By project appraisal in 2004, significant progress had been made in trade liberalization and trade-related policy by the Kyrgyz Republic, which was still in transition to private sector-led and market-oriented economy. This was evidenced by the country’s accession to the World Trade Organization in 1998. Progress in trade facilitation had been equally significant, effectively complementing the country’s trade policy reforms. As customs administration is a key function most relevant to enhancing trade facilitation and border controls, the country launched comprehensive programs to modernize its customs in 2002.
In November 2004, the Asian Development Bank (ADB) approved a loan of $7.5 million equivalent to finance 80% of the cost of the Kyrgyz Republic’s component of the Regional Customs Modernization and Infrastructure Development Project. The project was to complement ADB’s Regional Trade Facilitation and Customs Cooperation Program, approved in December 2002, which supported customs reform and modernization in the Kyrgyz Republic and Tajikistan. Its objectives were (i) improved efficiency and transparency of the customs services, reinforcing the ongoing customs legal reforms and simplification of customs procedures; and (ii) trade facilitation and promotion of regional customs cooperation through concerted customs reforms and modernization in East and Central Asia.
To achieve its objectives, the project focused on two major components: (i) unified automated information system development, consisting of three interrelated subcomponents—development of the core unified automated information system (UAIS) application systems and associated operation support systems, development of communication infrastructure, and human resource development and a public awareness campaign; and (ii) border crossing points (BCP) infrastructure development, which comprised improvement of the BCP infrastructure and facilities, provision of customs operations and anti-smuggling equipment, and capacity building and interagency border cooperation.
During implementation, revisions were made to better align the project with the capacity level of the State Customs Service (SCS), which was recognized at project appraisal as relatively young with weak institutional capacity, low efficiency, and poor governance, as well as to address the changed needs over time. The revisions, which included adjustments to the software specifications for the UAIS development process and increase in the scope of BCP rehabilitation works, strengthened the project’s relevance and enabled it to achieve all its desired outcomes.
Automation of the customs service with the full UAIS rollout improved the efficiency and transparency of customs services. Customs revenue collection consequently improved: in 2012, it reached $639 million or five times the $114 million collection level in 2003. As of the end of 2012, the SCS reported a 70% achievement (100% from 1 January 2014) in customs declarations processing through the UAIS. Processing time for customs declarations significantly decreased, from 60 minutes to 5–15 minutes. According to the annual SCS reports, corruption levels had declined because of less human interference in the customs procedures. As of the end of 2012, the number of customs irregularities fell to 3,076 from 4,488 cases in 2005, and is expected to fall further.
As of project completion review, the government was in the process of reviewing and reforming its trade facilitation strategy, which formed a part of the national development strategy and in line with the country’s anticipated accession to the Customs Union formed by Belarus, Kazakhstan, and the Russian Federation. The SCS continued to implement its development strategy and supported the passage through parliament of eight laws aimed at simplifying administrative procedures regulating external trade, and streamlining the function and management of the SCS. It also reformed its organizational structure and strengthened its operations. Customs cooperation continued to be promoted through the Kyrgyz–Tajik cross-border transit and transport agreement, signed in May 2004, and the data sharing agreement with the People’s Republic of China, signed in September 2004.
Meanwhile, the country’s trade grew significantly from $2.5 billion in 2005 to $8.9 billion in 2013. While it is difficult to measure the extent to which the trade turnover increase could be attributed to the project, it is apparent that improved customs administration and modernization efforts positively impacted trade. The level of foreign direct investment also increased from $132 million in 2005 to $757 million in 2013, which may reflect overall improvement in the investment climate and business environment. According to the World Bank 2012 Logistics Performance Index, the index for the Kyrgyz Republic slightly worsened from 2.62 in 2011 to 2.35 in 2012, which can be attributed to the trade disruptions and border closures after the 2010 civil unrest and political crises in the country. But during 2011–2012 trade rebounded strongly, especially for non-gold sectors. The Logistics Performance Index subcategories ranking on efficiency of customs and quality of infrastructure had improved, with the Kyrgyz Republic outperforming most of the Commonwealth of Independent States countries in the customs dimension of the index.
The project had the Ministry of Finance as executing agency, and the SCS, known at appraisal as the State Customs Committee of the Committee for Revenue under the Ministry of Finance, as the implementing agency.
