Report No. 23257-KZ
KAZAKHSTAN
GOVERNANCE AND SERVICE DELIVERY:
A DIAGNOSTIC REPORT
May 22, 2002
Poverty Reduction and Economic Management Unit (ECSPE)
Europe and Central Asia Region
Document of the World Bank
CURRENCY EQUIVALENTS
Currency Unit = Kazakhstan Tenge (KZT)
US$ 1 = KZT 153
(as of April 30, 2002)
Fiscal Year
January 1 to December 31
ACRONYMS AND ABBREVIATIONS
ACSIAmerican Customer Satisfaction Index
ACSAgency for Civil Service
AMCAnti-Monopoly Commission
BEEPSBusiness Environment and Enterprise Performance Survey
CASCountry Assistance Strategy
CPCCaspian Pipeline Consortium
EUEuropean Union
FIASForeign Investment Advisory Service
FSU Former Soviet Union
GPCGross Domestic Product
ICACIndependent Commission Against Corruption
IFIInternational Financial Institutions
IMFInternational Monetary Fund
INTOSAIInternational Organization of Supreme Audit Institutions
NGONon-Governmental Organization
SAISupreme Audit Institution
SALStructural Adjustment Loan
SCPCState Committee on Prevention of Corruption
SMEsSmall and Medium Enterprises
SPAState Procurement Agency
USAIDUnited States Agency for International Development
WTOWorld Trade Organization
Vice President: / Johannes LinnCountry Director: / Dennis de Tray
Sector Manager: / Helga Muller
Team Leader: / Amitabha Mukherjee
Acknowledgements
This report was prepared by James Anderson and Amitabha Mukherjee (Task Team Leader) of the World Bank (Poverty Reduction and Economic Management Department, Europe and Central Asia Region).
The team is grateful to the authorities of Kazakhstan and especially to Messrs. Alexandr Pavlov, Deputy Prime Minister and Minister of Finance; Oraz Jandosov, former Deputy Prime Minister; Erzhan Utembayev, former Deputy Prime Minister; and Alikhan Baimenov, former Minister of Labor and Social Protection for encouraging and facilitating this report. The team expresses its grateful thanks to Mr. Zautbek Turisbekov, former Chairman of the Agency for Civil Service and to his team, for providing valuable data on the civil service reforms. This report would not have been possible without the cooperation of 600 public officials at the central and local levels, 400 enterprise managers, and 1,000 citizens of Kazakhstan who agreed to be surveyed. Their willing participation is greatly appreciated.
The team gratefully acknowledges the collaboration of Alexander Ruzanov, Tatyana Startseva, Eduard Vinokurov, Elena Grigoryeva, Marina Zuyeva, L. Ja. Simakova, Elya Muratalieva and other staff of Brif Central Asia, Almaty, Kazakhstan for administering the surveys.
The peer reviewers were Messrs./Mmes. Navin Girishankar, Omer Gokcekus, Maureen Lewis and Andrew Stone. The report has benefited greatly from contributions to successive drafts by Zhanar Abdildina, Konstantin Atanesyan, Elene Imnadze, Alma Kanani, Yerbol Orynbayev and Roman Solodchenko. Helpful comments were provided by Anthony Cholst, Hamid Davoodi, Joel Hellman, Paul Mathieu, Helga Muller, Randi Ryterman, Shekhar Shah and Tanju Yurukoglu. The team is grateful to Mala Johnson for her assistance in the preparation of the report.
1
Kazakhstan: Governance and Service DeliveryTable of Contents
Table of Contents
Table of Contents
Executive Summary
Performance of the Public Administration
The Consequences of Weak Performance
The Organization of The Public Administration
1. Introduction
The Economic Context
The Institutional Context
Surveys And Public Sector Effectiveness
Improving Governance and Service Delivery: Key Messages
2. The Performance Of The Public Administration In Kazakhstan
Access
Quality
Corruption
Performance of Selected Sectors
Health
Education
Courts
Police
Enterprise Registration
International Trade – Customs, Border Crossing, and Trade Licenses
3. The Consequences of Weak Performance
Poverty and Inequality
Fiscal Cost
Business Environment
4. The Organization of The Public Administration in Kazakhstan
Organizing Human Resources
Training
Implementation of Civil Service Law
Code of Ethics
Salaries
Organizing Financial Resources
Budgets and the Budget Process
Public Procurement
Detection and Suppression of Corrupt Behavior
5.The Way Forward
Medium-Term Institutional Reform Priorities
The Need For Credibility
Annex 1. Sample Description and Methodology
Summary of Methodology
Households Survey
Enterprise Survey
Public Officials Survey
Annex 2. What is Corruption?
Annex 3. Governance and Public Administration—Details
Approach and Definitions
Accessibility
Quality
Corruption
Annex 4. The Government’s Development Program
Annex 5. Summary of Public Sector Institutional Reforms Undertaken
Annex 6. Notes on Figures and Tables
End Notes......
List of Figures
Figure 1. Perceptions of Accessibility......
Figure 2. Perceptions of Quality......
Figure 3. The Rich Pay More Often, but the Poor Pay More Dearly......
Figure 4. Perceptions of Corruption......
Figure 5. Encounters with Bribery......
Figure 6. Experiences with Unofficial Payments......
Figure 7. Perception of Improvements Since the New Civil Service Law......
Figure 8. Perceptions of the Commitment to Reform......
Figure 9. Mechanisms to Enhance Public Sector Effectiveness......
Figure 10. Perceptions of Accessibility......
Figure 11. Services the Poor Use and Do Not Use......
Figure 12. Perceptions of Quality......
Figure 13. Satisfaction with Government Services and Treatment -- Actual User Perspectives......
Figure 14. Perceptions of Widespread Corruption......
Figure 15. Sources of Information about Corruption......
Figure 16. Perceptions of Corruption......
Figure 17. Encounters with Bribery......
Figure 18. Enterprise Experiences with Bribery......
Figure 19. Household Experiences with Bribery......
Figure 20. Bribery and Complexity in Enterprise Registrations......
Figure 21. Encounters with Bribery during Registration......
Figure 22. Top Ten Problems Reported by Enterprises and Households......
Figure 23. The Rich Pay More Often, But The Poor Pay More Dearly......
Figure 24. Services: The Rich Bribe For Speed, The Poor Bribe For Access......
Figure 25. Little Willingness to Pursue Legal Rights......
Figure 26. Perception of Improvements Since the New Civil Service Law......
Figure 27. Evaluations of Competitive Recruitment (by those who went through it)......
Figure 28. Evaluations of Code of Ethics......
Figure 29. Divergent Understandings of Which Gifts are "Trivial"......
Figure 30. Evaluation of Budget Processes......
Figure 31. Participation in Public Hearings on Budget Execution......
Figure 32. Evaluations of Procurement Rules and Procedures......
Figure 33. Perceptions of the Commitment to Reform......
Figure 34. What is Corruption? Ordered Probit Results from All Three Sample Groups......
Figure 35. What is Corruption? Ordered Probit Results from Households......
Figure 36. Performance and Procurement Policies......
Figure 37. Performance and Provision of Information to the Public......
Figure 38. Performance and the Level of Salary......
Figure 39. Performance and the Use of Extra-Salary Premia......
Figure 40. Performance and Enforcement of Anticorruption Repression......
Figure 41. Performance and the Quality of Budget Processes......
Figure 42. Performance and the Quality of Internal Information Flows......
Figure 43. Performance and the Quality of Internal Procedures and Administration......
Figure 44. Performance and Personnel Policies......
Figure 45. Performance and Acceptance of Mission and Objectives......
List of Tables
Table 1. The Implicit Tax on Firms......
Table 2. Methods of Procurement......
Table 3. Enterprise Evaluations of State Tenders......
Table 4. Household Sample by Region and Settlement Type......
Table 5. Socio Demographic Characteristics of the Household Sample and the General Population......
Table 6. Enterprise Sample by Region and Size......
Table 7. What is Corruption?......
Table 8. Means for Indexes of Performance and Qualities of Public Administration......
Table 9. Accessibility of Services and the Qualities of Public Administration—Respondent-level Regressions
Table 10. Accessibility of Services and the Qualities of Public Administration—Institution-level Regressions
Table 11. Accessibility of Services and the Qualities of Public Administration—Respondent-level Regressions, Correcting for Respondent-level Biases
Table 12. Quality of Services and the Qualities of Public Administration—Respondent-level Regressions.
Table 13. Quality of Services and the Qualities of Public Administration—Institution-level Regressions..
Table 14. Quality of Services and the Qualities of Public Administration—Respondent-level Regressions, Correcting for Respondent-level Biases
Table 15. Corruption and Qualities of Public Administration—Respondent-level Regressions......
Table 16. Corruption and Qualities of Public Administration—Institution-level Regressions......
Table 17. Corruption and Qualities of Public Administration—Respondent-level Regressions, Correcting for Respondent-level Biases
Table 18. Alternative Calculations for the Percentage of Households Encountering Bribery......
Table 19. Alternative Calculations for the Percentage of Enterprises Encountering Bribery......
Table 20. Alternative Calculations for the Impact of Unofficial Payments on the Poor......
Table 21. Alternative Calculations for the Perceptions on the Civil Service Law......
Table 22. What Constitutes a “Trivial” Gift?......
List of Text Boxes
Text Box 1. Access, Quality, and Corruption...... 6
Text Box 2. Customer Satisfaction Surveys for the Public Sector in the United State...... 12
Text Box 3. What is Corruption?...... 13
Text Box 4. Unbundling Corruption...... 22
Text Box 5. Health Care: Unofficial Payments in Eastern Europe and Central Asia...... 25
Text Box 6. Corruption in Education...... 32
Text Box 7. A Minister’s Experience with Corruption...... 27
Text Box 7. Regional Cooperation for Reducing Corruption in Customs...... 29
Text Box 9. Poverty in Transition...... 32
Text Box 10. The Immeasurable Cost of “Petty” Corruption in the United States...... 33
Text Box 11. The Cumulative Cost of Administrative Delays in Kazakhstan...... 37
Text Box 12. The Immeasurable Cost of Poorly Implemented Regulations in India...... 38
Text Box 13. Kazakhstan – The Civil Service and the Reforms...... 40
Text Box 14. Confronting the Challenge of State Capture and Administrative Corruption...... 53
1
Kazakhstan: Governance and Service DeliveryExecutive Summary
Executive Summary
Governance plays a key role in ensuring economic development and improvements in the standard of living. Recognizing this, the Government of Kazakhstan requested a survey-based analytic report on governance and service delivery. The objective was to assist in enhancing state effectiveness and improving public sector performance, especially in respect of services for the poorest and most vulnerable.
A well-functioning state is critical for good governance and adequate delivery of quality public services. The 1997 World Development Report highlighted three mechanisms critical for promoting good governance: (i) “voice” (i.e. consultations and feedback) and partnerships (e.g., service delivery surveys to solicit user feedback, and decentralization to empower communities); (ii) internal rules and restraints (such as civil service and budgeting rules, internal accounting and financial controls, public procurement rules, and codes of ethics); and (iii) competition (e.g., competitive social service delivery, and privatization of certain market-driven activities). These mechanisms interact with and reinforce each other in enhancing public sector effectiveness by providing impulses and incentives for reform.
The role, structure and capacity of the public sector are still evolving in Kazakhstan. Strengthening its performance can enhance the efficient allocation and management of public resources, diminish the cost of doing business, unleash private sector growth, and directly impact the accessibility of the population to basic services. This focus on the economic and social benefits of improving governance and service delivery – and of the consequences of not doing so - is therefore apposite. For the purposes of this report, corruption is defined as the abuse of public office for private gain.
This diagnostic assessment is based on three sets of surveys of key groups in Kazakhstan. Four hundred enterprise managers and one thousand households were surveyed about their interactions with state bodies; their responses provide external assessments of the quality of the services provided by various government bodies, and about their experiences with corruption, from the perspective of the users of these services. Six hundred public officials were also surveyed, providing an insider’s perspective, as well as self-evaluations of the quality of their work. The public officials’ survey also highlights progress in implementation of reforms, such as competitive recruitment of civil servants, and provides information on the business culture of government offices. The three surveys complement each other.
The surveys make it possible to identify links between performance and weaknesses in public administration. The rich tapestry of information provided by the survey respondents is a means to improve the delivery of basic public services by enhancing the transparency and accountability of state functioning. The overarching messages from the survey results are:
a)Capitalize on successes. Significant progress has been made in instituting some difficult institutional reforms, e.g. in public expenditure management, public procurement, and in establishing a professional and merit-based civil service. Most publicly provided services are viewed as easily accessible. Bodies with the most open and thorough systems of providing information to the public were also those that were the most accessible (post office, mass media, electricity). Competitive recruitment of civil servants is largely viewed as fair, transparent, and an improvement over the previous system. Public budget hearings are well-attended and produce meaningful changes in the budgets. Enterprise registration is reported to be simpler and improving.
b)Weak governance is hurting the ability of the poor to access basic services; weaknesses in responsiveness and integrity of state entities need to be urgently addressed. Services crucial for households, such as education, social benefits, state housing assistance, and the police, are perceived to be of low quality and prone to corruption. Households generally provided lower assessments of quality and accessibility than did enterprise managers or public officials. Twenty-nine percent of household respondents in the poorest third of the country said that they had been sick to the point of needing medical attention but did not see a physician, and 65 percent of them cited the high official costs as the reason. Corruption is reported to be widespread: while the rich appear to bribe for speed of service, the poor need to bribe for access to public services. It must be stressed that are two separate issues here: (i) problems in health care financing which may have different reasons such as insufficient state revenues, unequal distribution of those revenues, problems specific to health care financing, etc. (these reasons may be common to Kazakhstan and other countries), and (ii) weak governance and corruption – with characteristics and causes specific to Kazakhstan. Both state capture and administrative corruption are prevalent in Kazakhstan: 51 percent of enterprises, and 31 percent of households, encountered bribery in the last 12 months. Enterprises have to contend with both state capture (exemplified by political contributions, sale of legislative votes, and sale of administrative decrees) as well as administrative corruption (exemplified by bribery of public officials, nepotism, and sale of judicial decisions).
c)The credibility gap between official and private perceptions of commitment to improving service delivery and combating corruption needs to be addressed. Most public officials expressed support for numerous proposed or ongoing reforms. Yet, the public perception is considerably pessimistic, with much of the population unconvinced of the state’s commitment to improve quality of public services and reduce corruption. Few are willing to complain of poor treatment by public officials, and even fewer actually file official complaints against bribe requests by public officials.
d)The reorientation of policy makers and civil servants from a top-down hierarchical mentality to one focusing on service delivery must be continued. The results point to the importance of developing a client-focused culture of service in the public administration – bodies in which officials identified with the organizational mandate and viewed citizens and enterprises as clients were the ones that were most accessible and delivered the highest quality services. While an attitude change of policy makers and civil servants from one of command to one of service will inevitably take time, important first steps have been initiated. The survey indicates some future directions – such as the need to establish performance standards for organizations and individuals, and benchmarks against which progress can be assessed.
e)Continued institutional reforms are essential to consolidate and protect past successes, and for further improving state and private sector functioning. The results highlight the importance of core civil service and public administration reforms allied to budget management reforms– bodies with lower levels of corruption tend to be those with the most transparent and merit-oriented personnel practices. The survey underscore the correctness of the government strategy of continuing with public sector institutional reforms – aimed at improving the financing and delivery of public services, and reducing public sector obstacles to the development of the private sector. Such reforms will also promote transparency and accountability. However, the involvement of civil society in the reform process requires to be strengthened – as much for consultative and monitoring purposes as to address the credibility gap referred to above.
f)Improving governance is not only about enforcement-oriented anticorruption initiatives – it involves preventive measures, public education and public awareness. Improving governance does involve tackling corruption associated with state structures. This will of necessity include enforcement-oriented actions, including investigation and penalization of offenders. However, the policies and practices of state bodies and public officials also require review from the preventive standpoint, to minimize the opportunities for corruption – such as by eliminating unnecessary inspections and over-regulation. Improving governance also involves strengthening transparency, accountability and efficiency, with active assistance and monitoring of civil society, and based on feedback from the users of services.
g)Institutionalizing such surveys, and disseminating the results, can be a powerful means to improve public sector performance and diminish cynicism about the authorities’ commitment to improve governance and service delivery. Periodic administration of such or similar surveys at the republican, oblast and rayon levels can be used for performance evaluation purposes, and to generate competition as part of the quest for improving performance. Additionally, frequent survey administration and public dissemination of the results can address the credibility issue, and raise awareness about the authorities’ commitment to improve governance and service delivery.
Performance of the Public Administration
The state – through its policies and the public sector – plays an important role in achieving society’s objectives of equity, development, and improvements in the standard of living. A public sector that performs well can more effectively work to reduce poverty and stimulate growth. Three particular aspects of performance of the public administration in Kazakhstan are examined: access to selected publicly provided services, the quality of delivery of such services, and the level of corruption within key public sector entities involved in policy-making, implementation or oversight in respect of these services.