Investment and competitiveness in Tajikistan

CENTRAL ASIA INITIATIVE
INVESTMENT AND COMPETITIVENESS
IN CENTRAL ASIA
Focus on Tajikistan
First Steering Group meeting
Dushanbe, 17 February 2014 With the financial assistance
of the European Union

OECD Private Sector Development 2
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34 Member countries Broad policy expertise
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Development
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 Financial and Enterprise Affairs
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This map is for illustrative purposes and is without prejudice to the
status of or sovereignty over any territory covered by this map

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.
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Objectives of today’s meeting
1. To present the new OECD project with Tajikistan and its
expected benefits
2. To agree on project governance
3. To agree on project focus
4. To agree on project schedule and next steps

Expected benefits of the project
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

OECD Eurasia Competitiveness Roundtable, Paris, 4 December 2013
Tajikistan agreed to be next to be peer reviewed, in November 2014

This project will focus on assessing two policy areas, while designing two
targeted action plans for competitiveness reforms
Access to Finance for
SMEs
Investment and trade
promotion for SMEs
Analytical work
Overall assessment of
2 policy areas
Practical work
Design of 2 targeted action plans
for reform
1
2
A B
2 targeted reforms
to be selected, based on:
 Consultations with
Government in Tajikistan
 Other stakeholders’ views
 OECD and GIZ expertise

Tajikistan in the peer review process
OECD members to comment on assessments and action plans for reform
Project Steering Group
Tajikistan
Eurasia Competitiveness Roundtable
2. OECD
reviewer
on Investment/
Trade promotion
1. OECD
reviewer
on Access to Finance
Tajikistan
Presentation of
the country work to OECD peers
In 2015, draft action plans for reform to be finalised and followed by
implementation with OECD support
Jan. 2014 – Nov. 2014 November 2014, OECD Headquarters in Paris

The focus of the two Working Groups will be on leveraging remittances to
develop private sector and on supporting export of agribusiness SMEs
Suggested focus
How to use remittances from migrant
workers as a source of financing for SMEs
and entrepreneurship?
Working Group 2
Investment and Trade Promotion for
SMEs
Working Group 1
Access to Finance for SMEs
Suggested focus
How to help agricultural SMEs tap into
international markets and further
support post-WTO accession ?
Areas to be further investigated
 Business services: How to provide SME
development advice or information on
investment opportunities for returning
migrants?
 Transfer of remittances into savings:
How to improve the transfer of
remittances into savings in Tajikistan?
Areas to be further investigated
 Export promotion: How to promote
export of the agribusiness sector?
 Certification and standardisation:
How to support certification and
standardisation of agribusiness
products for better exports?

Remittances are a highly relevant source of 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, mainly Money Transfer
Organisations
Sources: World Bank, World Development Indicators
SMEIntern.inAgribusinessRemittances
Share of
Tajikistan’s
GDP

While access to finance is limited, remittances are rarely used for
private sector development in Tajikistan
Remittances do scarcely enter the financial system for 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
Growing remittances inflows are not translated into
higher shares of credit to the private sector
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
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

Good practices show that remittances can be used for private sector
development
Sources: 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; FIRCO – Proyecto para fortalecer el potencial económico de los migrantes y el uso
productivo de las remesas: ¡Paisano, Invierte en tu tierra!
The programme has the following objectives:
• Enhance awareness of remittance senders and
beneficiaries of business opportunities in Moldova
• Increase entrepreneurial skills among migrants and
remittance beneficiaries
• Stimulate SME establishment and development by
migrants and remittance beneficiaries
• Facilitate access of migrants and remittance
beneficiaries to financial resources required to
establish/develop SMEs in Moldova
• Remittance investments obtained through PARE 1+1 are
2.7 times the value of programme investments
The programme consist of the following :
• Target population are farmers in Mexico or abroad
that want to invest in Mexico using remittances.
• Market knowledge of (former) migrants is leveraged
through the creation of new enterprises and the
connection of existing ones to the US market by
tapping the diaspora market.
• The programme provides financial support for storage,
cooling, packaging, processing and marketing.
• Services also include the creation of business plans or
export certification.
• Beneficiaries are reached through Mexican
associations in US cities as well as information
provided in Mexico.
Republic of Moldova: PARE 1+1
Remittances are a major source of financial
inflows to Moldova, which is why PARE 1+1
was launched in 2010.
Mexico: ¡PAISANO, INVIERTE EN TU TIERRA!
Objective is to facilitate remittance transfer to
productive use through investments in
businesses by migrants or their families.
Policy instruments can help leverage migrants’ financial and knowledge resources

Areas to be further
investigated
Rationale Examples
• Providing SME
development advice or
information on
investment opportunities
for migrants
 SME creation by migrants can
generate employment and
growth, and involve
knowledge transfers, but
migrants often lack
knowledge and skills
 Remittances can be invested
in home countries, however,
migrants often lack
information on investment
opportunities
 Equip migrants with the skills
and knowledge to save and
start a business (e.g. Mexico)
 Match remittances with
subsidies to enhance
investment (e.g. Moldova)
 Provide information on
investment opportunities prior to
migration as well as in host
countries (e.g. Philippines )
• Improving the transfer of
remittances into savings
 Remittances are rarely
deposited at banks,
deteriorating access to
finance, but targeted policies
can facilitate the transfer of
remittances to savings
 Improve the co-ordination
between MFIs and MTOs (e.g.
Mexico)
 Develop remittances-related
financial products (e.g. El
Salvador)
Suggested focus could be on leveraging remittances to enhance
investment and access to finance for SMEs

Agricultural sector in Tajikistan has been growing over the last years
and accounts for a major share of GDP and employment
•Net agricultural production sector grew on average by 5% since 1998 and accounted for more than
1/3 of GDP growth since then
•A large part of the population depends on agriculture for employment and income – the sector
accounts for 67% of total employment in the economy
•WTO-related SME internationalisation in the agribusiness sector can be one of the best ways to
improve the economic situation in Tajikistan
Sources:State Statistical Committee of the Republic of Tajikistan; Akramov and Shreedhar (2012), Economic Development, External Shocks, and Food
Security in Tajikistan, International Food Policy Research Institute Discussion paper 01163
Share of agriculture in GDP and
employment, 2011
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
constant2000somoni
Net value of agricultural production
24%
67%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Share in GDP Share in employment

Tajikistan Government has put agribusiness exports as a
priority in the WTO post-accession plan
Items of the Tajikistan’s WTO Post accession
plan related to SMEs in agribusiness:
• Item I.18 Expand the state support on
promotion of Tajik good into markets
• Item I.20 Active use of perspective support
programs in context of accession to the
WTO
• Item I.24 Provide conditions for the
reduction of interest rates on bank loans to
the average level for the developing
countries of the world
• Item VII.1.3. Support domestic agricultural
producers by stimulating demand in both
domestic and foreign markets (Partial
funding of events for the promotion of
products: exhibitions, workshops,
assistance in obtaining certificates)

Suggested
Instrument
Rationale Example
• Strengthening
export promotion
of agribusiness
SMEs
 Agricultural products (excluding
cotton) represent less than 5% of
Tajikistan’s exports
 Export promotion activities in
Tajikistan appear not be sufficient to
help farmers tap the opportunities
created by the WTO accession
 Information on export opportunities
and national marketing are limited
 Create a provincial brand as a
marketing instrument for the
promotion of agribusiness
products in Trentino (Italy)
 Customise assistance of the
Czech Trade Promotion Agency
(CzechTrade) to agribusiness
SMEs
• Supporting
certification and
standardisation of
agribusiness
products for
better exports
 Tajikistan’s agricultural products are
often not in compliance with good
international practice
 Complicated product certificates
procedures can constitute a genuine
barrier to entering a new market
 Promote vertical coordination
between agribusiness firms and
SMEs to improve the quality of
products in China
 Set up a grant scheme to support
agribusinesses’
internationalisation via product
certificates in Poland
Suggested focus could be on WTO-related support to the
internationalisation of SMEs in the agribusiness sector

Project Steering GroupPrivate sector
representatives
Relevant ministries and
government agencies
Chaired by Deputy Prime Minister
OECD (including relevant
experts)
Proposed governance for the project would include 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
Chaired by relevant Deputy Ministers by topic (e.g. MinEco)
Working Group 2
Investment and Trade
Promotion for SMEs
GIZ
Working Group 1
Access to Finance for
SMEs

1. Provide data (e.g. data request,
questionnaires)
2. Co-operate in developing the
analysis
3. Review materials
4. Suggest directions of work
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
Roles and responsibilities for the Steering Group and Working Group
members

Project Steering Group: 3 meetings are suggested for 2014
The objective is to get ready for the peer-review process in November 2014
2013 2014
Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
COUNTRYLEVEL
2 Working
Groups (one for
each area)
Project Steering
Group
REGIONAL
Eurasia
Competitiveness
Roundtable
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 two areas of
focus and set up of two
thematic working
groups
2nd Meeting
Review of two draft action
plans for reform and review
of initial results from the
horizontal assessment
3rd Meeting
Endorsement of two
action plans for
reform and review of
final results from the
horizontal assessment
3 meetings will be conducted for each of the two Working Groups
Design of draft action plans for reform in each of the two areas of
work
Building on the business survey designed specifically for the project

Points of decision and next steps
Points of decision:
1. To agree on project
governance
2. To agree on project
focus – remittances
and support to export
of agrifood SMEs
3. To agree on the project
schedule
Practical next steps:
1. Set up the 2 project Working
Groups
2. Appoint Working Groups chairmen
and vice-chairmen
3. Plan the first Working Group
meetings, 1st week of March is
suggested
4. Start for Working Group members
to collect data in co-operation
with GIZ and OECD

Annex
Examples of action plans in the Kyrgyz Republic

To raise project visibility, a clear and actionable communication plan is suggested
TOOL ACTION TIMEFRAME
Web site
Create web page for the project including
 Description of the project
 Key upcoming dates
 Facts about the country
 Project press release
MARCH
Moving forward the page can be enriched to include
 Meeting highlights
 Links to partners
 Video and photo materials (ex interview with TJ policy makers)
MARCH 2014 – NOV
2014
Press Press events and conference as useful for key milestones in project
(tbd)
MARCH 2014 – NOV
2014
Social media
Identify key stakeholders interested in TJ to disseminate key facts about
Kyrgyz Republic and achievements of the Project JULY 2013 – FEB 2014
Liaise with EU, GIZ on supporting the promotion of dissemination
around certain events
OECD publications to be launched in Dushanbe early 2015

OECD Private Sector Development 23CONFIDENTIAL – NOT FOR DISTRIBUTION
Despite being a relatively simple mechanism, the internship contract and its
regulatory framework among players are key aspects to consider
FIRMS
(PRIVATE
PLAYERS)
Educational
institutions
Convention
Students
Wage and training
Service and contract
Training
report
Monitoring
Feedback
on CVs
REGULATORY FRAMEWORK FRAMEWORK TO:
• Provide certainty to
employers
• Protect students (e.g.
medical coverage, insurance)
and employers (e.g.
confidentiality)
• Rule the interaction
between Universities and
private players
• Promote the Schemes
• Provide internships which
are relevant to the players
and of high quality
WORKPLACE TRAININGS IN
AGRIBUSINESS

Action plan for the establishment of workplace training schemes in
agribusiness
Strengthen the legislative framework and set incentives1
Ensure the engagement and ownership of the private sector2
Long
term
Medium
term
Short
term
• Introduce an internship/ apprenticeship convention/ contract
• Agree on a duration and on a minimum remuneration for workplace training
• Set up career services within agricultural institutions
• Build a database (through alumni and company visits)
• Organise outreach events, career fairs
• Consider creating financial incentives for employers that offer workplace training
• Provide workplace training opportunities on a competitive basis
Ensure that students are efficiently matched with training places3
• Create a formalised platform to match supply and demand
• Monitor the practical experience using a feedback report on the match of student skills
for firm needs
Promote education in agribusiness4
• Adjust educational institutions’ curricula based on recommendations of agricultural firms
• Market agribusiness as an attractive career option for students
WORKPLACE TRAININGS IN
AGRIBUSINESS

Warehouse receipt financing can improve access to finance providing
benefits to both agricultural players and to the banks financing them
Source: World Bank, FAO (2009), The use of warehouse receipt financing in agriculture in transition countries
•Increases transparency and efficiency
in commodity markets
•Addresses collateral and liquidity
constraints
•Encourages the development of
warehouses and the logistical network
around warehouses
•Manage price volatility
•Access to working capital finance
without having to sell crops at times
of low prices
Benefits to agricultural players
Reducing the risk by shifting the risk
from the borrower to the warehouse
operator
Benefits to banks
Sector benefits
Examples of production used as collateral: seeds,
fertilizers, grains, sugar, potatoes, fresh fruits and
vegetables, processed fruits and vegetables, dairy
products
Warehouse receipt financing
Agricultural supplier/
producer/ processor/
distributor/ trader
Warehouse
Financial
institution
Deposited
goods
Warehouse
receipt
Warehouse
receipt
Loan
WAREHOUSE RECEIPT FINANCING IN AGRIBUSINESS

There are two approaches to the development of warehouse receipt
financing in agribusiness
National Sub-national
Implementation at national level with
the development of all the elements in
parallel
Implementation at regional level with
certain banks farms or warehouses and
scaling up of the schemes later on
Key factors:
•Institutional setting at national level
•Ability of the banking sector to quickly
adopt innovative forms of financing
•Examples: USA, Bulgaria
Key factors:
•Capacity of farmers to organise
•Strength of local associations, co-
operatives and other associative bodies
•Willingness to accept innovative forms
of financing
•Examples: Malawi, Madagascar

Draft action plan for the establishment of warehouse receipt financing
in agriculture
Identify and engage partners1
Put in place elements to ensure the credibility of the scheme2
Set up the legal and regulatory framework3
Long
term
Medium
term
Short
term • reliable storage facilities at strategic locations
• development of trade and distribution services in agricultural co-operatives
• dissemination of information about financing opportunities among farmers
• ensure access to agricultural information
• support the development of a wider range of insurance products for agricultural sector
• establish a certification agency
• establish an indemnity fund
• ensure compliance of warehouses with the standards
• build reliable systems for collection and dissemination of agricultural information
Promote investments in the warehouse system4
• Build a warehouse/logistical centre based on a public-private partnership

Investment and competitiveness in Tajikistan

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