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26.11.2003ANALITICS - ECONOMY

TAJIKISTAN CAN'T BE CONSIDERED AS A "FREE COUNTRY"
"When there are too many inhibitive laws in the country, the people become poor. When laws and orders increase in number, the quantum of thieves and robbers enhances".
Lao Tzy, Dao de tzin. V-th century B. C.
Three fundamental reports are published in 2003 ranging world countries pursuant to such criteria as human development index, economic freedom and corruption level. In spite of outward distinctions of these criteria they give rise to serious contemplations over the shaping tendencies as to economic development of countries. Regretfully, the ratings over Tajikistan don't evoke optimism.
The Criteria Society Freedom Is Measured by
Our reference to the report published
1. The annual report "Index of Economy Freedom" is composed by "Heritage" American fund and "Wall Street Journal" leading world edition on economy. In order to qualify economic freedom and a respective rating of a separately taken country international experts used 50 independent variables which being classified are presented in the term of 10 basic components of economic freedoms: trade (Tajikistan rating - 3 points); taxation and money (5.0 points), policy, owner's rights protection (4.0 points); level of state interference into economics (3.0 points); stat of bank and financial sector (4.0 points); investitive climate (4.0 points) and state of "black market" (5.0 points). Each of the components is assessed on five-points-scale. Hereby, "1 point" means maximal economic freedom and "5 points" - minimal one. An index range of economic freedom for each country was computed as the arithmetic average of all components; there were singled out four categories of countries: free - countries with average index significance up to 1.95; basically free - countries with average index significance in the range of 2.00-2.95; basically non-free - countries with average index significance in the range of 3.00-3.95; with repressed economy - countries with the index more than 4.00.
Out of 156 countries information was systematized on, Tajikistan took the 143rd place; international experts qualify its economy as "basically non-free".
2. "Report on Human Potential Development" is prepared and published by UNO. Human development index is computed for each out of 175 countries included into the report and all states are divided into three conventional groups: 1 - countries with high development standard (55 countries); 2 - countries with middle development standard (86 countries) and 3 - countries with low development standard (34 countries). Tajikistan is referred to the second group with the lowest indicator, among the former USSR countries; it took only 113rd place in general rating.
3. In the annual published report of "Transparency International" non-government organization dwelling on corruption level in 133 countries ten-points-scale was used. Thus, 10 points mean complete absence of corruption and 1 point testifies to absolute evincement of this vice. Tajikistan took only the 5-th place from the end with the result of 1.8 points; it left behind only such exotic countries as Myanmar, Haiti, Nigeria and Bangladesh.
After the reports had been published we made an analysis of the economic situation and an assessment of separate streamlines in regard to economic reforms in Tajikistan; hereby, we tried to answer the question: why are ones states heightening their welfare from day to day and thriving, but others - on the contrary - are rolling down deeper and deeper into the abyss of penury and corruption? What ought to be done in order people's living standard gradually improved and, in general, what does free economy mean for the future of Tajikistan?
Why Are ones States Poor whereas others Are Rich?
The basic factors preconditioning a wealth level of these or those countries are imputed more often to: convenient (or inconvenient) geographical location of a country; availability (or non-availability) of valuable natural resources; political (financial or any other) dependence on other countries; population's educational standard and a whole number of other factors including demography, culture and even religion. We can deliver a considerable number of examples when ones countries have all the advantages, but others, which have practically nothing, ensure a steady rise of economy. For example, South Korea and North Korea whose economies and welfare standards are incomparable in spite of common geographical location and other qualifying factors.
Factors adduced for explanation of divergences in economic development of countries don't afford to predict potential tempos of prospects either. Thus, in 1913 the Philippines was the richest Asian country. In 1960 it was ahead of Taiwan and South Korea on per capita income, but at the end of the XX-th century the Philippines already fell behind Japan 7 times, behind Taiwan - 6 times, South Korea - 4 times.
Tajikistan as a country of fairly high economic potential remains, to our deep regret, one of the poorest countries for today with the highest corruption index and low human development level.
But what are the fundamental reasons accounting for today's economic state of Tajikistan?
Many people, and governmental officials especially, put down the present economic state of Tajikistan to heavy consequences of the military-political conflict, dearth of energy resources, negative political-economic sway on the part of separate neighboring states, non-availability of immediate reach of seas and etc. Of course, all these things really take place, however, these reasons are not fundamental in order to account for the shaped economic situation and that sweep of corruption, which is marked in Tajikistan by international experts. One can find an answer to the question if to recall the classical treatises by Adam Smith. This great economist qualifies the main principle of efflorescence in reference to the state and its citizens seeing in economic freedom; he formulates the basic provision of economic policy which runs to the following effect: the less the state is engaged in economy the better it is for the latter.
The state of Tajik economy is characterized in "Heritage" fund report and "Wall Street Journal" as "basically non-free"; this appraisal correlating completely with human development index and corruption level in the country. Laws, edicts and other instruments published by managerial bodies of all levels are prepared in order any solution in regard to economy depended in the long run on officials; this factor alongside with low wages of the latters is a basis for development of corruption in Tajikistan. Under these conditions any state organ bound to crate a favorable environment for economic development converts inevitably into the organ of regulation and control. So, economic relations became non-free and corruption spreads widely.
Analyzing the data of the published reports one can do an important inference: the freer the economy of the country is, the higher will be human development standard and GDP indicator (gross domestic product) computed per capita, the lower will be corruption level.
For today Tajikistan is an extremely poor state with non-high human development standard and sweeping corruption because economy is not free in a wide sense of the word. However, a chance to rectify the situation shaped is available. Today Tajikistan lives without great economic and social shocks; minor economic accretion (according to the authors' appraisal) is observed. The government must take advantage of this chance and demonstrate political vigor to the effect of ensuring strategic triunity: effective law-abiding state, free private economics and individual freedom.
What Ought to Be Undertaken to Make Economy Free?
The notion of "economic freedom" is based first of all, on private property immunity, the freedom to produce, trade, preserve and use the produced an the earned, to invest without limitations, to enter necessary economic contacts, to fix prices and utilize mutually concerted forms of accounts on transactions. Direct employment of the principles of economic liberalism afforded many countries of the world to achieve rebirth and accretion of their economics irrespective of geographic situation, natural resources and states they border on. Such countries as Italy, Germany, Japan, Taiwan, Chile, Ireland, China and many others exemplified unprecedented tempos of economic growth, heightened living standard and life quality of their citizens, reduced corruption and availability of the achievements of globalization for their population in the second half of the XX-th century. Any attempts to build up effective economy on the principles of pressure, protectionism or populism are doomed to failure. No example can be delivered when non-free economics and non-liberal approach to its regulation would have brought a positive result in any country.
As for Tajikistan, here economic reforms were carried out extremely non-consecutively and unjustifiably slowly. The frameworks of state management strive, first and foremost, for effectuation of controlling, permissive and planning functions. Their activity doesn't differ greatly from that one they performed at the initial stage of economic reforms in early 90-ies. The economic policy pursued in the country is utterly inertial, it doesn't take into consideration quickly changing realias. All this withholds essentially the development of entrepreneurship in the country impeding an influx of investments.
If in developed countries one can register a corporation or any private business for several minutes why can't it be done in Tajikistan? Why should we, when exporting cotton, for example, deal with a huge number of organizations (stock exchange, bank, statestandard, custom's house, taxation department and what not) which putting stamps and entering notes into registration lists only hamper business; into the bargain, they collect monetary dues being of no sense at all. Hereby, cotton production according to the laws of Tajikistan can be realized only at the prices no lower than the world prices. What is it? Is it a potent reluctance to make economy free and more transparent or non-understanding of negative results of such schemes of business organization? It stands to reason that we don't imply a complete refusal from control on the part of the state. The latter should effectuate certain controlling functions but their organization should be tactful and non-encumbering for business.
"The role of the government lies not in creation of values, but in creation of a certain environment in which a middle-sized or minor entrepreneur can run his own business and thrive", - this is the statement done by the USA president George Bush during his visit to Saint Petersburg. For this, he emphasized, one should "respect private capital, remove all sorts of whimsical administrative restrictions, create fair laws for banks and bankers and have good taxation policy". It is also necessary to acknowledge that the state apparatus constructed in Tajikistan is too big and few effective or - to apply an imagery locution - "there are too many excessive people occupying excessive positions". Therefore, in order to make economy free, to our mind, the next things need to be done:
- To cardinally reconsider the goals and functions of the government and its institutions from the point of view of the necessity of liberalization of economy;
- To maximally reduce all controlling and permissive functions of the state apparatus, to diminish its numerosity and the expenditures for its maintenance;
- to cancel all departmental instruments restricting economy development and to urgently reconsider the functioning legislation under the angle of ensuring maximal economic freedom in the country.
As soon as these goals are transferred into an economic plane and start to be solved, economic relations in Tajikistan will become more transparent, economy will be freer, corruption level will reduce and investitive attraction will enhance.
What Does Free Economy Mean for the Future of Tajikistan?
If Tajikistan is going to turn into a rich and thriving state in future, a new ideology based on universal development of economic freedom and democracy should be formed already today. Any steps towards liberalization of economy will be inevitably promoting an extension and reinforcement of democracy in the country. These two fundamental concepts are inseparably connected being a strategic ground for building up a free and economically developed state in future. Moreover, taking into consideration the situation shaping in Central Asia, the development of free economy and extension of democracy will become a reliable insurance policy against an origination of future hotbeds of terrorism and religious extremism.
We would like to adduce once more the words of great Adam Smith that in order to raise the state to the supreme stage of welfare. "… one needs only peace, non-crippling taxes and tolerance in management; natural course of things will be all the rest".
By N. Fahri and K. Ahmedov
(Al Ajdad Consulting, Canada)

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