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Tajikistan: Market Profile

Graph: Tajikistan factsheet
Graph: Tajikistan factsheet

1. Overview

Remittances from Russia account for half of Tajikistan's economic output and the economy is under pressure from gross external debt rising to 50.4% of GDP in 2017, from 42.0% in 2016. In addition, the banking sector struggles with a high number of non-performing loans. A potential International Monetary Fund (IMF) deal could reduce downside risks to the Tajik economy if agreed upon in 2019.

Sources: World Bank, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

May 2016
Referendum supported constitutional changes which scrap presidential term limits.

October 2016
Work began on the Rogun hydroelectric dam on the Vakhsh River. Downstream neighbour Uzbekistan has strongly opposed the dam, fearing the impact on its agriculture.

September 2018
The IMF visited Tajikistan in September 2018 raising the prospects of reaching an agreement with the government. The deal would focus on fiscal consolidation, reducing the economy's external vulnerabilities and securing a sustainable growth path.

Sources: BBC Country Profile – Timeline, Fitch Solutions

3. Major Economic Indicators

Graph: Tajikistan real GDP and inflation
Graph: Tajikistan real GDP and inflation
Graph: Tajikistan GDP by sector (2016)
Graph: Tajikistan GDP by sector (2016)
Graph: Tajikistan unemployment rate
Source: World Bank - World Development Indicators
Graph: Tajikistan unemployment rate
Source: World Bank - World Development Indicators
Graph: Tajikistan current account balance
Graph: Tajikistan current account balance

e = estimate, f = forecast
Sources: IMF, World Bank, Fitch Solutions
Date last reviewed: November 21, 2018

4. External Trade

4.1 Merchandise Trade

Graph: Tajikistan merchandise trade
Graph: Tajikistan merchandise trade

e = estimate
Source: WTO
Date last reviewed: November 21, 2018

Graph: Tajikistan major export commodities (2016)
Graph: Tajikistan major export commodities (2016)
Graph: Tajikistan major export markets (2016)
Graph: Tajikistan major export markets (2016)
Graph: Tajikistan major import commodities (2016)
Graph: Tajikistan major import commodities (2016)
Graph: Tajikistan major import markets (2016)
Graph: Tajikistan major import markets (2016)

Sources: Trade Map, Fitch Solutions
Date last reviewed: November 21, 2018

4.2 Trade in Services

Graph: Tajikistan trade in services
Graph: Tajikistan trade in services

Source: WTO
Date last reviewed: October 5, 2018

5. Trade Policies

  • Tajikistan has been a member of World Trade Organization (WTO) since March 2, 2013.
  • Tariff rates range between zero and 15%, with the overall trade-weighted import tariff averaging out to around 7%. The tax rate of 0% is granted to certain types of goods (e.g. some types of printed publication, unwrought wool, gaseous hydrocarbons, and electricity).
  • Tajikistan is signatory to several free trade agreements, primarily among the following Commonwealth of Independent States (CIS) countries: Russia, Belarus, Kazakhstan, and Kyrgyzstan.
  • The importation of alcohol and tobacco products in Tajikistan may be subject to quantitative restrictions and excessive requirements for health, safety and security.

Sources: WTO - Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Multinational Trade Agreements

Active

  1. Armenia (effective date: March 1994): Tajikistan's main exports to Armenia were other made-up textile articles, sets, worn clothing, and worn textile articles and rags in 2016. Tajikistan's main imports from Armenia were pharmaceutical products in 2016.

  2. Belarus (effective date: 1998): Belarus exports to Tajikistan include sugar, tractors, carpets and flooring, construction materials, medications, malt, refrigerators, and freezers. Tajikistan exports to Belarus include cotton yarn, untreated cotton fibre, dried fruits and nuts.

  3. Kyrgyzstan (effective date: January 2006): Tajikistan mainly exports fruits, nuts and tobacco to Kyrgyzstan. Tajikistan's imports from Kyrgyzstan include coffee, tea, and milk, preparations of cereals, spirts and vinegar.

  4. Russia (effective date: April 1993): In 2017, Russia’s trade with Tajikistan totalled USD717.6 million, up 4.31% compared to 2016.

  5. Ukraine (effective date: July 2002): The main imported goods from Ukraine to Tajikistan are foodstuff, canned goods, sugar, confectionery, pharmaceuticals, cement, bauxite, coal, coke, pitch, oil, synthetic corundum, aluminium oxide, aluminium hydroxide, motors and generators, turbines, paper, building materials, metal products, home appliances, agricultural equipment, tractors, machinery, products used in the electrical, railway cars, furniture and accessories. The main exported goods from Tajikistan to Ukraine are raw cotton, food products, including fruit and vegetables, dried fruit.

  6. Uzbekistan (effective date: January 1996): Uzbekistan exports to Tajikistan mainly transportation services, mineral fertilisers and food products. The list of exported Tajik goods includes cables, carpet products, building materials and coal. With a growing range of products traded, it is hoped that bilateral trade will reach USD500 million by 2020.

  7. CIS Free Trade Area (CISFTA) (Effective date: September 2012) - The CISFTA is a FTA between Russia, Ukraine, Belarus, Uzbekistan, Moldova, Armenia, Kyrgyzstan and Kazakhstan. The free trade zone area was designed to reduce all trade fees on a number of goods between participating countries.

  8. Economic Cooperation Organization Trade Agreement (effective date: 2008): Free trade region formed between the countries of Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan. Intra-regional trade accounts for around 7.64% of the total trade of the member states.

  9. Eurasian Economic Union (EEU)/Eurasian Customs Union (ECU): Consists of Russia, Kazakhstan, Belarus, Kyrgyzstan and Armenia. No customs are levied on goods travelling within the customs union and members of the customs union impose a common external tariff on all goods entering the union. It is hoped that Tajikistan will have observer status in the medium term.

Under Negotiation

  1. EEU/ECU: Consists of Russia, Kazakhstan, Belarus, Kyrgyzstan and Armenia. No customs are levied on goods travelling within the customs union and members of the customs union impose a common external tariff on all goods entering the union.

  2. Pakistan-Tajikistan Preferential Trade Agreement: Pakistan’s major exports to Tajikistan include sugar, dairy products, medical and pharmaceutical products, construction material including cement. Raw cotton, chemical materials and products and glass and glassware are imported from Tajikistan.

Source: WTO Regional Trade Agreements database

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Tajikistan FDI stock
Graph: Tajikistan FDI stock
Graph: Tajikistan FDI flow
Graph: Tajikistan FDI flow

Note: Outward FDI data not available
Source: UNCTAD
Date last reviewed: October 5, 2018

7.2 Foreign Direct Investment Policy

  1. The Tajik government continues to publicly advocate for increased foreign investment, particularly in energy and transport infrastructure. All sectors of Tajikistan’s economy are open to foreign participation with the exception of aviation, defence, security, and law enforcement which require special government permission for the operation of such types of businesses or services.

  2. Among the key foreign investors are Nelson Gold Corporation (mining of gold and silver), Gulf International Minerals (mining of gold fields), Kabool Textiles and Adjind International (textile industry).

  3. Tajikistan’s legislation allows for 100% foreign ownership of local companies, but the government can legally expropriate property under the terms of Tajikistan's Law on Investments, Law on Privatisation, Law on Joint Stock Companies and Criminal Code.

  4. The State Committee on Investments and State Property Management of the Republic of Tajikistan chiefly facilitates FDI in the country.

  5. Tajikistan’s Investment Law (Article 4) guarantees equal rights for both local and foreign investors. According to this law, foreigners can invest by jointly owning shares in existing companies with other Tajik companies or Tajik citizens; by creating fully foreign-owned companies; or by concluding agreements with legal entities or citizens of Tajikistan that provide for other forms of foreign investment activity.

  6. Tajik law allows foreign firms to acquire assets, including shares and other securities, as well as land and mineral usage rights. Foreign firms may also exercise all property rights to which they are entitled, either independently or shared with other Tajik companies and citizens of Tajikistan.

  7. The State Investments and Property Management Committee is responsible for filing and coordinating foreign investment project proposals as they pass through the review pipeline.

Sources: WTO - Trade Policy Review, ITA, US Department of Commerce

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Free Economic Zones (FEZs): Sughd, Pyanj, Ishkoshim and DangaraIn these zones, investors benefit from:

- Free transfer of income abroad.

- Import of goods to the FEZ is exempt from customs and taxes, as well as application of prohibitions and restrictions of an economic nature, established in accordance with the Tajik law; export abroad of goods from FEZ is exempt from customs and taxes, as well as application of prohibitions and restrictions of an economic nature, established in accordance with the Tajik law.

- Profits of foreign investors and wages of foreign employees, resulting in a foreign currency, may be freely repatriated.

- Simplified procedure of entry and exit for foreign employees - including 50% decrease of consular fees.

- Exemption from all taxes, except the individual income tax (from 8% to 13% withheld from employee salary) and social tax (25% from payroll budget).

- Businesses have the right to attract foreign workers, mainly in the position of managers and technical advisors; however, the number of foreign employees should not exceed 20% of the total number of employees in the FEZ.

- The one-stop registration process speeds up the process of opening a business.

Sources: US Department of Commerce, Fitch Solutions

8. Taxation – 2018

NIL

9. Foreign Worker Requirements

9.1 Localisation Requirements

The employment of foreign nationals is not discouraged, but there are few jobs available. According to the Tajik Law on Audits, for local companies at least 70% of the workforce must be local employees. If the CEO of the company is foreign, then the percentage of local staff should be at least 75%.

9.2 Foreign Worker Permits

Work visas for foreigners are issued in Tajikistan for a duration of no more than three months. Work visas can be extended on the basis of a work permit, provided by the Migratory Service of the Ministry of Internal Affairs of the Republic of Tajikistan. Companies attempting to employ foreign citizens must apply for a corporate work licence in order to receive permission to hire foreign employees. A letter must be submitted to the immigration authority outlining the staff list of the company. A corporate work licence is issued, subject to application as well as the demands of the local labour market. A corporate work licence is usually issued for up to one year, but can be extended on an annual basis; work permits for foreign nationals must be obtained by a company on the individual's behalf, and last for up to one year, with the possibility of extension. Dependents may accompany a main traveller by obtaining a visa on the basis of the main applicant's application.

Sources: Government websites, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody's
B3 (Stable)28/08/2017
Standard & Poor'sB- (Stable)28/08/2017
Fitch Ratings
Not Rated
Not Rated

Sources: Moody's, Standard & Poor's
Date last reveiwed: November 26, 2018

10.2 Competitiveness and Efficiency Indicators


World Ranking
201620172018
Ease of Doing Business Index
130/189128/190123/190
Ease of Paying Taxes Index
172/189140/190132/190
Logistics Performance Index
153/160N/A134/160
Corruption Perception Index
151/176161/180N/A
IMD World CompetitivenessN/A
N/A
N/A

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices


World Ranking
201620172018
Economic Risk Index Rank188/202
Short-Term Economic Risk Score35.639.240.2
Long-Term Economic Risk Score34.637.236.3
Political Risk Index Rank189/202
Short-Term Political Risk Score47.347.349
Long-Term Political Risk Score34.236.236.2
Operational Risk Index Rank126/201
Operational Risk Score4344.843.0

Source: Fitch Solutions
Date last reveiwed: November 26, 2018

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK
Tajikistan is one of the politically unstable countries in the Central Asian region, as it remains excessively dependent on remittances from Russia and is highly vulnerable to military Islamism due to its proximity to Afghanistan.

Tajikistan's economic success is increasingly tied to an agreement with the IMF and the construction of the Rogun Dam, which is projected to be completed in 2032 and the government issued USD500 million of 10-year Eurobonds to finance the construction. If completed on time, the dam will produce enough electricity to meet Tajikistan's needs and be sold to neighbouring countries. This would be a boost to the economy, which suffers from recurrent power outages. However, failure to complete the project risks complicating the process of rolling over its debt. Subsequently, risks remain high and the government will have to maintain fiscal caution over the coming years to ensure investor confidence.

OPERATIONAL RISK
There are considerable additional costs associated with employing workers in Tajikistan, which include generous overtime premiums, high annual leave allowances, and significant labour taxes and social security contributions. Although severance packages are not particularly burdensome, employers are required to give workers over two months’ notice for redundancy dismissal, which restricts the ability of investors to react speedily to changes in market conditions. In addition, the productivity levels remain hamstrung by logistics gaps, shortages of skilled labour and slow reform momentum in terms of investment policy.

Date last reviewed: November 23, 2018

10.5 Fitch Solutions Political and Economic Risk Indicies

Graph: Tajikistan short term political risk index
Graph: Tajikistan short term political risk index
Graph: Tajikistan long term political risk index
Graph: Tajikistan long term political risk index
Graph: Tajikistan short term economic risk index
Graph: Tajikistan short term economic risk index
Graph: Tajikistan long term economic risk index
Graph: Tajikistan long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: November 26, 2018

10.6 Fitch Solutions Operational Risk Index


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Tajikistan Score43.051.241.838.840.1
Caucasus and Central Asia Average49.654.952.046.644.9
Caucasus and Central Asia Position (out of 8)56
7
6
5
Emerging Europe Average56.954.158.458.556.8
Emerging Europe Position (out of 31)2824
30
29
27
Global Average49.649.749.949.149.8
Global Position (out of 201)12695
132
134
130

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Tajikistan vs global and regional averages
Graph: Tajikistan vs global and regional averages
Country
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Security Risk Index
Georgia61.664.769.754.857.1
Kazakhstan57.771.656.054.049.3
Azerbaijan57.660.358.059.352.8
Armenia55.156.156.849.957.6
Tajikistan43.051.241.840.440.1
Kyrgyzstan42.752.846.638.033.5
Uzbekistan41.349.248.834.732.5
Turkmenistan37.733.837.843.136.1
Regional Averages49.654.952.046.844.9
Emerging Markets Averages46.848.047.545.846.0
Global Markets Averages49.749.850.049.349.9

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: November 26, 2018

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Tajikistan

Graph: Major export commodities to Tajikistan (2017)
Graph: Major export commodities to Tajikistan (2017)
Graph: Major import commodities from Tajikistan (2017)
Graph: Major import commodities from Tajikistan (2017)

Note: Graph shows the main Hong Kong export to/import from Tajikistan (by consignment)

Graph: Merchandise exports to Tajikistan
Graph: Merchandise exports to Tajikistan
Graph: Merchandise imports from Tajikistan
Graph: Merchandise imports from Tajikistan

Note: Graph shows Hong Kong exports to/imports from Tajikistan (by consignment)
Exchange Rate HK$/US$, average
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: October 8, 2018


2017
Growth rate (%)
Number of Tajik residents visiting Hong Kong59
-27.2

Source: Hong Kong Tourism Board


2017
Growth rate (%)
Number of European residents visiting Hong Kong1,929,824
-2.0

Source: Hong Kong Tourism Board
Date last reviewed: November 27, 2018

11.2 Commercial Presence in Hong Kong


2016
Growth rate (%)
Number of Tajik companies in Hong KongN/A
N/A
- Regional headquarters
- Regional offices
- Local offices

Source: Hong Kong Census and Statistics Department

11.3 Treaties and Agreements between Hong Kong/PRC and Tajikistan

Bilateral Investment Treaty with mainland China entered into force in January 1994.

11.4 Visa Requirements for Hong Kong Residents

Hong Kong residents need to apply online for an electronic visa for stays with a duration of up to 45 days. Residents need to visit the website: Visa Tajikistan. On the website, applicants need to fill in their personal information, upload a copy of their passport and pay a fee of USD50 by credit card via the website. Once this is done, applicants receive an electronic visa by email within two days.

Source: Visa Tajikistan
Date last reviewed: November 26, 2018

Content provided by Picture: Fitch Solutions – BMI Research
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