения окружающей среды в объемах, превышающих способность экосистемы его
ассимилировать. Оно, таким образом, ориентировано не на получение максимального эффекта в
данный момент времени, а на сохранение условий для стабильного обеспечения человечества
продовольствием в долгосрочной перспективе.
С точки зрения экономики, устойчивое сельское хозяйство отличается меньшей зависимостью
от покупных средств производства (главным образом, сельскохозяйственных химикатов) и
большей степенью диверсификации производства. Сокращение или отказ от использования
минеральных удобрений и пестицидов могут с большей степенью вероятности привести к
падению объемов производимой продукции.
Однако, наибольшая экономическая эффективность достигается при объемах производства,
несколько меньшем максимального. В данном случае сельхозтоваропроизводители выигрывают
за счет экономии расходов на покупку химикатов и сокращения перепроизводства продукции,
ведущего к повышению цен. Частичную компенсацию снижения объемом производства от
сокращения использования химикатов можно достигнуть за счет своевременного и
качественного проведения всех других технологических приемов.
Вместе с тем, следует отметить, что освоение новой системы производства требует большей
интеллектуальной отдачи со стороны земледельца, поскольку знания и управленческое
мастерство замещают материальные ресурсы. Происходит переход к ресурсосберегающей,
информационно-емкой модели развития. Диверсификация же хозяйства делает его менее
уязвимым для конъюнктурных колебаний на рынках отдельных видов продукции.
Устойчивое сельское хозяйство дает и ряд социальных преимуществ. Поставляя более
экологически чистые и безопасные продукты питания, оно тем самым благоприятно
воздействует на здоровье их потребителей. Спрос на такую продукцию в последние годы
неуклонно растет, несмотря на высокие цены. Благоприятное влияние на качество жизни людей
оказывает и меньшее загрязнение окружающей среды при ведении сельскохозяйственной
деятельности. Сельскохозяйственные же товаропроизводители избавляются от риска отравления
в процессе применения опасных химикатов. Повышается также социальная устойчивость
хозяйств, поскольку новые технологии могут успешно использоваться и на сравнительно
небольших площадях - фермерских хозяйствах. Возрастают их шансы не только выжить, но и
повысить эффективность производства и, соответственно, не столь острой становится проблема
безработицы в сельской местности.
В обеспечении устойчивого сельскохозяйственного производства важное значение имеют
методы его ведения. При всем многообразии методов, их отличает стремление максимально
использовать естественные биологические процессы и не нанести вред окружающей среде
51
(главным образом за счет сокращения применения химикатов и более рациональном
использовании природных ресурсов). Исходя из этих критериев, в категорию устойчивых
попадает большое число сельскохозяйственных технологий.
Перспективным считается использование системы севооборотов. Биологического и
механического контроля за вредителями и сорняками. Комбинации производства
растениеводческой и животноводческой продукции с внутрихозяйственной утилизацией
отходов. Повышение плодородия почвы при помощи азотофиксирующих бобовых культур,
компоста и зеленых удобрений. Капельное орошение.
Таким образом, по мере распространения идей устойчивого сельского хозяйства прогресс в этой
отрасли перестает ассоциироваться с объемами производства и его продуктивностью. Основное
внимание переключается на качественный аспект - качество продуктов питания, качество жизни
и окружающей среды.
Однако при всей общепризнанной разумности данного пути развития для его практической
реализации потребуется немало времени и усилий. Причин здесь несколько.
Во-первых, в настоящее время нет явных предпосылок перехода к новой устойчивой системе
ведения хозяйства. Он, напротив, предполагает определенную долю риска, как любое
существенное нововведение.
Во-вторых, существующая модель государственного регулирования сельского хозяйства до
недавнего времени была в значительной мере ориентирована на поддержку производства без
согласования с природоохранными целями. Стимулируемая им интенсификация
растениеводства и животноводства приводит подчас к слишком большому напряжению на
экосистемы. Требования же по ограничению опасной практики остаются нередко в виде
пожеланий.
В-третьих, позиция ряда предприятий 1-ой сферы АПК на данном этапе выступает скорее
тормозом, чем двигателем прогресса. В развитых странах сложилась мощная индустрия по
производству минеральных удобрений и средств защиты растений. Спрос на её продукцию по
мере освоения новых методов хозяйствования будет падать. Следовательно, налицо
противоречие интересов отдельных фирм-поставщиков сельского хозяйства интересам
общества в целом. Поэтому рассчитывать на их поддержку пока не приходится.
В-четвертых, для ведения устойчивого сельского хозяйства требуется высокий уровень
квалификации работников отрасли. Важно не только наличие у них не только технических
возможностей, но и воли, готовности сознательно перейти от простых и отлаженных к
комплексным и гибким природоохранным технологиям и методам хозяйствования. Для
поддержки устойчивости системы необходим ее постоянный мониторинг и адаптирование к
меняющимся условиям. Это, безусловно, увеличивает интеллектуальную нагрузку, предъявляет
повышенные требования к качеству управления.
Располагаем ли мы сегодня реальными резервами в повышении ресурсной экономичности и
рентабельности отечественного земледелия? Бесспорно. В их числе, помимо модернизации
технических средств и использования низко затратных технологий, более адаптивное
размещение и специализация, оптимальное соотношение культивируемых видов и сортов
растений. Повышение не только продукционной, но и средообразующей, в том числе
фитосанитарной,
фитомелиоративной,
почвозащитной,
почвоулучшающей
и
средовоспроизводительной роли агроэкосистем и агроландшафтов. Увеличение доли вклада в
продукционный и средообразующий процесс агрофитоценоза механизмов и структур
биогеноценотической саморегуляции, а также фотосинтетической производительности
культивируемых растений. При этом именно культивируемые виды и сорта растений - главное
средство реализации дифференциальной земельной ренты. Она, как известно, определяется не
различиями в качестве той или иной почвы и/или климата, а в стоимости продукции,
получаемой в этих условиях, и затратами на нее. Иными словами, адаптивное соответствие в
системе «растение-среда» выступает в качестве главного рентообразующего фактора. Это,
кстати, и отличает агроэкологический подход к районированию территории от всех других
типов ее сельскохозяйственного зонирования33.
Таким образом, адаптивное (устойчивое) сельское хозяйство, будучи само комплексной
системой, требует комплекса мер по его переводу из области теории в область практики. Его
социально-экономическая важность не позволяет дожидаться, когда созреют в стране рыночные
предпосылки для освоения, так как к этому времени процесс деградации окружающей среды
может стать необратимым. Главное условие выхода из кризиса - это активная общественная и
33
ЖУЧЕНКО А. СТРАТЕГИЯ АДАПТИВНОГО РАСТЕНИЕВОДСТВА И РЕСУРСОСБЕРЕЖЕНИЕ//АПК;
ЭКОНОМИКА, УПРАВЛЕНИЕ.-М., 1997.- № 6.- С. 15-16.
52
государственная поддержка
агроэкологического и экономического оздоровления
сельскохозяйственного производства, опирающаяся на научные знания и профессиональный
опыт.
Литература:
1. Орузбаев А. У., Идинов К.И. и др. «Формирование и развитие многоукладной экономики на
селе в условиях перехода к рынку». Бишкек 2000г. с. 23.
2. Жученко А. Стратегия адаптивного растениеводства и ресурсосбережение//АПК;
экономика, управление. - М., 1997.- № 6.- С. 15-16.
3. www.news.namba.kg
Проблемы качества подготовки специалистов высшей квалификации для аграрного
сектора.
Ибраева Н.М.
Кыргызский национальный аграрный университет
им. К.И. Скрябина
[email protected]
Абстракт: в статье рассматриваются актуальные проблемы, связанные с переходом
Кыргызстана с 2012 года на болонскую систему в высшем образовании. Сегодня процессы
глобализации и информационной революции предъявляют более высокие требования к уровню
компетенции студентов и качеству образования. Для достижения гармонизации европейской
образовательной системы с кыргызской и признания дипломов отечественных вузов за
рубежом необходимо модернизировать образовательные программы. Для активного внедрения
интеллектуальных и научных технологий образование необходима интеграция между учебным
процессом, наукой и аграрным производством.
В Кыргызстане Учебно-методическими объединениями профильных вузов разрабатываются
новые образовательные стандарты на основе компетентностного подхода и учебные планы по
кредитной системе обучения. Кыргызский национальный аграрный университет им. К.И.
Скрябина является ведущим вузом республики по подготовке специалистов для отраслей АПК.
Проведение исследований в области изучения кадровой ситуации в аграрных формированиях
способствуют выявлению количественной и качественной потребности в соответствующих
специалистах, оценке мнений работодателей по необходимым для производства компетенциям.
По результатам социологического опроса и анкетирования в КНАУ сформирована база данных
по работодателям и выпускникам, разработаны новые образовательные стандарты и учебные
планы по 9 сельскохозяйственным направлениям: «Агрономия», «Зоотехния», «Лесное дело и
ландшафтное строительство», «Землеустройство и кадастры», «Природообустройство»,
«Технология производства и переработки сельскохозяйственной продукции», «Биотехнология»,
«Агроинженерия», «Экология».
КНАУ им. К.И. Скрябина проводит активную работу в направлении развития международного
сотрудничества. В настоящее время КНАУ имеет более 50 договоров о сотрудничестве с
ведущими университетами и научно-исследовательскими центрами Германии, Голландии,
Австрии, Швеции, Италии, стран СНГ. КНАУ участвует в различных международных
исследовательских проектах, которые требуют от преподавателей систематического повышения
уровня профессионального мастерства, мотивируют на изучение иностранного языка для
академической мобильности, эффективного обмена знаниями и способствуют интеграции в
международное образовательное пространство.
Ключевые слова: кадровый потенциал, качество подготовки, образовательные стандарты,
учебные планы, интеграция в международное образовательное пространство
1. Введение
Процессы глобализации меняют сегодня требования к традиционным профессиям и уровню
компетенции студентов. В связи с переходом Кыргызстана с 2012 года на 2 уровневую систему
образования, разработка новых образовательных стандартов и учебных планов с учетом
современных требований, издание учебно-методических комплексов, методических пособий и
учебников с применением современных обучающих компьютерных технологий являются
сегодня актуальной проблемой.
Качество образования становится важным фактором конкурентоспособности выпускников и
признания дипломов отечественных вузов за рубежом. Для повышения качества образования
53
необходимо комплексно решать проблемы учебно-методического, информационнотехнического и материального и кадрового обеспечения вуза. Интеграция между учебным
процессом, наукой и аграрным производством способствует активному внедрению научных
технологий в образование и улучшению практической подготовки студентов.
Важным при трудоустройстве является то, на сколько соответствуют полученные знания,
навыки и умения студентов требованиям работодателей. Активное участие в международных
исследовательских проектах способствуют внедрению инновационных технологий в
образовательный процесс, что позволяет повысить качество подготовки специалистов,
активизирует мобильность студентов и преподавателей.
Цель исследования. Изучение кадровой ситуации в аграрных формированиях, налаживание
деловых контактов с работодателями в процессе проведения социологического опроса по
изучению их мнений по необходимым профессиональным компетенциям, разработка новых
государственных образовательных стандартов и учебных планов по сельскохозяйственным
направлениям.
Методология: социальный опрос, анкетирование.
Исследования проводились путем разработки опросника по изучению существующей кадровой
ситуации и рассылки их в МСХ КР, областную и районные администрации, айыл окмоту,
сельхозкооперативы Чуйской области с просьбой оказать содействие по фактическому
заполнению. При формировании информационной базы по кадровой обеспеченности были
использованы данные агентства по делам местного самоуправления КР.
2. Основная часть
Кадровый потенциал любого предприятия определяется уровнем образованности работников,
их квалификацией, стажем работы, возрастом. Чем больше в организации работают людей с
высшим образованием, с большим стажем работы, с нужной квалификацией и специальностью,
тем качественнее выполняются производственные задания, тем большим интеллектуальным
потенциалом и конкурентоспособностью обладает данная организация.
Для изучения кадровой ситуации были выбраны следующие объекты: Центральный аппарат
Министерства сельского хозяйства, госадминистрация и районные администрации Чуйской
области, айылные округа Чуйской области, Кок-Ойрокский айылокмоту. Для анализа
качественного состава были получены данные по стажу работы, по возрасту, по уровню
образования, по специальности государственных служащих, глав айылных округов.
В Чуйской областной администрации в целом кадровая ситуация выглядит следующим
образом: всего в 2011 году численность служащих составляет 62 человека, из них 44% - со
стажем до 5 лет и 21% - со стажем более 15 лет.
Диаграмма 1. Распределение служащих по стажу за 2009-2011 годы
в Чуйской областной администрации (%).
В возрастной структуре кадров наблюдается увеличение доли молодых сотрудников, если в
2009 году она составляла 1/5 часть, то в 2011 году уже 1/4 часть, а также снижение с 9% в 2009
году до 4% в 2011 году работающих пенсионного возраста.
54
Диаграмма 2. Распределение государственных служащих по возрасту в Чуйской областной
администрации за 2009 -2011 годы (%).
По уровню образования 99% служащих имеют высшее образование и 1% средне-специальное
образование, 15% имеют 2 высших образования, 1/6 часть из них имеют сельскохозяйственную
специальность.
В Чуйских районных администрациях всего в 2011 году работали 157 служащих, из них 18%
- со стажем более 15 лет и 58% -со стажем до 5 лет.
Диаграмма 3. Распределение служащих по стажу за 2009-2011 годы в районных
администрациях Чуйской области.
В возрастной структуре кадров районных администрациях Чуйской области наблюдается
снижение доли молодых сотрудников, если в 2009 году она составляла 54%, то в 2011 году уже
20% часть, а также снижение с 5 % в 2009 году до 1% в 2011 году работающих пенсионного
возраста.
Диаграмма 4. Распределение служащих по возрасту за 2009-2011годы
в районных администрациях Чуйской области.
По уровню образования 91% служащих имеют высшее образование и 4% средне-специальное
образование, 8% имеют 2 высших образования, 10% из них имеют сельскохозяйственную
специальность.
55
В Министерстве сельского хозяйства КР в 2011 году распределение служащих по стажу было
следующим: 27% - со стажем от 1 года до 5 лет, 42% - со стажем от 5 до 15 лет, 30% - со стажем
более 15 лет.
По уровню образования 98% служащих имеют высшее образование и 8% средне-специальное
образование, 38% из них имеют сельскохозяйственную специальность.
В Чуйской области 8 административных района, в которых 108 айылных округов. В
айылных округах Чуйской области очень мала доля специалистов моложе 30лет, всего - 5%.
Самый высокий процент - 36% составляет возрастная категория от 40 до 49 лет.
По уровню образования 98 % работающих на должности глав айылного округа Чуйской
области имеют высшее образование, 2% незаконченное высшее и средне специальное
образование, 25% из них имеют сельскохозяйственную специальность.
Составление информационного банка данных по кадровой обеспеченности сопровождается с
большими трудностями с одной стороны. С другой стороны в условиях нестабильной
политической ситуации также проявляется нестабильность в кадровых вопросах, а именно
частая сменяемость кадров, отсутствие преемственности и последовательности в карьерных
продвижениях. Возникают большие трудности с
определением рыночного спроса на
конкретные сельскохозяйственные специальности.
В настоящее время в КНАУ им.К.И. Скрябина осуществляет свою деятельность по лицензии на
право ведения образовательной деятельности в сфере профессионального образования АЛ№349
и АЛ№547, выданной МОиН КР в 2004г. и 2010г. по 42 образовательным программам: по 6
направлениям, 38 специальностям и 3 магистратурам.
В состав университета входят 7 факультетов, 4 научно-исследовательских института, 4
колледжа, а также около 400 профессорско-преподавательского состава: 36 докторов наук, 2
академика НАН КР, 2 члена-корреспондента НАН КР, 10 заслуженных работников науки и
образования КР, 136 кандидатов наук, доцентов, лауреаты государственных, научнотехнических наград.
За последние годы Кыргызский национальный аграрный университет имени К.И. Скрябина
усилил работу в направлении развития международного сотрудничества. В настоящее время
КНАУ имеет более 50 договоров о сотрудничестве с ведущими университетами и научноисследовательскими центрами Германии, Голландии, Австрии, Швеции, Италии, стран СНГ и
реализуются 15 международных проектов.
Проекты ТЕМПУС-ТАСИS «Расширение центров по Болонскому процессу и поддержка
Тюнинг команд в Кыргызской Республике», «Совместная магистерская программа по аграрному
менеджменту» (сроки реализации 2006-2009 г.г.), «Разработка трехуровневой учебной
программы по наукам окружающей среды» (сроки реализации 2010- 2012г.г., а также проекты
CIDA «Укрепление земельного администрирования в Кыргызстане» (сроки реализации 20062009г.г.) и «Обучение специалистов Госрегистра и преподавателей КАУ на магистерских курсах
в Королевском технологическом институте» (сроки реализации 2002-2009г.г.) направлены на
внедрение двухуровневой системы подготовки специалистов, системы зачетных единиц,
усиление академической мобильности студентов и преподавателей.
В результате реализации данных проектов в КНАУ открыты международный магистерский
центр, ГИС-центр, центр "Инновационные технологии в сельском хозяйстве», оснащенные
компьютерами, мультимедийным оборудованием, современным программным обеспечением,
составлены рабочие программы, соответствующие Европейской системе образования,
преподаватели и
студенты прошли стажировки в университетах Германии, Швеции,
Швейцарии.
Большой интерес к рациональному распределению водных ресурсов между Таджикистаном,
Кыргызстаном, Казахстаном, Узбекистаном проявлен в проекте «Интегрированное управление
водными ресурсами в Ферганской долине», финансируемым Мировым Банком, сроки
реализации которого с 2005 по 2013 годы. В проекте МССБ ООН «Стратегия безопасного
строительства для сокращения риска стихийных бедствий в центральной Азии» наш
университет является партнером.
Проект фонда Фольксваген «Последипломное обучение для зооинженерного факультета КАУ в
Бишкеке» (сроки реализации 2006-2011г.г.) направлен на подготовку наших магистров и
56
аспирантов через магистратуру в Университете Гумбольдта в области животноводства,
растениеводства и аграрной экономики. В настоящее время в Университете Гумбольдта на
факультете сельского хозяйства обучаются 4 магистранта-выпускника КАУ, 3 аспиранта нашего
университета проводят научно-исследовательские работы.
Начиная с 2006 года по настоящее
время, реализуется проект ПРООН «Сохранение и
использование агробиоразнообразия» (плодовые культуры и дикие сородичи), с объемом
финансирования 1 млн. долл. США.
В 2009-2010 годах в КНАУ, по проекту фонда Кристиансена «Создание Центра Биокультурного
Разнообразия в КНАУ», разработана учебная программа, создан центр с соответствующим
материально-техническим оснащением, проведены конференции и выпущен сборник статей.
С 2008 по 2010 годы в университете реализовался проект «Устойчивое развитие сельской
местности в Ляйлякском районе», направленный на улучшение экологических и экономических
показателей региона, финансируемый Министерством сельского хозяйства Чешской
Республики.
С 2009 года по 2014 годы реализуется проект «Внедрение методов обучения интегрированной
защите растений с элементами полевой школы фермера и агроландшафтной экологии»,
предполагающий обучение PHd Doctor.
Проект Международного научно-технического центра (МНТЦ) «Эпидемилогический
мониторинг циркуляции вируса птичьего гриппа в природе, оценка биологической опасности
природных очагов в Кыргызской Республике» направлен на изучение природных очагов
вирусов птичьего гриппа (сроки реализации 2009-2012 годы).
С 2010 года при поддержке Японского агентства международного сотрудничества JICA в
университете реализуется проект «Содействие распространению биогазовых технологий в
Кыргызской Республике» по испытанию биомассы биогазовой установки.
С 2009 года в КНАУ реализуются 3 проекта Эрасмус Мундус «Окно Внешнего
Сотрудничества», CASIA и eASTANA ERASMUS, направленные на развитие академической
мобильности и 2 проекта ТЕМПУС, направленные на разработку совместных учебных планов
по подготовке бакалавров по направлению «Лесное дело и защита окружающей среды» и
«Агроэкология».
Для обеспечения системы управления качеством в КНАУ внедрена информационная система
AVN, образовательный портал, ИС «ТЕСТ» для компьютерного тестирования с базой тестовых
заданий по всем предметам, автоматизированная библиотечно-информационная система
«ИРБИС». На образовательном портале КНАУ размещены электронные образовательные
ресурсы по всем дисциплинам образовательных программ: учебно-методические комплексы и
рабочие программы.
В сентябре 2011 года КНАУ и еще 10 вузов Кыргызстана подписали Великую Хартию
Университетов в г. Болонья, Италия. КНАУ, как единственный аграрный вуз республики
разрабатывает образовательные стандарты и учебные планы по кредитной системе обучения по
9 сельскохозяйственным направлениям: «Агрономия», «Зоотехния», «Лесное дело и
ландшафтное строительство», «Землеустройство и кадастры», «Природообустройство»,
«Технология производства и переработки сельскохозяйственной продукции», «Биотехнология»,
«Агроинженерия», «Экология». Разработка учебных планов проводилась с использованием
методологии Тюнинг. В 2010 году было проведено анкетирование работодателей, выпускников
и преподавателей по определению и оценке компетенций, необходимых для каждого
сельскохозяйственного направления. Для обсуждения проблем качества подготовки и
востребованности студентов были организованы круглые столы, с привлечением специалистов
по каждому направлению. В результате проделанной работы создана информационная база
данных работодателей и выпускников. Учебные планы и государственные образовательные
стандарты по бакалаврским программам уже разработаны и прошли оценку экспертной
комиссии. Разрабатываются учебные планы по магистерским программам по этим
сельскохозяйственным направлениям.
3.Заключение
Для эффективного развития аграрного сектора необходимы специалисты высшей квалификации,
обладающие современными знаниями аграрной экономики, владеющие высокими
профессиональными компетенциями. Достижение требуемых компетенций не возможно без
57
установления тесной связи вуза и работодателей, без совершенствования содержания
образовательных программ и развития инновационных методов обучения. Участие в проектах
требует от преподавателей систематического повышения уровня профессионального мастерства,
нацеливает их на достижение максимального результата в процессе реализации проектов,
мотивирует на изучение иностранного языка для академической мобильности, эффективного
обмена знаниями и способствует интеграции в международное образовательное пространство.
4. Ссылки
1.
Абакирова Г.Б., Адамкулова Ч.У., Бекбоева Р.Р. (2007), “Руководство по применению
ECTS в Кыргызской Республике”, Бишкек
2.
Ибраева Н.М., (2011). “Болонский процесс и качество аграрного образования”, Вестник
КГУ им. И. Арабаева, Вып.1, Бишкек, с.189-192
3.
Ибраева Н.М., Калбаева А., (2011). “Международные образовательные проекты как
способ интеграции в европейское образовательное пространство”, Вестник КГУ им. И.
Арабаева, Вып.1, Бишкек, с.192-195
4.
Руководство по заполнению Приложения к диплому Европейского образца (Diploma
Supplement).- Б., 2010.- 46с.
5.
Сирмбард С.Р., Джаналиев А.Ф., Фишер-Зуйков Уте. “Методические рекомендации по
разработке моделей выпускников и проектированию учебных планов в высших учебных
заведениях
на
основе
компетентностного
подхода”,
Бишкек,
2007,
http://www.tga.gov.au/recalls/index.htm
The effects of reward type and its likelihood in customer brand co-creation activity on self-brand
Elmira Bogoviyeva
KIMEP University
[email protected]
Abstract: Although the benefits and outcomes of value co-creation have been discussed in the
academic literature before, scholars primarily concentrated on customer involvement in service coproduction and new product development. Brand co-creation is explored as an innovative way for
consumers to experience brands and a unique and invaluable strategy for companies to develop brand
identity and image. The study employs Self-Determination Theory (Deci and Ryan 1985) to understand
how the type of reward (internal vs. external) and the likelihood of being rewarded for customer brand
co-creation (low vs. high) influences self-brand connection. The results demonstrate the importance of
customer co-creation in brand development. In confirmation of self-determination theory, customers
who are encouraged to participate in the brand co-creation activity by referring to self-development,
report higher self-brand connection than individuals offered external reward.
Key Words - Co-creation, Brand management, Rewards, Self-Brand Connection
1. Introduction
Brand connection was recently stated to be “one of the most fertile topics in contemporary consumer
research” (Rindfleisch, Burroughs and Wong 2009). Previous studies concentrated on the nature and
quality of relations between consumers and the brand that they may know or own for a considerable
period of time. Current research explores how a brand that is in the very beginning stage of
establishment on the market can attract potential customers and build relations.
The study explores brand co-creation as an innovative brand development strategy. It is suggested that
involvement in brand co-creation positively influences self-brand connection and this preposition was
empirically tested. The research investigated the effects of rewards and varying degree of their
likelihood offered for brand co-creation activity and their impact on self-brand connection. The results
of an experimental study confirm that participation of customers in brand co-creation leads to an
increased level self-brand connection.
2. Background
To date, brand development has been studied from a limited perspective on “how to” design successful
logos and brand names (Lehmann and Keller 2006; Christodoulides 2008). Representatives of the
brand design research stream are traditionally considered mainly the by consultants and managers as
the active creators of a brand identity and image that would then be projected to consumers (Lowrey
and Shum 2007, Henderson and Cote 1998).
58
In contrast to new brand development outsourced to brand consultants and advertising agencies that
cost hundred of thousands of dollars (Keller and Lehmann 2006; Keller 2008), customer brand cocreation may become a valuable strategy as well as a unique and meaningful consumer brand
experience (Prahalad 2004). It may ensure the successful launch of new brand due to the fact that it was
originated by prospective customers, who envision new brand and became loyal to it from the start of
its introduction to the market (Payne et al. 2008). Moreover, these enthusiasts of brand co-creation may
spread positive WOM and accelerate the speed of brand growth.
Scholars paid limited attention to the option of customers being active participants in brand
development. Few studies that considered brand co-creation described the successful stories of service
co-creation (Boyle 2007) and car share experience (Payne et al. 2008). Current research seeks to fill the
gap by exploring the concept of brand co-creation and examining empirically the influence of customer
co-creation in brand development on self-brand connection.
Self-brand connection is defined as personal connection between an individual and a brand such, that
consumer has included the brand in his or her self-concept (Escalas and Bettman 2003). The
proposition that customer participation in brand co-creation influences self-brand connection is based
on the Social Exchange Theory (SET; Emerson 1976). According to SET, individuals are interested in
establishing and developing relationships. The effort people make in building relations is considered to
be an investment. These investments are perceived as resources that one gives to the relationship and
will not be able to retrieve in the case of ending it. The brand co-creation is a highly involving and
unique type of activity in which consumers invest time, creative ideas, and emotions. People make
substantial efforts to think about brand, its values, its benefits and relating it to self-concept. An
individual will feel more positive about a relationship with another party in the case of considerable
investment. Thus, it is expected that in case of brand co-creation consumers will form stronger selfbrand connection than in case of absence of such efforts.
Co-creation is a relatively new and unusual form of activity for customers. Not every individual might
be interested in pursuing development of a new product, service, or brand. Consumer can get involved
in brand co-creation due to different motives, their levels and orientations (Ryan and Deci 2000). Some
individuals enjoy creative tasks (Amabile 1996) because of curiosity, interest and internal drive for
learning. Some people get involved in the challenging task of creating new products or brands because
of external drivers like monetary reward or opportunity to upgrade status in the particular social strata.
In this study, Self-Determination Theory (Deci and Ryan 1985) was selected in order to explore how
reward types and the likelihood of reward for participation in brand co-creation will impact self-brand
connection. Specifically, the research project employs an experiment to examine the effect of a reward
offered for customer brand co-creation that varies in terms of its likelihood on the perceived customer
self-brand connection.
This research makes an important contribution to brand development and co-creation literature. It
establishes the effect of reward types for customer brand co-creation on the perceived self-brand
connection. Secondly, this project investigates the effects of reward likelihood on self-brand
connection. It also examines how the schematic intrinsic and extrinsic motivational orientation
(Amabile et al. 1999) is influencing the link between rewarding customer brand co-creation and selfbrand connection.
This study attempts to answer the following research questions: a) how does the customer’s brand cocreation influence self-brand connection: b) how the type of reward (external vs. external) and
likelihood of reward (low vs. high) interact and affect perceived self-brand connection in the brand cocreation activity.
3. Research Methods
The experimental setting was designed for the study. The 2 (type of reward: intrinsic versus extrinsic)
*2 (likelihood of reward in the context: low versus high) factorial between subjects design was
arranged for the experiment. 117 participants from an American public university were involved. The
media age of participants was 22 and 34.2% were female. Subjects were randomly assigned to the one
of the four conditions: high likelihood of internal reward, low likelihood of internal reward, high
likelihood of external reward, low likelihood of external reward. Scenario realism was assessed to
ensure the quality of stimulus materials.
4. Results and Discussion
59
The results of the experiment were assessed using the ANCOVA procedure, in which general need for
uniqueness, interest in social networking site category, intrinsic and extrinsic motivations were entered
as covariates. This analysis included one dependent variable self-brand connection. This ANCOVA
was run using a 2(type of reward: internal versus external, manipulated)* 2 (likelihood of reward: high
versus low, manipulated) between-subjects design. Additionally, ANCOVA was run (with gender as an
additional covariate) but did not reveal significant difference in model improvement in comparison
with the previously described ANCOVA.
H1 stated that there is a positive relationship between types of reward offered and self-brand
connection, and in the case of internal reward, there will be significantly higher level of self-brand
connection perceived than in case of external reward offered. ANCOVA revealed that type of reward
had a direct effect on self-brand connection and internally rewarded subjects perceived significantly
higher level of self-brand connection than those offered external reward (M internal reward = 4.358, M external
reward= 3.701, F (1,117) =13.936, p=.000). Thus, hypothesis H1 was supported. Offering an internal
reward to customers co-creating a brand leads to higher perceived self-brand connection than external
reward.
H2 stated there is a positive relationship between likelihood of reward offered and self-brand
connection and in case of high likelihood of reward there will be significantly higher level of self-brand
connection perceived than in case of low likelihood. Though participants in high likelihood condition
perceived higher self-brand connection, the results did not detect significant differences in terms of
likelihood of reward effect on self-brand connection (M high likelihood = 4.058, M low likelihood =4.001, at F
(1,117) =.100 at p>.05).
Table 1. How Reward Type and Likelihood of Reward influence Self-Brand Connection (standard
deviations are shown in parentheses)
Reward Type
Reward
Likelihood
Internal
External
High
4.2473
(1.11)
3.8280
(.98)
Low
4.3654
(1.02)
3.6782
(1.30)
Finally, the interactive effects of reward type and the likelihood of reward on self-brand
connection were hypothesized in H3. None of the interactions of reward type and likelihood of reward
on self-brand connection reached significance; thus there was no support found for these relationships
in data.
The inclusion of need for uniqueness, interest in social networking site category, intrinsic and extrinsic
dominant motivations as covariates improved the model of the analysis: ANCOVA model (corrected
model F (1,117) =8.600 at p=.000) in comparison with ANOVA (corrected model F (1,117) =2.500 at
p=.063) the effect of reward type on self-brand connection improved from F (1,117) =7.235 at p=.008
to F(1,117)=13.936 at p=.000.
The research goal of this project was to examine the interrelationship of customer brand co-creation,
types and likelihood of rewards and self-brand connection. It was empirically demonstrated that
consumers exposed to a new brand name and asked to engage in co-creation, report a higher level of
self-brand connection. The findings of study provide support for the effects of reward type on selfbrand connection. The accentuation of internal reward for customer brand co-creation leads to a higher
perceived self-brand connection than in the case of external reward. These findings support the selfdetermination theory assumptions that emphasis on self-competence and enjoyment of customer brand
co-creation increases interest in the task itself and leads to a higher perceived connection to the object
of the task while the external monetary reward offered for the task works as a diminishing factor and
thus decreases perceived connection with the brand, an object of brand co-creation activity.
5. References
1. Deci, E., and Ryan, R. (1991). A motivational approach to self: Integration in personality. In R.
Dienstbier (Ed.), Nebraska symposium on motivation: Vol. 38. Perspectives on motivation (pp.
237–288). Lincoln: University of Nebraska Press.
2. Deci, E., and Ryan, R. (Eds.), (2002). Handbook of self-determination research. Rochester,
NY:University of Rochester Press.
60
3.
4.
5.
Fornell, Claes and David F. Larcker (1981), "Evaluating Structural Equation Models with
Unobservable Variables and Measurement Error," Journal of Marketing Research, 18 (February),
39-50.
Fournier, Susan (1996), “Understanding Consumer-Brand Relationships,” Working paper 96-018,
Harvard Business School, Boston, 3.
Fournier, Susan (1998), "Consumers and Their Brands: Developing Relationship Theory in
Consumer Research," Journal of Consumer Research, 24 (March), 343-73.
Online Purchasing in Kazakhstan
Bulent Dumlupinar
KIMEP University
[email protected]
Mansur Khamitov,MBA student
KIMEP University
[email protected]
Abstract: Emerging digital technologies and increasing usage of internet are transforming consumers’
buying habits from retail shops to e-commerce. Online purchasing is becoming more and more
widespread as an alternative to retail shops in purchasing of physical goods worldwide. Today’s
consumers prefer the easiness of online purchasing. Mobile commerce is also increasing in an
unprecedented pace, mainly due to iphone, ipad, and android phones. Internet usage is increasing with
the effect of intelligent communication devices and developments of 3G technology. Number of
specialized e-commerce web sites like books, home accessories, shoes, belt, sportive products, and
fishing goods rather than general purpose web sites selling everything is increasing. We will soon start
seeing niche e-shops selling specific products. Due to tight security measures like 3D secure,
consumers are becoming more inclined to shop through internet. In internet shopping, we see the
dominance of men and electronic goods. In order to see the online purchasing habits and buying
behaviour of consumers in Kazakhstan, we have surveyed young people age 17-25 residing in the
largest city of the Republic of Kazakhstan as they are the group of people which is most subjected to
spending time and money online. Some BCB faculty members are participated in our survey. We
carried out survey through a set of questionnaires and analyzed the results.
Key Words: Retail business, Internet, Mobile commerce. Digital technologies
1. Introduction
Many retailers are adopting Internet strategies to maximize their marketing efforts; and this is
especially in the case of small businesses. More and more stores now use Internet as the primary way to
reach potential customers. Today, over one billion people are shopping through internet worldwide.
What are the general products groups? Electronic goods, foodstuff, rent-a-car, tourism and hotel
reservations, construction materials, sport goods, mobile phones, purchasing tickets, auto accessories,
and second-hand products. Women’s first priority is mainly cosmetic products.
Kazakhstan, an emerging power in Central Asia having 9th largest territory in the world has not escaped
the trend as well. With a GDP per capita adjusted by purchasing power parity rocketing from $3723 in
1995 to $13060 in 2011 and real GDP annualized growth rate for 2000-2010 equal to 8.5%, the
economy of the country is considered to be among the fastest growing ones in the world (Agency of the
Republic of Kazakhstan for Statistics, 2012; Ernst & Young & Oxford Economics, 2011, International
Monetary Fund, 2012). Although the estimated market size of online shopping in Kazakhstan as of
2011 is only $240 million compared to $23,2 billion worldwide, total retail market size (~1%) for 2011
as mentioned by Agency of the Republic of Kazakhstan for Statistics (2011), the average growth rate of
about 10% per year enables to say about huge potential of e-commerce market (Kazcontent JSC, 2011).
The objective of this paper is to examine the e-shopping as against retail shopping evaluation of
consumers in Kazakhstan.
As specified in Gazeta.kz online news portal (2011), total number of users of Internet in Kazakhstan is
6.7 million, growing more than 300% compared to end-2009 (Profit.kz Internet Portal, 2011).
Consequently, at present penetration of internet in the country is around 41%. These two figures indeed
show that internet channel is gradually emerging a strategic direction for the companies in Kazakhstan
and simply ignoring this fact can lead to companies being deprived of potential competitive advantage.
61
Why e-commerce is growing so fast? Two main reasons are increase of internet usage and perceived
easiness of online shopping. Consumers can make product-price comparison through internet
connections independent of place. Many online shopping websites have been created by retailers.
These firms have many activities such as e-mail marketing campaigns, brand creation, and promotions.
Today many supermarkets are now pursuing a bricks and clicks strategy.
Moreover, there is a direct relation on the increase of online purchasing as security measures increase.
Reliable shopping platform in Internet with three dimensions (3D Secure) is a model arranging the
responsibilities of business, bank, and the card owner. Here, the card owner verifies the security code
bank asks during virtual payment process. Verified by Visa and MasterCard Security Code logos are
becoming more widespread.
The indestructibility and reproducibility of digital goods means that the marginal cost of producing an
additional unit of the good is close to zero. Because the cost of storing and transmitting stored
information is cheap (and continues to get cheaper), there are also no effective capacity constraints on
the production of digital goods. With even a small amount of competition, prices are driven down to
marginal cost. Globally declining average costs imply significant economies of scale; global markets
are available to all potential sellers or buyers. Free information products (maps, telephone information,
email addresses, news, stock price quotes, etc.) due to commoditized information markets are on
increasing trend. Information allows replacement of distribution networks with just in time delivery
systems.
2. Methodology
Due to the financial and time constraint, we have decided to limit the locale of the survey of KIMEP.
The core research theme of this study is to find out purchasing patterns and buying behaviors through a
survey among students and professors. Study participants have composed over 70 KIMEP students
randomly selected, 40 students from other universities located in Almaty and 25 faculty members of
BCB in KIMEP.
3. Literature Review
There are numerous documents/articles in the literature practically from every single country
worldwide. We preferred using mainly the Kazakhstan data since our aim is to see the purchasing
behavior of people and future trends of the country. Official statistics and sample surveys gave us what
we aimed for. Due to time limitation, we had to select sample in a very narrow region, namely within
KIMEP. By extending the sample size and covering other regions, age, and occupation in Kazakhstan
by further survey; healthier conclusion can be reached which could also contribute to the knowledge of
Kazakh online shoppers across various dimensions more extensively and narrow the research gap in
this very fast changing trend.
4. Conclusion
The result of our survey is as follows:
•
Faculty age differs between 26 to 66+, and students’ are 20 -26 on the average.
•
Faculties’ and majority of students’ annual income is above 250000 Tenge.
•
Internet is used by both groups since over 4 years.
•
Students favorite social networks are Vkontakte and Facebook; faculty’ are LinkedIn and
Facebook.
•
Students are online 2-3 hours/day, whereas Faculties are 5+ per day.
•
Both groups purchase online at least “several times a year”.
•
Both groups are “satisfied” as overall impression of purchasing online.
•
In terms of product, service, information, availability, speed of processing, order ease, and
payment; Faculties are “satisfied”, whereas students are “neutral” or “satisfied”.
•
“Ease of order” influences most of the decision purchase online for both groups.
•
Tickets, books-magazines, clothes, and electronics are most frequent products for both groups.
•
Online shopping process is “somehow more convenient” in comparison to in-store shopping for
both groups.
•
Both groups spend “6000 or more” in one online shopping.
•
Both groups replied “for myself” for the purpose of shopping online.
•
Both groups will continue to shop in future and they recommend to friends.
62
Based on the survey we have conducted, the following conclusions can be drawn:
Almost all age groups and occupations are using internet and shopping online. However; it is difficult
to generalize the results of KIMEP sampling to all Kazakhstan population, due to the income levels and
purchasing power differences. E-commerce is widely used starting from teen ages and everybody is
actively registered to more than one social networks. More and more products/services are being
purchased online and satisfaction rate is increasing among all users. There is a considerable shift from
in-retail shopping to online.
5. Future prospects
- Many new players/retailers are expected to apply online shopping and bricks and clicks
strategy in the near future.
- New software companies in the field of e-commerce will be established.
- Dominance of men and electronic goods will be differentiated towards fashion and clothing
goods. More and more women will use e-commerce.
- M-commerce (mobile) will be more widely used through iphone, ipad, and android.
- More niche e-shops will be opened in specific areas like books, home accessories, and sports
goods. Internet usage is shifting more towards m-commerce, especially with the enlargement
of 3G technology.
- Many e-commerce web sites will create more social networking, similar to Facebook and
Twitter.
- Number of private shopping clubs, operating through membership, will increase.
6. References
1. Agency of the Republic of Kazakhstan for Statistics, (2012), “Socio-Economic Development of
the Republic of Kazakhstan”, Journal of Socio-Economic Development of the Republic of
Kazakhstan, January 2012 issue, p 140.
2. Agency of the Republic of Kazakhstan for Statistics, (2011), “Retail Trade by month 2009-2011”,
Official web-page of Agency of the Republic of Kazakhstan for Statistics Accessed at
http://www.stat.kz/digital/torg/DocLib/2012/Розничная торговля по месяцам 2009-2011гг.xls.
3. Agency of the Republic of Kazakhstan for Statistics, (2012), “Major Socio-Economic Indicators of
the Republic of Kazakhstan”, Accessed at http://www.stat.kz/Pages/default.aspx.
4. Ernst & Young & Oxford Economics, (2011), “Ernst & Young’s Rapid-Growth Markets Forecast”,
Autumn edition, p 64.
5. International Monetary Fund (2012), “Word Economic Outlook September 2011 edition”,
Accessed at http://www.imf.org/external/pubs/ft/weo/2011/02/weodata/index.aspx
6. Gazeta.kz online news portal, (2011), !Number of Internet Users in Kazakhstan Increased to 6.7
mln. People”, Available at http://news.gazeta.kz/art.asp?aid=351629
7. Kazcontent JSC, (2011), “Analysis of electronic commerce market of Kazakhstan”, Available at
http://kzcontent.kz/rus/kaznet_1/
8. Profit.kz Internet Portal (2011). “Number of Internet Users in Kazakhstan increased”, Available at
http://www.profit.kz/news/7480-Chislo-polzovatelej-interneta-v-Kazahstane-uvelichilos/ .
9. Jeklin. M, (2011), “How Digital Marketing Helps you to Grow your Business Effectively?”,
viewed 9 February, 2012, http://marketguidepro.com.2011/08/.
“Development of Branding in Kazakhstan”
Aliya Khamzina, MBA student
KIMEP University
[email protected]
Elmira Bogoviyeva
KIMEP University
[email protected]
Abstract: A specific of branding and brand management in Kazakhstan remains ‘terra incognita’ for
marketing academics. This exploratory study aims at investigating brand management development in
Kazakhstan. It also explores linguistic tools used in the creation of Kazakhstani brand names across
several product categories. Preliminary results demonstrate wide variety of linguistic approaches
employed by Kazakhstani specialists in the creation of brand names. Conclusions and
recommendations on successful brand naming are developed.
63
Keywords: branding, brand management, Kazakhstan
1.Introduction
On the modern stage of trade development, export and import opportunities, intensive competition,
brand is very significant (Keller and Lehmann 2006). Branded goods are easier sold, rather than
products without any brand which have the same quality. Firms that possess brands get better access to
new markets, rather for those competitors that do not have any brand names. Everyday consumer
comes across with various similar goods and chooses product in favor of brand, as brand makes easier
to choose.
Studying the experience of leading companies on forming powerful, competitive brands on the
Kazakhstani market will reveal the development of branding in Kazakhstan, what we have learned
during twenty years. This is very important issue for our country, as Kazakhstan is going to integrate to
international economic arena. Brand is able to bring to organization tangible economic results (Keller
2003). Thus companies are urging toward turning trade marks to sound brands (Schroeder 2008).
Despite of somehow development of some aspects of branding, there are objective reasons to make a
complete more detailed analysis on brand development mechanisms, regulation and promoting brands
in competitive environment in modern condition.
Analysis of world experience, investigating the nature of brands in Kazakhstan will allow creating an
effective economic-legal basis, to increase competitiveness of brands and companies, to encourage
them to participate in the worldwide process of globalization. In Kazakhstan there is now increase of
share of intangible assets in the cost of enterprises. In the upcoming years there will be the spread of
buying practice, licensing, insuring and concession of brands, brands then will appear on balance sheets
and will be entered on charter capital. In accordance with this, the great importance is lying in forming
the strategy of brands till the methodology of estimating costs of trade marks. Thus the topic of study is
actual and significant.
Bearing in mind importance of development of branding in Kazakhstan, the main objectives of the
paper are stipulated as follows:
1. to investigate development of branding in Kazakhstan, what have been done during twenty
years of sovereignty;
2. to analyze specifics of Kazakhstani Brands;
3. to conduct linguistic analysis for Kazakhstani Brands in several product categories.
2.Background Information
The American Marketing Association defines “brand” as a “name, term, sign, symbol, or design, or a
combination of them, intended to identify the goods or services of one seller or group of sellers and
differentiate them from those of competitors” (Kotler, 2000, p. 404). A strong brand provides a
competitive advantage as it warrants quality and thereby allows the customer to cut through the risks
and complexity of choice (Ahlstrand, 2003). As to the history of brand, the term “brand” has come
from the Old Norse brandr which means “to burn” (Keller, 2008). That time the producers were
burning their marks onto the products. Among the pioneers who used brand were Italians, they used
brands as watermarks on paper in the 1200s. ( Colapinto, 2011). The survival of brand is a signal of its
vitality, for it is one of the most ancient words in English. “It was first found in the Germanic
languages that evolved into Old English (Anglo-Saxon), in which it appeared as a noun (ca. 1000) in
the epic poem Beowulf (Heaney, 2002) and as a verb (ca. 1400) in Wycliffe’s religious tract An
Apology for Lollard Doctrines (Todd 1842). In fact, the word is even older, dating from at least the late
fifth century A.D.,when the events in Beowulf took place (Klaeber 1950). Thus, brand was used for 15
centuries before it entered marketing in 1922, when it appeared in the compound brand name (“Brand
Names on Menus?” 1922; Oxford English Dictionary 2004:II.9), defined as a trade or proprietary
name”.
Branding in Transition Economies
According to Niburg (2004) the emergence of global brands has homogenized markets around the
world and brands are constantly looking to expand onto new markets. At the same time, the fall of the
Soviet Union bloc has led to an increased openness, creating new opportunities. The transition
economies of Eastern Europe and Asia have, therefore, become hot targets for foreign companies and
brands.
Further according to Niburg (2004) an appealing aspect of transition economies is their low level of
exploitation, creating a huge future potential. But, markets in transition economies also have certain
characteristics that make brand establishment especially challenging; consumers have less purchasing
64
power and their level of brand awareness are often low. Furthermore, transition economies are
extremely dynamic, which can result in market instability and a lack of reliable market data.
The collapse of the Communist rule in 1991 meant that Russia went from being a planned economy to
a market economy almost over a night. The direct consequence of borders
opening up brought with it an influx of foreign goods and brands onto the Russian market. Russian
consumers, who were just starting to enjoy their new freedom found themselves overwhelmed by
foreign products and aggressive marketing campaigns. The foreign brands were well received by the
public, as years of restrictions and low-quality goods had made the Russians yearn for anything
Western.
The marketing environment has since changed however; after the economic crisis in 1998, Russians
went back to cheaper local brands and even though consumers have regained some of their purchasing
power since then, locally produced brands still enjoy increasing popularity among consumers. This
development has forced foreign companies to reconsider their brand strategies on the Russian market,
and the days when a marketing campaign could merely be translated into Russian are definitely over.
At the present time, global brands not only face stiff competition from other global brands, but also
from locally produced brands, which have improved greatly in terms of product quality, packaging and
market efforts. This upswing for local brands, in combination with the increased sense of patriotism,
has made the life of foreign companies much tougher, and the resulting consequences have been that an
even further insight into the needs and preferences of Russian consumers is now required.
Beginning in the late 1970s, the world witnessed the collapse of planned economies. Countries such as
China, Vietnam, the former Soviet Union, Poland, Hungary, the Czech and Slovak Republics, and
others have embarked on the journey to transform their economies to market economies (Pan et al.,
2002).
The transition period in Russia has certain characteristics common to other transition economies,
especially the eastern European countries. Golubeva (2001) states that the main components of the
transition period are: stabilization, liberalization, privatization, reformation of government and
education, and the importance of personal contacts.
From a consumer perspective, two dramatic changes take place in a transition economy (Pan et al.,
2002). First, customers witness the explosion of product offerings. In the former planned economies,
consumers had little brand choice, and brand awareness was negligible. The transition to a market
economy brought about a flood of new brands. Also, consumers saw an increase in disposable income.
In planned economies, citizens were given a nominal salary that covered basic items such as food;
housing, medical services, education, and transportation were heavily subsidized by the state. In the
transition phase, consumers gradually get more purchasing power, and thereby the possibility to choose
between brands.
Brands are not a natural part of a planned economy. Planned economies do not use competition as
motivation for manufacturers and, therefore, consumers have little or no options. The need for brands
was thereby unnecessary. After the transition however, consumers suddenly have access to options and
can (at least theoretically, purchasing ability is still low) choose between brands.
Kazakhstan
In Kazakhstan and in the whole Soviet Union there was no branding at all, the products were chosen by
quality and country of origin. Those years most popular countries of origin were Poland, Germany,
Czech Republic.
At early 90s there was an opinion among Kazakhstani entrepreneurs that brands are not significant,
however some companies as KazKom created marketing campaigns, developed marketing strategy,
conducted promotion campaigns and were among pioneers of brand development. In the symbols
development of brands it was very popular to take sun, horse, flower, moon, animal, bird, sky. It can be
characterized as a national culture and experience of ancestors. As well as Kazakh words were taken as
brand names during that period. E.g Tumar brand which was very popular during 90s.
Then in 2000s in the fourth stage of economic development new players appeared on Kazakhstani
arena and KZ market was full of foreign brands. As well as Kazakhstani brands became a mong a great
interest for consumers. In the diary products category Ainalayin, Lactel, Mumunya, Moe became most
popular. In the confectionary sector Rakhat, Bayan Sulu became popular and gained great loyalty
among customers. In the pasta segment Sultan is the leader, as it is the pioneer among pasta producers
and differs with its products of high quality. In the juice category among the leaders are Juicy, Piko,
Gracio and Da-Da. Some of these brands still hold leading positions in their product categories and
enjoy top of mind awareness among their clients. There might be various reasons for the success of
those brands. One of them is considered to be brand development and creation of triumphant brand
name. The linguistics techniques used for the development of those brands remain under investigated.
65
A specific of brand naming in Kazakhstan is unexplored area. Authors attempt to shed the light on this
topic.
3.Methodology
The aim of the study was to investigate which Kazakhstani brand names are most successful and how
linguistic techniques helped to make them popular. Linguistic analysis of Kazakhstani brands has been
conducted among different kinds of brand categories. Brand names in the categories: dairy products,
confectionary, pasta, juices, beverages, light snacks and tea have been examined and results analyzed.
4.Preliminary Results
There were different linguistic-semantic approaches employed for development of brands in
Kazakhstan: as metaphor, epithet, personification, assonance, alliteration, metonymy, etc. Preliminary
results demonstrated that twenty percent of brand names investigated had assonance employed, twenty
percent had initial plosives, another sixteen percent bear personification as linguistic tools employed
for brand name creation. Metaphor was present in ten percent of investigated brands, while epithet
semantic approach has been used in another ten percent of brand names. These results demonstrated
that variety of linguistic approaches can be employed in the creation of brand names. Marketing
specialists can pay special attention to metaphor, assonance and personification in the creation of new
brands (Fournier, 1998). These tools are useful in the development of brand names for dairy,
confectionery and other food items.
5.References
1. Escalas, Jennifer Edson and James R. Bettman (2005) “Self-construal, Reference Groups, and
Brand Meaning”, Journal of Consumer Research, 32, 378-389.
2. Fournier, Susan (1998), "Consumers and Their Brands: Developing Relationship Theory in
Consumer Research," Journal of Consumer Research, 24 (March), 343-73
3. Keller Kevin Lane (2003) “Brand synthesis: the multidimensionality of brand knowledge”,
Journal of Consumer Research, 29 (March), 595–600.
4. Keller Kevin Lane, Lehmann Don R. (2006), “Brands and branding: research findings and future
priorities”, Marketing Science, 25(6), 740–59.
5. Schroeder, Jonathan E. “Brand Culture: Trade Marks, Marketing and Consumption.” in Trade
Marks and Brands: An Interdisciplinary Critique, Jane Ginsburg, Lionel Bently and Jennifer Davis,
eds., Cambridge University Press, pp. 161-176, 2008. Available at SSRN:
http://ssrn.com/abstract=961268
The effects of consumer ethnocentrism and country of origin on consumers’ preferences in
Kazakhstan.
Alexander Ostrovsky
KIMEP University
[email protected]
Liza Rybina
KIMEP University
[email protected]
Abstract: Since receiving of independence in 1991, Kazakhstan has been evolving and gradually
accepting economic ideology bringing it to the age of globalization. In the light of these changes new
challenging tasks appear for organizations, companies, private entrepreneurs trying to establish
successful international business in Kazakhstan. The senses of the consumers toward foreign products
have been a subject of interest both in the area of the consumer behavior and in that of international
marketing. There is a trend of appearing in transition markets some form of protectionism with the
purpose to protect from international competition. The purpose of given research is to define and
evaluate the level of consumer ethnocentrism of Kazakhstani consumers using the Consumer
Ethnocentric Tendencies Scale (CET-SCALE), its contribution on consumers’ evaluation of food
products, to determine the relationship between consumer ethnocentrism and product attitudes, to
examine on which level country of origin effect influences on consumers’ decision (country, product or
attribute) and to investigate whether ethnocentric aspirations and product attitudes vary by
66
demographic variables. The study findings suppose that ethnocentric tendencies are not presented
evidently in a given sample of respondents. Results are discussed and recommendations are given.
Key words:
consumer ethnocentrism, country of origin effect, consumer ethnocentric tendencies
scale, product attitudes
1. Introduction
Nowadays for companies in order to be competitively steadfast and be able to develop beneficial
relationships with customers it is absolutely necessary to know consumers’ purchasing motivations.
Understanding of consumer attitudes towards foreign and domestic products and the ethnocentricity
that influences them is especially crucial for economies relying significantly on imported products.
Given research is dedicated to gathering market intelligence about Kazakhstani consumers’
ethnocentric tendencies and their assessment of the attributes of foreign and domestic products.
Consumer ethnocentrism and country of origin effects are two general areas of a given research. Some
studies mentioned in the literature review were devoted to analysis and understanding of the behaviors
and individual and organizational attitudes of high and low ethnocentric consumers on foreign and
domestic products. Other researches have tried to measure influence of country of origin effect on
consumers’ perceptions of various product groups manufactured in different countries (Beverland and
Lindgreen, 2002; Elliott and Cameron, 1994; Garland and Coy, 1993; Han and Terpstra, 1988; Kaynak
and Cavusgil, 1983; Lawrence et al., 1992; Manrai andManrai, 1995; Watson and Wright, 2000). Some
authors investigated influence of COO effect on consumers’ perceptions regarding products’ quality
(country-specific) (Balabanis and Diamantopoulos, 2004; Lantz and Loeb, 1996). Moreover
significance of the COO effect depends on the product category (product-specific) (Balabanis and
Diamantopoulos, 2004; Watson and Wright, 2000; Sharma et al., 1995, in Piron, 2000; Smith, 1993;
Cordell, 1992). Besides, some other studies supposed that the influence of COO-effect depends not
only on the country of origin or the product category, but also on specific product/service attributes
(attribute-specific) (Supphellen and Rittenburgh, 2001; Juric and Worsley, 1998; Johanson et al., 1985,
in Showers and Showers, 1993). Country of origin effects have also been ascribe to consumer
purchasing behavior (Ettenson, 1993), product image (Peris et al., 1993).
2. Ethnocentrism, country of origin tendencies.
The results of previously conducted studies showed that majority of consumers strive to buy goods
from their own countries rather than foreign products (Bilkey and Nes, 1982; Samiee, 1994).
Consumers tend to prefer products from countries with alike cultures to their own over those from
culturally different countries, in case they have to select among foreign country products. (Heslop et al.,
1998; Wang and Lamb, 1983; Watson and Wright, 2000). The given research attempts to evaluate the
impact of ethnocentrism in the evaluation of specific food products by Kazakhstani consumers. Taking
in account that majority of studies of COO effects were dedicated to high-tech, fashion products and
services, excepting studies of Juric and Worsley (1998) (food products in general) and Orth and
Firbasova (2003) (yogurt), it makes sense to the given research, which is focused exclusively with food
products. The list of food attributes introduced by Steptoe et al. (1995) is used to determine whether the
COO effect arises at the food attributes level (attribute-specific).
3. Methodology
Data for this study have been collected via a survey of consumers living in the city of Almaty, the
largest in Kazakhstan and one of the most cosmopolitan in terms of its demographic, social-economic,
and cultural peculiarities. It was selected on the strength of it consistent potential to collect a
demographically various sample. Questionnaire was adapted to Kazakhstani marketplace and
completed though survey by 130 respondents. Questionnaire prepared for the research is composed of
three parts. The first part of questionnaire contains questions to gather demographic data, specifically
age, educational level, monthly income, marital status, gender and other. The second part includes the
known CETSCALE (Shimp and Sharma, 1987) to measure the consumers’ ethnocentric tendency,
modified to fit the Kazakhstani context, which consists of 17 Likert-type questions with end-points 1
= “totally agree” to 5 = “totally disagree”. The third part of the questionnaire contains questions
concerning to “product attitudes” including country of origin. Respondents assessed product from
Kazakhstan, Switzerland and France in terms of quality, performance, taste, price, style, design, brand
image, diversity. Product attributes were evaluated by using five-point Likert-type agreement
questions with end-points 1 = “totally agree” to 5 = “totally disagree”. The evaluation was carried out
by using the following combinations of products and countries:
Kazakhstani chocolate vs Swiss chocolate;
67
Kazakhstani yogurt vs French yogurt;
The assessment criteria were obtained from the set of 36 questions devised by Steptoe et al. (1995),
which relates the overall assessment criteria that consumers bear in mind when they purchase food
products. The number of questions was adjusted per product, because not all questions included in the
list by Steptoe et al. (1995) were applicable for given research, so the evaluation of chocolate and
yogurt was based on 30 characteristics.
4. Results and Discussion
Reliability and mean values of the perceptions.
Mean values, standard deviations, and Cronbach’s alpha reliability are presented in Table I. They
suppose that respondent’s ethnocentric tendencies were generally moderate. Data collected for the
entire sample lead to the estimation of mean CE at 3.25. The reliability of these measures is good
enough, as confirmed by an overall alpha of 0.91. CET-SCALE questions with the most prominent
results are summarized as follows: 63.5 per cent of the sample declares that buying Kazakhstani
products helps to keep Kazakhstani people working (q.3). Only 39 per cent of respondents agree that
Kazakhstani people should buy from foreign countries only those products that they cannot obtain
within their own country, 32 per cent of the sample disagreed with this statement and 29 per cent of
respondents were indifferent of this statement (q.16). Only 19 per cent of the sample agreed that
purchasing of foreign-made products is an expression of un-Kazakhstani attitude and 59 per cent of
respondents did not agree with this proposition (q.5). Considering questions 6 and 11, it is possible to
affirm that they represent very unfriendly and hostile attitude towards foreign products. However only
8.7 per cent of respondent agreed that it is wrong to purchase foreign made products and 81 per cent of
auditorium did not agree with such claim (q.6). At the same time 20.7 per cent of the sample
manifested agreement with the statement that buying of foreign products by local people can hurt
Kazakhstani business and causes unemployment and 46.5 per cent disagreed with this (q.11). Together
with question #5 of the CET-SCALE, questions #7, 8, 17 express implementation of strong national
behavior. However only 12 per cent of respondents agreed that a real Kazakhstani people should
always buy Kazakhstan-made products and 66 per cent were against it (q.7). Proposition that local
people should purchase products produced in Kazakhstan instead of letting other countries get rich off
them was supported by 33 per cent of respondents and 34 per cent of the sample manifested the
opposite attitude (q.8). Another behavioral pattern related to assignment of responsibility on
Kazakhstani consumers, who purchase products made in other countries, for their role in putting their
Kazakhstani fellow out of work got positive confirmation only by 23 per cent of respondents and 47
per cents of the sample were against that (q.17). Questions # 12, 14, 15 of the CET-SCALE can be
considered as representing extremely violent attitude against imported products and foreign countries.
Analysis showed that 21 per cent of respondents are ready to support idea to put restraints on all
imports and 36 per cents dissented from the statement (q.12). Remarkable result is observed in relation
to the statement that foreigners should not be permitted to sell their products in Kazakhstan, where only
13.7 per cents of respondents agreed with it and 66.8 per cents were disagree(q. 14). 27.8 per cents of
the sample believe that foreign produced products should be taxed heavily to reduce their entry into the
Kazakhstan market and 44 per cents dispute that (q.15).
Set of questions # 1, 2, 4, 9, 10, 13 contains statements with relatively more moderate meaning. These
statements do not insist on overall rejection of imported products, but induce protection of locally
manufactured products and support preference towards domestic products. However only 25 per cent
of sample supported statement that Kazakhstani people should always buy Kazakhstan-made products
instead of imports and 47.7 per cent were against it (q.1). Interesting result was got for the statement
asserting that “only those products that are unavailable in the Kazakhstan should be imported”. Here
40.6 per cent of respondents agreed with it and 40.6 percent disagreed (q.2). As for statements #4, 9, 10,
13 there is no dramatic difference between respondents who agreed with these statements, their scores
are in the range between 23.7 per cents and 32.8 per cents, and who dissented statements, their scores
are in the range between 30.2 per cent and 42 per cent. The result of evaluation of CE level of mainly
younger and well-educated Kazakhstani consumers reveals that the sample used in the present survey
can not be described as particularly ethnocentric. Results of evaluation of CE statements by consumers
are summarized in Table II.
Table 1. Mean value, standard deviation and reliability, CET-SCALE
Statements
Mean
value
*
68
Standard deviation
Reliability
(a)
Kazakhstani people should always buy
1,05
0,90
Kazakhstan-made products instead of 3,29
1
imports
Only those products that are
1,11
0,90
unavailable in the Kazakhstan should 3,03
be imported
2
Buy Kazakhstan-made products. Keep
2,35
0,96
0,91
3
Kazakhstani people working
Kazakhstani products, first, last, and
3,05
0,93
0,90
4
foremost
Purchasing foreign-made products is
3,53
1,06
0,91
un-Kazakhstani
5
It is not right to purchase foreign made
4,00
0,92
0,91
6
products
A real Kazakhstani people should
3,73
0,99
0,90
always buy Kazakhstan-made products
7
We
should
purchase
products
1,07
0,91
manufactured in Kazakhstan instead of 3,01
8
letting other countries get rich off us
It is always best to purchase
3,23
1,01
0,91
Kazakhstani products
9
There should be very little trading or
1,02
0,91
purchasing of goods from other 3,15
10
countries unless out of necessity
Kazakhstani people should not buy
foreign products, because this hurts
3,34
1,01
0,91
Kazakhstani business and causes
11
unemployment
3,19
0,98
0,91
12
Curbs should be put on all imports
It may cost me in the long run but I
3,10
1,09
0,91
prefer to support Kazakhstani products
13
Foreigners should not be allowed to
3,71
1,00
0,91
14
put their products on our market
Foreign products should be taxed
1,06
0,91
heavily to reduce their entry into the 3,22
Kazakhstan
15
We should buy from foreign countries
1,13
0,91
only those products that we cannot 2,92
16
obtain within our own country
Kazakhstani consumers who purchase
products made in other countries are
3,30
1,04
0,91
responsible
for
putting
their
Kazakhstani fellow out of work
17
3,25
1,03
0,91
Total mean value
Notes:(a) Alpha if item deleted; *scale: 1 = "strongly agree"; 5 = "strongly disagree";
rall alpha = 0.91
Table 2. Consumer evaluation of CET-SCALE statements
Statements
1
Kazakhstani people should always buy Kazakhstan-made products
instead of imports
69
Agree
(%)
Disag
ree
(%)
25,0
47,7
40,6
40,6
63,5
14,5
24,5
30,2
19,0
59,0
8,7
81,0
A real Kazakhstani people should always buy Kazakhstan-made
products
12,0
66,0
We should purchase products manufactured in Kazakhstan instead of
letting other countries get rich off us
33,0
34,0
8
9
It is always best to purchase Kazakhstani products
23,7
42,0
There should be very little trading or purchasing of goods from other
countries unless out of necessity
25,7
38,0
10
Kazakhstani people should not buy foreign products, because this hurts
Kazakhstani business and causes unemployment
20,7
46,5
11
12
Curbs should be put on all imports
21,0
36,0
It may cost me in the long run but I prefer to support Kazakhstani
products
32,8
41,1
13
14
Foreigners should not be allowed to put their products on our market
13,7
66,8
Foreign products should be taxed heavily to reduce their entry into the
Kazakhstan
27,8
44,0
15
We should buy from foreign countries only those products that we
cannot obtain within our own country
39
32
16
Kazakhstani consumers who purchase products made in other countries
are responsible for putting their Kazakhstani fellow out of work
23,0
47,0
17
2
Only those products that are unavailable in the Kazakhstan should be
imported
3
Buy Kazakhstan-made products. Keep Kazakhstani people working
4
Kazakhstani products, first, last, and foremost
5
Purchasing foreign-made products is un-Kazakhstani
6
It is not right to purchase foreign made products
7
Preferences per product type.
A total of 30 characteristics of chocolate have been used by consumers for evaluation in paired
comparisons per criterion for Kazakhstani as contrasted to Swiss chocolate. Kazakhstani chocolate was
evaluated more favorably in terms of quality and price. Kazakhstani product was evaluated as a product
containing more natural ingredients by 54 per cent of the sample (q.5), and 47 per cent of respondents
confirmed it as having no additives (q.2) compare with Swiss product. Two third of the sample
considered Kazakhstani chocolate as inexpensive (q.6) and 71 per cent treated it’s value as a good for
their money (q.11) compare with 39.8 percent and 59.3 per cent consequently for Swiss chocolate.
More than half of the sample favorably rated Kazakhstani product as coming from country they
approve politically (q.18). The characteristics which demonstrated the most noticeable difference in
favor of Swiss chocolate were: smells nice (q.13), helps to cope with stress (q.14), helps to control
weight (q.15), helps to relax (q.23), helps to cope with life (q.29), has a pleasant texture (q.16), keeps
awake (q.21). Swiss chocolate products were also more favorably evaluated in terms of packaging,
through characteristics: “is packaged in an environmentally friendly way” which got 53.5 per cent
versus 46.5 percent for Kazakhstani product (q.17) and “packaging looks nice” which earned 70.5 per
70
cent against 57.3 per cent for Kazakhstani product (q.22). Kazakhstani chocolate products were
estimated more favorably in 10 out of 30 characteristics compare with Swiss chocolate products. Swiss
chocolate products were evaluated with the higher rate in 16 out 30 characteristics as compared to the
Kazakhstani ones. Results of consumer evaluation of Kazakhstani and Swiss chocolate products are
summarized in Table III.
Table III. Consumer evaluation of Kazakhstani and Swiss chocolate products
Evaluation characteristics: chocolate
Kazakhstani
(%)
Swiss
(%)
Disagree
(totally/agree)
Kazakh Swi
stani
ss
(%)
(%)
88,0
89,2
4,0
47,0
35,3
13,0
22,0
20,3
45,0
79,0
83,8
8,0
54,0
43,2
7,0
66,0
39,8
15,0
26,0
22,8
27,0
Agree (totally/agree)
1
Is easily consumable/edible
2
Contains no additives
3
Is low in calories
4
Tastes good
5
Contains natural ingredients
6
Is not expensive
7
Is low in fat
8
Is familiar
70,0
68,5
11,0
9,9
9
57,0
56,4
12,0
9,9
10
Is nutritious
Is easily available
supermarkets
86,0
86,3
5,0
11
Is good value for money
71,0
59,3
8,0
12
Cheers me up
63,0
64,3
10,0
9,1
13
Smells nice
71,0
80,1
12,0
14
Helps me cope with stress
43,0
51,9
31,5
15
Helps me control my weight
22,8
28,6
48,6
16
55,2
66,4
15,6
46,5
53,5
13,7
54,4
46,9
14,5
19
Has a pleasant texture
Is packaged in an environmentally
friendly way
Comes from country I approve of
politically
Is like the delicatessen I ate when I was a
child
7,1
26,
2
44,
8
10,
8
45,2
44,8
21,6
20
Contains no artificial ingredients
32,8
30,1
22,8
21
Keeps me awake/alert
36,9
44,8
24,9
22
Packaging looks nice
57,3
70,5
19,5
23
Helps me relax
42,3
56,9
27,4
24
Is high in protein
30,1
35,3
22,0
17
18
in
shops
and
71
2,9
19,
5
46,
1
7,5
14,
1
31,
1
39,
4
4,6
14,
1
9,6
9,1
20,
8
16,
2
17,
0
12,
5
14,
5
23,
7
25
Keeps me healthy
29,1
29,1
32,8
26
Makes me feel good
54,0
59,8
23,7
27
Has the country of origin clearly marked
57,3
53,9
17,9
28
Is what I usually eat
42,7
49,4
33,6
29
Helps me to cope with life
Can be bought in shop close to where I
live/work
35,7
41,9
34,0
36,
1
14,
9
13,
7
22,
4
29,
1
78,8
81,8
9,1
5,8
30
As well as to chocolate products, yogurt products were evaluated more favorably in terms quality, taste
and price. In favor of Kazakhstani yogurt as a product containing no additives voted 42.3 per cent of
the sample (q.2), 61.8 per cent of respondents agreed that it contains natural ingredients (q.5) and two
third considered product as inexpensive one (q.6). Almost 60 per cent of respondents recognized a
Kazakhstani product as providing good value for their money (q.11). More than two-third of the
respondents is familiar with Kazakhstani yogurt (q.8.) and 66 per cent of them believe it is nutritious
(q.9). Besides, more than a half of auditorium showed their more favorable attitude to Kazakhstani
yogurt products as coming from country they approve of politically (q.18.) and as a having clear
country of origin mark (q.27.). As for French yogurt products, positive difference in favor of these
goods was observed in such characteristics as: taste (q.4), texture (q.16), packaging (q.22). Moreover,
French yogurt products are considered as a more attractive in terms of supporting healthy life style.
They gain positive difference as products helping to cope with stress (+6.6 per cent, q.14), to control
weight (+8.3 per cent, q.15), to get relax (+7.9 per cent, q.23), to keep alert (+9.6, q.21), to keep
healthy (+7.5, q.25) and to make feel good (+7.9 per cent, q.26). Yogurt products produced in
Kazakhstan were evaluated more favorably in 12 out of 30 characteristics compare with French yogurt
products. French yogurt products were estimated with the higher scores in 17 out 30 characteristics as
compared to the Kazakhstani ones. Results of consumer evaluation of Kazakhstani and French yogurt
products are summarized in Table IV.
Table IV. Consumer evaluation of Kazakhstani and French yogurt products
Disagree
Evaluation characteristics: yogurt
Agree (totally/agree)
(totally/agree)
Kazakh
stani
Kazakhstani
French
Frenc
(%)
(%)
(%)
h (%)
1
Is easily consumable/edible
85,1
88,0
3,3
2,9
2
Contains no additives
42,3
39,8
14,5
18,7
3
Is low in calories
49,4
51,5
13,7
12,0
4
Tastes good
76,4
85,1
8,7
4,2
5
Contains natural ingredients
61,8
52,3
8,7
15,4
6
Is not expensive
67,6
43,2
7,5
32,8
7
Is low in fat
49,4
49,0
9,1
12,0
8
Is familiar
77,2
69,3
5,4
8,3
9
Is nutritious
66,0
62,2
6,2
6,6
10
Is easily available in shops and supermarkets
80,5
80,5
5,4
6,2
11
Is good value for money
59,8
54,4
8,7
17,0
12
Cheers me up
47,7
51,9
16,2
17,0
13
Smells nice
66,0
68,9
12,0
9,6
14
Helps me cope with stress
29,5
36,1
33,2
29,9
72
15
Helps me control my weight
44,4
52,7
24,9
17,0
16
Has a pleasant texture
57,3
68,9
14,5
10,4
17
Is packaged in an environmentally friendly way
51,5
50,2
11,2
11,2
18
Comes from country I approve of politically
56,0
46,1
12,5
13,7
19
Is like the delicatessen I ate when I was a child
33,6
37,8
27,0
29,9
20
Contains no artificial ingredients
33,6
34,9
20,3
21,6
21
Keeps me awake/alert
30,7
40,3
25,3
22,8
22
Packaging looks nice
52,3
64,3
19,9
14,1
23
Helps me relax
36,5
44,4
24,5
22,8
24
Is high in protein
39,0
42,7
17,4
19,5
25
Keeps me healthy
51,0
58,5
14,9
14,9
26
Makes me feel good
51,9
59,8
16,2
15,8
27
Has the country of origin clearly marked
57,3
52,3
16,6
18,7
28
Is what I usually eat
44,8
41,9
26,6
33,6
29
Helps me to cope with life
40,7
42,3
25,3
27,0
30
Can be bought in shop close to where I live/work
80,9
78,8
5,8
9,1
The purpose of this study was to define and evaluate the level of consumer ethnocentrism of
Kazakhstani consumers, its influence on consumers’ evaluation of food products, discovering the
relationship between consumer ethnocentrism, demographic variables and product attitudes,
influence of COO on consumer decision. Respondents manifested clear tolerance toward foreign
products answering on questions representing “hard ethnocentrism” attitude. The study found some
positive perception and clear preferences of local product in terms of quality and price, at the same
time foreign products were selected as more preferred because of packaging and stronger image
associated with healthy life style. The future research can examine more detailed associations of
ethnocentrism level and demographic characteristics and will propose useful market information for
marketing strategists in both international and national companies operating in Kazakhstan.
.
References
1.
2.
3.
4.
5.
6.
7.
8.
9.
Bilkey, W.J. and Nes, E. (1982), “Country-of-origin effects on product evaluations”, Journal of
International Business Studies, Vol. 8, Spring/Summer, pp. 89-99.
Bailey,W. and Pineres, S. (1997), “Country of origin attitudes in Mexico: the malinchismo
effect”, Journal of International Consumer Marketing, Vol. 9 No. 3, pp. 25-41.
Beverland, M.B. and Lindgreen, A. (2002), “Using country-of-origin in strategy: the
importance of context and strategic action”, The Journal of Brand Management, Vol. 10 No. 2,
pp. 147-67.
Balabanis, G. and Diamantopoulos, A. (2004), “Domestic country bias, country-of-origin
effects, and consumer ethnocentrism: a multidimensional unfolding approach”, Journal of the
Academy of Marketing Science, Vol. 32 No. 1, pp. 80-95.
Cordell, V. (1992), “Effects of consumer preferences for foreign sourced products”, Journal of
International Business Studies, Vol. 23 No. 2, pp. 251-69.
Elliott, G. and Cameron, R. (1994), “Consumer perception of product quality and the country of
origin effect”, Journal of International Marketing, Vol. 2 No. 2, pp. 49-62.
Evanschitzky, H., Wangenheim, F., Woisetschlager, D. and Markus, B. (2008), “Consumer
ethnocentrism in the German market”, International Marketing Review,Vol.25No.1,pp.7-32.
Garland, R. and Coy, D. (1993), “Buying New Zealand made groceries: does behavior match
attitude?”, New Zealand Journal of Business, Vol. 15, pp. 1-18.
Good, L.K. and Huddleston, P. (1995), “Ethnocentrism of Polish and Russian consumers: are
feelings and intentions related”, International Marketing Review, Vol. 12 No. 5, pp. 35-48.
73
10. Heslop, L., Papadopoulos, N. and Bourke, M. (1998), “An interregional and intercultural
perspective on subculture differences in product evaluation”, Canadian Journal of
Administrative Sciences, Vol. 15 No. 2, pp. 113-27.
11. Han, C.M. and Terpstra, V. (1988), “Country of origin effects for uni-national and bi-national
products”, Journal of International Business Studies, Vol. 16, Summer, pp. 235-56.
12. Han, C.M. (1990), “Testing the role of country image in consumer choice behavior”, European
Journal of Marketing, Vol. 24 No. 6, pp. 24-39.
13. Herche, J. (1994), “Ethnocentric tendencies, marketing strategy and import purchase behavior”,
International Marketing Review, Vol. 11 No. 3, pp. 4-16.
14. Huddleston, P., Linda, K. and Lesli, S. (2001), “Consumer ethnocentrism, product and polish
consumers’ perceptions of quality”, International Journal of Retail and Distribution
Management, Vol. 29 No. 5, pp. 236-46.
15. Johansson, J.K., Douglas, S.P. and Nonaka, I. (1985), “Assessing the impact of country of
origin on product evaluations: a new methodological perspective”, Journal of Marketing
Research, Vol. 19, November, pp. 388-96.
16. Juric, B. and Worsley, A. (1998), “Consumers’ attitudes towards imported food products”,
Food Quality and Preference, Vol. 9 No. 6, pp. 431-41.
17. Javalgi, R.G., Pioche Khare, V. and Gross, A.C. (2005), “An application of the consumer
ethnocentrism model to French consumers”, International Business Review, Vol. 14,
pp. 325-44.
18. Kaynak, E. and Cavusgil, S. (1983), “Consumer attitudes towards products of foreign origin: do
they vary across product classes?” , International Journal of Advertising, Vol. 2, pp. 147-57.
19. Kaynak, E. and Kara, A. (2002), “Consumer perceptions of foreign products”, European
Journal of Marketing, Vol. 36 Nos 7/8, pp. 928-49.
20. Lawrence, C., Marr, N. and Prendergast, G. (1992), “Country of origin stereotyping: a case
study in the New Zealand motor vehicle industry”, European Journal of Marketing, Vol. 26 No.
3, pp. 37-51.
21. Lee, D. and Ganesh, G. (1999), “Effects of partitioned country image in the context of brand
image and familiarity”, International Marketing Review, Vol. 16 No. 1, pp. 18-39.
22. Lantz, G. and Loeb, S. (1996), “Country of origin and ethnocentrism: an analysis of Canadian
and American preferences using social identity theory”, in Corfman, K.P. and Lynch, J. (Eds),
Advances in Consumer Research, Vol. 23, Association of Consumer Research, Provo, UT, pp.
374-8.
23. McLain, S. and Sternquist, B. (1991), “Ethnocentric consumers: do they buy American?”,
Journal of International Consumer Marketing, Vol. 4 Nos 1/2, pp. 39-57.
24. Myers, M. (1995), “Ethnocentrism: a literature overview and directions for future research”,
25. Developments in Marketing Science, Vol. XVIII, pp. 202-7.
26. Manrai, L.A. and Manrai, A.K. (1995), “Current issues in the cross-cultural and cross-national
consumer research”, Journal of International Consumer Marketing, Vol. 8 Nos 3/4, pp. 9-23.
27. Netemeyer, R.G.S., Durvasula, S. and Lichtenstein, D.R. (1991), “A cross-national assessment
of the reliability and validity of the CETSCALE”, Journal of Marketing Research, Vol. 28,
August, pp. 320-7.
28. Ozsomer, A. and Cavusgil, S. (1991), “Country-of-origin effects on product evaluation: a
sequel to Bilkey and Nes Review”, Enhancing Knowledge Development in Marketing,
American Marketing Association, Chicago, IL, pp. 269-77.
29. Orth, U. and Firbasova, Z. (2003), “The role of consumer ethnocentrism in food product
evaluation”, Agribusiness, Vol. 19 No. 2, pp. 137-53.
30. Peris, S., Newman, K., Bigne, E. and Chansarkar, B. (1993), “Aspects of Anglo-Spanish
perceptions and product preferences arising from ‘country of origin’ image”, International
Journal of Advertising, Vol. 12 No. 2, pp. 131-42.
31. Piron, F. (2000), “International outshopping and ethnocentrism”, European Journal of
Marketing, Vol. 36 Nos 1/2, pp. 189-210.
32. Schooler, R.D. (1971), “Bias phenomena attendant to the marketing of foreign goods in the
US”, Journal of International Business Studies, Vol. 2, pp. 71-80.
33. Shimp, T. and Sharma, S. (1987), “Consumer ethnocentrism: construction and validation of the
CETSCALE”, Journal of Marketing Research, Vol. 24, August, pp. 280-9.
34. Stoltman, J.J., Lim, Y.K. and Morgan, F.W. (1991), “The effect of country of origin, product
familiarity and ethnocentrism on the acceptance of foreign products”, Marketing Theory
and Applications, Academy of Marketing Winter Educators Conference, pp. 82-9.
74
35. Showers, V. and Showers, L. (1993), “The effects of alternative measures of country of origin
on objective product quality”, International Marketing Review, Vol. 10 No. 4, pp. 53-67.
36. Smith, W. (1993), “Country-of-origin bias: a regional labeling solution”, International
Marketing Review, Vol. 10 No. 6, pp. 4-12.
37. Samiee, S. (1994), “Customer evaluation of products in a global market”, Journal of
International Business Studies, Vol. 25 No. 3, pp. 579-604.
38. Sharma, S.H., Shimp, T.A. and Shin, J. (1995), “Consumer ethnocentrism: a test of antecedents
and moderators”, Journal of the Academy of Marketing Science, Vol. 23 No. 1, pp. 26-37.
39. Steptoe, A., Polland, T.M. and Wardle, J. (1995), “Development of a measure of the motives
underlying the selection of food: the food choice questionnaire”, Appetite, Vol. 25 No. 3,
pp. 267-84.
40. Steenkamp, J.-B.E.M. and Baumgartner, H. (1998), “Assessing measurement invariance in
cross-national consumer research”, Journal of Consumer Research, Vol. 25 No. 1, pp. 78-90.
41. Supphellen, M. and Rittenburgh, T. (2001), “Consumer ethnocentrism when foreign products
are better”, Psychology and Marketing, Vol. 18 No. 9, pp. 907-27.
42. Wang, C.-K. and Lamb, C.W. Jr (1983), “The impact of selected environmental forces upon
consumers’ willingness to buy foreign products”, Journal of the Academy of Marketing
Science, Vol. 11 No. 2, pp. 71-84.
43. Wall, M., Heslop, L.A. and Hofstra, G. (1988), “Male and female viewpoints of countries as
producers of consumer goods”, Journal of International ConsumerMarketing,Vol.1No.1,pp.125.
44. Watson, J.J. and Wright, K. (2000), “Consumer ethnocentrism and attitudes toward domestic
and foreign products”, European Journal of Marketing, Vol. 34 Nos 9/10, pp. 1149-66.
45. Wang, C.-L., Siu, N.Y.M. and Hui, A.S.Y. (2004), “Consumer decision-making styles on
domestic and imported brand clothing”, European Journal of Marketing, Vol. 38 Nos 1/2, pp.
239-52.
Perceptions of city brands in Kazakhstan
Aizere Akimbay
KIMEP University, MBA student
Elmira Bogoviyeva, Ph.D.,
KIMEP University
[email protected]
Abstract: This paper reports the analysis of the knowledge, perception and attitude of three target
groups: business people, students, and creative class about Almaty and Astana, two major Kazakhstan
cities. The survey was employed in order to explore associations about northern and southern capitals
of Kazakhstan. The analysis was conducted through building brand concept maps for both cities from
top brand associations identified.
Key words – marketing, city branding, concept map, network analysis, brand associations
1. Introduction
In age of globalization cities compete with each other and strive to attract tourists, investors, companies,
and talented labor. Place marketing people accent more and more on presenting city as a brand and
promote it to different target groups. Brand communication is a managerial issue because brand is an
association network in the mind of target groups. But the perceptions differ significantly as the variety
of target groups is large. Though research in field of city branding should focus more on perceptions of
different target groups and evaluate strategies for cities on the ways of building advantageous and
attractive place brand structure. The current academics discuss this issue without paying much attention
to the diversification of associations and perception of different groups (Ashworth & Kavaratzis, 2009).
Furthermore, city branding area is relatively “fresh and young”, because up-to-date works are
descriptive without proper differentiation (Ooi, C.-S., 2008).
In order to study brand association, it is important to point that the main function of brand is to serve as
a reminder, cue, and renovate the information from the memory related to certain brand, product or
service. It is commonly accepted that the information in consumer’s mind is stored in the form of
networks. So it will be logical to analyze associations as a network. Commonly, brand association
analysis is conducted on the premises of the Associative Network Theory (e.g. Anderson, 1983;
75
Janiszewski & Van Osselaer, 2000; Roedder-John, Loken, Kim, & Monga, 2006). The Associative
Network analysis is an approach based on the psychology of memory retrieval. It states that the
memory of the human consists of nodes that are linked with each other. Each node corresponds to the
particular information and data which becomes activated through stimulus.
2. Methodology
The study was arranged as a survey of two hundred people from big two Kazakhstan cities – Almaty
and Astana about their top five associations regarding these two cities. Respondents represented three
different groups – business people, creative class, and students. Snowballing sampling was selected for
the project to ensure representativeness of all target groups of respondents. Links to survey have been
placed in social networking sites. All information was coded and built into association network which
shows the differences and links of those associations with each other considering the issue of target
group diversification. These associations and perceptions have been sorted according to two
dimensions – positive and negative. The negative associations have been counted and grouped.
Furthermore, we analyzed them according to Pareto principle in order to determine the problem zones
– the points that will help to identify keys of successful branding and give managers useful
implications to the process branding.
3. Expected results
This study is expected to provide key associations about cities as brands, how they differ for two cities
as well as across target groups. Preliminary results show that Astana city has “Baiterek” and “the
President N.A. Nazarbayev” as the central brand associations among others. On the other hand,
concerning Almaty city and its brand associations, “Medeo” and “traffic jams” are the central
associations in the Associations Network.
4. Conclusion
This study was developed in order to identify weak associations and strong aspects of Astana and
Almaty cities as brands. Results of the study are expected to help representatives of city administration
and specialists involved in urban branding activities in Kazakhstan in further building of metropolitan
brands.
5. References
1. Aaker, D. A. (1991). Management brand equity: Capitalizing on the value of a brand name. New
York: Free Press.
2. Aaker, D. A. (1996a). Building strong brands. New York, NY: Free Press.
3. Ashworth, G., & Kavaratzis, M. (2009), Beyond the logo: Brand management for cities. The
Journal of Brand Management, 16, 520-531.
4. Chen, A. C.-H. (2001), Using free association to examine the relationship between the
characteristics of brand associations and brand equity. Journal of Product & Brand Management,
10(7), 439.
5. Henderson, G. R., Iacobucci, D., & Calder, B. J. (1998), Brand diagnostics: Mapping branding
effects using consumer associative networks. European Journal of Operational Research, 111(2),
306-327.
6. Keller, Kevin L. (2003b). Strategic brand management (2nd ed.). Upper Saddle River, NJ: Pearson
Education.
7. Novak, J. D. (2008), The Theory underlying concept maps and how to construct and use them.
Florida: Free Press
8. Ooi, C.-S. (2008). Reimagining singapore as a creative nation: The politics of place branding. Place
Branding and Public Diplomacy, 4(4), 287-302.
The Impact of InterfirmBehavior onForeign Subsidiary Performance: Social Capital, Resource
Sharing and Market Dominance
Gregory Dunn
National University of Singapore
[email protected]
Abstract: Expanding from recent macro-level findings in organization theory, this paper presents
several theoretical propositions regarding the micro-level influences of social capital on the
performance and resource acquisition of foreign subsidiaries operating in difficult environments.
76
Contrary to prior results, our study suggests the true causal mechanisms of superior foreign subsidiary
performance lie not with shared macro-level similarities among states, but rather in the micro-level
cultural and social capital they create on the ground. After laying out the theoretical basis for our
propositions, we propose and intend to test these hypotheses using a unique dataset of Japanese
subsidiaries operating in Central Asia and across the CIS.
Keywords: institutions, social capital, resource-based view, positive feedback
1. Introduction
Building on recent findings in organization theory, this study aims to examine the positive feedback
generated for companies from the same national origin operating in foreign environments. Such
benefits are generated by heightened levels of trust among locally-operating firms working together to
bypass local institutional blockages. While prior studies have found sanctioning and monitoring are
primarily responsible for mitigating concerns in imperfect institutional environments (Rangan and
Sengul, 2009), this study suggests the true causal drivers for such competitive advantages may stem
from the ability of collective foreign firms to fill an institutional void and work around local
institutional deficiencies (Khanna and Palepu, 2003). Drawing upon theories of social capital and
closure (Coleman, 1988; Burt, 2005), this study further suggests that social capital and higher levels of
trust generated among companies of the same national origin may promote a better business
environment for firms of the same national origin and allow such groups to collectively mitigate local
institutional deficiencies.
2. Literature Review and Hypothesis Development
In a firm-level empirical study, Gatignon and Anderson (1988) find evidence that the level of MNE
parent-company control over an affiliate is directly related to the risk and uncertainty of investing in
that country. A major component of this uncertainty is found to be cultural distance, which implies
MNEs lacking a strong understanding of the local market will have poorer performance and require
more monitoring. Contrary to Rangan and Sengul (2009), this suggests that other mechanisms may
account for the degree to which firms from particular countries dominate the foreign markets in which
they enter.
Operating in foreign environments is risky for numerous reasons. On the economic side, expatriate
staff are both highly costly and have a high failure rate in environments in which they do not fit
(McGoldrick, 1997). Social capital is valuable as a means of obtaining resources and other benefits
(Coleman, 1988; Burt 2005). On a micro level, social capital enables better team performance (Jones
and George, 1998) and is further necessary for career progression among individuals (Seibert et al.,
2001). The aims of this study is to expand the notion of social capital to a between firm setting. That is,
it seeks to measure whether social capital can be cultivated more fully when more firms from the same
country are present in a given country, regardless of industry.
The activities of subsidiaries operating in foreign markets are both enabled and constrained by their
relationships. Insofar as foreign subsidiaries are subject to the local realities and information
constraints of the market in which they operate, they will try to improve their information and resource
networks in order to obtain a sustainable competitive advantage. Resources unique to an organization
can provide a sustained competitive advantage (Barney, 1991), and a strong local network can be a
unique resource and present a highly profitable advantage in highly uncertain markets.
Granovetter (1973) proposed weak ties can form the basis for information search. As a result of higher
trust from individuals which are perceived as culturally more similar, a firm’s network is expanded and
it is able to search the market for talented individuals to join the firm. Networks function as pipes and
prisms to convey both information and resources (Podolny, 2001). Indeed, networks can serve not only
as a conduit through which a firm may obtain material resources, they may also function as prisms and
transmit information regarding the quality of opportunities, local competitors, bureaucratic realities,
government connections and individuals back into a network.
Ties can be used to obtain information from the local environment, and that ability is contingent upon
the embeddedness of the firm within the local environment (Granovetter, 1973 & 1985). As the quality
of information and embeddedness of a foreign subsidiary in local network increases, it is able both to
operate more efficiently and to obtain information regarding other key actors in its market. A foreign
subsidiary is likely to be better able to draw upon such local information the higher level of trust and
information sharing to which it is party in a given environment. In addition, egocentric (uncertainty
regarding how to convert a set of inputs into an output desired by a potential exchange partner) and
77
altercentric (doubts about quality of output a focal actor brings to the market) concerns are allayed to a
greater extent the more deeply an actor is embedded within a local network (Podolny, 2001). We argue
that an actor can become more locally embedded vicariously through its relationship with other trusted
firms and information sources. It can obtain a greater understanding of the local competitive
environment and benefits from information exchange with other actors. Furthermore, in uncertain
environments, these subsidiaries may be more likely to develop tight-knit networks for collaboration
and form stronger ties to trusted actors (Podolny, 1994). We thus propose the following:
Proposition 1: The weaker a host country’s institutional environment, the greater the positive feedback
generated by foreign subsidiary ties with other subsidiaries of the same nationality, resulting in stronger
incentives for other subsidiaries from the same national origin to enter the same foreign market.
Proposition 2: The weaker a host country’s institutional environment, the higher the level of
information and resource sharing that occurs among subsidiaries of the same national origin both
within and across industries, resulting in higher market performance over time.
As levels of uncertainty regarding the local competitive environment increase, the cost of transaction
costs and monitoring increases as well (Coast, 1937; Williamson, 1981). Thus, the costs of transactions
for subsidiaries competing in a host market increase if it cannot effectively develop a high-quality
network of trust and information exchange. As argued previously, subsidiaries from similar national
backgrounds can benefit by filling institutional and informational voids, thereby making a foreign
subsidiary with lower trust for local organizations and institutions much less efficient and competitive
than those which are able to bring in information from individuals and organizations perceived as more
trustworthy. They are able to leverage on the expat network of other subsidiaries from any industry,
thereby enabling the subsidiary to reduce its transaction costs and avoid costly mistakes in a difficult
institutional environment.
Expanding this argument, Mitchell (1989) found that Japanese firms entered a foreign market in
response to observing the entry of both competitors and allied firms. His findings thus imply that
national affiliation does matter for many firms in ways that transcend a simple consideration of
immediate profit maximization. Mitchell’s study also took place in a developed country with higher
levels of uncertainty than many developing markets, begging the questionwhether the effects could be
even stronger in environments with more poorly developed institutions.
Contrary to the notion that macro-level factors are primarily responsible for improved foreign
subsidiary performance in host countries due to sanctioning and monitoring at the level of international
organizations and governments (Rajan and Sengul, 2009), this study thus suggests the true causal
drivers lie at the micro level of culture and trust. In terms of immediate benefits realizable in any
context, a collection of firms of similar national origin ensures expatriate staff are happier, have greater
social capital, have lower transaction costs and operate better in the foreign environment by drawing
upon this capital and learning from their peers. In poorly developed institutional environments wherein
levels of trust are much lower, however, this effect is multiplied. In order to better understand how
firms might benefit from having a greater presence of firms from the same national origin present when
opening foreign subsidiaries, this study seeks to examine the micro-level benefits associated with
greater performance when operating in highly uncertain foreign markets. It suggests that coalitions of
firms that are best able to trust each other, fill institutional voids and benefit from information
exchange will be most dominate in a difficult foreign market environment. Drawing upon these
theoretical assumptions, we arrive at the following proposition:
Proposition 3: The weaker a country’s institutional environment, the higher the market share of
subsidiaries of the same national origin in any industry. In other words, most industries in weaker
institutional environments will be controlled to a higher degree by firms from fewer nations.
3. Proposed Methodology and Empirical Setting
The best setting for testing the above hypotheses is the CIS (Commonwealth of Independent States). As
former Soviet countries, all members of the CIS experienced a massive institutional shock in the early
1990s and opened their economies to various degrees. This shock presents a unique opportunity for
observing changes in these countries over time. Combining publicly available World Bank governance
data on the strength of institutions with our unique panel data set of Japanese subsidiary expansion
overseas, we seek to test our three hypotheses and expect results consistent with the theoretical
propositions elaborated above.
78
Dependent Variables: There are several dependent variables we seek to measure. In order to
empirically test Proposition 1 regarding the benefits of social ties and resource sharing among firms,
we seek to employ measures of market information exchange and cooperation.Following from our
arguments developed above, such cooperation with other firms of the same national origin is argued to
occur regardless of the industry in which they operate. As a proxy for this, we suggest the propensity of
Japanese subsidiary entry within and across industries increases as a result of positive feedback
mechanisms stemming from first movers, which we test in the context of our dynamic panel data set
across time. If we observe significantly increased entry in unrelated industries in countries with weaker
institutional environments as a result of first movers, we surmise based on our theory that institutional
deficiencies may be overcome through improved access to information afforded by higher levels of
trust and social capital in developing markets with weaker institutional environments.
In order to test Propositions 2 and 3, ourother dependent variable, subsidiary-level success in
competing in a particular institutional environment, is measured by market share in a given industry.
Given that data on subsidiary-level profitability is difficult to obtain, we follow both Tallman (1991)
and Rangan and Sengul (2009) by employing transnationals’ relative host market local sales. The
justification for using relative vs. absolute allows us to analyze outcomes for transnationals operating
across disparate industries, as well as across different host market environments.
With regard to subsidiary performance, we seek to test a continuous (0, 1) measure of foreign
transnationals’ relative host market performance in a given industry and market. A given
transnational’s host market local (non-export) sales are divided by total local sales achieved by foreign
transnationals operating in the same country and host market. Thus, we seek to estimate the following
log-linear function to test the objective performance of a transnational firm in a given industry and host
market:
log(sij/∑jnsij) = β(Xij) + γi + εij
In contrast to Rangan and Sengul, however, we need to measure the market share across industries. If
our hypotheses are correct, we should observe that market share increases both within and across
industries for firms from the same national origin. That is, firms from one country operating in one
industry will benefit other foreign firms from the same country vis-à-vis the mechanisms elaborated
herein.
An alternative approach could be to simply take the number of entries and registered foreign
subsidiaries present over time. This is much easier to observe, but it has the obvious limitation that we
don’t account for actual market share and true economic impact. Luckily, our dataset allows for
calculation of market share within specific industries. This study will also require an event history
analysis employing a hazard model for entries. If the hypothesized relations are correct, we should
observe that first movers are more likely to stimulate other firms from their home country to enter in
both the same and other, unrelated industries.
Key Independent Variables: Our crucial independent variable, institutional quality, can be obtained
from political science research. Researchers at the World Bank and other institutions have proposed
several well-regarded, quantitative measures of institutional quality at the country level.
Control variables: Naturally, we will need to employ numerous control variables. The most obvious
of these may be geographic proximity. According to a simple macroeconomic gravity model, firms are
more likely to trade with and operate in those which are physically closer. Thus, we need to account for
geographic distance when teasing out the true causal mechanisms driving our observed relationships.
Other control variables such as the level of economic development of a country (GDP), natural
resource possession, etc. should also be employed to account for as much non-institutional variation
across countries as possible. The benefit of using data from the CIS is that all countries had effectively
the same institutional starting point, making highlighting the effects of each of the countries enacting
various types of change much easier to observe. Since we are employing subsidiary-level data from one
country (Japan), cultural issues should not be a major factor. It might be argued, for instance, that
Turkish firms have an easier time expanding in Central Asia due to cultural similarity, but due to our
data coming from one country with a rather distant culture from all post-Soviet states, this becomes
much less problematic as an explanatory device.
4.
References
79
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management,
17, 99-120.
Burt, R. Brokerage and Closure: An Introduction to Social Capital. (2005). Oxford, UK: Oxford
University Press.
Coase, R.H. (1937). The nature of the firm.Economica, 4, 386-405.
Coleman, J. (1988). Social Capital in the Creation of Human Capital.American Journal of
Sociology, 94, 95-120.
Gatignon, H. & Anderson, E. (1988). The multinational corporation’s degree of control over
foreign subsidiaries: an empirical test of a transaction cost explanation. Journal of Law, Economics,
and Organization, 4, 305-336.
Granovetter, M.S. (1973). The strength of weak ties.American Journal of Sociology, 73, 13601380.
Granovetter M.S. (1985). Economic action and social structure: the problem of embeddedness.
American Journal of Sociology, 91, 481-510.
Jones, G. & George, J. (1998). The experience and evolution of trust: implication for cooperation
and teamwork. Academy of Management Review, 23, 531-546.
Khanna, T. and P. Palepu. (2000). Is group affiliation profitable in emerging markets? An analysis
of diversified Indian business groups.Journal of Finance, 55(2), 867-891.
McGoldrick, F., (1997). Expatriate compensation and benefit practices of us and Canadian firms:
survey results. International HR, 13– 17.
Podolny, J. M. (1994). Market uncertainty and the social character of economic
exchange.Administrative Science Quarterly 39: 458-483.
Podolny, J.M. (2001). Networks as the pipes and prisms of the market.American Journal of
Sociology, 107, 33-60.
Rangan, S. &Sengul, M. (2009). The influence of macro structure on the foreign market
performance of transnational firms: the value of IGO connections, export dependence, and
immigration links. Administrative Science Quarterly, 54, 229-267.
Seibert, S.E., Kraimer, M.L. &Liden, R.C. (2001).A social capital theory of career
success.Academy of Management Journal, 44, 219-237.
Tallman, S. (1991).Strategic management models and resource-based strategies among mnes in a
host market.Strategic Management Journal, 12, 69-82.
Williamson, O.E. (1981). The economics of organization: the transaction cost approach. American
Journal of Sociology, 87, 548-577.
Reports as Business Tools in Kazakhstani Companies
Farikha Yerzhanova
KIMEP University
[email protected]
Abstract: The aim of this paper is to contribute to understanding the practices of business reporting,
the types of reports used most commonly and the problems companies face in Kazakhstan. The paper
reports results derived from a study of 15 student projects performed on the course Business
Communications (MGT3201) on “Using Reports as Business Tools in Kazakhstani Companies”. The
study provides an insight into such major business reporting issues, such as a complexity, information
overload, and convergence of accounting standards, as well as real-time reporting. A paper provides a
number of recommendations to improve business performance through effective reporting on the
background emerginf trends.
Keywords: Report, Business tools, Communication, Business intelligence, Kazakhstan
1. Introduction
Reports are important method of getting information to the business people who need to make
decisions. This business information indicates whether a decision and action is required or not, whether
something is going wrong or not and the timing of the decision. Business report is important in many
regards because it is an epilogue which can be explored at ease. While many reports are historic, others,
such as budgets, forecasts and activity plans are forward looking, and can enable proactive rather than
reactive decision making.
The reports are the lifeblood of every organization. The management always likes to rely on reports,
accept their recommendations and suggestions if they are found workable as well as profitable. Thus
the report plays the great role in the planning and organization of the business.
80
2. What is the Importance of Business Report?
Business reports are written to communicate. Sometimes they are written as a means to attract investors
to an organization. Business reports are also written for employees to keep them abreast of a
company’s goals and achievements. The reports are produced regularly to comply with the regulatory
organizations. Whichever audience the report is written for, the purpose is to communicate specific
information about the business.
The reports help the businesses 1) to measure what is important, 2) to empower the people and 3) to
cater for individual needs.
2.1) Measure what is important
Key Performance Indicators (KPIs) are financial and non-financial metrics used to help an organization
define and measure progress toward organizational goals. KPIs are derived from the company’s
strategy and may be broken down into many subsidiary KPIs. Useful reports clearly support one or
more KPIs and if they do not then either the KPIs or the reports’ relevance need to be questioned.
Similarly, a KPI without any reports should raise suspicion. Astute businesses take a holistic approach
to reporting. They consider reporting in its entirety and develop a reporting framework on a number of
measures.
2.2) Empower the people
Information needs to be distributed and acted upon. At its base level, reports need to be delivered to the
people that can act on the information that it conveys. Consideration needs to be given to the ability of
employees to absorb and interpret information and turn it into useful action. Are all the people at each
level of your business getting all the information they need to make the decisions they are empowered
to make? If not, what is the ongoing cost to business? The answers to these questions will determine
whether reports need to be created, modified, culled, or redirected - and whether decision-making
powers need to be shifted up, down or around.
2.3) Cater for individual needs
Reports are not necessarily words on paper, and the presentation format will depend on who they are
presented to, for example, a formatted report for a junior sales clerk that can be easily ticked and
annotated, secure online account information for a bank customer to view in private, or a warning light
for a line worker. Generally, the higher the managerial level, the more summarized the report. However,
a good financial or operational system can present summary reports online with the ability for the user
to drill down through the data to investigate particular areas of interest, thus a single report can be used
by several users.
Information requirements change over time and best practice requires a continuous cycle of review and
improvement. Few reports are completely useful year after year, and cost of modification may also be a
factor when creating reports. As the business changes and grows, so the surrounding information needs
will also change. Maybe a skeleton report would be more useful than many specific reports so
employees can adapt it to their own needs.
3. Typical Business Reports
Business reports are generally tailored to major courses of study: accounting, finance, human resources,
marketing, information systems, management, and general business issues. The content, structure and
style of the business reports differ depending on the purposes and audience. The reports are grouped
into informational and analytical reports.
Informational reports provide required data or information about the things in a specific and
complete form. Informational reports include:
•
Periodic reports are most common in business practice. They help the management to make their
policies, procedures, operations, products according to the consumer requirement, so
management can decide how to develop their organization for more mutual benefits.
•
Situational reports are targeted at non-recurring situations. Unlike periodic reports, situations
that do not have a definite pattern of occurrence, e.g. trip convention and conference reports.
•
Progress and interim reports help measure the progress of activities.
•
Investigative reports are generally assigned reports which focus on examining a situation or
problem, e.g. report on doing business with a Russian company XYZ.
•
Compliance reports present data in compliance with local, state and national laws. Government
regulating agencies require organizations to submit reports verifying compliance with laws.
Usually answer the questions to how much profit, the organization earned and the taxes owed.
Analytical reports provide an insight into the problem, analysis of the issue and a set of findings,
conclusions and recommendations to management. They include:
•
Justification and recommendation reports make recommendations to management, provide data
to solve problems and make decisions, e.g. buying equipment; changing a procedure; hiring an
employee.
81
•
Feasibility reports analyze problems and predict whether alternatives will be practical or
advisable, help in decision making (among alternatives). For example, should we move to
another part of the country? Should we rent, lease or buy?
•
Yardstick reports. The term ‘yardstick’ issued in reference to anything which serves as a test or
standard of measurement, comparison or judgment. For example, comparison of different
manufactures for buying a piece of equipment.
•
Research reports present a problem statement, hypothesis, data and data analysis and a set of
conclusions and recommendations.
4. Kazakhstani Practice of Business Reporting
During 2009-2011 a number of student group projects were performed on the course Business
Communications (MGT3201) on “Using Reports as Business Tools in Kazakhstani Companies”. The
best 15 projects were the base to understand how business reports are utilized by companies and what
problems the companies face. These projects include public and private companies, national and
international, engaged in different industries such as transportation, pension funds, banks, consulting
and production.
The most common types of reports in Kazakhstani practice are communication documents and
informational reports: compliance reports (financial statements, reports to statistic and tax agencies),
progress (employee performance assessment by human resources unit) and periodic reports (activities
assessment by marketing, sales and production units). The other types of the reports also present,
however they are not wide-spread, non-recurring and also they are kept as confidential (e.g. feasibility
reports, research studies.
Generally speaking, the larger the company, the greater is the need to prepare written reports. As the
organization grows in complexity, so does the required degree of formal communication. While some
smaller companies may not write a great deal of business reports, larger companies use business reports
throughout the year.
A business report can be the best way a company has to communicate vital financial and background
information to others. It is of little use to formulate solutions to business problems without transmitting
this information to others involved in the problem-solving process.
Business Communication
The most utilized communication documents in Kazakhstani practice are letters, memos, and orders.
They are prepared according to the general requirements to style and format with some modifications
to language and presentation (some are written in one language, while others in two languages, e.g.
English-Russian, Kazakh-Russian). These documents are communicated both in hard copies and
electronically via e-mails and intranet. Due to an abundance of these documents received daily, there
are troubles with the proper response and also filing. The large corporations usually have regulations
on filing documents, while the small companies do have troubles with proper storage.
It seems that many business managers suffer from inadequate communication skills, particularly
writing skills, i.e. an ability to present an issue in a concise, but informative manner and tailored for a
targeted audience. As the business reports are quite often intended for a wide variety of different
audiences, it is critical that a person carefully identifies the audience for a report. Otherwise, it is likely
that the report will be misdirected and will be less effective. The managers should consider exactly
what the readers of the report already know and what they need to know to make informed decisions. A
report written for top executives will differ considerably from the prepared for line supervisors in terms
of style, word usage, and complexity. Even age, gender, and other demographic characteristics might
serve to shape the report.
Informational Reports
The compliance reports (financial statements, reports to statistic and tax agencies) are made in
Kazakhstan in accordance with the timing and format of the regulatory organizations and audit
companies, thus they do not differ much. There are differences only in the scope of activities and
nature of the business. The large and multinational companies do publish financial statements in their
corporate brochures and websites, while the smaller companies’ documents are less transparent.
Openness and transparency were the problems students faced when contacting the companies, many
mentioned in their projects that corporations regarded their reports as confidential issues.
All of the companies studied understand a significance of these reports as they show the results of
operations, revenues, expenses, and the profits or losses of the companies, as well as the financial
position and equity on a specific date.
Many of the project works contained an annual report, as it was named as the most important in
companies because it gives a lot of important information about them. Many understand that annual
reports help find out how well the company is doing, whether the company is making more money than
it is spending, and to get an idea of management’s strategic plan for the coming year. The companies
82
mentioned that a specific importance of the annual report relates to its presentation to shareholders and
the board, as well as to investors.
The other types of common reports are of an operational nature and differ much in the companies as
they are tailored to specific needs. The companies do report on their key performance indicators
(KazTransGaz-Almaty, Ernst and Young, Ular Umit), some on monthly and quarterly basis, some on
daily basis depending on how vital are the KPI changes to overall performance. For example,
KazTransGaz-Almaty measures and reports on such KPIs as sales and transportation of the natural gas,
while Ular Umit pension fund reports on fundamental capital, owners’ equity, investments income,
market share and structure of investment portfolio.
Many companies report on competitor performance (Price Waterhouse and Coopers), company
operations (sales, revenues, market share), employee performance, activities on specific events such as
conferences. The distribution, frequency, format and styles of these reports differ from company to
company, and even within the company. Overall, there is a lack in integrated approach to business
reports in the companies. There were only two companies that mentioned integrity in the reports
practice - Ernst and Young and KazTransGaz-Almaty.
Overall, many business reports are used daily to improve the quality of work performance. Annually,
management makes reports about the performance and decides about the new projects, upon this the
budget for the forthcoming year is made. Reports tell the past, present and future for the company. The
results in reports point out the distance that remains to reach corporate goals.
5. Results
The project works studied provide an insight into such major business reporting issues, such as
complexity, information overload, convergene of accounting standards, and real-time reporting.
5.1) Complexity of financial reporting
Complexity was identified as one of the main difficulties in financial reporting. Things like off-balance
financial accounts such that it has become difficult for many investors to trace the financial
performance of a business. If financial accounts are not prepared with the users in mind, then the
company risks a whole area of unaudited ‘shadow reporting’ being provided directly to investors. If
complexity is masking real issues, that is a real concern because that might result in less confidence.
Therefore, companies should genuinely try to produce financial accounts that are informative.
5.2) Information overload
Nowadays, the reports are long by necessity. As the accounting standards have got more complex,
analysts have needed more information to understand the numbers that they are focusing. Hence,
companies end up with about 400 pages in financial reporting, so that analysts are able to peel back that
information. On the other hand, the analysts say that the expanded disclosures are not used by investors.
The investors frequently ask for more quantitative and qualitative disclosures. An overload of detailed
information provides a problem for retail investors, many of whom lack the financial expertise or the
time for proper analysis.
5.3) International convergence of accounting standards
International convergence of accounting standards is valuable and desirable because it increases
international comparability. International convergence to one set of accounting standards would also
benefit multinational corporations. Although convergence is admirable, it should not be attained at the
expense of the quality. The priority should be to make the information in the accounts more relevant,
reliable, transparent, and consistent.
5.4) Real-time reporting
The financial reports show the past activities, while the operational reports show more real-time
activities that allow making the decisions to improve ultimately the financial outcomes. Most of the
problems managers face in the proper timing of the reports are made and received (see Figure 1).
6. Recommendations for Kazakhstani Companies
On the basis of the performed study a few basic strategies can be recommended for Kazakhstani
companies for improving business performance through effective reporting.
When writing reports, a writer should consider the audience it is written for, whether it is the CEO or
all staff concerned.
In writing reports, it is necessary to be precise, making the meaning as clear as possible so that it
accomplishes the desired purpose. The language used should be plain, as a meaning will be lost if the
words used are complex and do not lend to clear single meaning. Vagueness destroys accuracy which
leads to misunderstanding of the meaning or intent of the message. Accordingly, there is a need to be
specific and be to the point.
To obtain the best value from business reports and information systems, a company needs to:
• Measure what is important, question the assumptions;
83
•
Put information in the hands of the people who can make best use of it, and give them the
authority to make decisions based on that information;
• Cater for individual users’ requirements and provide them with information that is timely and
presented appropriately build strong information systems to support overriding strategy and
business information requirements;
• Train and empower employees;
• Pick the right reporting tools for the job;
• Keep questioning, optimize reports and processes as the business or environment changes;
• Follow a structured process in implementing change to ensure successful delivery of the
outcomes sought.
A business should evaluate the cost of not having the information; how the business will be affected
and consider the cost of inefficiency or poor decision making due to key information not being
available.
There are trends in business reporting that the corporations should take into account in business
reporting practice: requirements of more disclosure, integrated business reporting and application of
technologies.
6.1) The more disclosures required
One common criticism of companies’ financial reporting is that they failed to report certain matters in
their quarterly or interim financial reports. When it comes to corporate disclosures, the calls for change
seem endless. The investor community claim for more and better information to facilitate investment
decisions (Kelly, 1999). Companies, both on their own initiative and in response to new accounting
rules, have responded by expanding their financial statement disclosures and their reports of other
business measures. Technological innovation undoubtedly will demand that companies modify their
financial reporting and disclosure practices.
6.2) Integrated business reporting
There is a rising need for organizations to adopt integrated business planning. As a corollary, they need
to adopt as well integrated business reporting. The two are complementary and mutually reinforcing.
Integrated business reporting improves performance by bringing together operational and financial data
in a way that enables managers to make better decisions faster and more consistently (International
Federation of Accountants, 2010). Most IT departments now can deliver to business and finance users
the data they need soon enough, accurately and in the proper context. Having accomplished this,
corporations should focus on moving their management and financial reporting to the next level of
integration and effectiveness.
Every company routinely examines its operational and financial data. Many do some form of cost
accounting, and most variance analysis connects operating events to financial impacts. For example,
“Margins were narrower because of lower than normal yields and an unfavorable product mix.” But all
of this analysis is done weeks after the events occurred and its main focus is to explain financial
outcomes. What is still needed is to enable the people on the operational side to understand the
financial impact of the decisions they are making in the context of overall business objectives.
Integrated business reporting requires that companies not only collect all the needed data but also have
a way to easily bring it together. Data integration is an ongoing challenge in a majority of companies.
Managing the integration of financial and operational data for reporting should be a shared
responsibility of IT and business to ensure the data is accurate, synchronized and consistent. The IT
department’s role is to ensure the systems, data structures and other “plumbing” are in place, while
business units and the finance department must be part of an ongoing, periodic review process to
confirm that the operating and financial data are accurate, synchronized and consistent. This integration
must be automated; manual approaches are too inefficient and too error-prone to be workable.
6.3) Enabling technologies
The quality and completeness of the underlying business systems and database will often dictate the
quality and completeness of the reports that can be produced. There is a number of reporting tools
available, therefore a manager needs to select the right tool for the job. Having tools that work from
like technologies and platforms will facilitate the process tremendously. Some general considerations
with designing or evaluating of the information systems and reporting tools should include:
•
Open and integrated information systems and database. Ideally all business systems should be
integrated in one application, platform or database. This complete and accurate data store should
be the base of all reporting, ensuring one version of the truth.
•
Secure and scalable. The underlying technology needs to be flexible and have the ability to grow
with the business. Security and control of data and information is of paramount concern.
84
•
Cost effective data capture. Options can enable electronic capture of information at source rather
than manually re-keying e.g. bar code readers, electronic data interfaces. This creates
efficiencies, reduces errors and widens the depth of detail available for reporting.
•
Good reporting tools can make building reports much quicker and easier, or even give the report
users the ability to create their own. It is worth considering whether personalized reports give a
better feel for information than standard offerings, or whether time spent creating individual
reports might be better spent actually taking action in the business.
•
Spreadsheets enable financial data to be manipulated in a number of ways to get new insights
into the business. They should be dynamically linked to source data in the underlying
information system and have the ability to summarize financial data as well as drill back into
transactional detail. Spreadsheets are the preferred reporting environment by accountants and if
effectively used can be a powerful tool. Often spreadsheets are misused due to the inadequacy of
the underlying system or due to no better reporting options being available.
•
Forecasting and projections. Reporting tools and applications are available that assist the
business to predict future events rather than merely report history. Examples include sales
projections, cash flow forecasts, purchasing requirements, production planning.
•
Business intelligence tools (reporting and querying software, online analytical processing, digital
dashboards, data mining and warehousing, decision engineering) make it possible to merge a lot
more data and analyze it in more depth without overloading the user. Business intelligence tools
are good at identifying anomalies or trends that might otherwise have been missed.
•
Report distribution tools allow the efficient and timely distribution of reports. They can cater for
both push reporting and refresher information from a self-help online reporting environment.
The underlying technologies should always be subservient to the overriding strategy, desired business
processes and information needs of the business and users.
6.4) Business reporting on the Internet
Lymer, Debreceny, Gray and Rahman (1999) in their recent research paper found that technology has
altered irreversibly not only the physical medium of corporate financial reporting but also its traditional
boundaries. Paper reports are being supplemented – and, for many users, replaced – by electronic
business reporting, primarily via the Internet.
The rapidly developing Internet-based business reporting has created conditions that will have a
profound effect on the way accounting standard setting is traditionally conducted (Figure 1).
Traditional corporate reporting
model
Periodic
Highly aggregated
Historical,
background-looking
perspective
Focus on financial information
Current business environment
Real-time information flows
Disaggregated information
Requires flexibility and forward-looking,
strategic information
Focus on a broad range of performance measures
as indicators of success
Figure 1: Features of the traditional corporate reporting and current business environment.
Given that Web-based disclosure can provide information in many ways that can affect user
perceptions of the firm, this report suggests that form is becoming important and should receive
increased attention from standard setters. A code of conduct on such diversified Internet reporting
would ensure that accounting data stays relevant, reliable, and understandable to the information users.
Electronic networks such as the Web transcend national boundaries. Therefore business reporting on
the Internet is truly global in nature.
7. Conclusions
The paper reveals that the practice of business reporting is quite developed in the large and
multinational companies, while the reporting in smaller companies is limited to compliance reporting
to governmental agencies and financial statements.
The problems that persist in the companies include complexity, information overload, convergence. On
the background changes in the business environment that requires more up to date information, tailored
to different needs and available at a click of the mouse, the Kazakhstani companies should raise the
reporting at the next level with the use of integrated business reporting, enabling technologies and an
adequate transparency.
8. References:
1. Allen (2006), “Applied Statistics for Business and Economics”, Webster
2. Beattie, V. (2000), “The future of corporate reporting: a review article”, Irish Accounting Review,
7(1):1-36, viewed 10 March, 2012, <http://eprints.gla.ac.uk/829/1/Futcorprep.pdf>
85
3.
4.
5.
6.
7.
International Federation of Accountants (2010), “Business Reporting Through the Lens of the
Investor”,
Project
on
Business
Reporting
,
viewed
12
March,
2012,
<http://www.ifac.org/sites/default/files/downloads/3.0-Business-Reporting-Through-Lens-of-theInvestor-FINAL.pdf>
Kelly, H. (2000), “The Changing World of Business Reporting and Disclosures”, viewed 12
March, 2012, <http://10b5.pwc.com/PDF/HARVEY_ARTICLE.PDF>
Lymer, A., Debregency, R., Gray, G., Rahman, A. (1999), “Business Reporting on the Internet”,
viewed 12 March, 2012, <http://www.cs.trinity.edu/rjensen/Calgary/CD/iasb/busrepw.pdf>
Safrit, Z. (2009), “Which Report is the Important Report?”, viewed 12 March, 2012,
<http://smallbiztrends.com/2009/08/which-report-is-the-important-report.html>
Ventana Research (2009), “Time for Integrated Business Reporting”, viewed 12 March, 2012,
<http://www.itbusinessedge.com/cm/community/features/guestopinions/blog/time-for-integratedbusiness-reporting/?cs=35484>
Job satisfaction and organizational commitment in Kazakhstan
Maya Katenova
KIMEP University
Abstract:The purpose of the study is to identify whether Herzberg model of job satisfaction is
applicable in Kazakhstan. Such issues as job satisfaction and job dissatisfaction, organizational
commitment and work motivation have never been studies in Kazakhstan. Different researchers
conducted surveys on the above mentioned issue in the USA, UK, France, India and other countries.
The reason and justification of my choice is geographic location.
According to Herzberg (1959), intrinsic elements of the job are connected with the actual content of
work, such as recognition, achievement and responsibility. These were referred to as 'motivational'
factors and are important elements in job satisfaction. Alternatively, Herzberg described extrinsic
factors as elements associated with the work environment, such as working conditions, salary, class
size, staff assessment and supervisory practices, and benefits. These were referred to as 'context' or
'hygiene' factors which are primarily connected with job dissatisfaction. Herzberg concluded that
satisfaction and dissatisfaction are not on the same continuum. Hence, he argued that motivational
factors can cause satisfaction or no satisfaction, while hygiene factors cause dissatisfaction when
absent, and no dissatisfaction when present.
The sample includes 100 full time KIMEP employees. Questionnaires will be distributed during normal
working hours. The applicability of Herzberg model will be tested. The hypothesis stated says that
Kazakhstani employees identify motivational factors, which cause satisfaction or no satisfaction and
hygiene factors, which cause dissatisfaction when absent and no dissatisfaction when present.
Motivational factors are the most important ones while hygiene factors are not.
Key-words: Job satisfaction, organizational commitment, Herzberg model
Major forces affecting the pharmaceutical industry development in Kazakhstan
ZhansuluBaikenova
KIMEP University
[email protected]
DilbarGimranova
KIMEP Universty
[email protected]
Alma Alpeissova
KIMEP University
[email protected]
Abstract: Pharmaceutical industry in Kazakhstan represents about 10% of total local manufacturing and
90% of medicine is imported mostly from European countries. Currently the industry is growing annually
on 20% on average however facing serious challenge in regulating it. [1]
86
This paper aims to critically analyze the Kazakhstani pharmaceutical industry evolvement, present the
assessment of measures to address the industry issues and propose effective ways of the industry
management.
Key words: counterfeiting, pharmaceutical industry, industry development, healthcare
1. Pharmaceutical industry overview
It is believed that pharmaceutical industry growth is positively correlated with economic growth of
Kazakhstan. Other factor contributed to the growth are the improvement of local health care system
initiated in2010, budget increase for health medicare, strategies to develop local manufacturing
facilities, plans to increase local share in pharmaceutical products to50% by 2014 with the total size of
investment 200 mln dollars. Other factors include favorable tax regime, including absence of VAT,
eased registration procedure, lower cost for purchase of land and centralized tender procedure.
Overall the pharmaceutical industry can be considered attractive for new entrance due to its lower cost
of registration, countries political stability. However the industry is still highly competitive due to the
free inflow of pharmaceuticals from Russia because of Custom Union regulation and lack of
intellectual property rights protections. Currently the industry is represented by multinational players as
well as small and medium sized local companies while all of the them threatened by the expected
domination of SamrukKazyna.
Another disadvantage of being a pharmaceutical industry producer is drugs counterfeiting mainly
happening due to the fact that Kazakhstan represents a crossroad for illegal pharmaceutical products
coming from India, China, Russia, Ukraine, etc.US PDQAP define that number of counterfeit
medicines in Kazakhstan increased over the last three year. [2]
Mainly counterfeiting drugs are medicines against viruses, such as antibiotics. While in developed
countries those would be cholesterol lowering, against cancer drugs. Counterfeit manufactures may
produce generic or branded products, substances, fake packages and change concentration of
ingredients. [3]
Pharmaceutical industry institutions have been developing in line with the growth of pharmaceutical
industry, however they lagged behind the industry growth. Several strong institutionalizing measures
have been introduced since 2009 however those are still insufficient to effectively address the alarming
issue.
2. Results and conclusion
The analysis of pharmaceutical industry management system has revealed several challenges of supply
chain management including ineffective detection of counterfeiting medicines, lack of transparency of
counterfeiting events, and insufficient systemic relationships between institutions and pharmaceutical
companies.
Several measures to effectively approach counterfeiting issue shall be introduced. First, the
involvement and commitment of all the pharmaceutical industry supply chain players is required.
Second, strict regulations and adequate detective mechanisms of counterfeit productsare further to be
developed. Finally, the whole pharmaceutical industry supply chain management to be viewed as a
system where all participants have own contributing responsibilities.
3. References:
1. Kazakhstan Pharmaceuticals and Healthcare Report, Business Monitor International, 2011, Q4.
2. Kazakhstan Pharmaceuticals and Healthcare Report, Business Monitor International, Q4, 2009.
3. General Information on Counterfeit Medicines. WHO Programmes and Projects,
http://www.who.int/medicines/services/counterfeit/overview/en/index.html.
4. Baimbetova, O. TheAvailability of Medicines within the Context of WTO Entrance.
KazakhstanskiiPharmacevticheskiiVestnik. №2(342), 15.01.2010.
5. Counterfeit Internet Drugs Pose Significant Risks and Discourage Vital Health Checks,
ScienceDaily, http://www.sciencedaily.com/releases/2010/01/100120085348.htm,Jan.20, 2010.
6. Counterfeit
Medicines:
The
Silent
Epidemic,
WHO
Media
Centre,
http://www.who.int/mediacentre/news/releases/2006/pr09/en/index.html, 15.02.2006.
7. International Chamber of Commerce, Current and Emerging Intellectual Property Issues for
Business, Sixth edition, www.iccwbo.org/iproadmap, September 2005.
8. Rozkov, R., The means for strengthening of panic. “Money”, №10 (715), March 2009.
9. The economic impact of counterfeiting and piracy: Executive summary, OECD,
http://www.oecd.org/dataoecd/13/12/38707619.pdf,2007.
10. The EC’s Pharmaceutical Sector Inquiry Preliminary Report: Wading Into The Thicket of The
Antitrust/Intellectual Property Law Overlap, 2009, FIW – Innsbruck Symposium on Innovation
and
Competition
Law,
Innsbruck,
Austria,
http://www.ftc.gov/speeches/rosch/090226innsbruck.pdf,February 26, 2009.
87
Personality, risk perception and investment decisions:
A study on potential investors of Kazakhstan
Olga Pak, MBA, PRM
KIMEP University
[email protected]
Monowar Mahmood, Ph.D
KIMEP University
[email protected]
Abstract: The investors’ psychology is the most important factor that affects the individual perception
of the world and attitudes to the risk-taking. Risk – taking attitude, in turn, determines the investment
style. According to the efficient market theories, all investors are rational and value securities in the
same way. As a result, they follow the same investment pattern. However, the real life tells us that
market conditions only partially drive the individual investment decisions. Other factors such as
personality traits, financial literacy or past investment experience may contribute to the investment
decision process to the larger extent.
In this study, we will investigate the affect of individual’s personality on the investment
decision making process. We assume that personal traits, emotions, and existence of the past
experience or knowledge are the key determinants of the investor’s preferences. The research question
appears to us as timely and interesting in emerging markets such as Kazakhstan where the capital
markets are not so efficient and private investors groups almost do not exist. However, we believe that
the public IPOs of national companies in Kazakhstan that will start officially in the second quarter of
2012 will facilitate the emergence of private investors’ group.
We will conduct surveys among undergraduate business students who are potential investors in the
capital market’s securities. Differences in personalities will be measured by following the Big Five
model. Attitude towards risk is split in three dimensions: high risk, moderate risk and low risk also will
be measured through appropriate survey questionnaire. Statistical software, SPSS will be used to
analyze and interpret the data.
The results of this study will help to understand investors’ decision making and attitudes
towards risk and chosen investment strategies in Kazakhstan. It sheds the light on the importance of
financial literacy in the development of the domestic capital market. The results of this research may
also be useful for financial agencies which will serve private investors in Kazakhstan as well as for
potential investors’ themselves.
Academic motivation and personality traits among BCB students
Gulnara B. Moldasheva
KIMEP University
[email protected]
Abstract
Purpose - The purpose this of research to examine the association between academic motivation and
personality among the students of the Financial Modeling course in Kazakhstan.
Design/Methodology/Approach – Using the Academic Motivation Scale, reported college grade point
average(GPA), correlation analysis, multiple regression analysis the study examined cross-sectional
differences in personality traits and academic motivational drivers across the 210 college students,
completed the course Financial Modeling. Multiple regressions compares three types of intrinsic
motivation, three types of extrinsic motivation, and amotivation to five personality factors.
Findings – the results should indicate those who were intrinsically motivated to attend college tended
to be extraverted, agreeable, conscientious, and open to new experiences; although these trends varied
depending on the specific type of intrinsic motivation. Those who were extrinsically motivated tended
to be extroverted, agreeable, conscientious, and neurotic;
depending on the type of extrinsic
motivation. Those who lacked motivation tended to be disagreeable and careless. These results should
suggest that students with different personality characteristics have different reasons for pursuing
college degrees and different academic priorities. Moreover, even when differences will observed,
these should relate more to college specifics and complexities of the course.
88
Research limitations/implications – One of the key limitations is the use of cross-sectional data. To
further explore this issue, it would be interesting to undertake a longitudinal study to assess personality
preferences and academic motivational drivers of the different students majors, when the participants
are at the approximately same age or the same point in their career.
Practical implications – The research emphasizes the importance of managing individuals by
focusing on individual differences rather than relying on stereotypes, which may not be
as prevalent as the existing literature suggests.
Originality/value – One of the major contributions of this study is that the findings will help educators
to take appropriate measures in selecting appropriate learning strategies for different personality types
of students, and encourage and nurture students learning motivation for better academic performance.
Such type of research was never done in Kazakhstan for the pro- American college students as a BCB
at KIMEP University.
Keywords - Academic motivation, Big Five personality traits, Intrinsic motivation, Extrinsic
motivation, Achievement
Paper type - Research paper
1. Introduction
Several studies have shown that academic motivation is a key determinant of academic performance
and achievement (Green, Nelson, Martin, & Marsh, 2006; Linnenbrink & Pintrich, 2002). By our
opinion, a greater understanding of academic motivation and its correlates can provide instructors with
valuable information regarding how students adjust to the course setting. Much of the research
regarding academic motivation focuses on its relationships with academic performance, approaches to
learning, and thinking styles. However, several researchers have suggested that personality factors are
also related to motivation and have great implications for how students learn scholastic material .
Understanding students' motivations for attending course can offer a surprise into their way of coping
with various stressors and how they will fare academically. Academic success is strongly influenced by
individual differences in motivation and achievement. Prior research has focused mostly on academic
achievement among young students, and provides no clear and consistent evidence regarding the extent
to which personality traits relate to academic motivation and achievement. This study addresses these
gaps by examining the relationship between the Big Five traits described by the Five Factor model of
personality academic motivation, and academic achievement among BCB college students in KIMEP.
In presented research we are trying to examine the association between academic motivation and
personality among the students of the Financial Modeling course. This course is delivered for the
KIMEP’s students over 5 years. The great interest to this course among BCB students of KIMEP in
spite of their majoring in Finance , Accounting, Management , or even in Public Administration and
Marketing intended us to examine the relationships between personality and academic motivation .
This course is quit new and is more fitting to new technologies learning style, since all classes are
delivered in computer classes with the using of internet resources and different soft-ware programs
during the course ‘learning life. Not only are the academic demands more difficult, but students must
also learn to be self-starters when it comes to attending classes and completing assignments on time.
Each student has own assignment for every week, and completing of the assignment will depend from
endowing efforts. In light of their new found freedom, students' academic motivations will largely
dictate the choices they make and whether or not they meet these different standards and expectations.
We are going to do multiple regressions compared three types of intrinsic motivation ( To know,
Accomplishment and Simulation), three types of extrinsic motivation (External Regulation, Introjected
Regulation and Identified Regulation) and amotivation ( just only to get the passing grade) , based on
Self-Determination Theory of Motivation to five personality factors: extraversion, agreeableness,
conscientiousness, neuroticism, and openness to new experiences.. Results should indicate that those
who were intrinsically motivated to attend the course tended to be extroverted, agreeable, conscientious,
and open to new experiences; although these trends varied depending on the specific type of intrinsic
motivation. Those who were extrinsically motivated tended to be extroverted, agreeable, conscientious,
and neurotic; depending on the type of extrinsic motivation. Those who lacked motivation tended to be
disagreeable and careless. Expected results should suggest that students with different personality
characteristics have different reasons for pursuing KIMEP degree and different academic priorities.
2. Methodology
210 undergraduates from various majors who were completed the course of Financial Modeling in
from Spring 2010 to Spring 2012 will be interviewed for Academic Motivation Scale ( AMS),
demographic dates (gender, age, major) and the self-report measure of their current GPA..AMS will be
modified for appropriation to BCB students. The AMS-C 28 (Vallerand et al., 1992, 2004) is a 28 item
measure of academic motivation used to determine reasons why students attended college. Its sevenfactor structure is based on Deci and Ryan's (1985) self-determination theory. The seven subscales are
89
comprised of (a) three measures of intrinsic motivation: intrinsic motivation to know (IM to know),
intrinsic motivation toward accomplishments (IM to accomplish things), and intrinsic motivation to
experience stimulation (IM to experience stimulation); (b) three measures of extrinsic motivation:
identified regulation, introjected regulation, and external regulation; and (c) amotivation. Although
each subscale is measured by only four items, the reliability and validity of the AMS-C 28 has been
established with measures of internal consistency, test–retest reliability, concurrent validity, and
construct validity (Vallerand et al., 1992, 1993).
should indicate those who were intrinsically motivated to attend college tended to be extraverted,
agreeable, conscientious, and open to new experiences; although these trends varied depending on the
specific type of intrinsic motivation. Those who were extrinsically motivated tended to be extroverted,
agreeable, conscientious, and neurotic; depending on the type of extrinsic motivation. Those who
lacked motivation tended to be disagreeable and careless. These results should suggest that students
with different personality characteristics have different reasons for pursuing college degrees and
different academic priorities. Moreover, even when differences will observed, these should relate more
to college specifics and complexities of the course.
4. Conclusion
The relationship between personality and academic motivation should demonstrate that students have
different priorities and academic expectations. Knowing that students require different incentives for
getting through college, it is possible for instructors, academic counselors, parents, and students
themselves to devise teaching, planning and learning strategies that are tailored to individual needs.
However, more specific implications from this study suggest that intrinsic academic motivation should
be categorized as three subfactors rather than as a single factor. Also we expect that indication of
student’s personality will help to educators to develop the courses according with their academic
motivation and achievements.
5. References
1. Beaudoin, C. M. (2006). Competitive orientations and sport motivation of professional women
football players: An internet survey. Journal of Sport Behavior, 29, 201−212
2. Chamorro-Premuzic, T., & Furnham, A. (2003). Personality predicts academic performance:
Evidence from two longitudinal samples. Journal of Research in Personality, 37, 319−338.
3. Conard, M. A. (2006). Aptitude is not enough: How personality and behavior predict academic
performance. Journal of Research in Personality, 40, 339−346.
4. Costa, P. T., & McCrae, R. R. (1986). Cross-sectional studies of personality in a national sample: I.
Development and validation of survey measures. Psychology and Aging, 1, 140−143.
5. Costa, P. T., & McCrae, R. R. (1992). NEO PI-R: Professional manual: Revised NEO PI-R and
NEO-FFI. Florida: Psychological Assessment Resources, Inc.
6. Cury, F., Elliot, A. J., Da Fonseca, D., & Moller, A. C. (2006). The social-cognitive model of
achievement motivation and the 2×2 achievement goal framework. Journal of
Personality and
Social Psychology, 90, 666−679.
7. De Guzman, I. N., Calderon, A., & Cassaretto, M. (2003). Personality and academic achievement in
university students. Revista de Psicologia, 21, 119−143.
8. Deci, E. L., & Ryan, R. M. (1985). Intrinsic motivation and self-determination human behavior.
New York: Plenum.
9. Deci, E. L., Vallerand, R. J., Pelletier, L. G., & Ryan, R. M. (1991). Motivation and education: The
self-determination perspective. Educational Psychologist, 26, 325−346.
10. Dollinger, S. J., & Orf, L. A. (1991). Personality and performance in “personality”:
Conscientiousness and openness. Journal of Research in Personality, 25, 276−284.
11. Duckworth, A. L., & Seligman, M. E. P. (2005). Self-discipline outdoes IQ in predicting academic
performance of adolescents. Psychological Science, 16, 939−944
12. Farsides, T., &Woodfield, R. (2003). Individual differences and undergraduate academic success:
The roles of personality, intelligence, and application. Personality and Individual Differences, 33,
1225−1243
13. Green, J., Nelson, G., Martin, A. J., & Marsh, H. (2006). The causal ordering of self-concept and
academic motivation and its effect on academic achievement. International Education Journal, 7,
534−546.
14. Harackiewicz, J., Barron, K., Tauer, J. M., & Elliot, A. J. (2002). Predicting success in college: A
longitudinal study of achievement goals and ability measures as predictors of interest and
performance from freshman year through graduation. Journal of Educational Psychology, 94,
562−575.
90
15. Judge, T. A., Jackson, C. L., Shaw, J. C., Scott, B. A., & Rich, B. L. (2007). Self-efficacy and
work-related performance: The integral role of individual differences. Journal of Applied
Psychology, 92, 107−127.
16. Komarraju, M., & Karau, S. J. (2005). The relationship between the Big Five personality traits and
academic motivation. Personality and Individual Differences, 39, 557−567.
17. Komarraju, M., Karau, S., & Schmeck, R. (2009). Role of the Big Five personality traits in
predicting college students' academic motivation and achievement. Learning and Individual
Differences, 19, 47−52.
18. Linnenbrink, E. A., & Pintrich, P. R. (2002). Motivation as an enabler for academic success.
School Psychology Review, 31, 313−327.
19. Marsh, H. W., Craven, R. G., Hinkley, J. W., & Debus, R. L. (2003). Evaluation of the Big- TwoFactor Theory of academic motivation orientations: An evaluation of jinglejangle fallacies.
Multivariate Behavioral Research, 38(2), 189−224.
20. Noftle, E. E., & Robins, R. W. (2007). Personality predictors of academic outcomes: Big five
correlates of GPA and SAT scores. Journal of Personality and Social Psychology, 93, 116−130.
21. Ozer, D. J., & Benet-Martinez, V. (2005). Personality and the prediction of consequential
outcomes. Annual Review of Psychology, 57, 401−421.
22. Payne, S. C., Youngcourt, S. S., & Beaubien, J. M. (2007). A meta-analytic examination of the
goal orientation nomological net. Journal of Applied Psychology, 92, 128−150.
23. Ridgell, S. D., & Lounsbury, J. W. (2004). Predicting academic success: General intelligence, “Big
Five” personality traits, and work drive. College Student Journal, 38, 607−618.
24. Robbins, S. B., Lauver, K., Le, H., Davis, D., Langley, R., & Carlstrom, A. (2004). Do
psychosocial and study skill factors predict college outcomes? Psychological Bulletin, 130,
261−288.
25. Ross, S. R., Rausch, M. K., & Canada, K. E. (2003). Competition and cooperation in the fivefactor model: Individual differences in achievement orientation. Journal of Psychology, 137,
323−337.
26. Vallerand, R. J., Pelletier, L. G., Blais,M. R., Brière, N. M., Senècal, C., & Vallières, E. F. (1992).
The Academic Motivation Scale: A measure of intrinsic, extrinsic, and amotivation in education.
Educational and Psychological Measurement, 52, 1003−1017.
27. Wagerman, S. A., & Funder, D. C. (2007). Acquaintance reports of personality and academic
achievement: A case for conscientiousness. Journal of Research in Personality, 41, 221−229.
Self-Employment in a Post-Soviet Economy: Entrepreneurship and Gender Differences in
Kazakhstan
Paul J Davis
KIMEP University
Fatima Abdiyeva, MBA student
KIMEP University
Abstract
Purpose: To examine the experiences and perceptions of male and female entrepreneurs in Kazakhstan
and to discuss the Kazakhstani experience of entrepreneurship in relation to the findings of similar
gender-focused entrepreneurial studies in other societies.
Design/methodology/approach: 60 male and female entrepreneurs completed a self-administered
questionnaire distributed to their businesses.
Findings: The research discovered that there were several noticeable differences in the reported
experiences and perceptions of male and female entrepreneurs in Kazakhstan compared with those of
entrepreneurs elsewhere but there were also many similarities between them. The differences between
male and female entrepreneurs in Kazakhstan were similar to entrepreneurial gender differences in
other societies.
Research limitations/implications: This research project was an exploratory pilot study and as such
was limited in sample size; geographical reach (only entrepreneurs in Almaty were surveyed) and data
sought. There are potential implications for young Kazakh citizens considering entrepreneurship as a
career, for institutions that provide services to entrepreneurs in Kazakhstan and for government policy
makers.
Originality/value: This is the first research project that has sought to identify the extent and nature of
any gender-differences among Kazakhstani entrepreneurs.
91
Keywords: gender differences; entrepreneurship; small business; Kazakhstan;
Paper type: Research paper
Note
This research project is based on an exploratory, pilot study. The author acknowledges that the sample
size is too small a percentage of Kazakhstani entrepreneurs for the purposes of drawing any valid
conclusions on the data collected. A much larger survey would need to be conducted for a
representative sample to be captured ideally along with focus groups / interviews. This project was
designed as a preliminary look at entrepreneurship in Kazakhstan; a first step, and further, more
comprehensive research on the topic should be conducted.
1. Introduction
The investigation of the existence and prevalence of gender differences in entrepreneurship has
received significant attention from researchers for a number of years. It is notable, therefore, that there
remains much debate on the topic. The crux of this debate has two focal points. Firstly, whether there
are, in fact, significantly observable differences between male and female entrepreneurs. Secondly,
whether any observable gender differences can definitively be said to result as an inherent consequence
of gender. The counter argument to the second point is that differences between men and women small
business owners stem not from gender per se but from external factors that impact differently, and
often unequally, on men and women. These factors are sometimes ignored and so the simplistic
conclusion that men and women intrinsically make different choices as small business owners or are
simply ‘different by nature’ is drawn. This paper will present the findings from a new study of
Kazakhstani entrepreneurs and, in so doing, explore the two aforementioned points.
The majority of research concerned with gender differences in entrepreneurship has focused either on
western countries or other English-speaking countries (Orhan and Scott, 2001). Relatively little
research has explored these issues as they pertain to transitioning economies and, as far as can be
ascertained, no other study exists of gender differences and entrepreneurship in Kazakhstan. It is noted
that those research studies that have found few gender differences among entrepreneurs have nearly all
been conducted in industrialized countries (Orhan and Scott, 2001). This paper provides a first look at
the experiences and perceptions of Kazakhstani entrepreneurs. Kazakhstan is a fast developing, new
country which has positioned itself as a regional hub for commerce and banking. As such it presents
itself as an interesting and increasingly important place for entrepreneurial research in particular and
academic investigation generally.
2. Kazakhstan
This year marks the twentieth anniversary of Kazakhstan’s independence. Prior to 1991 Kazakhstan
was part of the Soviet Union. Kazakhstan is situated in Central Asia along with Kyrgyzstan,
Uzbekistan, Tajikistan and Turkmenistan. It shares a border with China to the East, Kyrgyzstan and
Uzbekistan to the South, the Caspian Sea to the East and Russia to the north.
Since its inception, Kazakhstan has been led by President Nursultan Nazarbayev who has overseen the
country’s rapid economic development and transformation from a Communistic centrally planned
society to a tentative free market economy. The country has a population of approximately sixteen
million but is about the size of Western Europe. Gross National Income (GNI) per capita is US$6,740.
Kazakhstan is a predominantly Muslim country operating a moderate, secular form of Islam similar to
Turkey.
Kazakhstan emerged from the Soviet Union in a far better position than its neighbors. The country
enjoys significant natural resources, especially large oil reserves, and bountiful productive farmland.
What Kazakhstan did not inherit was a culture of entrepreneurship. Only in the dying days of the
Soviet Union were laws passed to legalize private enterprise. The legacy Kazakhstan inherited from
seven decades of Soviet governance was a corrupt and inefficient bureaucracy, a central planning
mindset and under-developed infrastructure (Tovstiga et al., 2004). In light of this, Kazakhstan’s
progress towards a small business-friendly culture in just twenty years is surely remarkable.
According to Teal et al., (2011) there are 140,000 small businesses in Kazakhstan today and that this
figure doubled during the period 2005-10. The authors also note that 90 per cent of businesses in the
country are family owned and 50-60 per cent are some type of trading entity. It is also significant to
note that the southern city of Almaty is the center of small business in the country (Teal et al., 2011) as
this is where the research presented in this paper was conducted.
92
3. Literature Review
Many researchers have concluded that there are no significant differences between the choices and
characteristics displayed by male and female entrepreneurs. Tillmar (2007) argues that this is the
conclusion that can be drawn from most studies and that it is contrary to expectations. As examples; Yu
(2011) points out that male and female entrepreneurs are more similar than they are different in terms
of their personal attributes. Similarly, Tan (2008) studied Chinese entrepreneurs and also concluded
that self-employed men and women share similar character traits such as aggressiveness while in a
Polish study, Zapalska (1997) found no discernable differences in character traits between male and
female small business owners. Buttner (2001) found a number of common, shared characteristics
among male and female entrepreneurs including need for achievement; innovativeness and
independence.
Similar conclusions have been drawn by researchers looking at a range of other aspects of the role
played by gender in entrepreneurial activity. For example; Maxfield et al., (2010) found that women
and men have the same propensity for risk taking and that women’s motivations for taking risks in
business are the same as for men. Further, the authors found little evidence for a particularly female
decision making process. In a UK study it was discovered that there was no significant difference
between male and female entrepreneurs in raising the finance for a new business venture (Irwin and
Scott, 2010). However, only 26 per cent of respondents in the study were women and the authors do
not reveal whether the women had difficulty acquiring external financing. It could be that the 72 per
cent of women in the study who commenced their business using their personal savings did so because
they could not secure other finance. Certainly, the evidence from many studies is that women do find it
more difficult than men to raise capital to start a business (World Bank, 2011; Weeks, 2009; Singh and
Belwal, 2008; Brindley, 2005; de Bruin and Flint-Hartle, 2005; Hisrich and Fulop, 1994).
Tan (2008) found that the business start-up experience is the same for men and women and that women
have no specific difficulties in starting a business in comparison with men. While this may be the case
in China, it will be discussed in the following paragraphs that there is very substantial evidence to
suggest that women do indeed face particular difficulties in acquiring debt capital to commence a
business venture. Tan (2008) also concluded that men and women network the same and that there are
no differences in the effectiveness of their networks. Again, much evidence as will be presented from
many other countries specifically highlights networking as a major gender difference in entrepreneurial
experiences. In a different Chinese study of gender and entrepreneurship, Yu (2011) found no
significant difference in education level between men and women in business. Again, China appears to
differ from the vast proportion of the research which indicates that women entrepreneurs tend to be
better educated than their male counterparts (Weeks, 2009; McClelland et al., 2005; Cowling and
Taylor, 2001; Hisrich and Ozturk, 1999; Zapalska, 1997;).
The greater part of the research, however, represents that there are numerous and significant gender
differences among entrepreneurs. Some studies present these differences as evidence that men and
women behave, choose, act or decide differently along gender lines. Others argue that gender
differences are the consequence of discrimination and inequality that limits the opportunities women
entrepreneurs can exploit. This discrimination is what Malach-Pines et al., (2010) say is important
because it explains how gender makes a difference rather than whether it makes a difference (my
italics).
Indeed, the very premise that gender itself can be reliably cited as an explanation for how and why men
and women entrepreneurs come to be different business people is questionable. Tillmar (2007)
criticizes the literature which concludes that the training needs of male and female entrepreneurs are
essentially the same. She goes on to say that training needs do differ along gender lines but the reasons
stem from exclusion, disadvantage and the nature of the business being operated rather than simply
being gender based. Tillmar goes on to say that women entrepreneurs are not a homogenous group;
rather they are diverse in every aspect. This further highlights the simplification of explaining gender
differences without a broader context.
The tendency of some writers to characterize learned skills as inherent traits and then divide them into
masculine and feminine sub-sets has also been challenged. Bruni et al., (2004) give the example of
‘innovation’ as something that can be attained and developed as one such capability often treated as an
intrinsic trait. The authors argue that this practice has served to emasculate entrepreneurship and
sideline women with traits not perceived as valuable to entrepreneurship so that they become second
class entrepreneurs who must try to adopt masculine traits if they wish to be successful entrepreneurs.
Zapalska (1997) provides an example of this mode of thinking by claiming that most characteristics
associated with successful entrepreneurship are masculine including: competitiveness; proactivity;
93
independence; decisiveness and self-confidence). Zapalska goes on to say that unless women adopt
these masculine characteristics they will be less successful in business.
Brush et al., (2009) argue that women experience distinct and specific life events which influence
many of the experiences they have as they become entrepreneurs. They give the example of child
rearing and domestic work which necessarily influences a woman’s priorities and the time she has to
devote to self-employment. This in turn dictates what kind of businesses a woman is able to operate.
For example; with child rearing and domestic duties a business that requires a lot of travel (such as
some sales work or consulting) is far more difficult to pursue. Therefore, studies which simply state
that women seem to choose a narrow band of often home-based industries when starting a business fail
to identify the source of these ‘choices’. In many instances, it is more a case of lack of choice. MalachPines et al., (2010) make a similar point in relation to women’s ability to even start a business. They
say that subjective, perceptual variables significantly influence a woman’s ability to be an entrepreneur.
One example of this could be attracting investors needed to launch a new business.
This paper will now turn to the entrepreneurial gender differences different studies have highlighted.
The literature seems in agreement that men constitute a much bigger proportion of the entrepreneurs in
most societies than women but that the rate of female entrepreneurship is growing faster than that for
men (Hisrich and Ozturk, 1999; Lee, 1999; Jamali, 2009). In Singapore, for example, in the past twenty
years women entrepreneurship has grown by 80.3per cent compared with 65.6 per cent for men (Lee,
1999).
Another point on which there is a lot of consensus is that women entrepreneurs are more educated than
their male counterparts (Yu, 2011; Cowling and Taylor, 2001; Hisrich and Ozturk, 1999; Zapalska,
1997). These papers note that women business owners tend to have more business degrees than men
and tertiary qualifications in general. Women owned businesses are also generally smaller than those
run by men in most societies (Alam, et al., 2011; Yu, 2011; Roomi, et al., 2009; Ndemo and Maina,
2007; Orhan 2001). There is a greater number of microbusinesses operated by women and a greater
number of women sole traders. For example; a study of six sub-Saharan African countries found that
two-thirds of the women-owned businesses were micro enterprises (Ndemo and Maina, 2007).
Similarly, Al-Alak and Al-Haddad (2010) discovered that 66 per cent of the women-owned businesses
they studied had nine or less employees. Indeed; seventy-five per cent of those businesses were homebased.
Financing is another area of entrepreneurial activity which has revealed a difference between the
experiences of men and women. Women find it more difficult than men to secure external financing
and, as a consequence, start businesses with less capital (Davidson, et. al., 2010; Tambunan, 2009;
Brindley, 2005). Still and Walker (2006) found that in an Australian study 67 per cent of women
started their business with personal savings while only 24 per cent used bank financing. One in five
women in the study reported difficultly attracting financing to start their business. The problem appears
to be pervasive; Gatewood et al., (2008) found that even well educated, experienced and proven
women entrepreneurs have difficulty securing bank financing for their businesses.
Researchers have focused much attention on what drives men and women to become entrepreneurs.
People become entrepreneurs, it seems, as a consequence of push and pull factors. Push describes those
circumstances which force or compel people into entrepreneurship. For example; lack of alternatives;
losing one’s job; financial survival. Pull factors are the opposite; these are circumstances which attract
or entice people to entrepreneurship. Examples of pull factors are; exploiting a gap in the market;
having something to do to fill spare time; satisfying a need to use one’s skills or talents. Most studies
postulate that women are generally pushed into entrepreneurship while men are generally pulled
towards entrepreneurship (Malach-Pines, et al., 2010; Nagarajan et al., 2009; Still and Walker, 2006;
Zapalska, 1997). One reason for this is that female entrepreneurship is much higher in countries where
income per capita is low and unemployment high and so financial necessity is commonly advanced as a
reason why many women become self-employed (Malach-Pines et al., 2010). Conversely, male
entrepreneurship is higher in western countries where social security payments not only prevent people
from slipping into abject poverty but provide, albeit undesirable, an alternative to self-employment.
Male business owners have also been said to possess disproportionately more social capital than female
business owners. Moreover, women leverage what social capital they do have less effectively than men
(Farr-Wharton and Brunetto, 2009). Social capital such as experience, social networks and affiliations
are important because they influence the range and nature of businesses that individuals can operate
and they create opportunities for individuals. Jamali (2009) cites this as a reason why so many women
are concentrated in small, low-growth, service and sales businesses although Brindley (2005) suggests
94
women are better at self-screening than men and so start businesses which they are most confident will
be satisfying and successful. Irrespective, those with higher levels of social capital discover more
business creation and growth opportunities (Gonzalez-Alvarez and Solis-Rodriguez, 2011) and
therefore social capital helps explain some of the disparities observable between male and female
entrepreneurs.
Social capital is not the only factor researchers have identified as a barrier to female entrepreneurship
and a differentiator between male and female small business owners. Women in many societies, unlike
men, struggle against overt and covert discrimination; sexual stereotyping; legally and socially
embedded prejudices and diminished rights (Tan, 2008; Ndemo and Maina, 2007). The combination of
all barriers appears to conspire to largely limit women to just a few entrepreneurial paths and this
seems to be true in both wealthy, western industrialized nations and poorer, less developed nations in
Africa and Asia. Female owned businesses are very significantly concentrated in personal services;
administration; retail; non-scalable and non-durable manufacturing; sales and small scale laborintensive agriculture (Dzisi, 2008; Lituchy and Reavley, 2004; McElwee and Al-Riyami, 2003; Hisrich
and Ozturk, 1999) while male owned businesses are spread more equally across a broader range of
industries.
Some studies have highlighted differences between the motivations of male and female entrepreneurs.
Brindley (2005) found that women nominated autonomy as a business motivator more than men while
Farr-Wharton and Brunetto (2009) found women are less motivated by business growth than men and
more motivated by long-term survival. Similarly, Zapalska (1997) found that women were far more
motivated by long-term wealth accumulation than quick financial gains than were men. A study of
French entrepreneurs (Orhan, 2001) also discovered some notable differences among the motivators
driving male and female entrepreneurs. Women placed less emphasis on social status; power and
prestige than men and much more emphasis on economic development and creating jobs than did the
male respondents.
Finally, gender differences have been observed in the way male and female entrepreneurs manage and
lead their businesses. Women have been found to adopt a more participative and collaborative
leadership style than men with maintenance of cooperative relationships more important to women than
men. Yu (2011) discovered that women entrepreneurs are far more likely than men to make important
business decisions in consultation with their managers. Orhan (2001) expresses this as a preference for
creating harmony with others by nurturing positive relationships with employees. In the same vein,
Farr-Wharton and Brunetto (2009) state that women adopt a relational approach to leading their
businesses through building trust and encouraging involvement. An Israeli study (Dafna, 2008) found
that women were people-oriented in their leadership style while men were more goal-oriented. In a
United States study male entrepreneurs were found to use a mild form of ‘command and control’ to
achieve business objectives while women preferred to use employee involvement (Nixdorff and Rosch,
2010).
This can broadly be summarized as the difference between transformational leadership and
transactional leadership. Indeed, Tibus (2010) found a relationship between a woman owning a
business and an increase in transformational leadership behaviors. Buttner (2001) found that women
tended to be more transformational than men in their leadership because they often have better
developed interpersonal skills.
4. Research Project and Findings
A self-administered survey was distributed to sixty small business owners who expressed interest in
participating in the research. The survey was designed in English and translated into Russian. The
objective of the survey was twofold: to elicit information on some of the dominant gender themes in
entrepreneurship study for the purpose of comparison with earlier research and to explore possible
gender differences in entrepreneurship specific to Kazakhstan. According to Hisrich and Drnovsek
(2002) there are four dominant lenses through which to examine entrepreneurship: individual; process;
organizational and environmental. This research project was designed to incorporate the individual
aspect with the environmental. The individual aspect allows for comparison between this study and a
large portion of the earlier research while the environmental aspect facilitates the exploration of
entrepreneurship relevant to the development of Kazakhstan.
The survey had four sections. The first section sought basic demographic information on the small
businesses. The second section of the survey was designed to identify the most significant challenges
faced by Kazakhstani entrepreneurs in operating and growing their businesses. Section three of the
survey asked survey respondents to identify whether conditions had changed over the past ten years to
95
make business easier to conduct in Kazakhstan. The fourth section of the survey asked entrepreneurs to
nominate how important different business motivators were to them.
The first section revealed a number of differences between male and female entrepreneurs in
Kazakhstan. Men were almost twice as likely to own construction firms as women while 39 per cent of
the women owned businesses providing personal services. It was found that no male respondents
owned personal services businesses. The percentage of men and women that owned a retailing business
was almost exactly the same. In relation to business size, all of the women owned businesses had 30
employees or less while only half of the men owned businesses had 30 employees or less. 60.7 per cent
of the women owned businesses were microbusinesses with ten employees or less. 40.6 per cent of the
men owned businesses were microbusinesses. In terms of longevity, 57.1 per cent of the women owned
business had existed for two years or less while only 31.2 per cent of men had been in business for less
than two years. 7.1 per cent of women had had their business for eleven years or more while 37.5 per
cent of men had owned their business for at least eleven years.
Generally, the findings suggest that women in Kazakhstan find operating and growing a small business
more of a challenge than men. For example; 92.8 per cent of female respondents reported getting bank
finance to grow their business as a challenge while only 62.5 per cent of men found it a challenge. 64.2
per cent of women respondents said licensing and paperwork were a business challenge compared with
43.7 per cent of men. Government bureaucracy was considered one of the biggest business challenges
by 92.8 per cent of women and 75 per cent of men. Managing the laws governing hiring and firing
employees was similarly more a challenge for women than men (28.5 per cent and 12.5 per cent
respectively).
The business challenges which were experienced by men and women almost equally were: raising the
capital to start a business (64.2 per cent of women and 56.2 per cent of men) and administering labor
law that governs employee working conditions (35.7 per cent of women and 37.5 per cent of men). The
only business challenge which men experienced significantly more than women was meeting the
expectations of customers (35.7 per cent of women; 62.5 per cent of men).
Section three of the survey asked respondents to agree or disagree with nine statements about whether
it had become easier to do business in Kazakhstan over the past ten years. The women were noticeably
more positive than men about the improved business environment. On all nine statements at least half
the women respondents agreed that the business environment in Kazakhstan had improved in recent
years. Not one of the nine statements had half of the male respondents agreeing that the business
environment had improved.
The improvements felt by the most number of women entrepreneurs were: less bureaucracy connected
with starting and running a small business (78.5 per cent); easier to hire and fire employees (64.2 per
cent); bank finance has become easier to obtain (64.2 per cent). The improvements men recognized in
the greatest numbers were: social development (37.5 per cent); Infrastructure and public transportation
improvements (37.5 per cent) and easier to hire and fire employees (37. 5 per cent). There was a very
significant difference of opinion between men and women on two statements. While 78.5 per cent of
women respondents said there was less bureaucracy associated with doing business today in
Kazakhstan compared with several years ago, only 31.2 per cent of male respondents shared this view.
On whether economic developments had made it easier to run a business, 64.2 per cent of women said
it had while only 18.7 per cent of male respondents concurred.
The final section of the survey asked entrepreneurs how important ten different motivators were to
them in terms of being a small business owner. Respondents could nominate ‘very important’; ‘quite
important’; ‘not very important’ or ‘not important at all’ for each potential motivator. On some
motivators, men’s and women’s responses were similar. For example; 64.2 per cent of women and 59.3
per cent of men said that the desire to be their own boss was a very important motivator. Another
motivator that both men and women rated as very important to a similar degree was doing work that
they are passionate about (78.5 per cent for women and 71.8 per cent of men). Both men and women
also said in similar numbers that increasing their earning potential was an important motivator for
entrepreneurship (women 71.4 per cent and men 65.6 per cent).
Some significant differences were observed between male and female motivations for self-employment.
Men were found to be more community minded in that they said contributing to the country’s
economic development (65.6 per cent of men and 28.5 per cent of women); to make a difference to
others (50 per cent of men and 21.4 per cent of women) and to be a more visible part of my community
(28.1 per cent of men and 21.4 per cent of women) were very important motivators. Men were also far
more motivated than women by the opportunity for risk taking and self-challenge; 56.2 per cent of men
and 21.4 per cent of women said this was very important to them. Men, much more than women, also
said that having full responsibility and accountability for their life (90.6 per cent of men and 35.7 per
96
cent of women) and to better use their full set of skills and talents (78.1 per cent of men and 42.8 per
cent of women) were very important motivators.
5. Discussion
The research found a number of significant differences between the experiences, perceptions and
motivations of entrepreneurs along gender lines. Women were far more concentrated in services and far
less represented in traditionally male-dominated fields such as construction. Women were also found to
operate smaller businesses than men in terms of number of employees. This is all consistent with
earlier studies which have observed similar trends. The research also revealed that women owned
businesses were considerably younger than men owned businesses. This is something which other
studies seem not to have investigated and it provides an opportunity for future researchers to explore
further.
The study also discovered that women tend to find it more challenging than men across a range of
indicators to operate and grow their businesses. Consistent with earlier research, women in Kazakhstan
find it more challenging to secure finance to grow their business than do men. Government
bureaucracy posed a particular challenge for both men and women and, despite government reforms,
seems to reflect the social and political legacy Kazakhstan inherited from decades within the Soviet
Union. While significant differences do exist between male and female entrepreneurs in Kazakhstan
regarding the business challenges they face, the research identified that on several issues there is little
difference between entrepreneurs according to gender. Only on dealing with customers did men
indicate a greater challenge than women. The literature review suggested that women tend to have a far
more progressive, inclusive and people-centered approach to running their businesses than men.
Women have also been found to be more transformational in working with employees which could
influence how employees interact with customers on a daily basis. This could, in part, explain why
women business owners in the survey appear more at ease meeting their customers’ needs than their
male counterparts.
Based on the survey results, female entrepreneurs in Kazakhstan are significantly more positive about
the improved business climate in recent years. On average, barely a third of male respondents felt the
conditions for small business in Kazakhstan had improved over the past decade. For women the figure
was at least half on all statements. Irrefutably Kazakhstan has become a better place to be selfemployed as evidenced by the dramatic growth in small businesses in the past six years and the
significant government reforms which have been implemented to help small businesses (World Bank;
2011; World Bank, 2010). It seems that other studies on entrepreneurship have not sought to discover
whether small business owners perceive any improvement in operating conditions over time. This
would be an interesting research question that could identify whether entrepreneurs in other societies
see benefits from relevant reforms their governments have introduced.
In relation to motivation, male and female entrepreneurs in Kazakhstan are both motivated to a similar
degree by the aspirations of making money, being independent, controlling their own destiny and doing
work they are passionate about. This is consistent with other studies conducted elsewhere. In light of
earlier research, an interesting finding of this study was that male entrepreneurs in Kazakhstan appear
to be more community minded than female entrepreneurs and this contradicts the findings of other
studies which have found women are more motivated by a sense of community. On all three questions
directed at identifying the altruistic tendencies of entrepreneurs in Kazakhstan, male respondents
reported being more socially connected than women. This is the most significant finding to emerge
from this study in terms of contradicting all other entrepreneurship studies on this issue. The male
respondents were also found to be more motivated by risk taking and personal control than were the
female respondents which is a finding consistent with earlier studies.
In summary and to return to a key topic in entrepreneurial study situated at the beginning of this paper,
it is too simplistic to state that the gender differences observed through the study can be explained
merely in terms of sex. As the literature review revealed, stocks of social capital, societal prejudice and
discrimination are some factors which influence the entrepreneurial experiences and opportunities of
women. Unfortunately, there is a scarcity of published research on Kazakhstan generally and on gender
issues specifically and so there is insufficient evidence on which to interpret the gender differences
among entrepreneurs observed in this study. However, one might reasonably surmise that Kazakhstan,
like all other countries discussed earlier, would have an environment which in some ways makes
entrepreneurship more difficult to successfully pursue for women than men. It is certainly the case that
the data collected are suggestive of this. This noted; it would require further investigation to understand
the broader societal, economic, political and historical context of Kazakhstani small business within
which the research findings must be situated and interpreted.
97
6. Conclusion
Kazakhstan is a new country and entrepreneurship in Kazakhstan is in its infancy. The country
inherited a culture and psychology not conducive to entrepreneurial activities. Despite this, the number
of small businesses has grown dramatically in recent years and the Kazakhstani Government has
initiated a far-reaching reform agenda to build the small business sector. To date, there have been few
academic studies of small business in Kazakhstan and this is the first that has focused on gender
differences among Kazakhstani entrepreneurs.
This study found that there are a number of gender differences among Kazakhstani entrepreneurs that
have also been observed in studies conducted in other societies. Further, male and female entrepreneurs
in Kazakhstan are similar in some aspects of their experiences, opinions and motivations to their
international peers as documented in the findings of earlier studies. This study, however, also
contradicts some of the conclusions of earlier studies. The most notable illustration is that male
entrepreneurs in Kazakhstan were found to be more motivated by the importance of community or the
greater good than were women; this is the first study to reach such a conclusion. In addition this
research project has investigated new areas of entrepreneurship for gender differences such as business
longevity and how business conditions have changed over time.
It is the author’s contention that the gender differences observed in the research cannot be understood
without a full appreciation of the context in which males and females are socialized in Kazakhstan and
the nature of prevailing societal norms. Kazakhstan’s history as part of the Soviet Union and the
influence of communism on men and women would be an interesting and integral part of understanding
the context of entrepreneurship in present day Kazakhstan.
Finally, the findings of this study and conclusions on which they are based should be considered with
caution and are reported here with a caveat. The study drew on a small sample of business owners and
was elementary in design; it was a preliminary and very general first look at gender in entrepreneurial
activity in Kazakhstan. This exploratory pilot study was designed specifically as a platform for further
research; to give others a reference point from which to design and conduct their own, more
comprehensive research. There is certainly opportunity and need for further research on
entrepreneurship in Kazakhstan and other Central Asian nations too. A great deal more is waiting to be
learned about the issues introduced in this study and there are many more related topics in need of
further investigation too.
7.
1.
References
Al-Alak, B. and Al-Haddad, F. (2010), ‘Effect of gender on the success of women entrepreneurs in
Jordan’, Interdisciplinary Journal of Contemporary Research in Business, Vol. 1 No 12, pp. 42-62.
2. Alam, S. S., Jani, M. and Omar, N. A. (2011), ‘An empirical study of success factors of women
entrepreneurs in southern region in Malaysia’, International Journal of Economics and Finance,
Vol. 3 No. 2, pp. 166-175.
3. Brindley, C. (2005), ‘Barriers to women achieving their entrepreneurial potential: women and risk’,
International Journal of Entrepreneurial Behaviour and Research, Vol. 11 No. 2, pp. 144-161.
4. Bruni, A., Gherardi, S. and Poggio, B. (2004), ‘Entrepreneur-mentality, gender and the study of
women entrepreneurs’, Journal of Organizational Change Management, Vol. 17 No. 3, pp. 256265.
5. Brush, C. G., de Bruin, A. and Welter, F. (2009), ‘A gender-aware framework for women’s
entrepreneurship’, International Journal of Gender and Entrepreneurship, Vol. 1 No. 1, pp. 8-24
6. Buttner, E. H. (2001), ‘Examining female entrepreneurs’ management style: an application of a
relational frame’, Journal of Business Ethics, Vol. 29 No. 3, pp. 253-270.
7. Cowling, M. and Taylor, M. (2001), ‘Entrepreneurial women and men: two different species?’,
Small Business Economics, Vol. 16 No. 3, pp. 167-175.
8. de Bruin, A. and Flint-Hartle, S. (2005), ‘Entrepreneurial women and private capital: the New
Zealand perspective’, International Journal of Entrepreneurial Behaviour and Research, Vol. 11
No. 2, pp. 108-128.
9. Dafna, K. (2008), ‘Managerial performance and business success: gender differences in Canadian
and Israeli entrepreneurs’, Journal of Enterprising Communities: People and Places in the Global
Economy, Vol. 2 No. 2, pp. 300-331.
10. Davidson, M. J., Fielden, S. L. and Omar, A. (2010), ‘Black, Asian and minority ethnic female
business owners: discrimination and social support’, International Journal of Entrepreneurial
Behaviour and Research, Vol. 16 No. 1, pp. 58-80.
98
11. Dzisi, S. (2008), ‘Entrepreneurial activities of indigenous African women: a case of Ghana’,
Journal of Enterprising Communities: People and Places in the Global Economy, Vol. 2 No. 3,
pp.254-264.
12. Farr-Wharton, R. and Brunetto, Y. (2009), ‘Female entrepreneurs as managers: the role of social
capital in facilitating a learning culture’, Gender in Management: An International Journal, Vol.
24 No. 1, pp. 14-31.
13. Gatewood, E. J., Brush, C. G., Carter, N. M., Greene, P. G. and Hart, M. M. (2008), ‘Diana: a
symbol of women entrepreneurs’ hunt for knowledge, money and the rewards of entrepreneurship’,
Small Business Economics, Vol. 32 No. 2, pp. 129-144.
14. Gonzalez-Alvarez, N. and Solis-Rodriguez, V. (2011), ‘Discovery of entrepreneurial opportunities:
a gender perspective’, Industrial Management and Data Systems, Vol. 111 No. 5, pp. 1-23.
15. Hisrich, R. D. and Drnovsek, M. (2002), ‘Entrepreneurship and small business research: a
European perspective’, Journal of Small Business and Enterprise Development, Vol. 9 No. 2, pp.
172-222.
16. Hisrich, R. D. and Fulop, G. (1994), ‘The role of women entrepreneurs in Hungary’s transition
economy’, International Studies of Management and Organization, (winter), pp. 100 – 118.
17. Hisrich, R. D. and Ozturk, S. A. (1999), ‘Women entrepreneurs in a developing economy’, The
Journal of Management Development, Vol. 18 No. 2, pp. 114-120.
18. Irwin, D. and Scott, J. M. (2010), ‘Barriers faced by SMEs in raising bank finance’, International
Journal of Entrepreneurial Behaviour and Research, Vol. 16 No. 3, pp. 245-259.
19. Jamali, D. (2009), ‘Constraints and opportunities facing women entrepreneurs in developing
countries: a relational perspective’, Gender in Management: An International Journal, Vol. 24 No.
4, pp. 232-251.
20. Lee, J. (1997), ‘The motivation of women entrepreneurs in Singapore’, International Journal of
Entrepreneurial Behaviour and Research, Vol. 3 No. 2, pp. 93-110.
21. Lituchy, T. R. and Reavley, M. A. (2004), ‘Women entrepreneurs: a comparison of international
small business owners in Poland and the Czech Republic’, Journal of International
Entrepreneurship, Vol. 2 No. 1/2, pp. 61-87.
22. McClelland, E., Swail, J., Bell, J. and Ibbotson, P. (2005), ‘Following the pathway of female
entrepreneurs: a six country investigation’, International Journal of Entrepreneurial Behaviour
and Research, Vol. 11 No. 2, pp. 84-107.
23. McElwee, G. and Al-Riyami, R. (2003), ‘Women entrepreneurs in Oman: some barriers to
success’, Career Development International, Vol. 8, No. 7, pp. 339-346.
24. Malach-Pines, A., Lerner, M. and Schwartz, D. (2010), ‘Gender differences in entrepreneurship:
equality, diversity and inclusion in times of global crisis’, Equality, Diversity and Inclusion: An
International Journal, Vol. 29 No. 2, pp. 186-198.
25. Maxfield, S., Shapiro, M., Gupta, V. and Hass, S. (2010), ‘Gender and risk: women, risk taking
and risk aversion’, Gender in Management: An International Journal, Vol. 25 No. 7, pp. 586-604.
26. Nagarajan, K. V., Blanco, H. and LeBrasseur, R. (2009), ‘Men and women entrepreneurs in
Northeastern Onatrio; a comparative study’, Journal of Applied Business and Economics, Vol. 9
No. 4, pp. 67-85.
27. Ndemo, B. and Maina, F. W. (2007), ‘Women entrepreneurs and strategic decision making’,
Management Decision, Vol. 45 No. 1, pp. 118-130.
28. Nixdorff, J. L. and Rosch, T. H. (2010), ‘The glass ceiling women face: an examination and
proposals for development of future women entrepreneurs’, New England Journal of
Entrepreneurship, Vol. 13 No. 2, pp. 71-87.
29. Orhan, M. (2001), ‘Women business owners in France: the issue of financing discrimination’,
Journal of Small Business Management, Vol. 39 No. 1, pp. 95-103.
30. Orhan, M. and Scott, D. (2001), ‘Why women enter into entrepreneurship: an explanatory model’,
Women in Management Review, Vol. 16 No. 5/6, pp. 232-244.
31. Roomi, M. A., Harrison, P. and Beaumont-Kerridge, J. (2009), ‘Women-owned small and medium
enterprises in England: analysis of factors influencing the growth process’, Journal of Small
Business and Enterprise Development, Vol. 16 No. 2, pp.270-288.
32. Roomi, M. A. and Parrott, G. (2008), ‘Barriers to development and progression of women
entrepreneurs in Pakistan’, Journal of Entrepreneurship, Vol. 17 No. 1, pp. 59-72.
33. Singh, G. and Belwal, R. (2008), ‘Entrepreneurship and SMEs in Ethiopia: evaluating the role,
prospects and problems faced by women in this emergent sector’, Gender in Management, Vol. 23
No. 2, pp. 120-136.
99
34. Still, L. V. and Walker, E. A. (2006), ‘The self-employed woman owner and her business: an
Australian profile’, Women in Management Review, Vol. 21 No 4, pp. 294-310.
35. Tambunan, T. (2009), ‘Export-oriented small and medium industry clusters in Indonesia’, Journal
of Enterprising Communities: People and Places in the Global Economy, Vol. 3 No. 1, pp.25-58.
36. Tan, J. (2008), ‘Breaking the “Bamboo Curtain” and the “Glass Ceiling”: the experience of women
entrepreneurs in high-tech industries in an emerging market’, Journal of Business Ethics, Vol. 80
No. 3, pp.547-564.
37. Teal, E. J., Toxanova, A. N. and Izzo, G. M. (2011), ‘Entrepreneurial development in Kazakhstan:
a review and update’, Journal of International Business and Cultural Studies, pp. 1-10.
38. Tibus, C. (2010), ‘Leadership beyond the glass ceiling: does ownership matter?’, Leadership and
Organization Development Journal, Vol. 31 No. 8, pp.743-757.
39. Tillmar, M. (2007), ‘Gendered small-business assistance: lessons from a Swedish project’, Journal
of European Industrial Training, Vol. 31 No. 2, pp. 84-99.
40. Tovstiga, G., Den Hamer, P., Popova, V., Efimov, I., Moskalev, S. and Bortnik, I. (2004),
‘Preparing Russian small innovative enterprises for international competitiveness: a scoping study’,
Journal of International Entrepreneurship, Vol. 2 No. 1/2, pp. 89-108.
41. Weeks, J. R. (2009), ‘Women business owners in the Middle East and North Africa: a five country
research study’, International Journal of Gender and Entrepreneurship, Vol. 1 No. 1, pp. 77-85.
42. World Bank (2011), ‘Doing Business 2011 – Kazakhstan: making a difference for entrepreneurs’,
Washington, DC.
43. World Bank (2010), ‘Doing Business 2011: Making a difference for entrepreneurs’, Washington,
DC.
44. Yu, E. (2011), ‘Are women entrepreneurs more likely to share power than men?’, International
Journal of Business and Management, Vol. 6 No. 4, pp. 111-119.
45. Zapalska, A. (1997), ‘A profile of women entrepreneurs and enterprises in Poland’, Journal of
Small Business Management, Vol. 35, No. 4, pp. 76-83.
Challenges and enterprising strategies of small school leadership and management
Khuan Wai Bing,
Universiti Pendidikan Sultan Idris
[email protected]
Omar Abdull Kareem
Universiti Pendidikan Sultan Idris
Wan Salmuni Wan Mustaffa
Universiti Pendidikan Sultan Idris
Abstract: Small schools are often at the heart of the community providing facilities, amenities and
services to the community. They are schools with an enrolment of 149 or lesser students and are
located mostly in rural areas, small villages, estates and remote areas. Due to economics of scale, many
small schools are seen as not viable and cost effective in its daily operations. The aim of this study was
to investigate the challenges faced by headteachers of small schools, and strategies adopted to deal with
the challenges of their work. Questionnaires were distributed to 246 small primary schools in the five
states including Kedah, Perak, Negeri Sembilan, Johor and Pahang. Interviews, site visits, observation
and review of documents were also conducted. The study indicated that most of the school
headteachers faced various physical, role and responsibility, emotional and psychological challenges.
Various strategies for coping with the difficulties of managing small schools employed by the
headteachers, were also discussed. Recommendations for the improvement of small schools, the
leadership training of headteachers and further study in small schools were also made.
Keywords: small schools, contextual, challenges, strategies, leadership
1. Introduction
According to administrative circular 3/1967, small schools (sekolah kurang murid) are schools with an
enrolment of 149 or lesser students. Most of the small schools in Malaysia are located in rural areas,
small villages, estates and remote areas. The study focused on leadership in the context of the small
school. Two factors make the study of this context important: one relates to the location of schools; the
100
other to the work of the leader. The school leader’s work entails leading, managing and also teaching.
For these reasons, the work of the headmaster of small school is regarded as a complex one.
2. Leadership in Small Schools
The first reason to focus on leadership in small schools is their numerical significance. As indicated in
the statistics of the Ministry of Education, in 2010, there existed 2,261 small schools out of the total
number of 7,513 primary schools in Malaysia or 30.09% that was almost one third of the total number
of primary schools are small schools. Out of the 5546 national schools, 1547 of them are small schools
or 27.8%; 502 out of 1285 vernacular (Chinese) schools are small schools or 39.06%; and 333 out of
527 vernacular (Tamil) schools are small schools or 63.19% (EPRD, 2010). They are led by
headmasters who have substantial teaching commitment. Given that small schools deliver a substantial
proportion of educational services in Malaysia, it is desirable to investigate how a small school
environment influences the nature and character of educational leadership.
There is evidence to indicate that headmasters of small schools have close community links. They are
much more significantly important to the day to day running of their schools because of the intimate
way the small school community relates to its leaders (Leonard, Leonard & Sackney, 2001; Mohr,
2000). It is the organization outside the family to which children are entrusted on a regular basis.
Schools are viewed as a natural meeting place for both formal and informal occasions (Nolan, 1998)
including being used as a polling booth centre on election days, for community group meetings, and
even natural disasters like floods. Headmasters also play a central role in bringing about change and
improvement in the rural areas (Clarke & Wildy, 2004). From this viewpoint, it is desirable for
teaching headmasters to be operating in circumstances that enable them to be as effective as possible.
Understanding the impact of contextual factors can contribute to the headmaster’s ability to work in the
particular setting.
Although it is indicated that small schools are significant for the education system in Malaysia, not
many studies have been conducted to further understand and enhance small school effectiveness (MOE,
1993; EPRD, 2003). There is also evidence that the preparation of leaders for small schools does not
target contextual factors or skills that are required to work in these environments. On their first
appointment as headmasters, relatively few heads have prior experience of multi-age teaching or being
a teacher in a small school. Formal training in small schools administration is even less likely to be part
of a new teaching headmaster’s repertoire of knowledge and skills as indicated in Institut Aminuddin
Baki, Ministry of Education’s basic training course for headmasters (Kursus Pengurusan dan
Kepimpinan Sekolah). Indeed formal preparation for the leadership of small schools is lacking or
insufficient in preparing them for the challenges of the role. This could have contributed to the high
turnover of headmasters in small schools as the role is seen as overloading, pressurizing, disappointing
(Jones, 1999) and in professional isolation (Dunning, 1993).
3. Management Challenges
Due to economics of scale, many small schools are seen as not viable and cost effective in its daily
operations. Many small schools are also not having adequate curriculum provision, teacher expertise,
peer and social groupings, do not achieve good results (Lier, 2007), and are under the threat of closure
(Corbett, 2005). On 16 January 2007, the National Education Blueprint 2006-2010 listed plans and
projects of reducing the number of small schools by establishing central schools (sekolah berpusat) that
combines several small schools into a central school that has adequate facilities, amenities and teachers.
Despite such efforts from the Ministry of Education Malaysia to improve the conditions of managing
small schools and outcomes of learning, these efforts are not always well accepted by certain sectors of
the community. Many parents living in rural and remote areas would have to increase their expenditure
to send their children to the central schools that could be quite a distance from their homes. This is due
to the tendency for small schools to be at the heart of the community, especially in a rural and remote
area. Although the government has good intentions to establish central schools, it is not desirable to
close all small schools as this would deprive rural school going children from receiving an education.
Moreover, in Malaysia an education is viewed as a mean towards eliminating poverty in the society.
On the one hand, present conditions and challenges of small schools pose additional challenges for its
schools leaders but on the other hand, the important role of small schools in serving small rural
communities cannot be ignored. There is relatively limited literature on the subject of change in small
schools and leadership in small schools (Dunning, 1993; Nolan, 1998; Clarke & Wildy, 2004)
suggesting that there is a need to further study small school leadership and management. From the
substantial protest on the closure of several small schools, it is suggested that recent educational policy
has underestimated the contextual factors applying to small schools that add to the challenges of
implementing change. Clearly, these challenges have implications for the work of leaders in small
schools.
101
The purpose of this study is to examine the contextual challenges of small school leadership and the
ways in which this contextual challenges is dealt with by headmasters of small schools.
4. Methodology
To investigate this, a study with 246 small primary schools’ teaching heads in the five states including
Kedah, Perak, Negeri Sembilan, Johor and Pahang, was undertaken. Schools were selected from the
three types of schools, namely national and vernacular schools. The location of schools included small
schools situated in rural, remote, and estate environment because it is in these contexts that the
distinctive complexity of small school leadership is most apparent. Headmasters who have had at least
one year of experience as a headmaster were selected. Headmasters typically begin their leadership
career as head of a small school.
There were two parts to the study. Initially, a questionnaire was prepared and distributed to the school
heads to determine the number of students and staff; the types of facilities and infrastructure in their
schools; the number of roles played by the heads in the school and how they managed their time; and
the contextual and psychological complications faced by them. Secondly, semi structured interviews
with randomly selected school heads through phone interviews as well as school visits to seek
especially a greater understanding and exploration of respondents’ coping strategies.
A range of possible roles played by heads were listed and then condensed into a series of 12 common
aspects, covering managerial and professional duties (table 4). Respondents were asked to rate each
aspect on a seven point scale of how they perceived the challenges of each aspect from the perspective
of their headteacher role solely. They were also required to complete a second rating with the same
scale but this time from their perspective on the emotional and psychological challenges faced daily
(table 5).
5. Findings and Discussion
Only 246 schools returned the questionnaire with an 87.8 % rate of return. Table 1 indicated the profile
of the schools.
Table 1: Profile of the Sample Schools
Item
1. Type of School
N=246
Percentage (%)
National
Chinese
Tamil
36
114
96
14.6
46.3
39.1
2. Location of School
Urban
Sub-urban
Rural
Estate
8
0
227
11
3.1
0.0
92.3
4.6
3. School category
Fully government aided
Partial government aided
121
124
49.2
50.8
4. Combined classes
No combined classes
One class
Two classes
Three classes
Four classes
Five classes
61
15
42
87
30
11
24.6
6.2
16.9
35.4
12.3
4.6
As shown in Table 1, all the small schools consisted of Chinese and Indian primary schools. A majority
of the small schools are in rural areas (96.9 %) and three of them (4.6 %) are in estates. The number of
schools receiving full government support and partial government support are about the same. Most of
the schools have students from various ethnic groups like Malay, Chinese, Indians, indigenous and
others. About 75.4 % of the schools have combined classes. Only 24.6 % of the schools are able to
102
conduct normal classes and do not have combined classes. About 58.5 % of the schools have one to
three classes only, indicating that students from various levels of schooling study in the same class.
Table 2: Profile of Sample Headteachers
Item
1. Gender
Male
Female
N=246
Percentage (%)
121
125
49.2
50.8
2. Age group
35-40 years
41-45 years
46-50 years
51-55 years
56 years
4
4
106
125
7
1.5
1.5
43.1
50.8
3.1
3. Marital status
Married
Single
219
27
89.2
10.8
4. Years of Experience as Head
1 to 3 years
4 to 6 years
7 to 9 years
10 years and above
136
57
23
30
55.4
23.1
9.2
12.3
5. Home-school distance
1-25 km
26-50 km
51-75 km
76-100 km
> 100 km
110
98
11
8
19
44.6
40.0
4.6
3.1
7.7
There is an equal number of female and male headteachers in the small schools. About 50.8 % of the
headteachers are female while 49.2 % are male headteachers. Most of the headteachers are between the
ages of 46 to 55 years. This implied that they were promoted to the position as a head late in their
career after about twenty years as a teacher. Most of the headteachers, about 89.2 % are married while
10.8 % is still single. Majority of the headteachers (55.4 %) are experiencing their first post as a head
with one to three years experience in the small school. Those with four to six years of experience as
headteachers made up about 23.1 %. Very few of them would stay on as heads in small school. Only
12.3 % of them in small schools have more than ten years of experience as a head. Most of the small
schools are in the rural areas and most of the heads (55.4 %) have to travel more than 25 kilometers to
reach their schools. They often stay at the nearest town.
The physical infrastructure of a school is one of the basic needs of a conducive educational
environment for educating students. Table 3 indicated that most of the schools did not have concrete
buildings (56.9 %). Some only have wooden buildings. Furthermore most of the school buildings
(66.1 %) were constructed before 1957, Malaysia’s independence year, about 51 years ago and new
buildings were added to them. Most of the buildings before 1957 were wooden buildings and had not
been replaced. Some of the buildings are already worn out with time and termite infested, thus posing
danger to the students and staff (JiaoZong, 2005).
Table 3: Physical Challenges
Issue
N=246
Percentage
(%)
Building Structure
Fully Wooden
11
4.6
103
Fully Concrete
Wood and concrete
95
140
38.5
56.9
Year building was constructed
Built before 1957
Built after 1957
Part of structure before 1957 and
part of structure after 1957
61
83
102
24.6
33.9
41.5
Condition of infrastructure (N=65)
Yes
Nil
159
23
136
148
Percentage
(%)
64.6
9.2
55.4
60.0
87
223
110
98
Percentage
(%)
35.4
90.8
44.6
40.0
114
210
98
46.2
49.2
40.0
132
36
148
53.8
50.8
60.0
Special rooms
Library
Computer room
Science laboratory
Audio visual aid room
Teaching material room
223
144
106
19
61
90.8
58.5
43.1
7.7
24.6
23
102
140
227
185
9.2
41.5
56.9
92.3
75.4
Basic Amenities
24 hours electricity
24 hours water supply
Telephone
Schoolnet
242
242
238
208
96.9
96.9
84.6
84.6
4
4
8
38
3.1
3.1
15.4
15.4
Condition of amenities
Electrical wiring problems
Leaking roof
Termite problems
Ceiling
Walls
Tables and chairs (too old)
Lacking ICT facilities
106
136
98
102
114
129
140
43.1
55.4
40.0
41.5
46.2
52.3
56.9
140
110
148
144
132
117
106
56.9
44.6
60.0
58.5
53.8
47.7
43.1
Sufficient classrooms
Too many classrooms
Standardized room size
Conducive rooms for teachinglearning
Conducive teachers’ room
Conducive headteachers’ room
Sufficient space and conducive
school office
Out of 246 schools observed, about 87 (35.4 %) of the schools still do not have enough classrooms.
Only 136 (55.4%) of them have standardized classroom size while 110 (44.6%) other schools have to
make do with whatever room size that is available in their schools. About 98 (40.0 %) of the schools do
not have conducive room environment for teaching-learning. About 132 (53.8 %) of the schools do not
have suitable teachers’ room for the teachers to take a break and also to do their administrative work.
Furthermore, about 36 (50.8 %) of the headteachers also do not have suitable rooms for administrative
duties. In addition, about 148 (60.0 %) of the schools do not have sufficient space in their school office
for proper daily functions.
As for basic special rooms, most of the schools have libraries, 223 (90.8 %) and computer rooms 144
(58.5 %). However, the schools still lack science laboratories, audio visual aid and teaching material
room. More than 40 % of the schools face other physical challenges including electrical wiring
problems, leaking school roofs, termite problems, ceiling, wall problems, old furniture, and also
lacking ICT facilities. Four of the schools do not have 24 hour electricity and water supply whereas
about eight schools still do not have phone facilities. “When I want to photostate papers, I have to run
home as the photostat machine is in my house. My school doesn’t have electricity,” said Sivakumar.
6. Emotional and Psychological Challenges
104
Most of the small schools have few staff and students. They have to make do with combined classes
and multiple grade teaching. The larger schools usually have more than 100 students. However, the
number of students continues to decrease at an alarming rate each year. This is due to the migration of
rural folks to the towns to look for better employment. Phone interviews with the various headteachers
of small schools revealed that for schools with 1 to 10 students, they are entitled to be given one
teacher excluding the headteacher whereas schools with 11 to 20 students, they are entitled to two
teachers excluding the headteacher. With such limited number of teachers in small schools, their
workload and responsibilities will increase tremendously. Both the headteacher and teachers have to
carry out all the responsibilities for the smooth running of the school. Role conflict exists among
headteachers as a result of having to play too many different roles ranging from having to handle
administrative duties to teaching, school maintenance and meeting parents. The multiple roles and
responsibilities were often highlighted in past studies including Bell & Morrison (1988) and Wilson &
McPake (2000).
Table 4: Responsibility Challenges
Issue
Responsibility Constraint
Handle school administration
Teach in class
Co-curricular activities
Attend meetings outside school
Handle student affairs
Make school rounds
Replace teachers in relief classes
School infrastructure and equipment maintenance
Meetings with school teachers and staff
Supervise teaching-learning
Meeting parents, PTA members, sales persons etc.
Conduct extra classes
Mean
6.91
6.88
6.32
6.11
6.09
6.05
5.88
5.80
5.66
5.57
5.51
5.48
Besides conducting combined classes, the headteacher and the school staff have to fill in the
documentation of all transactions. They also have to attend to all kinds of meetings at various (district,
state, national) levels. Mr. Liew lamented, “I don’t mind going for meetings but my school is on a
small island off Perak. I have to take a boat and also travel for about two hours to reach the District
education office for the meeting. Sometimes, by the time the meetings are over I would have missed
the last boat back to the island. Then I would have to find accommodation and spend the night there.”
This situation will definitely affect the effectiveness of teaching and learning as well as the efficiency
of school administration. The headteachers are also expected to be the role model and conduct almost
every staff training and development programs. “I only have four teachers. It would be difficult to
invite any outside speaker to give training to the small number. They won’t come. Besides, most of the
speakers have never worked in small schools. They would not understand our situation,” said Selvi.
She continued, “I went for courses on school administration or leadership. When I go back to the
school, I would share with the teachers. I would personally give them the knowledge.”
In addition, the headteachers also had to accompany students for academic and co-curricular activities
and competitions within district and at state level. According to Mr. Tan, a school headteacher of one
of the small schools, “During the school holidays, I have to organize and accompany the students to
study trips at Kuala Lumpur (the capital), Putrajaya (government administrative center) and other
places. I have to chip in to accompany them since my school has only five teachers. We take turns to
bring them. They need to learn outside their classrooms.”
The heads who were interviewed saw their first priority in school was to ensure quality teaching and
learning. “My main objective is to teach. I love to teach. Even though I am an administrator now, my
first love is still teaching. That is the most important aspect of school.” said Kalaiselvan. However,
their administrative duties and responsibilities often interrupted the real task of teaching the classes
thus generating guilt feelings of not being able to do a good job. This is similar to the reflections in
Jones (1999). At the same time, education in Malaysia has stipulated that the syllabus taught must be
completed at the end of the school year. Many teachers face the difficulty of completing the syllabus
due to combined classrooms, sometimes with two or three levels in one class. One of the most frequent
complaints of small-school leaders has to do with the difficulty of offering the traditional breadth of
courses and subjects (Myatt, 2005).
105
As indicated in table 5, many headteachers felt emotionally drained and tired working in small schools.
The schools’ academic performance is often low and the heads find that trying to raise the performance
level is like pushing a log uphill. This is due to the fact that many of the students in small schools have
low levels of motivation to learn as many have to help out with their parents’ work and also the poor
economic situation in the rural areas. Many of the parents also lack education and are not able to give
guidance and care to their children. Most often their children are left in the care of grandparents who
are old, while they work in the estates or in towns.
Table 5: Emotional and Psychological Challenges
Issue
Emotional Fatigue
I feel that I have worked too hard
I feel exhausted after school hours
I feel tired because of my work
I feel drained in the morning and have to face another day at work.
I feel emotionally drained because of my work.
I feel disappointed with my work
I feel that I don’t have anymore energy.
Working with others the whole day gives me anxiety.
Working directly with others gives me too much pressure
Depersonalization
I am afraid that my work makes me more hard-hearted
I feel that teachers and students blame me for their problems
Ever since I was in this job, I feel that I have become less caring for other
people’ feelings
I actually do not care about what happens to some of the teachers and
students
I feel that I treat some of the teachers and students like objects without
feelings
Personal Achievement
I feel happy after the hard work of teaching my students
I can understand the feelings of teachers and students effectively
I can solve teachers’ and students’ problems effectively
I can easily create a conducive environment for my teachers and students
I am confident of impacting other people’s lives through my work
I feel full of energy
I will face the emotional problems in my work with calmness
Mean
6.09
5.78
5.78
5.00
4.85
3.97
3.86
3.83
3.66
3.75
3.20
3.14
2.85
2.74
5.29
5.12
5.06
4.83
4.29
4.23
3.89
As most of the schools encounter decreasing student enrolment each year, the number of students
completing standard six often outnumber the number of students enrolling in standard one. If this
situation persists, eventually the school would be forced to close or move to another place. Evidence
obtained through site visits indicated that Padang Gajah Chinese Primary School, had only one student
left, a 12 year old Indian boy who would have left the school in 2009 to go to the secondary school.
This school in Trong, near Taiping (a big town) was opened in 1953, had only two teachers including
the headteacher. This is not the only school facing a drop in student enrolment. At least six other
schools in the districts of Larut, Matang and Selama are facing similar problems with student
enrolment fewer than 20 students (New Straits Times, 2008). Mrs. Chan pointed out, “Most of the
people here have moved out to the big towns. Estates are employing more and more foreigners to do
the work. The younger generation has gone elsewhere in search of greener pastures. Only old people
live here now. Only 15 families are still here”. Padang Gajah Chinese Primary School has been
relocated to Bandar Seri Botani in Simpang Pulai, near Ipoh (the capital city of Perak).
In Malaysia, small schools in areas with decreasing population are allowed to move the school
physically to towns to set up schools under the same name there. Although the headteachers felt tired
emotionally, they have not reached the point of depersonalization yet as indicated in table 5. Some of
the more positive thinking heads commented that the simple lifestyle in the country with low cost of
106
living, fresh air, peacefulness, student appreciation and slower pace of life makes it worth serving in
small schools.
7. Enterprising Coping Strategies
Some of the challenges mentioned earlier included the school size getting smaller; difficulty in getting
headmasters as management burden increased; and continuous demands on the performance of
educational standards. Having realized these complications, the Ministry of Education, Malaysia
(MOE) which is very supportive of education activities has proposed that these small schools be
combined to form bigger schools to obtain bigger student enrolment (EPRD, 2003). In addition,
partially-aided Chinese primary schools are also encouraged to convert their schools into government
schools (New Straits Tines, 2008). These strategies would also improve the teaching and learning
process, language learning and overcome staff shortage and resources. While the Indian community is
open to all Tamil schools being converted to government schools, many small Chinese primary school
headteachers and board of governors are not in favour of this strategy. They think that the number of
Chinese schools would decrease as schools merge into bigger ones. Furthermore, as pointed out by Mr.
Lee, a member of the board of governors, “We have raised funds many times, and spent a lot of money
on the school facilities and equipment. We are not willing to hand the school over to the government.”
(Majority of Chinese schools are on private land while the school buildings belong to the government).
As a result, they try to keep, maintain and avoid closure of the schools although some schools have
become too small to continue operations economically and efficiently.
Although faced with many challenges, small schools have often shown great ingenuity in overcoming
their difficulties and finding imaginative solutions to compensate for their limited facilities (Jones,
2006). For instance, many Chinese primary schools would try to increase their school enrolment to
prevent a merging of schools. Many of the PTA members and the school boards of directors would
conduct promotional drive at shopping complexes, visit near-by housing areas to make known their
schools and to encourage parents to send their children to their schools. Other strategies included
providing van or forms of transportation and employing drivers to ferry the children living in housing
areas or in estates to and fro the schools without any extra charges. In addition the PTA members and
board of directors would also provide various kinds of subsidies and monetary incentives to those
needy students. Text books, stationery, exercise books, clothing, and shoes are some of the aid given to
students. The schools also tried to improve their funding through various activities to improve their
physical facilities. In order to gain parents’ trust in small school education, headteachers and staff
would also conduct extra classes or private tuition after school to improve students’ academic
performance. The difficulty of managing an extremely small school or closing school includes
maintaining the existing services in order to continue the smooth running of the school (Schofield,
1988) and introducing new services to draw new student recruits.
The above strategies might not be popular among all small schools especially those schools in
drastically rural areas where the Chinese ethnic population is very low. For such schools, they try to
encourage non-Chinese ethnic students to also attend their schools to ensure continuous survival. In
this study, more than 60% of the schools have non-Chinese students such as Malay, Indian, indigenous
and other ethnic group students studying in their schools. In fact, the enrolment in one of the schools
consisted of all non-Chinese students. This situation would create a different set of problems to the
school as non-Chinese (for example Malay) students would find it easier to speak and learn in their
own mother tongue as compared to learning in the Mandarin language but the irony is that it is a
Chinese school! It is predicted that for the next three years the school would not have any Chinese
student. In this situation, does the school maintain its Chinese name and tradition of teaching in the
Chinese language or switch to a national school with the medium of instruction in the national
language, Bahasa Malaysia.
8. Conclusions
The aim of the study was to determine the challenges and the coping strategies employed by the small
primary schools in the five states including Kedah, Perak, Negeri Sembilan, Johor and Pahang. About
246 small primary schools took part in the study. It was found that despite facing many physical and
responsibility challenges, the headteachers’ emotional and psychological challenges are relatively low.
This means that they are still able to cope with the situation. Some of the coping strategies practiced by
the school heads included having programs to increase the school enrolment through road shows, free
transportation, subsidies, monetary incentives, and improving school facilities. The government is also
urged to create more job opportunities in the rural areas so that people will stop migrating to towns and
school enrolment will increase. The MOE is urged by the Chinese schools to approve the shifting of
small Chinese schools from the rural to urban areas in order to avoid closure to these small schools. It
107
is also suggested that future research be extended to a bigger sample group to include all the small
schools in Malaysia as well as other types of schools to further enhance understanding and overcoming
challenges in small school management.
9.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
References
Bell, H. & Morrison, K. (1988). The teaching head in primary schools: Tensions, paradigms and
coping strategies, School Organization, 8(2), 203-209.
Clarke, S. & Wildy (2004). Context counts: Viewing small school leadership from the inside out,
Journal of Educational Administration, 42 (5), 555-572.
Corbett, M. (2005). Rural education and out-migration: The case of a coastal community,
Canadian Journal of Education, 28 (1/2), 52-72.
Cruzeiro, P. A. & Boone, M. (2009). Rural and small school principal candidates: perspectives of
hiring superintendents, The Rural Educator, 3(1), 1-9.
Dunning, G. (1993). Managing the small primary school: The problem role of the teaching head,
Educational Management and Administration, 21 (2), 79-89.
Educational Planning and Research Division, Ministry of Education (2003). Cost Analysis on
Small Schools. Kuala Lumpur: Ministry of Education Malaysia.
Educational Planning and Research Division, Ministry of Education (2010). Educational Statistics
2010. Kuala Lumpur: Ministry of Education Malaysia.
JiaoZong (2005). A Report on The Study of Chinese School Building Maintenance Problem. Kuala
Lumpur: Malaysia Chinese School Teachers’ Association.
Jones, N. (1999). The changing role of the primary school head: Reflections from the front line,
Educational Management Administration & Leadership, 27(4), 441 – 451.
Jones, J. (2006). Leadership in small schools: supporting the power of collaboration, Management
in Education, 20(2), 24-28.
Jones, J. (2009). The development of leadership capacity through collaboration in small schools,
School Leadership and Management, 29(2), 129-156.
Leonard, L., Leonard, P. & Sackney, L. (2001). Confronting assumptions about the benefits of
small schools, Educational Management Administration & Leadership, 29(1), 79-96.
Lier Giew Leong (2007). Management challenges in under enrollment Chinese schools in Perak.
Unpublished thesis. Universiti Pendidikan Sultan Idris.
Ministry of Education (1993). A Study on Small School Effectiveness. Kuala Lumpur: Ministry of
Education Malaysia.
Mohr, N. (2000). Small schools are not large schools. Potential pitfalls and implications for
leadership. In Ayers, W., Klonsky, M., Lyon, G. (eds.), A Simple Justice: The Challenge of Small
Schools, New York: Teachers College Press, 139-158.
Myatt, L. (2005). Nine friction points in moving to smaller school units, Education Week, 24 (30),
1-3.
New Straits Times (2008). Several schools in Perak with low enrolment, New Straits Times, 13
August 2008.
New Straits Times (2008). It’s up to Chinese schools: Conversion status will not be forced on them,
New Straits Times, 8 October 2008.
Nolan, B. (1998). Implementing departmental policy changes in one-teacher schools, Journal of
Educational Administration, 36 (3), 262-285.
Schofield, L. (1988). Management tasks and style within a closing school – The need for flexibility
in the light of staff uncertainties relating to immediate job prospects, Educational Management
and Administration, 16, 25-32.
Sergiovanni, T. J. (1995). Small schools, great expectations, Educational Leadership, 53 (3), 48 –
52.
Schmidt, M. J. (2010). Is there a place for emotions within leadership preparation programmes?,
Journal of Educational Administration, 48 (5), 626 – 641.
23. Wilson, V. & McPake, J. (2000). Managing change in small Scottish primary schools: Is there a
small school management style? Educational Management Administration & Leadership, 28, 119
– 134
108
On the Profitability of Carry Trades in Five CIS Countries
Razzaque H Bhatti
KIMEP University
Abstract: This paper explores whether carry trade operations in the five CIS currencies – Armenian
drams, Azerbaijani manat, Kazak tenge, Kyrgyz soms and Moldovan lei – are profitable over the
period 1996:01-2010:02. The results show that carry trades in the five CIS currencies funded by short
positions in the Japanese yen and Swiss franc outperform the two major stock markets–the Japanese
Nikkei 225 and Swiss market indices. The annualized quarterly returns in carry trades range between
12.7% and 32.5%, whereas those on the Swiss market and Japanese Nikkei 225 market indices are
5.79% and -3.4%. The results also show that the mean of the interest differential and annualized carry
trade returns are the highest for the Kyrgyz soms and the lowest for the Kazakh tenge and Azerbaijani
manat when carry trades in these currencies are funded with short positions in both the Japanese yen
and Swiss franc. These findings are also strongly supported by the Sharpe ratios, which are 0.62 and
0.72 for the former currency pairs and only 0.45 and 0.50 for the latter pairs, implying that the riskadjusted return in carry trade is the highest for the Kyrgyz soms.
Key words: Uncovered interest parity, exchange rate and open economy
JEL Classification: F30, F31, F41.
1. Introduction
This paper explores the profitability of carry trade in five CIS countries–Armenia, Azerbaijan,
Kazakhstan, Kyrgyzstan and Moldova. Carry trade is described as a highly speculative investment
strategy whereby a currency manager borrows funds in a currency yielding low interest rates (funding
currency) to finance investment in a currency yielding high interest rates (target currencies) in order to
capitalize on the interest differential as well as expected movements in the exchange rate of the funding
against the target currency. The carry trade operation turns out to be profitable only when the gain from
the interest rate differential is not overwhelmed by short-to-medium term movements in exchange rates
(Galati et al, 2007). While a carry trader is certain respecting the gain arising out of the interest
differential, he is not what the exchange rate will be of the funding against the target currency at the
time loan will be repaid in the funding currency. The movement in exchange rates between the time the
funds are borrowed and paid back in low-interest currencies can add to the gains emanating from the
interest differentials, result in a smaller gain, or give rise to even a huge loss34. This implies that the
return in carry trades depends not only on the interest differential between funding and target
currencies but also on the expected rate of change of the exchange rate of the latter against the former
currencies. The carry trade operation becomes highly profitable as long as the high-interest currencies
appreciate against the low-interest currencies. On the contrary, depreciation of the high-interest
currencies may wipe out much of the gains from the interest differential, and can even put a carry
trader out of business if the depreciation of the high-interest currencies is much higher than the interest
differential35. Consequently, the carry trade operation may entail a high degree of risk if the target
currencies depreciate possibly by more than the interest differentials over the holding period.
This paper aims to explore the profitability of the Japanese yen and Swiss franc–funded carry trades in
five currencies of the CIS countries – Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan and Moldova –
using historical quarterly data on three-month Treasury bills interest and spot exchange rates over the
period 1996:01-2010:02. Since the independence of these countries from the Soviet Union and their
transition to a market economic system, nominal interest rates in these CIS countries have been, and
are still consistently much higher than those of the two major currencies. Over the period under
consideration, the annualized average quarterly interest rates on T-bills in Japan and Switzerland are in
the range of 0.21% and 1.26% respectively, whereas the average annualized quarterly interest rates are
in the range of 19.31% (Kyrgyzstan) and 10.31% (Kazakhstan) in the five CIS countries. This provides
incentive to currency managers around the world to borrow funds in the Japanese yen and Swiss franc
and invest the funds borrowed in each of the five currencies of the CIS countries to capitalize on
differences in interest rates and possibly on exchange rate movements. The objective of the paper is to
34
In fact, while the interest differential is a necessary condition for the profitability in carry trades, it is not a
sufficient condition. The sufficient for the profitability in carry trades is the expected change in the exchange rate
of the funding currency against the target currency. If the funding currency depreciates by more than the interest
differential, then the carry trade operation may be completely wiped out.
35
Zukerman and Pacelle (1999) argue that “much of the time this “yen carry activity” is quite successful, although
it can backfire if the yen appreciates sharply as it did in 1998 and 1999.
109
explore whether such carry trade opportunities in 10 currency pairs of the CIS countries with the
Japanese yen and Swiss franc have been profitable over the period under consideration. Besides, the
paper aims to assess whether there is any degree of risk involved in carry trades in the five CIS
currencies funded by the two major currencies. Several measures of return and risk are employed in
this study. The measures of return used in this paper include mean annualized and cumulative returns,
whereas those of risk include standard deviation, downside semi-standard deviation and value at risk.
The Sharpe ratio is also used which measures a risk-adjusted return on carry trades.
2. Carry Trade Theory
Carry trade strategies are closely linked to the uncovered interest parity (UIP) hypothesis postulating
that high-interest currencies should depreciate whereas low-interest currencies should appreciate by
F
T
exactly the extent of the interest differential. Let it and it be the interest rates on the funding and
target currencies respectively set at time t, where it < it . Also let S t and S t +1 be the current and the
F
T
future spot exchange rates between the funding and target currencies (defined as the target currency
price of a unit of the funding currency) prevailing at time t and t+1 respectively. The UIP conditions is
given by
S t +1 1 + i F
=
St
1 + iT
(1)
Equation (1) can be approximated by
S&t +1 = itT − itF
(2)
The carry trade operation will be profitable if UIP condition implied by equation (1) or (2) is violated
T
F
consistently over time. Thus, the carry operation will be profitable as long as it − it > −S&t +1 (that is,
as long as the target currency does not depreciate by more than the interest differential).
3. Existing Evidence on Carry Trades
A number of studies have been conducted exploring the return and risk characteristics of carry trades in
the currencies yielding higher interest rates funded by short positions in the currencies yielding lower
interest rates, and have produced evidence showing that carry trade operations are profitable over long
periods. Investigating carry trades in 10 currency pairs – involving the Japanese yen and Swiss franc as
two funding currencies and the Australian dollar, Indian rupee, Indonesian rupiah, New Zealand dollar
and Philippine peso as target currencies – Gyntelberg and Remolona (2007) produced evidence
showing that carry trades outperformed the major stock markets over the period December 2000September 2007. The results they obtained show that the annualized average daily returns on these
currency pairs were in the range of 12.9 to 2.40% compared to 2.18 to 5.47% on stock market indices
including the S&P 500, Nikkei 225 and FTSE 100. The annualized daily returns on carry trades were
much higher when the Japanese yen was used as the funding currency than when the Swiss franc was
used. For example, the returns on the New Zealand dollar, Australian dollar, and Indonesian rupiah
were 14.94%, 12.50% and 10.40% respectively when the Japanese yen was used as the funding
currency, whereas of those involving the Swiss franc were 8.38%, 6.08% and 4.13% respectively. They
also found evidence strengthening the results of earlier studies conducted by Galati et al (2007) and
Hattori and Shin (2007) showing that volumes of carry trade involving the yen are high when interest
differential against the yen are high. Results obtained by studies conducted, inter alia, by Burnside et al
(2007), Dunis and Miao (2007), Jurek (2008), Moosa (2008, 2010), Dravas (2009), Fong (2010) and
Bhatti (2012) were also supportive of the profitability of carry trade over long periods.
4. Empirical Results
The results of the annualized quarterly returns in carry trades, as presented in Table 1, show that the
Japanese-yen and Swiss-franc-funded carry trades in the five CIS currencies were highly profitable
over the last 15 years and six month. As evident from Table 1, carry trades in all the CIS-currency pairs
with the Japanese yen and Swiss franc outperform the two major stock markets–the Japanese Nikkei
225 and Swiss market indices. The annualized quarterly returns in carry trades range between 12.7%
(in the case of the AZM/CHF pair) and 32.5% (in the case of the KRS/JPY pair), whereas the Swiss
market index produces an annualized quarterly return of 5.79% and Nikkei 225 market index produces
a negative return of 3.4%. Moreover, the risk in carry trades (as measured by standard deviation) in
seven currency pairs is lower than that of the stock markets, whereas the downside risk (measured by
VaR) of carry trades in all cases is the lowest. It must also be noted that carry trades in all cases
produces Sharpe ratios which are higher than those of the stock markets, implying that risk-adjusted
returns on carry trades are higher than those of the stock markets.
Table 1: Return and Risk on Carry Trades
110
Currency
Pairs
Mean Interest
Differential
Positive
change in
exchange
rate (%)
Positive
return
(%)
Mean
annualized
return
Cumulative
return
Standard
deviation
Downside
semi
standard
deviation
99%
value
at risk
Sharpe
ratio
ARD/JPY
15.47
50.88
70.18
17.2
460.39
32.91
34.01
38.31
0.52
AZM/JPY
10.66
48.07
65.38
13.62
180.16
27.51
29.42
21.95
0.49
KRS/JPY
19.09
52.63
71.93
32.52
1411.44
51.85
58.84
26.79
0.62
KZT/JPY
10.1
49.12
63.16
18.7
416.39
40.48
42.43
24.45
0.45
MDL/JPY
16.88
49.12
78.95
28.48
1145.88
59.79
64.29
23.54
0.47
ARD/CHF
14.43
42.11
70.18
15.3
388.43
28.79
28.21
39.26
0.49
AZD/CHF
9.64
44.23
71.15
12.7
182.21
23.04
24.89
28.34
0.50
KRS/CHF
18.05
57.89
84.21
30.12
2052.3
40.88
48.81
30.46
0.72
KZT/CHF
9.05
49.12
64.91
16.67
352.2
34.24
36.63
23.98
0.45
MDL/CHF
15.83
50.88
82.46
25.87
1002.24
45.67
51.04
23.05
0.54
91.10
0.14
Swiss Market
Index
5.79
41.30
Nikkei 225
-3.40
43.18
The results also show that annualized averages of the interest differential and carry trade returns are the
highest for the Kyrgyz soms when it is paired with both the Japanese yen and Swiss franc and the
lowest for the Azerbaijani manta and Kazakh tenge when they are paired with both the Japanese yen
and Swiss franc. These findings are strongly supported by the Sharpe ratios, which are 0.62 and 0.72
for the former currency pairs and only in the range between 0.45 and 0.50 for the latter pairs. This
implies that the risk-adjusted return in carry trade is the highest for the former than the latter. However,
the frequency of positive return for the KRS/CHF pair is much higher than the positive changes in the
underlying exchange rate when compared with that of the KRS pair with Japanese yen. Similarly, the
frequency of positive return for the MDL/JPY, ARD/CHF, AZD/CHF and MDL/CHF currency pairs is
also much higher than the positive changes in the underlying exchange rates. This leaves the biggest
percentage of negative rates of return for the ARD, AZM, and KRS when they are paired with the
Japanese yen and the KZT when it is paired with both the Japanese yen and Swiss franc, implying that
the highest risk is involved in these currency pairs. These results are supported by the findings based on
the Sharpe ratio, showing that the risk-adjusted return in carry trade is the highest for the Kyrgyz soms
and lowest for Kazak tenge. These results clearly imply that carry trades in the Kyrgyz soms initiated
by short positions in both the major currencies are relatively more profitable than those of other
currency pairs. This finding becomes more pronounced in Figure 1, showing that the annualized
quarterly returns in the Kyrgyz soms tend to have been positive and have often been quite high on more
occasions and that only on a smaller number of occasions have returns in carry trades been negative.
This also implies that the probability of huge occasional losses is much smaller in the Kyrgyz soms
than in other currency pairs.
Figure 2: Carry Trade Return
111
ARD/JPY
120
100
80
60
40
20
0
-20
-40
-60
KRS/JPY
300
250
200
150
100
50
0
-50
AZM/JPY
120
100
80
60
40
20
0
-20
-40
KZT/ J P Y
250
200
150
100
50
0
-50
Figure 2: Carry Trade Return
112
MDL/JPY
450
400
350
300
250
200
150
100
50
0
-50
-100
ARD/CHF
80
60
40
20
0
-20
-40
-60
113
AZM/CHF
80
60
40
20
0
-20
-40
-60
KZT /CHF
250
200
150
100
50
0
-50
KRS/CHF
200
150
100
50
0
-50
114
MDL/CHF
350
300
250
200
150
100
50
0
-50
5. Conclusion
In this paper the profitability is explored in carry trade operations in the five CIS currencies –
Armenian drams (ARD), Azerbaijani manat (ABM), Kazakhstan tenge (KZT), Kyrgyz soms (KRS)
and Moldovan lei (MDL) – funded by short positions in the Japanese yen and Swiss franc using
quarterly data on spot exchange rates and interest rates in Treasury bill markets over the period
1996:01-2010:02. Two important conclusions emerge from these results.
First, results based on several measures of return and risk show that carry trades in the five CIS
currencies outperform the two major stock markets–the Swiss market index and Nikkei 225 market
index. The annualized quarterly returns realized in carry trade operations in the five CIS currencies
funded by short positions in the Japanese yen and Swiss franc are highly profitable in all cases over the
last 15 years and six month. The annualized quarterly return in carry trades ranges between 12.7% and
32.5%, whereas the Swiss market index produces an annualized quarterly return of 5.79% and Nikkei
225 market index produces a negative return of 3.4%. Moreover, carry trades in all cases produces
Sharpe ratios which are higher than those of the stock markets, implying that risk-adjusted returns on
carry trades are higher than those of the stock markets.
Second, results also show carry trades in the Kyrgyz soms outperform those of other CIS currencies
when paired with both the Japanese yen and Swiss franc. The annualized averages of the interest
differential and carry trade returns are the highest for the Kyrgyz soms and the lowest for the
Azerbaijani manta and Kazakh tenge when these currencies are paired with both the Japanese yen and
Swiss franc. These findings are strongly supported by the Sharpe ratios, which are 0.62 and 0.72 for the
former currency pairs and only in the range between 0.45 and 0.50 for the latter pairs. This implies that
the risk-adjusted return in carry trade is the highest for the former than the latter. However, the
frequency of positive return for the KRS/CHF pair is much higher than the positive changes in the
underlying exchange rate when compared with that of the KRS pair with Japanese yen. Similarly, the
frequency of positive return for the MDL/JPY, ARD/CHF, AZD/CHF and MDL/CHF currency pairs is
also much higher than the positive changes in the underlying exchange rates. This leaves the biggest
percentage of negative rates of return for the ARD, AZM, and KRS when they are paired with the
Japanese yen and the KZT when it is paired with both the Japanese yen and Swiss franc, implying that
the highest risk is involved in these currency pairs.
References
1. Bhatti, R. H. (2012), “On return and risk in carry trades: a case of the Pak rupee”, International
Journal of Economics and Finance Studies, forthcoming.
2. Burnside, C., Eichenbaum, M. and Rebelo, S. (2007), “The returns to the currency speculation in
emerging markets”, American Economic Review, Vol. 97, pp. 333-338.
3. Dravas, Z. (2009), “Leveraged carry trade portfolios”, Journal of Banking and Finance, Vol 33, pp.
944-957.
4. Dunis, C.L. and Miao J. (2007), “Trading foreign exchange portfolios with volatility filters: the
carry trade model revisited”, Applied Financial Economics, Vol. 17, pp. 249-255.
5. Fong, W.M. (2010), “A stochastic dominance analysis of Yen carry trades”, Journal of Banking
and Finance, Vol. 34, pp. 1237-1246.
6. Galati, G., Heath, A. and McGuire, P. (2007), “Evidence of carry trade activity”, BIS Quarterly
Review, September, 27-41.
7. Gynelberg, J. and Remolona, E. (2007), “Risk in carry trades: a look at target currencies in Asia
and the Pacific”, BIS Quarterly Review, December, 73-82.
115
8.
Hottori, M. and Shin, H. S. (2007), “The broad yen carry trade,” Bank of Japan, Institute for
Monetary and Economic Studies, Discussion Paper No 2007-E-19.
9. Jurek, J.W. (2008), “Crash-neutral currency carry trades”, Working Paper, Princeton University.
10. Moosa, I. A. (2008), “Risk and return in carry trade”, Journal of Financial Transformation”, Vol.
22, No. 3, pp. 10-15.
11. Moosa, I.A. (2010), “The profitability of carry trade”, Economia Internazionale, Vol. 63, pp. 261380.
12. Zukerman, G. and Pacelle, M. (1999), “Treasury prices fall as hedge funds seek to unwind Yen
carry trades”, Wall Street Journal, June 14, 1.
Long-Term Strategic Benefits for Kazakhstan from “The People’s IPO” Program
Aizhan Syrgaeva
The Kazakh Academy of Labor and Social Relations
E-mail: [email protected]
Abstract: This paper provides an analysis of relationship between “The People’s IPO” program
implementation and ensuing favorable financial and macroeconomic consequences for Kazakhstan in
the long term. The author supposes that benefits, which can be derived by every economy subject
(enterprises, households/population, the State) from participation in “The People’s IPO” program, as
the final result can lead to common advantage. Being in need of additional resources for further
development, the enterprises should apply to alternative way of capital attraction that is different from
bank credit, taking into account negative experience of 2008 which was acquired by Kazakhstan as a
result of national economy’s involvement into global processes, and namely external loans of second
level banks at the world financial markets. Therefore it is better to carry out loans not at the world
financial markets but at the domestic one, and notably at the securities market. All the more so because
Kazakhstan’s securities market has huge unimplemented capacity of issuers and investors which should
be involved with the help of illustrative example showing opportunities of capital attraction and
multiplication. Wide introduction of IPO into Kazakhstan’s practice by means of “The People’s IPO”
program on delivery of “Samruk-Kazyna” NWF subsidiaries’ shares to Kazakhstan’s securities market
can serve as creation of such a precedent. It is expected that this program will facilitate activation of
investors who have lacked for attractive financial instruments to invest in and issuers who will discover
a real alternative to bank credit. In this paper the author offers to become familiar with ad hoc scheme
of “The People’s IPO” program’s role in improvement of Kazakhstan’s macroeconomy due to the
growth of GDP, decrease of unemployment and control of inflation. The main conclusion of analysis
provided is possibility of the RFCA’s transforming into one of the leading Asian regional financial
centers owing to emergence of new investors, issuers and liquid securities against the background of
economic growth in sum with already available factors like political stability, good geographic
situation, advanced service, developed financial infrastructure as well as planned active introduction of
Islamic instruments at KASE.
Keywords: RFCA, KASE, IPO, “Samruk-Kazyna” NWF, “blue chips”, GDP.
1. Introduction
A foreign term “IPO” that “stands for initial public offering and occurs when a company first sells its
shares to the public”[6] and proves to be an alternative to bank credit has become very popular in
Kazakhstani society lately. The fact of the matter is that at the certain stage companies begin to need
additional resources for further development. The most common way is to apply for a bank credit. The
negative experience of 2008 which was acquired by Kazakhstan as a result of national economy’s
involvement into global processes, and namely external loans of second level banks at the world
financial markets makes us think of alternative ways of capital attraction. It is better to carry out loans
not at the world financial markets but at the domestic one, and notably at the securities market.
However, to this day the optimal development of Kazakhstan's securities market has been restrained
with lack of attractive financial instruments and relatively low number of investors and issuers despite
the fact that Kazakhstan’s securities market has the developed infrastructure including organized stock
exchange, specialized financial law-court, rating agency, central depository, brokerage firms. The huge
unimplemented capacity of our securities market consists of a large number of potential investors (both
private and institutional) as well as potential issuers. In order to disclose this capacity the interference
of the government is needed for setting up a precedent to demonstrate that with the help of securities
market each economy subject (households, enterprises, the State) at reasonable weighing of risks can
derive profits.
116
Wide introduction of IPO into Kazakhstan’s practice by means of “The People’s IPO” program on
delivery of blue chips’ – subsidiaries of “Samruk-Kazyna” National Welfare Fund (NWF), the total
assets of which (13 trillion tenge[4]) by results of 2011 have composed nearly a half (48%) of
country’s GDP (27.3 trillion tenge[7]) – shares to Kazakhstan’s securities market can serve as creation
of such a precedent. For the first time the necessity of conducting «The People’s IPO» in Kazakhstan
was announced by N.A. Nazarbaev, the Head of State, when speaking at the 13th congress of “Nur
Otan” party in February, 2011[1]. As one can notice, in the framework of this program the term “IPO”
goes hand in hand with a word “People’s” what means targeting at improvement of Kazakhstani
people’s general welfare by giving an opportunity to every enterprising citizen who has some savings
to derive benefit through investing in major national companies’ shares. Also it should be mentioned
that approximately one more year earlier it was said in the Message of the President to Kazakhstan’s
people as of January 29, 2010 that by 2020 the national securities market was to enter a group of ten
leading financial centers of Asia[2].
The objective assigned determines automatic rejection of “Samruk-Kazyna” NWF blue chips’ shares
placing at foreign financial sites, since for the regional financial center of Almaty city (the RFCA) this
will mean the loss of most attractive financial instruments and, accordingly, of new investors - both
local and foreign. And then transformation of the RFCA into one of the leading financial centers of
Asia can be out of the question.
Relevance of this paper can be confirmed with regular extensive media coverage of “The People’s
IPO” issues and multiple commentaries of the Government, the National Bank, the Kazakhstan Stock
Exchange, the Ministry of Economic Development and Trade, the “Samruk-Kazyna” NWF and many
other respected institutions. However, there can be an impression that a wide audience from the number
of population is more absorbed with organizational aspects of conducting “The People’s IPO”.
Thereby the objective of this paper is to trace relationship between “The People’s IPO” program’s
implementation and ensuing favorable financial and macroeconomic consequences for Kazakhstan in
the long term due to emergence of new attractive financial instruments and widening the circle of
domestic and foreign investors and issuers at the RFCA.
2. The Necessity of Conducting “The People’s IPO” Program
Kazakhstan’s securities market was forming and developing gradually followed by increasing of
transactions volume, appearance of new market participants, and improvement of legislation.
Securities market development in Kazakhstan can be divided into several stages [8; p.16-29], [9; p.66]:
1)
1990-1995 – Process of transforming state property into form of property adequate to the
new market relations or in other words: privatization. First laws. First issues of securities by RK
Finance Ministry. First licensable professional participants-mediators at securities market.
Establishment of the Kazakhstan stock exchange (KASE). First joint stock companies. Issue of shares
for investments attraction. Formation of two-level banking system and introduction of national
currency – tenge.
2)
1995-2006 – Perfection of developing institutional infrastructure and standard legal
framework. Considerable development of Kazakhstani institutional investors. Implementation of
securities market regulation firstly by the RK National Commission for Securities, then by the National
Bank (since 2001) and later by the RK Agency for the Control and Supervision of the Financial Market
and Financial Organizations (since 2004). Establishment of “Central Securities Depository” JSC (in
1997). Transition to accumulative pension system. IPO of “KazMunaiGas Exploration Production” JSC.
3)
2006 - to present time – Break-neck growth of financial instruments. First unit investment
funds the investment in which demonstrated sufficiently good yield. Public offering of Kazakhstani
companies’ shares at the London Stock Exchange (LSE) with partial offering of their shares to
Kazakhstani investors: “KazMunaiGas Exploration Production” JSC, Kazakhmys PLC, “Halyk Bank”
JSC, “Kazkommertsbank” JSC, “Shalkiya Zinc” JSC and “KazakhGold” JSC (in 2006). IPO of
“Kazakhtelecom” JSC at the Kazakhstani market by means of offering the shares to population through
“KazPost” JSC transfer-agency network. Foundation of the RFCA. Securities market development
under financial crisis conditions. Adoption of “The People’s IPO” governmental program.
It would seem that Kazakhstan’s securities market was developing slowly but surely and positive
tendency was broken by the world financial crisis as a result of which Kazakhstan’s securities market
lost much in capitalization of shares market and share quotations of most issuers declined, and this led
to significant losses of Kazakhstani investors. However, as Mr. Andrei Tsalyuk, the vice-president of
KASE supposes, “the crisis is really guilty, but only of exposing problems existing in our economy”
including “underdevelopment of domestic securities market, its weak relation with real sector of
economy, lack of sufficient set of financial instruments at this market and interesting investment
objects”[10]. In his judgment, in Kazakhstan people who want to invest spare money reasonably
117
putting it at risk have appeared long ago. They no longer want to invest money in real estate. The banks
saved the situation till recent times since the deposit rates during crisis were acceptable.
One can assume that the majority of Kazakhstan’s population that possesses knowledge in investment
field due to obtaining economic education, attending courses and workshops on finance, watching
programs and reading books on private finance which have become so popular recently, will agree with
Mr. Tsalyuk. Diligently saving approximately 10% of its income (as it was taught by R. Kiyosaki, V.
Sinelnikov, S. Davlatov and other authors of books about how to accumulate and multiply the capital),
this very majority of population has amassed a sizeable amount of money at bank accounts and now is
seeking for effective ways of investing. According to the RK National Bank’s data, by the results of
2011 the deposits of population have composed 2.8 trillion tenge[3]. A conclusion inevitably comes to
mind that a part of this huge investment potential could be applied at securities market. Population has
savings and a will to multiply them. Enterprises have need of additional resources and an opportunity
to issue securities. Securities market is one of the ways of redistributing and transforming the
temporarily spare capital into loanable one. So what is the problem?
Let’s try to examine this from viewpoints of the Classical (A. Smith) and Keynesian (J.M. Keynes)
schools. According to classics, economy functioning is based on freedom to act without any
interventions and on priority of aggregate supply; if supply grows, so will demand. The Keynesian
school has an opposite opinion: aggregate demand is crucial, and growth of demand causes growth of
supply; that is why the government should stimulate demand in every possible way.
Classical Approach (A. Smith):
Keynesian Approach (J.M. Keynes):
Aggregate Supply is Primary
Low activity of private investors at
securities market
Aggregate Demand is Primary
Starting point:
No demand from population for
securities due to non-awareness of
opportunities to make money at
securities market
Risk that issued securities will not be
purchased or will be offered a low price
Unimplemented population’s
investment capacity
Risk that securities placement costs
will not pay off
Sinking of population’s savings at
deposits
Abstinence from securities issuing
Starting point:
No supply of attractive
financial instruments
&
Outflow of capital to international
financial markets
Lack of attractive securities to
purchase
Lack of Liquidity at the Market
Underdevelopment of Domestic
Securities Market
118
Figure 2.1 Existing Situation at Kazakhstan’s Securities Market (designed by the author)
So the question is whether to stimulate demand or supply. Taking into account a fact that justifiability
of both theories was formerly brought into question, Kazakhstan is likely to have decided to stimulate
both demand and supply: that is by having intervened in securities market development (according to
Keynes) with “The People’s IPO” program on providing population with attractive blue chips’ shares
to arrange things so that actions of inherently selfish people who seek personal welfare lead to overall
satisfaction (according to Smith). “The People’s IPO will provide hundreds of thousands of ordinary
Kazakhstani people with an opportunity to own shares of the largest enterprises as well as a new
instrument to invest in and multiply savings…”[1] – emphasized the President N.A. Nazarbaev at the
13th congress of “Nur Otan” party in February, 2011. Thus, “The People’s IPO” program can create a
successful precedent of deriving profit from taking part at securities market by each economy subject.
3. Macroeconomic Benefits from Implementation of “The People’s IPO” Program
As it is known the main objective of securities market development is to promote effective
development of country’s economy; speed up financial stability and economic growth based on work
stimulation of all market economy subjects. According to economic laws, development of securities
market positively affects country’s macroeconomy. Benefits for all the subjects of Kazakhstan’s
economy derived from IPO of “Samruk-Kazyna” NWF’s subsidiaries at national stock market are
shown in details in Figure 3.1.
Enterprises
Households
The State
Real Sector
“SK” NWF Subsidiaries
Receipts from IPO
can be forwarded for
business development
to: expand
production, retool,
introduce new
technology, construct
new buildings, etc.
Extra labor hiring
Other Firms
One can suppose
that other JSCs
due to the example
of “SK” NWF in
order to attract
financial resources
will prefer IPO to
bank loans
Increase in the
number of
brokers and
dealers related
to growth of
IPOs
Financial Sector
Accumulation
pension funds,
insurance
companies,
investment
funds, and
commercial
banks will
improve the
structure of
their
investment
portfolios with
newly appeared
shares of “SK”
blue chips
Population’s
investing into
shares of blue
chips at reasonable
weighing of risks
due to dividend
collection or
speculative trading
can result in…
Creation of new jobs
Decrease of unemployment
Increase of quantity and
improvement of quality of goods
produced
Increase of population's incomes
Growth of consumption (C):
Income ↑ => effective demand ↑
=> expenses on goods and
services purchase ↑
C↑ => GDP↑
Increase of net export (NX):
Even if net export does not have
“+” sign, then value of negative
net export will at least be
reduced
Increase in
Government
Expenses (G):
Government can
spend more on gov.
purchases and
governmentfinanced workers’
wage payment due
to increase in tax
receipt:
- VAT, excise, and
transport tax
(caused by increase
of population’s
income)
- property tax
(caused by increase
in investment
expenditures)
- corporate income
tax (caused by
growth of firms’
income)
- individual income
tax and social tax
(caused by creation
of new jobs)
Demand for goods and
services grows. Mass of
commodities grows, too.
119
G↑ => GDP↑
Increase in investment
expenditure (I)
for account of:
- fixed capital acquisition
(buildings, tools,
equipment),
- newly constructed
production buildings,
- storing of raw materials,
- unrealized finished
product (for firms);
- and newly constructed
residential buildings (for
households).
NX↑ => GDP↑
Inflation is controlled
I↑ => GDP↑
Figure 3.1 Role of “The People’s IPO” in Kazakhstan’s macroeconomy improvement
(designed by the author)
According to Figure 3.1, improvement of macroeconomic situation shall progress in three directions:
growth of GDP, decrease of unemployment, and control of inflation.
Increase in Employment. “Samruk-Kazyna” NWF companies can forward shares placing proceeds to
their further development: expanding of production, retooling, etc. Other enterprises (more than 6.4
thousand large and medium private companies operate in Kazakhstan[9, p.74]), following the positive
example of NWF companies, shall also start doing IPO or issuing bonds. Development of production
and activation of securities market will facilitate creation of new jobs.
Growth of GDP. In this analysis GDP is assessed with the expenditure method in which GDP is a sum
of all the expenditures: Consumption (C), Investments (I), Government Expenses (G) and Net Export
(NX). This method of GDP calculation does not take into account selling of second-hand things in
order to avoid double counting, expenses on securities-related operations and non-repayable transfers
since no goods and services are produced in return.
Thus, placing of “Samruk-Kazyna” NWF subsidiaries’ shares can influence on GDP growth by means
of its each component’s growth:
1) Growth of consumption expenses caused by effective demand’s increase due to:
• Increase of population's incomes thanks to creation of new jobs;
• Collection of dividends from owning shares;
• Further speculative operations at the stock exchange;
• Increase in profitability of institutional investors whose financial services are
consumed by the population.
2) Increase in investment expenditure at the expense of:
• - fixed capital acquisition (buildings, tools, equipment),
• - newly constructed production buildings,
• - storing of raw materials, and
• - unrealized finished product (for firms);
• - and newly constructed residential buildings (for households).
3) Increase in government expenses (governmental purchases, government-financed workers’
wage payment) due to increase in tax receipt owing to growth of:
• consumption expenses (VAT, excise, and transport tax);
• investment expenditures (property tax);
• firms’ income (corporate income tax);
• number of new jobs (individual income tax and social tax).
4) Increase of net export that shall favorably affect the NX indicator (difference between export
and import), which can be positive or negative. Even if Kazakhstan’s net export shall have “-”
sign, then value of negative net export will at least be lower.
Inflation Control. One can assume that inflation shall be under control because growth of effective
demand will be backed up with a mass of commodities thanks to production expansion.
4. Conclusions
Despite all accusations concerning Kazakhstan’s securities market functioning in not a high gear,
limited attractive securities, relatively low number of investors and issuers, one should nevertheless
recognize that within two decades Kazakhstan’s securities market passed ahead the stock markets of
many CIS countries. But it is not characteristic for Kazakhstan to stop at what has been accomplished.
Strategy on achieving regional leadership in financial sector and being in top ten regional financial
centers of Asia is a clear proof of that. Upcoming revival of securities market thanks to emergence of
new investors, issuers and liquid securities against the background of economic growth at the expense
of increase of GDP, decrease of unemployment and control of inflation in sum with already available
factors like political stability, good geographic situation, advanced service, developed financial
infrastructure (specialized financial law-court, rating agency, “ETS” commodities exchange, RFCA
120
Academy) as well as planned active introduction of Islamic instruments at KASE (which is a separate
topic for discussion) shall attract foreign investors and issuers to the RFCA. There is no doubt that on
paper the sum of factors listed promises to become a formula for success. But for now these are only
predictions. First conclusions can’t be made until 2nd-3rd quarter of 2012 when population and
accumulative pension funds will be offered 5 to 15% of three companies’ (“KazTransOil”, “KEGOC”,
and “Air Astana”) shares in terms of the first stage of “The People’s IPO”[5].
5. References
1. Speech of N.A. Nazarbaev, the President of the Republic of Kazakhstan at the 13th congress of
“Nur Otan” People’s Democratic Party, <http://www.akorda.kz>
2. Message of the President of the Republic of Kazakhstan to Kazakhstan’s people (January 29,
2010),
<http://www.akorda.kz/ru/speeches/addresses_of_the_president_of_kazakhstan/poslanie_prezident
a_respubliki_kazahstan_na_nazarbaeva>
3. The National Bank of the Republic of Kazakhstan press release as of February 14, 2012 # 7 “On
Situation at the Financial Market”, <http://online.zakon.kz/Document/?doc_id=31124911>
4. Report of N.K. Rakhmetov, “Samruk-Kazyna” JSC managing director at the “Samruk-Kazyna”
JSC extended collegium by results of 2011 as of February 3, 2012, <http://sk.kz/news/view/3208>
5. Information-analytical portal of “Samruk-Kazyna” National Welfare Fund” JSC,
<http://sk.kz/page/narodnoe-ipo>
6. Definition of “IPO” term by the U.S. Securities and Exchange Commission, <http://www.sec.gov>
7. The Agency of Statistics of the Republic of Kazakhstan, <http://www.stat.kz>
8. А.К. Arystanov (2010), “Regional Financial Center of Almaty: Monography”. – Almaty: Printing
House “Zhibek Zholy”. –168 p.
9. A.B. Azhikhanov (2011), “Price Determination Management of Kazakhstani Companies’ Shares
Initial Public Offering (IPO): Models, Methodology, and Ways for Improvement (on the Example
of London Stock Exchange)”, Doctor of philosophy thesis. – Almaty. –170 p.
10. А. Tsalyuk. “Who needs this?” Information portal Tengrinews.kz dated 19.01.2011
Impact of Globalizing Financial Markets on Emerging Economies and Possibilities of
Institutional Control – An Extended Abstract
Olga Dzilinska
Warsaw School of Economics
[email protected]
Abstract: The paper aims at outlining major consequences of financial globalization to the emerging
market and possibilities to limit those which seem potentially harmful. In economic theory, beside the
mainstream idea that liberalization of capital flows would enhance efficiency and economic growth,
there has also been undercurrent which recognizes that while developing countries are not able to reap
the benefits of free capital mobility yet, it puts their economies under much immediate pressure.
Empirical analyses of growth with respect to financial openness are used to ascertain how the aforementioned relationship varies depending on a stage of economic development. Case studies of financial
crises reveal, in turn, the nature of causality between macroeconomic volatility and a degree of
international financial integration. From this perspective adequacy of institutional instruments designed
to reduce vulnerabilities linked to globalization is assessed.
Key-Words: financial globalization, propensity to crisis, capital controls, institutional framework of
financial system
1. Introduction
Process of globalization seems to be one of most eminent characteristics of today’s world economic
system. Its imprint is particularly strong on fast developing intangible financial markets. While some
observers notice that markets were globally integrated already in 19th century and to a greater extent
than nowadays (Zevin, 1992; Soros, 1998), there are also those who allow for economic integration on
a global level before the I World War, but insist that the phenomenon did not reach the scale and depth
it has today (Bordo, Eichengreen, Kim, 1998). The consequences of the ongoing process,
unprecedented or not, raise even more controversies. On the one hand, economic theory suggests that
deepening financial integration would foster economic growth by (1) allowing for the most efficient
allocation of assets, used to finance worthwhile projects regardless of national borders and thereby
facilitating transnational technology transfer, (2) which, in turn, may increase efficiency of national
121
economies. Moreover, free capital mobility may result in enhanced international risk sharing, (3)
increasing developing countries’ ability to smooth consumption through possibility to borrow abroad in
times of need. Investors from advanced economies would, in turn, benefit from greater opportunities
for portfolio diversification (4). On the other hand, however, recent crises provided not negligible
empirical evidence that financial globalization may amplify vulnerabilities to possible contagion and
thereby exacerbate macroeconomic instability. Concerns of similar nature have been expressed with
regard to emerging market for quite some time. It has been even suggested that countries that are
“unsuitable for either currency unions or free floating” should consider controls on transnational capital
movements (Krugman, 1999). In order to identify a proper institutional response, those two sides of
free capital mobility will be compared, with a reference to possible diverging trends in advanced and
developing economies.
2. Two faces of financial globalization
2.1. Financial globalization and economic growth in emerging market
The afore-mentioned theoretical presumption that financial globalization should enhance economic
growth is intuitive and it may remain so because basic econometric tools has so far failed to provide
unequivocal empirical evidence of such a relationship. A survey of over 40 studies based on crosscountry regressions concluded that the evidence of a link between unrestricted capital mobility and
economic growth is not robust (Kose et al., 2006). These results would seem to be broadly consistent
with difficulties to identify any robust determinants of economic growth in cross-country or panel
regressions. In this view it may be concluded that rejecting theoretical promise of positive impact of
financial integration on growth would be premature. Ways of reconciling this intuitive presumption
with insufficient evidence were proposed instead (Dell’Ariccia et al., 2008). It was noted that three
issues should be taken into account. Firstly, decomposition of financial integration into different types
of flow helps unearth their relationship to economic growth. For instance, effects of equity market
liberalization on growth (Kose et al., 2006) as well as those of greater share of foreign direct
investments (FDI) in total liabilities (Dell’Ariccia et al., 2008) were both: positive and statistically
significant. Secondly, a survey of empirical studies indicates that for a country to accelerate growth due
to financial globalization certain preconditions regarding: (1) development of domestic financial sector,
(2) institutional quality, (3) sound macroeconomic policies and (4) trade integration must be met (Kose
et al., 2006). The overall picture indicates that increase in growth owing to financial integration
depends on those thresholds. Only FDI appears to be beneficial for growth independently of any
preconditions. Thirdly, it was observed that gains accrued from free capital mobility may be indirect –
namely, financial globalization may have a positive impact on phenomena which are associated with
growth (such as total factor productivity growth, domestic financial sector development and
macroeconomic policies). In sum, unbundling financial globalization and identifying factors behind
differences among groups of countries allows to detect the relationship between financial integration
and economic growth as well as its dependence on a number of thresholds which seem indicative of a
stage of economic development. However, it can be excluded that free capital mobility may facilitate
progress in attaining relevant policy and institutional thresholds, enabling the country to limit the risks
and maximize benefits from the process.
2.2. Impact of international financial integration on national macroeconomic stability
Arguably, the deepening financial integration played a not insignificant role during the Asian crisis and
the crisis of 2007. This observation, if true, would strengthen the argument for controls on transnational
capital movements in order to prevent countries from being forced to pay for big risk appetites of
multinational financial institutions or wrong policies adopted abroad. Nonetheless, it does not hold up
to empirical evidence on impact of financial globalization on the propensity of national economy to
crises. Studies (surveyed in Kose et al., 2006) do not support the presumption that unrestricted capital
mobility necessarily entails greater risk of crisis. Results to the contrary are reported in majority of
those studies and even allowing for the possibility of self-selection of more stable economies to deeper
integration the likelihood of currency crises does not increase with the extent of financial openness
(Glick, Guo and Hutchinson, 2006). It was suggested that institutional thresholds such as in case of
impact on economic growth may be the underlying cause (Dell’Ariccia et al., 2008) and the hypothesis
was confirmed for currency crises, debt crises and sudden stops. For countries with underdeveloped
financial sector a progress in integration is associated with an increase of macroeconomic volatility
(proxied by consumption volatility), but the effect weakens and loses statistical significance as the
domestic financial development increases. Economies which, beside developed financial system, are
characterized by at least 2 of other 3 preconditions identified in the previous section (institutional
quality, sound macroeconomic policies and trade integration) were found to be less prone to crisis than
those which met only 2 out of 4 thresholds. Summing up, developing countries may expose themselves
to increased risk of crises if they do not complete progressing financial integration with appropriate
122
institutional and policy developments. Causes of recent crises were, however, of more complex nature
and cannot be seen as direct consequences of financial globalization.
3. Instruments of institutional control over financial system
The results of the analyses of impact of financial globalization on economic growth and instability are
broadly supportive of benefits of institutional control over financial system. Its quality turns out to act
as constraint on country’s potential to attain benefits from financial globalization – only countries with
well-developed and regulated financial systems are able to accrue all its gains whereas those deprived
thereof may even experience increased frequency of crises. This general observation does not takes into
account practically unlimited forms which institutional control may take. The most radical would
naturally be restrictions on capital flows (1). Generally, two main types of such controls can be
construed: controls on capital inflows and controls on capital outflows. While the idea of restricting
capital outflows still seems exotic and radical to most economists, the latter concept has its advocates
(Eichengreen, 1998; Stiglitz, 1999). The underlying idea is to protect emerging economies from
negative consequences of financial globalization in the absence of proper institutional and policy
framework. Nevertheless, in the light of microeconomic studies (surveyed in Forbes, 2005) capital
controls impose a range of efficiency costs (lower international trade, more expensive and hence, less
accessible particularly for small firms capital, distortions to competition, evasion attempts,
administrative costs of monitoring compliance). Separation between deposit-taking and paymentsystem functions from investment banking constitutes a potential restriction that would be little less
intrusive from the perspective of capital openness (2). Such solution was imposed by Glass-Steagall
Act in 1933 in United States and its repeal in 1999 was tied by some observers to the late-2000s
financial crisis. Eventual reenactment of similar provisions requires an international coordination if its
effects are supposed to go beyond distorting competition between financial institutions based in
countries with different regimes (Eichengreen, 2009). Incidentally, potential for regulatory arbitrage
between the regulated sector of depository institutions and the parallel banking system of structured
vehicles and investment banks was pinpointed as one of systematic failures of institutional supervision
over financial sector that led to the crisis of 2007 (Vives, 2012). It seems only reasonable to avoid
creating new platforms for prospective regulatory arbitrage (between countries). Paradoxically, also the
solution based on well-regulated national financial systems (set of prudential requirements applied to
all financial institutions) (3) cannot function properly without international cooperation (4). Framework
of institutional control at both levels (national and supranational) should address: obligation to disclose
relevant information, capital as well as liquidity requirements, obligatory insurance to cover possible
losses and gradation of punishments for market participants which fail to comply with regulations. The
main problem which persists with regard to international dimension manifests itself with absence of
institution that could act as central regulatory body or at least the arbiter of national regulators. If
International Monetary Fund (IMF) does not assume such a role, to which it has not shown yet any
inclination, the need for enhanced coordination of multilateral institutional dialog will become more
apparent.
4. Conclusions
With reference to both: economic growth as well as macroeconomic volatility the differing trends in
financial globalization may be detected. These reflect partially different policy choices (i.e. applied
methods of control over financial sector) and, in other part, other characteristics of the country’s
economy (development of domestic financial sector, institutional quality, sound macroeconomic
policies and trade integration). Those factors act as constraints of the process of financial integration as
well as determinant of its consequences. Empirical evidence indicates that economies which meet
thresholds discussed above are more likely to attain greater gains from free capital mobility while those
which fail to satisfy the afore-mentioned preconditions expose themselves to increased crisis
propensity for no good reason since they are unable to benefit fully from the international integration.
These results support the integrated approach, presented currently by IMF, which envisages gradual
and orderly sequencing of reaching financial openness and ties it with necessary improvements in
relevant policy areas.
5. References
1. Bordo, Michael D., Barry Eichengreen and Jongwoo Kim (1998), “Was There Really an Earlier
Era of Financial Globalization Comparable to Today?” in Bank of Korea, “The Implications of the
Globalization of World Financial Markets, Seoul: Bank of Korea, pp.27-83.
2. Dell’Ariccia, Giovanni, Julian Di Giovanni, André Faria, Ayhan Kose, Paolo Mauro, Jonathan D.
Ostry, Martin Schindler, and Marco Terrones (2008), “Reaping the Benefits of Financial
Globalization”, International Monetary Fund Occasional Paper No. 264, Washington DC.
3. Eichengreen, Barry (1998), “Toward a New International Financial Architecture: A Practical PostAsia Agenda”, Institute for International Economics.
123
4.
Eichengreen, Barry (2009), “Out of the Box Thoughts about International Financial Architecture”,
International Monetary Fund Working Paper No. 09/116, Washington DC.
5. Forbes, Kristin (2005), “The Microeconomic Evidence on Capital Controls: No Free Lunch”,
National Bureau of Economic Research Working Paper No 11372, Cambridge: Massachusetts.
6. Glick, Reuven, Xuenyan Guo, and Michael Hutchinson (2006), “Currency Crisis, Capital-Account
Liberalization, and Selection Bias”, Review of Economics and Statistics, Vol. 88, No. 4, pp. 698714.
7. Kose, Ayhan, Eswar Prasad, Kenneth Rogoff, and Shang Jin Wei (2006), “Financial Globalization:
A Reappraisal”, International Monetary Fund Working Paper No. 06/189, Washington DC.
8. Krugman, Paul (1999), “Depression Economics Return”, Foreign Affairs, 78, 1.
9. Soros, George (1998), “The Crisis of Global Capitalism”, New York: Public Affairs Books.
10. Stiglitz, Joseph (1999), “Bleak Growth Prospects for the Developing World”, International Herlad
Tribune, April 10-11, 1999, p. 6.
11. Zevin, Robert (1992), “Are World Financial Markets More Open? If So, Why and With What
Effects” in Tariq Banuri and Juliet B. Schor (eds.), “Financial Openness and National Autonomy”,
Oxford: Clarendon Press, pp. 43-83.
12. Vives, Xavier (2012), “Seven principles for better banking regulation”,
http://www.voxeu.org/index.php?q=node/7717 , 13 March 2012
Corporate Governance influence on capital structure of Kazakhstan listed companies
Gulnara B. Moldasheva
KIMEP University
[email protected]
Abstract:The paper explores the influence of corporate governance on capital structure of listed
companies in an emerging CIS equity markets, Kazakh stock Exchange (KASE) during the period of
2006-2011. Over the last decade the corporate governance is as very actively analyzed in the behavior
finance of corporations. The purpose of this research is to find the relationships between Ownership
Structure and Capital Structure on the example of Kazakh listed companies. Good corporate
governance practices may have significant influence on the strategic decisions of a company, e.g.
external financing, that are taken at board level. Therefore corporate governance variables like size of
board, composition of board, skill set at board and CEO/Chair duality may have direct impact on
capital structure decisions. Analysis of this study is very important for Kazakhstan since most of all
listed on KASE have high concentration of ownership. This research employs firm level data for 65
randomly selected non-financial listed on KASE companies by using multivariate regression analysis
under fixed effect model approach. Measures of corporate governance employed in this study are
board’s size, board’s composition, and CEO/Chair duality. Also this study examines the impact of
shareholding on financing decisions by using managerial shareholding and institutional shareholding
variables, and influence of controlled variables like firm size and profitability on firms’ financing
mechanism.
Results of this panel study showed that only institutional shareholding is significantly negatively
correlated with debt to equity ratio. Also findings showed that board size is significantly negatively
correlated with number of independent directors and managerial shareholding, but positively correlated
with the institutional shareholding. Corporate financing behavior is influenced by CEO/Chair duality
and the presence of independent directors in the Board of directors. Duality is positively correlated
with the institutional shareholding and the board size and negatively correlated with managerial
shareholding. However, control variables firm size and return on assets do not have significant effect
on capital structure. Therefore found results suggest that corporate governance variable like
institutional shareholding has important role on decision about the leverage of the firm.
Keywords: Corporate governance, board composition,, capital structure, multivariate analysis
1.Introduction
The technology improvements and mass production by multinational companies, the minimum
efficient scale of operations were significantly increased within the last decades of 20th and first
decade of 21th centuries. Consequently, entrepreneurs were increasingly unable to finance the assets
out of their own pockets, and ownership of corporations became separated from control over the assets.
Corporations are managed by individuals who have superior knowledge to efficiently succeed in the
marketplace, but yet these managers do not have enough resources to finance the operations. Investors
124
have sufficient resources , but yet they do not have enough skills or motives to do business effectively.
With the transfer of resources from investors to managers also comes the problem of how to protect the
interests of the investor. How we can insure that the manager (agent) would use the investors’
(principal) resources to the purpose of getting significant returns to the company. This problem is
known in economics as the principal-agent problem. Agency theory was developed mainly in the 1970s
and 1980s (Eisenhardt, 1989; Fama and Jensen, 1983; Jensen and Meckling, 1976). Generally
corporate governance is associated with the existence of agency problem and its roots can be traced
back to separation of ownership and control of the firm. Agency problems arise as a result of the
relationships between shareholders and managers and are based on conflicts of interest within the firm.
Similarly conflict of interests between controlling shareholders and minority shareholders is also main
large area of the corporate governance literature. According to modern corporate finance theories,
agency cost is one of the determinants of capital structure. However empirical literature on corporate
governance does not provide any conclusive evidence on the existence of relationship between
corporate governance, ownership structure and capital structure of firm.
Over last decades the corporate governance has been a growing interests of finance and management
research. A comprehensive review of literature reveals that empirical work is mostly focused on the
impact of corporate governance on firm’s performance or examines the impact of ownership structure
on firm value (Welch,I.(2011), Lazarides,T.& Pitoska,E.,(2009). However relationship between
corporate governance and capital structure has not been fully explored. Only few studies discuss this
relationship. Berger, P. G., Ofek, E. and Yermack, D. L. (1997), Friend and Lang (1988), Wen, Y.,
Rwegasira, K. and Bilderbeek, J. (2002), Abor (2007), and Arshad Hasan, Muhammad Ali Jinnah,
Safdar Ali Butt Muhammad Ali Jinnah,(2009) discuss the impact of corporate governance on the
capital structure decisions of firms for developing and emerging markets.
Delivered by International Financial Corporation (IFC) of WB project on implementation of corporate
governance principal in Central Asia during 2007-2010 years mainly investigated the legal aspects of
the relationship between the Board of Directors and management bodies of the companies. But still no
study has been conducted to investigate the relationship between corporate governance and capital
structure of the firm in Central Asia countries . Kazakh Stock Exchange (KASE) is an emerging market
in Central Asia and in recent years has shown remarkable performance, attracting considerable direct
foreign investment. This paper explores the relationship between corporate governance and capital
structure of listed on KASE Kazakh companies and integrates various investigations in the literature.
The study examines the influence of three groups of variables on debt to equity ratio in capital structure
of the company. The first group includes the corporate governance measures presented by Board Size,
structure of the Board and CEO/Chair Duality. The second group is represented by two variables of
Institutional Shareholding and Managerial Shareholding according by percentage of shares belong to
the Board of directors or other Institutions. The third group is consist of two control variables of Size
of the firm and Return on Assets. The capital structure as a dependent variable is represented by Debt
to Equity ratio. The empirical study tests two hypotheses. The first hypothesis investigates that
ownership concentration is significantly negatively correlated with debt to equity ratio. The second
hypothesis explores that the ownership structure and CEO/Chair duality play important role in
determination of Debt to Equity ratio. This research may have important implication for the effective
corporate governance of Kazakh companies listed on KASE.
The paper has next sections:1.Introduction;2.Litrature Review;3.Data Description and Methodology of
empirical studies;4.Empirical findings and 5. Conclusions. Section 6 presents the references.
2. Literature review
The literature review is structured as follows:
• In first section, I explain the independent set of variables presenting the ownership structure and
its measurement and impact on corporate structure based on the reviewed studies.
• In the second section I explain the relationship between the ownership structure and management
of the firm and its impact on capital structure in varies research studies.
• In the third section I present the findings of the study on Debt to Equity ratio changes.
125
LITERATURE REVIEW MAP
Capital Structure and Corporate Governance
Debt to Equity Ratio
Relationship between Ownership and Management
Forecasting of
changes in D/E
ratio Welch,I.(2011),
Control of
Ownership Pindado,J.
Behaviour and
implicatioms
Theory and
Modeling Pindado,J. &
& Torre, C.( 2011),
Protopapa,M.(2011),Hong
Liu,Jianjun
Miao,(2006),Anderson R.,
Mansi, S. and Reeb, D.
(2004)
Lazarides,T.&
Pitoska,E.,(2009),
Celliera,A.,
Cholleta,P.(2010),Pfeffer,
J. and Salancick, G.R.
(1978).
Torre, C.( 2011),
E. Han Kim,(1978),
Gerwin van der
Laan,(2009),Rose,C.,(2006
)
Lazarides,T.&
Pitoska,E.,(2009),
Chang,K.P.(2004)Abor, J.
(2007). Titman, S., and
R.Wessels (1988),
Ownership Structure
Empirical Evidence
Pindado,J. & Torre, C.(
2011),
E. Han
Kim,(1978), Celliera,A.,
Cholleta,P.(2010),Vilan
ova, L. (2007),
Optimal Capital Structure and Performance of the firm
Welch,I.(2011), Hong Liu,Jianjun Miao,(2006), Gerwin van der Laan,(2009),Protopapa,M.(2011), Rose,C.,(2006), Lazarides,T.&
Pitoska,E.,(2009), Arshad Hasan, Muhammad Ali Jinnah,Safdar Ali Butt
Muhammad Ali Jinnah,(2009), Chang,K.P.(2004) ,Gerwin van der Laan,(2009) ,Berger, P. G., Ofek, E. and Yermack, D. L. (1997) ,Fama
E.F., and Jensen M.C. 1983 ,Friend, I. and Lang, L.H.P. (1988) ,La Porta, R., F. Lopez-de-Silanes, and A. Shleifer (1999), Wen, Y.,
Rwegasira, K. and Bilderbeek, J. (2002).
Need to Study
RQ: What
are the relationships betwwen Ownership concentration(OC) of the firm and
Capital structure on the example of Kazakh companies?
Figure 1. Literature Review Map
The third part is divided in two major subparts. The first subpart presents the relationship between the
size of firm and its influence on optimal capital structure (or debt to equity ratio)., and the second
subpart explains what are the relationships between the performance of the firms and the leverage of
the firm (Debt to Equity ratio). This review navigates to answer on my research question: “What are
the relationships between Ownership Concentration and Capital Structure on the example of Kazakh
listed companies? “
2.1 Ownership structure and Optimal Capital Structure
I divide the review of this part in two ways: a) Empirical Evidence of ownership structure, and b)
Theory and Modeling of ownership structure .
Since Modigliani and Miller’s (1958) paper, capital structure has become a puzzle where the pieces do
not fit. In attempting to find answers to some of the unresolved questions, in this study I will provide a
complementary perspective on capital structure, which might be considered as the ownership view of
capital structure. This view is that a firm’s ownership structure can help explain how the companies
make the choice between debt and equity. The idea is that the capital structure choice depends on who
is in control of the firm. The analysis of ownership and capital structures in Spain is an interesting case
study because Spain is a civil-law country and, according to La Porta et al. (1998), Spanish investor
protection is weaker than that of their U.S. counterparts. Furthermore, as La Porta et al. (1999) point
out, the risk of expropriation of minority shareholders is greater in countries with weaker investor
protection. Pindado,J. and Torre, C.( 2011) mentioned that link between corporate ownership structure
and performance consistent with the proposition that Spanish controlling owners manage to expropriate
rents from minority ones. They provided theory and empirical evidence supporting a complementary
perspective on capital structure based on corporate ownership structure , and showed in their paper that
capital structure is partly determined by the incentives and the goals of those who are in control of the
firm.
Transferring to theoretical view, E. .Han Kim( 1978) concludes that in a perfect capital market where
firms are subject to income taxes and costly bankruptcies, debt capacity occurs at less than one
hundred-percent debt financing and firms do have optimal capital structures which involve less debt
financing than their debt capacities. The market value of the firm increases for low levels of debt and
decreases as financial leverage becomes extreme. With linear bankruptcy costs, a simple method to
approximate the optimal capital structure was derived. A numerical example using this method shows
126
that the market value of the firm is a strictly concave function of its total end-of-period debt obligations
with a unique global maximum.
Jensen and Meckling (1976) argue that managerial shareholding reduces managerial incentives to
consume perquisites and expropriate shareholders’ wealth and results in alignment of the interests of
management and shareholders. It also reduces the propensity to involve in non maximizing behavior.
Fama and Jensen (1983) argue that managerial shareholding may still have adverse effects on agency
conflicts and it may entrench the present management leading to an increase in managerial
opportunism. Jensen (1986) again addresses the issue of agency theory and finds that managers of a
firm may make efforts to expand the firm beyond its optimal size for their personal gains and this may
result in increase in gearing levels. These efforts may lead to greater power and status for managers but
it will have a negative impact on firm efficiency. Friend, Irwin and Lang (1988) discuss role of
managerial self-interest in making capital structure decisions. They find that there exist negative
relationship between leverage ratio and management’s shareholding. This indicates that in the absence
of any outsider principal stockholder the tendency of low debt to equity ratio will continue which will
lead to higher non diversifiable risk of debt to management.
So, the relationship between capital and ownership structure is not straightforward, therefore let see
how the capital structure depends from the relationship between ownership and management of the
firm.
2.2 Influence of Relationship between Ownership and Management on Capital Structure
The review of this part observes the next variables: control of ownership, size of the firm, composition
of Board , Independent Directors and CEO/Chair Duality and their impact on capital structure .
Berger, Philip, Eli and Yermack (1997) investigate the relationship between managerial entrenchment
and firms' capital structures. Results indicate that entrenched CEOs make efforts to remain away from
debt and gearing ratios remain lower in the absence of demand from owners. A critical examination of
changes in leverage levels reveals that gearing levels moves upward when steps to reduce
entrenchment are taken. These steps may include threats to managerial security through involuntary
CEO replacements and the replacement in the board of directors.
Protopapa, M.(2011) investigates the role of equity ownership for the purpose of committing the
management to the pursuit of shareholder value in the presence of separation between ownership and
control. First, optimal equity ownership is positively related to the short-term performance of the firm
and negatively related to both its growth options and riskiness of cash flows. Second, optimal equity
ownership is negatively related to the probability of the firm being financially constrained, in the sense
that the level of desired investment exceeds internally available resources. It is also shown that straight
debt alone does not implement the second best, in absence of a large shareholder. Finally, an interesting
result shows that, in presence of financial constraints, pay for luck is associated in equilibrium to a
lower optimal degree of ownership concentration: pay for luck and looser governance, as implemented
by the internal discipliner of equity concentration, emerge as the equilibrium result of a constrained
incentive problem.
Arshad Hasan, Muhammad Ali Jinnah, Safdar Ali Butt Muhammad Ali Jinnah,(2009) reviewed the
influence of ownership structure on the financial structure of firms. Results reveal that there exist
positive relationship between management ownership and leverage ratio whereas negative relationship
is observed between large external equity holder’s ownership and financial leverage. However,
relationship between management ownership and leverage ratio is not significant in the presence of a
large outside equity holders. These findings suggest that outside equity holders affects the agency costs
of equity financing and debt financing.
Bilderbeek, J. (2002), finds that the managerial ownership and leverage may be related in nonlinear
fashion. He provides evidence about the presence of negative relationship among managerial equity
holding and gearing levels. He discovers that low level ownership by managers leads to low level of
agency conflicts and results in higher level of debt. On the other hand higher levels managerial
ownership results in managerial opportunism and ultimately leads to lower debt levels.
The board of directors is highest body of a company that is responsible for managing the firm and its
operation. It plays vital role in strategic decisions regarding financial mix. Pfeffer and Salancick (1978),
and Rose,C.(2006) find a significant relationship between capital structure and board size. The
evidence regarding direction of relationship between board size and capital structure is mixed.
Rose,C.(2006) conducted a multivariate analysis using a sample of listed Danish firms in order to
examine what describes board composition and showed that a higher proportion of insider ownership
increases the first dimension, whereas a higher remuneration increases the business person orientation
of the board. If firm size increases, the international dimension of the board increases and if a firm
experiences less growth board structure becomes more traditional.
127
Berger (1997) finds that firms with larger board of directors generally have low D/E levels. He argues
that larger boards exert pressure on managers to follow lower gearing levels and enhance firm
performance. Abor (2007) examined the relationship between corporate governance and capital
structure decisions of Ghanaian Small and Medium Enterprises (SME) by using multivariate
regression analysis. The results provide evidence about negative relationship between board size and
leverage ratios and SMEs with larger boards generally have low level of gearing.
On the other hand, Wen (2002) finds positive relationship between board size and capital structure. He
argues that large boards follow a policy of higher levels of gearing to enhance firm value especially
when these are entrenched due to greater monitoring by regulatory authorities. It is also argued that
larger board may find difficulty in arriving at a consensus in decision which can ultimately affect the
quality of corporate governance and will translate into higher financial leverage levels. Jensen (1986)
states that companies with high gearing level rather have larger boards. Anderson (2004) finds that the
cost of debt is generally lower for larger boards because lenders think that these companies are being
monitored more effectively by a diversified portfolio of experts. So debt financing becomes a cost
effective choice.
Independent directors are cornerstone of modern corporate governance. The relationship between
presence of independent directors and capital structure has been explored by few researchers but
evidence in this regard is mixed. Some representative work is reviewed below.
Pfeffer and Salancick (1978) accentuate that non executive directors plays a pivotal role in enhancing
the capability of a company to get recognition from external stake holders. Thus leads to reduction in
uncertainty about company and enhance ability of the company to raise funds. They find that higher
level of representation of non executive directors
on board leads to higher gearing levels. Jensen (1986)and Berger (1997) find e that companies with
higher gearing levels rather have relatively more non executive directors whereas companies with
lower representation of non executive directors experience lower leverage.
Abor and Biekpe (2007) provide evidence about the presence of positive relationship among gearing
levels and CEO duality, board skills and board composition. Ghanaian SMEs that have more outside
directors and a diversified set of skills at board generally have higher level of gearing. On the other
hand researchers like Wen (2002) provides evidence about the existence of significantly negative
relationship between gearing level and representation of non executive directors on the board. The
possible reason is that non executive directors monitor the managers more efficiently and effectively so
managers are forced to seek lower gearing levels for achieving superior results. Similarly companies
with higher representation of non executive directors are bound to follow low financial leverage with a
high market value of equity.
Finally , let’s review the impact of CEO/Chair duality on capital structure. Another important feature
of modern corporate governance is CEO/Chair duality. It indicates the corporate management where
the CEO also serves as chairman of the board. This situation has direct impact on the financing
decision of the company. Fama and Jensen (1983) argue that in a firm decision management and
decision control functions should be separate.
Decision management function encompasses the right to initiate and execute new proposals for the
disbursement of the firm's resources while decision control function comprises of the right to approve
and monitor those proposals. This separation is ensured through a set of internal checks and internal
controls. This system facilitates the judicious utilization of firm’s resources. Therefore the same system
should be implemented at the premier level. Therefore role of chief decision management authority
(CEO) should also be separated from role of chief decision control authority (chairman). Board of
directors is the seat of premier level of decision control mechanism in the corporate structure so it must
not be controlled by CEO. Presence of CEO/Chair duality signals the absence of separation of decision
management and decision control and it ultimately leads to agency problems. Arshad Hasan,
Muhammad Ali Jinnah, Safdar Ali Butt Muhammad Ali Jinnah,(2009) reviewed that firms with
separate chairman and CEO employ the optimal amount of debt in their capital structures. They
discovered that firms with separate CEO and chairman generally have higher financial leverage.
However it is worth mentioning that this relationship is statistically insignificant. Abor and Biekpe
(2007) also provide evidence about the presence of positive relationship between gearing levels and
CEO duality.
Arshad Hasan, Muhammad Ali Jinnah, Safdar Ali Butt Muhammad Ali Jinnah,(2009)’results reveal
that board size and managerial shareholding is significantly negatively correlated with debt to equity
ratio. However corporate’s financing behavior is not found significantly influenced by CEO/Chair
duality and the presence of non-executive directors on the board.
So, the review of relationship between ownership structure and management of the firm showed that
there are clear evidences of impact of managerial variables on capital structure.
128
Control of ownership, size of the firm, composition of Board , non executive directors and CEO/Chair
duality can positively or negatively influence on the leverage ratio (gearing level), and therefore
directly to impact on firm performance.
2.3 Performance of the firm and Optimal Capital Structure
Myers and Majluf (1984) , Titman and Wessels (1988), Hong Liu , Jianjun Miao,(2006), Lazarides, T.
and Pitoska, E.(2009), Welch, I .(2011)., analyzed the performance of the firm with the different debtto equity ratios and discovered many problems associated with .the decisions about optimal capital
structure.
Welch, I.(2011) points out two common problems in capital structure research:1)not clear whether nonfinancial liabilities should be considered debt, they should never be considered as equity,2)equityissuing activity should not be viewed as equivalent to capital structure changes. Also he showed that:
1)very common measure of leverage, the FD/AT( financial debt to total assets), incorrectly classifies
non-financial liabilities the same as equity, that is, as the opposite of leverage.2)indeterminacy and
measurement problems in reported corporate debt ratios that arise from the presence of a perfect
financial market for cash in the economy.3)The correlation between equity issuing activity and capital
structure changes is either insignificant or outright perverse (firms issuing equity on average increase
their leverage).
Lazarides, T. and Pitoska, E.(2009) concluded that debt aggravation is statistically affected by
performance, organizational structure and firm size. These findings are compatible with the literature.
The innovative finding is that variables like Corporate Governance Index , Mergers and
Acquisitions ,Major shareholder is the CEO and den dismissal or resignation of, executive, non
executive and independent members of the Board of Directors are not statistical important. Corporate
Governance does not seem to have any statistical important impact on capital structure and this
conclusion is the opposite of the relevant studies of Vilanova (2007). Greek firms seem to favor debt as
a mean of finance, instead of capital-share issues.
Celliera,A.and Cholleta,P.(2010) 1)analyzes the impact of Vigeo corporate social rating
announcements from 2004 to 2009 on short term stock returns.2)analyzes the relation between the
content of the announcement and the abnormal return measured companies’ performance in the field of
Sustainable Development & Social Responsibility.(SSR ). First, they found that the announcement of
CSR rating induces a positive reaction of the stock market, whatever the rating. This result confirmed
the CSR rating announcement is information incorporated in stock prices. Second, they confirmed that
abnormal return is an increasing function of aggregated CSR score.
Hong Liu and Jianjun Miao,(2006) analyzed conflicts of interest between insiders (e.g, controlling
shareholders) and outsiders (e.g., minority shareholders),examined a controlling shareholder’s optimal
choice of capital structure, ownership concentration, private benefit diversion, consumption, and
financial market investment. They concluded that 1) that the entrepreneur’s utility-maximizing default
policy depends on both firm cash flow level and the entrepreneur’s personal wealth, 2) that debt value,
equity value, capital structure, ownership concentration, and credit spreads are sensitive to managerial
preference characteristics, and 3.)stronger corporate governance is associated with higher equity value,
less concentration of ownership, lower leverage, and lower credit spreads.
Relationship between size and leverage of a firm is discussed in two different contexts. One point of
view supports positive relationship between firm size and leverage. Titman and Wessels (1988) state
that large firms do not consider the bankruptcy costs in deciding the level of leverage as these are just a
small percentage of the total value of the firm. Therefore large firms may prefer to use higher level of
gearing. Friend and Lang (1988) and Marsh (1982) also support the positive relationship between size
of firm and leverage levels.
Another group of researchers provides evidence about the existence of negative relationship between
size of firm and leverage. Myers and Majluf (1984) found that profitable firms generally have low
gearing levels because these firms prefer internally generated funds over external financing. These
results are in line with pecking order hypothesis.
So, presented part of review of the performance of the firm in mainly showed that such variables as
size of assets, stock prices, equity values, profit ratios, non-financial liabilities and others factors,
which characterize the performance, can positively or negatively relate to the choice of optimal capital
structure, or debt to equity ratio.
3. Data description and methodology
In this paper it was applied an explanatory quantitative research type of data in order to test the causal
relationships between the corporate governance and Capital structure of the firm . As the scope of
research work already exists on this topic mostly for developed countries, I would like to determine if
the same causal relationships between corporate governance and capital structure are held in
developing economies, particularly in Kazakhstan. I will rely on the deductive approach by, first,
129
stating hypotheses from existing theories, then, collecting and analyzing data and, finally, accepting or
rejecting hypotheses.
This study examines the impact of three groups of variables on capital structure. The first group of
variables includes corporate governance variables represented by Board Size, Composition of Board
and CEO/Chair Duality. The second group comprises ownership variables which include relationship
between ownership and management of the companies., representing the Managerial Shareholding
and Institutional Shareholding. The third group consists of control variables which include Size of
Firm and Profitability as ROA. All these three groups of variables are considered as an independent
variables . The capital structure is represented by Debt to Equity Ratio, and is considered as dependent
variable.
This study analyzes relationship between capital structure and corporate governance for 65 nonfinancial companies listed at Kazakh Stock Exchange. The reason that I used only non-financial
companies is that board of directors structure for financial companies is more complicated than for
non-financial companies , and are more regulated by Agency of Financial Control and Supervising
under the National Bank of Kazakhstan. The sample period chosen for this study was 10/2006 to
10/2011 which started just after beginning of financial crisis in Kazakhstan and introducing some
limitations and changes in Kazakh Law of JSC, which are created in Kazakhstan . Total data includes
390 observations for 65 companies. Board Size, Board Composition, Proportion of Non-Executive
Directors(or independent directors), CEO/Chair Duality, Institutional Shareholding and Shareholding
of Board Members are used as measures of Corporate Governance. Similarly, impact of control
variables like Return on Assets and Firm Size on capital structure has also been studied. Variables
included in study have been measured as follows.
3.1 Dependent variable: capital structure – leverage (or Debt to Equity Ratio -Dit)
Capital Structure is the dependent variable and it is quantified by using debt to equity ratio. Debt to
equity ratio can be calculated either by using market value or by using book value. The use of book
value measure of leverage is preferred in this study. The reason is that optimal level of leverage is
determined by the trade-off between the benefits and costs of debt financing. It is an established fact
that prime benefit of leverage is debt-tax shield and it is available on book value of the debt. Secondly,
leverage can be calculated either by using total debt or by using long term debt as a percentage of total
equity. Long term debt is better option but in this study total debt to total equity ratio was used because
in Kazakhstan a tendency to use short-term financing even for longer term funding needs is fairly
prevalent. There are number of companies that do not have long term debt at all. There are a number of
causes for this state of affair. The first is unwillingness of commercial banks to extend longer term
facilities, especially after the prolonged financial crisis. The second is relative absence of financial
institutions specializing in long term financing, except Kazakh Investment Bank. But this bank finances
only the long-term government projects .The third reason is the pure state of capital market for long
term debt. The only Institution for that purposes is the government Fund ”Samruk-Kazyna”, which is
strongly regulated by government bodies, and still is not active represented on KASE in the country.
Currently, less than thirty companies are being traded at Kazakh Stock Exchange while the number of
listed companies is well over 200. Most companies find it quite difficult to access the capital market for
debt financing. Under these circumstances, we will consider to take the total debt figure for measuring
the companies’ gearing level.
3.2 Independent variables
3.2.1 Board size
The board of directors is top body in the corporate set up, playing central role in a firm’s strategic
decisions like financial mix. It will therefore be considered an important variable to study the impact of
corporate governance on capital structure. The variable Board size is measured as logarithm of number
of board members. It is hypothesized that Board size influences on ownership structure and CEO/Chair
duality.
3.2.2 Board composition
Presence of Independent directors on a company’s board gives signal to the market that company is
being monitored efficiently so lenders consider company more credit worthy. In turn, this makes it
easier for the company to raise long term funds through debt financing. Variable Board composition
represents the proportion of independent directors on board and is calculated as the number of
independent directors divided by total number of directors. It was examined the influence of this
variable on the leverage level.
3.2.3 CEO/Chair Duality
If a person holds both positions of chief executive officer and chairman than it may create agency
problems. Higher level of control by CEO may lead to managerial opportunistic behavior and can lead
to lower gearing levels, as supposed to be analyzed in this study . It is tested that CEO/Chair duality is
130
negatively related to leverage levels. The variable CEO/Chair duality is included as a dummy variable.
It is taken as 1 if CEO is chairman; otherwise it is taken as 0.
3.2.4 Institutional Share Holding
Presence of institutional shareholding in a company helps it to raise long term finance at an
advantageous cost. In the first place, these institutional investors themselves act as a source of long
term debt as they are willing to provide debt to a company over whose board they enjoy an influence.
Secondly, these institutional investors serve as an effective monitoring device over the company’s
strategic decisions. They bring down the company’s agency costs and also
reduce managerial opportunism. This gives confidence to general public and other lenders – resulting
in favorable terms of borrowing by the company. It is therefore suggested that firms with higher
Institutional Shareholding are likely to have a higher debt to equity ratio. Institutional Shareholding is
measured as percentage of shares held by institutions as
disclosed in annual financial reports to KASE.
3.2.5 Managerial Shareholding
Large debt increases the threat of bankruptcy so higher managerial self interests in long term
sustainability of the company may induce managers to reduce gearing levels. Therefore it is suggested
that relationship between managerial equity holding and gearing levels is negative. Managerial
shareholding is measured as percentage of shares held by members of board disclosed in annual
financial reports to KASE.
3.2.6 Control Variables
Size of firm
Large firms generally have close links with their lenders and find it easy to arrange debt on favorable
terms. So it is suggested that there exists a positive relationship between the Size of Firm and leverage
level of the firm. The variable Size of Firm is measured as logarithm of total assets.
Profitability as Return on Assets
It is well known from the Pecking Order Theory of capital structure that companies use internally
generated funds as first priority to finance project. Then as second priority debt is used and finally
option of equity is exercised to finance company projects. Therefore it is assumed that profitability of
firms will have negative relationship with leverage levels. In this study Return on Assets (ROA) will be
used as measure of profitability and it will be calculated by dividing a company's net earnings by its
total assets
3.3 An Econometric Model
This study employs multivariate regression analysis in a panel data framework to measure the
dependence of capital structure on corporate governance variables. The panel data analysis explores
cross-sectional and time series data simultaneously. Pooled regression is used with assumption of
constant coefficients. Constant coefficient model assumes intercept and slope terms are constant.
Debt to Equity Ratio is not only the result of the various financial characteristics of the firm; it is also
determined by the decision-makers’ choice. Both managers and significant outside owners may
influence on decision-making in the firm and, consequently, on financing decisions of the firm. To
investigate whether or not the structure of a firm’s ownership has a
significant impact on leverage, and to test my hypotheses it was chosen the followed by many authors,
presented in literature review, the following general form of model:
Dit = α0 + α1(Log BS) it + α2 ( % ID) it + α3 (%IS) it + α4 (MS) it + α5 (ROA) it +
+ α6 (SZ) it +α7(DLT) it +εt
Where Dit = Leverage or Debt to Equity Ratio,
BS = Board size
ID = Independent Directors
IS = Institutional Shareholding
MS = Managerial Shareholding
ROA = Return on Assets
SZ = Size of Firm
DLT= CEO/Chair Duality
ε = Error Term
α0 = Intercept of the equation
αi = marginal effect of variable on debt to equity ratio
The first result of investigation of this model is the descriptive statistic shown in Panel A. The second
result is the correlation matrix in Panel B, and the third result is multivariate regression analysis,
shown in Panel C.
3.4. Limitations and sample description
The presented study has the following limitations:
131
•
Total data consists of 65 companies, listed on KASE in November of 2011. Monthly data
observations across companies traded on KASE are limited to the period of November, 2006 to
November, 2011 and available from the KASE’ reports. However, for the research work it was
needed more detailed ownership structure information and financial information, which were not
reported to KASE and required some additional efforts and costs to find them. For that purposes it
was excluded from the data set eight companies from the initial set of listed 73 companies which
did not have any information on board structures or financial performance. The Data will consist
of a sample of all Kazakh firms listed on KASE during 2006-2011, after the beginning of financial
Panel A. Descriptive statistics
Leverage
BS
% of ID
% of IS
% of MS
ROA
Mean
1.9114
.6170
.2531
.5083
.4519
.1140
Median
.6287
.7000
.2200
.5800
.3900
.0300
Std. Dev.
6.3499
.2165
.4911
.4116
.4058
.6048
Skewness
-.646
-1.072
8.732
-.089
.264
18.08
Kurtosis
49.851
1.386
96.564
-1.667
-1.617
346.0
Minimum
-68.21
.00
.00
.00
.00
-.38
Maximum
36.16
1.04
6.00
1.35
1.00
11.68
crisis. Banks, financial institutions and insurance companies were excluded . The reason to exclude
the financial intermediaries is that their board structures may differ from the other firms because
of strong regulation by other bodies.
• The sample period
covers the period 11/2006 to 11/20011 which will start just after the
promulgation of Code of Corporate Governance in Kazakhstan, introduced in 2003(13 May 2003
year № 415-II –the Law of JSC ) and renewed in 2005, 2007, 2009 and with the introduction of
obligatory of the independent directors in the Board of Director and some restrictions of
membership in Board of Directors. Therefore some companies in panel date do not have
independent directors in the Board of Directors.
• In the crisis period we may expect significantly distortion of the results because of the default
correlation between firm’s debt and creditors . It increases considerably during the economic
downturn. In the time of crisis, the number of traded companies in KASE was essentially
decreased, and this will lead to the loss of important dates for this study.
4. Empirical findings
Panel A in Table 1 shows the descriptive statistics. Results show that size of board in Kazakh listed
companies is 11with largest number of board members and minimum board size is 2 (which is the
statutory lower limit for a public company). In table 1 the mean is shown as logarithm of number of
board members . Independent directors (IDs) constitute in average of 25% of boards which is a fairly
good representation for Kazakh companies. Managerial ownership is approximately 45% which is
significantly high in the companies which represent retail business and significantly low in oil and gas
sector and communication industries. Institutional shareholding is more than 50% which is reasonable,
since most of the Kazakh listed companies belong to the government holdings, and shareholding is
distributed between national companies, pension funds and banks. Average rate of return on assets is
11.4%.
SF
7.034
7.090
.9396
-1.367
6.351
.91
9.77
Table1. Descriptive Statistics
Average (total) debt to equity ratio is 1.91 representing a fairly reasonable overall debt to equity ratios.
Panel B in Table 2 shows the results of correlation analysis.
1. Profitability is negatively correlated with debt to equity ratio which is consistent with pecking
order theory that firms use internally generated funds as first option to finance projects before
resorting to debt.
Kurtosis
49.851
1.386
96.564
-1.667
-1.617
346.0
Minimum
-68.21
.00
.00
.00
.00
-.38
Maximum
36.16
1.04
6.00
1.35
1.00
11.68
Panel B. Correlation Matrix
Leverage BS
Leverage
%
ID
of
% of IS
1
132
% of MS
ROA
SF
Duality
6.351
.91
9.77
BS
% of ID
% of IS
% of MS
ROA
SF
Duality
-0.068
-0.019
-0.106*
0.06
-0.025
-0.001
-0.033
1
-0.281**
0.189**
-0.132**
0.047
0.065
0.204**
1
-0.012
0.045
-0.029
-0.042
-0.024
1
-0.810**
0.057
-0.036
0.227**
1
-0.046
0.025
-0.262**
1
-0.001
-0.038
1
0.004
1
*) Correlation is significant at the 0.05 level
**) Correlation is significant at the 0.01 level
Table 2. Correlation Analysis
2.
3.
4.
5.
6.
7.
There is a positive relationship between size of board and the size of firm. This appears rational as
larger firms have more assets for collateral, they need a large board in order to negotiate better
terms and easier for them with lenders. Also, after the crisis in 2006 most commercial banks
become very conservative in their lending policies. Prudential Regulations of AFC under the
National bank of Kazakhstan make it extremely difficult for commercial banks extent their
lending policies. Hence, presence of a large boards are necessary for large assets base.
Correlation analysis indicates that managerial shareholding is positively correlated with debt to
equity ratio. This is quite inconsistent with other studies which argue that as managers’
shareholding in a company increases, they tend to bring down the size of firm’s debt to reduce the
risk and costs of bankruptcy. But for Kazakh companies , management controlled companies are
generally those whose majority equity is held by families, which are always averse to bankruptcy.
Also correlation matrix indicates significant negatively relationship between managerial
shareholding and board size and, also, managerial shareholding and institutional shareholding. It
might be explained by fact that most of Kazakh listed companies with prevailing shareholding by
the board of directors usually resist the increase of size of board and compete with institutional
shareholders for the influence on the company management.
Institutional shareholding is negatively correlated with capital structure at significant level and
positively correlated with the size of board. This positive relationship is result of efficient
management and reduction of the agency cost. The significant negatively correlation between the
institutional shareholding and debt to equity ratio is quite consistent with other studies which argue
that as institutional shareholding in a company increases, they tend to bring down the size of firm’s
debt to reduce the risk and costs of bankruptcy.
The size of board is found negatively correlated with debt to equity ratio indicating larger boards
may apply pressure on managers to follow lower leverage and improve firm performance. An
example of this observation is that larger companies have larger boards – and larger companies
with larger assets are more motivated to acquire debt at favorable terms.
Relationship between percentage of independent directors and institutional shareholding is
negative which shows that concentration of ownership leads to reduce the presence of independent
directors on boards. This results in evidence of stronger control on firms. This phenomenon is
common in government owned businesses in Kazakhstan and it can be said that equity market in
Kazakhstan is dominated by government owned companies. This works against the spirit of good
corporate governance. These practices unfavorably affect the performance of company as shown
by the negative relationship between Return on Assets and managerial shareholding.
CEO/Chair duality is significantly correlated with the ownership structure and the board size, and
insignificantly negatively correlated with the capital structure. This evidence is common for
Kazakh companies, where very often the Chair of the board is represented also as a CEO. In this
case the interests of board and CEO coincide in decision about the financing the firm.
Panel C in Table 3 presents results of multivariate regression analysis of the leverage level
Dit = α0 + α1(Log BS) it + α2 ( % ID) it + α3 (%IS) it + α4 (MS) it + α5 (ROA) it +
+ α6 (SZ) it +α7(DLT) it +εt
Panel C. Multivariate Regression Analysis
Coefficients
t-Statistics
P-value
Intercept
4.877
1.711
0.038
Board Size
-0.056
-1.025
0.306
% of Independent Directors
-0.035
-0.651
0.515
% of Institutional shareholding
-0.150
-1.707
0.05
% of Managerial shareholding
-0.070
-0.792
0.429
133
ROA
-0.018
-0.359
0.017
Size of firm
-0.003
-0.05
0.960
CEO/Chair Duality
-0.007
-0.140
0.889
Table 3. Results of Multivariate Regression Analysis
Results of Multivariate Analysis show that:
• Multivariate regression analysis provides that an increase of 1% in Profitability leads to 1.8%
decrease in leverage and this relationship is significant at α= 0.05. Results have economic
relationship and consist with pecking order theory which assumes that profitable firms use
internally generated fund for financing as first choice.
• Debt to equity ratio is significantly affected by Institutional shareholding. Correlation analysis
indicates the presence of significant relationship , and regression analysis provides evidence
about existence of significant relationship at α = 0.05. It may be due to the fact that
institutional shareholding provides the enough tangible assets on balance sheet that can serve
as collateral so it is relatively easier for the firms to secure debt financing on favorable terms.
• Presence of independent directors on the board has no significant impact on leverage. It may
be due to fact that in family owned business independent directors are generally
representatives of financial institutions , no statistics are available how these businesses
choose the independent directors, or whether they have any relationship to these businesses.
The Code of Corporate Governance has made it mandatory to have independent directors in
the board of directors. Similarly, institutional shareholding and CEO/Chair duality has
insignificant impact on debt to equity ratio which also verifies the above discussion.
5. Conclusion
The research empirically examines the relationship between corporate governance and capital structure
of the non-financial Kazakh listed companies for the period of 2006-2011 by using multivariate
regression analysis. The results expose that institutional shareholding significantly related to capital
structure , but presence of independent directors and CEO/Chair duality have no significant
relationship with capital structure. However, the correlation analysis suggests that CEO/Chair duality
and managerial shareholding are negatively correlated with the profitability of the firm. On the other
side, the institutional shareholding has significantly negative relationship with debt to equity ratio
which means that concentration of ownership motivate the managers to lover the leverage. Managerial
shareholding has positive relationship with capital structure which is consistent with corporate
governance principal, however this this relation is statistically insignificant. It can be explained by
infant stage of corporate governance in Kazakhstan. Finally, the traditional determinants of corporate
structure like return on assets and firm size are have insignificant effect on capital structure. Negative
relationship between profitability and the debt to equity ratio is consistent with pecking order theory.
Size of the firm doesn’t influence on the debt financing for the Kazakh listed companies. Concluding,
we can say that corporate governance and ownership structure have great influence on the capital
structure, and therefore, on financing decisions of firm’s leverage.
6. References
1. Anderson R., Mansi, S. and Reeb, D. (2004). Board Characteristics, Accounting Report Integrity
and the Cost of Debt, Journal of Accounting and Economics, 37, 315-34
2. Abor, J. (2007). Corporate Governance and Financing Decisions of Ghanaian Listed Firms,
Corporate Governance: International Journal of Business in Society, 7.
3. Arshad Hasan, Muhammad Ali Jinnah, Safdar Ali Butt Muhammad Ali Jinnah,(2009), Impact of
Ownership Structure and Corporate Governance on Capital Structure of Pakistani Listed
Companies, International Journal of Business and Management,2:4,50-57.
4. Berger, P. G., Ofek, E. and Yermack, D. L. (1997). Managerial Entrenchment and Capital
Structure Decisions, Journal of Finance, 52(4), 1411-1438.
5. Celliera,A., Cholleta,P.(2010),The Impact of Corporate Social Responsibility on Stock Prices An
Event Study of Vigeo Rating Announcement, retrieved from SSRN, April 30, 2010
6. Chang,K.P.(2004),Ownership and Objectives of the Firm, and Derivatives, retrieved from
SSRN ,August 2004
7. Fama E.F., and Jensen M.C. 1983. Separation of ownership and control. Journal of Law and
Economics 26: 301-325.
8. Friend, I. and Lang, L.H.P. (1988). An Empirical Test of the Impact of Managerial Self- interest
on Corporate Capital Structure. Journal of Finance, 47, 271-281.
9. Gerwin van der Laan,(2009),Behavioral Corporate Governance: Four Empirical Studies
134
10. Jensen M.C., and Meckling W.H. 1976. Theory of the firm: Managerial behavior, agency costs and
ownership structure. Journal of Financial Economics 48: 831-880.
11. Jensen, M. C. (1986). Agency Costs of Free Cash Flow, Corporate Finance and Takeovers.
American Economic Review, 76, 323-329.
12. Eisenhardt K. M. 1989. Agency theory: An assessment and review. Academy of Management
Review 14: 57-74.
13. Hong Liu,Jianjun Miao,(2006),Managerial Preferences, Corporate Governance, and Financial
Structure, retrieved from SSRN, March 15, 2006,Journal of Economic Literature ,1-44
14. E. Han Kim, A Mean-Variance Theory of Optimal Capital Structure and Corporate Debt
Capacity,The Journal of Finance, Vol. 33, No. 1 (Mar., 1978), pp. 45-63.
15. Lazarides,T.& Pitoska,E., Corporate Governance and Debt to Equity Ratio,, retrieved from
SSRN ,May 22, 2009, http://ssrn.com/abstract=1408408
16. La Porta, R., F. Lopez-de-Silanes, and A. Shleifer (1999), ‘Corporate Ownership around the
World’, Journal of Finance, 54, 471–517.
17. La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny (1998), ‘Law and Finance’, Journal
of Political Economy, 106, 1113–55..
18. Modigliani, F., and M. Miller (1958), ‘The Cost of Capital, Corporation Finance and the Theory
of Investment’, American Economic Review, 48, 261–97.
19. Myers, S., and N. Majluf. (1984). Corporate Financing and Investment Decisions When Firms
Have Information Investors Do Not Have. Journal of Financial Economics, 13, 187-222.
20. Pindado,J. & Torre, C.( 2011).Capital Structure: New Evidence from the Ownership Structure.
International Review of Finance, 11:2, 213–226
21. Protopapa,M.(2011),Managerial
incentives,
financial
constraints
and ownership concentration, retrieved from SSRN, Number 798 - March
2011,http://ssrn.com/abstract=1832342.
22. Pfeffer, J. and Salancick, G.R. (1978). The External Control of Organizations: a Resourcedependence Perspective. Harper & Row, New York.
23. Rose,C.,(2006),Board
composition
and
corporate
governance—
A multivariate analysis of listed Danish firms,Eur J Law Econ (2006) 21: 113–127
24. Titman, S., and R.Wessels (1988), ‘The Determinants of Capital Structures Choice’, The Journal
of Finance, 43, 1–19.
25. Vilanova, L. (2007), “Neither Shareholder nor Stakeholder Management: What Happens When
Firms are Run for their Short-term Salient Stakeholder?”, European Management Journal, Article
in Press.
26. Welch,I.(2011).Two Common Problems in Capital Structure Research: The Financial- Debt-ToAsset Ratio and Issuing, Activity Versus Leverage Changes. International Review of Finance, 11:1,
1–17
27. Wen, Y., Rwegasira, K. and Bilderbeek, J. (2002). Corporate Governance and Capital Structure
Decisions of Chinese Listed Firms. Corporate Governance: An International Review, 10, 2, pp.
75-83.
Portfolio Management: a new glance at the risl evaluation
Alexandr Dronin
International Business Academy
[email protected]
Abstract: This study compares two fundamental schools of risk evaluation and an optimal portfolio
construction in terms of risk/return tradeoff. The author reveals the results of his research on some
indices he examined, such as S&P 500, Russel 2000, MSCI Emerging Index Fund (EEM), and KASE.
The data covers the period from January 1, 2005 through March 1, 2012. Based on the analyses of
strengths and weaknesses of modern and post modern portfolio management theories, the author shows
the equality of mentioned methods and proposes the model that benefits from the synergy of two
methods' composition. He believes the given model is more adequate in describing the risks of a
portfolio and its optimization. Presented methods allow minimizing but not avoiding the negative
consequences of one or another event. A risk – is the constant companion of a financial securities'
portfolio. By using various quantitative and statistical methods, an historical experience, a
mathematical analysis, a diversification, and an establishing stop limits we can significantly minimize
the risks, but only in the events that we can predict.
135
Keywords: portfolio management, post-modern portfolio theory, risk evaluation, volatility skewness,
adjusted VaR
1. Introduction.
In primitive societies, people, facing the question of an alternative decision making, often made
decisions without a quantitative understanding of a risk. Today our understanding of a risk and of the
probability of its occurrence allows us to make current and long-term decisions by using rational
methods. However, the last decades' experience shows us that blind belief in "rational" calculations and
existing techniques also carries a destructive effect on our society. Increasing complexity and
interdependence of the elements makes our society more advanced, but on the other hand, more
vulnerable to systematic mistakes. The financial crisis in 2008 has exposed a number of fundamental
problems and revealed the vulnerability of the current types of an investment management analysis, in
consequences of which has created the need for a development of a new vision of the financial
securities' portfolio management. Current economical and financial climate has significantly changed
the attitude and an approach towards an investment analysis. With an increased uncertainty, and
consequently a huge volatility of the financial markets, traders and investors endeavor to find a new
strategy that would give positive results. Falling markets in 2011 have added even more uncertainty to
the current situation: the indices of the banking field of the USA, the most diversified in the world,
decreased to more than 17% percent, whereas the Kazakhstani banking field has lost more than 30% of
a market capitalization (1). Underestimation of the banking field risks, the principle reasons of the
instability of the financial field, an undeveloped assessment of systematic risks are far not the full list
of the problems that need solutions in near future.
2. Modern portfolio theory
Nowadays there are many theories of the portfolio management, two of which had become more
common and are the subjects of constant refinements. These are so called Modern portfolio theory and
postmodern portfolio theory. In practice the portfolio theory suggested by Markowitz is rarely used and
sometimes it seems illogical. Let's assume a situation when a portfolio analysis is conducted after a
market collapse in the circumstances of the next "bubble" explosion. The mean number of "fallen" in
price stocks would be negative. Accordingly, the measure of the return also would show the negative
result, and a respective unacceptability of the given securities for the portfolio investment. In addition,
a standard deviation used as a measure of a risk would also go off-scale. Although, as a rule, these
securities are those that underestimated during a crisis and their growth potential is much greater. Thus,
during the fell down in 2008 investors had unique opportunities, e.g. the share price of the national
company, JSC EP KazMunaiGas, at the height of the crisis, fell lower than the sum of the cash on its
accounts (the minimum price of the share that is fixed in November of 2008 composed KZT6586.44
and as soon as after only 10 months it reached KZT20 000 per share). While optimization models
would have shown the negative return of the given stock and respectively completely excluded this
stock from the portfolio.
2.1. Post modern portfolio theory
Post modern portfolio theory (PMPT) significantly overcomes this weakness. The theory combines
theoretical researches of several authors and was actively studied several decades ago in academia. A
significant difference between PMPT and Modern portfolio theory (MPT) is that PMPT focuses on the
level of the return, which is expected to be received from the assets in a portfolio in order to satisfy
expenses. This internal rate of return (IRR) is a connecting link between assets and liabilities. PMPT
measures the risk and return towards IRR, whereas MPT ignores it (2). In result the portfolio
construction and an asset allocation greatly diverges. Another important difference of PMPT is a
consideration of the risk measure as a downside risk, because it is more understandable for the
investors. Thus, in PMPT for the definition of a "risk" instead of a standard deviation the downside
deviation is used. One more important feature of PMPT is a lack of the normal distribution of the yield
around the mean (this fact wasn't ignored by Markowitz, but in his classical model he used this
assumption though). Therefore, for the portfolio return evaluation other modeling techniques are used
that allow avoiding given limitation (the Monte Carlo model and etc.).
Suggested in the PMPT model "downside deviation" measure can be expressed as follows (3):
, where
d – downside deviation (commonly known in the financial community as 'downside risk');
t – the annual target return, originally termed the minimum acceptable return, or MAR;
r – the random variable representing the return for the distribution of annual returns f(r);
f(r) – the three parameter lognormal distribution.
2.2. MPT and PMPT analysis in the present conditions
136
In order to compare two methods and their application in the present conditions we can use two widely
known coefficients of the MPT and PMPT followers: Sharpe ratio and Sortino ratio respectively. The
main difference of Sortino ratio from Sharpe ratio is that in Sharpe ratio a return is calculated relatively
to the risk that is measured by a standard deviation, whereas in the Sortino ratio a 'downside risk' is
used.
Let's compare two ratios:
The Sharpe ratio – is the measure that shows the effectiveness of a portfolio. It is calculated as
a relation of the mean risk premium to the standard deviation (4).
, where
R — Asset return (premium)
Rf — risk free rate (or benchmark)
E[R − Rf] — expected value
σ — standard deviation of portfolio return
Sharpe coefficient can be used to determine whether a portfolio yield compensates for the
accepted risk.
The Sortino rartio can be expressed as (5):
, where
r = Annual portfolio realized return,
t = target rate of return,
d = downside risk calculated as showed bellow
In comparison of two assets that have the same expected return, an investment in an asset with
a higher Sortino ratio will be less risky.
To analyze PMPT methodology we used a data on the stock indices during period from
01.01.2005 to 29.02.2012. Moreover, in purpose of including into the analysis a non-diversified
portfolio we used the depository receipts (GDRs) of JSC EP KazMunaiGas, which are listed on the
London Stock Exchange. The behavior of prices of the objects under study is illustrated on the
following line graph:
Figure 1. The Dynamic of researched indexes.
The relative values of S&P 500 and KASE indices are shown on the left side of “x” axis and
values of Russel 2000 and MSCI Emerging Index Fun (EEM) indices are shown on the right side of
“x” axis, for a more representative view.
137
The following table illustrates the main information about values of Sharp and Sortino ratios,
which were calculated by using an annual return value for each of the indices.
MSCI Emerging
S&P 500 Russel 2000
KASE
Index Fun (EEM) KMG IL
Coefficients/Indexes
average annual return
3,86%
5,55%
-0,77%
16,65%
standard deviation
0,18
0,20
0,49
0,53
Downside risk
0,25
0,21
0,63
0,41
Sharpe coefficient
-8,88%
0,24%
-12,90%
21,12%
Sortiono coefficient *
-6,44%
0,23%
-10,01%
26,97%
Table 1. Comparing Sharpe and Sortino Ratio
Date: Bloomberg, www.kase.kz and http://finance.yahoo.com/ daily and yearly returns, calculation of
the author.
* Sortino coefficient is calculated against the 5.5% required return per year and the Sharpe
ratio is calculated according to the risk-free interest rate 5.5%.
Table 1 shows that the Sortino ratio has different results than the Sharpe ratio. Nevertheless, in practice
the coefficients are used as a measure of investments results ranking, and in both cases, the ranking
results will be identical, and hence Sortino ratio cannot be regarded as more or less reliable
2.3. Volatility skewness
For a more deep and comprehensive analysis of the differences between the Sortino and Sharpe ratio
we are to analyze the deviation of the daily quotations for the specified period (in the previous
example, we have covered the annual deviation), and to calculate the volatility skewness. The volatility
skewness –measures the percentage relation of the distribution of the total deviation from the aboveaverage values, as a percentage from the total variance of the distribution from the below-average
values.
To create the table of a volatility skewness we used the data from 01.01.2005 to 29.02.2012 (1802
observations for each index). In order to calculate the price variations the daily price changes were
counted (natural log of the ratio of the current and previous daily quotes), after which the standard
deviation of all the positive deviation, and standard deviation of all the negative deviations was
evaluated (6). The results of this work are presented in following table:
Indexes
Upside Volatility (%)
Downside
(%)
Volatility
Volatility
skewness
45,36%
54,64%
0,83
46,90%
53,10%
0,88
20,32%
79,68%
0,26
KMG IL
49,44%
50,56%
0,98
KASE
49,05%
50,95%
0,96
S&P 500
Russel 2000
MSCI Emerging Index
Fun (EEM)
Table 2. Volatility skewness of researched indexes
Date: Bloomberg, www.kase.kz and http://finance.yahoo.com/ daily returns, calculation of the author.
As table 2 shows in many cases a downside volatility has a bigger value than an upside volatility,
which for investors is an indication of a likelihood of a bigger loss than in the traditional analysis.
Especially, in the analysis of the index MSCI Emerging Index Fun (EEM), which includes the shares of
corporations in developing countries, this distinction has a key character for decision-making, as the
downside risk in this case more sharp and rapid (the time and size of the downward trend is more than
twice higher than the time and size of the upward trend).
It is important to note that the theory PMPT still not widely used, moreover, in many theoretical studies
it simply ignored. One of the reasons why this model is not used for risk assessment is a statistical
consequence of the fact that this technique only analyzes the downside risks, which leads to a
substantial reduction in sample size, taken into account and, thus, reduces the reliability and
significance of the result.
138
4,13%
0,64
0,41
-2,14%
-3,37%
2.4. Adjusted VaR.
Illustrated above PMPT feature can be widely used in practical applications. For instance, risk
managers can determine the value of a portfolio at risk by using the downside volatility. To illustrate
the differences between classical methods of VaR valuation and VAR valuation that uses a downside
volatility, we used input data of the indices mentioned above. For all types of VaR calculation, we used
daily data with a confidence interval equal to 95%. The results are shown to the 10-day value.
Indexes
VaR
parametric
method (with using
standard deviation)
VaR
parametric
method (with using
downside volatility)
VaR
using
Monte Caro
simulations*
S&P 500
5,853%
7,150%
7,255%
Russel 2000
7,972%
8,995%
9,022%
MSCI Emerging Index Fun
(EEM)
9,387%
22,012%
22,189%
KASE
9,608%
7,150%
7,255%
Table 3. Comparison of the results obtained by different methods estimate VaR
Date: Bloomberg, www.kase.kz and http://finance.yahoo.com/ daily returns, calculation of the author.
*The calculation of VaR using Monte Carlo simulation was performed by creating a model of
price behavior on the basis of historical data of each index. The resulting model for each index was
subjected to 100 000 tests, based on the generation of random behavior of the market in the model
used.
As can be seen from the table, the use of VaR estimates based on the downside volatility can
significantly change the perception of a risk exposure of the securities portfolio, especially for the
emerging markets. Accordingly, the model of the risk assessment such as VaR must take into account a
volatility skewness.
3. Conclusion.
One of the key findings of analyses of these methods of the risk exposure calculation, that they are all
based on historical data anyway (even a model of Monte Carlo - generates future events, but on the
basis of an algorithm based on the results of the past events, or any other of our experience). PMPT
more appropriately describes the behavior of markets, as the investors response more to the price
decline, and hence more adequately rank the investment (in theory). Comparative analysis showed that
this difference is more significant for the emerging markets, in which the behavior of markets is not
symmetrical, and the assumption of normality distribution is not confirmed. Proposed in this paper a
methodology to assess the value of portfolio at risk (Modified VaR) which uses the basic postulates of
PMPT can provide more accurate measure of the risk assessment.
4. References
1. Analytical date based on www.kase.
2. Sortino, F., (1997). “Looking only at return is risky, obscuring real goal” Pensions and
Investments magazine. November 25.
3. Sortino, F., (2010). “The Sortino Framework for Constructing Portfolios”. Elsevier Inc.
4. Sharpe, W., Gordon J., Alexander, Jeffrey W., Bailey, (2006). “Investments” (6-th Edition): Book:
Hill-Publishing.
5. Ferguson K., B. (1993). Post-Modern Portfolio Theory Comes of Age. Journal of Investing
(Winter 1993).
6. Ferguson K., B. (2001). “A software developer's view: using Post-Modern Portfolio Theory to
improve investment performance measurement. Managing downside risk in financial markets:
Theory, practice and implementation”; . Butterworth-Heinemann Finance p59.
139
Test of weak-form efficiency of the Kazakhstani stock market
M Mujibul Haque
KIMEP University
Sang Lee
KIMEP University
Dmitriy Belyanin
KIMEP University
1. Introduction
This paper provides empirical evidence on the weak-form efficiency of the Kazakhstani stock market
by testing the random walk hypothesis and the day-of-the-week effect. A vibrant and efficient
financial market is crucial for the overall economic development of a country. Allocational, operational
and informational efficiencies of financial markets are all important dimensions in facilitating flow of
capital to the most productive uses in a cost-efficient manner. Kazakhstan is a newly emerging market
economy with a long history of socialistic operations under the Soviet rule. Despite a brief setback
during the recent global financial crisis, the financial sector of Kazakhstan has experienced rapid
growth and dynamic changes over the last decade. The financial sector, only second in importance to
the extractive industry (oil, gas and minerals), has contributed significantly to the high growth rate of
the economy of Kazakhstan. The banking industry and, to some extent the bond market, as opposed to
the equity market, has mainly led the growth in the financial sector. This is mainly due to the presence
of high degree of asymmetric information. Lack of informational efficiency might be another reason
for the sluggish growth of the equity market. This research attempts to shed some light on this issue.
2. Literature Review
Fama (1965), in his pioneering work on market efficiency, showed that stock prices are not correlated
enough to enable investors to profit from serial correlations. Since, numerous researchers have focused
on testing the random walk hypothesis and the day-of-the-week effect in developed countries. Overall,
the results of these studies show that past information is readily reflected in the current prices –
evidence in favor of weak-form market efficiency. In recent years, researchers have increasingly
focused on testing of market efficiency of emerging markets. Guidi, Gupta and Maheshwari (2011) test
weak-form efficiency of equity markets of seven Eastern and Central European countries, including
Romania, Poland, Hungary, Czech Republic, Bulgaria, Slovakia and Slovenia. Although, the results are
mixed, they find significant evidence against market efficiency. Worthington and Higgs (2006)
conducts serial correlation and runs tests, as well as multiple variance ratio tests, of stock indices of
twenty-one developing markets, using data over various periods of 1987 – 2003. These markets include
three in Africa (Egypt, Morocco and South Africa), ten in Asia (China, India, Indonesia, Korea,
Malaysia, Pakistan, the Philippines, Sri Lanka, Taiwan and Thailand), four in Europe (Czech Republic,
Hungary, Poland and Russia), seven in Latin America (Argentina, Brazil, Chile, Colombia, Mexico,
Peru and Venezuela) and three in the Middle East (Israel, Jordan and Turkey). Overall, their results
show that many of these markets are not weak-form efficient. Abrossimova and Dissanake (2002)
examine the Russian stock market from September 1995 - May 2001. Their results indicate that the
random walk hypothesis can not be rejected for the monthly data, but can be rejected for the daily and
weekly data. Many other studies investigate market efficiency of the above-mentioned and other
emerging markets, however, no study has focused on the efficiency of the Kazakhstani equity market.
3. Methodology
In order to test for the weak-form market efficiency of the Kazakhstani equity market, we use the daily
index value of Kazakhstan Stock Exchange (KASE) for the period of July 2000 - December 2011. The
KASE Index is a market-capitalization based index, calculated using seven most actively traded stocks
out of the seventy listed on the exchange. Using this data set, we apply three methods for testing the
random walk hypothesis: the autocorrelation test, the runs test and the variance ratio test. Also, we test
the day-of-the-week effect by using ordinary least square with dummy variables approach.
The autocorrelation test calculates the serial correlation directly by calculating the correlation of
successive values of returns for different lags. If the serial correlation is about zero, the random walk
model is accepted; otherwise, it is rejected. The runs test shows whether successive price changes are
random. A run is a sequence of consecutive price changes with the same sign. To perform the runs
test, the actual number of runs is compared to the expected number of runs. The variance ratio test is
140
based on the assumption that the variance increases linearly over longer time intervals for variables
following a random walk. The day-of-the-week effect is tested by estimating the regression model
Rt = β 0 + β1 D1 + β 2 D2 + β 3 D3 + β 4 D4 + β 5 D5 + β 6 Rt −1 + μ . Here, Rt is the rate of return
on day t and D1 , D2 , D3, D4 and D5 are dummy variables for Monday, Tuesday, Thursday, Friday,
and Saturday and Sunday combined (in Kazakhstan, a significant number of Saturdays and Sundays are
trading days because of holiday on weekdays, thus the last dummy variable is added). Wednesday’s
dummy variable is excluded to avoid the dummy variable trap. β 0 represents average Wednesday
return;
β1
to
β5
represent daily incremental return over Wednesday;
β6
represents impact of one-
day lag return and μ is the error term. According to the null hypothesis, the coefficients are all equal
to 0 and the residuals should be independent and identically distributed. Each above-mentioned test is
conducted with a 95% confidence level.
4. Results
The autocorrelation test revealed a mild serial correlation, changing from positive to negative for
different lags, from 1 to 10. The Ljung-Box statistic exceeded the critical value for the first ten values
of the lag, implying that the hypothesis of no joint serial correlation must be rejected. The runs test
showed a positive autocorrelation for the whole period and for each year of the sample period. Under
heteroscedasticity, the variance ratio test showed no autocorrelation for all years except 2007, where
the autocorrelation was negative, implying a mean-reverting trend. Under homoscedasticity, the
variance ratio test showed a negative autocorrelation prior to 2008, no autocorrelation in 2008, and a
positive autocorrelation afterwards. The day-of-the-week test revealed a statistically significant
negative incremental return for Monday over Wednesday. For other days of the week, the return was
positive incremental over Wednesday, but statistically not significant.
5. Conclusion
In an efficient market, with all participants having easy and free access to information and low
transaction costs, current prices would reflect all past information and anomalies like the day-of-theweek effect would not persist. Previous studies have shown that emerging markets are less likely to be
weak-form efficient than developed markets. Our evidence on efficiency of Kazakhstani stock market
is consistent with the previous findings. Future research may focus on identifying reasons for
inefficiency and measures necessary to make the markets efficient.
6.
1.
2.
3.
4.
References
Abroshimova N., Dissanake G., Linowski D. (2002), “Testing the Weak-Form Efficiency of the
Russian Stock Market.” EFA 2002 Berlin Meetings Presented Paper.
Guldi, F. Gupta, R. Maheshwari, S. (2011), “Weak-Form Efficiency and Calendar Anomalies for
Eastern Europe Equity Markets.” Journal of Emerging Market Finance, 10(3): 337-389.
Fama, E. (1965) "The Behavior of Stock Market Prices." The Journal of Business, 38(1): 34-105.
Worthington, A.C. Higgs, H. (2006), “Evaluating Financial Development in Emerging Capital
Markets with Efficiency Benchmarks.” Journal of Economic Development, 31(1): 1-27.
KASE Efficiency
Бахыт Байдельдинов
KIMEP University
[email protected]
Abstract: В работе проверялась гипотеза информационной эффективности Казахстанского
Фондового Рынка (KASE Efficiency) на разных временных промежутках. На некоторых из этих
временных промежутков выявлены признаки серийной корреляции в модели случайного
блуждания цен на акции некоторых казахстанских компаний входящих в представительский
список KASE и автокорреляция их доходностей. Проведенные тесты и анализ основных
статистических показателей описывающих поведение остатков авторегрессии цен этих
компаний показали серьезные отклонения от нормальности. В этих случаях в регрессии новых
цен на предыдущие найдены дополнительные высокозначимые объясняющие переменные
устранениющие автокорреляцию. Выявлены зависимости связывающие будущие доходности по
акциям некоторых казахстанских компаний через предыдущие доходности по другим активам в
том числе и по золоту. Кроме того проведены регрессии доходностей по акциям компаний из
141
представительского списка на доходности по биржевому индексу для оценки относительного
риска при торговле активами этих компаний. В работе использован лицензированный
статистический пакет IBM SPSS.
Key-Words- Market Efficiency, Random WalkModel, Durblin-Watson Test, Run Test,Kolmogorov
Smirnov Test, Serial Correlation.
1. Introduction
Нас будет интересовать эффективность казахстанского фондового рынка в контексте
применимости на этом рынке известных методик формирования портфеля ценных бумаг
(Марковица, САРМ, АРТ). В этих теориях эффективность (информационная прозрачность)
рынка означает способность рынка мгновенно доводить любую информацию до всех игроков и
так же мгновенно отражать эту информацию в ценах. На этом основании предполагается что
все участники эффективного рынка одинаково прогнозируют будущее цены на рыночные
активы. Последнее исключает получение сверхдоходов (т.н. «честная игра»)
Моделью достаточно адекватно отвечающей эффективному рынку принято считать
модель случайного блуждания цен
Pt +1 = Pt + ε t +1 , ε t +1 ∈ N (0, σ t +1 = σ ) ,
(1)
которой должны удовлетворять цены на любые активы торгуемые на эффективном рынке в
любые временные интервалы /1/. Любое нарушение в параметрах этой модели служит
предметом обсуждения при выяснении вопроса об эффективности рынка.
Доказать эффективность какого бы то ни было рынка практически невозможно, хотя бы
потому что в реальности таких рынков нет, как нет ничего идеального. Тем более сомнительна
эффективность развивающихся рынков. Поэтому естественной является попытка
доказательства информационной неэффективности Казахстанского Фондового Рынка до
текущего момента.
Отрицая свойство эффиктивности рынка мы получаем что тот или иной рынок не
является эффективным если на этом рынке в какой-то период времени существовала
«скрытая» информация, доступная далеко не всем игрокам. В результате игроки
руководствовались в эти периоды различными ценовыми прогнозами при заключении сделок.
Обнаружить такой период в работе рынка возможно если в этот период на этом рынке
был игрок который использовал эту «скрытую» информацию систематически, и это
систематическое использование участниками рынка разных информаций при прогнозировании
будущих цен отразилось в реальной последовательности рыночных цен в виде устойчивой
зависимости между последующими ценами и предыдущими на какой-либо актив торгуемый на
этом рынке:
Pt +1 = Pt + ht + ε t∗
При этом
(2)
ht можно трактовать как «темные пятна» скрытой информации в «белом
информационном шуме»
εt
из модели (1) :
ε t +1 = ht + ε t∗ . Таким образом наша попытка
доказательства неэффективности Казахстанского Фондового Рынка будет основана на
нахождении периода (ов) времени в истории рынка во время которого цены на какой либо актив
демонстрируют высокозначимую зависимость вида (2).
2. Data and Empirical Methodology
В работе использованы ежедневные котировки акций шести основных компаний входящих в
представительский список KASE на период с декабря 2006 года по февраль 2012 года
Компании
Код
EURASIAN NATURAL RESOURCES CORPORATION PLC
GB_ENRC
KAZAKHMYS PLC
GB_KZMS
Halyk Savings Bank of Kazakhstan JSC
HSBK
Kazkommertsbank JSC
KKGB
Kazakhtelecom JSC
KZTK
KazMunaiGas EP JSC
RDGZ
142
Исследование основано на методах прикладного регрессионного анализа и состоит из
следующих этапов:
1.
Проведены регрессии последовальностей цен на цены предыдущего торгового дня
Pt +1 = βPt + ε t для всех перечисленных компании в разные временые промежутки
в интервале с декабря 2006 года по февраль 2012 года.
С целью выявления отклонений от нормального распределения изучены статистические
показатели этих моделей (моменты первого и второго порядков), и проведены тесты
Смирнова-Колмогорова .
3. Для выявления возможной серийной корреляции в авторегрессиях первого порядка для
последовательностей цен, скачков цен, относительных доходностей и логарифмичнских
доходностей проведены Durblin-Watson Test и Run Test .
4. Для исключения мультиколлинеарности в регрессионных моделях описывающих
взаимовлияния цен на акции различных компаний изучены корреляционные матрицы
связывающие доходности по различным активам (в том числе и по золоту) в два
последовательных дня в разные периоды времени.
5. Для выявления временных периодов с взаимосвязью (2) получены регрессии связывающие
доходности по различным активам (в том числе и по золоту) в два последовательных дня в
разные периоды времени.
2.
Кроме того для для оценки относительного риска при торговле активами
вышеуказанных компаний построены регрессии доходностей по каждой компании на
доходность по биржевому индексу.
6. Empirical Results
В предположении справедливости гипотезы
H 0 : KASE эффективен с альтернативой H a : KASE
неэффективен получены следующие свидетельства в пользу гипотезы H a .
1 . Несмотря на то что построенные регрессии Pt +1 = β Pt + ε t показывают экстремально
высокую значимость модели случайного блуждания как для цен на акции всех
вышеперечисленных компаний так и для индекса КАСЕ во всех выбранных временных
интервалах, более детальное исследование остатков этих регрессий практически во всех
случаях показало значительные отклонения от нормальности.
2. На некоторых временных интервалах проведенные тесты выявили признаки серийной
корреляции.
3. В последних случаях проведены регрессии цен последующего торгового дня на цены
предыдущего дня с «уточнением» вида (2) найденным из анализа корреляционных матриц
(см.п 2, пп.4) . В результате на временных интервалах с серийной корреляцией остатков
получены «уточненные» Random Walk Models вида (2) без признаков серийной корреляции.
Например по данным 2011 года выявлена высокозначимая зависимость
P4,t +1 = P4,t − 0.182Δ 4,t + 0.172Δ 3,t + (11.4391 ⋅ 10 −4 )Δ 5,t + ε t∗
Где
(3)
P4,t -цены на акции KKGB в предыдущий торговый день
P4,t +1 - цены на акции KKGB в последующий торговый день
Δ 4,t -скачок цен на акции KKGB в предыдущий торговый день
Δ 3,t -скачок цен на акции HSBK в предыдущий торговый день
Δ 5,t -скачок цен на акции KZTK в предыдущий торговый день
В силу порядковой несоизмеримости цен чувствительность подобных зависимостей в
отношении изменений цен на некоторые активы оказалось слабовыраженной. В частности в
моделе (3) влияние скачка цен на акции KZTK в предыдущий торговый день на цены на акции
KKGB в последующий торговый день характеризуется очень малой (но высокозначимой!)
величиной. Поэтому стала очевидной необходимость перехода от грубых характеристик
изменения цен- скачков цен к более чувствительным характеристикам этих изменений:
относительным и логарифмическим доходностям. В результате проведенного корреляционного
анализа были выявлены периоды времени во время которых существовала значительная
корреляция между доходностями на акции некоторых компаний в последующий торговый день
143
от доходностей на другие финансовые активы ( золото) в предыдущий торговый день. В
результате выявлены временные периоды в которых реальные доходности по акциям не
являются «белым шумом», а демонстрируют наличие систематической зависимости от
доходностей на активы в предыдущий торговый день. Например в 2011 выявлены следующие
высокозначимые зависимости :
R3,t +1 = 157 R1,t + ε 1
(4)
R3,t +1 - доходности на акции HSBK в последующий торговый день
R1,t -доходности на акции GB_ENRC в предыдущий торговый день
R4,t +1 = 0.351R1,t − 0.835RG ,t + 0.393R6,t + ε 2
(5)
R4,t +1 - доходности на акции KKGB в последующий торговый день
RG ,t - доходности на золото в предыдущий торговый день
R6,t -доходности на акции RDGZ в предыдущий торговый день
В силу значительной взаимной корреляции корреляции переменных
R1,t и RG для прояснения
степени влияния каждой из них в модели (5) выявлена зависимость
R1,t = 0.597 RG ,t + ε 3
(6)
3. Summary and Conclusions
Главная цель данного исследования –проверка гипотезы информационной эффективности
Казахстанского Фондового Рынка . Были изучены также степени взаимного влияния цен и
доходностей по акциям главных компаний KASE на разных временных уровнях. Было выявлено,
в частности что цены и доходности на акции компании Kazkommertsbank JSC на сегодняшний
день очень часто формируются на основании цен и доходностей этой компании и некоторых
других казахстанских компаний за день предыдущий. Интересно отметить большую
объясняющую силу доходностей по золоту в модели (5). Таким образом проведенные тесты
показали наличие в истории KASE периодов во время которых не вся предыдущая (ценовая )
информация мгновенно отражалась в ценах, что говорит об информационной неэффективности
KASE . Возможно это связано с особенностями trading system (thin trading ?), возможно с
неразвитостью рыночной инфраструктуры или недостаточной профессиональной
квалификацией участников рынка.
Таким образом финансовые теории базирующиеся на
предположении об эффективности исследуемого рынка должны применятся в условиях
Казахстанского рынка с большой осторожностью.
References
1. Fama, E. (1970), “Efficient markets: A review of theory and empirical work”, Journal of Finance,
Vol. 25, pp. 1181-1185.
2. Fama, E. (1991), “Efficient capital markets II”, Journal of Finance, Vol. 46, pp.1575-1617.
3. Abraham, A., F. J. Seyyed, and S.A. Alsakran. (2002), “Testing the random walk behavior and
efficiency of the Gulf stock markets”, The Financial Review Vol.37, pp.469-480.
4. Cheung, K.C., and J.A. Coutts. (2001), “A note on weak form market efficiency in security prices:
Evidence from the Hong Kong stock exchange”, Applied Economics Letters
Vol.8,
pp.407-410.
Влияние асимметричной информации на регулирование банковской деятельности в
условиях финансовой глобализации.
Садвокасова К.Ж.
д.э.н., зав.кафедрой «Банковское дело» КазУЭФМТ
[email protected]
Садвокасов Р.К.
магистр экономики
[email protected]
144
Введение: В последние годы остро стоят вопросы, связанные с проблемами интеграции
(Мировая, Евразийская, в рамках Таможенного союза стран СНГ, Центральной Азии и т.д.).
Еще с времен Кейнса известно, что банки есть кровеносная система экономики. Поэтому всякая
интеграция предъявляет определенные требования к регулированию и надзору со стороны
государства за банковской деятельностью. С другой стороны нужно отметить, что сама
банковская деятельность существенным образом изменилась на современном этапе под
влиянием финансовой глобализации, так как для банков не существуют национальных границ.
Ключевые слова: асимметричность информации, финансовая глобализация, регулирование
банковской деятельности.
1.Основная часть
Финансовая глобализация есть следствие экономической интеграции, ускоренного
формирования наднациональных рынков капитала и ценных бумаг. Финансовая глобализация
способствует концентрации банковского капитала в крупных мировых финансовых центрах,
процессу слияния и поглощения банков, все большей «оффшоризации» и универсализации
банковского бизнеса, росту конкуренции со стороны небанковских финансовых организаций,
интеграции банковского бизнеса со страховым. В этих условиях финансовая глобализация
предъявляет особые требования к банковскому регулированию, так как международная
интеграция и интернационализация банковских систем требует адекватного глобального
регулирования и надзора за изменившейся по своему содержанию банковской деятельностью
[1,2,3]. Технологические новшества и дерегулирование дали как новые возможности банкам, так
и способствовали возрастанию конкуренции между банками и небанковскими финансовыми
учреждениями [4,5,6,7]. Традиционный вид банковской деятельности, основанный на
привлечении депозитов (вкладов) и предоставление кредитов на сегодня является лишь частью
современного банковского бизнеса и наименее прибыльной.
На наш взгляд, понятие
«банковская деятельность» - это финансово-посредническая деятельность банковских
учреждений при выполнении банковских операций и оказании банковских услуг, направленная
на осуществление депозитно-обменного, процентно-инвестиционного, финансового и
инвестиционного-гарантийного, виртуального бизнеса в интересах своих акционеров,
депозиторов и вкладчиков.. Таким образом, можно сказать, что усиление пруденциальных
требований с одной стороны послужило ужесточению ведения банковского бизнеса, с другой
стороны привело к появлению разнообразных новых «внебалансовых» финансовых
инструментов. Такие новые финансовые инструменты как – гарантии и аккредитивы, а также
широко применяемые производные инструменты – фьючерсы и опционы не отражаются в
качестве активов и пассивов банка, но вместе с тем подвергают банки определенным рискам.
Банковская деятельность изначально подвержена различным рискам и как следствие
циклическим кризисам. Поэтому банковские кризисы намного опаснее, чем производственные,
так как они могут спровоцировать эффект «домино». Этим и объясняется поддержка многими
государствами своих банковских систем в виде финансовой помощи в условиях глобального
кризиса, хотя государство не должно поддерживать частные банки за счет средств
налогоплательщиков.
В последние годы репутационный риск банка чаще связывают с проведением незаконных
международных банковских операций, которые способствуют «бегству» капитала за рубеж,
зачастую в оффшорные зоны, легализации доходов, добытых преступным путем,
финансированию терроризма, увеличению теневого капитала. Поэтому роль государства в
регулировании банковской деятельности заключается в обеспечении защиты банков от рисков в
целях обеспечения экономической безопасности и финансовой устойчивости банковского
сектора страны. В этой связи нужно обратить внимание на такую проблему как
асимметричность информации. Эта проблема в сфере банковского регулирования и надзора
приобретает особую актуальность, так как непрозрачность информации по владельцам,
крупным участникам и акционерам и деятельности коммерческих банков, а также
непрозрачность деятельности самих государственных надзорных и регулирующих органов
приводит к кризисным явлениям, социальной напряженности в обществе и даже к банковской
панике. Особенно это сильно проявляется в случае банкротства банков. С 2004 года по апрель
2011 года в Казахстане действовал единый уполномоченный государственный орган,
регулирующий и надзирающий весь финансовый рынок в лице АФН РК. Самое удивительное то,
что одной из задач совершенствования деятельности этого органа еще в 2005 году была –
преодоление фактора «асимметричности информации». К сожалению нужно констатировать
тот факт, что фактор «асимметричности информации» в деятельности АФН РК не только не
был преодолен в последующие годы, но еще больше усугубился в годы мирового кризиса, так
как в самый разгар кризиса (с 1 июля 2009 года) АФН РК представляет информацию и
145
отчетность в двух вариантах : 1)с учетом системообразующих банков, в т.ч. и АО «БТА банк» и
АО «Альянс банк»;
2) без учета двух этих системообразующих банков.
Таким образом, можно сказать, что с конца 2008 года финансовая устойчивость
банковского сектора имеет тенденцию к ухудшению. Значение АИФУ на 1.04.2009 года
составило 2,87, увеличившись по отношению на 1.01.09 года на 0,35 пункта за счет повышения
индексов качества ссудного портфеля и индекса эффективности деятельности до критического
значения. Так, по состоянию на 1.07 2009 года индекс АИФУ с учетом всех банков составил
3,40, что характеризует финансовую устойчивость банковского сектора как нестабильную,
диапазон этой категории (от 3 до 3,5). А без учета данных двух системообразующих банков АО
«БТАбанк» и АО «Альянс банк» индекс АИФУ составляет 2,65, что соответствует
удовлетворительному состоянию финансовой устойчивости банковского сектора с
чрезмерно высоким уровнем рисков, что соответствует показателю АИФУ на конец 2008 года –
2,53, так как значения 2,53 и 2,65 находятся в одном диапазоне (от 2,5 до 3 –
удовлетворительное (с чрезмерно высоким уровнем рисков (таблица 1).
Естественно, это вызывает ряд недоумений, так как в этом случае каждый пользователь
информации будет пользоваться теми показателями, в том числе и сам регулятор в лице
бывшего АФН, которые наиболее удобны лично ему. При этом объективная оценка истинного
положения дел в банковском секторе будет искаженной. А это можно рассматривать и как
недостоверную информацию официальных органов, и даже как дезинформацию. Представление
информации, отчетности и расчет АИФУ без двух системообразующих банков на наш взгляд
являлось некорректным, так как такие факторы как девальвация тенге, снижение цен на
недвижимость, рост безнадежных долгов, естественно сыграли свою отрицательную роль в
финансовой устойчивости банковского сектора. Так как после девальвации тенге все активы и
пассивы банков и их клиентов были пересчитаны по новому курсу, снижение цен на
недвижимость обострило проблему как с залоговым обеспечением кредитов (где залогом
выступала недвижимость), так и проблему возврата кредитов, особенно в строительном секторе
экономики. Основная проблема – оторванность финансового сектора от нужд реального
сектора экономики.
2.
В нашей стране принимались различные программы развития экономики, но все они
страдали одной проблемой. Каждый раз, принимая новые программы развития экономики,
Правительство до конца не прорабатывало вопрос финансово-кредитного обеспечения и
контроля проводимых реформ. Сюда можно отнести такие программы как «Год аула», «30
прорывных объектов», «30 корпоративных лидеров», разработка кластеров.
В настоящее время на период 2010-2014 годы разработан проект государственной программы
форсированного индустриально-инновационного развития Республики Казахстан, где, к
сожалению опять четко не обозначена роль банков второго уровня в кредитовании экономики.
3. Иллюстрации и таблицы
Таблица 1 - Динамика субиндексов в структуре Агрегированного индекса финансовой
устойчивости (АИФУ) с 1.01.2009 г. по 1.10.2009 г.
№
п/п
Индекс
финансовой
устойчивости
1.
Индекс
капитализации
Индекс
качества ссудного
портфеля
Индекс кредитного
риска
Индекс рыночного
риска
Индекс
эффективности
деятельности
Индекс
ликвидности
2.
3.
4.
5.
6.
1.01.2009
по всем
без
БВУ
учета
двух
банк.*
1,0
1,0
1.04.2009
по всем
БВУ
1.07.2009
по всем
БВУ
без учета
двух
банков*
1.10.2009
по всем без учета
БВУ
двух
банков*
2,0
4,0
1,0
4,0
1,0
2,0
2,0
4,0
4,0
3,29
4,0
3,29
3,8
3,4
3,0
3,8
3,4
3,8
3,4
2,2
2,2
2,2
2,8
2,2
2,8
2,2
4,0
4,0
4,0
4,0
4,0
4,0
4,0
2,63
2,5
2,0
2,0
2,0
2,0
1,67
146
7.
Агрегирован.
2,52
2,87
2,6
индекс
финансовой
устойчивости
Примечания
1 * без учета данных АО «БТА банк», АО «Альянс банк»
2 Таблица составлена автором
3,43
2,65
3,43
2,59
На наш взгляд, такая двоякая информация искажала реальное положение дел по двум причинам:
1) реструктуризация обязательств не освобождает банки от выполнения и соблюдения
пруденциальных нормативов и других норм, так как у них не отозвана лицензия, и они
продолжают обслуживать клиентов;
2) в силу этого агрегированный индекс финансовой устойчивости (АИФУ) по состоянию
на 1.10.2009 года не может быть скорректирован и тем более соответствовать положению дел на
1.01.2009 года, так как в феврале 2009 года была девальвирована национальная валюта – тенге,
что привело к нарушению многими банками пруденциальных нормативов и в первую очередь
по валютной позиции.
4. Заключение
Каждый раз мы за короткий срок пытаемся перескочить какие-то этапы, ранее не пройденные и
в силу этого вместо поступательного движения вперед оказываемся отброшенными назад, и
каждый раз причиной этого называется недостаточность инвестиций. Хотя сложность проблемы
заключается в том, что настало время для четкого осмысления того, чтобы вытащить структуру
экономики на новый уровень развития, необходим не столько новый приток финансовых
ресурсов или инвестиций, сколько создание такой атмосферы в обществе и экономике, которая
будет учитывать интересы основных субъектов. Нынешнее положение вещей во всем мире
подтверждает тот факт, что возрождение экономики невозможно без возрождения моральноэтических норм в обществе и экономике. Как отметил Н.А. Назарбаев, что «серьезным
испытанием для мира стал беспрецендентный глобальный финансово-экономический кризис,
объем потерь, от которого в мировой экономике оценивается в 3,5 трлн. долларов. Сегодня
лучшие умы человечества пытаются сформулировать причины его возникновения, делают
самые причудливые прогнозы. Но мало кто находит в себе смелость признать, что в основе
кризиса лежат извечные человеческие пороки – жажда наживы, беспринципность,
безответственность [9]. Очень многое будет зависеть от поведения самого единого
государственного уполномоченного надзорного органа в лице уже Комитета по финансовому
надзору Нацбанка РК. Насколько будет прозрачна его деятельность, будет ли преодолен фактор
асимметричности. В зарубежной литературе известны три концепции, раскрывающие поведение
органов регулирования банковской деятельности: теория общественных интересов (publicinterest theory, теория срастания (capture theory) и теория общественного выбора (publicchoice
theory) [9]. Дальнейшее совершенствование системы банковского регулирования и надзора в
посткризисный период должно идти по двум главным направлениям:
- совершенствование законодательно-нормативной базы банковского регулирования и
надзора;
- дальнейшее совершенствование риск-ориентированного надзора.
Экономическая модернизация невозможна без финансовой модернизации. В этой связи на
наш взгляд, необходимо разработать и принять в Республике Казахстан новый Закон «О
финансовой модернизации и развитии индустрии финансовых услуг». Принятие такого закона
позволит банкам второго уровня и органам регулирования восполнить брешь в применяемых
терминах и определениях и единообразно толковать те или иные процессы, происходящие в
сфере банковского бизнеса. Вместо постоянных поправок и дополнений в действующие законы
«О Национальном банке РК», «О банках и банковской деятельности», «О государственном
регулировании и надзоре финансового рынка и финансовых организаций» нужно издать новые
законы, раскрывающие суть новых положений, таких понятий, как «банковская деятельность»,
«банковский бизнес», «финансовая глобализация», «финансовая модернизация», «финансовые
услуги», «индустрия финансовых услуг», «реструктуризация активов и обязательств», «виды
банковской деятельности», «банковские риски», «системные риски», а затем уже
законодательно закреплять меры, методы и инструменты банковского регулирования и надзора.
Поскольку ряд банковских продуктов и операций не имеют четких законодательных
определений, регламентаций и запретов, то их просто относят к «иным сделкам». Банки в
своем эволюционном развитии прошли путь от простых обменных банков до финансовых
супермаркетов. Поэтому на наш взгляд «Закон о финансовой модернизации и развитии
147
индустрии финансовых услуг» должен четко обозначить виды банковской деятельности, так
как регулированию и надзору должны подвергаться не виды банковских учреждений, а виды
банковской деятельности, несущих в себя как единичный, так и системный риск.
5.Литература
1. Минина Т.И. Влияние глобализации экономики на финансово-банковскую систему//
Банковские услуги, 2002. - №4. - С.26.
2. Ройтбард Мюррей. Государство и деньги: Как государство завладело денежной системой
общества / Пер. с англ. и фр. под ред. Г. Санова. – Челябинск: социум, 2003. – 166 с.
3. Даниэлс Д.Д., Радеба Л.Х. Международный бизнес: внешняя среда и деловые операции /
Пер. с англ. М.: ДЕЛО ЛТД, 1994. – 748 с.
4. Иноземцев А.Б. За пределами экономического общества. М.: Academia – Наука,1998. – 640с.
5. Нухович Э.С. Глобализация, инфляция и стратегия международных корпораций.
6. Корпоративное строительство и роль ФПГ в подъеме экономики России: сборник
материалов круглого стола 16.11. 1998г. – Москва.: Изд-во Финансовой академии,
1999 . – ч.1. – 180 с.
7. Юданов А.Ю. Секреты финансовой устойчивости международных монополий. – М.:
Финансы и статистика, 1991. – 192 с.
8. Меньшиков С. Анатомия российского капитализма. – М.: Международные отношения, 2004.
– 232 с.
9. Назарбаев Н.А. Ключи от кризиса // Российская газета.-2 февраля 2009
10. Синки Д. Финансовый менеджмент в коммерческом банке и в индустрии финансовых услуг /
Пер.с анг. - М.: Альпина Бизнес Букс, 2007. - 1018 с.
Влияние международных финансовых организаций и иностранных инвестиций в
развитие экономики Кыргызстана.
АрзиеваАйгульКубанычевна
Институт экономики Национальной Академии наук КР
[email protected]
Аннотация: В современных условиях практически все страны мира, осуществляя
реформирование экономики для расширения источников финансирования, используют внешние
источники. В этом плане Кыргызстан не является исключением. Наша страна, как практически
все страны с переходной экономикой, осуществляет привлечение иностранного капитала для
финансирования проектов экономического развития в форме внешней финансовой помощи. Их
использование является вынужденной мерой, обусловленной ограниченностью внутренних
инвестиционных ресурсов и возможностей привлечения прямых иностранных инвестиций.
Следует учитывать, что они не могут считаться доходами государства, так как характеризуются
возвратностью, срочностью и платностью. Отсутствие разграничения доходов и займов на
практике может привести к усилению негативных последствий.
Ключевые слова: иностранные инвестиции, финансирование, эффективность, международные
финансовые институты, предприятия, объем производства.
До 2000 года Кыргызстан получил международную помощь в размере 1695,7 млн. долларов
США. В расчете на душу населения это составляет примерно 370 долларов США на каждого
жителя республики. В 1995-1999 гг. этот показатель доходил до 50-60 долларов США в год, что
по международным масштабам является очень высоким показателем и, по данным Всемирного
Банка, вторым по величине в СНГ после Армении36.
Однако, сложившиеся в республике экономические условия не дают пока реальных
возможностей для быстрого накопления сбережений и мобилизации внутренних
инвестиционных ресурсов. Некоторая сдержанность и пассивность инвесторов, обусловленная
несовершенством нормативно-правовой базы, транспортными проблемами и финансовой
нестабильностью в регионе, малыми размерами рынка республики и политической
нестабильности, привели к сокращению объема прямых иностранных инвестиций в Кыргызстан.
В этих условиях, внешняя помощь, как источник инвестирования, продолжает играть важную
роль.
36
Отчет Центра по привлечению прямых инвестиций при Министерстве финансов КР,2000 г.
148
В целом, освоение внешней помощи возросло, при этом высокие темпы прироста
освоения инвестиционных средств (157%) сохранялись в секторах транспорта и коммуникаций,
в частности, по проектам реабилитации дороги Бишкек-Ош и реконструкции аэропорта
«Манас», а также в энергетике (154%)37. Республика стремится привлекать в экономику прямые
иностранные инвестиции, реальное состояние которых можно увидеть из таблицы 1.
Экономическое сотрудничество и привлечение иностранного капитала являются объективно
необходимым процессом развития республики в современных условиях. Одним из способов
притока иностранных инвестиций является создание предприятий с иностранными
инвестициями.
Показатели
В процентах к итогу
2005
2006
2007
100
100
100
0,4
1,1
1,0
2008
2009
Всего прямых инвестиций
100
100
Сельское хозяйство
0,1
0,0
Горнодобывающая
11,6
16,6
12,5
0,9
1,3
промышленность
Обрабатывающая промышленность 45,1
42,0
30,9
27,8
12,2
Производство и распределение
0,0
0,0
0,0
0,2
электроэнергии, газа и воды
Строительство
5,8
2,7
2,9
5,7
3,0
Торговля; ремонт автомобилей,
бытовых изделий и предметов 10,4
8,0
9,1
6,5
8,4
личного пользования
Гостиницы и рестораны
1,2
0,6
0,6
0,3
0,9
Транспорт и связь
2,2
2,8
3,1
2,0
3,0
Финансовая деятельность
19,5
18,4
25,9
39,8
42,4
Операции
с
недвижимым
7,5
13,7
16,9
27,4
имуществом,
аренда
и 3,5
предоставление услуг потребителям
Государственное управление
0,0
0,1
Образование
0,0
0,0
0,1
0,0
0,0
Здравоохранение
0,0
0,2
0,0
0,0
0,1
Предоставление
коммунальных,
0,3
0,0
0,2
0,0
0,1
социальных и персональных услуг
Таблица 1. Объем прямых инвестиций в КР по видам экономической деятельности 38 (в % к
итогу).
Если посмотреть состояние международного финансирования по видам экономической
деятельности, то увидим, что более 40% прямых иностранных инвестиций вложено в
финансовую деятельность. Необходимо отметить, что в 2009 году вообще не было инвестиций в
сельское хозяйство, и практически наполовину снизились темпы освоения инвестиционных
средств в обрабатывающей промышленности и строительстве. Это обусловлено падением
заинтересованности со стороны конечных заемщиков из-за роста инфляции, ухудшений условий
торговли и высоких процентных ставок предоставляемых кредитов.
В структуре капитальных вложений внешняя помощь занимает значительную долю
(табл. 2). На начальном этапе развития республики доля иностранных кредитов в
капиталовложениях была несущественной и составляла в1993 г. 0,6% капиталовложений.
Однако с1994 г. доля иностранных кредитов в капиталовложениях неуклонно растет, и в1995 г.
за счет них профинансировано 5,3% капиталовложений.
Инвестиции в основной капитал, всего
2005
2006
2007
2008
2009
100
100
100
100
100
в том числе финансируемые за счет:
37
Отчет ГосинвесткомитетаКР о внешней помощи, 2009.
Кыргызстан в цифрах. Б. 2010. С 121.
38
149
Внутренние
инвестиции
республиканского
71,6
бюджета, включая:
Средства на чрезвычайные ситуации
6,3
75,9
78,5
64,0
74,2
5,4
8,8
10,9
12,3
Местного бюджета
1,3
1,4
2,4
1,8
1,9
Собственных средств предприятий
37,5
47,1
40,8
22,9
23,8
Кредитов банков
-
-
0,6
0,8
6,0
Средств населения
26,5
22,0
25,9
27,6
30,2
Внешние инвестиции
28,4
24,1
21,5
36,0
25,8
Иностранного кредита
15,5
14,5
10,7
12,7
15,3
Прямых иностранных инвестиций
11,2
8,0
6,9
19,7
7,4
Иностранных грантов и гуманитарной помощи
1,7
1,6
3,9
3,6
3,1
Таблица 2. Структура инвестиций в основной капиталпо источникам финансирования (в % к
итогу)39
Впоследующих1996, 1997 и 1998 гг. профинансировано за счет кредитов соответственно 11,1;
16,5 и 27,8% капиталовложений, в то время как из республиканского бюджета
профинансировано 3,5; 4,3 и 9,1% капиталовложений соответственно. В2004 г. за счет
иностранных кредитов осуществлялось 21,9% капиталовложений, затем проявляется
существенное снижение, и в 2008 году – за счет иностранных кредитов осуществлялось 12,7 %
капиталовложений, а в 2009 году заметен небольшой рост – 15,3% капиталовложений.
Для республики, сталкивающейся с проблемой неравномерности развития различных ее частей
и нуждающейся в преодолении географической и социально-экономической изолированности
некоторых из них, немаловажное значение имеет распределение внешней помощи по регионам.
Следует иметь в виду, что многие виды помощи по самой своей природе оказываются сразу
всей республике в целом и не могут быть разделены по регионам. К ним относятся, в частности
программные кредиты и многие проекты технической помощи.
Лидирующую позицию в освоении внешней инвестиционной помощи занимает Чуйская
область и г.Бишкек, на которые приходиться 2691,3 млн. долларов США (61,2%) совокупного
объема освоения инвестиционных средств. Это может быть объяснено тем, что многие виды
помощи направлены на укрепление центральных органов власти и поэтому концентрируются в
столице. С другой стороны, очевидно, этот регион обладает наилучшей инфраструктурой, и
реализация программ помощи здесь связана с наименьшими проблемами и позволяет дать
скорейший эффект. В то же время это фактически приводит к тому, что неравномерность
развития различных регионов не уменьшается. Среди остальных регионов лидируют наиболее
населенные Иссык-Кульская – 1253,0 млн. долларов США (28,5%) иДжалал-Абадская область
— 156,3 млн. долларов США (3,5%). Среднее положение занимают Таласская область – 63,3
млн. долларов США (1,4%) и Ошская область – 31,6 млн. долларов США (0,7%). Наименьший
объем помощи реализовывался в Баткенской области — 3,1 млн. долларов США (0,07%)
иНарынской области— 1,1 млн. долларов США (0,02%).40
Создание предпосылок к активизации инвестиционных процессов и повышению их
эффективности в регионах означает формирование благоприятного инвестиционного климата и
включение механизма устойчивых мотиваций к долговременному вложению средств. В
настоящее время инвестиционная политика на региональном уровне еще находится на стадии
становления, а организационный и экономический механизм ее реализации не выработан.
Анализ социально-экономического положения в регионах показал, что различия в
глубине спада инвестиций по регионам, качественные изменения в инвестиционной сфере и
особенности формирования рынка инвестиций были предопределены действием совокупности
факторов: отраслевая специализация регионов, связанная с особенностями их природноресурсного потенциала;сложившийся производственный, инновационный, экспортный и
трудовой потенциал;географическое положение, обусловливающее значительные различия в
транспортных издержках и затратах на воспроизводство рабочей силы;уровень развития
социальной сферы; масштабы и темпы приватизации, преобразование форм собственности;
39
Кыргызстан в цифрах. Б. 2010. С. 114.
40
Инвестиции в Кыргызской Республике 2005-2009. Бишкек, 2010 г. С. 42.
150
тенденции и формирование фондового рынка, развитие банковской системы и другой рыночной
инфраструктуры.
Для того чтобы максимально мобилизовать инвестиционные ресурсы региона и создать
рынок инвестиций, необходим учет региональных особенностей. Для учета региональных
особенностей, прежде всего, необходимо разработать принципиальные подходы к
ранжированию регионов по уровню развития регионального рынка инвестиций, а также по
благоприятности складывающегося там инвестиционного климата. Именно такое ранжирование
и может лечь в основу дифференциации мер государственного регулирования инвестиционной
деятельности на региональном уровне.
Вопрос об эффективности использования кредитных средств остается открытым и в
настоящее время стоит наиболее остро. Одни экономисты придерживается мнения, что
полученные средства, пущенные на покрытие дефицита бюджета (около 30 центов из каждого
полученного доллара США), т. е. на выплату социальных расходов и сглаживания колебаний,
имели положительный итог в плане исполнения бюджета и снижения социальной
напряженности. Другие, склоняются к мысли, что был смысл направить большую часть
полученных средств на развитие реального сектора, эффект от которого не замедлил бы
проявиться. Так или иначе, средства затрачены, эффект будет определён в будущем, а сейчас
долги надо погашать.В структуре внешнего долга больше половины суммы составляют
обязательства перед ВБ, МВФ и АБР.Около 44% — займы, полученные в рамках двусторонних
договоренностей от РФ — $490 млн., Японии — $330 млн., КНР — $151 млн. При проведении
анализа устойчивости госдолга страны за последние годы в расчет вносятся все будущие
заимствования от внешних доноров, включая международные финансовые организации. После
событий апреля 2010 года республика оказалась в самом низу рейтинга коррумпированных
стран, так как происходящее в стране, по мнению международных наблюдателей, напоминало
перехват власти и новый передел собственности, борьбу за контроль над высокодоходными
отраслями экономики.
Основными донорами Кыргызской Республики среди международных финансовых
институтов являются Всемирный банк (398 млн. долларов США или 23% всей помощи),
Азиатский банк развития (260 млн. долларов или 15,3%), Международный валютный фонд и
Правительство Японии (по 246 млн. долларов или 14,5%).В целом многосторонние доноры
предоставили 65% всех средств, правительства зарубежных стран — 29% и
неправительственные организации - 6%. Из организаций, входящих в систему ООН, помимо
Всемирного Банка и МВФ большой вклад в помощь Кыргызстану вносит ПРООН. Другими
важными многосторонними донорами являются Европейский банк реконструкции и развития,
Европейский Союз, Исламский банк реконструкции и развития. Среди правительств ведущее
место принадлежит Японии, Швейцарии и Германии. В последние годы среди доноров
происходит некоторое перераспределение ролей. За последние три года самые большие
средства вложил в Кыргызстан Азиатский банк развития, Европейский Союз и ПРООН.
Программная помощь для поддержки структурных реформ предназначается для реализации
программ макроэкономического уровня и непосредственно не связана с финансированием
какого-либо проекта. Действие этой программы и ее результаты оказывают влияние на ведущие
сектора экономики. Данный вид кредитов направляется в бюджет для поддержания платежного
баланса и укрепления национальной валюты. Также, в частности, Правительство Кыргызской
Республики должно было обеспечить отмену всех экспортных
пошлин на
сельскохозяйственную продукцию, демонополизацию и приватизацию объектов «Кыргыз-ДанАзык» и «Тамак-Аш»; подготовить законопроекты по обеспечению прав землепользования и
созданию единой системы регистрации земли; разработать систему государственных закупок на
конкурентной основе и соответствующие правовые акты. К сожалению, многие предприятия,
получившие иностранные кредиты оказались в финансовом затруднении и значительно
сократили объем производства из-за жестких условий кредитов, отсутствия или недостатка
оборотных средств, разрыва хозяйственных связей и резкого изменения ситуации на рынке.
Всемирный банк предложил республике новый способ оценки предприятий,
называемый методом чистых активов. Сущность его заключается в том, что оценочная
стоимость объекта определяется разницей между активами и пассивами предприятия.Удалось
сохранить, хоть и в значительно урезанном виде, только бывшие флагманы отечественной
промышленности: ГАО «Текстильщик», ГАО «Хайдарканский ртутный комбинат», ГАО
«Ташкумырский
завод»
полупроводниковых
материалов,
ГАО
«Майлу-Суйский
электроламповый завод».
В развитых странах заемные средства используются в основном для создания новых
рабочих мест и поддержания высоко уровня занятости, то в Кыргызстане эти средства лишь
151
дополняют внутренние ресурсы, предназначенные для инвестирования или восполнения
дефицита бюджета.
Только в условиях открытой экономики, у стран появляется возможность
использования внешней помощи. И хоть имеются случаи неправильного ее использования, она
имеет высокую степень важности. В современных условиях, делом первостепенной важности
является обеспечение того, чтобы проекты международного финансирования экономики
Кыргызстана оказали непосредственное влияние на экономический рост, улучшение жизни
людей, причем способы такого воздействия будут сильно различаться в зависимости от сферы
деятельности и типа проектов.
Литература:
1. Отчет Центра по привлечению прямых инвестиций при Министерстве финансов КР,2000 г.
2. Отчет ГосинвесткомитетаКР о внешней помощи, 2009.
3. Кыргызстан в цифрах. Б. 2010. стр. 114,121.
4. Инвестиции в Кыргызской Республике 2005-2009. Бишкек, 2010 г. стр.42
Стратегия обеспечения конкурентоспособности компании
на рынке сотовой связи.
Сатыбекова А.Е.
Международная Академия Бизнеса
Дуйсенгулова Н.С.
Международная Академия Бизнеса
Рынок сотовой связи Казахстана за последние годы показывает рост объема потребления услуг,
что свидетельствует о доступности мобильной связи для всех потребителей страны.
На сегодняшний день количество абонентов сотовой связи в Казахстане оценивается в 14,7 млн.
человек, уровень проникновения превысил 90% [1].
В то же время казахстанский рынок сотовой связи – наименее конкурентный, он переживает
фазу зрелости, является высококонцентрированным: 90% рынка делят между собой два
крупных оператора, на долю остальных участников рынка приходится чуть более 10% рынка.
Всего в республике действует шесть операторов: три в стандарте GSM - GSM Kazakhstan
(с торговыми марками K’Cell и Activ), "КаР-Тел" (Beeline и K-Mobile) и Mobile Telecom Service
(NEO); три в стандарте CDMA - "Алтел" (Dalacom и Pathword), "Мобайл Телеком Сервис"
("Жаршы") и компания Nursat (торговая марка Excord). Хотя, на самом деле, в большинстве
своем рынок сотовой связи поделен между тремя крупнейшими операторами: GSM Kazakhstan
(абонентская база около 3,5 млн. человек), "КаР-Тел" (более 4 млн. пользователей) и "Алтел"
(0,5 млн. абонентов).
На таком насыщенном рынке операторам постепенно приходится менять стиль работы: простое
понижение цен на связь, направленное на привлечение новых абонентов и проникновение
в разные слои населения, теряет эффективность. Разработка и введение новых тарифных планов
стали основным инструментом в конкурентной войне на текущем рынке. Наибольшим
разнообразием тарифных планов на данный момент обладает компания ТОО "КаР-Тел" (ТМ
Beeline), разработано около 13 тарифных планов, они обновляются раз в несколько месяцев.
Товарищество с ограниченной ответственностью "КаР-Тел" создано в 1998 г., является 100%ной дочерней компанией ОАО "ВымпелКом" [2]. В группу компаний "ВымпелКом" входят
операторы связи, предоставляющие услуги голосовой связи и передачи данных на основе
широкого спектра технологий беспроводной и фиксированной связи, а также широкополосного
доступа в Интернет. Это компании, осуществляющие операции в России, Казахстане, Украине,
Таджикистане, Узбекистане, Грузии и Армении, а также во Вьетнаме и Камбодже на
территории с общим населением около 340 млн. человек. Услуги предоставляются под брендом
"Beeline". ОАО "ВымпелКом" стало первой российской компанией, включенной в листинг
Нью-Йоркской фондовой биржи (NYSE), акции компании котируются на NYSE под символом
VIP.
ТОО "КаР-Тел" предоставляет услуги сотовой связи стандарта GSM 900/1800,
высокоскоростного доступа в Интернет и передачи данных по проводной технологии FTTB. В
1999 г. ТОО "КаР-Тел" первым запустило корпоративную программу, суть которой состояла
152
в том, что компании, объединяющиеся в корпоративные группы, должны были иметь
подключенными не менее 25 абонентских линий. В этом случае они не оплачивали
обязательную абонентскую плату. В 2005 г. брэнд "Beeline" вышел на казахстанский рынок
сотовой связи. В 2008 г. "Beeline" стал первой компанией, получившей официальное
разрешение на оказание услуг сотовой связи в стандарте GSM 1800 на территории Республики
Казахстан.
Основной задачей всех операторов сотовой связи является расширение сети и предоставление
более доступных тарифов. Чтобы оставаться лидером на рынке, ТОО "КаР-Тел" необходимы
следующие мероприятия:
- снижение тарифов;
- введение разнообразных услуг;
- улучшение качества связи и обслуживания;
- несет дополнительные затраты на построение сети и обеспечение качественного
сервиса.
Конкурентным преимуществом ТОО "КаР-Тел" является проведение гибкой и
прозрачной тарифной политики, которая позволяет учитывать потребности всех групп
абонентов и оперативно реагировать на их изменение.
Для ТОО "КаР-Тел" рекомендуется вести стратегию, исходя из положения фирмылидера на рынке – поддержание лидирующих позиций, обороны и укрепления. Смысл данной
стратегии заключается в том, чтобы затруднить доступ на рынок новым фирмам, а
претендентам на лидерство - укрепить позиции [3]. Задачами прочной обороны являются
удержание существующей доли рынка, укреплений достигнутого положения на рынке, защита
имеющихся у фирмы конкурентных преимуществ. Конкретные оборонительные действия могут
включать в себя:
- попытки поднять конкурентный барьер для претендентов на лидерство у новичков
через увеличение затрат на рекламу, более высокий уровень сервисного обслуживания и более
значительные расходы на исследования и разработки собственных товарных марок на
продукцию, на которую претендент на лидерство уже имеет товарные марки или, возможно,
будет иметь;
- переход к более выраженной персонализации обслуживания и использованию других
дополнений для усиления лояльности потребителей и усложнения или удорожания их перехода
к продукции конкурентов;
- расширение параметрического ряда продукции с целью закрыть для конкурентов
возможные свободные ниши;
- сохранение разумных цен и привлекательного качества;
- создание новых мощностей, чтобы опередить рост рыночного спроса и блокировать
потенциал расширения мелких конкурентов;
- осуществление инвестирования, обеспечивающего конкурентоспособность по
издержкам и технологическое развитие;
- патентование альтернативных технологий;
- разработка привлекательных акций для потребителей.
Данная стратегия всегда подразумевает попытки роста такими же быстрыми темпами,
что и у рынка в целом (чтобы не упустить свою долю рынка), а также достаточные капиталовложения для поддержания конкурентоспособности лидера.
Перспективы развития рынка сотовой связи Казахстана связаны с введением передовых
мировых телекоммуникационных технологий: передача данных, обслуживание клиентов,
расширение спектра услуг. Поэтому конкурентная борьба будет идти в двух направлениях:
за лучший сервис и за лояльность потребителей.
Таким образом, дальнейший рост конкуренции на рынке и развернувшаяся борьба
за пользователей среди операторов сотовой связи обязательно повлечет дальнейшее снижение
стоимости тарифов при росте уровня проникновения и внедрения новых технологий сотовой
связи.
Литература:
1.
Данные Агентства Республики Казахстан по статистике.
2.
Информация ТОО "КаР-Тел".
3.
Кныш М.И. Конкурентные стратегии. – СПб, 2000.
4.
Армстронг Г., Котлер Ф. Введение в маркетинг, 8-е изд. / Пер. с англ. - М.: ООО "И.Д.
Вильямс", 2007.
5.
Эл Райс, Джек Траут. Маркетинговые войны. – СПб: Питер, 2007.
153
Distance learning in a teaching process
Suyundukova R.,
KIMEP University
[email protected]
Fidirko N.
KIMEP University
[email protected]
Zaitseva M.
KIMEP University
[email protected]
Bragina L.
KIMEP University
[email protected]
Vlasov O.
KIMEP University
[email protected]
Abstract:Information technologies now become the main factor of improving education. Distance
learning or electronic learning (e-learning) gives the facility to more people to study at home, and this
allows saving family budget alongside with state budget at the expense of lowering of the cost of
education technologies.
Key-Words- Moodle, Modular Object-Oriented Dynamic Learning Environment, Distance learning
1. Introduction
The modern teacher can be now characterized with skillful and effective use of new information
technologies, Internet technologies, network services in education process, in e-learning process.
Information technologies now become the main factor of improving education. Distance learning or
electronic learning (e-learning) gives the facility to more people to study at home, and this allows
saving family budget alongside with state budget at the expense of lowering of the cost of education
technologies.
Distance learning or learning in distance is now recognized and accepted by many students. Distance
learning assumes the communication between student and teacher via computer network.
2. Distance learning in a teaching process
For proper effective organizing of such communication between teacher and student or students it’s
needed to take into account some features of such process of distance learning as:
•
Such communication assumes primarily good knowledge and orientation in new
products, online programs that offer online learning. Participants should be competent in emerging
information technology systems.
•
Teacher of online courses must have good skills of teaching methods, must be able to
use the teaching skills in distance learning technologies to create and to publish online comprehensive
and methodical materials.
•
Online or virtual environment communication should focus the teacher on particular
form of communication, which eliminates some direct conversation, but only through computer. This
form of communication is effective and is available at a certain tact and certain knowledge of a teacher
in the field of psychology.
With all those features and their proper use in distance learning it’s possible to expect good results
of on-line education.
The use of information placed in the network allows the student to arrange education process at
convenient time and place.
On-line education gives the student the facility not only to maintain course materials, but it also
allows to improve his(her) computer literacy.
In order not to exclude communication with student and to obtain proper understanding of course
materials, the teacher leaves some difficult topics for study at seminars, lectures, laboratory classes
to discuss with students face to face.
154
On-line education facilities allow the teacher to create own topics, to encourage students for self study,
self work. The work may be conducted either in teacher’s mode or in student’s mode to avoid any
unauthorized access to teacher’s materials.
Good feedback facilities of e-learning make it possible to maintain impartial study of students’
works.
On-line systems provide reliability and safety of information during exams, excluding any types of
cheating.
The proper choice of e-learning system must be done in accordance with requirements of the certain
higher institution. The practical usage of theoretical prerequisites for effective use of e-learning in
education was confirmed by Moodle.
Moodle, or Modular Object-Oriented Dynamic Learning Environment makes possible to work with
students in virtual area.
Using the Moodle pacckage (the system is licensed under GNU General Public License, Moodle can be
downloaded and installed for free from http://www.moodle.org.) in the process of learning in our
university (KIMEP website: http://el.kimep.kz) confirmed the correctness of the theoretical
characteristics for teachers in virtual learning environment.
Note: Our site is used in the name of the original transcription of the new educational technology - elearning.
Moodle – is a dynamic learning environment, focused on assistance in the organization of distance
learning, and in the proper and efficient administration of the educational process in the traditional fulltime
education.
The presence of various object-oriented modules makes it easy to design and implement teacher
requirements
to
the
educational
process.
Working in Moodle allows, in addition to the methodological issue of material control and test tasks, to
create forums, online dialogues (or chats).
With Moodle the teacher has the opportunity to maintain on-line dialogue with certain student, to
assign individual tasks, etc.
A very useful tool in this system is construction of the database of educational materials, which can be
supplemented by the students themselves, with their recommendations and a brief summary on the read
textbooks or articles. The database of educational materials can be effectively used and fulfilled.
3. Conclusion
This system, adapted to KIMEP learning process, has shown that students can independently and
efficiently organize the training process, using different materials both from teacher and from variety of
links and objects of the Internet. The system encourages teachers to continue self-improvement and
there is no need to refuse to adopt new learning systems.
4. References
1. http://docs.moodle.org/22/en/course/view
2. http://docs.moodle.org/20/en/Gradebook_1.9_Tutorial
3. http://www.ksu.ru/fpk/bin_files/moodle!7.pdf
4. http://swsu.org/index.php?gpunkt=16&punkt=0
5. http://applingva.blogspot.com/2011/03/blog-post.html
Using new methods in teaching future engineers
Luara Sergeeva
Almaty University of Power Engineering and Telecommunication
[email protected]
Abstract The paper report result derived from new method of teaching future engineers based on video
clips 5-7 minutes long technical content. The characteristic of this method are using computer and
internet during the lesson. The advantages of this method are: high motivation, visual, thorough
explanation and understanding of subject, developing professional skills.
Key-Words: video method, motivation, learning technical English (LSP), high motivation, thorough
explanation, understanding of subject, developing professional skills
1. Introduction
Nowadays government, society, universities and students are concerned with training highly qualified
specialists meeting the international requirements. Therefore it is necessary to study and take into
155
consideration inquiries and interests of all these sides. The aim of higher education is forming of
professional competence. What does “engineer’s professional competence” means? It is ability not only
speak English fluently but also communicate in professional sphere. Grammar Translation method
using in Technical University of Kazakhstan is out of date. In addition student’s book is stationary
constriction. Technologies are changing rapidly. It is nonsense to study article such content “In future
TV sets will hang on the wall like a picture.” We suggest teaching future engineers on new video from
technical sites and training students discuss new inventions from engineering point of view. We have
developed this method and have been applying it during training our students. As a result all students
with different levels learn English much more efficient. Motivation goes up steadily. Colored videos
with thorough explanation, graphs and diagrams give students an opportunity to master with foundation
of their future profession easily.
2. Section headline:
Social Sciences, Humanities, Language and Linguistics
2.1 Section subheadline:
Language and Literature Education: Local and Global Issues
Let’s consider application of this method. First of all we need to introduce new vocabulary: students
are studying the picture with parts of airplane and completing the table with definitions. In is very
important before watching video to set the goal for students: what information they should understand,
remember and use in post watching stage. In this case perception raises double. During watching each
video students are completing missing information. In post watching stage students are retelling
information being guided by completed tables. It forms strong speaking skills. Aim the video 1 is to
understanding what forces affect an airplane in flight (basic principles of physics). Video 2 is avoided
of comprehension: how to control the flight of the plane? Video 3 is introduced BWB Concept
Aircraft: completely new engineering idea of aircrafts building. Unlike a conventional aircraft in which
the lift is provided by the wings, the body of a BWB acts as a wing providing more lift with the same
amount of fuel. Video 4 is explained main engineering principles of double-decker Airbus A380.
During watching students are completing the table: BWB Concept Aircraft and Airbus A380 according
to main technical points. Having completed the table students are discussing advantages and
disadvantages of each model from engineering point of view. Next stage is project of future airplane.
3. Application of video method
Aircrafts
Pre-watching
1 Airliner is aerial transport apparatus that is heavier than air and is equipped with wings and engines.
It is used for carrying people. Airplanes come in many shapes and sizes, but they all have similar parts.
Look at the picture and complete the table: find terms for definitions.
Term
Definition
156
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
small, round, sealed window
device used to regulate the altitude of an aircraft
cubicle reserved for the operation of an aircraft (syn. cockpit)
apparatus used to turn an aircraft
gas turbine engine, the turbine of which is activated by exhaust gases
movable flap on the trailing edge of the wing, operated by the control stick
that allows an aircraft to bank
front part of an aircraft
device that prevents an aircraft from drifting
container in which fuel is stored
compartment where baggage is stored
section used aircraft travelers
tapered rear part of the fuselage
each of two lateral planes of an aircraft, which provide lift and balance
device that automatically corrects errors and deviations, and stabilizes the
aircraft
movable part on the trailing edge of the wing of an aircraft to allow
modifications to flight conditions
rear corner marker light
movable auxiliary part on the trailing edge of the wing that allows an aircraft
to bank
Watching
Video 1
“Forces that Act on Aircraft in flight”
Pre - watching
There are four forces that affect an airplane in flight: Lift, Gravity (or Weight), Thrust and Drag.
Match the forces and their definitions according to the picture:
Four forces of flight
1 ___A force that pushes objects upward.
2 ___Resistance that slows an object down in
the
air.
3 ___ A force that acts on the plane to pull it
back
to
earth.
4 ___ The force of flight that pushes a plane
forward with engine.
Watching
Watch the video “Forces that Act on Aircraft in flight” and complete the gaps with four forces: thrust,
lift, weight or drag.
1 ____ (1), a forward driving force, is opposed by air friction or drag.
2 ___ (2) is an upward force that keeps the vehicle airborne.
3 ___ (3), resulting from Earth’s gravitational pull, must be overcome by the lift for flight to occur.
4 Turbulent airflow behind a vertical plate result in:
a) a properly designed airfoil, or wing, generates ___ (4) by reducing air pressure above the wing.
b) decreased air friction and turbulence minimize ___ (5).
c) increasing the angle at which the wing meet overcoming air increases ___ (6) to a point.
d) Beyond a critical angle airflow becomes turbulent, increasing ___ (7) and decreasing lift.
Video 2
“The Wright Brothers Pitch and Other Flight Concepts”
1 Do you know how to control the flight of the plane? Watch the video and decide what
rotations of a plane are mentioned in each paragraph: Yaw, Roll or Pitch.
To ___ (a) the plane to the right or left, the ailerons are raised on one wing and lowered on the
other. The wing with the lowered aileron rises while the wing with the raised aileron drops.
157
___ (b) is to make a plane descend or climb. The pilot adjusts the elevators on the tail to make
a plane descend or climb. Lowering the elevators caused the airplane's nose to drop, sending the plane
into a down. Raising the elevators causes the airplane to climb.
___ (c) is the turning of a plane. When the rudder is turned to one side, the airplane moves left
or right. The airplane's nose is pointed in the same direction as the direction of the rudder. The rudder
and the ailerons are used together to make a turn
2 Watch the video again and complete the gaps:
a) There are ___ (1) motions or rotations for a plane. They called pitch, yaw and roll.
b) The ___ (2) of a plane is how the nose is angled if it is pointed up or down.
c) The pitch is controlled by ___ (3).
d) If the elevators are up the ___ (4) goes down and the nose goes up.
e) The plane is pedaling around a single point. This is called the centre of ___(5).
f) The ____ (6) is the turning of the aircraft.
g) The ___ (7) is used for turning the nose to the left or the right.
3 Speaking Work in pairs. Student A: look at the picture and explain main principle of two forces: Lift
and Gravity and what is yaw. Student B: look at the picture and explain main principle of two forces:
Thrust and Drag and two rotations: Roll and Pitch.
Video 3
“BWB Concept Aircraft”
Pre-watching
What do you know about BWB aircraft? Look at the picture and read the information:
NASA, Boeing test fuel-efficient BWB aircraft
158
NASA and Boeing have successfully tested a scale model of their blended wing body (BWB)
aircraft design; one that they hope will fly more with less fuel onboard.
The 8.5% scale model weighs 500 pounds but shows how the actual plane will work. The
model is efficient enough to reach 10,000 feet and 120 knots and is like a milestone in the continuing
research program that hopes to conclude once the actual blended-wing-body-design aircraft is
developed.
Unlike a conventional aircraft in which the lift is provided by the wings, the body of a BWB
acts as a wing providing more lift with the same amount of fuel. Still a more efficient technology is
flying wings, like the B2 bomber, but such a design has far less space to store cargo and is unstable due
to a lack of any stabilizing structures.
Boeing and NASA hope to develop a full scale model of the aircraft between 2015 and 2020.
When this revolutionary aircraft hits the skies, it will completely change the aviation industry making it
more fuel-efficient, silent and spacious.
Watching
Watch the video and complete the gaps:
1) BWB holds up ____ passengers
2) Wing span ___ feet
3) Length ___ feet
4) Height ___ feet
5) BWB will reduce ___ and ___. As a result airline tickets may cost ___.
6) Why Blended Wind Body is so special?
7) Blended wing fuselage helps to reduce ___ .
8) Less thrust means less ___ is needed.
9) Why did designers build some scale models?
10) What can wind tunnel test help engineers to predict?
11) NASA built another sub scale model called LOW SPEED VEHICLE or LSV for ___.
12) Flying test took place at NASA research centre in ____.
13) What geometrical shapes were the drawing of BWB divided?
14) To estimate total surface area one should add ___, ___ and ___.
Video 4
“Test Drive Airbus A380”
Pre-watching
Look at the picture Airbus A380. Why is A380 differing from other airplanes?
A380-800 – Flightcrew of two. Standard seating is for 555 passengers on two decks in a three class
arrangement.
A380 has 49% more floor area but only 35% more seats (in 555 seat configuration) than the
747-400, allowing room for passenger amenities such as bars, gymnasiums and duty free shops. Cargo
capacity is 38 LD3s or 13 pallets.
Apart from the prime contractors in France, Germany, the United Kingdom and Spain,
components for the A380 airframe are also manufactured by industrial partners in Australia, Austria,
159
Belgium, Finland, Italy, Japan, South Korea, Malaysia, Netherlands, Sweden, Switzerland and the
United States. A380 final assembly is taking place in Toulouse, France, with interior fitment in
Hamburg, Germany. Major A380 assemblies are transported to Toulouse by ship, barge and road.
Watching
Watch the video and complete the gaps:
1) Airbus A380 carries ___ passengers.
2) Wing span ___ feet
3) Length ___ feet
4) Height ___ feet
5) Its Rolls Rosie engine produces ___ of thrust.
6) The European manufacturers have spent ___ Euros and ___ dollars for developing double
decks plane.
Post watching
Which airplane is more effective? Complete the table.
BWB
Airbus A380
Carries passengers
Size, shape
Speed
Materials
Crew
Safety
Advantages
Disadvantages
Work in pairs. Student A is engineer developed BWB, student B is engineer developed Airbus
A380. Talk about your airplanes and decide: which airplane is more effective? Speak about advantages
and disadvantages of each model from engineering point of view.
Project
Students work in groups of 4 (engineering teams). Develop your own airplane according to points:
shape, size, fuel, materials, speed, runway, crew, safety and present it to the class. Other engineering
teams should discuss each project and find advantages and disadvantages.
4. Conclusion
Video is combination of different components (texts, sounds, pictures, images, animation, and videos).
There a lot of advantages of using video in teaching technical students.
160
First of all, video can help the teachers in delivering information to the students easily. Moreover
students learn a lot of information in short period of time and enable the students’ sense of hearing and
sight to percept more information, vocabulary and grammar constructions.
Secondly, video can motivate the students in learning English and being interested in their future
profession. Multimedia program presents information by using texts, sounds, videos, images, pictures,
and animation. It makes the class alive and interesting. The students will be interested in the learning
and feel inspired by engineering as a science.
Finally, this method provides students’ ample opportunity not only percept information but also master
it and forms stable speaking skill according to new theme at the end of the lesson. Besides it forms
critical engineering thinking that is the basic for highly developed specialist.
In conclusion, integrating video is to show the teaching materials clearly, interestingly, and
systematically and to deliver the information easily to the students. Using video in the English teaching
and learning process can improve teaching quality. The teaching will be more efficient. Using video
can make the class interesting. The students will be motivated in the learning and mastering of future
profession. They also will understand the lesson easily. Besides, this method relieves understanding
basis engineering sciences: physics, chemistry, mathematics and main principle of new technology;
enriches vocabulary; improves English skills and inspires students to develop their own inventions for
development of new technologies for Kazakhstan. This method has been applying in Almaty
University of Power Engineering and Telecommunication for 3 years and shown itself to advantage.
5. References
1. http://www.nasa.gov/
2. http://socyberty.com/education/the-advantages-of-the-use-of-multimedia-in-the-english-teachingand-learning/
3. http://www.eslpartyland.com/teachers/nov/film.htm
A Comparative Research Study on
Malaysian and Kazakhstani Perceptions of Educational Leadership and Culture
Aisham Seitova
KIMEP University
[email protected]
Maganat Shegebayev
KIMEP University
[email protected]
Abstract: Leadership in higher education has become a topical issue in scientific research over the last
decades. There has been a growing demand for research and literature on leadership across cultures.
Therefore, the current study aims at exploring the impacts of culture on leadership on the examples of
Malaysia and Kazakhstan, the countries which are marked by high cultural diversity and various
leadership practices applied. Several major dimensions of societal culture and the way they influence
on educational leadership styles will be looked into in this study. There is also a need to achieve a
clearer recognition of educational leadership, its characteristics, understanding the importance of crosscultural leadership and its practical application differences in different cultures. The present study is an
effort to contribute to this important and growing body of knowledge.
Key words: educational leadership, culture, leadership styles, cross-cultural perceptions, management,
education
1. Problem statement:
There are many empirical studies on leadership but few have been concerned with the impact of culture
on leadership. There are important discussions regarding the increase of interdependencies of nations
that makes the understanding of culture and its influence on leadership increasingly important. Hence
the main focus of this comparative research is to do an extensive study of perceptions of leadership
across the two cultures. The authors aim to explore the significant attributes attached to educational
leadership in Malaysia and Kazakhstan. The specific research questions addressed there are as follows:
1. To what extend is leadership culturally contingent?
2. How are the paradigms of educational leadership formed?
161
3.
4.
5.
Do leaders and managers from Malaysia and Kazakhstan differ in their beliefs about
educational leadership? If it is so, where do those differences stem from?
Do they (leaders and managers) attribute different characteristics, styles and approach to
educational leadership?
What are similarities and differences in perceptions of what constitutes leadership
effectiveness into two societies?
2. Approach or Method:
In addressing these questions, we focus on nine major dimensions of societal culture and their
influences on educational leadership style through a review of conceptual literature of educational
leadership and empirical analysis of Project Globe’s leadership scales (Dorfman, et. al 2004). These
nine major dimensions of societal culture are the following:
•
uncertainty avoidance;
•
future orientation;
•
power distance;
•
institutional collectivism;
•
humane orientation;
•
performance orientation;
•
group and family collectivism;
•
gender egalitarianism; and
•
assertiveness.
The dimensions measures for different societies allow an analysis of the cultural differences that exist
between two countries. Chhokar et al. (2007) state that culture does influence leadership styles and
perceptions. Nevertheless, Dorfman et al. (2004), based on the GLOBE study of 62 societies, reject the
culture convergence hypothesis; they propose that cultural differences might be exacerbated as a
reaction of most people who try to adapt to modernization and maintain their cultural identity. It could
be assumed that our perception of leadership is influenced by our view of self and our cultural
background. For instance, Bass (1990) suggests that variations in perception what constitutes as a
leader would systematically vary across cultures because most people of the same culture hold a
common set of beliefs about the attributes of a leader and are exposed to similar policies and practices
in their organizations. However, there are distinct patterns of leadership that are found in different
cultures which led them to identify three pervasive competing prepositions regarding leadership,
which namely are cultural congruence, cultural difference and near universality of leader behaviors.
3. Results/ Conclusion:
Thus this project may also expand in the following directions:
•
To establish theoretical frameworks, modern approaches and strategies for measuring
leadership and culture, or conceptualizing the comparative study of cultural and cross-cultural
effects on educational effectiveness.
•
To expand existing knowledge and allowance of comparisons of the variables across countries
with a sample of over 500 employees and leaders in higher educational organizations
•
To build a Human Resource Development (HRD) knowledge base in countries where it is not
existent.
•
To look into the issues of vision, ethics and decision-making in leadership.
•
To study the principles of transformational leadership to create a learning organization capable
of dealing with the challenges of 21st century.
•
To become more aware on the roles of mentoring and facilitation in educational management.
This research study also aims to contribute to a better understanding of culture-based differences and
serve as a source of information about both cultures. It will extend the GLOBAL study of 62 societies
by delineating that different leadership characteristics are practiced and accepted in Malaysia and in
Kazakhstan. In addition, the outcomes will suggest that similarities in perceptions and practices, which
are found between Malaysian and Kazakhstani leaders and managers, are due to similarities in certain
values. Specific differences found in culture will be linked to leaders’ and managers’ profiles and
cultural identities. The information could be of practical use to those working in high educational
organizations operating in both countries.
4.
1.
References:
Bass, B. M. (1990). Bass and Swordbill’s Handbook of Leadership: Theory, Research and
Managerial Applications (3d ed.), New York: Free Press
162
2.
3.
Chhokar, J.S., Brodberg, F.C., & House, R.J., (2007). Culture and Leadership across the World:
The GLOBE book of 25 societies, Mahwah, NJ: Lawrence Erlbaum Associates
Dorfman, P. W., & House, R. J. (2004). Cultural Influences on Organizational Leadership, in
Culture Leadership and Organizations: The Globe Study of 62 Societies, eds. R.J. House, P.J.
Hanges, M. Javidan, P.W. Dorfman & V. Gupta: London: Sage, pp. 51-73
Knowledge, Culture and the World-Class University:
The Case of KIMEP
Michael Quinn
KIMEP, Kazakhstan
[email protected]
Ewan Simpson, PhD
KIMEP, Kazakhstan
[email protected]
Abstract: The following paper looks to clarify some of the issues surrounding the debate of the nature
of world-class universities. To do so, it highlights several aspects of KIMEP University (formerly the
Kazakhstan Institute of Management, Economics and Strategic Research), a small, Western-style
academic institution based in Almaty, Kazakhstan. Founded in 1992 by Nursultan Nazarbayev, the
president of Kazakhstan, KIMEP has a mission to develop new leaders, teaching in English and
delivering programs on business, the social sciences, law and pedagogy. Following a privatization in
2000 that was led by its founding and current President, Chan Young Bang, KIMEP grew rapidly. It
has over 7,000 alumni and 3,400 current students. KIMEP has the highest concentration of Westerntrained PhDs in the CIS.
In this paper, world-class is defined as the ability to produce “eminently qualified graduates with the
values, expertise, skills and knowledge which are consistent with, and relevant to, the society in which
they intend to serve.” The paper highlights the importance of institutional culture in developing
effective operations. It focuses on key successes at the university and demonstrates how they relate to a
culture based on student-focused core values: care, honesty, integrity and transparency. Challenges in
replicating the model are highlighted. There is no shortcut to sustainable world-class status.
Keywords: Student-centered, Culture, Core Values, Sustainability, World-Class, Action-focus
1. Introduction
What is a world-class university? This seemingly simple question has emerged as a relatively sticky
problem in the field of international education. While it is often easy for most people to define which
universities qualify as world-class, with old and prestigious institutions like Oxford, Cambridge,
Harvard and Yale usually topping that list, most people have trouble actually explaining why these
universities are considered to be world-class.
If the definition of world-class is simply a matter of age, the University of Bologna and the University
of Paris both predate Oxford, yet few would refer to these tuitions universities as the world’s
preeminent academic institutions. If it’s a matter of research, surely many technical universities could
claim that they produce the more relevant and innovative research. And if it’s a matter of the quality of
education, it would be hard to come up with any objective criteria that show how Oxford, Cambridge,
Yale and Harvard somehow educate their students better than any other academic institution in the
world.
Obviously, this little exercise could continue further, but the point is already clear: there is no agreedupon set of factors that distinguish world-class universities from all the rest, and any set that is
generated will obviously be open to subjective bias. This problem is summarized particularly well by
Altbach (2004), who writes that:
Everyone wants a world-class university. No country feels it can do without one. The problem is that
no one knows what a world-class university is, and no one has figured out how to get one. Everyone,
however, refers to the concept. [1]
Because there is no precise definition for a world-class university, a wide array of standards has
emerged to judge university quality, in the hope of applying these standards to the definition of “worldclass.” Altbach provides his own – a series of “benchmarks” used to assess quality in a variety of
different academic environments. Altbach’s indicators include excellence in research, academic
freedom, an atmosphere of intellectual excitement, strong institutional governance, adequate facilities,
163
and adequate funding. Unfortunately, even here, the relative importance of each is open to debate, and
Altbach does not provide any definitive conclusions on the usage of his benchmarks nor does he offer
any empirical results.
These indicators were developed into a more flexible framework by Salmi (2009), in a World Bank
report on how countries can develop world-class universities. [2] Salmi notes that world-class
universities have three defining characteristics: they have a high concentration of talented students,
faculty and administrators; these talented individuals are supported by abundant resources, allowing for
a rich learning environment and facilities to conduct advanced research. Resources are managed by a
flexible and innovative administration that is action-centered and unencumbered by bureaucracy.
Unfortunately, while these standards seek to provide a relatively objective and flexible framework for
assessing the quality of tertiary education institutions, their application into various rankings shows a
clear bias to a specific group of Western universities with extensive resources. Analysis of the top 50 of
the Times Higher Education 2011-2012 World University Rankings [3] shows three distinct trends that
should prove daunting to anyone wishing to develop a world-class university: the top ranked
universities are very well funded, very old and usually very large. On average, the 50 universities
identified by the Times as the world’s “best” have 35,000 students, more than 200 years of history and
the resources to annually spend more than 100,000 US dollars per student. [4]
Figure 1: University Age, Students Numbers and Funding of the Times Top Ten
RANK
Established
2010
Endowment
(million USD, current
exchange rate)
Current
Enrollment
Expenses
Per student
(thousand
USD)
1891
1,545
2,244
1,025
1
INSTITUTION
California Institute
Technology
2
Harvard University
1636
27,557
34,412
108
2
Stanford University
1891
13,851
21,292
155
4
University of Oxford
1096
3,300
23,760
59
5
Princeton University
1746
14,391
7,802
158
6
1209
6,537
22,820
83
7
University of Cambridge
Massachusetts Institute of
Technology
1861
8,317
10,979
217
8
Imperial College London
1907
94
14,150
73
9
University of Chicago
University of CaliforniaBerkeley
1890
5,638
15,965
173
1868
5,441
38,970
49
10
of
Academic managers in developing countries have very little to gain by following the example set by
these rankings. Most universities in the developing world cannot expect to create endowments worth
several billion dollars, nor can they ever acquire the institutional heritage of Oxbridge or the Ivies.
While it would be nice for every dean in Russia, Malaysia or Kenya to just “do it the Harvard way,”
this is highly impractical in reality, and offers very little practical guidance.
On the other hand, these prestigious academic institutions all share a key institutional feature that can
actually be developed in other universities around the world. All world-class universities possess a
distinct and well-defined institutional culture, and in all instances, this culture is based on several key
core values. Cambridge, for example, has a list of twenty values that illustrate its mission statement: “to
contribute to society through the pursuit of education, learning, and research at the highest international
levels of excellence.” [5] These values are grouped into a series of categories affecting different areas
of university’s operations, including education, staff and the university’s relationship with society.
As this paper will make clear, an institutional culture based on explicit set of core values is essential to
the development of a world-class university. Culture plays a multifaceted role within in a university. As
the defining element of the institution, culture influences the daily lives of students, faculty and staff.
Moreover, it plays an important role in the creation and execution of the university’s strategy. If
properly executed, culture becomes apparent throughout a university’s operations, informing nearly
every key decision made by administrative staff.
To illustrate the link between culture and success for a university in a developing country, this paper
offers KIMEP University, a small Western-style academic institution in Almaty, Kazakhstan, as a case
study. It will provide a thorough overview of the university’s strategic vision and values, while offering
164
examples of their successful implementation into a system of operations. In particular, it will show how
KIMEP’s culture plays a key role in differentiating the university from other institutions in Central
Asia, giving it a distinct strategic advantage over its competitors.
This paper also seeks to provide a clear framework for other universities wishing to adopt this model.
Concrete examples of the role culture plays in life at KIMEP are provided, along with many of the
strengths that culture offers. While it take time and effort to develop, it will be clear that culture is
ultimately the key feature that separates truly great universities from the rest of the pack.
2. KIMEP – An Innovator in Kazakhstan
KIMEP University is a non-profit academic institution located in Almaty, Kazakhstan. The university
has four separate colleges and departments, offering undergraduate and graduate degrees in business,
law, economics, finance, accounting, public administration, political science, international relations, the
teaching of English as a second language, and journalism and mass communication. KIMEP also has a
doctoral program in business administration and offers professional development and executive
education. Currently, 3,400 students are enrolled on KIMEP degree programs. [6]
The university was founded by President Nazarbayev in 1992 under the leadership of its current
President, Chan Young Bang, PhD, to offer graduate-level management and administration programs
that would train executives, managers and civil servants to lead Kazakhstan in its transition to a market
economy. While KIMEP initially received considerable grant funding from the EU TACIS Program,
USAID and the Soros Foundation among others, almost all of the current operational revenue of the
university is derived from tuition. Many organizations offer scholarships to KIMEP students and grants
for research, but KIMEP receives no direct institutional support from external sources.
As an American-style academic institution in Kazakhstan, and the oldest and largest in Central Asia,
KIMEP possesses several strengths that separate it from its competitors: KIMEP’s curricula is based on
an American, credit-based system; almost all of KIMEP’s classes are taught in English; KIMEP
possesses the largest concentration of faculty members with PhDs from globally recognized
universities in CIS (88); and the Bang College of Business at KIMEP is the only institute of higher
education within Kazakhstan to receive level II (regional) accreditation from the Asian Forum on
Business Education, putting it two to four years from achieving the “gold standard” of global business
school accreditation – AASCB and EQUIS. [7]
KIMEP is recognized as a leading center for higher education in Kazakhstan. A 2011 survey from the
Ministry of Higher Education identified KIMEP as home to the top accounting, economics and public
administration programs in Kazakhstan. [8] Furthermore, the Independent Kazakhstan Quality
Assurance Agency in Education placed KIMEP second in its 2011 rankings among all Humanitarian –
Economic (Гуманитарно -Экономический) universities. [9]
KIMEP positions itself as a world-class university within Central Asia, different from all other Central
Asian universities, yet at the same time, fully differentiated from universities outside of the region.
This dual nature is clarified in the university’s definition of world class. According to its 2010 vision
statement, A World-Class Education Based on World-Class Values, “a world-class university should
produce eminently qualified graduates with the values, expertise, skills and knowledge which are
consistent with and relevant to, the society in which they intend to serve.” [10] KIMEP produces its
graduates following the standards and best practices of the world’s leading universities. Yet, unlike
those universities, it has the unique combination of circumstances of following this model and being
located in Central Asia. Presumably, this gives KIMEP graduates a unique advantage when entering
the job market. They receive many of the benefits of an education abroad, while at the same time
maintaining the personal ties and cultural awareness of life in Kazakhstan.
4. Knowledge, Culture and the “Blue Ocean” University
KIMEP is guided by a set of principles derived from three fundamental elements. First, while the
university is a key player in the development of Kazakhstan’s knowledge-based economy, further
innovation and leadership will also come from building its own capacity as a knowledge-driven
organization. Second, the institutional knowledge generated by KIMEP and the tools to generate
further knowledge are housed within the university’s culture. Last, the culture is translated back into
practice through the university’s strategy, which guides the process of creating knowledge and furthers
its growth. This process is cyclical, continually reinforcing itself.
Figure 2: The cyclical generation of knowledge, culture and strategy
165
Knowledge
Strategy
Culture
4.1 Knowledge
As a seminal OECD (1996) report highlighted, advanced economies are dependent on the production
and utilization of knowledge for competitive advantage. Applied properly, increases in a society’s level
of knowledge lead to productivity gains derived from technology:
Technological change raises the relative marginal productivity of capital through education and
training of the labour force, investments in research and development and the creation of new
managerial structures and work organization. Analytical work on long-term economic growth shows
that in the 20th century the factor of production growing most rapidly has been human capital, but there
are no signs that this has reduced the rate of return to investment in education and training. [11]
Universities are key in this process. No other national system bears as much responsibility for
increasing the national level of knowledge and human capital. Knowledge is generated through
academic research, while human capital is developed in the classroom. These processes are intimately
linked, as new research informs the classroom, while the needs of industries hiring university graduates
help shape curricula and research.
This dual function was captured in the concept of the university as a “knowledge factory,” a term
coined by The Economist in 1997. [12] Universities play a key role in the production of knowledge,
and they are knowledge-driven organizations themselves. In a review of Israeli universities, Shoham
and Perry (2009) noted that knowledge management offers higher education an infrastructure for
planning and managing innovation and change powered by cooperation, collaboration and transmission
of knowledge, as part of the organization’s activity, while relying on and using information technology
and supporting cooperation. [13]
This process occurred informally in the universities the authors researched, but almost all universities
have the organization framework to potentially adopt strategies for knowledge-based innovation and
growth. Moreover, effective knowledge management within the university helps increase its
engagement with the local community and its impact within the knowledge-driven economy. [14]
4.2 Culture
While formal structures play a role, institutional knowledge is ultimately contained within and fostered
by the organizational culture of a university. Innovative universities have a climate that encourages
attempts to improve teaching and learning, relies upon pedagogical and curriculum concerns to drive
technological developments, and finds ways of adapting old methods to new contexts. [15] All of these
factors take time to develop and rest on the relationships between students, faculty and staff. However,
as a report from Hannan (2005) on innovation in higher education points out, institutional cultures can
inhibit innovation, if they take the focus away from teaching, neglect to reward excellence or fail to
support people dealing with change.
Ultimately, organizational culture underpins any knowledge-based organization’s competitive
advantage, and is the most difficult element for competitors to replicate. Research shows that
companies that actively manage their organizational culture outperform their competitors. As Kotter
and Heskett (1992) write, “companies that intentionally managed their culture effectively outperformed
similar companies that did not. […] Findings included revenue growth of 682% versus 166%, stock
166
price increases of 901% versus 74%, net income growth of 756% versus 1%, and job growth of 282%
versus 36%.” [16]
In 2008, the American Management Association (AMA) identified eight key factors behind any
productive organizational culture, although few companies exhibited all at once. [17] In descending
order from most common to least, these factors are cooperation and democratic decision making,
following a strategic vision, support of innovation and change, focus on the execution of a strategy,
trust between decision makers and stakeholders, quick response to challenges, encouraging excellence
in all activities, and diffusion of authority through all levels of the organization. While all factors were
important in strong performance, the same survey from AMA highlighted innovation, talent
development and strategic thinking as the factors most strongly correlated with organizational
performance, and it also saw a clear relationship between employee satisfaction and a shared sense of
culture.
Companies employ these factors in different ways, and some excel at instituting certain factors. As a
study from Mahrokian et al. (2010) on corporate culture illustrates, companies often become well
known from their ability to develop one or two elements of their organizational culture. As they write,
Southwest Airlines (No. 7 on the Fortune 500) has not changed its business model in over 38 years
which shows commitment to strategic focus. The CEO of Southwest Airlines, Gary Kelly, said, “To
this day we still operate one aircraft type, the Boeing 737. We still fly in the domestic U.S. We still
operate with a single class of service. We just try to be really good at what we do.” [18]
Continuing on this theme, the authors note several strategic strengths of other companies as well. For
example, Johnson & Johnson has become well known for devoting significant resources to employee
development. Target has been able to build a culture of trust with its stakeholders through strong and
active corporate responsibility programs, while Starbucks has been able to use a focus on smaller units
in order to rapidly respond to public tastes and wants.
KIMEP has formally adopted these factors to further develop a successful organizational culture
through its core values. In turn, they form the foundation of its strategy. This will be discussed in more
detail below, following an overview of KIMEP’s strategic positioning and how culture influences its
strategy.
4.3 Strategy
“KIMEP is different.” It is a message that KIMEP students, faculty and staff receive repeatedly.
Faculty know that they are providing an “education to change society.” Students are reminded that it is
“their” KIMEP, and that KIMEP is a place where their needs come first. The wide range of course
offerings, individual schedule and large variety of extracurricular activities give students an intimately
personalized experience.
These factors make KIMEP wholly unique, and they place the institution in the enviable position of
having no true competitor either in the region or abroad. In a vein similar to the Blue Ocean strategy of
Kim and Mauborgne (2005), KIMEP delivers an innovative product that provides demonstrable value
to Kazakhstan. [19] No other university offers a similar Western-caliber education, taught by a large
and diverse body of international PhD holders that are based in Kazakhstan over the long term, at
prices comparable to other universities within Central Asia. These unique features have generated a
wholly different market for education services.
KIMEP combines the value offerings of a range of models into a unique product. By teaching all of its
classes in English, KIMEP is able to take on the value of a language program while teaching students
an entirely different set of skills. The focus on business, law and applied social sciences allows students
to get an immediate return on their education investment without requiring the university to invest in
research labs or other capital-intensive industries. The dynamic international environment of KIMEP
campus exposes students to new cultures without having to go abroad.
The ability to generate demand within a unique market space is the key to a Blue Ocean strategy.
Contrasting competition-free markets, or blue oceans, with markets characterized by intense
competitive rivalry (red oceans), Kim and Mauborgne write
Blue oceans, in contrast, are defined by untapped market space, demand creation, and the opportunity
for high growth. Although some blue oceans are created well beyond existing industry boundaries,
most are created from within red oceans by expanding existing industry boundaries [..]. In blue oceans,
competition is irrelevant because the rules of the game are waiting to be set.
Following the managerial theory developed by Savage (1996), a truly differentiated organization not
only exists in a unique market space, it is unique enough that other competitors face strong barriers to
imitation. [20] This, in the end, is the key strategic advantage of KIMEP. While other universities
could match KIMEP’s curriculum, facilities and price, the time and difficulty of trying to reproduce the
institutional culture of KIMEP present enormous challenges. As KIMEP continues to develop, this
culture will only further differentiate it.
167
Figure 3: Red Ocean/ Blue Ocean: Sustaining Competitive Advantage
Organizational
Culture
People
Difficulty of
Replication
Products
and Services
Blue Ocean
Systems
Red Ocean
Price
Time
5. Core Values: The Foundation of Culture
KIMEP has sought to build sustainable competitive advantage around efforts to create a culture
focused on student success, developing the quality of its faculty, staff, systems and products to
maximize student success. These factors are codified in a set of fundamental core values that inform
every action KIMEP makes as an organization (Figure 1).
Core values are the building blocks of developing a “student-centered culture.” This was specifically
defined September 2011 in a supplement to KIMEP’s newly released strategy, which took these values
and established a clear set of expectations for all of KIMEP’s stakeholders. As the document explains:
In order to deliver a world-class institute, KIMEP needs to re-emphasize, or at times re-set, the
expectations the institute has of its key stakeholders. In order for the institute to function sustainably at
the level we seek, each individual must strive to improve and deliver quality. All elements are
interlinked. We cannot achieve excellence in isolation. [21]
Five key groups of stakeholders are defined: students, faculty, staff, managers and external partners.
While each group has its own set of specific expectations, certain themes run throughout. All KIMEP
stakeholders are expected to act with integrity, (values seven and eight). All stakeholders are expected
to aspire for personal and organizational development, seeking excellence wherever possible (value
two). And all stakeholders are expected to act as ethical, respectable representatives of the university.
Figure 4: KIMEP Core Values [22]
168
1.
2.
We value the well-being of our students, faculty, and staff.
We encourage personal and professional development in an environment of collegiality and
trust.
3. We value quality in our education programs and research activities.
4. We value the holistic development of our students, instilling in them a questioning spirit and
the ability and desire to learn throughout life.
5. We value our responsibility to develop the future leaders of society who will embrace the
highest ethical standards.
6. We value the creation, application, and dissemination of knowledge in a culture which fully
supports the freedom of inquiry and speech.
7. We value fairness and integrity and will not tolerate favoritism, nepotism or corruption.
8. We value open, honest communications and transparent and accountable decision-making.
9. We value partnerships with our community, including the parents of our students, business,
government, and non-government organizations, within The Republic of Kazakhstan and
throughout the world.
10. We value the high reputation of our Institute in the Republic of Kazakhstan and beyond, and
also its important contribution to the growth of society.
11. We value all people both within and outside our organization, regardless of their nationality,
religion, gender or other factors not related to the purposes of the Institution.
These expectations actively build KIMEP’s organizational culture. They make explicit a process that
was previously implicit within the KIMEP community. At the same time, clarifying KIMEP’s
expectations will further develop the culture, ensuring that effort is rewarded, work is productive and
that KIMEP continues to produce high quality graduates.
Further, setting explicit expectations builds the foundations for integrated thinking among KIMEP’s
stakeholders. As the AMA report mentioned above emphasized, an environment of cooperation and
collaboration is crucial to an organization’s success. This need becomes even more apparent when an
institution is faced with tasks that are beyond the scope of individuals, offices or even entire
departments.
For example, internal research has identified that Word of Mouth (WOM) is the most important factor
in spreading information about KIMEP to potential students and encouraging them to enroll. [23]
Building positive WOM means excelling at every facet of the student experience. Like other significant
institutional tasks, this demands input from every member of the KIMEP community. In the end,
success depends on the strength of KIMEP’s culture, and the ability of the community to work together,
trust in each other and support the efforts of each individual member.
6. Clear Objectives Make it Possible to Translate Culture into Operations
With a clear set of values defined, KIMEP’s strategy then translates these values into a set of operating
targets and goals. Through this process, the university takes abstract elements of culture and embeds
them into the daily lives of administrators and faculty. This is accomplished by building a system of
priorities and targets, while encouraging a broad process of goal-setting and sharing.
The current three-year strategic plan was approved in September of 2011. [24] Focusing on eleven
priority areas for the coming years, the strategic plan lays out a detailed list of procedures that will help
KIMEP build a financially viable model that allows focus on academic services which meet students’
needs, maximize student success, develop a strong core faculty, deliver quality assured and accredited
programs, and enrich its international partnerships. In concert, these priority areas will guide KIMEP as
it develops the next generation of Kazakhstani leaders. KIMEP will produce graduates from
internationally accredited academic programs who are comfortable in English, critical thinkers,
committed to the well-being of their country and capable of proceeding either to successful
employment or further study.
While these priority areas cover the breadth of KIMEP’s operations, the entire system is based on the
institutional culture of KIMEP. Founded on core values of honesty, integrity, transparency,
collaboration and meticulous care for the well-being of students, faculty and staff, KIMEP’s culture
enables the development of institutional knowledge, shapes the classroom experience, guides
administrative efforts and ultimately forms the key feature that differentiates KIMEP.
The interplay of knowledge, culture and strategy is visible in KIMEP’s planning and delivery system.
The current strategic plan is the result of an extensive process of consultation. A forecasting model was
169
developed alongside this strategy. This allows the university to model decision impacts. Throughout
the process, decisions were data and consensus-driven.
The completion of the institutional strategy was followed by the development of strategies for each
academic unit. The forecasting tools that supported the development of the institutional strategy were
redesigned so that they could be applied to each degree program. The process of consultation was also
mirrored at the department level, bringing even more members of KIMEP’s academic staff into the
discussion on the university’s development. By replicating the process for the creation of the original
strategy, institutional transparency increased; the assumptions underlying the original strategy were
questioned and refined, while knowledge about KIMEP’s operations was shared at a variety of
management levels.
The development of both institutional and departmental strategies has led to increased accountability
for all administrators. Following a framework similar to Management by Objectives, [25] the
development of several co-existing strategies helps administrators throughout the university make
implicit assumptions explicit, while setting specific goals and targets for every unit’s operations.
Targets will help academic administrators motivate administrative staff, while ensuring cohesion
between various administrative divisions. Last, it will further the development of institutional culture,
by expanding the body of shared knowledge of all members of the KIMEP community.
7. Culture is Instrumental to Develop Outstanding People
The strength of a culture rests in the operational ability of the individuals that work within the
organization. As the earlier referenced AMA report pointed out, the ability to attract and develop
talented employees is the most important feature of any organization’s culture, and it is the one feature
most clearly reflected in the organization’s bottom line. KIMEP faces this challenge from two different
perspectives. First, KIMEP’s primary task is to produce high quality graduates. As its mission
statement makes clear,
[KIMEP’s goal] is to develop well-educated citizens and to improve the quality of life in Kazakhstan
and the Central Asian region through teaching, learning, community service and the advancement of
knowledge in the fields of business administration and social sciences. [26]
This mission can only be fulfilled if KIMEP can attract, develop and retain high-quality staff and
faculty to deliver its programs. Research from Yilmaz et al. (2010) confirms that students’ perception
of faculty quality is by far the most important factor in their final assessment of the quality of an
academic program. [27]
To improve the quality of its academic and administrative staff, KIMEP continually engages in three
significant processes. First, it recruits highly qualified administrators and professors from abroad. Over
the last four academic years, KIMEP has annually brought in an average of twenty three foreign
professors. While part of these cohorts replaces professors who left in the previous year, a significant
portion of incoming professors serve to expand KIMEP’s faculty and increases its qualifications. Since
2005, the number of PhD-qualified faculty members at KIMEP has more than doubled. [28]
KIMEP places several key responsibilities on its international faculty, which set it apart from all other
Central Asian universities. KIMEP’s foreign professors are expected to continually engage in
institution building. While these professors’ tenure is time limited, the programs, majors and research
centers that they formed here will outlast them. KIMEP’s Executive MBA is a particular example.
While it was originally started by foreign faculty members, it is now managed by a team of
Kazakhstani nationals, who have the capacity and skills to continue running the program long into the
future.
Second, KIMEP is unique in that its international faculty are actively engaged in training Kazakhstanis
to achieve terminal qualification to carry on the programs when they leave. Currently, 27 junior faculty
are achieving terminal qualification at KIMEP. To assist in this process, KIMEP’s administration is
giving them significant (50 to 100 percent) teaching load reductions, and it has offered guaranteed
employment to any Kazakhstani faculty member that goes abroad to receive terminal qualification.
This multimillion dollar investment will raise the total number of terminally qualified Central Asian
faculty members to 45 within the next three years. They will represent almost half of all terminally
qualified faculty.
The same practices extend to KIMEP’s staff. One hundred and six of KIMEP’s 773 employees (14
percent) received 50%-100% discount for their studies at KIMEP in 2010-2011. At the same time,
ninety-five employees attended one or more of the 20 different free training seminars KIMEP offered
in 2010-2011, covering topics like accounting, finance, marketing, management, computer skills and
English. The same job guarantee extended to faculty studying abroad is offered to staff members as
well, encouraging them to increase their personal qualifications in whatever way possible.
170
To continue to attract top Kazakhstani and foreign talent, KIMEP pays salaries significantly above the
average salaries in both Almaty and nationally. [29] Salaries of KIMEP’s Kazakhstani employees are,
on average, 2.17 times higher than the national average and 1.45 times the average salary in Almaty. In
comparison to the education sector, KIMEP’s Kazakhstani faculty and staff make 3.40 times more than
the average salaries of their counterparts in the education sector. KIMEP does not discriminate by
nationality in compensation, and KIMEP’s Kazakhstani faculty are well compensated. They make five
times as much as the national average and seven times as much as other professors in Kazakhstan.
8. Institutional Culture Helps Great People Deliver a Great Education
This substantial investment in the quality of its people allows KIMEP to deliver high-quality programs,
which foster excellence in the classroom, incorporate cutting-edge trends in the field, connect with the
business community and provide a gateway to the rest of the world. At the same time, it does not mean
that KIMEP takes these features as a given. In fact, to build on its third and fourth core values, KIMEP
is constantly engaged in program assessment and innovation. This process occurs at all levels within
academic programs – from external consultation, to program structure, curricula and pedagogical
methodologies, and is based around KIMEP’s insistence on high levels of transparency and democratic
decision making.
KIMEP is also engaged in soliciting feedback from many of its stakeholders, following its seventh and
eighth core values. Within the next year, all academic programs will be supported by external advisory
committees, giving insight on industry’s needs and the quality of KIMEP’s graduates. Internal student
advisory committees have been created which give the student body another platform to express their
opinions on the academic programs. The advisory committees will complement the long-standing 30
percent representation of students on all managerial committees, which guarantees that their voices are
heard in all administrative decisions.
Moreover, to enhance its understanding of KIMEP’s student body, the administration has expanded
upon its regular surveys of student satisfaction to better understand socioeconomic factors, students’
motivations for studying at KIMEP and their role in building the public image of the institution. These
processes will be complemented by a strengthened faculty-student mentorship program, which will
help open and maintain lines of communication between every student on campus and those
responsible for their well-being.
KIMEP recognizes the fundamental role that international partnerships play in shaping the academic
experience, fulfilling its ninth and tenth core values. Exchange programs enrich campus culture through
the addition of visiting professors and students. At the same time, they provide opportunities for
students to expand their horizons by spending a semester or year outside of the country. Currently,
KIMEP has 233 international students (7.1 percent of the total student population), with 146 of its own
students going abroad on exchange programs each year. With more than 70 active international
partnerships – growing from 12 four years ago – and four graduate dual degree programs, faculty and
student mobility will increase even more in coming years.
9. Culture Produces Outstanding Students
Institutional culture also has a strong direct impact on students, especially when it differs from their
native culture. Much of this evidence is illustrated in studies of exchange programs, which documents
the experiences that students go through abroad. A study by Messer and Wolter (2007) showed that
students completing exchange programs abroad were more likely to seek postgraduate degrees and
more likely to receive higher starting salaries. [30] While the causality of this relationship was
uncertain, as exchange programs could simply attract higher quality students, the authors conclude that
“it is well possible that student mobility increases the awareness of cultural differences and other things
and that these effects generate a private and social return not covered by the present analysis.”
One can easily think of examples that are less extreme but in no way less meaningful. For example, Ivy
League schools in the United States tend to draw a freshman class that represents every state in the
country, bringing this diverse group of Americans in contact with foreign students from around the
world. [31] This combination of people, tradition and location create a unique culture that shapes
students in ways similar to an exchange program. Students are confronted with people who do not
share their beliefs, come from different socioeconomic backgrounds and possess value systems that
may be substantially different. These challenges help spur the creation of individual values and
character traits that are the centerpiece of the American liberal arts education.
Across a wide array of metrics, it’s clear that KIMEP produces high-quality graduates that are highly
valued by employers. From 2007 to 2010, 93.6 percent of graduates were employed within six months
of graduation, which is more than 15 percent higher than the nation-wide employment rate for
university graduates. [32] The 2008 assessment of Higher Education Institutions by Kazakhstan’s
171
Independent Quality Assurance Agency showed that Kazakhstani employers had by far the highest
opinion of KIMEP graduates. [33] KIMEP students received scores that were 40 percent higher than
those of the next highest ranked university.
Since 2006, KIMEP graduates have received a starting salary that is more than 2 times the national
average. [34] Moreover, these starting salaries are more than 20 percent higher than those of other
Kazakhstani college graduates. This is clear evidence of the strong demand from employers for KIMEP
graduates.
10. Conclusion
As the case of KIMEP illustrates, the quest for world-class status can be a particularly useful
management tool for a university, especially if this goal is translated towards the development of a
strong institutional culture. Like it or not, all aspects of life in a university are touched by culture, and it
is up to the university’s managers to ensure that this culture develops in a way that is consistent with
their and the institution’s values. Moreover, by institutionalizing this culture in the strategic planning
process, a university’s administration can directly translate values into targets and goals, ensuring that
these values become the basis of the university’s operations.
KIMEP has developed significantly over its twenty year history, and this is largely due to its ability to
aggressively define itself through its unique institutional culture. What began as a small, externallyfunded academic institute that granted only graduate degrees has grown into a dynamic international
community of professors, students and administrators. Seven thousand KIMEP graduates now work
throughout Kazakhstan and the rest of the world, shaping the future development of the Republic as
entrepreneurs, corporate leaders and civil servants. Another 3,400 students are currently receiving a
unique education. The reputation of KIMEP continues to grow around the world, evidenced by its
burgeoning partnership activities.
That said, there is still much work to accomplish. KIMEP operates in a regulatory environment where
it is the ‘odd man out’ by design. Enhancing understanding in government of how to regulate an
institution that is different is an ongoing challenge. Further, KIMEP is certainly aware of the distance
that remains between it and the elite league of globally recognized world-class universities. They are
larger, have a deeper history and are much better funded. On the other hand, KIMEP shares a common
feature with these universities. The strength of its culture makes it recognized within the region as a
wholly unique academic institution. Just as there is no other Harvard in North America, there is truly
no other KIMEP within Central Asia.
This culture took many years to develop, and it is a strong foundation that KIMEP will be able to build
upon. It informs every aspect of the administrative process at the university, and it shapes the
educational experience in a powerful way. It is the result of the contribution of thousands of different
people, both from Kazakhstan and abroad, and in the end, it will be the key feature that allows KIMEP
to achieve world-class status in the future.
11. References:
1. Altbach, P.G. (2004).The Costs and Benefits of World-Class Universities.” Academe 90 (1,
January-February). http://www.aaup.org/AAUP/pubsres/academe/2004/JF/Feat/altb.htm.
2. Salmi, J. (2009). The Challenge of Establishing World-class Universities. The International Bank
for
Reconstruction
and
Development
/
The
World
Bank.
http://siteresources.worldbank.org/EDUCATION/Resources/278200-1099079877269/5476641099079956815/547670-1237305262556/WCU.pdf
3. The Times Higher Education Supplement. (2011). World University Rankings 2011-2012: Top
400 Universities. TSL Education Limited. http://www.timeshighereducation.co.uk/worlduniversity-rankings/2011-2012/top-400.html
4. A data set combining the ages of the Times’ top 50 universities with published financial data can
be
found
here:
https://docs.google.com/leaf?id=0B6QJg19SZyJZTJkYjY0OTctOTE2Zi00YmVjLTliNGItZWQxMDg5MTUwMDQw&hl=en_US
5. Cambridge
University
(2011).
The
University's
Mission
and
Core
Values.
http://www.admin.cam.ac.uk/univ/mission.html
6. The Office of the Registrar. (2011). Enrollment Statistics by Program and Year, F2011. KIMEP.
October 24. http://www2.kimep.kz/statistics/statistics_F2011.asp
7. Levy-Forsythe, A. (2011). Bang College of Business Awarded AFBE Accreditation. The KIMEP
Bulletin. September 20. http://bulletin.kimep.kz/blog/2011/09/20/bang-college-of-businessrecognized-for-its-mba-and-b-sc-programs-the-first-business-school-in-kazakhstan-to-receiveafbe-accreditation/
172
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
Yermanov, D. (2011). A new series of rankings give KIMEP top honors. The KIMEP Bulletin.
July 27. http://bulletin.kimep.kz/blog/2011/07/27/top-rank/
The Department of Quality Assurance and Institutional Research, KIMEP. (2011). National and
international
rating
of
KIMEP.
KIMEP.
http://www.kimep.kz/administration/opad/qualityassurance/KIMEP-Rating-Results
The Department of Planning and Development, KIMEP. (2010). A World-Class Education Based
on World-Class Value. KIMEP. http://www.kimep.kz/about/wcu
The Organisation for Economic Cooperation and Development. (1996). The Knowledge Based
Economy.
The
1996
Science,
Technology
and
Industry
Outlook.
http://www.oecd.org/dataoecd/51/8/1913021.pdf
David, P. (1997). Inside the knowledge factor. The Economist. October 2.
http://eg.de.iscte.pt/The%20Economist%20-%20Knowledge%20Factory.pdf
Shoham, S. and Perry, M. (2009). Knowledge management as a mechanism for technological and
organizational change management in Israeli universities. Higher Education, 57(2), 227-246.
Charles, D. (2006). Universities as key knowledge infrastructures in regional innovation
systems.Innovation: The European Journal of Social Sciences, 19(1), 117-130.
Hannan, A. (2005). Innovation in higher education: contexts for change in learning technology.
British Journal of Educational Technology. Vol 36, No 6.
Kotter, J.P. and Heskett, J.L. (1992). Corporate Culture and Performance. Free Press, New York.
The American Management Association. (2008). Cultivating Effective Corporate Cultures: A
Global
Study
of
Challenges
and
Strategies.
Retrieved
from
http://www.amajapan.co.jp/j/pdf/HRI_Cultivating_Effective_Corporate_Culture.pdf
Mahrokian, S., Chan, P., Mangkornkanok, P., and Hee Lee, B. (2010). Corporate Culture: A
Lasting Competitive. Review of Business Research, 10(1), 14-23.
Kim, C.W. and Mauborgne, R. (2005). Blue Ocean Strategy. Harvard Business Press. Boston,
Massachusetts.
Savage, C.M. (1996). Fifth Generation Management. Butterworth-Heinemann. Woburn,
Massachusetts.
The Department of Planning and Development. (2011). Building and Maintaining and StudentCentered Culture. September 15.
The Kazakhstan Institute of Management, Economics and Strategic Research. (2010). KIMEP
Institutes Core Values. February 6. http://www.kimep.kz/about/news/feb2010/core-values
Quinn, M. (2011). A report on students who chose not to enroll at KIMEP. KIMEP. October 12.
KIMEP. (2011). Building a World-Class University: a Strategic Plan 2011-2014. KIMEP.
September http://new.kimep.kz/strategy/
Aplin Jr., J. C., & Schoderbek, P. P. (1976). MBO: Requisites for Success in the Public
Sector. Human Resource Management, 15(2), 30-36.
The Kazakhstan Institute of Management, Economics and Strategic Research. (2011). Mission and
History. http://new.kimep.kz/about/about/history/
Yilmaz, H., Demircan, V., Bal, T., and Koskan, O. (2010). Students' perceptions of academic and
institutional service quality at the Faculty of Agriculture: The case of Suleyman Demirel
University, Turkey. African Journal of Business Management. Vol. 4(6), pp. 1107-1115, June.
Retrieved from http://www.academicjournals.org/ajbm/pdf/pdf2010/June/Yilmaz%20et%20al.pdf
The Department of Quality Assurance and Institutional Research, KIMEP. (2008). The KIMEP
Fact Book: Volume 3. http://www.kimep.kz/about/files/2011/10/KFB3_Eng.pdf
Quinn, M. (2011). A great place to work. KIMEP. July 8.
Messer, D. and Wolter, S.C. (2007). Are Student Exchange Programs Worth It? Higher Education.
Vol. 54, No. 5 (Nov.), pp. 647-663
For example, Yale University has “11,000 students come from all fifty American states and from
108 countries.” http://www.yale.edu/about/history.html
The Department of Quality Assurance and Institutional Research, KIMEP. (2011). Survey on HEIs
graduates’ salary level dynamics, 2006-2010. KIMEP. October 21.
Independent Quality Assurance Agency. (2008). General Rating of Kazakhstani humanitarianeconomic HEIs by employers. Retrieved from www.iqaa.kz
The Agency Statistics of the Republic of Kazakhstan. (2011). Average Monthly Earning by
Economic
Activity.
Retrieved
on
October
21,
2011.
http://www.eng.stat.kz/digital/Labour/Basic%20indicators%202010/14)%20Average%20monthly%20earning%20by%20economic%20activity_M-29.xls
173
IBM SPSS DECISION TREE PROCEDURE FOR EFFECTIVE DECISION MAKING
ULDANA (DANA) B. BAIZYLDAYEVA
KIMEP UNIVERSITY
[email protected]
RAISSA K.USKENBAYEVA,
KAZNTU NAMED AFTER K.I.SATPAYEV
ABSTRACT: DECISION MAKING IS A COMPLEX PROCESS, ESPECIALLY IN MULTI-CRITERIA PROBLEM WITH DIVERSITY OF DATA
CASES AND DATA TYPES TO TAKE INTO ACCOUNT. THE ROUTINE PROCESS OF DATA RESEARCH AND ANALYSIS BECOMES EASIER
WITH THE AID OF POWERFUL SOFTWARE. IN THE ARTICLE IBM SPSS STATISTICS 19 IS CONSIDERED AS A TOOL IN STAGES OF
DECISION MAKING. THE IBM SPSS DECISION TREE PROCEDURE GROWING METHODS ARE BRIEFLY INTRODUCED, ONE OF THE
METHODS IS CONTINUOUSLY APPLIED FOR BUSINESS CASE DATA.
KEY WORDS: DECISION TREE, GROWING METHOD, CHAID, EXHAUSTIVE CHAID, CRT, QUEST
1. IBM SPSS Decision Management enables the business experts to combine predictive analytics and
their business knowledge to optimize and automate the decision making process. The solution makes it
easy for non-technical users to incorporate their deep understanding of the business process to create
and customize predictive models catering for specific needs. The advanced data preparation and
modeling feature will allow the user to set up the modeling environment in a fast and efficient manner
while still taking advantage of the most advanced modeling technique. In addition, the user can run
simulations on multiple “what if” scenarios to compare the outcomes and find the best performing
models.
The IBM SPSS Decision Tree procedure creates a tree-based classification model. It classifies cases
into groups or predicts values of a dependent (target) variable based on values of independent
(predictor) variables. The procedure provides validation tools for exploratory and confirmatory
classification analysis.
2. The procedure can be used for:
1. Segmentation. For instance, Identify persons who are likely to be members of a particular group.
2. Stratification. Assign cases into one of several categories, such as high-, medium-, and low-risk
groups.
3. Prediction. Create rules and use them to predict future events, such as the likelihood that someone
will default on a loan or the potential resale value of a vehicle or home.
4. Data reduction and variable screening. Select a useful subset of predictors from a large set of
variables for use in building a formal parametric model.
5. Interaction identification. Identify relationships that pertain only to specific subgroups and specify
these in a formal parametric model.
6. Category merging and discrediting continuous variables. Recode group predictor categories and
continuous variables with minimal loss of information.
3. IBM SPSS DECISION TREE GROWING METHODS
The available growing methods are:
CHAID. Chi-squared Automatic Interaction Detection. At each step, CHAID chooses the independent
(predictor) variable that has the strongest interaction with the dependent variable. Categories of each
predictor are merged if they are not significantly different with respect to the dependent variable.
Exhaustive CHAID. A modification of CHAID that examines all possible splits for each predictor.
CRT. Classification and Regression Trees. CRT splits the data into segments that are as homogeneous
as possible with respect to the dependent variable. A terminal node in which all cases have the same
value for the dependent variable is a homogeneous, "pure" node.
QUEST. Quick, Unbiased, Efficient Statistical Tree. A method that is fast and avoids other methods'
bias in favor of predictors with many categories. QUEST can be specified only if the dependent
variable is nominal.
Note 1: There are benefits and limitations with each method
Note 2: For categorical (nominal, ordinal) dependent variables, you can
• Control which categories are included in the analysis.
• Identify the target categories of interest.
174
4. Application case example.
A bank wants to categorize credit applicants according to whether or not they represent a reasonable
credit risk. Based on various factors, including the known credit ratings of past customers, you can
build a model to predict if future customers are likely to default on their loans.
A tree-based analysis provides some attractive features:
• It allows you to identify homogeneous groups with high or low risk.
• It makes it easy to construct rules for making predictions about individual cases.
The data and variable views of example data set (see Table 1, Table 2)
Table 1
Table 2
To run decision tree procedure we need to specify dependent, independent, influence variables, and
growing method (see Picture 1). In the options we’ll set output in table and chart tree
175
Picture 1
We’ll get a tree in output file (see Picture 2).
Picture 2
Such kind of tree can be analyzed for some summaries and further decision making, or - can be a
source for further data filtering, and next step analysis.
For instance, SPSS allows to filter out in a new data set file the needed cases for the next step analysis.
Let’s select cases with some conditions into a new dataset (see Picture 3)
Picture 3
176
We’ll run Decision tree procedure, specifying dependent, independent, influence variables, and
growing method.
As a result, we’ll have the tree with graphs and Risk assessment (see Picture 4)
Picture 4
Risk
177
Estimate
Std. Error
.188
.039
Growing Method: CHAID
Dependent Variable:
Previously defaulted
5. Conclusions
IBM SPSS Statistics 19 Decision Tree procedure is a powerful tool useful in decision making process.
The combination of SPSS models and procedures can be of a great aid, especially in the cases of huge
volumes of data and variables considered in the problem.
6. References
1. G.Morgan, N. Leech, G.Gloeckner, K.Barrett (2012) “IBM SPSS for Introductory Statistics”,
Routledge Academic
2. http://www.spss.com.hk/software/statistics/decision-trees/
Neuro-linguistic programming techniques and their application in management
Maxut Gaini
UIB
[email protected]
Abstract: The purpose of this work is revealing of communication between efficiency of management
and possession of Neuro-linguistic programming techniques. The method of content-analysis was
applied in analyzing of negotiations between two ex-presidents of Russia (V.V. Putin), and USA (G.
Bush). The paper report’s result consists in that even big managers (presidents) apply NLP techniques
and are successful in their managing. The conclusion is that for being effective leader and manager in
any sphere, the person should work hard, train his abilities, and use some techniques because the
biggest amount of successful people (not only managers) use techniques for achieving of aims.
Key words: Management, Neuro-linguistic programming, negotiations, success, communication.
1. Introduction
«Ability to communicate with people is the goods which can be bought in the same way as we buy tea
or coffee … and I will pay for such ability more than for something another in the world».
J. D. Rockefeller
In today's quickly changing world effective strategies of trainings are necessary for becoming an
effective leader. Thus, Nero-linguistic programming (NLP) is one of the most effective practical
technologies for achievement of the desirable purposes which exist in the field of human dialogue,
training and change.
NLP can be applied for prevention of conflicts which are threats of achievement of aims in business
and in diplomatic dialogue sphere. Conflicts exist exactly as long as a human exists. So, the person
spends his/her most part of time at work, cooperating with the heads and subordinates, communicating
with colleagues and building joint activity with company partners. At such a busy schedule of dialogue
there is a weight of the reasons on which people do not absolutely correctly understand each other that
leads to disputes which in a consequence can outgrow in the conflict.
Neuro-linguistic programming (NLP) is an approach to communication and personal development that
was created in the 1970s. The title refers to a stated connection between the neurological processes
("neuro"), language ("linguistic") and behavioral patterns that have been learned through experience
("programming") and can be organized to achieve specific goals in life[1]. The art of managing and
team leading has always been dynamic and demanding and it seems that every 5 to 10 years since the
60's societies have moved into yet another 'even tougher times for managers' era. [2]
Besides, one of the aims of this article is the description of concrete examples with using of one of
receptions of NLP – a psychological aikido (AKV method), for adjustment of relations and the solving
of conflict situations on the work place where efficiency of activity depends on dialogue techniques.
All basic ideas and technicians of NLP have sustained check by time, as well as more rigid check in the
course of training to their practical application.
NLP is an art and a science about perfection, it is also the result of research that outstanding people in
various
spheres
of
activity
reached
with
their
outstanding
results.
Majority of the list of 500 best heads of magazine "Fortune" have found out that with the help of NLP
techniques it is possible to reach outstanding skill in management, and personal well-being. [3]
178
Managers always take parts in different negotiations. So, Neuro-linguistic programming also can be
successfully used in negotiations.
2. Negotiations
Communication is an art. But laws of dialogue for the professional are no more than rules of mixture of
paints or laws of prospect for the artist. Moreover, transformation into the master of dialogue demands
the same conditions, as transformation into the good artist. Negotiations - is the fact of our everyday
life. We discuss the promotion with the chief or try to agree with unfamiliar person about the price for
the house. Two lawyers try to solve a contentious case because of automobile failures. Group of the oil
companies plan joint venture on investigation sea deposit of oil. All is negotiations.
Every day all of us agree with something. Though negotiations occur every day, but to conduct them
properly is difficult. Standard negotiation strategy leaves in people a feeling of dissatisfaction very
often, exhaustions or alienations, and quite often both of them. Then people have a dilemma. They see
only two possibilities of conducting negotiations - too soft or rigid.
Second standard strategy of negotiations foresees the average approach — between soft and rigid, but
includes transaction attempt between aspiration to reach wished and to get on with people.
There is a third way of negotiating that foresees a position based not on weakness or strictness, but in
uniting both.
The method of basic negotiations developed within the limits of the Harvard project about negotiations,
consists in solving problems on the basis of their qualitative properties, i.e. proceeding from an essence
of the matter instead of to bargain concerning that, on what can go or not go each of the sides. The
method of basic negotiations means the rigid approach to consideration of merits of case, but provides
gentle approach to relations between participants of negotiations. This method gives the chance to
participants to be fair, simultaneously protecting them from people who could use ones honesty. [3]
The basic generalized types of representation:
•
Visual type (V)
•
Kinesthetic type (K)
•
Audile type (A) [2]
Channels that were listed above help people that want to apply the AKV technique (or psychological
aikido) to be understandable to different people with different opened channels. Also, this technique
allows to solve conflict situations.
3.
Table
Name
Theme of the negotiation
Using techniques
Result of the
negotiation
1. G. Bush
1.The system of reaction on rocket threat AKV
successful
2.Medvedev
AKV
successful
3. Strategic offensive arms (SOA)
AKV
successful
4. Iran
AKV
successful
2. V. V. Putin 1.Relations in the future
AKV
successful
2. Present of Bush
AKV
successful
3. Strategic offensive arms (SOA)
I am the statement
successful
4. Ballistic missile defense (BMD)
I am the statement
successful
4.
Analysis
So, the author of this article have made an analysis of negotiations of two ex-presidents (V.V. Putin
(Russia), G. Bush (USA)) and from this work it is possible to make a conclusion that they always use
psychological techniques, such as psychological aikido and «I am the statement». It is easy to notice
that G. Bush usually uses the simplest technique of NLP – the AKV - technique – information transfer
through all four channels: audile, visual, kinesthetic and discrete. As for the ex-president of Russia –
V.V. Putin, he applies «I am the statement» technique - the reference to other people, the description of
actions of the interlocutor and the statement of the relation. Success is the extensible concept but
nevertheless it is always positive. So, we can see the results of negotiations in last column – they are all
successful, it means that presidents came to mutual decision that would satisfy both parties.
5.
Conclusion
According to this example, we can understand that even great managers – presidents, who manage the
whole country, apply Neuro-linguistic programming techniques for effectiveness. The statistics proved
that people that use NLP techniques are more successful in any sphere of activity. It is useful to know it,
if we are going to be good managers.
179
6. References
1. http://en.wikipedia.org/wiki/Neuro-linguistic_programming
2. http://www.nlp-now.co.uk/nlp_management.htm
3. David Molden “Managing with the power of NLP”, 2006.
Interaction between Personality, Social networking sites, leisure activities and Academic
performance in Kazakhstan
Yevgeniya D. Kim
KIMEP University
[email protected]
Abstract:Social Networking Sites have been experiencing a tremendous rate of growth, and today it
has more than 500 million active users worldwide. This paper provides a preliminary analysis of the
effects of Social Networking Sites (SNS) usage by undergraduate and graduate students at KIMEP in
Kazakhstan. The proposed research model tests the perceived effect of personality traits and trust on
student’s achievements. We are going to use two types of survey: online and paper-based. Apart from
different variables and questions about SNS usage, we are going to collect survey data on personality
traits with a short question inventory of the Five Factor Personality Model. Based on flow theory, the
model suggests negative mediating effects of the use of Social Networking Sites, concluding that a
decrease occurs in students’ academic performance. Authors hope possible findings can improve our
understandings of interactions between personality, use of social network sites, leisure activities, and
an academic performance.
Keywords: Personality traits, Social Networking sites, academic performance, trust, leisure activities.
1. Introduction
The evolution of web applications has been continuing with a very fast pace of change. The rapid
growth of Internet usage has great effects (positive or negative) on interpersonal interaction among
people. Some studies suggest that Internet use has little negative effect on well-being (Biao-Bin, et al.,
2006) and that participation in online activities can confer social and psychological benefits
(Cummings, et al., 2002; Shaw & Gant, 2002). No matter how important the advantages or
disadvantages of new form (online) of communication, it is still a fact that 80 percent of adults go
online.
In this paper we will explore how individual personality styles influence online social networking
behavior. The number of users that signed up for social networking sites (SNS) has been growing at an
amazing speed. Obviously, the increasing popularity of social network sites has some impacts on our
social lives (Amichai-Hamburger & Hayat, 2011), such as friendship, information sharing, and leisure
activities and the huge number of users’ data has attracted researchers’ interests about possible impacts
of social networking sites on our social lives. Ross et al. (2009) conducted a survey about the influence
of personality and competence factors on Facebook use. They found that the majority of the
respondents (79%) used Facebook daily for 10 to 60 minutes and different personality types did use
different aspects of Facebook. For instance, people with high extraversion personality were found to
join more groups than people with low extraversion personality, and people with high neuroticism
personality liked to use the Facebook’s Wall, but people with low neuroticism personality preferred
posting photos.
The Internet has an effect on nearly every aspect of the world’s higher education – research and
learning. Some exploratory studies (Canales et al., 2009; Karpinski & Duberstein, 2009) have shown
that the extended presence of students on SNSs has a harmful effect on their productivity and academic
performance. But a recent study (Rouis, 2011) found that Facebook usage does not have a negative
effect on Tunisian student’s academic achievements and might instead have a positive impact as it
appeared that this interdependency is significantly moderated by student’s interest in the university and
multitasking capabilities. These controversial results, in addition to the actual picture from Facebook
anf students’ comments on different Facebook groups, indicate that students with particular profiles
focus more on bridging social networks, keeping in touch with old contacts, and developing friendships.
Some researchers have investigated possible relationship between personality and social networking, or
personality and academic performance, or personality and leisure activity but there is no research about
possible relationship between personality, social network sites usage, leisure activities and academic
performance. Hence, the purpose of this research is to assess the role of personality, trust in people,
social networking site usage, leisure activities and academic performance.
180
In this paper we will explore how individual personality styles influence online social networking
behavior and how social networking behavior effects on academic performance of KIMEP students.
2. Literature review
2.1. Personality
In the last few decades a broad consensus has emerged that the structure of the personality trait domain
can be encompassed by five major dimensions. The Five Factor Model (“Big 5”) received considerable
empirical support and is now the standard taxonomy to organize and measure personality traits
(Goldberg 1990). The scientific term “personality” is conceptualized as the entire mental organization
of a person’s traits, where traits are defined as a cross-situational and temporally stable set of individual
attributes.
The “Big Five” model of personality dimensions has emerged as one of the well-researched and wellregarded measures of personality structure in recent years. The Big Five traits are characterized by the
following: (1) Openness; (2) Conscientiousness; (3) Extroversion; (4) Agreeableness, and (5)
Neuroticism.
There are some researchers about possible influences of personality on the use of mass media such as
TV, music, TV, Internet, blogging, and social networking sites (Amichai-Hamburger, 2002; AmichaiHamburger & Vinitzky, 2010; Guadagno et al., 2008; Kraykamp & van Eijck, 2005; Landers &
Lounsbury, 2006; Ross et al., 2009).
Amichai-Humburger (2002) suggested that psychologists and web builders have to work together to
develop user-friendly web sites based on individual differences. Amichai-Hamburger and Vinitzky
(2010) investigated possible relationships between the individual personality and users’ behavior on
Facebook. Their study found that there was a strong link between personality and Facebook uses.
Guadagno et al., (2008) found that people with openness and neuroticism tend to be bloggers.
Kraaykamp & Eijck (2005) found that the Big Five personality factors have different impacts on media
preferences.
2.2. Social network sites (SNSs)
By definition, SN software is considered as “online spaces that allow individuals to present themselves,
articulate their social networks, and establish or maintain connections with others” (Ellison, et al.,
2007). On the other hand, SN sites have been described as “relationship facilitators” (Educause, 2007)
allowing individuals to construct relationships with other individuals with similar attentiveness and
interest.
A social network includes people or organizations that are linked with some common interests or value
(Garton, et al., 1997; Kempe, et al., 2003). Social networking encompasses a certain media outlet that
is broadly targeted to all individuals who wants to interact and be involved in interpersonal
relationships. Thus, social networking cannot be more equip or more satisfying for any certain
personality type because it is human nature to want to be involved in many relationships in ones
lifetime (Harbauugh, 2010).
Socializing via the Internet has become an increasingly important part of young adult life (Gemmill &
Peterson, 2006). Social networking sites and web-based services will allow “individuals to: (1)
construct a public or semi-public profile within a bounded system, (2) articulate a list of other users
with whom they share a connection, and (3) view and traverse their list of connections and those made
by others within the system” (Kimberly et al., 2009). Social network sites allow individuals to meet
with strangers with similar interests, but also allow individuals to make their social network visible
(Haythorthwaite, 2005). To join a social network site, an individual has to answer a series of questions
and the answers were used to generate an individual’s profile. User profiles with demographic data,
relational data, and extraordinary rate of increase, have created a fertile and attractive source of data for
researchers (Boyd & Ellison, 2007; Lewis et al., 2008).
2.3. Academic performance
Academic performance has been largely discussed in earlier researchers in education and education
psychology. Hew (2011) reviewed current published research studies on students’ and teachers’ use of
Facebook, and found nine motives of using Facebook: (1) to maintain existing relationships, (2) to
meet people, (3) using Facebook is cool, (4) to make oneself popular, (5) to pass time, (6) to express or
present oneself, (7) for learning purpose, (8) as task management tool, and (9) for student activism.
Most students did not use the Facebook for educational purpose. After expanding Facebook use to
individuals outside the college and university system, the age group experiencing the most growth was
25-34 years-old, with an increase of 181%, and the 35 and older group increased 98% (Lipsman, 2007).
No relationship was found between times spent on the computer at home and GPA in a sample of
adolescents (Hunley et al., 2005; Pasek, et al., 2009). Other researchers have found that recreational
Internet use is strongly correlated with impaired academic performance (Kubey, Lavin, & Barrows,
2001).
181
Some researchers found possible negative impacts of Facebook on academic performance (Kirschner &
Karpinski, 2010; Karpinski & Duberstein, 2009). They found that Facebook users reported lower grade
and less hours of studying than non-users did and Facebook users tended to be more involved in
extracurricular activities.
Oskouei (2010) found that informative use of technology not only increases productivity of students,
but also teachers who are building and reshaping the social asset/capital. There are also some
arguments in favor of using more internet as they proposed that greater use of internet has a positive
impact on students’ academic performance. Linda et al. (2006) found that children using internet more
got higher scores on reading skills’ tests and also had higher GPA than the children using internet less.
Ellison et al. (2007) suggested that Facebook usage may help people cure some psychological problems
such as low self-esteem and low life-satisfaction.
2.3. Trust in people
We cannot expect to achieve closeness with people unless we are willing to allow others to understand
what we are like on the inside and unless others trust us enough to grant the same privilege. Trust
provides information about with whom we should share information, from whom we should accept
information, and what consideration to give to information from people when aggregating or filtering
data. At the same time, social networking has become a major movement on the Web, with hundreds of
Web sites comprising hundreds of millions of users (Golbeck 2005). By using information that users
are already expressing, there is little overhead to gathering trust data which can then be analyzed and
used to create socially intelligent systems.
In interactions on SNS, trust relates more to trust in people than in the applications themselves. In 2010,
15 per cent of internet users said they find only a small portion of online information reliable. That's
greater than the 7 per cent who were likewise skeptical of the vast majority of information they come
across on the internet.
Individuals’ online social behavior depends on their trust in people (Golbeck, 2009), although Uslaner
(2000) argues that trust sometimes matters and sometimes does not in online social interactions.
2.4. Leisure activities.
Leisure activities are activities that individuals participate during free time. Social interaction is a
central component of leisure activities (Auld & Case, 1997) and the most positive experiences people
report are usually those with friends (Csikszentmihalyi, 1997). Munson & Widmer (1997) studied
relationships between leisure behavior and occupational identity of college students, and they used the
following leisure activities: arts and hobbies, games and sports, music, reading, social, thinking, and
television. According to their study, students participated in intellectual leisure activities such as
thinking, reading were more advanced in occupational identity.
It can be easy to understand that there is a relationship between leisure-time physical activity and
physical fitness levels. However, some research studies found that there is no relationship between
internet use time and the physical fitness (Kerner, et al.2001; 2004). That is the time spend on leisuretime physical activity is unrelated to internet use time.
Leisure
activities
Trust in
people
Personality
Social network
sites
Academic
Achievement
Figure 1. Conceptual framework
3. References:
1. Auld, C., Case, A., 1997. “Social exchange processes in leisure and non-leisure settings: a review
and exploratory investigation”. Journal of Leisure Research 29, 183–200.
2. Amichai-Hamburger, Y. (2202), “Internet and personality”, Computers in Human Behavior, 18,
pp.1-10.
182
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
Amichai-Hamburger, Y., & Vinitzky, G. (2010), “Social network use and personality”, Computers
in Human Behavior, 26, pp. 1289-1295.
Amichai-Hamburger, Y., & Hayat, Z. (2011). “The impact of the Internet on the social lives of
users: a representative sample from 13 countries”, Computers in Human Behavior, 27(1), pp. 585589.
Biao-Bin, V., Man-Na, H., Bi-Qun, Q. & Yong-Hong-H, (2006), “Relationship between Internet
behavior and subjective well-being of teenagers”, Chinese Journal of Clinical Psychology, 14, pp.
66-69.
Boyd, D., & Ellison N., (2007). “Social network sites: Definition, history and scholarship”,
Journal of Computer-Mediated Communication, 13(1), pp. 210-230.
Csikszentmihalyi, M., 1997. Finding Flow: The Psychology of Engagement in Everyday Life.
Basic Books, New York.
Cummings, J.N., Sproull, L. & Kiesler, S.B. (2002), “Beyond hearing: Where real-world and
online support meet”, Group Dynamics: Theory, Research and Practice, 6, pp. 78-88.
Ellison NB, Steinfeld C, Lampe C (2007). The benefits of Facebook ‘friends’: Social capital and
college students’ use of online social network sites. J. Comput. Mediated Commun., 12(4):
Garton, L., Haythornthwaite, C., & Wellman, B (1997), “Studying online social networks”,
Journal of Computer-Mediated Communication, 3(1).
Goldberg, M.S. (1990). “An alternative description of personality: The Big-Five factor structure.”
Journal of Personality and Social Psychology, 70, pp. 820-835.
Guadagno, R., Okdie, B. & Eno, C. (2008), “Who blogs? Personality predictors of blogging”.
Computers in Human Behavior, 24, ppp. 1993-2004.
Harbaugh, E.R., “The effect of personality styles (Level of Introversion- Extroversion) on Social
Media Use”, The Elon Journal of Undergraduate Research in Communications, Vol. 1, #2, pp. 7086
Hew, K., (2011). “students’ and teachers’ use of Facebook”. Computers in Human Behavior, 27,
pp. 662-676
Karpinski, A.C. (2009), “Media sensationalization of social science research: Social-networking
insites”, Teachers College Record.
Karpinski AC (2009). A description of Facebook use and academic performance among
undergraduate and graduate students. Annual Meeting of the American Educational Research
Association, San Diego, California.
Kempe, D., Kleinberg, J., & Tardos, E. (2003), “Research track: Macimizing the spread of
influence through a social network”, In proceedings of the 9th ACM SIGKDD international
conference on knowledge discovery and data mining, pp. 137-146.
Kraaykamp, G., & van Eijck, K. (2005). “Personality, media preferences, and cultural
participation”. Personality and Individual Differences, 38, pp. 1675-1688.
Krischner, P., & Karpinski, A., (2010). “Facebook and academic performance”. Computers in
Human Behavior, 26, pp. 1237-1245.
Kubey, R., Csikszentmihalyi, M., 1990. Television and the Quality of Life: How Viewing Shapes
Everyday Experience. LEA, Hillsdale, NJ.
Kubey RW, Lavin MJ, Barrows JR (2001). Internet use and collegiate academic performance
decrements: Early findings. J. Comm., 51(2): 366–382.
Landers R., & Lounsbury, J. (2006). “An investigation of Big Five and narrow personality traits in
relation to Internet usage”. Computers in Human Behavior, pp. 283-293.
Lewis, K., Kaufman, J., Gonzalez, M., Wimmer, A., & Christakis, N., (2008). “Tastes, ties, and
time: A new social network dataset using Facebook.com”, Social networks, 30, pp. 330-342.
Munson, W., & Widmer, M. (1997). “Leisure behavior and occupational identity in university
students”. Tge Career Development Quarterly, Vol.46, #2, pp. 190-198.
Pasek, J., More, E., & Hargittai, E. (2009). “Facebook and academic performance” Reconcilling a
media sensation with data.” 14(5).
Ross, C., Orr, E., Sisic, M., Arseneault, J., Simmering, M. & Orr, R. (2009). “Personality and
motivations associated with Facebook use”. Computers in Human Behavior, 25, pp. 578-586.
Shaw, L.H. & Gant, L.M., (2002), “In defense of the Internet: The relationship between Internet
communication abd depression, loneliness, self-esteem and perceived social support”,
CyberPsychology & Behavior, 5, pp. 157171.
Need for sustainability in mobile phone consumption behavior
183
Chekembayeva Gaukhar
Abstract
Purpose- The purpose of the study is to analyze the mobile phones replacement behavior among
youngsters in Almaty and find out the possible sustainable ways of devise disposal.
Design/methodology/approach- The paper is based on the survey made among the suppliers of smart
phones at the most popular shopping malls as well as the most frequent users of the mobile phone
devises. Sellers were asked for the interview session and consumers were given the carefully designed
questionnaires. Along with the survey the comparative analysis with other countries on this issue were
made based on the previous researches.
Findings- results will be summarized after finishing the research
Research limitation
Practical implication-The issue of mobile phones disposal is becoming very critical today all over the
world. Majority of Kazakhstani citizens are not aware yet of this problem. So, this study is aimed to
figure out the main replacement pattern among the target population, create the awareness of this
growing concern and investigate the possible ways of dealing with it. It is going to benefit the whole
society by ensuring more sustainable use of resources.
Key words-mobile phones, replacement pattern, sustainable development.
Paper type- research paper
1. Introduction
Market of the mobile phones is considered to be one of the most popular and rapidly developing and
simultaneously experiencing the extreme challenge for constant updating.
The major reason is the real fast growth in information technology, which stimulates competition
among the smart phone producers. Everybody wants to appear differentiated and create greater
consumer experience to win the market share in this type of monopolistic competition. It is obvious in
this kind of market structure that to be distinguished from others is really the single way to stay in
business. So this race creates a pleasant environment for consumers. The greater the competition
among the suppliers, the bigger the value that the customers will gain. And this advantage leads to the
very rapid turnover in mobile phone consumption.
Mobile phones have the shortest product lifecycle among all electronic consumer products. And the
study among the college students in USA showed that the main reason for early disposal of devices is
not the physical deterioration but rather certain social impacts. In USA currently the 60% of sales are
replacement sales and majority of those phones are in the functioning conditions. And actually this is
true for Kazakhstan as well. As long the tendency of disposition of workable devises is increasing it is
important to know the motives of consumers for the frequent changes so that the more sustainable
consumption could be encouraged.
The research presented here aims to explore the mobile phones disposition patterns in Kazakhstan and
the replacement motives to provide the information about the current situation and found out the
possible sustainable ways of mobile phone disposition in Kazakhstan.
The reasons to choose the mobile phones for investigation are: 1. Almost 80 % of Kazakhstani citizens
own the mobile phone devises and this product is penetrating globally really fast; 2. As already
mentioned above this product has the shortest lifecycle comparing to other electronic appliances; 3.
Mobile phone wastes is toxic, containing bio-accumulative toxins such as arsenic and lead, which leads
to unfavorable health problems. Some of the toxic components, which the mobile phones contain, are
lead, mercury, chromium and cadmium and plastic. Nokia made the survey among 13 countries and
figured out that only 3 % of all mobile phones are utilized, which is really low percentage41.
As since the most proficient mobile phone users are youngsters, the research group will be the people
of Almaty city at the age range of 18-25.
The methodology that the author is going to use is the survey mainly. It will capture the view from both
sides- consumers and producers. The questionnaires will be distributed to the target audience as well
as it will be the survey of smart phone sellers’ opinion about the disposal practices. After conducting
the analysis of obtained data, the conclusion about the most critical factors influencing the replacement
habits will be figured out. To suggest the possible ways of dealing with this problem the study of other
countries experience on that issue will be helpful.
The research objectives are to identify:
1)
The product lifecycle among the youngsters (the period between the purchase and the
replacement)
41
www.mobiset.ru
184
2)
The way of disposal
3)
The incentive to replace the current mobile phone
4)
Marketing strategies that may encourage consumers to replace the product less frequently
The paper is structured into 4 main parts. The first one is about contrasting the disposition patterns of 2
countries, then the possible reasons of mobile phone replacement will be provided and analyzed, after
that the empirical study is described and the findings summarized. The paper concludes with the a
discussion of how the findings might improve the current situation on disposition and create the
awareness of this problem.
2. Literature review
This section of the paper discloses the impacts of mobile phone waste on human health, reviews the
replacement practices in United States and Ukraine and then figure out any existing regulations in
Kazakhstan. There is no much research done on this particular topic yet, however it is becoming a
growing concern all over the world- more and more countries start recognizing the problem of tons of
toxic e-wastes.
The danger of mobile phone disposition
Most studies related to mobile phone industry is often concerned with the successful marketing
strategies to promote the product or with the identification of the degree of harmfulness of the product
usage. In fact, both of these two popular themes lead to another arising and really important problemthe need for utilization of the mobile phone devices. Marketing strategies contributes to the rapid
turnover of different models of the phones and an inappropriate device disposal could bring the huge
damage to the environment and people’s health.
Cell phones have been classified as hazardous material because of electromagnetic radiation and
electronic composition. Electronic devices, such as computers, mobile phones etc. contain substances
which are unsafe and the disposal of them in a form of waste to landfills creates real danger to the
environment and the health of the people. Certain cell phones contain elements that are in the list of the
10 most dangerous ones42.
Some of them are heavy metals, such as Cadmium, which is absorbed by leaving organisms and could
remain there for many years causing lung diseases and bone defects in human beings as well as blood
pressure in animals. Batteries contain Cadmium. Another element, Chromium could cause the kidney
and liver damage as well as the nerve tissue. Mercury is easily accumulated in human organisms and
can be passed forward through the food chain. This element could lead to the brain damage and 25 %
of the mercury in the world is used in electronic equipment. Lead could in huge doses cause the
problems in the synthesis of haemoglobin, effects on the kidneys, gastrointestinal tract, joints and
reproductive system, and acute or chronic damage to the nervous system. Consumer electronics
accounts for 40% of lead found in landfills, from which it can appear in the water system as well43.
Disposal options in Ukraine and United States
Before conducting the local research, it is appropriate to look at the disposal practices of other
countries. The author has chosen two countries for the review. The first one is United States, which is
really active in dealing with this kind of problems and where number of researches was already
conducted. The second one is Ukraine- the former Post-Soviet country, which economics and cultural
aspects is more similar to Kazakhstan.
In Ukraine there are some ways to utilize the old mobile phones however, not much of them.
First of all, among the mobile phone producers the Nokia is the only one who welcomes the old phones
back and fully utilizes it free of charge. There are special refuse bins at the Nokia service centers in
Ukraine. Other cell phone producers, unfortunately, do not offer such kind of service. There is a
number of utilizing companies in Ukraine, which deal with disposal of electronic wastes. However,
there are some problems associated with them: first of all there are only a few of such kind of
companies and they are located in the big cities; the second problem is that majority of them work with
organizations only because of the high volumes of waste provided by organizations; and the last is that
the fee is charged.
The reason is that the utilization is not that popular among the population and expenses on disposal are
not covered with the gained materials44.
There are several forms of the product disposition in United States. The most common as well as most
hazardous scenario is the removal a mobile phone for disposal in landfills. Others are considered to be
safer. Here are the main 3 ways of mobile phone disposal in USA and other developed countries:
42
43
44
http://www.envocare.co.uk/mobile_phones.htm
http://www.lenntech.com/processes/heavy/heavy-metals/heavy-metals.htm,
http://today.mts.com.ua/; http://www.nokia.ua/support/repair-and-recycle/repair-and-recycle-main/recycle
185
Recycling – Cell phone manufacturers, service providers, and non-profit groups often have
programs to renew mobile devices or recycle their components. Every state has the local cell
phone drop center, where people could leave their unused phones. In US even supermarkets
accepts the batteries back and then shift them to recycling agencies. There special sites available
such as www.charitablerecycling.com where people could learn about the unfavorable effects of
the telecommunication devices on the environment as well as information on the way of sending
the device for recycling. Another option is just to mail the cell phone via mail box to one of the
collecting organizations- US Postal service have free envelopes, so you can mail back small
electronic appliances without having to pay for postage45.
•
The Environmental Protection Agency (EPA) has information on electronic product recycling
programs at www.epa.gov/epaoswer/hazwaste/recycle/ecycling/donate.htm.
•
Donating – Many organizations collect old mobile devices for charitable purposes. It could be any
local charity organization or the devices could be sent to the developing countries as the part of the
Tools with the Mission program; this option has become popular- it creates the feeling of selfactualization by helping the people throughout the world.
•
Reselling – Some individuals and organizations will buy your old mobile devices. This kind of
“buy-back program” initiated by the service providers, manufacturers and retailers that collect and
reuse the devices. The similar is the practice of secondhand markets, such as e-bay and ReCellular
which is growing rapidly due to the popularity of consumer-to-consumer sales46.
In Kazakhstan the situation is pretty similar to the Ukrainian. There are very few agencies dealing with
recycling of mobile phones. One of the biggest one is RG-service, with actually work with the
organizations mostly47. They said that they do not practice the utilization of the small volume materials
and thus do not work with individuals. However if the person wish to utilize the phone they accept still.
They are ready to provide you with the certificate on utilization and the disposal of 1 device will cost
approximately 30 tg.
•
3. Reasons for product replacement
The result of the researches done in US showed that the primary reason of mobile phone replacement is
not the product deterioration just because the many devices are functioning at the time they are
discarded. There is a number of replacement motives associated with the philological behavior driven
by the desire of enhancing self-expression.
Several studies identified that there are the categories of goods, which called durable that the customers
feel the emotional attachment to. These are goods that have the “mental book value”. The example is
the bicycle. The reason to keep it might be the high price that you have paid, but the stronger is the
perception of bicycle as the part of identity, good memories associated with it. In other words the
durable goods create the feeling of emotional attachment and consequently the reluctance for
replacement. Generally, mobile phones do not have this kind of barrier because it is hard to form the
emotional attachment to them. And there are several reasons for that. Firstly, the cost of phone is not
high and many people could afford to change it frequently. Secondly, more and more updated versions
emerges and they effectively advertised to be better, more functional, beautiful and just fashionable. In
contrast to the bicycle the mobile phone today is the object of fashion. Everybody, especially the young
people, want to be fashionable. This creates very high turnover of mobile phones. So, the main reason
for the replacement is seem to be the marketing strategies of the producers. Competitive consumption
and novelty-seeking, stimulated by the short technology and fashion cycles enforces consumers to
change the devises really fast. This is the temptation to obtain new and, according to advertisements
made by the companies, much more advanced devise for the relatively low price. One more reason for
replacement is that due to the frequency and huge volume of production, the phones are of low quality
and has only limited, usually one year insurance. After that short period customers just have no chance
to repair the phone or the costs might exceed the benefits.
Role of Information Technologies in Operational Risk Management
Rusudan Seturidze
Iv. Javakhishvili Tbilisi State University,
[email protected]
45
http://www.ehow.com/how_2002537_dispose-cell-phones.html
http://www.t-mobile.co.uk/services/about-t-mobile/corporate-responsibility/radio-safety/
47
http://startcopy.kz/kontakt
46
186
Nino Mikiashvili,
Iv. Javakhishvili Tbilisi State University
[email protected]
Abstract: In the article “Role of Information Technologies in Operational Risk Management”, the
authors accent the essence of risk and the ways the risk management is formed and conclude that the
modern information technologies are an important subject of study of the operational risk management.
An urgent issue of the modern times is the problem of integration of different fields and the countries
are striving to create single automated systems of registration of products, operations and stages of
their processing. However, these processes entail a range of problems.
The article considers the achievements of LEPL Revenue Service of the Ministry of Finance of Georgia
in the field of information technologies using the risk management systems. Introduction and
successful operation of modern information systems at the Revenue Service have made the operation of
the Revenue Service transparent and successful. Therefore, it is clear that the role of information
technologies in the operational risk management is great and its successful operation promotes a
competitive environment in Georgia.
Key words: Operational risk management, information technologies, risk
1. Introduction
In recent years, the intellectual capital has been seen as one of the major factors of competition. In the
information epoch, knowledge occupies a leading place. Knowledge is considered by us as the
information facilitating decision-making, and it can be considered as the enterprises’ “Know-How”
answering the question ”How?”
Employees generate the necessary knowledge, while the information technologies help them in the
decision-making process.
It is traditionally considered that risk is the possibility of some undesirable negative outcomes;
however, there are methods considering the risks and problems of their management in different ways.
Risks are analyzed from three different positions. First of all, it is clear that risk is uncertainty. In the
second instance, risk creates new prospects needed to achieve competitive advantage. Third, risk may
have a demolishing impact on the organizations’ business. The whole variety of risks faced by any
organization can be divided into three categories: risks of events (business risks), financial risks and
operational risks. For financial organizations, all kinds of risks belong to the financial field and are
therefore commonly named as “financial risks”.
2.Rationales of the study method
Let us consider the following trends in the operational risk management: risk management
classification; association with other risk varieties; operational risk factors at micro and macro levels;
organization of risk management functions; quantitative models of operational risks; business
efficiency analysis by considering risk-factors; establishment of the internal control system at the
organization; development of information systems and their use in business.
Under the operational risk, they mean the risks (except business risks) occurring as a result of the
inefficient internal control system at the organization; however, they do not cover for example, natural
cataclysms, external roguery or breakage of the security system. In our opinion, the operational risk
reflects the direct and indirect losses caused by wrong understanding of processes, inefficient internal
control procedures, technological errors, personnel’s’ illegal actions or external impact.
For many operational risks, the results of their disclosure may be relatively less and the probability of
their occurrence may be relatively high (low severity, high probability). Another category of the
operational risks is even more complex, as the results may be catastrophic. In addition, the calculation
of their probability is very complex.
To prioritize and manage IT risk, senior executives need a frame of reference and a clear understanding
of the IT function and IT risk. However, the enterprise’s key stakeholders, including board members
and executive management, the very people who should be accountable for risk management within the
enterprise, often do not have a full understanding.
IT risk is not just a technical issue. While IT subject matter experts help to understand and manage
aspects of IT risk, business management is the most important stakeholder. Business managers
determine what IT needs to do to support their business; they set the targets for IT and are accountable
for managing the associated risks.
The Risk IT framework explains IT risk, allows the enterprise to make appropriate risk-aware decisions
and will enable users to:
187
• Integrate the management of IT risk into the overall enterprise risk management (ERM) of the
organization
• Make well-informed decisions about the extent of the risk, the risk appetite and the risk tolerance of
the enterprise
• Understand how to respond to the risk
In summary, the framework will enable enterprises to understand and manage all significant IT risk
types. The Risk IT framework provides an end-to-end, comprehensive view of all risks related to the
use of IT, as well as a similar view of risk management.
Risk IT consists of two publications: the Risk IT Framework and the Risk IT Practitioner Guide.
The Risk IT Framework provides:
• A set of governance practices for risk management.
• An end-to-end process framework for successful IT risk management.
• A generic list of common, potentially adverse, IT-related risk scenarios that could impact the
realization of objectives.
• Tools and techniques to understand concrete risks to operations, as opposed to generic checklists of
controls or compliance requirements.
Risk IT:
• Allows enterprises to customize the components provided in the framework to suit their particular
needs
• Provides an end-to-end, comprehensive view of all risks related to the use of IT and a similarly
thorough treatment of risk management, from the tone and culture at the top, to operational issues
• Enables enterprises to understand and manage all significant IT risk types
• Provides tangible business benefits
• Allows the enterprise to make appropriate risk-aware decisions
• Explains how to capitalize on an investment made in an IT internal control system already in place to
manage IT-related risk
• Enables integration with overall risk and compliance structures within the enterprise when assessing
and managing IT risk
A clear example of the role of information technologies in risk management is the simplified
registration procedures operating at present at the Revenue Service of the Ministry of Finance. If in the
past the customs registration took 2 to 10 days, at present this time is reduced to 1 hour. This is mainly
the result of LEPL Revenue Service undertaking the state control of the declared goods by the customs
automated system ASYCUDA through the risk management system.
At present, there are about 20 risk profiles operating, which are designed to prevent the import of nondeclared goods, manipulate with the commodity codes, protect intellectual property as well as for less
risky organizations (governmental structures and diplomacy) and ensure maximally simplified
procedures for goods. When drafting a customs declaration, the system compares the risk profiles data
under the declaration and software, and in case of their coincidence transfers the declaration into the
corridor of the relevant color. As for the color of a corridor, it depends on the risk profile and random
selection principle. At present, green, blue, yellow and red corridors operate. Green corridor means
admission of goods without cameral examination of the declaration or any enclosed documents or
goods examination; the yellow corridor means admission of goods with the cameral examination of the
tax and enclosed documents; the red corridor means cameral and physical examination of goods; and
the blue corridor means the post-admission audit of goods. After the system transfers the declaration to
the corridor of the proper color, a customs officer receives an e-notification about the due measure and
in case the declaration is not affected by a risk profile, the system gives the corridor the proper color by
using the random principle. The maximally efficient and flexible mechanism of risk management
system is being gradually perfected.
One of the tiers of the Revenue Service was made stronger, in particular the strong financialanalytical department www.fas.ge. The department designed a successful eDocument system, the esystem of document circulation control, which is a simple and efficient e-office product ensuring the
paper-free exchange of office information, and the human resources management system (HRMS)
introduced at the Ministry of Finance and all of its structural units, etc.
eDocument - the records management automated system is a simple and efficient office e-product
ensuring the exchange of office information without using a paper.
Let us list its advantages:
•
Simple and user-oriented interface
•
Paper-free document circulation system
•
e-approval and e-signature
•
Graphical visualization of document circulation
188
•
•
•
•
•
•
•
Control over the task accomplishment
Possibility to distribute a task
Control over the document versions
Automated generation of document-related tasks
Task management and their grouping in projects, programs, etc.
Extended search function of task and document
Possibility of HR integration in other systems.
HRMS - an automated HR management system covering the Ministry of Finance and all of its
structural units.
Advantages:
•
Information HR archives-catalog of the Ministry of Finance and all of its structural units managed
through a PC.
•
Flexible system of HR circulation monitoring.
•
Flexible system to monitor the numbers of staff, trainees, students and reserves.
•
Possibility of simultaneous system administration by the personnel departments of the Ministry of
Finance and all of its structural units.
•
Possibility for simple filling-in of the business trip and leave forms.
•
etc.
It is planned to integrate all e-systems of different state structures of Georgia in a single unified system
of state financial control, to offer a new, flexible and complex e-service to state and private sectors, etc.
3.Results
Based on the gained results, we can conclude that at present, the information technologies, their study
and development in different fields are extremely topical for the specialists, because as it is already
known, any economics or business, individual enterprise or state will find itself among the left-behind
without modern information technologies.
The operational risk management aims at preventing possible negative outcomes for the current
business and is oriented on the processes control and guaranteeing their compliance with safety
requirements.
It should also be considered that IT development is an expensive branch needing specialists’ quality
training and modern techniques. However, it should be noted that as these are realized, the produced
effect is something like revolutionary transformations.
Risk plays a critical role. Almost every decision requires executives and managers to balance risk and
reward.
4.Conclusions
The operational risk management accents the problems, which at one glance, are not financial, but can
cause real damage.
The field of operational risk is under the competence of the sub-divisions, which are auxiliary to the
principal ones (e.g. internal control or IT departments). However, despite such a classification, a
classification feature is difficult to identify for them. Therefore, there are other opinions, too. For
instance, if taking the major reason for risk as such an example, the primary reason for it may be
personnel, or technologies, or external impact. As for other elements, such as control procedures,
systems and processes, they cannot be a reason for risks, but are mainly the instruments to realize the
key business. In addition, they can be a source of an operational risk, whose reason ensues from the
above-mentioned factors.
A clear example is the information systems introduced at the Revenue Service of the Ministry of
Finance, which use a risk management system.
Thus, at present, the introduction of modern information technologies of risk management to every
field is very important, and their successful integration is capable of establishing a competitive
environment in Georgia.
5.References
1. De Wulf, Luc and Gerald Mclinder (2005). “The Role of Information Technology in
Customs Modernization” in Customs Modernization Handbook, de Wulf, Luc and Jose B.
Sokel (eds) , Washington: World Bank
2. No Excuses: A Business Process Approach to Managing Operational Risk [Hardcover]
Dennis I. Dickstein (Author), Robert H. Flast (Author), Publication Date: December 22,
2008
3. Computer and network security risk management: theory, challenges, and countermeasures,
Mohamed Hamdi, Noureddine Boudriga, Article first published online: 18 JUL 2005,
DOI: 10.1002/dac.729, Copyright © 2005 John Wiley & Sons, Ltd.
189
4.
5.
6.
7.
8.
J. Davidson Frame. Managing risk in organizations : a guide for managers /ISBN 0-78796518-9 (alk. paper) Risk management. I. Title. II. Series., 2003
Seturidze R., (2011) International Internet conference “New trends of development of V4
Countries & Ukraine”, Volyn Institute for Economics and Management, New Trends in
Development of Georgia’s Economic Border Information Systems, Book reports Ukraine
Seturidze R. (2012). The Reforms Realized in the Customs System of Georgia and Contradictions,
XVI IRSPM Conference, http://www.irspm.net/publications/viewcategory/56-9-openpanel.html?start=10, Rome, Italy
Ministry of Finance of Georgia www.mof.ge
Georgia Department of Revenue - www.rs.ge
The curse of Natural Resources: Is it a matter of degree or a Yes it exists/No it doesn’t exist
question or defining new factors in explaining growth in resource rich countries.
Dr. William Callahan
KIMEP University
Dr. Mira Nurmakhanova
KIMEP University
Abstract: The economic research literature beginning approximately 1995, revealed a strange
phenomenon whereby economies that are rich in natural resources grew at a much slower rate in future
years than those economies which are poor in natural resources. The term coined for this phenomenon
is the Natural Resource Curse. This is demonstrated by a negative association between growth and
natural resources as a percent of GDP. Econometric studies used an assortment of diverse control
variables that could explain growth but the curse would not go away. Researchers began to struggle to
find the cause of these unusual country-specific occurrences. According to one part of the literature, the
Natural Resource Curse has become accepted as a fact.
In the first decade of this century, however, new research has been published, questioning whether the
curse ever existed. They found no relationship between resource abundance and future economic
growth. They find other factors which may explain the low growth of these countries. The difficulty
may lie in the existence of numerous economic factors which are not independent of each other but
related to economic growth. This can add to the difficulty of interpreting any regression results.
To circumvent this problem, we therefore propose using Principal Components analysis (PCA) which
attempts to look at the Natural Resource Curse hypothesis in a different manner. PCA will attempt to
define a new set of independent variables created from those that other researchers utilized in their
analysis of the Resource Curse. PCA is used to reduce the number of variables in a data set into a
smaller number of dimensions.
The aim of this paper is a better understanding of this economic phenomenon and whether the Natural
Research Curse may be a measure of ranking where one end of the scale is a curse and the other end is
a blessing. The hypothesis may not be one of whether resource curse exists We believe the factors that
affect growth may be a combination of variables, each of which may not individually be significant,
but may work together to cause a relationship.. The confounding literature calls for a new approach.
The understanding of this economic phenomenon is important to understanding the role of natural
resources in our global economy.
About the realization of the econometric method to determine the trade potential
(on the example of Georgia)
Rusudan Seturidze
Iv. Javakhishvili Tbilisi State University,
[email protected]
Nino Mikiashvili,
Iv. Javakhishvili Tbilisi State University
190
[email protected]
Abstract: The authors have studied the trade relations at the international level, determined the
priorities a concrete country has at the given moment, used the theory of gravitation to consider the
international trade problems, evaluated the volumes and directions of the trade flows of the countries,
found the most suitable partners and identified the hampering factors. Based on the comparative
analysis, they have identified the real situation and its difference from or similarity to the desirable
level. They have considered and studied the factors influencing the country’s trade relations within
certain frames. They have identified the purposefulness the country has to face in a short- or long-term
perspective.
The authors used an econometric model to arrive at well-grounded conclusions. It should be noted that
the model can be extended by engaging such indicators, as e.g. index of economic freedom, index of
mean tariff, etc. The authors have made conclusions based on the analysis of concrete calculations and
proved the major principles of the gravitational model what in their opinion, must be interesting for the
representatives of other countries.
Key words: trade potential, trade flows optimization, econometric analysis
1. Introduction
On the background of the deepened and intensified global processes, the determination and prediction
of the intensity and direction of the international trade flows has become even more topical than before.
Sometimes, the established trends and proportions change significantly. This is why the study of trade
relations at the international level and determination of the priorities of a concrete country at the given
moment becomes urgent for any country or region.
For consideration of the problems of international trade problems, we have considered the use of such a
recognized theory, as the gravitation theory is. Based on the gravitation theory, Jan Tinbergen, the
Noble Prize laureate has developed the gravitational model of the international trade flows. Following
its individual specifics, the volumes and directions of a country’s optimal trade flows can be evaluated,
and the comparative analysis can be used to determine the real state and its difference from or
similarity to the optimal (desirable) level. The factors influencing the trade relations of a country are
also reviewed and studied within certain frames. We have considered it purposeful to consider the trade
relations according to the trends of individual regional associations and groupings, e.g. the European
Union, CIS countries, countries of Central Asia, the Great Seven countries, etc. The mentioned trends
are determined within the limits of a concrete economic policy following the objectives, which the
country expects to reach in a short or long term perspective. Georgia renewed its independent political
and economic development in the 1990s. On the international scene, its priorities were established
based on the economic analysis and stimuli in some cases; however, the accent was mostly made on the
political purposefulness causing certain corrections to the economic development of the country. At
present, Georgia is no longer a CIS country, but together with other CIS countries, it participates in the
agreement of a preferential nature. In addition, since 2000, Georgia has been a member of the World
Trade Organization trying to help the integration processes towards the West (Europe and USA), but an
eastern orientation is also vitally important to it.
Determination of optimal volume of trade flows, identification of the most favorable partners and any
hampering factors (tariffs, quotas, etc.) and giving answers to the similar issues is worth attention. It is
by answering the given questions that the future trends of a country in respect of international trade and
scales of involvement in the integration processes are determined.
The aim of Georgia is to establish a fair administration system to make the country a reliable partner in
international trade and a dignified and progressive member of the international commonwealth of states,
which regularly makes efforts to simplify the procedures of the international trade by eliminating tariff
and non-tariff barriers.
2. Rationales for the study methods
For making well-grounded conclusions based on the quantitative analysis, we think it purposeful to use
econometric models. In this concrete case, the accent was made on the already-mentioned gravitational
model. The attractiveness of a gravitational model is that it needs such basic data, calculated by every
country, and the data about one of the variables can be obtained from the geographical reference books.
In particular, the principal form of a gravitational model is as follows:
Eij = AYiα1Y jα2 Dijα3
where i and j are country indices;
Eij - is the intensity of trade flows from the ith country to the jth country;
191
Yi - is the Gross Domestic Product the ith country;
Yj - is the Gross Domestic Product the jth country
Dij- is the distance, geographical remoteness between the ith country and the jth country;
α 1, α2, α3 are constants.
All constants, except α3 are positive.
At this point, we would like to note that some variables may be modified. For example, instead of GDP
we can use such an indicator, as DGP per capita and the like.
In case of a qualitative econometric model, a logarithmication operation is used. The general
specifications of a model are expressed in the following logarithm form:
LnEij + A + α1LnYi + α 2 LnY j + α 3 Dij + u
where u is a random member.
Based on specifics of the model, the kind of dependence of the country’s (Georgia’s) trade flows on
different factors can be determined. In particular, the country’s trade volume depends on: its
geographical remoteness from other trade partners and scales of the business activity of the country and
its trade partners.
When modeling, additional factors may be tariffs, quotas, participation in the regional unions, etc.
The statistical data to calculate were mainly obtained based on information sources. In particular, we
used the database of the International Exchange Foundation (IEF) (DOTC - Direction of Trade
Statistics) and geographical reference books.
3. Results
The model can be extended by involvement of such indicators, as for example an index of business
freedom, index of mean tariff, etc.
If the partner countries at least undertake a similar economic analysis to determine the trade potential
by using the given model, they will have stronger grounds to substantiate the increase or decrease of
their trade turnover.
4. Conclusions
The conclusions made based on the analysis of concrete calculations have proved that the major
principles of the gravitational model are as follows:
a) The scales of one’s trade partners’ business activity have a directly proportional impact on the
volumes of trade flows.
b) The territorial remoteness has a negative impact on the trade flows intensity. In particular,
bordering countries or the ones speaking the same language have more potential to develop trade
relations.
c) A similar structure of demand and income of the countries is also an advantage making the trade
more intense and simpler.
d) The role of preferences is important. Following the theory of the international economic relations,
in case of a preferential agreement between the countries the volume of trade flows nearly doubles.
An advantage of the mentioned study is the fact of other countries being able to conduct a similar
economic analysis to determine their international trade potential, disclose the major trends in the
international trade relations, etc. I think the experience of Georgia in this direction must be an
interesting example for the representatives of other countries.
5.
1.
2.
3.
4.
5.
6.
7.
8.
References
Greene W.H. (2000). Econometric Analysis. Prentice Hall, Upper Saddie River, New Jersey
Mikiashvili N. Mekantsishvili E (2008) Econometrics 1. Tbilisi, Sitkva
Seturidze R. (2011). International Internet conference “New trends of development of V4
Countries & Ukraine”, Volyn Institute for Economics and Management, New Trends in
Development of Georgia’s Economic Border Information Systems, Book reports Ukraine
Seturidze R. (2012). The Reforms Realized in the Customs System of Georgia and Contradictions,
XVI
IRSPM Conference,
http://www.irspm.net/publications/viewcategory/56-9-openpanel.html?start=10, Rome, Italy
Georgia Department of Revenue - www.rs.ge
Ministry of Finance of Georgia www.mof.ge
USAID Georgia http://georgia.usaid.gov
European Parliament - www.europarl.eu.int
European Commission - http://europa.eu.int/comm/
192
The causes and preventative solutions for European debt crisis: Testing for fiscal sustainability
hypothesis
Abdulla Alikhanov
Lund University,
[email protected]
Abstract: The aim of paper is to discuss the causes of the Euro Zone crisis and to test fiscal
sustainability of some selected EU countries. In addition, the role of crisis responses by international
community and organizations toward this crisis will be covered. In empirical part, I examine Fiscal
sustainability and Debt/Economic Growth effect of selected countries. Sustainability hypothesis is
examined by testing simple Panel Unit Root tests for debt-to-GDP ratio from 2000Q1 to 2011Q2. The
evidence demonstrated incapability of rejection hypothesis in levels. Furthermore, OLS regression has
been run for debt and GDP growth relation. In addition, the dummy variable is implemented to test
structural break. The results indicate that only in the case Ireland there is significant relationship, yet it
is negative which is consistent with other researches. Finally, paper analyses possible theoretical
preventative measures and short and long run solutions for ongoing crisis.
JEL codes: F30, F33, F34, C20, C12
Keywords: Debt-to-GDP, financial sustainability, Euro zone, Economic Growth, Unit Root.
Firm’s profit maximization problem: from theory to practice
OrazalinRustem
Al-Farabi Kazakh National University
[email protected],
AlinaNazerke
Al-Farabi Kazakh National University
[email protected]
1. Introduction
The topic of work is basically boils down to the marginal product and diminishing of marginal returns
andthe proof ofthe legitimacy of the economic theory of entrepreneurial behavior about that every
entrepreneur wants to maximize his total revenue. This study looks closely at the law of diminishing
marginal.
A key question ishow to maximize the total revenue and profit.There are several reasons of raising such
a question: first, marginal product theorymade a great contribution not only to the development and
formation of the microeconomics, but also to an understanding of the theory of the production. I chose
this problem, because to maximize the total revenue (TR) is very important for every company, firm,
concern and so on. It’s the main aim and goal of every organization. The more the total revenue, the
more companies have chances to exist and succeed. The company which has the high total revenue is
very important to economics of every country, because the higher the total revenue, the more the taxes
company pays to the budget of government. Also wealthy companies play an essential role in the
market and they are the main players in the developing and growing of economies. Secondly, the way
firm maximization of total revenue influences ordinary people is interesting and important because if
the total revenue of the companies grows, the economical positions of companies will improve. As the
result of its improving the production of companies will improve too, so the qualities will be better.
Also if there are many companies which are competitors and theirs main aim is to sell their products to
the consumers (to us), they will try to make their products more tempting and profitable to the
consumers. There are many ways to do it such as not only to improve the quality of products but also to
make the prices lower than have their competitors. So it is beneficial to the consumers. So to solve this
problem is in the interest of the ordinary people.
193
Furthermore, solving this problem is very essential to the government, because every country tries to
improve the welfare of its citizens. So does our country “the Republic of Kazakhstan”. Our President,
NursultanNazarbaev, aims to elevate the economy of our country so as to take a place of one of the
most 50th developed countries in the world. However, the goal can be achieved if several things are
eradicated by the government.First and foremost, making good strategy in economical sphere of a
country; is to have a great interest on the economical market. It is an essential to the government of
Kazakhstan and our President Nursultan Nazarbaev’s strategy and messages which are send every year
to the nation of our country.
Therefore, it’s understandable and obvious that to research and solve the problem of maximization of
the total revenue is very important not only for the companies, but also for the government and
theconsumers respectively.
2. Theory behind the problem
It can be stated that the understandingof the marginal product is essential and best sources are the
books of classic economists such as “Economics” of Stanley Fischer, Rudiger Dornbusch, Richard
Schmalensee and ‘Microeconomics” of Pindain R., Rubenfeld D. and so on.
The definition which is given in the “Economics” stated that Marginal Product (MP) of every variable
factor of the production (for example, the labor) represents an increase in the outputting of production
which was gotten by the using of the additional unit of this factor. The marginal product of labor is
found by the simple way of the subtraction. For example, the company which produces the plastic
bottles for the water decided to increase their production and income. So their production of plastic
bottles in one week increased from the 1750 to the 2000 by the increasing of labor costs from the 5
workers to 6 workers. Therefore, the marginal product (MP) of labor in the adding of the 6th worker is
equal to 250, we got this number by the subtraction of the last result from the beginning result, 2000 –
1750 = 250. [1, page 138]
There are two important stages of the dynamic of the marginal product’s labor [1, page 140]:
1.
On the first stage if the costs of the labor are low, the marginal product will be positive and it will
increase. On this stage supplementary worker not only gives the increase of producing, but also
adds more that previous worker. In some situations small amount of employees can not be able to
manage all of the equipments which are used in producing of the plastic bottles. So the big team
will work more effectively. If there are 6 machines which are made the plastic bottles and for one
equipment should be one employee, the team from 5 employees will not be able to manage all
machines. So the production increases if the 6th employee will work.
2. On the second stage if the high costs of the labor increases the production the employing the
additional worker and still positive, the marginal product of the additional worker will increase.
But when it reaches the highest point it decreases. In other worlds it means that the lower is the
amount of marginal product of the extra employee, the more employees are working in the
company. Each additional employee provides lower increasing of production that does the
previous employee.
We can see the meaning of it in the next table:
The labor costs
The stage
The marginal product (MP)
0–5
The first
Increasing
6 – 10
The second
Decreasing
The next concept which we will write about is the law of the diminishing the returns. This law states
that if the amounts of the some factors are fixed, the marginal product of every variable factor (for
example, labor) will diminish by the reaching of the some volume and growing of the costs of that
factor. [2, page 150]
Looking at this example, noted above of a company which intends increasing its production by starting
with one employee and more, however, its 9 employees could not get a good outcome. So the more the
extra employees are working, the more diminishing of the returns is. It is the main principle of the law
of the diminishing returns. If the companies know and use this law, they can increase their total
revenue.
In the books of domestic scientists such as “Microeconomics” of Mukhamediev B.R.,
“Microeconomics” of Mamirov N.K., Esengalieva K. S., Tyleuzhanova M. A. etc the following
formulas of total revenue, average revenue are given in. [3, page 98]
;
;
194
We have to know these formulas to solve the problem about the maximization of revenue due to
diminishing of marginal returns.
For example, the company will get marginal revenues which are more than its marginal costs, that is
MR>MC, if it increases producing by changing production by one more unit.
The marginal profit (MR) is the increase, the increment of profit from the changing production by one
unit. [4, page 72]
If the Marginal profit is more than marginal costs, i.e. MR>MC, the marginal profit will be
positive.
The company gets the benefit from increasing the production until the marginal profit is equal to zero,
i.e. MPr=MC.
Therefore we have such conclusion about the solving of the problem the condition of maximizing profit
for every company is the equality of the marginal profit and the marginal cost : MR=MC.
3. Results.
Now I want to connect theoretical part of work with practical part.
Analyzing the areas of the financial statement of the “Asia Auto” Joint Stock Company,of 2010 and
2011, below are details for perusal.
“Asia Auto” is a Joint Stock Company whichwas founded and registered in the 20th of December, 2002.
The car assembly plant is located in the Ust’ – Kamenogorsk. The aim of the company is to make and
develop the car industry in Kazakhstan and producing the competitive automobiles to provide the needs
of the population. The objectives of “Asia Auto” are also aimed at implementing the strategy of
industrial – innovative development of Kazakhstan as a country to create new type entails not only
obvious economic benefit, but also social, such as employment and rising living standards, and the
participation of company on the public life.The partners of sampan are "Volkswagen Group",
"GeneralMotors", "Renault-Nissan-AutoVAZ" and "KIA Motors". Nowadays the company indulges in
the production of the automobiles such as Skoda, KIA, Lada and Chevrolet.. [5]
The amount of the sold cars for January – September of 2011 year was 11 865. It was 94, 13% more
thanitwas in the previous year “2000”.
At this period, January – September 2011, was produced 5 038 automobiles. It’s 2, 55 times more than
in the year before.
The amount of produced car in the August was less than nowadays. The reason of it was the problems
with transportation of vehicle sets on the territory of China, but it was solved by the changing in the
logistic scheme and redirecting the traffic through the Russian Federation.
The total revenue for the period January – September 2011 amounted to 10, 8 billion tenge. The
revenue for the period January – September 2010 amounted to 4, 7 billion tenge. Therefore the revenue
of the 2011 is 2, 3 times more than the previous one.
The profit of the company for January – September 2011 is 819, 5 millions tenge.
The commodity stock of the “Asia Auto” for the period January – September 2011: materials and
supplies 535 183 tenge, finished goods 1 100 982 tenge; that indicator for the previous year, 2010: raw
and materials 344 150 tenge, finished goods 991 108 tenge. So it is obvious that the company is
growing.
The revenue from the sales of the own assembled automobiles isfor the nine months of 2011 –
10 867 536 tenge, for the nine months of 2010 – 4 631 398 tenge.
The costs from the realization of the goods and provisions of the services are: wages (salaries) and
deductions for the nine months of 2011 – 10 072 thousands tenge and for the nine months of 2010 –
5 573 thousands tenge; the services for the transportations of the automobiles for the nine months of
2011 – 130 736 and for the nine months of 2010 – 61 680 tenge; advertisement for the nine months of
2011 – 234 thousands tenge and for the nine months of 2010 – 376 thousands tenge; pre – delivery for
the nine months of 2011 – 172 700 tenge and for the nine months of 2010 – 40 887 tenge; rent for the
nine months of 2011 – 2 138 thousand tenge and for the nine months of 2010 – 1 230 thousands tenge;
amortizations of the fixed assets and intangible assets for the nine months of 2011 –5 415 thousands
tenge and for the nine months of 2010 – 4 635 thousands of tenge.
The total costs for the nine months are 2011is 8, 1 billion tenge and for the nine months of 2010 are 3,
5 billion tenge. [6]
Below are the more vivid information on the financial situation and accounting balance of the “Asia
Auto” company,
The marginal cost by using the formulais 1 484 287, 72 tenge.
195
MC
=
1484287, 72.
The marginal revenue is 2 036 622, 46 tenge.
MR =
2036622, 46.
So MC<MR, it means that the marginal profit is positive: MPr = MR – MC = 2036622, 43 –
1484287, 72 = 552334, 74 > 0.
The condition of maximization of the revenue is the equality of marginal revenue and
marginal cost.
To maximize the revenue “Asia Auto” should decrease its marginal revenue. That means that
they should decrease the production. If the company produces 3 936 cars, the marginal cost will be
2 037 309, 71 and the marginal revenue will be 2 036 622, 47. So MR = MC, the company will get the
maximum revenue. Therefore, the company should decrease the production of cars until 3 936 cars, it
means that 874 cars should not be produced.
The theoretical material is proved by the practice. So our conclusions and decisions are totally
proved and obviously right.
4. Conclusion
In conclusion, while doing this study I acquainted not onlywith the works of the classic
microeconomics authors, scientists and economists who made the big contributions in the developing
of the economics as a science and whose works are playing the essential roles in the history of
developing microeconomics, but also with the works of Kazakhstan and Russian scientists who were
highly appreciated by the whole world.
I deepened my knowledge by reading these books, I learned new terms and fond many new and
important for my educationalfacts. I liked the popular and famous authors’ books, but the books of our
authors are very good too.
Summing up I can state the following definitions and concepts:
•
The marginal product is the additional product produced by using an additional unit of
resource.
•
Diminishing of marginal returns is when the number of new employees increases, the
marginal product of an additional employee will at some point be less than the marginal
product of previous employee.
•
If the marginal revenue is greater than marginal cost, marginal profit is positive.
•
If marginal revenue is less than marginal cost, marginal profit is negative.
•
When marginal revenue equals marginal cost, marginal profit reaches its maximum.
In our example about “Asia Auto” the company’s demand and cost conditions are such that
marginal profit is greater than zero for all levels of production. In this case company should maximize
the revenue: By selling all the produced cars; By reducing marginal costs, that means it should
produce 874 cars less than now, therefore MC = MR = 2 037 309.
Therefore to maximize the profit the company should make total cost equal to total revenue and
marginal cost equal to marginal revenue: TR =TC and MR = MC.
From the work it is obvious that the knowing of marginal product, the law of diminishing marginal
returns and basically knowing of the rules of maximization total revenue and total profit are very
important to successful exciting and thriving of every company and firm.
5.References:
1. Stanley Fischer, RudigerDornbusch, Richard Schmalensee “Economics” Moscow, Delo, 1995.
2. Pindaik R., Rubenfeld D. “Microeconomics” Moscow, Delo, 2000.
3. Mukhamediev B.R. “Microeconomics”, Akmaty, Kazakh University, 2001.
4. Mamirov N.K., Esengalieva K. S., Tyleuzhanova M. A. “Microeconomics”, Almaty, KazEU,
2000.
5. http://www.kase.kz/ru/emitters/show/ASAV
6. http://www.kase.kz/files/emitters/ASAV/asavf5q3_2011.pdf
Gender differences in negative expectances of smoking among youth in Kazakhstan.
196
Liza Rybina
KIMEP University
[email protected]
Alexander Ostrovsky
KIMEP University
[email protected]
Abstract: As former Soviet Union countries including Central Asia have become a target for
aggressive marketing by global cigarette producers to expand their geographical markets and develop
new demographical markets such as women and youth, local governments respond by developing and
enforcing comprehensive tobacco control policies. A common type of tobacco intervention,
antismoking advertising, often uses fear appealing to negative consequences of smoking. The purpose
of the present paper is to examine gender differences in negative expectances of smoking among youth
in Kazakhstan. A short version of Smoking Consequences Questionnaire (SCQ) was used to examine
negative outcomes of smoking. The study found a significant difference in negative expectances of
smoking between young men and women. Results are discussed and recommendations are given.
Key words:smoking, outcome expectancy, antismoking advertising, fear appeal
1. Introduction
With increased tobacco controls in developed countries, international tobacco companies shifted their
focus to less-developed and developing countries (Gilmore and McKee, 2004). To counter aggressive
marketing of tobacco companies, governments and non-for-profit organizations develop and enforce
polices and legislation to decrease tobacco consumption and prevent uptake of smoking. Antismoking
interventions include high taxes, bans and restrictions on smoking in public and work places, bans on
advertising and promotion of all tobacco products, counter-advertising, warning labels on cigarette
boxes, help for smokers who wish to quit, including increased access to nicotine replacement therapy
and other cessation therapies (World Bank, 2001). Antismoking counter-advertising often use fear
appeal messages that describe negative consequences of smoking (Pechmann et al., 2003; Wakefield et
al., 2003; Farrelly et al., 2002). The current research aims to examine differences in outcome
expectances between young men and women in Kazakhstan.
2. Smoking Outcome Expectancies
The existing body of research on addiction motivation has proven the relationship between outcome
expectances and substance abuse (Brandon et al., 1990; Gordon, 1986; Lewis-Esquerre et al., 2005;
Reig-Ferrer & Cepeda-Benito, 2007). Outcome expectancies can be defined as an individual's abilities
to utilize information stored in the memory to direct and organize future behavior. They refer to the
relationship between a stimulus, a response, and the outcome of a response influencing future
behaviors (Goldman et al., 1999). Brandon and Baker (1991) in their study of subjective expected
utility of smoking in college students developed the Smoking Consequences Questionnaire (SCQ) that
was uses by many researchers to study outcome expectances of smoking (Buckley et al., 2005;
Copeland et al., 1995; Jeffries et al., 2004; Lewis-Esquerre et al., 2005; Myers et al., 2003; Wetter et al.,
1994). Brandon and Baker (1991) identified four factors that define subjective expected utility of
smoking, namely Negative Consequences, Positive Reinforcement-Sensory Satisfaction, Negative
Reinforcement-Negative Affect Regulation, and Appetite-Weight Control. The present research studies
the first factor, negative consequences of smoking. It describes health risk, addiction sustainment,
respiratory irritation and negative social impression.
3. Methodology
The sample for this study consisted of 135 college students. We tested the negative outcomes of
smoking across two samples of male and female by administering the same pool of items to both
samples. The questionnaire consisted of thirty items borrowed from Smoking Consequences
Questionnaire (Brandon & Baker, 1991) and questions on demographic and smoking behavior. Each
smoking consequence item was rated for likelihood of occurrence on Likert type scale (0 = never
happen, 5 = always happen).
4. Results and Discussion
197
The participants were 22 smokers (23.8% of males, 9.7% of females) and 113 nonsmokers (76.2% of
males , 90.3% of females). The average age is 19 years old. In a half of families (51,2%) at least one
parent smoke. 59% of smokers started smoking at the age of under 18 years old. Over 90% of smokers
tried to give up smoking at least once. Principal-components analysis was conducted and yielded four
factors. Five items produced loading less than 0.5 and were not used for the further analysis. For this
study the first factor, Negative Consequences (NC) was selected (see Table 1). Scale reliability was
assessed and yielded coefficient alpha of 0.66. Kaiser-Meyer-Olkin measures of sampling adequacy of
0.72 and 0.77 prove that the samples are middling for factor analysis. Gender differences were
examined by independent samples t-test analysis (see Table 2).
Table 1. Factor Loadings for Negative Consequences of Smoking Items for the Male and Female
Samples
Items
Male
Sample Female
Sample
(n=63)
(n=72)
Smoking burns a person’s throat.
0,53
0,55
Cigarettes make a person’s lungs hurt.
0,61
0,80
Smoking will make a person cough.
0,74
0,70
Smoking makes a person seem less attractive.
0,65
0,65
Smoking makes people look ridiculous or silly.
0,61
0,55
Table 2. Negative Consequences Mean Comparison
Male Sample Mean
(Std. Deviation)
3,43
(0,86)
Female Sample Mean
(Std. Deviation)
3,81
(0,86)
Mean
Difference
-0,37
t
p-value
Result
-2,53
0,013
Significant
difference
The results show that negative expectancies of smoking differ significantly across comparable samples
of young men and women. Females have stronger believes than males that negative outcomes from
smoking would happen. Young men perhaps do not appreciate as much as women the risk from
smoking and believe that they can quit any time. They can be overoptimistic about health-related
consequences of smoking (Reppucci et al., 1991; Weinstein, 1998). The findings of this research
propose a ground for developing effective antismoking advertising campaigns with the uses of fear
appeal. As young women, in comparison with men, evaluate the negative consequences of smoking as
more probable to happen, segmentation approaches can be used in tobacco interventions. The future
research can examine how men and women would respond to fear appeal antismoking advertising.
Moreover, other variables such age, income, smoker status, readiness to quit can provide a more
comprehensive view on problems of smoking and tobacco control.
References
1. Brandon, T. H., Tiffany, S. T., Obremski, K. M., & Baker, T. B. (1990). Postcessation cigarette
use: The process of relapse. Addictive Behaviors, 15, 105-114.
2. Brandon, T. H., & Baker, T. B. (1991). The smoking consequences questionnaire: The subjective
expected utility of smoking in college students. Psychological Assessment, 3, 484−491.
3. Buckley, T. C., Kamholz, B. W., Mozley, S. L., Gulliver, S. B., Holohan, D. R., Helstrom, A. W.,
et al. (2005). A psychometric evaluation of the smoking consequences questionnaire-adult in
smokers with psychiatric conditions. Nicotine and Tobacco Research, 7, 739−745.
4. Copeland, A. L., Brandon, T. H., & Quinn, E. P. (1995). The smoking consequences
questionnaire-adult: Measurement of smoking outcome expectancies of experienced smokers.
Psychological Assessment, 7(4), 484−494.
5. Farrelly, M. C., Healton, C. C., Davis, K. C., Messeri, P., Hersey, J. C. & Haviland, M. L.
(2002).Getting to the Thuth: Evaluating National Tobacco Countermarketing Campaigns.
American Journal of Public Health,92 (6), 901-908.
6. Gilmore A, & McKee M. (2004). Moving east: how the transnational tobacco companies gained
entry to the emerging markets of the former Soviet Union. Part I: Establishing cigarette imports.
Tobacco control, 13,143-150.
7. Goldman, M. S., Del Boca, F. K., & Darkes, J. (1999). Alcohol expectancy theory: The application
of cognitive neuroscience. In K. E. Leonard & H.T. Blane (Eds.), Psychological Theories of
Drinking and Alcoholism (2nd ed.) ( pp. 203–246). New York, NY: Guildford Press.
198
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
Gordon, N. P. (1986). Never smokers, triers and current smokers: Three distinct target groups for
school-based antismoking programs. Health Education Quarterly, 13, 163-180.
Jeffries, S.K., Catley,D., Okuyemi, K. S.,Nazir, N., McCarter, K. S., Grobe, J. E., et al. (2004).Use
of a brief smoking consequences questionnaire for adults (SCQ—A) in African American smokers.
Psychology of Addictive Behaviors, 18, 74−77.
Lewis-Esquerre, J. M., Rodrigue, J. R., & Kahler, C. W. (2005). Development and validation of an
adolescent smoking consequences questionnaire. Nicotine and Tobacco Research, 7, 81−90.
Myers, M. G., McCarthy, D. M., MacPherson, L., & Brown, S. A. (2003). Constructing a short
form of the smoking consequences questionnaire with adolescents and young adults. Psychological
Assessment, 15(2), 163−172.
Pechmann, Cornelia, Guangzhi Zhao, Marvin E. Goldberg and Ellen Thomas Reibling (2003),
“What to Convey in Antismoking Advertisements for Adolescents: The Use of Protection
Motivation Theory to Identify Effective Message Themes”, Journal of Marketing, 67 (April), 1-18.
Reig-Ferrer, A., & Cepeda-Benito, A. (2007). Smoking expectancies in smokers andnever
smokers: An examination of the Smoking Consequences Questionnaire-Spanish. Addictive
Behaviors, 32, 1405-1415
Reppucci, J. D., Revenson, T. A., Abler, M., & Reppucci, N. D. (1991). Unrealistic Optimism
among Adolescent Smokers and Nonsmokers. Journal of Primary Prevention, 11(3), 227-236.
Wakefild, M., Flay, B., Nichter, M., Giovino. (2003). Effects of Anti-Smoking Advertising on
Youth Smoking: A Review. Journal of Health Communication, 8(3), 229-247.
Weinstein, N. D. (1998). Accuracy of Smokers’ Risk Perceptions. Annals of Behavioral Medicine,
20(2), 135-140.
Wetter, D. W., Smith, S. S., Kenford, S. L., Jorenby, D. E., Fiore, M. C., Hurt, R. D., Offord, K.P.,
& Baker, T.B. (1994). Smoking outcome expectancies: Factor structure, predictive validity, and
discriminant validity. Journal of Abnormal Psychology, 103(4), 801−811.
World Bank. (2001). Tobacco Control at a glance. Washington DC.
Determinants of behavioural intent to adopt M-commerce in Kazakhstan
Kim-Choy Chung
KIMEP University
[email protected]
Abstract: Due to its inherent characteristics such as ubiquity, personalization and flexibility, Mcommerce promises businesses unprecedented market potential. However, there is only marginal use of
mobile devices for transaction purposes worldwide (Sybase 2008). This study investigates the
determinants of behavioural intent to adopt M-commerce among the Y Generation in Kazakhstan.
Surveys from 345 university-level students and subsequent structural equation modeling revealed
perceived risk, trustworthiness, observability, trialability, compatibility and complexity determined
behavioural intent to adopt M- commerce. Marketing implications for mobile service providers are
discussed.
Keywords: M-Commerce, diffusion of innovation, behavioural intent
1. Introduction
M-commerce or mobile commerce is any transaction, involving the transfer of ownership or rights to
use goods and services, which is initiated and/or completed by using mobile access to computermediated networks with the help of an electronic device, such as a mobile phone, a PDA or a smart
phone (Tiwari & Buse 2007). While there are generally higher usage and familiarity with
communications, media, and digital technologies in the Y Generation (born between 1980-1994) than
the previous generations (Junco & Mastrodicasa 2007), there is only marginal use of mobile devices for
transaction purposes worldwide (Sybase 2008). There is a lack of study about mobile commerce in
Central Asian economies. In Kazakhstan, the Internet penetration rate is 34.3% while its mobile phone
penetration rate is 100% (International Telecommunication Union 2009), representing an ideal
environment to study M-commerce adoption.
2. Hypothesis development
According to the Diffusion of Innovation (DOI) theory (Roger 1983), technological innovation is
communicated through particular channels, among members of a social system over time, working
199
through five stages: Knowledge, persuasion, decision, implementation and confirmation. There are five
perceived characteristics of innovation that can be used to form a favourable/unfavourable attitude
toward the innovation at the persuasion stage: Compatibility, complexity, observability, trialability and
relative advantage. Empirical study by Tanakinjal, Deans and Gray (2010) suggest that compatibility,
complexity, trialability and relative advantage affect behavioral intention towards mobile marketing in
Malaysia (observability was excluded). Borg and Persson (2010) support the relevancy of all five
perceived characteristics of innovation in Roger’s DOI in forming favourable attitude towards mobile
transaction in South Africa. In addition, studies by Joubert and Van Belle (2009) and Tanakinjal et al.
(2010) indicate that trust influences intention to adopt M-commerce, and that perceived risk is a
necessary antecedent for trust to be operative (Mitchell 1999). Wu and Wang (2005) and Tanakinjal et
al. (2010) view perceived risk as influential determinant of behavioural intent to adopt M-commerce.
Correspondingly, the following hypotheses are proposed:
H1: Compatibility determines the behavioural intent to adopt M-commerce among the Y Generation in
Kazakhstan
H2: Complexity determines the behavioural intent to adopt M-commerce among the Y Generation in
Kazakhstan
H3: Observability determines the behavioural intent to adopt M-commerce among the Y Generation in
Kazakhstan
H4: Trialability determines the behavioural intent to adopt M-commerce among the Y Generation in
Kazakhstan
H5: Relative advantage determines the behavioural intent to adopt M-commerce among the Y
Generation in Kazakhstan
H6: Trustworthiness determines the behavioural intent to adopt M-commerce among the Y Generation
in Kazakhstan
H7: Perceived risk determines the behavioural intent to adopt M-commerce among the Y Generation in
Kazakhstan
3. Method
A total of 670 questionnaires were randomly distributed in three private institutions of higher learning
in two of the most populated cities in Kazakhstan (two institutions in Almaty and one in Astana). The
pre-tested questionnaire using 7-point Likert scale comprised of measurement variables extracted from
Roger (1983), Hupcey et al. (2001) and Bauer et al. (2005). Out of the 345 questionnaires returned,
233 were from Almaty and 112 from Astana. The respondents were equally distributed across gender.
All measurement items were subjected to Exploratory Factor Analysis (EFA) and subsequent Structural
Equation Modelling (SEM) for hypothesis testing.
4. Results
The SEM statistics supported all hypotheses (Figure 1). Further, there was evidence to suggest that
perceived risk is inversely related to trialability (regression wt=-33) and relative advantage (regression
wt=-24). However, gender has no significant affect on adoption intention (t-test). Possible explanations
for this finding could be that gender equality, in terms of education exists in Kazakhstan (99.5%
literacy rate) and that women play a central role in daily economic life of Kazakhs (Barfield 1993).
5. Conclusion and limitations of research
The high penetration rate of mobile telecommunication and the strong empirical evidence in support of
all hypotheses in this study suggested the viability of M-commerce in Kazakhstan. The limitations of
this study are that it has not yet explore other potential factors (technology enabler, network aggregator,
content provider and wireless operators) that may determine behavioural intention towards the adoption
of M-commerce.
6. References
1. Barfield, T. (1993). The Nomadic Alternative, Upper Saddle River NJ: Prentice Hall.
2. Bauer, H. H., Reichardt, T., Barnes, S. J., & Neumann, M. M. (2005). Driving consumer
acceptance of mobile marketing: A theoretical framework and empirical study. Journal of
Electronic Commerce Research 6 (3), 181-192.
3. Borg, F. & Persson, M. (2010). Assessing factors influencing the diffusion of mobile banking in
South Africa: A case study on the company Wizzit. Bachelor degree thesis, Goteborg University,
South Africa.
200
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Hupcey, J. E., Penrod, J., Morse, J. M., & Mitcham, C. (2001). An exploration and advancement of
the concept of trust. Journal of Advanced Nursing 36 (2), 282-293.
International Telecommunication Union (2009). Mobile cellular, subscriptions per 100 people.
Available: http://www.itu.int/en/pages/default.aspx [Accessed: 28 Sept 2010]
Joubert, J. & Van Belle, Jean-Paul (2009). The importance of trust and risk in M-commerce: A
South African perspective. Pacific Asia Conference on Information Systems (PACIS), Indian
School of Business, Hyderabad, India, July 10-12, 2009.
Junco, R. & Mastrodicasa, J. M. (2007). Connecting to the Net.Generation: What higher education
professionals need to know about today's students. Washington, DC: NASPA.
Mitchell, V. W. (1999). Consumer perceived risk: Conceptualisations and models. European
Journal of Marketing, 33(1/2), 163-195.
Rogers, E., M. (1983). Diffusion of Innovations. Third Edition, New York: The Free Press.
Sybase, 2008. Research reveals global appetite for mobile banking services. Available:
http://www.sybase.com/detail?id=1054292 [Accessed: 28 Sept 2010].
Tanakinjal, G. H., Deans, K. R. & Gray, B. J. (2010). Third screen communication and the
adoption of mobile marketing: A Malaysia perspective. International Journal of Marketing Studies
2 (1), 36-47.
Tiwari, R.; Buse, S. (2007). The Mobile Commerce Prospects: A strategic analysis of opportunities
in the banking sector. Hamburg: Hamburg University Press.
Wu, J. H., & Wang, S. C. (2005). What drives mobile commerce? An empirical evaluation of the
revised TAM model. Information & Management, 42(5), 719-729.
Figure 1: SEM (standardised) and reliability statistics
Regression weight
compatibility
complexity
observability
trialability
relative advantage
trustworthiness
perceived risk
--> intent
--> intent
--> intent
--> intent
--> intent
--> intent
--> intent
Est. Hypothesis
supported
.76 H1
.66 H2
.22 H3
.67 H4
.50 H5
.70 H6
.97 H7
Reliability
(Cronbach alpha)
Perceived risk
Trustworthiness
Observability
Relative advantage
Compatibility
Complexity
Trialability
.860
.849
.725
.793
.885
.900
.869
Fit measures
CMIN/DF=1.800
P=0.01
RMSEA=0.048
GFI= 0.903
CFI=0.954
Hoelter (0.05=221,
0.01=234)
201
Globalization or Regionalization: Where Kazakhstan is Going?
Dr. Bulent Dumlupinar
KIMEP University
[email protected]
Abstract: Globalization, the ongoing process of greater economic interdependence among countries, is
reflected in the increasing amount of cross-border trade in goods and services, international financial
flows, and flows of labor. Globalization is much more than an economic phenomenon and includes
poverty and inequality, integration into the global economy, inadequacy of aid flows and international
financial system. Globalism now reflects the new realities as a result of the end of the socialist bloc, the
dissolution of the Soviet Union, and the collapse of the Cold War order; and presumably is in part due
to a kind of celebration of capitalism’s recovery after some seventy years.
The specific challenges to globalization are both region- and subject-specific and have different
characteristics in various parts of the word. This study is mainly on literature review. We have
surveyed over thirty articles published on this issue and examples are examined in Asia, Latin America,
Middle East, and Africa. We also try to distinguish between the definitions of globalization and
regionalization in our study. Why Do Countries Seek Regional Trade Agreements? What are
Kazakhstan’s options? Kazakhstan has formed a custom union with Russia and Belarus. Despite this,
Kazakhstan is negotiating to enter to WTO by the end of 2012, in an attempt to utilize global market
opportunities. Where Kazakhstan will go?
Keywords: Globalization, regionalization, competitive advantage, custom union
1. Introduction
The inexorable forces of globalization and regionalization have reshaped the world economic
landscape over the past quarter century. Global trade and financial flows have registered unprecedented
growth during this period. Intra-regional economic linkages have also become much stronger with the
proliferation of regional trade agreements (Hireta et al., 2011). Many industries which are “linkage
intensive” (Ching, 2000) are important to developing countries. In a sense, this looks like globalization
of football which drives a considerable number of other sectors, such as media and different services
like catering and transportation (Soderman and Dolles, 2005). A process of regionalization around the
world has paralleled the process of globalization in recent years. We have witnessed a spectacular rise
of regional and bilateral trade agreements in most parts of the globe (Devlin et al., 2002).
Opposite to the globalization, a new trend of regionalization has emerged in the last few decades.
Regionalization comes in two forms: trade and institutional. The first type is the result of natural
economic development and the benefits of agglomeration, such as the use of economies of scale,
exceed the costs. Fast growing economies interact through trade and nontrade channels in order to
fasten economic growth. The second type of regionalization processes includes institutional forms such
as regional trade agreements. Regional trade agreements are discriminatory trade agreements that
ensure preferential treatment only for member countries. While regional trade integrations increase
trade within integration, if they result in higher barriers to outside countries, then they endanger trade
liberalization as a whole (Bilas and Franc, 2010).
Regionalization can be linked to the increased integration of economies of countries in a region. There
are five steps in the process of regional integration namely free trade areas, customs unions, common
markets, economic unions and a monetary union. Economic integration is seen as a synonym for
regionalization (Mostert, 2003).
2. Methodology
The article is based on literature review. First an extensive survey of literature was done. Worldwide
cases are examined. Our strong belief is that fully participating in the WTO, Kazakhstan’s
competitiveness will considerably increase and will benefit more from the Customs Union formed by
three countries.
202
3. Literature Review
There are numerous sources in the literature covering all the aspects of the topic. Globalization and
regionalization are multidimensional concept and are studied by different disciplines like political
science (Golam, 2011), international business (Cavusgil et.al., 2012), international economics, global
marketing (Keegan and Green, 2011), and international relations. We have surveyed over thirty articles
and books.
4. Conclusion
There are still some unsolved issues like why does the increasingly globalized world engender multiple
regionalist associations? Are regionalisms the effects of or responses to global capitalism? Regional
strategies, which aggregate based on geography (G), are very important since more than half of all
international trade and FDI takes place within regions. This degree of regionalization should come as
no surprise because regions also tend to share commonalities along the cultural (C), administrative (A),
and economic (E) dimensions of the CAGE distance framework (Ghemawat, 2010).
One way of integrating Central Asia into globalization trends is through regional integrations (Bilas
and Franc, 2010). It is quite difficult for Kazakhstan to face the challenges of globalization for today.
Being a regional power for Kazakhstan is more important than trying to globalize without solving
fundamental issues like transparency, increase of investors’ confidence, and having a strong base for
competitiveness. As the Kazakh companies develop distinctive capabilities, they will learn to move
them across markets. The path from emerging markets to global ones is arduous. Companies in
Kazakhstan must learn translate their homegrown capabilities across countries and thus to achieve the
size, the competitiveness, and the broad market presence required to succeed –and endure- in
increasingly turbulent global markets. (Sinha, 2005). Clusters-based regional industrial development is
more appropriate at this stage; as Ghemawat puts (2001), distance still matters.
5. References
1. Hyun Y.S., (1998), “Globalization od Daewoo Motor”, Actes du Gerpisa no. 22
2. Tulter R. V. and Ruigrog W., (1993), “Regionalization, Globalization, or Localization”, Printer
Publisher.
3. Dolles H. and Soderman S., (2005), “Globalization of Sports”, Working Paper 05/1, Deutsches
Institut fur Japanstudien
4. Hamel,G., and Prahalad,C.K., (1994), “Competing for the Future”, Boston HBS Press
5. Ching L., (2000), “Globalizing the Regional, Regionalizing the Global: Mass Culture and Asianism
in the Age of Late Capital”, Public Culture, Winter, 12(1).
6. Hireta, H., Kose, A., and Otrok, C., (2011), “Regionalization vs. Globalization”, November
7. Devlin, R., and Estevadeordal, A., (2002), “Trade and Cooperation: A Regional Public Good
Approach”, PECC Trade Forum, November, Vancouver.
8. Golam M., (2011), “Emerging Political, Ideological and Security Threats and Risks to International
Business”, Journal of Business and Policy Research”, July, Volume 6, Number 1
9. Cavusgil S.T., Knight G., and Riesenberger J.R., (2012), “International Business”. Second Edition,
Pearson Education, New Jersey.
10. Yip G.S. and Hult T.M., (2012), “Total Global Strategy”, Third Edition, Pearson Education, New
Jersey.
11. Keegan W.J. and Green M.C., (2011), “Global Marketing), Sixth Edition, Pearson Education, New
Jersey.
12. Ghemawat P., (2010), “Strategy and the Business Landscape”, Third Edition, Pearson Education,
New Jersey.
13. Ghemawat P., (2001), “Distance Still Matters: The Hard Reality of Global Expansion”, HBR 79,
no. 8.
14. Mummery A., Editor, (2010), “Country Report: Kazakhstan”, Economist Intelligent Report,
November.
15. Sinha J., (2005), “Global Champions from Emerging Markets”, The McKinsey Quarterly,
November 2.
16. Bilas V. and Franc S., (2010), “Globalization, Regionalization, and Information-Communication
Convergence of Africa”, Interdisciplinary Description of Complex Systems, 8(2), University of Zagrep.
17. Mostert J., (2003), “The Impact of Globalization on Developing Countries”, ESSA Conference,
September, Somerset West.
203
Expectation of international university experience
Kim-Choy Chung
KIMEP University
[email protected]
Abstract: Export education industry has become as important source of revenue for university
worldwide and to a nation’s economy. There also an increasing trend of female student enrolments in
university world-wide. However, there is a gap of knowledge on gender differences with respect to
student’s expectation of a good university experience among international students. This sequential
qualitative-quantitative study using in-depth interview and questionnaire survey among Asian
international students in New Zealand suggested female students have higher expectations of university
experience (support services, teaching and expected learning outcomes) than male students.
1. Introduction
From the initial arrival, international students in the host country encounter different and unexpected
problems: the need to adjust to a new educational system; different food taste; different housing and
public transportation systems; personal issues such as homesickness and geographic distance from
familiar others; and cross-cultural problems such as understanding and adjusting to new social norms
(different values and communication patterns, different focus in news delivery). Recent evidence
suggests female students outperform male students academically (Graf 2005); and have difference
expectations of university education from male students among incoming students (Anastasia et al.
1999). There is still a lack of study on gender differences in expectations of university experience
among international students (Sovic 2007).
2. Review of related literature
There is evidence to suggest enrolments or choice of international tertiary education is influenced by
personal recommendations or Word-Of-Mouth referral of former alumni (Mazzarol & Soutar 2002).
Srikatanyoo and Gnoth’s (2005) study of 240 prospective international students in Thailand identifies
six attributes that influences the Thai students’ decision to study abroad at another university: academic
and supporting facilities, academic staff performances, academic reputation of a country, and academic
reputation of domestic institutions. It is also well-known in the education industry that having ‘quality’
courses and reputation in selected fields of study can attract students (Gatfield & Hyde 2005). Research
by Edge Hill University (2011) in Great Britain suggests that men are more reluctant to seek out any
form of academic or pastoral support than women, especially emotional or counseling support. Further,
studies have shown that female students experience more difficulty in adjusting to other cultures than
male students (Hutley 1993; Zhang 2000). Despite numerous studies on higher education experience,
gender differences with respect to student’s expectation of a good university experience in international
tertiary education is under-explored (Sovic 2007), a gap addressed in this study.
3. Methodology
This study involved two-stage samplings: Stage 1 identifies key factors contributing to good university
experience (semi-structured interview) involving education experts, international student recruiters and
international students in New Zealand (total 36 interviewees). The results from stage 1 formed the basis
of the questionnaire survey in stage 2. Overall, survey was randomly collected from 550 international
students at three universities in New Zealand (University of Auckland, University of Otago and
University of Canterbury) and normal distribution was observed. The sample comprised of 48.9% male
and 51.1% female, of which 74.4% enrolled for undergraduate study, and 36.8% have prior working
experience. About 93.1% of respondents originated from Asia.
Statistical procedures
An independent t-test was conducted to determine whether there are gender differences between
respondents’ ratings of survey items. The t-test was supplemented by the effect sizes measures
(Cohens’ d). For Cohen's d, an effect size of 0.2 to 0.3 might be a "small" effect, meaning that if two
groups' means don't differ by 0.2 standard deviations or more, the difference is trivial, even if it is
statistically significant.
4. Findings
The survey revealed that university staff accessibility to response to student’s concerns (mean=5.39);
having knowledgeable and culturally sensitive front-line staff (mean=5.22); and small customised
204
tutorial classes (mean=5.14) contributed to good/positive university experience. Other contributing
factors include: Ease of accessibility to academic staff to help address their academic weakness
(mean=5.01); availability of orientation programs to induct newly arriving students into campuses and
destination country (mean=4.99); strong base of foreign students of same nationalities/ethnicity for
social support to make student feel ‘right at home’ in foreign land (mean=4.89); well-equipped student
support services such as counselling, accommodation and emergency funds for international students
(mean=4.73); the presence of senior staff (professorial level) at education fairs to answer queries about
course admission (mean=4.58); and congruency between what is advertised and the actual experienced
(mean=4.65). Further, the learning outcomes of enrolled programs meeting personal development goals
(expected skills/preparation for workforce) are also important contributors of positive university
experience (mean=4.62).
i)
Female (n=281) Male (n=269)
Mean SD
Mean SD t
5.79 .86
4.99 1.10 6.32
5.57 1.03
4.87 1.15 5.07
5.28 1.03
4.90 1.17 4.71
5.14 1.18
4.88 1.30 4.10
5.13 1.27
4.85 1.35 4.11
Ease of accessibility to university staff to
address student’s concerns
ii) Having knowledgeable and culturally
sensitive front-line staff
iii) Having small customised tutorial classes
to improve learning experience
4.98
iv) Ease of accessibility to academic staff to 4.80 1.33
address their academic weakness
4.71
v) Availability of orientation programs to 4.75 1.08
induct newly arriving students into
4.65 1.40
4.51
campuses and destination country
vi) Strong base of foreign students of same
4.45
nationalities/ethnicity for social support 4.85 1.20
4.49
to make student feel ‘right at home’ in 4.75 1.04
foreign land
3.19
vii) Well-equipped student support services 3.23 1.31
2.40
such as counselling, accommodation & 2.52 1.48
emergency funds for international
students
viii) The presence of senior staff (professorial
level) at education fairs to answer
queries about course admission
ix) Congruency between what is advertised
and the actual experienced
x) Learning outcomes of enrolled programs
meeting personal development goals
(expected
skills/preparation
for
workforce)
xi) Infrastructures of study destination
(rail/highway/airports)
xii) Geographic proximity of study
destination to home countries
Table 2: Independent sample test results by gender and effect sizes
* Significant different at p<.01 and d>.2
d
.81*
.64*
.35*
.21*
.21*
1.21 1.89 -.14
1.18 1.65 .03
1.44 1.55 .11
1.40 3.06 .31*
1.38 2.45 .24*
1.33 1.69 .03
1.42 1.82 .08
Out of the 12 surveyed contributing factors to good/positive university experience, seven showed
significant differences between mean ratings across gender at p<.01 and d>.2, with female giving
higher scores on (Table 2):
i) Ease of accessibility to university staff to address student’s concerns
ii) Having knowledgeable and culturally sensitive front-line staff
iii) Having small customised tutorial classes to improve learning experience
iv) Ease of accessibility to academic staff to address their academic weakness
v) Congruency between what is advertised and the actual experienced.
vii) Learning outcomes of enrolled programs meeting personal development goals (expected
skills/preparation for workforce)
205
5. Conclusions
Female students have higher expectations of university experience (student support services, teachings
and expected learning outcomes) than male students. To help improve student’s learning outcomes of
international students, universities need to consider customized tutorial sessions in accordance to the
academic needs of international students. The introduction of extra learning support such as interactive
workshops, peer learning and support groups can be beneficial to these students. Administrations
should also make special effort to educate international students about the various learning support
programs available to them. A peer or mentor systems are suitable for such purpose. In addition,
faculty members need to make themselves accessible to international students to address their academic
concerns and show empathy to their English proficiency. They need to be culture-sensitive in action,
deeds and words. Increasing the profile of their overseas alumni is another strategy to recruit
international students. Alumni are an ideal starter for building personal relations between past
graduates and the institution. Given that respondents are concerned with gaining appropriate
preparation and skills for the workforce, universities should also consider work-based qualification or
supplemental courses that gear towards career development and personal fulfillment.
6.
1.
2.
3.
4.
5.
6.
7.
8.
References
Anastasia, T.T., Tremblay, K.R., Makela, C.J. & Drennen, N.H. (1999). Student gender
differences in perceived importance of college services. College Student Journal, 33(2), 206–210.
Cohen, J. (1988). Statistical Power Analysis for the Behavioral Sciences (2nd Ed.). NY: Lawrence
Erlbaum Associates.
Dewey, J. (1938/1997). Experience and education. NY: Macmillan Press.
Edge Hill University (2011). Male student experience in higher education [online]. Available:
http://www.edgehill.ac.uk/news/2011/05/male-student-experience-in-higher-education [Accessed:
28 Jan 2010].
Gatfield, R. L. & Hyde, M. (2005). An examination of two case studies used in building a
decision-making model. International Education Journal 6(5), 555-566.
Graf, V. (2005, September 2). Study habits, co-curricular involvement in college varies by gender.
The Daily Evergreen. Retrieved June 5, 2006, from: http:// www.dailyevergreen.
com/disp_story.php? storyId=14094 [Accessed: 28 Jan 2010].
Mazzarol, T. & Soutar, G. N. (2002). Push-pull factors influencing international student
destination choice. The International Journal of Educational Management, 16 (2), 82-90.
Sovic, S. (2007). International Students as ‘Others’? The Experience of First-Year Students in the
Creative Arts, paper presented at the Annual Conference of the Society for Research into Higher
Education (SRHE), Brighton, Sussex, 11-13 December 2007.
Winning the ‘Co-Opetition’ Game in Central Asia: South Korea and Kazakhstan
David Dickerson
KIMEP University
William F. Pore
Pusuan National University
Abstract: The meaning and definition of “marketing” and “strategy” can be extracted and understood
differently, specifically between Korea and Kazakhstan. This paper examines the need to provide a
new framework for formulating business strategy in different destination “frontier” cultures of Central
Asia. It is suggested that this new framework be crafted by the cultural interaction of the participants
rather than by exporting an Anglo-Saxon driven marketing framework from one culture to another,
which can lead to conflict.Dilemma analysis is introduced as a means to resolve conflict resulting from
two contrasting strategies. This analysis has been applied to an examination of South Korea’s attempt
at gaining the competitive advantage in Central Asia, but it is potentially applicable to other regions
and countries of the world. In the present study, the features of classic dilemma analysis have been
applied, but this analysis has also been taken one step further by proposing that successful marketing in
Asia today, especially in the emerging markets of Central Asia, involves the need to apply this analysis
more creatively to resolve multiple contending positions that are not merely dichotomous opposites,
but polycentric.
206
Key-Words- dilemma analysis, new market entry, competitive advantage, cross-cultural marketing
strategy, business strategy, Central Asia, Kazakhstan, East Asia, South Korea
1. Introduction
The inception of ‘Business School’, ‘M.B.A.’, ‘B.B.A.’, ‘marketing degree’, was from the United
States of America during the 1960s while the Koreans, Japanese and Germans never heard of the term
because they were too busy manufacturing and exporting goods. The Anglo-Saxon world prides itself
on winning, competitive strategy, and even guerrilla marketing tactics which all share an American
‘individualistic’ mindset built into their framework. The Asian world prides itself on winning, but one
is only considered a winner if teaching the loser how to win; collaborative strategy, and even
relationship marketing tactics that date back centuries. Thus, the confrontational American buyer, with
the competitive spirit, will undoubtedly need to sit with his South Korean supplier, with a collaborative
spirit, and write a “co-opetition” strategy unifying competition and co-operation.
The M.B.A. had to expand into new markets, as do new companies, such as the Association to
Advance Collegiate Schools of Business (AACSB) which changed its name from the American
Assembly of Collegiate Schools of Business (AACSB) when they realized there existed profit outside
of the United States from gaining their accreditation. It is the commoditization of the ‘M.B.A.’ that
has sent Business Schools around the world in a spin searching for their nitche strategy while
witnessing their local brand in decline, so they believe that AACSB will be their salvation. Hence, a
‘globalized’ product is not ‘culture free’, and the M.B.A. embodies an ideology that may not be
welcomed with ‘regionalized’ expansion.International Business literature in marketing has mostly been
from America, and little or no research has been done to develop market entry models that account for
culture. This paper attempts to acknowledge multiple cultural voices, strategic positions and values
into an inclusive, rather than an exclusive, praxis and to demonstrate the need to build new strategic
cross-cultural frameworks for South Korean companies operating effectively in the different cultures
of Central Asia. Genuine moments of cross-cultural pathways seem to be punctuated, ultimately, by
exercises of hegemonic cultural power.
Dilemma analysis (Hampden-Turner and Trompenaars, 1997) is a methodology which enables one to
map out the mindsets of key players, such as those in Korea and Kazakhstan which are the focus of the
present study, at a time of failing internationalism. By learning how to identify and extract the different
meanings of the key players’ value systems, one is able to map out a new cross-cultural marketing
strategic framework for sustaining the evolution of an elite capacity for change.
A need for self-reflection and a critical examination of adopted management models, especially those
within embedded ethnocentric contexts of shared beliefs, values and cognitive structures, are also
explored. It is argued that organizations need to craft marketing strategy by building, from the groundup, a new framework that has the strategy-making participants’ cultural values built into it rather than
adapting an Anglo-American or European model to other cultures, such as those in East Asia or
Central Asia. The need for the development of organizational ideologies that build on cognitive
structures, culturally sensitized to diversity, is central to a generic strategy for managing increasingly
culturally-diversified organizations that will make up the globalized economy in the Third Millennium.
2. Cross-Cultural Diversity: A Neglected Organizational Capacity
Societies with Anglo-American work ethics have created value systems which emphasize that
individuals can succeed if they have talent and have commitment. There are also ethnie value
differences within these work ethics that are often neglected in increasingly multi-cultural
organizations. These differences are visible, even in the cross-cultural setting between
"psychologically-close" cultures (Sappinen, 1992). Where there are similarities they are defined as
those of a cultural, social, and economic kind. They are exemplified by country-led conglomerates. In
Asia, these include the South Korean chaebol Samsung or the Japanese keiretsu Sony with their
operations in the culturally close societies of Vietnam and China. However, when these same
corporations operate in other Asian cross-cultural contexts that might be assumed to be similar,
differences of a more complex kind have unexpectedly arisen in clashes arising from work and
operational ethics, as have occurred in Indonesia and Thailand (Kyoto Review of South East Asia,
2011). These differences stem from the divergent fields of experience, broadly defined, of each society
(Huo and McKinley, 1992; Kelley, Whatley, and Worthly, 1987).
Cultural Differences (Trompenaars and Woolliams, 2003) in national formative contexts may often
impact the inter-relationship between business strategy; environment and control system attributes; and
strategic management (Douglas and Rhee, 1989; Huo and McKinley, 1992; Kouzmin and KoracKakabadse, 1997; Ouchi, 1979; Porter, 1990; Schneider, 1989). Similarly, an organization's formative
context (whether it has experienced organic and/or acquisition-based growth), history and
circumstance determine organizational success (Kakabadse, 1991: 164).
207
In a European context, French managers, for example, require considerable attention in terms of social
skills training, while an in-depth study of senior mangers in the UK, France, Germany, Sweden,
Ireland, Austria, Spain, and Finland suggested that the French, in particular, resent interference in their
work or in the management of their functions (Kakabadse, 1993). They also find criticism difficult to
take and display a high need for control in terms of implementing their views and intentions. A French
view of interference is seen by managers of other European organizations as comments made by one
colleague to another which might require some consideration (Kakabadse, 1993). A study by
Kakabadse and Myers (1995b) strongly supports this position. Ethnic culture affects the process of
strategy formulation, particularly in scanning, selecting, interpreting, and validating information as
well as establishing priorities (Schneider, 1989). Differences in ethnic culture are, therefore, likely to
result in different interpretations and responses to the same strategic issue (Schneider and De Meyer,
1991)
3. The Meaning of Dilemma Analysis
Dilemma comes from the Greek word Di-lemma, two propositions, which means a situation in which a
choice has to be made to gain or avoid between two equally urgent, yet cunningly incompatible,
alternatives.
It is true that decision-making is about choosing between two unpleasant alternatives and quite often
that is a dilemma. Hampden-Turner (1990) sees di and lemma as two contrasting propositions, so
choosing between them is a challenge. There are dilemmas which are impossible to solve because the
person imposing the dilemma is determined to disintegrate the victim’s value system. Hampden-Turner
(1990) sees these as dilemmas because the author argues that any value one cares to name - such as
universality or rule orientation - has the task of accounting for many particular instances or exceptions
to its rule. Hampden-Turner (1990) maintains that dilemmas are often defined as choices between
unfavourable alternatives. This would certainly sharpen the dilemma, but it is also a dilemma to have
to forgo one alternative for another when one would like to have both. Hampden-Turner (1990) argues
that one needs to extend Dilemma Theory to describe a very common experience - such as
management wanting rapid growth and high profitability, but it is difficult to obtain both. Hence, the
effectiveness of the rule is how frequently one deals with encompassing, or failing to encompass, the
unusual exceptions. Choice includes combining values, not simply dividing them. The “horns” of a
dilemma can be used like the cross-co-ordinates on a chart, allowing an organization to navigate and to
plot its progress. Dilemmas are twin perils which you steer between. In early Greek mythology those
sailors who tried to navigate the straits of Messina were said to encounter a rock and a whirlpool. If
you were too intent upon avoiding the rock, you could be sucked into the whirlpool. If you skirted the
whirlpool by too wide a margin, you could strike the rock. These twin perils had markedly contrasting
natures: the first was hard, solid, static, visible, definite, asymmetrical and an object; the second was
soft, liquid, dynamic, hidden, indefinite, symmetrical and a process. Now anyone with a bias towards
regarding either peril as “more important” puts lives and ship in danger. Leaders who seek to steer
organizations must somehow give due weight to evidences of a quite different order.The purpose of the
charts (Hampden-Turner, 1992) is to show that many managerial choices are not either-or, but bothand. The “horns” of the dilemmas can be steered between and it is possible to navigate in the direction
of, say, “higher quality at lower cost”, while avoiding both the rock of relentless cost cutting and the
whirlpool of ineffable and fathomless quality. Charting records judgements and allows these to be
compared with the harder results and consequences that follow. Hampden-Turner (1990) argues that
since Dilemma Theory holds that one can oscillate from horn to horn, the actual location of a
quarrelling company is of less concern than the quarrelling itself. By Dilemma one does not mean a
bind invented by philosophers or academics to perplex students in perpetuity. Nor does one mean an
act of fascistic oppression, in the sense of Churchill’s phrase, “Everyone believes that if he feeds the
crocodile, the crocodile will eat him last”. These are “pure dilemmas”, designed to be insoluble and,
according to Hampden-Turner, one is concerned with practical dilemmas. An organization, its working
assumptions and strategies, constitute a whole mental and cultural pattern. Hampden-Turner (1990)
argues that one can try to analyse the whole into discrete dilemmas, but these are not, in fact, discrete
or separate. All dilemmas are connected weakly or strongly to all other dilemmas. All solutions or
near solutions make the other dilemmas easier to resolve. All failures or near failures to resolve a
dilemma make the other dilemmas harder to resolve. Dilemmas are connected by a generalised skill in
the capacity to resolve dilemmas - akin to steering a ship skilfully.
Moreover, such skills are learned not simply by individuals but by whole groups and organizations, so
that the resolving of several dilemmas is mediated by organizational learning - by routinized ways of
combining the needs and the claims of different groups both inside and outside the organization.
Dilemmas are combined by drawing upon the cybernetic process. A cycle or, more precisely, a helix
shows development on all three dilemmas sequentially. As the helix develops, the corporations
208
concerned become steadily more differentiated, yet better integrated, and encounter greater turbulence
to which they respond even faster to achieve even greater economies of scale - supported by increased
flexibility and versatility. From such learning circles, corporations can develop as wholes. Good
organizational performance requires one to break down value creation into its components and chart
progress on the separate planes or strategic maps. By concentrating on key dilemmas, one discovers
which issues and which resolutions are crucial to building a new, cross-cultural, strategic platform.
4. The Central Asian Dilemma: Historical and Cultural Context
Asia today asserts its unity in its diversity. Many of the great variety of people who live in Asia now
identify themselves first by the country in which they live and then often add that they are Asian as
well. In doing so, they express a changed habitus and hexus. They are also perfectly expressing the
realization that “between the global and the local there are regions, cultural areas and national states”
(Evans, 2002). Probably nowhere else in the world is this truer than in Central Asia. It is here that the
invented realities of East and West and the nomenclature of geographic subregions, the contested
identities ascribed to insider and outsider, conqueror and subject, a multitude of ethnicities, religions,
and languages, the meaning of past and present, meet and mix, converge, dissolve, come alive and still
contend. Yet, Central Asia is a region where a new transnational configuration is developing, driven by
economic growth, rising energy demand, and the collapse of geopolitical boundaries as evidenced by
the recent Customs Agreement between Russia, Kazakhstan and Belarus. It is the region in which
what has been identified as a “new continentalism” is now appearing (Calder, 2012).
Central Asia’s only previous experience of continentalism was in the thirteenth century. Before there
was the world-is-one-ism of globalization, the Mongols ruled over a nearly total geographic unification
of Asia between 1206 and 1368. Although at its fullest extent the Mongols’ empire existed for only
about a hundred years, Chinggis (Genghis) Khan and his successors came to control a borderless,
multifaceted empire that extended over most of Asia from the Pacific Ocean to Eastern Europe and
Asia Minor. Within this first, virtual Asia-is-one, the Mongols were the first to hold both inner and
outer Asia. This resulted in the disappearance of the boundaries between Persia and the western
steppes, between China and the eastern steppes, and those among the regions of Central Asia. Trade
flourished between East and West and, for the first time since the end of Tang China, the great transAsian overland link between the emporiums of East and West, the Silk Road, was reopened. Along this
continental, interlinked route with multiple hubs, not only was trade exchanged, but also ideas,
peoples, and even diseases. This great political realignment had dramatic consequences for Asian
civilizations (Invictus, 2006; Spodek, 2006). While Mongol rule was at times decidedly harsh and
unwelcome in most parts of Asia, the exchange of goods, the circulation of ideas, the connections
among different cultures, and the enforcement of security of movement among peoples did not go
unremarked by contemporaries (Rogers, 1998; Spodek, 2006).
Asia has traditionally been a continent of empires and the Mongol Empire, though the largest ever
assembled, was not the first or last. Today, however, all the world lives with the essentialism of nations
and states. Borders, not multicentrism and boundaryless-ness, are integral parts of the nation-state. The
nation-state is new to Asia and borders even more so (Chandler et al., 1987; Ricklefs et al., 2010).
There have been numerous studies of the way in which borders are constructed, negotiated, and
policed and how they are transgressed, challenged, and renegotiated. The nation-state encompasses an
ideological and conceptual hegemony and has built up epistemological conventions to support it that
have lasted into the present day. Borders are not only physical divisions but can be discursive practices
and cultural constructions. Yet, borders can be multiple and hybrid (national, cultural, geographical,
gendered, political, economic). They can also be scaled (local, national, supranational, global).
Regions afford convenient sites in which to examine how “bordering” identities are constructed and
performed and challenged.
Very often knowledge is defined, constructed, and constrained by borders, either national or other.
Knowledge and its practices thus shaped may reinforce, reproduce, or redefine those borders. This is
the situation today in the nationalistically defined Asian space. However, the identity of all the regions
of Asia ― East, Southeast, South, and Central ― has been formed not only by remote experiences,
such as the Mongol conquest, but also by the more recent experiences of Western and Japanese
colonialism, wars and revolutions, decolonization, nation-building, the Cold War and a variety of ideas
of pan-Asianism. These experiences have influenced the relations and identities among Asian peoples,
209
as well as those of other regions. Yet, in a political, economic or cultural sense, the term “Asia” itself
is contentious and fluid. The many upheavals in twentieth century Asia have not yet been completely
overcome. Therefore, identity in Asia remains characterized by various changing local, regional, and
national identities, which can be contradictory or mutually exclusive, but most of them stem from or
were shaped by the twentieth century.
Still, we can learn from historical memory. The “new continentalism” which is now being conjectured
comprehends not only the rotation of the world’s center of economic activity back to the East, but also
a “New Silk Road” on which Central Asia is again a major hub (Calder, 2012). In such a situation,
despite the endurance of the nation-state, one can be led to imagine again the borderless,
interconnected, cooperative time of the first Silk Road and all of its implications.
5.The South Korean Dilemma: National Rivalries and Threat of New Entries
Ever since South Korea began to establish diplomatic relations with the countries of Central Asia in the
early 1990s, it has also actively sought in nationalistic fashion to conclude trade relationships within
the region. South Korea’s demonstrated ability to develop a highly successful export trade based on the
manufacture and sale of quality electronics and cars, as well as its construction and shipbuilding
industries, makes it an attractive competitor in the Central Asian market. Less obviously this success
may include an intangible factor The Economist recently identified as South Korea’s “aspirational
entrepreneurial culture” (The Economist March 2012). The latter term conveys the soft power appeal
of other South Korean exports, such as its television dramas, pop music, and the youth culture features
associated with hallyu, or “the Korean wave,” which have recently become especially appealing in
many parts of Asia. It is mainly for these reasons that South Korea, even though not a major power,
has been able to find a foothold in the Central Asian market. But, the appeal of Korean exports stops
on the political front; the mostly hardline regimes of Central Asia have shown slow progress or very
little interest in liberalization or transparency in either business transactions or government-togovernment negotiations. For South Korea, China, and Japan, as for all of the nationalistically guided
Asian economies, the dictum, “Trade follows the flag,” has perhaps always been the most meaningful
way to understand their marketing strategies. The drive for national well being has supplied a major
impetus not only for Korean economic success but also for the desire to ensure future economic
strength and national security. Relatively small, resource-poor and geopolitically challenged, South
Korea is, even so, now more accurately ranked as a “middle power.” In this status, it seeks to ensure
strategic regional advantages within its economic development planning. Such was in large measure
the reason it moved to establish diplomatic relations with most of the five resource rich and
strategically located CIS states of Central Asia. Yet, in the Korean attempt to penetrate the Central
Asian market it faces some formidable challenges from competing nations. As such, its experiences are
those typical of the condition of all countries in the era of the nation-state. In such a one-against-one,
or one-against-all world, South Korea and other Asian countries competing for the markets and
resources of Central Asia face a conundrum. This conundrum is not inconsistent with the issues
encountered in dilemma analysis: Should each of these rivals for the Central Asian market separately
accept and deal as best they can with the present status of the region’s development, eliminate the
competition or cooperate among themselves and/or with the Central Asian governments on a path
forward?
6. Korean Strategic Imperative: Market Prioritization and Competitive Advantage
Six South Korean economic and business investment strategy studies since 2007 (Yi et al., 2007;
Import-Export Bank of Korea, 2009; Cho et al., 2010; Yun et al., 2010; Kim and Kim, 2010; Yun,
2010) abundantly detail the benefits and difficulties, real and potential, Koreans face in attempting to
establish trade relationships in five of the Central Asian republics. Each of these studies makes it clear
that Central Asian resources, especially oil, gas, and mineral ores, lie at the heart of Korea’s strategic
trade interests. South Korea’s main competitors in the region, China and Japan, seek the same benefits
for the same reasons. All of the studies cited above are separately and collectively cognizant of the
various drawbacks South Korea faces in comparison with its competitors, although they all to some
degree see that the industrial cooperation environment in Central Asia has been changing rapidly since
the early 2000s and seem to agree that the region has yet to realize its full potential. The most often
cited drawbacks to Korean penetration of the Central Asian market were the lack of sufficient Korean
capital and government support, the government’s lack of a solid financial vision for FDI investment in
most developing regions such as Central Asia, and that despite some efforts, Korea’s exports and
investments in the region have not led to expected results (Yun, 2010; Kim and Kim, 2010). In
addition, these studies unanimously pointed out that South Korea must observe, research and
continually monitor the changing relations among the Central Asian republics, so as to allow it to focus
on strategic regional industries.
210
Further, South Korea must consider Russian, CIS, Middle Eastern, and European strategies as the
region integrates. Moreover, the South Korean government and enterprises need to enter Central Asia
with a thorough understanding of the strengths and weaknesses of the region and assemble detailed
information about each country separately, so as to brighten investment prospects. Some of the studies
also proposed that the Korean government should employ a variety of penetration strategies according
to each of the Central Asian’s republics’ economic environments and recommended a government
support system for enterprises expanding into the overseas open market. But the most important task
that one of the studies recognized was that South Korea should establish measures which reinforce
cooperative relations within Central Asia and should set priorities. The core objective, as viewed by
this same study, was that South Korea’s central objectives should be the exchange of economic
cooperation and the securing of energy resources, the enhancing of geopolitical values, the
establishment of a bridgehead for entering Eurasia, the improvement of South Korea’s status in general
and the enhancement of its security. But, both studies emphasized that sustainable strategies in Central
Asia are possible only after the establishment of mid- and long-range plans which take these objectives
into account (Yi and Pak., 2007; Cho et al., 2010).
One study proposed in a socially circumspect fashion that the priority sectors for
Korean
attention in Central Asia should be industrial cooperation, value-added production and employment
along with fixed capital investment. The same study recommended that the South Korean strategy
should be to maximize resource exploration and extraction, then channeling the financial benefits so
acquired into investments in infrastructure and industrial diversification (Kim and Kim, 2010).
Recommendations of a more progressive nature have also come forth. A 2007 study suggested that
South Korea should concentrate on economic cooperation especially with Kazakhstan, Uzbekistan and
Azerbaijan before expanding into other Central Asian countries, through exploring marketability
options, making assessments of economic development potential and the trade environment (Yi and
Pak, 2007). However, the same study remarked that from the Korean point of view, since the
establishment of diplomatic relations with the Central Asian countries, although economic cooperation
has steadily expanded, it has not realized its potential. This study was, nevertheless, unequivocal in its
recognition of the complimentarity of the Korean-Central Asian bilateral trade potential existing in the
exchange of abundant Central Asian natural resources and Korean technology, communications,
construction, and transportation.
In a comparison with China and Japan’s efforts in Central Asia, one of the studies noted that China’s
trade with the Central Asian market far outdistances both Japan and Korea. China further was seen as
pursuing not regional but global options. The same study recommended that Korea invest chiefly in
Central Asian resources according to the receptiveness of the separate governments. But it also
recognized the benefits to all competing investor countries of the low cost labor available within the
region (Kim and Kim, 2010). Yet, China was viewed as already having positive diplomatic relations
and economic support programs in Central Asia which enhances its influence (Yi and Pak, 2007).
Another study observed that the Japanese strategy in Central Asia hinges on Japan’s promotion of
itself as a collaborator in economic development by donating financial support for infrastructure,
material and humanitarian support. The Japanese government is also actively involved in backing its
companies efforts by offering entry plans and a course of action, in addition to business climate
intelligence and courses of action and close support. Another competitor, Turkey, was also noted for its
cultural and educational exchanges in Central Asia, which it undertook for the purpose of facilitating
economic penetration (Yi and Pak, 2007).
6.1 “Co-Opetition”: South Korea’s Collaborative Strategy in Central Asia
All of the studies consulted on South Korean penetration of the Central Asian market provided detailed
individual country profiles. Overall, Kazakhstan was judged by each study to be the most attractive in
terms of level of economic development and policy factors favoring foreign investment, followed in
order by Uzbekistan, Turkmenistan, Kyrgyzstan, and Tajikistan. In a broader comparison, on policy
and political factors, Kazakhstan and Kyrgystan were sometimes viewed as equally more attractive
than other countries in the region because of their openness to international society and fewer
regulations. In terms of political stability, Kazakhstan and Turkmenistan compared well, but Kyrgystan,
Tajikistan, and Uzbekistan did not. In government efficiency, Kazakhstan was considered best.
Somewhat pessimistically, however, one 2010 Korean study which considered the economies, policies,
natural resources, and industries of the Central Asian region stated that it was not yet very attractive for
investment, because of its low population and income levels compared to other possible areas of
investment. While judged to be a small market, four of the five countries in the region were noted to
have posted steady economic growth. In the one exception, Kyrgystan, its lack of economic growth
was explained as due to political crisis in the country (Cho et al., 2010).
211
In terms of natural resources and industry, Kazakhstan and Uzbekistan were seen as most attractive for
FDI, because of their energy, mineral resources and robust agricultural sectors. Turkmenistan was
considered attractive due to its natural gas reserves. In the future, Kyrgistan was seen as becoming
more attractive due to exploration of rare earth deposits. In the industrial sector, Kazakhstan,
Turkmenistan and Uzbekistan were the most attractive for their establishment of fixed capital
investment. One of the drawbacks to Central Asian investment which appeared frequently was the
perceived lack of infrastructure. But Kazakhstan and Uzbekistan have competitive transportation
facilities; Kazakhstan and Kyrgistan have ample distribution sectors; and Kazakhstan and Uzbekistan
have a high rate of wire and wireless usage which makes them more attractive. Kazakhstan was
observed to have a high internet penetration rate (Cho et al., 2010).
In terms of Law and Institutions, the same Korean study stated that the legal processes for establishing
corporations were the simplest in Kyrgysstan and Tajikistan and the most documentation was required
in Turkmenistan. Setting up businesses in Uzbekistan was viewed as the most time consuming. As for
real estate acquisition, Kazakhstan recognizes land ownership by foreign corporations and individual
foreigners. Leasing, renting, and credit are not recognized in Uzbekistan and Turkmenistan. The same
study did note that there were encouraging signs of improvement in the policy of openness of most of
the countries in the region, but that there was severe political confusion in Kyrgyzstan (Cho et al.,
2010).
In an analysis of Central Asia’s attractiveness for investment, the above study found that the region’s
changing political and economic environment must be considered. Regional political developments
were considered to significantly affect the economy, and both domestic and foreign environments were
believed to have direct effects on foreign investment. Recent improvements in inter-country economic
exchange among all five countries in the region and the CIS are the most important factors in
increasing the region’s investment potential. By promoting international economic cooperation, the
five countries of Central Asia can reform their weak economic systems, improve their political
transparency, and FDI conditions (Cho et al., 2010).
In another Korean study, the potential for economic growth through the building of industrial plants
and their accompanying potential for adding to economic growth in Kazakhstan and Uzbekistan was
widely considered to be the newest source for raising the economies of those two countries. This study
concentrated on how South Korea could make inroads into this market. The study concluded that the
industrial plant market in Central Asia presents opportunities for South Korean economic growth, but
that there were also considerable obstacles, including the lack of industrial and legal support from the
countries themselves. Korea’s main industrial plant market is currently in the Middle East. In Central
Asia, it was recognized that there are insufficient funds at present for plant construction and fierce
competition from China and Japan in the same market, due to their massive financial strength (Cho et
al., 2010).
As such, the study proposed that an overseas investment fund be established for industrial plant
development and, at the same time, the acquisition of natural resources. The so-called ‘package
strategy’ that has been in use involves what were considered highly political agreements. As a caution,
the study recommended that the risks pertaining to each country in the region be handled very
attentively. In the competition for industrial plant installation, China and Japan were judged by the
study to be the most successful (Cho et al., 2010).
One further study commented that Kazakhstan and Turkmenistan have been able to achieve their level
of industrialization, such as it is, through a resource-based economic structure. But Kyrgystan and
Tajikistan were seen as the least developed countries in the region and, in fact, still dependent on
international aid. These two countries’ development policies consist almost entirely of alleviation of
poverty. Also according to this study, Uzbekistan has the largest population, most diversified economy,
and abundant agricultural production. Somewhat promising was the recognition that Uzbekistan also
has a policy of export promotion based on its low labor cost and abundant resources. In sum, this study
recognized that the economies of Central Asia in general were concentrated in primary products,
especially fuels, metal products, and that the main imports were machinery, transportation equipment,
vehicles, and construction materials in exchange mainly for fuels ─ all promising for South Korean
investment (Kim and Kim, 2010).
Finally, as of 2006, South Korea had also established collaborative science and technology agreements
with Kazakhstan and Uzbekistan in the research and development of nuclear reactors for power
generation. A research report prepared by the Korean Institute of Atomic Energy revealed the
involvement of Korean and Kazakh scientists in experimental joint projects and in designing nuclear
power plants (No et al., 2006). Hence, rather than Korea ‘compete’ against China and Japan for the
competitive advantage, they have sought a collaborative strategy that co-operates with the Kazaks, but
yet still competes with the other two East Asian countries.
212
7. Conclusion: crafting a cross-cultural strategy framework
The conceptualization of unity through diversity, or unity permeating difference, is becoming more
acceptable today as part of some of the changes which have given rise to the information age,
undermining the cultural integration of the nation-state. The concurrent incorporation of the state into
large units and the transformative effects of global economic and cultural flows require a global unity
within which diversity can take place. This is exemplified by the current efforts to create a European
identity, sponsored by the EC (European Commission), in such a way as to allow cultural variation and
unity through diversity (Schelsinger, 1987). Thus do we have one manifestation of the still not
completely understood concept of globalization and how it will evolve. It is a European idea ─ the
Kantian local idea of the cosmopolitan world. However, by extension, within the Kantian legacy, while
the Euro-American idea of the ‘global’ has the right to exist, it is not guaranteed the status of exclusive
universality (Mignolo, 2011). It is recognizing and drawing on the concepts of another universalism,
that of the East ─ from Asia, and China and its cultural sphere specifically─ that we may be able to
create a better strategic framework.
The effort to create an "imagined community" for Europe, generating unifying symbols which
differentiate Europeans from others, also draws sustenance from areas of cultural conflict such as the
notion of ethnie; the set of symbols, myth, memories, heroes, events, landscape and traditions woven
together in popular consciousness (Smith, 1990) and which are grounds for a common culture.
Reconstructing all national European cultures and constructing new symbols for an emerging European
super-state and transnational culture is problematic, although with the further development of the
European Union it is expected that trade between EC member states will rise and that collaborative and
joint-venture projects will be increasingly perceived as low risk initiatives (Burns, Myers and
Kakabadse, 1995). In Asia, there exists the possible viability of another idea. The ancient syncretizing
concept of yin-yang (the blending of opposites, rather than their absolute opposition, as in the West)
may in the end prove to be a useful starting point for harmonizing marketing strategies East and West.
Indeed, yin or yang are continuously blended, neither is always dominant. Both systems theory and yin
and yang direct our attention to context. It is after all the context, whether in the mundane world or
marketing strategy which evolves and requires us to revise the way we perceive reality (Jamieson,
1995). This returns us to the hybridized and blended business structural and marketing approaches
already found in parts of Asia.
However, the ethnic and cultural diversity of Central Asia present us with a problematization ─ a
complication of dilemma analysis ─ that moves us beyond the more clearly grasped yin and yang
duality dominant in the East Asian cultural sphere. This is because Central Asia adjoins and draws
from the influences of not only East Asian, but also South Asian, Middle Eastern, and Eurasian
civilizations. A further complication is that in employing the invented reality “Central Asia,” we are
led to assume a unity that, in fact, never was, and certainly today remains, not of one mindset.
Relations among the republics of Central Asia is at best cautious, at worst hostile. China and India (and
Russia as an afterthought) may be the major Asian rising powers which provide some counterattraction in the region, but we would be wrong to assume a binary contest for Central Asia’s
allegiance (Tellis, A., 2012). In this regard, Central Asia is not unique, but rather a challenge subject to
change on a daily basis.
Ethnie resilience to reconstruction has often been under-estimated, as frequently seen in newly
industrialized societies such as Brazil (Osiel, 1984: 49) and Eastern Europe. Convergence, however, is
never complete and the adoption of particular social forms is mediated by cultures and strong social
forces of ethnie. Hofstede (1992; 1993) contends that research evidence indicates that cultural diversity
and diverse ways of thinking will remain for the next few hundred years. Although ethnie cultural
differences undeniably exist, the significance attached to these differences is the point of discourse.
Some theorists argue that differences in international organizations have less to do with culture and
more to do with the absence of a shared experience within the organization. The argument is that being
of a different ethnie culture should not be a issue (Kakabadse and Myers, 1995a). Kakabadse and
Myers (1995a) argue that the real issue of ethnie differences is preventing the "inhibition factor" from
rising to prominence; not acting on the challenges that exist in an organization simply because they
have been labelled as differences of ethnie.
In order to manage "cultural dilemmas” (Trompenaars and Hampden-Turner, 1997) successfully in
response to global business connections requiring organizations and managers to become competent in
cross-cultural interactions, organizations need to reconcile the idea (Trompenaars and HampdenTurner, 2001) of building a new strategic platform, by first mapping out the existing cultural
differences between Koreans and each of the national cultures of the Central Asian Republics. These
shared and internalized basic assumptions enfold organizational scripts and values welcoming change
and the nurturing of the development and growth of all organizational actors. It could be suggested
213
that charting the mindsets of people East or West, working together in one organization, would
illustrate where the cultural differences exist. Synthesizing these differences will enable the
organization to avoid conflict and crisis, and enable a unified strategy to be implemented. Reconciling
cultural differences will enable the strategy participants to build their own cultures into it (Dickerson et
al, 2006). It could be suggested that a trans-culturally competent strategy for growth would include a
platform that is built in unity by people from diverse cultures.
The Anglo-American management "curse" of gender, multi-cultural talent, and chronic human
resource wastage, in the name of re-engineering both public and private sectors for short-term, least
cost efficiency and competitive advantage, is yet to be confronted in any strategic or cross-culturally
systematic way. This is why organizations based in New York, Mumbai, Almaty or Seoul need to sit
with their customers, strategic partners, investors and suppliers to design a platform that takes each
one’s cultural assumptions and imperatives into consideration because conflict can be costly as a result
of a failed strategy that did not unify organizational value systems.
Neither have the behavioural implications of "24/7" connectivity been addressed. We are now in the
age of technology and world-wide communication virtual networks. We use information technology
so that interactions between service provider and client can be in either "real-time" or "virtual." An
increased use of virtual interventions comprising "canned" or playback interventions, stored and
administered by technology, is also rising. Consultants, coaching mentors and some psychologists
have already used this technology in learning - such as how to do psycho-therapy and to diagnose
through software, designed as an exert system, based on decisions trees, heuristics and fuzzy logic. In
order not to invisibly "cage" individuals, more research and considerably more thought must be put
into the design and implementation of such techno-interventions and services in the globalized
workplace that are aligned with a newly constructed strategic framework that allows intercultural
interaction.
Given the support of the research extracted from Korean sources, there is a need for more case studies
within a collaborative inquiry framework, to increase actor understandings and to develop shared
meanings of actors' contexts. In the field of cultural diversity, ideologies and lifestyles compete for
hegemony. Dominant classes, represented by global enterprises, often impose culture on others in a
globalizing world (Thorne and Kouzmin, 2004) with little or no consideration of the host cultures’
framework for formulating market entry strategy. The emergence of new economic partners from
different destination cultures comes with different perceptions, assumptions and expectations, this
causes conflict, and without the reconciliation of those differences, sustaining a long-term market
presence will inevitably result in crisis.
This paper suggests that organizations of this millennium will require a new cross-cultural framework
for formulating market entry strategy; specifically in frontier markets as Central Asia. This framework
will be custom designed by the various participants and one which will include different value systems
eliciting difference. These cultural differences should be reconciled to sustain the evolution of market
entry strategy and the avoidance of revolution.
8.
1.
References
Ali, A. and Falcon, T. (1995), ‘Work Ethic in the USA and Canada’, Journal of Management
Development, 14(6), pp. 26-34.
2. Anna, C. (2011), “Beijing starts locking poor villages at night,” msnbc.com.
3. Bakhtin, M. M. (1968), Rabelais and His World, MIT Press, Cambridge.
4. Bell, D. (1976), The Cultural Contradiction of Capitalism, Heinneman, London.
5. Bell, D., (1980), 'The Social Framework of the Information Society' in Dertouzos, M.L., and
Moses, J., (eds.), The Computer Age: Twenty-Year View, MIT Press, Cambridge, pp. 159-167.
6. Bennis, W. (1993), An Invented Life: Reflections on Leadership and Change, Addison-Wesley,
Reading.
7. Borda, O.F. (1986), Retorno a La Tierra, Carlos Valencia Editores, Bogota.
8. Burawoy, M. (1994), ‘Why Coupon Socialism Never Stood a Chance in Russia: The Political
Conditions of Economic Transition’, Politics and Society, 2 (4), December, pp. 585-594.
9. Burawoy, M. and Krotov, P. (1993), ‘The Economic Basis of Russia’s Political Crisis’, New Left
Reivew, No.198, March-April, pp. 49-69.
10. Burns, P., Myers, A. and Kakabadse, A. (1995), ‘Are National Stereotypes Discriminating?’
European Management Journal, 13(2), pp. 212-217.
11. Calder,. K. (2012), The New Continentalism: Energy and Twenty-First Century Eurasian
Geopolics, New Haven: Yale University Press
214
12. Cho, Y. et al. (2010), A Study of FDI Attractiveness and Korea’s Entry into Central Asia
(Chungangasia kuggadŭlŭi t’ujamaeryŏkdo puntŏkgwa han’gukŭi chinch’ulbangan), Seoul: Korea
Institute for International Economic Policy (KIEP).
13. Corbett, J. and Mayer, C.P. (1991), ‘Financial Reforms in Eastern Europe: Progress with the
Wrong Model’, CEPR Discussion Paper, Number 603, September.
14. Cowling, K. (1987), ‘An Industrial Strategy for Britain: The Nature and Role of Planning’,
International Journal of Applied Economics, 1(1), pp. 18-27
15. Dickerson, D., Kouzmin, A., and Korac-Kakabadse, N. (2006), “Taking Ideology out of Ethics:
Building a New Cross-Cultural Platform”, Baltic Journal of Management, Emerald Publishing,
UK, 1(3), pp. 285-299
16. Douglas, S. P. and Rhee, D. K. (1989), ‘Examining Generic Competitive Strategy Types in US
and European Markets,’ Journal of International Business Studies, 20(3), pp. 437-463.
17. Escobar, A. (1992), 'Reflection on “Development”: Grassroots Approaches and Alternative
Politics in the Third World', Futures, 24 (6), pp. 411-436.
18. Esteva, G. (1987), 'Regenerating People's Space', Alternatives, 12 (1), pp. 129-136.
19. Evans, G. (2002), “Between the Global and the Local There are Regions, Cultural Areas, and
National States,” Journal of Southeast Asian Studies, 33 (3), pp. 147-162
20. Forbes(2004),‘TheWorld'sRichestPeople,’February26,2004,
http://www.forbes.com/maserati/billionaires2004/, (12 July 2004).
21. Gassner, V. and Schade, A. (1990), ‘Conflicts of Culture in Cross-Border Legal Relations,’
Theory, Culture and Society, 7(2 & 3), pp. 64-71.
22. Goldman, M. I. (2003), The Privatization of Russia, Routledge, London
23. Hampden-Turner, C. (1990), Charting the Corporate Mind: From Dilemma to Strategy, Basil
Blackwell, Oxford.
24. Hampden-Turner, C. (1992), ‘Charting the Dilemmas of Hanover Insurance’, Planning Review, 20
(1), January/February, pp. 22-28.
25. Hampden-Turner, C. and Trompenaars, F., (1997), Mastering the Infinate Game: How East Asian
Values are Transforming Business Practices, Capstone Publishing, Oxford
26. Harvey, D. (1989), The Condition of Postmodernity, Basil Blackwell, Oxford.
27. Hofstede, G. (1980), Culture's Consequences: International Differences in Work-Related Values,
Sage, Beverly Hills.
28. Hofstede, G. (1992), Cultures and Organizations: Software of the Mind, McGraw-Hill, London.
29. Hofstede, G. (1993), ‘Cultural Constraints in Management Theories,’ Academy of Management
Executive, 7(1), pp. 81-94.
30. Huang, Yasheng. (2010), “China’s Other Path,” The Wilson Quarterly, spring, pp. 58-64.
31. Huo, P. Y. and McKinley, W. (1992), ‘Nation as a Context for Strategy: The Effects of National
Characteristics on Business-Level Strategies’, Management International Review, 32(2), pp.103113.
32. Invictus (January 2006), “History of Central Asia – An Overview,” viewed 8 March 2012,
<http://www.allempires.com/article/index.php?=history_central_asia>
33. Jacques, M. (2009), “US Must Move Beyond Western Compass to Understand China,” Los
Angeles Times, November 22
34. Jamieson, Neil. (1995), Understanding Vietnam, University of California Press, Berkeley
35. Johnston, J. and Kouzmin, A. (1998), ‘Who are the Rent Seekers?: From the Ideological Attack on
Public officials to the “Pork Barrel” Par Excellence – Privatization and Out-Sourcing as
Oligarchic Corruption’, Administrative Theory and Praxis, 20(4), pp. 491-507.
36. Kakabadse, A. and Myers, A. (1995a), ‘Qualities of Top Management: Comparisons of European
Manufacturers,’ Journal of Management Development, 14(1), pp. 5-15.
37. Kakabadse, A. and Myers, A. (1995b), Boardroom Skills for Europe, International Management
Development Centre, Cranfield School of Management, Cranfield, pp.1-35.
38. Kakabadse, A. (1991), The Wealth Creators: Top People, Top Teams and Executive Best Practice,
Kogan Page, London.
39. Kakabadse, A.P. (1993), 'Success Levers for Europe: The Cranfield Executive Competencies
Survey', Journal of Management Development, 12(8), pp. 75-96.
40. Kanter, R. M. (1991), ‘Transcending Business Boundaries: 12,000 World Managers View
Change,’ Harvard Business Review, 69(3), May- June, pp. 151-167.
41. Kaplan, Robert D. (2010), “The Geography of China’s Power,” The Korea Herald, May 4
42. Kelley, L., Whatley, A. and Worthley, R. (1987), ‘Assessing the Effects of Culture on Managerial
Attitudes: A Three-culture Test,’ Journal of International Business Studies, 18(2), pp.17-31.
215
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
Khanna, T. et al. (2012), “The Globe: The Paradox of Samsung’s Rise,” Harvard
Business Review,
Kim, T. and Kim, K. (2010), Central Asia’s Industrial Structure and Drawbacks to KoreanCentral Asian Industrial Cooperation (Chungangasia sanŏpgujowa han-chungasia sanŏphyopryŏk
chŏllak), Seoul: Korea Institute of Indstrial Economics and Trade (KIET)
Korac-Boisvert, N. and Kouzmin, A. (1994), ‘The Dark Side of Info-Age Social Networks in
Public
Organizations and Creeping Crises,’ Administrative Theory and Praxis, 16(1), pp.
57-82.
Korac-Kakabadse, N. and Kouzmin, A. (1997a), ‘From "Captains of the Ship" to “Architects of
Organisational Arks”: Communication Innovations, Globalization and the “Withering Away” of
Leadership Steering, in Garnett, J. and Kouzmin, A. (eds.), Handbook of Administrative
Communication, Marcel Dekker Inc., New York, pp. 681-716.
Korac-Kakabadse, N. and Kouzmin, A. (1997b), ‘Maintaining the Rage: From “Glass and
Concrete Ceilings” and Metaphorical Sex Changes to Psychological Audits and Re-negotiating
Organizational Scripts (Parts 1 & 2)’, Women in Management Review, 12(5 & 6), pp.182-195 ;
207-221.
Korea Import-Export Bank (2009), The Condition of Central Asian Resources and Investment
Outlook: Kazakhstan, Uzbekistan, Turkmenistan (Chungangasia chawŏnhyŏnhwanggwa
t’ujahwangyŏng – k’jahŭsŭt’an, ujŭbek’sŭt’an, t’urŭk’ŭmenisŭt’an), Seoul: Korea Import-Export
Bank
Kouzmin, A. and Korac-Boisvert, N. (1995), ‘Soft-Core Disasters: A Multiple Realities Crisis
Perspective on IT Development Failures', in Hill, H. and Klages, H. (eds.), Trends in public Sector
Renewal: Recent Developments and Concepts of Awarding Excellence, Peter Lang, Berlin, pp. 89132.
Kouzmin, A. and Korac-Kakabadse, N. (1997), ‘From Phobias and Ideological Prescription:
Towards Multiple Models in Transformation Management for Socialist Economies in Transition,
Administration and Society, 29 (2), May, pp. 139-188.
Kouzmin, A., Korac-Kakabadse, N. and Jarman, A.M.G. (1996), ‘Economic Rationalism, Risk
and
Institutional Vulnerability’, Risk, Decision and Policy, 1(2), pp. 229-257.
Kouzmin, A., Leivesley, R. and Korac-Kakabadse, N. (1997), ‘From Managerialism and
Economic Rationalism: Towards “Re-inventing” Economic Ideology and Administrative
Diversity,’ Administrative Theory and Praxis, 19 (1), pp. 19-42.
Kumar, B.N. (1995), ‘Evidence of Corporate Transformation in Post Communist Countries:
Towards a Theory of Transformation Management’, in Culpan, R. and Kumar, B.N. (eds.),
Transformation Management in Post Communist Countries: Organizational Requirements for a
Market Economy, Quorum Books, Westpoint, pp. 235-242.
No, S. et al. (2006), A Study of Methods for Establishing a Structure for Cooperation in Nuclear
Energy Technology in Central Asia (Chungangasia kukkawaŭi wŏnjaryŏk hyŏpryŏk gibanjotŏng
pangan yŏngu), Korean Institute of Atomic Energy
Lim, Y. (2000), “The Liberalization Process of Korean Capital Markets,” Investment Management
Financial Innovations
Lipton, M. (1986), ‘The Theory of the Optimizing Peasant’, Journal of Development Studies, 5 (3),
pp. 74-89.
Marcuse, H. (1971), Soviet Marxism, Pelican, London.
McGrath, B. (2003), ‘Reply to All, with History Sticks and Stones, Series: 2/5’, The New Yorker,
New York, Vol. 79, Issue 28, September 29, p. 38.
Meyer, H.D. (1993), ‘The Cultural Gap in Long-term International Work Groups: A GermanAmerican Case Study,’ European Management Journal, 11(1), pp. 93-101.
Mignolo, W. (2011), “Cosmopolitan Localism: A Decolonial Shifting of the Kantian’s Legacies,”
Localities, volume 1, November, pp 11-45
Oh, Myung Seok, et al. (2011), “South East Asian Studies in Korea Since the 1990s: Review and
Reflection by Discipline,” Kyoto Review of South East Asia (online).
Osborne, D., and Gaebler, T., (1992), Reinventing Government: How the Entrepreneurial Spirit is
Transforming the Public Sector, Addison-Wesley, Reading.
Osiel, M. J. (1984), ‘Going to the People: Popular Culture and the Intellectuals in Brazil,’
European Journal of Sociology, 25(1), pp. 38-49.
Ouchi, W. G. (1979), ‘A Conceptual Framework for the Design of Organizational Control
Mechanisms.’ Management Science, 25(7), pp. 833-848.
Politovskaya, A. (2004), Putin’s Russia (trans. by Tait, A), Harvill, London.
Porter, M. E. (1990), The Competitive Advantage of Nations, Free Press, New York.
216
67. Rahnema, M. (1988), 'On a New Variety of AIDS and its Pathogens: Homo Economicus,
Development and Aid', Alternatives, 3 (1), pp. 117-136.
68. Rahnema, M., (1990), 'Participatory Action Research: The Last Temptation of Saint Development',
Alternatives, Volume 15, Number 2, pp. 199-226.
69. Ramos, J.A.G. (1981), The New Science of Organizations: A Reconceptualization of the Wealth of
Nations, University of Toronto Press, Toronto.
70. Ramos, J.A.G. (1985), The Rise and Fall of Capital Markets in the Southern Cone, ECLAC,
Santiago.
71. Reich, R.B. (1993), The Work of Nations: Preparing Ourselves for 21st Century Capitalism,
Simon and Schuster, Sydney.
72. Ricklefs, M. et al. (2010), A New History of Southeast Asia, New York: Palgrave MacMillan.
73. Robertson, R. (1990), ‘Mapping the Global Conditions.’ Theory, Culture and Society, 7(2 & 3), pp.
63-99.
74. Rogers, M. (1998), “National Consciousness in Medieval Korea,” Academy of Korean Studies,
Fifth Annual Conference.
75. Ronen, S. (1986), Comparative and Multinational Management, Wiley, New York.
76. Rosecrance, R. (1986), The Rise of the Trading State, New York: Basic Books, Inc.
77. Ruttard, P. (1994), ‘The End of the Soviet Union: Did it Fall, or Was It Pushed?’, Critical Review:
An Inter-Disciplinary Journal of Politics and History, 8 (4), Fall, pp. 565-578
78. Sappinen, J. (1992), ‘Adjustment to a Foreign Culture and Measuring Expatriate Failure and
Success: Two Case Studies of Finns in Estonia.’ Research Paper Series 2, Helsinki School of
Economic and International Business Administration, Centre for International Business Research,
Helsinki.
79. Schelsinger, P. (1987), ‘On National Identity: Some Conceptions and Misconceptions Criticized.’
Social Science Information, 26(2), pp. 111-124.
80. Schneider, S. C. and De Meyer, A. (1991), ‘Interpreting and Responding to Strategic Issues: The
Impact of National Culture.’ Strategic Management Journal, 12(4), pp. 307-320.
81. Schneider, S. C. (1989), ‘Strategy Formulation: The Impact of National Culture,’ Organization
Studies, 10(2), pp.149-168.
82. Sheldon, A. (1987), 'The Shifting Grounds of Poverty Lending at the World Bank', in Feinberg, R.
(ed.), Between Two Worlds: The World Bank's Next Decade, Overseas Development Council and
Transaction Books, Washington, pp. 87-103.
83. Sheldon, A. (1990), 'Toward a Pro-Poor Information Agenda at the World Bank', Development,
No. 2, pp. 73-76.
84. Smith, A. (1990), ‘Is There a Global Culture?’ Theory, Culture and Society, 7(2 & 3), pp. 92-101
85. Soros, G. (1997), “The Capitalist Threat,” The Atlantic Monthly, February, pp. 45-58.
86. Spodek, H. (2006), The World’s History, volume II, Upper Saddle River: Pearson Prentice Hall
87. Tellis, A. and Pyle, K.(2011), Asia Responds To Its Rising Powers, The National Bureau of Asian
Research, Washington, D.C., pp. 35-62
88. Terrill, Ross. (2005), “What Does China Want?” Wilson Quarterly, Autumn, pp. 50-61
89. Thorne, K. and Kouzmin, A. (2004), ‘Borders in an (In)visible World?: Revisiting Communities,
Recognizing Gulags,’ Administrative Theory and Praxis, 26 (3), September, pp. 408-429.
90. Tonnesson, S and Hans Antlov. (1996), Asian Forms of the Nation, Richmond (UK): Curzon
91. Trompenaars, F. and Hampden-Turner, C. (1997), Riding The Waves of Culture: Understanding
Cultural Diversity in Business (2nd Edition), Nicholas Brealey Publishing Limited, U.K.
92. Trompenaars, F. and Hampden-Turner, C. (2001), ‘Cultural Answers to Global Dilemmas’:
Mastering Management - Part 14, Financial Times, January 15, p. 14.
93. Trompenaars, F. and Woolliams, P. (2003), Business Across Cultures, Wiley-Capstone Publishing
Ltd., West Sussex.
94. Vernadsky, G. (1969), A History of Russia, New Haven: Yale University Press
95. Wamsley, G.L., et al, (eds.), (1990), Refounding Public Administration, Sage, Newbury Park.
96. Walsh, J. (1994), ‘The Global 100’, Time, Number 49, 5 December, pp. 51-53.
97. Wild, A. (1994), ‘Vision of 2022: Era of the Global Works Council and Individualism,’ Personal
Management, 26(13), pp. 39-49.
98. World Bank (2002), World Development Indicators: 2002, The World Bank Development Data
Group,
Washington,
DCWWW
(1996),
‘World-Wide-Web
Survey’,
http://www.consultco.com.au/ (10.10.2004).
99. Yi, C. et al. (2007), Central Asia’s Emergence and Korea’s Response (chungangasiaŭi pusanggwa
han’gukŭi taeŭngjŏllak), Seoul: Korea Institute for International Economic Policy (KIEP)
217
100. Yun, S. (2010), A Study of the Characteristics of the Industrial Plant Market in Central Asia and
Korea’s Strategy for Penetration (Chungang asia enŏji p’ŭllaent’ŭ sijang chŏnmanggwa hangukŭi
Ch’amyŏbangane kwanhanyŏn’gu), Seoul: Korea Institute of International Economic Policy
(KIEP).
101. Yun, S. et al. (2010), A Study of Energy Plant Markets in Central Asia and Korea’s Strategy for
Participation (Chungangasia p’ŭllaent’ŭ sijangŭi t’ŭkjinggwa han’gukŭi ch’amyŏbangan), Seoul:
Korea Institute for International Economic Policy (KIEP).
102. Ziauddin, S. and Davies, M.W. (1992), 'Lessons From the Third World', Futures, 24 (2), pp. 150157.
103. Zuboff, S. (1983), ‘The Work Ethic and Work Organisation,’ in Barbash, J., Lampman, R.,
Levitan, S. and Tyller, G. (eds.), The Work Ethic, Industrial Relations Research Association,
Madison, pp. 153-181.
Steady development of mountain regions of Central Asia by development of tourismA.А.
Mamadrizokhonov Akbar
Khorog state university named after M. Nazarshoev
The last decade the socio economic situation of the inhabitants of mountain regions of CA began
appreciably became worse. In parallel with it the condition of environment was worsened. The
mountain regions of CА are treasury of biovariety and natural resources, and also the place of
concentration of unique cultural heritage: here settled plenty of ethnic groups, each of which has
saved an own dialect, tradition, mode of life, outlook, and also monuments of architecture. As the
mountain communities are the suppliers of mineral, biological and recreational resources, in conditions
of market economy they become noncompetitive in comparison with communities located in flat
territories.
The reasons are the following:
•
remoteness of the markets of selling, absence of purchasing, transport, trade associations of the
population.
•
bad roads, absence of connection, household convenience and poor quality of habitation.
•
absence of industrial enterprise.
•
natural threats for settlements, roads and ground угодий: the avalanches, torrent, landslips,
rock fall and etc.
•
manual work, absence of small engineering sparing influencing mountain slopes.
The above-stated circumstances - remoteness, inaccessibility, severe climatic conditions and sensitivity
to ecological degradation and natural cataclysm, mountain territories collide with a number of specific,
serious problems, which require attention:
•
high level of unemployment;
•
unregulated and unstable tourism, which, on the one hand, does not bring in the investment
to local economy, and on the other hand, undermines ecological stability;
•
the limited access of local production and traditional crafts to the markets;
•
shortage of ground resources and limited steady nature management;
•
poaching;
Such situation results in impetuous development of migratory processes. In search of work and the
improvement of vital conditions of millions of mountaineer, especially the youth, leave to Russia and
other countries. As a result in mountain regions is ever more marked “dead torrent”, it is more difficult
to save high-mountainous ethnos and their cultural traditions, and also mountain ecosystem.
For steady development of mountain regions of CA it is necessary to improve an image of life of the
local population, to stimulate economic growth, and also to guarantee protection of environment,
applying principles of sparing nature management.
Such situation with each year is ever more disturbs the global community. In 1992 UN has conducted
in Rio de Janeiro the World conference on environment and its development, where more than 170
countries have signed a number of the program documents, which should define politics for
maintenance of steady development and preservation of biosphere of the Earth. The whole section of
this document was devoted to necessity of development of the program of actions at local levels. The
basic task - to develop the program of actions, which is called to solve local socio economic problems,
with condition of preservation of alive nature and improvement of alive environment - increase
standard of well-being of the inhabitants, create conditions for participation of public in acceptance of
218
decisions, concerning their community, to ensure access of population to the information and
opportunity of interaction of people with each other.
Based on this document today one of the urgent problems is development of the offers on long-term
steady development of mountain areas of CA, founded on principles of rational, inexhaustible use of
natural resources, preservation of the mountain population and its ethno-cultural specificity and
mobilization of local communities in the decision of problems.
In Caucasus, for the decision of similar problem is created "Alliance" - as voluntary informal
commonwealth mountain communities. It will help mountain communities in common to develop
effective methods of self-management and to influence on taking decisions of regional authorities,
allows them to develop ethno-cultural connection of mountain communities of Caucasus, to exchange
experience and to take the decision of local problems: to raise standard of living, save natural-cultural
variety and as a whole to promote steady development of mountain regions of Caucasus. It would be
very good to reflect above creation of similar Alliance for mountain communities of Central Asia and
in view of features of people living there, to define its tasks.
I analyze an existing situation of mountain communities of Tajikistan; we came to such conclusion,
that the most effective modern tool of steady development of mountain areas is development of tourism.
Not randomly, on the fifty third session of General Assembly of UN was accepted the decision on the
announcement of 2002 by the International year of mountains and International year ecotourism.
Recreation and tourism are the basic strategically important directions of regional development. At
present moment under the decision of Government of TR on the territory of mountain regions of
Tajikistan is created the special economic zone of tourist-recreational type. The basis of its creation is
unique recreational potential and natural importance. It will ensure not only development of economic
potential of region, but also promotes preservations of historical and natural heritage of mountaineers,
social development and steady use of natural resources.
Today, the attitude of the state to tourism as priority branch requires acceptance of the effective
decisions, promoting formation of highly profitable branch. The development of tourism requires
efforts of all interested people and groups the population. The people should understand that today by
narrow forces to decide the problems of tourism it is impossible, since they concern literally all
branches of economy and social sphere. Lack of coordination of work can be resulted in increase by
expense and small overall performance.
Thus, summarizing aforesaid, it is possible to note, that the mountain regions of Tajikistan have a rich
opportunity to lift the socio economic level and also nature protection of international image, as here
was saved in a natural kind the unique mountain ecosystem is rich of tourist resources.
The prevailing part of the territory of this region is not touched by the man, as these places are remote
in all seasons of year; here all biovariety is in primitive kind. With the purpose of further economic
prosperity of mountain regions of Tajikistan and increase of well-being of the local population, these
unique territories should become property of all mankind, not only in republican scale, but the whole
world community.
Pamir high altitude is known as “the Roof of the world ", long since involved tourists and travelers
with the invaluable recreational riches and traditional mode of the local population, however, that they
became powerful tourist resources is necessary the work on study of the international tourist demand,
estimation and preparation of mountain natural objects for operation.
Lack of such work, derivates the problem of impossibility of effective management, development of
tourism in mountain areas, and difficulty in rational territorial organization of the branch.
Necessary condition of formation of territorial - recreational systems and territorial organization of the
international tourism in mountain areas is the presence and territorial accommodation of the factors of
development of tourism and рекреации. They include tourist potential uniting tourist resources and an
infrastructure, tourist formalities and factors of safety of tourism.
In connection with decrease of the level of socio economic development of mountain areas of CA and
strengthening of migratory processes, which results in increasing reduction of number of the
inhabitants and occupied items, the steady development of tourism promotes creation of new
workplaces, involves financial investments in social sphere of mountain districts and saves network of
mountain settlements. Inherently of steady development are such properties of tourism, as capacity and
stability, ecological comp ability and attractiveness. It means connection and observance of interests of
protection of an environment, socio economic development of local communities, development of
national tour industry and tourist firms, tourists as consumers of services - and all this on the basis of
rational nature management. It is necessary to ensure the control of tourist flows and regulation of
anthropogenous loading on natural complexes; attraction of investments in mountain areas, creation of
new workplaces and development of a transport and social infrastructure; favorable conditions of
219
development of tourism and patronage to local tourist organizations; to increase the safety of mountain
tourism and to protect the rights of tourists as consumers.
The tourist resources have unique property to be the basis of realization of simultaneously of
several kinds of tourist occupations. Hence, the operation of natural tourist resources should carry
intensive character that is high-grade use of all opportunities of development of tourism given by
natural complexes. The realization of principle allows rationally use of tourist resources, infrastructure,
to improve fill ability of means of accommodation.
The large attention is necessary to give the development of inner tourism. The internal tourism
promotes tourist development of new mountain territories, creation of tourist infrastructure, and
preparation of experts on tourism.
Our research shows that one of the problems of development of tourism in mountain regions of TR is
lack of scientific knowledge about resources both factors of development of tourism and their effective
utilization. The complete and authentic knowledge of factors of development of tourism is fundamental
principle of management of branch of republican and regional administrations on tourism, fundamental
principal of acceptance of strategic decisions of development of tourism in republic.
Analyzing an existing situation of branch, we came to conclusion, that for steady development of
tourism in mountain regions of TR it is necessary:
1) To develop the scientifically proved strategy of development of tourism in the territory of Pamir
revealing recreational potential of the region.
2) Preparation of the qualified staff and increase of tourist consciousness of the population.
3) Development of hotel facilities and nutrition.
4) Development of transport and communications.
5) Activization of advertisement-information propagation in the world tourist markets.
6. Creation of the information-analytical centre.
7. Problem of protection and rational use of eco-tourist resources of GBAO.
8. Drawing up new tourist routes and reconsideration of existing routes.
9. Creation of new system accommodation of a recreational complex.
10. Development, demonstration and sale of production of national creativity and craft, national
cookery both manufacturing and sales of souvenirs for tourists.
11. Regional cooperation in Central Asia.
Thus, in conditions of growing world demand on eco-tourist service, high appeal of mountain natural
environment and uniqueness of local history-cultural heritage of mountain regions of Tajikistan, the
steady development of eco-tourism can become one of the profitable branches of economy of the
republic, currency receipts and maintenance of employment of the population.
Clusters development in tourism industry of Kazakhstan using Michael Porter’s Diamond
Theory
Nogaibayeva Aliya
KIMEP University
[email protected]
Abstract: This presentation would be a critical review of Porter’s theory on Competitive advantage of
Nations. It refers to the repositioning country to clusters of expertise based on innovation and
productivity. In essence, the chosen industry is tourism management in Kazakhstan. Actually, the goal
is to apply Porter’s Diamond theory to Kazakahstan’s potential in tourism global market. It is very
crtitically to define the potential opportunities, as well as resources for better integration and further
process of brand repositioning of Kazakhstan on global market, building cohesivenees among indusrty
clusters. Overall, the proposed presentation would be a review of Kazakhstan’s aptitude to set up a
valid foundation in tourism marketing abroad and facilitate the right course for economic growth and
tourism development in Kazakhstan.
Key-words: Clusters, comparative/competitive advantage of nations, tourism management,
economic growht, strategy, international business
Overview: Basically, global markets forces require from countries comprise competitive advantage to
survive tough competition and to grow in international business. Thus, the single country should have
something very featured and special to offer on a global stage and promote it in accordance with given
industry. This leads to what we know as common success or innovation.
The chosen topic is essential because in current stage of globalization, Kazakhstan is defined as
country which is in “transition”. This transition implies the progress of technologies, communications
220
and economic, as well as financial development. Tourism industry and infrastructure are rather poor in
terms of Investments, brand awareness, positioning and clusters. Indeed, clusters mean a set of
cohesive services, suppliers, products, activities which share common factors (Lingham, 2000).
Porter’s Diamond examines different sources of world clusters’ development.
Likewise, we can state some of them based on shared knowledge and experience. For example: World
Disney in Europe, Hollywood stars etc. This tells us that with certain factors, every country can create
its own competitive advantage on a global scale (Lingham, 2000). In addition, these factors are
usually free of inherited advantages and opportunites like land, mountains, geographic location etc.
Kazakhstan needs to challenge its potential and opportunities to promote clusters development,
which is critical for economically growing country. In other words, without strong competitive
advantage, which will be known well abroad, it is relatively difficult to position country branding
internationally.
Conclusion: To sum up, the growing and young generation of Kazakhstan must concentrate their
efforts on cohesive development of different industry groups which will set framework for tourism
industry management in smart way. It is very important that the Government should support conditions
and all other aspects to ensure that it gives proper organization and cooperation to motivate innovation
and productivity.
References:
1.
Lingham L., (2000). “Michael Porter’s Theory and its apllication”,http://citehr.com
2.
Recklies D.,(2001),“Porter’s Diamond-Determining Factors of National Advantage”,
http://themanager.org.
3.
Porter M.E. “Competitive Advantage of Nations”, Free Press, New York, 1990
Tourism Clusters: case of Kazakhstan
Bulent Dumlupinar, Ph.D.
KIMEP University
[email protected]
Alina Sapasheva, BCB Student
KIMEP University
[email protected]
Rano Iliyeva, BCB Student
KIMEP University
[email protected]