Kazakhstan: investors give lukewarm response to new rules for work permits
Since many foreign and Kazakhstani companies use the latest modern foreign equipment and technology, it is inevitable that, for the present and for the near future, such companies will find it difficult to locate skilled and competent Kazakhstani experts who can use this equipment and technology as effectively as their foreign colleagues. For this reason they transfer existing personnel or they specially recruit these trained individuals for work in Kazakhstan. These transfers and recruitments require special authorisation under Kazakhstani law.
I. Introduction
From the earliest days of independence in 1991, the Republic of Kazakhstan has been aware that it must adopt a legal framework that will attract the enormous foreign investment the country needs to develop its natural resources, to encourage the growth of manufacturing industries able to reduce the volume of imports, and to modernise the country's infrastructure.
Much progress has been made in this direction, and further legislative reform is underway. Despite these improvements, however, foreign investors have been frustrated by Kazakhstan's bureaucratic regulation of the use of foreign employees. Of course the country must regulate immigration; it naturally is entitled to look to foreign-financed investments as a means of reducing local unemployment; and Kazakhstan is not the first developing country to expect that the tapping of its natural resources will lead to the transfer of technology, skills and training to the local labour force. What has happened, however, is that the regime of control over the use of foreign workers has been massively expensive for foreign investors, has diverted the attention of high-level managers on what should be a routine administrative activity, while at the same time large numbers of foreign workers have been permitted to come to Kazakhstan.
Fortunately, the Government recently initiated a number of important changes in the regulation of the use of foreign workers that will satisfy many but not all of the complaints of foreign investors.
The employment in Kazakhstan of foreign workers has been regulated by a series of legal enactments, the latest having been approved on 25 June 1999. This is Government Resolution No. 862, approving the Rules on Matters Concerning the Licensing of the Recruitment of Foreign Workers to Kazakhstan and the Recruitment of Kazakhstani Workers for Employment Abroad (hereafter called the "1999 Rules"). This Resolution establishes a new procedure to replace the 1997 procedure that was implemented in a far more difficult, expensive, and time-consuming way.
The 1999 Rules differentiate between two types of authorisation:
the licence that is required only by companies whose main type of activity is the recruitment of foreign workers for client companies, i.e., recruitment agencies; and
the permit required by all other employers that transfer existing personnel from abroad to Kazakhstan or that engage in self-recruiting additional specialised foreign staff for their subsidiaries, joint ventures or branches in Kazakhstan.
This article deals only with the work permit and ignores the license which is of interest only to a very few recruitment agencies that recruit workers for their clients for work in or outside of Kazakhstan.
II. Practical Implications
The 1999 Rules have generally simplified the process of obtaining a permit, which should be, but often has not been, a simple matter.
Speed: On the positive side, a permit for foreign workers can now be obtained more quickly than before. Partly this is explained by the fact that fewer documents must be prepared for the application. Also, while the official time for processing applications (4 weeks) remains the same as under the former rules, it does seem that officials are under pressure to issue permits more quickly. In the spring of this year, it was our experience under the old rules that we required about five weeks to obtain a permit from the Ministry of Employment and Social Protection; since the summer it has taken as little as two weeks on some occasions. However, it should be remembered that such fast work of civil servants has not always been a tradition in Kazakhstan.
Number of Documents: Another major advantage of the 1999 Rules is that the number of supporting documents required to obtain a permit has been reduced from a staggering eleven per employee to a mere three, in addition to the application form. In the past, much time was lost while employees searched for their university diplomas and other documents, obtained certifications of their documents and obtained translations into the Russian or Kazakh languages.
Payment Mechanism: The payment procedure is now more convenient and less time-consuming than before. The various types of payments - the economic charge, the deposit and the periodic compensation payments – have been replaced by a single payment, the deposit, which is equivalent to the cost of the employee’s ticket to return home and must be deposited in a dedicated bank account in any authorised Kazakhstani bank.
The old provision expressly envisaged the repayment of this sum upon the departure of the employee from Kazakhstan. Although the word "deposit" implies that the sum will be repaid to the employer, the 1999 Rules do not state this explicitly. For this reason it is important to ensure that the deposit agreement with the bank provides for the repayment of the deposit. (The law also makes provision for per diem payments, i.e., the cost of the journey between the airport and the place of work. In practice, the employees of the state bodies that process work permit applications do not know how to calculate them, and for that reason they are not levied.)
Age Limits: The previous rules imposed age limits for foreign workers. The minimum age limit was 25 years and the maximum was the pensionable age as fixed in Kazakhstan’s laws – currently, 62 years of age for men and 57 years for women. These restrictions were abolished. However, on 2 July 1999, one week after the approval of the new Resolution, the Ministry of Employment and Social Security of the Population issued an Order dated 2 July 1999, "On the Approval of Rules for the Protection of the Domestic Labour Market when issuing Employers with Work Permits for Foreign Labour" (the "Order"). This Order incorporates some of the requirements of the old legislation into the new Resolution. The effect is that the age limits are now set from 23 years to the pensionable age. Multinational companies generally oppose the pensionable age limit as being much too low and out of step with prevailing international practice. Kazakhstan continues in many respects to be a difficult place to which to post employees, and it is unhelpful that mature employees who intend to work several more years for their companies are ineligible to be considered for Kazakhstan.
Advertising the Positions: It continues to be necessary for employers to advertise in the Kazakhstani press in an attempt to fill positions out of the local labour market before importing the workers under the work permit program. For large new projects, the advertisement sometimes can be "in bulk", giving only general specifications for the positions. If only one position is to be filled, then the advertisement must be specific as to the qualifications for the position. It is not uncommon for intending importers of labour to specify qualifications that only members of their pre-existing staff can satisfy.
Quotas: The 1999 Rules provide that the Government should approve a quota for the employment of skilled foreign workers, both for the Republic as a whole and for individual types of jobs. The 1999 Rules, however, do not clearly state that a permit can be refused on the grounds that the quota is full. In this regard, the Order supplements the 1999 Rules and states that permits are to be issued only within the limits of the quotas fixed by the Government.
Governing Law of Employment Contracts: 1999 Rules create confusion as to the extent to which Kazakhstani law governs the employment relationship of foreign workers who are transferred to Kazakhstan. One Chapter of the 1999 Rules deals with the procedure of conducting labour activities by foreigners and stateless persons on the territory of the Republic of Kazakhstan, and Clause 5 in that Chapter states that:
the procedure for the work of a foreign citizen in the Republic of Kazakhstan shall be determined by the terms of the contract concluded pursuant to the legislation of the Republic of Kazakhstan [emphasis supplied].
We have encountered lawyers of the Ministry of Employment and Social Protection who interpret this provision as requiring that an employment contract of a foreign worker should comply in all respects with Kazakhstani labour legislation. However, it seems equally plausible that the requirement that an employment contract "be concluded pursuant to the legislation of the Republic of Kazakhstan" does not mean that the contents of the contract itself must comply with local legislation. This is likely to remain a matter of contention between many foreign employers and the Ministry mainly because the prevailing work practices, such as in the international oil industry, clash with the labour laws of Kazakhstan, many of which still reflect their Soviet-era origins.
Current legislation requires that employment contracts with foreign workers should contain certain mandatory stipulations, e.g., on salary terms, life and health insurance, repatriation terms, etc. Copies of the employment contracts must be submitted to the Ministry of Employment and Social Protection, so the governing law will be quite apparent to those who issue the permits.
Owing to the nature of work in the oil sector, many quite normal and customary provisions in employment contracts (e.g., the use of the rotational work method) are regarded as being to the detriment of employees if judged by the current Labour Code of Kazakhstan, and are viewed as infringements by lawyers at the Ministry of Employment and Social Protection. In particular, foreign and Kazakhstani legal provisions diverge on matters concerning holiday entitlement, sick leave and working on local public holidays.
The Law on Foreign Investments of 27 December 1994 may help to resolve these problems. Article 25.3 of the Law on Foreign Investments states that:
the employment relations of foreign citizens working in the Republic of Kazakhstan on employment contracts concluded with foreign investors are governed by the law chosen by the parties to the employment contract.
For example, an employment contract concluded in the United States between a U.S. oil company and an American citizen using New York law as the governing law would seem, in light of the Law on Foreign Investments, to be properly concluded pursuant to the legislation of the Republic of Kazakhstan. Please note that this helpful provision does not apply to employment contracts between foreign workers and locally-registered companies. This partly explains why it is that branches are so popular among companies, including in the oil industry and in the related oil industry services sector.
III. Obtaining a Work Permit
To obtain a work permit, the employer applicant must prepare two bundles of documents, one containing the originals and the other containing copies of the documents. Pursuant to the 1999 Rules, the bundles consist of a list of foreign employees, copies of their contracts, an internationally accepted HIV certificate for each employee, and the application form itself. The bundle of copies must be submitted for review to the local territorial body of the Ministry of Employment and Social Protection. The local territorial body is given 14 days to verify that the documents presented are in conformity with all existing requirements and that there are no suitably qualified Kazakhstani nationals in the region to fill the vacancy. Presumably, local territorial bodies check their databases to determine whether any candidates with suitable qualifications are available. Although these bodies can act quickly, they are entitled to take up to two weeks before giving their conclusion. Recently, it has taken us only a few days to obtain such verification from the territorial body of Atyrau Region, one of the main areas of Kazakhstan’s oil industry. If the documents are approved, the local territorial body issues a conclusion stating the expediency of importing foreign experts to the region.
Thereafter, the bundle containing the originals together with the conclusion from the local territorial body is submitted for review to the Ministry of Employment and Social Protection in the capital of Kazakhstan, Astana. Again, they have up to a further two weeks, making a total for permissible processing time of four weeks.
Although the 1999 Rules do not state that the city of Almaty (former capital of Kazakhstan) has its own procedure for issuing work permits, it continues the old practice of issuing them. The tradition of the former rules, under which work permits were issued by the local mayor’s office, seems to have become in practice stronger than the law. The reality is that an employer located in a city of Almaty will be able to apply for and to receive a work permit without the need to go to Astana to collect it.
In addition to the 1999 Rules, there has been a separate new development of great importance to the oil industry and its many contractors in the Western part of Kazakhstan. Since many of Kazakhstan’s major oil fields are situated in the Atyrau Region, bordering on the Caspian Sea, most large-scale users of foreign employees are concentrated in that area. For a limited period, the procedure for obtaining the permit itself from the capital in Astana does not apply to companies operating there.
On 8 September 1999, the Government adopted a resolution under which the power to issue work permits is vested in the local bodies of the Ministry of Employment and Social Protection of the Atyrau Region. This obviates the need to travel to Astana to undertake the second stage of the verification process. This temporary procedure is experimental in nature and, for the time being, applies only to the Atyrau Region undoubtedly because so many applications are processed there. The experiment began on 1 September 1999 and will continue until 31 December 2000. The Atyrau Region is to be granted a special licensing procedure because the resolution of 8 September 1999 contains an order for new licensing Rules to be drawn up. Unfortunately, these are not yet available to the public.
IV. Operation of the Law
The concept of monitoring the use of foreign workers by way of issuing permits is not a recent requirement; it was first implicit in the Kazakhstani legislation in 1991. However, it took some time to put the relevant enforcement mechanism into place. The procedure for entry into Kazakhstan includes not only obtaining authorisation for entry from the diplomatic service, but also the registration of foreign nationals with agencies of the Ministry of Internal Affairs. Thus, the inclusion of these agencies in the above-mentioned mechanism enabled monitoring to be implemented in practice and the loophole allowing persons to enter the country without work permits to be closed.
The Ministry of Foreign Affairs is now directly involved in issuing of entry visas to foreign nationals for employment on the basis of a work permit. Unfortunately, the receipt of a business visa issued by the Ministry of Foreign Affairs, such as for a one-year period, does not necessarily mean that the term of the work permit will be co-extensive with the visa.
On entry into Kazakhstan, a foreign national intending to stay in Kazakhstan for longer than three days must register with the agencies of the Ministry for Internal Affairs (Immigration Police Department); otherwise the foreigner may be deported. We know of one U.K. national who possessed a one-year visa who was only allowed to stay in Kazakhstan for a few weeks. In response to our enquiries the Immigration Police Department informed us that a work permit for foreign workers was necessary in order to obtain registration for a longer stay. The problem is that Kazakhstani legislation does not state that it is the obligation of the agencies of the Ministry for Internal Affairs to register (or authorise) the stay of foreigners in possession of a valid visa issued by the Ministry of Foreign Affairs, because it is implied that registration is actually only conducted on the basis of the opinion of the Immigration Police Department. Therefore, after receiving a work permit for foreign workers, such permit must be submitted not only to the agencies of the Ministry of Foreign Affairs, but also to the Immigration Police Department. This legal regulation not only applies to persons hired by companies formed in Kazakhstan but also to workers on secondment in Kazakhstan.
In the midst of all these requirements, an important question relates to when during the work permit process a company should send its workers to Kazakhstan. The preferred route is to obtain both the visa and the work permit before the employee enters Kazakhstan. In such cases, only one registration would be made with the Ministry of Internal Affairs for the entire period of the stay. Unfortunately, many companies cannot wait so long for the performance of their business.
When speed is needed in transferring the employee, the visa should still, if possible, be obtained and affixed in the passport before entering Kazakhstan. It is possible to collect the visa upon entry into Kazakhstan if the proper steps have been followed and if no mistakes have been made by the local officials. This can be very troublesome, however; if any of the documents have been misplaced or are out of order, then the visa cannot be issued at the point of entry, and the employee may be sent out of the country. The better course is to obtain the visa abroad.
As soon as possible during this procedure the application for the work permit should be started at the local department of labour.
Within three days of arrival in Kazakhstan, the employee should register with the Ministry for Internal Affairs. Often, if the work permit has not yet been obtained, the registration will be for a period that is shorter than the visa period. During this time, it should be possible to complete the first stage of processing of the permit application by the local department of labour. If a satisfactory conclusion is not given (such as because of the age limitation or because local workers qualify for the position), the employee may be required to leave the country no later than the expiry date of the registration with the Ministry of Internal Affairs. If the conclusion is satisfactory, a second trip to the Ministry of Internal Affairs becomes necessary and they will give a one-month prolongation of the registration upon submission of the conclusion. During that additional one month period, it should be possible to obtain the permit itself within the second 14-day processing period. When the permit is received, it will be necessary for the employee to make a third trip to the Ministry of Internal Affairs, and this time the objective will be to seek registration for a period that is co-extensive with the visa and the work permit.
It is likely that the Ministry of Foreign Affairs will cease issuing visas to intending workers unless they are already covered by a work permit. The resolution that approved the 1999 Rules instructs the Ministry of Foreign Affairs to change its procedures so that people who require a permit but do not have one are not given visas. At present, this arrangement is not being followed. When it is implemented, employers will not be permitted to be as casual as they now are in sending employees to Kazakhstan when the work permit application is still being processed.
V. Assessment of the 1999 Rules
The new rules on work permits and the latest innovations involving Atyrau go a long way toward satisfying foreign investor complaints about the previous regulatory regime. However, much depends upon how these rules are implemented at the local level. Moreover, the new rules do not address all of the specific problems identified by foreign investor groups. It is likely, therefore, that pressures will continue to be applied for additional changes.
CMS Cameron McKenna, Almaty office
Aidar Egeubayev
Telephone: 7 (3272) 58 12 58
Fax: 7 (3272) 58 17 52
e-mail: cmck@online.ru
Website: www.cmck.com
