joint stock company
The Kazakh government has typically paid a very active role in the organization and governance of higher education in the country. Over time the particular policy instruments du jour have changed depending on the main aim being pursued by the state. Of late, there has been an uptick in the number of university mergers as well as the (pseudo-)privatization of the many state funded universities and specialized institutes.
In the most recent round of reorganization in October 2019, 25 universities have been affected. The top-down directive switches their status from ‘republican state enterprise*’ (i.e. state funded) to ‘non-profit joint stock company’. This isn’t quite an act of privatization as the new status transfers all shares in the new company to the Ministry of Education and Science!
This status of non-profit joint stock company (NPJSC) is unusual: joint stock companies tend to be profit-making, which make sense given their ability to make the company’s stocks available to buy and sell. According to the Kazakhstani Law on Non-Profit Organizations (2001), a non-profit organization may be created as a joint stock company or in several other formats (e.g. religious association, public association, foundation).
NPJSCs are described in article 16 of the law as ‘a legal entity that issues shares with the aim of attracting funds to conduct its activities whose income used exclusively for the development of this company’. It may not issue preference shares, derivative and converted securities and it cannot later become a profit-making organization.
The economic aim of the status change appears to be to move the burden of funding these universities away from the state, although if as suggested the only shareholder so far is the Ministry of Education, this must be a long-term goal. It appears there is a secondary (also longer term) mission to diversify ownership of these universities through the transition to a shareholding organization, but without the ability to make profit from the shares, it’s not clear to me which individuals or companies might like to part-own a university.
The October reorganization also envisages the merger of a number of universities – Taraz State Pedagogical University is to be brought together with Taraz State University to become Taraz Regional University; the same fate awaits the State and State Pedagogical universities of Kostanay. In addition, various so-called ‘daughter state enterprises’ – research institutes and laboratories – of the Al-Farabi National University are to be folded into the university.
As usual, it’s a blur of activity in Kazakhstan, with the latest changes reflecting the state’s continued interest in higher education and its creativity in applying new legal and organizational statuses to universities. For more background, check out other posts I’ve written on this topic at Universities for sale in Kazakhstan, Privatizing Kazakhstan’s universities, Mergers and acquisitions in Kazakhstan’s universities and I’d close some universities if I could – Kazakh Ambassador to Canada.
*In Russian, this is республиканское государственное предприятие на праве хозяйственного ведения, often shortened to РГП на ПХВ which translates more specifically as ‘republican state enterprise on the right of economic management’ – can any legal experts out there help explain this in lay terms?
Kazakhstan has embraced private ownership of higher education and many other sectors since it became an independent state following the fall of the Soviet Union. This initially stemmed from the economic turmoil of the early and mid-1990s that led to a need to diversify what had once been a totally state owned and funded higher education system.
Privatization has led to the creation of new organizational statuses in higher education.
Kazakhstan may be the only country in the former Soviet space to have created the category of ‘joint stock company‘ covering higher education institutions (at least, it’s the only instance I’m aware of – please correct me if you know differently). This is, according to Ahn et al (2018):
a scheme where the Kazakhstani government shares ownership with other shareholders, which could be a private individual(s) or corporation. (p.208)
Joint stock companies have ‘the same legal status as privately owned businesses’, according to Hartley et al (2016, p.280). Just a handful of universities were created as joint stock companies to begin with, although an identifiable wave of privatization in the 2000s led to the conversion of some existing state universities into joint stock companies.
One of the country’s first joint stock company-universities was the Kazakh-British Technical University (KBTU), founded in 2000. KBTU makes a fascinating case study in and of itself, not least because of its initial links with then British Prime Minister Tony Blair and the recent debacle about its on-again off-again merger with Satbayev University (about which very little is publicly available so I am waiting to learn more from an inside source. See my April 2017 post for the “on-again” story).
So KBTU is a joint stock company-university, and here’s where it gets even more interesting. KazMunayGaz, an oil and gas company, currently owns 100% of the shares in the highly rated Kazakh-British Technical University (KBTU).
Yes, that’s right, petrol is fuelling degrees (sorry, couldn’t resist that one).
But the story doesn’t quite end there.
KazMunayGaz is not quite the sole proprietor of KBTU. It may own all the shares [ru], but KazMunayGaz itself is fully owned by the Samruk Kazyna Sovereign Wealth Fund, which in turn has just the one shareholder: the government.
So does that make KBTU a private or a public university? The answer is somewhere in between.
NB: Higher ed researchers take note: a new category is needed here!
Having not quite established what sort of higher education institution KBTU is – or is not – the next part of the story only complicates matters.
Earlier in August 2018, it was announced that KazMunayGaz will be selling all of its shares in KBTU.
This time, it seems, KBTU really is going private.
This is not a shock, as it formed part of the second wave of a government-led plan for privatization announced in 2015.
Nevertheless, the various news articles announcing the details of the share sale raise more than an eyebrow about the very fact that a cold hard value has been placed on education.
And, it seems, the cost of education is high: starting offers of US$31 million are expected to buy KBTU. Expressions of interest may be made until early November, at which point a bidding process will take place (these details included in case any of my blog readers ever felt like owning their own university and have some spare cash…).
The new owner is required to retain KBTU’s current profile i.e. range of academic specializations for at least 10 years, ensure that at least 50% of staff are Kazakh, promise to maintain student living conditions for the next five years, and retain use of the current buildings (including the iconic former Kazakh SSR Supreme Council in Almaty) for at least two years.
Further, the new owner may not re-sell or pass on its shares for at least two years and for the three years that follow may only do so with KazMunayGaz’s permission.
So KBTU is going private and it’s going to cost a helluva lot to buy it. And even once you’ve bought it, it’s not quite yours for a good decade, given the buying conditions.
I can’t wait to see who raids their piggy bank for this investment.
Ahn, Elise, John Dixon, and Larissa Chekmareva. 2018. “Looking at Kazakhstan’s Higher Education Landscape: From Transition to Transformation between 1920-2015.” In 25 Years of Transformations of Higher Education Systems in Post-Soviet Countries: Reform and Continuity, edited by Jeroen Huisman, Anna Smolentseva, and Isak D. Froumin, 199–227. Palgrave Studies in Global Higher Education. Palgrave Macmillan. www.palgrave.com/de/book/9783319529790.
Hartley, Matthew, Bryan Gopaul, Aida Sagintayeva, and Renata Apergenova. 2016. “Learning Autonomy: Higher Education Reform in Kazakhstan.” Higher Education 72 (3): 277–89. https://doi.org/10.1007/s10734-015-9953-z.