The General Director of the National Centre for Innovation and Entrepreneurship (NCIE), Doctor of Business Administration, Associate Professor at the Institute of Management of the Academy of Public Administration (APA) under the President of the Republic of Kazakhstan, Aslanbek Dzhakupov, raised pressing issues related to public procurement rules, in particular their organisation and implementation procedures.
According to Dzhakupov, despite the active development of policies supporting small and medium-sized businesses in Kazakhstan in recent years, the important business legislation in the field of public procurement is currently being 'improved' without proper analysis of socio-economic consequences and regulatory impact.
As one example, the head of the NCIE cited an innovation which involves incentivising territoriality, whereby companies located in the region where construction work is taking place are granted a conditional discount of 1%.
The aim of this innovation is to stimulate local companies. Formally, this does not exclude the participation of companies from other regions; however, such a procedure puts them at a deliberate disadvantage by prioritising local companies and fostering the formation of a local monopoly in the construction sector.
Aslanbek Dzhakupov believes that the introduction of regional monopolies creates conditions for the uneven development of regions and the deepening of economic imbalances. He also notes that, in violation of the requirements of the Entrepreneurial Code, an analysis of the impact of these measures on the market was not carried out.
To date, no data or reports have been published demonstrating the positive impact of regionality on the construction market, an assessment of the economic and social consequences, or a comparison of alternative regulatory options.
In addition to this, the draft of the new Public Procurement Rules provides for a significant increase in the procurement price threshold for the application of the 'territoriality' criterion from 1.4 billion to 11.8 billion tenge and an increase in the conditional discount from one percent to two. Meanwhile, there is no justification for what these radical changes are based on.
Another contentious aspect, according to Dzhakupov, is the innovation in the mechanism for automatically assigning a conditional discount for taxes paid. Now, companies with higher tax contributions will gain an advantage when participating in any tenders. The discount will increase by 0.1% for each additional 0.1% of taxes paid, but will not exceed three percent.
The head of the NCIE believes that despite the seemingly apparent attractiveness of such measures, they could lead to negative consequences for the economy and fairness in the distribution of government contracts. It is not unlikely that companies will artificially inflate their tax indicators, which places those who continue to operate honestly and transparently at a disadvantage.
Another measure in public procurement which, in Dzhakupov's opinion, directly contradicts the principles of fair competition and freedom of entrepreneurial activity, is the 'negative value' criterion. This is when the web portal automatically reduces the total amount of the conditional discount by 0.1% for each existing contract or final protocol where the supplier is deemed the winner.
The measure is supposedly aimed at combating companies that win tenders en masse, but on the other hand, it creates an artificial restriction for those who possess sufficient resources and experience to carry out several projects simultaneously.
Effectively, companies that successfully manage multiple tasks are penalised for their very efficiency. The draft of the new Public Procurement Rules proposes increasing the 'negative value' indicator from 0.1% to 0.2%, which further tightens the existing administrative barrier for business.
Among other things, a new law on public procurement will come into force in 2025, which prohibits companies from participating in public procurement if their founder or affiliated persons are linked to a company listed in the register of dishonest suppliers.
Such approaches, based on collective responsibility, contradict the state's declared goals of supporting entrepreneurship and the transition of small businesses to medium-sized ones, believes Aslanbek Dzhakupov.
He also notes that another novel feature in the law on public procurement concerning the reduction of the threshold for engaging subcontractors from 50% to 30% might seem like a standard state regulation measure. However, a legitimate question arises: why exactly 30%? At present, there is no analysis or assessment of the impact of the introduced measures on the market.
In recent years, entrepreneurs have increasingly encountered such inefficient state regulation, which forces them to seek workarounds or even go underground. Such cases are observed in many socially important areas: healthcare, education, construction, etc.
To prevent such situations, the state has a sufficient number of tools at its disposal. One of these is the regulatory impact analysis (RIA), which makes it possible to predict how changes in laws will affect business and economic activity in the country, as well as to improve the quality of decisions made.
As Dzhakupov reports, the effectiveness of this institution has already been proven, and its further development is enshrined in the country's legal policy until 2030.
Unfortunately, recently, developers have increasingly been avoiding the RIA institution, which allows the introduction of new rules and restrictions without proper justification of their benefits. This is particularly noticeable in the field of public procurement, where such actions have become commonplace.
Dzhakupov emphasises that the ministries of justice and national economy play a key role in monitoring compliance with mandatory procedures. However, with regard to acts concerning public procurement, the impression is that these mandatory norms are increasingly being ignored.
In conclusion, the head of the NCIE reminded that when making any decisions, state bodies are obliged to take into account socio-economic consequences and analyse their impact on the market. After all, without this, any innovation, however useful it may seem, risks not meeting expectations and leading to unpredictable consequences for business and the economy as a whole.