Review of Industry Regulatory Environment

The Republic of Kazakhstan Ministry of Communication and Information (MCI), by the Statutes Concerning MCI, approved by Order ППРК №427 dated 18 May 2010, is the regulating authority (Regulator) in the sphere of postal communication and performs the duty of the tariff and technical regulation of the postal industry.

The tariff regulation covers publicly available postal services that fall into the sphere of natural monopolies (according to the Law of the Republic of Kazakhstan Concerning Natural Monopolies and Regulated Markets) and is inclusive of the following activities:

 - analyses of commodity markets for the purpose of non-discrimination access to services;

 - approval of natural monopolies’ tariffs and tariff plans;

 - design and approval of non-discrimination methodologies for tariffs calculation or establishment of maximum levels to be observed by natural monopolies;

 - approval of temporary reduction factors for regulated service tariffs;

 - approval of temporary compensation tariff for regulated services and others.

Technical regulation covers the issues pertaining to establishment of process norms and collection of various work permits and liceses.

The Kazpost activity regarding the acceptance of deposits and maintenance of private individuals’ bank accounts is governed by the authorized public body in the sphere of regulation and supervision of the financial market and financial institutions, including establishment of individual prudential standards and issuance of licenses.

Government Guarantee and Subsidy Information

Based on the Resolution of the Republic of Kazakhstan Government dated 31 December 2003 № 1386 Concerning National Postal Operator, the company was assigned the National Postal Operator.

According to the Law of the Republic of Kazakhstan Concerning Post, the National Postal Operator is assigned with the duty to provide commonly available (accessible) postal services.

High requirements imposed on the quality of commonly accessible postal services, accompanied with the necessity to ensure the availability of such services to the population make obligations to provide such services burdensome. Republic’s peculiar geography, including enormous territory with low density of population, as well as the big number of remote areas only complicate the written/hard copy correspondence delivery process and make it more expensive.

Given the above, the provision of commonly available postal services appears a non-profitable venture, for the low level of tariffs does not cover expenses associated with the provision of said services.

Because the Republic of Kazakhstan legislation does not envisage any mechanisms for compensation of damage and losses incurred in the course of provision of regulated services, the company is impelled to practice the mechanism of cross-financing from the incomes generated by non-regulated services.