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The violations revealed in the activities of JSC Kazakhtelecom

Prime-Minister of the Republic of Kazakhstan, Mr. Smailov A.A.

Prosecutor General of the Republic of Kazakhstan, Mr. Asylov B.N.

Chairman of the Anti-Corruption Agency of the Republic of Kazakhstan, Mr.Bektenov O.A.

Chairman of the Agency of the Republic of Kazakhstan for Financial Monitoring, Mr. Elimanov Zh.K.

The Public Fund Elge Qaitaru has previously applied to you regarding the violations revealed in the activities of JSC KazakhTelecom.

At present, Kairat Satybaldyuly, a former shareholder of the company, and a number of other persons have been convicted on those facts, and the verdict has entered into force. Two questions naturally arise here.

1. The court verdict established the facts of large-scale embezzlement and infliction of property damage to JSC KazakhTelecom. But Kairat Satybaldyuly was a shareholder of the Company and did not hold a high management position in it. Why hasn’t anyone from the Company’s top management been brought to justice for allowing multibillion-dollar damage to the country’s strategically important national company?

2. Why were the activities of law enforcement agencies limited to investigating violations only in the sphere of the provision of services by the Company? Why was the most corruption-prone area, the Company’s purchases, left out of their scope of vision?

In the last 5-6 years, JSC Kazakhtelecom, for absolutely incomprehensible reasons, has almost completely refused to conclude direct contracts with equipment manufacturers (such as Nokia, ZTE, Huawei, etc.), and switched to signing contracts with local companies, which, in their turn, also do not directly sign contracts with equipment manufacturers, but use another intermediary – a non-resident of the Republic of Kazakhstan. Exactly the same scheme of work is used with manufacturers working through official partners (Juniper, Infinera, Calix, etc.). In other words, partners winning tenders from JSC KazakhTelecom do not conclude contracts with manufacturers but use additional non-resident partners. We believe that the use of such a scheme is related to the desire to hide the real cost of the supplied equipment as much as possible. An exception here is the American company Cisco Systems, which, in order to maintain transparency, supplies its equipment directly in the Republic of Kazakhstan.

Until January 2022, this scheme could be attributed to the old rules of the game and their beneficiaries. But it is alarming that information about ongoing non-transparent purchases regularly appears in the media, including companies that did well under the previous beneficiaries, for example, Logycom company (for more details about this entity you may follow the following link: 975665).

The signs of corruption and lack of real competition in the procurement process are:

— the complete absence of equipment manufacturers as tender winners;

— there is almost no bidding at a reverse auction;

— the winner’s price is very close to the planned tender budget;

— usually, winning companies have non-public owners that do not receive dividends;

— a rather low margin of purchases (this can be seen from corporate income tax payments, information on which is available in open sources).

All of the above is present in full when purchases are made by JSC KazakhTelecom. A recent example below is a confirmation of how “open” tenders are really held at JSC KazakhTelecom.

At the end of June 2022, JSC Kazakhtelecom announced two open tenders for the purchase of equipment for supplying home Internet in the cities of Almaty, Karaganda, Temirtau, Zhezkazgan, Petropavlovsk, Kostanay for a total amount of 7.1 billion tenge without VAT or 10% of the total investment budget.

How these two tenders went, during which a huge number of violations were committed, which made it possible to cut off real producers from participation in them and cause damage of at least 539,561,298 tenge, was described in detail on the website in the article “The inaccessibility of open public procurement of Kazakhtelecom” dated August 25, 2022.

This publication provides detailed information about the affiliated participants of these tenders Digibased-Almaty LLP and Broadband Kazakhstan LLP, while hinting at their possible Mr.connection with the Chairman of the Board of JSC Kazakhtelecom Mr. Kuanyshbek Yesekeyev.

The latter circumstance raises the question of who and why takes the top management of the Company away from its direct responsibility.

By the way, the representatives of the National Chamber of Entrepreneurs Atameken, whose participation is mandatory for tenders worth more than 250 million tenge without VAT, were not invited.

Such facts allow us to conclude that corruption and lawlessness continue at JSC KazakhTelecom, 80 per cent of the shares of which belong to the people of Kazakhstan!

We ask you to check the stated facts, bring to justice those responsible, primarily from the top management of the Company, and take measures to compensate for the inflicted damage.

Respectfully yours,

Bulat Abilov, Founder of the Fund

Urazaly Yerzhanov, Director and Founder of the Fund