Document of The World Bank Report No: ICR00003820 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD- 48740) ON A LOAN IN THE AMOUNT OF US$ 18.50 MILLION TO THE REPUBLIC OF KAZAKHSTAN FOR A CUSTOMS DEVELOPMENT PROJECT June 15, 2016 GOVERNANCE GLOBAL PRACTICE EUROPE AND CENTRAL ASIA REGION CURRENCY EQUIVALENTS (Exchange Rate Effective 23 May 2016) Currency Unit = Kazakhstani Tenge (KZT) 1.00 KZT= US$ 0.0030 US$ 1.00 = 336.868 KAZAKHSTAN: GOVERNMENT FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ASYCUDA Automated System for Customs Data BEEPS Business Environment Enterprise Perception Survey CCC Customs Control Committee CDP Customs Development Project CMP Customs Modernization Program CPS Country Partnership Strategy ECA Europe and Central Asia ECU Eurasian Customs Union FM Financial Management GoK Government of Kazakhstan ISR Implementation Status and Results Report ICR Implementation Completion and Results Report JERP Joint Economic Research Program ICT Information and Communication Technology MTR Mid-Term Review M&E Monitoring and Evaluation NFRK National Fund of the Republic of Kazakhstan PAD Project Appraisal Document PDO Project Development Objective PMU Project Management Unit PSC Project Steering Committee SRC State Revenue Committee TARP Tax Administration Reform Project TFA Trade Facilitation Agreement UNCTAD United Nations Conference on Trade and Development WCO World Customs Organization WTO World Trade Organization QER Quality Enhancement Review Senior Director: Deborah Wetzel Practice Manager: Adrian Fozzard Project Team Leader: Rajul Awasthi ICR Team Leader: Clayton Kerswell ICR Primary Author: Elena Georgieva-Andonovska TABLE OF CONTENTS Abbreviations and Acronyms .................................................................................................. i Table of Contents ................................................................................................................... ii Data Sheet ............................................................................................................................. iii Executive Summary ............................................................................................................ xiii 1. Project Context, Development Objectives and Design ...................................................... 1 2. Key Factors Affecting Implementation and Outcomes ...................................................... 5 3. Assessment of Outcomes .................................................................................................. 12 4. Assessment of Risk to Development Outcome ................................................................ 20 5. Assessment of Bank and Borrower Performance ............................................................. 20 6. Lessons Learned ............................................................................................................... 23 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .................. 23 Annex 1. Project Costs and Financing ................................................................................. 25 Annex 2. Outputs by Component ......................................................................................... 26 Annex 3. Economic and Financial Analysis ......................................................................... 35 Annex 4. Bank Lending and Implementation Support/Supervision Processes .................... 36 Annex 5. Summary of Borrower's ICR and/or Comments on Draft ICR............................. 38 Annex 6. Comments of Cofinanciers and Other Partners/Stakeholders............................... 42 Annex 7. List of Supporting Documents .............................................................................. 43 Annex 8. Customs Reform Indicators in World Bank-financed projects ............................. 44 Annex 9. Map of Kazakhstan ............................................................................................... 48 i A. Basic Information Customs Development Country: Kazakhstan Project Name: Project Project ID: P096998 L/C/TF Number(s): IBRD-48740 ICR Date: 04/07/2016 ICR Type: Core ICR REPUBLIC OF Lending Instrument: SIL Borrower: KAZAKHSTAN Original Total USD 18.50M Disbursed Amount: USD 7.35M Commitment: Revised Amount: USD 14.50M Environmental Category: C Implementing Agencies: Customs Control Committee Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 09/19/2005 Effectiveness: 03/24/2009 03/24/2009 Appraisal: 06/11/2007 Restructuring(s): NA Approval: 11/27/2007 Mid-term Review: 06/30/2010 12/2011 Closing: 12/31/2012 12/31/2015 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Unsatisfactory Risk to Development Outcome: Negligible Bank Performance: Moderately Unsatisfactory Borrower Performance: Moderately Unsatisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Quality at Entry: Moderately Satisfactory Government: Unsatisfactory Moderately Implementing Moderately Quality of Supervision: Unsatisfactory Agency/Agencies: Unsatisfactory Overall Bank Moderately Overall Borrower Moderately Performance: Unsatisfactory Performance: Unsatisfactory iii C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 100 100 Theme Code (as % of total Bank financing) Legal institutions for a market economy 17 17 Other accountability/anti-corruption 17 17 Tax policy and administration 33 33 Trade facilitation and market access 33 33 E. Bank Staff Positions At ICR At Approval Vice President:  Cyril E Muller Shigeo Katsu Country Director: Mariam J. Sherman Annette Dixon Practice Adrian Fozzard Ronald E. Myers Manager/Manager: Project Team Leader: Rajul Awasthi Munawer Sultan Khwaja ICR Team Leader: Clayton Kerswell ICR Primary Author: Elena Georgieva-Andonovska ICR Co- Author Clayton Kerswell F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The development objective is to increase the efficiency, effectiveness and accountability of the CCC in order to: (i) promote internationally acceptable practices for expeditious processing of international trade flows, so as to further integrate the country into the world economy and improve the investment climate and competitiveness; (ii) improve taxpayer compliance with the Customs Code and thereby increase revenue collection; and (iii) support transparency of customs operations in order to reduce the potential for iv corruption and increase predictability for traders. The project will facilitate Kazakhstan’s accession to the WTO, as well as post-accession support. v (a) PDO Indicator(s) Original Target Actual Value Values (from Formally Revised Achieved at Indicator Baseline Value approval Target Values Completion or documents) Target Years Indicator 1 : 75% reduction in average customs processing time at the border posts (based on client surveys) by end of the Project Value 29 hours 75% 53% (stakeholder quantitative or (stakeholder survey)/24% (SRC) qualitative) survey)/1.36 hours (SRC) Date achieved 2011 2015 Comments The baseline 29 hours for customs processing was established in 2011 through a (incl. % stakeholder survey. According to the last survey conducted in 2014, the final achievement) value of this indicator is 13.4 hours, which would indicate a 53 percent decrease in processing time. Data from the CCC indicated that the baseline processing time of 1.36 hours which was cut by 24 percent in 2015 to 1.03 hours. CCC confirmed that this does not cover the whole time needed for clearing customs but rather the average time spent at a customs clearance center. The target of 75 percent was not achieved by either measure even though there was an overall positive trend towards reducing customs processing times. However, the ICR team could not find credible evidence of the CDP’s contribution to this positive trend. Indicator 2 : 75% reduction in average customs clearance time at the inland posts by end of the Project (based on client surveys) Value 17.2h (stakeholder 75% 0.55 hours for quantitative or survey)/1 hour (SRC exports and 3.1 qualitative) hours for imports Date achieved 2011 2015 Comments No survey data was available for 2015 but according to the 2014 survey the (incl. % value was 11.4 hours. According to the SRC, average customs clearance time in achievement) 2015 was 0.55 hours for exports and 3.1 hours for imports. It is difficult to confirm the Project’s contribution to this indicator. Improvements followed the implementation of the new Customs Code in July 1, 2010, which reduced customs clearance time up to 1 day for imports and up to 4 hours for exports. Indicator 3 : Percentage of physical inspections of import declarations by Customs reduced from 70% (in 2006) to less than 40% in 2009 and 20% in 2012 Value 70% 20% 14.8% quantitative or qualitative) Date achieved 2006 2015 Comments Based on CCC data, the percentage of consignments selected for physical (incl. % inspection fell from the 2006 baseline of 70% to 23.4% in 2013 and 14.8% in achievement) 2015, which was above the target of 20%. Evidence gathered indicates that changes in this indicator were at least in part due to the requirements of the Eurasian Customs Union (ECU) not just the CDP. The CDP was expected to contribute through improvements in the risk management system, which were vi not fully implemented due to the cancellation of the main ICT component. In addition, third party sources suggest that the actual level of physical inspections is much higher than what is reported by the CCC/SRC. Indicator 4 : Number of documents required for border and customs clearance for imports to be reduced from 14 in 2006 to 10 in 2009 and to 7 by 2012 Value 14 7 3 quantitative or qualitative) Date achieved 2009 2011 Comments Following implementation of the revised Customs Code the number of (incl. % documents required to be presented for Customs clearance fell from 14 in 2009 achievement) to 12 in 2010 to only 3 in 2011 and 2012. While this exceeds the project target of 7 documents, it is difficult to confirm that the project contributed to this result, since in 2011 most project activities had not started yet. There is a discrepancy between the number of documents prescribed by the CCC and the documentary requirements identified through the stakeholder survey. According to the results of the survey, on average, 9 documents were required for customs clearance. This could be due to the fact that CCC performed delegated tasks on behalf of other government agencies that, depending on the goods in question, prescribed certain additional documents. Indicator 5 : 20% increase in ratio of total revenue collected by customs to number of customs staff (US $) Value 426,250 20% 179% quantitative or qualitative) Date achieved 2006 2015 Comments The baseline was calculated prior to Kazakhstan's participation in the Customs (incl. % Union. Using 2011 as a new base, performance has improved by 79 percentage achievement) points in 2014, which is well above the targeted 20% increase. 2015 data reflects revenues collected in 10 months. However, data from 2011 and 2014 is not comparable because revenues and staffing numbers included both tax and customs in the merged SRC. Improvements in revenue collection can largely be attributed to the ECU. Indicator 6 : Client service standards covering key customs outputs are established by end of 2008 with performance against standards published annually from 2009 Value Not established, not Established, Six service quantitative or published performance standards adopted qualitative) published by Government Decree Date achieved 2006 2012 Comments A series of core service standards and key performance indicators covering all (incl. % major Customs responsibilities, six of which were agreed and formalized as the achievement) client service standards for the CCC through a Government Decree. The adoption of the standards represented a significant improvement in transparency and public accountability to which the CDP contributed. Indicator 7 : Improved perception of traders and other stakeholders regarding the frequency of unofficial payments to customs officials as measured by vii periodic surveys Value Base line to be Significant 71,2%. quantitative or established improvement qualitative) Date achieved 2011 2014 Comments The baseline was established in 2011 at 60%. According to the stakeholder (incl. % survey conducted in 2014, 71.2% of traders had a positive perception of customs achievement) professionalism and integrity. The methodology used to conduct the surveys was not fully disclosed and it is not clear what questions were exactly asked and how the responses were analyzed and interpreted. In addition, as with other indicators, it is not possible to identify whether and how the CDP contributed to this trend. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Component 1 Strategic plan is prepared, published on CCC web-site starting from 2009, Indicator 1 : and reviewed annually A strategic plan for the CCC for the period 2012 – 2020 Value Not prepared/ was prepared based Reviewed, review (quantitative on an analysis of published or Qualitative) Published the strategic management and planning situation in the CCC. Date achieved 10/30/2007 31/12/2012 A strategic plan for the CCC for the period 2012 – 2020 was prepared based on an analysis of the strategic management and planning situation in the CCC. The Comments inputs on strategic planning delivered through the project resulted in a much (incl. % stronger internal capacity for planning and results monitoring. However, after the achievement) merger of CCC with the Tax Committee, a new SRC strategy was put in place with support of the JERP program. New HRM plan which includes provisions for merit-based promotion and Indicator 2 : remuneration, is developed (by end 2008), approved, and implemented (by 2009). Not prepared A new HR strategy was developed Value HRM Plan based on an (quantitative approved and analysis of the or Qualitative) implemented existing HR policies and processes. Date achieved 10/30/2007 31/12/2012 viii Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years A new HR strategy was developed based on an analysis of the existing HR Comments policies and processes. Even though many elements of the new strategy were (incl. % adopted by the CCC, the strategy could not be fully implemented due to the achievement) merger with the Tax Committee. Comprehensive training strategy, curriculum, and distance learning systems Indicator 3 : are developed and used for continuous professional development of CCC staff Value Not in place Distance learning A comprehensive (quantitative system is used for training strategy, or Qualitative) continuous revised training professional materials, development of at curriculum and a least 20% of competency customs staff framework were annually developed based on a competency assessment. However, the competency framework was not fully implemented due to the merger. A Distance Education program was developed and implemented at the Training Methodological Center of the CCC in Astana. Date achieved 10/30/2007 31/12/2012 Comments (incl. % achievement) Component 2 Amendments to legislation enacted to support new systems and procedures; Indicator 4 : all customs legal, regulatory documents and forms are available on CCC web-site by end of 2009 Legal, regulatory Improvements in Value documents, and the legislative (quantitative Not specified forms available on framework were or Qualitative) the web-site delivered. Date achieved 10/30/2007 31/12/2012 Comments Improvements to the legislative framework were identified and drafted and (incl. % endorsed under the CDP, but not implemented by SRC ix Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years achievement) Integrated Tariff Automated System is developed and made operational (by Indicator 5 : 2009), and incorporates 50% of all other agency requirements by 2010; and 80% - by 2011 and 100% by end of 2012. Value Not in place 100% of inter- Software for an (quantitative agency Integrated Customs or Qualitative) requirements are Tariff Database, captured in the modules for system operational customs information management system and e-audit software Date achieved 10/30/2007 31/12/2012 Comments As a result of these outputs, the SRC introduced a free public electronic, web- (incl. % based searchable database of customs tariffs. Previously this service was paid. achievement) This was highly appreciated by the business community of Kazakhstan. Full acceptance of electronic data submission for customs declaration Indicator 6 : procedures by the end of 2010. Value Hardware was (quantitative Not specified Fully operational acquired to support or Qualitative) e-declarations Date achieved 10/30/2007 31/12/2012 Comments Hardware was acquired to support e-declarations, but the main contracts (incl. % expected to introduce e-declaration were not implemented achievement) Increase in ratio of total additional revenue assessed as a result of post Indicator 7 : clearance controls to total revenue assessed by 10 % by end of 2009 and by 25% by end of 2012 (corrected for inflation) Value (quantitative 2% 25% NA or Qualitative) Date achieved 10/30/2007 31/12/2012 Comments (incl. % No data is available. achievement) Component 3 New integrated IT system is available by the end of 2010, piloted by end of Indicator 8 : 2011, and is fully operational by end of 2012 Value System fully The IT system was (quantitative Not present operational not procured or Qualitative) x Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Date achieved 10/30/2007 31/12/2012 Comments The IT system was not procured, since SRC decided to acquire the ASYCUDA (incl. % provided by UNCTAD instead of developing its own system. achievement) Backup and disaster recovery center is established by end 2008 and is fully Indicator 9 : operational by end of 2011 Value Center fully The Centre was not (quantitative Not present operational established or Qualitative) Date achieved 10/30/2007 31/12/2012 Comments The Centre was not established. (incl. % achievement) G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 06/30/2008 Satisfactory Satisfactory 0.00 2 06/02/2009 Satisfactory Satisfactory 0.00 3 02/26/2010 Satisfactory Satisfactory 0.00 4 02/19/2011 Satisfactory Moderately Satisfactory 0.25 5 10/11/2011 Satisfactory Moderately Satisfactory 0.51 6 05/19/2012 Satisfactory Moderately Satisfactory 1.56 Moderately 7 03/31/2013 Moderately Satisfactory 3.86 Unsatisfactory Moderately 8 10/08/2013 Moderately Satisfactory 4.45 Unsatisfactory 9 04/30/2014 Moderately Satisfactory Moderately Satisfactory 7.42 10 11/23/2014 Moderately Satisfactory Moderately Satisfactory 7.42 11 06/24/2015 Moderately Satisfactory Moderately Satisfactory 7.42 12 12/26/2015 Moderately Satisfactory Moderately Satisfactory 7.42 H. Restructuring (if any) I. Disbursement Profile xi xii Executive Summary The Kazakhstan Customs Development Project (CDP) was approved on 27 November 2007 with the objective of increasing the efficiency, effectiveness and accountability of the Kazakhstan Customs Control Committee (CCC) and support Kazakhstan’s accession to the World Trade Organization (WTO). CDP had three components: institutional development, governance and human resource management; customs operations; and information and communication technology (ICT). The initial project cost was US$61.72 million of which US$18.50 million was to be provided by an IBRD loan and the remainder as counterpart financing. The project started only in July 2009, eighteen months after approval, due to delays in the ratification of the Loan Agreement and formation of the Project Steering Committee. CDP was restructured twice: in 2012 it was extended by two years (until December 31, 2014) and in 2014 it was extended until 31 December 2015, when the project closed. At the time of the second restructuring, US$4 million of the loan funds was cancelled. Total disbursements at project closing were just US$ 7.35 million: 51 percent of the revised loan amount. The overall outcome rating is assessed as Moderately Unsatisfactory. The Government was committed to the customs reform agenda at project design and made progress early on with the adoption of a new Customs Code that streamlined procedures as a requirement for Kazakhstan’s entry into the Eurasian Customs Union in July 2010. Thereafter the Government lacked a strategic vision for CDP and paid insufficient attention to the development of the institutions needed to support reforms. Implementation was hampered by frequent changes of CCC executive and key members of the project management unit while procurement decisions were often delayed due to compliance with internal Government requirements beyond those imposed by the Bank. The project stalled after the merger of the Tax and Customs Committees under the State Revenue Committee (SRC) in August 2014 and with the onset of the economic crisis in 2014-2015. SRC decided to acquire the Automated System for Customs Data (ASYCUDA) system provided by the United Nations Conference on Trade and Development (UNCTAD). Development of an integrated customs ICT system was no longer considered relevant and SRC requested that the remaining procurements related to IT be cancelled. During the second half of 2014, a 50 percent fall in oil prices and a 50 percent depreciation of the tenge against the US dollar impacted the Government’s ability to provide sufficient counterpart financing. There were no disbursements from CDP after November 2014. Data provided by CCC indicates that all of the PDO indicators were either fully or partially achieved. Average customs processing time at the border posts, average customs clearance time at the inland posts, physical inspections of import declarations by Customs, the number of documents required for border and customs clearance for imports were reduced while revenue collected by customs staff increased. Client service standards covering key customs outputs were established and the perception of traders and other stakeholders regarding the frequency of unofficial payments to customs officials was improved. Kazakhstan signed the protocol on WTO accession on July 27, 2015. xiii However, it is difficult to attribute these achievements to CDP. First, without an explicit results chain detailing the link between project activities, outputs and PDO outcomes it is not possible to differentiate between results achieved through CDP support and results achieved by GoK independently or through external factors, such as the entry into force of the Customs Union. Second, CDP’s M&E arrangements did not generate robust data and the results reported by CCC/SRC differed significantly from data derived from stakeholder surveys. Third, CDP’s principal contribution to the PDO was expected to come from the introduction of electronic filing of customs declarations through an integrated ICT system, the procurement of which was cancelled. As a result, with the exception of the adoption of client service standards, which can be attributed to the project, and WTO accession, to which CDP contributed, there is no evidence that CDP contributed to changes in the PDO indicators. Looking beyond PDO indicators, the Project did contribute to institutional improvements which made an indirect contribution to achieving the PDO. Component 1 introduced distance learning in the Training and Methodological Center and recommendations on CCC organizational design, HR optimization, anti-corruption and change management, as well as training. Component 2 delivered an analysis of current business processes, revised business process maps in line with international standards and training in risk management, post-clearance audit, compliance management. While the impact of Components 1 and 2 was expected to be fully realized when the new Integrated Customs Management System became fully operational, the Government has indicated that some of the recommendations delivered by these two components are still relevant and inform the current customs reform agenda. xiv 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. Country context. Kazakhstan is the ninth largest country in the world and the largest landlocked country by land area. Natural resources have been the cornerstone of the country’s development. Kazakhstan is one of the world’s top 20 oil producers, with estimated reserves of 40 billion barrels, or about a 2 percent share of global oil production. Following independence in 1991, Kazakhstan suffered economic stagnation, experiencing hyperinflation, high rates of unemployment and steep decline in GDP. Between 1990 and 1995, GDP fell to half of the pre-independence level. Development of the country’s energy sector coupled with rising oil prices led to an economic recovery. Kazakhstan’s economy has expanded almost tenfold since 2002, from a gross domestic product (GDP) of $24.6 billion in 2002 to $231.9 billion in 2013. Growth catapulted Kazakhstan to upper-middle-income country status with a gross national income (GNI) per capita of $11,501 in 2013, close to the high-income country threshold of $12,745. 2. At the time of project preparation in 2006, economic growth had reached an all- time high of 10.7 percent. High oil prices had increased export earnings and revenues, and had helped boost Kazakhstan’s current account and fiscal surpluses which increased from about 6 percent of GDP in 2005 to about 8 percent of GDP in 2006. Most of the fiscal surplus from oil revenues was accumulated in the National Fund of the Republic of Kazakhstan (NFRK) which, apart from its stabilization and savings functions, was used for foreign exchange sterilization. The Government of Kazakhstan (GoK)’s borrowing policies were very prudent in light of the fact that oil revenue was flowing in amounts that could not easily be absorbed. The share of revenues collected by the customs service was about 30 percent of total state budget revenues. 3. Sector Context. At the time of project design, GoK viewed integration into the global economy and regional partnerships such as the Eurasian Economic Community as a prerequisite for a qualitative boost to economic development. GoK was in the process of negotiating the country’s accession to the World Trade Organization (WTO), which was expected to result in a significant increase in foreign trade, contribute to improving Kazakhstan’s international investment reputation, and create opportunities for improving its competitiveness in international markets. Modernization of the Customs Control Committee’s (CCC) business processes was necessary to facilitate trade , a key issue discussed in WTO negotiations and so a priority for the President and the Government. GoK embarked on customs reform with a view to facilitating trade and transit, improving the business climate and competitiveness and combating corruption. 4. CCC had made significant improvements in the functioning of customs. The legislative framework was strengthened by the enactment of a new Customs Code in 2003, after extensive consultation with the private sector. Revenues collected by the CCC –import tariffs, value-added tax (VAT) and excise on imported goods – increased by nearly 35 percent in 2004 and 2005 and productivity, as measured in terms of the average number of declarations processed by staff, increased by 18 percent in 2004. Significant investments had been made in technology and infrastructure. Steps had been taken to improve integrity and good governance in customs with the establishment of an Internal 1 Security Department. The CCC had also developed a positive corporate culture and shown a willingness to adopt modern international standards. 5. However, the reform agenda remained challenging given the complexity of customs modernization reform. The costs of revenue collection were high by international standards. Productivity was half the average for South East European countries. Business processes were not conducive to trade or economic development and provided opportunities for rent-seeking. The customs regime was characterized by excessive document review and physical inspection of transactions. This led to delays and expensive clearance procedures for traders with little in the way of enforcement results to justify the level of physical interventions. While not often voiced openly, there were allegations of facilitation payments to customs staff and those of other border management agencies and that payments were extracted by some of their staff, or offered by clients, to expedite release and to minimize duties, taxes and other fees. Perception of corruption among businesses remained a serious issue- according to the Business Environment Enterprise Perception Survey (BEEPS): the percentage of firms in Kazakhstan that stated bribery was frequent in customs in the 2005 stood at the same level as in 2002. 6. Sector policy. GoK’s vision for customs reform was outlined in the triennial plan Customs Modernization Program (CMP) 2007-2010 and reiterated in several speeches made by the President in the Kazakhstan Parliament. GoK sought to modernize the customs administration as a means to enhance Kazakhstan’s international trade and competitiveness, and to make the country one of the top 50 most competitive economies in the world. In the medium term, the CCC saw itself as transitioning to a modern service-oriented philosophy, with international standards in customs processing, significant emphasis on human development and training, substantial reduction in avenues for corruption, use of state-of-the-art technology and risk management techniques. 7. Rationale for Bank’s assistance. Despite the deep commitment of GoK to serious customs reform, the results of repeated attempts thus far, had not yielded satisfactory results. At the time of project design, the World Bank had already gained extensive international experience, particularly in Russia and Turkey in the Europe and Central Asia (ECA) region, in helping countries with institutional reforms of customs administrations similar to those needed in Kazakhstan. The Bank’s experience with developing comprehensive customs reform and modernization plans/strategies and establishing effective mechanisms to monitor them was relevant for the challenges faced by the customs administration in Kazakhstan. The Bank’s extensive experience in dealing with issues of integrity and corruption in the customs sector in other countries, including economies in transition, was also of relevance. The Bank was well placed to add value to customs reform in Kazakhstan and assist the GoK in meeting WTO accession requirements. GoK’s decision to seek World Bank assistance had the support of the World Customs Organization (WCO). 1.2 Original Project Development Objectives (PDO) and Key Indicators 8. The Project development objective (PDO) was to increase the efficiency, effectiveness, and accountability of the CCC in order to: (i) promote internationally 2 acceptable practices for expeditious processing of international trade flows, so as to further integrate the country into the world economy and improve the investment climate and competitiveness; (ii) improve taxpayer compliance with the Customs Code and thereby increase revenue collection; and (iii) support transparency of customs operations to reduce the potential for corruption and increase predictability for traders. A fourth objective of the Project was to facilitate Kazakhstan’s accession to the WTO and provide post-accession support. The key results indicators for the Project were:  75 percent reduction in average customs processing time at border posts (based on client surveys) by end of the project;  75 percent reduction in average customs clearance time at inland posts by the end of the project (based on client surveys);  Reduction in physical inspections of import declarations by customs from 70 percent (in 2006) to less than 40 percent in 2009 and 20 percent in 2012;  Reduction in the number of documents required for border and customs clearance for imports from 14 in 2006 to 10 in 2009 and to 7 by 2012;  Increase in the ratio of total customs revenue collected to number of CCC staff by 20 percent;  Client service standards covering key customs outputs established by 2008 with performance against standards published annually from 2009; and  Improved perception of traders and other stakeholders regarding the frequency of unofficial payments to customs officials as measured by periodic surveys. 1.3 Revised PDO and Key Indicators 9. The PDO remained the same throughout the project and there was no change in the PDO indicators. 1.4 Main Beneficiaries 10. The direct beneficiary of the project was CCC and its successor the State Revenue Committee (SRC). In addition to its national headquarters, the CCC was organized into 16 regions and 3 major customs offices directly reporting to headquarters, with 175 customs stations (113 inland and 62 border customs stations) and 33 checkpoints. CCC had a staff of approximately 6,000 and was responsible for 14,053 km of borders patrolled jointly by customs mobile units and the Border Police. SRC has approximately 15,000 staff. The indirect beneficiaries of the project were Kazakhstan’s business and trading communities. 1.5 Original Components 11. The project consisted of three main components, dedicated to institutional development (Component 1), customs operations (Component 2) and information and communication technology (ICT) (Component 3), and a component for project management. 12. Component 1: Institutional Development, Governance, and Human Resource Management (US$15.75 million). This component had eight sub-components which would finance: (i) a comprehensive review of the CCC organizational structure including workload analysis and future staffing requirements as new systems and procedures are progressively implemented; (ii) a detailed review of CCC strategic planning methodology 3 and delivery of training programs to assist the newly created Modernization and Strategic Development Unit; (iii) development of service standards and establishment of a modern management information system (MIS); (iv) review, redesign, development, and implementation of the National Integrity Development Plan within an effective anticorruption framework; (v) development and implementation of a human resource management strategy to facilitate a steady move towards a more professional Customs service; (vi) the development of a comprehensive training strategy and curriculum, based on a competency assessment and support for the establishment of the Customs Academy; (vii) the preparation of a comprehensive change management and continuous improvement strategy; and (viii) implementing a cost-based financial management framework that can be used to monitor the cost of customs services, a requirement for WTO accession. 13. Component 2: Customs Operations (US$16.30 million). This component had six subcomponents which would finance: (i) activities to align the code and secondary legislation with major international instruments and best practices; (ii) establishment of a special unit staffed with tariff, legal and systems-design specialists to build and maintain an integrated tariff system and development of e-document systems software; (iii) support to implement new measures of cargo control and declaration processing based on risk management; (iv) strengthening of the back-end functions of post-clearance verification and audit through the design and implementation of a risk management system; (v) strengthening of law enforcement functions through training and enhancement of support facilities; (vi) development of a comprehensive control and enforcement strategy to strengthen CCC capacity to manage compliance risks; and (vii) activities to strengthen interaction and collaboration within customs, with other border control agencies both within Kazakhstan and neighboring countries, and with regional and international institutions involved in international trade. In addition, this component will finance a comprehensive review and rationalization of all import, export, and transit procedures and documentation across government agencies. 14. Component 3: Information and Communication Technology (ICT) (US$28.41 million). This component had three subcomponents: (i) activities to strengthen CCC organizational capacity to plan and manage the ICT systems effectively; (ii) development of an integrated ICT system based on proven technologies used in modern customs administrations and customized to Kazakhstan’s conditions; and (iii) strengthening of archiving, data warehousing and security capacity of CCC. 15. Component 4: Program Management (US$1.26 million). The purpose of this component was to ensure the effective and efficient management and coordination of all project activities and to comply with World Bank accountability requirements. To this end, this component would finance the setting up of a Project Management Unit (PMU) staffed by customs officials within the Modernization Department of the CCC. 1.6 Revised Components 16. There were no revisions to the components. 4 1.7 Other significant changes 17. First Restructuring. The first Level-2 restructuring of the Project, completed in January 2012, extended the closing date of the project by 36 months from December 31, 2012, to December 31, 2014. A significant delay in ratification of the Loan Agreement and initiation of the Project Steering Committee (PSC) had caused project implementation to start 18 months late. While project activities were moving at a steady pace at the time of the extension, the lag created by the initial delay could not be bridged because additional tasks were implemented in parallel to new priorities resulting from the creation of the Customs Union with Russia and Belarus. 18. Second restructuring. A second Level-2 restructuring, completed in November 2014, extended the closing date of the Project from December 31, 2014, to December 31, 2015. The extension was required to complete the procurement of hardware and software and allow for installation and piloting. This followed a partial cancelation of loan funds (US$ 4 million) agreed earlier that year as a result of depreciation of the tenge. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 2.1.1 Soundness of the background analysis 19. The project design was informed by analytical work and the Bank’s experience in institutional reforms of customs, particularly in the ECA region. A comprehensive diagnostic assessment was conducted during project preparation. Other reports that informed project design included studies conducted within the Joint Economic Research Program (JERP), such as the report “Towards an Optimal Taxation System in Kazakhstan”, BEEPS and Doing Business reports. To ensure that the approach taken during the diagnostic process was robust and comprehensive, the design team drew also on the WCO Customs Capacity Building Diagnostic Framework. The framework provided a comprehensive template for addressing all key operational and support functions of customs and was based on the application of agreed international standards and best practice approaches. Project design was also informed by GoK’s own vision of customs reforms expressed in its CMP 2007-2009 and the “Concept of Development of the Customs Service on the Republic of Kazakhstan for 2007-2010.” 2.1.2 Assessment of project design 20. Objectives. The Project PDO was overly ambitious. The objectives were to be achieved in only four years, an accelerated pace of reform relative to GoK’s track record in customs modernization and other institutional reforms over the previous ten years. Some of the targets, such as 75 percent reduction in average customs processing time at border posts and 75 percent reduction of clearance time at inland posts, were ambitious when compared with similar projects elsewhere in the region: the Russia CDP, for example, anticipated a 10 percent reduction in processing time at borders and 50 percent reduction in clearance time over a similar time frame. More modest PDO and targets would have been prudent considering the substantial risks identified at project appraisal (see paragraph 25), including procurement and financial management risks, the 5 complexity of the proposed reforms, the limited capacity of the borrower and the reliance on Republican budget (70 percent of the total funding),. 21. Components. The Project design was based on WCO’s capacity building methodology and framework, with each section of the methodology representing a Project sub-component. The sub-components were grouped into three technical components with the following themes: (i) institutional development and governance; (ii) customs operations; and (iii) information and communications technologies. The fourth component supported project management. Each component was to be led by a component coordinator and supported by a thematic working group made up of senior experts. While all components and sub-components were relevant for the PDO at project design, Component 3 related to ICT and parts of Components 1 and 2 became less relevant as implementation progressed and the institutional environment of customs reform changed. 22. Client capacity. The institutional capacity of CCC to support an extensive reform was rather limited particularly when considering that responsibility for border management was shared with other agencies, such as the Financial Police and the Border Guards. Customs officers had a negative image with the public due to perceptions of corruption. Previous modernization efforts had failed and the internal capacity to manage a substantial reform project was limited, especially in the area of information and communication technologies. Modernization efforts were hampered by frequent changes of IT managers. 23. In 2006, the Bank carried out an assessment of CCC’s capacity to implement procurement which identified significant risks to the CDP. The assessment found that procurement processes conducted at the national level suffered from insufficient transparency and government officials involved in project procurement were not always familiar with international procurement procedures. More importantly, the assessment uncovered that the CCC had limited capacity in: conducting international bidding processes for procurement of goods; preparing technical specifications for procurement of the different types of office equipment that would be required by the Project; preparing terms of references for consultancy services; and contract administration under World Bank procedures. While the project design incorporated measures to address these capacity limitations, lack of knowledge of Bank procedures and poor drafting of technical specifications did lead to delays in procurement. 24. Client capacity in financial management (FM) was also limited. While the FM arrangements were satisfactory, the overall FM risk was assessed as High even after CCC implemented an action plan before project appraisal. This was mainly due to the lack of experience of the CCC Financial Management Department in implementing Bank- financed projects. The Bank organized a three-day workshop in Astana to train the staff of the CCC on their fiduciary responsibilities before the Project became effective. 25. Assessment of risks. The Project Appraisal Document (PAD) identified a total of ten risks and rated overall risk as Moderate. All of the identified risks were relevant: most of them related to the client’s limited capacity and mitigation measures were planned accordingly. However, only three of the risks were identified as High: the risk of weakening GoK support for customs reforms; the risk of limited institutional support for 6 the reforms aimed at fighting corruption; and the risk that CCC might only pay lip service to reforms instead of actually improving its capacity. In hindsight, the risk related to changes in the chairmanship of CCC should have also been assessed as High as well and mitigation measures should have been proposed. Frequent changes in the chairmanship of CCC were one of the main factors causing implementation delays, reform fatigue and loss of institutional memory. The risk related to ICT reforms also materialized, suggesting that the mitigation measures were inadequate. Finally, the project design failed to consider political economy risks, even though these were highlighted at the Quality Enhancement Review (QER). Political economy risks proved to be critical for project implementation, starting with the delayed ratification of the Loan Agreement and the inability to form the PSC, Kazakhstan decision to join the Customs Union with Russia and Belarus, which rendered some of the Project’s outputs no longer relevant, and changes due to the merger of the CCC with the Tax Committee which further delayed implementation. These reforms radically changed the institutional environment and absorbed CCC’s management attention to the detriment of the CDP implementation. 26. Adequacy of Government commitment. The development of the Project was supported by a high level of GoK commitment to reform. At project design, customs modernization was a priority for the President and the Government, seen as critical for improving Kazakhstan’s competitiveness and creating an attractive business climate and trade environment. GoK was already implementing an ambitious modernization program consistent with the Project’s objectives and international best practice. GoK had signaled its commitment to fighting corruption in customs through a he CCC had developed a positive corporate culture and a willingness to adopt international standards, fostered in part through Bank-funded peer-learning exchange visits and workshops for CCC leadership and senior staff. 1 GoK’s goal of WTO membership was expected to lock in reform strategies implemented through the Project. 2.2 Implementation 27. Project implementation was delayed by a number of factors, such as waning GoK commitment to the project, the limited procurement capacity of the PMU, delays in securing counterpart funding, inadequate attention to change management, the decision not to restructure despite changed institutional environment, membership of the Customs Union and the merger of CCC with the Tax Committee. 28. Institutional development. GoK’s customs reform agenda focused on international commitments leading to membership of Eurasian Customs Union in 2010 and WTO accession in 2015. Beyond these commitments, GoK lacked a strategic vision for CDP and paid insufficient attention to the development of the institutions needed to support reforms. While GoK endorsed CDP’s institutional development agenda during preparation, once implementation started, GoK did not engage on institutional reform 1 The peer-learning exchange visits and workshops for CCC leadership and senior staff were organized through the following projects: Trade & Transport Facilitation in Southeast Europe Project (TTFSE) (P065041); Trade & Transport Facilitation in Southeast Europe Project (TTFSE) (P065041); Kazakhstan Customs Peer-learning Exchange Visits (JERP) (P104078). 7 issues and the project depended on the priorities of the CCC Chairmen. The eighteen month delay in ratification of the Loan Agreement by Parliament and delays in compliance with the effectiveness condition related to the appointment of the PSC were early signs of waning commitment. The PSC, which was supposed to drive and coordinate the reform agenda, was not effective and met only twice due to its large size (19 members) and the limited availability of its members. 29. Management Capacity. Implementation of the reform program was delayed by frequent changes in CCC management and PMU: there were four CCC chairmen and five project managers from project approval up to the creation of the SRC. Staffing changes affected operational positions in the PMU, with replacement of essentially the entire unit on at least one occasion. A change management advisor was not recruited to the PMU until 2013, despite the fact that change management was considered to be key to building capacity to absorb the reforms. Communication with the public and the traders’ community was also poor: a communications consultant was hired only during the last year of implementation. 30. Procurement capacity. Procurement capacity constraints identified at appraisal had not been adequately addressed by CDP start-up. Procurement workshops for project staff took place in May and September 2009 but the recruitment of an international procurement specialist was delayed until October 2009. While the Bank maintained acceptable turn-around times in provision of Bank ‘no-objections’, the Project suffered from regular delays in execution of procurement decisions by the borrower. This was partly due to the long internal approval process for contracts related to IT packages and the client’s limited experience with World Bank procurement guidelines. Procurement decisions were further delayed by internal Government requirements beyond those imposed by the Bank, notably the requirement for a feasibility study for IT investments. 31. Choice of Technology. CDP was expected to improve efficiency in customs administration through the introduction of electronic filing of customs declarations (e- declaration) as part of an integrated ICT system. However, IT procurements related to Component 3 were cancelled following the merger of customs and tax administrations, when the SRC decided to acquire the Automated System for Customs Data (ASYCUDA) system provided by the United Nations Conference on Trade and Development (UNCTAD) instead of developing its own system. The GoK believes that the ASYCUDA system will serve the needs of the new SRC better than would different customized systems for customs, tax and economic crimes. The system is planned to be rolled out in 2017 32. Counterpart funding. The Implementation Status and Results Reports (ISRs) rating for counterpart financing was Highly Satisfactory up to the last year of implementation. Given the heavy reliance on the Republican budget, which financed around 70 percent of the project’s budget, delays in GoK funding were bound to have a disproportionate impact on implementation. Delays in securing Republican budget for the Project occurred several times, but counterpart funding effectively ceased in 2014-2015 due to the adverse economic situation: during the second half of 2014, oil prices fell by about 50 percent and the tenge depreciated by almost 50 percent against the US dollar, affecting GoK revenues. Lack of counterpart financing prevented the project proceeding with the remaining procurements. There were no disbursements after November 2014. 8 33. Membership of the Eurasian Customs Union. Kazakhstan decided to join the Eurasian Customs Union with Russia and Belarus in 2010. This required harmonization of customs procedures and made some customs reform initiatives subject to approval by the Commission of the Customs Union. Implementation of the Customs Union’s requirements had an immediate impact on most of CDP’s PDO indicators, notably the number of documents required for border and customs clearance and the percentage of physical inspections of goods was reduced. However, these changes happened independently of CDP activities (see section 3). 34. Merger of Tax and Customs Committees. In 2014 GoK announced the merger of the Customs and Tax Committees and the formation of the State Revenue Committee headed by a new Chairman. SRC decided that the CDP and the Bank-financed Tax Administration Reform Project (TARP) would continue as planned, since both projects were already at an advanced stage of implementation. Initially, SRC decided also to go ahead with the procurement of equipment which was specifically needed for the administration of each revenue instrument. However, the merger disrupted project implementation and caused delays in procurement. SRC’s new priority was to integrate the functions and IT systems of tax and customs authorities, as well as those of its newly acquired responsibilities for economic crimes investigation. As a result, many of the outputs which were already delivered and the remaining planned activities, notably the development of an integrated customs ICT system, were no longer considered relevant. Consequently, SRC requested that the remaining procurements related to IT be cancelled and some of the outstanding components of the CDP be incorporated in a restructured TARP. However, at the time of ICR preparation TARP has not been restructured yet. 35. Project Restructuring. In planning the Mid-Term Review in November 2011, both the CCC and the Bank team anticipated that some adjustments in the project design would be needed to accommodate Kazakhstan’s entry into the Eurasian Customs Union (ECU). However, the MTR ultimately did not propose project restructuring. The report provided an overview of CCC modernization efforts, challenges ahead and recommendations how to address them. It did not discuss how CDP activities contributed to these reforms or whether the PDO indicators remained relevant, given that they showed improvements even before the start of CDP activities (see section 2.3 on M&E). The MTR highlighted issues with the data reported by CCC, which was significantly different from data reported by independent surveys. Instead, the report recommended a two year extension of the project’s closing date and limited its recommendations to operational issues: advising the PMU to improve coordination between project activities and the various consulting firms working on different aspects of customs administration and to ensure continuity of staff, in order to reduce disruption caused by high staff turnover. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 36. M&E design. The M&E design of the project suffered from deficiencies which make it difficult to attribute the achievement of PDO indicator targets to CDP activities. 9 37. First and foremost, the PDO indicators did not capture the project’s contribution to achieving the PDO. Instead PDO indicators were chosen to provide “a broader assessment of the achievement of key reform goals and objectives of the Government” .2 All of the PDO indicators were sensitive to changes outside the control of the Project; indeed the ISRs showed that the customs reforms were making significant progress against PDO indicators even before the start of CDP activities 3 . Lack of an explicit results chain detailing the link between project activities, outputs and PDO outcomes make it difficult to distinguish between results achieved through CDP support and results achieved by the GoK independently 4 . None of the Aide Memoires (AMs) or ISRs describe how CDP contributed to changes in PDO indicators, but they do document the impact of external conditions. As a result, the PDO indicators measured the broader reform agenda pursued by the GoK rather than of the specific contribution of CDP to these reforms. This limited their usefulness in measuring progress on the Project’s objectives. 38. Second, the results framework did not capture key aspects of effectiveness and institutional development. The CCC (and SRC today) had broad administrative responsibilities, including community protection, border security, industry support and trade facilitation, which are not measured by the PDO Indicators. While institutional strengthening and capacity building were important aspects of the Project supported by Components 1 and 2, there were no PDO or intermediate indicators capturing the impact of these activities. Alternative indicators could have been selected. The QER meeting proposed two additional indicators: reduction in the gap between the Kazakh data on imports and neighboring country’s data on exports; and results obtained from risk-based interventions expressed as a percent or ratio of detections to examinations conducted. However, these indicators were not included in the project results framework. 39. Third, the results framework did not specify the precise definition of the indicators and the methodology for collecting them. This resulted in significant differences between data provided by CCC/SRC, stakeholder surveys commissioned by the project or third- party sources. For example, there were significant differences between CCC statistics on PDO Indicators 1 and 2 regarding customs processing time at border posts and clearance at inland posts and data from the 2011 stakeholders’ survey. According to the survey, customs processing at border posts was 29 hours (vs 1.36 hours reported by CCC) and clearance time at inland posts was 17.2 hours (vs 1 hour reported 2 PAD, p. 13. On the other hand, CDP PDO indicators were similar to those used in other projects- see Annex 8. 3 PDO Indicator 3 on physical inspections showed a remarkable improvement from the baseline of 70 percent in 2006 to 10.9 percent as of 11/27/2009, shortly after the project became effective (March 2009) and before any of the activities had begun. Subsequent changes in this indicator (both positive and negative) can be attributed to the requirements of the ECU. Similarly, a reduction in the number of documents required for customs clearance from 12 to 3 (PDO Indicator 4) can be attributed to implementation of the ECU Customs Code rather than the Project. 4 The MTR states that “Improvements followed the implementation of the new Customs Code in July 1, 2010, which reduced customs clearance time up to 1 day for imports and up to 4 hours for exports, and also resulted from automation of Customs Automated Information System-2”, acknowledging that improvements in PDO indicators 1 and 2 resulted from developments that cannot be linked to the project. 10 by CCC). These discrepancies can be explained by the fact that the business survey and customs data used different methodologies. The survey included in "clearance time" the time spent on road blocks at the border, clearance time on both sides of the border, as well as time spent on immigration and security check with the border police. Administrative statistics measured the total number of transactions cleared in a day divided by the number of counters operating for clearance. It did not measure the time spent by importers before initiating work with customs. To help overcome the data limitations, the Bank intermittently conducted observations of operational practices through field visits and limited consultations with clients and stakeholders. 40. Fourth, the project results framework and M&E arrangements did not capture the less tangible aspects of the project, such as the continuous policy dialogue that the Bank team had with CCC. Over a period of almost ten years (2006-2015), the Bank was in constant contact with the GoK regarding customs reform and its advice is reported to have informed many of the broader policy reforms undertaken by the GoK. Neither the PDO nor the intermediate indicators or the Bank and CCC records captured this well. Only anecdotal evidence collected through interviews is available to support these project impacts. 41. M&E implementation. The M&E rating in ISRs was Satisfactory throughout the life of the Project. However, feedback from interviewees and the analysis of monitoring reports suggest that neither the Bank nor the Borrower paid sufficient attention to M&E implementation. 42. ISRs did not comment on M&E arrangements, data for many of the indicators was either missing or reported only in AMs and not in ISRs, and there were inconsistencies in the data provided in different reports, such as AMs, ISRs, MTR and final completion report. For example, it appears that the values of PDO Indicators 1 and 2 were used interchangeably in early ISRs and were not always consistently reported. PDO Indicator 2 was not reported in any ISR but only in AMs, while PDO Indicator 1 was reported in all ISRs but based on data on inland posts. This resulted in discrepancies in the baselines (e.g. four different baseline values were reported for PDO Indicator 1 in different documents) and units of measurement (e.g. days vs hours, annual vs monthly). 43. Methodologies for data collected were not adjusted to reflect CDP’s changing circumstances, even though these problems were identified in AMs and ISRs. Data for PDO Indicator 2 (physical inspections) was no longer comparable with the base data after ECU accession because clearance was no longer required for goods coming from Russia. Similarly, data for PDO Indicator 5 (percentage increase in revenue against the total number of customs staff) was no longer comparable after establishment of SRC because support and operation functions had to be distributed across the Committee and it became difficult to differentiate between customs and non-customs staff. Improvements in PDO Indicator 5 were not comparable after ECU accession because Kazakhstan started collecting customs duty for goods from China destined for other Union members and was required to raise tariff rates on a significant number of commodities. The Bank team 11 noted in its supervision mission of November 2012 that it was “difficult to draw meaningful conclusions about [revenue] collection efficiency and effectiveness.”5 44. M&E utilization. The Bank relied mainly on the data provided by CCC/SRC to report on the PDO indicators. However, as mentioned, the data was unreliable and did not show how project activities were contributing to changes in the indicators. The client had limited understanding of M&E and was not provided with M&E training, even though the PAD promised to build in-house M&E capacities. There is no evidence that the quarterly and annual reports envisaged in the PAD were produced or made public on the website of the Ministry of Finance. Consequently, neither the Bank nor the client used the data on the PDO indicators to inform decision making and resource allocation. 45. M&E Rating. Based on the above, the rating for the M&E arrangements of the project is Modest. 2.4 Safeguard and Fiduciary Compliance 46. The CDP achieved either a ‘Satisfactory’ or ‘Moderately Satisfactory’ rating for Financial Management throughout its life. While procurement capacity was identified as weak early on and proved to be problematic throughout, Procurement Management performance was never rated lower than ‘Moderately Satisfactory’ and the project finished with this rating. Shortcomings with procurement were reviewed in sections 2.1. and 2.2. 47. No social safeguard policies were identified as applicable during preparation of the CDP and it was assessed as a category C project. No negative environmental impacts arose, nor were any safeguards triggered during the life of the project. There were no deviations or waivers from Bank safeguards / fiduciary policy requirements. 2.5 Post-completion Operation/Next Phase 48. The GoK has indicated that some of the undelivered components from the CDP could be financed by the on-going Tax Administration Reform Project. The SRC has on a number of occasions indicated it would like to explore options for continued cooperation with the Bank in the context of its new institutional structure. The Bank provided technical assistance to support the merger of tax and customs through a JERP financed project. Senior officials also noted that although many of the recommendations arising from Components 1 and 2 activities were not implemented during the project, some of them are still relevant and are being currently revisited or are expected to be considered at a more appropriate time. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation  Relevance of Objectives: Substantial 49. The objectives of the Project remain relevant. They are consistent with the overall strategy of improved governance and accountability in public agencies as well as more 5 Customs Development Project Mid-term Review Aide-Memoire November 5-16, 2012. 12 specific requirements for adoption of international practices to facilitate trade, improve revenue outcomes and further integrate the country into the global economy. At the time of approval, the CDP was closely aligned to the priorities set out in the Kazakhstan Country Partnership Strategy (CPS) 2004, the second pillar of which sought to develop an appropriate role for the government to foster competitiveness and facilitate business. More specifically, WTO accession and greater cooperation, particularly in areas such as customs and trade facilitation, were seen as vehicles to help Kazakhstan firms engage in global value chains. 50. These objectives remain relevant in the context of the CPS for 2012-2017, which still has a strong focus on improving governance and competitiveness. What has changed is the strategic context of the implementing agency under the framework of the SRC. This change in institutional arrangements did impact on the relevance and appropriateness of some CDP activities and outputs in that some recommendations remained unimplemented and ICT procurements were cancelled.  Relevance of Design: Modest 51. The original design of the project remained relevant for most of the Project’s duration. The design was based on sound background analysis and project components reflected WCO capacity building framework. The design was informed by the Bank’s previous experience in customs reforms in the ECA region and elsewhere and integrated international best practices. However, the PDO and the targets were overly ambitious and poorly formulated. While project activities were relevant at the time of project design, they became less relevant when the priorities of CCC changed with the entry into force of the ECU and the merger of tax and customs. 3.2 Achievement of Project Development Objectives 52. Assessment of the achievements of the PDOs is hampered by the weaknesses of the M&E arrangements, especially the choice of PDO indicators (which were better suited to tracking broader reform priorities rather than progress on the project’s PDO), the poor quality of data provided by CCC/SRC, and the lack of evidence on the project’s contribution to improvements in the PDO indicators. All PDO indicators were influenced by external factors and showed improvements despite the fact that the project outputs were either not fully implemented (Components 1 and 2), or were cancelled (Component 3). According to the borrower’s completion report, “the main objective of CDP- implementation of the customs e-declaring was not achieved”.  Increased administrative efficiency: Modest 53. The PDO indicators intended to measure increases in efficiency were PDO Indicator 1 (reduction in processing time at border posts), PDO Indicator 2 (reduction in clearance time at inland posts) and PDO Indicator 5 (increase in the percentage of revenue per staff member). CCC statistics suggest that PDO Indicators 1 and 2 were partially achieved, while PDO Indicator 5 was fully achieved. However, it is difficult to identify the Project’s contribution to the achievement of these indicators. 13 54. The baseline for PDO Indicator 1 was established in 2011 through a stakeholder survey at 29 hours.6 According to the last survey conducted in 2014, the final value of this indicator is 13.4 hours, which would indicate a decrease of 53%. Data from the CCC, however, pointed to a baseline for customs processing of 1.36 hours which, according to the SRC, was reduced to 1.03 hours in 2015 which indicates a decrease of 24%. Field visits and discussions with SRC staff confirmed that the 1.03 hours does not cover the whole time needed for clearing customs, but rather the time spent on average at a customs clearance center.7 CDP was to improve performance against this indicator through the implementation of the integrated ICT system, e-declaration and e-audit, which were not fully implemented. In the absence of these outputs, the ICR team could not find credible evidence of the CDP’s contribution to the positive trend of this indicator. 55. The baseline for PDO Indicator 2 was also established in 2011 by the stakeholder survey at 17.2 hours. According to the last survey conducted in 2014, the average customs clearance time at the inland posts was 11.4 hours, keeping in mind that final clearance of imported goods is not undertaken at the border but at final destination (a decline by 33% only vs the target of 75%). Again data reported by CCC has much lower values with a baseline of 1 hour and a reduction reported by SRC in 2015 to 0.55 hours for exports and 3.1 hours for imports. As in the case of PDO Indicator 1, it is difficult to attribute improvements in this indicator to CDP, because the improvements were a result of the implementation of the new Customs Code in July 1, 2010. 56. PDO Indicator 5 measured the increase in the revenue per customs staff. This showed a steady increase from the beginning of the project, with 53 percent reported by 2009 to 283 percent increase reported by 2014. Even if 2011 is used as a new baseline in order to account for Kazakhstan’s entry into the Customs Union, revenues increased by 79 percentage points in 2014, which is well above the target of 20 percent increase. However, data from 2011 and 2014 is not comparable because revenues and staffing numbers included both tax and customs in the merged SRC. Besides, improvements in revenue collection can largely be attributed to the ECU.8 6 Originally PDO indicator 1 did not have a baseline but eventually four different baselines were established- one suggested in ISR 3 based presumably on CCC statistics (1.8 days as of 11/27/2009 i.e. 43.2 hours), one derived from the stakeholder survey (29 hours as of 2011) and one provided by CCC/SRC (1.36 hours as of 2011). The MTR from Dec 2011 provided new data based on CCC statistics- 1.3 hours for 2009, 1.8 hours for 2010 and 1.36 hours in 2011. 7 A survey conducted by the Association of Brokers claimed that the average time for customs clearance was 120h instead. The survey results are based on 193 responses to a questionnaire sent to businesses by the Association of Brokers. 8 The borrower’s completion report notes that data on the intermediate indicator related to revenues (Increase in the rate between the total additional revenue assessed as a result of post-customs control and total revenue by 10% by the end of 2009 and by 20% by the end of 2012 (corrected for inflation)” was never collected. 14 57. Alternative indicators. Independent assessments such as the Logistics Performance Index (LPI) show improvements in efficiency between 2007 and 2012 but some backsliding in 2014 (see Figure 1). Input received from Association of Customs Brokers (Almaty) based on a survey of its members was also less positive than CCC/SRC data would suggest. The 2016 Doing Business report does show improved performance against some comparable indicators but changes to methodology makes direct comparison difficult.  Increase administrative effectiveness: Modest 58. PDO Indicators. This objective was measured by PDO Indicator 3 (physical inspections) and PDO Indicator 4 (reduction in the number of documents required for customs clearance). Based on CCC data, both indicators were achieved. However, these improvements occurred before CDP activities began or in spite of the fact that key CDP components expected to lead to improvements were not delivered. 59. According to CCC data, the percentage of consignments selected Figure 1: Logistics Performance Index: for physical inspection fell from the Customs (efficiency of the clearance 2006 baseline of 70 percent to 23.4 processes) percent in 2013 and 14.8 percent in 5.00 2015, relative to the target of 20 4.50 percent. However, changes in this 4.00 indicator were due to the 3.50 requirements of the ECU rather than 3.00 Kazakhstan the CDP. The CDP was expected to 2.50 ECA contribute through improvements in 2.00 the risk management system, which 1.50 were not fully implemented due to the 1.00 cancellation of the main ICT 2007 2010 2012 2014 component. Third party sources suggest that the actual level of physical inspections is much higher than what is reported by the CCC/SRC. The number of documents required to be submitted by traders for customs clearance (PDO Indicator 4) fell from 14 in 2009 to 3 in 2011. While this exceeds the project target of 7 documents, it is difficult to demonstrate that CDP contributed to this result because most project activities had yet to start in 2011. AMs clearly state that legislative changes were initiated and implemented independently of the project. 60. There is a discrepancy between the number of documents prescribed by the CCC and the documentary requirements identified through the stakeholder survey. According to the survey, on average, 9 documents were required for customs clearance. This can be attributed to the fact that CCC performed delegated tasks on behalf of other government agencies that, depending on the goods in question, prescribed certain additional documents. The project was expected to address this issue through the development of the Integrated Tariff and Single Window initiatives which would require inter-agency coordination and process rationalization. However, while a publicly available and free searchable tariff database was delivered and was highly appreciated by the business 15 community in Kazakhstan, and most of modules of the Customs Information Management system were developed, the Single Window has not been fully implemented yet. 61. Additional evidence. Looking beyond PDO indicators, Components 1 and 2 contributed to institutional reforms that contributed to improved effectiveness but were not fully captured in the results framework. The impact of Components 1 and 2 was to be fully realized when, under Component 3, the e-declaration system and the new Integrated Customs Management System became fully operational. While most of the recommendations provided by Components 1 and 2 related to institutional changes were largely accepted by CCC not all were implemented and they became less relevant with the merger of tax and customs or because the necessary legislative amendments have not yet been adopted. CDP’s contributions to institutional reform include:  Training. A training strategy and revised training materials were prepared. Content matter specialists, CCC managers and training staff were trained in adult education methodologies and administration. CDP advised on the reorganization and rationalization of the training processes of the Training and Methodological Center in Astana. The Training Center was formally inaugurated as WCO affiliated Regional Training Center for the Central Asia region in December 2009. CDP consultants recommended the merger of the Atyrau branch of the Center with the one in Astana which was successfully implemented. Before the merger the two centers operated independently without much coordination, while now they followed the same curriculum and processes. CDP provided the Center with software for distance learning, accompanying server, manual and training, a revised curriculum for distance education programs, including on the technical requirements of the Customs Union, and an assessment of its capacity and potential to become an academy. Following the merger of tax and customs, the training materials developed through CDP were revised in order to include training for officials from the SRC tax and economic crimes departments. Training delivery increased from around 800-900 CCC staff per year before the merger to 3,000 today. It is not possible to assess the impact of the training since the Center does not collect such data.  Organizational Reform. CDP provided recommendations on CCC organizational design, HR optimization, anti-corruption and change management. CDP provided training in the practical aspects of strategic and operational planning as well as performance management principles. CDP also recommended that the number of regional offices be progressively reduced from sixteen to four and support functions be centralized. While this recommendation was accepted, it became less relevant after the creation of SRC and the rationalization of the regional offices was delayed till 2020. A number of HR processes were revised and a strategic plan for the period 2012 – 2020 was developed. After the merger, a new SRC strategy was put in place with support of the JERP program. A new competency framework tailored to the needs of customs was developed as well but was not fully implemented due to the merger and would need to be redone to suit the needs of SRC. Nonetheless, the recommendations regarding HR capacity building remained relevant and are currently being implemented in the context of 16 the merged agency. Some improvements to staff recruitment and selection practices to enhance competition and support merit-based selection were also achieved.  Business processes. CDP supported the development of revised business process maps in line with international standards and training in risk management, post- clearance audit, compliance management and the establishment of an Authorized Economic Operator regime. Recommendations provided by CDP included the full automation and integration of key business processes, a reduction in the number of documents and physical interventions and strengthening risk management capabilities. The project’s outputs related to post-clearance audit strengthened CCC’s capabilities in the area of audit planning. The revised business processes, the improved risk profiles and the audit activities were to underpin the new Integrated Customs Management System and the e-declaration system. A pilot e- declaration system for exports was completed and risk analysis and associated document matching were upgraded as part of the e-declaration initiatives but the system was not fully rolled-out. Business process designs were delivered in 2012 and 2013 and the new ICT system was to be implemented in 2014 but procurement was put on hold following the merger of integrate customs and tax administrations. 62. Alternative indicators. Data from the World Bank BEEPS indicated a positive improvement in client perceptions of customs regulations between 2008 and 2013. The percentage of firms indicating that customs regulations were not a problem rose from 51 percent in 2008 to 67 percent in 2013. More recent data from the World Economic Forum also suggests a positive trend in terms of reducing the burden of customs procedures (see Figure 2 below). While it is not possible to attribute these positive trends entirely to the CDP, the Project has made an indirect contribution to these improvements through Components 1 and 2. Figure 1. World Economic Forum (WEF) Global Competitiveness Report, Burden of customs procedures in Kazakhstan 17  Increase administrative accountability: Modest 63. PDO Indicators. Outcomes for this aspect of the PDO were measured by PDO indicator 6 (adoption of client service standards) and PDO Indicator 7 (perceptions of traders and stakeholders about unofficial payments). PDO Indicator 6 was achieved while PDO Indicator 7 was partially achieved. 64. CCC developed a series of key performance indicators covering all major customs operational areas with support from CDP. Six of these standards were formalized as client service standards (PDO Indicator 6) for the CCC. Reporting on the standards was mandated through Government Decree No. 273 dated 29 February 2012 which required key government agencies to prepare and report on service standards from 2013. In April 2015 a new Government Decree No.284 was adopted listing standards for 23 customs related public services. While the standards are published on SRC’s website9 and data on actual performance against them is not made public. The standards do not have baselines and targets and it is difficult to judge what constitutes good performance. Nonetheless, the adoption of the standards represents an improvement in transparency and public accountability which can be attributed to the CDP. 65. No baseline data is available for perceptions of traders and stakeholders about unofficial payments and no target was set. The first stakeholder survey conducted in 2011 showed satisfaction with customs service at 60 percent on average, varying from 42 percent to 86 percent by region. It is not clear whether the survey actually measured the indicator because the terminology varies between documents: some refer to “satisfaction” with customs services, others ask whether customs is corrupt or not, others the perception of clients about the frequency of unofficial payments. The methodology used to conduct the surveys was not fully disclosed. ISRs report that the indicator improved from 60 percent in 2011, to 62 percent in 2012, 68 percent in 2013 and finally 71.2 percent in 2014. The source of the indicator in 2013 and 2014 is unclear because the project funded only two surveys- in 2011 and in 2012. The project team interpreted this positive trend as “suggesting” that CCC’s reforms had started to have a positive impact on client perceptions. However, it is not clear how CDP contributed to this trend. 66. Alternative indicators. The BEEPS provides an external source of data on the perceptions of businesses about corruption in customs in Kazakhstan but it does not cover the later part of the project. The data that is available does not support the positive trend claimed by SRC. It shows a slight increase in the percentage of firms stating that bribery is frequent in dealing with customs/imports- from 12 percent in 2008 to 13 percent in 2013 (Figure 3). A survey commissioned by the Association of Brokers found in 2015 that on a scale of 1 to 10 (most corrupt) customs authorities scored of 8.8, the highest among the other rated institutions, including the financial police (7.9), tax authorities (8.2) and transport police (6.5). 9 http://kgd.gov.kz/ru/content/standarty-okazaniya-gosudarstvennyh-uslug-1 18 Figure 2. BEEPS at-a Glance 2013: Unofficial Payments: Customs. Percentage of firms stating that bribery is frequent in dealing with customs/imports 67. Additional evidence. Activities financed by Component 1 also contributed to improved accountability but were not captured by the PDO or intermediate indicators. CDP reviewed anti-corruption laws, strategies, policies and procedures. A comprehensive analysis of the CCC’s compliance with the WCO’s Arusha Declaration on Integrity in Customs was also completed and resulted in the alignment of the national integrity strategy with the Declaration. These outputs resulted in a shift in focus from a purely investigatory anti-corruption regime to a more positive and balanced approach involving support for corruption prevention and staff education. A new Code of Ethics and Conduct tailored to the operating environment and vulnerabilities of customs officials was developed. However, the Code could not be enforced since Customs was advised to apply instead the general ethics code valid for the whole administration of Kazakhstan.  Adopt International standards/Facilitate WTO Accession: Substantial 68. Kazakhstan signed the protocol on WTO accession on July 27, 2015 after twenty years of negotiations. CDP facilitated accession by helping the GoK demonstrate that its customs administrative framework was consistent with internationally accepted practices for regulating trade, with: the adoption of a contemporary regulatory compliance framework for customs and border management; improvements in transparency, simplification and predictability in trade ‘regulatory’ practices, automation and documentation of procedures, and reduced discretion and physical intervention; sustainable cost accounting methodology to facilitate calculation of fees in a way that is compatible with WTO rules. CDP also helped increase the GoK’s levels of understanding and ability to better apply the provisions of the WTO Valuation Agreement (GATT Art. VII) and alignment with a number of requirements of the WTO Trade Facilitation Agreement (Art 1. Publication; Art.6 Release and Clearance of goods; Art.8 Agency Cooperation and Art. 10 Formalities connected with Import/Export). 3.3 Efficiency: Modest 69. CDP originally included a number of equipment procurement and infrastructure components but owing to the cancellation of the IT procurement the project became primarily a capacity building and institutional reform operation. Economic benefits were to come from reductions in the number of days required for customs clearance and resulting reductions in costs for the trading community. This was to be achieved through 19 the single window. However, the single window was not implemented and so CDP did not realize the economic benefits as planned. The benefits realized from capacity building and institutional reform are difficult to attribute and do not lend themselves to economic analysis. The financial analysis conducted in the PAD cannot be replicated because it assumed increases in revenues which cannot be attributed to the Project. Reduced costs to traders due to the reduced amount of documents needed for clearance cannot be attributed to CDP either. The only tangible result attributable to the project that might have led to efficiency gains is the use of distance learning at the Training Center, which was only a small part of the project. 70. Allocation efficiency for the project is considered low. Initial expected outcomes were delayed by more than 18 months and project implementation period was increased by two years. This resulted in increase in the cost of Component 4 (Project management) which was more than double the planned amount - USD 2.68 million instead of USD 1.21 – even though CDP still only disbursed 51 percent of the revised allocation. 3.4 Justification of Overall Outcome Rating Rating: Moderately Unsatisfactory 71. The overall outcome rating of Moderately Unsatisfactory is based on the individual ratings for relevance, efficacy and efficiency as showed in Table 1. Table 1: Calculation of Overall Project Outcome Rating Relevance of Efficacy by Objective Efficiency Outcome 1 2 3 4 Objectives Design Efficiency Effective Account- WTO -ness ability Accession Moderately Substantial Modest Modest Modest Modest Substantial Modest Unsatisfactory 3.5 Overarching Themes, Other Outcomes and Impacts 72. Poverty Impacts, Gender Aspects, and Social Development. CDP’s poverty, gender and social impacts are not addressed in project documentation. 73. Institutional Change/Strengthening. CDP was an institutional strengthening project that contributed to the strengthening of the customs administration in Kazakhstan. Staff of the CCC and SRC benefitted from World Bank technical assistance and capacity building throughout the Project’s duration. Consultants engaged through the Project provided a range of training courses covering strategic planning, anti-corruption, risk management, performance management and other international best practices. 4. Assessment of Risk to Development Outcome: Negligible 74. The risk to the development outcome as expressed in the PDO is negligible. Two of the PDO aspects (efficiency and effectiveness) cannot be attributed to the project while the risk to the other two (improvements in accountability and WTO accession) is negligible. GoK plans to continue with the modernization of the customs administration and CDP outputs will inform the future reforms. 20 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Quality at Entry Rating: Moderately Satisfactory Bank performance in ensuring Quality at Entry is rated Moderately Satisfactory. The Bank took into account relevant technical and institutional aspects, including procurement and financial management. CDP was aligned with the strategic priorities of the GoK and the World Bank as defined in the Kazakhstan Country Partnership Strategy for 2004 and the CPS for fiscal years 2012-2017. Major risk factors and lessons learned from earlier projects in the governance sector were incorporated in the project design. The Bank provided adequate human and financial resources to ensure quality preparation and appraisal work (details in Annex 4). In addition, the project drew on extensive analytical work, such as such as the WCO Customs Capacity Building Diagnostic Framework and other diagnostic assessments conducted during Project preparation. The results framework, however, had significant shortcomings. While the objectives were clear and outcome-oriented, only one of the PDO indicators (PDO Indicator 6 on client service standards) was appropriate for measuring the Project’s contribution to achieving the objectives. The Bank should have paid more attention to the design of the project’s M&E arrangements. (b) Quality of Supervision Rating: Moderately Unsatisfactory 75. The project was subject to close supervision from the very beginning, which was eventually intensified due to the accumulated implementation delays and the low capacity of the PMU. Bank supervision missions visited Kazakhstan 2-3 times a year and prepared Aide-Memoires and ISRs regularly (12 supervision missions were carried out in total, including the MTR mission). The headquarters-based team of customs and public sector specialists was complemented by FM and procurement specialists in the field. On the FM side, Bank staff were proactive in supervision efforts, going beyond the review of FMRs and audit reports. The Bank was responsive to the capacity needs of the PMU and helped build its capacity through trainings on Bank procurement procedures. The Bank’s supervision of M&E was less effective. While the MTR highlighted issues with the data reported by CCC on the PDO indicators, the Bank did not consider revising the indicators because they appeared to be on track. There was no analysis of whether the indicators remained appropriate or whether there was a link between project activities and progress on the indicators. The Bank did not consider restructuring of the project to take into account the requirements of the ECU. Following the creation of SRC, the Bank proposed restructuring of the project in order to align it better to the needs of the newly formed institution. However, GoK asked the Bank to leave both the CDP and TARP unchanged and the Bank team agreed to proceed with the parallel projects. (c) Overall Bank Performance Rating: Moderately Unsatisfactory 76. Overall Bank performance is rated Moderately Unsatisfactory based on the Moderately Satisfactory rating for quality at entry and the Moderately Unsatisfactory rating for quality of supervision, in accordance with Independent Evaluation Group’s harmonized rating criteria. 21 5.2 Borrower Performance (a) Government Performance Rating: Moderately Unsatisfactory 77. GoK realized transformative reforms during CDP’s lifetime: accession to the Eurasian Customs Union in 2010, creation of the State Revenue Service in 2014 and accession to the World Trade Organization in 2015. However, GoK lacked a strategic vision for the implementation of the project 10 and paid insufficient attention to the development of the institutions needed to support reforms. While senior government officials worked closely with the Bank on the design of the CDP, they were not adequately engaged in implementation. There was an 18-month delay in project effectiveness owing to delays in the appointment of a project manager and ratification of the Loan Agreement. Approval of changes to the project feasibility study, which amended following accession to the ECU, and revisions to the procurement plan caused further delays. The decision to create a unified SRC was not informed by detailed analysis or preparatory work at an agency level. Instead, SRC had to work out how to merge tax and customs administrations after the decision had been taken. GoK did not agree to restructure the project after the merger which rendered some of the last but most important procurements irrelevant. (b) Implementing Agency Performance Rating: Moderately Unsatisfactory 78. General execution and implementation. Once properly constituted, CCC’s project implementation team was generally effective and dedicated. However, frequent changes of CCC leadership and high staff turnover hampered timely decision-making and slowed project implementation. Appropriate levels of review and approval were usually in place, though lengthy internal procedures, particularly for procurement, often slowed project implementation. Changes in CCC leadership led to changes of operational staff and loss of institutional memory. PMU staff lacked project management skills and was focused on processes rather than achieving the project’s objectives. Insufficient attention was given to communication with the business community and the public. A change management advisor was hired only in late 2013. The decision to merge customs and tax administrations under SRC stalled project implementation while decisions were taken about institutional arrangements. The lack of a clear sense of purpose for the project in the context of the new institutional structure combined with reductions in budget allocations as a result of the fiscal crisis ultimately paralyzed the project. 79. Financial management. Financial management was rated Satisfactory in ISRs during most of the project. The financial management arrangements established by the PMU, including project accounting and reporting arrangements, staffing of the financial management function, internal control procedures, and external audits provided adequate control and accountability. The CCC and later on SRC were in full compliance with the Financial Covenants of the Legal Agreement. Quarterly IFRs were submitted on time and in a format and content acceptable to the Bank. The requirements for annual audit were also complied with. Counterpart funding was rated Moderately Satisfactory until the last year of implementation when inadequate funds allocated for the Project activities. 10 See Borrower’s report, p. 25. 22 80. Procurement. The capacity of the Project unit to handle international/national procurement was deemed adequate throughout the project duration. The procurement arrangements within the project unit were assessed as satisfactory to the Bank throughout the Project’s life. Nonetheless, procurement was always rated Moderately Satisfactory, except in the first ISR. The PMU was staffed with an international procurement consultant and a local procurement specialist. The local procurement specialist and the technical staff attended several workshops organized by the Bank procurement team. The procurement plan was updated regularly and the Bank conducted regular annual procurement post-reviews, which did not identify any major procurement deviations. 81. The PMU faced significant capacity constraints mainly due to the lack of experience with Bank procedures and high staff turnover. There were frequent changes in the key staff involved in project implementation, including the procurement specialists who had received training. There were delays in the bid evaluation processes as well as in the submission of bidding documents for Bank clearance. The quality of terms of reference and contract documents was often poor. At one point the PMU asked for USAID for assistance with preparing terms of reference, because they were often rejected by the Bank, and the USAID hired consultant helped improve the quality of drafting. Translation of bid documentation from Russian to English and back proved cumbersome and inefficient, especially for technical specifications. Often it was not possible to ensure high quality translations. Confusion over which procedures had to be followed – national or Bank procurement guidelines – caused additional delays. Complex procurements with multiple activities as well as procurement of IT equipment were the most challenging. Contract negotiation processes often took more than six months. Towards the end of the project, a significant factor constraining the last scheduled procurements was the fact that insufficient funds were allocated from the Republican Budget for 2015. (c) Overall Borrower Performance Rating: Moderately Unsatisfactory 82. With Moderately Unsatisfactory ratings for government performance and implementing agencies’ performance, overall borrower performance is also rated as Moderately Unsatisfactory in accordance with Independent Evaluation Group’s harmonized rating criteria. 6. Lessons Learned 83. ICT project management. The project design overestimated the implementing agency’s capacity to manage procurement and ICT procurement in particular. While some training was provided, frequent changes in the PMU staff undermined its effectiveness. Problems arising from the poor quality of translation of technical requirements to and from English, lack of familiarity with Bank procedures and lack of clarity on the interaction between Bank and Government project procedures compounded these difficulties. It is therefore recommended that PMUs which manage large ICT investments should have a dedicated ICT Project Manager on board from the design stage in addition to the relevant ICT and procurement experts. The Bank should provide specialized training on Project Management and ICT Procurement and Contract Management based on a needs assessment, complemented by specialized Bank technical supervision. 23 84. Project M&E. M&E arrangements should lay out the source and methodology for calculating the values of the PDO indicators and describe the results chain linking project activities, outputs and PDO outcomes. Results frameworks should be revised as new indicators become available during a project’s lifecycle or some of the existing indicators become irrelevant. Results frameworks should also include only those indicators for which a plausible connection between project activities and results can be made. In the case of the CDP, almost none of the PDO indicators were directly linked to project activities and so it proved difficult to demonstrate the contribution of the project to changes in the indicators. Indicators whose values are strongly influenced by external factors are of little use for performance measurement and management. Without credible and verifiable evidence produced by a project’s M&E framework, it becomes very difficult to evaluate achievement of project PDO. 85. Counterpart funding. CDP relied on counterpart funding to cover almost 70 percent of project costs with a relatively modest Bank contribution (USD 18.5 million initially and finally USD 14.5 million). This was feasible at the time of project design when oil prices were high and the Government enjoyed substantial revenues. Macro- economic risks were underestimated. Lack of counterpart financing effectively stopped CDP implementation when Kazakhstan faced a steep decline in oil prices and cuts in revenues. The Bank should assess the feasibility of mobilizing counterpart funds against various scenarios at the design stage and adjust implementation plans promptly when faced with significant changes in counterpart funding conditions. 86. Institutional change. Many of the recommendations provided by consultants through Components 1 and 2 of CDP were to be implemented through legislation or required high level Government approval. This proved to be much more difficult than originally anticipated. The legislative environment in Kazakhstan is not flexible. CCC/SRC had little opportunity to influence the legislative agenda and GoK did not focus on institutional development issues after project approval. Project design should ensure arrangements that engage policy making levels of Government throughout project implementation so that institutional reform and legislative requirements can be addressed when needed to support the reforms. 7. Comments on Issues Raised by Grantee/Implementing Agencies/Donors 87. The Borrower has submitted its Implementation Completion Report, a summary of which is contained at Annex 5 to this report. 24 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Component 1. 15.40 6,819, 823.48 44.28 Component 2. 15.88 4, 994, 513.77 31.42 Component 3. 28.34 9, 294, 859.87 32.60 Component 4. 1.21 2, 689, 460.38 222.31 Total Baseline Cost 60.83 23, 798, 657.50 39.13 Physical Contingencies 1.12 0.00 0.00 Price Contingencies 0.00 0.00 0.00 Total Project Costs 61.95 23, 789, 657.50 38.40 Project Preparation Costs 0.00 0.00 .00 Front–end Fee 0.05 0.00 .00 Total Financing Required 62.00 0.00 (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) IBRD-International Bank For 18,500,000.00 7,348,305.34 0.39 Reconstruction And Development Borrower 43,500,000.00 16 450 362.16 0.37 25 Annex 2. Outputs by Component Planned Outputs Actual Outputs Delivered by the CDP Component 1. Institutional Development, Governance and Human Resource Management (US$15.75 million) Sub-Component 1.1. Organizational and Institutional Reform Review of the organizational structure, A new high level organizational structure functional description, and the design of the which recommended the rationalization of future organizational structure the number of customs regional offices from 16 to 4 and the centralization of operational and support functions. Management training for senior cadre of CCC Management training for senior cadre of officials CCC officials was delivered. Study tours A study tour to Brussels (Belgium) was organized for 5 staff of the Legal Department aimed at raising awareness of customs legislation and best practice. Sub-Component 1.2. Strategic Planning A detailed review of CCC strategic planning An analysis of the current strategic methodologies management and planning situation in the CCC; strategic plan for the CCC for the period 2012 – 2020. The strategic planning inputs resulted in a much stronger internal capacity for planning and results monitoring. However, after the merger of CCC with the Tax Committee, a new SRC strategy was put in place with support of the JERP program A series of core service standards and key performance indicators covering all major Customs responsibilities, six of which were agreed and formalized as the client service standards for the CCC through a Government Decree. The adoption of the standards represented a significant improvement in transparency and public accountability; Training in strategic planning techniques to Training in the practical aspects of strategic senior officials and staff of Modernization and and operational planning as well as Strategic Development Unit performance management principles to middle managers within the CCC leading to a much higher level of understanding of the practical aspects of strategic and operational planning as well as performance management principles. Study tours to examine the strategic planning A study tour to observe strategic and frameworks operative planning methods was included in the training plan of 2010. Sub-Component 1.3. Management Information System Develop, specify, and agree with the trade NA community and key government stakeholders on service standards for Customs 26 Planned Outputs Actual Outputs Delivered by the CDP Identify a range of new performance indicators for alignment of performance to CCC goals and objectives Design and develop a Management Information System (MIS); Online Management Center and implement an Executive Support System (ESS) Study tours to countries with advanced MIS Sub-Component 1.4. Anti-corruption and Integrity A detailed review of the CCC’s anti-corruption A review of anti-corruption laws, strategies, strategy and its compliance with the provisions policies and procedures; comprehensive of the WCO Arusha Declaration analysis of the CCC’s compliance with the WCO’s Arusha Declaration on Integrity in Customs and making current national integrity strategy compliant with the WCO Arusha Declaration. The analysis resulted in a shift in focus from a purely investigatory anti-corruption regime to a more positive and balanced approach involving additional support for corruption prevention and staff education; a new Code of Ethics and Conduct was developed to complement the civil service wide Code currently in use within the CCC. Design and development of a revised National NA Integrity Development Plan Training in anti-corruption methods and Reports on internal investigation and anti- investigative methods corruption Procurement of specialist surveillance and NA equipment Study tour to examine anti-corruption practices Sub-Component 1.5. Human Resource Management New Human Resource Management strategy An analysis of current HR policies and New merit-based remuneration and conditions processes; a new HR strategy was developed; of service regime Code of Conduct in line with WCO Review of existing Human Resource guidelines; analysis of best practice Management Information System (HRMS) to approaches from elsewhere in the world; ICT determine feasibility of redeveloping or requirements for the HRM system. However, modifying existing system to support new and and due to the integration of CCC and TC enhanced human resource management some of the recommendations related to processes human resource management did not remain Training and workshops for HR managers fully relevant. Nevertheless, some of the CDP and TARP recommendations on staff policies, motivation system and competency based performance assessment have been taken to account for further HRM development under the SRC. Sub-Component 1.6. Training and Staff Development 27 Planned Outputs Actual Outputs Delivered by the CDP Competency assessment Development of a comprehensive training strategy, revised training materials and curriculum and competency framework based on a competency assessment and support for training. Training strategy and training curriculum Analysis of special needs of the CCC; Development of training program and implementation during October-December 2010- the courses were adapted to the Project as well as to the level of different staff of CCC. Trainees received certificates upon completion of the training course; CCC officers took part in the meeting of Managers of European regional training centers of the World Customs organization. Training equipment and software for the Training at the Regional Training Institute; Customs Academy or equivalent facilities Courses were conducted for all customs officials and instructors include delegates from the World Customs Organization. Establishment of a world class Customs Training Methodological Center of the CCC Academy or equivalent facilities, and to in Astana, which was designated as a WCO provide for international experts in the first affiliated Regional Training Center for the three years of operation of the Customs Central Asia by the World Customs Academy, if established Organization (WCO). Development and implementation of a A Distance Education program was Distance Education program developed and implemented at the Training Methodological Center of the CCC in Astana; Content matter specialists, CCC managers and training staff have been trained in adult education methodologies and administration. Sub-Component 1.7. Change Management and Continuous Improvement Implement comprehensive change Change management strategy; Development management and a continuous improvement of the leadership and managerial capacity in strategy and process the CCC to lead the change process and to Training and advisory service for the CCC communicate key change messages to Modernization Unit, the Project Steering internal and external stakeholders; a Customs Committee and the Project implementation Reform Advisor was hired at the end of 2013 team to support change management. Training in process simplification/improvement tools Internal and external communications to A public awareness campaign was developed disseminate information to the public on and implemented. However, the Bank team customs modernization, and stakeholder noted in 2013 that “the reform efforts are not surveys by local research company monitor the internal and external effects of the reform 28 Planned Outputs Actual Outputs Delivered by the CDP clearly communicated to the public”. Sub-Component 1.8. Financial Management Development and implementation a cost- Sustainable cost accounting methodology to accounting based Financial Management facilitate calculation of fees in a way that is Information System (FMIS) compatible with WTO rules was developed. While it was initially envisaged that this work would lead to the development of an automated system to track and monitor workload statistics and performance indicators, this work was incorporated into a wider Ministry of Finance project. However, project inputs in this and other areas (such as human resource management) enabled the CCC to play an active role in the design of the Ministry of Finance system. The disciplines and methodology developed through the project were implemented and provided the CCC with a credible basis for calculating the costs of individual services. Procurement of FMIS NA Enhancement of the current financial management processes and procedures relative to international best practice, and improving the levels of accountability and transparency that are required for WTO accession Training of financial management staff in FMIS and WTO financial management requirements Component 2. Customs Operations (US$16.30 million) Sub-Component 2.1. Customs Legislation Review of all legislation impacting Improvements to the legislative framework international movements of persons, vehicles, were drafted but not implemented. and goods, and perform a gap analysis with major international instruments and best practices Preparation of amendments to support news systems and procedures Review of the organization and structure of the Revised business practices recommended by customs legislation and update of the the consultants included the full automation supporting legislation and integration of key business processes; a significant reduction in the number of documents and approvals required for clearance; reduced levels of physical intervention through enhanced risk management and improved ICT capabilities; the introduction of simplified and harmonized procedures; and the 29 Planned Outputs Actual Outputs Delivered by the CDP establishment of an Authorized Economic Operator regime. Training in customs legislation best practices Training to the staff of the legal department and legal functions of CCC on drafting legislation was held on 9 – 13 June, 2014. On August 21, 2014 the Ministry of Finance held a workshop for senior officials where draft law on Revisions and amendments to some legislation of the Republic of Kazakhstan related to customs administration under the Customs modernization Project was presented. Preparation and implementation of a plan for A Law on Revisions and amendments to adjusting organizational and operational some legislation of the Republic of standards to new legislation Kazakhstan related to customs administration Translation of all pertinent customs legislation was drafted within the CDP but was not and forms in Kazakh, Russian and English adopted. Sub-Component 2.2. Integrated Tariff Review and introduce legislation and 15 modules out of the planned 18 were regulations to improve coordination between developed in 2014 for the Customs customs and other departments involved in all information Management System, and the aspects of international trade, including remaining 3 modules were accepted in 2015 security and health issues was delivered. A public electronic service on customs tariffs was introduced free of charge on SRC website. Previously this service was paid. This novelty was highly appreciated by the business community of Kazakhstan. Establishment a special unit staffed with tariff, legal and systems-design specialists who will build up and maintain an integrated tariff system Development of e-document and systems software to implement an Integrated Tariff Automated System Corresponding internal and external training and information instruments Sub-Component 2.3. Cargo Control, Risk Management and Declaration Processing Reengineering, simplifying and standardizing Analysis of current business processes and business processes in (a) cargo clearance, (b) the ICT environment; a series of revised transit control, (c) e-declaration of goods and business processes in line with international vehicles, (d) declaration processing, (e) standards and accepted global good practice valuation system, and (f) high volume regular and recommendations; business process processes, based on a strategy to minimize mapping of key Customs functions; outlines risks of user requirements for new ICT system functionality; modernization of human resource development capabilities; Hardware was acquired to support e-declarations; Consultancy recommendations designed to 30 Planned Outputs Actual Outputs Delivered by the CDP strengthen the CCC’s risk management capabilities and systems were largely accepted and introduced; Risk profiles were improved; intelligence capabilities were strengthened Analysis of the system of valuation and NA implementation of a modern valuation mechanism, using price information Assessment of equipment needs Develop methodology, software and databases on price information Implement Risk Management System integrated with TAIS to build-up experience with risk-management based operations Review internal arrangements and support for the development and maintenance of risk- management profiles Develop and obtain software licenses to implement a Customs Information Analysis System Procurement of high volume document processing equipments Procurement of process-reengineering software Training and study tour to learn techniques in risk management, quality assurance, simplified and improved business process methods; Staff training and public outreach in new cargo declaration and valuation procedures Sub-Component 2.4. Post Clearance Controls Design and implementation of a risk Recommendations on improving the CCC’s management system for post clearance post clearance audit capabilities were verification and post clearance audit, including delivered. The project’s inputs were well software to automate selection of entities received and were instrumental in subject to verification strengthening the CCC’s capabilities in this area particularly in respect to audit planning. Training and study tours in new system of post NA clearance verification and audit and building capacity to perform post clearance checks and audit Procurement of e-Audit software and laptops Procurement of “e-audit” software and for auditors notebooks to install it was completed. Sub-Component 2.5. Strengthening Law Enforcement Training and building capacity in intelligence, Customs service was equipped with special investigations, and anti-smuggling functions anti-smuggling equipment, office and videoconference equipment, modernized IP telephony system, and strengthened information security systems Assessment of equipment needs and NA 31 Planned Outputs Actual Outputs Delivered by the CDP procurement of equipment Improvement of information exchange with the communications center of the CIS Improvement of information exchange with the Tax Department for VAT control Sub-Component 2.6. External cooperation Formal joint order and agreements with other NA law enforcement agencies active at the border, which accepts the risk management strategy of customs Agreements with neighboring states regarding the exchange of import/export data, trade statistics and enforcement co-operation Development and implementation of procedures to streamline and integrate border control activities into a “single window” and one-stop principles through establishment of unified information database shared by regulating authorities Development of a joint border design model incorporating equipment, infrastructure, and possible cross-border cooperation Training and study tours in single window procedures for officials of both CCC and other border control agencies Component 3. Information and Communication Technology (ICT) (US$28.41 million) Sub-Component 3.1. Organization and Management of ICT Consultancy services in IT development The Project did not complete all the planned planning, and strengthening of executive IT procurements. However, the IT management of IT component financed the development of an Review and assessment of the role and operative management center and Integrated placement of the IT function in the Customs Tariff Database, supplied e-audit organization software to increase e-audit capacities of Comprehensive review and assessment in SRC auditors, equipped the customs service order to develop to achieve an integrated with special anti-smuggling equipment, system solution for Customs, and to determine office and videoconference equipment, whether it would be more cost effective to modernized IP telephony system, and procure an ready-made solution for its strengthened information security systems. integration with the existing legislation and Some activities were also carried out to bring hardware and the existing communication customs legislation, other laws and parameters, or to develop a new information regulations in line with Kyoto convention. system with due regards to the requirements of the revised Kyoto Convention Gap analysis and implementation of Recommendations in Annex J to WCO Revised Kyoto Convention Development and implementation of a strategy for recruitment and retention of IT staff Training and study tours to countries with 32 Planned Outputs Actual Outputs Delivered by the CDP advanced management of information, statistics, and risk management Sub-Component 3.2. ICT Infrastructure Procurement or development of an advanced NA and integrated ready-made solution for customs processing system, based on a proven world class system Procurement, implementation and deployment of equipments and licenses for inter-agency data exchange Procurement, implementation and deployment of equipments and licenses for transit control system Replacing obsolete ICT equipments (workstations, archives, servers, software licenses) and expand computing capacity as required to support current operations of Customs while the new system is implemented Update of ICT equipment infrastructure, including customs multi-service network to support the operations of the new integrated customs processing system Training, countrywide, of internal staff, staff of other border agencies, traders, and other key participants in trading activities in the characteristics and use of the new customs processing system Sub-Component 3.3. Data Warehousing and Security Develop a data warehouse to facilitate the This is planned to be implemented by the analyses of accumulated data in view of SRC as a common resource for the tax and improving the effectiveness of custom customs committees. operations Implement a backup and disaster recovery center Enhance the information security feature of the information infrastructure Component 4. Program Management (US$1.26 million) Provision of procurement and disbursement Officers of the Customs Control Committee technical assistance to the Project involved in Project Management Unit took Management Team of the CCC part in six professional development Provision for Project audit trainings organized by the World Bank; an Provision for a financial management system ICT procurement specialist and an for the Project international procurement specialist were Translation services and language training hired; Translation services were provided; A Project management training for key CCC special office space was rented for officials including training in all Project convenient and productive joint activities of management, financial management and the Project management unit and consultancy procurement requirements companies during the Project from 2009 to 2012. 33 34 Annex 3. Economic and Financial Analysis No Applicable 35 Annex 4. Grant Preparation and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending/Grant Preparation Rajul Awasthi Senior Public Sector Specialist GGODR Task Team Leader Nurbek Kurmanaliev Procurement Specialist GGODR Aliya Kim Financial Management Specialist GGODR Alma Nurshaikhova Public Sector Mgmt. Spec GGODR Clayton Bryant Kerswell Senior Trade Facilitation Specialist GTCDR Wyatt Grant Consultant GGODR Munawer Sultan Khwaja Lead Public Sector Specialist GGODR Task Team Leader John Otieno Ogallo Sr Financial Management Specialist GGODR Virginia S. Yates Program Assistant GGODR Anara Akhmetova Procurement Assistant GGODR Ilyas Sarsenov Senior Economist GMFDR Gerard McLinden Lead Specialist GTCDR Danielle Malek Roosa Senior Counsel LEGES Legal Salamat Kussainova Consultant ECSPF Information and Communications Carlos D. C. Ferreira GGODR Technology Consultant Yuling Zhou Lead Procurement Specialist GGODR Gulmira Akshatyrova Program Assistant ECCKZ Olga Fleshler Team Assistant Brian Clifford Jones IMF Consultant Francois Corfmat Customs Legal Consultant ECSPF Vasili Slobozhanov IT Consultant Ramiro Ignacio Jauregui- Counsel LEGLE Legal Zabalaga Yoko Kagawa Operations Officer GGOOS Shynar Zakir Consultant GGODR Robert Tait Consultant Michel Zarnowiecki Sr. Trade Facilitation Specialist TUDTR Aslan Sarinzhipov Operations Officer ECSPF Human Resources and Management William Mayville ECSPE Consultant Stella Ilieva Economist ECSPE Supervision/ICR Rajul Awasthi Senior Public Sector Specialist GGODR Task Team Leader Nurbek Kurmanaliev Procurement Specialist GGODR Alma Nurshaikhova Public Sector Mgmt. Spec GGODR Clayton Bryant Kerswell Senior Trade Facilitation Specialist GTCDR ICR Team Leader 36 Wyatt Grant Consultant GGODR Aliya Kim Financial Management Specialist GGODR Yuling Zhou Lead Procurement Specialist GGODR Ilyas Sarsenov Senior Economist GMFDR Gerard McLinden Lead Specialist GTCDE Olga Fleshler Team Assistant Yoko Kagawa Operations Officer GGODR Elena Georgieva-Andonovska Public Sector Specialist GGODR Shynar Zakir Consultant Information and Communications Carlos D. C. Ferreira Technology Consultant Gulmira Akshatyrova Program Assistant ECCKZ Salamat Kussainova Consultant Anara Akhmetova Procurement Assistant ECCKZ Munawer Sultan Khwaja Lead Public Sector Specialist GGODR Task Team Leader Aslan Sarinzhipov Operations Officer ECSPF Robert Tait Consultant Francois Corfmat Customs Legal Consultant ECSPF (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only Stage of Project Cycle No. of Staff Weeks USD Thousands (including Travel and Consultant Costs Lending FY07 44.55 379.24 FY08 22.42 87.62 Total Lending 66.97 466.86 Supervision/ICR FY08 3.68 24.16 FY09 10.80 84.30 FY10 18.33 94.56 FY11 34.07 110.74 FY12 13.67 109.34 FY13 12.77 113.99 FY14 13.02 108.91 FY15 26.74 173.17 FY16 17.43 116.94 Total Supervision/ICR 150.51 936.11 37 Annex 5. Summary of Project Implementation Report by State Revenue Committee Customs Development Project - Republic of Kazakhstan The SRC provided the ICR team with the above report on 24 May 2016. A summary of that report is provided below. 1.1 Historical Context The Government of Kazakhstan considers the modernization of the customs administration a first priority to improve national competitiveness and business environment. The introduction of international practices and standards presents opportunities for further integration to global markets and supports WTO accession. The Ministry of Finance with the support of the World Bank and World Customs Organization developed a comprehensive program, based on WCO methodology, for institutional development of customs. 1.2 Project Objectives  Promote internationally accepted standards to support integration into the global economy and improve investment climate and competitiveness.  Improve compliance and revenue collection  Support transparency and reduce corruption In relation to the objective of ‘Improved customs processes and procedures’ under Component 2, it should be noted that no data on the ratio of revenue assessed as a result of post clearance control was provided for this indicator during the implementation of the CDP. Additional revenue is NOT and objective of post-customs control and is deemed to increase the number of “unscrupulous” traders. We do not think it is advisable to assess CDP performance based on this indicator. 1.3 Project Components and Activities Key Performance Indicators  75 percent reduction in average processing time at border/inland posts  Reduction in physical inspections to 20%  Reduction in required documents to 7  20% increase in ratio of revenue collection /staff member  Development of service standards  Improvement of community perception 1.4 Borrower’s organizational structure and implementation mechanisms 38 The project was implemented starting March 24, 2009. Order No. 155 to create the PIU was issued May 22, 2009. In accordance with the provisions of the loan agreement. A Project Supervisory Committee (PSS), headed by the Vice-minister, was established on March 20, 2009, to provide strategic supervision. The State Revenue Committee was established under the Ministry of Finance on August 06, 2014, the SRC continued to implement the project. Under the SRC a Development and Modernization Department was created. During the project implementation the PSS held two meetings, in absentia and documents were sent to voting members. One of the problems with the functioning of the PSS was its composition, with many high-level members and frequent changes to membership. These issues were discussed with the Bank and changes to improve efficiency were made, reducing membership and decision approval processes. The project was implemented in accordance with the Project Implementation Manual. 2.1 Project Design Assessment The first stage was the realization of consulting contracts, which delivered recommendation to improve and restructure customs main business processes. The results of these contracts became the basis of the second stage of implementation which was planned to build ICT architecture and a package of corresponding software for full automation of activities. The third stage based on the results of analysis and ICT architecture was the purchase of software and hardware. Each stage was accompanied by training. 2.2 Activities implemented under the project The contract for provision of office equipment for the training and methodology center (RTC) was successfully implemented. The training center was opened on December 14, 2009. A digital library was acquired for the RTC. A language laboratory is functioning and providing distance learning opportunities. Remaining consulting contracts for providing analysis and recommendations were delayed until the following year. During 2011-2014 contracts were implemented that resulted in recommendations for improvements and institutional development, procedures were reengineered to be used later during implementation of e-declaration. An initial and main activity was a consultancy to assess key issues of customs administration; legislation, HR, organizational structure. Based on these findings a revised structure was proposed. The formation of the SRC resulted in new opportunities for the recommendations on institutional development, but the recommendations on institutional structure being irrelevant. Recommendations on HR capacity building are now being implemented. This contracted is considered a strength of the project. A contract for strategic planning developed a strategy with goals and objectives for the agency. Contracts also developed legislative review and recommendations for restructuring and simplification. Based on these recommendations, restructuring and 39 simplification of business processes were carried out in anticipation of further automation and improvements to risk management. Laws and regulations were brought in line with the Kyoto Convention and new laws or revisions were drafted. Training and a study tour was provided. The contract for the customs information management center was signed in 2013, but was suspended in 2014 and an investigation and negotiations with the supplier were carried out, but no agreement could be reached. The system was never accepted. The integrated tariff database was completed and was much appreciated by the business community. Due to the suspension of main ICT contracts, the international ICT consultant’s contract was terminated. After the projects extension in 2014 some contracts for technical equipment, audit software and a public awareness campaign were completed in 2015 and provided a sound finish to project implementation. 2.3 Cancelled Procurements Due to the termination of the “Automated customs information management system”, all related contracts were cancelled. Two tenders were planned in 2015 for hardware, however the MoF issued a decision to cancel as it was considered premature, with the ASYCUDA system to be implemented. 2.4 Project coordination and management The Deputy Chairman of Customs Modernization served as Project Director and managed the PMU. A Decree issued in 2009 approved the project operational manual. PMU meetings took place once every three months if needed. Due to the merger in October 2014 of CCC and Tax to form SRC, project management functions were reviewed and consistent with best practice under the tax reform project, the services of the international procurement specialist was cancelled and a local specialist employed instead. 2.5 Project impact on implementation of reforms The introduction of advanced practices had an effect on streamlining customs procedures, service quality, improving transparency, client consultation, enhanced infrastructure and organizational capacity. The reduction of excessive administrative barriers had a positive effect on economic development. 3 Critical Analysis of the actions of the Bank, Borrower and Government The Bank team provided regular assistance and support. A lack of key decisions by the borrower hindered project implementation. Changes in Borrower/Government organization impacted on the efficiency of monitoring and project implementation. 40 The problems caused to project implementation by the Borrower include frequent replacement of project management staff, lack of strategic vision and some delays in internal approval processes. 4 Economic and Financial Evaluation Under-dispersed funds from the Republican budget were returned to the budget during 2015. 5 Conclusions The main objective of the project, e-declaration was not achieved, however the project provided a number of positive outcomes, including:  Enhanced capacity and skills from working in an international project  International experience of customs administration was studied  Business processes were analyzed and helped identify strengths and weaknesses of operations  Special technical equipment was procured which had a positive effect on operations …… A draft of the ICR was proved to the SRC in April 2016, as of the date of submission of the ICR no further comments from SRC had been received. 41 Annex 6. Comments of Cofinanciers and Other Partners/Stakeholders Not Applicable 42 Annex 7. List of Supporting Documents 1. Project Appraisal Document, Report No. 40504-KZ, dated October 30, 2007 2. Loan Agreement, Loan Number 4874 KZ, dated February 2, 2008 3. Amendments to Loan Agreement dated January 26, 2012 4. Amendments to Loan Agreement – Partial Cancelation of loan Proceeds, dated May 22, 2014 5. Restructuring Paper, Report No. RES16427, dated October 24, 2014 6. Letter from Kazakhstan Finance Minister Sultanov to Bank Country Director of June 22 2015, re request for TARP extension 7. Implementation Status and Results Reports 8. Aides Memoires, Bank supervisory missions 9. Kazakhstan Country Partnership Strategy, August 2004 10. Kazakhstan Country Partnership Strategy 2012-17, March 2012 11. CCC, Concepts of Development of the Customs Service on the Republic of Kazakhstan for 2007-2010, 2006 12. Improving ICT Procurement in Central Asia, V2, World Bank 13. Border Management Modernization, World Bank, 2011 14. Assessment Report on the Readiness Of The Republic Of Kazakhstan to Implement Future Commitments, Arising from the WTO Trade Facilitation Agreement, 2016 (UNECE/UNCTAD) 15. Doing Business Reports: 2007 & 2016 16. World Bank Logistics Performance Index, 2014 17. Business Environment Enterprise Perception Survey (BEEPS), 2002, 2005, 2013 18. ICR Guidelines, World Bank, May, 2011 19. ICR Guidelines for Reviewing World Bank ICRs, November 12, 2013 20. Governance Global Practice, East Asia, ICR/IEG Review (Report), 2015 21. Advisory Services Document: TA on Integration of Fiscal Agencies, Kazakhstan 2015 (P153434), JERP. 22. Borrower’s Evaluation Report, April, 2016 43 Annex 8. Customs Reform Indicators in World Bank-financed projects Figure 3. Performance indicators used in Bank projects during 1982-2002 Source: De Wulf, Luc; Sokol, José B. 2005. Customs Modernization Handbook. Trade and Development. Washington, DC: World Bank. Figure 4. Performance indicators used in Bank projects 2006-2015 Country Project Project Name Indicator Type Number Lao People's P101750 Lao PDR Customs and Customs Efficiency: Reduction PDO Indicator Democratic Trade Facilitation in mean import, export, and Republic transit clearance times. Lao People's P101750 Lao PDR Customs and Customs Efficiency: Reduction PDO Indicator Democratic Trade Facilitation in number of steps to clear Republic commercial shipments. Lao People's P101750 Lao PDR Customs and Customs Effectiveness: Increase PDO Indicator Democratic Trade Facilitation in the ratio of Republic detections/inspections by customs. Lao People's P101750 Lao PDR Customs and Customs Effectiveness: Increase PDO Indicator Democratic Trade Facilitation in the perceptions of customs Republic performance and integrity by clients. 44 Colombia P106628 CO Consolidation of Average time to clear customs PDO Indicator Nat. Publ Mgmt Inf. decreases from 48 hours to less than 8 hours Colombia P106628 CO Consolidation of Tax administration efficiency PDO Indicator Nat. Publ Mgmt Inf. increases, as reflected by an increase in the ration of total tax collection/DIAN's executed budget from 103.2 to 103.7 El Salvador P095314 SV Fiscal Mgmt and Increased efficiency of customs PDO Indicator Public Sector Perf TA through increased number of Customs points with non- intrusive control methods financed by the Loan Jamaica P146688 JM Strategic Public Supporting trade facilitation by PDO Indicator Sect Transformation integrating clearance processes of selected border agencies, resulting in a transparent, cost efficient and faster international trade environment as measured by LPI-C Africa P079736 3A-CEMAC Transp Customs operations carried out PDO Indicator Transit Facil (FY07) electronically for goods in transit Central African P149884 CF- Emergency Public Percentage of staff from PDO Indicator Republic Services Resp. Proj Customs Directorate whom have resumed work El Salvador P095314 SV Fiscal Mgmt and Increased efficiency of customs PDO Indicator Public Sector Perf TA through increased number of Customs points with non- intrusive control methods financed by the Loan Jamaica P146688 JM Strategic Public Supporting trade facilitation by PDO Indicator Sect Transformation integrating clearance processes of selected border agencies, resulting in a transparent, cost efficient and faster international trade environment as measured by LPI-C Africa P079736 3A-CEMAC Transp Time to release customs bond Intermediate Transit Facil (FY07) Results Indicator Africa P079736 3A-CEMAC Transp Electronic transmission of the Intermediate Transit Facil (FY07) transit documents collected by Results Indicator the Cameroon customs to CAR and Chad customs Africa P079736 3A-CEMAC Transp Customs checkpoints for secured Intermediate Transit Facil (FY07) goods Results Indicator Africa P079736 3A-CEMAC Transp Publication of key customs Intermediate Transit Facil (FY07) statistics in a media acceptable Results Indicator to the Bank (newspaper or most likely Internet). Cote d'Ivoire P107355 CI-Governance and Standard deviation of data Intermediate Institutional Dev. provided by the One-Stop shop, Results Indicator the Bourse du café et du cacao (BCC) and the Customs Niger P108253 Niger Reform Deviation of aggregate revenue Intermediate Management and TA for Tax and Customs Results Indicator Directorates 45 Niger P108253 Niger Reform Degree of compliance with rules Intermediate Management and TA for processing and recording Results Indicator transactions Niger P108253 Niger Reform Frequency of complete accounts Intermediate Management and TA reconciliation between Results Indicator tax/customs assessments, collections, arrears, records and receipts by Treasury Liberia P127319 LR-Integrated PFM Increase in customs revenue Intermediate Reform collections adjusted for inflation Results Indicator Central African P149884 CF- Emergency Public Ratio of revenue recorded at the Intermediate Republic Services Resp. Proj Customs Directorate to revenue Results Indicator collected from the commercial banks Sierra Leone P133424 PFM Improvement Increase in customs revenues Intermediate and Consolidation paid into the Consolidated Results Indicator Revenue Fund, adjusted for inflation. Guinea-Bissau P150827 Public Sector The tax and customs revenue Intermediate Strengthening Project increase by 30% (baseline in Results Indicator XOF billion nominal) Guinea-Bissau P150827 Public Sector Reform focal points in place in Intermediate Strengthening Project the Tax, Customs, Budget and Results Indicator Treasury Directorates Guinea-Bissau P150827 Public Sector Customs arrears collection Intermediate Strengthening Project improvement (Percentage of Results Indicator recuperated arrears over total arrears) Indonesia P085133 Govt Finl Mgt & Improved Customs revenue Intermediate Revenue Admin performance and time-for- Results Indicator Project release performance. Indonesia P085133 Govt Finl Mgt & Increased ratio of revenues to Intermediate Revenue Admin GDP, increase in registered tax Results Indicator Project payers and filers, reduced tax arrears, and reduced clearance time in Customs. Lao People's P101750 Lao PDR Customs and Full acceptance of electronic Intermediate Democratic Trade Facilitation data submission for customs Results Indicator Republic declaration procedures by the end of 2013 Uruguay P097604 UY Institutions Incentive based performance has Intermediate Building TAL been implemented for Human Results Indicator Resources in Customs Administration. (YR5) Colombia P106628 CO Consolidation of The average number of physical Intermediate Nat. Publ Mgmt Inf. documents required for customs Results Indicator clearance has been reduced from 12to 5 El Salvador P095314 SV Fiscal Mgmt and % increase of web-processed Intermediate Public Sector Perf TA transactions in Customs Results Indicator Africa P079736 3A-CEMAC Transp Time to release customs bond Intermediate Transit Facil (FY07) Results Indicator Indonesia P085133 Govt Finl Mgt & Increased ratio of revenues to Intermediate Revenue Admin GDP, increase in registered tax Results Indicator Project payers and filers, reduced tax arrears, and reduced clearance 46 time in Customs. Colombia P106628 CO Consolidation of The average number of physical Intermediate Nat. Publ Mgmt Inf. documents required for customs Results Indicator clearance has been reduced from 12to 5 Source: World Bank ISR database 47 Annex 9. Map of Kazakhstan 48