Economic and Trade Policy

Trade has played an increasing role in the world economy over the past decades as illustrated by the fact that the growth of real trade exceeded that of world output. According to the WTO data the ratio of world exports of goods and services to GDP rose from 13.5 per cent in 1970 to 32 per cent in 2005 and all major geographic regions recorded an excess of trade over output growth.

Implementation of reasonable trade policy by the countries around the world made provided achievement of this tremendous result. Thus the Government of Tajikistan takes all relevant steps to establish suitable condition for free trade condition.  The program of economic reform, which aims to achieve macro-economic stability in the country, successful is been implemented. The key targets of the Program are:

 

a)      maintenance of economic growth;
b)      reduction of the budget deficit;
c)      reduce annual inflation

Significant success was achieved in the implementation of structural reform policies. Following privatization of the small enterprises, attention will be given to privatization of large-scale enterprises.

Since independence the legislative and regulatory framework for the establishment of a market-oriented economy in the country has been developed. The Law on Privatization of State-Owned Property encourages the participation of foreign investors in the privatization of the national economy. Within the context of bilateral relations the Government of Tajikistan signed agreements on promotion and mutual protection of investments with a number of countries, which form the basis for the regulatory framework for investment activity in Tajikistan. At present, more than 210 joint ventures are established in Tajikistan. The main areas of activities of joint ventures are textiles, output of necessary products, export-import operations, agro-processing, construction and construction materials, telecommunications, and mineral resources exploration.

In line with objectives of the Government, the investment program targets foreign direct investment for construction of a water-energy station, exploration and processing of mineral resources, cotton-processing and export of textiles, production and export of citrus, processing of cattle breeding products and production of final goods, increasing of output of fertilizers, production of consumer goods, reconstruction and modernization of existing agricultural capacities, creation of progressive and scientific industrial sub-sectors, and development of the telecommunications system.

With regard to the external economic sector, the Government of Tajikistan has implemented reforms since independence. The main principles and rules of the external economic activities in Tajikistan are determined by the Law on Foreign Economic Activities of Tajikistan, adopted in 1993. This document creates the basis for activities of all foreign economic subjects in a country,

protects their rights, interest and properties in accordance with accepted standards of international law on a fair and equal basis and strengthens integration of the national economy into the world economy.

Another important legislative act regulating external economic activity is the Law on Foreign investment, adopted in 1992. This law, which creates a quite favorable investment climate for foreign investors, secures the rights and interests of foreign investors and economic subjects.

The Government of Tajikistan has keen interest in removal cross-border barriers to trade. Lowering or removal of tariffs has traditionally been considered to be one of the functions of trade policy. It is still a valid function, but increasing attention has to be paid on the global nature of business and entrepreneurial activities. Now that cross-border barriers have been lowered or entirely abolished widely, other barriers to trade have to be focused on, such as technical regulations and standards, intellectual property rights, use of subsidies, competition and trade procedures.

Nevertheless to the side effects of free trade Tajikistan prone to strengthening it trade liberalization process. The adoption of the two legislative acts mentioned above in the early stage of reform allowed the strengthening of trade-economic relations of Tajikistan with the rest of the world. But economic reforms have progressed well since 1995 after the adoption of the resolutions on Foreign Trade Liberalization in the Republic of Tajikistan on 27 June 1995 and on Liberalization of Currency and Export Operation on 24 February 1996. Administrative constraints and trade protective measures have been gradually removed. Since 1 February 1996 the quota and licensing system in a country have been eliminated. Later, in February 1997, the obligatory examination of import-export contracts was also abolished.

At present Tajikistan’s foreign trade policy is oriented towards development of the export potential of the country. The Government has applied a progressive approach to trade liberalization. Initially, liberalization covered practically all export categories, except a few items, including cotton and aluminum. During the second stage, 1996-1997, the Government gradually liberalized trade in the two main export items: cotton and aluminum and established necessary financial institutions, such as the Cotton-Exchange, and the Tajik Universal Commodity and Raw Material Exchange.

All these measures allowed an increase of the export potential of the country and stimulated foreign trade. As a result, Tajikistan has maintained a positive trade balance, to some extent, has led to the normalization of currency transactions and balance of payments stabilization.

During 1995-1997, 100 per cent pre-payment mechanisms for a limited range of export categories (ten items) were introduced. For other exports payment periods were limited from 90 up to 120 financial days. These measures were introduced in order to develop a proper mechanism for currency transactions.

In order to stimulate exports and promote foreign trade the Government of Tajikistan adopted an export promotion policy. Export duties were abolished and differential rates for import duties were adopted. It should be pointed out that the accepted rates of import duties are generally lower than those in neighboring countries. Since independence, Tajikistan has created trade-economic links with more than 80 countries all over the world. These trade-economic relations are developed on the basis of bilateral agreement and treaties on trade-economic co-operation, which routinely include a clause on most-favoured nation (MFN) treatment. At the same time, Tajikistan pays attention to the development of relations within the framework of regional trading arrangements and custom unions. Today Tajikistan is a member of the Euro-Asian Economic Community, CIS, Central-Asian Economic Community, ECO and so one. Membership in such arrangements and organizations provide opportunities to the country to benefit from privileges granted by all member countries.