New requirements for treasury support of public procurement in construction have become a serious barrier to business.

The experts considered the issues with the participation of representatives of relevant committees of Ministry of Finance of the Republic of Kazakhstan and construction companies from all regions of the country on the platform of Atameken NCE RK.

Remind that since the beginning of 2019, the requirements for treasury support of public construction procurement worth over 2 billion tenge came into force.

The essence of the mechanism is that contractors are obliged to open special accounts in the treasury agencies and make all their payments via these accounts. This will allow the state to control all money transfers within the framework of implementation of construction projects financed by budget funds.

Initially, such a mechanism was launched in pilot mode in 2017 in three regions of Kazakhstan. However, the project participants faced many problems at the pilot stage. The problems are mainly related to the provision of advance payments, money transfer on the basis of electronic invoices, controversial criteria for assessing the integrity of suppliers by the treasury agencies and state revenues, a procedure for interacting with engineering companies for project management, etc.

Despite the fact that during the pilot stage some problems were not solved, the project was introduced throughout Kazakhstan. Moreover, state agencies declare that they intend to expand the circle of participants and extend the treasury support system to facilities worth more than 500 million tenge.

At the same time, if earlier the authorized agency reported that only subcontractors of the general contractor are subject to integrity testing, then in practice all counterparties take the test, even those who perform the smallest amounts of work. The number of such counterparties for only one object can be several hundred.

The meeting participants unanimously consider these requirements unreasonable.

“We do not understand why the manufacturing plants should be checked by the State Revenue Committee. Today, electronic invoices are used when selling goods and the entire turnover of the company, what taxes it pays, etc. are obvious. Why do they take such a multistage test?  After all, the number of companies that can participate in tenders will be significantly reduced,” Natalya Skorikova, vice president of Bazis-A Corporation, said.

 According to head of ASTI LLP Bolat Ashimov, the general contractors will remain with a very limited number of suppliers. He also focused on the risks of delaying the implementation of projects.

“Such objects that we were able to build in a year we cannot complete today for the second year in a row, because there is treasury support. This mechanism has long passage of payments we cannot get financing for a long time,”the entrepreneur said.

Entrepreneurs of the Turkestan region express great concern, where active implementation of investment projects has begun today, more than 40 of which fall under treasury support. Anxiety of businessmen is shared by representatives of the local akimat. According to their opinion, these problems may lead to a breakdown in the commissioning of facilities.

Considering the priority of Turkestan region’s development, Atameken addressed the authorized agency with a proposal to consider the possibility of withdrawing construction objects of the region from the treasury support.

“This issue is already being discussed at the level of the Government. Perhaps some objects of strategic importance will be exempted from treasury support,” Aigul Baiguzhina, chairperson of Treasury Committee, said.

Vice-president of the Basis-A corporation Raushan Bizhkenova proposed to suspend the widespread introduction of treasury support until all controversial issues are resolved.

 “This all affects the speed of construction of facilities, proper fulfillment of obligations. Moreover, construction companies with a good track record suffer,” Raushan Bizhkenova said.

“Business agrees that control is needed. But, as we see, many issues occur, therefore, we believe that it is too early to scale the project for the whole country. We consider it should be introduced gradually, removing all problems step-by-step,” Lazzat Ramazanova, deputy chairperson of Atameken Presidium, said.

Representatives of the authorized bodies stated that the treasury support mechanism had already been launched and there could be no question of its abolition. At the same time, government agencies are ready, together with the business, to remove all barriers.

 “We are always open to suggestions on how to improve the process. Much has already been done, some problems have been solved. Let's continue to work together and strive to ensure cost transparency and quality construction. The need for such control has arisen for a reason that the quality of construction has begun to suffer. Money is allocated, but there are no objects after three years. All these problems caused the need to introduce treasury support," Aigul Baiguzhina, chairperson of Treasury Committee, said.

Lazzat Ramazanova drew the attention of participants to the problem of the presence in the market of more than 60 thousand companies having licenses in this area. After all, as the meeting participants noted, the need for treasury accompaniment arose due to the presence of unscrupulous companies on the market, which is a consequence of the lack of transparency of licensing in the construction industry and the lack of post-licensing control by the authorized agency, that is Committee on Construction and Housing.

 “There are 60, 000 companies in the Registry. Why had all these companies been included in your Registry?” The Registry was not updated from its compiling date. We see that there are no more than 10 thousand active construction companies. This is a general, state issue; therefore, not only the Treasury Committee should address these issues. They need to be addressed together. You have the opportunity to update the Register via post-licensing control,” Lazzat Ramazanova said.

Representatives of the Construction Affairs Committee agreed with the Atameken proposal and reported that the matter was already at the decision stage.

“We are considering mechanisms for how to exclude invalid companies from the total number of licensed companies. We are planning to create a Registry for licensed organizations, linked to the objects they are building. Then everyone will be able to see the history of each company: the quality and amount of the objects they built,” Arnold Lee, acting head of the State Architectural and Construction Control of the Committee for Construction and Housing and Public Utilities, said.

As a result of the discussion, the authorized agencies declared their readiness to work out in detail each issue, if necessary, the possibility of introducing appropriate amendments to the legislation.