In Tajikistan: Investing in People to Improve Lives and Reduce Poverty

Challenge

Landlocked and largely mountainous, Tajikistan is Central Asia’s least accessible, most isolated country, with only limited regional and international connectivity. Due to its elevation and topography, barely 7 percent of the country’s land area is arable, with the rest consisting of glaciers, mountains, and pasture land or steppe that supports livestock grazing. Thanks to abundant water resources, Tajikistan’s hydropower potential, including for export, is substantial, but its other natural resources are limited. The country experiences periodic natural disasters, such as droughts, floods, and landslides, as well as disruptions in trade and transport and severe winter energy deficits, partly due to regional tensions. Shortly after independence in 1991, a devastating civil war that lasted until mid-1997 caused widespread physical damage and loss of life, essentially preventing any significant economic development or reform during that time. Tajikistan’s transition to a market economy was thus delayed by a decade and remains a work in progress.

Against this background, Tajikistan’s principal development challenges include: (a) the country’s geography, limited natural resources, and uncertain regional neighborhood; (b) the economy’s narrow production and export base (partly a legacy of the Soviet era), its depleted human capital, and currently excessive dependence on remittances; and (c) the state’s weak institutions, both in terms of public administration at all levels and the delivery of public services such as education, health, social assistance, and water supply. Finally, there remain equally serious challenges in other areas such as climate change, gender, and governance.

Solution

The World Bank’s main goal—reflected in its ongoing and planned new Country Partnership Strategy (CPS)—is to promote private sector–led growth and increased private investment, in particular for small and medium-sized enterprises (SMEs) and especially in agriculture, through structural reforms and financial sector development. Concerted efforts are needed to reduce the costs of doing business and to raise the profitability of private investments and exports, especially in agriculture and agro-processing. Reforms enabling farmers to farm any crop, combined with the adoption of land use rights, have led to increased non-cotton agricultural exports, suggesting significant room for future growth. However, realizing Tajikistan’s potential in this area will depend on a more competitive, conducive, and transparent business environment, as well as easier cross-border movement of goods to regional markets. Enhanced regional cooperation and public investments in infrastructure and energy will also be important.

In addition to private sector development, the World Bank and the Government aim to promote social inclusion—in particular for young people, especially girls and young women as well as vulnerable groups—through improved access to better quality basic social services, as well as regional connectivity, by enhancing Tajikistan’s access to regional markets and, more broadly, to global information and knowledge. In addition, the design and implementation of activities in these areas is shaped by three cross-cutting themes, namely: gender, governance, and climate change. In this connection, Tajikistan is the focus of four multi-donor mechanisms to address these challenges: a recently completed US$3.8 million Governance Partnership Facility grant to mainstream governance; a US$50 million Pilot Program for Climate Resilience; a US$28 million Global Food Security grant; and a planned US$20 million Communal Services Development Fund to scale up safe drinking water and sanitation nationwide.

Results

Below is a selective listing of results achieved during the fiscal years 2011–13:

Private sector–led development and growth:

• Signed New York Arbitration Convention, applied for Extractive Industries Transparency Initiative (EITI) candidate status, and joined World Trade Organization (WTO);
• Implemented “single-window” business registration system, reducing the bureaucracy and time required to open a business from over 50 days to 5 working days;
• Reduced the number of business inspections;
• Reduced the number of permits required (from more than 600 to 86) and their coverage;
• Created “single window,” simplifying import and export procedures and processes;
• Implemented revised tax code, cutting the number of taxes and simplifying tax reporting and payment procedures;
• Implemented risk-based audit system based on objective parameters, piloted in Dushanbe city and now rolled out nationwide.

Social inclusion

• Introduced per capita financing of primary health care and case-based financing of hospital services in two oblasts (regions), leading to increased public spending on primary health care;
• Implemented per capita financing of general education nationwide;
• Extended education management information system (EMIS), operational nationally since 2009 and an extension to all subsectors under way, providing key education data to inform and improve policy decision making;
• Established national testing center and, at the tertiary level, piloted unified university entrance examination for implementation nationwide in 2014–15.

Regional connectivity

• Completed regional plans to export summer surplus electricity from the Kyrgyz Republic and Tajikistan to Afghanistan and Pakistan, and appraised the regional Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000);
• Adopted aviation policy to initiate liberalization of air transport system.

Bank Group Contribution

As of April 2014, the portfolio comprises 13 active projects for a total of US$222 million. The largest share of the portfolio is in agriculture and rural development (34 percent), followed by water (19 percent), energy (16 percent), the public sector and economic policy (10 percent), education (8 percent), health and social protection (8 percent), and the private sector (5 percent). Tajikistan’s Trust Fund (TF) portfolio—one of the largest in ECA—is a critical complement to International Development Association (IDA) resources, accounting for about 30 percent of total combined commitments during 2010–13.      

To date in FY14, the World Bank has approved two grants—the Health Results-Based Financing Project and the Global Partnership for Education-4 Project—with a total commitment of US$32 million.

The portfolio includes 45 active trust-funded operations with US$63 million in commitments. In addition, Tajikistan is the beneficiary of two new large TFs: one that addresses climate change (Pilot Program for Climate Resilience), with the World Bank share at US$16 million, and another for food security (Global Agriculture and Food Security Program) at US$27.9 million. TF activities cofinance ongoing IDA operations in health, education, agriculture, food security, migration, state procurement, and demand-side governance. The International Finance Corporation (IFC), with its focus on private sector development, has an important role to play in supporting inclusive growth and job creation in Tajikistan. IFC works with private sector clients, government, and civil society to bring global expertise to Tajikistan through its advisory services and investment projects. IFC looks forward to continuing to support reforms to strengthen the investment climate and to increase its direct financing of Tajikistan’s private sector companies.

Since 1997, IFC has invested US$86.9 million to support private sector projects in the financial, hydropower, retail, tourism, and manufacturing sectors. As of December 31, 2013, IFC’s committed portfolio stood at US$28.7 million, which includes investments in financial markets and the agribusiness sector.

IFC’s program in the country includes annual advisory services assistance spending of approximately US$3 million focused on: legal and regulatory infrastructure for SMEs, credit bureau development, corporate governance, tax administration, agricultural finance, and infrastructure advisory. IFC’s advisory services projects are being implemented with financing from the Department for International Development of the United Kingdom (DfID), the Swiss State Secretariat for Economic Affairs (SECO), and the Austrian Development Bank.

Partners

The Tajikistan Development Coordination Council, which brings together 28 development partners and is currently chaired by the World Bank, has played a key role in strengthening country ownership and mutual accountability through sector and thematic working groups, in line with the 2005 Paris Declaration on Aid Effectiveness. At the 2012 Development Forum, development partners (bilateral and multilateral agencies, donors, UN agencies, international financial organizations [IFIs]) agreed upon a number of joint initiatives designed to achieve measurable results by 2015 in line with the Government’s ongoing medium-term Living Standards Improvement Strategy, 2013–15. The initiatives aim to improve the living standards of the population by: a) improving the quality of and access to education, health care, and safe drinking water; b) planning and preparing for economic and climatic shocks, including by increased fiscal savings; c) using scarce public resources wisely and increasing the transparency of public financial management; and d) enlarging the role of the private sector in the economy so as to create jobs, increase the incomes of vulnerable and middle-class groups, and raise revenues for the budget. A multi-partner–financed Communal Services Fund initiated by the World Bank is under preparation for approval in 2015.

Moving Forward

The World Bank Group’s CPS for FY10–13, extended to FY14, will formally end in June 2014. Its principal objective is to help stimulate private investment through overall private sector development. Other key priorities include: (a) ensuring macroeconomic stability and sound public financial management; (b) increasing productivity in agriculture and efficiency in water use; (c) strengthening the power sector for reliable domestic supply and larger hydropower exports; and (d) increasing access to higher quality social services. Improving core governance is being mainstreamed in the context of the Country Governance and Anti-Corruption (CGAC) strategy.

A new CPF for FY15–18 is currently under preparation and is expected to be presented to the Board of Directors in June 2014. Building on the outcomes and lessons learned from the current CPS, the new strategy’s principal goal is to promote shared prosperity by supporting the expansion of opportunities in three areas and related pillars: (a) private sector–led growth; (b) social inclusion; and (c) regional connectivity. The design and implementation of CPS activities under each of these pillars will also be shaped by applying three cross-cutting themes, namely: gender, governance, and climate change.