The World Bank will place the loan into an escrow account in exchange for an up-front commission by the Kazakh authorities. Funds would only be released as necessary for reimbursement of companies. The programme is a response to consultations with foreign and local businesses operating in Kazakhstan. Businesses have important concerns about the absence of laws, the arbitrary way in which they are applied and discriminatory actions by the authorities when investments have been made. The scheme can help the government to limit corruption and administrative failures.
Similar schemes are under way in Ukraine, Albania and Bosnia.
Kazakhstan, the second largest of the former Soviet republics in territory, possesses enormous fossil fuel reserves as well as plentiful supplies of other minerals and metals. Kazakhstan's industrial sector rests on the extraction and processing of these natural resources and also on a growing machine-building sector specializing in construction equipment, tractors, agricultural machinery, and some defense items. The breakup of the USSR in December 1991 and the collapse of demand for Kazakhstan's traditional heavy industry products resulted in a short-term contraction of the economy, with the steepest annual decline occurring in 1994. In 1995-97, the pace of the government program of economic reform and privatization quickened, resulting in a substantial shifting of assets into the private sector. The Caspian Pipeline Consortium agreement to build a new pipeline from western Kazakhstan's Tengiz oil field to the Black Sea increases prospects for substantially larger oil exports in several years.