Enhancing Investment Promotion in Tajikistan

Recommendation 1. Ensure IPAs use consistent messaging and proper tools for promotional activities

Challenge: Tajikistan does not approach investors with clear messages and effective digital tools

Tajikistan’s investment promotion efforts suffer from the absence of a clear value proposition and narrow definition of priority sectors

Tajikistan could improve its efforts in creating a recognisable image for most potential foreign investors. Generating such an image requires clear and consistent messaging about what it can offer investors, that is, a compelling value proposition. The three major selling points to investors identified by the SCISPM in the 2021 OECD questionnaire – macroeconomic and political stability, a young and well-educated workforce, and a harmonised regulatory environment – are not framed specifically or comparatively, nor do they necessarily reflect strengths investors themselves would cite. Furthermore, there is no explicit connection between Tajikistan’s self-assessed strengths and the priority sectors it identifies: industry, energy, transport, and food (Government of Tajikistan, 2012[25]).

IPAs from OECD countries are already prioritising fewer and more focused sectors in response to the pandemic. The changed economic conditions of the pandemic are also generally an opportunity to reassess economic realities and priorities (OECD, 2020[15]). Identifying specific and narrow priority sectors in line with the country’s potential and mentioning them consistently should thus become a crucial component of marketing Tajikistan to investors. Once key messages and priority sectors are identified, Tajikistan can use them in more targeted marketing materials and events.

Tajikistan’s marketing to investors does not provide specific and consistent messages and information

Tajikistan does not have a strategy for marketing to and targeting investors. Investment promotion action plans usually cover marketing, branding, and targeting of investors through a detailed step-by-step approach. In Tajikistan, the 2012 Concept of State Policy for Attraction and Protection of Investments, the main investment promotion document to date, does not contain these elements (Government of Tajikistan, 2012[25]; UNCTAD, 2016[26]). Without a strategy to co-ordinate among agencies, Tajikistan’s messaging to investors is inconsistent, particularly regarding priority sectors (Box 1).

In the OECD IPA survey, Tajikistan indicated that it conducts a wide range of generalised image-building and marketing activities, spending 20% of its budget thereon, compared to 34% in Eurasia and 18% in OECD countries. These include maintaining multiple websites to promote investment in Tajikistan, making use of international and domestic media, regularly producing promotional materials, and organising public relations events (OECD, 2020[27]).

Tajikistan’s main marketing tools to investors are the country’s investor guide, which includes generic information on investment opportunities and the investment climate. Other presentations are also available, which tend to be presented at business forums and other investor-related events (UNCTAD, 2016[26]; OECD, 2020[27]). These materials do not provide clear logistical information, which can be further exemplified by Tajikistan’s investment promotion websites. These websites, which are often investors’ first and primary source of information, are not consistent in their messaging about investment opportunities, and crucial facts are scattered across them (see Box 1). While most sites and media reports emphasise improvements in Tajikistan’s business climate (Mirsaidov, 2021[28]) – certainly reassuring for investors – this is merely a prerequisite for investment and does not in itself constitute a valid value proposition. Investors need to be able to find information that helps them determine that Tajikistan is a good location to produce goods or services in a specific industry.

Box 1. An overview of Tajikistan’s websites for investors

Tajikistan has a number of investment-related websites. Their strengths include their generally modern appearance and the availability of much content in English as well as Russian, including downloadable information on investment opportunities and legal texts.

• B2b.tj was established by Tajinvest with support from the OSCE and GIZ. Its most useful feature is the detailed information on the legal environment in its “business guide”. For example, investors can easily obtain tailored information on exports through an interactive tool that allows a quick search by product and function. However, many pages in this section are not well maintained; the interactive and helpful section “guidelines for investors” was a broken link as of July 2021, and while it is working as of February 2022, it is only available in Russian, even when accessed via the English-language website. The website lists investment projects by general sector, yet it is unclear how regularly these are updated, since the list of projects does not overlap at all with the one provided by the SCISPM on their investment map (map.investcom.tj), nor the list on Tajinvest’s main website. The information about each sector includes some basic facts about the sector, numerous priority sub-sectors, and relevant legal incentives but lacks a clear argument for investors about why Tajikistan is a better place to invest in this sector than its competitors. Information about domestic companies, presumably provided for matchmaking purposes, is mostly only available in Russian. News articles are also frequently posted, but there are far more articles in Russian than English.

• Tajinvest.tj is the main website of Tajinvest. It is visually appealing, but it remains unclear how much of the information is still relevant. The priority sectors and investment projects have little overlap with those on the b2b.tj or investcom.tj sites or other government documents (priority sectors are the same as those identified in a 2019 report Investment Opportunities in Tajikistan, authored by Tajinvest but available only on the SCISPM website). The section “Why Tajikistan?” is also dated 2019. Detailed information on investment opportunities is only available in a Russian-language downloadable file, whereas b2b.tj has such files available in English. All this suggests that the website has not been updated for the last two years, apart from the news section, which is entirely duplicated on b2b.tj. Since b2b.tj is also co-managed by Tajinvest, it is probably worth consolidating the two websites and eliminating Tajinvest.tj. Despite the government noting digitalisation as its priority in the coming decade, no digital infrastructure project has been listed on the Tajinvest.tj site.

• Investcom.tj is the website of the SCISPM. As the Committee has a variety of mandates, only part of the website is devoted to investment. The specificity of priority sectors compared to the other websites (e.g., beekeeping) is commendable, although other sectors are more general or even encompass the others (e.g., agriculture). The descriptions of these sectors, especially the specific ones, include somewhat better value propositions than the other websites, such as available land and the appropriate native plants for beekeeping. The website also includes a useful map of investment opportunities with fairly detailed information, but these are not the same as those on b2b.tj. Unfortunately, very little of the website appears to be up to date; sections like investor services and priority sector pages were last updated in 2018 according to webpage timestamps. Confusingly, there are two lists of projects, one labelled “priority” and from 2020, and the other from 2018. The site is somewhat difficult to navigate, as one must return to the homepage to find the section on priority sectors.

• The Ministry of Economic Development and Trade is also actively promoting the Free Economic Zones (FEZ); general information about these is available on the above websites. There is a consolidated page fez.tj. The site provides investors useful information, albeit from 2017 and therefore possibly outdated, on topics like taxes, labour, services, and relevant laws. Investors can also find specific information on websites of each FEZ, with differences in quality and intensity. Supported by UNDP, the MOE is currently developing the websites of individual FEZ, including reference materials to promote them to international investors.

Sources: (SCISPM, TajInvest, GIZ, & OSCE, 2019[29]; SPISPM, 2018[30]; TajInvest, 2019[31]; FEZ "Dangara", 2018[32]; FEZ "Panch" & OSCE, 2009[33])

Tajikistan lacks tools for targeting specific investors

Like its marketing strategy, Tajikistan’s approach to targeting investors is expensive yet too general. The SCISPM expends significant resources on general events (sector-specific road shows, business fora, fairs), missions abroad, and one-on-one meetings with prospective investors. It also carries out trade fairs, organises trips for business delegations and signs co-operation agreements with other countries (OECD questionnaire, 2021). Many of the events are co-organised with other government entities. For instance, the Chamber of Commerce and Industry (CCI) regularly organises exhibitions in which the SCISPM takes an active role to follow up with investors if interest arises; more specific agencies, such as the Ministry of Agriculture, participate in events relevant to their work (OECD questionnaire, 2021).

However, the government’s investment promotion work does not always target specific countries and investors proactively, an approach with greater likelihood of success and potentially lower costs (OECD, 2020[27]). Instead, most investors had already been present in other Central Asian countries and decided to explore other countries in the region. For instance, Coca Cola is in Tajikistan, Kyrgyzstan, and Kazakhstan. Knowing this, Tajikistan could conduct research on which investors are already present in the region and contact them (see Recommendation 2B). Green energy companies in Kazakhstan like Visor International DMCC and Risen Solar Technology as well as hotel companies in Kyrgyzstan like Novotel and Hyatt Regency may be good fits for Tajikistan’s state priority sectors of hydropower and tourism respectively (Agency for the Promotion and Protection of Investments of the Kyrgyz Republic, 2021[34]; Kazakh Invest, 2021[35]).

The SCISPM’s co-operation with the network of embassies and consulates could also be further enhanced to carry out effective investor targeting outside of Tajikistan. Over the past years, the visa regime has been simplified, making it easier for investors and individuals alike to request and pay for visas via an electronic channel.

Recommendation 1A: Identify specific target sectors to focus investment promotion efforts

Realistic economic analysis should form the core of Tajikistan’s marketing to investors and selection of target sectors

The first step to attracting investors is informing them of opportunities in Tajikistan, through both general marketing and proactive outreach. This, in turn, requires that IPAs identify the country’s strengths. Economic realities about development goals or political agendas, must come first if investment attraction is to be realistic and therefore successful (OECD, 2015[36]; WAIPA, 2020[37]; World Bank, 2020[38]). Investors are interested in three major categories of benefits: resources, market, and efficiency. Resource-seeking investors look for environmental features and the labour market, market-seeking look for opportunities to sell their products due to gaps in Tajikistan’s domestic production and supply chains, and efficiency-seeking look for low operating costs and other factors that increase efficiency, like specialised human capital (Wadhwa and Reddy, 2011[39]). Ideally, Tajikistan’s strengths in each of these areas should be framed with competitors in mind, but in some cases collaboration with neighbours can be more of a benefit than an increased competition from investors’ perspective. Collaboration can provide larger markets in the context of Tajikistan and other Central Asian small economies, opportunities for economies of scale, and cross-border infrastructure – including digital (Center for Regional Economic Competitiveness, 2021[40]; Carole Biau, 2015[41]; OECD, 2020[27]). It is also crucial that the value proposition be realistic: it must be based on accurate data and show how Tajikistan’s strengths and the IPA’s services can compensate for issues in the market or business climate or for gaps with competitors (UN ESCAP, 2019[42]; Clarity Business Strategies, 2018[43]).

Understanding Tajikistan’s strengths allows it to identify potentially viable target sectors. Being specific about target sectors is critical to maximising the impact of investment promotion resources, because it enables the IPAs to focus their efforts on sectors that have the best chance of attracting investors and that will bring the most benefit to Tajikistan. According to one study, funds used by an IPA in sector-specific marketing resulted in investments nearly 200 times what the IPA spent (Harding and Javorcik, 2012[44]).

To make an initial list of potential priority sectors, IPAs can use pre-existing analyses and studies, expert opinions, and discussions with current investors (WAIPA, 2020[37]; OECD, 2018[20]). These qualitative data can be supported with quantitative market analysis. Good target sectors are based on a combination of national assets critical to the functioning of the sector; merely one reason to invest in each sector is not enough (Center for Regional Economic Competitiveness, 2021[40]).

Once a list of potential target sectors is created, Tajikistan should conduct a more detailed analysis of the opportunities Tajikistan has in that sector and identify the more narrow sub-sectors that have the greatest potential in Tajikistan. For example, research and analysis could determine if dried fruits, rather than food processing in general, would be a good sector to target based on Tajikistan’s comparative advantages (such as high-quality and inexpensive raw fruit inputs). The OECD’s Sector Competitiveness Strategy for Kazakhstan and the UNCTAD Investment Policy Review of Kyrgyzstan provide examples of market analysis of competitive advantages to choose priority sectors for investment (OECD, 2010[45]; UNCTAD, 2016[46]).

Box 2. Kazakhstan’s sector competitiveness strategy

The OECD conducted a thorough sector prioritisation for Kazakhstan in 2010. To make a long list of potential sectors, the OECD started with stakeholder interviews, including government ministries, foreign investors, and BIOs. All sectors were converted to a standardised classification system, namely the Classification of Economic Activities of the European Community NACE. Next, the OECD looked at quantitative data on the economic competitiveness of the sector and benefits for Kazakhstan’s development goals. Example economic viability variables included the cost of labour, domestic consumption of the product, and availability of inputs for the production process, including energy demands. Example development attractiveness variables included employment level in the sector, value added per employee, and sector innovation performance index. The sectors that were both most economically viable and beneficial to Kazakhstan were selected. Finally, these findings were reviewed by stakeholders to ensure consideration of qualitative factors that the quantitative analysis may have missed.

One of the sectors identified was Logistics for Agribusiness. This is specific: it refers to a business function within an industry. Detailed analysis of this sector revealed Kazakhstan’s concrete value proposition, which would have been even better if it were framed comparatively:

• Central location between Europe and Asia;

• Extensive road and train network;

• Two major logistics centres for warehouses, including a Russian-Kazakh project, and plans to develop a third to improve logistics with China; and

• Doubled value of the logistics sector in Kazakhstan over the past eight years.

At the same time, the strategy was honest about some shortcomings in the sector and the ways that Kazakhstan can address them, which is very important for investors. For instance, the report recommended improved road quality and increased access to refrigerated trucks.

Source: (OECD, 2010[45]).

Specificity about priority narrow sectors, countries, and timeline will maximise the benefits of focused investment promotion

The last step is to select the final sectors reflecting both a unique comparative value proposition and an alignment with development goals (Center for Regional Economic Competitiveness, 2021[40]). The IPA should select no more than 3-5 highly specific sectors (Byrne, 2016[47]; World Bank, 2020[38]). A focus on such specific sectors does not imply that Tajikistan should refuse other FDI opportunities if approached by investors, but rather that resources for proactive investment promotion should be devoted primarily to the priority sectors (World Bank, 2020[38]). Georgia’s investment promotion strategy for instance sets out two categories of sectors that it prioritises: (1) priority sectors – sectors that Georgia’s IPA actively targets and conducts outreach towards, and (2) facilitation sectors – those in which interest already exists but support is needed to enter the country.

Once sectors are selected, it may be beneficial to focus investment promotion efforts even further on priority countries and projects. Tajikistan already uses a variety of criteria when it comes to project prioritisation, but others could be added to the analysis. Ukraine’s IPA, for example, takes into account the investment horizon, and the firm’s engagement in internationalisation and the mode of entry. Georgia’s IPA uses the size of the company as a criterion too. Both IPAs also focus on priority country of origin (OECD, 2020[27]). For instance, Tajikistan could target South Korea, a recent investor in Tajik cotton textiles (SugdNEWS, 2020[48]). It is also helpful to specify which priority sectors are relevant for which priority countries. This can include considerations of both supply (interests of investors) and demand (benefits for Tajikistan). For instance, on the supply side European countries may be interested in renewable energy, while on the demand side certain Asian countries may be able to provide Tajik manufacturers with desirable high technology (WAIPA, 2020[37]). Investment brochures with comparative value propositions for specific desired projects will help attract investors as well (WAIPA, 2020[37]).

Finally, there may be a need for timeline differentiation depending on targeted sectors. Some may be immediately ready for investment, while others might be part of medium and long-term plans pending reforms. Some IPAs choose to institutionalise these priorities through different subsections or staff responsible for each sector (OECD, 2018[20]). Effective prioritisation over the long term relies on monitoring and evaluation of the quantity and impact of investments in each priority sector, so Tajikistan should be prepared to collect this data (OECD, 2020[15]).

Recommendation 1B: Use digital tools to reduce costs and increase effectiveness

Relatively simple upgrades to IPA websites can easily improve investment attraction

Tajikistan should prioritise consolidation and updating of existing websites. Virtual means of connecting with investors have grown in importance during the pandemic, when in-person interactions became impossible (WAIPA, 2020[37]). An investment-promotion website can be visually quite simple with few graphics and less text, provided it meets the following key criteria: accurate, updated, easily navigable, and translated (UN ESCAP, 2019[42]; Kaymaz, 2019[49]). All content should be in English, and it would be even better if the language of Tajikistan’s biggest investor, Chinese, were also an option (Byrne, 2016[47]). Having one investment website is preferable; if there are multiple web sites, care must be taken to ensure that information is consistent across sites. This may entail simplifying and removing less relevant information so that agencies can focus on regular updates (including working hyperlinks) of core content: value proposition, priority sectors, investment opportunities, and logistical information like the legal environment and IPA services. Notably, none of the sites described in Box 1 provided information about COVID-19: this is the kind of core information that investors need.

The content of the website should be driven by consistent messaging about Tajikistan. The front page should clearly state what makes Tajikistan an attractive investment location, and the consistent use of related keywords throughout the website has the additional benefit of helping with search engine optimisation (SEO) (IBT Partners, 2020[50]; Byrne, 2016[47]). Priority sectors – which must be consistent across all government websites – should each have dedicated pages describing individual value propositions, with advantages for each sector (monetised whenever possible), such as land prices and local salaries (OECD, 2018[20]; Clarity Business Strategies, 2018[43]; UN ESCAP, 2019[42]).

Contact information on the website is also critical so that Tajikistan’s IPAs can begin direct targeting of individual investors. According to a 2012 report, out of 181 IPAs just 24 (13.3%) responded to inquiries from their websites in a helpful and timely manner (World Bank, 2020[38]). Tajikistan’s websites do provide contact information, but this could be improved with more specific contact details regarding individual sectors (WAIPA, 2020[37]). Requesting that site visitors leave some information about themselves can make it easier to follow up. Even if visitors do not leave contact information, site analytics, such as the country of origin of site visitors, can be helpful for targeting purposes.

Box 3. Interactive map of Egypt’s investment opportunities is an excellent way to convey information to investors

If time and resources allow, more advanced and interactive tools for the website, like a map, can help investors quickly find information. Currently, the SCISPM hosts an English-only investment project map at map.investcom.tj. This is an excellent step and includes useful features, like filtering by sector. When an investor clicks on a project, they can find further information in English on the project details and incentives. However, lack of co-ordination among agencies means that the investment opportunities featured are not the same as those on b2b.tj or Tajinvest.tj. This raises questions about which – if any – list is up-to-date and thereby relevant to investors. Tajikistan can consider improving its map along the lines of the one hosted by Egypt’s IPA.

Egypt’s IPA provides a map that summarises important legal information with a geographical component, like zones. This may be particularly useful in Tajikistan’s context due to the large number of FEZs that each have their own legal framework and incentives for investors. The Egyptian map also indicates the location of utilities investors may find important, like airports and universities. While Tajikistan’s map directs all interested investors to contact the SCISPM’s general email, Egypt’s map provides specific, direct contact information of the relevant government entity for that project. The Egyptian map is dynamic and regional officials (or FEZs, in the case of Tajikistan) can easily add new opportunities without waiting for approval from the central IPA, which would ensure the map is continually updated.

Source: (OECD, 2020[51]).

Digital tools can help target specific investors, which is more likely to lead to investment

Generalised image-building, such as through a website, is very important, but successful IPAs also reach out proactively to potential investors in priority sectors (Kaymaz, 2019[49]). This can be viewed as a subsidy for location searches that counteracts investor concerns about additional costs of being a “first mover” in a relatively unknown country like Tajikistan (OECD & Inter-American Development Bank, 2019[21]). Nearly half (47%) of IPAs in OECD countries target specific investors (OECD, 2018[20]).

Before Tajikistan can do this, it needs to make a list of possible investors, a process called lead generation (UN ESCAP, 2019[42]). A first step is ensuring ongoing dialogue with international companies already in Tajikistan, such as Coca Cola, and those that have reached out themselves through the website. Other methods to find companies include sectoral publications, commercial databases such as Hoovers, BIOs, and investors in neighbouring countries. The latter option is especially promising for Tajikistan. Investors could be found through collaborative regional investment forums – including virtual ones with much lower overhead costs for both hosts and investors – that facilitate investment policy co-ordination and highlight potential benefits for investors with a regional dimension like economies of scale, an approach that has been successful in the Southern African Development Community and the Association of Southeast Asian Nations (Byrne, 2016[47]; Kaymaz, 2019[49]; Carole Biau, 2015[41]). Once a list is created, it can be narrowed through basic internet research on each company, including its specific products, market and plant locations, previous investments, and announced future intentions (Kaymaz, 2019[49]). These can then be compared to Tajikistan’s value proposition in the sector to determine if Tajikistan fits the investor’s needs.

It is also helpful to consider potential investors as customers and include them in a CRM system like SalesForce even before they choose to invest. This allows the IPA to keep track of their contact information over time and contact them about customised future opportunities for investment as they become available (Loewendahl and Bryan, 2019[52]). The IPA should set specific objectives for the frequency and timeline of communication with potential investors and engage in “politely persistent” outreach to high-level company executives (Caribbean Export Development Agency, 2014[53]; Kaymaz, 2019[49]). Such a database has advantages for communicating with current investors as well; IPAs with CRM systems could communicate with and support current and potential investors about changing conditions related to the pandemic (OECD, 2020[15]).

Once an investor is closely considering a project in Tajikistan, digital tools can help make the decision. A standard online library of important documents and clear operating procedures for IPA staff members can ensure responses are quick (World Bank, 2020[38]). Videoconferences and virtual site visits, and digital trade and economic missions may be necessary as the pandemic continues and useful afterwards as well since they are less costly for both the investor and IPA (OECD, 2020[51]).

A long-term approach to relationships with potential investors is necessary, since it might take years for the right project and timing to emerge, and even then investment decisions are a lengthy process (WAIPA, 2020[37]). Not everything about the investment targeting process can or should be digitised. Building trust and partnerships with potential investors through personal contact complements robust CRM and accurate, useful online information (Tsimal, 2020[54]). To add a human dimension to the digital tools, assigning individual staff members as account managers for designated prospective investors provides consistency (OECD, 2018[20]). Recruiting the right staff to carry out marketing and branding activities will be a critical priority in the years ahead, particularly ensuring the advanced digital skills needed to promote Tajikistan as an investment destination (UNCTAD, 2016[26]; OECD, 2020[27]).