**[Anti-Corruption and Intervention]{.smallcaps}**

**[in Central Asia]{.smallcaps}**

**[A Report Prepared for USAID/Central Asia's]{.smallcaps}**

**[Anti-Corruption Team]{.smallcaps}**

**[IN FULFILLMENT of]{.smallcaps}**

**[USAID/CAR Task Order No. 800]{.smallcaps}**

**[Issued Under USAID Indefinite Quantity Contract]{.smallcaps}**

**[No. DFD-I-00-03-00143-00]{.smallcaps}**

**[Corbin B. Lyday, Ph.D.]{.smallcaps}**

**[Senior Governance and Integrity Advisor]{.smallcaps}**

**[PADCO, Inc.]{.smallcaps}**

**[(Planning and Development Collaborative)]{.smallcaps}**

**[1025 Thomas jefferson Street NW, Suite 170]{.smallcaps}**

**[Washington DC 20007-5209]{.smallcaps}**

[**[www.padcointegrity.com]{.smallcaps}**](http://www.padcointegrity.com/)

[**[www.padcoinc.com]{.smallcaps}**](http://www.padcoinc.com/)

**[April 2004]{.smallcaps}**

**[Introduction]{.smallcaps}**

This Report ("Report") encapsulates key findings, emergent issues,
implementer and counterpart concerns regarding corruption, integrity and
transparency issues in Central Asia. Requested under a Task Order issued
by USAID/CAR's Anti-Corruption Team (ACT), it was assembled during March
and April 2004 from personal interviews, written program descriptions,
workshop feedback and comments garnered during interviews and roundtable
discussions organized by USAID's Anti-Corruption Team. Conclusions
reached represent the professional opinion of its author and PADCO,
Inc., and are intended as broad and prescriptive in nature, intended
only to assist the ACT in its strategic thinking, and should not be
construed by any source as official U.S. Government policy or strategy
or specific program designs. Mistakes and inaccuracies are the
responsibility of PADCO, Inc. alone. PADCO is grateful to the ACT for
the opportunity to work under this Task Order, and to the individuals
listed in this Report for their candid portrayal of what all widely
concur is a serious development and political obstacle for
post-communist Central Asia.

The Report consists of four parts, an *Executive Summary*, a *General
Findings* section which tries to summarize the larger governance issues
facing Central Asia, a *Specific Findings* section which highlights
information shared during workshops and interviews (separated by country
and sector), and a *Conclusion*, which re-capitulates some of the
executive summary, underscores the most common themes from the
workshops, and offers generalized recommendations. Four *Appendices* to
the Report then follow:

A Suggested Strategic Framework for the Anti-Corruption Team............
Appendix A

Workshop Welcome Sheet and Workshop Findings/Recommendations......
Appendix B List of Interviewees and Workshop
Participants................................. Appendix C

Workshop
Matrices...................................................................\...Appendix
D

PADCO, Inc. would like to extend special thanks to the head of the
Anti-Corruption Team, Beth Salamanca, for organizing this effort and
bringing the attention of USAID/CAR to this important and complex issue.

**I. [Executive Summary]{.smallcaps}**

The one-day anti-corruption course presented to 55 mostly Kazakhstani
FSNs in Almaty on March 8, and the 11 half-day informal workshops
focused around corruption conducted in four countries (Kazakhstan,
Uzbekistan, Kyrgyzstan and Tajikistan), presented to between 200-250
participants, together with the wrap-up and final stakeholder sessions
all show tremendous interest---as well as frustration---with the issue
of corruption in Central Asia. Even in Uzbekistan, the most
authoritarian of the four, where government maintains a near complete
monopoly on information and ideas, levels of interest are high, although
how to capitalize on them remains unclear.

Corruption in Central Asia, as in most systemically corrupt countries,
is less of a disease than a symptom of misgovernment and
misadministration. Its existence costs society twice---first by the
deterioration to the 'public good' represented by embezzlement, bribery
and cronyism; second, by the repetitive *failure to prosecute* such
offenses, especially the more important ones. The effects of both of
these failures reverberate all over the region. Elites know they have
little to fear, and thus have even less motivation to change their
behavior.

The environment for integrity is serious and *deteriorating* and impacts
all four of USAID's strategic objectives in all four countries:
democratization, social sector reform, economic growth and natural
resource conservation. These informal courses and workshops point toward
a major strategic corrective for USAID, and for other donors by
implication. Currently, USAID's strategy for Central Asia does not take
into account how strong the *misincentives* for good governance are in
Central Asia, and their capacity to undermine its development programs.

The seriousness of the misincentive issue does not leave many good
option. But there are always choices that can, and should be made, even
in the most difficult of environments. In the absence of clear positive
direction, this Report strongly endorses the reverse concept of *primum
non nocere* or 'first, do no harm.' At the very least, USAID's programs,
especially those conducted with governments, should be careful not to
strengthen, or be seen to strengthen authoritarian and oligopolistic
tendencies. Only then can the next question---namely; how existing
programs might be changed, or what new actionable activities can be
undertaken---be asked.

The answers to all three require not just careful but (1) *genuinely
imaginative programming;* (2) a relentlessly proactive policy of
*information-dissemination* to counteract an information-poor
environment with a much stronger focus on *how information is used* by
key stakeholders to bring about smaller-scale behavior changes; (3)
*stronger* *donor co-operation efforts*; and (4) *control over program
content and funding* by the Mission's own Anti-Corruption Team. The
workshops and training revealed that many of these efforts are simply
not in place. Those that are in place remain far from visible or clearly
understood. It is hoped that this Report will help the Anti-Corruption
Team advance some of these critical efforts in the near future.

II. **[General Findings: Snow Leopards and Rentier States]{.smallcaps}**

[Central Asia---Emerging Snow Leopards?]{.underline} In the late 1990s,
Kazakhstan's President Nursultan Nazarbaev proposed a vision for the
economic and political development of his country (and by implication
the larger region) a generation into the future. *Kazakhstan 2030*
visualizes a country leaving behind a failed Soviet industrialization
and nation-building experience to become---within two generations---the
first among equals of a new group of 'Central Asian Snow Leopards,'
modeled on the successful transformation of the East Asian 'Tigers' of
South Korea, Indonesia, Malaysia and Taiwan during the 1980s and 1990s.

In some sense, USAID assistance is loosely organized around a similar
vision for Central Asia, where American goals for the region include
"stable, democratic and market-oriented development \[expanding\] trade
and access to oil, gas and mineral resources and mineral resources and
\[preventing\] arms proliferation, drug trafficking and...the expansion
of radicalism from the south."[^1]

The desired analogy to the East Asian tigers is misleading, however.
High (and increasing) levels of state corruption and authoritarian rule
pose a direct threat to this vision, and challenges both the vision of
the United States Government and the internal goals stipulated in
*Kazakhstan 2030*. Even were corruption not a serious obstacle, the
analogy itself does not hold. With the exception of Indonesia, none of
the East Asian Tigers consisted of emerging single-commodity economies,
unlike Kazakhstan and Uzbekistan, whose dependence on oil and cotton
has, if anything increased since Soviet collapse. While the East Asian
examples did achieve impressive levels of export-led economic growth,
their societies paid heavy political costs for that growth. Each was
ruled by powerful authoritarian elites who freely used the apparatus of
the state to reward political cronies, infiltrate business competitors
and repress mass political dissent. The undercurrent of corruption in
the East Asian examples has been playing out in that region since the
late 1990s, as evidenced by recent political upheavals in Indonesia,
South Korea and Taiwan.

But the Tigers also invested heavily in their industrial, trade and
educational bases, authoritarian political tendencies notwithstanding.
This, in turn, helped to generate a viable middle class that continues
to play a stronger role in demanding greater accountability and
political freedoms. The creation of that middle class was possible
because the Tigers invested heavily in the social welfare of their
populations, greatly expanding basic literacy, economic opportunity,
funding healthcare and educational systems, and providing
cradle-to-grave social insurance schemes for their populations.

By contrast, in Central Asia, critical social safety nets---once the
pride of Soviet Central Asia---are increasingly being abandoned, either
because of misgovernance, stagnant economies, or the failures of
political leadership to grasp the correct lessons from the East Asian
examples mentioned above. In Kazakhstan especially, in spite of a
current \$4 billion petrofund, populations are simply being abandoned to
fend for themselves in education, healthcare and social services
(although pension systems have been modernized and payments made on
time). The health of the nation measured in almost every way is in
decline, and corruption is both a central cause---and a critical
effect---of this failure to invest wisely or efficiently to provide
efficient state services, a well-functioning and broadly invested
economy, or a well-protected population.

[Or Consolidating Rentier States]{.underline}? Unfortunately, nearer
analogies to the emerging single-commodity corrupt economies and
authoritarian patronage rule of Central Asia exist. They include not
Malaysia or Taiwan, but 'rentier' states such as Bahrain, Nigeria, Libya
and Iraq before 1991. Rentier states' major income comes from 'rents'
from the export of extractive resources, such as oil, gas and minerals.
Rentier states are known for their failure to nurture genuinely
competitive markets or generate broad-based infrastructure investment.
They insulate their elites from political change, and specialize in the
export of needed capital---human and financial---abroad. Internally,
their state systems are prone to deterioration, inefficiency and---in
extreme cases---the inability to engage in routine functions, such as
taxation, income redistribution and the provision of basic education and
social services. The weakness of core institutions, in turn, leads to
inevitable crises during political succession. Everyday problems of
governance and administration in rentier states often metamorphose into
extended upheavals, with greatly expanded potentials for instability,
misrule and breakdown.

The inability to turn oil wealth into an industrial or service-based
economy means that political and economic elites increasingly invest
abroad, further fueling poverty, income disparity and trade
deficits.[^2] This is a direct cause---as well as outcome---of a system
of state deterioration mentioned above. To prevent increasing attention
to this, elites increasingly must conceal their inability and
unwillingness to rule wisely or in the public good from their people,
either by weakening institutions of democratic accountability or even
through active repressions of their people.

These are the stronger analogies to the emerging Central Asian political
economy. Rather than a series of emerging snow leopards, the region is
turning into an agglomeration of crony emirates, complete with royal
families (some of whom have already intermarried) obsessed with their
own short-term gain at the longer-term developmental expense of their
peoples. While elites in such states can and do succeed in 'riding the
tiger' for a little while, their unrestrained ambitions for wealth and
power set into motion their eventual undoing. Eventually, the short-term
bargaining cannot contain their ineffectiveness, leading to instability
and even state failure over the longer-run.

[Nature of State Corruption: Understanding the Patron-Client
System]{.underline}. While rentierism is only one form of corruption
(and applies more readily to Kazakhstan than the others), common
patterns of state mismanagement exist throughout the region and need to
be understood by donors. Government appointments at the ministerial and
local level remain the primary arena for patronage and clientelism. They
are geared less toward technical competence, and more toward fulfilling
informal *quid pro quo* arrangements among patronage networks.
Ministries throughout Central Asia are deliberately *underfunded*
because it is expected that ministers and their sub-ordinates will use
their positions to enrich themselves at public expense during their term
in office. This also helps to explain the all-too-frequent cadre
re-organization at mid-levels throughout the region.[^3]

[Parasitism and Incompetence]{.underline}. Because of this, distinctions
between 'petty' and 'grand' corruption acquire less significance the
deeper one investigates. The bribe of a traffic policeman to avoid a
fine, the bestowing of a small gift for 'tea' or "something for the
children" to get a government license or speed a service, the
under-the-table payment to a doctor or hospital to get needed medicine
may all look innocuous. Certainly most Central Asians perceive it that
way because there are no ready alternatives. But each state position
represents the tip of a larger iceberg generally hidden from view and
scrutiny. The traffic policeman, the judge, the doctor, the teacher, the
low-level government bureaucrat---each must pay someone else *first* in
order to be appointed to his or her position. Those persons, in turn,
must pay someone above them even more, whose supervisors must pay still
higher, and so forth, all the way up the food chain to the very top
levels of government.

[Short-Term Payoffs v. Longer-Term Rewards]{.underline}. This system
reflects two realities: the inability of the state to get things done in
legal, transparent, efficient ways, and the willingness of all parties
(public, private and non-profit sectors alike) to bypass cumbersome,
repressive, or simply confusing laws and practices both inherited from
the Soviet system and the reform period just to conduct normal
transactions. From this perspective, corruption is not a disease, but a
*symptom of a larger dysfunction*---state incompetence and its inability
(and/or unwillingness) to clarify distinctions and rules governing
behavior within and between public and private sectors. This dysfunction
leads the state to do the one thing it does know how to do: to become a
racket, aiding and abetting citizens and businesses to evade legality in
order to avoid even greater sanctions by the state later on. In
worst-case scenarios, every interaction between the state and its
citizens becomes yet another opportunity to extract payment (with
insiders paying less and the poor paying much more.) It is a
'trickle-up' system of income redistribution that impoverishes society
in the long run.

While dysfunctional on paper, it needs to be understood that such
arrangements do serve the interest of many in the short-run. Only when
this balance begins to shift will the larger systemic incentives for
corruption begin to change. Sadly, most of Central Asia remains caught
in the first balance sheet, not the second. There is a great deal to
steal and society remains largely incapable of the kind of collective
action needed to change the balance, despite much funding of NGOs by
western donor organizations.

[The Role for Donors]{.underline}. And yet we know that over the
long-term, as more is stolen or lost through theft and/or incompetence,
those systemic pressures do indeed shift, sometimes with frightening
speed and results. As has been observed for decades, the most dangerous
time for any corrupt political and economic system is when it finally
starts to reform itself. Here USAID and other donors can and *must* play
vitally important roles:

(a) *to provide strong institutional arenas for alternative viewpoints,
    and legitimate, peaceful discontent to emerge;*

(b) *to help both governments and societies articulate the costs of
    corruption for themselves to show the unsustainability of current
    arrangements; and*

(c) *offer models for 'good governance' increasingly being attempted in
    developed and other developing and transition states to substitute.*

> [Donor Cooperation a Must]{.underline}. The above simply assumes that
> all donor organizations in a country themselves operate with complete
> transparency and are working together to counter the information-poor
> environment. This is not the case, however. It is not simply 'donor
> coordination' that is needed (that can be done informally or through
> websites), but 'donor cooperation' that is required. That means that
> donors themselves must come to a greater understanding of corruption
> and how to fight it than they currently do now. If donors act
> together, rather than undermine one another however inadvertently,
> they will together create the necessary 'insurance policy' for the
> region so that when systemic pressures do shift, they do so in ways
> that allow for change and relieve pressure, rather than block it.
> USAID/CAR's interest in the corruption issue is a vitally important
> first step in this process, and other donors should be encouraged to
> follow suit.

**[III(A). Specific Findings\--Kazakhstan]{.smallcaps}**

[Main Issues]{.underline}. Kazakhstan's single-commodity extractive
economy dominates nearly all discussions of accountability and
corruption across all sectors that pertain to state activity, and
influences efforts to counteract an increasingly poor enabling
environment for integrity. The near total absence of reliable and
transparent information at all levels and a shortage of meaningful donor
programs that promote the active co-operation of both NGOs *and*
government structures to cooperate with each other simultaneously toward
common ends stand out as major donor-created obstacles to greater
anti-corruption efforts.

[Democracy and Media]{.underline}. The fact that USAID works actively
with non-elected local governments chosen dire under questionable legal
authority under the Kazakh Constitution and because of their lack of
basic public accountability. Instead of an arena for change, local
government is instead one the most important avenues for organized
patronage and clientelism that defeats the very point of good
governance.[^4] Personalized patron-client relationships, rather than
impersonal institutions, are the way that 'things get done' in corrupt
countries and half-hearted reforms that fail to change the incentives
for this offer false confidence.[^5] The quality of journalism has
steadily *deteriorated* in the country over the last five years, with
three major opposition newspapers being shut down with apparent impunity
the past year alone (two still remain).[^6] Opposition parties cannot
function and avenues for legitimate disagreement and discontent with the
President and his policies have narrowed steadily. Judges and law
enforcement officials do not understand, nor do they enforce concepts
like conflict of interest or minority shareholder protection in private
contracts.

> [Civil Society]{.underline}. The Need for Politically-Oriented
> Interest Groups. SMEs, pensioners, students and lower-level civil
> servants were singled out as those who stood to benefit the most from
> an anti-corruption political platform. No one addressed the
> organizational obstacles in front of those groups, or what role
> disaffected political leaders from political parties once allied with
> President Nazarbaev could play in uniting those groups under a single
> banner.

[Enterprise, Trade and Finance]{.underline}. If a declining political
environment adversely impacts the ability to mount serious
anti-corruption efforts in society, the economic arena is the major
playing field for corrupt activities in the country. As summarized by a
recent statement by a Kazakh minister once arrested (then later
released) on charges of corruption, the main rules for American
companies, in particular, doing business in the country are simple:
"Find a powerful political patron high-up in the government; find a
local patron to take care of the details; and go to the Ambassador if
you run into any problems."[^7] The phrase is simple and refreshingly
direct, summing up the larger environment as one dominated by insider
knowledge, the absence of institutional or legal redress for contract
violations, asset-stripping, hostile takeovers and complicated shell
games that few can follow, let alone understand.

[Small and Medium Enterprises (SMEs) and the Competitive
Environment]{.underline}. The Kazakh state and economy are not geared
toward the development of a competitive market environment. Legislation
affecting SME development is rarely discussed with the people it impacts
the most, and the larger environment is marked by many inauspicious
factors, including:

> \(1\) The tendency for the state to interfere regularly in matters of
> private sector corporate governance;
>
> \(2\) The limited access to credit by SMEs;
>
> \(3\) An environment for licensing and other regulatory permits filled
> not only with strong incentives for and incidences of predatory petty
> corruption;
>
> \(4\) An extremely complex, burdensome environment for income and
> profit-reporting and a taxation system that discourages payment;
>
> \(5\) A low level of business education and governance standards---a
> larger culture of swimming in 'dirty water' (in the words of one
> interviewee);
>
> \(6\) Incompetence, legal ignorance and mismanagement on the part of
> government officials interacting with the private sector;[^8]
>
> \(7\) State structures that create their own commercial companies,
> confusing an already blurred barrier between the public and private
> sector;
>
> [Larger Issues: Single-Commodity Domination and Dutch
> Disease]{.underline}. Because of the above constraints, foreign
> companies attempting to enter the Kazakh market must maintain larger
> back office operations just to accommodate public-private sector
> dealings. Government-compelled audits are compressed into very short
> period of time, inviting mistakes and sloppiness unless bribes are
> paid to simply avoid them. The larger environment, many feel, has a
> distinct purpose to it---to intimidate all but crony investors with
> ties to the Kazakh elite. Hostile take-overs, asset stripping and a
> larger private sector market dominated by opacity all make minority
> ownership without such connections a dangerous and high-stakes game
> with highly risky outcomes at best. And within 'favored' insider
> markets, boondoggle public sector projects (road-building,
> construction of high-rise apartments in Almaty) with extremely high
> fixed costs predominate. The result is a non-competitive 'official'
> market and an economy dominated by underperformance and
> non-diversification (Dutch Disease) elsewhere. Two recent examples are
> worth mentioning:
>
> [Kazakh Air/Air Kazakhstan/Air Astana...]{.underline}. Kazakh Air
> emerged as the predominant 'baby Flot' emerging from the break-up of
> the Soviet Aeroflot monopoly in the mid-1990s. Soon plundered by
> internal management-led asset stripping, the company went bankrupt
> within a few years, and was replaced by Air Kazakhstan. But it too
> went bankrupt for the same reason, replaced by Air Astana, which is
> now purchasing exclusive landing rights in Atyrau, even as the
> Government quietly canceled landing rights for any other airline.
> Although 90% of the company is owned by British Aerospace, the
> remaining 10% (and key) shares are reportedly owned by someone with
> close personal ties to the President. With 5-10 aircraft, it remains
> unclear whether Kazakhstan even possesses a national airline or not.
>
> [Alma TV]{.underline}. A US investor once held 50% of shares in this
> media company, with the other half owned by one Kazakhstani partner,
> who was suddenly replaced by four others in an opaque process, after
> which the American company was informed that the Government did not
> intend to renew its commercial license. The combined Kazakhstani
> investors then made an initial offer to acquire all the American-held
> shares for next to nothing.
>
> [A Middle-Class---Moribund or Emerging]{.underline}? The sheer amount
> of wealth coming into Kazakhstan means that some of it will certainly
> 'trickle-down' to an emerging urban professional class in the country.
> And a mortgage market seems to be accelerating rapidly, with the bulk
> of loans under \$10,000---a healthy sign that small amounts of money
> are being invested at least. But the larger issues concern whether,
> beyond personal residential property, does this emerging middle class
> have anything to invest in. The markets are full---of Chinese, Turkish
> and Iranian commercial and manufactured goods, which mean that net
> purchasing power and investment are flowing out of the country, not
> into it. The reality is that wealth is being tightly held by the
> Kazakhstani ruling elite, and as long as it continues to do so,
> investment for the rest of the country will be limited.[^9]

[Health and Education]{.underline}. The overriding issue in health
especially continues to be precipitous declines in the quality of health
and education, and a corresponding lack of investment in either sector
by the GOK. A major reason for this is not simply 'old thinking' by the
government, but a powerful patronage system that operates through health
and education ministries, which tends to actively resist change because
of its ability to disrupt that patronage network. One example of this
failure to change is the GOK's disincentives to publish more accurate
child mortality figures or to disseminate other health statistics to
those institutions which need them.[^10]

> [The Pharmaceutical Risk]{.underline}. An emerging issue concerned
> future expenditures from the Global AIDS/Malaria/TB Fund will be
> apportioned, publicized and spent throughout Central Asia. The risk of
> unaccountable moneys subsidizing new black and grey markets in
> pharmaceuticals is a recognized risk in the developing world. Drugs
> are easy to hide, transport and re-sell, and already there is a
> thriving business in Russia and East Africa alike re-selling already
> prescribed anti-tuberculosis drugs. \$22 million has been set aside
> for Kazakhstan in the Global AIDS Fund, and in January 2004, Ukraine's
> grant of approximately \$40 million was suspended by the Fund's own
> auditors (including the UNDP-administered portion of it). This
> important warning sends a clear message to Central Asia vis-à-vis the
> consequences of non-accountability and improper management, and
> represents a stick donors may use to pursue accountability and
> transparency issues within this sub-sector.

[Energy and Water]{.underline}. Although the larger enabling environment
for energy production is dominated by huge state oil monopolies such as
Kazmunaigaz, more than 30 companies make up the larger energy sector
(including electricity, water and other sources of power. USAID's work
in this has focused heavily in supporting the development of
non-commercial, non-governmental electricity users associations, which
work in conjunction with the State Anti-Monopoly Committee on lobbying
for coherent tariff rates and policies. By the end of 2004, all of the
regional electric distribution companies within the country will have
been privatized, and their management structures will change. One of
these already privatized companies in western Kazakhstan actually
lowered customer rates, but became the victim of a forced bankruptcy by
other firms who feared genuine competition, or moved to quickly take
over a more profitable company.

> [Unfair Tenders, Hostile Takeovers and Weak Oversight
> Bodies]{.underline}. In either event, the market for energy
> independence is compromised by the larger enabling environment for
> corporate collusion and hostile commercial take-overs seen in the
> larger private sector. The privatization process for many of these
> companies has been marked by tenders sold at less than market value
> with little transparency. Ownership itself remains a complex issue
> because of clear absences of public and private barriers. And the
> Anti-Monopoly Committee has limited political clout and shies away
> from corruption issues when other USAID implementers broach the
> question.[^11] In the oil sector, *Kazmunaigaz* is now entitled to 50%
> of all profits from new discoveries *by law*. It is no accident that
> this state-owned company operates without transparent standards of
> governance and internal operation, and its profits---now guaranteed by
> law rather than by market performance---are not automatically returned
> to the State Budget.
>
> [Corporate Governance and Corporate Regulation]{.underline}. The
> larger challenge for this sector is the future of its work in the
> electricity field. Although electricity is not considered a
> politically sensitive issue per se, nothing prevents any of these
> newly-privatized firms from being subject to the same forced
> bankruptcies and hostile take-overs as has already taken place with
> one of them. Part of the difficulty is that commercial and regulatory
> functions are not divided in the Kazakh state economy, with clear
> conflicts of interests that deliberately confuse the short-term
> interests of some against the larger term public good of regulation
> and oversight. Until these functions are separated, the environment
> facing privatized energy distribution companies will be uncertain and
> precarious.

**[III(B).---Kyrgyzstan]{.smallcaps}**

[Main Issues]{.underline}. The overall governance environment in
Kyrgyzstan is probably much worse than in Kazakhstan, despite the fact
that local mayors are now elected (something not present elsewhere in
Central Asia) even though *Akimder* continue to be appointed at *rayon*
levels. The growing deterioration of the political environment and the
narrowing space for opposition politics is matched by increasing levels
of self-censorship by journalists fearful of state repression, and
high-level apparent immunity from prosecution for wrong-doing. [^12]

> [Corruption Confusion]{.underline}. A basic confusion regarding
> corruption exists in Kyrgyzstan. On the one hand, formal proclamations
> proclaim 2004 as the 'Year of Good Governance,' yet on the other, the
> state either has (or does not wish to have) any concept about what
> conflict of interest means in practice. Donors continue to give the
> GOKyrg too much credit for far too little effort, and overlook major
> avenues of state corruption. Despite Kyrgyzstan's apparent poverty,
> the vertical 'racket' system is probably stronger here than in
> Kazakhstan, which means that investment costs are correspondingly
> higher. Corruption is systemic and permeates virtually all commercial
> transactions, medical services and land markets. Partly because of
> these factors, Kyrgyzstan's position in Transparency International's
> CPI Index has fallen dramatically to 118^th^ out of 134 by 2003 from
> 87^th^ place just one year earlier.)
>
> [Suspect Financial Practices]{.underline}. Unlike Kazakhstan, the
> practice of 'special fund accounting' is widespread. Only 20% of
> police funding comes from the Ministry of Interior's public budget,
> while 80% comes from quasi-private, quasi-public agencies with their
> own systems of accounting, income and expenditures that simply never
> make it into the state budget---a major obstacle to good governance.
>
> [A Governing Taste for 'Sour Cream]{.underline}.' A recent example of
> these failures took place during the 'Year of Good Governance.' Kyrgyz
> independent media revealed that Prime Minister Tanaev received a
> \$100,000 personal loan from the State Energy Company he also served
> as Chairman of at the same time, to buy and build an apartment for his
> family. Rather than hold public hearings on the matter, or censuring
> its Prime Minister, or take steps to diffuse a scandal, the President
> said nothing proactively. When questioned of the matter, he defended
> his Prime Minister by saying that there is 'nothing wrong with public
> servants seeking to improve their living conditions.'[^13] On the one
> hand, the President tells the country, in the words of the Kyrgyz
> Association of Independent Journalists, to 'stop eating sour cream,'
> yet he himself, like a cat, goes on with whatever it was doing anyway.

[Democracy and Media]{.underline}. The political arena continues to
offer small, but important continues successes, such as the direct
election of local mayors. The fact that 35-50% of all local officials
were voted out of office in 2001 demonstrates that change is taking
place, but at *lower* levels than donors are prone to look. 40 of these
villages already have open budget hearings, which argues that village
council elections are more important than national-level ones, because
they have been creating models of successful behavior change. At higher
levels, the issues are less clear. Hearings have been instituted by NGOs
in Bishkek and Kara-Kol but sometimes without the participation or
sponsorship of *Keneshler*. In practice, many *Keneshler* feel privately
such hearings are useless, and other do not understand fully their
purpose.

> [Civil Society]{.underline}. In some ways, donors have reached a
> plateau with NGOs. They are far more active than their counterparts in
> other countries, but there is little for them to do, both because
> people fear taking concerns for redress of grievances to higher levels
> and because there is a lag in the private and state sectors. Workshop
> participants underscored the importance of bringing training and
> development for the private sector and public organizations into line
> with that for NGOs.

[Enterprise and Finance]{.underline}. As 50% of Kyrgyzstan's economy
comes from the SME sector, public sector performance and rent-seeking by
the state is a critical issue. Not only do SMEs face the routine
scenario of complex and excessive regulation, but the GOKyr has recently
introduced a new 'Ministry of the Economy,' which many see as simply yet
another rent-seeking bureaucracy. In truth, ministries are routinely
(and many claim deliberately) underfunded, since it is expected that
ministers and high-level agency heads will simply use their positions to
acquire informally what they lack in formal budgets. 'Get what you can
while you can' seems to be the prevailing philosophy with regard to
government appointments. Lending practices in the banking sector are
highly suspect, with 10% in kickbacks routinely given to cement loans.
Yet because of their perceived 'deep pockets' banks fear the actions of
the judiciary, which many feel is as corrupt as other state
institutions.

> [Taxation]{.underline}. The current tax rates for the social fund
> stand at 33%, creating a powerful automatic incentive to withhold
> taxes in return for smaller bribes. Yet the racket system increases
> the price for bribes, and further creates pressure on a tax inspector
> to find "mistakes" in a company's auditing in order to share informal
> proceeds with his own higher-ups. The result is a severe income and
> tax loss, both for the state as well as for private enterprises, and a
> dysfunctional system that only further encourages tax evasion. Yet if
> there were viable alternatives, there would also be incentives to
> participate in them. In the words of one Kyrgyz participant, "if we
> knew that the money is really going where it supposed to be going, we
> would pay with pleasure."

[Education]{.underline}. Aided by President Akaev's high-level support
and interest in pursuing greater international accreditation of its
universities, USAID has focused attention on education standards through
activities of its main implementer, the Independent Testing. Service.
Yet the larger environment corruption in education involves not only
standards, but the larger propensity of the state to erode its own
educational capacity by deliberately underfunding primary and secondary
education (with bad salaries and inadequate infrastructure the most
obvious results), not enforcing laws on how publicly-chartered
universities are funded, and finally having a Parliament filled with
disproportionate numbers of rectors and deans of schools who use their
positions to help finance their own quasi-private, quasi-public
institutions of higher learning. The result is an impoverished public
sector and a rapid deterioration in the quality of public education
throughout.

> ['No Child Left Behind?]{.underline}' In any country, education is the
> most vulnerable of all public goods, precisely because those who must
> pay for the upkeep of the good are never those who receive the direct
> benefits of it. In a corrupt educational system, those systemic
> differences are magnified exponentially. The party responsible for
> upkeep and maintenance (local authorities) essentially "blackmail"
> those most vulnerable (children and their parents) into paying the
> difference between the true costs of education and the public budget
> for it. From age 5 and up, children are expected to give small "gifts"
> of money and parents expected to 'voluntarily' participate in
> infrastructure financing projects, just to make up the difference.
> Children are not as much as left out of the picture as they are
> expected to pay for the maintenance of the picture.
>
> [Child Criminals Cost More than Child Citizens]{.underline}. The
> larger damage to any concept of the public good this creates goes
> virtually unrecognized in the Government of Kyrgyzstan (and throughout
> most Central Asian governments writ large). The reality is that
> children are being taught by example that personal effort and merit is
> worthless, that only bribery and personal connections 'get things
> done.' One million children attend schools in Kyrgyzstan, and
> unofficial sources estimate the total amount of informal bribes
> brought into the school system by these child-criminals is *more than
> double* the entire official budget for public education in the
> country. Not only is the country undermining social capital by
> training its children in the worst values it could bestow, it is doing
> so at far greater cost than if it chose an above-board, fully-funded
> primary and secondary education program for its students. At higher
> levels, there is an even greater social cost: all students understand
> that only diplomas, rather than education, constitute the ultimate
> 'meal ticket' worth pursuing.

[Healthcare]{.underline}. Internal governance at higher-level medical
facilities is still constrained by a system of appointments and
responsibilities which goes directly from the *Akimder* directly to
local officials to the medical facility. The 'racket' system kicks in by
requiring that those medical heads pay bribes back to the *Akimder* to
be appointed to their positions. The only way for this to change would
be if the Ministry of Health would change internal procedures for
appointing chiefs of physicians at hospitals. This could be done through
the introduction of a secret ballot by the Appointment Commission after
a specified period of time during which physicians could 'campaign'
publicly for the post. This would help to reduce levels of incompetence
and misadministration that seem to prevail within the Ministry of Health
at higher levels.

> [The Single-Payer System: Benefits]{.underline}. Yet at the primary
> and family health care levels, USAID and its implementer ZdravPlus
> have scored at least one major policy change---the nation-wide
> introduction of the single-payer co-payment system through the Family
> Medical Center. The effort was designed to change the way healthcare
> is provided to better reflect real patient cost, rather than a
> Ministry financing system based on the number of beds and hospitals.
> The effort was not originally intended to stem corruption, but it has
> had a similar 'trust-busting' effect by breaking up the Health
> Ministry's monopoly over health care and lowering costs
> simultaneously.
>
> [And Some Unexpected Drawbacks]{.underline}. But the patronage system
> that operates informally in every ministry is fighting back. Because
> co-payments are above-board, they gave the GOKyr an excuse to lower
> budget support for the Ministry of Health even below what USAID
> believed was necessary for its core functioning. With funding below
> what is needed, doctors once again are putting pressure on their
> patients to extract informal payments from their patients *in addition
> to* their formal co-payments. The emerging result could well become
> yet a new form of corruption not envisioned by anybody at the start of
> the reform process.

**[III(C). Tajikistan]{.smallcaps}**

[Main Issues]{.underline}. Unlike the rest of Central Asia, the
governance environment is set against levels of extreme poverty and a
five-year civil war which shifted the patronage system to benefit the
southern clan of President Rakhmonov, and displaced the influence of the
northern clan, which had ruled Tajikistan since its inception into the
Soviet Union.[^14] There are reports that the President is strengthening
his control over the country by appointing southern clan members even in
local village councils and institutions throughout the country. Nowhere
in the region are public sector salaries less (most public servants earn
between \$5-10 per month), and the county's location next to Afghanistan
makes it a transit point for drugs, arms and other forms of trafficking.
Corruption is pervasive (with Transparency International rating
Tajikistan 128^th^ out of 134---one of the most corrupt countries on
earth) and basic services (Dushanbe has no potable water) are not even
intact.[^15] Citizens do not believe that the state operates with their
interests in heart and national and sub-national leaders are not
particularly motivated toward concrete tasks of day-to-day
administration and governance.

Official estimates of the poorest of Central Asia's republics GDP is
about \$1 billion, but because of the drug trade (and unofficial cotton
and aluminum earnings), unofficial estimates place it at \$4 billion.
Remittances from Russia (mostly by Tajik men working abroad) constitute
nearly half of the official GDP. The amount of illicit and unreported
wealth in the country raises serious questions about the effectiveness
of anti-corruption efforts, since presumably many have incentives to
maintain the status quo. Overall, however, the country remains quite
poor with wealth and power highly concentrated in the hands of the
ruling elite.

> [Is Corruption the Price of Peace]{.underline}? The larger issues
> connecting corruption to Tajikistan's current states revolve around
> the question of whether corruption, in essence, was the payment for
> the current peace arrangements. The civil war was a deep-seated
> conflict over access to power, and did not fundamentally resolve these
> questions. The combatants were essentially bought off by the ruling
> leadership, which may mean that it is less interested in upsetting the
> status quo of governance than other states who may fear the opposition
> less. Or it may mean that Tajikistan is more willing to embark on
> changes because the civil war and its pacts with the opposition has
> made a return to violence less likely.

[Democracy and Governance]{.underline}. Tajikistan's unitary state
structure means that there is no 'local government' per se, and mayors
(as in Kazakhstan) are appointed by (and accountable only to) the
Hukumat. Examples of misadministration and misplaced governing
priorities abound.[^16] Hukumat financing is itself ridden with
counterincentives for integrity, with these local branches of the
central government estimating their needs to the Ministry of Finance.
Any amount the Ministry gives back in excess of this estimate is held
exclusively by the Hukumat and may be used at his virtual discretion on
anything.[^17] Current legislation not only does not separate public
from private sector funding, it actually authorizes contributions to the
state budget from "private resources." Under this practice, state
officers routinely seek contributions to the budget from the private
sector in the form of bribes in return for favors (which mostly involve
being left alone by higher levels of state authorities). The Ministry of
Finance draws up a budget in virtual secrecy and the Government simply
presents broad categories to the public and Parliament as well with
virtually no details published.[^18]

> [Proposed Law on Local Self-Government Powers]{.underline}. The
> current absence of local government means that many other activities,
> such as local billing for water and garbage, are currently impossible.
> Under pending legislation authored by the Government and currently
> before the *Majli*s, a 10% limit on discretionary funding would be
> set, and local *Majlis* would meet four times a year, which would at
> least begin to limit discretionary powers of the
> presidentially-appointed Hukumat and create some basis for eventual
> local self-government. Underneath the district (and city) levels, the
> *Jamoat* exists as a kind of naturally-created local community
> organized around a common feature: a road, lake, waterway, valley or
> other formation, with populations of anywhere from 7,000 to 70,000
> people. *Jamoats* are not Soviet creations, and part of the intent of
> at least some reformers is to eventually give them greater authority
> and eventual responsibility for very low levels of
> self-government.[^19]
>
> [The Need for Urban Services]{.underline}. The most important
> by-product of this absence of local government is the absence of
> municipal services in every city. Garbage, water, heat and electricity
> are not billed to consumers and with the sole exception of USAID's
> Urban Institute municipal management program, donors have simply
> by-passed this essential area in favor of working with NGOs. Two years
> ago, the World Bank negotiated a \$17 million loan to improve
> Dushanbe's water system, yet has run into considerable difficulties
> because of perceived corruption and the Bank's insistence that a
> private contractor undertake the renovation, rather than the
> Government. Currently, only 8% of Dushanbe's water operates under this
> renovation plan, but even that percentage requires metering, which in
> turn requires some measure of local government control and taxation,
> which the World Bank has either not planned for, or lacks experience
> in developing.[^20]

[Enterprise and Finance]{.underline}. The environment for SMEs does not
appear to be as bad as in some neighboring countries, such as
Uzbekistan, for example. But the licensing requirements are
fundamentally distorted, and the very interaction process with
government inevitably ends in bribe-giving and taking. Codes are
frequently enforced without legal citation and often without cause. A
major drawback to economic development remains the absence of private
property. Combined with the sheer lack of information everywhere, this
factor leads to a continuation of the old collectivization system, with
the old class of tenant 'sharecroppers' rather than individual
land-holders.

[Health and Education]{.underline}. The Kyrgyzstan scenarios of
co-payments turning into yet another possibility for corruption to
emerge is equally the situation in Kyrgyzstan, but accompanied by more
serious problems of outright malpractice, where doctors prescribe
medicine for phony illnesses in order to extract as much as possible
from the co-payment system. Despite very low official salaries, there
are long waiting lists to get into medical schools, which suggests that
the profession is far more lucrative than it appears. A new Minister of
Health was appointed specifically to reduce corruption in this sector
because the problem is real, and affects the performance of the entire
sector.

> [A Stronger Need for Donor Cooperation]{.underline}. Although some
> sectors are marked by better than average interaction among donors,
> many participants felt an acute lack of genuine cooperation and
> above-board dealings among major financial institutions, such as the
> Asian Development Bank (ADB) and World Bank, and USAID implementers.
> The lack of a home office for both institutions leads to these
> organizations constantly requesting information, briefings and
> background from on-the-ground implementers, who feel that the same
> courtesies are not extended to them. At the same time, the lending
> institutions must operate according to their Project Implementation
> Units, which further dilutes pressures for transparency. The opaque
> atmosphere presents wide possibilities for the Government of
> Tajikistan to 'double-dip' and play donors off against one another.
> One participant noted that there is even competition among donors to
> work with the GOT, which only causes the price of assistance to rise
> in informal ways. The UNDP does hold regular donor meetings, but this
> has not yet led to more cooperative or more informed environment
> overall.
>
> **[III(D). Uzbekistan]{.smallcaps}**

[Main Issues]{.underline}. The major issues continue to be the
Government of Uzbekistan's (GOK) active repression of many human rights
groups, its refusal to register opposition political parties and the
widespread practice of 'situational law' and misuse of authority that
forms day-to-day governance in a corrupt and authoritarian state.
Implementers of programs rightly stated that the main question should
not be how to 'combat corruption' but more directly, *how to survive in
a highly corrupt environment* without becoming corrupt oneself. The
monopoly on information, in particular, is almost total and dominates
all other concerns and programs.

[USG Procurement and Tendering]{.underline}. Procurement and tendering
issues related to commodity and resource needs for enterprise and trade
implementers was an unexpected, but major sub-component of the
corruption issue in Uzbekistan, affecting all USG agencies engaged in
the procurement of basic goods and services in an authoritarian
environment where concepts like competitive bidding, international
accounting and contracting standards, and conflict of interest avoidance
are simply not understood concepts. Keeping such 'islands of integrity'
is more important than 'fighting corruption' which appears simply
impossible. A legal and regulatory environment dominated by discretion,
secrecy, conflicting interpretation, intra-ministerial competition, and
a deteriorating political and economic environment are the key
institutional obstacles to integrity. For SMEs, such an environment
simply means that counterincentives to integrity are too powerful to
resist---trying to comply with the "law" will only bankrupt an emerging
business.

Beyond the issue of practice stands a larger political culture of
patronage where all are assumed to be corrupt (whether they are or not).
Corruption in such a context is not even rightly understood as a social
cost, but a part of the basic cradle-to-grave experience common to
Central Asia.

A third major issue is the (GOK) on-going attempts to re-register NGOs
and place them under Ministry of Justice and Central Bank jurisdiction,
removing them from the more relaxed Foreign Ministry bi-lateral
agreement competence they currently operate under. All present saw this
move both as a clumsy attempt to crack down on the political activities
of NGOs as well as provide new opportunities for rent-seeking and abuse
of authority.

[A Fundamental Scarcity of Information]{.underline}. One of the most
pernicious results of such an environment is the assumption---never
questioned---that nothing is achievable, doable or even important
without reliance on personal and crony connections. Even were honest
people to be appointed to government positions, or receive critically
needed technical training and grants in the non-governmental sphere, all
actors are 'tainted" with the assumption of personal dishonesty and
graft. It was pointed out that the World Bank is facing default on about
34% of its basic enterprise loans in Uzbekistan. Nowhere, however, is
this information freely available, published or disseminated in
Uzbekistan beyond the very narrow confines of a few donors who speak
regularly with one another and with their implementers.

While the issue is complex and multi-faceted, the World Bank has
publicly committed itself to greater transparency in its internal risk
assessment calculations as part of the larger effort to promote good
governance in the countries it operates in. This is but one example
where donors should be encouraged to 'clean up their act.' Many NGOs,
integrity-oriented human rights groups in Central Asia, and
reform-minded parts of the government need to know how high Uzbekistan's
default rate is, and the extent the Bank believes this is due to basic
issues of poor governance such as corruption and mismanagement. While
donors must at times protect confidential sources, this does not relieve
them of their obligations to foster greater transparency through example
by *disseminating what they already know* to those in the country with a
strong interest and 'need to know.' By doing so, donors directly counter
an officially-sanctioned censorship that dominates political and social
life and help provide alternatives visible to large number of people in
the country.

[Surviving in an Ocean of Corruption through Islands of
Integrity]{.underline}. If donors compel grantees and implementers to
think actively about "combating corruption" in such an environment, they
stand to be disappointed. More appropriate, as the US Treasury
Department's Banking Advisor recommended to one of the two Uzbekistan
workshops, is to teach grantees and implementers to "survive in an
overwhelmingly corrupt environment" without become corrupt
themselves---to construct 'islands of integrity' to keep themselves and
their vulnerable counterparts from simply being overwhelmed by the sea
of arbitrary legal interpretation, rent-seeking, nepotism and
information-poor environment all around them.

One such 'island of integrity' can easily be easily constructed (and
already is) in existing programs by ensuring absolute transparency in
all implementer programs through the trainee selection process. People
chosen for training, according to Counterpart, are routinely expected to
pass money to their employers as a *quid pro quo* for the 'gift' of
selection. No one in Uzbek society finds credible the idea that
candidates are selected on the basis of merit, rather than personal
connections. The only way to combat this image is to insist upon
complete transparency in the training selection process (with government
officials or employers present during the final review), to show to them
that the USAID selection process is not (and cannot be) influenced by
patronage, and that kickbacks are neither expected nor tolerated.

[Breaking 'Corruption' into Manageable Units]{.underline}. Because the
entire political and social environment is so permeated with corruption,
it is essential, said workshop participants, to break down the term into
more manageable units, like "transparency" or "information-sharing."
These are concepts that can be understood (and perhaps tackled
one-by-one) by counterparts and provide some small chance of success,
which at some point, may lead to larger successes in the future. To
'fight corruption,' however, is to take on a burden that no workshop
participant was willing to, largely because the risks of failure are so
overwhelming and because western-based concepts of integrity have so
little resonance with the political culture of the region.

[Severe Constraints to Change]{.underline}. While the political and
economic environment in Uzbekistan, according to workshop participants,
is noticeably deteriorating as employment and income falls, political
pressures mount and ordinary people seem to be expressing themselves
more robustly than a few years ago, there are powerful limits to this
type of incremental change and must be clearly acknowledged to avoid the
illusion of false progress. At best, Uzbekistan represents a museum
exhibit devoted to stagnation at all levels---a Soviet holdover without
a clear model or sense of regional or spiritual direction, seemingly
immune (for the moment) to the waves of Islamic fundamentalism affecting
nearby areas, yet unable to articulate any meaningful alternative in the
long-run to the failed Soviet patronage state. For the time being, it
makes do with various donor and political patronage largesse from the
United States, Japan and others, while the health, economic vibrancy and
political opportunities for its peoples continue to decay. The USG can
institute marginal changes in this environment up to a point, but it
cannot change the basic rules of the system, guarantee efficiency in the
use of scarce water and other energy resources, nor change the basic
state-dependent system of cronyism firmly in place. While the small US
investment in the country can "buy" some institutional solidity that
might protect society when crisis does hit, it cannot stop the crisis in
governance that some feel will take place much sooner than a generation.

The governance choices for USAID in Uzbekistan are far from easy, and
increasingly come down to tough choices between supporting slight
chances for intermediate policy reform (unlikely even in a more positive
political environment), or simply to 'serve the poor' by providing basic
service delivery support through NGOs to health, education, and rural
development. Such programs tend to be small and do not promise great
"impact" but in the end may mean more to ordinary Uzbekistanis than
attempts to change their moribund political institutions from outside.
Both choices involve key trade-offs and unclear improvements in the
quality of life and governance in the country.

**[IV. Conclusions]{.smallcaps}**

[Distinctions between Petty and Grand Corruption]{.underline}. When
asked to give examples of corruption in transition economies, people
often point to the patient being expected to pay her doctor under the
table, a driver bribing the traffic police in order to avoid paying a
fine, a businessman paying off the tax inspector to avoid an audit, or a
student bribing his teacher to get good grades, or even to sit for an
exam. On the surface, such daily examples of corruption look innocuous
enough; the same way an iceberg does from afar. But underneath the
surface, each one is in reality part of a large, complex pyramid scheme
whose workings are sensed, but never reported on. Although the picture
varies from country to country, the gate-keepers only constitute the
visible tip of that iceberg. Underneath the surface, they must pay their
supervisors for the privilege of being appointed gate-keepers, who must
in turn pay their superiors even more, and so on, all the way up to the
ministerial level.[^21]

> [A Vertical 'Racket' System]{.underline}. The result is a vertical
> racket---a reverse 'Robin Hood' system of income redistribution, kept
> alive by informal patron-client networks that determine
> precisely---and for how long---each person is to keep their
> appointment. By focusing on the 'horizontal' exchange of money or
> favors between the lowest levels---the private sector and the
> gate-keeper, donors ignore this much more important vertical system.
> It is the existence of that symptom that takes away investment money,
> pension money, health and education money, and makes virtually
> everyone who comes into contact with it an accomplice. This is why
> donors would be well-advised not to make such clear distinctions
> between petty and grand corruption. In a systemically corrupt state,
> there is no meaningful distinction between the two.

[Corruption: A Symptom, not a Disease]{.underline}. The existence of the
vertical racket highlights the next understanding of corruption, one
that emerged regularly during the one-day course and 11 half-day
workshops. Central Asia's corruption is not a disease per se, but a
symptom. The true disease is state failure, not in the sense of collapse
or breakdown, but in the sense of maladministration and incompetence.
Simply put, the Central Asian state does not work.[^22] The vertical
racket system evolves precisely in the vacuum it leaves behind. The more
dysfunctional the state and its institutions, the more parasitic its
behavior toward its citizens, its non-governmental organizations and
private businesses. Unchecked, the parasitic state will eat its own,
leaving behind even greater poverty, underdevelopment and misrule.

> [What is the Right Donor Role]{.underline}? But the truth is that
> citizens are willing to pay those rents just to avoid contact with the
> larger apparatus of the state. And as long as no alternatives are
> articulated for either party, both sides have strong incentives to
> continue 'playing the game' which can only end in disaster for both
> sides. If donors have any positive role to play here, it is to begin
> to articulate working models and alternatives types of interaction
> between the public and private sectors that offer everyone a way out.
> While no one will be content (and elites stand to lose a great deal in
> the short-run), the game can be structured through greater
> transparency to lend a strong appearance of fairness, and in many
> cases, legitimate fears can be assuaged, and incentives can be
> re-ordered.

[*Primum Non Nocere:* 'First, Do No Harm.']{.underline} What are the
right (and wrong) steps toward this particular donor role? It is worth
saying first that before USAID and other donors can promote positive
governance in Central Asia, they must come to greater terms with the
extent of misgovernance than they have so far been willing to. The
failure to do so inadvertently leads to technical assistance programs
which either do too little in too ineffective a way, those which miss
the 'good governance' goal entirely, or even those which inadvertently
strengthen the political and informational monopoly of the
state---something that no donor should do. Programs geared toward
increasing the fiscal solvency of the state and local authorities must
be counterbalanced by an aggressive commitment to transparency and open
government. This combination, unfortunately, is not always visible, or
even intended. Fortunately, a much stronger commitment to linking
programs across sectors *as well as* host-country counterparts, and
incentivizing programs which bring together all three critical
stakeholders---the public, private and non-profit
sectors---simultaneously and under the same roof, are those which can go
a long way to ensuring that programs, in the words of the ancient
Hippocratic Oath, "do no harm."

[Second, Do Programs Really Address Corruption]{.underline}? Second,
USAID must ask whether the programs it conducts actually do influence
personal behavior systems mentioned earlier. In many cases, assistance
is ineffectively geared toward those with little power or influence or
the reverse---those without strong incentives to change behavior and the
larger enabling environment. Much macro-level policy assistance falls
under this second category. Until corrupt governments have incentives to
listen to voices for reform, much of this technical assistance will
simply miss the mark, or be easily reversed when donors pick up stakes
and leave. This helps to explain why the overall environment for
integrity in the region has been deteriorating. Lower-level programs, by
contrast, offer better chances to affect behavior, and are often carried
out in environments where incentives for change and receptivity to donor
advice are stronger. The drawback, of course, is a higher level donor
involvement to manage that investment in order to turn such advantages
into successes. While there are no easy answers, USAID in particular has
often tried to buy change on the cheap, forgetting that long-term change
requires not just long-term investments but in the right areas, and the
patience and stamina needed to endure failure, as well as engender
successes.

[Third, What Remains to be Done]{.underline}? Third, USAID should indeed
ask if there are new approaches, stand-alone activities or changes to
existing programs that could be undertaken to address corruption. In
some cases, the answers are easy. Certain programs have actually 'struck
gold' by challenging the fundamental patronage system that underlies
governance in the region. But this has created new problems which either
must be answered or risk seeing the return of corruption to these areas.

> [Single-Payer Health Care: An Example]{.underline}. The country-wide
> introduction of the single-payer health care system in Kyrgyzstan (and
> throughout Central Asia), for example, is important precisely because
> it has greatly damaged the ability of the health system to extract
> rents from patients. But the patronage system is striking back. Budget
> support for the Ministry of Health in Bishkek is being lowered beyond
> what is necessary for its core functioning. Perhaps oversimplified,
> the patronage system that once operated in the Ministry can no longer
> guarantee hospital heads and chief doctors their former incomes, and
> as a result, the 'reverse Robin Hood' racket system is putting new
> pressure on family physicians to extract payments from their
> physicians *in addition to* patient co-payments. The potential for a
> new form of corruption to arise from this critical governance reform
> means that donors and reformers must work together even harder to
> avoid being left behind.

[A Focus on Integrity Puts *Process* Before *Results*]{.underline}
Lastly, USAID and its implementers need to arrive at more honest ways of
discussing the progress---and failures---of the past 13 years in the
region. In many ways, the focus on "results" has diverted critical
attention (and resources) away from the arguably more important question
of "process." USAID has claimed many "results" in the post-communist
world over the last decade, yet all over the region notwithstanding,
systems of integrity are in *deterioration*, not rebirth, and the
environment for corruption has strengthened, rather than weakened.
Privatization did not create good public/private barriers which must
exist for good governance to flourish; new accounting systems have not
supplanted old ones, and NGOs have not---despite millions of dollars of
assistance---been able to make up the differences. Something is clearly
amiss. Much of what has not been considered up to now is how governments
function and the incentives for them to do so. An anti-corruption and
governance focus is needed precisely because it shifts needed attention
from *outcomes* to *processes* themselves. And it is the *process* of
government---how it behaves vis-à-vis its people---that eventually
determines whether it engenders and builds social trust and cooperation
or whether it becomes simply another source of misery, among many
others, for an already overburdened population.

**[Appendix A:]{.smallcaps}**

**[(A Suggested Anti-Corruption Strategic Framework for
USAID/CAR)]{.smallcaps}**

**Problem Statement:**

*How can public/private sector integrity be better promoted through
USAID technical assistance in Central Asia?*

**The 'Business Case' for Integrity and Against Corruption: Why Do
This?**

-   [Integrity Promotes Strong States Necessary to Generate Strong
    Markets]{.underline}. Public sector integrity is one of the most
    important markers of state strength and capacity. Only strong,
    accountable states can create the laws, institutions and incentives
    that in turn generate strong, competitive *markets*. Countries with
    effective public sector administrations tend to be precisely those
    with high standards of living, competitive private sector
    environments, open trade policies, well-trained workforces, strongly
    enforced labor, business and environmental standards, and high
    levels of public good investment

-   [Corruption Facilitates Weak Authoritarianism and Discourages
    Investment]{.underline}. By definition, a corrupt state is an
    incompetent one, which cannot enforce laws, regulations, and codes
    of conduct nor effectively levy taxes and redistribute income. Such
    states compensate for this fundamental inefficiency through
    increasingly authoritarian 'insider' rule based on patron-client
    relationships. Yet this fundamentally contradicts an economic
    environment conducive to broad-based *competitive investment*, and
    resources tend to flow only to those institutions necessary to
    sustain single-commodity economies, without 'multiplier effects'
    that boost infrastructure, industrial and service development.
    Despite resource endowments, such economies generally *fail* to find
    competitive niches in an increasingly globalized economy.

-   [Integrity Legitimizes Political Change and Lowers Costs of Social
    Reform]{.underline}. States marked by high degrees of public sector
    integrity are able to pursue difficult reforms or re-structure their
    economies *precisely* because they enjoy high levels of public trust
    and confidence. 'Clean' states invest in critical public goods (such
    as primary and secondary education, basic healthcare, social
    welfare, pension systems, environmental protection) and thus 'rule
    justly' in the public interest. When reforms are necessary,
    political leaders can appeal to patriotism, national pride and
    social justice to obtain needed support, and thus lower the
    political and social costs of complex transitions.

-   [Corrupt States Lack Political Legitimacy]{.underline}.
    Kleptocracies (where the public sector is primarily a vehicle to
    facilitate organized theft) are rightly perceived by increasingly
    well-informed publics as undeserving of political loyalty and trust,
    which, over time, is magnified by widening gulfs between rich and
    poor, leading to serious political and economic crises. By failing
    to check the propensity to theft of their own long-term resources
    for short-term gain, corrupt states arguably sow seeds of their
    future destruction by galvanizing increasingly interested publics
    against them.

-   [Integrity Fights Poverty and Narrows Income Disparities between
    Rich and Poor]{.underline}*.* Non-corrupt 'clean' states are also
    strongly associated with narrower income disparities between rich
    and poor, and provide greater channels for social, economic and
    political mobility to poorer and marginalized groups. They are also
    able to absorb critical labor force shifts (rural to urban
    migrations, extractive to industrial, and industrial to
    service-based economies) with minimal social stress.

-   [Corrupt States are also Poor States Prone to Conflict]{.underline}.
    The most corrupt countries in the world are also the world's
    poorest, natural resource endowments notwithstanding. Vast gulfs
    between rich and poor contribute to economic insecurity, with
    stronger pressure on elites to remove capital---both human and
    monetary---overseas (using corrupt mechanism to hide assets and
    investments). Such actions only further impoverish their peoples and
    make them increasingly vulnerable to both internal and external
    resource conflicts.

**Solutions: What Lies (and Does Not Lie) Within USAID's Manageable
Interest?**

-   [Goal]{.underline}: To use technical assistance to help change
    *enabling environment for corruption* throughout the region,
    specifically by changing microincentives that can lead to behavior
    change. But this must be balanced against...

    -   [Severe Intervention Limitations]{.underline}. Unless
        interventions succeed in reversing incentives for corruption
        (which are stronger than those for integrity), interventions
        must accept the inevitability that there will be many failures,
        even in the Workshop Recommendations, balanced against piecemeal
        successes. Simply put, incentives to continue short-term
        stealing which benefits a few are simply greater than those for
        longer-term prosperity for all, and even reversing
        microincentives and microenvironments for reform will not soon
        change this.

    -   [Declining Budgets]{.underline}. While declining budgets
        severely constrain large new projects, they also simultaneously
        compel existing programs to undergo far greater scrutiny than
        they currently do, particularly toward the twin goals of
        *avoiding harm* and *maximizing current benefits*.

**A Strategy to Guide Intervention: Lenses for All Programs**

> [(1) Focus on the Scarcity of Information and
> Competition]{.underline}. The larger enabling environment for
> corruption revolves around the *scarcity* of both good information
> (and how to use it to change behavior) and competition (both political
> and economic). A strategy to combat this must use scarce resources *to
> increase the supply of information and provide tools to increase
> political and economic competition*.

-   [Benefits: Safety and Economy]{.underline}. Disseminating
    information, findings, research, but especially tools and
    methodologies that people can use to change their environments,
    USAID will go a long way to counter the larger enabling environment
    for corruption, because it will have helped *level the playing
    field* between governments and their people. Such a strategy
    promotes good without doing harm because it leaves to Central Asians
    themselves the responsibility for using that information in ways
    they feel are appropriate and can use. (By contrast, some
    'anti-corruption campaigns' by governments can easily end up little
    more than witch hunts against opposition politicians and human
    rights activists and must be very carefully monitored.)

-   [Take Advantage of People's Thirst for
    Information...Carefully]{.underline}. The further training,
    professionalism and increased integrity of the 'fourth estate' are
    important precisely because of its ability to provide critically
    needed information to ordinary people genuinely interested in
    corruption issues. But USAID must resist the simple temptation to
    'bribe' journalists to cover more corruption issues, not only
    because this indirectly contributes to corruption, but because it
    may genuinely threaten journalists. Some of that danger can be
    lessened by focusing on the *legal environment* for journalists, and
    recognizing their need to be defended from governments by effective
    legal clinics that will counter government libel and slander cases.

-   [Promote Associational Strength, Which Promotes Independence, Which
    Promotes Integrity]{.underline}. When professional associations
    discover their own strength and overcome barriers to effective
    collective action, they naturally seek to become more independent of
    the state, and that very movement is itself a strong incentive for
    professional and organization transparency and integrity. Those are
    the contesting voices of power and information that USAID knows must
    be strengthened before the larger environment can change, whether in
    business, the judiciary, NGOs, electricity users, journalists, or
    accountants.

> [(2) Incentivize Cross-Recipient Programs]{.underline}. USAID's
> trainings do not sufficiently bring together forums of public, private
> and non-profit sectors *at the same time* and *under the safe roof*.
> It is critical that information training and seminars not focus on one
> sector at the expense of others. Each sector must know that other
> sectors have received the same information, training and suggestions;
> otherwise they will work at cross purposes to one another.
>
> [(3) Recognize the Benefits of Lower-Level Programs and Pursue
> Accordingly]{.underline}. School committees, village and local
> councils not part of the favored network, farmers' organizations and
> small businesses and business organizations have ironically been more
> open to behavior change and information precisely because they have
> not been a part of insider networks of power and patronage. Many of
> these institutions and nexuses can be a focal point for change in ways
> that higher-level institutions often have not, and can be used to
> increase receptivity to change at higher levels of government and the
> private sector.
>
> [(4) Civic Education: Both Necessary and Doable---and Some
> Guidelines]{.underline}. Bring NGOs, government agencies and private
> sector groups together to develop culturally-sensitive presentations
> of corruption into schools, communities and the media, ones which both
> help people to *understand its true costs* and specific ways to pursue
> better models in ways that can also help them to overcome barriers to
> collective action and low levels of social trust that are also part of
> the problem. (Evidence from other corrupt countries shows that when
> people are given better information about the costs of corruption,
> they are less willing to participate in it, and more receptive to
> alternatives.) Transparency International, working in conjunction with
> education sector grantees, can play a key role in this effort. Some
> issues that could be covered:

-   [Gifts v. Bribes]{.underline}*.* There are at least 10 words in
    Kazakh for 'gift'---and not all are tainted. Most Kazakhs consider
    bribe-taking much worse than bribe-giving. Gifts in traditional
    areas may actually be legitimate form of social capital and social
    trust---not to be dismissed lightly. An ethics program can help
    people understand the differences and when each is appropriate.

-   [Patronage v. Pilferage]{.underline}. Patronage isn't always
    pernicious, and forms part of everyday politics in every society,
    but an integrity program can help people understand where it
    works---and where it doesn't, to promote society's overall wealth
    and access to power.

-   [Conflict of Interest v. the Public Good]{.underline}. Few in
    Central Asia or the former Soviet Union understand these concepts,
    even high-level professionals whose job requires them to. Clarifying
    these issues can help people answer the question for themselves:
    '*how much corruption is too much*?' and connect their own personal
    behavior (*kun koru*---just trying to 'see the sun' in Kazakh) with
    the larger system of governance in the country that often leaves
    them with few alternatives. Helping to separate these issues can
    help them understand more clearly what they need to do to change the
    larger systems of rule.

> [(5) Formally Support 'Publish What You Pay]{.underline}.' Although
> some MNCs may oppose this, others want to do the right thing, but are
> waiting for high-level political leadership first. If political
> leaders lead on this issue, the MNCs will pay attention to the details
> of implementation and will be able to work them out. Transparency
> International's proposed 'Integrity Pact' with the oil companies
> deserves support and recognition in this area.
>
> [(6) Anti-Corruption Team Empowerment]{.underline}. The ACT must have
> access to resources and veto power over programs, not simply serve as
> a consultative body. AEFs need to be written with this in mind,
> otherwise the effort will die on the vine.

**[Appendix B-1]{.smallcaps}**

**[(Welcome Sheet Distributed to All Participants in English and
Russian)]{.smallcaps}**

As some of you know, USAID/Central Asia recently re-organized its
Anti-Corruption Team with the goal of bringing new energy to address
corruption in the region. The Team contracted with PADCO, Inc.---an
international consulting firm in Washington---to bring Dr. Corbin Lyday,
an anti-corruption specialist, to Central Asia to conduct a one-day
course for USAID employees. In this effort, PADCO is partnered with
Transparency International and Mr. Stian Christensen from Transparency
International (Berlin) attended and co-facilitated this course on March
4.

That course emphasized the importance of seeing Central Asian corruption
in the context of several perspectives: (1) the region's geostrategic
importance and isolation from democratic countries; (2) a Soviet legacy
of secrecy and Communist Party patronage; and (3) an emerging political
economy dominated by single-commodity economies and authoritarian
political tendencies.

The Anti-Corruption Team then asked PADCO to conduct 10 half-day 'round
table' workshops with USAID grantees and contractors to ask how much
existing programs really address this [underlying environment for
corruption]{.underline}. USAID's Anti-Corruption Team and PADCO are
co-facilitating these workshops in 4 countries (Kazakhstan, Kyrgyzstan,
Uzbekistan and Tajikistan) and will review programs in USAID's 4 major
strategic areas: *Democracy and Conflict Mitigation*; *Small Enterprise
and Trade Development*; *Health and Education Reform*; and *Natural
Resource Management*.

Each 3-4 hour workshop will examine our programs in one (or more) of
these strategic areas with three questions in mind:

(1) *Are there specific things USAID should [not]{.underline} be
    undertaking (approaches which might cause harm or inadvertently
    strengthen forces connected with corruption, for example)?*

(2) *Is USAID approaching this problem [correctly]{.underline} through
    its existing programs? (Are there ways to change existing programs
    to address this issue more effectively?)*

(3) *Are there [other approaches]{.underline} or programs which USAID
    could be doing which would have an even stronger effect on
    corruption in the region?*

By answering these questions today, you will help USAID understand
better what it can---and cannot---realistically achieve in this sector
in Central Asia. For programs in Kazakhstan and Kyrgyzstan, Mr. Sergei
Zlotnikov of Transparency International (Kazakhstan) and Ms. Aighul
Akmadhzanova of Transparency International (Kyrgyzstan) will also
present their perspective on how our programs might better address these
difficult issues facing Central Asia today.

On behalf of USAID's Anti-Corruption Team, PADCO and Transparency
International, we thank you for your interest and attendance!

**[Appendix B-2]{.smallcaps}**

**[(Specific Workshop Recommendations)]{.smallcaps}**

**KAZAKHSTAN**

**Workshop 1---Democracy and Media**

> [(1) Journalism Training and Investment]{.underline}. Much more
> intensive push to focus on inadequacies and obstacles to a free
> press---training on reporting corruption (basic concepts and notions
> like conflict of interest and enforcement); human rights watch
> training---this in view of quality of journalism over last five years
> has deteriorated. Public interest in corruption issues is high because
> of 'Kazakhgate.'
>
> [(2) New Judicial Training vis-à-vis Ratification of International
> Convenant on Civic and Political Rights]{.underline}. Kazakhstan is
> expected to sign this agreement this year---yet it allows governments
> to establish formal limitations on certain freedoms. Yet there is no
> discussion as to what kinds of measures and limitations are allowable
> under international and constitutional law, and no understanding of
> this issue by judges, prosecutors or advocates. An NGO-organized
> training program could use this issue to address not only these
> limitations, but begin critical training on concepts like conflict of
> interest, which are nowhere understood or articulated within the legal
> or civil society community.
>
> [(3) Pressure to Sign/Ratify the OECD Anti-Bribery
> Convention]{.underline}. Because Kazakhstan has already indicated
> willingness to go ahead with ratifying Convention Against Organized
> Crime (as well as move not to be a Tier 3 trafficking country) and
> because GOK wants to assume the chairmanship of the OSCE in 2009,
> there is a foothold to pressure the government (laying the foundation
> of an integrity NGO coalition in country) to both sign and ratify the
> Convention. Would require GOK to specify concrete timelines, specify
> legal codes need to be changed---NGOs prepared to give expert
> testimony in Parliament. Cross-Sectoral Working Group should form in
> conjunction with economic stakeholders to create this working group.
> Very clear achievable goal by 12/04, if government is willing
> (elections are in 12/04) so there is also incentive to do it before
> then.

**KAZAKHSTAN**

**Workshop 2---Health and Education**

> [(1) Global Fund Issues]{.underline}. USAID in conjunction with a
> health NGO network (modeled similar to the activist Kazakh Association
> of Patients with Diabetes) should demand greater transparency for the
> upcoming fund disbursements for HIV prevention and treatment. (As
> Ukraine has already had its funds frozen because its own internal
> auditing system could not account for disbursements, there is better
> chance of receptivity in Kazakhstan). Grant application process needs
> to be put on a website so everyone can see what the rules are. This
> coalition needs to talk directly to the National Auditing Organization
> (supported by PA Consulting in part) which has already focused
> attentions on disbursements issued by the Republican TB Institute.
>
> [(2) Patients' Bill of Rights]{.underline}. Modeled after similar
> program in UZ, USAID can do this at primary health care level---an
> organized effort needs to be publicized in clinics and even at higher
> levels of secondary and tertiary care. (International Planned
> Parenthood did this with contraception, so there exists a viable model
> for this in KAZ. It would not immediately change the enabling
> environment for corruption, but it would clarify a right to patient
> confidentiality, would create a consciousness surrounding fact that
> patients are persons first, and they have rights and providers have
> responsibilities---would move the country toward something approaching
> a *social contract* in the health arena.
>
> [(3) Working Groups on Health Care Implementation Established by
> Deputy Prime Minister]{.underline}. The Deputy Prime Minister has
> already established working groups needed to determine the right
> investments in health and education, and USAID can assist these groups
> to develop models of financial transparency as an integral part of any
> investment policy decisions. (Again, using the model of the National
> Auditing Organization's previous approach toward the TB Institute).

**UZBEKISTAN**

**Workshop 3---Enterprise, Trade, Investment, Energy, and Agriculture**

> \(1\) [Clarity in Banking and Related Legal Regulations
> Initiative]{.underline}. To directly counteract the arbitrary
> environment that banks and related legal institutions operate under,
> Bering Point's representative suggested a review of current
> legislation with specific suggestions for deleting burdensome,
> contradictory or overly vague codes in order both to decrease
> opportunities for rent-seeking (especially at lower ministerial or
> Hakim levels), but also to provide a more positive environment for the
> operation of basic financial services, like banking and insurance,
> necessary before outside investment can increase. The presence of the
> Embassy's Economic Affairs Officer confirmed both the Ambassador's
> support for such an approach, as well as a logical interest on the
> part of the Deputy Prime Minister for Economy Azimov in this.
> (Azimov's office receives both greater prestige if he can attract new
> donor or investment money from the US, and the arrest and
> incarceration of several of his deputies on corruption-related charges
> gives him a further 'stick' to care about such an approach.) If
> carried through, such an initiative might go a long way to reversing
> the "Roach Motel" banking system of the country ('money checks in, but
> it doesn't check out.')

**UZBEKISTAN**

**Workshop 4---Democracy, Media, Health and Education**

> [(1) Strengthen Transparency in Selection of Program
> Trainees]{.underline}. By ensuring that government officials and
> employers of potential trainees are present during a trainee selection
> process, USAID and its implementers can directly counter the unspoken
> belief that 'all are tainted' by showing that the process for training
> in not subject to favoritism, cronyism or bribery.
>
> [(2) Institute 'Nexus' Roundtable Implementer Meetings Around
> Corruption]{.underline}. Using a model instituted by the US Embassies
> in Slovakia and Albania, the US Treasury advisor recommended a monthly
> meeting of implementers focused around the subject of corruption with
> various sub-themes in roundtables every two weeks. Such a roundtable
> must include implementers from all of the strategic objectives, not
> simply from the democracy and media one. The effect hoped for would be
> threefold:
>
> to *provide an information-based synergy* that can build on itself,
> relieving some of the real and perceived feelings of isolation that
> implementers can have in facing corruption;
>
> to *provide a 'safety valve'* allowing frustration and discontent to
> be expressed openly among implementers and thus highlight both good
> (and bad) emerging practices by all concerned; and
>
> *to generate solidarity and prepare for an information-based*
> 'guerilla warfare' against a backsliding, re-authoritarianizing,
> increasingly isolated Uzbek state and its security apparatus. (This is
> also needed to answer the larger question, voiced by some
> participants, of what the USG interest is in combating corruption in
> Uzbekistan, a question not at all clear to many.)
>
> [(3) From Roundtables to an "Integrity Corps]{.underline}." A next
> step for such a roundtable might be to extend them beyond implementers
> to the core network of 'trusted intermediaries and counterparts' that
> each organization in Uzbekistan deals with. Sharing information,
> discussing on-going practices and airing mutual approaches to common
> problems *between and among* these networks will help to create an
> emergent 'integrity corps' of practitioners, both American and Uzbek,
> which may form the basis of new institutions that must emerge to fill
> the increasing social vacuum left behind by a deteriorating
> authoritarian state.
>
> [(4) Encourage Cross-Disciplinary Programmatic
> Activities]{.underline}. Part of the effect of corrupt
> authoritarianism is the widespread ignorance citizens have of basic
> rights and responsibilities in a democracy. Programs that can combine
> the roles of media and the judiciary, for example, or business
> behavior and human rights strengthening, stand a better chance of
> impacting a corrupt environment than single 'stand-alone' programs in
> an individual sector.

**KYRGYZSTAN**

**Workshop 5---Democracy and Media**

> [(1) Strengthen Lower-Level Accountability Reforms]{.underline}.
> Village council elections are arguably a more important arena for
> change than national-level ones, with 30-50% of mayors overturned in
> 2001 elections. 40 villages already hold open budget hearings, which
> need to be sponsored by local *Keneshler*, rather than NGOs, properly
> advertised and publicized in advance. It is at these levels that
> public anti-corruption education efforts (below) should take place.
>
> [(2) Anti-Corruption School and Public Awareness
> Programs]{.underline}. School committees, local village councils and
> rural organizations with little access to information are the most
> receptive to behavior change and new thinking, and anti-corruption
> programs should start at this level. (The popularity of the National
> Scholarship Standardized Test with President Akaev ironically gives
> the USG a hedge to pursue this, based on similar models sponsored by
> Transparency International/Slovakia, or some of IFES' civic education
> programs in other countries, for example).
>
> [(3) Centralize Donor Cooperation Efforts]{.underline}. As Kyrgyzstan
> appears to be a nation of round-tables, many workshop participants
> expressed the need for an incentivized system of donor co-ordination
> to both avoid replication and provide a forum for a more serious
> discussion of specific anti-corruption initiatives. (The timing for
> this, on the heels of an upcoming OSCE/World Bank/UNDP assessment on
> corruption for April, is opportune).
>
> [(4) Revisit the Freedom of Information Act (FOIA]{.underline}).
> Kyrgyzstan passed new legislation a year ago making parliamentary
> records open to the public, but the larger FOIA legislation is only
> two pages long, which means it is virtually meaningless and
> unimplementable. There is already a working group of businesspersons
> and Parliamentary deputies co-operating with Transparency
> International to improve this effort, but it needs greater support.
> Without improvements to this law, land use and registry records and
> records of privatization will simply be hidden from public view, as
> the current head of *Gosregistratsia* seems to want.

**KYRGYZSTAN**

**Workshop 6---Enterprise, Trade and Finance**

(1) [Improve legislation and implementation procedures regarding
    conflict of interest]{.underline}. Because so few people even
    understand the connection between law and life, they do not know how
    or why law applies to them. But if the business community can be
    taught that this is worth knowing, they will put pressure on the
    state to address its inadequate performance and understanding of
    coherent tax and conflict of interest legislation. A critical
    component of this is the strengthening of professional business
    associations in order to overcome real barriers to effective
    collective action.

(2) [Get USAID grantees and implementers out of buildings owned by the
    President or members of his family]{.underline}. As part of leading
    by example, USAID should not be seen to be profiting or
    participating in what most workshop participants widely regard as a
    severely corrupt land and real estate market in Bishkek.

(3) [Pursue 'Publish What You Pay' Efforts]{.underline}. The State
    Committee to Encourage Investment is already receiving advice from
    USAID implementers on how to issue publicized permits for land and
    business investment. This kind of procedure could be used to work
    with the mayor's office to help citizen groups track money and
    expenditure flows, using municipal models from elsewhere (such as
    Mexico City's recent reforms.)

(4) [Donor Transparency and Coordination]{.underline}. In the same vein,
    Kyrgyz know very little about World Bank and Asian Development Bank
    activity in the country, and all donors need to work together to
    publicize and open up their efforts to greater public scrutiny.
    USAID can set an example in this by publishing breakdowns of its own
    expenditure---few Kyrgyz even understand what it is donors do, how
    they do it, or to whom their money goes. All donors must require
    their Kyrgyz employees to pay local taxes, for example, otherwise
    their own Kyrgyz employees will have no stake in the financial and
    governance outcomes within their own country.

(5) [Bring Private Sector, NGOs and Government Officials *Under the Same
    Roof*]{.underline}. Training components need to consist of two
    parts, both technical strengthening and 'know your rights.' There is
    a great danger that NGOs, which have received the bulk of USAID
    assistance, are far better positioned in the country than their
    private sector counterparts who often receive very little training
    and support. This must also be done with government officials *at
    the same time*, so that the private sector can "know that the
    government also knows certain things."

**KYRGYZSTAN**

**Workshop 7---Health and Education**

(1) [Don't Accredit Institutions of Higher Learning Until the Government
    Re-Structures its Primary and Secondary School Financing
    Systems]{.underline}. The system of primary public education in
    Kyrgyzstan (as for most of Central Asia) is in shambles, and
    deliberately kept that way in order to maintain the prestige of
    small, but influential patronage network of rectors, deans and
    higher education officials in tertiary institutions. Children are
    the primary conduits for corruption with unofficial bribes for
    education, upkeep and maintenance more than double the amount
    budgeted for formal education. Kyrgyzstan's education sector is the
    most corrupt in the region, second only to Tajikistan's.

(2) [Introduce New Public Ethics and Integrity Curricula into Primary
    and Secondary Schools]{.underline}. This effort could be sponsored
    by USAID or other donors, but jointly carried out by groups like
    Transparency International, IFES, the Independent Testing Service,
    and the Ministry of Education to introduce basic ethics and civics
    education curricula in schools, school committees and village
    councils. (Transparency Slovakia has carried out a similar program
    at all educational levels: pre-school, primary and secondary, and
    the open enrollment system in Kyrgyzstan already provide a platform
    on which to build such a program.

(3) [Activities of the Health Insurance Fund need to be made public and
    transparent]{.underline}. Businesses and individuals alike have
    strong incentives not to pay taxes that go to the Fund because the
    opacity and non-transparency of the Fund and its procedures means
    that very few people trust that it will be wisely spent.

(4) [Convene a National Health Forum Centered On the Single-Payer
    System]{.underline}. This significant effort would bring together
    ZdravPlus, the Ministry of Health, associations of family care
    physicians, members of Parliament and concerned NGOs to fully
    disseminate information about, and defend the single-payer
    co-payment system, as well as to dissuade efforts by some in
    Parliament (especially in opposition parties) to underfinance the
    system by reducing budgets below sustainable levels. The danger is
    very great that the single-payer system will come to be seen as
    merely a new form of under-the-table financing, rather than a
    transparent system to ensure better and cheaper primary health care.

**KAZAKHSTAN**

**Workshop 8---Energy and Water**

(1) [Stronger Parliamentary Oversight and Definitions of Corporate
    Governance in Energy Sector]{.underline}. Newly privatizing
    electricity distribution companies face an uncertain legal and
    operating environment despite the cooperation between the
    Electricity Users Association and the Anti-Monopoly Committee, which
    has very little political power or influence, and is reluctant to
    become involved in corruption issues. Serious parliamentary
    oversight is needed to rectify an environment increasingly dominated
    by forced bankruptcies, and hostile takeovers. Concepts such as
    holding companies, legal bankruptcy, making corporate governance
    more transparent, and creating some kind of public monitoring
    process can help keep much of Energy and Water's work intact.

(2) [Divorce Commercial from Regulatory Functions in State Energy
    Enterprises]{.underline}. How Kazakh state commercial bodies
    function is totally unclear, and further confused by the fact that
    commercial and regulatory functions are often housed within the same
    organization---a clear and basic conflict of interest most visible
    in the energy sector. No legislation currently exists defining the
    management of state-owned enterprises, other than a highly
    politicized appointment process. Kazmunaigaz, by example, has
    special laws that cover its operations, and its profits do not go
    back into the state budget. Ownership of state energy companies is
    exceedingly complex and who stockholders are remains deliberately
    unclear.

(3) [Publicize Details Surrounding the National Oil Fund]{.underline}.
    The National Bank of Kazakhstan manages the current \$3.7 billion
    petrochemical fund derived from oil profit revenues. The account is
    audited every other year, but there is complete ignorance in the
    population as to where this money is currently invested in, what it
    is invested in, why the bulk of it hasn't been re-invested yet, and
    what the GOK eventually intends to use it for.

(4) [Support an 'Economic Reporting' Program to Help Train Journalists
    to cover 'Safe' Sectors]{.underline}. If journalists feel that
    reporting on oil and gas issues puts them at personal risk, then
    explore other areas (such as electricity distribution and rates)
    that may be safer in the energy and water field.

**KAZAKHSTAN**

**Workshop 9---Enterprise, Trade and Finance**

(1) [Support a Stronger Role for Parliamentary Oversight: Public
    Hearings, Program-Based Budgeting, Corporate
    Governance]{.underline}. As an integral part of the democratic
    process, public hearings geared toward the private sector must
    become part of Parliament's internal processes. Currently,
    legislation affecting SMEs is undertaken without any consultations
    with the people it affects most. The Association of Entrepreneurs
    could be encouraged to inaugurate this process in conjunction with
    the proper committees in the Majlis.

(2) [Public Education on Corruption]{.underline}. Similar to other
    sectors, a public education program geared toward the private sector
    that would help businesspeople understand what corruption is, what
    it costs, why people give and take bribes, and models of behavior
    that can work without resort to corruption are needed.

(3) [Cautious Involvement with the Anti-Corruption Agency]{.underline}.
    Presidential decree has created a new agency with uncertain legal
    and political authority, interests, a definite budget, sector
    expertise or personal leadership. USAID can help work with
    Transparency International to at least provide economic and
    analytical expertise to the Agency, to at least investigate whether
    a partnership or formal support is warranted at a later date.

**TAJIKISTAN**

**Workshop 10---Democracy and Natural Resources**

(1) [Support Public Hearings Associated with Significant Loans for
    Various Sector Projects]{.underline}. The World Bank currently has
    15 on-going projects in health, water use, road-building, and other
    key development areas. USAID and its implementers can help bring
    NGOs, local representatives of national government bodies and
    interested others to these hearings (and those of other major
    lenders, such as the Asian Development Bank) and can help improve
    stakeholder analyses done before their disbursements. Most people in
    Tajikistan do not understand the difference between a loan and a
    grant, even fewer are familiar with the activities of large lenders
    and donors, and many more need to be brought into this process far
    more than they have been in the past.

(2) [A Copying Machine in Every Mayor's Office, Communal Services Office
    and Financial Office]{.underline}. About 600 copying machines (with
    toners, paper, etc.) would go a long way to solving basic
    information problems that work to prevent the emergence of real
    local government in the country.

(3) [Regularize Accounting Procedures and Introduce Regular Audits for
    Ministry Budgets]{.underline}. With technical assistance, the
    National Accountants' Association could begin to institute regular
    audits as part of the government's normal budget process.

(4) [Thorough Analysis of Country's Tax Code]{.underline}. The
    complexity and incoherence of the country's tax code not only
    allows, but virtually guarantees extortion and rent-seeking. By
    seeking to eliminate many of the most onerous provisions, shadow
    businesses will have an incentive to register officially, and the
    government a better chance of increasing its legitimate taxes.
    Because Parliament is set to approve a new tax code next year, this
    suggestion is timely.

**TAJIKISTAN**

**Workshop 11---Enterprise, Finance, Health and Education**

(1) [Donors must Cooperate Together to Prevent the GOT from Playing them
    Against One Another]{.underline}. The environment for donor
    cooperation has notably deteriorated over the past year, with the
    inevitable result that in the resulting opacity, the GOT plays
    donors off against each other and 'double-dips.'

(2) [More Focused Entrepreneurial Education and Skills Training for
    SMEs]{.underline}. Large organizations have access to funds for
    training, but smaller ones do not. A training program should focus
    on the environment for SMEs and train them how to deal with the
    scarcity of information that remains a hallmark of the Tajik system.

(3) [Public Education on Basic Civics and Corruption]{.underline}. IFES
    has already instituted a secondary-school civics instruction course
    beginning at the 9^th^ grade, but participants recognized the need
    for this much earlier, combined with some kind of approach to
    corruption that helps promote models of alternative behavior that
    could work in the country.

**[Appendix C]{.smallcaps}**

**[(List of Interviewees and Workshop Participants)]{.smallcaps}**

**[KAZAKHSTAN]{.underline}**

> **US Mission in Kazakhstan**
>
> Ambassador Larry Napper
>
> Deputy Chief of Mission and Counselor Mark L. Asquino
>
> James Fluker, Senior Commercial Officer
>
> Mike Fritz, Acting Mission Director, USAID/CAR
>
> R. David Harden, USAID/CAR Regional Legal Advisor
>
> Beth Salamanca, USAID/CAR Anti-Corruption Team (ACT) Leader
>
> Amy Tohill-Stull, USAID/CAR Anti-Corruption Team (Program Office)
>
> Kaya Adams, USAID/CAR Anti-Corruption Team (Democracy/Conflict Office)
>
> Susan K. Fritz, Division Chief, Democracy and Conflict
>
> Kerry Pelzman, USAID/CAR, Health and Education
>
> Jessica Leonard, USAID/CAR, Health and Education
>
> Shawna Wilson, USAID/CAR Anti-Corruption Team (Democracy/Conflict)
>
> Craig Anderson, USAID/CAR, Energy and Water
>
> Sergei Yelkin, USAID/CAR, Energy and Water
>
> Anne Kim, USAID/CAR, Training Office
>
> **Donors, Implementers, Counterparts and Others**
>
> Ronald Ashkin, Chief of Party, Enterprise Development Project (Pragma)
>
> Eric Boyle, Urban Institute, Resident Advisor
>
> Irene Burns, Regional Coordinator, Trade/Investment Project (Pragma)
>
> Douglas Grube, Urban Institute, Kazakhstan Country Director
>
> Lawrence Held, Regional Director, Academy for Educational Development
>
> Catherine Ingleheart, Deputy Chief of Mission, British Embassy
>
> Oleg Katsiev, Country Director, Internews Kazakhstan
>
> Stephen Moody, Senior Advisor, Financial Sector Initiative (Pragma)
>
> Dennis de Tray, World Bank Regional Director
>
> Sergei Zlotnikov, Country Director, Transparency International
>
> Informal Meeting of the 'Kazakh Investment Club'

**[Workshop Participants]{.smallcaps}**

> **Workshop 1 (Democracy and Media)**
>
> Kaya Adams, USAID/CAR Democracy and Media Office
>
> Marat Aitmagambetov, Country Director, Counterpart Consortium
>
> Katerina Badikova, International Organization for Migration (IOM)
>
> Kuralai Bekenova, Chairwoman of Business Women's Association
>
> Marat Bigaliev, International Foundation for Election Systems (IFES)
>
> Kevin Borrup, International Center for Non-Profit Law (ICNL)
>
> Tom Bridle, National Democratic Institute (NDI)
>
> Douglas Grube, Kazakhstan Director, Urban Institute
>
> Rinat Khassanov, Urban Institute
>
> Chris Krafchak, Country Director, ABA/CEELI
>
> Vsevolod Ovcharenko, International Center for Non-Profit Law
>
> Marit Rasmussen, ABA/CEELI
>
> Beth Salamanca, USAID/CAR Anti-Corruption Team
>
> Donna Stewart, International Republican Institute (IRI)
>
> Sergei Zlotnikov, Transparency International (Kazakhstan)
>
> **Workshop 2 (Health and Education)**
>
> Kim Alter, Countepart
>
> Michael Curtis, ACCELS
>
> Sara Feinstein, Zdravplus
>
> Ol'ga Kim, TBI Study Manager for the Red Cross
>
> Lara Koushenova, PSI
>
> Sheila O'Doughterty, Chief of Party, *Zdravplus*
>
> Konrad Juskiewicz, MD., MPH, TB Program Director, Project Hope
>
> Jessica Leonard, USAID/CAR Health and Education Office
>
> Laula Nugmanova, Program Specialist, AED Central Asia
>
> Carina Omoeva, USAID/CAR Health and Education Office
>
> Beth Salamanca, USAID/CAR Anti-Corruption Team
>
> Martha Sickles, Executive Director, Alliance for Open Society
> International
>
> Larisa Vakhmistrova, Centers for Disease Control
>
> Mikhail Zemskov, Regional Financial Manager, AED Central Asia
>
> Ol'ga Zyus, Abt Associates
>
> **Workshop 8 (Energy and Water)**
>
> \[to be filled in\]
>
> **Workshop 9 (Enterprise, Trade and Finance)**
>
> \[to be filled in\]

**[KYRGYZSTAN]{.underline}**

**[Workshop Participants]{.smallcaps}**

> **Workshop 5 (Democracy and Media)**
>
> Aighul Akmadhzhanova, Transparency International
>
> Edil Baisalov, Executive Director, Coalition for Democracy and Civil
> Society
>
> Hugh Brown, Chief of Party, ACDI/VOCA
>
> Stuart Kahn, Freedom House
>
> Amy Heyden, Country Director, Trafficking Prevention Program, Winrock
> Int.
>
> Erkinbek Kasybekov, Kyrgyzstan Country Director, Counterpart
>
> Denis Kovalenko, Academy for Education and Development
>
> Simon Jenkins, Project Director, IFES
>
> Kuban Mambetaliev, Chairman of Association of Journalists
>
> Jarkyn Mambetova, Academy for Education and Development
>
> Amy J. Schultz, National Democratic Institute
>
> Elmira Shishkaraeva, Program Manager, Preventing Human Trafficking,
> Winrock
>
> Corinne Smith, Rule of Law Liaison ABA/CEELI
>
> Hillary Smith, Local Government Initiative, Urban Institute
>
> Shakirat Toktosunova, Country Director, Eurasia Foundation
>
> **Workshop 6 (Enterprise, Finance and Trade)**
>
> Aighul Akmadzhanova, Transparency International
>
> Mamak Ashtari, Fiscal Analysis Advisor, Bearing Point
>
> Allen Decker, Chief of Party, Land Reform Project, Chemonics
> International
>
> Edward M. Edgaro, Consultant, Office of Special Representative
>
> Of the President of Kyrgyzstan on Foreign Investment
>
> David Grant, Director, International Business Council
>
> David Greer, ARD/Checchi
>
> Arnold Hoitnik, Chief of party, Bearing Point
>
> Steve Kenney, Executive Director, Certified International Professional
>
> Accountant Examination Network, Pragma
>
> Kumushkan Konurbaeva, Program Officer, Eurasia Foundation
>
> Brian Kemple, ARD/Checchi
>
> Yekaterina Maltseva, AED
>
> Murad Omoev, Carana Corporation
>
> Aziza Yuldasheva, Kyrgyz Agrobusiness Association
>
> Representatives from the Kyrgyz State Procuracy
>
> Representatives from the US State Department
>
> **Workshop 7 (Health, Education, Energy and Water)**
>
> Aighul Akmadhzhanova, Transparency International
>
> Damira Bibosunova, M.D., Ph.D., Project Management, USAID/HE
>
> Todd Drumond, Chief of Party, National Testing Initiative
>
> Terry Giles, Chief of Party, Academy for Education and Development
>
> Basic Education Program
>
> Shamsiddin Kariomov, AED, Start Program
>
> Antonina Santalova, Project Coordinator, AED
>
> Olga Terenteva, Program Coordinator, PA Consulting
>
> Inna Valkova, Director of Local Independent Testing Organization

**[TAJIKISTAN]{.underline}**

**[Workshop Participants]{.smallcaps}**

> **Workshop 10 (Energy, Water, Democracy and Conflict)**
>
> Nargis Azizova, Program Analyst, UN Development Program on Environment
>
> Marilynne Davis, Country Representative, Urban Institute
>
> Kibriyo Jameva, Governance Specialist, UN Development Program
>
> Najimidin Jamolidinov, Senior Community Development Advisor, UNDP
>
> Christine Hammill, ABA/CEELI Khujand Representative
>
> \_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_, ARD/Checchi
>
> Nigina Mamadjanova, Program Manager/Counter-Trafficking, IOM
>
> Abdurahim Muhidov, USAID/CAR Dushanbe
>
> Kate Whitbeck, Country Representative, IREX
>
> **Workshop 11 (Health, Education, Enterprise, Finance, Democracy and
> Conflict)**
>
> Genny Abel, US-CARE
>
> Irina Alpeyeva, Chief of Party, IBET
>
> Olga Barakaeva, AIDS Foundation West-East
>
> Frederic Chenais, International Organization for Migration (IOM)
>
> Abdusattor Esoev, Programme Manager for Microfinance, IOM
>
> Bezhod Faizullaev, Babilon-T
>
> Maria Idrissova, Project Hope
>
> Adolat Ismailova, PSI
>
> Barbara Kamisnky, Bearing Point/Banking Supervisor
>
> Zurad Masumova, Project Hope
>
> Ashley Moretz, USAID/CAR Dushanbe
>
> Mavjuda Nabieva, USAID/CAR Dushanbe
>
> Jav O'Brayan, European Bank for Reconstruction and Development
>
> Anne Pater, AAH
>
> Shavkat Saidmuradov, AIDS Foundation West-East
>
> Nigina Shadieva, PSI
>
> Marian Sheridan, Country Director, ZdravPlus
>
> Rakhat Toktanliev, TFI Country Representative, Pragma
>
> Mickey Torreano, EDP Country Representative, Pragma
>
> Suhrob Tursunov, USAID/CAR Almaty
>
> Matluba Uljabaeva, Association of Small and Medium Businesses
>
> Robert Underwood, Chief of Party/Democracy and Economics, ARD/Checchi

**[UZBEKISTAN]{.underline}**

**[Workshop Participants]{.smallcaps}**

> **Workshop 3 (Energy, Water, Agriculture, Enterprise, Finance and
> Trade)**
>
> Bibigul Alimbekova, M.D. Program Manager, Project HOPE TB Institute
>
> Randy Buton, DCOP, NRMP
>
> Michael Crossley, Financial Regulatory Specialist, Bearing
> Point/Barents
>
> Rob Cronin, Chief of Party, IREX
>
> Michael Dan, Country Director, Pragma
>
> Kamol Jiyankhodjaev, Country Director, PEAKS
>
> Richard McQuady, Country Director, Winrock
>
> Normunds Mizis, Country Director, WOCCU
>
> Marika Olsen, Country Director, Internews
>
> Alexandr Osipov, Project Specialist, Winrock
>
> Richard Paton, Country Director, ABA/CEELI
>
> Linda S. Recht, Second Secretary for Economic Affairs, US Embassy
>
> Robert M. Simmons, Private Enterprise Officer, USAID/OMT
>
> David Smith, Civic Advocacy Program, Counterpart
>
> Jay Stanford, Procurement Manager, NRMP
>
> **Workshop 4 (Democracy and Media)**
>
> Henry R. Janiszewski, Resident Banking Advisor to the Ministry of
> Finance
>
> US Department of Treasury
>
> Nargiza Nugmanova, Community Action Investment Project, Counterpart
>
> Richard Stoddard, Democracy Specialist, USAID/DM
>
> \[To be filled in\]

 

[^1]: USAID's Assistance Strategy for Central Asia 2001-2005, p. 1.

[^2]: These issues are explored in detail in Terry Lynn Karl, *Paradox
    of Plenty: Oil Booms and Petro-States* (Berkeley: University of
    California Press, 1997) and Kiren Chowdry*, The Price of Wealth*
    (Berkeley: University of California Press, 1997). Only one modern
    extractive economy (Norway) has managed to turn oil wealth in to a
    development asset. Scholars believe this is because the basic
    institutions of state-building, administration and governance were
    all well in place *before* oil was discovered off the North Sea.

[^3]: As one interviewee stated, because there are strong incentives to
    join and participate in patronage, appointees are given relatively
    short periods "to steal," understanding that they will soon be
    replaced by others who want "their fair share as well." This creates
    additional incentives to view government service as little more than
    period for short-term personal enrichment, rather than longer-term
    problem-solving.

[^4]: The other main source being mid-level line ministries and their
    specific sector activities, such as road-building, mining, and oil
    extraction.

[^5]: For example, USAID's 2001-2005 Strategy for Local Government
    claims that Kazakhstan's 1999 civil service reforms "should rein in
    patronage." But several different sources told this author in 2004
    that the "price" for an *Akimat* has, in fact, risen to about
    \$300,000 (closer to \$1 million and more for an appointment to one
    of the more prosperous regions near the Caspian, like Atyrau). It is
    important to note that ten years ago, USAID's Strategy also placed
    hope on presidential pronouncements regarding the inevitability of
    direct local elections in Kazakhstan. But this ignores the benefits
    of the patron-client structure to the President. Why would the
    President surrender perhaps the most important playing field for a
    system of appointments to support his Administration? It should be
    no surprise that the possibility of direct local elections in
    Kazakhstan remains as amorphous as it did a decade ago.

[^6]: A recent partially successful lawsuit by the President's former
    son-in-law against Internews for reportedly publishing the claim
    that one of the President's daughters controls 65% of the media
    market in Kazakhstan was taken by many as a sign of just how far
    freedom of the press extended.

[^7]: Repeated at a recent meeting of the American Chamber of Commerce
    in Almaty.

[^8]: One US company was visited by "auditors" 30 times in one month,
    none of whom apparently had much training or expertise in accounting
    or finance.

[^9]: It is worth noting that banks, insurance companies and pension
    funds are reportedly owned by the same persons, increasing both
    opacity and concentrations of wealth and power at the top.

[^10]: UNICEF is not even able, reportedly, to disseminate its own
    findings on disease and child mortality.

[^11]: The heads of the Committee are appointed directly the President
    and have changed frequently over the past five years. Neither
    Parliament nor local authorities exercise meaningful interest or
    control in their activities, and their larger work output is a
    single claim against *Petrokazakhstan*, the predecessor of
    *Kazmuinaigaz*.

[^12]: Tens of articles in the Criminal Code can be (and are) used to
    intimidate or arrest and prosecute journalists who report on
    corruption-related issues.

[^13]: In fairness, Prime Minister Tanaev reportedly did re-pay at least
    a portion of his private sector salary back to the State Treasury.

[^14]: The country possesses three main clan systems: the southern (with
    about 50% of the population); the northern and eastern ones. All
    appointees now come from the southern clan, yet the civil war and
    peace did not resolve fundamental issues of access to power and
    privilege it was ostensibly about.

[^15]: A signifant study on corruption and interventions against it in
    Tajikistan can be found in Sue Williams, "Corruption and
    Anti-Corruption Activities in Tajikistan," Donor Standards in
    Anti-Corruption and The Collaborative for Development Action,
    Washington DC, September 2002.

[^16]: The Mayor of Kurgan-Tyube boasted to a USAID implementer that he
    had spent \$250,000 to build an expensive, new park with its private
    water supply route out of 'special resource funds,' for example,
    despite the fact his city has no potable drinking water.

[^17]: In theory, the *Majlis Oli* must give approval for this excess
    spending; in practice, the Hukumat spends it first, then asks for
    'approval' from the *Majlis* after the fact. (The *Majlis* currently
    meet only once a year.) Last year, in Kurgan-Tyube, the amount
    collected was actually 167% of the formal estimate given to the
    Ministry of Finance, all of which was retained by the Hukumat.

[^18]: In Moldova, by contrast, the Minister of Finance formally
    presents a year 300-400 page book explaining and defending the
    Government's budget, outlining possible scenarios for Parliament,
    and suggestions for oversight and improvement.

[^19]: Underneath the Jamoat are villages, and it is at the village
    level that most of the long-term community development programs run
    by the Agha Khan Foundation are located.

[^20]: It is unclear why the loan amounts were so high, given that the
    price of a submersible pump is around \$12,000 and that of the
    larger distribution pumps around \$250,000.

[^21]: Even in Tajikistan, the poorest of all the Central Asian
    republics, a simple traffic policeman in Dushanbe reportedly must
    pay \$3,000 for the privilege his appointment, and must regularly
    pay his superiors with proceeds of his own bribe-taking as well.

[^22]: Probably because of exposure to international oil markets and
    donor assistance to create workable securities markets and a
    regulatory apparatus, Kazakhstan's economic institutions probably
    function somewhat better those of its neighbors.