Consultative Group Meeting for the Kyrgyz Republic

Table of Contents

A. Chairman’s Report of Proceedings

B. Agenda

C. List of Participants

CONSULTATIVE GROUP MEETING FOR TAJIKISTAN Dushanbe, Tajikistan, May 2-3, 2003

A. Chairman's Report of Proceedings

Your Excellency, distinguished members of the delegations, ladies and gentlemen:

1. This Consultative Group (CG) meeting for Tajikistan – the first ever held in the country -- helped enrich the dialogue between the Government, Donors, and other stakeholders. Participants expressed their appreciation to the Government of Tajikistan for hosting the event. They paid special tribute to President Rahmonov for his involved and passionate participation. The fact that it was held in Tajikistan demonstrates how far the country has come since the end of the civil conflict. The meeting was also noteworthy in that it was based on the Government’s own Poverty Reduction Strategy Paper (PRSP) and draft Public Investment Program (PIP).

2. Participants welcomed the Government's commitment to making poverty reduction a central element in their strategy and congratulated the Government of Tajikistan on its improved macroeconomic stability and for progress in transitioning from humanitarian assistance to a regular development program based on Tajikistan’s PRSP. They also recognized that stability and security in Tajikistan have improved and that the Government has initiated important reforms in trade liberalization, land reform, privatization, the legal framework, and fiscal management. These reforms, if sustained and deepened, should make a great difference in the lives of the people in all parts of Tajikistan.

Implementing the Poverty Reduction Strategy

3. Participants expressed their support and appreciation for the PRSP and the inclusive process of preparation. The importance of continued parliamentarian and civil society participation during PRSP implementation was underlined. They noted the importance of building country ownership at both the central and local levels. The importance of placing development in the context of human rights, fighting corruption, reducing drug trafficking and establishing a pluralistic market economy was also stressed.

4. The Government outlined the key achievements of the PRSP during the first year of implementation. These included strengthening the macro-economic environment through restructuring debt, improving tax collection, drafting a privatization plan, improving the legal and regulatory framework for private sector development, agriculture reforms, and social sector reforms. Participants expressed support for the inclusion of the Millennium Development Goals (MDGs) in PRSP targets. Specific economic issues discussed included:

5. Macro-Economic Framework: The IMF briefed donors on the status of the PRGF program and indicated that Tajikistan’s macro-economic performance to date has been broadly satisfactory. However, the IMF indicated that there was a need to reduce inflation; reallocate government expenditures towards social spending; accelerate structural reforms in the energy and banking sectors; and improve external debt sustainability and debt management. Several bilateral debt agreements in 2002 provided significant near term benefits, but further restructuring of bilateral debt on more concessional terms was necessary to ensure longer term debt sustainability. The IMF also suggested the establishment of a single aid coordination unit to help align public investment priorities with the PRSP and to improve absorptive capacity. Participants welcomed progress on macro-economic and debt sustainability and agreed that further debt restructuring and grant support would be necessary.

6. Foreign Remittances: Some participants indicated that foreign remittances, from both migrant workers and shuttle traders, played an important role in macro-economic performance and suggested the need for clear rules and procedures to facilitate this. The Government felt that shuttle trade rather than migrant workers played a more important role in foreign remittances.

7. Infrastructure: The Government noted its efforts to strengthen the energy, transport, water and telecommunication sectors including regulations and to improve tariff policies. Participants recognized the importance of infrastructure for development but stressed the need to ensure appropriate maintenance for currently existing infrastructure. They also stressed the importance of providing targeted support to offset the impact of higher energy tariffs on the poor.

8. Rural Development: Participants agreed that farm privatization has been one of the driving forces of recent rapid growth, and can dramatically increase yields. The Government noted actions taken to date, including the piloting of a single land tax. Participants welcomed Government efforts, although they underlined that land privatization needed to be accelerated and combined with improved input access and market infrastructure if high rates of rural growth and poverty reduction are to continue. Participants also noted that it would be important to address farm debt, reduce interference by local authorities on land use, and give equal land rights to women.

9. Community Driven Development: Participants suggested the need for greater attention to community driven development in the provision of infrastructure and social services. They recognized, however, that increased community empowerment would need to be matched by increased capacity building at both the central and local levels.

10. Improving Social Service Delivery: Participants recognized the importance of 2 increasing access to health and education services, especially for women, and improving access to safe water. The Government noted its efforts to provide incentives to the poorest schoolchildren to improve school attendance and indicated the importance of improving educational quality. Participants agreed that strengthening these sectors will help nurture Tajikistan’s human capital. The President indicated that education was the number one priority of the country. Participants stressed the need to strengthen the Government’s efforts to reduce the population growth rate, which puts particular strains on social services. They welcomed Tajikistan’s hosting of the Global Freshwater Forum later this year which will help identify ways of improving access to safe water. Improving water supply systems would help to reduce water borne diseases. Participants also emphasized the importance of reducing the incidence of TB and preventing the growth of HIV/AIDS.

11. Environment: Participants acknowledged the need for environmentally sustainable development, and both emphasized the importance of developing a sound National Environmental Action Program (NEAP) now underway. HE President Rahmonov invited donor interest in innovative approaches to improving the environment such as debt for nature swaps.

12. Governance: Participants stressed the importance they placed on deepening efforts to improve efficiency, transparency and accountability of public institutions. They noted the need to improve professionalism in law enforcement. The Government pointed to its efforts to restructure central government agencies and to establish a State Financial Control Office. Some participants suggested that the creation of a State Audit Committee would help improve transparency in public expenditures.

13. Gender Equity: Participants raised concern about gender issues in Tajikistan, including land rights for women, school attendance for women, violence against women, inclusion of women in high level government positions, and access to micro-credit. The Government agreed that this was an important issue and indicated that they had developed a program to address gender equity issues.

Public Investment Program

14. The Government presented participants with a draft Public Investment Program (PIP) to implement the PRSP for the next three years in three primary areas: poverty alleviation including education and health, infrastructure rehabilitation, and legal and institutional reform. The Government urged participants to support projects through grants and concessional lending, given high debt levels. Participants commended the Government for presenting a comprehensive and clear indication of their investment needs. They noted the importance of prioritizing the public investment program given debt and implementation constraints. Some participants felt that the public investment program should include more in the areas of health and education given the declining share of social sector expenditures in GDP and social indicators, in order to preserve Tajikistan’s human capital. Other participants expected stronger growth effects from infrastructure investments than from increased investment in the social sectors. There were also differences in views on the trends in social expenditures and indicators. It was concluded that improved statistics are needed to make informed decisions on prioritization.

15. There was general agreement that prioritization should be based on economic returns, 3 factoring in the need for maintenance, and contribution to meeting the PRSP and MDG goals. It was also important to ensure that both the PRSP and the PIP have ownership from the Ministries and that the PIP is fully consistent with the PRSP priorities.

16. The Government made a special request to participants to increase technical assistance to train public officials, provide language teachers, and to increase the number of students accepted at overseas educational institutions.

Private and Financial Sector Development

17. The Government described the private investment potential of Tajikistan, including in natural resource development, agriculture exports, cotton production and processing, aluminum processing, tourism, telecommunications, hydro-power, health care, and other areas. The Government also described its efforts to reform customs and taxes to simplify the collection system and make it more transparent. The Government indicated that these reforms would facilitate its move towards WTO accession. A representative of the private sector indicated that in his experience the investment climate has improved considerably over the past seven years.

18. Participants appreciated the progress that has been made so far, but indicated areas where further improvement was needed. New regulatory rules needed to be complemented by strong action to reduce administrative barriers and government interference in the private sector. Participants acknowledged the progress to date in privatizing small enterprises and expressed hope that current plans to privatize medium to large enterprises would be implemented in the near term. They also noted the importance of bringing the shadow economy into the formal sector to strengthen labor rights and improve government revenue. Participants welcomed the Government’s efforts to join the WTO quickly.

19. Participants were briefed about the Pamir Hydro-Power Project, an innovative public- private partnership that aims to provide sustainable power to the people of Gorno- Badakhshan. If successful this could be a useful pilot for private participation in infrastructure in the region.

20. The Government provided participants with a description of its reform agenda in the banking sector and in the development of non-bank financial institutions. The Government expressed appreciation for the support they had received in drafting a microfinance law. Participants acknowledged that while progress had been made, many of the banks remained weak. Poor access to capital was a key element limiting private sector growth. Further efforts will be needed to restructure the banking system and improve regulation and supervision. The creation of a solid financial sector will reduce the credit and transaction constraints that are important impediments to growth, especially for small and medium sized enterprises.

Regional Cooperation

21. Participants stressed the importance of enhancing regional cooperation in key areas such as trade, transportation, water, energy and the environment. Tajikistan’s support for regional cooperation was widely recognized and appreciated, including its leadership in the International Fund to Save the Aral Sea (IFAS). National projects in Tajikistan to improve 4 water management and enhance energy production would also have a positive impact on regional development. However, they suggested that the frequent high level discussions with neighboring countries needed to be matched by stronger implementation to be effective. It was also noted that until the big Central Asian countries demonstrated their readiness to cooperate, there would be little chance that the smaller ones would make much headway on regional cooperation. It was recognized that donors and partner organizations could also assist in strengthening regional cooperation. In this respect, the ongoing CIS-7 Initiative has created an importance platform for building support for regional cooperation.

22. The Government noted that an important related area in which regional cooperation was critical for Tajikistan was the fight against drug trafficking and terrorism.

Resources Pledges

23. Participants expresses their support for the PRSP and provided an indicative figure of commitments totaling some US$900 million over the next three years, of which US$200 million is humanitarian assistance. Some two thirds of this total was pledged in the form of grants. These amounts are preliminary and will be followed up with greater specificity as regards amounts and projects. Participants and the Government expressed satisfaction that this level is significantly higher than the amount pledged in Tokyo two years ago. However, they recognized the need to strengthen implementation in order to ensure that this pledge is translated into an actual increase in support. While humanitarian needs remain high, there was general satisfaction that Tajikistan was shifting from short term humanitarian post- conflict assistance towards a regular development assistance program based on Tajikistan’s PRSP priorities and goals.

24. Participants stressed the need for the Government to provide adequate counterpart funding to ensure timely implementation of projects.

Conclusion and Next Steps

25. Participants felt that the CG meeting helped to sharpen the development agenda for Tajikistan and to develop a process for implementing reforms. The significant level of pledges during the CG, particularly in the form of grants and highly concessional loans, underlined the commitment of donors and partner organizations to support these efforts. Donors and partner organizations agreed to work with the Government to strengthen coordination and harmonization. The Government proposed to prepare an action plan to address issues raised at the CG.

5 B. AGENDA

CONSULTATIVE GROUP MEETING FOR THE REPUBLIC OF TAJIKISTAN Dushanbe, Tajikistan

May 2-3, 2003

AGENDA

Thursday, May 1

Afternoon

14.00 - 14.30 Arrival and Registration, welcome of delegations, and introductions

13.00 - 16.00 Registration

19.00 Reception for members of Delegations hosted by the World Bank

Friday, May 2

Morning

8:00 Departure to Presidential Dacha in Varzob

Opening Session Welcome and opening remarks by the Co-Chairmen

9.00 – 9.20 Prime Minister of the Republic of Tajikistan Akil Akilov World Bank Country Director Dennis de Tray

9.20 – 9.50 Opening Statement by His Excellency Emomoli Rahmonov, President of the Republic of Tajikistan

9.50 – 10.15 Opening Statement by Johannes Linn, World Bank Vice-President for Europe and Central Asia

10.15 – 10.30 Opening Statement by Mr. Muhammad E. Tusneem, Director General for ADB East and Central Asia Department

10.30 – 10.50 Coffee- break

Poverty Reduction Strategy

10.50 – 12.15 Poverty Reduction Strategy Paper – Prime Minister of the Republic of Tajikistan Akil Akilov 6 Presentation by the representative of the International Monetary Fund Presentation by the representative of United Nations Development Program Comments and Questions

12.15 – 14.00 Lunch

Afternoon

Public Investment and Financial Requirements

14.00 – 15.30 Public Investment Program and the Financial Requirements to Implement PRS priorities – Minister of Finance Safarali Najmuddinov Presentation by the representative of the Asian Development Bank Comments and Questions

15.30 – 16.00 Coffee break

Investment Climate and Private Sector Development

16.00 – 17.30 Economic Reforms and Investment Opportunities in Tajikistan - Minister of Economy and Trade Khakim Soliev Role of Banking System in the Development of Tajikistan Economy - Chairman of the National Bank of Tajikistan Murodali Alimardonov Tax and Customs Arrangements for Private Sector Development – Minister of State Duties and Revenues Gulomjon Babaev Presentation by the representative of European Bank for Reconstruction and Development Presentation by the representative of International Finance Corporation Presentation by the representative of private sector and NGO Comments and Questions

18.00 Departure to Dushanbe

19.30 Reception hosted by Government of the Republic of Tajikistan

Saturday, May 3

Morning

8:00 Departure to Presidential Dacha in Varzob

9.00 – 11.30 Delegations Statements and Indications of Support

11:30 – 12:00 Coffee-break

Closing session

12.00 – 12.30 Closing Statements by the Co-Chairmen Prime Minister of the Republic of Tajikistan Akil Akilov World Bank Country Director Dennis de Tray

7 12.30 – 14:00 Lunch Afternoon

13.00 – 13.30 Press conference Prime Minister Akil Akilov and World Bank Country Director Dennis de Tray

14:30 Departure to Dushanbe

16.00 Departure to airport 17.00 Charter flight to Tashkent

8 C. List of Participants

Countries (11)

1. Canada

Mr. Hector Cowan (Head of Delegation) Canadian Ambassador in Almaty (also accredited to Tajikistan and the Kyrgyz Republic)

Mr. Jean Couturier Country Program Manager South Caucasus and Central Asia Central and Eastern Europe Branch Canadian Agency for International Development Email: [email protected]

Ms. Linda Cloutier Counselor on Development Canadian Embassy in Almaty

Ms. Jan Sheltinga Senior Environmental Specialist Central and Eastern Europe Branch Canadian Agency for International Development

Mr. Michael Koros Program Analyst South Caucasus and Central Asia Central and Eastern Europe Branch Canadian Agency for International Development

2. China

Mr. Shi Ze (Head of Delegation) Charge d’Affairs of the People’s Republic of China in Tajikistan

Mr. Zhu Jiming Second Secretary of the Embassy of the People’s Republic of China in Tajikistan

9 3. Germany

Dr. Alexander Muser (Head of Delegation) Head of Division for Central Asia and South Caucasus Ministry for Economic Cooperation and Development Email: [email protected] [email protected]

Mr. Christian Haas Representative of KfW (Kreditanstalt fuer Wiederaufbau), Frankfurt

Mr. Karlfried Metzler GTZ Country Director for Tajikistan, Turkmenistan and Kazakhstan

Mr. Wolfgang Neuen German Ambassador to Tajikistan

4. France

Mr. Patrick Le Gauthier (Head of Delegation) Financial Attaché Embassy of France in Moscow

Mr. Pierre Andrieu Charge d’Affaires Embassy of France in Dushanbe Email: [email protected]

5. Iran

Dr. Murtazo Abdutolibi Head of Financial and Investment Department Ministry of Foreign Affairs

6. Japan

Mr. Akira Kono (Head of Delegation) Director of Country Assistance Planning Division Economic Cooperation Bureau Ministry of Foreign Affairs

Mr. Koichi Miyoshi Charge d’Affairs Embassy of Japan to the Republic of Tajikistan

Mr. Takashi Kamada First Secretary

10 Embassy of Japan to the Republic of Tajikistan

Mr. Asami Eiji Assistant Resident Representative Japanese International Development Agency

Ms. Sugiyama Etsuko Project Formulation Advisor in charge of Tajikistan Japanese International Development Agency

Mr. Usman Rakhmanov Liaison Officer in Tajikistan Japanese International Development Agency

Ms. Nodira Karimova Economic Cooperation Secretary Embassy for Japan in Dushanbe

7. Sweden

Ms. Maria Israelsson Area Manager, SIDA

8. Switzerland

Mr. Hanspeter Maag (Head of Delegation) Swiss Agency for Development and Cooperation

Mr. Christian Kellerhals State Secretariat for Economic Affairs

Mr. Michel Mordasini Operations Director SECO Development and Transition Ministry of Economy, Switzerland

Mr. Daniel Zuest Head of Swiss Cooperation Office Tajikistan [email protected]

Mr. Sobir Kurbanov National Program Officer for Economic Affairs Swiss Cooperation Office [email protected]

Mr. Aham Makhmudov National Program Officer for Local Development [email protected]

11 9. UK

Mr. Michael Smith (Head of Delegation) British Ambassador to Tajikistan

Ms. Jessica Irvine Head of Europe and Central Asia Department, Department for International Development (DFID)

Ms. Gwyneth Chittleborough Economic Advisor (DFID)

Ms. Tamsin Ayliffe Social Development Advisor for Central Asia (DFID)

Mr. Roy Trivedy Program Manager for Central Asia (DFID)

Mr. Shuhrat Rajabov DFID Representative in Tajikistan

10. US

Mr. Thomas Adams (Head of Delegation) Acting Coordinator of Assistance to Europe and Eurasia US Department of State

Mr. Kenneth E. Gross Charge d’Affairs US Embassy to the Republic of Tajikistan Email: [email protected]

Mr. George Deikun Mission Director US Agency for International Development (USAID) Regional Mission to Central Asian Republics

Ms. Sheila Gwaltney Director of Country Assistance Section Office of the Coordinator of Assistance to Europe and Eurasia US Department of State

Mr. Michael Harvey Tajikistan Country Officer USAID

12 Mr. Christopher Grewe International Economist International Affairs/Office of Russia, Eastern Europe and Central Asia US Department of Treasury Email: [email protected]

11. Republic of Korea (as observer)

Mr. Bek Bumhym Deputy Head of Mission of the Republic of Korea Embassy of the Republic of Korea in Uzbekistan Email: [email protected]

12. Russia (as observer)

Mr. Vladimir V. Adrianov First Secretary of Russian Embassy in Tajikistan

13 Organizations (15)

13. Aga Khan Development Network

Mr. Tom Kessinger (Head of Delegation) General Manager of the Aga Khan Foundation

Mr. Hakim Feerasta Resident Representative in Tajikistan Aga Khan Development Network Email: [email protected]

Mr. Matthew Scanlon Project Development Officer Aga Khan Fund for Economic Development, Tajikistan Email: [email protected]

Mr. Mirza Jehani Chief Executive Officer Aga Khan Foundation, Tajikistan Email: [email protected]

14. Asian Development Bank

Mr. Muhammad E. Tusneem (Head of Delegation) Director General of East and Central Asia Department

Mr. Adrian Ruthenberg Director of Operations Coordination Division East and Central Asia Department

Ms. Kazuko Motomura Country Director Tajikistan Resident Mission

Ms. Johanna Boestel Economist of Operations Coordination Division East and Central Asia Department

Ms. Oksana Nazmieva ADB Liaison Officer in Tajikistan Email: [email protected]

14 15. European Bank for Reconstruction and Development

Mr. Michael Davey (Head of Delegation) Director for Kazakhstan, the Kyrgyz Republic and Tajikistan Email: [email protected]

Mr. Martin Raiser Director for Country Strategy and Analysis Office of the Chief Economist

Mr. Fernard Pillonel Head of Bishkek and Dushanbe Resident Offices

Mr. Muzaffar Usmanov Mission Advisor EBRD Resident Office in Dushanbe [email protected]

16. European Commission

Mr. Daniel Guyader (Head of Delegation) Principal Administrator Directorate for Eastern Europe, Caucasus and Central Asian Republics EC External Relations Directorate General

Francois-Vadim de Hartingh Program Officer Delegation of European Commission in Tajikistan Email: [email protected]

Mr. Brian Toll Head of TACIS in Kazakhstan, Kyrgyz Republic and Tajikistan

Pierre-Paul Antheunissens Team Leader TACIS Support to the National Coordinating Unit in Tajikistan Email: [email protected]

17. International Finance Corporation

Mr. Gorton de Mond (Head of Delegation) IFC Regional Representative for Central Asia

Mr. Olim Khomidov IFC Investment Officer in Tajikistan Email: [email protected]

15 18. International Monetary Fund

Mr. Robert Christiansen (Head of Delegation) Mission Chief for Tajikistan Email: [email protected]

Mr. Sarmad Khawaja IMF Resident Representative in Tajikistan Email: [email protected], [email protected]

Ms. Franziska Ohnsorge Economist in the IMF's European 2 Department

19. International Organization for Migration

Mr. Igor Bosc IOM Chief of Mission in Dushanbe

20. Islamic Development Bank

Mr. Nik Zainal Abidin (Head of Delegation) Director of IDB Regional Office in Almaty

Mr. Rauf Mammedov Program Officer for Tajikistan Country Operations Dept-1 Email: [email protected]

21. Multilateral Investment Guarantee Agency

Mr. Keith Martin Advisor to the Executive Vice President Email: [email protected]

22. Open Society Institute

Ms. Zuhra Halimova Executive Director Open Society Institute – Tajikistan Email: [email protected]

23. OSCE

Mr. Igor Popov Deputy Head of OSCE Center in Dushanbe

16 24. The Saudi Fund for Development

Mr. Mohammad Al-Arifi (Head of Delegation) Director General, Asia Projects Department

Mr. Eid Bin Eid Researcher of the Saudi Fund for Development Email: [email protected]

25. United Nations Organization

Mr. Matthew Kahane (Head of Delegation) UN Resident Coordinator and UNDP Resident Representative for Tajikistan Email: [email protected]

Mr. Ben Slay Director RBEC Regional Support Center Bratislava

Ms. Gulden Turkoz-Cosslet Head of the Central Asia Unit UNDP Headquarters in New York

Mr. Vladimir Sotirov Representative of the UN Secretary General in Tajikistan

Ms. Gisela Nauk Political Affairs Officer UNTOP

Mr. Brian Vitunic Political Affairs Officer UNTOP

Mr. Ardag Meghdessian UNWFP Country Director for Tajikistan

Mr. Ismail Omer Deputy UNWFP Country Director for Tajikistan Email: [email protected]

Mr. Phillipe Heffinck UNICEF Area Representative for Central Asian Republics and Kazakhstan

Ms. Yukie Mokuo

17 Head of UNICEF Office in Tajikistan

26. World Bank

Mr. Johannes Linn (Head of Delegation) Vice President for Europe and Central Asia Washington D.C.

Mr. Dennis de Tray Country Director Central Asia Regional Office Almaty, Kazakhstan

Mr. Cevdet Denizer Country Manager Tajikistan Country Office Dushanbe [email protected]

Mr. Pietro Veglio Executive Director, Washington D.C.

Mr. Djamoliddin Nuraliev Advisor to Executive Director

Mr. Stanislav S. Katash Advisor to Executive Director

Mr. Anthony Cholst Senior Country Officer for Central Asia Washington D.C.

Mr. Nick Van Praag Senior Communications Advisor for ECA Washington D.C.

Mr. Sudhee Sen Gupta Privatization Specialist

Mr. Jakob von Weizsacker Country Economist for Tajikistan