Tajikistan: Cotton Sector Restructuring

1
Tajikistan Cotton Sector Restructuring

• Program Development
• As at 8 May 2008

2
Current situation Farms

• Slow and incomplete freedom to farm 40 North,
  20 South
• Role confusion how and where to get loans,
  inputs, instructions
• Mixed capacity 60 cotton still desired, while
  20 can profit
• Mixed help LACs, some extension, some business
  services

3
Current situation Government

• Debt resolution stalled, and investors partly
  sidelined
• Markets in disarray inputs, credit, outputs
• Partial government delinkage but what else to be
  doing?
• Exogenous factors causing damage winter 07,
  winter 08, energy, food

4
Current situation Donors

• Angry about mis-reporting and legal fees holding
  up budget money IMF repayment
• Half empty freedom to farm a failure?
• Many reprogramming agriculture a loser
• Food and energy situation complicates matters
  dont punish the poor

5
Some recent thinking

• Reform agendas this large take time
• Defining a good faith effort is critical, on both
  sides of the table
• Inadequate resources mean delays
• Not everything can be predicted need to have
  what if resources

6
Principals may consider

• Mechanisms require sustained credible commitment
  to be workable
• Reform incentives, cultural context
• Citizens/beneficiaries must be sure their leaders
  and donors -- are sincere
• Watch citizens for their actions
• Alert Government to the consequences

7
ADB, IMF, World Bank agreed

• IMF will handle macroeconomic management,
  misreporting
• World Bank will handle financial sector, debt
  resolution
• ADB will concentrate on addressing key underlying
  causes of cotton and ag weaknesses

8
Binding constraints we see

• Insecurity of land tenure
• Changing role of Government at center and
  district levels
• Weaknesses in land, bus. reg., input, output
  markets and water
• Insufficient farmer access to key knowledge law,
  accounts, tax, agronomy

9
Options we are exploring (1)

• Unified land registry -- with safeguards
• Farmer capacity development private agronomy,
  legal aid centers, accountants, separating land
  from business registration
• Reform support 111 achievement TA, monitoring
  on ground as well as at center

10
Options we are exploring (2)

• Agricultural finance improving banks and MFI
  capacity to lend, and partial credit guarantees
  to expand liquidity, risk options
• Gins finance farmer ownership? Help with
  industry restructure if investors forfeit
  ownership?
• Local government change role? Tax structure?
  Stopping quotas

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Seeking results

• Freedom to farm, process, market cotton and
  by-products
• Improved sector productivity, profitability, and
  competitiveness
• Spillover to rural sector incomes, agricultural
  diversification, food security
• Government focus on facilitation of sector
  growth, not control

12
Risks and issues

• Sustainability and certainty of Government and
  donor credible commitments
• Farm debt resolution
• Capacity to deliver the reforms
• Addressing immediate energy and food, vs
  important farmer freedoms

13
Processing schedule

• Fact finding April/May 2008
• Management Review July 2008
• Appraisal July/Aug 2008
• Loan negotiations August 2008
• Board considn September 2008

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Thank you.