Public procurement carries a high risk of corruption for business investing in Kazakhstan. Bribes and irregular payments are widespread in the process of awarding contracts and licenses (GCR 2015-2016). Likewise, two in every ten companies expect to give gifts to procurement officials (ES 2013). Companies report that public funds are often diverted to individuals or companies due to corruption (GCR 2015-2016). Large funds have reportedly been embezzled through fraudulent public contracts (BTI 2016). Companies find favoritism to be widespread among procurement officials (GCR 2015-2016). Government regulations allow unfair benefits for domestic companies, and for state intervention in foreign companies’ operations related to public procurement (ICS 2016).
Kazakhstan’s largest national holding company, Samruk-Kazyna, which manages the state’s assets in oil, gas, energy, transportation, financial and innovation sectors – is provided with special status and rights by President Nazarbayev. It is exempt from government procurement procedures, and thereby endowed with the right to conclude large transactions between members of its holdings without public notification (ICS 2016). Moreover, the government can transfer state-owned property to Samruk-Kazyna without any tender process (ICS 2016).
In June 2015, senior officials involved in the organization of the EXPO-2017 international exhibition were arrested on charges of embezzlement of USD millions of state funds (NiT 2016). Serik Akhmetov, the former prime minister, was sentenced to ten years in prison for embezzlement (NiT 2016). His sentence was reduced to eight years after an appeal in March 2016; in which, he had pleaded guilty to taking bribes worth USD 2,4 million in return to secure a firm, run by his brother Berik Akhmetov and his son was awarded lucrative contracts (Eurasia Net, Mar. 2016). The reduced sentence also comes after Akhmetov’s relatives had paid USD 15 million of the embezzled funds (Eurasia Net, Mar. 2016). Nonetheless, perceptions of inter-elite factionalism motivating the trials are widespread (NiT 2016). Companies are recommended to use a specialized public procurement due diligence tool to mitigate the corruption risks associated with public procurement in Kazakhstan.