Aigoul Kenjebayeva of Dentons in Almaty looks at amendments to state regulation
Strategic economic sectors include the following: production of hydrocarbons, minerals, processing of minerals (coal, petroleum, gas, uranium and metal ore), production and circulation of petroleum products, ferrous and non-ferrous industry, mechanical engineering, space engineering, agricultural complex, water industry, chemical industry, transport and communication, production and distribution of electricity, and defense.
Previous legislation already identified those sectors of the economy considered to be ‘strategic’. However, that list was not linked to any restrictive measures or controls by the state.
The main purpose of the suggested amendments and modifications is a substantial extension of state control over foreign investments in the abovementioned sectors by means of the following:
The introduction of a system for tracing foreign participation in the strategic economic sectors, up to the level of ultimate beneficiaries. It is proposed that a definition of a beneficial owner of a monitored object will be introduced, i.e. owner of any company working in a strategic economic sector. Another proposed amendment envisages an obligation an a company to submit to an authorized state body information about its ownership structure, as well as information about the entire chain of ownership, up to the level of ultimate beneficiaries.
The introduction into antimonopoly legislation of a requirement to obtain an approval (opinion) of the authorized state body as to whether a contemplated transaction is in the interests of the respective economic sector (as part of an application for approval for economic concentration).
Through amendments to subsoil use legislation, the creation of an ability for each of (a) the Interdepartmental commission on exercise of the State’s priority right; (b) the Commission on granting subsoil use rights; and (c) the tender commissions, to take into account the above opinion when making decisions on which they are competent. Although the draft law does not envisage that such an opinion (if negative) would be an absolute ground for refusal to grant a subsoil use right, or to grant consent for a transaction, we assume that the ultimate goal of the proposed amendments is to control the inflow and distribution of foreign capital.
Through amendments to legislation concerning strategic objects, the creation of an ability for the Commission on strategic objects to take into account the above opinion when deciding whether to approve the encumbrance or transfer of a strategic object.
Although the RK Government continues to assure the public, the investment community and the world of its intent to encourage foreign investors and to improve the investment climate in Kazakhstan, the proposed legislative amendments appear designed to increase the level of state regulation in ‘strategic’ sectors of the economy, and to create additional barriers for foreign investors.