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




Kyrgyzstan Review, 10 years ago




Lessons From Past Experience

Implementation of the FY99-01 CAS and the FY02 CAS progress report were generally strong. The triggers for the FY99-01 CAS high case, which proposed 9 projects, were substantively met and most of the proposed projects were delivered within the period noted. The CAS projects and ESW support contributed directly to reform in a number of key areas. In some, there is clear and consistent progress. In others, initial strong progress has been marred by subsequent slowing of reform implementation. Specific areas of focus included:
 
Agriculture Reform: The Land Registration Project is playing a fundamental role in underpinning a well developed and largely equitable land reform program. Over 60,000 small private farms have emerged from this process. The Irrigation, Rural Finance, Agriculture Services projects have played a key role in transforming the rural economy, which, along with land reform, have enabled the agriculture sector to become a leading source of growth in the economy.
 
Energy Reform: The Consolidated Structural Adjustment Credit (CSAC) helped the government to reduce quasi-fiscal operations from 17 percent to 10 percent, and to restructure the energy sector to make it more transparent and sustainable. IDA also helped to increase social payments to compensate for the affect of higher energy tariffs on the poorest. Despite some hesitancy on moving further, the government has recently indicated its intention to continue this restructuring through creating a private-public partnership in the distribution sector through a concession arrangement.
 
Health Reform: The Health I and II Projects have helped pilot and introduce more cost effective approaches to health care that have made an important impact on health statistics to date. Notwithstanding the slow down in health reform in 2002, the government has indicated its commitment to rolling out the reforms on a country wide basis in the near future (see Box 1).
 
Pension Reform: The Social Sector Adjustment Credit (SOCAC) did help the government to establish a more viable pension system. A more equitable formula for benefits was adopted, the contribution base was broadened and the retirement age was raised. Nevertheless, there remain concerns, including pressures to move to a fully funded scheme without the appropriate economic prerequisites in place.
 
Private Sector Development: The previous CAS took as one of its objectives to clear away the remaining policy and regulatory impediments to private sector activity. While some achievements have been made such as in the wide adoption of international accounting standards and some simplification in registration procedures, this is an area that remains challenging as noted in the private sector strategy in Attachment 2.
 
The FY02 CAS Progress Report defined FY02 as a year of assessment through key documents such as the PER, the Poverty Assessment, the FSAP, the CPAR, and the CFAA. These key documents have now all been substantially completed and have helped inform this CAS. The Poverty Assessment, prepared jointly with the government, also served as a key input into the governments NPRS. These pieces of ESW will provide an important analytic basis for deepening the reform agenda and effectively implementing the NPRS.
 
Notwithstanding generally good implementation, there are a number of lessons learned and issues associated with implementation under past CASs which are to be addressed in this CAS. On the policy side, both the OED evaluation of Bank Group assistance and the client survey (see Boxes 5 and 6) have highlighted the importance of good governance and public sector management, and this CAS does make this a key focus area. The importance of a having a realistic economic scenario that adequately addresses the external debt issue has also been highlighted. On the process side, both point to the need for improved attention to capacity building and ESW, and this CAS also highlights this as critical. Based on these reviews and overall lessons from the Bank Group work program, the following lessons have been distilled that have influenced the CAS:
 
Follow-through on past policy actions is as important as initiating new ones: IDA has extended seven adjustment loans to the Kyrgyz Republic, and supported many policy reforms through investment loans as well. Experience indicates that continued attention is needed to prevent dilution of important past reforms, for example in the pension and health sectors. In some cases, ambitious reforms may have outpaced government commitment and could have benefited from additional and more regular technical, financial, and outreach support to bolster public support and their sustainability.
 
An inclusive policy dialogue is critical to sustaining progress: Over the past year the increase in tariffs under the CSAC has had difficult social ramifications but IDA was able to help Kyrgyz Republic move forward through a seminar for Parliamentarians and a well-publicized Swiss grant to offset the impact on the poorest. The dynamic political situation in the coming years is expected to require IDA to pay even more attention to developing an inclusive dialogue on key issues.
 
Capacity building should be an integral part of projects and ESW. In many cases, some members of the Government enthusiastically embrace new ideas, beyond their capacity to implement them and without wide-spread support. Public sector capacity remains weak, affected by low wages and high attrition. This can lead to poor implementation or reversals. IDA therefore needs to avoid over-design projects and ensure policy recommendations are consistent with the countrys capacity. Emphasis should be given to strengthening the knowledge and capacity of the government to develop good policies on their own. Capacity needs to be built not only at the central level but at the local level with the stronger emphasis on decentralization.
 
Project supervision has proved difficult and time consuming: IDAs portfolio has suffered from a lack of counterpart funding and micro-management by MOF in the processing of disbursements. In addition, it has also suffered from limited capacity and high turnover in operational counterparts, and uncertain commitment on the part of some government officials. IDA and the government have worked on improving procedures over the past year, but continued attention is critical. In addition, a move to more programmatic support with greater responsibility placed with the government for individual projects and increased donor coordination would help strengthen operations.
 
Partnership among donors and between donors and the government needs to be strengthened: Development activities of various donors often occur in parallel, with reasonable information sharing but without a strong sense of integration. Particularly in light of the need to restrain the growth of debt and reduce implementation overload on the government, there is a need for donors and the government to work more closely with a shared vision, in both investments and analytic work. The good donor partnership that has developed in the field of health can be built upon and provide lessons for the other sectors as well.  
 
National projects must be complemented by regional approaches: Past country assistance strategies have not focused enough on regional efforts. For example, agriculture and irrigation investments may not achieve their maximum potential without additional trade facilitation. The development of Kyrgyz Republics hydro-electric capacity will depend on improved cooperation with neighbors on water management. Admittedly, improvements in regional cooperation may be long term and difficult, but they are a necessary component in the development of the Kyrgyz Republic.