Meeting Minutes Between GOT & SME Legal Environment 13 June, 2005

This was the first meeting between representatives of the government, headed by Mr Buriev from the President?s Office, and the SME Legal Environment working group.

The meeting took place in IFC PEP office, and was chaired by Florentin Blanc. It was agreed that the format was interesting, although the sessions had to focus on a narrower agenda, and that such meetings should be continued.

List of participants:

1.                   INSPECTIONS

Florentin Blanc, IFC, presented key issues related to inspections reform:

·              Justification for this reform: inspections are too frequent and too heavy ? they result in numerous unofficial payments ? they do not achieve their goals from the perspective of the state?s and the population?s interests

·              Main objectives: reduce frequency of inspections ? change approach from sanctions to compliance ? reduce opportunities for corruption

·              Support from policymakers in the government is particularly needed in order to:

o        Reduce overlaps and duplications between inspecting organs, by reviewing the list of such organs, and their responsibilities

o        Require advance notice for inspections

o        Restrict power of inspecting organs to inflict sanctions: inspectors themselves should not have this power ? severe sanctions should be inflicted by courts.

Mr N. Buriev replied the following:

·              Problems with inspections are well known and the government generally agrees;

·              Many problems come from the need to reform the structure of the state, and to increase salaries of state employees ? these issues are currently being reviewed by the government with World Bank and IMF assistance ? this is a global process;

·              Changes in responsibilities of state structures, or cancellation of some structures, can only be done if very concrete and detailed justification and analysis are given ? and it is better to do it as a part of a more global review;

·              Problems cannot be solved in one day, or in one law ? this is a gradual process;

·              SMEs also very often are not aware of the law, of their rights and obligations ? this also affects the situation, and the results of the surveys ? this should be addressed as well. SMEs need to defend themselves their own rights.

He also drew the participants? attention to the oncoming WBI Investment Climate workshop, in which he hopes that these issues will be discussed, and for which the meeting should be a kind of preparation.

Fernand Pillonel, EBRD, commented that of course, reforms were a ?gradual process?, but some real changes had to be achieved ? the transition process in Tajikistan started 15 years ago, and too many issues remain critical. There is need to accelerate reforms, and this needs political will. This point of view was also supported by Alex Kitain, World Bank, who cited the positive results achieved by countries which took a radical approach to reforms. Mr N. Buriev replied that such radical approaches present risks.

2.                   CERTAINTY AND TRANSPARENCY OF LEGISLATION / REGULATIONS

Sanda Putnina, IFC-FIAS/MIGA, presented key issues related to the way laws and normative/sub-normative acts are prepared, registered and published in Tajikistan:

·              A major problem for business development is that laws/norms/regulations are often unclear, or unavailable ? regulations are not transparent, not public, and the process to prepare new ones is also such;

·              There needs to be a clearer coordination of the preparation of regulations ? for this there needs to be a dedicated structure;

·              Most regulations issued by line ministries or state structures that regulate entrepreneurs are not registered, and none of them is published ? as a result it is impossible for businesses to know what rules they must respect, and the power of these structures is arbitrary;

·              It is indispensable to address this issue ? FIAS/MIGA project, and other donors (USAID), can help address the technical problems in the Ministry of Justice ? but the government must also show its commitment, and this includes allocating adequate staff to the department in MJ that registers normative acts.

Mr N. Buriev commented that the President?s Office was also working on a database of normative acts, and on the need for efforts to be constant over time in order to achieve success.

Jienshoh Bukhoriev, IFC, mentioned that the Ministry of Justice was also overloaded because it was unclear which type of acts had to be registered, and often ministries were sending too many, including some that did not have to be.

Mr N. Buriev underlined that, in Uzbekistan, JICA had provided assistance to the Ministry of Justice to develop considerably well-resourced structures to support entrepreneurship ? in contrast to which Tajikistan?s MJ was drastically understaffed and underequipped.

3.                   JUDICIAL SYSTEM ? NEED FOR FINALITY, INDEPENDENCE, ADAPTATION TO WTO RULES

Bill Kennedy, USAID-ARD/Checchi, presented shortly the Legal Infrastructure for a Market Economy project?s activities (including development of a pledge law, pledge registry, judicial reform, legal training, publication of laws ? ongoing: development of new Administrative Procedure Law, etc. ). He also underlined a few critical issues:

·              Need for finality of civil court decisions ? eliminate ?Supervisory Proceedings?, by which higher courts have the right to review a lower court?s decision even when the appeal period has expired, in both new procedural codes (economic and civil) ? unfortunately, for the moment, the working groups have refused the project?s proposals ? policymakers need to support this reform, since it is key to improving investment climate;

·              Need for increased judicial independence ? change the role of Prosecutors in civil disputes; anti-corruption measures should be pursued through prosecutorial investigation, not by allowing prosecutors to intervene as parties to civil cases ? for the moment, Prosecutors can intervene in any civil case, at their own decision ? this is a critical issue for business environment;

·              WTO Accession is a key objective of the President and his government ? but the working group developing the new Civil Procedure Code is refusing to include ?preliminary relief? provisions, by which a party can ask the court for an injunction (immediate decision which, though not deciding the matter of the case, aims at avoiding any damage to the party).

Mr N. Buriev replied that he was pleased to see the project?s close cooperation with the government, but did not feel qualified to comment, not being a lawyer. He underlined that he believed the Ministry of Justice was able to provide all needed support.

Florentin Blanc, Bill Kennedy and Sanda Putnina commented on this that precisely, the Ministry of Justice, Juridical Department in the President?s Office etc., as lawyers, did not necessarily see the economic relevance and importance of the issue, and only looked at them from the point of juridical tradition in Tajikistan. Therefore there is need for an interaction between the economic and the juridical sides to promote needed reforms, otherwise key objectives (such as WTO accession) will be endangered. Sobir Kurbanov (seco) noted that in any case Tajikistan will have to implement all legal changes required by WTO, sooner or later ?therefore better to do it now.

4.                   LICENSING

Alexander Kitain, World Bank, presented the following key issues on licensing:

Licensing is a very heavy type of regulation, that has adverse effects on business development, and also can impact negatively the quality of goods and services, for it restricts competition;

·              All surveys show that licensing is a heavy burden, particularly for larger businesses ? so it stifles growth of enterprises;

·              The new law adopted in 2004 achieved improvements, but not yet sufficient;

·              In particular, there remain:

o        Too many types of activities licensed,

o        Unclear justifications and inadequate/unclear requirements for many licenses,

o        Excessive discretion and powers of licensing organs when it comes to suspension/revocation of licenses.

The presentation had to be shortened and there was no time for comments due to the tight schedule. Discussion of licensing and of finance-related issues was postponed to the next session, to be organized shortly.