Investment Shield: Prosecutors Guard the Country's Economy

– The question is very relevant and important. To answer this question, first I would like to give a short overview.

As you know, the country is actively working to diversify and demonopolize the economy, modernize infrastructure, support business and attract investment. In this context, stimulating investment is of particular importance as it is the cornerstone of efforts and the key to increasing the competitiveness of the state at the global level.

The head of state brought the work to stimulate investment to the level of national priorities.

Over 400 billion dollars of investment have been attracted to the country. In 2022 alone, gross FDI inflows amounted to a 10-year record of $28 billion. And this is far from the limit. There is huge potential for the market to be filled with big players.

After the visits of the head of state to the USA and Germany, large global companies in the fields of IT, medicine, transport and metallurgy became interested in the Kazakhstan market.

Kazakhstan, located in the heart of Eurasia, attracts the attention of investors due to its potential in the fields of energy, natural resources, agriculture and transport and logistics system. It is important to seize every opportunity to ensure that valuable investments find fertile soil in our economy. Therefore, all government agencies are required to make maximum efforts to support investment activities.

A defining and very important step in this direction was the signing by the Head of State on December 4, 2023 of the Decree “On measures to improve the efficiency of work to attract investment in the country’s economy,” which introduced a new system for quick decision-making. In accordance with this, the government has already reformatted the work of the Investment Headquarters.

Its decisions are now binding on government agencies and national companies. This significantly speeds up the process of improving the investment environment.

The President assigned a key role to the Prosecutor General's Office, which opens a new chapter in the history of the highest supervisory body - support of investment projects and protection of investments. The point is not just about expanding responsibilities, but also, to some extent, about transforming the prosecutor’s office at the present stage.

The task set before us is very clear: to make the process of doing business and investing in the country as straightforward and transparent as possible. We must solve investors' problems directly, eliminating bureaucratic delays and obstacles.

To do this, first of all, we established cooperation with the Ministry of Foreign Affairs. Its structure includes a specialized Investment Committee, with which the so-called “investment” prosecutors work in close coordination.

We established a partnership with the national company Kazakh Invest, which specializes in attracting investments and providing comprehensive support for investment projects.

In the regions, front offices have opened on the “one-window” principle, and call centers have been created in each prosecutor’s office.

– What is the essence of supporting investment projects and how many such projects are supported by prosecutors today?

– The essence is legal support and protection of the interests of investors at all stages of the project.

And as you know, there are many stages. For example, to begin construction of facilities, more than 60 permits are required from various authorities, including state examination, architectural and environmental control, and other structures. Issues of connecting to utility networks also arise. The entire process can take up to a year and a half, and even after all this, the investor may fail.

One government agency may deny access to the infrastructure, another may suspend work, a third may initiate a procedure for confiscating land, and so on.

But now, as part of the new function, prosecutors actively intervene, promptly giving a legal assessment of the actions of officials. Let me give you a few examples.

In Almaty, in an industrial zone, 26 investors could not connect to gas supply for more than a year and a half due to a failure of the energy and water supply department. The motivation of the officials was formal: the gas pipeline to which entrepreneurs were supposed to connect was not transferred from municipal ownership to the operator, KazTransGasAimak, although the akimat, as the owner, had the opportunity to give consent to the connection.

The prosecutor's office intervened, introduced an act of supervision, demanded that the problem be eliminated and the guilty official held accountable, which was successfully accomplished.

A Spanish investor faced serious obstacles in the Akmola region, who could not obtain land for three years and almost left the market. With our support from the stage of public hearings to the issuance of a land plot, this project worth 63 billion tenge was saved.

In Pavlodar, the prosecutor's office solved the problem of a French investor, from whom the akimat unlawfully demanded to move a dairy production plant outside the city limits, because, they say, the general plan of the regional center had changed. At the same time, the entrepreneur has already invested one and a half billion tenge in this plant.

I would like to note that when supporting projects, prosecutors not only evaluate the actions of government agencies, but also carefully analyze court decisions.

For example, in the Abay region, at the request of the prosecutor's office, the appellate court reasonably and fairly overturned the decision of the first instance court to invalidate the purchase and sale agreement for a cement plant. Thanks to this, the Singaporean investor was able to maintain production, in which he had invested considerable funds - 25 billion tenge.

And we have plenty of such examples.

Currently, we are supporting projects totaling over 7.5 billion US dollars. These are 1,011 projects of the Nationwide Pool from 32 countries and more than 40 large domestic investors.

All investment projects were studied, a comprehensive legal assessment was given, protection was provided for 94 investors, the total value of their investments in the country’s economy is 1.4 trillion tenge.

There is still a lot of work to be done, but the main thing is that the “flywheel” has been launched and is already gaining momentum.

As we increase our efforts, we are also working to improve our approaches and introduce new methods. Investors themselves play a huge role in this process. At their suggestion, by decision of the Investment Headquarters, a new tool for investment projects, the so-called “prosecutor’s filter,” was introduced. Now any prohibitive, restrictive and other decisions of government agencies and national companies that entail burdensome consequences for investors are subject to agreement with prosecutors.

This applies to suspension of activities, revocation of licenses and other permits, unilateral termination of contracts, tax audits, initiation of cases of administrative offenses and other actions.

As part of this work, the prosecutor's office blocked an unfavorable decision by the department of entrepreneurship and investment of one of the regions regarding a manufacturer of reinforced concrete products.

The government agency tried to refuse to extend the contract and put the plant into operation due to delays in construction caused by bureaucratic obstacles on the part of the authorized bodies themselves. After the intervention of the prosecutor's office, the contract was extended, allowing the investor to continue construction.

The Prosecutor General's Office identified an unlawful tax demand against a French investor for 99.8 million tenge from tax authorities in the Pavlodar region. The error in the classification of imported goods was corrected, and the violator from the State Revenue Department was subject to disciplinary action.

In general, I can say that support of investment projects today has become a full-fledged and comprehensive activity of the prosecutor’s office.

– You emphasized that the formation of approaches to business protection occurs with the participation of investors themselves. How is interaction with them structured and organized?

– Investors know the problems best because they face them directly. They often point to the inertia, red tape and inconsistency of individual officials.

We conducted an analysis, studied judicial practice and found out that within the framework of the administrative procedural code, half of all court decisions are made in favor of entrepreneurs. That is, the state apparatus is not working correctly, groundlessly dragging businessmen into litigation.

As part of our cooperation with Kazakh Invest, we encountered a problem that affected an investor who was implementing a project to build a feed mill and poultry farm in the Akmola region.

The process of approving the project with the Ministry of Agriculture went beyond the established deadlines. However, thanks to our efforts, the investor was ultimately given a positive industry opinion, which allowed him to continue with the project. The director of the relevant department of the Ministry of Agriculture was subject to disciplinary punishment.

The prosecutor's filter aims to completely eradicate such counterproductive practices.

It is feedback from the business community that is extremely valuable for us to develop systemic solutions to improve the practice of supporting investment projects.

When the president entrusted us with this important task, we began to think about how to build clear boundaries and determine the degree of our influence on the work of government agencies in order to effectively help investors.

Just as an architect thinks through every detail from the choice of brick to the shape of the windows, so we thought through every aspect of our work.

This is where partnerships with consulting firms helped, including representatives of companies from the Big Four, world leaders in the field of auditing - Deloitte, Ernst & Young and KPMG. They especially highlighted the problem of lengthy and multi-stage procedures when implementing projects that depend on decisions of government agencies.

For feedback, the use of digital platforms has played an important role.

We also studied the practices of foreign countries. The experience of Chinese prosecutors who work according to the concept of “the rule of law is the best business environment” was interesting. They focus on strengthening equal protection of market actors, serving high-quality economic development and building a modern state.

A number of measures proposed by investors, taking into account international experience, have already been implemented, and we are working on some in cooperation with the government.

Last year, we proposed introducing a Fast Track investment project support system - the so-called “green corridor” to expedite the investor’s completion of all procedures necessary for the implementation of the project. Today, appropriate rules are being developed for this. It is expected that the green sector will initially include global brands and high-tech companies from the Fortune Global 500 list.

If a company has already proven its worth at the global level, then, in our opinion, it is illogical to apply all the procedures and approvals to it.

– Berik Nogaevich, you talked about new methods and approaches, but the prosecutor’s office has long been focusing on protecting the interests of entrepreneurs. How effectively do those innovations in your work that were introduced at earlier stages function?

– If you look back 20-30 years into the past, it was a period when legislation had not yet had time to adapt to changes, the rules turned out to be vague, and the processes of control and regulation were far from transparent. Individual officials often behaved rather peculiarly in their relations with business. They could enter any business facility without warning as owners.

Now we live in a completely different reality.

Extensive legislative work has been carried out in recent years. The measures that I have already mentioned are a logical continuation of this evolution.

You know that today all inspections of business entities are pre-registered with the Committee on Legal Statistics and Special Accounts of the Prosecutor General's Office. This provides transparency and reduces pressure on the business. More than two thousand illegal checks were prevented at the registration stage alone.

A three-tier model has been introduced in the criminal process, and now all key decisions of the investigator are approved by the prosecutor, otherwise they have no legal force.

In addition, my instructions drew attention to the need to comply with clear legal criteria for launching a pre-trial investigation against business representatives. The effectiveness of these measures is confirmed by statistics.

Last year, the number of criminal cases against entrepreneurs decreased by half compared to 2022 - from 913 to 444, and those dismissed due to the absence of an event or criminal offense decreased threefold - from 470 to 133.

Overall, it can be said that the integration of new and proven approaches creates a synergy that contributes to the formation of a predictable business climate.

Last year, thanks to the efforts of prosecutors, over 14 thousand illegal prohibitory and restrictive measures, 21 thousand tax orders, 4.9 thousand cases of administrative offenses were canceled, and 13 thousand enforcement proceedings were terminated. Moreover, over 1.2 thousand officials have been brought to various types of liability.

Mobile groups of the prosecutor's office for business protection operate around the clock. Last year they processed more than two thousand signals from entrepreneurs, of which every fifth turned out to be justified.

Protecting business is a constant and painstaking work that prosecutors carry out both in the center and locally. Undeniably, such work plays an important role in creating new businesses and jobs, maintaining them, and ensuring fair wages.

Ultimately, all this is aimed at improving the well-being of citizens, which is an important task for building a fair state.

– What prospects do you see for the further development of investment activity in the country?

– Now the state is rethinking approaches to regulating entrepreneurship.

The government is developing a new Tax Code, which should change the relationship between the state and business.

The new clean slate regulatory policy aims to eliminate ineffective requirements for businesses. Taking into account this policy, work is underway to create a Register of Mandatory Requirements, which will contain all regulatory requirements for entrepreneurs.

The register will make it possible to apply the “regulatory guillotine” method to eliminate requirements that negatively affect the business environment.

The government, together with the business community, has identified more than 10 thousand unnecessary requirements, of which 9 thousand have already been cancelled.

A reform of the state control and supervision system is being carried out with an emphasis on preventive measures and inspections based on specific facts and circumstances.

A serious impetus for the influx of investments should be given by the creation of a Unified Digital Investment Platform, designed to monitor in real time all processes - from attracting investments to commissioning of the facility.

All stages of the project, including deadlines for issuing permits, land plots and other processes, will be digitized, indicating the responsible persons. If there are violations and barriers, the system will report them to the Ministry of Foreign Affairs and the prosecutor's office. Today, process analysis and monitoring is carried out manually.

In the medium term, the state sets a strategic goal to achieve economic growth of 6–7% and double the size of the economy by 2029.

The head of state emphasized that achieving these ambitious goals will require large-scale reforms that will bring standards, rules and business practices in Kazakhstan to OECD levels.

I think that all heads of government agencies realize the importance of these tasks and are ready to take a proactive part in shaping the future investment landscape.

https://kazpravda.kz/n/investitsionnyy-shchit-prokurory-na-strazhe-ekonomiki-strany/