World Bank Group – Kazakhstan Partnership Program Snapshot April 2015 RECENT ECONOMIC AND exchange rate, in the second half of 2014 the NBK SECTORAL DEVELOPMENTS spent a record amount of its foreign exchange reserves (about US$14 billion, two-thirds of the total) Growth and External Performance and tightened monetary policy by curbing tenge liquidity and allowing money market interest rates to Kazakhstan experienced slower growth and soar by end-2014 (they averaged 33 percent in higher inflation in 2014. Kazakhstan’s real GDP December 2014). growth slowed from 6 percent in 2013 to 4.3 percent Total Official International Reserves in 2014, due to weaker domestic demand. This came 120 as a consequence of the devaluation of the local 100 currency in February 2014 and an oil price shock 80 US$ billion during the second half of the year, as well as weaker 60 external demand from China and Russia for 40 Kazakhstan’s crude oil, iron ore, and metal products. 20 Private consumption, in particular, was hit hard by 0 the negative wealth effect after the devaluation, a Sep Dec Sep Dec Sep Dec Sep Dec Dec Mar Sep Jan Mar Mar Mar Mar Jun Jun Jun Jun Jun tightening of lending conditions for consumer loans, 2010 2011 2012 2013 2014 15 and the delayed impact of the slower growth in real FX monetary and gold reserves FX fiscal reserves wages in 2013. Because of the devaluation, domestic inflation, as measured by the consumer price index Looking forward, as external uncertainties (CPI), increased gradually from 4.5 percent year-on- heighten and domestic policies create demand year in January 2014 to 7.4 percent in December, imbalances, Kazakhstan’s economy will grow at due to higher imported input prices. During the a slower pace. In the medium term, the growth second half of 2014, oil prices fell considerably and outlook is dampened by weaker domestic demand, affected export and fiscal revenues as well as and consumer and investor sentiment have already business confidence to invest in the Kazakh started to deteriorate. Expectations of weaker economy. external demand were maintained due to the anticipated slowdown in China and the recession in Real GDP Growth Composition by Expenditure Russia. Based on an oil price assumption of US$53 10 7.3 7.5 per barrel, Kazakhstan’s GDP growth is projected 8 to slow considerably from 4.3 percent in 2014 to 1.3 Percent/pecentage points 6.0 Discrepancy 6 5.0 4.3 Investment percent in 2015. Lower oil export revenues are 4 Consumption expected to lead to deficits in both the current 2 Net exports account and the overall fiscal balance. 0 GDP growth -2 In the longer run, Kazakhstan’s development -4 objective of joining the rank of the top 30 most -6 2010 2011 2012 2013 2014 developed countries by 2050 will depend on its ability to sustain balanced and inclusive growth. The fall in oil prices affected the external trade Enhancing medium- to long-term development balance and put pressure on the exchange rate. prospects depends on Kazakhstan’s success in As oil prices have softened considerably since June diversifying its endowments, namely, creating highly 2014, the trade balance surplus narrowed and led to skilled human capital, improving the quality of a deficit in the current account in the second half of physical capital, and more importantly, the year. Weaker demand from China and Russia has strengthening institutional capital—all of the also contributed to the decrease in export revenues. necessary ingredients for the development and Despite the fall in oil prices, the National Bank of expansion of the private sector in the country. Kazakhstan (NBK) kept tight control on the exchange rate, holding the tenge-dollar rate fairly Fiscal Policy and Public Financial stable. This pushed up devaluation expectations, as Management was reflected in the high demand for foreign currency and a rise of dollarized deposits in the The authorities are applying a countercyclical banking system by year’s end. To defend the pegged expansionary fiscal policy to support the 1 economy. Immediately after the tenge devaluation planning and results-based budgeting, and enhance and amid early indications of an economic the public audit function. There are also plans to slowdown, the Government launched an economic improve the equity and neutrality of the tax system support program for 2014–15 of 1 trillion tenge, and increase the efficiency of the use of transfers equivalent to US$5.5 billion, used mainly to relieve from the Oil Fund. The subsequent phase will focus credit problems in the banking sector by addressing on expanded PPP implementation, the improved a long-standing issue with nonperforming loans efficiency of local governments, and the enhanced (NPLs) and providing subsidized loans to small- and functioning of the public audit system to improve medium-sized enterprises (SMEs). With oil prices fiscal sustainability. sliding and external uncertainties heightening, the Government announced a supplemental five-year The Bank assists the public sector and PFM economic support program for 2015–19 centered reforms in Kazakhstan through a range of on a major stimulus package of about US$14 billion activities, including: the ongoing Customs to be used for developing transport and utility Modernization Project, the Tax Administration Reform infrastructure and building social housing and Project, the Statistical Capacity Building Project, and the schools. At the same time, the 2015 government recently launched Justice Sector Institutional budget was optimized and rebalanced by cutting Strengthening Project. An additional program is the nonproductive expenditures and scaling up those Joint Economic Research Program (JERP), which expenditures that stimulate growth, while protecting involves technical assistance for improving the basic previous social commitments from cuts. Assuming principles of results-based budgeting, reforming relatively stable external conditions, the fiscal selected tax areas and the integration of fiscal stimulus is expected to have a positive impact on agencies, strengthening the public debt management employment in the near term and on growth from system, improving the insolvency system, and 2016 onward. facilitating the Extractive Industries Transparency Initiative (EITI). The Government has developed a new budget policy aiming to further strengthen the public Financial Sector Performance financial management (PFM) system. Following President Nursultan Nazarbayev’s address to the Kazakhstani banks benefit from the economic nation in December 2012, the Government support program. In 2014, economic support went developed a concept on a new budget policy for mainly to the banking sector to relieve credit Kazakhstan aiming to enhance budget efficiency problems by addressing a long-standing issue with during 2014–17 (phase I) and improve fiscal NPLs and providing subsidized loans to SMEs. The sustainability during 2018–20 (phase II). The budget support program recapitalized the Problem Loans efficiency phase envisages reforms across a large Fund by US$1.4 billion in 2014 and US$1.4 billion number of functions and objectives. The in 2015 in order to reduce NPLs, which constituted Government aims to streamline current about 23.5 percent of total bank loans in December expenditures by addressing the financial 2014. The authorities also extended tax exemptions sustainability of the pension system; introducing per for NPL write-offs. Nevertheless, the NPL ceiling capita financing in education and health care; (set at 10 percent by end-2015) remains too reforming the public service pay system; and ambitious for several banks. This program of credit improving the targeting of social assistance stimulus has been rolled over to 2015. programs. Banks' Non-performing Loans and Provisions The Government also hopes to achieve better 40 capital expenditure efficiency by improving the 35 public investment system; developing new public- Percent of total loans 30 private partnership (PPP) mechanisms for 25 NPLs overdue 90 infrastructure development; introducing public 20 days and more 15 monitoring and oversight over the debt of the state- 10 Provisions for all owned enterprise (SOE) sector; and reforming the 5 types of NPLs intergovernmental targeted capital transfer system. 0 Aug-14 Nov-14 Jun-14 Mar-14 Apr-14 May-14 Oct-14 Dec-14 Jan-14 Jul-14 Sep-14 Feb-14 In addition, the Government intends to further strengthen the inter-linkages between strategic 2 Tighter monetary policy and targeted policy the insolvency system in the country. It is expected interventions impacted the rate of credit growth that the new insolvency legislation, if soundly and its composition. By year-end 2014, credit implemented, would produce significant results, growth had slowed from double digits in the first such as: (i) the expansion of access to credit at half of the year to 2.3 percent year-on-year by the affordable rates, particularly for SMEs; (ii) the end. Credit to the corporate sector stagnated after efficient use of judicial resources; (iii) the monetary policy tightened. Growth of consumer encouragement of foreign and local investment; (iv) credit fell from nearly 50 percent year-on-year in the the preservation of jobs; and (v) improved overall beginning of 2014 to 17 percent in December, due financial stability and enhanced economic growth to the NBK-imposed cap of 30 percent for each through the release of locked-up productive assets. bank. Meanwhile, subsidized loans to SMEs grew from -9 percent year-on-year in January 2014 to Private Sector Performance nearly 33 percent in December, supporting a growth in credit overall. The Government’s strategy for the diversification and competitiveness of the Contribution to Nominal Credit Growth economy is anchored in the recognition of the 20 private sector’s paramount role. Though 15 diversification toward non-extractive tradables has Percentage points 10 been part and parcel of Kazakhstan’s development Mortgage strategy, actual success has so far been limited. The 5 Consumer loans economy was and remains highly resource 0 Loans to SMEs dependent, with manufacturing accounting for 11 -5 Corporate loans percent and agriculture for 5 percent of GDP. The -10 diversification agenda proved difficult in the face of Feb-14 Sep-14 Oct-14 Dec-14 Jan-14 Apr-14 May-14 Jun-14 Mar-14 Aug-14 Nov-14 Jul-14 the booming commodity prices leading into the 2008 financial crisis. The Government’s current development program puts a major emphasis on Non-bank financial institutions (NBFIs) can increasing the non-oil sectors’ contribution to complement the activities of commercial banks growth. by targeting specific market segments in which banks do not participate actively. NBFIs are Labor productivity in Kazakhstan has grown in usually more effective than commercial banks in recent years but much remains to be done in key market segments delimited by the characteristics of sectors, especially agriculture and borrowers (smaller firms, rural areas) or by type of manufacturing. Over the past decade, labor financial products. In developed financial sectors, productivity has grown faster in the oil-extracting NBFIs account for a large proportion of the overall sectors/regions; the highest productivity growth financing provided to private enterprises. In was observed in the oil-extracting Atyrau region, Kazakhstan, however, NBFIs are significantly where regional output per worker was four times underdeveloped compared to countries with higher than the average for the country and 11 times comparable income levels. Similarly, the use of higher than in the agro-intensive Zhambyl region. financial instruments that can enhance access to Productivity growth in the oil-extracting regions was finance, such as leasing, factoring, and trade-credit fueled by large capital investments associated with financing, could be further promoted by introducing oil-extraction activities, while employment creation a more conducive legal and institutional framework. was limited. The agriculture sector, on the other The World Bank is working with the hand, lags behind the global possibilities frontier; a Government on financial sector reforms domestic agricultural worker in Kazakhstan through several technical assistance projects produces US$3,000 worth of crops per year, while a along with ongoing policy dialogue. As part of farm worker in a developed country produces the JERP, the Bank continues to work with the US$50,000–$70,000 worth of crops, or 17–23 times NBK on strengthening the stability of the financial more. sector through regulatory reforms. For a number of years, the Bank has been providing technical Improving productivity and competitiveness in assistance to the Ministry of Finance on improving Kazakhstan requires a mix of private initiative and public support in order to (i) stimulate 3 investment in physical capital for the modernization enabling environment to attract needed of production processes, (ii) adopt and develop new investment in the non-oil industry. The results of technologies to accelerate the pace of technological this commitment are visible in a variety of areas, change in the country, (iii) develop human capital to resulting in an improvement in Kazakhstan’s Doing enhance managerial and technical skills, and (iv) Business ranking from 74 in 2010 to 50 in 2014, 1 promote public investment in basic infrastructure. placing it among the top reformers in improving the ease of doing business for entrepreneurs. The Government plans to address these Kazakhstan improved conditions for starting a challenges through structural reforms and business, getting credit, and protecting investors. selective financial support and investments. The The Government continues to improve the Government’s medium-term agenda for stimulating regulatory environment for SMEs with the aim of private sector investment, productivity, and increasing their contribution to the economy. economic diversification is outlined in the State However, although positive legal reforms have been Program of Industrial and Innovative Development achieved, many obstacles remain in practice for for 2015–2019, which is aimed at more focused enterprises. Similarly, although reforms supporting support for the manufacturing industry through a the business environment beyond Doing Business combination of targeted industry/cluster support have taken place, they could be enhanced further in and systemic measures. SME development is also terms of implementation. one of the top priorities of the Government. Kazakhstan has established several programs, The World Bank is working closely with the instruments, and institutions to foster SME Government on this agenda by providing development, but with modest success so far. SMEs’ technical assistance under the JERP. The World contribution to GDP amounts to only 20 percent, Bank assists with the implementation of reforms in and 30 percent to employment. In January 2014, the the business environment; improvements in the number of registered small enterprises (small insolvency regime; and reform of the permits system companies, individual entrepreneurs, and farmers) regulating business activities. Over the past fiscal reached 1.5 million; however, only 56.4 percent were year, the World Bank has also collaborated closely economically active and the majority (over 70 with the Ministry of Investments and Development percent) were in the form of individual in building the capacity of the national agency entrepreneurship without the creation of a legal charged with attracting investments and promoting entity. Other efforts will be directed toward exports, and is engaging in policy dialogue to improving the business environment, strengthening support a favorable environment for local exporters market competition, modernizing large and in the non-oil sectors. medium-sized enterprises, and stimulating private sector innovation, particularly in new and high value The Bank’s recently approved SME added and export-oriented sectors. Competitiveness Project aims to strengthen the management capacity of SMEs to grow and Labor Productivity in 2008 ($ PPP) create more and better jobs. The project also Kazakhstan 22,475 focuses on increasing market linkages for SMEs in Russia 27,830 the non-extractive sectors with a market-based Italy 77,404 growth potential. The implementation of the five- Netherlands 78,007 France 82,446 year project will start after ratification by the Hong Kong 86,697 Parliament. Belgium 85,937 Ireland 88,505 Austria 96,659 Poverty and Social Protection USA 99,347 Norway 101,205 - 20,000 40,000 60,000 80,000 100,000 120,000 The favorable external economic environment and fast per capita income growth have contributed to an impressive reduction in The Government has shown a commitment by poverty in less than 10 years. The share of the accelerating reform efforts in the business- Kazakhstan population living in poverty went down 1The Doing Business methodology has evolved over 2010– 14, therefore the rankings are not fully comparable. 4 from 47 percent in 2001 to about 3 percent in 2013, countries. This low coverage is related to the low as measured by the national poverty line. Similarly, value of the income-eligibility threshold, which is set at the international poverty line, as measured by the per person at about US$1 per day. Kazakhstan’s purchasing power parity (PPP)-corrected US$2.5 social safety net consists of categorical and means- per capita per day, poverty in Kazakhstan fell from tested transfers. Categorical programs transfer about 41 percent in 2001 to 4 percent in 2009. However, 60 percent of all their resources to the population in against a benchmark of a higher poverty line at the the two lowest quintiles of income distribution. The PPP-corrected US$5 per capita per day (which is means-tested program is more cost efficient, more appropriate for countries with a higher level of transferring almost 90 percent of all resources to the income per capita), some 42 percent of two lowest quintiles. It has suffered from reductions Kazakhstan’s population was still living in poverty in real budget outlays, however, and it now covers in 2009, though down from 79 percent in 2001. less than 1 percent of the population. To prevent it from contracting further, the program needs to be 100 Headcount Poverty Rates reformed to include activation elements that focus on graduating prime-aged, able-bodied recipients Percent of total population 80 from relying on assistance to finding employment. 60 40 Kazakhstan’s pension system was transformed 20 from a pay-as-you-go (PAYG) scheme to a 0 contribution-based, fully funded accounts 2001 2009 2001 2009 2001 2009 2001 2009 2001 2009 scheme in 1998. Real returns remained low, given Kazakhstan Turkey Russia Ukraine Belarus the risk aversion of the funds. Current pensioners Poverty headcount ratio at $2.5 a day (PPP) Poverty headcount ratio at $5 a day (PPP) continue to rely almost exclusively on state pensions, while lump-sum distributions from individual A comparison of Kazakhstan’s performance in accounts remain small. In response to the decreasing the World Bank’s indicator of shared prosperity purchasing power of pensions, a basic pension was with other countries in the region shows introduced in 2005, and pensions continue to be significant progress. The shared prosperity augmented each year at a rate exceeding inflation. indicator is measured by the growth rate of The Government is now considering further reform consumption per capita of the bottom 40 percent of options. the population. In Kazakhstan, the average consumption growth for all households was about 5 The World Bank’s engagement with the percent, while the growth rate of consumption per Government of Kazakhstan in the social capita of the bottom 40 percent was about 6 percent protection sector is underpinned by the JERP during 2006–10. While Russia and Belarus and currently consists of two tasks. The first assists outperformed Kazakhstan in per capita the Government of Kazakhstan in introducing consumption growth, including the bottom 40 elements of activation and conditional cash transfers, percent of the population, the Baltic countries and so that the resulting social safety net is flexible, Turkey were behind. incentive compatible, and proactive. The second technical assistance task focuses on helping the Shared Prosperity Validation Government’s efforts to improve the national 15 pension system by ensuring its financial sustainability and transparency and that it maintains Percent change 10 a socially acceptable income replacement ratio, and 5 also by diversifying pension payment sources upon 0 reaching the retirement age and expanding the coverage. Turkey Albania Georgia Belarus Romania Latvia Lithuania Bulgaria Serbia Croatia Macedonia Poland Kyrgyz R. Moldova Hungary Montenegro Slovak R. Tajikistan Russia Estonia Ukraine Czech R. Slovenia Armenia Kazakhstan Kosovo -5 Consumption growth of the bottom 40 percent Education Consumption growth of total population Since 2010, Kazakhstan has ranked first on the Overall, about 30 percent of the population UNESCO Education for All (EFA) receives some form of social assistance, which is Development Index by achieving universal low by the standards of upper-middle-income primary education (99 percent), adult literacy (99 5 percent), gender parity (99 percent), and a nearly 100 Program on Education Development for 2011– percent rate of transition from primary to secondary 2020, the Government plans to achieve universal general education (confirmed by the latest EFA preschool education by 2020, complete the report 2013–14). Public expenditures on education transition to a 12-year model, and introduce a per have been on the rise (3.4 percent of GNP in 2013– capita financing scheme and a Board of Trustees at 14), though they are still lower than the average of the secondary level. Since Kazakhstan joined the the Organisation for Economic Co-operation and Bologna process in 2010, a three-level degree system Development (OECD) benchmarks of 6–7 percent. of higher education has been introduced in all higher education institutions. National universities will be Kazakhstan has demonstrated a strong granted autonomy in 2015, followed by autonomy commitment to improving student outcomes, for all universities in the country by 2016. Improving with recent laudable achievements. These the quality of teaching, learning, and training and include the rapid increase in access to preschool increasing funding at all levels, including for education (from 23 percent enrollment in 2005 to 74 preschool, secondary, technical and vocational, and percent in 2013), the introduction of innovative higher education, are among the remaining teaching and learning in secondary education challenges, together with further systemic reforms through Nazarbayev Intellectual Schools (NIS), the focused on increasing quality. development of per capita financing methods, and the establishment of Kasipkor Holding and In recent years, Kazakhstan has shifted its focus Nazarbayev University to elevate technical, to post-basic education. One of the priorities is vocational, and higher education. The biggest the modernization of technical and vocational challenge for the Ministry of Education and Science education (TVE), which has not received due going forward is improving the quality of education. attention for some years. The introduction of the An important factor in this effort is ensuring that the unified and centralized National University education system allows for evidence-based decision Entrance Test in 2004, with adaptation in 2012, making and has a strong linkage between intended along with the pilot launch of a new per capita policy goals and implementation. financing approach in secondary education in 2014, has been helping to improve access and Kazakhstan participated in the Trends in transparency. International Mathematics and Science Study (TIMSS) in 2007 and twice in the Program for The World Bank supports the education sector International Student Assessment (PISA) in in Kazakhstan through a two-pronged approach: 2009 and 2012. Kazakh 4th-grade students scored technical assistance implemented under the JERP relatively high in both mathematics (fifth place) and and an investment project supporting the science (11th place) on the TIMSS. The PISA 2012 modernization of TVE. Building on the progress of results show marked improvements in math and JERP activities since 2005 on improving the quality science compared to 2009 for both boys and girls, of secondary education, a three-year programmatic equivalent to almost one year of schooling. technical assistance program for 2015–17 has been Improvements in reading were more modest. launched to raise the learning outcomes of general Despite these improvements, PISA scores remain secondary education. In 2014, to help Kazakhstan below the OECD average, equivalent to 1.5 and 2.5 rise to international educational benchmarks and years of schooling in math and reading, respectively. promote well-performing school systems, the Kazakhstan also spends the least per pupil on program used the PISA framework to stress teacher education in the Europe and Central Asia region. effectiveness, school autonomy, and best There was a dramatic decline in the share of students international practices in student assessment and who are functionally illiterate in math, but little school inspection. A benchmarking analysis of PISA change in reading illiteracy. Kazakh students show 2012 results, along with ongoing capacity-building more mastery of classical math and reading skills, activities in inspection and country assessment, have but less so far of what could be referred to as “21st- enhanced the analytical and technical capacity of century skills.” education policy makers in quality assurance in secondary education. Over the next 10 years, Kazakhstan is embarking on further major reforms across all The ongoing Technical and Vocational education levels. As delineated in the State Education Modernization Project (TVEM) is 6 aimed at raising the efficiency, quality, and a national estimate of 12.6 per 100,000 live births in relevance of TVE through an improved policy 2013 for the maternal-mortality ratio could indicate framework and institutional capacity. As a result, a that the country has reaped the results of its efforts national qualifications system and occupational to reduce this ratio over the past couple of years and standards have been developed, linking the needs of is on track to reach the related MDG target. industries with education programs. Sixty-eight TVE colleges have received grants on a competitive The State Health Care Development Program basis to enhance institutional development and for 2011–2015 recognizes health as one of the teacher training and to introduce a competency- country’s major priorities and a prerequisite to based curriculum. In 2014, a per capita formula sustainable socioeconomic development. The model and a project evaluation system were program aims to (i) enhance the effectiveness of developed. By the end of 2015, the project aims to intersectoral and interagency collaboration on pilot a competency-based curriculum and extend the public health issues; (ii) strengthen preventive grants program to amplify the results and impact. To services and improve the diagnostics, treatment, and continue the efforts, the recently approved Skills and rehabilitation of the main socially important diseases Jobs Project aims to improve the employment and injuries; (iii) upgrade the sanitary and outcomes and skills of the current workforce as well epidemiological services; (iv) enhance the as the relevance of technical and vocational organization, management, and financing of health education and training and higher education care services; (v) improve medical and programs in Kazakhstan. The project will help align pharmaceutical education and introduce innovative the national qualifications system with labor market technologies in the health sector; and (vi) enhance demands to improve the quality assurance and the accessibility and quality of pharmaceuticals for relevance of pre-employment education and training. the population and upgrade medical equipment in the health facilities. The Kazakhstan Youth Corps Project is designed to promote young people’s The World Bank supports health care system community engagement and life skills through reform through a comprehensive Health Sector community-based service learning programs, Technology Transfer and Institutional Reform especially for vulnerable youth. The project’s Project. The project helps introduce international Grant Agreement is pending a signature by the standards into the health sector and build long-term Government and ratification by the Parliament, institutional capacity in the Ministry of Health and which is expected to be completed by September related health institutions. It deals with all aspects of 2015. Overall, the project aims to reach 8,500 young health sector reform, including: (i) health financing, people and about 150 youth-focused organizations budgeting, planning, and management; (ii) health over a three-year period. care quality improvement; (iii) reform of medical education and medical science; (iv) health Health information system development; (v) pharmaceutical policy reform; and (vi) food safety Kazakhstan is facing challenges in and World Trade Organization (WTO) accession. restructuring its health care system. The country’s health outcomes are lagging behind its The next state program for 2016–2020 aims to rapidly increasing income. At 70.45 years in 2013, its further build on the achievements of the life expectancy is low compared to other countries ongoing program, with particular attention to (i) with similar incomes. Noncommunicable diseases strengthening disease prevention, (ii) improving the such as cardiovascular diseases and cancers, as well service delivery system with priority development of as tobacco- and alcohol-related diseases and injuries, primary health care, (iii) enhancing the coverage and are major causes of adult mortality. However, sustainability of the health system through notable progress has recently been achieved in implementation of a social health insurance system, maternal and child health. Infant mortality and and (iv) developing adequate human resources for under-five mortality rates, according to international the health care system. The World Bank will estimates, were 16.7 and 18.7 per 1,000 live births in continue supporting implementation of the program 2012, respectively, with the latter set on track to through lending and technical assistance under the achieve the Millennium Development Goals (MDG) JERP. target of 18.0 per 1,000 live births by 2015. Similarly, 7 Agriculture and Irrigation farms that operate without legal registration and are involved mainly in subsistence farming. Agriculture growth averaged 4.6 percent in 2001–13. Although slower than the rest of the The Government recognizes the enormous economy and uneven from year to year, the growth untapped potential of the agriculture sector and is robust. The agriculture sector accounts for only is developing options for reform. Facilitating 4.5 percent of GDP, but it continues to employ structural change in the sector will require the almost one-fourth (24 percent) of the working creation of a more flexible land market. Improving population and is therefore critical to addressing the efficiency of the increased amount of subsidies poverty and food security, as well as to providing an and credit programs and aligning them with WTO important avenue for the diversification of the accession requirements would release significant economy. Capital investments in agriculture are public funds for other important priorities. growing and reached almost US$900 million in 2012. Livestock production has become a major priority Yet, agriculture’s share in total investment was only for the Government’s agriculture policy, and a 2 percent in 2012, two times lower than the share in significant share of subsidies was given to livestock total GDP. producers in 2013. A major part of agriculture exports comes from the exports of grain and flour, which totaled US$2.7 billion in 2013. The share of food and agriculture exports in total exports was 3. 3 percent in 2013. The share of imports of agriculture/food products in total imports was 9.4 percent in the same year. Labor productivity in agriculture increased by almost 50 percent between 2001 and 2012, but not to the same extent as in other sectors (75 percent). Consequently, the disparity between Key World Bank contributions include: (i) the incomes in the agriculture sector and other sectors Irrigation and Drainage Improvement Project (IDIP), increased. Agricultural labor declined from 36 which helped rehabilitate the irrigation percent of total employment in 2001 to 24 percent infrastructure (a follow-up project IDIP-2 will be in 2012. The majority of labor is concentrated in the launched in 2014); and (ii) the Agricultural Post- small household sector, which produces 46 percent Privatization Assistance Project (Phases I and II, both of agricultural output, including over 80 percent of completed), which supported the inflow of financial livestock output. resources to the sector and provided technical assistance to the financial advisory network in the The sector is highly heterogeneous in terms of country and risk management to the agriculture farm structure and productivity, and thus average sector. In addition, building on the 2010 Public data across regions and farm types give quite limited Expenditure and Institutional Review (PEIR), information. The northern region is dominated by which provided a qualitative critique of the larger farms specializing in crop production, agricultural subsidies programs, the JERP study, whereas smaller mixed farms, which include “Improvement of the Approach to Agricultural substantial meat and dairy production for the Strategy, Policy and Budget Formulation,” provided domestic market, predominate in the south. Large a more detailed quantitative analysis of the impact of farms in the north are called agricultural enterprises selected subsidies on tariff quota programs in terms and have forms of limited liability partnership and of the distribution of costs and benefits for joint stock companies. Individual farms (or so-called producers, consumers, and taxpayers, as well as peasant farms) have a special legal status that allows economic losses and outputs. Finally, a high-level them to produce agricultural products, employ brainstorming session on “Economic workers, and benefit from various tax privileges. Diversification and Rural Job Creation through Individual farms are present around the country. Private Sector Investment in Agriculture” was held The household farm is a category of very small in Astana in February 2015 on the initiative of the 8 Prime Minister to consider international experience refined in the new State Program for Transport in agribusiness development with the aim of dealing Infrastructure Development up to 2020 with the challenges faced by Kazakhstan. (Transport Strategy) with the assistance of the World Bank. The Transport Strategy calls for more Transport efficient transport infrastructure and logistics, with a greater focus on infrastructure at the local level, in Although strategically Kazakhstan has the terms of both improving basic accessibility and potential to connect the growing markets of increasing connectivity throughout the country, Southeast Asia and China to Russia and Europe, including remote and sparsely populated regions, to the country ranks only 88th among the 160 provide access to social infrastructure and services. economies included in the trade logistics survey as Among the key priorities are investment programs presented in the Bank’s 2014 report, “Connecting to that include the rehabilitation of the national road Compete 2014: Trade Logistics in the Global network, one-fourth of which is in poor condition; Economy.” Routes to and from dynamic growth the provision of selected additional infrastructure, poles such as Turkey, Russia, India, and China particularly along the Central Asia Regional (accounting for more than half of the world’s Economic Cooperation (CAREC) corridors; the economic and trade growth) cross through the development of the country’s potential as a regional country. Improving internal road transit links is logistics hub in Central Asia and as a transit country crucial for Kazakhstan’s development in order to between Europe and Asia (to double the transit interact with and benefit from the economic growth traffic to reach 35 million tons of transit flow per adjacent to its borders. There are also nonphysical year by 2020); and institutional and legislative barriers to trade, including inefficiencies at border changes. crossings, unofficial payments, and deficiencies in the harmonization of basic transit documents and In the railways sector, key reforms have been regulations. aimed at separating infrastructure from rail transport, largely eliminating above-rail tariff regulation, Kazakhstan’s current transport system includes providing open access to infrastructure, and 97,427 kilometers of roads, 14,000 kilometers of subsidizing unprofitable but socially important railways, and numerous logistics centers, as well as services. The National Railway Company free-trade zones to facilitate production, “Kazakhstan Temir Zholy” defines its strategic role warehousing, and transportation. The road and rail as a key logistics provider for transit traffic between networks account for the transportation of nearly 90 Asia and Europe and takes measures to attract percent of total cargo volume. transit freight traffic through Kazakhstan. The total volume of goods in transit through In the roads sector, key institutional reforms are Kazakhstan in 2012 amounted to 17.8 million planned to improve road maintenance and to secure tons, which amounted to more than US$1 billion investments in highway infrastructure. The special in income. The majority of goods in transit are organization “KazAvtoZhol” has been established transported via the rail network (16.3 million tons), to oversee the construction, management, and the rest by road (1.46 million tons) and water funding of the major republican road network. transport (0.16 million tons). Most of the items in transit originate in Russia, whose share was 50 In the aviation sector, the gradual liberalization of percent in 2012. China accounts for 15 percent of air transport regulation is planned, along with the total goods in transit, with Georgia and investments in infrastructure and significant Uzbekistan roughly 9 percent each. The main measures to improve safety. destination countries for transit cargo through Kazakhstan are countries in Central Asia In the water transport sector, the emphasis is on (Uzbekistan, 36 percent; Kyrgyzstan, 19 percent; the Aktau port and services infrastructure, Tajikistan, 11 percent; and Turkmenistan, 8 percent), expansion of the merchant fleet, maritime safety, Afghanistan (13 percent), and Russia and China (5 and the development of human resources. percent). The Government of Kazakhstan embarked on The overall development objectives for the an ambitious roads development program in transport sector in Kazakhstan have been 2010, the Western Europe-Western China (WE- 9 WC) International Transit Corridor Project (part and commercial activities along the road and in of CAREC), to stimulate economic growth and adjacent towns and cities. reduce poverty in the poorest parts of the country by improving access to the regions and providing As weaker global growth depressed oil prices employment in the construction sector and related and external demand, in late 2014, the President services. As part of the Government’s plan to announced a new economic program “Nurly upgrade the 2,840 kilometers linking Europe and Zhol” (NEP), which charges the Government to Russia to China through Kazakhstan, the World implement road and rail transport projects Bank supports the implementation of the South-West connecting Astana at the center of the country with Roads Project (SWRP), the largest infrastructure areas in the east, west, north, and south via rail, air, project in Central Asia and one of the largest single and road networks. investment loans in the World Bank’s history. Overall, about 85 percent of the total amount of the The Government of Kazakhstan sees the Bank WE-WC project is cofinanced by the International as a partner of choice to implement the NEP Bank for Reconstruction and Development (IBRD), through the cofinancing of two important road the Asian Development Bank (ADB), the European corridors linking the center (Astana) with the Bank for Reconstruction and Development west (Aktau) and the south (Almaty). The (EBRD), the Japan International Cooperation Center-West Corridor is the main gateway to the Agency (JICA), and the Islamic Development Bank west through the Caspian Sea and beyond, through (ISDB). the Caucasus to Europe, and to the east to the port of Lianyungang in the Pacific Ocean. The Center- Objectives of the SWRP include: (i) upgrading South Corridor strategically connects Kazakhstan to and reconstructing 1,150 kilometers of road sections Western China and Russia. These projects are within the South Kazakhstan and Kyzylorda oblasts intended to create an environment conducive to along the WE-WC corridor; (ii) strengthening the business-driven regional economic integration institutional capacity of the Ministry of Transport through enhanced factor and goods mobility that and Communications and the Committee of Roads; allows the formation of distributed production and and (iii) improving road safety and road services. To delivery systems. Additional jobs and incomes date, more than two-thirds of the road length has generated by the proposed transport projects will been opened to traffic, the National Road Operating help support domestic demand. Company “KazAvtoZhol” has been created to optimize management of the national road network, Energy and around 35,000 local jobs have been created under the project. Kazakhstan’s rapid economic growth in the past decade has led to a sharp upswing in electricity The Government of Kazakhstan expanded its consumption. As a result, the earlier generation’s partnership with the Bank on the rehabilitation surplus has disappeared and the supply-demand and development of the WE-WC corridor by situation has become extremely tight. Power seeking the Bank’s assistance on implementing the shortages due to the increasing population and East-West Road Project, which is part of the economic growth in urban areas, in particular in Government’s long-term strategy to stimulate Astana and Almaty, have resurfaced in the winter sustained growth and improve competitiveness. periods of maximum electric loads, necessitating This project will provide an efficient transport link some restrictions on consumption that have had an from Khorgos, which is the primary road border adverse impact on regional economic development. crossing point between Kazakhstan and China, to The deteriorating state of regional electricity the city of Almaty, one of the major economic cooperation in Central Asia has further aggravated centers of Central Asia. The project aims to increase the supply deficit. Following the ongoing recovery the efficiency and effectiveness of modern highway from the economic slowdown in 2008–09, electricity operation and maintenance by scaling up road consumption is expected to increase rapidly. A lack transport sector reform efforts initiated under the of investment to expand electricity capacity in the ongoing Bank-financed SWRP. It will also facilitate past two decades—and the fact that most of the the more efficient movement of goods and people coal-fired fleet, accounting for 84 percent of total and enhance road safety by providing improved generation, started reaching the end of its design conditions for the growth of industrial, agricultural, life—threaten economic growth unless new 10 generation and transmission investments are of about a dozen major projects, including a large undertaken in a timely manner. (2,640 megawatt) greenfield coal-fired power plant at the Balkhash Lake. To address the weaknesses in Kazakhstan ranks among the most advanced the investment climate on the generation side, the countries in the Former Soviet Union (FSU) in Government has adopted “incentive wholesale the area of power sector reforms. Today, the tariffs” whereby administered tariffs are given to electricity sector has a threefold structure: (i) the new investors in exchange for investment generation subsector, with all large power plants commitments. A number of program documents either privatized or transferred to strategic investors and laws have been developed to define a road map under concessionary agreements, (ii) the to address the existing and expected challenges in transmission subsector, with the electric power the energy sector. A new Energy Efficiency Law, in system and its management under the state-owned effect since January 2012, provides a comprehensive Kazakhstan Electricity Grid Operating Company legal, regulatory, and institutional framework. In (KEGOC), and (iii) the distribution subsector, with August 2013, an ambitious Energy Efficiency regional electricity distribution companies (REKs), Program 2020 was approved, aiming to reduce the most of them privatized, operating at the retail level energy intensity of the national economy by 10 as vertically integrated entities also engaged in percent by 2015 and 25 percent by 2020. A new generation and trade. Furthermore, Kazakhstan has Energy Sector Development Strategy has also been established a two-tier electricity market that includes: adopted, and an electricity capacity market is to be a) the wholesale market primarily based on bilateral introduced in 2016 to stimulate new investments sale/purchase contracts; and b) the retail electricity through an auction-based market mechanism. market, which is not yet open to competition and is controlled by the REKs. On the organized electricity Since 1999, the Bank’s support has focused on spot market (KOREM), short-term electricity the large-scale modernization and extension of transactions are conducted electronically. the high-voltage transmission sector through four projects: (i) the Electricity Transmission Total Electricity Consumption Rehabilitation Project; (ii) the North-South Electricity 90 Transmission Project; (iii) the Moinak Electricity 80 70 Transmission Project; and (iv) the Alma Electricity 60 Transmission Project. Under the projects, major Tirawatt 50 40 transmission sector reforms were successfully 30 carried out, including transmission tariff 20 10 rationalization and the construction of over 1,000 0 kilometers of overhead transmission lines (OHTL), 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Year the adoption of a modern grid code, and the establishment of an organized spot market. KEGOC has become a financially strong company Although sector regulation has evolved over as a result of a series of institutional capacity- time, government intervention is still present. building measures introduced with World Bank In particular, retail tariff setting does not ensure the assistance. The new Energy Efficiency Project will focus full recovery of justifiable expenses, including the on energy-efficient investments in public and social cost of modernization. As a result, much of the facilities along with technical assistance to create an distribution sector is stuck in technological enabling environment for sustainable energy obsolescence, which is chiefly the cause of the financing. In addition to investment projects, the inadequate reliability of supply facing retail Bank provides technical assistance under the JERP consumers. on the integration of renewables into the power market of Kazakhstan, modernization and financing The Government, under its current sector mechanisms for the district heating sector, and the development program, focuses on the development of a renewable energy market. Support expansion of generation capacity through new is also rendered for the development of investments and the modernization of existing Kazakhstan’s domestic Emissions Trading Scheme capacity, as well as through the extension of related under the Partnership for Market Readiness (PMR). transmission capacity amid growing threats of debilitating power shortages. The program consists 11 Water and the Environment Improvement Project (IDIP-2) and the SyrDarya Control and Northern Aral Sea Project Phase II (SYNAS-II). Kazakhstan has made commendable progress SYNAS-I focused on the most urgent investments on modernizing its post-Soviet regulatory and needed to reduce water losses in the Kazakh part of institutional framework for environmental the basin and to capture that water in the NAS, with management, but challenges remain in adequately impressive results. managing the environmental impact of industries. Air and water pollution is significant, and since The Bank also supports Kazakhstan’s water and environmental monitoring systems are not environment sectors under the JERP sufficiently funded, environmental statistics do not engagements. The Bank provides technical reflect the current pollution load on the assistance to the Ministry of Energy to inform environment. government policy and identify regulatory changes for improved solid waste management. The Bank is Kazakhstan has inherited a legacy of significant also engaged in a nationwide assessment to analyze environmental problems related to pollution the impact of climate change on different regions of and natural resource use by heavy industries. the country in various sectors of the economy and The environmental impacts of the extraction and to provide input on the formulation of mitigation manufacturing industries that Kazakhstan inherited and adaptation strategies. The Bank actively works from the Soviet era are sometimes associated with with the Committee for Water Resources to develop excessive pressures on scarce water and other a road map for strengthening water management for environmental resources and significant public improved water efficiency and security. Particular health damage. activity is focused on an assessment of the system of bulk water pricing and financial sustainability at the One other significant environmental challenge macro-sector level and a review of the institutional for Kazakhstan is the desiccation of the Aral Sea, framework to identify ways to increase efficiency formerly one of the four largest lakes in the and financial self-sustainability. Technical work also world. Rapid irrigation developments in includes support to identify a road map for policy Kazakhstan and Uzbekistan over the past 40 years reform and public investments to improve water use have resulted in serious economic, social, and efficiency in irrigation, increase agriculture environmental damage to the sea and to the adjacent productivity, and achieve water savings to meet the region. The shrinking of the sea (and its growing non-agriculture water demands. consequences) has been described by many environmentalists as the worst environmental The Bank also continues its advisory assistance disaster in recent history. to Kazakhstan on reducing gas flaring to broaden and deepen the benefits of the existing gas The Bank’s support to Kazakhstan’s utilization program. environment sector has been through the Nura River Clean-up Project (closed), which helped provide THE WORLD BANK access to safe, reliable, and affordable water by PROGRAM IN KAZAKHSTAN cleaning up the mercury pollution in the river- adjacent areas; the ongoing Forest Protection and Kazakhstan joined the World Bank in 1992. Since Rehabilitation Project, supporting forest rehabilitation then the Bank has approved 41 loans to the country and preventing land degradation in the Irtysh Pine for a total amount of more than US$6.8 billion, of Forest and Dry Aral Seabed; and the Ust-Kamenogorsk which about 73 percent, or over US$5 billion, has Environmental Remediation Project, addressing been disbursed. groundwater pollution and strengthening institutional mechanisms for groundwater quality The Country Partnership Strategy (CPS), monitoring, as well as providing technical assistance approved on May 1, 2012, was designed to on reducing gas flaring. The World Bank helps the ensure continued strong government ownership Government to improve the timely availability of of the Bank-supported programs, and to allow water for productive purposes, including irrigated the Bank to adjust to changing government agriculture, fisheries, and industry, while at the same priorities and country circumstances, thereby time reviving the Northern Aral Sea (NAS) through maximizing the Bank’s contribution to Kazakhstan’s the upcoming Second Irrigation and Drainage 12 development. The CPS concentrates on the disbursed. While over 80 percent of the Government’s key priorities of competitiveness and commitments are concentrated in the two big jobs; strengthened governance in public South-West Road and East-West Road projects, the administration and service delivery; and the portfolio remains diverse, with two-thirds of the safeguarding of the environment. In contrast to projects focused on institutional building in the earlier CPSs, the current CPS is programmatic by areas of education, health, innovations, and the interlinking knowledge interventions through revenue administration agenda. sequenced products in a multiyear framework to maximize impact. The CPS targets key areas of The pipeline in Kazakhstan includes a number lagging performance as revealed by country of projects at various stages of preparation. development strategies or the Bank’s assessment These include: (i) the Elimination of Persistent Organic tools, including international comparative analysis. Pollutant Wastes Project; (ii) the Support to Social Modernization: Health Insurance Project, (iii) the In May 2014, the World Bank and the Education Modernization Project; (iv) the Center South Government of Kazakhstan embarked on a new Road Corridor Project; (v) the Center West Regional Partnership Framework Arrangement (PFA), Development Corridor; (vi) the Forestry Development which is being guided by the CPS and aims to Project; (vii) the Kazakhstan Solid Waste Management support the Government’s efforts to ensure more Project; (viii) the Syr Darya Control and Northern Aral sustainable development and inclusive growth that Sea Project, Phase 2, (ix) the Modernization and is widely shared and benefits the lower-income Rehabilitation of Irrigation and Drainage Project;) (x) the groups. Implementation of this PFA will be Climate Change Mitigation Project; (xi) and Support to conducted through technical assistance activities Attracting and Retaining Investments in high-potential and investment and institutional capacity-building sectors. projects along the following thematic areas of cooperation: (i) attracting investments into the Overall, Bank operations in Kazakhstan enjoy economy and developing PPPs; (ii) facilitating strong government ownership. However, several sustainable environmental (greener and energy- projects have experienced slow disbursements, efficient) development; (iii) increasing the role of the reflecting a somewhat slow start-up. The private sector in the economy by fostering the performance of Bank operations in the country have development of SMEs and improving the business also been affected by a number of country system climate; (iv) providing implementation support to aspects, including rapid staff turnover at both the institutional reforms; (v) developing job skills for the mid-management and working levels, a rigid labor market; (vi) promoting regional cooperation regulatory environment, and limited interagency and economic integration; (vii) fostering science and coordination. innovation; and (viii) strengthening the financial sector. As part of the 2014 Country Portfolio Performance Review (CPPR), the Bank and the With the signing of the PFA, the Bank has Government agreed to complete the 14-point significantly extended its advisory and Action Plan that was adopted to address the analytical services (AAA) to the Government systemic issues slowing down the portfolio provided under the JERP. The JERP is an performance. As of September 2014, all actions had instrumental tool for providing policy analysis, been successfully implemented, in part by strategic planning expertise, and good practice streamlining the specific Government procedures options to assist the Government with the reform that can sometimes lead to preparation and agenda in the field of economic and social effectiveness delays. Given that the PFA program is development. It also helps to further strengthen the expected to be implemented in a very short time institutional capacity of the Government to conduct frame, further measures are required to streamline economic and sectoral work. the internal government procedures. A set of recommendations were proposed at the PFA As of March 2015, the Kazakhstan portfolio Coordination Council meeting in March 2015 and consisted of 17 operations (15 IBRD loans and agreed to by the Government to allow for faster two large grants funded from the Recipient decisions during the negotiations stage and to Executed Trust Fund), with a total net commitment expedite the preparation of all projects under the of US$3.8 billion, of which US$2 billion has been PFA. In addition, the Prime Minister endorsed the 13 preparation timeline for all the investment projects, IFC supports the country’s financial sector with specific deadlines for signing and ratification. development through providing a full range of The Bank and the Government continue a joint investments to financial institutions and thus monitoring of the problem projects and those expanding access to finance for micro, small, and potentially at risk of not achieving their medium-sized enterprises (MSMEs). Nearly US$900 development objectives by i) improving million in investments was provided to Kazakhstan implementation performance, and ii) ensuring that via equity participation, quasi-equity products, new projects build on lessons learned from previous senior debt, and trade finance products to a number operations. of commercial banks, including microfinance and leasing companies. The International Finance Corporation In the real sector, IFC focuses on key industries Kazakhstan became a member of the that form the foundation of sustainable growth International Finance Corporation (IFC) in and that provide affordable goods and services to 1993. IFC began operating in the country by consumers, create jobs, contribute to government pioneering advisory services focused on private revenue, and stimulate the growth of local SMEs. In sector development. Since the beginning of Kazakhstan, priority real sector subsegments investment operations in 1997, IFC has invested include agribusiness and food processing, more than US$1.66 billion, including US$300 construction materials, and a broad range of million in syndicated loans, to support 61 private consumer service industries such as retail, affordable sector projects in the financial, oil and gas, housing, health care, and education. Recently agribusiness, and manufacturing sectors. financed projects include a cement plant, a medical insurance company, and a shopping mall. As of June 30, 2014, IFC’s total committed portfolio in Kazakhstan amounted to US$264 IFC has identified infrastructure development million in 14 projects in financial markets, as one of the critical components of promoting agribusiness, retail, construction materials, and the sustainable development in Kazakhstan. IFC railway sector. intends to facilitate infrastructure development through PPP advisory work and direct investments In line with the CPS, IFC’s strategy in with both private sector and subnational sponsors. Kazakhstan focuses on improving access to Specific focus areas include the logistics and infrastructure, strengthening the financial transportation sectors to improve connectivity and sector, and supporting the diversification and trade. IFC has recently provided financing to competitiveness of the economy. In addition to Eastcomtrans to help expand its railcar fleet, direct investments, IFC is providing advisory broadening commercial logistics services and services to improve corporate governance, help the helping develop the country’s infrastructure for government structure PPPs, and bring food safety trade and industry. In addition to investments, IFC, standards to international levels. jointly with EBRD, is advising the Government of Kazakhstan on its first large-scale PPP project for the Almaty Ring Road. 14 KAZAKHSTAN: FORESTRY PROTECTION AND REFORESTATION PROJECT Key Dates: Approved: November 29, 2005 Effective: July 12, 2007 Closing: June 30, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 30.0 28.9 1.1 Government of Kazakhstan 28.8 GEF Grant 5.0 4.97 0.03 Total Project Cost 63.8 *as of March 25, 2015 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Kazakhstan possesses a significant forest resource of 11.5 million hectares of forested land, which in absolute terms is the third-largest forest area in the Europe and Central Asia region. These forests are home to a biodiversity of global significance and play an important role in preserving the soil, wildlife and watershed management, and tourism. They are also a key to protecting the watershed of the Aral Sea Basin and to reducing the desertification and siltation of waterways and reservoirs. About 300,000 people directly depend on the sector, while an estimated 2.5 million live in or rely on the forests for fuel, fodder, and other resources. Kazakhstan’s forests, like the rest of its vast natural resources, have been subject to various challenges associated with the transition. The threats to forests have intensified in recent years as government funds have dwindled, hindering even the most basic forest management activities. The Project Development Objective is to develop and initiate ways of cost-effective and sustainable environmental rehabilitation and management of forest lands and associated rangelands, with a focus on the Irtysh Pine Forest, the Dry Aral Seabed (DAS), and the saxaul rangelands (saxaul is a plant growing in Central Asian deserts). The development objective is both local and global in nature. The project will address a range of forestry sector issues through the following components: 1. Reforestation activities and the purchase of fire management equipment in the Irtysh Pine Forest 2. Amelioration of the Dry Aral Seabed 3. Capacity building of the national forestry institution Implementation Status and Key Results:  About 40,600 hectares in the Irtysh Pine Forest have been planted to help rehabilitate the forest and reverse fire degradation trends.  Land degradation has been prevented on the Dry Aral Seabed, with 56,500 hectares of dry seabed area covered with vegetation, including 47,100 hectares planted with project resources.  Rangeland management activities on 20 demonstration sites have been fully completed. Some 168,000 hectares benefit from the improved access to water for livestock.  To date, about 7,000 people have been employed under other project activities (planting, construction works, competitive grants, etc.).  Construction of the Nursery and Seed Complex is nearing completion and scheduled to be operational in June 2015.  Five councils for participatory forest management were created and are operational in the Irtysh Pine Forest.  The capacity of forestry authorities significantly increased through improved knowledge of modern planting and fire management technologies and natural resource dynamics and also through management gained from project activities, study tours abroad, and inland trainings. Key Partners: the Ministry of Agriculture of the Republic of Kazakhstan, Committee for Forestry and Hunting. Key Development Partners included the Global Environment Facility (GEF), which financially contributed to the project, providing a US$5 million grant for technical assistance and a competitive grant program. KAZAKHSTAN: SECOND IRRIGATION AND DRAINAGE IMPROVEMENT PROJECT Key Dates: Negotiated: May 14–16, 2013 Approved: June 27, 2013 LA signed: April 29, 2014 Effective: Closing: Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 102.90 0 0 Government of 240.10 0 0 Kazakhstan Other Donors (EC) 0 0 0 Total Project Cost 343.00 0 0 The project responds to the government strategy to accelerate the improvement of irrigated land, improve the efficiency of water use in agriculture, and reduce demands on scarce surface water resources. Better use and management of irrigation infrastructure will help develop the agricultural sector to benefit the national economy and people in rural areas. The Project Development Objective is to improve irrigation and drainage (I&D) service delivery to support farmers in the project areas. This will be achieved through rehabilitation and modernization of I&D systems; improved management, operation, and maintenance (MOM) of these systems; and more efficient use of associated irrigated lands, all with the improved participation of users in developing and managing the rehabilitated/modernized systems. The project comprises the following components: 1. Rehabilitation and Modernization of I&D Systems Infrastructure (US$323.38 million). Subcomponent A will support the rehabilitation and modernization of I&D infrastructure on approximately 113,000 hectares. Subcomponent B will provide technical assistance for the design and supervision associated with the rehabilitation and modernization of I&D infrastructure, including preparing Site-specific Dam Safety Plans. 2. Sustainable Management, Operation, and Maintenance of I&D Systems (US$6.93 million) will support: (a) developing and strengthening RCCs and water management organizations through: (i) supporting the establishment of the enabling training and support units (Rural Support Units, RSUs); (ii) supporting Participatory Irrigation Development and Management (PIDM) activities, including related water sector studies and access to credit and leasing resources; and (iii) enhancing MOM activities, including water monitoring tools; (b) modernizing and strengthening on- farm water management (at the RCC level); and (c) modernizing and strengthening the MOM of the main irrigation and drainage system. 3. Agricultural Development (US$9.80 million) will support: (a) strengthening of farmer capacity through: (i) improving farm management and land use; (ii) supporting knowledge transfer on innovative agro-techniques; and (iii) supporting agro-cooperatives, including establishing and strengthening the enabling farmer services centers (FSCs); (b) farming and irrigation mechanization through: (i) developing water saving techniques, (ii) facilitating access to maintenance equipment for the on-farm irrigation systems, and (iii) strengthening the related advisory facilities. 4. Project Management, Technical Assistance, and Training (US$2.89 million) will include operational support for the Project Management Unit (PMU) to be established within the Committee for Water Resources. Implementation Status and Key Results:  The Executive Directors of the Bank approved the project on June 27, 2013. A Legal Agreement was signed by both parties on April 29, 2014, and ratified by the Parliament of Kazakhstan on December 26, 2014.  Project implementation has been started. The procurement process of the largest irrigation consultancy contracts on integrating irrigation system design, participatory management, construction supervision, and safeguards management is ongoing. Key Partners: the Ministry of Agriculture of the Republic of Kazakhstan, responsible for overall implementation through the Committee for Water Resources. KAZAKHSTAN: ALMA ELECTRICITY TRANSMISSION PROJECT Key Dates: Approved: November 16, 2010 Effective: March 2, 2011 Expected Closing Date: April 30, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 78.0 71.4 6.6 Other Borrower 122.9 Total Project Cost 200.9 *as of March 25, 2015 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The Project Development Objective is to improve the reliability and quality of the electricity supply to consumers in the Almaty region in an environmentally responsible and financially sustainable manner. This objective will be achieved by expanding the capacity of the Almaty oblast transmission network in order to provide additional capacity and redundancy in the system for an uninterrupted supply of electricity. The aim of the project is the construction of a new bulk supply point—the Alma substation—for the Almaty region. Other related components include the reconstruction and extension of related substations and the construction of overhead transmission lines (OHTLs). Specifically, the main project subcomponents are classified under the following groups: Project Component Part 1 - Construction of OHTLs (a) 500-kilovolt (kV) OHTL from YuKGRES substation to Alma substation (b) 500-kV OHTL from Almaty substation to Alma substation (c) 220-kV OHTL from Alma substation to Kensai substation (d) cross connection lines (220 kV OHTL) Project Component Part 2 - Construction, Extension, and Modernization of Substations: construction of 500-kV Alma substation, extension and modernization of 500-kV Almaty substation, and extension and modernization of 500-kV YuKGRES substation. The Bank is financing component Part 1(a) of the project, i.e., construction of a 500-kV OHTL from YuKGRES substation to Alma substation. The Bank is also financing procurement and project management consulting services for the construction of a 500-kV OHTL from YuKGRES substation to Alma substation. Key Expected Results:  Increased reliability of supply measured by reduced outages (maximum of 10 outages) in Almaty branch of KEGOC  Increased capacity by 1,000 MVA (MegaVolt Ampere) to supply Almaty oblast measured by the capacity of 500-kV transformers that tie to the high-voltage network  Increased capacity to supply Almaty oblast, measured by 70 percent overload of Almaty substation transformers Implementation Status:  Project implementation is completed, with construction works finished and the Alma Substation and transmission line put into operation. The project was restructured and the Project Results Framework updated. The unutilized balance of US$6,643,638.65 was cancelled at KEGOC’s request.  The project was found to have satisfactorily complied with the environmental safeguards. The compensation payments have been fully paid off as per the Land Acquisition Plan.  The Project Implementation Completion and Results Report is under way. Key Partners: Joint Stock Company “Kazakhstan Electricity Grid Operating Company” (KEGOC), the borrower. KAZAKHSTAN: ENERGY EFFICIENCY PROJECT Key Dates: Approved: May 22, 2013 Effective: Closing: June 2017 Financing in million US Dollars*: Financier Financin Disburse Undisburse g d d IBRD Loan - Local governments 1.3 Trust Fund 21.7 Total Project Cost 23 Kazakhstan ranks among the top 10 most energy-intensive economies in the world and uses more than three times as much energy per unit of GDP as the countries in the European Union (EU). This high energy intensity results in significant costs for the country in terms of economic competitiveness, public health, and the environment. Reducing the inefficient use of energy would allow Kazakhstan to save up to US$1.3 billion per year in energy expenditures in the public and private sectors. International experience shows that public buildings can readily achieve 20–40 percent energy savings through cost-effective retrofits. To this end, the project will support investments in energy-efficient upgrades in about 75 public and social buildings throughout the country. These improvements are expected to enhance the working conditions of more than 30,000 pupils, teachers, hospital patients, children, doctors, and others benefiting from improved indoor comfort levels in these buildings. The Project Development Objective is to improve the energy efficiency in public and social facilities and the enabling environment for sustainable energy financing. The project will address a range of energy-efficiency issues through the following components: 1. The upgrading and modernization of public and social facilities, such as schools, kindergartens, clinics/hospitals, and street lighting; 2. Technical assistance to help address the existing financial, technical, institutional, and legislative barriers that are preventing the public sector from tapping into its large energy savings potential. Implementation Status and Key Results:  Following the signing of the grant and project agreements on July 18, 2014, the Law on the Ratification of the Project passed the Parliament and was submitted to the President for approval.  All of the project’s effectiveness conditions have been met, including the following: the Steering Committee has been set up, the Subsidiary Agreement has been signed, the Project Operational Manual was adopted, the project implementation unit (PIU) has been set up and staffed, and the Memorandum of Understanding between MID, EEDI, and Akimats oblast have been signed, as well as the project agreement between EEDI and the social facilities.  The project implementing agency (EEDI) has commenced the project implementation activities. Nineteen subprojects in Atyrau, Mangistau, Karaganda, Kyzylorda, Pavlodar, and East Kazakhstan oblasts have been selected for the first year of implementation. The procurement of an energy audit and the designing and hiring of supervision consultants is ongoing.  Three technical assistance activities were included in the first year of project implementation: (i) a comprehensive energy-efficiency market assessment of Kazakhstan; (ii) computerization of the State Energy Registry; and (iii) a public outreach campaign. Key Partners: the Ministry of Investment and Development (MID), JSC “Institute for the Electricity and Energy Saving “KazakhEnergoExpertise” (EEDI), local authorities, and private energy service providers. KAZAKHSTAN: UST-KAMENOGORSK ENVIRONMENTAL REMEDIATION PROJECT Key Dates: Approved: February 1, 2007 Effective: December 15, 2008 Closing: December 31, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 24.3 5 19.3 Government of Kazakhstan 15.8 1.6 14.2 Other Donors ( EC) 4.5 4.5 0 Total Project Cost 44.6 6.1 38.5 * as of March 25, 2015 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The project will address the environmental pollution in Ust-Kamenogorsk City, linked to industrial hazardous waste accumulated before 1990. The project will optimize the design and implementation of a program for groundwater cleanup and the remediation of waste disposal sites in Ust-Kamenogorsk based on technical, economic, financial, social, and ecological assessments. In addition, the project will cover investments and activities to control groundwater downstream of treatment sites and the development of a long-term Groundwater Quality Monitoring System. The Project Development Objective is to prevent contaminated groundwater from becoming a risk for residential areas, drinking water resources, and the Irtysh River, and to strengthen the institutional mechanisms for groundwater quality monitoring. The Project comprises the following components: 1. Containment of high-priority sources of groundwater contamination (US$19.36 million). This component will develop immediate cleanup activities to prevent further infiltration into the aquifer of contamination from the identified high-risk waste dumps and slurry ponds located within or near the city, mostly in the area of the Central Industrial Complex. 2. Remediation of Current Contaminated Groundwater Sites (US$20.13 million). This component includes two subcomponents: (i) a pump and treat groundwater remediation system; and (ii) a groundwater quality monitoring network. This component will support the interception, treatment, and monitoring of contaminated groundwater in the project area and prevent the further migration of groundwater with unacceptable contamination levels to sensitive areas, groundwater users, and the Irtysh River. Implementation Status and Key Results:  Investigation program to assess the contamination level of seven industrial high-priority waste dumps in Ust- Kamenogorsk was concluded, and the detailed design for remediation of these industrial waste dumps developed. State approval for the detailed design has been obtained for six out of seven industrial waste dumps.  Civil works started in April 2013. The rehabilitation of four industrial waste dumps is about to be fully completed, work on two other industrial waste dumps is pending the Ministry of Agriculture’s facilitation, and one waste dump was already remediated with public funding when the design work for the other waste dump remediation was carried out.  Telemetry, leak detection, and other equipment has been supplied at the Vodokanal. The water leakage reduction program in Ust-Kamenogorsk is being implemented. Laboratory equipment to measure heavy metals and organic chemicals in the ground, surface water, and soil in Ust-Kamenogorsk has been successfully installed, and laboratory staff trained.  Detailed sampling and analysis have been undertaken in the Capacitator sludge pond for laboratory analysis to determine the precise concentration of polychlorinated biphenyls (PCBs) and required remediation technologies in line with the Stockholm Convention. Technical options of the treatment system confirmed and tested; works are completed.  The Groundwater Monitoring Program for the groundwater remediation component is being implemented. Twenty-two multilevel monitoring wells drilled and installed. The design of the groundwater treatment system has been finalized, reviewed, and actively discussed by all parties concerned. Key Partners: the Ministry of Agriculture of the Republic of Kazakhstan, responsible for overall strategy planning through its Committee for Water Resources. Key Development Partners: the European Commission (EC) and the Government of Japan. KAZAKHSTAN: SOUTH-WEST ROADS PROJECT: WESTERN EUROPE-WESTERN CHINA INTERNATIONAL TRANSIT CORRIDOR Key Dates: Approved: April 30, 2009 Effective: December 9, 2009 Expected Closing Date: June 30, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 2,125 1,67 446.1 Government of Kazakhstan 375 Total Project Cost 2,500 *as of March 25, 2015 Note: Disbursements may differ from financing due to exchange rate http://europe-china.kz fluctuations at the time of disbursement. Kazakhstan is the ninth-largest country in the world, with a land area equal to that of Western Europe. The upgrade of the Western Europe-Western China (WE-WC) Road Corridor is among the top priorities of Kazakhstan’s infrastructure development agenda. It is the main road corridor crossing Kazakhstan from the border with China in the southeast, through Almaty, Taraz, Shymkent, Kyzylorda, and Aktobe, to the border with Russia (a total of 2,787 kilometers). The construction of the corridor started in 2009. The World Bank is financing the rehabilitation of a section of the corridor in the south of Kazakhstan. The Project Development Objective is to increase transport and trade efficiency along the 1,150-kilometer road section from the border of Aktobe/Kyzylorda oblasts to the border of South Kazakhstan (SKO) and Zhambyl oblasts, and to improve road management and traffic safety in Kazakhstan. The project will boost Kazakhstan’s (and its neighbors’) trade, competitiveness, logistics, and infrastructure connections with the world, while providing an artery for regional economic cooperation. The upgrading of the corridor will facilitate a more efficient movement of goods and people and improve road safety. It will also facilitate industrial, agricultural, and commercial activities, with improved trade and services along the road and in adjacent towns and cities. The Project comprises five components: 1. Upgrade and reconstruction of road sections (788.5 kilometers, two-lane infrastructure north of Kyzylorda and four- lane infrastructure south of Kyzylorda) within Kyzylorda oblast. 2. Upgrade and reconstruction of road sections within SKO (361.5 kilometers of four-lane infrastructure). 3. Assistance to the Committee for Roads (CR) with the management of activities associated with the projects funded by other international financial institutions. 4. Institutional development and preparation of action plans to improve road safety and road services. 5. Supervision of civil works. Implementation Status and Key Results: More than two-thirds of the road length is open to traffic, with 90 percent of the works completed.  Works are ongoing on the additional 80 kilometer section, a four-lane highway along the same road corridor (east of Shymkent), which became part of the project after its first restructuring in 2012.  In 2014, the Borrower requested to restructure the project for the second time to allow the financing of one more additional section of 85 kilometers and to commit US$217 million of accrued savings, resulting from the lower cost and more efficient procurement of civil works and also the devaluation of the Kazakhstan tenge.  To date, the project has provided up to 35,000 jobs for local people.  In an effort to strengthen accountability and transparency, an external monitoring mechanism agreed to by the Government and executed by civil society organizations (CSOs) was established in 2012: the National Expert Council for Transparency and Sustainable Development, comprised of the Roads Committee, Project Management Consultants, Supervision Consultants, and CSOs. Land acquisition monitoring has been included as a priority activity in the work program.  The Government has initiated reform in the roads sector and created an autonomous Roads Agency, the JSC KazAvtoZhol, to optimize management of the national road network.  While civil works continue, institutional strengthening activities (road safety, road services, and road asset management) are being implemented jointly by the CR and the KazAvtoZhol. Key Partners: the Ministry of Investment and Development, the Committee for Roads, and KazAvtoZhol. Key Development Partners include the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the Japan International Cooperation Agency (JICA), and the Islamic Development Bank (ISDB). KAZAKHSTAN: EAST-WEST ROADS PROJECT WESTERN EUROPE-WESTERN CHINA INTERNATIONAL TRANSIT CORRIDOR Key Dates: Approved: May 1, 2012 Effective: June 14, 2013 Expected Closing Date: June 30, 2017 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 1,068 247,3 820,7 Government of Kazakhstan 188 Total Project Cost 1,256 *as of March 25, 2015 The East-West Roads Project is part of the Government’s plan to upgrade and improve the international transit corridor linking Europe and Russia to China through Kazakhstan (a total of 2,787 kilometers). The Bank has been helping to upgrade 1,150 kilometers of the corridor through the financing of the ongoing South-West Roads Project. The East-West Roads Project is expected to provide an efficient transport link from Almaty—one of the major economic centers of Central Asia—to Khorgos, the primary road border crossing point between Kazakhstan and China, thereby completing the upgrade of the WE-WC Road Corridor. The Project Development Objectives are to increase transport efficiency along the section of the WE-WC Road Corridor within Almaty oblast and to modernize highway management on sections of the WE-WC Road Corridor. The project will provide an efficient transport link from Almaty to Khorgos, thereby completing the upgrade of the WE- WC Corridor. The upgrading of this 305-kilometer long section of the WE-WC Road Corridor in Almaty oblast would facilitate a more efficient movement of goods and people and improve road safety. It would also facilitate industrial, agricultural, and commercial activities, with improved trade and services along the new road and in adjacent towns and cities. Long-Term Development Impact: The project will focus on increasing the quality of services provided to road users, including a reduction in road user costs and improved road safety and services, by undertaking pilot operation and maintenance activities along the WE-WC Road Corridor. Additionally, a study will be launched to review different user pay mechanisms, such as tolling options, to help the Government to recover costs for the operation and maintenance of parts of the corridor. Based on the experience of the pilot activities, the study will also develop realistic cost estimates for the operation and maintenance of the other road corridors in Kazakhstan. The Project comprises two components: 1. Upgrade and construction of the road section of the WE-WC Road Corridor within Almaty oblast 2. Modernization of highway management on sections along the WE-WC Road Corridor Implementation Status and Key Results:  Procurement for all eight lots, civil works, and the supervision consultancy was completed by the time the project became effective to fully utilize the construction season.  JSC KazAvtoZhol National Roads Operating Company has been authorized to implement day-to-day management and operation functions under the project, with the Roads Committee responsible for overall project implementation. Institutional strengthening activities are being procured to support the development of a tolling strategy for the road section from Almaty to Khorgos and to support the development of a concept and instruments for operation and maintenance of the road network.  In 2014, the Borrower requested to restructure the project to allow the financing of one more additional section of 98 kilometers between the border with Uzbekistan and Almaty toward the border with Kyrgyzstan and to commit US$213 million of accrued savings, resulting from the lower cost and more efficient procurement of civil works and also the devaluation of the Kazakhstan tenge. Key Partners: the Ministry of Investment and Development, the Roads Committee, and KazAvtoZhol. Key Development Partners include ADB, EBRD, JICA, and ISDB. KAZAKHSTAN: HEALTH SECTOR TECHNOLOGY TRANSFER AND INSTITUTIONAL REFORM PROJECT Key Dates: Approved: January 15, 2008 Effective: December 15, 2008 Closing: December 31, 2015 Financing in million US Dollars*: Financier Financ Disbursed Undisbursed ing IBRD Loan 117.7 58.21 59.49 Government of Kazakhstan 178.4 69.98 108.42 Total Project Cost 296.1 128.19 167.91 *as of March 25, 2015 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. http://www.healthproject.kz/ The Project Development Objective is to introduce international standards and build long-term institutional capacity in the Ministry of Health (MOH) and related health institutions in support of key health sector reforms pursued by the Government of Kazakhstan. This comprehensive project deals with all aspects of health sector reform, including: (i) health financing, budgeting, planning, and management, (ii) health care quality improvement, (iii) reform of medical education and medical science, (iv) health information system development, (v) pharmaceutical policy reform, and (vi) food safety and World Trade Organization (WTO) accession. Implementation Status and Key Results: Project implementation is approaching its last year with noteworthy progress, including:  Twelve technical centers/structures established to support the health system in accreditation, economic research, planning and investment monitoring, management, standardization, health information management, and innovative education.  Modern provider payment methods (comprehensive capitation rate for primary/outpatient care and diagnosis-related groups for inpatient care) introduced. New qualifications standards for managers based on British Occupational Standards developed and tested.  Health network master plans for all 16 regions developed based on new facility planning standards and adopted through regional prospective plans for health infrastructure development for 2015–25.  Strategies for enhancing provider autonomy and a number of health management training programs, including a master’s degree course, developed and implemented.  The upgraded National Hospital and Outpatient Accreditation Standards are certified by the International Society for Quality in Health Care and used in the annual accreditation process. 90 international standard Clinical Practice Guidelines adapted and being gradually introduced into the clinical practice and medical education process.  A state-of-the-art E-Health Concept was approved and implementation of the Road Map launched.  Regional drug information centers opened in 16 regions, with Call-Center services increasingly demanded by health professionals and the population at large; National Pharmaceutical Policy, Formulary, and Strategy “Outpatient Drug Benefit 2020” developed; and the National Drug Quality Testing Center fully equipped and preparing for international accreditation.  National food safety strategy implemented, with European Union (EU)-standard food safety regulations adopted for the whole Customs Union in 2013, and food safety control capacity gradually strengthened through the use of modern research methods and the establishment of the Central Asian Training Center on Food Safety in early 2014.  Over 92,500 health professionals and managers received overseas and in-country training. Applied bachelor’s educational program in nursing specialty and three simulation training courses for health specialists and trainers developed. Strategy for capacity building of health managers and researchers until 2020 has been developed. Key Partners: the Ministry of National Economy, the Ministry of Finance, and the Ministry of Health and Social Development. Key Development Partners: World Health Organization (WHO), EC, United Nations Children’s Fund (UNICEF), United Nations Population Fund (UNFPA), U.S. Agency for International Development (USAID), and Centers for Disease Control and Prevention (CDC). KAZAKHSTAN: TECHNICAL AND VOCATIONAL EDUCATION MODERNIZATION PROJECT Key Dates: Approved: July 8, 2010 Effective: August 9, 2011 Expected Closing Date: December 31, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 29.2 25.5 3.7 Government of Kazakhstan 4.0 Total Project Cost 33.2 *as of March 25, 2015 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Kazakhstan, a fast growing middle-income country, has a vision of becoming an industrialized country by 2025, but low work force productivity and huge gaps in skills are major impediments to increased competitiveness. The present technical and vocational education (TVE) system in Kazakhstan has been engineered to support a command economy and therefore today, suffers from a lack of linkages to a market economy and faces daunting challenges in terms of relevance, management, quality, and internal efficiency. The Project Development Objective is to raise the relevance, quality, and efficiency of TVE through an improved policy framework and institutional capacity. In the long term, the project will help (i) improve the employability of TVE graduates, as the quality of TVE rises and “new quality” TVE graduates are more demanded in the labor market; (ii) increase rates of returns to TVE as the skills and competencies of the graduates of the new TVE system are significantly enhanced and match the requirements of the dynamic labor market; and (iii) increase workforce productivity and competitiveness as a result of the increased supply of new skills that are of high quality and relevance. The project aims to assist Kazakhstan in linking the supply of skills to the demands of industries and employers and focuses on: (i) developing the National Qualifications System and occupational standards in selected priority sectors and upgrading the assessment of the qualifications and institutional accreditation of TVE institutions; (ii) modernizing the governance, management, and financing policies and structures for TVE; and (iii) strengthening the skills delivery capacity of TVE institutions through competitive financing of the institutional development of both public and private providers. Implementation Status and Key Results:  Project implementation accelerated in 2013, attributable to the progress on policy development and the strengthening of the institutional capacity of TVE institutions, resulting in total disbursement at 64 percent.  As a result of policy development, the National Qualification System, 13 sector qualifications frameworks, and 147 occupational standards covering 10 economic sectors were adopted by the Government. Close coordination and partnership between the Ministry of Education, Ministry of Labor and Social Protection, sector ministries, employers, and the business community represent a significant achievement at the institutional and policy level.  The financing mechanisms of the TVE system have been revisited to reflect best international practices on funds distribution through a per capita financing model. Pilots will be launched in two regions, complemented by the training of local government officials and college administrators.  The educational capacity of TVE institutions has increased as a result of the professional development of teachers in support of a competency-based modular curriculum. The second round of competitive grants was carried out in 2014. Forty-one colleges (in addition to the 27 in 2012) from the remaining nine regions received grants to enhance institutional development, provide teacher training, develop a competency-based curriculum, and strengthen social partnerships through dual-system training programs at the plants. The last round of grants is planned in 2015 to strengthen the collaboration of 15 colleges with industry representatives and to finalize the pilot of new education standards.  The development of new education standards and a core curriculum linked to occupational standards is under way, with methodology developed in 2014 and standards planned for piloting in 2015. Key Partners: Ministry of Education and Science of the Republic of Kazakhstan. Key Development Partners: European Union (EU), European Training Foundation, German Society for International Cooperation (GIZ), British Council, and International Labour Organization (ILO). KAZAKHSTAN YOUTH CORPS PROJECT Key Dates: Approved: March 25, 2014 Effective: Expected by June 2015 Expected Closing Date: February 28, 2018 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed Total Project Cost $21.763 Youth development is regarded as an important national issue in Kazakhstan, which is reflected in the ratification of the first Law on State Youth Policy in the Republic of Kazakhstan in 2004. Three domains appear to be important for positive youth development in Kazakhstan: (i) community engagement/service, to promote concern for the welfare of others and enhance young people’s integration into society, (ii) skills development, in particular behavioral/life and technical skills that are needed to make the transition from school to productive employment, and (iii) initiative, to tap into young people’s naturally inventive, creative, and enterprising characteristics. The proposed project supports the Government’s various policies related to youth, particularly the Concept of State Youth Policy 2020. The project is also aligned with the overarching objectives of the Country Partnership Strategy (CPS), specifically “improving competiveness and fostering job creation.” The Project Development Objective (PDO) is to promote positive youth development in Kazakhstan through service learning opportunities that serve the community while enhancing youth initiative and life skills. The project is expected to also bring about wider recognition among the public that youth can be both an asset and part and parcel of the building blocks of a just society. 1. Expected beneficiaries of the project are:  Young people participating in the community-based service learning and skills development program: Youth (aged 14–29) will benefit from opportunities to participate in a community-based service learning and life skills development program. A cohort of youth will also benefit from access to entrepreneurial training and capital to launch their own community-based service learning activities. In total, the project is expected to benefit 8,500 young people, of which approximately 5,100 (60 percent of total direct beneficiaries) will be vulnerable youth.  Youth-focused organization staff and Ministry of Education and Science officials: Some 150 youth-focused organizations will benefit from opportunities to implement community-based service learning programs with youth. They will receive training and become part of a network of organizations that focus on youth issues. Technical assistance to the Ministry of Education and Science (MOES) will help enhance the policy institutional framework and fiduciary and monitoring capacity. 2. Expected key PDO level results of the proposed project include: - Share of subgrant programs rated satisfactory at completion - Share of youth project beneficiaries who feel able to make a positive contribution to their community - Share of youth project beneficiaries who demonstrate an improvement in defined noncognitive skills - Direct project beneficiaries, of whom (i) vulnerable youth – 60 percent, (ii) female – 55 percent, and (iii) youth with disabilities – 5 percent 3. The project comprises three components: - Subgrants for Community-Based Service Learning and Life Skills Development (US$20 million) - Institutional Development for Youth Policy Implementation (US$0.763 million) - Project Management, Monitoring, and Evaluation (US$1 million) Implementation Status and Key Results:  The project was approved by the World Bank’s Europe and Central Asia Regional Vice President on March 25, 2014. The next steps are Grant Agreement signing and project effectiveness.  To start implementation of the project, subsequent ratification of the Grant Agreement by the national parliament is required. This step is expected to be completed by the Government of Kazakhstan by June 2015. Key Partners: Ministry of Education and Science of the Republic of Kazakhstan. KAZAKHSTAN: JUSTICE SECTOR INSTITUTIONAL STRENGTHENING PROJECT Key Dates: Approved: March 19, 2014 Effective: October 22, 2014 Closing: December 31, 2018 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 36,000,000 Government of Kazakhstan 24,000,000 Total Project Cost 60,000,000 *as of March 25, 2015 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Kazakhstan stands on the doorstep of a new stage of social and economic modernization and political democratization. The Government foresees the creation and strengthening of the rule of law and judicial institutions as an essential component of this new stage of modernization for Kazakhstan. That is the main reason that Kazakhstan’s authorities envisage the Justice Sector Institutional Strengthening Project (JSISP) as a strategic instrument to strengthen the institutional capacity and performance of core justice sector entities and deliver measurable results; because of the importance of this agenda, the Presidential Administration itself is overseeing project preparation. The Project Development Objectives are to (a) strengthen the institutional capacity of selected agencies for effective implementation of selected laws and (b) improve the efficiency and transparency of and access to select public services in the justice sector. The project will address a range of justice sector issues through the following components: 4. Strengthening the Implementation of Key Elements of the Legal and Institutional Framework 5. Improving Ministry of Justice Service Quality and Responsiveness 6. Strengthening Judicial Efficiency and Professionalism 7. Promoting Project Implementation, Coordination, and Fellowships Key Expected Results:  Strengthened institutional capacity of designated agencies for effective implementation of selected laws measured by private sector satisfaction level with the implementation of the Commercial Code, a new Law on Self-Regulatory Professional Organizations, and the Administrative Offenses Code.  Improved efficiency of selected justice services measured by JSISP-supported pilot court-users’ satisfaction level with the quality of judicial services.  Improved transparency of selected justice services.  Improved access to selected justice services measured by the growth in the number of eligible persons, including women beneficiaries, provided with legal aid.  Strengthened professionalism of judges and other public servants of the justice system. Key Partners: Ministry of Justice (implementing agency), Supreme Court, selected high-volume courts Key Development Partners: EU, USAID, GTZ, and the American Bar Association Rule of Law Initiative (ABA-ROLI). KAZAKHSTAN: CUSTOMS DEVELOPMENT PROJECT Key Dates: Approved: November 27, 2007 Effective: March 24, 2009 Expected Closing Date: December 31, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 14.5 7.4 7.1 Government 43.5 Total Project Cost 58.0 *as of March 25, 2015 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The Project Development Objective is to increase the efficiency, effectiveness, and accountability of the Customs Control Committee (CCC) in order to: (i) promote internationally acceptable practices for the expeditious processing of international trade flows so as to further integrate the country into the world economy and improve the investment climate and competitiveness, (ii) improve taxpayer compliance with the Customs Code and thereby increase revenue collection, and (iii) support the transparency of customs operations in order to reduce the potential for corruption and increase predictability for traders. The project comprises the following components: 1. Institutional Development, Governance, and Human Resource Management 2. Customs Operations 3. Information and Communications Technology Key Expected Results:  75 percent reduction in average customs processing time at border posts and clearance time at inland posts (based on client surveys);  Reduction in physical inspections of import declarations by customs and number of documents required for border and customs clearance for imports;  Increased effectiveness of total customs revenue collection (as per CCC staff);  Establishment of client service standards covering key customs outputs with improved performance on an annual basis;  Improved perception of traders and other stakeholders regarding the frequency of unofficial payments to customs officials as measured by periodic surveys. Implementation Status:  Implementation of project activities is under way, focusing on: (i) the institutional improvement of the customs service through development of the organizational structure, human resource management, and anticorruption activities; (ii) a strategy for the complex modernization of strategic and financial management methods and for the creation of a modern information system; and (iii) the modernization of core customs operations.  Three operation centers with modern surveillance equipment have been established in Shymkent (for the Kyrgyz and Uzbek borders), Almaty (for the China border), and Mangistau (for the borders with Turkmenistan and Uzbekistan) to ensure the efficiency of customs procedures at entry points and the rapid response to an emergency when controlling the movement of goods and vehicles.  The Regional Training Institute delivers courses for all customs officials in order to upgrade the professional skills of customs staff, learn best international practices, and exchange knowledge.  Integrated Tariff Automated System has been developed and will be operational by the end of 2015.  As a result of business process reengineering, the number of documents required for customs clearance has decreased from 14 in 2009 to three in 2013, while the average customs processing time at the border posts has dropped from 1.3 days to 13.9 hours.  Physical inspections of import declarations by customs have dropped from 70 percent in 2007 to 39.8 percent in 2013. Key Partners: State Revenue Committee under the Ministry of Finance of the Republic of Kazakhstan. Key Development Partners include USAID, German Agency for Technical Cooperation (GTZ), and EC delegation. KAZAKHSTAN: TAX ADMINISTRATION REFORM PROJECT Key Dates: Approved: February 16, 2010 Effective: February 17, 2011 Expected Closing Date: December 31, 2016 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 17.0 2.5 14.5 185 Government 39.7 Total Project Cost 56.7 *as of March 25, 2015 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The Project Development Objective is to reform and strengthen tax administration in the Republic of Kazakhstan in order to improve the level of voluntary taxpayer compliance with tax regulations, enhance effectiveness to fight tax evasion, and increase administrative efficiency and reduce the potential for corruption. The project consists of three components: 1. Institutional development is aimed at optimizing the structure of tax administration, increasing institutional efficiency, and improving human resources (HR) management practices. 2. Operational development aims to improve and further develop core tax administration operations. 3. Information technology infrastructure development attempts to develop a comprehensive and integrated tax management system. Key Expected Results:  Increase in non-oil tax/GDP ratio  Increase in total number of registered taxpayers by 10 percent each year  Increase in average tax revenue collected by each tax official by 10 percent each year  Increase in adjustments made as a result of tax audits per auditor by 5 percent each year  Increase in percentage of field audits selected by automated procedure to reach 50 percent by 2014  Reduction in cumulative stock of arrears as a percentage of total tax collected in a year by 5 percent each year  Increase in percentage of electronic filing to reach 80 percent by 2014  Reduction in average time taken by taxpayers to comply with tax obligations by 50 percent (as evidenced from surveys) by 2014  Improvement in perception of taxpayers regarding level of professionalism and honesty in tax administration Implementation Status and Results:  Introduction of universal filing and reform of excise taxation is under way.  The establishment of two Data Centers in Kazakhstan, including establishment of a modern Call Center with the appropriate database at the Central Data Processing Center, is progressing.  The Tax Committee is building the capacity of tax officials through learning from the experiences of advanced and developing tax administrations. Key Partners: Committee of State Revenues of the Ministry of Finance of the Republic of Kazakhstan. Key Development Partners: USAID. KAZAKHSTAN: TECHNOLOGY COMMERCIALIZATION PROJECT Key Dates: Approved: January 15, 2008 Effective: December 15, 2008 Closing: December 31, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 13.4 10.3 3.1 Government of Kazakhstan 61.6 Total Project Cost 75.0 *as of March 25, 2015 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The Technology Commercialization Project (TCP) was designed to revamp the way science is conducted and perceived and contributes to social and economic development in Kazakhstan. Owing to several innovative design features, the TCP is well positioned to effectively restore important productive linkages between scientific research and the private sector, thereby contributing to improved innovation and commercialization outcomes. It is aligned with the Government’s efforts to diversify and improve the regional and international competitiveness of the Kazakhstani economy. The Project Development Objective is to demonstrate the significantly improved scientific performance and commercial relevance of research performed by interdisciplinary teams of scientists selected through transparent competitive processes in line with international best practice. By using merit-based selection procedures, the project will help to rebuild, strengthen, and restructure segments of Kazakhstan’s research and development (R&D) base. The project will also help to link this rejuvenated R&D capacity to integrate into national and international technology markets. Project components include: 1. Competitive grant program selected and overseen by the International Science and Commercialization Board to finance high-quality R&D projects conducted by groups of senior scientists and junior researchers, and to develop a world class research infrastructure in the International Materials Science Center (IMSC); 2. Technology Commercialization Office (TCO) to finance and broker partnerships between Kazakhstani scientists and local and international technology markets. Performance Indicators: Some notable markers of success with regard to the project development objectives will include: (i) establishment of Senior Scientist Groups (SSG) and Junior Researcher Groups (JRG), encouraging the participation of graduate students; (ii) establishment of the IMSC; (iii) establishment of the TCO and awarding of grants for technology commercialization; (iv) completion of technology audits and legislative and regulatory reviews; (v) subsequent implementation of policy recommendations and revisions to legislation; and (vi) an increase in the number of licenses sold with the help of the TCO. Implementation Status:  The R&D grants program for senior and junior scientists, developed in line with international practice, is reaching its completion. Within three selection rounds, 33 scientific groups received funding for research activities, with a high potential for commercialization. The grant program’s tangible results so far: 10 scientific groups have reached or are very near to entering the commercialization stage, including six that have made their first sales; scientists have published articles in international peer-reviewed scientific journals; and one group has attracted foreign equity investment, another group has established an operational pilot production line for its products, and another group is running field tests in cooperation with a potential buyer of the technology.  The IMSC is operating on the site of Karagandy State Technical University, under close guidance of the International Science and Commercialization Board.  The TCO is working in partnership with a reputable international technology commercialization contractor, CRDF Global, and has run several knowledge-sharing and capacity-building workshops in Kazakhstan and one in the United States in addition to completing two selection rounds of grant applications for technology commercialization grants for prototype development and proof of concept. Key Partner: the Ministry of Education and Science of the Republic of Kazakhstan. KAZAKHSTAN: KAZSTAT: STRENGTHENING THE NATIONAL STATISTICAL SYSTEM PROJECT Key Dates: Approved: March 31, 2011 Effective: February 24, 2012 Closing: April 30, 2017 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 20.0 9.6 10.4 Government of Kazakhstan 2.8 Total Project Cost 22.8 *as of March 25, 2015 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. The main objective of the project is to improve the efficiency and effectiveness of the national statistical system to provide relevant, timely, and reliable data, in line with internationally accepted methodology and best practices. The project will upgrade the conceptual, methodological, and analytical skills of the Agency of Statistics of the Republic of Kazakhstan (ASRK) and other data producers and user agencies in the country. This will position the ASRK to respond quickly and effectively to the new needs and priorities that will arise in the future. The main beneficiaries of the project outcomes are the ASRK, the Government, and the general public, as well as international development partners. The principal outcome of this project will be an improved national statistical system that can inform the Government’s decision-making process by providing timely and accurate economic and social data and can also help monitor progress toward national development goals. Key Expected Results:  Improved institutional framework that will encourage statistical development  Improved IT infrastructure  Strengthened human resources through training in statistical operations  Improved statistical infrastructure through application of internationally accepted methodologies and data quality standards  Developed statistical production system that continuously adapts to the evolving needs of society and the economy through user-producer dialogues  Institutionalized core statistical activities, including poverty monitoring  Increased output of reliable statistics by consolidating and strengthening existing surveys and administrative sources and by designing and conducting new data-generating activities  Timely dissemination, information sharing, and use of data for policy decisions Achievement of project objectives will support the overall goal by reducing the cost of information supply, increasing the demand, and making the coordination of statistical activities, financing, and execution more effective. It will be also be beneficial to the statistics departments of line ministries through improved institutional interaction between statistics agencies and the training of the relevant staff. Implementation Status:  A twinning arrangement has been established between the Agency and a consortium of statistical agencies, led by the German Federal Statistical Office (Destatis), since September 2012. Around 50 percent of activities have been completed as part of the technical assistance provided by the consortium.  Procurement of some IT equipment for regional offices has been completed.  Mid-term review of the project has been conducted by an international expert and the draft report states that the project has so far been fully successful and satisfactory. Key Partner: the Agency of Statistics of the Republic of Kazakhstan. KAZAKHSTAN: JOINT ECONOMIC RESEARCH PROGRAM Key Dates: JERP Allocations in FY2003-2015 Approved: December 6, 2002 (the first three-year program was signed) 15.0 (US$ million) Effective: December 6, 2002 Closing: June 30, 2015 10.0 5.0 0.0 2011 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 In 2003, the World Bank and the Government of Kazakhstan embarked on a Joint Economic Research Program (JERP), a key instrument in responding to the country’s core priorities in the medium-term development agenda. Thirteen years on, the program has proved to be an innovative solution, with a client-driven knowledge agenda and Bank-selected work, bringing in and building up international experience while developing wider lessons of a public good character. The JERP is structured around the Country Partnership Strategy pillars focusing on development gaps in growth, governance, and the public service delivery agenda. The JERP is a unique program of analytical work and technical assistance aimed at building up the capacity to adapt the knowledge transferred. The program is designed to ensure strong government ownership while enhancing the Bank’s contribution to the country’s development in a way that goes beyond funding. In order to maximize its effectiveness as a knowledge service instrument, the JERP was transformed into a programmatic structure in mid-2011 with activities developed as multiyear and interconnected engagements. The new structure proved to be more effective in increasing and tracking the impact of the JERP by improving the strategic focus of the program and providing more room to fully exploit analytical insight, capacity support, and synergies between sector works. Programming as part of the JERP continued in 2015 with the inclusion of blocks of activities arranged by thematic groups as identified in the Partnership Framework Arrangement (PFA). A highlight of the JERP—the brainstorming session, co-chaired by the Prime Minister—brings the highest level of Government, World Bank management, and experienced practitioners together for in-depth discussions on key development issues. Since 2003, 18 brainstorming sessions have provided direct input into the Government’s ambitious reform agenda. The JERP for FY15 comprises 12 standard JERP activities that include a number of ongoing programmatic tasks as well as one-year tasks requested by various government agencies that are not a part of the PFA program for a total of US$1.95 million, and 21 PFA technical assistance activities, aligned by eight thematic groups, for a total of US$7.845 million. Key Achieved Results: In terms of results, the JERP has informed policies and built capacity in wide-ranging areas of the Government’s reform program, such as macroeconomic management; public financial management; education, health, and social protection; financial sector supervision; and private sector development. In some of these sectors, Kazakhstan has become a leader in the region and a source of good practices for other countries. Among the key JERP-supported results:  Advisory support on public resource management led to improvements in public investment planning followed by a full assessment of budget/financial management systems, resulting in a new Budget Code, a new multiyear budget preparation system, an effective treasury system, and other efficiency-improving measures.  Review of Kazakhstan’s tax policy and administration framework translated into the development of a new Tax Code based on JERP recommendations.  Advisory services helped the Government to avoid fiscally risky general bailout strategies in the wake of the financial sector crisis and to balance macroeconomic and monetary stability with sustainable growth objectives while continuing to provide advisory support to maintain prudent management of oil revenues. Design of a countercyclical fiscal policy helped assess and improve the cyclicality of the Government’s economic policies.  The Bank provided advisory assistance toward the establishment of a Committee for Financial Monitoring under the Ministry of Finance to lead efforts in Anti-Money Laundering and Combating Terrorism Financing.  Assistance with civil service reform, enhancement of the public sector audit system, and implementation of the Extractive Industries Transparency Initiative contributed to increased transparency and accountability in public sector operations through the introduction of new legislation, regulations, and institutional arrangements.  In the social protection area, policy advisory support is translating into a new employment program and social safety net system with a Conditional Cash Transfer component to improve the balance between the protection and promotion objectives of the Government’s interventions.  In the health sector, analytical work initiated under the JERP has evolved into a comprehensive joint project (covering health program planning, financial management, quality improvement, reform of medical education and pharmaceutical policy, and food safety measures) that is now building international standards and institutional capacity in the health sector.  Advisory support to the development of a new social modernization strategy informs the Government’s evolving program on the financing and delivery of social services for accelerated improvement of human capital outcomes.  Assistance with business environment reforms has facilitated (i) a steady improvement in business entry and exit conditions, payment of taxes, and protection of investment rights, leading to an accelerated improvement in Kazakhstan’s overall Doing Business rating to 50th in 2014 from 74th in 2010; and (ii) the simplification of the licensing and permits regime through the development of a risk-based methodology.  Assistance to Kazakhstan’s Export Promotion and Foreign Direct Investment (FDI) Attraction Agency helped strengthen its institutional capacity to support local exporters and potential foreign investors toward establishing sustainable, long-term partnerships in foreign markets.  A JERP assessment to strengthen national statistics supported the development of a Statistical Master Plan, which is now being implemented through a joint project as well as other government interventions.  JERP analytical work on the improvement of industrial competitiveness through cleaner and greener production helped with an assessment of the economic and health costs of air pollution and the subsequent design of air pollution monitoring and emission registration systems.  Technical assistance on agricultural reform helped deepen the analysis of specific subsidies programs and supported the development of impact monitoring and evaluation tools for the necessary reform. Key Partners: the Prime Minister’s Office, the Ministry of National Economy, and other line ministries. IFC ADVISORY SERVICES IN KAZAKHSTAN The International Finance Corporation (IFC), a member of the World Bank Group, provides advisory support to help private sector clients in Kazakhstan attract investment by promoting resource efficiency, strengthening corporate governance, and improving risk management practices. IFC also supports microfinance institutions in expanding access to finance for micro entrepreneurs and helps food processing firms to improve safety standards. Helping Companies and Banks Improve Corporate Governance The Challenge: Corporate governance continues to be a subject of significant market concern in the Europe and Central Asia (ECA) region. Many companies and banks in ECA remain vulnerable to corporate governance challenges and lack the experience needed to strengthen their corporate governance practices. Local institutions are also not sufficiently developed to be able to deliver full-fledged corporate governance services independently. The IFC Approach: The IFC Corporate Governance Program in ECA (i) assists individual companies and banks in implementing good corporate governance practices, leading to improved performance and increased investment attractiveness; (ii) strengthens the capacity of local partner institutions; and (iii) contributes to the development of laws, codes, regulations, and other corporate governance tools. Key Achievements: Since 2012, the project has helped local partner institutions raise nearly US$412,000 in sales revenue through corporate governance work; assisted in improving the performance of 37 companies; helped 19 companies access financing in the amount of US$437 million; and contributed to the drafting and adoption of 19 laws and regulations. Strengthening Microfinance The Challenge: To grow further and in a sustainable manner, microfinance institutions in Kazakhstan need to expand their reach to attract more clients with a diverse product and service range supported by a stronger funding base. To build a stronger funding base, microfinance institutions can transform into a wider financial organizations, deposit-taking institutions, or even banks. The IFC Approach: IFC is working with selected microfinance institutions in Kazakhstan to strengthen and build capacity by developing a modular package of fee-based advisory services. The modules cover such areas as financial management, assets and liabilities management, funding strategies, treasury, development of deposit products, and risk management. Key Achievements: IFC helped Arnur Credit microfinance institution to strengthen its human resources management and corporate governance. IFC facilitated US$2 million in financing for Arnur Credit. The developmental impact is far reaching in terms of economic support to entrepreneurs in Kazakhstan, especially in rural areas. IFC helped small entrepreneurs to access finance and build business assets across the country. Helping the Food Industry Improve Safety Standards The Challenge: Improved food safety systems and practices can help food producers in Central Asia increase exports and become more competitive. The IFC Approach: IFC advises food producers in implementing HACCP (Hazard Analysis Critical Control Point), the international food safety management system. Together with Metro Cash & Carry, IFC is also raising awareness about best practices in food safety across the entire agro supply chain. Key Achievements: The program trained more than 30 food industry participants and partnered with the Entrepreneurship Fund DAMU and Kazakhstan Food Producers Union to stimulate the development of local institutional capacity and help food businesses implement food safety standards. Increasing the Resource Efficiency of Private Firms The Challenge: Efficient use of power, energy, raw materials, and water along a company’s value chain not only helps conserve resources and reduce waste, pollution, and greenhouse gas emissions, but can also reduce operating costs. Yet many firms in ECA remain unaware of the potential cost savings and environmental benefits and are reluctant to invest. The IFC Approach: The IFC ECA Resource Efficiency Program works at the firm and sector levels to stimulate investment into resource-efficient technologies and practices. It helps improve management and operational practices in industry across all sectors; raises awareness among decision makers; and drives market transformation through sector studies such as benchmarking and assessment tools. Expected Results: In ECA, the program will facilitate the investment of around US$90 million (including US$60 million from IFC) and a reduction of CO2 emissions by 1.2 million tons. Donor Partners: The Governments of Austria, the Netherlands, and Switzerland. KAZAKHSTAN: EASTCOMTRANS Key Dates: Approved: April 13, 2012 Signed: March 13, 2012 IFC financing (million US Dollars): Financier Amount Fiscal Year Loan 30.0 2012 Equity 20.0 2012 Eastcomtrans is one of the largest private railway operators in the transport market of Kazakhstan and has been operating since 2003. It provides a full range of freight railway services for export, import, and domestic traffic. The company has been a leader in providing oil product transportation services by railway. Eastcomtrans, with a fleet of about 8,350 railcars, also provides railcars to major Kazakh and Russian companies on an operating lease basis. IFC provided Eastcomtrans with long-term financing to help expand its railcar fleet, broadening commercial logistics services and helping develop the country’s infrastructure for trade and industry. The investment will help Eastcomtrans to expand its operations and meet the growing demand for new and reliable railcars in the country. IFC’s investment will enable Eastcomtrans to continue its growth and assist it in diversifying its fleet and client base, while also allowing it to continue to grow its proprietary freight forwarding business. This is IFC’s first investment in the country’s railway sector, helping increase the quality and availability of rail transportation, reduce costs, and increase transport reliability in Kazakhstan. Key Expected Results: The project’s anticipated development impact would be:  Supporting the continued development of a key player in the still nascent private rail sector.  Contributing to the development of the transportation and logistics sectors in Kazakhstan.  Helping renew Kazakhstan’s aged railcar fleet and helping avoid a supply crisis over the next 5–10 years, as about half of the existing fleet needs to be retired. Contact info: 12 Samal, Astana Business Tower 14 floor, 010000, ASTANA KAZAKHSTAN Tel.: +7 (7172) 691-440 www.worldbank.org.kz