TELEVISION INDUSTRY IN KAZAKHSTAN: AN ENTITY FOR FOREIGN INVESTMENT

Kazakhstan has set a strategic goal to attract foreign investment into the national economy. In order to establish favorable investment climate Kazakhstan went through the radical liberalization of foreign economic activity and made changes (amendments) to the legal framework. Certain steps were also taken in order to facilitate business activities and protect foreign investors' interests. Over the past 30 years of independence Kazakhstan has attracted 320 billion USD of foreign direct investments. In spite of certain upward trend of sustained growth, the statistics has showed short-term fluctuations during the times of crisis. While Kazakhstan economy has been hit hard by the crisis and global oil prices, it did not become less resource oriented. At the same time, despite the relative decline in FDI inflows to GDP, Kazakhstan has significant advantage over the average result for Europe and Central Asia. The most of FDI inflows in Kazakhstan are coming from the resource development and service sector. One of the areas of investment is culture and recreation. The share of investments in this particular area is not high and is mainly provided by domestic investors. This paper emphasizes the prospects of national television as an entity for foreign investment. The author draws attention to a number of factors that affect prospects of Kazakhstan television industry in terms of attracting investments. The paper describes both positive and negative contributing factors. Positive ones include competitive environment, modernization of the national media industry, Television dominance in terms of media consumption; high demand for TV series as the most promising product in terms of investment and qualified personnel in Television industry with a relatively low wage. As for several factors that shape risks for foreign investors, the author stresses on the issues of transport and logistics infrastructure, administrative environment and lack of the consumer market capacity. The author provides recommendation to mitigate risks against the insufficient consumer market capacity. 34  Integración de las ciencias fundamentales y aplicadas en el paradigma de la sociedad post-industrial  Volumen 1


Distribution of gross FDI inflows by industry, 2019
One of the areas for the investments within Professional and Technical Services is culture and recreation. The share of investments in this particular area is not high and is mainly provided by domestic investors. This paper emphasizes the prospects of national television as an entity for foreign investment.
In terms of attracting investment, the prospects of Kazakhstani television are influenced by a number of positive and negative contributing factors. Amongst the . factors, which increase investment attractiveness of the television industry are the following influences.
Firstly, the environment, which national media operates in, has rather competitive nature that is the result of a deliberate and conscious policy of the state. Over the past 30 years, Informational space of the Republic of Kazakhstan has been open to foreign mass media. Currently, as of February 25, 2020, 165 local channels, 24 of which with republican status and 141 Regional channels are officially registered in Kazakhstan [8]. In addition, 247 foreign television channels are distributing their products in our country [9]. As of 2015, geographically Kazakh television channels broadcast in 118 countries [10].
Government has set a priority to create conditions for the progressive development of the national media industry.
Secondly, in accordance with 'Information Kazakhstan -2020' State Program [11], modernization is seen as the main objective for the national media industry. Considering the principles of national television in the economy of Kazakhstan, it is quite logical to expect investment growth in the industry.
Thirdly, television in Kazakhstan remains dominant among the population, which can be measured by media consumption and audience share. This is evidenced by data obtained from monitoring the volume of the audience of various media [11]. Data by TNS shows that 97.9% of households in Kazakhstan have at least one TV set. 23.4% have two TVs and 5.1% have more than three TVs [13]. Besides, Kazakhstan demonstrates high rates of average daily TV consumption. On average Kazakhstanis' daily spend 205 minutes watching TV, which is nearly 3.4 hours. Also the time population spends in the Internet is 174 minutes (2.9 hours), 125 minutes (2.1 hours) listening to the radio and 57 minutes on the press. Moreover, in Kazakhstan 72% of respondents watch TV every day, which corresponds to the level of Latvia, Great Britain and Estonia. European countries' statistics also shows a high level of television content consumption. On average, in 28 countries of the European Union 78% of respondents watch TV every day or almost every day. At the same time, the largest consumption of television content is observed in Portugal -94%, 90% in Bulgaria and Romania, 87% in Italy, and the lowest is in Germany -68%, Sweden -60% and Luxembourg -57% [15].
Fourth, the most popular genres include 'soap operas', 'entertainment shows' and 'movies' [16]. The world practice has showed that TV series are the most promising television production in terms of investment. The appeal of television series is also determined by technology development and transformation of the TV product into an advertising tool.
Comparing genre preferences with the 2014 indicators we see that the structure of media content consumption as a whole remains [17].
Fifth factor are low wages, despite of the availability of qualified personnel in the television industry. In February 2020, the average salary in Kazakhstan amounted to 203,833 tenge and first time exceeded 500 US dollars since the summer of 2015 [18]. However in March, a series of events occurred: the OPEC+ deal was disrupted, the price of Brent oil fell to 20-23 US dollars per a barrel, the introduction of the State of Emergency in Kazakhstan due to the coronavirus pandemic, the dollar exchange rate exceeded 447 tenge and consequently the average salary in Kazakhstan amounted to 456 US dollars. For comparison, in Germany and France the minimum wage for 2018 amounted to 1498 Euros, while in Hungary, Romania, Latvia and Lithuania it ranges from 400-430 Euros, which means that the average level of wages exceeds the one in Kazakhstan [19].  Lastly, Kazakhstan introduced the ban on advertising on foreign television channels in order to strengthen the protectionism of the media sphere since July 1, 2016. This norm will increase the flow of advertising budgets to the Kazakhstan television market. However, it is not possible to give accurate indicators of the economic effect of the implementation of this norm, since in recent years the advertising market has been greatly transformed due to the flow of advertising budgets into the internet. Nevertheless, the investors sees the political and legislative will of the state to protect the advertising and media markets of Kazakhstan that is an important factor in assessing investment forecasts.
At the same time it is worth mentioning and identifies certain factors that shape risks for foreign investors.
According to EY data, investors operating in Kazakhstan pay attention to the following areas that require improvement [20]: Firstly, current and potential investors suggest further improvement in transport and logistics infrastructure of the country.
Secondly, it is administrative environment. In spite of high level of political stability, Kazakhstan is facing such challenges as corruption and bureaucracy in public administration.
Third challenge includes flexibility of labor legislation and simplified procedure for issuing work permission. Many investors urge Kazakhstan to facilitate the procedure to bring qualified foreign personnel to the country, recruitment process and layoffs, as well as working hours.
One of the most significant challenges that potential foreign investors may face is lack of the consumer market capacity. Kazakhstan TV series concede competitors as domestic channels are not able to refund the cost of high-quality TV series production. Insufficient volume of television audience in the country does not allow paying off high-quality TV series. While comparing the production cost, it shows that the cost price of one episode of American TV series is 350 times higher than the cost of Kazakhstani product [21]. At the same time, foreign TV series producers consider Kazakhstan to be a secondary market as they collect basic income from the premiere in their respective countries. Selling TV series to Kazakhstan TV channels is a bonus after receiving basic fees. This situation generates low prices when selling TV product in Kazakhstan. As a result, national TV channels get more profit while buying foreign TV series, rather than producing their own. Currently the production of national TV content is of high priority, which is clearly reflected in Kazakhstan legislation.
In order to improve the situation, government officials even tried to implement the ban on foreign TV series on national channels but this decision was found to be ineffective. The establishment of Eurasian Economic Union (EAEC) will significantly expand the consumer market and to some extent ease the situation. However, the most efficient way to improve current status quo is to attract foreign investors and focus on high-quality export-oriented TV product. In that case basic profit would come from sales of foreign TV channels or aggregators of entertainment content on the Web. In this approach both art films and documentary TV series would have great potential.