Barriers within Kazakhstan’s mining sector have been identified as a major hurdle for investment in the country. A recent consultation document on proposed legal amendments highlighted concerns about access to mineral rights, including convoluted regulations and a lack of automation in government services.
Further issues stem from inconsistencies between mining regulations and other areas of law, such as tax, water, land and environmental legislation. These inconsistencies create uncertainty for mining companies and hinder their ability to meet their licence obligations.
Regulatory and Procedural Barriers
- The current regulatory framework for mining lacks clear and efficient procedures, leading to complexities in obtaining and exercising mining rights. This includes inadequate automation of state services, insufficient regulation of state information resources, and overlapping legislation in areas such as ecology, land use, and taxation.
Legislative Inconsistencies
- There are inconsistencies between the mining code and other related legislation, such as water, land, and environmental laws. For example, the mining code prohibits operations on certain territories, including those within water fund lands, which contradicts previous legislation and restricts activities like sand extraction from river beds.
Specific Issues
- Unclear regulations on the reclamation of mining sites, conflicting provisions with the Civil Code regarding contract and license obligations, and the lack of clear guidelines on servitude payments and compensation for land use are significant issues.
- The prohibition on mining in certain areas, such as those with high natural methane content without prior degasification, creates operational challenges due to the absence of specific norms and authorities to set these standards.
Institutional and Administrative Challenges
- The process of forming the State Fund for Mineral Resources Management is marred by lack of transparency and coordination between state bodies. This leads to inefficiencies in the allocation of mining rights and the management of mineral resources.
- The requirement for exclusive rights to specific territories is not adequately ensured, leading to conflicts between different mining users.
Practical Challenges
- The use of experimental-industrial mining is often abused, hiding industrial-scale extraction under the guise of exploration. This practice undermines the integrity of the exploration phase.
- The high cost of acquiring machinery for small-scale mining operations is a significant financial burden, suggesting the need for more flexible arrangements such as equipment rental.
International Comparisons and Recommendations
- Kazakhstan ranks 56th out of 84 countries in the Investment Attractiveness Index by the Fraser Institute, with negative evaluations in legal, tax, and labor legislation, as well as in geological data quality. To improve, Kazakhstan should analyze and adopt best practices from other countries, engage in consultations with stakeholders, and streamline regulatory processes to enhance transparency and efficiency.
Addressing these issues is crucial for improving Kazakhstan’s investment climate, particularly in the mining sector, and aligning it with international standards to attract more foreign and domestic investment.
