Kyrgyz Republic: Investment Climate Improvement Program System Support Project

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Lessons

Implementation of a single window for foreign trade is an extremely complex process that requires long-term government commitment, high-level support, and continuous dialogue and cooperation.

The requirements for this project, particularly in relation to its single window for foreign trade (SWFT) component, were inadequately assessed at appraisal. The technical specifications in the initial design had some limitations. The institutional arrangements were weak and did not consider the lack of capacity and high-level support for the state enterprise designated to implement and administer the SWFT. The implementation timeline was too ambitious. Amendments to the technical specifications and implementation arrangements enabled the establishment and process automation of SWFT. However, as of project completion, it continued to have limited use and had not been fully operating along the single-window principle. Government agencies involved in foreign trade clearance had continued to resist the single-window approach and more time will be required to solve the problem. While demonstrating the complexity of the undertaking, the experience has also underscored the need for government to bolster such undertaking with long-term commitment and high-level support. A stronger communication and change management component, including continuous dialogue should have been included in the project design to reduce resistance and foster cooperation among all concerned agencies. Preparation of a project administration manual and the early establishment of a project performance monitoring system could have improved project execution. Implementation of risk mitigation measures, identified at appraisal, may have helped address some of the challenges faced by the project.

Project Cycle Stage:

Preparation

Implementation

Incentives are needed to attract competent specialists and civil servants to work full-time in public sector projects in the Kyrgyz Republic.

The executing agency assigned the project to two successive officers/senior staff members, but neither managed the project on a full-time basis. Besides the part-time managers, the project technical cell (PTC), which served as the project implementation unit, also comprised an international institutional reform expert, a national expert in trade facilitation information technology (IT), a national expert in business registration IT, and a national accountant, all of whom were consultants. The PTC composition and work arrangements were inadequate to meet the project requirements. A dedicated project manager and a procurement specialist should have been appointed or recruited to the project. Incentives, which are generally lacking in public sector jobs in the country, would have been provided to attract competent specialists and civil servants to the project. Incentivizing specialist and managerial jobs, in terms of compensation and benefits, may be explored in future development projects, especially foreign-funded ones.

Project Cycle Stage:

Preparation

Implementation

Projects with significant IT components require specialized skills and expertise.

IT systems development and implementation require expertise in matching software and hardware technical specifications to user demands and capacities. In public sector projects, this would also mean ensuring that the technical specifications are accurately reflected in the bidding documents and progress of work is efficiently monitored. The terms of reference for the IT experts under this project should have required applicants to have minimum experience in designing and setting up the technical specifications demanded by the envisaged IT system. The PTC should have also retained an international IT expert throughout the project to help it supervise software development.

Project Cycle Stage:

Preparation

Implementation

End-user awareness building and basic skills training is necessary for the adoption of IT-based changes in government administration.

The IT training provided by this project to government personnel was expensive but inadequate. It may be more efficient in the future to plan and implement a separate package for basic information and communication technology training in government agencies, and there are many institutions in the country that can provide such service. End-user awareness raising and skills training will help increase the demand for and utilization of modern IT systems that in turn can be expected to improve efficiency, reduce misinformation, and better advance public sector and investment climate reforms in the country. Adequately funded awareness campaigns to mobilize the public to support these reforms should also be explored.

Project Cycle Stage:

Preparation

Implementation

Background

In November 2008, the Asian Development Bank (ADB) approved a $2.9 million grant for the Investment Climate Improvement Program System Support Project of the Kyrgyz Republic. The project aimed to reduce the cost of doing business in the country by streamlining business registration and foreign trade clearance as measures to improve the investment climate. Specifically, it planned to establish two new systems: a business registration system (BRS) under a one-stop-shop approach, and a single window for pre-customs clearance of foreign trade (SWFT). The project would complement and be supported by policy actions under the ADB-financed Investment Climate Improvement Program (ICIP).

The BRS was expected to allow legal entities to complete all registration formalities in the Ministry of Justice, instead of dealing with four different government agencies. Streamlined and automated processes would reduce the time to register a business from 21 to 3 days, as well as the uncertainty of the registration approval process. The SWFT would enable businesses to apply for government export and import permits and receive them through a single channel, instead of transacting these with up to 12 agencies depending on the type of goods or services. By streamlining regulations and automating processes, the SWFT would allow businesses to obtain pre-customs clearance within 5 days—instead of an average of 25 days—and through a single administrative document.

Project preparatory technical assistance helped the government design the technical documents or blueprints for the BRS and SWFT. However, the initial design of the SWFT had limitations, and its implementation timeline was too ambitious and did not fully acknowledge the complexity involved in this reform. At the request of the State Customs Service, an addendum to the SWFT blueprint was approved by ADB to amend its technical specifications and implementation arrangements. The addendum also clarified the information-sharing arrangements between the Single Window Center for Foreign Trade (SWC)—the state enterprise responsible for implementing and administering the SWFT—and the State Customs Service.

The SWC, established under the Ministry of Economy, had little high-level support to overcome vested interests that regularly created obstacles to the project—particularly the State Customs Service and the government agencies responsible for issuing export and import permits. The institutional arrangements did not consider the limited capacity of the Ministry of Economy to enforce the necessary change in government agencies and its inexperience in public procurement rules. These obstacles significantly delayed implementation, causing a two-time, 19-month extension in the project.

Nevertheless, because of the incorporation in its design of the policy conditions in the ICIP, the project was able to address the obstacles and acquire the necessary political support. At project completion, both the BRS and SWFT systems had been operationalized with all processes automated. However, the SWFT had remained in limited use and had not been fully operating along the single-window principle. SWFT implementation is expected to have a more positive impact on the investment climate than the implementation of the BRS.

The project’s executing agency was the Ministry of Economy and the Ministry of Justice and the SWC acted as de-facto implementing agencies. A project technical cell within the Ministry of Economy took charge of day-to-day implementation.

Project Information

Project Name:

Investment Climate Improvement Program System Support Project

Report Date:

June, 2013

Main Sector:

Finance

Country:

Kyrgyz Republic

Project Number:

41544

Report Type: