Second Intersession Meeting of the Consultative Council on Improvement of Investment Climate under the President of the Republic of Tajikistan
Issues of Conducting Analysis and Preparation of Recommendations for Improving the Investment Climate in the Field of Information and Communication Technologies
The COVID-19 pandemic is confronting every country worldwide with new sets of socio-economic development challenges. Already, we can see that some countries—irrespective of their income levels—have sought to ignore resultant risks and, for that reason, overlooked opportunities, with which to balance the costs from lockdowns, travel restrictions, and other social distancing measures. Without efforts to support domestic production, foster innovation, and protect employment, these countries have risked increased socio-political fragility. Already, it has become obvious in several countries that the absence of economic perspectives and increasing levels of income and food insecurity fuelled intra-society conflicts and unrest.
By contrast, some countries have succeeded in their attempts to manage the COVID-19 crisis—seeking ways to translate perceived weaknesses, old or new, into sources of post-crisis recovery and resilience. And there are first signs that Tajikistan is ready to do exactly that. A country with a young, largely rural population, with a high degree of import reliance and considerable connectivity constraints, with the legacy of a State-led approach to development, can respond to the social, economic, financial, and fiscal consequences of the economic crisis. With increasing fiscal constraints, this would have to go beyond standard “demand-side” policies (social assistance, subsidies to struggling enterprises) and be complemented by “supply-side” policies that have the private sector—with investments, innovations, and exports—play a more active role in co-contributing to overarching development objectives. These types of policies would thus help to generate additional employment opportunities and broaden the tax base, directly addressing secondary effects from the current COVID-19 crisis.
Against the backdrop of Tajikistan’s specific characteristics, there are two sectors in particular that would buffer the negative COVID-19 impacts during the short term, and provide a strong foundation for a dynamic, sustainable, and inclusive recovery over the medium term, viz., (i) the development of rural economies (by fostering the entire value chain from agriculture to food processing); and (ii) the implementation of policies aimed at enabling the economy’s digital transformation. To set in motion these crisis-response developments, Tajikistan has maintained a general focus on preparing reforms with which to remove principal obstacles to private-sector development. The ongoing tax reform is the single-most important and the potentially most transformative effort in this direction. And if these are complemented by sector-specific upgrades, including on telecommunications, it is possible to set in motion dynamic rates of sectoral innovations, growth, and employment generation.
For the information and communication technology (ICT) sector, specifically, there is considerable interest in, and enormous potential for, the full digital transformation of Tajikistan’s economy, from new firms in this sector to applications of e-Government, cashless payments, and smart city solutions. Government has recognised this potential, as reflected in its Concept of Digital Economy, which had been adopted by the Government Decree № 642 in late December 2019. For this to work, existing constraints in sector regulations and the business environment would have to persist being a policy priority.
This agenda was of strategic significance before the COVID-19 crisis, and it has grown in importance ever since, not least because—throughout the world—digital technologies have been seen to offer effective instruments for governments, individuals, and firms to cope with social distancing and ensure business continuity. Reliable, high-speed internet has helped to prevent service interruptions that would, otherwise, have contributed to welfare, revenue, and/or employment losses. Businesses and Governments have negotiated across the globe virtually, while families have benefitted from access to remote education and e-health services. We can see the ever-faster dynamism in digital innovations, including those unleashed by the COVID-19 pandemic, risking Tajikistan to fall behind further.
At the same time, Tajikistan already understands the benefits that can be derived from an encouraging regulatory environment and a transparent licensing regime. During the period 2000–15, the country’s ICT sector was one of the fastest growing sectors, having contributed to socio-economic development and, indirectly, the state budget revenues. It had been possible, with transparent licensing procedures and low licensing fees, to translate the economy’s relative weakness—low penetration rates—into an ability to attract reputable international operators. Still in early 2015, the country’s telecom regulator talked about ICT revenue growth rates to continue along the previous historic average of close to 15 percent. It thus warrants assessments and reflections on underlying reasons why—against the backdrop of a generally dynamic economy—gross revenues in the ICT sector have started to fall in subsequent years and the growth in new subscribers has started to decelerate.
For this industry diagnostic, areas of particular significance include industry restrictions, telecom legislation, and/or tariff increases. The principal question to assess is the degree to which the changing regulatory environment and the lack of a level playing field in the market, partially reflecting the market position held by the state-owned telecom company, could have contributed to the worsening sector performance. In parallel, it would be critical to strengthen the dialogue and communication with principal operators on potential links between high tax margins and the ability to reinvest funds into the development of the 3G/4G infrastructure and general industry development. The objective of this industry assessment appears clear: without the development of high-speed internet, it would not be possible to permit a digital transformation, implement e-Government services, and advance mobile financial applications. Without a focus on required reforms, prices will remain amongst the highest worldwide, notwithstanding limited access and low speed.
Members of the Development Coordination Council (DCC) appreciate the pro-activity demonstrated by Government, also through the initiative shown in organising today’s event, and they are open to support Tajikistan in its efforts to implement less restrictive regulatory policies, increase connectivity, and improve the sector’s operational and financial performance. The latter would help to generate additional resources that could be re-invested into more innovative, affordable, and accessible services. If successful, such an ICT strategy—with innovative, dynamic, and profitable firms employing, especially, young people countrywide—would provide significant socio-economic development stimuli and, as an externality, yield significant additional revenues for the State budget. By removing entry barriers and implementing a modern regulatory framework, Tajikistan would be able to attract more private investment, thereby creating a virtuous cycle as newly established, profitable private enterprises would co-finance the deployment of broadband infrastructure and the increase of network capacity, including last-mile investments.
In short, through the combination of vision and courage, Tajikistan will be able to improve access, affordability, and security, attract private investment, and provide the foundation for the modernisation of the entire governance sector. Digital transformation can help Tajikistan to come out of the COVID-19 crisis stronger and more competitive, with more employment and higher revenue, than when it entered it earlier this year. In these efforts, DCC members offer their support and are looking forward to seeing this vision become a reality soon.