**BISNISTRADES & TENDERS DECEMBER 10, 1999 WEB SUPPLEMENT**

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InternationalCopyright, U.S. & Foreign Commercial Service and U.S. Department of State,1999.   All rights reservedoutside of the United States.

 

The BusinessInformation Service for the Newly Independent States (BISNIS) is the U.S.Department of Commerce's information clearinghouse on trade and investment inthe emerging markets of the newly independent states of the former SovietUnion.  BISNIS has created the"BISNIS Trades & Tenders" electronic newsletter to help U.S.companies find business opportunities in these expanding markets.

 

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Table ofContents for Web Supplement:

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Lead #1:Procurement and Consulting Opportunities/Asia Development Bank- Kyrgyzstan

 

 

02 DECEMBER 1999

SOURCE: US EMBASSY MANILA

 

SUBJECT:  KYRGYZSTAN

 ASIAN DEVELOPMENT BANK

-    -    EARLY PROJECT NOTIFICATION (ALERT 2)

-    -    FINANCIAL INTERMEDIATION AND RESOURCE

-    -    MOBILIZATION PROGRAM

 

INTERNATIONAL COPYRIGHT, U.S. &FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 1999.  ALL RIGHTS RESERVED OUTSIDE OF THEUNITED STATES.

 

1.   THE PROPOSED LOAN GRANT FOR THE PROPOSED FINANCIALINTERMEDIATION AND RESOURCE MOBILIZATION PROGRAM IS EXPECTED TO COME TO THE ADBBOARD IN TWO WEEKS.  THIS CABLE ISINTENDED TO:

 

--   PROVIDE U.S. BUSINESSES WITH AS MUCH LEAD TIME ASPOSSIBLE CONCERNING PROCUREMENT AND CONSULTING OPPORTUNITIES.  FOR MORE INFORMATION ON THIS PROJECT ORADB LENDING OPPORTUNITIES, FIRMS SHOULD CONTACT MS. N. CINNAMON DORNSIFE, USALTERNATE EXECUTIVE DIRECTOR AT TELEPHONE NOS. (63 2) 632-6051 OR (63 2)632-4444 AND FAX NOS.: (63 2) 632-4003 AND 632-2084 AND/OR MR. DENNY BARNES,U.S. COMMERCIAL LIAISON TO THE ADB; PHONE: (632) 804-04-60, 804-03-53; FAX: (632)804-03-57.FOR IN-COUNTRY INQUIRY, PLEASE CONTACT PATRICK SMELLER C/O AMEMBASSYALMATY AT TELEPHONE NOS.: (7 3272) 633905, 631375, 632426 AND FAX NO. 633883.

 

A.   BACKGROUND: THOUGH SMALL, THE FINANCIAL SECTOR OF THE KYRGYZ REPUBLIC HAS UNDERGOINGSIGNIFICANT CHANGES BOTH IN TERMS OF STRUCTURE AND REGULATIONS. THE COUNTRYINHERITED A BANKING SYSTEM FROM THE FORMER SOVIET UNION WHICH INCLUDED A FEWLARGE STATE BANKS THAT PROVIDED DIRECTED CREDIT TO STATE-OWNED ENTERPRISES(SOES) IN PRIORITY SECTORS. IN THE FIRST PHASE OF REFORMS, THE GOVERNMENTENACTED THE CENTRAL BANK LAW AND THE COMMERCIAL BANKING LAW, WHICH ESTABLISHEDA TWO-TIER BANKING SYSTEM TO LAY THE FOUNDATION FOR A MORE MODERN SYSTEM ANDENCOURAGE THE ENTRY OF PRIVATE BANKS. IN 196, FINANCIAL SECTOR REFORMS WERELAUNCHED TO INITIATE A FUNDAMENTAL RESTRUCTURING OF BANS, FOCUSING ONLIQUIDATION/RESTRUCTURING OF THE FOUR LARGEST STATE-OWNED BANKS, AND THECREATION OF AN IMPROVED POLICY AND REGULATORY ENVIRONMENT. IN ADDITION, STEPSWERE TAKEN TO DEVELOP THE REGULATORY FRAMEWORK FOR STOCK MARKET AND NONBANKFINANCIAL INSTITUTIONS SUCH A PENSION FUNDS AND INSURANCE COMPANIES. THESEREFORMS HAVE FACILITATED THE DEVELOPMENT OF THE FINANCIAL SECTOR FOR THE KYRGYZREPUBLIC ALONG MARKET-BASED PRINCIPLES.

 

HOWEVER, THE RECENT RUSSIAN FINANCIALCRISIS AND THE COLLAPSE OF A MAJOR SOE (KYRGYZGAZMUNAIZAT) HAVE BROUGHT TO THEFOREFRONT SOME INHERENT STRUCTURAL WEAKNESSES OF THE FINANCIAL SYSTEM AND ITSEXCESSIVE DEPENDENCE ON THE BANKING SECTOR. THE COUNTRY'S PRIVATE FINANCIALINSTITUTIONS CONTINUE TO BE SMALL AND VULNERABLE TO EXTERNAL SHOCKS. THECAPITAL MARKETS DO NOT OFFER A

VIABLE ALTERNATIVE FOR MEETING THELONG-TERM FUNDING REQUIREMENTS OF THE ECONOMY AND THE IMMEDIATE STRUCTURALADJUSTMENT COSTS EMERGING FROM THE RUSSIAN CRISIS. THE STOCK MARKETS LACKSBREADTH AND DEPTH, WITH MANY OF THE

LARGEST ENTERPRISES STILL IN THE STATESECTOR BECAUSE IMPLEMENTATION OF THE PRIVATIZATION PROGRAM HAS BEEN SLOW. THEGOVERNMENT IS KEEN TO EXPAND AND STRENGTHEN THE FINANCIAL SECTOR WITHDIVERSIFIED INSTITUTIONS AND MARKETS THAT COULD INDUCE GREATER EFFICIENCY INTHE FINANCIAL INTERMEDIATION PROCESS, WHILE INTRODUCING AND ENFORCINGINTERNATIONAL PRUDENTIAL NORMS AND REGULATORY STANDARDS TO IMPROVE RESILIENCEOF THE SECTOR.

 

B.   PROJECT OBJECTIVES: THE MAIN OBJECTIVE OF THE PROPOSEDPROGRAM WILL BE TO IMPROVE EFFICIENCY OF FINANCIAL INTERMEDIATION BY PROMOTINGA SOUND, WELL- FUNCTIONING, AND RESILIENT BANKING SYSTEM, AND BROADENING ANDDEEPENING CAPITAL MARKETS AS AN EFFECTIVE ALTERNATIVE MEANS OF LINKING SAVERSAND INVESTORS. TO REALIZE THIS OBJECTIVE, THE PROGRAM WILL FOCUS ON (I)RESTRUCTURING AND CONSOLIDATING THE BANKING SECTOR, (II) DEVELOPING THEGOVERNMENT SECURITIES MARKET, (III) FACILITATING THE DEVELOPMENT OF THE EQUITYMARKET, AND (IV) PROMOTING THE INSTITUTIONAL INVESTOR SECTOR.

 

C.   EXECUTING AGENCY: THE MINISTRY OF FINANCE WILL BE THEEXECUTING AGENCY AND WILL BE RESPONSIBLE FOR DISBURSEMENT OF LOAN PROCEEDS ANDTHE PROPER MAINTENANCE OF RECORDS. THE NATIONAL BANK OF THE KYRGYZ REPUBLICWILL BE THE IMPLEMENTING AGENCY AND WILL COORDINATE AND MONITOR THEIMPLEMENTATION OF THE PROGRAM. IA WILL CHAIR A STEERING COMMITTEE TO OVERSEETHE IMPLEMENTATION OF THE PROGRAM COMPRISING (I) THE MINISTRY OF FINANCE, (II)THE NATIONAL SECURITIES COMMISSION, AND (III) THE STATE INSURANCE SUPERVISIONAUTHORITY.

 

D.   PROPOSED BANK ASSISTANCE: PROPOSED BANK SUPPORT FORTHE GOVERNMENT'S FINANCIAL INTERMEDIATION AND RESOURCE MOBILIZATION PROGRAMCOMPRISES (I) A PROGRAM LOAN OF $35 MILLION EQUIVALENT SUPPORTING POLICYREFORMS ENVISAGED UNDER THE PROGRAM; A (II) A TECHNICAL ASSISTANCE (TA) LOAN OF$1 MILLION EQUIVALENT FOR COMMERCIAL BANK AUDITS.  THE PROGRAM LOAN, WHICH WILL BE PROVIDED FROM THE BANK'SSPECIAL FUNDS RESOURCES, WILL HAVE AN AMORTIZATION PERIOD OF 24 YEARS INCLUDINGAN 8-YEAR GRACE PERIOD. IT WILL CARRY AN ANNUAL INTEREST CHARGE OF 1 PERCENTDURING THE GRACE PERIOD, AND 1.5 PERCENT THEREAFTER. THE TA LOAN, WHICH WILL BEPROVIDED FROM THE BANK'S SPECIAL FUNDS RESOURCES, WILL HAVE A 32-YEAR MATURITYINCLUDING AN 8-YEAR GRACE PERIOD. IT WILL CARRY AN ANNUAL INTEREST CHARGE OF 1PERCENT DURING THE GRACE PERIOD AND 1.5

PERCENT THEREAFTER.

 

E.   PROGRAM PERIOD AND TRANCHING: THE PROGRAM PERIOD WILLBE THREE YEARS. THE LOAN WILL BE RELEASED IN TWO EQUAL TRANCHES WITH THE FIRSTTRANCHE AVAILABLE UPON LOAN EFFECTIVENESS. THE SECOND TRANCHE IS EXPECTED TO BERELEASED BY MARCH 2001, SUBJECT TO SATISFACTORY IMPLEMENTATION OF THE AGREEDCONDITIONS.

 

F.   PROCUREMENT: PROCEEDS OF THE LOAN WILL BE UTILIZED TO FINANCE THE FULL FOREIGNEXCHANGE COSTS (EXCLUDING LOCAL DUTIES AND TAXES) OF ELIGIBLE ITEMS PRODUCED INAND PROCURED FROM THE BANK'S MEMBER COUNTRIES, OTHER THAN THOSE SPECIFIED INTHE LIST OF INELIGIBLE ITEMS. EACH SUPPLY CONTRACT FOR ELIGIBLE IMPORTS THATEXCEEDS THE EQUIVALENT OF $5 MILLION WILL BE AWARDED BY INTERNATIONALCOMPETITIVE BIDDING IN ACCORDANCE WITH THE BANK'S GUIDELINES FOR PROCUREMENT.EACH SUPPLY CONTRACT FOR ELIGIBLE IMPORTS EQUIVALENT TO $5 MILLION OR LESS MAYBE AWARDED THROUGH NORMAL COMMERCIAL PROCUREMENT PRACTICES FOR THE PRIVATESECTOR OR GOVERNMENT'S PRESCRIBED PROCUREMENT PROCEDURES ACCEPTABLE TO THEBANK. PROCEEDS FROM THE LOAN WILL BE WITHDRAWN IN ACCORDANCE WITH THE BANK'SSTANDARD DISBURSEMENT PROCEDURES.

 

G.   CONSULTING SERVICES: THE TA LOAN WILL FINANCE THEPROVISION OF INTERNATIONAL CONSULTING SERVICES FOR AUDITS OF COMMERCIAL BANKS.THE SELECTION OF CONSULTANTS WILL BE IN ACCORDANCE WITH THE BANK'S GUIDELINESON THE USE OF

CONSULTANTS.

 

3.   FOR U.S. BUSINESSES AND CONSULTANTS: THE LOAN IS NOWAT A POINT WHERE, SHORTLY AFTER ADB BOARD APPROVAL, SHORTLISTED CONSULTANTSWILL RECEIVE A REQUEST FOR PROPOSALS, SELECTION OF AND CONTRACT NEGOTIATIONWITH THE FIRM SUBMITTING THE BEST TECHNICAL PROPOSAL WILL BE COMPLETED, ANDPREPARATION OF BID SPECIFICATIONS AND CONTRACT DOCUMENTS WILL BEGIN.

 

POTENTIAL EQUIPMENT SUPPLIERS ANDCONTRACTORS SHOULD MAINTAIN REGULAR CONTACT WITH THE EXECUTING AGENCY AND ITSCONSULTANT SO THAT THEY MAY ACT QUICKLY WHEN TENDERS OR PREQUALIFICATIONNOTICES ARE ISSUED.  PROCUREMENTNOTICES AND PREQUALIFICATION ANNOUNCEMENTS ARE ALSO RELEASED BY THE U.S.COMMERCIAL ADB LIAISON OFFICE AND MADE AVAILABLE ON THE NATIONAL TRADE DATABANK (NTDB) AND THE COMMERCE BUSINESS DAILY.  THESE ARE ALSO PUBLISHED ON

THE ASIAN DEVELOPMENT BANK'SHOMEPAGE,  http://WWW.ADB.ORG.