Opening Remarks by Ozan Sevimli, Chairman of the Development Coordination Council and Country Manager of the World Bank
November 28, 2023
Your Excellency,
I am pleased to have the opportunity to participate in the 23rd Session of the Consultative Council under your leadership and contribute to the discussion on improving the investment climate in Tajikistan.
As the Chair of the Development Coordination Council (DCC), I would like to emphasize the firm commitment on the development partners’ side to support the government’s aspiration of making the economy of Tajikistan investment attractive and export oriented, as outlined in the National Development Strategy 2030.
In line with the first priority of the National Development Strategy, the development community is working closely with the Government of Tajikistan on the energy sector of the country, given the abundance of hydro resources and a considerable potential for hydropower generation and export of green energy.
We all know that the Rogun Hydropower Plant (HPP) is a critical project in the energy-water nexus of Central Asia that is expected to help Tajikistan to develop an export-oriented economy and support neighboring countries in their low carbon development path. The development community would like to be part of this.
Several multilateral and bilateral development partners are working on this important project—including the European Union, European Investment Bank, Asian Infrastructure Investment Bank, Asian Development Bank, Arab Coordination Group, and others—to support the mobilization of the required financing for the Rogun project and the implementation of a broader set of energy and economic reforms. Support to Rogun and the reform agenda in various sectors do need to go hand in hand.
In line with the other priorities of the National Development Strategy, financial support to the Rogun HPP project is closely linked to the progress on economic reforms to ensure Rogun can be unleashed fully to benefit the whole economy and the entire population. We see a critical reform momentum for making the economy more competitive and inclusive going forward and Rogun being the dynamo spurring it. However, we do need auxiliary and comprehensive reforms that ensure that 1) energy sector reforms are accelerated to ensure the sector especially in the context of Rogun is managed well and is fully fiscally sustainable and 2) economic reforms on investment climate and competition are fast tracked – including on ensuring level playing field vis a vis State Owned Enterprises.
First, to make the most of our joint efforts, it’s crucial that the private sector can leverage to capitalize on the enhanced energy infrastructure anticipated from the Rogun project to boost its competitiveness. Analysis shows (i.e., the Tajikistan Economic Update) areas for critical interventions within Tajikistan’s private sector. For example, a typical private firm in Tajikistan earns 30 percent less revenue per worker compared to a similar firm in neighboring countries. Additionally, only 3.1 percent of Tajik private firms are involved in exports, a stark contrast to neighbors where it is three times higher. And exports are the key to prosperity.
Addressing these issues is essential, and doing so requires enhancing the investment climate to foster private sector growth. By improving these conditions, we can help private enterprises flourish, increase efficiency, and create quality job opportunities.
What are the key actions we would like to support as the development community. Well, we are looking at both economy-wide and sector-specific interventions. These interventions will help to address the following bottlenecks for the private sector development, including competition, digital connectivity, transport links, better financial intermediation, efficiency of public enterprises and more investments in climate resilience.
Regarding the economy as a whole, we need to focus on creating a regulatory framework that is more conducive to private sector growth. We would like to support strengthening competition laws and antitrust enforcement to reduce unfair competition practices. We also want to support the Government in streamlining government subsidies’ monitoring and control system, ensuring they are used efficiently and achieve the objectives they are intended for so that government resources are not wasted if subsidies are not creating jobs, economic growth, innovation — and very importantly ensure that they do not distort competition among firms. We believe that the new Investment Law that the Government of Tajikistan is developing, will be instrumental in making it easier for investors to enter the market and provide them with stronger protection. This is a right step forward.
At the sector level, there are two key areas for private sector competitiveness we would like to focus on and seek accelerated action: the telecom sector for better internet connectivity and digital development; and international connectivity for transport, trade. Particularly, in the civil aviation sector for improved market access and better air connectivity.
Tajikistan remains among the least digitally connected countries in the region and globally. The quality of internet connection is low, as mobile broadband download speed per user remains among the lowest globally, while cost affordability poses a significant uptake constraint. To address these issues, it is crucial to remove regulatory barriers that hinder competition and investment in the telecom sector. In particular, it is important to liberalize access to international telecoms gateway. We are in discussion on this with the relevant authorities – but we do need accelerated action on this. We want to encourage the development and adoption of innovative digital solutions that can enhance various aspects of people’s lives, such as e-commerce, e-government services, and digital education. Recently, the Communications Service granted two mobile companies, licenses to enter the international gateway – we do not have details on this yet– but in general this is a positive development. However, more needs to be and we do need more sustained and further cooperation on data sharing and dialogue.
Second area which is a key sector identified by the World Bank as a potential catalyzer of economic growth is the aviation sector. Landlocked Tajikistan depends heavily on its aviation sector to maintain connections with international markets. However, the performance of this sector leaves much to be desired. Ranking 143rd in IATA’s Air Connectivity Global Ranking, Tajikistan’s aviation standing is the lowest across Europe and Central Asia, comparable only to that of small island states. Additionally, the cost of air travel in Tajikistan is significantly higher, with prices averaging 60-70 percent more than those in fully liberalized markets of the Europe and Central Asia region, such as Georgia or Armenia. To remedy these issues, it’s vital to promote market and institutional reforms that will enhance competition and encourage the entry of new players. These changes are expected to improve connectivity, safety, and quality of services while also reducing the cost of international air tickets. Our analysis shows if actions are enacted, they are expected to bring positive spillovers, benefiting consumers with lower prices, improving accessibility to the country, and foster cross-border trade. The indirect and induced economic benefits of the proposed incremental air services is based on the additional employment in the sector (an extra 5 percent or 300 new staff to be employed in airport and aviation services) through the aviation supply chain resulting from increased air connectivity.
Tajikistan also faces significant risks from climate change due to its high dependence on natural resources and social vulnerability. The country is ranked 103 out of 182 nations in terms of vulnerability to climate change and readiness to improve resilience. A pressing imperative is the development of a green economy to adeptly manage the challenges posed by climate change. Investments and reforms need to align with the Green Economic Development Strategy of the Government and development partners are ready to help with the implementation. This means that the country needs to enact tangible measures, incorporating digitalization, introducing climate-friendly public investments, addressing air quality, amending the environmental code in the country, and facilitating opportunities for climate-friendly small and medium-sized enterprises, to effectively address climate-related challenges. This includes investments and institutional changed into water supply and sanitation and irrigation sectors.
As the chair of the DCC as well as the Country Manager for the World Bank, I am glad to be in Tajikistan at this critical development juncture. As we look back at our achievements together, we also need to take the opportunity to look forward with the focus on removing key remaining bottlenecks to poverty alleviation, shared prosperity, and sustainable and inclusive growth. Development partners stand ready to walk this path together with the Government of Tajikistan in ensuring Rogun’s full potential is unleashed to be a catalyst for a dynamic, investment and export driven Tajik economy.