USAID REFORMA Project Year Two, First Quarterly Report Fourth Quarter 2012

The project began in 2011 and is implemented by Deloitte Consulting, LLP. The project's main objective is to improve the regulatory framework and business environment in the country, with a focus on licensing, taxation, and public-private dialogue. One of the key accomplishments of the project is the completion of the licensing review process. The Law on Licensing was finalized by the Government in December 2012, and it is expected to be passed by Parliament in mid-January 2013. The Law will reduce the number of business activities subject to licensing from over 600 to approximately 250. REFORMA will provide support to the Government in promoting public discussion of the Law and its implementation. Another significant achievement of the project is the development of the strategic planning process and creation of the Strategic Plan of the Ministry of Economy (MoE). REFORMA extended the contract of PDC to develop and institutionalize a strategic planning process for the MoE. The resulting Strategic Plan clearly delineates the goals, activities, expected results, deadlines, budget, source of funding, and the person responsible for achieving the identified results. The final version of the Strategic Plan will be completed in early January and presented to the entire Ministry staff. The project also conducted a tax study of resorts and sanatoriums in the Kyrgyz Republic. The study analyzed financial and tax data collected from approximately 150 resorts and sanatoriums in the Issyk-Kul region. The purpose of the study was to study the effectiveness of four currently applied tax regimes and make recommendations for creating an alternative regime that would ensure fairer distribution of the tax burden among resorts and increase budget revenue to the State. The study concluded in late November, and REFORMA supported a two-day conference at which the Ministry presented the recommendations to 53 resort and sanatorium owners and managers. The participants supported the proposed system of imputed tax to be paid in the form of a mandatory patent based on the number of beds and on a hotel rating system. The project also focused on improving the business environment for mining and mineral resources. REFORMA developed a medium- and long-term development strategy for the mineral resources sector, which includes human and institutional capacity development (HICD) at the State Agency for Geology and Mineral Resources. The strategy aims to improve the regulatory framework and business environment for the mining sector, with a focus on licensing, taxation, and public-private dialogue. In addition, the project implemented REFORMA's fiscal assistance agenda, which includes a study on indirect tax policy and administration, public outreach, awareness, and training of STS officials for introducing the universal tax declaration regime, and public outreach, awareness, and training for the universal tax declaration regime. The project also conducted a tax study of resorts and hotels in the Kyrgyz Republic. The project's geographic focus is the Kyrgyz Republic, and its implementation is expected to have a positive impact on the business environment and economic development of the country. The project's timeframes and recommendations are aligned with the Government's development strategy and priorities.