Privatisation Process Needs Review

Tajikistan’s privatisation process must change so that it is managed through tenders rather than auctions to prevent asset-stripping, NBCentralAsia analysts say.



The country’s industrial sector remains in dire need of investment, and that is only likely to come through privatisation. According to the national statistics agency, a third of around 700 major industrial enterprises are not functioning at all, while the rest are working at 20 or 25 per cent of capacity. Economists say the main reasons for this are that these firms lack liquid capital, they do not use modern technology, what equipment they do have is worn out, they have no markets to sell their products, and the terms on which they were privatised were poorly conceived.



In 1993, Tajikistan promised the World Bank that virtually all state-owned industrial enterprises would be privatised by 2007, while 37 large state monopolies would be restructured by 2015. This pledge has been fulfilled almost in full.



However, NBCentralAsia analysts say the privatisation process has not lived up to the hopes that were attached to it. Many new owners have halted production at their new acquisition, and sold off land and plant equipment.



An industry ministry analyst noted that there have also been cases where the sole reason for acquiring a denationalised concern was to wait until the price rose and then sell it on.



NBCentralAsia’s informants say one way to break this cycle would be conduct privatisations by tender rather than auction. In a tender, prospective buyers have to comply with State Property Committee requirements, for example by investing in the enterprise, modernising equipment and creating new jobs; in the auction system, no such rules apply.



In addition, the analysts recommend setting up joint ventures on the basis of existing firms. This would ensure that investment took place, but would mean potential investors would have to be offered enticements such as guarantees that their capital would be protected/



The government is currently engaged in an attempt to re-nationalise a number of major industrial assets that it privatised in the mid-Nineties. NBCentralAsia’s commentators believe it will succeed in doing so with the help of a new provision in the tax code that requires even non-functioning enterprises to pay taxes, and allows the state to claim possession of them if they fail to do so.



So far, no major companies have actually been re-nationalised, but the State Property Committee says several cases are being reviewed in government. For example, the owners of a Dushanbe refrigerator plant and another factory that makes steel for reinforced concrete have been given two years to resume production or face re-nationalisation.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)