Malika Kalandarova is a small-business owner in Dushanbe. Since opening up her mini-market in the Tajik capital two years ago, she has experienced numerous inspections from various authorities. Almost all inspections ended with unofficial payments, for, as she says herself: “It was easier for me just to pay, because of my own lack of legal knowledge…. None of the inspectors provided me with information about the inspection procedure or my rights.”
In Tajikistan, Malika Kalandarova’s story was not unusual. Entrepreneurs averaged over a dozen inspections in 2005, costing them around 7 business days and an estimated $154 (or 9% of annual profits) in fines and unofficial payments. Sectoral laws gave sweeping rights and powers to inspecting bodies, who often conducted inspections of the same business multiple times a year.
The lack of a unified inspection law meant that each inspection (for fire, sanitary epidemiologic, etc.) could have different rules. Entrepreneurs had no idea what to expect from an inspection, or even which authorities were allowed to conduct them.
“In practice, it was impossible to fulfill most of the requirements,” said Muslima, the owner of a small hairdressing salon in Dushanbe.
Government support helps to push for reform
To reform the inspection practice, the IFC Tajikistan Business Enabling Environment/SME Policy Project, funded by the Swiss State Secretariat for Economic Affairs (SECO), took a participatory approach from the start. The project team organized a series of round table discussions among entrepreneurs, business associations, inspecting agencies, government officials and donors, giving a platform for all stakeholders to voice their views about the inspection process. The dialogue resulted in widespread agreement on the need for reform, and defined the key areas to be addressed.
The result? A new law on inspections. In July 2006, the Inspections Law and proposed amendments to the Tax Code were adopted by Parliament and signed into force by the President.
The new inspection law limits the frequency and duration of inspections based on the risk a firm’s activities pose to public health, safety, and the environment. It establishes an official list of inspecting bodies and requires inspectorates to create and abide by checklists, which will be distributed to the public through the official sources. The Inspections Registration Book (IRB) is another powerful tool to keep the inspections under control by the entrepreneurs themselves. It will allow entrepreneurs to comply with requirements and prevent violations by providing a clear record of inspection activities.
The economic impact of the Inspections Law is expected to free up more than $7 million for Tajikistan’s SME sector, according to IFC estimates. For Malika Kalandarova, the new law means, “The unofficial payments which unfortunately became standard practice will disappear from my financial plan.”
Watch the public service announcements about the Inspections Law online
Box – How does the Tajikistan Business Enabling Environment – SME Policy Project help improve the business environment?
- The project has conducted two comprehensive surveys of small and medium businesses to assess the business environment as seen by entrepreneurs: 12 policy recommendations out of 45 listed in 2003 survey have been adopted by the government to date
- It has assisted in drafting the Inspections Law and relevant amendments to the Tax Code adopted in 2006 – savings for SMEs are estimated at $7.6 million in direct and indirect costs
- It closely collaborates with Fire and Sanitary Inspectorates to adopt internal inspection manuals and check lists and initiated trainings of over 600 inspectors on new inspection procedures
- The project developed, filmed and broadcast 4 Public Service Announcements covering the main provisions of the Inspections law for entrepreneurs on Tajikistan’s only country-wide television station
