Oecd’s central asian initiative: reforms through oecd standards

Abstract. The interaction of the Republic of Kazakhstan with the Organisation for Economic Co-operation and Development (OECD) is one of the key strategic priorities of the country. Kazakhstan is interested in joining the Organization, as well as in transition to the standards of developed countries of the world. The article describes the role of Kazakhstan in Central Asia and work accomplished in the framework of cooperation with the OECD.

Kazakhstan is one of the first countries in Central Asia that began to closely work with the Organisation for Economic Cooperation and Development (OECD) signing the OECD Country Cooperation Program.

Kazakhstan has entered a new historical period. Our main goal is to become one of the 30 most developed countries in the world by 2050. The nation’s “100 Concrete Steps” plan is a new institutional framework not only for the economy, but also for the state as a whole, which will make it possible to pass all the difficulties and trials on Kazakhstan’s entry into the thirty developed countries of the world.[1] In this regard, Kazakhstan and the OECD have established close relations in the light of our country’s aspiration for the top thirty most developed countries.

Today the OECD is the largest international organization of economically developed countries that recognize the principles of representative democracy and a free market economy, known as the “club of developed countries”. Founded back in 1948, it initially pursued the goal of economic reconstruction of Western Europe and only in 1961, it began to be responsible for coordinating the policies of developed countries with a market economy.

The OECD’s main objectives are to improve the global economy, promote world trade, and social well-being of people. Today, the member countries of the OECD, which produce more than 60% of world GDP, demonstrate fundamental development indicators. All participating countries have gone through a deep modernization, have high rates of investment, research, labor productivity, business development, and living standards.

There are 9 major indicators of countrywide progress of Kazakhstan in comparison with the OECD to be noted:

In order to achieve the indicators that the OECD countries demonstrate today, the First President of Kazakhstan Nursultan Nazarbayev within the framework of the “Five Social Initiatives” and his Message of 2018 defined clear guidelines for the social modernization of society: increasing spending on education, science and healthcare to 10% of GDP; improving the quality of education; ensuring access to medical care; increasing the efficiency of state bodies; and strengthening anticorruption measures.

Cooperation between the Republic of Kazakhstan and the OECD

Six regional programs are being implemented within the framework of the OECD’s Global Relations Secretariat[4]:

  1. The Eurasia Competitiveness Program (ECP);
  2. Integrated Regional Program for Latin America and the Caribbean;
  3. Regional Program for Southeast Asia (SEARP);
  4. MENA-OECD Middle East and North Africa Initiative;
  5. Regional Program in Southeast Europe;
  6. OECD Regional Program in Africa.

In this regard, the ECP, an initiative of the OECD and the OSCE on increasing investments and competitiveness in Central Asian countries, was launched in November 2008 in Berlin, Germany. It was later transformed into the OECD Eurasia Competitiveness Program.

The activities of the ECP are to support the development and implementation of a policy to increase competitiveness in the Eurasian region, which includes 13countries of Central Asia, the Caucasus and Eastern Europe by encouraging Eurasian countries to join OECD policy standards and other instruments, identifying political barriers to competitiveness and supporting capacity building in the field of development and implementation of policies aimed at improving competitiveness: Kazakhstan, Afghanistan, Kyrgyzstan, Tajikistan, Mongolia, Turkmenistan, Uzbekistan, Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine.

As mentioned above, Kazakhstan’s interaction with the OECD ECP began in 2008. In 2011 Kazakhstan officially became a donor to the OECD ECP with the donor contribution amounted to 800 thousand euros. In 2013-2016 Kazakhstan was a co-chair of the Central Asian Initiative of the OECD ECP together with the European Union. Since 2013, the annual donor contribution increased to one million euros.

Payment is carried out in accordance with the Agreement between the Government of the Republic of Kazakhstan and the OECD on the financing of the ECP, which is approved by the Government. In accordance with the Agreement, funds are allocated to finance the activities of the Global Relations implemented within the framework of the ECP:

  1. “Diversification of Kazakhstani resources for foreign direct investment and strengthening sectoral competitiveness” (2009 - 2013);
  2. “Improving regional competitiveness” (2011-2016);
  3. “Improving Kazakhstan’s competitiveness through public sector reform” (2011–2016);
  4. “Improving the competitiveness of Kazakhstan through the implementation of innovation policy” (2014-2016);
  5. “Strategy for improving industry competitiveness in Kazakhstan. Support in the implementation of the recommendations proposed in the public policy guides” (20142016);
  6. “Fostering investment in Kazakhstan’s mining sector” (2014-2015).

New Stage of Cooperation

Kazakhstan is one of the four countries of the world (Kazakhstan, Morocco, Peru, Thailand), which the OECD Country Cooperation Program (Memorandum) was signed with. The Country Program allowed Kazakhstan to carry out significant structural and institutional reforms based on OECD Secretariat of the ECP. best practices and standards after the results

The economy of Kazakhstan is one of the fastest growing economies in Central Asia. Over the past few years, Kazakhstan has strengthened its ties with the OECD: expanded cooperation with OECD committees and bodies such as the Investment Committee, the Committee on Agriculture and the Committee on Industry, Innovation and Entrepreneurship. Kazakhstan actively participates in the OECD Eurasian Competitiveness Program, namely, as a co-chair of the Central Asian initiative of the Eurasian Competitiveness Program and other programs, such as the Anti-Corruption Network for Eastern Europe and Central Asia, in the regional program of the OECD Anti-Bribery Working Group during international business operations, as well as the OECD political dialogue on development based on the extraction of natural resources as a coleader in the work on fund consolidation and cost sharing.

Kazakhstan is interested in working with the OECD in these and other policy areas, using this cooperation as a means of supporting country reforms. In light of the above, on April 18, 2014, the OECD decided to invite Kazakhstan to sign the Country Program, under which both parties intend to promote Kazakhstan’s country reforms in areas such as the development of sustainable economic growth, taking into account social integration, strengthening the competitiveness and diversification of the domestic economy, increasing the efficiency of state institutions, as well as achieving better environmental results. In light of this, the parties agreed to conclude this Memorandum.

During the conclusion of the Memorandum, it was decided to join the 29 OECD legal instruments, of which Kazakhstan has already joined 20 (12 recommendations, 6 declarations, 1 convention and 1 action plan). At the same time, Kazakhstan works with 37 OECD committees and working bodies. As part of the work with the committees, 13 reviews were conducted as part of the first stage, as well as 5 reviews as part of the second stage of the Country Program. Currently, work is underway to conduct another 10 OECD reviews in Kazakhstan within the Country Program (stage 2) and new Memorandum.

Generally, Country Program aims to assist Kazakhstan in implementing country reforms in various fields. Cooperation between the parties will focus on a number of key areas:

  1. public administration;
  2. the environment;
  3. financial activities;
  4. healthcare, employment and social integration;
  5. education and advanced training;
  6. competitiveness and business climate;
  7. statistics;
  8. intersectoral activity.

It is worth noting that there are substantial reforms and changes that have been implemented after conducting the OECD reviews:

Public administration[5][6][7][8][9] (completed)

Within the nation’s “100 Concrete Steps” Plan:

  • 1 606 functions were transferred from the government to ministries, 261 functions from the center to the local level, 14 functions from the regional level to the district level, 2 functions to the non-state sector;
  • The Law “On Self-Regulation” was adopted;
  • Akim elections were held in cities of regional significance, rural districts, through their elections by maslikhats of districts (cities);
  • New laws “On Public Councils” dated November 2, 2015, “On Access to Information” dated November 16, 2015, and “On Informatization” dated November 24, 2015, which ensure transparency in the process of making government decisions, were adopted, and a Commission was established on access to information;
  • State platforms have been created, such as “Open Data”, “Open Legal Acts”, “Open Budget”, “Open Dialogue”;
  • The system for assessing the performance of state bodies has been improved (the number of assessment areas has been optimized from 5 to 3);
  • A Commission was established to evaluate the performance of state institutions;
  • The Concept of family and gender policy in the Republic of Kazakhstan until 2030 was adopted, which includes all gender aspects: in the planning system, gender budget and the reduction of the gender gap in employment, etc.
  • A fourth budget level (independent budget) has been introduced, which will significantly increase the financial independence of local self-government in resolving issues of local importance;
  • Maslikhats are authorized to create public structures (committees, councils, etc.) in order to interact with akims in the relevant region; and others.

Environment[10][11] (in process)

Out of the 54 green growth indicators:

  • 30 indicators have already been developed and are ready for implementation;
  • 16 indicators were introduced in 20172018;
  • 8 indicators, the implementation of which is not yet possible due to the lack of methodology, lack of data, etc.;
  • A model of green public investments has been developed to reduce air pollution in the public transport sector by switching to environmentally friendly fuels;
  • A comprehensive plan of measures to improve atmospheric air in the city of Almaty for 2016-2017 was adopted;
  • In 2016, an agreement was signed to raise funds from the Islamic Development Bank under a state guarantee aimed at implementing two projects in the water sector: improving the availability of drinking water in rural areas and restoring the irrigation system;
  • The Akbulak Program is being implemented to provide villagers with drinking water, as well as the project “Building a drainage water intake system,” which will be implemented using the “green” infrastructure;
  • Mechanisms of state support and reform of counterproductive government subsidies related to water resources will be strengthened;
  • Targeted indicators of environmental quality indicators will be developed;
  • There will be a transition to a comprehensive environmental permit through the merger of 2 public services (conclusion and resolution in a single document);
  • An environmental impact assessment will be carried out in a transboundary context, taking into account international experience; and others.

Healthcare, employment and social integration[12][13][14][15] (close to be completed)

  • The Ministry of Health according to the OECD standards implemented national health accounts in Kazakhstan;
  • During the implementation of the Program “Employment Roadmap 2020” (2011-2016), 770 thousand people were assisted in finding employment, 619 thousand of whom were employed for permanent jobs;
  • In the public sector, a system of remuneration for productivity is being introduced;
  • The Convention of the International Labor Organization No. 26 “On the Establishment of a Procedure for Setting the Minimum Wage” was ratified;
  • In 2014, a voluntary pension contribution system was introduced;
  • In 2015, the UN Convention on the Rights of Persons with Disabilities was ratified (2007);
  • Since 2015, people with disabilities have access to disability services and the receipt of appropriate benefits by submitting one electronic application;
  • In 2016 alone, as part of the Employment Roadmap 2020 program, 11,000 people with disabilities were employed;
  • The requirement to submit an individual rehabilitation plan for the employment of persons with disabilities has been canceled.
  • From July 1, 2017, a system of compulsory social health insurance began to function;
  • An integrated digital platform “Labor Exchange” (www.enbek.kz) is being developed;
  • Starting in 2018, the state subsidize the costs of employers on arranging jobs for people with disabilities;
  • Starting in 2018, the participation of the unemployed in active measures to promote employment will become mandatory for receiving benefits; and others.

Education and advanced training [16][17] (close to be completed)

  • The State Program for the Development of Education and Science of the Republic of Kazakhstan for 2016 - 2019 was based on the recommendations of the OECD;
  • Strengthened the integration of universities and business structures; there are 16 commercialization offices, 3 technology parks and 4 business incubators;
  • Implemented joint research projects with foreign partner universities;
  • The academic mobility of students and faculty is developing, in particular, in 20112015;
  • Considerable work has been done on the restructuring of technical and vocational education, in the technical direction of training, college students have the opportunity to assign several applied qualifications, the principles of dual training and obtaining the first working specialty are free of charge, international accreditation of educational institutions;
  • Strengthened the principles of dual college education in partnership with enterprises; 27 200 cooperation agreements with employers were concluded.
  • Phased implementation of the experience of Nazarbayev University in matters of academic and managerial independence in civilian universities;
  • The participation of universities in the implementation of scientific projects through the conclusion of tripartite agreements (universities - a scientific organization - business);
  • Creation of commercialization offices, technology parks, business incubators and other innovative structures in universities;
  • The academic autonomy of universities was increased for bachelors up to 55%, masters - up to 70%, doctors of science - up to 90%.
  • A model of accreditation of higher education institutions has been introduced and a gradual transition is being made from state certification to accreditation.
  • It is necessary to increase funding for the education system as a whole, and, in particular, in the field of higher education.
  • State grants will be determined by industry associations of employers based on the needs of the public and private sectors.
  • The development of academic mobility will continue; and others.

Competitiveness and business climate[18][19] (in process)

  • Four packages of amendments to the legislation on improving the business climate were adopted, which made it possible to increase the position of Kazakhstan in the WB Doing Business rating;
  • Organization of youth practice at SMEs up to 6 months before persons not older than 25 years;
  • Microcrediting startups and existing projects in rural settlements, small towns and cities on preferential terms up to 7 years, loan amount up to 50 thousand US dollars;
  • Legislatively fixed procedure for the analysis of regulatory impact;
  • The Law of the Republic of Kazakhstan dated May 16, 2014 No. 202-V “On Permits and Notifications” is accompanied by a reduction in permits by 50%;
  • The Institute of Business Ombudsman (Commissioner for the Protection of Entrepreneurs’ Rights) is represented in the Entrepreneurial Code;
  • A strategy for integrating entrepreneurship at all stages of the educational system will be developed;
  • Investment climate conditions have been improved: harmonization of legislation on the protection of intellectual property rights; improvement of tax and customs administration; introduction of a single Entrepreneurial Code, adoption of the law “On Public-Private Partnership”; introduction of an investment ombudsman mechanism;
  • An Investment Board under the Supreme Court of the Republic of Kazakhstan has been established;
  • Corporate governance standards were revised and government participation in the private sector was reduced;
  • The development of responsible business practices: the appointment of the Ministry of National Economy as a National Contact Point;
  • Adoption of a Detailed Plan for Improving the Investment Climate in accordance with OECD Standards for 20162017;
  • By 2025, it is planned to double nonresource exports;
  • It is planned to create a favorable migration regime; and others.

As mentioned above, Kazakhstan’s engagement in the OECD has meant it has been subject to conduct reviews governed by the OECD committees in such areas as public administration, education, employment, healthcare, civil service, investments, environment, economics, etc. Kazakhstan has already made some changes to its legislation and policies, bringing them in line with OECD standards.

Harmonization with OECD best practices requires an assessment of the possible socio – economic consequences for the country, taking into account the reforms already carried out, assessing the prospects and threats of cooperation with the Organization.

Kazakhstan’s accession to the OECD is linked to the implementation of large-scale legislative reforms, the implementation of recommendations and the implementation of OECD standards. The implementation of these changes carries mainly positive consequences for the country, overall improving public policy of the country, which positively affect the well-being of the population.

Since the beginning of 2017, the economy of Kazakhstan has embarked on a path of recovery growth, an important role in this has been played by OECD standards and recommendations implemented in such government policy documents as the Nation Plan - 100 steps to implement five institutional reforms, the Concept of Family and Gender Policy until 2030, State Program for the Development of the Agro-Industrial Complex of the Republic of Kazakhstan for 2017-2021, the Program for Attracting Investments “National Investment Strategy”, National Export Strategy, Strategic Development Plan of Kazakhstan until 2025.

Kazakhstan has benefited from such changes in different ways. For instance, the implementation of the OECD recommendations in various areas of economic policy has made it possible to timely create the institutional framework to accelerate business activity, modernize corporate governments of state companies, to improve regulatory politics, and increase the autonomy in the education system.

There are also other benefits to Kazakhstan:

  • bringing the legislative framework of Kazakhstan to the best practices of the OECD countries and their constant updating in order to improve the welfare of the population;
  • opportunity for professional growth of civil servants and expanding the network of contacts with civil servants of OECD countries;
  • increasing the recognition of Kazakhstan in the world, improving the image and growth of investment attractiveness in the country;
  • pooling the resources of international organizations to implement the national agenda for joining the 30 most developed countries in the world;
  • expanding regional influence (disseminating OECD standards in the region, promoting the SDGs, advising developing countries with Kazakhstani experts, involving Central Asian countries in OECD working bodies).

What’s next for Kazakhstan?

The current format of cooperation enhances the country’s political credibility and reputation as an economically developed and committed state to democratic reforms. It is important to specify our priorities in the OECD, to enhance the image of Kazakhstan as a country focused on the quality of policies. Focus on high quality, systematic and content work with key committees and OECD decision-makers will position Kazakhstan as a professional and goal- oriented player.

Despite the fact that Kazakhstan has made significant progress in reforming the main sectors of the economy, some sensitive sectors remain, such as the environment, taxation, anti-corruption, public administration, social policy, which show a high gap in performance compared to OECD countries, which may affect the decision of the Council to accept Kazakhstan as a member of the Organization.

In spite of the possible difficulties that Kazakhstan may encounter when and after joining this organization, conducting qualitative, structural, constitutional and political reforms based on the best world practices, it has all the prerequisites to become one of the OECD members.

Central Asian countries are also OECD partner countries and are of particular interest to the Organization. Kazakhstan is a leader in the interaction and implementation of significant projects with the OECD.

Confirmation of this is the holding of the first exit session of the OECD Eurasia Week 2017 in Almaty.

We do not exclude the possibility that Kazakhstan can be considered as the OECD representative office in our region. It is necessary to use our leadership and become a hub for the transfer of OECD best practices and standards throughout the Central Asian region.

 

RefeRences:

  1. State of the Nation Address by the President of the Republic of Kazakhstan Nursultan Nazarbayev – Astana: Akorda, January 10, 2018 // https://www.akorda.kz/en/addresses/addresses_of_president/state- of-the-nation-address-by-the-president-of-the-republic-of-kazakhstan- nursultan-nazarbayev-january-10-2018
  2. Statistics Committee of the Ministry of National Economy of the Republic of Kazakhstan – March 4, 2020 // https://stat.gov.kz
  3. OECD’s statistics data and metadata – March 4, 2020 // https://stats. oecd.org
  4. OECD’s Global Relations – March 4, 2020 // http://www.oecd.org/ global-relations
  5. Decentralisation and Multi-level Governance in Kazakhstan – Paris, France: OECD, December 19, 2017 // https://www.oecd.org/ gov/decentralisation-and-multi-level-governance-in-kazakhstan- 9789264280700-en.htm
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  10. Promoting Clean Urban Public Transportation and Green Investment in Kazakhstan – Paris, France: OECD, October 24, 2017 // https://www. oecd.org/env/promoting-clean-urban-public-transportation-and-green- investment-in-kazakhstan-9789264279643-en.htm
  11. Sustainable Business Models for Water Supply and Sanitation in Small Towns and Rural Settlements in Kazakhstan – Paris, France: OECD, April 13, 2016 // https://www.oecd-ilibrary.org/environment/ sustainable-business-models-for-water-supply-and-sanitation-in-small- towns-and-rural-settlements-in-kazakhstan_9789264249400-en
  12. Kazakhstan Monitoring Skills Development through Occupational Standards – Paris, France: OECD, 2019 // https://www.oecd.org/eurasia/ competitiveness-programme/central-asia/Kazakhstan-Monitoring- Skills-Development-through-Occupational-Standards-2019-EN.pdf
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Year: 2020
City: Almaty