Systemic corruption in the KR is widely regarded as the key obstacle for doing business and severely damage investment climate. Desiring to improve this situation, on 12.11.13 the KR President issued a decree on measures for elimination of political and systemic corruption in the state authorities, whereby an institute of Business Ombudsman (BOI) was envisaged to protect the rights of businessmen. However, the political economy of the country at the time and several years afterwards didn’t allow to progress to actual establishment of the BOI.
The commitment of the authorities to form a third-party recourse mechanism for businesses against the abuse of state power was renewed in 2016 with the issuance by the Parliament of the decree on attracting and protecting of investment, which emphasised the importance of establishment of the BOI. The Government, having heard of the EBRD experience in establishing the BOI in Ukraine, approached the EBRD for assistance. The EBRD conducted stakeholder consultations, which revealed that business associations felt the BOI would be their competitor and thus BOI creation of the BOI would mean diminishing their role. In response to that, in April 2017 the EBRD organised a study visit of a focused group of stakeholders out of the prominent business associations, the Government representatives and the Investment Council Secretariat to the Ukrainian BOI. Inspired by what they have learned in Ukraine from both the BOI itself, its clients and the Government, the group returned to the Kyrgyz Republic with an intention to replicate the success in the KR, this time realising the complementary role of the BOI to the business associations. This was a real change in the ownership – from now on, the local stakeholders, in particular business associations have been the drivers of the process. The group started sharing the experience with the wider stakeholder community in the KR to prepare for the establishment of the BOI.
Following consensus-building supported by the EBRD, the independent Business Ombudsman institution in the KR was established on 31 December 2018 with the adoption of the Government Decree. On 30 October 2018, the GRU approved the TC project for support for the BOI KR, including the (1) start-up phase (the "Start-Up Phase") covering, inter alia, project design, physical establishment of the BOI, and identifying and mobilising professional and support staff and commencing operations, and (2) operational period covering, inter alia, financing and providing support for the operational activities of the BOI; drafting of the implementing BOI rules and procedures: Launching a media campaign including a BOI webpage, and carrying out the functions of the BOI as per rules of procedures and mandate.
In January 2016, the SP Com approved the Business Ombudsman Framework, which sets forth the EBRD-supported principles of the BOI. These principles include: independence; ability to influence; accountability; professionalism, integrity and efficiency. The proposed model of the KR as envisaged by the draft Decree is compliant with these principles -- please see the Terms of Reference for the detailed compliance description. Compliance was confirmed by the discussion at the SP Com in February 2019. Following the success of Start up Phase and BOI Initial period funding is requested for Phase 2 continuation of the BOI for additional 19 months. Grant Management Arrangements for Phase 3 -continuation of funding: There will be no changes to the structure of the grant management arrangements as developed and successfully implemented for the prior period of functioning of the BOI KR. In particular, as requested by the Grant Review Unit, a separate legal entity was established and a grant agreement was signed with this legal entity on 13 December 2019 and amendment on 31 August 2021.
This TC Project is fully aligned to the EBRD’s Investment Climate and Governance Initiative ("ICGI"), of which the Business Ombudsman Institution is the one of the flagship products. The TC project is fully aligned with the current Country Strategy for the Kyrgyz Republic which envisages the Bank stepping up efforts in the investment climate through policy dialogue. The continued support for the BOIs is a key Covid-19 policy response measure according to the EBRD’s Covid policy response paper. The continued funding for the BOI KR will ensure continuous support to the businesses and the continued attention by the BOI KR to the main activities. In the Covid-specific circumstances, this will enable the BOI to continue providing systemic recommendations to the authorities on crisis response measures based on the requests received from companies and to fight informality.
The TC Project will require TC activities as follows:
A. Start-up period During the start-up period the following TC activities are required: (1) Project design, planning and coordination of the Ombudsman and Deputies’ recruitment process; the preparation of the BOI statute and key procedures (e.g., the Charter) among all key parties. This stage also includes integrity investigations on specific candidates and legal advice in connection with the establishment and legal structure of the BOI; (2) Physical establishment of the BOI including finding, renting and equipping the BOI; (3) Identifying and mobilising professional and support staff and commencing operations.
B. Initial operational period The following TC activities are required for the implementation phase: (1) Financing and providing support for the operational activities of the BOI; (2) Drafting of the implementing rules and procedures relating to BOI’s governance, duties and responsibilities, rules for investigations etc. to be approved by the BOI Supervisory Board, which will cover, inter alia: (i) BOI detailed governance (e.g., the role of the Supervisory Board, its powers, relationship between the Ombudsman/Deputies and the Supervisory Board; duties and responsibilities of the Ombudsman and Deputies, rules relevant to staff recruitment and employment, etc.,); (ii) Detailed rules for conducting investigations, including clear eligibility criteria for a claim to be investigated by the BOI and the types of matters that are not handled by the BOI (such as review of court decisions), rules relevant to the processing of a claim, guidance on how to conduct investigations and the procedure for requesting a further investigation by the relevant authorities in cases where the initial investigation by the BOI determines that there are reasonable grounds that a business malpractice may have occurred; (iii) Rules relevant to the periodic Reports to be issued by the BOI – to the Supervisory Board and to the public at large; (iv) Confidentiality issues; (v) Files and archives of the BOI. The Rules of Procedure will be available to the public via the BOI website. (3) Launching a media campaign including a BOI webpage, to help raising public awareness of the BOI and its activities. (4) Carrying out the functions of the BOI as per rules of procedures and mandate as approved by the Supervisory Board.
Update 9 November 2020: Phase 2: Continuation of funding for BOI for additional 19 months for the continuation of operational period as described under B. The team is seeking Grant Review approval for the extension of Phase 2 for next 19 months. The scope of work TOR remains unchanged, only minor changes are made to reflect on the factual developments are made since the previous approval (BO established, Decree issued etc.). The TOR keeps also to the Start-Up Phase but as noted above, it is largely completed, with just few equipment pieces to purchase and staff position to hire – all on hold due to the Covid-19 restrictions). The changes have been tracked and uploaded to the TCRS.
Phase 3-continuation of funding for BOI . Continuation of the BOI operation for additional 27 months, from February 2023 to April 2025, as the continuation of the operational phase and the expenses related to the recruitment process of new BO. The scope of work of TOR remains unchanged, only minor changes are made to reflect the factual developments since the previous approval (BO established, Decree issued etc.).
The (main) client/beneficiary: the Government of the Kyrgyz Republic
BOI-Business Ombudsman Institute
SP Com-Strategic project committee
ToR-Terms of Reference
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