Investment Environment and Preferences

Investment climate in Tajikistan.

Development of legislation in Tajikistan is the evidence of authorities’ commitment to reform and their support of all forms of entrepreneurial activities. Enhancement of the legislation, introduction of changes and amendments in the Tax and Customs Codes are targeted to bringing the national economic legislation in compliance with international standards, including guarantees of protection of investors’ and entrepreneurs’ rights.

According to the new provisions of the legislation, enterprises supported by foreign investments are exempted from the income tax for the period from 2 to 5 years, depending on the amount of invested capital.

There are no limitations on foreign direct investments in Tajikistan. Any current account transactions are fully convertible. Interest rates are liberalized. The exchange rate is regulated and floating.

Legal guarantees for investors and protection of investments:
  • equal rights for foreign and domestic investors;
  • non-discrimination policies for investors;
  • the right to select the most favorable legal conditions during five years;
  • guarantees of stability of signed agreements;
  • guarantees of rights for using incomes, and free movement within the country;
  • non-interference of the state authorities in investor’s investment activities;
  • guarantees of investor’s rights against nationalization and requisition;
  • guarantees of investor’s right on export of equipment and information;
  • guarantees of rights on the use of natural resources
  • Tax and customs preferences:
    1) Exemption from customs and VAT
  • import of industrial-manufacturing equipment and spare parts;
  • import of personal property for private needs for foreign employees of enterprises with foreign investments;
  • import of commodities for implementation of targeted projects approved by the Government of the Republic of Tajikistan;
  • import of commodities for construction of hydropower plants, which are considered the most important for Tajikistan;
  • import of items for private needs for newly created enterprises involved in the full cycle of processing of raw cotton.
  • 2) Exemption from VAT
  • financial services;
  • interest from fnancial leases;
  • export of commodities, apart from processed cotton, cotton yarn and primary aluminum, precious metals and precious stones, jewelry made from precious metals and precious stones.
  • 3) Exemption from income tax
    Enterprises created for production of commodities with invested registered capital are exempted from income tax. The exemption period depends on the invested amount:
  • 2 years – if the volume of investments amounts up to $500 thousand;
  • 3 years – if the volume of investments exceeds $500 thousand, up to $2 million;
  • 4 years – if the volume of investments exceeds $2 million, up to $5 million;
  • 5 years – if the volume of investments exceeds $5 million.
  • Special tax regulations
    1) Taxation of construction of hydropower plants. The customer of construction works and general contractor are exempted from the following taxes:
  • value added tax;
  • road tax;
  • income tax from legal entities;
  • minimum profit tax;
  • land taxes;
  • taxes from owners of transport;
  • immovable property tax;
  • social tax;
  • state tax
  • 2) Taxation of newly created enterprises involved in full cycle of processing of raw cotton:
    1. export of commodities manufactured by newly created enterprises are exempted from value added taxes.
    2. newly created enterprises are exempted from:
      • income tax from legal entities;
      • minimum profit tax;
      • immovable property tax;
      • land taxes

    Creation of the Consultative Council on Improvement of Investment Climate under the President’s Office and activities it implemented have been very conducive to improvement of Tajikistan’s investment climate.

    Favorable conditions are being consistently created to attract foreign investments, support market structures and develop commercial banking and finance system. The process of registration of joint ventures and enterprises with other forms of property has been simplified. Tajik Government’s policy measures create favorable conditions for foreign direct investments flow into the country’s economy.

    Tajikistan has adopted the National Development Strategy untill 2015. The paper defines the following priority sectors for investment:
  • energy;
  • mining industry;
  • chemical industry;
  • civil construction and manufacturing of construction materials;
  • light industry and food industry;
  • agriculture and processing of agricultural products;
  • transport and communication;
  • tourism.
  • The biggest volumes of investment in the period from 2007 to 2009 went to the following sectors of Tajikistan’s economy: energy – $419 million; civil construction – $201,4 million; banking services – $194,4 million; communication – $188,9 million.
    According to the CIS Interstate Statistical Committee, in the years preceding the crisis, Tajikistan remained the leader among the other CIS countries in terms of investment growth in fixed capital. In 2008 investments in Tajikistan’s fixed capital increased by 60 percent compared to 2007.
    The volume of foreign direct investments reached USD 760 million and amounted to 14,6 percent to GDP. The growth of the foreign direct investments is shown on the Table 2.

    At present, the biggest investors in Tajikistan’s economy are companies from Russia, Kazakhstan, Cyprus, China, Canada, USA, and the United Kingdom. Among them: Gazprom, Tethys Petroleum (exploration and extraction of oil and natural gas), United Energy Systems of Russia (power generation), Zijin Mining (exploration of gold and silver deposits), Adjind International (textile industry), Hyatt (hotel chain) and other companies. The most successful major enterprises with joint capital are: Sangtuda-1 hydropower plant, Sangtuda-2 hydropower plant, “Penjikent – Zeravshan”, “Darvaz”, “Aprelevka”, “Javoni”, “Marmar”, “Obi Zulol”.
    Indicators of FDI growth
    Table 2
    Years GDP Foreign Direct Investments As Percent to GDP Per capita
    2005 $2, 3 bln. $55 mln. 2,3 7,9
    2006 $2, 8 bln. $390 mln. 13,9 55,2
    2007 $3, 7 bln. $700 mln. 18,9 97,2
    2008 $5, 2 bln. $760 mln. 14,6 103,4
    Source: State Committee on Statistics of RT, State Committee on Investments and State Property Management of RT
    National resource endowment for economic development:
  • availability and accessibility of mineral resources and raw materials;
  • fertile soil and favorable climate;
  • availability of inexpensive and qualified manpower;
  • renewable resources of energy and hydropower.
  • Tajikistan is the land of inexhaustible hydro resources.

    The estimated hydro potential of Tajikistan is 527 bln. Kilowatt-hour per annum. Less than 6 percent of this capacity is being used at present.

    Tajikistan is the only country in the CIS, which during the years of independence built and put into operation a major hydropower facility - Sangtuda-1 with capacity of 400 Megawatt and with the total volume of investments of $750 million.

    The Government of Tajikistan defined the list of priority investment projects in the area of hydropower and heating stations, including 11 projects, implementation of which requires investment of over $5 billion. Schemes of integrated use of Tajikistan’s hydro potential and construction of power transmission lines have been developed.

    The State Committee on Investments and Property Management in close cooperation with public and private sector partners implements activities to improve the investment climate and promote investments. The Committee regularly updates the list of priority proposals for potential investors.

    Currently, more than 200 projects are under consideration of the State Committee on Investments. The database of priority projects contains around 40 projects for the total amount of over USD 8 billion.

    Mineral wealth of Tajikistan - More than 400 mines and deposits of ore and non-metallic subsoil assets have been discovered and prepared for exploration:

  • deposits of gold and silver;
  • iron-bismuthic and wolfram minefields;
  • antimony deposits;
  • marble, granite and precious stones;
  • deposits of oil and natural gas
  • Licenses for exploration of natural resources are provided on competitive basis. In 2010, under support of the International Finance Corporation, the Government of Tajikistan will conduct the first international open bidding on the complex exploration of Konimansuri Kalon deposit (

    Konimansuri Kalon is one of the biggest silver minefields located in the northern region of Tajikistan. The deposits of the minefield amount to about 1 billion tons of ore with the content of silver – 49 grams, lead – 0,49 grams, and zinc – 0,38 grams per ton of ore. The total deposits of silver in Konimansur are estimated at more than 50 thousand tons. There is a list of companies selected for participation in the final bidding. The Government is planning to organize biddings on other prospective minefields.

    Agriculture – Tajikistan has favorable natural and climate conditions – plenty of sunshine and water, fertile valleys. It is conducive for growing delicious fruits and vegetables.

  • Priorities for development of agriculture:
  • processing of agricultural products;
  • processing of wool and leather;
  • cotton farming;
  • gardening and vegetable farming (ecologically clean products);
  • cattle breeding;
  • beekeeping;
  • newlands reclamation
  • Tourism - Tajikistan strengthens the infrastructure in the areas of tourism and services. The country has a potential for further development in:
  • eco-tourism;
  • health tourism;
  • highland and hunting trophy tourism.
  • Overview of investment projects under implementation by the Government
    Foreign loans are an important source of development of Tajikistan’s economy. Only in the last decade the country has attracted more than $2,2 billion in the form of loans, grants and technical assistance.

    More than $502,8 million was allocated and used only for development of the transport infrastructure within the framework of the State Investment Portfolio. In the next few years, it is planned to channel another $300 million for the same purpose. The reconstructed highways “Dushanbe – Kurgan-Tube – Dangara – Kulyab”, Shagon – Zigar”, “Dusti – Nizhny Pyanj” have already proven their economic viability, i.e. transport expenditures have decreased, the interstate trade turnover has increased, promoting development of private sector. By the end of 2012, when the current infrastructure rehabilitation projects will be finalized, Tajikistan will have fully implemented its strategy of access to the international transport routes and markets. It is expected that the freight traffic activities with China, Afghanistan, Pakistan and the countries of Central Asia will increase sixfold due to the growing trade turnover.
    Within the framework of the State Investment Portfolio, the amount of $472,2 million was allocated for development of the energy sector. These funds were directed towards rehabilitation of existing facilities as well as construction of new generating capacities and new power transmission lines. Tajikistan has implemented a number of big projects, such as the “South – North” power supply line with the transmitting capacity of 500 kilowatt and the 220-kilowatt “Lolazor – Khatlon” line. A number of other energy projects are at stage of completion.

    It should be noted that Tajikistan has potential foreign buyers of electricity, and, the country is implementing construction projects of interstate power transmission lines. After putting the new power generating facilities into operation, in the near future, Tajikistan can become a leading exporter of energy in the region.