OECD Review of the Corporate Governance of State-Owned Enterprises in Kazakhstan

Annex A. Methodological note on data analysis

Legal definitions and main sources of information

SOEs in Kazakhstan are often referred to as enterprises with public interest. The legal definition of what is considered an enterprise with public interest is laid out in the law On Accounting and Financial Reporting No. 234/ 2007, and includes a range of sector- and operation-specific features.

There are certain pre-requisites an enterprise with public interest will need to fulfil in order to classify as such. For example, an enterprise with public interest may be a JSC whose operations are commercial in nature. However, there is no consistently applied classification system in Kazakhstan that provides the basis for what enterprise may be seen as commercial or non-commercial, and thus falling under the scope of what may constitute an enterprise with public interest in Kazakhstan. The Kazakh authorities shared plans to introduce such a classification system, though at the moment of analysis, such plans have not been realised.

Despite some ambiguity in the legal definition, the Ministry of Finance (MF), which is the main state body tasked with monitoring and analysing the performance of the quasi-state sector, maintains a repository of financial statements and auditor reports on all organisations considered as enterprise with public interest. Said repository serves as the primary source for data on the state-owned sector for the purpose of this review.

The total scope of the SOE sector

The overall scope of the quasi-state sector in Kazakhstan is very large and economically significant. Besides various legal entities such as JSCs, LLPs, state institutions and state enterprises, Kazakhstan also recognises the special status of 22 state-owned JSCs with additional management functions.

The overall legal understanding of what constitutes state and communal property is also different from what enterprises with public interest are, and the way in which this distinction is drawn in the monitoring mechanisms of the MF is not fully known. According to the MF,1 the quasi-state sector includes 18 819 non-commercial bodies and 5 469 commercial enterprises – thus vastly exceeding the overall number of enterprises with public interest in the Kazakh economy.

According to information obtained from the World Bank, not more than 5% of the 5 469 organisations deemed as commercial in their nature of operations are in fact commercial. Roughly 95% of the 5 469 “commercial”-classed enterprises are in fact non-commercial entities – with the majority of their revenue coming from the state budget, or their activities being related to the provision of public services.

The SOE Guidelines note that “… any corporate entity recognised by national law as an enterprise, and in which the state exercises ownership, should be considered as an SOE” (OECD, 2015[1]). According to this definition, all 5 469 entities selected by the MF would be accepted as SOEs in the context of the state recognising them as corporate entities. However, given that the MF encompasses many enterprises that, in reality, are almost exclusively not-for-profit in nature, certain elements of the recommendations of the SOE Guidelines only apply to them in a limited capacity.

The data from the MF as of March 2023 finds that the state, directly and via state-owned holding companies, holds 700 enterprises at the central level of government. The first part of this review focuses its analytical work on the following group of enterprises:

• State property: 320 enterprises that are comprised of 132 JSC, 29 limited liability companies (LLC), and 159 state enterprises.

• State-owned holding companies (SOHC): 89 JSCs, 291 LLCs that are assigned to Samruk-Kazyna (178), Baiterek (12), Kazakhstan Engineering (17), social entrepreneurial corporations (96) and others (77).

Within the selected 700 SOEs, the state and holding companies own 50% or less shares in 139 of them, and thus hold a non-controlling stake in them. 58 of the 700 SOEs are non-commercial JSCs. Thus, the final selection of SOEs within the OECD scope of the analysis, include both non-commercial entities, as well as entities in which the state has non-controlling interest.

The largest 20 SOEs in terms of asset size

As established, the Kazakh quasi-state sector spans a variety of legal forms, covering both “commercial” and “non-commercial” enterprises and national (management) holding companies. For the purpose of facilitating the analysis, the OECD Secretariat reduces the overall amount of SOEs considered for more detailed assessments down to a pool of 700 SOEs that are held at the central level of government, thus excluding SOEs that are held at the regional Akimat level.

Certain sections of the SOE review of Kazakhstan, namely Equitable treatment of shareholders and investors, as well as Disclosure and transparency, necessitate a refined sample of SOEs to conduct detailed and qualitative analysis with. In past OECD reviews of the state-owned sector, the largest and most economically significant SOEs were typically selected for fine-grained analysis.

Though analysing the largest SOEs ensures that the review provides an apt description of the performance of the economically most impactful parts of the SOE sector, there are various reasons why such a selection methodology would not accurately reflect the SOE sector in Kazakhstan. Out of the 20 largest SOEs in terms of total asset size, 16 belong to either Samruk-Kazyna’s or Baiterek’s portfolio of state enterprises. This places 69% of the overall assets of these large SOEs in the management of national (management) holdings. Merely one of the largest SOEs in Kazakhstan is owned by a line ministry that reports to the government. The table below further showcases the ownership structure of the largest SOEs in Kazakhstan, and highlights that the top-20 largest SOEs do not accurately reflect Kazakhstan's state ownership structure.

Table A ‎A.1. Overview of the ownership arrangements of the 20 largest SOEs

Ownership entity	Number of portfolio companies	Asset size, in bn KZT	Weight out of total assets
Samruk Holding	14	34 913	61%
Baiterek Holding	2	4 664	8%
Kazakhstan Engineering	1	12 229	21%
National Bank	2	4 769	8%
MIID	1	978 479	2%

SOEs that are managed by either Samruk-Kazyna or Baiterek comply with reporting expectations that are set, according to the Kazakh authorities, fairly independently. Both holdings require their portfolio companies to disclose information in accordance with their group internal Corporate Governance Codes. Therefore, relying the analysis on them exclusively will give a one-sided perspective on the state-owned sector, mostly shining light on the part of it that is owned by larger holding structure.

SOHCs in Kazakhstan, in particular SWF Samruk-Kazyna, provide an entirely different institutional structure to house SOEs, often regulated and monitored separately than other branches and entities of the state which equally exercise ownership of SOEs. For this reason, it is important to consider a different selection method to arrive at the final sample of SOEs.

Selecting a stratified random sample of 20 SOEs

To obtain a balanced picture of the overall disclosure across different types of SOEs, the heterogeneity of the enterprises considered as state-owned in Kazakhstan must be considered in the sampling process. Therefore, the Secretariat analysis relies on a stratified sample of SOEs, where the overall amount of eligible SOEs is divided into three strata that are deemed to accurately reflect key characteristics of the Kazakh SOE sector.

The different strata cover 1) portfolio SOEs of holding companies Samruk-Kazyna and Baiterek; 2) financial SOEs; and 3) SOEs of different legal forms. SOEs that are classed as holding companies are excluded from the analysed sample to ensure comparability across portfolio SOEs. From the identified strata, a random sample of 20 SOEs was selected. The final sample of SOEs offers a more holistic perspective of the effect of the disclosure requirements applied conducive to the legal framework under which a given SOE may operate in. The final sample is detailed in the table below.

Table A ‎A.2. Information on final sample of 20 selected SOEs

Full title of entity	Legal form	Ownership form	Owner
National Company "QazaqGaz"	JSC	SOHC	Samruk-Kazyna
KazTransGaz Aymak	JSC	SOHC	Qazaq Gas
National Company Kazakhstan Temir Zholy	JSC	SOHC	Samruk-Kazyna
Kazakhstan Railcars Building Company	LLC	SOHC	Kaztemirtrans NC
Kuryk Port	LLC	SOHC	Kazakhstan Temir Zholy NC
Fund on Entrepreneurship Development Damu	JSC	SOHC	Baiterek
Authority AIFC	JSC	State	National Bank
Banking Servicing Bureau of the National Bank	JSC	State	National Bank
Kazakhavtodor	LLC	State	KazAutoZhol NC JSC
International Airport Nursultan Nazarbayev	JSC	State	Ministry of Finance
Institute of Economic Research	JSC	State	Ministry of Finance
National Center for Neurosurgery	JSC	State	Ministry of Finance
SK-Pharmacy	LLC	State	Ministry of Finance
National Geological Exploration Company "KazGeology"	JSC	State	Ministry of Finance
Khabar Agency	JSC	State	Ministry of Finance
SEZ "Ontustyc" Management Company	JSC	SOHC	Social Entrepreneurial Corporation Shymkent
Plant after name of Kirov S. JSC	JSC	SOHC	Kazakhstan Engineering
Machine Building Plant named after Kirov S. JSC	JSC	SOHC	Kazakhstan Engineering
Republican Center for Space Communication JSC	JSC	State	Ministry of Finance
QAZEXPOCONGRESS National Company JSC	JSC	State	Ministry of Finance

Source: Information provided by the government of Kazakhstan to the OECD team.

References

[1] OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition, OECD Publishing, Paris, https://doi.org/10.1787/9789264244160-en.

Note

← 1.  According to assessments of the OECD team, there are discrepancies in the amount of SOEs held by different ownership entities and reflected in the SOE data repository maintained by the MF.