Financial Sector/Pension System Development Project (FS/PSD)

USAID/Ukraine, Belarus, and Moldova anticipate an award of a five-year, performance based contract to support Financial Sector/Pension System Development (FD/PSD in Ukraine. The procurement will be through full and open competition.

The purpose of USAID/Ukraine’s Financial Sector/Pension System Development Project (FS/PSD) is to create a viable, effective financial sector which will promote economic growth and provide a sound private pension system.

The development of a viable, effective, financial sector will provide small and medium enterprises with access to financing to through the capital markets. In addition, USAID’s experience has demonstrated that when commercial banks realize that small and medium sized enterprises are obtaining credit through the capital markets, it can stimulate a competitive response which generates increased commercial bank lending to SMEs.

The development of a viable, effective, financial sector is also critical to the successful implementation of Ukraine’s mandatory, defined-contribution, private accumulation pension system. This “second pillar” pension system which is scheduled to go into effect in January 2007 requires that all employees contribute 7% of their salaries the private accumulation pension system. This will total a minimum of over $ 1 billion in contributions per year. Properly invested, these funds can become a major engine of economic growth. However, Ukraine’s nascent financial sector is completely inadequate to accommodate the investment of such sums of money. It is essential and urgent that the challenges of developing a financial market be met in order to protect the pension contributions of Ukraine’s labor force and to guarantee retirement payments to the country’s current and future pensioners.

The challenges to financial sector development in Ukraine include:
• Prudential regulation and oversight, particularly in securities market and other non-bank financial markets, do not protect the public, nor stimulate the growth of financial markets.
• Financial statements are not a reliable indicator of company financial performance and condition, and the public generally does not have access to accurate, understandable information on financial intermediaries
• The capital markets infrastructure remains shallow, with inadequate non-bank financial institutions and instruments, insurance products, equity and debt markets, money market funds, corporate and municipal bonds.
• The anticipated contributions to the Second Pillar pension system will quickly exceed domestic investment opportunities, which could result in a concentration in government securities, which will not fuel economic growth, or in sub-standard, high risk domestic corporate stocks and bonds.

Lack of progress in meeting these challenges can be attributed primarily to a lack of a modern joint-stock company law which incorporates the OECD principles of corporate governance which protect investors, and weak, inefficient financial market regulators.

To meet the challenges, the FS/PSD has set the following objectives:
• Strengthen the capacities of the financial markets regulators to provide efficient and effective prudential regulation to the NBFI sector.
• Broaden the range of financial instruments available for portfolio investment.
• Strengthen the capacity of the pension system to enhance the operational capabilities of the pension fund providers, regulators, supervisors, and policy makers.

USAID anticipates awarding one (1) contract, The NAICS Code for this procurement is 541611. The solicitation will be posted on the FEDBIZOPPS web page (i.e., www.fedbizopps.gov) on or around December 15, 2004. In accordance with FAR 5.102(d), availability of the solicitation is limited to this electronic medium only. Requests for other copies of the solicitation will be disregarded without notice to the requestor. No phone requests will be accepted, no solicitation will be available for pick-up, and no walk-ins will be allowed. Questions must be directed to Raymond Jennings until December 3, 2004, and beginning December 6, 2004 to Svetlana Podeyko.