Regions and Countries

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Country Strategy and Program Update 2002-2004: Kyrgyz Republic

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II. Implementation of the Country Strategy amd Program

9. The current country operational strategy for the Kyrgyz Republic, which was endorsed by the ADB Board in December 1996, needs to be revised and updated to reflect ADB's and the Government's priorities. A new CSP will be drawn up in close consultation with the Government and other stakeholders after finalization of the CDF and NPRS, prioritization in the PIP, and formulation of the debt strategy. The proposed lending and technical assistance (TA) program for 2002-2004 is therefore tentative, and will be reviewed and adjusted during the formulation of the new CSP by mid-2002.

A. Poverty Reduction

10. Until 1999, most ADB-financed projects had supported economic growth, as the country suffered from a protracted period of economic decline. In 2000, ADB held discussions with the Government regarding the increasing need to addressing poverty and unemployment in the country. The Government, too, under its CDF and NPRS initiative had accorded the highest priority to resolving the same problems. Consequently, agreement was reached in identifying the present pipeline of projects, with a major focus on poverty reduction, in line with the thrust of the CDF and NPRS. Apart from two projects planned in 2004 (Environment Improvement and Subregional Power Transmission Line), all the other projects in the 2002-2004 program are either core poverty or poverty interventions. Planned interventions over this period will cover the priority areas of early childhood development, rural development, agriculture sector development, power distribution projects and support for basic education. Thus, the projects are fully in consonance with the overarching goal of the Government and ADB to reduce poverty and address social concerns. Appendix 2 gives the social and environmental indicators.

B. Thematic Priorities

1. Economic Growth

11. One of the key themes under the CDF is sustainable and economic growth and development. Therefore, support of sustainable economic growth will continue to be important. Assistance will be extended in 2001 for the third phase of the rehabilitation of the strategic Bishkek-Osh road. In 2002, a rural development project is expected to include improving rural infrastructure, credit, and support for livelihood programs. Based on the results obtained from the ongoing agriculture areas development project, a second-phase investment will be considered in 2004 in another province. A power distribution project in 2003 will focus on electricity distribution in selected poverty areas.

2. Human Development

12. Support of human development has featured prominently in ADB’s assistance to the country. With the increased importance of and focus on poverty reduction, human development will continue to be an important element of future operations. The ongoing ADB-financed Social Services Delivery and Finance Project² is assisting central and local governments to rationalize the financing and delivery of social services. An ongoing education sector development project³ supports educational reform and strengthens basic education. This will be continued and deepened through further support for basic education.

3. Gender and Development

13. Through an increasing number of projects aimed at reducing poverty and improving the living standards of the poor, ADB will mitigate some negative impacts of the economic transition on women. The active participation of women entrepreneurs is a special feature of the Skills and Entrepreneurship Development Project.⁴ The water supply improvements in Community-Based Infrastructure Services Support Project⁵ approved in 2000 will particularly benefit women and children since collecting and storing water comprise their main responsibility. The Early Childhood Development Project planned for 2002 will improve the health, nutritional, and education development of children of up to age 8 and improve the health of mothers in areas with a high prevalence of poverty.

4. Good Governance

14. Under the CDF, the Government attaches high priority to effective and transparent state governance, including judiciary reforms. Improving governance is a key feature of ADB’s TA and lending operations in agriculture, energy, road, and social sectors. ADB has provided substantial loan and TA support to improve governance, including enterprise reform and corporate governance, e.g., insolvency procedures and financial intermediation. ADB is increasing its support in meeting the challenge of alleviating constraints to market institutions. It is strengthening the Ministry of Finance, supporting the development of a resilient, well-functioning, and properly regulated and supervised financial sector. In addition, it is assisting in improving commercial bank audits, all of which have underscored the need for transparency and predictability in the public sphere. ADB continues to support the Government’s efforts to reduce corruption. The Government is aware of the need to take strong measures against it which led to the formulation of a program to fight corruption. A governance assessment is scheduled for completion by end-2001. It will identify areas of focus (e.g., constraints to private sector functioning) and opportunities for ADB's continued involvement in the medium term, which will serve as key inputs into the CSP.

5. Private Sector Development

15. To date, ADB’s support of the private sector in the Kyrgyz Republic has focused on creating enabling conditions and improving the investment climate. The effects of the Russian crisis that began in 1998, the subsequent crisis in the banking sector in 1999, weaknesses in the tax system, administrative bottlenecks, and weakness in law enforcement and the judiciary have compounded the problems facing private sector activity. An ongoing structural reform program of the World Bank and planned ADB assistance this year for corporate governance will address many of these difficulties and improve the environment for private business. Subsequently, ADB will explore avenues to directly support private sector activity and investment.

6. Environmental Protection

16. The operational strategy for the Kyrgyz Republic recognizes the importance of sound management of natural resources and protection of the environment. However, ADB assistance in this regard is intended to address mainly environmental concerns related to the projects that ADB supports. ADB has extended second phase technical assistance in 2000 to strengthen the Government’s capacity for environmental monitoring and management.⁶ ADB assistance planned for 2004 will address the long-standing problem of radioactive and other hazardous tailings from several abandoned uranium mines and processing facilities at different locations in the country. The processing of this project is conditional on the requirement that all uranium processing facilities in the country be permanently closed down.

7. Regional Cooperation

17. The Kyrgyz Republic actively participates in ADB’s efforts to promote subregional cooperation in Central Asia and the Xinjiang Uygur Autonomous Regions of the People's Republic of China, with principal focus on the areas of energy, transport, and trade. Because the country is landlocked, it attaches considerable importance to regional cooperation. ADB activities in this field have already borne results with the approval of assistance in 2000 for the Almaty-Bishkek Road Rehabilitation Project. A high-level conference on Central Asia regional economic cooperation, sponsored by ADB, is being planned. In addition, a number of ongoing or planned regional TAs aim to promote cooperation in the region in areas such as education management, energy, and audit.

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