Speech at the International Entrepreneurship Forum – 2018 “Development of Entrepreneurship and Investment and Contemporary Economic Trends”
Ladies and Gentlemen!
I would like to welcome you to the International Entrepreneurhsip Forum in Dushanbe.
This event provides an important opportunity for exchange of opinion and experience, discussion of available potential and expansion of mutually beneficial cooperation between its participants.
The Forum topics have been expanding and their level of discussion and summarization have been improving every year.
The Government of Tajikistan attaches a particular importance to development of entrepreneurship and improvement of investment climate in the country and initiates solutions to the issues related to support of businesses.
I believe that the topics, which will be discussed in today’s forum, will also promote resolving important issues related to operation of businesses and developing proposals and recommendations for improvement of business and investment climate and the public support to this sector.
Ladies and Gentlemen!
During the previous fora a number of documents of cooperation on production of industrial products, construction of infrastructure for our economy’s real sectors, including energy, industry, tourism and other priority social areas were signed and they are under implementation.
Establishment of a mutually beneficial cooperation with foreign investors and entrepreneurs during the last five years made it possible to encourage more than 5bn U.S. dollars of foreign investments, including almost 2bn U.S. dollars of foreign direct investments into our country’s economy. As a result, this increased the private sector’s share in GDP to more than 70% this year, and by 12 points compared to five years ago.
Attraction of foreign direct investments increased the industry’s share in our GDP to 17% in 2017 and the export of the sector’s products, particularly cement, plasterboard, paint, metal, canned fruits and vegetables, cotton fabric and carpet by several times.
However, I would like to highlight that Tajikistan has abundant potential for export of final products and the entrepreneurs and investors need to apply their skills and possibilities to produce and export competitive products in local and international markets and to ensure value added.
The National Development Strategy of Tajikistan to 2030 focuses on transition from agrarian to industrial economy as its main objective and identifies the future national economic model.
The State Committee for Investment and Public Property Management jointly with other relevant public and private agencies needs to continue undertaking necessary measures to empower producers, ensure thorough public support to local producers and establish human development centers providing services to entrepreneurs and investors.
By doing so we can increase the share of private sector in our social and economic sectors, create permanent jobs and further improve the population’s living standards.
I am confident in the abilities of our entrepreneurs today in terms of expansion of industrial production, production of competitive products, increasing the export of final products and ensuring innovative production through introduction of the latest technologies. I would like to reiterate that the Government of Tajikistan will always support the initiatives of entrepreneurs and investors.
I would like to extend my gratitude to all dedicated entrepreneurs, who have been establishing production enterprises and workshops, social services facilities, roads and bridges in towns and districts of our country and have been initiating other development and charity activities in support of the Government’s idea to celebrate the 30th anniversary of the state independence of Tajikistan with decent achievements.
I would like to particularly recall that it is very important for us to lay a conducive foundation for development of industrial production, production of high-quality products, increase of export and deserve our decent position in the global market of goods and services given the current sensitive geopolitical situation, growing trade competitons and sanctions between the world’s superpowers.
Therefore, introduction and wider application of the latest innovative technologies, professional development of entrepreneurs and improvement of their management skills, ensuring modern quality assurance and training of professionals are the main factors to achieve this objective.
The forum participants need to make specific proposals on further development of entrepreneurship and public support to it, so that the relevant institutions undertake measures with regard to their implementation in pursuing business support policy.
The current trend of public support to business given the situation and development of market-based relations in our country requires continuing reforms in this area, though the Government of Tajikistan has implemented a series of activities in this regard, there are still a number of issues to be resolved.
The reforms on improvement of business environment and investment climate made it possible to maintain stable level of our macroeconomic indicators and ensure real development of our economy at the rate of 7% in average.
I would like to once again emphasize that the private sector’s share in this process is valuable and it is the State’s task to ensure conducive environment for this sector’s effective operations.
Now our important task is to effectively use the huge hydropower resources of our country, transfer Tajikistan into a transit country and ensure decent life for our people as well as expand opportunities for productive employment in the production sectors. We have identified a number of target indicators to achieve these objectives by 2030, including tripling our GDP, expanding our national economy’s diversification, reducing poverty rate by more than two times and increasing the middle class share up to 50%.
With a view to creating a favorable environment for entrepreneurs, the Tajik Government has been continuously conducting important reforms in various areas of the economy, including on simplification of business registration, protection and support of entrepreneurs and investors, improvement of taxation system, relieves on business inspection, enhancement of system of permits and licensing.
Through the operation of the Consultative Council for improvement of investment climate under the Office of the President of Tajikistan, which ensure free dialogue between the public and private sectors with involvement of the representatives from international organizations and foreign investors, we have been improving the legislation for support of entrepreneurship and improvement of investment climate.
While improving the sectorial legislation we defined the provisions strengthening the public-private dialogue, development of entrepreneurship skills and capacity, support of producers and service providers and development of the monetary policy for smooth operation of businesses.
In this process we will continue improving the national legislation on support of entrepreneurship and improvement of investment climate. Thus, with a view to improving the tax administration and taxation system, in February of this year we incorporated amendments and additions to the Tax and Customs Codes of Tajikistan accordingly.
Overall, the amendments and additions we introduced, include 30 incentives and relieves aimed at improving the business environment and investment climate in the real sectors of the economy and in the services sector.
In this process it is important for the business entities to effectively apply the incentives and relieves set forth by the legislation and follow the tax payment discipline in a proper manner.
At the same time, it is important for entrepreneurs to improve their financial and economic awareness and apply the international accounting standards.
The State Committee on Investments and Public Property Management, the Tax Committee and the relevant authorities in charge of support of business need to undertake additional measures with this regard.
With a view to simplifying the procedures of business inspection within the activities of the brand new Council for Coordination of Inspection Agencies, and to ensure the private sector development and reduce the number of inspections, we have reduced the number of inspection agencies from 31 to 25 and the number of target inspections almost by 23% compared to indicators of 2017.
With a view to supporting the production entrepreneurship in 2018-2019, we introduced moratorium for various inspections and a number of tax incentives. This initiative decreased the office audit by almost 50% during eight months of this year.
I would like to reiterate that disregard of the conducive environment we have ensured for entrepreneurship, unfortunately, still a part of taxpayers violate the tax legislation.
The inspections in 2017 and 8 months of 2018 revealed 1,240m Tajik Somoni of taxes evaded and 900m of them are returned to the budget.
Therefore, it is necessary to undertake relevant measures to avoid such breaches of legislation.
Overall, with regard to inspections, I would like to highlight that we intend to introduce risk-based inspections in line with international standards for all types of inspections.
Introduction of electronic payment of state duties for several types of public services with the use of payment cards is another achievement of our reforms in this year, which minimizes the tax expenditures by entrepreneurs.
All of the relevant public agencies providing public services to entrepreneurs need to fully introduce the electronic acceptance of payments in the nearest future by building on this experience.
The permit system reform reduced the number of permits from 605 to 75 and established a single public electronic register of permit applications in the country.
With a view to improving the effectiveness of public administration in the country we started the process of establishment of ‘Single Window’ for construction permit, registration of immovable property, export, import and transit transactions, introduction of electronic public services, transfer to electronic documentation and modernization of database of public regulation authorities.
By building on the international best practices we plan to consolidate the procedures of electronic public procurement of goods, single electronic register of land plot acquisition and register for property security within one system of electronic registration.
In this regard, specific activities are already being undertaken to develop and introduce a system for information management and legal and regulatory documents and thereby arrange electronic register of population and the electronic civil registration will start in Tajikistan in 2019.
Ladies and Gentlemen!
We annually allocate resources from the public budget to support the private sector and ensure development of small and medium enterprises. For instance, only in this year the allocations through the Tajik President Grant Scheme will be as follows: 8m Tajik Somoni for development of women entrepreneurship, 15m Tajik Somoni for start-ups and their further development, 370m Tajik Somoni to the Public Fund for Business Support and 8m Tajik Somoni to the Public Fund for Support of Young Teachers.
We also issued 243m Tajik Somoni of concessional loans to support 168 projects in 50 towns and districts via the Business Support Fund so far. However, we are not still satisfied with these allocations since the demand by enterpeneurs in loans is greater and even our banking system cannot meet it fully.
The banking statistics shows that our commercial banks and financial institutions allocated 49bn Tajik Somoni of loan during the last five years, and 27bn Tajik Somoni, or 55% of them are channeled to production businesses.
However, the lack of monetary stock, high interest rates and lack of access by entrepreneurs to financial resources requires undertaking additional measures in this area.
The National Bank needs to conduct a study on this issue and undertake effective measures to ensure inflow of local and foreign investments into the banking system.
It is necessary to improve the national legislation and develop draft Law of Tajikistan on secured transactions in order to further improve access to loans. At the same time, it is necessary to establish the register of electronic registration of pledge of real property within the Ministry of Justice.
Sustainable operation of banking system is a main factor to ensure financial stability and economic growth of the country. With this regard, this year we established the National Financial Stability Council to strengthen the financial stability oversight mechanisms. We believe this Council will help preventing and overcoming the implications of potential risks into our national financial system.
The Tajik Government has always been exploring the effective ways of improvement of business environment and investment climate, and it will continue doing so until our private sector, sectors of our national economy and local producers will become internationally competitive and our investment climate will be favorable against all indicators.
Thought during the recent years Tajikistan’s rating improved against several indicators of the Doing Business Report, there is still a lot needs to be done in terms of simplification of connection to engineering networks, simplification of procedures for business termination, particularly small businesses, access to credit and other indicators.
With this regard, the State Committee for Investment and Public Property Management jointly with relevant agencies and authorities need to develop relevant legal and regulatory documents and submit them to the Government of Tajikistan.
The Tajik Government has been pursuing the ‘open doors’ policy since the beginning of Tajikistan’s independence and has been expanding the country’s direct economic and trade relations with other countries of the world every year.
Our objective is first and foremost to ensure a favorable investment climate for effective economic operation of local and foreign entrepreneurs and to bring it in line with international standards.
The Tajik economy is open to investors, who create jobs, offer their goods and services to local and international markets and follow our national legislation, and it offers a package of economic and administrative incentives to these investors.
Alongside with this, it is necessary to pay a specific attention to development of feasible projects since the analysis and observations show that the majority of projects offered to investors have significant weaknesses and are not feasible.
The majority of projects do not have marketing analysis and do not include information on activities for marketability of their products and return of equities. Though the majority of investors make decision based on the possibilities of return of their equities.
Operation of four free economic zones in our country provides a favorable platform for encouragement of greater amount of foreign direct investments into our economy.
Therefore, the heads and persons in charge at the central and local executive authorities need to undertake measures to encourage more local and foreign investments into the production sectors and ensure effective cooperation with businesses and investors.
Establishment of Dushanbe industrial zone is a vivid exemplary for such a cooperation. We laid the corner stone for nine production entities covering the area of 9ha in our capital city several days ago.
The governors of towns and districts need to undertake measures to establish similar industrial zones by following the standards in place.
In 2017 the free economic zones of ‘Soughd’ and ‘Danghara’ produced products amounting 78m and 18m Tajik Somoni respectively. Construction activities are still ongoing in the two other zones of ‘Ishkoshim’ and “Panj”.
I have to emphasize that the potential of free economic zones are not fully used due to the infrastructure and logistic difficulties.
Improved regional connectivity provides a great opportunity for establishment of new free economic or industrial zones in border districts and towns, which would facilitate the use of local human and infrastructure resources. Therefore, it is necessary to thoroughly study the possibility of establishment of free economic or industrial zones in border districts and towns.
With this regard, the Tajik Government needs to undertake necessary measures to define the standards of operation of industrial zones and possible incentives in priority areas of economy by taking into account their contribution to the local markets and exports.
The major objective of the Tajik Government from the establishment of such industrial zones in towns and districts is to create a favorable environment for entreprenership, process raw materials and produce final products, supply the local markets with quality products, strengthen the export capacity and create new jobs.
Currently the Tajik industry has a developed overal framework covering 90 areas of production and produces more than 140 types of products. Our country’s relative advantages include minerals extraction and processing, coal extraction, garment industry and chemistry, engineering, processing of metal and construction materials and food industry in the current condition.
The Government needs to further develop and implement joint investment projects to establish large industries on production and installation of various products, particularly in the areas of engineering, garment industry, food sector and service enterprises.
By doing so we can strengthen our economy’s competitiveness and promote the trademark of ‘Made in Tajikistan’ in the global markets.
We declared 2018 as the ‘Year of tourism and handicrafts’ with a view to transfer tourism services into an export sector by encouraging local and foreign investments.
Tajikistan has a visible ranking in the rating of many reputational organizations of the world for its capacity and potential for development of this sector and the number of tourists visiting our country has been increasing every year.
It is worthwhile noting that Tajikistan is included into the list of countries with the best tourism performances during a year.
With a view to effectively using the available potential and developing the tourism infrastructure, improving service quality, supporting domestic and international tourism and encouraging more investments into this sector, we improved our legal and regulatory framework and the Government has been undertaking additional measures to improve the investment climate in this area.
Thus, we have been implementing public investment projects on development of air transit in the country.
As a result, foreign air companies launched several new flights carried out through the air space of Tajikistan and with the use of services of our international airports and service companies.
Now it is high time for the local and foreign entrepreneurs to introduce modern styles of tourism services by developing proper investment projects and business plans.
Regular publication of information on the investment climate, available opportunities and attractive projects via internet can facilitate the foreign investors’ access to information.
In this process the Ministry of foreign affairs, Ministry of economic development and trade, the State Committee for Investments and Public Property Management and other relevant agencies of the country need to supply the Tajik diplomatic missions, consular and trade offices in other countries with a detailed and comprehensive information on potential investment projects in Tajikistan and establish regular contacts with them to promote the country’s investment opportunities.
Distinguished Entrepreneurs and Investors!
The experience of advanced countries of the world shows that the development of industry increases the demand in young talented professionals, who as a creative power can ensure sustainable economic growth.
The share of the population under 35 years old and the middle age people constitutes 54% and 24% accordingly, which shows the availability of a great intellectual capacity and human resources in our country.
The human capital as a powerful engine promotes development of innovation and the latest technologies. Therefore, the Tajik Government has been undertaking effective measures to encourage young people for entrepreneurship and investment, implementation of innovative projects, research of digital economy issues and other areas.
In order to use this intellectual power in full capacity, avail our broad investment opportunities and strengthen the export potential of our country we will further remain interested in encouraging foreign direct investments, introducing the latest technologies and best practices.
In this context, arranging regular international investment and entrepreneurship fora, exhibitions and fairs of products made in Tajikistan and other countries is of particular importance, which would create a great platform for wider trade and production cooperation.
I believe that the outcomes of this Forum today, the agreements reached and the contracts signed by its participants will promote strengthening mutually beneficial economic and trade cooperation, ensuring economic growth and improving the wellbeing of the population of Tajikistan and the region and also ensures solidarity for joint and effective use of our opportunities.
It is also my firm belief that our dedicated entrepreneurs will decently contribute to the process of preparation for celebration of the 30th anniversary of the state independence of our country, to further prosperity of our beloved Tajikistan and make it more beautiful and developed.
According to the summary information we expect the construction of almost 18 900 new facilities in towns and districts of our country in addition to 378 assets, which are to be constructed based on the Action Plan approved by the Resolution of the Government during the next three years, i.e. by the 30th anniversary of our independence, including 400 facilities in Badakhshon Mountainous Autonomous Province, 6000 in Soughd province, 5000 in Khatlon province, 3530 in Dushanbe and 3422 assets in republican subordination districts.
Thus, establishment of such a huge number of new facilities and buildings will further develop our beloved country and address many social issues and at the same time this process will become the field of tests for patriotism, high sense of national pride and identity and efforts of entrepreneurs, investors and other dedicated and generous individuals.
It is my firm belief that our patriot and dedicated entrepreneurs will pass this examination successfully.
I wish you fruitful activities, good luck, continued health and happiness.