Areas of promotion

National economy includes more than 90 sectors. Majority of companies have been transformed into joint stock companies and private entities, some with attraction of foreign investment. At present, Tajikistan has achieved a qualitatively new stage of development, when restructuring of various sectors of economy and private sector development started to bring some positive results. Under these circumstances, investments in real sector of economy become effective and profitable.

Foreign direct investment (FDI)

Since 1996 total volume of FDI reached approximately US$277 million. In 2002 foreign direct investments in economy of Tajikistan reached US$36 million, which exceeds 2001 level by 3.8 times. Significant growth of FDI followed economy economic stabilization in te country and was directed in equity of Tajik companies. There are more than 300 enterprises with foreign capital operating in Tajikistan. Primary targetsof FDI were gold mining (30%), commercial activity (19%), food (17%), construction (16%) and chemical industry (8%). In 2002 major sources of FDI included the United Kingdom (40.2%), Russia (23.4%), the USA (7.8%), Cyprus (7.6%), Pakistan (6.9%), Canada (6.8%). Apart from Pakistan, among IDB member-countries major FDI sources also included Turkey (US$ 848.300), Iran (US$385,500) and UAE (US$200.000).

A lack of investment is an acute problem. It is the cause of low productivity and production volumes in manufacturing as well as of a weak infrastructure. The government started active development of national infrastructure. Together with IFIs several large road and bridge reconstruction and rehabilitation projects with the view to upgrade them internationally acceptable standards. Electricity distribution facilities are also undergoes a serious overhaul, as well as system of air navigation and telecommunications. New infrastructure facilities are also built with the use of own reserves and with assistance provided by bilateral donors.

Taxation

Since 1999 a new tax code development together with international experts has been in force in the RT. Enforcement of the TAX Code tax allowed to significantly simplified tax system by reducing number of taxes and simplifying the mechanisms of tax collection, shortening administrative expenses associated with state revenue collection. There are the following state taxes in the RT.

1. Income tax levied upon physical persons;
2. Profit tax levied upon legal persons;
3. Value Added Tax (VAT);
4. Excises;
5. Social contributions;
6. Land tax;
7. Subsoil use tax;
8. Property tax levied upon legal persons;
9. Road tax levied upon legal persons;
10. Tax levied upon vehicle owners;
11. Simplified tax levied upon small businesses;
12. Cotton and aluminum sales tax;
13. Customs duties and fees;
14. State duty.

Free economic zones

With the view t further promote foreign direct investment and develop of real sector of economy, the Government has drafted a new law “On free economic zones (FEZ) in the RT”, which is currently being reviewed by the Parliament. Draft law provides for legal and economic basis of organization and functioning of FEZ as separate areas with special customs and tax regimes within their boundaries, including full or partial relief from customs tariff when importing goods to FEZ; simplified procedure for transportation of goods and vehicles across FEZ boundaries; and cancellation of non-tariff restrictions.

It is also proposed that legal and physical persons 9Ressidance and non residents duly registered on the territory of FEZ will receive full or partial exemption from taxes and other contributions during their operating in FEZ, if they are directed into production on the territory of the RT. It is expected that this law will come into force soon.

Legal Review

Law “On foreign investment in the Republic of Tajikistan (RT) remains the main legal document that govern activity of foreign investors. Foreign investments on the territory of Tajikistan cannot be nationalized. Moreover, they cannot be confiscated, apart from cases of natural disasters, accidents, epidemics and other circumstances of emergency nature by decision of the Parliament. In such cases investors shall be compensated, which upon investors request, can be repatriated abroad.

Investors enjoy a guaranteed right to repatriate profits and other amounts in foreign currency abroad, provided that they have been received legally from made investments. Profits received ion the territory of RT can be reinvested in accordance with investors request and in compliance with national legislation.

Investors can open and maintain accounts in local and foreign currencies in authorized banks of the RT, as well as abroad. Investors may use founds accumulated in local currency accounts to purchase foreign currency under of the prevailing legislation with regard to purchase and sale of foreign currency.

When investor stops its activity on the territory of the RT, he has a right to receive compensations for his investment and received profits in a monetary or commodity form at real prices prevailing at the time of stoppage of investment activity.

Potential investors can us the following types of investments in the economy of te country;

• Equity participation in entities and companies jointly with legal and physical persons;
• Establishment of companies, which are fully owned by foreign investors;
• Acquisition of assets, including shares and other securities;
• Acquisition of title to use land and other natural reserves, as well as other proprietary rights independently or with participation of local legal and physical persons;
• Enter into agreements with local legal and physical persons, which provide for other form of foreign investments.

An investor may also participate in privatization of assets, which are owned by the state or communal authorities in a manner provided for by prevailing legislation.

The Government has created foreign investment legal framework with regard to property and proprietary right, which can not be less attractive that legal framework for local companies, entities and citizens. Moreover, the government may provide for additional tax and other preferences in priority areas of economy and geographic regions.

Investors and companies with foreign participation may engage into any allowed by law of the RT. However, investors and companies with foreign participation may engage in several type activities upon receipt of special permit (license).

There are also other legislation acts on foreign investments such “On privatization of state property” and “On joint stock companies”.