BEE Coordination Working Group Meeting Minutes, 30 May 2008

Present at the meeting:

1. Continuation of Brief Project Introduction From Introductory Meeting

Wendy Werner made a welcoming speech and proposed that Pragma, OSCE, MSDSP and IFC will make a briefing on their project activities.

Nurali Shukurov informed that the objectives and key activities of the BEI Pragma Project are mainly connected with the analysis of legislation to eliminate administrative barriers for entrepreneurship development, including work on 5 Doing Business indicators. Current areas of focus include the one-stop shop for business registration, a free economic zone in Sughd, and licensing. Pragma's key government partner is Goskominvest (State Committee on Investments and State Property Management). See the BEI webpage for more information: http://www.bei-ca.net/tjpage.html.

Bess Brown briefly described the activities of OSCE, which focuses on small businesses at the local level. OSCE has established 9 training centers around Tajikistan, each of which includes an agronomist. OSCE is trying to attract returning igratns to training courses, based on ILO's " Start and Improve Your Business Programme." They will be developing a series of workshops on the national, regional and district level around the OSCE Best Practice Guide for a Positive Business and Investment Climate. On May 29, the OSCE ambassador presented a report on OSCE activities, and the Tajik ambassador to OSCE indicated the government's interest in working with OSCE to develop free economic zones. This partnership will likely begin with the free economic zone at Khatlon bridge in Kurgan-Tube. OSCE?s key government partner is Ministry of Foreign Affairs. See the OSCE webpage for more information: http://www.osce.org/dushanbe/13490.html.          

Claire Finas described the main activities of the AKF/MSDSP Enterprise Development Project. The project has two goals: to facilitate micro and small enterprises? access to business development services (training, monitoring, coaching, legal advice, financial advice); and to facilitate access to working capital, such as agriculture equipment for agriprocessing. MSDSP has 5 centers that began as business incubators and have evolved to provide more general business development services at the local level.

Christine Bowers made a brief note on IFC BEE Project activities to address administrative barriers to private sector development, in particular regarding inspections, taxes and permits. The project includes a significant outreach component, conducting training on Inspections rules and soon a new campaign on the super-patent. The project also conducts a survey of SMEs in Tajikistan every two years. The project?s main government partners are Goskominvest and the Tax Committee. In addition, IFC also has other projects in Tajikistan that touch on related issues, such as the Leasing Project and the Corporate Governance Project. Both of these are regional projects.

2. Status update on on-going BEE initiatives

Shukhrat Rakhmatboev gave an update on permits reform. The first presentation on permits was done together with IFC in April 2008, where it was decided to create a working group with participation of relevant government ministries and structures. At the present time, Goskominvest is completing the selection process for the permits working group, having received nominees from 70 percent of the government ministries. Mr. Rakhmatboev would like to organize a training seminar for the new working group members to introduce them to permits reform concepts.

Matluba Uljabaeva gave a briefing on tax code amendments implementation, summarizing work the National Association of SMEs has developed through its grant from the Pragma BEI Project. [Please see attachments A, B and C.] Ms. Uljabaeva noted that recent amendments to tax code as of April 2008 only make the tax burden worse for entrepreneurs. She said that during the last 5 years, the tax code was not reformed but only slightly corrected, and that the text of the code is still unclear for businesses. In cooperation with Pragma project, the Association has undertaken a financial and economic analysis of the tax code, and the draft report has been provided to Goskominvest. Within 10 days, Ms. Uljabaeva expects to finalize the report and circulate within the government and donor community for discussion. Sherali Zardov asked Matluba what will be her recommendations to improve the situation. She mentioned that for instance one of the recommendations to decrease number of reports to be made to tax bodies. Now it is 12-times reporting system per year, while before the amendments adoption it was 4 times per year.

Rustam Jabborov added that the Tax Committee is working on regulations to meet the 2009 and 2015 deadlines laid out in the Poverty Reduction Strategy (PRS) and National Development Strategy. After the identification of spheres were economic development is possible, the government will then look at tax incentives. Ms. Werner suggested a separate forum to discuss these tax issues in further detail.

Alisher Isaev gave an update on the super-patent. At the last government meeting, the resolution on super-patent was adopted, including many but not all of IFC?s recommendations. Not included in the final resolution was a suggested discount system for the super-patent. The IFC BEE project will start to conduct trainings on the super-patent to reach entrepreneurs across Tajikistan.

Zarina Odinaeva briefly informed on the IFC Leasing Project activities. Mainly, there 2 significant problems hindering the development of leasing in Tajikistan: (1) lack of long-term funding; (2) unfavorable tax treatment (VAT) for leasing compared to credit. There is no supporting legislation for leasing. A working group on leasing helped develop the tax amendments that may be adopted soon. Ms. Odinaeva suggested that the two tax code amendments related to leasing might be adopted as a separate package and not incorporated into other amendments to the tax code. This may speed their adoption and implementation.

Shukhrat Rakhmatboev updated the status of the One-stop shop (OSS) for business registration. After Presidential Address to Parliament in April, a Presidential Decree was adopted on the placing of responsibility of OSS body to the Tax Committee of Tajikistan. Now, Action Plan for implementation of the Decree is under development, in coordination with Tax Committee and Ministry of Justice. On 29 May 2008, there was a joint meeting of Goskominvest, Tax Committee, DFID and EC on handing all available materials and database on OSS to Tax Committee. For the OSS working group, most of involved ministries have already made nominations, except for the Ministry of Justice.

Bakhtiyor Sultanov thanked DFID and EC for their support to date on the OSS working group. The Tax Committee would like to add additional activities to the group's terms of reference, and will then be ready to begin work. Mr. Sultanov suggested adding the Office of the President to the OSS working group, in order to facilitate the whole OSS implementation process.

Mr. Rakhmatboev also thanked the World Bank and USAID for their significant support in helping with background analysis for the OSS. He asked the donors present to add to DFID/EC support with additional financial and advisory support during implementation of the OSS. Once the design is finalized, additional resources will be required for implementation, such as technical equipment, advisory support and trainings for tax, statistical, social fund and other government staff.

Sobir Kurbanov noted that DFID is pleased that the OSS working group is starting, and that it includes international organizations.

Ms. Werner reflected on the updates and identified 3 areas that may require further coordination: free economic zones, as both Pragma and OSCE are working on them; tax issues, as there is great interest; and continuing coordination around the one-stop shop. Also Nurali Shukurov added that USAID has regional BEI projects in Kyrgyzstan and Kazakhstan where one-stop shops are being implemented, and they can provide consultancy on OSS in Tajikistan. Shahlo Rahimova mentioned that Boris Divjak, who prepared the WBI paper on OSS options, will come back to Tajikistan to assist the working group. She said that any organizations that feel they have something to contribute are welcome to attend OSS working group meetings.

Mr. Rakhmatboev suggested that 1 member of the Tax Committee participate in the BEE Coordination Working Group on a regular basis.

3. Discussion on Investment Council (IC)

Sherali Zardov made a briefing on the Secretariat activities. There were 50 candidates put forward for membership on the Council: EBRD and USAID for international organizations; 12 candidates from 6 foreign companies for the foreign investor representative; more than 20 candidates from the Tajik private sector and 20 candidates from business associations for the domestic representatives. The Secretariat drafted a selection report and submitted it to government members of the Investment Council for their consideration.

Mr. Zardov said the draft agenda for the first meeting has also been submitted to government members of the Investment Council for their consideration. Based on recommendations of Investment Council members, 32 items were put forward as priorities for the Council. From these, only 1 or 2 issues can be proposed for discussions at each Council meeting. Mr. Zardov said among the issues, the inspections moratorium was the most common suggested item for discussion. The exact date of the first Investment Council meeting is still pending.

Bakhtiyor Faiziev noted the great importance of having the Investment Council. This body can promote the tackling of issues that are not supported yet by any legislation. With direct access to the top management of government, the Council will facilitate adoption of governmental laws, resolutions and instructions required for introduction or implementation of issues related to investment climate improvements. He suggested that all donors present use this channel.

Mr. Zardov added that the priorities for the Investment Council are those items that: should be solved immediately, and have legislation/normative acts already developed. The first meeting will be organizational, with time to discuss 1 topic. He mentioned that the Head of Goskominvest is a member of the Investment Council. As the main responsibility of Goskominvest is to attract more investments, Mr. Zardov said it is excellent that they will participate in the Council.

4. Preparation of Medium-Term Issues

The BEE Working Group held an emergency meeting on May 8 to identify issues for submission to the Investment Council. Ms. Werner informed the group that a preliminary chart summarizing these proposed issues has been drafted (see attachment D). She asked each participant to do 2 things by June 6:

1. provide corrections or additional information to the chart
2. vote on which 2 issues should be addressed over the next 3 to 6 months (by the BEE Working Group and/or the Investment Council and/or Goskominvest).

5. Concluding items

The BEE Coordination Working Group's next meeting will be Friday, June 27. The agenda will be shared in advance of the meeting.

List of attachments:

1. BEI handout on amendments to the tax code - English
2. BEI handout on amendments to the tax code - Russian
3. National Association of SME summary of tax code analysis - Russian
4. Subjects for next IC and BEE WG meetings - English

30.5.08/MS/CB