The Pragma Corporation TRADE and INVESTMENT PROJECT in CENTRAL ASIA

The Pragma Corporation TRADE AND INVESTMENT PROJECT IN CENTRAL ASIA

FIFTH QUARTERLY REPORT FOR THE PERIOD: September 1 through November 30, 2002

For the U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT Contract No. 116-C-00-01-00015-00

GENERAL INFORMATION

COTR USAID/CAR Mark Urban PROJECT MANAGER Mohammad Fatoorechie CHIEF OF PARTY Paul Pieper

Table of Contents

I. SUMMARY OF GENERAL DEVELOPMENTS 3

II. ADMINISTRATIVE ISSUES AND HOME OFFICE SUPPORT 5

III. CUSTOMS COMPONENT 6

“SAFE SEARCH SEMINAR – CLOSEDOWN REPORT” 17

IV. WTO COMPONENT 32

“MAS-Q REPORT – NOVEMBER 2002” BY ED NEMEROFF 42

V. REMOVAL OF INVESTMENT CONSTRAINTS COMPONENT 47

The Pragma Corporation USAID Trade and Investment Project In Central Asia Summary and Administrative Sections Quarterly Report September 1 through November 30, 2002

I. Summary of General Developments

This quarterly report summarizes the activities of the USAID/Pragma Trade and Investment Project (TIP) during the past quarter. At the conclusion of the current quarter, TIP has completed 18 months of the two-year contract base period.

The Pragma Corporation was authorized to begin work on TIP as of June 1, 2001. The contract between the U.S. Agency for International Development (USAID) and the Pragma Corporation was finalized and signed in mid-July, 2001.

The TIP was designed so that different components would be phased in gradually over a period of several months. The initial phase began on June 1, 2001. The Customs Component in Kyrgyzstan and Kazakhstan was phased in from the predecessor project beginning on July 1, 2001. The World Trade Organization (WTO) Component began to be phased in August in Kyrgyzstan. Work in Kazakhstan depends on specific requests from the Government and no request has been received to date. WTO work was initiated in Tajikistan by a contract amendment in December 2001, and in Uzbekistan by a contract amendment in October 2002. The initial phase of the Removal of Investment Constraints (RIC) Component began to be phased in during October 2001 with the establishment of oblast RIC offices in Bishkek and Osh, Kyrgyzstan, and Atyrau, Uralsk, Pavlodar, Ust-Kamenogorsk and Almaty, Kazakhstan. National RIC activities began in Kazakhstan in that same quarter. The last piece of the RIC Component was the national RIC component in Kyrgyzstan which was phased in beginning September 1, 2002. Staff from the ARD/Checchi Regulatory Reform Project (RRP) was absorbed into TIP and now provide national RIC support as anticipated in Section C.

As of November 30, 2002, TIP is authorized to provide RIC support in Kazakhstan and Kyrgyzstan; WTO support in Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan (including WTO related customs); and Customs in Kazakhstan and Uzbekistan.

Some of the notable developments during the quarter include:

A. RIC Localization

October 1, 2002 marked an important transition time for the Kazakhstan RIC component. As of that date, MBA Corps members and other expatriates who managed RIC oblast activities were replaced by local managers that had been trained in the oblast RIC offices. During the quarter, the new managers were trained and supervised by two expatriate RIC specialists. This is a first step towards exiting RIC cities and leaving local capacity operating in a sustainable RIC environment.

B. Reduction of Investment Constraints

The target USAID established for the reducing investment constraints for the TIP was five constraints per oblast or a total of 35. As of November 30, 2002, TIP had removed 52 constraints in seven oblasts. All oblasts, but two, had removed at least five constraints, and Uralsk had removed 14. With six months left in the TIP base period, it is projected that more than 100 constraints will be removed.

C. WTO Expansion to Uzbekistan

During the quarter, the TIP contract was amended to authorize support for Uzbekistan’s accession to the World Trade Organization. The TIP senior WTO advisor was relocated to Tashkent and work began on determining the specific needs and interests of the Uzbek government.

D. The Osh Initiative

In January 2002, USAID began exploring a pilot project to support accelerated development of agro-processing in the Ferghana Valley. This project, initiated at the request of the U.S. Ambassador to Kyrgyzstan, became known as the Osh Agro-processing Initiative, or the Osh Initiative.

TIP participated with USAID in the initial design and strategy for the Osh Initiative and participated in meetings with Oblast officials. Subsequently, TIP collaborated with the SME Project in the development of a coordinated the work plan. TIP also developed a strategy for and a draft memorandum of understanding between the Kyrgyz and U.S. governments. As part of the preparation for implementation, TIP organized focus groups with entrepreneurs to determine the most serious obstacles to increased trade and investment.

A Memorandum of Understanding between the U.S. and Kyrgyz Governments was signed in March. The full time RIC advisor, Steve Orestis, was hired and arrived at post in April. During the period since April, TIP has reduced seven investment constraints and is working on institutionalization of the process in the Governor’s office. Also, TIP began focusing on the removal of cross border trade constraints related to agro-processing. The analysis will be completed in the next quarter.

E. New Customs Codes in Kazakhstan and Kyrgyzstan

The TIP continued to assist in the final phases of the efforts to draft new Customs Codes in Kazakhstan and Kyrgyzstan. The reorganization of the Customs Committee in August 2002 in Kazakhstan caused considerable problems but TIP has been active in providing seminars, group consultation and other activities to lawmakers and businesses to promote the adoption of a WTO customs code. In Kyrgyzstan, the code has been completed and will be submitted to Parliament after New Year’s.

II. Administrative Issues and Home Office Support

During the quarter, several administrative and personnel issues took place.

A. RIC Advisor in Bishkek –with the conclusion of the Regulatory Reform Project, TIP hire one international advisor, Kelly Seibold, to manage RIC activities in Kyrgyzstan. Mr. Seibold was also designated as the TIP Country Representative for Kyrgyzstan and coordinates all technical aspects of the project there. He is complemented by a staff of four local specialists to support the effort.

B. Transition of Regional WTO Advisor Regional Economic Advisor, Maurice Thorne, completed a year of service with the project in October and was repatriated. Mr. Allen Shinn was hired as the regional WTO Advisor, based in Bishkek. In November, at the request of the U.S. Embassy in Uzbekistan, TIP transferred Mr. Shinn to Tashkent, Uzbekistan.

The Pragma Corporation’s home office has been extremely active in supporting the TIP project this quarter. TIP Project Manager, Mohammad Fatoorechie, made a trip to the field in September to conduct the quarterly project review, review and present the detailed Action Plan with USAID and monitor project progress. In addition, major efforts were made to ensure the participation of international experts in the MAS-Q Conference held in Bishkek in November 2002. Coordination efforts were underway between Ed Nemeroff and Irene Burns in early September and continued through the duration of the conference.

Meetings were held in Falls Church between Booz-Allen, Hamilton and Pragma Headquarters staff to evaluate procedures and ensure smooth communications and processes on the TIP.

The Pragma Corporation’s home office has insured that there is a synergy between the TIP and EDP project. Through Pragma’s centralized regional capabilities, the Trade and Investment Project and the Enterprise Development Project have both been housed in the same building allowing the two projects to experience substantial savings in telecommunications; office set up; rent; project logistics including travel and transportation; financial management; account consolidation; and efficient voucher preparation and reporting to USAID.

This cooperation has yielded a significant synergy between the two projects. In their present locations, and through centralized procedures and operational policies, both projects have been provided with access to IT, administrative support staff, and other resources. This synergy also extends to Pragma’s Financial Protection Initiative Project, as in the case of the sharing of legal expertise. In November 2002, TIP moved its Almaty office location and is temporarily located apart from the EDP until additional space can be found.

III. CUSTOMS COMPONENT

The Customs Component’s purpose is to reform customs procedures and administration in Kazakhstan and Kyrgyzstan and to assist with the implementation of customs modernization plans to bring the customs regimes of both countries into compliance with the Revised Kyoto Convention. The Customs Component’s objectives are to cultivate “grass roots” participation of business, legal and other professional associations in regulatory reform efforts and build demand for regulatory reform among these groups and other private sector participants; to help appropriate government agencies effectively, consistently and transparently implement market- oriented changes in new regulations and laws; to educate local level officials and entrepreneurs on existing laws that limit SME trade and investment regarding the need to enforce these laws; to assist in accession and post-accession WTO compliance issues in Kazakhstan and Kyrgyzstan respectively; to foster cooperation and coordination between customs and tax authorities within and between both countries; to continue to provide advice and technical assistance to the customs administrations of both countries to implement streamlined customs procedures; customs record keeping rules.

A. SUMMARY OF SIGNIFICANT EVENTS AND ACHIEVEMENTS

Kazakhstan and Kyrgyzstan (with impact on Tajikistan & Uzbekistan)

• The TIP has completed an analysis of both Kazakhstan and Kyrgyzstan tariff nomenclatures for compliance to international standards as contained in the 2002 updated Harmonized Commodity Description and Coding System maintained by the World Customs Organization. (These findings and recommendations will be presented to government counterparts in December) Neither Kazakhstan nor Kyrgyzstan is a Contracting Party to the HS Convention at this time. Both Kazakhstan and Kyrgyzstan have now expressed intent to become Contracting Parties. Additionally, TIP has worked informally with the EurAsia Economic Community (EAEC) that by an agreement ratified this quarter will have a single tariff nomenclature that is compliant with the HS Convention. This process through the EAEC will ensure sustainability of compliance with the HS Convention by not only Kazakhstan and Kyrgyzstan but also Tajikistan, another member of the EurAsia Economic Community. From a Customs technical perspective and for the flow of international trade, the compliance to the Harmonized System for Commodity Description cannot be over emphasized. Proper merchandise classification is one of the three fundamentals for customs processing. Compliance to the International Convention will form the basis for the development of integrated tariffs for Kazakhstan, Kyrgyzstan, and Tajikistan. (An integrated tariff provides for a single document used by the Government, Customs and the trade community for the identification of all import, export and transit licensing and regulatory requirements. It also provides an ideal framework and roadmap for the simplification and harmonization of border clearance procedures to insure seamless border crossings.)

• Facilitation of cross border trade and transit work has begun. This portion of the Customs work plan was originally scheduled for earlier in the year. The results have identified an agreement reached between Kazakhstan and Kyrgyzstan to permit a “green corridor” for

produce to transit from Kyrgyzstan and Uzbekistan through Kazakhstan to Russia is in jeopardy of cancellation because of alleged abuses by some of the Kyrgyz transporters. TIP has initiated steps that will be expanded in the next quarter to work with both the Kyrgyz transporters and Kazakh officials to insure that because of a “few bad apples” the low risk, compliant companies are not restricted in this procedure. This is an excellent opportunity for the further development of the previously initiated private sector Due Diligence Standards that form part of the fundamental steps in a modern risk management process for Customs.

Kazakhstan • The Customs of Kazakhstan has been reorganized under the Presidents’ Apparatus and no longer is in a direct agency relationship with the tax authorities that have been moved to the Ministry of Finance. This separation of the Customs and Tax functions will degrade the level of coordination and cooperation between tax and customs. Additionally the Customs now reduced to an agency level without Minister level support is reduced in stature and influence. • Work of the Customs Code in this quarter has included a polished English translation of Parliament version of the draft code. A review of this version identified that several key provisions were still not compliant with the amended Kyoto Convention and the requirements of the WTO. A copy of the English translation was delivered to the Ministry of Economy and Trade with a strong recommendation that the draft should be submitted to the WTO prior to enactment to ensure that the draft code did not violate the stand still provision on WTO accession. The Trade and Investment Project developed a vital working relationship with the Majilis Budget Committee reviewing the draft code. Mr. Obolonkin, the project’s local staff attorney was admitted to the Majilis working group as a non-voting member. The long-term technical advisor, Mr. Hekala prepared over 200 comments and recommendations for improvements to the draft code and identified 6 critical concepts for improvement. A short term customs legal advisor, Mr. Creskoff, has worked with the Majilis on 39 recommendations for changes in language. The chairman of the Majilis working group, Mr. Milyutin, has agreed to introduce these 39 proposals to the working group for inclusion in the code. Customs has agreed to support 24 of the proposed changes, reconsider 11 and has rejected outright only 4 of the provisions. The second reading of the draft is scheduled for December 25th in the Majilis. The estimates range from passage by January 1, 2003 (unlikely) June, 2003.

• The final two of the four regional anti corruption conferences were held this quarter. The anti corruption conferences received a very heavy press coverage. The anti corruption conferences are part of a strategic plan to develop a comprehensive anti corruption/public integrity program within customs that will include participation from both the private sector and customs. TIP has brought in a short-term advisor to assist on the development of a comprehensive public integrity program for Customs. The public integrity program has been given a high priority by the newly appointed Chairman of the Customs Committee, Mr. Saparbaev. As part of the public integrity initiative TIP has prepared a draft action plan for Customs and completed a wage and benefits expectations survey of Customs officers. In the next quarter a similar survey is scheduled with the private sector to identify what professional customs officers are valued at by the businesses.

Kyrgyzstan • The draft revised Customs Code has continued to occupy much of the time of the Project and it is anticipated that it is will soon be submitted for consideration by the Parliamentary Legislative Committees. It has been circulated amongst the government Ministries and returned with their comments and the appropriate signatures. I t requires the signature of the Deputy Prime Minister, after which, a Resolution will be issued approving the draft and requiring it to be submitted to Parliament.

• A Presidential Decree was issued on 26 September 2002, which created a Committee for Revenue under the Ministry of Finance on the basis of the State Tax Inspectorate and the State Customs Inspectorate under the Ministry of Finance. The Decree specifically states that the status of law enforcement body should be retained by the structural units of the Committee performing the functions of customs bodies. A resolution of 30 October 2002 includes the provision to re-designate the State Customs Inspectorate as the “Department of Customs of the Committee for Revenue”

• “Osh Initiative”.

1. In September 2002, TIP held a Round Table on Customs Regulations relating to the import and export of goods between the Kyrgyz Republic and the Russian Federation. The invited participants were representatives of eleven companies all of which were either producers or processors of agricultural goods. The Project invited Mr Yuriy Barvinok of Teplichnyi JSC, Bishkek to give a presentation on his experiences during the eight years that the company has been exporting tomatoes to the Russian Federation. The presentation emphasized the benefits of shipping goods under the TIR Carnet system to avoid additional inspections and expenses when the goods are in transit through Kazakhstan. The project also invited Vassily Udodov of the RF Customs Mission in Kyrgyz republic to explain the specific requirements of the Russian Federation Customs when goods from the Kyrgyz Republic are imported into the Russian Federation after being transported through Kazakhstan.

2. TIP prepared a summary analysis of the problems concerning the Customs Border Posts in Osh, Batken and Jalal-Abad Oblasts. Many issues concerning barriers to trade by small or one man businesses are related to national security rather than Customs procedures

B. SUMMARY OF SIGNIFICANT ISSUES AND RESPONSES

Kazakhstan

1. In the last quarterly report it was reported that the Ministry of Revenue had been abolished on August 28, 2002. At that time it, the future role and position of Kazakhstan Customs was uncertain. TIP took immediate steps to meet with counterparts, including the new Chairman and Deputies of what was now organized as the Customs Control Agency under the President’s Administration. A primary object was to evaluate the current work plans and confirm that the work was still appropriate as planned and agreed to by the new management team in Customs. The re-organization in our opinion is not in the best interests of Kazakhstan in

the long term. As a VAT tax based country, the close coordination between tax and customs is critical to revenue collections. With Customs now under the President’s apparatus and Tax under the Ministry of Finance, coordination will be more difficult. TIP has responded first by insuring that the continued work is appropriate and second by obtaining during a meeting with the new Chairman, Mr. Saparbaev that the direct work with Customs is desired by Customs. A positive note during the meeting with Mr. Saparbaev was his strong interest in the development of substantive changes for public integrity and anti corruption. While Mr. Saparbaev recognizes that critcal elements of an effective Public Integrity Program (such as payment of a living, sustainable wage) are not in his control, he candidly asked for assistance from an “outside source” to bring these issues to the surface. TIP long range work plan included intensified work on anti corruption/ public integrity in the next quarter and is appropriate.

2. TIP analysis of the draft customs code submitted to Parliament identified that several changes had been introduced from the previous version that were not as discussed with the drafters in the working groups. These included provisions that based on our opinion are not compliant with the requirements of the WTO. Our response was to provide the Ministry of Industry and Trade with both an electronic and paper copy of an English translation of the Parliament version of the Draft Customs Code with a recommendation to submit the draft to the WTO prior to passage so that the WTO could confirm our recommendations for change. We also worked very closely with the Majilis working group reviewing the draft code. See Summary of Significant Events for details.

3. The private contract between the GOK and the US firm ICS has been put into effect and based on reports from businesses and Customs, ICS is recommending uplifts (increases in value) on imports that are not compliant with the current Kazakhstan Customs Code valuation methodology that is WTO compliant. Our concern is both for the private sector that will forced to pay higher duties and taxes not consistent with the law and for Customs officials that will be placed in bad light for not following the ICS recommendations. TIP’s response has been to meet with ICS and confirm that they are now recommending alternative values to Customs. A representative from ICS identified that they have discovered a blatant under valuation conspiracy involving false invoices generated in a manufacturing company in Europe. We have suggested that this information should be shared with Customs who has the legal authority to request assistance from another Customs Administration for an investigation into this matter. We have also met with businesses and with Customs officials urging that the fundamental basis for value should be based in the law. We are drafting a model appeal that will be distributed to the private sector in the next quarter to use in those instances where values have been increased based on ICS recommendations inconsistent with the WTO/Kazakhstan valuation methodology.

Kyrgyzstan As mentioned in the previous report, the completion of the draft revised Customs Code is a significant development and, by virtue of its being in accordance with the requirements of the Kyoto Convention it makes wide provision for trade facilitation both for importers and ancillary services. However, the issue relating to licensing has still not been resolved and, despite the fact that the draft Customs Code is with the Prime Minister’s Office, there is still a conflict between the Law on Licensing and the Customs Code. In its present form there is no provision in the Licensing Law for licenses to be issued for Customs Brokers, Bonded (Customs) Warehouses,

Temporary Storage Warehouses and Customs Carriers, all of which would provide major benefits to importers and exporters.

Several discussions have been held with representatives from the State Customs Inspectorate and the Parliamentary Legislative Committee concerning the precedent of the Law and the Code. None of these have been conclusive, as the Russian text seems to leave this open to several different interpretations. The Project’s concern is that any solution/compromise, which requires the licensing of Customs Brokers etc in the Licensing Law should not in any respect diminish the powers of Customs under the Customs Code to issue and revoke licenses and impose conditions as required in the Code. Similarly the time limits prescribed in the Code should be retained.

C. TRAINING ACTIVITIES

General Training

None

Kazakhstan Training

• A two-day training session on anti corruption/public integrity was delivered in both Aktobe and Ust Kamenagorst with each delivery to approximately 50 Customs Officers. On the second day of the training the public was invited and participants from the business community joined in the conference. The regional conferences on anti corruption were within the original work plan but the level of training has been greatly increased at the request of Customs. A key objective of the regional conferences is to gather participation and recommendations from the regions, both from Customs officers and the trade community for the development by the Customs Committee of a comprehensive anti corruption plan.

• A one-day seminar was delivered in Astana at the Kazakhstan Parliament to parliamentarians and representative from government agencies on the WTO requirements for Customs and the provisions of the amended Kyoto Convention. (Note: Each of the members of both the Majilis and the Senate was provided in advance of the seminar a compact disk with Russian translations done by the previous Trade and Investment Project of all the WTO reference materials and the amended Kyoto Convention with the Guidelines to the General and Specific Annexes. These basic reference documents if printed in hard copy are several hundred pages. The delivery in advance of the reference materials in an electronic format was much appreciated by the participants. Several participants asked for additional copies of the CD for staff members. The use of the electronic format distribution was both more effective and a fraction of the cost of distribution of the materials in paper format.)

Kyrgyzstan Training None

D. PROGRESS AGAINST WORKPLAN AND BENCHMARKS

Work Plan Item Status & Quarterly Activity Assemble team and 1c conduct orientation Completed July 01 2c Develop Work Plan Completed July 01 KZ – The amended Kyoto Convention has been used as a primary reference document during the redrafting of the Customs Code. TIP has provided almost daily consultations to the drafters on the implications and interpretations of the Standards contained in the amended Kyoto Convention. In addition during the Assist Customs reporting period, the primary participants from the private sector have been 3C administrations of provided with copies of the convention and the guidelines for use in presenting KG and KZ in their proposals. implementing KR – As above. TIP continues to in conjunction with the WB Team to identify Revised Kyoto those aspects of the legislation or procedures, which are not in accordance Convention (BM 1) with the requirements of the Kyoto Convention.

Assist the GOKs in No activity this quarter preparation of letters 4C of accession to the amended Kyoto Convention (BM 1) Analyze customs A STTA has been selected and hired to do an analysis of the possibilities for regulations and increased cross border trade. Kazakhstan currently has a “green corridor” for procedures in KG and Kyrgyz and Uzbek produce to Russia but because of abuses this system by KZ and make some transporters is in jeopardy of being closed. TIP is working with 5C recommendations for transporters in Kazakhstan and Kyrgyzstan to develop companies meeting low increased cross- risk criteria that may continue to use this procedure. Further work on Customs border trade targeting Union and CIS transit and TIR is in progress with the assistance of short-term TIR expansion (BM specialist consultant. 2,5, 6) Initiate and expand KZ – TIP as a follow on activity to one regional anti-corruption seminar has public outreach assisted the Customs in developing an additional regional Consultative Council program working with of Customs and the Trade community. TIP is working with the Kazakhstan Trade community and Union of Road Transporters and the Freight Forwarders to develop low risk due 6C customs by providing diligence procedures. Models have been developed for both industries. TIP technical advice to continues to work on a routine basis with the Forum of Entrepreneurs and the trade organizations Customs Brokers Association providing technical advice. (BM 9) Establish legal basis Completed: for joint post entry KZ- Order issued by former Ministry of Revenue for Customs to have a Tax control teams of officer accompany Customs on Post Entry Control Audits. Full integration not Customs and Tax in taken and now not likely due to separation of Customs and Tax with the KG and KZ to dissolving of the Ministry of Revenue. 7C decrease KR- Pending Implementation of Fiscal Reform Strategy administrative burdens on agencies and SMEs (BM 5, 7 & 12) Audit Task Force 11/02 TIP recommends deleting from work plan pending implementation of joint 8C Performance KZ and audits by Customs and Tax. KG (BM 5, 7 & 12) Conduct training on Completed –12 day course delivered to 20 officers from Kazakhstan and audit and Kyrgyzstan. 9C investigations to KG and KZ Customs (BM 13, 14)

Provide training to Completed – Customs the only law enforcement agencies in Kazakhstan and customs officers on Kyrgyzstan trained in risk to blood borne pathogens in the work environment. safe search The “Safe Search” seminar was conducted in 8 cities of Kazakhstan. Totally, techniques. Dates to 283 customs officers from 47 customs points and 45 border guard officers 10C be coordinated with participated in the seminar. In Kyrgyzstan the “Safe Search” seminar was delivery of equipment conducted in 4 oblasts, 6 customs posts. Total amount of customs officers – 55 from USCS (BM 11, (plus 16 officers from “Chaldavar” and “Ak-Jol” Customs Posts). 12, 13, 14) Completed – Audit of performance and recommendations for further training on Audit performance of national level for risk management and compliance audit developed. customs officers in KZ & KG; assess 11C effectiveness of training and offer remedial training if necessary (BM 12) Assist Customs STTA has performed an audit of Kazakhstan and Kyrgyzstan tariff administrations of KZ nomenclatures for conformance to the HS 2002 version. EAEC agreement and KG in joining and reached on single basis nomenclature compliant with HS convention. implementing HS Kazakhstan and Kyrgyzstan reported to the World Customs Organization as 12c Convention by following the HS convention but not contracting parties. (Reports to both conducting technical governments on independent audit of nomenclature, model letters of accession review and model to delivered in December.) letters of accession (BM 2) Provide technical KZ- Ad hoc advice to Customs and trade community. advice and training to KR –Continuous work with Jogorku kenesh, SCI on Customs Concept for assist Customs Reform and Modernization. administrations and 13c the trade community of KG and KZ in implementing customs modernization plan. (BM 3) The TIP local expert on the EAEC attended one meeting during the quarter of Provide technical the EAEC Customs members. TIP through Kyrgyz counterparts are making assistance on recommendations to the EAEC for better transit procedures. One very 14c customs matters to significant agreement was reached by the EAEC this lat quarter on the the Eurasian agreement to a single tariff nomenclature for the member states. An important Economic Community part of this agreement is that it will be sustainable for compliance to the HS Added 12/01 convention. Conduct review of December 2002 – TIP recommends deleting this item from the work plan. The current legislation to new WTO Origin Rules are not completed. WTO Origin Rules 15c (when finalized by WTO, delivery date not specific) (BM 8) Conduct training December 2002 – TIP recommends deleting this item from the work plan. The session on new WTO new WTO Origin Rules are not completed. 16c Origin rules (delivery) (BM 8)

Assist the KG and KZ Presentations drafted for training sessions to Customs teams in both countries Customs in for Cost Based user fee analysis. Preliminary research on budget and time and developing cost based motion studies conducted in Kazakhstan by local contract consultant. user fees for WTO 17c compliance and recommendations for budget restructuring to business model (BM 4) Conduct Cost Cost analysis to be started in December with training of analysis teams In

analysis Kazakhstan and Kyrgyzstan. STTA identified and to be proposed to Pragma/USAID for work to begin next Conduct HR Study quarter.

Assist customs Green corridor established for limited companies in Kyrgyzstan and administrations of KG Uzbekistan. Problems of abuse identified by Kazakh Customs. TIP to work and KZ to further with Kazakhstan Customs in next quarter for application of risk management to develop "Green maintain system. TIP working with compliant companies to insure 18C Corridor" system for sustainability. agricultural produce in transit through KZ (added 12/01) KYRGYZSTAN Assist Kyrgyz Completed - Competition for internships is intense. Despite two applications by Customs in obtaining the KR for French speaking Internships KR has not been successful. This is 1ckg a WCO Internship due to intense competition rather than the ability or language skills of the (BM 10) applicants. Develop web site for TIP IT continued work on web site pages. 2ckg Kyrgyz Customs (BM 3) Assistance in drafting TIP continues to work on the draft code. See summary of significant events 3ckg new Customs Code and achievements. (added 12/01) Review and provide In process comments on 2 draft versions Provide technical In process assistance and advice to Working Groups of SCI, Parliament and Secretariat Provide English In process translation of final draft for dissemination

to business community and Donor Agencies Using WCO Provision of training materials and translation of WCO PowerPoint standards, further presentations for further use provided to Customs. 4ckg develop training techniques for Customs (BM13)

Prepare pilot version Pilot Project identified to demonstrate use of integrated tariff. Primary work to of "Integrated Tariff" be completed in next quarter. 5ckg for agricultural products (added 12/02) Assist exporters in KG Interviews with Kyrgyz users of green corridor through Kazakhstan initiated to to develop use of strengthen system. 6ckg "Green Corridor" transit system (added 12/02) Due Diligence No activity this quarter 7ckg Standards (added 12/02)

Due Diligence No activity this quarter Standards Transporters Due diligence No activity this quarter Standards Freight Forwarders KAZAKHSTAN Develop an 12/02 TIP recommends deleting this component. Work on broker and other appropriate system of guarantees incorporated in customs code reform. broker guarantees to 1ckz support a competitive customs broker market added 12/01 Provide support for STTA in country and has identified the problems that have begun to surface opposition to with the start of a value verification system by a private company. Value implementation of a increase not incompliance with WTO/Kazakh valuation methodology. A model 2ckz Preshipment appeal has been started and will be delivered to the trade community in Inspection System December. added 12/01 Develop with Brokers' A short term advisor has been working to develop models for transporters, Association and freight forwarders and warehouse operators. 3ckz Customs due diligence standards. (BM 3,5,6, 9) Due diligence Competed – Adapted as requirement for members of Kazakhstan Customs

Standards Brokers Brokers Association Due diligence Model drafted – Companies to implement now being identified. Standards Importers & Exporters Due Diligence Model drafted and delivered to Union of International Road haulers. Standards Transporters Due diligence Model drafted and delivered to Kazakhstan Freight forwarders Standards Freight Forwarders Due diligence Model drafted. Standards Warehouse Operators

Stage public No activity this quarter. information seminars that include new trade 4ckz topics including due diligence standards (BM 9, 13, 14) 5ckz Develop coordination Two regional anti corruption seminars delivered. One additional regional and cooperation consultative council developed. Preliminary public integrity action plan written between trade and delivered to the Customs Control Agency. community and customs authorities through training in responses to corruption (BM 9, 13, 14)

Conduct Training Model Action plan delivered. Training initiated on code of conduct and

Customs Committee corresponding table of offences. Conduct 4 regional Two regional seminars delivered and follow up visit resulting in the

seminars establishment of a regional consultative council. Conduct Customs Wage surveys completed during this quarter. Analysis and tabulation begun. officer wage expectation survey Conduct Trade Survey designed. Agreement reached with the Forum of Entrepreneurs for the Community wage conducting of the survey to begin in December.

value survey private sector Develop interactive No activity this quarter. Pending availability of TIP IT specialists. web site for 6ckz Kazakhstan Customs Brokers. (BM 6 & 14) Provide support for Support of the drafting of the new Customs Code continues to be a primary the drafting of the activity. See Summary of Significant Events and Achivments 7ckz New Customs Codes in Kazakhstan added 12/01 Review and provide Completed comments on 5 draft versions Sponsor and stage 3 Completed public forums on the draft code Provide English Competed translation of Parliament version Draft to GOK for submission to WTO Sponsor and stage Completed conference on WTO and amended Kyoto Customs Requirements Identify Critical areas Completed lacking in parliament version and draft

alterative language.

VI. REPORTS AND PAPERS

See: Safe Search Training Report (follows)

Safe Search Seminar

Closedown Report

Kazakhstan, Kyrgyzstan

October 2001- September 2002

ACTION CLOSEDOWN REPORT

I. Administrative Information

1.1 Subject of the Seminar Safe Search Conducting

1.2 Place of deliver 1. Semey Eastern-Kazakhstan Oblast “Aul” Customs Point “Aul” Customs point is situated on the Kazakh-Russian border and is in the structure of “Semey”. Customs house. # of participants: - 22 officers. Dates: October 3, 2001

2. Jambyl Oblast “Kordai” Customs Point “Kordai” Customs point is an autonomous point situated on the Kazakh-Kyrgyz border and subject directly to the Customs Committee of RK. At present it is the main point for transit trucks following from Russia to Kyrgyzstan. A contiguous Customs point from Kyrgyz side is “Ak-Jol” point. # of participants: - 43 officers. Dates: November 14, 2001

“Sapytai-Batyr” Customs Point “Sapytai-Batyr” Customs point is situated on the Kazakh-Kyrgyz border and is in the structure of the Jambyl Regional Customs department. Due to internal order of Kyrgyz Customs Inspectorate all transit trucks going to/from Russia and Kazakhstan must pass through “Ak-Jol” point. # of participants: - 31 officers. Dates: November 15, 2001

3. Shymkent Southern Kazakhstan Oblast “Jybek-Joly” Customs Point “Jybek-Joly” Customs point is situated on the Kazakh-Uzbek border and is in the structure of the Southern Kazakhstan Regional Customs department. Distance from Shymkent city- 100 km. # of participants: - 30 officers. Dates: November 27, 2001

4. Uralsk Western-Kazakhstan Oblast Uralsk – the participants were from the neighboring Customs Points such as: “Taskala”, “Zhelaevo”, “Aksai” # of participants: 22 officers Dates: June 25, 2002

5. Pavlodar Eastern-Kazakhstan Oblast Pavlodar – the participants were from the neighboring Customs Points such as: “Urlitobe”, “Aksu”, “Ekibastuz”, “Sulu- agash”, “Naiza”, “Ertis”, “Kosak”, “Sharbakty”, “Amangeldy”

# of participants: 23 officers. Dates: July 2, 2002

6. Aktobe Western-Kazakhstan Oblast Aktobe – the participants were from the neighboring Customs Points such as: “Kargaly”, “Bozoy”, “Martok”, “Aktobe”, “Auezhai”, “Temirzhol”, “Kobda” # of participants: 28 officers Dates: July 18, 2002

7. Petropavlovsk Northern-Kazakhstan Oblast Petropavlovsk – the participants were from the neighboring Customs Points such as: “Karakoga”, “Petropavlovsk”, “Zhanazhol”, “Kyzyl-Zhar”, “Bidaik”, “Aimzhan”, # of participants: 33 officers. Dates: July 30, 2002

8. Kostanai Northern-Kazakhstan Oblast Kostanai- the participants were from the neighboring Customs Points such as: “Tobyl”, “Akbalshyk”, “Lisakovsk”, Auliekol”, “Zhylandy”, “Zhelkuer”, “Kairak”, “Aiyat”, “Kairak”, “Kenaral”, “Ubagan”, “Zaayatskiy”, “Kostanai”, “Zhetikora”, “Sarykol” # of participants: 53 Dates: September 11, 2002

9. Almaty Southern-Kazakhstan Oblast Training to Border Guard Officers from Kazakhstan, Kyrgyzstan, Turkmenistan and Tajikistan. This course was specifically developed by Mr. Hekala to train Customs officers how to conduct intensified, high risk searches while minimizing the risk to an on the job exposure to blood borne pathogens such as HIV and Hepatitis. Mr. Hekala was invited to deliver this course to the respective Border Guards during a training session this last week sponsored by the International Organization for Migration, US Customs and the US Embassy in Kazakhstan. Three sessions were delivered to the participants during their training session in Almaty. This is the first training offered to Border Guard Officers from the four countries on minimizing the risks to HIV and Hepatitis. # of participants: 45 officers Date: April 15-19, 2002

10. Osh Osh Oblast “Dostuk” Customs Post borders with Uzbekistan # of participants: 15 officers Observer of the seminar was M-r Udodov, Head a Russian Mission Department of the State Customs Committee under the State Customs Inspectorate of the Kyrgyz Republic, Lieutenant Colonel of the Customs Service

Kara-Suu Customs Post borders with Uzbekistan # of participants: 10 officers Date: 14 May, 2002 Observer of the seminar was M-r Udodov , Head of a Russian Mission Department of the State Customs Committee under the State Customs Inspectorate of the Kyrgyz Republic, Lieutenant Colonel of the Customs Service

11. Djalal-Abad Djalal-Abad Oblast “Bek-Abad” Customs Post # of participants: 10 officers Date: May 15, 2002 Observer of the seminar was M-r Udodov, Head of a Russian Mission Department of the State Customs Committee under the State Customs Inspectorate of the Kyrgyz Republic, Lieutenant Colonel of the Customs Service

12. Kara-Kol Issyk-Kul oblast “Kara-Kol” Customs House # of participants: 8 customs officers Observer of the seminar was M-r Udodov, Head of a Russian Mission Department of the State Customs Committee under the State Customs Inspectorate of the Kyrgyz Republic, Lieutenant Colonel of the Customs Service

“Karkyra” Customs Post is 180 km from Karakol c.(3000 m above see level) and borders with Kazakhstan # of participants: 2 officers Date: May 28, 2002

13. Naryn Naryn Oblast “Torugart” Customs Post is situated at the border with China (4000 m above see level, 200 km far from Naryn c. The participants were customs officers of one shift of “Torugart” Customs Post # of participants: 10 officers Date: August 27, 2002

SUMMARY:

The “Safe Search” seminar was conducted in 8 cities of Kazakhstan. Totally, 283 customs officers from 47 customs points and 45 border guard officers participated in the seminar.

In Kyrgyzstan the “Safe Search” seminar was conducted in 4 oblasts, 6 customs posts. Total amount of customs officers – 55 (plus 16 officers from “Chaldavar” and “Ak-Jol” Customs Posts).

1.3 Instructors - Walter Hekala- Senior Customs Advisor - Gulnar Sultanalieva - Customs Advisor - Nikolay Obolonkin, Customs Advisor - Zhannat Rakhimzhanova, Customs Advisor - Anna Zhugan, Training Coordinator - Meerim Abdukadyrova, Head of the Training Center of the State Customs Inspectorate under the Ministry of Finance of the Kyrgyz Republic

II. Objectives of the Seminar

2.1 Improvement of knowledge and skills of border customs points` officers in conducting intensive search of vehicles, passengers and luggage based on risk assessment; 2.2 Concentration of attention of employees conducting search of vehicles, passengers and luggage on the necessity to take proper safety measures while conducting search in order to avoid HIV/AIDS and hepatitis contamination.

III. Expected Results

3.1 Increased number of customs violations revealed. 3.2 Increased amount of revenues collected through intensive and effective search of vehicles, passengers and luggage. 3.3 Improved system of transfer and exchange of operational information between the points.

IV. Description of the Seminar

The seminar consisted of the theoretical part on the following topics: - Search of persons - Search of cars - Search of luggage - Search of commercial vehicles. - Personal risks (blood borne pathogens)

And the practical part conducted at the Customs Temporary Storage Warehouse in all mentioned above cities demonstrating the detailed search of a truck.

ACTION CLOSEDOWN REPORT

During discussions emphasis was made on: - The necessity to conduct intensive search based on risk assessment; - The necessity to ensure personal safety of the officers conducting search – prevent them from HIV/AIDS and hepatitis contamination; prevent them from being injured or wounded as the result of possible attacks of passengers; - The necessity to strictly follow health and safety measures and to provide protective clothes to ensure such safety (gloves, special protective clothes, glasses, etc.)

The theoretical part was followed by practical exercise conducted directly at the warehouse.

During the training the inspectors were asked questions aimed at identification of their knowledge and professional level.

Question 1 – Is there difference between “Smuggling” and “Commercial Fraud”?

The participants of the seminar were right to answer that “Smuggling” is illegal transportation of drugs, weapons, ammunition and currency, while “Commercial fraud” is wrong declaration of goods weight and name, non-declaration, undervaluation. According to the inspectors such kinds of violations are rarely observed at these points.

Question 2 – What groups of people and which objects can be dangerous for the customs officers working at the border points?

The inspectors mentioned aggressive people under alcohol or narcotic intoxication, terrorists, people searched by the police, individuals showing hesitation, uncertainty and nervousness in presence of Customs officers. No one mentioned sick people. The trainers pointed out the importance of knowing how to protect yourself from people that are sick with tuberculosis and other unseen diseases.

Question 3 – What is the concept of risk assessment? What to target on primary searching and documents check?

Customs officers at these points pay attention mainly to the trucks going by transit through the territory of the Republic of Kazakhstan from Russian Federation.

Customs violations at these points are rare, mostly they relate to underweight and wrong classification.

ACTION CLOSEDOWN REPORT

V. RECOMMENDATIONS

1. Apply the system of selected search of vehicles, passengers and luggage based on risk assessment in a more effective way; 2. Conduct more frequently personal search as on-body way of smuggling is often used by violators; 3. Start to establish own data base on vehicles and travelers involved in Customs violation commitment; 4. Improve the system of transfer and exchange of operational information; 5. If possible provide officers conducting search of vehicles, passengers and luggage with personal safety means – protective gloves, glasses and clothes – and search instruments. 6. The management of the Customs committee to consider possibility of mandatory free of charge vaccination of officers. 7. At every Customs point to have a stand with information on how to prevent being exposed to blood borne pathogens and measures in case of accidents.

Enclosure 1. List of participants 2. Map of Kazakhstan 3. Map of Kyrgyzstan

LIST OF PARTICIPANTS

1. Shymkent

“Jybek-Joly” point

1. Tuyakbaev Kasymkhan – head of the point 2. Kenjekhanov M.

3. Sharipov S 4. Dshabrailova T. 5. Medeuov S. 6. Esenbaev A. 7. Abramov I. 8. Makhanov S. 9. Turgunbaev A. 10. Bisultanov I. 11. Eshilov F. 12. Kirbasov D. 13. Shamdauletov E. 14. Tajibaev K. 15. Kyrykbaev B. 16. Kazban F. 17. Ospanov K. 18. Mynbatyrov G. 19. Ziyadanov K. 20. Berdiev E. 21. Abildabekov 22. Dairbekov N. 23. Sardarov T. 24. Tlemisov T.

“Abai” point 1. Dosybaev D. 2. Mambetaliev E. 3. Sadykov F. 4. Namiabekov Sh. 5. Moldabaev M. 6. Rysbai B.

2. Kordai

“Kordai” point 1. Aubakirov Nurmuhammed - chief inspector 2 Danekeev Abai – inspector 3. Chimuldinova Bakhyt – inspector 4. Nurpiyasov Sanat – chief inspector 5. Gavanov Amir - inspector

“Ak-Jol” point ( Kyrgyzstan) 1. Asakeev Erkinbek – inspector 2. Toktonaliev Nurlan – inspector 3. Jamankulov M. - inspector 4. Toktobekov Askat – inspector 5. Sydykhbekov Talant – inspector 6. Niyazov Azamat – inspector 7. Samsaliev Nurbek – inspector 8. Djoldoshev Bilim - inspector

“Sypatai-Batyr” point 1. Ismailov Makhmulla Maripovich – head of the point 2. Omirzakov S. – inspector

3. Tashbolatov B. – dog-handler 4. Kipshakbaev M. – chief inspector 5. Tuleuov S. – inspector 6. Smailov K. – chief inspector

“Karakhan” point 7. Begeltaev B. – deputy head of the point 8. Khasenov R. – chief inspector 9. Januzakov M. – chief inspector 10. Gavryushenko S. – chief inspector 11. Jondykaraev M. – senior inspector 12. Tynaliev S. - inspector

“Jualy” point 8. Daribaev M. – chief inspector 9. Asabaev J.– senior inspector 10. Moldabek A.- inspector 11. Atabekov M.- inspector 12. Kulpashev T.– inspector 13. Sultashev K. – senior inspector

“Merke” point 1. Akhmetjanov A. – inspector 2. Konkabaev D. – senior inspector 3. Ibraev A. - inspector

“Chaldovar” point (Kyrgyzstan) 1. Mamatov B. – chief inspector 2. Begaliev A. – senior inspector 3. Shamiev A. – inspector 4. Zakirov T. – inspector 5. Sargynbaev S. – inspector 6. Israilov M. – senior inspector 7. Begaliev T. – senior inspector 8. Myrsakmatov K. – inspector Asygaliev A. – inspector

3. Semey

“Uba” point 13. E. Baigarinov – chief inspector 14. N. Martynov – senior inspector 15. A. Bykhanov – senior inspector

“Aul” point 14. Manap Karasartov – head of the point 15. Nurlan Kenjenov – chief inspector-head of shift 16. Marat Bayazitov - inspector 17. Serik Mataev – chief inspector 18. Rafik Abraimov – chief inspector 19. Murat Bermagambetov – chief inspector

“Baitanat” point 4. Galymjan Ospanov – chief inspector 5. Nurlan Duisenov - inspector

“Jeskent” point 1. Arman Isakov – chief inspector

“Semey” Customs house 1. Maksut Uzakov – senior inspector 2. Gulmira Orazalinova – chief inspector

“Boztal” point 1. Kairat Meiremkhanov – inspector

4. Uralsk

“Taskala” point 16. Kyrykbaev N. – senior inspector 17. Mukanov Abai – senior inspector 18. Ikhsanov A. - senior inspector 19. Bekenov Askhat – inspector 20. Ismagulov Madi – inspector 21. Kereev Esei - senior inspector 22. Kuimbetov Serik – chief deputy of the point

“Zhelaevo” point 20. Shuriev Eltai– inspector 21. Shamuratov Kenzhemurat –inspector 22. Almukhanov Nurlan - main inspector 23. Apiev Mirzhan– chief inspector 24. Khuzasaitov Rishat– chief inspector 25. Nurtaziev Kuben– chief inspector 26. Baidildin Marks - inspector

“Aksai” point 6. Uspanov Edilbai– inspector 7. Kaliev Berik - main inspector 8. Bainiyazov Erkin – inspector 9. Gumarov Bauyrzhan - senior inspector 10. Zubaniev Berik - inspector

Customs (Registration Department) 1. Voroneikin Vitaliy – inspector 2. Aitmukhambetov Alik – senior inspector Dushkanov Avutalip – chief of department

5. Pavlodar

“Urlitobe” point 1. Akhmentov Nurlan- head of the Point 2. Kanapiyanov Sembai – main inspector

“Aksu” point 1. Zhusupov Talgat – head of the point 2. Turganbaev Erbolat – main inspector

“Ekibastuz” point 1. Sarmanov Kadyr – head of the point 2. Karimov Bauyrzhan – main inspector

“Sulu- agash” point 1. Syrymov Burambai – head of the point 2. Bozgozin Erlan – inspector “Naiza” point 1. Isaev Dulat – head of the point 2. Bondarenko Victor – main inspector

“Amangeldy” point 1. Konbergenov Hurlan – head of the point 2. Elusidov Samali – main inspector

“Ertis” point 1. Meklibaev Marat – main inspector

“Sharbakty” point 1. Zhakinov A. – main inspector 2. Kamyshkenov Baizolla – head of the point

“Kosak” point 1. Iskakov Asylbek – main inspector 2. Sauranbaev Kurymbek – chief

“Passenger Department” 1. Baitaev Serik – main inspector 2. Serikbaev Murat – chief of department 3. Temirgaliev Erlan – main inspector

Customs department 1. Omarov Dauren – main inspector 2. Omarov Hurlan – main inspector

Warehouse Gabbasov Takhir – main inspector

6. Aktobe

“Kargaly” point 1. Adilchenov B.K. – inspector 2. Kumarov S.M. – main inspector 3. Arharov A.C. - inspector 4. Sagintaev K. – inspector

“Bozoi” point 1. Tagibergenov N.M.– inspector 2. Kerimbaev M.A –inspector

“Martok” point

1. Suleimenov A.R.– inspector 2. Shurin R.S. - inspector 3. Belesov T. B. – senior inspector 4. Urazalin M.K. - senior inspector

“Aktobe” point 1. Alniyazov S. A. – senior inspector 2. Mukatov D.M. – inspector 3. Ergaliev S.T. – senior inspector 4. Kasymov R.K. – main inspector 5. Matahaev G.- inspector 6. Abdyhalykov N. – inspector 7. Kulamanov M. – inspector

“Auezhai” point 1. Spabekov K.B. – main inspector 2. Izbasova A.K. – senior inspector

Passenger department 1. Narikbaeva K.U. – main inspector

Energeticheskiy point 1.Uralbaev K.P. – senior inspector 2. Kurmanov A.B. – main inspector

“Kobda” point 1. Aliturliev Zh. A. – inspector

“Temirzhol” point 1. Abdirov T.E. – inspector 2. Aitmurzaev K.N. – senior inspector

“Customs Regimes and Registration Department” 1. Zholanov D. – senior inspector 2. Kim R.T. – main inspector 3. Malyanov A. A. – chief of department

7. Petropavlovsk

“Karakoga” point 1. Kortybaev S. - inspector 2. Kenzhebaev T. – main inspector 3. Cherkazyanov Victor – main inspector 4. Mustaphin Talgat – senior inspector 5. Sarsenbaev Mukhtar – inspector

“Petropavlovsk” point 1. Akhmetov T. – main inspector 2. Zhagiparov A. – main inspector 3. Cherednichenko Elena – main inspector 4. Victorov Alexsey – inspector 5. Delin Anatoliy – inspector

6. Seksenbaev Rustam – inspector 7. Anokhin Alexandr – inspector 8. Livadnyhk Sergey – inspector 9. Akhmetov Askar – senior inspector

“Zhana Zhol” point 1. Timbaev Marat – main inspector 2. Mustaphin Saphri – main inspector 3. Kasenov Nazargali – inspector 4. Ayashev Kazbek – inspector 5. Eslyamov Zhenis – inspector 6. Dzhumabaev Ruslan – inspector 7. Sailynkov Khamip – senior inspector 8. Khanin Yuriy – main inspector 9. Tapikov Talgat – main inspector 10. Kaziev Zangar – senior inspector 11. Zhaparov Bota – inspector 12. Kozhanov B. – inspector

“Bidaik” point 3. Kenesbaev Ondagaly – main inspector 4. Zhampeisov Rustem – inspector 5. Shahouv B. – main inspector 6. Elusidov Biken – main inspector

“Aiymzhan” point 3. Butumbaev Burkut – inspector 4. Nurmoldin Bekbolat – senior inspector

8. Kostanai “Tobyl” point 1. Munchuzhikova A.B. - inspector 2. Karasev A.U. - inspector 3. Shormukhametov S.A. – senior inspector

“Akbalshyk” point 1. Zhusupov R.B. – senior inspector 2. Mukhamedin M.M. – inspector

“Aulilekol” point 1. Ermagambetov T.R. – main inspector

“Lisakovsk” point 1. Zhaksalykov M.K. - inspector 2. Shektybaev K.T. – senior inspector 3. Bekbolatov A.O. – inspector

“Zhilandy” point 1. Nurakhmetov A.K. – inspector 2. Ashiagambetov A.Sh. – inspector 3. Baidauletov S.A. – senior inspector 4. Kostegaev I.B – inspector

“Zhelkuer” point 1. Kurmanov S. – senior inspector 2. Polodov S.A. – inspector

“Ornek” point 1. Magambetov M.M. – main inspector

Customs regime department 1. Seigaly D.A. – inspector

“Kairak” point 1. Alekemov Zh.B. – inspector 2. Malikov N.B. – main inspector 3. Tumubaev B.M. – inspector 4. Imanov B.K. – inspector 5. Temirbaev R.N. – senior inspector 6. Tokaev Zh.K.- senior inspector 7. Bokaev B. – inspector 8. Zhumagulov S. – inspector 9. Tuyakbaev A. – main inspector

“Ubagan” point 1. Tankin S. – senior inspector 2. Karamurzin M.A. – senior inspector

“Karatar” point 1. Kaliev A.K. – inspector 2. Yusupov R. – main inspector 3. Kimelbaev Sh.S. – senior inspector

“Aiyat” point 1. Akhmetov E.T. – inspector 2. Zhandybaev Zh.I. – senior inspector 3. Munaphorov H.B. – inspector 4. Umarov S.K.- senior inspector

“Fight against smuggling department” 1. Sadvakhasov B. – senior inspector 2. Taskumanov K. – inspector 3. Demirkov V. – inspector 4. Urazbaev A. – senior inspector 5. Ponomarev A.A. – chief 6. Kurbanov R.B. – senior inspector

“Registration department” 1. Zakiryanov E.A. – inspector

“Zaayatskiy” point 1. Goncharuk S. – inspector 2. Dosaev S. – inspector 3. Kunaev K. – inspector

“Kostanai” point 1. Dzhunisova S.O. – senior inspector

2. Seitkhanov M.K. – inspector 3. Akhov U.A. – senior inspector

“Sarykol” point 1. Burbaev B.M. – main inspector

Kyrgyzstan 1. Osh Oblast Dostuk” Customs Post

1. Tair Djumabaev – Head of the Customs Post 2. Kurbek Murzaibraimov – Senior Inspector 3. Nurlan Kaibyldaev – Inspector 4. Amat Berdieb – Inspector 5. Rustambek Boronbaev – Senior Inspector 6. Aichurek Mamashlieva - Inspector 7. Djahangir Husanov – Inspector 8. Maniyaz Keldibaev - Inspector 9. Usen Koilubae _ senior Inspector 10. Meder Ergeshev – Inspector 11. Rahmatulla Amatov - Inspector 12. Ulukbek Bekmatov – Inspector 13. Eshbolot Toktosunov -Inspector 14. Tabyldy Berdibaev - Inspector 15. Mederov Shamshibek – Inspector

“Kara-Suu” Customs Post

1. Saidrahmanov Suiyn – Head of the Customs Post 2. Kubanychbek Zulpieb – Inspector 3. Sharabidin Marighov – Senior Inspector 4. Felix Tolonof – Inspector 5. Torokul Kurbanaliev - Inspector 6. Kutukali Kosubaev - Senior Inspector 7. Nyzamedin Kurbanbaev – Inspector 8. Almazbek Adjimamatov - Inspector 9. Maksutali Kaldybaev – Inspector 10. Chinara Myrzalieva – Inspector

2. Djalal-Abad Oblast “Bek-Abad” Customs Post

1. Beknazar Kasymbekov – Head of the Customs Post 2. Kalmamat Tagaev – Senior Inspector 3. Rahim Uldashev – Senior Inspector 4. Almazbek Arziev – Inspector 5. Kamaldin Chamashev – Inspector 6. Alymbek Akimov – Inspector 7. Davlijat Attokunov – Inspector 8. Dair Uzenaliev –Senior Inspector 9. Stalbek Abdurasulov – Inspector 10. Denizbek Baigazinov – Inspector

3. Issyk-Kul Oblast Karkyra Customs Post

1. Kasymbek Alyshbaev – Senior Inspector 2. Jolochuu Alymbaev – Inspector

Kara-Kol Customs Post

1. Samaev Oktjabr – Head of the Customs Post 2. Aitkuliev Adylbek 3. Osmonov Syrtbek 4. Orozakunov Bolotbek 5. Sagaliev Talant 6. Sharsheev Omurbek 7. Baisalov Azamat 8. Kadyrova Gulnura

4. Naryn Oblast Torugart Customs Post

1. Kamchybek Kaipov – Head of the Customs Post 2. Ryskulbek Nurmanbetov - Head Inspector 3. Sagyn Muratov 4. Sagynbek Kydyraliev 5. Tazabek Taisalov – 6. Narynkul Abdraev 7. Djakyp Tabaldiev 8. Kadyr Usenov 9. Meder Asakeev 10. Anarbek Mambetov

IV. WTO COMPONENT

A. COMPONENT DESCRIPTION

The WTO Component’s purpose is to assist the Government of the Kyrgyz Republic in fully implementing its WTO trade agreements and assist the Government of Kazakhstan and the Government of Tajikistan with its accession to the WTO. During this reporting period, the project was further extended to include assisting the Government of Uzbekistan in its WTO accession. In Kazakhstan, project assistance to the GoKZ is essentially suspended, and project activities are limited to education efforts directed at the private sector.

The WTO Component’s objectives are to monitor, review and propose amendments to draft legislation that affects the foreign trade regimes of the countries, so as to ensure their compliance with WTO requirements; to assist the host countries in keeping the WTO apprised of any changes in their foreign trade regimes in a timely fashion; to provide training on WTO settlement mechanisms and work on strengthening the capacity of WTO oversight bodies to provide information on the compliance of new laws with WTO-related agreements, and provide notification of legislative changes relevant to WTO compliance. In conjunction with WTO assistance, the WTO Component focuses efforts on supporting cross-border trade. Specifically, the TIP seeks to 1) identify regional market niches and areas of comparative advantage for SMEs operating in Kazakhstan and Kyrgyzstan; 2) identify incentives and disincentives in these regional markets vis-à-vis SMEs elsewhere in Kazakhstan and Kyrgyzstan; and 3) analyze and translate various proposals that could affect the regional trade practices of SMEs in the two republics on an as-needed basis.

B. SUMMARY OF SIGNIFICANT EVENTS AND ACHIEVEMENTS

Kazakhstan • Reviewed Kazakhstan draft Standards law and found it to be only about 50% compliant with WTO/TBT.

Kyrgyzstan • Prepared Memorandum for Mrs.A. Rahmanova, Head of the WTO Department of the MFTI, on implementation of the Kyrgyz Republic commitments on WTO notification procedures. A program of training seminars on specific notification requirements was prepared, and eight seminars were conducted between 25-29 November, with several more to follow in early December. These seminars were presented to officials of various ministries with WTO reporting responsibilities, and provided an opportunity as well to review other aspects of the WTO agreements that were relevant to these ministries. • Prepared recommendations to the MFTI on developing the Export Program of the Kyrgyz Republic. • Consulted with the WTO Department on the issue of safeguard investigation - possible introduction of safeguard measures with respect to glass in order to protect national producer, Interglass, LLS. A similar issue exists with respect to the paper industry. Kyrgyzstan is concerned that its WTO tariff commitments may prevent what they see as necessary protection to these industries, although in fact this does not seem to be a

serious problem. The glass and paper industries have been substantially improved through foreign direct investment from China and Germany, and must pursue in export strategy in order to be viable in any case. Project staff have taken the position that the GoKG must scrupulously respect its WTO commitments in order not to imperil its reputation as a reliable trading partner, and that the GoKG should use the political cover provided by WTO to resist efforts of the private sector to gain protection. • Consulted with the National Bank on a proposal of the Russian Central Bank regarding a “simplified procedure” for Foreign Direct Investment of companies from one member of the EurAsian Economic Community (EAEC) in the territory of another member. Although simplified procedures are certainly desirable, this is at best a preliminary proposal for an agreement among the EAEC members, with no details provided. • Provided assistance to the Minister of Foreign Trade and Industry with respect to preparation for his official visit to the USA. • Provided assistance to the National Bank in developing the GoKG’s position on the Draft Agreement on Cooperation in Currency Regulation and Control of EAEC member- countries. • Provided assistance to the WTO Department in assessing the consistency of the Draft Law “On Veterinary” with WTO commitments under the SPS agreement. • Prepared an assessment of the Draft Law “On Export Control” of the Kyrgyz Republic for the Legislative Assembly of Jogorky Kenesh of the Kyrgyz Republic (namely, Mr. V. Tolokontesv, the deputy). • Consulted with Mrs. A Rahmanova concerning a perceived need for protection of sugar importers from rising imports from China resulting from China’s accession to the WTO. A safeguard measure in this case might be appropriate, if the GoKG could demonstrate that imports from China have risen rapidly and thus caused injury to domestic sugar producers. • Consulted with Mrs. Rahmanova concerning a perceived need for protection of the domestic insurance industry. Such protection would be difficult at best to square with Kyrgyzstan’s commitments under the General Agreement on Trade in Services; the position of the project is that such protection would be undesirable in any case, and that domestic insurance providers would be better advised to seek joint venture or similar arrangements with international insurance companies.

Tajikistan • Clearance of the draft Memorandum of Understanding on technical assistance to support Tajikistan’s WTO accession between the Tajik Government and USAID/CAR through the Tajik government took longer than expected. During the quarter, TIP worked with USAID and the Tajik government to finalize the draft Memorandum of Understanding. Formal approval procedures were completed at the end of November, when President of Tajikistan signed a resolution formally authorizing Minister of Economy and Trade to sign it on behalf of the Tajik government. As soon as the MoU is signed the accession assistance work plan will be discussed with the MET. • A Consultative Council to facilitate linkage between the Tajik government and the private sector with respect to the WTO accession was established, and an initial training seminar was held in Dushanbe to provide the Consultative Council with a basic understanding of the WTO agreements and the process of accession.

C. SUMMARY OF SIGNIFICANT ISSUES AND RESPONSES

Kazakhstan See Nemeroff report attached as an appendix to this section)

Kyrgyzstan

• Mrs. Rahmanova, Head of the WTO Department of the Ministry of Foreign Trade and Industry, has asked assistance of the Project team on possible protection of the domestic paper, glass, sugar, and insurance industries in accordance with the WTO rules. The project has discussed this request with her, and has advised on the basic procedures necessary to amend Kyrgyzstan’s tariff commitments. However, project staff believe that protection for the glass, paper and insurance industries would not be wise, and intends to discourage action in these cases. The sugar industry present a somewhat different situation, as problems appear to have arisen because of sharply rising imports resulting from China’s WTO accession. A WTO-compliant “safeguards” action might be appropriate in this case. • Mrs. Rahmanova has also requested support for the participation of the representatives of Kyrgyzstan in the WTO Ministerial Conference in Mexico in May, 2003. Project staff will discuss this issue with the Ministry early in 2003 and make a recommendation to USAID. • Assistance has also been requested with respect to replying to the US questions regarding the Kyrgyz Republic’s Responses to the Checklist of Issues for Provisions of Information Relating to Accession to the Agreement on Government Procurement in Document GPA/W/197/. The issue is now with the State Procurement Agency; project staff will determine whether any assistance in this area is required. • Mr. Nuritdin Jamankulov, Advisor to the Special Representative of President on attracting foreign investments, made a proposal to the Project to assist in developing Investment Matrix # 3 on trade policy issues. Discussions are continuing on the specific items to be included within this Matrix. • Mrs. Rahmanova has previously suggested that it could be useful for her to visit Dushanbe for the purpose of briefing Tajik officials on her experience in negotiating the Kyrgyz accession. Project staff believes this might be useful at some point before the first meeting of the Tajik Working Party, and will make a recommendation at an appropriate time. • Although economic research on the implications for Kyrgystan of the Chinese accession to WTO has previously been requested, project staff believe that this would not be particularly useful to policy makers, and that it is also beyond the present capabilities of the project.

Tajikistan

Project team has made efforts to coordinate with the recently launched Swiss government funded Tajikistan WTO accession assistance program implemented by United Nation’s Institute for Training and Research (UNITAR) with the view to avoid duplication and make assistance

activities complementary.

Project team will work with its main counterpart, the Ministry of Economy and Trade of Tajikistan to ensure coordination and best accommodation of Tajik governments WTO technical assistance needs.

Uzbekistan

• A series of meetings during October with senior GoUZ officials, including now Deputy Prime Minister Ganiev, established the desire of the GoUZ for new assistance with its WTO accession. • On November 12th, Dr. Allen Shinn became resident in Tashkent as the WTO adviser, with responsibility also for other WTO activities in the region. • WTO workplan for Uzbekistan is under development.

D. TRAINING ACTIVITIES

General Training - none Kazakhstan Training - none Kyrgyzstan Training

A series of eight seminars on Kyrgyzstan’s notification obligations under the various WTO agreements was delivered at the end of November, 2002. Participants were members of the WTO staff of the MFTI plus officials in other ministries dealing with specific topics.

Tajikistan Training

A two-day seminar in October, 2002, for members of the Consultative Council on WTO Accession presented a basic introduction to WTO and the major agreements, and an overview of the accession process. Members of the Consultative Council are primarily from the business and academic communities.

Uzbekistan Training A seminar for students of the “President’s Academy” on the basics of WTO and the accession process was presented on November 20, 2002. The President’s Academy provides in service training for senior officials of the GoUZ, from Department Head through Deputy Minister level.

V. PROGRESS AGAINST WORKPLAN AND BENCHMARKS

Defined Activity Progress Made During Quarter/ Proposed Future Actions 1. Field Team • KZ, KG, TJ Completed. UZ team fielded in November, 2002

2. Develop work plan • KZ, KG, TJ Completed. UZ plan drafted November, 2002, to be revised on basis of progress in GoUZ’s own action plan for WTO Accession Kazakhstan and Kyrgyzstan 3. Identify regional market • Completed report on trade between Kazakhstan, Kyrgyzstan and niches and areas of Russia comparative advantages • Complete draft report on barriers to trade between Kazakhstan, for SMEs operating in Kyrgyzstan and Russia Kazakhstan and Kyrgyzstan and widely disseminate such information to SMEs operating in each of the selected oblasts. 4. Review and evaluate • Analysis Completed – dissemination strategy under discussion. relevant Regional Trade The important RTA is that establishing “in principle” (but not in Agreements (RTAs) to fact) a customs union between Russia, Belarus, KZ, KG, and TJ. identify specific benefits and Whether this will actually be implemented is questionable, and advantages, as well as possible disadvantages and will turn mainly on political factors. However, an argument can impediments, for SMEs be made that the proposed customs union would not actually be in operating in the selected the interest of KG and TJ. This is an issue that will recur in the oblasts. Disseminate such context of the TJ WTO accession. information to relevant SMEs and to other USAID- sponsored projects.

5. Monitor, review and • Tracking Standards laws in Kazakhstan and Kyrgyzstan and propose amendments to working on making them TBT Compliant. draft legislation to streamline the foreign trade regimes of, and promote cross border trade between, the two countries, while ensuring compliance with WTO requirements.

6. Evaluate each country’s • Pending trade policies, including quantitative restrictions (import and export licenses and quotas), state trading, import and export registration, import and export tariffs policies, foreign exchange policies and other non-tariff barriers to trade. On the basis of the evaluations, provide recommendations to further liberalize the foreign trade regimes of the two countries.

7. Provide assistance in • Analysis underway in Tajikistan. further developing WTO • Kazakhstan has not met conditionalities for transfer. research libraries/centers in • Continue to monitor in Kyrgyzstan. both countries

Kyrgyzstan • 8. Provide post-accession • Continued interaction with the Kyrgyz government on TBT and support to Kyrgyzstan in other issues. fulfilling WTO-related • Extensive work on standards under the MAS-Q program will obligations and requirements substantially improve the ability of the GoKG to comply with the TBT and SPS agreements. • Recent support has included a series of seminars on WTO notification requirements, and advice to the MFTI concerning perceived needs for new levels of protection for the KG sugar, paper, and glass industries. 9. Assist the government of • Training of Kyrgyz officials has continued, most notably in the the Kyrgyz Republic in area of WTO notification requirements, with eight seminars on handling post-accession specialized aspects of this subject. issues in the trade and investment area. Within the first two years of the project, the contractor should phase out assistance and complete training of locals to carry on thereafter with WTO compliance-related issues.

10. Assist the Kyrgyz • The seminars on WTO notification conducted in November were government in keeping the directly concerned with this subject. GoKG officials ability to WTO apprised of any changes prepare and submit the required notifications is improving. in its foreign trade regime in a timely fashion

11. Assist the Kyrgyz • Counseling with respect to the compliance of draft laws on government in its currency controls, veterinary sanitary regulations, and export development of WTO controls was conducted during the reporting period. Training in oversight bodies to provide notification procedures substantially improved the ability of the information on the compliance of new laws with GoKG to meet its notification obligations. WTO-related agreements, and provide notification of legislative changes relevant to WTO compliance

12. Assist the Kyrgyz • Plan being developed with WTO unit. This should be limited to government in developing basic training in the Dispute Settlement Procedures, as and, as appropriate, providing Kyrgyzstan is not likely to be either the petitioner or the educational training on WTO respondent in such an action in the near future. settlement mechanisms.

13. Develop the capacity of • A member of the WTO office in the MFTI will complete a three- the Kyrgyz government to month training course in Geneva in December, and will bring a liaise directly with WTO much-improved understanding of how to maintain relations with officials. Help to establish the relevant units of WTO. relations between complementary bodies within the Kyrgyz government and the WTO

14. Within two years after the • Pending. The GoKG needs to devote more resources to effective date, Kyrgyzstan maintaining the WTO relationship, including establishing a more should have developed, as a effective mission in Geneva. With the return of a member of the result of the contractor’s WTO staff from a three-month course in Geneva (see item # 14), assistance, sufficient local capacity to handle WTO- the capacity of the WTO office within the MFTI will have been related issues without further substantially improved. In early 2003, the project will reconsider donor assistance the needs for further staff training.

15. Develop the capacity of • Ongoing consultations and joint work. See Item # 16. Kyrgyz government officials to properly interpret and apply WTO regulations

16. Provide ad hoc WTO • Ongoing. Most recent issues have involved proposed protection troubleshooting advice to the for the sugar, paper, glass and insurance industries, and government explanations of the renegotiation procedures that would be required should KG decide to attempt to raise its bound tariff levels in these cases. • A serious renegotiation problem will arise if plans for the proposed customs union between Russia, Belarus, KG, KZ and TJ are realized. This would require KG to raise tariffs substantially above its present bound levels, and could probably be accomplished only after Russia and KZ had become members of the WTO. Kazakhstan • 17. Providing training, • TIP carried out seminars jointly with SME in Atyrau, Uralsk, support and assistance with Pavlodar and Ust Kammenogorsk on quality management. ISO product certification and • Training organized for summer on laboratory accreditation standards requirements compliance

18. Assisting the Kazakhstani • Not yet invited to work with the government government in keeping the WTO apprised of any changes in its foreign trade regimes in a timely fashion 19. Assisting the Kazakhstani • Not yet invited to work with the government government in its development of WTO oversight bodies to provide information on the compliance of new laws with WTO-related agreements, and providing notification of legislative changes relevant to WTO compliance 20. Assisting the Kazakhstani • Not yet invited to work with the government. government in developing and, as appropriate, providing educational training on WTO settlement mechanisms

21. Developing the capacity • Not yet invited to work with the government of the Kazakhstani government to liaise directly with WTO officials. Helping to establish relations between complementary bodies within the Kazakh government and the WTO 22. Developing the capacity • Working with Gostandart on TBT requirements. Provided of Kazakhstani government support of technical specialists to review and discuss the current officials to properly interpret TBT status of draft standards law. and apply WTO regulations 23. Within the context of the • Working to make Draft Customs Code WTO compliant overall advancement of Kazakhstan’s accession to the WTO, recommending changes in Kazakhstani trade and investment practices in the following areas: non-tariff barriers to trade; cross-border trade; legal and regulatory guidelines; and administrative barriers. 24. Providing ad hoc WTO • Not yet invited troubleshooting advice to the Kazakhstani government Tajikistan 25. Conduct an assessment of • TJ Completed the WTO technical assistance needs of Tajikistan. The assessment shall identify the current situation in Tajikistan including institutional capacities, indicate assistance programs being undertaken by other external funding agencies and assess the deficiencies in existing and proposed programs

26. Provide WTO education Progress: and training to Tajik • TJ A conference on “The Role of the Private Sector in Trade government officials Policy Development” took place in Dushanbe on September 11. responsible for the accession Representatives of the Ministry of Economy, businesses and matters business associations, and academia discussed the issues of coordination between the private sector and the government. Participants agreed to form a consultative council as a government-private sector coordinating mechanism. The following week the Consultative Council met to discuss its organizational issues. • TJ On October 29-30, 2002, a seminar was conducted in Dushanbe on “An Overview of the World Trading System and the WTO Accession Process” for members of the newly established Consultative Council on Trade. This training session was aimed at making the Consultative Council more effective in defining and formulating interests of Tajik businesses with respect to the WTO accession.

Proposed activities: • Training for the Tajik WTO Accession Commission and the Negotiating Group (to be established) on developing initial market access offer on goods and on services. • Briefing for Tajik WTO Accession Negotiating Group team on accession negotiating techniques and procedures and practical study tour to WTO Headquarters for some of its members to learn how multilateral accession negotiations are conducted and to establish contacts with representatives of WTO Working Party members and the staff of the WTO Accessions Division. • Training for members of the Consultative Council on Trade and officials from relevant governmental agencies focused at increasing their awareness of WTO membership effects on specific sectors of Tajik economy.

27. Review the foreign T&I • TJ In progress. Project team has collected and reviewing trade policy of Tajikistan and investment related information and legislation. Hopefully, will get access to more information necessary for analysis once the WTO assistance MoU is signed.

• TJ As a result of the review a plan of the legislative changes to liberalize the trade regime and bring it into compliance with the WTO requirements shall be developed. Project team will then start working on suggesting amendments to the foreign trade legislation including: customs valuation, rules of origin, preshipment inspection, antidumping, countervailing , safeguards legislation and etc.

28. Assist the Tajik • TJ As part of the strategy for Tajik WTO accession, the project government in the preparation team promoted the idea of involving the private sector in the of a strategy and approach for accession process. MET has agreed to cooperate with the newly WTO accession established Consultative Counsel Trade. The Project’s focus is to

strengthen abilities of the private sector institutions to advocate their trade interests during the WTO accession process.

TJ Activities that will begin in the next quarter include: • Assist GoRT developing a WTO accession action plan • Assist the GoRT in preparation of WTO ACC/4 Agricultural subsidy information • Assist the GoRT in preparation of WT/ACC/5 information on policy measures affecting trade in services • Review compliance of GoRT Standards legislation with the TBT Agreement, assist the GoRT with preparation of WTO ACC/8a documents • Review compliance of GoRT legislation with the SPS Agreement, assist the GoRT with preparation of WTO ACC/8b documents • Review RT TRIPs-relevant legislation, propose necessary amendments to assure compliance with WTO, assist GoRT in preparing WTO ACC/9 documents • Provide continuing assistance to the GoRT in preparing for and conducting bilateral and multilateral negotiations with WTO Members in Geneva

29. Facilitate coordination TJ The following activities are planned for the next quarter: and cooperation of the Tajik government with the WTO • Establish a WTO Library/Research Center and assist MET in Secretariats and creating and maintain its Web-Site, where developments in the UNCTAD\WTO International Trade Center accession process will be posted. • Assist the GoRT to establish the required enquiry points and notification authorities under the SPS and TBT agreements, and the enquiry point for the GATS agreement • The principal assistance for the coming quarter will focus on preparing and submitting the Memorandum on the Foreign Trade Regime, and preparing for the first meeting of the Working Party on the Accession of Tajikistan, tentatively planned for late spring, 2003.

Uzbekistan 30. Conduct an assessment of UZ: the WTO technical assistance • Meetings conducted during October with senior GoUZ officials needs of Uzbekistan. established the desire of the GoUZ for technical assistance, and provided a preliminary view of the assistance needs. • WTO assistance team established in Tashkent. • Review of the GoUZ’s own WTO Actio Plan is underway 31. Provide WTO education UZ and training to Uzbek • Seminar for senior government officials in the training program government officials of the President’s Academy conducted in November, 2002 responsible for accession matters. 32. Review the foreign trade UZ and investment policies of • Development of WTO accession workplan for Uzbekistan in Uzbekistan and mange the underway. process of identifying reforms, draft and modify laws . . . comply with WTO standards. 33. Facilitate coordination UZ and cooperation of the Uzbek • Coordination discussions with TACIS/EUROPAID held in government with the WTO October. secretariat and the UNCTAD/WTO International Trade Center and other sources of specialized technical assistance for accession. 34. Assist the Uzbek UZ government in developing its • The Uzbek MFTR was prepared in 1998; the first Working Party strategy for WTO accession, meeting was held in July, 2002. and assist in preparing documentation required for • Project staff will assist in preparing for the second WP meeting in accession. late spring, 2003.

VI. REPORTS AND PAPERS

MAS-Q Report - November 2002 Prepared by Ed Nemeroff

Introduction This period we made progress within the region; major accomplishments were achieved in Kyrgyzstan. Our efforts to replace Soviet era out dated and technically meaningless documentary standards, accreditation, certification and metrology (MAS-Q) practices is succeeding. This was achieved by informing, educating and introducing the Gosstandards of Kyrgyzstan, Kyrgyzstan, Tajikistan and now Uzbekistan to international systems and practices that are compliant with the TBT and SPS agreements of the WTO, and being used by regional and international MAS-Q bodies around the world. The overall goal of this effort is to reduce barriers to trade by having the regional MAS-Q bodies adopt and introduce the international practice of a system of voluntary standards and accreditation and certification. This effort also includes replacing existing related legislation and restructuring national MAS-Q organizations (Gosstandards) whose mandates are being changed from those of a regulatory and enforcement body to that of a technical services organization. When achieved, this will encourage industrial investment; improve the quality of locally produced products, thus opening new international markets, resulting in improving the economy throughout the region.

Progress Achieved Regional

Assessor Qualification Training for Laboratory Accreditation in Accordance with the International Standard ISO/IEC 17025 Summary of the training: We received applications from 112 technical specialist applicants from government and private sector of Kazakhstan, Kyrgyzstan and Tajikistan. Our review panel made up of technical experts from the US National Institute of Standards and Technology and Pragma selected 55 participants based on their technical experience, field of specialization and education. The 55 participants were required to have 100% attendance and pass a written examination in order to complete Phase 1 of accreditation training. All 55 participants had 100% attendance and took a 2-hour written at the conclusion of the course.

Results by Country Country Passed Failed

Kazakhstan 26 (93%) 2 (7%)

Kyrgyzstan 19 (86%) 3 (14%)

Tajikistan 2 (40%) 3 (60%)

Totals 47 (85%) 8 (15%)

Those successfully passing the examination were presented with a Certificate of Recognition for successful completion of the Phase 1 training and are eligible to take part in the next two phases of training. The heads of the Gosstandards from Kazakhstan, Kyrgyzstan and Tajikistan, as well as the lead instructor and the TIP MAS-Q Director, all signed the certificates to establish regional acceptance and recognition of the successful technical specialists. It is our intention to proceed with part two of the training. Selection will be made based on scores achieved in the examination and their area of expertise. Highest scores will be selected first. Three of the participants that passed the course (English speaking –2 from Kyrgyzstan and 1 from Kazakhstan) were selected to attend the ILAC/IAF conference in Berlin. They each were required to provide a written report and make an oral presentation to their organizations upon their return. Both were accomplished. Note: The German PTB (German Gosstandard) funded part of this cost.

Central Asian Regional Forum on Metrology, Accreditation, Standardization and Quality November 12-14, Bishkek, senior representatives of the Gosstandards from Kyrgyzstan, Kazakhstan, Tajikistan and Uzbekistan participated in a 3-day forum to discuss the regional MAS-Q technical cooperation. The purpose of the forum was to bring together the National MAS-Q bodies of the region to address technical issues to insure uniformity of metrology, accreditation, standards and certification activities that effect economic conditions and promote removal of investment constraints and be compliant with the WTO –TBT and SPS Agreements.

The US National Institute of Standards and Technology (NIST -USA) co-hosted the forum, additional support was provided by International experts from The International Organization for Standardization, (ISO - Switzerland) The International Laboratory Accreditation Cooperation, (ILAC- Australia) the Interamerican Metrology System, (SIM- Brazil) NCSL International (NCSLI-USA) and the US Department of Defense. Mr. Mike Fritz, Deputy Mission Director, USAID/CAR provide the welcome address. Kyrgyzstandard was the host MAS-Q organization.

International support for the forum was provided by the following:

Dr. B. Stephen Carpenter, Director Office of International and Academic Affairs, National Institute of Standards and Technology -USA Since 1964, B. Stephen Carpenter has been a member of the National Institute of Standards and Technology (NIST), currently, he serves as Director for International and Academic Affairs which includes managing the NIST Foreign Guest Researcher Program, developing and managing Bilateral Research Programs and Scientist Exchange Program, representing NIST internationally. Dr. Carpenter serves as a technical consultant on Standards and Metrology to the World Bank for the Mexico Science and Technology loan and for Ghana; to the Interamerican Development Bank; as an advisor to the Organization of American States, and as a Board Member of the U.S. - Egypt Joint Board for Science and Technology Cooperation. His biography is listed in Who's Who in the East and Who's Who of Emerging Leaders in America. He is also a Fellow of the American Nuclear Society, since June 1983; a recipient of the American Nuclear Society's Radiation Science and Technology Award, November 1987; a recipient of the U.S. Department of Commerce Silver Medal Award, October 1994; a recipient of the U.S. Department of Commerce Gold Medal Award, December 1998, a co-patent holder; and the author of more than 100 technical and professional papers and articles. In 2001, he was the recipient of a US Presidential Citation. Mr. Graeme Edward Drake. Head of Conformity Assessment, International Organization for Standardization (ISO), Geneva, Switzerland Graeme is head of this international policy and secretariat unit within the ISO Central Secretariat, reporting directly to the Secretary General. He is responsible for general management and servicing of 23 groups

43 under a principal international committee (ISO/CASCO). He is Secretary of CASCO and responsible for development and maintenance of some 31 ISO publications and for policy development and communication of conformity assessment issues, rules and procedures on behalf of ISO and its members. Dr. Vera Maria Lopes Ponçano Alves Silva, Sistema Interamericano De Metrologia (SIM), The Regional Metrology Organization for the Americas -) – Brazil Dr. Poncano has been at The Technological Research Institute (IPT) of the State of São Paulo, for over 28 years as an expert in regulatory affairs and quality control for industrial chemicals and environmental issues. She has been responsible for the coordination of research projects, related to the petroleum area. She was responsible for the establishment of two laboratories and a Management Center, which integrates technological services of twenty laboratories of IPT in areas like: chemistry, electricity, mechanical and civil engineering, metallurgy and geology. She was appointed Director of IPT Chemistry Division in 1994. She is the author of over thirty technical articles and presented more than 80 invited lectures at technical meetings, symposia and congress in Brazil and anothercountries. Presently, she is Chief of the IPT Center for Reference Materials and General Coordinator of the Brazilian Chemical Metrology Program and the Committee for Chemical Industries of São Paulo State. She is the Brazilian representative for The Inter-American Metrology System (SIM), the Comité Consultatif pour la Quantité de Matière (CCQM), the Co – Operation on International Traceability in Analytical Chemistry (CITAC) and the International Standardization Organization/ Reference Materials Committee (ISO REMCO).

Colonel Larry Yates- US Air Force (ret.) Representing the US Department of Defense Larry Yates was Director of Metrology for the US Air force and was responsible for operations of the Primary Standards Calibration facility as well as technical and logistical support of over 120 calibration laboratories worldwide. He developed strategic plans for technical training, equipment and facilities maintenance programs and ensuring laboratory and testing procedures were in accordance with ISO 9000 and ISO/IEC 17025. He retired from the Air Force after 27 years of service. He is presently, President of Acumen Strategies, a consulting firm specializing in MAS-Q activities. Present client base includes United States Department of Defense and several private sector corporations. He is also a qualified ISO 9000 assessor. Larry currently serves as a member of the Board of Directors for the National Cooperation for Laboratory Accreditation (NACLA) and is Chairman of the Quality Committee. He is also the Chairman of the NCSL- International Membership Committee. Edward Nemeroff -Vice President NCSL International and Director, USAID/Pragma MAS-Q Program in Central Asia Ed Nemeroff is an international consultant in the area of standards, accreditation and metrology, specifically as it relates the WTO accession and compliance with the TBT and SPS Agreements. He created the original plan for providing assistance in metrology, accreditation, and standardization in Central Asia and has been involved in implementing and directing the program since its inception. He has worked on similar programs for USAID, the World Bank, and the Department of Commerce in Egypt, Mongolia, Israel, Palestine and countries in Latin America. His 40 years of experience includes being President of a multinational electronics instrumentation firm, serving as President of NCSL International, the worlds largest industry/government association in the field of metrology and accreditation. He still serves on the Board of Directors of NCSL International as the Vice President of International Affairs.

He is the recipient of many international awards including receiving in 1991, the William A. Wildhack Award, which is presented annually by NCSL to recognize lifetime contribution to the field of measurement science. He serves as a council of the Sistema Interamericano De Metrologia (Inter- American Metrology System) which is sponsored by the Organization of American States (OAS) and is made up of 34 nations in the America’s. He also serves as an advisor to the US Department of Commerce,

National Institute of Standard and Technology in the area of science and technology as it relates to international trade.

The forum concluded with the regional Gosstandards agreeing to go forward and formally establish Central Asia Regional MAS-Q Cooperation. USAID/Pragma will play an advisory role.

Additional donor support for the regional cooperation.

¾ NIST- Establish International traceability of measurement, explore possible MOU with the regional cooperation for training –exchange of technical staff ¾ ISO - DEVCO Program (ISO Program for assistance to developing countries) – Training in the use and application of standards, joint workshops & seminars, establishing a regional ISO representative in Central Asia. –The DEVCO Director will be visiting Central Asia in Jan –Feb, we are working with them and will be establishing his schedule. ¾ NCSL International –NCSLI provide technical procedures and recommended practices, a series of how–to handbooks – we have authorization to translate and produce. ¾ US Navy – They will be providing metrology, test and measuring instrumentation free of charge to each of the regional MAS-Q bodies that participate in the regional cooperation. This equipment will come from the DOD inventory of spare equipment. EN and Larry Yates will be meeting with Navy representatives in January in California to discuss details. Estimate first round of equipment will be valued at $100,000.00.

EN Comment: The additional donor services being offered in support of our program represent a significant achievement. Examples: NIST will bring international technical credibility, ISO’s assistance will set straight the misunderstanding, misconception, misrepresentation and misuse of ISO standards and procedures. The US DOD will bring many thousands of dollars of modern scientific instruments into the region. This will enhance the technical capabilities of the national metrology and testing laboratories in the region.

USAID/Pragma are and will assist member countries of the regional cooperation –our role will be in advisory capacity. We will also provide start up funds for travel and related cost for meeting attendance.

National Programs

Kyrgyzstan 1. Law on Technical Regulations. The working group on developing the draft law on technical regulations completed the draft version” “On the Bases for Technical Regulation in the Kyrgyz Republic”. The draft was submitted to the commission on Friday November 29. There were no objections; commission members are to submit their comments within 10 days.

2. Removal of obsolete standards. Based on recommendations made by members of the USAID/Pragma MAS-Q team, Kyrgyzstandard implemented a program for deleting obsolete documentary standards from their list of mandatory standards. To date, this program has resulted in the removal of approximately 5000 standards left from Soviet times.

3. Restructure of Kyrgyzstandard: We have made a major breakthrough in the restructure of Kyrgyzstandard. We developed and signed an “Agreement In Principle For The Re-Structure Of The State Inspection For Standardization And Metrology Under The Government Of The Kyrgyz Republic – Kyrgyzstandard Including The Kyrgyz Center For Testing And Certification – State Enterprise”

Summary of the agreement: The agreement will serve as the basis for the development and implementation of a detailed three (3) year transition plan for the restructure of Kyrgyzstandard and the Kyrgyz Center for Testing and Certification. The proposed restructure is in full accordance with the President’s Order (Number 98, - April 25, 2002) to “Reform State Regulatory functions to Eliminate Barriers that Hinder Foreign Investment and Business Activities in the Kyrgyz Republic” It is also in full compliance with the proposed draft law “On the Bases for Technical Regulation in the Kyrgyz Republic” The Restructured Organization will: • Assume a new name, the “National Institute for Standards and Metrology” (NISM) • Be a government organization without Executive Authority and have no regulatory or enforcement functions; it will not impose or collect fines or penalties. • Operating funds will be provided from the Central Budget and supplemented by fees generated from requested technical services provided as described in the plan to be developed. • Be in support of the law on Technical Regulations, when stipulated by a specific Technical Regulation, the NIMS will provide technical assistance in the form of conformity assessment. A technical test report will be issued by NISM and provided to the appropriate government organization for their action.

In addition to the above, the “Agreement” details the mission and core functions : ¾ In the area of Metrology ¾ In the area of Accreditation ¾ In the area of Standardization ¾ In the area of Product Certification and Testing ¾ In the area of Public Relations, International Activities and Training The agreement was signed by Batyrbek Davlesov, Director of Kyrgyzstandard

EN comment: This agreement is a major achievement and represents a large effort by many people.

Uzbekistan 1. Request for assistance: The Uzbek State Center for Standardization, Metrology and Certification – Uzgost sent an Official request for technical assistance from Uzgost was sent to the US National Institute of Standards and Technology via the Department of State. NIST response stated that they would be glad to assist via the USAID- MAS-Q project in Central Asia. Initial meeting conducted between Paul Pieper and members of Uzgost, waiting their official request for support, at which point we will enter into a MOU, similar to those that we have between the other Gosstandards in the region. Were ready to perform detailed assessment of their MAS-Q system, in order to establish level of support to be provide.

Kazakhstan A new Chairman of Gostandart was appointed. We have had initial meetings with him, and are establishing a relationship without any serious progress to date.

Tajikistan Tajikstandard provided 5 participants to the regional MAS-Q forum. The task is underway to find an individual to conduct the training in English (same as in Kyrgyzstan).

IV. REMOVAL OF INVESTMENT CONSTRAINTS COMPONENT A. COMPONENT DESCRIPTION

The Removal of Investment Constraints Component’s purpose is to remove investment constraints that impede operations and growth of businesses. At the national level, efforts focus on drafting and implementation of liberalized and transparent laws and regulations that encourage investment and growth of SMEs. At the local level, the activity focuses greater effort on dissemination, adoption and implementation of those laws and regulations in selected oblasts in each nation. The Removal of Investment Constraints Component also promotes increased dialogue and information sharing between local governments and businesses, and educates members of both government and the private sector on the constraints to SME trade and investment.

B. SUMMARY OF SIGNIFICANT EVENTS AND ACHIEVEMENTS

Kazakhstan

National Level • The Ministry of Labor has begun to pass amendments on the Law on Labor that will give the authority to approving work permits to the oblasts. This is a significant development in that most of the delays reported by investors came from the approvals that were required from Astana. • Amendments were made in the tax code that will relieve one of the burdens leasing companies faced. Leasing companies were previously doubly taxed with VAT (once at the time of the purchase, and then again at time of leasing). Issues regarding depreciation are still pending • An amendment was passed to the Law on Licensing clarifying an aspect of law with regard to company changes

Oblast Level • In Almaty, Pragma has worked with the Statistics Department to provide a simple yet important change for investors. Previously investors were required to submit all reports in person to the Dept. Pragma recommended that investors be allowed to mail in applications, and the Department officials accepted this recommendation. • In Pavlodar, the City Akim has accepted Pragma’s recommendations with regard to the Land Acquisition Process and has instructed his technical staff to implement the recommendations. • In Ust-Kamenagorsk, processes involving alcohol licensing, land acquisition, and product certification were all passed through the city Akimat. • In Atyrau, the Maslihat passed the new procedures designed by Pragma for land acquisition and billboard permits. This will save very significant amounts of time for investors.

Kyrgyzstan

National Level

• Kyrgyzstandard (Gosstandard) agrees in principle to a 3-year restructuring plan that will remove its regulatory and oversight functions and change its legal status to an institute rather than a body of executive power. • TIP-led working groups under the Investment Matrix prepared and submitted their reform recommendations to the government. Highlights included: - Recommendations to eliminate 280 permits and other illegal practices within 5 government agencies. Decision pending; - First draft of the new law On Technical Regulations submitted; - Amendments to 44 laws approved and submitted to Parliament to eliminate illegal licenses and licensing practices; - Amendments to the law On Normative Legal Acts approved and submitted to Parliament requiring review and comment and cost analyses for all regulatory acts.

Oblast Level • Three constraints removed in the private transport sector. • Approval of the Osh governor to establish one-stop-shop for business registration and other services in the oblast administration. • Significant progress in the identification of customs and cross-border constraints. • Official decision of the government to consolidate registration of legal entities into the Tax Administration and to draft a new law on registration paves the way for the creation of a nation-wide one-stop-shop.

C. Personnel and Staffing

• Local staff now leads all RIC offices with the exception of Almaty and Osh. New managers were promoted from within and have completed training on managing their offices. All managers were recruited from their respective oblasts and are well-connected with decision makers • Two regional directors were hired to oversee oblast operations and provide training to local decision makers on various RIC topics • A National RIC Director with close contacts in Astana was hired in Kazakhstan with the responsibility of identifying and leading National RIC projects. • RIC personnel have undergone the first half of training in leading and managing training courses and facilitation. RIC personnel will be responsible for delivering training courses to local counterparts in topics relevant to RIC activities.

C. SUMMARY OF SIGNIFICANT ISSUES AND RESPONSES

Kazakhstan

• There have been a number of statements from the President regarding the importance of reducing the number of inspections faced by Small and Medium Enterprises. Nazerbayev has called for a moratorium on inspections from January through October 2003.

• We are not certain that an actual moratorium will take effect on all inspections, but we believe that there will be a concerted effort to cut down on the number of illegal inspections that take place. Prosecutor’s offices in the various oblasts have begun taking action on illegal inspections in the past 6 months. • However, it is not entirely clear why inspections are such a problem given there are several good mechanisms in place and exist in law. Further examination of the problem will likely be necessary to better understand how the laws are being circumvented to conduct illegal onerous inspections. • The existence of the Inspection Journals represents a wealth of untapped data on inspections. Pragma will look for ways to utilize this data in the coming months.

2. Pragma has formed a relationship with the Drafting Office of the Kazakhstan Parliament. The Chief Drafter has offered to assist us in passing amendments to law given that our recommendations are of clarification rather than substantial change. The Chief Drafter offered us assistance in identifying sponsors for the amendments • The RIC office in Pavlodar submitted recommendations to the business registration process. Pragma attorneys in Almaty are currently working with the proposed amendments in anticipation of submission to Parliament. • Other oblast RIC offices are preparing proposals for amendments.

3. Pragma has recently completed a study of licensing processes, and several were identified as being problematic with opportunities for reform. Included in these licensing processes are Pharmaceuticals, transport, and various professional licenses.

Kyrgyzstan

1. In late November Kyrgyzstandard signed an agreement in principle with Pragma TIP to restructure its organization and eliminate its regulatory and oversight functions and focus solely on MAS-Q functions. As part of this agreement, Pragma TIP has agreed to assist in developing a 3-year plan and begin implementing it as soon as possible. The timing of this development was unexpected and will, thus, require the TIP to respond in the latter part of the next quarter with short-term technical assistance to Kyrgyzstandard.

2. The Congress of Business Associations (14 associations) and the Bishkek Business Club requested that Pragma/TIP cooperate and coordinate our common interests and seek opportunities for sustainability of RIC efforts. Both groups are newly established and need assistance in developing their capacity for strong advocacy. This activity will be undertaken together with the EDP.

D. Training

Pragma/TIP has begun preparations for a monthly seminar series to be conducted in RIC offices in Kazakhstan and Kyrgyz Republic.

• Course will be delivered in Russian by the RIC offices in the oblasts. The first stage of Train-the-Trainer training was delivered in November to all of the consultants in the field. • A practical follow-up to the theoretical Train-the-Trainer is set for Mid- December. All of the RIC consultants and Managers will practice facilitation skills in anticipation of delivering monthly courses to associations and government officials. • Course topics are now being chosen through surveys with key stakeholders in the regions. The first topic will likely be the use of the internet and email in local government.

E. PROGRESS AGAINST WORKPLAN AND BENCHMARKS

Act Defined Activity Progress Made During Quarter/ # Proposed Future Actions 1r Assemble team and • KZ – completed conduct orientation/begin • KG – completed training 2r Agree on selected • KZ – completed oblasts in KZ and KG • KG – completed with USAID 3r Develop and deliver a • KZ – completed work plan with specific • KG – completed time frame for acquiring knowledge base of existing investment constraints 4r Prepare concept for • KZ – completed Enterprise Development • KG – completed Centers (EDCs) that combine Removal of Investment Constraints (RIC) and Business Advisory Services (BAS) 5r Prepare training • KZ – completed materials and conduct • KG – completed training for RIC/BAS personnel 6r Meet with key oblast level • KZ – completed officials in KZ and KG to • KG – completed explain EDC operations 7r Review laws and • KZ – completed establish a legal • KG – completed database 8r Agree with counterparts • KZ – completed and USAID on priorities • KG – completed for removing national level legal obstacles in KZ & KG

9r Perform diagnostic • KZ – initial five priority obstacles identified – ongoing for analysis of obstacles in other obstacles selected oblasts in KZ • KG – initial five priority obstacles identified – ongoing for and KG other obstacles 10r Perform diagnostic • KZ – completed analysis of employment • KG – completed requirements and practices in selected oblasts in KZ and KG 11r Perform diagnostic • KZ –completed in Uralsk and Atyrau, not priority in other analysis of land/site oblasts location requirements in • KG – USAID decision not to have TIP work on land issues selected oblasts in KZ and KG 12r Perform diagnostic • KZ –completed analysis of operational • KG - completed requirements in selected oblasts in KZ and KG 13r Preparation and • KZ – completed see database submission of work plan • KG – Completed see database containing recommendations to remove investment constraints. 14r Creation of a database of • KZ – completed oblast level constraints • KG – completed 14r Identify appropriate (duplicate numbering) (a) counterparts and proponents of regulatory • KZ – completed reform. • KG – completed 15r Each oblast will prepare • KZ – completed and deliver a work plan • KG – completed with specific objectives and time frame for removal of oblast-level investment constraints and improvement of oblast-level capacity for reforms favorable to SMEs 16r Design measurement • KZ – completed systems to assess • KG – completed progress. 17r Develop basic materials • KZ – ongoing with techniques and • KG – ongoing processes for removing investment constraints in the oblasts and train oblast staffs

18r Establish areas where • KZ – ongoing international benchmarks • KG – ongoing are applicable and provide specific recommendations for regulatory reforms 19r Design program for • KZ –completed development of • KG – completed international standards and certification infrastructure with the Standards Committee in Kazakhstan and Kyrgyzstan 20r Implement program to • KZ – draft memorandum and work plan developed, develop international and initial training for accreditation organized. certifications • KG – memorandum and analysis completed, and infrastructure with the programming underway Standards Committee in Kazakhstan and Kyrgyzstan 21r Conduct workshops at • KZ – seminars completed the republican and oblast • KG – Bishkek seminar completed levels to disseminate materials from item 25 to government and other interested parties, work with officials to identify solutions 22r Conduct national press • KZ – initial press conference held at national level, and in conferences in KZ and Atyrau oblast. KG to disseminate • KG – press conference in Chui oblast (Marc – what else information on should be have here??) constraints and project's efforts at reducing constraints. 23r Prepare Interim Report • Pending summarizing workshops, discussing lessons learned, and presenting strategy for implementing Action Plan. 24r Establish and maintain a • KZ – functional, but under development website on Removal of • KG -- functional, but under development Investment Constraints (in Russian, Kazakh and Kyrgyz languages) 25r Performance • Single Performance Measurement system in place for both Measurement Systems countries for oblast performance. The system measure the number of constraints removed by maintaining project “scorecard” reflecting number of projects completed and total number of constraints removed.

I.B. Phase II RIC General Activities - Building Sustainable Programs and Transition Kazakhstan 26r Transition Oblast In the months of September through November, three local Personnel from Pragma consultants were promoted to the position of acting Expatriate to Local manager. One person was promoted from the position of Placing Regional translator to consultant, and one of Almaty’s economists was Directors/Trainers assigned to work in Uralsk. One new consultant was hired to Skills Upgrading - Basic work in Almaty. Skills Training Semi-Annual RIC In addition, two expatriates were hired from the USAID SME Meeting project to assume the role of Regional Directors. Quarterly Management Meetings A meeting was held in September to introduce the new staff to each other. Reporting issues were discussed, and basic questions answered. Some of the technologies were introduced including an information sharing website hosted by Yahoo!

The next meeting will be held in December for all RIC consultants. 27r Transfer Skills to Local Leadership Councils have been formed in all 5 oblasts and have Counterparts met at least once. Agendas typically include successes to date, Monthly Oblast Training ongoing projects, and proposals for new projects. In Atyrau and for Associations and Govt Almaty, the Leadership Councils are working on surveys of Establish and Meet with association members. In Uralsk and Pavlodar, association Leadership Councils heads are sharing needs of their members. Quarterly (Almaty, Atyrau, Pavlodar, Uralsk, Pragma has begun the process of determining criteria for Ust-Kamenagorst) assessing future partners for handing off RIC activities. Partners Create Documentation are being chosen from business associations, NGO’s and for Handoffs (RIC government institutions. Pragma will work closely with selected Management Manual, partners to develop internal capacities and learn RIC RIC Consulting Guide) techniques.

Documentation including a RIC operations manual and a consulting guide are in preparation.

Counterpart International conducted a study of the RIC program’s goals for sustainability and emphasized the importance of ensuring that the fundamentals are in place for our partner(s) of choice that they can maintain a RIC program without external finance.

28r Establish Sustained Criteria are being determined for future sites of RIC programs. Programs and Transition Emphasis will be placed on the willingness of the government to to New Cities improve its services to Small and Medium Enterprises and the Determine handover existence of a sustainable partner. approach (Determine candidates for handover, This component has been postponed until the evaluation criteria Determine method of in step 27r have been completed. The increasing emphasis on handover / counterparts) sustainable programs has increased the importance of creating Handover a reliable set of criteria for evaluating the prospects of creating a Create Scoring System sustainable program. Once we have developed the criteria and for New Cities tested it in step 27r, we will begin to implement the criteria in Visit Potential Cities and selected cities. Score Some cities targeted include Actobinsk, Shimkent, Karaganda, Petropovolisk, and Aktau. Kyrgyzstan 29r Transition Region KG- Complete as of October 2002. Additional local staff may be Personnel from required as projects develop. Expatriate to Local Placing Country Director KG – Complete as of September 2002. Kelly Seibold is the new Country Representative for TIP in Kyrgyzstan and the National RIC Advisor. Skills Upgrading (Basic KG – Complete Skills Training, Procedures Training, Annual TIP Meeting, Quarterly Management Meeting, Semi-Annual RIC Meeting, Quarterly Management Meeting) 30r Transfer Skills to KG – Ongoing Counterparts Monthly Oblast Training ?? for Associations and Govt II. Removal And Monitoring of Constraints Kazakhstan Almaty 1ar Retail Sales of Hard This project was completed in June. Monitoring efforts are Alcohol underway to ensure that the two rayons which were identified to have processes that were in opposition to the law are complying with the decision of the Almaty Prosecutor.

Brochures are being distributed by the licensing authority in all rayons. They were provided to the rayons by Pragma in disk format and they are responsible for printing and publishing. 2ar Land Site Acquisition Pragma has worked with the SME department in the Akimat to prepare a scheme for consideration by the Deputy Akim. This scheme is currently under consideration. They have expressed internal support. A formal decision is anticipated in December.

3ar Inspections Pragma has worked with the City Prosecutor to ensure that illegal inspections are identified and addressed. All inspections must register with the prosecutor’s office 7 days in advance on an inspection. The Prosecutor’s office has examined its logs and determined illegal inspections.

Until now the Tax Inspectorate has never registered its inspections with the Prosecutor’s office, so that the Prosecutor could not know whether inspections were legal or illegal. However, the Prosecutor accepted Pragma’s analysis that the law requires the Tax Inspectorate to register inspections. However question still remains as criminal inspections are not subject to registration, and the Tax Inspectorate is using this loophole to avoiding registration. 4ar Pre-Construction and During the quarter, the process was analyzed and mapped. A Post-Construction complete set of recommendations were submitted to the Akimat. Approvals The Akimat has expressed support for the recommendations; a final decision is anticipated in December. 5ar Planning New Processes Two new processes have been identified by the Almaty RIC office: Several business associations have complained about the State Procurement Process. The RIC office is examining whether these problems are the result as flaws in the law or in the implementation of the law in Almaty. Recently, a new set of rules on procurement has been passed.

Pragma RIC Almaty began working with the Statistical Department to ease the reporting burden that businesses face. The requirement that reports be hand-delivered has been removed, investors are now permitted to mail in applications. As reports can be as frequent as one every three days and lines at the dept can be long, this represents a significant savings in time for investors. Atyrau 1atr Land Acquisition This project is nearing completion and will soon be in the monitoring phase.

After a two month delay due to administrative changes in the City Akimat, the recommendations were moved to the City Maslikhat where they were voted on and approved Nov. 7. The recommendations are now being registered at the Justice Department, and the parameters for the monitoring phase will be set by mid December. 2atr Billboard Permits This project has the same status as the one above. It was also approved by the City Maslikhat on Nov. 7 and is being registered at the Justice Department. Responsibilities for monitoring will be set by mid December. 3atr Tax Inspection During Sept./Oct., information was gathered about the process and a process map was drawn. Three constraints were identified by a working group which was composed of representatives from the Tax Committee, the city SME Department, the Association of Entrepreneurs, and Pragma. Recommendations were formulated and submitted to the Tax Committee at the end of October and are awaiting approval. These recommendations mostly concern simplifying the tax declaration process.

4atr Customs Three constraints have been identified and recommendations have been created, but this project has been temporarily suspended and is awaiting the passage of the new Customs Code in order to avoid any redundancy in effort. 5atr Company Registration This project started in November. The Leadership Committee distributed a survey and the results of 44 surveys indicated the process of business registration as a major concern. Follow up interviews were conducted to identify problem areas in the process.

By the end of December, the constraints will be identified, a process map will be drawn, and recommendations formulated. 6atr Product Certification Pavlodar 1pr Business Registration This project was completed in July 2pr Land Site Selection 1 The Pragma recommendation for rezoning and proactive distribution of 70 prime real estate sites has been adopted and implemented, and success has spawned further rezoning throughout the oblast. The sites include both the city center and the industrial region. The risk associated with developing this land is considerably reduced, as is the time for the entire process. 3pr Sanitation Permission A brochure has been published explaining the process in detail to the restaurants and cafes. Many local business associations as well as the Sanitation Department of the government have agreed to cooperate with Pragma to distribute the brochure to all affected businesses. Details include document requirements, associated costs, and office directions and hours. The brochure makes the process more transparent and informs these business owners of the requirement of all necessary licenses. Only 40% of these establishments knew about and possessed all documents whereas the others risked being shut down because they did not know the compliance requirements. 4pr Land Site Selection 2 All of the recommendations have been accepted, and the City Akim, himself, instructed the heads of all technical departments to create implementation plans. The City Akim supports the effort and has taken charge in creating a more transparent and effective competitive environment.

An implementation plan for the creation of a "one-window" system for registration of a land site has been drafted, private expediting firms have been excluded from the process, and a list of forms and prices has been produced for investors. 5pr Standardization & The maximum and minimum prices for certification have been Certification calculated and will be distributed within a brochure outlining the entire process for business owners. Uralsk 1ur Alcohol Licensing This project was completed in April. Questionnaires were created and given to the City Akimat SME Department for distribution in June. They were collected and reviewed, and entrepreneurs who had received licenses after reform confirmed the improvements. The City Akimat also confirmed that licenses were being issued in the reduced timeframe that was stipulated in the implemented recommendations.

2ur Land Acquisition for New This project was completed in June and the monitoring process Construction is in progress.

Questionnaires were developed in September and distributed to the Land Committee, the Agricultural Department, the City Akimat SME Department, and local business associations. These departments and associations are distributing these questionnaires to entrepreneurs who are going through the reformed process and they will be collected and reviewed in January. 3ur Property Rights for Land This project was completed in July and is going through the monitoring process described above. 4ur Remodeling Process This project was completed in July and is going through the monitoring process described above. 5ur State Registration of The registration process for limited liability partnerships (TOO) Legal Entities was researched during September and a process map was created mid-October. Recommendations were formulated and a final draft was presented to the Tax Committee, the Justice Department, and the Statistical Department on Nov. 15.

In the following 10 days, the three departments accepted 8 out of the 11 recommendations and have received drafts of the informational display and brochures that Pragma has designed and will implement if approved.

Implementation of recommendations, creation and installation of the informational display, and the printing of brochures will be completed by the end of December.

Pragma has begun researching the registration process for sole proprietorships and will have created a process map and recommendations by early Jan. 2003. Ust-Kamenogorst 1ukr Certification The state examination board now performs the examination of simple food products according to a new ministry of agriculture standard, replacing a sophisticated laboratory analysis except in cases where necessary expertise is required. The process has been clarified, simplified and communicated to affected importers. The collection of materials process has been documented including quotations from the law, the departmental process regulating instructions, the flow of the process, and the list of the organizations included in process 2ukr Alcohol Licensing Removal of several unnecessary steps has been accomplished including the municipal fire-protection service and the city architecture department. There is no longer a site visit required by several unrelated organizations, and the entrepreneur does not have to create the potential list of goods for sale. A draft informational brochure has been written and submitted to the akimat for approval.

3ukr Land Acquisition Applications for construction or reconstruction are now performed directly in the administration of architecture and committee on land issues and land use. Previously applications were accepted by the Akimat, then sent to the architecture administration, and returned again to the Akimat.

Another recommendation that was implemented was that a list of licensed contractors was produced by the administration of architecture, and is now distributed by them to interested entrepreneurs. 4ukr General Trade Licensing This project was completed in May. National 1kzn Identify Constraints in 1st draft of report on licensing completed by Sana Consulting. 11 Licensing and licenses identified as constraints including: medical licensing, Inspections and Law on pharmaceutical, alcohol licensing, and catering services. Licensing The Committee on Small and Medium Enterprises in the Ministry of Trade and Industry has placed licensing activities on its list of priorities. The President announced a moratorium on all small business inspections during the first 9 months of 2003.

Amendments were adopted to the Law on Licensing by the government which clarified the obligations of companies that have changed the type of their organization or their address. 2kzn Franchising Law Reform A new franchising law passed in 24 June 2003. The result of this law will be an increase in international franchisers in Kazakhstan.

Some of the provisions of the new law include the harmonization of the terms of “Franchisor”, “Franchisee”, and “Franchise” with internationally accepted language.

Pragma also ensured that franchising agreement can be concluded before the registration of the transfer of intellectual property rights.

A prohibition of the transfer of the property rights to third parties that will protect franchisers.

As a result of this project, an Association of Franchisers was formed to further advocate for franchising and to provide technical assistance and training to franchisees.

3kzn Simplify Labor Permit The Ministry of Labor has presented to Parliament changes to Process the Labor Law which will allow the regional bodies to approve work permits eliminating the Ministry of Labor in Astana from the process. This will result in a significant time savings to the process.

The next step is determining the most transparent approach towards implementing this decentralized strategy. Pragma Corporation will work with the Ministry of Labor and several representatives of the private sector to design a transparent approval process that will be timely and efficient. The Ministry has set an internal deadline of Jan 1 for the completion of this process, although it is likely that it will take longer. 4kzn Investment Law Reform The investment code has passed through the Senate and Majolis. The next step is for it to be signed by the President. Several amendments were made to the text, although the amendments will not be available until after the President has signed it. 5kzn Leasing Law Amendments to the tax code involving the application of VAT to leases were passed November 2002. This will eliminate the double charging of VAT on leases. These amendments reflect the recommendations of Pragma Corporation and the Leasing Working Group.

Pragma continues to work with the Leasing Working Group to advocate for changes to the laws on depreciation. Pragma is in active discussion with the National Bank on the topic of matching depreciation schedules to the life of the leases. This law will be included in the plan of legislation for 2003 with the hope of adopting the new law by March. Kyrgyzstan Bishkek 1br Registration-Legal Completed in August 2002. An order was signed by the Ministry Entities of Justice to registration offices in Bishkek instructing them to begin registering legal entities in 3 days rather than the 10 days required by law. 2br Registration-Individual Completed in June 2002. Information booklets explaining the Entrepreneurs registration and tax paying process for individual entrepreneurs were prepared with the assistance of the Chamber of Tax Consultants, a private professional association based in Bishkek. In addition, information boards were posted in four tax offices in Bishkek and are regularly monitored by the Chamber. We anticipate extending this to other locations in the Chuy oblast. 3br Land Site Acquisition This project has been temporarily suspended at the request of USAID as it is connected to the work undertaken by the USAID Land Reform Project. TIP Kyrgyzstan believes that this point can be reactivated with the assistance of the Land Reform Project beginning in 2003.

4br Marshrutka Permits Partially Complete. The Bishkek Transport Authority (PTA) has accepted our proposals to reduce the number of permits and streamline the process of awarding and operating private Marshrutka routes. They have agreed to effect these changes from January 1, 2003. Additionally, TIP is working with the World Bank, which finances the PTA, to implement further reforms. Handicrafts Complete. The government (cabinet) approved the amendments to the rules on exporting cultural items to exclude Kyrgyz national felt rugs (shyrdaks). We are awaiting the final resolution from the Ministry of Justice. We have also provided recommendations to exporters on further reforms in the regulations, which they themselves will attempt to change through their own lobbying efforts. Osh 1or One-Stop-Shop Partially Complete. Governor Kasiev has signed a Decree on Registration the creation of the Center. Space in the Osh Oblast Administration building has been allocated and renovations completed. The Osh oblast representative of the Secretariat has relocated to the Business Development Center Office. BDC informational materials are nearly completed. An information board has been created and is ready to be installed. An initial staff person has been hired and training of that staff person commenced during the week of November 25th. The center is scheduled for opening during the first week of January 2003. 2or Marshrutka Permits Osh component Complete. The Osh Transport Authority (PTA) has accepted our proposals to reduce the number of permits and streamline the process of awarding and operating private Marshrutka routes. The Osh Mayor held a formal ceremony in his offices on October 30, 2002. Educational pamphlets outlining the new procedures as well as the rules of the road and the legal authority of GAI officers were also presented to the Marshrutka drivers in attendance. 3or Inspections Phase one complete. Working with the State Anti-Monopoly Committee successfully reduced the types of equipment subject to inspections by the Ministry of Agriculture from 76 to 27 (overall reduction of 49 types of equipment). Educational brochure on Inspections rights and obligations drafted and distributed throughout Osh Oblast to businesses including Agro- processing businesses. To date 800 brochures have been distributed. Phase two underway. Phase two includes further identification of excessive or illegal inspections and recommendations to reduce those identified. 4or Business Registration Complete. Information boards regarding business registration procedures installed at the Ministries of Justice in Osh and Uzgen. Informational brochures drafted and distributed to Osh oblast entrepreneurs through the Ministries of Justice. As a result of the actions taken, there is greater process transparency and investors now have the information required to successfully and efficiently navigate the registration process.

5or Cross-Border Trade Ongoing. Work on the Cross-Border trade component commenced in Mid-August 2002. To date the following has been completed: • Gathering statistical data on sales between Kyrgyzstan and Uzbekistan is complete. Except for Batken oblast, where statistics are not maintained. • A list of all customs posts has been created. • Complete information of required customs documents for import and export has been created. • Documented payment (official and unofficial) requirements for import and export of goods. • Multiple interviews with Osh importers and exporters in order to identify investment constraints with regard to Cross-Border trade. • Preliminary report on identified constraints is currently being drafted. Constraint reduction recommendations will follow. • Study of contraband trade routes and impact analysis is underway. The statistical data being gathered relates to quantity of contraband and the process of black market import and export. • Preliminary Data on transit through Uzbekistan and Kyrgyzstan has been compiled. • Identified illegal documentation requirements for export of Ag-Products in 3 categories of the Harmonized System and developed strategies to eliminate or reduce the same. • Study of TIR transit originating from Osh initiated. National 1kgn Shyrdak Certificates Complete. See above (Bishkek) 2kgn MAS-Q Draft Law Partially complete. The first draft of the law was submitted to the commission on technical regulation reform Nov. 29, 2002. Work should continue into January 2003. MAS-Q Implementation In process. Completion will depend on completion of the draft Plan Prepared law. MAS-Q Restructuring Partially Complete. Kyrgyzstandard has agreed in principle to a Implementation restructuring plan that will remove its regulatory functions and its status as a body of executive power. The agreement was signed Nov. 26, 2002. 3kgn Licensing Reform Complete. The government officially approved amendments to 44 laws (potentially 51) bringing them into compliance with the law On Licensing. These amendments cancel illegal licenses and other practices, such as costs, terms and other requirements inconsistent with the law. Awaiting official approval of the remaining 7 amendments.

4kgn Permit Reform - Partially complete. TIP and its working groups under the 2nd Recommendations Matrix prepared and submitted recommended amendments to government acts to remove illegal permits and practices in 5 government agencies. Those of 3 agencies have been approved but not in their entirety. The remaining 2 are still pending. Permit Reform - Next Partially Complete. Draft language for the 3rd matrix was Matrix prepared prepared that will continue permit reform. Final language will be approved by Jan. 2003. 5kgn Administrative and Legal Partially Complete. TIP and its working groups under the 2nd Reforms. Improved law matrix submitted draft amendments to the law On Normative drafting procedures Legal Acts that were approved by the government in September 2002 and submitted to Parliament for ratification. Once approved TIP will assist in the implementing regulations. Introduction of Ongoing. TIP, together with the Secretariat and the World Bank, Regulatory Impact has developed a program to introduce Regulatory Impact Analysis (RIA) Analysis to select private sector organizations to build demand methodology (Dec. 02- for this type of analytical tool. A firm should be selected and Mar. 03) mobilized by Jan. 2003. Special Means Reform - - Modified. The working group under the 2nd matrix was unable to Draft law “On Non-Tax agree on a draft law and this point has now been modified in the Payments” 3rd matrix to require changes in the Budget Code and rules of the Budget. The timing for completion is now mid-2003.