Every year Kazakhstan helps agrarians to pay for mineral fertilisers. However, the state is reluctant to invest in organic fertilisers, whose efficiency has been proved. Why does it happen so? It can be explained either by lobbying by companies producing mineral fertilisers or the incapability of the state system to readjust to new realities. See the investigation to know which of the hypotheses proved to be true.
In early 2024, Minister of Agriculture of Kazakhstan Aidarbek Saparov announced the increase in the amount of subsidies for mineral fertilisers and the new scheme of payments. Now state subsidies (60 per cent of cost) will go directly to the Kazakhstan-based fertiliser factories. In other words, a farmer will get the product that was made cheaper by 60 per cent. Previously, subsidies were provided to farmers directly, who paid factories for fertilisers.
Moreover, Saparov noted that Kazakhstan has a very low level of application of mineral fertilisers. For example, European countries apply over 250 kilogrammes of nutritive substances per hectare, Belarus – 120 kilogrammes, Russia – 55-60 kilogrammes. While in Kazakhstan it is less than 10 kilogrammes per hectare. This indicator puts Kazakhstan on the 215th place among 235 countries monitored by the World Bank.
The minister also complained about low crop yield in the republic – 9-10 hundred kilogrammes per hectare, on the average. As a comparison, in neighbouring Russia, the crop yield in 2023 was 30.8 hundred kilogrammes per hectare. A low crop yield increases the production cost, so the farmers of Kazakhstan lose the competition for market share between rival countries. Application of bigger amount of fertilisers, according to the minister, will increase the crop yield by 3-5 hundred kilogrammes per hectare.
Want more ‘mineral’ fertilisers?
A certain set of nutrients in soil is required for the normal growth of plants. Every crop harvesting reduces soil fertility. Fertilisers are needed to recover the soil and get new crops.
There are two main types of fertilisers – organic and mineral. Mineral fertilisers are based on potassium, phosphorus and nitrogen. According to the Bureau of National Statistics (BNS), Kazakhstan uses nitrogen and phosphorus fertilisers most often.
According to the Bureau of National Statistics, the area exposed to mineral fertilisers reduced three-fold in five years, from 1990 to 1995. Only in 2010, Kazakhstan increased the area of lands exposed to mineral fertilisers.
The state’s aid, when farmers are compensated a portion of their expenditures on mineral fertilisers, also began to increase in the 2010s. It has grown almost five-fold from 5.5 billion tenge (32,86 million dollars) in 2013 to 27 billion tenge (58,59 million dollars) in 2022.
Officers of the Kazakhstan Research Institute of Soil Science and Agricultural Chemistry specify that mineral fertilisers are used not to improve the fertility of soil, but to increase crop yield. Mineral fertilisers may enrich the soil by organic matter indirectly.
“Here is the wheat, it has an ear, and the ear has a grain. It consists of chemical elements – nitrogen, phosphorus, potassium, minor elements, and so on. The plant takes these elements from the soil. If we do not apply fertilisers, we exhaust the soil. In other words, it lacks the relevant amount of those chemical elements. When we apply mineral fertilisers, we keep the balance. We give back as much as we take. This is the basic law of crop farming,” said Raushan Ramazanova, chair of the board of the Kazakhstan Research Institute of Soil Science and Agricultural Chemistry.
According to experts, the use of mineral fertilisers allows to use less land for agriculture, and interfere less in the wildlife and to preserve biodiversity, accordingly. According to Bakhytbek Mustafauly, head of the agricultural chemistry department of the Kazakhstan Research Institute of Soil Science and Agricultural Chemistry, today nearly 50 per cent of population of the Earth survive due to mineral fertilisers, while organic fertilisers cannot entirely replace the mineral fertilisers.
The fear of mineral fertilisers holds some validity: they can do harm if misused.
“It happens if too much nitrogen is used or no balance is maintained and no phosphorus or potassium is used. The plant consumes much nitrogen and has an improper metabolism. And the nitrogen remains in plant cells as nitrates and has a toxic nature,” said Bakhytbek Mustafauly.
Plants absorb 40 to 60 per cent of 100 per cent of nitrogen applied to the soil. The excessive amount leaches from the soil or evaporates as a gas, thus contributing to the greenhouse effect. Phosphorus can also leach from the soil. If the soil with phosphorus enters water basins, they turn into marshes.
The excessive use of fertilisers changes the natural structure of soil – the species composition of microorganisms changes, which causes soil acidification. “The beneficial microbial flora and fauna get lost. The soil becomes lifeless without microbial flora. Dead soil does not produce yield. Organic fertilisers must be applied: they not only improve the soil fertility, but also apply microorganisms, and make soil healthy,” said Bakhytbek Mustafauly.
Mineral fertilisers have another negative side effect – they reduce the humus layer. Washing out of valuable nutrients, such as calcium, magnesium, zinc, manganese, and others, from the soil affects the process of photosynthesis and raises the risk of plant disease.
The soil in Kazakhstan is degraded, which is mainly caused by the man-induced impact. The area of cropland decreases, while the area of saline land increases.
According to experts, soil fertility reduced by 40 per cent from the date of virgin lands reclamation in Kazakhstan, i.e. from 1954. In the last 10 years, the weighted average humus content reduced to 20.5 per cent.
The situation with the content of main microelements is also poor. The scientists of the Kazakhstan agro technical university in their 2018 study prepared a map of soil constitution.
The research reported a shortage of main microelements important for plant nutrition – nitrogen and phosphorus. Bakytzhan Asembekov, chair of the Committee for Vermifarmers Cooperation, shared his feelings about the soil condition.
“In Shymkent (where Asembekov works – Author’s note), everyone uses mineral fertilisers. It is an area of risk farming today. Soil degradation is increasing, plants do not produce fruit. It takes one hundred years to produce one centimetre of humus. We need to use organic fertilisers. They are not more expensive than mineral ones. First of all, this is the investment to our future fertility,” Asembekov said.
Organics at a minimum level
There is a great variety of organic fertilisers. The most known is manure. It is a natural source of micro and macro elements required for a full vital activity of plants. This simplest organic fertiliser has an advantage that mineral fertilisers do not have. The manure components form a fertile soil layer, which thins when mineral fertilisers are applied.
All organic fertilisers have one thing in common – if used properly, they can recover the soil fertility. In Kazakhstan, biologicals and biofertilisers have proven to be effective. Scientists of the agrarian research university used them to increase the humus content in the lands of south-eastern Kazakhstan.
Recommendations on how to use organic fertilisers in the republic have been received for a long time and regularly. For example, according to the 2022 report of the ministry of agriculture “On the condition and use of lands”, “To ensure deficit-free or positive balance of the organic matter (humus) in soils, much attention should be paid to the cheapest and effective sources of its accumulation: recovery and maintenance of the humus condition of soils by applying organic fertilisers.”
However, Kazakhstan keeps on using organics at a minimum level by actively supporting the use of mineral fertilisers by state money.
The amount of organic fertilisers used is not increasing consistently.
What is the outcome of state subsidies?
Since 2008, according to the memories of Alikhan Kairatbekuly, president of the Union of Cereal Processors, there was a system of subsidies for farmers, when the state helped them with seeds, fuel, herbicides and mineral fertilisers (please note that fertilisers were subsidised previously). According to Kairatbekuly, subsidies were introduced to reduce the cost of wheat production, but it turned into the rise in fertiliser prices. For example, ammophos price has increased from 40 thousand to 80 thousand tenge per tonne within a decade. Kairatbekuly believes that this is the way how producers of mineral fertilisers, not farmers, are being subsidised. In his opinion, without subsidies fertilizer prices would not rise so fast.
The key mineral fertiliser producers in Kazakhstan are two companies. One of them is ‘KazAzot’, the country’s only producer of ammonia and ammonium nitrate (nitrogen fertilisers). Another is ‘Kazphosphate’ producing phosphorus-containing fertilisers and feed phosphates. They account for more than 96 per cent of the total volume of fertiliser production in the country. It can be said that there is oligopoly in the market – a situation when a small number of players dominate in the market.
If we look at the responses of ‘Kazphosphate’, we will have the following profit, revenue and subsidies situation (2023 report was not published by the date of publication).
If we analyse the reports of ‘KazAzot’, we will see the following picture: revenue from ammonium nitrate sales grows faster than the cost of sales.
Let’s compare the net profit of the company to the amount of subsidies received.
According to economic observer Askar Mashayev, the increase in subsidies may be caused by a variety of reasons, e.g. rising cost of production or growth in production, which usually affect the volumes of subsidies.
Damir Babanazarov, co-founder of the investment company Harry Qelm Baabsman, studied the ‘KazAzot’ reports. He links the revenue of ‘KazAzot’ that increased in recent years from nitrate fertiliser sales with the global leap in fertiliser prices, especially in 2021-2022 amid the corona crisis and the war. When the global prices stabilised in 2023, the revenue dropped by 20 per cent compared to the same period last year. This is obvious from the company’s statement for 9 months of 2023.
Damir Babanazarov compared the profitability of ammonium nitrate sales less state subsidies. It turned out that it was a low profit production: once in a few years nitrate fertilizers yield a small loss. If granted subsidies are reported as operating revenue, the company’s profitability seems better.
“Subsidy rates are too generous once we are aware that they are financed from our taxes and our mineral resources. Such subsidy rates make the company all of a sudden extremely profitable in the business segment of ‘ammonium nitrate’,” said Babanazarov.
In his opinion, marginality should not be higher than that of natural monopolies, whose activities are regulated by the state. Babanazarov emphasises that in developed countries regulation is based on the dynamics of inflation. If the country has a long-term inflation rate 2 to 3 per cent, state bodies permit private monopolies to set the tariffs that help maintain profitability at the rate of 5-10 per cent.
“In normal situation, our inflation rate is 6-7 per cent. We can afford to let companies maintain marginality at the rate of 10-15 per cent. But it should not be 30-40 per cent or higher,” Babanazarov said.
He also noted that the profitability of ‘KazAzot’ in other sectors, e.g. gas, does not depend on any subsidies, “Because the revenue segment ‘commercial gas’ is highly profitable without any support.”
Both enterprises, ‘KazAzot’ and ‘Kazphosphate’, have come to the attention of the Agency for Competition Protection and Development (AZRK). Thus, in April 2022, AZRK received a complaint from farmers and started inspection of ‘Kazphosphate’. The investigation showed that the company abused its dominating position and sold ammophos at monopolistically high price.
“In November 2021, there was a jump in the price of ammophos from 125,000 tenge to 168,750 tenge. Compared to the beginning of the year, the growth was 35 per cent. However, in January 2022, the price was 185,625 tenge. Compared to January 2021, the rise in price was 48.5 per cent,” AZRK said adding that the change in expenses necessary for production and sale of the commodity is disproportionate to the change in sale price.
In other words, cost of production increased slightly, but the sale price rose dramatically. Owners receive the margin between the costs and the sale price. ‘Kazphosphate’ reduced the price of fertilisers. In 2024, AZRK reported that the company fully paid the penalty, while the monopoly profit was confiscated from the company.
‘KazAzot’ (see chart above) also shows the increasing gap between the revenue and the cost value. An antimonopoly investigation was held into this company as well. In early March 2022, AZRK reported that the plant set monopolistically high prices of ammonium nitrate, which made farmers refuse to buy fertilisers. On March 18, 2022, ‘KazAzot’ reduced the price of subsidised ammonium nitrate.
Who produces mineral fertilisers?
Former and current owners of both companies dominating on the market of mineral fertilisers are quite interesting.
‘KazAzot’
‘KazAzot’ is the successor to the Peri-Caspian mining-and-metallurgical integrated works (mining of uranium and scandium), which was established in 1969. Later on, integrated works began to produce nitrophos and ammophos fertilisers. In the 1990s, uranium and scandium mining was stopped due to the depletion of reserves, and production of fertilisers became the core activity of the company.
In the meantime, in the 1990s, after Kazakhstan became an independent republic, the enterprise was privatised. It changed owners and type of ownership. Since 2016, when ‘KazAzot’ was transformed into a joint-stock company, and the company started to publish statements, we can name the owners of the company.
50 per cent of ‘KazAzot’ passed to Timur Kulibaev, middle son-in-law of the ex-president of Kazakhstan Nursultan Nazarbayev. Kulibaev is also on the list of the richest people of the plant and the most influential businessmen of Kazakhstan. The second half of ‘KazAzot’ shares were divided between three Kazakhstan businessmen – Dinmukhamet Idrisov, Bakharidin Ablazimov, Yerzhan Dostybaev. All of them are on the Forces list of multimillionaires, while Idrisov and Ablazimov are on the list of the most influential persons.
The time of appearance of these entrepreneurs in the structure of ‘KazAzot’ coincides with the beginning of increasing state allocations to mineral fertilisers (see “Amounts of subsidies allocated for mineral fertilisers”).
At the end of 2021, Idrisov, Dostybaev and Kulibaev (his share was estimated as 39.44 billion tenge, or nearly 91 million dollars) sold their shares. 85 per cent of shares were bought by Kazakhstan Petrochemicals, probably created specifically for the deal in August 2021. 15 per cent of shares remained with Ablazimov, but he increased his ownership in ‘KazAzot’ because he became one of co-owners of ‘Kazakhstan Petrochemicals’. In addition to Ablazimov, the founders of the company became 10 more persons (by 2024, the number of founders was reduced to eight).
‘Kazphosphate’
According to the website of ‘Kazphosphate’, the company was founded in 1999. It is true formally, legally the company named ‘Kazphosphate’ began to exist one year before the new century. However, ‘Kazphosphate’ is rooted in the 1960s, when the plant producing mineral fertilisers (ammophos) was opened. At the end of the 90s, ammophos producing facilities privatised by foreigners became a part of the closed joint-stock company ‘KazSabton’. Back then, in 1999, ‘KazSabton’ asked the government of Kazakhstan to keep the previous transportation privileges. Meanwhile, by decision of the government of Kazakhstan, ‘KazSabton’ created ‘Kazphosphate’.
‘Kazphospate’ has been through a number of owners. Rich people always went into this business, and some could even become millionaires due to it. It happened, e.g., with Nurlan Bizakov, who in 2007 became the co-owner of ‘Kazphospahte’. Soon, he sold the enterprise. The deal, as well as the sale of other assets put him on the list of the richest businessmen of Kazakhstan in 2012, according to Forbes Kazakhstan, with the capital of 440 million dollars.
Apparently to emphasise the wealth of the businessmen, the journalists specified, “A connoisseur of racehorses and a horse breeder, last year he bought a red mare for 1,7 guineas (2.8 million dollars) from Galileo. The mare, according to the agent, should become the basis of the Hesmonds Stud in East Sussex, which was purchased by Nurlan Bizakov.”
In 2017 (which is shown in the company’s statements), Galimzhan Yesenov began to control ‘Kazphosphate’, who had already owned assets with the value of 290 million dollars. In May 2017, when Yesenov sold ‘Kazphosphate’, the fortune of the businessman was estimated at 412 million dollars. The sale of the ‘mineral’ asset made Aizhan Yesim, ex-wife of Yesenov and daughter of ex-akim of Almaty Akhmetzhan Yesimov, a millionaire (207 million dollars).
Afterwards, ‘Kazphosphate’ was again owned by ‘special people’. The 80 per cent share belonged to Kazakhstan billionaire Vladimir Kim (via Kazakhmys Resources B.V.), and Nurzhan and Nurkhan Nurlanovs, sons of the ex-chair of the lower house of parliament Nurlan Nigmatulin, owned 10 per cent.
In June 2023, Russians invested in the capital of ‘Kazphosphate’. Current stakes of old and new owners are unknown. They will be revealed in the 2023 statements, which remain unavailable by the date of publication.
We can suggest that such a heavy artillery is able to lobby their interests at the state level. It is impossible to check officially if there is any lobbying in Kazakhstan – the country has failed to pass the lobbying law since the 1990s. So, we asked questions whether the companies take part in commissions of the Ministry of Agriculture, which decides on subsidies, and questioned the experts. The companies failed to answer the questions, while experts had different opinions.
Lobbying or economic policy?
According to Denis Ten, director of the Centre for Green Technologies in Almaty and Almaty region, there is a “strong lobbying for poisoning the soil taking place.”
“Because of the fact that plants and crops get used to chemical fertilisers more and more every year, they [fertilisers] should be bought in bigger quantities. Insects and microorganisms get used as well. Therefore, the next year the concentration should be increased to be useful. However, it is the other way round with the organics. You apply organic fertilisers for two-three years consecutively, the soil gets filled with humic substances and can remain fertile for many years to come,” Ten said.
According to Denis Ten, once there are lobbying and subsidies on mineral fertilisers only, no one will care about organic fertilisers.
According to Kazybek Shaikh, president of the National Association of Cooperatives and Other Forms of Economic Communities, there may be some lobbying from key players, who promote mineral fertilisers: “Our subsidy law (Rules of subsidies on increase of productivity - Editor’s note) has it everywhere in round brackets “except for organic fertilisers”. And organic fertilisers are used by ordinary people – farmers, vermifarmers. Their voices are not well heard.
“Lobbying is lobbying because it cannot be proven directly, unless you are the security service. We can see there is lobbying on fruits. But no one can provide direct evidences, so everyone avoids these questions,” Shaikh said.
According to Askar Mashayev, it is difficult to speak about lobbying of a particular sector to the detriment of other sectors that have adjacent functions: “Because the public is unaware of the real lobbying practices in Kazakhstan. All available information is rather poor and does not let us have any idea about it.”
He focused on the fact that state support of mineral fertiliser producers is not something extraordinary that requires lobbying.
“If we consider the year of 2010 as the beginning of active industrial development, then we have a well-developed wide range of sectors today, which are usually called prioritised ones and which are actively supported by the state. The sector of mineral fertiliser production became one of the priority sectors once industrial development started,” Mashayev said. Priority sectors are still being supported by the state and their number has increased.”
Askar Mashayev suggested not to forget that Kazakhstan has a consistent industrial policy based on the ideas of dirigisme. In other words, the state makes conscious efforts to promote certain sectors, but not certain companies.
“In the final analysis, we have the economic policy in place, which supports the whole processing sector. Given the wide range of the state support and moderate scopes of the manufacturing sector, it is difficult to find a company, moreover, a larger and average one, which has never received benefits, taxes, subsidies, preferences, or any help from the state,” said Mashayev.
He agrees that the active state support gives birth to various inefficiencies, creates market distortions, support is not always provided to the most effective business entities, that the excessive state support turns companies into ‘zombies’, which hinder other firms and possibly the whole sector from development. “But this is a topic of another discussion,” the speaker said.
How to calculate organic fertilisers?
Officers of the Kazakh Research Institute of Soil Science and Agricultural Chemistry called the suggestion of lobbying the interests of mineral fertiliser producers rumours and idle talks. According to the officers, subsidies on mineral fertilisers only can be explained by the lack of necessary standards.
Mineral fertilisers are produced industrially. All chemical compounds and proportions are well-known. There are standards of application based on scientific recommendations. Therefore, it is easy to calculate and figure out how much money should be allocated. According to scientists, it is more complicated with organic fertilisers. The composition and proportions of key elements vary, and there is no fixed value that can be used as a basis.
“What is an organic fertiliser? Leaves, paper, composts, leaves and soil, or consumer waste, sludge deposits, organic slime, green manures. Just imagine: you approach a pile of organic fertilisers, but what is it made of? Green manure or poultry manure? How much of nitrogen, carbon, phosphorus is there? The problem is that we do not know the composition. How can be subsidise it?” Raushan Ramazanova said.
Arsen Kerimbekov, director of the Union of Organic Producers of Kazakhstan, participant of the project office Organic on the platform of the National Chamber of Entrepreneurs ‘Atameken’, has the same opinion. According to him, the project office does not raise issues of subsidising organic fertilisers now because they are very difficult to measure.
“Other fertilisers are produced in bags, packages, with available standards of application. But the manure has different composition in a month. There should be a standardised well-balanced measure. I can understand the ministry of agriculture, it is difficult to administer all these things. Say, they will subsidise 1,000 tonnes, and it will turn into 700. Then they will be penalised by the financial police. There should be a clear instruction, which is not available,” Kerimbekov said.
Mira Yesimova, representative of the ministry of agriculture, explained at one of the public meetings that organic fertilisers are not subsidised because there are no standards of administration, regulation and use of organic fertilisers. To fill the gap, the nationwide pilot project was launched in 2022 to carry out studies to determine the methodology of subsidising organic fertilisers.
The project participant Kazybek Shaikh, president of the National Association of Cooperatives and Other Forms of Economic Communities, was pleased with the outcomes of the pilot project. He said that many tests were made to study the increase of efficiency from the use of organic fertilisers. All results were submitted to the ministry of agriculture. There was no response by the date of writing of the article.
According to Kazybek Shaikh, all organic fertilisers pass laboratory tests before they receive a certificate of analysis.
“The composition in proportions is precise. If they [officers of the institute of soil science] do not know about it, it is weird,” Shaikh said. “They try to go their own way all the time. They always need some time to create the methodology. Developed countries introduced everything a long time ago: both the methodology, the procedure, and the standards. There are GOSTs on vermicompost (or biohumus – the product of organic residues processed by earthworms and soil bacteria – Editor’s note) available back from the Soviet period – just take them and act.”
According to Andrei Strelets, farmer, organic fertiliser producer, Kazakhstan has had a standard of biohumus for two years already. “My opinion is different from the one of the officers of the institute [of soil science and agricultural chemistry]. That very standard specifies necessary parameters, up to a comma, of nutrients to be contained in a unit of production.”
Is the state stuck in a rut?
According to Andrei Strelets, subsidising organic fertilisers is impossible because Kazakhstan has no relevant bylaws. “It is not enough to make a law, there should be a legal framework first. What is subsidising? Subsidising means money. Everything related to money, national budget is based on many documents; some need to be developed separately, others need to be amended. This is an immense scope of work, which no one does.”
Kazybek Shaikh said he did not have an answer to the question of why Kazakhstan does not subsidise organic fertilisers.
Denis Ten, who has been involved in recycling of organic residues since 2014, and has taken part in various roundtables on organics since 2016, could not find a clear answer to why Kazakhstan hinders organic fertilisers.
“I always ask this question at all round tables, and I hear in response, ‘We do not have standards’. However, we have submitted the standards one million times. Afterwards, ministries start to redirect our proposals between themselves: ministry of agriculture, ministry of ecology. No one wants to deal with it, that’s it,” Denis Ten said.
A vivid example is the law “On state regulation of the development of the agroindustry and rural territories” dated 2005, which provides for the subsidies on fertilisers ‘except for organic fertilisers’.
“This topic has been discussed many times, - Denis Ten said. - Everyone understands that it [exclusion of organic fertilisers] is a mistake because the main problem of soil fertility in Kazakhstan is a low content of organic matter. The government decided to change the situation and adopted the Concept of Development of the Agro-Industry of the Republic of Kazakhstan for 2021-2030 in 2020. The Concept schedules discussion of the issue from December 2025 to December 2027, and making amendments – delete the mistake ‘except for organic fertilisers’.”
Arsen Kerimbekov agrees that the ministry of agriculture is irresponsive to changes: “They say all the time ‘We need to feed the country’, but why do they feed the country with garbage?”
According to Kerimbekov, we need to look at the developed world and invest in organic farming now to avoid the stage of consumption of ‘bad food’.
“Our Western European partners say, ‘We do not teach you how to live, you just need to understand: we started itching and became sick 25 years earlier than you, so we promote organic food now.’ But our [civil servants] do not want to hear,” Kerimbekov said.
The ministry of agriculture failed to answer directly the question of why the production and use of organic fertilisers is not subsidised. However, they said that subsidies are available on the purchase of equipment for poultry manure processing and application of liquid and solid fertilisers. The plans for organic fertiliser support are envisaged for 2028, when state support mechanisms will be introduced during the purchase of industrially produced organic fertilisers.
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The fact that the state focused on supporting mineral, not organic, fertilisers could be explained by several interrelated factors. The economic policy pursued by Kazakhstan contributes to it. Economic observer Askar Mashayev noted that all processing sectors, including mineral fertiliser production, are covered by the government aid programme.
Producers of organic fertilisers can hardly change the existing system and get subsidies. Kazybek Shaikh, president of the Association of Cooperatives and Other Forms of Economic Communities, sees the reason in the fact that ordinary people use organics, so ‘their voices can hardly be heard’.
In fact, producers of mineral fertilisers have a ‘louder voice’, so to speak. Production of mineral fertilisers was and is still controlled either by the people on the Forbes list, or by people related to the political elite of Kazakhstan.
Some experts asked by the editorial staff tend to think that subsidies in the sector of mineral fertiliser production are the result of lobbying. Others call these statements wild guesses and explain the lack of subsidies on organic fertilisers by the absence of measuring methods for such kind of fertilisers, and, consequently, challenges in handling government expenditures in this area.
Main illustration: jcomp на Freepik.com