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: https://yvision.kz/post/ 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 exclusive.kz 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