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To address corruption as a fundamental investment barrier in Central
Asia, CIPE conducted an in-house program in 2002 that included a
series of business-only roundtables on “Administrative Barriers
to Entrepreneurship.” Six local NGOs coordinated the gathering
of 120 businessmen and representatives of business associations
in Almaty, Bishkek, and Tashkent to discuss direct barriers to democratic
and economic reform that cultivate corruption.
Typical barriers cited during the course of discussion that hinder
the development of small-and medium-sized enterprises were:
- Constant and unfounded interference of government structures
in the private sector
- Limited access to financial resources
- Voluminous and confusing licensing system
- Confusing and suffocating taxation and accounting systems
- Excessive penalties for entrepreneurs
- Legal illiteracy on behalf of entrepreneurs
- Lack of access to information
- Little access to credit and harsh crediting terms (interest
rates too high, collateral assessment questionable)
- Incompetence of government officials
- Hampered access to raw materials
- Lack of transparency in state purchases and tenders
- Lack of communication channels between big businesses, which
include foreign enterprises, and small and medium-sized businesses
in Kazakhstan
- Weak financial and credit policy
- Little technological support for enterprises
- Lack of training availability for workers and technical-engineering
staff for many industrial sectors
- Few instruments of economic regulation
- Few channels of communication between government and NGOs
- Lack of a national registry
- Lack of a advocacy mechanism for industries
- Lack of standardization of criteria for market entry for small
and medium-sized business
- Lack of inclusion of private sector representatives into public
procurement commissions
- High VAT for import of production equipment and introduction
of new technologies
- Lack of government-sponsored training for workers and technical-engineering
staff in different industrial sectors
- High import and customs duties for raw materials and components
used for production that are currently not manufactured domestically
CIPE organized a regional roundtable to bring together Central
Asian business associations that offered a wider forum for discussion
and a possibility to network. A pillar of this program was to promote
regional cooperation on fostering economic growth and regional stability.
View photos of the event
Strengthening
Business Associations and Fostering Information Flow for Afghanistan's
Transition to a Market Economy
Afghanistan faces a variety of physical and institutional barriers
to its renewal and reconstruction. While physical infrastructure
is relatively easy to replace, experience from other post-war transitional
environments shows that renewal (the creation of new institutions
and values) is vital but more elusive. In December 2002, CIPE sponsored
three business round tables in Afghanistan on obstacles to reform
and economic development. In Kabul and Kandahar, the Afghan-American
Chamber of Commerce (AACC) gathered business men and women who
communicated their concerns regarding the high costs of doing business
in Afghanistan. A similar round table took place in the northern
city of Mazar-i Sharif, organized by the Foundation for Central
Asian Development (FCAD). Specifically, the following problems were
emphasized:
- Inefficient banking system
- Weak rule of law
- Poor infrastructure
- Little protection of private property
- Few property rights
- Lack of standardization for goods
CIPE is supporting the AACC to set up offices in Kabul and Kandahar
and raise awareness of the private sector’s role in reconstructing
Afghanistan by promoting an open-market economy.
Read reports on these roundtables:
In May 2003, CIPE held a training session for Afghan businessmen
and business associations from Kabul, Kandahar, Herat, Jalalabad
and Mazar-i Sharif. CIPE staff and trainers worked with business
leaders from across Afghanistan to identify their role in society
and strategies to participate in its democratic reconstruction.
Energy, intent, and vision were present at the training event, however
it was clear that 30 years of war and isolation left few organizations
prepared to operate on a sustainable level, let alone constructively
advance the interests of Afghan business. In response to the immediate
task of rebuilding and reforming Afghanistan’s economic sector
based on democratic values, CIPE is planning to establish a project
office in Kabul to raise awareness within society regarding market
and democratic values.
Combating
Corruption and Decreasing Administrative Barriers to Entrepreneurship
in Kazakhstan
As a result of CIPE’s regional program where businessmen
identified corruption as the primary obstacle to reform, the Almaty
Association of Entrepreneurs (AAE) has strengthened its approach
to combat corruption and decrease administrative barriers to entrepreneurship
in Kazakhstan. With a CIPE grant, AAE is currently working to correct
the flaws of the Administrative Code, which is considered to be
the single-most important legal document regulating the relationship
between government and entrepreneurs, to rid it of corruption points
and to steer the country toward democratic reform. Their research
indicated that 60% of small businesses consider the numerous unjustified
inspections by state authorities to pose the largest problem for
business development. This is also the basis for corruption and
extortion by the government. AAE is galvanizing public support behind
reforming the Code and reducing the loopholes in the legislative
framework that foster corruption. By engaging the government into
an effective debate with the business community on how to address
the problems associated with the Code, AAE plans to create a participatory
form of decision-making in Kazakhstan.
Strengthening
Business Association Advocacy in Kyrgyzstan
In all transitional countries, and Kyrgyzstan is no exception,
the challenge of building an effective and sustainable public-private
dialogue rests on two pillars: Engaging a government that is ill-disposed
to such a dialogue and preparing a business community that is ill-prepared
to advocate its causes. Excluded from the political process, local
businessmen contend that unless substantial changes are undertaken
aimed toward improving the business climate, Kyrgyzstan will continue
its plunge into poverty and despair, while SMEs submerge into the
informal economy. This project addresses the problem of rampant
corruption and the growing shadow economy in Kyrgyzstan by strengthening
the voice of business associations. CIPE will work with two local
business associations to engage the local entrepreneurs in the effort
to revise the Tax Code, which is blamed for much of the corruption.
Informing the business community on the importance of business advocacy
and empowering organizations to responsibly represent the private
sector is a fundamental pillar of this project. The current opaque
regulatory framework leaves ample opportunity for corruption, undermines
the rule of law and weakens the legitimacy of the government. Recognizing
that the business community is not homogenous, CIPE’s strategy
in Kyrgyzstan spans across several sectors of the business community
who have a stake in a more effective economic reform and a more
transparent and open bureaucratic process.
Reducing
the Informal Sector by Combating Corruption in Tajikistan
Rampant corruption prevents democracy from taking root by undermining
the rule of law, the efficacy, governance and reinforcing society’s
mistrust of government. Widespread tax evasion clearly indicates
that citizens are not obeying the law and have few incentives to
do so, promoting a culture of extra-legality. In addition, an excessive
tax burden drives most businesses into the informal economy or out
of business completely. According to recent research by the National
Investment Consulting Agency in Tajikistan, 45% of entrepreneurs
indicated that “tax pressure barriers” are the biggest
impediment to business development. In addition to the excessive
tax rates, bribe-seeking inspectors intimidate entrepreneurs. The
National Association of Managers and Marketologists (NAMM) has begun
to develop a strategy that will aim to reduce the informal sector
by combating corruption. NAMM will also develop a Code of Ethics
for tax collectors and taxpayers and in the process bring the Tajik
society a step closer to a participatory form of governance. This
includes a significant amount of visits by inspectors, who intimidate
entrepreneurs into bribing them. This project aims to close the
loopholes in the tax code that foster corruption and to improve
the relationship between the business community and the government
tax agencies by developing and enforcing a Code of Ethics, and,
in the process, strengthen the voice of the private sector in the
policymaking process.
Protecting
Private Property in Uzbekistan
As a result of international pressure, recent legislation aimed
to reduce the shadow economy. In reality, these regulations had
an extremely traumatizing effect on local business, consumers, and
the citizenry at large. The new regulatory framework that emerged
as a result of these laws practically devastated the local economy,
particularly small-and medium-sized enterprises. In an effort to
help develop a vibrant private sector and a strong middle-class
in Uzbekistan, CIPE has continued working with the Tashkent Business
Club (TBC) to help level the playing field for all who want to participate
in Uzbekistan’s economy. A key strategy for achieving this
is by protecting the private property rights of entrepreneurs who
work within the official economy, allowing them to retain the fruits
of their labor by educating them on their rights, and teaching them
how to handle various legal and administrative violations of their
rights.
This includes also those entrepreneurs who tend to stay within
the boundaries of the gray sector because they are not able to enter
the official market due not only to financial disincentives, but
also to a lack of a protection mechanism for their property. Of
the numerous infractions on their property, the following eight
were cited by SME owners as the most grave:
- Restricted access to cash
- Limited access to raw materials
- Limited venues to sell small quantities of products
- Insurmountable barriers to exporting locally manufactured goods
- No distinction between a small and large wholesale business
- Lack of a realistic currency convertibility for export/import
purposes
- Little protection for entrepreneurs when their goods are confiscated
at Customs
- Few incentives for competition and artificially high prices
on goods that reduce competitiveness
CIPE has had a three-year relationship with the Tashkent Business
Club during which TBC developed a comprehensive set of tools to
design and promote the National Business Agenda in Uzbekistan. Focusing
on business advocacy, TBC’s activities have brought together
over 500 business journalists, government officials, and representatives
from business associations and financial institutions in Uzbekistan.
As a result of many productive roundtables and numerous seminars,
TBC developed a National Business Agenda, which was published in
2001. The Small Enterprise Development Coordination Center of the
Cabinet of Ministers and the State Committee on State Property Management
and Entrepreneurial Support have reviewed the Business Agenda and
are working on incorporating its elements in their future Strategic
Plans. TBC is also working with the Tashkent Mayor's office on promoting
and implementing the Business Agenda in the small business development
plan of the Mayor's office.
Numerous policy recommendations that TBC submitted to the Cabinet
of Ministers have been adopted into law through specific decrees
and numerous amendments to existing legislation. TBC has worked
closely with many government structures, including the Chamber of
Commodity Producers and Entrepreneurs to build a constructive public-private
dialogue to support the National Business Agenda. Through its roundtables
around the country, TBC continues to galvanize support within the
business community behind the most critical issues that drive economic
reform. In the process, TBC works closely with the media to persuade
them of the importance of their role in supporting the private sector
in improving the economic and democratic condition of their country.
Read more in the following publications:
CIPE
Feature Service Articles
CIPE Overseas Report Articles
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