Donor Assistance in Kazakhstan

9.2 Activities Related to the Machinery Industry 9.2.1 World Bank

9.2.2 EBRD 9.2.3 JICA 9.2.4 USAID 9.2.5 ADB 9.2.6 TACIS

9.3 Areas of Complementarity and Coordination

9.1 Donor Assistance in Kazakhstan

There are a number of bilateral and multilateral donor agencies that provide assistance to Kazakhstan. Of particular concern to the machinery industry is the availability of support offered to investors by these institutions, as well as the assistance provided for the development of human capital and infrastructure supporting that industry. The following provides an overview of the activities of the leading bilateral and multilateral development agencies operating in Kazakhastan.

 The World Bank is a source of long-term financing for projects in Kazakhstan. The World Bank traditionally finances infrastructure projects such as road and bridge building, oil and gas development projects, and power facilities. It has provided structural adjustment loans to Kazakhstan to assist the country in resolving some of its financial problems through market-oriented policy and institutional reforms.

Kazakhstan has signed agreements with this institution for approximately US$560 million in technical assistance and financing in such areas as urban transport, oil and gas field development, and social protection. The World Bank also has many projects under preparation for financing in the areas of treasury modernization, highway infrastructure, agriculture privatization, and private enterprise support. Total financing involved in these projects is more than US$800 million.

 The International Finance Corporation (IFC) is the private sector branch of the World Bank that provides loans for small-scale projects (not exceeding US$10 million). The IFC has focused its efforts in Kazakhstan on private sector development, and has analyzed small and medium-scale undertakings in the medical, agricultural (including food processing), and consumer goods sectors.

The Machinery Industry in Kazakhstan: Economic Conditions and Policies

 TheEuropean Bank for Reconstruction and Development(EBRD) provides loans for large projects, as well as technical assistance, in the areas of oil and gas development, mining, agriculture, and infrastructure development. The EBRD has recently approved financing for the reconstruction of the Aktau Port Facility in western Kazakhstan. The EBRD has also developed a program for small and medium enterprises (SMEs) worth 100 million ECU. The SME Program for Kazakhstan was jointly created by the EBRD, the Kazakhstani Ministries of Finance, and the National Bank of Kazakhstan (NBK). The funds allocated to this program will be channeled through selected participating banks in Kazakhstan to help local entrepreneurs develop business plans that represent bankable projects. Loans by the EBRD are issued to small and medium-sized enterprises for up to US$5 million.

 TheAsian Development Bank (ADB) focuses its efforts largely on the energy sector, followed by social infrastructure, transport and communications, agriculture and agro-industry, finance, and industry and non-fuel minerals. The ADB's medium-term strategy centers on poverty reduction, improving the status of women, population planning and environmental protection. In Kazakhstan, the ADB is involved in the agricultural sector and a road rehabilitation project on a portion of the Almaty -Akmola highway. The ADB leverages its financial resources through co-financing and other techniques to attract additional private capital in funding the development needs of its member countries.

Bilateral assistance to Kazakhstan is provided by a number of countries, including Japan, the United States, the European Union and individual member countries.

 Japan provides assistance through grants and loans. The Japan International Cooperation Agency (JICA) undertakes most of the grant aid and technical cooperation assistance, while the Overseas Economic Cooperation Fund (OECF) administers loan assistance.

 The United States offers technical assistance through a variety of programs and agencies. The US Agency for International Development (USAID) has administered more than US$220 million in technical assistance programs in Kazakhstan since 1993. These programs include cooperation in privatization, fiscal and financial policy, commercial law, judicial reform, support for democratic institutions and non-governmental organizations, energy, social transition (especially in the health care sector) and efforts to improve Kazakhstan's environment. Other United States agencies that are active in Kazakhstan include the Department of Defense, which has provided significant amounts of humanitarian assistance; the Departments of State and Justice, which have sponsored law enforcement and counter-narcotics training and assistance; the United States Information Service (USIS), which has provided support to independent media and manages an active exchange program; and the Peace Corps, which has provided approximately 95 volunteers who are working throughout Kazakhstan in small business development, English teaching, and the development of environmental non-governmental organizations (US Embassy, 1997a).

 TheExport-Import Bank of the United States (EXIM BANK) is an independent U.S.

government agency that provides support for exports through export credit insurance, loan guarantees, and loans. Its affiliated agent, the Foreign Credit Insurance Association, assists exporters to process shipments on short and medium-term credits by insuring against non-payment. Coverage is usually limited to irrevocable letters of credit issued by either the Kazakhstan Eximbank or one of several large Kazakhstani commercial banks, including Kazkommertsbank and Center Bank. Other transactions are examined on a case-by-case basis (USAID, 1996).

 The Overseas Private Investment Corporation (OPIC) is an independent U.S.

government agency that provides project financing, political risk insurance, and a variety of investor services. OPIC focuses its efforts mainly on the following areas:

(i) financing of investments through direct loans and loan guarantees; (ii) insuring investments against a broad range of political risks; and (iii) providing investor services such as trade missions and outreach (USAID, 1996).

 The Central Asian-American Enterprise Fund (CAAEF) makes loans to small enterprises for private sector development. CAAEF focuses on small and medium-sized enterprises, and it offers assistance to Kazakhstani entrepreneurs for business plan development.

 TheUnited States Trade and Development Agency (USTDA) is an independent U.S.

government agency providing funding for firms to carry out feasibility studies related to major projects. The TDA provides funding in the form of non-reimbursable grants for studies to determine the technical, economic, and financial feasibility of major projects and to provide detailed data for making decisions on how to proceed with project implementation. The TDA has provided funding for public-sector undertakings that are planned and implemented by government ministries and agencies.

 The Defense Enterprise Fund (DEF) assists Kazakhstan and other NIS countries to privatize defense industries and to convert military technologies and capabilities into civilian activities. The DEF invests in initiatives involving privatized enterprises or in enterprises that have committed to privatization.

 TheEuropean Union and its TACIS program and individual bilateral donors such as Germany, Britain, and Japan provide additional aid, usually in the form of technical assistance and training. The European Investment Bank offers financing for major investment projects.

The Machinery Industry in Kazakhstan: Economic Conditions and Policies