World Bank...

The World BankSME Competitiveness Project (P147705)

REPORT NO.: RES33263

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF

SME COMPETITIVENESS PROJECT

APPROVED ON MARCH 2, 2015

TO

REPUBLIC OF KAZAKHSTAN,MINISTRY OF NATIONAL ECONOMY

FINANCE, COMPETITIVENESS AND INNOVATION

EUROPE AND CENTRAL ASIA

Regional Vice President: Cyril E Muller Country Director: Lilia Burunciuc

Senior Global Practice Director: Alfonso Garcia MoraPractice Manager/Manager: Marialisa Motta

Task Team Leader: Stefka Slavova

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ABBREVIATIONS AND ACRONYMS

CPF Counterpart FundingGoK Government of KazakhstanIBRD International Bank for Reconstruction and DevelopmentKIDI The Kazakhstan Industry Development InstituteMNE Ministry of National EconomyMSME Micro-, Small and Medium EnterprisesNFS Non-financial supportPDO Project Development ObjectivePIC Project Implementation CommissionPIU Project Implementation UnitSDP Supplier Development ProgramSME Small and Medium EnterprisesTA Technical Assistance


Note to Task Teams: The following sections are system generated and can only be edited online in the Portal.

BASIC DATA

Product Information

Project ID Financing Instrument

P147705 Investment Project Financing

Original EA Category Current EA Category

Not Required (C) Not Required (C)

Approval Date Current Closing Date

02-Mar-2015 30-Jun-2020

Organizations

Borrower Responsible Agency

REPUBLIC OF KAZAKHSTAN,Ministry of National Economy Ministry of National Economy

Project Development Objective (PDO)

Original PDOThe project development objective is to enhance the competitiveness and capacity of targeted small and medium sized enterprises in Kazakhstan.OPS_TABLE_PDO_CURRENTPDOSummary Status of Financing

Ln/Cr/Tf Approval Signing Effectiveness ClosingNet

Commitment Disbursed Undisbursed

IBRD-84770 02-Mar-2015 20-Jul-2015 26-Feb-2016 30-Jun-2020 40.00 2.84 37.16

Policy Waiver(s)

Does this restructuring trigger the need for any policy waiver(s)?No


Note to Task Teams: End of system generated content, document is editable from here.

I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING

The Project was designed in 2013-2014, a period of considerable uncertainty in Kazakhstan’s external and domestic environment. It was designed as part of a Partnership Framework Arrangement between the Government of Kazakhstan and International Financial Institutions to tackle structural reforms that could boost economic growth and shared prosperity.

Project interventions are organized across four (three technical and one project management) components:

1. Small and Medium Enterprises (SME) Capacity Building Program - US$15 million (thereof US$11.5 million IBRD, and US$3.5 million counterpart funding, CPF); Amount committed (IBRD): US$891,000 committed, of which US$272,000 disbursed. The component’s goal is to strengthen and expand existing SME training and advisory programs offered by the government to entrepreneurs, SME owners and managers by enhancing the quality of such training programs in substance and methodology, introducing international best practices, establishing certified business advisors and trainers, and increasing public awareness of these programs widely in the country.

2. SME Linkages in Competitive Sectors – US$20 million (thereof US$18.2 million IBRD, and US$1.8 million CPF); Amount committed (IBRD): US$2.98 million, of which US$1.8 million disbursed. The component promotes linkages and integration of SMEs in existing and emerging competitive sectors. It covers three main subcomponents:

2.1. Supplier Development Program (SDP) – US$12 million (thereof US$10.87 million IBRD, and US$1.13 million CPF); Amount committed (IBRD): US$265,600, of which US$265,600 disbursed. Supplier development activities designed to increase the ability of SMEs to supply inputs into local operations of multinational corporations, large local firms and state-owned enterprises. This subcomponent will help the Government of Kazakhstan (GoK) adopt a SDP aimed at increasing market linkages for SMEs with large local and multinational corporations operating in Kazakhstan, both during project implementation and after its closure. At the outset, it was envisaged that during the project’s lifetime the program would focus on the oil and gas, metallurgy and railway equipment sectors.

2.2. Competitive Sectors (territorial clusters) – US$6 million (thereof US$5.5 million IBRD, and US$466,000 CPF); Amount committed (IBRD): US$2.7 million, of which US$1.5 million disbursed. This subcomponent aims to nurture a world-class cluster development team within the government for best-practice support to the competitiveness of six territorial clusters in various regions of the country. To achieve this, the component provides hands-on implementation support to the GoK (in particular, the Kazakhstan Industrial Development Institute (KIDI)) through the following two technical assistance (TA) activities: 1) Training services to build KIDI’s capacity on cluster policy deployment; and 2) TA to KIDI in implementing the cluster policy in six regions of Kazakhstan.

2.3. Factoring Strategic Assessment – US$2 million (thereof US$1.8 million IBRD, and US$0.2 million CPF); Amount committed (IBRD): US$0. A contract with international consulting company (valued at US$0.95 million)


is expected to be signed in November-December 2018. This subcomponent aims to conduct a strategic assessment and suggest recommendations for the development of factoring and reverse-factoring in Kazakhstan to support SMEs that are part of local supply chains.

3. Impact Evaluation & Monitoring of SME Programs – US$8 million (thereof US$7.4 million IBRD, and US$0.6 million CPF); US$950,000 committed (IBRD), no disbursements thus far. In its current design the component envisages 4 activities: (1) conducting an impact evaluation of 6 government SME support programs and building the capacity of relevant GoK stakeholders in conducting such impact evaluations; (2) establishing a sustainable Third-Party Monitoring System (TMS) and establishing a business ombudsman’s office to increase participation of the private sector in SME policy design and introduce a mechanism to address business grievances; (3) developing an SME data dashboard to provide stakeholders with reliable and up-to-date information on Kazakh SMEs; and (4) conducting a national baseline survey of SMEs in order to inform policies in frame of GoK strategy to increase the share of SMEs in GDP to 50% by 2050.

4. Project management – US$3 million (IBRD); Amount committed (IBRD): US$0.9 million, of which US$0.5 million disbursed. Project management over its five-year tenure is conducted by a Project Implementation Unit (PIU) housed in the Ministry of National Economy (MNE) and consisting of PIU head, procurement and FM specialists, a technical lead of components 1 and 2, an M&E specialist and an administrative assistant.

The Department of State Support of Entrepreneurship at MNE is the main project implementing agency, charged with overseeing and coordinating overall project implementation. The PIU works under the guidance of a Project Implementation Commission (PIC), which is composed of members of the main agencies involved in the implementation of the project (MNE, Ministry of Investment and Development (MID), National Chamber of Entrepreneurs (NCE), KIDI, and the Economic Research Institute (ERI)). The PIC convenes semi-annually and is chaired by the Vice-Minister of MNE, responsible for the project (currently Mr. Serik Zhumangarin).

The initial project design included also a complementing Line of Credit for the MSMEs, which was later dropped due to the then-government and IFI loans’ market saturation and forex swap issues.

B. Project Status

The project has been rated Moderately Unsatisfactory (MU) since November 2016, with an actual disbursement rate of 7% 3.5 years following the Board approval in March 2015 (and 2.5 years after effectiveness in February 2016). There were several issues leading to the implementation delays, including: delayed allocation of counterpart financing; lack of clarity of the counterpart agencies’ roles, as well as the potential conflict of interest from overlaps in the roles of implementing agencies, which at the same time aspired to be contractors for various activities under the sub-components. Another bottleneck was a complicated and time-consuming government consultation and authorization process, as in the case for subcomponent 2.2, where MNE has not yet completed the formal approval process of the 6 pilot competitive clusters. Nevertheless, the Bank team acknowledges the Borrower’s growing ownership of the project and expedited implementation starting in mid-2017, which has led to visible positive results across all components. The Bank undertook a Quality Enhancement Review (QER) of the project in March 2018, ahead of the mid-term review (MTR). The QER recommended either downsizing on activities where there has not been sufficient progress, such as component 1, and reallocating project resources to activities that have demonstrated momentum, such as the cluster initiative, or partial cancelation of a significant portion of the loan and eliminating activities that are unlikely to be implemented successfully. Following the QER, the GoK requested that task team look into reallocating project funds to a new apex fund for


microfinance and technical missions during the MTR phase recommended working with the Entrepreneurship Development Fund (DAMU) on a credit line for on-lending to participating micro-finance institutions or a partial credit guarantee scheme for MSME lending. Following discussions of these proposals with officials of MNE and MOF in June 2018, the proposal of including a credit line or a partial credit guarantee scheme in the project was rejected and the GoK proceeded to request a partial cancelation in the amount of US$22 million as well as an extension of the project closing date to February 28, 2021.

1. SME Capacity Building Program - US$15 million (thereof US$11.5 million IBRD, and US$3.5 million counterpart funding, CPF); Amount committed (IBRD): US$891,000 committed, of which US$272,000 disbursed. Since the work began in September 2017, Component 1 has demonstrated gradual, albeit insufficient, progress in implementation.

As per Project Implementation and Procurement plans, the first package under this subcomponent was for Studying the state of SME non-financial support (NFS) system in Kazakhstan, elaborating a Concept for its further development and improving the competencies of stakeholders”, (QCBS-01 valued at US$ 8000,000, of which US$680,000 IBRD Loan), led to a contract signed with GDSI in September 2017 and contractual activities completed in June 2018. Activities included (i) empirically supported assessment of the needs of Kazakhstani SMEs in NFS instruments (including a survey of over 1,000 SMEs, 100 large firms, 25 financial institutions), (ii) comparative analysis of international experience in implementing NFS measures and development of recommendations on improvement of state-run NFS programs, (iii) Elaboration of a draft Concept of Development of SME NFS system and a draft Roadmap of its implementation. This work provided MNE and NCE Atameken with a comprehensive analysis of the business advisory market in Kazakhstan, recommendations on its further development and addressing the numerous complaints of business owners and banks about the poor quality of business consulting services in the country. The draft Concept of Development of SME NFS System, elaborated as a result of the activities financed under this subcomponent, is currently being reviewed by MNE.

A second package was for contracting a consultant to carry out an information campaign that covers the project in general and the NFS services to SMEs available (CQS-02, US$212,000 committed from IBRD loan). Implementation started in June 2018 and is expected to be completed by December 2019. The contract amount will be fully disbursed in two tranches in 2019 (March 2019 and December 2019).

A third package is for the Creation of a system for business consultants training of leading instructors, business-consultants and SME enterprises (QCBS-02 valued at US$1.9 million, of which US$1.3 million IBRD Loan). Based on findings of the first package above, MNE will hire an international company to train 40 business advisors, master trainers and quality assessors, and 150 business consultants, all selected competitively. These activities will be followed by the advisors and consultant providing in turn training to SMEs. The TORs for the procurement package were developed in consultation with the IFC and NCE, and have been approved by the Bank. In August 2018, MNE issued request for expression of interest from potential contract bidders, but due to the low qualification of bidders, had to revise and reissue the request in October 2018. Currently, MNE is reviewing submitted expressions of interest.

2. SME Linkages in Competitive Sectors

2.1. Supplier Development Program – US$12 million (thereof US$10.87 million IBRD, and US$1.13 million CPF); Amount committed (IBRD): US$265,600, of which US$265,600 disbursed. There are two contracts under this subcomponent.


i. Elaboration of a strategy for supplier development services, a roadmap and TA to stakeholders (CQS-01 valued at US$ 266,000 from IBRD Loan; contract signed in March 2017, completed in October 2017 and fully disbursed). The subcomponent helped strengthen the capacity of key players involved in supplier development activities (MNE, NCE Atameken, the National Agency for Development of Local Content (NADLoC)) in administering, monitoring and evaluation of supplier development activities through workshops devoted to comprehensive analysis of legislative and institutional landscape, global experience, as well as organizing a three-day study visit to Serbia for 5 representatives of key stakeholders. MNE has endorsed the strategic roadmap to establish the SDP.

ii. Services on establishing the Supplier Development Service and implementation of supplier development pilot projects (QCBS-04 valued at US$6.9 million from IBRD Loan). Activities under this sizeable contract are expected to boost the visibility of the project and increase disbursement. Under this contract an international company will support NADLoC in implementing the Supplier Development Strategy through the establishment, operational and methodological support of a supplier development office, selection and building capacity of 200 existing and potential suppliers in the three target industries. The bidding process was completed in August 2018, and the tender committee shortlisted three companies in the summer 2018, however KIDI, which is a committee member and will be involved in the SDP implementation, voiced a concern over the validity of the technical evaluation results. The task team, after consultations with the Bank Procurement Team, decided to send the three companies’ bidding documents for independent review within the WBG, which confirmed inconsistencies in the scores awarded for specific selection criteria and discrepancies among CVs of key consultant staff and the scores being assigned for consultants’ skills. This led the Bank task team to request a re-evaluation of the short-listed technical proposals. Based on the results of the re-evaluation by the tender committee, the Bank task team in consultation with the procurement team may give formal No Objection or request restart of the selection procedure. In the former case, the contract would be concluded in November or December 2018 and disbursement start in March-April 2019 (in view of GoK’s budget allocation procedures). In the latter case, this timeline could be pushed back by 6 months.

2.2. Competitive Sectors: – US$6 million (thereof US$5.5 million IBRD, and US$466,000 CPF); Amount committed (IBRD): US$2.7 million, of which US$1.5 million disbursed. There are two contracts under this subcomponent:

1) Training services to build the capacity of KIDI on cluster policy deployment (QCBS-05 valued at US$349,000 (100% financed from IBRD loan)), contract signed in December 2016, completed in June 2018 and fully disbursed. Apart from training KIDI staff, the activity provided tools, methodologies, and documentation covering all aspects of cluster development and equipped the KIDI team with technical tools to support clusters after the project ends.

2) TA to KIDI in implementing the cluster policy in six regions of Kazakhstan (QCBS-06 valued at US$2.4 million from IBRD loan), an ongoing contract signed in December 2016, to be completed in August 2019, current disbursement – US$1.2 million. The contract covers implementation support to KIDI, including: (i) full-time workplace mentoring, (ii) access to international expertise in the target sectors, (iii) study tours and workshops to develop action plans for cluster competitiveness, and monitoring and evaluation of their implementation, and (iv) providing guidance and IT tools to support the 6 targeted clusters. The activities under this contract progressed in line with the original schedule and some early results include:

1) Six pilot territorial clusters (dairy in Akmola region, flour in Kostanay region, furniture in Almaty region, tourism in Almaty region, construction materials in Karagandy region and pharmaceuticals in Shymkent region) have been competitively selected by KIDI based on the selection methodologies and guidelines approved by the Bank;


2) The cluster team of KIDI participated in the 20th Global Cluster Development Conference;

3) 13 KIDI staff were certified by the European Cluster Excellence Foundation as a result of 6 training modules conducted

4) Representatives of clusters participated in 6 study visits to learn international best practices.

The implementation partner - KIDI - has been demonstrating full commitment to the project, hiring required KIDI staff, conducting field visits, and working closely with the 6 pilot clusters. KIDI’s capacity in implementing cluster policy has significantly increased. KIDI has developed from scratch and adopted cluster selection procedures, a database of cluster participants, obtained hands-on experience in analyzing the potential of territorial clusters from micro and macro perspective, and acquired extensive experience in building productive links between different value-chain actors.

However, there is an outstanding issue: the final endorsement of the six selected pilot clusters should have been made by a government inter-ministerial commission on industrial development, chaired by the Prime Minister. This has not happened. This issue has been pending since September 2017 and will need to be resolved if KIDI were to continue supporting the development of territorial clusters in 2019-2020 and after the project’s completion.

In addition, in October 2018, both KIDI and NADLOC started a deep internal reorganization and merging process, including changes in KIDI’s top management and removal of key personnel that had led the cluster work so far. Very recently, the new chairwoman of KIDI confirmed to the Bank that KIDI remains committed to its obligations vis-à-vis MNE and the Bank and will continue implementing subcomponent 2.2 on cluster development. However, because the six clusters’ selection has never been formally approved by the Prime Minister, MID cannot allocate funds to KIDI for this work and 7 KIDI employees working on cluster component were laid off as of October 2018. As a way forward, in November 2018 KIDI initiated amendments to the cluster selection rules. The intention is to hand over the formal selection of clusters to another commission that includes representatives of line ministries and regional governor offices, but is not chaired by the PM. This is a lengthy process but is doable since selection of clusters is envisaged by the Loan Agreement and Government’s strategic program on industrial development (SPIID-2). KIDI will push to have the amended rules in force by January 2019. The work on development of cluster action plans will continue in parallel.

2.3. Factoring Strategic Assessment – US$2 million (thereof US$1.8 million IBRD, and US$0.2 million CPF, no disbursements thus far). In May 2018 the PIU conducted negotiations with the bidding winner (Capital Tool Company BV) to conduct a feasibility study on establishing a factoring platform, but the negotiations stalled due to lack of sufficient financial resources at the PIU’s disposal to pay the advance payment upon signing of the contract.

Procurement had been on hold since September 2017 due to a legal dispute: MOF did not approve the financing of a feasibility study under this subcomponent, referring to the fact that feasibility studies can be financed only in infrastructure projects. In the end this was resolved, but the long-standing problem of MNE and the PIU respectively receiving an adequate budget allocation from the available loan funds prevented the signing of a contract and has delayed the start of this work. The contract (valued at US$1 million from IBRD Loan) is expected to be signed in November or December 2018 and fully disbursed by July 2020.


3. Impact Evaluation & Monitoring of SME Programs – US$8 million (thereof US$7.4 million IBRD, and US$0.6 million CPF); US$950,000 committed (IBRD Loan), no disbursements thus far. There are two contracts under this subcomponent.

Services on conducting an impact evaluation of programs on support of small and medium sized enterprises and training for capacity building of key stakeholders engaged in monitoring and evaluation of such programs (QCBS-09 valued at US$950,000 from IBRD Loan), contract signed in June 2018, to be completed and fully disbursed in December 2019.

Services on conducting a national baseline survey of SMEs in Kazakhstan and development of the Concept of SME development (QCBS-10 valued at US$1 million from IBRD Loan). The draft negotiated contract with the winning bidder (Euroconsultants) has been cleared by the Bank and is expected to be signed in November or December 2018.

Implementation delays in this component were mainly related to 3 factors: a) delayed recruitment of local and international M&E specialists by the PIU. The two specialists were hired in early 2017 and developed 4 ToRs related to M&E activities envisaged in Component 3; b) MNE and ERI declined ownership of the impact evaluation and related capacity-building activities; and c) exogenous changes since the design of the project, notably, the third-party monitoring and Business Ombudsman’s office envisaged in Component 3 are already in place and hosted by NCE. As a result, in December 2017, the PIC proposed that three activities envisaged under the component could be abandoned (the third-party monitoring mechanism, the Business Ombudsman, and the M&E dashboard), leaving only two activities to be implemented: (1) an impact evaluation of 2 SME support programs and building capacity of stakeholders in conducting impact evaluations; and (2) conducting a national baseline survey of SMEs.

4. Project Management.

The chronic issue of delayed and insufficient national budget allocation has impeded the implementation of all project components and is the main factor for not accelerating disbursement, even after the ability of the PIU to carry out its functions was significantly strengthened. As a result of delayed budget allocation, key PIU staff had been selected, but not hired, and the PIU lacked basic resources needed for its staffing and operation, especially in the first twelve months after project effectiveness. The PIU also lost competent staff due to delayed salary payment.

Timely implementation of the contracts under the components is expected to enable the Project to generate valuable results. The latest PDO and IP ratings will be upgraded once the restructuring is processed and the progress on the revised results indicators and signed contracts is captured. Recent developments suggest a much greater potential to achieve impact in many areas of the project, although on a smaller scale than originally envisioned.

C. Rationale for Restructuring

The authorities have asked the Bank to restructure the project so as to adequately respond to their new policy initiatives and expedite project implementation with a realistic budget. The project is, therefore, being restructured reflecting the authorities’ intention to: (i) cancel US$22 million of IBRD loan proceeds due to savings and elimination or scaling down of project activities, while keeping the PDO and the description of the Project unchanged; (ii) modify the project results indicators; (iii) reduce the government contribution from US$6 million to about US$2.1 million; and (iv) extend the project closing date to February 28, 2021 in order to enable successful


implementation of ongoing and planned activities. This restructuring proposal is based on this approach and rationale so as to improve project implementation and achievement of results.

The proposed reduction in the scale of Components 1, 3 and 4 will not require amendments to Schedule 1 of the Loan Agreement as they do not imply changes in the PDO and the description of the Project, given that many of the originally planned activities have been implemented by the Borrower using its own funds and given savings that resulted from the sharp devaluation of the national currency since August 2015.

No changes have been proposed to the project’s institutional, disbursement or financial management arrangements, which continue to be adequate.

II. DESCRIPTION OF PROPOSED CHANGES

A. Change in Results Framework: The results framework was adjusted in light of the proposed changes in components and costs as described below. Some indicator targets were updated to more realistic values (see details in section IV below).

B. Change in Components and Cost: The table below shows the proposed cancellation amounts by project components, discussed during the MTR mission and subsequently elaborated by the MoF in September 2018.

IBRD Loan proceeds, USD*Components Allocated Proposed

Reduction, USD

1. SME Capacity Building Program 11,453,568 2,607,679 -8,845,8891.1. Consulting services on strategy improvement and planning 800,000 680,000 -120,0001.2. Preparation of business consultants and conducting training for business consultants and SMEs 7,503,962 1,672,679 -5,831,283

1.2.1. Procurement of goods related to 1.2. 1,181,102 0 -1,181,1021.3. Information and Communication Campaign with SME 1,968,504 255,000 -1,713,504

2. SME Linkages in Competitive Sectors 18,189,286 11,805,195 -6,384,091

2.1. Supplier Development Program 10,869,638 7,173,266 -3,696,3722.1.1. A study on all aspects of creating and maintaining Supplier Development Service (SDS). 277,700 256,600 -21,100


2.1.2. Procurement of goods for Supplier Development Service 239,286 0 -239,2862.1.3. Establishment and building capacity of SDS, implementation of pilot supplier development projects 7,519,319 6,916,666 -602,653

2.1.4. Scaling-up pilot programs in priority sectors 2,833,333 0 -2,833,333

2.2. Competitive Sectors 5,533,935 2,739,072 -2,794,8632.2.1. Training of the personnel of KIRI and other stakeholders 461,200 348,445 -112,7552.2.2. Support to KIDI in implementing cluster development activities 5,072,735 2,390,627 -2,682,1082.3. Strategic Factoring Evaluation 1,785,714 1,892,857 107,1432.3.1. Feasibility study on creation of a factoring platform and enhancing the competence of stakeholders 1,785,714 1,000,000 -785,714

2.3.2. Procurement of the factoring platform 0 892,857 892,857

3. Impact Evaluation and Monitoring of SME Programs 7,357,146 2,260,012 -5,097,134

3.1. Provision of institutional integration in the assessment of the current state policy (Dashboard) 3,191,637 0 -3,191,637

3.2. Support for impact evaluation of SME programs 1,851,338 2,260,012 408,6743.2.1. Conducting of the evaluation of the two programs and of training seminars for ERI and academic institutions (universities, research institutes, etc.)

138,850 1,010,012 871,162

3.2.2. Conducting SME baseline survey, development of Concept of SME development 1,712,488 1,250,000 -462,488

3.3. Third-party monitoring of SME policies, establishment of Business Ombudsman’s Office 2,314,171 0 -2,314,171

4. Project Management 3,000,000 1,327,114 -1,672,886

Total 40,000,000 18,000,000 -22,000,000

The proposed scaling-down of Component 1 by US$8.6 million results from a reduction of the target indicator (the number of business trainers prepared) from 750 to 150 and a reduction of related procurement of goods. This reduction is motivated by the results of the comprehensive study by GDSI Limited and verified by MNE and NCE Atameken during a PIC meeting in December 2017. MNE also requested to scale down the information and communication campaign (subcomponent 1.3) due to the implementation of awareness-raising campaigns funded from the national budget.

Component 2 funding will be reduced by US$6.6 million. The major reduction emanates from the cancellation of the scaling-up of pilot SDP projects (subcomponent 2.1) due to the short remaining implementation period and the ongoing supplier-development activities funded from the state budget. The amount of subcomponent 2.2 is proposed to be reduced by US$2.8 million, which reflects actual savings in consulting contracts, without any impact on the scope of work.

In Component 3, the major changes are the elimination of subcomponent 3.1 (SME Dashboard) due to the fact that the dashboard development is carried out by NCE Atameken and SOEs under the "Digital Kazakhstan" State Program. Similarly, activities under subcomponent 3.3 (third-party monitoring of SME policy and Business Ombudsman’s Office) have been established by NCE Atameken with its own resources. Overall, the budget for component 3 will be reduced by US$5.0 million.


As a result of scaling-down of several subcomponents and due to actual savings, the Borrower proposes to reduce component 4 expenditures from US$3 million to US$1.3 million.

C. Reallocation between Disbursement Categories: The proposed changes will not trigger a need to reallocate loan proceeds among project disbursement categories. Only allocations within disbursement categories will be reduced.

D. Change in disbursement estimates: The original timeline for disbursements will be adjusted based on a new procurement plan (see details in section IV below).

E. Change in overall Risk Rating:

No change in overall risk rating is being proposed.

F. Change in Institutional Arrangements:

No changes have been proposed to institutional arrangements.

G. Change in Economic and Financial Analysis:Implementation delays may negatively impact project efficiency and the NPV described in the ex-ante economic analysis. No Financial Analysis of the project activities was conducted at the project preparation stage.

H. Change in Technical Analysis:The proposed changes will not trigger changes in the Technical Analysis.

I. Change in Environmental Analysis:The proposed changes will not trigger changes in the environmental category of the project.

Note to Task Teams: The following sections are system generated and can only be edited online in the Portal.

III. SUMMARY OF CHANGES

Changed Not Changed

Results Framework ✔

Components and Cost ✔

Loan Closing Date(s) ✔

Cancellations Proposed ✔

Reallocation between Disbursement Categories ✔


Disbursement Estimates ✔

Overall Risk Rating ✔

Implementation Schedule ✔

Other Change(s) ✔

Economic and Financial Analysis ✔

Social Analysis ✔

Implementing Agency ✔

DDO Status ✔

Project's Development Objectives ✔

Disbursements Arrangements ✔

Safeguard Policies Triggered ✔

EA category ✔

Legal Covenants ✔

Institutional Arrangements ✔

Financial Management ✔

Procurement ✔

Technical Analysis ✔

Environmental Analysis ✔

IV. DETAILED CHANGE(S)

OPS_DETAILEDCHANGES_COMPONENTS_TABLE

COMPONENTS

Current Component Name

Current Cost

(US$M)Action Proposed

Component NameProposed

Cost (US$M)

1. SME Capacity Building Program 15.00 Revised 1. SME Capacity Building

Program 2.80

2. SME Linkages in Competitive Sectors 20.00 Revised 2. SME Linkages in Competitive

Sectors 11.60

3. Impact Evaluations & Monitoring 8.00 Revised 3. Impact Evaluations &

Monitoring 2.20

4. Project Management 3.00 Revised 4. Project Management 1.30


TOTAL 46.00 17.90

OPS_DETAILEDCHANGES_LOANCLOSING_TABLE

LOAN CLOSING DATE(S)

Ln/Cr/Tf StatusOriginal Closing

Revised Closing(s)

Proposed Closing

Proposed Deadline for Withdrawal

Applications

IBRD-84770 Effective 30-Jun-2020 28-Feb-2021 28-Jun-2021

OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE

CANCELLATIONS

Ln/Cr/Tf Status Currency Current Amount

Cancellation Amount

Value Date of

Cancellation

New Amount

Reason for

Cancellation

IBRD-84770-001

Disbursing USD 40,000,000.00 22,000,000.00 06-Aug-2018 18,000,000.00

LOAN RESTRUCTUR

ING, COST SAVINGS

OPS_DETAILEDCHANGES_REALLOCATION _TABLE

REALLOCATION BETWEEN DISBURSEMENT CATEGORIES

Current Allocation Actuals + Committed Proposed Allocation Financing %(Type Total)

Current Proposed

IBRD-84770-001 | Currency: USD

iLap Category Sequence No: 1 Current Expenditure Category: GO, NON CS, CS, TR COMP 1

11,453,568.00 272,000.00 2,607,679.00 85.00 85.00

iLap Category Sequence No: 2 Current Expenditure Category: GO, NON CS, CS, TR, OC COMP 2,3,4

28,546,432.00 1,869,794.67 15,392,321.00 100.00 100.00

Total 40,000,000.00 2,141,794.67 18,000,000.00


OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE

DISBURSEMENT ESTIMATES

Change in Disbursement EstimatesYes

Year Current Proposed

2015 0.00 0.00

2016 67,900.00 567,273.00

2017 586,551.07 1,058,100.00

2018 4,044,342.00 1,641,642.00

2019 14,977,939.00 6,987,940.00

2020 20,349,342.00 7,745,046.00

2021 0.00 0.00

OPS_DETAILEDCHANGES_SORT_TABLE

SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)

Risk Category Rating at Approval Current Rating

Political and Governance Substantial Substantial

Macroeconomic Substantial Substantial

Sector Strategies and Policies Moderate Moderate

Technical Design of Project or Program Moderate Substantial

Institutional Capacity for Implementation and Sustainability

Substantial Substantial

Fiduciary Substantial High

Environment and Social Low Low

Stakeholders Low Low

Other Substantial

Overall Substantial Substantial


.

Results framework

COUNTRY: KazakhstanSME Competitiveness Project

Project Development Objectives(s)

The project development objective is to enhance the competitiveness and capacity of targeted small and medium sized enterprises in Kazakhstan.

Project Development Objective Indicators by Objectives/ OutcomesRESULT_FRAME_TBL_PDO

Indicator Name DLI Baseline Intermediate Targets End Target

1 2 3 4 5 6

Number of SMEs who become accredited suppliers to large companies

Number of SMEs who become accredited suppliers to large companies (Number)

0.00 0.00 0.00 0.00 0.00 0.00 100.00 100.00

Action: This indicator has been Revised

Rationale:

Intermediate targets were updated to reflect actual numbers and proposed extension of the project closing date. The end target has not been changed.

Number of Cluster Competitiveness Action Plans for which implementation has begun

Number of Cluster Competitiveness Action Plans for which implementation has begun (Number)

0.00 0.00 0.00 0.00 0.00 6.00 6.00 6.00

Action: This indicator has been Revised Rationale:


RESULT_FRAME_TBL_PDO


1 2 3 4 5 6

Intermediate and end targets were increased to reflect actual numbers and proposed extension of the project closing date.

Percentage of participating SMEs reporting improved management and business practices

Percentage of participating SMEs reporting improved management and business practices (Percentage)

0.00 0.00 0.00 0.00 0.00 75.00 75.00 75.00


Rationale:

Intermediate targets were updated to reflect actual numbers and proposed extension of the project closing date. The end target has not been changed.

PDO Table SPACE

Intermediate Results Indicators by ComponentsRESULT_FRAME_TBL_IO


1 2 3 4 5 6

1. SME Capacity Building Program

Number of local SME Advisors trained to undertake SME capacity building based on an established competency framework (Number)

0.00 0.00 0.00 0.00 0.00 150.00 150.00 150.00


RESULT_FRAME_TBL_IO


1 2 3 4 5 6


Rationale:

Based on results of the study conducted by external consultant (GDSI Limited) and position of NCE "Atameken", Kazakhstan currently needs no more than 150 business consultants. Hence, the end target reduced from 750 to 150.

Percent of Women Advisors trained (Percentage)

0.00 0.00 0.00 15.00 20.00 30.00 30.00 30.00


Rationale:

The intermediate and end targets made more conservative based on stakeholder consultations and results of study by external consultant.

Percent of training participants who found the training offered as effective and useful to them (Percentage)

0.00 0.00 0.00 0.00 66.00 66.00 66.00 66.00


Rationale:

The end target stays the same. Intermediate targets are updated to reflect extension of project closing date and actual launch of training activities.

Number of master trainers, assessors, instructional designers developed and trained in global best practice (Number)

0.00 0.00 0.00 0.00 0.00 23.00 40.00 40.00


Rationale:

Intermediate targets updated to reflect actual timeline of implementation of subcomponent 1.2.


RESULT_FRAME_TBL_IO


1 2 3 4 5 6

2. SME Linkages in Competitive Sectors

Number of SMEs who are in the process of becoming "accredited suppliers" to large companies (Number)

0.00 0.00 0.00 0.00 0.00 200.00 200.00 200.00


Rationale:

The end target does not change. Intermediate indicators changed to reflect actual implementation progress.

Enhanced institutional structure and technical approach for cluster competitiveness (Text)

Current approach focuses on providing financial resources and is measured primarily by output

Government's approach to cluster competitiveness includes an enhanced institutional structure and incorporates relevant best practices.

Action: This indicator has been Marked for Deletion

Number of Cluster Competitiveness Action Plans that have been developed (Number)

0.00 0.00 0.00 0.00 6.00 6.00 6.00 6.00


RESULT_FRAME_TBL_IO


1 2 3 4 5 6


Rationale:

Intermediate targets updated to reflect actual implementation progress.

Strategic assessment for supply chain financing program has been completed, including recommendations on design, partners, structure, location, and regulatory requirements. (Text)

Activity is new and no prior experience is available in the country

Activity is new and no prior experience is available in the country

Preparation of the terms of refence for consultant.

Selection of consultant firm to conduct the assessment completed and assessment has been initiated

The consultant is selected and the contract is signed

Assessment with recommendations on all aspects of the terms of refence completed.

Strategic assessment completed with clear and actionable recommendations on the next steps for developmet of supply chain financing in the country by project mid-term and factoring program installed.

Strategic assessment completed with clear and actionable recommendations on the next steps for development of supply chain financing in the country and factoring program installed.


Rationale:

The end target modified to include installation of factoring platform program .Intermediate targets updated to reflect project extension.

Value of increased sales of SMEs facilitated through participation in the project (Amount(USD))

0.00 0.00 0.00 0.00 0.00 0.00 25,000,000.00 25,000,000.00


Rationale:

Intermediate targets updated to reflect actual implementation progress.


RESULT_FRAME_TBL_IO


1 2 3 4 5 6

Direct project beneficiaries (Number) 0.00 0.00 0.00 50.00 70.00 1,100.00 3,500.00 3,500.00


Rationale:

The indicator description and measurement methodology modified to exclude misinterpretation and made more conservative in defining direct beneficiaries. E.g. the Borrower suggests counting an SME as a direct beneficiary, rather than multiplying the number of beneficiary SMEs by average number of employees and the average family size. Consequently, intermediate and end targets become more conservative.

Female beneficiaries (Percentage) 0.00 0.00 0.00 15.00 20.00 30.00 30.00 30.00


Rationale:

Intermediate and end targets modified to due to change in description of the parent indicator. In particular, if employees of an SME and their family members are not counted as direct beneficiary, this automatically reduces the share of female direct beneficiaries as a majority of SME owners are male.

3. Impact Evaluations & Monitoring

Number of impact evaluations of SME interventions conducted or underway (Number)

0.00 0.00 0.00 0.00 0.00 3.00 3.00 3.00


Rationale:

Indicator name changed to specify objective of impact evaluations. The end target reduced from 6 to 3 impact evaluations.

A fully functioning and credible third-party monitoring system (Text)

Existence of a Call Center at NCE that is largely unknown

TMS operational and actively managing a flow of calls, escalating issues to


RESULT_FRAME_TBL_IO


1 2 3 4 5 6

and not fully independent

the appropriate policy levels to ensure resolution and policy change based on systemic and specific feedback received. SMEs also view the TMS as credible and responsive.

Action: This indicator has been Marked for Deletion

Rationale:

This activity has lost relevance due to the fact that the office of the business Ombudsman and public monitoring are already implemented by the NCE "Atameken".

Number of government and associated professionals/staff receiving capacity building through trainings, workshops, study visits, etc. (Number)

0.00 0.00 0.00 30.00 40.00 125.00 125.00 125.00


Rationale:

Intermediate targets updated to reflect project extension and actual project implementation.

Beneficiaries reporting that working group decisions represented their views (Percentage)

0.00 0.00 0.00 0.00 0.00 60.00 75.00 75.00


RESULT_FRAME_TBL_IO


1 2 3 4 5 6

Action: This indicator is New

Rationale:

This indicator will measure the citizen engagement process and look into beneficiaries (representatives of partners for components/subcomponents of Project, SME, large companies, government authorities, and other stakeholders including business/industry associations, universities, etc.), who participated in the public-private dialogue during organized public outreach events/meetings/workshops and responded via survey that working group decisions represented their views.

IO Table SPACE

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