Wednesday, 27 March 2013

Modernization Efforts On The Rise In Kazakhstan

Published in Field Reports

by Georgiy Voloshin (03/20/2013 issue of the CACI Analyst)

Since the reorganization of Kazakhstan’s Government ordered by President Nursultan Nazarbayev in his keynote address to the nation (“Kazakhstan-2050”) delivered in December 2012, several Kazakhstani ministries have already put forward ambitious modernization proposals. On March 12, the newly established Ministry of Regional Development, whose head is also serving as the first deputy of the country’s Prime Minister, proposed to set up entrepreneurship support centers in every provincial capital as well as in the cities of Astana and Almaty and several preselected remote locations. Currently, two pilot projects are already underway in Almaty and Shymkent, while five provinces benefit from the presence of mobile centers providing information and consultative services to local small and medium enterprises. The purpose of such new structures would be to offer exhaustive information about the latest legal and regulatory changes in Kazakhstan, available funding opportunities and potential ways of further economic development.


Earlier, the chairman of the National Economic Chamber “Ata-Meken” Ablay Myrzakhmetov said that the Kazakhstani Parliament would soon receive a draft law on the status of a refurbished business association implying compulsory membership. The idea of such a comprehensive organization collectively representing the interests of Kazakhstan’s business community vis-à-vis administrative authorities and consumers was previously cited by President Nazarbayev and his son-in-law Timur Kulibayev. According to the initiators of the draft law, compulsory membership would serve as a guarantee of uniform legal protection and increase general awareness with regard to the constantly changing rules of play, including updated tax requirements and regulatory restrictions.

Following Nazarbayev’s decision to lift the ban on the delivery of new subsoil use permits, which remain the primary legal instrument regulating all the extractive activities in Kazakhstan’s energy sector, additional measures have been proposed to attract more investment into the oil, gas and mining fields. In mid-March, the Ministry of Industry and New Technologies reported that it was working on amendments to the law on subsoil use that would considerably simplify the acquisition of mineral rights, especially at early production stages. For example, it is proposed to exempt exploratory activities from the VAT as well as to transfer at least five percent of the mining tax on prospect drilling with no extra cost for the investor who could also enjoy the preemptive right to production and distribution provided that she has already invested in geological activities.

Additionally, the Regional Development Ministry has suggested lowering the minimum threshold of loans available to small and medium businesses in order to boost the volume of small-scale projects implemented by entrepreneurs. Previously, the only source of funding accessible to Kazakhstani businesspeople was offered by the 2020 Business Roadmap, which has already been used by over 35,000 individuals and is expected to further broaden its scope to cover more areas. Finally, the Ministry plans to establish a comprehensive list of permits by the end of 2013, while the delivery of such permits, whose number is expected to progressively decrease, will become fully automated within two years.

During the mid-March Government meeting, Prime Minister Akhmetov instructed his first deputy to prepare a detailed analysis of the audits of private companies conducted between January 2012 and March 2013, paying special attention to those by the Ministry of Health and the Ministry of Emergency Situations. This decision comes in reaction to numerous complaints received on behalf of entrepreneurs citing harassment by administrative authorities in the form of frequent visits and excessive paperwork. Furthermore, one of the Government’s top priorities has been the eradication of corruption, particularly within such control agencies as the Finance Ministry’s Tax Committee and its provincial branches. According to a recent statement by the Agency for fighting economic crimes, corruption has become endemic within tax authorities, while corrupt officials continue to evade punishment with the support of higher-ranking public servants.

This string of measures aimed at boosting economic activity and eliminating obstacles to greater prosperity and brighter business opportunities is being accompanied by vast changes in Kazakhstan’s public service. The country’s Agency of Public Service is currently implementing structural reforms modeled on the Anglo-Saxon system, under which public officials will now belong to three distinct groups (A, B and C) depending on their administrative responsibilities and qualifications. The A-group servants will primarily exercise political functions in the central government, with two other groups working both in the capital and in the regions. According to the latest announcement made by the Agency, over 5,000 officials will soon be deployed in provinces in order to share the best managerial practices with their provincial colleagues and impart new Westernized approaches to the many issues of local government.

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