Privatization is part of the economy denationalization which assumes a transition from a predominantly state-prescriptive regulation of production to its regulation on the basis of market mechanisms.
In 1991, the RoK Constitution for the first time has defined the right to private property. Then were taken the first steps of privatization and denationalization, the purpose of which was to transform state property into other forms and to provide conditions to transit to a market economy.
The first wave of privatization was carried out in the 90-s by the GoK to build the foundations of a market economy. Nevertheless, a certain number of enterprises remain in public ownership while numerous companies and development institutions were established later. In due course, some of these public Assets have been transferred to the management of the state holding Samruk-Kazyna to improve their efficiency. This was done for objective economic reasons, in particular, under the nation's leadership plan to level impact of the 2008 economic crisis.
Currently, Samruk-Kazyna JSC is in the process of transfer the companies established under the government initiatives to diversify economy and develop new industries to the private sector. It is critical to realize that these productions were established by the state for objective reasons: the lack of experience and financial capabilities of Kazakhstani businesses; unreadiness of strategic partners to do business and to provide funding on reasonable terms in the absence of government guarantees; and etc.
It should be noted that earlier Samruk-Kazyna JSC used to sale some of its non-core Assets and Facilities. By the end of 2013, 482 Assets and Facilities out of 713 were withdrawn from the structure of the Fund and 405 were sold to the private sector.
Unlike previous privatization program the current campaign due to the development of technology provides greater transparency, openness and involvement of a wide range of individuals in the acquisition of state ownership ratio/equity share offered for auction companies.
The importance of Privatization program
program aims at reduction of the state's presence in the business. This
correlates with the policy of the Head of State and the GoK aimed at
strengthening the economy foundations due to the increase of the private sector
in its share. By 2020, the share of state ownership should be increased to the
level of the OECD member states, which is 15% of the GDP.
Whereas, the privatization will help the Fund to solve the following issues:
- Improve the Fund's Assets structure;
- Improve the level of corporate governance and, therefore, the companies' transparency and efficiency;
- Ensure the technologies' transfer and capital for the companies' development;
- Encourage the development of small and medium-sized businesses;
- Encourage the development of Kazakhstan's stock market.
Comprehensive privatization plan for 2014-2016
In January 2014, the Head of State in his annual address to the people of Kazakhstan has instructed to review all the state-owned companies, to make a list of companies to be transferred to the private sector, and approve the comprehensive privatization program for 2014 - 2016 in the 1st quarter.
In the process of program developing the principles Yellow Pages Rule of the Singaporean government were used. This would assume the secession of a state from the sectors with at least one competitor among private businesses. This certainly does not apply to strategic Facilities; Facilities associated with administration of law and order; and etc.
On April 30, 2014, the GoK has approved the list of the companies to be withdrawn to the private sector under the Comprehensive Privatization Plan for 2014-2016. Overall, it was planned to privatize 106 companies of the Fund.
As the result of 2014 and 2015 the Fund has sold 37 facilities totaling 49.97 billion tenge. Also within the framework of «People’s IPO” program “Samruk-Kazyna» JSC has offered “KEGOC” JSC and gained 13.1 billion tenge. Thus, the total revenues of «Samruk-Kazyna» group of companies from privatization amounted to 63 billion tenge within two years of the program.
Сomprehensive privatization plan for 2016-2020
In September 2015, the Government of Kazakhstan has announced plans to launch a new, large-scale privatization, taking into account new approaches. In December 2015, the Government of the Republic of Kazakhstan issued a decree «On some issues of privatization for 2016 - 2020».
The resolution adopted Comprehensive privatization plan, lists and priority actions for governments and national holdings in denationalization.
The holding’s objects included into two lists. The list of Annex 3 of the new regulation (The list of major subsidiaries, affiliates of the national governing holding companies and other legal entities that are affiliated with them, offered for transfer to the competitive environment in priority order) consist of 44 major assets of the Fund and its subsidiaries, the implementation of which requires involvement of independent consultants. It is planned that the latter after proper verification and valuation of the assets will give advice on the terms and implementation of the share sold and, presumably, will offer a range of potential buyers. The mechanism of work with independent consultants are currently still being developed by the Ministry of National Economy of Kazakhstan, as the activities of consultants and their recommendations will undergo strict control by the public authorities (represented by the State Commission for Economic Modernization of Kazakhstan). At the same time the Fund on the recommendation of independent consultants and in coordination with the State Commission will take some decisions on placement term, size of sold shares, as well as the terms of sale.
The list of Annex 4 of Resolution includes 172 assets of the Fund’s group of companies, the realization of which will be implemented relatively easily, because after evaluating these assets will be realized through the electronic auction. As previously, the electronic auctions will be conducted on the basis of electronic platform of the State Property Registry of the Ministry of Finance of the RK GOSREESTR.KZ.