Completion Report

Project Numbers: 41544-088, 41544-089, 41544-091 Grant Numbers: 0432, 0487, 0563 Loan Number: 3410 October 2019

Kyrgyz Republic: Second Investment Climate

Improvement Program

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS

Currency unit – som (Som)

At Appraisal

At Program Completion

17 June 2015 6 October 2015 Subprogram 1 Som1.00

$1.00 = =

$0.01666 Som60.02

$0.01452 Som68.86

29 July 2016 30 December 2016 Subprogram 2 Som1.00

$1.00 = =

$0.01474 Som67.86

$0.01441 Som69.38

18 December 2017 2 November 2018 Subprogram 3 Som1.00

$1.00 = =

$0.01434 Som69.75

$0.01434 Som69.71

ABBREVIATIONS

ADB – Asian Development Bank DMF – design and monitoring framework EU – European Union FDI – foreign direct investment GDP – gross domestic product GSP+ – Generalized System of Preferences Plus MOE – Ministry of Economy MOF – Ministry of Finance

PPP – public–private partnership SME – small and medium-sized enterprise TA – technical assistance TVET – technical and vocational education and training

NOTES

In this report, “$” refers to United States dollars.

Vice-President Shixin Chen, Operations 1 Director General Werner E. Liepach, Central and West Asia Department (CWRD) Director Tariq H. Niazi, Public Management, Financial Sector, and Trade Division,

CWRD Team leader Ruslan Kurmanbekov, Financial Sector Specialist, CWRD Team members Ethyl Bulao-Lorena, Senior Operations Assistant, CWRD

Elinor Piano, Project Analyst, CWRD Dai Chang Song, Principal Financial Sector Specialist, CWRD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i

I. PROGRAM DESCRIPTION 1

II. DESIGN AND IMPLEMENTATION 2

Program Design and Formulation 2 Program Outputs 2 Program Costs and Financing 5 Disbursements 5 Program Schedule 6 Implementation Arrangements 6 Technical Assistance 6 Consultant Recruitment and Procurement 7

Gender Equity 7 Monitoring and Reporting 8

III. EVALUATION OF PERFORMANCE 8

Relevance 8 Effectiveness 9 Efficiency 11 Sustainability 12 Development Impact 12 Performance of the Borrower and the Executing Agency 13 Performance of the Asian Development Bank 13 Overall Assessment 13

IV. ISSUES, LESSONS, AND RECOMMENDATIONS 14

Issues and Lessons 14 Recommendations 14

APPENDIXES

1. Design and Monitoring Framework 15

2. Disbursement of ADB Loan and Grant Proceeds 23

3. Chronology of Main Events 24

4. Status of Compliance with Covenants in Grant and Loan Agreements 25

5. Completion Report For TA 8688: Strengthening the Enabling Environment For Public–Private Partnerships 29

6. Completion Report For TA 8297: Implementing the E-Procurement System 33

7. Gender Equality Results and Achievements 37

8. Policy Matrix Status as of 31 December 2018 52

BASIC DATA A. Loan and Grant Identification

1. Country Kyrgyz Republic 2. Loan number and financing source Subprogram 1 Grant 0432 (Asian Development Fund) Subprogram 2 Loan 3410 (concessional OCR loan) Grant 0487 (Asian Development Fund) Subprogram 3

Grant 0563 (Asian Development Fund) 3. Project title Second Investment Climate Improvement

Program, Subprogram 1, Subprogram 2, and Subprogram 3

4. Borrower Kyrgyz Republic 5. Executing agency Ministry of Economy 6. Amount of loan/grant Subprogram 1

Grant 0432 – $20,000,000 Subprogram 2

Grant 0487 – $12,500,000 Loan 3410 – SDR8,890,000 Subprogram 3

Grant 0563 – $25,000,000 7. Financing modality Programmatic approach policy-based

lending B. Loan and Grant Data

1. Appraisal – Date started – Date completed

23 September 2014 17 June 2015

2. Loan and grant negotiations – Date started – Date completed – Date started – Date completed – Date started – Date completed

Subprogram 1 30 April 2015 30 April 2015 Subprogram 2 17 June 2016 17 June 2016 Subprogram 3 6 November 2017 6 November 2017

3. Date of Board approval Subprogram 1: 17 June 2015 Subprogram 2: 29 July 2016 Subprogram 3: 18 December 2017

4. Date of financing agreement Subprogram 1: 17 June 2015 Subprogram 2: 12 August 2016 Subprogram 3: 18 December 2017

5. Date of loan/grant effectiveness – In grant agreement – Actual

Subprogram 1 15 September 2015 30 July 2015

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– Number of extensions – In loan and grant agreements – Actual – Number of extensions – In loan agreement – Actual – Number of extensions

Not applicable Subprogram 2 10 November 2016 13 December 2016 Not applicable Subprogram 3 18 March 2018 22 December 2017 Not applicable

6. Program completion date – Appraisal – Actual – Appraisal – Actual – Appraisal – Actual

Subprogram 1 30 June 2015 6 October 2015 Subprogram 2 30 June 2016 30 December 2016 Subprogram 3 30 June 2018 30 June 2018

7. Loan closing date – In grant agreement – Actual – Number of extensions – In financing agreement – Actual – Number of extensions – In grant agreement – Actual

– Number of extensions

Subprogram 1 31 December 2015 6 October 2015 Not applicable Subprogram 2 31 December 2016 30 December 2016 Not applicable Subprogram 3 30 June 2018 30 June 2018 Not applicable

8. Financial closing date – Actual

Subprogram 1: 6 October 2015 Subprogram 2: 30 December 2016 Subprogram 3: 2 November 2018

9. Terms of loan/grant – Interest rate – Maturity (number of years) – Grace period (number of years) – Interest rate – Maturity (number of years) – Grace period (number of years) – Interest rate – Maturity (number of years)

– Grace period (number of years)

Subprogram 1 Not applicable Not applicable Not applicable Subprogram 2 1% per annum during grace period and 1.5% per annum thereafter 24 years 8 years Subprogram 3 Not applicable Not applicable Not applicable

10. Terms of relending (if any) Not applicable

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– Interest rate – Maturity (number of years) Not applicable – Grace period (number of years) – Second-step borrower

11. Disbursements

a. Dates

Subprogram 1

Initial Disbursement 3 August 2015

Final Disbursement 3 August 2015

Time Interval 0 months

Effective Date 30 July 2015

Actual Closing Date 6 October 2015

Time Interval 2 months

Subprogram 2

Initial Disbursement 16 December 2016

Final Disbursement 16 December 2016

Time Interval 0 months

Effective Date

13 December 2016 Actual Closing Date 30 December 2016

Time Interval 0.5 months

Subprogram 3

Initial Disbursement 26 December 2017

Final Disbursement 26 December 2017

Time Interval 0 months

Effective Date

22 December 2017 Actual Closing Date

30 July 2018 Time Interval 7.25 months

b. Amount ($ million)

Category

Original Allocation

(1)

Increased During

Implementation (2)

Canceled During

Implementation (3)

Last Revised

Allocation (4=1+2–3)

Amount Disbursed

(5)

Undisbursed Balance (6 = 4–5)

Subprogram 1 4801 (Grant) 20.0 20.0 20.0

Subprogram 2 7501 (Loan) 12.0 12.0 12.0 4801 (Grant) 12.5 12.5 12.5

Subprogram 3 4801 (Grant) 25.0 25.0 24.6 0.4 Total 69.5 69.5 69.1 0.4

C. Program Data

1. Program cost ($ million)

Cost Appraisal Estimate Actual

Foreign exchange cost Subprogram 1 20.0 20.0 Subprogram 2 23.0 24.5 Subprogram 3 20.0 25.0 Subtotal 63.0 69.5 Local currency cost Total 63.0 69.5

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2. Financing plan ($ million)

Cost Appraisal Estimate Actual

Implementation cost ADB financed Subprogram 1 Grant 20.0 Loan 20.0 Subprogram 2 Grant 12.5 Loan 23.0 12.0 Subprogram 3 Grant 25.0 Loan 20.0 Total implementation cost 63.0 69.5

3. Cost breakdown by program component ($ million)

Component Appraisal Estimate Actual

Subprogram 1 20.0 20.0 Subprogram 2 23.0 24.5 Subprogram 3 20.0 25.0 Total 63.0 69.5

4. Program disbursement schedule

Item Appraisal Estimate Actual

Subprogram 1 – single tranche June 2015 3 August 2015 Subprogram 2 – single tranche October 2017 16 December 2016 Subprogram 3 – single tranche October 2018 26 December 2017

5. Project performance report ratings: Not applicable

D. Data on Asian Development Bank Missions

Name of Mission Date No. of

Persons No. of Person-

Days Specialization of

Membersa

Reconnaissance mission – SP1 27 May–4 June 2014 4 36 a, b, c, d

Inception mission – TA 8721 11–21 November 2014 4 44 a, b, d, e

Reconnaissance mission – SP2 5–9 October 2015 2 10 a, b

Reconnaissance mission – SP2 22 February–4 March 2016 4 48 a, b, d, f

Loan fact-finding mission – SP2 21–29 April 2016 1 4 a Loan negotiation mission – SP2 14–18 June 2016 1 5 a

Reconnaissance mission – SP3 22 February–1 March 2017 2 16 a, d

SP = subprogram, TA = technical assistance. a a = mission leader and financial sector specialist; b = senior economics officer or economics officer; c = private sector development specialist; d = senior project officer or project officer; e = head of the economics unit; f = senior financial sector specialist.

I. PROGRAM DESCRIPTION 1. On 17 June 2015, the Asian Development Bank (ADB) approved a policy-based program for the Kyrgyz Republic for the Second Investment Climate Improvement Program, comprising three single-tranche subprograms totaling $70 million.1 Three technical assistance (TA) programs supported the program (para. 25). 2. Since the collapse of the Soviet Union, the Kyrgyz Republic has made significant progress in adopting market-based reforms, with private sector development as the key engine of growth. Nonetheless, growth has occurred largely from natural resource exploitation and remittances-backed private consumption. To stabilize economic growth, the government strives to diversify the economy in accordance with the National Sustainable Development Strategy, 2013–2017; the Export Development Strategy, 2015–2017; and the Development Program, 2018–2022.2 3. ADB actively works with the government to support one of the key priorities of the country’s National Sustainable Development Strategy, 2013–2017: decreasing the country’s dependence on natural resource exploitation and migration-led remittances by improving the investment climate and supporting private sector development. ADB’s earlier Investment Climate Improvement Program helped the government address development constraints in regulation, access to finance, workers’ skills development, and public–private partnerships (PPPs).3 Despite progress under this program, policy distortions include policy and institutional shortcomings and market constraints in five areas: (i) limited access to finance and financial services, (ii) nascent private sector participation in infrastructure development, (iii) undiversified trade and investments, (iv) industry–labor market skills mismatch, and (v) weak governance and high cost of doing business. Through the Second Investment Climate Improvement Program, ADB continued supporting the Kyrgyz Republic in addressing these development constraints. 4. The Second Investment Climate Improvement Program aimed to create a more attractive climate for private sector development in the Kyrgyz Republic. The program’s envisaged impact was increased private sector investments. The anticipated outcome was an improved business and investment climate. The program`s 4 outputs (paras 10–17) were delivered through 21 policy

1 ADB. 2015. Report and Recommendation of the President to the Board of Directors: Proposed Programmatic

Approach and Policy-Based Grant for Subprogram 1 to the Kyrgyz Republic for the Second Investment Climate Improvement Program. Manila (Grant 0432-KGZ); ADB. 2016. Report and Recommendation of the President to the Board of Directors: Proposed Policy-Based Loan and Grant for Subprogram 2 to the Kyrgyz Republic for the Second Investment Climate Improvement Program. Manila (Loan 3410 and Grant 0487-KGZ); ADB. 2017. Report and Recommendation of the President to the Board of Directors: Proposed Policy-Based Grant for Subprogram 3 to the Kyrgyz Republic for the Second Investment Climate Improvement Program. Manila (Grant 0563-KGZ).

2 Government of the Kyrgyz Republic. 2013. National Sustainable Development Strategy, 2013–2017. Bishkek; Government of the Kyrgyz Republic, Ministry of Economy. 2015. Export Development Strategy, 2015–2017. Bishkek; Parliament of the Kyrgyz Republic. 2018. The Development Program of the Kyrgyz Republic for the Period 2018–2022: Trust. Unity. Creation. Bishkek (Decree No. 2377-VI, April 20). https://www.unpage.org/files/public/the_-development_program_of_the_kyrgyz_republic_for_the_period_2018-2022.pdf.

3 ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Program Cluster, Grant for Subprogram 1, and Technical Assistance Grant to the Kyrgyz Republic for the Investment Climate Improvement Program. Manila (Grants 0120-KGZ and 0121-KGZ, and TA 7162-KGZ); ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Policy-Based Grant for Subprogram 2 and Technical Assistance Grant to the Kyrgyz Republic for the Investment Climate Improvement Program. Manila (Grant 0319-KGZ and TA 8222-KGZ); ADB. 2014. Report and Recommendation of the President to the Board of Directors: Proposed Policy-Based Grant for Subprogram 3 to the Kyrgyz Republic for the Investment Climate Improvement Program. Manila (Grant 0393-KGZ).

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actions under subprogram 1, 21 policy actions under subprogram 2, and 15 policy actions under subprogram 3.

II. DESIGN AND IMPLEMENTATION

Program Design and Formulation 5. The program was well aligned with the government’s National Sustainable Development Strategy, 2013–2017; ADB’s country partnership strategy, 2013–2017; and ADB’s Strategy 2020 midterm review.4 6. Budget support under the program was necessary to finance part of the country’s development financing needs, particularly covering the period between the introduction of reforms and the resulting fiscal benefits. The program was a timely intervention designed to support the government’s reform agenda during the slowdown in the Kyrgyz economy in 2014–2017. Recessions in the Kyrgyz Republic’s two main economic partners—Kazakhstan and the Russian Federation—led to a significant drop in remittances and trade and investment flows. Coupled with a reduction in gold production at the Kumtor mine, the recession triggered a decline in the country’s gross domestic product (GDP) growth from 11% in 2013 to 3.5% in 2018.5 In 2015, the Kyrgyz som also experienced a sharp 29% depreciation driven by the current account deficit and reduced foreign currency inflows because of lower remittances from the Russian Federation and Kazakhstan. This resulted in the growth of nonperforming loans and a slowdown in the volume of bank loans disbursed. 7. The program was structured as a programmatic approach. Four outputs (paras. 11–17) were expected to be delivered through a package of policy reforms phased over three subprograms. The subprograms were chronologically sequenced to ensure that each subprogram built on the satisfactory performance of the previous one, and that there was flexibility to incorporate experience and changes in the external environment in subsequent subprograms. This approach helped to ensure that the reforms were effectively implemented and not confined to amendments in laws and regulations. 8. ADB and relevant government agencies jointly developed the policy matrix, which benefited from consultation with nongovernment organizations, particularly business associations and private businesses. The program implemented all policy actions in accordance with the initial program design. 9. The program’s size increased from $63 million to $70 million to accommodate the government’s increased development financing needs for subprograms 2 and 3 (para. 18).

Program Outputs

10. The program’s design and monitoring framework (DMF) stipulated the delivery of four outputs: (i) access to finance increased, (ii) PPP program enhanced, (iii) trade and investment diversified, and (iv) transparency and ease of doing business increased. The program achieved all output indicators.

4 Government of the Kyrgyz Republic. 2013. National Sustainable Development Strategy, 2013–2017. Bishkek; ADB.

2013. Country Partnership Strategy: Kyrgyz Republic, 2013–2017. Manila; ADB. 2014. Midterm Review of Strategy 2020: Meeting the Challenges of a Transforming Asia and Pacific. Manila.

5 The Kyrgyz economy is highly dependent on the performance of the Kumtor gold mine, whose production represented 8.6% of the country’s GDP and 38% of its exports in 2018.

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11. Output 1: Access to finance increased. This output aimed to increase access to finance by reducing the costs and risks of lending to small and medium-sized enterprises (SMEs), increasing cashless payments, and increasing the access of the underbanked (rural population, poor people, women, and those in the informal sector) to the formal financial system. The program implemented all policy actions for this output, which resulted in:

(i) the establishment of the State Guarantee Fund (para. 12); (ii) the establishment of the legal and regulatory framework for e-payments and mobile

financial services, including the risk management and dispute resolution systems for e-payments and mobile financial services;6

(iii) the piloting of the Internet Payment Gateway project to enable online (noncash) payments for key public services (State Registration Service, State Tax Service, State Service of Intellectual Property and Innovation, Mandatory Health Insurance Fund, Higher Attestation Commission of the Kyrgyz Republic, and the State Communications Agency); and

(iv) the introduction of innovative financing products for SMEs (para. 13). 12. The government approved the establishment of the State Guarantee Fund on 23 June 2016, with an issued share capital of Som72 million, and it became operational in December 2016.7 By the end of May 2019, the fund had issued a total of 845 guarantees totaling Som1 billion. Guarantees supporting SMEs in the priority sectors (exports and agriculture) were 359, including 88 issued to women entrepreneurs.8 The issued guarantees were used as partial security for SME loans totaling Som3.6 billion. 13. The government approved the law on warehouse receipts on 17 April 2018.9 By the end of 2018, warehouse receipts secured 14 loans with an aggregate principal amount of Som8.2 million. Further development of this product is constrained by a shortage of modern warehouse infrastructure. 14. Output 2: Public–private partnership program enhanced. This output aimed to support private sector participation in infrastructure and services by bringing bankable PPP projects to the market and gradually building operational experience through pilot projects. The program implemented all policy actions for this output, which resulted in:

(i) strengthening of the PPP policy, legal and regulatory, institutional, and financial framework for developing the country’s PPP program and market, including developing project selection criteria, templates for project concept notes, a model concession agreement, and guidelines for managing PPP fiscal risks and contingent liabilities;

(ii) the provision of support to the government for pre-feasibility studies for 10 potential PPP projects;

6 National Bank of the Kyrgyz Republic. 2016. Resolution of the Board of the National Bank of the Kyrgyz Republic.

No. 15/6. Bishkek. 30 March. 7 Government of the Kyrgyz Republic. 2016. Decree No. 288-p. Bishkek. 23 June. 8 State Guarantee Fund. 2019. Information on the issued guarantees as of May 2019. Bishkek. http://gf.kg/wp-

content/uploads/2019/06/maj19_summa-utverzhdennyh-garantij-1-russ.pdf. 9 Government of the Kyrgyz Republic. 2018. Law on warehouse receipts. Bishkek.

http://cbd.minjust.gov.kg/act/view/ru-ru/111772.

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(iii) the signing of the first competitively tendered PPP project agreement with the private sector (para. 15); and

(iv) the allocation of budget funds to enable implementation of PPP projects.10 15. The government signed the first PPP in October 2017, for €11 million,11 for hemodialysis centers in Bishkek, Osh, and Jalal-Abad.12 On 4 May 2018, the government signed the second PPP project, for $0.3 million, for the rehabilitation of the Kyzyl Kyrgyzstan Cinema in Bishkek.13 On 6 May 2019, the Bishkek City municipality signed the third PPP contract, for $2 million, with the Swiss company BPC AG to implement a system of electronic ticketing in municipal public transport.14 By 1 January 2019, the government had announced tenders for an additional 15 PPP projects totaling $166 million, including two in health care, five for the Bishkek City Development Agency, one to construct a toll road, one regarding a logistics center, and three in tourism. 16. Output 3: Trade and investment diversified. This output aimed to more effectively implement the country’s open trade and investment policies. The focus was on dedicated trade and investment facilitation services for Kyrgyz exporters and prospective foreign investors, developing national product quality infrastructure (standardization, metrology, and accreditation), addressing investors’ grievances, and aligning workers’ skills with market demand. The program implemented all policy actions for this output, which led to:

(i) the country obtaining its first sovereign credit rating in December 2015 and Generalized System of Preferences Plus (GSP+) status with the European Union (EU) in January 2016;15

(ii) streamlining export and investment facilitation under a single entity, the Investment Promotion Agency;

(iii) the adoption of a draft process for addressing investor grievances; (iv) the introduction of industry-reviewed technical and vocational education and

training (TVET) curricula in selected institutes; (v) the modernization and operationalization of four phytosanitary and three veterinary

laboratories to enhance the potential for exports of high value and high value-added food products to the EU, and the training of 62 officials from two key state bodies—the Department of State Sanitary and Epidemiological Supervision and the State Inspection of Veterinary and Phytosanitary Safety—in hazard analysis and critical control points;

(vi) the approval of two guidance manuals on access to EU markets by the Investment Promotion Agency (one each for the apparel and agriculture sectors), which were piloted with one exporter from each sector;

(vii) the ratification of the Trade Facilitation Agreement on 6 December 2016 and operationalization of the National Trade Facilitation Committee;16

10 Government of the Kyrgyz Republic, Ministry of Finance. 2017. Decree No. 117-p. Bishkek. 6 September. 11 Average exchange rate for October 2017: €1=$1.1756. 12 PPP unit of the Investment Promotion Agency, Government of the Kyrgyz Republic, Ministry of Economy. 2019.

Summary of the PPP project on hemodialysis centers. Bishkek. http://ppp.gov.kg/upload/file/Hemodialysis.pdf. 13 PPP unit of the Investment Promotion Agency; Government of the Kyrgyz Republic, Ministry of Economy. 2019.

Summary of the PPP project on the rehabilitation of children’s cinema ‘Kyzyl Kyrgyzstan’. Bishkek. http://ppp.gov.kg/upload/file/cinema_for_children.pdf.

14 PPP unit of the Investment Promotion Agency, Government of the Kyrgyz Republic, Ministry of Economy. 2019. Summary of the PPP project on the introduction of electronic ticketing in Bishkek municipal transport. Bishkek. http://www.ppp.gov.kg/upload/file/e-ticketing.pdf.

15 GSP+ is a trade privilege that grants zero or preferential tariffs for exports to the EU. 16 World Trade Organization. 2018. Kyrgyz Republic page. Geneva. https://tfafacility.org/kyrgyz-republic.

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(viii) approval of the action plan to institutionalize an improved investor grievance mechanism, with improved procedures, for out-of-court settlement of investor disputes; and

(ix) implementation of market-oriented training modules in the textile, agriculture, food processing, and manufacturing sectors by the Agency for Vocational Education and training of 100 students under the TVET institutes’ internship program.

17. Output 4: Transparency and ease of doing business increased. This output aimed to increase transparency in government procurement and ease of doing business by providing incentives to businesses to expand and join the formal economy. The program implemented all policy actions for this output, which led to:

(i) implementation of a government e-procurement system and allocation of funds from the state budget for maintenance of the system; and

(ii) reduction of the tax burden on businesses and simplification of tax administration through (a) increasing the limit for business turnover exemption from value-added tax; (b) waiving sales tax on exports and on all noncash payments; (c) decreasing the single tax from 4% to 2% and 6% to 3% (depending on the type of business activity) for SMEs making cashless payments;17 and (d) approving tax code amendments that set time limits for resolving taxpayer grievances and increased the time period for the validity of tax patents.18

Program Costs and Financing

18. The overall program size increased from $63 million at appraisal to $70 million to account for the higher than expected costs for subprograms 2 and 3. The amount of subprogram 1 (all grant) was $20 million. Subprogram 2 increased from $23 million to $25 million (half loan; half grant), while subprogram 3 (all grant) increased from $20 million to $25 million.

Disbursements 19. All three subprograms were disbursed on schedule. Subprogram 1 was disbursed on 3 August 2015; subprogram 2 was disbursed on 16 December 2016; and subprogram 3 was disbursed on 26 December 2017. While subprograms 1 and 2 were disbursed in full, only $24.6 million of the subprogram 3 approved amount of $25 million was disbursed; the difference was withheld because of ineligible items that had been funded under Grant 0121-KGZ.19 The loan and grants were disbursed in accordance with relevant ADB procedures.20 There were no delays in disbursement of the three attached TA grants (para. 25).

17 Government of the Kyrgyz Republic. 2016. Law No. 212 of 22 December 2016 on amendments to the tax code of

the Kyrgyz Republic. Bishkek. http://cbd.minjust.gov.kg/act/view/ru-ru/111493?cl=ru-ru. 18 Government of the Kyrgyz Republic. Law No. 27 of 20 February 2017 on amendments to the tax code of the Kyrgyz

Republic. http://cbd.minjust.gov.kg/act/view/ru-ru/111535. 19 External auditors identified items totaling $0.4 million that were potentially ineligible for funding under the Investment

Climate Improvement Program System Support Project (Grant 0121-KGZ). ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Program Cluster, Grant for Subprogram 1, and Grant Assistance to the Kyrgyz Republic for the Investment Climate Improvement Program. Manila. According to para. 5 of Schedule 2 of the grant agreement for subprogram 3 of the Second Investment Climate Improvement Program, the additional $0.4 million could be disbursed after ADB and the government agreed on the aggregate amount of eligible expenditures incurred in connection with Grant 0121-KGZ. In October 2018, ADB and the government agreed that the $0.4 million would not be disbursed.

20 ADB. 1998. Simplification of Disbursement Procedures and Related Requirements for Program Loans. Manila.

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Program Schedule 20. Subprogram 1 was approved on 17 June 2015 and the grant agreement was signed on 17 June 2015. It became effective on 30 July 2015, well ahead of the originally scheduled date of 15 September 2015. The grant closed on 6 October 2015, ahead of the expected date of 31 December 2015. 21. Subprogram 2 was approved on 29 July 2016. The grant and loan agreements were signed on 12 August 2016 and became effective on 13 December 2016. The program closed on 30 December 2016. 22. Subprogram 3 was approved on 18 December 2017 and the grant agreement was signed on the same day. It became effective on 22 December 2017. It was completed and closed as scheduled on 30 June 2018. However, it was not financially closed until 2 November 2018, after ADB and the government resolved the issue regarding the $0.4 million of possibly ineligible items under Grant 0121-KGZ (footnote 19). 23. In all three subprograms, the government demonstrated a strong willingness to receive budget support as early as possible. As a result, there were no significant delays in the program’s implementation. A chronology of main events is in Appendix 3.

Implementation Arrangements 24. Implementation arrangements were satisfactory and adequate. The Ministry of Economy (MOE) was the executing agency and assumed overall responsibility for the program, including coordinating the agencies responsible for implementing policy actions. The implementing agencies were the MOE, the Ministry of Finance (MOF), the Ministry of Justice, the National Bank of the Kyrgyz Republic, and the Agency for Vocational Education. The Macroeconomic and Investment Policy Coordination Council, chaired by the Prime Minister, oversaw program implementation. Based on the experience of the first Investment Climate Improvement Program (footnote 3), the MOE and ADB regularly informed the Prime Minister’s Office of uncompleted and critical policy actions. The Prime Minister’s Office helped remove resistance to reforms.

Technical Assistance 25. The implementation of the program was supported by three TA programs:

(i) TA 8721-KGZ: Second Investment Climate Improvement Program. This $1.1 million project preparatory TA helped the government identify key reforms for the program and prepare, implement, and monitor the proposed reforms. The TA was approved on 3 October 2014. Its original implementation period was extended by one year, from 30 June 2015 to 30 June 2016, to allow remaining activities to be completed. The TA was closed on 30 December 2017. The TA, which was funded by ADB’s Technical Assistance Special Fund, was instrumental in ensuring successful implementation of the program. No completion report was produced.21

(ii) TA 8688-KGZ: Strengthening the Enabling Environment for Public–Private Partnerships. This $1 million capacity building TA helped the MOE, the MOF, and the Bishkek City Development Agency develop key elements of the enabling

21 A completion report is not required for a project preparatory TA that results in a loan or grant. ADB. 2018. Project

Administration Instructions 6.08. Manila. para. 4.

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environment for PPPs in infrastructure. The TA was approved on 27 October 2014. The original implementation period was extended by one year, from 31 December 2016 to 31 December 2017, to allow remaining activities to be completed. The TA, which was funded by the Japan Fund for Poverty Reduction, closed on 30 December 2017. The completion report rated the TA successful (Appendix 5).

(iii) TA 8297-KGZ: Implementing the E-procurement System. This $1 million TA, which was approved on 11 January 2013, helped the MOF develop and roll out the electronic procurement system. The TA’s implementation period was extended from 31 December 2015 to 31 May 2016. The TA, which was funded by ADB’s Technical Assistance Special Fund, was closed on 31 December 2016. The completion report rated the TA highly successful (Appendix 6).

Consultant Recruitment and Procurement

26. Selection of the consultants for all three TA programs was conducted in accordance with ADB’s Guidelines on the Use of Consultants (2013, as amended from time to time). Across the three TA programs, 39 individuals were hired using individual consultant selection, while two firms were selected using the consultants’ qualifications selection method. The performance of the consultants was satisfactory. Gender Equity

27. The program was categorized effective gender mainstreaming. It included gender-related policy actions that aimed to promote greater participation of women in the enhancement and implementation of investment-related policies and programs, both as service providers (as personnel in government agencies involved in investment, financial services, and quality control of products) and as clients (MSME owners and TVET students). The gender perspective was well integrated in the project outcome as well as in the outputs and specific actions/activities and targets. 28. The project had 19 gender-related policy actions. At project completion, 18 (or 95%) of the actions were completed. A matrix detailing the gender-related actions and outputs are included in Appendix 7. Among the key gender-related achievements were the following:

(i) Implementation of a PPP project with gender, social, and environmental

assessments. In August 2017, the country’s first PPP agreement was signed by the Ministry of Health and Fresenius Medical Care Deutschland GmbH (Germany), which was selected as the private partner under the PPP project on the organization of hemodialysis services in Bishkek, Osh, and Jalal-Abad. The report on the “Feasibility Study for Dialysis Services in Bishkek, Osh, and Jalal-Abad” included an assessment of the potential gender, social and impact of the project. Approximately 100 jobs were created to provide dialysis services in three locations to about 280 clients daily.

(ii) Establishment of regulations for e-money, operators of payment systems, and the remote delivery of financial services, which facilitated financial transactions by women. The most common e-finance services used by rural women entrepreneurs are top-ups for mobile phone balance and payment for internet connection, withdrawal of salaries and pensions by cards, e-money transfers, and less often for business purposes. The G20 Financial Inclusion data shows that there was an increase in digital payments. From 2014 to 2017, the

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percentage of women making or receiving digital payments increased by 2.3 times (from 15.1% in 2014 to 35% in 2017).

(iii) Operationalization of the State Guarantee Fund (para. 12). (iv) Development of a draft health sector strategy by the Ministry of Health that

includes a PPP and at least one gender and social development project. The investment program in the health sector for 2016–2025 that was adopted by the government on 30 June 2016 included several investment projects that directly benefit the poor, youth, and women. The program has 23 priority projects, seven (or 30%) of which will benefit women and children by improving medical services in the National Center for Protection of Motherhood and Childhood, providing and modernizing equipment for the National Center for Protection of Motherhood and Childhood, taking measures to improve the health of children and women of reproductive age, and decreasing maternal and child mortality.

(v) Training of at least 100 students (of which at least 45% are women). A total of 17,503 students (of whom 8,646 [or 50%] were women) were trained in 2016–2018. Most of them received training in the food industry, light industry, construction, or agriculture. The training and internship programs lasted from 1 to 6 months. According to the Ministry of Education, 71% of those who completed internships were able to get jobs within 1 year after graduation.

Monitoring and Reporting

29. None of the three subprograms encountered any problems with monitoring and reporting. There were no amendments made to any of the loan and grant agreements. The borrower complied with all covenants in the agreements (Appendix 4). Monitoring and reporting arrangements for the program were satisfactory and there were no delays in receiving required reports.

III. EVALUATION OF PERFORMANCE

Relevance 30. The program was relevant throughout program implementation. Improvement of the investment climate for the private sector and diversification of the economy have been and remain among the government’s top priorities, and they are closely aligned with ADB’s priorities in the country. The implementation of policy and institutional reforms have provided a foundation for further improvements in the investment climate and the stimulation of private sector activities to decrease the country’s dependence on natural resource exploitation and migration-led remittances. These reforms will continue to be necessary to support further development of the private sector and ensure sustainable economic growth and employment creation. 31. The chosen modality was relevant. The policy-based nature of the program, particularly the incentive provided by the ADB budget support, helped the government deliver the four outputs in a phased manner over three subprograms that allowed each subprogram to build on the progress of the previous one and incorporate changes (as necessary), which ensured effective implementation. ADB TA supported the implementation of the policy reforms on capacity building of the government in the areas of PPP and e-procurement (para. 25). 32. The design of the program was also relevant. The policy actions have demonstrated a positive influence on achieving the outcome targets and are expected to have further positive effects in the near future.

9

Effectiveness

33. The program is rated effective based on the assessment of outcome and outputs achieved and the program’s success in addressing gender issues. The first outcome indicator—increasing banking sector lending to the private sector by 18% by 2019—was achieved. From 2015 to 2018, bank loans to the private sector increased at a compound annual growth rate of 11%, to Som128 billion (or 23% of GDP). Bank loans also became more affordable. As shown in Table 1, (i) the weighted average interest rate for loans in local currency declined from 23% in 2015 to 18% in 2018, while the interest rate for loans in foreign currency went down from 16% to 10%; and (ii) the amount of loans with a tenor above 1 year more than doubled (from Som57 billion to Som115 billion) over the same period.

Table 1: Loans to the Private Sector (2015–2018)

Item

Type of Lender

Banks Micro-finance

Institutions Credit Unions Total

In Local Currency

In Foreign Currency

2015 Outstanding loans (Som billion) 42.2 51.7 14.0 0.9 108.8 Loans with tenor >12 months (Som billion) 25.9 25.7 4.7 0.7 57.0 Weighted average interest rate (%) 22.8 15.7 32.2 27.9

2016 Outstanding loans (Som billion) 51.9 41.6 9.9 0.9 104.3 Loans with tenor >12 months (Som billion) 41.9 25.6 5.6 0.7 73.8 Weighted average interest rate (%) 22.2 13.4 31.4 27.8

2017 Outstanding loans (Som billion) 67.2 41.1 11.7 0.9 120.9 Loans with tenor >12 months (Som billion) 50.9 28.1 6.2 0.6 85.8 Weighted average interest rate (%) 18.8 11.2 31.1 25.9

2018 Outstanding loans (Som billion) 79.4 48.5 15.9 1.0 144.8 Loans with tenor >12 months (Som billion) 63.2 43.6 7.9 … 114.7 Weighted average interest rate (%) 17.9 10.1 30.4 27.4

… = no data available. Source: Bulletin of the National Bank of the Kyrgyz Republic.

34. Two external factors also helped increase the volume and affordability of bank loans: (i) the establishment of the Russian–Kyrgyz Development Fund and (ii) the government’s program of subsidized lending to agriculture.22 Since 2013, the government funded 63,590 subsidized loans (at annual interest rates of 6%–10%, compared to market rates of 20%–30%), representing around 22% of loans disbursed to the agriculture sector. 35. ADB intervention helped achieve this outcome indicator. The volume of SME loans secured by the State Guarantee Fund’s guarantees totaled Som2.7 billion, and loans supported by warehouse receipts totaled Som8.2 million. 36. The program’s policy actions had a positive impact on another dimension of financial intermediation, namely, greater usage of formal payment services, including plastic cards and

22 Government of the Kyrgyz Republic. 2019. Realization of the project ”Agriculture financing-7”. Bishkek.

http://www.gov.kg/?p=128931&lang=ru.

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mobile payments (output 1).23 Cashless payments have become popular among customers: the number and volume of cashless payments roughly doubled from 2015 to 2018 (Table 2). Along with an increase in transaction volume, the range of available payment services also improved with the launch of mobile banking services in 2016. At present, 9 out of 24 Kyrgyz banks offer mobile financial services to their clients. Waiver of the sales tax on noncash purchases (which was one of the program’s policy actions) incentivized an increasing number of customers to switch from cash payments to plastic cards or mobile payments.

Table 2: Cashless Payments (2015–2018)

Item Using

Plastic Cards Using Mobile

Financial Services Total

2015 Number of transactions 20,515,800 … 20,515,800 Volume of transactions (Som billion) 100.5 … 100.5

2016 Number of transactions 24,808,000 189,563 24,997,563 Volume of transactions (Som billion) 120.5 16.0 136.5

2017 Number of transactions 28,818,700 170,342 28,989,042 Volume of transactions (Som billion) 146.9 16.7 163.6

2018 Number of transactions 38,000,000 158,604 38,158,604 Volume of transactions (Som billion) 196.2 18.2 214.4

… = no data available. Source: Bulletin of the National Bank of the Kyrgyz Republic.

37. The second outcome indicator—at least one PPP project competitively tendered and implemented by 2018—was achieved (para. 15). This was attributable to ADB intervention to help establish a favorable legislative and regulatory environment for PPPs. ADB effectively coordinated its actions with the International Finance Corporation and KfW, which provided advisory support at the transaction level. 38. The program achieved the third outcome indicator: an e-procurement system implemented in at least 90% of central government agencies by 2018 (para. 17). By the end of 2018, an e-procurement system was introduced in all government agencies; the ADB intervention played a significant role in this development. TA from the World Bank on computer-based self-learning modules on electronic procurement effectively complemented the ADB action. 39. The program met all performance targets to assess the achievement of the DMF’s four outputs (paras. 11–17). Policy actions implemented under the program either were instrumental in achieving these targets or are expected to have a positive impact on achieving the targets in the near future. Program actions exerted a strong positive impact on outputs 1 and 2 related to improved access to finance (paras. 33–36) and establishing an enabling environment for PPPs (para. 37). 40. Policy reforms for output 3 established preconditions for diversifying trade and investments. However, achieving GSP+ status has not yet resulted in an increase of Kyrgyz exports to EU markets. Exports remain concentrated in a few products (gold, mercury, agriculture,

23 Government of the Kyrgyz Republic, National Bank of the Kyrgyz Republic. 2019. Bulletin of the National Bank of the

Kyrgyz Republic. Bishkek.

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and textiles) to four major markets: Switzerland (27.8% of total export volume), the Russian Federation (15.1%), Kazakhstan (15.5%), and the United Kingdom (10.8%).24 The volume of Kyrgyz exports to the EU has remained low and represented only 5.4% of total exports in 2018. The policy actions implemented under output 3—particularly on enhancing high-value food products and matching of skills and vocational training to the needs of local exporters and foreign investors (para. 16)—should eventually help diversify trade and investments. 41. At the project completion, no Kyrgyz company had international credit rating and the government has not issued bonds in the international capital markets. Despite a relatively open Foreign Direct Investments (FDI) regime (the country’s FDI restrictiveness index is 0.08 compared to the OECD average of 0.06), overall non-mining FDI remains low.25 The Kyrgyz Republic’s sovereign credit rating of B2/Stable (Moody’s) is expected to improve the Kyrgyz economy`s chances to attract investments as prospective investors have a benchmark to assess and price country risk . It is also expected to help the government consider making reforms to improve the country’s credit rating and facilitate access to international capital markets. 42. Policy actions for output 4 (transparency and ease of doing business increased) had a mixed result. The program had a strong positive influence on the quality of government procurement as a result of the implementation of the e-procurement system (para. 17). Because of the time lag effect, the policy actions that were implemented to reduce the tax burden and simplify tax administration have not yet resulted in the expected improvement in the ease of doing business or an increase in the relative size of the formal economy. Because tax compliance costs are still high, the size of the informal economy has not changed since 2015 and remains at 24% of GDP (2017).26 In 2015–2018, the total tax rate remained at 29%, while the time required for tax administration increased from 210 to 225 hours per year.27 The overall number of tax-related payments per year remained high, at 51, well above the regional average of 16.2. Further reforms targeting a wider introduction of the one-stop shop for taxpayers, simplification of tax reports, electronic submission of tax reports, and increased opportunities to pay taxes electronically are required. Proposed digitalization of the tax administration is well aligned with the Development Program, 2018–2022, which stipulates widescale introduction of e-government (footnote 2). 43. Gender-wise, the program had 19 gender-related policy actions. At project completion, 18 (or 94.7%) of these policy actions were completed (Appendix 7).

Efficiency 44. The program is rated efficient. Efficiency was assessed in terms of (i) the time taken to process the three subprograms and implement the actions agreed in the policy matrices and (ii) the promptness of the timing of disbursements. Despite the complexity of the policy-based modality, program processing time was short. There were no delays in implementation of the agreed policy actions and disbursement time was also short. Subprogram 1 was approved on 17 June 2015 and disbursed in less than two months; subprogram 2 took 4.5 months to disburse

24 World Bank. 2018. World Integrated Trade Solution. Washington DC. https://wits.worldbank.org/Country-

Profile/en/Country/KGZ/Year/LTST/TradeFlow/Export/Partner/all/. 25 Organization for Economic Co-operation and Development. OECD FDI Regulatory Restrictiveness Index

https://stats.oecd.org/Index.aspx?datasetcode=FDIINDEX# (accessed 5 June 2019). 26 National Statistical Committee of the Kyrgyz Republic. 2017. Not observable share of the Kyrgyz Economy. Bishkek.

http://www.stat.kg/ru/news/ nenablyudaemaya-ekonomika-v-2017-godu/. 27 World Bank. 2015. Paying Taxes 2015. https://www.doingbusiness.org/content/dam/doingBusiness/media/Special-

Reports/DB15-Paying-Taxes.pdf; World Bank. 2018. Paying Taxes 2018. https://www.doingbusiness.org/ content/dam/doingBusiness/media/Special-Reports/2018-Paying-Taxes.pdf.

12

after approval on 29 July 2016; and subprogram 3 required less than 10 days for disbursement from the approval date of 18 December 2017. The short periods required to process the program and make the disbursements, with no significant delays in implementing policy actions, justify the rating.

Sustainability 45. The program is rated likely sustainable. The program helped establish two new institutions that will continue supporting a better investment climate: the State Guarantee Fund and the Project Development Support Facility under the MOE. The fund is self-sustainable (para. 46), while the government is committed to supporting the facility (para. 47). Reforms supported under the program were instrumental in establishing new, not easily reversible behavior patterns among the population, e.g., increasing the popularity of cashless payments (para. 36). 46. The State Guarantee Fund, established in 2016, is self-sustainable, with net after-tax profits of Som12.6 million in 2017 and Som25.5 million in 2018. Equity injections made in December 2016 and June 2018 further increased the fund’s sustainability. As of the end of 2018, the fund’s total equity was Som613 million and its leverage ratio was 75%. On 18 June 2019, the government strengthened the fund’s financial position by injecting an additional Som550 million in equity. The performance of the SME loans supported by the fund’s guarantees has been satisfactory, with a collection rate of 99.9%.28 47. The government has demonstrated a strong commitment to support the Project Development Support Facility (PDSF), with state budget allocations equivalent to $1 million in 2015, $1 million in 2016, $2 million in 2017 and $1.4 million in 2018 to finance the preparation of feasibility studies and pay transaction costs for potential PPP projects. For 2019, the Government projected budget support of $2.2 million to PDSF. The government currently has a strong pipeline of potential PPP projects (para. 15). 48. Although ADB covered the cost of obtaining the government’s first sovereign credit rating in 2015, the government paid for the credit ratings issued in each subsequent year. The state budget for 2019–2021 stipulates annual allocations for sovereign credit ratings.

Development Impact 49. The program’s rating is satisfactory. From 2015 to 2018, unemployment declined from 7.6% to 6.9%, poverty declined from 32% to 25.6%, and GDP grew at an average of 4% per year.29 SME loans secured by the State Guarantee Fund’s guarantees helped create 1,711 new jobs.30 The currently active PPP project on hemodialysis centers (para. 15) generated around 100 new jobs. Although current exports to the EU remain limited in volume and range of goods, the program was instrumental in creating required preconditions for improved export opportunities to this market.

28 State Guarantee Fund. 2019. Annual Report 2018. Bishkek. 29 Government of the Kyrgyz Republic, National Statistical Committee. 2019. Statistical Yearbook 2013–2017. Bishkek. 30 State Guarantee Fund. 2019. Annual Report 2018. Bishkek. http://gf.kg/about/-godovoj-otchet/godovoj-otchet-oao-

garantijnyj-fond-2018g/.

13

50. Although the ranking of the Kyrgyz Republic in the World Bank’s Doing Business Rating improved from 102nd in 201531 to 70th in 2018,32 this improvement occurred in areas not covered by the program. However, the reforms under the program of reducing the tax burden and simplifying tax administration are expected to have a positive impact on the country’s ranking in the paying taxes index in the near future. 51. The observed positive development impact is linked to the introduction of new quality standards by the PPP project for hemodialysis centers (para. 15). The quality of services delivered in these centers is higher compared to previously existing facilities, while the price is only around 10% higher (Som6,882 per procedure compared to around Som6,000).

Performance of the Borrower and the Executing Agency 52. The executing agency’s performance in implementing the program was satisfactory. The majority of implementing agencies completed the policy actions within reasonable time periods, considering the need for extensive communication among stakeholders. The grant and loan effectiveness conditions for all subprograms were swiftly met despite frequent government changes.

Performance of the Asian Development Bank 53. ADB staff at headquarters and the resident mission in Bishkek provided appropriate assistance to the government to implement policy actions and comply with the covenants in the loan and grant agreements. ADB fielded seven missions from 2014 to 2017. The same ADB team processed all three subprograms and this institutional memory ensured consistency of the reforms. The terms of reference for the consultants engaged under the three TAs were relevant. Overall, the performance of ADB in program implementation is rated satisfactory.

Overall Assessment 54. Overall, the project is rated successful based on its relevance, effectiveness, efficiency, and high probability of having long-lasting effects. The overall weighted average of the core criteria (relevance, effectiveness, efficiency, and sustainability) is 2. Gender-wise, the program is rated successful based on the criteria that 18 of the 19 policy actions (95%) were successful (Appendix 7).

Table 3: Overall Ratings Criteria Rating

Relevance Relevant Effectiveness Effective Efficiency Efficient Sustainability Likely sustainable Overall Assessment Successful Development impact Satisfactory Borrower and executing agency Satisfactory Performance of ADB Satisfactory

ADB = Asian Development Bank. Source: Asian Development Bank.

31 World Bank. 2015. Doing Business 2015: Going Beyond Efficiency. Economy Profile–Kyrgyz Republic. Washington

DC. http://documents.worldbank.org/curated/en/379231468278710052/pdf/920610WP0Box380yz0Republic00Pub-lic0.pdf.

32 World Bank. 2018. Doing Business 2018: Reforming to Create Jobs. Economy Profile–Kyrgyz Republic. Washington DC. http://documents.worldbank.org/curated/en/596381510036707125/pdf/120970-WP-PUBLIC-DB18-KGZ.pdf.

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IV. ISSUES, LESSONS, AND RECOMMENDATIONS

Issues and Lessons 55. The combination of long-term programmatic assistance and TA proved to be effective and should be continued. TA facilitating the implementation of reforms had a strong impact on the delivery of expected results. For instance, TA provided to the MOF on e-procurement system development helped to overcome natural resistance to change and provided an important incentive to the ministry to undertake this reform. Further policy-based programs focusing on significant capacity building or introducing new mechanisms should be supported by TAs. 56. Success in promoting PPPs was partially attributable to close coordination with other development partners, namely the World Bank, the International Finance Corporation, and KfW (para. 37). Continued close coordination to increase synergies with other development partners in implementing policy-based programs is recommended. 57. Some policy actions supported under the program (e.g., promotion of electronic payments under output 1, improved export opportunities to the EU under output 3, and reduction of tax compliance costs under output 4) were as not fully reflected in the DMF indicators as they could have been to more comprehensively assess the impact of this ADB intervention.

Recommendations 58. ADB assistance to the Kyrgyz Republic should continue to improve the environment for businesses, especially in diversifying trade and investments (para. 40) and tax administration. Remaining challenges include: (i) lack of appropriate sanitary and phytosanitary certification systems; (ii) poor quality of the infrastructure needed to support exports (e.g., logistical centers); (iii) limited access to information on trading in new markets (e.g., the EU); (iv) lack of an effective mechanism to protect investors’ interests; and (v) continuing high costs of tax compliance. 59. ADB should consider promoting increased financial sector penetration through continuing support of electronic financial services. One of the factors explaining currently high interest rates on loans is the time and effort required for financial intermediaries to reach customers and check their creditworthiness. Introduction of electronic signatures and access by lenders to the databases of the major government agencies (e.g., the Tax Service, the Social Fund, and state utilities companies) would reduce loan processing costs and, hence, loan interest rates. Another area for ADB intervention would be developing the capital markets as an alternative source of financing. At present, this market does not exist because of significant regulatory and nonregulatory barriers. 60. As the Kyrgyz Republic joined the Eurasian Economic Union in 2015, significant changes in the local legislation to harmonize it in accordance with the Eurasian Economic Union’s common goals are expected. This factor should be taken into account when discussing new policy actions for subsequent policy-based programs. 61. Timing of the project performance evaluation report. Given the time lag between launch of the reforms under the program and materialization of the results, the program performance evaluation report is recommended four to five years after completion of the program.

Appendix 1 15

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Indicators and Targets Project Achievements

Impact Private sector investment in the economy increaseda

Share of private investment in GDP increased to 20.0% by 2023 (baseline 2008–2013: average of 18.3%).

Likely to be achieved. Private investments equaled 25% of GDP in 2018.

Outcome Investment and business climate improved

a. Banking sector lending to the private sector increased to 18.0% of GDP (2015–2019) (Baseline 2010–2014: 15.7%) b. At least one competitively tendered PPP project (with gender, social, and environment assessments) implemented by 2018 (Baseline 2014: 0) c. E-procurement implemented in at least 90%b of central government agencies by 2018 (Baseline 2014: 1%)

Likely to be achieved. Loans to the private sector equaled 23% of GDP in 2018. Achieved. On 15 August 2017, the country’s first PPP agreement was signed between the Ministry of Health and Fresenius Medical Care Deutschland GmbH (Germany), which was selected as the private partner under the PPP project on organization of hemodialysis services in Bishkek, Osh, and Jalal-Abad. The feasibility study prepared for this report included an assessment of the potential environmental and social impact of the project. Achieved. E-procurement has been implemented in all government agencies.

Outputs 1. Access to finance increased

By March 2015: Law on payment system approved By June 2016: 1a. IPC (i) established a risk management system, an internet payment gateway, and a dispute resolution system to improve the operations; (ii) approved the IPC business strategy 2016–2018; and (iii) executed payment and money transfer services. 1b. NBKR established regulations for e-money, operators of payment systems, and the remote delivery of financial services to ensure the launch of mobile financial services that will benefit the under-banked (rural population, poor people, women, and informal sector). 1c. Government implemented the State Program on Financial Literacy to increase bank customer awareness of the benefits, costs, and risks of using electronic payments and financial services.

Achieved. The law on payment system was adopted on 21 January 2015. Achieved. Achieved. Resolutions of the Board of NBKR dated 30 March 2016, No. 15/6. Achieved. On 15 June 2016, the government approved the Program on Financial Literacy for 2016–2020.c This program is currently being implemented through the webpage www.finsabat.kg and programs on local TV. The government received support from international donors. For instance, the International Finance Corporation financed several short video clips.

16 Appendix 1

1d. Government approved the establishment of a state (national) guarantee fund for SMEs with at least $1 million capital allocated by the 2016 budget, with at least 20% of the benefiting SMEs being majority owned by women. By October 2017: 1a. Information Technology and Communications Committee of the government: (i) implemented the IPG project in the State Registration Service for online payments of public services (Baseline 2016: not implemented); (ii) rolled out the IPG to five key agencies (Baseline 2016: 0); and (iii) increased knowledge of at least 300 specialists (of which 50% are women) in IPG services (Baseline 2016: not implemented). 1b. SGF, with at least 25% female technical staff (Baseline: 0), issued at least 33 guarantees for SMEs in priority sectors (exports and agriculture) at least 35% of which are owned and/or managed by women (Baseline: 0 in 2016). 1c. SGF management approved the SGF’s medium term business strategy 2017–2022 (Baseline 2016: not approved).

Achieved. On 23 June 2016, the government issued Decree No. 288-p on establishment of the State Guarantee Fund. The SGF started issuing guarantees in December 2016. In 2016, there were 3 guarantees issued for a total of Som1.9 million, including 1 guarantee (33%) for Som0.4 million of a loan to a women-owned SME. Achieved. Internet Payment Gateway (IPG) was piloted in the State Registration Service for online payments of public services. IPG was also rolled out to the State Tax Service, State Service of Intellectual Property and Innovation, Mandatory Health Insurance Fund, Higher Attestation Commission of the Kyrgyz Republic, and the State Communications Agency. No data is available on the trainings delivered. Partly Achieved. From inception through 31 October 2017, SGF issued 192 guarantees, including 99 supporting SMEs in the agriculture and export sectors. There is no data available on the number of guarantees supporting women entrepreneurs in priority sectors as of end-October 2017. As per end-2017 data, SGF issued 237 guarantees, including 117 to projects in priority sectors. The latter includes 37 guarantees to women entrepreneurs involved in priority sectors. In terms of staff, 9 out of SGF’s 50 employees are women (18%), which is below the 25% target. Achieved. On 15 June 2016, the Concept on guarantee fund development till 2020 was approved.d

2. Public–private partnership program enhanced

By June 2016: 2a. Government executed the PPP development program, including capacity building.

Achieved. ADB delivered a series of trainings for PPP focal points (18 full days in total). Two out of 9 participants (22%) were women representing the PPP unit. Eight of the 9 participants have successfully completed the training by passing the final exam with an average score of 74 out of 100. The Kyrgyz government receives support from international donors in capacity building. The latest training on PPPs was delivered by IFC on 14–15 June 2019.e

Appendix 1 17

2b. Government recruited (or reassigned) and deployed adequately skilled staff (at least 35% of whom are women) in relevant line ministries and/or agencies to develop PPP transactions. 2c. Government (i) amended PDSF regulations to expedite project preparatory and/or advisory funding for PPPs by the PDSF steering committee, and (ii) established a PPP council, headed by the vice prime minister. 2d. Government (i) approved development strategies with multiyear investment plans (up to 2025) for the health and transport (roads) sectors, and (ii) submitted at least one health sector and one transport sector PPP project for PDSF funding. 2e. Parliament approved amendments to the PPP law. 2f. Government included in the Draft Budget Code appropriate provisions for government financial support for PPPs and drafted a plan and guidelines for long-term debt financing of PPP projects. 2g. PDSF steering committee approved PDSF funding for at least five projects, and relevant line ministries and/or agencies published tenders. 2h. Ministry of Health commissioned PDSF-funded transaction advisory contract for the CT scan (health) project. By October 2017: 2a. (i) The government approved the development strategy “Sports for Kyrgyzstan 2018–2022” and multiyear investment plan of the State Agency for Youth Affairs, Physical Culture and Sports (Baseline 2016: not approved), and submitted to MOE project briefs for Modernization of Edelveis Sports Base Project and Modernization of Small Sports Arena Project (Baseline 2016: not submitted); and (ii) Bishkek City Development Agency approved the city development strategy “Program on Economic and Social Development for

Achieved. All relevant line ministries have allocated sufficient staff to develop and process PPP transactions:g - 8 officials at the Ministry of Economy including the Investment Promotion Agency; - 3 officials at the Ministry of Finance; - 2 officials at the Ministry of Transport and Communications; and

• - 5 officials at Bishkek City Development Agency.

• On average, 39% of PPP specialists and focal points in relevant ministries and/or agencies were female.

• Achieved. Achieved. On 16 June 2016, the government approved the program on PPP development for 2016–2021.h

Achieved. On 22 June 2016, Parliament approved amendments to the PPP law.i Achieved. Achieved. Achieved.j

Achieved. On 22 September 2017, the government approved the development strategy “Sports for Kyrgyzstan 2018–2022”.k

Briefs for Modernization of Edelveis Sports Base Project and Modernization of Small Sports Arena Project were submitted to MOE. PDSF agreed to finance project preparation costs of the PPP project on construction of the sport-tourist base ‘Edelveis’.l

On 27 September 2017, the Bishkek City Council approved “Program on Economic and Social Development for

18 Appendix 1

2017–2020” and multiyear investment plan of the Bishkek City Development Agency (Baseline 2016: not approved), and submitted to MOE priority project briefs for the On-Street Parking Project and Development of Kindergartens Project (Baseline 2016: not submitted). 2b. The government: (i) allocated 100% of the funds requested by the concerned public partner (ministry), (including exemptions from taxes and other payments) for implementation of PPP projects (Baseline 2016: no allocation); and (ii) limited the annual budget support for PPP projects to 0.3%–0.5% of the annual budget (Baseline 2016: no budget limits imposed). 2c. Prefeasibility studies, including those funded by the PDSF, for at least five additional projectsf commenced commissioning by the government, with at least two projects directly benefitting women and the poor (Baseline 2016: 2). 2d. The Ministry of Health signed a competitively tendered PPP contract with the private sector for the Hemodialysis Services Project in Bishkek, Osh, and Jalalabad (Baseline 2016: not signed)

2017–2020”.m Briefs on On-Street Parking Project and Development of Kindergartens Project were submitted to MOE. These two potential PPP projects are included in the pipeline. PDSF selected consultancy companies to develop the designs of these projects. Achieved. (i) According to the PPP agreement on the project “Organization of hemodialysis services” between the Ministry of Health and a private company, the state provides financial assistance to cover the costs of rendered services. This project is exempted from VAT. (ii) MOF approved Decree No. 117-p dated 6 September 2017 limiting the annual budget support for PPPs to 0.5% of the annual budget. Achieved. The feasibility studies have been initiated for 6 projects. The studies on 5 out of the 6 have been completed and public partners evaluate them jointly with MOE to make decisions on the next steps. Achieved. On 15 August 2017, the country’s first PPP agreement was signed between the Ministry of Health and Fresenius Medical Care Deutschland GmbH (Germany), which was selected as the private partner under the PPP project on organization of hemodialysis services in Bishkek, Osh, and Jalal-Abad.

3. Trade and investment diversified

By March 2015: National Export Development Program approved and IPA business plan (strategy) operationalized. By June 2016: 3a. Government established the EDP, 2015–2017 monitoring and implementation secretariat and implemented the EDP tracking system. 3b. Kyrgyz Republic acquired the EU GSP+ trade privilege, and the government established a working group chaired by the MOE to draft a time-bound action plan for trade expansion under GSP+. 3c. Government approved the Strategy for the Modernization of National Quality Infrastructure for Trade (incorporating EEU quality standards). 3d. Government mandated IPA as the single agency responsible for investment and export promotion, and adequately

Achieved. National Export Development Program was approvedn and IPA business strategy operationalized. Currently, the EDP is updated to cover 2019–2023. Achieved. Achieved. Kyrgyz Republic obtained GSP+ status in January 2016. Achieved. Achieved. The Kyrgyz government has established in 2014 the IPA by Government Resolution No. 158 of 18

Appendix 1 19

staffed IPA (including with female professional staff). 3e. Designated by government to address investor grievances and establish a grievance redress mechanism, IPA (i) established a database registering all grievances, (ii) drafted a process for out-of-court settlement of investor grievances, and (iii) identified the required modifications of law and regulations to establish a grievance redress mechanism. 3f. MOE and MOF (i) published Standard & Poor’s and Moody’s sovereign credit ratings; and (ii) commissioned and budgeted for annual sovereign ratings update by internationally recognized agencies, from 2016 onward. 3g. AVE (i) established occupational standards for at least one skill each from the three priority occupations identified by IPA; (ii) approved, through relevant sector councils (having appropriate industry representation), those standards; and (iii) signed, through TVET schools, internship agreements, for at least 50 TVET students (25% of whom are women). By October 2017: 3a. MOE: (i) approved a guidance manual each for the apparel and agriculture sectors (in which women are predominantly employed) (Baseline 2016: 0); and (ii) piloted the guidance manuals with at least one apparel and one agriculture exporter (Baseline 2016: 0). 3b. The government: (i) modernized and operationalized three laboratories (Baseline 2016: not operationalized); and (ii) increased skills of at least 30 officials (including 20% women) from two key state bodies—sanitary epidemiological inspection and veterinary inspection—in HACCP (Baseline 2016: 0).

March 2014. As of June 2019, women represent 31% of the technical staff of the agency. Achieved. Achieved. On 9 December 2015, Moody’s issued its sovereign credit rating for the Kyrgyz Republic (B2/Stable). On 10 December 2015, Standard & Poor’s issued its rating of B/Stable for the Kyrgyz Republic. Moody’s reaffirmed its B2/Stable rating for 2016–2019. (The government decided to discontinue working with Standard & Poor’s due to budget constraints.) Achieved. Tripartite internship agreements between the lyceum, students, and employers were signed. Every year, at least 20,000 students, of whom 37% were girls/women, were selected to undertake internships. Achieved. (i) Guidance manuals on access to EU markets for agriculture and apparel sectors were elaborated and approved by IPA. (ii) the guidance manuals were disseminated by IPA among potential exporters. Achieved. Currently, 4 phytosanitary laboratories and 6 veterinary laboratories are modernized, accredited, and functioning. In 2016, with the assistance of IFC and GIZ, representatives of the Department for Disease Prevention and State Sanitary-Epidemiological Surveillance, and the State Inspection for Veterinary and Phytosanitary Safety were trained in all regions of the country. In total, 62 people were trained (no data is available on the number of female participants).

20 Appendix 1

3c. Government ratified the TFA and operationalized the National Trade. Facilitation Committee as per the TFA requirements (Baseline 2016: not ratified). 3d. MOE: (i) approved the plan of action to institutionalize an improved IGM for out-of-court investor dispute settlement (Baseline 2016: not approved); and (ii) resolved at least two investor-related grievance cases in its current portfolio (Baseline 2016: 0) 3e. Government: (i) commissioned and obtained from Moody’s Investor Services its SCR update for 2017; and (ii) made budget allocations for rating reviews in 2018 and 2019 (Baseline 2016: first SCR update or review). 3f. AVE, in coordination with IPA (i) developed with TVET institutes and export industries, market-oriented training modules in at least three skills each from the textile, agriculture and food processing, and manufacturing sectors; and (ii) increased the skills of at least 100 students (including at least 45% women) for the September 2016–May 2017 academic year under the internship program of the TVET institutes.

On 12 December 2018, a seminar on the topic, “Risk-oriented approach in the inspection of food enterprises, in matters of HACCP, GMP, GHP” was held at the Center for Standardization and Metrology (CSM) under the Ministry of Economy of the Kyrgyz Republic. This seminar was held jointly by the CSM and ADB in the Kyrgyz Republic, as part of the project “Technical Assistance for the Development of Regional Capacity to Strengthen the Implementation of International Food Safety Standards in the Agricultural Production Chain in Member Countries of the Central Asian Regional Economic Cooperation” funded by ADB in the Kyrgyz Republic. 30 participants, including 15 women (50%), from various state bodies attended the training. Achieved. The TFA was ratified on 6 December 2016 and the National Trade Facilitation Committee was operationalized.o Achieved. (i) An Investor Grievance Mechanism was established and operationalized by MOE and IPA, through the adoption of relevant Orders. (ii) IPA resolved 2 investor-related grievances in its current portfolio. The first was related to the ski base “ZIL”, while the second was related to a Kyrgyz–Chinese company producing cement. Achieved. Moody’s reaffirmed its sovereign credit rating for the Kyrgyz Republic of B2/stable in 2017, 2018, and 2019. Achieved. 17,503 students, including 8,646 women (49.4%), were trained in 2016–2018 in the fields of food industry, light industry, construction, and agriculture. The training and internship programs lasted from one to six months. According to the Ministry of Education, 71% of those who underwent internships were able to get jobs within 1 year after graduation.

4. Transparency and ease of doing business increased

By March 2015: Full e-procurement System operationalized in at least 20 government entities By June 2016: 4a. MOF approved the regulation on e-procurement system operation and

Achieved. Achieved.

Appendix 1 21

maintenance and concluded related employment contracts and budgets. 4b. Government reduced the administrative burdens for small business by (i) exempting from value-added tax businesses with annual turnover of up to Som8 million, (ii) waiving sales tax on exports and on all noncash transactions, (iii) approving a simplified tax declaration form for individuals, and (iv) simplifying tax reporting for individual entrepreneurs to a single agency. By October 2017: 4a. The government allocated (i) Som4 million in the 2017 annual budget to ensure continued use and maintenance of the e-procurement system (Baseline 2016: 0); and (ii) at least Som8 million to develop additional e-procurement modules (Baseline 2016: 0). 4b. The government: (i) decreased the single tax for SMEs (35% of which are owned or managed by women) making cashless payments from 4% to 2% and 6% to 3% (depending on the type of activity) and (ii) approved amendments to the Tax Code (a) to set time limitations for resolution of taxpayer grievances, and (b) to relax the time limitations on the validity of voluntary tax patents.

Achieved. Achieved. (i) The MOF allocated in the annual budget of the State Procurement Department Som4 million for continued utilization and maintenance of the e-procurement system and (ii) Som8 million was allocated according to Government Decree No.132-p dated 4 April 2018 in the framework of the Taza-Koom digital transformation program for the revision and modernization of the public procurement web portal. Achieved. Government has made amendments to the Tax Code: Law of 22 December 2016, No. 212; and Law of 20 February 2017, No. 27. The number of registered women individual entrepreneurs increased from 94,987 (34% of the total of 276,740 of men- and women-owned enterprises) in 2015 to 110,141 (35% of the total of 315,912 men- and women-owned enterprises) in 2018.

ADB = Asian Development Bank, ADF = Asian Development Fund, AVE = Agency for Vocational Education, EEU = Eurasian Economic Union, EU = European Union, GDP = gross domestic product, HACCP = hazard analysis and critical control points, IGM = Investor Grievance Mechanism, IPA = Investment Promotion Agency, IPC = Interbank Processing Center, IPG = Internet Payment Gateway, MOE = Ministry of Economy, MOF = Ministry of Finance, MOH = Ministry of Health, NBKR = National Bank of the Kyrgyz Republic, PDSF = Project Development Support Facility, PPP = public–private partnership, SCR = sovereign credit rating, SGF = State Guarantee Fund, SMEs = small and medium-sized enterprises, TFA = Trade Facilitation Agreement, TVET = technical and vocational education and training. a Government of the Kyrgyz Republic, National Council for Sustainable Development of the Kyrgyz Republic. 2013.

National Sustainable Development Strategy for the Kyrgyz Republic for the Period of 2013–2017. Bishkek; and Government of the Kyrgyz Republic, Ministry of Economy. 2015. Private Sector Development Program 2015–2017. Bishkek.

b 50% under subprogram 1. c Government of the Kyrgyz Republic. 2016. Program on Financial Literacy for 2016–2020. Bishkek.

http://finsabat.kg/admin/laravelfilemanager/files/shares/documents/Program/Programma_povysheniya_finansovoi_gramotnosti.pdf.

d Government of the Kyrgyz Republic, State Guarantee Fund. 2016. Concept on guarantee fund development till 2020. Bishkek. http://gf.kg/about/dokumenty-fonda/kontseptsiya-razvitiya/.

e PPP unit of the Investment Promotion Agency, Government of the Kyrgyz Republic, Ministry of Economy. First

Training on APMG certification. Bishkek. http://www.ppp.gov.kg/ru/news/full/144. f The five additional projects will be chosen from among the following projects: (i) Uzgen Bypass Road Project,

(ii) Angiography Project, (iii) Solid Waste Management Project, (iv) Customs and Logistics Complex Project, (v) On

22 Appendix 1

Street Parking Project, (vi) Public Transportation Project, and (vii) Development of Pre-school Organizations (Kindergartens) Project.

g PPP unit of the Investment Promotion Agency, Government of the Kyrgyz Republic, Ministry of Economy. PPP strategy. Bishkek. http://www.ppp.gov.kg/en/regulatory-framework/ppp-strategy/.

h Government of the Kyrgyz Republic. 2016. Program on PPP development for 2016–2021. Bishkek. http://cbd.minjust.gov.kg/act/view/ru-ru/98559.

i Government of the Kyrgyz Republic. 2016. Law No. 88 of 22 June 2016 on amendments to the law on Private Public

Partnerships in the Kyrgyz Republic. Bishkek. http://cbd.minjust.gov.kg/act/view/ru-ru/111367?cl=ru-ru. j PPP unit of the Investment Promotion Agency, Government of the Kyrgyz Republic, Ministry of Economy. Summary

on PPP project on installment of computer tomography. Bishkek. http://www.ppp.gov.kg/upload/file/tomography.pdf. k Government of the Kyrgyz Republic. 2017. Development strategy “Sports for Kyrgyzstan 2018–2022’. Bishkek.

http://cbd.minjust.gov.kg/act/view/ru-ru/11557. l PPP unit of the Ministry of Finance. 2019. Summary of potential PPP projects. Bishkek. http://www.ppp.gov.kg/

ru/proekty2/. m 2017–2020. Bishkek. http://www.gorkenesh.kg/ru/the-rulings-of-the-bgk/27-sozyv/2882-no-28-approving-the-

programme-of-socio-economic-development-of-the-city-of-bishkek-on-the-2017-2020-years-of-the-enabling-environment-city.html.

n Government of the Kyrgyz Republic. 2015. Export Development Plan for 2015–2017. Bishkek. o World Trade Organization. 2016. Kyrgyz Republic–Trade Facilitation Agreement Ratified: December 6, 2016.

Geneva. https://tfafacility.org/kyrgyz-republic. Source: Asian Development Bank.

Appendix 2 23

DISBURSEMENT OF ADB LOAN AND GRANT PROCEEDS

Table A2.1: Annual and Cumulative Disbursement of ADB Loan Proceeds

Annual Disbursement Cumulative Disbursement

Year Amount ($ million) % of Total

Amount ($ million) % of Total

2015 (SP1-G0432) 20.0 28.9 20.0 28.9

2016 (SP2-G0487) 12.5 18.1 32.5 47.0

2016 (SP2-L3410) 12.0 17.4 44.5 64.4

2017 (SP3-G0563) 24.6 35.6 69.1 100.0

Total 69.1 100.0 69.1 100.0

ADB = Asian Development Bank, G = grant, L = loan, SP = subprogram. Source: Asian Development Bank.

24 Appendix 3

CHRONOLOGY OF MAIN EVENTS Date Event

27 May 2014 to 4 June 2014 Reconnaissance Mission for Subprogram 1 21 July 2014 CDTA Strengthening the Enabling Environment for Public-Private

Partnerships (TA 8688-KGZ) approval. CDTA amount is $1.0 million. 27 August 2014 TA 8688-KGZ effectivity 23 September 2014 Concept Paper and PPTA Second Investment Climate Improvement

Program (TA 8721-KGZ) approval. PPTA amount is $600,000. 3 October 2014 TA 8721-KGZ effectivity 4 February–17 February 2015 Fact-Finding for Subprogram 1 17 June 2015 Board Approval for Subprogram 1 17 June 2015 Signing of Grant Agreement (G0432-KGZ) 30 July 2015 Effectivity of Subprogram 1 3 August 2015 Disbursement of $20.0 million grant for Subprogram 1 6 October 2015 Subprogram 1 financially closed 22 February–4 March 2016 Reconnaissance Mission for Subprogram 2 5 April 2016 Additional financing of $500,000 approved for TA 8721-KGZ 21 April–30 April 2016 Fact-Finding for Subprogram 2 29 July 2016 Board Approval for Subprogram 2 12 August 2016 Signing of Grant and Loan Agreements (G0432-KGZ and L3410-KGZ) 13 December 2016 Effectivity of Subprogram 2 16 December 2016 Disbursement of $12.5 million grant and $12.0 million loan for

Subprogram 2 30 December 2016 Subprogram 2 financially closed 21 August 2017 Fact-Finding for Subprogram 3 18 December 2017 Board approval for Subprogram 3 18 December 2017 Signing of Grant Agreement (G0563-KGZ) 22 December 2017 Effectivity of Subprogram 3 26 December 2017 Disbursement of $24,592,040 for Subprogram 3. A total of $407,960

was deducted from the grant amount of $25 million, in accordance with the provision of the grant agreement regarding disallowed items from G0121-KGZ.

28 February 2018 Financial closing of TA 8688-KGZ, with total disbursement of $605,124 13 March 2018 Financial closing of TA 8721-KGZ, with total disbursement of $712,252 2 November 2018 Subprogram 3 financially closed CDTA = capacity development technical assistance, KGZ = Kyrgyz Republic, PPTA = project preparatory technical assistance, TA = technical assistance. Source: Asian Development Bank.

Appendix 4 25

STATUS OF COMPLIANCE WITH COVENANTS IN GRANT AND LOAN AGREEMENTS

Covenant

Reference in Grant/Loan Agreement

Status of Compliance

Section 3.01. The Recipient shall cause the proceeds of the Grant to be applied to the financing and expenditures on the Program in accordance with the provision of this Grant Agreement.

Grant Agreement, Grant 0432-KGZ (SF), Article III

Complied with.

Section 3.02. The proceeds of the Grant shall be withdrawn in accordance with the provision of Schedule 2 to the Grant Agreement, as such Schedule may be amended from time to time by agreement between Recipient and ADB.

Grant Agreement, Grant 0432-KGZ (SF), Article III

Complied with.

Section 3.03. Withdrawals from the Grant Account shall be made only on account of expenditures relating to Eligible Items which: (a) are produced in, and are supplied from, such member countries of ADB as shall have been specified by ADB from time to time as eligible sources of procurement; and (b) meet such eligibility requirements as shall have been specified by ADB from time to time.

Grant Agreement, Grant 0432-KGZ (SF), Article III

Complied with.

Section 4.01. In the carrying out of the Program, the Recipient shall perform, or cause to be performed all obligations set forth in Schedule 3 to this Grant Agreement.

Grant Agreement, Grant 0432-KGZ (SF), Article IV

Complied with.

Section 4.02. (a) The Recipient shall maintain, or cause to be maintained, records and documents adequate to identify the Eligible Items financed out of the proceeds of the Grant and to record the progress of the Program. (b) The Recipient shall enable ADB’s representatives to inspect any relevant records and documents referred to in paragraph (a) of this Section.

Grant Agreement, Grant 0432-KGZ (SF), Article IV

Complied with.

Section 4.03. As part of the reports and information referred to in Section 6.04 of the Grant Regulations, the Recipient shall furnish, or cause to be furnished, to ADB all such reports and information as ADB shall reasonably request concerning the implementation of the Program, including the accomplishment of the targets and carrying out of the actions set out in the Policy Letter.

Grant Agreement, Grant 0432-KGZ (SF), Article IV

Complied with. Detailed status and progress of compliance with the Policy Actions are in Appendix 8.

Implementation Arrangements. 1. MOE shall be the program Executing Agency and MOE, MOF and NBKR will be the implementing agencies for the Program. MOE shall oversee and coordinate the carrying out of policy actions under the Program.

Grant Agreement, Grant 0432-KGZ (SF), Schedule 3

Complied with.

Policy Actions and Dialogue. 2. The Recipient shall ensure that all policy actions adopted under the Program, as set forth in the Policy Letter and the Policy Matrix, continue to be in effect for the duration of the Programmatic Approach. The Recipient and ADB shall also work closely on achieving compliance with the indicative policy actions for the second and third subprograms of the Programmatic Approach. Such collaboration shall take place on a regular basis from at least 12–18 months prior to the processing of these subprograms and include agreement on clear milestones and timeframes for achieving compliance with the indicative policy actions. In the event an indicative policy action requires revision, details of the proposed revision shall be agreed as well. The Recipient acknowledges that any further subprogram for the Programmatic Approach is subject to approval of ADB’s Board of Directors.

Grant Agreement, Grant 0432-KGZ (SF), Schedule 3

Complied with.

26 Appendix 4

Covenant

Reference in Grant/Loan Agreement

Status of Compliance

Policy Actions and Dialogue. 3. The Recipient shall keep ADB informed of policy discussions with other multilateral and bilateral aid agencies that may have implications for the implementation of the Program and shall provide ADB with an opportunity to comment on any resulting policy proposals. The Recipient shall take into account ADB’s views before finalizing and implementing any such proposal.

Grant Agreement, Grant 0432-KGZ (SF), Schedule 3

Complied with.

Use of Counterpart Funds. 4. The Recipient shall ensure that the counterpart funds are used to finance the implementation of certain programs and activities consistent with the objectives of the Program.

Grant Agreement, Grant 0432-KGZ (SF), Schedule 3

Complied with.

Governance and Anticorruption. 5. The Recipient, the Program Executing Agency and the implementing agencies shall: (a) comply with ADB's Anticorruption Policy (1998, as amended to date) and acknowledge that ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practice relating to the Program; and (b) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation.

Grant Agreement, Grant 0432-KGZ (SF), Schedule 3

Complied with.

Section 3.01. The Beneficiary shall cause the proceeds of the Loan and the Grant to be applied to the financing of expenditures on the Program in accordance with the provisions of this Financing Agreement.

Financing Agreement, Loan 3410-KGZ (SF) and Grant 0487-KGZ (SF), Article

III

Complied with.

Section 3.02. The proceeds of the Loan and the Grant shall be withdrawn from the Loan Account and the Grant account in accordance with the provisions of Schedule 3 to this Financing Agreement, as such Schedule may be amended from time to time by agreement between the Beneficiary and ADB.

Financing Agreement, Loan 3410-KGZ (SF) and Grant 0487-KGZ (SF), Article

III

Complied with.

Section 4.01. In the carrying out of the Program, the Beneficiary shall perform, or cause to be performed all obligations set forth in Schedule 4 to this Financing Agreement.

Financing Agreement, Loan 3410-KGZ (SF) and Grant 0487-KGZ (SF), Article

IV

Complied with.

Section 4.02. As part of the reports and information referred to in Section 6.05 of the Loan Regulations and Section 6.04 of the Grant Regulations, the Beneficiary shall furnish, or cause to be furnished, to ADB all such reports and information as ADB shall reasonably request concerning (i) the Counterpart Funds and the use of thereof; and (ii) the implementation of the Program, including the accomplishment of the targets and carrying out of the actions set out in the Policy Letter.

Financing Agreement, Loan 3410-KGZ (SF) and Grant 0487-KGZ (SF), Article

IV

Complied with. Detailed status and progress of compliance with the Policy Actions are in Appendix 8.

Implementation Arrangements. 1. MOE shall be the program Executing Agency and MOE, MOF and NBKR will be the implementing agencies for the Program. MOE shall oversee and coordinate the carrying out of policy actions under the Program.

Financing Agreement, Loan 3410-KGZ (SF) and Grant 0487-

KGZ (SF), Schedule 4

Complied with.

Policy Actions and Dialogue. 2. The Beneficiary shall ensure that all policy actions adopted under the Program, as set forth in the Policy Letter and the Policy Matrix, continue to be in effect for the duration of the Programmatic Approach. The Beneficiary and ADB shall also work closely

Financing Agreement, Loan 3410-KGZ (SF) and Grant 0487-

Complied with.

Appendix 4 27

Covenant

Reference in Grant/Loan Agreement

Status of Compliance

on achieving compliance with the indicative policy actions for the subsequent subprogram of the programmatic Approach. Such collaboration shall take place on a regular basis from at least 12-18 months prior to the processing of these subprogram and include agreement on clear milestones and timeframes for achieving compliance with the indicative policy actions. In the event an indicative policy action requires revision, details of the proposed revision shall be agreed as well. The Beneficiary acknowledges that any further subprogram for the Programmatic Approach is subject to approval of ADB’s Board of Directors.

KGZ (SF), Schedule 4

Policy Actions and Dialogue. 3. The Beneficiary shall keep ADB informed of policy discussions with other multilateral and bilateral aid agencies that may have implications for the implementation of the Program and shall provide ADB with an opportunity to comment on any resulting policy proposals. The Beneficiary shall take into account ADB’s views before finalizing and implementing any such proposal.

Financing Agreement, Loan 3410-KGZ (SF) and Grant 0487-

KGZ (SF), Schedule 4

Complied with.

Use of Counterpart Funds. 4. The Beneficiary shall ensure that the Counterpart Funds are used to finance the implementation of certain programs and activities consistent with the objectives of the Program.

Financing Agreement, Loan 3410-KGZ (SF) and Grant 0487-

KGZ (SF), Schedule 4

Complied with.

Governance and Anticorruption. 5. The Beneficiary, the Program Executing Agency and the implementing agencies shall: (a) comply with ADB's Anticorruption Policy (1998, as amended to date) and acknowledge that ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practice relating to the Program; and (b) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation.

Financing Agreement, Loan 3410-KGZ (SF) and Grant 0487-

KGZ (SF), Schedule 4

Complied with.

Section 3.01. The Beneficiary shall cause the proceeds of the Grant to be applied to the financing and expenditures on the Program in accordance with the provision of this Grant Agreement.

Grant Agreement, Grant 0563-KGZ (SF), Article III

Complied with.

Section 3.02. The proceeds of the Grant shall be withdrawn in accordance with the provision of Schedule 2 to the Grant Agreement, as such Schedule may be amended from time to time by agreement between Beneficiary and ADB.

Grant Agreement, Grant 0563-KGZ (SF), Article III

Complied with.

Section 4.01. In the carrying out of the Program, the Beneficiary shall perform, or cause to be performed all obligations set forth in Schedule 3 to this Grant Agreement.

Grant Agreement, Grant 0563-KGZ (SF), Article IV

Complied with.

Section 4.02. As part of the reports and information referred to in Section 6.04 of the Grant Regulations, the Beneficiary shall furnish, or cause to be furnished, to ADB all such reports and information as ADB shall reasonably request concerning (a) the Counterpart Funds and the use of thereof; and (b) the implementation of the Program, including the accomplishment of the targets and carrying out of the actions set out in the Policy Letter.

Grant Agreement, Grant 0563-KGZ (SF), Article IV

Complied with. Detailed status and progress of compliance with the Policy Actions are in Appendix 8.

Implementation Arrangements. 1. MOE shall be the program Executing Agency and MOE, MOF and NBKR will be the implementing agencies. MOE shall oversee and coordinate the carrying out of policy actions under the Program.

Grant Agreement, Grant 0563-KGZ (SF), Schedule 3

Complied with.

28 Appendix 4

Covenant

Reference in Grant/Loan Agreement

Status of Compliance

Implementation Arrangements. 2. The Recipient shall ensure that the Program Executing Agency and the Program Implementing Agencies are adequately staffed and provided with the necessary financial, technical and other resources to perform their respective functions and responsibilities under the Programmatic Approach.

Grant Agreement, Grant 0563-KGZ (SF), Schedule 3

Complied with.

Policy Actions and Dialogue. 3. The Recipient shall ensure that all policy actions adopted under the Program, as set forth in the Policy Letter and the Policy Matrix, continue to be in effect for the duration of the Programmatic Approach.

Grant Agreement, Grant 0563-KGZ (SF), Schedule 3

Complied with.

Policy Actions and Dialogue. 4. The Recipient shall keep ADB informed of policy discussions with other multilateral and bilateral aid agencies that may have implications for the implementation of the Program and shall provide ADB with an opportunity to comment on any resulting proposals. The Recipient shall take into account ADB’s views before finalizing and implementing any such proposal.

Grant Agreement, Grant 0563-KGZ (SF), Schedule 3

Complied with.

Use of Counterpart Funds. 5. The Recipient shall ensure that the counterpart funds are used to finance the implementation of certain programs and activities consistent with the objectives of the Program.

Grant Agreement, Grant 0563-KGZ (SF), Schedule 3

Complied with.

Governance and Anticorruption. 5. The Recipient, the Program Executing Agency and the implementing agencies shall: (a) comply with ADB's Anticorruption Policy (1998, as amended to date) and acknowledge that ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practice relating to the Program; and (b) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation.

Grant Agreement, Grant 0563-KGZ (SF), Schedule 3

Complied with.

Monitoring and Review. 7. The Recipient has (a) in consultation and agreement with ADB prepared an action plan to strengthen the internal control environment and capacity of the Program Implementing Agencies and other concerned ministries and agencies of the Recipient for effective execution, procurement, financial management, monitoring and implementation of ADB-financed projects and programs; and (b) agreed to fully implement the action plan prior to the Grant Closing Date.

Grant Agreement, Grant 0563-KGZ (SF), Schedule 3

Complied with.

Monitoring and Review. 8. The Recipient shall use its consultative mechanisms to facilitate dialogue among relevant stakeholders to evaluate benefits of all policy actions adopted under the Programmatic Approach and to identify future areas of private sector development.

Grant Agreement, Grant 0563-KGZ (SF), Schedule 3

Complied with.

ADB = Asian Development Bank, KGZ = Kyrgyz Republic, MOE = Ministry of Economy, MOF = Ministry of Finance, NBKR = National Bank of the Kyrgyz Republic, SF = Special Funds.

Appendix 5 29

COMPLETION REPORT FOR TA 8688: STRENGTHENING THE ENABLING ENVIRONMENT FOR PUBLIC–PRIVATE PARTNERSHIPS

30 Appendix 5

Appendix 5 31

32 Appendix 5

Appendix 6 33

COMPLETION REPORT FOR TA 8297: IMPLEMENTING THE E-PROCUREMENT SYSTEM

34 Appendix 6

Appendix 6 35

36 Appendix 6

Appendix 7 37

GENDER EQUALITY RESULTS AND ACHIEVEMENTS

I. NARRATIVE 1. An improved business climate will help create new enterprises and support existing businesses to grow and innovate. This will create more jobs for women and men, including the poor and rural workers. Greater involvement of the private sector, including through public–private partnerships (PPP) is expected to improve infrastructure and public services such as transport and health services which will help promote the welfare and well-being of people, including the poor and vulnerable groups.

GENDER ACTIONS 2. The Second Investment Climate Improvement Program was categorized as effective gender mainstreaming (EGM) and aimed to address some key issues that affect women in accessing finance and their participation as employees in policy, trade, and investment bodies. Benefits from the policy actions were expected to trickle down to women-managed/owned enterprises, where women constitute 30% of the total. 3. The program had 19 gender-related policy actions. Among the key gender-related actions were the following:

a. Implementation of at least one PPP project (with gender, social, and environment assessments) at the outcome level.

b. Establishment of regulations for e-money, operators of payment systems, and the remote delivery of financial services to ensure the launch of mobile financial services that will benefit the under-banked (rural population, poor people, women, and informal sector workers).

c. Operationalization of the State Guarantee Fund (SGF) (with at least 25% female technical staff) by issuing 33 guarantees amounting to $1.05 million, catalyzing $5.5 million in bank lending for small and medium-sized enterprises (SMEs) in priority sectors (exports and agriculture), at least 35% of which are women-owned and/or managed.

d. Development of a draft health sector strategy by the Ministry of Health (MOH) that includes a PPP project and at least one gender and social development project that directly benefits the poor, youth, and women.

e. Training of at least 100 students (of which at least 45% are women) by the Agency for Vocational Education (AVE) under the internship program of the TVET institutes.

GENDER ACHIEVEMENTS

4. At project completion, 18 (95%) actions were completed. Among the key gender-related achievements were the following:

a. Implementation of a PPP project with gender, social, and environmental assessments. The country was able to forge its first PPP agreement between the MOH of the Kyrgyz Republic and Fresenius Medical Care Deutschland GmbH (Germany) in August 2017, which was selected as the private partner under the PPP project on the organization of hemodialysis services in Bishkek, Osh, and Jalal-Abad. The report on the “Feasibility Study for Dialysis Services in Bishkek, Osh, and Jalal-Abad” included an assessment of the potential environmental and social impact of the project.

38 Appendix 7

b. Establishment of regulations for e-money, operators of payment systems, and the remote delivery of financial services that facilitated women’s financial transactions. From 2014 to 2017, the percentage of women making or receiving digital payments has increased by 2.3 times (from 15.1% in 2014 to 35% in 2017); the increase for men was 2.7 times (from 13.7% in 2014 to 37.2% in 2017).

c. Operationalization of the State Guarantee Fund (SGF). By end-May 2019, SGF supported 845 entrepreneurs, including 239 women entrepreneurs (28%). Since inception till May 2019, SGF issued 359 guarantees for SMEs in priority sectors—48 for export-oriented businesses and 311 guarantees for agriculture. There were 88 women-owned or managed SMEs in priority sectors that were provided with guarantees. This exceeded the target of 12 loans to be issued to women entrepreneurs involved in priority sectors by October 2017.

d. Development of a draft health sector strategy by the MOH including a PPP project and 23 gender and social development projects. The investment program in the health sector for 2016–2025 was adopted by the government on 30 June 2016 and includes several investment projects that directly benefit the poor, youth, and women. There are 23 priority projects in the program, of which seven (30%) will benefit women and children directly. These projects include: the improvement of medical services in the National Center for Protection of Motherhood and Childhood, modernization and provision of equipment for the National Center for Protection of Motherhood and Childhood, and measures to improve the health of children and women of reproductive age and decrease maternal and child mortality.

e. Training of a total of 17,503 students (of whom 8,646 [49.4%] were women) including 477 persons with disabilities in 2016–2018. Most of them trained in the food industry, light industry, construction, and agriculture. The training and internship programs lasted from 1 to 6 months. According to the Ministry of Education, 71% of those who completed internships were able to get jobs within 1 year after graduation.

II. LESSONS LEARNED AND RECOMMENDATIONS

Lessons Learned

5. Among the factors that helped make the project gender-responsive and achieve gender

equality results were the following: a. Engagement of a qualified short-term gender specialist. The gender specialist

helped identify gender issues relevant to the project as well as gender policy actions to promote greater participation of women owned/managed enterprises and provide opportunities for employment of women in government entities with mandates to improve the enabling environment for enterprise development.

b. Inclusion of targets for the gender policy actions. Most of the policy actions had specific gender targets (for women’s participation, benefits for women). Including targets, especially in the DMF, helped ensure that government delivered on its commitment to carry out the gender actions and that these benefited a specified number of women.

c. Integration of reporting on gender-related actions in core documents of the government. Inclusion of reporting on gender-related actions in the Development Policy Letter and ADB documents such as back-to-office reports, aide memoires, mid-term review reports, and TA consultants’ reports helps ensure monitoring and accountability.

Appendix 7 39

Recommendations

6. The following actions are proposed to strengthen the implementation of gender-related

actions in future similar programs or projects:

i. Include the responsibility for integrating gender equality actions in the program/ project in the terms of reference (TORs) of project staff responsible for different policy areas, so that all possible opportunities for women’s participation in and benefit from the project will be considered.

ii. Engage a project gender specialist, as s/he plays a crucial role in assisting in the implementation of gender-related actions including (i) building the capacity of government partners to understand the importance of gender-related actions, and (ii) developing the capabilities of implementing agencies in carrying out the gender-related actions.

iii. Establish and implement a good monitoring and reporting mechanism that will include collection and analysis of sex-disaggregated data and regular reporting. ADB should regularly follow up with government partners regarding regular submission of sex-disaggregated data and relevant gender data on the implementation of actions and targets.

iv. ADB review missions should engage the project implementers in dialogues to discuss the relevance of the gender-related actions and build support for the project. The review missions should also regularly monitor the progress and results achieved for women. In addition, it should discuss with project implementors the challenges in implementing gender-related actions, as well as solutions to address these.

v. Project staff who work on PPPs should be provided with gender awareness workshops to help them have a better understanding and appreciation of the importance and value-addition of incorporating gender elements in PPP project development.

Sources: 1. 70.7% of graduates of vocational schools find a job in the first year after training. Ministry of Education.

http://bilim.akipress.org/ru/news:1429843/?from=bilim&place=cat. 2. AVE progress in Second Investment Climate Improvement Program, AVE document. 3. Feasibility study for the PPP Project “Organization of partnerships to provide hemodialysis services in the

cities of Bishkek, Osh, and Jalal-Abad, Ministry of Health of the Kyrgyz Republic. 4. Final Report, TA-8688: “Strengthening the Enabling Environment for Public–Private Partnerships” (JFPR). 5. Investment Program in Healthcare Sector for 2016–2025, Government of the Kyrgyz Republic. 6. Letter from the State Investment Promotion Agency, dated 28 June 2019. 7. List of current PPP projects, the webpage of PPP unit under Investment Promotion Agency:

http://ppp.gov.kg/upload/doc/Laboratories.pdf. 8. Consultant’s Report on the 2015 National PPP Training, TA-8688, “Strengthening the Enabling Environment

for Public Private Partnerships.” 9. Reports and Recommendations of the President for Subprograms 1, 2, and 3 of the Second Investment

Climate Improvement Program for the Kyrgyz Republic. 10. The Concept of Guarantee Funds Development till 2020, approved by Government Resolution No. 325 on 15

June 2016 http://gf.kg/about/dokumenty-fonda/kontseptsiya-razvitiya/. 11. Law of the Kyrgyz Republic on Warehouse and Warehouse Receipts, a database of the normative and legal

acts, Ministry of Justice http://cbd.minjust.gov.kg/act/view/ru-ru/111772. 12. State Guarantee Fund annual reports for 2017 and 2018 http://gf.kg/about/godovoj-otchet/godovoj-otchet-

oao-garantijnyj-fond-2017g/ http://gf.kg/about/godovoj-otchet/godovoj-otchet-oao-garantijnyj-fond-2018g/. 13. Ministry of Economy of the Kyrgyz Republic. Manual on Export of Goods to EU Markets: Textile Industry

(Clothes) http://mineconom.gov.kg/froala/uploads/file/48c751c6057d54f1331bf7a746e013c424d70348.pdf.

40 Appendix 7

GENDER ACHIEVEMENTS MATRIXa Total no. of activities: 19 Activities completed: 18 (95%) (Thematic Cluster Division (SDTC) standard for successful rating: 80%) Total no. of targets: 11 Targets achieved: 9 (81%) (Thematic Cluster Division (SDTC) standard for successful rating: 80%)

Outcome Subprogram 1b

(Completed by June 2015) Subprogram 2c

(Completed by June 2016) Subprogram 3d

(Completed by October 2018) Achievements at

Completion

Output 1: Financial deepening and access to finance increased

1.1 Support the structured development of electronic payments and mobile financial services

Activity 13 Target 6 1.1.1 To commence mobile financial services, the Information Technology and Communications Committee of the Government to: … (ii) roll out the Internet Payment Gateway (IPG) to the State Tax Service, State Service of Intellectual Property and Innovation, Mandatory Health Insurance Fund, Higher Attestation Commission of the Kyrgyz Republic, and the State Communications Agency, and train 300 specialists (50% women) of these agencies/organizations. DMF Output 1a Indicator/ Target (by October 2017) Information Technology and Communications Committee of the government…. (iii) increased knowledge of at least 300 specialists (of which 50% are women) in IPG services (baseline: 2016: not implemented)

No data is available to determine whether the activity on training of 300 specialists (50% women) was done/completed and if the target was achieved.

Activity 8 1.1.2 National Bank of the Kyrgyz Republic (NBKR) to establish regulations for e-money, operators of payment systems and the remote delivery of financial services to benefit the underbanked

Activity 8 completed. The regulations were established for e-money, operators of payment systems, and remote delivery of financial services.

Appendix 7 41

Outcome Subprogram 1b

(Completed by June 2015) Subprogram 2c

(Completed by June 2016) Subprogram 3d

(Completed by October 2018) Achievements at

Completion

(rural population, poor, women, and informal sector) DMF Output 1b indicator/target by June 2016 NBKR established regulations for e-money, operators of payment systems, and the remote delivery of financial services to ensure the launch of mobile financial services that will benefit the under-banked (rural population, poor people, women, and informal sector) by June 2016

G20 Financial Inclusion data shows that there is an increase in application of digital payments. From 2014 to 2017 digital payments made or received by women have increased 2.3 times (from 15.1% in 2014 to 35% in 2017),e while the figure for men was 2.7 times (from 13.7% in 2014 to 37.2% in 2017). According to the National Bank, the number of e-wallets increased almost twice within a year (from 672 thousand in 2018 to 1.209 million in 2019)f

1.2 Reduce the costs and risks of lending to small and medium-sized enterprises (SMEs)

Activity 1 1.2.1 Ministry of Economy (MOE) to approve concept paper (i) including business case for a risk sharing facility to support SMEs, including women-owned and managed SMEs with potential for growth in line with the national Export Development Program; and (ii) for a commodities exchange

Activity 9 1.2.1 Government to approve the establishment of a guarantee fund for SMEs with at least $1 million capital allocated by the Republican Budget 2016, with at least 25% of the benefiting SMEs being women-owned or managed. DMF Output 1d indicator/target Government approved the establishment of a state (national) guarantee fund from SMEs with at least $1 million capital allocated by the 2016 budget, with at least 20% of the benefiting SMEs, being majority owned by women by June 2016.

Activity 14 Target 7 and 8 1.2.1 Government to operationalize the State Guarantee Fund (SGF) (with at least 25% female technical staff) by issuing 33 guarantees amounting to $1.05 million catalyzing $5.5 million in bank lending for SMEs in priority sectors (exports and agriculture), at least 35% of which are women owned and/or managed. DMF Output 1b Indicator/ Target SGF with at least 25% female technical staff (Baseline: 0), issued at least 33 guarantees for SMEs in priority sectors (exports and agriculture) at least 35% of which are owned and/or managed by women (Baseline: 0 in 2016)g

Activity 1 Activity completed. The concept paper was approved through Government Resolution No. 235 on 15 June 2016. Activity 9 Activity completed The Government approved the establishment of SGF through Resolution No. 288-p dated 23 June 2016, “On establishment of the Guarantee Fund”. Activity 14 Activity completed Target 7 – not achieved Target 8 – achieved The SGF employs 9 female technical staff (or 18% as against target of 25%) of 50 total employed.

42 Appendix 7

Outcome Subprogram 1b

(Completed by June 2015) Subprogram 2c

(Completed by June 2016) Subprogram 3d

(Completed by October 2018) Achievements at

Completion

By end May 2019, a total of 845 entrepreneurs were supported by the SGF, of whom 239 (28%) were women entrepreneurs. As of May 2019, 359 guarantees for SMEsh in priority sectors were provided—48 for export-oriented businesses and 311 guarantees for agriculture. Of the 48 export-oriented enterprises, 16 guarantees were provided to women owned/led businesses. Of the 311 agriculture-related SMEs provided with guarantees, 72 are women led/owned enterprises. Overall, there were 88 women-owned/managed SMEs in priority sectors that were provided with guarantees. This exceeded the target of 12 (35% of 33 SMEs in the priority sector provided with guarantees).

1.3 Strengthen prudential supervision and conditions for financial sector deepening

Output 2: Comprehensive public-private partnerships program fostered

2.1 Strengthen policy, institutional and legal framework

Activity 2 Target 1 2.1.1 MOE to complete inter-ministerial review and submit for Government approval, the public-private partnership (PPP) development program, including a capacity building program for the period 2015- 2020 (with at least 20% women participation)

2.1.1 Government to execute the PPP Development Program including capacity building.

Activity 2 completed. Target 1 achieved. PPP Development Program for 2016–2021 was adopted by the Government on 16 June 2016. With the support of Asian Development Bank (ADB) through TA 8688, the project was able to conduct a series of trainings for PPP focal points. There were nine (9) participants representing

Appendix 7 43

Outcome Subprogram 1b

(Completed by June 2015) Subprogram 2c

(Completed by June 2016) Subprogram 3d

(Completed by October 2018) Achievements at

Completion

the PPP unit, two (22%) of whom were women.

Activity 3 Target 2 2.1.2 Ministry of Health (MOH) to develop a draft health sector strategy that includes PPP and multi-year investment plan and includes at least one gender and social development project that directly benefits the poor, youth, and women.

Activity 3 completed. Target 2 achieved. Investment program in the health sector for 2016–2025 was adopted by the Government on 30 June 2016 and includes several investment projects that directly benefit the poor, youth, and women. There are 23 priority projects in the program. Seven (7) (30%) of them will benefit women and children directly: (1) Improvement of medical services in the National Center for Protection of Motherhood and Childhood (supported by the Embassy of Japan) ; (2) Construction of new section of the Perinatal Center under the National Center for Protection of Motherhood and Childhood (supported by German bank KfW); (3) Modernization and equipping the National Center for Protection of Motherhood and Childhood (possible PPP project); (4) Introduction of e-healthcare (telemedicine) to outreach remote areas (to be supported by the Aga Khan Foundation); (5) Improvement of the infrastructure of obstetric service in Talas oblast hospital (to be supported by German bank KfW); (6) Improvement of health of children and women of reproductive age, decrease

44 Appendix 7

Outcome Subprogram 1b

(Completed by June 2015) Subprogram 2c

(Completed by June 2016) Subprogram 3d

(Completed by October 2018) Achievements at

Completion

of maternal and child mortality (grant from German bank KfW); (7) Construction of surgery section of children’s clinical hospital (to be supported by Saudi Arabia). Only one of them is planned as a PPP: “Modernization and equipping the National Center for Protection of Motherhood and Childhood” which aims to benefit women and children directly.

Activity 10 Target 5 2.1.2 Government to recruit and deploy adequately skilled staff (at least 35% of whom are women) in relevant line ministries and/or agencies to develop PPP transactions. DMF Output 2b indicator/target by June 2016 Government recruited (or reassigned) and deployed adequately skilled staff (at least 35% of whom are women) in relevant line ministries and/or agencies to develop PPP transactions by June 2016.

Activity 10 completed. Target 5 achieved. Ministry of Finance – 33% (1 out of 3) MOE – 25% (1 out of 4) Ministry of Transport and Communication – 50% (1 out of 2) Bishkek City – 40% (2 out of 5) Investment Promotion Agency (IPA) – 50% (2 out of 4) Total no. of staff deployed by the 5 agencies: 18; total no. of women staff deployed: 7 (39%) The women’s assignment in ministries undertaking or supporting PPP transactions opened new opportunities for professional development. In the interview done with one of the women who worked as a member of the tender commission for hemodialysis services, the woman noted that her assignment on PPP opened

Appendix 7 45

Outcome Subprogram 1b

(Completed by June 2015) Subprogram 2c

(Completed by June 2016) Subprogram 3d

(Completed by October 2018) Achievements at

Completion

the door for her professional growth. She was able to get a scholarship for her master’s degree in Japan and did a thesis on PPP.

Activity 4 2.1.4 The Ministry of Economy (MOE) to operationalize a (i) comprehensive PPP website and (ii) PPP communication plan to disseminate information and raise public and private sector awareness about PPPs for infrastructure and social projects that directly benefit the poor or women.

Activity 4 completed.

Operationalization of the PPP website

The operationalized PPP website is informative, information (news, announcements) is well structured and presented. The information on PPP projects includes initiated projects as well as proposed projects and is easily accessible for users.i http://www.ppp.gov.kg/

The website includes social projects that benefit the poor and/or women such as the following:

1) centralized health laboratory for medical institutions in Bishkek

2) construction of pre-schools and kindergartens

3) improvement of public transport in Bishkek.

PPP Communication Plan The communication plan aimed to: (i) effectively inform state and municipal officials, representatives, and local and international investors about the benefits of PPP projects in terms of improved quality of public services and

46 Appendix 7

Outcome Subprogram 1b

(Completed by June 2015) Subprogram 2c

(Completed by June 2016) Subprogram 3d

(Completed by October 2018) Achievements at

Completion

(ii) to effectively communicate the mission and activities of the IPA to the target audience. The communication plan targeted 2 groups of audience: (i) local stakeholders (state agencies and municipalities; business councils; investors/developers; banking sector; community in general; political parties and politicians) and (2) international audience (investors; international organizations; development partners; banks; other finance providers). The communication plan noted limited attention to small-scale PPP interventions that are deliverable locally and can have an immediate impact on critical socio-economic indicators (poverty, health, education). The PPP unit has conducted several awareness raising eventsj throughout the country in 2017–2018: 2 regional workshops in the north and the south of the country, several events in regional towns (Naryn, Karakol, Batken towns) and 15 events at local level where representatives of local governments and stakeholders were informed about the PPP, its processes, procedures, as well as its positive impact PPP on socio-economic development of local communities.

Appendix 7 47

Outcome Subprogram 1b

(Completed by June 2015) Subprogram 2c

(Completed by June 2016) Subprogram 3d

(Completed by October 2018) Achievements at

Completion

2.2 Strengthen Public Financial Management of PPPs

2.3 Operationalize the Project Development Support Facility (PDSF) to develop pipeline of PPP projects

Activity 15 Target 9 2.3.1 Government to commence commissioning of prefeasibility studies, included those funded by the PDSF for at least 5 of the following 7 projects: … (vi) Public Transportation Project (Bishkek City Development Agency); and (vii) Development of Pre-school Organizations/ Kindergartens Project (Bishkek City Development Agency) with at least two projects (vi and vii) directly benefiting women and the poor. DMF Output 2c Indicator/ Target by October 2017 Prefeasibility studies, including those funded by the PDSF, for at least five additional projects commenced commissioning by the government, with at least two projects directly benefiting women and the poor (Baseline 2016: 2)

Activity 15 completed. Target 9 achieved. Projects that will benefit women and the poor include: (i) construction of 10 kindergartens in Bishkek for 2,500 children and (ii) construction of a school in Kok-Jar village. These will enable women to provide their children with access to early childhood education which sets the foundation for literacy for girls and boys. In addition, the projects on Centralized Health Lab and Improvement of Public Transport will facilitate women’s access to health and public transport services.

2.4 Establish needed government financial support mechanisms

Output 3: Trade and investment diversification facilitated

3.1 Strengthen the policy and institutional framework for trade

Activity 16 Target 10 3.1.2 To enhance the potential for exports of high-value and value-added food products to the EU, Government to: …. (ii)

Activity 16 completed. Target 10 achieved. On 12 December 2018, a seminar on the topic “Risk-oriented approach in the

48 Appendix 7

Outcome Subprogram 1b

(Completed by June 2015) Subprogram 2c

(Completed by June 2016) Subprogram 3d

(Completed by October 2018) Achievements at

Completion

increase skills in Hazard Analysis and Critical Control Points (HACCP) of at least 30 officials (of which 20% women) in two key state bodies—sanitary epidemiological inspection and veterinary inspection. DMF Output 3b Indicator/ Target by October 2017 The government: … (ii) increased skills of at least 30 officials (including 20% women) from two key state bodies—sanitary epidemiological inspection and veterinary inspection—in HACCP (Baseline 2016:0)

inspection of food enterprises, in matters of HACCP, good manufacturing practice, good hygienic practices” was held at the Center for Standardization and Metrology (CSM) under the MOE of the Kyrgyz Republic. This seminar was held jointly by the CSM and the ADB in the Kyrgyz Republic, as part of the project “Technical Assistance for the Development of Regional Capacity to Strengthen the Implementation of International Food Safety Standards in the Agricultural Production Chain in Member Countries of the Central Asian Regional Economic Cooperation” funded by ADB in the Kyrgyz Republic. Thirty (30) participants from various government bodies attended the training. Of this number, 15 (50%) were women participants.

3.2 Operationalize and strengthen the institutional framework for investment promotion

Activity 5 Target 3 3.2.1 IPA of MOE to implement its 2015–2017 strategic plan, covering: (i) staffing with at least 30% women technical staff; …

Activity 11 3.2.1 Government to mandate IPA as the single agency responsible for investment and export promotion, and adequately staff IPA (including with female professional staff). DMF Output 3d indicator/target by June 2016 Government mandated IPA as the single agency responsible for investment

Activities 5, 11 completed. Target 3 achieved. There are 31 staff in the IPA of whom 10 (32%) are women. The 10 women staff include 1 chief accountant, 6 experts, and 3 specialists.

Appendix 7 49

Outcome Subprogram 1b

(Completed by June 2015) Subprogram 2c

(Completed by June 2016) Subprogram 3d

(Completed by October 2018) Achievements at

Completion

and export promotion, and adequately staffed IPA (including with female professional staff by June 2016)

Activity 6 Target 4 3.2.2 Government to establish with an action and budget plan, an inter-agency working committee (having at least 1 senior level woman representative) headed by the Center for Judicial Representation and including MOF, Ministry of Foreign Affairs (MFA), Ministry of Justice, MOE and other relevant government agencies, as the first step towards creating an institutional platform for resolution of investment grievances.

Activity 6 completed. Target 4 achieved. The inter-agency working commission was established by the Order No. 34 of the Ministry of Justicek on 30 March 2015. Out of 15 members, 7 were women. Three of them were senior level representatives (including deputy director of the International Law Department of the MFA; acting head of Investment and External relations unit of the State Agency on geology and mineral resources; head of legal unit of the Ministry of Emergency. The other four women members represented the following agencies: (i) Legal Department, Ministry of Energy and Industry, (ii) Legal Department of the MOH; (iii) Department of Communication and Information under the Ministry of Transport and Communication, and (iv) Center for Judicial Representation.

3.3 Sovereign Rating to encourage financial market development and international capital flows

3.4 Support the development of market -based skills for SMEs

Activity 7 3.4.1 To ensure matching of skills and vocational training to the needs of local

Activity 12 3.4.1 The AVE to: (iii) ensure signed internship agreements (between technical and vocational

Activity 17 Target 11 3.4.1 AVE in coordination with IPA, to… (ii) train at least 100 students (of which at least 45% are women) for the

Activity 7 completed. Signing of MOU between IPA and AVE The MOU was signed in March 2015.

50 Appendix 7

Outcome Subprogram 1b

(Completed by June 2015) Subprogram 2c

(Completed by June 2016) Subprogram 3d

(Completed by October 2018) Achievements at

Completion

exporters as well as foreign investors, MOE to: (ii) sign a memorandum of understanding (MOU) with Agency for Vocational Education (AVE) to collaborate on the identification of market-relevant skills and the development of market-responsive vocational skills training and curriculum, including vocational skills aimed at attracting more women into traditional male occupations.

education and training [TVET] schools and private sector companies) for internships for at least 50 TVET students (25% of whom are women) DMF Output 3g indicator/target by June 2016 AVE…. (iii) signed, through TVET schools, internship agreements, for at least 50 TVET students (25% of whom are women) by June 2016

September 2016-May 2017 academic year under the internship program of the TVET institutes. DMF Output 3f Indicator/ Target by October 2017 AVE, in coordination with IPA… (ii) increased the skills of at least 100 students (including at least 45% women) for the September 2016 to May 2017 academic year under the internship program of the TVET institutes.

Activity 12 completed. Internship Agreements Tripartite internship agreements between the lyceum, students, and employers were signed. Every year, at least 20,000 students, of whom 37% are girls/women, were to undertake internships. Activity 17 completed. Target 11 achieved. Internship A total of 17,503 students (of whom 8,646 (49.4%) were women) including 477 persons with disabilities were trained in 2016–2018. Most of them trained in the food industry, light industry, construction, and agriculture. The training, internship programs lasted from 1 to 6 months. According to the Ministry of Education, 71% of those who underwent internships were able to get jobs within 1 year after graduation.

Output 4: Increased ease of doing business

4.1 Improve the transparency and efficiency of public procurement.

4.2 Reduce costs of tax compliance

Activity 18 4.2.1 Government to reduce administrative burdens to incentivize formalization of micro- and small businesses (35% of which are women-owned or managed) by: (i) decreasing the single tax from 4% and 6% (depending

Activity 18 completed. As indicated in the DMF, the regulatory reform was done. The number of registered women individual entrepreneurs increased from 94,987 (34% of the total of 276,740 of men and women-

Appendix 7 51

Outcome Subprogram 1b

(Completed by June 2015) Subprogram 2c

(Completed by June 2016) Subprogram 3d

(Completed by October 2018) Achievements at

Completion

on the type of activity) to 2% and 3% respectively for SMEs making cashless payments; and (ii) approving amendments to the Tax Code (a) to set time limitation for resolution of tax payers’ grievances, and (b) to relax the limitations on the number of days for which a voluntary tax patent is valid. Also as DMF Output 4b Indicator/ Target by October 2017

owned enterprises) in 2015 to 110,141 (35% of the total of 315,912 men and women-owned enterprises) in 2018.

a The Gender Achievements Matrix includes the gender-related policy actions from the design and monitoring framework and policy matrixes of the three subprograms. The activities and targets are numbered based on the chronology of the subprograms.

b ADB. 2015. Report and Recommendation of the President to the Board of Directors: Proposed Programmatic Approach and Policy-Based Grant for Subprogram 1 to the Kyrgyz Republic for the Second Investment Climate Improvement Program. Manila

c ADB. 2016. Report and Recommendation of the President to the Board of Directors: Proposed Programmatic Approach and Policy-Based Grant for Subprogram 2 to the Kyrgyz Republic for the Second Investment Climate Improvement Program. Manila.

d ADB. 2017. Report and Recommendation of the President to the Board of Directors: Proposed Programmatic Approach and Policy-Based Grant for Subprogram 3 to the Kyrgyz Republic for the Second Investment Climate Improvement Program. Manila.

e G20 Financial Inclusion Indicators. https://databank.worldbank.org/reports.aspx?source=g20-basic-set-of-financial-inclusion-indicators#. f The site of akchabar https://www.akchabar.kg/ru/news/dengi-electronnui-koshelek-nbkr-april-2019/ (accessed 21 July 2019). g 35% of 33 =11.55 women-owned and/or managed SMEs. h 449 guarantees for SMEs is part of 845 entrepreneurs. j Interview with the head of the Investment Promotion Agency unit under the Ministry of Economy, Daniyar Abdyldaev (conducted on 5 August 2019). k http://cbd.minjust.gov.kg/act/view/ru-ru/9505. l Government of the Kyrgyz Republic, National Statistics Committee. 2018 and 2015. Women and Men of the Kyrgyz Republic. Bishkek.

Source: Asian Development Bank

52 Appendix 8

POLICY MATRIX STATUS AS OF 31 DECEMBER 2018

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

Output 1: Access to finance improved

1.1. Support the structured development of electronic payments and mobile financial services

The government to establish an enabling legal environment for mobile financial services by approving the Payments System Law.

To enable use of innovative technologies including mobile financial services, National Bank of the Kyrgyz Republic (NBKR) to: (i) Establish Risk Management

System, Internet Payment Gateway (IPG) and dispute resolution system to improve the operations of the Interbank Processing Center (IPC);

(ii) Approve the IPC business strategy 2016–2018; and

(iii) Execute payment and money transfer services.

To commence mobile financial services, the Information Technology and Communications Committee of the Government to:

(i) pilot the IPG in the State Registration Service for online payments of public services; and

(ii) roll out the IPG to the State Tax Service, State Service of Intellectual Property and Innovation, Mandatory Health Insurance Fund, Higher Attestation Commission of the Kyrgyz Republic, and the State Communications, and train 300 specialists (50% women) of these agencies/ organizations.

The law on payment system was adopted on 21 January 2015. NBKR established risk management and dispute resolution systems for IPC, approved IPC`s business strategy 2016–2018 and continued executing supervision over the payment system. The SE "Info-System" under the State Committee of Information Technologies and Communications of the Kyrgyz Republic has developed a "State system of electronic payments". Its operations are regulated by Resolution No. 709 “On Approval of the Regulations on the State Electronic Payments System”. Information systems and databases of the State Registration Service, Ministry of Finance (MOF), State Tax Service, Social Fund of the Kyrgyz Republic, and State Communications Agency have been connected to the State Electronic Payment System and currently at the integration stage with the State e-services portal. There is no data available on the training conducted for 300

Appendix 8 53

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

specialists (50% women) in the selected state agencies. 7 commercial banks are also connected to the system (KICB, Demir Bank, Commercial Bank Kyrgyzstan, Kyrgyzkommertsbank, Optima Bank, Bakai Bank, and Ayil Bank). In addition, joint work was carried out with JSC IPC on the integration of the State Electronic Payment System with the National Payment System "Elcard".

NBKR to establish strategy and regulations for expanding the coverage of the payment system to retail transactions.

NBKR to establish regulations for e-money, operators of payment systems & the remote delivery of financial services to benefit the under banked (rural population, poor, women, & informal sector).

Required policy actions were implemented (Resolutions of the Board of NBKR dated 30 March 2016, No. 15/6) As per NBKR, implemented policy actions had a positive impact on the development of cashless payments. The number and volume of cashless payments roughly doubled in 2015–2018. The development of digital payments also improved access to finance for women. In 2014–2017, the percentage of digital payments made or received by women has increased by 2.3 times (from 15.1% in 2014 to 35% in 2017).

Government to carry out the State Program on Financial Literacy to increase bank customer awareness on the benefits costs and risks on the use of electronic payments and financial services.

On 15 June 2016, the government approved the Program on Financial Literacy for 2016–2020.a This program is currently being implemented. One of the delivery channels is the specialized webpage on

54 Appendix 8

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

financial literacy, www.finsabat.kg.

1.2. Reduce the risks of lending to small and medium-sized enterprises (SMEs)

The Ministry of Economy (MOE) to approve concept for business cases for (i) a risk-sharing facility to support SMEs, including women-owned and managed SMEs, with potential for growth in line with the national Export Development Program (EDP); and (ii) a commodities exchange.

Government to approve the establishment of a guarantee fund for SMEs with at least $1 million capital allocated by the Republican Budget 2016, with at least 25% of the benefitting SMEs being women-owned or managed.

Government to operationalize the State Guarantee Fund (SGF) (with at least 25% female technical staff) by issuing 33 guarantees amounting to $1.05 million catalyzing $5.5 million in bank lending for SMEs in priority sectors (exports and agriculture), at least 35% of which are women owned and/or managed.

Policy actions were implemented resulting in SGF established and operationalized. By the end of May 2019, SGF supported 845 entrepreneurs, including 239 women entrepreneurs (28%). This includes 449 guarantees issued to SMEs in priority sectors—48 in export-oriented businesses and 311 in agriculture. There were 88 women-owned/managed SMEs in priority sectors that were provided with guarantees. This exceeded the target of 11 loans to be issued to women entrepreneurs involved in priority sectors by October 2017. At present, 9 out of SGF’s 50 employees are women (18%), which is below the 25% target.

1.2.2 SGF management to approve the CGF’s medium-term strategy (2017–2022) including SME capacity building.

On 15 June 2016, the Concept on guarantee fund development till 2020 was approved.b

1.3. Strengthen prudential supervision and conditions for financial sector deepening

NBKR to strengthen risk-based supervision for the microfinance sector by approving an internal document through NBKR management on the roles, responsibilities, and coordination mechanisms for on-site and off-site supervision of the sector.

NBKR developed coordination mechanism between off-site and on-site supervision departments to strengthen risk-based supervision of the microfinance sector.

Output 2: Public–private partnership program enhanced

2.1 Strengthen policy, institutional, and legal framework

MOE to complete inter-ministerial review and submit for Government

Government to execute the PPP Development program, including capacity building.

On 16 June 2016, the government approved the program on PPP development

Appendix 8 55

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

approval, the public-private partnership (PPP) development program, including a capacity building program for the period 2015- 2020 (with at least 20% women participation)

for 2016–2021.c This program is currently being implemented. As per this strategy, the government plans to sign at least 20 PPP projects totaling more than $400 million. With the support of ADB through TA 8688, the program was able to conduct a series of trainings for PPP focal points. There were nine (9) participants representing the PPP unit, two (22%) of whom were women.

Government to recruit and deploy adequately skilled staff (at least 35% of whom are women) in relevant line ministries and/or agencies to develop PPP transactions

All relevant line ministries have allocated enough staff to develop and process PPP transactions:d - 8 officials at the MOE including the Investment Promotion Agency (IPA), including 3 women (38%); - 3 officials at the MOF, including 1 woman (33%); - 2 officials at the Ministry of Transport and Communications (MOTC), including 1 woman (50%);

• - 5 officials at Bishkek City Development Agency, including 2 women (40%).

• On average, 39% of PPP specialists and focal points in relevant ministries and or agencies were female.

Government to (i) amend Project Development Support Facility (PDSF) Regulations to expedite project preparatory and/or advisory funding for PPPs by the PDSF Steering Committee; and

Required policy actions are implemented. PDSF regulations were amended and PPP council led by Vice Prime Minister is established.

56 Appendix 8

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

(ii) establish a PPP Council, headed by the Vice Prime Minister.

The Ministry of Health (MOH) to develop a draft health sector strategy that includes PPP and multiyear investment plan and includes at least one gender and social development project that directly benefits the poor, youth, and women.

Government to: (i) approve development

strategies with multiyear investment plans (up to 2025) for the health and roads sectors; and

(ii) submit at least one health sector and one road sector PPP project for PDSF funding.

(i) Government to approve development strategy “Sports for Kyrgyzstan 2018–2022” and multiyear investment plan of the State Agency for Youth Affairs, Physical Culture and Sports and submit to MOE project briefs for Modernization of Edelveis Sports Base Project and Modernization of Small Sports Arena Project. (ii) Bishkek City Development Agency to approve the city development strategy “Program on Economic and Social Development for 2017–2020” and multiyear investment plan of the Bishkek City Development Agency and submit to MOE priority project briefs for On-Street Parking Project and Development of Preschool Organizations (Kindergartens) Project.

Investment program in the health sector for 2016–2025 was adopted by the government on 30 June 2016 and includes several investment projects that directly benefit the poor, youth, and women. There are 23 priority projects in the program. Seven project (30%) will benefit women and children directly: (1) Improvement of medical services in the National Center for Protection of Motherhood and Childhood (supported by the Embassy of Japan); (2) Construction of new section of the Perinatal Center under the National Center for Protection of Motherhood and Childhood (supported by German bank KfW); (3) Modernization and equipping the National Center for Protection of Motherhood and Childhood (possible PPP project); (4) Introduction of e-healthcare (telemedicine) to outreach remote areas (to be supported by the Aga Khan Foundation); (5) Improvement of the infrastructure of obstetric service in Talas oblast hospital (to be supported by German bank KfW); (6) Improvement of health of children and women of reproductive age, decrease of maternal and child mortality (grant from German bank KfW); (7) Construction of

Appendix 8 57

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

surgery section of children’s clinical hospital (to be supported by Saudi Arabia). Only one of these projects, Modernization and equipping the National Center for Protection of Motherhood and Childhood, is proposed as a PPP project. This project, if implemented, will have strong positive impact on women and children. PDSF has agreed to finance project preparation costs of the following three PPP projects: (i) installation of computer tomography; (ii) road project in Uzgen town and (iii) construction of the sport-tourist base ‘Edelveis’.e

The government approved the Program for Development of Physical Culture and Sports in the Kyrgyz Republic for the period 2018–2022 on 22 September 2017. Bishkek Municipality approved its Development Program for 2017–2020 “Renovation of the Urban Environment” on 3 October 2017.

Government to submit for approval amendments to the PPP Law and its regulations.

Parliament to approve amendments to the PPP Law.

On 22 June 2016, Parliament approved amendments to the PPP law.f

MOE to operationalize a (i) comprehensive PPP website; and (ii) PPP communication plan, to disseminate information and raise public and private sector awareness

PPP unit of the MOE runs PPP-dedicated website www.ppp.gov.kg to increase awareness about PPP programs. This website is informative with information

58 Appendix 8

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

about PPPs for infrastructure and social projects that directly benefit the poor or women.

(news, announcements) and is well-structured and presented.

The website includes a description of the PPP projects that benefit the poor and/or women, such as (i) centralized health laboratory for medical institutions in Bishkek, (ii) construction of preschools and kindergartens, and (iii) improvement of public transport in Bishkek.

The PPP communication plan targets 2 groups of audience: (i) local stakeholders (state agencies and municipalities; business councils; investors/developers; banking sector; community in general; political parties and politicians) and (2) international audience (development partners; international investors). The PPP unit has conducted several awareness raising eventsg throughout the country in 2017–2018: 2 regional workshops in the north and the south of the country, several events in regional towns (Naryn, Karakol, and Batken) and 15 events at the local level where representatives of local governments and stakeholders were informed about PPP, its processes, procedures, as well as its positive impact PPP on socio-economic development of local communities.

2.2 Establish Government Financial Support Mechanisms

To ensure appropriate and transparent budgeting of fiscal costs of PPP

The government approved guidelines on identifying and managing PPP fiscal risks,

Appendix 8 59

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

within Public Financial Management Framework

projects and minimizing of fiscal risks, MOF to approve fiscal risk guidelines for PPPs (including guidance on contingent liabilities).

including PPP contingent liabilities. It also developed a PPP manual, which included a model concession agreement and set out policies and procedures for PPP selection, preparation, due diligence and approval, fiscal risk identification and management, and tender procedures.

To support commercial viability of PPP projects and enable availability of long-term financing for PPP projects, MOF to prepare and review the proposals of possible financial support schemes (such as a long-term debt facility, viability gap fund, and guarantee mechanisms).

Government to (i) include in the Draft Budget Code appropriate provisions for government financial support; and (ii) draft a plan and guidelines for long-term debt financing of PPP projects.

In line with the existing legislation, Government: (i) to allocate, on the request of the concerned public partner (ministry/ agency), budget funds (including exemptions from taxes and other payments) for implementation of PPP projects; and (ii) to strengthen fiscal risk management of PPPs by limiting the annual budget support for PPP projects to 0.3%–0.5% of the annual budget.

The government developed the mechanism and guidelines for long-term debt financing of PPP projects; and amended the draft budget code to include government financial support for PPP projects. The government, in line with PPP legislation, (a) allocated budget funds (including an exemption from taxes and other payments) to enable implementation of PPP projects on the request of the concerned public partner (ministry or agency); and (b) strengthened fiscal risk management of PPPs by limiting annual budget support for implementation of PPP projects to 0.3%–0.5% of the state budget.

PPP project “Organization of hemodialysis services’ is exempted from VAT.

2.3 Operationalize the Project Development Support Facility to develop pipeline of PPP projects

Relevant government bodies to: (i) tender a PDSF

financed pre-feasibility or feasibility study for at least [1]

PDSF Steering Committee to approve PDSF funding for at least 6 projects and relevant line ministries and /or agencies to publish tenders.

Government to commence commissioning of prefeasibility studies, including those funded by the PDSF for at least 5 of the following 7 projects:(i) Uzgen Bypass Road Project (MOTC);

On 15 August 2017, the country’s first PPP agreement was signed between the MOH of the Kyrgyz Republic and Fresenius Medical Care Deutschland GmbH

60 Appendix 8

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

PPP project, preferably a social sector project; and

(ii) submit for approval by PDSF Committee, at least [2] projects for pre-feasibility or feasibility study financing from the PDSF (in addition to the CT scan project).

MOH to commission PDSF-funded transaction advisory contract for the Computer Tomography Scan (health) project.

(ii) Angiography Project (MOH); (iii) Solid Waste Management Project (City of Tokmok); (iv) Customs and Logistics Complex (State Customs Services) Project; (v) On-street Parking Project (Bishkek City); (vi) Public Transportation Project (Bishkek City Development Agency); and (vii) Development of Pre-school Organizations/ Kindergartens Project (Bishkek City Development Agency, with at least two projects (vi and vii) directly benefitting women and the poor. MOH to sign a competitively tendered PPP contract with the private sector to implement the Hemodialysis Services project in Bishkek, Osh and Jalalabad.

(Germany), which was selected as the private partner under the PPP project on organization of hemodialysis services in Bishkek, Osh, and Jalal-Abad. The feasibility study prepared for this report included an assessment of the potential environmental and social impact of the project. Following this project, another two PPP projects were signed, rehabilitation of the cinema and implementation of e-ticketing in the municipal transport in Bishkek. At present, the government has a strong pipeline of potential PPP projects. Potential PPP projects that will benefit women and the poor include: (i) construction of 10 kindergartens in Bishkek for 2,500 children and (ii) construction of school in Kok-Jar village. These projects will enable women to provide their children with access to early childhood education. The government signed feasibility study and transaction advisory contract for CT scan project.

Output 3: Trade and investment diversified

3.1 Strengthen the policy and institutional framework for trade

Prime Minister’s Office to approve the revised national EDP. MOE to prepare a draft project proposal, including organizational chart, operational plan, and budget, to establish a

Government to establish the EDP 2015–2017 monitoring and implementation secretariat and implement the EDP tracking system

National EDP was approvedh and IPA business strategy operationalized. Currently, the EDP is updated to cover 2019–2023.

Appendix 8 61

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

Eurasian Economic Union (EEU) Help Desk.

To avail of the EU Generalized System of Preferences Plus (GSP+) status (granting preferential or zero tariffs for nearly 7,000 export products) MOE to submit application to EU.

Kyrgyz Republic to acquire the EU GSP+ trade privilege;

MOE to: (i) approve a guidance manual each for the apparel and agriculture sectors in which women are predominantly employed; and (ii) pilot such guidance manuals with at least one apparel and one agriculture exporter

EU granted GSP+ status to Kyrgyzstan in January 2016. To improve export potential of the Kyrgyz businesses, the IPA of the MOE developed guidance manuals on access to EU markets for agriculture and apparel sectors. The guidance manuals were disseminated by the IPA among potential exporters.

To comply with product quality requirements for the EEU and export markets such as the EU, MOE to prepare and publish on its website, a draft concept paper on the modernization of national quality Infrastructure (NQI), incorporating ADB findings on the existing physical infrastructure and institutional capacity to implement sanitary and phytosanitary standards.

Government to approve the Strategy (“Concept”) for Modernization of NQI for Trade (incorporating EEU quality standards). MOE to identify at least [20] priority export sector-oriented SMEs (at least 25% majority owned, managed or women employees) that can be linked to the Guarantee Fund for SMEs (to be established under 1.2.1). (i) Government to establish a working group chaired by MOE; and (ii) MOE to draft time bound action plan MOE to draft time bound action plan for trade expansion under GSP+.

To enhance the potential for exports of high-value and value-added food products to the EU, Government to: (i) modernize and operationalize at least 3 laboratories; and (ii) increase skills in Hazard Analysis and Critical Control Points of at least 30 officials (of which 20% women) in two key state bodies – sanitary epidemiological inspection and veterinary inspection.

The government developed and approved strategy for modernizing the NQI for trade in line with international requirements. Currently, 4 phytosanitary laboratories and 6 veterinary laboratories are modernized, accredited, and functioning. In 2016, with the assistance of the International Finance Corporation (IFC) and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), representatives of the Department of Disease Prevention and Sanitary Inspection, the State Inspectorate for Veterinary and Phytosanitary Safety were trained in all regions of the country. In total, 62 people were trained (no data is available on the number of female participants). On 12 December 2018, a seminar on the topic “Risk-oriented approach in the inspection of food enterprises,

62 Appendix 8

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

in matters of hazard analysis and critical control points (HACCP), good manufacturing practice (GMP), good hygienic practices (GHP)” was held at the Center for Standardization and Metrology (CSM) under the MOE of the Kyrgyz Republic. This seminar was held jointly by the CSM and the ADB in the Kyrgyz Republic, as part of the project “Technical Assistance for the Development of Regional Capacity to Strengthen the Implementation of International Food Safety Standards in the Agricultural Production Chain in Member Countries of the Central Asian Regional Economic Cooperation” funded by ADB in the Kyrgyz Republic. 30 participants, including 15 women, from various state bodies attended the training.

Government to ratify the Trade Facilitation Agreement (TFA) and operationalize the National Trade Facilitation Committee as per TFA requirements

The TFA was ratified and the National Trade Facilitation Committee was operationalized. The work of the Committee is in process.

Appendix 8 63

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

3.2 Strengthen the institutional framework for investment

IPA of MOE to implement its 2015–2017 strategic plan, covering: (i) staffing with at least

30% women technical staff;

(ii) operationalization of the website in Russian and English (providing information at least on investment laws and incentives, on the economy, and taxation and company registration);

(iii) Operationalization of the customer relationship management system to manage the information flow with potential investors.

Government to mandate IPA as the single agency responsible for investment and export promotion, and adequately staff IPA (including with female professional staff).

IPA is better prepared to execute its functions. It is adequately staffed with women representing 32% of the staff. 10 women hold professional staff positions (chief accountant, 6 experts, and 1 specialist). Its mandate was also strengthened – nowadays it is the single agency responsible for investment and export promotion. Information on the IPA’s activity is available on its webpage, www.invest.gov.kg.

Government to establish, with an action and budget plan, an interagency working committee, (having at least 1 senior level woman representative) headed by the Center for Judicial Representation (CJR) and including MOF, Ministry of Foreign Affairs (MFA), Ministry of Justice (MOJ), MOE and other relevant government agencies, as the first step toward creating an institutional platform for resolution of investment grievances.

(i) Government to designate IPA to address investor grievances and establish a grievance redress mechanism;

(ii) IPA to: - establish database

registering all investor grievances;

- draft process for out-of-court settlement of investor grievances; and

- identify the required modifications of law and regulations.

MOE to: (i) issue an Order

approving the action plan to institutionalize an improved (with improved procedures) Investor Grievance Mechanism (IGM) for out-of-court investor dispute settlement; and

(ii) IPA to resolve at least 2 investor-related grievances in its current portfolio.

An interagency working committee was established by Order No. 34 of the MOJ on 30 March 2015.i Out of 15 members, 7 were women. Three of them were senior level representatives (including deputy director of the International Law Department of the MFA; acting head of Investment and External relations unit of the State Agency on geology and mineral resources; head of legal unit of the Ministry of Emergency. The other four women members represented the following agencies: (i) Legal Department, Ministry of Energy and Industry, (ii) Legal Department of the MOH; (iii) Department of Communication and

64 Appendix 8

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

Information under the Ministry of Transport and Communication, and (iv) CJR. IGM was established and operationalized by MOE and IPA, through the adoption of its relevant Orders. IPA resolved 2 investor-related grievances in its current portfolio. First is related to the Ski base “ZIL”. Second is related to the Kyrgyz Chinese cement company.

3.3 Sovereign Rating to encourage financial market development and international capital flows

MOE to sign a contract with one of the three international credit rating agencies (S&P, Moody’s or Fitch) to start the sovereign rating process.

Government (MOE-MOF) to: (i) publish sovereign credit

ratings assigned by Standard & Poor’s and Moody’s;

(ii) commission and budget for annual sovereign ratings update by internationally recognized agencies, from 2016 onwards.

3.3.1 Government to: (i) commission and obtain from Moody’s Investor Services its sovereign credit rating (SCR) update for 2017; and (ii) make budget allocations for rating review in 2018 and 2019.

On 9 December 2015, Moody’s issued its sovereign credit rating for the Kyrgyz Republic (B2/Stable). On 10 December 2015, Standard & Poor’s issued its rating of B/Stable for the Kyrgyz Republic. Moody’s reaffirmed its B2/Stable rating for 2016–2019. (The government discontinued working with Standard & Poor’s due to budget constraints.) Government published the credit rating from Moody’s and allocated the relevant budget for rating agencies services every year thereafter.

3.4 Support the

development of market-

based skills for SMEs

To ensure matching of skills and vocational training to the needs of local exporters as well as foreign investors, MOE to: (i) Designate the IPA as its representative on the National Skills Development Council of the Agency for Vocational

AVE to: (i) set occupational standards for at least one skill each from the three priority occupations identified by IPA; (ii) ensure relevant Sectoral Councils (with appropriate industry representation) approval of the standards; and (iii) ensure signed internship agreements between technical and vocational

AVE, in coordination with IPA, to (i) develop, with TVET institutes and export industries, market-oriented training modules in at least three skills each* from textile, agriculture & food processing, and manufacturing sectors; and (ii) train at least 100 students (of which at least 45% are women) for the September

The MOU between IPA and AVE was signed in March 2015. Industries reviewed TVET curricula was introduced in select institutes. Tripartite internship agreements between the lyceum, students, and employers were signed. Every

Appendix 8 65

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

Education (AVE); and (ii) Sign a memorandum of understanding (MOU) with AVE to collaborate on the identification of market-relevant skills and the development of market responsive vocational skills training and curriculum, including vocational skills aimed at attracting more women into traditional male occupation

education and training (TVET) schools and private sector companies for internships for at least 50 TVET students (25% of whom are women).

2016-May 2017 academic year under the internship program of the TVET institutes.

year, at least 20,000 students, of whom 37% are girls/women, were to undertake internships. AVE set 45 professional standards in public catering, information technologies, sewing, agriculture, and processing industries. A total of 17,503 students (of whom 8,646 [49.4%] were women) including 477 persons with disabilities were trained in 2016–2018. Most of them trained in the food industry, light industry, construction, and agriculture. The training, internship programs lasted from one to six months. According to the Ministry of Education, 71% of those who underwent internship were able to get jobs within one year after graduation.

Output 4: Increased ease of doing business

4.1 Improve the

transparency and

efficiency of public

procurement

To increase competition, transparency, and efficiency in public procurement, at least 20 states and municipal bodies start using the e-procurement system.

MOF to approve the Regulation on e-procurement system operation and maintenance and conclude related employment contracts and budgets.

4.1.1 Government to allocate (i) at least Som4 million in the annual budget (2017) to ensure continued utilization and maintenance of the e-procurement system; and (ii) at least Som8 million to develop additional e-procurement modules.

E-procurement system is now operational with all state organizations and all procurement activities should be done through e-procurement portal www.zakupki.gov.kg. The MOF allocated in the 2017 annual budget of the State Procurement Department (i) Som4 million for continued utilization and maintenance of the e-procurement system and (ii) Som8 million to develop additional e-procurement modules (Government Decree No 132-p of 11 April 2018).

66 Appendix 8

Outputs

Subprogram 1 Policy Actions

(completed June 2015)

Subprogram 2 Policy Actions

(completed June 2016)

Subprogram 3 Policy Actions

(completed October 2017) Status as of 31 December

2018

4.2 Reduce costs

of tax compliance

To reduce tax filing/payment frequency for SMEs from monthly to quarterly, thereby reducing transaction costs, government to approve the draft law on amendments to the Tax Code.

Government to reduce administrative burdens for small business by: (i) exempting business from

value-added tax with annual turnovers up to Som8 million;

(ii) waiving sales tax on exports and on all noncash transactions;

(iii) approve a simplified tax declaration form for individuals; and

(iv) simplify tax reporting for individual entrepreneurs, to a single agency.

4.2.1 Government to reduce administrative burdens to incentivize formalization of micro- and small businesses (35% of which are women owned or managed) by: (i) decreasing the single tax

from 4% and 6% (depending on the type of activity) to 2% and 3%, respectively for SMEs making cashless payments; and

(ii) approving amendments to the Tax Code (a) to set time limitation for resolution of taxpayers’ grievances, and (b) to relax the limitations on the number of days for which a voluntary tax patent is valid.

Required policy actions were implemented (Law No. 212 of 22 December 2016 and Law No. 27 of 20 February 2017). The number of registered women individual entrepreneurs increased from 94,987 (34% of the total of 276,740 of men and women-owned enterprises) in 2015 to 110,141 (35% of the total of 315,912 men and women-owned enterprises) in 2018.j

ADB = Asian Development Bank, AVE = Agency for Vocational Education, CDA = Bishkek City Development Agency, CSM=Center for Standardization and Metrology, EDP = Export Development Program, EEU = Eurasian Economic Union, EU = European Union, GHP = Good Hygienic Practices, GMP=Good Manufacturing Practice, GSP+ = Generalized System of Preferences (Plus),HACCP=Hazard Analysis and Critical Control Points, IFC = International Finance Corporation, IPA = Investment Promotion Agency, MFA = Ministry of Foreign Affairs, MFS = mobile financial services, MOE = Ministry of Economy, MOF = Ministry of Finance, MOH = Ministry of Health, MOJ = Ministry of Justice, NBKR = National Bank of the Kyrgyz Republic, NQI – National Quality Infrastructure, PDSF = project development support facility, PPP = public–private partnership, SGF=State Guarantee Fund, SME = small and medium-sized enterprise, TA= Technical Assistance, TFA = Trade Facilitation Agreement, TVET =Technical and Vocational Education and Training, VAT = Value Added Tax. a http://finsabat.kg/admin/laravel-filemanager/files/shares/documents/Program/Programma_povysheniya_finansovoi_ gramotnosti.pdf. b http://gf.kg/about/dokumenty-fonda/kontseptsiya-razvitiya/. c http://cbd.minjust.gov.kg/act/view/ru-ru/98559. d http://www.ppp.gov.kg/en/regulatory-framework/ppp-strategy/. e PPP unit of the Ministry of Finance. 2019. Summary of potential PPP projects. Bishkek. http://www.ppp.gov.kg/ru/proekty2/. f http://cbd.minjust.gov.kg/act/view/ru-ru/203607. g Interview with the head of Investment Promotion Agency unit under the Ministry of Economy, Daniyar Abdyldaev (conducted on 5 August 2019). h Government of the Kyrgyz Republic. 2015. Export Development Plan for 2015–2017. Bishkek. I http://cbd.minjust.gov.kg/act/view/ru-ru/9505. j National Statistics Committee, Women and Men of the Kyrgyz Republic, 2018, 2015.