Developing Law for Nature Resources Use in Kazakhstan in the Context of Industrial Development
Gulsara Edilbaeva, Executive Director Kazakhstan Business Association for Sustainable Development
Once again, the issue in question is state environmental policy in the context of attracting private investment to ensure the Kazakhstan Industrial Development Programme implementation The new Programme focuses on the achievement of sustainable development through economy diversification: this approach is expected to promote a retreat from a raw-material economy and a transition to a service and technology economy in the long term. One of the main tasks of state environmental policy in Kazakhstan is to ensure predictable and transparent state economic policy and to establish reasonable and comprehensible rules for private businesses. The slogan “Take care of nature!” provides great scope for a so-called “toughening up” of the regulation of nature and subsoil use, which is sometimes applied with little or no regard for the economic interests of the state or private businesses.
One very positive development is that an Interagency Committee for Environmental Quality Stabilisation has been formed in Kazakhstan (Government Decree #776 of 1 August 2003). The composition of the Committee gives hope that all aspects of private business activities and the public interest will receive due attention. Another task force has been formed under the Kazakh Prime Minister with the mission of coming up with proposals for encouraging domestic investment in extractive industries (Prime Ministerial Order #158-r of 30 July 2003).
Another example of joint decision-making aimed at forming an efficient state regulatory system, for environmental protection in particular, is the co-ordination of effort being directed into streamlining the licensing system in Kazakhstan, with the goal of eliminating administrative barriers for successful businesses (decided at a meeting at the office of Deputy Prime Minister A.C. Pavlov on 14 May 2003).
Nevertheless, at present both domestic and foreign investors have to deal with a complicated licensing system. In order to start a business, 18 approvals have to be obtained from various bodies; in addition, the document presentation requirements are not stated clearly and differ in format from one body to another.
In the near future it is proposed to extend licensing to project design, environmental standard setting and environmentally hazardous activities.
However, mining companies already hold certain types of licences issued by the Ministry of energy and mineral resources for hazardous activities such as operating mining facilities, manufacturing and selling explosives, transporting hazardous cargoes by all modes, and operating vessels and pipelines under pressure, among others.
Reclassifying these activities as “environmentally hazardous” does not essentially change the situation. Additionally, the existing licensing procedure requires that a certificate must be obtained from the environmental inspectorate, a function which falls within the competence of the Ministry of Environmental Protection.
This practice of double licensing requirements will create new barriers to investment in Kazakhstan’s economy.
We believe that a system that would allow enterprises to develop long-term production programmes featuring sound environmental provisions, and require large-scale investment in new technology, as is the case in EU countries, should be the main outcome of the reform of state regulation.
Nowdays, a new Concept of Environmental Safety of Kazakhstan has been developed which, in contrast with the current 1996 Concept, reflects the present-day reality that calls for an ecologically-based economy. It is crucial that enterprises implement efficient practices for the use of raw materials and safe disposal of waste and, in parallel, are still able to increase production.
But what is happening in reality? Whilst the Industrial Development Program states that “the presence in the country of manufacturers with outdated technology suggests that no reduction of pollutant discharge can be expected in the near future”, it has already been made compulsory to report an annual decrease in environmental pollution.
Even without precise calculations it is obvious that, at present, any decrease in pollution can only be achieved at the expense of production rates nationwide. The focus should be on stabilising the environmental situation, and pollution levels during the downturn period should not be taken as the benchmark for this.
It is important that any increase in production must outstrip the accompanying increase in pollutant and waste levels. It is also obvious that large investments in new technology and equipment cannot come on stream within a year, so even those enterprises that do invest in environmental protection will not be able to comply with the new requirements.
How is the Ministry of Environmental Protection striving to keep pollution levels down? For decades this body, irrespective of its formal status or composition, has resorted to the single tool of toughening pollution limits. The limits are based on maximum permissible concentrations (MPC), the characteristics of technology and equipment, and the industry’s ability to implement environmental measures, therefore administrative methods cannot be used to adjust the limits. It must also be emphasised that changing market conditions make it impossible to forecast annual production rates accurately over any length of time. However, the Ministry is continually cutting down the limits proposed by enterprises, disregarding technical and economic considerations. Whereas the initial intention was to employ an adjustment system based on environmental monitoring data, it is now proposed to withdraw the system of Temporary Agreed Limits.
As a replacement, discharge quotas are proposed based on MPCs, which are developed by a rather questionable technique, as the resulting limits are far stricter than those adopted elsewhere.
Notably, many foreign permitting systems also use pollution quotas which, unlike those set in CIS countries, are “temporary agreed”. The approval process relies on considerations such as the overall level of the economy, the enterprises` ability to pay for “the best available technology”, and project feasibility.
The Industrial Development Concept also states that “in order to balance the interests of the economy and environmental protection, it will be necessary to adjust export policy, develop high-tech industries and promote less natural resource intensive and more environmentally friendly production”.
A permitting system should encourage investment in tangible assets modernisation and self-monitoring by private enterprises, particularly so that they can be in compliance with their pollution reduction obligations.
In this connection, the period of validity of the limits approved should be determined either by the project investment period or operational stability of the enterprise. This approach would enable government bodies to supervise the implementation of environmental protection programmes and apply punitive measures to those who breach permission terms.
State bodies participation in forming a system for funding environmental projects should focus on putting mechanisms in place for interacting with the Investment Fund of Kazakhstan, the National Innovation Fund and the Development Bank of Kazakhstan. These could take the form of setting environmental requirements for new equipment, simplifying the international exchange of technology and products, and issuing catalogues of products and innovative ideas.
Kazakhstan now has good conditions for introducing innovations in the economy. The future of this process will go with improving regulation on the one hand and with modifying the degree of government interference with private business activities on the other hand.
It is not quiet clear with the question of funding environmental activities. What is the of the state in funding production modernisation projects? Can the existing payment collection system be described as an efficient natural resource management tool if 90% of the investment in environmental projects is contributed by the private sector?
The answer is clear: the government cannot finance large environmental projects because there is no special fund for it. At the same time the practice of accumulating environmental fees in local budgets is an obstacle even to finance environmental regulation development.
The Kazakhstan Business Association for Sustainable Development has initiated a number of meetings to clarify the situation regarding the policy framework and environmental monitoring system.
Amendments were proposed to the Law On Environmental Protection in line with recommendations by the Organisation for Economic Co-operation and Development (OECD): these include a separation of the functions of environmental monitoring and industrial monitoring (control). However, problems still exist in the existing regulation with regard to industrial monitoring. As a result, enterprises’ industrial monitoring data cannot be used in reporting Kazakhstan’s compliance with environmental protection conventions to international agencies.
There is a need to develop an adequate methodology and unify data collection procedures to meet international requirements. However, the Ministry of Environment Protection continues to collect industrial monitoring reports, which are of no use in the permitting system.
This formality could even be tolerated, if only it was not associated with considerable costs to the private sector, whose money could otherwise be spent on real measures to minimise environmental impact.
On the whole, co-operation between industry and the government in policy framework improving for regulating private business has been raised to a new quality level. A recent example is that the draft Law On Underground Reserves, prepared by the Committee on Geology of the Ministry of Energy and Mineral Resources, has been discussed with the largest mining companies.
The dispute between the Committee and the mining companies concerning this draft are mainly centred on the powers of the competent body. The Law authors proposed to broaden and strengthen the control functions of state bodies, by revising the basic terminology and definitions of the law currently in force and, on that basis, eventually revising the whole draft.
Finally, a working group was formed comprising several Members of Parliament, along with representatives of the Energy Ministry and mining companies, the latter acting under the auspices of the Kazakhstan Business Association. Five sessions were held between March and June this year, and 261 amendments to 76 Articles (first version) were discussed.
In addition, by the Order of the Minister of Environmental Protection, a permanent working group on the streamlining permission system and improvement of environmental regulation was formed. Over a half year this group took an overview of 12 draft laws and submitted recommendations and expert assessments on some of them to the Majilis (lower house of the Kazakh Parliament). Although no mechanism for utilising these recommendations is in place to date, one positive outcome from this body’s work is that ethics have been developed, along with a way of maintaining a constructive dialogue. In the future this experience will be used to build a legal mechanism for lobbying the interests of the private sector through professional associations.
Today, state bodies have domestic and international experts at their disposal who are able to co-operate in this field, whilst programmes of work are in place for regulation improvement There are, however, certain problems associated with the need to revise the legislative procedures of ministries and create a system for checking the consistency of proposed and existing laws (some documents currently in force were adopted at different times and contradict each other). It is still not clear how and by whom recommendations are prepared on the inclusion of various internal ministerial documents in Government legislative plans. A number of problems and violations also remain in the procedures for passing, adopting and abrogating internal ministerial documents.
The Kazakhstan Association of Natural Resource Users for Sustainable Development has set itself the priority task of making a contribution to building an adequate policy framework for successful economic activities with taking in consideration environmental restrictions and the goals of sustainable development. The Association has initiated activities to systematise requirements in the fields of environmental standard setting and payments, but the status of these projects remains unclear, even after positive evaluations by experts and the Scientific and Technical Council of the Environmental Ministry.
We believe that analysis of the existing environmental law and development of new documents by the Environment Ministry would be made more efficient if the number of compulsory documents were reduced and determined by the new Concept in this field.
The article was translated by the author
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