tajikistan - Enterprise Surveys
Enterprise Surveys Country Note Series
Running a Business in Tajikistan
N
ew data from Enterprise Surveys indicate that corruption is a major constraint for private businesses in Tajikistan. In the entire Eastern Europe and Central Asia (ECA) region, Tajik firms face the second highest frequency of informal gift requests by government officials when obtaining an operating license (figure 1). However, there was a reduction between 2005 and 2008 in the percentage of firms expected to pay bribes when meeting with tax officials. Two elements of Tajik infrastructure clearly seem to constrain private firms’ operations: failures in the provision of electricity and customs efficiency. The average duration of a power outage is 9.7 hours and for exporting, it takes on average 20 days to clear exports through customs. In addition, Tajikistan ranks near the bottom in terms of the percentage of firms that use their own Web site (table 1).
The Enterprise Surveys1 use standard survey instruments to collect firm-level data on the business environment from business owners and top managers. The surveys cover a broad range of topics, including access to finance, corruption, infrastructure, crime, competition, labor, obstacles to growth, and performance measures. The survey is designed to be representative of a country’s private nonagricultural economy, and firms sampled are stratified by size, location, and sector (figure 2)2 to ensure that most major types of firms are covered. Only firms with five employees or more are included in the sample. The Enterprise Survey in Tajikistan was implemented from May to August 2008, and data on 360 firms were collected. The information refers to the characteristics of the firm at the moment of the survey, or to fiscal year 2007.
What is the average firm in Tajikistan? The average firm3 in Tajikistan has been in operation approximately 15 years, which is similar to the average firm in the ECA region (table 2). However, firms’ age varies considerably by firm type. Exporting firms in Tajikistan have been in operation considerably longer than nonexporting firms, 29 years and 13 years, respectively, and not surprisingly, larger firms are significantly older than smaller firms. Female participation in firm ownership, management, and workforce is low when compared to the region. Less than 12 percent of firms in Tajikistan are run by women. The percentage of firms with female top management is lower only in Kosovo, Azerbaijan, and Uzbekistan. Firms
Firms in Tajikistan endure corruption during day-to-day operations Percentage of firms expected to give gifts when obtaining an operating license
60 50 Percent
40 30 20
ECA regional average
Source: Enterprise Surveys.
Uzbekistan
Tajikistan
Ukraine
Azerbaijan
Kazakhstan
Romania
Kyrgyz Rep.
Russian Fed.
Bulgaria
Albania
Belarus
Armenia
Turkey
Moldova
Bosnia and Herzegovina
Kosovo
Lithuania
Georgia
Macedonia, FYR
Hungary
Montenegro
Poland
Czech Republic
Slovenia
Slovak Rep.
Serbia
0
Estonia
10 Croatia
World Bank Group
Figure 1
Latvia
Country
note no.
4
rev. 8/2011
TAJIKISTAN
Figure 2
Characteristics of the firms interviewed Location
Size Large (100+ employees) 14% Medium (20-99 employees) 36%
Small (5-19 employees) 50%
Region of Republican Subordination (or RRP) 26%
Khatlon 17%
Dushanbe 27%
Sughd 30%
Sector
Other services 39%
Retail 30%
Manufacturing 32%
Source: Enterprise Surveys.
workers than the rest of the ECA without government participation in region. This is due to the presence of ownership and firms in the retail sector Female participation a few firms with very large permanent are more likely to have female top in firm ownership, and temporary workforces. In fact, management: almost 12 percent for management and Tajik firms stand out in the region as purely private firms versus 2 percent for they have the fourth largest number of partially government-owned firms, and workforce is low when temporary workers and they have the 28 percent for retail firms versus 7-8 compared to the region. fifth largest number of permanent, percent for manufacturing and other full-time workers. Large firms employ, services firms. Exporting firms or firms on average, almost 300 permanent with female participation in ownership or in management are more likely to employ women in their employees and 11 temporary employees. The subnational region with the largest average permanent workforce is workforce. Tajikistan shows a considerably higher average level of Sughd, with 95 employees. employment per firm for both permanent and temporary
Table 1
How does Tajikistan 2008 compare within Eastern Europe and Central Asia?
Ranking 1 assigned to the largest value Percent of firms formally registered when started operations in the country Private domestic ownership (%)* Private foreign ownership (%)* Government/state ownership (%)* Percent of firms with female participation in ownership Bank finance for investment (%) Percent of exporter firms Domestic sales (% of sales) Percent of firms with internationally recognized quality certification Percent of firms with annual financial statement reviewed by external auditor Capacity utilization (%) Percent of firms using their own Web site Percent of firms using e-mail to communicate with clients/suppliers Ranking 1 assigned to the smallest value Value of collateral needed for a loan (% of the loan amount) Number of power outages in a typical month Senior management time spent in dealing with requirements of government regulation (%) Average number of visits or required meetings with tax officials Incidence of graft index** Losses due to theft, robbery, vandalism, and arson against the firm (% of sales)
Descending ranking (out of 29 countries) 27 11 20 3 18 27 25 7 18 26 24 28 26 Ascending ranking (out of 29 countries) 24 26 20 14 26 6
Source: Enterprise Surveys. Note: This table presents a ranking out of 29 economies for each of the listed indicators. The numbers are ranks as opposed to the actual value of the indicator. 2
Table 2
The average firm in Tajikistan 2008
Age (years) Percent of firms formally registered when started operations in the country Most common legal form Private domestic ownership (%)* Private foreign ownership (%)* Government/state ownership (%)* Percent of firms with female participation in ownership Percent of firms with female in top management position Experience of the top manager (years) Average number of temporary workers Average number of permanent, full-time workers Percent of full-time female workers
Tajikistan 14.6 92.7 Limited Partnership 92.6 5.1 2.0 34.4 11.8 14.1 5.2 57.1 31.4
ECA-29 † 13.9 96.8 Closed Shareholding Co. 91.3 6.2 1.1 36.7 18.9 16.1 3.2 43.4 38.5
EU-10 ‡ 13.9 98.7 Closed Shareholding Co. 90.3 7.4 0.5 39.0 22.2 17.2 2.5 36.4 40.1
Source: Enterprise Surveys.
Unlike the rest of the ECA region, the typical firm firms, since the average percentage of participation increases in Tajikistan, within the population studied, is a limited to 2.2 percent when firms that opened within the last three partnership. The predominance of limited partnerships is years of the survey are eliminated from the sample. Firms stronger among nonexporting firms (63 percent) than among in Khatlon are more likely to have government participation in ownership than the private firms in exporting firms (37 percent). Consistent other regions. with these results, limited partnerships Firms that do not export are the most common legal form of How do businesses operate show a significantly small and medium firms, whereas in Tajikistan? large firms are most commonly private higher percentage of shareholding companies either closed or Firms in Tajikistan seem to face investment financed using severe constraints when using banks publicly listed. Government participation in internal funds. for financing (table 3). Tajikistan ownership of private firms in Tajikistan places third to last in the ECA region; is quite high by regional standards. only Uzbekistan and the Republic Only Belarus and Azerbaijan have a higher participation of Kosovo have lower percentages of bank financing for of government ownership in private firms (2 percent investments in fixed assets. Instead, capitalization by the for Tajikistan, 10 percent for Belarus, and 3 percent for owners of the firm is used more frequently than in the rest Azerbaijan). This fact seems to be associated with older of the region: only Armenia, Montenegro, and the Kyrgyz
Table 3
Choices by the average firm inTajikistan 2008
Internal finance for investment (%) Bank finance for investment (%) Value of collateral needed for a loan (% of the loan amount) Loans requiring collateral (%) Percent of firms with a checking or savings account Percent of exporter firms Domestic sales (% of sales) Sales exported directly (% of sales) Sales exported indirectly (% of sales) Sales that are pre-paid (%) Sales sold on credit (%) Percent of firms with internationally recognized quality certification Percent of firms with annual financial statement reviewed by external auditor Capacity utilization (%) Percent of firms using their own Web site Percent of firms using e-mail to communicate with clients/suppliers
Tajikistan 57.7 10.8 145.2 84.1 86.9 8.8 95.1 4.2 0.6 38.7 31.7 16.7 23.3 66.3 21.0 41.9
ECA-29 † 59.7 22.9 132.2 81.0 88.9 22.1 90.8 7.1 2.0 23.0 49.4 20.0 37.9 73.7 48.5 73.1
EU-10 ‡ 58.8 25.7 123.4 74.2 85.2 29.1 88.3 9.5 2.2 11.2 66.3 25.8 38.6 81.3 63.6 88.3
Source: Enterprise Surveys.
3
Republic show a higher percentage of investment financed lower Web site usage and only Uzbekistan, Azerbaijan, and by owners’ contributions. It is interesting that firms with at Georgia have lower e-mail usage. There are also significant differences in the use of least 5 percent government ownership show a significantly lower share of bank financing for investment as well as a technology across regions within the country. The number significantly lower share of investment financed by owners’ of firms using e-mail to communicate with their clients is significantly higher in Dushanbe than capitalization. Additionally, firms that in Khatlon and RRP. This number is do not export show a significantly higher The percentages of also higher than in Sughd, although the percentage of investment financed difference is not statistically significant. using internal funds: 60 percent for firms using e-mail to Furthermore, the percentage of firms nonexporter versus 8 percent for communicate with their with an internationally recognized exporters. Also worth noting are the high levels of collateral needed to clients or having their own quality certification is significantly higher in Dushanbe than in Khatlon, secure a loan. Only five countries in the Web site are well below RRP, and Sughd (figure 4). Across the region require higher levels of collateral. the regional averages. country the percentage of large firms Furthermore, firms managed by women with financial statements externally are more often required to provide collateral when requesting a loan than firms run by men (98 audited is significantly higher than for medium and small firms. Not surprisingly, the percentage of firms using percent versus 81 percent, respectively). Few firms in Tajikistan export. The percentage of firms technology licensed from foreign companies is considerably that export is the fifth lowest in the region. This result may higher for exporting companies than for nonexporting be due in part to inefficiencies in the provision of logistic companies. services for international trade. The data collected show that Tajikistan ranks lowest in the region when customs What constrains firms in Tajikistan? efficiency is measured by the average time to clear exports According to the data collected, corruption is a major in customs and ranks third to last when measured by the problem for firms in Tajikistan. Compared to the ECA average time to clear imports for manufacturing (figure 3). region, the country fares poorly in the Graft Index, which These results are not surprising as Tajikistan ranks 177th measures the instances where bribes were paid or expected in out of 181 economies in the ease of trading across borders six different transactions for public services (table 4). These measured by Doing Business 2009. results are consistent with the Transparency International The use of technology in Tajikistan is low when Corruption 2008 Index, which ranked Tajikistan 151 out compared to the region. Although 17 percent of firms have of 180 countries in the world. Nevertheless, regulation internationally recognized quality certification, close to the seems to affect Tajik firms unequally: firms in Sughd and regional average, the percentages of firms using e-mail to Dushanbe are more likely to be expected to pay bribes to communicate with their clients or having their own Web site public officials to “get things done” than firms in the other are well below the regional averages. Only Uzbekistan has two regions included in the survey. Three-fourths of firms
Figure 3
Customs efficiency in Tajikistan is below regional standards
60 50 Days
40 30 20 ECA regional averages
10
Source: Enterprise Surveys. 4
Average time to clear direct exports through Customs (days) Average time to clear imports from Customs in manufacturing (days)
Tajikistan
Kyrgyz Rep.
Kazakhstan
Russian Fed.
Poland
Czech Republic
Turkey
Uzbekistan
Hungary
Bulgaria
Armenia
Georgia
Ukraine
Slovenia
Montenegro
Belarus
Slovak Rep.
Macedonia, FYR
Lithuania
Moldova
Romania
Albania
Azerbaijan
Latvia
Serbia
Estonia
Kosovo
Croatia
Bosnia and Herzegovina
0
Figure 4
Access to technology is greater in the capital region of Tajikistan
70
exception of Uzbekistan, is that the average duration of an individual outage is quite long. Tajik firms report an average duration of 10 hours.4
How has the business environment changed over the past three years?
60 50 Percent
The Enterprise Surveys data provide the tools to monitor changes in the business environment across different rounds 30 of surveys. By looking at the answers provided by 67 firms 20 interviewed in both 2005 and 2008, we can assess how 10 businesses have changed over these three years.5 Since the 0 Total Dushanbe Sughd Khatlon RRP same firms are interviewed over time, this subset of data is % of firms using e-mail to communicate with clients/suppliers more appropriate to evaluate the evolution of the business % of firms with ISO certification ownership environment and the impact of business environment reforms than the full datasets for both years. Considering Source: Enterprise Surveys. the full datasets would introduce effects that are the result in Sughd report informal payments, as do slightly more of variations in the sample composition over the two years.6 than half in Dushanbe versus 32 percent in Khatlon and 12 Therefore, the following analysis refers only to these firms percent in RRP. that were interviewed in both rounds of surveys. Additionally, time spent dealing with government First of all, despite being ranked as one of the worst regulations also varies across regions and firm types. Firms countries in the ECA region regarding corruption, with male top management spend significantly more of corruption in tax collection in Tajikistan decreased senior management’s time dealing between the two rounds of surveys. with regulations, 12 percent versus 7 The percentage of firms expected Losses due to power percent, and nonexporting firms are to pay bribes when meeting with tax outages showed a visited more often by tax officials. officials decreased significantly, from Although firms in RRP are less likely 73 percent to 41 percent, among significant increase to report making informal payments, the firms surveyed in both years. between 2005 and 2008. their management spends more time Furthermore, the average number of dealing with regulation than in the other visits or required meetings with tax regions. Seventeen percent of senior management’s time is officials also decreased significantly. However, there was no spent dealing with regulations in RRP versus 9 to 12 percent significant change in the percentage of firms expected to in the other three regions. make informal payments in order to “get things done.” While crime and security concerns do not seem to be Second, the percentage of firms required to pledge an issue for private firms in Tajikistan, access to reliable collateral to obtain a loan increased significantly between electricity services is a major concern (figure 5). Tajikistan 2005 and 2008 from 67 percent to 100 percent. However, is the country with the fourth largest number of power the percentage of sales sold on credit increased significantly outages in a typical month for the whole ECA region. between the two years, from 12 percent to 27 percent. In terms of value (as a percentage of sales) lost due to In infrastructure, another area of major concern for power outages, Tajik firms report on average 15 percent Tajikistan, losses due to power outages showed a significant of sales—only Kosovo is worse (17 percent). The problem increase between 2005 and 2008, from 6 percent to 15 in Tajikistan, unlike any other country in ECA with the percent among the firms interviewed in both rounds. 40
Table 4
Constraints on the average firm in Tajikistan 2008
Number of power outages in a typical month Senior management time spent in dealing with requirements of government regulation (%) Average number of visits or required meetings with tax officials Percent of firms expected to pay informal payment to public officials (to get things done) Incidence of graft index** Losses due to theft, robbery, vandalism, and arson against the firm (% of sales) Percent of firms paying for security
Tajikistan 6.3 11.7 1.4 44.6 28.7 0.3 48.2
ECA-29 † 5.2 10.6 1.6 23.1 13.5 0.5 57.7
EU-10 ‡ 2.1 9.5 1.1 12.7 6.8 0.4 62.2
Source: Enterprise Surveys.
5
Figure 5
Electricity is a major constraint for firms in Tajikistan
18 15 12 9 6 3 0
Value lost due to power outages (% of sales)
Duration of power outages (hours) Tajikistan
Number of power outages in a typical month
ECA average
Source: Enterprise Surveys.
The duration of the average power outage increased but not significantly. Finally, in the area of trade, the average percentage of sales exported directly decreased significantly, from 13 percent to 8 percent, over the same period. Despite the relative negative ranking of Tajikistan in 2008 in the areas of corruption and infrastructure, the results of the survey also reveal some improvements in the business environment between 2005 and 2008 as mentioned above. Unfortunately, these improvements do not seem to have been strong enough to move Tajikistan ahead of its regional counterparts.
Notes 1. The Enterprise Surveys, when implemented in Eastern Europe and Central Asia countries, are also known as Business Environment and Enterprise Performance Surveys (BEEPS) and in this region are conducted jointly by the World Bank and the European Bank for Reconstruction and Development. 2. This figure presents the unweighted distributions by size, sector, and location of the firms interviewed without any inferences to the whole economy.
3. The term “average firm” is used to convey the average firm characteristics from the Tajikistan 2008 Enterprise Survey. The sample of firms interviewed is representative of the manufacturing and services sectors of the economy. For more information on the survey methodology please consult http://www.enterprisesurveys. org/Methodology/ 4. The winter before the survey was carried out was one of the coldest on record and this may have influenced the responses regarding electricity supply. 5. The information collected in 2005 refers to the characteristics of the firm at the moment of the survey or to fiscal year 2004. 6. The firms surveyed in both years may not be representative of the Tajikistan’s private nonagricultural economy since these are a subset of the full sample. Firms with fewer than five employees may be included among the firms surveyed in both years. The analysis presented is purely descriptive and does not aim at establishing causality between reforms and their intended effects. † ECA-29 includes Albania 2009, Armenia 2009, Azerbaijan 2009, Belarus 2008, Bosnia and Herzegovina 2009, Bulgaria 2009, Croatia 2009, Czech Republic 2009, Estonia 2009, Georgia 2008, Hungary 2009, Kazakhstan 2009, The Republic of Kosovo 2009, Kyrgyz Republic 2009, Latvia 2009, Lithuania 2009, FYR Macedonia 2009, Moldova 2009, Montenegro 2009, Poland 2009, Romania 2009, Russian Federation 2009, Serbia 2009, Slovak Republic 2009, Slovenia 2009, Tajikistan 2008, Turkey 2008, Ukraine 2008, and Uzbekistan 2008. ‡ EU-10 includes 2009 data from Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, and Slovenia. * The ownership variables represent the average ownership composition within a firm. These variables do not represent the ownership composition across firms. ** Incidence of Graft Index is the percentage of instances in which a firm was either expected or requested to provide a gift or informal payment during solicitations for public services, licenses, or permits. This Index uses data from six survey questions for each firm. For purposes of Index computation, a refusal to answer a particular survey question is considered an affirmative answer. This Index is a modified version of the Graft Index defined in A. Gonzalez et al. 2007. World Bank Policy Research Working Paper #4394.
The Enterprise Surveys measure the business environment in over 100 countries in the world. A standardized questionnaire, universe under study, and implementation methodology is used to make sure information is comparable across countries and time. The full data and documentation explaining the methodology are available at www.enterprisesurveys.org. The Country Notes are a product of the staff of the Enterprise Analysis Unit. The findings, interpretations, and conclusions expressed in this note are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
6
Running a Business in Tajikistan
N
ew data from Enterprise Surveys indicate that corruption is a major constraint for private businesses in Tajikistan. In the entire Eastern Europe and Central Asia (ECA) region, Tajik firms face the second highest frequency of informal gift requests by government officials when obtaining an operating license (figure 1). However, there was a reduction between 2005 and 2008 in the percentage of firms expected to pay bribes when meeting with tax officials. Two elements of Tajik infrastructure clearly seem to constrain private firms’ operations: failures in the provision of electricity and customs efficiency. The average duration of a power outage is 9.7 hours and for exporting, it takes on average 20 days to clear exports through customs. In addition, Tajikistan ranks near the bottom in terms of the percentage of firms that use their own Web site (table 1).
The Enterprise Surveys1 use standard survey instruments to collect firm-level data on the business environment from business owners and top managers. The surveys cover a broad range of topics, including access to finance, corruption, infrastructure, crime, competition, labor, obstacles to growth, and performance measures. The survey is designed to be representative of a country’s private nonagricultural economy, and firms sampled are stratified by size, location, and sector (figure 2)2 to ensure that most major types of firms are covered. Only firms with five employees or more are included in the sample. The Enterprise Survey in Tajikistan was implemented from May to August 2008, and data on 360 firms were collected. The information refers to the characteristics of the firm at the moment of the survey, or to fiscal year 2007.
What is the average firm in Tajikistan? The average firm3 in Tajikistan has been in operation approximately 15 years, which is similar to the average firm in the ECA region (table 2). However, firms’ age varies considerably by firm type. Exporting firms in Tajikistan have been in operation considerably longer than nonexporting firms, 29 years and 13 years, respectively, and not surprisingly, larger firms are significantly older than smaller firms. Female participation in firm ownership, management, and workforce is low when compared to the region. Less than 12 percent of firms in Tajikistan are run by women. The percentage of firms with female top management is lower only in Kosovo, Azerbaijan, and Uzbekistan. Firms
Firms in Tajikistan endure corruption during day-to-day operations Percentage of firms expected to give gifts when obtaining an operating license
60 50 Percent
40 30 20
ECA regional average
Source: Enterprise Surveys.
Uzbekistan
Tajikistan
Ukraine
Azerbaijan
Kazakhstan
Romania
Kyrgyz Rep.
Russian Fed.
Bulgaria
Albania
Belarus
Armenia
Turkey
Moldova
Bosnia and Herzegovina
Kosovo
Lithuania
Georgia
Macedonia, FYR
Hungary
Montenegro
Poland
Czech Republic
Slovenia
Slovak Rep.
Serbia
0
Estonia
10 Croatia
World Bank Group
Figure 1
Latvia
Country
note no.
4
rev. 8/2011
TAJIKISTAN
Figure 2
Characteristics of the firms interviewed Location
Size Large (100+ employees) 14% Medium (20-99 employees) 36%
Small (5-19 employees) 50%
Region of Republican Subordination (or RRP) 26%
Khatlon 17%
Dushanbe 27%
Sughd 30%
Sector
Other services 39%
Retail 30%
Manufacturing 32%
Source: Enterprise Surveys.
workers than the rest of the ECA without government participation in region. This is due to the presence of ownership and firms in the retail sector Female participation a few firms with very large permanent are more likely to have female top in firm ownership, and temporary workforces. In fact, management: almost 12 percent for management and Tajik firms stand out in the region as purely private firms versus 2 percent for they have the fourth largest number of partially government-owned firms, and workforce is low when temporary workers and they have the 28 percent for retail firms versus 7-8 compared to the region. fifth largest number of permanent, percent for manufacturing and other full-time workers. Large firms employ, services firms. Exporting firms or firms on average, almost 300 permanent with female participation in ownership or in management are more likely to employ women in their employees and 11 temporary employees. The subnational region with the largest average permanent workforce is workforce. Tajikistan shows a considerably higher average level of Sughd, with 95 employees. employment per firm for both permanent and temporary
Table 1
How does Tajikistan 2008 compare within Eastern Europe and Central Asia?
Ranking 1 assigned to the largest value Percent of firms formally registered when started operations in the country Private domestic ownership (%)* Private foreign ownership (%)* Government/state ownership (%)* Percent of firms with female participation in ownership Bank finance for investment (%) Percent of exporter firms Domestic sales (% of sales) Percent of firms with internationally recognized quality certification Percent of firms with annual financial statement reviewed by external auditor Capacity utilization (%) Percent of firms using their own Web site Percent of firms using e-mail to communicate with clients/suppliers Ranking 1 assigned to the smallest value Value of collateral needed for a loan (% of the loan amount) Number of power outages in a typical month Senior management time spent in dealing with requirements of government regulation (%) Average number of visits or required meetings with tax officials Incidence of graft index** Losses due to theft, robbery, vandalism, and arson against the firm (% of sales)
Descending ranking (out of 29 countries) 27 11 20 3 18 27 25 7 18 26 24 28 26 Ascending ranking (out of 29 countries) 24 26 20 14 26 6
Source: Enterprise Surveys. Note: This table presents a ranking out of 29 economies for each of the listed indicators. The numbers are ranks as opposed to the actual value of the indicator. 2
Table 2
The average firm in Tajikistan 2008
Age (years) Percent of firms formally registered when started operations in the country Most common legal form Private domestic ownership (%)* Private foreign ownership (%)* Government/state ownership (%)* Percent of firms with female participation in ownership Percent of firms with female in top management position Experience of the top manager (years) Average number of temporary workers Average number of permanent, full-time workers Percent of full-time female workers
Tajikistan 14.6 92.7 Limited Partnership 92.6 5.1 2.0 34.4 11.8 14.1 5.2 57.1 31.4
ECA-29 † 13.9 96.8 Closed Shareholding Co. 91.3 6.2 1.1 36.7 18.9 16.1 3.2 43.4 38.5
EU-10 ‡ 13.9 98.7 Closed Shareholding Co. 90.3 7.4 0.5 39.0 22.2 17.2 2.5 36.4 40.1
Source: Enterprise Surveys.
Unlike the rest of the ECA region, the typical firm firms, since the average percentage of participation increases in Tajikistan, within the population studied, is a limited to 2.2 percent when firms that opened within the last three partnership. The predominance of limited partnerships is years of the survey are eliminated from the sample. Firms stronger among nonexporting firms (63 percent) than among in Khatlon are more likely to have government participation in ownership than the private firms in exporting firms (37 percent). Consistent other regions. with these results, limited partnerships Firms that do not export are the most common legal form of How do businesses operate show a significantly small and medium firms, whereas in Tajikistan? large firms are most commonly private higher percentage of shareholding companies either closed or Firms in Tajikistan seem to face investment financed using severe constraints when using banks publicly listed. Government participation in internal funds. for financing (table 3). Tajikistan ownership of private firms in Tajikistan places third to last in the ECA region; is quite high by regional standards. only Uzbekistan and the Republic Only Belarus and Azerbaijan have a higher participation of Kosovo have lower percentages of bank financing for of government ownership in private firms (2 percent investments in fixed assets. Instead, capitalization by the for Tajikistan, 10 percent for Belarus, and 3 percent for owners of the firm is used more frequently than in the rest Azerbaijan). This fact seems to be associated with older of the region: only Armenia, Montenegro, and the Kyrgyz
Table 3
Choices by the average firm inTajikistan 2008
Internal finance for investment (%) Bank finance for investment (%) Value of collateral needed for a loan (% of the loan amount) Loans requiring collateral (%) Percent of firms with a checking or savings account Percent of exporter firms Domestic sales (% of sales) Sales exported directly (% of sales) Sales exported indirectly (% of sales) Sales that are pre-paid (%) Sales sold on credit (%) Percent of firms with internationally recognized quality certification Percent of firms with annual financial statement reviewed by external auditor Capacity utilization (%) Percent of firms using their own Web site Percent of firms using e-mail to communicate with clients/suppliers
Tajikistan 57.7 10.8 145.2 84.1 86.9 8.8 95.1 4.2 0.6 38.7 31.7 16.7 23.3 66.3 21.0 41.9
ECA-29 † 59.7 22.9 132.2 81.0 88.9 22.1 90.8 7.1 2.0 23.0 49.4 20.0 37.9 73.7 48.5 73.1
EU-10 ‡ 58.8 25.7 123.4 74.2 85.2 29.1 88.3 9.5 2.2 11.2 66.3 25.8 38.6 81.3 63.6 88.3
Source: Enterprise Surveys.
3
Republic show a higher percentage of investment financed lower Web site usage and only Uzbekistan, Azerbaijan, and by owners’ contributions. It is interesting that firms with at Georgia have lower e-mail usage. There are also significant differences in the use of least 5 percent government ownership show a significantly lower share of bank financing for investment as well as a technology across regions within the country. The number significantly lower share of investment financed by owners’ of firms using e-mail to communicate with their clients is significantly higher in Dushanbe than capitalization. Additionally, firms that in Khatlon and RRP. This number is do not export show a significantly higher The percentages of also higher than in Sughd, although the percentage of investment financed difference is not statistically significant. using internal funds: 60 percent for firms using e-mail to Furthermore, the percentage of firms nonexporter versus 8 percent for communicate with their with an internationally recognized exporters. Also worth noting are the high levels of collateral needed to clients or having their own quality certification is significantly higher in Dushanbe than in Khatlon, secure a loan. Only five countries in the Web site are well below RRP, and Sughd (figure 4). Across the region require higher levels of collateral. the regional averages. country the percentage of large firms Furthermore, firms managed by women with financial statements externally are more often required to provide collateral when requesting a loan than firms run by men (98 audited is significantly higher than for medium and small firms. Not surprisingly, the percentage of firms using percent versus 81 percent, respectively). Few firms in Tajikistan export. The percentage of firms technology licensed from foreign companies is considerably that export is the fifth lowest in the region. This result may higher for exporting companies than for nonexporting be due in part to inefficiencies in the provision of logistic companies. services for international trade. The data collected show that Tajikistan ranks lowest in the region when customs What constrains firms in Tajikistan? efficiency is measured by the average time to clear exports According to the data collected, corruption is a major in customs and ranks third to last when measured by the problem for firms in Tajikistan. Compared to the ECA average time to clear imports for manufacturing (figure 3). region, the country fares poorly in the Graft Index, which These results are not surprising as Tajikistan ranks 177th measures the instances where bribes were paid or expected in out of 181 economies in the ease of trading across borders six different transactions for public services (table 4). These measured by Doing Business 2009. results are consistent with the Transparency International The use of technology in Tajikistan is low when Corruption 2008 Index, which ranked Tajikistan 151 out compared to the region. Although 17 percent of firms have of 180 countries in the world. Nevertheless, regulation internationally recognized quality certification, close to the seems to affect Tajik firms unequally: firms in Sughd and regional average, the percentages of firms using e-mail to Dushanbe are more likely to be expected to pay bribes to communicate with their clients or having their own Web site public officials to “get things done” than firms in the other are well below the regional averages. Only Uzbekistan has two regions included in the survey. Three-fourths of firms
Figure 3
Customs efficiency in Tajikistan is below regional standards
60 50 Days
40 30 20 ECA regional averages
10
Source: Enterprise Surveys. 4
Average time to clear direct exports through Customs (days) Average time to clear imports from Customs in manufacturing (days)
Tajikistan
Kyrgyz Rep.
Kazakhstan
Russian Fed.
Poland
Czech Republic
Turkey
Uzbekistan
Hungary
Bulgaria
Armenia
Georgia
Ukraine
Slovenia
Montenegro
Belarus
Slovak Rep.
Macedonia, FYR
Lithuania
Moldova
Romania
Albania
Azerbaijan
Latvia
Serbia
Estonia
Kosovo
Croatia
Bosnia and Herzegovina
0
Figure 4
Access to technology is greater in the capital region of Tajikistan
70
exception of Uzbekistan, is that the average duration of an individual outage is quite long. Tajik firms report an average duration of 10 hours.4
How has the business environment changed over the past three years?
60 50 Percent
The Enterprise Surveys data provide the tools to monitor changes in the business environment across different rounds 30 of surveys. By looking at the answers provided by 67 firms 20 interviewed in both 2005 and 2008, we can assess how 10 businesses have changed over these three years.5 Since the 0 Total Dushanbe Sughd Khatlon RRP same firms are interviewed over time, this subset of data is % of firms using e-mail to communicate with clients/suppliers more appropriate to evaluate the evolution of the business % of firms with ISO certification ownership environment and the impact of business environment reforms than the full datasets for both years. Considering Source: Enterprise Surveys. the full datasets would introduce effects that are the result in Sughd report informal payments, as do slightly more of variations in the sample composition over the two years.6 than half in Dushanbe versus 32 percent in Khatlon and 12 Therefore, the following analysis refers only to these firms percent in RRP. that were interviewed in both rounds of surveys. Additionally, time spent dealing with government First of all, despite being ranked as one of the worst regulations also varies across regions and firm types. Firms countries in the ECA region regarding corruption, with male top management spend significantly more of corruption in tax collection in Tajikistan decreased senior management’s time dealing between the two rounds of surveys. with regulations, 12 percent versus 7 The percentage of firms expected Losses due to power percent, and nonexporting firms are to pay bribes when meeting with tax outages showed a visited more often by tax officials. officials decreased significantly, from Although firms in RRP are less likely 73 percent to 41 percent, among significant increase to report making informal payments, the firms surveyed in both years. between 2005 and 2008. their management spends more time Furthermore, the average number of dealing with regulation than in the other visits or required meetings with tax regions. Seventeen percent of senior management’s time is officials also decreased significantly. However, there was no spent dealing with regulations in RRP versus 9 to 12 percent significant change in the percentage of firms expected to in the other three regions. make informal payments in order to “get things done.” While crime and security concerns do not seem to be Second, the percentage of firms required to pledge an issue for private firms in Tajikistan, access to reliable collateral to obtain a loan increased significantly between electricity services is a major concern (figure 5). Tajikistan 2005 and 2008 from 67 percent to 100 percent. However, is the country with the fourth largest number of power the percentage of sales sold on credit increased significantly outages in a typical month for the whole ECA region. between the two years, from 12 percent to 27 percent. In terms of value (as a percentage of sales) lost due to In infrastructure, another area of major concern for power outages, Tajik firms report on average 15 percent Tajikistan, losses due to power outages showed a significant of sales—only Kosovo is worse (17 percent). The problem increase between 2005 and 2008, from 6 percent to 15 in Tajikistan, unlike any other country in ECA with the percent among the firms interviewed in both rounds. 40
Table 4
Constraints on the average firm in Tajikistan 2008
Number of power outages in a typical month Senior management time spent in dealing with requirements of government regulation (%) Average number of visits or required meetings with tax officials Percent of firms expected to pay informal payment to public officials (to get things done) Incidence of graft index** Losses due to theft, robbery, vandalism, and arson against the firm (% of sales) Percent of firms paying for security
Tajikistan 6.3 11.7 1.4 44.6 28.7 0.3 48.2
ECA-29 † 5.2 10.6 1.6 23.1 13.5 0.5 57.7
EU-10 ‡ 2.1 9.5 1.1 12.7 6.8 0.4 62.2
Source: Enterprise Surveys.
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Figure 5
Electricity is a major constraint for firms in Tajikistan
18 15 12 9 6 3 0
Value lost due to power outages (% of sales)
Duration of power outages (hours) Tajikistan
Number of power outages in a typical month
ECA average
Source: Enterprise Surveys.
The duration of the average power outage increased but not significantly. Finally, in the area of trade, the average percentage of sales exported directly decreased significantly, from 13 percent to 8 percent, over the same period. Despite the relative negative ranking of Tajikistan in 2008 in the areas of corruption and infrastructure, the results of the survey also reveal some improvements in the business environment between 2005 and 2008 as mentioned above. Unfortunately, these improvements do not seem to have been strong enough to move Tajikistan ahead of its regional counterparts.
Notes 1. The Enterprise Surveys, when implemented in Eastern Europe and Central Asia countries, are also known as Business Environment and Enterprise Performance Surveys (BEEPS) and in this region are conducted jointly by the World Bank and the European Bank for Reconstruction and Development. 2. This figure presents the unweighted distributions by size, sector, and location of the firms interviewed without any inferences to the whole economy.
3. The term “average firm” is used to convey the average firm characteristics from the Tajikistan 2008 Enterprise Survey. The sample of firms interviewed is representative of the manufacturing and services sectors of the economy. For more information on the survey methodology please consult http://www.enterprisesurveys. org/Methodology/ 4. The winter before the survey was carried out was one of the coldest on record and this may have influenced the responses regarding electricity supply. 5. The information collected in 2005 refers to the characteristics of the firm at the moment of the survey or to fiscal year 2004. 6. The firms surveyed in both years may not be representative of the Tajikistan’s private nonagricultural economy since these are a subset of the full sample. Firms with fewer than five employees may be included among the firms surveyed in both years. The analysis presented is purely descriptive and does not aim at establishing causality between reforms and their intended effects. † ECA-29 includes Albania 2009, Armenia 2009, Azerbaijan 2009, Belarus 2008, Bosnia and Herzegovina 2009, Bulgaria 2009, Croatia 2009, Czech Republic 2009, Estonia 2009, Georgia 2008, Hungary 2009, Kazakhstan 2009, The Republic of Kosovo 2009, Kyrgyz Republic 2009, Latvia 2009, Lithuania 2009, FYR Macedonia 2009, Moldova 2009, Montenegro 2009, Poland 2009, Romania 2009, Russian Federation 2009, Serbia 2009, Slovak Republic 2009, Slovenia 2009, Tajikistan 2008, Turkey 2008, Ukraine 2008, and Uzbekistan 2008. ‡ EU-10 includes 2009 data from Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, and Slovenia. * The ownership variables represent the average ownership composition within a firm. These variables do not represent the ownership composition across firms. ** Incidence of Graft Index is the percentage of instances in which a firm was either expected or requested to provide a gift or informal payment during solicitations for public services, licenses, or permits. This Index uses data from six survey questions for each firm. For purposes of Index computation, a refusal to answer a particular survey question is considered an affirmative answer. This Index is a modified version of the Graft Index defined in A. Gonzalez et al. 2007. World Bank Policy Research Working Paper #4394.
The Enterprise Surveys measure the business environment in over 100 countries in the world. A standardized questionnaire, universe under study, and implementation methodology is used to make sure information is comparable across countries and time. The full data and documentation explaining the methodology are available at www.enterprisesurveys.org. The Country Notes are a product of the staff of the Enterprise Analysis Unit. The findings, interpretations, and conclusions expressed in this note are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
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