Project Case Study
Assessing Kazakhstan’s compliance with the EITI
Assessing how far Kazakhstan's extractive industries comply with the Extractive Industry Transparency Initiative
Kazakhstan’s extractive industries generated nearly $28 billion in 2011, which amounted to 50% of government revenue. As the sector grows, this is set to rise at a rapid pace over the coming years, putting the country under huge pressure to comply with best-practise initiatives such as the Extractive Industries Transparency Initiative.
The EITI promotes transparency and accountability in extractive industries as a way of making the markets of developing countries more attractive to international investors, encouraging good governance, greater economic and political stability and so reducing the risk of conflict over the vast wealth tied up with natural resources.
In early 2011, Kazakhstan rated as ‘close to compliant’, but did not meet all of the requirements to become fully compliant in June 2011. On the back of this, we were asked by the World Bank in 2012 to conduct a scoping study focussed on Kazakhstan’s transparent, EITI-compliant management of oil, gas and mining companies, the payments made by those companies, and the revenues received by government agencies. The study also aimed to inform stakeholders about the measures needed to be undertaken in order to meet EITI requirements, increasing awareness of both companies and individuals in order to bring the country closer to EITI compliance.
We undertook a review of all past EITI reports and EITI board decisions to understand the current state of the processes in place to ensure EITI accountability in Kazakhstan, and assessed areas which needed further improvement to comply with the 2011 EITI Rules. In addition, we conducted a comprehensive analysis of the tax payments and government income streams related to the extractive sector, noting in particular the revenue streams that needed to be covered by establishing a threshold level to be met by more than 170 companies active in the country in 2011, and government agencies.
The two-month study identified a number of areas the government must address in order to meet the EITI’s criteria before their next validation date. This enabled the government of Kazakhstan to issue a comprehensive 2012-15 work plan to increase investment potential and revenue, and ensure the proper treatment of workers and small businesses, with the result of full EITI-compliance on the 17th October 2013.