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FY 1997 Assistance to the NIS Request: $39,000,000
Introduction.
Kazakstan, the world's largest land-locked country, is resource-rich and offers considerable trade and investment opportunities. Of particular value are vast reserves of oil, as well as gold, copper, and chromium. Lack of effective transport routes and relative isolation make it difficult for Kazakstan to access international markets. The government is publicly committed to building a democratic, market-based political, social and economic order. Considerable progress has been made in a number of areas since independence, though many elements of the Soviet legacy continue to have strong impact. Kazaks represent the single largest ethnic group, but there is also a significant Russian population and dozens of other ethnic minorities, including Germans, Koreans, Tatars, and Uigers. The country's geographic location, combined with its mix of both Russian and Asian traditions, position it to play an important role in supporting a successful interaction between the two traditions.
U.S. national interests in Kazakstan are both commercial and strategic. The country actively promotes Western trade, investment and economic support. The potential is enormous, especially in the energy sector. Foreign investment is already at levels higher than any other former Soviet republic including Russia, though lack of a transparent, consistent legal and regulatory environment causes concern and is proving to be a stumbling block for foreign investors. Kazakstan's large size and geographical location means it is also a key player in shaping the post-Soviet political and economic order in the large Eurasia landmass. Relations with Russia are vital, as are those with China, its other large neighbor; Kazakstan also interacts closely with the other Central Asian republics and, more indirectly, with both the Middle East and the Indian Subcontinent to the south. Kazakstan was one of four states in the former Soviet Union that possessed nuclear weapons on independence, but is now nuclear weapons free. An independent and prosperous Kazakstan which engages constructively on the international stage is an important factor in determining regional stability in a potentially volatile area of the world.
The Development Challenge.
Kazakstan, the largest recipient of U.S. assistance in Central Asia, has made considerable progress in privatizing government assets and setting up the basic framework for a market-based economy. Official pronouncements support such an approach, and the government has issued a series of measures designed to fundamentally change the role of the state in bringing about sustained economic growth. However, implementation often lags. Lack of experience in managing a market economy is often a problem, especially at lower levels where officials lack either the expertise or commitment needed to implement meaningful reform. Lack of transparency and the difficult social costs associated with some aspects of the transition also have undermined public confidence in the shape and direction of change.
Overall macroeconomic management has been relatively good, especially considering that Kazakstan at independence lacked the experience needed to conduct international trading relationships and take control of its own economic destiny. Despite initial difficulties in introducing a new currency in November 1993, the Kazakastani tenghe has been relatively stable since at least June 1995. Initially rampant inflation has also been largely brought under control, with monthly inflation rates now in the low single digits and overall inflation rates the lowest since independence. These and other measures designed to ensure greater macro stability are important first steps in setting the country on a path toward sustained growth. Although most production figures plummeted following independence, the rate of decline has slowed and there are signs that the recession may have finally bottomed out. Regarding debt, Kazakstan has relatively low external debt obligations with a debt service in terms of exports ratio averaging one percent over the period 1992-94. The future appears promising as there is significant investor interest in the country's natural resource base.
Privatization programs have on occasion been delayed and suffered implementation difficulties, but the government has shed itself of most small businesses as well as a large number of medium-sized enterprises. A few very large firms have been sold off on a case-by-case basis and others are slated to be sold off as well. The decision in the fallof 1995 to break apart a number of large holding companies and sell off their constituent parts was an important step forward, ensuring that some of the more attractive enterprises were available for private purchase and giving an important boost to the overall privatization process. According to one estimate by the European Bank for Reconstruction and Development, as much as 25% of Kazakstan's GDP now originates in the private sector.
Growth in the energy sector has not yet met expectations, though it is still regarded as a significant engine for future economic growth. Current oil production levels of around 300,000 barrels a day are still only about 25% of those achieved just prior to independence in 1991. Continued lack of progress on an oil export pipeline makes it extremely difficult for Kazakstani oil and gas to reach world markets. Oil and gas are critical to the economic future of the region; USAID and State will be developing some focused activities in FY 1996/97 to further natural development and regional cooperation. Joint ventures are becoming more active, but uncertainty on the pipeline issue and difficulties exporting through Russia will continue to cast a cloud over future development until the issues are resolved. Power sector reform appears to be back on track raising the possibility of major privatization and investment.
Agricultural performance has been disappointing in a number of respects. The 1995 grain harvest represented a major setback, with production levels only half of those in 1994. Kazakstan will still meet its own domestic requirements, but grain exports will be much reduced. Drought, inefficiencies in supply and distribution systems and a shortage of spare parts and fuel all contributed to the poor harvest. Areas in which the private sector plays an important role, such as the production, distribution and marketing of fruits and vegetables, have performed much better.
Kazakstan's population is relatively well educated, and its literacy rate is almost 98 percent. State-organized systems for delivering social services have proven to be unsustainable. For example, the health care system is centralized and emphasizes curative measures instead of prevention. Some market-based mechanisms are now being introduced, including the privatization of dozens of government-owned pharmacies. The economic transition has proven to be especially difficult for vulnerable groups such as pensioners and large families headed by women. Ways to introduce more targeted assistance for vulnerable groups are being discussed and in some instances introduced.
While individual human rights are by and large respected and there is a lively independent media, democratization has not yet taken root in Kazakstan. Government institutions still run largely along communist lines. The population tends to focus on economic issues and is frequently uninterested in political processes. An April 1995 referendum extended the president in office until 2000, and a new constitution adopted in August 1995 concentrates power in the presidency. It remains to be seen to what extent the new parliament, elected in December, will exercise its limited powers and emerge as an effective and open forum for debating issues.
USAID expects that Kazakstan 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.
Other donors are heavily engaged in Kazakstan, reflecting the country's reputation as one of the early reformers interested in working with international institutions to effect lasting change. Standby agreements have been negotiated with the IMF, and both the European Bank for Reconstruction and Development (EBRD) and the World Bank have active programs. The World Bank provides technical assistance for economic restructuring and loans in key areas related to oil development, urban transport, social protection, and finance and enterprise development. New projects in a number of areas covering land registration, financial sector adjustment, private sector support, irrigation and drainage, water supply, agricultural privatization, and treasury modernization are being prepared. EU-
TACIS and bilateral donors such as Germany, Britain, Japan and Korea provide additional aid, usually in the form of technical assistance and training. USAID works closely with these other organizations and in some instances their resources are able to supplement and provide wider support for programs pioneered by USAID-funded technical assistance teams.
FY 1997 Program.
USAID's strategy for helping Kazakstan achieve a democratic, market-based society focuses on four main areas: economic and financial restructuring; democracy building; social transition; and participant training. Economicrestructuring remains the single most significant part of the portfolio, though the emphasis over time has shifted from privatization (which is now being phased out) to broader legal and regulatory concerns. This in turn represents a natural "next step" toward the ultimate purpose of the aid program: promoting and sustaining private commercial trade and investment relationships for which aid is no longer needed.
The planned 1997 program anticipates further work in the fiscal area, mainly by providing hands-on practical training and support for administering a modernized tax code and managing a more transparent budgetary process. Private firms, whether newly privatized or established by an emerging entrepreneurial class, will benefit from improvements in the overall legal and regulatory environment. Trade and investment issues receive special attention, including speeding up Kazakstan's membership in the World Trade Organization. Further support for financial sector development is envisaged by building on Central Asia's first stock market, established in Almaty in spring 1995. Plans are to improve and expand operations. Planned democratization programs include a mix of support for independent media, for strengthening the judiciary and parliament, and for developing local NGOs as an essential feature of a more open civil society. Work in the social sectors will be closely linked to the economic restructuring objective, especially by using sustainable, incentive-based market systems to deliver needed social services. Finally, a continued training program is envisaged, cutting across all sectors, with greater emphasis on in-country training and on follow-on programs which ensure greater effectiveness of newly acquired technical skills in Kazakstan.
Strategic Goal: Economic Restructuring
Kazakstan's educated population, large natural resource base and relatively developed industrial infrastructure offer a number of advantages that should enable it to eventually compete effectively in world markets. Although the shift from a socialist system to a market-based economic system has at times been difficult, Kazakstan is partway down the path toward fundamental, lasting change. As the government's own privatization program, implemented with considerable assistance from USAID, winds down, greater emphasis needs to be placed on building the commercial environment needed to ensure that newly privatized firms grow and prosper. Also, although the government has issued a number of significant decrees and is working on others, considerably more work is needed to implement legal frameworks effectively.
USAID advisors played a central role in developing Kazakstan's new tax code that was introduced in July 1995 and described as perhaps the most modern and transparent in the former Soviet Union. Considerable work is also being done to improve the budget planning and implementation process. Effective implementation of these new policies is needed in order to ensure their ultimate success. Key activities include providing technical advisors and training in modern tax administration procedures. Programs aimed at ensuring more rational and transparent ways to raise revenues and allocate among the various levels of government (national, oblast, local) is also planned.
The imminent conclusion of ongoing privatization programs makes it all the more imperative to work on the legal environment in which newly privatized firms must operate. Private economic actors must know the "rules of the game" at the outset, and potential new investors have to be sure beforehand that they can confidently analyze risks involved in a new venture. Trade and investment concerns figure prominently in the work undertaken, with a view toward assuring the economic climate in Kazakstan is attractive to both local and foreign investors.
The notion of financial markets was almost unknown during the Soviet era. In a market economy, strong financial markets are needed to ensure that capital is channeled into areas of highest economic return rather than being squandered on inefficient enterprises that contribute nothing to long-term growth. Initial USAID activity ensured creation of Central Asia's first stock market in Almaty as well as establishment of an independent securities exchange commission to regulate it. Next steps include expanding the size and scope of the stock exchange and ensuring that Kazakstani counterparts are effectively equipped with the skills needed to manage a modern financial sector. As with fiscal and commercial environments, a strong financial sector is crucial for attracting the kind of trade and investment needed to ensure sustainable, long-term commercial relationships in the international marketplace.
Strategic Goal: Democratic Transition
There were a number of setbacks last year in terms of democracy building in Kazakstan, including the use of a referendum in place of a presidential election and the relatively sudden introduction of a new constitution that concentrates power in the office of the president. International observers have questioned some elements of the electoral process as it has been implemented in Kazakstan. More positive signs include a sensitivity to human rights, maintenance of a lively independent media and the emergence of a growing NGO sector. Building democracy will be a long-term process in Kazakstan, requiring both commitment at the upper levels of government and interest on the part of individuals and NGOs in helping to shape future development patterns.
The trend toward greater centralization of power underscores the importance of expanding the flow of information and ensuring that a variety of voices are heard. Growing emphasis is now being placed on building and sustaining local NGOs as a way to ensure more grassroots involvement. Assistance will also continue to independent television networks, both to improve their professional programming skills and to ensure that they become sustainable, commercially viable business operations. Where appropriate, programs on judicial development and parliament strengthening will also be considered.
USAID interventions will stress more efficient, market-based approaches to social service delivery, especially in the health sector. When feasible, development and testing on a localized, pilot basis will be emphasized. Once the pilots are successful, efforts will be made to work with the government and other donors on trying to expand these pilot efforts nationally.
Cross-cutting/Special Initiatives
In Kazakstan, "special initiatives" refers mainly to Congressional earmarks in the areas of medical partnerships and family planning. There is substantial interest among health professionals in Kazakstan in participating in such programs. USAID also attempts when possible to ensure that these earmarks are closely integrated with other activities and that they address broader strategic and programming concerns, including those in health reform. Finally, modest general project support in the form of special studies, evaluations, and pilot activities are funded out of the special initiatives line item; on occasion, these activities involve not only Kazakstan but other countries in Central Asia as well.
The medical partnership between a Tucson hospital consortium and four medical facilities in Almaty has provided training and technical assistance since 1993. A new partnership between Methodist Hospital and Baylor College of Medicine and four medical institutions in Semipalatinsk/Kurchatov began in February 1995. Thus far, the Almaty partnership has resulted in the establishment of the Almaty Perinatal Center, the Almaty Poison Information Center and the Almaty Regional Emergency Medical Services Center. New clinical practices are being introduced into the Almaty Medical College curriculum. Also, the city health administration created the new position of Head Nurse for Infection Control. This position was then created at 80 other city hospitals and resulted in reduced infection rates andshorter hospital stays. Under the reproductive health initiative, a Demographic Health Survey was recently completed, the first in the former Soviet Union. The survey provides empirically sound data on the health and family planning situation in Kazakstan which can be used to shape more targeted interventions. Also, the contraceptive social marketing program, based on market approaches to contraceptive sales, trained hundreds of pharmacists in modern counselling techniques and broadcast television messages seen by hundreds of thousands of Kazakstanis since January 1995. Five international pharmaceutical manufacturers have entered the Kazakstan market. The number of pharmacies carrying modern contraceptives has increased dramatically since December 1994. Kazakstan is also participating in the USAID-funded reproductive program resulting in two fully equipped service delivery/clinical training sites in Almaty staffed with qualified trainers and service providers. Finally, special studies and programs funded out of the special initiatives have included such items as an innovative conference and follow-up programs linking Kazakstanis to professional counterparts in the U.S.
Also under Cross-cutting Programs, the Exchanges and Training program continues to provide important support for reform-minded Kazakstanis to obtain specific training in a way that also exposes them first-hand to Western systems and methods. The training has proven to be especially effective in Kazakstan because it is usually linked to the larger technical assistance effort and because counterparts often come back with new ideas and views on how to do things differently back in Kazakstan. Given the country's historical isolation, this opportunity is all the more useful.
NET provided U.S. short-term training for 482 officials in 1994 and 1995, with an additional 160 participants scheduled for 1996. USAID-funded participants have been instrumental in the development of a tax code, central banking operations, national budgeting commercial law, accounting standards and health reform. This effort benefits Kazakstanis 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 governance. New 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 reports and 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.
The focused technical training provided through NET has been instrumental in assisting the Government of Kazakstan in the implementation of its economic restructuring program. NET is coordinated closely with the program of other donors in Kazakstan, a number of which also sponsor various training initiatives.
Although some elements of the training program will change, there will be a continued emphasis on linking participants to ongoing technical assistance in order to increase their effectiveness. Expanded follow-on programs and more in- country training is also planned, to ensure that technical skills learned on a U.S. study tour are effectively applied in Kazakstan-specific work contexts once the trainees return.
|
Strategic Objectives |
Economic Restructuring |
Democratic Transition |
Social Stabilization | Cross-cutting / Special Initiatives | Total |
| Privatization | |||||
| Fiscal Reform | 3,500,000 | 3,500,000 | |||
| Private Enterprise | 14,000,000 | 14,000,000 | |||
| Financial Reform | 6,000,000 | 6,000,000 | |||
| Energy | |||||
| Citizens' Participation | 3,000,000 | 3,000,000 | |||
| Legal Systems | 500,000 | 500,000 | |||
| Local Government | |||||
| Crises | |||||
| Social Benefits | 1,500,000 | 1,500,000 | |||
| Environmental Health | |||||
| Cross-cutting / Special Initiatives | 10,500,000 | 10,500,000 | |||
| TOTAL | 23,500,000 | 3,500,000 | 1,500,000 | 10,500,000 | 39,000,000 |
USAID Mission Director, Acting: Patricia K. Buckles
PROGRAM: KAZAKSTAN
TITLE: Fiscal Reform, 110-S001.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $3,500,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Increased soundness of fiscal policies and fiscal management practices.
Background: The Soviet legacy ensured that newly independent states such as Kazakstan inherited an antiquated set of fiscal programs and policies. Complicated budget procedures lacked transparency. Similarly, little was known about modern approaches to tax collection and revenue generation. Progress in both areas is essential in order to ensure and sustain macroeconomic stability.
USAID Role and Achievements to Date: USAID-funded advisors made major contributions to the formulation of a new tax code, adopted in July 1995 and described by some outsiders as perhaps the most modern and transparent of any in the former Soviet Union. On the budgetary side, USAID-funded contractors and USAID-
funded Treasury advisors are helping to introduce a new budget classification system, a national and local budget law, and a modern system for managing public external debt.
Description: USAID advisors are working with Kazakstani counterparts to ensure a more efficient revenue collection system and to shape more rational and transparent budgetary processes. Now that a new tax code is in place, the focus is shifting to training and hands-on instruction in how to manage and implement the new system. In the budgeting area, advisors work directly with counterparts to improve systems and to rationalize the expenditure and taxation authority among the various levels of government (national, oblast, local).
Host Country and Other Donors: Ongoing efforts in the fiscal arena are coordinated with those of other donors, including the World Bank, IMF and EU-TACIS. The World Bank is planning a major treasury modernization project which would involve technical advisors, training and equipment.
Beneficiaries: This effort seeks to benefit tax-paying Kazakstanis 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 fiscal systems are adopted. Increased government revenues and a more rational system for allocating their use should also lead to more effective governance and greater macro economic stability.
Principal Contractors, Grantees, or Agencies: USAID activities are implemented through two private U.S. firms and the U.S. Department of Treasury.
Major Results Indicators*:
Amount of government budgetary transfers to state-owned enterprises.
*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: KAZAKSTAN
TITLE: Private Enterprise, 110-S001.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $14,000,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Accelerated development and growth of private enterprise.
Background: Kazakstan's economic future depends largely on its ability to stimulate a nascent private sector. Some of this will come through the privatization process, some as a result of entrepreneurs entering the marketplace to start or expand businesses. Already, outside private investment is higher in Kazakstan than in any other country in the former Soviet Union, in large part because of Kazakstan's enormous supplies of oil and other natural resources. Although the government is broadly supportive of economic reforms needed to foster private sector growth, problems often occur at lower levels, where there is a lack of understanding of market-based policies and procedures and a lack of technical competence that will be needed to implement them effectively.
USAID Role and Achievements to Date: Privatization represented the first phase of USAID economic restructuring work in Kazakstan. By early 1996, more than 6,000 enterprises valued at more than $49 million had been sold through cash auctions. A parallel program of mass privatization involving coupons has also made considerable progress, especially since August 1995. By the middle of February 1996, 22 coupon auctions for 1,712 companies had been held. By some accounts, nearly two-thirds of the industrial employment in Kazakstan now works for firms that are majority owned by the private sector. Recently, USAID focused more attention to the policy and legal environment needed to sustain a supportive business environment. To promote competition, USAID advisors worked with the Anti-Monopoly Committee to successfully promulgate reforms that drastically reduced the number of companies subject to pricing and profitability controls. USAID advisors also helped force the breakup of many major holding companies and made sure that they were included in the mass privatization program. Finally, they helped ensure an insurance regulatory framework which promotes competition and ensures foreign participation. Also, the USAID-funded Central Asian American Enterprise Fund (CAAEF) is now a very visible presence and has already made a number of equity and loan investments in Kazakstan.
Description: Private sector support represents by far the biggest USAID activity in Kazakstan. In the area of legal and regulatory reform, advisors are working in key areas including trade and investment, bankruptcy reform and general business law reform; a large training effort in all three areas is anticipated. The general business component targets constraints to business operations, including passage of legislation in such areas as contract law and property rights. The bankruptcy area is designed to help establish the rights of creditors and develop a framework for disposing of unproductive assets and channeling them toward more efficient economic uses. Many of these efforts are needed to maintain the momentum created by the privatization process and to expand opportunities for US trade and investment in Kazakstan. The CAAEF is also available to help facilitate and promote this type of investment. People-to-people efforts and exchange programs such as those supported by the International Executive Service Corps (IESC) and the various farmer-to-farmer programs have proven to be excellent vehicles to identify potential investment opportunities and develop appropriate business plans.
Host Country and Other Donors: Ongoing efforts to strengthen private business operations are developed in conjunction with those of other donors, especially the World Bank, EBRD, and EU-TACIS. World Bank funds are being used to provide consultantcy services. A World Bank-funded project on private enterprise support is now being developed. EBRD programs include a loan program comparable to that offered by the CAAEF. EU-Tacis also supports private sector development and has a special interest in the agricultural sector.
Beneficiaries: Specific beneficiaries include the hundreds of thousands of Kazakstanis who own shares in privatized government enterprises and stand to gain financially if these new firms are successful. Aspiring entrepreneurs stand to benefit from a transparent, stable and consistent legal environment. The entire population stands to gain from a more efficient market-based economic system that produces jobs and increases the availability of goods and services.
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, Agricultural Cooperative Development International (ACDI), Volunteers in Overseas Cooperative Assistance (VOCA), and Winrock. As noted, the CAAEF also makes an important contribution by expanding the amount of investment and equity capital available to Kazakstan's private sector.
Major Results Indicators*:
Number of private sector businesses operating and generating employment.
Number of business associations advocating on behalf of private sector initiatives, needs, and future growth requirements.
Number of laws implemented to expand the private sector.
* 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: KAZAKSTAN
TITLE: Financial Reform, 110-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $6,000,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: A more competitive and market-responsive private financial sector.
Background: Success in privatization will be fleeting unless it is followed by development and expansion of a vibrant capital market to channel scarce investment resources into areas of highest economic return. A basic legal and institutional framework for market-based financial market development is now in place, but further skill and understanding is needed to ensure its effective operation and implementation.
USAID Role and Achievements to Date: The establishment of the Central Asia Stock Exchange (CASE) in Almaty represents one notable achievement, the formation of an Independent Securities Exchange Commission another. International corporate accounting standards were introduced in December 1995. Significant strides also have been made to tighten financial regulatory guidelines and to enhance monitoring capacity in the banking sector. Through January 1996, as a result of detailed bank examinations, more than fifty insolvent banks have had their licenses suspended. These actions, plus a dramatic reduction in credits and an overall tight monetary policy in 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. Work often entails drafting and introducing new laws, procedures, and operating systems. Hands-on work and on-the-job training receives special emphasis. Banker training is conducted through a series of one-week classroom sessions. High level policy advice is accompanied by efforts to ensure that counterparts develop the capacity to undertake such research and analysis on their own.
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. Training activities for private banks undertaken by both USAID and EU-TACIS are about to be merged into a single institution that should set the standard for banker training in Central Asia.
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 Kazakstani citizens should benefit by the extension of capital markets that channel scarce financial resources into more productive directions.
Principal Contractors, Grantees, or Agencies: USAID activities are implemented through several U.S. firms in cooperation with local counterparts at the National Bank, Ministry of Finance, Central Asia Stock Exchange, and National Securities Commission.
Major Results Indicators*:
Amount of investment, both from domestic and foreign sources.
Number of licensed, viable, 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: KAZAKSTAN
TITLE: Citizens' Participation, 110-S002.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $3,000,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Increased citizens' participation in political and economic decision-making.
Background: There have been a number of setbacks on the road to democracy in Kazakstan. Since independence in December 1991, the country already has had two constitutions, two general parliamentary elections, several by-elections, and one presidential referendum. The current constitution consolidates power in the president. However, there are independent media outlets, non-governmental organizations (NGOs) that organize and carry out activities, and opposition voices that can be heard. The diverse nature of Kazakstani society underscores the importance of ensuring a multiplicity of media outlets and NGOs that provide platforms upon which all sections of society can voice opinions and help shape their future. An independent media and a vibrant NGO sector are the foundations for building a truly democratic civil society in Kazakstan.
USAID Role and Achievements to Date: Prior to 1990, there were no truly non-governmental organizations in Kazakstan. Several hundred now exist, though lack of funding and lack of organizational skills is a recurring problem. Through the end of December 1995, USAID-funded American organizations had provided 126 grants throughout Kazakstan to local NGOs representing a variety of interests, including human rights, the environment, rule of law, women's rights, agricultural development and market transition. The fact that Almaty by some accounts has the most independent local television programming of any city in the former Soviet Union is in part a tribute to the work of the relevant USAID grantee. The same group is helping to strengthen independent media across the country (of the 38 independent television stations throughout Kazakstan, only five are in Almaty). Following a July 1995 conference involving 21 television cities in 14 cities, membership in an Association of Independent Electronic Mass Media increased nearly 200 percent, from 7 to 20. The organization's main goal is to protect independent electronic media. USAID-supported monitoring groups made sure that inadequacies in Kazakstan's electoral processes have been documented and brought to public attention, in hopes of establishing dialogue with relevant government institutions and improving electoral processes in future.
Description: USAID's current program focuses on democratic processes, especially those aimed at enhancing civic participation and education, the flow of information, ensuring transparency and accountability in government and dialogue between the government and non-governmental sectors. Parliamentary strengthening programs will also be considered. The local NGO sector receives special attention, in terms of improving the legal and regulatory environment they work in, in terms of introducing greater professionalism and new management skills, and in terms of effecting needed social change and providing needed services. The formation and effectiveness of a local bar association, a form of NGO, is being furthered because of their potential contribution to democratic, economic and social change.
Host Country and Other Donors: The United States is the major foreign donor working in the area of democratization in Kazakstan. Programs supported by the various USG agencies, including those of USAID and USIA, are closely coordinated.
Beneficiaries: Immediate beneficiaries include individuals directly associated with Kazakstan's NGO sector. Many more Kazakstanis will benefit through the public interest advocacy and social services provided as the NGO sector grows and expands. Tens of thousands of Kazakstanis also benefit from improved programming and management skills at the country's independent television stations. More broadly, all Kazakstanis stand to benefit from strengthened civil society and the introduction of more democratic norms and practices.
Principal Contractors, Grantees, or Agencies: Several USAID-funded American NGOs such as the National Democratic Institute (NDI), the American Bar Association/CEELI, Internews and the International Foundation for Election Systems (IFES) have played a role in promoting democracy in Kazakstan. Familiar American groupssuch as Goodwill Industries, Aid to Artisans, and the Citizens Network for Foreign Affairs also participate in local NGO development.
Major Results Indicators*:
Number of changes made to government policy as a result of citizen participation.
Number and types of fora in which NGOs engage state institutions in policy debate.
Percent of citizens who believe they are being represented by their legislators.
* 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: KAZAKSTAN
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. In the absence of subsidies from Moscow, old patterns of social service planning are no longer viable. Old age pensioners and large families headed by a single mother have been especially hard hit. What is needed is a combination of fee-based services (for those able to afford it) to ensure sustainability, combined with targeted assistance to the most vulnerable populations. Some progress has been made in these areas, but much more needs to be done to ensure a successful and less painful transition to a market-based economy.
USAID Role and Achievements to Date: The rapid privatization of large numbers of pharmacies represents the most significant achievement to date. Since the decision to privatize was approved by the Cabinet of Ministers in July 1995, 438 auctions have been held and 239 pharmacies have been privatized. Immediate results include lower prices and increased availability of key pharmaceuticals. USAID-funded advisors and training also helped draft a Presidential decree to establish health insurance. USAID-funded advisors from the Centers for Disease Control (CDC) are working to improve health surveillance and introduce more effective, efficient and less costly health surveillance measures. Already, CDC advice on eliminating a costly, inefficient and outdated TB detection program for children should result in savings of around $2.4 million annually. Also, USAID-funded advice to the Ministry of Health resulted in revised immunization schedules consistent with world standards. This will reduce the required number of vaccinations for children under age 17, reduce current expenditures on commodities by 16.5 percent, and result in annual savings of $1.75 million. In the housing sector, USAID advisors have played an influential role in helping the national government address the costly problem of local governments' subsidizing housing and utilities. The government is in the process of adopting a national policy which expects cities to reduce these subsidies through the year 2000. USAID has also helped one city, Semipalatinsk, implement a housing allowance program. As a result, the city has been able to increase utility service fees, raise much-
needed municipal revenue, and still protect low-income households and vulnerable groups. Presently, 8,720 families receive allowances, while the city had gradually raised its service fees to cover 75 percent of real costs.
Description: USAID work focuses mainly on health and housing, with health representing the most significant area of concern. At the policy level, advisors prepare analyses and discussing with government counterparts new approaches to dealing with problems in key social sectors such as health and housing. Training programs, both within Kazakstan and in the U.S., further support and supplement this effort.
Host Country and Other Donors: Work by World Bank-funded technical advisors in the health sector are closely coordinated with that of USAID. Similarly, frequent discussions have been held regarding the World's Bank's $41 million Social Protection loan. Immunization programs are implemented in cooperation with WHO and UNICEF.
Beneficiaries: Immediate beneficiaries include owners of newly privatized pharmacies and their clientele. Given the far-reaching nature of policy changes introduced in the health and housing area, large numbers of Kazakstani citizens stand to benefit from more efficient, market-based approaches which expand the availability of goods and services, lower prices, and allow citizens to individually determine their own preferred priorities and choices.
Principal Contractors, Grantees, or Agencies: Several USAID-funded groups are involved in the area of social transition, including commercial contractors and the Centers for Disease Control (CDC) in Atlanta.
Major Results Indicators*:
Number of services privatized (e.g. pharmacies, hospitals).
Percent of public with confidence in private 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.