Facilitating business conditions: How improvement of Kazakhstan’s position in Doing Business ranking affects development of small and medium business

Monday, 28 October 2019, 18:36:45

In the new World Bank's Doing Business ranking, Kazakhstan took 25th place, ahead of its own plan for entering the top 25 by 2 years. Initially, this indicator was planned for 2021.

The ease of doing business index is an index for comparing the simplicity of entrepreneurial activity between countries of the world, compiled by the World Bank on the basis of annual data. The index was developed in 2003.

Favorable conditions for doing business are assessed in 10 categories: registration of enterprises, obtaining building permits, connecting to an electricity supply system, registering property, obtaining loans, protecting minority investors, taxation, international trade, enforcing contracts and resolving insolvency.

The leaders of the 2019 ranking are New Zealand and Singapore, who retained their positions.

Hong Kong came in third from fourth, displacing Denmark.

The United States rose two positions — from eighth to sixth place.

Georgia worsened its position a little, dropping from sixth to seventh place.

Kazakhstan joined top 25 in doing business among 190 countries

Kazakhstan received 79.6 points out of 100 possible after Germany with 79.7 points. Kazakhstan was ahead of Austria, Japan, Spain, France, Switzerland and the CIS countries.

In terms of the number of points, Kazakhstan has equal positions with Canada and Ireland, which also scored 79.6 points. Their places are 23rd and 24th in the ranking.

Over the past two years, Kazakhstan has risen 11 positions up (2017 — 36th place, 2018 — 28th place), demonstrating the record results of the reforms adopted by the Government since 2014 as part of 7 packages of legislative initiatives.

This was evidence of the effectiveness of government measures aimed at creating favorable conditions for business development from year to year.

The measures taken allow us to unlock entrepreneurial potential and create a business climate. Improving the business climate ensures the growth of small and medium-sized enterprises, which contributes to the economic growth of the country, and as a result of improving the welfare of the population.

Kazakhstan climbed up in 3 directions

Kazakhstan climbed up 3 out of 10 main directions and retained its fourth place in the world in the indicator “Enforcing Contracts.”

Kazakhstan has shown significant growth in the indicators “Getting loans” (+35 positions), “Registration of enterprises” (+14 positions), “Connection to the power supply system” (+9 positions).

The main reforms implemented by Kazakhstan:

  • Implementation of the Astana-1 electronic customs declaration system;
  • Reduced time for registration of value added tax from 5 to 1 business day;
  • The time spent on the execution of the judicial act on recovery in favor of legal entities was reduced from 231 days to 64 days;
  • Eliminated the need for additional obtaining a building permit from local executive bodies if the customer has rights to the land plot;
  • It eliminates the need to visit banks after opening an account online, which allows companies to use the account remotely from the moment it is opened;
  • Within the framework of the “Trial cabinet” service, it is possible, without leaving your home or office, to file a lawsuit (complaint, appeal, recall, counterclaim or appeal) and pay the state fee online.

In January-June 2019, production by business entities increased by 10.8%

According to official statistics, the share of small and medium-sized enterprises (SMEs) in GDP for the period from January to June 2019 amounted to 28.5% in the republic. The task of the MNE of the Republic of Kazakhstan is to bring this indicator to 30% by 2025 and to 50% by 2050, which corresponds to the level of developed countries.

So, in January-June 2019, the output of SMEs amounted to 12.7 trillion tenge and increased by 10.8% compared to the corresponding period of 2018 in comparable prices.

If we compare the results by years, in 2018 the output amounted to 26.5 trillion tenge, which is 70% more compared to the 2015 figure.

About 3.3 million people are employed in the business sector

The number of registered SMEs as of Oct. 1, 2019 amounted to 1.6 million.

The number of employees in SMEs as of July 1, 2019 amounted to about 3.3 million people.

To improve the business environment, 7 packages of legislative initiatives adopted in 5 years

Systematic reforms of the legislation on entrepreneurial activity began in 2014 with the adoption of the Concept of state regulation of entrepreneurial activity until 2020, in 2015 — the adoption of the Entrepreneurial Code and for 5 years — the adoption of 7 packages of legislative initiatives aimed at creating favorable conditions for business development as part of the Doing Business rating.

Dates of conducting business inspections reduced from 30 to 15 days

In 2018, the Law on Improving the Regulation of Entrepreneurial Activities introduced the institute of preventive control in place of inspections carried out on a selective basis. The difference between preventive control and spot checks is the prevention and prevention of offenses without initiating administrative proceedings.

The terms for conducting business inspections by government bodies reduced from 30 to 15 days

Also, the adopted law excluded 20 areas of control from 114 and 3 areas of supervision from 18 due to duplication and lack of effectiveness in their implementation, as well as the corresponding control and supervisory functions of state bodies that are not related to security risks to the state and the consumer.

At the same time, work is underway to introduce a moratorium on inspections of small businesses, including micro-businesses, from Jan. 1, 2020, for a period of 3 years, which also contributes to favorable conditions for the development of entrepreneurship.

So, over the past 10 years, a risk-based approach has been introduced for the selection of audited entities based on an assessment of the risks of a particular activity, the institute of random inspections and alternatives to inspections have been introduced, with the adoption of the Entrepreneurial Code, general risk management approaches for government bodies have been structured and established and approved risk assessment criteria and checklists.

Thanks to the reforms carried out on a systematic basis, the total number of inspections against business entities has decreased by more than 4.3 times since 2010.

 

Number of permits reduced by 70%

In 2014, with the adoption of the Law “On Permits and Notifications,” an exhaustive list of 481 permits and 227 subspecies of licensed activities was systematized and established. Today, the total number of permits has been reduced by more than 70%, that is, from 1200 to 316.

The adoption of the Law provided a reduction in pressure on business, a reduction in the number of administrative barriers and unloading of state bodies from unnecessary functions, as well as the creation of the most favorable conditions for the development of entrepreneurship.

 

What does the new 8th package of legislative initiatives provide?

The goal is to create the best conditions for business in Kazakhstan and get an international rating of the TOP-20 of the best countries of the Doing Business rating.

  • Within the framework of the 8th package of legislative initiatives being developed, it is envisaged:
  • Implementation of “Single Window” for connecting to electric networks;
  • Registration as a VAT payer will be within one day only by electronic application;
  • Obtaining an electronic digital signature of the company in your personal account, without the need to visit a public service center;
  • Implementation of a mechanism for resolving conflicts (deadlocks) among members of an LLP;
  • Implementation of the system of only electronic filing of applications for connection to electric networks;
  • Exclusion of the procedure for filing a notice to the State Construction Department and the traffic police about the beginning of construction and installation work;
  • Issuance of land plots with architectural and planning assignment, topography and technical conditions;
  • Exclusion of relatively low-risk construction projects from mandatory expertise.

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