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The World Bank

The World Bank (International Bank for Reconstruction and Development and the International Development Association) was established concurrently with the International Monetary Fund (IMF) following the resolution of the United Nations International Bretton-Woods Conference in 1944.

Since 1946, the World Bank has been operating as a specialized financial institution of the United Nations, with headquarters in Washington D.C. U.S.A. with country offices in 100 countries around the world, including the office in the Kyrgyz Republic. There are 184 member countries.

The World Bank Group is one of the world's largest sources of development assistance. In Fiscal Year 2002, the Bank provided US$19.5 billion in loans to its client countries. It works in more than 100 developing economies with the primary focus of helping the poorest people and the poorest countries.

The Bank's Mission is to fight poverty with passion and professionalism for lasting results. The Bank helps people help themselves and their environment by providing resources, sharing knowledge, building capacity, and forging partnerships in the public and private sectors.

The World Bank in the Kyrgyz Republic

Since the Kyrgyz Republic joined the World Bank in September 1992, Bank’s assistance to the country was designed to support the transition from a command to a market economy and provide the basis for sustained growth. The Bank’s strategy supported policy-based operations and sectoral investments designed to lay the foundation for a quick supply response. Over the next years the Bank’s assistance has been aimed at poverty reduction through sustainable development and pro-poor economic growth by investing in physical and social sector infrastructure, accelerating structural reforms and with a strong focus on agriculture sector development. In parallel, Bank-financed activities have been addressing poverty through supporting private sector-led growth.

Private sector arm of the World Bank is the International Finance Corporation. IFC Portfolio in the Kyrgyz Republic has been constrained by economic shocks and poor investment climate but has grown steadily to US$27.2 million. The largest investment in the existing portfolio in the Kumtor gold mine, with additional investments in a packaging plant (Altyn-Ajydar) and three financial sector projects (Demirbank, KICB, and FINCA). IFC has also approved an investment in a regional small equity fund. Under the Small Enterprise Fund (SEF) procedure, IFC has committed a direct investment into a pasta plant (Akun).

To date the World Bank has financed 25 projects totaling approximately US$ 621.4 million of which US $ 469.7 million has been disbursed, In addition two regional projects are grant funded (of which the share of the Kyrgyz Republic is about US $6 million) by the Global Environment Facility (GEF).

In 2002 the Bank’s most immediate challenge was to assist the Government to finalize the full National Poverty Reduction Strategy through focused analytical work, advisory services and capacity building initiatives. The Bank continued its support for the ongoing structural reforms in energy, business, public expenditure management, health and sanitation and agriculture.

The World Bank Portfolio

Adjustment Lending: Seven credits have provided balance of payments support for the government’s Economic Reform Program. These include: (i) Rehabilitation Credit (RC) to finance the design and initiation of the economic reform program, together with critical imports and technical assistance; (ii) Privatization and Enterprise Sector Adjustment Credit (PESAC) to support privatization, enterprise restructuring and the establishment of the Enterprise Restructuring and Resolution Agency program; (iii) Agricultural Privatization and Enterprise Adjustment Credit (APEAC) to support government’s program to de-monopolize agro-conglomerates, develop land market, and eliminate remaining trade and price distortions; (iv) Financial Sector Adjustment Credit (FINSAC) to reform the financial sector, with a particular focus on the banking sector, in the context of rapid economic transformation; (v) Public Sector Resource Management Adjustment Credit (PSRMAC) to help the government reduce the fiscal deficit and strengthen the management of public sector resources; (vi) Social Sector Adjustment Credit (SOSAC) to revamp the state pension reform, social assistance, and employment services; and (vii) Consolidation Structural Adjustment Credit (CSAC) to support reform of the utilities and improve the fiscal and business environment, while ensuring a minimum acceptable level of access to utilities for the poorest elements of the society. Technical Assistance Credit to finance the necessary analytical work and some equipment for support of CSAC reform program is also under implementation.

Investment Lending: the Bank’s portfolio in the Kyrgyz Republic deals with four key sectors:

  • Human Development: (i) Social Safety Net Project to mitigate the social costs of the transition; and (ii) two Health Sector Reform Projects to support reforms and restructuring of the health system, health finance and quality improvements in the sector.
  • Private and Financial Sector Development: (iii) Private Enterprise Support Project (PESP) to foster the development of private enterprises; and (iv) Financial Sector Technical Assistance (FINSAC/TA) Project to support institution-building activities in the financial sector.
  • Infrastructure and Energy: (v) Telecommunications Project to support the modernization and expansion of telecom services and the establishment of appropriate regulatory and policy frameworks in telecom sector; (vi) Urban Transport Project to rehabilitate roads in Bishkek, Osh, and Jalal-Abad and to develop a mechanism for financing rehabilitation and maintenance of city roads; (vii) Power and District Heating Rehabilitation Project and Power and District Heating Rehabilitation Supplemental Project to develop, rehabilitate and reform the power and district heating sector; and (viii) Rural Water and Sanitation Project to rehabilitate and develop rural water and sanitation infrastructure.
  • Rural Development: (ix) Sheep Development Project (SDP) to help the government make sheep farming more efficient and profitable; (x) Agricultural Support Services Project (ASSP) to finance farm restructuring, rural advisory development services, seed industry development, an agricultural marketing information system, and sectoral capacity building initiatives; (xi) Land and Real Estate Registration Project to support development of markets for land and real estate through the introduction of a reliable and well–functioning system for registration of rights in immovable property; (xii) two Rural Finance Projects to develop sustainable commercial rural financial system and to contribute to the reduction of poverty in rural areas; (xiii) Irrigation Rehabilitation Project to increase the productivity of irrigated agriculture through improved irrigation infrastructure and water supply; (xiv) On-Farm Irrigation Project to contribute to increased agricultural production through the development and utilization of sustainable on-farm irrigation systems with full participation of users; and (xv) Flood Emergency Project to finance the reconstruction of critical irrigation and flood protection infrastructure affected by heavy floods in 1998 in Osh and Jalal-Abad oblasts.
  • Regional projects: The Central Asia Transboundary Biodiversity Project (GEF grant) to support an integrated set of activities at local, national, and regional (trans-national) levels to strengthen and extend a transboudary protected area network by providing new models for protecting and managing biodiversity; and Water and Environmental Management Project/Aral Sea Basin Program (GEF grant) to assist the Central Asian States in addressing environmental degradation of international waters in the Aral Sea Basin and improving regional water management.

A new Country Assistance Strategy for the years 2003 – 2006 provides the basis for the World Bank’s ongoing support of the Kyrgyz Republic as it moves forward in the implementation of the National Poverty Reduction Strategy and focuses on three key priorities, each corresponding to a priority focus of the NPRS.

  • Supporting Sustainable Private Sector-Led Growth: The highest priority is given to supporting those key areas that will be required to promote private domestic growth, without which near term poverty reduction will not be feasible. There are three key drivers of private economic growth in the economy – agriculture, energy, and small and medium enterprises – and World Bank Group will be active in helping the Kyrgyz Republic to implement reforms and investments at the central level in these areas. These central activities will be connected with local ones through Community Driven Development projects which should help to slowly diversify the economy
  • Providing Essential Services: A second key priority is to help stem the deterioration in key infrastructure and social services. The Kyrgyz Republic inherited a reasonably developed, if basic, infrastructure and social service systems which have been slowly deteriorating since independence. Selectivity and systemic reform are therefore critical, and much of WB’s activity in this area will seek to empower local communities to identify priorities, in keeping with the decentralized vision in the NPRS. The Bank will also target services such as education in the rural areas where they are most needed.
  • Strengthening the Governance Framework: A third priority is to address the governance constraints to growth and poverty reduction – while recognizing this is a long term proposition. In the Bank’s client survey, governance was identified as the most important constraint to growth. This will include increasing transparency and accountability at the central level, capacity building at the local level, and supporting the continued development of the NPRS and Medium Term Expenditure Framework (MTEF) as vehicles for government planning and budgeting. The centerpiece of this work will be the Governance Structural Adjustment Credit, which will seek to make the public sector more accountable and transparent.

The World Bank will continue providing the Government with a strong level of Economic Sector Work and assisting it with capacity building. By the end of FY03, the Bank will have prepared (i) full Poverty Assessment, jointly with the National Statistics Committee, (ii) Financial Sector Assessment, jointly with the IMF, based on which the Government circulated an action plan during the in-country Consultative Group meeting in October 2002, (iii) Public Expenditure Review, (iv) Country Procurement Assessment, and (v) Country Financial Accountability Assessment. The World Bank has also delivered a Governance Survey, a Mining Strategy Paper, and engaged in an active dialogue on energy, health and pension policies.

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