Document of The World Bank Report No: 72397-KG RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF REDUCING TECHNICAL BARRIERS FOR ENTREPRENEURSHIP AND TRADE PROJECT (P087811) (IDA GRANT H247-KG) (BOARD APPROVAL DATE JULY 13, 2006) TO THE KYRGYZ REPUBLIC September 17, 2012 ABBREVIATIONS AND ACRONYMS CSM Center for Standards and Metrology MSTQ Metrology, Standards, Testing and Quality IDA International Development Association PIU Project Implementation Unit ILAC International Laboratory Accreditation PDOs Project Development Objectives Cooperation TBT Technical Barrier to Trade KCA Kyrgyz Center for Accreditation TR Technical Regulations WTO World Trade Organization Regional Vice President: Philippe H. Le Houérou Country Director: Saroj Kumar Jha Acting Sector Manager: John Pollner Task Team Leader: Sylvie Bossoutrot KYRGYZ REPUBLIC REDUCING TECHNICAL BARRIERS FOR ENTREPRENEURSHIP AND TRADE PROJECT (P087811, IDA GRANT H247-KG) RESTRUCTURING PAPER 1. The closing date of the Reducing Technical Barriers for Entrepreneurship and Trade (RTBET) Project in the Kyrgyz Republic (Grant No H247, P087811) will be extended for five months from October 31, 2012 until March 31, 2012. This will be the second project extension with a cumulated extension period of 23 months. 2. Overall implementation progress has been encouraging despite a number of operational difficulties and delays related to project activity disruptions caused by the repeated domestic political and social unrests that took place over the course of implementation. USD 3.1 million or 62% of total IDA grant funds have been disbursed to date. An additional 30% are committed under signed contracts currently under implementation. PDOs are currently moderately satisfactory with noteworthy results observed in the (i) development of a significant number of new technical regulations in replacement of outdated standards, (ii) reduction in the burden of regulatory compliance for businesses, (iii) upgrading of metrology infrastructure, (iv) improved reliability of domestic laboratory accreditation services, (v) harmonization of Kyrgyz standards on international standards, and (vi) creation of a WTO Enquiry Point providing updated information on the Kyrgyz regulatory framework to prospective trade partners. 3. The proposed extension requested by the MOF and MOEAP1 is necessary to complete an important ongoing equipment contract delivery (USD 591,000). This is the last large equipment contract under the project, which represents over 11% of Grant funds and will provide important high precision metrology equipment needed in areas critical to the support of agribusiness and potential agro exports amongst other sectors2. The contractor is late in the delivery due to unexpected delays in the supply of some of the lots by the manufacturer out of the contractor’s control. For its part, the Center for Metrology which will receive the equipment already refurbished the rooms in which the equipment will be housed and operate. 4. While this is not the primary reason for requesting the extension, the proposed extension would allow project stakeholders to make more progress towards international accreditation of laboratories (one of the intermediate indicators), which would be a highly beneficial outcome for the Kyrgyz Republic. 5. The PDOs continue to be achievable within the extended closing date. The Kyrgyz Government is keen to advance its challenging reform and institutional building program in the Technical Regulation and MSTQ areas initiated under RTBET. Completing the installation of this equipment will allow the Project to meet its PDOs more fully by ensuring that the project indeed helped "Streamline the national technical regulation and standards framework for business, develop systems to enhance quality and safety of products and increase enterprise competitiveness in pilot sectors� as per the formal Project Development Objectives. In practical terms, the concerned equipment will permit the precise calibration of laboratories' equipment in the Kyrgyz Republic, which will enable them to perform a wider range of tests with higher demonstrated levels of accuracy and thus reliability. The Borrower has prepared an acceptable procurement plan and a contract implementation plan. The performance of the Borrower and implementing agencies continues to be satisfactory. Financial management performance is satisfactory with good internal controls and there are no overdue audits and the PIU is in compliance with the project financial covenants. 1 Letters from the Minister of Economy and Antimonopoly Policy dated August 28, 2012 and Minister of Finance dated September 3, 2012, requesting an RTBET project extension of 5 months. 2 The equipment is part of Component 2 of the project which seeks to establish reference laboratories in key areas relevant to manufacturing processes and safety controls. The Project already installed or is in the process of installing laboratories that allow performing trusted measurements in mass, temperature, length, pressure, and time frequency. The final contract that would require extension is for viscosity, density, volume and PH. These are important pieces of equipment on which the Quality infrastructure that the Government is seeking to build rests. Measurements indeed enter into practically all commercial operations from trading of bulk goods such as metal/ores, agribusiness/food processing to retail sale of goods to the public in the marketplace. At the national metrology laboratory, metrology equipment must thus supply measurement of basic units (e.g. mass, length, temperature, density, volume, etc) required to meet the country’s measurement needs in critical sectors of the economy. 1