Principals group Presentation vers 2 May 18 06

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Information about Principals group Presentation vers 2 May 18 06
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Published on December 27, 2007

Author: Clown

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Tajikistan Farm debt Resolution Strategy - Situation report:  Tajikistan Farm debt Resolution Strategy - Situation report Presentation by Hans Woldring May 18th 2006 Background:  Background cotton is a key component of the Tajik agricultural sector, and important on a national basis Each year 260,000 – 290,000 ha of crop is grown, occupying 60 – 70% of the irrigated land area Cotton proceeds account for around 20 % of export revenues, 11% of GDP and 35% of fiscal receipts cotton production supports over 75% of farm households Cotton is the main source of income for 75% of poor and extremely poor households Background continued:  Background continued post civil conflict, TAJ gov’t used a system of foreign lender capital, channeled through local banks and then local counterparts, known as investors, to finance the Tajik cotton crop as a result of various issues and problems, cotton investors claimed that many farmers were not fully repaying their seasonal loans. many debts accumulated at the State Kholhoz level, which upon later reorganization, were subsequently distributed to dekhan (private) farmers Investors claim they are presently owed $322 M (interest component not known) Farmers dispute the amount owed Background continued:  Background continued To address the problem, the President signed the Farm Debt Resolution Strategy (FDRS) on March 9th 2005 – donors made considerable input into the strategy At a retreat in June 2005, a work plan for the strategy was developed, and signed by the Prime Minister in early September 2005 An Independent Commission for Debt Resolution was formed, Chaired by Mr Davlatov, State Adviser to the President of the RoT, for Economic Policy, with Mr Alimardonov, Chairman of National Bank of Tajikistan, as Deputy Chairman. Donors are providing support to the IC to deliver on the work plan, however more assistance is required Donor Engagement Status on IC work plan::  Donor Engagement Status on IC work plan: donor support for farm by farm debt analysis is underway (WB, ADB, DFID). More assistance may be required. support for the Information and Communications Strategy is hopefully forthcoming Agricultural reforms to create a more competitive sector - in some areas there is good donor support, in other areas there are gaps Agricultural Reform – Areas Where Donor Support is Active:  Agricultural Reform – Areas Where Donor Support is Active Land Reform Issues – Use of Land use certificates as collateral (3.4 and 3.7):  Land Reform Issues – Use of Land use certificates as collateral (3.4 and 3.7) Katerine Kelm to address Regulations to improve Agricultural Financing oversight (2.8):  Regulations to improve Agricultural Financing oversight (2.8) A lack of regulatory oversight of investor lending to agriculture has been a factor in existing farm debt problems. Analysis of Farmer / investor legal contracts (3.1) Current investor contracts do not place equal responsibilities / obligations between the lender and borrower parties. Introduction of Universal Cotton Grade Standards and other Market reforms (3.6):  Introduction of Universal Cotton Grade Standards and other Market reforms (3.6) resolution passed by government this is underway with primary support from ADB. Additional funding for immediate support is being organized. WB has provided valuable incentive triggers in the PDPC program Opportunities for controller companies Introduction of Universal Cotton Grade Standards and other Market reforms (3.6) (con’d):  Introduction of Universal Cotton Grade Standards and other Market reforms (3.6) (con’d) reforms to “methodica” underway Further reforms planned Bonded warehousing to be introduced Will allow for more open trading environment for international buyers Strengthen capacity of the Courts (3.8):  Strengthen capacity of the Courts (3.8) As a result of legislative issues, concern exists about the capacity of the court system to deal with bankruptcy cases DFID is providing regulatory reform of bankruptcy legislation. Commercial Law project? Agricultural Reform – ADDITIONAL DONOR ENGAGEMENT IS REQUIRED FOR THE FOLLOWING::  Agricultural Reform – ADDITIONAL DONOR ENGAGEMENT IS REQUIRED FOR THE FOLLOWING: Freedom to Farm (3.3):  Freedom to Farm (3.3) This is regarded as a high priority issue: the government should work to create a profitable business environment for agriculture, however leave farm level decisions to farmers farmers will increase cotton production automatically when it is profitable for them to do so. Freedom to Farm (3.3) (con’d):  Freedom to Farm (3.3) (con’d) The experience of donors is that unless farmers “freedom to farm” is fully respected, then farmer education programs suffer reduced effectiveness. Farmer education programs Assess Hukumat performance by parameters other than cotton production ? Alternative financing sources (2.8):  Alternative financing sources (2.8) In order to attract further new sources of finance, it is essential to: resolve issues with old debts - this process is underway. allow the use of land use certificates as collateral improve sector profitability / competitiveness so that farmers can repay their seasonal loans, as well as be profitable enough to service restructured loans. Tax Reform (3.5):  Tax Reform (3.5) The tax system for the cotton sector is complicated and I believe the total tax burden (taxes paid) is excessive. a review of tax revenues is required to identify how to make adjustments to the tax base and collection rates so as to reduce the burden on the agricultural sector. Reminder – cotton sector is 11% of GDP and 35% of tax base! Farmer demonstration and Education programs (4.3 and 5.1):  Farmer demonstration and Education programs (4.3 and 5.1) The system of cotton production and land management used in Tajikistan was modern in the ‘60’s and ’70’s. Very substantial progress has been made to crop management and crop rotations to improve yields and sustainability. for farmer training programs to be successful, it is important that freedom to farm is fully respected there are some specific project programs underway, however no broad program, and further donor support is required. Seed Breeding (4.3):  Seed Breeding (4.3) the design and nature of future cotton seed breeding and reproduction programs needs consideration and planning. WB will be trialing CIS cotton seed varieties in their Land Registration and Cadastre System for Sustainable Agriculture project. further donor assistance is required Quarantine Regulations (4.3):  Quarantine Regulations (4.3) Currently, no new cotton varieties from outside the CIS can be imported into Tajikistan for entry into the State Commission for Variety Testing program. This year the Ministry of Agriculture rejected applications for trailing of new cotton seed varieties from Turkey on Quarantine grounds. Quarantine does not have the proper resources to inspect seeds and regulations are out of date. Swedish SIDA, who support the current seed project in the Ministry of Agriculture, are considering an extension of their project to address quarantine issues. Tajik Universal Goods and Commodity Exchange (TUGE) (4.3):  Tajik Universal Goods and Commodity Exchange (TUGE) (4.3) TUGE has a cotton price setting mechanism, however, in reality its role is largely regulatory in nature TUGE needs support to transition to a true Commodity exchange, with linkages into the international market for a range of commodities. TUGE would like to move forward with on line and live cotton auctions. The Liverpool or NY Cotton Exchange have the skills to assist with this Donor support for this would be valuable. Ginning sector (4.3):  Ginning sector (4.3) Ginning equipment is dated and often not well maintained, evidenced by long ginning periods, fiber quality problems attributable to ginning performance, and poor out turn. Critical to improving ginning sector performance is competition between cotton gins WB is planning sector support in its Integrated Cotton project on a pilot area basis Ginning sector (con’d) (4.3):  Ginning sector (con’d) (4.3) A commercial finance package for the ginning sector is required for: purchase of spare parts packages for cotton gins improved out of season maintenance major capital upgrades, and trade finance for raw cotton purchases Agricultural Chemical regulatory harmonization (4.3):  Agricultural Chemical regulatory harmonization (4.3) Farmers in Tajikistan presently have access to a limited range of agricultural chemicals Introduction of new chemicals is hampered by the approval process Tajikistan has not adopted any system which allows third party country approvals. Donor assistance is required. Updating of on Farm Equipment (4.3):  Updating of on Farm Equipment (4.3) Tajik farm equipment is showing advanced signs of age and wear. as new systems of farming practice are demonstrated, and farmers become profitable, they will want to update to newer equipment there has been a considerable loss of fabrication skills in Tajikistan. Donors may consider programs to update skills training. Rapid Response Advisory Technical Assistance Facility for FDRS Reform Support and Capacity Building:  Rapid Response Advisory Technical Assistance Facility for FDRS Reform Support and Capacity Building GoT wishes to move forward with the FDRS… we are receiving requests from the GoT for “rapid response” TA no facility exists…. TA components will be a sub set of all of the above timely and flexible assistance is required to avoid stalling important progress a proposal for an Advisory Technical Assistance facility will be prepared for donor consideration Conclusion:  Conclusion There is progress with the FDRS. farm by farm debt analysis is underway, however more financial support from donors may be required to extend the program Continued progress with agricultural reforms is required - - Priority areas are Land use certificates need to be available as collateral and “freedom to farm” must be respected A competitive and profitable agricultural sector is essential to reduce poverty and service debts much is still be done and more donor support in the areas identified is essential

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