On 9 November 2015, in connection with Kazakhstan’s accession to the WTO, amendments to the subsoil use legislation made came into force and significantly altered the existing local content requirements. We summarize below the key changes to the requirements for local content in goods, works & services and personnel.
1. Local content in goods
- Newly concluded subsoil use contracts shall not contain any requirements related to:
- local content in goods; or
- support of Kazakhstan producers (for example, the existing requirement for a conditional reduction of bids received from Kazakhstan producers of goods by 20% when determining the winner of a tender).
- There is a transitional period for subsoil use contracts concluded before 1 January 2015. Any requirements in such contracts regarding the local content in goods and the support of Kazakhstan producers are effective only until 1 January 2021;
- If the term of a subsoil use contract concluded before 1 January 2015 is amended, the “local content in goods” requirements existing thereunder shall be excluded.
2. Local content in works & services
- The minimum local content of works & services in the newly concluded subsoil use contracts shall not exceed 50%.
- The minimum local content of works & services in existing subsoil use contracts which were concluded during the period from September 2011 to the date of Kazakhstan’s accession to the WTO, shall be decreased down to 50% over the next 5 years (according to the terms of Kazakhstan’s accession to the WTO ).
- The following requirements remain in effect:
- Kazakhstan producers of works & services must be granted a putative 20% reduction in the price of their bids during the tender procedure;
- Subsoil users and their contractors shall purchase works & services from Kazakhstan producers, provided that they satisfy the requirements of design documents and Kazakhstan law on technical regulation.
- The term “Kazakhstan producer of works & services” means individual entrepreneurs and Kazakhstan legal entities, where at least 95% of all employees are citizens of Kazakhstan without taking into account managers and specialists engaged in labour activities in Kazakhstan within the framework of intra-corporate transfers. At the same time, the number of such managers and specialists shall not exceed 25% of the total number of all managers and experts in each respective category (to increase to50% after 1 January 2022).
3. Local content in personnel
- When hiring personnel a subsoil user shall give preference to Kazakhstan citizens, except in the case of managers and specialists. When engaging managers and specialists within the framework of intra-corporate transfers, the number of Kazakhstan citizens shall be at least 50% of the total number of employees in each respective category.
- Existing subsoil use contracts, which were concluded during the period from September 2011 to the date of Kazakhstan’s accession to the WTO, shall be amended over the next 5 years in order to bring them into compliance with the above requirement (according to the terms of Kazakhstan’s accession to the WTO).