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FY 1997 Assistance to the NIS Request: $20,000,000
Introduction.
Kyrgyzstan remains the most open of the five countries of Central Asia in terms of both economic and political change. On the economic front, the transition, though difficult, has included some of the most far-reaching reforms in the former Soviet Union. Initial steps toward democracy were very encouraging, but more recent political developments have included some setbacks. For example, efforts have on occasion been made to silence the press, and the disqualification of some candidates prior to recent presidential elections cast a cloud over the electoral process which followed. Presidential moves to consolidate and centralize power also suggest that interest may be flagging in maintaining a strong parliamentary system in which many independent voices are heard.
United States strategic interests in Kyrgyzstan are twofold. First, there is strong desire to work with Kyrgyzstan reformers to build and sustain a democratic and market-oriented country that could serve as an example to neighboring countries which seem less committed to these values. Second, a vibrant, independent Kyrgyzstan interacting positively on a wider international stage is important to maintaining stability in an area of the world where a number of international players, including Russia, China, Iran, the Middle East, and the Indian Subcontinent, have displayed strategic interests of their own.
The Development Challenge.
Kyrgyzstan is a relatively small country of 4.6 million people living in an area about the size of Nebraska. Despite considerable out-migration over the past several years, the country remains ethnically diverse. Ethnic Kyrgyz represent the majority population, but there are sizable communities of Russians, Uzbeks, Germans, Tatars, Uigers, and others. Mountains cover much of the country. There are significant hydro as well as mineral resources which enhance the country's prospects for long-term economic success. However, Kyrgyzstan's geographic isolation, combined with the enormous investment costs in exploiting these resources makes short-term economic prospects much more problematic.
Kyrgyzstan's major achievement since independence in 1991 has been to establish the basic framework for a market economy and to maintain a commendable degree of macroeconomic stability. In 1993 it became the first country in Central Asia to introduce its own currency. Since then, the Kyrgyz 'som' has been remarkably stable, maintaining its value well against the dollar and other freely tradable international currencies. Monthly inflation rates have been brought to within the low single digits and overall fiscal management has been among the best of any country in the former Soviet Union. Foreign investment is strongly encouraged and the country's privatization is regarded as among the most ambitious of the former Soviet republics. Kyrgystan is classified as a lesser indebted lower income country by the World Bank.
Despite overall macroeconomic stability, the standard of living has fallen and the social costs have been high. The elimination of subsidies from Moscow represented one early concern; the disruption of existing trading systems a second concern; and the departure of many skilled technical and professional workers to Russia, Germany and elsewhere a third. Also, the industrial sector that Kyrgyzstan inherited at independence was among the least efficient in the former Soviet Union. It included unproductive defense-related plants and a variety of other industrial establishments that simply cannot compete in the international marketplace.
Perhaps because of its isolation and weak economic situation, Kyrgyzstan moved quickly to introduce economic reform and emerge as a leader in demonstrating commitment to bring about real and enduring change. There are signs, especially when economic activity in the informal sector is factored in, that the post-independence recession may finally have bottomed out. The economy is divided roughly equally among the agriculture, industry, and service sectors. According to official statistics, agricultural performance was quite strong in 1995 and overall agricultural output appears to have increased by about eight percent. The continued decline in industrial output appears to have been cushioned to some extent by a rise in electricity production. Trade patterns continue to be dominated bycountries in the former Soviet Union, which still account for well over half of both imports and exports.
USAID-funded advisory groups have played an important role, both in the privatization process and in the overall economic restructuring effort. The mass privatization program is now reaching its final stages and should be largely complete by the end of the year. Central Asia's second stock exchange has been established in Bishkek and, despite a modest start, is positioning itself to play an important role in promoting the kind of capital market development needed to ensure that scarce financial resources are directed toward areas of highest economic return. A new tax code is being finalized and should be implemented soon. As the private sector begins to play an increasing role in the economy, more attention is being devoted to ensuring that appropriate legal and administrative structures are in place that promote rather than retard private sector growth. Recent approval for creation of an independent energy regulatory agency is one important example of the type of change needed to improve efficiencies and attract foreign investment. Further changes in the policy and administrative environment are needed to consolidate and maintain Kyrgyzstan's reputation as a country which is committed to market reform, encourages entrepreneurial talent and is hospitable to private investment.
USAID expects that Kyrgyzstan will have the institutional and other resources to continue its own transition. Current plans are to phaseout Freedom Support Act (FSA) assistance within the next several years.
Other Donors.
Kyrgyzstan's relative openness to economic reform has attracted a large number of foreign donors. Kyrgyzstan counterparts have demonstrated a commendable interest in ensuring that donor efforts are properly coordinated and that aid resources are stretched as far as possible. The Japanese and several European donors are active, including Germany (in agriculture, education, health and small enterprise development) and Switzerland (in agriculture and social services). The European Community has a wide-ranging technical assistance effort covering a number of areas, including communications, education, energy, environment and privatization. UN agencies such as UNDP have more modest programs. Multilateral banks such as the Asian Development (ADB), World Bank, and European Bank for Reconstruction and Development (EBRD) are well represented. They are expanding their loan portfolios, in some instances based in part on work undertaken by USAID-funded technical assistance teams that have been on the ground for some time. As USAID's own resources decline, renewed efforts are being made to ensure greater coordination and, where possible, dialogue with other donors on using USAID's own past experience to extend pilot programs to a national level.
FY 1997 Program.
USAID's strategy in Kyrgyzstan emphasizes both economic and political reform, reflecting the belief that both issues must be addressed in order to build and sustain democracy and a market-based economy in Kyrgyzstan. The largest share of aid resources are devoted to the economic transition, though the composition of the program is changing over time. For example, the privatization program is scheduled to wind down this year and no new resources are anticipated in this area. At the same time, work in other areas such as trade, investment, legal and regulatory environments, and land registration are due to be increased. Democratization programs will increasingly focus on developing the basic foundations for a civil society, in large part through promoting a variety of independent means of communication and in building an indigenous non-government organizations (NGO) sector. Social sector programs are tied closely to broader economic restructuring objectives, emphasizing for example the importance of health reform in bringing about more sustainable approaches to health care.
Strategic Goal: Economic Restructuring
Kyrgyzstan's future hinges in large part on completing the program of economic restructuring now under way. Considerable progress has been made on a number of fronts, particularly lowering inflation rates, maintaining currency stability, and establishing an overall level of macroeconomic stability that sets Kyrgyzstan apart from most of the other NIS countries. Major elements of the country's privatization program are winding down following a process that has in many ways been more transparent and open than those adopted elsewhere. As this phase of the economic transition moves to completion, increasing emphasis will need to be devoted to ensuring a legal and regulatory environment that promotes private sector growth. Trade, investment, bankruptcy laws, financial sectordevelopment and land registration are all likely to be emphasized during the next phase of the reform process.
Considerable progress has been made on the fiscal front. However, further work is needed to ensure that the macroeconomic progress achieved thus far is maintained. Many of the early successes are attributable to very tight short-term fiscal management policies, including a drastic reduction in subsidies for both failed enterprises and the social sectors. While budgetary controls have been tight, revenue generation reforms have lagged behind. The introduction of a new tax code in the near future should help, resulting in a more rational and transparent approach to tax collections. This in turn needs to be followed by improvements in tax administration, including greater use of computers and the introduction of a taxpayer information system. Finally, a USAID-funded Department of Treasury advisor is helping to improve budgetary classification and ensure more effective budget management. Reforms in the revenue generation and budget allocation process among the various elements of government (national, oblast, local) are also needed.
As noted, the legal and regulatory environment is increasingly emerging as a key issue within Kyrgyzstan's larger reform program. Private economic actors must know the "rules of the game" beforehand, and potential investors must have assurance that their risks are protected by laws. Some elements of a policy, legal and regulatory framework that support competition and private sector growth are already in place, but much work still needs to be done. Also, on-
the-job training and hands-on advice is needed to ensure that new laws and regulations, once adopted, are effectively managed and implemented.
A new legal and regulatory reform initiative began in November 1995. The emphasis is on adopting approaches that further trade and investment and on implementing legislation and regulations that clarify and strengthen property ownership and the transfer of commercial transaction rights. Without such measures, newly privatized industries will flounder and new entrepreneurs are unlikely to enter the marketplace. Given Kyrgyzstan's relative isolation and lack of easily exploitable natural resources, the extent to which its own legal and regulatory environment is conducive to both local and foreign investors will go a long way to determining prospects for future economic growth.
USAID has already provided crucial support in several areas of legal and regulatory reform as well as in setting up a corporate governance framework for privatized enterprises. Land registration will be added to the housing program, which includes formation of a housing policy council and a real estate register. The housing program is also successfully engaged in promotion of land privatization and private sector housing production, as well as formation of condominium associations able to manage and maintain housing to a much needed higher standard. USAID advice on a draft energy law led to important modifications that called for an independent electrical utility regulatory agency and more private sector involvement, both of which are preconditions for proposed World Bank and Asian Development Bank electricity sector loans.
Systems need to be introduced that ensure that scarce capital is channeled into the areas of highest economic return. Activity here revolves around developing the main institutions and features of an effective financial market, including the Kyrgyz Stock Exchange (KSE), State Securities Agency (SSA), private investment funds and private broker and dealer groups. Policy advice, the transmission of technical skills and training are all important parts of this effort.
The fact that KSE opened its doors and began trading in May 1995 represents one early success, the establishment of the SSA as a licensing and oversight institution another. The fact that the SSA has been able to establish its independence and receive appropriate enforcement powers and budget allocations is also important. Also, an Investment Funds Association was established in October 1995. Specifications for the clearing and settlement of transactions were established when the commercial bank "Maskat" was designated the clearing bank for KSE operations.
Future goals including promoting a self-sufficient securities exchange with at least 30 companies trading on the main board; assistance for a variety of automated accounting, settlement and depository systems; assistance to the SSA to enforce securities law and regulations and to train staffers about regulations and various operations; and completion of a broker/dealer compliance manual. Over time, the emergence of efficient capital markets should also help channel foreign investment into the Kyrgyz economy.
Strategic Goal: Democratic Transition
The importance of ensuring that economic reform is accompanied by political reform lies at the heart of the ongoing USG dialogue with Kyrgyzstan as it moves to build and shape its own future. The role of free information flows, respect for human rights, the importance of an active non-governmental sector and the need to ensure widespread citizen participation are all prominent features of this effort.
Efforts to enhance the flow of information and help develop the basic features of a civil society in Kyrgyzstan take place on a number of levels. First, USAID would like to help nurture and develop the non-governmental organization (NGO) sector as a way to enhance citizen participation and involvement. Second, programs are underway to promote independent media, especially television. Third, assistance is being offered to the newly elected Kyrgyz parliament in order to enhance its effectiveness. Fourth, outreach programs involve judges and lawyers as part of an effort to improve the effectiveness of and expand the independence of the judiciary. Finally, efforts are underway to improve the electoral process.
Viable democracies depend on the participation of all citizens, as individuals or as members of interest groups. Virtually no NGOs existed before the breakup of the Soviet Union. Since then, several hundred NGOs have emerged, but are poorly funded and make a limited contribution to the political, economic and social life of Kyrgyzstan. However, the generally open environment for NGOs provides opportunities that are being increasingly realized. USAID-funded groups work directly with such groups, providing both training and small grants to assist in program development.
A free and independent media is also a hallmark of democratic societies. Efforts are under way to improve both the quality of independent television programming and ensure its continued financial viability. TV officials attest to the value of these programs in redesigning studios, improving presentations, maintaining ethical standards, and learning how to manage a private enterprise.
While constitutional changes limit the power of the legislative branch of government, the parliament still represents a forum for public debate and can play a constructive role in ensuring that alternative voices are heard and pending legislation is properly debated and discussed before it becomes law. USAID-funded organizations assist by providing forums for public discussion on pending legislation and in helping legislatures strengthen relationships with their constituents.
USAID-funded programs seek to involve the judiciary to help ensure a transparent law-making process. USAID focuses on judges, bar development, and legal education. It has provided advice on legal and constitutional issues and on improving the credibility and independence of the judiciary. In July 1995, a charter for a forty-member Voluntary Lawyer's Union of Kyrgyzstan was established. USAID also helped organize a seminar on legislative drafting as well as candid discussions on draft legislation related to civil and criminal codes.
Finally, USAID programs have sought to improve the electoral process and, where appropriate, bring weaknesses and inconsistencies to light. Work of this type helps strengthen the professional capacity of the Kyrgyz Central Election Commission (CEC) and improves the effectiveness of foreign observer teams. USAID-funded groups have assisted local monitoring groups that brought claims of election fraud and other violations to the attention of news media and the CEC. This action in turn led to reruns of some elections.
Social sector restructuring is closely related to the wider economic restructuring effort. The elimination of subsidies from Moscow shortly after independence underscored the fact that existing approaches were not sustainable. Theneed for sustainable approaches also provides a powerful impetus for devising new and innovative ways in which the state can facilitate social sector development rather than being solely responsible for funding and managing it.
USAID efforts focus on health, with the aim of introducing market-based approaches that increase individual choice and rely when possible on the private sector. In the health area, a pilot project is under way in the Karakol region of northeastern Kyrgyzstan. Activities include the introduction of insurance schemes, family group practices, cost-
accounting and more efficient patient-discharge programs. Based on the experience gained in Karakol, the World Bank anticipates extending this health reform effort to other oblasts.
In Kyrgyzstan, "special initiatives" refers to new medical partnerships and family planning. Both represent Congressionally-mandated funding earmarks. There is considerable interest on the part of Kyrgyz health professionals in collaborating with U.S. counterparts. USAID also attempts when possible to ensure that these earmarks are closely integrated with other activities and address broader strategic concerns in Kyrgyzstan, especially in health reform.
The medical partnership between Kansas University Medical Center and two health institutions in Bishkek was established in 1992. More than 130 exchange visits have already taken place, during which hospital administration and nursing care received special emphasis. Among other things, the partnership led to the establishment of a Kyrgyzstan nursing association and outreach programs at 100 other Kyrgyz medical institutions. The partnership also resulted in a Ministry of Health decision to institute a new position of Nurse Manager in all hospitals with more than 300 beds. This is a revolutionary step in the former Soviet Union where nursing skills and responsibilities tended to be minimized. New management techniques have reduced the cost of treating patients, reduced the average length of stay in a hospital, introduced fee for service approaches in some areas, and helped support the wider health reform effort. One particularly creative approach adopted by the Institute of Oncology and Radiology cut the number of hospital beds by 30 percent. This move emptied one building for use as a hotel for visiting friends and relatives and allowed the proceeds to be applied toward better hospital services. Kyrgyzstan also participated in the USAID-funded reproductive health program, resulting in two fully equipped service delivery/clinical training sites in Bishkek staffed with qualified trainers and service providers.
The medical partnership involves training and people-to-people exchanges between medical staff in Kansas City and Bishkek. In Kyrgyzstan, as elsewhere in the former Soviet Union, the partnership serves as a vehicle for raising additional private American funds and providing badly needed medical supplies and equipment to Kyrgyzstan. Family planning programs are a combination of advisory services and training aimed at introducing new approaches and technologies to Kazakstani counterparts.
Economic and democratic reform cannot take place without a cadre of individuals from both the public and private sectors who have an understanding of markets and democratic processes. The NIS: Exchanges and Training (NET) program in Central Asia has been developed to supply the human resources necessary to assure this orderly transition. The program has been designed to support USAID's technical assistance programs in the areas of economic, democratic and social sector reform and to develop cadres of officials willing and able to bring about necessary change.
NET provided U.S. short-term training for 341 officials in 1994 and 1995, with an additional 30 participants scheduled for 1996. USAID-funded participants have been instrumental in the fiscal reform, central banking operations, commercial law, accounting standards and health reform. This effort benefits the Kyrgyz at all levels by training qualified public officials who are able to establish laws and regulations that are transparent and foster the growth of markets and democratic government. Potential entrepreneurs will benefit as they establish links with potential future U.S. commercial partners.
NET resources provide for both U.S. short-term training as well as in-country follow-on programs. The in-country program revolves around the establishment of an Alumni Center where returning participants can utilize e-mail and fax facilities to keep in touch with U.S. trainers and contacts, as well as duplicating equipment to reproduce reportsand other materials. The in-country follow-on program also provides for additional training through seminars and conferences, principally conducted by technical expertise located in Central Asia. The NET program will continue, with greater emphasis on in-country training.
NET has been instrumental in assisting the Government of Kyrgyzstan in implementing its economic restructuring program. NET is coordinated closely with the program of other donors in Kyrgystan, a number of which also support various kinds of training.
|
Strategic Objectives |
Economic Restructuring |
Democratic Transition |
Social Stabilization | Cross-cutting / Special Initiatives | Total |
| Privatization | |||||
| Fiscal Reform | 1,500,000 | 1,500,000 | |||
| Private Enterprise | 6,000,000 | 6,000,000 | |||
| Financial Reform | 4,000,000 | 4,000,000 | |||
| Energy | |||||
| Citizens' Participation | 3,000,000 | 3,000,000 | |||
| Legal Systems | |||||
| Local Government | |||||
| Crises | |||||
| Social Benefits | 1,500,000 | 1,500,000 | |||
| Environmental Health | |||||
| Cross-cutting / Special Initiatives | 4,000,000 | 4,000,000 | |||
| TOTAL | 11,500,000 | 3,000,000 | 1,500,000 | 4,000,000 | 20,000,000 |
USAID Mission Director, Acting: Patricia K. Buckles
PROGRAM: KYRGYZSTAN
TITLE: Fiscal Reform, 110-S001.2
STATUS: Continuing
PROPOSED OBLIGATION: FY 1997: $1,500,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Increased soundness of fiscal policies and fiscal management practices.
Background: Prior to independence, Kyrgyzstan had almost no experience in formulating its own fiscal policy and administering rational and efficient tax collection and budgeting practices. Complicated budget procedures lacked transparency and little was known about modern approaches to tax collection and revenue generation. Given this backdrop, Kyrgyzstan has been successful in implementing a tight fiscal policy which contributes to economic stability. For example, subsidies on both the production and consumption side have been drastically reduced. Similarly, inflation is now around two or three percent per month, among the lowest of any countries in the former Soviet Union. Finally, exchange rate management has been extremely effective, with the Kyrgyzstan som emerging as probably the most stable currency in the NIS.
USAID Role and Achievements to Date: Officials at the Ministry of Finance have benefitted from USAID-funded analysis and policy advice, particularly in the fiscal area. As noted, results include dramatically reduced inflation, currency stability and a macroeconomic environment that is among the most stable in the former Soviet Union. USAID-funded advisors have also made major contributions to the formulation of a new tax code which is being presented to parliament and should be adopted soon.
Description: USAID-funded consultants play an important role in providing policy advice to the Ministry of Finance. USAID-funded advisors also played a lead role in developing a new draft tax code which, when adopted, will mark a major improvement over the highly distortive and inequitable tax system now in place. Once the new tax code is adopted, additional assistance will be provided to help manage the new tax system. Finally, a USAID-funded Treasury advisor is helping to design a modernized budget classification system and strengthen the budgetary implementation process. Part of this Treasury work involves introducing new systems of inter-governmental finance and clarifying the role of the various levels of government (national, oblast, local) in raising revenue and allocating resources.
Host Country and Other Donors: Ongoing efforts in the fiscal arena are coordinated with those of other donors, including the World Bank and EU-TACIS.
Beneficiaries: This effort seeks to benefit tax-paying citizens of Kyrgyzstan at all levels by ensuring greater transparency and a more rational revenue collection and budgetary expenditure process. Potential entrepreneurs will benefit as more comprehensible and transparent tax systems are adopted. More efficient revenue collection and more rational budgetary procedures should also help strengthen the credibility of the government and help ensure the sustainability of targeted social programs aimed at the most vulnerable sections of society.
Principal Contractors, Grantees, or Agencies: USAID activities are implemented through a U.S. commercial contractor as well as through the U.S. Department of Treasury.
Major Results Indicators*:
Amount of (local currency) of revenues available from a cost efficient tax administration.
* These are illustrative indicators. ENI Missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.
PROGRAM: KYRGYZSTAN
TITLE: Private Enterprise, 110-S001.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $6,000,000 Freedom Support Act
INITIAL OBLIGATION: FY1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Accelerated development and growth of private enterprises.
Background: Given relative success in stabilizing the macro economic environment and placing government-owned assets under private control, Kyrgyzstan's future growth now depends on its ability to stimulate and promote a new and emerging indigenous private sector. The fact that Kyrgyzstan lacks easily exploitable natural resources and the fact that it inherited one of the least efficient industrial sectors in the former Soviet Union complicates matters. Nonetheless, there was widespread citizen participation in the mass privatization program and approximately 70 percent of the industrial labor force is expected to shortly be working for private firms.
USAID Role and Achievements to Date: USAID is providing crucial support for promoting legal and regulatory reforms that call for broad-based privatization process, promote the breakup of regional transport and wholesale monopolies, promote effective banking and securities market regulatory guidelines, and improve the corporate governance framework for privatized firms. Work in privatization has been especially key, ensuring among other things that the percentage of investment coupons invested in private enterprise increased from 10 percent in December 1994 to 90% in July 1995. By June 1, 1996 virtually all of the 900 targeted medium- and large-scale firms should have gone through the coupon auction process. As the proportion of the economy managed by the private sector expands, new emphasis is being given to the legal and regulatory environment in which private entrepreneurs must operate. Trade and investment, bankruptcy, and general business law receive special attention. The Central Asian American Enterprise Fund (CAAEF) represents another vehicle for bringing badly needed capital to the emerging private sector and recently started operations in Kyrgyzstan.
Description: Support for private sector expansion represents by far the biggest area of USAID activity in Kyrgyzstan. As USAID support for mass privatization winds down, greater emphasis is being placed on legal and regulatory work. Advisors work with counterparts on a number of key areas, including trade and investment, bankruptcy reform and general business law reform. Many of these efforts should also help pave the way for foreign investors interested in Kyrgyzstan. Already, the CAAEF is making capital available to eligible local entrepreneurs. People-to-people efforts involving retired executives, agriculturalists and others sponsored by USAID-funded groups such as the International Executive Service Corps (IESC) and the various farmer-to-farmer programs help identify potential investment opportunities and develop appropriate business plans. Also, an innovative micro enterprise initiative is now underway, providing modest but essential amounts of loan funds to new entrepreneurs, particularly women in the rural areas around Bishkek and Osh.
Host Country and Other Donors: Ongoing efforts to strengthen private business operations are developed in close conjunction with those of other donors, especially the World Bank, EBRD, and EU-Tacis.
Beneficiaries: Specific beneficiaries include the hundreds of thousands of citizens of Kyrgyzstan who own shares in newly privatized government enterprises and stand to gain if these new firms increase in value or pay out dividends. Aspiring entrepreneurs stand to benefit from a more comprehensible and more transparent legal environment. The entire population stands to gain from a market-based economic system which creates employment, increases incomes, lower prices, and expands individual choice.
Principal Contractors, Grantees, or Agencies: USAID activities are implemented through several private U.S. firms as well as U.S. private voluntary organizations such IESC, FINCA and Volunteers in Overseas Cooperative Assistance (VOCA). As noted, the CAAEF is an important player because of its role in making scarce investment and equity capital available to Kyrgyzstan's emerging private sector.
Major Results Indicators*:
Volume of business support services available to private enterprises from self-sustaining local institutions.
Number of laws implemented to expand private sector
Number of private sector businesses operating and generating employment.
* These are illustrative indicators. ENI Missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.
PROGRAM: KYRGYZSTAN
TITLE: Financial Reform, 110-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $4,000,000 Freedom Support Act
INITIAL OBLIGATION: FY1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: A more competitive and market-responsive private financial sector.
Background: Early success in the privatization arena will be unsustainable unless it is followed by the establishment and growth of a vibrant capital market to channel scarce investment resources into areas of highest economic return. Most commercial banks are barely solvent, and there is only the most rudimentary understanding of how capital markets work. Although Kyrgyzstan adopted basic central and commercial banking laws in December 1992, continued assistance is needed to modernize these laws and ensure effective implementation. A strong, independent Central Bank with an effective banking supervisory capacity is needed to modernize the banking system. The basic framework for an effective securities market also needs to be implemented and set on a sustainable footing.
USAID Role and Achievements to Date: The formation of a State Securities Agency in 1994 represents one early achievement, the establishment of Kyrygyzstan's first stock exchange in Bishkek in 1995 another. Twelve companies are now listed on the stock exchange board. New corporate accounting standards have been introduced. Significant strides have also been made as part of USAID's effort to tighten financial regulatory guidelines and enhance monitoring capacity in the banking sector. A number of insolvent banks have had their licenses suspended as a result of this work. These actions, and a dramatic reduction in credits and an overall tight monetary policy over the last two years, reflect the success of the Central Bank in asserting its independence.
Description: USAID's main role is to provide technical assistance and training to nascent institutions in the financial sector. Much of the early work--drafting and introducing new laws, procedures and operating systems--has already been done. Now, hands-on work and on-the-job training is receiving special emphasis.
Host Country and Other Donors: USAID is the major foreign donor working in the financial sector, and the only one involved in the securities area. Work is coordinated closely with the World Bank as well as with other donors such as EU-TACIS.
Beneficiaries: Immediate beneficiaries include professionals involved in securities market development such as private bankers, stock brokers, and government officials. Newly emerging entrepreneurs as well as a broad range of Kyrgyz citizens should benefit by expanding capital markets which channel scarce financial resources in more productive directions.
Principal Contractors, Grantees, or Agencies: USAID activities are implemented through three private U.S. firms in cooperation with the local counterparts at the Central Bank, Ministry of Finance, the Bishkek Stock Exchange, and Securities Exchange Commission.
Major Results Indicators*:
Number of licensed, viable private commercial banks.
Amount of funding for equity/credit provided to small and medium-sized businesses from private commercial banks.
* These are illustrative indicators. ENI Missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.
PROGRAM: KYRGYZSTAN
TITLE: Citizens' Participation, 110-S002.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $3,000,000 Freedom Support Act
INITIAL OBLIGATION: FY1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Increased citizens' participation in political and economic decision-making.
Background: Kyrgyzstan remains the most open Central Asian country, but there have been a number of recent setbacks on the road to democracy. Examples include the muzzling of some newspapers, constitutional changes that limit the power of the legislature, and the disqualification of several candidates in recent presidential elections. In this environment, the importance of building and sustaining a vibrant non-government sectoral with active citizen participation and a free media becomes even more important.
USAID Role and Achievements to Date: Active support of local non-governmental organizations (NGOs) remains a central part of the USAID program in Kyrgyzstan. Through December 1995, 64 grants had been provided to local groups active in such areas as the environment, human rights, agricultural development, women's rights, media, civic education, and election law reform. An effective USAID presence supported the presence of foreign observers at various Kyrgyz elections, ensuring that problems brought to the attention of both private groups and governmental institutions in order to improve electoral practices in future. USAID grantees have also been influential in establishing a voluntary lawyer's union for Kygyzstan, encouraging the development of local bar associations, and promoting public discussion on pending legislation.
Description: USAID-funded program activities largely involve technical assistance, training, and grants to local NGOs. The local NGO sector receives special attention, in terms of the legal and regulatory environment, in terms of introducing greater professionalism and new management skills to NGOs, and in terms of effecting social change and providing needed social services. Under a competitive small grants programs, a number of local organizations are eligible to receive direct programming support. A new initiative will provide training to private television stations to improve programming quality and enhance their financial viability.
Host Country and Other Donors: The United States is the major foreign donor working in the area of democratization in Kyrgyzstan. Programs supported by the various USG agencies, including those of USAID and USIA, are closely coordinated.
Beneficiaries: Immediate beneficiaries include individuals directly associated with Kyrgyzstan NGO sector. Many more will benefit as various NGOs increase their public interest presence and expand their social service programs. Tens of thousands should also benefit from improved programming and management skills at the country's independent television stations. More broadly, all citizens stand to gain from strengthened civil society and the opportunity to help shape the future economic, political, and social life of the country.
Principal Contractors, Grantees, or Agencies: Several USAID-funded American NGOs such as the American Bar Association/CEELI, National Democratic Institute (NDI), Internews, International Republican Institute (IRI) and the International Foundation for Election Systems (IFES) have played important roles in promoting democracy in Kyrgyzstan. Familiar American groups such as Goodwill Industries, Aid to Artisans, and the Citizens Network for Foreign Affairs, which together form The Counterpart Consortium, also participate in local NGO development.
Major Results Indicators*:
Number of changes made to government policy as a result of citizen participation.
Number of new federations, organizations, coalitions, etc. formed to promote/oppose specific policies/legislation-Number and types of fora in which NGOs engage state institutions in policy debate.
* These are illustrative indicators. ENI Missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.
PROGRAM: KYRGYZSTAN
TITLE: Social Benefits, 110-S003.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $1,500,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Improved sustainability of social benefits and services.
Background: The transition to a market economy places severe strains on the social sectors, which were previously funded and managed entirely by the government. Without subsidies from Moscow, old patterns of social service planning are no longer sustainable. The relative macroeconomic stability which has been achieved in Kyrgyzstan stems in part from deep budget cuts, which have especially affected the social sectors. Some medical personnel do not receive paychecks for months at a time. Although some progress has been made, the central elements of a market-based approach to the social sectors are not yet in place.
USAID Role and Achievements to Date: Initial USAID efforts have focused on pilot demonstration projects in the Karakol region of Kyrgyzstan. Considerable progress has been made, including the introduction of market-based insurance schemes, establishment of 29 family group medical practices, and development of new cost accounting and patient discharge programs. The World Bank intends to introduce and extend the successful elements of this approach to the country's other five oblasts. USAID-funded technical assistance to the Ministry of Health resulted in revised immunization schedules consistent with international standards. This will reduce the number of vaccinations required for children under the age of 17, reduce current expenditures on commodities by 6.7 percent, and result in annual savings of approximately $650,000.
Description: USAID work focuses mainly on health and housing, and health represents the most significant area of concern. At the policy level, advisors prepare analyses and discuss with government counterparts new approaches to key social sectors such as health and housing. Training programs, both in Kyrgyzstan and in the United States, further supplement this effort. Advisors from the Centers for Disease Control (CDC) are also funded, in order to improve surveillance systems and promote more effective public health strategies.
Host Country and Other Donors: USAID work is closely coordinated with that of other donors, in order to leverage additional funding and ensure that successful pilot activities are extended to a national level. As noted, the World Bank anticipates extending the Karakol pilot program to other regions of the country.
Beneficiaries: Immediate beneficiaries include the population of Karakol oblast who are participating in the pilot health reform effort and have a wider choice of health care options. Funding from other donors should allow these benefits to be spread to other regions of the country.
Principal Contractors, Grantees, or Agencies: The health reform effort is being implemented mainly through a commercial American contractor. Centers for Disease Control (CDC) personnel are also actively involved in promoting better approaches to health surveillance.
Major Results Indicators*:
Number of services privatized (e.g. pharmacies, hospitals, delivery services).
Incentives for private (profit and non-profit) services exist for quality service delivery.
Market reforms in place and introduced to various sub-sector service deliverers.
* These are illustrative indicators. ENI Missions are in the midst of the complex process of developing measurable country-specific indicators and targets, which will be completed by June 1996.