Technical Assistance Consultant's Report
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Technical Assistance Consultant’s Report Project Number: 41124 December 2010 Republic of Tajikistan: Implementation Support for Private Sector Development Strategy in Tajikistan (Co-financed by the Government of the United Kingdom) Prepared by David Pearce, Consultant For State Committee on Investments and State Property Management This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design. CURRENCY EQUIVALENTS (as of 2 September 2012) Currency Unit – somoni (TJS)} TJS1.00 = $0.20 $1.00 = TJS4.76 ABBREVIATIONS ADB – Asian Development Bank DfID – Department for International Development EBRD – European Bank for Reconstruction and Development EC – European Commission GDP – Gross Domestic Product PSD – Private sector development PSDS – Private sector development strategy SCISPM – State Committee on Investments and State Property Management TA – Technical Assistance WBG – World Bank Group TECHNICAL ASSISTANCE CLASSIFICATION Targeting Classification – General intervention Sector – Law, economic management, and public policy Subsector – Economic management Theme – Private Sector Development Subthemes – Policy/institutional/legal/regulatory reforms; private sector investment CONTENTS Page I. BACKGROUND 1 II. IMPLEMENTATION OCTOBER, 2007—APRIL, 2010 2 III. FINAL SIX MONTHS—APRIL-OCTOBER, 2010 2 IV. CONCLUSIONS AND LESSONS LEARNED 4 APPENDIXES 1. Industry Brochures, Regional Profiles, Guide for Foreign Investors 2. SCISPM—Efficiency and Effectiveness Issues I. BACKGROUND 1. In 2006, when the project was being prepared, Tajikistan ranked 133 out of 175 countries covered in the World Bank Group’s annual Doing Business survey. The private sector was estimated to account for 43% of GDP and one strategic goal of the country’s 2nd Poverty Reduction Strategy (PRS-2), 2007-09 was to increase the share to 55% by 2009. The key obstacles to private sector development in Tajikistan, in addition to the country’s inaccessibility, small economy, and limited domestic market, included: (a) the government’s limited understanding of its role as ‘enabler’ or facilitator; (b) the prevalence of multiple, poorly- designed registration and inspection requirements—many a legacy of unfinished reforms initiated in the erstwhile Soviet Union; (c) an unsatisfactory legal framework and judicial system; (d) weak public administration; (e) fragile infrastructure, especially in energy and transport; and (f) a still emerging financial sector and banking system. In 2006, the Tajik authorities prepared a private sector development strategy, with the help of development partner-financed specialists. Towards the end of that year, they established a new State Committee on Investments and State Property Management (SCISPM) with staff drawn from the former State Agency for Anti- Monopoly, the Aid Coordination Unit under the President’s Office, and the State Property Management Committee (responsible inter alia for the privatization of state-owned enterprises), as well as the National Social Investment Fund. 2. Against this background, the operational objectives of the project, approved on 2 October, 2007, were threefold. The first was to help deepen the government’s understanding of its role as a facilitator of private sector development; the second was to simplify the legal and regulatory framework and promote a more business-friendly environment; and, the third was to mainstream and strengthen the country’s private sector advisory and investment promotion services. Project design took into account the private sector-related activities of other development partners, in particular those of the European Commission (EC), the European Bank for Reconstruction and Development (EBRD), and the World Bank Group (WBG). The project’s estimated total cost was $2 million equivalent—$900,000 to be financed by ADB, $1 million by the United Kingdom’s Department for International Development (DfID), and $100,000 to be provided by the government of Tajikistan in kind (office accommodation and remuneration of counterpart staff). Its implementation period was to be three years, ending October 31, 2010. The SCISPM, responsible to and under the overall direction of the President’s Office, was the beneficiary and formally the project’s Executing Agency1. 3. In support of the PRS-2’s goal to increase the private sector’s contribution to GDP from 43% in 2006 to 55% by 2009, the project sought to enhance the government’s capacity in promoting private sector development. This goal was to be achieved by means of three sets of mutually supporting activities: (a) policy advice to the SCISPM regarding implementation of the recently completed private sector development strategy and support for its role in coordinating all the government agencies concerned; (b) human and institutional capacity building within the SCISPM in terms of it organizational structure, staff development and training, and the tools needed to adjust, re-engineer, and strengthen the legal and regulatory framework for private sector development; and (c) business development and investment promotion in selected regions and sectors and of the country as a whole in potential markets abroad. 1 ADB Technical Assistance Report (Project No. 41124), October 2007 2 II. IMPLEMENTATION OCTOBER, 2007—APRIL, 2010 4. While the government never formally adopted the private sector development strategy, ostensibly due to lack of ownership, its substance was nevertheless reflected in the PRS-2. However, although the project’s basic rationale and intended outcomes remained broadly valid, both ADB and the authorities felt it necessary to re-visit its content and to agree on revised outputs. Accordingly, in August 2008—almost a year after the project’s approval—an international consultant was engaged for six months for this purpose. At the same time and throughout 2008-09, two national consultants appointed in December 2007 provided a range of analytical and technical support activities aimed at building up the newly established SCISPM’s policy coordination and formulation functions as well as strengthening its organizational structure and human resources. 5. In February 2009, although the international consultant’s recommendations were not accepted by the parties concerned, they nevertheless provided the basis for a year- long dialogue with the government through early 2010. Ultimately, this resulted in a revised and drastically reduced list of activities and planned outputs for the final six months of the project (April-October, 2010). Instead of the earlier, somewhat ambitious focus on the government’s role as facilitator of private sector development and the creation of a simplified, more user-friendly legal and regulatory environment, the project’s revised more modest agenda, approved in mid-May, concentrated entirely on the third of the original objectives, namely the mainstreaming and strengthening of the country’s business advisory and investment promotion services. In particular, it comprised three main tasks: (a) creating investment opportunities— through preparation of regional and sector maps or profiles, an investment guide, a green book of investment promotion best practices, and performance indicators; (b) strengthening SCISPM’s institutional capacity—through internal and external training of its staff, procurement of equipment and furniture, and recommendations regarding its organizational structure; and (c) supporting business development and investment promotion—through investment forums and sector-specific investment missions to selected source countries. Reflecting this reduced scope, the project’s cost was cut by about one-third to just under $1.3 million equivalent—$900,000 to be financed by ADB, $294,675 by DfID (comprising the amount already disbursed through early 2010), and $100,000 in kind by the government of Tajikistan. III. FINAL SIX MONTHS—APRIL-OCTOBER 2010 6. Whereas the revised project envisaged a six month-long final implementation period ending October 31, 2010, the time actually available was only three months, i.e. barely half the schedule originally programmed. This was partly because three consultants (one international and two national) were not engaged nor started work until the 2nd half of July. Against this background, under the first main task—creating investment opportunities—the consultants drafted, edited, and arranged for the printing of the following information and promotion materials (in English and Russian): Seven industry/sector-specific brochures covering agriculture, energy, fruits and vegetables processing, minerals and mining, textiles and clothing, tourism, and transport; An introductory brochure Invest in Tajikistan and four supporting economic profiles covering the country’s four regions: Gorno-Badakshan Autonomous 3 Oblast (GBAO), Khatlon, Regions of Republic Subordination, and Sughd, including detailed information on investment opportunities in each area; A guide for potential foreign investors in Tajikistan covering business registration and licensing procedures, priority sectors, investment incentives (including special economic zones), employment and labor, taxation, banking and foreign exchange, investment guarantees and dispute resolution, and protection of intellectual and property rights; and Retail promotional materials for distribution