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EASTERN EUROPE AND CENTRAL ASIA AGROINDUSTRY DEVELOPMENT COUNTRY BRIEF 2014 TAJIKISTAN Contents Agro-industry national policy framework ........................................................................................................................ 2 Economic and social development and trends .............................................................................................................. 3 Agro-industry outlook and performance ......................................................................................................................... 5 Trade liberalization, WTO accession and trade performance.................................................................................... 8 Foreign direct investments ................................................................................................................................................. 11 Food safety, certification & quality control ................................................................................................................... 13 Business environment and competitiveness ............................................................................................................... 13 1 Key Economic Indicators1 2009 2011 2012 2013 Food&Beverages Indicators 2009 2011 2012 2013 GDP (PPP), current intl.$, billion 14.6 17.3 18.9 20.6 Value Added, % of manufactur. n/a n/a Manufacturing VA, % of GDP 14.4 11.0 10.8 11.2 Enterprises, % of manufacturing n/a Agriculture VA, % of GDP 20.9 27.2 26.6 27.4 Employment, % of manufacturing Employment in Agri., % of total n/a n/a n/a 25.6 Gross Fixed Capital F.,% of GDP 14.3 15.5 15.4 0.3 1.0 Merch. trade., % of GDP 71.9 Merch. exports, curr. US$ billion Merchandise imports, US$ bln n/a n/a n/a n/a n/a 9.3 n/a n/a n/a Investments, % of manufacturing n/a n/a n/a n/a 14.1 FDI inflow, % of total inflow n/a n/a n/a n/a 2.6 n/a Net food trade, US$ billion n/a n/a 68.4 67.3 n/a Food exp.,% of merch. exp. n/a n/a n/a 1.01 1.26 1.36 n/a Food imports, % of merch. imp. n/a n/a n/a 2.57 3.21 3.78 n/a Food exports, 2006-11 growth. % 4.7 Exports annual growth, % 7.1 6.2 5.9 5.5 Food imports, 2006-11 growth. % 11.6 Imports annual growth, % 7.7 6.7 6.2 5.9 Food prod. index (2004-06=100) 145 n/a GNI per capita, PPP 1’000 c.intl.$ 1.9 2.2 2.3 2.5 Agribusiness Indicators Value FDI net inflows., % of GDP Trade per capita, US$ 2010-2012 Doing Business Indicators Rank Global Merch. Exports Rank 2012 Imports Rank 2012 141 700 FDI inflow rank 143 Global Competitiveness Index -0.4 115 n/a n/a 130 2.03 155 100 n/a 145 135 Agro-industry national policy framework National development programmes: The key documents that set out the Government policies of Tajikistan for overall economic development as well as for agriculture, rural and agro-industry development include: (i) the National Development Strategy for the period until 2015; (ii) the Agrarian policy concept, food security and agriculture investment plan for the comprehensive agrarian reform in the period 2010-2015 (with projected investments at US$ 1.28 billion or US$ 200 million per year which is equivalent to 3-4 percent of GDP) were prepared as a part of the NDS and PRS-3 (2009); (iii) the Programme of Economic Development for the period until 2015 (2004); (iv) the National Disaster Risk Management Strategy (NDRMS) for 2010-2015; (v) the Development Programme for Cotton Industry for 2010-2014; (vi) the Development Programme of Seed Industry for 2010-2014; (vii) the State Investments, Grants and Capital Construction Program for 2012-2014; (viii) the programme “200 Days of Reform” and “One‐stop Shop”, which simplified administrative and legal process. The new Nutrition and Food Safety Strategy for Tajikistan (2012-2020) has been developed to establish nutrition and food safety goals and provide a coherent set of integrated actions, spanning different government sectors and involving public and private actors and to be considered in the national policies and health system governance. The strategy is the result of a truly multi-sectoral effort at country governmental level coupled with combined efforts namely of WHO, UNICEF, WFP, the WB, USAID and NGOs. The strategy was approved at the highest government level in late 2012.2 Tajikistan is a recipient of significant international aid. In 2009 the Government of Tajikistan and 12 Development Partners from International Organizations signed a Joint Country Partnership Strategy for 20102014, then the Country Partnership Strategy 2015-2018. Donors hold Food Security cluster meetings as a focus on coordinating emergency response in the field of food security, agriculture and nutrition in Tajikistan. 1 World Bank Indicators, ITC & UNIDO databases, accessed in August 2014. Author’s calculations 2 http://www.euro.who.int/en/what-we-do/health-topics/noncommunicable-diseases/diabetes/news/news/2012/9/tajikistandevelops-strategy-to-tackle-nutrition,-diet-and-related-noncommunicable-diseases 2 Moreover, the Donor Coordination Council was established with the purpose of improving multi-way flow of relevant information among donors, government agencies and civil society institutions. Together with the UN organizations Tajikistan elaborated the United Nations Development Assistance Framework (UNDAF) for 20102015. Tajikistan and the EU signed the Partnership and Coordination Agreement 2004 and it entered into force 2010 with a focus of the EC assistance on rural development and poverty reduction, agriculture and land reform, promotion of good governance and economic reforms. Legal framework: During the past decade, Tajikistan has adopted several government resolutions and legislations to slowly reduce government intervention in land use and planning, as well as to encourage a growth of agriculture and agro-industry and rural development, among those are: the Law on Privatization of State-Owned Property, which encourages the participation of foreign investors in the privatization of the national economy; the Law on Food Safety (2012); the Law on Poultry (2010); the Law on Innovation (2012), the Law on Plant protection (2012); the Law on Food Security (2010); the Land Code (1996, latest amended in 2012); the Decree of the GoT on Resolution of Cotton-Growing Farms’ Debts and Improvement of Financial Conditions for Agricultural producers (2008); the Presidential Decree on Additional Measures to Support the Agricultural Sector (2009), the Resolution on Reforming Agriculture (2009); the Law on Dehkan Farm (2009); the Law on the State Protection and Support of Entrepreneurship (2002, amended 2007), the Law on Geographic Indications (2007); the Law on Public Procurement of Goods, Works and Services (2006). Supporting institutions: The main state bodies related to agriculture and agro-industry development in Tajikistan are the Ministry of Agriculture, the Ministry of Water Resources and Land Reclamation and the Ministry of Economic Development and Trade. To support reforms activities in the country the Working Group on Agriculture Reform was created, which comprised six sub‐working groups for covering following issues: (i) water and irrigation; (ii) land reform; (iii) new mechanisms of agricultural financing; (iv) rural social development; (v) local government reform; and (vi) cotton debt write off. Other supporting institutions were established such as: the Public Organization “Sugdagroserv Consulting” (2010) with Agricultural Information Marketing System (AMIS) for providing services to the management of agricultural business; the State Committee on Investments and State Property Management (2006) with a focus on the foreign aid coordination. Economic and social development and trends Economic and social development: Tajikistan is a landlocked and low income country with GNI per capita of constant 2005 US$ 411 in 2010 and 470 US$ in 2013. The total population is 8.1 million inhabitants, of which 75 percent live in rural area, and the annual population growth is 1.9 percent. Tajikistan enjoyed strong economic performance and macroeconomic stability with 15.2 percent of annual growth on average between 2000 and 2008. As a result of the global economic crisis, GDP declined by 8.1 percent in 2009. In 2011 GDP growth accelerated to 7.4 percent and this rate stayed the same in 2012 and 2013 as well, driven to an important extent by increasing aluminium prices in 2011, continued high remittance growth and the largest-ever cotton harvest. The economy was highly agriculture-dependent in the last century and it still remains the main employer. However, by 2013 only 25 percent of the total labour force was employed in agriculture. In value terms, agriculture has increased by 7.8 percent on average annually between 2000 and 2011, boosted mostly by an increase in non-cotton agricultural production.3 In 2009 – in accordance with the Cotton Debt Resolution of US$ 580 million – the government of Tajikistan, with the help of donors, resolved a long-standing problem of accumulated debt on cotton farms by writing debts off. This allowed new commercial financing to the agricultural sector. In 2013, the agricultural sector contributed 27 percent of value added to GDP with annual growth of 10 percent in 2011, 2012 and 2013, despite difficult climatic conditions. Cotton production shot up by 34 percent, reflecting a 30 percent rise in the area devoted to cotton, as high international prices encouraged additional planting. Other crops, particularly fruits and vegetables, also showed double-digit growth. Manufacturing industry generated about 11 percent of GDP in 2012 and 2013, experiencing some stagnation between 2009 and 2011 after 25 percent average growth between 2000 and 2008. From 2011 to 2013, manufacturing industry grew by 8.6 percent annually on average. 3 http://www.stat.tj/ru/analytical-tables/real-sector/ 3 Chart 1. Evolution of value added to GDP in Tajikistan (percent) Source: WBDI, accessed in October 2012; UNIDO database; National Statistics; Author’s calculations Growing demands and trends: The share of total household expenditure spent on food and beverages declined to 59 percent in 2011 compared to 87 percent in 1999, and further declined to 56.7 percent by the first quarter of 20134. Even though it has decreased over the past decade, expenditure on food increased from 56 percent in 2010 due to rising prices.5 In 2011, the share of expenditures spent on food in urban areas had increased by 3.1 percent as compared to 2010, while in rural areas it had increased by 3.5 percent.6 In the total structure of household spending on food, bread and bread products occupies the first place (36 percent), which exceeded the approved medical norm by 22.8 percent in 2011. Other products in food consumption are meat products, sugar & confectionery and vegetable oil. Expenditure on alcoholic products is very low due to cultural traditions. Demand for beverages, dairy products and high quality meat and fish is growing in the capital due to an increasing number of expatriates. Tajikistan heavily depends on international trade to meet its domestic food demands and it has also been a significant food aid recipient over the past decade. Tajikistan imports more than 50 percent of domestic consumption of wheat and its products from international markets, especially Kazakhstan.7 Nearly threequarters of total vegetable oil consumption and almost all of sugar consumption are based on imports. Moreover, nearly half of total meat consumption, including about 30 percent of beef and 80 percent of poultry meat, also depends on imports. In 2012, the five top agricultural products in terms of values in Tajikistan were: cotton lint (173 million Int$), potatoes (137 million Int$), sheep meat (123 million Int$) tomatoes (121 million Int$)), , and cow milk (108 million Int$).8 Besides, the important commodities of domestic production are almonds, cottonseed, apricots, goat milk and wheat. Tajikistan has one of the lowest per capita GDP among CIS countries and it is very vulnerable in food price changes. The most important sources of cash incomes of households in 2013 continued to remain labor incomes (50.1 percent) and receipts from sales of agricultural products (8.1 percent). In 2011 non-employment, 4 TAJSTAT Food security and poverty 2013 http://www.stat.tj/ru/analytical-tables/real-sector/ 6 Statistical Agency under President of the Republic of Tajikistan, 2012 7 IFPRI (2012) Economic Development, External Shocks, and Food Security in Tajikistan. Prepared by K.Akramov & G.Shreedhar 8 FAOSTAT, accessed in November 2014 5 4 i.e. unregistered jobless, is reported to be around 60 percent of the active population, comprising some 33 percent of workforce in overseas occupations and 27 percent working unofficially. Because of a lack of employment opportunities in Tajikistan, as many as a million Tajik citizens work abroad, mainly in Russia and Kazakhstan, supporting families in Tajikistan through remittances likely to be in excess of US$ 2.4 billion per annum officially recorded by the National Bank of Tajikistan in 2010.9 The unreliability of available data can be demonstrated with the official rate of unemployment, which was reported to be 2.5 percent in 2013.10 Despite 10 years of sustained economic growth and achievements in reducing poverty levels, the main challenge for Tajikistan still remains poverty and the low standard of living of the majority of its people.11 In 2009, about 46.7 percent of Tajikistan’s population lived below the national poverty line, and nearly 80 percent of the poor population resides in rural areas. According to the World Bank and the UNDP Tajikistan made a good progress and the poverty rates have fallen between 1999 and 2009 from 83 percent to 47 percent. Increase of food prices has negative implications on food security. 12 Agro-industry outlook and performance Agro-industry background and challenges: The importance of agriculture to Tajikistan’s long-term food security, as well as overall economic development and poverty reduction13, contrasts with the comparatively small area of arable land (less than 7 percent of total area) as Tajikistan is a mountainous country. The collapse of the Former Soviet Union and it is centralized system as well as the civil war (1992-97) severely damaged the economic infrastructure and caused a sharp decline in manufacturing and agricultural production. Tajikistan has taken significant steps towards deepening economic reforms, restructuring the national economy and developing international relations. Foreign trade and currency transactions have been liberalized. All of the country’s acting small enterprises and approximately 70 percent of the medium-sized and large enterprises have been privatized. Progress with agricultural reform in recent years includes liberalization of cotton sector prices and production under the “freedom to farm” decree, cotton debt resolution, and the drafting (but not yet adoption) of a new land code that makes land tradable.14 However, according to EBRD Transition report 2012, progress with agricultural sector reform has been slow. Several initiatives are ongoing but little progress has been made with none brought to completion. The sector remains heavily controlled by the state. The development of the sector is being held back by limited access to finance, insufficient protection of property rights and the lack of the necessary infrastructure for non-cotton agriculture. Productivity remains low and the sector is still highly dependent on cotton production. Agricultural production is fragmented, with very few large farms. Since 1999, nearly one-quarter of arable land has been controlled by more than 740 000 traditional household plots that have an average size of 0.3 hectares per holding. In recent years, the crop patterns have changed in favor of food and high-value crops. During the transition period, the crop sector’s share in gross agricultural output increased from 67 percent in 1990 to 98 percent in 200815. This is a result of faster growth in the crop sector and stagnation in the livestock sector. After independence in 1991, the output of the food processing sector sharply declined, reaching an all-time low in 1999. The breakup of the centralized planning and sales system and the lack of financing to run operations, coupled with political and economic instability, resulted in the sector’s critical state. Tajikistan was a large producer of fruits and vegetables in the former Soviet Union, with annual exports outside of the republic reaching 200 000 tonnes (100 000 tonnes of fruit, 60 000 tonnes of vegetables and 30 000-40 000 tonnes of canned food) prior to 1990.16 Exports of processed vegetables, fruits and their preparations (mainly fruit concentrates, fruit and vegetable juices) amounted US$ 1.8 million in 2012, which was five times less than in 9 The Impact of the Economic and Financial Crises on Agriculture and Food Security in Europe and Central Asia: a Compendium TAJSTAT Food Security and Poverty 2013 11 EC (2011) DCI indicative Programme 2011-2013 12 IFPRI (2012) Economic Development, External Shocks, and Food Security in Tajikistan. Prepared by K.Akramov & G.Shreedhar 13 The Impact of the Economic and Financial Crises on Agriculture and Food Security in Europe and Central Asia: a Compendium 14 FAO/EBRD (2012) Innovative agricultural finance and risk management Strengthening food production and trade in the transition region. Working Paper of Investments Centre. Prepared by L.Rutten 15 Tajikstat 16 http://globalimpactconsulting.com/47/3/2/hot_sectors/food_processing/tajikistan.html 10 5 2002.17 The majority of canning factories are located in the northern part of the country but the wheat and cotton processing industries are mainly located in the central and southern parts of the country. Tajikistan’s food-processing industry includes canning, meat and milk processing, flour-milling, baking, fruits drying and brewing. Enterprises sell mainly to domestic market. Tajikistan has a great potential for growth in the food processing industry in order to meet domestic demands of high quality food products as well as to increase and improve export-oriented products. Despite the fact that organic products have become more popular and expensive commodities in developed countries, organic production in Tajikistan is at the initial stage with no existing regulations. The share of organic land accounts for only 0.01 percent of total agricultural land with only 75 registered producers in 2010.18 The country has all the terms and conditions for organic farming. Until now farmers in Tajikistan have successfully grown organic cotton. But there is great potential for organic production of various fruits, berries, nuts, legumes and vegetables. Tajikistan has one of the greatest wild collection area of 1.06 million hectares.19 The dried apricots from Tajikistan have no great potential on the global market since Turkey and Iran produce cheap and high quality organic dried apricots, but dried fruits, nuts and honey produced in Tajikistan, have potential on the fast-growing and as yet unsaturated markets in CIS countries.20 Serious constraints for food-industry development are: extremely fragmented agricultural production, low productivity of both agriculture commodities and labor; the lack of a well-organized extension service and information networks; outdated equipment and technologies of food processing and packing; the deficit of qualified workers and of good infrastructure for physical trade, including warehouses and grading laboratories; a weak legal and regulatory regime, especially on food safety; and widespread corruption. Food & beverage industry performance: The food and beverage industry forms a modest part of the economy, but it is the second-largest contributor to gross industrial output. In 2009 Tajikistan’s food processing industry together with the milling industry amounted to around US$ 82.4 million or 26.8 percent of the total industrial output. The output has decreased by 6.3 percent compared to the 2007 level when it was the top food industry output, experiencing a steady growth in both real terms and a contribution in GDP after social crises in 1990s. F-processing industry employs around 10 000 people (about 10 percent of the industrial labor force). Labor productivity is low. There are over 600 companies in the F&B sector, which are largely private small or mediumscale enterprises, operating seasonally and selling products to local markets. In 2008 the F&B industry, excluding milling industry, accounted 265 enterprises operating (or about 20 percent of total number of manufacturing enterprises). The food-processing sector in Tajikistan has 21 sub-sectors, including flour, macaroni, canned vegetables, canned fruits, fresh and dry fruits, meat and dairy processing, feed and confectionary production, as well as production of tobacco and alcohol. Dairy and meat sectors are underdeveloped. The F&B industry performance is not stable over time in terms of output and employment share. The industry has a strong demand for capital investments. Opportunities exist in fruits and vegetable processing, vegetable oil and food-organic production and the development of fish and wine industry. 17 ITC database, accessed in October 2012 Research Institute of Organic Agriculture FiBL and International Federation of Organic Agriculture Movements IFOAM, 2012, http://www.organic-world.net 19 www.fibl.org Organic Agriculture Worldwide 2014 20 http://www.agroinform.tj/index.php?option=com_content&view=article&id=449:gjnty&catid=45:analitika&Itemid=128&lang=en 18 6 Chart 2: Evolution of food production in Tajikistan over time Source: WBDI 2014. Note: There is missing information on employment and number of enterprises in milling branch after 2003, which is the largest part of the food manufacturing Chart 3. Distribution of output in food & beverage sub-sectors of Tajikistan in 2007 Source: Author’s calculations are based on national statistics, analytical reports 7 Trade liberalization, WTO accession and trade performance Trade regulation and trade unions: Tajikistan has made progress in reforming its trade regime in order to be fully compatible with WTO rules. As part of the accession process, Tajikistan has agreed to undertake a series of important commitments to further open its trade regime and accelerate its integration in the world economy. From the date of accession, Tajikistan has committed to fully apply all WTO provisions uniformly throughout its entire territory, including in regions engaging in border trade, special economic zones and areas where special regimes for tariffs, taxes and regulations were established. Tajikistan has agreed to accept “bound” rates, i.e. maximum ceiling levels, for all its import tariffs. Tariffs will be “ordinary customs duties” only, within committed levels, with no additional duties and charges. Tajikistan concluded six bilateral agreements on market access for services and 13 on market access for goods. Currently, the legal basis is with the Law on the State Regulation of Foreign Trade (1999), the Customs Code (2004) among others. The rates of customs duties for the goods imported to the Republic are established by the Resolution of the Government on Customs Tariff (2003) and ranges in accordance with a type of goods at rates of 0 percent, 2.5 percent, 5 percent, 7 percent, 10 percent and 15 percent. Due to the regime of free trade the zero rates are applied for imported customs duty for imported goods produced in Russia, Kazakhstan, Belarus and Kyrgyzstan. Customs duties are low and the country does not have strict trade barriers. Simple average of imports duties for agricultural goods applied in 2011 were 11.2 percent. The excise taxes apply to spirits, alcoholic and non-alcoholic drinks, vinegar, tobacco and tobacco products. Tajikistan signed nine FTA and continuing a negotiation with 15 WTO members, among them, the EU, Japan, Honduras, Canada, the US, Korea, El Salvador and Dominican Republic. Tajikistan expressed its interest to join the Customs Union, formed by Belarus, Kazakhstan and Russia and being fully introduced as a single economic space from 1 January 2012. WTO accession: Tajikistan became a member of the WTO on 2 March 2013, having been negotiating accession to the WTO since May 2001. In December 2012, the General Council of the WTO paved the way for Tajikistan’s membership of the WTO by approving its accession package. Tajikistan was finally ratified in 2013 and became a WTO member in March 2013.21 The statements that follow in this compilation were made at the Ninth Meeting of the Working Party on the Accession of the Republic of Tajikistan to the WTO in October 2012. Trade performance: After a steady growth until 2007 merchandise exports have decreased by 5 percent in 2008 and by 28 percent in 2009, exports slowly grew up by 18 and 5 percent in 2010 and 2011, amounting to US$ 1.26 billion. In contrary, imports showed a steady growth until 2008, amounting US$ .7 billion and sharply declining by 27.5 percent in 2009 small increase in 2010 and a significant increase by 17 percent in 2011. This resulted in a trade deficit of US$ 1.93 billion in 2011. Tajikistan is import-dependent country in F&B products. The trade balance of processed F&B experienced a negative food balance of US$ 330 million in 2011, higher than any previous year. Food and agricultural exports and imports together made 8.6 percent and 12.4 percent of total merchandise exports and imports of Tajikistan in 2011. Processed F&B products accounted for US$ 3.2 million or 0.35 percent of total merchandise exports and US$ 333.4 million or 8.6 percent of total merchandise imports. In 2009 exports rose in three times compared to the previous year and fall down to almost the same level in 2010, decreasing almost five times in 2011. Exports per capita of F&B were US$ 46.5 in 2011.22 The main export commodities of Tajikistan, in general, are electricity, aluminum, cotton fibers and fruits (mainly fresh and dried). The imports of F&B products are quite diversified and the highest share of imported products is with milling products and starches products group (32 percent), sugars and sugar confectionery (17 percent), vegetable oils (12 percent), cocoa preparations (11 percent), and cereal and flour (10 percent). The 56 percent 21 http://www.wto.org/english/thewto_e/countries_e/tajikistan_e.htm This trade statistic on F&B products were extracted from the ITC database. Due to the fact that Tajikistan does not submit trade reports to ITC, data is based on the Tajikistan’s partner reported data (Mirror data) 22 8 of exports is made by fruits, vegetables and nuts products, another large commodities group is sugars and sugar confectionery (29 percent).23 Across partners, exports of Tajikistan’s F&B commodities was not diversified in 2011, where Algeria, Kazakhstan and Russia shared 93 percent of total exports, compared to relatively diversified imports, where two countries made 67 percent of total F&B imports. Top destinations for F&B products: Algeria (60 percent), Kazakhstan (22 percent), Russia (11 percent) and Kyrgyzstan (2 percent). Top origins for F&B products: Kazakhstan (34 percent), Russia (33 percent), Ukraine (7 percent), Turkey (7 percent) and Belarus (5 percent).24 Chart 4. Food & beverage and agriculture trade performance over time Source: ITC (UNCTAD/WTO): Trade Map online, accessed in October 2012 23 24 ITC (UNCDAT/WTO) FAOSTAT 2014 9 Chart 5. Share of product groups in total exports and imports of food & beverages, top ten products Share of product groups in total F&B imports by Tajikistan in 2011 Share of product groups in total F&B exports by Tajikistan in 2011 3% 2% 2% 1% 1% 2% 1% 5% 5% 3% 2% 1% 5% 32% 10% 29% 11% 56% 12% 17% Milling products, malt, starches, inulin, wheat gluten Sugars and sugar confectionery Vegetable, fruit, nut, etc food preparations Cocoa and cocoa preparations Sugars and sugar confectionery Animal,vegetable fats and oils, cleavage products Beverages, spirits and vinegar Cereal, flour, starch, milk preparations and products Meat, fish and seafood food preparations Miscellaneous edible preparations Dairy products, eggs, honey, edible animal product Beverages, spirits and vinegar Cereal, flour, starch, milk preparations and products Dairy products, eggs, honey, edible animal product Animal,vegetable fats and oils, cleavage products Meat, fish and seafood food preparations Miscellaneous edible preparations Vegetable, fruit, nut, etc food preparations Milling products, malt, starches, inulin, wheat gluten Residues, wastes of food industry, animal fodder Chart 6. Evolution of the top five destinations of exported F&B products by Tajikistan over time Source: ITC (UNCTAD/WTO). Data is based on the selected products’ groups. Trade Map online, accessed in October 2012 10 Chart 7. Growth of national supply and international demand for exports of F&B products by Tajikistan in 2011 Source: ITC (UNCTAD/WTO). Data is based on the selected products’ groups. Trade Map online, accessed in October 2012 Foreign direct investments Strategies, regulations and ranking: The Government is creating favorable conditions for foreign investments, market structure support, and commercial finance, and banking system development. The Law on Investment (2007), the Law on Foreign Economic Activities (1993), the Law on International Treaties (1999, amended in 2005) and the Law on Free Economic Zones (2011) provide the legal basis for foreign investment in Tajikistan. The State Committee on Investments and State Property Management of the Republic of Tajikistan coordinate the foreign aid and investments. The established Consultative Council on improvement of investment climate under the President of Tajikistan allows to the key Government bodies, business, foreign investors and international organizations participate contribute to the successful of the programme “Improving Business Environment – 200 Days of Reforms”.25 According to WIR 2012,26 Tajikistan was ranked only 178 (among 181 economies) by the FDI Inward Attraction Index in 2011, which went down compared to 146 in 2000 (among 178 economies). In order to attract more investments, Tajikistan lowered the corporate tax. Tajikistan gives equal rights to domestic and foreign investors, investors are provided with legal protection and non-interference of Government in business is guaranteed. Foreign companies in Tajikistan are free to open and maintain bank accounts in foreign currencies and have full currency convertibility on current operations. According to new laws, enterprises with foreign investments are exempt from income taxes from two to five years depending on the amount of capital. Moreover, they are VAT and customs duties exempt for a number of goods imported within the framework of priority projects approved by the Government of Tajikistan. Tajikistan does not have any limitations on direct investments from abroad. Interest rates are fully liberalized.27 Foreign direct investments flow: In 2010 Tajikistan’s FDI inflows accounted only US$ 15.8 million or 0.28 25 http://www.investin.info/country/tajikistan/10-reasons-to-invest-in-tajikistan/ UNCTAD (2012) World Investment Report 2012: Towards a New Generation of Investment Policies, UN Conference on Trade and Development NY and Geneva, Switzerland 27 http://www.investin.info/country/tajikistan/10-reasons-to-invest-in-tajikistan/ 26 11 percent of GDP experiencing a sharp reduction by 96 percent to the 2008 level, when it was a peak of FDI inflows to Tajikistan, generating US$ 375.8 million. In 2013 FDI inflows accounted for US$ 108 million28 after 8 million in 2010, 70 million in 2011 and 233 million in 2012. The vast majority of FDI is directed to the hydroelectric central power plants and banking sector. F&B industry continues to attract low levels of FDI, mainly supported by international aid. There are two joint-venture companies in the tobacco industry. The major five investing countries are Russia, China, Uzbekistan, Kazakhstan and Turkey. More than 210 joint ventures are established in Tajikistan with the main activities in textiles, agroprocessing, construction and construction materials, telecommunications, and mineral resources exploration. Between 1991 and 2008 only two projects received major investment: (1) US$ 12.6 for million water bottling plant Obi Zulol and (2) US$ 3.97 million for fruit and vegetable juice packaging line in Khujand.29 Donors’ contributions for development purposes in Tajikistan for the period of 2008-2010 accounted for US$ 146 million. Since 1997 to 2010 Tajikistan had signed agreements with donors on grants amounting to a total of US$ 505 million and has taken out loans of US$ 2.1 billion. Agriculture and irrigation are the sectors that receive the second most support after the energy sector. Chart 8. Foreign direct investments in Tajikistan over time Source: WBDI 2014 28 29 World Investment Report 2014 http://www.investin.info/country/tajikistan/food-and-beverage/ 12 Food safety, certification & quality control Food safety background and country’s membership: Tajikistan is not a member of the Codex Alimentarius Commission and it has a status of correspondent member in the International Organization of Standardization (ISO). Issues of protection of human health in general and in particular from food-borne risks are dealt with by the Law on Sanitary-Epidemiological Safety (2003) and the Law on Veterinary (2003). Food products are a subject to the new Law on Food Safety (2012); the Law on Consumer Rights Protection (2004), the Decree of the Government on the protection of the consumer market from the introduction of unsafe food (1999), the Regulation of the Government on measures for the prohibition of processing of foodstuff, feedstuff (1994) and the Law on Technical Regulations (2010). There are the Norms on Public Nutrition Services were adopted and amended with the Governmental Decree in 2005 and 2007. As part of the WTO accession Tajikistan had to fully implement the WTO Agreements on Technical Barriers to Trade (product standards and labelling) and Sanitary and Phytosanitary Measures (food safety and animal and plant health) from the date of accession in 2013. Quality control and certification: The State Centre for Sanitary Epidemiological Control under the Ministry of Health and the State supervision on veterinary under the Ministry of Agriculture and Land Reclamation are responsible for sanitary-epidemiological, veterinary and phytosanitary control in Tajikistan in compliance with the Law on Food Safety (2012). The Agency for Standardization, Metrology, Certification and Trade Inspection (Tajikstandart), which is affiliated with the Ministry of Economy and Trade with 30 accredited laboratories, ensures compliance with standards and prevents prohibited and non-compliant food products from gaining access to market in compliance with the Law on Certification of production and services (2002) and the Law on Standardization (2010). The following normative documents on standardization of the following categories are in force in Tajikistan: international (regional) standards; interstate standards – GOST (all-Union State Standard); national standards of the RT – ST RT; branch standards – OST; enterprise standards – STP; technical terms and conditions of the RT – TU RT. There are above 240 national and GOST standards used for agriculture and food industry in Tajikistan. Harmonization of legislation with international standards on food safety and quality (i.e. Codex Alimentarius standards) is still under way. There are still weak official controls over manufacturing of food ingredients and food products have a negative impact on food safety and quality. HACCP system has not been fully introduced yet. Business environment and competitiveness Retail and domestic market: Domestic retail market is underdeveloped across the country with no hypermarkets. Retail trade of food products generated TJS 2.6 billion (US$ 600 million) in 2009, accounting for 47.5 percent of total retail turnover. Business environment: According to the Doing Business Report,30 Tajikistan has made steady progress over time and improved significantly since 2005 in starting a business by implementing a one-stop-shop and simplifying business registration procedures; in strengthening investor protections by regulatory practice and making it easier to sue directors in cases of prejudicial related-party transactions, and in dealing with construction permits. The economy was ranked 143 (out of 185 economies) in 2014 (5 points up compared to 2010; 8 points down compared to 2006). Trading across the borders is ranked 188, paying taxes – 178, protecting investors – 22, getting credit – 159, and starting business – 787. Tajikistan made starting a business easier by allowing entrepreneurs to pay in their capital up to one year after the start of operations, thereby eliminating the requirements related to opening a bank account. Access to credit using movable property in 30 WB/IFC (2014) Doing Business 2014 13 Tajikistan became more complicated because the movable collateral registry stopped its operations in January 2011. Tajikistan is ranked 8 out of the top 50 economies the most improved overall (by 17.6 percent of points) in narrowing distance to frontier since 2005 until 2013, as well as by 55 percent in starting business and by 52 percent in protecting investors. Tajikistan has good practice around the world in protecting investors by allowing access to all corporate documents before the trial. While still being among the most difficult countries in dealing with construction permits, Tajikistan has narrowed the distance by 48 percent to frontier in 2013. However, Tajikistan is still among the most difficult and the most costly countries in in terms of getting electricity, paying taxes, trading across borders and getting credit. Tajikistan has formed regulatory reform committee at the inter-ministerial level, reporting, that use the DBIs as one input to inform their programs for improving the business environment. Taxation relief: Tajikistan lowered its corporate income tax rate in 2011. According to a PwC report from 2011, Tajikistan is one of the ten countries in the world with the highest total tax rates (86 percent of profit). The tax burden on companies still needs to be reduced. Recently, only the corporate income tax was lowered. Agriculture is VAT exempt. Farms are taxed through the Unified Tax for Agriculture Producers apart from social taxes, personal income and property taxes, as well as road taxes. A sales tax of 3 percent is applied to state farms, dehkan farms, and family farms, but not to household plots. Research & Development, innovations: Required investments and activities in R&D of new technologies and products in agro-industry are not provided. State-owned enterprises continue to be the primary beneficiaries of government support for innovation and R&D. The Government has no strategy on development of research and innovation services, but it has adopted the law on Innovations in 2012. In 2009, expenditures in R&D accounted 0.09 percent of GDP, increased in share of 0.07 percent of GDP in 2008. Competitiveness:. According to the Global Competitiveness Report 2014-2015 Tajikistan is at a 1st stage of development (factor driven), it got 91 overall Global Competitiveness Index among 144 economies (116 in 2010-2011 among 139 countries). Tajikistan is ranked 80 for Innovation, 82 for Business sophistication factors, and 43 (score 4.0) for agricultural policy costs31. The five most problematic factors for doing business in Tajikistan are: access to financing, tax rates, tax regulations, corruption and foreign currency regulations. 31 Agricultural policy costs: How would you assess the agricultural policy in your country? [1 = excessively burdensome for the economy; 7 = balances the interests of taxpayers, consumers, and producers] | 2011–12 weighted average 14 The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The mention of specific companies or products of manufacturers, whether or not these have been patented, does not imply that these have been endorsed or recommended by the Food and Agriculture Organization of the United Nations in preference to others of a similar nature that are not mentioned. The views expressed in this publication are those of the author(s) and do not necessarily reflect the views of the Food and Agriculture Organization of the United Nations. For more information please contact: Stjepan Tanic Agri-food Economist FAO Regional Office for Europe and Central Asia Email: [email protected] 15