Highlights

Although the World Bank Group support targeted major constraints to private sector development (including access to finance, agricultural productivity, and financial stability), overall outcomes were modest, particularly in the context of the need to foster additional sources of economic growth.

The Bank Group support to improve the business environment relied on technical solutions to reduce discretion but did not address the roots of the unpredictable business environment. These included weak rule of law and abuse of regulatory processes to pressure businesses.

The International Finance Corporation made some important contributions to help microfinance institutions transform into commercial banks and to provide long-term finance to financial institutions. However, the Bank Group did not seek to enhance competition in the financial sector, which was necessary to lower costs to businesses.

The 2018 Systematic Country Diagnostic identified lack of growth in small firms as a challenge. This was further emphasized in the 2020 Country Economic Memorandum and the fiscal year 2016 Performance and Learning Review. However, apart from the dairy sector, the Bank Group program did not address the weak capabilities of firms.

Partnerships and a stable counterpart were key to the Bank Group’s success in helping the National Bank of the Kyrgyz Republic transition to a risk-based supervisory framework consistent with good practices; however, the National Bank of the Kyrgyz Republic’s takeover in 2018 of a bank linked to money laundering contravened good practices.

The Bank Group support to private sector development to drive economic growth focused primarily on making the business regulatory environment more predictable and improving access to finance. While there were some improvements in access to finance, there was no resulting increase in private sector–led growth, nor was there any significant improvement in private investment as a share of GDP, nongold GDP growth, or discernible growth of SMEs. In 2019, governance-related issues still topped the list of the top business environment obstacles facing firms (World Bank Group, EBRD, and EIB 2019), with many firms operating in the informal sector as a means to adapt to the uncertainty faced in the formal sector.1

At the beginning of the evaluation period, there were three main challenges to private sector development, and these persisted over the period:

• Inconsistent application of laws and regulations. This is reflected in the governance shortcomings with respect to rule of law, government effectiveness, and corruption. Protection of property rights was low relative to comparators (see table 1.3). Regulatory enforcement changed frequently, limiting firms’ ability to adapt, increasing the cost of doing business, and pushing many firms into the informal sector. This increased competitive pressures on companies that remained in the formal sector while curtailing access to finance for firms operating informally. Uncertainty also affected foreign investors: among countries in the region, the Kyrgyz Republic has one of the highest numbers of international disputes in which the state is a respondent. A 2015 Bank Group survey found that foreign investors complained about unpredictable, arbitrary, and inconsistent government decisions; lack of transparency in regulations; breach of contract; and expropriation (World Bank 2018c). The nationalization of the Kumtor gold mine in 2021 further deteriorated the risk perceived by foreign investors. There have been politically motivated arrests of businesspeople (Dzhumashova 2022; OCCRP 2021), and businesses have faced extortion from public officials (examples of which were shared in interviews for this evaluation).
• Firms’ difficulty accessing finance. In 2013, Kyrgyz Republic performed substantially below regional and lower-middle income country averages on domestic credit to the private sector as a percentage of GDP and percentage of firms with a bank loan or line of credit. Commercial banks concentrated mostly on short-term lending, with a weighted average loan maturity of 20 months and limited reach (NBKR 2014). Deficient financial sector infrastructure remained an important impediment to broader access to financial services in FY14–21 (IFC 2021).
• Limited firm capabilities for financial management to develop business plans, adopt technologies, innovate, and comply with relevant standards, particularly food safety standards. As of 2022, there were only three laboratories accredited to conduct comprehensive food safety tests required for EAEU markets (all of which are in Bishkek), and there is no unified legal framework on food safety. Limited financial management and business planning capacity was cited in interviews as a major constraint to private sector development during 2013–21 by representatives of development partners, banks, and businesspeople. Commercial banks justified high collateral requirements on the grounds that information on SMEs’ creditworthiness was not easily available or sufficiently transparent (IMF 2020). In the agriculture sector, land market weaknesses hamper the consolidation of landholding, thereby reducing opportunities to increase agricultural productivity.

Uncertainty in the Business Environment

Discretionary inspections and administrative procedures introduce uncertainty that is burdensome for businesses and provides opportunities for corruption (World Bank 2022f). Core issues include incentives for civil servants to follow the laws on the books, clarity in those laws and opportunities for loopholes or alternative interpretations, and a government structure that enables public office to be used for private gain. The Bank Group’s approach to helping reduce uncertainty in the business environment was a major component of the CPS objective to promote private and financial sector development and the CPF objective of enhancing conditions for private investment and diversification. The support was provided through IFC advisory services, with DPOs supporting associated policy reforms.

Despite its critical importance for the country, after FY16, there was little high-level interest on the part of the authorities to address business environment constraints. Bank Group engagement shifted from policy to technical solutions that sought to reduce the discretion of government officials in business inspections and administrative procedures required to obtain permissive documents (for example, licenses, permits, and other documents required to conduct business).

Support through FY18 focused on shifting business inspections to a risk-based system. This was expected to improve predictability in the business environment by introducing clear, risk-based criteria for selecting firms to inspect, inform firms of upcoming inspections, provide clarity on the aspects of business operations that inspections would cover, and provide a mechanism through which firms could provide feedback to the Ministry of Economy on inspections carried out. IFC provided advisory services to the Ministry of Economy and individual inspectorates from FY08 through FY18 to make these changes. The FY14 DPO series supported the introduction of risk-based criteria for planning business inspections, development, and operationalization of a risk-based inspection coordination system in the Ministry of Economy. The FY17 DPO supported amendments to the resolution on risk criteria to allow for less frequent inspections of businesses with lower risk.

Beginning FY19, IFC supported efforts to increase transparency by cataloging permissive documents required by businesses to operate. This involved making legal and regulatory requirements for firms available through one electronic portal. IFC (FY14–24) also supported the agency responsible for promoting foreign direct investment to establish a foreign investor “aftercare” program to help investors identify and help resolve any issue over which the government has influence,2 with the goal of retaining the investment and fostering additional investment.

Despite effort over the evaluation period, there was no sustained progress as a result of Bank Group support for implementing risk-based inspections of businesses. The Bank Group, through IFC advisory services and Bank DPOs, supported the Ministry of Economy and inspectorates in developing the risk-based inspection approach and systems, including the legal framework, risk criteria, checklists, and training. The government placed a moratorium on planned inspections from January 2019 through early 2022; this decision was taken by the government and not supported by the Bank Group. The moratorium negated much of the expected impact because the system supported by the Bank Group had focused on planned inspections. Nevertheless, unplanned inspections during this time were implemented using tools supported by IFC. However, unplanned inspections were not reduced; from 2016 to 2020, they increased by 35 percent. The website established to provide information to firms on planned inspections and what is to be covered in each type of inspection and a channel for feedback to the Ministry of Economy was down at many points during the conduct of this evaluation (July 2021–December 2022);3 when it was functioning, it was only partially up to date.

The approach to reducing discretion was not targeted at the right level to be effective. Particularly problematic for businesses, according to numerous interviews, were inspections undertaken by law enforcement bodies and the prosecutor’s office (which were outside the scope of the reforms supported by IFC or the World Bank and which were not mentioned in Bank Group program documents). Nor did the Bank Group address the identified knowledge gap on grand corruption and vested interests.

There has been limited progress on permissive documents and investment policy, and the incentives of public officials to follow established rules have not improved. Progress in this area is critical to improve the predictability of the business environment. IFC is supporting the creation of an online registry of permissive documents that contains information on requirements for licenses, permits, approvals, and other documents required for business operations.4 As of May 2023, the registry was incomplete, and some of its information was out of date.5 While IFC has indicated that, since October 2021, the website had been visited more than 16,000 times from unique IP addresses, none of the private sector representatives interviewed for this evaluation were familiar with it and could therefore not comment on its effectiveness. IFC support did not simplify any procedures, reduce the number of permissive documents required for business activities, or strengthen the incentives of government officials to follow established rules. Interviews with IFC and government officials indicated that the intention of cooperation with the government on permissive documents had been to automate the issuance of licenses and permits, but this was stymied by problems with system interoperability. Regarding investment policy, an investor grievance mechanism was adopted in mid-2022, outside the end of the evaluation period. IFC reports that the mechanism has resolved grievances of three investors that together represent $76 million in investment and more than 250 jobs. An additional eight grievances are in process. This mechanism is a positive step, but it is too early to assess its impact.

The CPS results framework indicators on the business regulatory environment are presented in table 5.1. Despite its prominence in the CPF, the CPF did not have any results indicators on business regulation.

Source: Project documents and Independent Evaluation Group analysis

Note: IFC = International Finance Corporation; MSME = micro, small, and medium enterprise.

Difficulty Accessing Finance

Access to finance for firms was constrained by the high cost of credit and high collateral requirements, with weaknesses in financial infrastructure contributing to the latter. High interest rates are driven by limited competition in the banking sector, among other factors (IMF 2019a, 2020; World Bank 2010a). Weaknesses in the credit information–sharing infrastructure and deficiencies in the collateral registration and execution regimes contribute to high collateral requirements (World Bank 2010a). These issues persisted through the evaluation period; as of 2021, “the Kyrgyz financial system struggles with high net interest margins and high collateral requirements” (IFC 2021, 59), and “collateral requirements applied by banks are onerous and also constrain the quantity of credit supplied” (IMF 2020, 2).

To support increased access to finance for firms, the Bank Group supported strengthening financial sector infrastructure and domestic financial institutions to expand their services. The Bank Group also supported financial sector stability to safeguard the financial sector from the vulnerabilities uncovered in the 2010 economic and political crisis. All these areas were included in the CPS and CPF under the objectives of promoting financial and private sector development and enhancing financial deepening and inclusion, respectively. However, the Bank Group did not support efforts to increase competition in the banking sector.

To help alleviate collateral constraints, the World Bank and IFC worked in a coordinated way. Efforts were supported by the FY12–21 Financial Sector Development Project (investment loan), the World Bank–executed Kyrgyz-SECO financial sector trust fund (FSTF), and considerable analytical and advisory work. This work aimed to (i) improve the functioning of the private credit bureau so that banks would have better information on which to assess borrowers’ creditworthiness and (ii) modernize the movable collateral regime, including its framework and implementation, to expand the range of collateral used in the financial system.

The collateral registry and credit information system are not yet effective in helping to ease collateral constraints:

• The Bank Group supported the development of a new Secured Transactions Law, adopted in 2017, and a unified online collateral registry for movable property that became operational in 2017. However, the system has not enabled the registration of encumbrances; thus, lenders cannot know whether collateral is already encumbered before lending against it (IFC 2021). In 2019, while there were 53 financial institutions connected to the online collateral registration system, only 1 used it extensively, 3 used it moderately, and 49 hardly used the registry (World Bank 2019). An FY21 restructuring of the FSTF in the context of the COVID-19 response added a component to further support secured transactions reform because of renewed government interest.
• IFC supported the development of a legal and regulatory framework for credit information sharing and of the central bank’s capacity to supervise credit bureaus. The number of financial institutions reporting data to and using Ishenim (a private credit bureau) increased from 107 in 2013 to 238 in 2018. Overall credit coverage of Ishenim and the public credit bureau increased from 25 percent of adults in 2012 to 39 percent in 2019 (World Bank Group 2020a). However, according to the findings of the 2021 Country Private Sector Diagnostic, companies continue to be reluctant to give commercial banks permission to share their information with the credit bureau, and credit bureaus have only partly automated information exchange with financial institutions (IFC 2021). The FY21 FSTF restructuring added a component to further support credit reporting because of renewed government interest in the agenda.

IFC investments made important contributions to the development of commercial financial institutions in the Kyrgyz Republic. IFC provided long-term financing and supported microfinance institutions to transition to banks. IFC’s additionality through investing in financial institutions has mainly been in providing long-term financing, including local currency financing, not available on the market (IFC 2014, 2020). IFC’s support for several of the financial institutions in the Kyrgyz Republic extended back to their founding or early years and involved important “hand-holding” and signaling to other investors as they established themselves. A long-running IFC advisory services project helped advance development of the microfinance sector and “lay the foundations for a more mature, resilient, and responsible microfinance sector” (World Bank 2020e). The project supported the Bai-Tushum Bank, FINCA International, and Kompanion Bank to transform into banks. IFC helped the National Bank of the Kyrgyz Republic (NBKR) improve and clarify the legal and regulatory framework governing the transformation of microfinance institutions into deposit-taking institutions or full-fledged banks and adopt regulations on information transparency, complaints handling, and client protection in financial institutions.

IFC’s support to commercial financial institutions helped these institutions expand their products and reach. IFC worked through advisory services to (i) strengthen lending and management practices in private financial institutions (especially microfinance institutions), help them transform into deposit-taking institutions or banks, and extend their outreach (especially to rural communities); and (ii) develop capacity in financial institutions to implement agrifinancing and risk management solutions for farmers and provide technical advice to farmer-borrowers. During the evaluation period, IFC had existing or new investments in four commercial banks (including three that were focused on microfinance). It also invested in a fund that provided risk capital to micro, small, and medium enterprises.

IFC clients expanded lending to microenterprises and SMEs over the evaluation period. Kyrgyz Industrial Credit Bank’s outstanding portfolio of lending to microenterprises increased by 28 percent from 2013 to reach $11.3 million in 2021. Its outstanding SME portfolio increased by 49 percent from 2013 to reach $85 million in 2021. It fell short of the FY17 target linked to IFC’s FY14 investments but has since surpassed it. FINCA International transformed from a microfinance institution into a full-fledged bank and maintains a focus on microlending in rural areas. Its outstanding SME portfolio increased by 176 percent from 2013 to reach $12 million in 2016 (latest data available, since IFC has exited this investment). The Bai-Tushum Bank transformed from a microfinance institution into a commercial bank and is now one of the 10 largest banks in the country. Its outstanding SME portfolio increased by 316 percent between 2013 and 2019 (including conversion of microloans to SME loans), meeting the project’s target. During the CPS period (FY14–17), microfinance institutions supported by IFC provided $250 million in loans to micro, small, and medium enterprises, surpassing the CPS target of $200 million. The CPF target of micro, small, and medium enterprises reached with financial services (450,000 by 2021) was also exceeded, with 544,021.

IFC supported three financial institutions to improve risk management practices in agricultural lending. They helped streamline risk assessment processes to enable smaller-scale lending to farmers, introduced tailored agrifinance products, and developed technical extension services to farmer-borrowers. One institution launched value chain financing products, including lending to farmers using milk contracts as collateral. Through IFC’s support to financial institutions, 57,397 farmers were reached with $61 million in loans issued by four financial institutions (World Bank 2022e).

The World Bank worked to increase access to finance in rural areas through the expansion of KPO’s services, but this approach was only tangentially relevant to addressing firms’ constraints to access to finance. The World Bank sought, through the Financial Sector Development Project, to help transform the state-owned KPO into a provider of financial services to increase access for poor and rural communities. Deposit services and modern payment systems were virtually nonexistent in rural areas, and KPO had a wide network throughout the country. The project scope did not include expanding access to credit for firms. World Bank supervision reports noted that “competition” and “digital substitution” were undermining KPO’s ability to expand the provision of its nonlending financial services to individuals. More adults were switching to cards or e-wallets, and private financial service providers were overcoming some of the physical and cost obstacles to expanding financial services. These market developments might have warranted a reassessment of the original rationale of the project. The project did ultimately help KPO expand its financial services, with 72 percent of post offices and more than double the number of bank branches in the Kyrgyz Republic offering access to information and communication technology–based financial services and KPO having cooperation agreements with eight banks. As of project close at the end of FY21, the number of KPO financial transactions had declined from the baseline of 17 million in 2012 to 9.8 million (World Bank 2022g) because other services were available in the market.

The CPS and CPF results framework indicators on access to finance are presented in table 5.2.

Sources: Project documents and IEG analysis.

Note: IFC = International Finance Corporation; MFI = microfinance institution; MSME = micro, small, and medium enterprise.

Limited Firm Capabilities

While limited firm capabilities were a major challenge for private sector development, the Bank Group support did not address these directly, apart from some work in the agriculture sector. Bank Group analytics, including the 2018 SCD and 2021 Country Private Sector Diagnostic, show that small firms lacked the competitive potential to grow. Bank Group work in the agriculture sector, envisaged in the CPS and CPF, included activities to support producer-level productivity, which is linked to capabilities. However, Bank Group activities outside the agriculture sector did not focus on developing firms’ capabilities. While other development partners were working to support entrepreneurs and micro and small enterprises, IEG interviews suggested that Bank Group support in this area, particularly with analytics, coordination, and technical assistance, would have been helpful. Beyond some work in the dairy sector, the Bank Group did not support firms’ financial management, innovation, technology adoption, quality improvement, or other management or technical capabilities. Bank Group work in the tourism sector, introduced in the CPF under the objective of building transport connectivity, did not address firm capabilities. Bank Group interventions did not target growth-oriented firms, which the World Bank Productivity Project had found to be key to private sector development (Cirera and Maloney 2017, World Bank Group 2019, Grover Goswami, Medvedev, Olafsen 2019).

The Bank Group worked to strengthen the framework for corporate financial reporting; however, it did not work to support firms’ adoption of good practices. The Kyrgyz Audit and Financial Reporting Enhancement Project, funded by a grant from the government of Switzerland, supported amendments to the Accounting Law (adopted) and Audit Law (pending parliamentary approval as of August 2021; no update is available), in line with international good practices; development of a new system and curricula for professional accounting qualification; and capacity development on accounting and auditing curricula in professional associations and universities. However, the project did not strengthen knowledge of, or demand for, accounting and auditing services by firms. In addition, while the Accounting Law established an accounting, reporting, and disclosure framework, it is not fully observed in practice (World Bank 2021c). Thus, the project did not “raise standards in both private and state-owned businesses in corporate financial reporting and audit, accounting education, financial literacy, and use of financial information,” as was stated in the CPF (World Bank 2018a, 17).

IFC worked to improve corporate governance of enterprises and banks; however, the impact has been small. The 2021 Country Private Sector Diagnostic notes that the country lacks good corporate governance (IFC 2021). The CPS and CPF stated that IFC would implement advisory services to improve corporate governance, with the ultimate goal of contributing to building a sustainable private sector. IFC advisory services contributed to legal amendments related to corporate governance, which were enacted; advised seven financial institutions, one manufacturing firm, one service-sector firm, and Kyrgyzaltyn on improving corporate governance; 6 and trained five local institutions to deliver corporate governance–related trainings and services. However, a World Bank report stated that the adoption of the Corporate Governance Code, which is voluntary, is not common among joint stock companies and that accountability is diluted and enforcement is weakened because corporate governance procedures are regulated by scattered secondary legislation (World Bank 2021c). Nevertheless, according to IFC, corporate governance improvements as a result of the IFC advisory services did contribute to five financial institutions and Kyrgyzaltyn accessing finance that would not have been possible otherwise.

The Bank Group’s work on agricultural productivity supported firm capabilities, but the projects had several weaknesses. Support to agriculture was included in the CPS under the “increasing the efficiency and competitiveness of agri-business” (World Bank 2013b, 25) and “improving management of agriculture, forestry, livestock, pastureland, and water resources, including extension and other support services, for sustainable development” (World Bank 2013b, 26) objectives. The projects focused on productivity of primary agriculture. They were of a limited scale that was spread thinly across the country. Projects providing inputs to farmers reached approximately 20,000 farmers, equivalent to 5 percent of the estimated 400,000 smallholders in the country, and beneficiaries were scattered throughout the country; there was no targeting strategy. They omitted the market linkages to better position the sector to contribute more substantially to economic growth. The sector’s challenges extend to the small size of landholdings and constraints along the value chain including with respect to intermediaries, processing, and exports.

The Bank Group’s agriculture interventions in FY17 and later were more relevant, as they work along specific value chains to address constraints to increasing competitiveness and exports, including product quality (identified by this evaluation as a binding constraint for the country). This approach was taken in the dairy sector through coordinated Bank Group work, influenced by the FY16 PLR’s shift toward economic growth and consistent with the CPF objective of supporting regional development. The World Bank worked on enhancing dairy animal productivity and milk quality on beneficiary farms, linkages with processors, and establishment of a milk quality control system linking producers, collectors, and processors in the Issyk-Kul region. IFC provided training to farmers to help increase milk yields and worked with four financial institutions to facilitate access to finance to small dairy farmers (see the Difficulty Accessing Finance section) and introduced cattle traceability, which is key for food safety and animal health, and a prerequisite for exports, all through advisory services. In addition, the agriculture component of the World Bank–funded Regional Economic Development Project (focused on the Osh region) is focusing on high-value agriculture products, such as fruits and vegetables, which can be exported to existing and new markets. The project is aiming to develop partnerships between agribusinesses and small agricultural producers, based on a value chain approach—Productive Alliances—that has been applied successfully in other countries (World Bank Group 2016b). It is also supporting upgrading and accreditation of four regional food safety laboratories. However, information on results is not available, and landholding was not addressed.

More improvements and tracking of outcomes are needed. World Bank projects did not track increases in sales or exports. While exports of dairy products more than doubled from 2016 to 2021, surpassing the CPF target of a 20 percent increase, the increase was driven by concentrated or sweetened milk, butter, and other processed dairy products. Milk and cream exports, which the Bank Group work focused on, fell by 51 percent. Despite increased productivity, milk quality still needs improvement, and milk supply especially during the winter continues to be low. Continued and sustained support to help develop the knowledge of the farmers on improved animal husbandry practices, nutrition, animal health and breeding, and information about markets is required. In addition, improvements are needed in the quality and delivery of services (for example, artificial insemination and veterinary services) and ability to meet and obtain certification for quality standards. Furthermore, according to focus group discussions in the Issyk-Kul region, increased productivity of milk has contributed to increased prices for animal fodder, rising demand for pastureland, and growing prevalence of animal diseases.

The availability of food safety laboratory services in the country remains limited. Only three state laboratories are accredited to conduct comprehensive tests (up to 70 percent of the tests) required for export to EAEU markets. All three are in Bishkek, whereas agriculture production is scattered throughout the country. Approximately half of fruit and vegetable and milk production—the main agricultural export commodities—are in the three southern regions of Jalal-Abad, Osh, and Batken. These regions are far from Bishkek and have border crossing points to regional export markets. Private sector representatives interviewed for this evaluation stated that the lack of accredited labs closer to agriculture production is problematic and adds to the time and cost of exporting. The work on food safety standards expected under the CPS, through IFC’s regional Food Safety Program, was dropped because of lack of regional cooperation (World Bank 2016c). The FY19 Economic Governance DPO supported submission of a Food Safety Law that IFC had advised on to parliament, but the law was not adopted. The FY20 Regional Economic Development Project is supporting upgrading and accreditation of laboratories in Osh (which is an important step).

Box 5.1 examines the Bank Group corporate and International Development Association special themes of gender and climate change.

Main Findings

The most successful Bank Group contribution to strengthening the foundations for private sector development was the support to NBKR to implement a risk-based supervisory framework. Partnerships, donor coordination, and a single counterpart with good capacity were key to this success. SECO funded nearly all the World Bank’s ASA and IFC’s advisory services projects in the financial sector over FY14–21. Some good practices were developed in the Bank Group’s relationship with SECO, including open and continuous communication on implementation progress. The World Bank and the International Monetary Fund coordinated advice and technical assistance to help strengthen NBKR’s supervisory capacity. NBKR had the same governor for the entire 2014–21 period, with the exception of a three-month period in 2017, and the implementation of a risk-based supervisory framework was fully under its control. In addition, NBKR has generally been able to attract and retain qualified staff, partly because of higher salaries for professional staff in the central bank compared with those in the regular civil service.

However, the impact of the work on bank supervision is hindered by weaknesses in bank resolution related to governance issues. Under the FY14 DPO series, the World Bank had initially sought to support development of the Prompt Remedial Action Framework to strengthen NBKR’s resolution functions for distressed banks. This prior action was dropped from the second operation of the DPO series after an assessment that more time was needed for the reforms. While the World Bank attempted to make progress on the bank resolution framework through the Financial Sector Development Project and FSTF, NBKR’s 2018 takeover and recapitalization of Rosinbank—a bank involved in money laundering (IMF 2019b)—contravened many of the good practices for which the World Bank had been advocating. As of June 2021, the International Monetary Fund was continuing dialogue with the government on how to improve the bank resolution framework (IMF 2021).

The Bank Group’s work on the business environment and financial sector infrastructure relied on technical approaches, with insufficient attention to critical underlying constraints. After the end of the work on the National Private Sector Development Strategy, there was little dedicated follow-up on business-enabling environment priorities. Although recommended at various stages in the country engagement cycle, a detailed and actionable political economy analysis focusing on grand corruption and vested interests—drivers of the weak rule of law and unpredictability of the business environment—was not conducted. This meant that critical considerations, such as the incentives that public officials face, loopholes that enable alternative interpretations of laws and regulations to persist, and the capture of political office by private interests, were not adequately recognized. The lack of competition in the financial sector—a core reason for insufficient access to finance—was not tackled. The CLR argued that “private sector development reforms need to go beyond a narrow focus on specific business climate indicators to take a more holistic view of the factors affecting investor confidence” (World Bank 2018a, 12). While the CPF indicated that it incorporated this lesson, there was inadequate attention to implementation of laws and regulations on the books.

Although it was a major focus of Bank Group’s work, there is little evidence of reduced uncertainty in the business environment. The government’s introduction of a moratorium on planned business inspections undermined the impact of the reform. While there is some evidence of compliance cost savings, inefficiencies remain in the system. Neither the portal providing information on business inspections nor the registry of permissive documents is currently active. No discernible improvements were made in sector-specific regulations, although work is ongoing. The system for identifying and tracking progress in addressing complaints by investors (grievance system) was only recently adopted.

The Bank Group’s approach did not seek to build firm capabilities. Thus, there continues to be a “missing middle” as identified in the SCD and more prominently in the 2020 Country Economic Memorandum (Izvorski et al. 2020). The FY16 PLR indicated that it would implement entrepreneurship programs to help firms export and grow, but such programs did not materialize. There were efforts to enhance the quality auditing and accounting services, but not on firms’ demand for them.