KAZAKHSTAN

	FY 1998 Actual	FY 1999 Estimate	FY 2000 Request
FREEDOM Support Act	$40,499,000	$44,190,000	$53,500,000

Introduction.

An independent and prospering Kazakhstan is critical for regional stability and peace and is in the strategic interest of the United States. Kazakhstan has close ties with the other Central Asian republics and, more indirectly, with Russia, the Middle East, the Indian Subcontinent and China. In addition, the United States has particular commercial interests in Kazakhstan because of its significant oil, gas, gold and other mineral reserves. Efforts to strengthen Kazakhstan's sovereignty and independence also represent an important counterbalance to any attempt to revive the former Soviet empire. Kazakhstan is the largest recipient of U.S. assistance in Central Asia.

Since becoming independent seven years ago, Kazakhstan has taken a number of important actions as a new member of the world community. The first and most important of these was its decision to become a nuclear-free state and give up its considerable nuclear arsenal. Second, Kazakhstan has firmly committed itself to a free market economy and is noted for its good monetary policy, pension reform, securities markets and fiscal reform. It has actively promoted Western trade, investment and economic support. Per capita foreign investment is already at levels higher than any other former Soviet republic including Russia. Recently, in support of the U.S. government position on global climate change, Kazakhstan announced its intention to take on a commitment to reduce greenhouse gas emissions by setting voluntary limits and acceding to the Framework Convention on Climate Change (the Kyoto Protocol). Kazakhstan is the first USAID-assisted country to make this important commitment to reduce pollutants.

The Development Challenge.

Kazakhstan faces several challenges now as it seeks to become a modern state, following years of Soviet domination and no prior history of independent nationhood.

In the economic area, Kazakhstan must continue along the path to an open, truly free market economy lessening the dependence on Russia, its principal trading partner. Kazakhstan has made considerable progress in privatizing government assets and setting up the basic framework for a market economy. Overall macroeconomic management has been quite good; Kazakhstan, at independence, lacked the experience needed to control its own economic destiny. Recently, however, despite the tough decisions made on fiscal and monetary policy in prior years with USAID, the World Bank (IBRD) and the International Monetary Fund (IMF), Kazakhstan’s economy was profoundly affected by external events. The Russian and Asian crises, the subsequent general retreat by investors from emerging markets and the continued weakness of commodity prices reversed what had been a pattern of steady economic growth. Kazakhstan's gross domestic product (GDP) growth turned negative in the third quarter of 1998 after five positive quarters of growth despite maintaining the tight fiscal and monetary discipline of an IMF Extended Fund Facility program. Yet, inflation in 1998 remained low at 6% (compared to 14% in 1997), significantly below expectations, and continues to decline, and the local currency, the Tenge, is fully convertible and stable, a credit to solid monetary management.

Sound commercial law is a key component of USAID’s economic assistance strategy. This focus helps the Government of Kazakhstan (GOK) to address a range of macroeconomic and structural reform problems that must be resolved before Kazakhstan can join the World Trade Organization (WTO). During the past two years Kazakhstan has made extremely rapid progress in satisfying the requirements for WTO membership. For example, with USAID assistance, pro-business bankruptcy, procurement, and foreign investment laws have all been adopted. Likewise, Kazakhstan now has a growing stock market, a significantly healthier banking sector, and a dramatically reformed pension system that became mandatory and private in January 1998. A major step in the implementation of pension reform was accomplished with the allocation of personal identification numbers to most current contributors.

Substantial success was achieved with USAID assistance in privatizing small and medium-sized companies. Although the GOK has committed to privatizing a critical mass of the largest "blue chip" companies, many large-scale enterprises remain under state control. In late 1998 the GOK committed itself to privatizing 39 second-tier companies through the stock market. By early 1999, five second tier "baby blues" were privatized through the stock exchange, thereby making the transactions more transparent. These companies provide an attractive option for the newly created private pension funds, which need additional equities in which to invest.

In the electricity sector, the government has privatized a majority of power generation facilities and coal mines; recently announced its intention to privatize the electricity distribution companies; and recently established an independent regulatory entity for the power sector. Two-thirds of all oil pumped in Kazakhstan comes from joint venture operations with international petroleum firms.

At the same time, the government has taken some steps to protect its vulnerable populations through reforms in the areas of health, housing and pension. Kazakhstan is beginning to address the health system through greater efficiency, access to services, and quality of care which had been deteriorating from significant problems since independence in 1991. Building upon USAID’s pioneering work in health reform in Kyrgyzstan, pilot programs in family group practice and new payment systems have demonstrated that cost-effective, quality services are possible and health reform models can also work in Kazakhstan. The President has endorsed a plan to replicate nationwide the USAID health care reform model and a large IBRD loan is being developed based on the USAID approach. The introduction of new treatment protocols for tuberculosis (TB) is a major step toward containing this virulent disease which has reemerged in the post-Soviet period. With success in social marketing, family planning efforts now need to shift and support the greater role the independent health provider can play in reproductive health care.

In democracy, hoped-for changes have not occurred at the national level. The constitution still concentrates power in the presidency. The leadership did not permit a fairly contested election for the presidency in 1999. Instead, two opposition candidates, including a strong potential contender, were disqualified, leaving the outcome certain. In addition, government crackdowns on the media leading up to the election increased the practice of media self-censorship and favored the incumbent. Freedom of assembly was at times restricted, and there were credible reports of numerous irregularities at the polls. As a result, USAID is revising its planned election-related assistance. Unfortunate as this is, it would be a mistake to judge democracy as a lost cause in Kazakhstan. In the area of civil society, where USAID has made by far its greatest investment in democracy, there have been great strides. There are now over 700 non-governmental organizations (NGOs) operating in Kazakhstan. A significant number of them are learning how to advocate their causes to the government. In addition, a working group comprised of NGO leaders and parliamentarians has been working together to draft new NGO legislation. USAID will help these organizations become self-sustaining.

Other Donors.

The IBRD provides technical assistance for economic restructuring and loans in areas of oil development, urban transport, social protection, public administration and finance, and enterprise development. New projects will address land registration, financial sector adjustment, private sector support, irrigation and drainage, water supply, agricultural privatization, fiscal reform and health. The European Union (EU) and major bilateral donors such as Germany, Britain, Japan, France, and Korea provide additional aid for programs pioneered by USAID-funded technical assistance teams.

FY 2000 Program.

While the request for the Kazakhstan program will continue to focus on economic, social, and democratic reforms, USAID will deepen support for critical structural reforms in Kazakhstan, although most of its assistance will be to private or local groups and institutions other than the central government and towards partnerships between American and Kazakhstani institutions. An important example of this focus is the Atyrau Regional Initiative, a public-private partnership designed to increase investment in a region of Kazakhstan that has significant human needs despite its gas and oil reserves.

In the economic reform area, trade and investment issues will continue to receive special attention, especially Kazakhstan's membership in the WTO. Democratization activities include a mix of supporting independent media, strengthening the judiciary and parliament, building the capacity of local government, and encouraging the sustainability of local NGOs. Work in the social sectors will continue to focus on the development of cost-effective systems through the use of market systems to deliver needed social services. Successful local health reform models which incorporate the important new TB initiative are almost ready for replication. The IBRD loan under discussion will provide the necessary capital to replicate USAID’s health reform model. USAID will provide technical assistance in the first phase of expansion.

In addition to support for accession to the WTO, USAID will provide technical assistance to promote a more attractive environment for expanded trade and investment opportunities in Kazakhstan. USAID assistance will accelerate progress in establishing the commercial regulatory framework necessary to build investor confidence by ensuring property ownership and transfer of commercial transaction rights to market agents.

In the fiscal and financial reform areas, USAID will deepen support for the implementation of sound tax administration, intergovernmental finance reform, and budget reform at the national and local levels, as well as continue assistance for financial sector reforms in the areas of capital markets, pension reform, bank supervision, and accounting reform.

USAID's efforts in energy and environment in Kazakhstan are covered in the Central Asia Regional Presentation.

Cross-cutting and special initiatives will be closely integrated with other activities and address broader strategic and programming concerns, including those in health reform and demographic policy. Cost-effective infectious disease control will be expanded and family planning efforts will focus on strengthening independent family group practices that will provide quality reproductive health services. Participant training will be increased to support public administration, health, economic restructuring, democracy, energy and the environment.

KAZAKHSTAN

FY 1999 PROGRAM SUMMARY*
(in Thousands of Dollars)

USAID Mission Director: Glenn Anders

Strategic Objectives	Economic Restructuring	Democratic Transition	Social Stabilization	Cross-cutting / Special Initiatives	Total
Privatization	--	--	--	--	--
Fiscal Reform	2,800	--	--	--	2,800
Private Enterprise	8,600	--	--	--	8,600
Financial Reform	6,100	--	--	--	6,100
Energy	--	--	--	--	--
Environmental Management	--	--	--	--	--
Citizens' Participation	--	5,000	--	--	5,000
Legal Systems	--	--	--	--	--
Local Government	--	1,200	--	--	1,200
Crises	--	--	--	--	--
Social Benefits	--	--	1,000	--	1,000
Environmental Health	--	--	--	--	--
Cross-cutting / Special Initiatives	--	--	--	28,800	28,800
TOTAL	17,500	6,200	1,000	28,800	53,500
*Freedom Support Act (FSA) funds

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ACTIVITY DATA SHEET

PROGRAM: KAZAKHSTAN
TITLE AND NUMBER: Increased Soundness of Fiscal Policies and Fiscal Management Practices, 110-S001.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $2,800,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2001

Summary: The Government of Kazakhstan seeks to undertake a comprehensive set of specific reform measures. The purpose of this activity is to increase the soundness of fiscal policies and fiscal management practices. Toward that end, USAID is assisting the GOK in each of the following major fiscal areas: tax policy, tax administration and budget/intergovernmental finance reforms. These measures include: 1) restructuring the current system of intergovernmental finance to allow for a more effective distribution of expenditure and revenue-raising authorities between the national government and local governments; 2) rapid development of a state-of-the-art automated system for tax administration; 3) establishment of modern program budgeting for all GOK ministries and agencies; 4) adoption of measures to increase the transparency of the budget and budget process; 5) revision of the tax code to make it more fully in accordance with international standards; and 6) rapid enactment of a comprehensive set of tax and administration policies and procedures. Progress in these areas would lead to steady declines in the general government deficit as a percentage of GDP -- to 2.1 percent by FY 2001.

This effort seeks to benefit tax-paying Kazakhstanis at all income 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 budget allocation system will also lead to more effective governance and greater macroeconomic stability.

Key Results: These include the following: 1) the government deficit will continue to fall, reaching 2.1% of GDP in 2001; 2) local government revenues will climb to 45% of total revenues; 3) the GOK will maintain compliance with the fiscal conditions of international financial institutions; 4) the established legal framework will continue to improve; and 5) the volume of government securities will average $240 million in 2001.

Performance and Prospects: To date, USAID’s role and achievements have been significant. USAID-funded advisors made major contributions to the formulation of a new tax code, 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 are helping to introduce a new budget classification system, a national and local budget law and a modern system for managing public external debt. Other USAID-funded advisors are working with Kazakhstani 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 on training and hands-on instruction in how to manage and implement the new system. 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).

Possible Adjustments to Plans: This activity is well on track. Nonetheless, with USAID assistance in FY 2000, stronger efforts are expected to be made in the area of tax administration, in order to help make up for the loss in oil and minerals tax revenues. Also, additional efforts will be made to further rationalize the GOK's system of intergovernmental financial relations, with a view toward ensuring that various levels of government operate with greater efficiency in implementing their taxation and expenditure authority.

Other Donor Programs: Ongoing efforts in the fiscal arena are coordinated with those of other donors, including the World Bank, IMF and the EU. The World Bank is planning a major treasury modernization project that involves technical advisors, training and equipment. USAID technical advisors would play a key role in complementing these reforms.

Principal Contractors, Grantees or Agencies: USAID activities are implemented through the U.S. Department of the Treasury and several USAID-funded contractors, particularly KPMG/Barents.

Selected Performance Measures:

	Baseline	Target
Government deficit as a percentage of GDP	3.0% (1995)	2.1% (2001)
Local government revenue as percentage of total	34% (1995)	45% (2001)
GOK maintains compliance with conditions of international financial institutions	Yes (1995)	Yes (2001)
Legal framework established	No (1995)	Yes (2001)
Volume of government securities (millions)	$89 (1995)	$240 (2001)

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ACTIVITY DATA SHEET

PROGRAM: KAZAKHSTAN
TITLE AND NUMBER: Accelerated Development and Growth of Private Enterprises, 110-S001.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $8,600,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2001

Summary: Privatization represented the first phase of USAID economic restructuring work in Kazakhstan. The purpose of this activity has been to accelerate the development and growth of private enterprise. With USAID assistance, by the end of 1997 some 19,786 enterprises had been sold through cash auctions. A parallel program of mass privatization involving coupons has also made considerable progress, especially since August 1998. By some accounts, nearly two-thirds of the industrial employment in Kazakhstan now is in firms that are majority-owned by the private sector. Currently, the Government of Kazakhstan is in the midst of privatizing its major remaining "blue chip" enterprises in the oil and gas and minerals sectors. USAID is assisting the Government to develop fair and transparent procedures for privatizing these enterprises. Since 1995, USAID has also supported the privatization of major energy sector assets, including more than 80% of the national power generation capacity. It also helped establish an independent regulatory entity for electricity. More recently, USAID has focused greater attention on the policy and legal environment needed to sustain a supportive business climate. In order 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. These advisors also helped achieve an insurance regulatory framework which promotes competition and ensures foreign participation. Progress in this area will cause a greater share of GDP to be generated by the private sector -- 80% by 2001.

Specific beneficiaries include the hundreds of thousands of Kazakhstanis who own shares in privatized government enterprises and who will gain financially if these new laws are successful. Aspiring entrepreneurs benefit from a transparent, stable and consistent legal environment. The entire population will benefit from a more efficient market-based economic system that produces jobs and increases the availability of goods and services.

Key Results: In the hope of accelerating development and growth of private enterprises, the achievement of the following indicators is deemed important: 1) the share of GDP generated by the private sector would climb to 80% by FY 2001; 2) the GOK will continue to adhere to international conditionality requirements; and 3) the number of firms transferred to new accounting standards will increase by 1,500 in FY 2001.

Performance and Prospects: Private sector support represents by far the largest USAID activity in Kazakhstan. In the area of legal and regulatory reform, advisors are working in key areas including trade and investment, bankruptcy and collateral law reform, and general business law reform; a large training effort in all three areas is underway. Pro-business laws covering bankruptcy, foreign investment, and procurement have all been enacted with USAID support. The general business component targets constraints to business operations by helping the passage of legislation in such areas as contract law and property rights. Many of these efforts are needed to maintain the momentum created by the privatization process and to expand opportunities for U.S. trade and investment in Kazakhstan. Among other accomplishments, USAID technical assistance is playing a critical role in moving the GOK to join the World Trade Organization (WTO). Continued advocacy for implementing legal reforms will also promote foreign investment in Kazakhstan's all-important oil and gas industry and help develop the country's power sector. 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. The Central Asia-American Enterprise Fund (CAAEF) continues to provide important equity and credit financing to small and medium-sized Kazakhstani enterprises. Significant progress has been made towards conforming Kazakhstan’s trade regime to the WTO’s requirements, including the completion and submission to Parliament of draft trade remedy laws. In the area of commercial law reform, USAID efforts have assisted in the drafting of laws and amendments to laws in such key areas as bankruptcy, collateral law, the Civil Code, corporations and monopolies. In accounting reform, through USAID’s efforts, 1,400 enterprises have been converted to international accounting standards, while 4,000 accountants have been trained in the theory and practical application of international accounting. In November 1998, Kazakhstan became the first country in the NIS to pass an Auditing Law that allows a Self-Regulatory Organization to set national auditing standards to determine qualifications required to become a certified auditor and to certify auditors. Finally, through USAID’s efforts, the Kazakhstan Community Loan Fund (KCLF) was established to provide for the first group-lending program in Kazakhstan. The KCLF is the first and only registered NGO in Kazakhstan and has disbursed 2,240 loans to small enterprises with a delinquency rate of less than two percent. Further, USAID provided technical assistance through the International Executive Service Corps (IESC) to Kazakhstani small and medium-sized enterprises in linking up with U.S. partners and in providing strategic marketing advice.

Possible Adjustments to Plans: Because it is expected that the Government will continue to pursue accession to the WTO at the same steady pace, no major changes are expected in this area. Support for private enterprise reform will focus mainly on areas such as accounting reform at the enterprise level, with a particular emphasis on curriculum reform, i.e., introducing undergraduate and graduate- level degree programs in business administration with a focus on international accounting theory and practice. These activities help produce a Kazakhstan economy more open and transparent and therefore less susceptible to corrupt practices.

Other Donor Programs: Ongoing efforts to strengthen private business operations are being developed in conjunction with those of other donors, especially the World Bank, European Bank for Reconstruction and Development, and the EU. The EU also has a special interest in the agricultural sector. World Bank funds are being used to provide consultant services. A World Bank-funded project on private enterprise support is now being developed. EBRD programs include a loan program comparable to that of the Central Asian-American Enterprise Fund.

Principal Contractors, Grantees, or Agencies: USAID activities are implemented through several private U.S. firms, such as Booz Allen & Hamilton, ARD/Checchi and Carana Corporation, along with U.S. private voluntary organizations such as the International Executive Service Corps (IESC), Agricultural Cooperative Development International (ACDI), Volunteers in Overseas Cooperative Assistance (VOCA), the U.S. Energy Association (USEA), Harvard Institute of International Development (HIID) and the Central Asia-American Enterprise Fund (CAAEF).

Selected Performance Measures:

	Baseline	Target
Share of GDP generated by private sector	24.5% (1995)	80%(2001)
GOK maintains adherence to conditionally of international financial institutions	Yes (1995)	Yes (2001)
Number of firms transferred to new accounting standards	0 (1995)	1,500 (2001)

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ACTIVITY DATA SHEET

PROGRAM: KAZAKHSTAN
TITLE AND NUMBER: A Competitive Private Financial Sector that is More Responsive to the Needs of a Market-Oriented Economy, 110-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $6,100,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2001

Summary: When USAID began working on this objective in 1993, the financial sector was very rudimentary and geared along Soviet patterns. Since that time, the USAID role and level of achievement has been significant. The purpose of this activity is to create a competitive private financial sector that is more responsive to the needs of a market-oriented economy. (There is an established Kazakhstan Stock Exchange and an independent National Securities Commission.) Kazakhstan’s corporations law, officially known as the law on Joint Stock Companies, was passed in July 1998. International accounting standards were introduced in December 1996, and are being implemented during 1997 and 1998 to help tighten financial regulatory guidelines and to enhance monitoring capacity in the banking sector. Through December 1998, more than 150 insolvent banks had their licenses suspended as a result of detailed bank examinations. These actions, combined with sustained discipline by the Central Bank in managing the nation’s currency, and the adoption of international accounting standards, are laying a solid foundation for the development of the financial sector. USAID continues to play a key role in assisting the Government of Kazakhstan to develop the legal and institutional framework for private pension funds; the country has embarked on the most ambitious pension reform program in the NIS region (as of January 1998, all citizens are required to contribute 10% of their yearly wage to a private pension fund of their choice). Success in all of these areas will lead to steady increases in the ratio of bank deposits to GDP -- 15% by 2001.

Immediate beneficiaries include professionals involved in capital market development, such as private bankers, stock brokers and registered private enterprises. More importantly, entrepreneurs, as well as a broad range of Kazakhstan’s citizens will benefit by the extension of capital markets that channel scarce resources into more productive directions.

Key Results: Achievement of a competitive private financial sector will depend upon the following indicators: 1) bank deposits as a percentage of GDP rises to 15% by FY 2001, 2) the percentage of banks meeting capital adequacy requirements will climb to 95% by FY 2001; 3) there will be at least 20 types of financial institutions by FY 2001; 4) there will be at least 300 companies listed on the stock exchange by FY 2001; and 5) the number of private pension funds will rise to 18 by FY 2001.

Performance and Prospects: Performance in banking reform has been notable: in 1998 USAID advisors participated in nine on-site bank examinations with National Bank of the Republic of Kazakhstan (NBRK) inspectors, leading to eight liquidations. In the policy area, USAID advisors provided regulatory assistance regarding issues such as credit derivatives, cash settlement and currency controls and consolidation of banking enterprises. Regarding bank accounting, the most significant recent accomplishment was the first full bank conversion. Tsesna Bank and its branches became the first local bank in Kazakhstan to implement accounting practices in accordance with international accounting practices and the requirements of the NBRK. The implementation enables the NBRK to more readily track the bank’s performance and allows foreign investors to read financial statements of the bank that are consistent with international accounting standards. It is expected that continued progress will be made in this area, with more bank conversions taking place.

Through USAID’s efforts, the capital markets institutional infrastructure is in place, including the Kazakhstan Stock Exchange (KASE), a self-regulatory association, the National Securities Commission, the Central Depository, and custodians and registrars. Not only did USAID play the lead role in establishing and maintaining these institutions, but it also provided the hardware, software and training to put them into operation.

Finally, USAID has been very instrumental in assisting Kazakhstan reform its pension system. After the collapse of the Soviet Union, the old "solidarity system" could not maintain solvency. USAID worked closely with the GOK in drafting a new Pension Fund Law that went into effect in 1998. USAID advisors have assisted the Government in creating a State Center for Benefits Payments and the National Pension Agency. The pension system is quite new and needs further development. The private pension funds as well as the regulatory body lack experience and maturity. USAID will continue working closely with the funds to introduce proper record keeping, to develop better systems of monitoring and protecting pension contributions, and to facilitate a smooth, transparent flow of funds.

In FY 2000, USAID will continue to promote financial sector reform in the major areas of capital markets, pension reform, bank reform/restructuring and corporate accounting reform. USAID's thrust is to provide technical assistance and training to developing intermediary and regulatory institutions in the financial sector. Work often entails drafting and introducing new laws, regulations, procedures, and operating systems. Practical, on-the-job training receives special emphasis. High-level policy advice is accompanied by efforts to ensure that counterparts develop the capacity to undertake needed research and analysis on their own.

Possible Adjustments to Plans: This activity is well on track. By 2000, the Capital Markets Development project will have been phased out and the Pension Reform project will be in its final year.

Other Donor Programs: 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, currently undertaken jointly by USAID and EU, will soon be assumed by a single institution, which should set the standard for banker training in Central Asia. In the area of pension reform, USAID coordinates with the Asian Development Bank.

Principal Contractors, Grantees, or Agencies: USAID activities are implemented through several U.S. firms, including IMCC, KPMG/Barents, Pragma and IBTCI in cooperation with local counterparts at the National Bank, the Ministry of Finance, the Kazakhstan Stock Exchange and the National Securities Commission.

Selected Performance Measures:

	Baseline	Target
Bank deposits as a percentage of GDP	4.9% (1995)	15.0% (2001)
Percentage of banks meeting capital adequacy requirements	66% (1995)	95% (2001)
Types of financial institutions	4 (1995)	20 (2001)
Number of companies listed on stock exchange	12 (1995)	300 (2001)
Number of private pension funds	0 (1997)	18 (2001)

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ACTIVITY DATA SHEET

PROGRAM: KAZAKHSTAN
TITLE AND NUMBER: Increased Citizens' Participation in Political and Economic Decision-making, 110-SOO2.1
STATUS: Continuing
PROPOSED OBLIGATIONS AND FUNDING SOURCES: FY 2000: $5,000,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2006

Summary: USAID-funded activities strengthen democratic processes, especially those aimed at enhancing civic participation and education, increasing the flow and sources of information, ensuring transparency and accountability in government, and expanding dialogue between the government and non-government sectors. Support for independent broadcast media and parliamentary strengthening programs continue. The local NGO sector receives special attention to improve the legal and regulatory environment in which it operates, to enhance its professionalism and management skills, to enable it to effect needed social change, and to provide services. Because of its contribution to democratic, economic and social change, a local bar association operates more effectively.

Key Results: Three key intermediate results are necessary: NGO participation in civil society must be strengthened, information on domestic economic policies and politics must become more widely available, and the Government must become more responsive and accountable to citizens and citizens' organizations.

Performance and Prospects: Performance over the last year has been good with the exception of setbacks in the elections arena associated with recent constitutional amendments and the suppression of opposition groups and independent media related to the presidential elections of January 10, 1999.

Ministry of Justice officials at the Oblast level applauded the Southern Kazakhstan Association of Lawyers' (SKAL) bi-monthly publication "Mir Jurista" and touted it as an example of how legal information should be disseminated. With ABA/CEELI support, the publication began in 1997 as a supplement to southern Kazakhstan's largest general circulation newspaper. USAID-funded Counterpart Consortium’s Central Asia regional conference on NGO-government-business social partnerships helped to forge significant cooperation between NGOs and the GOK including the formation of a NGO-parliamentarian working group on NGO legislation. The USAID-funded Aid to Artisans (ATA) received a substantial grant from Texaco International for the construction of an artisans center. In a collaborative effort, USAID and U.S. Peace Corps are providing technical assistance to the artisans in the form of business training, guidance in democratic governance, and other support. Kazakhstan, with significant USAID assistance, became the first country in Central Asia to broadcast nationally a debate among political candidates for a parliamentary seat. Based on USAID technical assistance, the Government eliminated the 50% voter turnout requirement for President and Majilis (lower house of Parliament) elections and modified the ballot format to allow for positive voting. Recently in Shymkent, several parliamentarians from southern Kazakhstan participated in an open town hall meeting with citizens and citizen groups. With the help of grants and training from the USAID-funded Counterpart Consortium, NGOs in Kazakhstan are developing a strong network, supported through 30 newsletters and seven associations, and are increasingly becoming involved in advocacy. Finally, efforts are being made, with the coordination of other donors, to help NGOs and Parliamentarians work together to draft and present more effective NGO legislation.

Given the recent events surrounding the 1999 presidential elections, USAID democracy programming may face particular challenges for continued openings in the electoral process, the independence of the media, and the participation of opposition groups. It may also have negative implications for the achievement of the performance indicators.

Possible Adjustments to Plans: In FY 2000, USAID is anticipating opportunities to offer support on women’s legal rights issues and women’s participation in political processes. In addition, activities are underway to support the Atyrau Regional Initiative by strengthening the advocacy role of environmental NGOs in Kazakhstan.

Other Donor Programs: USAID’s efforts in developing civil society are part of a multi-donor effort. In 1997, the UNDP founded a center for the promotion of NGOs and has been organizing seminars bringing together donors and NGOs. One key activity has been supporting USAID’s and ICNL’s efforts to encourage Parliament to adopt improved NGO legislation. The Soros and Eurasia foundations support NGOs through their grant programs. In the electronic media area, the UNDP supports the media association, ANESMI, and periodically finances media conferences. The Soros Foundation made a grant to Internews to publish textbooks for journalists; it also promotes civic education through its debates program. The UNDP supports Parliament in various ways including work with ABA/CEELI to establish a legislative drafting center. Election assistance is coordinated through a focal point group consisting of the USAID, UNDP, Soros, European Union, Konrad Adenaur Foundation and various embassies.

Principal Contractors, Grantees or Agencies: Several USAID-supported American NGOs such as the American Bar Association/CEELI, Internews, the National Democratic Institute (NDI), and the International Foundation for Electoral Systems (IFES), are playing a role in promoting democracy in Kazakhstan. Counterpart International, Aid to Artisans, and the International Center for Not-for-Profit Law, which together form the Counterpart Consortium, also participate in local NGO development. Initiative for Social Action and Renewal in Eurasia (ISAR) will also participate in the development of local environmental NGOs.

Selected Performance Measures:

	Baseline	Target
# of NGOs involved in advocacy (media/gov.off):	75/35 (1996)	95/85 (2001)
Average daily minutes of local news programming:	15 (1996)	20 (2001)
# of Parliamentary hearings and committee meetings addressing legislative/policy issues	2 (1996)	30 (2001)

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ACTIVITY DATA SHEET

PROGRAM: KAZAKHSTAN
TITLE AND NUMBER: More Effective, Responsive, and Accountable Local Government, 110-S002.3
STATUS: Continuing
PROPOSED OBLIGATIONS AND FUNDING SOURCES: FY 2000: $1,200,000 Freedom Support Act
INITIAL OBLIGATIONS: FY 1998; ESTIMATED COMPLETION DATE: FY 2004

Summary: The Government of Kazakhstan has greatly increased the responsibilities of local officials in a series of pragmatic moves based more on the central government’s diminished desire and capacity to fulfill all the functions previously performed by the soviet state than on a philosophical decision to decentralize authority. As local governments have taken on these responsibilities, they have become more accountable for providing services to their citizens. However, the central government has not addressed local government reform in a systematic way. Thus, it was a particularly opportune time for the USAID to start work on activity to help the Government of Kazakhstan create more effective, responsive and accountable local governments, as there are a number of progressive local officials anxious to undertake reforms. The immediate beneficiaries are the local government officials. The ultimate beneficiaries are the people who will receive improved public services.

Key Results: This activity contributes directly to a more effective, responsive and accountable local government through three key intermediate results: Practices promoting citizen input and involvement adopted; practices improving delivery of services and management of resources adopted; and powers of local governments increased. By the year 2000, at least two of the six conditions defined in the Performance Plan are expected to be achieved. The conditions are: 1) authority to manage local level services; 2) authority to raise and retain revenues locally; 3) power to make local budget decisions; 4) elected officials accountable to local citizens; 5) local property control; and 6) department heads directly accountable to municipal government officials. A Memorandum of Understanding has been signed between the USAID and the Retraining Institute (now merged into the Academy for Civil Service) elaborating the responsibilities of each party with respect to the training program for municipal officials. The Agency of Strategic Planning has identified counterparts in areas of procurement and budgeting. Preliminary assessments have been completed to start "best practices" demonstrations in two Oblasts: Atyrau and Pavlodar.

Performance and Prospects: Performance has been affected due to the late start of the project. However, the USAID is confident that activity will achieve stated targets at the end of year one. Training materials are well into the development stages. Initial assessments of budget and financial management systems have been completed in Pavaldar and Atyrau and recommendations developed. Assistance in formulating local government policy has been requested by the President’s Office. Procurement seminars have been held in Pavlodar and Atyrau using a "how-to" manual developed by the contractor. An open hearing process for public comment on the end-of-year financial documents, as a demonstration of a good practices model promoting citizen input and involvement, is on schedule. In addition, a Competitive Procurement System model to improve local management of resources has been designed. A US study tour by top local government policy makers has been organized and a seminar on decentralization has been held.

Possible Adjustments to Plans: The second year work plan is under development and will complete the work started in the first year. However, the USAID will closely coordinate local government activities with the World Bank’s water and environmental activities in Atyrau Oblast which the USAID will adapt, if needed to maximize results.

Other Donor Programs: Other donors also support activities with a local government dimension, including the World Bank and EU. For example, water and environmental activities of the World Bank in Atyrau oblast and training program of EU at the Academy for Civil Service.

Principal Contractors, Grantees, or Agencies: International City/County Management Association, ICMA.

Selected Performance Measures:

	Baseline	Target
Adoption of practices promoting citizen input and involvement.	0 (1998)	2 (2000)
Adoption of practices improving delivery of services and management of resources.	0 (1998)	2 (2000)
Increasing the powers of local government	0 (1998)	2 (2000)

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ACTIVITY DATA SHEET

PROGRAM: KAZAKHSTAN
TITLE AND NUMBER: Improve the Sustainability of Social Benefits and Services, 110-S003.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000 1,000,000 Freedom Support Act
INITIAL OBLIGATION: FY 1993 ESTIMATED COMPLETION DATE: FY 2002

Summary: As the key player in strengthening health care delivery systems at the local level, USAID will continue to work with the Ministry of Health in the implementation of national health reform plans. USAID will continue to provide assistance in payment reforms and to make new family group practices both operationally and economically viable. USAID will collaborate with the World Bank to introduce health reform to new oblasts. In addition, efforts will be made to strengthen the role of family group practices in providing an integrated package of services, including family planning, prevention and control of infectious diseases, especially hepatitis and tuberculosis. The family group practices are the first point of contact for populations at the local level and will be strengthened to meet the basic health care needs of the population. The immediate beneficiaries are the health care providers while ultimately all citizens of Kazakhstan benefit, especially the segment of the population classified as vulnerable (e.g., elderly pensioners, women, children).

Key Results: This activity contributes to improved sustainability of selected social services through achievement of two intermediate results: 1) Cost-effective health care services demonstrated in selected Oblasts and 2) cost-effective health sector reforms adopted nationally. To date, 151 Family Group Practices (FGP) are operational in the two demonstration sites compared to 65 sites in 1997 and cover 90 percent of the population in the Zhezkazgan pilot areas. Eighty-two percent of the people are enrolled and are exercising their choice to their FGP. Sixty-four percent of the service providers in the pilot sites are being reimbursed by market-oriented payment systems. The USAID model is the basis for the National Health Law under which the model will be replicated nationwide.

Performance and Prospects: USAID has been a key player since 1993 in the reform of Kazakhstan’s health care system. In the Zhezkazgan and Semipalatinsk health demonstration areas, USAID has developed and implemented comprehensive models of health reform. By shifting resources and services to more cost-effective primary care, USAID has supported the creation of independent, community-based structures that are financed by market-based payment methods and are staffed by newly-trained family physicians. Family group practices have been established and are fully operational in the two demonstration sites, covering nearly 90 percent of the population. The strengthening of the primary care sector has been integrated with reforms at all levels of the health care system, including a new case-based hospital payment system and rationalization of the hospital sector. Consumers now can exercise their right to choose the family practitioner of their choice. The Health Decree requiring nationwide replication of health reform causes some concern because of limited technical assistance. A $150 million World Bank health sector loan is being finalized which will provide the capital to establish Family Group Practices and restructure the health care system over a ten-year period. In addition, under the first phase of the loan, intensive training of family practitioners will be provided. Prospects are excellent for USAID to assist with technical assistance during the first phase of the expansion.

Possible Adjustments to Plans: With the negotiations of the World Bank sector loan, USAID technical assistance would need to expand to additional sites while completing reforms in the pilot areas.

Other Donor Programs: Various government ministries and other donors are involved in this crucial area, including the World Bank, WHO, United Nations Development Program (UNDP), UNICEF, United Nations Population Fund (UNFPA), and EU.

Principal Contractors, Grantees or Agencies: Abt Associates is the principle contractor working to implement this activity.

Selected Performance Measures:

		Baseline	Target
Number of independent primary care practices - family group practices (FGP's)		0 (1994)	300 (2000)
Percent of health care providers reimbursed by market-oriented payment systems	Pilot: Roll-Out:	0 (1994) 0 (1994)	75% (2000) 40% (2000)
% of the population enrolled in FGP's	Pilot: Roll-Out:	0 (1994) 0 (1994)	85% (2000) 60% (2000)

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