Economic Reforms to Enhance Competitiveness in Central Asia (EREC)
2008-2011 || U.S. Agency for International Development
EREC provided technical assistance to public sector officials and institutions in Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan in two broad areas: (i) building sustainable institutional capacity for public financial management and (ii) strengthening the legal and regulatory framework to promote private sector participation throughout the economy and stimulate private investment.
Central Asia is a large oil and gas rich region struggling to generate jobs, revenue and private sector growth. EREC’s overarching objective was the promotion of macroeconomic stability through strengthened regulation of the financial system, more effective and transparent public financial management and the promotion of private sector investment. Deloitte advisors helped provide assistance based on country-specific needs.
EREC technical assistance areas in Kazakhstan were extremely diverse, involving a wide variety of public counterparts. Assistance was aimed at strengthened and sustainable institutional capacity for fiscal management in budgeting, public-private-partnership program and project development, tax policy and administration, financial reporting and public audit, banking and consolidated supervision, and competitive market regulation.
In Kyrgyzstan, support was principally channeled towards helping public officials address the country’s fiscal deficit through expanded tax revenues and improved tax policy and administration. Additional emphasis was placed on improving transparency and accountability in the use of public expenditures, through the introduction of international public sector accounting standards. Assistance included the drafting of a simplified Tax Code, as well as public outreach and education efforts to create public awareness and inform taxpayers and tax officials of their obligations. EREC was also instrumental in introducing a practical property tax system to bolster revenues for local governments. The project also rolled out an updated integrated version of the Kyrgyz Integrated Tax Information System, as well as developed the Kyrgyzstan Property Tax System. These key IT systems resulted in enhanced capacity of the public sector to efficiently and transparently administer a wide range of taxes.
In Tajikistan, EREC supported the Ministry of Finance, the Tax Committee and the National Bank of Tajikistan providing assistance in budget classification and modeling, implementing functional reorganization in pilot tax inspectorates, strengthening corporate governance and internal controls and audits in commercial banks, and providing ongoing support to the NBT in implementation of leading international practices in banking supervision and regulation.
EREC delivery areas in Turkmenistan were diverse, involving a wide variety of public and private counterparts. Assistance was generally aimed at accounting reform, strengthened institutional capacity for economic policy development, financial reporting and public audit, and private sector development.
Training was a centerpiece of EREC activities. Capacity building was achieved through on-the-job-training (learning through doing), allowing for practical implementation assistance, targeted seminars and study tours. Over 3,600 public and private sector officials were trained through this program, with some 2,400 receiving training in public sector financial management competencies and 1,200 in regulation and private sector development.
While the total economic impact of the project cannot be quantified with certainty, EREC activities resulted in significant leverage of USAID funding. In Kazakhstan alone, the project facilitated $55 million in new private sector investments as a result of work on the Karaganda kindergarten concession, while EREC contributions to the Tax Code resulted in a 7.4% increase in annual tax revenues ($200 million). Project activities in Kyrgyzstan resulted in a fifteen-fold increase in the number of taxpayers visiting tax centers to pay their property taxes. Likewise, EREC activities resulted in improved financial sector regulation in both Kazakhstan and Tajikistan, arguably helping to limit the impact of the global financial crisis in these countries.
Overall, EREC supported beneficiary countries in improving their institutional capacity for public financial management and strengthening their legal and regulatory framework to promote competition and stimulate private investment.