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  KAZAKHSTAN International Business Magazine №2, 2004
 The Fifth Majilis Session: Deputies Summarize the Results
The Fifth Majilis Session: Deputies Summarize the Results
Ivan Chirkalin, Chairman of the Committee for Economic Reform and Regional Development under the Majilis of the Parliament of the Republic of Kazakhstan, answers questions from our magazine
Mr. Chirkalin, how successful was the work of the Committee during the fifth session?
In the dry language of statistics, the Committee for Economic Reform and Regional Development received 39 draft laws during that period: 18 of these were related to amending statutes in force, and 7 were instigated by Members of Parliament. The President signed 8 draft laws, thus bringing them into legal force. Another 8 drafts were approved by the Majilis and submitted to the Senate. 21 draft laws are currently under consideration by our Committee. The first to be reviewed by the Majilis will be: On Technical Supervision, On Amending a Number of Statutes of Kazakhstan Concerning Rail Transport Issues, On Amending the Law of the Republic of Kazakhstan on Natural Monopolies, and On Competition and Limitation of Monopolistic Activities.
More than 1,000 amendments and propositions were recommended by the Committee and then adopted for all the draft laws received during the fifth session. During this period, more than 1,200 Kazakhstani citizens referred queries to Committee members, which were answered in a comprehensive and timely manner. It is typical that most of the questions touched on social issues. The Parliamentary hearings on issues and prospects concerning the development of state wildlife and natural reserves held by the Committee on 23 March 2004 are also worth noting.
The economic growth of the country is linked to the level of transport and infrastructure development. What is the Committee doing in order to improve the legal basis of these economic sectors?
During the second convocation, the Committee for Economic Reform and Regional Development has reviewed 13 specialized draft laws which regulate relations in certain areas of the transport and communications industry (TCI). Adoption of these draft laws will bring current laws into line with the requirements of market economy, promote investment in the TCI, create the conditions necessary for the development of a competitive transport and communications market, and protect consumer rights.
Presently, a draft law On Inland Water Transport has been put before the President of Kazakhstan. It aims to define procedures for using and maintaining the navigable inland waterways, as well as their exploitation and the maintenance of water facilities (sluices), the terms for shipping cargo, passengers, towing ships and other floating vessels, the status of ports, ships and crew, as well as the recovery of damages in shipping and navigation. This draft law deals with property rights to ships, ship identification, registration of ships, property rights and maintenance. The draft law has been developed on the basis of current transportation laws and international treaties signed by Kazakhstan.
The draft laws being reviewed by the Senate include the draft law On Communication. Its adoption will allow communication services subscribers to receive social and legal protection, establish a modern telecommunications network and integrate it into the global information infrastructure. The main provision of the draft law aims to provide for interaction of telecommunication networks, based on equal terms of access to network resources for all operators via mandatory connections based on state-monitored technical specifications, and sound access and traffic tariffs. The draft law will provide the legal basis for the introduction of alternative long-distance operators. It is expected that licensing in the area of communications will be differentiated from licensing in the area of TV and radio broadcasting. The draft law introduces the definition of universal services and procedures for organizing and financing such services based on fair, joint participation by the main communications operators. These universal services will be financed through reimbursement of operating costs (for existing networks), and construction and utilization of new networks on a tender basis. The universal services fund (funded by deductions from all the long-distance operators) will reimburse the costs incurred by rural operators.
At present, our Committee is working on the draft law On Amending a Number of Statutes of Kazakhstan Concerning Rail Transport Issues. Its major objectives are to develop competition, with reasonable and free access for all interested parties to rail services, to retain the main railway network as a single property complex, and to protect the economic interests of national market entities. The current law will be amended because it does not include procedures for financing passenger transport from the national budget. The draft law also aims to eliminate discrepancies between provisions of the Railway Law and the actual status of the Kazakhstan Temir Zholy (Railway) national company. The draft law also aims to establish a National Carrier in order to continue restructuring the railway industry and develop competition.
I would like to emphasize that adoption of these draft laws will allow the development of a legal basis to be continued through the adoption of various bylaws, including orders, rules and other documents of the Kazakh Government.
25 treaties and agreements signed by Kazakhstan, foreign countries and international organizations have been ratified lately. Which of these are the most crucial for the development of the national TCI?
In total, Kazakhstan has signed more than 30 bilateral intergovern-mental and interdepartmental agreements concerning road transport. Their major goal is to create a legal basis for the development of international co-operation and to make international road transport easier.
Kazakhstan adopted a Road Transport Law and then ratified an Agreement on International Road Transport Services between the member states to the Treaty on Formation of a Transport Union. It was signed within the framework of the Customs Union of Belarus, Kazakhstan, Kyrgyzstan and Russia, with Tajikistan joining later.
An increase in the number foreign carriers passing through the country under the no-permit system has facilitated the exploitation of Kazakhstan’s transport and transit potential. In addition, ratification of the Agreement will bring down the transportation component in the cost of products made by the Customs Union member states, which is to the advantage of all of them. The country will gain additional budget revenue from selling fuel and providing transport infrastructure services.
One of the most important agreements ratified by Parliament during the fifth session was the Common Economic Space Agreement signed by the Belorussian, Kazakh, Russian and Ukrainian presidents on 19 September 2003 in Yalta. As the most developed CIS states, these four countries decided to shift gradually to a new, higher level of integration.
Further development of the national transport and communications industry is closely connected with forming a common principle for regulating natural monopolies (including rail transport, trunk telecommunications, transmission of electricity, oil etc), an integrated competition policy, and non-discriminatory access and equal tariffs for services by natural monopolies.
You were the instigator of the draft law On State Property and National Companies. Could you tell us about goal and objectives of this draft law?
Yes, I did this on 30 October 2003. The spontaneous privatization of state property facilitated the formation of regulations in the area of legal control of private property. Today, thorough supervision and state property have become necessary. International practice shows that the most topical issues in transitional economies demanding legal solutions are the legal status of state property, the content and fulfilment of legal authority by the state private and public organizations which possess this property as legal entities, and the legal status of companies with government participation.
The current property laws are highly developed. At the same time there are gaps and a number of disadvantages. So-called national companies prevail in some economic sectors. However, their legal personality has not yet been defined. The procedures for state property ownership and trust management by private companies have not been worked out yet, especially for strategically important industries.
It should be noted that there is still no definition of a subject of strategic importance in our legislation. The state has a duty of care towards the interests of future generations when carrying out privatization or passing these objects into trust management. Under these circumstances this initiative by Parliament is sensible and historically important. This is the first time that the legislature has given definitions of essential constitutional terms such as public welfare, strategic state interests, interests of future generations and national company.
When working on the draft law, we defined its position with respect to other statutes concerning ownership. The closest attention was given to harmonizing this draft law with the Civil Code. The Civil Code should be the basis for the draft law because it is the key document on property relations, containing general provisions on property and the forms it can take. In addition, the possibility of parallel existence of the laws on national companies and joint-stock enterprises was studied because these forms of incorporation are similar.
The assumption that national companies have a special legal personality should be the key element in defining their legal status. A realistic draft law should be based on this principle, because it provides the necessary number of regulations specifying the activities of national companies. The formation of national companies is of special concern, because licenses are needed to do this, as opposed to registering legal entities in the private sector (without licensing or registration required for their validity).
The basis for the activities of national companies is the major point around which their legal status is defined. This draft law is based on the need to set clear limits on a national company’s legal personality, including state property management.
Another urgent issue is managing the operation of national companies. Efficient management of state property for the sake of all citizens will be the major objective of national companies. This is why the project focuses on the role of an authorized body that will solve the most vital issues in managing the operation of national companies. These are accounting, borrowing, and making agreements on behalf of the state by national companies.
Efficient management is provided for by the draft law regulations, according to which the voting shares of national companies must belong to the state, and their assets cannot be granted for trust management.
The liabilities of national companies are also being substantially amended. The general rule of private law, which assumes that partners are liable for the debts of a legal entity to the limits of their contributions, should exclude national companies because gradual enforcement of this rule would lead to the insolvency and liquidation of many such companies. It should be recorded in the articles of association that a national company can only be liquidated by the body which made a decision on founding such company.
Currently, national companies participate actively in business, often on behalf of the state. This draft law should include specific information such as: who is the real party to a certain contract, the state or a national company?
The development of the draft law was based on the fact that national companies operate across a range of industries, which influences the principles of their operation and legal control. We believe that it would be appropriate to let the authorized body pursuing state policy in the industry concerned decide when a national company has the right to act on behalf of the state, because the authorized body is well informed about the character of operation of these national companies.
The authorized body will have a large number of issues to resolve, since it has the goal of defending the public interest and maintaining a consistent state policy in the various economic sectors. World practice in the management of public corporations ensures the validity of this approach.
This is a brief summary of some draft laws adopted by the Committee for Economic Reform
and Regional Development under the Majilis of the Parliament of the Republic of Kazakhstan.
The draft law On Investment Fund provides goals, objectives and guidelines for investment policy, as well as the ways in which this fund will interact with the state authorities and other organizations. It aims to assist in the implementation of the Industrial and Innovation Programme based on investment, and to attract investment into promising projects in the non-raw material industries. At the same time, an independent legal act does not give this institution any more privileges than other investment funds. Currently, a legal base for the first investment fund is necessary for the future development of such institutions.
The draft law On Amending the Law of the Republic of Kazakhstan on Government Purchasing has been developed in order to streamline government purchasing and eliminate problems emerging during law enforcement activities. In developing the draft law, special attention has been given to specifying the regulations relating to the process of government purchasing. In particular, it provides for publishing details of the instigators of bids (in order to pay for the bid documentation). The bids documentation index must include all necessary standard technical documentation. In addition, the period of government purchasing contracts has been prolonged. Public associations of disabled people participating in government purchasing have also received close attention. A number of benefits concerning the provision of guarantees have been applied for these groups.
Development of the draft law On Technical Supervision was instigated because Kazakhstan is soon to become a WTO member. The Kazakh President called this draft law a top priority measure. It is aimed at establishing a technical supervision authority that will solve standardization, confirmation, compliance, accrediting and state control issues in a comprehensive manner under a single state policy. It also states the types and major provisions for development, adoption and implementation of technical regulations. It should be noted that technical regulations and a legal basis for them, based on international practice, are currently being developed in all the CIS countries.
Adoption of the draft law On Amending the Law of the Republic of Kazakhstan on Natural Monopolies has been caused by the need to specify a number of regulations to indicate the competence of an authorized body in a fair way. The draft law provides an opportunity for the authorized body to approve the levels of investment tariffs and marginal tariffs. Mandatory public hearings will be introduced in order to approve applications for tariffs (prices or levies) submitted by the natural monopoly entities, irrespective of the State registry section in which the entity is included.
The draft law On Competition and Limitation of Monopolistic Activities clearly defines the regulations which deal with a dominant entity. It includes a procedure for designating anti-competitive actions taken against competitors by the state authorities, and defines the state supervisory functions for an authorized body monitoring the economic concentration of market entities. The draft law aims to take effective steps to develop competition and restrict monopolistic activities.
The draft law On Electrical Energy has been developed according to the Concept of Further Development of Market Relations in the Electrical Energy Industry. It aims to balance the interests of energy producers and consumers based on improving wholesale market relations and creating competitive retail markets. According to the draft, a system operator will provide a range of system services to entities in the wholesale market, including electricity transmission, dispatching, controlling and backing-up the facilities, and balancing the production and consumption of electricity. It should be noted that, according to the international regulations, a System operator means an organization carrying out centralized supervision of operation and dispatching. This definition is specified in documents relating to the establishment of a single electrical energy network in the CIS and EurAsEC countries. The system operator’s activities in the area of facilities management do not grant it ownership of these facilities. Any system services provided to wholesale market entities by the system operator, or auxiliary services provided to the system operator by these entities, will be carried out in return for the value received, based on the rules of the wholesale market and tariffs set by the regulating authority.

Table of contents
Navigators of Our Skies  Sergei Kulnazarov 
Traceca, a Route to the Future  Thomas Lamnidis 
Ispat Karmet: The Reincarnation of A Giant  Nawal Kishore Choudhary 
We are United - and Not Only by Oil!  Morteza Saffari Natamzi 
Pipelines in Kazakhstan: the Legal Issues  Abai Shaikenov, Anthony Cioni 
Well-drilling by Professionals!  Serik Kudaikulov 
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