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Financial Infrastructure and Economic Governance
Customs Reform and Cross Border Trade

The Pragma Corporation worked on improving the customs and trade regime among the four countries of Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan) through its USAID-funded Trade Facilitation and Investment (TFI) Project. The project's Trade Facilitation and Customs component focused on making it easier for businesses to deliver their products to market. To accomplish this objective, the project:

  • Provided expert assistance to governments and business associations that are working to modernize their legal and regulatory frameworks by ensuring that new customs legislation is developed in accordance with international standards and best practices

  • Identified alternative ways to facilitate trade and transit and to remove barriers to the cross border movement of goods and conveyances in the region

  • Provided assistance to the development of trade services to importers and exporters such as customs brokers and freight forwarders

The component's activities included:

  • Technical advice and support in the development and adoption of new Customs Codes in the Republic of Kazakhstan and the Kyrgyz Republic

  • Development and publication of an International Trade Guide and Integrated Tariff for Kazakhstan, and electronic publication of the Guide at www.ca-trade.com

  • Assistance and support for the creation of Customs Consultative Councils in Kazakhstan, the Kyrgyz Republic, and Tajikistan, which serve to facilitate dialogue among customs officials, traders, and other stakeholders and resolve trade-related issues

In a cooperative effort to leverage resources, Pragma’s TFI Project worked with Pragma’s Enterprise Development Project and with the Osh Governor's office in Kyrgyzstan to improve the regulatory environment for agroprocessors by identifying and helping reduce barriers to investment and daily business operations. This effort was focused on adopting and implementing less stringent, but acceptable regulatory standards.
The TFI Project also worked on identifying regional trade issues through regular trainings that address issues such as accurate duty rate application, correct commodity classification, and proper value assignment, as well as streamlining export procedures.

Pragma has achieved major success in identifying impediments within the legal and regulatory environment. These impediments include customs barriers, transportation regulations, double VAT taxation, and burdensome certification, taxation, and inspection processes. In response to these obstacles, TFI’s Removal of Investment Constraints component helped reduce or remove eight regulatory constraints adversely affecting Osh businesses. For example, as a result of Pragma’s work to curtail the Ministry of Agriculture’s inspections of industrial equipment, 49 types of equipment have been removed from the required inspection list. In addition, TFI’s reform initiatives have allowed more than 840 businesses in Osh region to benefit from a reduction in the number of inspections to which they had been previously subjected.

Featured Success Story

TFI “Insures” Kazakh Trade Into Russia

Source: http://www.catfi.net/WWW/ActionsDet.asp?NewsId=24

Kazakh imports into Russia occur primarily through land borders situated in the North of Kazakhstan. Often importers utilizing these land passages are individual businessmen or small enterprises who do not possess large cash reserves. As a result, the Russian government’s decision, in January 2004, to impose mandatory transit insurance on Kazakh cars and trucks created almost immediate problems for Kazakh traders. The mandatory insurance rates of between $90 and $340 US dollars were prohibitively high for many traders and they were unable to conclude deals or get their goods to foreign markets.

Kazakh Trucks Wait at the Russian Border in West Kazakhstan Oblast
Kazakh Trucks Wait at the Russian Border in West Kazakhstan Oblast

TFI, working collaboratively with the Customs Consultative Council of West Kazakhstan Oblast and the Customs Control Department of Western Kazakhstan Oblast, successfully lobbied the Russian Federation to lower the rates on compulsory auto insurance imposed on Kazakh cars and trucks entering the Russian Federation.

Based on recommendations and impact analyses developed by TFI and the West Kazakhstan Oblast Consultative Council, the representatives of Russian Customs in Kazakhstan raised the issue within the Russian Duma, which subsequently issued decree No 823 “On Making Changes to the Resolution of the Government of the Russian Federation as of May 7, 2003 No 264”. That decree, signed by Michael Fradkov, Prime Minister of the Russian Federation , reduces insurance rates for Kazakh drivers from between $90-$340 to between $35-$130,a rate reduction of almost 60%.

The rate reduction is expected to save Kazakh drivers more than 10 million US Dollars in 2005 and will further facilitate cross-border trade between Kazakhstan and Russia.

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