Subnational Series Doin Busin ss in K khst n 2017 Comp rin Busin ss R ul tion for Dom stic Firms in 8 K khst ni Loc tions with 189 Oth r Economi s © 2017 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 19 18 17 16 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Subnational Series Doin Busin ss in K khst n 2017 Comp rin Busin ss R ul tion for Dom stic Firms in 8 K khst ni Loc tions with 189 Oth r Economi s Resources on the Doing Business website Doing Business Subnational and regional in Kazakhstan 2017 projects http://www.doingbusiness.org/kazakhstan Differences in business regulations at the subnational and regional level Current features http://www.doingbusiness.org/subnational News on the Doing Business project http://www.doingbusiness.org Historical data Customized data sets since DB2004 Rankings http://www.doingbusiness.org/custom-query How economies rank—from 1 to 190 http://www.doingbusiness.org/rankings Law library Online collection of business laws and Data regulations relating to business All the data for 190 economies—topic http://www.doingbusiness.org/law-library rankings, indicator values, lists of regulatory procedures and details Entrepreneurship data underlying indicators Data on new business density (number http://www.doingbusiness.org/data of newly registered companies per 1,000 working-age people) for 136 economies Reports http://www.doingbusiness.org/data Access to Doing Business reports as well /exploretopics/entrepreneurship as subnational and regional reports, case studies and customized economy and Distance to frontier regional profiles Data benchmarking 190 economies to http://www.doingbusiness.org/reports the frontier in regulatory practice and a distance to frontier calculator Methodology http://www.doingbusiness.org The methodologies and research papers /data/distance-to-frontier underlying Doing Business http://www.doingbusiness.org/methodology Information on good practices Showing where the many good Research practices identified by Doing Business Abstracts of papers on Doing Business have been adopted topics and related policy issues http://www.doingbusiness.org/data http://www.doingbusiness.org/research /good-practice Doing Business reforms Short summaries of DB2017 business regulation reforms and lists of reforms since DB2006 http://www.doingbusiness.org/reforms Contents 1 Overview Doing Business in Kazakhstan 2017 is the first report of the 12 Report Methodology and Scope subnational Doing Business series in Kazakhstan. It measures business regulations and their enforcement in four Doing 13 About Doing Business and Doing Business in Business areas. It goes beyond Almaty city to benchmark Kazakhstan 2017 seven additional Kazakhstani locations—Aktobe, Astana, East Kazakhstan (Oskemen), Karagandy, Kostanay, Pavlodar and South Kazakhstan (Shymkent). This report’s regional data is 22 Starting a Business current as of December 2016 and includes comparisons with Almaty city and other economies based on data from Doing 30 Dealing with Construction Permits Business 2017: Equal Opportunity for All, the 14th in a series 42 Getting Electricity of annual reports published by the World Bank Group. The 54 Registering Property indicators in Doing Business in Kazakhstan 2017 are also comparable with more than 400 locations from 65 economies benchmarked in other subnational Doing Business studies. All 66 Data Notes data and reports are available at www.doingbusiness.org /subnational. 84 Indicator Snapshots Doing Business measures aspects of regulation that enable 86 Location Snapshots or hinder entrepreneurs in starting, operating or expanding a 89 Indicator Details business—and provides recommendations and good practices 89 Starting a Business for improving the business environment. Regulations affecting 91 Dealing with Construction Permits four areas of the life of a business are measured at the 93 Getting Electricity 90 Registering Property subnational level in Kazakhstan: starting a business, dealing with construction permits, getting electricity and registering 95 Acknowledgments property. These indicators were selected because they cover areas of local jurisdiction or practice. The indicators are used to analyze economic outcomes and identify what reforms have worked, where and why. This project was requested by the Ministry of National Economy of the Republic of Kazakhstan and implemented by the Global Indicators Group (Development Economics) of the World Bank Group. iv DOING BUSINESS IN KAZAKHSTAN 2017 Overview MAIN FINDINGS ƒƒ Where entrepreneurs in Kazakhstan establish their business matters for the regulatory hurdles they face. Regulatory efficiency varies substantially across locations in two of the four areas benchmarked—dealing with construction permits and getting electricity— because of differences in local interpretations of the law and in the level of implementation of recent reforms. ƒƒ Almaty city, which tends to be prompter than other locations to implement new reforms, has the most business-friendly regulation. The capital city, Astana, which is often selected to pilot reforms, brings up the rear. ƒƒ Good practices can be found across Kazakhstan in all four areas of regulation covered. Reform-minded policy makers can make tangible improvements by replicating measures already successfully implemented within the country. ƒƒ There is still room to streamline business regulation— and as Kazakhstan seeks to move closer to the regulatory frontier, it could look beyond its borders to examples of good practice around the world. OVERVIEW 1 K azakhstan celebrated the 25th FIGURE 1.1  Kazakhstan’s income per capita nearly quadrupled over the past two anniversary of its independence decades, but GDP growth recently slowed on December 16, 2016. The country has come a long way since 1991 Gross national income per capita (PPP$ thousands) Real annual GDP growth (%) to become a regional economic power. 25 15 Basic economic indicators show impres- sive progress. GDP growth averaged 10 7.7% a year in real terms between 2000 20 and 2014, contributing to the creation 5 of more than 2 million jobs.1 Income per 15 capita nearly quadrupled over the past 0 two decades, poverty fell dramatically, 10 and living standards improved (figure 1.1). -5 In the past decade Kazakhstan strength- ened public management, improved 5 -10 the business climate and shifted resources toward critical infrastructure. 0 -15 According to a recent assessment by the 1 2 3 4 5 6 7 3 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Year Organisation for Economic Co-operation and Development (OECD), Kazakhstan is Gross national income per capita Real annual GDP growth well placed to realize the objectives of its Kazakhstan 2050 Strategy and catch up Source: World Development Indicators database, World Bank. with OECD income levels by 2050.2 Note: Gross national income per capita is in current international dollars, converted using purchasing power parity (PPP) rates. But a challenging external environment has caused a broad economic slowdown. private sector growth and in attracting of Kazakhstan. The goal is for these GDP growth fell from 4.1% in 2014 to 1.2% more foreign direct investment—reforms enterprises to contribute 50% of GDP in 2015 and 0.9% in 2016.3 In addition, leading to a well-regulated land market, by 2050.8 Kazakhstan remains vulnerable to external streamlined licensing procedures for shocks because of its high dependence on establishing a formal business, and Achieving that goal will require facilitat- natural resources—extractive industries efficient and transparent processes for ing the entry and growth of small and account for 16% of GDP.4 obtaining construction permits and elec- medium-size enterprises. In 2016 these tricity connections.6 enterprises accounted for only 25.6% of In response, national authorities plan GDP and for 28% of total job creation, to accelerate the implementation of Reforms providing an appropriate far below the global average of 63%.9 structural reforms designed to promote incentive framework based on a clear, Moreover, local small and medium-size diversified economic development, raise transparent and predictable business enterprises grow more slowly than their productivity and improve the effective- and investment climate are all key to counterparts in comparable countries ness of the bureaucracy.5 Against this promoting the development of small and as well as larger firms in Kazakhstan.10 backdrop, strengthening the role of medium-size enterprises.7 And indeed, Barriers to their entry and growth remain, the private sector is critical. Business improving the investment climate for such as limited competition, inadequate regulation reforms would help in creat- small and medium-size enterprises is access to finance, and high administra- ing an environment more conducive to among the priorities of the government tive costs and regulatory burdens.11 Kazakhstan already has a strong track record in promoting regulatory reform. It is vital that the government identify new Indeed, the country is regularly acknowl- sources of growth to reduce the country’s edged as a leading reformer by the annual dependence on extractive industries. Private Doing Business report (box 1.1). Moreover, sector development is a strategic priority its reform program is continuing at a strong pace, as evidenced by the recent for this purpose. partnership with the OECD that includes 19 policy reviews.12 2 DOING BUSINESS IN KAZAKHSTAN 2017 BOX 1.1 Kazakhstan a top reformer four times in 10 years, according to Doing Business Kazakhstani authorities have taken important steps toward making it easier to do business—implementing 36 reforms acknowl- edged by Doing Business since 2006. Indeed, Kazakhstan was recognized by the annual Doing Business report as one of the top 10 reformers four times during that period—a unique achievement. In the period from June 2015 to June 2016 alone, Kazakhstan made improvements in 8 of the 11 regulatory areas covered. No other country reformed in more areas benchmarked by Doing Business during that period. The main area of focus has been business registration, with six reforms recorded by Doing Business (see figure). As a result, start- ing a business has become much simpler since 2003, when the process was so complex that 80% of applications were rejected because of errors in the documents submitted.a Over the intervening years Kazakhstan simplified the application package for registration and eliminated the requirement to separately register the business at the local tax office. It also exempted local small and medium-size enterprises from paying registration fees, eliminated the legal requirement for a company seal and reduced the time required for electronic registration on the e-government (egov) web portal from one day to one hour. Kazakhstan also abolished the notarization requirement for the memorandum of association, company charter and founders’ signatures.b Kazakhstan has made big strides since 2003 in improving the process to start a business Cost (% of income Time (days) per capita) 35 Between 2003 and 2016:* - Number of procedures was cut by half. 15 30 - Time was reduced by more than 70%. - Cost was almost eliminated. 12.9% 25 20 10 15 10 5 5 0.76% 0 0 1 2 3 4 5 6 7 8 9 10 11 Procedures (number) 2003 2016 Source: Doning Business database. * The data for 2003 are for Kazakhstan as represented by Almaty city, while the data for 2016 are the average for the eight locations benchmarked in this study. The most recent improvements have been achieved under the Kazakhstan 2050 Strategy (announced in December 2012), which sets a series of seven economic, social and political objectives, including “comprehensive support of entrepreneurship.” With the goal of becoming one of the 30 most developed economies by 2050, Kazakhstan aims to transform itself into a diver- sified, knowledge-based economy driven by the private sector. In May 2015 President Nursultan Nazarbayev announced “100 concrete steps” to overcome the effects of the global crisis and implement the Kazakhstan 2050 Strategy. Of these 100 steps, 49 are aimed at fostering economic growth and diversification, including through the creation of a favorable investment climate. In the area of construction permitting, for example, the goal is to introduce a three-stage process: issuance of an architectural planning assignment within 30 days; concurrence with the project design within 20 days; and issuance of the construction permit within 10 days. a. World Bank, Doing Business 2004: Understanding Regulation (Washington, DC: World Bank, 2003). b. World Bank, Doing Business 2017: Equal Opportunity for All (Washington, DC: World Bank, 2016). OVERVIEW 3 In the annual Doing Business report com- and cost of regulatory processes affect- WHAT DOES DOING paring 190 economies around the world, ing four stages in the life of a small to BUSINESS IN KAZAKHSTAN Kazakhstan is represented by Almaty medium-size domestic firm—starting 2017 MEASURE? city, its largest business center, account- a business, dealing with construction ing for 9% of the country’s population.13 permits, getting electricity and registering Doing Business studies business regula- Yet Almaty city does not tell the full story. property. These four indicator sets were tion from the perspective of small to Entrepreneurs operating in different loca- selected because they relate to areas of medium-size domestic firms. A funda- tions face different local regulatory business regulation where implementa- mental premise of Doing Business is that practices. Thus in addition to Almaty city, tion of the common legal and regulatory economic activity benefits from good Doing Business in Kazakhstan 2017 bench- framework differs across locations. While rules and institutions. These include rules marks six regions (oblasts)—Aktobe, highly centralized line ministries hold the that establish and clarify property rights, East Kazakhstan, Karagandy, Kostanay, direct formal authority for the delivery of increase the predictability of economic Pavlodar and South Kazakhstan, each most services across the territory, regions interactions and provide contractual represented by its largest business city as well as Almaty city and Astana wield partners with core protections against (Aktobe, Oskemen, Karagandy, Kostanay, local power and authority, especially in abuse. The idea is simple: if entrepre- Pavlodar and Shymkent)—as well as the the areas of getting electricity and dealing neurs spend less time dealing with regu- capital city, Astana (figure 1.2). with construction permits. latory burdens, they will have more time to devote to productive activities. If laws The objective of the study is to gain a The data for the study are based on rel- and regulations are clear, efficient and broader understanding of the business evant laws, regulations, decrees and fee simple to implement—and, at the same regulatory environment across Kazakhstan schedules as well as responses to ques- time, enforceable in a court of law— as well as to provide good-practice tionnaires from more than 300 local entrepreneurs will be more comfortable examples and reform recommendations experts from the private sector across the about doing business with people they to help guide policy at the national and country. The respondents include law- do not know, expanding their networks of subnational levels. The study focuses on yers, architects, engineers, construction clients and suppliers. indicator sets that measure the complexity companies, professional associations FIGURE 1.2  In addition to Almaty city, Doing Business in Kazakhstan benchmarks six regions and Astana Alm t cit BENCHMARKED REGIONS SELECTED LOCATIONS REGION BOUNDARIES 0 4 DOING BUSINESS IN KAZAKHSTAN 2017 and others who regularly carry out or kind of variation in performance across of a lack of coordination between the advise firms on the procedures required indicator sets can help guide local policy utilities and the municipality when it in each of the benchmarked areas. Public makers to areas where improvements comes to the clearance of architectural officials from all levels of government are possible without major legislative and engineering plans. These findings also contributed information. The data changes (figure 1.3). indicate that reform-minded local gov- are current as of December 2016.14 ernments have ample scope for action Second, the efficiency of local regulation and can learn from one another. Doing Business in Kazakhstan 2017 does drives the aggregate ranking. The top not measure all aspects of the busi- three locations—Almaty city, Aktobe Third, local business regulation reforms ness environment that matter to firms and Kostanay—do better on indica- not only will improve the ranking of or investors—such as macroeconomic tor sets relating to areas where local one location relative to another within stability, the size of the market, the state authorities have the most autonomy in Kazakhstan; they can make a substantial of the financial system or the quality of developing and implementing regula- difference in performance in global com- human capital. Nor does it cover special tory rules—dealing with construction parisons. This is illustrated by the dis- economic zones where companies permits and getting electricity. Aktobe, tance to frontier score, which shows the receive incentives to open a business. which is among the bottom four on distance between a location’s regulatory The results reveal variation in business three indicator sets, has the number 2 performance and the “frontier,” defined regulations and their implementation ranking overall because of the relative as the best performance globally across across Kazakhstan. ease of connecting a warehouse to the 190 economies. electricity grid in that location compared with its peers. Conversely, Astana, Distance to frontier scores for dealing WHAT ARE THE FINDINGS? which leads in starting a business, lags with construction permits show a sub- behind in the aggregate ranking mainly stantial gap between the best and worst On aggregate across the four regulatory because of complexity in connecting to performers in Kazakhstan (figure 1.4). areas covered, Almaty city has the most the electricity grid and a low score on With a score of 73.61, Almaty city would business-friendly regulation, and Astana the reliability of supply and transpar- rank near the top 30% of economies the least (table 1.1). Several observations ency of tariffs index. South Kazakhstan globally, comparable to Canada (whose stand out. First, no location does equally (Shymkent) ties for the lead in register- score of 73.66 puts it at 57 in the well in all four areas. All locations rank ing property and is runner-up in start- ranking). East Kazakhstan (Oskemen) among the top three on at least one ing a business, but lags behind in the and South Kazakhstan (Shymkent) lag indicator set, but also among the bot- aggregate ranking and in dealing with behind with scores of 68.54 and 67.03; tom four on at least one other. This construction permits, mainly because among the eight locations, these are the TABLE 1.1  Where is doing business easier in Kazakhstan—and where not? Dealing with 4 indicator Starting a business construction permits Getting electricity Registering property average Aggregate Location DTF score rank DTF score Rank DTF score Rank DTF score Rank DTF score Rank Almaty city 80.85 1 91.94 5 73.61 1 73.64 1 84.20 1 Aktobe 78.88 2 89.94 8 72.38 5 69.13 2 84.08 7 Kostanay 78.82 3 90.14 6 73.00 2 67.95 3 84.20 1 Pavlodar 76.90 4 91.94 4 71.81 6 59.67 5 84.20 1 East Kazakhstan 76.33 5 90.10 7 68.54 7 62.49 4 84.20 1 (Oskemen) Karagandy 74.00 6 91.94 3 72.48 3 47.38 7 84.20 1 South Kazakhstan 73.85 7 91.95 2 67.03 8 52.21 6 84.20 1 (Shymkent) Astana 72.51 8 92.07 1 72.45 4 41.44 8 84.08 7 Source: Doing Business database. Note: Rankings for the four areas measured are based on the distance to frontier (DTF) score, which shows how far a location is from the best performance achieved by any economy on each Doing Business indicator. The aggregate ranking is based on the aggregate distance to frontier score for the four areas. The distance to frontier score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more information, see the chapter “About Doing Business and Doing Business in Kazakhstan 2017” and the data notes. OVERVIEW 5 FIGURE 1.3  A location’s regulatory environment may be more business-friendly in some areas than in others—revealing opportunities for reform Almaty city Aktobe Kostanay Pavlodar East Kazakhstan Karagandy South Kazakhstan Astana (Oskemen) (Shymkent) 1 1 1 1 1 1 1 2 3 4 5 5 6 6 6 7 7 7 8 8 8 Indicator with highest ranking Aggregate ranking Indicator with lowest ranking Source: Doing Business database. only two where dealing with construc- Distance to frontier scores for getting is already making strides to converge tion permits takes longer than the aver- electricity tell a similar story. With a with good practices. In 2016 it started age for economies of Europe and Central score of 73.64, Almaty city would rank using a centralized and automated Asia. If they were to replicate good prac- among the top 40% of economies approach to monitoring outages. This tices found elsewhere in Kazakhstan to globally, similar to Spain (whose score will improve its score on the reliability of shorten the delays, they would move up of 72.99 places it at 78 in the ranking). supply and transparency of tariffs index not only in the ranking relative to their But Astana, with a score of 41.44, would and, in turn, its distance to frontier score peers but also on the global scale. rank among the bottom 15%. Yet Astana for getting electricity. But even if Astana were to measure up to Almaty city on the index (with 7 of 8 possible points), FIGURE 1.4  Marked gaps in performance among the eight Kazakhstani locations in it would still lag behind Almaty city by dealing with construction permits and getting electricity 10 percentage points in the distance to frontier score. To catch up, Astana will Distance to frontier score (0–100) also need to streamline the process of connecting a warehouse to the elec- Highest score in Kazakhstan 73.61 69.07 73.64 tricity grid—reducing both procedural Lowest score in Kazakhstan 67.03 69.02 complexity and time.15 54.97 or below 46.28 or below Fourth, in some areas there is only a 41.44 narrow gap between the best and worst performers. One such area is starting a business, which involves the same bottlenecks in all locations. The time Dealing with Getting electricity required differs by only 1.5 days between construction permits Astana, with the fastest process (8.5 ECA average Bottom 20% of 190 economies days), and Aktobe, East Kazakhstan (Oskemen) and Kostanay, with the slowest (10 days). But the overall time Source: Doing Business database. requirement is relatively high by global Note: The distance to frontier score shows how far a location is from the best performance achieved by any comparison. Among the 190 economies economy on each Doing Business indicator. The distance to frontier score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). ranked by Doing Business, Astana would 6 DOING BUSINESS IN KAZAKHSTAN 2017 or medium-size enterprise. South Kazakhstan (Shymkent), where busi- ness registration involves no private There is room to improve the impact of recent third parties and company seals can regulatory reform efforts by focusing on be obtained swiftly and inexpensively, implementation across the country. would be number 7 in the global ranking. THE WAY FORWARD be only the 60th fastest place to start a averages for both Europe and Central business. While the capital city outper- Asia and OECD high-income econo- Global benchmarking exercises like Doing forms the Russian Federation (9.8 days), mies, Kazakhstan has a greater distance Business inspire governments to reform. it lags behind Afghanistan (7 days). to go in closing the gap with global best Comparisons within a country may be Some steps are particularly long: value practices on the number of procedures even stronger drivers of reform—because added tax (VAT) registration alone takes for starting a business, dealing with con- they make it more difficult for local gov- 7 calendar days. This step depends on struction permits and getting electricity ernments to justify more burdensome pro- the State Revenue Committee, which (figure 1.5). Yet doing business is also cesses for doing business in their region or abides by the legal time limit for review- relatively inexpensive in Kazakhstan. city than in neighboring locations. ing applications. Performance also varies The cost to register property, at only little in the area of registering property, 0.1% of the property value, puts the Almaty city, historically the main busi- but here all locations would rank among country at number 6 in the global rank- ness center in Kazakhstan, has been the top 20 economies globally. ing on this cost indicator. And all eight faster to implement regulatory reforms Kazakhstani locations would rank among than other locations have been. In the Finally, doing business remains pro- the top 20% of economies worldwide area of getting electricity, for example, cedurally complex across Kazakhstan on the cost to start a business, thanks Almaty city is the only location where by global comparison. Compared with to minimal fees for registering a small the authorization to carry out the ground works can be requested online. FIGURE 1.5  Dealing with business regulation in Kazakhstan is relatively complex The former capital city was also an early but inexpensive starter in monitoring electricity outages and using automated tools to restore Average distance to frontier score (0–100) service. Astana too is often selected to 100 pilot reforms. In construction permit- ting, for example, Astana is the only 80 location other than Almaty city that has fully implemented the one-stop shop combining the issuance of technical 60 conditions and the architectural plan- ning assignment into a single step. 40 But local good practices can be found 20 across Kazakhstan. Providing an electric- ity connection as quickly as in Aktobe (61 0 days) and at the cost in East Kazakhstan n A D n A D n A D n A D sta EC OEC sta EC OEC sta EC OEC sta EC OEC (Oskemen) (41.2% of income per capita) akh akh akh akh Kaz Kaz Kaz Kaz Dealing with would give Kazakhstan a DTF score of Starting a business construction permits Getting electricity Registering property 75.41 on the ease of getting electric- Procedures Cost ity—similar to the one of 68th ranked Croatia (DTF score of 76.25) and ahead Source: Doing Business database. of Israel (DTF score of 75.20) (figure 1.6). Note: The data are averages for the eight locations benchmarked in Kazakhstan, for the economies of Europe and Reducing the procedures for construction Central Asia (ECA) and for OECD high-income economies. The distance to frontier score shows how far a location is from the best performance achieved by any economy on each Doing Business indicator. The distance to frontier permitting to the number in Astana (18) score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the and lowering the cost to that in Kostanay score, the better). For more information, see the chapter “About Doing Business and Doing Business in Kazakhstan 2017” and the data notes. (1.6% of the warehouse value) would OVERVIEW 7 FIGURE 1.6  With good practices to be found within Kazakhstan, locations can learn from one another—especially in two regulatory areas Dealing with construction permits Getting electricity Average performance Where are the good practices? Average performance Where are the good practices? Average for eight locations Best performace in Kazakhstan Average for eight locations Best performace in Kazakhstan Distance to frontier score (0–100) Distance to frontier score (0–100) Distance to frontier score (0–100) Distance to frontier score (0–100) 99.49 92.19 99.23 41.2% of income per capita 89.53 1.6% of warehouse value (Kostanay) 62.6% of income per capita (East Kazakhstan [Oskemen]) 2.1% of warehouse value 87.50 86.67 86.67 7 of 8 points (Almaty city) 13 of 15 points 13 of 15 points (all locations) 81.30 74.18 61 days (Aktobe) 72.05 77.4 days 123 days (Almaty city) 64.95 147.6 days 48.00 44.50 18 (Astana) 19 40.63 3.3 of 8 points 33.33 7 (Almaty city, Aktobe, Kostanay and 22.92 South Kazakhstan [Shymkent]) 8 Cost Building quality control index Time Procedures Reliability of supply and transparency of tariffs index Source: Doing Business database. Note: The distance to frontier score shows how far a location is from the best performance achieved by any economy on each Doing Business indicator. The distance to frontier score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more information, see the chapter “About Doing Business and Doing Business in Kazakhstan 2017” and the data notes. give the country a DTF score of 74.72 on Mexico, where the Federal Commission visit neighboring states and cities. Not the ease of dealing with construction per- for Regulatory Improvement (Cofemer) surprisingly, data show that the states mits—similar to the one of 49th ranked organizes a biannual conference allow- making a greater effort to maintain a dia- Austria (DTF score of 74.96) and ahead ing every state to share its experience in logue with their peers also have a better of Canada (DTF score of 73.66). improving regulation. Peer learning also regulatory environment as measured by takes place when local policy makers Doing Business (figure 1.7). The good news is that there is no need to reinvent the wheel: locations can achieve tangible improvements by intro- FIGURE 1.7  Mexican states doing more to maintain a dialogue with their peers have ducing measures already successfully a better business regulatory environment implemented elsewhere in Kazakhstan. Average distance to frontier score for the four areas measured (0–100) Sharing the same national legal and regulatory framework makes it easier 100 to replicate local good practices. Small Colima 90 administrative improvements requiring Aguascalientes no major regulatory changes can make 80 Guanajuato a big difference in the life of a small or State of Mexico 70 medium-size firm (table 1.2). Tamaulipas Puebla Durango 60 Peer-to-peer learning can facilitate the sharing of knowledge and provide oppor- 50 Baja California Morelos tunities for local authorities to lobby 40 Mexico City the national government for nationwide 0 1 2 3 4 5 6 7 8 regulatory reforms advancing the agenda Number of states contacted for the country as a whole. Some coun- tries have built a strong track record in Source: Doing Business database, based on data obtained in November 2013 during consultative meetings with peer-to-peer learning, with Doing Business authorities from Mexican states. indicators and good practices provid- Note: The correlation between the distance to frontier score and the number of states contacted by other states is 0.53, and the relationship is significant at the 1% level. ing a framework for discussion. One is 8 DOING BUSINESS IN KAZAKHSTAN 2017 TABLE 1.2  Summary of reform recommendations to improve the ease of doing business in Kazakhstan Starting a business In Astana most new firms register their business directly through the e-government (egov) portal rather than going to a Government for Citizens center or seeking the assistance of a third party. This makes starting a business less procedurally Good practices indentified complex in Astana than in the other locations. Moreover, since there is no fee for business registration, all eight Kazakhstani locations would rank among the 20% of economies globally with the most affordable business entry. Relevant institutions and stakeholders What can be improved? National Local Develop a communication strategy to Ministry of Justice Department of Justice; Entrepreneurs Service Centers publicize reforms Enhance the egov portal with Government for Citizens state corporation; Ministry Local banks; local insurance companies additional services of Information and Communication; Public Services Development Department Allow simultaneous company and Ministry of Finance State Revenue Committees value added tax (VAT) registration and abolish the need to visit a notary Dealing with construction permits In Almaty city and Astana the municipal Department of Architecture is a one-stop shop delivering the spatial planning guidelines and utility connection requirements in one package. This reflects effective collaboration between municipal Good practices identified authorities and utilities as well as clearly delineated responsibilities for issuing approvals, clearances and the relevant documents—resulting in a more efficient construction permitting process in these two locations. Relevant institutions and stakeholders What can be improved? National Local Expand the scope of online services Administration of State Architectural and Construction Department of Architecture; local branch of the in construction permitting Control (GASK) Administration of State Architectural and Construction Control (GASK) Improve the functionality of the Department of Architecture; water and sewerage one-stop shops utility companies Integrate spatial planning Department of Architecture; water and sewerage utility guidelines and utility supply companies information into online platforms Streamline project approval Single-Window Online Platform (epsd.kz) Department of Architecture; water and sewerage requirements utility companies Introduce smarter time limits for State Expert Examination Agency (Gosexpertiza) better compliance Enhance risk-based inspection Administration of State Architectural and Construction Local branch of the Administration of State Architectural mechanisms Control (GASK) and Construction Control (GASK) Introduce mandatory insurance Ministry of National Economy requirements to cover structural defects Prevent corruption risks Administration of State Architectural and Construction Department of Architecture; local branch of the Control (GASK) Administration of State Architectural and Construction Control (GASK) (continued) OVERVIEW 9 TABLE 1.2  Summary of reform recommendations to improve the ease of doing business in Kazakhstan (continued) Getting electricity In Aktobe, Almaty city, Karagandy, Kostanay and South Kazakhstan (Shymkent) the authorization for ground works is issued in four days or less. Among these locations, Almaty city has the easiest process because it can be completed online. In the other locations entrepreneurs must visit the relevant public authority in person to apply for and receive the clearance. Compared with distribution utilities elsewhere in Kazakhstan, the utility in Aktobe is more efficient in issuing the technical Good practices identified conditions for a new connection, conducting the inspection of completed works and issuing the relevant postinspection documents. Its greater efficiency can be attributed to better internal coordination. In Aktobe and Pavlodar there is better coordination between distribution utilities and electricity suppliers. The final step in getting an electricity connection—the issuing and signing of the supply contract and energizing of the connection—takes less time in these two locations than in the others. Relevant institutions and stakeholders What can be improved? National Local Improve workflow within Distribution utilities; electricity suppliers distribution utilities and between the utilities and suppliers Improve the coordination between Department of Architecture; Department of Communal Services, distribution utilities, municipal Passenger Transport and Roads (or equivalent); cadastral departments and other utilities authority issuing the scheme of the connection route (where required);a distribution utilities; utilities responsible for such services as gas, water, heating and telecommunications Streamline the approval processes Department of Architecture; Department of Communal Services, Passenger Transport and Roads (or equivalent); distribution utilities; utilities responsible for such services as gas, water, heating and telecommunications Further simplify issuance of the Administration of State Architectural and Construction Control Department of Architecture;b Department of Communal clearance for ground works (GASK) Services, Passenger Transport and Roads (or equivalent); Department of Land Relations (where applicable); local branch of the Administration of State Architectural and Construction Control (GASK) Streamline inspections of external Distribution utilities; private companies responsible for works delivering the "expert opinion" Registering property Six locations—Almaty city, East Kazakhstan (Oskemen), Karagandy, Kostanay, Pavlodar and South Kazakhstan (Shymkent)— outperform their peers on the ease of registering property. The reason is that the Department of Justice in these locations is Good practices identified able to complete property registrations within the legally established time limit. But all eight Kazakhstani locations would rank among the economies with the fastest and least costly processes for registering property, thanks to online services and low property registration fees. Relevant institutions and stakeholders What can be improved? National Local Make information on cadastral Department of Automated Information System of the State Government for Citizens centers; local branch of the Directorate services publicly available and Land Cadastre and Technical Support; Directorate of Land of Land Cadastre and Technical Survey of Real Estate establish a dedicated complaint Cadastre and Technical Survey of Real Estate; Government for mechanism for the cadastre Citizens state corporation Make property ownership Government for Citizens state corporation; Ministry of Justice Department of Justice; Government for Citizens centers information publicly available Strengthen the infrastructure of the Department of Automated Information System of the State Department of Justice; Government for Citizens centers; local land administration system Land Cadastre and Technical Support; Directorate of Land branch of the Directorate of Land Cadastre and Technical Cadastre and Technical Survey of Real Estate; Government for Survey of Real Estate Citizens state corporation; Ministry of Justice Establish a state guarantee and Government for Citizens state corporation; Ministry of Justice Specialized Inter-district Economic Court make statistics on first-instance land disputes publicly available Expand geographic coverage Department of Automated Information System of the State Local branch of the Directorate of Land Cadastre and Technical Land Cadastre and Technical Support; Directorate of Land Survey of Real Estate Cadastre and Technical Survey of Real Estate; Government for Citizens state corporation Source: Doing Business database. Note: For a detailed explanation of each recommendation, see the section “What can be improved?” in the corresponding chapter. a. Astana Kala Kurylys Monitoring; Karagandy City Cadastre Center LLC; and RGP Gosgradocadastre in Pavlodar (local branch). In East Kazakhstan (Oskemen) the scheme of the connection route is prepared by the Department of Architecture. b. In Astana the Department of Permits for Excavations of the City Landscape is responsible for issuing excavation permits. 10 DOING BUSINESS IN KAZAKHSTAN 2017 In Kazakhstan one important cross-cut- the e-government (egov) web portal for from various municipal departments and ting theme is the need for closer coordi- starting a business or getting electricity. multiple utilities for the scheme of the nation across municipal departments, as Many entrepreneurs do not know how to connection route, the project design or well as between municipal departments use all the services the portal provides. the excavation permit—imposing a bur- and the other institutions involved, such Seeking advice from an attorney or the den on the entrepreneur. By contrast, in as utilities and cadastral authorities. local Government for Citizens center Sweden, Switzerland and Taiwan, China, Take the example of getting electricity. before proceeding with online business an entrepreneur needs only to submit a In Astana, East Kazakhstan (Oskemen), registration remains a common practice. connection application to the utility— Karagandy and Pavlodar the private com- And even where applications for a new which is then responsible for preparing pany responsible for designing the con- electricity connection can be submitted the design of the connection, obtaining nection first needs to obtain the scheme online or by email, customers usu- all authorizations needed and complet- of the connection route ensuring that the ally submit their application in person, ing the connection works. Kazakhstan design will not interfere with the com- at the utility’s office. For a government could streamline the process by having munication lines of other utilities (gas, introducing new online services, some one single institution coordinate the col- water, heating, telecommunications). of the main challenges are a poor public lection of approvals. This could be done With close coordination between the understanding of the services, the lack by convening all the parties in a single distribution utility, cadastral authorities of a sense of ownership among those meeting or by circulating the documents and the relevant municipal departments, affected by the changes, a general iner- among them in a timely manner. Reducing this scheme could be provided together tia (or lack of support) and weak trans- the number of personal interactions not with the technical conditions issued by mission channels. More efforts need to only increases efficiency; it also reduces the distribution utility, speeding up the be made to ensure proper use of such opportunities for corruption (figure 1.8). connection process. services. A good practice is to pilot a reform in one location before rolling it Similar opportunities exist in the busi- Coordination could also be improved in out across the country, to allow time to ness start-up process. As part of this construction permitting, in the approval gather adequate feedback from the first process, any entrepreneur registering process for the plan for engineering users and fine-tune the new system. for value added tax (VAT) must visit networks. This plan is supposed to be the State Revenue Committee in person. approved by a commission representing Another cross-cutting theme is the Kazakhstan could follow the example the utility companies and the Department opportunity to make better use of of Singapore, which combines VAT of Architecture of the respective munici- online platforms to reduce regulatory registration and company registration pality. In practice, however, a lack of coor- burdens. In dealing with construction in a single procedure. No in-person dination between the entities responsible permits, for example, only 4 of the 18–19 visit to the tax authority is required— for approving the plans means that the procedures required can be completed because it is simply assumed that going builder has to apply to each one sepa- online. After construction is completed, through a fraudulent registration is not rately. Because a private firm performs builders have to make separate visits to in the interest of any business. In fact, a separate review of the engineering and the Administration of State Architectural Kazakhstan very recently passed a law architectural plans, this approval proce- and Construction Control (GASK) and introducing changes to the VAT regis- dure could even be eliminated. to the Department of Architecture to tration process.16 As of May 1, 2017, a submit the “Act of Acceptance,” a form company may submit its application for At the national level, there is room to of occupancy certificate. Incorporating VAT registration electronically. The law improve the impact of recent regulatory these procedures into the egov portal also abolishes the requirement for the reform efforts by focusing on implemen- would eliminate the need for builders to company’s CEO to have a photo taken as tation across the country. For example, go to these agencies in person. part of the application process as well as many new companies obtain a company the need to submit documents confirm- seal even though this requirement was In areas where even the best practices in ing the company’s location. Ensuring eliminated at the beginning of 2015. An Kazakhstan still are not globally competi- proper implementation of the new law effective communication strategy could tive, the country could look to external will be key to streamlining the business help ensure that reforms do not go unno- examples for inspiration—such as for registration process in practice. ticed, remaining on the books without reducing procedural complexity in start- being implemented. ing a business, dealing with construction Over the past few years the government permits or getting electricity. For example, of Kazakhstan has established an excel- Other recent reforms have yet to bear getting a new electricity connection in lent track record of passing new laws fruit, such as some relating to the use of Kazakhstan requires collecting approvals and continually improving regulation. OVERVIEW 11 release of June 14, 2016. See also President FIGURE 1.8  Higher levels of regulatory efficiency and quality are associated with Nursultan Nazarbayev, “Kazakhstan Way— lower levels of corruption 2050: One Goal, One Interest and One Future,” January 2014 State of the Union Address. Corruption Perceptions Index score (0–100) 9. Dorsati H. Madani and Ilyas Sarsenov, “A Long Road to Recovery,” Kazakhstan Economic 100 Update 3 (World Bank Group, Washington, DC, 2016). 10. Dorsati H. Madani and Ilyas Sarsenov, “A Long 75 Road to Recovery,” Kazakhstan Economic High income Update 3 (World Bank Group, Washington, Upper middle DC, 2016). income 11. “Recovery Position: Kazakhstan 2017,” interview 50 Lower middle with Moazzam A. Mekan, regional manager income for the International Finance Corporation Low income in Central Asia, on long-term infrastructure 25 development, diversification, and the prospects of economic recovery, The Business Year, http:/ / www.thebusinessyear.com/kazakhstan-2017 0 /recovery-position/vip-interview. 0 25 50 75 100 12. OECD, Multi-dimensional Review of Kazakhstan, Distance to frontier score (0–100) vol. 2, In-depth Analysis and Recommendations (Paris: OECD Publishing, 2017). 13. World Development Indicators database, Sources: Doing Business database; Corruption Perceptions Index 2015, Transparency International, https://www. World Bank, http:/ /data.worldbank.org. transparency.org/cpi2015/. 14. Data for Almaty city are as of June 2016. For Note: The distance to frontier score shows how far an economy is from the best performance achieved by any economy on each Doing Business indicator. Higher scores indicate greater regulatory efficiency and quality. The more details, see the chapter “About Doing sample includes 165 economies covered by both Doing Business and the Corruption Perceptions Index 2015. Business and Doing Business in Kazakhstan Relationships are significant at the 1% level after controlling for income per capita. 2017,” and the data notes. 15. The reliability of supply and transparency of tariffs index measures the reliability of the power And there is more to come. For exam- the business environment and promote supply and the transparency of consumption ple, Astana and South Kazakhstan higher productivity for all entrepreneurs, tariffs. The data on power outages used to compute the index are for 2015. (Shymkent) started to systematically regardless of where in the country they 16. Law of the Republic of Kazakhstan on monitor power outages in 2016. This have set up their business.17 Amendments to Certain Legislative Acts of the should help ensure a reliable supply of Republic of Kazakhstan in Relation to Issues of Improvement of the Civil Law, Banking Law and electricity to small and medium-size Improvement of Conditions of Business Activity enterprises. In addition, the cadastre has NOTES (no. 49-VI), February 27, 2017. been making efforts since early 2017 to 17. The Economist Intelligence Unit, “Political 1. OECD, Multi-dimensional Review of Kazakhstan, Reforms Prepare for Post-Nazarbayev Future,” increase its transparency and improve February 3, 2017. vol. 2, In-depth Analysis and Recommendations the overall quality of data in the land (Paris: OECD Publishing, 2017). administration system. 2. OECD, Multi-dimensional Review of Kazakhstan, vol. 2, In-depth Analysis and Recommendations (Paris: OECD Publishing, 2017). Designing and implementing a reform 3. Dorsati H. Madani and Ilyas Sarsenov, “A Long plan to improve the business climate is Road to Recovery,” Kazakhstan Economic a challenging task—because it requires Update 3 (World Bank Group, Washington, DC, 2016). the participation of multiple government 4. OECD, Multi-dimensional Review of Kazakhstan, agencies as well as coordination efforts vol. 2, In-depth Analysis and Recommendations and technical capacity. But business reg- (Paris: OECD Publishing, 2017). 5. The Economist Intelligence Unit, “Few Surprises ulation reforms can have large payoffs in Annual Address,” February 7, 2017. for sustainable and inclusive growth. In 6. Anderson, John, and Adrian Gonzalez. 2013. Kazakhstan, sharing successful reform “Does Doing Business matter for foreign direct investment?” In Doing Business 2013: experiences with all regions can play Smarter Regulations for Small and Medium-Size a crucial part. As the country moves Enterprises, ed. World Bank, 47-50. World ahead with policy and institutional Bank Group. 7. Cecile Fruman, “Economic Diversification: changes to grant greater powers to A Priority for Action, Now More Than Ever,” local governments—in line with a strat- Private Sector Development Blog, World Bank egy of boosting local governance and Group, March 1, 2017, http:/ /blogs.worldbank .org/psd/economic-diversification-priority- public accountability—the new wave action-now-more-ever. of modernization targeting multiple 8. Office of the Prime Minister of the Republic areas of regulation will help strengthen of Kazakhstan, “NEM RK Observes Decline in Share of SME in Economy in 2016,” press 12 DOING BUSINESS IN KAZAKHSTAN 2017 Doing Business in Kazakhstan AT A G L ANCE REPORT METHODOLOGY AND SCOPE The first subnational report of the Doing Business series in Kazakhstan Full report: www.doingbusiness.org/kazakhstan D oing Business in Kazakhstan 2017 focuses on business regulations and their enforcement in four Doing Business This report contains data current as of December 2016 and includes comparisons with Almaty city and Doing Business measures aspects of regulation that enable or hinder entrepreneurs in starting, operating areas. It goes beyond Almaty city to other economies based on data from or expanding a business—and provides benchmark seven additional Kazakhstani Doing Business 2017: Equal Opportunity recommendations and good practices locations—Aktobe, Astana, East Kazakhstan for All. for improving the business environment. (Oskemen), Karagandy, Kostanay, Pavlodar and South Kazakhstan (Shymkent). Four Doing Business indicator sets covering areas of local jurisdiction or practice Starting a business Getting electricity Records the procedures, time, cost and paid-in Records the procedures, time and cost required minimum capital required for a small or medium- for a business to obtain a permanent commercial size domestic limited liability company to formally electricity connection for a standardized operate; includes a gender dimension to account warehouse; assesses the reliability of the electricity for any gender discriminatory practices. supply and the transparency of tari s. Dealing with construction permits Registering property Records the procedures, time and cost required Records the procedures, time and cost required for a small or medium-size domestic business to to transfer a property title from one domestic rm obtain the approvals needed to build a commercial to another so that the buyer can use the property warehouse and connect it to water and sewerage; to expand its business, use it as collateral or, if assesses the quality control and safety mechanisms necessary, sell it; assesses the quality of the land in the construction permitting system. administration system; includes a gender dimension to account for any gender discriminatory practices. EAST SOUTH Seven locations beyond Almaty city: AKTOBE ASTANA KAZAKHSTAN KARAGANDY KOSTANAY PAVLODAR KAZAKHSTAN Advantages and limitations of the Doing Business methodology Focus on the law Reliance on expert respondents Doing Business does not cover: Makes the indicators “actionable” because Reflects knowledge of those with most ✗ Security the law is what policy makers can change, experience, but allows less ability to ✗ Market size but allows less ability to reflect the degree capture variation in experiences among ✗ Macroeconomic stability of compliance with the law. entrepreneurs. ✗ State of the financial system ✗ Prevalence of bribery and corruption Use of standardized case scenarios Focus on domestic and formal sector ✗ Level of training and skills of the Enables comparability across locations, Keeps attention on the formal sector, where labor force but reduces the scope of the data. firms are most productive, but does not re ect the informal sector or foreign firms. This project was requested by the Ministry of National Economy of the Republic of Kazakhstan and implemented by the Global Indicators Group (Development Economics) of the World Bank Group. 13 DOING BUSINESS IN KAZAKHSTAN 2017 About Doing Business and Doing Business in Kazakhstan 2017 MAIN FINDINGS ƒƒ Doing Business measures aspects of business regulation affecting domestic small and medium-size firms in 11 areas across 190 economies. Doing Business in Kazakhstan 2017 covers 4 of these areas: starting a business, dealing with construction permits, getting electricity and registering property. ƒƒ Doing Business and Doing Business in Kazakhstan 2017 do not capture other aspects of the business environment, such as security, market size, macroeconomic stability and the prevalence of bribery and corruption. ƒƒ The Doing Business methodology is based on standardized case scenarios in the largest business city of each economy. Subnational Doing Business studies expand the Doing Business analysis beyond this largest business city to measure variations in regulations or in the implementation of national laws across locations within an economy or a region. Doing Business in Kazakhstan 2017 relies on the following main sources of information: the relevant laws and regulations, private sector respondents, government officials and World Bank Group staff. ƒƒ Doing Business includes a gender dimension in 4 of the 11 indicator sets. Starting a business, registering property and enforcing contracts present a gender dimension for the first time in the Doing Business 2017 report. Labor market regulation already captured gender- disaggregated data in the Doing Business 2016 report. 14 DOING BUSINESS IN KAZAKHSTAN 2017 T he foundation of Doing Business is quantitative indicators on the regula- distance to frontier score or ranking on the notion that economic activity, tions that apply to firms at different the ease of doing business, it does pres- particularly private sector devel- stages of their life cycle. The results for ent the data for these indicators. opment, benefits from clear and coherent each economy can be compared with rules: rules that set out and clarify prop- those for 189 other economies and over The subnational Doing Business stud- erty rights and facilitate the resolution time. ies expand the Doing Business analysis of disputes, and rules that enhance the beyond the largest business city of an predictability of economic interactions economy. They measure variation in and provide contractual partners with FACTORS MEASURED regulations or in the implementation of essential protections against arbitrari- BY DOING BUSINESS national laws across locations within an ness and abuse. Such rules are much AND DOING BUSINESS IN economy or a region. Projects are under- more effective in shaping the incentives KAZAKHSTAN 2017 taken at the request of governments. of economic agents in ways that promote growth and development where they are Doing Business captures several impor- Data collected by subnational studies reasonably efficient in design, are trans- tant dimensions of the regulatory over the past three years show that there parent and accessible to those for whom environment as it applies to local firms. can be substantial variation within an they are intended and can be imple- It provides quantitative indicators on economy (figure 2.1). In Mexico in 2016, mented at a reasonable cost. The quality regulation for starting a business, deal- for example, registering a property trans- of the rules also has a crucial bearing on ing with construction permits, getting fer took as few as 9 days in Puebla and how societies distribute the benefits and electricity, registering property, getting as many as 78 in Oaxaca. Indeed, within finance the costs of development strate- credit, protecting minority investors, pay- the same economy one can find locations gies and policies. ing taxes, trading across borders, enforc- that perform as well as economies rank- ing contracts and resolving insolvency ing in the top 20 on the ease of register- Good rules are a key to social inclusion. (table 2.1). Doing Business also measures ing property and locations that perform Enabling growth—and ensuring that all features of labor market regulation. as poorly as economies ranking in the people, regardless of income level, can Although the Doing Business 2017 report bottom 40 on that indicator. participate in its benefits—requires an does not present rankings of economies environment where new entrants with on the labor market regulation indicators While subnational Doing Business studies drive and good ideas can get started or include the topic in the aggregate generate disaggregated data on business in business and where good firms can invest and expand. The role of govern- ment policy in the daily operations of TABLE 2.1 What Doing Business measures—11 areas of business regulation domestic small and medium-size firms is Indicator set What is measured a central focus of the Doing Business data. Starting a business Procedures, time, cost and paid-in minimum capital to start a The objective is to encourage regulation limited liability company that is designed to be efficient, acces- Dealing with construction permits Procedures, time and cost to complete all formalities to build a sible to all and simple to implement. warehouse and the quality control and safety mechanisms in the construction permitting system Onerous regulation diverts the energies Getting electricity Procedures, time and cost to get connected to the electrical grid, of entrepreneurs away from developing the reliability of the electricity supply and the transparency of tariffs their businesses. But regulation that is Registering property Procedures, time and cost to transfer a property and the quality of efficient, transparent and implemented in the land administration system a simple way facilitates business expan- Getting credit Movable collateral laws and credit information systems sion and innovation, and makes it easier Protecting minority investors Minority shareholders’ rights in related-party transactions and in for aspiring entrepreneurs to compete on corporate governance an equal footing. Paying taxes Payments, time and total tax rate for a firm to comply with all tax regulations as well as post-filing processes Doing Business measures aspects of Trading across borders Time and cost to export the product of comparative advantage and business regulation for domestic firms import auto parts through an objective lens. The focus of Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes the project is on small and medium-size companies in the largest business city Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency of an economy. Based on standardized Labor market regulation Flexibility in employment regulation and aspects of job quality case studies, Doing Business presents ABOUT DOING BUSINESS AND DOING BUSINESS IN KAZAKHSTAN 2017 15 FIGURE 2.1  Different locations, different regulatory processes, same economy Time to register property (days) 80 Oaxaca (78) Isiolo (73) 60 58 Wroclaw (51) Mangaung (52) Mombasa (41) 40 33 32 26 Johannesburg Melilla (26) Bialystok (23) 20 (18) 17 Madrid Puebla (12.5) (9) 0 Kenya Mexico Poland South Africa Spain Least time Most time Average time Source: Subnational Doing Business database. Note: The average time shown for each economy is based on all locations covered by the data: 11 counties in Kenya in 2016, 32 states in Mexico in 2016, 18 cities in Poland in 2015, 9 cities in South Africa in 2015 and 19 cities in Spain in 2015. regulation, they go beyond a data col- including Colombia, the Arab Republic Bank Enterprise Surveys.1 These lection exercise. They have been shown of Egypt, Italy, the Philippines and surveys provide data highlighting the to be strong motivators for regulatory Serbia. Seventeen economies—including main obstacles to business activity reform at the local level: Indonesia, Kenya, Mexico, Nigeria, the as reported by entrepreneurs in more Philippines and the Russian Federation— than 130,000 firms in 139 economies. ƒƒ Results can be benchmarked both have undertaken two or more rounds of Access to finance and access to elec- locally and globally because the data subnational data collection to measure tricity, for example, are among the produced are comparable across progress over time. This year a subnation- factors identified by the surveys as locations within the economy and al study was completed in Afghanistan important to businesses—inspiring the internationally. Comparing locations and last year subnational studies were design of the Doing Business indicators within the same economy—which completed in Kenya, Mexico and the on getting credit and getting electricity. share the same legal and regulatory United Arab Emirates. Ongoing studies framework—can be revealing: local include those in Colombia (32 cities) and The design of the Doing Business officials struggle to explain why doing three European Union member states (22 indicators has also been informed by business is more challenging in their cities in Bulgaria, Hungary and Romania). theoretical insights gleaned from exten- jurisdiction than in a neighboring one. sive research and the literature on the ƒƒ Highlighting good practices that exist Doing Business in Kazakhstan 2017 is the role of institutions in enabling economic in some locations but not others with- first report of the subnational Doing development. In addition, the background in an economy helps policy makers Business series in Kazakhstan. This first papers developing the methodology recognize the potential for replicating edition of Doing Business in Kazakhstan for each of the Doing Business indicator these good practices. This can yield covers seven locations—Aktobe, Astana, sets have established the importance discussions about regulatory reform East Kazakhstan (Oskemen) Karagandy, of the rules and regulations that Doing across different levels of government, Kostanay, Pavlodar and South Kazakhstan Business focuses on for such economic providing opportunities for local gov- (Shymkent)—in addition to Almaty city. outcomes as trade volumes, foreign ernments and agencies to learn from direct investment, market capitalization one another and resulting in local How the indicators are selected in stock exchanges and private credit as ownership and capacity building. The choice of the 11 sets of Doing a percentage of GDP.2 Business indicators has been guided Since 2005 subnational reports have by economic research and firm-level Some Doing Business indicators give a covered 438 locations in 65 economies, data, particularly data from the World higher score for more regulation and 16 DOING BUSINESS IN KAZAKHSTAN 2017 better-functioning institutions (such as economy to the “frontier,” which repre- the business regulatory environment. The courts or credit bureaus). Higher scores sents the best performance observed distance to frontier scores and rankings of are given for stricter disclosure require- on each of the indicators across all each economy vary, often considerably, ments for related-party transactions, economies in the Doing Business across topics, indicating that a strong for example, in the area of protecting sample since 2005 or the third year in performance by an economy in one area minority investors. Higher scores are which data were collected for the indi- of regulation can coexist with weak per- also given for a simplified way of apply- cator. The frontier is set at the highest formance in another. One way to assess ing regulation that keeps compliance possible value for indicators calcu- the variability of an economy’s regulatory costs for firms low—such as by easing lated as scores, such as the strength performance is to look at its distance to the burden of business start-up formali- of legal rights index or the quality of frontier scores across topics. Morocco, ties with a one-stop shop or through a land administration index. This under- for example, has an overall distance to single online portal. Finally, Doing Business scores the gap between a particular frontier score of 67.50, meaning that it scores reward economies that apply a economy’s performance and the best is two-thirds of the way from the worst risk-based approach to regulation as a performance at any point in time and to the best performance. Its distance to way to address social and environmental helps in assessing the absolute change frontier score is 92.34 for starting a busi- concerns—such as by imposing a greater in the economy’s regulatory environ- ness, 83.51 for paying taxes and 81.12 for regulatory burden on activities that pose ment over time as measured by Doing trading across borders. At the same time, a high risk to the population and a lesser Business. The distance to frontier score it has a distance to frontier score of 33.89 one on lower-risk activities. Thus the is first computed for each topic and for resolving insolvency, 45 for getting economies that rank highest on the ease then averaged across all topics to com- credit and 53.33 for protecting minority of doing business are not those where pute the aggregate distance to frontier investors. there is no regulation—but those where score. The ranking on the ease of doing governments have managed to create business complements the distance to Calculation of the distance to rules that facilitate interactions in the frontier score by providing information frontier score marketplace without needlessly hinder- about an economy’s performance in Calculating the distance to frontier ing the development of the private sector. business regulation relative to the score for each economy involves two performance of other economies as main steps. In the first step individual The areas measured in Doing Business measured by Doing Business. component indicators are normalized in Kazakhstan 2017 were selected in to a common unit where each of the 36 collaboration with the government of Doing Business in Kazakhstan 2017 includes component indicators y (except for the Kazakhstan, on the basis of their rel- rankings of the eight locations surveyed total tax rate) is rescaled using the linear evance to the country context and ability on four topics: starting a business, deal- transformation (worst − y)/(worst − to show variation across the locations ing with construction permits, getting frontier). In this formulation the frontier covered. The benchmarked locations are electricity and registering property. The represents the best performance on the those that meet minimum standards rankings presented are based on the indicator across all economies since for measurement—sufficient economic distance to frontier score. The distance to 2005 or the third year in which data for activity within the locale, population size frontier score captures the gap between the indicator were collected. Both the best and demographic difference from the rest a location’s performance and a measure performance and the worst performance of the sample—and showed the greatest of best practices across the areas covered are established every five years based interest in participating in the subnational by the report. For starting a business, on the Doing Business data for the year in Doing Business study. for example, New Zealand has both the which they are established, and remain smallest number of procedures required at that level for the five years regardless The distance to frontier and (one) and the shortest time to fulfill them of any changes in data in interim years. ease of doing business ranking (0.5 days). Slovenia has the lowest cost Thus an economy may set the frontier for To provide different perspectives on (0.0), and Australia, Colombia and 111 an indicator even though it is no longer at the data, Doing Business presents data other economies have no paid-in mini- the frontier in a subsequent year. both for individual indicators and for mum capital requirement (table 2.2). two aggregate measures: the distance In the same formulation, to mitigate the to frontier score and the ease of doing Doing Business uses a simple averaging effects of extreme outliers in the distri- business ranking. The distance to fron- approach for weighting component butions of the rescaled data for most tier score aids in assessing the abso- indicators, calculating rankings and component indicators (very few econo- lute level of regulatory performance determining the distance to frontier mies need 700 days to complete the and how it improves over time. This score.3 Each topic covered by Doing procedures to start a business, but many measure shows the distance of each Business relates to a different aspect of need nine days), the worst performance ABOUT DOING BUSINESS AND DOING BUSINESS IN KAZAKHSTAN 2017 17 TABLE 2.2 What is the frontier in regulatory practice in the areas measured by Doing Business in Kazakhstan 2017? Topic and indicator Who set the frontier Frontier Worst performance Starting a business Procedures (number) New Zealand 1 18a Time (days) New Zealand 0.5 100b Cost (% of income per capita) Slovenia 0.0 200.0b Minimum capital (% of income per capita) Australia; Colombiac 0.0 400.0b Dealing with construction permits Procedures (number) No economy was at the frontier as of 5 30a June 1, 2016. Time (days) Singapore 26 373b Cost (% of warehouse value) No economy was at the frontier as of 0.0 20.0b June 1, 2016. Building quality control index (0–15) Luxembourg; New Zealand 15 0d Getting electricity Procedures (number) Germany; Republic of Koreae 3 9a Time (days) Republic of Korea; St. Kitts and Nevis 18 248b Cost (% of income per capita) Japan 0.0 8,100.0b Reliability of supply and transparency of tariffs index (0–8) Belgium; Ireland; Malaysia f 8 0d Registering property Procedures (number) Georgia; Norway; Portugal; Sweden 1 13a Time (days) Georgia; New Zealand; Portugal 1 210b Cost (% of property value) Saudi Arabia 0.0 15.0b Quality of land administration index (0–30) No economy has attained the frontier yet. 30 0d Source: Doing Business database. a. Worst performance is defined as the 99th percentile among all economies in the Doing Business sample. b. Worst performance is defined as the 95th percentile among all economies in the Doing Business sample. c. Another 111 economies also have a paid-in minimum capital requirement of 0. d. Worst performance is the worst value recorded. e. In 14 other economies it also takes only three procedures to get an electricity connection. f. Another 23 economies also have a score of 8 on the reliability of supply and transparency of tariffs index. is calculated after the removal of outliers. in Doing Business in Kazakhstan 2017, 0 represents the worst performance and The definition of outliers is based on the this is done for starting a business, deal- 100 the frontier. All distance to frontier distribution for each component indica- ing with construction permits, getting calculations are based on a maximum of tor. To simplify the process two rules electricity and registering property. More five decimals. However, indicator ranking were defined: the 95th percentile is used complex aggregation methods—such as calculations and the ease of doing busi- for the indicators with the most dispersed principal components and unobserved ness ranking calculations are based on distributions (including minimum capital components—yield a ranking nearly two decimals. and the time and cost indicators), and identical to the simple average used the 99th percentile is used for number of by Doing Business.4 Thus Doing Business procedures (figure 2.2). uses the simplest method: weighting all FACTORS NOT MEASURED topics equally and, within each topic, BY DOING BUSINESS In the second step, for each economy the giving equal weight to each of the topic AND DOING BUSINESS IN scores obtained for individual indicators components. KAZAKHSTAN 2017 are aggregated through simple averaging for each topic for which performance is A location’s distance to frontier score is Many important policy areas are not measured and ranked; for the locations indicated on a scale from 0 to 100, where covered by Doing Business; even within 18 DOING BUSINESS IN KAZAKHSTAN 2017 FIGURE 2.2  How are distance to frontier scores calculated for indicators? An example is captured in the trading across borders indicators, for example, but these indica- A time-and-motion topic: dealing with construction permits tors do not measure the cost of tariffs or Distance to frontier of international transport. Doing Business score for procedures provides a narrow perspective on the 100 Regulatory frontier infrastructure challenges that firms face, Best performance particularly in the developing world, (frontier): 80 5 procedures through these indicators. It does not address the extent to which inadequate roads, rail, ports and communications 60 may add to firms’ costs and undermine competitiveness (except to the extent that the trading across borders indicators 40 indirectly measure the quality of ports and border connections). Similar to the Worst indicators on trading across borders, all performance 20 (99th percentile): aspects of commercial legislation are not 30 procedures covered by those on starting a business or protecting minority investors. And 0 5 10 15 25 while Doing Business measures only a few 20 30 35 Procedures (number) aspects within each area that it covers, business regulation reforms should not Source: Doing Business database. focus only on these aspects, because A legal topic: protecting minority investors those that it does not measure are also Distance to frontier score for extent of disclosure index important. the areas 100 it covers its scope is nar- frontier Regulatory market size, the quality of the labor row (table 2.3). Doing Business does force or the incidence of bribery and Doing Business does not attempt to quan- not measure the full range of factors, corruption. tify all costs and benefits of a particular policies80 and institutions that affect the law or regulation to society as a whole. quality of an economy’s business envi- The focus is deliberately narrow even The paying taxes indicators measure the ronment or its national competitive- within the relatively small set of indica- total tax rate, which, in isolation, is a cost 60 ness. It does not, for example, capture tors included in Doing Business. The time to businesses. However, the indicators Best performance aspects of macroeconomic stability, and cost required for the logistical pro- (frontier): do not measure—nor are they intended 10 points to measure—the benefits of the social development of the financial system, cess of exporting and importing goods 40 and economic programs funded with tax revenues. Measuring the quality and TABLE 20 2.3 What Doing Business does not cover efficiency of business regulation provides Examples of areas not covered only one input into the debate on the reg- Worst performance: 0 points ulatory burden associated with achieving Macroeconomic stability 0 regulatory objectives, which can differ 1 financial Development of the 2 system 3 4 5 6 7 8 9 10 across economies. Doing Business pro- Quality of the labor force Extent of disclosure index (0–10) vides a starting point for this discussion Incidence of bribery and corruption and should be used in conjunction with Market size other data sources. Lack of security Examples of aspects not included within the areas covered ADVANTAGES AND In paying taxes, personal income tax rates LIMITATIONS OF THE In getting credit, the monetary policy stance and the associated ease of logistics METHODOLOGY In trading across borders, export or import tariffs and subsidies The Doing Business methodology is In resolving insolvency, personal bankruptcy rules designed to be an easily replicable way to ABOUT DOING BUSINESS AND DOING BUSINESS IN KAZAKHSTAN 2017 19 TABLE 2.4 Advantages and limitations of the Doing Business methodology Alternatively, they may deliberately avoid compliance altogether—by not regis- Feature Advantages Limitations tering for social security, for example. Use of standardized case Makes data comparable across Reduces scope of data; only Where regulation is particularly onerous, scenarios economies and methodology regulatory reforms in areas transparent, using case scenarios measured can be systematically firms may opt for bribery and other infor- that are common globally tracked; the case scenarios may mal arrangements intended to bypass not be the most common in a particular economy the rules—an aspect that helps explain Focus on largest business citya Makes data collection Reduces representativeness of differences between the de jure data pro- manageable (cost-effective) and data for an economy if there are vided by Doing Business and the de facto data comparable significant differences across locations insights offered by World Bank Enterprise Surveys.5 Levels of informality tend to Focus on domestic and formal Keeps attention on formal Unable to reflect reality for sector sector—where regulations are informal sector­—important where be higher in economies with particularly relevant and firms are most that is large—or for foreign firms burdensome regulation. Compared with productive facing a different set of constraints their formal sector counterparts, firms in Reliance on expert respondents Ensures that data reflect Indicators less able to capture knowledge of those with most variation in experience among the informal sector typically grow more experience in conducting types of entrepreneurs slowly, have poorer access to credit and transactions measured employ fewer workers—and these work- Focus on the law Makes indicators “actionable”— Where systematic compliance ers remain outside the protections of because the law is what policy with the law is lacking, regulatory makers can change changes will not achieve full labor law and, more generally, other legal results desired protections embedded in the law.6 Firms a. Subnational Doing Business studies go beyond the largest business city within a country or region. in the informal sector are also less likely to pay taxes. Doing Business measures one set of factors that help explain the benchmark specific aspects of business Doing Business recognizes the limitations occurrence of informality and give policy regulation. Its advantages and limitations of the standardized case scenarios and makers insights into potential areas of should be understood when using the assumptions. But while such assump- regulatory reform. data (table 2.4). tions come at the expense of generality, they also help to ensure the comparabil- Ensuring comparability of the data across ity of data. Some Doing Business topics DATA COLLECTION IN a global set of economies is a central con- are complex, and so it is important that PRACTICE sideration for the Doing Business indicators, the standardized cases are defined care- which are developed around standardized fully. For example, the standardized case Doing Business data are based on a case scenarios with specific assumptions. scenario usually involves a limited liabil- detailed reading of domestic laws and One such assumption is the location of ity company or its legal equivalent. There regulations as well as administrative a standardized business—the subject are two reasons for this assumption. requirements. The Doing Business 2017 of the Doing Business case study—in the First, private, limited liability companies report covers 190 economies—includ- largest business city of the economy. The are the most prevalent business form ing some of the smallest and poorest reality is that business regulations and (for firms with more than one owner) economies, for which little or no data are their enforcement may differ within a in many economies around the world. available from other sources. The data country, particularly in federal states and Second, this choice reflects the focus of are collected through several rounds of large economies. But gathering data for Doing Business on expanding opportuni- communication with expert respondents every relevant jurisdiction in each of the ties for entrepreneurship: investors are (both private sector practitioners and 190 economies covered by Doing Business encouraged to venture into business government officials), through responses is infeasible. Nevertheless, where policy when potential losses are limited to their to questionnaires, conference calls, writ- makers are interested in generating data at capital participation. ten correspondence and visits by the the local level, beyond the largest business team. Doing Business relies on four main city, Doing Business has complemented its Another assumption underlying the sources of information: the relevant laws global indicators with subnational studies. Doing Business indicators is that entre- and regulations, Doing Business respon- Coverage was extended to the second preneurs have knowledge of and comply dents, the governments of the economies largest business city in economies with a with applicable regulations. In practice, covered and the World Bank Group population of more than 100 million (as of entrepreneurs may not know what needs regional staff. For a detailed explanation 2013) in Doing Business 2015. to be done or how to comply and may of the Doing Business methodology, see lose considerable time trying to find out. the data notes. 20 DOING BUSINESS IN KAZAKHSTAN 2017 Relevant laws and regulations answer the questionnaires related in writing. Having public officials discuss Indicators presented in Doing Business to dealing with construction per- and comment on the preliminary results in Kazakhstan 2017 are based on mits. Local government officials and has proven to be an important activity, not laws and regulations. Besides par- representatives of national agencies only to improve the quality of the report, ticipating in interviews or filling out also provided information that is but also to enhance the dialogue between written questionnaires, respondents incorporated into the indicators. the local governments and the World provided references to the relevant laws, Bank Group at the subnational level. regulations and fee schedules, which The Doing Business in Kazakhstan 2017 were collected and analyzed by the approach was to work with legal Doing Business in Kazakhstan 2017 team. practitioners and other professionals ADDING A GENDER who regularly undertake the transac- COMPONENT For the rest of the data, the team con- tions involved. Following the standard ducted extensive consultations with methodological approach for time-and- The Doing Business 2017 report presents multiple contributors to minimize mea- motion studies, Doing Business breaks a gender dimension in four of the indica- surement error. For some indicators—for down each process or transaction, such tor sets: starting a business, registering example, those on dealing with construc- as starting a business or registering a property, enforcing contracts and labor tion permits—the time component and building, into separate steps to ensure market regulation. The first two of these part of the cost component (where fee a better estimate of time. The time indicator sets are included in Doing schedules are lacking) are based on estimates for each step are provided by Business in Kazakhstan 2017. actual practice rather than the law on practitioners who have significant and the books. This introduces a degree of routine experience in the transaction. Doing Business has traditionally assumed judgment by respondents on what actual that the entrepreneurs or workers dis- practice looks like. When respondents There are two main reasons that Doing cussed in the case studies were men. This disagree, the time indicators reported Business does not survey firms. The first was incomplete in not correctly reflecting by Doing Business in Kazakhstan 2017 relates to the frequency with which the Doing Business processes as applied represent the median values of several firms engage in the transactions cap- to women—which in some economies responses given under the assumptions tured by the indicators, which is gener- may be different from those applied to of the standardized case. ally low. The second reason is that the men. The Doing Business 2017 report Doing Business questionnaires mostly began to measure the starting a business Doing Business in Kazakhstan gather legal information, which firms process for two case scenarios: one in 2017 respondents are unlikely to be fully familiar with. which all entrepreneurs are men and one More than 300 professionals par- For example, few firms will know about in which all entrepreneurs are women. In ticipated in the study, providing the all the many legal procedures involved economies where the processes are more data that inform the four sets of in resolving a commercial dispute onerous if the entrepreneur is a woman, Doing Business indicators included. through the courts, even if they have Doing Business now counts the extra The subnational Doing Business gone through the process themselves. procedures applied to the roughly half of website and the acknowledgments But a litigation lawyer should have little the population that is female (for example, section of this report list the names difficulty in providing the requested obtaining a husband’s consent or fulfilling and credentials of those respon- information on all the processes. gender-specific requirements for opening dents wishing to be acknowledged. a personal bank account when starting a Respondents are professionals who Governments and World Bank business). Within the registering property routinely administer or advise on the Group staff indicators, a gender component has been After analyzing laws and regulations and added to the quality of land administra- legal and regulatory requirements in conducting follow-up interviews with tion index. This component measures the specific areas covered by Doing Doing Business in Kazakhstan 2017 respon- women’s ability to use, own and transfer Business in Kazakhstan 2017 , selected dents, the subnational Doing Business property according to the law. Finally, on the basis of their expertise in these team shared preliminary findings of the within the enforcing contracts indicator areas. Because of the focus on legal report with governments and public agen- set, economies are scored on having equal and regulatory arrangements, most cies operating at the national and local evidentiary weight of women’s and men’s of the respondents are legal profes- levels. Through this process, government testimony in court. The labor market regu- sionals, such as lawyers. Architects, authorities had the opportunity to com- lation indicators have included data on engineers, physical planners, con- ment on the preliminary data, in meetings gender components for the past two years. tractors and other professionals with World Bank Group staff as well as These data include whether nonpregnant ABOUT DOING BUSINESS AND DOING BUSINESS IN KAZAKHSTAN 2017 21 and nonnursing women can work the 6. Friedrich Schneider, “The Informal Sector in 145 Countries” (Department of Economics, same night hours as men; whether the law University Linz, Linz, 2005). See also Rafael mandates equal remuneration for work of La Porta and Andrei Shleifer, “The Unofficial equal value; whether the law mandates Economy and Economic Development,” Tuck School of Business Working Paper 2009-57 nondiscrimination based on gender in (Dartmouth College, Hanover, NH, 2008), hiring; whether the law mandates paid available at Social Science Research Network or unpaid maternity leave; the minimum (SSRN), http:/ /ssrn.com/abstract=1304760. length of paid maternity leave; and whether employees on maternity leave receive 100% of wages. NOTES 1. Data from the World Bank Enterprise Surveys and Doing Business complement each other as two sides of the same coin. They both provide useful information on the business environment of an economy, but in significantly different ways. The scope of Doing Business is narrower than the Enterprise Surveys. However, by focusing on actionable indicators related to business regulation, Doing Business provides a clear roadmap for governments to improve. Doing Business uses standardized case scenarios while the Enterprise Surveys use representative samples. For more on the Enterprise Surveys and the differences between the Enterprise Surveys and Doing Business, see the website at http://www.enterprisesurveys.org. 2. These papers are available on the Doing Business website at http:/ /www.doingbusiness .org/methodology. 3. For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. In this way each point included in these indexes has the same value independent of the component it belongs to. Indicators for all other topics are assigned equal weights. 4. See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, “Doing Business Indicators: Why Aggregate, and How to Do It” (World Bank, Washington, DC, 2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 5. Mary Hallward-Driemeier and Lant Pritchett, “How Business Is Done in the Developing World: Deals versus Rules,” Journal of Economic Perspectives 29, no. 3 (2015): 121–40. 22 DOING BUSINESS IN KAZAKHSTAN 2017 Starting a Business MAIN FINDINGS ƒƒ Kazakhstan has steadily streamlined the business start-up process for small and medium-size companies in recent years, with six reforms recorded by Doing Business since 2006. ƒƒ Across the eight locations benchmarked in this study, starting a business of this size today takes 5.4 procedures and 9.3 days and costs only 0.76% of income per capita on average. ƒƒ Kazakhstan’s start-up process compares well both globally and regionally on cost, though there is room to make it faster and less cumbersome. Efforts to do so could focus on streamlining the process through the e-government website by merging several procedural steps into one at the time of registration. STARTING A BUSINESS 23 O ver the past decade the number technology shifts.4 Empirical evidence enterprise, a business partnership, a of active small and medium- also suggests that more efficient business joint stock company or a production size enterprises registered in entry regulations improve firm productiv- cooperative. Doing Business focuses Kazakhstan grew by more than 80%— ity and macroeconomic performance.5 on the most common legal form used from 643,376 in 2007 to 1,174,464 in in the country, the limited liability January 2017.1 Enterprises in this group Conversely, higher entry costs are asso- partnership. accounted for 25.6% of GDP in 2016, ciated with a larger informal sector and still far short of the government’s goal of a smaller number of legally registered The process of starting a 50%.2 Fostering entrepreneurship should firms.6 Cumbersome regulations and business help boost their contribution, leading to administrative procedures for starting The establishment of a limited liability an economy that is more diversified and a business are found to be associated partnership is regulated by several laws, less vulnerable to cyclical commodity with more opportunities for corruption.7 including the Law on State Registration of crises. Moreover, higher compliance costs cut Legal Entities and Record Registration of into firm profits and discourage entrepre- Branches and Representative Offices as Efficient and effective business regula- neurs, which in turn reduces job creation well as the Tax Code. The process of state tions are key to supporting firm creation in the economy.8 registration differs depending on the size and productivity. Economies that have of the entity. For small and medium-size an efficient business registration process companies the process has been steadily also tend to have a higher rate of entry by HOW DOES STARTING streamlined over the past few years new firms and greater business density.3 A BUSINESS WORK IN (box 3.1). Across the eight locations Moreover, where business registration is KAZAKHSTAN? benchmarked in this study, starting a faster, more businesses tend to register business of this size today takes 5.4 in industries with the strongest potential Under the laws of Kazakhstan, legal procedures and 9.3 days and costs only for growth, such as those experienc- entities whose primary activity is deriv- 0.76% of income per capita on average. ing expansionary global demand or ing a profit can be established as a state Kazakhstan’s start-up process compares What does starting a business measure? Doing Business measures the number of procedures as well as the time, cost and paid-in minimum capital required for a small to medium-size limited liability company to start up and formally operate (see figure). To make the data comparable across locations, Doing Business uses a standardized limited liability company that is 100% domestically owned, has start-up capital equivalent to 10 times income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people within the first month of operations. What are the time, cost, paid-in minimum capital and number of procedures to get a local limited liability company up and running? Cost (% of income per capita) Formal operation Paid-in $ Number of minimum capital procedures Entrepreneur Time Preregistration Registration, Postregistration (days) incorporation 24 DOING BUSINESS IN KAZAKHSTAN 2017 BOX 3.1 Recent regulatory reforms making it easier to start a business in Kazakhstan An attorney interviewed in Astana in June 2016 confessed that he had lost business recently. In 2015 he was registering a new com- pany every day. A year later he was registering only one a week, despite offering an all-inclusive package with state registration, a company seal and the certificate of registration with the statistical agency for only KZT 20,000 (US$60). The reason? Business start- up has been streamlined to the point where local entrepreneurs no longer need help with the process. The lawyer is now targeting his services almost entirely to foreign investors. Indeed, starting a business has become much simpler than it was in 2003, when it took 11 procedures, 32 days and 12.9% of income per capita (see figure). The process was so complex that 80% of applications were rejected because of errors in the documents submitted.a Kazakhstan has made big strides since 2003 in improving the process to start a business Cost (% of income Time (days) per capita) 35 Between 2003 and 2016:* - Number of procedures was cut by half. 15 30 - Time was reduced by more than 70%. - Cost was almost eliminated. 12.9% 25 20 10 15 10 5 5 0.76% 0 0 1 2 3 4 5 6 7 8 9 10 11 Procedures (number) 2003 2016 Source: Doing Business database *The data for 2003 are for Kazakhstan as represented by Almaty city, while the data for 2016 are the average for the eight locations benchmarked in this study. The improvements started in 2009, through a reform simplifying the application package for registration and eliminating the require- ment to separately register the business at the local tax office. The minimum capital requirement for small and medium-size enter- prises was reduced to KZT 100 (US$0.50) in 2010, then canceled altogether in 2014.b On January 1, 2015, the process was further streamlined. Local small and medium-size enterprises are now exempt from paying reg- istration fees, the legal requirement for a company seal was eliminated, and the time required for electronic registration on the egov web portal dropped from one day to one hour. In addition, the notarization requirement for the memorandum of association, company charter and founders’ signatures was abolished.c To support the reform efforts, central and regional governments have carried out a vast media campaign. In the South Kazakhstan region, for example, the Department of Justice organized nearly 150 workshops and 100 roundtable events between the beginning of 2015 and June 2016 to familiarize entrepreneurs with the relevant business regulations. In addition, the city and district departments of the Department of Justice used media outlets to reach out to the broader population—giving 13 radio and 21 television interviews and publishing 78 articles in newspapers. The outreach campaign involved the Government for Citizens state corporation and the local chamber of entrepreneurs.d a. World Bank, Doing Business 2004: Understanding Regulation (Washington, DC: World Bank, 2003). b. Law of the Republic of Kazakhstan on State Registration of Legal Entities and Record Registration of Branches and Representative Offices (no. 269-V), December 29, 2014. c. World Bank, Doing Business 2017: Equal Opportunity for All (Washington, DC: World Bank, 2016). d. Data from the Doing Business database, provided by the Department of Justice of the South Kazakhstan region. STARTING A BUSINESS 25 well both globally and regionally on cost, Center or Government for Citizens center abolished by the same law. Banks now though there is room to make it faster and get assistance from a trained public verify the authenticity of the signatures and less cumbersome (figure 3.1). servant. Once all the required information themselves. The fees to open a bank has been submitted through the portal, account range from KZT 2,000 to KZT The first step in starting a business in the entrepreneur can print the state 5,000 (US$6 to US$15), but most banks Kazakhstan is to register the company registration certificate and the certificate waive the fees if the company purchases (figure 3.2). This can be done either elec- of registration with the statistical agency. other services, such as a credit card, or tronically using the e-government (egov) There are no fees for the registration. if the banks have agreements with attor- portal or in person with the Government neys to waive fees for their clients. for Citizens state corporation or the At this point the company is officially local Entrepreneurs Service Center.9 registered but not yet fully operational. The next step is to get mandatory social Entrepreneurs can also delegate this The entrepreneur needs to set up a bank insurance to cover employees against registration to an attorney, though using account. For this purpose most banks accidents during the performance of their an agent takes longer and adds cost. request IDs and signature cards for the duties. This needs to be done within the authorized signatories as well as a copy first 10 days of the month following the The online application includes the of the state registration certificate and date of the state registration.11 The pro- desired company name and the name the company charter. They are also likely cess of setting up a policy is fast and free. of the founders and directors. The portal to request an imprint of the company The amount of the monthly premiums immediately confirms the availability of seal on the signature cards. This is one for different employees depends on their the company name and issues a unique reason that companies continue to wages and the risk of their work activities. business identification number. It also have a company seal even though the automatically notifies the tax authorities requirement for one was eliminated by a The company can now operate, though and the statistical agency of the registra- law taking effect in early 2015 that was one last procedure remains. Within the tion. The entrepreneur elects a type of aimed at improving the conditions for first 10 days of the month after the com- legal entity and a tax regime. An applicant entrepreneurial activity in Kazakhstan.10 pany’s annual turnover reaches a thresh- unsure about which option to choose Until 2015 the company charter needed old of KZT 68,070,000 (US$210,000), can visit the local Entrepreneurs Service to be notarized, but this requirement was the company needs to register as a value X X X X FIGURE 3.1  Kazakhstan outperforms comparator economies on the cost to start a business—but not on the number of procedures X X X X Procedures Time Cost (number) (days) (% of income per capita) 0 0 Almaty city, Astana, New Zealand Slovenia (global best) Karagandy, Pavlodar, (global best) South Kazakhstan Ukraine (Shymkent) New Zealand Kazakhstan average 1 1 Russian Federation (global best) 3 Kostanay Azerbaijan, Georgia Azerbaijan East Kazakhstan (Oskemen) 2 2 Azerbaijan Ukraine Kyrgyz Republic Uzbekistan 6 Georgia Aktobe 3 3 Georgia Astana OECD OECD Almaty city, Karagandy, Pavlodar, Uzbekistan Russian Kazakhstan average 9 South Kazakhstan (Shymkent) Federation Russian Federation 4 4 Kyrgyz Republic, Kyrgyz Republic Aktobe, East Kazakhstan Ukraine, ECA (Oskemen), Kostanay Uzbekistan OECD 12 ECA Almaty city, Astana, Karagandy, ECA 5 5 Pavlodar, South Kazakhstan (Shymkent) Tajikistan Kazakhstan average 6 Aktobe, East Kazakhstan 22 Tajikistan 17 (Oskemen), Kostanay Tajikistan Source: Doing Business database. Note: OECD is the average for OECD high-income economies; ECA is the average for economies of Europe and Central Asia. 26 DOING BUSINESS IN KAZAKHSTAN 2017 FIGURE 3.2  Across Kazakhstan, starting a business requires at least five procedures PROCEDURE AGENCY Registration www. Government for Citizens center Obtain state registration e-government (egov) website Entrepreneurs Service Center Postregistration Have a company seal made Seal provider Open a bank account Private bank Provide employees with mandatory accident insurance Private insurer Register for value added tax (VAT) State Revenue Committee of the Ministry of Finance www. Government service Online service Private sector service Source: Doing Business database. Note: These procedures are common to all locations benchmarked. Additional requirements may apply in specific locations. added tax (VAT) payer with the State represented by Almaty city, Kazakhstan their performance in this area over the Revenue Committee of the Ministry of stands at 45 in the ranking of 190 years, with the result that they are closely Finance.12 VAT registration is a burden- economies, ahead of the average for clustered at the top. some task. The CEO of the company economies of Europe and Central Asia must visit the Ministry of Finance in per- (55), but below Azerbaijan (5), Georgia Starting a business in Kazakhstan takes son so that a photograph can be taken (8) and the Russian Federation (26). five or six procedures, depending on for its records. In addition, the company Yet Kazakhstan is close to the frontier of where the business is located. Among must provide a notarized declaration of global good practices, with a distance to the eight locations, it is easiest to start its location, which requires a visit to the frontier score of 91.94.1 3 Its relatively low a business in Astana, where the process public notary. In most cases the com- ranking is attributable to the compressed is fastest, and in South Kazakhstan pany’s landlord has to go to the notary distribution of the starting a business (Shymkent), where it is least costly. with his or her ID so that ownership of indicators. Most economies have imple- Starting a business is most difficult in the premises can be checked against the mented regulatory reforms improving Aktobe (table 3.1). database. The notary then issues a letter of consent for a minimal fee (KZT 1,125, TABLE 3.1 Where is it easy to start a business in Kazakhstan—and where not? or US$3.60). Since April 1, 2016, the VAT Distance to Cost registration certificate has been issued frontier score Procedures Time (% of income per only in electronic format. Processing Location Rank (0–100) (number) (days) capita) takes five business days. Astana 1 92.07 5 8.5 0.32 South In 2016 Doing Business added questions Kazakhstan 2 91.95 5 9 0.27 (Shymkent) to the starting a business indicator set in order to address a previous lack of data Karagandy 3 91.94 5 9 0.31 on those economies where women face a Pavlodar 4 91.94 5 9 0.32 higher number of procedures. Kazakhstan Almaty city 5 91.94 5 9 0.34 is among the 167 economies that do not Kostanay 6 90.14 6 10 0.99 impose more procedures for women than East Kazakhstan for men to start a business. 7 90.10 6 10 1.26 (Oskemen) Aktobe 8 89.94 6 10 2.60 How the process compares Source: Doing Business database. How does Kazakhstan perform in the Note: Rankings are based on the average distance to frontier score for the procedures, time and cost associated latest Doing Business global ranking with starting a business. The distance to frontier score is normalized to range from 0 to 100, with 100 representing About Doing the frontier of best practices (the higher the score, the better). For more details, see the chapter “ on the ease of starting a business? As Business and Doing Business in Kazakhstan 2017.” STARTING A BUSINESS 27 The main reason that Astana tops the a rural region that provides a third of how Kazakhstani locations stand rela- ranking of the eight locations is that the country’s grain, attorneys reported tive to one another and relative to other the egov system is more widely used that they would charge KZT 15,000 economies. in the capital. This results in the time (US$45) for registration services. This is to start a business, as measured by the because registering a new business there For procedures, Almaty city, Astana, Doing Business methodology, being half is relatively rare, something an attorney Karagandy, Pavlodar and South a day less in Astana than in the other might have done only a dozen times a Kazakhstan (Shymkent), with five each, locations. For aspiring entrepreneurs in month in 2016. Lawyers would charge receive a distance to frontier score of those other locations, it is still common more for this service in the other two 76.47, similar to the scores of such practice to seek assistance from a third locations: KZT 20,000 (US$60) in East diverse countries as Belarus, Luxembourg party, such as an attorney or the staff of Kazakhstan (Oskemen) and up to KZT and Rwanda. Aktobe, East Kazakhstan the local Entrepreneurs Service Center or 50,000 (US$160) in Aktobe. (Oskemen) and Kostanay, where the Government for Citizens center, before common practice of using an attorney registering online. Indeed, in Almaty Another cost is the company seal. Under adds a procedure, receive a score of city, Karagandy, Pavlodar and South the assumption that an entrepreneur 70.59, on par with Bulgaria, Romania and Kazakhstan (Shymkent) they often go requests same-day service, obtaining a the United States. Eliminating just one to the local center, ask for guidance on seal is least costly in South Kazakhstan procedure would have a big impact on the process and then use the computer (Shymkent) (KZT 4,800, or US$15.25) the distance to frontier score. This would provided on the premises to register their and Kostanay (KZT 5,407, or US$17.15) enable the top five Kazakhstani locations business. In Aktobe, East Kazakhstan and most expensive in Almaty city (KZT to catch up not only with the Kyrgyz (Oskemen) and Kostanay aspiring entre- 6,200, or US$19.70) and East Kazakhstan Republic, Ukraine and Uzbekistan, but preneurs tend to seek the assistance of (Oskemen) (KZT 6,500, or US$20.60). also with the Netherlands and Norway. an attorney, which adds one day and one The price is higher in East Kazakhstan Kazakhstan would jump from 47 to 25 in procedure to the start-up process.14 because most seal producers there offer the global ranking of 190 economies on same-day service only if the customer this indicator. The start-up process takes longer in the pays a premium of up to 50% of the cost locations where entrepreneurs still use of the seal. While Astana performs slightly better attorneys because the state registra- than the other locations on the time to tion procedure gets broken into two Because of the relatively small differences start a business, all eight have a distance steps: first visiting the attorney and then in performance on the starting a busi- to frontier score for this indicator above proceeding with online registration. The ness indicators, both globally and within 90. Yet they would still have a global price tag for the registration process also Kazakhstan, using the distance to frontier ranking on this indicator of around 59. The goes up quickly (figure 3.3). In Kostanay, score helps in better understanding reason is that so many economies around FIGURE 3.3  While low by regional comparison, the cost to start a business in Aktobe is almost 10 times that in South Kazakhstan— mostly because of legal fees South Kazakhstan (Shymkent) OECD ECA Karagandy Astana Pavlodar Almaty city Kostanay East Kazakhstan (Oskemen) Aktobe 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Cost to start a business (% of income per capita) Company seal Notarization for VAT registration Attorney fees Source: Doing Business database. Note: OECD is the average for OECD high-income economies; ECA is the average for economies of Europe and Central Asia. 28 DOING BUSINESS IN KAZAKHSTAN 2017 the world are close to best practice in reforms from going unnoticed or even ministries and courts review their public the efficiency of business registration. unimplemented. forms and remove any requirement for a Starting a business takes only three days company stamp. in Azerbaijan and Georgia, for example. This kind of communication strategy might be helpful in Kazakhstan, where Enhance the egov portal with The most interesting comparison relates some recent reforms in the area of start- additional services to the cost to start a business. With no ing a business have yet to bear fruit. To start a business in Kazakhstan, an requirement for paying government One example is the egov portal. Many entrepreneur needs to interact with fees to register a small or medium-size entrepreneurs do not know how to use public entities online (through egov) and enterprise, all eight Kazakhstani loca- all the services it provides—as evidenced in person (for VAT registration or at the tions would rank among the top 20% of by the still common practice of seeking Government for Citizens center) as well economies worldwide on this indicator. advice from an attorney or the local as with private firms offering different But there is still some variation across Government for Citizens center before services, such as banks, insurers and seal locations. South Kazakhstan (Shymkent), proceeding with online business registra- makers. where registration involves no private tion. Another example is the continued third parties and company seals can be use of company seals. Even though the The egov website offers more than obtained swiftly and inexpensively, would legal obligation to have a company seal 200 public services to companies and rank number 7 in the world on this indica- was abolished at the beginning of 2015, individuals (from passports and IDs tor—preceded only by Slovenia, United newly created companies continue to get to company registration). But it does Kingdom, the former Yugoslav Republic one for the purpose of opening a bank not provide access to any private ser- of Macedonia, Ireland, Denmark and account. In the past, the company seal vices. In other economies, by contrast, South Africa. Other Kazakhstani loca- symbolized the legal identity of a busi- e-government websites allow access tions would follow closely behind. Even ness and authenticated all its contracts. to both public and private services. Kostanay, where entrepreneurs continue Now most documents are transmitted Take Singapore, where incorporation is to use attorneys for business registration, electronically. Moreover, seals can be done through Bizfile, an electronic filing has a distance to frontier score (99.51) easily forged. In many economies seals system providing one-stop business that would rank the city among the top are being replaced with electronic signa- facilitation services to customers at 25 economies, just ahead of the Russian tures. Indeed, among the 190 economies the point of registration. The services Federation (99.50) and just behind covered by Doing Business, 70% do not provided by the portal include reserv- Armenia (99.55). require companies to have a seal.15 ing domain names, registering for the goods and services tax and applying for To sharpen the focus of a communication a corporate bank account at preapproved WHAT CAN BE IMPROVED? strategy on the abolition of the require- banking institutions. ment for a company seal, for example, While Kazakhstan has made big strides authorities could conduct an assessment Kazakhstan’s egov website could make in streamlining the process of starting to identify which types of entities need starting a business easier by merging a business, opportunities remain for one in practice and why. This knowledge several procedural steps into one at the further improvement. would help in targeting the communica- time of registration. For example, it could tion strategy to address specific concerns explore data sharing arrangements with Develop a communication as well as benefits, including the added private companies to facilitate access strategy to publicize reforms security of electronic signatures. Such an to their services, or host basic service For a government introducing regulatory assessment was undertaken in Croatia, offers by private companies. Rather reforms, some of the main challenges for example, where companies kept using than visiting a bank to open a company are a poor public understanding of the a company seal despite a law abolishing account and then an insurance company issues, the lack of a sense of ownership the requirement to have one. This came to obtain an accident insurance policy for among those affected by the changes, an from a long tradition of including the employees, entrepreneurs could access uneven distribution of the benefits, a gen- company signatory’s name and signature such services from preapproved vendors eral inertia (or lack of support) and weak and the company stamp in all com- directly through the egov portal. transmission channels. An effective, tar- pany bylaws as well as in several public geted communication strategy can help forms. The Agency for Investments and overcome these obstacles, preventing Competitiveness contributed to the full implementation of the law by having all STARTING A BUSINESS 29 Allow simultaneous company registration process.1 7 As of May 1, 2017, 9. The state corporation Government for Citizens is a one-stop shop that offers more than 500 and VAT registration and a company may submit its application for public services ranging from passport issuance abolish the need to visit a notary VAT registration electronically. The law to business registration, social protection and Globally, only 22% of economies have also abolishes the requirement for the real estate registration. The Entrepreneurs Service Center provides state registration VAT registration as a separate procedure company’s CEO to have a photo taken as for companies as well as consultations on from business registration.16 Kazakhstan part of the application process as well as business regulations, management and is among this group, because registering the need to submit documents confirm- finance. 10. On January 1, 2015, the requirement to obtain for VAT becomes mandatory only when a ing the company’s location. Ensuring a company seal was formally eliminated as company’s turnover reaches a particular proper implementation of the new law a procedure in the business start-up process threshold. But even companies that do will be key to streamlining the business by the Law of the Republic of Kazakhstan not reach this threshold often register vol- registration process in practice. on Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan untarily, because registration is required in Relation to Issues of Fundamental to compete in public procurements. Improvement of the Business Environment in NOTES the Republic of Kazakhstan (no. NQ 269-V), December 29, 2014. In an effort to fight fraud in VAT refunds, 11. Law of the Republic of Kazakhstan on Kazakhstan requires the CEO of a com- 1. Official statistical information on small and Obligatory Insurance of the Liability of the medium-size enterprises from the Statistics pany registering for VAT to go in person Agency of the Republic of Kazakhstan, Employer for Life and Health Tort to the to the State Revenue Committee of the Employee in Discharge of Labor and (Official) accessed April 24, 2017, Duties, effective July 1, 2005, and as amended Ministry of Finance. Rather than imposing http://www.stat.gov.kz. on May 7, 2007. 2. Office of the Prime Minister of the Republic this burdensome step on all companies 12. A company must register for VAT when of Kazakhstan, “NEM RK Observes Decline registering for VAT, Kazakhstan could its annual turnover reaches 30,000 MCI in Share of SME in Economy in 2016,” (monthly calculation index), in accordance follow the example of Singapore, where press release of June 14, 2016, https:// with the provisions of article 568.5 of the Tax public entities are well coordinated. primeminister.kz/en/news/finansi/snizhenie Code of the Republic of Kazakhstan. The MCI -vklada-msb-v-ekonomiku-strany-v-2016-g There, the registrar simply assumes that -otmechajut-v-mne-rk; President Nursultan was established by the Law of the Republic of Kazakhstan on the Republic’s Budget for it is not in the interest of businesses to Nazarbayev, “Kazakhstan Way—2050: One 2015–2017. Effective January 1, 2017, the MCI go through a fraudulent registration, and Goal, One Interest and One Future,” 2014 is KZT 2,269 (around US$7). State of the Union Address. VAT registration takes place through 13. The distance to frontier score is normalized 3. Leora Klapper, Anat Lewin and Juan Manuel an automated, notice-based service to range from 0 to 100, with 100 representing Quesada Delgado, “The Impact of the the frontier of best practices (the higher the at the time of company registration. If Business Environment on the Business score, the better). For more details, see the Creation Process,” Policy Research Working Kazakhstan adopted this approach, the chapter “About Doing Business and Doing Paper 4937 (World Bank, Washington, DC, time required to start a business could 2009). Business in Kazakhstan 2017.” 14. The delay resulting from the use of an attorney drop by a week. 4. Antonio Ciccone and Elias Papaioannou, is small, as registration would be done online “Red Tape and Delayed Entry,” Journal of the in less than 30 minutes. European Economic Association 5, nos. 2–3 If people are fraudulently listed as (2007): 444–58. 15. Doing Business database. company founders, the registry office 16. Doing Business database. 5. Norman Loayza, Ana Maria Oviedo and Luis 17. Law of the Republic of Kazakhstan on could use postregistration verification, Servén, “Regulation and Macroeconomic Amendments to Certain Legislative Acts Performance,” Policy Research Working Paper at the time VAT refunds are claimed, to of the Republic of Kazakhstan in Relation 3469 (World Bank, Washington, DC, 2005); investigate the matter. That way officials and Levon Barseghyan, “Entry Costs and to Issues of Improvement of the Civil Law, Banking Law and Improvement of Conditions could focus their time on the minority of Cross-Country Differences in Productivity and of Business Activity (no. 49-VI), February 27, cases involving possible fraud rather than Output,” Journal of Economic Growth 13, no. 2 2017. (2008): 145–67. verifying every application. 6. Levon Barseghyan and Riccardo DiCecio, “Entry Costs, Industry Structure and Cross- By the same logic, Kazakhstan could Country Income and TFP Differences,” Working Paper 2009-005C (Federal Reserve abolish the requirement for notariza- Bank of St. Louis, 2009). tion of evidence of a company’s legal 7 . David Audretsch, Max Keilbach and Erik address. With online VAT registration Lehmann, Entrepreneurship and Economic and digital signatures, the need to verify Growth (New York: Oxford University Press, 2006). legal addresses and personal identifica- 8. Raquel Fonseca, Paloma Lopez-Garcia and tion becomes obsolete. Christopher Pissarides, “Entrepreneurship, Start-Up Costs and Employment,” European Economic Review 45, nos. 4–6 (2001): In fact, Kazakhstan very recently passed 692–705. a law introducing changes to the VAT 30 DOING BUSINESS IN KAZAKHSTAN 2017 Dealing with Construction Permits MAIN FINDINGS ƒƒ Over the past five years Kazakhstan has improved efficiency in construction permitting by implementing a single window for project approvals, replacing some permitting procedures with notifications and expanding the role of private sector experts. ƒƒ In the eight locations studied, completing the permitting process for a simple warehouse takes 18–19 procedures, substantially more than the average for OECD high- income economies. But the average time and cost—148 days and 2.1% of the warehouse value—are broadly in line with the OECD high-income averages. On the building quality control index Kazakhstan scores among the top 30 economies globally. ƒƒ Going forward, Kazakhstan could capitalize on information technology solutions to expand and improve online services. It could improve quality control and safety standards by adopting risk-based criteria for construction supervision as well as mandatory insurance to cover structural defects. And it could reduce corruption risks in construction permitting and control by introducing regulatory appeal and transparency mechanisms. DEALING WITH CONSTRUCTION PERMITS 31 W ith the drop in global oil acknowledged the importance of simpli- Europe and Central Asia. Eleven of the prices, the construction fying construction permitting and land procedures must be completed before industry has been the lead- use processes, as reflected in the nation’s construction can begin. The approval ing driver of GDP growth in Kazakhstan, “100 concrete steps” to implement its of project documentation alone (stages expanding by 7.5% in 2016.1 This growth long-term modernization strategy.5 2–4) requires 6 procedures and up to has been led mostly by the private sector three months. as the government share of investment in construction has dropped substantially HOW DOES CONSTRUCTION After obtaining the geological and over the past few years, from 39% in PERMITTING WORK IN topographic surveys of the land plot, 2012 to 25% in 2016.2 Kazakhstan’s KAZAKHSTAN? the entrepreneur requests the spatial recent reforms in the construction and planning guidelines (known as the urban planning sector might have helped Kazakhstan’s Law on Architectural, architectural planning assignment, or invigorate construction activity. But Town Planning and Construction Activity APZ6) from the municipal Department sustaining and increasing this activity establishes the national regulatory of Architecture and the relevant techni- will require further steps to streamline framework for construction activity. A set cal specifications (technical conditions) construction regulation. of regulations referred to by the Russian from the water and sewerage utilities. acronym SNIP (Construction Norms By law, the Department of Architecture Sound regulation of construction matters and Rules) covers the technical aspects is supposed to serve as a single window, for other reasons as well. In January 2017 of construction and urban planning. In collecting all required technical condi- a multistory residential building collapsed addition, municipal and regional tions from the relevant utilities, preparing in Shakhan (in the Karagandy region), authorities have a substantial role the architectural planning assignment causing nine deaths. A few months earlier in approving building plans and super- and issuing this document and the a section of the newly built International vising the construction process. technical conditions to the applicant in a Exposition building in Astana had also single package. In practice, however, the collapsed.3 Robust control mechanisms The process of dealing with construc- single-window principle operates only for new construction help protect the tion permits can be divided into 10 main in Almaty city and Astana. In the other public from unsafe buildings. stages (figure 4.1). Completing these six locations it is faster to obtain these stages requires 18 procedures in Astana documents separately from the utilities Well-functioning building permitting and 19 in the other seven locations and the Department of Architecture. and inspection systems also strengthen benchmarked—7 more than the average The reason is that the utilities fail to property rights and contribute to capital for OECD high-income economies and comply with the official time limit of five formation.4 Kazakhstan’s leadership has 3 more than the regional average for business days for issuing the technical What does dealing with construction permits measure? Dealing with construction permits: measuring the efficiency and quality of To measure the ease of dealing with construction permits, Doing Business re- building regulation cords the procedures, time and cost required for a small or medium-size busi- ness to obtain the approvals needed to build a simple commercial warehouse Rankings are based on distance to frontier scores for four indicators and connect it to water and sewerage. This includes all inspections and certifi- cates needed before, during and after construction of the warehouse. It is as- Days to comply Cost to comply sumed that the warehouse is in the periurban area of the analyzed business city, with formalities with formalities, that it is not in a special economic or industrial zone and that it will be used for to build a as % of warehouse warehouse value the general storage of nonhazardous materials such as books. In addition, Doing Business compiles a building quality control index that measures the underlying quality of construction regulations and controls. The index accounts for one- 25% 25% fourth of the distance to frontier score for dealing with construction permits Time Cost (see figure). 25% 25% Procedures Building quality control index Steps to comply with Quality of building formalities; completed regulation and its when final document implementation is received 32 DOING BUSINESS IN KAZAKHSTAN 2017 FIGURE 4.1  The 10 main stages of construction permitting take 18–19 procedures in the Kazakhstani locations Stage Agency BEFORE CONSTRUCTION Procedures Get geological and topographic surveys of land plot Licensed private firm www. Obtain technical conditions and architectural planning assignment (APZ) Municipality; utilities Seek approval of architectural sketch (Eskiz) and engineering plans Municipality; utilities www. Obtain comprehensive expert examination of project documentation Licensed private firm Hire construction supervision company or specialist Municipality www. Notify GASK of start of construction and receive inspection Administration of State Architectural and Construction Control (GASK) CONNECTION TO UTILITIES Receive inspections and connect to water and sewerage systems Utilities AFTER CONSTRUCTION www. Request technical passport, receive inspection and obtain technical passport Government for Citizens center Register Act of Acceptance at Department of Architecture and at GASK Municipality; GASK Register ownership rights to warehouse Government for Citizens center Government or utility service Private sector service www. Online service Procedure Source: Doing Business database. conditions, disrupting the single-window networks (indicating the planned layout “running around.” As a result, the appli- mechanism.7 On the other hand, the of the utility and communication net- cant has to have at least two interactions Department of Architecture lacks formal works) from the same utilities involved with the utilities before construction— mechanisms (such as online platforms or in issuing the technical conditions as well first to obtain the technical conditions collaboration protocols) for obtaining and as from the Department of Architecture. and then to obtain clearance of the plans consolidating the technical conditions Standing commissions at the Department for engineering networks. from the utilities in a timely manner. of Architecture meet weekly to approve such plans. These meetings are also The next step is the comprehensive expert In all eight locations the architectural attended by representatives from the examination of the architectural and engi- sketch (Eskiz) has to be approved before various utilities. In practice, however, neering plans, both of which were already the applicant can start developing the the applicant requests clearances from verified in the previous steps (figure 4.2). main project. Then the applicant has to each utility separately—a process infor- Thus the verification process involves get clearance of the plans for engineering mally referred to in Russian as begunok, or three separate clearances—one from the FIGURE 4.2  Obtaining a project approval in Kazakhstan requires six interactions with three separate entities Obtain Obtain clearance Obtain clearance Obtain clearance Obtain approval Obtain technical architectural of architectural of plans for of plans for of main project conditions planning sketch (Eskiz) engineering engineering (architectural and assignment (APZ) networks networks engineering plans) Source: Doing Business database. DEALING WITH CONSTRUCTION PERMITS 33 utilities, a second from the Department issued; this step was replaced in 2012 by building (a document indicating the tech- of Architecture and yet another from an an online notification to GASK.8 nical characteristics of the building). This accredited private firm. Before 2016 the step involves three procedures: submit- process was even more complex, involv- During construction the water and sewer- ting an application to the single window ing three additional clearances—now age utility conducts an on-site inspection at the Government for Citizens center, combined in the comprehensive expert to verify and approve the infrastructure receiving an inspection and obtaining examination carried out by an accredited connection routes. The excavation and the technical passport. The applicant firm (box 4.1). plumbing works for the water and sewer- then submits two mandatory notifica- age connection are typically done by the tions of the completion of work, one to Once the project is approved, the appli- building company. Upon completion the GASK and the other to the Department cant needs to notify the Administration utility visits the construction site and of Architecture, which are registered and of State Architectural and Construction connects the building to the main water archived by these agencies. Finally, the Control (GASK), hire a technical supervi- and sewerage systems. applicant registers the building at the sion company and receive an inspection local Government for Citizens center. from GASK before the beginning of the After construction the applicant has construction work. No building permit is to obtain a technical passport for the BOX 4.1  A simplified process for the expert examination of building projects in Kazakhstan Since January 1, 2016, the expert examination of building projects has been done through an online platform (epsd.kz)—a single window combining the sanitary, fire and environmental clearances into one comprehensive clearance.a This reform saved entrepreneurs 20 days (see figure). The government delegated this service to accredited private firms for technically noncomplex buildings and has indicated its commitment to fully privatizing the industry in the medium term, which will potentially channel some US$70 million worth of contracts annually to the private sector.b The reform has already created a vibrant market for project consulting services, and the resulting competition reduced the cost of the expert examination by more than 20%.c Kazakhstan also transferred the responsibility for construction supervision to accredited private experts, addressing concerns about burdensome government intervention in the construction process.d The reform of the expert examination reduced the time for the process by 20 days and the cost by almost a quarter Time (days) Cost (KZT thousands) 50 500 40 400 30 300 20 200 10 100 0 0 Before the reform After the reform Before the reform After the reform Source: Doing Business database. a. Law of the Republic of Kazakhstan on Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan in Relation to Issues of Fundamental Improvement of the Business Environment in the Republic of Kazakhstan (no. NQ 269-V), December 29, 2014. b. According to official national statistics, the value of construction works in 2016 was around US$17 billon. The project assessment typically costs about 0.4% of total construction costs, suggesting a total potential value of around US$70 million for the contracts. For statistics on construction, see the website of the Statistics Agency of the Republic of Kazakhstan at http://stat.gov.kz. c. Doing Business database. d. In accordance with article 38 of the Law of the Republic of Kazakhstan on Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan in Relation to Issues of Fundamental Improvement of the Business Environment in the Republic of Kazakhstan (no. NQ 269-V), December 29, 2014, newly completed buildings are commissioned for use by customers, building contractors, and architectural design and technical supervision companies without the participation of state bodies since January 1, 2016. 34 DOING BUSINESS IN KAZAKHSTAN 2017 How does the process vary (figure 4.3). In Almaty city it takes only Approval of the plans for engineering across locations? 123 days, similar to the time in Athens, networks by the utilities takes a week The efficiency of the construction Greece (124 days). In Astana the process in Astana but almost three weeks in permitting process differs substantially takes 144 days, slightly more time than in South Kazakhstan (Shymkent). In South across the eight locations benchmarked Bishkek, Kyrgyz Republic (142 days), but Kazakhstan (Shymkent) the commission in Kazakhstan (table 4.1). Obtaining the less than in Warsaw, Poland (153 days). that meets weekly to approve the plans approvals needed to build a warehouse typically covers only a fraction of the and connect it to water and sewerage Approvals from the architectural super- projects submitted, resulting in back- is easiest in Almaty city and Kostanay vision agencies and utilities are the main logs.11 The expert examination of project and most difficult in South Kazakhstan drivers of the variation in time among documentation by a licensed private firm (Shymkent). In Kostanay developers can the locations. Obtaining the architec- is conducted through an online platform complete the process in 19 procedures tural planning assignment (APZ) takes (epsd.kz), which allows the applicant to and 133 days, at a cost of 1.6% of the the least time in Karagandy (5 days) and submit documents electronically.12 But warehouse value. In South Kazakhstan more than four times as long in South as a result of multiple rounds of revi- (Shymkent) they would need 72 more Kazakhstan (Shymkent) (23 days) and sions and consultations, this process days to do so, mainly because of the long East Kazakhstan (Oskemen) (22 days). routinely exceeds the legal time limit of process for obtaining the architectural Delays in the issuance of this document 10 business days (14 calendar days) in planning assignment (APZ), the technical are common across Kazakhstan and most of the locations. In practice, the conditions and the approval of the plans have been cited as one of the major time ranges from two weeks in Almaty for engineering networks. Overall, Almaty obstacles for entrepreneurs.9 Approval city and Pavlodar to 33 days in East city is the closest to international good of the architectural sketch (Eskiz) takes Kazakhstan (Oskemen). The fact that practices: it would rank near the 70th per- only a week in Pavlodar but around two the system for involving private sector centile globally, similar to Canada (at 57 in weeks in Aktobe, Karagandy and East experts is relatively new, having started in the global ranking of 190 economies). In Kazakhstan (Oskemen). And it takes 2016, partly explains the variation in the contrast, South Kazakhstan (Shymkent) more than three weeks in Almaty city, time required. In smaller cities only a few would rank below the 50th percentile, at Astana and Kostanay—substantially private sector experts qualify to carry out the level of Angola (at 111 in the ranking). longer than the time limit set by the the expert examination.13 relevant standard of state service (figure Despite the many requirements, the con- 4.4).10 In Astana the relatively long wait Overall, dealing with construction permits struction permitting process is quite fast. for approval of the architectural sketch is takes the most time in East Kazakhstan On average across the eight locations it related to the city’s special status as the (Oskemen), at 179 days, and in South takes 148 days, less than the regional aver- nation’s capital, which entails greater Kazakhstan (Shymkent), at 205. In East age for Europe and Central Asia (163 days) scrutiny of initial blueprints. Kazakhstan the delays can be explained in part by the disproportionately high TABLE 4.1  Where is dealing with construction permits easy in Kazakhstan—and where not? volume of construction activity in its Distance to Building quality capital city: despite its relatively modest frontier score Procedures Time Cost control index size, Oskemen had a higher volume of Location Rank (0–100) (number) (days) (% of warehouse value) (0–15) commercial construction in 2016 than Almaty city 1 73.61 19 123 1.7 13 Almaty city, Astana or the capital city Kostanay 2 73.00 19 133 1.6 13 of any of the other five regions.14 South Karagandy 3 72.48 19 128 2.3 13 Kazakhstan’s capital city, Shymkent, is Astana 4 72.45 18 144 2.2 13 equal in population size to Astana but has markedly lower construction volumes. Akotbe 5 72.38 19 132 2.1 13 Nevertheless, builders in Shymkent have Pavlodar 6 71.81 19 137 2.3 13 to spend on average two more months on East the construction permitting process than Kazakhstan 7 68.54 19 179 2.5 13 (Oskemen) those in Astana. The biggest delays occur South in obtaining the technical conditions, Kazakhstan 8 67.03 19 205 2.2 13 the architectural planning assignment (Shymkent) (APZ) and the clearance of the engineer- Source: Doing Business database. ing plans, because of poor coordination Note: Rankings are based on the average distance to frontier score for the procedures, time and cost associated with dealing with construction permits as well as for the building quality control index. The distance to frontier score is between the utilities and the Department normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the of Architecture (figure 4.5). better). For more details, see the chapter “About Doing Business and Doing Business in Kazakhstan 2017.” DEALING WITH CONSTRUCTION PERMITS 35 X X X X X X X X FIGURE 4.3  Dealing with construction permits in Kazakhstan involves many requirements but also high quality standards EFFICIENCY OF BUILDING CONSTRUCTION PERMITTING QUALITY CONTROL Procedures Time Cost Index (number) (days) (% of warehouse value) (0–15) 0 0 6 economies Luxembourg, (global best)*** New Zealand 15 Korea, Rep. (global best) (global best) Georgia 5 40 All 8 locations Georgia 1 Azerbaijan, 13 4 economies Tajikistan (global best)* ECA, OECD 80 Russian Federation 10 Kyrgyz Republic, 11 OECD Kostanay Uzbekistan Kyrgyz Republic Kyrgyz Republic Almaty city OECD 2 Russian 120 Kazakhstan average, Aktobe Federation 9 Russian Federation Almaty city Tajikistan Astana, 15 Kyrgyz Republic Karagandy, Aktobe, South Kazakhstan Georgia ECA (Shymkent) Kazakhstan average 160 Kostanay, Pavlodar** 7 Astana 3 Karagandy, Azerbaijan Astana OECD Pavlodar 20 7 locations ECA East Kazakhstan East Kazakhstan Uzbekistan 200 (Oskemen) (Oskemen) 5 Azerbaijan Uzbekistan Uzbekistan South Kazakhstan 4 25 (Shymkent) 3 Russian Federation 240 ECA Tajikistan Tajikistan Azerbaijan 1 30 260 5 0 Source: Doing Business database. Note: OECD is the average for OECD high-income economies; ECA is the average for economies of Europe and Central Asia. * These are Denmark, Georgia, the Marshall Islands and Sweden. ** The time shown is the average for these four locations: Karagandy (129 days), Aktobe (133), Kostanay (134) and Pavlodar (138). *** These are Dominica, Mongolia, the Slovak Republic, St. Vincent and the Grenadines, Thailand, and Trinidad and Tobago. FIGURE 4.4  Official time limits for construction permitting procedures are poorly enforced in Kazakhstan Approval of architectural sketch (Eskiz) Registration of building Technical passport Pavlodar Almaty city Aktobe East Kazakhstan (Oskemen) Karagandy Kostanay Karagandy Aktobe Astana Aktobe Kazakhstan average 4.6 days Karagandy Kazakhstan average 3 days Astana Almaty city South Kazakhstan (Shymkent) Kostanay Pavlodar Kostanay South Kazakhstan (Shymkent) Kazakhstan average 13.3 days Astana East Kazakhstan (Oskemen) East Kazakhstan (Oskemen) Almaty city Pavlodar South Kazakhstan (Shymkent) 0 5 10 15 20 25 0 5 10 15 0 5 10 15 20 25 30 Expert examination of project documentation Architectural planning assignment (APZ) & technical conditions Almaty city Almaty city Pavlodar Karagandy Kostanay Astana Official time limit Kazakhstan average 11 days Kostanay Aktobe Kazakhstan average 18 days Average delay beyond Astana Aktobe official time limit Karagandy Pavlodar South Kazakhstan (Shymkent) East Kazakhstan (Oskemen) East Kazakhstan (Oskemen) South Kazakhstan (Shymkent) 0 5 10 15 20 25 30 35 0 5 10 15 20 25 30 35 40 45 50 Source: Doing Business database. 36 DOING BUSINESS IN KAZAKHSTAN 2017 FIGURE 4.5  The architectural planning assignment and technical conditions are the main drivers of the variation in time for dealing with construction permits Total time (days) Almaty city 10 25 17 14 20 37 123 Karagandy 16 14 14 30 20 34 128 Aktobe 29 15 19 25 21 23 132 Kostanay 21 22 18 23 26 23 133 Pavlodar 29 7 24 15 33 29 137 Astana 20 23 21 30 25 25 144 East Kazakhstan 179 (Oskemen) 35 13 24 33 36 38 South Kazakhstan 205 (Shymkent) 47 17 31 30 42 38 0 50 100 150 200 Time to deal with construction permits (days) Architectural planning assignment (APZ) & technical conditions Approval of architectural sketch (Eskiz) Clearances of engineering plans Expert examination Registration & technical passport Other Source: Doing Business database. The cost of dealing with construction per- (KZT 21,210, or US$112 for regular service Because most government services are mits ranges from 1.6% of the warehouse and KZT 63,630, or US$337 for expe- free of charge, private sector fees account value in Kostanay to 2.5%—nearly 60% dited service). The costs of connecting for about 94% of the cost of dealing with more—in East Kazakhstan (Oskemen). to water and sewerage are established construction permits on average. The fees The average cost, 2.1% of the warehouse by the utilities in each location based charged by the technical supervision com- value, is half the regional average for on their internal cost structures and panies to conduct the on-site supervision Europe and Central Asia (4.2%) as well operational factors, ranging from KZT of construction amount to about 60% as the global average (4.5%). The fees 7,600 (US$40) in Karagandy to KZT of the total cost on average (figure 4.6). for services provided by the government 140,038 (US$743) in Astana. In Almaty These fees range from 0.9% to 1.5% of are the same across Kazakhstan. These city there is no cost for the connection to total construction expenses. They tend include the fees for the technical passport water and sewerage. to be lower in Astana and Almaty city FIGURE 4.6  Private sector services account for 94% of the cost of dealing with construction permits, with the technical supervision of construction representing the largest share 6% Government services: Kostanay 0.2 0.3 1.1 0.1 • Register building Almaty city 0.4 0.3 1.0 0.1 • Obtain technical passport Kazakhstan average 0.4 0.4 1.4 0.1 • Connect to water & sewerage Aktobe 0.4 0.4 1.4 0.1 19% Astana 0.6 0.4 1.2 0.2 Geological & topographic South Kazakhstan (Shymkent) 0.4 0.4 1.5 0.1 surveys 16% Karagandy 0.4 0.5 1.5 0.1 Expert Pavlodar 0.4 0.4 1.6 0.1 examination 59% Hire technical East Kazakhstan (Oskemen) 0.5 0.4 1.6 0.1 supervision company 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Cost to deal with construction permits (KZT millions) Source: Doing Business database. Note: Cost estimates are based on the Doing Business case study warehouse. DEALING WITH CONSTRUCTION PERMITS 37 KZT 1,178,680, or US$6,250 and KZT 4.2). Because the Law on Architectural, a full score of 1 point on quality control 981,115, or US$5,202, as calculated for Town Planning and Construction Activity before construction). the warehouse in the Doing Business case as well as the SNIP regulations apply study), possibly because of greater market equally across Kazakhstan, there is no Kazakhstan clearly specifies the legal competition. And they tend to be higher variation in scores across locations. requirements for inspections during in the smaller cities, such as Pavlodar and construction as the responsibility of Oskemen (KZT 1,637,894, or US$8,685). Kazakhstan makes building regula- the project designer (in-house, for the In smaller cities, where there are few local tions and information on all required purposes of the case study) and a third- accredited construction supervision firms, construction permitting steps available party construction supervision company some builders hire firms from Almaty city to the public through its public services (technical supervision company).15 The and Astana for larger projects and pay online platform (egov) as well as through technical supervision company has to extra fees as a result. brochures and printed materials at the provide monthly reports to the regional relevant authorities—and clearly speci- authorities. But while Kazakhstan has Going beyond efficiency— fies the fees for government services in adopted a law specifying risk categories building quality control regulations accessible online (scoring for buildings, this law does not affect Kazakhstan performs well on the building the full 2 points on the quality of build- construction supervision procedures quality control index, which assesses ing regulations). Globally, the majority of (resulting in a score of 2 of 3 points on the quality of construction regulations economies have their construction regu- quality control during construction).16 and controls in six main areas (for a lations accessible to the public. possible 15 points): quality of building Final inspections after construction are regulations (2 points); quality control Local authorities in Kazakhstan are similarly required by law to be carried out before (1), during (3) and after construc- staffed with licensed engineers who by an in-house engineer and a third-party tion (3); liability and insurance regimes verify that the building plans are in com- technical supervision company before (2); and professional certifications (4). pliance with the building regulations and the signing of the “Act of Acceptance,” a The country scores 13 of the 15 possible actively participate on the committees form of occupancy certificate (for the full points, surpassing the regional average responsible for approving the plans (for 3 points on quality control after construc- for Europe and Central Asia of 11.3 (table tion). Most economies globally, including the majority in Europe and Central Asia, also have this requirement. TABLE 4.2  Kazakhstan scores among the top 15% of economies globally on the building quality control index Structural defects in a building are often discovered only after it has been occu- Russian Federation pied. Liability for such defects is shared United Kingdom Kyrgyz Republic between the contractor and the architect Kazakhstan Azerbaijan in most economies, and insurance to cov- Tajikistan Belarus er these defects is mandatory in some. In Kazakhstan the Law on Architectural, Building quality Town Planning and Construction Activity control index (0–15) 13 13 12 12 11 10 9 and the Civil Code specify the liability Quality of building requirements for structural defects, but regulations (0–2) 2 2 2 2 2 2 2 there is no legal obligation for anyone to Quality control obtain an insurance policy to cover pos- before construction (0–1) 1 1 1 1 1 1 1 sible defects (resulting in a score of 1 of 2 Quality control points on liability and insurance regimes). during construction (0–3) 2 2 2 2 2 2 3 Globally, only about 20% of economies require insurance to cover structural Quality control after construction (0–3) 3 3 3 3 3 0 3 defects. In Europe and Central Asia only Albania, Bulgaria and Serbia have both Liability and insurance regimes (0–2) 1 1 0 0 0 1 0 liability and insurance regimes in place for covering structural flaws. Professional certifications (0–4) 4 4 4 4 3 4 0 It is important that professionals respon- Source: Doing Business database. Maximum points obtained sible for construction permitting approvals 38 DOING BUSINESS IN KAZAKHSTAN 2017 have the necessary technical qualifica- the functionality of single-window mecha- introduced electronic notifications of tions. Kazakhstan has formal regulations nisms, streamlining preconstruction proce- the completion of construction, includ- specifying the qualification requirements dures and enforcing official time limits. ing Denmark, the Netherlands and the for both the technical professionals who Russian Federation (in Moscow). review the drawings and those who super- Expand the scope of online vise the construction on-site (for the full services in construction Improve the functionality of the 4 points on professional certifications). permitting one-stop shops Globally, only about 30% of economies Of the 18–19 procedures for deal- In Almaty city and Astana applicants can have qualification requirements for both ing with construction permits in obtain the spatial planning guidelines groups of professionals; in Europe and Kazakhstan, 4 can be completed (the architectural planning assignment, Central Asia more than 65% do. through online platforms. Several oth- or APZ) and the relevant technical condi- ers could easily be incorporated into tions in one package from the municipal these platforms, reducing the number Department of Architecture—which WHAT CAN BE IMPROVED? of interactions with third parties and serves as a one-stop shop, not only issu- increasing efficiency. One example is ing the architectural planning assignment Kazakhstan has made notable strides in the notification of the completion of but also compiling the technical condi- modernizing and streamlining construction construction (Act of Acceptance) that tions from the utilities. Both municipalities permitting. But the process remains com- builders have to submit both to the successfully coordinate the time limits plex. In construction permitting—a regula- Administration of State Architectural and clearly delineate the responsibilities tory area particularly prone to corruption and Construction Control (GASK) and for the issuance of these documents. In worldwide, according to research—com- to the Department of Architecture. Astana the water and sewerage utility has plexity can go hand in hand with corrup- These procedures could easily be inte- adopted an official time limit of 5 working tion. But where the permitting process is grated into the well-functioning online days (10 for complex buildings) for the less cumbersome, the level of corruption platform for notifications and other issuance of technical conditions, which drops (figure 4.7). In Kazakhstan opportu- government services (egov), eliminat- is in line with the standard of state ser- nities for further reform remain in making ing the need for a separate visit to vice on the issuance of the architectural greater use of online platforms, improving these agencies. Other economies have planning assignment.17 In Almaty city the utility’s website clearly indicates that FIGURE 4.7  Less cumbersome requirements in dealing with construction permits are the application for technical conditions associated with lower levels of corruption should be directed to the Department of Architecture.18 In the other locations, Share of firms that expect to give gifts in exchange for construction permits (%) where poor coordination and lack of for- 30 mal collaboration mechanisms have left the single-window mechanism largely nonfunctional, the process is delayed by an average of 20 days. 20 Kazakhstan could improve the function- ing of the existing one-stop shops by creating an online platform to facilitate coordination between the utilities and the Department of Architecture. Such a platform could enable the electronic 10 exchange and archiving of technical documentation and provide a forum for discussing technical issues in real time. Kazakhstan could follow the example of Serbia, which recently achieved a 0 remarkable increase in efficiency by Least difficult Most difficult Economies ranked by ease of dealing with construction permits, quintiles consolidating the issuance of technical conditions and location conditions (simi- Sources: Doing Business database; Enterprise Survey database, World Bank, http://www.enterprisesurveys.org. lar to the architectural planning assign- Note: Relationships are significant at the 1% level and remain significant when controlling for income per capita. ment) through an online system. Similar DEALING WITH CONSTRUCTION PERMITS 39 examples can be found in the United Arab Streamline project approval for registration of the building. This Emirates and the Russian Federation. In requirements improvement would eliminate the need 2009 Dubai introduced an online system Entrepreneurs going through the for the applicant to make two separate for clearances from utilities, achieving construction permitting process in visits to the center. a notable reduction in time. Moscow Kazakhstan put in much time and effort integrated the procedures for obtaining on multiple levels of clearances by dif- Introduce smarter time limits the urban planning guidelines (similar to ferent agencies, some with duplicate for better compliance the architectural planning assignment) functions. Substantial efficiencies could While 5 of the 18–19 procedures for and obtaining the technical conditions be achieved by consolidating procedures dealing with construction permits have from the utilities by mandating electronic related to the approval of the plans for associated time limits, these are rarely exchange of technical documentation engineering networks or the registration enforced in practice (see figure 4.4). Time between agencies.19 of the completed building, for example. limits for approvals outsourced to private entities, such as the expert examination, Integrate spatial planning While the plans for engineering are difficult to enforce. Moreover, for guidelines and utility supply networks are formally approved by a technically complex projects, which are information into online commission representing the utilities reviewed by the State Expert Examination platforms and the Department of Architecture, Agency (Gosexpertiza), enforcing an In the medium term Kazakhstan could lack of coordination between the inflexible time limit might not be practi- build on its modern system of digital responsible entities means that in cal because of the variability among zoning maps to integrate spatial planning practice applicants have to apply to projects and the uncertainty about the guidelines and utility supply information each one separately. This verification is potential revisions and modifications into an online platform available to the then duplicated when the architectural needed. Kazakhstan could instead follow public or to accredited engineering firms. and engineering plans are reviewed the example of Singapore by adopting a This would eliminate the need to obtain by a private firm as part of the com- target range for project approvals—for the architectural planning assignment prehensive expert examination (see example, requiring that 90% of projects and technical conditions, since the zoning figure 4.2). The need for the clearances be cleared within a specific number of maps would already specify the spatial from the utilities and the Department days. This would allow some flexibility planning guidelines and the available of Architecture could be eliminated in prioritizing projects by their complex- supply capacity of utility networks in by incorporating the technical condi- ity and processing time. Because such each district of a municipality. tions from the utilities into the online a system increases the discretion of the platform for expert examination (epsd. evaluator, it would also require putting Slovenia has made detailed plans and kz). That would enable the private firm in place a strong framework of account- zoning maps available online since 2012, to verify the engineering plans against ability and transparency. allowing professionals to obtain land those conditions. This change would maps and geodetic data directly.20 Most streamline the process, reducing the Enhance risk-based inspection economies in the European Union have number of procedures for dealing with mechanisms integrated utility capacity into their zon- construction permits by two and saving In Kazakhstan buildings are classified by ing systems.21 In Denmark and Sweden, entrepreneurs almost a month. risk category, which affects the types of for example, legally binding district plans approvals required and the associated provide detailed planning guidelines Another opportunity is to merge the time limits. But the risk categories are not and design requirements that include all procedures for registering the building taken into account in the inspection pro- information needed to prepare the proj- and for obtaining a technical passport. cess,23 which is conducted by third-party ect design for a building. Since both procedures are administered supervision companies and in-house engi- by the state corporation Government neers.24 Introducing clearly defined levels While preparing a detailed development for Citizens and involve the same set of of scrutiny for each risk category would plan for a district takes time and effort, it application documents, they could be improve overall quality control while saves considerable resources in project combined in a single application that allowing a more efficient allocation of design and adds transparency on the the applicant could submit to the local resources by both the supervision compa- criteria for approving or rejecting building Government for Citizens center. Once nies and the clients (builders). This should plans.22 Almaty city has already taken the the technical passport is issued, the be accompanied by robust licensing initial steps in this direction by making Government for Citizens center could requirements and sanction mechanisms its updated master plan and zoning rules automatically submit the package of designed to prevent potential safety risks available online (almaty.genplan.kz). documents to the Department of Justice due to corruption or negligence. 40 DOING BUSINESS IN KAZAKHSTAN 2017 In Australia the state of Queensland levels of coverage for structural defects— best practices in OECD countries.32 This links inspection requirements to the risk insurance taken out by the owners of the would reduce the discretionary powers of category of buildings, which is defined by building (dommage ouvrage) and decen- the construction control agency and limit the height and floor area, the complexity nial insurance taken out by the builders. the physical inspection cases to major of the project, the experience of the design violations or repeated instances of devia- and building teams and the climatic As a first step Kazakhstan could introduce tions from the norms. Introducing formal conditions. While there are a number of voluntary mechanisms. A public-private mechanisms for appealing regulatory mandatory inspections for all buildings, partnership between the government control measures could further strength- riskier projects are subject to progressively and the construction association could en the fairness of the process and prevent greater scrutiny.25 The United Kingdom— then identify the most relevant cases for regulatory abuse. Such mechanisms are which, like Kazakhstan, allows inspections decennial insurance and develop stan- common in advanced economies, includ- to be conducted by licensed private sector dard contractual clauses. Alternatively, ing New Zealand, Sweden and the United experts—defines the risk level for inspec- a requirement for decennial insurance Kingdom. tions by assessing such criteria as the size could be introduced only for major proj- and complexity of the building, the experi- ects. For example, Italy has introduced ence and qualifications of the builder, compulsory decennial insurance for NOTES groundwater and other ground-related public procurement projects exceeding hazards, as well as alternative means of EUR 10 million.30 1. “Main Drivers of the GDP Growth from January–November 2016,” Ministry of achieving compliance.26 National Economy of Kazakhstan, accessed Prevent corruption risks February 6, 2017, http:/ /economy.gov.kz/ru Introduce mandatory insurance Like many other countries, Kazakhstan /press-sluzhba/infografika/. 2. “The Expenses of Construction and Installation requirements to cover structural faces corruption risks in the construc- Work by Sources of Financing,” Statistics defects tion industry. Builders sometimes make Agency of the Republic of Kazakhstan, Insurance to cover costs arising from unauthorized changes in approved accessed February 6, 2017, http:/ /stat.gov.kz. 3. “One of EXPO 2017 Constructions Collapsed structural defects benefits clients as well projects or proceed without the required (Updated),” Kazinform International News as contractors and encourages more clearances in the hope of legalizing the Agency, November 16, 2016, http:/ /www construction, particularly for small and building in the future. There is no system .inform.kz/en/one-of-expo-2017 -constructions-collapsed-updated_a2970201. medium-size construction companies.27 in place to prevent officials at the local 4. World Bank Group, Investment Climate Kazakhstan does not have mandatory architectural or construction supervision Department, Good Practices for Construction insurance requirements to cover structural authorities from having their own inter- Regulation and Enforcement Reform: Guidelines defects discovered after the completion of ests in private project design firms. On for Reformers (Washington, DC: World Bank Group, 2013). construction. Many advanced economies the supervision side, reports persist of 5. “100 Precise Steps towards Realization of also lack specific legal requirements unjustified government inspections for the Five Institutional Reforms,” Kazakhstan for such insurance, but they typically the purposes of rent seeking. Institute for Strategic Studies under the President of the Republic of Kazakhstan, have standard contractual clauses that February 6, 2017, http:/ /kisi.kz/en/pages set the liability regime and insurance Increasing transparency around the /national-plan-%E2%80%9C100-precise requirements for structural defects.28 In approval of construction projects and -steps%E2%80%9D. 6. The APZ is issued using a modern system of Kazakhstan construction contracts typi- involving public participation is a good digital zoning maps and master plans. cally do not include such provisions. way of reducing corruption risks. Local 7. For example, Kostanay Su specifies 15 governments in many advanced econo- calendar days for technical conditions on its website at http:/ /kostanay-su.kz/novosti Kazakhstan could follow the example of mies, including New Zealand and the /proizvodstvenno-tekhnicheskij-otdel, Denmark or France, both early adopters Nordic countries, publish the building accessed February 6, 2017. Akbulak, which of mandatory insurance regimes. Both permits they issue on their websites. New operates in Aktobe, specifies 10 business days (14 calendar days) for the same service on its require decennial (10-year) insurance. Zealand requires public hearings for the website at http:/ /aoakbulak.kz/ru/article Denmark requires this insurance for the approval of construction projects of a cer- /tehnicheskie-usloviya, accessed February construction of new permanent dwell- tain complexity, thus establishing a level of 6, 2017. ings. The municipality checks the valid- public oversight over the process.31 8. Law of the Republic of Kazakhstan on Amendments and Additions to Some ity of the insurance before issuing the Legislative Acts of the Republic of Kazakhstan building permit and, after the completion The issue of unjustified inspections could Regarding the Reduction of Permits and of construction, when issuing the occu- be addressed by introducing an “improve- Optimization of Control and Supervisory Functions of State Bodies (no. 36-V), July 10, pancy permit. France applies the same ment notice” for first-time violations and 2012, available at http://online.zakon.kz requirement to all new buildings, regard- for cases that do not represent an immi- /Document/?doc_id=31230569#pos=1;-173. less of their purpose.29 It requires two nent hazard, consistent with regulatory DEALING WITH CONSTRUCTION PERMITS 41 9. “Businessmen Are Not Satisfied with the 17. “Technical Conditions,” Astana Su, accessed Technique du Bâtiment (CSTB), “Liability and Quality of Government Services,” Kapital February 6, 2017, http:/ /www.astanasu.kz Insurance Regimes in the Construction Sector: News Agency, March 31, 2015, https:/ /kapital /abonentam/tekhnicheskie-usloviya.php. National Schemes and Guidelines to Stimulate .kz/gosudarstvo/39148/biznesmeny 18. “Technical Conditions,” Almaty Su, accessed Innovation and Sustainability” (ELIOS, Paris, -nedovolny-kachestvom-ryada-gosuslug.html. February 6, 2017, http:/ /www.almatysu 2010). 10. According to the standard of state service .kz/?page_id=1362. 31. New Zealand, Ministry for the Environment, on Approval of the Sketch Design (no. 137), 19. Decision of the Government of Moscow of An Everyday Guide to the Resource Management approved by the government of the Republic March 29, 2016 (no. 137-PP), available at Act Series 1.1: Getting in on the Act (Wellington: of Kazakhstan on March 17, 2016, the official http://www.garant.ru/hotlaw/moscow Ministry for the Environment, 2015), http:/ / time limit for the approval of the Eskiz is 10 /720520/. www.mfe.govt.nz/publications/rma/everyday- business days for technically noncomplex 20. World Bank, Doing Business 2017: Equal guide-rma-getting-act. buildings and 15 for technically complex ones. Opportunities for All (Washington, DC: World 32. OECD (Organisation for Economic Co- The case study warehouse is considered to Bank, 2016). operation and Development), OECD Best be a technically noncomplex building. The 21. World Bank, Doing Business in Poland 2015: Practice Principles for Regulatory Policy: standard is available at http:/ /economy.gov Comparing Business Regulations for Domestic Regulatory Enforcement and Inspections .kz/ru/razrabotka-aktov/detail.php?ELEMENT Firms in 18 Cities with 188 Other Economies (Paris: OECD Publishing, 2014). _ID=69032. (Washington, DC: World Bank, 2015). 11. While the Doing Business case study takes into 22. World Bank, Sweden’s Business Climate: account only water and sewerage connections, Opportunities for Entrepreneurs through Improved a typical building also needs connections to Regulations (Washington, DC: World Bank gas, heating and telephone networks, adding up Group, 2014), http:/ /documents.worldbank to two more months to the process in reality. .org/curated/en/596101468184733693 12. The expert examination of technically complex /Swedens-business-climate-opportunities- projects is currently conducted by the State for-entrepreneurs-through-improved- Expert Examination Agency (Gosexpertiza). regulations. The level of complexity is established by the 23. Order of the Minister of National Economy Order of the Minister of National Economy of the Republic of Kazakhstan on Approval of of the Republic of Kazakhstan on Approval of Rules of Provision of Engineering Services in Rules Determining the General Classification the Field of Architecture, Urban Planning and of Buildings and Structures for Technical and Construction Activities of February 3, 2015 (or) Technologically Complex Objects of (no. 71) (as amended December 2, 2015), February 28, 2015 (no. 165), as amended by available at http:/ /online.zakon.kz the Order of the Minister of National Economy /Document/?doc_id=31683647. of the Republic of Kazakhstan of November 3, 24. There are two levels of mandatory supervision 2015 (no. 685). of construction. The first is the “author’s 13. “On the Transparency of Gosexpertiza: supervision,” conducted by the project design Interview with the Head of the Gosexpertiza firm. Under the assumptions of the Doing Branch in Almaty,” June 23, 2015, http:/ / Business case study the building company www.k-pro.kz/ru/statii/personalii/o- prepares the drawings in-house and thus prozrachnosti-gosekspertizy.html. the author’s supervision is considered to be 14. “Amount of Completed Construction Works in-house supervision. The second level of by the Object Type, 2016,” Statistics Agency inspection is conducted by a licensed private of the Republic of Kazakhstan, accessed on company. February 6, 2017 http:/ /stat.gov.kz. 25. Queensland (Australia) Department of 15. The requirement for third-party supervision Housing and Public Works, Guidelines on and in-house (or author’s) supervision is Inspections for Class 2 to 9 Buildings (2016), stipulated by the Order of the Minister http://www.hpw.qld.gov.au of National Economy of the Republic /SiteCollectionDocuments/guidelines of Kazakhstan on Approval of Rules of -inspection-of-class-2-to-9-buildings.pdf. Provision of Engineering Services in the 26. Greenstreet Berman, Risk Assessment Decision Field of Architecture, Urban Planning and Making Tool for Building Control Bodies: Final Construction Activities of February 3, 2015 Risk Assessment Guidance (London: U.K. (no. 71) (as amended on December 2, 2015), Department for Communities and Local available at http://online.zakon.kz Government, 2012). /Document/?doc_id=31683647. 27. World Bank, Doing Business 2016: Measuring 16. Order of the Minister of National Economy Regulatory Quality and Efficiency (Washington, of the Republic of Kazakhstan on Approval of DC: World Bank, 2015). Rules Determining the General Classification 28. Consortium formed by Centre d’Etudes of Buildings and Structures for Technical and d’Assurances (CEA) and Centre Scientifique et (or) Technologically Complex Objects of Technique du Bâtiment (CSTB), “Liability and February 28, 2015 (no. 165), as amended by Insurance Regimes in the Construction Sector: the Order of the Minister of National Economy National Schemes and Guidelines to Stimulate of the Republic of Kazakhstan of November Innovation and Sustainability” (ELIOS, Paris, 3, 2015 (no. 685), available at https:// 2010). tengrinews.kz/zakon/pravitelstvo_respubliki 29. Except those listed in articles L243-1-1 of the _kazahstan_premer_ministr_rk/stroitelstvo_i Insurance Code. _arhitektura/id-V1500012344/. 30. Consortium formed by Centre d’Etudes d’Assurances (CEA) and Centre Scientifique et 42 DOING BUSINESS IN KAZAKHSTAN 2017 Getting Electricity MAIN FINDINGS ƒƒ In 2015 Kazakhstan adopted a series of legislative amendments aimed at making it faster and easier to get a new electricity connection. A more recent regulatory reform, now being implemented, is designed to improve the reliability of electricity supply. ƒƒ Getting electricity involves seven to nine procedures, which take 77.4 days and cost 62.6% of income per capita on average. Aktobe has the most efficient process, and Astana the most complex one. Almaty city receives the highest score on the reliability of supply and transparency of tariffs index, thanks to early adoption of an automated system for monitoring outages and restoring service. ƒƒ Going forward, Kazakhstan will need to ensure that all recent legislative amendments are fully implemented across the country and clearly communicated to customers. And it could further simplify and speed up the connection process for entrepreneurs by improving coordination between the different actors involved and streamlining approvals and inspections. GETTING ELECTRICITY 43 I n today’s fast-paced world—where electricity as well as reliable and affordable by a different distribution utility—whether technological innovations cut produc- supply. Recent regulatory changes are a regional company or a company serving a tion times, speed the exchange of leading to improvements on both these single city, as in Astana. Finally, electricity goods and enable instant information fronts. Yet challenges persist, intensi- supply companies sell electricity to sharing—entrepreneurs must be able fied in this setting where investment is end-users.5 to start businesses quickly and operate needed to increase generation capacity them easily. Key factors are the time it and modernize the power infrastructure. The power industry is supervised by the takes to obtain an electricity connec- Committee for State Energy Supervision tion and the subsequent reliability and and regulated by a body of laws, notably affordability of electricity supply. In some HOW DOES GETTING the Law on Electric Power Industry and countries companies can connect their ELECTRICITY WORK IN the Rules on the Use of Electrical Energy. facilities to the network in less than a KAZAKHSTAN? Both laws have been amended in recent month; in others they need to wait more years with the aim of making it easier to than a year.1 Delays put entrepreneurs at a In Kazakhstan power activities are orga- get electricity and improving the reliabil- disadvantage when they enable competi- nized under the Unified Power System, a ity of supply (box 5.1; see also box 5.2). tors to seize market opportunities first. combination of power plants, transmis- Unreliable electricity service is another sion lines and substations. Electricity The process for obtaining an electric- constraint, identified as a major obstacle is generated by more than 100 power ity connection is fairly standard across by nearly a third of firms surveyed around plants, with more than 90% of production Kazakhstan, though there is some varia- the world.2 coming from fossil fuels.4 Transmission is tion across locations because of certain handled by the state-owned Kazakhstan practices within the purview of munici- Kazakhstan aims to transform its growth Electricity Grid Operating Company. palities and distribution utilities. Seven model so as to become a more diversified Regional Electric Network Companies baseline procedures common to all eight economy.3 Central to achieving this goal (RECs) are responsible for distributing locations are required, along with one or is ensuring that entrepreneurs across the electricity within regions. Each of the two additional procedures in four of the country have easy and timely access to eight locations benchmarked is covered locations (figure 5.1). What does getting electricity measure? Doing Business records all procedures required for a business to obtain Getting electricity: measuring efficiency, a permanent electricity connection and supply for a standardized warehouse. reliability and transparency These procedures include applications and contracts with electricity utilities, all necessary inspections and clearances from the distribution utility and other agencies, and the external and final connection works. To make the Rankings are based on distance to frontier scores for four indicators data comparable across locations, several assumptions about the warehouse and the electricity connection are used. The location of the warehouse is Days to obtain an Cost to obtain a electricity connection connection, as % of assumed to be within city limits, the subscribed capacity of the connection income per capita 140 kilovolt-amperes (kVA), and the length of the connection 150 meters. Doing Business also measures how reliable the supply of energy is and how 25% 25% transparent the consumption tariffs are. Its reliability of supply and transparency Time Cost of tariffs index encompasses quantitative data on the duration and frequency 25% 25% Procedures Reliability of power outages as well as qualitative information on several aspects: of supply and the mechanisms put in place by the utility for monitoring power outages and transparency of tariffs restoring power supply, the reporting relationship between the utility and the regulator for power outages, the transparency and accessibility of tariffs and Steps to file a connection Power outages and whether the utility faces a financial deterrent aimed at limiting outages. application, prepare a regulatory mechanisms design, complete works, in place to monitor The index accounts for one-fourth of the distance to frontier score for getting obtain approvals, go through and reduce them; electricity (see figure). In addition, Doing Business records the price of electricity inspections, install a meter transparency of tariffs and sign a supply contract in each location covered.a a. While Doing Business records the price of electricity, it does not include these data when calculating the distance to frontier score or the ranking on the ease of getting electricity. 44 DOING BUSINESS IN KAZAKHSTAN 2017 BOX 5.1 Recent regulatory changes are making it easier to get a new electricity connection in Kazakhstan In early 2015 Kazakhstan adopted a series of legislative amendments aimed at making it easier to establish new electricity connections. Two of them simplify the process by reducing the number of requirements; the other three make the process faster by tightening time limits for certain actions by distribution utilities and suppliers (see table). While these regulatory changes apply throughout the country, the level of implementation varies across locations. The elimination of the need for an inspection of the completed works by the Authority for State Energy Supervision and Control is an exception, as this change has been systematically and consistently implemented across the country. Regulatory changes introduced in early 2015 to ease the connection process Change Date of adoption Law amended Elimination of the need to obtain an inspection of the completed works January 2015 Law on Electric Power Industry a and subsequent permission to connect from the Authority for State Energy Supervision and Control Elimination of the need to obtain a permit for construction and installation January 2015 Law on Architectural, Town Planning works (replaced by an online notification to the relevant agency) and Construction Activity b Tightening of the time limit for distribution utilities to issue technical conditions April 2015 Rules on the Use of Electrical Energy (from 14 days to 5 for facilities with an installed capacity of up to 200 kilowatts) (paragraph 13) c Tightening of the time limit for distribution utilities to approve projects (from 20 April 2015 Rules on the Use of Electrical Energy days to 3 for facilities with an installed capacity of up to 200 kilowatts) (paragraph 15) c Tightening of the time limit for suppliers to issue a contract for the sale of April 2015 Rules on the Use of Electrical Energy electricity (from 7 days to 3) (paragraph 23) c a. Law of the Republic of Kazakhstan of July 9, 2004. b. Law of the Republic of Kazakhstan of July 16, 2001. Also amended was the Law of the Republic of Kazakhstan on Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan in Relation to Issues of Fundamental Improvement of the Business Environment in the Republic of Kazakhstan (no. NQ 269-V), December 29, 2014. c. Rules approved by order of the Ministry of Energy of the Republic of Kazakhstan as of February 25, 2015. FIGURE 5.1  Obtaining an electricity connection in Kazakhstan takes seven to nine procedures Submit a connection application to the distribution utility and await technical conditions Obtain the scheme of the connection route (and collect sign-offs) Await completion and approval of the project design Obtain authorization for ground works (excavation, drilling or pole installation) Await completion of external works by the electrical contractor Await and receive an expert opinion on external works Submit the expert opinion to the distribution utility and await inspection and issuance of relevant documents Sign a supply contract with an electricity supplier (and await sealing of the meter and energizing of the connection) Apply to the distribution utility for the final connection and await sealing of the meter and energizing of the connection Procedure present in all locations Procedure present in certain locations only Source: Doing Business database. GETTING ELECTRICITY 45 The entrepreneur first submits an connection route from the relevant entity, For the construction of the connection, application for a connection to the dis- usually the cadastre—which adds one entrepreneurs usually hire a construction tribution utility. Even in locations where more procedure to the overall process. company to purchase the material— the application can be submitted online This document maps the communication including the meter and, if needed, the or by email, customers usually submit networks surrounding the warehouse and substation—and complete the external their application in person at the utility’s indicates which route the new electricity works. This practice is most common office.6 The utility assesses whether there connection (the cables) should take.9 In even in locations where the distribution is a substation with sufficient capac- Astana and Pavlodar the entrepreneur utility offers this service. Once the works ity located close to the entrepreneur’s shares it with the designer, who then are completed, the entrepreneur has warehouse and whether the connection prepares the design and collects the to request an “expert opinion” from a should be underground or overhead. If necessary approvals. In East Kazakhstan licensed private company, which assess- there is enough capacity, the warehouse (Oskemen) and Karagandy, however, es compliance with the technical condi- can be connected directly. If there is not, the design phase can begin only after tions and the approved project design. a new substation must be installed.7 the entrepreneur collects the necessary The entrepreneur then requests another The utility then prepares the technical clearances on the scheme itself, to ensure inspection from the distribution utility, conditions—which indicate where the that the planned route will not disrupt which comes on-site to evaluate the final new connection should join the electrical other utilities’ communication lines. works and verify that the installation of grid—and shares them with the customer. the meter and other material is correct. Whether underground or overhead, the The distribution utility issues two docu- With this information in hand, a private connection will require ground works— ments: one providing proof of ownership company hired by the entrepreneur digging, drilling or the installation of of the installed material and defining the designs the new connection.8 The design poles—and the next step is for the entre- responsibility for its maintenance, and defines all the specifications needed for preneur, or the construction company in another certifying the compliance of the the construction to begin and maps the charge of the works, to obtain a clearance metering devices.10 planned cabling route. to carry them out. While the recent reform included provisions aimed at simplifying Finally, the entrepreneur signs a contract In Aktobe, Almaty city, Kostanay and this step, by introducing a requirement for with an electricity supplier. In seven of South Kazakhstan (Shymkent) the a simple notification at this stage, these the locations the supplier notifies the company can prepare the design based provisions are not yet fully implemented distribution utility, which then comes solely on the technical conditions issued (see box 5.1). In all eight locations, there- on-site to seal the meter (if this has not by the distribution utility. The design fore, the entrepreneur still needs to apply been done as part of the previous step) must include a cabling scheme that for an authorization. and switch on the electricity. In Astana, sketches the planned connection route however, this step is not automatic. The on a topographic survey or similar situ- In Almaty city the entrepreneur can entrepreneur submits a request for the ational map. Once finalized, the design request the authorization online by final connection to the distribution utility, needs to be approved by the distribution uploading a set of documents, including which comes on-site to seal the meter utility; the Department of Architecture; the approved design. In Aktobe, East and activate the electricity flow.11 the Department of Communal Services, Kazakhstan (Oskemen), Karagandy, Passenger Transport and Roads (or its Kostanay and South Kazakhstan On average across the eight locations equivalent); and all other utilities whose (Shymkent) the entrepreneur requests benchmarked, obtaining a new electric- communication lines might be affected the authorization in person from the ity connection takes 7.6 procedures and by the new connection (such as gas, relevant public entity. In Astana and 77.4 days and costs 62.6% of income water, heating or telecommunications). Pavlodar, however, the entrepreneur per capita (figure 5.2). The number of Obtaining these clearances is usually part first needs to collect sign-offs from procedures exceeds the average for of the service provided by the designer. municipal departments and utilities Europe and Central Asia (5.6) and for But in some cases the customer chooses whose communication lines might OECD high-income economies (4.8). to collect the clearances as a way to save be affected by the ground works (the But the connection process is faster time or money. same entities that cleared the design). and less costly in Kazakhstan than in Only then can the entrepreneur apply the neighboring countries of the Kyrgyz The process is slightly different in Astana, for the authorization at the relevant Republic, Tajikistan and Uzbekistan—and East Kazakhstan (Oskemen), Karagandy public entity. In the other six locations faster and less costly than in Europe and Pavlodar. In these locations the the clearances collected for the design and Central Asia on average. Indeed, it entrepreneur first obtains a scheme of the remain valid for the ground works. is as quick and affordable as in OECD 46 DOING BUSINESS IN KAZAKHSTAN 2017 X X X X X X X X FIGURE 5.2  Compared with the average for Europe and Central Asia, the connection process in Kazakhstan is faster and more affordable but also more complex EFFICIENCY OF RELIABILITY OF SUPPLY AND GETTING ELECTRICITY TRANSPARENCY OF TARIFFS Procedures Time Cost Index (number) (days) (% of income per capita) (0–8) 26 economies 0 Japan 0 (global best)** 10 (global best) 20 East Kazakhstan 8 (Oskemen) OECD 1 Korea, Rep.; 20 40 Russian Karagandy Almaty city St. Kitts and Nevis Federation 7 (global best) 30 60 Almaty city 2 40 OECD Aktobe Kazakhstan average 80 Astana Georgia 6 16 economies 50 Aktobe 100 Kostanay ECA (global best)* 3 South Kazakhstan Aktobe, Azerbaijan 60 Kostanay 120 (Shymkent) 5 East Kazakhstan Georgia 70 South Kazakhstan Pavlodar (Oskemen), 4 (Shymkent) 140 Georgia OECD Azerbaijan Kostanay 80 Almaty city Azerbaijan 160 4 Pavlodar Kazakhstan average 90 Karagandy 5 Pavlodar Kazakhstan OECD 340 average Uzbekistan 100 East Kazakhstan (Oskemen) Georgia 360 3 ECA 110 6 Astana ECA ECA 380 120 2 Azerbaijan, Aktobe, Almaty city, Kyrgyz 700 Kyrgyz 7 Kostanay, South Kazakhstan Republic 130 Republic, (Shymkent) Tajikistan Tajikistan 800 Uzbekistan 140 1 8 150 Kyrgyz 900 Kazakhstan Republic average East Kazakhstan (Oskemen), Karagandy, Pavlodar 160 1,200 Russian Uzbekistan Kyrgyz 9 Federation 170 1,400 Republic, 0 Tajikistan Astana Astana, Tajikistan Karagandy, South Kazakhstan (Shymkent) Source: Doing Business database. Note: Data on power outages used to compute the reliability of supply and transparency of tariffs index are for 2015. Because locations are not eligible to obtain a score on the index if they do not collect data on power outages, those not doing so in 2015—the case for Astana, Karagandy and South Kazakhstan (Shymkent)—receive a score of 0 on the overall index. (See box 5.2 for more information.) OECD is the average for OECD high-income economies; ECA is the average for economies of Europe and Central Asia. * These are the Comoros; Germany; Hong Kong SAR, China; Kenya; the Republic of Korea; the former Yugoslav Republic of Macedonia; the Federated States of Micronesia; the Russian Federation; San Marino; St. Vincent and the Grenadines; Sweden; Switzerland; Taiwan, China; Timor-Leste; Togo; and the United Arab Emirates. These are the Belarus; Belgium; Cyprus; the Czech Republic; Estonia; Finland; France; Germany; Hong Kong SAR, China; Ireland; Japan; the Republic of Korea; Lithuania; **  Malaysia; the Netherlands; Norway; Portugal; the Russian Federation; the Slovak Republic; Slovenia; Spain; Sweden; Taiwan, China; the United Arab Emirates; the United Kingdom; and Uzbekistan. high-income economies on average. On driven by differences in three factors: the The time required to obtain a new connec- the reliability of supply and transparency number of procedures required to obtain tion ranges from 61 days in Aktobe to 95 of tariffs index, however, Kazakhstan the connection, the time required to com- in Astana (figure 5.3). The variation across has a lower average score (3.3) than plete these procedures and the score on the eight locations stems from two main Europe and Central Asia (5.2) and OECD the reliability of supply and transparency factors. First, in the four locations with high-income economies (7.5). But this of tariffs index (box 5.2). While differ- the fastest processes—Aktobe, Kostanay, relatively low score reflects more about ences in cost are also observed across South Kazakhstan (Shymkent) and the monitoring of supply reliability in locations, they have a smaller impact on Almaty city—entrepreneurs do not have to three locations—Astana, Karagandy and the distance to frontier scores. obtain the scheme of the connection route South Kazakhstan (Shymkent)—during as a prerequisite for the preparation of the the relevant period than about the supply Among the eight locations covered, the design, saving 8 days on average. In the reliability itself. connection process is least complex in other four locations, where entrepreneurs Aktobe, Almaty city, Kostanay and South do need to obtain it, the time required for The distance to frontier score for getting Kazakhstan (Shymkent), where only the this step ranges from 5 days in Karagandy electricity, reflecting both the efficiency seven baseline procedures are required. It is to 11 in Pavlodar. of the connection process and the quality most complex in Astana, where the entre- of services provided by distribution utili- preneur needs to complete two additional Second, locations that have the fastest ties and suppliers, ranges from 73.64 in procedures: obtaining the scheme of the connection processes overall also tend Almaty city to 41.44 in Astana, indicating connection route as a basis for the prepa- to record the shortest times for most that Almaty city is the closest to global ration of the design, and applying at the individual procedures. For example, in best practices (table 5.1). The variation is distribution utility for the final connection. Aktobe the distribution utility needs GETTING ELECTRICITY 47 TABLE 5.1 How close are Kazakhstani locations to the world’s best regulatory practices in the area of getting electricity? Reliability of supply and Distance to frontier score Procedures Time Cost transparency of tariffs index Location Rank (0–100) (number) (days) (% of income per capita) (0–8) Almaty city 1 73.64 7 77 50.6 7 Aktobe 2 69.13 7 61 51.5 5 Kostanay 3 67.95 7 71 80.1 5 East Kazakhstan 4 62.49 8 84 41.2 5 (Oskemen) Pavlodar 5 59.67 8 80 83.1 4 South Kazakhstan 6 52.21 7 72 82.4 0 (Shymkent) Karagandy 7 47.38 8 79 49.2 0 Astana 8 41.44 9 95 62.7 0 Source: Doing Business database. Note: Rankings are based on the average distance to frontier score for the procedures, time and cost associated with getting electricity as well as for the reliability of supply and transparency of tariffs index. The distance to frontier score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more details, see the chapter “About Doing Business and Doing Business in Kazakhstan 2017.” Astana, Karagandy and South Kazakhstan (Shymkent) are not eligible to receive a score on the reliability of supply and transparency of tariffs index because they were not collecting data on power outages in 2015. See box 5.2 for more information. only 4 days to issue the technical con- Astana—because the entrepreneur first The time required for construction of ditions for the new connection, while has to collect approvals from relevant the connection also varies substantially. this takes 9 days in Karagandy and 10 municipal departments and utilities, These works can be completed within a in Astana. Similar differences occur in addition to those already collected week in Kostanay and South Kazakhstan in obtaining clearance for the ground for the design (which is also the case in (Shymkent), but they take up to two works. This takes an entrepreneur 3 Pavlodar). weeks in Astana and three in Almaty city. days in Aktobe, but it takes 20 days in The difference can be explained by the FIGURE 5.3  Obtaining a new connection takes a month longer for an entrepreneur in Astana than for one in Aktobe Baseline procedure 1: Submit a connection application to the distribution utility and await technical conditions Additional procedure: Obtain the scheme of the connection route Baseline procedure 2: Await completion and approval of the Aktobe project design Baseline procedure 3: Obtain authorization for ground works (excavation, drilling or pole installation) Baseline procedure 4: Await completion of external works by the electrical contractor Baseline procedure 5: Await and receive an expert opinion on external works Baseline procedure 6: Submit the expert opinion to the Astana distribution utility and await inspection and issuance of relevant documents Baseline procedure 7: Sign a supply contract with an electricity supplier (and await sealing of the meter and energizing of the connection)a 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 Additional procedure: Apply to the distribution utility for the final Time to get electricity (days) connection and await sealing of the meter and energizing of the connection Source: Doing Business database. a. Sealing of the meter and energizing of the connection take place in Aktobe in this procedure, but in Astana they occur in the very last procedure. 48 DOING BUSINESS IN KAZAKHSTAN 2017 BOX 5.2 Measuring the reliability of supply and transparency of tariffs—going beyond efficiency The reliability of supply and transparency of tariffs index measures the quality of service provided by utilities and suppliers as it relates to stability in distribution and clarity of information provided on consumption costs. The scoring is based on six main components, for a total of 8 possible points. The first five components relate to power outages: reliability of supply (3 points), mechanisms for monitoring outages (1 point), mechanisms for restoring service (1 point), regulatory monitoring (1 point) and financial deterrents aimed at limiting outages (1 point). The sixth relates to the transparency of electricity tariffs (1 point). All eight locations receive the same score on two components: those on regulatory monitoring (1 point) and the transpar- ency of tariffs (1 point). Scores on the overall index vary considerably, however (see table). Almaty city has the highest score, and Astana, Karagandy and South Kazakhstan (Shymkent) the lowest. But the difference lies much less in how reliable the electricity supply is than in how that reliability is measured. Data linked to the duration and frequency of power outages—as measured by the system average interruption duration index (SAIDI) and the system average interruption frequency index (SAIFI) or their equivalent—are from 2015. At that time Astana, Karagandy and South Kazakhstan (Shymkent) were not computing these data and therefore receive a score of 0 on the overall index, despite earning points for meeting certain other criteria.a The picture is changing rapidly, however, as a result of new requirements that all distribution utilities keep the dura- tion and frequency of outages below certain thresholds. In locations measuring outages in 2015, SAIFI data indicate that customers experienced less than two a year on average East South Almaty Kazakhstan Kazakhstan city Aktobe (Oskemen) Kostanay Pavlodar Astana Karagandy (Shymkent) Reliability of supply and transparency of tariffs index (0–8) 7 5 5 5 4 0 0 0 Total duration and frequency of outages per customer 2 3 3 3 2 0 0 0 a year (0–3) System average interruption duration index (SAIDI) 0.9 0.7 0.2 0.1 1.7 — — — System average interruption frequency index (SAIFI) 1.2 0.4 0.2 0.5 1.4 — — — Mechanisms for monitoring outages (0–1) 1 0 0 0 0 1 0 0 Does the distribution utility use automated tools Yes No No No No Yes No No to monitor outages? Mechanisms for restoring service (0–1) 1 0 0 0 0 1 0 0 Does the distribution utility use automated tools Yes No No No No Yes No No to restore service? Regulatory monitoring (0–1) 1 1 1 1 1 1 1 1 Does a regulator—that is, an entity separate from the utility— Yes Yes Yes Yes Yes Yes Yes Yes monitor the utility’s performance on reliability of supply? Financial deterrents aimed at limiting outages (0–1) 1 0 0 0 0 0 0 0 Does the utility either pay compensation to customers or face Yes No No No No No No No fines by the regulator (or both) if outages exceed a certain cap? Communication of tariffs and tariff changes (0–1) 1 1 1 1 1 1 1 1 Are effective tariffs available online? Yes Yes Yes Yes Yes Yes Yes Yes Are customers notified of a change in tariff ahead of the Yes Yes Yes Yes Yes Yes Yes Yes billing cycle? Source: Doing Business database. — = not available. (continued) GETTING ELECTRICITY 49 BOX 5.2 Measuring the reliability of supply and transparency of tariffs—going beyond efficiency (continued) As part of a regulatory reform now being implemented to improve the quality of electricity service, Kazakhstan adopted legis- lative amendments in April 2016 that require distribution utilities to comply with normative values for power supply reliability indicators (such as SAIDI and SAIFI) set by the Ministry of Energy.b Fines are imposed on utilities if the number or duration of outages exceeds these values. As a consequence, distribution utilities across the country have put in place monitoring sys- tems or are developing them. Ontustik Zharyk Transit, which operates in South Kazakhstan (Shymkent), started monitoring power outages in January 2016. Astana-REK recently introduced an automated tool to monitor outages and restore service and started to collect data on power outages in September 2016. In parallel, some utilities that were already monitoring out- ages, though through manual systems (such as call centers), are now developing automated systems. a. Doing Business uses SAIDI and SAIFI to measure the duration and frequency of power outages. SAIDI is the average total duration of outages over the course of a year per customer served, while SAIFI is the average number of service interruptions experienced by a customer in a year. An economy is eligible to obtain a score on the reliability of supply and transparency of tariffs index if the utility collects SAIDI and SAIFI data and if the SAIDI value is below a threshold of 100 hours and the SAIFI value below a threshold of 100 outages. An economy receives a score of 0 on the overall index if it does not compute SAIDI and SAIFI, even if the economy scores points on any other component. b. The amendments are to the Law on Electric Power Industry and the Code on Administrative Offenses. type of works involved and the density of Finally, once the expert opinion has been Another way to break down the overall the communication networks surrounding issued—a step that takes from 2 to 5 time required to obtain a new electricity the warehouse. In Kostanay and South days—completing the last procedures connection is by the type of institution Kazakhstan (Shymkent) establishing the takes around a week in Almaty city and involved. On average across the eight connection involves installing poles to Aktobe, while it takes about twice as locations, an entrepreneur has to devote carry overhead cables, while in Astana and long in East Kazakhstan (Oskemen), 23 days to interacting with the distribu- Almaty city it requires the more complex Karagandy and South Kazakhstan tion utility or supplier, 24 days to the process of excavation for underground (Shymkent). The difference can be traced completion of services undertaken by cables. On average across the eight loca- to delays in obtaining the postinspection private companies and 30 days to inter- tions, completing the connection works documents from the distribution utility acting with municipal departments, other takes 8 days when the cables are extended and on-site visits to seal the meter and utilities (those responsible for such ser- overhead and 15 days when they are laid turn on the electricity. vices as gas, water, heating and telecom- down through excavation.12 munications) and cadastral authorities FIGURE 5.4  Interactions with public entities and utilities in other sectors account for almost 40% of the time needed to obtain a new connection in Kazakhstan Time to get electricity, by type of institution involved (%) 100 80 60 40 20 0 South Kazakhstan Pavlodar Almaty city Karagandy East Kazakhstan Aktobe Astana Kostanay Average (Shymkent) (Oskemen) Public entities and other utilities Distribution utility and/or supplier Private companies Source: Doing Business database. Note: Public entities include the Department of Architecture; the Department of Communal Services, Passenger Transport and Roads (or its equivalent); the Administration of State Architectural and Construction Control (GASK); and cadastral authorities. Other utilities are those responsible for such services as gas, water, heating and telecommunications (which are in some cases privately owned). 50 DOING BUSINESS IN KAZAKHSTAN 2017 (where applicable).13 While only two to US$1,280). Second, the amount paid of the connection route in Pavlodar (KZT three steps involve public entities and to the construction company is much 15,000, or US$80) and in Karagandy other utilities—issuance of the scheme higher, because it includes the acquisi- (KZT 75,000, or US$400). And in (where applicable), collection of sign-offs tion of the substation (for around KZT Astana an entrepreneur must pay for the and delivery of the clearance for ground 1,250,000, or US$6,630) and its installa- visit from technicians to finalize the con- works—these steps account for almost tion. So it is unsurprising that the average nection (KZT 20,000, or US$105). 40% of the time needed to obtain a con- cost of external works in Kostanay, South nection on average, ranging from 21% in Kazakhstan (Shymkent) and Pavlodar In addition to the up-front cost to obtain South Kazakhstan (Shymkent) to 47% in (KZT 1,400,000, or US$7,420) exceeds the new connection, the entrepreneur Astana and Kostanay (figure 5.4). that in the other five locations (KZT has to pay for the electricity consump- 765,000, or US$4,055).15 tion of the warehouse. In Kazakhstan Across the eight locations, the cost to suppliers are free to set their tariffs, connect a warehouse to the network Other factors influencing the cost of the but all changes need to be approved ranges from 41.2% of income per capita design and the works include the num- by the Committee on Regulation of in East Kazakhstan (Oskemen) (KZT ber of contractors available to provide Natural Monopolies and Protection of 900,000, or US$4,770) to twice that design or construction services, the Competition. For the warehouse in the amount in Pavlodar (KZT 1,815,000, or cost of labor, the ease and affordability Doing Business case study an entrepre- US$9,625) (figure 5.5). The cost is nota- of sourcing materials in the locale and neur would pay a cost ranging from bly higher in Kostanay, South Kazakhstan the level of urban development in the KZT 11.80 per kilowatt-hour in East (Shymkent) and Pavlodar than in the chosen location. In densely populated Kazakhstan (Oskemen) (KZT 317,865 other five locations, mainly because in or older neighborhoods the construction per month) to KZT 22.20 per kilowatt- these three locations the warehouse con- of the new connection involves crossing hour in South Kazakhstan (Shymkent) nection requires a new substation.14 This many lines from other communication (KZT 596,880 per month)—or an aver- raises the overall cost for two main rea- networks, which increases the complex- age across the eight locations of KZT sons. First, because the project is more ity of the task. 17.50 per kilowatt-hour (KZT 469,120 complex, the preparation of the design per month).16 costs more on average in these three Beyond these three main drivers of cost locations (KZT 300,000, or US$1,590) variations, an entrepreneur has to pay an than in the other five (KZT 241,000, or additional amount to obtain the scheme FIGURE 5.5  Installing a new substation—as required in Kostanay, South Kazakhstan (Shymkent) and Pavlodar—almost doubles the cost of the material and works Cost to get electricity (KZT thousands) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 East Kazakhstan Karagandy Almaty city Aktobe Astana Kostanay South Kazakhstan Pavlodar (Oskemen) (Shymkent) Design of the project Material and works Expert opinion Other fees Source: Doing Business database. Note: Other fees include the price for the issuance of the scheme of the connection route (Karagandy and Pavlodar) and the connection fees (Astana). GETTING ELECTRICITY 51 on-site visits by different teams (to seal The main reason that this process takes WHAT CAN BE IMPROVED? the meter and turn on the electricity). so long is that different municipal depart- Moreover, in Astana entrepreneurs have ments and multiple utilities are involved This review of the process for obtaining a to go back to the distribution utility to and their clearances must be obtained new electricity connection in Kazakhstan apply for the final connection once they sequentially—because each institution’s reveals opportunities for continuing to have signed the supply contract—a step representative must sign the same improve efficiency. that could be eliminated if the supplier original document. In most locations notified the utility directly, as is done in signatures have to be collected from at Improve workflow within all the other locations. least seven entities (the Department distribution utilities and of Architecture; the Department of between the utilities and Improve the coordination Communal Services, Passenger Transport suppliers between distribution utilities, and Roads; the distribution utility; and the On average across the eight locations municipal departments and utilities in charge of gas, water, heating covered, an entrepreneur connecting a other utilities and telecommunications). The process warehouse to the grid needs to spend In four of the locations the private also usually requires two interactions 23 days interacting with the distribution company responsible for the design with the Department of Architecture— utility and the supplier to complete three can start the project immediately after one to submit the scheme or project and procedures (four in Astana)17—or 29% the technical conditions are issued. In receive the list of required clearances, and of the total time required. Recent regula- Astana, East Kazakhstan (Oskemen), another to submit the list once all the sig- tory changes have helped shorten the time Karagandy and Pavlodar, however, natures have been collected. In addition, frames for these procedures, saving entre- the entrepreneur first needs to obtain some institutions can sometimes take up preneurs more than a week in Almaty city, the scheme of the connection route to a month to approve a project, while for example. Nevertheless, delays are still ensuring that the connection will not others accept requests for approvals only observed across the country. interfere with the communication lines once a week, within a certain time slot.18 of other utilities (gas, water, heating, For example, in all the locations except telecommunications) and that public Not surprisingly, collecting approvals is Aktobe, East Kazakhstan (Oskemen) authorities can maintain oversight of often perceived as a major bottleneck and Kostanay entrepreneurs need to wait the development of all networks. With in the process of obtaining electricity in more than five days to receive the techni- closer coordination between the distri- Kazakhstan—even for small projects, cal conditions for the new connection—a bution utility, cadastral authorities and because the requirements remain the delay that survey respondents attribute the relevant municipal departments, this same. Streamlining the approval process to lengthy internal coordination pro- scheme could be provided together with could do much to improve the ease of cesses as the responsible department the technical conditions issued by the getting electricity. One possible solution collects information and clearances distribution utility—easing the burden is to have all approvals coordinated by from other units. When it comes to the on the customer. a single institution. This could be done postconstruction inspection, distribution through a meeting of all the parties utilities across the country are quick to Streamline the approval involved or by ensuring that the scheme process the application and send techni- processes or project is circulated to all the parties in cians to the site. But once the inspection Collecting approvals from various a timely manner.19 is done, entrepreneurs may have to wait municipal departments and multiple utili- for the issuance of the final documents: ties—for the scheme of the connection Further simplify issuance of the while in four of the locations this takes route, the project design or the authoriza- clearance for ground works only a day or two, in the other four it can tion for ground works—imposes a burden In 2015 Kazakhstan introduced legislative take an additional two to five days. on entrepreneurs or their agents, who amendments aimed at simplifying the need to visit each institution and wait authorization of ground works (excava- In addition, while supply contracts are for each approval. The time spent col- tion, drilling or installation of poles) by issued within three days in most cases, lecting these approvals ranges from two replacing the requirement for a permit entrepreneurs sometimes have to wait weeks in South Kazakhstan (Shymkent) with a simple notification system (see box more than a week to start receiving elec- to one month in Almaty city. Indeed, this 5.1). In practice, however, the changes have tricity. This delay can often be attributed task accounts for 39% of the total time not yet been fully implemented across the at least in part to a lack of coordination needed to obtain a new electricity con- eight locations, leaving much room for within the distribution utility, notably nection in Almaty city and 45% of the improvement. Even in Almaty city, where where finalizing the connection involves total in Kostanay and Aktobe. the authorization process is the easiest 52 DOING BUSINESS IN KAZAKHSTAN 2017 because it can be undertaken online, entrepreneur—would make the process 9. The “scheme of the connection route” referred to in this chapter should not entrepreneurs must nevertheless submit not only more efficient but also less bur- be confused with the “scheme of the an application to obtain the clearance. densome for the entrepreneur. connection” or “scheme of external power supply.” That document, which does not apply to the process described In most of the locations the authorization in this chapter, is a longer one that maps still takes the form of a permit, which NOTES the electrical network surrounding the means that the entrepreneur must visit warehouse and indicates capacities; it is 1. Doing Business database. required by distribution utilities as part of the relevant public authority in person the application for technical conditions only 2. According to 2010–17 data from World to apply for and receive the permit. This Bank Enterprise Surveys, 31.5% of the firms for connections exceeding 5,000 kilowatts process could be simplified by adopting surveyed globally identify electricity as a (which is not the case for the Doing Business major constraint to their activities. Enterprise case study warehouse). the approach used in Almaty city, where 10. The first document, the “act of segregation Survey database, World Bank, http:/ /www the application and clearance can be .enterprisesurveys.org. of electrical grid balance ownership and done through an online platform. The 3. “Kazakhstan Overview,” World Bank, accessed maintenance,” is required for the next step in March 2017, http:/ /www.worldbank.org/en the process, the signing of a supply contract. entrepreneur submits an online applica- The second document, the “act of meter /country/kazakhstan/overview. tion—together with the approved project 4. In 2014, 72% of the electricity was generated acceptance,” which confirms the serial design and list of sign-offs—to the from coal, 19% from gas, 8% from hydro, 1% number and technical specifications of the from oil and less than 1% from wind, according meter, is requested before the signing of a Administration of State Architectural and supply contract in only some of the locations. to International Energy Agency statistics Construction Control (GASK) and awaits (“Kazakhstan: Electricity and Heat for 2014,” 11. In Astana, unlike in all the other locations, the a notification of receipt. This receipt, pro- accessed March 2017, http:/ /www.iea.org distribution utility checks the compliance of the /statistics/statisticssearch/report/?year= meter after the signing of the supply contract. vided through the same online platform, 12. Pole installation is the practice in Kostanay 2014&country=KAZAKHSTAN&product= serves as the formal authorization for ElectricityandHeat). Data on the number of (where it takes 5 days), South Kazakhstan ground works. power plants are from “Kazakhstan Electric (Shymkent) (7 days) and Pavlodar (12 days); Power Industry Key Factors,” Kazakhstan drilling in Aktobe (9 days); and excavation Electricity Grid Operating Company, accessed in East Kazakhstan (Oskemen) (11 days), The process remains particularly long March 2017, http:/ /www.kegoc.kz/en/power- Karagandy (12 days), Astana (14 days) and and burdensome in Astana and Pavlodar, industry/kazakhstan-electric-power-industry- Almaty city (22 days). key-factors. 13. These interactions involve either the where the entrepreneur or the design entrepreneur directly or the project design 5. There are around 230 electricity supply company needs to collect another round companies registered in Kazakhstan, or construction company acting on the of approvals from various municipal according to data from the Committee entrepreneur’s behalf. on Regulation of Natural Monopolies 14. Installation of a new substation would be departments and multiple utilities before necessary in these three locations because in and Protection of Competition, Ministry obtaining the permit. Eliminating this of National Economy of the Republic of the areas where warehouses are commonly extra round of sign-offs could cut sub- Kazakhstan (“Register of Power Supply built, the low-voltage network usually has too Companies as of 30 September 2016,” little capacity available to allow the warehouse stantial time from the process. to be connected directly. In such cases the accessed April 2017, http:/ /www.kremzk .gov.kz/rus/menu2/gosudarstvennye_uslugi connection must be to the medium-voltage Streamline inspections of /licenz/reestr_energo). network and therefore requires the installation of a new substation. Customers must obtain external works 6. In Pavlodar the application form can be the substation at their expense. It is installed downloaded from the website of the utility Recent legislative amendments elimi- (PREK), then submitted to the utility by email on their property and remains under their nated the need to obtain an inspection together with the required documents. In ownership. South Kazakhstan (Shymkent) applications 15. Although the cost of works is higher in of the external works by the Authority Kostanay, South Kazakhstan (Shymkent) can be submitted through the public for State Energy Supervision and Control, registration online portal, in which case and Pavlodar, it remains relatively low if the simplifying the postconstruction pro- the customer then receives the technical cost of the substation is excluded. In these conditions online. Utilities in most of the other three locations the connection is established cess and reducing the time required by overhead, which is less costly overall than locations are developing platforms to allow seven days. But two inspections are still online submission. doing so through excavation or drilling, which needed—one by a licensed expert and 7. For a facility like the Doing Business case study is the practice in the other locations. warehouse, establishing an underground 16. Doing Business calculates the consumption another by the distribution utility. These fees based on the following assumptions: The connection to an existing substation is the inspections are valuable because they most common option in Aktobe, Almaty city, warehouse operates 30 days a month from ensure that the installation is correct and Astana, East Kazakhstan (Oskemen) and 9:00 a.m. to 5:00 p.m. (eight hours a day), Karagandy. However, in Kostanay, Pavlodar with equipment utilized at 80% of capacity on that the electrical devices comply with average. For simplicity, it is assumed that there and South Kazakhstan (Shymkent) installation industry standards. Still, they represent of a new substation is usually required and the are no electricity cuts. The monthly energy additional interactions for the entrepre- cables are most commonly extended over the consumption is 26,880 kilowatt-hours (kWh). road (overhead connection). Hourly consumption is 112 kWh. If multiple neur. Coordinating and streamlining these electricity suppliers exist, the warehouse 8. In some of the locations distribution utilities steps—by ensuring that there is no overlap also provide design services. In practice, is served by the cheapest supplier. Tariffs between the two inspections and limiting however, it is more common for entrepreneurs effective in March of the current year are used to hire a private company. for calculation of the price of electricity for the the number of interactions involving the GETTING ELECTRICITY 53 warehouse. Although March has 31 days, for calculation purposes only 30 days are used. 17. These procedures are to submit a connection application to the distribution utility and await technical conditions; submit the expert opinion to the distribution utility and await an inspection and the issuance of relevant documents; sign a supply contract with an electricity supplier and await the sealing of the meter and energizing of the connection; and, in Astana only, apply to the distribution utility for the final connection and await the sealing of the meter and energizing of the connection. In addition, the number of days includes the design approval provided by the utility (requiring four days on average), which is part of the procedure “await completion and approval of the project design.” 18. As a result of the recent reform that included tightening the time limit for distribution utilities to approve projects (from 20 days to 3 for installations with installed capacity of up to 200 kilowatts, which would include the Doing Business case study warehouse), distribution utilities in the eight locations covered tend to approve projects faster than other institutions do. (See box 5.1 for more information on the reform.) 19. While meetings convening all parties take place in some of the locations, respondents report that going to each of the relevant municipal departments and utilities in person to collect the approval remains the common practice. 54 DOING BUSINESS IN KAZAKHSTAN 2017 Registering Property MAIN FINDINGS ƒƒ Over the past decade Kazakhstan has used information and communication technology to improve government services and simplify and increase the efficiency of property registration. ƒƒ In all eight locations covered by this study, registering property involves three procedures—which take 3.8 days on average and cost 0.1% of the property value. This ranks Kazakhstan among the economies with the most efficient property registration globally. Scores on the quality of land administration index reveal areas of potential improvement, however. ƒƒ Going forward, Kazakhstan will need to focus its efforts on improving the quality of its land administration system. As the country with the ninth largest land mass, its greatest challenge is expanding the system’s geographic coverage. Other improvements are feasible in the short term, such as making more information publicly available in a user-friendly format. REGISTERING PROPERTY 55 K azakhstan has embraced the digi- of simplifying procedures to save time, to access authoritative information on tal age. The country has invested introducing transparent administrative ownership reduces transaction costs in substantially in information and processes to curb corruption and improv- financial markets and makes it easier to communication technology (ICT) since ing record keeping to ensure the reliability use property as collateral.6 2000 to improve government services.1 of government information.4 Since kicking According to the 2016 United Nations off its e-government campaign in 2004, Land registries along with cadastres iden- E-Government Survey, Kazakhstan ranks Kazakhstan has made most property tifying the location of property are tools among the 32 economies with a very registration processes ICT-reliant—and as used around the world to map, prove and high score on the Online Service Index, represented by Almaty city, the country secure property rights. With real prop- which assesses the use of ICT to deliver places among the top 20 in the Doing erty (land and buildings) accounting for government services as well as gen- Business 2017 global ranking of 190 econo- between half and three-quarters of the eral e-government policies and strategies mies on the ease of registering property. wealth in most economies, having up-to- across 193 UN member states.2 date land information is important.7 There A focus on improving property registra- are inherent benefits for governments Kazakhstan has used e-government to tion makes sense, because property as well. Having reliable information in advance its goal of increasing economic rights have proved to be important glob- cadastres and land registries is essential prosperity as outlined in its development ally in supporting investment, productiv- for correctly assessing and collecting tax strategy, Kazakhstan 2030.3 Improving ity and growth.5 Research suggests that revenues. It also enables governments to property registration and land admin- property owners with secure ownership map out the varying requirements of dif- istration is among the government’s are more likely to invest in private enter- ferent locations and strategically plan the priorities. Following international good prises and to transfer property to more provision of services and infrastructure in practices, it has exploited ICT with the aim efficient users. In addition, the ability the areas where they are most needed. What does registering property measure? Doing Business records the full sequence of procedures necessary for a business (the buyer) to purchase a property from another business (the seller) and to transfer the property title to the buyer’s name so that the buyer can use the property for expand- ing its business, use the property as collateral in taking new loans or, if necessary, sell the property to another business. It also measures the time and cost to complete each of these procedures. In addition, Doing Business measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastruc- ture, transparency of information, geographic coverage, land dispute resolution and equal access to property rights (see figure). Registering property: measuring the efficiency and quality of the land administration system Rankings are based on distance to frontier scores for four indicators Days to transfer Cost to transfer property between property, as % of Measures whether the land registry and mapping system (cadastre) Reliability have adequate infrastructure to guarantee high standards and two local companies property value reduce risk of errors Measures whether and how the land administration system makes Transparency Time Cost land-related information publicly available 25% 25% 25% 25% Procedures Quality Measures the extent to which the land registry and mapping system of land Coverage (cadastre) provide complete geographic coverage of privately held administration land parcels index Steps to transfer Measures the accessibility of conflict resolution mechanisms and property so that it Dispute the extent of liability for entities or agents recording land can be sold or resolution transactions used as collateral Equal access Measures the ownership rights of unmarried men and unmarried to property rights women as well as of married men and married women 56 DOING BUSINESS IN KAZAKHSTAN 2017 TABLE 6.1  Recent regulatory reforms in Kazakhstan reveal a commitment to HOW DOES PROPERTY facilitating property transfers REGISTRATION WORK IN KAZAKHSTAN? Year Regulatory reform Impact on property registration process 2014/15 Eliminated the requirement to obtain a technical passport Reduced time requirements and The law governing property registra- and have the seller’s and buyer’s incorporation documents procedural complexity notarized for property transfers between companies tion in Kazakhstan has been amended nearly every year over the past decade 2013/14 Introduced effective time limits for the delivery of the Reduced time requirements technical passport and nonencumbrance certificate with the goal of simplifying the registra- tion process.8 These legal amendments Introduced an expedited procedure for issuance of the technical passport have been supported by regulatory improvements reducing the complex- Made the nonencumbrance certificate accessible through the e-government portal and public service centers ity of registration and the time required 2012/13 Introduced a fast-track procedure for property registration Reduced time requirements (table 6.1). In addition, the government of Kazakhstan continues to expand the 2007/08 Introduced a unified registry of all real property (land and Reduced time requirements and buildings) as well as public service centers where most procedural complexity benefits of e-government by moving registration procedures can be done client-related and back-office processes Source: Doing Business database. online. Between 2012 and 2015, for example, it progressively broadened the options for property registration by legal- property has no encumbrances, liens or information pertinent to the transaction ly authorizing notaries to electronically other attachments that would prevent and enabling communication with gov- lodge registration applications on behalf the sale. To check the status of the prop- ernment agencies.11 of their clients.9 As of 2015 only notaries erty, the notary uses the Unified Notary can complete an electronic registration. Information System (ENIS), an electronic Second, the parties have their sales agree- portal allowing access to government ment notarized. The notary confirms The property transfer process There are two ways to transfer prop- erty in Kazakhstan. Parties can apply for FIGURE 6.1  Only three procedures to register a property in Kazakhstan a transfer at the local Government for Citizens center—a one-stop shop offer- Due diligence ing multiple government services for NOTARY ensures citizens and businesses—or go through there are no encumbrances or a notary.10 These application processes other attachments to are markedly different. Registration at a prevent transfer Government for Citizens center is under- taken directly by the transacting parties, and the application process is paper- iz ed Notarization based. Registration through a notary t ar NOTARY confirms parties can no is an electronic application process, contract, notarizes sales agreement and submits done remotely from the notary’s office. registration application to Overall, the majority of transactions are Department of Justice completed at a Government for Citizens PARTIES pay notary fee center (box 6.1). But in the eight locations BUYER pays registration fee covered in this study, most businesses like those in the Doing Business case study Registration use a notary. DEPARTMENT OF JUSTICE processes registration and sends documents back to When a notary handles the transfer of notary commercial property from one com- NEW OWNER picks up pany to another, the process consists documents from notary of three main procedures (figure 6.1). First, the notary conducts the required due diligence, confirming that the Source: Doing Business database. REGISTERING PROPERTY 57 BOX 6.1 A Government for Citizens center is the preferred option for property registration, but electronic registration is catching up The Government for Citizens centers offer more than 500 government services, including property registration. The centers can complete many transactions on-site and also serve as front offices for services provided by other agencies.a For property regis- tration, for example, the local center receives the registration application, but the Department of Justice carries out the actual registration.b A courier is dispatched by the Department of Justice twice a day to collect documents from the Government for Citizens center and return them after processing. The Government for Citizens center has a time limit of three days to return the hard copy of the registered documents to the parties. Together, the steps involved in this paper-based registration process take a minimum of one week. The Government for Citizens centers also offer expedited registrations. The time limit for expedited processing is one day—the same as for applications initiated through a notary. In locations where the time limits are met, transferring a property—whether through a notary or through the expedited process at a Government for Citizens center—takes 3.5 days. The state registration fee for an expedited registration is three times the standard fee, or slightly more than the cost of registration through a notary.c Data from each Department of Justice on the aggregate number of property registrations show that the majority are done at Government for Citizens centers (see figure). But the share of notary-initiated electronic registrations is growing. Between 2015 and 2016 this share increased in six of the eight locations—Almaty city, Astana, East Kazakhstan (Oskemen), Karagandy, Kostanay and South Kazakhstan (Shymkent). In Astana the share of notary-initiated electronic registrations increased by nearly 18 percentage points—twice as much as in Karagandy, with the second biggest increase—while the absolute number of these registrations grew by more than 50% (from 34,899 to 53,984). In 2016 the majority of property registrations in Kazakhstan were initiated at a Government for Citizens center… Total number of registrations Karagandy 84% 16% 81,103 Kostanay 82% 18% 33,077 Aktobe 81% 19% 60,783 Pavlodar 78% 22% 36,755 East Kazakhstan (Oskemen) 76% 24% 39,843 Almaty city 73% 27% 194,099 South Kazakhstan (Shymkent) 71% 29% 89,133 Astana 61% 39% 137,529 Share of registrations (%) Initiated at a Government for Citizens center Initiated through a notary … but electronic registration through a notary is picking up fast in most locations Astana Karagandy Almaty city South Kazakhstan (Shymkent) East Kazakhstan (Oskemen) Kostanay 0 2 4 6 8 10 12 14 16 18 20 Change in share of notary-initiated registrations between 2015 and 2016 (percentage points) Source: Department of Justice for each location covered. Note: The share of notary-initiated electronic registrations decreased in Aktobe and Pavlodar between 2015 and 2016. a. “K azakhstan Citizens Can Get Over 70% of Public Services via Government for Citizens,” Government of the Republic of Kazakhstan, June 3, 2016, http://www.government.kz/en/novosti/1001262-d-nazarbayeva-kazakhstan-citizens-can-get-over-70-of-public-services-via-government-for-citizens.html. b. The Ministry of Justice oversees property registration, but in each locality it has a territorial body called a Department of Justice that carries out registrations. c. The state registration fee is KZT 21,210 (US$112) for the standard paper-based process, and KZT 63,630 (US$337) for the expedited process through a Government for Citizens center. The total cost of using a notary for registration (notary fees plus the state registration fee) is KZT 57,267 (US$304). 58 DOING BUSINESS IN KAZAKHSTAN 2017 the identity of the seller’s and buyer’s registration application as soon as the that in the Russian Federation—though representatives and ensures that they are payment is made. The manager of the it narrowly falls short of the global best authorized to conduct the transaction on property registration division forwards (one procedure), in Georgia and three their company’s behalf.12 Then the notary the electronic file to a registration spe- other economies (figure 6.2). On time, witnesses the signing of the agreement cialist, who accesses the State Database the average performance in the eight and records the transaction in a logbook, of Property Registration to verify the locations also compares well: a prop- where the parties also sign. Next, the validity of the transfer. The specialist erty transfer can be completed nearly six notary transmits the registration applica- then enters the sale price in the file, times as fast in Kazakhstan as in OECD tion, along with the signed agreement, to assigns the property to its new owner high-income economies on average. On the Department of Justice through the and transfers the file to the office man- cost, Kazakhstan outperforms all other ENIS electronic portal. The buyer pays ager for review. The file is returned to the economies of Europe and Central Asia the state registration fee. This payment notary for delivery to the new owner. The except Belarus and Georgia, with the is most commonly made at the post Department of Justice has a processing sixth lowest cost globally. But the average office (KAZPOST),13 though it can also be time limit of one day for completing an score on the quality of land administra- made through the e-government (egov) electronic registration.15 tion index tells a different story, revealing portal,14 at a commercial bank, or at the an area of potential improvement for payment desk or automated teller at a How the process compares Kazakhstan. All eight locations obtain Government for Citizens center. A unique Across the eight locations benchmarked, 16.5 of 30 possible points on this index— transaction number ties the payment to completing these three procedures similar to Colombia and Serbia. the registration. through a notary takes 3.8 days on average and costs 0.1% of the property Registering a property takes a day longer Third and last, the registration of the value. On the number of procedures for in Aktobe and Astana than in the other six transfer is completed. The Department a property transfer from one company to locations, where it requires just 3.5 days of Justice in the locality receives the another, this performance is on par with (table 6.2). The reason is that on average X X X X X X X X FIGURE 6.2  Kazakhstani locations score high on the efficiency of property registration—but show room for improvement on the quality of land administration EFFICIENCY OF QUALITY OF LAND PROPERTY REGISTRATION ADMINISTRATION Procedures Time Cost Index (number) (days) (% of property value) (0–30) 3 economies 0 0 5 economies (global best)** (global best)*** All 8 locations Singapore 30 4 economies 1 Kyrgyz Republic 6 locations (global best) (global best)* Kazakhstan average Azerbaijan, Azerbaijan Kyrgyz Republic, 2 10 Russian Federation 1 Russian Federation Aktobe, Astana Kyrgyz Republic 25 Azerbaijan, 3 Uzbekistan OECD Kyrgyz Republic, All 8 locations Russian Federation Russian Federation Georgia 4 20 2 ECA 20 ECA Uzbekistan OECD 5 OECD All 8 locations ECA Azerbaijan ECA Tajikistan 15 6 3 Tajikistan 30 7 10 Tajikistan Tajikistan 8 40 4 OECD 5 9 Uzbekistan Uzbekistan 10 50 5 0 Source: Doing Business database. Note: OECD is the average for OECD high-income economies; ECA is the average for economies of Europe and Central Asia. *  These are Georgia, Norway, Portugal and Sweden. ** These are Georgia, New Zealand and Portugal. These are Belarus, Georgia, Kiribati, Saudi Arabia and the Slovak Republic. ***  REGISTERING PROPERTY 59 TABLE 6.2  Where is it easy to register property in Kazakhstan—and where not? Distance to Quality of land frontier score Procedures Time Cost administration index Location Rank (0–100) (number) (days) (% of property value) (0–30) Almaty city 1 84.20 3 3.5 0.1 16.5 East Kazakhstan 1 84.20 3 3.5 0.1 16.5 (Oskemen) Karagandy 1 84.20 3 3.5 0.1 16.5 Kostanay 1 84.20 3 3.5 0.1 16.5 Pavlodar 1 84.20 3 3.5 0.1 16.5 South Kazakhstan 1 84.20 3 3.5 0.1 16.5 (Shymkent) Aktobe 7 84.08 3 4.5 0.1 16.5 Astana 7 84.08 3 4.5 0.1 16.5 Source: Doing Business database. Note: Rankings are based on the average distance to frontier score for the procedures, time and cost associated with registering property as well as for the quality of land administration index. The distance to frontier score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more details, see the chapter “About Doing Business and Doing Business in Kazakhstan 2017.” in Aktobe and Astana the Department Justice. In the other locations the spe- is laid out in the Tax Code, as a function of Justice is unable to meet the one-day cialists handle all types of transactions, of the monthly calculation index used to time limit for completing electronic regis- while in Aktobe only 2 of 14 staff process calculate taxes and government fees.18 trations, instead returning the registered electronic registrations. documents to the notary the following Going beyond efficiency—the day (figure 6.3). There is no variation across the loca- quality of land administration tions in the cost of registering property. Good land administration is not just Part of the reason for the longer process- Completing a property transfer electroni- efficient and inexpensive. It ensures ing time in Astana could be a shortage of cally costs just 0.1% of the property value. property owners a secure title, backed staff. Astana processed more than one This cost includes the notary’s fee for by a reliable land administration system. and a half times as many registrations as drafting the sales agreement and notariz- Doing Business assesses the quality of South Kazakhstan (Shymkent) in 2016, ing it, the notary’s service fee for initiating land administration systems through yet has fewer staff.16 In Aktobe the slower the transfer and the state registration fee five measures: the reliability of infra- processing may reflect the organization (figure 6.4). The notary’s fees are nation- structure index (0–8 points); the trans- of the workflow by the Department of ally regulated.17 The state registration fee parency of information index (0–6); the FIGURE 6.3  Registration takes a day longer in Aktobe and Astana than in the other FIGURE 6.4  Notary fees account for six locations nearly two-thirds of the cost to register property in Kazakhstan Almaty city East Kazakhstan (Oskemen) Karagandy 26% Kostanay 37% Pavlodar South Kazakhstan 37% (Shymkent) Aktobe Astana 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Notary’s fee for drafting and notarization Time to register property (days) Notary’s service fee for initiating transfer Due diligence Notarization Registration State registration fee Source: Doing Business database. Source: Doing Business database. 60 DOING BUSINESS IN KAZAKHSTAN 2017 geographic coverage index (0–8); the Transparency is assessed by how the locations have achieved full coverage, and land dispute resolution index (0–8); and land administration system makes land- so all score 0 points on the geographic the equal access to property rights index related information publicly available. coverage index. Kazakhstan is nonethe- (−2 to 0). Results for these indices are All eight locations receive 3.5 of the 6 less getting close to achieving complete then added for the overall score on the possible points on the transparency of cadastral coverage: nearly 90% of each quality of land administration index. All information index. The best practice is for region and of the entire country is covered eight locations in Kazakhstan receive registries and cadastres to make informa- by the cadastre, according to its website.26 the same score on each of the compo- tion publicly available either online or on Extending the coverage of the registry and nent indices and thus the same overall a public board. In Kazakhstan general cadastre to include all privately held land score (table 6.3). information—on required documents, would result in a score on this index of the fees and time limits for completing full 8 points. A reliable land administration system property transactions at the registry—is provides clear information on prop- available online (1.5 points).22 But access An economy with a model land admin- erty ownership and prevents fraudulent to information on property ownership istration system minimizes the number transactions.19 Adequate infrastructure is limited to the transacting parties of land disputes by ensuring that clients for keeping property records is key to and their agent (for example, a notary). receive accurate information, provides a ensuring reliability. The gold standard Citizens can file complaints about their state guarantee for registration and com- is a fully digital, unified or linked prop- interactions with the registry through the pensates parties for losses incurred as a erty registry and cadastral mapping Ministry of Justice’s national website and result of errors by the property registry. In system that allows staff to electronically also each Department of Justice’s web- addition, it ensures that an effective and search and update records. The eight site (1 point).23 Further boosting transpar- efficient court system exists to handle Kazakhstani locations receive 6 of the ency, Kazakhstan makes statistics on the land disputes, and provides statistics on 8 possible points on the reliability of number of property transactions publicly the number of such disputes in the first infrastructure index. The property reg- available (0.5 points)—as one of the 56 instance.27 The eight locations each score istry (the State Database of Property economies doing so worldwide. These 7 of the 8 possible points on the land dis- Registration) and cadastre have elec- statistics are available on the Ministry of pute resolution index. The law governing tronic record keeping (2 points), but Justice’s website.24 property registration mandates that all the majority of historical files (titles and property transactions must be registered cadastral maps) are scanned images that The cadastre posts less information. at the property registry in order to be cannot be searched electronically.20 The Cadastral maps for individual plots opposable to third parties (1.5 points). property registry does, however, contain are freely available to applicants (0.5 However, property registration is not information on property encumbrances points), but fee schedules and time limits legally subject to a state or private guar- that can be searched electronically (1 for updating cadastral plans following antee.28 Kazakhstan thus diverges from point). This is the capability that notaries modifications to a property are not the common practice of legally requiring and property registration officials use in publicly available. Instead, the cadastre a guarantee (such as title insurance), conducting due diligence on a property informs clients about the time frame for observed in 144 economies worldwide. during the course of registration. completing a transaction in person, case by case. In addition, there is no separate But Kazakhstan does require in-depth In addition, Kazakhstan has a geographic mechanism for filing complaints about verification during the course of a prop- information system that captures, interactions with the cadastre. erty registration (1 point). The identity of stores and analyzes geographic data the parties to a property transaction is (1 point).21 Furthermore, the registry Globally, only 22% of economies have checked against a national database to and cadastre are linked and use a com- a registry with full coverage of private confirm accuracy and ownership (1 point), mon number to uniquely identify each land, and 24% a cadastre with complete and documents proving the legality of the property (2 points). The use of a unique coverage. Where land registries fall short transfer are checked by the notary and number reduces the potential for errors of complete geographic coverage, com- the registry, both of which can be found in identifying a land plot and ensures that panies and individuals cannot be sure liable for errors. The state thus provides ownership and boundary data are linked whether the areas not covered are relevant compensation for losses incurred because across the two agencies. If the registry to their interests.25 For Kazakhstan, as the of erroneous information provided by the and cadastre’s historical files were fully country with the ninth largest land mass, registry (0.5 points). When land disputes digital (rather than scanned), Kazakhstan the greatest challenge in land administra- do arise, parties can file claims at their would score another 2 points—1 for each tion has been extending its coverage of local Specialized Inter-district Economic agency’s records being fully digital. privately held land plots. None of the eight Court, where cases typically take less REGISTERING PROPERTY 61 TABLE 6.3 Kazakhstan scores less than two-thirds of the possible points on the quality of land administration index Index Legal requirements (points scored) Index category Property registry Both agencies Cadastre and resources Ministry of Government for Citizens Justice state corporation Separate but linked databases (1 of 1 point) Reliability of Registry Cadastre infrastructure index (6 of 8 points) Computer/scanned Computer/scanned State of records n.a. (1 of 2 points) (1 of 2 points) Electronic database for checking Yes n.a. n.a. n.a. encumbrances? (1 of 1 point) Yes Geographic information system? n.a. n.a. n.a. (1 of 1 point) Common and unique Interconnection between registry n.a. property number n.a. n.a. and cadastre? (1 of 1 point) Parties and Freely accessible Who can access ownership information? intermediaries n.a. by anyone n.a. (0 of 1 point) (0.5 of 0.5 points) Yes No Fee schedule publicly available? n.a. n.a. (0.5 of 0.5 points) (0 of 0.5 points) Transparency of List of required documents publicly Yes information index n.a. n.a. n.a. available? (0.5 of 0.5 points) (3.5 of 6 points) Yes No Commitment to on-time delivery? n.a. n.a. (0.5 of 0.5 points) (0 of 0.5 points) Yes No Separate mechanism to file complaints? n.a. n.a. (1 of 1 point) (0 of 0.5 points) Statistics on registry’s transactions Yes n.a. n.a. n.a. publicly available? (0.5 of 0.5 points) Geographic No No coverage index Full coverage of privately held land plots? n.a. n.a. (0 of 4 points) (0 of 4 points) (0 of 8 points) Yes Law requires registration of property? n.a. n.a. n.a. (1.5 of 1.5 points) Property registration is subject to No n.a. n.a. n.a. a guarantee? (0 of 0.5 points) Yes Law requires compensation for losses? n.a. n.a. n.a. (0.5 of 0.5 points) Land dispute Law requires due diligence on Yes resolution index n.a. n.a. n.a. documents and parties? (1 of 1 point) (7 of 8 points) Yes National database to check identities? n.a. n.a. n.a. (1 of 1 point) Time to resolve land dispute in first- Less than 1 year n.a. n.a. n.a. instance court? (3 of 3 points) Statistics on number of first-instance No n.a. n.a. n.a. land disputes publicly available? (0 of 0.5 points) Equal access to Married and unmarried women have the Yes property rights index n.a. n.a. n.a. same ownership rights as men? (0 of 0 points) (0 of 0 points) Quality of land administration index (total score: 16.5 of 30 points) Source: Doing Business database. Note: The equal access to property rights index ranges from −2 to 0 points, with higher values indicating greater equality between married or unmarried women and their male counterparts. n.a. = not applicable. 62 DOING BUSINESS IN KAZAKHSTAN 2017 than one year to resolve (3 points). But no Kazakhstani authorities’ efforts to infrastructure, establishing a state guaran- disaggregated data are available on the simplify regulatory processes and make tee over property registration and expand- number of first-instance land disputes. property registration faster. Use of this ing geographic coverage. Kazakhstan would score an additional 0.5 option is growing in Kazakhstan: on aver- points if such statistics were available, age across the eight locations, electronic Make information on cadastral and another 0.5 if property registration notary-initiated registration accounted services publicly available and were subject to a guarantee. for 20% of all property registrations in establish a dedicated complaint 2015 and for 27% in 2016. In addition, all mechanism for the cadastre In 2016 Doing Business added questions eight locations outperform the average Transparency is pivotal, because it helps to the quality of land administration index for OECD high-income economies on eliminate asymmetries in information to assess, in each economy, whether a the efficiency of property registration (as between users and officials in land person’s gender has a bearing on access measured by procedures, time and cost). administration and increases the efficien- to property rights. The data show that In the two locations where property reg- cy of the land market.29 In Kazakhstan the in Kazakhstan married and unmarried istration takes a day longer—Astana and property registry already makes details women have the same ownership rights Aktobe—authorities could identify the relevant to property transactions available to property as their male counterparts (0 causes of delay and take remedial action online, such as costs, timelines, statistics points). Kazakhstan is thus among the to ensure that registrations can be com- and lists of required documents. Making 188 economies with no gender-based pleted within the established time limits. information on cadastral services publicly restrictions on property ownership available, and introducing a dedicated rights for unmarried women and among The quality of the land administration complaint mechanism for the cadastre, the 174 where married women have the system is at least as important as its effi- would also improve transparency. same property ownership rights as their ciency. A global comparison shows that husband does. Kazakhstan lags in this area—nearly 40% The cadastre has been striving to improve of economies are closer to the frontier of transparency, but there is still work to be best practices as measured by the quality done. The time limits for various cadastral WHAT CAN BE IMPROVED? of land administration index (figure 6.5). services are available online, but they are The government is already working to buried in a legislative document that does In adopting ICT, Kazakhstan has made emulate international good practices in not specify the time frame for authorities improving the efficiency of the prop- land administration. As it implements fur- to update cadastral maps.30 Authorities erty registry a priority—and excelled in ther improvements, there are examples it might consider making all service stan- doing so. The introduction of electronic could look to—such as in making informa- dards—including the time limit for delivery registration is one of the hallmarks of tion more broadly available, strengthening of an updated cadastral map—available FIGURE 6.5  Globally, 37% of economies are closer than Kazakhstan is to the frontier of best practices in the quality of land administration 25th percentile 50th percentile 75th percentile 37% of economies Frontier Libya, Marshall Islands, Tajikistan Azerbaijan Uzbekistan Georgia Russian Micronesia, Timor-Leste Federation All 8 Kazakhstani Kyrgyz Singapore (best locations Republic performance) 0 10 20 30 40 50 60 70 80 90 100 Distance to frontier score for the quality of land administration index (0–100) Source: Doing Business database. Note: The figure illustrates the distribution of the 190 economies in the Doing Business sample by their distance to frontier score for the quality of land administration index. The score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). REGISTERING PROPERTY 63 online in an easily accessible format. For an example Kazakhstan could look accurate information about ownership. The information systems center for the to Lithuania, whose unified cadastral and In addition, many governments back cadastre (the Department of Automated registry database is publicly accessible their registration system with a state Information System of the State Land by law. For each property the database guarantee. Kazakhstan is among the 41 Cadastre and Technical Support) posted includes encumbrances, ownership economies covered by Doing Business in a price list on its website in early 2017.31 details, geospatial data, the physical which the government does not do so. Authorities should ensure that this list address and geographic coordinates, This suggests a need to consider legisla- includes the fee for obtaining an updated and the property’s average market value. tive options for establishing a guarantee cadastral map. In addition, the cadastre’s Except for a few limitations aimed at over property registration, such as requir- main site provides the number for a hot- protecting owners’ personal information, ing title insurance. line for filing complaints.32 But because the detailed data are accessible both online hotline is reserved for reporting corruption and in person at the State Enterprise When land disputes do occur, it is impor- issues, it falls short of being an indepen- Center of Registers.34 tant to ensure that they clear the courts dent, separate complaint mechanism for quickly so that citizens’ resources are not land issues. Strengthen the infrastructure of perpetually tied up in the legal system. In the land administration system Kazakhstan the local Specialized Inter- Finding fees, timelines and other details Kazakhstan aims to establish a unified district Economic Court resolves land important to clients remains difficult property registry and cadastre in 2018.35 disputes in less than a year. But these because this information is spread As the country continues to work toward courts do not systematically make data across multiple websites. Kazakhstani this goal, it could look to some of its on first-instance cases resulting from authorities could look into establishing regional neighbors for models. In 2013 the land disputes publicly available. In early a single website allowing easy access to Russian Federation created a unified elec- 2017 the information systems center all land-related information for both the tronic land and property registry by merg- for the cadastre added a new page to registry and the cadastre. One model ing the state registry of property and the its website with information on land is Sweden, which has an online system state topographical and cadastral map- disputes in 2016.38 But because the data allowing anyone to access not only infor- ping system. Merging the two systems are not disaggregated, it is unclear which mation on fees but also any information helps ensure tenure security by making locations they cover and whether they on plots going back 400 years.33 When it easier to maintain up-to-date records are specific to first-instance court cases. Kazakhstani authorities launch websites on the legal rights to properties and the or make additional information publicly special characteristics of land plots.36 The existence of statistics on the number available, widely publicizing these events of first-instance land disputes in itself would help raise awareness among Russia also has a fully digital registry serves as a measure of the quality of the clients. and cadastre that could serve as a model land administration system.39 Across for Kazakhstan. While the majority of the world 24 economies provide such Make property ownership Kazakhstan’s land records are already statistics, including Finland and Latvia. In information publicly available scanned, fully digital records offer further 2013 Finnish courts settled 1,173 land dis- Information on the ownership of property advantages. They enable officials to putes—1.92% of all civil cases resolved should also be made widely available— search the contents of historical titles by first-instance courts. In Latvia in the rather than restricted to the respective and maps, input data and add annota- same year, 234 land dispute claims were owners and their agents (such as a tions. They also allow the extraction of filed—0.91% of all first-instance claims. notary conducting a transaction involving information from historical documents to Kazakhstani authorities should consider the property). Such data are important populate new files for new transactions, making such statistics publicly available inputs for those seeking to invest in which limits opportunities for human in a user-friendly format. the real estate market, but Kazakhstan error and strengthens security. has restricted public access following Expand geographic coverage incidents of misuse of information. Establish a state guarantee and Increasing geographic coverage is per- Ownership information can be obtained make statistics on first-instance haps the biggest challenge Kazakhstan only with the owner’s permission. land disputes publicly available faces in improving the quality of land Land makes up a substantial share administration. Ideally the property regis- A secure information system can be of wealth in most countries.37 So it is try and cadastre would cover all privately open to the general public—to ensure important to minimize the potential for held land and make the information read- that potential investors have access to land disputes. One way to do this is by ily available to clients.40 Georgia might relevant data—while preventing misuse. ensuring that state agencies provide serve as an example. It achieved 100% 64 DOING BUSINESS IN KAZAKHSTAN 2017 registration of privately held land plots in 12. This includes checking the parties’ 24. The statistics on property transactions can be identification cards; the company charter; found on the Ministry of Justice’s website at Tbilisi in 2015. The effort started in 2010, the shareholder resolution or protocol of http://www.adilet.gov.kz/ru/taxonomy when Georgia introduced its Cadastre the general shareholders’ meeting allowing /term/200. See also http:/ /www.adilet REG project. Over five years the project the sale; a power of attorney empowering .gov.kz/ru/articles/otchet-o-deyatelnosti- the buyer and seller to act on behalf of their departamenta-registracionnoy-sluzhby-i- systematically mapped property rights company; and the original property title. organizacii-yuridicheskih. Statistics are also throughout 12 pilot areas across Georgia, 13. For more on KAZPOST, see its website at available for each locality through the Ministry including Tbilisi. Besides expanding cov- https://old.post.kz/en/. of Justice’s website. 14. For the egov portal, see http:/ /egov.kz/cms/en. 25. Klaus Deininger, Harris Selod and Anthony erage, it unified the cadastre and property 15. Law of the Republic of Kazakhstan on State Burns, The Land Governance Assessment registry, introduced a single software sys- Registration of Rights to Immovable Property Framework: Identifying and Monitoring Good tem for both agencies and established a (no. 310-III), as amended as of February 27, Practice in the Land Sector (Washington, DC: 2017, available at http://online.zakon.kz World Bank, 2012). single graphic web portal allowing clients /Document/?doc_id=30118294#pos=0;62. 26. For information on the cadastre’s coverage to search land plots and cadastral maps. 16. Astana handled 137,529 registrations with of each of Kazakhstan’s 14 regions, Almaty 16 staff, and South Kazakhstan (Shymkent) city and Astana, see the website of the 89,133 registrations with 17 staff. information systems center for the cadastre at 17. Notary fees are regulated by the Law of the http://www.aisgzk.kz/aisgzk/ru/content NOTES Republic of Kazakhstan on Notaries (no. 155), /transfer_1-2/, last modified March 14, 2017. July 14, 1997, available at http:/ /adilet 27. “Registering Property: Measuring the Quality of 1. Shahjahan H. Bhuiyan, “Trajectories of .zan.kz/eng/docs/Z970000155_; and the Land Administration Systems,” in World Bank, E-Government Implementation for Public Code of the Republic of Kazakhstan on Taxes Doing Business 2015: Going Beyond Efficiency Sector Service Delivery in Kazakhstan,” and Other Obligatory Payments into the (Washington, DC: World Bank, 2014). International Journal of Public Administration 34, Budget (Tax Code) (no. 99-IV), December 10, 28. The data presented in Doing Business in no. 9 (2011): 604–15, doi:10.1080/01900692 2008, available at http:/ /adilet.zan.kz/eng Kazakhstan 2017 are current as of December .2011.586894. /docs/K080000099_. See also “Tariffs for 2016. In February 2017 the government of 2. United Nations, United Nations E-Government Notarial Acts,” Parliament of the Republic of Kazakhstan passed new legislation that may Survey 2016: E-Government in Support of Kazakhstan, last modified January 20, 2017, be intended to establish a guarantee over Sustainable Development (New York: United http://enis.kz/Article/Details/101. property registration. See the Law of the Nations, 2016), https:/ /publicadministration 18. Code of the Republic of Kazakhstan on Taxes Republic of Kazakhstan on Amendments .un.org/egovkb/en-us/reports/un-e- and Other Obligatory Payments into the to Certain Legislative Acts of the Republic government-survey-2016. Budget (Tax Code) (no. 99-IV), December of Kazakhstan in Relation to Issues of 3. “The Strategy for Development of the Republic 10, 2008, articles 455–56. The monthly Improvement of the Civil Law, Banking Law of Kazakstan,” Akorda (Presidential Palace), calculation index for 2016 was KZT 2,121 and Improvement of Conditions of Business http://www.akorda.kz/en/official_documents (US$11). For more information, see “Minimum Activity (no. 49-VI), February 27, 2017. /strategies_and_programs. Calculated Indexes,” egov, last modified April 29. “Registering Property: Measuring the Quality of 4. Shahjahan H. Bhuiyan, “Trajectories of 14, 2017, https://egov.kz/cms/en/articles Land Administration Systems,” in World Bank, E-Government Implementation for Public /article_mci_2012. Doing Business 2015: Going Beyond Efficiency Sector Service Delivery in Kazakhstan,” 19. UN-Habitat, Tools to Support Transparency in Land (Washington, DC: World Bank, 2014). International Journal of Public Administration 34, Administration (Nairobi: UN-Habitat, 2013). 30. Approval of the Standards of Public Services no. 9 (2011): 604–15, doi:10.1080/01900692 20. The registry is housed by the Ministry of in the Sphere of Land Relations, Geodesy .2011.586894. Justice. The cadastre (the Directorate of Land and Cartography (no. 11050), May 15, 2015, 5. Stijn Claessens and Luc Laeven, “Financial Cadastre and Technical Survey of Real Estate) available at http://adilet.zan.kz/rus/docs Development, Property Rights, and Growth,” is housed by the Government for Citizens /V1500011050#z16. Journal of Finance 58, no. 6 (2003): 2401–36. state corporation. For more on the cadastre, 31. The data presented in Doing Business in 6. Simon Johnson, John McMillan and see its website at http://www.kazlands.kz/. Kazakhstan 2017 are current as of December Christopher Woodruff, “Property Rights and 21. For more information, see the website of the 2016. For information on the price list, see the Finance,” American Economic Review 92, no. 5 information systems center for the cadastre website of the information systems center for (2002): 1335–56. (the Department of Automated Information the cadastre at http:/ /www.aisgzk.kz/, last 7. World Bank, World Development Report 1989 System of the State Land Cadastre and modified March 14, 2017. (New York: Oxford University Press: 1989). Technical Support), at http:/ /www.aisgzk 32. For more information, see the cadastre’s 8. Law of the Republic of Kazakhstan on State .kz/. Also see the GIS Center’s website at website at http:/ /www.kazlands.kz/, last Registration of Rights to Immovable Property http://www.gis-center.kz/pmain/Default modified November 11, 2016. (no. 310), July 26, 2007, available at http:/ / .aspx?page=mainpage&lang=ru. 33. “Registering Property: Measuring the Quality of adilet.zan.kz/eng/docs/Z070000310_. 22. “Property Right and Size of the Rates for Real Land Administration Systems,” in World Bank, 9. This authorization was implemented Estate Transactions,” egov, last modified Doing Business 2015: Going Beyond Efficiency by amending the Law of the Republic of September 23, 2015, http:/ /egov.kz/wps (Washington, DC: World Bank, 2014). For Kazakhstan on State Registration of Rights to /portal/Content?contentPath=%2Fegovconte more on the information available, see the Immovable Property (no. 310), July 26, 2007, nt%2Fbuy_sell_rent%2Farticle%2Frates_for_ website of Sweden’s mapping, cadastral and available at http://adilet.zan.kz/eng/docs real_estate&lang=en; Law of the Republic of land registration authority (Lantmäteriet) at /Z070000310_; and the Law of the Republic Kazakhstan on State Registration of Rights to http://www.lantmateriet.se/en/Maps-and- of Kazakhstan on Notaries (no. 155), July 14, Immovable Property (no. 310), July 26, 2007, geographic-information. 1997, available at http:/ /adilet.zan.kz/eng available at http://adilet.zan.kz/eng/docs 34. Thea Hilhorst and Frederic Meunier, eds., /docs/Z970000155_. /Z070000310_. How Innovations in Land Administration Reform 10. For more on the Government for Citizens 23. The complaint mechanism can be found Improve on Doing Business: Cases from Lithuania, centers, see the Government for Citizens state on the Ministry of Justice’s website at the Republic of Korea, Rwanda and the United corporation’s website at https:/ /goscorp.kz http://www.adilet.gov.kz/kk/pis. Also see Kingdom (Washington, DC: World Bank, 2015). /istoriya-sozdaniya-gk/. the complaint mechanism for Astana’s 35. “Uniform State Cadastre of Land and Real 11. For more on the ENIS portal, see the website Department of Justice, as an example, at Estate Will Be Created in Kazakhstan at http://enis.kz/. http://www.astana.adilet.gov.kz/kk/pis. (Government for Citizens),” Zakon.kz, August REGISTERING PROPERTY 65 31, 2016, https://www.zakon.kz/4814564- edinyjj-gosudarstvennyjj-kadastr-zemli.html. 36. “Registering Property: Measuring the Quality of Land Administration Systems,” in World Bank, Doing Business 2015: Going Beyond Efficiency (Washington, DC: World Bank, 2014). 37. “Registering Property: Measuring the Quality of Land Administration Systems,” in World Bank, Doing Business 2015: Going Beyond Efficiency (Washington, DC: World Bank, 2014). 38. The data presented in Doing Business in Kazakhstan 2017 are current as of December 2016. For more on the land dispute statistics, see the website of the information systems center for the cadastre at http://www.aisgzk .kz/, last modified March 14, 2017. 39. “Registering Property: Measuring the Quality of Land Administration Systems,” in World Bank, Doing Business 2015: Going Beyond Efficiency (Washington, DC: World Bank, 2014). 40. UNECE (United Nations Economic Commission for Europe), Policy Framework for Sustainable Real Estate Markets: Principles and Guidance for the Development of a Country’s Real Estate Sector (Geneva: UNECE, 2012). 66 DOING BUSINESS IN KAZAKHSTAN 2017 Data Notes T he indicators presented and of data covers different aspects of specific study in Kazakhstan. The ques- analyzed in Doing Business employment regulation. The 11 sets of tionnaires use a simple business case to measure business regula- indicators measured in Doing Business ensure comparability across locations tion and the protection of property were added over time, and the sample and economies and over time—with rights—and their effect on businesses, of economies and cities expanded. assumptions about the legal form of the especially small and medium-size business, its size, its location and the domestic firms. First, the indicators This report presents Doing Business indi- nature of its operations. Questionnaires document the complexity of regula- cators for eight locations in Kazakhstan. were administered to local experts, tion, such as the number of proce- The data for all sets of indicators in including lawyers, business consultants, dures to start a business or to register Doing Business in Kazakhstan 2017 are architects, engineers, public officials, a transfer of commercial property. current as of December 2016. The data magistrates and other professionals rou- Second, they gauge the time and cost for Almaty city and 189 other economies tinely administering or advising on legal to achieve a regulatory goal or comply used for comparison are based on the and regulatory requirements. These with regulation, such as the time and indicators in Doing Business 2017: Equal experts had several rounds of interaction cost to enforce a contract, go through Opportunity for All, the 14th in a series of with the Doing Business in Kazakhstan bankruptcy or trade across borders. annual reports published by the World team, involving conference calls, written Third, they measure the extent of Bank Group. correspondence and visits by the team. legal protections of property, for The data from questionnaires were sub- example, the protections of minority jected to numerous rounds of verifica- investors against looting by company METHODOLOGY tion, leading to revisions or expansions directors or the range of assets that of the information collected. can be used as collateral according The Doing Business in Kazakhstan 2017 to secured transactions laws. Fourth, data were collected in a standardized The Doing Business methodology offers a set of indicators documents the tax way. To start, the team customized the several advantages. It is transparent, burden on businesses. Finally, a set Doing Business questionnaires for the using factual information about what Economy characteristics Gross national income per capita Doing Business in Kazakhstan 2017 reports 2015 income per capita as published in the World Bank’s World Development Indicators 2016. Income is calculated using the Atlas method (in current U.S. dollars). For cost indicators expressed as a percentage of income per capita, 2015 gross national income (GNI) per capita in current U.S. dollars is used as the denominator. Kazakhstan’s income per capita for 2015 is US$11,580 (KZT 2,183,859). Region and income group Doing Business uses the World Bank regional and income group classifications, available at http://data.worldbank.org/about /country-and-lending-groups. Regional averages presented in figures and tables in the Doing Business in Kazakhstan 2017 report include economies from all income groups (low, lower middle, upper middle and high income), though high-income OECD economies are assigned the “regional” classification OECD high income. Exchange rate The exchange rate used in the Doing Business in Kazakhstan 2017 report is US$1 = 188.6 Tenge (KZT). DATA NOTES 67 laws and regulations say and allowing promptly. Alternatively, the business any required notifications, verifications multiple interactions with local respon- may choose to disregard some burden- or inscriptions for the company and dents to clarify potential misinterpreta- some procedures. For both reasons the employees with relevant authorities. tions of questions. Having representative time delays reported in Doing Business samples of respondents is not an issue; would differ from the recollection of The ranking of locations on the ease of Doing Business is not a statistical survey, entrepreneurs reported in the World starting a business is determined by and the texts of the relevant laws and Bank Enterprise Surveys or other firm- sorting their distance to frontier scores regulations are collected and answers level surveys. for starting a business. These scores are checked for accuracy. The methodology the simple average of the distance to is inexpensive and easily replicable, so frontier scores for each of the component data can be collected in a large sample CHANGES IN WHAT IS indicators (figure 7.2). The distance to of locations and economies. Because MEASURED frontier score shows the distance of an standard assumptions are used in the economy or location to the “frontier,” data collection, comparisons and bench- The Doing Business 2017 report has three which is derived from the most efficient marks are valid across locations. Finally, major innovations. First, it expands the practice or highest score achieved on the data not only highlight the extent of paying taxes indicator set to also cover each indicator. specific regulatory obstacles to business postfiling processes. Paying taxes is the but also identify their source and point final indicator set to be changed as part Two types of local liability companies to what might be reformed. of the methodology update initiated in are considered under the starting a busi- Doing Business 2015. Second, three indi- ness methodology. They are identical in cator sets (starting a business, register- all aspects, except that one company is LIMITS TO WHAT IS ing property and enforcing contracts) owned by five married women and the MEASURED were expanded to cover a gender other by five married men. The distance dimension, in addition to labor market to frontier score for each indicator is the The Doing Business methodology has four regulation, which was expanded last average of the scores obtained for each limitations that should be considered when year. Starting a business was expanded of the component indicators for both of interpreting the data. First, the data often to also measure the process of starting these standardized companies. focus on a specific business form—gener- a business when all shareholders are ally a limited liability company (or its legal women. Registering property now also After a study of laws, regulations and equivalent) of a specified size—and may measures equality in ownership rights publicly available information on busi- not be representative of the regulation on to property. And enforcing contracts ness entry, a detailed list of procedures other businesses (for example, sole propri- was expanded to measure equality in is developed, along with the time and etorships). Second, transactions described evidentiary weight for men and women. cost to comply with each procedure in a standardized case scenario refer to a Despite these changes in methodology under normal circumstances and the specific set of issues and may not represent introduced in the Doing Business 2017 paid-in minimum capital requirement. the full set of issues that a business encoun- report, the data under the old and new Subsequently, local incorporation law- ters. Third, the measures of time involve methodologies are highly correlated.1 yers, notaries and government officials an element of judgment by the expert complete and verify the data. respondents. When sources indicate different estimates, the time indicators STARTING A BUSINESS Information is also collected on the reported in Doing Business represent sequence in which procedures are to the median values of several responses Doing Business records all procedures be completed and whether procedures given under the assumptions of the officially required, or commonly done may be carried out simultaneously. It is standardized case. in practice, for an entrepreneur to start assumed that any required information up and formally operate an industrial or is readily available and that the entre- Finally, the methodology assumes commercial business, as well as the time preneur will pay no bribes. If answers that a business has full information on and cost to complete these procedures by local experts differ, inquiries con- what is required and does not waste and the paid-in minimum capital require- tinue until the data are reconciled. time when completing procedures. ment (figure 7.1). These procedures include In practice, completing a procedure the processes entrepreneurs undergo To make the data comparable across may take longer if the business lacks when obtaining all necessary approvals, economies, several assumptions about the information or is unable to follow up licenses and permits and completing businesses and the procedures are used. 68 DOING BUSINESS IN KAZAKHSTAN 2017 FIGURE 7.1  What are the time, cost, paid-in minimum capital and number of Procedures procedures to get a local limited liability company up and running? A procedure is defined as any interaction of the company founders with external Cost parties (for example, government agen- (% of income per capita) cies, lawyers, auditors or notaries) or Formal operation spouses (if legally required). Interactions between company founders or company Paid-in $ officers and employees are not counted minimum Number of capital procedures as procedures. Procedures that must be completed in the same building but in dif- ferent offices or at different counters are counted as separate procedures. If found- Entrepreneur Time ers have to visit the same office several Preregistration Registration, Postregistration (days) times for different sequential procedures, incorporation each is counted separately. The founders are assumed to complete all procedures themselves, without middlemen, facilita- tors, accountants or lawyers, unless the use of such a third party is mandated by Assumptions about the business or services. The business does not law or solicited by the majority of entre- The business: perform foreign trade activities and preneurs. If the services of professionals ƒƒ Is a limited liability company (or its does not handle products subject to a are required, procedures conducted by legal equivalent). special tax regime, for example, liquor such professionals on behalf of the com- ƒƒ Operates in the selected location. or tobacco. It is not using heavily pol- pany are counted as separate procedures. ƒƒ Is 100% domestically owned and luting production processes. Each electronic procedure is counted as a has five owners, none of whom is a ƒƒ Leases the commercial plant or offices separate procedure. Obtaining approval legal entity. and is not a proprietor of real estate. from a spouse to own a business or leave ƒƒ H as start-up capital of 10 times The amount of the annual lease for the the home is considered a procedure if income per capita. office space is equivalent to 1 times it is required by law or if by failing to do ƒƒ Performs general industrial or com- income per capita. The size of the so an individual will suffer consequences mercial activities, such as the produc- entire office space is approximately under the law, such as the loss of rights tion or sale to the public of products 929 meters (10,000 square feet). to financial maintenance. Documents or ƒƒ Does not qualify for investment permissions required for only one gender FIGURE 7.2  Starting a business: getting incentives or any special benefits. for registering and operating a company, a local limited liability company up and ƒƒ Has at least 10 and up to 50 employ- opening a bank account or obtaining a running ees one month after the commence- national identification card are considered ment of operations, all of them additional procedures. Rankings are based on distance to frontier scores for four indicators domestic nationals. 25% Time 25% Cost ƒƒ Has a turnover of at least 100 times Both pre- and postincorporation Preregistration, As % of income income per capita. procedures that are officially required registration and per capita, no postregistration bribes included ƒƒ Has a company deed 10 pages long. or commonly done in practice for an (in calendar days) entrepreneur to formally operate a 12.5% 12.5% women men The owners: business are recorded (table 7.1). Any 12.5% 12.5% ƒƒ Have reached the legal age of majority interaction with an external party men women and are capable of making decisions within three months of registration is 12.5% 25% women Paid-in as an adult. If there is no legal age of considered a procedure, except value minimum 12.5% capital men majority, they are assumed to be 30 added tax or goods and services tax years old. registration, which is counted when- 25% Paid-in 25% Procedures minimum capital ƒƒ Are sane, competent and in good ever the assumed turnover exceeds the Procedures are Funds deposited in a health and have no criminal record. determined threshold. completed when bank or with a notary final document before registration (or ƒƒ Are married, and their marriages is received up to three months after incorporation), as % are monogamous and registered Procedures required for official cor- of income per capita with the authorities. respondence or transactions with public DATA NOTES 69 TABLE 7.1  What do the starting procedures are excluded. For example, Cost a business indicators measure? procedures to comply with environmen- Cost is recorded as a percentage of the tal regulations are included only when economy’s income per capita. It includes Procedures to legally start and formally operate a company (number) they apply to all businesses conduct- all official fees and fees for legal or profes- Preregistration (for example, name verification or ing general commercial or industrial sional services if such services are required reservation, notarization) activities. Procedures that the company by law or commonly used in practice. Fees Registration in the selected location undergoes to connect to electricity, for purchasing and legalizing company Postregistration (for example, social security water, gas and waste disposal services books are included if these transactions registration, company seal) are not included in the starting a busi- are required by law. Although value added Obtaining approval from spouse to start a ness indicators. tax registration can be counted as a sepa- business, to leave the home to register the rate procedure, value added tax is not part company, or to open a bank account Time of the incorporation cost. The company Obtaining any gender-specific document for company registration and operation, national Time is recorded in calendar days. The law, the commercial code, and specific identification card or opening a bank account measure captures the median duration regulations and fee schedules are used Time required to complete each procedure that incorporation lawyers or notaries as sources for calculating costs. In the (calendar days) indicate is necessary in practice to absence of fee schedules, a government Does not include time spent gathering complete a procedure with minimum officer’s estimate is taken as an official information follow-up with government agencies and source. In the absence of a government Each procedure starts on a separate day no unofficial payments. It is assumed that officer’s estimate, estimates by incorpora- (two procedures cannot start on the same day)— though procedures that can be fully completed the minimum time required for each pro- tion lawyers are used. If several incorpora- online are an exception to this rule cedure is one day, except for procedures tion lawyers provide different estimates, Registration process considered completed once that can be fully completed online, for the median reported value is applied. In all final incorporation document is received or company can officially start operating which the time required is recorded as cases the cost excludes bribes. No prior contact with officials takes place half a day. Although procedures may take place simultaneously, they cannot start Paid-in minimum capital Cost required to complete each procedure (% of income per capita) on the same day (that is, simultaneous The paid-in minimum capital requirement Official costs only, no bribes procedures start on consecutive days), reflects the amount that the entrepreneur again with the exception of procedures needs to deposit in a bank or with a notary No professional fees unless services required by law or commonly used in practice that can be fully completed online. A reg- before registration or up to three months Paid-in minimum capital (% of income per istration process is considered completed after incorporation and is recorded as a capita) once the company has received the final percentage of the economy’s income per Funds deposited in a bank or with a notary incorporation document or can officially capita. The amount is typically specified before registration (or up to three months after commence business operations. If a pro- in the commercial code or the company incorporation) cedure can be accelerated legally for an law. Many economies require minimum additional cost, the fastest procedure is capital but allow businesses to pay only a agencies are also included. For example, chosen if that option is more beneficial part of it before registration, with the rest if a company seal or stamp is required to the province’s ranking. For obtaining to be paid after the first year of opera- on official documents, such as tax dec- a spouse’s approval, it is assumed that tion. In Turkey in June 2015, for example, larations, obtaining the seal or stamp permission is granted at no additional the minimum capital requirement was is counted. Similarly, if a company cost unless the permission needs to 10,000 Turkish liras, of which one-fourth must open a bank account in order to be notarized. It is assumed that the needed to be paid before registration. complete any subsequent procedure— entrepreneur does not waste time and The paid-in minimum capital recorded such as registering for value added tax commits to completing each remaining for Turkey is therefore 2,500 Turkish liras, or showing proof of minimum capital procedure without delay. The time that or 10.2% of income per capita. deposit—this transaction is included as the entrepreneur spends on gathering a procedure. Shortcuts are counted only information is ignored. It is assumed The data details on starting a business can if they fulfill four criteria: they are legal, that the entrepreneur is aware of all be found at http://www.doingbusiness. they are available to the general public, entry requirements and their sequence org. This methodology was developed by they are used by the majority of compa- from the beginning but has had no prior Simeon Djankov, Rafael La Porta, Florencio nies, and avoiding them causes delays. contact with any of the officials involved. López-de-Silanes and Andrei Shleifer (“The Regulation of Entry,” Quarterly Journal of Only procedures required of all busi- Economics 117, no. 1 [2002]: 1–37) and is nesses are covered. Industry-specific adopted here with minor changes. 70 DOING BUSINESS IN KAZAKHSTAN 2017 EFFICIENCY OF Assumptions about the DEALING WITH CONSTRUCTION PERMITTING construction company CONSTRUCTION PERMITS Doing Business divides the process of build- The construction company (BuildCo): ing a warehouse into distinct procedures ƒƒ Is a limited liability company (or its Doing Business records all procedures in the questionnaire and solicits data for legal equivalent). required for a business in the construction calculating the time and cost to complete ƒƒ Operates in the selected location. industry to build a warehouse along with each procedure (figure 7.4). These proce- ƒƒ Is 100% domestically and privately the time and cost to complete each pro- dures include but are not limited to: owned. cedure. In addition, Doing Business mea- ƒƒ Obtaining and submitting all rel- ƒƒ Has five owners, none of whom is a sures the building quality control index, evant project-specific documents legal entity. evaluating the quality of building regula- (for example, building plans, site ƒƒ Is fully licensed and insured to carry tions, the strength of quality control and maps and certificates of urbanism) out construction projects, such as safety mechanisms, liability and insurance to the authorities. building warehouses. regimes, and professional certification ƒƒ Hiring external third-party supervisors, ƒƒ Has 60 builders and other employees, requirements. Information is collected consultants, engineers or inspectors all of them nationals with the techni- through a questionnaire administered to (if necessary). cal expertise and professional experi- experts in construction licensing, includ- ƒƒ Obtaining all necessary clearances, ence necessary to obtain construction ing architects, civil engineers, construction licenses, permits and certificates. permits and approvals. lawyers, construction firms, utility service ƒƒ Submitting all required notifications. ƒƒ Has a licensed architect and a providers and public officials who deal with ƒƒ Requesting and receiving all neces- licensed engineer, both registered building regulations, including approvals, sary inspections (unless completed by with the local association of archi- permit issuance and inspections. a hired private, third-party inspector). tects or engineers. BuildCo is not assumed to have any other employ- The ranking of locations on the ease of Doing Business also records procedures for ees who are technical or licensed dealing with construction permits is deter- obtaining connections for water and sew- specialists, such as geological or mined by sorting their distance to frontier erage. Procedures necessary to register topographical expert. scores for dealing with construction per- the warehouse so that it can be used as ƒƒ Has paid all taxes and taken out all mits. These scores are the simple average collateral or transferred to another entity necessary insurance applicable to its of the distance to frontier scores for each are also counted. general business activity (for example, of the component indicators (figure 7.3). accidental insurance for construction To make the data comparable across loca- workers and third-person liability). tions, several assumptions about the con- ƒƒ Owns the land on which the ware- struction company, the warehouse project house will be built and will sell the FIGURE 7.3  Dealing with construction and the utility connections are used. warehouse upon its completion. permits: efficiency and quality of building regulation Rankings are based on distance to FIGURE 7.4  What are the time, cost and number of procedures to comply with frontier scores for four indicators formalities to build a warehouse? Days to comply Cost to comply with formalities with formalities, to build a as % of Cost warehouse warehouse value (% of warehouse value) Completed warehouse 25% 25% Time Cost 25% 25% Number of Procedures Building procedures quality control index A business in the Steps to comply Quality of building construction with formalities; regulation and its industry Time completed when implementation Preconstruction Construction Postconstruction (days) final document is and utilities received DATA NOTES 71 Assumptions about the tank in the smallest size available TABLE 7.2  What do the indicators on warehouse will be installed or built. the efficiency of construction permitting The warehouse: ƒƒ Will not require water for fire protec- measure? ƒƒ Will be used for general storage tion reasons; a fire extinguishing activities, such as storage of books or system (dry system) will be used Procedures to legally build a warehouse (number) stationery. The warehouse will not be instead. If a wet fire protection system used for any goods requiring special is required by law, it is assumed that Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and conditions, such as food, chemicals the water demand specified below certificates or pharmaceuticals. also covers the water needed for fire Submitting all required notifications and receiving ƒƒ Will have two stories, both above protection. all necessary inspections ground, with a total constructed ƒƒ Will have an average water use of Obtaining utility connections for water and area of approximately 1,300.6 662 liters (175 gallons) a day and an sewerage square meters (14,000 square feet). average wastewater flow of 568 liters Registering the warehouse after its completion Each floor will be 3 meters (9 feet, (150 gallons) a day. Will have a peak (if required for use as collateral or for transfer of 10 inches) high. water use of 1,325 liters (350 gallons) the warehouse) ƒƒ Will have road access and be located a day and a peak wastewater flow of Time required to complete each procedure in the periurban area of the selected 1,136 liters (300 gallons) a day. (calendar days) location (that is, on the fringes of ƒƒ Will have a constant level of water Does not include time spent gathering the location but still within its official demand and wastewater flow information limits). throughout the year. Each procedure starts on a separate day— ƒƒ Will not be located in a special ƒƒ Will be 1 inch in diameter for the water though procedures that can be fully completed online are an exception to this rule economic or industrial zone. connection and 4 inches in diameter ƒƒ Will be located on a land plot of for the sewerage connection. Procedure considered completed once final document is received approximately 929 square meters (10,000 square feet) that is 100% Procedures No prior contact with officials owned by BuildCo and is accurately A procedure is any interaction of the Cost required to complete each procedure registered in the cadastre and land (% of warehouse value) company’s employees or managers, or registry. any party acting on behalf of the com- Official costs only, no bribes Is valued at 50 times income per capita. ƒƒ pany, with external parties, including ƒƒ Will be a new construction (there was government agencies, notaries, the land Time no previous construction on the land), registry, the cadastre, utility companies Time is recorded in calendar days. The with no trees, natural water sources, and public inspectors—and the hiring of measure captures the median duration natural reserves or historical monu- external private inspectors and techni- that local experts indicate is necessary ments of any kind on the plot. cal experts where needed. Interactions to complete a procedure in practice. It is ƒƒ Will have complete architectural and assumed that the minimum time required between company employees, such as technical plans prepared by a licensed for each procedure is one day, except for development of the warehouse plans and architect. If preparation of the plans procedures that can be fully completed inspections conducted by employees, requires such steps as obtaining fur- online, for which the time required is are not counted as procedures. However, ther documentation or getting prior recorded as half a day. Although proce- interactions with external parties that approvals from external agencies, dures may take place simultaneously, are required for the architect to prepare these are counted as procedures. they cannot start on the same day (that ƒƒ Will include all technical equipment the plans and drawings (such as obtain- is, simultaneous procedures start on required to be fully operational. ing topographic or geological surveys), consecutive days), again with the excep- ƒƒ Will take 30 weeks to construct or to have such documents approved tion of procedures that can be fully (excluding all delays due to adminis- or stamped by external parties, are completed online. If a procedure can be trative and regulatory requirements). counted as procedures. Procedures that accelerated legally for an additional cost the company undergoes to connect the and the accelerated procedure is used Assumptions about the utility warehouse to water and sewerage are by the majority of companies, the fast- connections included. All procedures that are legally est procedure is chosen. It is assumed The water and sewerage connections: required, or that are done in practice by that BuildCo does not waste time and the majority of companies, to build a commits to completing each remaining ƒƒ Will be 150 meters (492 feet) from warehouse are counted, even if they may procedure without delay. The time that the existing water source and sew- be avoided in exceptional cases. This BuildCo spends on gathering information er tap. If there is no water delivery includes obtaining technical conditions is not taken into account. It is assumed infrastructure in the location, a for electricity or clearance of the electrical that BuildCo is aware of all building borehole will be dug. If there is no plans only if they are required to obtain a requirements and their sequence from sewerage infrastructure, a septic building permit (table 7.2). the beginning. 72 DOING BUSINESS IN KAZAKHSTAN 2017 Cost through an official gazette free of TABLE 7.3  What do the indicators on Cost is recorded as a percentage of the charge (or for a nominal fee), if they building quality control measure? warehouse value (assumed to be 50 times must be purchased or if they are not Quality of building regulations index (0–2) income per capita). Only official costs made easily accessible anywhere. Accessibility of building regulations are recorded. All the fees associated with ƒƒ Whether the requirements for obtaining completing the procedures to legally build a building permit are clearly specified. A Clarity of requirements for obtaining a building permit a warehouse are recorded, including those score of 1 is assigned if the building reg- Quality control before construction index associated with obtaining land use approv- ulations (including the building code) (0–1) als and preconstruction design clearances; or any accessible website, brochure or Whether licensed or technical experts approve receiving inspections before, during and pamphlet clearly specifies the list of building plans after construction; obtaining utility con- required documents to submit, the fees Quality control during construction index nections; and registering the warehouse to be paid and all required preapprovals (0–3) property. Nonrecurring taxes required for of the drawings or plans by the relevant Types of inspections legally mandated during the completion of the warehouse project agencies; 0 if none of these sources construction are also recorded. Sales taxes (such as specify any of these requirements or if Implementation of legally mandated inspections in practice value added tax) or capital gains taxes are these sources specify fewer than the Quality control after construction index not recorded. Nor are deposits that must three requirements. (0–3) be paid up front and are later refunded. Final inspection legally mandated after The building code, information from local The index ranges from 0 to 2, with construction experts, and specific regulations and fee higher values indicating clearer and Implementation of legally mandated final schedules are used as sources for costs. more transparent building regulations. inspection in practice If several local partners provide different In the United Kingdom, for example, all Liability and insurance regimes index (0–2) estimates, the median reported value is relevant legislation can be found on an Parties held legally liable for structural flaws after used. official government website (a score building occupancy of 1). The legislation specifies the Parties legally mandated to obtain insurance to BUILDING QUALITY CONTROL list of required documents to submit, cover structural flaws after building occupancy or insurance commonly obtained in practice The building quality control index is based the fees to be paid and all required Professional certifications index (0–4) on six other indices—the quality of build- preapprovals of the drawings or plans ing regulations, quality control before by the relevant agencies (a score of Qualification requirements for individual who approves building plans construction, quality control during con- 1). Adding these numbers gives the Qualification requirements for individual who struction, quality control after construc- United Kingdom a score of 2 on the supervises construction or conducts inspections tion, liability and insurance regimes, and quality of building regulations index. Building quality control index (0–15) professional certifications indices (table Sum of the quality of building regulations, quality 7.3). The indicator is based on the same Quality control before control before construction, quality control during case study assumptions as the measures construction index construction, quality control after construction, liability and insurance regimes, and professional of efficiency. The quality control before construction certifications indices index has one component: Quality of building regulations ƒƒ Whether by law a licensed architect index or licensed engineer is part of the the building regulations or if a licensed The quality of building regulations index committee or team that reviews and architect or engineer is part of the has two components: approves building permit applications committee or team that approves the ƒƒ Whether building regulations are eas- and whether that person has the plans at the relevant permit-issuing ily accessible. A score of 1 is assigned authority to refuse an application. A authority; 0 if no licensed architect or if any building regulations (including score of 1 is assigned if the national engineer is involved in the review of the the building code) or any regulations association of architects or engineers plans to ensure their compliance with dealing with construction permits are (or its equivalent) must review the building regulations. available on a website that is updated building plans, if an independent firm as soon as the regulations change; 0.5 or expert who is a licensed architect or The index ranges from 0 to 1, with higher if the building regulations are available engineer must review the plans, if the values indicating better quality control free of charge (or for a nominal fee) at architect or engineer who prepared in the review of the building plans. In the relevant permit-issuing author- the plans must submit an attestation Rwanda, for example, the City Hall in ity; 0 if the building regulations are to the permit-issuing authority stating Kigali must review the building permit distributed to building professionals that the plans are in compliance with application, including the plans and DATA NOTES 73 drawings, and both a licensed architect under the Physical Planning Act of 2003 is legally mandated to conduct a final and a licensed engineer are part of the (a score of 1). However, the Development inspection under the National Building team that reviews the plans and draw- Control Authority rarely conducts these Code of 2012 (a score of 2). However, the ings. Rwanda therefore receives a score inspections in practice (a score of 0). final inspection does not occur in practice of 1 on the quality control before con- Adding these numbers gives Antigua and (a score of 0). Adding these numbers gives struction index. Barbuda a score of 1 on the quality control Haiti a score of 2 on the quality control after during construction index. construction index. Quality control during construction index Quality control after Liability and insurance regimes The quality control during construction construction index index index has two components: The quality control after construction The liability and insurance regimes index ƒƒ Whether inspections are mandated by index has two components: has two components: law during the construction process. Whether a final inspection is mandated ƒƒ ƒƒ Whether any parties involved in the A score of 2 is assigned if an in-house by law in order to verify that the build- construction process are held legally supervising engineer (for example, an ing was built in accordance with the liable for latent defects such as struc- employee of the building company), approved plans and existing building tural flaws or problems in the building an external supervising engineer regulations. A score of 2 is assigned once it is in use. A score of 1 is assigned or a government agency is legally if an in-house supervising engineer if at least two of the following parties mandated to conduct risk-based (that is, an employee of the building are held legally liable for structural inspections. A score of 1 is assigned company), an external supervising flaws or problems in the building once it if an in-house supervising engineer engineer or an external inspections firm is in use: the architect or engineer who (that is, an employee of the building is legally mandated to verify that the designed the plans for the building, the company), an external supervising building has been built in accordance professional in charge of supervising engineer or an external inspections with the approved plans and existing the construction, the professional or firm is legally mandated to conduct building regulations or if a government agency that conducted the inspections technical inspections at different agency is legally mandated to conduct a or the construction company; 0.5 if stages during the construction of the final inspection upon completion of the one of the parties is held legally liable building or if a government agency building; 0 if no final inspection is man- for structural flaws or problems in the is legally mandated to conduct only dated by law after construction and no building once it is occupied; 0 if no technical inspections at different third party is required to verify that the party is held legally liable for structural stages during the construction. A building has been built in accordance flaws or problems in the building once score of 0 is assigned if a government with the approved plans and existing it is in use, if the project owner or agency is legally mandated to conduct building regulations. investor is the only party held liable, if unscheduled inspections, or if no tech- ƒƒ Whether the final inspection is imple- liability is determined in the court or if nical inspections are mandated by law. mented in practice. A score of 1 is liability is stipulated in a contract. ƒƒ Whether inspections during construc- assigned if the legally mandated final ƒƒ Whether any parties involved in tion are implemented in practice. A inspection after construction always the construction process is legally score of 1 is assigned if the legally occurs in practice or if a supervising required to obtain a latent defect mandated inspections during con- engineer or firm attests that the build- liability—or decennial (10-year) struction always occur in practice; 0 ing has been built in accordance with liability—insurance policy to cover if the legally mandated inspections do the approved plans and existing build- possible structural flaws or prob- not occur in practice, if the inspections ing regulations; 0 if the legally man- lems in the building once it is in occur most of the time but not always dated final inspection does not occur use. A score of 1 is assigned if the or if inspections are not mandated by in practice, if the legally mandated final architect or engineer who designed law regardless of whether or not they inspection occurs most of the time but the plans for the building, the pro- commonly occur in practice. not always or if a final inspection is not fessional or agency that conducted mandated by law regardless of whether the technical inspections, the con- The index ranges from 0 to 3, with higher or not it commonly occurs in practice. struction company, or the project values indicating better quality control owner or investor is required by law during the construction process. In The index ranges from 0 to 3, with higher to obtain either a decennial liability Antigua and Barbuda, for example, the values indicating better quality control insurance or a latent defect liabil- Development Control Authority is legally after the construction process. In Haiti, for ity insurance policy to cover pos- mandated to conduct phased inspections example, the Municipality of Port-au-Prince sible structural flaws or problems 74 DOING BUSINESS IN KAZAKHSTAN 2017 in the building once it is in use or is assigned if this professional must The index ranges from 0 to 4, with higher if a decennial liability insurance have a minimum number of years of values indicating greater professional or latent defect liability insurance practical experience, must have a uni- certification requirements. In Cambodia, policy is commonly obtained in versity degree (a minimum of a bach- for example, the professional responsible practice by the majority of any of elor’s) in architecture or engineering for verifying that the architectural plans these parties even if not required and must also either be a registered or drawings are in compliance with the by law; a score of 0 is assigned if member of the national order (asso- building regulations must have a relevant no party is required by law to obtain ciation) of architects or engineers or university degree and must pass a quali- either a decennial liability insurance pass a qualification exam. A score of fication exam (a score of 1). However, the or a latent defect liability insurance 1 is assigned if the professional must professional supervising construction policy and such insurance is not have a university degree (a minimum must only have a university degree (a commonly obtained in practice of a bachelor’s) in architecture or score of 0). Adding these numbers gives by any party, if the requirement engineering and must also either Cambodia a score of 1 on the professional to obtain an insurance policy is have a minimum number of years of certifications index. stipulated in a contract, if any party practical experience or be a registered must obtain a professional insur- member of the national order (asso- Building quality control index ance policy to cover the safety of ciation) of architects or engineers or The building quality control index is the workers or any other defects during pass a qualification exam. A score of sum of the scores on the quality of build- construction but not a decennial 0 is assigned if the professional must ing regulations, quality control before liability insurance or latent defect meet only one of the requirements, if construction, quality control during liability insurance policy that would the professional must meet two of the construction, quality control after con- cover defects after the building is requirements but neither of the two is struction, liability and insurance regimes, in use, or if any party is required to have a university degree, or if the and professional certifications indices. to pay for any damages caused on professional is subject to no qualifica- The index ranges from 0 to 15, with higher their own without having to obtain tion requirements. values indicating better quality control and an insurance policy. ƒƒ The qualification requirements for the safety mechanisms in the construction professional who conducts the tech- regulatory system. The index ranges from 0 to 2, with higher nical inspections during construction. values indicating more stringent latent A score of 2 is assigned if this profes- The data details on dealing with construc- defect liability and insurance regimes. sional must have a minimum number tion permits can be found at http://www In Madagascar, for example, under of years of practical experience, must .doingbusiness.org. article 1792 of the Civil Code both the have a university degree (a minimum architect who designed the plans and the of a bachelor’s) in architecture or engi- construction company are held legally neering and must also either be a reg- GETTING ELECTRICITY liable for latent defects for a period of 10 istered member of the national order years after the completion of the building of engineers or pass a qualification Doing Business records all procedures (a score of 1). However, there is no legal exam. A score of 1 is assigned if the required for a business to obtain a perma- requirement for any party to obtain a professional must have a university nent electricity connection and supply for decennial liability insurance policy to degree (a minimum of a bachelor’s) in a standardized warehouse (figure 7.5). cover structural defects, nor do most par- architecture or engineering and must These procedures include applications ties obtain such insurance in practice (a also either have a minimum number and contracts with electricity utilities, score of 0). Adding these numbers gives of years of practical experience or be all necessary inspections and clearances Madagascar a score of 1 on the liability a registered member of the national from the distribution utility and other and insurance regimes index. order (association) of engineers or agencies, and the external and final con- pass a qualification exam. A score of nection works. The questionnaire divides Professional certifications index 0 is assigned if the professional must the process of getting an electricity The professional certifications index has meet only one of the requirements, if connection into distinct procedures and two components: the professional must meet two of the solicits data for calculating the time and The qualification requirements for ƒƒ requirements but neither of the two is cost to complete each procedure. the professional responsible for to have a university degree, or if the verifying that the architectural plans professional is subject to no qualifica- In addition, Doing Business measures the or drawings are in compliance with tion requirements. reliability of supply and transparency of the building regulations. A score of 2 tariffs index (included in the aggregate DATA NOTES 75 FIGURE 7.5  Doing Business measures the connection process at the level of FIGURE 7.6  Getting electricity: distribution utilities efficiency, reliability and transparency Rankings are based on distance to frontier scores for four indicators Days to obtain Cost to obtain a an electricity connection, as % of connection income per capita Generation Transmission 25% 25% Time Cost Distribution 25% 25% Procedures Reliability u New connections of supply and transparency u Network operation and maintenance of tariffs u Metering and billing Customer Steps to file a connection Power outages application, prepare and regulatory a design, complete mechanisms in works, obtain approvals, place to monitor go through inspections, and reduce them; install a meter and transparency of sign a supply tariffs contract distance to frontier score and ranking of tariffs and the procedures for obtaining on the ease of doing business) and the an electricity connection, are collected Note: The price of electricity is measured but does price of electricity (omitted from these from all market players—the electricity not count for the rankings. aggregate measures). The reliability of distribution utility, electricity regulatory supply and transparency of tariffs index agencies and independent professionals encompasses quantitative data on the such as electrical engineers, electrical con- ƒƒ Is a new construction and is being con- duration and frequency of power out- tractors and construction companies. The nected to electricity for the first time. ages as well as qualitative information electricity distribution utility consulted is ƒƒ Has two stories, both above ground, on the mechanisms put in place by the the one serving the area (or areas) where with a total surface area of approxi- utility for monitoring power outages warehouses are located. If there is a choice mately 1,300.6 square meters (14,000 and restoring power supply, the report- of distribution utilities, the one serving the square feet). The plot of land on which ing relationship between the utility and largest number of customers is selected. it is built is 929 square meters (10,000 the regulator for power outages, the square feet). transparency and accessibility of tariffs To make the data comparable across ƒƒ Is used for storage of goods. and whether the utility faces a financial locations, several assumptions about the deterrent aimed at limiting outages warehouse, the electricity connection Assumptions about the (such as a requirement to compensate and the monthly consumption are used. electricity connection customers or pay fines when outages The electricity connection: exceed a certain cap). Assumptions about the ƒƒ Is a permanent one. warehouse ƒƒ Is a three-phase, four-wire Y connection The ranking of locations on the ease of The warehouse: with a subscribed capacity of 140-kilo- getting electricity is determined by sorting ƒƒ Is owned by a local entrepreneur. volt-ampere (kVA) with a power factor their distance to frontier scores for getting ƒƒ Is located in the selected location. of 1, when 1 kVA = 1 kilowatt (kW). electricity. These scores are the simple ƒƒ Is located in an area where similar ƒƒ Has a length of 150 meters. The con- average of the distance to frontier scores warehouses are typically located. nection is to either the low- or medi- for all the component indicators except In this area a new electricity con- um-voltage distribution network and the price of electricity (figure 7.6). nection is not eligible for a special is either overhead or underground, investment promotion regime whichever is more common in the Data on reliability of supply are collected (offering special subsidization or area where the warehouse is located. from the electricity distribution utilities faster service, for example). ƒƒ Requires works that involve the or regulators, depending on the specific Is located in an area with no physical ƒƒ crossing of a 10-meter wide road (by technical nature of the data. The rest of the constraints. For example, the property excavation, overhead lines) but are data, including data on the transparency is not near a railway. all carried out on public land. There is 76 DOING BUSINESS IN KAZAKHSTAN 2017 no crossing of other owners’ private unless the use of a third party is man- TABLE 7.4 What do the getting property because the warehouse has dated (for example, if only an electrician electricity indicators measure? access to a road. registered with the utility is allowed to Procedures to obtain an electricity ƒƒ Includes only negligible length in the submit an application). If the company connection (number) customer’s private domain. can, but is not required to, request the Submitting all relevant documents and obtaining ƒƒ Does not require work to install the services of professionals (such as a all necessary clearances and permits internal wiring of the warehouse. This private firm rather than the utility for Completing all required notifications and has already been completed up to and the external works), these procedures receiving all necessary inspections including the customer’s service panel are recorded if they are commonly done. Obtaining external installation works and possibly purchasing material for these works or switchboard and the meter base. For all procedures, only the most likely cases (for example, more than 50% of Concluding any necessary supply contract and obtaining final supply Assumptions about the monthly the time the utility has the material) and Time required to complete each procedure consumption for March those followed in practice for connecting (calendar days) ƒƒ It is assumed that the warehouse oper- a warehouse to electricity are counted. Is at least one calendar day ates 30 days a month from 9:00 a.m. to Each procedure starts on a separate day 5:00 p.m. (8 hours a day), with equip- Time ment utilized at 80% of capacity on Time is recorded in calendar days. The Does not include time spent gathering information average and that there are no electricity measure captures the median duration Reflects the time spent in practice, with little cuts (assumed for simplicity reasons). that the electricity utility and experts indi- follow-up and no prior contact with officials ƒƒ The monthly energy consumption is cate is necessary in practice, rather than Cost required to complete each procedure 26,880 kilowatt-hours (kWh); hourly required by law, to complete a procedure (% of income per capita) consumption is 112 kWh. with minimum follow-up and no extra Official costs only, no bribes ƒƒ If multiple electricity suppliers exist, payments. It is assumed that the mini- Value added tax excluded the warehouse is served by the mum time required for each procedure is Reliability of supply and transparency of cheapest supplier. one day. Although procedures may take tariffs index (0–8) ƒƒ Tariffs effective in March of the place simultaneously, they cannot start Duration and frequency of power outages current year are used for calculation on the same day (that is, simultaneous Tools to monitor power outages of the price of electricity for the procedures start on consecutive days). Tools to restore power supply warehouse. Although March has It is assumed that the company does not 31 days, for calculation purposes only waste time and commits to completing Regulatory monitoring of utilities’ performance 30 days are used. each remaining procedure without delay. Financial deterrents aimed at limiting outages The time that the company spends on Transparency and accessibility of tariffs Procedures gathering information is not taken into Price of electricity (cents per kilowatt-hour) A procedure is defined as any interac- account. It is assumed that the com- Price based on monthly bill for commercial tion of the company’s employees or its pany is aware of all electricity connection warehouse in case study main electrician or electrical engineer requirements and their sequence from Note: While Doing Business measures the price (that is, the one who may have done the the beginning. of electricity, it does not include these data when calculating the distance to frontier score for getting internal wiring) with external parties, electricity or the ranking on the ease of getting electricity. such as the electricity distribution utility, Cost electricity supply utilities, government Cost is recorded as a percentage of the agencies, electrical contractors and economy’s income per capita. Costs are schedules are used as sources for costs. electrical firms. Interactions between recorded exclusive of value added tax. If several local partners provide different company employees and steps related to All the fees and costs associated with estimates, the median reported value is the internal electrical wiring, such as the completing the procedures to connect used. In all cases the cost excludes bribes. design and execution of the internal elec- a warehouse to electricity are recorded, trical installation plans, are not counted including those related to obtaining Security deposit as procedures. Procedures that must be clearances from government agencies, Utilities may require security deposits as completed with the same utility but with applying for the connection, receiving a guarantee against the possible failure different departments are counted as inspections of both the site and the inter- of customers to pay their consumption separate procedures (table 7.4). nal wiring, purchasing material, getting bills. For this reason the security deposit the actual connection works and paying for a new customer is most often cal- The company’s employees are assumed a security deposit. Information from local culated as a function of the customer’s to complete all procedures themselves experts and specific regulations and fee estimated consumption. DATA NOTES 77 Doing Business does not record the full deposit would have been returned only to obtain a score on the index if data on amount of the security deposit. If the at the end of the contract. The customer power outages are not collected. deposit is based on the customer’s could instead have invested this money actual consumption, this basis is the one at the prevailing lending rate of 20.66%. For all locations that meet the criteria assumed in the case study. Rather than Over the five years of the contract this as determined by Doing Business, a the full amount of the security deposit, would imply a present value of lost score on the reliability of supply and Doing Business records the present value interest earnings of 77,272.68 lempiras transparency of tariffs index is calcu- of the losses in interest earnings expe- (US$3,420). In contrast, if the customer lated on the basis of the following six rienced by the customer because the chose to settle the deposit with a bank components: utility holds the security deposit over a guarantee at an annual rate of 2.5%, the ƒƒ What the SAIDI and SAIFI values are. prolonged period, in most cases until the amount lost over the five years would be If SAIDI and SAIFI are 12 (equivalent to end of the contract (assumed to be after just 15,861.75 lempiras (US$702). an outage of one hour each month) or five years). In cases where the security below, a score of 1 is assigned. If SAIDI deposit is used to cover the first monthly Reliability of supply and and SAIFI are 4 (equivalent to an out- consumption bills, it is not recorded. To transparency of tariffs index age of one hour each quarter) or below, calculate the present value of the lost Doing Business uses the system average 1 additional point is assigned. Finally, if interest earnings, the end-2015 lending interruption duration index (SAIDI) SAIDI and SAIFI are 1 (equivalent to an rates from the International Monetary and the system average interruption outage of one hour per year) or below, Fund’s International Financial Statistics are frequency index (SAIFI) to measure the 1 more point is assigned. used. In cases where the security deposit duration and frequency of power outages ƒƒ What tools are used by the distribution is returned with interest, the difference in each of the selected locations. SAIDI is utility to monitor power outages. A between the lending rate and the interest the average total duration of outages over score of 1 is assigned if the utility uses paid by the utility is used to calculate the the course of a year for each customer automated tools, such as the super- present value. served, while SAIFI is the average number visory control and data acquisition of service interruptions experienced by a (SCADA) system; 0 if it relies solely on In some economies the security deposit customer in a year. Annual data (covering calls from customers and records and can be put up in the form of a bond: the the calendar year) are collected from dis- monitors outages manually. company can obtain from a bank or an tribution utility companies and national ƒƒ What tools are used by the distribu- insurance company a guarantee issued regulators on SAIDI and SAIFI. Both tion utility to restore power supply. A on the assets it holds with that financial SAIDI and SAIFI estimates include load score of 1 is assigned if the utility uses institution. In contrast to the scenario shedding. automated tools, such as the SCADA in which the customer pays the deposit system; 0 if it relies solely on manual in cash to the utility, in this scenario the A location is eligible to obtain a score on resources for service restoration, company does not lose ownership con- the reliability of supply and transparency such as field crews or maintenance trol over the full amount and can continue of tariffs index if the utility collects data personnel. using it. In return the company will pay on electricity outages (measuring the ƒƒ Whether a regulator—that is, an the bank a commission for obtaining average total duration of outages per entity separate from the utility— the bond. The commission charged may customer and the average number of monitors the utility’s performance vary depending on the credit standing of outages per customer) and the SAIDI on reliability of supply. A score of 1 the company. The best possible credit value is below a threshold of 100 hours is assigned if the regulator performs standing and thus the lowest possible and the SAIFI value below a threshold of periodic or real-time reviews; 0 if it commission are assumed. Where a bond 100 outages. does not monitor power outages can be put up, the value recorded for the and does not require the utility to deposit is the annual commission times Because the focus is on measuring the report on reliability of supply. the five years assumed to be the length reliability of the electricity supply, a ƒƒ Whether financial deterrents exist to of the contract. If both options exist, the location is not eligible to obtain a score limit outages. A score of 1 is assigned cheaper alternative is recorded. if outages are too frequent or long-lasting if the utility compensates customers for the electricity supply to be consid- when outages exceed a certain cap, In Honduras in June 2015 a customer ered reliable—that is, if the SAIDI value if the utility is fined by the regulator requesting a 140-kVA electricity connec- exceeds the threshold of 100 hours or the when outages exceed a certain cap or tion would have had to put up a security SAIFI value exceeds the threshold of 100 if both these conditions are met; 0 if deposit of 126,894 Honduran lempiras outages.2 A location is also not eligible no compensation mechanism of any (US$5,616) in cash or check, and the kind is available. 78 DOING BUSINESS IN KAZAKHSTAN 2017 ƒƒ Whether electricity tariffs are trans- the threshold of 100. For Papua New Countries,” Global Indicators Group, World parent and easily available. A score Guinea, for example, the SAIDI value Bank Group, Washington, DC, 2015) and is of 1 is assigned if effective tariffs are (211) exceeds the threshold. Based on the adopted here with minor changes. available online and customers are criteria established, Papua New Guinea notified of a change in tariff a full bill- cannot receive a score on the index even ing cycle (that is, one month) ahead though the country has regulatory moni- REGISTERING PROPERTY of time; 0 if not. toring of outages and there is a compen- sation mechanism for customers. Doing Business records the full sequence The index ranges from 0 to 8, with higher of procedures necessary for a business values indicating greater reliability of If an economy issued no electricity con- (the buyer) to purchase a property from electricity supply and greater transpar- nections between June 2015 and June another business (the seller) and to ency of tariffs. In the Czech Republic, 2016, or if electricity is not provided transfer the property title to the buyer’s for example, the distribution utility com- during that period, the economy receives name so that the buyer can use the pany PREdistribuce uses SAIDI and SAIFI a “no practice” mark on the procedures, property for expanding its business, use metrics to monitor and collect data on time and cost indicators. In addition, a the property as collateral in taking new power outages. In 2015 the average total “no practice” economy receives a score loans or, if necessary, sell the property duration of power outages in Prague was of 0 on the reliability of supply and to another business. It also measures 0.49 hours per customer and the average transparency of tariffs index even if the the time and cost to complete each of number of outages experienced by a cus- utility has in place automated systems these procedures. In addition, Doing tomer was 0.33. Both SAIDI and SAIFI for monitoring and restoring outages, Business measures the quality of the land are below the threshold and indicate that there is regulatory oversight of utilities administration system in each economy. there was less than one outage a year per on power interruptions, and tariffs are The quality of land administration customer, for a total duration of less than publicly available. index has five dimensions: reliability of one hour. So the Czech Republic not only infrastructure, transparency of informa- meets the eligibility criteria for obtaining a Price of electricity tion, geographic coverage, land dispute score on the index, it also receives a score Doing Business measures the price of resolution and equal access to property of 3 on the first component of the index. electricity but does not include these data rights. The utility uses an automated system when calculating the distance to frontier (SCADA) to identify faults in the network score for getting electricity or the ranking The ranking of locations on the ease of (a score of 1) and restore electricity ser- on the ease of getting electricity. (The registering property is determined by vice (a score of 1). The national regulator data are available on the Doing Business sorting their distance to frontier scores actively reviews the utility’s performance website, at http://www.doingbusiness for registering property. These scores in providing reliable electricity service .org.) The data on electricity prices are are the simple average of the distance (a score of 1) and requires the utility to based on standardized assumptions to to frontier scores for each of the compo- compensate customers if outages last ensure comparability across locations nent indicators (figure 7.7). longer than a maximum period defined and economies. by the regulator (a score of 1). Customers EFFICIENCY OF TRANSFERRING are notified of a change in tariffs ahead of The price of electricity is measured in PROPERTY the next billing cycle and can easily check US$ cents per kilowatt-hour. On the basis As recorded by Doing Business, the pro- effective tariffs online (a score of 1). of the assumptions about monthly con- cess of transferring property starts with Adding these numbers gives the Czech sumption, a monthly bill for a commercial obtaining the necessary documents, Republic a score of 8 on the reliability of warehouse in each of the selected loca- such as a copy of the seller’s title if nec- supply and transparency of tariffs index. tions is computed for the month of March. essary, and conducting due diligence if As noted, the warehouse uses electricity required. The transaction is considered On the other hand, several economies 30 days a month, from 9:00 a.m. to 5:00 complete when it is opposable to third receive a score of 0 on the reliability of p.m., so different tariff schedules may parties and when the buyer can use supply and transparency of tariffs index. apply if a time-of-use tariff is available. the property, use it as collateral for a The reason may be that outages occur bank loan or resell it (figure 7.8). Every more than once a month and none of The data details on getting electricity can be procedure required by law or necessary the mechanisms and tools measured found at http://www.doingbusiness.org. The in practice is included, whether it is the by the index are in place. An economy initial methodology was developed by Carolin responsibility of the seller or the buyer may also receive a score of 0 if either the Geginat and Rita Ramalho (“Electricity or must be completed by a third party SAIDI or SAIFI value (or both) exceeds Connections and Firm Performance in 183 on their behalf. Local property lawyers, DATA NOTES 79 ƒƒ Are 100% domestically and privately ƒƒ Will not be used for special purposes, FIGURE 7.7  Registering property: efficiency and quality of land owned. and no special permits, such as for administration system ƒƒ Have 50 employees each, all of whom residential use, industrial plants, are nationals. waste storage or certain types of agri- Rankings are based on distance to frontier scores for four indicators ƒƒ Perform general commercial activities. cultural activities, are required. ƒƒ Has no occupants, and no other party Days to transfer property between two Cost to transfer property, as % of Assumptions about the property holds a legal interest in it. local companies property value The property: ƒƒ Has a value of 50 times income per Procedures capita. The sale price equals the value. A procedure is defined as any interaction 25% 25% ƒƒ Is fully owned by the seller. of the buyer or the seller, their agents (if Time Cost ƒƒ Has no mortgages attached and has an agent is legally or in practice required) 25% 25% Procedures Quality of land been under the same ownership for or the property with external parties, administration index the past 10 years. including government agencies, inspec- ƒƒ Is registered in the land registry tors, notaries and lawyers. Interactions Steps to transfer Reliability, or cadastre, or both, and is free of between company officers and employees property so that it transparency and can be sold or used coverage of land title disputes. are not considered. All procedures that are as collateral administration system; ƒƒ Is located in a periurban commercial legally or in practice required for register- protection against land disputes; equal access zone, and no rezoning is required. ing property are recorded, even if they may to property rights ƒƒ Consists of land and a building. The be avoided in exceptional cases (table 7.5). land area is 557.4 square meters It is assumed that the buyer follows the (6,000 square feet). A two-story fastest legal option available and used by notaries and property registries provide warehouse of 929 square meters the majority of property owners. Although information on procedures as well as (10,000 square feet) is located on the the buyer may use lawyers or other pro- the time and cost to complete each of land. The warehouse is 10 years old, is fessionals where necessary in the registra- them. in good condition and complies with tion process, it is assumed that the buyer all safety standards, building codes does not employ an outside facilitator in To make the data comparable across and other legal requirements. It has locations, several assumptions about no heating system. The property of the parties to the transaction, the prop- land and building will be transferred in TABLE 7.5  What do the indicators on erty and the procedures are used. its entirety. the efficiency of transferring property ƒƒ Will not be subject to renovations measure? Assumptions about the parties or additional building following Procedures to legally transfer title on The parties (buyer and seller): the purchase. immovable property (number) ƒƒ Are limited liability companies (or the ƒƒ Has no trees, natural water sources, Preregistration procedures (for example, checking legal equivalent). natural reserves or historical monu- for liens, notarizing sales agreement, paying property transfer taxes) Are located in the periurban area of ƒƒ ments of any kind. Registration procedures in the selected location the selected location. Postregistration procedures (for example, filing title with municipality) FIGURE 7.8 What are the time, cost and number of procedures required to transfer Time required to complete each procedure property between two local companies? (calendar days) Does not include time spent gathering Cost information (% of property value) Each procedure starts on a separate day— Buyer can use the property, though procedures that can be fully completed resell it or online are an exception to this rule use it as collateral Procedure considered completed once final Number of document is received Land & two-story procedures No prior contact with officials warehouse Cost required to complete each procedure Seller with property (% of property value) registered and no title disputes Time Official costs only, no bribes Preregistration Registration Postregistration (days) No value added or capital gains taxes included 80 DOING BUSINESS IN KAZAKHSTAN 2017 the registration process unless legally or in of information, geographic coverage, land 1 if the majority are scanned; 0 if the practice required to do so. dispute resolution and equal access to majority are kept in paper format. property rights indices (table 7.6). Data ƒƒ Whether there is a geographic informa- Time are collected for each of the selected tion system—an electronic database for Time is recorded in calendar days. The locations. recording boundaries, checking plans measure captures the median duration and providing cadastral information. A that property lawyers, notaries or registry Reliability of infrastructure index score of 1 is assigned if yes; 0 if no. officials indicate is necessary to complete The reliability of infrastructure index has ƒƒ How the land ownership registry and a procedure. It is assumed that the mini- six components: mapping agency are linked. A score mum time required for each procedure is ƒƒ How land titles are kept at the registry of 1 is assigned if information about one day, except for procedures that can of the selected location. A score of 2 land ownership and maps are kept in a be fully completed online, for which the is assigned if the majority of land titles single database or in linked databases; time required is recorded as half a day. are fully digital; 1 if the majority are 0 if there is no connection between the Although procedures may take place scanned; 0 if the majority are kept in different databases. simultaneously, they cannot start on the paper format. ƒƒ How immovable property is identified. same day, again with the exception of ƒƒ Whether there is an electronic data- A score of 1 is assigned if there is a procedures that can be fully completed base for checking for encumbrances. unique number to identify properties online. It is assumed that the buyer does A score of 1 is assigned if yes; 0 if no. for the majority of land plots; 0 if there not waste time and commits to complet- ƒƒ How maps of land plots are kept at are multiple identifiers. ing each remaining procedure without the mapping agency of the selected delay. If a procedure can be accelerated location. A score of 2 is assigned if The index ranges from 0 to 8, with for an additional cost, the fastest legal the majority of maps are fully digital; higher values indicating a higher qual- procedure available and used by the ity of infrastructure for ensuring the majority of property owners is chosen. If procedures can be undertaken simul- TABLE 7.6  What do the indicators on the quality of land administration measure? taneously, it is assumed that they are. Reliability of infrastructure index (0–8) It is assumed that the parties involved are aware of all requirements and their Type of system for archiving information on land ownership sequence from the beginning. Time Availability of electronic database to check for encumbrances spent on gathering information is not Type of system for archiving maps considered. Availability of geographic information system Link between property ownership registry and mapping system Cost Transparency of information index (0–6) Cost is recorded as a percentage of the Accessibility of information on land ownership property value, assumed to be equivalent to 50 times income per capita. Only offi- Accessibility of maps of land plots cial costs required by law are recorded, Publication of fee schedules, lists of registration documents, service standards including fees, transfer taxes, stamp Availability of a specific and separate mechanism for complaints duties and any other payment to the Publication of statistics about the number of property transactions property registry, notaries, public agen- Geographic coverage index (0–8) cies or lawyers. Other taxes, such as Coverage of land registry at the level of the selected location and the economy capital gains tax or value added tax, are excluded from the cost measure. Both Coverage of mapping agency at the level of the selected location and the economy costs borne by the buyer and those borne Land dispute resolution index (0–8) by the seller are included. If cost esti- Legal framework for immovable property registration mates differ among sources, the median Mechanisms to prevent and resolve land disputes reported value is used. Equal access to property rights index (-2–0) Unequal ownership rights to property between unmarried men and women QUALITY OF LAND Unequal ownership rights to property between married men and women ADMINISTRATION The quality of land administration index Quality of land administration index (0–30) is composed of five other indices: the Sum of the reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution and equal access to property rights indices reliability of infrastructure, transparency DATA NOTES 81 reliability of information on property Whether the agency in charge of ƒƒ and separate mechanism for filing a titles and boundaries. In Turkey, for immovable property registration complaint; 0 if there is only a general example, the land registry offices commits to delivering a legally bind- mechanism or no mechanism. in Istanbul maintain titles in a fully ing document that proves property digital format (a score of 2) and have ownership within a specific time The index ranges from 0 to 6, with higher a fully electronic database to check frame. A score of 0.5 is assigned if values indicating greater transparency for encumbrances (a score of 1). the service standard is accessible in the land administration system. In the The Cadastral Directorate offices in online or on a public board; 0 if it is Netherlands, for example, anyone who Istanbul have digital maps (a score of not made available to the public or pays a fee can consult the land owner- 2), and the Geographical Information if it can be obtained only in person. ship database (a score of 1). Information Directorate has a public portal allow- ƒƒ Whether there is a specific and sepa- can be obtained at the office, by mail or ing users to check the plans and rate mechanism for filing complaints online using the Kadaster website (http:/ / cadastral information on parcels along about a problem that occurred at www.kadaster.nl). Anyone can also get with satellite images (a score of 1). the agency in charge of immovable information online about the list of docu- Databases about land ownership and property registration. A score of 1 ments to submit for property registration maps are linked to each other through is assigned if there is a specific and (a score of 0.5), the fee schedule for reg- the TAKBIS system, an integrated separate mechanism for filing a istration (a score of 0.5) and the service information system for the land reg- complaint; 0 if there is only a general standards (a score of 0.5). And anyone istry offices and cadastral offices (a mechanism or no mechanism. facing a problem at the land registry can score of 1). Finally, there is a unique ƒƒ Whether there are publicly available file a complaint or report an error by filling identifying number for properties (a official statistics tracking the number in a specific form online (a score of 1). In score of 1). Adding these numbers of transactions at the immovable addition, the Kadaster makes statistics gives Turkey a score of 8 on the reli- property registration agency. A score about land transactions available to the ability of infrastructure index. of 0.5 is assigned if statistics are pub- public, reporting a total of 178,293 prop- lished about property transfers in the erty transfers in Amsterdam in 2015 (a Transparency of information index selected location in the past calendar score of 0.5). Moreover, anyone who pays The transparency of information index year; 0 if no such statistics are made a fee can consult online cadastral maps has 10 components: publicly available. (a score of 0.5). It is also possible to get ƒƒ Whether information on land own- ƒƒ Whether maps of land plots are made public access to the fee schedule for map ership is made publicly available. A publicly available. A score of 0.5 is consultation (a score of 0.5), the service score of 1 is assigned if information assigned if maps are accessible by standards for delivery of an updated plan on land ownership is accessible by anyone; 0 if access is restricted. (a score of 0.5) and a specific mechanism anyone; 0 if access is restricted. ƒƒ Whether the fee schedule for access- for filing a complaint about a map (a score ƒƒ Whether the list of documents ing maps is made publicly available. of 0.5). Adding these numbers gives the required for completing any type A score of 0.5 is assigned if the fee Netherlands a score of 6 on the transpar- of property transaction is made schedule is accessible online or on a ency of information index. publicly available. A score of 0.5 public board or free of charge; 0 if it is is assigned if the list of documents not made available to the public or if it Geographic coverage index is accessible online or on a public can be obtained only in person. The geographic coverage index has four board; 0 if it is not made available ƒƒ Whether the mapping agency com- components: to the public or if it can be obtained mits to delivering an updated map How complete the coverage of the ƒƒ only in person. within a specific time frame. A score land registry is at the level of the ƒƒ W hether the fee schedule for com- of 0.5 is assigned if the service stan- selected location. A score of 2 is pleting any type of property trans- dard is accessible online or on a public assigned if all privately held land plots action is made publicly available. A board; 0 if it is not made available to in the location are formally registered score of 0.5 is assigned if the fee the public or if it can be obtained only at the land registry; 0 if not.. schedule is accessible online or on in person. ƒƒ How complete the coverage of the a public board or is free of charge; ƒƒ Whether there is a specific and sepa- land registry is at the level of the 0 if it is not made available to the rate mechanism for filing complaints economy. A score of 2 is assigned public or if it can be obtained only about a problem that occurred at if all privately held land plots in the in person. the mapping agency. A score of economy are formally registered at 0.5 is assigned if there is a specific the land registry; 0 if not.. 82 DOING BUSINESS IN KAZAKHSTAN 2017 ƒƒ How complete the coverage of the registry. A score of 0.5 is assigned if by the state (a score of 0.5) and has a mapping agency is at the level of yes; 0 if no. compensation mechanism to cover for the selected location. A score of 2 is ƒƒ Whether the legal system requires losses incurred by parties who engaged assigned if all privately held land plots verification of the legal validity of the in good faith in a property transaction in the location are mapped; 0 if not.. documents necessary for a property based on an error by the registry (a score ƒƒ How complete the coverage of the transaction. A score of 0.5 is assigned of 0.5). A notary verifies the legal validity mapping agency is at the level of the if there is a review of legal validity, of the documents in a property transac- economy. A score of 2 is assigned either by the registrar or by a profes- tion (a score of 0.5) and the identity of if all privately held land plots in the sional (such as a notary or lawyer); 0 the parties (a score of 0.5), in accordance economy are mapped; 0 if not. if there is no review. with the Law on the Notary Office (Law ƒƒ Whether the legal system requires I-2882). Lithuania has a national data- The index ranges from 0 to 8, with higher verification of the identity of the par- base to verify the accuracy of identity values indicating greater geographic ties to a property transaction. A score documents (a score of 1). In a land dis- coverage in land ownership registration of 0.5 is assigned if there is verification pute between two Lithuanian companies and cadastral mapping. In the Republic of identity, either by the registrar or over the tenure rights of a property worth of Korea, for example, all privately held by a professional (such as a notary or US$745,000, the Vilnius District Court land plots are formally registered at the lawyer); 0 if there is no verification. gives a decision in less than one year (a land registry in Seoul (a score of 2) and ƒƒ Whether there is a national database score of 3). Finally, statistics about land in the economy as a whole (a score of 2). to verify the accuracy of identity docu- disputes are collected and published; In addition, all privately held land plots ments. A score of 1 is assigned if such a there were a total of seven land disputes are mapped in Seoul (a score of 2) and national database is available; 0 if not. in the country in 2015 (a score of 0.5). in the economy as a whole (a score of ƒƒ How much time it takes to obtain a Adding these numbers gives Lithuania a 2). Adding these numbers gives Korea decision from a court of first instance score of 8 on the land dispute resolution a score of 8 on the geographic coverage (without appeal) in a standard land index. index. dispute between two local businesses over tenure rights worth 50 times Equal access to property Land dispute resolution index income per capita and located in rights index The land dispute resolution index assess- the selected location. A score of 3 is The equal access to property rights index es the legal framework for immovable assigned if it takes less than one year; has two components: property registration and the accessibility 2 if it takes between one and two ƒƒ Whether unmarried men and unmar- of dispute resolution mechanisms. The years; 1 if it takes between two and ried women have equal ownership index has eight components: three years; 0 if it takes more than rights to property. A score of −1 is W hether the law requires that all ƒƒ three years. assigned if there are unequal ownership property sale transactions be reg- ƒƒ Whether there are publicly available rights to property; 0 if there is equality. istered at the immovable property statistics on the number of land ƒƒ Whether married men and married registry to make them opposable disputes in the first instance. A score women have equal ownership rights to third parties. A score of 1.5 is of 0.5 is assigned if statistics are to property. A score of −1 is assigned assigned if yes; 0 if no. published about land disputes in the if there are unequal ownership rights Whether the formal system of ƒƒ economy in the past calendar year; 0 to property; 0 if there is equality. immovable property registration is if no such statistics are made publicly subject to a guarantee. A score of 0.5 available. Ownership rights cover the ability to is assigned if either a state or private manage, control, administer, access, guarantee over immovable property The index ranges from 0 to 8, with higher encumber, receive, dispose of and trans- registration is required by law; 0 if no values indicating greater protection fer property. Each restriction is consid- such guarantee is required. against land disputes. In Lithuania, for ered if there is a differential treatment ƒƒ Whether there is a specific compen- example, according to the Civil Code and for men and women in the law consider- sation mechanism to cover for losses the Law on the Real Property Register, ing the default marital property regime. incurred by parties who engaged in property transactions must be registered For customary land systems, equality is good faith in a property transaction at the land registry to make them oppos- assumed unless there is a general legal based on erroneous information able to third parties (a score of 1.5). The provision stating a differential treatment. certified by the immovable property property transfer system is guaranteed DATA NOTES 83 The index ranges from −2 to 0, with 100 a year), leads to higher nonagricultural incomes. Ujjayant Chakravorty, Martino higher values indicating greater inclu- Pelli and Beyza P. Ural Marchand, “Does the siveness of property rights. In Mali, for Quality of Electricity Matter? Evidence from example, unmarried men and unmarried Rural India,” FEEM Working Paper 11.2014 (Fondazione Eni Enrico Mattei, Milan, 2014). women have equal ownership rights to property (a score of 0). The same applies to married men and married women, who can use their property in the same way (a score of 0). Adding these numbers gives Mali a score of 0 on the equal access to property rights index—which indicates equal property rights between men and women. In con- trast, in Swaziland unmarried men and unmarried women do not have equal ownership rights to property according to the Deeds Registry Act of 1968, article 16 (a score of −1). The same applies to married men and married women, who are not permitted to use their property in the same way according to the Deeds Registry Act of 1968, articles 16 and 45 (a score of −1). Adding these numbers gives Swaziland a score of −2 on the equal access to property rights index— which indicates unequal property rights between men and women. Quality of land administration index The quality of land administration index is the sum of the scores on the reli- ability of infrastructure, transparency of information, geographic coverage, land dispute resolution and equal access to property rights indices. The index ranges from 0 to 30, with higher values indicat- ing better quality of the land administra- tion system. The data details on registering property can be found at http://www.doingbusiness.org. NOTES 1. For more information, see the data notes in the Doing Business 2017 report. 2. According to a study based on evidence from India between 1994 and 2005, a higher- quality electricity supply, with no more than two outages a week (or no more than about 84 DOING BUSINESS IN KAZAKHSTAN 2017 Indicator Snapshots Starting a business Cost Paid-in minimum Distance to Ease of starting a Procedures Time (% of income per capital frontier score business Location (number) (days) capita) (% of income per capita) (0–100) (rank) Aktobe 6 10 2.60 0.0 89.94 8 Almaty city 5 9 0.34 0.0 91.94 5 Astana 5 8.5 0.32 0.0 92.07 1 East Kazakhstan (Oskemen) 6 10 1.26 0.0 90.10 7 Karagandy 5 9 0.31 0.0 91.94 3 Kostanay 6 10 0.99 0.0 90.14 6 Pavlodar 5 9 0.32 0.0 91.94 4 South Kazakhstan 5 9 0.27 0.0 91.95 2 (Shymkent) Note: The procedures to start a business are the same for men and women across all 8 locations measured. Dealing with construction permits Cost Building quality Distance to Ease of dealing with Procedures Time (% of warehouse control index frontier score construction permits Location (number) (days) value) (0–15) (0–100) (rank) Aktobe 19 132 2.1 13 72.38 5 Almaty city 19 123 1.7 13 73.61 1 Astana 18 144 2.2 13 72.45 4 East Kazakhstan (Oskemen) 19 179 2.5 13 68.54 7 Karagandy 19 128 2.3 13 72.48 3 Kostanay 19 133 1.6 13 73.00 2 Pavlodar 19 137 2.3 13 71.81 6 South Kazakhstan 19 205 2.2 13 67.03 8 (Shymkent) INDICATOR SNAPSHOTS 85 Getting electricity Reliability of supply Cost and transparency of Distance to Ease of getting Procedures Time (% of income per tariffs index frontier score electricity Location (number) (days) capita) (0–8) (0–100) (rank) Aktobe 7 61 51.5 5 69.13 2 Almaty city 7 77 50.6 7 73.64 1 Astana 9 95 62.7 0 41.44 8 East Kazakhstan (Oskemen) 8 84 41.2 5 62.49 4 Karagandy 8 79 49.2 0 47.38 7 Kostanay 7 71 80.1 5 67.95 3 Pavlodar 8 80 83.1 4 59.67 5 South Kazakhstan 7 72 82.4 0 52.21 6 (Shymkent) Registering property Quality of land Distance to Ease of registering Procedures Time Cost administration index frontier score property Location (number) (days) (% of property value) (0–30) (0–100) (rank) Aktobe 3 4.5 0.1 16 84.08 7 Almaty city 3 3.5 0.1 16 84.20 1 Astana 3 4.5 0.1 16 84.08 7 East Kazakhstan (Oskemen) 3 3.5 0.1 16 84.20 1 Karagandy 3 3.5 0.1 16 84.20 1 Kostanay 3 3.5 0.1 16 84.20 1 Pavlodar 3 3.5 0.1 16 84.20 1 South Kazakhstan 3 3.5 0.1 16 84.20 1 (Shymkent) 86 DOING BUSINESS IN KAZAKHSTAN 2017 Location Snapshots AKTOBE Aggregate rank (1–8): 2 Distance to frontier 4 indicator average (0–100): 78.88 Population: 834,768 Starting a business (rank) 8 Getting electricity (rank) 2 Distance to frontier score (0–100) 89.94 Distance to frontier score (0–100) 69.13 Procedures (number) 6 Procedures (number) 7 Time (days) 10 Time (days) 61 Cost (% of income per capita) 2.60 Cost (% of income per capita) 51.5 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 5 Dealing with construction permits (rank) 5 Registering property (rank) 7 Distance to frontier score (0–100) 72.38 Distance to frontier score (0–100) 84.08 Procedures (number) 19 Procedures (number) 3 Time (days) 132 Time (days) 4.5 Cost (% of warehouse value) 2.1 Cost (% of property value) 0.1 Building quality control index (0–15) 13 Quality of land administration index (0–30) 16.5 ALMATY CITY Aggregate rank (1–8): 1 Distance to frontier 4 indicator average (0–100): 80.85 Population: 1,703,481 Starting a business (rank) 5 Getting electricity (rank) 1 Distance to frontier score (0–100) 91.94 Distance to frontier score (0–100) 73.64 Procedures (number) 5 Procedures (number) 7 Time (days) 9 Time (days) 77 Cost (% of income per capita) 0.34 Cost (% of income per capita) 50.6 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 7 Dealing with construction permits (rank) 1 Registering property (rank) 1 Distance to frontier score (0–100) 73.61 Distance to frontier score (0–100) 84.20 Procedures (number) 19 Procedures (number) 3 Time (days) 123 Time (days) 3.5 Cost (% of warehouse value) 1.7 Cost (% of property value) 0.1 Building quality control index (0–15) 13 Quality of land administration index (0–30) 16.5 ASTANA Aggregate rank (1–8): 8 Distance to frontier 4 indicator average (0–100): 72.51 Population 853,153 Starting a business (rank) 1 Getting electricity (rank) 8 Distance to frontier score (0–100) 92.07 Distance to frontier score (0–100) 41.44 Procedures (number) 5 Procedures (number) 9 Time (days) 8.5 Time (days) 95 Sources : Doing Business database; Committee on Statistics, Ministry of National Economy of the Republic of Kazakhstan (for population data). Note: The procedures to start a business are the same for men and women across all 8 locations. LOCATION SNAPSHOTS 87 Cost (% of income per capita) 0.32 Cost (% of income per capita) 62.7 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 0 Dealing with construction permits (rank) 4 Registering property (rank) 7 Distance to frontier score (0–100) 72.45 Distance to frontier score (0–100) 84.08 Procedures (number) 18 Procedures (number) 3 Time (days) 144 Time (days) 4.5 Cost (% of warehouse value) 2.2 Cost (% of property value) 0.1 Building quality control index (0–15) 13 Quality of land administration index (0–30) 16.5 EAST KAZAKHSTAN (OSKEMEN) Aggregate rank (1–8): 5 Distance to frontier 4 indicator average (0–100): 76.33 Population: 1,395,797 Starting a business (rank) 7 Getting electricity (rank) 4 Distance to frontier score (0–100) 90.10 Distance to frontier score (0–100) 62.49 Procedures (number) 6 Procedures (number) 8 Time (days) 10 Time (days) 84 Cost (% of income per capita) 1.26 Cost (% of income per capita) 41.2 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 5 Dealing with construction permits (rank) 7 Registering property (rank) 1 Distance to frontier score (0–100) 68.54 Distance to frontier score (0–100) 84.20 Procedures (number) 19 Procedures (number) 3 Time (days) 179 Time (days) 3.5 Cost (% of warehouse value) 2.5 Cost (% of property value) 0.1 Building quality control index (0–15) 13 Quality of land administration index (0–30) 16.5 KARAGANDY Aggregate rank (1–8): 6 Distance to frontier 4 indicator average (0–100): 74.00 Population: 1,384,889 Starting a business (rank) 3 Getting electricity (rank) 7 Distance to frontier score (0–100) 91.94 Distance to frontier score (0–100) 47.38 Procedures (number) 5 Procedures (number) 8 Time (days) 9 Time (days) 79 Cost (% of income per capita) 0.31 Cost (% of income per capita) 49.2 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 0 Dealing with construction permits (rank) 3 Registering property (rank) 1 Distance to frontier score (0–100) 72.48 Distance to frontier score (0–100) 84.20 Procedures (number) 19 Procedures (number) 3 Time (days) 128 Time (days) 3.5 Cost (% of warehouse value) 2.3 Cost (% of property value) 0.1 Building quality control index (0–15) 13 Quality of land administration index (0–30) 16.5 Sources : Doing Business database; Committee on Statistics, Ministry of National Economy of the Republic of Kazakhstan (for population data). Note: The procedures to start a business are the same for men and women across all 8 locations. 88 DOING BUSINESS IN KAZAKHSTAN 2017 KOSTANAY Aggregate rank (1–8): 3 Distance to frontier 4 indicator average (0–100): 78.82 Population: 883,640 Starting a business (rank) 6 Getting electricity (rank) 3 Distance to frontier score (0–100) 90.14 Distance to frontier score (0–100) 67.95 Procedures (number) 6 Procedures (number) 7 Time (days) 10 Time (days) 71 Cost (% of income per capita) 0.99 Cost (% of income per capita) 80.1 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 5 Dealing with construction permits (rank) 2 Registering property (rank) 1 Distance to frontier score (0–100) 73.00 Distance to frontier score (0–100) 84.20 Procedures (number) 19 Procedures (number) 3 Time (days) 133 Time (days) 3.5 Cost (% of warehouse value) 1.6 Cost (% of property value) 0.1 Building quality control index (0–15) 13 Quality of land administration index (0–30) 16.5 PAVLODAR Aggregate rank (1–8): 4 Distance to frontier 4 indicator average (0–100): 76.90 Population: 758,479 Starting a business (rank) 4 Getting electricity (rank) 5 Distance to frontier score (0–100) 91.94 Distance to frontier score (0–100) 59.67 Procedures (number) 5 Procedures (number) 8 Time (days) 9 Time (days) 80 Cost (% of income per capita) 0.32 Cost (% of income per capita) 83.1 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 4 Dealing with construction permits (rank) 6 Registering property (rank) 1 Distance to frontier score (0–100) 71.81 Distance to frontier score (0–100) 84.20 Procedures (number) 19 Procedures (number) 3 Time (days) 137 Time (days) 3.5 Cost (% of warehouse value) 2.3 Cost (% of property value) 0.1 Building quality control index (0–15) 13 Quality of land administration index (0–30) 16.5 SOUTH KAZAKHSTAN (SHYMKENT) Aggregate rank (1–8): 7 Distance to frontier 4 indicator average (0–100): 73.85 Population: 2,841,307 Starting a business (rank) 2 Getting electricity (rank) 6 Distance to frontier score (0–100) 91.95 Distance to frontier score (0–100) 52.21 Procedures (number) 5 Procedures (number) 7 Time (days) 9 Time (days) 72 Cost (% of income per capita) 0.27 Cost (% of income per capita) 82.4 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 0 Dealing with construction permits (rank) 8 Registering property (rank) 1 Distance to frontier score (0–100) 67.03 Distance to frontier score (0–100) 84.20 Procedures (number) 19 Procedures (number) 3 Time (days) 205 Time (days) 3.5 Cost (% of warehouse value) 2.2 Cost (% of property value) 0.1 Building quality control index (0–15) 13 Quality of land administration index (0–30) 16.5 Sources : Doing Business database; Committee on Statistics, Ministry of National Economy of the Republic of Kazakhstan (for population data). Note: The procedures to start a business are the same for men and women across all 8 locations. Indicator Details STARTING A BUSINESS Procedures required to start a business, by location Standard company legal form: Limited Liability Partnership East South Minimum capital requirement: KZT 0 Kazakhstan Kazakhstan Data as of: December 2016 Aktobe Almaty city Astana (Oskemen) Karagandy Kostanay Pavlodar (Shymkent)  etain a lawyer to prepare the incorporation documents 1. R Time (days) 1 n.a. n.a. 1 n.a. 1 n.a. n.a. Cost (KZT) 50,000 n.a. n.a. 20,000 n.a. 15,000 n.a. n.a. 2. State registration of legal entity on egov (online) Time (days) 1 1 0 .5 1 1 1 1 1 Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost 3. Make a company seal Time (days) 1 1 1 1 1 1 1 1 Cost (KZT) 5,667 6,200 5,820 6,500 5,650 5,407 5,845 4,800  egister for VAT at the State Revenue Committee of the 4. R Time (days) 7 7 7 7 7 7 7 7 Ministry of Finance* Cost (KZT) 1,125 1,125 1,125 1,125 1,125 1,125 1,125 1,125 5. Provide employees with mandatory accident insurance* Time (days) 2 1 2 1 1 1 1 1 Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost 6. Open the company account in the bank* Time (days) 1 1 1 1 1 1 1 1 Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost INDICATOR DETAILS Source: Doing Business database. * Takes place simultaneously with another procedure. Note: The data details can be found for each location at: http//doingbusiness.org/kazakhstan. The procedures to start a business are the same for men and women across all 8 locations measured. n.a. = not applicable. 89 90 REGISTERING PROPERTY Procedures required to transfer property, by location East South Property value: KZT 109,192,930 Kazakhstan Kazakhstan Data as of: December 2016 Aktobe Almaty city Astana (Oskemen) Karagandy Kostanay Pavlodar (Shymkent) Conduct due diligence on the property Time (days) 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost Notarization of the sale-purchase agreement Time (days) 1 1 1 1 1 1 1 1 Cost (KZT) 36,057 36,057 36,057 36,057 36,057 36,057 36,057 36,057 Registration of the title document at the Department of Justice Time (days) 3 2 3 2 2 2 2 2 Cost (KZT) 21,210 21,210 21,210 21,210 21,210 21,210 21,210 21,210 DOING BUSINESS IN KAZAKHSTAN 2017 Source: Doing Business database. Note: The data details can be found for each location at http//doingbusiness.org/kazakhstan. Quality of land administration index East South Kazakhstan Kazakhstan Aktobe Almaty city Astana (Oskemen) Karagandy Kostanay Pavlodar (Shymkent) Quality of land administration index (0–30) 16.5 16.5 16.5 16.5 16.5 16.5 16.5 16.5 Reliability of infrastructure index (0–8) 6 6 6 6 6 6 6 6 Transparency of information index (0–6) 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 Geographic coverage index (0–8) 0 0 0 0 0 0 0 0 Land dispute resolution index (0–8) 7 7 7 7 7 7 7 7 Equal access to property rights index (-2–0) 0 0 0 0 0 0 0 0 Source: Doing Business database. Note: The data details for the Quality of land administration index can be found for each location at http//doingbusiness.org/kazakhstan. DEALING WITH CONSTRUCTION PERMITS Procedures required to build a warehouse and to connect to utilities, by location East South Warehouse value: KZT 109,192,930 Kazakhstan Kazakhstan Data as of: December 2016 Aktobe Almaty city Astana (Oskemen) Karagandy Kostanay Pavlodar (Shymkent)  equest and obtain land allocation permit from Almaty City 1. R Time (days) n.a. 10 n.a. n.a. n.a. n.a. n.a. n.a. Akimat** Cost (KZT) n.a. no cost n.a. n.a. n.a. n.a. n.a. n.a.  btain geological survey of the land plot 2. O Time (days) 15 14 17 30 26 15 21 30 Cost (KZT) 350,000 375,000 565,766 500,000 378,000 225,000 362,500 325,000 3. Obtain topographic survey of the land plot* Time (days) 7 7 14 7 6 7 14 10 Cost (KZT) 50,000 35,000 45,000 40,000 43,250 22,000 30,000 34,250  equest and obtain technical conditions for the connection to 4. R Time (days) 14 n.a. n.a. 13 11 7 15 24 water supply and sewerage service Cost (KZT) no cost n.a. n.a. no cost no cost no cost no cost no cost  equest and obtain architectural planning assignment (APZ) 5. R Time (days) 15 10 20 22 5 14 14 23 Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost  equest and obtain approval of the architectural drawings 6. R Time (days) 15 25 23 13 14 22 7 17 (Eskiz) from the department of architecture and town planning Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost  equest and obtain clearance of the plans for engineering 7. R Time (days) 14 10 7 9 7 7 14 20 networks from the water and sewerage authority Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost  equest and obtain clearance of the plans for engineering 8. R Time (days) 5 7 14 15 7 11 10 11 networks from the Department of Architecture Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost  ubmit project documentation to the single window to undergo 9. S Time (days) 25 14 30 33 30 23 15 30 expert evaluation Cost (KZT) 416,470 321,248 350,000 402,094 482,940 250,000 362,500 402,094  ire construction supervision company/specialist 10. H Time (days) 1 1 1 1 1 1 1 1 (tekhnadzor)* Cost (KZT) 1,364,912 981,115 1,178,680 1,637,894 1,474,105 1,095,965 1,637,894 1,500,000  otify the Administration of State Architectural and 11. N Time (days) 1 1 1 1 1 1 1 1 Construction Control (GASK) about the start of construction Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost  eceive inspection from Administration of State Architectural 12. R Time (days) 1 1 1 1 1 1 1 1 and Construction Control (GASK) before the start of construction Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost  eceive inspection of the land plot from water and sewerage 13. R Time (days) 1 1 1 1 1 1 1 1 authorities Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost  eceive inspection from water and sewerage authorities and 14. R Time (days) 1 6 1 1 1 1 1 1 connect to the water and sewerage systems Cost (KZT) 45,000 no cost 140,038 39,000 7,600 21,000 15,000 41,010 15. Request a technical passport Time (days) 1 1 1 1 1 1 1 1 INDICATOR DETAILS Cost (KZT) 2,465 26,800 2,465 2,465 2,465 2,465 2,465 2,465 91 92  eceive a technical inspection for the issuance of technical 16. R Time (days) 1 1 1 1 1 1 1 1 passport Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost  btain a technical passport 17. O Time (days) 14 18 15 22 15 14 18 30 Cost (KZT) 68,822 800 68,822 68,822 68,822 68,822 68,822 68,822  egister the Act of Acceptance at the Administration of State 18. R Time (days) 1 1 1 1 1 1 1 1 Architectural and Construction Control (GASK) Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost  egister the Act of Acceptance at the Department 19. R Time (days) 1 1 1 1 1 1 1 1 of Architecture* Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost 20. Register BuildCo's right to the warehouse Time (days) 7 2 10 14 5 12 15 12 Cost (KZT) 21,210 63,630 21,210 21,210 21,210 21,210 21,210 21,210 Source: Doing Business database. DOING BUSINESS IN KAZAKHSTAN 2017 * Takes place simultaneously with another procedure. ** This procedure is required only in Almaty city. Note: The data details can be found for each location at http//doingbusiness.org/kazakhstan. n.a. = not applicable. Building quality control index East South Kazakhstan Kazakhstan Aktobe Almaty city Astana (Oskemen) Karagandy Kostanay Pavlodar (Shymkent) Building quality control index (0–15) 13 13 13 13 13 13 13 13 Quality of building regulations index (0–2) 2 2 2 2 2 2 2 2 Quality control before construction index (0–1) 1 1 1 1 1 1 1 1 Quality control during construction index (0–3) 2 2 2 2 2 2 2 2 Quality control after construction index (0–3) 3 3 3 3 3 3 3 3 Liability and insurance regimes index (0–2) 1 1 1 1 1 1 1 1 Professional certifications index (0–4) 4 4 4 4 4 4 4 4 Source: Doing Business database. Note: The data details for the Building quality control index can be found for each location at http://doingbusiness.org/kazakhstan. GETTING ELECTRICITY Procedures required to obtain a permanent electricity connection and supply for a warehouse, by location East South Kazakhstan Kazakhstan Data as of: December 2016 Aktobe Almaty city Astana (Oskemen) Karagandy Kostanay Pavlodar (Shymkent)  ubmit a connection application to the distribution utility and 1. S Time (days) 4 7 10 5 9 5 7 7 await technical conditions Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost  btain the scheme of the connection route (and collect 2. O Time (days) n.a. n.a. 10 26 25 n.a. 11 n.a. sign-offs)* Cost (KZT) n.a. n.a. no cost no cost 75,000 n.a. 15,000 n.a. 3. Await completion and approval of the project design Time (days) 34 33 26 13 14 41 28 34 Cost (KZT) 350,000 255,000 250,000 150,000 200,000 300,000 300,000 300,000  btain authorization for ground works (excavation, drilling or 4. O Time (days) 3 4 20 9 4 4 6 4 pole installation) Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost 5. Await completion of external works by the electrical contractor Time (days) 9 22 14 11 12 5 12 7 Cost (KZT) 675,000 750,000 1,000,000 650,000 750,000 1,400,000 1,400,000 1,400,000 6. Await and receive an expert opinion on external works Time (days) 3 4 3 5 2 4 4 4 Cost (KZT) 100,000 100,000 100,000 100,000 50,000 50,000 100,000 100,000  ubmit the expert opinion to the distribution utility and await 7. S Time (days) 3 4 4 6 3 6 7 9 inspection and issuance of relevant documents Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost  ign a supply contract with an electricity supplier (and await 8. S Time (days) 5 3 4 9 10 6 5 7 sealing of the meter and energizing of the connection)** Cost (KZT) no cost no cost no cost no cost no cost no cost no cost no cost Apply to the distribution utility for the final connection and 9.  Time (days) n.a. n.a. 4 n.a. n.a. n.a. n.a. n.a. await sealing of the meter and energizing of the connection*** Cost (KZT) n.a. n.a. 20,000 n.a. n.a. n.a. n.a. n.a. Source: Doing Business database. *  This procedure is required in Astana, East Kazakhstan (Oskemen), Karagandy and Pavlodar. In Astana and Pavlodar, this procedure involves only obtaining the scheme of the connection route, while in East Kazakhstan (Oskemen) and Karagandy, it also involves collecting sign-offs from relevant institutions. ** In Aktobe, East Kazakhstan (Oskemen) and Karagandy, this procedure involves signing a supply contract and awaiting for the meter to be sealed and the connection to be energized. In Kostanay, Pavlodar and South Kazakhstan (Shymkent), this procedure involves signing a supply contract and awaiting for the connection to be energized, as the meter is sealed as part of the previous procedure. In Almaty city, this procedure involves only signing a supply contract, as the meter is sealed and the connection energized as part of the previous procedure. In Astana, this procedure involves only signing a supply contract, as the meter is sealed and the connection energized as part of the very last procedure. *** This procedure is required in Astana. Note: The data details can be found for each location at: http//doingbusiness.org/kazakhstan. n.a. = not applicable. INDICATOR DETAILS 93 94 Reliability of supply and transparency of tariffs index East South Kazakhstan Kazakhstan Aktobe Almaty city Astana (Oskemen) Karagandy Kostanay Pavlodar (Shymkent) Reliability of supply and transparency of tariffs index (0–8) 5 7 0 5 0 5 4 0 Total duration and frequency of outages per customer a year (0–3) 3 2 0 3 0 3 2 0 Mechanisms for monitoring outages (0–1) 0 1 1 0 0 0 0 0 Mechanisms for restoring service (0–1) 0 1 1 0 0 0 0 0 Regulatory monitoring (0–1) 1 1 1 1 1 1 1 1 Financial deterrents aimed at limiting outages (0–1) 0 1 0 0 0 0 0 0 Communication of tariffs and tariff changes (0–1) 1 1 1 1 1 1 1 1 Source: Doing Business database. DOING BUSINESS IN KAZAKHSTAN 2017 Note: The data details for the Reliability of supply and transparency of tariffs index can be found for each location at http://doingbusiness.org/kazakhstan. ACKNOWLEDGMENTS 95 Acknowledgments Doing Business in Kazakhstan 2017 was project. The communications campaign participated in the project and provided produced by the Global Indicators Group was designed and led by Indira Chand valuable comments during the consulta- of the Development Economics Vice in collaboration with Shynar Jetpissova tion and data review period. The names Presidency of the World Bank Group. and the Europe and Central Asia External of those wishing to be acknowledged are The team was led by Moussa Traoré Relations Team (comprising Paul listed on the following page and online and Julien Vilquin. It comprised Azizbek Anthony Clare, Meriem Gray, Carl Patrick at www.doingbusiness.org/Kazakhstan. Bakiyev, Diane Davoine, Anushavan Hanlon and Kubat Sydykov). The web- Contributors for Almaty city are acknowl- Hambardzumyan, Joyce Antone Ibrahim, page (http://www.doingbusiness.org/ edged in the annual Doing Business Yelizaveta Krupochkina and Anastasia Kazakhstan) was developed by Kunal report and online at www.doingbusiness Shegay from the Subnational Doing Patel, Kamalesh Sengaonkar, Bishal Raj .org/contributors. Business Unit of the Global Indicators Thakuri and Hashim Zia. The report was Group and Yeraly Beksultan and edited by Alison Strong, and the layout Gaukhar Ospanova from the Trade and produced by Corporate Visions. Competitiveness Global Practice. The study was prepared under the direction The project was requested by the of Mierta Capaul. Francis Ato Brown and Ministry of National Economy (MNE) of Lisa Kaestner provided guidance. the Republic of Kazakhstan. It was imple- mented with the collaboration of the The team is grateful for valuable peer MNE’s Department of Entrepreneurship review comments provided by colleagues Development and the Economic from across the World Bank Group. Marie Research Institute (ERI) of Kazakhstan. Lily Delion and Stefka Slavova reviewed The MNE team was led by Gaukhar the full text. Experts in each of the four Alibekova, under the general direction of indicator areas covered were consulted Galiya Dzholdybaeva. Chingis Torez was during the drafting of the individual chap- the point of contact for the ERI. ters: Taneem Ahad, Husam Mohamed Beides, Laura Sagnori Diniz, Frédéric Data collection was carried out in col- Meunier, Sagita Muco, Tigran Parvanyan, laboration with Grata International Morgann Courtney Reeves and Alessio Law Firm (whose team comprised Zanelli. Liya Akzhanova, Maksim Burak and Aigul Sabyr), and with Sange Research Aigerim Aiguzhina, Gulmira Akshatyrova, Center (whose team comprised Dana Ainoura Alzhanova, Yuriy Valentinovich Boranbaeva, Fatima Jandosova, Janar Avramov, Azat Baidauletov, Frédéric Jandosova and Sabina Serikbaeva). Bustelo, Dariga Chukmaitova, Irina Galimova, Xeniya Kirova, Aisulu More than 300 lawyers, notaries, urban Mailybayeva, Eugene Bempong planners, engineers, architects, contrac- Nyantakyi, Monique Pelloux Patron, tors and public officials contributed to Nadezhda Pronskaya, Valentina Saltane, the Doing Business in Kazakhstan 2017 Pilar Sanchez-Bella, Nazigul Uatayeva study. The team would like to express and Yelizaveta Yanovich provided valu- its special gratitude to the national able assistance at different stages of the and regional government officials who 96 DOING BUSINESS IN KAZAKHSTAN 2017 PRIVATE SECTOR Yerbol Toktarbekov ORYUL LLP Alexander Genrihovich Elektromontazh LLP EAST KAZAKHSTAN Roza Kenekbayeva Department of Architecture Vladislav Sokolov CONTRIBUTORS Erkin Tanibergenov Gulim Ratayeva Administration of Dauren Askarov ShygysEnergoTrade LLP Grata Law Firm LLP State Architectural Department of Energy AKTOBE and Construction and Public Utility Vyacheslav Genadyevich Serik Beyenovich Control (GASK) KazakhstanInterService Sedakov Kazhanova N.T. IE Ablaykhan Daurenbekovich Law Firm Tarbagatai Munai LLP Asel Kadyrbekova Kapenov Bigaisha Sadvakassova Department of Maksat Nurzhanov Department of Justice Tleugabyl Mysayev Law Agency RB LLP Communal Services ADVOCO Law Firm LLP Altayenergoaudit LLP Zhanat Basgarovna Rasul Bulatov Gulzhan Sabalakova Kappassova Bolat Kuanyshev Nikolay Medvedev Law Agency RB LLP Akbulak JSC Department of Justice Department of Justice Medvedev IE Gennady Semenovich Gulmira Zhaksylykovna Valentin Nikolayevich Olzhas Mazhrenov Lyubushkin Pavlychev KARAGANDY Mussina Megatex LLP NVS-Stroitel LLP Akprom LLP Nurlan Mazhitov Department of Justice Anastasiya Nikolayevna Fedor Bodrukhin Department of Energy Malik Madiyarov Natalya Agapiy Ameyeva PREK AktobeEnergoSnab LLP and Public Utility Department of the Yelena Cherkashina Valentina Alexandrovna Ruslan Amirkhanovich Committee for Regulation Sergey Kanibolotskiy Yaroshuk of Natural Monopolies and Energosystema Amina Nurpeisova Assilkhanov PREK Department of Justice Protection of Competition Sergey Prays Vladimir Kozlov Zhumabai Erkin Kyzyruly Energosystema KARAGANDY Aidar Umufzakovich Rosa JSC Amantayer Government for Citizens Bakyt Shalzhanova Insar LLP Government for Citizens state corporation Vladislav Vasilievich Energosystema Dastan Isanov Stroyservice state corporation Dinara Muratova Kairat Kazbayev Asim IE Zaure Bolatovna Nurzhanova Government for Citizens Aliya Shukirovna Kazhibekova state corporation Grata Law Firm LLP Kirill Igorevich Syomin Trend Plus LLP Government for Citizens Business Engineering LLP state corporation Bekzat Abubakirov Dauren Imashev JurPartnerConsult Scientific and Production Murat Kuderinov SOUTH KAZAKHSTAN Law Firm LLP KOSTANAY Center of Land Cadastre Grata Law Firm LLP Department Anara Aibuldinova Nadezhda Shapovalova Vladimir Alekseevich Bazis-K LLP Kanat Kenzhetayevich Ofitsioz LLP Bayambetov Helena Oganova Karaganda Expert Project LLP Nargiza Abdukhalikova Administration of Maksim Anatolevich Simonov 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of Anvar Kadyrov Control (GASK) State Architectural Roza Taizhanova KOSTANAY YuzhenergoProekt Astana Lex Group LLP Makpal Esimtayeva and Construction Azamat Bayekin Control (GASK) Chamber of Notaries Sergey Karpenko Administration of Sergey Udeneev Zerde NPO LLP State Architectural Astana Stroy Invest LLP Daniyar Masalimov Angela Volodkina and Construction Administration of Chamber of Notaries Beket Tursynhanov Control (GASK) Azamat Davletov Zero Max KZ LLP State Architectural Astana-REK Burkitbay Nugmanov Askar Galikhanov and Construction Kasymzhan Raev Energo Lux LLP Administration of Control (GASK) BI Group Didar Nurtisovich Amanzhulov PUBLIC SECTOR State Architectural and Construction Cyril Efremov Department of Architecture Kairat Karsenov Bikom Engineering LLP EPK-Forfait OFFICIALS Control (GASK) Valeriy Ugai Ashirbek Zhanbolat Berik Kuanyshevich Meyrmanuly Sanat Kusainov EPK-Forfait AKTOBE Administration of Department of Architecture Demeu Ast LLP Marlen Maratovich Dautov Kayrat 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