world bank document · pdf filedocument of the world bank report no. t-6896-kg technical annex...

Document of

The World Bank

Report No. T-6896-KG

TECHNICAL ANNEX

THE KYRGYZ REPUBLIC

FINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT

MAY 31, 1996

Agriculture, Industry and Finance DivisionCountry Department IIIEurope and Central Asia Region

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EOUIVALENTS

(as of March 31. 1996)

Currency Unit = SomI Som = US$ 093US$1 = 10.8 Somn

AVERAGE EXCHANGE RATES

Som per US$1

1993 1994 1995 March 1996

Period Average 6.0 11.0 10.8 10.8End of Period 8.3 10.6 11.2 10.8

WEIGHTS AND MEASURES

Metric System

KYRGYZ REPUBLIC - FISCAL YEAR

January I - December 31

ABBREVIATIONS AND ACRONYMS

CAS - Country Assistance StrategyCTC - Coupon Trading Center

DEBRA - Debt Resolution AgencyFINSAC - Financial Sector Adjustment Credit

FSU - Former Soviet UnionFMU - Finsac Management UnitGDP - Gross Domestic ProductIDA - International Development AssociationIFC - International Finance CorporationIMF - International Monetary FundM2 - Broad Money Supply

NBK - National Bank of the Kyrgyz RepublicNBFI - Non-Bank Financial Institutions

PESAC - Privatization and Enterprise Sector Adjustment CreditPPF - Project Preparation Facility

PMU - Project Management UnitSAS - State Agency for SecuritiesSDR - Special Drawing Rights

TA - Technical AssistanceTAP - Technical Assistance ProgramTOR - Terms of Reference

KYRGYZ REPUBLIC

FINANCIAL SECTOR TECHBICAL ASSISTANCE PROJECT

TABLE OF CONTENTS

PART I. THE FINANCIAL SECTOR ..................................... 1

PART II. THE PROJECT ............................................ 2Project Objectives and Description ...................................... 2Assistance to the National Bank of the Kyrgyz Republic ........................ 3Bank Restructuring and Liquidation ..................................... 4Debt Recovery and Resolution ........................................ 4Central Registry for Pledges .......................................... 5Training ...................................................... 5Non-bank Financial Institutions (NBFIs) .................................. 5Public Debt Instruments and Securities ................................... 6Rural Finance ................................................... 6Project Costs ................................................... 6Financing Plan .................................................. 6

PART III. PRO.JECT IMPLEMENTATION ARRANGEMENTS .................. 6Project Implementation ............................................. 6Procurement ................................................... 7Disbursement ................................................... 7Project Accounting, Financial Reporting and Auditing ......................... 8

PART IV. BENEFITS AND RISKS ...................................... 8Benefits ...................................................... 8Risks ........................................................ 9

ANNEXES

Annex I. Detailed Cost and Financing TablesAttachment 1: Detailed Project Costs: 1996-1998 ........................... 10Attachment 2: Detailed Financing Plan: 1996-1998 .......................... 11Attachment 3: Summary of Proposed Procurement Arrangements for IDA and

Estimated IDA Disbursements ...... ........ ..................... 13

Annex II. Terms of ReferenceSenior Bank Adviser to Chairman, National Bank of the Kyrgyz Republic .... ........ 14Legal Adviser to the National Bank of the Kyrgyz Republic ..................... 17Adviser on Bank Reorganization to the National Bank of the Kyrgyz Republic ... ...... 20Adviser to AKB Kyrgyzstan and Promstroibank ............................ 22

- ii -

Liquidation Adviser to Debt Resolution Agency (DEBRA) ...................... 25Financial Adviser to Debt Resolution Agency (DEBRA) ........................ 28Specialist in Non-Bank Financial Institutions Including InvestmentFunds to Advise the Ministry of Finance ................................. 32Specialist in Insurance Services to Advise the Ministry of Finance ................. 37Specialist in State Securities Instruments to Advise the Ministry of Finance .... ....... 40

Annex III. Timetable of Key Project Processing Events ......................... 44

Annex IV. Cost Estimates from Donors' Conference .......................... 45

Annex V. Implementation Plan ........................................ 48

Annex VI. Performance Monitoring Indicators .............................. 49

KYRGYZ REPUBLIC


PART I. THE FINANCIAL SECTOR

1. Before 1991, the Kyrgyz financial system was a regional component of the Soviet financial systemwhich mobilized and allocated resources according to the decisions of the Soviet government in Moscow.In June 1991, the first set of financial sector reforms was introduced with the establishment of a two-tierbanking system with the National Bank of the Kyrgyz Republic (NBK), the central bank, created underthe supervision of Parliament. Since then, the NBK has gradually assumed broader, more traditionalcentral bank powers through the enactment of a comprehensive Central Bank Law and a CommercialBanking Law in 1992, the introduction of the national currency in 1993, and the development of a fullrange of indirect monetary policy instruments. There are now weekly foreign exchange sales by the NBKto the interbank market, regular treasury bill auctions, and credit auctions.

2. At present, the Kyrgyz financial system consists of NBK, 17 commercial banks and a savings bank.The "Big Four" specialized banks (Agroprombank, AKB Kyrgyzstan, Promstroibank and Elbank)dominate the financial system, accounting for over 80% of the banking system's assets. Though moneyand capital markets are underdeveloped, there are also a number of non-bank financial institutions. Theseinclude 17 investment funds, 30 insurance companies, a stock exchange (KSE), a Coupon (privatization)Trading Center (CTC), and three pension funds.

3. The commercial banking system is dominated by the Big Four commercial banks which areinsolvent. Other weaknesses in the banking system include a low level of capitalization, an inadequateaccounting system, deficient communication and payment systems, a lack of adequate banking skills atall operational levels, and the ill effects of the directed credit policy followed in the past which isreflected in the poor quality of the banks' loan portfolios. The adverse economic conditions of the pastfew years have led to a further deterioration in banks' portfolios and exacerbated their problems.

4. Because of the systemic deficiencies in the financial system, the formal financial sector in the KyrgyzRepublic has not been an effective vehicle for mobilizing financial resources and allocating these to theirmost efficient uses. The M2/GDP ratio at 12% indicates the low level of savings and financialintermediation. Incentives for financial savings by the private sector have been undermined by lack ofconfidence in the financial system and, until recently, by substantially negative real interest rates. Despitethese disincentives however, the private sector has been generating (small) positive savings while theGovernment at large, including state-owned enterprises, has been the biggest dissaver (i.e., overall netborrower).

5. An efficient financial sector, with an effective banking system at its core, is essential to support andfoster the Kyrgyz Republic's stabilization and structural adjustment efforts. The Government's objectiveis to develop and deepen the financial system, restore public confidence, and to establish, over the

- 2 -

medium term, an efficient system of resource mobilization and allocation which would becomeincreasingly more liberal and market-oriented and offer a greater variety of instruments to both borrowersand savers.

6. The reforms required to achieve these longer-term goals will need to be phased over a number ofyears, given the emerging nature of key financial institutions in the Kyrgyz Republic and the limitedimplementation capacity of the country. Immediate reforms required to facilitate the deepening anddiversification of the financial system include: refining the enabling policy and regulatory environment;resolving the problems engendered by the insolvency of the country's four largest commercial banks, themost pressing of which is the poor quality of these bank's portfolios; enhancing and developing skillsin the banking sector and, more specifically, strengthening the regulatory and supervisory capabilitieswithin the NBK; and fostering development of nascent non-bank financial institutions. The growth andviability of the financial system also depends heavily on the growth and viability of the real sectors. Thetypes of financial services and products needed by the real sectors, and the availability of bankableopportunities in the economy as a whole, will largely determine the growth of financial services in thefuture.

7. A number of multilateral and bilateral organizations have already provided technical assistance inseveral areas. These include: drafting banking and securities laws; preparing a new Chart of Accounts;assistance to NBK in bank supervision, monetary analysis, and the reorganization of its Cash and Foreigndepartments; assistance to commercial banks in accounting, operational policies and procedures, creditinvestigation and appraisal, trade financing and the development of a credit reporting system; automationof the clearing house; and "specialized" audits of the four largest commercial banks by internationalauditors. While this partial assistance has been useful, a more coordinated and comprehensive approachis required.

8. The principal objectives of the Reform Program to be supported by the proposed FINSAC are: (i)to improve the enabling policy and regulatory environment for the development of a sound, competitiveand market-oriented banking system, by eliminating policy-induced barriers to competition, efficiency andprofitability and by strengthening prudential laws and regulations, accounting and auditing, and paymentsand settlements systems; (ii) to liquidate or restructure the four dominant insolvent specialized banks, andassist with the establishment of a competitive and efficient private banking system which is both soundand capable of providing a broader range of financial services to borrowers and savers; (iii) to helpcollect part of the non-performing loans extended by these banks, and thus accelerate enterpriserestructuring or liquidation in the process; and, (iv) to promote the development and growth of emergingnon-bank financial institutions.

PART II. THE PROJECT

Project Objectives and Description

9. The objective of the Technical Assistance Program (TAP) is to facilitate the implementation of thepolicy and institutional reforms envisaged under FINSAC by strengthening the capabilities of the keyfinancial and regulatory institutions, assisting in the establishment of new, temporary institutions that willeffect the restructuring/liquidation of major banks, extending the new accounting infrastructure, andtraining bank personnel.

10. Implementation of the reform program envisaged under FINSAC would require massive technicalassistance from abroad as the local capacity for carrying out these reforms is limited due to lack of

- 3 -

exposure of the Kyrgyz authorities to a market oriented sector. Assistance available to the KyrgyzRepublic from other donors is limited. Without IDA funding for the programs and activities not coveredby other donors, it would not be possible to transform the sector into a well-functioning and efficientfinancial system capable of meeting the evolving requirements of a market-oriented economy. The maininstitutions and areas which will receive technical assistance under the TAP are described below.

11. Proposed Technical Assistance. The proposed technical assistance program was designed after acomprehensive review of the overall needs of the sector. It identifies key areas which are important forthis initial stage in the development of a healthy financial sector. The major areas requiring assistanceunder the proposed TAP are described below.

Assistance to the National Bank of the Kyrgyz Republic

12. The National Bank of the Kyrgyz Republic has appropriately been the major beneficiary of recenttechnical assistance from bilateral and international donors, but further strengthening in several areas isneeded. The following areas have been identified for additional assistance under the proposed FINSAC-supported reform program.

(a) Overall reform of the Financial Sector. The Chairman (Governor) of NBK needs theservices of a Senior Bank Adviser to: (i) assist with the implementation and coordination of theFINSAC reform program, which is wide-ranging and would need expert monitoring of progress;and (ii) advise NBK management on policy and operational issues, as they evolve during the courseof program implementation. Initially, the adviser will be funded by the Project Preparation Facilityto assist the Chairman in carrying out some preparatory work for the Financial Sector ReformProject. When PPF funding for this assignment ends, this credit will provide the financing for itscontinuation.

(b) Bank Supervision. Although the Bank Supervision Department of NBK, given the shortperiod of its operation, is performing very well, its skills in both on-site examination and off-sitemonitoring need to be further strengthened. While a US AID-funded adviser is presently assistingthe Department, it is important to provide the department with an adviser with extensive bankexamination experience for another 12-18 months, particularly to train on-site supervision staff onthe job, by guiding examiner teams through some actual examinations, and to monitor the problembanks.

(c) Implementation of the new chart of accounts. The new chart of accounts, consistent withinternational practice, is about to be completed. Associated accounting rules and procedures arebeing developed, along with software, to permit parallel runs between the old and new accounts.NBK would need the services of two specialists to implement the new chart of accounts, preparenew reporting formats and standards, manuals for practitioners, pilot tests and staff training. Similarassistance would later be needed by all other banks. The NBK could make the services of thesespecialists available to other banks, as needed.

(d) Bank restructuring and liquidation. NBK needs the services of a bank adviser withexperience in branch systems to (i) complete the analysis of the branch network of theAgroprombank which has been initiated by an international consulting firm and (ii) assist in therationalization, merger, and preparation for sale of selected branches of this bank. Later, theconsultant would advise NBK on branch rationalization issues in other banks, including Elbank.

-4 -

(e) Payment and clearing systems. The current payment and clearing systems in the KyrgyzRepublic are inefficient, cumbersome and inappropriate for a modem banking system. Bothimmediate and long-term improvements are needed to reduce inter-enterprise arrears, facilitateliquidity management, minimize the float in the system by requiring banks to maintain lessersettlement reserves, promote cross-border flows, and instill confidence in the banking system. Anumber of initiatives have been taken during the last few years, on an interim basis, to reform thepayment system. These include various studies performed by the IMF, EBRD, Bank of Japan, andthe Japanese International Cooperation Agency (JICA). Some of the refinements recommended inthese studies have been or are being introduced, while a large number still remain to beimplemented. The JICA-financed specialists have recomrmended both short-term improvements aswell as a detailed long-term feasibility and functionality study of the payment system. The total costestimates, including hardware and application software, however, are still the subject of discussionbetween the Kyrgyz Government and the Japanese authorities, but it is understood that most of theexpertise and equipment, software etc. will be financed by the Japanese authorities.

(f) Mortgage financing. At present, facilities for mortgage financing in the Kyrgyz Republicare virtually non-existent. The NBK needs the services of a consultant to study the situation andidentify opportunities for creating mechanisms for mortgage financing.

(g) Financial legislation. NBK also needs the services of a lawyer for a short period to assistwith the finalization of various financial legislation.

Bank Restructuring and Liquidation

13. Under the proposed reform program, Elbank and Agroprombank are slated for liquidation. NBKhas already applied to a court for Elbank's liquidation and is working out a scheme to pay off householddeposits. The position of Agroprombank is somewhat different. While it is also insolvent and will beliquidated, it has a network of 52 branches, which in the past provided rural finance and otherwise actedas Government agents for subsidy payments. NBK and the government are keen that, beforeAgroprombank's liquidation, a specialist in branch systems advise NBK on the rationalization anddisposition of its branch network with particular attention given to possibly using some of them to provideservices to rural communities.

14. Two other large banks, Promstroi Bank and AKB Kyrgyzstan Bank, which are also in financialdifficulties, are in the process of being recapitalized. They have been advised to increase capital from"negative" to "positive", or at least to "zero" level by March 31, 1997. If they are unable to achievethis, they will be liquidated. These banks urgently need an adviser to provide policy and operationaladvice to management on credit policies, advice on financial restructuring and help to attract domesticand/or foreign investors.

Debt Recovery and Resolution

15. As an integral part of the financial sector reform progran, the NBK has established Debt ResolutionAgency (DEBRA) as an agency under its control to act as receiver on its behalf, to take over, and todispose of the assets and liabilities of banks. It will also have a Debt Recovery Unit that will take titleand control of the non-performing loan portfolios of the insolvent banks with a view to seeking theirrecovery and ultimate resolution. Initially, DEBRA will handle the liquidation of Agroprombank andElbank, but during its tenure it may be called upon to manage the liquidation of other banks whichencounter difficulties in the new market environment. DEBRA will need the services of two experts forat least two years each for the following tasks: (i) to help organize DEBRA, establish its operating

procedures, and to manage the asset sales and liquidation process; and (ii) to coordinate work-out teamsand manage the recovery of outstanding balances in the non-performing loan portfolios of the intervenedbanks.

Central Registry for Pledges

16. In order to implement the Law on Pledge which will be submitted to Parliament in 1996, a centralregistry for pledges will be established within the Ministry of Justice. Eventually, this registry will beextended to the district level to ensure national coverage. To aid the Ministry of Justice in this effort,the provision of computer hardware, software and training is envisaged.

Training

17. Among the many challenges the Kyrgyz commercial banks face are the. switching over to modembanking practices and methods and the upgrading of the skills of their staff. At present, technical skillsin most areas of modem banking either do not exist or are thinly distributed. The areas where skillupgrading is most needed include, inter alia, strategic planning, credit analysis and risk management,international trade finance, asset and liability management and the new legal environment which willgovern banking operations. Over the last four years, sporadic training efforts have been made by theKyrgyz banks by deputing their staff to foreign banks and to regional training centers in Almaty andTashkent. These arrangements are inadequate to meet the training needs of the nearly 4,000 commercialbank staff in the country. There is a need for a Bankers' Training Institute in Bishkek to conduct courseson a regular basis in various areas of interest to banks. Establishing an institute will require thecommitment of and regular funding from NBK and the commercial banks in the country. To start with,technical assistance would be necessary to organize the Institute, develop curricula, establish a library,provide equipment and teaching materials, and provide short-term consultants to run specialized coursesand train local trainers. The proposed institute would require the services of: (i) a commercial bankerexperienced in training for about one year; (ii) short-term consultants to conduct courses over the nexttwo years; and (iii) two full-time teachers specialized in Business legislation of "Civil Code tradition"countries, to provide training to lawyers in the new laws on corporation, banking, bankruptcy, pledge,mortgages, etc.. To assist in the training of lawyers, a database containing a comprehensive collectionof all legal, official texts and major case law will be created. A principal objective of this databasesystem is to disseminate this information collection nationwide via a computer "station" network, withhard copy back-ups available. Two legal publishers exist with the capability to provide this back-up.

Non-bank Financial Institutions (NBFIs)

18. While the State Agency for Securities has been given substantial responsibilities for regulating andsupervising capital markets and NBFIs, it still lacks adequate authority, technical capacity, personnel,training facilities, equipment and budget. Under the reform program, SAS would be transformed intothe executive arm of the proposed Securities Commission, with adequate resources and authority for theenforcement of securities law and regulations. In addition, the SAS would undertake supervisoryresponsibility for investment funds, which are currently under the purview of the State Property Fund.Under the proposed reform program, new laws on insurance companies and pension funds are envisaged.With these developments, SAS will acquire considerable regulatory responsibilities for the execution ofwhich it needs to develop capability now. For these purposes, SAS will need: (a) an adviser to provideguidance and training to enhance its implementation and enforcement capabilities; and (b) an adviser toreview existing pension fund schemes and to design new schemes for government consideration. TheMinistry of Finance, as the leading arm of the government responsible for non-bank financial institutions(NBFIs), would need the services of: (a) two advisers, one to advise on the overall development of

-6 -

NBFIs, with special emphasis on the securities market, the other to provide guidance in developing amarket for insurance services; and (b) a lawyer to assist in the drafting of new legislation on insuranceand pension funds and to improve existing legislation on leasing.

Public Debt Instruments and Securities

19. In addition to assistance in developing NBFIs and capital markets, the government needs assistancein developing its own capabilities in the areas of public debt instruments and government securities. Thecredit will finance an adviser to the MOF who will provide advice, guidance and policy strategies for thedevelopment and deepening of government debt instruments and securities in the Kyrgyz Republic.

Rural Finance

20. Draft legislation/regulations for the development of rural credit unions and cooperatives wil beneeded very soon. This would require the services of an experienced lawyer for the MOF/Ministry ofAgriculture.

Project Costs

21. The project is estimated to cost US$7.34 million, of which US$7.26 million would be in foreigncurrency and the equivalent of US$0.08 million in local currency. Total project costs include thoseassociated with IDA, other donor financing, and local costs. Costs include the services of advisers,consultants, equipment, software, support and counterpart staff, books and ancillary supplies. IDA andother donor agencies would finance 100 percent of the foreign exchange costs. Local costs would be inthe form of support services and seconded staff and would be provided by the beneficiary agencies. TheProject Preparation Facility (PPF) of US$0.07 million would be re-financed under the proposed TAproject. Detailed project costs are provided as Attachment 1 in Annex I.

Financing Plan

22. Total project costs of US$7.34 million would be financed as follows: IDA US$3.4 million; otherdonors (Japan, USAID, TACIS, Finland, ADB, and TICA) US$3.86 million; and local institutions andgovernment US$0.08 million. A detailed financing plan is provided as Attachment 2 in Annex I.

PART III. PROJECT IMPLEMENTATION ARRANGEMENTS

Project Implementation

23. NBK has established a FINSAC Monitoring Unit (FMU) which will have responsibility formonitoring implementation of policy reforms under FINSAC and for managing and administering theTAP. This will be headed by a senior NBK official; the Senior Bank Adviser (SBA) to the Chairmanof NBK will work closely with this unit and, with authorization from the Chairman, will coordinate thework of the various experts appointed under TAP and also other technical assistance activities in thefinancial sector, and submit periodic progress reports to the Chairman and, through him, to IDA onimplementation of the Reform Program.

-7 -

Procurement

24. All procurement, within the framework of FINSAC TA Programn, will be carried out by FMU, butdisbursement of IDA funds will be administered through the PMU, already established in the Ministryof Finance under the PESAC and utilized by APEAC operations. Procurement of all goods and serviceswould follow World Bank guidelines (Guidelines for Procurement under IBRD Loans and Credits,published by the Bank in January 1995, and revised in January 1996). Selection of consultants forTechnical Assistance would follow World Bank guidelines (Use of Consultants by Bank Borrowers andby the Bank as Executing Agency, August 1981). Most goods are expected to cost less than $100,000and will be procured following International Shopping. Equipment expected to cost less than US$50,000will be procured following local shopping. Equipment purchases are expected to include computers,software, fax machines, phones, photocopiers and other office-related equipment. Consultants will beselected from short-listed candidates acceptable to the Bank and based on review of qualifications and pastperformance. All documents relating to selection of consultants will be subject to prior review of theBank. Preparatory activities financed under the PPF include assistance on agreed upon steps requiredbefore Board Presentation, including advice on the initiation of bank liquidation and restructuringprocedures, the establishment of a debt resolution agency (DEBRA), and coordination and policy adviceto the Chairman of the NBK. The Summary of Proposed Procurement Arrangements is presented asAttachment 3 in Annex I.

Disbursement

25. The disbursement of IDA funds will be administered through the Project Management Unit (PMU)already established in the MOF under PESAC and utilized by the APEAC operations. It will monitorand control the proposed use of IDA funds. The estimated schedule of disbursements is given inAttachment 3 of Annex I. Disbursements are expected to be completed within four years from the dateof effectiveness.

26. The project would finance the following categories of expenditures:

Category | Amount Percentage of Expenditures To Be(US Dollars) Financed

100% of foreign expenditures; 100% oflocal expenditures (ex-factory cost) and

1. Goods 1,529,000 95% of local expenditures for other itemsprocured locally.

2. Consultants' Services 1,170,000 100%

3. Refunding of Project 700000Preparation Advance

[ TOTAL 3,399,000

27. Special Account. To facilitate timely project implementation, the Borrower would establish,maintain and operate, under conditions acceptable to the Bank, a Special Account in US dollars in a bank.

-8 -

During the early stage of the project, the initial allocation of the Special Account would be limited toUS$250,000. However, when the aggregate disbursement under the Credit has reached the level of SDR1.0 million, the initial allocation may be increased up to the authorized allocation of US$500,000 bysubmitting the relevant Application for Withdrawal. Replenishment applications should be submitted atleast every three months, and must include reconciled bank statements as well as other appropriatesupporting documents.

28. Statement of Expenditures (SOEs). Disbursements would be made against Statement ofExpenditures for contracts for goods and services up to US$100,000 equivalent for which detaileddocuments evidencing expenditures will be reviewed by the Project Management Unit (PMU) and madeavailable for the required audit as well as to Bank supervision missions. Disbursements against contractsfor goods and services exceeding US$100,000 equivalent would be made against normal documentation.

29. The project completion date would be June 30, 2001.

Project Accounting, Financial Reporting and Auditing

30. Accounting. The PMU would be responsible for the appropriate accounting of the funds providedby IDA under the Credit, for reporting on the use of these funds and for ensuring timely submission ofaudits of the financial statements or reports to IDA.

31. The PMU would establish an accounting system to provide information on the proper receipt anduse of funds furnished in accordance with the Credit Agreement. Accounting for all Special Accounttransactions and all other project accounts will be maintained in accordance with practices and standardssatisfactory to the Association, with the objective of timely and accurate accounting of all transactionsunder the Credit.

32. Financial Reporting. Financial reporting for the Credit would comprise a statement of receipts andpayments for the reporting period from the beginning of the program. Reporting would be in accordancewith disbursements classified and reported under the expenditure categories agreed to by the Borrowerand specified in the Credit Agreement. The PMU would submit quarterly progress reports. A ProjectCompletion Report would be submitted to the Association by the PMU promptly after the conclusion ofproject activity, and in any event not later than 6 months after the Credit closing date.

33. Auditing. A condition of the Credit would be that the financial statements and reports on theproceeds are audited in accordance with internationally accepted standards by independent auditorsacceptable to the Association.

PART IV. BENEFITS AND RISKS

Benefits

34. The project would provide financing for critically needed technical assistance to implement thereforms in the financial sector as part of the Kyrgyz Republic's stabilization and structural adjustmentefforts. It would help the evolution of a healthy and efficient financial sector through refining theenabling policy and regulatory environment, resolving the problems of the country's four financially-troubled/insolvent commercial banks, developing and enhancing skills in the banking sector, andstrengthening the supervisory and regulatory capabilities of the central bank. While these reforms willbe phased over a number of years, their immediate impact would be the restoration of public confidence

- 9 -

in the system and a laying of the groundwork for an efficient system of resource mobilization andallocation.

Risks

35. The major project risks relate to timely availability of well qualified and experienced technicalassistance personnel to launch the ambitious reform program, particularly within the budget allocations.Another risk is the absorptive capacity of the concerned Kyrgyz institutions and the ability of thecounterparts to carry on the reform program after the expatriates have left. These concerns are mitigatedby the fact that the government is highly committed to carrying out structural and sectoral reforms andIDA's experience of project implementation in the country has been very good.

Washington, D.C.May 31, 1996

ANNEX I

DETAILED COST AND FINANCING TABLES

-10- Attachment I

KYRGYZ REPUBLICFINANCIAL SECTOR TECHNICAL ASSISTANCE PROJECT

Detailed Project Costs: 1996-1998(U.S. Dol)

ForeipTot Odthr. Cot a Capo-

FOREIGN FINANCING Foreig IDA Donor Local % Of et Uoet Cepopast (1996-1991) F_ing F g F g Costs Total Coss Total of Total

1996 1997 19981. Overall Reforr of F-in Il Sector

a. SeniorAdvisertoNBK 87,000 87,000 87,000 4,350 91,350 95% 1.2b. Financial Legislation 75,000 75,000 75,000 3,750 78,750 95% 1.1

Bak R euucti and LUWdatona. Reorganization Adviser to NBK 70,000 70,000 70,000 3,500 73,500 95% 1.0%b. Adviser to AKB Kyrg and Promstroi 100,000 100,000 100,000 5,000 105,000

. Debt Recovery and Resoudiona. Asd sales and fiquidation specialist 185,000 180,000 365,000 365,000 18,250 383,250 95% 5.2%b. Loan Workout Specialist 100,000 100,000 200,000 200,000 10,000 210,000

. Bank Sa. Bank Exaniner 92,000 92,000 92,000 92,000 100% 1.3%

S. Trahna. Bankers' Training Institute 230,000 210,000 97,000 537,000 537,000 537,000 100% 7.3b. Lawyer's Training 100,000 200,000 300,000 300,000 300,000 4.1%c. Legal Infornation Sytem 120,000 120,000 120,000 6,000 126,000 1.7%

. Impkmtgatlo of Chart of Acctsa. Accounting Specialists 224,000 210,000 434,000 434,000 434,000 100% 5.9%

7. Ceal Registry for Pledges 350,000 350,000 350,000 17,500 367,500 95% 5.0%

. Payment ad Clearing Systema. Redesign Clearnce & Payment Systen 2,965,000 2,965,000 1,000,000 1,965,000 2,965,000 100% 40.4%

. Mortgage Fbiacinga. Mortgage Specialist 100,000 100,000 100,000 100,000 100% 1.4

110. Non-Bak Finasadal ,iutionsa. Securities Market 200,000 100,000 300,000 300,000 300,000 100% 4.1%b. Investment Funds 60,000 60,000 60,000 3,000 63,000 95% 0.9%c. Insrnce Services 60,000 60,000 60,000 3,000 63,000 95% 0.9%d. Pension Funds 60,000 60,000 60,000 60,000 100% 0.8

11. Pube Debt Ilnstrnents & Secartie 100,000 100,000 100,000 5,000 105,000 95% 1.4

2. Rural Financea. Legal Framework 75,000 75,000 75,000 75,000 100% 1.0

13. Sub-Total 4,140,000 1,623,000 687,000 6,450,000 2,587,000 3,863,000 79,350 6,529,350 99% 88.9

14. Cotngsides (IDA-hmnded ony)# 66,750 31,100 14,000 111,850 111,850 111,850 100% 1.5%

15. PFF Rdeflnang 700,000 700,000 700,000 700,00 100% 9.5-

TOTAL PROJECT COSTS 4,906,750 1,654,100 701,000 7 ,261,850 3, 398,850 3863,000 79,350 7,341,200 99% 100.0%I Contingencies calculated at approximately 5% of IDA-knded components.

Attachment 2


Detailed Financing Plan: 1996-1998(US Dollars)

IDATotal Total IDA

Foreign Local Project s % efForeign Cost Cost Cost Totdl

FIN- TACIS/ JAPAN JAPAN IFC/Fancing Components IDA LAND TACIS TICA USAID GRANT CREDIT TICA ADB

Overail Reform of Fiancial Sectora. Senior Adviser to NBK 87,000 87,000 4,350 91,350 95%b. Financial Legislation 75,000 75,000 3,750 78,750 95%

Bank Restructuring and Liquidationa. Reorganization Adviser to NBK 70,000 70,000 3,500 73,500 95%b. Adviser to AKB Kyrg. and Promstroi 100,000 100,000 5,000 105,000 95% _

Debt Recovery and Resoltiona. Asset Sales and Liquidation Specialist 365,000 365,000 18,250 383,250 95%b. Loan Workout Specialist 200,000 200,000 10.000 210,000 95%

Banlk Superisona. Bank Examiner 92,000 92,000 92,000 0%

5. TraIniga. Bankcrs' Training instiu 537,000 537,000 537,000 0%b. Lawyer's Training 300,000 300,000 300,000 0%c. Legal Information System 120,000 120,000 6,000 126,000 95%

Iinplemebtaio of New Chart of Acetsa. Ancuming Speialist 434,000 434,000 434,000 0%

7. Cenl Registry for Fe4e 350,000 350,000 17,500 367,500 95%

Paymnt ad Claring Systea. Redesign Ckarance & Paymeus System 1,000,000 465,000 1,500,000 2,965,000 2,965,000 34%

Atachment 2


Detailed Financng Plan: 1996-1998(US Dollars)

Total Total ,mdFore|n Loc Projet T % |t

Forelpn Cost Cost cost Total

FIN- TACIS/ JAPAN JAPAN IFC/cing Components IDA LAND TACIS TICA USAID GRANT CREDIT TICA ADB

Mortgage Financinga. Mortgage Specialist 100,000 100,000 100,000 0%

0. Non-Bank FbIancIal Intitutionsa. Securiies Madcet 300,000 300,000 300,000 0%b. InvestmentFunlds 60,000 60,000 3,000 63,000 95Xc. Inmurae Services 60,000 60,000 3,000 63,000 95%d. Pension Funds 60,000 60,000 60,000 0%

1. Publc Debt Instrments and SecurWies 100,000 100,000 5,000 105,000 95%

1 Rnral Financea. Legal Framework 75,000 75,000 75,000 0%

1 Sub-Total 2,587,000 92,000 597,000 300,000 734,000 465,000 1,500,000 100,000 75,000 6,450,000 79,350 6,529,350 40%

4. Contingencies (IDA-funded only)# 111,850 111,850 111,850 100%

S. PPF Refiuacin 700,000 700,000 700,000 100%

TALPROJECT FINANCING 3,398,850 92,000 597.000 300,000 734,000 465,000 1,500,000 100,000 75,000 7,261,850 79,350 7,341,200 46%

I Contingencies calculated at approximately 5% of IDA-funded components.

- 13 -

Attachment 3

KYRGYZ REPUBLIC


Summary of Proposed Procurement Arrangements for IDAUS$ (000)

Procurementl_________________________________________ j ___Method l

Project Element IS/NS Other | Total

GQQ_

Computers and related Office Eqpt 1529 1529

(1529) (1529)

Consultancies. Other Technical Assistance 1170 1170

(1170) (1170)

Miscellaneous

PPF 700 700

(700) (700)

Government Support+ 79 79

TOI 1608 1870 3478(1529) (1870) (3399)

Note: Figures in parentheses are the respective amounts Jinanced by the IDA credit.+ Government Support includes staff support, office rental and misceclaneous expenses.NS: National ShoppingIS: Internadonal Shopping

Estimated IDA Disbursementson a Fiscal Year Basis

(US$ 000)

FY1997 FY1998 FY1999 FY2000

Annual 700 1689 910 100

Cumulative 700 2389 3299 3399

ANNEX II

TERMS OF REFERENCES

- 14 -


SENIOR (CiFiEF) BANK ADVISER TO CHAIRMAN, NATIONAL BANK OF KYRGYZ REPUBLICTERMS OF REFERENCE

Background

1. The Kyrgyz Republic has embarked on a comprehensive reform program to transformits centrally planned economy to a market economy. As a part of this program, the government is keento develop a modern and efficient financial sector, fashioned along the lines of financial systems in theleading market economies, that will support the continuing transformation.

2. The Kyrgyz financial sector consists of the National Bank of the Kyrgyz Republic (NBK),the central bank; 19 commercial banks (including four large banks which have serious portfolioproblems); the State Insurance Company and a host of small insurance companies which mushroomed in1992-93, mostly to cater to some very specific insurance needs; the State Pension Fund; and a numberof Investment Funds, recently established to participate in the Privatization Program. The commercialbanking system dominates the financial sector.

3. Technical assistance for the modernization of the financial sector has so far been providedby a number of multilateral and bilateral institutions. While this assistance has been very useful, it hasbeen sporadic and covers only a few areas. The financial sector reform program (attached) beingsupported under the proposed IDA credit (FINSAC) takes a more comprehensive view of the reforms stillneeded.

4. NBK, the central bank, which will have responsibility for implementing the reforms underFINSAC, is interested in appointing a Senior (Chief) Bank Adviser to the Chairman (Governor) to advisehim on broad policy matters, assist him to coordinate the work of foreign experts presently assisting thesector, and to monitor progress of reforms. The adviser will work in close cooperation with NBK'sDepartment for Reorganization of the Financial System of the Kyrgyz Republic and the Directorate forInvestments and Coordination of Technical Assistance.

5. The adviser will report directly to the Chairman of NBK and will be appointed initiallyfor a period of one year, with possibility of extension, subject to mutual agreement.

Duties and Responsibilities

6. The Adviser, who will be resident in Bishkek, will have the following majorresponsibilities:

a. provide overall assistance to the FINSAC Monitoring Unit (FMU) to enable it to monitorthe implementation of reforms under FINSAC and manage and administer the TechnicalAssistance Program for the Financial Sector;

b. prioritize and pay particular attention to urgent issues and problems that may arise in thecourse of implementation of the program;

- 15 -

c. provide program coordination and, where necessary, make suggestions to otherbeneficiaries of the technical assistance program with regard to performance of varioustasks in order to ensure compliance with the program schedule and strategy;

d. provide liaison between NBK and the international and bilateral organizations involvedin the reorganization of the banking and financial sectors of the Kyrgyz Republic;

e. in cooperation with foreign consultants performing special assignments at other Kyrgyzinstitutions and banks, monitor compliance with all requirements set down within theframework of the FINSAC program;

f. analyze recommendations made by foreign consultants and submit more concreteproposals and recommendations for consideration of NBK management;

g. review and analyze the technical assistance activities currently in progress in the bankingand financial sectors of the Kyrgyz Republic, evaluate their effectiveness and determinerequirements and priorities for further technical assistance;

h. hold periodic meetings with foreign consultants working in the banking and financialsectors with a view to avoiding duplication of effort, improving efficiency with whichtasks are carried out and developing a clearly defined strategy for the reorganization ofthe sectors;

i. meet periodically with top officials of commercial banks, ministries and involved agenciesin order to inform them about progress of consultants' work, results achieved,effectiveness of the program and any problems encountered by consultants in the courseof their work;

j. monitor overall adherence to work schedules and time frames, with assistance from localpersonnel, and assist in drafting of work plans for newly arrived foreign consultants;

k. provide policy advice to the Chairman, NBK, on matters pertaining to the financialsector;

1. to submit periodic reports to the Chairman, NBK, and IDA on the progress of reformsunder FINSAC and on the progress of the technical assistance program; the initial reportwill be submitted within four weeks of his appointment and bi-monthly thereafter, by the10th of the following month, in both English and Russian; and

M. ensure that all procurement made under the IDA credit are in accordance with the IDAprocurement guidelines.

Qualifications

7. The Adviser should possess a degree in Economics, Finance, or Accounting and have atleast 20 years experience in management positions in a major international bank or in a central bank ina country having a strong and diversified financial sector. He/she could be on loan from the respectiveinstitution or be a retired banker. He/she could also be provided by international bank managementconsultancy organizations. Knowledge of Russian would be an advantage. The Adviser should be usedto working in an international environment.

Contract Arrangements

8. The NBK is responsible for providing a personal computer, appropriate software, andpriority use of office equipment (printer, photocopier, fax, etc.) all of which are expected to be purchasedby the beneficiary out of the Project Preparation Facility. The NBK will also provide a bilingualsecretary, desk and office space, assistance in finding appropriate housing, administrative assistance in

- 16 -

obtaining visas, customs clearance and any other administrative permits required by the consultant in theperformance of the assignment.

9. The consultant contract will cover fees, including overhead, travel, accommodation andother living expenses.

- 17 -


LEGAL ADVISER TO THE NATIONAL BANK OF THE KYRGYZ REPUBLICTERMS OF REFERENCE

Background

1. The transition from a command economy to a market economy requires considerablechanges in the legal framework. A number of important legal reforms have already been initiated witha view to providing an adequate framework for ensuring sustained banking soundness and businessstability over the long term.

2. The authorities are actively pursuing this process. A new Civil Code has just beenapproved by the Parliament in spring 1996. A draft Bankruptcy Law, a draft Law on Pledge, and a newBanking Law are now under preparation or under discussion. These laws are crucial for the building ofa new legislative framework for banking activities.

3. The legal technical assistance program on banking legislation described in the followingparagraphs will focus on all commercial and financial regulations which might have an impact oncommercial banking activities, especially on the leasing activity. The assistance described in these Termsof Reference is a Legal Subcomponent of the Technical Assistance Component for Non-Banking FinancialInstitutions, which is part of IDA's Financial Sector Technical Assistance Project. This subcomponentis associated with the Financial Sector Adjustment Project (FINSAC) in the Kyrgyz Republic.

Objectives

4. The main objective of this assistance is to help the Legal Department of the National Bankof the Republic of Kyrgyz (NBK) in its participation in finalizing and implementing the new legal bankingframework. More specifically, it aims at supporting NBK efforts to: (i) propose the key elements of andhelp to draft any legal instruments which may improve the use of leasing; (ii) deal with issues related tothe finalization and implementation of the draft Law on Pledge, and especially the conception of the newPledge Registry (this Registry, along with modern legal instruments for credit collateral, is essential forthe development of private commercial banking activity); (iii) finalize and implement, from NBK's side,a revised Banking Law and a revised Bankruptcy Law that are to be enacted under the support of the IDAFINSAC project; and (iv) propose whatever other legal instruments may prove necessary to build atransparent, sound, and efficient banking sector.

Assistance Strategy

5. The envisaged technical assistance program will be carried out by a lawyer (hereafterreferred to as "the Consultant") having high credentials and long experience in banking issues in CIScountries and other transition economies. The Consultant shall have extensive experience with the legalcommercial and banking framework of countries following a Civil Code tradition. It is expected that theselected lawyer will act as a short-term resident legal adviser.

- 18 -

6. The Consultant will coordinate his/her work closely with the consultants assigned to theother legal subcomponents of the Technical Assistance Component under the same IDA Credit. Inparticular, he will fully cooperate with the Legal Adviser assigned to the Ministry of Finance. TheConsultant will further liaise, as appropriate, with other assistance teams from other donors, such asIBRD, TACIS (EC), USAID, the Asian Development Bank, etc.

7. The resident expert will coordinate his/her work with Government bodies in charge ofthe legislative process; develop contacts with academic and professional circles specializing in commercialand banking legislation and with banking practitioners.

8. This project will be implemented over a six-month period and is expected to start in July1996.

Activities and Output

9. According to the outline of the Technical Assistance Project described supra ,this technicalassistance subcomponent will involve the following activities:

* Assist NBK in designing, drafting and discussing whatever legal instruments may benecessary to improve the use of leasing; for this task, he/she may participate as an expertin drafting meetings;

* Review and comment on the present state of the legislation related to commercial bankingactivities and the ongoing preparatory work on complementary legal measures takingplace in NBK and other Government entities, with special attention to the proposed draftLaws on Pledge, Banking, and Bankruptcy; for this task, he/she may participate as anexpert in drafting meetings;

3 Take part in any legal work related to the implementation of these laws and proposerevisions and complements that seem to be required for the existing legal framework tobe fully consistent with the development of an efficient and sound banking sector;

3 Assist the Legal Department of NBK in designing a strategy for proposing legal reformsto ensure the move towards a transparent, stable and efficient environment, favorable toa sound private banking sector in a market economy.

10. On all the aforementioned issues, the Consultant is expected to provide NBK with advice duringparliamentary debates adequate to maintain the consistency of the draft laws and in keeping with theneutrality of a foreign expert.

Reporting

11. The Consultant will submit an Inception Report within six weeks of commencing his/herassignment, mainly with a view to outlining the planned work program in more detail, and recommendingchanges--for approval by NBK and IDA--as appropriate in view of the initial findings and discussions.This first report will also include the suggested work program for NBK's legislative activities.

- 19 -

12. At the end of month four, the Consultant will submit a quarterly Progress Report, in briefinformal style, on past and planned activities and detailed inputs, oni contributions to the projectobjectives, and on problems encountered and remedies introduced or proposed. This Progress Reportwill also contain updates on NBK's legal reform work program.

13. At the end of the month six, the Consultant will submit a Final Report that reviews thelast two months as well as the entire year's activities. The Final Report will also propose a banklegislation program for the next year, and make general recommendations on the conduct of banklegislation reform. The reports will annex all formal written materials provided by the Consultant to theGovernment/NBK. Moreover, the Consultant will submit at appropriate times other reports or legaldrafts. These outputs may be submitted jointly with the Progress Report if this does not entail delays.All reports shall be submitted to NBK (three copies in Russian, one in English), and IDA (one inRussian, two in English). On the Consultant's suggestion and with the approval of NBK, further copiesof reports will be provided to other executive, legislative and judicial organs as appropriate.

Consultant Qualifications

14. The Consultant will have extensive experience in banking legislation. The Consultantshall have high credentials and long experience in banking issues in CIS countries or other transitioneconomies. He or she shall have a good knowledge of and extensive experience with the legal commercialand banking framework of countries following a Civil Code tradition.

15. He or she should have a good sense of diplomatic interaction with various officialinstitutions, much initiative, and a pragmatic approach. He or she should have, if possible, at least basicRussian language skills; fluent Russian would be highly desirable.

16. The Consultant will be selected on the basis of his/her approach, methodology, time table,and qualifications. He/she may only be replaced with the prior written approval by NBK and IDA.

Inputs

17. The Consultant contract will cover:

* fees, including overhead;* travel, accommodation, and living expenses;* project-related communication, report distribution, and office supplies;* office equipment (one personal computer with auxiliary equipment, one printer, and

facsimile machine) for the direct project-related use by the Consultant, to be turned overto NBK upon project completion.

18. NBK will make available to the Consultant:

* assistance in the arrangement of housing, hotel rooms, visas, and travel;* bi-lingual Russian/English language secretarial support;* information including draft and final legal texts as requested by the Consultant and

required for carrying out his/her assignment;* adequately furnished office space with telephone facilities.

- 20 -


ADVISER ON BANK REORGANIZATIONTO THE NATIONAL BANK OF KYRGYZ REPUBLIC

TERMS OF REFERENCE

Background

1. As part of the financial sector reform program, the National Bank of the Kyrgyz Republic, thecentral bank, has been reviewing the performance of the four largest commercial banks in the country(all of which have serious liquidity and loan portfolio problems) with a view to determining which banksmay have to be liquidated and which need restructuring In the case of Agroprombank, it has beendecided to liquidate it.

2. Agroprombank was- established in 1991 as a joint stock company with 600 enterprises and 1000individuals as shareholders. It has 52 branches and a total staff of 1,300. Until 1994, it was thedominant lender to the agriculture sector, extending loans to farmers and farm enterprises through itsbranch network, as directed by government decrees. It was also used by the Kyrgyz Treasury and theMinistry of Agriculture to distribute various pension, salary, disability and social services payments tothe populace and make remittances of taxes to Bishkek. NBK examination has revealed that virtually theentire loan portfolio of Agroprombank is non-performing and the bank is both unprofitable and insolvent.After considering various options it has been decided that it should be liquidated.

3 . Since the Agroprombank has an extensive network which was the conduit for providing ruralfinance, NBK is desirous of considering various options regarding the rationalization of the branchnetwork at the time of its liquidation. It is possible that over time a number of key branches of the bankwill re-emerge as either new independent banks, rural credit unions, branches of existing banks, or localoffices for credit cooperatives. A team of international auditors is already reviewing this matter. NBKnow needs the services of an adviser for one year to carry out the following duties:


a. Taking into account the work done by the auditors, develop an in-depth study and profileof each branch in the network, including size of branch, location, market niche, potentialprofitability, and synergy with other branches in the network;

b. Analyze each branch under the criteria stated above (paragraph 3) and develop a profileof those branches which could be sold independently or in a group package based on alogical market segment;

c. Determine which branches should be closed down and which are necessary to continuethe government payments system; and

d. Lead a working group in NBK to carry out the above tasks and assist the working groupin implementing NBK management decisions on the above and allied matters.

- 21 -

Qualifications

4. The Adviser should possess a degree in Economics, Finance, law or Accounting and haveat least 1S years experience in management positions in a major international bank, preferably in HeadOffice dealing with administration of branches, or in international bank management consultancyorganizations, with exposure to bank liquidation. He/she could be on loan from the respective institutionor be a retired banker. Knowledge of Russian would be an advantage. The Adviser should be used toworking in an international environment.


5. The NBK is responsible for providing a personal computer, appropriate software, andpriority use of office equipment (printer, photocopier, fax, etc.) all of which are expected to be purchasedby the beneficiary out of the Project Preparation Facility. The NBK will also provide a bilingualsecretary, desk and office space, assistance in finding appropriate housing, administrative assistance inobtaiing visas, customs clearance and any other administrative permits required by the consultant in theperfbrmance of the assignment.


7. Prior to submission of TOR to prospective applicants, the Ministry of Finance, inconsultation with the IDA, will review the TOR and include such other details as duration of assignment,counterparts, required qualifications, experience and background and language proficiency.

- 22 -


TERMS OF REFERENCEADVISER TO AKB KYRGYZSTAN AND PROMSTROIBANK

Background

1. An adviser is required for a 6 month period to assist the management of AKB Kyrgyzstanand Promstroibank to raise capital from institutional investors. Reporting to the Governor of the NationalBank or his delegate, and to the Chairperson of each of the 2 banks, the consultant will work with thebanks' management teams to prepare them for the sale of an interest in each bank, to identify potentialinvestors, to market the banks and to assist in the negotiations with investors.

2. The banking system in the Kyrgyz Republic currently consists of the National Bank ofthe Kyrgyz Republic, three former state-owned banks (Agroprombank, AKB Kyrgyzstan andPromstroibank) and 14 small, privately owned banks. Agroprombank, the nation's largest bank, is to beliquidated and a fourth state-owned bank, Elbank, is currently being liquidated.

3. AKB Kyrgyzstan and Promstroibank are both joint stock institutions formed from statebanks. AKB was formerly the Soviet Housing and Social Commodity Bank while Promstroi was the statebank for industry and construction. These two banks have significant branch networks and with thedemise of Agroprombank and Elbank have the potential to be the largest banks in the restructured bankingsystem.

4. Both banks made loans to state enterprises as directed by Government and, as a result ofthis practice and poor management, have negative capital according to diagnostic audits recentlyperformed in accordance with International Accounting Standards. These audits indicate that AKB hasgross loans of about 213 million som and required provisions against these loans of 171 million som;capital is a negative 160 million som, and 169 million som is required to bring capital to the required 8%level. Promstroibank has gross loans of approximately 104 million som with required provisions of 50million som; capital is a negative 15 million som and 24 million som is required to bring capital to the8% required level.

5. Both banks are operating under a letter of agreement with the National Bank of theKyrgyz Republic (NBK) under which they are to raise additional capital and meet all prudentialguidelines. Failure to achieve recapitalization will result in the liquidation of both banks. The diagnosticaudits have provided management of both banks with recommendations for improvement but managementneeds assistance in setting a new course and in raising the required capital.


6. For each bank, the adviser is to: develop investment options; counsel management on theimplications of the options and on the process for seeking investment; prepare an information package;market the bank to potential domestic and international investors; identify a short-list of investors; preparemanagement to conduct negotiations with the potential investors; and provide assistance as appropriate

- 23 -

during the negotiations. The minimum required result is that by the end of the assignment managementof both banks are prepared to enter negotiations with investors who have provided written evidence oftheir financial capacity and their interest in investing in the banks.

7. The consultant will spend about I month at the beginning of the assignment working withbank management, with the remainder of the time divided between communicating with potential investorsand preparing management for negotiations with investors. The consultant's time and efforts will bedivided equally between the 2 banks, at least until such time as potential investors have been identified.

8. The consultant will:

a. become familiar with each bank and the banking environment by reviewing the findingsof the diagnostic audits, interviewing management, visiting branches and customers andconducting research into the competitive situation;

b. work with management to identify the strengths of each bank, suggest possible strategicdirections and develop criteria for determining eligible investors;

c. propose alternative investment options and counsel management on the implications ofeach option;

d. prepare one or more information packages for each bank directed to international andpossibly domestic investors;

e. identify potential investors from discussions with bank management, from his or her owncontacts and from discussions with the World Bank, IFC and EBRD;

f. communicate with potential investors and prepare a short list of eligible investors whohave provided written evidence of a serious interest in investing in the banks;

g. prepare management to enter negotiations with investors; andh. assist management with negotiations as appropriate.

Qualifications

9. The consultant will have: extensive and senior level contacts within the bankingcommunity in Europe, Central Asia and the CIS countries; demonstrated merchant banking experience;proven experience in facilitating investments in banks by institutional investors; and the ability to motivateand counsel bank management to prepare them for a period of considerable change.


10. The NBK is responsible for providing a personal computer, appropriate software, andpriority use of office equipment (printer, photocopier, fax, etc.) all of which are expected to be purchasedby the beneficiary out of the Project Preparation Facility. The NBK will also provide a bilingualsecretary, desk and office space, assistance in finding appropriate housing, administrative assistance inobtaining visas, customs clearance and any other administrative permits required by the consultant in theperformance of the assignment.


- 24 -


- 25 -


Liquidation Adviser to Debt Resolution Agency (DEBRA)Terms of Reference

Background

1. The government of the Kyrgyz Republic has established the Debt Resolution Agency(DEBRA) as a legal entity to act in the capacity of a receiver on behalf of the National Bank of theKyrgyz Republic (NBK), the central bank, to take control over and dispose of the assets and liabilitiesof some of the former state-controlled commercial banks in the country. The banks so identified willhave been deemed insolvent by NBK and their assets, primarily non-performing loans (classified asdoubtful or loss by NBK), will be subject to resolution and ultimate disposition, while their liabilities,primarily deposits, will be subject to scheduled payout programs.

2. DEBRA's operations will be carried out through two principal units (a) the ReceivershipUnit and (b) the Debt Recovery Unit. The Receivership Unit will, on behalf of NBK, take possessionof assets and liabilities of intervened banks and dispose of them in accordance with the insolvencylegislation. The Debt Recovery Unit will take title of and control over the non-performing loan portfoliosof these banks and establish a recovery and resolution strategy for each of the non-performing assetsunder its control.

3. DEBRA will be headed by a managing director, who will be assisted by two full timeforeign resident advisers having responsibility respectively for receivership and debt recovery functions.The overall management will be entrusted to a board of directors, chaired by the Governor of NBK andhaving representatives of the Ministry of Finance and NBK. All recommended courses of action withregard to liquidation of assets and liabilities of intervened banks, and the resolution and disposition oftheir non-performing loan portfolios will be referred to the board for review and decision.

4. DEBRA is presently in need of an adviser, who will be stationed in Bishkek for two yearswho will provide assistance in the development of policies and procedures that wil enable thereceivership unit to co-ordinate its activities with the Bank Supervision Department of the NBK to initiatethe orderly intervention of insolvent banks. This activity will include: the establishment of guidelinesfor receivership activities, including deposit payouts, conversion of liquid assets to cash, disposal of fixedassets, etc.. The receivership adviser will also assist in the establishment of procedures for the transferof non-performing loans and other assets to the debt recovery unit; participate, as appropriate, in theinitiation of such legal actions as required by the receivership unit, and supervise the conduct of suchother receivership activities as called for in established liquidation procedures. The adviser will beresponsible for the establishment of an organizational structure for the receivership unit and the trainingof its personnel.


5. The Receivership Adviser will be responsible for the following activities:

- 26 -

a. Assist in establishing DEBRA to carry out its functions, prepare organization structure,rules of business and operating procedures; specifically,

i. Drafting operating manuals for the establishment of conservatorship operationsat insolvent banks in anticipation of conversion to the receivership function;

ii. Detailing individual roles and responsibilities of the members of the interventionteams from the Bank Supervision Department of the National Bank, as well asthe DEBRA Receivership Unit;

b. Issue instructions as to asset valuation, loan review, deposit analysis, liquidity review,etc., in conjunction with established conservatorship procedures;

c. Effect the transfer of non-performing loan assets to the Debt Recovery Unit;

d. Initiate such legal actions as appropriate in the role of receiver;

e. Monitor the activities of receivership unit personnel, concurring in approval of actionstaken where appropriate, assuming overall direction of the continuing training program,evaluating the performance of the receivership unit personnel;

f. Assume overall responsibility for the establishment of ongoing training programs for theKyrgyz personnel under his/her supervision. The training activities in the receivershipunit will be primarily of an on-the-job nature, as the activities of this unit will beundertaken on the premises of the intervened banks. There will be a great deal of hands-on assistance until the Kyrgyz staff have developed sufficient expertise to makeindependent decisions;

g. Conduct such other receivership activities as called for in established liquidationprocedures.

Liaison and Reporting Requirements

6. The Receivership Adviser will report directly to the Chairman of the Management Boardof DEBRA. The Adviser will have continuing liaison responsibilities with Bank Supervision Departmentmanagement at the NBK. Within thirty days of the commencement of the project both advisers willprepare a work plan for concurrence in by the supervisory management of DEBRA, the Bank SupervisionDepartment management, and the task manager of the World Bank. At the end of each quarter, theadviser with prepare a progress report to the above-mentioned parties, outlining each unit's activities,progress made to date, next quarter activities and expected achievements, and any areas of concern thatshould be addressed. At the end of the project, a final report will be submitted in accordance withestablished World Bank procedures.

- 27 -

Qualifications

7. The Adviser should possess a degree in Economics, Finance, Law or Accounting andhave at least 15 years commercial banking and/or bank regulatory and supervision experience. TheAdviser should be well-versed in bank examination procedures, loan review and audit procedures, andhave experience in the lending and debt recovery areas. He/she could be on loan from an appropriatebanking/bank management institution. Knowledge of Russian would be an advantage. The Advisershould be used to working in an international environment.

Contract Arrangements -




- 28 -


FINANCIAL ADVISER TO DEBT RESOLUTION AGENCY (DEBRA)TERMS OF REFERFNCE

Background

1. The government of the Kyrgyz Republic has established the Debt Resolution Agency(DEBRA) as a legal entity to act in the capacity of a receiver on behalf of the National Bank of theKyrgyz Republic (NBK), the central bank, to take control over and dispose of the assets and liabilitiesof some of the former state-controlled commercial banks in the country. The banks so identified willhave been deemed insolvent by NBK and their assets. primarily non-performing loans (classified asdoubtful or loss by NBK). will be subject to resolution and ultimate disposition, while their liabilities,primarily deposits, will be subject to scheduled payout programs.

2. DEBRA's operations will be carried out through two principal units (a) the ReceivershipUnit and (b) the Debt Recovery Unit. The Receivership Unit will, on behalf of NBK, take possessionof assets and liabilities of intervened banks and dispose of them in accordance with the insolvencylegislation. The Debt Recovery Unit will take title of and control over the non-performing loan portfoliosof these banks and establish a recovery and resolution strategy for each of the non-performing assetsunder its contrnl

3. In its capacity as a temporary agency operating under a governmental mandate, to recruitand train indigenous personnel under the supervision of foreign advisers in both the receivership and debtrecovery functions so as toS create a cadre of experienced and capable supervisory and debt work-outspecialists for on-going activities within the Kyrgyz banking system after the termination of the mandate.

4. DEBRA will be headed by a managing director, who will be assisted by two full timeforeign resident advisers having resp(onsibility respectively for receivership and debt recovery functions.The overall management will he entrusted to a board of directors, which will be chaired by the Governorof NBK, and will have representatives of the Ministry of Finance and NBK. All recommended coursesof action with regard to liquidation of assets and liabilities of intervened banks, and the resolution anddisposition of their non-pertorming lo:tn portfolios will he referred to the board for review and decision.

5. DEBRA is piresently in need of a financial adviser, who will be stationed in Bishkek fortwo years and head the proposed Debt Recovery Unit (DRU) DRU will act as the vehicle through whichall recoveries are made by the governmenit and all other classes of creditors, by collection, restructuring,and resolution of outstanding balances of the intervened banks' non-performing loan portfolios. Morespecifically, the adviser's dujties and responsibilities will he as follows:


a. Will develop the policies and procedures and establish the guidelines and oversight of theactivitics tit the roceivership unit as follows

- 29 -

i. Drafting work-out loan manuals outlining the basic loan recovery principles andtechniques;

ii. Establishing debt recovery teams from existing and/or recruited personnel, andcreating operating procedures and chains-of-command for each team member;

iii. Creating debt recovery unit goals and objectives with regards to collection totals,restructured loans, asset sales, write-offs, etc;

iv. Preparing status reports for DEBRA supervisory management regardingdisposition activities, personnel performance evaluations, operational reviews,etc..

b. Direct the work-out teams to carry out the following exercises in respect of the portfolioassigned to them:

i. analysis and review of the loans: to include borrower's background and itsoperation; review and assessment of the borrower's financial statements, taxreturns (if applicable/available) and other relevant financial data; evaluation ofcollateral, and personal and/or third party guarantees; cash flow projections toassess realistic repayment prospects of some or all debt (principal and interest);

ii. development of restructuring options: to include rescheduling of debt i.e.,extension of loan maturities, balloon payments, interest rate relief etc.; requestingadditional collateral, guarantees, setting up of accounts receivable financing;negotiating payments and compromise of principal (interest)- all these alternativesto be discussed in direct negotiation with the borrower to devise an optimumrestructuring plan;

Hi. recommendation as to courses of action; and

iv. ultimate disposition of each loan in its portfolio.

c. review the restructuring plans developed by the work-out teams and theirrecommendations and submit adviser's recommendations to the management/board, asper rules of business;

d. In the cases where no recovery potential exists, make recommendations to themanagement/board for approval to write off uncollectible principal and interest;

e. In cases of restructured loans, to require the work-out teams to continue to monitor debtservicing until final payment to ensure that further attention is given to cases whereborrowers continue to experience financial difficulties;

f. Establish and have overall responsibility for ongoing training programs for the indigenouspersonnel under their supervision. It is envisioned that most of the training will be in theform of classroom seminars where instruction will focus on:

- 30 -

i. Analysis and review of each non-performing asset;ii. Familiarization with the borrower and its operations;iii. Review and assess the borrower's financial statements, etc.;iv. Evaluation of collateral, and personal and/or third party guarantees;v. Cash flow projections for debt repayment analysis;vi. Debt restructuring options;vii. recommendations as to disposition courses of action;viii. Reporting and monitoring requirements and techniques

g. Evaluate the personnel under supervision on a continuing basis and convey an assessmentand recommendation to the DEBRA supervisory management within agreed to timeframes.

h. Carry out any other activity in respect of loans requiring resolution, as may be deemednecessary.

Liaison and Reporting Requirements

6. The Debt Recovery Adviser will report directly to the Chairman of the ManagementBoard of DEBRA. The adviser will have continuing liaison responsibilities with the Bank SupervisionDepartment Management at the National Bank of the Kyrgyz Republic.

7. Within thirty days of commencement of the project, both advisers will prepare a draftwork plan to be submitted and cleared by: supervisory management of DEBRA, the Bank SupervisionDepartment management, and the Task manager of the World Bank. At the end of each quarter, theadviser will prepare a progress report to the above-mentioned parties, outlining the Unit's activities,progress made to date, next quarter activities and expected achievements, and any areas of concern thatshould be addressed. At the end of the project, a final report will be submitted in accordance withestablished World Bank procedures.

Qualifications

8. The Adviser should possess a degree in Finance or Accounting and have at least 15 yearsexperience in management positions in commercial bank lending. The Adviser should have worked withregulatory agencies in the conservatorship-receivership areas with special emphasis on asset disposition.A familiarity with real estate disposition will be particularly helpful. He/she could be on loan from anappropriate banking/bank management institution. Knowledge of Russian would be an advantage. TheAdviser should be used to working in an international environment.



- 31 -



- 32 -


SPEcIALLST IN NON-BANK FINANCIAL INsTrrITmoNsINCLUDING INVESTMENT FUNDS

TO ADVISE THE MINSTRY OF FINANCE

TERMS OF REFERENCE

Background and Issues

1. The development of the an efficient network of non-bank financial institutions, to worktogether with an operating capital market sector, is an important and fundamental part of the Kyrgyzgovernment's program to achieve an efficient, sustainable and market-oriented financial sector. A key tothe transformation of the Kyrgyz economy will be the role of the NBFIs in their support of thedevelopment of the capital markets as both a facilitator of the privatization process and as an investmentsource for new securities. Currently the securities market is in an early stage of development, however,it is envisioned that the supply of securities will increase rapidly in the near future and the NBFIs mustbe developed as well if they are to be available as an important source of savings to absorb these newissues.

2. In mature market economies, a system of NBFI operations such as insurance companies,pensions funds, and investment funds are able to mobilize large amounts of medium and long termsavings for investment. These companies, in both the public and private sectors, are commonly consideredto be contractual savings institutions which can greatly stimulate the capital markets in which they invest.As the fledgling Kyrgyz capital markets begin to gain in both size and strength, the NBFIs will play anincreasingly important role. The existing investment funds, insurance companies and the evolving privatesector and government pension funds all require a high level of technical assistance to strengthen theiroperations and enhance their development.

3 . In the case of the Kyrgyz Republic the current uncertain legal status and poor operationalefficiencies of the NBFIs, as well as the weak regulatory environment in which the existing NBFIsoperate, will all require adjustment. It is envisioned that technical assistance will be needed to strengthenthe performance of each of the following NBFI type operations:

Investment Funds. There are currently some 17 different investment funds operating in theKyrgyz Republic, of which 4 account for over 85% of the total assets managed. The funds issueshares to the public for cash, or in exchange for privatization coupons and use these coupons topurchase shares directly in newly privatized enterprises. By mid-1995 however, the vast majorityof the coupons issued had not been invested and many of the funds are in a very poor financialposition; to the extent that their future operations are threatened. The fund's problems are a resultof a number of diverse factors, including but not limited to:

i. the limited scope for attracting cash in exchange for shares;ii. the 25% limit on any fund's investment in any enterprise;iii. many cases of poor fund management, and;iv. a lack of prudential regulations and supervision;

- 33 -

v. a shortage of investable savings in the economy.Fund managers need training in accounting, asset/liability management, enterprise governance,and basic management techniques. There is widespread evidence that these funds have beenpaying dividends in excess of earned income, probably from the fear that investors will make arun to sell their fund shares if their (often unrealistic) dividend expectations are not met.

Insurance Companies. The Kyrgyz republic's insurance sector has the potential for playing avery major role in the financial markets, As the industry evolves away from its traditional, andloss incurring, base of credit insurance and into the fields of property, accident, life and medicalpolicies; the potential for the accumulation of investable funds seems assured. However, it isimperative that the industry shift its accounting systems towards internationally accepted practices.Additional constraints to immediate financial market investment by insurance companies includerapid changes in the nature and maturity of insurance company liabilities and the lack oftransparent market values of investments. The industry requires several fundamental adjustmentsin the areas of accounting practices, prudential supervision, reserve requirements, transfer ofskills and technology from foreign insurers, and the easing of restrictive regulations regardinglimits on where companies can invest and where they must place their reserves.

Pension Funds. To date pension fund operations in the Kyrgyz Republic are marginal with onlytwo private funds offering services to private sector enterprises. A few of the large formerlystate-owned enterprises have formed internal pension fund schemes but they appear to be largelyunderfunded, As yet the government employees funds are not managed on any coordinated orcentralized basis. There is a government managed social security system which requiresmandatory contributions from employees earning wages above a minimum level. The futurecontribution of pension funds a savings contributors into the capital markets will depend on anumber of factors including:

i. a change in public policy regarding pension funds;ii. the development of prudential regulations on pension funds;iii. new tax laws regarding investments by pension funds;iv. the degree to which mandatory pension funds become required;v. the development of a centralized public social security system, and;vi. new incentives to develop private pension fund operations versus individual

employer funds without regulation.

It is necessary at this stage of the development of pension funds to review the fundamental natureand future of the pension fund system through technical assistance. The nest step would be thedevelopment of coordinated policies, a new Law on Pension Funds, and the drafting of prudentialregulations on pension fund operations.

4. The State Agency for Securities (SAS) is a small agency under the Ministry of Financewith responsibilities for regulating and supervising capital markets and the NBFIs. Currently this agencyis incapable of undertaking its assigned tasks due to shortages in personnel, facilities, training, budget,and adequate authority. It is envisioned that this agency will become a focal point for capital market andNBFI development and that these shortcomings will be corrected. The SAS should be upgraded throughthe creation of an inter-Ministry Board of Directors and eventually evolve into a permanent SecuritiesCommission with both regulatory and enforcement powers over the capital markets and the NBFIs.

- 34 -

Objectives

5. The Ministry of Finance will be responsible for the development of the NBFIs, the designof a comprehensive policy strategy for the sector, the evolution of the SAS, and the future role of theNBFIs in the capital markets. Consequently, the Ministry of Finance seeks the technical assistanceservices of a foreign expert to provide advise, guidance, and policy strategies for the development of theNBFIs in the Kyrgyz Republic. This advisor, who would report directly to the Minister of Finance,should be an experienced financial generalist with relevant international knowledge of NBFI operations,regulatory issues, and securities market development. The assignment will be for a minimum of one yearwith the possibility of further extensions at the request of the Ministry of Finance.

6. The overall objective of this technical assistance effort will be for the advisor to providedirect policy advice to the Minister and his designated staff in all areas of NBFI development. Emphasiswill be on addressing the problems and shortfalls outlined above and preparing the NBFI sector to becomean active and positive participant in the growth of the Kyrgyz capital markets. The advisor will act asprimary manager and coordinator for all additional short-term technical assistance which is to be providedin such areas a insurance services, legal reform, and investment fund development.


7. The advisor to the Ministry of Finance for the development of the non-bank financialinstitution sector will be responsible for providing advice and assistance in the following activities:

a. To study and determine the existing scope, organization, and operations of existingNBFIs as background for initiating future strategic policies for development of the sector;

bi. To assist the Ministry of Finance in the development of new prudential regulations andpolicies reforms designed to initiate further development of investment funds and theirinvolvement with the capital markets of the Kyrgyz Republic;

c. Act as liaison and coordinator for efforts to upgrade to performance of investment fundswith the purpose of better integrating their investment in listed shares on the stockexchange and improving their internal operational procedures;

d. Advice and assist in the efforts to strengthen prudential regulations governing theoperations of investment funds and develop methodologies to enhance the enforcementof these regulations;

e. Assist in the efforts to enforce the provisions of the recently issued Investment FundAccounting Guidelines;

f. Assist in the development and enactment of legislation for insurance companies andpension funds, coordinating the efforts of legal experts who will be engaged specificallyfor these tasks;

g.- To provide advice and cooperation with the proposed insurance specialist who will beengaged to provide direct technical assistance within the insurance sector;

- 35 -

h. To lead a standing working group for industry policy issues, to be formed within theMinistry of Finance and staffed with selected personnel from the MOF, NBK, SAS, andthe national stock exchange,

i. To provide timely, relevant, and ongoing advice to the Minister of Finance, and anyother government official as he may designate, on all matters concerning strategic issuesand the development of the NBFI sector and their relationship with the capital markets.

Implementation and Reporting Requirements

8. The technical assistance will be implemented over a period of one year with the possibilityof further extensions at the request of the Minister of Finance. The advisor will report directly to theMinister of Finance or his designee and will be expected to live full time in Bishkek during thisassignment. Appropriate office space, office equipment, and secretarial support will be provided theMinistry of Finance as will assistance in locating appropriate housing, obtaining work visas, and customsclearance.

9. The consultant contract will cover all fees for service, including overhead, travel,accommodation, and other living expenses.

10. The advisor will submit to the Minister of Finance and IDA an inception report withinthree weeks of the commencement of the assignment. This report should include a detailed work planbased on initial findings and consultation with Ministry of finance and NBFI sector personnel. This reportshould also include a brief summation of the consultant's understanding of the current status of the NBFIsector and initial recommendations for addressing perceived constraints to the project goals.

11. The advisor will submit to the Minister of Finance and IDA three quarterly reports whichwill concentrate on a discussion of the technical assistance activities undertaken and the progress of theproject to date. The quarterly reports should contain a separate section which clearly lists the advisor'srecommendations and indicates the next step actions that should be implemented by each party.

12. The advisor will submit to the Minister of Finance and IDA a final draft report at thecompletion of the assignment which incorporates both a summation of the activities completed during theproject and a discussion of the NBFI sector, its current activities, and recommendations for any futureactions to be taken.

Qualiincations

Given the diverse nature of this consultancy assignment, the advisor to the Ministry of Finance fordevelopment of the NBFI sector and its enhanced integration with the capital markets should be anexperienced financial generalist with relevant experience in the development and financial aspects ofinsurance companies, pension funds and investment funds and their relationships with the capital markets.The advisor should exhibit the following academic and professional qualifications:

* An advanced degree in either economics, finance, business or the equivalent and at least15 years relevant experience in the commercial banking, insurance, pension fund, orinvestment fund industries. Direct experience in capital markets or investment banking

- 36 -

activities involving working relationships with investment funds or insurance fundinvestment strategies would be an added strength.

* Prior experience with developing economies and the design and implementation ofprudential regulations for NBFI operations as they relate to capital market developmentpolicies.

* Experience and understanding of the operational and financial aspects of NBFIs ascontractual savings institutions and their relative importance and role in the developmentof the capital markets.

* A self-starter with strong written and verbal communication skills and the ability toprepare timely reports and action plans as may be requested by the Minister.

* A proven ability to work well with senior government officials and provide timely anduseful advice and policy strategies in this area, as well as to provide motivation andtraining to counterpart staff in the Ministry of Finance.

* Previous international experience in a similar project, preferably within the CIS or FSU,and the ability to communicate professionally in Russian would be an advantage.

- 37 -


SPECIALIST IN INSURANCE SERVICESTO ADVISE THE MINISTRY OF FINANCE

TERMS OF REFERENCE

Background

1. The are currently 15 risk and general insurance companies operating in the KyrgyzRepublic although over 70 operating licenses have been issued by the State Insurance SupervisionAgency. The industry profile is heavily skewed as the top five companies account for approximately 80%of the premium income. The State Supervision Agency which was formed in 1991, has the primaryresponsibility of registering and licensing insurance companies. The Agency has not been very activein its supervision role and is currently in the process of being privatized.

2. The industry is shifting away from its previously heavy position is credit risk insurancewhere major losses have been incurred (payments exceeded premium income by 36% in 1993), and ismoving towards property, life, accident, and voluntary medical insurance. The composition of premiumincome, as of mid-1995, is as follows: 52.6% in personal insurance (life and health); 37.2% in propertyinsurance; and 10.1% relating to goods in transit. Total premium income in 1994 top the 10 billion sommark, approximately $1 million. Reserves of the insurance industry totaled 42% of 1994 premiumincome. Premium rates and the allocation of reserves is determined by the State Insurance Supervisor.

3. The insurance sector faces a number of development problems and challenges as relatedto adjusting to western practices for risk assessment, premium rates, underwriting methodology, reservesmanagement, and accounting practices. The industry should expand its scope by working together withforeign firms on a co-insurance and re-insurance basis. The current level of industry reserves appear tobe excessive with restrictions on investment alternatives for these reserves which currently must be placedonly in low yielding bank deposits. Finally there is a need restructure the accounting systems used andrelieve the burdens of the current tax regime.

4. It is envisioned that as the insurance industry continues its improved performance andgrowth it wiU evolve into a position to play a major role in the financial markets, particularly as aninvestor in the capital markets. In order to achieve this goal there is a need for short-termn technicalassistance from a specialist in the insurance industry.

Objectives

5. The Ministry of Finance is currently responsible for the development of the insuranceindustry and is effecting the current privatization of the Insurance Supervisory Agency. Consequently theMinistry of Finance seeks the technical assistance support of a foreign expert/specialist in insuranceservices to provide advice and guidance for the immediate changes in the structure and supervision of theKyrgyz insurance sector. This assignment will be for a minimum of six months with the possibility ofa further extension at the request of the Minister of finance.

- 38 -

6. The primary objective of this technical assistance effort will be for the advisor to providedirect policy advice to Minister and his designated staff as well as work directly with insuranceprofessionals in the development of the industry. The advisor will act as primary liaison with theinsurance industry and the Insurance Supervision Agency for the purpose of effecting the structuralreforms necessary for transition towards western practices in the industry, the enhancement of riskassessment and underwriting practices, premium rate determination, and reserves investment. The advisorwill coordinate his efforts with the long-term advisor for NBFI development who will also be work inthe Ministry of Finance.


7. The advisor to the Ministry of Finance for the development of the insurance industry willbe responsible for the following activities:

a. To study and determine the existing scope, size, and operating procedures andprofitability of the insurance sector as background for developing a work plan to enhancethe industry's capability to become an active participant in the capital markets;

b. To assist the Ministry of Finance in the privatization process for the State SupervisionAgency, formulating new prudential regulations, setting the proper level for reserves, andstandardizing new accounting practices to be implemented throughout the industry;

C. Assist in the development and enactment of necessary industry legislation through auniversal Law for Insurance Companies, coordinating efforts with individual legal expertswho will be engaged specifically for this task;

d. Assist industry management in the evolution and development of their companies in suchareas as: 1) risk assessment and underwriting, 2) premium pricing and marketing ofproduct, 3) standard accounting systems, and, 4) investment strategies and managementof reserves;

e. Develop an industry standard for the valuation of investments and establish an initialprogram for the investment of reserves in alternative financial instruments, includingshares listed on the local exchange;

f. Assist industry management in establishing joint-venture relationships with foreigninsurance companies as co-insurers and re-insurance sources;

g. To work closely with the long-term advisor who will be responsible for the overalldevelopment of the NBFI sector as an advisor to the Ministry of Finance;

h. To provide timely, relevant, and ongoing advise to the Minister of Finance, and othergovernment officials as may be designated, on all matters concerning the strategicdevelopment of the insurance industry and its relationship with the capital markets.

- 39 -


8. The technical assistance will be implemented over a six months period with the possibilityof a further six month extension at the request of the Minister of Finance. The advisor will be expectedto live full time in Bishkek during this assignment. Appropriate office space and secretarial support willbe provided by the Ministry of Finance.

9. The advisor will submit to the Minister of Finance and IDA an inception report withinthree weeks of the commencement of the assignment. This report should include a detailed work planbased on initial findings on the insurance industry and consultation with the Minister of Finance. Theinception report should also include a brief summary of the advisor's understanding of the current statusof the insurance sector and initial recommendations for the next action steps to be taken to meet theagreed upon development goals.

10. The advisor will submit to the Minister of Finance and IDA a final draft report at thecompletion of the assignment which incorporates both a summation of the activities completed during theassignment and a discussion of long-term strategies to be developed for the further involvement of theinsurance sector in the development of the Kyrgyz capital markets.

Qualifications

11. The advisor to the Ministry of Finance for the strengthening of the Kyrgyz insurancesector should exhibit the following academic and professional qualifications:

* An advanced degree in finance or business along with a professional qualification in theinsurance field and at least 10 years relevant experience in management of aninternationally recognized insurance company.

* A thorough understanding of the various types of general risk and life insurance, theirrelative risks and policy structures, underwriting methodologies, and premium structures.

* Prior management experience with an internationally oriented insurance companyincluding the design, management, and implementation of reserve investments for thecompany in a developing economy.

* Experience and understanding of the operational and accounting aspects of a general riskinsurance company in an inflationary and high risk environment.

* A proven ability to work well with senior government officials and industry managementand to provide timely and useful advice and in-house training on specific and generaldevelopment issues concerning the industry.

* A self-starter with strong written and verbal communication skills with the ability toprovide timely reports and action plans as may be requested.

* Previous international experience in a similar project, preferably in the CIS or FSU, andthe ability to communicate professionally in Russian would be an advantage.

- 40 -


SPECIALIST IN STATE SECURITIES INSTRUMENTSTO ADVISE THE MINISTRY OF FINANCE

TERMS OF REFERENCE

Background and Issues

1. The development of the an efficient capital market sector, with a well developed supply of stateor government issued securities, is an important and fundamental part of the Kyrgyz government'sprogram to achieve an efficient, sustainable and market-oriented financial sector. A key to thetransformation of the Kyrgyz economy will be the role of the government in promotion and direct supportfor the development of the capital markets as both an issuer of stable short term securities and bonds.Also the state can perform important functions in the areas of assistance in the improvement of the legalbasis and regulation of the markets and an important facilitator of the privatization process through theissuance of new securities. Currently the securities market is in an early stage of development, however,it is envisioned that the supply of securities will increase rapidly in the near future and the abilities of thestate must be further developed if it is to achieve its potential in this area.

2. In the case of the Kyrgyz Republic the current uncertain legal status and poor operationalefficiencies of the capital markets as well as the lack of marketable securities available on the exchange,will require a concentrated effort of adjustment. It is envisioned that technical assistance will be neededto strengthen the performance of the capital markets through the introduction of a series of governmentsecurity and debt instruments.

3. The State Agency for Securities (SAS) is a small agency under the Ministry of Finance withresponsibilities for regulating and supervising capital markets. Currently this agency is incapable ofundertaking its assigned tasks due to shortages in personnel, facilities, training, budget, and adequateauthority. It is envisioned that this agency will become a focal point for future capital market developmentand that these shortcomings will be corrected. The SAS should be upgraded through the creation of aninter-Ministry Board of Directors and eventually evolve into a permanent Securities Commission withboth regulatory and enforcement powers over the capital markets.

Objectives

5. The Ministry of Finance will be responsible for the design of a comprehensive policy strategyfor the capital markets sector, the development of a securities market for state financial instruments, andthe evolution of the SAS. Consequently, the Ministry of Finance seeks the technical assistance servicesof a foreign expert to provide advise, guidance, and policy strategies for the development of the statesecurities market in the Kyrgyz Republic. This advisor, who would report directly to the Minister ofFinance, should be an experienced capital market and securities specialist with relevant internationalknowledge of official financial instruments, capital markets operations, regulatory issues, and securities

- 41 -

market development. The assignment will be for a minimum period of six months with the possibility offurther extensions at the request of the Ministry of Finance.

5. The overall objective of this technical assistance effort will be for the advisor to provide directpolicy advice to the Minister and his designated staff in all areas state security market development.Emphasis will be on addressing the problems and shortfalls outlined above and preparing the state sectorto become an active and positive participant in the growth of the Kyrgyz capital markets.


6. The advisor to the Ministry of Finance for the development of the state securities and debtinstrument market through the local stock exchanige will he responlsible for providing advice andassistance in the following activities:

a. To study and determine the existing scope and extent of the government security and debtinstrument market as background for initiating future strategic policies for developmentof the sector;

b. To assist the Ministry of Finance in the development of a new short-term treasury billmarket their involvement with the capital markets of the Kyrgyz Republic:

c. Design and promote the development of a program for state bonds and debt notes to beissued through the capital markets;

d. Design and promote the issuance of government-hacked long term savings instrumentsfor the public,

e. Assist the government in the development of Kyrgyz securities which can be floated onthe international markets;

f. Provide assistance in the improvement ot the legal basis for the state security marketsand the enforcement of prudential regulations for the capital markets;

g. To provide advice and cooperation with the management of DEBRA for the purpose ofestablishing a methodology for the securitization of debts transferred to DEBRA (i.e. debt/ equity swaps);

h. To provide timely, relevant, and ongoing advice to the Minister of Finance, and anyother government official as he may designate. on all matters concerning strategic issuesand the development of state securities sector to be traded through the capital markets.


7. The technical assistance will be implemented over a period of six months with thepossibility of further extensions at the request of the Minister of Finance. The advisor will report directlyto the Minister of Finance or his designee and will be expected to live full time in Bishkek during thisassignment. Appropriate office space, office equipment, and secretarial support will be provided by the

- 42 -

Ministry of Finance as will assistance in locating appropriate housing, obtaining work visas, and customsclearance.

8. The consultant contract will cover all fees for service, including overhead, travel,accommodation, and other living expenses.

9. The advisor will submit to the Minister of Finance and IDA an inception report withinthree weeks of the commencement of the assigmnent. This report should include a detailed work planbased on initial findings and consultation with Ministry of finance and capital market personnel. Thisreport should also include a brief summation of the consultant's understanding of the current status of thestate securities sector and initial recommendations for addressing perceived constraints to the projectgoals.

10. The advisor will submit to the Minister of Finance and IDA a final draft report at thecompletion of the assignment which incorporates both a summation of the activities completed during theproject and a discussion of the state securities sector, its current activities, and recommendations for anyfuture actions to be taken.

Qualifications

11. Given the diverse nature of this consultancy assignment, the advisor to the Ministry ofFinance for development of the state securities sector and its enhanced integration with the capital marketsshould be an experienced capital markets specialist with direct experience in the design and trading ofgovernment security and debt instruments. The advisor should exhibit the following academic andprofessional qualifications:

a. An advanced degree in either economics, finance, business or the equivalent and at least10 years relevant experience in capital market operations and the theory behind theissuance of state security and debt instruments. Direct experience in capital markets orinvestment banking activities involving working relationships governments and/or thegrading of government instruments would be an added strength.

b. Prior experience with developing economies with the design and implementation ofprudential regulations for government securities operations as they relate to capital marketdevelopment policies.

c. Experience and understanding of the operational and financial aspects of government debtinstruments, debt/equity swaps, international government securities, and treasury billoperations.

d. A self-starter with strong written and verbal communication skills and the ability toprepare timely reports and action plans as may be requested by the Minister.

e. A proven ability to work well with senior government officials and provide timely anduseful advice and policy strategies in this area, as well as to provide motivation andtraining to counterpart staff in the Ministry of Finance.

- 43 -

f. Previous international experience in a similar project, preferably within the CIS or FSU,and the ability to communicate professionally in Russian would be an advantage.

ANNEX III

TIMETABLE OF KEY PROCESSING EVENTS

- 44 -

KYRGYZ REPUBLIC


TIMETABLE OF KEY PROJECT PROCESSING EVENTS

Time for Preparation: 3 months

Pre-Appraisal Mission: December 4, 1995

Appraisal Mission: March 26, 1996

Negotiations: May 9, 1996

Board Presentation: June 25, 1996

Expected Effectiveness: July 25, 1996

Closing Date: June 30, 2001

The Task Manager for this project is Ms. F. Aynur Sumer (EC3AI). The Division Chief and Department Directorare Messrs. Michael Gould (EC3AI) and Yukon Huang (EC3DR), respectively.

ANNEX IV

COST ESTIMATES FROM DONORS' CONFERENCE


Cost Estimstes from Donors' Conference held In Bishkek ii

April 5, 1996

REQUIREMENT DESCRIPTION YEAR SOURCE STATUS1996 1 1997 1 I998 OF OF

VERALL REFORM OF FINANCIAL SECTOR

_ Senior Aaw'se r to NB: One adwser to: (a) coordinate the TA providers to the financial 96.Funded by PPFsctor; (b) assist in implementation of FINSA C; (c) advise NBK 105,000 87,000 IDA 97:Uninded (wiling to

_ manafement on woicv and ooerationaM issues _ borrow from IDA)

ANK RESTRUCTURING AND LIQUEDATION

Advisreto NBK: on One adviser to: (a) help reduce/rationalize the branch network; 96:Fkuded by PPFRcorganztion of (b) assist in merger andpreparationfor sale of appropriate 105.00o 70,000 lDA 97:Unded (NE is

Bankiz seected branches of Agroprom and other bans wohich are lookingfr soures)branch systems l

Adviser to AKB . . ._Urffuided, NBK is

Ayrgyzsean and One adviser to provide marketing assistance in attacting 100,000 looking for grant basedKPromstroibana domestic and/or foreign investors. TA

DT RECOVERY AND RESOLUTIONS5pecialists in Debt I . ~~ nI I1 96 Funded byPFSp fsu inDb One specialnint asset sales and lisda,uidon to oversee 96-une by PP**Collection and I . . o foBrse 105,000 185,000 180,000 IDA 97:UnfWnded

Resclution to DEBRA estabshment and operat DEBRA DEB98 1- I 1 98Un fded

Spectali n Debt One (1)financial analyst experienced in loan workouts, to 96105,000d 100,00 100,0 IDA 3P97UrJcddColectio and prowde analytical support. * I 97*IU * 'ule-

.Resolution to DEBRA rR I _ R 98:Unw,ded

ANK SUPERVISION

One highly experienced bank eaminr to strengthen bank i IIIStrengthening Bank supervison skis and capabiletis in: (a) on-site bank fiundedby USAI 92000 l I A IANDI 96Pwuded

Supervision cxamination; (b) off-site surveillance; (c) problem bank R 1 97: Funded____ ____ ____ ___ m o nitoring_ _ _ _ _ _ __ _ _ _ _ _ _ _

Bankers Training One commercial banker experienced in training and leasing | 1 96: humded

nBankers Traimng operations to establish and run tbe Instiuce, develop 100,000 TACIS 97: unfumded

|lnstatuc |curriculum, hire outside trainers, etc. __, pledged b

* ITACS DENOTE HIGHER PRIORITY TECHNICAL ASSISTANCE REQUIREMENTS


Cost Estimates from Donors' Conference held in Bishkek i/

April 5, 1996

REQUIREMENT DESCRIPTION 1 YEAR |SOURCE STATUS1 1 1997 1998 OF OF

J IA-U I AN-UNIVItlTINCBankers Training Short -term consultants to teach short courses and to train future 100,000 200,000 92,000 TACIS pledged by TACISLInstitute trainers

Bankers Training Library and other equipment 30,000 10,000 5,000 TACIS pledged by TACISInstitute__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

* Two (2) full-time teachers, specialized in business law of ledged by TACIS/Training for Lawyers Civil Code tradition countries, to give training in the new laws 100.000 200,000 TACIS/ TIC TICA

on corporation, baneruptcy, banking, pledges, mortgages, etc. I

* Hardware and software for a comprehensive legal infonnatio 120,000 unfundedL __________________ system , _ __

BANK ACCOUNTING STANDARDS .. ..

Accounting Specia.sts Tw (2) specialists to help inpiement the new Chart of R USAID: 96:Partly Fundedtheanking specitsr Accouns, new reporting formats and standards, manuals for 224000 210,0000 1996 and 2/ 97: Pledged byLo t0fhe banking sector practitioners, pilot tests, and training to all commercial bank_s. H 1997 USAID

PAYMENTS SYSTEM

inprove the Payments Credit from the Japanese Government is $1.5 mln 1500000 Japan |1.5 of Japa Crty te 19l9and Clearing Systems finance_________partly________the_____1997____

Improve the Payments Needs to be borrowedfrom IDA 1000000 jj IDA UnfYndedand Clearing Systems

Imrv th Pamet II 46,0-Jpn grant anprovcahenPaymenu |Grantfrom the Japanese Government is $465,000 465000 Japan 465,0s alapan. grant,and Clearing Systems I _______________I_______I__ I_is_already_provided

MQTGAGE CREDITIN

|Consuffanf on Mortgage nalysis of opportunities for creation of mechanism on 100.000 IPC/TICA 1996:.o Be FundedCerediting Imortgage credits RI

NON-BANK FINANCIAL INSTITUTIONS

anon of the One (1) advisor to the MUinistry of Finance to provide guidance I 1 00 96: Funded by PPF

Sacurities andtraining in Development of the Securiies Market - - 105,0001 00,000 1 00,000 97,98: Urnded, but

* fAUCS DENOTE HIGHER PRIORIY TECHNICAL ASSISTANCE REQUIREMUET


Cost Estimates from Donors' Conference held in Bishkek it

April 5, 1996

REQUIREMENT DESCRIPTION YEAR SOURCE STATUS1 1996 1 1997 1998 OF OF

l gIAN-luN nJT .npc IsN-~~~~~~~~~ ~ ~ ~~~~~lUNJlknj F TNI}NG Fl J1Sl)NC.

One (I) advisor to the State Agency on Securities to provide 100,000 Pledged by USA1Iguidance and training in Development of the Securities Market P U

Investment fwunds One (I) advisor to set up a new accounting system, to improve 60,000 Unfundedcthe organization and management in investmentfunds | J

gencies speciaizing in One (1) advisor to the Ministry of Finance to provide guidance 60,000 96: UnfundedInsurance Services and training in developing the market on insurance services

Pension Funds One adviser to review Pension Fund Schemes, recommend 60,000 TA CIS | Fundedchanges, and help to design new schemes 4l l l lr

Legal Framework One lanyer to NBK to draft new legislationfor speciaUzed 75,000 Unfundedbanks and improve legislation on leasing._____________

One lawyerfor the Ministry of Finance to draft newLegal FrwmeKvrk legislation/regulations in area of non-banking financial 105,000 96: Funded by PPF

institutions including: (a) Law on Insurance; (b) Law on 97, 98: Unfunded= _____________ Pension Funds. l l l

RURAL FINANCE

Creding iOne advisor to the Ministry of Finance 100,000 l l Unfunded

egal & ewrk lOne layer to draft new legislation/regulations for development 75soo 1 ADB 97.FundedJ j egal Framrt |of rural credit unions and cooperatives I_T 1 I , I I _ _

ANNUAL TOTALS: 0 4420000 1623000 0 687,0001

THREE YEAR TOTAL 6730000 l

1/ Cost edtimates subject to revision depending on agreements with tbe Government and NBK

2/ USAID consukanii contma ends 6/30/96.* Cost estimates for advisory and consutany services inwlude the cost of office equipment necessary for each advisor/ consultant

* IrAICS DENOTE IHGHER PRIORITY TECICAL ASSISTANCE REQUIREMENTS

ANNEX V

IMPLEMENTATION PLAN

- 48 -

KYRGYZ REPUBLIC


IMPLEMENTATION PLAN

(for IDA-Funded Components)

COMPONENT RESPONSIBLE TIMINGAGENCY

1. Overall Reform of the Financial Sector l

* Senior Adviser to NBK NBK Dec. 1996 - Nov. 1997

* Financial Legislation NBK Dec. 1996 - May 1997

2. Bank Restructuring & Liquidation l

* TA to NBK NBK June 1997 - May 1998

* TA to Promstroi and AKB Kyrgyzstan Banks NBK Dec. 1996 - Nov. 1997

3. Debt Recovery and Resolution l

* Asset Sales and Liquidation Specialist NBK Dec. 1997 - May 2000

* Loan Workout Specialist NBK Dec. 1997 - May 2000

5. Training

* Legal Information System NBK/MOJ Apr. 1997 - Sep. 1998

7. Central Registry for Pledges NBK/MOJ Mar. 1997 - Feb. 1998

8. Payment and Clearing System NBK Apr. 1997 - Oct. 2000

9. Non-Bank Financial Institutions

* Investment Services MOF Feb. 1997 - Jan. 1998

* Insurance Funds MOF May 1997 - Oct. 1997

11. Public Debt Instruments & Securities MOF June 1997 - Nov. 1997

ANNEX VI

PERFORMANCE MONITORING INDICATORS

- 49 -

KYRGYZ REPUBLIC


Performance Monitoring Indicators

OUTPUT INDICATORS |IPACT INDICATORS

MANAGEMENT OF OVERALL REFORM PROGRANI

Obiective: a) Assist with i) Assist implementing new charn of accounts and i) Increased implementation capacity within NBK measured byimplementation and DEBRA operations, assist improving the payments substantial progress in achieving second tranche release conditionscoordination of and clearing system, assist creating mechanisms for in a timely manner;FINSAC reform mortgage finance; ii) Increased capabilities within NBK top management to handleprogram; ii) Develop training program for management and complex technical issues in financial sector reform andb) Strengthen the staff of NBK: development;NBK's institutional iii) Review, draft and finalize financial legislation; iii) Introduction of new, and possible revision to existing.capacity to manage iv) Bi-monthly reports on progress of the reform financial legislationthe FINSAC program and coordination of the TA Programreform program;c) Assist withfinalization offinancial legislation

DirectBenefiaain: NBK

BANK RESTRUCTURING AND LIQUIDATION

Obiective: Restnicture or i) Complete branch analysis of Agroprombank: i) Sale of viable former branches of Agroprombank and Elbank:liquidate insolvent ii) Submit timetable for completion of liquidation of ii) Transfer of non-performing loans and other assets of insolventbanks Agroprombank and Elbank to IDA and FINSAC banks to DRUt (DEBRA);

Review Commission; iii) Reduction of staff levels of Agroprombank and Elbank;iii) Prepare bi-monthly reports on the financial iv) By second tranche release, attainment of 'positive' or "zero"performance of Promstroi and AKB Kyrgyzstan level of capital bv Promstroi and AKB Kyrgyzstan banks. If not,

Direct Banks commencement of liquidation proceedingsBeneficiary: NBK, Elbank,

Agroprombank,Promstroibank,AKB Kyrgyzstan

DEBT RECOVERY AND RESOLUTION

Objective: Recovery of i) Prepare policies and procedures guides for DRU i) Transfer of analytical skills and managerial capabilities tooutstanding and BRU; DEBRA staff measured by number of unsupervised work-outbalances of non- ii) Develop loan work-out and conservatorship team visits to insolvent banks, and level of independence of BRUperforming loans of manuals; staff;insolvent banks or iii) Develop training program for DEBRA staff: ii) Increased sophistication within the Kyrgyz financial sectorresolution via other iv) Transfer all recoverable loan assets of Elbank and evidenced by the development of markets for asset sales and othercost-effective Agroprombank to DRU; asset disposition alternatives;means v) Prepare report classifying the non-performing iii) Increased financial discipline and improved portfolio

loans under its control into two categories (a) loans management within the banking sector measured by reduction inwhere the work plan for collection will be based on value of loan loss provisions;

Direct automatic criteria; and (b) loans where a case-by-case iv) Govemment issuance of Som 965 million long term bond toBeneficiary: DEBRA, NBK approach is practicable replace Agroprombank arrears to NBK

- 0-

TRAINING

Obiective: a) Training of i) Develop a training program for judges, (financed Wide disemnination of all official legal texts and major case law,Judges; by other donors); measured by the distribution, accessibility, and rates of usage ofb) Development of ii) Procure, install and implement a computerized the database 'stations'a comprehensive database system containing a comprehensivelegal information collection of legal recordssystem

DirectBeneflejarI: MOJ

CENTRAL REGISTRY FOR PLEDGES

Obiective: Establish a Central Procure, install and implement a database system in a Reduction of lending risk of banks, measured by reduction in theRegistry of Pledges Central Registry, to be established in the MOJ, to rate of loan defaultsto enforce security register pledges used as securityrights

DirectBenefician: MOJ, NBK

PAYMENT AND CLEARING SYSTEM

Obiective: Improve the Procure, install and implement new data processing Reduction in delays of payments, currently at 2 days within anational clearing and communications equipment region and up to 14 days inter-regionallyand settlementsystem

DirectBeneficiary: NBK, banks, bank

customers

NON-BANK FINANCIAL INSTITUTIONS

Obiective: Develop the i) Develop methodologies to enhance enforcement i) Emergence of SAS into permanent securities commissioncountry's non-bank of new regulations on "investment funds"; with regulatory and enforcement powers over capital marketsfinancial ii) Develop work plan to enhance insurance and NBFIs;institutions, industry's capability to become an active participant ii) The consolidation of authority for all securities marketincluding capital in capital markets, including, inter alia, developing regulations and supervision in SAS;markets, their industry standards, skills development, and joint iii) Development of the legal and regulatory framework forprudential venture relationships with foreign insurance the sound growth of the insurance industry, pension funds andregulation and companies; leasing institutions;supervision iii) Prepare new legislation on insurance industry, iv) Development of organized secondary market for T-Bills;

pension funds and leasing; v) The issuance of government bonds directly to publiciv) Develop policy reforms within MOF to promote through Kyrgyz Stock Exchange;NBFPs; vi) Increased public confidence in contractual savingsv) Strengthen SAS as the executive arm of the institutions, measured by increased transaction volume on

Direct Securities Commission KSE, increased number of contractual savings institutions,Benefidary: and increase in total value of their portfolios

MOF, SAS

PUBLIC DEBT INSTRUMENTS AND SECURITIES

Obiective: Develop i) Develop strategies for: i) Increased involvement by the government in the capitalinstitutional (a) a short term treasury bill market; markets, measured by the increased variety of govemrnent debtcapacity within (b) a program for state bonds and debt notes to be instruments available for purchase by the public;MOF to raise funds issued through the capital markets; ii) Greater use of non-inflationary means to finance budget deficitsin the debt markets (c) a program for government-backed long term

savings instruments for the public;ii) In conjunction with DEBRA, develop a

Direct methodology for the aecuritization of debtsBeneficiary: MOP, enterprises, transferred to DEBRA (i.e., debt/equity swaps)

_ publicMay 24, 1996

BRED 26822

KAZAKSTAN

<A, 1 s KokD honWro, =A

/} < = s~~~'t \syt1 ( ~~ CHUI

DZI, 4LAL- 4B AD ~ ~ (MAN RAD

N A R Y

O K,r. _D

/ KAZAKSTAN~~~~~" K

NATONAL-APIATO -, > r K ~ ORLAST CAPITALS

| /

0 SELECTED CITES0 S H

\ 6 9_ %>, -s ~~~~~~~~~~~~~~~~~~KY RGY Z R EP UB LI C|

T A J I K I S T A N c t+ t t, RAILkOADS

e [of ushonfs */ loMurrpb 9

f%~~~~~~~~~~~~~~~~~~~~~~~~AIN ROADS

5 , r. 'r_, cusSlso * ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~OTHER ROADS

AZL'RL UArl / lI KA ZA K STlAN \ Erro

s NATIONAL CAPITAL

w.roD,;-r t m \( - \ _ \ , , / v15s a | O SEIECTED C TIES~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~SLECEDCIIE

R1LCt4ETERS OBLAST BOUNDARIES

_ _ 5:, 0 L0 10 ITO -. s INTERNATIONAL BOUNDARIES

0 j~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~ 0

EE 1,8Llt /t- ( t ~~~~~~L @ C H , N ;A .. vEelo h egluse0 fPfr- odBt ou <E

Ar4UANSIA4, -414444 bto,d,'.,,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~,'L12

IIMAGI NG

Report No: h 6896 KGType: MOP

world bank document · pdf filedocument of the world bank report no. t-6896-kg technical annex...

Documents