The Asian Development Bank’s country director in Tajikistan C.C.Yu is completing his term in the country. In an exclusive interview to the Asia-Plus, Mr. Yu said that he over-enjoyed the hospitality of the country 4 years and 4 months. He noted that usually ADB country directors work in a country for three years. “But I liked it a lot here that is why I extended my stay’, the ADB country director said.
- ADB is Tajikistan’s main external donor. Since 1998, the Bank has provided a total of over $1.5 billion to Tajikistan. During your term, a total of over $560 million was allocated. Is the assistance used on target and efficiently?
- ADB has two modalities of providing support: project financing and policy-based lending or budget support. Goals, objectives and components of projects are clearly identified and approved by ADB Board of Directors. Any deviations from the original goals or objectives are very unlikely during implementation. Even if an executing agency wants to make a small change, it has to get ADB’s prior approval. We carefully monitor project implementation. The quality of project implementation in Tajikistan is among the best in the Bank. We are satisfied how funds are utilized in Tajikistan. We can give examples of road and energy projects.
Policy-based lending, or more commonly referred to as budget support, is based on a series of reforms that we agree with the government. The authorities fulfill the agreed actions and we provide money to the country. Since 2015, there were two such programs aimed at improving the investment climate. In 2015, upon fulfilling 10 conditions, Tajikistan received $60 million. In 2016, ADB approved $50 million. But the money is not yet disbursed, as the government is still implementing the 14 policy actions required by the Bank. The reforms are aimed at three directions: business protection, including inspections; reducing the cost of doing business in the country that also includes taxation; and creating environment for a more innovating private sector.
In budget support programs, the government has some flexibility in utilizing the resources. Once conditions are met, we give the money, and the government decides how to use it. But there is a “negative list” of items that cannot be purchased from the proceeds.
- How do you assess the utilization of budget support?
- As mentioned above, once the conditions are met, money is disbursed and go into the government’s budget. Thus, ADB does not have a clear mechanism to track the exact utilization of these funds but the utilization is subject to the “negative list”. ADB also has maximum ceiling on budget support which should not exceed 20% of the total assistance package.
- Tajikistan is still among the countries that need external assistance. What support did the government ask ADB for this year?
- We have an operations business plan for each country for three years, which is updated every year and guided by the Country Partnership Strategy. At around this time of a year, we start to update it. So far, we have two projects for 2017: improving food security through climate resilient technologies (dairy sector) and strengthening the Hydromet capacity. Initially, we also had an energy project, but it’s been moved to 2018. We are discussing the details of this project with the government.
- What difficulties did you face in your work in Tajikistan? How difficult is it to negotiate with Tajik authorities to define directions of support or recommendations to be followed?
- In general, it is difficult to negotiate with governments, as they are tough negotiators. Of course, we have a common goal – economic development of the country. I respect the government of Tajikistan for its tough positions. I think, the main goal of the government is to get maximum support to develop the country.
Overall, I had very good four years in Tajikistan and very good relations with the government. But it does not mean that we had no difficulties in our work. One of them is taxes. Based on the agreement that we signed with Tajikistan, all ADB projects are tax-exempt. But we had misunderstandings with the Tax Committee. At the end, we are often able to resolve the issues with the support of our Governor, First Deputy Prime Minister Davlatali Said. But this issue is still recurring and we need to keep working on this.
- How were the tax issues resolved?
- The Tax Committee say that based on the local legislation, some taxes need to be paid. But we explained that here are international agreements that prevail over the local legislation. The Tax Committee has to follow the agreement that we signed with Tajikistan.
- During your stay in Tajikistan, you often interacted with the private sector, investors. What deficiencies in business and investment climate would you highlight?
- Not a single country in the world can develop without a booming private sector. No donor money can help fully develop a country. This is the reason why we focus so much on improving the investment climate. The private sector in Tajikistan faces difficulties, especially recently. The flow of remittances reduces, but the revenue targets are still high and need to be fulfilled. This translates into a lot of pressure to increase tax collection through all means. I met with private sector representatives many times, and many businessmen say that they are ready to pay taxes, but want to see a transparent and predictable system. One of the government tasks is to attract more private investments. But it is also necessary to think how to keep them in the country. Even if some investments are coming to the country, it does not mean that they will stay here. Investors tell their stories to each other. A potential investor will always ask an opinion from a person who worked here. The taxation system has to be transparent and people need to know about taxes before coming here.
- The authorities plan to transform agrarian Tajikistan into a developed industrial country by 2030. How feasible are these brave plans?
- It’s commendable to have such long-term goals. I come from China and the Chinese government always has long-term goals on developing the country. But it’s more important to think about short-term steps to reach the goal. It’s necessary to have clear indicators to track the progress. It’s necessary to have a definition what a developed industrial country is.
But the goal itself is good. Currently, the share of industry in GDP is about 15%. If the goal transforming Tajikistan into a developed industrial country entails that this indicator reaches 50%, it’s necessary to improve the investment climate to attract and keep investors here.