On the ratification of the Memorandum on Financing between the Government of the Republic of Kazakhstan and the Commission of the European Community

Law of the Republic of Kazakhstan dated December 27, 2002 No. 368

       To ratify the Memorandum on Financing between the Government of the Republic of Kazakhstan and the Commission of the European Community, signed in Astana on October 11, 1999.  

     President of the Republic of Kazakhstan  

          Tacis Program for 1999 Agreement on financing terms  

      Sides:  

     The Commission of the European Communities (hereinafter referred to as the Commission), acting on behalf of the European Community (hereinafter referred to as the Community)         on the one hand, and         The Government of Kazakhstan (hereinafter referred to as the Government), acting on behalf of Kazakhstan (hereinafter referred to as Kazakhstan)         on the other hand.         It is taken into account that these parties have agreed on the implementation of the Indicative Community Technical Assistance Program (Tacis) for 1996-1999 in Kazakhstan, the following is hereby agreed:  

      1. Essence and subject  

     The Parties hereby agree that, within the framework of the Tacis program for fiscal year 1999, the Community will finance, in the form of grants, the implementation of technical assistance measures established by the 1999 Action Program for Kazakhstan, attached here in Annex 1, as an integral part of this Financing Agreement. For convenience, the named program is defined as: Program N KZ9901 Title: Technical assistance to Kazakhstan  

      2. Integration  

     The measures referred to in Article 1 above must be implemented and financed from the Community budget in accordance with the provisions set out in this Agreement on the Terms of Financing and in the Basic Rules applicable to the Agreement on the Terms of Financing, attached here in Annex 2, as an integral part of this Agreement on the Terms of Financing.         Amendments to this Agreement on the terms of financing, as well as to the Action Program for Kazakhstan for 1999 and the Basic Rules applicable to the Financing Agreement must be in writing and can be agreed upon through an exchange of letters between the named parties.  

     3. Obligations of the parties  

     The Community undertakes to allocate 16,650,000 Euros (sixteen million six hundred and fifty thousand euros) for the implementation of the 1999 Action Program for Kazakhstan.  

     4. Duration. Expiration date  

     This Agreement on the terms of financing will enter into force from the time it is signed by both parties.         The end of the term of this Agreement under the terms of financing is December 31, 2002. After this deadline, any financing balance under the KZ9901 program will cease.         The extension of the duration of this Agreement under the terms of financing and the corresponding KZ9901 program may be agreed upon by submitting a reasoned written request from the Government.  

     5. Addresses  

     Any and all information related to this Agreement on the terms of financing will be addressed to:  

     For the Commission For the Government  

     Mr. F. Lamoureux Mr. U.A.Dzhandosov European Commission Deputy Prime Minister Tacis Program 144 Tchaikovsky St. CHAR 12/67 1st floor, room 109 Rue de Loi 200 480091 Almaty B-1049 Brussels                Kazakhstan Belgium  

     6. Number of copies  

     This Agreement on the terms of financing is signed in two copies in English and in two copies in Russian, both languages are considered original.  

     For and on behalf of and on behalf of the European Commission             Government of Kazakhstan  

     Name: Mr. Name: Mr. U.A.Dzhandosov Position: Member of the Commission Position: Deputy                                          The Prime Minister  

     Date: Date:  

     Place:                           Place:  

Appendix 1      

    European Community Technical Assistance Program  

Draft Action Program 1999 Republic of Kazakhstan  Action Program - Kazakhstan 1999  

                                                    million euros  

     But. Enterprise support 8,8 1. Promotion of legal reform 1.0 2. Promotion of industrial competitiveness 1.0 3. Support of the Ministry of Economy 1.0 4. Promoting the organizational development of KIMEP 2.3 5. Assistance to the Ministry of Natural Resources and Environmental Protection 1,0 6. Organizational assistance to the Ministry of State Revenue 2,5  

     B. Food production, processing and distribution 2.0 7. Support for agricultural producers 2.0  

     V. Transport and Telecommunications 2.0 8. Development of transit corridor policy 2.0  

     G. Energy 2.0 9. Support for Kazakhoil 2.0  

     D. Bistro 0.85  

     E. Reserves 1,00  

     Total 16.65  

     In addition, Kazakhstan will benefit from participating in support programs (SPP & ATA). This will be set out in a separate financial statement. A total of 7.35 million euros were allocated to the following areas::  

     1. Tempus 2.0 2. Advisory Assistance Program in 2.5* Strategy development 3. Customs 0.5 4. Statistics 1.5 5. Lien 0.3 6. Management Efficiency Improvement Program 0.3 7. Twinning of cities 0.2 8. ATA 0.05 mechanism         Only 7.35  

     _________________ * Including publications of the journal "Economic Trends of Kazakhstan"  

    Project description No. 1  

     Project name:           Promoting legal reform in the Sector: Structural and organizational reform         Project cost 1.0 MEVRO         Project duration:  24 months         Main beneficiary: The Ministry of Justice of the Republic                                     Kazakhstan  

      Justification of the project:  

     Since independence, the Government of Kazakhstan has focused its efforts on establishing a market economy and ensuring a stable macroeconomic framework by curbing inflation, controlling budget deficits, and introducing systematic reforms aimed at the process of liberalization and privatization. Structural reforms are under control, price and trade controls have been largely eliminated, the privatization of small and medium-sized enterprises is almost complete, most collective farms and state farms have been privatized, and many oil, gas and mineral reserves have been transferred to foreign investors for development. Despite these positive changes, the reform of the legislative system has lagged behind the economic reform program and does not meet the requirements of a market economy. A weak legislative framework regarding the fulfillment of contractual obligations increases risk and constrains the inflow of private capital.         Fully aware of the weaknesses of the existing legislative framework regarding the effective protection of private property and economic rights from encroachment, the Government of Kazakhstan has approved a State Legislative reform Program with the assistance of international donors. The International Bank for Reconstruction and Development (IBRD) is at the stage of approving a technical assistance loan in the amount of 15 million. USD, which will be used for the implementation of the legislative reform project. The Tacis project intends to complement the IBRD project in order to strengthen the organizational development of the legislative sphere. The specific goals, objectives and organizational evaluation of the Tacis project will be carried out in close cooperation with the IBRD and other potential donors at the stage of developing detailed terms of reference.  

      The purpose of the project:  

     The overall objective of the proposed project is to strengthen the legislative system, regulatory framework and organizational structures in key areas for the functioning of a market economy.  

      The main components of the project:  

It is assumed that the project will focus its activities on one or more components: - Drafting of legislative documents. This component will build on the Government's efforts to improve the quality, efficiency, transparency and efficiency of the law-making process with the assistance of international donors and with a special focus on the economy. Under this component, Tacis can provide assistance on one or more points: a) training of civil servants, in particular those involved in the development of legislation related to economic and market reforms; b) improving the competence and organizational structures in the bodies involved in the drafting of legislative documents; c) technical advice on legislative issues. documents.         - Legal education and public awareness of legal issues . This component contributes to the development of a unified, modern legal education system focused on today's market, whose objectives are to improve the quality of legal education and training, public awareness and understanding of legal norms. Under this component, the Tacis project can provide assistance in one or more areas: a) the development of curricula, courses; b) the development of standards for the issuance of documents on the training of legal institutions; c) companies in the media in order to increase public awareness of the norms of legislation and the legislative process.         - Access to legal information . The purpose of this component is to provide timely and wide access to reliable and comprehensive legal information for practicing lawyers, private sector enterprises, government officials and society at large. Legal information on this component includes laws, decrees, government resolutions, resolutions of ministries and departments, and individual court decisions. For this component, the Tacis project may provide one or more items: a) development of a national strategy for the provision of legal information; b) development of a unified system for the implementation of this strategy; c) implementation of part or all of the strategic plan, including equipment and services related to electronic and non-electronic means of access to legal information; d) classification and codification of legal information.         - Strengthening the rule of law . The purpose of this component is to strengthen the independence and increase the quality and efficiency of the courts. For this component, the Tacis project can provide assistance in one or more areas: (a) training bailiffs and judges in the application of laws in the field of economic reform; (b) developing appropriate legislative and regulatory frameworks to eliminate alternative decision-making mechanisms in the event of disputes; (c) implementing alternative decision-making mechanisms through the process of training and retraining judges.  

      General indicative budget: 1.0 MEVRO  

    Project description No. 2  

     Project name:             Promoting industrial competitiveness in the Sector: Structural and institutional reform         Project cost: 1 MILLION         Project duration:    24 months         The final recipient:          Ministry of Energy, Industry and Trade of the Republic of Kazakhstan  

      Background and rationale:  

     The Partnership and Cooperation Agreement (PCA), ratified in February 1998 by the Government of the Republic of Kazakhstan and currently in the process of ratification by the European Parliament and the Member States, aims to create the basis for political and economic relations between the EU and Kazakhstan. In particular, the Regulation on industrial cooperation (art. 45) aims to assist the Community in Kazakhstan's efforts to restructure and develop its industry to the extent that the support does not contradict EU competition rules.        The commitment of the Government of Kazakhstan to promote economic growth in an open market economy is clearly identified as a priority in the long-term Development Strategy "Kazakhstan-2030". After achieving an acceptable level of inflation, the Government's strategy began to change towards ensuring economic growth through reforms in the manufacturing industry, which accounts for 20.7% of the country's GDP and 22.2% of the employed workforce.         The policy of progressive liberalization and opening of the economy to foreign trade, pursued after independence, reveals a lack in the development of competitiveness of the Kazakh manufacturing industry both in the domestic market and in the CIS markets. The main structural disadvantages negatively affecting the manufacturing industry in Kazakhstan are:  

     - Poor product quality and inappropriate product composition - Low demand for finished products and semi-finished products - Insufficient qualifications in management and marketing - The presence of formal and informal barriers to export - High risk associated with direct investment in the manufacturing sector, resulting from insufficient investment and technological backwardness in the manufacturing industry  

     In connection with this situation, the Ministry of Energy, Industry and Trade of the Republic of Kazakhstan has issued the "Main directions of the state Industrial Policy for 1999-2003". However, the fundamental provisions must be reviewed if Kazakhstan wants to achieve a globally recognized level of competition and trade practices.  

      Main objectives:  

     - To enable enterprises to develop and compete in both domestic and international markets with internationally recognized fair practices - To support the development of enterprises in the manufacturing sector by implementing appropriate policies aimed at creating a legal framework and macroeconomic structure for all groups of the manufacturing industry - To support the development of qualified professionals in the manufacturing industry  

      Main components:  

     The project will consist of two interrelated components: - The first component will support the training of professionals on such narrow topics as marketing, export promotion, financial control through training and training tours - The second component provides assistance to the Ministry of Energy, Industry and Trade in the development and implementation of appropriate policies in the field of manufacturing, compatible with the rules of an open market economy  

      General indicative budget: 1 MEVRO  

    Project description No. 3  

     Project name:            Strengthening the institutional capacities of the Ministry of Economy of the Republic of Kazakhstan for macroeconomic analysis and forecasting (Supported by the Agency of the Republic of Kazakhstan for Economic Planning)  

     Sector: Structural and institutional reform  

     Project cost: 1.0 MEVRO         Project duration:   24 months         The final recipient:         Ministry of Economy of the Republic of Kazakhstan  

      Background and rationale:  

The Ministry of Economy of the Republic of Kazakhstan was established in accordance with the Decree of the President of the Republic of Kazakhstan, N. Nazarbayev, dated October 13, 1999, No. 235.         The Ministry of Economy of the Republic of Kazakhstan (hereinafter referred to as the Ministry) is the central executive body authorized to perform the functions of public administration and control in the field of organizing the development of the main directions of socio-economic development of the Republic of Kazakhstan, regions and the cities of Almaty and Astana. The Ministry defines economic policy, provides analysis and forecasting of the socio-economic development of the country, preparation and implementation of indicative plans and other documents of a general economic nature.         The Ministry of Economy is developing scenarios for the development of the economy, taking into account the conjuncture in global commodity markets.         The responsibilities of the Ministry of Economy include: - preparation of Indicative socio-economic development plans for the short and medium term;         - development of macroeconomic indicators for short and medium-term periods, which are the basis for the formation of budgets at all levels; - development and control over the implementation of regional policy; - development, coordination and control over the implementation of the Government Action Plan; - preparation of state investment programs.         The Minister of Economy is a member of the Government.         The main activities of the Ministry of Economy of the Republic of Kazakhstan include collecting information, economic analysis and forecasting, as well as determining the main directions of economic policy based on them. The Ministry's current activities are limited by several factors, including an incomplete information base, outdated methodological approaches, and a lack of technology and equipment to perform the necessary functions.         In its activities, the Ministry of Economy uses data provided by the Agency of the Republic of Kazakhstan for Statistics. In addition, for the effective and timely fulfillment of its tasks, the Ministry uses the necessary information collected from various sources, both domestic and foreign.         In addition, there are problems both in professional development and in the experience of the staff of the Ministry of Economy in macroeconomic modeling and forecasting techniques. Also, one of the main limitations of effective data collection, analysis and processing is the lack of information technology and modern computer equipment.  

      The main goals and objectives of the Project:  

     The main goal of the project is to provide specialists of the Ministry of Economy of the Republic of Kazakhstan with modern analysis and forecasting tools to develop adequate features of the market economy, socio-economic policy measures and parameters for the development of the state budget.         Based on the purpose of the project, as well as considering that it is a continuation of the Tacis EDKA 9602 project "Strengthening the institutional capabilities of the Agency for Strategic Planning and Reforms of the Republic of Kazakhstan" (ASPR), the following tasks are envisaged: - ensuring effective adaptation of economic and mathematical models created in ASPR in the Ministry of Economy;         - further development and improvement of the system of economic and economic models, with the aim of creating financial and budgetary programming in the Ministry of Economy, which allows forecasting the most important development indicators by quarter, year and for a period of up to 5 years; - development of a qualitatively new tool based on existing and newly created models, simulating the functioning of the socio-economic system, taking into account external and internal factors;         - training of specialists of the Ministry of Economy in the techniques of economic analysis, economic and mathematical modeling and forecasting; - regular and immediate provision of high-precision economic data necessary to create microeconomic and macroeconomic models in accordance with international standards.  

      The main components of the project  

     Further expansion of existing economic modeling and analysis capabilities in Kazakhstan through seminars and practical assistance.         Develop the ability to provide economic data necessary for effective economic modeling and analysis of economic models.         Increase and internship of at least 8-10 specialists of the Ministry of Economy in leading European economic institutions and departments.  

      Expected results  

     In accordance with the draft Reform of official statistics, the creation of accurate, complete and timely economic data necessary for economic models.         Further development of the abilities of the Government of Kazakhstan in building economic models necessary for making economic decisions.         Increasing the ability of the Government of Kazakhstan to interpret and practically apply the results of economic models and analysis.         Improving the organizational, technological and communication structures of the Ministry of Economy, which will allow it to become an effective partner in discussing economic policy with other ministries and departments.         Trained and trained personnel to adapt and maintain the economic and mathematical models developed during the project.  

      General indicative budget: 1.0 MEBPO  

    Project description No. 4  

     Project name:           Master of Business Administration (MBA) Program at KIMEP (Promoting the organizational Development of KIMEP)         Sector: Structural and institutional reform         Project cost: 2.3 MILLION euros         Project duration:  24 months         The final recipient:        KIMEP  

      Background and rationale:  

     KIMEP was established by the Decree of the President of the Republic of Kazakhstan dated January 14, 1992. Its goal is to create business and government leaders in Kazakhstan by teaching modern management and transferring knowledge internationally, training personnel who would contribute to economic growth while adhering to the principles of a market economy, as well as progressive extrapolation of Kazakhstan's competitive opportunities in the global market economy.         Since 1993, Tacis has continuously supported KIMEP, in particular, its MBA program. Over the years of its operation, the number of students has increased due to the creation of two more programs, the Master of Public Administration (MSU) program with the support of the British Know-How Foundation and the Master of Economics program funded by USAID. The support of KIMEP donor organizations has made a huge contribution to the current status of KIMEP, as this institute is now considered the "flagship" of business schools in Central Asia (Tacis Annual Report for 1997).         At the moment, while the three main programs have been and remain dependent on foreign funding, KIMEP faces a difficult task to achieve self-functioning. To achieve this, a double tactic began to be applied: gradually replacing a foreign faculty with an equivalent local faculty, and making a profit sufficient to balance the costs of the organization. Tacis has contributed to the development of the local faculty, in which he has made particular progress in recent years. The local faculty of the MBA is gradually changing teachers from foreign experts to local ones, although they have not yet fully acquired modern research skills and educational methodology. (European experts are now specifically engaged in the development of the Local Faculty).         In order to complete the replacement of a foreign faculty with a local one, further investment in training and education of a local faculty is needed. Considering that the aim of the MBA program at KIMEP is to achieve and maintain a level of quality that can be compared with post-graduate programs (postgraduate studies) at European Business Schools and Universities, the development and preservation of such a local MBA faculty is the main objective of the project.         Additional Tacis resources will enable KIMEP to strengthen the local faculty and administration of the MBA, achieving the long-term viability and self-functioning of the MBA program. There is a consensus among the shareholders of KIMEP that self-functioning should be achieved at the end of the project, in the summer of 2002.         Moreover, Tacis' assistance will allow MBAI KIMEP to become involved in the network of European Business Schools and Universities, to guarantee the overall quality of the program, thus justifying its name as the "flagship" of business schools in Central Asia.  

      Project Objectives:  

      The overall goal of the MBA KIMEP program is to produce highly educated professionals in business management who should occupy key positions in Kazakh society in order to effectively influence the further development of the market economy.  

      The specific goals are:  

     Ensuring the self-functioning of the MBA program developed by Tacis at KIMEP, guaranteeing European equivalent quality in the context of Kazakhstan.         Training of local staff to use the mentor system, group teaching, Doctoral studies (PhD) both in KIMEP and abroad.         Improving the quality of MBA courses, achieving a high level of knowledge of MBA students and the quality of scientific activity and research in the field of exact sciences.         Development of the MBA program in the context of Kazakhstan by introducing examples of study and research on Kazakhstan.  

The main components are: - Continuous development of the MBA program and its curriculum; - Continuous strengthening of international relations; - Improving the quality of students; - Further development and strengthening of the local faculty; - Stimulating research activities; - Bringing the MBA program in line for accreditation; - Assistance in strengthening the administration; - Assistance in profitable activities; - Assistance in the development of new programs beneficial to the MBA program, e.g. Bachelor of B.A.  

      General indicative budget: 2.3 MEVRO  

    Project description No. 5  

     Project name: Urban air basin pollution (Assistance to the Ministry of Ecology)         Sector: Structural and institutional reforms         Project cost: 1.0 MEVRO         Project duration:  24 months         Main beneficiary: Ministry of Natural Resources and Environmental Protection of the Republic of Kazakhstan  

      Justification of the project:  

     The project will focus on the problems of urban air pollution. As this issue is considered one of the priorities according to the Government's National Environmental Action Plan (NEAP), which was developed by the Ministry of Natural Resources and Environmental Protection and completed with the multilateral and bilateral support of donors, including the EU TACIS, the World Bank, Australia and Italy.         The rapid growth in the number of cars and their use after Kazakhstan gained independence is one of the most obvious phenomena of the transition to a market economy. However, until today, the steady growth of road transport has not been accompanied by the parallel adoption of appropriate government measures to protect public health and the environment from harmful exhaust emissions into the atmosphere.         It has been proven that there is a direct correlation between the increase in the volume of road transport and the intense air pollution in cities. In such large cities as Almaty and Shymkent, 70-90% of the cause of air pollution is cars. The air basin of Almaty is the most polluted in the country. In recent years, the indicator of environmental pollution in Almaty has approached 55. Air pollution poses an immediate threat to public health for a long period of time, contributes to the growth of chronic respiratory diseases, cancer, a decrease in the birth rate and an increase in mortality at an early age. Statistics show that G. Almaty ranks first in the number of respiratory diseases and second in the number of oncological diseases in the country.         The high level of exhaust emissions from motor vehicles also has a negative impact on the environment of the territory adjacent to cities. According to data provided by the Kazakh Institute of Hydrometeorology, with the current level of carbon dioxide emissions into the atmosphere, the number of glaciers in Kazakhstan may fall by 1/3 by 2020 and glaciers may completely melt by 2050. Consequently, hundreds of kilometers of the territory are subject to desertification and drought. Climate warming can also lead to an increase in mud flows.         The Government of Kazakhstan has committed to reducing greenhouse gas emissions by approving the Carbon Initiative of Kazakhstan program. This government project aims to develop a unified national strategy to reduce greenhouse gas emissions into the atmosphere and prepare for Kazakhstan's ratification and implementation of the Kyoto Protocol, which provides a framework for allocating quotas to reduce greenhouse emissions into the atmosphere in each country.         When developing a national strategy to reduce greenhouse gas emissions into the atmosphere, it is necessary to take into account the environmental impact of the growth of car fleets, which has almost doubled in recent years. Therefore, it is necessary to include consideration of environmental issues in national policy.  

      The main objectives of the project:  

     Comprehensive goals: - Strengthening environmental safety - Improving public health  

     Specific goals:  

     - Reduction of air pollution by motor vehicles - Reduction of the negative impact caused by toxic emissions of motor vehicles on the health of the population in cities.  

      The objectives of the project are: - Research and collection of information on the negative impact on public health and the environment of exhaust emissions into the atmosphere by motor vehicles; - Preparation of a national transport strategy on environmental issues in order to improve the quality of the fleet of cars, gasoline, motor vehicle management in cities, increase public awareness of environmental issues, etc.;         - Presentation of the strategy to all intermediaries at the republican seminar, including the Ministry of Natural Resources and Environmental Protection, the Ministry of Transport and Communications, the Agency for Strategic Planning and Reforms, the Center for Sustainable Development of the National Environmental Action Plan, local authorities; - Implementation of a pilot project in Almaty, which will focus on the following one or more tasks: - Development of environmental safety standards and regulations (for example, on the concentration of harmful substances and exhaust gases, car maintenance requirements, etc.);         - Training of teachers for specialized car maintenance centers, specialized gasoline quality control laboratories, and regulatory organizations, including the city Traffic Police Department for environmental safety control, to raise awareness and educational levels of the population; - Equipping gasoline quality control laboratories, air pollution control stations, and maintenance stations. inspection of motor vehicles;         - Providing recommendations on controlling the entry of vehicles into the most polluted areas of the city; - Providing recommendations on the development of environmentally safe public transport (for example, electric public transport); - Increasing public awareness through the development of a special environmental education program on radio and television.  

      Expected results:  

     - A unified strategy for environmental safety of road transport has been developed; - The efficiency of the automobile fleet has been improved; - Management of urban public transport has been improved; - Management of urban transport circulation has been improved; - The use of high-quality ecological fuels has increased; - Environmental awareness among developers of environmental strategy, local authorities and users of vehicles has increased;         - The relevant legislation on the environmental safety of motor vehicles has been developed.  

      General indicative budget: 1 MEVRO.  

    Project description No. 6  

     Project name: Tax Administration reform (Organizational assistance to the Ministry of State Revenue of the Republic of Kazakhstan)         Sector: Structural and organizational reform         Project cost: 2.5 MILLION EUROS         Project duration:  36 months         Partner organization:        Ministry of State Revenue  

      Background and justification of the project:  

The main feature of the transition period in the CIS countries is the severe and prolonged pressure on the state budget, which leads to increased financial instability. This trait is also inherent in Kazakhstan, where there is a large deficit relative to the size of the economy. Therefore, in such a situation, revenue collection is of acute concern to the Government of Kazakhstan. Indeed, the share of tax revenue is only 12% of gross domestic product (GDP), while in the EU it is 40% of GDP, in Central and Eastern European countries it is 34%, and in Latin American countries it is 23%. Increasing tax revenue is important not only for controlling budget deficits, but also for fulfilling obligations to pensioners and employees of state-owned enterprises, for maintaining medical and educational institutions, and investing funds to rebuild destroyed infrastructures. Without revenue collection, the system of state and social institutions will not be able to function.        Income from tax collection is limited by a number of factors. This is a low level of governance, the destruction of the foundation of taxation, the development of barter and other forms of illegal concealment of income. In June 1995, Kazakhstan adopted a new Tax Code. A market-oriented code that simplified the tax structure and provided a legislative framework for improving the tax management system and improving tax collection rates. In subsequent years, amendments were made to the Tax Code, the last of which took place in December 1997, which aimed to strengthen measures to meet taxpayers' obligations. However, the current level of tax collection remains low at 40%, while this figure ranges between 80-90% in advanced market economies and 60% in developing countries (for example, Africa). In this context, the reorganization and reform of the tax and administrative system is perhaps the single most important budgetary problem facing Kazakhstan today. Therefore, it is very important to use a significant amount of resources to reform the tax process, including training and effective leadership in order to increase the organizational, managerial and operational capacity and competence of revenue collection authorities.         USAID is already providing a grant in the amount of USD 4.0 million as technical assistance to expand the activities of the Tax reform project until the end of 2001. The project contributes to the improvement of tax policy and the domestic fiscal financing mechanism.         The British Know-How Foundation provides materials and organizes training courses for management personnel and employees of the Tax Committee.         The World Bank recently approved a US$ 17.3 million loan to finance 85% of the total budget of the Tax System Improvement project, which aims to develop republican, regional and local tax collection agencies and improve control over the provision of services to taxpayers. Under the terms of the loan, the Government of Kazakhstan has agreed to co-finance the project's activities and its share is 15% of the total project budget.         The proposed Tacis project will be based on the results of donor activities and will be more interconnected with the further implementation of the objectives of the World Bank's Tax System Improvement project. Efforts will also be made to ensure close cooperation with other donors (e.g. USAID, the British Know-How Foundation). A Committee will be established in the Ministry of State Revenue to coordinate the activities of donors in the field of tax administration.  

      Organizational assessment:  

     In September 1998, full responsibility for the management of tax collection activities (including excise duties and import duties) was transferred to the newly established Ministry of State Revenue. The structure of the new ministry includes the Tax Committee, the Customs Committee and the Tax Police, along with other revenue collection committees (for example, the Committee for Control over the Production and Turnover of Alcoholic Beverages). The main organizational structure is the Tax Committee, organized at the republican, city and district levels. In October 1997, back under the Ministry of Finance, the Tax Committee assumed new functions consistent with the actual requirements of the tax system in a market economy, which included overseeing compliance with tax legislation, strengthening control over taxpayers and taking measures in case of non-payment of taxes. Therefore, it is now very important to further improve and implement the functions of the Tax Committee at all levels. It is also necessary to improve the organizational and administrative level of the Ministry's Central Office and promote the unification of efforts of the Tax Committee, Customs for Tax Collections, and extra-budgetary funds for collecting deductions.         There are two main factors hindering the complete reorganization of the tax and administrative system: 1) the size of the head office and a significant shortage of staff in relation to the performance of functions, compared with international practice; 2) low wages, which limits the Ministry in the selection, retention of highly qualified personnel and ensuring their integrity. However, it is worth noting that the Ministry of Justice is also limited in resolving these issues. In accordance with the new Law on Civil Service, which is currently under approval, the policy regarding the personnel of civil servants is under the direct jurisdiction of the new Agency of the Republic of Kazakhstan for Civil Service Affairs.  

      Goals:  

     The overall goal of the project is to improve the income indicators of the tax and administrative system.  

      Specific goals are to increase transparency and integrity of tax and administrative authorities; - Reduce costs associated with fulfilling obligations by taxpayers; - Unbiased distribution of the existing tax burden; - Reduction of tax arrears, concealment of income and contraband goods.  

      Stages/Components:  

     The project is divided into two stages of implementation:  

      1st stage  

     1.1 Improvement of the Central Office of the Ministry of State Revenue  

     Under this component, the concept of a functional structure will be developed in order to improve the organizational and managerial structure of the Central Office.  

     Main activities: - Organizational review and analysis of information received by the central office; - Development of a draft functional structure for the central office, which will clearly determine the number of additional personnel and individual units needed in accordance with accepted international practices for revenue collection in a market economy; - Provide new functional units of the central office with concepts, methodology and training;         - To develop and establish an Information Management System to facilitate planning and decision-making at the central office level with access to the management system of the resources of other state administrative bodies.  

      Stage 2  

     The 2nd stage of the project will be implemented only if the number of staff at the head office of the Tax Committee is increased to an adequate level. It includes the following components:  

     2.1 Improving the work of the Tax Committee Office  

     The Tax Committee adopted the functional system of the organization in October 1997. Under this component, the project will provide new functional units with concepts, operational procedures and tools so that they can effectively manage tax collection activities carried out at the regional (city) and district levels. The main activities are:  

     - Issuing Instructions that ensure a clear and unified direction and distribution of work between the head, regional and district offices (Tax Committee); - Issuing national standards for reporting, monitoring and evaluation of performance of functions (Office responsible for performing management functions); - Issuing national standards for all tax laws and regulations and standards for internal appeals (Office, responsible for the legislative and regulatory framework of the work);         - Building an office responsible for the legislative and regulatory framework in order to monitor the implementation of various laws and regulations on taxation and identify loopholes and contradictions. Decisions on these issues will be used to improve the country's tax legislation; - Release of national standards for the implementation and management of unified information technologies (Office responsible for Information Technology); - Release of: a) an economic analysis and design plan; b) an annual audit plan; c) auditing and research standards; d) Technical handbook on auditing standards (Office responsible for Audit); - Issue of: a) national debt coverage plan; b) debt management standards; c) standards for coordinating enforcement measures with tax policy; d) technical handbook of debt collection standards (office responsible for audit for debt management);         - Strengthening the capabilities of the office responsible for public relations policy so that it can effectively handle a) the development of publications for the media campaign; b) the publication of cases of qualified audit and debt collection; c) establish close relations with the press; d) the publication of press releases.  

2.2. Implementation of Functional Units at the Regional and District Levels:  

     Under this component, the project will develop the concept of a functional structure and facilitate its implementation. The main activities are:  

     - Development of a functional structure that will be precisely divided into separate divisions for taxpayer services, appeals management, audit, enforcement measures and information technology; - Development of a detailed concept, process and procedures for the main types of activities to be carried out in district and regional offices; - Job description for management and operational staff in accordance with with a new structure, process and procedures;         - Preparation of a training program so that tax inspectors can carry out their duties in accordance with the functions of their work.         Special attention will be paid to the creation of audit reference books and assistance in training these personnel.         - Development of a program for reshuffling the staff of regional and district tax offices, including retaining staff whose previous duties differ from the current ones; - Development of a methodology for evaluating the performance of regional and district tax offices under new working conditions. The methodology should include tools for evaluating and continuously improving the functional structure of the organization.  

     2.3 Consolidation of tax collection activities  

     Under this component, the project will promote the unification of tax collection efforts by the Tax Committee, the Customs Committee, the Committee for Control over the Production and Turnover of Alcoholic Beverages and extra-budgetary funds involved in income tax collection. In order for the Tax Committee to receive information on the accuracy of filling out tax returns, the project will also establish a link between the electronic data of the Ministry of Justice and other relevant authorities. The main activities are:  

     - Implementation of a simultaneous national program to update the registration data of the Tax Committee with the Ministry of Justice and the creation of registration data at the republican and regional levels; - Implementation of a simultaneous program to update the registration data of the Tax Committee and the creation of a national registry for individuals; - Issuance or adoption of a unified system of assignment of RNN for individuals and legal entities immediately after the creation of national registries;         - Discussion of protocols on the creation of electronic communication with the Ministry of Justice and the establishment of the need for re-registration and filing of legal documents upon receipt by legal entities of the RNN; - Discussion of protocols on the creation of automatic communication with authorities that have important information about the registration of individuals; - Discussion of protocols on the creation of automatic communication between government agencies to ensure the correctness of declarations, submitted to the tax authorities;         - Combine audit and enforcement measures, if necessary, in order to reduce the negative impact of such measures on the private sector, thereby making it possible to identify income concealment through the audit process.  

      Expected results:  

     - Organization and equipping of tax and administrative bodies in order to effectively collect income in a market economy; - Equipping of tax and administrative bodies in order to monitor the effectiveness of tax legislation, honesty and impartiality; - Equipping of tax and administrative bodies in order to educate taxpayers to be voluntary in paying taxes; - Equipped tax and administrative bodies and capable identify discrepancies and tax evasion.  

      Potential liabilities/risk:  

     - Commitment at the highest political level to reforming the tax and administrative system; - increasing the size of staff at the head offices of the Tax Committee and the Central Office of the Ministry of State Revenue and improving the payment policy for tax officials; - improving the tax code with the assistance of USAID, in particular the provisions on VAT registration, refund of funds, the system of fines and tax appeals; - development of information technologies according to the scheme and with the assistance of the World Bank;         - creation of a unit for the implementation of the program and its functioning according to the scheme and with the assistance of the World Bank; - creation by the Ministry of State Revenue of a Committee for coordinating the activities of all donors in the field of tax administration.  

      Allocation of the EU budget:  

     1st stage - 0.5 MEVRO 2nd stage - 2.0 MEVRO        Only 2.5 MEVRO  

    Project description No. 7  

     Project name:            Support for integrated agricultural marketing (Support for agricultural producers)         Sector: Agriculture and agricultural industry         Project cost: 2.0 MEVRO         Project duration:   24 months         The final recipient:         Ministry of Agriculture of the Republic of Kazakhstan  

      Background and rationale:  

     The state food distribution system in Kazakhstan is currently disrupted, and while a new marketing system is developing, the overall situation is still difficult. The system, in particular, the virtually non-existent infrastructure of the agricultural market, needs urgent improvement. Many private farmers face difficulties in marketing their products, and consequently receive little profit from their efforts. Without adequate policies on market-based production systems and means of production, farm restructuring efforts may be at risk.         There have been some positive changes in the food distribution system. Currently, a pilot wholesale market has been established in Almaty. Other cities, including Aktobe, Karaganda and Taldy-Kurgan, have requested support from the Tacis Project in the development of wholesale markets, and intend to open a network of wholesale markets. This project also develops information services for farmers so that they can make the right marketing decisions and effectively use new market structures. However, the creation of an agricultural market structure linking private producers to these markets is critical. The acquired experience shows that the creation of wholesale markets in cities is a prerequisite for the development of various forms of the agricultural market.  

      Project Objectives:  

     It will be necessary to develop different approaches in each of the selected areas, which, among others, include the following:  

     - Creation of an assembly market, including, if necessary, the supply of means of production; - Development of local market information systems linked to the national system; - Strengthening of farmers' groups and cooperatives; - Encouragement in the creation of entrepreneurs specializing in agriculture in order to ensure effective competition.  

     These approaches should be evaluated in terms of different consumer goods, as well as institutional and functional aspects, in particular:  

     - Consumer goods - taking into account the situation of supply and demand in the market for each product; - Institutional aspects - create appropriate organizational or business structures and necessary support services (for example, finance); - Functional aspects - taking into account various functions in marketing.  

     The project should be carried out in two stages:  

      The first stage, the strategic planning stage, will focus on the creation of a project within the Ministry of Agriculture and the target areas. During the first stage, local needs, strengths and weaknesses of the current market system will be assessed, and new marketing structures created by the project in the context of the overall agricultural market strategy will be identified.  

      The second stage, the implementation stage, will undertake the recommended strategy for each target area.  

      General indicative budget: 2.0 MEVRO  

    Project description No. 8  

     Project name:            Support of transit corridor development policy in the Republic                                      Kazakhstan (Development of transit corridor policy)         Sector: Infrastructure development         Project cost: 2.0 MEVRO         Project duration:   18 months         The final recipient:         Ministry of Transport and Communications  

      Background:  

A distinctive characteristic of the economy of the Republic of Kazakhstan is the wide dispersion of the centers of generation and attraction of freight transport. The main industrial facilities engaged in mining, ferrous and non-ferrous metallurgy, processing, heat generation, and grain processing are located along the entire vast territory of Kazakhstan so that their exchange, export, and import of raw materials and semi-finished products constitute a huge cargo that must be transported over long distances. Under such conditions, transport becomes an important component of industry and the national economy.         Moreover, when studying Kazakhstan's transport system and formulating transport policy, it is necessary to take into account its geographical location in the center of the Asian continent. Kazakhstan is an unavoidable transit country for transcontinental and interregional transport links between many Eurasian states.  

      Justification:  

     Constant monitoring of cargo and passenger transport flows in international and domestic traffic along the main transport corridors of the republic will make it possible to adjust the scheme of formation of international transport corridors of the Republic of Kazakhstan, taking into account the development of industry in certain regions of Kazakhstan and neighboring countries, as well as identify physical and non-physical obstacles standing in the way of ensuring the required time for the transportation of goods and passengers. It is necessary to find ways and means to overcome these obstacles in order to increase trade flows, including transit flows, through our territory. In this context, the draft law "On Transit" for the Republic of Kazakhstan will contribute to the rationalization of existing procedures and practices, such as tariffs and quality of service, and the impact on increasing the competitiveness of transport corridors in the Republic of Kazakhstan.         Currently, there are two important principles for customers in the transport and communication sector:  

     - Delivery time - Information on the location and conditions of shipment during transportation, including their safety.  

     Therefore, we need to improve cargo promotion by creating a centralized collection and processing of transportation information. This again proves the usefulness of systematic monitoring.         The efficiency of transport operations and the full exploitation of the Republic's potential require the project to review and set tariffs in a new environment. Tariffs should not only cover the actual cost of providing transit transport services, but also stimulate an increase in their quality. The tariff system should set different tariffs due to different regional costs. The quality of freight transport is determined by the speed of delivery and good conditions of goods upon arrival. Passengers also want speed and good conditions. These principles imply a thorough study and full analysis of the detailed components of the tariff system.         It is known that investing capital in the development of transport infrastructure in most cases brings a low level of profit, making this area of investment less attractive to foreign and private capital, which leads to inadequate development and establishment of a transport network, therefore, the transportation of the company is not carried out in full required volume. Therefore, a fair tax policy should be developed and applied in order to attract investment and gradually allow transport enterprises to become self-financing.         Intensive investment measures such as rehabilitation, reconstruction, or duplication of existing roads and the creation of new ones inevitably require foreign investment, and this, in turn, can be mobilized based on a detailed feasibility study.         The TRACECA program provides technical assistance to realize the transit potential of the republic, but in reality about 2/3 of the total potential remains outside the area of influence of the TRACECA program.         The next important factor is the revision of the legislation of the Republic of Kazakhstan in order to simplify the procedure without prejudice to the customs authorities in their duties of control and revenue generation.  

      Project objectives:  

     The overall objectives of the project are to increase the competitiveness of the corridors of the Republic of Kazakhstan, which provides:  

     - Reducing the cost of freight and passenger transportation - Increasing the speed of these shipments - Supporting the increase and improvement of the quality of transport services through: - Systematic monitoring - Centralized collection and processing of statistics.  

      Tasks:  

     - Revision of the legal framework for transport by developing a model law "On transit" for the Republic of Kazakhstan - Recommendations for improving tariff and tax procedures in the transport sector - Recommendations for simplifying customs procedures in order to attract more transit flows through the territory of Kazakhstan         - Development of measures to improve the quality of transport accounting, including speed parameters of transport corridors, providing for the creation of centralized collection and processing of transportation data, and timely dissemination of complete and reliable information - Research of existing passenger and cargo flows, in particular those related to transit, import and export operations, preparation of transport forecasting in accordance with the expected development industrial and oil and gas production in Kazakhstan         - Preparation of a feasibility study of the main projects, which will improve transit opportunities - Taking into account the development of intermodal and combined transport practices in all these tasks.  

      General indicative budget: 2.0 MEVRO  

    Project description No. 9  

     Project name:            Support for the oil production and oil transportation sectors of the Republic                                      Kazakhstan (Company support                                      Kazakhoil) Sector:                      Energy industry         Project cost:           2.0 MEVRO         Project duration:   24 months         Main beneficiary: Ministry of Energy, Industry and Trade  

      Background and rationale:  

     The National Oil and Gas Company Kazakhoil was established in 1997 and has equity participation in approximately 20 enterprises in the oil and gas sector of Kazakhstan, including enterprises with foreign participation. These include Mangistaumunaigas JSC (25% of shares belong to KazakHoil), Aktobemunaigas JSC (20% of shares belong to KazakHoil), Uzenmunaigas JSC (85% of shares belong to KazakHoil), Embamunaigas JSC (85% of shares belong to KazakHoil), Tengizmunaigas JSC (85% of shares belong to KazakHoil) and the Tengizchevroil Joint Venture (25% owned by KazakHoil). The volume of oil production of companies in which Kazakhoil owns a stake totaled more than 24 million tons of oil in 1997 out of a total of 28 million tons.         Kazakhoil represents the interests of the state in these companies and may conclude agreements for the exploration, production and processing of oil and gas on behalf of the Republic of Kazakhstan.        KazTransOil was established in April 1997 by Decree of the Government of the Republic of Kazakhstan No. 461 to represent the country's interests in the transportation of oil and petroleum products. The Company manages about 6,300 kilometers of main trunk pipelines and 3,400 water pipelines (the most important of which provide supply from the Volga to the fields of the Mangystau region, including the giant Uzen field).         KazTransOil is also authorized to represent the interests of the Republic of Kazakhstan in international pipeline projects.         The Ministry of Energy, Industry and Trade of the Republic of Kazakhstan is responsible for the general regulation of the energy sector. The Investment Agency of the Republic of Kazakhstan is responsible for licensing exploration and production of oil and gas.  

      Main tasks:  

     In 1997, Kazakhstan's oil and gas sector was restructured, where Kazakhoil assumed the traditional role of a national oil and gas company.         In addition to the Agency of the Republic of Kazakhstan for Investments, Kazakhoil is the recipient of the Tacis 1996 project, aimed at providing support to the company in organizing monitoring in the oil and gas sector.; This includes the creation of a pilot database that will allow government agencies to store and query data obtained by oil and gas operating companies, and one of the components is to strengthen the company's ability to develop projects; and it also includes training in advanced drilling technologies.         The newly proposed project will aim to further strengthen the capacity of government agencies to act as observers and will also focus on some other issues crucial to the development of the oil and gas sector, such as independent quality control and certification of oil and petroleum products, assistance in safety and environmental protection during offshore operations.         Similarly, assistance in environmental safety for onshore pipelines will support KazTransOil in its development and recognition as a pipeline operator at the international level.  

     The main tasks, therefore, are:  

- Further assistance to the Ministry of Energy, Industry and Trade and/or NOC Kazakhoil in their regulatory and/or supervisory role; - Creation of an independent certification system for petroleum and petroleum products; - Assistance in safety and environmental issues for offshore operations; - Assistance to KazTransOil in safety and environmental issues for operators pipelines.  

      Main components:  

     The main components include:  

      Further assistance to NOC Kazakhoil and/or the Ministry of Energy, Industry and Trade in their regulatory and/or supervisory roles: - Assistance to the Ministry of Energy, Industry and Trade in matters of legislation in the gas sector and taxation regime in the energy sector; - Assistance to NOC Kazakhoil in organizing an international accounting system, Information Management System and other international controls;         - Development of options and collection of material for the feasibility study of the development of Alibekmola, Kozhasau and Urikhtau fields.  

      Creation of an independent certification system for petroleum products: - Development of standards for an independent certification system for petroleum and petroleum products; - Creation of a pilot laboratory at an existing organization in Atyrau for the analysis and certification of the quality of petroleum and petroleum products; - Training program on quality assurance and other related issues on certification of the quality of petroleum and petroleum products (venue - Atyrau).  

      Assistance in safety and environmental issues for maritime operations: - Development of universal standards and procedures for safety and environmental protection in maritime operations; - Development of standards and procedures for safety and environmental protection in maritime operations for a specific Kazakh company - operator at sea; - Training program on standards and procedures for safety and environmental protection during maritime operations (location - Aktau).  

      Assistance to KazTransOil in safety and environmental issues for pipeline operators: - Development of universal standards and procedures for safety and environmental protection for pipeline operators, including issues such as preventive maintenance systems;         - Creation of a pilot monitoring system for a small section of the pipeline operated by KazTransOil, where issues such as preventive maintenance systems, pipeline monitoring and simulation systems, safety issues, environmental monitoring and emergency response will be demonstrated; - Collection of material for the preparation of a business plan for the distribution of such a system as all KazTransOil's operations;         - Training program on maintenance procedures, safety and environmental standards and procedures for pipeline operators (location - Aktau).  

     The training program should be conducted jointly with the Oil and Gas Industry Training Center, founded earlier with the assistance of Tacis.         According to this project, the activities in Aktau will be conditioned by the creation of an appropriate structure that will act as a recipient at the local level. The responsibility for the creation of such a structure remains with the Kazakh authorized bodies.  

      General indicative budget:             2.0 MEVRO  

     Experts 1.5 MEVRO         Equipment 0.3 MEVRO         Other 0.2 MEVRO         Only 2.0 MEVRO  

    European Community technical assistance program  

The 1999 Action Program for the Republic of Kazakhstan  

      1. Definition  

     Title:                Tacis Action Program for 1999                                  for Kazakhstan         Cost: 16.65 million Euros EU contribution: 16.65 million Euros         Duration: until December 31, 2002         Budget line: B7-520         Program Coordinator:    Daniel Ghiyader (DGIA-C4)         Project implementation: Sven Kjellstrom's Department (SCR-A3)  

      2. Program summary  

     The Program of Action (POA) on Technical Assistance for the Republic of Kazakhstan combines a number of actions in key sectors of the economy, namely: Structural and Organizational Reform, agriculture and agro-industrial, as well as infrastructure development; some of the funds are allocated to small-scale project programs, which are described in detail in the financial proposal, under paragraph 10 "Cost estimates and financing". These actions, to be implemented at both the national and regional levels, have a common goal - to support Kazakhstan during its transition to democratic relations and a market economy. These steps will be taken within the framework of the Indicative Program for 1996-1999, agreed upon between the authorities of Kazakhstan and the Tacis Steering Committee. They will continue and expand the previous Action Program for 1997.         The program will be funded by EU grants in the amount of 16.65 million euros.; 7.35 million will be allocated for Kazakhstan's participation in the small projects program, as well as in the ATA program. Other actions funded by the EU and of interest to Kazakhstan will be provided by the funds separately, through an interstate program.  

      3. The situation in the country  

      3.1 Political development  

     Kazakhstan has managed to maintain its leading position in the field of market reforms in Central Asia, and to a large extent, among the CIS countries.         Acting under the guidance of the Soviets and international forces, the Government underwent a radical reform; the number of ministries, as well as State committees, was reduced. The President consolidated his power by creating several influential agencies controlled by the President himself: the Agency for Strategic Planning and Reforms (ASPiR), and later the Agency for Civil Service Affairs (AGS). In early 1998 President Nazarbayev appointed Mr. Dzhandosov, the former Chairman of the National Bank, to the post of First Deputy Prime Minister. The Ministry of Oil and Gas has been transformed into the state-owned Kazakhoil company, which will manage the state's share of oil and gas operations. In September 1998, the State Tax Committee under the Ministry of Finance was abolished and the Ministry of State Revenue was established.         Since gaining independence, Kazakhstan has made progress in consolidating its democratic institutions. The Parliament, and especially its lower house, the Mazhilis, is working hard on the legislative infrastructure for a modern market economy, and the Tenge is now a fully convertible currency. One of the most important new laws is the Regulation on Currency Regulation, adopted in December 1996, which completed the last stage and allowed for international transactions in foreign currency and Russian rubles.         Pension reform continues, and issues related to the education and health sectors, as well as the new civil code, are under discussion.         The issue of human rights remains a sensitive issue for Kazakhstan, although there have been positive developments here, such as cooperation between the Government and NGOs. However, there are still shortcomings in their implementation, political rallies held without official permission are noticeably persecuted, organized opposition, trade unions, NGOs, and the media (when they are not owned by the party in power or directly by the president's family and friends) are under constant pressure from the government, tax police, and security agencies.         It should be noted that although the death penalty has not been abolished, the scope of its application has been reduced, and the number of death sentences imposed has decreased in recent years.         The social situation of the majority of the population remains difficult: the poverty trap has deepened over the past year, with incomes below the minimum consumer basket. A large delay in salary payments exacerbates the problem. The stagnation in the economy, especially in the manufacturing sector, has a direct effect on the migration process from Kazakhstan. In 1997 The number of people choosing to emigrate from the country decreased slightly, but in 1998 it increased again, and another 25,000 people emigrated from Kazakhstan.         The main political event of 1998 was the official presentation of Astana as the new capital of the state. Huge investments were made in the construction of infrastructure: government buildings, hotels and the airport.  

      3.2 Macroeconomic development  

Since gaining independence in 1991, Kazakhstan has faced a set of challenges common to all newly independent States.         In 1992, the Kazakh government began a gradual process of reforms towards a market economy: a gradual approach was chosen in order to preserve social and national stability in the country, as well as to avoid social division. While structural transformations began slowly due to this evolutionary approach, reform efforts have increased significantly since 1993, when the Government launched a macroeconomic stabilization program.         The first signs of stabilization were observed in 1995, when, following the introduction of relatively tight monetary and fiscal policies, the inflation rate was significantly reduced.         In the second half of 1996, growth resumed for the first time in the country's history.         The shock waves that have recently swept abroad, related to the financial crises in Southeast Asia and Russia, as well as the fall in world oil and metal prices, had a negative impact on the Kazakh economy in the second half of 1998. After a review of macroeconomic results, the inflation rate will be 2.8%, and the drop in GNP - 2.5%. In 1996, despite difficulties with tax collection, the Kazakh authorities reached the target budget deficit of 2.8% of GNP, agreed with the IMF. In 1997 The government was faced with the urgent need to significantly reduce the amount of unpaid pensions and salaries, and was forced to increase the budget deficit, bringing it, with the consent of the IMF, to 4.2% of GNP.         The National Bank's anti-inflationary approach helped stabilize the external value of the Kazakh Tenge and lowered interest rates. The exchange rate has remained stable in nominal terms over the past two years, with a volatility of less than 1% in 1997, and a concomitant rise in the real exchange value of Tenge over the same period.         The level of foreign exchange reserves in 1998 It remained stable, amounting to approximately 1.9 billion US dollars, despite the financial crisis in neighboring Russia.         As for the currency, the Government and the National Bank have made assurances that there will be no devaluation: the main argument in favor of this is the fact that large reserves are in foreign currency and gold. To protect the Tenge, the National Bank recently raised the refinancing rate from 18.5% to 25%.         Despite such optimistic official forecasts, foreign investors remain cautious. Russia is Kazakhstan's main trading partner, although transactions in rubles account for only 7% of the country's foreign trade turnover, Russia accounted for more than 30% of Kazakhstan's total exports and 42.5% of its imports. The relationship between the banks of Kazakhstan and Russia is very strong. According to official statistics, the investment volume of approximately 80 Kazakh banks in Russia totals 600 million Tenge (7 million Euros).         Kazakhstan's request to join the WTO is progressing well, but further progress will be required if it is to achieve its intended goal and be accepted during 1999.         The economic crisis in Russia was the most serious event in 1998. The crisis not only severely affected the Russian economy, but also had a negative impact on the republics of Central Asia. The crisis has already affected, and will continue to affect, mainly through its consequences, the volume and value of trade in goods, inflows of foreign investment, the stability of the exchange rate, as well as obligations to pay off external debt. These consequences will have significant socio-economic significance in all Central Asian countries. In the short term, economic growth will be weakened, the stabilization process will be jeopardized, efforts aimed at structural reforms will be slowed down, and the living conditions of the population will have a negative effect.         In the first half of 1998, Kazakhstan carried out more than a third of its trade with Russia. The impact of the Russian crisis on Kazakhstan has been fundamentally felt in the decline in trade. Kazakhstan has temporarily banned the import of most Russian food products, which are already produced in sufficient quantities in the country. Kazakhstan's particular problem lies in the resulting combined effect of the Russian crisis and low current oil prices, as oil revenues account for the largest share of the state's total profits.  

   3.3 Progress in reforms  

     The reform process is still very far from being completed. The main economic reform measures undertaken after independence consisted in liberalizing most prices, as well as freeing up domestic trade. Other reforms have progressed slowly in recent years: land privatization has just begun, and some sectors of the economy have not been fully privatized, although the program of mass privatization, as well as the privatization of small enterprises, was nearing completion in 1995.         The reform process in Kazakhstan started slowly: it accelerated only in the last two months, which was highly appreciated by the international community, which pledged to support the transformation process.         Structural and organizational reforms were not carried out evenly, with democratic reforms lagging behind market-based economic reforms.         Market reforms have been successfully implemented in many areas, while the process of economic reform is still far from complete. The economic reforms implemented after independence mainly focused on the issue of price and trade liberalization. Consumer price liberalization has been achieved for the most part, but cross-subsidization remains in public utilities. A liberal domestic trade regime has been established, and Kazakhstan is at the last stage of negotiations on WTO membership.         The privatization of small enterprises officially ended in 1997, with more than 13,000 enterprises sold through cash auctions and vouchers. Rapid progress has been made in the privatization of medium and large enterprises, although the State continues to retain a large share of capital in privatized companies.         The Government has made important efforts to facilitate the restructuring of unprofitable enterprises. In 1998, the Bankruptcy Law was amended to apply it to agriculture. By mid-1998, 26 State-owned insolvent enterprises had either been liquidated or put up for sale. However, unprofitable enterprises continue to delay payments to suppliers, their employees, and the state budget, despite government efforts to eliminate "offsets" in which tax liabilities are offset against budget debts.         The privatization of utilities has made significant progress, privatizing more than 80% of the generation capacity of the energy sector and selling most of the minority stake of the national telecommunications operator. Attempts to attract investors to the remaining parts of the energy distribution system, however, were unsuccessful due to the lack of a proper pricing scheme. In July 1998, the Antimonopoly Committee responsible for price regulation, after attempts to subordinate it to the Ministry of Industry and Trade, became independent again.         The banking sector was strengthened through privatization and foreign participation. Improvements made in accordance with the rules regarding capital adequacy, single debtor exposure and related lending have led to the failure of a number of banks and branches. Most of the assets of the banking sector are currently privately owned. Twenty banks with foreign ownership account for approximately 22% of the capital of the banking sector. The recent lifting of any restrictions on the share of foreign capital in the banking sector seems to have further increased foreign participation.         In September 1997 The Kazakh Stock Exchange was founded, which is still at an early stage of its development. Although the exchange already has its own infrastructure, regulatory structure and requirements for the admission of securities to the exchange, approaching international standards, there are not many trades taking place, besides, they are not sufficiently open.         In January 1998, the Government of Kazakhstan launched a comprehensive pension reform to transform the existing withholding system into a fully funded system. However, the implementation of the reform proved problematic, and was hampered by both administrative obstacles and the lack of attractive private investment opportunities for pension funds.         Significant measures are currently being taken to reduce bureaucratic structures in all public sectors, such as healthcare, education, and social protection. Since 1997, the Government has been promoting the restructuring of central executive bodies and the reform of the budgeting process. The civil service is being reformed, and at the end of 1998 The Agency for Civil Service Affairs under the President was founded with the aim of developing a policy for civil service reform.         Kazakhstan's agricultural resources are enormous, accounting for 20% of the total agricultural land area of the CIS. However, agricultural production in the country is low and continues to decline (by more than 50% over the past 5 years). Great efforts have been made to privatize the farming sector and agribusiness in Kazakhstan as part of an attempt to ensure greater self-sufficiency in food. Land use has been transferred to private hands on more than 90% of state-owned farms. Agricultural crops, including cotton, are grown in the south of the country on small farms and in cooperatives, while processing companies and distributors are located in the north of the country. The system of distribution of agricultural products is currently undergoing significant changes, developing from a state system into one that will meet the requirements of the market. Restructuring, as well as improving production and distribution efficiency, on and off farms, remains elusive and continues to pose a formidable challenge. The 1998 harvest turned out to be the worst in the last 40 years, with 6.9 million tons of grain, due to severe drought in the west of the country.         The development of this sector remains a priority issue, despite the fact that this sector has already been largely privatized.         As in other newly independent states, per capita electricity consumption in Kazakhstan remains much higher than in the most developed economic regions.         The oil and gas sector is the fastest growing sector in Kazakhstan. The confirmed oil reserves total more than 15 billion barrels, but the potential reserves at the bottom of the Caspian Sea may be much larger. Approximately 85% of Kazakh reserves are concentrated near the Caspian Sea, and half of the production comes from three large onshore deposits.         Thanks to such significant investments, oil and gas production is growing, with current annual production estimated at 26 million tons of oil and 8 million cubic meters of natural gas. The presence of foreign companies in this sector continues to increase.         Currently, Kazakhstan does not have an oil and gas pipeline with direct access to international markets. Transportation is limited through Russian pipelines and too expensive rail transportation. The SRS consortium plans to build a new pipeline that will export oil from the Tengiz field through the Russian port of Novorossiysk on the Black Sea. Construction has already begun, and completion is scheduled for 2001.         Kazakhstan has three main refining plants, which have experienced a significant decline in output since the country gained independence.         The market reforms introduced by law in 1996 and 1997, which affected public utilities, led to a sharp increase in electricity tariffs, as well as to an improvement in the collection of payments. Although energy tariffs are set below their full cost of energy distribution per unit, improved collection procedures, as well as consumers' expectations that tariffs will continue to rise gradually in the future, act as powerful incentives for the development and implementation of a sustainable energy conservation system.         Therefore, the main problems the country is facing in this sector are related to the restructuring of Kazakhoil, the transportation of hydrocarbons at a lower price, and the more efficient use of refineries.  

      4. Improvement and refinement of the program  

     The present Action Program is compiled within the framework of the Indicative Program of 1996-1999, in which two Action Programs were prepared. The first, covering 1996/97, was taken from the 1997 budget, and the second, which requires a solution, covering 1998/99, was taken from the 1999 budget. The strategy for the Indicative Program for 1996-99 was prepared based on discussions with the Kazakh authorities, taking into account the needs of Kazakhstan during the transition period, the previous assistance from Tacis, as well as assistance from other international donors. It was presented to the Tacis Steering Committee in June 1996, and then formally agreed upon between the Kazakh authorities and the Commission services, following agreement and adoption by the EU member States in November 1996. The 1997 action program was approved by the Tacis Steering Committee in May 1997.  

      5. Coordination with other donors  

Coordination efforts are underway with other donors through several channels. Regular meetings are held with representatives of major international donors, in particular with the World Bank and the EBRD, in order to review the objectives and content of various programs, as well as coordinate actions. Furthermore, the Commission and the EU member states regularly exchange views and information on relevant assistance programmes for Kazakhstan. The Commission's office in Almaty holds regular meetings with the international donor community on specific sectors. Such exchanges helped to develop a better understanding of the relevant priorities and programs for donors. The World Bank, of which Kazakhstan became a member in 1992, actively supports the country, mainly through technical assistance and political loans. Up to the beginning of 1998, the Bank approved loan transactions totaling 1.18 million US dollars. The most recent adjustments and operational loans, amounting to over USD350 million, include support for Public Sector Management, modernization of the State Treasury Service, rehabilitation of oil fields, as well as two pilot projects related to real estate and water supply.         The key priorities for the European Bank (EBRD) for this year are: Financial services (continuing to support existing financial resources for SMEs by acquiring equity interests in selected private industries and non-banking organizations); Industrial and Production support for the privatization process through restructuring financing, Infrastructure (continued support for the Aktau port and distribution network through the railway improvement program), Energy and natural resources, Agriculture and agro-industry.         The Asian Development Bank has given the go-ahead for six loans totaling $230 million so far. The priorities for ADB are: Pension Reform program, Agricultural Development, Farm Restructuring, Basic Education, and Road Rehabilitation.         The International Monetary Fund (IMF) is working closely with the Government on a stabilization course. By mid-1997, all the macroeconomic objectives outlined in the IMF's Extended Lending Program covering 1996/98 had been achieved. Close cooperation on structural regulation issues continues.         When preparing the 1999 Action Program, initiatives initiated or envisaged by other donors, in particular the World Bank, EBRD, ADB, EU member States on bilateral programs, as well as USAID, were taken into account. In general, Tacis projects and the actions of other donors complement each other well. This is especially evident in the role of Tacis, as the main technical assistance service, and the World Bank, EBRD, and ADB, as the main international borrowers.  

      6. The role of the program in the Indicative Program of 1996-99.  

     The overall goal of Tacis assistance is to support the transformation of the political, social and economic situation in Kazakhstan, in order to raise the standard and quality of life of the local population. The guiding principle underlying Tacis-funded activities, according to the previous Indicative Program (IP), was to support the macroeconomic and sectoral policies of the Kazakh authorities. And this continues to be the guiding principle of IP for 1996-1999.         The main objectives of the Government's reform program in cooperation with the IMF and the World Bank are to stabilize the macroeconomic situation, reverse the decline in output, improve productivity and achieve sustainable development in the medium term, as well as protect vulnerable segments of the population.         As a result of negotiations with the Kazakh authorities, it was decided that the priority areas under the Indicative Program 1996-1999, which will support the main axes of the reform program of the Government of Kazakhstan, including the Partnership and Cooperation Agreement and WTO accession, are: Structural and Organizational reforms, Agriculture and Agro-industry, as well as Infrastructure Development. This does not exclude the support of other projects if a specific urgent need is identified, as well as if such activities can be considered as additional to the general incentive for political and economic reforms.         The indicative Program of 1996-1999 introduces a number of new elements to the project definition and implementation method, which can be briefly described as follows: more attention to a limited set of goals; greater horizontal connectivity of projects, both within and between sectors, in Tacis projects, as well as with the Interstate Tacis Program and other donor projects, in order to achieve maximum complementarity and expediency, and ultimately greater impact; more attention to the duration and drafting of projects within a four-year structure, so that the subsequent tracking and extension of projects are more effectively linked and, as a result, have a greater impact.; and in accordance with the wishes of national governments, projects should have more visible and concrete results, emphasizing investments wherever possible.         The 1999 Action Program (PD) is a continuation of the goals outlined in the 1996/1999 IP, which began with the PD 1996/97. In total, it covers 10 projects in three priority areas. The number of projects has decreased (15 in PD 96/97), and the project life has increased. As a result, greater concentration of efforts on specific sectors and greater sustainability of projects will be achieved. Within the framework of the current Action Program, as well as in accordance with the wishes of the Kazakh government, about 60% of the financial resources of the projects will go to the most priority area, Structural and organizational reform. A broad theme is the reform and reorientation of organizations and institutions, both in the public and private sectors, with the common goal of supporting the emerging market economy. Modernization of management and administration capabilities through training/retraining, as well as advisory assistance in strategy development are a prerequisite for the entire reform process. If management is unable to plan for development, and is unable to put organizational support and control structures in place, then political, economic, and social tension may be inevitable. The appeal to government agencies is carried out on five different projects: training and retraining of civil servants is provided through the implementation of a project on legal reform; through assistance to the Ministry of State Revenue in developing its organizational capabilities in tax management; through support provided to the Agency for Economic Planning in information analysis and economic forecasting; through the improvement of organizational structures of the Kazakh Institute of Management, Economics and Forecasting (KIMEP); through assistance to the Ministry of Ecology in developing an environmental strategy to reduce urban air pollution.         Activities in the second priority area, Agriculture and Agro-industry, will focus on agriculture and its supporting functions. Kazakhstan remains heavily dependent on agriculture, which accounts for 15% of its GNP, and related industries, but the sector faces acute challenges. This is mainly due to the legacy left by the command and administrative system, as well as failures in the launch and release distribution service. Primary agriculture and food processing services have not yet been restructured and have needed investments in recent years. As a result of the privatization of many farms, loans for many suppliers have stopped. The Kazakh Government has recognized the need to correct the current situation and promote the future development of agriculture.         The 1997 program Supported the elements of privatization, providing special support to private farms in obtaining loans, improving the availability of farm equipment, as well as in developing wholesale markets and marketing information systems. The new proposed project will be integrated into the existing network of wholesale markets and information marketing system, and will expand these capabilities into an efficient modern market infrastructure and local information systems in rural areas.  

     The third priority area is Infrastructure development, with a focus on transport and energy. Kazakhstan is located on a vast flat terrain stretching from the Caspian Sea to China, and from Siberia to southern Central Asia, making the country a natural crossroads for regional trade flows. The main centers of economic activity are scattered over this vast land mass. The economy is heavily dependent on the export of raw materials (oil, gas, minerals), as well as the import of high-quality goods through neighboring countries. The development of an inclusive and competitive transport network is therefore a top priority for Kazakhstan.  

To date, Tacis assistance in the transport sector has mainly been provided through TRACECA projects, with funds from the interstate budget, in which Kazakhstan, due to its strategic location, has been a key partner state. However, the TRACECA corridor covers only 1/3 of the territory of Kazakhstan, while the remaining transport routes outside the TRACECA project are equally important for the economic development of the country.         The new proposed project will expand the achievements of previous TRACECA projects and will aim to increase the competitiveness of Kazakhstan's transport corridors by making additional contributions to the modernization of administrative and customs procedures, helping to improve transportation rules and tariff policy, developing transport speed parameters, forecasting traffic on highways in industrial, oil and gas, mining regions, places of great strategic importance for export of the country, preparation of Feasibility studies for capital projects, which will improve transit opportunities.         With regard to oil and gas resources, Kazakhstan is a member of the INOGATE program (Inogate is an Interstate program for the Transportation of Oil and Gas to Europe), the purpose of which is mainly to help attract much-needed investments to rebuild the existing network, as well as the introduction of new pipeline routes. Since the gas network is managed by private companies, Kazakhstan has not benefited from assistance in this subsector. However, with regard to the oil network and trade improvement, Kazakhstan participated in Inogate's network audit projects, and initialed Inogate's Umbrella Agreement on the Organizational Framework of the interstate oil and gas network.         In parallel with the interstate activities, the restructuring of the Kazakh sector will continue to be among the priorities of Tacis support. This will include a project aimed at strengthening Kazakhoil's ability to perform a supervisory role in the oil and gas sector, such as quality control, certification of oil and petroleum products, and promotion of safety and environmental protection procedures for offshore operations. The assistance becomes especially relevant in the perspective of the development of oil and gas resources in the Kazakh water sector of the Caspian Sea.         Due to the risky situation in the environment of the Republic of Kazakhstan, and in connection with the current Tacis Regulations, it is especially important to pay due attention to environmental protection issues in the design and implementation of proposed projects.  

      7. Program Components  

     The 1999 Technical Assistance Action Program focuses on three priority areas, namely: Structural and Organizational reform, Agriculture and Agro-industry, and Infrastructure development, especially with regard to transport and energy. In addition, there are a number of funding mechanisms through National Indicative Programmes that can be mobilized to achieve the objectives of the Tacis programme in ways complementary to the main projects of the Action Programme.  

      7.1 Structural and organizational reform  

     Among the top priorities is Structural and organizational reform, a broad theme is the reform and reorientation of organizations and institutions towards supporting the emerging market economy. The project addresses areas that are important for the transformation process, such as legal reform, statistical reform, tax administration reform, macroeconomic policy, reform of higher education institutions, industrial competition, and environmental protection.         - Kazakhstan has focused its efforts on ensuring a stable macroeconomic structure by curbing inflation, bringing the deficit under control, and introducing systemic reforms emphasizing liberalization and privatization. Realizing the weakness of the existing legal structure, the Government approved a State program on legal reform. The main objective of the proposed project is: (1) to strengthen the regulatory and legal system and organizations in areas related to the functioning of a market economy by providing technical advice in the field of writing bills, as well as preparing laws related to market reforms, supporting the development of a market-based legal education system, facilitating access to legal information, and through training administrative employees of courts and judges.         - The Partnership and Cooperation Agreement (PCA) promotes industrial cooperation aimed at promoting Community participation in Kazakhstan's efforts to restructure and develop its industry, unless there is a conflict with EU competition rules. The liberalization and opening of the Kazakh economy to foreign trade demonstrated the disadvantages of production in the national and CIS markets. The proposed project (2) should enable enterprises to develop in accordance with international standards, as well as better compete in national and global markets.         - The collection of information, economic analysis and forecasting are under the jurisdiction of the Agency for Economic Planning. This Agency is responsible for the preparation of indicative plans for social, economic and regional development, as well as for the preparation of a Public Investment Program. The proposed project (3) should improve the skills of the Agency's employees in the field of using methods of macroeconomic modeling and forecasting.         - Realizing the need to form managers in the field of business and public service through training in modern management skills and international knowledge, the state established the Kazakh Institute of Management, Economics and Forecasting by Presidential Decree in 1992. In 1993, Tacis began to support the MBA program at KIMEP (4).         The number of students and new programs has increased significantly over the past few years. The support of KIMEP by the international donor community has contributed to the recognition of this educational institution as one of the best economic schools in Central Asia.         The main problem that has arisen today is the achievement of economic independence and sustainability, the replacement of foreign teaching staff with local staff of similar quality, as well as the generation of income sufficient to cover all administrative costs. The proposed project should allow KIMEP to strengthen its involvement in the network of European business schools, improve its overall quality, and ensure its economic independence and sustainability.         - The main environmental problems of Kazakhstan are related to water pollution, air pollution, and radioactive contamination. The state suffers from inefficient use of oil and gas resources, as well as from radioactive contamination in the Semipalatinsk region.         The Ministry of Ecology and Natural Resources, with the support of the international donor community, including Tacis, has developed a National Environmental Action Program for Sustainable Development. Environmental issues were analyzed and prioritized according to the following criteria: healthcare, environmental protection, and economic development.         The continued growth in the number of road transport contributes to the increase in the country's environmental problems. This is especially the case in large cities like Almaty and Shymkent, where more than 70% of air pollution is caused by vehicle exhaust, which has a very bad effect on public health. Statistics show a rapid increase in respiratory diseases and cancer. Measures are required to improve fuel quality, reduce transport emissions, and public environmental awareness (5). They will cover the main issues related to improving the air pollution situation by supporting the development of an environmental and transport policy strategy.         A pilot campaign on measures aimed at reducing the negative impact of pollution on public health will be held in Almaty.         - The Ministry of State Revenue was established by Presidential Decree in November 1998. The main responsibility of the new ministry is to manage taxes. The proposed project (6) will aim to strengthen the organizational capabilities of the Ministry of State Revenue in tax collection and management, by developing its functional structure, improving the skills of tax officials, and introducing more simplified and fair procedures for taxpayers.  

      7.2 Agriculture and agro-industry  

Agriculture plays an important role in Kazakhstan, supporting more than 2 million rural households and contributing approximately 15% of GDP in 1995. This figure has dropped from 25% compared to 1986-90, and probably underestimates the contribution of newly privatized individual farms. In 1995, 194 million hectares were designated for agricultural needs, of which only 16% fall under the category of arable land. Land cultivation is limited to a short growing season of 125-175 days, as well as rare and erratic rains. Despite such obstacles, the sector supplies most of the basic foodstuffs for home consumption, with imports mainly limited to tea, coffee, oilseeds and sugar.         Land reform and farm restructuring have received government attention, but the area covered by truly private farms remains small. Most of the agricultural land (75%) remains in the former public sector, operating a supposedly private production and sales system, usually under the leadership of former bosses. In addition to the real privatization of land, its use is limited by economic, social and political factors at the regional level. There is a danger that the farm restructuring process may stall if it does not receive further momentum through initiatives at the regional level. Tacis assistance in this second priority area is mainly directed to the private farming sector and addresses an issue that is critical in the evolution of the vibrant private farming sector, namely, the creation of an effective agricultural marketing infrastructure.         The essence of the improved marketing system is that prices, rather than purchase orders, become the determining factor in allocating farm resources and meeting consumer needs. There must be real competition in every link of the marketing chain. The development of a multi-channel marketing system, coupled with a market information system that ensures price transparency, is the most effective way to ensure competitive prices. The distribution system of agricultural products is currently undergoing significant changes, developing from a state system into one that will meet the needs of the market.         The proposed agricultural marketing project (7) will help the Ministry and regional departments of Agriculture to develop suitable agricultural market infrastructure and will complement and support initiatives already developed on wholesale markets and market information.  

      7.3 Infrastructure development  

     The third priority area identified by the Indicative Program for 1996-1999 is the development of infrastructure, in particular, energy and transport.         - Kazakhstan's strategic location makes its vast expanse a natural crossroads for trade in the region. The main centers of business and economic activity are scattered throughout the vast territory. The country's economy is heavily dependent on the export of raw materials (oil, gas, mineral resources) and the import of high-quality goods through the territory of neighboring countries. An efficient transport system is therefore essential for the economic development of the country.         To date, Tacis assistance in the transport sector has mainly been provided through TRACECA projects, in which Kazakhstan, due to its strategic location, has been a key partner state. However, the TRACECA corridor covers only 1/3 of the territory of Kazakhstan, while the remaining transport routes outside the TRACECA project are equally important for the economic development of the country.         The new proposed project will expand the achievements of previous TRACECA projects and will aim to increase the competitiveness of Kazakhstan's transport corridors by making additional contributions to the modernization of administrative and customs procedures, helping to improve transportation rules and tariff policy, developing transport speed parameters, forecasting traffic on highways in industrial, oil and gas, mining regions, places of great strategic importance for export of the country, preparation of Feasibility studies for capital projects, which will improve transit opportunities.         - Kazakhstan's oil and gas sector was restructured in 1997, giving Kazakhoil the traditional role of a national oil and gas company. More recently, a second oil transportation company merged into Kazakhoil, transforming the latter into an internationally integrated company.         Kazakhoil is the recipient of the Tacis project in 1996, aimed at providing assistance in its role as an observer in the oil and gas sector, which includes the creation of a pilot database enabling government agencies to save and request information received by existing oil and gas companies, as well as an element aimed at strengthening its capabilities in the development of the project; in addition, this includes the element teaching advanced drilling techniques.         The new project proposal (9) will aim to further strengthen the ability of government agencies to fulfill their role of controller, as well as address other issues vital for the further development of the oil and gas sector, such as independent quality control and certification of oil and petroleum products, promotion of safety and environmental protection procedures for offshore activities, and transfer of knowledge in the field of modern technologies.  

      7.4 Bistros  

     The Bistro program is managed by the Representative Office of the European Commission in Almaty. It is designed to finance small projects up to 100,000 Euros. Its main objectives are to complement the Tacis program by responding quickly and flexibly when information received on the ground demonstrates promising small projects: to test on a small scale, on-site, promising proposals for technical assistance projects that can be distributed or copied to major Tacis projects.; and be accessible to all types of partner organizations, for which it is not very easy to enter into major international assistance programs.  

      7.5 Small Project Program  

     Kazakhstan will continue to participate in most small-scale project programs.  

      8. Implementation of the program  

     The implementation of the proposed steps should begin in 1999. The implementation of the program will connect, as far as possible, EU private and public operators with their Kazakh partners, or special institutions, public utilities, foundations, etc. The work of EU organizations involved in the implementation of the project with and through Kazakh partner enterprises and institutions will be encouraged. The program will be implemented by the EU Commission and Kazakh authorities, the final recipients of assistance, as well as employing companies and institutions. Contracts are awarded in accordance with the Tacis rules.         The implementation of this program, which means the conclusion of an agreement, should be completed by 31.12.2002. Payments must be put in order by 31.12.2003. The program will be managed by the Public Service for External Relations, in close cooperation with the General Directorate of 1A.  

      Assessment and Monitoring  

     In addition to the usual on-site monitoring and control, if necessary, the Commission's services and the Community Accounting Chamber have signed agreements with independent consultants to monitor the progress of the program and the actions of contractors, as well as to undertake an inclusive follow-up assessment of the achievement of the goals of the programs and agreements.  

      Audit  

     The activities funded under this program will be under the supervision of the relevant services of the Commission and the Accounts Chamber of the Community, to be carried out on site, if necessary. Accounts and expense records funded by this program may be regularly reviewed by an auditor hired by the Contract Commission from outside, without prejudice to the responsibilities of the Commission and the Community Accounts Chamber.  

      9. The Government's commitment to the reform process  

     As defined by the Indicative Program of 1996-1999, Tacis assistance in the period 1996-1999 is carried out on the basis of certain mutual economic and political values and practical aspects included in the Partnership and Cooperation Agreement reached between the European Union and the Newly Independent States. This applies to respect for democratic principles and human rights as defined in the Helsinki Final Act and the Charter of Paris for a New Europe, as well as the principles of a market economy, including those set out in the CSCE documents, Bonn. These principles lay the foundation for the internal and external policies of the EU and its member states, and also constitute a mandatory element in the provision of assistance by the European Commission.         The activities funded by the 1998/99 Action Program represent a unified set of macroeconomic and sectoral policies established by the Kazakh authorities. The implementation of this Action Program can be carried out only where the authorities continue to take the necessary measures of macroeconomic reforms, and where there is continued progress towards democracy. Similarly, within the selected area for cooperation established by the Action Plan, the implementation of the project should be complemented by continued progress on the implementation of appropriate reform processes by the authorities of Kazakhstan.  

    Action Program - Kazakhstan 1999  

      10. Cost estimates and financing  

                                                          M Euro  

A. Enterprise Support 8.8 1. Promotion of legal reform 1.0 2. Promotion of industrial competition 1.0 3. Support for the Economic Planning Agency 1.0 4. Promoting the organizational development of KIMEP 2.3         5. Assistance to the Ministry of Ecology 1.0 6. Organizational assistance to the Ministry of State Revenue 2.5  

     V. Food production, processing and distribution 2.00 7. Support for agricultural producers 2.00  

     With. Transport and telecommunications 2.00 8. Development of transit corridor policy 2.00  

     D. Energy 2.00 9. KAZAKHOIL 2.00 support  

     E. Bistro 0.85 F. Reserves of 1.00         Total 16.65  

     In addition, Kazakhstan will benefit from participating in the (SPP & ATA) programs. This will be outlined in a separate financial proposal. A total of 7.35 million Euros were allocated to the following areas::  

     1. Tempus 2.0 2. Advisory Assistance Program in strategy development 2.5* 3. Customs 0.5 4. Statistics 1.5 5. Lien 0.3         6. Management Efficiency Improvement Program 0.3 7. The twinning of cities 0.2 8. ATA 0.05 mechanism         Only 7.35  

     ________________ * (Including publications of the journal "Economic Trends of Kazakhstan")  

    General rules applicable to the Financing Memorandum  

     The Commission of the European Communities, hereinafter referred to as the "COMMISSION", acting for and on behalf of the European Economic Community, hereinafter referred to as the "Community",  

                                    on the one hand, and  

     The Government of the Republic of Kazakhstan, hereinafter referred to as the "GOVERNMENT", acting for and on behalf of the Republic of Kazakhstan,  

                                    on the other hand,  

hereinafter referred to as the "Contracting Parties".         Due to the fact that the Republic of Kazakhstan is a country receiving assistance in the form of Community technical assistance program ACTIVITIES, as provided for in Community Council Instructions No. 2157/91 of July 15, 1991 and No. 2053/93 of July 19, 1993.         Due to the fact that general technical, legislative and administrative rules must be approved for the implementation of ACTIVITIES funded in the Republic of Kazakhstan under the Community technical assistance program.         We have agreed on the following:  

    Article 1  

     In order to facilitate cooperation between the Contracting Parties in order to support the process of economic and social reform in the Republic of Kazakhstan, the Contracting Parties have agreed to implement MEASURES as specified in the above-mentioned instructions, which will be funded and implemented within the framework of the technical, legislative and administrative structures approved in these General Rules applicable to the Financing Memorandum. The individual details of each of the ACTIVITIES (or set of ACTIVITIES) will be set out in a Financing Memorandum to be adopted by the Contracting Parties (hereinafter referred to as the "Financing Memorandum").         The Contracting Parties shall take all necessary steps to ensure the proper implementation of all MEASURES.         The Contracting Parties may modify a separate measure by mutual agreement in the interests of its effective implementation. Such a modification may not lead to: a) a change in the distribution of the various quantitative components of the programs by more than 15% of the amount indicated in the breakdown by the cost of the Financing Memorandum; b) an impact on the implementation of the program under initially defined conditions by significantly changing the content or technical elements of the program.  

    Article 2  

     Each ACTIVITY covered by these General Rules applicable to the Financing Memorandum will be carried out in accordance with the general provisions set out in the annex to this document, which should be included in each Financing Memorandum.         The Financing Memorandum may, however, modify and supplement these General Rules, if necessary, for the implementation of the EVENT.  

    Article 3  

     The terms of these General Rules will also apply to EVENTS funded under the Community's technical assistance program, including interstate EVENTS in the region that are of interest to the Republic of Kazakhstan and other countries receiving assistance, but which are not inherently covered by a separate Financing Memorandum.  

    Article 4  

     For issues related to EVENTS funded under these General Rules, the Commission may send a submission to its representative office accredited in the Republic of Kazakhstan (if any), which will ensure, on behalf of the Commission and in close cooperation with the relevant authorities of the Republic of Kazakhstan, that the EVENT is carried out in accordance with legitimate financial and technical management practices.  

    Article 5  

     Any dispute concerning these General Rules will be the subject of consultations between the Contracting Parties, who will thus make every possible effort to resolve the problem, taking into account the objectives of these General Rules.  

    Article 6  

     These General Rules will enter into force on the day they are signed by both parties.         They will apply to all activities carried out under the Community technical assistance program, as provided for in Community Council Regulations No. 2157/91 of July 15, 1991 and No. 2053/93 of July 19, 1993.  

    Article 7  

     These General Rules, applicable to the Financing Memorandum, replace and cancel the Protocol signed by the European Economic Community and the Union of Soviet Socialist Republics on August 2, 1991.         Done in Brussels on February 4, 1994, duplicates in English and Russian in two original copies, each text is equally authentic.  

     The Commission of European             Government of the Republic              Communities                           Kazakhstan  

     Sir Leon Brittan D. Sembaev         Vice-President of the Commission          First Deputy of the European Communities            Prime Minister of the Republic of Kazakhstan  

Application      

    General rules applicable to the Financing Memorandum Chapter I - Financing of events  

    Article 1 Planned financial allocations of the Community  

     The planned financial allocations of the Community, hereinafter referred to as the "EEC subsidy", the amount of which is set in each Financing Memorandum, determines the limit of investments and payments based on duly approved contracts or work programs.  

    Article 2 Payments  

     1. Payments will be made by the Commission directly to the contractor or, in case of completion of formalities based on work programs, in the form of advances to a bank account designated specifically for the project, from which payments are made by contractors on behalf of the Commission or the organization responsible for the implementation of the Event, under the supervision of the Commission.         Whenever an Event is to be implemented based on work programs, advance payments to the account will be made based on the relevant cash flow plans.         The contracts will comply with international models such as standard contracts and general provisions for contracts applied by the Commission of the European Communities.  

    Chapter II - Logistics  

    Article 3 General  

     The procedure to be applied for the conclusion of technical cooperation and supply contracts will be set out in the Financing Memorandum, adhering to the principles outlined below.  

    Article 4 Source  

     Except as specifically authorized by the Commission, the materials, resources and services required for the performance of contracts must originate from the Community or the beneficiary countries specified in Instructions No. 2157/91 of July 15, 1991 and No. 2053/93 of July 19, 1993. The list of beneficiary countries at the time of signing this agreement is attached.         In individual cases, and with the special approval of the Commission, the source can be expanded to the beneficiary countries of the PHARE program, the Mediterranean countries and, in the case of co-financing, to other relevant third countries. The list of beneficiary countries of the PHARE program at the time of signing these General Rules is attached.         Grouping, consortium, and subcontracting agreements between firms of the same or different national origin are subject to this source rule.  

    Article 5 Departure from standard procedures  

In cases where the urgency of the issue is recognized or where justification is found due to the nature, secondary importance or special characteristics of the Event (for example, a two-stage financing operation, multi-phase operations, separate technical specifications, etc.), the Commission may, as an exception, authorize: - the placement of supply contracts after a limited announcement in the project competition; - the conclusion of contracts by direct agreement.  

    Article 6 Conditions of participation in supply contracts  

     Under the terms of article 5, equal conditions for participation in supply contracts will be guaranteed, in particular, by publishing an invitation to participate in a project competition in due course. As a rule, the Community announcement will be published in the Official Journal of the European Communities and the relevant mass media for the Republic of Kazakhstan and other interested States.  

    Article 7 Provision of contracts  

     The Commission will ensure that, for each operation, the selected proposal is the most cost-effective, especially in terms of the qualifications and guarantees provided by the applicants, the cost and quality of supplies and services, the nature and conditions for implementation, disposal costs and technical value.         The results of the competition for draft supply contracts will be published in the Official Journal of the Community.  

    Article 8 Technical assistance contracts  

     1. Technical assistance contracts will generally be concluded following a limited announcement of a project tender or, when justified for technical, economic or financial reasons, through a direct agreement procedure, in accordance with the financial regulations applicable to the general budget of the Community.         2. The contracts will be drawn up, discussed and concluded either by the COMMISSION or, where provided for in the Financing Memorandum, by the recipient of the assistance or the legal entity acting on its behalf, after approval by the COMMISSION or its representative office accredited in the Republic of Kazakhstan, if any.         3. Within the framework of the limited announcement of the project competition, the COMMISSION or, where provided for in the Financing Memorandum, the recipient of the assistance or the legal entity acting on its behalf, with the approval of the Commission, will prepare a final list of potential contractors who will be invited to participate.         4. As part of the direct agreement procedure, the COMMISSION or, where provided for in the Financing Memorandum, the recipient of the assistance or the legal entity acting on its behalf, with the approval of the Commission, selects the candidate and concludes the contract.  

    Chapter III Granting of benefits  

    Article 9 General privileges  

     The staff involved in the ACTIVITIES funded by the Commission will receive the status of seconded experts, and the GOVERNMENT will grant these experts and their family members who come to the Republic of Kazakhstan for this purpose the rights and privileges no less than those of other expatriates whose services are required in the Republic of Kazakhstan for the same or similar purposes.  

    Article 10 Establishment, accommodation, entry and possibility of residence  

     In the case of supply and service contracts, persons interested in participating in the contracts will have the right to visit the Republic of Kazakhstan and temporary accommodation and accommodation, if the importance of the contract requires it. This right will be obtained only after the contract has been announced, or the invitation to participate in the project competition has been issued and reviewed by the staff involved in conducting research to prepare the contract; it will expire one month after the contractor is named.         The Government will issue multiple-entry visas to staff engaged in Community-funded service contracts and their family members, as specified in article 9, and ensure that visas in the Republic of Kazakhstan are extended. In addition, the Government will allow the above-mentioned seconded experts to obtain a residence permit, work there and leave, as required by the nature of the contract and within the period necessary to fulfill it, and in accordance with the relevant laws and regulations in the Republic of Kazakhstan.         Upon arrival of the experts, the GOVERNMENT will provide them and their families with a permit and a visa for free movement throughout the REPUBLIC and residence in any city without the need to obtain any additional special permit.  

    Article 11 Import and re-export of equipment  

     The Government will issue the permits necessary for the import of professional equipment necessary for the implementation of the Event, and in particular cars.         The seconded experts will register the vehicles imported for the purpose of carrying out the project in a list indicating that these vehicles were supplied for the agreed projects and are managed by the Community or the organization that has duly concluded a contract with the Community for the implementation of this agreed contract.         In addition, the GOVERNMENT will provide individuals and legal entities that have fulfilled supply and service contracts with the permits necessary for the re-export of the above-mentioned equipment and vehicles in accordance with the existing legislation of the Republic of Kazakhstan.  

    Article 12 Control over the import and exchange of currency  

     To implement the MEASURES, the GOVERNMENT undertakes the issuance of permits for the import and purchase of foreign currency and the application of rules for the control of currency exchange, without distinguishing between members of the Community.         The Government will issue the permits necessary for the seconded experts and their families to import and store foreign currency in the Republic of Kazakhstan during the term of the technical assistance contract.         In addition, seconded experts and their family members will have the right to export unused foreign currency at their own discretion.  

    Article 13 Taxation and customs  

     1. Taxes and customs duties will not be financed from the EU subsidy.         2. Goods, including equipment and cars, imported into the Republic of Kazakhstan under contracts financed or jointly financed from EU subsidies, will not be subject to import duties, taxes or fiscal charges of a similar nature established by the Government or any of its bodies.         At the request of the Commission, the Government will ensure that the imported goods in question will be passed on time from the checkpoint to the recipient, as required for the normal performance of the contract, regardless of any disputes about the settlement of the above taxes, duties and charges.         In cases where a supply contract funded by an EU subsidy includes products originating from the Republic of Kazakhstan, the contract will be concluded on the basis of a price that does not include domestic taxes or fiscal charges applied in the Republic of Kazakhstan to this type of supply, and will provide a list of these taxes and charges separately.         3. Contracts financed from an EU subsidy will not be subject in the Republic of Kazakhstan to the requirement of document stamping or registration fees or fiscal charges having the same effect, regardless of whether such fees exist or should be introduced.         4. Individuals and legal entities, including expatriate employees working under technical cooperation contracts funded by EU subsidies, will be exempt from paying social insurance contributions levied in the Republic of Kazakhstan by the Government or any body subordinate to it:;         - business tax and income tax or charges of a similar nature on income received from the Community or an organization with which the Community has entered into a contract.         5. Personal and household items, as well as food imported for personal use by individuals (and their family members) - other than those employed in the area - working on tasks defined in technical cooperation contracts, will be exempt from import duties, taxes and other equivalent fiscal charges levied in The Government of the Republic of Kazakhstan or any body subordinate to it.         These personal and household items may be either re-exported or donated in the Republic of Kazakhstan in accordance with the rules in force in the Republic of Kazakhstan after the completion of the contract.         Customs duty-free import of one motorized mobile vehicle per family into the Republic of Kazakhstan is permitted, subject to compliance with existing rules and instructions, provided that this vehicle is used only during the period of the relevant contract and is re-exported at the end of this period. Experts and their family members can obtain a local driver's license by presenting the driver's license they already have.         6. Individuals and legal entities importing professional equipment, as referred to in Article 11, will receive, upon their request, temporary import privileges, as defined by the legislation of the Republic of Kazakhstan in respect of the said equipment. Upon import and export, all of this equipment will not be subject to customs duties, taxes and fees or charges of a similar nature levied by the Government or any subordinate authority.  

    Chapter IV - Payment procedures  

    Article 14 Payment procedures  

1. Applications for contracts financed or jointly financed from an EU subsidy will usually be drawn up and payments made in ECU. For special reasons, the use of other currencies will be allowed by the Commission in individual cases.         2. After the contract applications are drawn up in ECU, the corresponding payments will be made, as they should be, in the currency indicated in the contract, based on the equivalent of the ECU value at the exchange rate on the day preceding the payment.  

    Chapter V - Cooperation between the Contracting Parties  

    Article 15 Information and assistance  

     1. The COMMISSION will immediately inform the GOVERNMENT about the identities of the experts and their dependents, if any, about the agreed project they will be working on, the date of their arrival, their location in the Republic of Kazakhstan and the estimated duration of their work.         2. The GOVERNMENT will provide any administrative assistance that is required to facilitate the implementation of the agreed projects and to comply with the terms of these General Rules.  

    Article 16 Inspection and revision  

     1. The COMMISSION, together with the Control Commission of the European Communities, will have the right to send their proxies or duly authorized representatives to carry out such technical and financial mission or audit as they deem necessary for the implementation of the EVENT. However, the COMMISSION and the Control Commission will give advance warning about such missions and may request the authorities of the Republic of Kazakhstan to participate in these audits.         The Government will make all relevant information and documents available to them, as required, and will take all necessary measures to facilitate the work of those who have been instructed to conduct audits or inspections.         2. In cases where a Financing Memorandum provides funds for the implementation of an event by the recipient or a legal entity acting on its behalf, with the approval of the COMMISSION, the GOVERNMENT must ensure that: (a) Records and records sufficient to establish the authenticity of supplies and services financed under the Financing Memorandum are maintained in accordance with appropriate procedures. accounting procedures;         (b) The aforementioned authorized persons or representatives of the COMMISSION and the Control Commission have the right to verify all documentation and reports related to items that were funded under the Financing Memorandum.  

    Article 17 Development measures  

     The Parties may, where appropriate, in accordance with the schedule specified in the Financing Memorandum, monitor the follow-up activities and conduct a retroactive assessment of the implementation of the ACTIVITY and inform each other of the results.  

    Chapter VI - General and final provisions  

    Article 18 Consultations - disputes  

     1. Any issue related to the implementation or interpretation of the Financing Memorandum or these General Rules will be the subject of consultations between the Contracting Parties leading, where necessary, to the creation of an amendment to the Financing Memorandum.         2. In cases where the obligation referred to in the Financing Memorandum or these General Rules is not fulfilled, which has not been subject to corrective measures taken in due course, the COMMISSION may suspend or terminate the financing of the EVENT after consultation with the GOVERNMENT.         3. The GOVERNMENT may refuse to hold the EVENT in whole or in part. The Contracting Parties will discuss the details of such a waiver through an exchange of letters.  

    Article 19 Notices - addresses  

     Any notification and any agreement between the parties submitted in this case must be the subject of correspondence, with reference to the number and name of the EVENT. Such notices or agreements will be expressed in a letter sent to the party that received permission for the same event and sent to the address indicated by that party. In case of emergency, messages via fax, telegraph or telex will also be allowed and will be considered valid provided that they are immediately confirmed by letter.         The addresses are indicated in the Financing Memorandum.  

                                                   Annex I  

      List of recipient countries under the TACIS program  

     Armenia,         Azerbaijan, Belarus, Georgia,         Kazakhstan,         Kyrgyzstan, Moldova,         Russian Federation,         Tajikistan, Turkmenistan,         Ukraine,         Uzbekistan,         Mongolia.  

                                                  Annex II  

      List of recipient countries for the PHARE program  

     Albania, Bulgaria,         Hungary,         Latvia,         Lithuania,         Poland, Romania, Slovakia, Slovenia, Czech Republic,         Estonia.  

President    

Republic of Kazakhstan     

© 2012. RSE na PHB "Institute of Legislation and Legal Information of the Republic of Kazakhstan" of the Ministry of Justice of the Republic of Kazakhstan  

 Constitution Law Code Standard Decree Order Decision Resolution Lawyer Almaty Lawyer Legal service Legal advice Civil Criminal Administrative cases Disputes Defense Arbitration Law Company Kazakhstan Law Firm Court Cases