16
Kazakhstan*
K azakhstan is a large land-locked central Asian
country, which shares borders with Russia, China,
Kyrgyzstan and Uzbekistan. Though Kazakhstan does not
Population:
PROFILE
15.2 million*
border an ocean, it has part or whole of the three Central GDP (Current US$): 26.93 billion**
Asian water bodies – the Aral Sea, the Caspian Sea and Per Capita Income: 1,780 (Atlas method)**
Lake Balkash – within its boundaries. (Current US$) 6,671 (at PPP.)**
Surface Area: 2.7 sq. km
The Kazakh natives were conquered by Russia in the 18th
century and Kazakhstan became a Soviet Republic in Life Expectancy: 66.5 years*
1936. During the 1950s and 1960s “Virgin Lands” Literacy (%): 98.4 (of ages 15 and above)**
programme, Soviet citizens were encouraged to help HDI Rank: 80***
cultivate Kazakhstan’s northern pastures. The influx of
Sources:
immigrants skewed the ethnic mix and non-Kazakhs
- World Development Indicators Database, World Bank, 2004
outnumbered natives. The Perestroika in 1991 caused - Human Development Report, UNDP, 2004
many of these newcomers to emigrate. Kazakhstan is the (*) For the year 2005
largest of the former Soviet Republics after Russia and (**) For the year 2003
extremely sparsely populated (6 per km2).
designed to diversify the economy away from over-
Economy dependence on the oil sector, by developing light industry.
Kazakhstan possesses enormous fossil fuel reserves and
plentiful supplies of other minerals and metals. The Kazakhstan has not completed its accession to the WTO,
industrial sector rests on the extraction and processing of though the application was made in 1996 and a Working
these natural resources. In 1995-97, the pace of the Party was established in the same year. Negotiations are
government programme of economic reform and on-going, on the basis of revised offers on goods and
privatisation quickened, resulting in a substantial shifting services. The Working Party prepared a draft report in
of assets into the private sector. Kazakhstan enjoyed near May 2005 and was scheduled to meet again in the first
double-digit growth for four years from 2000 onwards, quarter of 2006.
largely thanks to its booming energy sector, but also due
to economic reform, good harvests, and high foreign Kazakhstan is a member of the Central Asia Cooperation
investments. However, investors continue to complain Organisation, the Conference for Interaction and
about moving goalposts and rampant corruption. Confidence-Building Measures in Central Asia, the
Eurasian Economic Community, the Shanghai
The government has been involved in several disputes Cooperation Organisation, the Organisation for Security
with foreign oil companies over the terms of production and Co-operation in Europe, and most importantly the
agreements, and tensions continue. The local currency, Commonwealth of Independent States (CIS). This last
the Tenge, continued to appreciate through 2005 due to membership has a predominant influence on the
massive oil-related foreign-exchange inflows. The country development path of the competition regime in
has, therefore, embarked upon an industrial policy Kazakhstan.
* Original paper done by Sheetal Bharat of CUTS in March 2006.
86 Competition Regimes in the World – A Civil Society Report
Competition Evolution and Environment Monopolies of July 1998, which regulates the activities
One of the most important CIS treaties, the Treaty on the of natural monopolies in Kazakhstan and provides for one
Creation of the Economic Union of CIS Countries, of the functions of the anti-monopoly authority.
mandates the creation of a free trade area, formation of a
customs union, and creation of a common market of goods, A natural monopoly is defined by this Law as a market
services, capital and labour. These tasks can be achieved situation in which the creation of competitive conditions
only if common competition principles are observed in for satisfying demand in a market for particular types of
these countries; hence the Treaty on the Implementation services or goods is impossible or economically
of a Coordinated Competition Policy1 was concluded in impracticable due to the technical features of the
1993, with the main objective of creating a legal basis for production and provision of the service or good. The Law
the prevention, limitation and elimination of monopolistic on Natural Monopolies also lists eight services that may
activities and unfair competition among companies in the be called natural monopolies and hence are not subject to
common CIS economic area. This Treaty also provides control under the Anti-monopoly Law.
for close cooperation among CIS antimonopoly
authorities, with the following goals: An important exception to the scope of the Law on Natural
Monopolies is the regulation of entrepreneurs and legal
• Coordination of joint activities; entities conducting activity involving a natural monopoly,
• Rapprochement of the antimonopoly laws of the Parties but which is connected with the construction and
to the extent needed for the implementation of the exploitation of objects intended exclusively for their own
Treaty; needs. This situation often arises in connection with
• Creation of favourable conditions for the development petroleum exploration and production companies that must
of competition, effective functioning of the goods construct pipelines and other facilities for the purpose of
markets and consumer rights protection; transporting their own production to port terminals or main
• Elaboration of common procedures for the investigation export pipelines.
and evaluation of monopolistic activities of economic
entities and executive/governing bodies; and Competition law
• Creation of a mechanism for cooperation. The Anti-monopoly Law 2001 of Kazakhstan establishes
the national anti-monopoly organisational framework,
The definitions and rules fixed in the Treaty vis-à-vis which is composed of the central anti-monopoly body
competition were later used in individual country contexts (hereinafter referred to as the AMB) and its local divisions.
by CIS countries while drafting their national laws. This It also describes the tasks and competencies of the AMB,
not only resulted in many CIS countries adopting their and addresses issues related to the definition of market
own competition laws, in the form of antimonopoly laws, dominance, the state control over dominant undertakings
subsequently. It is also the reason behind the high level of and market mergers, the responsibilities of operators, the
similarity between those countries’ antimonopoly laws at right of appeal against the authority’s decision, etc.
the initial stage of their drafting, thus facilitating the further
process of competition law harmonisation.2 The stated objectives of the Anti-monopoly Law are as
follows:
The antimonopoly regime in Kazakhstan, as such, is fairly
well-developed, and is, in many respects, very similar to 1. The development of free competition,
those of the other Central Asian CIS countries. The entrepreneurship, protection of the interests of
country has an old law called the ‘Law on Unfair consumers, and assurance of conditions for the
Competition’ passed in 1998, which was subsequently efficient functioning of commodity markets shall be
amended by Law No. 125 of 2000 of the Republic of recognised as the objectives of this Law.
Kazakhstan, effective from 2001. This law, the concurrent
competition law of Kazakhstan is titled, ‘Law No. 144 of 2. The Law shall define the institutional and legal
19 th January 2001 of the Republic of Kazakhstan measures of state-directed regulation associated
Concerning Competition and Restriction of Monopoly with support to entrepreneurship, the prevention,
Activities’ (hereinafter referred to as the Anti-monopoly restriction, suppression, and regulation of monopoly
Law). activities.
Similarly as other CIS countries, Kazakhstan has another
relevant piece of legislation – the Law on Natural
1 See footnote 2 on page 97
2 http://r0.unctad.org
Kazakhstan 87
No provision of the Anti-monopoly Law suggests any Further conditions that deem market entities dominant are
extra-territorial effect. The jurisdiction of the law is that the aggregate share of not more than two market
restricted to only the territory of the Republic of entities in a commodity market is at least 50 percent, and
Kazakhstan. at least 70 percent for not more than three market entities.
Monopolistic activities are defined as actions of “market The AMB maintains “State Registers of Market Entities
entities, state bodies […] which are aimed at the non- Holding the Dominant (Monopolistic) Position at the
admission, restriction, or elimination of competition, and Commodity Markets of the Republic, Provinces, the Cities
(or) those which infringe the legitimate interests of of Astana and Almaty”, in accordance with the procedure
consumers”. determined by the central body. The market entities that
are included in the Register are subject to severe control
With regard to horizontal collusion, the Anti-monopoly and must provide the AMB with information regarding
Law fully or partially prohibits any agreement between financial and business activities, dealings in shares,
market entities that may have an aggregate market share volumes of production, sales and profitability. These
of the definite goods of more than 35 percent, in cases entities are also required to pre-notify any planned increase
where such agreements may lead to restriction of in prices and the reasons thereof.
competition. Such agreements may be aimed at restriction
or termination of production, withdrawal of goods from The Law also forbids those mergers or agreements
circulation to create an artificial deficit in the market or between enterprises that would result in the controlling
rise in prices by way of collusion, territorial or volume share of more than 35 percent of the relevant market by
sharing of the commodity market, restriction of entrance the said enterprises and if those mergers or agreements
to the market, fixing prices, discounts, mark-ups or aim at impeding a free play of competition in the
increase or decrease of prices at auctions and tenders. Republic.3
The Law also prohibits, fully or partially, any agreement Competition Institutions and Competencies
between “non-concurrent market entities, one of which The governmental body in Kazakhstan, which is
holds the dominant (monopolistic) position and the other authorised to develop commodity markets and
is a supplier or buyer (customer) of such entity” (vertical competition, prevent, restrict and suppress monopolistic
collusion), when such an agreement may “result in the activities, protect the rights of consumers, supervise
restriction of competition and (or) infringement of the compliance, regulate prices and co-ordinate the activities
interests of physical persons and legal entities”. of the other state bodies in the sphere of anti-monopoly
policy, is the AMB, as mentioned before. It is a system
Violation of these requirements may result in “measures composed of the central executive body and the territorial
to market entities, right up to liquidation in a judicial units subordinated to the AMB. The AMB also has a
procedure pursuant to a lawsuit of the antimonopoly council of experts attached to it, comprising of scientists,
body”. specialists and representatives of state bodies and market
entities.
The dominant position of a market entity is defined in the
Law as having a share of a relevant commodity market in The AMB is required to:
excess of “a maximum value to be established annually • carry out analyses to identify market entities that hold
by the Anti-monopoly body”. In the form of some the dominant position,
guidelines given to the AMB, the Law suggests that “the • evaluate other laws that relate to the development of
position of the market entity, whose share at a relevant competition,
commodity market does not exceed 35 percent, may not • submit reports to the Parliament and Government of
be recognised as dominant (monopolistic)”. But a market the Republic of Kazakhstan, and
entity may be considered to have a dominant position even • hear and decide on cases concerning the violation of
though its share in the relevant commodity market is less anti-monopoly legislation.
than the established value, in view of factors such as
stability of the share, relative size of competitors and entry The AMB is also responsible for price policy in areas
barriers. The onus for this decision, as well as the one where there is insufficient competition or ones that require
regarding the boundaries of the relevant market are special attention from a development perspective – a
decided by the AMB. function that is generally the prerogative of the ministry
concerned with the product in question. Some other such
3 mkaccdb.cec.eu.int
88 Competition Regimes in the World – A Civil Society Report
duties include alteration of licensing procedures for export obliged to present a petition to the AMB expressing this
and import transactions, adjustment of customs duties, etc. intention and providing all the information required for
the adoption of a decision in accordance with the list of
When the share of a market entity in the relevant market information to be approved by the AMB. The AMB has
exceeds 35 percent, the AMB must issue mandatory the right to accept or decline the petition on the basis of
instructions to the market entity and also to the heads of whether its acceptance will lead to an assurance of
such entities. It has the right to impose fines on the market competition, or the strengthening of the dominant position
entities, their heads or even official persons of state bodies of an entity/restricting competition.
that may obstruct the process of competition.
If a market entity commits two or more violations of the
Official persons of state bodies, market entities and their antimonopoly legislation in one calendar year, then the
heads, and also physical persons “shall be obliged pursuant AMB has the right to “bring a lawsuit for the compulsory
to the demand of the antimonopoly body to present reliable division or segregation out of their membership of one or
documents, written and verbal explanations, and any other several legal entities”. All market entities and even state
information required for the antimonopoly body for the bodies are obliged to comply with the prescriptions/
performance of its activity”. Market entities may exercise decisions of the AMB. If they do not, the AMB has the
their rights to commercial secrecy, as established by the right, in an administrative procedure, to impose fines in
law, and not be subject to disclosure. accordance with the laws of the Republic of Kazakhstan.
Any state body/market entity has “the right to address to
The territorial state bodies are obliged to assist the the court with the application for the recognition as invalid,
development of markets and competition, “carry out fully or partially, of any prescription or decision of the
purpose-oriented investment”, “stimulate the activities of antimonopoly body” within six months from the day the
concurrent production lines in monopolised sectors”, decision was issued.
undertake “re-organisation of market entities” and
“promote the creation of new enterprises in order to Regulatory Framework
expand competition in the commodity market”. The competition rules of Kazakhstan do not at all address
the crucial issue of the overlap between national
The Anti-monopoly Law also has clear restrictions on the competition law and sectoral regulation.
kind of activities that state bodies may take up and kind
that they may not, in the interest of competition. “The Telecommunications Sector4
state bodies shall be prohibited to adopt acts and (or) to Kazakhtelecom (KT) was created in 1994 on the basis of
commit actions whose which restrict business the telecommunication infrastructure belonging to the
independence, create discriminating conditions, or, on the state, represented by the Ministry of Communication of
contrary, favourable conditions for the activities of certain Kazakhstan. Almost 60 percent of KT’s equity is owned
market entities, in cases where such acts or actions lead by the government. The company has the status of a unique
or may lead to the restriction of competition”. national operator in charge of ensuring the development,
implementation and management of the public
Such actions include the introduction of unreasonable telecommunications network. KT has also the status of
restrictions on the creation of new market entities, their an operator of the public telecommunications network and
performance, sale of goods and their rights, or, conversely, an exclusive provider of the long distance and international
the creation of associations with market entities by sharing services in Kazakhstan.
markets or delegating powers, which may lead to the
creation of a dominant market player. Apart from the incumbent KT, there are also some private
companies operating in the fixed telephony market in
State bodies are not allowed to issue instructions to market Kazakhstan. Most of them are the owners of so-called
entities on priority supply of goods to a certain group of governmental networks that have received a
buyers unless otherwise provided for by the laws of the telecommunications licence. Others have built their own
Republic of Kazakhstan. Any decision of state bodies network. Those private companies are basically dealing
concerning issues of the creation, re-organisation, and with the corporate market and their market share remains
liquidation of market entities shall be subject to agreement small.
with the AMB.
The provision of services via the local telecommunications
Any physical person or legal entity that wishes to purchase network (local voice telephony, fax etc.) is considered as
shares/voting rights/intangible assets of another entity, is a natural monopoly under the Law on Natural Monopolies.
4 http://mkaccdb.cec.eu.int
Kazakhstan 89
According to this law, the tariffs for the provision of these The Communications Law states that the activities in the
services are fixed by the government. area of communications must respect, among others, the
principle of fair competition. Besides, the Law on Licences
All major policy and regulatory functions were delegated also provides that the granting of licences by the state
to the state regulation body – the Committee on shall respect the principle of non-discrimination. It forbids
Communications and Information (CCI), which was reservation of priority treatment for the state enterprise
established in 2000 as a department of the Ministry of while granting licences, except for the activities that are
Transport and Communications. Its activities are financed considered as state monopoly. Licensing must not
by the state’s budget and it is not an independent body, strengthen the monopolistic behaviour of operators nor
though one such regulatory body is planned in 2006. must it limit the freedom of business activities.
The CCI carries out the national regulatory activities in Consumer Protection
the fields of telecommunications and postal services, like: Kazakhstan does not have a specialised consumer
protection agency. The Anti-monopoly Law 2001 has as
• elaboration of national infrastructure development one of its objectives, “the protection of the interests of
programmes; consumers”, and this phrase is reiterated several times in
• granting telecommunications licences, and permissions the text of the Law. But this is only meant to be a broad
for the use of radio frequencies; philosophy that the agency is expected to respect when
• exercises the control over the licensees’ activities; acting in the interest of competition. There are no direct
• establishing rules related to the distribution of the provisions for the redressal of the grievances of consumers
national telecommunications numbers and of the in the Law. To make up for this gap, recently, a Consumer
attribution of the Kazakh Internet addresses; and Rights Law has been passed in Kazakhstan.
• laying down conditions for international telecom traffic
and the tariff principles. The Consumer Rights Law regulates the interactions
between consumers and producers, providers, and sellers
In principle, no sectors of the Kazakh economy are closed of goods and services. The Law protects the rights of
to investors. However, sectors apart from natural consumers to get goods of good quality that are safe for
resources, and in particular telecom, are perceived as human life, health, property and the environment; supports
rather unattractive. An investor does not need to obtain a the right of consumers to get correct and full information
special permission, neither is there a (minimum/maximum) about products and services and their providers; defines
foreign participation limit. An investor can freely choose protection of consumer rights and ways to achieve it in
an appropriate structure (representative office, a particular reality.
legal entity or a joint venture) for doing business.
Concluding Observations and Future Scenario
In principle, several pieces of Kazakh legislation, both Much of the increased attractiveness of Kazakhstan as a
general (e.g. the Anti-monopoly Law) and sector specific destination for foreign investment can be attributed to the
(e.g. the Communications Law), deal with competition relative success with which its government has
issues. Nevertheless, several exceptions impede the restructured its centrally-planned economy to move
accurate implementation of the said principles in the towards a more free-market based system. Its successes
telecommunications sector. include the creation from scratch of a sophisticated
financial services sector (the most advanced in the former
The Anti-monopoly Law, for example, does not cover the Soviet Union), introduction of a private pension plan,
area of the exclusive rights (article 2§2). In this context, privatisation of the electricity industry, civil service
it is worthy to note that the Kazakhtelecom (KT) has been reforms, decentralisation to give greater autonomy to local
granted with exclusive rights for the provision of the long government and the creation of a National Oil Stabilisation
distance and international telecommunications services. Fund.5
In other words, the KT’s exclusive provision of these
services can not be considered as violating the competition In spite of all the achievements, a number of challenges
rules. Considering the state of development of the market, remain to be dealt with if Kazakhstan is to maintain its
there was thus no decision taken by the competition current high rates of growth, FDI and government
authorities regarding telecommunications. spending and make it to the top 50 developed countries in
5 www.cisstat.com
90 Competition Regimes in the World – A Civil Society Report
the world, such as that of diversifying the economy, the country. This is crucial to ensure that the benefits
promoting the competitiveness of non-oil exports, gained from liberalisation, global and regional integration
addressing the severe income inequalities, improving the and privatisation accrue to a large part of the society, as
corruption record, developing innovative technologies and well as to ensure long-term dynamic efficiency and
human capital, and of course, no less importantly, that of improved consumer welfare.
strengthening and developing the competition regime in
Kazakhstan 91
