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Speeches & Transcripts February 12, 2020

Towards Delivering on Tajikistan’s Transformation

The results of the latest Doing Business report reflect the commitment to, progress in, and challenges of aligning Tajikistan’s economic policies to the objective of encouraging investments. The improvement relative to results from earlier years foreshadows a path towards a new development phase, one that succeeds in taking full advantage of the considerable opportunities inherent in the ambitious public investment program, emerging trade opportunities, and the country’s young and growing population.

Against the backdrop of a changing internal and external environment, with improved prospects and risks, it is becoming increasingly evident—whether in terms of macro-fiscal stability, especially young Tajiks’ professional perspectives, or the breadth of the underlying tax base—that enterprises and investors will need to play a key role in buttressing dynamic, inclusive, and sustainable growth and securing improved living standards in Tajikistan.

Tajikistan’s recognition by the Doing Business report as a top-five reformer worldwide reflects the transition from economic policy responses to the post-2008, post-2014, and post-2016 crises towards a clearer and forward-looking focus on measures needed to address critical institutional bottlenecks and strengthen confidence among entrepreneurs and investors that Tajikistan does indeed provide an environment within which to build innovative, employment-generating, and tax-paying companies that are competitive, increasingly export-oriented, and ultimately profitable. In this, the focus on improving the investment climate represents the key to unlocking Tajikistan’s considerable development potential and, concomitantly, mitigating rising risks to harmful debt dynamics.

The members of the Development Coordination Council have taken note, Mr President, and they are committed to supporting you in related efforts to (i) devise a modern tax code that is incentive compatible with the objective of encouraging taxpayers’ voluntary tax compliance (the principal message from last year’s response by the DCC to the Consultative Council); (ii) ensure that a well-functioning, financially stable power utility amplifies the development impact from the public investments in energy generation and transmission; (iii) have a healthy financial sector, entrusted by the private sector, become an engine to innovation and growth; (iv) strengthen the internal management in key sectors of the economy that are subject to considerable risks and in need of substantial investments, spanning water and agriculture to natural hazards and the environment (a critical ingredient to the potential of exporting high-quality food products and tourism services); (v) exploit the efficiency-increasing and employment-generating possibilities inherent in a genuine digital transformation; (vi) pay appropriate attention to strengthening the education, skills, and health of Tajikistan’s most valuable resource, its young and entrepreneurial population; and (vii) balance the country’s expensive investment priorities with predictable, sustainable, and transparent macro-fiscal and debt management, a critical element to potential foreign investors’ confidence.

This is an impressive list of reforms proposed, initiated, and/or developed last year. As such, the year 2019 has the potential to be considered—by the time the National Development Strategy up to 2030 will be assessed in totality—as the “foundational year” for Tajikistan’s graduation from post-crisis response to socio-economic transformation. This next development stage in Tajikistan’s economic history would see a successful, innovation-driven, export-oriented, employment-generating, and tax-paying private sector co-contribute to Tajikistan’s ambitious development objectives.

Specifically, potentially transformative decisions have been taken by the Government since the previous Consultative Council, for which support has been sought from development partners. The ongoing work on the tax reform, with efforts to (i) replace the current tax audit practice with risk-based audits targeting high-risk taxpayers, thereby enshrining voluntary tax compliance as the principal objective of tax authorities’ conduct; and (ii) define a proper balance between fiscal costs of, and socio-economic benefits from, tax exemptions, holds the potential of redefining the, at times, apprehensive relationship between the State and private sector. Agreements reached on a medium-term restructuring agenda for the main power utility, with corresponding policy measures aimed at setting it on financially sound feet, will empower it to (i) provide for uninterrupted universal access to electricity at lowest-possible tariffs, without fiscal drains to the budget; and (ii) be a reliable commercial partner to suppliers.

At the same time, this would enable the power utility to negotiate favourable long-term power purchasing agreements with neighbouring countries, a pre-condition for Tajikistan’s ability to take full advantage of the development potential inherent in the current electricity generation investments. And there is a growing list of additional efforts, started or ongoing, to overcome—often overarching institutional—constraints to the business climate and development objectives.

While there is a considerable and accelerating momentum towards the preparation and implementation of reforms to strengthen the business climate, as reflected in the improvement by 20 positions in the Doing Business country ranking, its current position—in absolute terms and relative to other countries in Central Asia—continues to indicate the need to keep the policy focus on modernising and adapting the economy’s institutional superstructure to evolving development needs and addressing real and/or perceived bottlenecks that have inhibited entrepreneurs from growing their businesses and investors from choosing Tajikistan as their preferred site of doing business.

The year 2020 will be a critical year. It will be the year, in which it becomes evident whether the economy can walk through the doors that have opened during 2019—towards a more dynamic, private sector-driven, and increasingly export-oriented economy. Mr President, during last year’s Consultative Council, you have expressed commitment and provided the encouragement to resolve long-lingering obstacles to investment and private-sector development.

The international development community recognises—and is grateful for—the follow-through. This has started to be seen outside the audience of this room as well. In this endeavour, the first—and, therefore, most important—steps have been made. Maintaining this focus and commitment beyond the implementation stage over the next few years has the potential of improving the country’s socio-economic development perspective beyond widespread expectations.

In these efforts, DCC members will do their utmost to provide the necessary support, united in the shared objective of seeing Tajikistan enter the virtuous cycle of the “innovate-industrial” development scenario described in the National Development Strategy up to 2030 and provide its citizens with substantially improved living conditions. 
 

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