Procurement of subsoil users to work for the country — Kazakh PM on strengthening regulation of commodity exchanges

Issues of development of commodity exchanges were considered at the Government session chaired by Prime Minister of Kazakhstan Alikhan Smailov, El.kz cites primeminister.kz.

As reported by the Minister of Trade and Integration Arman Shakkaliyev, a new draft law on exchange trade has been developed in fulfillment of the Head of State's instruction. It envisages measures to strengthen regulatory requirements for exchanges, eliminate the possibility of circumvention of procurement procedures by subsoil users and eliminate barriers to entry to commodity exchanges for businesses.

In addition, trade in coal, wheat, oil products and a number of socially important food products will be carried out only on those commodity exchanges that will be included in a special list determined by a decision of the Government on a competitive basis. This will ensure transparent pricing of such goods, as well as trace commodity flows both within the country and in foreign economic activity.

As incentives to enter the exchange it is proposed: for domestic producers of socially important food products to apply the method of offset in the payment of VAT; for national exporters to introduce a simplified procedure for VAT refund up to 5 days; together with the KTZ to revise railway tariffs for logistics in the case of an exchange transaction.

Prime Minister noted that currently there are 10 commodity exchanges in Kazakhstan, which conduct trades in grain, oil products, coal and other goods. In this case, the main task of the exchange is to organize trade with the formation of transparent market pricing and competition.

"Great expectations were connected with exchange trading. Over the last 5 years the legislation has been changed 2 times. Nevertheless, exchanges still do not fully fulfill their function in the market," Alikhan Smailov said.

Prime Minister pointed out that the need for a conceptual revision of the legal framework and requirements for bidders was raised by the Head of State. In general, one of the main problems in the development of this activity is the use of commodity exchanges by subsoil users for their needs.

"Most of the exchange market today is concentrated precisely on servicing such purchases, where there are no obligations to comply with local content. As a result, annually more than 1 trillion tenge does not reach our business. It should not be so. Procurement of subsoil users should work for the country. It is important to expand local content, diversify our production," Alikhan Smailov emphasized.

Another problem is the classification of commodity exchanges as microentrepreneurship entities. This allows them to make extremely low tax deductions and avoid inspections.

"The identified shortcomings should be eliminated within the framework of the new draft law," the Prime Minister said.

Alikhan Smailov instructed to agree within 2 days the draft Government's opinion on the bill on exchange trading, to work out the issue of improving information security of software of commodity exchanges taking into account world standards and to develop a package of amendments to the Code of Administrative Offenses to tighten the responsibility of commodity exchanges and its participants.

"Together with the Ministries of National Economy, Transport and Samruk-Kazyna JSC it is necessary to develop a set of measures to stimulate the sale of exchange goods, including exports through the mechanism of exchange trading," he concluded.

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