BEE Coordination Working Group Meeting Minutes, 25 June 2008

Present at the meeting:

1. Introduction of BEE Working Group members and projects

Wendy Werner welcomed participants and asked GTZ and Bearing Point/USAID projects to give a briefing on the status of their project activities.

Barbara Kaminski briefly described the activities of the Bearing Point/USAID project. Key partners of the project are the Tax Committee, National Bank of Tajikistan and Ministry of Finance. With the Tax Committee, Bearing Point addresses tax policy development and improvement in regards to quantifying the impact of tax policy, and also to increasing tax revenues. Cooperation with the Ministry of Finance is focused on budget classification and improving the budget process. Also the project provides consultancy on IT service management to National Bank, Ministry of Education and others.

Matthias Halder indicated the main activities of GTZ are to support business associations and to provide exemplary support to selected enterprises in fruit and vegetable processing businesses. With business associations, namely the National Association of SMEs and the National Association of Business Women of Tajikistan (NABWT), the project helps strengthen their capacity to render service to members. The project is helping these associations transition to becoming more financial sustainable and member-driven. The projects will start soon offering crash-courses for start-ups, NABWT including financial services for start-ups through IMON, the microfinance organization started by NABWT. Regarding direct support, GTZ has 4 pilot cases. The fruit and vegetable processing pilot project already started in Khujand. The largest is Khujand Canning, where support is provided jointly with EBRD. Mr. Halder pointed to the poor market for business consulting services in Tajikistan. Donor activity to enhance services stimulates supply, but it can also deteriorate the willingness of firms to pay for services.

Then, Michael Pedersen made a brief description of Somon Capital's activities in Tajikistan. Somon Capital is helping structure a TALCO project on conversion to domestic resources. The project requires full transparency in TALCO ownership and cash flow, among other conditions. Also, TALCO is working on setting up corporate governance bodies such as a management board and board of directors. Somon Capital also helped set up Somon Air. Also Mr. Pedersen noted that the development of the mining sector has huge potential for Tajikistan's economic development and in reality should be the main focus area for attracting investments into Tajikistan. He urged the working group to support efforts to have a sovereign credit rating assigned for Tajikistan, as well as accession to the New York Convention on Arbitration.

2. Discussion on Investment Council

Ms. Werner asked Sherali Zardov about the status of Investment Council activities.

Mr. Zardov updated the group on the Inspection Moratorium Draft. The Draft was distributed among business-structures and the donor community for comments. On June 20, the Secretariat provided feedback to government, incorporating comments from SECO, IFC, the Coordination Council of Business Associations, and others. On June 24, a working group under Goskominvest was held to incorporate the proposals and comments. On June 26, it is planned to submit the final version of the Draft to Government of Tajikistan for consideration and approval.

Regarding the agenda of the first Investment Council meeting, Mr. Zardov indicated that two options are under consideration. In option 1, the first meeting is only organizational and will not cover any substantive issues. This meeting will include approval of the agenda for the second meeting. In option 2, the first meeting will be organizational and also substantive. The substance of the meeting will be the Inspection Moratorium. It is more likely that the Investment Council will choose the second option.

Mr. Zardov suggested seven issues to be included to agenda of the first few Council meetings. He asked the Working Group to provide feedback via email on the donor priorities among these items. He listed the (1) the one-stop shop for simplification of business registration (for 2nd or 3rd meeting); (2) simplification of licensing of construction activities; (3) abolishment of the TUCE certificate for export of goods; (4) foreign trade policy improvement and development of an import/export improvement strategy; (5) improvement of permitting system; (6) development of private notaries; and (7) optimization of state regulation of the business environment. Issues 4 and 5 are more complicated, and he suggested they be addressed in 4th meeting or later.

Mr. Zardov also requested a presentation on the investment climate in Tajikistan from the donors' point of view. Mr. Zardov mentioned that it would be great to prepare a three- to five-minute presentation on doing business conditions for Government. The presentation could cover Doing Business rankings, among other indicators of the investment climate.

Regarding Mr. Zardov's request for the presentation, Shahlo Rahimova suggested that the Doing Business presentations already given were sufficient. Nurali Shukurov mentioned that there is a lot already done on the licensing sphere, including an action plan for reform on Doing Business rankings and a recent study tour to Georgia. Ms. Kaminski added that she met recently with Mr. Sultanov, First Deputy Chairman of Tax Committee, who was one of the participants of that study tour, and he had positive impressions from the study tour, particularly in Georgia's increase in tax revenues, and displayed a willingness to implement changes.

Mr. Pederson asked to add sovereign credit rating to the list of issues Mr. Zardov proposed. He said a World Bank report estimated that Tajikistan's rating would be in the low B range, which would attract some investors. Mr. Zardov mentioned that the ratings agencies were ready to come to Tajikistan, but that approval for this step was stalled in some government ministries.

Ruedi Schoch expressed his concern at the disconnect between the President's view of the investment climate in Tajikistan and international perceptions of it. Regarding Mr. Zardov's request for a donor presentation on the investment climate, Mr. Schoch responded that donors are not investors. He suggested that substantive proof of outside perception of the investment climate does exist.

Mr. Halder agreed that sovereign credit rating is an important issue, although he isn't convinced it is appropriate on the Investment Council agenda. Also, Mr. Halder disagrees with Mr. Zardov's proposal that donors prepare a presentation on investor perception. He told the group about a Doing Business presentation of its findings to Government, and the Government's reluctance to accept the validity of the Doing Business ranking.

Mr. Schoch proposed that the issue of Tajikistan's overall investment climate might be a good topic for the first Investment Council meeting. 

Mr. Schoch asked Mr. Zardov to explain the selection mechanism of the Investment Council members. Mr. Zardov noted that the selection of private sector representatives will be done on rotation basis, i.e. they will be rotated depends on the subject (topic) to be discussed at the Council meetings. First, the President of RT should confirm the agenda and list of participants for the first meeting. The first meeting will be mostly devoted to arrangement issues and procedures.

Ms. Werner emphasized to Mr. Zardov that procedural issues are extremely important to be fixed before the first meeting. Mr. Schoch stressed that we need the entire Investment Council process to be transparent, as it closely relates to overall business environment development. He wants to know whether appointments to the Investment Council are individual or institutional. Ms. Werner asked about whether the private sector representatives would also be permanent, as one of the donor representatives is. She argued that the private sector representatives should not change at each meeting. Mr. Shukurov asked Mr. Zardov how many individuals were put forward to the Government for selection to the Investment Council, and what the process of selection was. Ms. Rahimova asked Mr. Zardov to send an email to the Working Group detailing the selection process, including who was proposed.

Mr. Zardov agreed to send an email to the group detailing the selection process for the Investment Council members.

3. Issues for further development by the group

Wendy Werner highlighted the results from voting on what issues can be proposed for further development of BEE Coordination Working Group. As the voting was inconclusive, she suggested that the group focus on a few topics that could benefit from additional donor coordination (see attached). These were: (1) the New York Convention on Arbitration; (2) Technical assistance to the Tax Committee; (3) Guillotine (quick review) mechanism for permits and licensing. She said that future Working Group meetings would include time for focused presentation and discussion of one of these issues.

Michael Pederson suggested adding partnership sharing agreements (PSAs) as an issue to the BEE WG list. He agreed to prepare a short document summarizing the issue.

4. Concluding items

The BEE Coordination Working Group's next meeting will be Friday, July 25 at IFC Office. The agenda will be shared in advance of the meeting.

List of attachments:

1. Matrix of issues for development by BEE Coordination Working Group

26.6.08/MS/CB