The World Bank, under the Joint Economic Research Program (JERP), is providing technical assistance to the government of Kazakhstan to amend the law on bankruptcy, and draft a new law on rehabilitation and insolvency, which if successfully implemented, will help preserve financial stability and jobs, and boost the economic growth of the country.
Insolvency procedures are a way of dealing with the natural exit of firms from the market that occurs due to loss of capital, revenue, and credit. An effective corporate insolvency system seeks to ensure the most efficient use and allocation of economic value, by liquidating enterprises that have no prospect of recovery, whilst restructuring distressed businesses that are viable and could contribute to economic growth in the long run.
Corporate insolvency laws, policies and regulations play an important role in the economy and in society in general, and in the business environment in particular. This is also important at times of financial turmoil.
Before the reform process began, the Kazakhstan Law on Bankruptcy was heavily weighted in favor of strict piece meal liquidation -- assets were sold individually many times undervalued. Rehabilitation procedures were rarely used. The number of rehabilitation cases was very low in 2009 (14 companies representing 0.6 per cent of bankruptcies) and 2010 (43 companies representing 2 per cent of bankruptcies).