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 2 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. 3 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. 4 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. 5 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