Deputy Chairman of the Board of the Atameken NCE RK - Advisor to the Prime Minister of the Republic of Kazakhstan Dana Zhunusova told about the work that the Atameken National Chamber of Entrepreneurs carried out to support domestic business in procurement.

Dana Beisenovna, the topic of regulated procurement is always one of the most important for the business. Recently, this issue has been given a lot of attention from the country's leadership. What is the role of the National Chamber in this direction?

- Since the establishment of the Chamber, one of the important issues on our agenda is to protect the interests of domestic business, as well as to ensure their access to regulated procurement.

We are working in two directions.

For the first time, the Government, at the proposal of the Chamber, established local content targets, KPIs, for all akimats in four sectors: light industry, furniture industry, food industry, and production of construction materials. At the same time, it is planned to increase this KPI by 20% annually.

The first direction is a systematic work to improve the legislative framework. We carry out expert examination of regulatory legal acts, develop together with the business community proposals aimed at supporting domestic producers, increasing the volume of procurement conducted competitively, the use of national standards, as well as reducing the time of payment, etc.

As you know, the Law on Public Procurement came into force on January 1, 2019, and the relevant rules were adopted for its implementation, all the proposals of the Atameken NCE RK are taken into account in it.

Secondly, this year we are conducting an analysis of local content in public procurement for goods produced within the Economy of simple things programme.

I'll explain the purpose of the work.

For the first time, the Government, at the proposal of the Atameken NCE RK, has established local content targets (KPIs) for all akimats in four sectors: light industry, furniture industry, food industry, and production of construction materials. At the same time, it is planned to increase this KPI by 20% annually.

It was necessary to create a regulatory environment for the customer and supplier, which would contribute to the achievement of these KPIs.

In particular, since July 1, 2019, there was a pre-qualification selection, which means the purchase of goods of light industry and furniture industry only from the domestic manufacturers with Industrial certificates.

On July 26 this year, exemptions from national treatment also came into effect for vehicles, transformers, and cable products. For the first time since the establishment of the EAEU, Kazakhstan has exercised this right to support domestic production, etc.

In order to objectively understand and account for the origin of goods supplied within the framework of public procurement, changes have been made in terms of reporting. That is, at present, the supplier in the supply of Kazakh goods must necessarily provide a certificate of CT-KZ, and if the goods of foreign origin they should have a certificate of the foreign country. The same is true for the works. This will allow both the state and the business community to understand the real share of local content in procurement and take appropriate measures based on this. By the way, this does not apply only to the goods of the Economy of simple things.

As we can see, the specific measures to support domestic producers are laid down on paper. What about their implementation?

- Indeed, this issue requires the effective implementation of all measures. To this end, every weekthe Department of Procurement and Local Content of the Atameken NCE RK  analyzes the information on the actual purchases made by more than 10,000 state customers in 4 sectors of the Economy of simple things. On behalf of the Prime Minister, such reporting is provided by all 17 akimats.

The analysis is carried out for compliance with regulations, including the choice of the correct method of procurement, provision of the correct and complete package of documents, as well as for the verification of certificates of CT-KZ and determining the share of local content in the supply of goods.

Since March of this year, mass errors of regions on seemingly elementary issues have been revealed.

Firstly, KazInSt analyzed jointly with the Committee for Technical Regulation and Metrology (CTRM) about 2,000 technical specifications and found violations in 30% of them.

Namely, clients specify invalid in the territory of republic GOSTs, the Russian standards, standards of the particular organisations (so-called specifications) that lead to a decrease in the competitiveness of the domestic manufacturers, fitting under a certain supplier.

In this regard, on behalf of the Government, CTRM jointly with KazInSt conducts seminars directly for customers to explain the norms of technical regulation and correct application of standards.

Secondly, there is ignorance or incorrect fulfillment of the established regulatory rules. For example, in all the regions, violations were found in the purchase of furniture and light industry goods. That is, the procurement was carried out in other ways than through the prequalification process, as established by the order of the Ministry of Finance.

Thirdly, mass incorrect filling of reports by customers on executed contracts in terms of local content.

For example, there were cases when in the reports of the local executive authority the CT-KZ certificate for the car industry issued for furniture purchase. Or, when a batch of goods was delivered but CT-KZ was indicated as on the sample of goods. In this regard, the Chamber submitted proposals to the Ministry of Finance regarding amendments to the procurement rules to abolish the possibility of using certificates for the sample of goods in procurement.

Moreover, in some regions, the existence of the CT-KZ certificate itself was automatically accepted as 100% local content, while the percentage of local content specified in the certificate should be entered into the system.

In this connection, the National Chamber together with the MF holds seminars for customers (local executive authorities) to explain the legislation, correctness of filling in the reports. Such seminars have already been held for akimats of the East Kazakhstan region, Kostanay, Akmola, Aktobe, Karaganda, Pavlodar regions and Nur-Sultan.

Taking into account that the work was started in March this year, thanks to the support of the Government leadership, we have achieved good results after 9 months. Thus, the growth of the share of local content in the light industry increased from 1% to 17%, in furniture - from 5% to 22%, in the food industry and construction materials - from 1% to 21%. Thus, we plan to achieve the KPI of the local content set by the Prime Minister.

Similar work is planned for the procurement of the quasi-public sector. As you know, on October 10, at a meeting of the heads of the Atameken NCE RK and the Samruk-Kazyna Fund, these agreements were reached.

Today, the Fund reports in the Atameken NCE RK on the purchases made once a quarter.

Now we are working to ensure that the information exchange took place more often - once a week, as in the case of reporting on public procurement.

Taking into account that the National Chamber itself issues Certificates of Origin, do you have conditions for customers to verify CT-KZ certificates?

- Indeed, understanding the need to provide transparent and accessible information to all customers on the current issued certificates of CT-KZ, since October 1 of this year we place and update them daily on the official website of the Atameken NCE VRK. This is about 7,000 CT-KZ certificates issued annually.

Previously, the certificates were posted on the website of Nadloc, but in response to numerous complaints from customers and businesses about technical failures in the Nadloc information system, we decided to place the certificates on our portal. It should be noted that all interested parties, from government agencies and quasi-public sector to business representatives, have taken this approach positively.

The issuance of certificates is a unique function of the National Chamber, so we are interested in the maximum transparency of our work. In addition to CT-KZ, which confirms the local content, we issue 6 more types of certificates of origin for export purposes (more than 40,000 certificates per year). All of them are also available on the website.

Information on the falsification of СT-KZ certificates and their improper issuance is published several times, often in social networks. What measures does the National Palace take?

The process of issuing CT-KZ certificates is divided into two stages. This stage is established by the Order of the Ministry of Industry and Infrastructure Development and cannot change the process unilaterally by the Atameken NCE RK.

I will explain the essence of the issue.

The first stage is the stage of expertise with the mandatory departure for production and inspection of the technological process, the examination of documents, identification of goods, and most importantly - the calculation of the share of local content. All this is done by experts-auditors who are accredited by CTRM. The main document at the output is the expertise act, on the basis of which the regional chambers issue CT-KZ.

That is, in the legal field it is stipulated that the Atameken NCE RK issues certificates only on the basis of certificates of expertise of independent expert auditors. Naturally, we have no leverage over them.

Accordingly, this has its risks and statistics confirms it. According to the certificates issued for the period 2017-2019, which is about 18,000, we received complaints on 112 certificates. 44 certificates were confirmed as violations of our complaints. That is, it is only 0.2% of all issued certificates for three years. At the same time, it should be noted that 40 out of 44 violations were committed due to the fault of expert auditors.

According to the Rules, when an expertise act is received by the Chamber, in most cases the check of applications for compliance with the Rules is carried out in the office.

At the same time, the employees of the Atameken NCE RK can visit the place of production only if it is a new product, equipment or there are changes in the technological processes of production. There are very few such cases. I would like to note that in accordance with the current Rules, the Chamber employees only carry out visual inspection of equipment and premises, as well as the completeness and correctness of filling in the documentation.

Thus, in practice, entrepreneurs, non-government organisations and associations suffer from mistakes or illegal actions of expert auditors, but not the experts-auditors themselves.

Therefore, this year, thanks to the new management of the Committee for Technical Regulation and Metrology, we have reached an understanding of the need for joint control of the entire process of issuance, from the relationship between the applicant and the expert auditor to the direct issuance of the certificate.

For the convenience of such control, we are creating an information system, which will be ready in December this year. It will allow increasing the transparency of the process for each participant, increase the responsibility of expert auditors and the quality of their expertise.

Moreover, we will involve the Committee in this process, which will promptly respond to identified violations of the auditors' standards.

These agreements will be enshrined in an Agreement with CTRM, which will reflect all our joint actions.

As a result of this work, and with the transition to the digital format of CTRM certification, we can expect a high level of transparency in the certification procedures, elimination of the possibility of document substitution, and transparency of the internal audit procedure with the publication of the results.

 Dana Beysenovna, what is the situation with the Industrial Certificate?

 - Issuance of the Industrial Certificate is a new function of the National Chamber. Since 1 January this year, it has been enshrined in the Law on National Chamber of Entrepreneurs. Since March of this year, a step-by-step issuance of certificates in accordance with the Rules, which were widely discussed with the business community.

As of today, more than 100 certificates for goods of light industry, furniture industry, mechanical engineering, etc. have been issued. Industrial certificates will already be used in public and quasi-public procurement. Thus, for three months of intensive work of the Chamber and the Government in the framework of public procurement of goods of light and furniture industry through the prequalification process, the number of contracts concluded with the domestic manufacturers amounted to about 3 billion tenge (light - 2.4 billion tenge, furniture - 541.6 million tenge).

We plan to carry out similar work in other sectors.

But it should be understood that the Industrial certificate is a document confirming the existence of production, but does not determine the share of local content. Thus, the Industrial Certificate is not an analogue of the CT-KZ certificate.

In this regard, in order to support domestic producers, the Chamber has sent a proposal to use an Industrial Certificate at the stage of selection of suppliers, and at the stage of delivery of goods - the provision of a certificate CT-KZ.

Also, we plan to start working on the expansion of the scope of the Industrial Certificate, both for the purpose of access to procurement and in general for the analysis of the level of technological development of enterprises and the development of other support measures on the basis of this.

You mentioned earlier the work of the Local Content Control Commissions. Tell us more about their activities?

- In 2017, in order to support domestic producers, at the initiative of the National Chamber of Entrepreneurs, Local Content Control Commissions were established in all regions of Kazakhstan.

Chaired by the deputy akim of the region, the Commissions include representatives of local executive bodies, customers, regional chambers of entrepreneurs and industry associations, and business. Regional commissions have become a platform for public control of public procurement processes, where domestic business can interact with customers on issues of legality and local content.

All commissions actively conduct control and monitoring of purchases of goods relating to the Economics of simple things programme to comply with all the rules stipulated by law and, of course, support domestic business.

As one of the latest examples, I will cite the purchase of school furniture in Almaty, when the Commission found that the purchase was carried out with violations in terms of incomplete submission of documents by suppliers. On this fact, we appealed to the Internal State Audit Committee of the Ministry of Finance.

The second area of the Commission's work is public control over the procurement of construction and installation works.

We have taken into account the interests of OTP to the maximum extent possible. At the initiative of the NPP, we established the obligation of our customers to require designers to use materials produced in Kazakhstan, as well as to publish design documentation on the websites of local executive bodies.

Normally, we took into account the interests of the domestic manufacturers as much as possible. At the initiative of the Chamber, it was established the obligation of the customers to demand that the designers use Kazakh materials, as well as publish design documentation on the websites of local executive bodies.

To ensure effective implementation of this standard, the Register of Construction Materials, Products and Structures of Kazakh Manufacture was developed in 2018 on the proposal of the Chamber, which should be followed by designers.

In addition, since July 1, 2019, the Model Construction Contract was approved, which also establishes the obligation of the Contractor to use domestic materials from this Register.

This multi-stage process is constantly monitored by the Commissions.

Since the beginning of 2019, the Commissions have held 139 meetings and identified 1,105 construction projects (the cost of which exceeds 100 million tenge) for which construction and installation works are planned for a total amount of 944.7 billion tenge.

At the same time, the total amount of materials amounted to 441.3 billion tenge, 135.4 billion tenge of this sum was purchased from domestic manufacturers.

As noted by Elbasy, local content in housing construction is the engine of economic growth. Therefore, we make every effort to create optimal conditions for domestic producers.

Currently, the Atameken NCE RK has made a proposal to the Government on the need to fix the responsibility of the general contractor for deviation from the design documentation in terms of replacement of domestically produced materials with imported goods.

In general, important work remains to be done to improve the legislation under the auspices of the Ministry of Finance. The Atameken will focus on the protection of domestic manufacturers and their access to procurement.