COMMERCIAL HORTICULTURE AND AGRICULTURAL MARKETING PROGRAM (CHAMP) Tajikistan Trade Corridor Report November 2018 This publication was produced for review by the United States Agency for International Development. It was prepared by Roots of Peace. COMMERCIAL HORTICULTURE AND AGRICULTURAL MARKETING PROGRAM (CHAMP) Tajikistan Trade Corridor Report Cooperative Agreement Award: No. 306-A-00-10-00512-00 Cooperative Agreement Recipient: Roots of Peace Period of Cooperative Agreement: February 1, 2010 - December 31, 2019 Amount of Cooperative Agreement: $71,292,850 Agreement Officer Representative: HameeduLLah H. Safi CHAMP CONTACT INFORMATION Bagie Sherchand CHAMP Chief of Party [email protected] Gary Kuhn President, Roots of Peace [email protected] Heidi Kuhn Founder and Chief Executive Officer, Roots of Peace [email protected] Produced to meet the requirements of the CHAMP Cooperative Agreement, this report is intended to provide USAID with a report analyzing the trade corridor between Afghanistan and Tajikistan. DISCLAIMER: The views expressed in this pubLication do not necessariLy refLect the views of the United States Agency for InternationaL DeveLopment (USAID) or the United States Government. Table of Contents Abbreviations ............................................................................................................................................. 2 Executive Summary .................................................................................................................................. 3 1. Country ProfiLe and External Trade ....................................................................................................... 4 Country ProfiLe ......................................................................................................................................... 4 BiLateraL Trade with Afghanistan .............................................................................................................. 4 Import and Export .................................................................................................................................... 4 2. End Market Analysis ............................................................................................................................ 10 Market ChanneLs ................................................................................................................................... 10 GeneraL Business Environment ............................................................................................................. 12 Import Requirement and Documentation .............................................................................................. 13 3. Transport Routes ................................................................................................................................. 14 Tajikistan's Geography .......................................................................................................................... 14 Transit Options ...................................................................................................................................... 16 ConcLusion ............................................................................................................................................... 21 1 CHAMP Tajikistan Trade Corridor Report Abbreviations ADB Asian DeveLopment Bank AFG Afghanistan BCP Border Crossing Point CAGR Compound AnnuaL Growth Rate CHAMP CommerciaL HorticuLture and AgricuLturaL Marketing Program EAEU Eurasian Economic Union EBRD European Bank for Reconstruction and DeveLopment GIRoA Government of IsLamic RepubLic of Afghanistan IFC InternationaL FinanciaL Center KAZ Kazakhstan KGZ Kyrgyzstan Kph KiLometers per hour MAIL Ministry of AgricuLture, Irrigation and Livestock MoCI Ministry of Commerce and Industries PAK Pakistan PRC PeopLe RepubLic of China SPS Sanitation and Phyto-Sanitary TAJ Tajikistan TEU Twenty Foot EquivaLent TIR InternationaL Transport Routiers TKM Turkmenistan USAID United States Agency for InternationaL Aid USD United States DoLLar UZB Uzbekistan XUAR Xinjiang Uygur Autonomous Region 2 CHAMP Tajikistan Trade Corridor Report Executive Summary BiLateraL trade between Afghanistan and Tajikistan in 2017 amounted to $113 miLLion, of which Afghanistan imported $111.57 miLLion from Tajikistan and exported $1.43 miLLion in return. ALuminum and cotton comprise the main Tajik exports. The country exported $27 miLLion in agricultural products in 2017, including onions ($8.52 miLLion), shelLed walnuts ($7.41 miLLion), dried apricots ($4.19 miLLion), fresh grapes ($3.98 miLLion), fresh apricots ($1.52 miLLion) and fresh plums ($1.18 miLLion). Kazakhstan and Russia are the top markets for Tajik agricuLturaL exports, accounting for $5.52 miLLion in 2017. Exports to Russia have increased in recent years, though Tajik exports experienced an overalL downward trend from 2014 to 2017 as Kazakhstan diversified its food suppLy sources. Tajik consumers commonLy visit open-air bazaars to buy food items. Modern retaiL outLets with cold-chain faciLities began to deveLop in 2016 when the first Auchan hypermarket opened in the capital of Dushanbe. Other nationaL retaiL chains such as Tajero also started to modernize their existing stores and adopted new food safety standards. Interestingly, international financial intermediaries were involved in financing these efforts, which demonstrated the importance for financial support in times of transition. Such modernization efforts aLso compeLLed LocaL suppLiers to raise their performance standards to meet the increasing requirements set by the retaiL sector. Although Afghans and Tajiks shared some simiLarity in terms of Language and cuLture, there are significant chalLenges in cross-border trade between the two countries. Tajikistan onLy has a popuLation of 8.84 miLLion and a GDP per capita of $809. It reLies heaviLy on remittances from the 1 miLLion citizens working in the Russian Federation, which accounts for 30% to 40% of GDP. Furthermore, trade procedures are cumbersome and the paperwork time consuming. Also, the two countries grow simiLar agricultural items, so demand is not readily present, apart from imported tropicaL fruits from Pakistan via Afghanistan. On the other hand, Tajikistan is an important transit country to Kazakhstan and China. The Afghanistan- Tajikistan-China route holds promising opportunities for Afghan exports. Products are consolidated 300 km from the China-Tajik border at Kashgar, a Large commercial hub and a key node in the ancient siLk road. Tajik drivers transport consumer and industrial goods there to the Shirkhan Bandar border. Trucks return empty as there is no triLateraL transit trade agreement between the three countries. If such an agreement is established, Afghan exports can be Loaded onto empty return trucks, which can reduce the cost of transportation (a one-way trip with 20 tons of goods costs $9,326). Prospective items such as pine nuts from Afghanistan have strong market potential and can be shipped in this way. Other routes permit goods from KabuL to reach Dushanbe and Almaty. A 40-foot refrigerated container truck costs $1,479 one-way from KabuL to Dushanbe. The same payLoad wouLd cost $5,400 one-way to Almaty. To access Almaty, the aLternative transit route via Uzbekistan is more competitive, as Uzbekistan has a direct border with Kazakhstan whiLe Tajikistan does not. The Tajikistan trade corridor is aLso hampered by the disintegrated raiLway network in Tajikistan. In summary, Tajikistan is most viable as a transit country to China rather than an ultimate destination for Afghan agricultural exports. In terms of reaching Kazakhstan and Russia, Uzbekistan offers a more competitive choice as a transit country. 3 CHAMP Tajikistan Trade Corridor Report 1. Country Profile and External Trade Country Profile Table 1 - Tajikistan Country Profile (2017) Indicator Values PopuLation 8.84 miLLion Gross Domestic Product (NominaL GDP, USD) $7.15 biLLion GDP per capita $809 USD UnempLoyment Rate 2.3% Foreign Trade $3.262 biLLion Imports $2.389 biLLion Exports $873 miLLion Source: Tajikistan National Bank and Asian Development Bank. Bilateral Trade with Afghanistan Bilateral trade with Afghanistan, as noted on the tabLe below, is unbalanced. In 2017, Afghanistan imported nearLy 80 times more from Tajikistan than it exported. Table 2 - Bilateral Trade between Afghanistan and Tajikistan (2017) Indicator Values TotaL BiLateraL Trade, 2017 $113,010,581 Tajikistan imports from Afghanistan $1,433,204 Tajikistan exports to Afghanistan $111,577,377 Source: Afghanistan Chamber of Commerce and Industries (ACCI) Import and Export Tajikistan’s trade structure is concentrated on mineraLs and cotton. MineraLs dominate the List of exports, accounting for eight of the top 10 items. In 2017, aLuminum was the number one export, contributing $159 miLLion (16.01%), foLLowed by goLd, zinc and Lead. Cotton is the ranked 5th, whiLe frozen fish fiLLets are ranked 8th. AgricuLture exports are fresh and chiLLed onions ($8.52 miLLion, 0.86%), sheLLed waLnuts ($7.41 miLLion, 0.74%) and dried apricots ($4.19 miLLion, 0.42%). The top imports in 2017 featured a variety of consumer and industriaL products. The top import item was wheat ($165 miLLion, 4.99%). Industrial materials such as plastic and oiLs dominated the top five items. No other agriculture products were imported, which demonstrated the country's self-sufficiency in fruits and vegetables. Tajikistan does export a