Kazakhstan Country Update (English)
Kazakhstan Country Update #16
Monday, June 09, 2008
Recent developments, decisions, and civil society activities related to activities of the International Financial Institutions (IFIs) in Kazakhstan.
The Kazakhstan Country Updates provide information about recent developments, decisions, and civil society activities related to activities of the International Financial Institution’s (IFIs) in Kazakhstan, including that of the World Bank (WB), International Finance Corporation (IFC), International Monetary Fund (IMF), European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB). If you would like to be included or removed from the distribution list, please email the moderator, George Holliday, at gholliday@bicusa.org. Correspondence with BIC may be conducted in Russian.
The Bank Information Center (BIC) partners with civil society in developing and transition countries to influence the World Bank and other international financial institutions (IFIs) to promote social and economic justice and ecological sustainability. BIC is an independent, non-profit, non-governmental organization that advocates for the protection of rights, participation, transparency, and public accountability in the governance and operations of the World Bank, regional development banks, and IMF. For more information about BIC, see www.bicusa.org.
Sections:
I. IFI Project Activities
II. Extractive Industry Transparency Issues
III. Civil Society Activities
IV. IFI Consultations and Policy Updates
V. Other Notable Developments
IFC Activities
December 5, 2007: IFC provided a $10 million senior loan to Technopole, a furniture and home appliance retailer.
LuMir (IFC website)
December 5, 2007: IFC approved an investment of $80 million and a $25 million trade financial line to the Caspian Bank to sustain its lending operations for small and medium enterprises.
Bank Caspian (IFC website)
World Bank Activities
May 28, 2008: The World Bank in Kazakhstan and Eurasia Foundation of Central Asia announced the results of the joint Small Grants Program for NGOs in Kazakhstan.
Grant Competition (Eurasia Foundation website)
EBRD Activities
May 22, 2008: EBRD disclosed a proposal for a $105 million telecommunication upgrade project that involves laying fiber optic cables along Kazakhstan National Railways Company rail tracks. The project aims to improve railway company’s ICT technology, Transtelecom’s (subsidiary of National Railways Company) data transmission capability, and Transtelecom’s move to independent, competitive business. Board meeting date is 22 July 2008.
KTZ Transtelecom Communication Infrastructure Modernization (EBRD website)
May 9, 2008: EBRD proposed a $50 million investment in Bank CenterCredit for on-lending to micro, small and medium enterprises. Emphasis will be on extending lending outside of Astana and Almaty. The loan comes with technical assistance to upgrade the bank’s existing systems and policies for MSE lending. Board meeting date is 17 June 2008.
Bank CenterCredit SME/MSE Loan (EBRD website)
April 21, 2008: EBRD intends to invest $10 million in Bank CenterCredit for on-lending to private local companies for the leasing of modern equipment used in agricultural, industrial and mining sectors. The equipment will be provided by Turkey’s Borusan Makina, who will also share 50% of the loan’s risk. The project is expected to help increase the efficiency and competitiveness of the agricultural and industrial sectors.
Bank CenterCredit/Borusan Leasing Facility (EBRD website)
April17, 2008: EBRD disclosed a proposed loan of $60 million for Bank Caspian for further lending expansion for micro, small and medium enterprises in Kazakhstan. The board meeting is scheduled for June 17, 2008.
Bank Caspian SME/MSE II (EBRD website)
April 15, 2008: EBRD provided a $40 million five year loan to Almaty Bottlers. The project intends to expand and improve the company’s operation and strengthen supplier linkages.
Almaty Bottlers (EBRD website)
March 19 2008: EBRD disclosed a Project Summery Document of a proposed $292 million euro modernization investment in Kazakhstan Electricity Grid Operating Company to increase the efficiency and reliability of electricity distribution.
KEGOC Modernization Loan II (EBRD website)
January 18, 2008: EBRD co-acquired a 10% stake in Demir Kazakhstan Bank. The proposed transactions will support the DKB’s projected growth and increase availability of long-term financing to companies operating in Kazakhstan.
Demir Kazakhstan – Equity participation (EBRD website)
November 1, 2007: EBRD invested $30 million in Pavlodar Energo. The project will replace a combined heat and power unit, rehabilitate the power plant, and increase power generation efficiency.
Pavlodar Energo (EBRD website)
ADB Activities
December 19, 2007: The Asian Development Bank awarded a $3 million grant to boost trade within the Central Asia Regional Economic Cooperation (CAREC), of which Kazakhstan, Azerbaijan, China, Kyrgyz Republic, Mongolia, Tajikistan, Uzbekistan, and Afghanistan are members.
Trade in Central Asia (ADB website)
Overview
The Extractive Industries Transparency Initiative (EITI) was begun in 2002 by UK Prime Minister Tony Blair. It aims to improve openness and transparency in company payments and in government revenues from extractive industries. An independent auditor reconciles payments from companies with revenues received by the government.
EITI Progress
The Kazakhstani government took the first steps to EITI implementation in 2005. A Memorandum of Understanding was signed in 2006, and a National Stakeholders Council was established with input from representatives of civil society, companies, and government. Progress slowed from 2006 to 2007. In January of 2008, Kazakhstan published its first EITI report with results of an audit by Deloitte. Kazakhstan is currently a candidate country and will go through its validation period this year.
In total, around 97 companies participate in EITI, including KazMunaiGas (KMG), the state oil and gas company. The Coalition “Oil Revenues - Under Public Oversight” has proposed an increase in the scope of EITI, known as EITI Plus. EITI Plus envisions reports of disaggregated data, public involvement in revenue management, and the inclusion of local social investments in EITI.
For more information, see the links below:
Revenue Watch Institute website
EITI website
Oil Revenues - Under Public Oversight website
IFI Involvement
- World Bank support of EITI includes administration of the EITI Multi-Donor Trust Fund and assistance to civil society groups and the EITI Secretariat.
- In September of 2007, the World Bank approved a $72,922.50 EITI project in Kazakhstan. EITI Project (WB website)
- On April 12, 2008, the World Bank announced an Extractive Industries Transparency Initiative Plus Plus (EITI++) project, which offers governments additional options and technical aid for improving revenue management. Civil society groups, such as Publish What You Pay, have endorsed the project. EITI Plus Plus (WB website)
- As of January 2007, all investors supported by the International Finance Corporation must publish their payments to the government. The IFC will evaluate investor compliance in the first half of 2008. Implementation of the Management Response to the Extractive Industries Review, World Bank, February 2008 (WB website, Acrobat pdf)
- The European Bank for Reconstruction and Development (EBRD) has pledged support for EITI through active involvement in EITI consultation, promotion of transparency in revenue reporting and within the financial sector, and capacity-building aid for countries implementing EITI principles. EBRD EITI Policy (EBRD website)
- In February of 2008, the Asian Development Bank officially endorsed EITI. ADB Endorses EITI (ADB website)
Problem Areas
- Civil society leaders cite the failure of two of the largest consortiums, Agip KCO and Tengizchevroil, to participate in EITI
- EITI does not include extra-budgetary payments or payments at the sub-national level.
- Based on the 2008 report, the Coalition of “Oil Revenues – Under Public Oversight” estimates discrepancies between government and company data to be 12 to 24 billion tenge. Other discrepancies and shortcomings in the report have yet to be addressed.
- Public awareness is still considerably low.
- Although the IFIs have largely pledged support for EITI, the exact form of this assistance and its effects on Kazakhstan are still questionable.
Resources
EITI (Extractive Industries Transparency Initiative) in Kazakhstan, “Oil Revenues - Under Public Oversight!” Coalition, June 2007- February 2008 (Coalition website, Acrobat pdf)
Two Years of Implementation of Extractive Industries Transparency Initiative (EITI) in Kazakhstan: Conclusions and Recommendations, “Oil Revenues - Under Public Oversight!” Coalition, 2005-2007 (Coalition website, Acrobat pdf)
Drilling Down: The Civil Society Guide to Extractive Industry Revenues and the EITI, Revenue Watch Institute, May 2008 (RWI website)
Implementation of the Management Response to the Extractive Industries Review, World Bank, February 2008 (WB website, Acrobat pdf)
Eye on EITI: Civil Society Perspectives and Recommendations on the Extractive Industries Transparency Initiative, Publish What You Pay and Revenue Watch Institute, 2006 (EITI website, Acrobat pdf)
International Conference on Preventing Corruption in Kazakhstan
Transparency Kazakhstan will be hosting a conference on counteracting corruption in Kazakhstan on June 23, 2008, in Almaty.
Anti-Corruption Conference (Transparency Kazakhstan website)
Transparency International Report on Oil and Gas Companies
On April 28, 2008, Transparency International released a new report on oil and gas companies’ payments to host governments. The 2008 Report on Revenue Transparency of Oil and Gas Companies investigated 42 major companies operating in 21 countries, revealing that only a third of the companies attained a high-performance transparency rating on their reporting and payments to governments. The report includes companies operating in Kazakhstan, Russia and Azerbaijan.
Promoting Revenue Transparency Project (Transparency International website)
EITI Conference in Kazakhstan
The results from the first reconciliation report were presented at a conference on February 29 in Astana, where over 200 actors from civil society, government, extractive industries, and international organizations, including the World Bank, discussed the report.
World Bank Conference Summary (WB website)
IFC Audit Reveals Compliance Failure in Kazakhstan
The International Finance Corporation released an audit in April admitting toxic emissions problems in western Kazakhstan. This is seen as a major victory for civil society actors in Kazakhstan, who have been protesting environmental and health conditions in Berezovka and areas surrounding the Karachaganak field. In March, Green Salvation, an environmental NGO in Kazakhstan, won a related suit in the country’s Supreme Court.
Karachaganak Audit (IFC CAO website)
Karachaganak press release (Crude Accountability website)
Letter to the EBRD Regarding the Bautino Project (CEE Bankwatch website, Acrobat pdf)
Kazakhstan NGO Representative Meets with Leaders during Spring Meetings
On April 9, 2008, Sergey Solyanik from Kazakhstan’s Green Salvation environmental organization gave a presentation on the protracted campaign against the violation of Berezovka villagers’ rights and environmental pollution caused by the development of Karachaganak oil and gas field. During the WB Spring Meetings, Sergey Solyanik also met with International Finance Corporation’s Compliance Advisor Ombudsman regarding Green Salvation’s complaints, as well as World Bank staff to discuss concerns with a World Bank supported forest project in Kazakhstan.
EIB Civil Society Workshop
On June 30, 2008, the European Investment Bank will hold a workshop for civil society organizations in Brussels, Belgium. The workshop will be in English and French and will include observers from other international finance organizations. For more information and to request an invitation, visit the link below:
EIB Civil Society Workshop (EIB website)
Extended Consultation on EIB’s Environmental and Social Statement
The European Investment Bank has extended the public consultation period for its Environmental and Social Statement until June 20, 2008. A consultation meeting will be held in Warsaw on June 12. With sufficient stakeholder interest, the Bank intends to hold the second round of consultation between September 1 and 28 to seek input on the second draft revised Statement on Environmental and Social Principles and Standards. Submission details and the statement draft can be found at the links below.
Comment Submission Details (EIB website)
EIB Environmental and Social Statement (EIB website, Acrobat pdf)
Public Consultation on EIB's Environmental and Social Statement (EIB website)
EBRD Environmental and Social Policy
On May 12, 2008, the Board of Directors of the European Bank for Reconstruction and Development (EBRD) approved the Bank's new Environmental and Social Policy as well as a new Public Information Policy, one week before the EBRD's Annual Meetings in Kiev, Ukraine.
EBRD 2008 Environmental and Social Policy, May 12, 2008 (EBRD website, Acrobat pdf)
BIC comments on the draft EBRD Environmental and Social Policy, April 8, 2008 (BIC website)
EBRD Public Information Policy
The new Public Information Policy was approved on May 12, 2008, bringing some positive improvements to the previous policy. Civil Society comments on the initial discussion paper called for more transparent and amenable public consultation and disclosure provisions, an independent appeal system, and more timely and automatic disclosure of project impact information. Concerns were also expressed at the disclosure exceptions.
EBRD 2008 Public Information Policy, May 12, 2009 (EBRD website, Acrobat pdf)
Global Transparency Initiative and CEE Bankwatch Network comments on EBRD PIP, December 26, 2007 (GTI website, Acrobat pdf)
Independent Recourse Mechanism Review
EBRD is currently reviewing its complaint review system, the Independent Recourse Mechanism (IRM). It is also expected that a revised version of the IRM policy will be made public late 2008 for an additional round of public comment period that will last through January 2009.
EB Independent Recourse Mechanism (EBRD website, Acrobat pdf)
Study: Weak EBRD complaints mechanism (CEE Bankwatch study)
World Bank Consultations
The World Bank Group is seeking comments on its strategic priorities for civil society engagement. The process will take place from March until July of 2008. Additionally, the bank is drafting an issues paper on Climate Change, which is currently available for comment and will be discussed at the 2008 Annual Meetings. Details can be found here:
Strategic Priorities Framework for Bank – Civil Society Relations (WB website)
Climate Change Global Consultation page (WB website)
World Bank and IMF Spring 2008 Meetings Summary
The World Bank and IMF Spring Meetings addressed climate change, rising food and commodity prices, and the global credit crisis. Civil society meetings examined revenue transparency in extractive industries, anti-corruption measures, IMF conditionalities, and a variety of other issues. For summaries of official WB/IMF meetings as well as civil society strategy meetings, see the links below:
Bretton Woods Project (BWP website)
IMF and World Bank - Spring Meetings 2008 (IMF website)
WB and IMF: Revenue and Contract Transparency Assessment
Global Witness and Bank Information Center are conducting an assessment of revenue and contract/licensing transparency implementation in extractive industry operations by the World Bank, IFC and IMF. Preliminary findings of the assessment across 15 resource rich countries (including Kazakhstan) revealed that revenue transparency is inconsistent across countries and programs of these institutions. Both civil society involvement and contract transparency were rarely mentioned in institutions’ project/country documents and were only once used as progress indicator upon which further funding was tied. GW and BIC plan to release the final assessment during summer 2008.
New World Bank Website Publishes Company Payments
The World Bank launched a webpage, where IFC clients publish their payment to their host governments starting with operations in 2007. The webpage provides figures for companies that already disclosed payment figures and those planning to do so during June 2008, as well as projects that do not involve payments to the government.
IFC Extractive Industry Clients Government Payment Disclosure (WB website)
Independent Evaluation Office (IEO) Report
The International Monetary Fund leadership has commented on the IEO report of 2008. The report examines IMF governance structures, accountability, and stakeholder involvement. The comments and report can be found at the link below:
IEO Report and the IMF (IMF website)
EBRD 2008 Annual Meetings and Business Forum
Over 2,000 government, civil society, and business actors met in Kiev, Ukraine on May 18-19, 2008, for the EBRD’s Annual Meeting. Civil society groups were critical of the bank’s support of problem projects, such as Arcelor Mittal and Bautino II in Kazakhstan, and of new policies drafted without adequate commentary from civil society. These policies, energy efficiency, and banking systems formed some of the topics of discussion. More information on the meetings and civil society responses can be found at the following links:
2008 Annual Meetings (EBRD website)
Blogs and 2008 Annual Meetings News (IFIwatchnet website)
Comments on New EBRD Policies (BIC website)
EBRD's Annual Meeting (BIC website)
Asian Development Bank 2008 Annual Meetings
At the 2008 Annual Meeting in Madrid, Spain, on May 6-7, 2008, rising food costs were a major area of concern. The ADB committed $500 million to address the problem immediately and $2 billion for agricultural support in the coming year. The ADB also launched its Strategy 2020, which will help shape ADB activity in the future. Some civil society actors have objected to the strategy. Further news articles, summaries, and useful documents can be found at these sites:
Annual Meeting News and 2008 News (ADB website)
2008 ADB Annual Meeting and Civil Society Criticisms (BIC website)
NGOs Boycott ADB Consultations, ADB Agrees to Second Draft
Several members of the NGO Forum Network did not attend the Asian Development Bank’s April roundtable consultations, citing the draft Safeguard Policy Statement’s failure to comply with basic objectives. After U.S. and NGO pressure, the ADB agreed in May to release another draft and consultation.
ADB Consultations Boycotted (BIC website)
ADB Agrees to Second Draft (BIC website)
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