Pension Development Program
In We are proud of our record of close to a decade supporting a wide array of pension reform programs around the globe. Our accomplishments cover a variety of projects including pension design and implementation in transition economies of all sizes from the countries of Former Soviet Union to those of Asia. Our teams of pension reform expatriates, benefiting from the core expertise and the vast knowledge of the corporation in such areas as: Financial Sector Development, Insurance Sector Development, IT design and implementation, managed to create and become the source of numerous accomplishments and best practices that are solidly in place around the world.
The specific fields of expertise provided by Pragma include: funds and investment programs structuring and implementation; assisting in design and implementation of private guided pension investment systems; designing and actuarial modeling of programs; designing policies and procedures to facilitate the combined effect and impact of insurance, capital market and pensions; developing policies and procedures and training personnel to establish reasonable benefit programs throughout the country; designing and implementing government subsidy programs with specific consideration to avoid inflationary impacts; designing public outreach (education and information system) programs targeted to the recipients in oil producing countries, and designing and establishing world class actuarial capacity including highly trained local staff.
The following is a sampling of our Pension Reform Projects for oil-producing countries:
- Financial Sector Initiative Project in Kazakhstan (2001-2006)
- Reform of Pension and Provident Funds in Indonesia ( 1999 –2000)
- Public Information and Education in Support of Pension Reform in Kazakhstan (1 999 –2000)
- Capacity Building for Pension Reform: Kazakhstan (1998 –1999)
Financial Sector Initiative Project in Kazakhstan (2001-2006)
One of major components of this USAID-funded Financial Sector Initiative Project goal was to ensure that Kazakhstan ’s pension system provided suitable income for retired, disabled, sole survivors, and other Kazakhstani citizens unable to provide for themselves. It was aimed to develop a strong, competitive accumulation private pension system that was well regulated and safeguarded against systemic risk, that provided an adequate income for old age pensioners, and that supported the development of the private financial sector. Specifically, the project helped establish an effective regulatory body to supervise all segments of the accumulation pension system; assisted in the privatization or liquidation of the State Accumulation Pension Fund (SAPF); and provided technical assistance to monitor, evaluate, and respond quickly to specific issues that threatened the continued development of the accumulation system.
Some of the results Pragma help achieved were:
- Increased total Pension assets from US $1.2 billion in 2001 to nearly $4.6 billion dollars (600 billion Tenge) in 2005
Total Pension Assets (Annually, Billions of KZT, 1998- 2005)
- Began the process of privatizing the State Accumulation Pension Fund, completed a thorough review and study of impact and risk analysis of the SAPF, and assisted in valuing the SAPF;
- Assisted the pension system to address the equivalency and sanitation of currency between their assets (typically denominated in US Dollars [USD] and their liabilities typically denominated in Kazakhstani Tenge [KZT]). The program included investigating the creation, feasibility and economic impact of a KZT/USD futures market as well as encouraging Tenge-Dollar swaps between pension funds and their affiliated banks;
- Assisted in creating the present improved regulatory framework and investment climate for accumulation pension funds by working with the Financial Supervisory Agency and asset managers (KUPA). A specific accomplishment was the implementation of uniform methodologies for calculation of investment returns for all pension funds;
- Assisted in creating a unified regulator for banking, insurance, securities, and pension under Kazakhstan ’s central bank (the National Bank);
- Provided significant technical expertise to the Government of Kazakhstan, including advice on valuing asset funds, addressing the moral hazards of pension fund management, supporting a labor pension fund study aimed at assessing equity and poverty issues, and pension fund commission fee structure analysis to support a new pension law;
- Assisted the National Bank of Kazakhstan to establish the Kazakhstan Actuarial Center. Assisted in the provision of a complete set of advanced actuarial courses to increase the number of qualified actuaries in the country in support of pension and insurance industry. One of the key figures in this activity was Professor Charles Becker (Department of Economics, Duke University) who provided high level advisory counsel to the corporation on matters regarding International Pension Reform;
- Under the guidance of Prof. Charlie Becker, a Pragma Senior Consultant, developed mortality tables for pension annuities in cooperation with the Kazakhstan Actuarial Center.
- Assisted Kazakhstan Actuarial Center to complete Pension Fund study for the World Bank.
These results were achieved with the support of USAID, a dedicated team of long term experts, both expatriates and cooperating country nationals. In addition, many short term experts were brought in as needed to provide focused technical expertise. Throughout the entire life of this complex project, a strong partnership with various branches of the Kazakhstani government was maintained.
Pragma enjoys an unparalleled record for each of its projects in forming teams of professionals that make on-going commitments to their host country. In many consultancies, international assignments have a revolving door aspect, with few senior professional staff developing deep institutional knowledge or personal relationships. In contrast, for example, Pragma’s primary chief of party, David Lucterhand, spent over six years in Kazakhstan on a series of Pragma projects, developing close ties both with Government of Kazakhstan officials and with international counterparts. Senior expatriate staff, including the deputy chief and primary financial advisor, Stephen Moody, legal expert Javier Piedra, and actuarial modeler Prof. Charles Becker also maintained ongoing relationships for the entire period. A majority of the team enjoyed fluency in a national language. In addition, the President of Pragma, Dr. Fatoorechie, visited Kazakhstan over 50 times during the course of the projects to ensure that client needs were being met in a timely manner.
Of equal importance, the vast majority of local Pragma senior technical staff also remained with the series of programs for their entire duration, creating continuity and partnership of a nature rarely seen. The result of this stable relationship on both sides is that many of Pragma’s local technical staff now occupy key senior policymaking positions in the National Bank, the Financial Supervisory Agency, and in the Actuarial Society of Kazakhstan.
Reform of Pension and Provident Funds in Indonesia ( 1999 –2000)
Through the Asian Development Bank (ADB), Pragma provided technical assistance to the government of Indonesia for the reform of pension and provident funds through feasibility studies, investment guidelines and a blueprint of legal, regulatory and institutional framework. The blueprint was intended to mobilize larger flows of savings and provide adequate social security coverage to a larger segment of the population. The project emphasized the importance of addressing the major social and economic issues affecting the prevailing pension and provident funds schemes and the financial sustainability of the entire system. Key activities included:
An actuarial cash-flow analysis of the current and proposed pension and provident fund system under different assumptions concerning demographic changes, wage growth, investment returns, compliance, coverage expansion, and benefits structure
An analysis of the impediments to the development of the Employer Pension Funds and the Financial Institutions Pension Funds
The feasibility of restructuring Jamsostek
Proposals for restructuring financially unstable pension funds
Public Information and Education in Support of Pension Reform in Kazakhstan (1 999 –2000)
Pragma designed and implemented a comprehensive and targeted public education and information campaign based upon a nationwide survey and focus group research in an effort to ensure successful implementation of the new pension system in Kazakhstan. This campaign, funded by the ADB, included national conferences, collaboration with USAID sponsored seminars, journalist training, production of 50,000 question and answer brochures, production of 7,500 employer handbooks, 10 television public service announcements, 20 television programs, and 20 radio programs.
To achieve significantly increased individual participation in the reformed, modern pension program, the project emphasized addressing multiple audiences to develop their understanding of the capacities in the new pension system. Key audiences included employees, employers, mass media professionals, government regulators, the general public, and pension fund managers.
Capacity Building for Pension Reform: Kazakhstan (1998 –1999)
This ADB funded project emphasized the importance of merging three interrelated industries—pensions, capital markets and insurance—critical to the development of an effective and sustainable multi-pillar pension system. This project was part of an overall ongoing effort to fundamentally transform Kazakhstan ’s existing pay-as-you-go (PAYG) pension scheme into a three-pillar system. Focus in the project was on strengthening the evolving private pension fund industry, improving the processing of employer contributions, designing a benefit payments administration system, and dealing with legal and regulatory issues. Pragma along with other organizations linked the Government’s pension reform efforts to the development of capital markets and instruments. Pragma’s specific activities focused on evaluating Kazakhstan ’s capital markets. This included analyzing the diversity of financial institutions currently operating, available investment instruments and prospectively available securities, the depth and liquidity of each market segment, the potential for attracting foreign investors and the resulting impact thereof, the impact of potential privatization, and the legal and regulatory framework on domestic capital markets.
An active applied research program aimed at disseminating lessons learned, best practices, and new realities
This work has involved both local and expatriate professionals. While research is not a formal objective, it is a natural byproduct of a successful project and in Pragma’s case again reflects the close collaboration between domestic and expatriate technical experts. A sample of research includes:
Becker, Charles M., Grigory A. Marchenko, Sabit Khakimzhanov, Ai-Gul S. Seitenova, and Vladimir Evliev, 2008 (forthcoming). Pension Reform in Transition Economies: Lessons from Kazakhstan. New York: Palgrave – Macmillan.
Becker, Charles M, Ai-Gul Seitenova, and Javier Piedra, “Demand for bank loans and credit bureau services in the Republic of Kazakhstan,” Central Asian Journal of Management, Economics and Social Research3, June 2002, pp. 1-19.
Becker, Charles M., Erbolat Musabek, Ai-Gul Seitenova, and Dina Urzhumova, “Short-run migration responses of men and women during a period of economic turmoil: lessons from Kazakhstan .” Eurasian Geography and Economics 44(3), 2003, pp. 228-243.
Seitenova, Ai-Gul and Charles M. Becker, “Kazakhstan’s pension system: pressures for change and dramatic reforms,” Hitotsubashi Journal of Economics 45(2), December 2004, pp. 151-187. Becker, Charles M., Erbolat Musabek, Ai-Gul Seitenova, and Dina Urzhumova, “The migration response to economic shock: lessons from Kazakhstan.” Journal of Comparative Economics 33(1), March 2005, pp. 107-132.
Becker, Charles M. and Dina Urzhumova, “Mortality recovery and stabilization in Kazakhstan,” Economics and Human Biology, 3(1), March 2005, pp. 97-122.
Seitenova, Ai-Gul and Charles M. Becker, “Disability in Kazakhstan: making sense of recent trends,” Washington, DC: World Bank, Social Protection discussion paper 0802, February 2008.
Disability in Kazakhstan: making sense of recent trends (PDF File, 1,666 KB)
Becker, Charles M. and Ai-Gul Seitenova, “Fertility and Marriage in Kazakhstan’s Transition Period: Implications for Social Security Policy,” Ch. 13 in Masaaki Kuboniwa and Yoshiaki Nishimura, Eds. Economics of Intergenerational Equity in Transition Economies. Tokyo: Maruzen Publishers, 2006, pp. 341-357. Japanese version: “Chuou Azia no Nenkin Kaikaku,” in: Yoshiaki Nishimura (ed.),
Ikoukeizaikoku no Nenkin Kaikaku: Chutouou-Kyusoren Shokoku no Keiken to Nihon e no Kyokun (Pension Reforms in Transition Economies: Experiences in the CEE and FSU countries and Lessons for Japan ), Minerva Publishing Co.: Kyoto, 2006, pp. 277-300. (Japanese translation prepared by Ichiro Iwasaki).
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