Enhancing Investment Promotion in Tajikistan

Recommendation 3. Better leverage the policy advocacy function and improve the facilitation system

Challenge: Investors struggle with the de facto investment climate and do not receive enough facilitation and advocacy support from Tajikistan’s IPAs

Tajikistan’s legal framework for investment facilitation is relatively strong, but resources could be better spent

In 2016, the government introduced a new Law on Investment (LoI) that codifies investment procedures and guarantees a number of investor rights and protections (Government of Tajikistan, 2016[59]). Many of these are in line with investment policy good practices, including:

• non-discrimination and equality before the law for foreign and domestic investors (Art. 7), including the opportunity to participate in privatisation (Art. 12);

• stability of the legal environment, such that if a law worsening investment conditions is adopted, investors do not have to comply for 10 years (excepting laws on national security, health, the environment or morality (Art. 8);

• protection from direct expropriation; a definition of indirect expropriation and provisions for compensation (Art. 14);

• freedom to repatriate profits (Art. 10) and property, including intellectual property, in accordance with customs law (Art. 16) and to convert currency (Art. 11); and

• free access to all relevant legal information for investors in an online format (Art. 13).

The LoI is supplemented by the 2012 Law on Investment Agreements, the 2011 Law on Free Economic Zones, and the charters of the SCISPM and Tajinvest. Taken together, they provide the legal framework for international investment and a relatively strong set of guarantees for investors.

Information on relevant legislation has become more easily accessible, but issues remain

Many investment-related laws and policy documents can be found across different websites and are often available only in Russian or Tajik. Investors must purchase access to Adliya, a commercial legal database, to obtain updated legal and regulatory information.

Efforts to increase transparency and access to information through systematising digital delivery of investment-related legislation is already underway. The SCISPM has created a B2B Business Portal that integrates information from eight government agencies, including the tax portal (which itself has implemented a notable digitalisation campaign) and the National Bank of Tajikistan. This portal is a significant improvement, with key pieces of legislation available in English, Russian and Tajik. Investors can also find key legislation in these languages on the SCISPM and Tajinvest websites.

However, updates appear to be irregular. Most notably, during the COVID-19 pandemic the SCISPM and Tajinvest have not added new legal information that is important to investors, such as information on lockdowns, tax measures, and credit support (Blavatnik School of Government, 2020[60]). Despite the clear consequences of these for investors and the private sector more broadly, information on the pandemic and crisis response is limited to the website of the Ministry of Health (OECD questionnaire, 2021). Investors say that this caused uncertainty on their end. In the context of lingering uncertainty over the impact of COVID-19 on the country’s economy, it is more crucial than ever to ensure that investors have access to reliable and updated information.

Tajikistan’s IPAs have a legal mandate to facilitate investment facilitation, but they are trying to do too much with too little

On average, Eurasia IPAs devote fewer resources to investment facilitation and retention than other regions: 17% compared to 30% in OECD countries. In contrast, the SCISPM devotes 30% of its budget to investment facilitation and 30% to policy advocacy, a percentage matched only by Kazakhstan and Ukraine in Eurasia (OECD questionnaire, 2021) (OECD, 2020[27]). However, this figure is relative to the overall resources at the SCISPM’s disposal, so Tajikistan devotes fewer resources than its neighbours in absolute terms. With these limited resources, the State Committee aims to provide a long list of investment facilitation and aftercare functions1. This raises questions about how much the country can devote to each facilitation activity (OECD, 2020[27]).

Policy advocacy institutions aimed at improving the investment climate are relatively robust, but their impact is unclear

To support public-private dialogue on investment, the government has established the Consultative Council on Improvement of the Investment Climate. The Council prepares recommendations for the President and the government on matters related to private sector development and the investment climate (UNCTAD, 2016[26]). It is chaired by the President himself and includes four permanent representatives (the Prime Minister, the First Deputy Prime Minister, the Chair of the SCISPM – who acts as its Executive Secretary – and the Head of the Council Secretariat), seventeen rotating representatives: three from development partners, and 14 members from the private sector (13 domestic businesses and one foreign investor). Tajikistan developed the platform in 2007 with support from the international donor community starting with sub-national PPD mechanisms (Kosymova and Abdujabborov, 2015[61]). In the OECD IPA survey, Tajikistan indicated that it spends 30% of its budget on policy advocacy, compared to 12% in Eurasia and 6% in OECD countries. (Consultative Council on Improvement of Investment Climate under the President of the Republic of Tajikistan, 2021[62]).

The main meetings of the Council are chaired by the Chairman of the Council, the President or the First Deputy Prime Minister (an intersessional meeting of the Council). Topics and issues for discussion at Council meetings are proposed by the private sector, then, in the filtering process, the main topics for discussion at the Council meeting are selected. The Secretariat of the Council conducts analyses on selected topics and prepares recommendations with the participation of representatives of the private sector, experts and industry business associations. After discussion at a meeting of the Council, on the basis of recommendations, a draft action plan for individual sectors is developed. The Council produces annual monitoring reports, with the most recent available report from March 2020. The report demonstrates that, for the most part, the government assigns the Council or one of its ministry members (frequently the SCISPM) the development of a particular policy proposal or action plan, which is then returned to the government for review and possible approval (Consultative Council on Improvement of Investment Climate under the President of the Republic of Tajikistan, 2020[63]).

These arrangements are meant to enable investors to put policy issues on the agenda or make concrete contributions to the policy proposals. It is unclear, though, how many of these proposals ultimately become law, or the timeframes in which they do so. While the Council is not designed as a platform for individual investors to state specific grievances (as opposed to addressing broader policy concerns), occasionally such issues are on the agenda, such as a request for land from the domestic chicken processing company Behamto, cited in the 2019 monitoring report.

Other mechanisms for PPD exist as well. According to an OECD survey, the Chamber of Commerce and Industry of Tajikistan – the country’s largest business association – and smaller business intermediary organisations (BIOs) participate quarterly in a variety of government councils and working groups. Of particular note is the current working group on reforming the tax code, as described in Box 8.

Box 7. Tajikistan’s new tax code

In 2019, the Tax Committee and Ministry of Finance initiated a reform of the tax code, in order to align it with international best practice, and to adapt it to new realities for businesses and individuals. The new version reduces the number of taxes from 10 to 7, introduces measures intended to improve tax administration and reduces the rates of a number of specific taxes, including VAT. There are preferential tax regimes for a number of sectors.1

The new tax code also aims to limit unplanned inspections and audits, as new technologies and risk management tools are used to identify tax violations, rendering it unnecessary to conduct additional unplanned inspections. The number of inspections has in any case been declining gradually in recent years. With the new code, individuals will also be able to submit tax returns electronically, which is meant to reduce compliance costs (especially in terms of time). Since 2012, the Tax Committee has been providing digital services on andoz.tj; it now provides sixty services for legal entities, individual entrepreneurs, individuals, civil servants, government agencies and the banking sector.

The new code was developed by an interdepartmental working group. It took into account numerous comments and proposals from ministries and departments, the private sector and the development community. The committee consulted international financial institutions such as the World Bank, the IMF, the Asian Development Bank, and the EBRD.

1. poultry farming, fish farming, the securities market, free economic zones, innovative and technological activities; construction of hydroelectric power plants, newly created and operating enterprises that include the full range of processing cotton fibre into final products

Source: Tax Committee; Ministry of Finance

Investors in Tajikistan struggle with bureaucratic requirements despite recent reforms

Despite a range of recent reforms (Box 9), administrative burdens remain an issue for many investors. As described in detail in the OECD’s recent Improving the Legal Environment for Business in Central Asia report, despite the relatively good formal legal framework, implementation gaps sometimes undermine the quality, transparency, and coherence of the investment process (OECD, 2021[2]). Investors highlighted what they see as inconsistent interpretation and arbitrary application of investment laws, which hinder the process of transparent investing (OECD interviews, 2021). Therefore, Tajikistan’s investors need IPA support with investment logistics and continued policy advocacy to address remaining bottlenecks in legislation, public administration and the judicial system (OECD, 2021[2]).

Box 8. Tajikistan’s recent legal and regulatory reforms to improve the investment climate

The Tajik government has undertaken a series of reforms to bring the investment climate in line with international standards, including:

• Business registration: the government has introduced the opportunity to digitally register a business or pay taxes, by using national payment cards, along with a centralised electronic registry for movable property.

• Inspections: the government adopted a new edition of the Law on Inspections that makes it mandatory for inspection bodies to report all inspections of businesses digitally. This information is then relayed to a newly established Co-ordination Council of Inspection Bodies and a special website in order to keep track of them.

• Banking and Access to finance: New amendments to the Law on Credit History have expanded the coverage of credit bureaus from 15.9% to 47.6% of the adult population between 2016 and 2020, thereby strengthening the protection of the rights of lenders and borrowers. Moreover, the government has aimed to strengthen the legislative base for secure transactions and the bankruptcy in order to reinforce creditors and borrowers’ legal rights.

• Competition: the government launched an electronic portal for public procurement. The corresponding by-laws are being developed to better adapt it to the needs of SMEs.

• Commercial justice: the Supreme Economic Court, the economic court of Dushanbe, Khatlon region, Sughd region and of GBAO have launched their websites to facilitate the access for citizens and businesses, to legislative and judicial information. Users can also find helplines, and a feedback platform. In addition, a recent package of bills1 strengthened the rights of creditors and simplified the process of resolving insolvency.

• Real Estate: the "single window" to register real estate digitally has been established, thereby merging five government departments in one.

• Trade: Tajikistan's Trade Portal, an online platform with descriptions of import and export procedures has been launched. The government is also testing a pilot "single window for the registration of transit and export-import" which unites ten licensing authorities for trade related purposes.

1. In particular, amendments were made to the Law of the Republic of Tajikistan "On Enforcement Proceedings" dated January 2, 2019 year, no. 1562 and to the first and second parts of the Civil Code of 01/02/2019, No. 1557 and No. 1558.

Source: SCISPM, Tax Committee, Ministry of Finance.

Investors want greater facilitation support

Investors tend to see investment screening mechanisms, including into Free Economic Zones (FEZ), as an impediment. The SCISPM oversees the screening process, which can be lengthy and, in the view of investors, opaque. In the absence of clear information about requirements, investors may be inclined to use personal connections with senior government officials. This may lead to decisions that favour market incumbents and reduce pressure to improve the transparency and consistency of the investment regime (OECD, 2021[2]). Even the perception that this may happen can be sufficient to deter some investors.

There are several useful but limited digital services for investors from other agencies. Investors can apply for a business (K) e-visa for 60 days, but cannot electronically apply for the specialised investor (C) visa (Ministry of Foreign Affairs, 2021[64]). Registered users of the “Customs Service Single Window” can digitally complete 22 export and import-related transactions, although this is only available in Tajik and Russian (Customs Service, 2021[65]; SCISPM & TajInvest, 2020[66]). The Tax Committee provides a range of digital filing and payment services, which enjoy very high satisfaction and usage from Tajik citizens (OECD questionnaire of the State Tax Committee, 2021). The tax committee’s website offers services in Russian, English and Tajik, although the documents that need to be completed mostly remain in Tajik. The explanatory and informational resources of the Tax Committee website are regularly updated and translated into English. In addition, a contact centre can put individuals in contact with the International Co-operation Office, whose specialists speak Russian, English, French, Chinese and Japanese. While the main page of the Tax Committee has now been translated to English, the documents and subsequent explanations remain in Tajik and Russian (Tax Committee, 2021[67]). In 2021, the website of the Tax Committee - andoz.tj recorded more than 137 000 visits from outside Tajikistan, including 6004 visits from the USA, 1836 from the UK, 2924 from the Netherlands, 1637 from Germany, 1865 from China, 93049 visits from Russia and 30334 visits from other countries.

The SCISPM is aware of the importance of digitalising investor services and is committed to improving them. In response to an OECD questionnaire, the Committee identified China’s IPA, China Council for the Promotion of International Trade, as the example of digital services it wishes to emulate. The Invest China website provides various services such as registration, accounting, and licencing for registered users (Investment Promotion Center of CCPIT, 2021[68]).

Investors already in the country could benefit from stronger IPA support

Investors interviewed for this report described limited support during their investor journey, especially when they encountered issues relating to the implementation of guarantees in the LoI and their investor agreements. Investors who feel they receive inadequate support or believe they are not able to secure the conditions they believed were offered may refrain from future investment or even share their negative assessments with other potential investors (OECD interviews, 2021). While individualised intervention is not necessarily typical of all IPAs, Tajikistan’s environment and the SCISPM’s mandate to support investors with legal issues would seem to warrant such a role.

Investors cite numerous issues that would benefit from IPA intervention, particularly with respect to property, inspections and taxation (OECD, 2021[2]). Protection against, and regulation of, expropriation of private property is captured in the 2016 LoI, and most cases of expropriation concern procedural or criminal violations in privatisations. However, investors have cited cases in which they claimed to have been denied access to infrastructure essential for business operations, which may constitute indirect expropriation. Some investors also complained of unplanned inspections (sanitary/ standard/ anti-monopoly/ fire department), despite a 2018 moratorium on such inspections in production facilities, except for inspections by tax officials, prosecutors, the audit chamber, anticorruption officials and the National Bank (Eurasianet, 2018[69]).

Enforcement of tax laws is a major concern cited by investors. The Tax Committee notes that additional tax incentives have been established for investors within the framework of investment agreements in recent years. Agreements signed with more than 18 investors and executors of investment projects exempt them from income tax and social tax for non-residents for set periods (up to ten years). When importing equipment and spare parts, they may be exempt from value added tax and customs duties. In addition, there are other investment agreements, according to which investors and executors of investment projects are completely exempt from paying all taxes, except for income and social tax for residents for up to 10 years. Some investors have raised concerns that these exemptions may not work in practice and that they “cannot access or utilise most of these incentives” (U.S. Department of State, 2020[70]). However, the Tax Committee emphasises that it has received no complaints from investors about failure to honour these tax preferences and that the volume of such tax incentives has risen over time, from TJS 2.1 billion in 2015 to TJS 3.9 billion in 2019.

Although some businesses have included clauses in bilateral investment treaties (BITs) that mandate the use of international courts for dispute resolution and Tajikistan is a signatory to the 1958 New York Convention, some observers report encountering problems with domestic courts’ implementation of foreign arbitration awards and domestic contract enforcement (Santander Trade, 2021[17]) (OECD, 2021[2]).

There is no department responsible for relations with existing or prospective new investors and no database or customer relationship management (CRM) system in which their contact information is stored (see Recommendation 2B). In this context, limited investor aftercare is carried out, potentially affecting important re-investment opportunities. The SCISPM is aware of the issue and stated that it plans to improve and digitise monitoring and data collection in an OECD questionnaire.

Therefore, requesting support from SCISPM can be complicated, and in interviews some investors complained about a lack of response from the Committee to inquiries. According to its website, the SCISPM will not provide services to investors without six required documents, including a certificate of state registration, charter of the company, and an official, stamped letter requesting the service (SCISPM, 2019[71]). This may inhibit investors’ timely receipt of assistance and the Committee’s ability to offer services that were not officially requested. Tajinvest is further constrained by its status as a State Unitary Enterprise with minimal legal power of its own (OECD interviews; Tajinvest, 2021).

When investors do manage to connect with the SCISPM, resolving issues for investors and pushing forward investment projects often requires co-ordination with other bodies (ministries, agencies, committees) through a whole-of-government approach. Despite reporting a high number of interactions with other institutions compared to other countries in the region, investors report that the SCISPM often been unable to resolve their issues with other agencies, especially the Tax Committee (OECD, 2020; OECD interviews, 2021). The SCISPM has no direct authority over many aspects of the investor experience, from registration to tax payment. Although the 2016 Law on Investments commits it to providing legal aid to investors, its charter does not include any mechanism for it to play the role of mediator between agencies in either a binding or advisory capacity (Government of the Republic of Tajikistan, 2006[55]).

Recommendation 3: Ease hurdles for investors and advocate on their behalf to encourage re-investments and improve the country’s reputation

A strong public-private dialogue platform and individual advocacy when needed can help address investment climate issues

Effective policy advocacy is the most effective tool IPAs have to win investment, since much investment is re-investment from existing investors and positive investor experience begets a positive country reputation (OECD, 2011[72]). In the wake of the pandemic, which has rapidly changed economic conditions, OECD IPAs have devoted more time to dialogue with investors to comprehend administrative obstacles and establish priorities to ease operations. The usefulness of regulations can change; trade restrictions, public health limitations, inflation, and other changing market conditions may render incentives or regulations ineffective. It therefore makes sense to reassess regulatory regimes periodically for streamlining and simplification purposes through regular consultation with investors (and other stakeholders, such as domestic businesses). Often, existing investors share many concerns that affect decisions about new investments, so dialogue with a limited number of them has a strong chance to improve the business climate for all (OECD, 2015[23]).

Tajikistan’s IPAs could improve regular and proactive collection of information from investors, which will feed into PPD. Mechanisms for dialogue with investors – prospective and current, large and small – can include regular meetings, feedback mechanisms for investors on the State Committee website, structured surveys, and periodic discussion forums on issues of interest to investors. Outcomes from these mechanisms could feed into the Consultative Council’s regular meetings.

Dialogue, particularly if it is structured to cover general and industry-specific concerns of investors, requires time, staff, and funding. Given the need to make best use of limited resources, it could be useful to prioritise dialogues with investors in strategic sectors. Development partners and BIOs like the Chamber of Commerce and Industry could likely support Tajikistan’s IPAs with facilitating dialogue or conducting surveys, since they already gather feedback from and have extensive contacts in the private sector. It is good practice to use various ways of collecting information from investors, like short surveys, because not all investors have time to dedicate to working group meetings or continuous dialogue. Yet, throughout conversations with investors it became clear that most investors in Tajikistan and elsewhere are content to dedicate time to improving the process (Box 10) (OECD, 2015[36]).

In many cases, structural reform will mitigate the need for individualised dispute resolution, but when conflicts arise, the SCISPM should be prepared to assist. To do this effectively, it needs to active and efficient co-operation of other ministries and state agencies involved in investment policy issues, like the Ministry of Economic Development and Trade and the Ministry of Justice. Fortunately, the SCISPM already has a strong relationship with other agencies through hosting joint events and other activities and enjoys high-level political support due to the government’s strategic focus on investment promotion. However, it may nevertheless be useful to indicate what steps the SCISPM can take in the event that other institutions are unresponsive with respect to its concerns with respect to specific investor issues (OECD, 2011[72]). If this is done, the SCISPM will have the necessary clout and communication mechanisms to inform other agencies about investors’ individual complaints and request that they be resolved before they escalate (UNCTAD, 2010[73]).

Box 9. Collecting investors’ feedback through multiple channels: the case of the NFIA

The Dutch IPA, the Netherlands Foreign Investment Agency (NFIA), showcases how IPAs can collect feedback through multiple channels:

• Project managers in the IPA seeking daily feedback from a number of existing and potential investors;

• Ad hoc feedback through events or emails;

• Investor Relations’ meetings;

• Triannual extended surveys among existing investors on the business climate;

• Quarterly meetings with the Invest in Holland Network directors;

• Analysis of lost projects by the NFIA; and

• Analysis of the media, external studies and reports on the Dutch business climate.

The feedback is then channelled to relevant decision-makers through:

• Annual reports to ministries (Ministry of Economic Affairs and Climate Policy and Ministry of Foreign Affairs) and discussions based thereon;

• Triannual reports on the results of the extended survey of the business climate; and

• Regular ad hoc discussions with the ministries.

Source: (de Combrugghe, 2019[74])

Tajikistan’s IPAs can help investors by making information about regulations and administrative processes more available

Tajikistan may need to shift its resource distribution even more toward aftercare. In general, attracting new investors is more challenging and costly than supporting reinvestment and expansion (OECD, 2015[23]). COVID-19 further incentivised IPAs to shift their efforts and resources away from marketing and targeting and towards informing existing investors about government programmes, helping them cope with the crisis, and supporting their current investments and operations (OECD, 2020[15]). This has the effect of ensuring business continuity and investor satisfaction, which is critical for maintaining and expanding investments. OECD countries enhanced their facilitation activities and ensured service continuity through digital tools, such as virtual site visits. They strengthened dialogue with existing investors to monitor firm-level trends and respond quickly to potential problems, acting even more like “liaison officers” between governments and investors than usual.

Tajikistan’s IPA should make it as easy as possible for investors to find information about rapidly changing economic conditions and pandemic-related policies. Most OECD IPAs created a dedicated COVID-19 section of the website with all relevant changes, including taxes, stimuli, export restrictions (OECD, 2020[15]). Some OECD IPAs, such as Spain and France, posted immediate English translations of new laws and regulations and prepared comprehensive sector-specific reports on the effects of COVID-19. Others, including Germany and Australia, offered daily updates. It is difficult to exaggerate the utility of providing reliable information in one dedicated spot, particularly where legislation is both complex and constantly evolving. This can take the form of updates in English and Russian on the B2B website.

Considering the relatively small number of foreign investors In Tajikistan, the SCISPM could even reach out to check in with investors and inform them about government measures affecting their investment. While it may be challenging at first to collect contact information without the benefit of a CRM system, this could serve as an impetus to create such a database, which will be valuable for years to come.

Box 10. IDA Ireland’s outreach strategy about COVID-19 changes

Ireland has made information about COVID-19 very clear and easily available to investors:

• The front page of the website has a banner inviting investors to click for further information about IDA Ireland’s COVID-19 updates and support. Investors can also navigate to this page from anywhere on the website by clicking “How we help” in the header.

• The first link on the COVID-19 page invites investors to contact their account manager or the general IDA Ireland e-mail for free advice on accessing government support and funding, while also providing a button to access more information about these programmes. A government-run hotline for businesses is also available.

• A brief yet highly useful response plan reassures investors that the IPA’s goal is to help them weather the crisis. The plan includes specific information about consulting services available and the application process for IPA funding. Many relevant links are also provided, like the government’s list of essential services, payroll and tax support information, and loans for SMEs.

• Relevant publications from other government agencies are, such as Enterprise Ireland’s guide to HR in the post-pandemic environment and health and travel advice, are consolidated on the website.

• Monthly e-magazines and e-mailed newsletters are freely available and include even more detailed updates than regular news articles.

IDA Ireland also prioritised collecting information from investors about their new challenges through a client assessment process of firm responses and supply chain disruptions.

Source: (IDA Ireland, 2021[75])

Both during the pandemic and beyond, investors would benefit from clearer information on the services and requirements – digital and not – that are offered by other government agencies. Digital services, such as the tax payment portal and the e-visa, should be clearly linked on the IPA’s website with detailed instructions. This would also help resolve language issues because investors would not need to navigate non-English websites of other agencies. For paper-based services, the IPAs should provide PDF versions of forms that need to be submitted and comprehensive information on how to submit them, including the contact information of the relevant agency. Furthermore, the process of requesting assistance from the SCISPM in fulfilling other agencies’ bureaucratic requirements should be dramatically simplified. Instead of having to upload relevant documents – including those that investors may need help obtaining, such as proof of registration – a basic request should be enough at least to obtain a meeting. At that point, the SCISPM can request only the documents necessary to fulfil the other agency’s requirement. In this way, the SCISPM will be a helpful facilitator rather than an additional bureaucratic hassle.

On top of obtaining reliable information, investors rely on IPAs to continue their operations. Particularly amidst COVID-19 and interrupted supply chains – which could even affect crucial health and food imports – investors need reliable networks with domestic firms. Some OECD agencies, including Czech Invest, Enterprise Greece and the Polish Investment and Trade Agency stepped up their existing matchmaking services by making use of virtual platforms (OECD, 2020[15]). Tajikistan’s B2B portal has contact information for some companies, mostly in Russian. Ensuring this is all translated into English and potentially improving or individualising this matchmaking mechanism would be useful to investors in such uncertain times. Georgia also provides a good example in creating guidebooks for investors, which are regularly updated on the website (Box 12).

Box 11. Invest in Georgia’s partnership with global advisory companies and its role as an information provider

Representative offices abroad are some of the most effective mechanisms for FDI attraction. However, smaller countries cannot always afford operating such offices in various places. In order to tackle this challenge, Georgia has undertaken the following measures:

• Development of special Investment attraction guidebooks for Georgia’s Diplomats abroad. The guidebook includes, consolidated information on sectors that are prioritized in terms of FDI attraction, as well as “Talking points” with potential companies. With this, Invest in Georgia conducted special training sessions with the embassies to make them more acquainted with the investment proposition of the country.

• With the support of USAID Georgia and USAID Invest, Invest in Georgia contracted a global advisory company - OCO Global, which partially fulfils the duties of offices abroad for Invest in Georgia. More precisely, the company is responsible to contact potential investors on behalf of Invest in Georgia in various countries and facilitates meetings with companies that have interest to invest in Georgia. The contract is developed with specific KPIs, including number of meetings to be conducted, site visits to be organized and potential deals to be concluded. This experience has allowed Georgia to contact hundreds of companies through facilitators in foreign countries, without actually having to establish and operate representative offices abroad.

In addition, Invest in Georgia has developed a number of investment guidebooks in partnership with internationally well-known companies like the “Big 4”. These cover a variety of legislative issues and explain to investors the labour laws, customs procedures, issues related to privatization, company registration, obtaining various permits and licenses, and other relevant topics. Overall, 11 roadmaps containing information have been developed and are updated on annual basis. With this, Georgia only runs and promotes a single web page – investingeorgia.org.

Source: Enterprise Georgia.

In the long term, it may be desirable to grant more authority to the SCISPM such that they could provide required services directly through the single-window mechanism. This would significantly simplify the investment process and make Tajikistan more competitive for investors, since most Eurasia IPAs have a one-stop-shop already (OECD, 2020[27]).

Simplifying investment project approval processes and using the investment agreement as a tool to pre-emptively protect investors from legal disputes are under the SCISPM’s control

Since the process of approving an investment is one over which the SCISPM has full control, unlike many other investor services areas like registration and customs, it is highly recommended that the Committee digitise the investment approval process. The first step is providing detailed information about criteria and requirements on the website (which should be minimised and simplified), and the second step is introducing an online application. This will increase transparency and reduce bureaucratic hurdles for investors. In cases of rejection, the SCISPM should publish the reasons and allow appeal. Enhancing trust at this early stage of investment will encourage investors to stay in Tajikistan, re-invest, and share their positive experience with potential investors.

According to its charter, the SCISPM also has statutory authority to negotiate and sign investment agreements on behalf of the government. Ultimately, though, the Law on Investment Agreements stipulates that they be approved and ratified by the government and parliament (Government of the Republic of Tajikistan, 2006[55]; 2017[76]). This can create several potential bottlenecks. Another concern is that the government can offer the project to another investor through an open tender, in which the winning investor compensates the one who proposed the project for expenses incurred but not the intellectual property involved (U.S. Department of State, 2020[70]; Government of Tajikistan, 2013[77]). Therefore, it would be desirable to remove the possibility of an open tender when an investor proposes a project – essentially only allowing the government to accept or refuse the investment.

Nevertheless, according to interviews with investors and government stakeholders, the investor agreement has proven as a reliable tool in the past that creates a safety net for investors, rendering it nearly impossible to change regulations. Therefore, in line with the SCISPM’s charter, the government should empower the Committee to encourage investors to sign an agreement, negotiate with them, and sign it with as few other approvals as possible. The Law on Investment Agreements provides for several benefits that can be included in agreements:

• Special incentives and advantages in areas like taxes, customs, permission to act in violation of anti-monopoly laws, and regulatory requirements (e.g., licensing);

• A commitment that any future legislation worsening the investment climate would not apply to the investment project; and

• A provision that disputes will be resolved in an international arbitration forum rather than Tajikistan’s courts (which is otherwise the default mechanism, as per the Law on Investment Agreements).

The last point is especially an important protection for investors given the legal issues that investors encounter in Tajikistan, although unfortunately as of now Tajikistan does not always enforce international arbitration awards (OECD, 2021[2]).

Note

← 1.  Assistance with project definition, information on local suppliers/ clients, working meetings, site visits; assistance with administrative procedures, such as business/ tax registrations, obtaining licenses/ land and construction approvals, visas and work permits, with utilities; legal issues; assistance in obtaining financing; aftercare services: structured trouble shooting; mitigation of conflicts; matchmaking, linkages and other business support programmes (database of local suppliers; capacity-building support for local firms; matchmaking service between investors and local firms)