Doing Business 2009 Tajikistan Launch Wendy Werner International Finance Corporation

1. Doing Business 2009Tajikistan LaunchWendy WernerInternational Finance Corporation

2. DB can help Tajikistan measure progress • Where are we? Where do we want to be? • Why DB is important for Tajikistan • What do the indicators measure? • How to take action

3. Doing Business in Tajikistan: 2009-2008 Overall ranking on ease of doing business is 159 out of 181 • Decrease in rankings of separate indicators is caused by: • Addition of 3 countries in DB 2009; • Other countries improved their regulations, while Tajikistan did not introduce as many improvements; • Some indicators reflect worsening of the situation (e.g. increase total tax rate, cost of business registration, etc. ) Source: Web-based database of Doing Business on www.doingbusiness.org

4. Tajikistan can improve its DB ranking with action now • Focus on 3-4 reforms that can be in place by May 2009 • Recommendations developed/ work ongoing • Low ranking • Part of current PSD Strategy/ Action Plan Starting a Business Protecting Investors Construction Permits & Licenses Getting Credit

5. Timing is critical • DB 2010 data is collected Jan-May 2009 • Much can be accomplished in 8 months • New Laws or amendments passed • Processes must be in place

6. How much can Tajikistan improve? Current Proposed Reform Potential Improvement All 3 actions would yield an overall Doing Busines rating of 130 Jump of 29 places! Starting a Business 49 days 13 steps Min Capital 216% of GNI = 995 Somoni Registration in 5 days 2 steps Min Capital 5% of GNI = 80 Somoni Jump 129 places from #168 to #39 Getting Credit Credit Information Index = 0 / 10 Pass and apply draft Credit Bureau Law. Credit Info Index = 4 / 10 Jump 49 places from #172 to #123 Protecting Investors Investor Protection Index = 3.3 of 10 Amend Joint Stock Companies Act. Increasing disclosure & shareholders’ rights Index = 4.7 Jump 46 places from #150 to #104 www.doingbusiness.org Simulated improvement assuming all other countries stay constant.

7. DB can help Tajikistan measure progress • Where are we? Where do we want to be? • Why DB is important for Tajikistan • What do the indicators measure? • How to take action

8. DB is an Business Environment Report Card • Consistent methodology • Critical activities for all businesses Policy and legislative action can change DB Rankings

9. Country competitiveness

10. Kyrgyzstan: Improved rank from 99 to 68 • Starting a Business • OSS streamlined business registration processes • Eliminated requirements such as proof of residence • Obtaining company seal became optional • Cut 4 steps. Time reduced from 21 to 15 days. #50 to #31 +19 in rank • Protecting Investors • Minority shareholders can take legal actions • Assess related-party transaction before approval • Directors liable for negligence if they harm shareholders • If found liable, Directors pay damages, disgorge profits Now #11 was #33 +22 ranking • Dealing with Construction Permits • Occupany permit at a single place • Cut 9 steps, reduced time by almost 6 months • Lowered cost from 759% of income per capital to 406% Moved up 112 spots!! #170 to #58

11. DB can help Tajikistan measure progress • Where are we? Where do we want to be? • Why DB is important for Tajikistan • What do the indicators measure? • How to take action

12. To Improve . . . Chose your target. . . .

13. Protecting Investors Extent of disclosure, Extent of Director liability, and Ease of Shareholder suits Tajikistan jumped 29 places in 2009! • Improvement achieved through new Joint Stock Companies Law • Amendments to law could improve ranking further: • Disclosure on related party transactions to public and in periodic filings • Increase Director liability for damage to company • Allow further access to documents by shareholder plaintiffs in the court case

14. Starting a Business Procedures, time, cost and paid-in minimum capital to open a new business • OSS project targets 5 day registration through implementation of IT system • EC funding for project with Tax Cmt • Draft Law ready for consideration ?Is timing right for DB 2010? ? Can Tajikistan further cut paid-in capital?

15. Kyrgyz Republic: 2009 vs. 2008 4 procedures 15 days Fees are 7.4% of GNI Min Capital = 0.4% of GNI • Remove MoJ review of documents • Cut capital requirement, remove requirement for 50% paid-in capital • Presidential decree makes seal optional, but included because most companies still do it Tajikistan: 13 procedures, 49 days Cost is 27.5% of GNI Min Capital = 216.8% of GNI

16. Dealing with Construction Permits Procedures, time and cost of obtaining construction permits, inspections and utility connections • Only 5 countries require more procedures than Tajikistan • Silence-is-consent rules exist in 27 countries • Top reformers implemented one-stop shops to streamline approval process • Elaboration of subnormative acts offers opportunity for streamlining procedures • Amendments to 2006 Licensing Law needed • OSS and Risk-based approach

17. Getting Credit Strength of legal rights index, depth of credit information index • Draft Credit Bureau Law under discussion with Parliamentary Work Group • Mandatory participation by Financial institutions • Positive and negative credit information • Previous 5 years information provided • No licensing body, will speed implementation • Range of information providers • Implementation of private Credit Bureau with EBRD technical assistance • Feasibility study envisions CB within 50 weeks of Law

18. Poor Performance: Medium term target Paying Taxes Trading Across Borders • Number of tax payments: 54 • Time to prepare and file tax returns and pay taxes: 224 hours • Total taxes as a share of profit: 85.5% DB Rank = 159 DB Rank = 177

19. Fair Performance: Monitor • Employing Workers • Difficulty of hiring index, rigidity of hours index, difficulty and cost of economic redundancy dismissals • Enforcing Contracts • Procedures, time and cost to resolve a commercial dispute in court • Registering Property • Procedures, time and cost to register a transfer of commercial real estate • Closing a Business • Recovery rate in bankruptcy

20. DB can help Tajikistan measure progress • Where are we? Where do we want to be? • Why DB is important for Tajikistan • What do the indicators measure? • How to take action

21. Acceleration of current efforts • On the right track: speed, focus, implementation • State DB improvement is target • Integrate DB into reform plans • Monitor progress

22. BEE Working Group Action Plan • OSS • Identified coordination requirements in OSS: DFID, WB, EC, USAID • Leverage collective expertise • Topic for BEE Working Group on Friday • Permits Reform • Early October on process, sequence • Next Investment Council meeting • Protecting Investors • Planned for December in BEE WG Action Plan • Can be accelerated to develop draft amendments by January Thematic group on Getting Credit can be formed

23. DB knowledge and tracking • Decide target indicators today • Detailed workshops on target indicators (October) • DB methodology and case study • Examples of reformers • Current activities • Bi-monthly meetings to keep track of progress (Nov/ Jan/ Mar) • Monitoring of Action Plan at highest levels

24. Thank You Questions and Discussion

25. Survey respondents are one part of the data collection • Review of legal frameworks with validation and additional information from survey respondents • Respondents are business intermediaries, law firms, etc.