KAZAKHSTAN - TWO STEPS FORWARD, ONE STEP BACK ON DOING

UNCLAS SECTION 01 OF 02 ASTANA 001724

SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN EINV PGOV KZ
SUBJECT: KAZAKHSTAN - TWO STEPS FORWARD, ONE STEP BACK ON DOING
BUSINESS

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Summary
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1. The 2009 World Bank Doing Business report was published on
September 10. It ranks Kazakhstan as the 70th out of 181 countries
regarding the ease of doing business, a 10-place improvement from
its revised rank of 80th place in the 2008 report. Kazakhstan made
major gains in two specific Doing Business indicators --
"registering property" and "getting credit" -- but took a step
backwards in several other indicators.

Background
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2. Published annually by IFC and the World Bank, Doing Business
assesses the ease of doing business in a country based on 10
factors: starting a business, dealing with construction permits,
employing workers, registering property, getting credit, protecting
investors, paying taxes, trading across borders, enforcing
contracts, and closing a business. The report has both rankings and
absolute values. Rankings are a relative measure: if a country is
reforming, but its pace of reforms is slower than that of other
countries, its ranking may still deteriorate despite improvements.
Absolute values (for example, the number of days or procedures
required to obtain a construction permit) help provide a more
objective picture of the situation within a country.


3. Published for the sixth time, the report has become increasingly
recognized as a tool to compare a country's position in the
above-mentioned spheres against other countries, as well as against
its own performance in the past. Moreover, the report helps
governments set priority areas that need reforms most, and helps
streamline these reforms along lines of improving specific Doing
Business indicators. USAID closely looks at the report, since Doing
Business figures serve as indicators for several USAID projects,
including BEI and RTLC, and for the U.S.-Kazakhstan Program for
Economic Development (PED).

2009 Results
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4. The greatest improvement for Kazakhstan in the 2009 Doing
Business report was in the "registering property" indicator, with
Kazakhstan's ranking improving from 77th to 25th place, or by 52
places. This improvement was the result of streamlining the
registration process and reducing fees. Kazakhstan also showed
significant improvement in the "getting credit" indicator, with its
ranking improving from 61st to 43rd place, or by 18 places. This
was the result of increased credit bureau coverage and improved
access to credit information. The first credit bureau in Kazakhstan
was created with USAID assistance and continues to be a valuable
partner for USAID projects in improving access to credit
information.


5. For Kazakhstan, the 2009 rankings and revised 2008 rankings for
each Doing Business indicator are as follows:

Doing Business - 2009: 70, 2008: 80, Change: +10
Starting a Business - 2009: 78, 2008 61, Change: -17
Construction Permits - 2009: 175, 2008: 176, Change: +1
Employing Workers - 2009: 29; 2008: 23, Change: -6
Registering Property - 2009: 25, 2008: 77, Change: +52
Getting Credit - 2009: 43, 2008: 61, Change: +18
Protecting Investors - 2009: 53, 2008: 49, Change: -4
Paying Taxes - 2009: 49, 2008: 47, Change: -2
Trading Across Borders - 2009: 180, 2008: 181, Change: +1
Enforcing Contracts - 2009: 28, 2008: 28, Change: 0
Closing a Business - 2009: 100, 2008: 103, Change: +3


6. Regarding the decline in the "employing workers" indicator, the
2007 labor law was cited as a negative reform which makes it more
difficult to fire workers by forcing employers to reassign a worker
before firing the worker. While the ranking changes reflect a
comparison to other countries, changes in absolute values help
confirm an improvement in the overall business environment in
Kazakhstan. For example, the costs, relative to average annual
income, to start a business and execute a construction project in
Kazakhstan decreased by 32% over the 2008 Doing Business report.

Additional Reforms
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7. Given the World Bank's survey and analysis cycle, additional
reforms achieved in 2008 are expected to be reflected in future
reports showing additional improvements in a number of indicators.
The government of Kazakhstan is expected to meet with an upcoming
Doing Business mission to the region, with the support of USAID, in
order to strengthen the relationship between Kazakhstan and the
Doing Business team. This should facilitate increased accuracy of
the Doing Business report and more rapid inclusion of reforms in
future publications.

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