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More Unified Approach to Public Procurement Needed to Boost Kazakhstan’s Economic Recovery

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Kazakhstan has made significant efforts over the past two decades to bring its public procurement system closer to international standards, but a considerable part of procurement activity has yet to meet these standards, thereby limiting overall effectiveness and efficiency, says a World Bank Assessment.

“We acknowledge that the rules and institutions of Kazakhstan’s public procurement system have reached a level of maturity that could potentially leverage economic and market growth, and drive innovation and environmentally sustainable development,” said Jean-Francois Marteau, World Bank Country Manager for Kazakhstan. “As President Tokayev recently mentioned, competent use of public procurement, and procurement by the quasi-public sector, should be considered as means to restore economic activity post-COVID-19.”

The assessment of Kazakhstan’s current procurement practices indicates improved efficiency of the mandatory e-procurement system. At the same time, it reveals that the open tender method led to a contract award in only one-third of procurements in 2017. Overall, public procurement activities in the country were estimated at $21 billion (or 13% of GDP) in 2017. Significant value of procurement is associated with the quasi-public sector, including Samruk-Kazyna JSC, which is estimated to account for almost twice the size of government procurement.

A recent reform has brought the quasi-public sector closer to the general public procurement system, by requiring application of a unified set of rules. However, state-owned enterprises remain far outside the general system. A separate regulatory framework creates a fragmented landscape, with difficult-to-follow legal frameworks generating additional burden on suppliers of different procurement systems.

The report provides recommendations for both the general government public procurement system and that of Samruk-Kazyna, and identifies several key areas that need improvement, including the requirement of a digital signature certificate for foreign bidders that negatively affects the principle of open eligibility, greater competition, and hence value for money.

The report also recommends to further consolidate the system to ensure greater transparency and value for money, further professionalize the procurement workforce, enhance contract management arrangements and practices, and promote integrity and citizen engagement in public procurement.

The World Bank launched the assessment of Kazakhstan’s public procurement system in 2018, jointly with the Organization for Economic Cooperation and Development (OECD), the European Bank for Reconstruction and Development (EBRD), the Islamic Development Bank (IDB), and the Asian Development Bank (ADB). Using the revised universal methodology for assessing procurement systems (MAPS), experts reviewed the following pillars: legal and regulatory framework, institutional framework and management capacity, procurement operations, market practice, and accountability, integrity and transparency. Early results were presented at a public event in Nur-Sultan in September 2019.

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US Anti-Inflation Law threatens Europe

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Europe and the US are heading towards a serious trade and economic conflict, writes “Berliner Morgenpost”.

In the European Union hopes are fading that the US government will significantly amend the controversial subsidies law by providing billions in bailouts to US manufacturers. This forces the EU to protect domestic companies from threatening competitive advantages over US competition and to prevent investment from moving to America.

Fear of the “de-industrialization” of Europe is spreading. For example, buyers of a “Made in USA” electric vehicle with a battery also made in the USA receive a $7,500 subsidy. Subsidies also go to companies that make wind turbines or solar panels from American steel. Europeans are worried that not only will they have to contend with heavily subsidized US competition in future strategic sectors, but industrial cooperation with US companies could also be threatened.

The head of the trade committee in the European Parliament, Bernd Lange, told: “I assume that a few small changes to implement the IRA can still be agreed upon in the negotiations. But I do not think that anything will change significantly, because the Law has already been passed.”

The US IRA law goes into effect on January 1. By that time, the EU countries should have found a common line. France is already openly threatening a trade war and agitating for a tough counterattack: the EU should take a protectionist course and respond with the Buy European initiative. But there are also concerns in Berlin.

An EU trade expert argues that lower energy prices for industry should be considered, as they are currently ten times higher than in the US. European Commission economic policy spokesman Markus Ferber is also calling for a hard line: If the US side doesn’t give in now, the EU commission should “put all instruments of torture on the table” and consider boosting trade. Disappointment with the protectionist course of US President Joe Biden is great, Ferber says: “The American anti-inflationary law threatens Europe, and can make its economic situation much worse.”

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Macron vs U.S. Inflation Reduction Act

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Emmanuel Macron warned that the U.S. risked “fragmenting the West” with a flagship climate law that the French president said would distort competition by massively subsidizing American companies to the detriment of European industries, informs “The Financial Times”. The harsh words, which came on the first day of his state visit to Washington hosted by president Joe Biden.

In a speech at the French embassy in Washington, Macron said while he agreed with the objectives of Biden’s Inflation Reduction Act, it would have negative repercussions for Europe by making it less attractive for companies to invest there. “We need to co-ordinate and re-synchronize our policy agendas.”

Macron called the new U.S. Inflation Reduction Act (IRA) “super aggressive for our companies,” according to comments reported by Agence France-Presse and confirmed by a person present. “Perhaps this law will solve your problems but it will make mine worse,” he said, adding that many jobs would be destroyed.

Macron has also called on the EU to pass a so-called “Buy European Act” that would offer similar subsidies to local industries. Other countries such as Germany are less supportive of the idea.

U.S. President Joe Biden was forced to retract. He said that new laws that give incentives for domestic production of computer chips and renewable energy parts were never intended to exclude European allies and could be tweaked.

Speaking with French President Emmanuel Macron at a joint press conference at the White House, Biden said “There are tweaks that we can make that can fundamentally make it easier for European countries to participate and/or be on their own.”

The United States and France also announced the formation of ‘Joint task force’ between the Unites States and the European Union to deal with trade disputes around clean energy issues emerging from the IRA.

Europe’s industry fears that the bill, which gives tax credit for each eligible renewable energy component produced in a U.S. factory, would take away potential investment from the continent.

Biden said he makes no apologies for promoting American manufacturing of essential goods, but said large legislation often requires tweaks to deal with unintended consequences.

“We’re going to continue to create manufacturing jobs in America but not at the expense of Europe,” Biden said.

Macron told reporters that he was encouraged by his talks with Biden and is hopeful of a fair resolution.

…We’ll see whether Biden keeps his word or not.

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FOCUS: The German economy is in a dangerous pliers

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The politicization of trade relations is proceeding rapidly. German Economics Minister Robert Habeck said: “The phase where many thought markets should rule and politicians should stay out is definitely over. Previously, this idea was wrong,” –  quotes FOCUS.

The German economy is in a dangerous pliers. The craziness is that it is not the Russians or the Chinese who move with both hands in the tongs, but the Americans, who are clearly determined to organize their future prosperity at the expense of the Chinese and Europeans.

Pliers consist of two very different legs:

– On the one hand, the US Inflation Reduction Act (IRA) is primarily aimed at reducing US inflation. In fact, this is a gigantic program to subsidize new technologies. The legislative package plans to spend $369 billion over the next decade on energy security and climate change programs, putting pressure on European industry. The US wants to reinforce its industrial base again.

In some cases, subsidies offered by the US government are four to ten times the maximum government support allowed by the European Commission, French Finance Minister Bruno Le Mer said.

– On the other hand, US government sanctions against China’s semiconductor industry are putting pressure on China, and German industry is also suffering from restrictions. Chinese manufacturers make up one-fifth of the global semiconductor industry, and their European customers and suppliers are required to follow US policy.

Dutch company ASML was under pressure from US officials to stop selling individual chip-making machines to China, Bloomberg reported.

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