Report No. PIC1778
Project Name         Kyrgyz Republic-Privatization and Enterprise (&)
Sector Adjustment Credit (PESAC)
Region                              Europe and Central Asia
Sector                              Industry / Finance
Project ID                          KGPA8514
Implementing Agency                 State Commission for the Economy
Bishkek, Kyrgyz Republic
Date PID Prepared                   March 1995
Appraisal Date                      March 1994
Board Date                          June 9, 1994
Objectives
1.   The principal objectives of the Reform Program to be supported by
this Credit are: (i) to reduce the role of the state in economic
activity through privatization; (ii) to improve the governance of
enterprises that will remain temporarily in Government ownership;
(iii) to reduce economic and financial costs to the economy of large
and inefficient state-owned enterprises (SOEs) through liquidation or
passive restructuring; (iv) to improve the enabling environment for
private sector development by reducing market imperfections, price and
trade distortions, and barriers to entry and exit; and (v) to help
ease the social costs of adjustment.
Description
2.   The credit is quick-disbursing and is designed to provide balance
of payments support linked to the conditionality specified for first
and second tranche releases. The first tranche became available upon
credit effectiveness. The second tranche will become available upon a
review, satisfactory to IDA, of successful implementation of the
adjustment program as a whole and fulfilent of tranche release
conditions. Objectives include liquidation or passive restructuring
of LEs; improved governance and improved financial performance of SOEs
that will remain temporarily under government ownership; and removal
of market imperfections for the development of a dynamic private
sector. The proceeds of the credit are to be used for financing the
foreign exchange costs of general imports.
Implementation
3.   The State Committee for the Economy (Goskomekonomyky), through
the PESAC Working Group led by the first Deputy Minister of Economy,
will have responsibility for the overall management of the program,
while the implementation of individual program components will be
carried out by relevant ministries or agencies (NBK, SPF, ERRA and
Ministry of Trade). Goskomekonomyky will report periodically to the
high level Policy Coordination Committee chaired by the First Deputy
Prime Minister. The PESAC Management Unit will be established in the



State Committee for the Economy to facilitate and coordinate
implementation of the various actions required.
4.   The credit will reimburse 100 percent of the foreign exchange
costs of eligible imports. PMU would be responsible for the
coordination and collection of relevant documents, as well as the
preparation and submission of withdrawal applications and supportive
documents to IDA.
Cost and Financing
5.   The credit amount is US$60 million.   The credit would be on
standard IDA terms, with a 35-year maturity, including 10 years of
grace.
6.   The success of the reform program supported by PESAC will depend
on providing the Government with a team of resident advisors and
short-term consultants possessing the required expertise, to develop
strategies, execute studies, devise legislation, strengthen local
institutions and skills, and implement programs in the areas of
privatization, trade policy, SE liquidation, and restructuring. The
technical assistance (TA) requirements will be financed from existing
and future IDA credits, or from other bilateral and multilateral
sources, preferably on grant terms. USAID has already provided
financing for a number of TA positions and proposes to continue such
assistance in the future. A number of other donors have expressed
interest in the program.
Environmental Aspects
7.   Under IDA policies for adjustment operations, no environmental
rating has been assigned. Nevertheless, in the privatization program,
the Government will be required to introduce environmental audits, and
begin to develop a legal framework necessary for environmental
protection and enhancement through privatized and state enterprise
operations.
Task Manager: Ms. F. Aynur Sumer
Telephone:   (202) 473-4208
Fax:   (202) 477-3291
Contact Point:       Public Information Center
The World Bank
1818 H Street N.W.
Washington D.C. 20433
Telephone No.: (202)458-5454
Fax No.: (202)522-1500
Note: This is information on an evolving project. Certain components
may not necessarily be included in the final project.
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