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publication June 25, 2018

Tajikistan Systematic Country Diagnostic


Systematic Country Diagnostic

Making the National Development Strategy 2030 a Success: Building the Foundation for Shared Prosperity

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To take full advantage of emerging development opportunities, Tajikistan should look to providing entrepreneurs and potential investors with sufficient confidence to choose the country as their preferred site of business. This means that Tajikistan will need to ensure macro-financial stability, increase the efficiency of public institutions, and close major infrastructure gaps, while investing in health and education.

Effective policies and institutional reforms encouraging small and medium-sized enterprises to invest, innovate, and grow are a pre-condition for a broader tax base need to, inter alia, ensure the sustainable financing and timely construction of the Rogun Hydro Power Plant. To this end, Tajikistan would need to address its growth-inhibiting governance challenges and ensure a level-playing fields for all firms, irrespective of ownership.

While the new-found access to large neighboring markets has opened the possibility to develop a profitable, export-oriented private sector, the lack of focus and vision to modernize Tajikistan’s unsustainable, remittance-financed, import-reliant economy could thwart efforts to stimulate growth, foster hydropower exports, and generate economic perspectives and social cohesion.

The economic situation (since late 2014), increased levels of external debt, and high population growth rates have increased the urgency to focus on addressing existing weaknesses and overcoming development constraints that have hampered private sector activity, investments, innovation, job creation, and the pursuit of objectives spelt out in the National Development Strategy 2030.

To help Tajikistan address these challenges, the World Bank’s Systematic Country Diagnostic (SCD) for Tajikistan makes several key recommendations:

Macro-Financial Stabilization

Macro-financial stability is the cornerstone of any successful effort to promote private sector development and sustained economic growth. The banking system has the highest priority for macro-financial stabilization. In the immediate short-term, legal reforms are necessary to resolve the banking distress, while governance issues will need to be tackled to prevent recurrence of the problem.

To manage risks stemming from the large financing needs of the Rogun HPP, Tajikistan should develop a realistic and cohesive medium-term macro-fiscal framework, while bolstering its capacity to manage public debt and fiscal risks.

Creation of Effective Public Institutions

International evidence suggests that countries rarely achieve sustainable economic and social development in the absence of effective state institutions. Existing laws and regulations, including competition laws, need to be enforced to improve Tajikistan’s business environment and create pre-conditions for investment, innovation and job creation.

The reform of State Owned Enterprises is indispensable to promote market competition and thereby drive productivity growth. There is also considerable scope to strengthen revenue administration and tax policy.

Good governance, the fight against corruption, a sense of justice, and a level-playing field for all, would go a long way towards shifting the private sector into a key driver of growth and job creation, while boosting the state’s legitimacy. An independent judicial system would have a far-reaching, positive impact on various segments of the economy by instilling a culture of compliance.

Investments in Strategic Infrastructure and Human Capital

Tajikistan has considerable scope to increase productivity and maximize its demographic dividends by investing strategically in key infrastructure and human capital. Tajikistan’s human productive capabilities are significantly underutilized because of years of limited investment in human capital.

Ensuring a reliable and adequate supply of electricity and connectivity infrastructure is a priority area for the Government. Tajikistan can take advantage of its geographical proximity to very large markets by improving connectivity and thus reap the potential from regional and global integration. China’s Belt-Road Initiative represents a major opportunity for Tajikistan to develop physical infrastructure, access new markets via cheaper routes, and generate and strengthen competitiveness.

About the Systematic Country Diagnostic

The Systematic Country Diagnostic is an assessment of the constraints a country faces and the opportunities it can embrace to accelerate progress in reducing poverty and achieving higher living standards for people. The SCD draws upon all available information, including findings of World Bank Group analytical work, as well as research by other international and domestic partners, and incorporates feedback received during online and face-to-face consultations.

The Systematic Country Diagnostic (SCD) for Tajikistan was prepared by the World Bank Group in close consultation with the business community, civil society, local think tanks, the government, development partners, and other stakeholders in Tajikistan, and draws from a large pool of research and data from across different sectors of the economy.

The purpose of the SCD is to inform the Country Partnership Framework (CPF), which is a strategic document that sets priority areas for World Bank Group support in a country. The new CPF for Tajikistan will be launched in mid-2018 and it will guide the World Bank Group's support to the country over the years 2019-2022.