Kyrgyz REpublic
Review of Effectiveness of and Update of Measures to Reduce Informal Economy in the Kyrgyz Republic
Terms of Reference
1. Background
Informal economy is a major challenge of business environment in the Kyrgyz Republic. Firms face competition from a wide range of informal practices – unregistered firms, misreporting of operational results and payments due etc. In 2012, the Ministry of Economy commissioned a study from the World Bank and UNDP on “Analysis of Informal Economy in Kyrgyz Republic” (the “2012 Study”) which assessed the share of informal economy in the KR at 43%, which is 10% higher than the highest ratio in the Eastern Europe and significantly higher than in the countries of Western Europe.
The 2012 Study recommended a number of actions to reduce the share of the informal sector, which were adopted by the Government in the form of an Action Plan for Reduction of Share of Informal Economy in the KR for 2015-2017. As of Q2 2017, most of the recommendations in the Action Plan have been implemented, as reported by the Government and the Ministry of Economy. However, the effectiveness of the implementation of these recommendations is yet to be measured. In particular, main measure of effectiveness of such measures will be the share of informal economy (expected to be reduced). However, given the nature of informal economy, assessment of its share is not straightforward and requires specialised research / assessment.
Monitoring of the share of informal economy is vested with the Ministry of Economy of the KR. The Ministry of Economy does not have technical skills and capacity to undertake such research by themselves and are requesting the EBRD assistance with assessing the effectiveness of the recommendations and development of the updated recommendations. The updated recommendations will form part of the new Action Plan for Reduction of the Informal Economy Share in the KR for 2018-2020 that the Government is looking to adopt.
2. Objectives
The objective of the Project is to review of the effectiveness of the measures to reduce informal economy in the KR implemented to date and to develop updated recommendations.
3. Scope
To achieve objectives of the Project, services of a consultant (the “Consultant”) are required. In particular, the Consultant shall provide the following services:
3.1. Review of Effectiveness of Measures to Reduce Share of Informal Economy in the KR
1) Review the measures identified in the Action Plan to Reduce Informal Economy in the KR for 2015-2017 (the “2015-2017 Action Plan”), in particular the ones that are identified by the Government as implemented, and assess whether the proper implementation took place and whether the intended effect of the measures was achieved. The review shall be done based on the best practices in the sector.
2) Identify which measures in the 2015-2017 Action Plan are not or not fully implemented, assess the causes and prepare lessons learnt.
3) Make an overall assessment of whether the implementation of the Action Plan was effective, identify lessons learnt as to what worked and what didn’t. It is expected that the review will contain:
a. An assessment of the current share of informal economy in the KR using on quantitative and qualitative methods;
b. Most common practices / forms of the informal economy in the KR (e.g., unregistered firms, registered firms with informal practices etc.).
c. Sectors which have / prone to the high share of informal economy and causes for that;
d. An analysis of the informal economy share by regions;
e. An analysis of the informal economy share by ownership rights (state vs. private) and size of enterprises.
4) Discuss the findings of the review with the Ministry of Economy and other government stakeholders, as well as with the business stakeholders, both as part of interviews and collective discussions / roundtables.
3.2. Updating of Recommendations to Reduce Informal Economy in the KR
1) Based on the review undertaken as part of Section 1 above and particularly lessons learnt, update the recommendations to reduce informal economy contained in the 2015-2017 Action Plan, including developing new recommendations and tools that will help the Ministry of Economy to track progress towards achieving objectives of reducing the share of the shadow economy in the KR.
2) The review shall identify sectors which are most affected by / prone to high share of informal economy and the updated recommendations to reduce share of the informal economy shall be sector-specific.
3) Discuss the recommendations with the Ministry of Economy, other government and private stakeholders, including all key business associations active in the KR, and update the recommendations to reflect the views of the stakeholders. These discussions are envisaged as both bilateral and collective, in the form of roundtables or other dissemination events.
4) The Consultant shall review and provide comments on the Action Plan to Reduce Informal Economy for 2018-2020, and discuss them with the Ministry of Economy and other relevant government stakeholders. The 2018-2020 Action Plan shall identify responsible parties for each individual measure.
Overall goal of such recommendations shall be the creation of incentives for the businesses to become formal, rather than penalising them for remaining / getting into the informal sector, and to provide the Ministry with the tools to track the progress against the delivery under these recommendations. The Project shall be done based on the review of best practices / successful examples of reduction of informal economy share.
View of businesses in assessing the share of informal economy and the development of the updated recommendations shall be taken into account. It is proposed to have at least two roundtables with private sector and government stakeholders – one to discuss the analysis of effectiveness of the implementation of the 2015-2017 Action Plan and the other – to discuss the recommendations for the 2018-2020 Action Plan.
The Consultant shall propose the methodology for undertaking the Project and discuss it with the Ministry of Economy and the EBRD team before undertaking the Project.
4. Consultant’s Profile
The Consultant should be a firm or an individual expert with: (i) strong economic expertise and experience in assessing share of informality in other countries; (ii) knowledge or preferably, first-hand experience, in implementation of successful reforms aimed at reducing informality; (ii) strong analytical and quantitative skills; and (iv) good command of English and Russian, and preferably also have Kyrgyz language capacity.
Specifically, the Consultant’s expert team is expected to include key experts as follows:
a Key Expert No 1 (Team Leader) with preferably 10 years of previous professional experience in assessing the incentives for the firms to be in the informal sector of the economy and to be become formal; understanding of the informal sector of the economy, preferably in the EBRD region and ideally in Central Asia; expertise in, and ideally first-hand experience in, delivering successful reforms in reducing the informal economy share, preferably in the EBRD region; experience in successfully delivering assessment and reform advice projects, managing teams of experts and engaging with senior-level stakeholders, preferably in the EBRD region and ideally in Central Asia; fluency in Russian or Kyrgyz is desired (the Consultant shall be responsible for arranging their own translations otherwise);
b. Key Expert No 2 (Key Economic Expert) with preferably 7 years of previous professional experience in assessing the incentives for the firms to be in the informal sector of the economy and to be become formal; deep understanding of the informal sector of the economy, preferably in the EBRD region and ideally in Central Asia; expertise in, and ideally first-hand experience in, delivering successful reforms in reducing the informal economy share, preferably in the EBRD region; preferably fluency in Russian and Kyrgyz (the Consultant shall be responsible for arranging their own translations otherwise);
c. Key Expert No 3 (Pool of Additional Experts) to help deliver the assignment, including: -economic experts with excellent analytical and research capabilities, understanding of the practical of the informal economy, preferably in the EBRD region and ideally in Central Asia;
- legal expert(s) to assess the legal framework affecting (contributing to) the share of the informal economy in the Kyrgyz Republic and to develop recommendations that would help reduce such share, at least one of whom should be qualified in the Kyrgyz Republic, preferably with expertise in drafting and reviewing draft legislation and regulations and engaging stakeholders.
5. Project Implementation
5.1. The Project is expected to start as soon as the approvals are received and to be completed approximately within 6 months. The inception of the Project is expected to happen with a kick-off meeting taking .
5.2. The Project will be managed by the EBRD’s project team consisting of the EBRD’s Operational Leader and the team members communicated to the Consultant.
6. Deliverables
The Consultant will prepare the following deliverables:
(a) Inception Report identifying the methodology for undertaking the Project, timeline and milestones – two weeks after signing the contract;
(b) Draft Review Report presenting the results of Task 3.1. – two months after the Inception Report;
(c) Final Review Report incorporating comments of the EBRD, the Ministry of Economy and other stakeholders on the Draft Review Report – two weeks after presenting the comments from the EBRD, the Ministry of Economy and other stakeholders;
(d) Draft Recommendations Report presenting the results of Task 3.2. – within 1 month after presenting the Final Review Report;
(e) Final Recommendations incorporating comments of the EBRD, the Ministry of Economy and other stakeholders on the Draft Review Report – two weeks after presenting the comments from the EBRD, the Ministry of Economy and other stakeholders.
Each of the deliverables need to be submitted to the EBRD Project Team/Operational Leader first in the draft form, and upon discussions with the relevant parties, comments will be incorporated and the final draft then presented to the EBRD. All deliverables shall be presented to the EBRD in English.
7. Reporting
The Consultants shall report to the Project Team on a biweekly basis or upon material event affecting the implementation of the Project.
The Project is expected to start immediately after the signing of the contract. The Final Report shall be provided to the EBRD team within one month after the completion of the study visit.
All information enclosed in the ToR as well as that associated with the Project shall remain confidential.
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