Access to finance in Tajikistan

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Presented at the 1st Working Group Meeting on Access to Finance and Remittances - Dushanbe, Tajikistan, 12 March 2014

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Access to finance in Tajikistan

  1. 1. CENTRAL ASIA INITIATIVE INVESTMENT AND COMPETITIVENESS IN CENTRAL ASIA Focus on Tajikistan 1st Working Group meeting on Access to Finance and Remittances Dushanbe, 12 March 2014 With the financial assistance of the European Union
  2. 2. OECD Private Sector Development 2 Objectives of today’s meeting 1. To present the OECD project with Tajikistan: expected benefits, governance, planning 2. To present the methodological framework of the OECD assessment of access to finance policies in Tajikistan 3. To highlight the potential of using remittances for SME development and access to finance, to present and discuss international case studies, and to identify policy instruments that could be relevant for Tajikistan 4. To agree on next steps until next WG meeting in June
  3. 3. OECD Private Sector Development 3 Agenda  Introduction to the project  Assessment of Access to Finance policies in Tajikistan: Methodological Framework  Remittances as an opportunity for SME development and access to finance  Baseline situation in Tajikistan  International case studies and lessons learnt  Discussion of case studies’ relevance for Tajikistan  Next steps
  4. 4. OECD Private Sector Development 4 Expected benefits of the project: enhancing country competitiveness and providing global visibility 1. Enhancing country competitiveness • Developing targeted and practical action plans for reforms • Following-up on implementation and building capacity 2. Providing global visibility • Reviewing reform action plans with OECD countries • Showcasing Tajikistan’s reform agenda as a model in Eurasia
  5. 5. OECD Private Sector Development 5 The OECD at a glance A forum where governments can compare policy experiences and address the economic, social and governance challenges of globalisation as well as to exploit its opportunities 34 Member countries Broad policy expertise Horizontal policy areas  Competitiveness and Investment  Public Governance and Territorial Development  Entrepreneurship, SMEs and Local Development  Employment, Labour and Social Affairs  Trade  Education  Tax Policy and Administration Sector-specific policy areas  Agriculture  Industry  Science and Industry  Financial and Enterprise Affairs Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States This map is for illustrative purposes and is without prejudice to the status of or sovereignty over any territory covered by this map
  6. 6. OECD Private Sector Development 6 Armenia, Azerbaijan, Belarus, Georgia, Republic of Moldova, and Ukraine Eastern Europe and South Caucasus Initiative Afghanistan, Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan, and Uzbekistan Central Asia Initiative The OECD Eurasia Competitiveness Programme OECD Council Mandate covering two regions and thirteen countries The OECD Eurasia Competitiveness Programme was launched in 2008 and aims at contributing to economic growth and development in eleven countries of the former Soviet Union as well as Afghanistan and Mongolia. This map is for illustrative purposes and is without prejudice to the status of or sovereignty over any territory covered by this map
  7. 7. OECD Private Sector Development 7 Project Steering GroupPrivate sector representatives Relevant ministries and government agencies Chairman: First Deputy Prime Minister Deputy Chairman: Minister of Economy OECD (including relevant experts) Proposed governance for the project includes 2 public-private Working Groups reporting to a Project Steering Group OECD Secretariat, GIZ and Ministry of Economic Development and Trade of Tajikistan European Commission Chairman:DeputyChairman,SCISPM Working Group 2 Investment and Trade Promotion for SMEs GIZ Working Group 1 Access to Finance for SMEs Chairman:DeputyMinister,MEDT
  8. 8. OECD Private Sector Development 8CONFIDENTIAL – NOT FOR DISTRIBUTION 1. Provide data (e.g. data request, questionnaires) 2. Co-operate in developing the analysis 3. Review materials Working Group Members 1. Co-ordinate the project 2. Analyse data and develop materials with the support of international experts 3. Draft key conclusions and propose recommendations for discussion WG Secretariat: OECD and GIZ 1. Sets overall priorities of the project 2. Reviews and comments on progress accomplished by the Working Groups (approves proposals, recommends adjustments) 3. Decides on recommendations to be implemented Steering Group – Chaired by the First Deputy Prime Minister WG members collaborate with the OECD and GiZ to develop an action plan that will be reported to the Steering Group for final endorsement
  9. 9. OECD Private Sector Development 9 Tajikistan in the peer review process Roundtable members to comment on draft report and draft guidelines Project Steering Group Tajikistan Eurasia Competitiveness Roundtable Policy reform plan and draft guidelines finalised by Tajikistan with support of the OECD and GiZ Policy reform plan to be peer reviewed by Roundtable members Finalisation of reform plans and guidelines based on comments provided by Roundtable members Using remittances to improve access to finance in Tajikistan Reviewers Follow up on reform implementation Tajikistan 1 2 3 4 Tajikistan, March-October 2014 Paris, November 2014 Dushanbe, December 2014
  10. 10. OECD Private Sector Development 10 Working Group Schedule: 3 meetings are suggested for 2014 The objective is to get ready for the Roundtable in November 2014 2013 2014 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec COUNTRYLEVEL Working Group, Dushanbe Project Steering Group, Dushanbe REGIONAL Eurasia Competitiveness Roundtable, Paris 1st Roundtable Peer review of action plans for reforms in the Kyrgyz Republic 2nd Roundtable Peer review of two action plans for reforms of Tajikistan 1st Meeting Decision on focus and set up of two thematic working groups 2nd Meeting Review of the initial results and recommendations 3rd Meeting Endorsement of final recommendations 3 meetings will be conducted for each of the two Working Groups Design of draft action plans for reform
  11. 11. OECD Private Sector Development 11 Agenda  Introduction to the project  Assessment of Access to Finance policies in Tajikistan: Methodological Framework  Remittances as an opportunity for SME development and access to finance  Baseline situation in Tajikistan  International case studies and lessons learnt  Discussion of case studies’ relevance for Tajikistan  Next steps
  12. 12. OECD Private Sector Development 12 Access to finance in Tajikistan - Bank use for Private Sector Development is limited, Micro Finance Institutions (MFIs) fill the gap Sources: World Bank, World Development Indicators; National Bank of Tajikistan; IMF Financial Access Survey; bne:Invest in Tajikistan; AMFOT (2013) Analysis of AMFOT members activity in 2013; http://www.microworld.org/en/news-from-the-field/article/tajikistan-microfinance-supports-independence; http://www.crif.com/site/en/News/Press- Review/Lists/List/Attachments/1070/Tajikistan.pdf; AMFOT analysis of member activity 2008, 2010, 2012. 11% 3% 3% 1% 1% 0% 2% 4% 6% 8% 10% 12% Account used for business purposes (% age 15+) Kazakhstan Uzbekistan Afghanistan Kyrgyz Republic Tajikistan Regular banking services are rarely used for business in comparison with other countries in Central Asia • The first Credit Information Bureau has been created in June 2013 • Currently, regulation regarding the creation of a Tajik secondary market is being drafted • At least eight leasing companies are operating in Tajikistan • Several pieces of legislation have been drafted or adopted (e.g., Credit Unions, Islamic Banking and Finance Law) Reforms are taking place At the same time, MFIs and the number of MFI clients have increased strongly in Tajikistan 4 11 85 123 125 0 20 40 60 80 100 120 140 2002 2004 2008 2010 2012 0 50,000 100,000 150,000 200,000 250,000 NumberofMFIs Numberofclients
  13. 13. OECD Private Sector Development 13 OECD peer review methodology for access to finance in Tajikistan 15 policy indicators will be assessed across three policy sub-dimensions Dimensions Sub-dimensions 1 Access to finance for SMEs Sub-Dimensions 1.1 Legal and regulatory framework 1.2 Sources of external finance 5.3 ACAAs Sub-dimensions Indicators 1.1 Sources of external finance for SMEs Indicators 1.2.1 Credit guarantee schemes Indicators Level of Reform Indicators 1 2 3 4 5 Credit guarantee schemes Public start-up funding Supply-chain financing Assessment of access to finance policies to define priorities for reform implementation • Legal and regulatory framework • Cadastre • Collateral and provisioning requirements • Registration systems for moveable assets • Credit information services • Laws and procedures on distressed companies, receivership and bankruptcy • Creditor rights • Sources of external finance • Credit guarantee schemes • Financial support services for start-ups • Supply-chain financing instruments • Microfinance facilities • Credit unions • Availability of risk capital • Leasing • Financial literacy
  14. 14. OECD Private Sector Development 14 OECD structures the policy development path of each policy indicator from 1 to 5 to measure the level of policy development Policy indicator levels: • Level 1: There is no framework (e.g. law, institution, project, initiative etc.) in place to cover the area concerned. • Level 2: There is a draft or pilot framework and there are some signs of government activity to address the area concerned. • Level 3: A solid framework is in place for this specific policy area. • Level 4: Level 3 + some concrete indications of effective policy implementation of the framework. • Level 5: Level 4 + some significant record of concrete and effective policy implementation of the framework. This level comes closest to good practices as identified by OECD standards. Level of Reform 1 2 3 4 5 No microcredit facilities (neither small credit lines nor microfinance sector) in the country. Microcredit facilities (either small credit lines or microfinance) exist at the level of pilot projects with limited impact. Microfinance sector present and operating throughout the country. Facilities mainly state or donor funded. Limited range of microfinance products. Microfinance facilities self-sustainable. Special facilities for targeted groups such as youth and women entrepreneurs. Legal and regulatory framework for microfinance industry under preparation. Level 4 plus wide range of microfinance products. Appropriate legal and regulatory framework in place for microfinance Example indicator: Microfinance Facilities
  15. 15. OECD Private Sector Development 15 The assessment of the Kyrgyz Republic identified a need to further strengthen several access to finance-related policy areas 3 2 3 3 3 3 2 1 2 4 3 2 4 1 0 1 2 3 4 5 1.1.1 Cadastre 1.1.2 Collateral and provisioning requirements 1.1.3 Registration systems for moveable assets 1.1.4 Credit information services 1.1.5 Laws and procedures on distressed companies, receivership and bankruptcy 1.1.6 Creditor rights 1.2.1 Credit guarantee schemes 1.2.2 Financial support services for start-ups (vouchers, grants, etc.) 1.2.3 Supply- chain financing instruments (warehouse receipts, contract farming, etc.) 1.2.4 Microfinance Facilities 1.2.5 Credit Unions 1.2.6 Availability of Risk Capital (e.g. venture capital, private equity funds) 1.2.7 Leasing 1.3.1 Financial literacy 1.1 Effective Regulatory Framework 1.2 Access to External Finance 1.3 Other factors that affect demand and supply of finance EXAMPLE OF RESULTS Source: OECD Peer Review Assessment of the Kyrgyz Republic (2013) • Review current collateral and provisioning requirements • Streamline procedures for registration of moveable assets • Expand the activities of the existing guarantee funds and develop a regulatory framework for risk capital • Enhance financial literacy through targeted support programmes on business planning and financial management Example recommendations
  16. 16. OECD Private Sector Development 16 Agenda  Introduction to the project  Assessment of Access to Finance policies in Tajikistan: Methodological Framework  Remittances as an opportunity for SME development and access to finance  Baseline situation in Tajikistan  International case studies and lessons learnt  Discussion of case studies’ relevance for Tajikistan  Next steps
  17. 17. OECD Private Sector Development 17 Remittances are a significant source of Tajikistan’s external revenue Their share to GDP is higher than FDI, Exports and Aid combined Bilateral Aid FDI Remittances Exports 0% 10% 20% 30% 40% 50% 60% 70% 2003 2004 2005 2006 2007 2008 2009 2010 2011 Remittances and other sources of external revenue as a share of Tajikistan’s GDP • Remittances amounted to more than 3.6 billion US Dollars in 2012 • 87% of which are channelled through low cost formal channels • An estimated 10-30% of remittances correspond to small export revenue Sources: World Bank, World Development Indicators, National Bank of Tajikistan Share of Tajikistan’s GDP
  18. 18. OECD Private Sector Development 18 Growing remittances are rarely used for private sector development, where access to finance barriers persist •Remittances are a very high and reliable inflow, despite their seasonality •Aggregate remittance savings are almost as high as domestic credit to the private sector Sources: Buckley and Hofmann (2012), World Bank: Tajik Living Standards Monitoring Survey, World Development Indicators; * Calculation based on WDI data and ILO (2010) Migrant remittances to Tajikistan the potential for savings, economic investment and existing financial products to attract remittances Lending to the private sector as a share of GDP is small compared to other countries in Eurasia 13% 20% 37% 38% 43% 52% 0% 10% 20% 30% 40% 50% 60% Tajikistan Azerbaijan Kazakhstan Moldova Armenia Mongolia Growing remittances inflows are not translated into higher shares of credit to the private sector 0% 10% 20% 30% 40% 50% 60% 2004 2005 2006 2007 2008 2009 2010 2011 2012 Remittances: 46% Domestic credit to the private sector: 13% Of which: long term savings: 5%* Savings from remittances: 11%* Share of Tajikistan’s GDP
  19. 19. OECD Private Sector Development 19CONFIDENTIAL – NOT FOR DISTRIBUTION The potential of remittances policies has already been identified, but further policies could be implemented Access to finance Situation in Tajikistan • Very large inflows of remittances, that are reliable on the long term, but little usage for access to finance • The National Labor Migration Strategy aims to improve the use of remittances in the economy • GIZ works on financial literacy, development of the microfinance sector & product development • Several donors provide advice and support to the banking system and MFI sector What could be further done? Potential impacts of using remittances for access to finance extend to skills and knowledge, and access to foreign markets ?
  20. 20. OECD Private Sector Development 20 Agenda  Introduction to the project  Assessment of Access to Finance policies in Tajikistan: Methodological Framework  Remittances as an opportunity for SME development and access to finance  Baseline situation in Tajikistan  International case studies and lessons learnt  Discussion of case studies’ relevance for Tajikistan  Next steps
  21. 21. OECD Private Sector Development 21CONFIDENTIAL – NOT FOR DISTRIBUTION Migration and remittances – policy instruments focus on financial inclusion, SME development advisory and investment advice Financial inclusion: Improve the transfer of remittances into savings  Establish co-operation between Money Transfer Organisations (MTOs) and Micro Finance Institutions (MFIs)  The people’s network, Mexico  Create remittance-specific products and build financial knowledge  The people’s network, Mexico SME development support: Encourage migrant entrepreneurship  Actively encourage returning migrants to start up their own business  PARE 1+1, Moldova  Paisano invierte en tu tierra, Mexico  Match investments by migrants with public money  PARE 1+1, Moldova  Paisano invierte en tu tierra, Mexico  Help SMEs tap into the diaspora market and/or profit from migrants’ expert knowledge  Paisano invierte en tu tierra, Mexico  Provide services, such as business consultancies, information services, training in small-scale business management and financial support, etc  PARE 1+1, Moldova  Paisano invierte en tu tierra, Mexico Investment advice: Inform on investment opportunities for migrants  Create an agency contacting migrants and informing them about investment opportunities  Mexico  Connect migrants and high potential SMEs/local investment opportunities  Mexico Financial literacy: All policy instruments should be complemented by efforts to increase remittance receivers’ and senders’ financial literacy and knowledge. Three case studies will be investigated: Mexico, Moldova and Turkey.
  22. 22. OECD Private Sector Development 22 Mexico – the world’s second biggest receiver of remittances Sources: World Bank. 2010. Migration and Remittances Factbook 2011: Second Edition. Terrazas, Aaron. 2010. “Mexican Immigrants in the United States.” Migrationpolicy.org. http://www.migrationpolicy.org/article/mexican- immigrants-united-states-0. World Bank. 2013. World Development Indicators 2013. Washington, D.C.,: World Bank. http://elibrary.worldbank.org/doi/book/10.1596/978-0-8213-9824-1. Özden, Çağlar. 2013. “Low Hanging Fruit on the Development Tree: Patterns of Global Migration & Opportunities” presented at INTERNATIONAL COOPERATION AND GLOBAL PUBLIC GOODS: Patterns of Global Migration and Opportunities for Policy Makers, World Bank; World Development Indicators • 13 million Mexicans live abroad, 11 % of the population • Largest destination country is the US, Mexico-USA is the biggest migration corridor • Mostly, but not solely low-skilled employment: 14% of migrants are high- skilled workers Background: A large number of migrants… CASE STUDY …that remits a substantial amount • Mexico is the second largest recipient of remittances in absolute terms • In 2012, the country received remittances of 23 billion USD $5,000.00 $10,000.00 $15,000.00 $20,000.00 $25,000.00 $30,000.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 CurrentUSDMillions After growing for decades, remittances to Mexico have stabilised at high levels
  23. 23. OECD Private Sector Development 23 Remittances are first transferred to savings, in addition, programmes aim to promote entrepreneurship and investment Source: Ministry of Economy of Mexico, Information brochure “Sácale provecho a tus remesas” (2012), Instituto de los Mexicanos en el Exterior; De la Torre, Augusto, Juan Carlos Gozzi, and Sergio Luis Schmukler. 2007. “Innovative Experiences in Access to Finance: Market Friendly Roles for the Visible Hand ?” Policy Research Working Paper Series 4326. The World Bank CASE STUDY • Compatriot, invest in your country: Financial support and advisory services supporting the creation and strengthening of agribusinesses or the export of typical Mexican products to diaspora markets • Investment promotion to rural property: Advising migrants on how to and where to invest in farming co-operatives Investments in agriculture • 3x1 Programme for migrants: Matching public money with migrant investments in the development of livestock agricultural projects, infrastructure, manufacturing or others • Business initiation programme for migrants: Facilitating productive options for Mexicans abroad who wish to start , build or reactivate a micro, small or medium business in Mexico Creation of businesses • The peoples’ network: Facilitate the transfer of remittances into savings/investment accounts at Microfinance Institutions and banks by creating a network that is connected to large Money Transfer Organisations and banks abroad. The basis: Financial inclusion of remittance senders and receivers 2 1
  24. 24. OECD Private Sector Development 24 Good fundamentals: Remittances are connected to bank accounts and tailored financial products are provided Source: De la Torre, Augusto, Juan Carlos Gozzi, and Sergio Luis Schmukler. 2007. “Innovative Experiences in Access to Finance: Market Friendly Roles for the Visible Hand ?” Policy Research Working Paper Series 4326. The World Bank. Taber et al. (2004) Integrating the Poor into the Mainstream Financial System: The BANSEFI and SAGARPA Programs in Mexico; BANSEFI (2010) The Importance of the receiving network: L@Red de la Gente – The Value of being close. Presentation at Directo a México Conference, Atlanta, GA. BANSEFI • Coverage of rural areas by banks was low, many loosely regulated or unregulated financial institutions filled the gap • Support programme to strengthen credit and saving unions: - New regulatory and supervisory framework - Capacity building of existing MFIs - Creation of a shared technological platform - Provision of centralised back-office software and services • National Savings and Financial Services Bank (BANSEFI) as driver of the process First step: Strengthening MFIs Second step: Linking MFIs and remittances • On top of existing MFI, BANSEFI developed and implemented a commercial alliance - a network of savings and credit institutions • The network was then linked to Money Transfer Organisations, facilitating the transfer of remittances through • the “traditional” sending of remittances • directly depositing remittances to an account • Development of accounts that link different savings and investment products, migrants can allocate different proportions to savings or investments CASE STUDY 1
  25. 25. OECD Private Sector Development 25 Example programme: Compatriot invest in your land Focus is on SME advisory and co-financing of agribusiness investments CASE STUDY Description of the programme • Target group: Farmers in Mexico or abroad that want to invest in Mexico using remittances • Content of the programme:  Targeted co-financing for storage, cooling, packaging, processing and marketing  Assistance in the creation of business plans or export certification, especially for the US nostalgia market for Mexican products • Strong emphasis on outreach: Through Mexican associations in US cities as well as information provided in Mexico • Many migrants come from rural under- developed areas • Agriculture provides around 15% of employment • However, the sector lacks financing • In addition, a substantial market of Mexicans in the US emerged, demanding Mexican nostalgia products Rationale Source: Ministry of Economy of Mexico, Information brochure “Sácale provecho a tus remesas” (2012), Instituto de los Mexicanos en el Exterior 2
  26. 26. OECD Private Sector Development 26 Lessons learnt and questions for Tajikistan Source: OECD analysis CASE STUDYCASE STUDYCASE STUDY • Complementarity: Leverage existing programmes and institutions • Focus on the fundamentals: Combine entrepreneurship programmes with efforts to increase migrants’ participation in the financial sector • Communication: Reach out to and inform migrants abroad about programmes at home • Service-oriented: Provide convenient services and a simple choice to migrants Key success factors • What kind of programmes and services are already existing in Tajikistan and abroad? • How can migrants’ participation in the financial sector be further facilitated? • Are there any migrant associations abroad? How strong are migrants’ ties to Tajikistan? • How can services be provided as convenient as possible (abroad/local – urban/rural)? Example questions for Tajikistan
  27. 27. OECD Private Sector Development 27 Moldova has experienced high levels of migration and remittances, policy instruments aim to translate remittances to investments Sources: Source: Ibabanji (2012) Program on attracting remittances into the economy “PARE 1+1”. Presentation at the ETF seminar “Migration and Skills”, 6 – 7 March 2012, Torino; UN in Moldova Magazine (2012) Building Future at Home, “Program on attracting Remittances into the economy ‘’PARE 1+1’’for 2010-2015, High migration and remittances inflows… CASE STUDY …a small percentage used for investment • Number of migrants: around 300,000 persons, or 25 % of the economically active population • Remittances level: 23% of GDP • Remittances are the major source of financial inflows • 45% of migrants go to the EU, the same number is migrating to CIS countries • Remittances use: mostly used for basic household consumption, consumer durables, purchase of housing, and debt repayment. • Less than 7 % are used to finance business investments, 5 % are deposited into savings accounts General problems include: • Lack of awareness regarding business development opportunities • Weak entrepreneurial skills • Lack of incentives for SME establishment and development • Limited access of migrants and remittance beneficiaries to financial resources
  28. 28. OECD Private Sector Development 28 PARE 1+1 programme: Focus on strengthening entrepreneurial skills and knowledge and matching remittances investments with public money It consists of four pillars: 1. Information and Communication: - consultation and information 2. Training and Entrepreneurial Support: - training courses 3. Business Financing/1+1 Rule: - investments by migrants are matched with an equivalent subsidy by PARE 1+1 4. Post-financing Monitoring and Program Evaluation Policy instrument: PARE 1+1 programme CASE STUDY Main results Objective: mobilization of human and financial resources of the Moldovan migrant workers in order to sustain the economic development of the Republic of Moldova by stimulating the establishment and development of SMEs. • Creation of 153 start-ups in the following sectors: • 313 companies assisted • They provide 1600 jobs • Attraction of >4 million Euro • This is 2.5 times the value of programme investments 42 % 29 % 30 % Agriculture Production Services Sources: Source: Ibabanji (2012) Program on attracting remittances into the economy “PARE 1+1”. Presentation at the ETF seminar “Migration and Skills”, 6 – 7 March 2012, Torino; UN in Moldova Magazine (2012) Building Future at Home, “Program on attracting Remittances into the economy ‘’PARE 1+1’’for 2010-2015,
  29. 29. OECD Private Sector Development 29 Lessons learnt and questions for TajikistanCASE STUDYCASE STUDY • Communication: - Motivate migrants through success stories - Communication with the diaspora is critical • Governance: Involvement of the local public administration in the implementation of the programme • Financial support: Match remittances investment with public funds • Improving business climate: Important to create an enabling environment for SMEs - Moldova ranks 81st globally, up from 93 (2013) Lessons learnt • Which communication channels to the diaspora exist? • Could support services first focus on urban areas or pilot regions? • Are public or donor funds available for co-financing? • Is the general business climate supportive enough for migrant entrepreneurial activity? Example questions for Tajikistan Source: OECD analysis, 2014 Review of Pare 1+1: “Program on attracting Remittances into the economy ‘’PARE 1+1’’for 2010-2015, report elaborated in Chisinau 2014. World Bank, and International Finance Corporation. 2013. Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises. Doing Business 2013. Washington, D. C:
  30. 30. OECD Private Sector Development 30 In the 1970’s Turkey witnessed large levels of state-supported labor migration Sources: World Bank. 2013. World Development Indicators 2013. Washington, D.C.,: World Bank. http://elibrary.worldbank.org/doi/book/10.1596/978-0-8213-9824-1. Içduygu, A. (2005), "Migration, Remittances and their Impact on Economic Development in Turkey", in OECD, Migration, Remittances and Development, OECD Publishing • For decades Turkey has been one of the top 10 remittance recipients among developing countries • By 1980, 2.3 million Turkish citizens had emigrated, around 5% of the population. • They remitted more than 2 billion USD, which corresponded to 3% of the GDP Background Migration was seen as a development tool • Most of the migration originated from rural underdeveloped areas and went to Europe • Migration was intended to be temporary • Goal was to develop sending regions of migrants • Migrants kept strong ties to Turkey, created diaspora organisations CASE STUDY
  31. 31. OECD Private Sector Development 31 Turkey’s focus on state-driven top-down remittance policy instruments resulted in limited success Source: Içduygu, A. (2005), "Migration, Remittances and their Impact on Economic Development in Turkey", in OECD, Migration, Remittances and Development, OECD Publishing; Faist, Thomas, and Eyüp Özveren, ed. 2004. Transnational Social Spaces: Agents, Networks, and Institutions. Harzig, Christiane, Danielle Juteau Lee, and Irina Schmitt. 2006. The Social Construction of Diversity: Recasting the Master Narrative of Industrial Nations. Oxford. Koc, Ismet, and Isil Onan. 2004. “International Migrants’ Remittances and Welfare Status of the Left-Behind Families in Turkey.” International Migration Review 38 (1): 78–112 Köksal, Nazli Elif. 2006. “Determinants and Impact on the Turkish Economy of Remittances.” MATISSE. • Creation of Worker’s Joint Stock Companies (>600 companies) • Aim: invest in the industrialisation of underdeveloped regions • Created with capital from shareholders working in Europe (at least 50% of migrants as shareholders) • OR: created with savings from migrants abroad, local shareholders (min. 50%) and state investments • Establishment of the State Industry and Workers’ Investment Bank • To support Worker’s Joint Stock Companies  Inadequate project identification: Goals of companies were not in line with economic considerations  Bad financial and technical planning and management  Lack of good governance  Inadequacy of communications  Mismatch between financial resources and workers’ entrepreneurial abilities Result: Only 20-30 companies remain up to now Policy instrument Lessons learnt CASE STUDY
  32. 32. OECD Private Sector Development 32 Lessons learnt and questions for Tajikistan Source: Içduygu, A. (2005), "Migration, Remittances and their Impact on Economic Development in Turkey", in OECD, Migration, Remittances and Development, OECD Publishing; OECD analysis CASE STUDY Main lesson: Policies have to be based on economic evidence, a strong investment incentive should be present to limit misuse • Focus on political instead of economic goals – Worker’s Joint Stock Companies had to operate according to political considerations instead of economic needs • Business skills were not sufficient for large companies based on contributions from numerous remittance senders Problematic areas • How can a supportive environment be created in which businesses set their own goals? • How can efforts focus on creating small, easy manageable independent companies? Example questions for Tajikistan
  33. 33. OECD Private Sector Development 33 Agenda  Introduction to the project  Assessment of Access to Finance policies in Tajikistan: Methodological Framework  Remittances as an opportunity for SME development and access to finance  Baseline situation in Tajikistan  International case studies and lessons learnt  Discussion of case studies’ relevance for Tajikistan  Next steps
  34. 34. OECD Private Sector Development 34 Suggested areas to be further investigated: Focus should be on financial inclusion or SME development advice SUMMARY Financial literacy has to be complementary to any instrument applied  Complementarity: Leverage existing programmes and institutions  Service-orientation: Provide convenient services and a simple choice to migrants Focus area 1: Financial inclusion • How can migrants’ participation in the financial sector be further facilitated? • How can services be provided as convenient as possible (abroad/local – urban/rural)?  Creation of entrepreneurial skills: Provide advice and training in entrepreneurial skills to migrant entrepreneurs  Financial support: Match targeted remittances investment with public funds Focus area 2: SME development advice • How can efforts focus on creating small, easy manageable independent companies? • Is the general business climate supportive enough for migrant entrepreneurial activity?  Communication: Reach out to and inform migrants abroad about investment opportunities at home Focus area 3: Remittances investment information • How can a supportive environment be created in which investors and businesses set their own goals?
  35. 35. OECD Private Sector Development 35 Agenda  Introduction to the project  Assessment of Access to Finance policies in Tajikistan: Methodological Framework  Remittances as an opportunity for SME development and access to finance  Baseline situation in Tajikistan  International case studies and lessons learnt  Discussion of case studies’ relevance for Tajikistan  Next steps
  36. 36. OECD Private Sector Development 36 How to further assess policy gaps Main components and suggested work plan for Working Group members Horizontal Assessment Remittances policy instrument Components Expected contributions from WG members Timeline Availability for content discussions by phone or in Dushanbe Provision of information on access to finance regulations Availability for content discussions by phone or in Dushanbe Provision of data and strategies Feed-back on if/how good policy practices from other countries could be applicable to Tajikistan From now on to next WG meeting in June 2014 Fact-finding mission to Dushanbe to be organised in April 2014
  37. 37. OECD Private Sector Development 37 Working Group Schedule: Two more meetings are suggested for 2014 The objective is to get ready for the Roundtable in November 2014 2013 2014 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec COUNTRYLEVEL Working Group, Dushanbe Project Steering Group, Dushanbe REGIONAL Eurasia Competitiveness Roundtable, Paris 1st Roundtable Peer review of action plans for reforms in the Kyrgyz Republic 2nd Roundtable Peer review of two action plans for reforms of Tajikistan 1st Meeting Decision on focus and set up of two thematic working groups 2nd Meeting Review of the initial results and recommendations 3rd Meeting Endorsement of final recommendations 3 meetings will be conducted for each of the two Working Groups Design of draft action plans for reform
  38. 38. OECD Private Sector Development 38 Points of decision 1. To agree on the project schedule 2. To agree on the focus area of the Working Group 3. To agree on the assignment of responsibilities and expected contributions from Working Group members
  39. 39. OECD Private Sector Development 39 OECD contact details Grégory LECOMTE Project Manager and Policy Analyst, OECD Eurasia Competitiveness Programme e-mail: gregory.lecomte@oecd.org Sebastian KUPFERSCHMID Policy Analyst, OECD Eurasia Competitiveness Programme e-mail: sebastian.kupferschmid@oecd.org Martin POSPISIL Policy Analyst, OECD Eurasia Competitiveness Programme e-mail: martin.pospisil@oecd.org

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