In early June, the FBRK editorial team became aware of a draft agreement for a public-private partnership (PPP) to introduce an intelligent traffic control system on highways (ITCSH).
We have already detailed how the project, being developed jointly by Freedom Telecom and Sergek Group, is planned to be implemented.
To begin with, let us remind you that the main function of the stated system is to monitor the transportation of goods across the entire country, as well as to control the weight of freight vehicles.
Alongside this, it is assumed that ITCSH will perform a number of the same functions as the well-known "Sergek" system, developed by one of the Sergek Group companies – Korkem Telecom LLP.
Namely, the system will be required to supply data on any traffic violations to government bodies around the clock.
According to the developers' calculations, the budgetary efficiency of ITCSH over 10 years will amount to 2.855 trillion tenge.
According to our data, the project will cost the state 470 billion tenge.
At the same time, as we have learned, the system itself and all the equipment necessary for its operation will not be transferred to the state's balance sheet, but will remain the property of the investors.
In other words, the system's operation will be completely dependent on Freedom Telecom and Sergek Group, making the state, which has potentially invested huge sums in the project, absolutely non-independent in this matter.
Why is it so important for the state to have control over any large-scale video surveillance system?
Such a system acts as a certain guarantor of security, as it allows for the rapid identification and prevention of threats.
A data leak could have extremely serious consequences for both an individual and the state as a whole. This is precisely why the reliability of such a system is strategically important.
For this same reason, the developers cite high information security as the main advantage of ITCSH.
And while the implementation of ITCSH is still at the negotiation stage, we can judge the information security of the project by looking at another Sergek Group product – the "Sergek" intelligent public and road safety system project.
Throughout the entire period of "Sergek's" operation, tireless debates have been ongoing about the system's safety and effectiveness.
For example, a very popular opinion is that "Sergek" cameras are useless during bad weather. Many believe the system does not account for the "human factor" and is overly regulated.
Activists, who demanded a review of "Sergek's" operation, spoke about this at a recent press conference in Almaty, as reported.
And yet, the main subject of dissatisfaction is the system's vulnerability, which has access to data on the movements of Kazakhstani citizens obtained when recording various traffic violations.
After all, it is no secret that the technical partner of "Sergek" is the Chinese giant company Dahua Technology.
In 2019, the USA imposed sanctions on the competing Chinese companies Dahua Technology and Hikvision. The reason was the facial recognition function in both systems, which transmitted data to the authorities.
In the UK and Australia, Dahua cameras are banned from being installed at state and strategic facilities for national security purposes.
In February 2024, the Ukrainian editorial team of Radio Azattyk discovered that Dahua cameras with internet access were sending encrypted information to servers of Chinese companies.
Part of the data was reportedly sent to the servers of China's state provider – Chinanet.
It is worth recalling that, according to Chinese data security law, the government has the right to access data from private companies.
And, for instance, China and Russia, based on a treaty of good-neighbourliness, practice exchanging strategic data.
According to information from the Ministry of Internal Affairs of the Republic of Kazakhstan, more than 22,000 cameras manufactured by Dahua Technology, which are part of the "Sergek" system, are installed throughout Kazakhstan.
Representatives of Sergek Group claim that data from the cameras is stored exclusively on Kazakhstani servers and is only accessible to competent authorities.
The company assures that cameras of any manufacture undergo a mandatory "re-flashing", meaning there is no cause for panic.
In 2022, Korkem Telecom LLP submitted an application for conducting tests on the information security of the "Sergek" system in the cities of Turkestan, Semey, and Taraz.
The system check, carried out by State Technical Service JSC, and the issuance of the relevant certificate from the Information Security Committee of the MDIIAP are mandatory requirements for receiving payments from the state budget under the PPP agreement.
The FBRK editorial team has information indicating that the company provided the system's software code, which differed from the actual code installed on the servers, allowing "Korkem Telecom" to pass the inspection.
Presumably, the company took this step to be able to sell the hardware-software complex to government bodies later.
Incidentally, in December 2022, "Sergek" was put into industrial operation in Semey, and the company received an interim payment from the state budget.
At the same time, it is worth noting that information security tests are conducted not only so the company can sell the product.
The state must ensure that the system is invulnerable to unauthorised access and is also incapable of causing damage to existing state information systems.
Although, even in this case, questions arise regarding "Sergek". According to our data, the company "Korkem Telecom" sent materials on administrative offences by drivers to the Processing Centre of the Unified Register of Administrative Offences (URAO).
However, this process took place via an existing gateway in the "Sergek" system in Astana and through a direct connection to the URAO servers, which constitutes a gross violation of information security requirements.
Furthermore, we have learned that Korkem Telecom LLP has the ability to manually delete materials available in the system, meaning they can, among other things, control budget revenues from fines for traffic violations.
But that is far from all.
The editorial team has obtained documents indicating that Korkem Telecom LLP unjustifiably inflated costs, which were subsequently reimbursed by the state budget under the PPP project in Astana.
The "Sergek" system in the capital was promised to be introduced as early as 2017, but was only commissioned in August 2018, and even then only partially. The system began operating fully in 2020.
At the same time, the PPP agreement outlines costs to be reimbursed from budget funds from 2017 to 2023.
Given the untimely delivery of the system, it is logical to assume that the state's costs should have been reduced.
Specifically, the amount of expenses from 2018 to 2020, totalling 2.2 billion tenge, should have been excluded from the total reimbursement amount.
According to our information, the company still received about 2 billion tenge, which should have been subject to a reduction in the contract amount, by increasing operating expenses through a number of affiliated companies, including Adicom 2000 LLP and Capital City Center LLP.
And although the "Sergek" system is a flagship product of "Korkem Telecom", this project is not the only one in the company's arsenal.
Certainly not the only one raising questions.
For instance, in June 2021, the company entered into a PPP agreement, with partners on the state side being the Almaty city Digitalisation Department, the Urban Mobility Department, and the Almaty City Police Department.
The total cost of the five-year project to implement the "Intelligent Safety and Traffic Analysis System for Almaty" amounted to about 10 billion tenge.
At the same time, the cost of providing services is around 9.5 billion tenge, with over 475 million tenge being the profit for "Korkem Telecom".
In the list of operating costs making up the cost price, the most expensive item is depreciation of the hardware-software complex (HSC) amounting to 2.4 billion tenge, which is based on the company's capital expenditures.
According to the contract, the total cost of all HSCs is over 5.3 billion tenge, which should be reflected in the company's financial statements and depreciated annually.
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For reference: Depreciation – the decrease in the value of an asset as a result of its use or natural ageing.
According to the financial statements of Korkem Telecom LLP as of 31 December 2021, the Almaty branch of the company had assets worth about 1.2 billion tenge.
A logical question arises: how does the company intend to cover its costs?
Apparently, the cost of the HSC was taken from the "Sergek" project in Atyrau, where the company received compensation for investment costs (CIC) and management fees (MF).
At the same time, CIC involves reimbursement of the cost of capital expenditure for property that is transferred to the state's balance sheet – but in this case, this does not occur.
Given the facts mentioned, we can assume that the actual cost of the equipment is significantly lower than stated, meaning that Korkem Telecom LLP inflated the initial cost of the project.
Incidentally, in December 2022, without competitive procedures, the parties concluded an additional agreement, which, among other things, accounted for an increase in the cost of services by 4.2 billion tenge.
In 2022, Korkem Telecom LLP initiated, through direct negotiations, a PPP project for the "Creation and operation of a video surveillance system in Almaty".
The total cost of the ten-year project is 18.3 billion tenge.
Qualification documents were submitted for consideration on 31 October 2022.
It is worth noting that a mandatory condition for participation in direct negotiations is confirmation that the private partner has funds amounting to no less than 20% of the PPP project cost.
The editorial team has obtained information that Korkem Telecom LLP provided a statement dated 26 October 2022, confirming the availability of funds in the company's accounts exceeding 1.5 billion tenge, which is insufficient for participation in direct negotiations.
In this case, perhaps one should question how the company could initiate the project without having the necessary funds for its implementation.
Or, for instance, inquire how the "Sergek" system passed the information security check, and furthermore, how the company calculated the costs covered by the state budget under the PPP agreements.
Perhaps it makes sense to take these facts into consideration when contemplating the implementation of the new PPP project - the intelligent traffic control system on highways (ITCSH).
After all, in the new project, the developers promise to introduce weight-in-motion systems for freight transport, which neither Sergek Group nor Freedom companies have previously announced.
As we have learned, the investors intend to use the innovation of a young Kazakhstani company, Automatic System LLP. The company implemented the first project in Kazakhstan for ASI weighing systems at the entrances to Astana.
Furthermore, according to our data, the ITCSH project is not unique. There is information about an alternative project involving a PPP agreement with the state fund of the Presidential Administration.
The maximum costs for implementation are expected to be 70 billion tenge, which is almost 7 times less than the state's investment in the Sergek Group and Freedom Telecom project.
The developers promise that the equipment provided for in the project, as well as the system itself, will remain on the state's balance sheet.
However, Freedom Telecom and Sergek Group do not intend to give up easily. According to our information, the investors have secured support from the Ministry of Transport.
It is worth remembering that earlier this year, at an extended government meeting, the President noted that PPPs rather represent a scheme of hidden budget financing for private projects.
And considering the facts mentioned, it becomes obvious that the road control system project requires close public scrutiny.
After all, the project is conceived for the benefit of the people, not for the realisation of the commercial and political ambitions of individuals.