USD/KZT 450.79  -0.58
EUR/KZT 482.21  -5.01
 KAZAKHSTAN International Business Magazine №1, 2003
 Imstalcon: Domestic Producers Need State Support!
Imstalcon: Domestic Producers Need State Support!
Vladimir Khoroshilov, Deputy Director General for Industry of the Imstalcon Open Joint-Stock Company, Answers Questions from our magazine
Mr. Khoroshilov, what opportunities and ways can Imstalcon offer to oil producing enterprises?
Imstalcon was established in 1956. Today this old-established enterprise holds a strong position in the manufacture and erection of steel structures in the markets of Kazakhstan and the FSU countries. The company comprises seven plants and 15 assembly firms with up to 6,000 workers and engineers. Imstalcon manufactures some 160,000 tonnes of metalwork per year, including 12,000 tonnes of tanks.
The principal customers for our products are traditionally ferrous and non-ferrous metallurgy enterprises. We have also entered the construction market for the oil and gas sector, due to heavy expansion of geological exploration and hydrocarbon production in the western regions of Kazakhstan. We can offer tanks capacity up to 50,000 cu m, building frames for primary and auxiliary production, pipe bridges, buffer tanks, settling tanks and gas separators, as well as manufacturing pre-insulated pipes and well-equipped mobile buildings for camps. Kazmunaigaz, TCO, KIO, Agip KCO and other companies are among our customers.
In 2002 the share of production that went to the oil producing industry, including assembly service, amounted to 8% of the company’s total production. It is important to mention that our plants were at half load, and we have the resources to accelerate construction and, by providing adequate loading, to cut down prices. Imstalcon products comply with ISO-9001 ? API-650, therefore the quality of work performed by the enterprise is capable of satisfying any customer and meeting the requirements of any project.
What is the potential of domestic companies in providing services and equipment for the oil industry in Kazakhstan?
The oil industry has been rapidly developing during recent years resulting into increased construction. It may seem that the expansion of large-scale construction would lead to recovery by domestic producers, such as design institutes, structure-building plants and builders. Unfortunately, there is no evidence of recovery or, if there is, the process is going ahead at too slow a pace.
However, Kazakhstani building companies have sufficient potential to manage construction, or act as a general contractor, in any oil sector project under construction. Our builders are able to utilize up to 60%-70% of the foreign investments assigned to industrial construction.
Unfortunately, domestic building companies, as legal entities, are participating in industrial construction only in certain types of subcontracting or even sub-subcontracting work. The causes of such feeble involvement by domestic producers in providing the oil industry with building structures, equipment and other materials are obvious. This question has been often discussed at various meetings and conferences for import substitution of products, including at highest-level meetings attended by domestic providers, investors and authorized agencies. 
Though some progress has been observed in this matter over the past three years, and some Kazakhstani companies have moved closer to domestic producers (a striking example is the changed attitude of KazMunaiGaz and Kazzinc towards co-operation with local work and service providers), the common problem of construction companies has remained the same: non-transparency of the bidding procedure and inaccessibility of tenders for potential providers of work and services. Thus, there is hardly ever an announcement of bids to be seen for large projects in which the principal investors of the oil and gas sector are operating, such as Karachaganak, Tengiz and East Kashagan. 
The information published on the results of tenders is very poor and usually contains only the names of the preferred bidders. But what should the other bidders think, those who have not even been told why their bids were rejected? Why did they lose? What do they need to work at in the future? What shortcomings did the commission find? Was it the technology, the price, or the schedule times?
Another crucial problem is that Kazakhstan lacks its own bank of project and technical documentation for import substitution involving oil production and storage equipment. To date not a single design institute has designs for oil and gas equipment. All the existing projects refer to equipment manufactured in Russia and Ukraine. As a result, enterprises from these countries have become monopolists in the manufacture and delivery of oil and gas equipment to our country, though Kazakhstani plants have all the techniques required, skilled personnel and adequate production facilities.
What, in your opinion, should be done to improve the current situation?
It is essential to develop an efficient state policy and clear tendering rules in the industrial construction field. To ensure a level playing field for all market participants, information about tenders should be available to everybody, e.g. through publishing in the press. Furthermore, bids should be opened in presence of all the bidders. As for the development of oil and gas equipment, this problem only can be solved at government level. A government order to design domestic equipment for this industry will enable design institutes to create their own base of technical documentation, and thus encourage domestic producers.

Table of contents
A Summary Review of the Kazakhstan Law On Investments  Andrew Griffin, Karen Ostrander-Krug 
Tax burden in Kazakhstan  Janat Berdalina, Aigul Mustapaeva 
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