ATTACHMENT 14d_TJ Povetry Reduction strategy.pdf

DRAFT

REPUBLIC OF TAJIKISTAN

POVERTY REDUCTION STRATEGY

OF THE REPUBLIC OF TAJIKISTAN

for 2007-2009

Regional Conference on MDG based NDS and PRS, 15-17 March, Dushanbe, Tajikistan

1. INTRODUCTION

2. RESULTS OF IMPLEMENTATION OF THE PRSP FOR 2002-2006

2.1. POVERTY IN TAJIKISTAN: CURRENT STATUS, DYNAMICS AND PRINCIPAL PROBLEMS

2.2. PSRP: LESSONS LEARNED

3. GOALS AND KEY DIRECTIONS OF THE PRS POLICY FOR 2007-2009

4. ESTABLISHMENT OF THE GENERAL CONDITIONS FOR DEVELOPMENT (FUNCTIONAL

BLOCK)

4.1. PUBLIC ADMINISTRATION REFORM

4.2. MACROECONOMIC DEVELOPMENT

4.3. IMPROVEMENT OF THE INVESTMENT CLIMATE, DEVELOPMENT OF THE PRIVATE SECTOR AND

ENTREPRENEURSHIP

4.4. DEVELOPMENT OF REGIONAL COOPERATION AND INTEGRATION INTO THE GLOBAL ECONOMY

5. PROMOTION OF SUSTAINABLE ECONOMIC GROWTH (PRODUCTION BLOCK)

5.1. DEVELOPMENT OF INFRASTRUCTURE, ENERGY AND INDUSTRY

5.2. FOOD SECURITY AND DEVELOPMENT OF THE AGRICULTURAL SECTOR

6. DEVELOPMENT OF HUMAN POTENTIAL (SOCIAL BLOCK)

6.1. DEVELOPMENT OF THE EDUCATION SYSTEM AND SCIENCE

6.2. DEVELOPMENT OF THE HEALTH CARE SYSTEM

6.3. IMPROVEMENT OF SOCIAL WELFARE

6.4. EXPANSION OF ACCESS TO WATER, SANITATION AND HOUSING AND MUNICIPAL SERVICES

6.5. PROMOTION OF ENVIRONMENTAL SUSTAINABILITY

6.6. PROMOTION OF GENDER EQUALITY

7. FINANCING OF PRS IMPLEMENTATION

8. MANAGEMENT OF PRS IMPLEMENTATION AND MONITORING

APPENDIX 1. ACTIVITY MATRIX FOR 2007-2009

APPENDIX 2. MONITORING MATRIX

APPENDIX 3. PRS PRIORITIZATION PRINCIPLES

APPENDIX 4. PARTICIPATION IN THE DEVELOPMENT OF THE NDS/PRS

Table of Acronyms

AAS Academy of Agricultural Sciences ACA Agency for Construction and Architecture under the Republic of Tajikistan

Government ACEC Agency to Combat Corruption and Economic Crimes under the President of the Republic of Tajikistan ADB Asian Development Bank AIDS Acquired Immunodeficiency Syndrome ALGC Agency for Land Use, Geodesy and Cartography under the Republic of

Tajikistan Government AS Republic of Tajikistan Academy of Sciences ASMC Agency for Standardization, Metrology, Certification and Trade Inspection under the Republic of Tajikistan Government BFHI Baby-Friendly Hospital Initiative CCI Chamber of Commerce and Industry CES Committee on Emergency Situations and Civil Defence under the Republic of Tajikistan Government CF Catalytic Fund CFWA Committee on Family and Women’s Affairs under the Republic of

Tajikistan Government CIDA Canadian International Development Agency CS Customs Service under the Republic of Tajikistan Government CSA Civil Service Administration CSIP Centralized State Investment Programme CYST Committee on Youth Affairs, Sports and Tourism under the Republic of

Tajikistan Government DfID Department for International Development (United Kingdom) DWC Dushanbe Water Canal EAP Executive Administration of the President of the Republic of Tajikistan EBRD European Bank for Reconstruction and Development EC European Commission ECHO European Community Humanitarian Office ECO Economic Cooperation Organization EMIS Education Management Information System EU European Union FAO United Nations Food and Agriculture Organization FDI Foreign direct investment GBAO Gorno-Badakhshan Autonomous Region GDP Gross Domestic Product GF Global Fund to Fight AIDS, Tuberculosis and Malaria GIS Geographical Information System GTC German Technology Centre HIV Human Immunodeficiency Virus HPP Hydropower plant IAEA International Atomic Energy Agency IAS International Accounting Standards ICPWB International Committee of Pharmacists without Borders IDA International Development Association IDB Islamic Development Bank

IFC International Finance Corporation ILO International Labour Organization IMF International Monetary Fund IPEC International Programme on the Elimination of Child Labour ITC International Trade Centre JICA Japan International Cooperation Agency KfW German Development Bank KhMK Khochagii Manziliyu Kommunali state unitary enterprise KWC Khujand Water Canal MA Monitoring and assessment MAEP Republic of Tajikistan Ministry of Agriculture and Environmental

Protection MDGs Millennium Development Goals MEDT Republic of Tajikistan Ministry of Economic Development and Trade MEI Republic of Tajikistan Ministry of Energy and Industry MFA Republic of Tajikistan Ministry of Foreign Affairs MGA Main Geology Administration under the Republic of Tajikistan Government MIA Republic of Tajikistan Ministry of Internal Affairs MICS Multiple Indicator Cluster Survey MLSW Republic of Tajikistan Ministry of Labour and Social Welfare MOE Republic of Tajikistan Ministry of Education MOF Republic of Tajikistan Ministry of Finance MOH Republic of Tajikistan Ministry of Health MOJ Republic of Tajikistan Ministry of Justice MRWR Republic of Tajikistan Ministry of Reclamation and Water Resources MTBF Medium-Term Budget Framework MTC Republic of Tajikistan Ministry of Transportation and Communications NASMB National Association of Small- and Medium-Sized Business NBT National Bank of Tajikistan NDS National Development Strategy NGO Non-governmental organization OPEC Organization of Petroleum Exporting Countries OSCE Organization for Security and Cooperation in Europe OSI Open Society Institute of the Soros Foundation PIP Public Investment Programme POP Persistent organic pollutants PPP Purchasing power parity PRS Poverty Reduction Strategy PRSP Poverty Reduction Strategy Paper RRS Region of Republican Subordination RT Republic of Tajikistan RTG Republic of Tajikistan Government SCI Republic of Tajikistan State Committee on Investment and State Property

Management SDC Swiss Agency for Development and Cooperation SECO Swiss State Secretariat for Economic Affairs SFD Saudi Fund for Development SIDA Swedish International Development Cooperation Agency SM Safe Motherhood SMB Small and medium-sized business

SSC Republic of Tajikistan State Statistics Committee STDs Sexually-transmitted diseases SUAE State Unitary Aviation Enterprise TadAZ Tajikistan Aluminium Plant TC Tax Committee under the Republic of Tajikistan Government TICA Turkish International Cooperation Agency TRW Tajik Railway UN United Nations UNAIDS Joint United Nations Programme on HIV/AIDS UNDP United Nations Development Programme UNESCO United Nations Educational, Scientific and Cultural Organization UNFPA United Nations Population Fund UNICEF United Nations Children’s Fund UNIFEM United Nations Development Fund for Women UNTOP United Nations Tajikistan Office of Peace-Building USAID United States Agency for International Development WB World Bank WFP World Food Programme WHO World Health Organization WIPO World Intellectual Property Organization WTO World Trade Organization WUAs Water Users Associations YFS Youth-friendly services

1. INTRODUCTION

This document, the Poverty Reduction Strategy of the Republic of Tajikistan for 2007-2009 (PRS), is intended to serve as a medium-range socio-economic development programme for the country. Taking into account available resources and additional needs, it outlines concrete actions to implement institutional and economic reforms that will promote strong and sustainable economic growth and an improvement in the scope and quality of social services aimed at easing the burden of poverty in the country.

In 2005, with a view to raising the nation’s standard of living, the President initiated the drafting of the long-range National Development Strategy of the Republic of Tajikistan for the Period to 2015 (NDS), and the medium-range Poverty Reduction Strategy of the Republic of Tajikistan for 2007-2009.

In light of this, activities under the PRS are also based on the NDS goals and priorities (public administration reform, development of the private sector and attraction of investment, development of human potential) and they are aimed at creating in Tajikistan a democratic and prosperous state in which all members of society will have an equal opportunity to enjoy the benefits of political, social and economic development.

The actions outlined in the PRS take into account the results of the implementation of the Poverty Reduction Strategy Paper (PRSP) for 2002-2006 and the lessons learned from that process.

As in the NDS, the activities under the PRS are focused on development in 12 sectors (directions) of economic reform, which have been provisionally combined into three blocks based on their role and place in promoting strong and sustainable economic growth and improving the range and quality of social services provided to the poor:

(a) the Functional Block, which provides for the overall institutional environment for development and encompasses the following sectors: public administration reform;

macroeconomic development; improvement of the investment climate; development of the private sector and entrepreneurship; regional cooperation and integration into the global economy;

(b) the Production Block, which provides for the physical environment to support economic growth and brings together the following sectors: food security and development of the agricultural sector, and the development of infrastructure, energy and industry;

(c) the Social Block, which provides for broader access to basic social services and is comprised of the following sectors: development of the health care system; development of the education system and science; expansion of access to water supply, sanitation and housing and municipal services; improvement of social welfare; promotion of gender equality; and environmental sustainability.

The focus of government, sectoral and regional development strategies, programmes and plans that have been adopted and are currently being drafted (including the Public Investment Programme [PIP] and the Centralized State Investment Programme [CSIP]) is being shifted toward implementation of the PRS.

The PRS serves as a tool for dialogue with all interested parties, including business and non-governmental organizations, international organizations and foreign donor countries that are providing assistance to Tajikistan. To this end, the government will make every effort to ensure that PRS tasks and activities are taken into account in the drafting of programmes to provide technical and financial assistance to the country.

Each PRS task has been formulated as a list of concrete actions with a clearly established timetable for implementation, parties responsible and sources of financing, as well as quantitative and qualitative indicators. A specific list of activities in the area of development and poverty reduction based on the PRS will be approved each year by the government.

With a view to measuring progress that has been achieved in the implementation of the PRS, the government has selected a list of international, national and sectoral indicators, which will be added to and modified in the monitoring and assessment of the planned PRS activities.

2. RESULTS OF IMPLEMENTATION OF THE PRSP FOR 2002-2006

2.1. Poverty in Tajikistan: current status, dynamics and principal problems

2.1.1. The status of poverty, dynamics and key tasks

Regardless of the method chosen to calculate this indicator, the overall poverty rate is clearly on the decline. Available data (from a calculation of the overall rate of absolute poverty in terms of income level and extreme poverty based on purchasing power parity (PPP) of US$2.15 and US$1.08 per day, respectively) show that the poverty rate declined from 83% in 1999 to 64% in 2003, and according to some preliminary data, to 57% in 2004.

Extreme poverty was cut in half, from 36% in 1999 to 18% in 2003. In view of the growth trends, there is a strong likelihood that the poverty rate fell even further in 2005 and 2006.

We will be able to determine the exact amount of the decline based on the results of the standard of living survey that is scheduled for 2007. The decline in poverty in 1999-2004 was driven in large degree by economic growth, which resulted from the achievement of macroeconomic, social and political stability in the country. In spite of these gains, however, Tajikistan is still the poorest country in the region, with a per capita GDP of US$337.5 in 2005.

Official payments (wages and pensions) were not always enough to lift households out of poverty. In connection with this, growth in household income from private farming plots, the raising of goats, sheep and other small livestock and remittances from abroad was an important factor contributing to the decline in the poverty rate in Tajikistan. The available data show that households whose income depends solely on official payments are more vulnerable to poverty than those whose income sources are somewhat diversified.

The decline in poverty did not occur uniformly at either the inter-regional or sub-regional levels. At the regional level the decline in poverty ranged from 12% to 26%. The Region of Republican Subordination (RRS) experienced the most rapid decline in poverty

(26%), while the rates in other regions of the country were close to half that, with Dushanbe posting the lowest indicator at 12%. The sharpest drop in extreme poverty indicators occurred in Gorno-Badakhshan Autonomous Region (GBAO), which reported a decline of 33%.

Table 1 Dynamics of Poverty Reduction

Region Population

(2003)

PPP poverty rate in 2003

(US$2.15)

Proportion of total population living in poverty (2003)

Decline in poverty between 1999 and

PPP

extreme poverty rate in

(US$1.08)

Decline in extreme poverty between 1999 and

Inequality (2003)

GBAO 197,000 84% 4% -13% 36% -33% 0.30

Sogd 2,123,000 64% 32% -15% 16% -11% 0.32 Khatlon 2,169,000 78% 40% -13% 27% -22% 0.35 Dushanbe 630,000 49% 7% -12% 12% -1% 0.37

RRS 1,553,000 45% 17% -26% 9% -16% 0.31

Total 6,672,000 64% 100% -18% 18% -18% 0.35

The nature of the regional differences is based primarily on the different income levels, the cost of living and the overall level of socio-economic development of the various regions. There are also significant differences within individual regions of the country, which can be explained by the geographical features of the regions (low-lying areas, mountainous terrain), the proximity to borders, large cities or industrial centres, agricultural trends and so

on. The revival of certain industrial enterprises had an impact on poverty reduction in Sogd Province; in GBAO, which is a remote, mountainous and sparsely populated region, humanitarian assistance, development of the private sector and an increase in private remittances played a role; in the RRS (where an aluminium plant is located), the development of industry, an increase in employment and expansion of the non-cotton sector of agriculture were important factors.

In terms of absolute indicators, however, the majority of poor people live in Khatlon and Sogd provinces, which account for 65% of Tajikistan’s total population. These regions have 72% of the total poor population and 75% of the population living in extreme poverty, and this highlights the importance of focusing poverty-reduction efforts on these two provinces, which are the country’s most densely populated areas.

In spite of the fact that poverty reduction in rural areas is proceeding at a faster pace than in urban areas, poverty continues to be a predominantly rural phenomenon. In 2003, 65% of the rural population was living on less than US$2.15 per day in terms of PPP, while in the cities this figure was 59%. Between 1999 and 2003, however, there was a greater decline in the poverty rate in rural areas, by 19%, than in urban areas, where it fell by 14%. In 2004 the gap between urban and rural poverty continued to shrink, and the difference is now negligible (estimates show an urban poverty rate of 58% and a rural poverty rate of 57%).

Poverty in urban areas is tied more to a lack of jobs and the wages earned in the formal economy, while rural poverty is linked to low income levels, particularly in agriculture, as well as inadequate access to basic social services (education, health care, water supply, etc.).

The effect of economic growth on poverty is greater in rural areas. More than 70% of Tajikistan’s population and a large share of the poor population lives in rural areas. The elasticity of the poverty rate with respect to economic growth is higher in rural areas than in urban areas, with figures of -0.71 and -0.61, respectively. On the whole, this would indicate that the influence of structural transformations in agriculture, particularly in cotton production and land reform, has a potentially greater impact on poverty.

Demographic indicators have a direct effect on the poverty rate. Indicators such as household size, the number of children and the gender and age of household members can sometimes be key factors in determining the incidence of poverty. While the average poverty rate for the country as a whole is 64%, the risk of poverty in large households is twice as high as in households with two or fewer children. Rapid population growth (10% over the past seven years) puts strains on the education, health care and social welfare systems, which are already overburdened. The demographic factor also has a major impact on the labour market, where there are already signs that supply is outstripping demand.

In addition to improving the gender equality situation, there are still pressing issues related to equal access for men and women to education and land use, to the decision-making process and to employment. Recent research shows that there are no significant differences between households that are headed by men and women. This is true for both urban and rural households. At the same time, participation by women in the labour market, particularly the formal labour market, remains low, especially in rural areas. In connection with this, in 2004 employment among men was twice as high as among women. On average, in 2004 income earned by men was almost 1.5 times higher than women’s income. There is also a serious gender gap in school attendance: in rural areas girls drop out of school at twice the rate as boys, and in urban areas at three times the rate. By the age of 18, for example, only 40% of boys and 10% of girls are still in school.

2.1.2. Labour market, employment and poverty

Unemployment can be seen as one of the main factors contributing to poverty. If the head of a household is unemployed or has lost his job, there is a higher risk that he will become poor. Households whose heads are not employed full-time also have poverty rates that are higher than average, particularly in rural areas.

In spite of the fact that unemployment fell by 1.9 percentage points between 2000 and 2004, when it was reported at 7.4%, growth in employment is lagging behind growth in the labour force. This points to the fact that the “surplus” labour force is either not being reported as unemployed, is working in the informal sector of the economy or is migrating to find work outside of Tajikistan. There are also substantial inter-regional differences in employment patterns, with a particularly high concentration of manpower in densely populated areas, such as the city of Dushanbe. Women with children are among the most vulnerable groups in terms of employment and poverty, particularly in rural areas. If the economy and the population continue to grow at current rates, and there are no significant changes in the labour market, over the medium term this could lead to an additional burden on the social service system.

Unemployment among young people continues to be a serious problem for Tajikistan. The proportion of young people (15-29 years of age) in the overall structure of registered unemployment is quite high and is in the range of 60-65%. The average age among the unemployed is 29.6 years. At the same time, due to low income levels and small pensions, approximately 43% of men and 15% of women over the age of 60 continue to work.

Child labour is becoming another important measure of poverty in Tajikistan. This is a very complicated and multi-faceted issue, which is driven by a number of factors, such as poverty, local traditions, household size, etc. According to data from the Labour Force Assessment (2004), approximately 2.7% of all children between the ages of 12 and 14 work full-time. In rural areas paid child labour is used more frequently than in urban areas, and this practice occurs most commonly in agriculture, trade, construction and small business.

2.1.3. Non-material poverty

In spite of an increase in funding for the education system, a great deal remains to be done to ensure and maintain access to high-quality education. A shortage of funding continues to be a key problem in the education sector. Budget spending on education increased from 2.3% of GDP in 2000 to 2.7% of GDP in 2005. A significant proportion of the spending came from donors and households themselves. The overall condition of the infrastructure and material and technical support for educational institutions remains poor.

Serious attention also needs to be given to the education and training of teachers, as well as vocational and technical training, the development and improvement of curricula and higher teacher salaries.

Demographic growth and financial constraints are limiting public access to educational services. According to the Poverty Survey (2005), 20% of the poorest households spend only about 5.5% of their budget on education and can barely afford the cost of clothes, school supplies, books, etc. As a result, attendance at secondary schools has declined significantly in all of the country’s regions, with an average rate of 88% for the country as a whole.

The health care sector continues to face challenges. The health care system also suffers from inadequate funding (total spending on health care represents approximately 1.5% of GDP). In spite of the fact that some aspects of health care have improved, a number of key problems remain unresolved, and a large proportion of the population has limited access to medical care. With the aim of resolving this situation, the government is taking measures to introduce a guaranteed package of free medical services, in addition to services that are partially or completely self-sustaining. A system of per-capita financing for public medical institutions is also being introduced.

Problems related to nutrition and infectious diseases are a cause of concern. The incidence of acute malnutrition among children under the age of five has risen by 60%. There has also been an increase in the proportion of children under the age of five suffering from chronic malnutrition. In spite of gains that have been made, socially dangerous diseases such as tuberculosis, measles, malaria and AIDS represent a significant threat to the country’s development in general, and to poverty reduction in particular. Among of the main factors complicating the fight against these diseases are labour migration and the deterioration of water supply and sanitation systems.

The social welfare system is in need of reform with a view to ensuring that its functions are performed efficiently and effectively, because a significant proportion of the population depends on these services. The most socially vulnerable segments of the population are disabled persons, the elderly, families headed by single women, the unemployed, orphans, large families and people performing unskilled manual agricultural labour. In spite of the fact that budget spending on social welfare is on the rise in the country, the size of social benefits that are paid and the targeting of these benefits are still inadequate.

This is why the payment of social benefits cannot have a serious impact on reducing poverty, and in terms of their effectiveness they fall considerably short of remittances from abroad and various forms of humanitarian assistance. The system of benefits and compensation is need of optimization, as is the pension security system, and they need to be placed on a financially sound footing.

Access to electricity, drinking water and communications services is inadequate. In spite of practically universal access to electricity, as well as an increase in the amount of electricity being generated, the availability of electricity continues to be irregular and the quality of the electricity supply is poor, particularly in the winter. A significant proportion of the population in Tajikistan has problems with access to clean drinking water. Only one-third of the population has access to chlorinated water from a public utility, 29% of the population uses water from centralized sources, and the rest of the people collect water from cisterns and irrigation ditches. As much as 40% of the water consumed is not potable and 41% of the population uses water from public utilities that is of poor quality. There are a number of difficulties associated with access to communications and telecommunications services. In spite of the fact that television broadcasting is available to 98% of the population and radio broadcasting to 76.6%, many people are not able to take advantage of these services because of frequent and prolonged power outages. At the same time, both landline and mobile telephone services are growing and are being constantly upgraded.

The government has begun to make a serious effort to restore the highway system and to build tunnels, roads and bridges (including bridges linking Tajikistan and Afghanistan), and a number of preliminary steps have been taken to liberalize aviation and the railway system.

Labour migration continues to be a key survival strategy for many households and a guarantee of social stability. In spite of relatively strong demographic growth, not many new jobs are being created. In view of this, migration of the labour force is the most common method used by households to find work that offers sufficient remuneration. A survey of migrants conducted in 2005 showed that the average labour migrant is a Tajik with an average age of 34 who is married with five family members and has a secondary or technical education. In turn, remittances have become a source of income for a majority of low-income families and are used predominantly to meet basic needs. Remittances increase the purchasing power of the poor, and they also provide a sort of social safety net for families.

Most of the remittances go to rural areas (70%), where the poverty rate is the highest.

According to the latest poverty assessment report, remittances from labour migrants account for as much as 25% of total household income. Based on official estimates, a total of 420,600 labour migrants left the country in 2004. Official remittances were equal to approximately 17% of the country’s GDP in 2005.

2.1.4. Difficulties on the path to reducing poverty and a poverty forecast based on anticipated economic growth

In spite of the considerable gains that have been made, estimates show that the poverty rate could decline even faster given more rapid reforms in key sectors of the economy. Poverty reduction in Tajikistan has been achieved to a significant extent as a result of macroeconomic and political stability, substantial remittances from migrants, basic reforms and efforts to liberalize the economy. To ensure sustainable economic growth and poverty reduction in the future, targeted structural and sectoral reforms will need to be carried out (in agriculture, the energy sector, education, health care and social welfare), in addition to second-generation reforms that cut across different sectors (public administration, government spending, financial governance and development of the private sector).

Poverty reduction requires economic growth and the optimal distribution of its results throughout society. While the target indicators for extreme poverty have already been met (18% in 2003, compared to 36% in 1999), the minimum economic growth needed to achieve the Millennium Development Goal (MDG) for income must be 3%. According to the estimates, economic growth of 1% will lead to a decline in the overall poverty rate by 0.46% and a 1% increase in per capita GDP will result in a drop in the overall poverty rate by 0.62%. It is important to note here that the inequality indicator increased by more than 6% between 1999 and 2003, from 0.33 to 0.35, respectively, and it is likely to rise even further. It is troubling to see such a minimal effect from economic growth and the increase in the inequality indicator. In light of this, it is very important to provide not only for economic growth, but also for the socially optimal distribution of national income among the country’s population.

From a sectoral standpoint, entrepreneurial activity, agriculture and the service sector have the greatest potential to reduce poverty. Given the limited number of jobs available, self-employment based on small and medium-sized businesses, accompanied by the removal of excessive administrative barriers, has a great deal of potential to reduce the poverty rate. An increase in productivity in agriculture (due primarily to gains in the non-cotton sector) had a negligible effect on reducing rural poverty. In spite of the fact that spending per capita and the share of per capita GDP in agriculture grew by 50% and 46%, respectively, the poverty reduction rate within the sector is only in third place, while the elasticity of poverty with respect to per capita GDP is in fourth place, behind sectors such as services and infrastructure (mining, energy, the gas sector and water supply). Thus, it is clear that the main emphasis in further efforts to reduce poverty should be on the development of entrepreneurial activity, the intensification of structural reforms in the area of rural development, such as land reform, for example, and an equitable and sustainable resolution of the problem of debt owed by cotton farms within the framework of a comprehensive programme for reform of the cotton sector.

2.2. PSRP: lessons learned

The main goal of the Strategy that was adopted for 2002-2006 was to increase the population’s real income and to provide for a fair distribution of the results of economic growth. The key directions of the PRSP were: (1) the promotion of rapid, socially equitable, labour-intensive and export-oriented economic growth; (2) fair and effective delivery of basic social services; (3) targeted support for the poorest segments of the population; (4) good governance; and (5) improved security.

Overall, the results of the implementation of the PRSP are unequivocal. Despite some progress in macroeconomic management and the development of legislation, structural reform measures were not fully implemented. The PRSP did not manage to produce high-quality results in a timely manner. For example, public access to basic social services, as one of the factors of successful poverty reduction, remains quite limited.

The maintenance of macroeconomic stability was a key aspect of the poverty reduction process within the framework of the PRSP. The goal of the Strategy was to achieve growth in real GDP of 6% per year in 2002-2005, while lowering inflation to an annual rate of 5%. The sustainability of external debt servicing was a focus of particular attention in the

PRSP.

There was dynamic economic growth during the period covered by the PRSP, averaging 9.5% per year. Starting in 2003, the dependence of economic performance on cotton and aluminium production eased somewhat thanks to output in the non-cotton agricultural sector, as well as growth in the share contributed by the service sector to GDP.

Economic growth was also linked in part to an increase in domestic demand resulting from remittances from citizens working abroad. In spite of fiscal constraints, the government increased spending on the social sector, and in particular on education, health care and social welfare. Although the funding allocated was insufficient, the social sphere accounted for 40.5% of the budget in 2005, which represented 8.7% of GDP. In addition, the decline in external debt to 31% of GDP in 2005 helped reduce the budget deficit.

The main lessons learned from the PRSP were that: (1) the process of the drafting and implementation of the PRSP was somewhat isolated from other activities; (2) the fundamental principles and methodology of the PRSP were not defined clearly enough; and

(3) there was not enough coordination and harmonization of donor activities.

1. The isolation of the PRSP process. In spite of the fact that the PRSP was adopted as one of the country’s fundamental strategic documents, the process of its implementation was not integrated into the activities of government bodies in institutional, organizational and financial respects. Another important lesson is that the PRSP was frequently viewed as a document that called for one-time measures, rather than one that described and reflected an ongoing process aimed at achieving the poverty reduction goals that had been set.

From an institutional standpoint, the function of PRSP implementation and progress assessment was not fully identified within the functions and structure of government bodies at all levels. Instead of the gradual integration of this function, new bodies were frequently created that were financed by funds from one donor or another and that were not sustainable from either an institutional or financial standpoint. The establishment of the PRSP Monitoring and Assessment Division within the Executive Administration of the President of the Republic of Tajikistan can be viewed as the first step towards providing institutional backing for the PRSP implementation process. The “injection” of the PRSP process, however, needs to be viewed from a comprehensive perspective, taking into account adequate financial support for implementation of the process and a clear division of labour among the governmental and non-governmental structures that are involved in the process. Frequently the priorities, goals and tasks of sectoral and regional programmes or strategies did not correspond to the provisions of the PRSP.

The status of the PRSP was not sufficiently clear in legal respects, and this resulted in different readings regarding the implementation of its provisions. The legal status of the PIP and Medium-Term Budget Framework (MTBF), which should serve as a sort of link between the PRSP and government spending, is also in need of clarification.

In the organizational context, the legislative and other regulatory legal acts that have been adopted are not focused enough on achieving the PRSP goals and on its monitoring and assessment. Furthermore, gains in the implementation of the PRSP were not utilized to shift the focus of the policies being pursued or as criteria for evaluating the performance of government bodies.

It turned out to be virtually impossible to achieve the financial integration of the PRSP with the state budget due to differences in the principles that form the foundations of the PRSP and the budget system. The PRSP, as an instrument of government policy, was designed according to the sectoral principle, while the country’s budget system is organized on a regional basis. The public investment sphere, which is financed by both external sources and the country’s own budget funds, could have been integrated more successfully with the PRSP, since the process of planning and implementation of both the Public Investment Programme and the Centralized State Investment Programme was based for the most part on a sectoral approach. One of the obvious facts pointing to a “gap” between the PRSP and the PIP, which is financed primarily by multilateral donors, is that the process of surveying project implementation, which is performed by the government on a regular basis in conjunction with such international financial institutions as the World Bank and the Asian Development Bank, is not coordinated with the process of evaluating progress in the implementation of the PRSP, which also receives a significant amount of funding from external sources.

2. PRSP principles and methodology. One of the key unresolved issues concerning the PRSP is the lack of methods for identifying interconnected and interdependent general and sectoral goals and priorities, and insufficient clarity in defining the principles for the development and implementation of the PRSP and other sectoral and regional programmes.

The definition of poverty and its statistical infrastructure also need to be coordinated. For example, the poverty line recognized by the government needs to be defined, along with the methodology for conducting statistical surveys of the standard of living, including the identification of the most vulnerable segments of the population. The methodology and process for the drafting and implementation of the PRSP are also in need of coordination, in particular with regard to such important aspects as the methodology for prioritization and calculating the cost of measures, consulting with the public, providing for independent progress assessments and feedback, etc.

3. The coordination and harmonization of donor activities has turned out to be a difficult task for both the government and donors. For example, the Donor Coordination Council has been in operation in Tajikistan only since 2006. The coordination of donors at the level of country assistance strategies, policies and projects began to improve only toward the end of the implementation of the 2002-2005 PRSP. In spite of the fact that donor programmes on the whole were not inconsistent with the PRSP, at the project level the alignment with PRSP goals and priorities was still insufficient. In the majority of cases this is due to internal requirements or conditions imposed by the donors themselves. To some degree, this is the result of objective factors, such as an improvement in the overall situation in the country, the development of major investment projects, as well as a change in external factors that have led to an increase in donor activity in the country.

The harmonization of procedures employed by donors, in particular international financial organizations, at the country level has still not produced the desired result. The adoption of the Paris Declaration on Aid Effectiveness (March 2005) provided a needed impetus for this process, however. At the same time, lack of clarity from the standpoint of identifying a government body responsible for dialogue with donors on harmonization issues was also a factor contributing to slow progress in this area.

The government has analyzed the conclusions, deficiencies and lessons learned from the 2002-2006 PRSP and it has prepared relevant comprehensive approaches to addressing these issues within the context of the new PRS, as outlined below:

1. Isolation of the PRS process. In view of the Public Administration Reform Strategy (2006) that is being implemented, it is important to focus particular attention on the structural and functional integration of the PRS process into the activities of governmental bodies that have undergone reorganization, at both the central and local levels. Special attention will be given to functional, regulatory and legal and personnel support for the State Statistics Committee in the regular collection and analysis of poverty and employment data.

Ministries (departments) and local government authorities should ensure timely and proper participation in the PRS implementation monitoring process, and the drafting and implementation of the relevant sectoral and regional programmes should be carried out in strict compliance with the provisions of the PRS.

With a view to establishing a more clearly defined legal status for the PRS, the advisability of making amendments and additions to the national legislation needs to be considered, in particular with regard to laws on socio-economic programmes, government finance, the state budget, local government, state statistics, etc., and the relevant sublegal acts need to be adopted as well. A permanent executive group of national and international experts needs to be established under the National Development Council (NDC) to provide for the organization and performance of these tasks, adjustments to the existing medium-range socio-economic programme and the elaboration of new programmes.

The political decision-making process and the adoption of significant measures and activities need to be focused in the future on the PRS as one of the key government policy documents. It would also be advisable, for example, to study the feasibility of evaluating the activities of the government, sectoral ministries and departments and local government bodies on the basis of their achievement of the PRS goals that have been set, in addition to other criteria.

It should be possible to overcome financial isolation in stages. First the process of the compilation and implementation of the PIP and CSIP needs to be oriented entirely toward the goals and priorities of the PRS. It will also be important to ensure that the drafting of the PIP and CSIP is an open and clearly defined process, with a view toward their future consolidation. Over the medium term, and as a pilot programme, it would be advisable to introduce MTBF principles, which shift the budget process to a sectoral basis. It will also be necessary to link the process of tracking the performance and effectiveness of government projects financed by donors to the PRS monitoring and assessment process. Over the short term, this can be achieved through the participation of government bodies, which are responsible for the monitoring and assessment of the PRS in the relevant sector, in the portfolio management process for projects financed from external sources. The monitoring and assessment systems that are in place at the project level also need to be consolidated according to the sectoral principle, with a focus on achieving PRS goals.

2. The PRS principle and methodology. In view of the practically unlimited needs and the limited resources available to the country, it would make sense to adopt the principle of focusing the goals and measures of future Poverty Reduction Strategies on the NDS and the available internal and external resources. It would also be advisable to direct the PRS above all toward ensuring sustainable economic growth, taking into account the socially optimal distribution of the results of this growth among the population. Within the context of the implementation of the initial stage of the national statistics system reform, it will be necessary to specify and approve a definition of poverty and employment, their signature characteristics and methodologies and processes for conducting surveys. Within the framework of a medium-term survey of PRS implementation, a PRS methodology that corresponds to the realities of Tajikistan, as a document and a process, needs to be presented to the government and all of our development partners for review.

3. Coordination and harmonization of donor activities. With a view to improving the effectiveness and productivity of donor coordination, the government will focus its attention on strengthening the dialogue with the Donor Coordination Council on the top priorities and the areas that lend themselves most easily to coordination, such as implementation, monitoring and assessment of the NDS and PRS, the implementation of reforms in the energy and cotton sectors, land reform, development of the private sector and education, health care and social welfare reform. A partner from the government will be identified to maintain a regular dialogue with the Donor Coordination Council.

Efforts to harmonize the activities of donors both at the level of country assistance strategies and programmes and at the level of various types of project implementation assessments, surveys and procedures, will be continued. For example, we would welcome the adoption of general country assistance strategies by international financial institutions. Donor assessments of the status of national procurement systems, financial reporting, government spending, the investment climate and so on, should become joint efforts. Procurement and financial management procedures will also be harmonized within the context of projects financed by international financial institutions. Measures will be undertaken to employ common structures for project implementation, while the establishment of separate structures created solely for specific projects will be avoided, and an effort will be made to gradually shift responsibility for the implementation of investment projects to the appropriate government bodies. A partner from the government will be identified to carry out harmonization measures.

3. GOALS AND KEY DIRECTIONS OF THE PRS POLICY FOR 2007-2009

1. The country’s long-term socio-economic development goals are set forth in the NDS. The implementation of several successive medium-range socio-economic development programmes, which identify concrete tasks and state policy measures applicable to the current conditions and trends, is planned as a way to achieve in stages the goals set down in the NDS. All other sectoral and regional programmes and plans, regardless of their timeframes, should be entirely in line with these two national strategic documents.

2. Poverty in Tajikistan is currently defined in material and non-material terms.

Material poverty is defined by an insufficient level of income to meet a person’s minimum essential needs, while non-material poverty is defined as limited access to education, health care and social services, to participation in public life and so on. Poverty puts constraints on the country’s political, economic, social and human development and endangers the achievement of NDS goals. A sustained and radical reduction in poverty requires not only the socially optimal redistribution of income, but even more, it requires sustained economic growth, in the course of which the poor have the opportunity to find jobs and they gain access to vitally important services, social insurance and a proper place in society. This is why the PRS, which is focused entirely on problems associated with reducing poverty, is the first medium-range socio-economic programme aimed at implementation of the NDS. The goals of the PRS are fully harmonized with the Millennium Development Goals, to which Tajikistan acceded back in 2000.

3. The goal of the PRS is to provide for a sustained rise in the standard of living, particularly among socially vulnerable segments of the population, through economic growth and an increase in human potential.

4. The goal of the PRS is reflected in the targets that have been set for key indicators that describe the development of all the main aspects of the people’s welfare during the PRS implementation period. These poverty reduction targets are shown in Table 2. Other sectoral and regional development programmes and plans should be consistent with the PRS and should promote the achievement of PRS goals over the medium term.

Table 2 Poverty Reduction Targets in Tajikistan for 2007-2009

Indicator Baseline level

(2005) Target (2009)

Per capita GDP 402.1 (2006) 485.5 Average annual growth in GDP (%) 7.0 (2006) 7.0 Average annual inflation (%) 12.5 (2006) 6.0-7.0 State budget surplus/deficit (not including the PIP) (%) +0.3 -1.0 Poverty rate ($2.15 PPP) 64.0 (2003) 52.0 Extreme poverty rate ($1.08 PPP) 18.0 (2003) 10.0 Contribution of private sector to GDP (%) 43.0 55.0 Annual increase in gross private investment (other than investment in the primary sector) (%)

100.0 110.0

Growth in gross agricultural output (%) 103.1 120.0 Growth in industrial output (%) 100.0 125.6 Overall basic secondary education coverage (% of total number of children of the relevant age)

97.0 98.0

Mortality rate among children under the age of 5 (per 1,000 live births)

79 (MICS-3) 75

Infant mortality (per 1,000 live births) 65 (MICS-3) 62 Maternal mortality (per 100,000 people) 97 70 Number of people infected with HIV 627 (2006) not more than

2,500

Indicator

Baseline level (2005)

Target (2009)

Incidence of disease (per 100,000 people):

malaria 37.4 20 tuberculosis, according to WHO 177 (2004) 145 parasitic diseases 292.9 (2004) not more than

292.9 measles 0.0 0.0 Proportion of urban/rural population with regular access to high-quality water sources (%)

93.0/ 49.0 96.0/ 51.0

Proportion of urban/rural population with access to basic sanitation and hygiene services (%)

20.0/ 5.0 47.0/ 37.0

Area of land covered by forests as a proportion of total land area (2005 - 100%)

100.0 105.0

Percentage of economically active population by gender (m/f)

58.3/41.7 (2004)

57.8/42.2 (preliminary estimate)

5. The PRS goals reflect the influence of external and internal factors that the country has to deal with in its development. In addition to external factors such as a lack of an outlet to the sea, its distance from the markets of high-income countries, the instability of the region in which the country is located and drug-trafficking and terrorism threats, the country’s development faces serious internal obstacles, such as an ineffective public administration system, an undiversified economy and an insufficient competitive environment, high demographic growth and a decline in the level of inherited human and physical capital. The PRS, however, is based on the conviction that purposeful and coordinated efforts on the part of the state and society, with the help of development partners, will enable us to overcome the effect of these factors and fulfil the PRS goals, thereby laying the foundation for meeting the NDS goals as well. The government hopes that donor organizations will make changes in their country assistance programmes, taking into account the NDS and PRS to the extent possible.

6. The PRS is aimed at achieving the openness, transparency and accountability of government policy to society and at strengthening democracy. The Strategy will become the basis for organizing cooperation between the state and civil society, which has been assigned an important role at every stage of implementation of the PRS, and particularly in the…