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Kazakhstan's Samruk-Kazyna cutting expenses

19 february 2013, 18:59
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Photo courtesy of samruk-kazyna.kz
Photo courtesy of samruk-kazyna.kz
Samruk-Kazyna National Welfare Fund will start cost saving, Tengrinews.kz reports citing the Fund's press-service. 11 Kazakhstan companies have already implemented the cost saving program.

"The group is expected to save around 70 billion tenge ($467 million) in three years. The fund's cost saving program was developed with the help of international consultants. All business processes, self-costs and other expenses of the companies were analyzed. The program is expected to improve the competitiveness and optimize the group's activities. The three-year program is being implemented by KazMunaiGas, Kazakhstan Temir Zholy, KazAtomProm, Kazakhstan Engineering, Samruk-Energy, KEGOC, KazpPochta, Kazakhstan Development Bank, SK-Farmatsiya, Damu and Samruk-Kazyna Fund," the press-service said.

KazakhTelecom and Kazakhstan Temir Zholy (national railroad company) has been working on cost saving since 2011 and has already produced some results. The telecommunications company saved 1.3 billion tenge ($8.7 million) in 2012. "Kazakhstan Temir Zholy is implementing the cost saving program. The expected effect of the 3-year program will make is 58 billion tenge ($387 million). Additionally, we will decrease the self-cost of our products and improve the activities' efficiency," head of Kazakhstan Temir Zholy Askar Mamin said.

Lowering the costs, KazPochta (national post service) counts on automation of its business processes. "We plan to cut human resources by means of the optimization. This will help improve efficiency and work quality. The wage pool makes 60 percent of the company's costs. Cutting it by 2-3 percent will give a significant economic effect. There are 16 thousand people working in our system. We plan to cut the staff by 2 percent every year," chairman of KazPochta Arken Arystanov said.

The Samruk-Kazyna group's costs are not always related to its production and commercial activities. Part of them is government payments. For example, the total amount of these expenses made around 301.2 billion tenge ($2 billion) in 2011 (178 billion tenge ($1.2 billion) in 2010). First of all, these costs are related to sponsorship and charity, subsiding passenger transportation, local communications losses and losses from oil and gas sales to the local market at low prices.

The group will separate accounting of incomes and expenses of commercial and non-commercial activities to adequately register every type of the costs in 2013. Besides, considering the multiple growth of expenses, on November 2011 the fund's board limited sponsorship and charity to 3 percent of the consolidated annual net profit, exclusive of second tier banks.

According to experts, cost saving projects should not be coming from above (should not be initiated by top managers). "Any company has space for cost saving. But savings should not be going downwards, but upwards. They lower the costs today and increase them tomorrow. Best option is to develop a program for stimulating personnel to save cost. Primary groups of the companies have to see a real benefit from that. In this case the program would work perfectly," independent director of Kazakhstan Engineering Oleg Kalugin said.

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