Product labeling in Kazakhstan: a safeguard against counterfeits or a sentence for businesses?

The mandatory labeling of goods in Kazakhstan has sparked mixed reactions. Businesses are concerned about increased costs and bureaucratic challenges, predicting a rise in product prices. Meanwhile, the government assures that the primary goal of labeling is to combat the shadow economy and protect consumers. We decided to investigate how labeling will affect product prices and what businesses can expect in the coming years, reports inbusiness.kz.

Why is labeling necessary and who provides it?

In Kazakhstan, the labeling system operates with the support of "Kazakhtelecom," which was appointed as the sole operator after a competitive selection in 2019. As explained by the managing director of the company, Almat Ismailov, the main task of the operator is to provide the infrastructure and software for applying Data Matrix codes.

The sole operator does not engage in the sale of equipment or stickers, allowing businesses the freedom to choose their suppliers.

Thus, entrepreneurs determine where to order the necessary products themselves. The operator's revenue is generated solely from providing codes, which cost between 2.40 and 2.68 tenge each.

Who stands to gain?

The main concern of businesses is the rise in expenses. According to entrepreneurs, purchasing equipment and stickers could cost between 20 and 60 million tenge, which they believe will inevitably lead to price increases.

However, Almat Ismailov claims such statements are exaggerated, as some entrepreneurs intentionally inflate their expenses to reduce taxes.

"We do not know their equipment costs. This is a technological process that they keep under wraps. For example, automating labeling for a pharmaceutical company with a turnover of 35 billion tenge will cost 50 million tenge. If we calculate in terms of their turnover and the number of medicines, the impact of labeling on product cost is about 1%," Ismailov explained.

The Ministry of Trade and Integration states that to minimize business expenses, the government has provided a mechanism for financial support. Among the reimbursable costs are: 

• purchase of labeling equipment; 
• acquisition of engineering software; 
• purchase of identification means. 

Labeling expenses are reimbursed at 50% of the claimed amount, but not exceeding 10,000 MRP for labeling footwear and 3,000 MRP for certification. These measures aim to ensure that conscientious entrepreneurs do not incur losses.

"Thus, the expenses of conscientious entrepreneurs will be reimbursed by the government. The introduced fine for selling unlabeled goods will only affect gray importers," the Ministry of Trade stated.

What are the benefits for Kazakhstanis?

The benefits of labeling are felt not only by the government in the form of increased tax revenues but also by consumers. Anyone using the free mobile application Naqty Onim can scan a product code and receive complete information: 

• product originality; 
• delivery route from the manufacturer to the point of sale; 
• quality guarantee. 

This is especially important for medicines. For instance, labeling helps identify counterfeit products and track free medications purchased with budget funds. 

"The most important information is that the code is genuine, that it is indeed a legal product, it has the correct expiration date, it has the proper certification, it has passed all verification stages before entering the country, and you can even see the product's path, meaning where it came from and to whom it was delivered. Did you know that the state budget spends about 250 billion tenge to provide us with medicines under the GBMP? So now we are asking the government: Why don’t we see this? The path of these medicines can be traced through these codes," Ismailov noted.

Speaking of counterfeits or smuggling, it is worth noting that since the implementation of labeling in the tobacco industry, the detection of counterfeit products has significantly increased. For instance, while 3.7 million packs of cigarettes were seized in 2022, in the first nine months of 2024, 14.6 million packs worth over 11 billion tenge were seized.

"For the identified tobacco products, the amount of unpaid excise tax was 935 million tenge in 2022, 4,084 million tenge in 2023, and 4,668 million tenge in the first nine months of 2024," the Ministry of Trade clarified.

The ministry explained that the increase in statistics is connected to the fact that the country's authorities can more effectively identify illegal products through labeling.

What can businesses expect in 2025?

As of now, mandatory labeling covers three product groups: tobacco products, footwear, and medicines. There are no plans to expand the list of mandatory goods in the coming years.

Pilot projects are currently ongoing for products such as motor oils (until February 1, 2025) and brewing products (until March 31, 2025).

Additionally, in 2025, a pilot project for labeling dietary supplements (DS) will begin. This phase will take up to 1.5 years, and only after its successful completion will the possibility of implementing mandatory labeling be considered – which could be in 2026 or 2027. There are also pilot projects in progress for beer, beer beverages, and motor oils.

The ministry also noted that they are ready to consider business proposals, including the implementation of cheaper technologies, but so far, no such initiatives have been submitted. Regarding requests for voluntary labeling or the abolition of the sole operator, the ministry clarifies that this contradicts Kazakhstan's international obligations under the EAEU.

Thus, at present, businesses can relax a bit, as mandatory labeling is part of the government's plans. However, its implementation is inevitable – as it is a crucial step for the development of the Kazakh economy, consumer protection, and combating the shadow market.