Link to Country Partnership Strategy/Regional Cooperation Strategy:
After twelve years of pursuing accession to the World Trade Organization (WTO), Tajikistan finally became, on 2 March 2013, a full-pledged member of the WTO. Led by the Ministry of Economic Development and Trade (MEDT), the Tajikistan government recently drafted a strategic framework for post-WTO accession. In this regard, ADB has been requested by the Tajikistan government for support in the conduct of three key activities: (i) an international trade and investment conference to show that Tajikistan is Open for Business ; (ii) policy research and analysis on organizational reform of the Standards Agency (Tajikstandart); and (iii) capacity-building on policy and regulatory reforms to effect organizational change and tackle technical barriers to trade. These activities were discussed during an ADB consultation mission on 3-5 March 2013 and deemed crucial to Tajikistan compliance with its WTO commitments and to its ability to ensure the country fully benefits from WTO accession and membership. The activities are also consistent with the strategic framework of the Tajikistan Country Partnership Strategy (CPS 2010-2014). Specifically, the TA activities will support CPS operational priorities in developing the private sector and improving public services, particularly for traders. The activities also support broader objectives in regional cooperation and integration and governance. The TA will build on the work of other donor-funded WTO-related initiatives, including USAID's Regional Trade Liberalization and Customs Project (which ended in 2011), the EU project on Technical Assistance to Support the Tajik Ministry of Economic Development and Trade in the WTO Accession Process (which ended in January 2013), and USAID's Regional Economic Cooperation Project (which is ongoing until late 2013).
|Project Rationale and Linkage to Country/Regional Strategy
ADB's Country Partnership Strategy (CPS) for Tajikistan (2010-2014) highlights the substantial challenges faced by a landlocked country with a small population and significant development constraints. Tajikistan faces multiple problems as it sets out to better integrate itself into the world economy and develop more credible institutions, policies and regulations. It is the poorest country among the former Soviet Union republics, with a gross national income per capita of $870 (2011, Atlas method). Although Tajikistan has posted high GDP growth in recent years, this is mainly due to high commodity prices (aluminum and cotton) and migrant workers' remittances (which in 2012 was around $3.6 billion or 46% GDP). Moreover, Tajikistan also has the lowest foreign direct investments (FDI) among the former Soviet Union republics ($933 million in 2011). Tajikistan's dependency on narrow revenue sources and low FDI make it imperative to diversify its economic base. Tajikistan's recent accession to the World Trade Organization (WTO) presents an important development that can underpin a robust economic development strategy for increased trade and investment.
If skillfully managed, several benefits could accrue to Tajikistan following its entry in the WTO. First, Tajikistan can be assured of receiving nondiscriminatory treatment of its exports and, as necessary, avail of WTO's multilateral dispute settlement mechanisms. For a small and poor country, this is critical in the face of bigger and wealthier countries in the international marketplace. Second, WTO membership requires Tajikistan to undertake extensive market-oriented legal and regulatory reforms. Thus, Tajikistan's investment climate will be enhanced as WTO rules and regulations assure investors that the country's policy and regulatory environment is aligned with international best practices. Third, the transparency and accountability of Tajikistan's business environment can be improved due to WTO monitoring through Trade Policy Reviews. Positive trade policy reviews can serve as an effective communication and information tool to strengthen the positioning of Tajikistan as a competitive place for business. Fourth, given the political economy of Tajikistan, WTO accession will help enable reform-oriented officials to better manage demands from special interest groups for trade privileges.
This proposed ADB Technical Assistance (TA) will support Tajikistan by addressing three areas:
1. Demonstrating commitment to improving the trade and business environment. In the World Bank's Doing Business 2013 Report, Tajikistan ranks 141 among 185 economies surveyed. Although other CAREC countries are ranked lower (i.e., Afghanistan is ranked 167), Tajikistan scores low in comparison with other Central Asian countries that have improved in recent years, notably Kazakhstan (ranked 47) and the Kyrgyz Republic (ranked 77). However, Tajikistan has demonstrated sharp gains in one key area, namely investor protection, where it improved its ranking by 41 notches, from 66 in 2012 to 24 in 2013. However, its score in trading across borders remains close to the bottom, at 184, unchanged from 2012. While the high costs of trade are substantially due to Tajikistan's landlocked nature, there are a number of legal, regulatory and administrative impediments that contribute to its prohibitive environment which this TA seeks to address.
2. Rationalizing technical barriers to trade. In the interest of safety for human, animal, and plant life or health, WTO allows governments to establish rules and regulations as long as they are not discriminatory or protectionist. There are two WTO agreements that provide guidelines to its members, namely the Sanitary and Phytosanitary Measures Agreement (SPS) and the Technical Barriers to Trade Agreement (TBT). Both agreements allow countries to develop their own standards as long as they are scientifically based and aligned with international standards. In Tajikistan, however, there are institutional deficiencies in implementing the TBT agreement. The Standards Agency (Tajikstandart) that is in charge of TBT-related activities is viewed as poorly performing, with combined functions that present it with untenable conflicts of interests. It is involved in drafting standards and technical regulations, conformity assessment, accreditation and metrology, as well as inspection and enforcement. These multiple functions need to be disaggregated, to ensure that policymaking, regulation, services, inspection, and enforcement are properly delineated.
3. Enhancing capacity in policy and regulatory reforms. Improving Tajikistan's legal and regulatory environment to increase policy credibility and investor confidence requires capacity in policy and regulatory analysis, as well as in change management. Few Tajikistan officials have had the opportunity to learn the necessary knowledge and skills to determine what policies and regulations need to be reformed, and where, when, and how they can be effectively changed. This TA will seek to provide an opportunity for policy learning for key officials that can be scaled up and expanded when more resources are available.