WTO Rules the House. How will WTO Membership Affect the Development of Local Content?
Beket Izbastin, Director of the Department of subsoil use of the Ministry of Energy, tells the Council on the development of strategic partnerships in the oil and gas industry his vision of the development of Kazakhstani content in oil and gas projects.
–As you know, the requirements of "Kazakhstani content" in the procurement of subsoil users contradict the rules of the World Trade Organization (WTO). What will happen to the plans to achieve 50% of local content in Kazakhstan's oil and gas projects, taking into account our country's participation in the WTO?
- In the framework of integration processes, accession to the WTO and EurAsEC, Kazakhstan has strengthened its position on the world stage, but at the same time assumed obligations that limit the role of the state in the subsoil market. Thus, according to the report of the working group on accession of the Republic of Kazakhstan to the WTO (a. 895), from January 1, 2015, Kazakhstan should not include requirements on local content in procurement of goods under the new contracts with the subsoil users and a conditional discount of 20% for Kazakhstan producers.
In addition, according to the report of the working group on WTO accession (a. 1127), from the moment of Kazakhstan's accession to the WTO, in establishing the terms of the tender for granting the right to subsoil use, Kazakhstan will establish create a minimum local content in works and services exceeding 50%. In contracts concluded between September 2011 and January 1, 2015, local content obligations in works and services should be reduced to 50% by 2021, and in contracts concluded before September 2011, these obligations remain for the entire period of the contract. The conditional discount of 20% for Kazakhstani producers of works and services in the procurement of subsoil users is maintained and is not limited to time.
Thus, the requirement of the state to achieve a 50% share of Kazakhstan's content from the total volume of purchased works and services does not contradict the terms of the WTO. All changes in the system of local content within the framework of integration processes are reflected in the legislation on subsoil use, in particular, in the Code of the Republic of Kazakhstan "On subsoil and subsoil use," adopted in December 2017.
The document retains the norm for a conditional discount for Kazakhstani producers, includes requirements for local content in works and services in the amount of not less than 50% of the total volume of purchased works and services, as well as at least 50% for each type of the list of priority works and services, the requirements for minimum local content in personnel, mandatory financing of training of Kazakhstani staff and science. Also, the Code of the Ministry of Energy retains state regulation of the procurement process of subsoil users, which is also an integral part of the system of support and protection of domestic producers.