Facilitating Regulatory Reforms for a Better Investment Climate in Kazakhstan

Challenge

Kazakhstan has been very active in improving its business environment as tracked through the Doing Business report, improving its ranking from 63 in 2010 to 50 in 2014. The country has demonstrated strong ownership of the reform agenda and continues working actively on new reforms to further improve the investment climate. Efforts have been made to reduce administrative burdens by attempting to cut the number of required business permits in combination with temporal bans on business inspections, increase the transparency of planned inspections, and introduce risk-based inspections, efforts that were only partially successful. The existence of multiple layers of regulatory legislation gives wide room for the duplication of different permitting instruments, making them hard to track down. Unplanned and inconsistent business inspections and obscure permit procedures remain issues that need addressing.

Solution

Although structuring the work as a longer term programmatic technical assistance under the Joint Economic Research Program (JERP), the World Bank team has put a lot of emphasis on providing quick response advisory support to the challenges facing the Government during the reform process. The majority of the formal outputs were developed in close collaboration with the respective authorities, which, on the one hand, helped produce highly relevant policy recommendations and, on the other, translated into substantial capacity building through ongoing advisory and technical support. The result was a new regulatory system that was conceptualized in parallel with an inventory of existing permitting instruments, laying solid grounds for the rapid introduction of a new system. 

Results

• Over 750 permit documents have been reviewed, based on a new risk and activity type categorization in 2012–13. According to the Standard Cost Model–based analysis, the application of new principles will potentially result in a 43 percent decrease in the compliance burden for businesses.
• The Concept of State Regulation of Entrepreneurial Activity 2020 was developed and approved in June 2013 as a result of analytical work and extensive hands-on assistance and guidance provided to the Ministry of Economic Development and Trade. The Concept sets firm foundations for building a modern regulatory system in Kazakhstan to offer a clear and transparent legislative and administrative framework for businesses and regulators. The envisaged system provides a clear separation between the regulated and nonregulated areas of business activities as well as a concrete methodology for the development of appropriate permit instruments, depending on the associated risks and the public interest.
• The World Bank team also peer-reviewed the draft Law on Permits and Notifications in December 2013, which will be submitted to the Parliament for approval in April 2014.

Bank Group Contribution

This technical assistance within the framework of the JERP is funded jointly by the Government of Kazakhstan and the World Bank.

Partners

This work with the Ministry of Economic Development and Trade evolved from the Doing Business reform advisory assistance by the International Finance Corporation (IFC) as part of broader work on business environment improvements. Periodic meetings with the Ministry of Economic Development and Trade, Ministry of Regional Development and the National Analytical Center on regulatory impact assessment helped better coordinate analytical work.

Moving Forward

Further technical assistance will focus on a suitable institutional solution to lead the reforms, as well as recommendations on the practical implementation of the elements of the Regulatory Impact Assessment into the new system, which will be established by the new legislation on permits and notifications.

Beneficiaries

“The need for a comprehensive law on licensing procedures for business was raised about seven years ago, but at that time we were not ready for its development. We did not know how many and what kind of permits existed in the country.”

- Yerlan Buzurbaev, Deputy Director of Enterprise Development, Ministry of Regional Development

  “Over the past five years, jointly with the business community and the World Bank, we spent a lot of time completing an inventory of permits. The draft Law on Permits and Notifications requires respective regulators to substantiate the introduction or existence of each permit by evaluating the regulatory impact and cost implications for affected businesses and regulators themselves. For entrepreneurs, this law will ensure that the availability of information on existing permits and related procedures and requirements is unified.”