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Full privatization of state bus fleets planned in Kazakhstan — Zhumangarin

Tuesday, 22 June 2021, 11:30:32

Chair of the Agency for the Protection and Development of Competition Serik Zhumangarin reported on new approaches to the development of competition at the government session chaired by the Prime Minister Askar Mamin.

“In accordance with the instructions of the Head of State, the Agency has opened crowdsourcing platforms within the framework of the Hearing State concept. First of all, it is an open dialogue platform for the exchange of views Open Space, where more than 211 sessions were held on the most pressing and burning issues of concern to society, and Councils on Barriers were created in 17 regions of the country, in which 216 experts take part. During this time, more than 80 barriers have been identified, 13 of which have already been addressed. The main task for today is clear — it is to define the role of the state in the economy,’’ Zhumangarin said.

So, according to him, a high level of concentration in key commodity markets and a high level of state participation in the economy today are the main barrier to the development of a competitive economy. At the same time, there are 3 main regulatory barriers to the development of competition.

First of all, it is access to key power, pricing distortion, and selective patronage or favoritism.

The most important task is to ensure access to key capacity. It is an infrastructure or facility without access to which competitors cannot provide their services to consumers.

As an example, the chairman of the Agency cited the main railway network, cable ducts of communication, primary metals for further processing, seaports, substances for the production of drugs, production technologies.

“We have defined the principles of access to key capacity: payment, transparency, urgency, opportunity, occupation of a dominant position,” said the chair of the Agency for the Protection and Development of Competition.

A further direction in the development of competition is the development of exchange trading. Serik Zhumangarin emphasized that now the exchange trade has been transferred to a civilized track. As of today, trading in gasoline, bitumen, coal, liquefied gas has been launched. Ahead, by the end of the year, trade will expand due to aviation kerosene, diesel fuel and wheat. For the first time, exchange trading in coal took place, where the basis of supply is the quarries themselves. The first auctions of Karazhyra JSC and Shubarkul Komir JSC showed that the savings for the consumer is about 20%.

“The next important step and this was the order of the Head of State - regulation of the activities of the so-called operators, public and private. We have identified 51 monopoly operators, 47 of them with state participation,” the head of the Agency reported.

For 24 of them, the institute of special law is being introduced — they will be subject to strict regulation — price, restriction of other activities, a ban on participation in other companies, publicity, compensation for business losses during creation.

Under 18, regulation is not required — these operators carry out public services and do not make a profit.

For 9, drastic measures will be taken: for 4 — liquidation or privatization, for 5 — deprivation of operatorship, keeping them simply in the status of subordinate organizations.

Another important aspect is the reduction of state participation in entrepreneurship. The participation of the state in the economy today is 14.8%, more than 2 thousand subjects of the quasi-public sector. A sectoral analysis of state property was proposed here. That is, regardless of the type of activity, if the sector has matured, taking into account the number of SMEs, the level of state support, it must be completely privatized. Examples are dentistry, security companies, transport services, beautification companies. Naturally, taking into account the regionalization of Kazakhstan.

“It is also important to reduce the number of government assignments. We plan to cut them by 27 next year, and in general, by about 2 times by 2025. The economic effect will be more than 30 billion tenge,’’ he added.

Ensuring equal access to government support measures. Today the state support is being personalized. Basically, according to Zhumangarin, big business is supported.

The Agency will develop competitive principles for the provision of state support measures, taking into account the share of SMEs, the level of state participation, the presence of barriers, and the level of market concentration.

Implementation of new approaches to regulating the digital economy.

As the head of the Agency for the Protection and Development of Competition noted, Kazakhstan has already entered the era of the digital economy. In this regard, today's regulatory methods are a little outdated, so it is necessary to define the concepts of a digital platform, network effect and a new methodology for analyzing digital markets.

Competition in the electricity market is important. To date, only 1% of electricity is sold at organized auctions. Everything else is on non-transparent direct contracts. In this regard, by 2025, organized trade in electricity will increase to at least 30%. In addition, it is planned to eliminate differentiation in the electricity supply market.

“All this will give an annual savings of about 20 billion of budgetary funds, 31 billion will become savings for the expenditure side of SMEs and, naturally, housing assistance will increase, according to our calculations, by 720 million,” Zhumangarin explained.

The next important issue is the development of competition in the transport market. This mainly concerns the development of competition in the rail freight market. More than 40 licenses have already been issued in this area. There are already 3 carriers, 2 of them are private, they operate in pilot mode. The challenge is to expand this activity. That is, there should be at least 10 carriers in the plans by 2025.

Also the large closed market is the market for airport activities. It is planned to have free access to the terminal service, at the apron service there should be at least 2 operators, with 1 of them independent. On the market of airports with a passenger traffic of more than 2 million people must have access to at least 3 ground handling services.

There is a certain number of state-owned bus fleets on the passenger road transport market in Kazakhstan. There are plans for their complete privatization.

As for the market for the sale of medicines, as noted by Zhumangarin, it is planned to reduce medicines subject to state price regulation, if there is interchangeability according to INN.

As part of antitrust regulation, 109 investigations were completed in 2020 on various aspects. There are currently 29 investigations in progress.

“The effective institution of soft law has proven itself from the right side. During this time, 210 notifications, 6 warnings were issued, 138 acts of antimonopoly compliance were concluded. All this made it possible to fulfill various instructions of the Head of State, to reduce the price of medical masks, PCR testing,’’ the head of the Agency for the Protection of Competition emphasized.

Also, relevant work is being done on the building materials market. Thus, the trend towards price increases in the NWPC and housing construction markets has been reduced.

The effect of the implementation of measures to develop competition:

  • an increase in exchange trading in petroleum products up to 20% by 2025, liquefied gas — up to 100% as early as next year. The economic effect will be more than 1.9 trillion tenge.
  • An increase in the volume of centralized trading in electricity up to 30% by 2025 in the amount of more than 350 billion tenge. Annual savings of budget funds — by 20 billion tenge and 31 billion tenge for SMEs.
  • The development of marketplaces will reduce the time to change the electricity supplier by 10 times.
  • Ensuring free access to at least 7 ground handling services at airports by 2025.
  • Providing access to cable ducts in the field of communications.
  • Reduction of the number of municipal bus fleets in cities of republican and regional significance to 0.
  • Reduction of the number of government orders by 50% by 2025.
  • Optimizing 20 single operators by 2025.

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