But administrative costs, particularly for business registration, permits, and compulsory certification, are rising for SMEs registered as legal entities.

The report, Business Environment in Tajikistan as Seen by Small and Medium Enterprises 2009, is based on a survey of about 1,500 businesses throughout Tajikistan. IFC carried out comparable surveys in the country in 2003 and 2006, allowing for meaningful comparisons of the investment climate over time.

Mr. Saidov D., Chairman of State Investments and State Property Management Committee of Tajikistan said, “In September, the World Bank Doing Business report identified Tajikistan as a ’top 10 reformer.’ Today’s IFC survey confirms our country’s progress in supporting the private sector through reform.”

Access to finance remains one of the top challenges for Tajik SMEs, especially for dehkan farms. Yet from 2002 to 2007 the business environment improved for SMEs in several ways. For example, implementation of the 2004 Licensing Law lessened the burden of licenses for SMEs.

“The $9.3 million in private sector savings from inspections reform has exceeded our expectations, but a lot more work remains to be done to address other key business challenges like tax reform,” said Wendy Werner, IFC Country Officer for Tajikistan.

New entrepreneurial activity in the SME sector is concentrated in the individual entrepreneur and dehkan farm categories. There is less growth among SMEs registered as legal entities, due largely to a challenging business environment. These small and medium companies report paying 12 percent of sales informally to public officials to resolve issues related to customs, taxes, licenses, and other administrative procedures.

Key survey recommendations include eliminating unnecessary steps in the registration process, increasing transparency in licensing, undertaking comprehensive permit reform, implementing risk assessment for inspections and tax audit, making certification optional for low- risk categories of goods and services, and simplifying import/export procedures.

The IFC Business Enabling Environment Project is funded by the Swiss State Secretariat for Economic Affairs and the United Kingdom’s Department for International Development.

IFC is the only international financial institution focused exclusively on the private sector, the engine of sustainable development in emerging markets. Along with the IBRD, it is currently seeking a capital increase to strengthen its ability to create opportunity for the poor in developing countries—including by improving the investment climate in Tajikistan and the wider region.