Extractive Industries Transparency Initiative Country Report on Kazakhstan

Country Report

Kazakhstan Executive Summary Introduction Country and Context EITI in Kazakhstan Sub-‐National Reporting Conclusions References Resource Map Report compiled by: Lotus Yang Ruan

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Executive Summary

• The Republic of Kazakhstan is the 9th largest national territory in the world. Its oil reserves are ranked 12th in the world and its natural gas reserves are 19th. It is a global leader in the production of coal, copper, zinc, bauxite, uranium and chrome ore.

• The extractive industries contributed a third to Kazakhstan’s GDP (33.4%). The substantial reserve of natural resources has secured the country’s economic growth for the past two decades but such growth is becoming difficult to maintain in recent years due to rising social problems and domestic security issues, potential political instability, worrying Russia-Ukraine and other geopolitical crisis, as well as the global economic recession.

• State participation in the oil and gas industry has increased over the last several years. The vertically integrated National KMG controls 20% of total oil and gas proved reserves of Kazakhstan and produces 27% of total oil and gas condensate and 14% of gas. Meanwhile, the annual volume of foreign direct investment has been increasing year by year since 1998.

• Kazakhstan was awarded the status of “EITI Compliant” on October 17, 2013 and it was the eighth year since it became the EITI candidate country since September 27, 2007.

• Kazakhstan has issued seven EITI reports since 2005 for seven consecutive years and the number of companies that participates in the reporting has been increasing yearly.

• Corruption, the unlimited presidential power, as well as a lack of judicial independence, remain large problems that await solutions.

• While there is a strong presidential control over media, non-governmental organizations and civil society organizations remain a strong force for pushing forward the EITI process and implementation.

• Kazakhstan does not have an articulated plan for sub-national reporting despite the EITI introduced new standards on the matter of sub-national reporting on resource revenues in July 2011. But NGOs such as Decenta Public Foundation has proposed a project named Kazakhstan: From Compliant Country To Compliant Region and it awaits Kazakhstan’s National Council of Stakeholders’ approval.

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Introduction

Kazakhstan is exceptional in world terms with respect to the diversity, quality and total quantities of its mineral resources. It is the ninth largest national territory in the world and rates as a leading producer of hydrocarbons, precious and base metals, ferrous metals and energy resources represented by uranium and coal. Kazakhstan’s oil reserves are ranked 12th in the world and its natural gas reserves are 19th. It is one of the world's top 15 oil-producing countries. It is a global leader in the production of coal, copper, zinc, bauxite, uranium and chrome ore.

Kazakhstan was admitted as an Extractive Industries Transparency Initiative (EITI) candidate country on September 27, 2007. Since 2005, it has published seven EITI reports covering all material revenues and payments from oil, gas, and mining companies for eight consecutive years.

FACT BOX Population 17.04 million (2013) GDP $231.9 billion (2013) Projected Annual GDP Growth 6.5% (Ministry of Economy and Budget

Planning) % GDP FROM EXTRACTIVE SECTOR 33.4 (2013) Revenue From Oil & Gas 24% of GDP (2013) Revenue From Mining 33.4% of GDP (2013) GDP Per Capita $13,610 Literacy rate 99.7% (2013) Unemployment 5.2% (2013) Ranking UN Human Development Index 69/187 (2013) Corruption Perception Index 126/175 (2013) Rule of Law Index (World Justice Project) 71/99 (2013) Bertelsmann Transformation Index 2014

Status Index 83/129 Political Transformation Index 102/129 Economic Transformation Index

47/129 Management Index 75/129

Resource Governance Index 19/58 (2013) Fraser Institute Mining Survey

Policy Perception Index 87/112 (2013)

Best Practices Mineral Potential Index 31/112 （2013）

Investment Attractiveness Index 67/112 （2013） Democracy Index N/A AON Political Risk Map Medium-high risk Index of Economic Freedom (Wall Street Journal)

69/178

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There has been an incremental increase in company participation in Kazakhstan’s EITI reporting from 38 companies in 2005, to 103, 108, 109 and 123 companies in 2006, 2007, 2008 and 2009 respectively. In its latest 2013 EITI report, the number of companies that participated in the reporting reached 203. Total revenues collected in 2013 was over US $30 billion as documented in the report. Oil and gas revenues were responsible for 93% of the revenue from the sector, with mining accounting for the remaining 7%. Revenue from the extractives sector has steadily increased between 2005 and 2011 from around US $2.5bn to $38bn.

Thanks to its National Stakeholder Council, increasing company participation, and relevant actions that aim at increasing transparency in reporting corporate earnings and government-led activities in the extractive industry, Kazakhstan was designated by the International Board of EITI as “EITI Compliant” on October 17, 2013, which suggests that the country has the mechanisms in place to ensure regular disclosure of natural resource revenues.

Country and Context

Government Structure

The Government of the Republic of Kazakhstan oversees a presidential republic. The President of Kazakhstan, currently Nursultan Nazarbayev, is head of state and nominates the head of government. The government exercises the executive power in Kazakhstan.

Kazakhstan is one of the most stable countries in Central Asia. President Nazarbayev, who came into power in 1991, has ruled the oil-rich country for over two decades. Thanks to the country’s substantive amount of natural resources and the country’s relatively open approach to economic reform as well as foreign investment, the upper middle-income Kazakhstan has been enjoying prosperity and economic success that help maintain the nation’s stability. President Nazarbayev, who has unlimited authority in the country’s governance, is welcomed as a popular leader among Kazakhstan’s pubic.

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Figure 1 Scheme of the flow of information for verification within the EITI implementation in Kazakhstan (National Report on the Implementation of EITI in Kazakhstan, 2011)

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However, political stability in this resource-rich country may be faced with potential challenges in the near futures. Domestically, since the economic success is largely based on the unquestioned authority of President Nazarbayev, the country’s stability is in question as the successor of the 73-year-old incumbent president is yet to be determined. In addition, home-grown terrorism is becoming a more worrying challenge to Kazakhstan’s security and stability. The International Crisis Group (ICG) addressed in one of its reports on the stability of Kazakhstan that “The expert and political community in Kazakhstan is almost unanimous about the main reason for the existence and spread of religious radicalization: the grim socio-economic situation in the regions, especially the west” of the country1. Between May and August 2011, a series of attacks and suicide bombings led to the death of dozens in the country’s westernmost provinces2. The country also witnessed shootings of police and arm forced officers in various places. Regionally, global economic recession and political turmoil in neighboring countries such as the Ukraine crisis are already taking a toll on Kazakhstan’s economy.

Economic context

Under the leadership of President Nazarbayev, Kazakhstan has been experiencing an impressive economic growth for the past two decades. With a GDP of US$ 201.7 billion and a population of less than 17 million, Kazakhstan aims to join the world's top 30 economies by 2050.

However, as mentioned earlier, Kazakhstan is experiencing slower economic growth in 2014. Kazakhstan’s real GDP growth slowed from 6 percent in 2013 to 4 percent in the first nine months of 2014. This was caused primarily by lower output in the oil industry, weaker external demand for Kazakhstan’s metal products by China and Russia, and weaker domestic demand. Private consumption, in particular, was hit hard by the negative wealth effect after the tenge devaluation in February 2014, a tightening of lending conditions for consumer loans, and the delayed impact of the slower growth in real wages in 2013.

The oil and gas industry of Kazakhstan plays an important role in the economic development of the republic. It is one of the main drivers of GDP growth and an important source of national budget revenue. However, the slumping oil prices and global economic slowdown have impacted the country’s economic development. According to the latest GDP forecast by the Ministry of Economy and Budget Planning of Kazakhstan in 2013, the average annual 10.9% growth from 2014 to 2018 will be 6.5%. In the first quarter of 2014, GDP growth slowed to 3.8% missing its target of 6%.

Meanwhile, while Kazakhstan’s transition to a market-led economy has been steady, further reforms are necessary to solidify past gains. Its overall investment and trade regime remains 1 http://www.crisisgroup.org/~/media/Files/asia/central-asia/kazakhstan/250-kazakhstan-waiting-for-change 2 http://cacianalyst.org/publications/analytical-articles/item/12806-kazakhstan%E2%80%99s-counter-terrorism-strategies-for-the-post-2013-security-environment.html

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relatively closed to foreign investors compared to regional and global peers. The country is also grippled with uneven distribution and redistribution of resources and economic development.

Zhanaozen, a town in the Mangystau Province of Kazakhstan located south-east of the city of Aktau which is formerly known as Novy Uzen, may offer a glance of some struggles Kazakhstan’s facing. With a population of 90,000 people, it is one of the ageing oilfields in Kazakhstan where jobs are now difficult to find and thus leads to a series of social problems. In 2011, a long-simmering strike was organized by oil workers in Zhanaozen who demanded higher wages. Police’s crack down on the strike led to the death of 15 people. Zhanaozen is one example to show that Kazakhstan’s immense oil and mineral riches are not benefiting every region or individual evenly. The wealth from the extractive industries is mostly concentrated in Almaty and Astana, where the cost of living is almost comparable the most expensive cities in the world. In contrast, those more remote and poorer cities in this vast country lack even basic infrastructure.

Social and political background

The situation with human rights in Kazakhstan remains unchanged despite relative improvement of the socio and economic situation in the country.

Since 2011, there is a serious crackdown on Kazakhstan’s opposition and its independent media. After reviewing relevant reports, Soros Foundation Kazakhstan (SFK) concluded that international ratings on political rights and civil liberties often define the country as “unfree”. Last year, Kazakhstan’s freedom on the Internet came close to the edge of “partly free” with “unfree”, according to the Freedom House's rating of Freedom on the Net 20143. It’s 2014 ranking of Internet freedom is 60th among 65 countries; in 2013, it was ranked at 59th.

But in a positive light, legislative changes are taking place in the country. In such circumstances it is very important to underscore the value of human rights, and any reforms in different spheres should take into account human rights based approach. When it comes to the EITI and the extractive industries in Kazakhstan is particular, since it became a candidate for EITI compliance, there are several laws relating to freedom of information in the sector, although significant gaps in transparency remain4.

Corruption and other relevant issues

As mentioned above, in Kazakhstan, President Nazarbayev enjoys almost absolute authority. Statutory independence is missing in the judiciary and the later is subservient to the executive branch. The level of corruption remains sufficiently high, especially in the spending of public

3 http://www.akipress.com/news:552894/ 4 http://www.resourcegovernance.org/sites/default/files/country_pdfs/kazakhstanRGI2013.pdf

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funds5. Kazakhstan ranked at the 126th out of 175 countries in the 2014 Corruption Perception Index6.

The ICG estimated that more than 50% of Kazakhstan’s GDP is controlled by a single sovereign-wealth fund, Samruk-Kazyna, which was once led by President Nazarbayev’s son-in-law. There are no doubts the president wields enormous power over the fund7.

To prevent corruption and ensure integrity in the private sector Kazakhstan is recommended to establish proper systems for reporting, information disclosure, internal and external audit, financial control and transparency in the activity of national managing holdings, national companies and other similar entities, which possess significant material resources.

Transparency

Kazakhstan, like some other post-Soviet states, has sought to expand EITI principles to public expenditures and bring accountability measures particularly to the areas of health, education and social protection. Since 2005, the NSC produced seven EITI reports so far, which helps promote a more transparency and openness in the management of revenues from the extractive sector, provide access to important public information for citizens, and increase effectiveness of revenue management and the investment climate.

However, a research on openness of local budgets that was undertaken for the second time in 2013 defined the degree of transparency and accountability in budgeting in all regions of Kazakhstan as “below average” (Annual Report, 2013).

Open Local Budget Index (OLBI) was developed based on the results of research data, collected in 2012 from 16 administrative territorial units of the Republic of Kazakhstan. The OLBI results show low relatively level of accessibility of budget information and openness of budget process at the regional level. The highest rating of 100 points that is assigned when the local budget is fully open and transparent; however, the average rating in Kazakhstan is only 35 points.

The 2013 annul report by the SFK quoted Zhanibek Khasan, director of public foundation Zertteu Research Institute, “The majority of citizens of Kazakhstan cannot participate in the budgeting due to the lack of knowledge and limited openness of the budget process or accountability of state agencies”.

A new Memorandum of Understanding was signed by the government, extractive companies, members of Parliament and civil society on 9 October 2013. This commits the parties to EITI implementation. The Law on Subsoil and Subsoil Use No. 291-IV, 24 June 2010, Art. 76 (§6 and 22) requires all companies to observe the MoU and submit data confirmed by an audit report 5 http://www.oecd.org/countries/kazakhstan/48908325.pdf 6 http://www.transparency.org/country#KAZ 7 http://www.economist.com/blogs/banyan/2013/10/kazakhstans-political-stability

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in compliance with the EITI Requirements. Despite the existing laws and policies that aim at increasing the transparency in the extractive industries, a lack of effective communication with the public has provoked serious tensions between Kazmunaygaz and communities in Kazakhstan’s western region.

According to the Resource Governance Index (RGI) which measures the quality of governance in the oil, gas and mining sector of 58 countries, the government of Kazakhstan does not provide detailed information on most aspects of the petroleum industry, leading to a “partial” score of 58 out of 100 and a rank at 21st8. In its EITI reports, only disaggregated figures for most taxes, dividends, and acreage fees are contained, but not data on social payments or company-by-company receipts.

In all, there are still many opportunities for improvement of budget processes at the local level, including involvement of local communities in the discussion and planning of budget expenditures, as well as public monitoring of budget effectiveness in the regions.

Major mining companies

At the current time, there are 172 oil and 42 gas condensate fields, including 80 that are being developed, registered in Kazakhstan. There are top five oil and gas condensate producers in Kazakhstan is Tengizchevroil, KazMunayGas (KMG), Karachaganak Petroleum Operating, Mangistaumunaygas, and CNPC-Aktobemunaygas.

State participation in the oil and gas industry has increased over the last several years due to the vital role of this industry in the economy of the republic. The vertically integrated National KMG represents the state’s interests of at least 50 percent in all production-sharing agreements in the industry. It controls 20% of total oil and gas proved reserves of Kazakhstan and produces 27% of total oil and gas condensate and 14% of gas.

However, consistent development of the oil and gas industry would not be possible without foreign direct investment (FDI). The annual volume of FDI has been increasing year by year since 1998 and the share of investments in the oil and gas industry in total volume of FDI remains high.

Kazakhstan’s oil is located both onshore and offshore with four main areas under development: Tengiz, Karachaganak, Kashagan, and Kurmangazy. Specifically, the Tengiz field contributes roughly 21% of the country’s daily production. Although the Kashagan field is still being appraised, it is estimated to be the largest oil field outside the Middle East and the fifth largest in the world. After months of haggling over Kashagan's rising costs and concerns of environmental non-compliance, the government has reached a deal with Italy’s ENI and all major stakeholders to redistribute revenues increasing KMG’s share in Kashagan.

1) Tengiz field

8 http://www.resourcegovernance.org/countries/eurasia/kazakhstan/overview

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The Tengiz field was discovered in 1979. Its recoverable crude oil reserves are estimated at 750 million to 1.1 billion tons (6–9 billion barrels). Tengizchevroil (TCO) partnership has been developing the Tengiz field since 1993.

Tengizchevroil ownership structure

Company Equity Share

Chevron (US) 50.0%

ExxonMobil (US) 25.0%

KazMunayGas NC (Kazakhstan) 20.0%

LUKArco (Russia) 5.0%

2) Kashagan field

Kashagan, the largest offshore field within the North Caspian PSA contract area, was discovered in 2000. Its proved recoverable oil reserves equal to 761.1 million tons. Kashagan’s owners will continue to explore other structures in the North Caspian PSA contract area — Kalamkas—Sea, South West Kashagan, Aktoty and Kairan.

The North Caspian Operating Company (NCOC), a company owned by foreign and local investors, is the current operator of the project. In 2013, China-based CNPC signed an agreement to join the project acquiring an 8.33% stake earlier controlled by ConocoPhillips.

North Caspian Operating Company ownership structure



Eni (Italy) 16.81%

ExxonMobil (US) 16.81%

Royal Dutch Shell (Netherlands/UK) 16.81%

Total (France) 16.81%

CNPC (China) 8.33%

INPEX (Japan) 7.56%

3) Karachaganak field

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The Karachaganak field, which is being developed by Karachaganak Petroleum Operating B.V. (KPO), a joint venture between several Western companies ��led by BG Group and ENI, has estimated recoverable reserves of 9 billion barrels (1.2 billion tons) of oil and gas condensate, as well as 1.35 trillion cubic meters of natural gas reserves. The company produced 10.2 million tons of oil in 2012.

In 2012, KazMunayGas NC joined the project acquiring a 10% stake from its current shareholders. Karachaganak for a long time was the last large oil and gas project in Kazakhstan without the state’s participation.

KPO ownership structure


BG Group (UK) 29.25%

ENI (Italy) 29.25%

Chevron (US) 18.0%

Lukoil (Russia) 13.5%


4) Nonfuel Mineral Commodities

The four most significant producers of nonfuel mineral commodities in Kazakhstan were Eurasian Natural Resources Corp. plc (ENRC) of the United Kingdom (aluminum, ferroalloys, and iron ore), Kazakhmys plc of the United Kingdom (copper and zinc), the state-owned company Kazatomprom JSC (uranium and rare metals), and Kazzinc JSC (lead and zinc, and byproducts, such as minor metals and gold).

Oil and Gas vs. Metals

Kazakhstan's main natural resources are petroleum, natural gas, and coal. Domestic oil consumption rates remain low, with exports averaging over 1 million bbl/d, making Kazakhstan a significant player in world oil markets. It is the second largest oil producer among the former Soviet republics after Russia and is heavily reliant on oil export revenues. Kazakhstan is also a net exporter of natural gas, and holds the largest known reserve of recoverable coal in Central Asia9. According to British Petroleum’s Statistical Review of World Energy June 201410, Kazakhstan has proven reserves estimated at 30.0 billion barrels (3.9 billion tons) of oil and 9 http://www.resourcegovernance.org/countries/eurasia/kazakhstan/extractive-industries 10 http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-report.pdf

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proven natural gas reserves of 53.9 trillion cubic feet (1.5 trillion cubic meters), which represent 1.8% and 0.8% of total global reserves, respectively.

Total production of oil and gas condensate in 2013 amounted to 81.8 million tons, up 3.2% year-on-year, of which 72.1 million tons, up 5.1% year- on-year, were exported. The government expects total production to rise to 90 million tons in 2015 and 110 million tons in 2018. According to the International Energy Agency’s World Energy Outlook 2010, by 2020 Kazakhstan will join the top 10 oil and gas exporters. As for Kazakhstan’s natural gas reserves, vast majority of them are located in the west of the country, with roughly 23% of proven reserves situated��in one field, Karachaganak.

Kazakhstan also produces a diverse range of mineral commodities. The state balances in Kazakhstan accounts for the reserves of minerals on 102 types of mineral raw materials, including on 40 types of solid minerals. It is the world’s leading producer of uranium. Kazakhstan is assessed to have the world’s largest reserve base of chromite (USGS, 2006).

According to the 2013 EITI report, it has 1.7 million tons of uranium reserves and resources. As of the end of 2014 the coal reserves of Kazakhstan are 33.6 billion tons (3.8% of the world reserves. Kazakhstan ranks 10th in the world on proved reserves of gold and 25th on mining. Gold deposits have been found out in all the regions of Kazakhstan, on the level of reserves the leading position is occupied by East, North and Central Kazakhstan. It is also a significant producer of silver, bauxite, copper, gallium, and zinc. The country has also been working on the development of polymetallic raw material. Good conditions to develop the copper-zinc industry are created in West Kazakhstan where its own mining and metallurgical production is provided to be formed on the basis of the proved copper-sulphide deposits. The forecasted zinc resources are estimated as more than 135 mln. tons, and the lead - 60 mln. tons.

Stakeholders

In 2006, which was a year after Kazakhstan joined EITI, the NSC in the extractive industries that acts as the coordinating body was established to implement EITI in the country.

The NSC comprised of members of the Parliament, representatives of government agencies, extractive companies, and NGOs. In the course of eight years since Kazakhstan joined EITI, the Council achieved meaningful results in organization of multi-stakeholder dialogue and in regular publication of EITI reports.

The NSC was chaired by Deputy Prime Minister Kairat Kelimbetov until early October 2013 when Mr Kelimbetov took up the post as Governor of the Central Bank. Kairat Kelimbetov's replacement Aset Isekeshev, Minister of Industry and New Technologies, was appointed as EITI Champion on 31 December 2013. Albert Rau, Vice-Minister for Industry and New Technologies, is Deputy Chair. The Kazakhstan EITI Secretariat within the Geology Committee of the Ministry of Industry and New Technologies coordinates implementation activities.

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EITI in Kazakhstan

EITI office location

Committee of Geology and Subsoil Use under Ministry of Investment and Development of the Republic of Kazakhstan Address: Orynbor st., 8, Ministry House, 7th porch, 12th floor, Astana, 010000, Republic of Kazakhstan

Initial Engagement Year 2007 (candidate country, pre-validation) Status of Membership EITI Compliant Number of reports and years 7 reports (2005-2013) Voluntary or mandatory Mandatory Reconciliation firm (advisory firm)

UHY Sapa Consulting LLP

Reporting threshold

Oil and gas companies

US$200,000 (excluding value-added tax)

Mining companies

US$100,000 (excluding value-added tax)

Performance Awarded the highest status of EITI Compliant in 2013

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Sub-‐National Reporting & Civil Society Engagement

Country Specific Efforts (and/or plans)

The EITI introduced new rules and requirements on the issue of sub-national reporting on resource revenues in July 2011. The rationale behind such is that a more accurate disclosure of corporate payments and government revenues at the local level in the extractive industries would help curtail corruption and other forms of mismanagement of funds.

In the case of Kazakhstan, sub-national reporting is an important issue that has been discussed for a few years. Sergey Gulyayev, General Director of Decenta Public Foundation (DPF) in Kazakhstan, introduced in my exchange of emails with him that local non-governmental organizations (NGOs) as well as civil society organizations (CSOs) initiated these discussion earlier than the EITI’s new standard was introduced.

When it comes to civil society engagement, NGOs and CSOs in Kazakhstan have been working hard to push forward public participation. According to a report by DPF, there were a few attempts to develop communication strategy on EITI in Kazakhstan to help better engage the public. These attempts have been made by:

• Coalition of NGOs “Oil Revenues – Under Public Control” in 2008-2012; • Dialogue Platform11 of NGOs – in 2011-2012; • National Stakeholders Council – in 2008; • Working Group of the National Stakeholders' Council – in 2012; • Ministry of Information and Culture with Ministry of Industry and New Technologies –

in 2013.

Besides the above-listed measures, CSOs in Kazakhstan have also been seeking to improve their representation within the EITI National Stakeholders Council. So far, eight EITI advocacy conferences (four national and four regional conferences) were held in different cities of Kazakhstan from 2008 to 2012. In 2013, further activities are planned: training of CSOs in the

11 The Dialogue Platform is a means of facilitating cooperation between NGO bodies on an equitable basis in the context of promoting EITI. On 9 February 2011, civil society representatives from Kazakhstan involved in implementing the EITI offered to coordinate their activities through a Dialogue Platform. The basic aim of the Dialogue Platform is to formulate a common position among civil society organisations on issues around EITI implementation and to promote this position through the NSC. The Dialogue Platform is intended to resolve a whole series of issues: in particular, reducing the risk of disagreements emerging among civil society groups and raising levels of awareness and expert knowledge regarding EITI implementation.

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extractive industries and communication activities to raise awareness on EITI transparency issues among the general public.

For example, in line with the new EITI standard and with the support of World Bank and Soros Foundation-Kazakhstan, there was a project implemented by MediaNet International Centre for Journalism (MediaNet)12 in 2012 to develop new approaches on communicating the information on EITI to the public and all interested parties. To achieve these goals, MediaNet proposed a number of means such as infographics that allowed easier access of information and better presentation formats of EITI reports and the National Reports on EITI to the public.

In February 2014, a conference was held in Aktau, entitled “Post-validation period of EITI implementation at subnational level”. The conference was organised by the Civil Alliance of Mangystau Province, with support from The United States Agency for International Development (USAid) under the “Developing cooperation and dialogue in Mangystau Province” project for the “Strengthening EITI at a regional level” component. It is the first time that such a conference has been held in Mangystau Province. The two-day conference came up with a list of recommendations for the development of the country’s national and regional reporting13. On 28 May, 2014, another regional conference was held in Astana, entitled “EITI: effective interaction at the local level”. Representatives of the NSC, the EITI Secretariat in Kazakhstan, NGOs from the western region and the SFK, with support from the British embassy in Kazakhstan all participated.

Despite the good progress in civil society engagement and all stakeholders’ awareness of sub-national reporting, Sergey Gulyayev remarked that few specific steps or plans have been taken so far to develop strategy of sub-national development for EITI reporting.

Last year, DPF initiated initiated a project named Kazakhstan: From Compliant Country To Compliant Regions. It included a component on development of the Strategy of EITI sub-national development. The Strategy was developed last year and presented during the National EITI Conference in December 2014 in Astana. It was decided to consider the Strategy on the next National Council meeting and approve it by a decision of the Council in order to make it obligatory for local authorities and other stakeholders. That is to say, there is no local reporting yet but most stakeholders are trying to figure out how to proceed with such.

Recommendations

v On communication among stakeholders:

The NSC and the EITI Secretariat in Kazakhstan should strengthen communications (exchange of information and activity planning) among stakeholders. To better engage the civil society, the

12 http://www.medianet.kz/1197 13 https://eiti.org/files/Eng%20Annual%20Activity%20Report%20Kazakhstan%202013.pdf

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EITI Secretariat should set up an independent online information resource, through which it should be possible to post information from representatives of all stakeholders, including NGOs and companies, regarding the projects, measures and initiatives that they are undertaking. For example, local media can be used as a tool to promote EITI at the provincial level; reconciliation reports regarding the payments and revenues from the extractive industries can be published online and other forms of platforms.

v On the regional development of EITI:

Kazakhstan’s government can introduce the practice of compulsory, systematic, and regular assessment of requirements separately in each region. This requires the introduction of a procedure for identifying priority issues. In the course of planning the expenditure and distribution of resources from local budgets, including SIPs, an assessment of the requirements of the population must be taken into account.

Conclusions Kazakhstan is a country worth studying because of the fact that within eight years since it became an EITI candidate, it was awarded the status of “EITI compliance” despite the country is still gripped by problems such as corruption, decreasing stability, and external pressures that lead to the slowdown of economic development.

In the particular case of Kazakhstan, civil society was probably the most interested party to promote EITI in the country. The experience and progress in EITI Kazakhstan can served as a learning model for other countries such as Mongolia. At first, the EITI process was not going smoothly in Kazakhstan and there were periods when some stakeholders were not keen on implementing relevant rules and standards. NGOs and CSOs, in this case, were the power to push the EITI forward. As a result, laws, policies, as well as concerned organizations have been set in place to assist with the EITI process. Advancements in transparency have been seen in Kazakhstan now but additional efforts will be needed to strengthen the accountability side of the equation.

To conclude, in order to maintain and comply with the EITI standards such as increasing the transparency level or pushing forward sub-national reporting, citizen participation, institutional strengthening of government agencies and strengthening the rule of law will be needed in Kazakhstan and the same rule applies to other EITI implementing countries as well.

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Resource Map

Extractive Industries Transparency Initiative Country Report on Kazakhstan

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