Speech transcript: Suma Chakrabarti at the Consultative Council on the Investment Climate in Tajikistan

It’s a great pleasure to be in Tajikistan and an honour to be invited by President Rahmon to participate in this important forum.

The EBRD is a Bank for its countries of operations – now we have 34 – and we always listen to and respect the priorities of these countries, who are also our shareholders. But we are also a Bank for the private sector, having been founded in 1991 on the unshakable conviction that private sector actors – from the biggest corporations to the smallest micro-enterprises – are the best available tools society has to harness people’s creative talents, to create jobs and prosperity, and to provide the building blocks of sustainable communities. We have seen that repeatedly in our operations over the last twenty-two years – in Central Europe, in Russia, in Central Asia. Around 80 % of our investment every year is in the private sector, and the Bank has invested a total of EUR 90 billion since 1991.

Just now with President Rahmon we had a good discussion on the important role of the private sector in Tajikistan’s economy and I very much agree with him that the role of the State is to provide a sound regulatory framework and a predictable environment in which law-abiding enterprises can flourish and grow.

And there is plenty of good news here.

Tajikistan has made some good progress in its integration into the world economy and in making improvements to the business environment.

• First, a one stop shop” for business registration has been created,
• Second, a new tax code was introduced to revamp the existing tax regime. Our surveys and our clients tell us that more can be done, of course, to make sure that the tax code is applied predictably.
• But, third, in the last three years Tajikistan has introduced a number of reforms to simplify permits, licensing, and inspections.
• Fourth, a private credit bureau has been established for the first time, which will collect information on individual credit histories.
• Fifth, - a really big event, - Tajikistan became a member of the World Trade Organisation (WTO) in March 2013.
• Sixth, in May 2012, Tajikistan acceded to New York Convention of 1958 on Recognition and Enforcement of Foreign Arbitral Awards, which brings an important enforcement mechanism to international arbitration decisions.
• Seventh, Tajikistan achieved candidate country status under the Extractive Industries Transparency Initiative, which is designed to improve the quality of governance and transparency in the extractive sector.
• Last but not least, Tajikistan has created four Free Economic Zones nationwide which provide special investment incentives to qualified firms.

These impressive achievements are all the more remarkable in the context of Tajikistan’s challenging history and geography. In Western Europe we have just celebrated the twenty-fifth anniversary of the fall of the Berlin Wall, an event that led to the creation of the EBRD. But we should also celebrate the extraordinary achievement of national reconciliation and reconstruction that took place even more recently in this country, in a challenging geopolitical and regional setting. The EBRD certainly sees Tajikistan as a priority: we are here for the long term, and this year will be a record year for our investments. 

What you have accomplished lays the foundations for a new phase in Tajikistan’s development – a move from state led to private sector led development. We see some indications that this is starting to take place. The construction of strong state institutions and of critical infrastructure are a prerequisite for growth, but it is only the private sector that will deliver the jobs and the innovation and the productive capacity that Tajikistan needs: and that makes the role of this Consultative Council very special. This is the place where the meaning of a private sector led development model needs to be discussed and worked out. I can see from the agenda today that your approach is detailed and serious and specific. I am glad to say that the EBRD will continue to support the secretariat of the Council and the strong steps it is taking to accompany the private sector in its development and in its dialogue with the state on enhancing the investment climate.

I think two things are especially important as you take these steps:

First, Tajikistan needs to send good signals about its openness to investment. This is especially important for economies which are perceived to be at the frontier, as Tajikistan’s is. The new airport terminal is a good such signal, as was the Economic and Investment Forum of last month. Joining the Hague Convention and the decision to invite Standard and Poor’s to assign a sovereign rating (and you are only the second country in Central Asia to do that) are also good signals. Maintaining Tajikistan’s vibrant press and civil society are also important signals of openness;

Second, there needs to be predictability in the business environment, for example in the way tax policy is administered and in the work of the economic courts. The private sector needs stability and certainty in the environment in order to flourish and grow; 

The improvement in the investment climate is one of the reasons the EBRD is about to have a record investment year, with about US$100 million committed to the country’s economy in 2014.

The EBRD is working on a new country strategy for the period 2015-2018. At the centre of this strategy will be the Bank’s support to the private sector. Above all this is about our financial support. For example I will be signing tomorrow two important new deals: a local currency loan to Imon International, one of Tajikistan’s best run financial institutions; and an equity participation and loan to Schiever Tajikistan, a majority French owned company that will open Tajikistan’s first hypermarket and develop supply and export channels for agro-producing Tajik businesses. And we have a number of Tajik companies whom we expect to benefit from further EBRD financing before the end of the year. 

In its next strategy the EBRD hopes to scale up financing to such sound, well managed, and innovative companies. We are especially keen to support the productive and agriculture and food processing sectors. And we will continue to provide advice through our small business support programme on areas as diverse as financial management, human resources and strategic planning. We will continue also with our strong cooperation in the legal system, working for example with the Council of Justice on the quality and transparency of the judicial process. And we will continue to support initiatives, such as last month’s successful Economic and Investment Forum that promote Tajikistan to investors and bring their perspectives and experience into policy discussions. 

At the EBRD we believe that it is the commercial spirit itself that will often provide the solutions to development. For example a strong and well governed banking sector operating independently on commercial principles will over time improve the cost and availability of finance, which our experts have identified as one of the main problems for businesses in Tajikistan. And a commercial approach to the management and regulation of power generation, supply, and transmission, based on private sector principles, will over time address another significant difficulty for businesses, delivering uninterrupted power supplies across the country at all times of year.

It is in the Consultative Council that all these issues of the business environment, the issues that our clients tell us about, come together. And that is why our support for the secretariat of the Consultative Council is at the centre of our new strategy. The EBRD strongly believes in the power of fora such as this for expert discussion and open dialogue between the public and private sectors. Of course many questions are not easy, whether for technical reasons or because the interests of private and public sectors are not always aligned. But we have found in many countries where the EBRD supports these Councils that well-structured, open and respectful dialogue really supports change: accompanied by good faith on all sides it can foster an atmosphere of trust, enable quick responses to specific problems, and support complex reform.

Once again I am grateful for the honour to address this meeting. I hope I have given some indication of the importance the EBRD attaches to your work and of the support we intend to provide in the years ahead.  Thank you very much.