KAZAKHSTAN: GOVERNMENT REDOUBLING EFFORTS TO MAKE

UNCLAS SECTION 01 OF 03 ASTANA 002474

SIPDIS

STATE FOR SCA/CEN, EEB
STATE PLEASE PASS USAID

E.O. 12958: N/A
TAGS: PGOV ECON EINV KZ
SUBJECT: KAZAKHSTAN: GOVERNMENT REDOUBLING EFFORTS TO MAKE
PROGRESS ON WORLD BANK DOING BUSINESS INDICATORS

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1. SUMMARY: Prime Minister Masimov has redoubled the Government of
Kazakhstan's commitment to reforms to improve the legal environment
for business, making this a top priority since the September release
of the 2009 World Bank Doing Business (WBDB) report. In November,
Masimov ordered each relevant ministry to prepare a comprehensive
action plan on improving the business environment through a focus on
the indicators used in the WBDB report. On December 10, Masimov and
Stefka Slavova, Senior Economist of the World Bank's Doing Business
Reform Unit, chaired a USAID-organized conference on the
government's WBDB action plan which was attended by over 150
representatives of the public and private sectors and the media. We
expect Kazakhstan's reforms to significantly improve the underlying
business environment measured by seven of the ten WBDB indicators:
Trading Across Borders, Protecting Investors, Getting Credit,
Starting a Business, Registering Property, Dealing with Construction
Permits, and Closing a Business. Additional reform work is also
underway in areas not covered by the WBDB report -- including
licensing and permitting systems and inspections. END SUMMARY.

ORGANIZED FOR REFORM


2. The Government of Kazakhstan established a Commission on the
Reduction of Administrative Barriers in March 2008 to deal with a
wide range of reforms to improve the business environment. With the
publication of the 2009 Doing Business report in September, Prime
Minister Masimov ordered more focused work in key areas highlighted
by the WBDB report and tasked Deputy Prime Minister Yerbol Orynbayev
to facilitate the creation and implementation of action plans by the
relevant government ministries. Orynbayev established a working
group with senior-level representatives from a number of ministries
and government agencies -- including vice ministers of justice,
finance, and industry and trade -- as well as representatives of
private sector business associations and USAID's Business
Environment Improvement (BEI) and Regional Trade Liberalization and
Customs (RTLC) projects.


3. There are five expert groups under the working group which are
focused on WBDB indicators: Starting a Business and Registering
Property; Closing a Business (Bankruptcy); Dealing with Construction
Permits; Trading Across Borders; and Protecting Investors and
Getting Credit. Each expert group is led by a specific ministry and
also includes representatives from other affected government
agencies, the Atameken business association, the Forum of
Entrepreneurs, and USAID's BEI or RTLC project.

CONFERENCE HIGHLIGHTS ACTION PLANS


4. During the December 10 conference in Astana, each expert group
presented initial action plans on reforms in their areas, with
specific targets for improvements in Kazakhstan's ranking on the
WBDB indicators.


5. Vice Minister of Economy and Budget Planning Marat Kusainov
presented highlights from the action plan for improving the Trading
Across Borders indicator. For the short term, his ministry
proposes, among other things, to make amendments in the Customs Code
to reduce the number of required customs documents and to limit the
time frame for customs processing to two days; introduce the
one-stop shopping principle for import/export procedures; increase
public access to information on import/export procedures,
regulations, service providers, and tariffs; implement electronic
declaration of goods; and shorten the list of goods subject to
licensing.


6. Deputy Head of the Agency for Financial Control Alina
Aldambergen introduced highlights from the action plan for the
Protecting Investors indicator. Proposed reforms include requiring
the publication of additional information in corporate financial
reports.


7. Deputy Head of the Agency for Financial Control Alina

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Aldambergen was the presenter regarding the Getting Credit
indicator. The proposals for improving this indicator included
simplifying the process of gathering information on the credit
histories of legal entities, and reducing the administrative
expenditures of credit information suppliers and credit bureaus.


8. Vice Minister of Justice Marat Beketayev presented highlights of
the action plan for improving the Starting a Business indicator.
Proposals in this action plan included reducing the time frame for
registering a business to three days and limiting the time for
issuing a tax registration to one day.


9. Beketayev also introduced the highlights of the action plan for
the Registering Property indicator. The proposals to the improve
this indicator included reducing the time required for confirmation
of property to one day by allowing documents to be provided
electronically at public service centers and via the internet;
reducing costs for notary registration of documents to 6,000 tenge
(approximately $50); and reducing the time required for registration
of ownership rights to ten days.


10. Vice Minister of Finance Ruslan Dalenov discussed plans for
improving the Closing a Business indicator, for which work has only
just begun. The Finance Ministry presented a series of questions to
the World Bank in early December. When a response is received, the
ministry will formulate more concrete proposals. In any event,
Dalenov said he tentatively aims to improve this indicator by 30
percent.


11. Vice Minister of Industry and Trade Yedel Mamytbekov presented
highlights of his ministry's 2008 work on the Dealing with
Construction Permits indicator, and plans for additional reforms.
The construction permitting process has already been significantly
modified by reforms. The time required to receive technical
conditions for connection to water, sewage, and telephone utilities
has been reduced from ten to five days. Requirements to obtain
approvals from local fire departments, the sanitary and epidemiology
service, and the seismological agency have been eliminated.
Requirements to obtain certain permits from local architecture and
town planning authorities have been removed. Fees have been
eliminated for electrical connections by small and medium
businesses. The requirement to obtain local government approval
prior for putting a building into service has been eliminated. A
number of other reforms have also been instituted.


12. Mamytbekov's future actions include amending regulations in
three legislative acts and four government decrees. In total, he
expects that existing and proposed changes will reduce the
construction permitting process to 11 procedures from 38, the
timeframe for constructing permitting to 81 days from 231, and the
cost from approximately $87,800 to about $3,200 -- a reduction due
mostly to savings in electrical connection fees.

COMMENT


13. Government will for these reforms is strong, in part due to the
global financial crisis, which has affected Kazakhstan's growth and
brought greater public attention to the need to improve the business
environment. The role of Prime Minister Masimov and Deputy Prime
Minister Orynbayev in diligently pursuing specific, WBDB-related
reforms cannot be underestimated. In addition, the appointment of
the USAID BEI project's country manager to the position of special
advisor to Masimov has also been helpful. The December 10
conference allowed for public airing of the action plans. Masimov's
supportive remarks at the conference underscored the seriousness
with which he is approaching this issue. As Masimov put it,
"improvement of the investment environment, establishing absolutely
new forms of profitable partnerships between the state and private
sectors, is always one of the most important parts of the
government's work." It is important to note that despite
Kazakhstan's WBDB efforts, U.S. and other foreign companies still

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face many difficulties doing business in Kazakhstan, especially with
local officials, who have their own interests and are not always
fully supportive of the central government's efforts to improve the
country's business climate. END COMMENT.

HOAGLAND