WTO accession, national development strategies and investment opportunities discussed in depth during an interview with Tajikistan’s Minister of Economic Development and Trade, HE Sharif Rahimzoda.
Please describe the key priorities of the Ministry of Economic Development and Trade that you have nominated?
One of the key tasks of the Ministry of Economic Development and Trade (MEDT) is to analyze, forecast and assess the economic situation and provide recommendations and proposals on defining the priorities for economic development to the government. The ministry is also engaged in the development of short-term, medium-term programs and long-term strategies and also programs for socio-economic development in the regions and districts of the country. We also actively participate in the macroeconomic stabilization process and the development of financial and monetary policies. In addition, the ministry has a competence in the areas of organizing foreign trade, working as a intergovernmental commission on economic cooperation, and organizing the activities of the free economic zones.
My task mainly consists of organizing the work of the ministry so that qualitative analysis and other materials are presented to the government in order for it to make relevant decisions. In general, this is done to facilitate balanced economic development, increase GDP, create jobs, reduce unemployment and improve the welfare of the population in the country.
In 2001 the Republic of Tajikistan submitted an application for accession to the World Trade Organization (WTO), but in practical terms, didn't place it as a significant priority. Only in the beginning of 2012, thanks to the special efforts and leadership of his Excellency the President of Tajikistan, did we actively start negotiations and make the necessary changes to our legislation needed to meet international standards. Of course it yielded a positive result and in 2013 Tajikistan became full member of the WTO.
Following accession we have undertaken certain obligations. In order to fulfill these obligations, a special adaptation program for WTO membership has been developed and approved by the government.
The implementation of this program will ensure compliance of our regulations and tariffs in accordance with international standards and norms. We are sure that it will facilitate further development of trade and economic relations with our partners and will improve the balance of payments of the country.
How do you support the implementation of National Development Strategy?
With the aim of creating a steady platform for the further development of the country, in 2006 we accepted the National Development Strategy 2015. This has defined the following strategies: reforms in the public administration system, the development of private sector and attraction of investment opportunities, and the development of human capital.
To achieve these set objectives, several consecutive medium term programs focusing on social economic development, with specified tasks and state policy steps were undertaken. All other industrial and regional programs and plans had to be developed and approved in full compliance with the National Development Strategy.
Within the implementation framework of the National Development Strategy, the Strategy for the Reduction of Poverty from 2007-2009 and 2010-2014 was successfully implemented. Currently the Strategy for Enhancing the Wellbeing of the Population in Tajikistan from 2013-2015 is in the process of implementation.
The implementation of Strategy for Poverty Reduction has allowed a considerable reduction in the level of poverty. According to research completed by the Agency for Statistics of the President of Republic of Tajikistan, the World Bank and other international organizations, the poverty level has decreased from 81% in 1999 to 35.6% in 2013. The reduction of the level of poverty has been facilitated by economic development and has been accomplished as a result of the macroeconomic, social and political stability of the country.
During these years, the average growth of GDP has been around 7%, the inflation level hasn’t exceeded the indicators of the financial program presented by the government, and the exchange rate of our national currency has remained stable.
Taking into consideration the fact that the implementation term of National Development Strategy is coming to an end, we have been entrusted by the President to begin the development of a new National Development Strategy until 2030 and the first five year strategy for sustainable economic development for 2016-2020.
Currently, we are in close cooperation with all international financial institutions and our partners for the development of new project strategy.
What are the key sectors and opportunities that exist in Tajikistan for both the international and American business community?
The lucrative direction for the further economic development of the republic is defined by the disposition of Tajikistan, which includes the huge potential for raw material and human resources.
Tajikistan is a mountainous country and as a result, has considerable reserves of natural resources. It has high potential for the development of hydro power, mining and industrial processing, as well as mountain tourism. A small part of Tajikistan is covered by plains (7%), which is used for growing cotton and other crops.
The State Committee on Investment and State Property Management widely advertises economic opportunities and its preferences to attract investors. By becoming a member of the WTO, we have accepted laws and ratified international agreements and conventions that provide possible investors rights and protect their property. Similar conditions have been set for the local and international investors in our country.
With the assistance of the European Bank for Reconstruction and Development (EBRD), a special consultation board has been set up to enhance the country investment climate. The board is led by His Excellency Emomali Rahmon, and the members of the committee are both local and foreign investors. The committee discusses questions and solutions that would facilitate toward improvement of the investment climate and attraction of new investment, protection of investor rights, and easing the barriers for movement of capital.
Currently, in Tajikistan, such well-known companies as Total (France), CNPC (China), Tethys (Canada), and Gazprom (Russia) are doing business in the area of geological exploration. Chinese, Turkish and Russian companies are involved in energy, processing and light industry, building plants for cement processing and other construction materials as well as constructing metallurgic and oil processing enterprises. Trade and communication are also lucrative businesses for the future.
I believe the following areas are worth considering for future cooperation:
The development of cooperation in the areas of energy, including the construction of small and large hydroelectric stations and electricity transmission lines (e.g. CASA- 1000).
Investment in geological exploration activities, joint production and processing of Tajikistan’s natural resources (Areas include silver, lead, zinc and forestry).
The creation of new lines for electronic device and household appliance production. These include TVs, phones, calculators and computers as well as integral schemes involving the utilization of pure aluminum.
Investment in the preparation, processing and realization of granite, marble, semiprecious and ornamental stones
Modernization of the existing and the creation of new industrial firms for the processing of agricultural products, storage of vegetables and fruits, construction of vegetable storage for long-term transport and freight for long distances.
The creation of sanatoriums and health resorts in favorable areas such as mountains with fresh air, and mineral and thermal springs using the most modern facilities to attract tourists.
The establishment of tourist complexes for mountaineering and hunting.
Participation in projects related to rebuilding Afghanistan.
Creation of enterprises focused on deep processing of raw cotton and the production of end user products.
The mutual participation in rebuilding transportation and communication infrastructure, irrigation and drainage systems of Afghanistan, as well as the construction of housing, schools, hospitals and hotels.
Through such initiatives we invite foreign investors including Americans to take part in the Tajik economy and establish profitable enterprises.
Can you please briefly describe the policies of your ministry regarding the regional economic development?
For Tajikistan it is extremely important to enhance economic trade with all the Central Asian countries as well as China and Afghanistan. Especially as Tajikistan, Uzbekistan, Kazakhstan, Kyrgyzstan, and Turkmenistan have common history and cultural diversity, secular governments, as well as interconnected communication systems. China is developing with high speed and has prominent financial opportunities. It is ready to make investments in the development of various sectors of the economies of its neighboring states. Moreover, taking into account all the future prospects of Afghanistan, we can say that it could become a profitable partner for Tajikistan.
Evaluating the current situation, it has to be noted that relations with other countries is an important factor for Tajikistan. Particularly, considering the current world crisis, it is essential to expand its economic and political cooperation with other neighboring countries.
Tajikistan is actively engaged in the work of various regional organizations. To demonstrate, we are actively involved with our partners in the CIS framework, the Shanghai Cooperation Organization, the Eurasian Economic Union, and others. One of the vivid examples is the Energy Council for CIS members which is coordinating a uniform energy policy among its member states.
Tajikistan is interested in enhancing regional cooperation and integration. The establishment and use of a common market is an important indicator for the development of the economy and resolving social targets that the government has set.
The most vital directions for cooperation within the regional cooperation and integration framework are the following: the creation of a complete transportation and transit system, the easing of trade restrictions, the development of border trade, the efficient use of water potential and hydro carbon raw materials, the creation of a common energy system and the free movement of goods and labor.
Cooperation in the area of trade between the countries in the region plays a key role in the process of integration which leads to the creation of dynamic regional economy. It is highly important at this stage due to the challenges occurring in the world.
Describe please the current conditions at the free economic zones in Sughd, Dangara, Pyandzh and Ishkoshim. What are the advantages for foreign investors to establish companies in these zones?
I believe that the most convenient way to implement an effective project and target the market is the establishment of free economic zones (FEZ) and making use the opportunities these present. These zones are becoming important factors for development that promote the expansion of economic activity, promote the strengthening of regional trade and the transit of goods.
Now, following the approval of the Government of Republic of Tajikistan, four economic zones were created for 50 year terms. The first is the Sughd FEZ, a production and innovative zone in the Sughd region that encompass an area of 320 hectares. The second is the Pyandzh FEZ -a complex in the Khatlon Region with a total area of 400 hectares. The Dangara FEZ is a production and innovative zone in the Khatlon Region with the area of 521 hectares. The fourth is the Ishkoshim FEZ production and commercial zone in the Gorno Badakshan Autonomous Region (GBAO) with an area of 200 hectares.
The Free Economic Zone is a part of the customs territory of Tajikistan. The core purpose of placing goods within the territory of free economic zones is to exempt tenants from customs duties, taxes, and also remove any restrictions of an economic character set by the regulations of the Republic of Tajikistan.
When exporting goods from the territory of Free Economic Zone abroad, no taxes and custom duties are paid, apart from charges for custom registration and no economic restrictions are applied.
Regardless of the form of ownership, on the territory of free economic zone, all business activities are exempted from paying any taxes according to Tax Code of Republic of Tajikistan, apart from social taxes and tax on personal income.
The profit gained by foreign investors, as well as the salary of foreign workers received in foreign currency can be taken out freely, and when exporting abroad, these profits aren’t taxed.
The State grantees the protection of property, investments and use of the land plots provided by the legislation of the Republic of Tajikistan to all subjects on the territory of Free Economic Zones.
The state ensures full protection of rights and interests of the subjects on the territory of FEZ according to the current legislation of Republic of Tajikistan.
Today there are 52 subjects registered on the territory of FEZs, of which 21 subjects are in Sughd, 8 in Pandzh and 23 in Dangara. Out of all the subjects, 11 are engaged in the processing of materials such as plastic pipes, paints and varnishes, cable production and similar operations. Investments have arrived generally from Tajikistan, Turkey, China, Russia and Afghanistan.
We are looking forward to seeing American companies as subjects of FEZs in Tajikistan.
How would you describe the current state of economic and development cooperation between the Republic of Tajikistan and the USA?
The USA is one of the main donors in providing humanitarian aid to Tajikistan. Now, in Tajikistan a number of programs provide humanitarian and technical assistance to the republic. In recent years the International Development Agency of the USA (USAID) has provided considerable means for rendering humanitarian and technical assistance to Tajikistan.
On June 19, 1996 in Washington the cooperation agreement between the Ministry of Education of the Republic of Tajikistan and the American Council for Collaboration in Education and Language Study (ACCELS) was signed. Within this agreement, ACCELS provides the opportunity to school students, students and experts from Tajikistan to participate in educational programs in the USA. Additionally, annually on a competitive basis grants on training and training at universities of the USA are provided to ACCELS.
Within the bilateral economic relations between the Republic of Tajikistan and the United States of America, more than 50 joint-ventures with the participation of American investors are registered on the territory of the Republic of Tajikistan. The primary activities of these enterprises are focused on the industry and trade sectors.
Unfortunately, the volume of investment from the USA is not significant. From 2001 for 2013 foreign direct investments from the USA only provided around $174 million to the economy of the republic. Comparatively, for this period, a total of $600 million has been invested in form of food, medicine and other consumer goods by the government of USA.
It is necessary to point out that in December 2003, an agreement was signed for development of regional cooperation between the Government of the Republic of Tajikistan and Government of the United States of America. This was implemented to build bridges between the Republic of Tajikistan and the Islamic State of Afghanistan. Today, these construction projects have been completed linking the two states.
It should be noted that the U.S. Government actively provided technical assistance to the Government of the Republic of Tajikistan during the lead up to the country’s accession into the WTO. This was carried out through implementation of a USAID project.
Do you have any final remarks for our readers?
In conclusion, it important to note that today our country is taking measures to sustainably develop the economy. Relevant legislation and other legal changes that give the chance to develop economic and investment cooperation have been adopted.
Despite many difficulties and, without having an outlet to the sea, Tajikistan has a strong motivation to develop its economy, including foreign trade. Currently, the Republic of Tajikistan has established trade relations with more than 110 countries. Potential access to large and dynamic markets, such as Russia, China, countries of Central Asia and Afghanistan is an asset for us. Reducing of the formal and informal distance to these markets is the main priority of Tajikistan’s trade policy, and the potential to develop the export potential of Tajikistan is real.
The Government of the Republic of Tajikistan is fully committed to the modernization of economy and strengthening the long-term sustainable economic development of the country. We consider the development of external economic relations to be a key tool for achieving his goal.