Identifier
Created
Classification
Origin
06DUSHANBE583
2006-03-31 13:46:00
UNCLASSIFIED
Embassy Dushanbe
Cable title:  

TAJIKISTAN: AMBASSADOR'S SPEECH ON ECONOMIC REFORM AND

Tags:  PGOV PREL ECON EINV TI 
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UNCLAS SECTION 01 OF 04 DUSHANBE 000583 

SIPDIS

SIPDIS
STATE FOR SCA/CEN, EUR, EB

E.O. 12958: N/A
TAGS: PGOV PREL ECON EINV TI
SUBJECT: TAJIKISTAN: AMBASSADOR'S SPEECH ON ECONOMIC REFORM AND
FOREIGN INVESTMENT

DUSHANBE 00000583 001.2 OF 004


UNCLAS SECTION 01 OF 04 DUSHANBE 000583

SIPDIS

SIPDIS
STATE FOR SCA/CEN, EUR, EB

E.O. 12958: N/A
TAGS: PGOV PREL ECON EINV TI
SUBJECT: TAJIKISTAN: AMBASSADOR'S SPEECH ON ECONOMIC REFORM AND
FOREIGN INVESTMENT

DUSHANBE 00000583 001.2 OF 004



1. At the invitation of the Strategic Research Center (SRC) of
the President of Tajikistan, the Ambassador delivered a speech
March 31 at a business conference in Dushanbe. Participants
included government officials and private business people. The
venue was especially influential because the SRC is the think
tank charged with developing policy recommendations for the
Tajik government. The give and take during the discussion
periods was unfettered, with the private sector freely
criticizing the government and calling for new laws and
regulations and better implementation of existing laws.


2. Embassy Dushanbe delivered a copy of the Ambassador's speech
to the government in advance, and distributed copies in English,
Russian, and Tajik to the conference participants. Public
Affairs Section released the text electronically, and we expect
the next news cycle to publish the full text of the speech.


3. Begin text:

BUSINESS IN TAJIKISTAN: A FEW SUGGESTIONS FOR GROWTH AND
STABILITY

I want to tell you from the very beginning that I firmly believe
Tajikistan is a remarkable success story. In the 1990s, it
suffered a double blow. In 1991, at independence, it lost
nearly all the financial support from Moscow it had previously
received as a Soviet Socialist Republic. And then for much of
the rest of the decade, it was torn apart by the catastrophe of
civil war. Now, in 2006, it is well on its way not just to
recovery but to prosperity. Yes, there is a long way to go, but
the signs are increasingly visible.

In the nearly three years I have had the privilege to serve as
U.S. Ambassador in Dushanbe, I have seen real change. Real
positive change. By the end of my first year here, I noticed
much more traffic on the streets, including many new European
and Japanese cars. During my second year, I observed
shop-fronts being renovated and many new businesses opening.
Also, during my second year, I watched with amazement the
explosion of residential construction. Not just the
high-profile "mini-mansions" (and many not so "mini"),but also

modest homes and apartments being remodeled. In my third year
now, I see major commercial construction - large new office
buildings and at least two five-star hotels, as well as new
factories.

None of this kind of growth happens by accident. It requires
leadership and good economic policies. I remember listening
very closely to President Emomali Rahmonov's 2004 speech to
parliament, which many called "The Reform Speech." With advice
and collaboration from many international donors, including the
United States, the banking and financial sectors have been
making the kinds of reforms that are making Tajikistan an
increasingly attractive place for direct foreign investment.

People often ask me, "Why doesn't the United States invest in
Tajikistan?" Though not very well known, there already is U.S.
private investment here, in telecommunications, mining, and
manufacturing. But I will be the first to tell you it isn't
nearly enough. I want much, much more.

Before I tell you what we have been doing to attract U.S.
investment, let me explain, once again, that the United States
Government does not have state enterprises that can be ordered
to invest for geopolitical purposes, nor can we tell our private
investors where and how to invest. Nor do our businesses make
"back-room deals" with the special interests that already

DUSHANBE 00000583 002.2 OF 004


control too much of the economy here and stunt the broader
growth of entrepreneurship. What we as a government do is help
our private investors learn about the opportunities in
Tajikistan.

To that end, during the past two years, our Trade and
Development Agency has provided major grants to write U.S.
government reports about investment opportunities in six
different sectors of the Tajik economy (three of them in just
the last two months): telecommunications, transportation,
energy, mining, agribusiness, and hydropower.

We are already seeing results from these reports for American
businesses. A major U.S. corporation is negotiating with the
Ministry of Energy to build the high-tension power lines that
will allow Tajikistan to export its excess electricity. And
another U.S. company would like to rebuild the Varzob Cascades
project. In October, Secretary of State Condoleezza Rice
announced the Infrastructure Integration Initiative for Greater
Central Asia. We will work closely with International Financial
Institutions, other donors, and the private sector to promote
hydroelectric, road-building, telecommunications, and other
projects. I am certain during the next year or two you will
find many more U.S. businesses that will want to invest in
Tajikistan. You have built the foundation, we are doing our
part, and U.S. investors will come, driven by a large number of
Tajik business men and women, not just by a small number of
privileged insiders.

While investment is now coming into Tajikistan from a number of
countries for large projects, the real basis for growth and
enduring prosperity is small and medium businesses. Fully 60
percent of the U.S. multi-trillion-dollar economy is based on
small and medium businesses. Tajik investors need the
conditions that will encourage them to start and to grow their
businesses. Although much work has been done on economic
reform, I would like to make three suggestions that, if
implemented, would create the conditions for broader, deeper,
and more sustainable economic growth.

First, it is time to complete the reforms that have already
begun at TojikStandart. Despite much progress, much remains to
be done. Business people need transparent rules to follow. But
the new "List of Goods and Services Subject to Mandatory
Certification," and the fees for certification of compliance,
have neither been approved by the government nor registered by
the Ministry of Justice. The existing list has never been
published in the mass media. It is not available in any legal
database. It is not even available on request. You would think
it's a state secret! Experts who have been permitted to see the
list say that it includes nearly 2,000 types of products, and is
at least 15 years out of date. Some argue that the list is
necessary to protect people from low-quality goods. But because
it is non-transparent and out of date, it discourages small
retailers, and, in fact, encourages the culture of corruption.

Second, it is time for radical reform of the Tajik Universal
Commodity Exchange. A 2001 government resolution mandated that
selected products be sold through the Exchange. The initial
goal of this resolution was positive, to promote domestic goods
in foreign markets. But the real effect has been to inhibit
competition, add another layer of bureaucratic control over
private business, and increase the possibilities for corruption.

Third, it is time to finish writing and to publish the
implementing regulations for the new tax code of January 2005.
Until that happens, every tax inspector is free to interpret the

DUSHANBE 00000583 003.2 OF 004


tax code as he sees fit. And everyone knows what that means.
More corruption.

What is the common theme in these three recommendations? If you
limit government interference in business, and if you level the
playing field with clear rules for all, businesses will grow,
trade and commerce will flourish, the tax base will deepen so
that the government can afford increasingly higher wages and
social-sector support, and corruption will decrease.

Is there a role for government in business, in trade and
commerce? Absolutely. It's a regulatory role. Responsible
governments create independent regulatory bodies that protect
consumers, promote competition, and ensure fair rules for all.

I'd like to give you an example of how the wrong kind of
regulation can be harmful. The Tajik Ministry of
Telecommunications has proposed implementing a "single telecom
gateway" that would be a transit point for all telecom operators
of any kind, including mobile operators, all international
long-distance traffic, Internet, and other data transfer. No
other county in the world has ever done this. Some, like
Uzbekistan and Russia, have considered it, but in the end
rejected the concept.

Some have argued that a single gateway is necessary to bring
"gray traffic" under control - that is, to "capture" those
telecom operators who evade government fees and taxes. But, in
fact, information technology has become so sophisticated that
there will always be smart technicians who will be able to evade
the "single gateway." To solve the "gray traffic" problem, it
would be much better to use market forces and well structured
interconnect agreements, as was recently agreed in Afghanistan.
That would be a legitimate role for an independent
telecommunications regulatory body.

A "single gateway" can have unintended negative consequences.
One real concern is that call quality and data transmission
capacity could suffer because of the extra switching that a
"single gateway" would require. Another consequence should be
obvious - a technical breakdown of the "single gateway" would
isolate the entire country until it is repaired. Even if the
breakdown would be for a relatively short period, commercial and
financial sectors would suffer, and even national security could
be in jeopardy. Also, a "single gateway" would have the
potential to reduce competition if an aggressive client bribed
the "gate keeper" to limit access by competitors. The
government's goal should be to decrease opportunities for
corruption, not create new opportunities.

A lot really comes down to the issue of corruption, doesn't it.
President Rahmonov has said he is serious about decreasing
corruption in Tajikistan. And yet it can never be "talked away"
or "ordered away." The government can help the president by
legislating sensible business regulations that are fair for all,
fairly implemented, and enforced by independent and impartial
courts. When that is done, not only will corruption decrease,
but also the economy will grow. And, in fact, the economy will
grow even faster, because foreign investors will then look more
favorably on Tajikistan. The "golden rule" of the global
economy is that capital goes where it is welcome and stays where
it is fairly treated according to international standards.

As I said at the beginning, my government and I have been
working hard to educate American businesses about the
opportunities in Tajikistan. I am certain that if Tajikistan
stays on the path of economic reform, and accelerates the pace

DUSHANBE 00000583 004.2 OF 004


of economic reform, including land reform for the 70 percent of
the population that lives by agriculture, you will soon see more
American investors here than anyone would ever have imagined.
Yes, our system and its processes are slow. Sometimes it seems
as if all we ever do is "talk" but never "act." But I assure
you that our deliberate pace leads to long-term results.

I will close by saying, as I have in the past, I am optimistic
about Tajikistan. With my own eyes, I have seen impressive
progress in three years. I am convinced prosperity will
continue to grow. Prosperity is a "fertilizer" for democratic
evolution. In the end, prosperity and democracy will be the
twin guarantors of Tajikistan's long-term stability.

Thank you for your attention.

End text.
HOAGLAND