13 Kazakhstani factories producing polypropylene bags and big bags are in a critical financial situation, Forbes reports citing the words of the chairman of the board of the Association of Packers of Kazakhstan Batyrbek Aubakirov.

According to him, the matter is not only in the pandemic of the coronavirus, which crippled the Kazakh business. Kazakhstani manufacturer was in conditions of unequal competition. Based on data from international exchanges, the cost of polypropylene in May 2020 was in the range of 475,000-500,000 tenge per ton.

Thirteen Kazakhstani packaging plants create over five thousand jobs in the real economy. Two packaging factories have already closed in Kazakhstan over the year, and several more are on the verge of closure.

According to B. Aubakirov, it is necessary to build fair competition with packaging manufacturers from countries such as Turkmenistan, Iran and Uzbekistan. From 65% to 80% of the packaging cost is formed from the cost of raw materials – polypropylene. Since the petrochemical enterprises in Iran and Turkmenistan are mainly state-owned, they implement a policy of developing domestic processing to increase exports and attract more foreign exchange earnings. That is, domestic processors receive raw materials at special prices and thus have the opportunity to increase exports.

Unlike Kazakhstan, Uzbekistan is not a member of the Customs Union. Manufacturers enjoy all the preferences similar to ours, but do not bear their burden of responsibility. In particular, they can single-handedly, without coordination with the participants of the Customs Union, point to support and develop their industries. In particular, in the framework of Presidential Decree No. 3818 of October 2, 2019, Uzbekistan introduced protective measures in the amount of 20% for packaging products, including products from Kazakhstan. At the same time, they have the right to export their products duty-free to the territory of the Customs Union under the CIS agreements.

Moreover, the government of Uzbekistan specifically supports its processors and exporters. Land under the largest production sites in Uzbekistan has been transformed into lands of special economic zones, which freed producers from taxes and import duties, including for raw materials. And Kazakhstani producers under the Customs Union are forced to pay duties in the amount of 6.5%.

Two enterprises have already closed in Kazakhstan, several more on the verge. It is expected that 4-5 plants will close before the end of the year.

“Now we need to introduce anti-dumping measures or some other ones that protect producers. By the way, the Russian factories that produce pipes used this opportunity quite successfully. The Kazakhstan side, as far as I know, has never submitted an application to the EEC. But the problem is familiar in Russia. About 70 enterprises in Russia with a total headcount of up to 40 thousand people are ready to support us, Kazakhstani processors, “he said.