Tajikistan

GDP (US$ Billion)

7.28 (2017)

World Ranking 146/192

GDP Per Capita (US$)

824 (2017)

World Ranking 168/192

Economic Structure

(in terms of GDP composition, 2017)

Services
(41.44%)
Industry
(27.00%)
Agriculture
(21.22%)

External Trade (% of GDP)

52.8 (2015)

Currency (Period Average)

Tajikistani Somoni

8.55per US$ (2017)

Political System

Republic

Overview

Remittances from Russia account for half of Tajikistan's economic output, with the economy under pressure from its gross external debt. The country's debt levels are expected to rise further as it ramps up construction of the Rogun dam. Adding to the state's fiscal woes is the banking sector's struggles with a high number of non-performing loans. In the medium term, Tajikistan's economic stability will be increasingly tied to the timely construction of the Rogun dam. The dam will make Tajikistan an electricity surplus country, while a failure to complete the project risks complicating the debt situation further.

Sources: World Bank, Fitch Solutions

Major Economic/Political Events and Upcoming Elections

​​​​​​​May 2016
​​​​​​​A referendum supported constitutional changes which removed presidential term limits.

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

September 2018
Representatives from the International Monetary Fund 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.

February 2019
The CASA-1000 project was launched, which was an interregional electricity transmission project in Central and South Asia to connect four countries: Kyrgyzstan, Tajikistan, Pakistan and Afghanistan. The project was expected to be completed by 2021 and to generate an annual income of more than USD150 million.

March 2020
Parliamentary elections took place, with the ruling People's Democratic Party of Tajikistan securing a majority win.

Sources: BBC Country Profile – Timeline, Fitch Solutions

Major Economic Indicators
External Trade

Merchandise Trade

Trade in Services

Trade Policies
  • Tajikistan has been a member of the World Trade Organization (WTO) since March 2, 2013.

  • Tariff rates range between 0 and 15%, with the overall trade-weighted import tariff averaging out to around 7.18%. The tax rate of 0% is granted to certain types of goods (such as for some types of printed publication, unwrought wool, gaseous hydrocarbons, and electricity). The country has kept an export promotion trade policy with little to no export duties.

  • Tajikistan is signatory to several free trade agreements (FTAs), 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

Trade Agreement

Multinational Trade Agreements

Active

  1. Armenia (effective March 1994): Tajikistan's main exports to Armenia in 2016 were other made-up textile articles, sets, worn clothing and worn textile articles and rags. Tajikistan's main imports from Armenia in 2016 were pharmaceutical products.
     
  2. Belarus (effective 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 January 2006): Tajikistan mainly exports fruits, nuts and tobacco to Kyrgyzstan. Tajikistan's imports from Kyrgyzstan include coffee, tea, milk, preparations of cereals, spirts and vinegar.
     
  4. Russia (effective April 1993): In 2017, Russia's trade with Tajikistan totalled USD717.6 million, up 4.31% compared to 2016.
     
  5. Ukraine (effective 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 and food products, including fruit and vegetables, and dried fruit.
     
  6. Uzbekistan (effective January 1996): Uzbekistan's exports to Tajikistan are mainly transportation services, mineral fertilisers and food products. The list of exported Tajikistani 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. Commonwealth of Independent States Free Trade Area (FTA; effective September 2012): This is an FTA between Russia, Ukraine, Belarus, Uzbekistan, Moldova, Armenia, Kyrgyzstan and Kazakhstan. The agreement was designed to reduce all trade fees on a number of goods between participating countries.
     
  8. Economic Cooperation Organization Trade Agreement (effective 2008): This trade agreement consists of a free trade region formed between Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan. Intra-regional trade accounts for around 7.64% of the total trade among member states.

Under Negotiation

  1. Pakistan-Tajikistan Preferential Trade Agreement: Pakistan's major exports to Tajikistan include sugar, dairy products, medical and pharmaceutical products, and construction material including cement. Raw cotton, chemical materials and products, and glass and glassware are imported from Tajikistan.
     
  2. Eurasian Economic Union: Consists of Russia, Kazakhstan, Belarus, Krygyzstan 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. In a step towards joining this union, Tajikistan has applied a zero rate in import duty for goods originating from member states.

Sources: WTO Regional Trade Agreements database, Fitch Solutions

Investment Policy

Foreign Direct Investment

Foreign Direct Investment Policy

 

  1. The Tajikistani 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 Tajikistani companies or Tajikistani 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. Tajikistani 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 Tajikistani 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.

  8. Tajikistan has a history of expropriating land based on the grounds that the properties involved were illegally privatised following Tajikistan's independence.

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

Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive Programme

Main Incentives Available

Free Economic Zones (FEZs): Sughd, Pyanj, Ishkoshim and Dangara

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

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

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

- Exemption from all taxes, except 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

Taxation – 2020
  • Value Added Tax: 18%
  • Corporate Income Tax: 13-23%

Source: Tax Committee under the Government of the Republic of Tajikistan

Important Updates to Taxation Information

  • The Tajik tax system is still relatively new and many tax concepts and issues that are standard in most market economies are just emerging. The process of paying taxes is complex, resulting in high administrative costs for businesses, except for goods producing industries such as manufacturing as they benefit from low corporate income tax (CIT).
     
  • The import of technology, equipment and materials to meet the needs of the fish farming sector and (or) the import of goods by the companies operating in the field of fish farming directly for its own needs is exempt from value added tax (VAT).
     
  • Companies operating in the field of fish farming are exempt from CIT; VAT, except for VAT on goods imported for further domestic sale; and road and property tax for a period of six years.

Business Taxes

Type of Tax

Tax Rate and Base

 

CIT

- 23% on operating profits
- 13% for companies involved in production of commodities

Capital Gain Tax

Part of business income (gains derived by investors and issuers from trade at a stock exchange are exempted for five years from the beginning of participating on the stock market)

Withholding Tax

-Royalties: 15%
-Interest, Dividends: 12% on net earnings (dividends received by investors on securities traded at the stock exchange are exempted for five years from the beginning of participating on the stock market)

Branch Remittance Tax

15% on net earnings

VAT (standard)

18% on the value of the products

Social Tax

Social tax is withheld by the employer at the rate of 1% of the employment income, 25% contribution on gross salaries by employer.

Source: Tax Committee under the Government of the Republic of Tajikistan
Date last reviewed: March 4, 2020

Foreign Worker Requirements

Localisation Requirements

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

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 and 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 an extension. Dependents may accompany a main traveller by obtaining a visa on the basis of the main applicant's application.

Visa/Travel Restrictions

For most foreign nationals, visas must be obtained in their respective home country, prior to entering the Republic of Tajikistan. To receive a visa upon arrival, a registered letter from the Tajik Ministry of Foreign Affairs confirming the applicant's request for a visa is required. A visa upon arrival will be issued for 45 days only at the Immigration Office at the International Airport in Dushanbe. Tajikistan has a visa-free regime with 19 countries, including several of its neighbours and Russia, Mainland China, India, Iran and North Korea.

Sources: Government websites, Fitch Solutions

Risks

Sovereign Credit Ratings

 

Rating (Outlook)

Rating Date

Moody's

B3 (Negative)

10/12/2018

Standard & Poor's

B- (Stable)

28/08/2017

Fitch Ratings

Not Rated

Not Rated

Sources: Moody's, Standard & Poor's, Fitch Ratings

Competitiveness and Efficiency Indicators

 

World Ranking

2018

2019

2020

Ease of Doing Business Index

123/190

126/190

106/190

Ease of Paying Taxes Index

132/190

136/190

139/190

Logistics Performance Index

134/160

N/A

N/A

Corruption Perception Index

152/180

153/180

N/A

IMD World Competitiveness

N/A

N/A

N/A

Sources: World Bank, IMD, Transparency International

Fitch Solutions Risk Indices

 

World Ranking

2018

2019

2020

Economic Risk Index Rank

188/202

184/201

188/201

Short-Term Economic Risk Score

40.2

42.3

38.1

Long-Term Economic Risk Score

36.3

36.0

35.7

Political Risk Index Rank

189/202

184/201

183/201

Short-Term Political Risk Score

49

49.0

56.5

Long-Term Political Risk Score

36.2

40.2

40.2

Operational Risk Index Rank

126/201

124/201

124/201

Operational Risk Score

43

43.7

44.6

Source: Fitch Solutions
Date last reviewed: March 4, 2020

Fitch Solutions Risk Summary

​​​​​​ECONOMIC RISK
Tajikistan is one of the risk-exposed countries in the Central Asian region, as it remains excessively dependent on remittances from Russia. Tajikistan's economic success hinges on an agreement with the International Monetary Fund and the construction of the Rogun dam, which is projected to be completed in 2032. The government issued USD500 million of 10-year Eurobonds to finance the construction. If completed in time, the dam will produce enough electricity to meet Tajikistan's needs and to 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 restructuring its debt.

OPERATIONAL RISK
Businesses evaluating opportunities in Tajikistan will face a poor operating environment. The country's weakest points are its logistical profile and security environment, as ageing utilities and transport infrastructure mean power outages and road accidents are commonplace. The country's trade and investment, and labour environments do not perform much better, with factors such as a heavy economic reliance on remittances from Russia, high public debt and significant levels of bureaucratic red tape making it difficult to do business. Education levels are also poor in Tajikistan, with most workers in the formal economy being employed within the agricultural sector.

Date last reviewed: March 4, 2020

Fitch Solutions Political and Economic Risk Indicies

Fitch Solutions Operational Risk Index

 

Operational Risk

Labour Market Risk

Trade and Investment Risk

Logistics Risk

Crime and Security Risk

Tajikistan Score

44.6

54.6

39.1

41.4

43.2

Caucasus and Central Asia Average

51.8

58.2

53.4

50.5

44.9

Caucasus and Central Asia Position (out of 8)

7

6

8

7

5

Emerging Europe Average

58.0

56.3

59.1

60.5

55.9

Emerging Europe Position (out of 31)

30

21

31

30

25

Global Average

49.7

50.2

49.8

49.3

49.2

Global Position (out of 201)

124

71

139

120

120

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

Country/Region

Operational Risk Index

Labour Market Risk Index

Trade and Investment Risk Index

Logistics Risk Index

Crime and Security Risk Index

Georgia

62.3

63.5

71.4

56.1

58.3

Azerbaijan

61.2

62.5

62.5

66.4

53.2

Kazakhstan

60.2

73.5

58.9

57.0

51.5

Armenia

56.8

60.5

58.6

53.9

54.2

Kyrgyzstan

44.9

54.1

44.6

43.1

37.7

Uzbekistan

44.7

54.8

53.1

39.2

31.7

Tajikistan

44.6

54.6

39.1

41.4

43.2

Turkmenistan

39.6

42.4

39.3

47.3

29.4

Regional Averages

51.8

58.2

53.4

50.5

44.9

Emerging Markets Averages

46.2

48.2

46.5

45.0

44.9

Global Markets Averages

49.7

50.2

49.8

49.3

49.2

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: March 4, 2020

Hong Kong Connection

Hong Kong’s Trade with Tajikistan

Export Commodity

Commodity Detail

Value (US$ thousand)

Commodity 1

Professional, scientific and controlling instruments and apparatus

235.1

Commodity 2

Telecommunications and sound recording and reproducing apparatus and equipment

83.7

Commodity 3

Office machines and automatic data processing machines

51.7

Commodity 4

Electrical machinery, apparatus and appliances and electrical parts thereof

17.8

Commodity 5

Chemical material and products, N.E.S.

7.2

Import Commodity

Commodity Detail

Value (US$ thousand)

Commodity 1

Telecommunications and sound recording and reproducing apparatus and equipment

188.9

Commodity 2

Crude animal and vegatable materials

4.4

Exchange Rate HK$/US$, average
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
7.77 (2019)

  2019 Growth rate (%)
Number of Tajik residents visiting Hong Kong  47 -21.7

Number of European residents visiting Hong Kong 

1,747,763

-10.9

Source: Hong Kong Tourism Board

 

2019

Growth rate (%)

Number of emerging Europe citizens residing in Hong Kong

114

29.5

Sources: United Nations Department of Economic and Social Affairs – Population Division, Fitch Solutions
Note: Growth rate for resident data is from 2015 to 2019. No UN data available for intermediate years
Date last reviewed: March 4, 2020

Commercial Presence in Hong Kong

 

2019

Growth rate (%)

Number of Tajik companies in Hong Kong

N/A

N/A

- Regional headquarters

- Regional offices

- Local offices

Source: Hong Kong Census and Statistics Department

Treaties and Agreements between Hong Kong/PRC and Tajikistan

A bilateral investment treaty with Mainland China entered into force in January 1994.

Visa Requirements for Hong Kong Residents

HKSAR passport holders need to apply online for an electronic visa for stays with a duration of up to 45 days. 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: e-Visa Tajikistan
Date last reviewed: March 4, 2020

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