At the government session chaired by the Prime Minister of the Republic of Kazakhstan Alikhan Smailov, measures were discussed to implement the instructions of the Head of State, given at a recent extended meeting of the Government. Chairman of the Agency for the Protection and Development of Competition of the Republic of Kazakhstan Serik Zhumangarin reported during the meeting on measures to fulfill the instructions of the President, as well as on the current situation and main approaches to demonopolize the construction market.

So, according to Zhumangarin, the analysis of the housing market conducted by the agency in 2021 showed that the housing sales market in many regions is highly concentrated. In Almaty, North-Kazakhstan, Zhambyl, Kyzylorda, Mangystau regions — moderately concentrated, in the city of Almaty the market for the sale of housing I and II classes is highly concentrated, III and IV classes — moderately concentrated.

There is an annual increase in housing construction by more than 10%.

Attraction of funds from equity holders is allowed during construction in one of three ways: 1) availability of a guarantee of the Single Operator (Kazakhstan Housing Company); 2) permission of the akimat with the method of participation in the project of a second-tier bank; 3) permission of the akimat after the construction of the frame.

When organizing construction in the first way (2% of the share volume), the guarantee limit of the Single Operator per developer does not exceed 50 billion tenge.

The second method of lending by second-tier banks practically works only after the construction of the frame, which is 30% of the construction at the expense of the developers' own funds. So, according to the analysis of the Agency, out of 7.5 million square meters. meters of housing built in 2021 by private construction organizations, 27% were built at their own expense and 26% after obtaining permits provided for by law. The remaining 47% of housing was built under booking agreements, reservations, etc.

“The presidential program for using pension payments to improve housing conditions showed that the monopolized market for shared housing construction with a huge shadow turnover was not ready for this. So, out of 2.5 trillion tenge of pension funds, 68% was directed to the purchase of housing for ownership under civil law transactions (full settlement), while only less than 4% for the purchase of housing under a shared construction agreement,” said the head of the Agency of the Republic of Kazakhstan.

Zhumangarin also reported on the spread of the practice of imposing unreasonable terms of contracts. These are requirements for concluding agreements with management companies affiliated with developers, telecom operators, Internet services, cable television, and for the purchase of parking lots. Thus, the monopoly construction market already limits competition in adjacent markets.

“Bidding is a competitive way to provide land plots. An exception is the implementation of investment and innovation projects in the territories of special economic zones (SEZs) or with the participation of social entrepreneurial corporations (SECs). Thus, 50 investment projects with the production of products and 135 projects for the construction of residential and administrative complexes are being implemented on the territory of the Astana FEZ,” Zhumangarin said.

Under the guise of investment projects, social entrepreneurial corporations sell land plots for the construction of residential buildings, shopping centers, fitness halls, gas stations. Public procurement and public private partnerships have become another way to obtain non-competitive advantages. The Law "On Public Procurement" provides for the possibility of procurement from a single source from persons designated by the Government. In this way, without holding a tender, service providers for the construction of 149 facilities in the city of Turkistan were identified in the amount of 566 billion tenge.

Also, according to the head of the Agency of the Republic of Kazakhstan, the procedure for public-private partnership for the construction of roads, hospitals, schools and other facilities, which is essentially a public procurement of construction services, is becoming extremely non-transparent, non-competitive. These projects provide for a full and accelerated (3-5 years) return of the funds spent and does not include further operation by a private partner of the PPP facility or the implementation of activities by the private partner in the profile of the facility - educational, medical activities.

All of the above will be the work of the Agency in pursuance of the order of the Head of State to demonopolize the construction market, which will result in the development of a package of comprehensive measures with the introduction of appropriate legislative changes, in particular:

- amendments to the legislation on shared housing construction, with an emphasis on public placement of information about developers, beneficiaries, company owners, their affiliation with other organizations, housing sales volumes, prices, costs, suppliers of materials and services;

- delimitation of responsibility between participants in shared construction, exclusion of the practice of creating “one-day” companies (under the object) and avoiding liability by parent companies (large developers, holdings);

- implementation of state control over the procedure for attracting funds from equity holders and their intended use;

- exclusion of the construction of residential and non-residential facilities from the list of activities in the territory of special economic zones;

- cancellation of the out-of-competition procedure for the provision of land plots and the placement of public procurement of construction services;

- limiting the volume of construction work financed by equity holders and subcontracted.