Remarks by Anabel Gonzalez at the Doing Business in Kazakhstan Roundtable - WEF Annual Meeting 2016

I would like to thank the Kazakh Government for co-hosting this roundtable discussion, and particularly to our distinguished guests, Karim Massimov, Prime Minister of Kazakhstan, Bakytzhan Sagyntaev, First Deputy Prime Minister of Kazakhstan, and Nika Gilauri, former Prime Minister of Georgia.

It is safe to assume that those of us in the room are familiar with the Doing Business report and the ten indicators that comprise the Distance to the Frontier rankings and relative rankings, so I will only mention a few key points.

I would like to mention some important changes being introduced from this year’s Doing Business 2016. The report now includes new measures of quality that have been rolled out across four indicators in 2016 including Dealing with Construction Permits, Getting Electricity, Registering Property, and Enforcing Contracts. These new measures are important because they assess the quality of service delivery to the private sector, and help incentivize proper implementation of reforms. Kazakhstan performs particularly well on the quality indices in the areas of Construction Permits and Protecting Investors.

Another big change in 2016 was increasing the relevance of the Trading Across Borders indicator to better reflect the trade patterns of DB countries, which included among other changes, the introduction of natural trading partners that may be linked by land rather than sea. Further changes to continue introducing quality indices will be rolled out in DB 2017.

Now turning to 2016 results, we can see that by any measure, Kazakhstan had an excellent year for private sector reforms. Kazakhstan was recognized with positive reforms in seven of ten topics, the most of any country in the world in 2016 while also improving by 3.34 percent in the Distance to the Frontier, also the greatest increase of any country in 2016. Topping it off, Kazakhstan broke into the top 50 for the first time, earning 41^st place in the 2016 report. Clearly there is much that can be learned in how Kazakhstan achieved these impressive results.

First Deputy Prime Minister Sagyntaev has discussed the individual reforms that were adopted, and we can highlight some common themes from this list that provide some insights on how successful reformers think about regulation.

First, good regulators help firms grow and consider the lower capacity SMEs may have to comply with regulations. Kazakhstan improved the business registration process by eliminating requirements for SMEs to pay the state registration fee and to have a company seal. These are great steps to encourage something that all governments want more of – firms registering and operating in the formal economy. Similarly, Kazakhstan introduced a fast-track procedure in the civil code for small claims that allows for self-representation and quicker decisions by the courts. This boosts the efficiency of the court system, while allowing for quick resolution of small cases. Kazakhstan ranks 18^th on the indicator for Paying Taxes, another area where a simplified tax regime for small businesses has contributed to a much reduced regulatory burden and greater incentives for formalization.

Second, good regulators manage data efficiently. Kazakhstan improved performance across several indicators including Registering Property and Dealing with Construction Permits simply by eliminating requirements that firms produce data already known to the government. This saves time and money both to the government and the private sector. It also requires intra-governmental coordination, one of the key challenges facing reformers. Doing more to manage and use data effectively would go a long way toward improving the one DB indicator where Kazakhstan is still above 100, Trading Across Borders. A fully operational single window for trade could have a big impact on reducing the border and documentary compliance time for exports, where Kazakhstan lags the region. Fortunately, Kazakhstan is working together with its development partners and other Eurasian Economic Union countries on implementing single window and we will likely see these improvements in future DB reports.

Finally, good regulators use ICT to boost efficiency and governance. As I have noted with the example of the electronic single window, the use of ICT has significant potential to improve the efficiency of regulators. Kazakhstan made it faster and cheaper to enforce contracts by launching an online auction system for selling assets in 2015. ICT-enabled reforms have also been central to Kazakhstan’s performance in indicators such as paying taxes, registering property, getting credit, and trading across borders. Finally, ICT also helps strengthen governance and reduce opportunities for corruption by reducing interactions between firms and regulators.

These are some of the cross cutting features that are at the core of modern, second generation regulatory reforms in Kazakhstan and around the world. But as we all know, there is much more that goes into a successful reform program. Good reformers are also good at setting a strategic vision, coordinating among government agencies, and working closely with the private sector to design and monitor implementation of the reforms. Perhaps most critical is the political will to adopt and then implement these reforms.

Even while many reforms are win-win, increasing efficiency and reducing costs both for the public and private sectors, there are often difficult changes at the agency or department level. Government agencies may face a reduced level of autonomy or discretion, or lose functions to administer revenue streams for fees or services, or even face cuts in their resourcing or staff. How well a government can coordinate internally to balance these the tradeoffs in reform is a critical driver of the ability to drive the kind of rapid transformation in economic competitiveness that the Kazakh government is targeting. And the results achieved this year certainly suggest that they are getting this right.

As a closing thought, we are talking a lot about the supply side of reforms, but we should also consider the demand side coming from firms and the extent to which firms are aware of and involved in rulemaking. The WBG maintains a dataset called ‘Citizen Engagement in Rulemaking’ which credits Kazakhstan with a lot of positive tools to keep firms and citizens involved such as requirements to post draft laws, online opportunities for citizens to comment, and the use of regulatory impact assessments (which is being developed with WBG support). These kind of steps will help cultivate this culture of reform, where firms take greater responsibility for complying with regulations because they are greater partners in helping design regulations.

Once again I would like to thank our hosts and I look forward to discussing more in the Q&A session.