Tajikistan is a challenging place to do business but could present high-risk, high-reward opportunities for foreign investors who have experience in the region, a long-term investment horizon, and the patience and resources to conduct significant research and due diligence. At the most senior levels, the Tajik government consistently expresses interest in attracting more U.S. investment, but the poorest of the Central Asian countries harbors few U.S. investors and remains a largely uncompetitive investment destination.
Tajik President Rahmon publicly emphasizes the need to foster private-sector-led growth, and attracting investment is prioritized in the government’s 2016-2030 National Development Strategy and in-progress 2021-2024 Economic Development Strategy. Strategy documents notwithstanding, bureaucratic and financial hurdles, widespread corruption, a largely dysfunctional banking sector, non-transparent tax system, and countless business inspections greatly hinder investors. The absence of private investment, along with the government’s commitment to dedicate significant financial resources to the construction of the Roghun Dam hydropower plant, creates pressure on the Tax Committee to enforce or reinterpret tax regulations arbitrarily in order to meet ever-increasing revenue targets.
Tajikistan is saturated in opaque loans connected to China’s Belt and Road Initiative, and Chinese investments account for more than three-quarters of the country’s total Foreign Direct Investment. Tajikistan is also reportedly considering joining the Russian-led Eurasian Economic Union. Should it apply for and receive membership, U.S. firms could experience higher trade tariffs. Finally, despite Tajikistan’s 2013 accession to the World Trade Organization, the Tajik government has imposed both blanket and targeted trade policies to protect private interests without notifying its partners, as occurred with bans on imported chicken meat in 2017 and exports of mining concentrate in 2019.
The Tajik economy faces endemic challenges. Consumption has been a major driver of Tajikistan’s economic growth, but it is reliant on migrant remittance flows from Russia, where about one million labor migrants reside. The novel coronavirus pandemic is projected to severely reduce remittances this year and precipitate a two percent GDP contraction in Tajikistan. Falling remittances also lead to shortages of foreign exchange and put downward pressure on the country’s reserves as it defends the national currency. Tajikistan’s banking sector is plagued by politically-directed, non-performing loans, high interest rates, and the absence of correspondent banking accounts in the West.
Despite these challenges and risks to potential investors, Tajikistan is pursuing greater trade links with its neighbors and has made modest progress to improve its investment climate over the past year. The World Bank cited Tajikistan as a top reformer on its Doing Business 2020 report and is also providing technical assistance towards tax reform. Authorities made steps towards greater compliance on intellectual property rights protections this year, and Tajikistan was recognized for significant progress towards transparency in the extractives sector. Should the government continue an economic reform path, opportunities in energy, agribusiness, food processing, tourism, textiles, and mining could prove promising.
|TI Corruption Perceptions Index||2019||153 of 180||http://www.transparency.org/
|World Bank’s Doing Business Report||2020||106 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2019||100 of 129||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, historical stock positions)||2017||$41||http://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2018||$1,010||http://data.worldbank.org/
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Tajik government is consistent in its calls for greater U.S. investment. Despite this, Tajikistan has traditionally courted state-led investment and external loans from larger regional neighbors, including China, Russia, and, to a lesser extent, Iran. In 2019, Chinese foreign investment rose six percent to USD 62.3 million, accounting for almost 76 percent of the USD 346 million of 2019 foreign direct investment (FDI). Russia (USD 33.1 million) was the second largest source of FDI last year, followed by the United Kingdom (USD 13.9 million), and Turkey (USD 13.5 million). Following increased outreach to Gulf States, Qatar has invested USD 384.5 million in a high-rise luxury apartment complex and the region’s largest mosque and is investigating opportunities in banking and infrastructure.
Tajikistan’s Investment Law (Article 7) 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. Foreign firms may acquire assets, including shares and other securities, as well as land leasing 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. Most of Tajikistan’s current international agreements provide most-favored-nation status.
Tajikistan’s legal code does not discriminate against foreign investors by prohibiting, limiting, or conditioning foreign investment. To receive permission and licenses for operation, however, a foreign investor must navigate a complicated, cumbersome, and often corrupt bureaucratic system.
Several Tajik government agencies are responsible for investment promotion, but they frequently have competing interests. The Committee on Investments and State Property Management ( ) facilitates FDI. In addition, state-owned enterprise Tajinvest under the Committee on Investments and State Property Management is responsible for attracting investment into Tajikistan .
Tajikistan has established several formal mechanisms to maintain open channels of communication with existing and potential investors. With donor support, the government established a Consultative Council on the Improvement of the Investment Climate in 2007. This annual council provides a formal venue for dialogue with donors, international financial institutions, and members of the private sector ( ). In January 2015, the government established a National Entrepreneurship Day, annually celebrated in October. Nevertheless, investors continue to claim that many of their complaints to the government go unheeded.
Limits on Foreign Control and Right to Private Ownership and Establishment
Tajikistan’s legislation provides a right for all forms of foreign and domestic ownership to establish business enterprises and engage in remunerative activity. There are no limits on foreign ownership or control of firms and no sector-specific restrictions that discriminate against market access. Local law considers all land and subsoil resources to belong exclusively to the state, although initial efforts to establish a private land market are underway.
Tajikistan’s legislation allows for 100 percent foreign ownership of local companies. In the context of jointly-owned companies, local partners generally seek to possess a controlling share (51 percent or more) at the initial stage of business development and in some cases may seek to increase their stake over time.
All sectors of Tajikistan’s economy are open to foreign participation with the exception of aviation, defense, security, and law enforcement, which require special government permission for the operation of such types of businesses or services. Tajikistan does not restrict foreign investment; it does not mandate local stakeholder equity positions or local partnership. In some cases, the government requires specific licenses. There are no mandatory IP/technology transfer requirements.
Tajikistan’s government maintains an investment screening mechanism for inbound foreign investments involving government interests, including investments into Free Economic Zones, issuing approval or rejection statements in particular for investments requiring government financial support or state guarantees. The Committee on Investments and State Property Management is responsible for filing and coordinating foreign investment project proposals as they pass through the review pipeline. The government takes particular interest in determining whether the proposed project may impact the county’s national security and/or economic performance.
Investors must submit their proposals for screening to all relevant government agencies. This process can be lengthy and cumbersome. The Committee on Investments and State Property Management circulates the investor’s proposal among the relevant government offices and ministries with instructions to review and then provide a formal opinion. If a ministry objects to the proposed investment activity, it submits an official note to the Committee on Investments and State Property Management.
Screening proposals often involve background checks on the company, the person(s) representing the company, and identification of a financial source to comply with anti-money laundering regulations. U.S. businesses have not identified screening mechanisms as a barrier to investment.
The purpose of the investment screening process is to ensure that a proposed project does not violate Tajik laws. The review process could reject the proposal and the Tajik government may flag it as “incomplete.” Applicants may appeal the government’s decision by submitting a claim to the Tajik Economic Court.
Other Investment Policy Reviews
The United Nations Conference on Trade and Development (UNCTAD) presented a draft Investment Policy Review of Tajikistan in November 2015 to stakeholders from the government, local and international private sector, and civil society and development partners. The final report was published on August 10, 2016 ( )
Tajikistan has not conducted a WTO Trade Policy Review, and a WTO Trade Policy Review scheduled for 2020 has yet to take place.
Some international and local consulting companies in the recent years produced ratings, guides and reports on investment and business in Tajikistan:
Although the Tajik government has simplified the business registration process by adopting a single-window registration system, that process still requires significant legal and human resources, government connections, and time. The Tax Committee is the primary agency responsible for business registration ( ). In addition to obtaining the state registration through a single-window, a company must also register with the Social Protection Agency ( ); Statistics Agency under the President of Tajikistan ( ); Ministry of Labor, Migration, and Employment ( ); Sanitary-Epidemiological Service at the Ministry of Health ( ); as well as with local authorities, municipal services, and other agencies. According to the country’s regulations, registering a business should take less than five business days; in reality, it may take several days or even months due to the inappropriate or illegal actions of registering agencies. The Tajik government must notarize all businesses.
The Committee on Investments and State Property Management is the key agency that collects information and project proposals from investors. However, numerous other agencies are involved in the investment coordination process, making it cumbersome.
According to the Tajik Tax Code, there are three types of enterprises: 1. Small-scale businesses with turnover up to USD 100,000 during a 12 months period. 2. Medium-scale businesses with annual turnover from USD 100,000 to USD 2.5 million, and 3. Large-scale companies from USD 2.5 million annual turnover. The international donor community, in coordination with the government, funds a number of projects that stimulate development of small and medium enterprises in Tajikistan.
The Tajik government does not promote outward investments. Private companies from Tajikistan have invested in Kazakhstan, Uzbekistan, Kyrgyzstan, Turkey, Russia, the United Kingdom, the United States, and the UAE, primarily in trade, food processing, real estate, and business development. The Tajik government does not restrict domestic investors from investing abroad.
3. Legal Regime
Transparency of the Regulatory System
Tajikistan’s regulatory system lacks transparency. Executive documents – presidential decrees, laws, government orders, instructions, ministerial memos, and regulations – are often inaccessible to the public. Businesspeople and investors must purchase access to Adliya, a commercial legal database, to obtain updated legal and regulatory information. Each ministry has its own set of unpublished regulations and these may contradict the laws and/or regulations of other ministries.
The Tajik government rarely publishes proposed laws and regulations in draft form for public comment. Although the Tajik government solicited public comment on the 2013 Tax Code, it did not modify the draft law based on the input received. The World Bank is assisting the government with ongoing tax reform, and the government will provide for a period of public comment before the finalization of a draft tax code.
TajikStandard, the government agency responsible for certifying goods and services, calibrating and accrediting testing laboratories, and supervising compliance with state standards, lacks experts and appropriate equipment. TajikStandard does not publish its fees for licenses and certificates, or its regulatory requirements.
The World Bank funded Public Financial Management Modernization Project helps the Ministry of Finance adopt International Public Sector Accounting Standards (IPSAS). National energy utility company Barqi-Tojik, Dushanbe municipality water and sewage, utility Dushanbevodokanal, and the national rural water utility Khojagii Manziliyu Kommunali received World Bank assistance to fully adopt and apply International Financial Reporting Standards (IFRS). The 2011 Accounting Law requires all Public Interest Entities, including major State-Owned Enterprises, to apply International Financial Reporting Standards (IFRS), but the transition period continues.
The Tajik central government is the highest rule-making and regulatory authority. On a case-by-case basis, the central government will delegate some regulatory functions to regional or district levels.
The Office of General Prosecutor, Anti-Corruption Agency, the Tax Committee, and the State National Security Committee oversee government and administrative procedures.
The Tajik government did not announce any regulatory system and enforcement reforms in 2019. Government agencies submit proposed draft regulations to government commissions. Once cleared, draft regulations receive final review by the relevant ministries and the Executive Office of President.
Legally, the public has the right to review and monitor the enforcement process. In practice, however, Tajikistan does not regularly enforce regulations. The Tajik government does not review regulations based on scientific or data-driven assessments. Tajikistan archives its laws, regulations, and policies at .
Although the government has taken steps to improve its fiscal transparency, publicly-available budget documents fall short of internationally-accepted standards. International assessments recommend that Tajikistan breakdown data by ministry and include information about debt held by State-Owned Enterprises.
International Regulatory Considerations
Tajikistan is a member of the CIS (Commonwealth of Independent States). Government officials claim they are still studying the prospect of membership in the Eurasian Economic Union.
The regulatory system that governs Tajikistan’s cotton sector incorporate CIS and U.S. technical norms. Tajikistan is a WTO member and must notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade.
Legal System and Judicial Independence
Tajikistan has a civil legal system. The parties to a contract can seek enforcement by submitting their claims to Tajikistan’s Economic Court. Tajikistan has written laws on commercial activities and contracts. Tajikistan’s economic courts review economic/commercial disputes.
Legally, the judicial system is independent. In practice, the executive branch interferes in judiciary matters. The current judicial process is neither fair nor reliable. Outcomes tend to favor the government’s executive branch.
Legally, regulation and enforcement actions are appealable, and the national court system adjudicates appeals. In practice, national courts typically carry out executive preferences, leaving business and commercial interests vulnerable to government interference.
Laws and Regulations on Foreign Direct Investment
Several government websites provide information on laws/regulations:
- Presidency –
- Parliament –
- Government media –
- Tax Committee –
- Ministry of Finance –
- National Bank of Tajikistan –
The Tajik government regulates investments through a number of laws, inter alia, the Law on Investment Agreement, Law on Concessions, Law on Resources, Law on Legal Status of Foreigners, Law on Free Economic Zones, Law on Investments, Concept of State Policy on Investments and Protection of Investments, Law on Natural Resources Tenders, and Law on Privatization of Housing. The government also established the New Coordination Council of Inspection Agencies. According to the proposed draft decree, an initial risk assessment will now guide all inspections. Historically, inspections lack justification and are a means to extract fines and revenue from the private sector.
The government’s Action Plan for the Improvement of Investment Climate of the Industrial Sector, Support of Production Entrepreneurship, and Development of National Production for 2016-2018 was approved July 27, 2016 and extended to 2020.
The Tajik government does not offer a “one-stop-shop” website for investment that provides relevant laws, rules, procedures, and reporting requirements for investors.
Competition and Anti-Trust Laws
The Antimonopoly Service ( ) is responsible for regulating prices for products of monopolistic enterprises, preventing and eliminating monopolistic activity, and monitoring potential monopolistic abuse and unfair competition.
Expropriation and Compensation
The Tajik government can legally expropriate property under the terms of Tajikistan’s Law on Investments, Law on Privatization, civil code, and criminal code. The laws authorize expropriation if the Tajik government identifies procedural violations in privatizations of state-owned assets or determines a property has been used for anti-government or criminal activities, as defined in the criminal code. Under the Law on Joint Stock Companies, the government may request that a court cancel the private purchase of shares in SOEs if it determines that there was a violation to the procedure within the original sale.
Tajikistan has a history of expropriating land because the properties involved were illegally privatized following Tajikistan’s independence. Following an investigation by government anti-corruption, anti-monopoly, and other law enforcement agencies, the Committee for Investments and State Property Management can issue a finding that the asset was illegally privatized, and request that the Tajik court system order its return to government control. Domestic law requires owners be reimbursed for expropriated property, but the amount of the compensation is usually well below the property’s fair market value.
In several cases, Tajik officials have used government regulatory agencies to pressure businesses and individuals into ceding properties and business assets. The Tajik government has not shown any pattern of discrimination against U.S. persons by way of illegal expropriation. All privately owned operations are vulnerable to expropriation actions.
The Tajik government may threaten to impose inflated and baseless taxation charges on companies, and use this as leverage to negotiate the transfer of some share of a company to the government. In cases of expropriations, claimants and others have generally had no access to due process.
ICSID Convention and New York Convention
Tajikistan is not a member state of the International Centre for the Settlement of Investment Disputes (ICSID) Convention.
Tajikistan became the 147th country to sign and ratify the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). Tajikistan acceded to the Convention on August 14, 2012, and it entered into force on November 12, 2012 – 90 days after depositing the signed text at the UN and in accordance with Article XII (2) of the Convention.
Nonetheless, Tajik courts have overturned arbitral awards in favor of connected officials. Tajikistan signed the Convention with a number of reservations regarding types of arbitration agreements and decisions that Tajikistan can recognize and implement.
One of the reservations established that Tajikistan does not apply the provisions of the Convention to disputes with immovable property; Norway had previously established a similar reservation. Another reservation established that Tajikistan apply the Convention only to disagreements and decisions “arising after the entry into force of the Convention and to decisions made in the territories of third countries.”
Investor-State Dispute Settlement
In 2011, Tajikistan joined the Cape Town Convention on International Interests and Mobile Equipment. The Cape Town Convention on International Interests in Mobile Equipment and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment, together usually referred to as the Cape Town Treaty, is an international treaty intended to standardize transactions involving movable property, particularly aircraft and aircraft engines. The treaty creates international standards for registration of ownership, security interests (liens), leases, and conditional sales contracts, and various legal remedies for default in financing agreements, including repossession and the effect of a particular states’ bankruptcy laws.
Disputes involving foreign investors have primarily centered on the implementation of tax incentives. In the last ten years, numerous foreign investors have reported difficulty utilizing promised value-added tax exemptions on imported items to Embassy officials. Tajik procedures require businesses to submit in January of the calendar year a list of goods to be imported, the exemption then expires at the end of December in that same year.
It takes an average of 430 days to obtain a resolution on a commercial dispute/contract enforcement proceeding in Tajikistan: 40 for filing and service, 120 for trial and judgment, and 270 for enforcement of the decision.
International Commercial Arbitration and Foreign Courts
Tajik law recognizes the role of local courts in dispute resolution and arbitration but in reality there is no reputable arbitration institution for resolving disputes domestically among individuals and businesses. In practice, however, these courts are primarily used to resolve disputes over agricultural plot demarcations as part of the land reform process, and do not serve as venues to resolve non-agricultural commercial disputes.
Tajikistan has signed bilateral agreements with several countries on arbitration and investment disputes, but local domestic courts do not always properly enforce or recognize awards.
Under Tajikistan’s Law on Bankruptcy (2003), both creditors and debtors may file for an insolvent firm’s liquidation. The debtor may reject overly burdensome contracts, and choose whether to continue contracts supplying essential goods or services, or avoid preferential or undervalued transactions. The law does not provide for the possibility of the debtor obtaining credit after the commencement of insolvency proceedings. Creditors have the right to demand the debtor return creditors’ property if that property was assigned to the debtor less than four months prior to the institution of bankruptcy proceedings. Tajik law does not criminalize bankruptcy.
5. Protection of Property Rights
The Tajik government uses a cadaster system to record, protect, and facilitate acquisition and disposition of property, but it needs improvement. Even when secured interests in property do exist, enforcement remains an issue. Investors should be aware that establishing title might be a more involved process than in Western countries because title histories can be difficult to find.
Since 2007, the U.S. government has provided significant, sustained, and focused support to the Tajik government on market-driven land reforms. Most recently, Tajikistan’s Land Market Development Activity (LMDA), a USD 9.7 million project, successfully launched “one-stop shops” for land registration throughout Khatlon, cutting wait times in half. The activity also supports the launch of a new automated registration system designed to centralize records, streamline procedures, and further simplify land registration. In 2019 the activity facilitated Tajikistan’s first land auction and the government has since conducted several other land auctions. The Tajik government is replicating the one-stop-shop model throughout the country and has established a training center for Land Registration Department employees.
The government passed mortgage legislation in March 2008 that allows parties to use immovable property as collateral. The government also adopted revised land code amendments in August 2012.
According to domestic law, all land belongs exclusively to the state; individuals or entities may be granted first or second-tier land-use rights. The government restricts foreigners’ first-tier land-use rights to 50 years, while Tajik individuals and entities may have indefinite first-tier land-use rights. Foreigners may request second-tier land-use rights from the government similar to the first-tier rights of Tajik individuals and entities, for periods of up to 50 years. Tajik first-tier land-use rights holders may also grant foreigners lease agreements for up to 20 years. Ownership of rural land-use rights can be particularly opaque, since many nominally privatized former collective farms continue to operate as a single entity. Many of the new owners do not know where their land is and do not exercise their property rights.
Officially, Tajik authorities clearly demarcate land by title and affiliation to state-ownership or for private use.
Tajik law does not allow the sale of land. All land is the property of the state. If leaseholders do not use land in accordance with the purpose of the lease, then authorities can revert it to other owners.
Intellectual Property Rights
Tajikistan is a signatory to several international conventions that protect intellectual property rights (IPR), including the World International Property Organization (WIPO) Convention. Tajikistan has signed 17 WIPO administered treaties.
The Tajik government is actively working to improve IPR protection. President Rahmon’s 2018 decree mandating that the government use licensed software led to the September 2019 creation of an interagency working group — chaired by the Ministry of Economic Development and Trade, with participation from the Ministries of Foreign Affairs, Internal Affairs, and Culture, as well as the Customs Service and the Department for the Protection of State Secrets — to develop processes to enforce IPR. Additionally, the working group proposed amendments to several IPR-related laws and has a presidential mandate to report progress on its 2020 Action Plan to the Deputy Prime Minister.
Notwithstanding the gains Tajikistan has made in the past couple years, numerous challenges remain. Tajikistan is a party to many international IPR agreements, and IP protection provisions exist in the Constitution as well as the country’s criminal and civil codes. Despite these protections, infringement is widespread and enforcement remains weak.
The government lacks the technical capacity to effectively protect patents, copyrights, trademarks, and other intellectual property. The Ministry of Economic Development and Trade, the Ministry of Interior, and the Ministry of Culture have regulatory authority. The IPR Unit at the Ministry of Interior was established in 2006 and reorganized in 2011 under the new Unit to Combat IP Crimes. Article 156 of the criminal code allows for seizures of counterfeit goods. For the first time since 2012, the Ministry of Internal Affairs shared information about enforcement actions with the Embassy.
At present, IP does not represent a sizeable portion of the Tajik economy, although over 90 percent of software and other media products sold in Tajikistan are unlicensed copies, and many “brand name” consumer goods are counterfeit.
The Tajik government has limited human, technical, and financial resources to monitor the implementation of TRIPS. It has adopted several laws within the TRIPS framework: – Law of the Republic of Tajikistan on Trademarks and Service Marks
- Law of the Republic of Tajikistan on Trademarks and Service Marks
- Law of the Republic of Tajikistan on Inventions
- Law of the Republic of Tajikistan on Copyrights and Related Rights
- Law of the Republic of Tajikistan on Industrial Designs
- Law of the Republic of Tajikistan on Geographical Indications
- Law of the Republic of Tajikistan on the Legal Protection of Topographies Integrated Circuits
- Law of the Republic of Tajikistan on Secret Inventions
- Law of the Republic of Tajikistan on the Protection of Plant Varieties
- Law of the Republic of Tajikistan on Competition and Restriction of Monopolistic Activity on Commodity Markets.
All other IPR related laws, regulations, and treaties in Tajikistan are accessible here:
As part of its WTO accession process, Tajikistan amended Article 441 of its customs code to provide ex officio authority to its customs officers to seize and destroy counterfeit goods. The Department on Disclosing and Seizing of Counterfeit Products within the Customs Service of Tajikistan has the responsibility to detect IPR-related violations. Currently, the Customs Service has only three IPR products registered in its customs registry. Tajikistan’s Law on Quality and Safety of Products requires IPR violators to pay all expenses for storage, transportation, and destruction of counterfeit goods.
To register a patent or trademark with the National Center for Patents and Information (NCPI), applicants must submit an application with all relevant information on the IP and pay a fee. The NCPI ( ) will search its records for conflicts and, if none is found, register the IP within 30 days from the time the application is received. In general, the issuance of a trademark might take four to seven months, while obtaining a patent for an invention could take up to two years.
Tajikistan was removed from the USTR Special 301 Watch List in 2019 and is not included in the Notorious Markets List.
Resources for Rights Holders
U.S. Embassy Economic Section
Public list of local lawyers: https://tj.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/
6. Financial Sector
Capital Markets and Portfolio Investment
Foreign portfolio investment is not a priority for the Tajik government. Tajikistan lacks a securities market. According to government statistics, portfolio investment in Tajikistan totaled USD 502.5 million at the end of 2019. This includes the USD 500 million Eurobond the National Bank of Tajikistan issued in September 2017. The National Bank of Tajikistan has made efforts to develop a system to encourage and facilitate portfolio investments, including credit rating mechanisms implemented by Moody’s and S&P. Apart from these initial steps, however, Tajikistan has not established policies to facilitate the free flow of financial resources into product and factor markets.
Tajikistan does not place any restrictions on payments and transfers for current international transactions, per IMF Article VIII. It regards transfers from all international sources as revenue, however, and taxes them accordingly.
Commercial banks apply market terms for credits, but are also under considerable pressure by governing elites and their family and friends to provide favorable loans for commercially questionable projects.
The private sector offers access to several different credit instruments. Foreign investors can get credit on the local market, but those operating in Tajikistan avoid local credit because of comparatively high interest rates.
Money and Banking System
According to the latest National Bank of Tajikistan report from December 2019, 75 credit institutions, including 17 banks, including one Islamic bank, 22 microcredit deposit organizations, six microcredit organizations, and 30 microcredit funds, function in Tajikistan. Tajikistan has 328 bank branches, a 4 percent reduction since 2018. Although the National Bank of Tajikistan reports 26.1 percent of commercial loans are non-performing, other estimates range as high as 60 percent.
Tajikistan’s banking system has still not recovered from the 2015 financial crisis. AgroInvestBank and TojikSodirotbank, two of Tajikistan’s largest, are in fact collapsed banks awaiting liquidation. Tajikistan’s banking sector has assets of USD 2.2724 billion as of December 2019, which is USD 130 million more than in 2018. Total liabilities in 2019 were unchanged from 2018, reaching USD 1.6 billion. The National Bank of Tajikistan is the country’s central bank ( ). Foreign banks can establish operations but are subject to National Bank of Tajikistan regulations. United States commercial banks discontinued correspondent banking relations with Tajik commercial banks in 2012.
To establish a bank account, foreigners must submit a letter of application, a passport copy, and Tajik government-issued taxpayer identification number.
Foreign Exchange and Remittances
Tajikistan places no legal limits on commercial or non-commercial money transfers, and investors may freely convert funds associated with any form of investment into any world currency. However, businesses often find it difficult to conduct large currency transactions due to the limited amount of foreign currency available on the domestic financial market. Investors are free to import currency, but once they deposit it in a Tajik bank account it may be difficult to withdraw.
In December 2015, the National Bank of Tajikistan reorganized foreign currency operations and shut down all private foreign exchange offices in Tajikistan. Since that time, only commercial bank exchange offices may exchange money and transactions require customers to register with an identity document. In December 2019, the National Bank of Tajikistan launched a national money transfer center that centralizes the receipt of all remittances from abroad.
The government’s policy supports a stable exchange rate but remains susceptible to changes in the Russian ruble. As global oil markets caused the Russian ruble to devaluate in March 2020, the National Bank adjusted the official rate from TJS 9.68 per U.S. dollar to TJS 10.2 per U.S. dollar, a 5.4 percent depreciation. Defending the somoni’s rate to the dollar puts pressure on Tajikistan’s foreign currency and gold reserves, leaving the government with little capacity for systematic currency interventions.
The National Bank of Tajikistan mandated that commercial banks disburse remittances in local currency since early 2016. There are no official time or quantity limitations on the inflow or outflow of funds for remittances. Tajikistan’s tax code classifies all inflows as revenue and taxes them accordingly; however, the Tajik government does not tax remittances from labor migrants.
Sovereign Wealth Funds
Tajikistan does not have a sovereign wealth fund. The country does have a “Special Economic Reforms Fund,” but, according to official statistics, it is empty.
10. Political and Security Environment
Tajikistan’s civil war lasted from 1992 to 1997 and resulted in the deaths of 50,000 people. Apart from a minor uprising in September 2015, however, political violence following the end of the civil war has been rare.
Tajikistan is governed by an authoritarian ruler who has consolidated power by silencing opposition voices and ending multi-party democracy. As part of its security efforts, the Tajik government has placed numerous restrictions on religious, media, and civil freedoms.
The state, as an extension of the regime, furthers the interests of the ruling elite, often to the detriment of the business community. Democratic reform is viewed by many elites as a threat to important political and financial interests.
Government institutions are often unwilling or unable to protect human rights, the judiciary is not independent, and the court system does not present Tajiks with a fair or effective forum in which to seek protection. Law enforcement institutions often overuse their authority to monitor, question or detain a wide spectrum of individuals, and the State Committee on National Security (GKNB) exercises a wide degree of influence in all aspects of government.
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs
There are opportunities for the Development Finance Corporation to work in Tajikistan. The Overseas Private Investment Corporation (OPIC) has supported a potato chip factory, an expansion at the University of Central Asia, and consulting companies.
Tajikistan signed an investment incentive agreement with the United States in 1992, with provisions for issuing investment insurance, loans, and guarantees administered by OPIC.