Grey area alert - IFI sponsored PPPs the latest big thing in Kazakhstan

While it is not to be unexpected for the public to attempt to scrutinise the effective performance of governmental agencies, in recent years in Kazakhstan it has been far from obvious that many resources and services, projects and finances are being provided by international financial institutions (IFIs). Indeed, very often it is the IFIs that act as catalysts for various government programs, reforms and ideas that are subsequently adapted via the bureaucratic apparatus to Kazakhstan’s reality.

This article is from Issue 54 of our quarterly newsletter Bankwatch Mail

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In this context, the IFIs are seen as convenient external agencies by Kazakh officials as they can always be referred to in terms of data, competencies, responsibilities and recommendations. At the same time, though, when asked to comment on the effectiveness of programs and projects, IFI representatives tend to prefer leaving it to the responsibility of the country's executive bodies, referring to the fact that their institutions only provide financial support and necessary competencies while the national authorities themselves are responsible for tendering and other project implementation.

For projects to be successful, all stakeholders – the media, NGOs, sub-contractors, government agencies and the IFIs themselves – should be involved. This can help to resolve conflicts and prevent new ones from arising. Given the risks of corruption in Kazakhstan, as well as the traditional reluctance of the law enforcement agencies to investigate budgetary costs associated with international organisations, alas the main means of reducing project inefficiency is primarily via the involvement of civil society.

Yet such involvement has been facing new challenges since a recent upswing in public-private partnership (PPP) projects in Kazakhstan. 2011 saw the signing of a cooperation roadmap between Kazakhstan, the World Bank, the EBRD, the Asian Development Bank, the EU, USAID and others that are actively helping the country to upgrade national legislation in favour of PPP projects.

Not a silver bullet for public infrastructure. Our website Overpriced and underwritten exposes the hidden costs of public-private partnerships.

A notoriously opaque investment vehicle, are PPPs going to deliver more problems than solutions in Kazakhstan, particularly as the government has announced its intention to seriously ramp up the number of PPP projects over the next few years and has established a national PPP centre?

Never mind PPPs, just trying to investigate transport investments in the country can be challenging, as Anatoly Ivanov discovered with a recent article in the Respublika newspaper about an EBRD bus project in Almaty. The article raised questions about the procurement of 200 allegedly overpriced buses that had been supplied by the Chinese manufacturer Yutong in Almaty, as part of an EBRD loan, with a price tag of approximately USD 28 million.

According to Ivanov, the price for each bus is noticeably high when compared to European manufactured equivalents of better quality and higher capacity. As part of his investigation, the journalist attempted to find out which body had held the tender for procurement of the buses. In response to an information request, a representative of the municipality said that the tender was conducted by the EBRD; meanwhile an EBRD employee explained that the competitive bidding for the buses was held by the Akimat (the local Mayor’s office), in line with EBRD rules. Ivanov's investigations thus hit a dead end.

Will PPPs pose similar investigative problems? What is beyond doubt is that IFI promotion and sponsoring of PPP projects in Kazakhstan is now well underway. The EBRD has recently signed a memorandum of understanding with Almaty’s Akimat for a forthcoming “light rail” project, again expected to be a PPP project. Will media and civil society scrutiny of this and other similar projects in the pipeline hit the buffers again?