Technical Assistance Consultant’s Report

Project Number: 41124 December 2010

Republic of : Implementation Support for Private Sector Development Strategy in Tajikistan (Co-financed by the Government of the United Kingdom)

Prepared by David Pearce, Consultant

For State Committee on Investments and State Property Management

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.

CURRENCY EQUIVALENTS (as of 2 September 2012) Currency Unit – somoni (TJS)} TJS1.00 = $0.20 $1.00 = TJS4.76

ABBREVIATIONS

ADB – Asian Development Bank DfID – Department for International Development EBRD – European Bank for Reconstruction and Development EC – European Commission GDP – Gross Domestic Product PSD – Private sector development PSDS – Private sector development strategy SCISPM – State Committee on Investments and State Property Management TA – Technical Assistance WBG – World Bank Group

TECHNICAL ASSISTANCE CLASSIFICATION

Targeting Classification – General intervention Sector – Law, economic management, and public policy Subsector – Economic management Theme – Private Sector Development Subthemes – Policy/institutional/legal/regulatory reforms; private sector investment

CONTENTS Page

I. BACKGROUND 1 II. IMPLEMENTATION OCTOBER, 2007—APRIL, 2010 2 III. FINAL SIX MONTHS—APRIL-OCTOBER, 2010 2 IV. CONCLUSIONS AND LESSONS LEARNED 4

APPENDIXES 1. Industry Brochures, Regional Profiles, Guide for Foreign Investors 2. SCISPM—Efficiency and Effectiveness Issues

I. BACKGROUND

1. In 2006, when the project was being prepared, Tajikistan ranked 133 out of 175 countries covered in the World Bank Group’s annual Doing Business survey. The private sector was estimated to account for 43% of GDP and one strategic goal of the country’s 2nd Poverty Reduction Strategy (PRS-2), 2007-09 was to increase the share to 55% by 2009. The key obstacles to private sector development in Tajikistan, in addition to the country’s inaccessibility, small economy, and limited domestic market, included: (a) the government’s limited understanding of its role as ‘enabler’ or facilitator; (b) the prevalence of multiple, poorly- designed registration and inspection requirements—many a legacy of unfinished reforms initiated in the erstwhile ; (c) an unsatisfactory legal framework and judicial system; (d) weak public administration; (e) fragile infrastructure, especially in energy and transport; and (f) a still emerging financial sector and banking system. In 2006, the Tajik authorities prepared a private sector development strategy, with the help of development partner-financed specialists. Towards the end of that year, they established a new State Committee on Investments and State Property Management (SCISPM) with staff drawn from the former State Agency for Anti- Monopoly, the Aid Coordination Unit under the President’s Office, and the State Property Management Committee (responsible inter alia for the privatization of state-owned enterprises), as well as the National Social Investment Fund.

2. Against this background, the operational objectives of the project, approved on 2 October, 2007, were threefold. The first was to help deepen the government’s understanding of its role as a facilitator of private sector development; the second was to simplify the legal and regulatory framework and promote a more business-friendly environment; and, the third was to mainstream and strengthen the country’s private sector advisory and investment promotion services. Project design took into account the private sector-related activities of other development partners, in particular those of the European Commission (EC), the European Bank for Reconstruction and Development (EBRD), and the World Bank Group (WBG). The project’s estimated total cost was $2 million equivalent—$900,000 to be financed by ADB, $1 million by the United Kingdom’s Department for International Development (DfID), and $100,000 to be provided by the government of Tajikistan in kind (office accommodation and remuneration of counterpart staff). Its implementation period was to be three years, ending October 31, 2010. The SCISPM, responsible to and under the overall direction of the President’s Office, was the beneficiary and formally the project’s Executing Agency1.

3. In support of the PRS-2’s goal to increase the private sector’s contribution to GDP from 43% in 2006 to 55% by 2009, the project sought to enhance the government’s capacity in promoting private sector development. This goal was to be achieved by means of three sets of mutually supporting activities: (a) policy advice to the SCISPM regarding implementation of the recently completed private sector development strategy and support for its role in coordinating all the government agencies concerned; (b) human and institutional capacity building within the SCISPM in terms of it organizational structure, staff development and training, and the tools needed to adjust, re-engineer, and strengthen the legal and regulatory framework for private sector development; and (c) business development and investment promotion in selected regions and sectors and of the country as a whole in potential markets abroad.

1 ADB Technical Assistance Report (Project No. 41124), October 2007

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II. IMPLEMENTATION OCTOBER, 2007—APRIL, 2010

4. While the government never formally adopted the private sector development strategy, ostensibly due to lack of ownership, its substance was nevertheless reflected in the PRS-2. However, although the project’s basic rationale and intended outcomes remained broadly valid, both ADB and the authorities felt it necessary to re-visit its content and to agree on revised outputs. Accordingly, in August 2008—almost a year after the project’s approval—an international consultant was engaged for six months for this purpose. At the same time and throughout 2008-09, two national consultants appointed in December 2007 provided a range of analytical and technical support activities aimed at building up the newly established SCISPM’s policy coordination and formulation functions as well as strengthening its organizational structure and human resources.

5. In February 2009, although the international consultant’s recommendations were not accepted by the parties concerned, they nevertheless provided the basis for a year- long dialogue with the government through early 2010. Ultimately, this resulted in a revised and drastically reduced list of activities and planned outputs for the final six months of the project (April-October, 2010). Instead of the earlier, somewhat ambitious focus on the government’s role as facilitator of private sector development and the creation of a simplified, more user-friendly legal and regulatory environment, the project’s revised more modest agenda, approved in mid-May, concentrated entirely on the third of the original objectives, namely the mainstreaming and strengthening of the country’s business advisory and investment promotion services. In particular, it comprised three main tasks: (a) creating investment opportunities— through preparation of regional and sector maps or profiles, an investment guide, a green book of investment promotion best practices, and performance indicators; (b) strengthening SCISPM’s institutional capacity—through internal and external training of its staff, procurement of equipment and furniture, and recommendations regarding its organizational structure; and (c) supporting business development and investment promotion—through investment forums and sector-specific investment missions to selected source countries. Reflecting this reduced scope, the project’s cost was cut by about one-third to just under $1.3 million equivalent—$900,000 to be financed by ADB, $294,675 by DfID (comprising the amount already disbursed through early 2010), and $100,000 in kind by the government of Tajikistan.

III. FINAL SIX MONTHS—APRIL-OCTOBER 2010

6. Whereas the revised project envisaged a six month-long final implementation period ending October 31, 2010, the time actually available was only three months, i.e. barely half the schedule originally programmed. This was partly because three consultants (one international and two national) were not engaged nor started work until the 2nd half of July. Against this background, under the first main task—creating investment opportunities—the consultants drafted, edited, and arranged for the printing of the following information and promotion materials (in English and Russian):

 Seven industry/sector-specific brochures covering agriculture, energy, fruits and vegetables processing, minerals and mining, textiles and clothing, tourism, and transport;

 An introductory brochure Invest in Tajikistan and four supporting economic profiles covering the country’s four regions: Gorno-Badakshan Autonomous

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Oblast (GBAO), Khatlon, Regions of Republic Subordination, and Sughd, including detailed information on investment opportunities in each area;

 A guide for potential foreign investors in Tajikistan covering business registration and licensing procedures, priority sectors, investment incentives (including special economic zones), employment and labor, taxation, banking and foreign exchange, investment guarantees and dispute resolution, and protection of intellectual and property rights; and

 Retail promotional materials for distribution to participants of investment forums and seminars.

Copies of these materials are attached at Appendix 1.

7. The second main task—strengthening the SCISPM’s human and institutional capacity—comprised three modest but important activities. First, equipment (computers, printers, and photocopiers; and cameras, recorders, speakers), office furniture, and related software and other materials required for effective investment promotion were procured for the SCISPM’s central administration and its departments for entrepreneurship support, investment, and state property management as well as for the separate state unified enterprise TAJINVEST. Second, the national consultants delivered a series of seminars, trainings, and workshops for SCISPM staff in conjunction with a more broadly based, tailor-made staff development program provided by the Pragma Corporation under financing provided by other development partners. However, the main external staff development activity envisaged—comprising a 3-week investment promotion study tour and training program for 15 SCISPM senior officials in Switzerland (University of Neuchatel) and (ISPAT, ) did not materialize, partly because of timing considerations (it could only be scheduled October 18—November 7, i.e. after the project’s closing date) and partly because there were insufficient numbers of qualified staff available. Third, a preliminary analysis of SCISPM’s mandates and related organizational structure was undertaken as background for recommendations designed to rationalize and strengthen the Committee’s efficiency and effectiveness. Unfortunately, it was not possible to complete this task in the few weeks remaining before the project’s closing, partly because of its complex and politically sensitive nature and partly because there appeared to be little appetite or demand for organizational change within what was still a relatively new and young institution. A summary of the preliminary analysis and initial recommendations (in Ppt. format) is attached at Appendix 2.

8. The third main task—supporting business development and investment promotion—delivered few visible results before the project’s closing. Despite considerable interest by both ADB and the SCISPM organizing either a high-level country or more focused industry or sector-based investment forum in , as well as in the scheduling of one or more sector-specific investment missions to selected source countries (e.g. to East Asia, Turkey, etc.)—both, if possible, by end-October or eventually by end-December—neither aspiration proved realistic in the limited time available (less than three months). In the circumstances, once

4 it became clear that ADB would not be able to extend the project’s three-year implementation period, even by three months, no further action was taken. Nonetheless, thanks to the material and institution-building resources provided by the project, the SCISPM reportedly conducted several successful bilateral and international investment promotion events during 2011-12.

IV. CONCLUSIONS AND LESSONS LEARNED

9. Although the project’s original rationale was partly diluted by the authorities’ decision not to adopt a private sector development strategy, its three original outputs were partly achieved. This was due to the efforts made throughout 2009 and early 2010 to re- design the project, although implementation was virtually halted during this period. The project provided some policy advice regarding private sector development, it contributed to human and institutional capacity building within the SCISPM, and it offered modest support for business development and investment promotion in selected regions and sectors. On the other hand, it is doubtful whether either the government’s role as facilitator or the country’s environment for private sector development—two of the project’s intended, more ambitious outcomes—have improved and, if so, whether the project contributed. For example, Tajikistan’s ranking in Doing Business—albeit a flawed and relative measure—and the private sector’s share of GDP have both remained virtually unchanged.2 Moreover, according to the 2009 Business Environment and Enterprise Performance Survey (BEEPS), the major constraints to growth cited by private enterprises were, in order of importance, tax rates, corruption, and unreliable electricity supply, i.e. structural factors beyond the control of the SCISPM.

10. Against this background, lessons learned during project implementation include the following.

 First, private sector development may be more effectively promoted by a non- governmental, quasi-governmental, or parastatal organization rather than a state committee, especially one with four only loosely related functions. The same applies to investment promotion;

 Second, capacity-building becomes problematical and ultimately unsustainable in institutions where, as in the SCISPM, there is continued high staff turnover at all levels;

 Third, client ownership and, more broadly, political will is key for the structural reforms that are needed to promote the private sector and attract foreign direct investment, especially in small, landlocked economies still undergoing transition, such as Tajikistan; and

 Fourth, institutional development and policy dialogue is a laborious, time-consuming process requiring sustained, long-term commitment that may not fit easily into the standard 3-year implementation period and results framework of conventional technical assistance projects.

2 In 2012, Tajikistan ranked 147/183 in Doing Business; and in 2010, the private sector was estimated to account for less than half of GDP. The PRSP-3 (2010-12) targets an increase to 66% by 2012.

Appendix 1

SECTOR-SPECIFIC MAPS

Preliminary estimates show that Tajikistan has about 1.33 million cubic meter of gas; At present the level of development is 1 %. STATE COMMITTEE ON INVESTMENTS Southern Tajikistan is the site of significant salt resources. The Khoja-Mumin, Khoja-Sartez, Tanobchi, AND STATE PROPERTY and Samanchi deposits contain billions of tons of salt. MANAGEMENT OF THE There are also deposits of gold, silver, copper, tungsten, mica and precious stones in GBAO. The REPUBLIC OF TAJIKISTAN country's only deposit of boron is located at Ak-Arkhar. Resources of datolit and danburit ores are estimated at 7.4 million tons.

INVEST IN MINERALS & MINING MINERALS & MINING

Overview Aluminum Excavation (UK), raised its output to 140 kilos of Other alluvial sand gold, a 70% increase over the same Tajikistan has rich deposits of minerals, During the Soviet era, Tajikistan was known for its period in 2006. Another joint venture, in which Tajikistan's reserves of antimony are the largest especially gold and silver, although its difficult Aluminum Smelter (TadAZ), the Canada's Gulf International Minerals has a 49% in the CIS, with its largest deposit-Skalnoye- geography and insufficient foreign investment country's largest enterprise and one the largest share, is developing the Aprelovka mine, located accounting for about 50% of all silver ore in the have held back mining exploration. Deposits of aluminum smelters in the world. Located in the in northern Tajikistan. The Canadian Ikar Mineral CIS. With intensive development, this deposit silver are estimated at about 60,000 tons, mainly south-west of the country, its overall capacity Corporation has 100 per cent ownership of the could yield 800 tons of ore over 45 years. Apart in the northern where the 38,000 exceeds 520,000 tons annually, accounting for Rushan deposit, which contains tungsten, silver, from gold, silver, coal, and antimony, the Sughd tons deposit of Koni Mansur —the world's 2nd 53 percent of total exports. In 2008, Tajikistan copper and cobalt, as well as gold. Ten per cent region also contains 214 deposits of many other largest—is located. There are about 30 known produced 131,900 tons of aluminum and earned of mining revenues will go to Tajik national and minerals, such as lead, zinc, copper, bismuth, gold deposits with total reserves of over 400 tons, $210 million in export revenues. Aluminum is local governments. molybdenum, tungsten, strontium, iron, lead, oil although not all have been surveyed and only a exported to Belgium, Finland, Hungary, and gas, and salt. The Uchkado deposit, for few are being exploited. Netherlands, South Korea, Turkey and the United Coal example, is unique, comprising gold, silver, zinc, Kingdom and, within the CIS, to and antimony and lead with an estimated value of Turkmenistan, who are the largest importers of Tajikistan has six large coalfields. The main coal more than $10 billion. Tajik aluminum. An estimated 5,000 tons is mining company is Sugdugol (formerly consumed domestically to produce kitchenware Leninabadugol), with an annual output of 4,000 In the north of Tajikistan are endless deposits of and other household necessities. tons. Sugdugol plans to supply various regions in construction and decorative materials: marble, 's with 190,000- granite, limestone, and mineral springs. 220,000 tons annually from the Fan Yagnob and Shurab mines which currently operate below In central Tajikistan, 95 km from Dushanbe, a capacity due to low demand within Tajikistan. tungsten deposit, Maykhura, has been [During the Soviet era, Shurab, with an annual discovered, sufficient to produce an estimated capacity of 650,000 tons, was the main supplier 150,000 tons of ore annually. of coal to Tajikistan and parts of and Uzbekistan]. Fan Yagnob annually produced Deposits of the rare metal strontium have been 4,900 tons of fuel. Tajikistan is believed to have found in . Strontium salts are up to 2 billion tons of coal reserves in the Fan widely used in the atomic, chemical, Yagnob mine alone and geologists are currently metallurgical, and pharmaceutical industries. Apart from gold and silver, Tajikistan has some of studying deposits in the range in western Total strontium resources at Chaltash, Daudyr the richest mineral reserves in the former Soviet Tajikistan. and Chikultan are sufficient for annual production Union, in particular salt and strontium. Tajikistan of 180,000 tons of ore. In the same area, large is Central Asia's leading producer of fluorspar, lead and zinc fields have been discovered. The lead and zinc; it also has uranium, an important largest, in , has an estimated 1.2 million mineral during the Soviet era, although this is no TadAZ employs 12,000 workers, consumes tons of lead and 1.2 million tons of zinc. longer extracted. Reserves of mercury and nearly 40% of the country's total power supply, antimony are mined by the plant in the and indirectly supports a community of 100,000. In Shaartuz and Kabodien districts large deposits west and a large new antimony deposit has been The only downstream industries at present are a of raw materials with estimated reserves of 200 discovered in the Khovland district, southeast of cable and foil plant. The government is seeking million tons for cement production are revealed. Dushanbe; Japan has tentatively agreed to foreign investment in the aluminum plant itself as Foreign investors, including the Czech and provide $2 million for a planning and feasibility well as opportunities for downstream projects. Iranian companies are interested in the study. Fossil fuel resources are limited to coal, of construction of a cement factory with annual which there are 35 known deposits with Gold and Silver capacity about 2 million tons. Approximate cost of estimated reserves totaling 4 billion tonnes but, investments will be about 300 million US dollars. apart from the mine in Sughd, they are During the first seven months of 2008, Tajikistan not yet developed. While suitable for relatively produced 1.5 tons of gold, a 15 per cent increase Also in Khatlon oblast, Baldzhuvan and low-cost open-pit mining, many are in over the same period in 2007, then worth about Dzhaloliddini Rumi districts, new gas fields are mountainous areas where extreme weather $36 million. The joint venture Of great importance are the coal deposits at revealed and in the process of development. conditions and difficult transport have so far between Tajikistan and Nelson Gold (UK), the Kshtut-Zauran and Fon-Yaghnob: there, coal can Nowadays in Dangara district, a Russian inhibited their development. Tajikistan's country's largest gold mine, produced 2,710 kilos be converted into low cost liquid natural gas at company "Gazprom" and a Tajikcompany « extensive aluminum processing industry relies of Dore alloy in the first nine months of 2008. about $120-130 per ton. Coal mining here would petroleum» are conducting exploration works on entirely on imported ore. , a joint venture with Gold and Mineral last for 200 years. oil and gas deposits. Accelerating the development of livestock of farms with diverse forms of property. By the production depends on many factors. Of resolution of the Government of Tajikistan #338 STATE COMMITTEE ON INVESTMENTS paramount importance is the introduction of dated 1.09.2005 on the “Programme of advanced technology for cultivating feed crops, restoration and further development of bee- AND STATE PROPERTY rational use of natural lands and on the basis of farming in the Republic of Tajikistan for the period that strengthening of fodder supplies, particularly of 2006-2010”, an increase of bee-families to 800 MANAGEMENT OF THE in rural households. This in turn will ensure a full thousand and honey production to 10-12 REPUBLIC OF TAJIKISTAN feeding, improved reproduction, complete thousand tones have been planned. implementation of breeding and productive qualities and thus increasing the overall The main direction of the sector's development is production volume and accordingly improving the breeding of purebred bees – Carpathian type and access of population to livestock products of their local population, breeding of early female bees, own production. Meanwhile, land resources are perfection and introduction of a batch method of utilized more effectively in subsidiary farms of breeding. population. Per 1 hectare of agricultural land in private households, the gross livestock products The organization of a batch method of breeding are produced 8-9 times more than in agricultural production in a system of the Republican bee- or peasant farms. bureau, in numbers, meeting the needs of all categories of farms will speed the development of Bee-farming bee-farming, particularly among the population.

Bee-farming has a great potential for Fish Breeding development in Tajikistan. Until the recent past, the number of bee-families was 150-160 Tajikistan has the largest volume of fresh water in thousand, 70% of which was concentrated the world. 60% of all Central Asian fresh water is among the amateur beekeepers. located in Tajikistan. The production of marketable honey in the republic does not exceed 60 grams per person. 1, 300 natural pools with total volume of 705 This is 33 times less than a recommended square kilometers, 8 large water storage medical norm (2 kg per annum per person). It is reservoirs with total volume of 556,31 square estimated that in order to achieve this norm, it is kilometers, 6 large rivers with total volume of necessary to bring up the honey production to 12 5, 555 square kilometers, 5 large glaciers with thousand tones that will consequently require the total volume of 414 square kilometers are located growth of bee-families. in the Republic.

There is a huge fodder supplies in Tajikistan for Currently, Tajikistan utilizes 20% of its available the development of this sector. Melliferous potential. The republic'sdemand in fish products agriculture lands make up around 5 million is 14 thousand tons. hectares, which enable to bring up the production On the basis of water resources volume, of honey to 30-40 thousand tones, beeswax to 8 Tajikistan has the potential of increasing its fish tones, propolis to more than 300 kg, as well as to production to 50 thousand tons in future. increase the production of royal jelly, apitoxin and ambrosia. There are the following types of fish in The Government of the Republic of Tajikistan Tajikistan: Trout, Asp, Grass Carp, Silver Carp, pays a keen attention to the fast restoration and Sheat-fish, Carp, Pikeperch, Bream, Golden development of bee-farming in all the categories Carp. INVEST IN AGRICULTURE AGRICULTURE

Overview of land is defined as lowland and suitable for irrigation necessary for plant growing. During the past years, growth of crop capacity agricultural activity. Nevertheless, water resources are in sufficient and expansion of land occurred at the expense of Agriculture is the 2nd largest sector by magnitude quantity and around 85% of all the arable land decline in manufacturers' actual prices, resulting after nonmaterial, and provides around 70% of The bases ofAgricultural Industry (720 000 hectares) are located within the in a slow growth of production value. Since cotton workplace,accounting for 25% of income from irrigation system. Unaccomplished thought-out is highly important for the country's economy, the export and 35% of tax yield. Cotton is the main Tajikistan has favourable climatic conditions for plan and a lack of appropriate management over government does not abandon to control the agricultural exportable product and accounts for cultivating of many types of grain crops. The irrigation, drainage and pumping systems in subsector. Though production distribution and 90% of the overall volume of agricultural products country has a continental climate with hot and dry recent years, resulted in decreasing efficiency of processing were devolved on a private export. Other exportable agricultural products are summer in the lowlands, but cooler and more using water resources, raising of underground management, the government continues to value raw and pr ossessed fruits and vegetables humid climate in mountain valleys and foothills. waters' level and increase of salinity in some cotton as a strategic crop and maintains unofficial (approximately 9% of exportable agricultural The soil is fertile enough in the south and in areas. At present, only some 515000 hectares of production plan which local bodies of power value) as well as silk and silk products plateau valleys and is less rich in the northern irrigated land is used. Inexpensive at cost price, impose on. (approximately 1%). valleys. However, the base of agricultural river systems, supply about 2/3 of irrigated land, resources is characterized by restricted area of while pumping systems cover the rest. Cotton, The total processing power of 41ginneries in In 2009 the production volume of agricultural arable land, by large dependence on irrigation, wheat, fruits and vegetables are the main Tajikistan is 1,1 million tons. Tajikginneries at an products in all forms of farming was 7903, 4 which is necessary for plant growing and by major irrigated grain crops. As opposed to a high average clean the cotton within 200 days while in million Somoni that makes 10,5% of gross area for continual pastures. Tajikistan's mountain pressure in arable land, 3,3 million hectares of western countries it takes 110-120 days. Cotton domestic product over the country. topography limits the possibilities for agricultural continual pastures are rarely used due to a is planted inApril andis harvested until the middle production. Only 30% of Tajikistan's overall decrease in livestock number, which is observed of November. Currently, more than 40 thousand peasant territory, approximately 4.1 million hectares can after gaining independence ( World Bank.2005a). economies operate in the agriculture of the be used for agricultural production. Roughly Livestock farming country, of which 126 are cooperative farms, 849 800, 000 hectares of this land is arable that makes are peasant collective farms and 767 are up approximately 0,21 hectares per person for Tajikistan hasa great potential for cultivating associations of peasant (farm) economies. In rural population. The rest of 3,3 million hectares competitive products in livestock farming sector whole, around 70% of the population lives in rural are pastures. and supplying products to home market. The areas. Despite the absence of information on The main agricultural areas are located at a analysis of livestock production indicates that the rural economy structure, available data indicate height between 300 and 1, 500 meters, yet in the total number of farm animals and poultry is to the prevailing position of agricultural sector in Pamirs, such crops as vegetables, potatoes and annually increasing on an average of 8-10 per production and employment of the population. barley,, grow at a height of 3 900 meters. Soil cent. However, the number of pedigree livestock erosion is the main problem including erosion is annually decreasing on an average from 10 to from wind on previous pastures, now used for 25 per cent. growing wheat; water erosion and landslide, particularly in high-altitude areas. In whole, the It is known that as a result of reorganization of area of arable land is decreasing. This relates former collective and state farms, three both to pastures and to arable land. categories of farms were formed - agricultural Cotton Subsector organizations (cooperative productions, joint- Table Arable land use ('000 hectare), 2005-2009 stock farms), peasant farms and personal Land use 2004 2005 2006 2007 2008 2009 Cotton remains one of the most important crops, subsidiary farms of population. The contribution occupying one third of arable land, two thirds of of these farms in gross output of livestock Arable land 857 803 735 714 718 699,2 crop production value and 75-90% of export. 85% products is quite unequal.

Grain crops 101 103 98 98 98,6 98,6 of total fertilizers used in the country, also fall to Thus, particularly, the share of individual farms in the share of this given sector.Agricultural ecology the production of all livestock products, except for Meadows 27 22 19 17 17,6 17,6 conditions including 10 months of sunny days eggs and poultry meat products has been and abundant water resources are favorable for steadily growing in the past few years and is Pastures 3259 3236 3258 3065 3064,4 3064,4 cotton production. exceeding 85-90%. The contribution of this

An average population density of 43 people per Fallow 25 19 17 23 22,3 22,3 Cotton sown area is annually increasing and crop category of farms in the solution to the problem of square kilometer is a low indicator in comparison capacity is decreasing during the past few years supplying the population with livestock products to many Asian countries but at the same time is Total area of arable 4269 4181 4127 3917 3921.0 3902,1 at an average, crop capacity decreased from 2,8 is indisputable. high in comparison to several other Central Asian tons off a hectare to 1,8 tons. The production of Intrasectoral development data indicates that in countries. The majority of the population and the Low level of precipitation limits the possibilities of cotton products decreased from 600, 000 tons of 2006- the share of agricultural enterprises in the most productive share of agricultural sector of the agriculture production for which rain is essential seeds to 200,, 000 tons in a year. In 2009, 296 051 production of meat totaled 3,65 thousand tones country are located in the western part where 7% andit also increases the dependence on tons of cotton was produced. (6, 2%) of its total production. third of total production areaare follow ed by the Regions of Republican Subordination. The most STATE COMMITTEE ON INVESTMENTS important fruits are apples and apricots, then cherries and peaches, as well as nuts, walnuts, AND STATE PROPERTY pistachio and almond. Also some types of subtropical fruits, including lemons, pome- MANAGEMENT OF THE granates and figs are grown. Areas for growing REPUBLIC OF TAJIKISTAN vegetableshas increased in S u g h d region, decreased in Khatlonregion and have not changed in the Regions of Republican Subordination and the Mountainous Autonomous Province.

The total area of many years of planting in Tajikistan is 102,, 433 hectares, of which 78 996 is irrigated. In overall scope, gardens are 63283 hectares (51, 688 hectares are irrigated), vineyards - 30,, 121 hectares (19 005 hectares are irrigated), mulberries 7, 152 hectares (6689 hectares are irrigated), and citrus plants - 1506 hectares (1, 299 hectares are irrigated), look at table.

The total area of many years of planting in Tajikistan, in hectares

Including #Items Area, in irrigated hectares area, in hectares 1 Gardens’ area 63283 51688

2 Vineyards 30121 19005

3 Mulberries 7152 6689

4 Citrus Plants 1506 1299

The total area of many years of 102433 78996 planting

Source: Data of state committee on land-utilization

For a period of 2009, 1 million and 47 thousand tons of vegetables, 424 thousand tons of watermelons, 138 thousand tons of grapes were produced in the country.

During the current year, 92769,5 tons of dried fruitsand 213687 tons of fruits was exported from the republic.

INVEST IN SECTOR OF FRUITS AND VEGETABLES PROCESSING SECTOR OF FRUITS AND VEGETABLES PROCESSING

Overview are located in Sug hd region, which is also the Raw products expenditure is 40-70% of general that banks are very bureaucratic and the process Tajikistan is famous for its fine fruits, the role of mainregion for growing fruits. S ug hd region is expenses. Although some producers use the raw of application is too lengthy. In addition, the long- which is extremely important in balanced located in proximity to export markets, cheaper products of their own production, a major portion term investment credits are rarely available and provision of organism with vitamins and labour is used in this area and the electricity is still bought from large and small farms and rates of interest that are higher than 30% are too microelements. Due totheir unique bioclimatic supply is rarely cut off. intermediaries. Prices offered by producers are high even for loans in the field of manufacturing conditions, such fruits as apricots, peaches, usually lower than market prices (40-50% lower). resources. grapes, apples, pears, ebony, pomegranates and The majority of canned factories produce juice Apart from that, a lot of producers pay the farmers Currently, some enterprisesare implement ing citrus plants are grown and processed in (77%), brine (50%), tomato paste (50%) and jam with tinned products rather than with cash new production lines such as Tetra-Park, which Tajikistan. Tajikistan isan agrarian country. (40%). Production time is limited to 5 or 6 months because of circulating capital shortage. enables torais e their products competitive ability. Approximately 66% of the population lives in rural according to harvesting time of various crops. Consequently, the majority of producers face After several years of decline during the transition areas. In export of agricultural products of the Lack of storage rooms and production resources difficulties while buying a sufficient quantity of raw period in the 90s, the sector shows a low but a country,fruits and vegetables rank second after are themain restrictions for the expansion of products. Farmers have a preference to sell their steady growth rate, mainly thanks to the export of cotton . production. Factories are not used toa full raw products in the market or to intermediaries products. Vegetable growing, gardening, capacity and only to 40% on average. During the but the producers of processed products are the viniculture and water melon growing is intensively I,n Tajikistan the production of processed past few years, the production was only 40 million last in the list of farmers. Just 15-20% of developing. A number of new enterprises were vegetables and fruits has a long tradition and liters on average. Smaller factories usually work gardeners' total harvest is processed. established over a period from 2, 000 which good prospects for development. Agrarian and with higher capacity than large ones. The output undoubtedly is a positive result of the climatic conditions of the region are very volume is low and is said to reach 5% or less. Some processing factories, particularly the big development. favourable forthe grow th of various types of fruits ones, were privatized by their formerowners . The and vegetables witha perfect taste. Long second group, mainly including small and Sector's raw materials base vegetation periods with sunny days result in average factories was established and privatized higher sugar content in fruits,and therefore by businessmen. The owners of processing Long vegetation periods with sunny days result in Tajikistan’s fruits and vegetables are in brisk enterprises are well familiar with production high quality fruits and vegetables. Works on demand in other countries. process and other technical processes but they diverse altitudes enables to carry out a step-by- have insufficient knowledge in management and step production and to organize harvesting in marketing fields. This applies particularly to the areas where processing plants operate, first group. The majority of factories are working supplying raw material for a long period. with obsolete equipment of soviet production and Tajikistan's sweet fruits and vegetables are in the investment is very small. Consequently, the brisk demand in other CIS countries, therefore efficiency of processing is quite low. Tajikistan was the main producer in former Soviet Union. Export was 100, 000 tons in 1965-1990 of which two thirds were exported as fresh products and one third as canned.Currently, the structure Apart from producing tinned goods, there are a of fruit and vegetables exportis the following: number of enterprises in Tajikistan engaged with drying of vegetables and fruits. These enterprises Item Quantity, tons dry apricots, grapes, plums, apples and berries. Fruits (in total) 247 000 The production is mainly focused on export. Dried fruits are well stored, transported and sold at a Apricots 30 000 There are approximately 40 industrial processing higher price. Apples 83 000 companiesout of which only 32 are operat ing . Citruses 2 000 Total processing capacity is 100 million liters Some factories invested funds in equipment for annually that makes up to 400 million conditional drying vegetables. The equipment is expensive Almond 2 000 cans. There are only four factories with a capacity but the profitability in dried fruits sector is a little bit Pistachio 1 000 of more than 10 million liters, six factories with a higher, i.e. 10 % than in tinning sector. The capacity of 1-10 million liters and the rest with a production is mainly focused on export. Drying More than half of total areas allocated for fruits capacity of less than 1 million liters. Thus, an fruits, being a less profitable business than drying All processing companies face the challenges of production is located in Su g h d region , thereafter average capacity of processing industry is 3,7 vegetables is mainly carried out in small dryers. liquidity and difficulties of access to necessary follows Khatlon region and the Region s of million liters on average. A few processing plants The majority of apricots, grapes, plums, apples finances in banks. This limits their chance to Republican Subordination with 17% of total are state or collective farms and obtainthe raw and berries' producers are engaged in drying of update their equipment. The members of volume. Vegetable production is more or less product as aresult of their own production. products. Dried fruits are well stored, transported processing companies that meetings were equally distributed between Suh g d and Khatlon Eighty per cent of processing plants and sold at a higher price. organized with in the course ofthis mission, state regions, each occupying approximately one Preliminary surveys have shown that on the inflows The 220 kV system consists of 30 substations of above-named rivers, technically it is possible to and 1,200 km of lines. In addition, there are STATE COMMITTEE ON INVESTMENTS construct more than 200 small hydroelectric power approximately 2,800 km of 110 kV lines in plants with a capacity of 10 kilowatts to 3000 operation. Another project financed by to AND STATE PROPERTY kilowatts in mountainous regions. connect Nurek and Kulyab city with a 220 kV MANAGEMENT OF THE transmission line is also under implementation. Energy consumption As regards consumption, TALCO, the aluminum REPUBLIC OF TAJIKISTAN smelter, consumes about 40 percent of total Tajikistan possesses vast amounts of supplies. Households account for about 28% or hydroelectric (527 billion kWh) and coal (700 m power consumption and lift irrigation for 15%. tons) potential of which only a small fraction (less Until recently, average electricity tariffs were than 6% hydroelectric and negligible coal) has considerably below cost recovery levels at been exploited. Hydrocarbon resources are $0.006/kWhr. This problem was compounded by limited and Tajikistan depends on imported oil high technical and commercial losses and poor products and natural gas. Oil drilling has not collection levels. Recently Tajikistan has recovered since the civil war. Tajikistan imports committed to gradual yearly increases to bring nearly all of its oil, mainly from Uzbekistan. Some the average tariff to a financial viability level natural gas is extracted in Khatlon, but 95 percent ($0.1kWhr) by end of 2010. In the gas sector, the of domestic demand is met by imports from Uzbekistan and Turkmenistan. Tajikistan's coal current tariffs have been increased so that they reserves are estimated at 700 million tons, with are closer to the financial viability levels. Coal the largest field in the Sughd region. prices are market based.

The electricity subsector alone represents about Per capita domestic energy consumption, at 5% of GDP and is a critical input for the country's about 0.5 tons of oil equivalent, is very high given two main exports: cotton and aluminum. the level of the country's economic development. Generation is about 46 GWh per day, with peak This is because of the low end-use efficiency and production in the summer averaging 52 GWh per high heating requirements during winter. With day which drops to 38 GWh day in the low water the rise in prices of imported fuel households flow winter period. have switched to electricity for heating and cooking reflecting the fact that electricity is the Pamir-1 HPP accounts for 75% o f the capacity in only form of reliable energy available and the the main grid system of the Gorno Badakhsan government's historical below-cost pricing Autonomous Oblast (GBAO), operated by a policies have encouraged a shift to electricity privately owned company, Pamir Energy, under a away from other forms of energy. 25-year concession given by the government. The north-south grid system in Tajikistan is the Tajikistan, with its large hydroelectric potential key vehicle for imports and exports of relatively relative to its domestic needs, has been pursuing significant amounts of electricity. energy export-led growth strategies since its independence. However, the potential has not There are two 500 kV lines running from the been realized in part because of: (a) the Nurek Power Station to the 500/220 kV Regar significant resources needed to develop the Substation, and a connection from there to the hydropower plants and associated transmission 500 kV system in Uzbekistan. There are two lines; (b) limited regional cooperation; and (c) the 500 kV substations and about 300 km of 500 lack of political stability and clarity in the export kVlines. markets. INVEST IN ENERGY SECTOR ENERGY SECTOR

Overview the overall scheme of energy balance is more than 200 million US dollars. According to preliminary support will grow with increasing speed in 95%. The hydropower potential of Tajikistan is 3 figures, an approximate cost of lines will be 350 connection with the rise in prices and mineral fuel Tajikistan has an enormous reserves of renewable times higher than the current consumption of million US dollars. reserve depletion in those neighbouring countries, and safe drinking water resources. There are about electricity throughout Central Asia. With efficient which do not have their own sufficient hydropower 14,500 glaciers in Tajikistan with total iced area of use of these resources, the region can be assured There is a Memorandum of Understanding for the potential. 11 thousand km2, which is around 8 percent of total of cheap and ecologically clean energy. construction of LEP 765 kilovolt (500 kilovolt) territory of the country. Most of hydropower potential is concentrated in Rogun-Khorog- Wakhan Corridor-Chitral- For the purpose of developing mutual cooperation Vahsh, , Amudaria, Syrdaria and Zeravshan Peshawar, between the Government of the in the field of hydropower potential development, From the glaciers the biggest rivers are stemming river basins. Republic of Tajikistan and the Government of the the Government of the Republic of Tajikistan offers which are intensively used in national economy. In At estimation of total hydropower potential of Islamic Republic of . to interested countries including interested states, Tajikistan there are more than 2,500 rivers and Tajikistan small hydropower were singled out. Most to consider a matter of constructing hydropower channels of total extension around 90 thousand km. of small hydropower potential is concentrated in the There is an agreement with 's Ministry installations for their own use in the territory of western regions of the Republic. of energy sector and water economy on the supply Tajikistan. The volume of water contained in the lakes is about of electricity. With the support of the Ministry of 46.3 cubic km. The reserves are estimated at 19.3 Potential reserves hydroenergy recourses of Tajikistan energy sector's units of the Republic of Tajikistan, In 1970s, a scheme of multipurpose use of the river cubic km of fresh water and 16.2 cubic km of Pools of river Fair annual Fair annual Share in general distribution network is restored in the frontier Panj and the riverAmu Darya was carried out by the river, mWt energy, TWt.h volume, % underground water. This all is high on mountain Panj 14030 122,90 23,2 northern regions of Afghanistan. Via restored LEP- Central Asian Hydro project department named gorges with major altitude difference. It should be 2260 19,80 3,73 110 kilovolt, electricity is transmitted to Kunduz city. after Zhuk S.Y., which we have at our disposal and 2969 26,01 4,93 noted that 54.3 percent of Aral Sea is coming by 1191 10,34 1,96 which is used for working out a strategy of the TajikistanRivers. Yzgulem 845 7,40 1,39 Currently the transmitted power is 10-15 megawatt. development of the republic's hydroenergetics. Kyzyl-su 1087 9,52 1,78 28670 251,15 48,00 A Report is signed with the Islamic Republic of Iran Only in the river Panj, the main inflow of the Amu Tajikistan possesses vast inexhaustible reserve of Kaphirnigan 4249 37,22 7,00 on matters pertaining to electric-power Darya, a construction of 14 hydroelectric power Lakes Kara-Kul 103 0,90 0,17 hydropower resources, estimated at 527 billion Surkhan-Daray 628 5,50 1,03 transmission to Iran in the capacity of 6 billion plants is economically sound with a capacity of 300 kWh per year at an average annual capacity of Zeravshan 3875 33,94 6,38 kilowatt-hours. megawatt to 4000 megawatt and with 86,3 billion Syr-Daray 260 2,28 0,43 60.167 million kWt. Power cost is 0.4 U.S. cents per Total 60167 527,06 100,00 kilowatt-hours power generation per year. 1 kWh, which is very low compared with other Already now, Tajikistanhas a possibility of exporting One of the engaging projects is the Dashtijum energy resources. Tajikistan hydropower resources Hydropower recourses of Tajikistan on categories electricity to Iran in summer time in the capacity of hydropower station with a capacity of 4000 technically possible to develop in the foreseeable 1,5-2 billion kilowatt-hours. Iran is exploring the megawatt and with reservoir capacity of 17,6 cubic prospect consist of 317 billion kWh per year, of Regions Industrial spare Potential facylity N, Production, Large rivers Creek L Creek L less possibility of electric-power transmission through kilometers. The Dashtijum hydropower station site which only 5% utilized so far. mWt TWt.h more 10 km 10 km the Republic of Uzbekistan and the Republic of is located on a frontier area between the Republic of N, TWt.h N, TWt.h N, TWt.h mWt mWt mWt Turkmenistan and has started the construction of Tajikistan and Afghanistan and accordingly has a Sughd 1590 13,93 1544 13,52 1303 11,41 1288 11,28 LEP-400 kilovolt at a length of 245 km from Mari city tremendous significance for Afghanistan's (Turkmenistan) to Mashhad city (Iran). recovering economy, including the irrigation of RRS 17709 155,13 22744 199,24 3974 34,81 16056 140,65 and hundreds of thousands of hectares of agricultural Khatlon land that will consequently ensure employment of GBAO 5884 51,54 6990 61,23 2555 22,38 3713 32,53 Total 25183 220,6 31278 274 7832 68,61 21057 184,46 manpower resources and radical improvement of food supply for the population. Preliminary Electricity Exports technical and economic assessment indicates that the Dashtijum hydropower station is one of the most Export of electricity, owing to Tajikistan's economical and long-term hydropower stations of geographical location is economically sound both to Tajikistan. By generating 15,6 billion kilowatt-hours the near abroad and to the far abroad countries. a year, specific capital investments are 800 US For the purpose of generating power by Rogun dollars per 1kilowatt of installed capacity. Project hydropower station and hydropower cost is preliminary estimated as 3,2 billion US station-1 as well as exporting excess summer dollars.. Dashtijum hydroelectric complex should electricity, investment projects for the construction be considered as a potential regional project for In terms of hydropower potential Tajikistan ranks of VL-500-765 kilovolt in Afghanistan, Pakistan, energy and irrigation purposes. Possible irrigation the eighth largest in the world, after China, Russia, Iran and the People's Republic of China are worked of hundreds of thousands of hectares of agricultural USA, Brazil, Zaire, and Canada. For specific out. The construction of electric lines through the land in Afghanistan, guaranteed water supply for indices of hydropower potential per capita (73,8 territory of Afghanistan to Peshawar city of With the completion of the construction of Rogun Turkmenistan and Uzbekistan, a relative proximity thousand kilowatt-hours per year per person) and Pakistan, at an approximate length of 600-650 km hydropower station and Sangtuda hydropower of the main consumers of electricity in Afghanistan, per square kilometer (3682,7 thousand kWt/h per will ensure electricity export to the Islamic Republic station-2 construction, only 8-10% of hydropower Iran, Pakistan and the People's Republic of China, year/km2), the country ranks the second and first in of Pakistan with a capacity of 5,5 billion kilowatt- potential of the republic will be used. guarantees the project's recoupment within 4-5 the world, respectively. The share of hydropower in hours yearly and with annual efficiency of about Simultaneously the expenses for energy safety years of service. industries in existing and new markets as well as improving quality management infrastructure. Two notable government programs affecting the T&C industry are the Cotton Fiber Processing Program STATE COMMITTEE ON INVESTMENTS (2007 -2015) and the Tajikistan Light Industry Development Program (2006 - 2015). The first program seeks to increase the production and complete processing of cotton fiber within Tajikistan with the goal of AND STATE PROPERTY providing input sources for light industry. By improving the growth and capacity of cotton fiber processing, this program is expected to increase investment activity and manufacturing capacity, especially in the MANAGEMENT OF THE T&C sector. The Light Industry Development Program seeks to increase the processing of raw materials REPUBLIC OF TAJIKISTAN and boost export capacity for light industry, especially for clothing and textiles by improving regulatory conditions, developing effective legislation, developing human resources, attracting foreign investment, modernizing production, spurring new enterprises and researching methods for innovative production.

Distribution of main Tajik textiles and clothing sector enterprises

vertical and integrated textile enterprise

clothing enterprise

spinning enterprise

hosiery enterprise

INVEST IN TEXTILESAND CLOTHING SECTOR TEXTILESAND CLOTHING SECTOR

Overview Textile and clothing enterprises, generally Sector potential privately owned, include a handful of gins, around Textiles, clothing, and handicrafts, long a tradition 20 textile firms and about 30 clothing companies. Tajikistan has a number of characteristics that will in Tajikistan, were a major source of employment In addition, there are numerous, mostly smaller permit it to achieve future growth and during the Soviet era and, despite a decline since establishments not captured by official data. development in textiles and clothin. Of particular then, this remain the case, particularly for Firms vary in size from small, family owned note is the large, internal production of cotton, women. operations with a few dozen employees to large, which provides the backbone of the textile and integrated companies with uo to 2,000-3,000 clothing industry and which will allow Tajikistan to Unlike many other countries, Tajikistan covers staff. Several of the larger, formerly state-owned tap into its own raw inputs in order to fuel sector the full value chain, starting with the production of factories have entered into joint ventures with growth. The sector also benefits from Tajikistan's raw materials, especially cotton, to spinning, foreign partners. However, the most dynamic strategically important position between Asia and weaving and knitting to produce fabrics, as well elements of the industry are found among smaller Europe, which gives it proximity to other raw as garment production itself. A further step is enterprises recently created as green-field material producers as well as to the potential added by traditional artisans who decorate and investments or as spin-offs from older, larger markets of Europe, Asia and the Middle East. embellish finished products with elaborate establishments. Additionally, demand conditions place Tajikistan embroidery and other specialized additions. in a favorable position; demand for clothing in Products Eastern European markets grew at rates between 8% and 21% over the last few years, About 61 gins produce roughly 100,000 tons of which is well above demand growth in the rest of high quality ginned cotton, which is mostly the world. Tajikistan has the potential to harness exported to other countries. Annually, about this demand in order to increase its regional 12,000 tons of cotton yarn are processed exports in the Eastern European and CIS internally. markets.

The clothing sector produces a wide variety of products, including uniforms, corporate wear, shirts, trousers and jeans. Nearly half of these firms also create finished products that may include handicraft enhancements such as embroidery.

Enterprises

Production includes cotton fibers, fabrics and yarns, clothing, and clothing with textile- enhanced additions. Textiles and clothing, excluding cotton production, were about 9% of total industrial output in 2007, employed nearly 12,600 people. Total output in 2009, excluding cotton fiber, was valued at about $32 million, of The Tajik government has included the textile and which $28 million from exports. These data do not clothing sector as a priority for its economic include the work of artisans in textile crafts, if they development plans. Development goals include are directly employed by clothing companies. diversifying the base of Tajik exports and the creation of employment opportunities. The 2000 2004 2005 2006 2007 2008 2009 government believes that the T&C sector has the Production 51,1 52,3 47,1 44,8 40,5 39,3 31,9 capacity to significantly contribute to this Value, mln USD Most fabrics are procured from local agents; objective due to its strong growth potential. % of GDP 5,2 2,5 7,1 1,5 1,3 1,2 0,64 however, a number of support materials such as Government supported initiatives seek to Value of Export, 45,6 37,5 38,8 40,8 37,1 31,6 28 metal buttons, zippers, buckles, and coloring contribute to the sustainable expansion and mln USD acids are imported by textile and clothing diversification of small and medium size Value of Export, 130 198,5 187,3 169,5 175 139,8 127,7 companies from China, Switzerland, Turkey, and enterprise exports by increasing the mln USD Russia. competitiveness of the textile and clothing Meanwhile, in March 2009, Tajikistan started building a rail link between Dushanbe and the STATE COMMITTEE ON INVESTMENTS US-funded bridge over the Pyanj river to Afghanistan completed in 2007. The almost 1 km AND STATE PROPERTY long span, supplementing an unreliable, seasonal ferry service, enables up to 1,000 trucks MANAGEMENT OF THE daily to cross the border (compared to only 50 by REPUBLIC OF TAJIKISTAN ferry), thereby greatly increasing the flow of goods between South and Central Asia. Moreover, improved rail and road access to this bridge-- a road link to the bridge is also planned will cut the distance between Dushanbe and seaports by almost half, spur increased trade and development throughout the broader region, and also enable goods to be transported directly from the subcontinent through Tajikistan to China, bypassing Uzbekistan.

InstitutionalArrangements

The Ministry of Transport & Communications, which in addition to roads also now covers rail and civil aviation as well, is responsible for the planning and coordinating of all modes of transport. Its road department handles the administration, construction, maintenance and rehabilitation of the country's 13,700 km national network, and has a number of associated entities involved in these activities. While Tajik Rail and , previously completely independent state-owned enterprises, are now formally part of and report to the Ministry, in practice they remain largely autonomous in terms of day-to-day operations. However, deputy ministers of trans- port for air and rail transport exercise oversight and regulatory functions in behalf of the Govern- ment. Meanwhile,despite recent progress, a large reform agenda remains, especially in civil aviation and railways.

Investment Opportunities

Priorities for investment in Tajikistan's air transport system include: (a) modernization and upgrading of its four international airports; and, the purchase of more fuel efficient foreign aircraft to expand both freight and passenger traffic. INVEST IN TRANSPORT TRANSPORT

Overview meeting load-bearing requirements. handle international traffic- Dushanbe, , operations are largely self-financed. TajikAir has Nonetheless, the overall situation has improved Kulyab and Kurgan-Tube- as well as eleven also been self financing, thanks to monopoly Landlocked, mountainous, and 3,000 kms away gradually in recent years because financing for smaller airports serving purely internal, domestic rents and revenue from the main airports and air from deep sea ports, Tajikistan's road and railway road maintenance has increased. The regional destinations. navigation services. systems are crucial for its economic network is also being rebuilt with help from the development, especially for external trade which Asian Development Bank (ADB), China, Iran and Sector Policy and Planning Framework accounted for almost two-thirds of GDP in 2007. other development partners totaling more than It inherited an extensive network of roads, $500 million, almost all for rehabilitation and The long-term objective of Tajikistan's overall railways and airports from the former Soviet construction of roads and tunnels. These transport strategy, outlined in its National Union, but inadequate maintenance, civil war improvements have helped increase traffic Development Strategy and elaborated further in a damage, and natural disasters have left it volumes- cargo traffic, for example, increased 2007 policy statement is to create: “.... a system severely degraded. Roads are the dominant from 32.9 million tons in 2003 to 42.7 million tons that is efficient, that provides the transport mode, carrying 90% of passenger and almost in 2007, averaging 6.7% annually. While bulk services the nation needs and can afford, that is 70% of cargo traffic. Railways compriseof 860 imports (bauxite) and exports (aluminum) are responsive to changes in economic conditions, km of mostly single-track line, located separately transported by rail, road transport accounts for and that meets the needs of the country as a in the north and south. Tajik Air, the state , about 68% of total cargo. whole, through the efficient allocation of scarce has 95 aircrafts , half manufactured in the resources.” Against this background, the repair 1970s–80s. There is no direct rail link between the north and and rehabilitation of the road network is south of the country. In the south, the line considered the main priority for reducing connects Dushanbe and the agricultural south- transport costs, increasing internal and external A recently completed transport sector master west with southern Uzbekistan and the former trade, and promoting social and political cohesion plan, funded by ADB, highlights the following Soviet railway network, via Turkmenistan. In the within the country. The strategy also includes three broad strategic issues. First, with roads by north, a railway line crosses Tajikistan, linking developing an efficient road transport industry by far the most important mode for freight and and the Fergana valley in Uzbekistan. promoting the private sector. passenger traffic, maintenance expenditures that In September 2000, the railway between Kulyab reduce vehicle operating costs and travel times and Kurgan Tyube in southern Tajikistanwent into are the most important. Capital investments service after a major upgrade. A large number of should focus on completing rehabilitation of locomotives and railcars need to be retired and national and regional road links, with priority to major repairs are overdue on 142 km of the 951 those with the highest economic return and high km system, where trains slow on some sections social benefit. Second, while rail is important, to 15-20 km/hour. Signalling equipment, mainly for external trade, expenditures that communications, centralization and shunting minimize costs and allow the railway to adapt to systems are also badly in need of repair and changing markets should enjoy priority. Third, upgrading. civil aviation can be largely private-sector driven, Existing transport infrastructure, originally Tajikistan's air transport system is highly priced, subject to creation of an appropriate institutional oriented towards Russia and , is inefficient, and poorly served. Domestic framework, and should be financially self- constrained by restrictions at regional borders protection has sheltered Tajik Air from sustaining- except for investment in airport which discourage efficient utilization of roads for competition on the most important route- terminals and the air safety and traffic control cross-border trade. Links to China and South Dushanbe- (carrying mostly migrant system. Asia are not yet well developed, making it difficult workers)- and on direct links to Asia and Western Total public expenditure on roads is estimated at Tajikistan is a signatory of the Trans-Asian to expand trade with Tajikistan's new, Europe. Except for Air Baltic (thrice weekly from 3.6% equivalent of GDP, although most funds are Railway (TAR) Pact linking the railway systems of increasingly important trading partners. In Riga), China Southern (twice weekly from allocated to major new projects such as the 28 countries in Asia and Europe that became addition, owing to its inaccessibility and Urumqi), and Turkish (twice weekly from Anzob, Shariston and Shar-Shar tunnels effective June 11, 2009. China, Cambodia, India, topography, Tajikistan is burdened with very high Istanbul), no major international airlines fly into financed by soft-loans and grants from China and Mongolia, Korea, Russia and Thailand have also transport costs. Tajikistan. Meanwhile, Tajik Air flies to three CIS Iran. While road maintenance funding has ratified the agreement. The TAR comprises over countries-- , Kyrgyzstan, and Russia increased to $300/km- a quarter of the estimated 114,000 kms of major rail routes and the Pact Two-thirds of all roads are in poor condition, as well as to Afghanistan, China, , India, minimum $1,200/km required- budget allocations aims to facilitate freight and passenger traffic including 48% of national roads in poor and 32% Iran, Turkey, and the of about $7 million are still substantially below withinAsia and betweenAsia and Europe through in very poor condition, mainly due to maintenance (UAE). Since February 2008, there is also a essential requirements, which are estimated at improved border transit facilities and processes. backlogs. Outdated design standards and private operator, Somon Air, which flies to about $27-30 million annually. Tajik Rail receives It will also provide improved access to major ports excess vehicle weights have increased Moscow and (weekly) using a leased some funds for capital expenditure from the for inland areas and landlocked countries, such pavement damage, with 30% of bridges not Boeing 737-800. There are four airports able to Ministry of Finance, but its other investments and as Tajikistan. some of its banks is covered with permafrost for miles. A lot of interesting expects travelers in the south of Around 200 sources of mineral and thermal waters are Tajikistan. One of the oldest cities of Central Asia, Kulyab functioning in Tajikistan's territory, on the basis of which a celebrated its 2700 anniversary in 2006,that became a STATE COMMITTEE ON INVESTMENTS sanitaria and health resort sectors of tourism are milestone for the country. In forest thicknesses close to developed. The most famous of them "Khoja Obi Garm” Baljuvan district, Tajik archaeologists have unearthed AND STATE PROPERTY resort, “Shaambary" , “Obi Garm", "Zumrad", "Havatag” stone tools, the most ancient one found in Central Asia - sanatoria. Tajikistan's sanatoriums and resorts provide their age is 850,000 years. There is also a unique open MANAGEMENT OF THE services for treatment of such diseases as cardiovascular parking of Neanderthals in Dangara district, in the cave system, respiratory system, musculoskeletal system, area Ogizkichik with the centers,near which 15,000 REPUBLIC OF TAJIKISTAN urinary system, gynecological diseases, gastrointestinal charred shells of turtles were found. tract, liver and biliary tract, as well as skin diseases. In hot- carbonated spring resorts as "Garmchashma", "Bashor" A great interest for foreign tourists represents an attraction and "Shahdara", travertine - limestone deposits of extruded of beautiful surroundings of the ancient Hutalya, today shapes are formed. Kulyab. Particularly attractive is the mountain of Hoja Mumin, a unique natural monument, which entirely consists They are particularly beautiful on Garmchashma spring, of pure saltof different colors, pale yellow and gray, bluish located within 35 km from Khorog city. Garmchashma green and pink. Stocks of salt of Hoja Mumin mountain, spring is located at a height of 2325 m. above the sea level can provide the whole mankind for many hundreds years. and is visible from afar due to the extraordinary white Anothermiracle of Hoja Muminare its caves, which are travertine. Travertine is a long shaft, descending to a river renowned for their musicality. It turns out that wonderful by laced terraces. Stalactites, as if grown together are sounds are generated by the wind, as if fingering through hanging on its slopes, giving an impression of solidified the keys, the long and thin glass icicles- stalactites, hanging cascades and stone bowls. Natural baths are formed on at the entrance to the cave. ledges with water ofa different temperature (up to 62 * C). A unique historical and architectural monument is a Man-made unique monument of naturein the Pamirs is the mausoleum ofa prominent philosopher and religious figure Pamir Botanical Garden, located at an altitude of 2320m ofthe IV century Mir Said Ali Hamadoni in Kulyab, where above the sea level near the city of Khorog. Against a many followers honoring his Sufi teachingsperform a background of barren slopes, this garden is a real green religious pilgrimage. miracle, where more than 20,000 plants from all the continents are collected.T he rare and unusual specimens Aiscompetitive tourist complex formed in Tajikistan and of plants, as Amur velvet, cork tree, black Austrian pine and more than 50 tourist enterprises are operating. In order to a unique collection of roses with the purest colours and promote international tourism in the country, the incomparable smellare among them. Governmentmade a decision to simplify the visa procedure.A t present , documents for entry to the country Fan Mountains are particularly popular among the tourists are issued within three days. and mountaineers,which are located between Zerafshan and Hissar ranges from Kshtutdari to Fandaria. Today, Fan The decisions adopted by the Government of the Republic Mountains are the most accessible for tourists among the of Tajikistan by declaring , Baljuvan and all high mountains of the country. In these mountains, regions as zones of sanatorium treatment, tourism and mirror blue-green water - Lake is located, recreation, contributes to the gradual revival of tourism which is the largest lakeof Fan Mountains, located in the industry. More than 65% of sanatorium and resort, tourist north of Tajikistan. It is widely spread out at an altitude of sectors are restored in the country,and about 35 private 2200 meters. Here, tourists can watch the stars twinkle and tourist recreation areas are constructed, creating real mist rising from the lake surface. conditions for the organization of international tourism, employment and investment in the given infrastructure. On the shore of a lake, within 160 km from Dushanbe, a tourist base "Iskanderkul” is located. This road is crossed In order to see and to feel the color and exoticism of Asia, it by touristsin cars through the amazing gorges of Fandarya, isessential to visit Tajikistan, to see its rich and diverse Yagnob and Iskanderdarya. markets with an abundance of fruits and vegetables, to The mountains around seem to be multi-colored, as they wander in the shadowy historic streets ofold cities, to sit in are dominated by bluish, red and purple hues. the tea houses covered with delicate patterns,to drink Iskandardarya gorges are sometimesnamed as ravines of flavored green tea,to chat with people and learn their colored rocks andthe forces of wind have turned them into traditions, culture and life,as well as to learn the kindness, fanciful walls and castles. greatness and wisdom ofits people. INVEST IN TOURISM TOURISM

Tajikistan represents a unique tourist attraction of modern donated a chainmail to China, which the local gunsmiths 10000 species of insects inhabit in the republic's territory. - Mountaineering, mountain sports and ecotourism; times, as it possesses a great cultural-historical heritage, took as a sample and spread it in the Chinese army. Flora of Tajikistan consists of more than 5,000,000 species - Rafting, paragliding, downhill skiing; original culture, and a favorable geographical location, a Sogdian leather and jewelry items, silk fabrics and colored of higher plants, including many endemics. The territory of - International hunting; variety of natural landscapes, recreational zones, flora and salt had an excellent reputation. Sogdiana exported the Tajik National Park covers 2.6 million hectares, that - Historical and educational, ethnographic tourism; fauna. "golden peaches” which so much amazed the aliens, white covers 18 percent of the country's territory and 60 percent - Sanatorium-and-spa treatment. and yellow cherries, sheep and graceful fast horses. of Gorno-Badakhshan Autonomous Region of the republic. The history of Tajik people is rooted in the mists of time, to In recent years, the Directorate of the National Park, Majestic Pamir - one of the most famous highlands of the the beginning of human civilization. The oldest objects Today in the oldest cities of Tajikistan- Khujand, actively implements measures for promotion of eco-tourism word, with absolute altitudes of 2800 up to 7495 meters found in the territory of modern Tajikistan are the proof of Istaravshan, Penjikent, Kulyab,an appearance of which infrastructure and improvement of ecological situation in above the sea level, known worldwide as the “roof of the that. Opening of the first monuments of Stone Age in 1956 has changed significantly over the years, the ancient the highlands ofthe Pamir s . world” is located in the territory of Tajikistan. Here, the was a kind of sensation. 60 sites of stone tools' findings historical, cultural and craft traditions are carefully tourist resources include the climbing routes to the highest were recorded in a country's territory. More than 10 preserved. The famous dynasties of gold embroidery One of the unique corners of nature in the upperAmu Darya mountain peaks- and Eugenia thousand items made of stone were excavated in sites, products’ craftsmen, craftsmen producing silk, abrasive, River istitled as "Tigrovaya balka”. Here, in natural Korjenevskaya, located at a height of more than 7,000,000 located at an altitude of 4200 meters above the sea level, in batik, embroiderers of flowers and skullcaps, weavers, primordial environment,inhabit such animals as the meters, hunting facilities, natural landscapes, caves and hard-to-reach regions of high mountains. They are jewelers, craftsmen of knives, craftsmen of ceramics European red deer Hangul, desert antelope Jayran, mineral springs of thermal and cold, carbonate and silicate presented as large tools such as scrapers and notched whose products arewell- known throughout the world , are leopard, jungle cat, hyena, black-and-gold Tajik pheasant, waters. Annually, international climbing expeditions are tools which preserve Paleolithic traditions during still preserved. Among the tourists visiting these ancient desert partridge-Chil, snake eater eagle, wild boar, badger conducted in Tajikistan, during which climbers from around processing. The age of Stone Age open monuments is cities, the most popular is ethnographic tourism, which, and porcupine. Of reptiles, valuable for science and the world, ascend the highest peaks of the country. mostly related to VIII-V BC. Rock carvings – petroglyphs, apart from learning the historical traditions, culture and life medicine, there arethe Central Asian cobra, viper, carpet Climbers from all over the world, aim for the conquest of carved on rocks or on separate stones of some figures of of people, gives an opportunity to learn the basics and skills viper and numerous groups of other non-poisonous Ismoili Somoni (7.495 meters)-a high-altitude pole of animals, people or whole compositions, represent a of ancient forgotten crafts under the guidance of famous snakes. There is trout, marinka, catfish, mudfish, carp, Pamir. The unique topography of the region favors the separate, very specific area of archaeological research in artists. grass carp in rivers and lakes, and an ancient relic fish- development of tourist trips and trekking of various degrees Tajikistan and since then more than 10,000 drawings on skafiringus, is preserved in the lower reaches of the river of difficulty, engagement in specific sports, such as rock rocks have been detected. Tajikistan mountains and Kairakkum reservoir, titled as Tajik sea, is located in the Vakhsh. climbing, mountaineering, skiing, hiking, combined with valleys, people living on its territory, are already mentioned east of Khujand,and has been formed by the construction There are 125 facilities of tourist, sanitaria and health resort hunting and photo hunting, rafting, paragliding, in ancient sources of classical authors such as Pliny and of hydropower station on Syr-Darya River, which has sectorsfunctioning in the republic, including 51 hotels and snowboarding, speleotourism and other types of extreme Ptolemy. become an excellent tourist destination. Sanatoriums, 9 resorts, the rest are holiday houses and recreation areas, tourism. holiday houses, camping sites located in beautiful tourist bases and recreation camps. The majority of hotels orchards, have been constructed on its shores. are located in Dushanbe, Khujand, Kurgan-Tube, Kulyab and Khorog. Modern Tajikistan is a mountainous country with absolute Tajikistan has 3 international airports in Dushanbe, altitudesfrom 300 up to 7 , 495 meters above the sea level. Khujand and Kulyab. The republic's territory is crossed by 93% of the country is covered by mountain ranges that are three branches of railways from the west to the east, which related to the Pamirs, Hissar-Alay and Tien-Shan mountain link the central, northern and southern regions of the system. The mentioned ranges are separated by rich and republic through the territories of neighboring fertile lands of Ferghana, Zarafshan, Vakhsh and Hissar Turkmenistan and Uzbekistan. valleys. The complexity of the relief and large amplitude of mountain systems'altitudes causes an exceptional variety of flora and fauna.

Tajikistan is a country of the highest peaks, powerful glaciers,and rapid turbulent rivers, inimitable in its beauty lakes, unique flora and rare animals. It isprecisely the mountainous, floor landscape that defines a specific and unique nature of Tajikistan, the richness of its forms, Since ancient times the territory of Tajikistanwas located on brought to life by a variety of climatic zones. In an hour and Tajikistan is the richest country in reserves of fresh water important historical routes of the Great Silk Road a half hour's flight, one can leave the sultry heat of Vakhsh resources. Almost half of water resources of the Central connecting the East and the West. It occupied an important valley and reach the arctic cold of the Pamirs eternal Asian region are formed in high-altitude rivers, lakes and place in international trade and cultural exchange, from the snows. glaciers of the country. The Republic of Tajikistan ranks earliest times linking the possessions of Bactria - eighth in the world on reserves of hydropower resources. Taharistan (Chaganian, Shumon, Ahorun, , On the basis of 13 existing state wildlife sanctuaries and Particularly, the Gorno-Badakhshan Autonomous Region Vakhsh, Hutal, Rasht, Kumed, Darvoz, Vanj, Rushan and preservationsof "", "Romit", "Mozkul", "Dashti Jum", of the republic is very rich in lakes, which have the most Wakhan), Sogda, Istaravshan (Ustrushan) and Ferghana as well as the Tajik National Park, a unique environment, varying origins. The largest of them are Karakul, Zorkul, with India, Afghanistan and China. The Great Silk Road did landscapes and natural monuments are preserved in its Rangkul, Shorkul, Bulunkul as well as Lake Sarez, which not only become an exchange of goods between the East original form. Natural and recreational resources of the republic, the was formed as a result of earthquake in 1911. In general, in and the West, but also an exchange of ideas, cultures and As well as rare species of plants and animals listed in the availability of historical and cultural monuments, the Pamirs, in the altitude range of 3200 up to 5000 meters people. Consequently, a kind of cultural community, an Red Book, are preserved, including the horned goat predetermine the features of formed national tourist are concentrated 1450 lakes and 220 rivers or 83% of the amazing composition was created, in which with a varying (morhur), mountain argali (Marco Polo), argali product, promotion and implementation of which provides total area of lakes surface in Tajikistan. The largest lake in a stream of foreign tourists to Tajikistanon the world tourism degrees of intensity both “Western" and "Oriental" features (ureal), spotted Bukhara deer, snow leopards, the Tien- the Pamirs is a unique salty Lake of Karakul, located at an market. In this regard,the priority-driven sectors of manifest. For example, across the entire Great Silk Road, Shan brown bear, striped hyena, Indian mountain goose. altitude of 3,914 meters above the sea level. Its maximum international tourism in the country are considered the weapons manufactured by Sogdian craftsmen were 84 species of mammals, over 365 species of birds, 49 depth is 236 meters. It is believed that it was formed during following: famous. It is a known fact that in 718,the rulers of Sogdiana, species of reptiles, about 52 fish species and more than the boulder-period and the bottom of the lake, as well as some

REGIONAL PROFILES

Agroinvestbank 124 Ayni Street, (main branch) Tel: (3222) 2-35-44, 2-45-25, 2-55-44 Oriyonbank Qurghonteppa Mirzokadirova Street, Tel: +992 (3222)2-30-19, 2-52-38, 2-55-24

Eskhata Qurghonteppa Lenin Street, Qurghonteppa.

Tojiksodirotbonk Qurghonteppa 3-a Mirzokadirova Street, Tel: (83222) 2-23-92, 2-25-30, 6200666, E- mail:[email protected]

Agroinvestbank Khujand city 735700, 118 Firdawsi Street (main branch) Tel: +992 (3422) 6-48-30

Oriyonbank Khujand city 735700, 189 Khujandi Street Tel: +992 (3422) 6-37-71

Eskhata Khujand city Gagarina Street Tel: +992 (3422) 66-999 Tojiksodirotbonk Khujand city 85a Lenin Street 85a Fax: (83422) 4-39-86, 4-32-38 Tel: (83422) 4-39-86, 4-34-13, 600-63-00, 630-63-02 e-mail: [email protected]

First Microfinance Bank Khujand city Lenin Street 44 (P MB) Tel: +992 (3422) 6-29-24 Agroinvestbank Gorkiy Street, Shakhrinav settlement, Shakhrinav district. Phone: (3155) 446-20-21 17 Street, settlement, . Phone: (3137) 442-05-03 53 Somoni Street, Fayzabad settlement, Fayzabad district. Phone: (3135) 2-31-93 5 Lenin Street, Varzob settlement, . Phone: (3153) 199, 234, 140 9 Usmanov Street, Garm settlement, Rasht (Garm) district. Phone: (3131) 2-21-37 22 Somini Street, Tajikabad district. Phone: (44) 610-20-04 38 Somoniyon Street, Jirgatal district. Phone: (44) 610-20-07 (06) Rasht Street, Darband settlement, Nurobad district. Phone: (3133) 2-21-38 Orienbank 159 Tursunzade Street, Tursunzade. Phone: +992 (3130) 2-70-58, 2-25-49, 2-81-68 Javonon Street, Somoniyon. Phone.: +992 (3137) 442-01-77, 2-24-67 16 Somoni Street, Fayzabad. Phone.: +992 (3135) 3-25-62 7 Somoni Street, . Phone: +992 (3155) 3-11-13 5 Burhonov Street, Garm town, . Phone: +992 (3131) 2-16-16, 2-17-17

Eskhata 9 Burkhonov Street, Garm. 29 Somoni Street, Fayzabad. 57 Somoni, Rudaki district.

Tojiksodirotbank Адрес: 735000 12 Tolstoy Street, Tursunzade. phone.: (83130) 2-40-85, 2-41-93, 600-41-06, 600-41-07 e-mail: [email protected]

GBAO's legislative body, like those of other regions in Tajikstan, is called the Majlis, or Assembly of People's Representatives, who are elected for a five year term.

Specific information about investment conditions and opportunities in the GBAO region, may be obtained from the region's Department for Investment and State Property Management (www.gki.tj) at the following address:

Mr. Quvvat Faizullo, 75, Lenina Street, Khorog, Tajikistan Tel: +992 (3522) 2-46-30

8b. Finance & anking

There are five banking institutions represented in GBAO

Agroinvestbank Khorog 51, Lenin Street, Tel: +992 (35220) 4053, 6076, 6075

Oriyonbank Khorog 7 Azizbek Street, Tel: +992 (3522) 2-36-69, 2-28-64

Tojiksodirotbonk Khorog 48 Lenin Street, Tel.: (835220) 25-49, 29-67, 600-41-20, 600-41-18. E-mail: [email protected] First Microfinance Bank Khorog 4 Azizbek Street, Tel: (+992 3522) 2-55-25 (P MB)

9. Summary of GBAO's key development opportunities and constraints

Despite the constraints stemming from its mountainous topography, relative inaccessibility, harsh climate, and sparse population, GBAO has significant development potential in three main areas: minerals and mining; health and recreation; and, related to the latter, extreme or eco-tourism. The latter includes mountain climbing, trekking, camping, and cycling as well as transit to China, Kyrgyzstan, and Afghanistan- albeit for only up to six months maximum annually. Full development of all three, however, will require major improvements to the region's communications and transport infrastructure.

Thus, GBAO's priority targets for investors, domestic and/or foreign, are:

? Energy sector ? Mineral resource investigation, exploration, mining, and processing; ? Communications and transport infrastructure upgrading and development; ? and ? Health, recreation, and tourism promotion and development. 26 27

GUIDE FOR FOREIGN INVESTORS IMPLEMENTING ENTEPRENEURAL ACTIVITY IN THE REPUBLIC OF TAJIKISTAN

GUIDE FOR FOREIGN INVESTORS IMPLEMENTING ENTEPRENEURAL ACTIVITY IN THE REPUBLIC OF TAJIKISTAN

Content: I. Investment Policy and Legislation of the Republic of Tajikistan ...... 2 II. Investment Procedures ...... …………………………………………………………...3 a) Business Registration in the Republic of Tajikistan...... ………..3 b) Licensing of business activity...... ………...... 5 c) Certification of products and services………………………………………………..7 III. Investment Priority Sectors ...... ……………………………………………..8 IV. Investment Incentives Including Special Economical Zones...... …………………...10 V. Taxation...... ………………………………………………………………………12 VI. Employment and Labour ...... …………...13 VII. Banking System and Foreign Exchange...... ………...... 15 VIII. State Guarantee on Investors Protection and Dispute Resolution …...... 16 IX. Protection of Intellectual and Property Rights...... 19 X. Useful links...... ……………………………………………………………………….20

State Committee on Investments and State Property Management of the Republic of Tajikistan 734025Dushanbe, Republic of Tajikistan , Shotemur st., 27 Phone: (+992 37) 221 86 59;; Fax: (+992 37) 221 57 29 E-mail: [email protected] I. Investment Policy and Legislation of the Republic of Tajikistan II. Investment Procedures

Development of economic potential, arrangement of favourable conditions for the effective а) Business Registration in the Republic of Tajikistan business sector development, arranging a favorable climate for attracting investments and the activities of foreign investors, is one of the priority activities of the state. There are all the necessary prerequisites in Tajikistan for a successful and effective development of investments in various Tajikistan is a law-governed state and any business activity should be carried out after registering sectors of economy, the existing infrastructure and resources enable to talk about high a legal entity with the state. The legislation of the Republic of Tajikistan provides investors with a achievements and great future of the country. wide variety of different organizational and legal forms of establishing profit organizations. For instance, such forms can be: a limited liability company, a double liability company, open or closed Essential importance is also assigned to a legal side, a constant work is carried out for the joint-stock companies, production cooperatives and other forms. Kinds of entrepreneurial improvement of the existing legislation of the Republic of Tajikistan as well as various legislative activities are governed by various legislative acts, such as: reforms are implemented that aim to better the legislation of the Republic of Tajikistan.The country has created a favorable environment for business registration, procedures to obtain licenses, 1. Law of the Republic of Tajikistan “On joint-stock companies” dated March 5, 2007 #237, various permits have been considerably simplified, there are tax and customs preferences, a high which defines a legal status, an order of establishing, reorganizing, and liquidating of joint-stock level of property rights protection (particularly of investors), the rights of minority stockholders companies, the rights, obligations, protection of rights of stockholders and third parties, the have been significantly improved, the procedure of closing business and bankruptcy are authorities and responsibilities of bodies and officials of joint-stock companies. substantially simplified and etc. One of the numerous examples of the implemented reforms is the successfully realizied Program on the improvement of business environment - 200 days of 2. Law of the Republic of Tajikistan “On limited liability companies” dated May 10, 2002 # 53, reform, which was approved by the decree of the Government of the Republic of Tajikistan on July which defines a legal status of a limited liability company, its members' rights and obligations, an 2, 2009 # 386 and which contributed significantly to the creation of a favorable climate for both order of establishing, reorganizing, and liquidating of a company. domestic and foreign entrepreneurs. 3. Law of the Republic of Tajikistan “On production cooperatives” dated December 2, 2002 # Priority-driven sectors of economy development of the country are determined by the state until 68, which controls relations arising from the formation, activity and termination of cooperatives that 2015, which will be highlighted.As a result of active work on the creation of favorable conditions for are engaged in production, processing, marketing of industrial, agricultural and other products, business development and investment opportunities, on the basis of World Bank report "Building performance of work, trade, consumer and other types of services. Business 2010", the Republic of Tajikistan is recognized as one of the 10 countries-reformers among the 183 countries of the world. Reform in terms of improving the investment and business Law of the Republic of Tajikistan "On state registration of legal entities and individual environment continues and is under a close scrutiny of the President and the Government of the entrepreneurs" dated May 19, 2009 # 508 is the main legislative act controlling in detail the Republic of Tajikistan, under the auspices of international financial institutions. The strategic procedure of registration of a legal entity in the Republic of Tajikistan. In accordance with the objective of the Republic of Tajikistan is to promote an export-oriented multisectoral economy named law, state registration is carried out by tax authorities. Registration is carried out by a single through the development of traditional sectors and to enhance the share of private capital in the state agency. Period of registration is up to 5 working days from the date of submitting of all economy. required documents. The following documents are submitted for state registration:

A document, of the highest legal effect in Tajikistan is the Constitution of the Republic of Tajikistan. 1) application - is a special form which is approved by a registering authority; Article 12. of the Constitution stipulates that: “The state guarantees freedom of economic and 2) solution of the founder (protocol of the founders) on the establishment of a legal entity. The entrepreneurial activities, equality and legal assistance of all forms of ownership, including solution to establish a legal entity is signed by the founder (founders) of a legal entity; private”. It is also necessary to pay attention to the fact that the country has a special Law of the 3) a copy of a document proving the identity of the head of executive body if the documents are Republic of Tajikistan "On investments" dated May 12, 2007 # 260, which governs the relations submitted by the head, or a copy of identity document, and the power of attorney in the name of connected with the implementation of investment activities, legal and economic foundations of the authorized person in case if documents are submitted by a person entitled to act on behalf of revitalization, promotion and public support for investments by means of providing a fair, equitable the founders; legal regime and safeguards to protect the investors' rights in the territory of the Republic of 4) a copy of identity document of each founder (individual) of a legal entity; Tajikistan. 5) a copy of state registration of a legal entity or an extract from the register of legal entities of a foreign state (or other equivalent legal document proving the legal status of a foreign legal entity) in case, if the founder is a foreign entity. It is important to note that in this case the submitted The purpose of the named law is attraction and effective use of material and financial resources, documents should be legalized. advanced equipment and technology, managerial expertise in the economy of the Republic of Tajikistan; providing favorable conditions for investment activities, as well as conditions for free Legalization in the Republic of Tajikistan is carried out by Consular Department of the Ministry of use, transparency, ownership and disposal of investments; compliance with international rules of Foreign Affairs of the Republic of Tajikistan, and if abroad, by consular institutions of the Republic law and international practice of investment cooperation. Tax and customs legislation of the of Tajikistan. Legalization is carried out in accordance with Regulations on the procedure of Republic of Tajikistan provides investors with broad preferences, which creates favorable consular legalization, which was approved by the Minister of Foreign Affairs of the Republic of conditions for doing business in the territory of the Republic of Tajikistan. Tajikistan on November 19, 2008 # 428 and registered with the Ministry of Justice on November 27, 2008 # 464. Legalization of documents is not required in the event that there is an international treaty and agreement between the two countries and they are acknowledged by the Republic of Tajikistan;

2 3 6) a conclusion of an appropriate authority in case of mass media registration; representative office of a foreign legal entity; a copy of identity document, and the power of 7) state duty payment receipt (the rate of duty in accordance with Law of the Republic of Tajikistan attorney in the name of the authorized person in case if the documents for registering of a branch “On state duty” dated February 28, 2004, # 19 are 25 indicators for calculations, that is around or representative office of a foreign legal entity are submitted by the authorized person; 196 US dollars at the time of drafting this guide). 4) a power of attorney issued to the head of a branch or representative office; 5) a copy of a document confirming state registration of a foreign legal entity or other equivalent legal document confirming its legal status; All the documents submitted to a registering authority should be in the official language, i.e. Tajik 6) state duty payment receipt. language. In the event that a foreign company (foreign entity) is being registered, and the documents submitted are in a foreign language, while submitting, they must be translated into the official language and translation must be notarized. All the documents submitted to a registering authority should be in the official language, i.e. . In the event that a foreign company (foreign entity) is being registered, and the It should be noted that, depending on the choice of organizational and legal forms of established documents submitted are in a foreign language, while submitting, they must be translated into the legal entity, the founders must have founding documents such as the charter, foundation official language and translation must be notarized. agreement or the charter and foundation agreement. During the registration procedure, the Charter and a document confirming the formation of the authorized capital are not required (but Legalization is not required for documents of member-countries of relevant international treaties such information should be submitted to a registering authority within a year, indicating that the and agreements acknowledged by Tajikistan. authorized capital was formed). Following the procedure of state registration by a legal entity, it is necessary to obtain a taxpayer identification number (TIN) in tax authority. In order to obtain a Adocument confirming state registration of a branch or representative office is a Certificate of state (TIN), one must submit an application and a certificate of state registration. In practice, the registration of a branch and representative office of a foreign legal entity. It is a ground for opening procedure of (TIN) assignment takes 1- 2 working days. account in banking institutions, as well as for making of seals and stamps of the organization. Following the registration of a branch or representative office, it is necessary to obtain a taxpayer A document confirming state registration is a ground for opening accounts in banking institutions, identification number (TIN) in tax authority for which one must submit an application and a as well as for making of seals and stamps of the organization. An established organization can certificate of state registration of a branch or representative office. The branches and open bank accounts both in domestic currency (Somoni) and in foreign currency (for example in representative offices should exercise their activities on the basis of Rules, which should be US dollars). In order to open a bank account, the following documents should be submitted: approved by a legal entity that developed them. Apart from the documents mentioned above (which are necessary to open an account for a legal entity), to open a settlement account, one ? an application for opening an account; must provide a power of attorney of a directing agency, issued in the name of the head of a branch, ? a copy of the organization's certificate of registration and a copy of notarized founding representative office. documents; ? a card with signatures' samples and a copy of a seal in duplicate along with documents proving Procedure of opening bank accounts for legal entities and branches or representative offices is the identity of the persons entitled to the first and second signatures; regulated by Instruction # 171 “On procedure of opening, re-issuing and closing of bank accounts ? a copy of the document confirming the registration in tax authority as a taxpayer (TIN). by credit institutions in the Republic of Tajikistan”, which was approved by the Decree of the Executive Board of National Bank of Tajikistan # 190 dated May 29, 2009 and registered in the Based on the submitted documents, a contract is concluded between the organization and bank. Ministry of Justice of the Republic of Tajikistan#545 dated 25 September, 2009. The rate of bank fees is determined by the bank itself. It should be noted that certain activities, listed by law (for example: Law of the Republic of Tajikistan “On licensing certain types of activities” dated May 17, 2004 # 37), can be exercised by the investor Registration of a branch or representative office in the Republic of Tajikistan only after obtaining (and under) a special permit (license).

In case if a foreign investor decides that he/she wants to open a branch or a representation of b) Licensing of business activity his/her organization in the territory of the Republic of Tajikistan, it is also necessary for him/her to apply to a registering authority - tax authority, at the location (address) of a branch or representative office. State registration is carried out within five working days after submission of In accordance with the legal system of the Republic of Tajikistan, some kinds of business activities all the required documents. are subject to licensing. In Tajikistan, licensing is divided into 2 groups. Licenses that are issued for a period, no less than 5 years and licenses that are issued for a period no less than 3 years.

In order to register a branch and a representative office of a foreign legal entity, the following The first group includes the following kinds of businesses: documents are required for submission: 1. repair and maintenance of hoisting machinery activity; 1) an application – in a form approved by a registering authority; 2. activities on extraction, production, processing of oil, gas, coal and exploitation of oil and gas 2) a decision of an authorized body of a foreign entity to establish a branch or representative network structures; 3. activities on storage and sale of oil, gas and their processed products; office in the territory of the Republic of Tajikistanand to appoint the head of a branch or 4. activities on installation, setting-up and maintenance of energy facilities and equipment; representative office of a foreign legal entity, which are signed by the authorized officials of a 5. activities on generation, transmission and distribution of electric energy; foreign legal entity; 6. activities on implementation of design and survey works, construction of buildings and 3) a copy of a document proving an identity of the head of a branch or representative office of a structures; foreign legal entity in case if the documents are submitted by the head of a branch or

4 5 7. activities on design and survey works, construction, repair and reconstruction of highways, In addition to the above mentioned documents, a licensing authority on the basis of the Decree railways and road structures; of the Government of the Republic of Tajikistan “On approval of Rules on licensing 8. pharmaceutical activities; characteristics of certain types of activities" dated April 3, 2007 # 172 may require the provision 9. private health activities; of other documents, which are enshrined in Rules on licensing. It is not allowed to demand 10. activities related to import and export, production, sales, use, transportation, storage, from entrepreneurs the submission of documents which are not covered by the mentioned laws processing and disposal of radioactive substances; and rules. 11. air, automobile, railway transportation of passengers and freight activities; 12. passenger and freight terminals activities; All the documents submitted to the appropriate licensing authority for granting licenses are 13. assessment activities; accepted by inventory, a copy of which is sent (handed over to) a license applicant with a note 14. tourist activities; of date of receiving the documents by the authority. 15. auditing; 16. stock-exchange activities; Since the submission of all the required documents, the licensing authority decides to grant or 17. insurance activities; to refuse to grant a license within a period not exceeding thirty days. 18. production, import and export of tobacco products activities; 19. private veterinary activities; 20. activities on collecting of medicinal plants and harvesting of crude drugs; 21. private pension funds activities; c) Certification of products and services 22. credit bureaus activities. There can be a requirement of certifying products and services in the territory of the Republic of For considering an application for a license that is listed above, a license fee is charged, which Tajikistan, depending on a kind of business activity. The main standard legal act regulating legal, amounts to 4 indicators for calculations (at the time of drafting this guide, the amount is equivalent economic fundamentals of products certification, works and services, as well as rights, duties and to approximately 32 US dollars), which is non-refundable. For issuing a license, a fee of 10 responsibilities of participants of certification is Law of the Republic of Tajikistan “On certification of indicators for calculations is collected (about 79 US dollars). products and services” dated December 13, 1996 # 313. Products certification is an activity to confirm the conformity of products in accordance with established requirements. Products that are The second group of licensing includes the following kinds of businesses: manufactured in Tajikistan or imported into Tajikistan must have a certificate, in case if these products are subject to compulsory certification. 1. activities on implementation of banking operations; 2. activities on implementation of foreign exchange transactions; Certification is carried out for: 3. activities on production and sale of ethyl alcohol and alcohol-containing products; ? 4. activities in the field of electric link; consumer protection in matters of products safety for life, health and property, 5. activities on the use of mineral resources; environmental protection, information compatibility and interchangeability of products; ? 6. activities, work and services in the field of atomic energy usage. arrangement of conditions for the activities of enterprises, institutions, organizations and entrepreneurs on a single goods market of the Republic of Tajikistan, as well as for participation in international economic, scientific and technical cooperation and international For considering an application for a license that is listed above, a license fee is charged that trade, amounts to 10 indicators for calculations (at the time of drafting this guide, the amount is equivalent ? assisting consumers in adequate selection of products, verification of product-quality to approximately 79 US dollars), which is non-refundable. For issuing a license, a fee is charged, index claimed by the manufacturer (the seller). the amount of which is determined by the Government of the Republic of Tajikistan and is specified in Rules on licensing of certain kinds of activities. It is important to note that certification may be mandatory and voluntary. Foreign investors must pay attention to the Decree of the Government of the Republic of Tajikistan “On the list of goods (works, Law of the Republic of Tajikistan “On licensing certain types of activities” dated 17 May, 2004 # 37, services) that are subject to obligatory certification” dated October 1, 2008 # 486. In accordance with the named document, the authorized body on certification is theAgency on standardization, metrology, is the main legislative act regulating the activities which are subject to licensing, establishing a certification and trade inspection under the Government of the Republic of Tajikistan. Thus, in legal framework for issuing licenses, which aims to ensure the observance of standards and accordance with the mentioned Decree of the Government of the Republic of Tajikistan, the qualification requirementsfor the protection of interests and security of individuals, society and undermentioned are subject to mandatory certification: the state. The license is issued by the authorized public authority. The name of the licensing public authority is specified in Rules on licensing of certain types of activities. ? Alcoholic and non alcoholic beverages and vinegar; ? Tobaccoand manufactured tobacco substitutes; ? Ores, slag and ash; For obtaining a license, the following documents must be submitted: ? Mineral fuel, oil and products of their distillation; ? Fertilizers; 1. application- in a prescribed form; ? Wood and woodwork; charcoal 2. copies of founding documents and a copy of the certificate of state registration of a legal ? Cotton entity; ? Glass and glassware, etc. 3. a copy of a certificate confirming the registration of a license applicant in tax authority; 4. a document confirming a license fee payment for considering an application for a license More information on certification and standardization, as well as the entire list of products subject by a licensing authority; to mandatory certification can be found on the official website of the Agency on standardization, 5. information on skills of employees of a license applicant. metrology, certification and trade inspection under the Government of the Republic of Tajikistan at: www.standard.tj

6 7 III. Investment Priority Sectors The rapid development of energy and infrastructure facilities construction, revitalization of housing construction create a favorable foundation for the development of construction materials production. The country possesses significant reserves of resources that can be used in There is a Concept of entrepreneurship development in the Republic of Tajikistan for the period construction. of up to 2015 (approved by the decree of the Government of the Republic of Tajikistan dated Having one of the major primary aluminum productions in its territory, Tajikistan is interested in the December 3, 2004 # 469). The named concept defines the priority-driven sectors of economy development of sectors for processing of aluminum with high added value. It is a production of development of the country until 2015. aluminum shapes, foils and production of particularly pure aluminum and other commodities.

The main goal of the Concept of entrepreneurship development in the Republic of Tajikistan, is the Taking into consideration the existing stocks of natural resources and its proximity to major creation at state-level, of legal, socio-economic, financial and organizational conditions necessary consumer markets of China, Kazakhstan, Russia and India, the development of mining sector in for the formation of the country's private-sector economy, development of business infrastructure, Tajikistan has very good prospects. More than 400 mineral deposits have been explored in the providing of a foundation of efficient business in the country, as well as the identification of key country. macroeconomic and other leverages of government and public support of entrepreneurship based With the participation of foreign investors, an active exploration of oil and gas reserves detection is on private and corporate ownership. going on. A number of deposits have been successfully developed with the attraction of foreign investments and a great interest is observed from major international companies and investors Apart from favorable legislative treatment for investors including the Concept of entrepreneurship towards the natural reserves in the territory of Tajikistan. The oil and gas sector of Tajikistan is also development, there is a significant resource potential in the Republic of Tajikistan for a period of up prospective in the field of industry. to 2015, including: It should be noted that 24% of Tajikistan's territory have potential oil and gas deposits. There are ? The availability and accessibility of mineral resources; more than 100 prospective areas in need of geophysical and exploratory works. At present, the ? Favorable soil and climatic conditions; explored oil and gas reserves amount to 1% of total resources estimated at 1033 million tons of ? Availability of cheap and skilled labor; fuel. ? Renewable hydropower resources; ? Well-developed infrastructure of international trade Excellent climatic conditions of the country, characterized by an abundance of sun and water, as well as fertile valleys, enable to grow fruits and vegetables which are unique by taste. And the The above-mentioned resource potential and available investment legislation enable to define a proximity of large consumer markets of Russia, Kazakhstan and China, makes this business very number of economy sectors prospective for investments attraction: ? attractive. Therefore, agriculture and processing of its products, has been and remains one of the Energy top priorities of the country's development. The following attractive trends for investment can be ? Mining and chemical Industry distinguished here: ? Light Industry ? Transport and communication infrastructures ? Horticulture and vegetable growing (especially growing of ecologically clean products); ? Tourisminfrastructure and service ? Agricultural production processing; ? Banking area and insurance ? Processing of wool and hides; ? Storage and processing of agricultural products ? Cotton; ? Trade ? Bee-keeping; ? Sericulture; Hydroenergetics is one of the most important factors of further provision of economic development ? Livestock, etc. in the country. It should be noted that the Republic of Tajikistan is rich in its unique natural sites, mountain views, The hydropower potential of Tajikistan is estimated at 527 billion kWh of electricity per year, but at ponds, and various springs. Tajikistan is one of the centers of international mountaineering and present, the degree of development of these resources is no more than 6%. climbing as the mountains of Tajikistan are the most picturesque places that combine in their landscape the highest mountain ranges of Eurasia, grassy alpine meadows and cleanest rivers. The Government has identified a list of priority-driven hydropower and thermal power stations, Tajikistan's rivers and lakes have glacier system nourishment. The total length of 947 rivers is including 11 projects with a total investment of more than 5,0 billion US dollars. Several projects on more than 28,500 kilometers. The rivers account for more than 60% of water resources in Central power transmission lines construction are developed and are waiting for investors, which will Asia. enable to export electricity to the neighboring countries. Tajikistan is the only post-Soviet country where Sangtuda 1 hydropower station with a capacity of 600 MW, was put into operation with the The climate of Tajikistan is moderate, continental and dry. January temperatures range from 0 C to participation of Russian fund and the construction of Sangtuda 2 hydropower station with a +2 C in the valleys, in the highlands they descend to -30 C, July temperatures range from +23 C to capacity 400 MW is at its final stage, with the participation of Iranian investors. State program on +40 C in the valleys and in the mountains - from +4 C to +15 C. small hydroenergetics development has been adopted and implemented, which has identified more than 200 potential sites for the construction of small hydropower stations. The Government's As part of the Silk Road, there is a huge amount of historical monuments and attractions on its immediate plans are restructuring and subsequent privatization of the national energy holding territory, which draws attention of tourists from the near and the far abroad. company “Barki Tojik”, which will provide with new opportunities for diversification of industry and In this regard, Tajikistan implements a strategic development of tourism infrastructure and tourism attraction of additional investments. services, and in particular has the potential of ethno-ecological, recreational, hunting and mountaineering tourism. Mining industry, production of construction materials, light industry and particularly the deep In the field of tourism infrastructure development, a number of major hotels of world-known processing of cotton fiber, as well as processing of primary aluminum can be distinguished in the networks have been constructed. The hotel “Hyatt Regency” began operating in Dushanbe since field of industrial development. last year. 8 9 IV. Investment Incentives Including Special ? manufacture of plaster products, different brands of electrical wires; production of waste, cosmetics and chemical powdered detergents, pharmaceutical products and Economical Zones medicines; ? activities in the field of scientific and technical research, innovative activities, the The Republic of Tajikistan provides various incentives for the development of business sector by development of nanotechnology and etc. domestic and foreign investors. One of the most effective incentives to attract investments is the establishment and functioning of free economic zones. The main legislative act governing the Free economic zone "Sughd” institutional, legal and economic basis for the establishment, operation and liquidation of free economic zones, financing and entrepreneurial activity in them is Law of the Republic of Tajikistan In order to become a party of FEZ “Sughd”, it is necessary: "On free economic zones in the Republic of Tajikistan" dated May 17, 2004 # 24. Currently, there are four free economic zones in Tajikistan,namely: 1. To pass through state registration of a legal entity, branch or representative office. However, prior to the procedure of state registration of a legal entity, branch or representative 1. Free economic zone “Panchi poyon”. The zone is established for a term of 25 years. office, a potential party of FEZ "Sughd" should appeal to the Administration of FEZ and provide a The total area is 400 ha of land. Site of establishment is a territory of the array Karadum Kumsangir complete information about himself/herself (about the organization), including business plans, district, Khatlon region of the Republic of Tajikistan.(Adecree of the Government of the Republic of and (or) investment projects. Tajikistan "On the establishment of free economic zones" Panchi poyon "and" Sughd "dated May Business plans and investment projects must meet the following requirements: 2, 2008, # 227); 2. Free economic zone “Sughd”. The zone is established for a term of 25 years. The total ? the volume of investments for production activities -no less than the amount equivalent to 500 area is 320 ha of land. Site of establishment is a territory of south-western industrial zone of the city thousand US dollars; of Khujand, Sughd region of the Republic of Tajikistan. (A decree of the Government of the ? imports of no less than 90 percent of industrial-engineering equipment; Republic of Tajikistan "On the establishment of free economic zones" Panchi poyon "and" Sughd ? the term of earlier use of the imported industrial-engineering equipment should not exceed 3 "dated May 2, 2008, # 227); years; 3. Free economic zone “Ishkoshim”. The zone is established for a term of 25 years. Site of ? the volume of investments for export-import activities - no less than the amount equivalent to establishment is a territory of Ishkoshim district of Gorno-Badakhshan Autonomous Oblast of the 500 thousand US dollars; ? Republic of Tajikistan. (A decree of the Government of the Republic of Tajikistan "On the the volume of investments for the activities of rendering of services - no less than the amount establishment of free economic zones"Ishkoshim"and" Dangara" dated February 2, 2009, # 74); equivalent to 10 thousand US dollars; ? output of products should be realized no later than 3 years from the date of state registration. 4. Free economic zone “Dangara”. The zone established for a term of 25 years. Site of establishment is a territory of Dangara district, Khatlon region of the Republic of Tajikistan. (A State registration of a legal entity or registration of a branch or representative office shall be in decree of the Government of the Republic of Tajikistan "On the establishment of free economic accordance with the legislation, i.e. tax authorities of the Republic of Tajikistan in the same manner zones" Ishkoshim "and" Dangara "dated February 2, 2009, # 74). as stated above (in business registration section). At present, "Sughd" and "Panj" free economic zones are functioning in practice, the work on 2. To sign a Contract with theAdministration of FEZ on activities in the territory of FEZ regulatory and legal base of "Ishkoshim" and "Dangara free economic zones, continues. “Sughd”. The Contract specifies the requirements for activities in the territory of FEZ "Sughd, the procedure Law of the Republic of Tajikistan "On free economic zones in the Republic of Tajikistan" is of using preferences and special treatments, lease of land, buildings, industrial and administrative establishing a special (more simplified) customs, financial and currency, tax treatments, a facilities, necessary communications, financial and economic relations. In order to sign the simplified procedure for entry, sojourn and departure of residents and nonresidents. contract, an applicant must provide the following documents to FEZAdministration: ? application; Before proceeding to work in free economic zones, foreign investors are encouraged to review the ? proof of state registration in the territory of FEZ "Sughd; normative legal act, which governs in detail the activities of specific area (such acts include: the ? samples of signatures of the applicant's authorized persons Status of free economic zone "Sughd", which is approved by the Decree of Majlisi Namoyandagon Majlisi Oli of the Republic of Tajikistan dated 29 October 2008, # 1146, or the Status of free 3. To obtain the certificate of party of FEZ "Sughd. economic zone "Panj", which is approved by the Decree of Majlisi Namoyandagon Majlisi Oli of the After signing a Contract on the activities in the territory of FEZ "Sughd, a certificate is issued to a Republic of Tajikistan dated 29 October 2008, # 1147). A brief description of each of the free party of FEZ" Sughd. Certificates are issued for the following terms: economic zones is given further. ? a certificate for commercial activity is issued for a term of up to 10 years; ? a certificate for production activity is issued for a term of up to 15 years. Priority-driven activities in the territory of free economic zones are: Cost of certificates for any type of activity regardless of its volume of production and goods ? production of sewing thread, knitted garments, fabrics and ready-made products made of silk turnover is 5 000 US dollars. and cotton yarn, ready- made fabrics and clothing products made of wool; ? processing of cattle and small cattle's hides; Customs regime in FEZ "Sughd” ? production of chairs and furniture; ? production of artificial and synthetic colours; FEZ “Sughd” is part of the customs territory of the Republic of Tajikistan. In the territory of FEZ ? mechanical engineering; "Sughd" under the customs regime of free customs zone, foreign and domestic goods are placed ? production of non-metallic pipes; without collection of customs duties and taxes, as well as without the use of prohibitions and ? production of electrotechnical, radio-electronic and household appliances; restrictions of economic nature stipulated in accordance with normative legal acts of the Republic ? production of mineral fertilizers and nutritional supplements for agriculture; of Tajikistan.

10 11 Tax regime in the FEZ "Sughd" # Taxable income (on average per Rate and amount of tax month) In the territory of FEZ "Sughd", entrepreneurial activity of FEZ parties, irrespective of ownership, is exempt from all types of taxes stipulated by Tax code of the Republic of Tajikistan, except for the 1. Does not exceed the figure for Income tax is not imposed (zero rate) social tax and personal income tax of employees taken into service by FEZ parties. Social tax and calculations (35 somoni) personal income tax of employees taken into service by FEZ parties are charged and paid by FEZ parties independently in accordance with Tax code of the Republic of Tajikistan. 2. Over the figure for calculations 8 percent of the amount of taxable income (i.e. from 35 somoni) to 100 exceeding the figure for calculations (i.e. 35 Free economic zone "Panj” somoni somoni)

Priority-driven sectors are determined by the Administration of FEZ "Panj". In order to become a 3. Over 100 somoni The amount of tax row 2 plus 13 percent of the party of FEZ "Panj", it is necessary: amount of taxable income exceeding 100 somoni

1. To pass through state registration of a legal entity, branch or representative office. Profit tax for legal entities. The tax rate is 15% and for the enterprises of transport and However, prior to the procedure of state registration of a legal entity, branch or representative communications, services, and banks is 25%. The object of taxation is the profit of enterprises office, a potential party of FEZ "Panj", should appeal to the Administration of FEZ and provide a (resident). complete information about himself/herself (about the organization), including investment projects. Value- added tax. The tax rate is 18% of gross revenue.

The investment project must meet the following criteria: Excise duties. The tax rate is established by the Government of the Republic of Tajikistan.

? the volume of authorized capital for legal entities – no less than 500 thousand US dollars; Social security tax. The tax rate is set at 25% for insurers, and 1% for the insured. ? no less than 90 percent of imports of the main manufacturing equipment should be older than 5 years. Land tax.

2.T o obtain the certificate of a party of FEZ “Panj”, it is necessary to provide the following ? the city of Dushanbe - 500 somoni per ha; documents: ? the cities of Khujand, Kurgan-Tube and Kulyab - 375 somoni per ha; ? the cities of the republican subordination and the city of Khorog - 250 somoni per ha. ? a completed application form; ? an information letter about the nature of the company and its proposed activities in FEZ "Panj"; ? Highway users tax. The tax rate is 2% of the tax base. The tax rate for trading, procurement, proof of signatures of authorized persons of the company; supply and sales activities shall be equal to 0.5 percent of the tax base. ? for banking institutions – permit of the National Bank of Tajikistanon the right to establish a branch r a bank branch in FEZ "Panj". Sales Tax (cotton fiber and primary aluminum). The rate on cotton is 10% and for primary aluminum is 3%. Attention should be drawn to the fact that the certificate is issued for the same activities, same period and same value that the certificate of FEZ "Sughd parties. The customs regime of FEZ "Panj" coincides with the customs regime of FEZ "Sughd. The minimum tax on income. The rate is 1%.

Tax regime in FEZ "Panj" It should be noted that the investor conducting his/her operations in Tajikistan does not have to pay all taxes, which are set forth in Tax code of the Republic of Tajikistan. Types of taxes that the In the territory of FEZ "Panj", entrepreneurial activity of FEZ parties, irrespective of ownership, is investor would have to pay depend on the kind of business activity he/she is engaged in. Moreover, exempt from all types of taxes stipulated by Tax code of the Republic of Tajikistan, except for the each of the existing taxes have their own specific preferences - or exemptions under which the social tax and personal income tax. investor can fall. In order to define the correct types of taxes that the investor must pay, it is advisable to use the services of a professional accountant.

V. Taxation VI. Employment and Labour

One of the main issues interesting investors are the issues of taxation. Basic normative legal act regulating types of taxes, their rates, rights and duties of taxpayers and tax authorities is Tax code Once the investor has registered its business (opened a branch or representative office), it of the Republic of Tajikistan of 2004. All the existing taxes in Tajikistan are divided into 2 groups: becomes necessary to employ staff. Employment of the staff should be carried out in strict national taxes (16 types) and local (3 types). The main ones are the following: accordance with laws of the Republic of Tajikistan. The main legislation that regulates a legal relationship between employer and employee is the Labour code of the Republic of Tajikistan Income tax (income tax of individuals). dated1997. The named code provides for the rights and responsibilities of the employer. The following rates of income tax are set:

12 13 The employer has the right to: (1) manage the organization and make decisions within his/her It should be noted that foreign specialists may also carry out labor activity in the territory of the authority; (2) enter into and terminate labor agreements (contracts); (3) determine the number of Republic of Tajikistan. They must obtain an appropriate visa (if there is no agreement on visa-free employees; (4) encourage employees; (5) require employees to fulfill the terms and conditions of a regime between Tajikistan and the country where the specialist comes from). The main legislative labor contract. In case of violation of contract terms and conditions, to attract an employee to act establishing a legal opportunity for foreigners to work in the territory of the Republic of disciplinary liability; Tajikistan is Law of the Republic of Tajikistan "On legal status of foreign citizens in the Republic of Tajikistan"dated February 1, 1996, # 230. The employer must: (1) comply with all the laws in force of the Republic of Tajikistan, the labor contract, provide employees with normal working conditions, taking into account safety measures, The main types of visas that can be used by foreign investors and foreign specialists at entry (exit) sanitary norms and fire-prevention measures; (2) provide employees with timely payments; (3) to / from the Republic of Tajikistanare: provide employees with equipment and materials necessary for work performance. Investor's visa. Denoted by letter © and is issued to: While employing the staff, of particular importance for the investors is how well a labor contract is ? managers of world-famous foreign firms and companies, travelling as well as staying in the drafted. Labor agreement (contract) is made in a written form and it certainly must include: (1) Republic of Tajikistan with business purposes and who are involved in investing in Tajikistan's place of work (of organization or specific departments), (2) employee's labor function, (3) the first economy; day of work, (4) duration of labor agreement (contract), (5) wage, (6) duration and mode of working ? executives of large foreign firms and companies operating in the Tajik market or having real time, (7) duration of leave. At the discretion of the employer, other additional information can be plans to develop business projects; included in a labor agreement (contract). ? family members of the above mentioned persons.

Labor agreement (contract), is made in duplicate and signed by the parties. One copy is submitted Business visa. Denoted by letter (K) and is issued to: to the employee, the other is kept by the employer. It should be noted that when applying for a job, ? foreign citizens travelling to or staying in the Republic of Tajikistan for business purposes the employee must submit the following documents: (1) work record card (except in cases when a (participation in business negotiations, meetings, symposiums, forums, conferences, tenders, person is employed for the first time); (2) passport; (3) certificate of education; (4) for persons conclusion of contracts, establishment of joint ventures, study of the Tajik market, participation liable to military service - military ticket (or pre-conscription certificate). in auctions, exhibitions and trade fairs, provision of consulting and auditing services, etc.). Labor visa. Denoted by letter (M) and is issued to: While employing staff, an employer may establish a probation period for employees. The ? foreign nationals travelling to the Republic of Tajikistan for work, including, in accordance with probation period may not exceed 3 months. Duration of daily work cannot exceed: a six-day international treaties and agreements; working week is no more than 7 hours at a weekly rate of 40 hours, 6 hours - at a weekly rate of 35 ? family members of the above mentioned persons. hours and 4 hours - at a weekly rate for 24 hours. ? Visa - "Free economic zone". Denoted by letter (MOI) and is issued to: An employee has a right for rest. Types of leisure time are: ? foreign nationals- investors for employment and entrepreneurial activities in free economic zones. 1. breaks during the workday; 2. daily (between shifts) work breaks; A work permit is issued by the Migration Service of the Ministry of Internal Affairs of the Republic of 3. weekends; Tajikistan. More information on how to obtain the forms is available on the official website of the Ministry 4. holidays; of ForeignAffairs of the Republic of Tajikistan:www.mfa.tj 5. annual paid leave (annual leave is 24 calendar days); 6. social leave (a leave provided for creative activity, maternity leave, childcare and education without discontinuing work).

Concluded labor agreement (contract) may be terminated: VII. Banking System and Foreign Exchange

1. under the agreement of the parties. On these grounds any labor agreement (contract) may be terminated at any time; Any investor carrying out activities in the Republic of Tajikistan will definitely work with banks or 2. on the employee's initiative. In this case, the employee must notify the employer in a lending agencies. The main legislative acts regulating the operation of banks and lending written form 2 weeks in advance; agencies is the Law of the Republic of Tajikistan "On banking activity" dated May 19, 2009 # 524 3. on the employer's initiative. In this case, the termination of the contract must be well- and the Law of the Republic of Tajikistan "On the National Bank of Tajikistan" dated December 14, grounded. The reason for this may be: (1) dissolution of the organization, staff reduction; 1996 # 383. There are both public and private (commercial) banks and lending agencies in (2) discrepancy employee position; (3) a systematic failure of employee to perform his/her Tajikistan. job duties; (4) truancy, (5) coming to work in a state of alcohol and drug intoxication or under the influence of toxic substances. Currently, there are 14 banks and 3 loan associations, a non-bank financial institution and 120 4. on the expiry of the term for which a labor agreement (contract) was signed; microfinance institutions in the Republic of Tajikistan. There are 172 branches and 70 branches of 5. due to circumstances beyond the will of the parties. Such circumstances are: (1) appeal of lending agencies in Tajikistan. employee to military service; (2) if the employee is convicted and the sentence entered a legal force; (4) in connection with the death of an employee; (5) violating the rules of The list of operating banks and loan associations can be found on the official website of the employment. National Bank of Tajikistan at www.nbt.tj . The main function on the development and strengthening of banking system in the country is implemented by the National Bank of Tajikistan.

14 15 The main functions of the National Bank of Tajikistan are: 5. Guarantee of transparency of public authorities in relation to investors. The guarantee means that the official reports of government authorities of the Republic of Tajikistan and ? developing and implementing the monetary management of the Republic of Tajikistan; regulations affecting the interests of investors are published in the manner prescribed by the ? acting as the banker of state and its fiscal agent; legislation of the Republic of Tajikistan. Investors are provided with free access to information ? conducting economic and monetary analysis; about the registration of legal entities and their charters, registration of agreements concerning ? issuing licenses to banks, nonbank lending agencies and regulating and supervising their real estate, as well as granting of licenses, except for the information containing commercial and activities; other secrets protected by law. ? is a credit institution of ultimate authority for lending agencies; ? sole issuer of money and arranging for movement of money and withdrawal of money from 6. Guarantee of non-interference of public authorities in investment activities. The circulation; guarantee means that public authorities have no right to interfere in investment activities (except ? maintaining and managing the international reserves at its disposal; for cases stipulated by legislation of the Republic of Tajikistan). ? making up a balance of payments. 7. Guarantees of investors rights under nationalization and requisition. The guarantee A good legislative framework is formed in Tajikistan that governs the legal relationship arising means that in the event of natural disasters, accidents, infectious diseases, epidemics, epizootics between entrepreneurs and banks (lending agencies). A bureau of credit history is established in and other emergencies, the owner's property can be confiscated for the benefit of the public, with Tajikistan.Basic legislative acts, which may be useful to the investor: payment of the value of property (requisition). Appropriating the property belonging to citizens and legal entities to state property through its nationalization is permitted only under the law on ? Law of the Republic of Tajikistan“On chattel mortgage” dated March 1, 2005 # 93 nationalization of property enacted in accordance with the Constitution. In this case, the person is ? Law of the Republic of Tajikistan“On state registration of immovable property and rights to reimbursed the value of this property and other damages. The amount of compensation cost of it" dated March 20, 2008 # 375 nationalized or requisitioned investment property is determined on the basis of market value of the ? Law of the Republic of Tajikistan"On microfinance organizations" dated May 17, 2004 # 38 property. The amount of compensation cost of nationalized or requisitioned investment property ? Law of the Republic of Tajikistan"On credit histories" dated March 26, 2009 # 492 may be challenged by the investor in courts of the Republic of Tajikistan, as well as in arbitration ? Law of the Republic of Tajikistan"On currency regulation and currency control" dated court, international court and international arbitration court, if it is provided by agreement or November 4, 1995 #112 international treaty. VIII. State Guarantee on Investors Protection and 8. Guarantee the rights of the investor to transfer assets and information. The investor who originally imported property, documentary data or information in electronic form as an investment Dispute Resolution into the territory of the Republic of Tajikistan, has a right to unimpeded (without assignment of quotas, licensing, and being subjected to other non-tariff regulations of foreign trade activities) export of the mentioned property and information outside the Republic of Tajikistan after the The Republic of Tajikistan provides investors with the following guarantees: termination of investment activities in accordance with the customs legislation of the Republic of 1.Guarantee of equal rights for investors. The guarantee means equality of rights between foreign Tajikistan. and domestic investors, allowing no discrimination against investors on the basis of their nationality, ethnicity, language, gender, race, religion, location of economic activity, as well as the country of origin 9. Investor's rights to intellectual property. All rights of the investor in relation to intellectual of the investor or investments. property are protected in accordance with the legislation of the Republic of Tajikistan. 2.Guarantee of legal protection of the investor and investment activities. The guarantee means that state guarantees the investor a full and unconditional protection of the rights and legitimate 10. Investor's rights to the use of natural resources. Acquisition of rights by the investor to use interests. It is necessary to emphasize that, in case of amendments and additions to the investment land and other natural resources is exercised in accordance with the legislation of the Republic of legislation of the Republic of Tajikistan, investors within five years from the date of official publication of Tajikistan.Through the transfer of rights of ownership of buildings and structures, a right to use the such changes or additions, have a right to choose the most favorable conditions for them. It is important land also transfers to the investor along with these facilities, on the terms and conditions stipulated to note that this rule does not apply if amendments or additions are made to the Constitution of the by the legislation of the Republic of Tajikistan. A right to lease the land can be acquired by the Republic of Tajikistan and the Tajik legislation on matters relating to national security, health, investor in established order in accordance with the Land code of the Republic of Tajikistan. environmental protection, morality and ethics. 3.Guarantee the right to movement of foreign investors. The guarantee means that foreign 11. Guarantees for the investor exercising reinvestment. The investor may choose to reinvest investors, their representatives and foreign workers, have the right to move throughout the territory of the profits left after paying taxes in the territory of the Republic of Tajikistan. While carrying out the the Republic of Tajikistan, except in areas that may be restricted by the legislation of the Republic of reinvestment, investor enjoys a full legal protection, guarantees and privileges established by Tajikistan. hereby Law. 4. Guarantee the right to use income. The guarantee means that investors are entitled to: Opening of bank accounts in national and (or) foreign currency in the territory of the Republic of 12. Guarantees on products ownership and income from concession activities. Production Tajikistan; and revenues received by concessionaire as a result of concession activities are his/her property ? Freely use profits earned from their activities, after paying taxes and other obligatory in the amount stipulated by the concession agreement. payments; ? Transfer abroad wages and salaries in foreign currency; 13. Guarantees on profits from concession activities. Profits remaining with concessionaire ? Compensation owing to his/her investments (in the event of termination of investment activities, through no fault of the investor). after payment of taxes and other fees are at his/her full disposal. The concession agreement is ? Freely convert the national currency of the Republic of Tajikistaninto the other freely concluded for a period of no less than 50 years, depending on technical and economic convertible currency and purchase foreign currency in order to pay for operations outside the characteristics of the concession facility. The exceptions are mineral deposits that require major Republic of Tajikistan. capital investments and are characterized by long-run payback costs. The duration of the concession contract in this case can be determined by time which is necessary to complete the

16 17 processing of deposit, but may not be more than 99 years. Upon the expiry of the concession In order to enjoy tax benefits or customs preferences, the investor must prepare relevant agreement, the concessionaire, faithfully meeting the conditions of the contract, fully enjoys a right documentation, which confirms that the investor in accordance with the laws of the Republic of of priority of extending a short-term and medium-term contract. Tajikistan should be given an appropriate benefit. The investor prepares a letter on behalf of the organization (a branch or representative office), accompanied by all the supporting documents It should be noted that state also provides investors with investment benefits in the form of tax and forwards them to an appropriate state agency. benefits, customs preferences and issuance of state grants. Tax benefits are granted to investors in accordance with the procedure established by Tax code of the Republic of Tajikistan and Customs code of the Republic of Tajikistan. The procedure of issuing government grants and Resolution of Investment Disputes their types are determined by the Government of the Republic of Tajikistan.

Tax benefits and customs preferences include: Investment disputes between the participants of investment activities are solved in accordance 1. Exemption from customs duty and value added tax is subject to all businesses which are: with the terms of agreements concluded between the parties. In the absence of these agreements, ? involved in import of production and processing equipment and its component parts, for the investment disputes between the parties of investment activities are solved through the meeting formation or increase of enterprise's authorized capital stock or technical reequipment of existing of the parties, to the possible extent. In the event of failure to settle investment disputes in production, provided that the property is used directly for the production of goods, works and services accordance with signed agreements, disputes are resolved in thecourts of the Republic of in accordance with the constituent documents of the enterprise and does not belong to category of Tajikistan, as well asin international arbitration court, arbitration court , determined with the excisable goods. consent of the parties in accordance with the laws of the Republic of Tajikistan and international - ? involved in import of goods for the implementation of targeted projects approved by the legal acts. Government of the Republic of Tajikistan at the expense of (within) grants and (or) credit (loans), granted to legal entities or individuals by foreign states, governments of foreign states or international In case of any investment dispute, the investor is recommended to gather all the documents that organizations. are available on business (on investment disputes), which confirm his/her rightness. However, it is ? involved in import of goods for the construction of hydropower stations, which are particularly necessary to note that if the case is considered in the courts of the Republic of Tajikistan all the important targets for the Republic of Tajikistan. documents must be submitted in the official language, i.e. Tajik language. A legal process of the ? involved directly in import for their own needs by the newly established enterprises that are case is also conducted in state language. Before initiating a legal process, the investor should engaged in a complete cycle of processing cotton fiber to a finished product (from cotton yarn to cotton garments). consult with an experienced lawyer in order to get help in drafting of documents, and in consideration of a case on the merits. 2. Exemption from value added tax is subject to all the enterprises that are involved in export of goods produced by the newly established enterprises that are engaged in a complete cycle of processing cotton fiber to a finished product (from cotton yarn to cotton garments). IX. Protection of Intellectual and Property Rights 3. Exemption from profit tax of legal entities, the minimum corporate income tax, real property tax and land tax is subject to the newly established enterprises, engaged in a complete cycle of processing cotton fiber to a finished product (from cotton yarn to cotton garments). Protection of intellectual and property rights of investors in the Republic of Tajikistan is implemented by quite a number of standard and legal acts. The most significant of them are: 4. Transactions taxable at zero rate. All businesses that export goods except raw cotton, cotton fiber and primary aluminum are subject to VAT at a zero rate. ? Civil code of the Republic of Tajikistan. Part I, Part II, Part III. Civil code of the Republic of Tajikistan, regulates the relations originating among entrepreneurs, individuals and legal entities, 5. Exemption from income tax. New enterprises involved in the production of goods, in a year and is aimed at preventing violation and abridgment of rights. The methods of protection of civic of state registration and starting from a year following the year of the initial state registration, when rights are fixed in Civil code, which could benefit any individual who considers that his/her rights their founders make a minimum investment in theauthorized fund prescribed by the law, the are violated. It is important to mention that in many cases, the state registration of rights is a following amounts of investments, for a period of: ? 2 years if the investment is equivalent to 500 thousand US dollars; document confirming the right of property for either this or that object. The methods of protection ? 3 years if the investments is equivalent to over 500 thousand to 2 million US dollars; are: payment of damages; recovery of penalty; compensation of moral damage; compensation ? 4 years if the investment is equivalent to over 2 million to 5 million US dollars; payment. It is important to note that the most widespread way for the protection of a violated right is ? 5 years if the investment exceeds the equivalent of 5 million US dollars. to bring an action before the court. Depending on what right was precisely violated, the individual must have the relevant confirming documents - registration of a right such as patent, certificate or 6. Construction of hydropower stations. Building owners and general contractor - for a period other document. while hydropower station is constructed in the territory of the Republic of Tajikistan, are exempt ? Law of the Republic of Tajikistan “On copyright and adjacent rights” dated 13 from paying VAT, highway users tax, profit tax, the minimum corporate income tax, land tax, November, 1998 #726. The named law regulates the relations originating in connection with the vehicle ownership tax, real estate tax, social security tax as well as persons directly employed establishment and use ofscience, literature and art works (copyright) , phonograms, in the construction of hydropower stations and who are not the citizens of the Republic of performances, broadcasts, programs, on-air broadcasting and cable broadcasting Tajikistan. (adjacent rights).

7. Exemption from value added tax, highway users tax and social tax is subject to suppliers Copyright in a work of science, literature and art arises by virtue of its creation. For the emergence and subcontractors of construction, people directly involved in the construction of hydropower and realization of copyright, there is no requirement for registration, special design of work or stations. Individuals and legal entities directly engaged in the construction of hydropower stations, compliance with any formalities. For the notification of his/her rights, the holder of exclusive persons who are not the citizens of the Republic of Tajikistan. copyright has the right to use a sign of copyright's protection, which is placed on each copy of the

18 19 work and consists of three elements: (1) Roman letter “C” in circumference; (2) name (title) of the holder of exclusive copyright; (3) the year of the work's first publication.

For the emergence and realization ofadjacent rights , there is no requirement to comply with any formalities. For the notification of his/her rights, the producer of phonograms and the performer has the right to use a sign of adjacent rights' protection, which is placed on each copy of phonogram and (or) on each case containing phonogram and consists of three elements: (1) Roman letter “P” in circumference; (2) name (title) of the holder of exclusive adjacent rights; (3) the year of the phonogram's first release.

? Law of the Republic of Tajikistan “On inventions” dated 28 February, 2004 #17. New invention is subject to state registration and official publication of information on objects of industrial property, for which a protection document, such as patent should be issued. ? Law of the Republic of Tajikistan “On industrial standard” dated 28 February, 2004 # 16. Industrial standard is subject to registration and the information on it is entered into the state register. Following the registration, the individual is issued with a patent, which confirms his/her rights for industrial standard. ? Law of the Republic of Tajikistan “On trademarks and service marks” dated 5 March, 2007 234. The named law regulates the relations originating in connection with a legal protection and use of trademarks and service marks.Atrademark is subject to registration (in state register of trademarks of the Republic of Tajikistan), following the registration, the investor is issued with a trademark certificate. Verbal, graphic, voluminal and other symbols or their combinations can be registered as trademarks. A trademark can be registered in any color or color combination.

Before bringing an action before the court for the protection of a violated right, it is necessary for a claimant to prepare a probative base and prove that precisely his/her right was violated. It is worth trying to collect a maximum number of documents that confirm the rights of the individual appealing to court.

Х. Useful links

Public authorities (official websites).

1. The President of the Republic of Tajikistanwww.president.tj 2. The Parliament of the Republic of Tajikistan www.parlament.tj 3. State Committee on investments and State property management of the Republic of Tajikistan http://www.amcu.gki.tj 4. The Ministry of Justice of the Republic of Tajikistan www.minjust.tj 5. National Bank of Tajikistanwww.nbt.tj 6. The Ministry of ForeignAffairs of the Republic of Tajikistanwww.mfa.tj 7. The State Land Management Committee of the Republic of Tajikistanwww.komzem.tj 8. National Centre for Patents and Information of the Republic of Tajikistanwww.tjpat.org 9. State Committee on Statistics of the Republic of Tajikistan www.stat.tj 10. The Ministry of Economic Development and Trade of the Republic of Tajikistan www.met.tj

20 Appendix 2

TA 4978‐TAJ Implementation Support for Private Sector Development Strategy

State Committee on Investment & State Property Management (SCISPM)— Efficiency and Effectiveness Issues Background

• SCISPM established December 28, 2006—as part of overall government re‐organization (Presidential Decree #9, November 30, 2006) • Four functions:  privatization and state property management  coordination of official development assistance  promotion of investment  entrepreneurship support SCISPM Organizational Structure (1)

• Cha irman, plus three Deputy Cha irmen, each responsible for three departments:  Investments, including three units: (i) foreign direct investment promotion; (ii) expertise and analysis; (iii) aid coordination and monitoring;  Entrepreneurship Support, including two units: (i) entrepreneurship support; (ii) legal protection;  State Property Management, including four units: (i) state pppropert yand expertise; (()ii) joint stock and joint venture companies; privatization & local state bodies; restructuring & bankruptcy of State enterprises SCISPM Organizational Structure (2)

• Inaddition to five adiittidministrative support units, Sta te PtProperty Use Supervision Service and three State Unitary Enterprises (SUEs) report to Chairman directly:  TjiTajinves tSUE  State Property Sale SUE  Valuation of State Property SUE

• SCISPM staff totals: 100 (excluding service staff), of which 80 funded from state budget and 20 from own ‘special’ funds

• SCISPM Board totals: 7 SCISPM—overall (1)

• Four fifunctions onlyverylllooselyreldlated,wihith each requiring different institutional culture, experience, skills, and staff • Their unnatural merger in single committee gives rise to potential confusion—internally and externally • Multiple coordinating activities with other related agencies, committees, and ministries ineffective, inefficient , costly SCISPM—overall (2)

• SifiSpecificexamples:  once privatization process completed, separate institution no longer needed to manage remaining state properties  coordination of official development assistance— a fiscal, budgetary function—is Ministry of Finance responsibility  promotion of investment is, in most countries, sole mandate of autonomous public agency  entrepppreneurship support or private sector development also, in most countries, typically a non‐ governmental activity SCISPM—overall (3)

• Recommendidations:  transfer coordination of all official development assistance (financial and technical) to Ministry of Finance (as new, separate department)  create autonomous, public‐private national investment promotion agency  retain SCISPM’s existing privatization and state property management functions until privatization compltdleted, then tftransfer stttate property management to (e.g.) Ministry of Justice SCISPM—Tajikistan’s Investment Promotion Agency (IPA)—in international perspective • 14 practices of 33 top‐ranked IPAs (2009) Staff with public and private sector experience Salaries and benefits comparable to private sector Operational autonomy, reports to high‐level Focused on few priority sectors