In May of this year, a presidential decree titled "On Measures for Economic Liberalization" was issued, aimed at accelerating structural economic and legal reforms to enhance the economic potential and improve the business climate in the country. The primary goal of this decree is to significantly reduce state participation in the economy, privatize assets, and ensure the independence of corporate governance in the quasi-public sector, reports inbusiness.kz.
The importance of this decree for the development of Kazakhstan's economy, its implementation, and the extent to which it alters the economic policies of the state over the past 10-15 years were discussed during a round table with representatives from Halyk Finance, the agency for competition protection and development (AZRK RK), JSC "Samruk-Kazyna," and prominent economists from the country.
It was noted that state involvement in the economy is very high and barriers for entrepreneurs are created by directly interested government bodies. This is a recurring issue both in procurement and in financing projects, as well as in attracting investments, and so on.
"The indicators related to competition development are again dependent on the state and quasi-public sector. There was a question regarding the government working together with the agency to conduct a large-scale and accelerated reduction of the state sector's share. One of the tasks arising from the decree is to develop criteria for state entities subject to mandatory privatization, analyze activities, and monitor the privatization process itself. To date, more than 1,140 companies have already been selected for analysis. A preliminary analysis of commodity markets has been conducted, resulting in the preliminary selection of over 500 enterprises," noted Marat Omarov, chairman of AZRK RK.
According to him, a website has been developed where all information will be publicly available, and by the end of this year, a list of state assets will be formulated and submitted to the modernization commission. Subsequently, this pool of enterprises will be approved by the president and the Supreme Council for Reforms of the RK. Making changes to it will be significantly more challenging. He believes this innovation will yield certain effects.
In terms of implementing the decree itself, a commission for the de-monopolization of the economy is working under the leadership of the prime minister, along with a commission for asset recovery. The state controls certain sectors of the economy, particularly through companies such as KazMunayGas and LLP Petrosun.
Omarov stated that the second phase of the reform will involve deregulating maximum fuel prices. These changes stem from the decree, and decisions on them have already been made. Currently, information notifications are being developed for interaction with major retail chains to comply with antimonopoly legislation. The main idea is to gradually move away from strict price controls, especially in the retail segment. Similar measures are being applied to the pharmaceutical market, as specified in the decree.
The issue of establishing maximum drug prices remains opaque and creates unnecessary administrative burdens on pharmaceutical companies. Maximum price lists are approved twice a year. Within the framework of the decree, a National Center for Drug Expertise is being established, which will handle the digital submission of applications from domestic manufacturers to establish these prices. This will simplify the registration process and interaction within the industry, according to the chairman of AZRK.
"I want to emphasize the importance of monitoring the implementation of the decree — this task is not only for the antimonopoly authority but also for the government. We strive for collaborative work, although we observe a certain reluctance from some government bodies to participate in privatization processes. We are not simply compiling lists of assets to transfer to a competitive environment; we conduct a thorough analysis of each asset. It is essential to consider the existing competitive environment and private entrepreneurship. The current legislative framework involves several stages: first, an auction is held (Dutch or English method), followed by a potential transition to bankruptcy," said Marat Omarov.
Regarding the methodology for selecting projects for privatization, it was noted that earlier government bodies proposed a list of projects, which was then approved. Now the process has changed: it is conducted by AZRK, the national office.
A new methodology has already been developed and published. The previously existing methodology had a sectoral nature. However, AZRK's experience has shown that the agency recommends a list of assets for acceptance, but the final decision lies with the government. Further meetings regarding this methodology are planned. At the end of November, a commission on economic modernization will be held at AZRK, where these issues will be discussed.
Photo by Indira Kusaynova
Unfair Tariffs of "Samruk-Kazyna"
A significant portion of the decree is dedicated to changes in the corporate governance of "Samruk-Kazyna." The company states that it sees the holding as a catalyst for attracting direct foreign investments into the country, but believes that fair tariffs are necessary for economic liberalization.
"We are currently implementing large-scale projects. This is very important for the country's development. Speaking of the decree on liberalization, it is a very important and necessary document. If we take the major assets under the management of 'Samruk-Kazyna,' of which there are 10, seven companies are already in the market with a total capitalization of $31 billion. Of the large companies, only three have not yet been brought to IPO, including KTZh. We see a great, enormous potential in the comprehensive privatization plan. KTZh is set for IPO privatization in 2025," highlighted Saltanat Satzhan, managing director for development and privatization of JSC "Samruk-Kazyna."
According to her, KTZh needs to be prepared to become investment-attractive, which hinges on fair tariffs. Until we resolve the issue of tariffs specifically in the domestic market, where internal gas prices are much lower, and we are operating at a loss, it is an unappealing story for an IPO, Ms. Satzhan continued.
"Liberalization should indeed begin with tariff liberalization. We are very pleased that the government is cooperating and has come to understand that with unfair tariffs, we simply cannot proceed further," added the top manager of "Samruk-Kazyna."
Photo by Indira Kusaynova
The Economy Suffers from Manual Management
Advisor to the chairman of the board of Halyk Finance, Murat Temirkhanov, commented on the current situation in the transportation sector, touching upon the activities of KTZh.
"We are observing attempts to maintain a monopoly in the transport and logistics sector by adding additional functions to it. For instance, we are discussing the necessity of dividing KTZh into separate structures — freight transportation and main lines — to create a competitive environment. Transportation tariffs have been raised twice over the past one and a half years, which increases the financial burden on consumers and entrepreneurs. These tariffs remain opaque, and private business is effectively excluded from this sphere. State subsidies supporting KTZh amount to about 260 billion tenge annually. The question is how these funds are managed. Despite ongoing investigations and fines, the structure remains unchanged."
Regarding economic liberalization, he stated that despite the president's declarations about the state's significant role as an owner and regulator, real steps in this direction are not being observed. The state accumulates its strength from natural resources but does not pay adequate attention to developing the private sector.
The economy suffers from manual management and command-administrative methods. Subsidizing prices for electricity and gas also negatively impacts the economy and the energy sector. There are no significant steps toward industrialization or support for entrepreneurship.
At the same time, business lending is hindered by unfair competition, supported by the state through preferential interest rates. The decree mentions a transition from commodity-specific subsidies to preferential lending, which will continue to exert pressure on competition in the financial market.
If the state wishes to subsidize, it is better to do so directly with borrowers, for example, through tax deductions or from the budget. Otherwise, borrowers are forced to seek more favorable offers on the market. For instance, if one has an interest rate of 14% and another has 20%, the savings will only benefit those who find a lower rate. However, it is unclear how this issue will be resolved. At a recent government meeting, the expansion of this program was discussed, but there is no clarity regarding its implementation.
At Halyk Finance, they view the decree positively and hope for its improvement, but they sense a lack of a systematic approach and desire to execute it.
"We strive to create a market economy similar to that which existed in the USSR, using 18 key indicators concerning state and corporate governance, as well as price regulation. If we could achieve these indicators by 2029, we would be living in a different country. This would require painful changes, especially in electricity and gas tariffs. The decree includes many deadlines, some of which have already passed. For example, the establishment of a national privatization office was announced on June 1, but there is practically no information about its powers. We have numerous concepts and programs, but their execution leaves much to be desired. Moreover