: / Strategies / Kyrgyz Republic Country Assistance Strategy (2003)

Kyrgyzstan Review, 10 years ago

V. Key Issues In Implementation

Selectivity and Partnerships

As a small country with limited capacity, the Kyrgyz Republic will have difficulty in effectively implementing a wide range of investments and reforms within a relatively short time period. At the same time, it has embarked on an ambitious reform agenda with a legitimate reason without an ambitious reform program leading to increased growth, it will be unable to move towards a sustainable reduction in poverty and make progress towards debt sustainability. The challenge for IDA, rendered more acute since IDA represents a large portion of the Kyrgyz Republics development investment, is to maintain selectivity, while ensuring that a broad range of reforms are supported.
The CAS proposes to extend 12 projects over four years (on average 3 projects per year). These interventions have been identified through the primary lens of whether they will contribute to near term growth and poverty reduction, particularly in support of local entrepreneurs and the rural poor, as well as providing a sound base for longer term sustainable growth. Many activities also focus on areas particularly in agriculture, energy, health, pensions, and finance in which IDA has already developed a comparative advantage over the past decade.
Beyond this, IDA has introduced two approaches into this CAS which should facilitate selectivity. First, in keeping with the NPRSs increased emphasis on decentralization, IDA will plan to extend two community driven development projects which will empower villages and small towns to select their own priorities based on their on-the-ground knowledge. This will be particularly useful in the Kyrgyz Republic, where investment and infrastructure priority needs far exceed financing available. Second, IDA will begin introducing programmatic support to the Kyrgyz Republic during the upcoming CAS period, enabling IDA and other donors to focus on key issues within a smaller and more coordinated footprint. If this approach is successful, it is anticipated that it will become a larger part of the operational framework in the future.
Another important element in IDA selectivity is donor partnership. Currently, donor partnership has taken various forms: In some areas, there is a division of labor, for example, the ADB (with others) has taken the lead on areas such as corporate governance and rehabilitating major roads while IDA (with others) has taken the lead in public sector governance and the power sector. In other areas, partnership has taken the form of well-coordinated but parallel action, for example in irrigation and water supply and sanitation. In a few cases, like health, a particularly close partnership has developed between IDA, USAID, DFID and WHO, which can be built upon and extended to other areas. During the CAS period, it is anticipated that donor coordination will be increased, within the context of the NPRS and under the leadership of the government.
A good step in increased donor coordination came during the recent donor Consultative Group (CG) held in Bishkek and Osh in October 2002. This CG was the first in-country CG held in Central Asia. As an in-country CG it benefited by the active participation of most high level government officials, as well as of NGO and the private sector representatives. The President remained at the CG for the entire two days in Bishkek and actively contributed to the discussion. The CG took as its base a draft of the NPRS, and discussed it frankly between the government and the donors. The NPRS was then finalized after the CG after taking into account all of the discussions. In addition to policy discussions, donors agreed to contribute a record amount towards the NPRS, pledging US$700 million, about half as grants.
The CG was also important in agreeing on the need to continue to strengthen donor coordination. Since the CG, Donors and the Government have taken a useful step in this direction by agreeing to hold more regular working group meetings on particular sectors and to jointly employ a local staff to maintain a web-based partnership information system to strengthen knowledge sharing and cooperation. The establishment of the Central Asia Regional Office (CARO) in Almaty in July 2002 has also provided a platform to not only get closer to national governments and civil society but also to forge stronger donor partnerships on critical cross-cutting issues like community driven development and micro-finance.
A key IDA partner in this respect is the Asian Development Bank. Together, IDA and the AsDB provide the bulk of the public investment funds in the Kyrgyz Republic. IDA and AsDB have a well established coordination approach, particularly in the fields of water supply, finance and irrigation. IDA and the AsDB have also agreed to jointly develop a framework for educational reform, within which both institutions would operate. IDA and the AsDB have also been building increased coordination in pension strategy. On governance, the AsDB will focus on corporate governance while IDA will focus on Public Sector Governance. The AsDB has also taken the lead on large transport projects (like the Osh-Bishkek Road), while IDA will take the lead in other infrastructure areas such as energy. The AsDB and IDA have also agreed to hold joint Country Program Performance Reviews (CPPRs) in the future.
IDA and the IMF are collaborating extensively on such matters as support for the National Poverty Reduction Strategy, the Medium Term Expenditure Framework, the recent Financial Sector Assessment Paper, the approach to external debt, the governance agenda, the banking payments system and the expected Treasury component supported by the proposed Governance Technical Assistance Credit.
IDA, the IFC and the European Bank for Reconstruction and Development (EBRD) are also closely coordinating their activities to ensure the additionality of their technical assistance and investment projects. A notable example is the EBRD/IFC Swiss Central Asia Microlending Facility with technical assistance support provided by USAID. IFC has co-invested with EBRD in Demir Kyrgyz Ban and the Kyrgyz Investment Credit Bank, and plans to work closely with EBRD in strengthening existing financial institutions, in addition to providing support for leasing. IFCs technical assistance directly and through PEP is helping to provide the framework and environment to enable both IFC and EBRD to provide financing for microfinance, leasing , tourism, and agri-business. IDA will also maintain a close relationship with IFC and EBRD as plans are developed to privatize existing state owned banks, in addition to supporting private sector investment in the energy sector.
IFC and its PEP program, SECO and USAID have developed close cooperation to support a technical assistance program in Central Asia. Projects undertaken and ongoing in the Kyrgyz Republic include development of the microfinance regulatory framework legislation which was adopted in late 2002; support for conversion of FINCA from an NGO microfinance provider into a regulated microfinance bank; development of a new law on leasing together with changes to the civil and tax codes; a information program to disseminate information on leasing together with technical assistance to support the development of leasing in existing financial institutions. Future technical assistance work funded through this cooperation is anticipated in agri-processing and marketing and business environment. Another area for cooperation among the three institutions is in developing housing finance.