1. Kazakhstan
  2. Local government PPP landscape

Local government PPP landscape

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  • Overview

    A Kazakh soldier wearing a protective mask stands on duty

    Number of SNGs

    • Municipalities
      2,445
    • Intermediate
      215
    • Regional/State
      16
    • Total Number of SNGs
      2,676

    SNG Expenditure (% of GDP)

    • Total SNG Expenditure
      9.4 %
    • SNG Current Expenditure
      6.8 %
    • SNG Staff Expenditure
      2.0 %
    • SNG Investment
      2.6 %

    SNG Expenditure (% of govt. expenditure)

    • SNG Expenditure
      46.3 %
    • SNG Current Expenditure
      N/A
    • SNG Staff Expenditure
      61.9 %
    • SNG Investment
      63.7 %

    SNG Revenue (% of GDP)

    • SNG Revenue
      9.5 %
    • SNG Tax Revenue
      3.7 %
    • SNG Grants
      5.6 %
    • Other SNG Revenue
      0.2 %

    SNG Revenue (% of govt. revenue)

    • SNG Revenue (% of govt. revenue)
      37.2 %
    • SNG Tax Revenue (% of govt. tax revenue)
      17.8 %
    • SNG Grants (% of govt. grants)
      N/A
    • Other SNG Revenue (% of other govt. evenue)
      N/A

    SNG Debt Profile

    • SNG Debt (% of GDP)
      0.5 %
    • SNG Debt (% of govt. debt)
      4.1 %

    Transfers to SNGs from National Government

    • SNG Transfers Score
      C
    • Score for Transfer Allocation System
      C
    • Score for Info Transfer Timeliness
      C
    • Score for Collection and Reporting of Fiscal Data
      N/A

    GDP = gross domestic product, N/A = not applicable, SNG = subnational government.

    Note: The Public Financial Management and Accountability Assessment report, developed by the World Bank and other development partners, comprised scoring of various indicators by rating them from A to D. These ratings, as per criteria stated in the Public Expenditure and Financial Accountability (PEFA) framework, are broadly interpreted as follows:

    A = good performance that meets international standards (i.e., the criteria for the indicator are met in a complete, orderly, accurate, timely, and coordinated way);
    B = a level of performance ranging from good to medium by international standards;
    C = a level of performance ranging from medium to poor; and
    D = a process or procedure that is either nonexistent or not functioning effectively.

    Data on number of SNGs is as of December 2021. In March 2022, Kazakhstan created three more regions by splitting the Almaty region to (Almaty and Zhetsu), the East Kazakhstan region (to East Kazakhstan and Abay) and Karaganda (to Karaganda and Ulytau). The number of subnational governments will increase to 20 (17 regions and three cities of regional importance).

    Sources: Organisation for Economic Co-operation and Development (OECD), United Cities and Local Governments (UCLG), Agence Française de Développement (AFD). 2016. Subnational Governments Around the World: Structure and Finance; Part III – Country Profiles. Paris and Barcelona. http://www.uclg-localfinance.org/observatory; World Bank. 2018. Kazakhstan Public Expenditure and Financial Accountability (PEFA): Assessment Report 2017. Jakarta and Washington, DC. https://www.pefa.org/sites/pefa/files/2019-11/KZ-Dec18-PFMPR-Public%20with%20PEFA%20check_ENG_0.pdf.

  • Local Governance System in Kazakhstan

    Law No. 148 on “Local Government and Self-Government,” dated 23 January 2001 (Self-Governance Law), is the presiding legal framework for subnational governments in Kazakhstan, which was last amended in December 2021. The law regulates social relations in the field of local government and self–government, and determines the powers, organization, and procedures for local executives (akimats) and representative bodies (maslikhats).

    The Self-Governance Law established a three-tier system of subnational governments:

    • At the upper level, there are 17 regions (oblasts) and three cities of republican significance (Almaty, Astana, and Shymkent) which have a status equivalent to the regions. They are headed by regional/city governors (akims) appointed by the President, and have also regional/city councils elected by universal suffrage (maslikhats).
    • At the intermediate level, there are 37 towns of regional significance and 161 districts (audans), of which 16 are city districts and the rest are rural.1 Their executives (akims) are appointed by the regional/city akims and they have a directly elected council (town or district maslikhats).
    • The third tier has 47 towns of district significance and 2,298 villages and rural communities recognized as local self-governments (auls). It also comprises around 4,325 rural settlements.
    • The Self-Governance Law, as amended in 2013, introduced some elements of decentralization, such as election of local akims through indirect suffrage by local-level councils. The Concept for Development of Self-Governance until 2025, adopted in August 2021, calls for direct election of third-tier akims by citizens and for a decentralization of certain budget and financial functions.2

    The regional budgets; the budgets of the cities of republican significance and of the capital city; the district (city of regional significance) budgets; the budgets of the towns of district significance; and the budgets of villages, townships, and rural districts all form the local budgets.3 The budgets are formed and executed at the following levels:

    • Oblast, city of republican status, capital.
    • Districts (towns of regional significance).
    • 1In March 2022, Kazakhstan created three more regions by splitting the Almaty region to (Almaty and Zhetsu), the East Kazakhstan region (to East Kazakhstan and Abay) and Karaganda (to Karaganda and Ulytau) The number of subnational governments will increase to 20.
    • 2“Concept for the Development of Local Self-Government in the Republic of Kazakhstan until 2025” adopted by Order of the President of the Republic of Kazakhstan No. 639 dated 18 August
    • 3Budget Code of Republic of Kazakhstan of December 25, 2017, No. 120-VI ZRK. https://adilet.zan.kz/eng/docs/K080000095_#:~:text=121-V (in Russian).

  • Infrastructure Development Plan of Local Governments

    The local governments are responsible for a variety of development activities in their respective jurisdictions:

    • Management of community property at the district or city level, as applicable.
    • Primary, basic secondary, and general secondary education.
    • Social assistance and social security, including housing assistance.
    • Housing and utilities infrastructure, including housing stock improvements, organization of the maintenance of public housing area, construction of the communal housing stock, provision of sanitation for the settlements, maintenance of burial places, street lighting in the settlements, and landscaping of settlements.
    • Culture and sports.
    • Transport and communication, including construction, reconstruction, and repair and maintenance of roads; technical means of traffic control on roads; passenger transportation on socially important urban/ rural areas; and suburban and inter-district communications, except for railroads
    • organization of water supply and waste of settlements.

    The exact detail and nature of the activities and the extent of expenditure differs to a minor extent depending on the entity—the city of republican significance and the capital city; the district (city of regional significance); the city of district significance; or a village, township, or rural district.

  • Sectors for Potential PPPs with Local Government Projects

    The local governments have actively been undertaking PPP projects across various sectors. However, education and health care have been sectors of prime importance.

    PPP Projects Being Implemented by Subnational Governments, 2019

    Sector No. of Projects
    (cumulative)    		 Total Commitments
    (T billion)    		 Total Commitments
    ($ million)
    Agriculture, forestry, and fisheries 10 1.3 2.85
    Culture and sports 95 1,127.1 2,400.13
    Education 764 312.6 665.67
    Energy, housing, and utilities sector 167 646.3 1,376.28
    Financial and insurance activities 6 1.1 2.34
    Health care and social services 229 187.6 399.49
    Information and communication 2 11.1 23.64
    Manufacturing industry 2 3.7 7.88
    Transport and communications 30 183.5 390.76
    Other 13 80.0 170.36
    Total 1,318 2,554.34 5,439.40

    Note: The list includes projects that are under implementation, those with expired agreement, and those that have been terminated. Currency equivalent is as of 1 September 2022.

    Source: Government of Kazakhstan, Kazakhstan Public–Private Partnership Center. PPP Project Database (accessed 18 October 2022), https://forum.kzppp.kz/en/

    Despite the significant number of regional projects, many of these are small and short-term, which makes their classification as PPPs arguable.

  • Revenues for Local Governments

    According to the Budget Code, subnational governments’ local budgets can draw revenues from seven taxes,4 seven excise duties,5 five environmental payments,6 and nine different nontax revenues7 . As most state revenues come from corporate taxes and National Fund8 transfers—and accumulate centrally—subnational governments depend on upper-tier budget transfers. Only a few of the 20 regions generate surplus revenues as donors to the republican budget (e.g., Almaty and Astana cities, Atyrau and Mangistau regions).

    Apart from the republican transfers, the most prominent sources of local budget revenues, as established by the statutory income distribution of local maslikhats, are individual income tax, social tax, and environmental and emissions fees. Other revenues of varying importance are advertisement fees, fees for use of water resources and forestry, and fees for use of specially protected natural territories of local significance.

    In Kazakhstan, the law stipulates the independent formation of local budgets, which have legislatively assigned tax and nontax revenues that form their profits. However, the formation of local budgets is highly influenced by the transfers, the provision of which is determined by the central authorities, which makes the local government budgets depend on the budgetary allocations of higher governments.

    The local governments, in aggregate, derive about 40% of their revenue from the taxes and nontax revenues whose yield is allocated to them by the Budget Code. The rest is transfers from the upper-level budgets (e.g., republican budget transfers to regional authorities). Total revenues of local governments in 2021 were T8,742.6 billion (about $20 billion); of these T3,666.4 billion (about $8 billion) had been accrued through taxes, and T4,754.9 billion (about $10.7 billion) are total transfers received from the central/republican budget. Of the total transfers received by regional budgets, T2,120.9 billion (almost $5 billion) were received as subsidy/dotation, and T2,463.0 billion (about $5.7 billion) as targeted transfers for current expenditure and development.9

    • 4Taxes on land, property, advertisement, transport vehicle (individuals), transport vehicle (firms), land lease, and social security contributions.
    • 5Spirits and alcohol (locally produced and exported), beer, tobacco, cars, and petrol.
    • 6Water use, forestry use, emissions, land use, and use of specially protected territory.
    • 7Payments for licensing and registration of property, pledges, rights, advertisement, etc.
    • 8The Kazakhstan National Fund was established in 2000, primarily to act as a stabilization fund to lessen the impact that volatility in oil, gas, and mineral prices have on the Republic of Kazakhstan. It is financed from surplus revenues gained from taxes on the development of oil, gas, and mineral reserves. The National Bank of Kazakhstan lists assets for the fund at $52.4 billion as of October 2022. About $2.1 billion of that total was in gold (the limit is set at up to 5% of the portfolio).
    • 9Ministry of Finance. 2022. Statistical Bulletin for 2021. Astana

  • Borrowings by Local Governments

    The Budget Code and its rules legally allow any subnational government to raise external debt in the form of bonds or bank loans, provided that total annual repayments would not exceed 10% of their revenues. The annual borrowing limits are approved for the regions and republican cities on an annual basis, as part of the state budget approval process. All subnational governments submit budget execution statements, together with the reports of the audit commissions established to review them, within 9 months of the end of each fiscal year. Subnational government total borrowing amounts to only about 0.5% of total state debt; amounts are published quarterly together with other state debt statistics.

    Based on the statistics published by the Ministry of Finance, Government of Kazakhstan, the total debt of the local governments as of 1 April 2022 is as follows:

    • To the Government of the Republic of Kazakhstan—$1.6 billion.
    • To other creditors—$2.4 billion.10

  • Budgetary Allocation to Local Governments

    In addition to revenues from their own taxes and other sources, there are also budgetary transfers between each level. Transfers between republican and regional budgets are regulated by transfers and budgetary credits while those between regions and districts are regulated by transfers, budgetary credits, and norms of income distribution. Transfers are divided into two types: transfers of a general character (subsidy/dotation) and targeted transfers.

    • Transfers of general character include budget subsidies and budget withdrawals, depending on the deficit or surplus at the lower budget and the principles set out in the Budget Code. The volume of transfers of a general character changes every 3 years. These transfers aim to level the budgets of regions and provide equal fiscal capacities for services guaranteed by the state.
    • Targeted transfers are categorized into targeted current transfers and targeted transfers on development. The targeted current transfers are transfers provided during a 3-year period of the transfers of a general character. They are provided from a higher budget to a lower budget to compensate for losses of the lower budget due to the adoption of legislative acts, entailing an increase in costs and/or a reduction of local incomes. They are also provided from a lower budget to a higher budget to compensate for losses of the higher budget due to the adoption of legislative acts, entailing increased costs in the higher budget, or due to a redistribution of government functions in public administration. The targeted transfers on development are transfers provided by a higher budget to a lower budget to implement local investment programs, limited to the amounts approved in the republican or in regional budgets.11

  • Credit Rating of Local Governments

    Almaty City is the only subnational government with an active credit rating (BBB, stable outlook by Fitch Ratings). The affirmation reflects Fitch’s expectations that the city’s credit quality will remain sound over the 2021–2025 rating horizon. Fitch expects that despite the increased 2020 debt burden, which was partly triggered by the coronavirus pandemic, the city’s debt sustainability will remain strong under Fitch’s rating case scenario and commensurate with a Standalone Credit Profile of BBB+, above Kazakhstan’s sovereign international depository receipts (BBB/Stable).12