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Interview of Nurlan Aldabergenov, Minister for Competition and Antimonopoly Regulation of the EEC, to the Kazakhstanskaya Pravda newspaper: On Rules of Free Competition

Interview of Nurlan Aldabergenov, Minister for Competition and Antimonopoly Regulation of the EEC, to the Kazakhstanskaya Pravda newspaper: On Rules of Free Competition

7/27/2012
According to Nurlan Aldabergenov, Minister for Competition and Antimonopoly Regulation of the Eurasian Economic Commission, the Customs Union demonstrates benefits for the Kazakh consumers and producers.

 
– The expanding market results in stronger competition. What are the goals of the Eurasian Economic Commission, as of a supranational authority, in forming a common competition policy for the CU that ensures equal trade terms for all participants?
 

– One of the priorities in this respect is the formation of a common competition policy, including such objectives as antimonopoly and price regulation, state and municipal procurement. In other words, our structure creates a legal framework for free movement of goods and rendering services within the Common Economic Space. In this connection, the absolute priority is to harmonize the legislations on competition policy of Kazakhstan, Russia, and Belarus.
 
For our national producers to avoid unfair practices of monopolists from Russia and Belarus, our specialists are thoroughly analyzing the legal regulatory framework of all CU member-states, identify legal acts and regulations subject to harmonization, i.e. remove the barriers. This pertains to licensing and the cost of transportation services and electric power.
 
We plan to complete the work on harmonizing the legislations of the three countries on competition policy by July next year. Later on, in September-October, the fact of the harmonized legal framework will be established by the Supreme Economic Council, with the heads of the three countries participating. The Commission will then begin its independent investigations and suppression of any abuse of dominance, unfair competition, and cartelization. The Board should adopt, by the end of this year, a number of legal regulatory documents common for the three countries and necessary to ensure the common competition rules in cross-border markets.
 

– Could we say that the documents adopted within the frames of the common competition policy are based on the antimonopoly legislation of one of the member-states of the Customs Union?
 

– The antimonopoly legislation of each country of the Common Economic Space meets the requirements of today. We cannot say that the experience of a particular country serves as the framework. The practice of the three countries is essential for the legislation harmonization procedure aimed at future elimination of any barriers within the CU. A model law on competition to be passed by July next year is seen as the culmination of this work. By the way, we often use foreign experience as well.
 
The US antitrust legislation, for example, provides for a tougher administrative responsibility. The cartel penalty will be 10% of the earned revenue in Kazakhstan and Belarus and less than 100 thousand rubles in Russia, while in the US the penalty will amount to $100 million.
 
Such exchange of experience enriches the national legal practice, teaches methods of counteracting unfair competition, and lays the groundwork for the future. The life makes it necessary for us to approve in the future a common antimonopoly code applicable in the CES. This is a long-range objective for which today we are establishing a framework.
 

– Are there serious differences in the state price control of Kazakhstan, Russia, and Belarus?
 

– I wouldn’t call them serious, but there is a difference in tariff calculation methods applied by natural monopolies in Kazakhstan and Russia. Tariffs are calculated in our country based on the principle of cost scarcity. Let us assume that a monopolist was penalized or has an uncollectable debt. These costs are not included in the tariff. Why should a consumer pay for inefficient work of an enterprise or finance its social sphere? Besides, investment programs of a monopolist, efforts to modernize the assets, and efficient management are first of all taken into account in natural monopoly tariff fixing.

In Russia, for example, these factors are not taken into account in tariff formation to full extent. Therefore, our Board is aimed at harmonizing the tariff formation principles. This empowers us, in the Common Economic Space conditions, to strive for reduced tariffs of Russian natural monopolies for Kazakh producers.

 
 

– So can we say that the natural monopoly legislation of Kazakhstan is more advanced?
 

– The point is that structural reforms of large holdings took place in Kazakhstan earlier than in Russia or Belarus. The tariff formation was secured from any influence of non-core assets, and priority is given to investment attractiveness of the natural monopolies, their innovation programs, cost reduction, and efficient use of assets.
 

– What are the mutual trade indicators today for the countries of the Common Economic Space? Are the forecasts for the rise in turnover justified?
 

– The mutual turnover among the Customs Union countries increased last year by 32%. Mutual trade was $16.3 billion in the 1st quarter of 2012. The turnover of Kazakhstan with Russia and Belarus increased last year by 22% and that between our country and Russia by 24%. The greatest benefit obtained by out producers after the formation of the Customs Union was the market extension and, first of all, the opportunity of sale and marketing. Imagine Kazakh business having a home market of 16 million buyers, or when this market is supplemented by Russia (142 million) and Belarus (9.5 million).
 

– What will the Kazakh consumers gain from the formation of the Customs Union?
 

– Wider range of products, lower price, higher quality of products. It is a free competition law followed by trade throughout the world.
 
Let me give you some practical examples. The West Kazakhstan Region bordering on five regions of Russia experiences today a shortage of electrical power from local sources. Transiting the deficient power from the Pavlodarsk Region to the West Kazakhstan Region connected to the Russian mains according to Russian internal tariffs will make it possible to save 640 million tenge annually. This may result in lower electricity tariffs in the region.
 
First, together with antimonopoly services of Kazakhstan and Russia we are planning to suppress any attempts to manipulate electricity prices in cross-border markets of these countries. Second, working groups have been formed at the initiative of the Agency for the Protection of Competition of the Republic of Kazakhstan in order to ensure equal competitive conditions for roaming services. The agenda of our Board includes gasoline prices in cross-border territories. The point is that the AI-92 gasoline excise duties amount to $220 per ton in Russia, about $70 in Kazakhstan, and about $140 in Belarus. This creates unequal competitive conditions for economic entities of the three countries operating in the oil-products market.

 
Therefore, establishing the supranational authority in the field of competition policy offers us an opportunity to control the activity of monopolists in the cross-border markets and suppress possible abuse.
 
Yulia POLONSKAYA​