Tajikistan was once part of the Great Silk Road, a system of caravan routes linking Europe to Asia, generally facilitating trade between the various cities along the way. The Silk Road incorporated the people of Central Asia into a system of world trade, providing the mechanism for Tajik producers to adapt to the needs and requirements of customers from Vienna to Shanghai.
The modern equivalent of the Silk Road runs through WTO membership, and on March 2, 2013 Tajikistan became the 159th full member. WTO membership will bring, many benefits to the Tajik economy, including increased access to foreign markets for Tajik exporters, and increased foreign direct investment. As Tajikistan is coming out of a period that saw the dismantling of the Soviet Union system of economics and a violent civil war, providing stability to both the prices and the supply of goods in and out of the country has become a priority for reviving the Tajik economy. WTO membership was a large first step in this process.
However, the path to WTO accession, and the road through post-accession will require legal reforms. Tajikistan had to reduce its average import tariff rate to 8% on all goods and 10.4% on agricultural goods. Although these rates are still better than the concessions made by other countries in the region: Montenegro (5.1%), Croatia (6.1%), Albania (7%), Moldova (7%), Macedonia (7.1 %), Georgia (7.4%), Kyrgyzstan (7.5%) and Russia (7.8%), they will none-the-less make foreign goods less expensive in Tajikistan. This will be good for consumers, but hard for producers as they will face more foreign competition.
Tajikistan was able to keep higher tariff rates on certain agriculture specialties, such as alcoholic beverages (18-23%), dried fruits (15%), honey (20%), fresh fruits and vegetables (20-23%), ready products from fruits and vegetables (20%). It also kept higher tariffs in strategic industrial products, including textiles (20%), clothing (17%), footwear (20-30%), carpets (30%), aluminium products (10 %), construction materials (15%) and some types of chemical products (20%). The idea behind keeping these higher rates is that Tajik producers will focus on perfecting their production methods for domestic consumers first, then grow their business through exporting. In order to succeed, Tajik producers will need the higher tariff rates during the first years to protect these nascent industries from foreign competitors.
In addition to reforms in tariff rates, Tajikistan will need to make reforms to its domestic laws and regulations. Some of these reforms are already underway, while others remain in the near future. In the remainder of this brief we will address some of the more significant reforms and the effect they will have on related industries.
The Law on Technical Regulations,Number 522 from 2009. This law, which was requested by other WTO members, attempts to reduce the prevalence of compulsory standards. Mandatory safety standards are made for products that are likely to be especially hazardous. In making mandatory safety standards, the government protects consumers by specifying minimum requirements that products must meet before they are supplied. Safety standards require goods to comply with particular performance, composition, contents, methods of manufacture or processing, design, construction, finish or packaging rules. From January 2010, all state standards are voluntary. However, a large number of standards were recompiled into technical regulations, which are still mandatory. These technical regulations are prevalent in areas like food products, construction materials, clothing and textiles and machinery. Overall, the number of technical regulations is decreasing. This is due in part to efforts from the private sector to continue to limit the use of technical regulations to only those that serve a legitimate government interest with minimal negative effects on business.
The Law on Food Safety, Number 890 from 2012. The International Trade Centre has conducted an assessment of the existing system of food safety in Tajikistan and concluded that there was extensive duplication of functions and activities between the various ministries and agencies involved in food safety. The new law defines and sets the role and responsibilities of each state agency and ministry within the food safety system. For example the Health Ministry is responsible for promoting good practices of proceedings at all stages of food processing and carrying out state control and state supervision of facilities for processing and circulation of food products. The Ministry of Agriculture is responsible for conducting state veterinary and sanitary and phyto-sanitary supervision and control on livestock facilities, raw foods of animal and vegetable origin and circulation of agricultural products. The agency on standardization, metrology, certification and trade inspection is responsible for development of standards and technical regulations, metrological supervision, accreditation of laboratories and carrying out state control of mandatory compliance with the technical regulations. Knowing the scope of each agencies mandate is important for the efficient operation of the food safety mechanism in Tajikistan.
One advantage of the new law is the introduction of a more modern approach to food safety. This modern approach provides greater protection at a reduced cost to the government, by utilizing a system of risk management and shared responsibility. Most importantly, the new law puts more responsibility on the manufacturer to ensure food safety. The new low also introduces the distinction between food quality and food safety, and regulates the latter more stringently as it is more important for human health.
The Law on Foreign Trade, Number 846 from 2012. This law regulates the implementation of trade remedies (antidumping, countervailing, safeguards) within Tajikistan legislative framework, as well as business activity in free trade areas and related areas where a special regime of foreign trade activity applies. Trade remedies are actions taken in response to ”unfair” trade coming from one of three types: subsidies, imports sold at less than fair value (“dumping”) and import surges. Three separate WTO agreements deal with these topics, but all three provide protection to a specific domestic industry when there is a threat of a serious injury to that industry coming from the unfair practice. The law requires the Tajikistan government to consult with the industries who are claiming to be harmed, and if the potential injury is large enough, the law authorizes the government to increase the tariffs paid on the corresponding items, for a number of years. As long as the government follows the appropriate procedures and makes the appropriate consideration, this type of action is not seen as a WTO violation.
The Tajikistan Ministry of Economic Development and Trade has initiated a Post Accession Work Plan which foresees continuation of work on adjustment of the trade regime of the Republic of Tajikistan subsequent to WTO accession. Basically it means that Tajikistan in the negotiation process has agreed to implement the provisions of State Programs and Strategies adopted by the Government of the country which served as country promise to fulfil with the WTO obligations. The Post Accession Plan while still in draft form, has been widely circulated among public and private sector.
The Post-Accession Work Plan suggests the following pro-business reforms:
– Reduce interest rates on bank loans
– Replace standards with new and improved technical regulations
– Further reduce of number of goods subject to mandatory certification
– Strengthen laboratory facilities and improve the equipment to the level corresponding to international practices
– Restructure the telecommunications service and the Committee on TV and Radio, including eliminating the State Communication Agency’s share within state owned telecommunication company (TajikTelecom).
– Provide income tax and value-added tax exemptions for enterprises that substantially increase production output
– Provide income tax exemptions for textile and light industry enterprises for 5 years, on the condition that the related profits will be used for improving the technical capacities of the machinery.
– Create property tax exemptions for enterprises that put new equipment into operation for textile and light industry for 5 years from the date of registration of the said property, on condition that saved funds will be used for further improvements in the technical equipment.
– Provide preferential tariffs to the industrial sector for the use of electricity in the summer.
All legal documents are available on:
http://mmk.tj/legislation/base/ – in Tajik
http://mmk.tj/ru/legislation/legislation-base/ – in Russian