2007 INVESTMENT CLIMATE STATEMENT FOR TAJIKISTAN

UNCLAS SECTION 01 OF 10 DUSHANBE 000125

SIPDIS

SIPDIS

DEPT FOR SCA/CEN (GEHRENBECK),EB/IFD/OIA (HATCHER),EUR/ACE, DEPT FOR USTR

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TAGS: EINV EFIN ETRD ELAB KTDB OPIC USTR TI
SUBJECT: 2007 INVESTMENT CLIMATE STATEMENT FOR TAJIKISTAN

REF: STATE 06 178303

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1. (U) Following is our submission per the referenced telegram
for the 2007 Investment Climate Statement for Tajikistan.

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BEGIN TEXT
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2006 INVESTMENT CLIMATE STATEMENT -- TAJIKISTAN
Tajikistan presents selected opportunities for savvy investors
who are willing to put in significant research and effort into
market development activities. Tajikistan lagged behind other
Soviet republics economically and remains the poorest of the
former Soviet republics and one of the poorest countries in the
world. The Tajik government has shown interest in attracting
foreign investment but seems unsure of how to implement much
needed economic reforms, including the incorporation of the
country's considerable gray economy and sizeable remittances.
The Tajik government has committed to addressing Tajikistan's
internal and external isolation, but progress is slow. In
addition, corruption and rent-seeking in Tajikistan is still
high. Until Tajikistan addresses internal infrastructure
impediments to investment, the system will not attract or
support significant growth in Foreign Direct Investment.

Openness to Foreign Investment
--------------
Although the Government of Tajikistan is hungry for foreign
investments, through 2004 it was only able to attract on average
$27 million per annum. President Rahmonov has made numerous
public and private statements, calling for foreign investment,
particularly in the hydropower sector. However, his
administration has yet to fully implement key reforms and
regulations to create an attractive business climate. The Tajik
Government still burdens the private sector with unnecessary
costs and creates substantial uncertainty and risk through
non-transparent practices and unjustified barriers to
competition.

Major opportunities for investment exist in the hydropower, food
processing, construction, and consumer goods sectors.

To accelerate flow of foreign investments the Government of
Tajikistan adopted a Law on Foreign Investments in 1992.
Although this law establishes the general investment conditions,
it has many gaps and contradicts other legislative acts.

According to existing legislation, foreign investments can be
made through acquisitions, mergers, and takeovers by:

- Owning a share in existing companies, either jointly with
other Tajik companies or Tajik citizens;
- Creating fully foreign-owned companies under the laws of
Tajikistan;
- Acquiring assets, including shares and other securities;
- Acquiring the right for use of land and other mineral
resources, as well as exercising other property rights either
independently or in shared with other Tajik companies and
citizens of Tajikistan;
- Concluding agreements with legal entities and citizens of
Tajikistan providing for other forms of foreign investment
activity;

The judicial system recognizes sanctity of contracts; however
contract enforcement is poor, due in part to general inadequate
legal awareness and a non-independent court system. While
Tajikistan is party to a number of arbitration agreements and
conventions, it does not have its own internationally recognized
arbitration system. The courts do not always respect or uphold
international arbitration rulings.

The Tajik Government's Economic Development Strategy for
2005-2015 emphasizes economic and industrial growth. The
Strategy has no discriminatory effects on foreign-owned

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investors. According to the Civil Code (Article 1) there are no
legal discriminations against foreign companies and foreign
entities. Practically all international agreements of
Tajikistan have a provision for most favored nations regime
(climate).

Foreign investors can acquire up to 50-year land-use rights,
although all land belongs to the state. There are no legal
limitations for foreign investors to buy shares on the local
stock exchange. The law on foreign investments guarantees
foreign investors' right to buy shares on the local market,
according to the procedures set forth by the Ministry of
Finance. Foreign investors' activity on the stock exchange is
regulated by the Law on Security and Exchanges which in turn
refers to the Law on Foreign Investments. The foreign
investments law has no articles that regulate professional
activity of foreign investors on stock exchange.

In December 2006, the Government of Tajikistan created a new
Committee on Investments and State Property. Top officials
claim this will be dedicated to attracting foreign investment,
but as of January 2007, no decisions regarding the committee's
authority have been made.

There are no established criteria to screen investment
proposals. Instead of working with delegated investment
promotion agency, a potential investor has to go through a
lengthy screening process by all concerned government agencies.
In practice, a proposed statement of foreign investments
forwarded to the Government of Tajikistan is circulated among
the relevant government offices and ministries with instruction
to review and express their formal no-objection statement. If a
certain ministry of the government objects to the proposed
investment activity statement it forwards an official note to
the attention of the Government. The criteria for screening
include a background check on the company, person(s)
representing the company, and identification of a financial
source to comply with anti money-laundering regulations. Much
of this could change when the investments committee is up and
running.

In general, privatization of small and medium enterprises is
complete. The privatization process began during the civil war
(1992-1997) which limited potential international owners
exposure and access to small and medium enterprises.
Privatization of state property still continues, and although
there are no limitations on foreign investor participation in
privatization of state owned assets, in many circumstances the
decisions are made in favor of selected interest groups through
behind-the-scene arrangements. Some of the largest
enterprises, belonging to Tajikistan's transportation,
infrastructure and electricity distribution and maintenance
sectors, are still government-owned but are planned for
restructuring.

There is no discrimination against foreign investors at the time
of the initial investment or after the investment is made.
Current investment law and tax code provide for a number of
incentives, including a waiver on taxation on initial
investment, and Value Added Tax-free importation of industrial
equipment. Companies may have a difficult time actually
receiving these tax breaks, however, due to poor implementation
of taxation regulations. Companies with foreign investments are
treated equally as domestic companies in terms of access to and
procedures for obtaining licenses, approvals and procurements.

There are no laws or regulations specifically authorizing
private firms to adopt articles of incorporation or association
which limit or prohibit foreign investment, participation, or
control. Also, there are no other practices by private firms to
restrict foreign investment, participation in, or control of
domestic enterprises.


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The Tajik economy began its rapid growth at 8-10% per annum in

2000. Since then, regulation and taxation are still under
reform. Economic indicators remain below the benchmarks of
1991, when Tajikistan gained its independence. The government
has increased revenue collection for its social expenditures,
although investments in health and education remain extremely
low. In addition, non-transparent administration and corruption
in tax agencies results in high-level informalities. The tax
burden is placed on the private sector and companies who do
actually comply, resulting in distorted competition.

Although bank deposits in 2006 increased by almost 60% on a
year-to-year basis, the informal economy is still quite
substantial. According to some estimates, it is approximately
$1 billion, one-third the size of official Gross Domestic
Product.

Conversion and Transfer Policies
--------------
Currently Tajikistan does not actively restrict funds conversion
or transfer, although the National Bank has been preparing a
package of new regulations on this topic for two years.
However, less developed and strictly controlled banking
infrastructure with limited capital present obstacles for
investors in terms of local sources of financing. Currency can
be freely exchanged; however it is often difficult to conduct
large currency transactions, due to limited amount of foreign
currencies available in the domestic financial market.
Investors are free to import currency.
Starting in 2006, the minimum regulating capital for commercials
banks was $5 million. All banking institutions (9 commercial
banks, and one branch of Iranian Tijorat bank) fulfilled this
requirement.

Expropriation and Compensation
--------------
There are no recent cases of the government expropriating
commercial property. The Law on Foreign Investments details the
types of actions that can be taken with regard to expropriation
of property. The Law states that investors are to be compensated
for expropriated property, but compensation levels are likely to
be minimal. The sectors most likely to face expropriation are
monopolies where the state controls almost all of the market.

Dispute Settlement
--------------
In official pronouncements, the Tajik government recognizes the
value of the rule of law, but has not demonstrated a clear
understanding of its importance to investors. The international
community has encouraged Tajikistan to improve its legal system
with mixed results. Many well-written laws have been passed, but
implementation and consistent interpretation lag behind. The
Tajik government does not openly publish laws and regulations,
and few people, especially small business owners, are aware of
their rights and responsibilities. Further compounding the
problem is a weak judiciary that is ill equipped to defend the
interests of investors.
In 2005-2006, one American company was involved in an investment
dispute with a state-owned enterprise. In all hearings and
appeals, the court system has ruled against the American company
in favor of the state-owned company. The case is in the final
stages of the appeals process in foreign arbitration. This is
the first investment dispute concerning an American company, and
does not reflect a trend, but in past years, investors from The
Netherlands, Switzerland, Italy and Iran among other countries
have been involved in legal disputes. A Norwegian company
successfully settled a suit in foreign arbitration.
Tajikistan does have well-written commercial and bankruptcy laws
including rights for foreign creditors and investors and
bankruptcy legislation revised in 2005. The country's contract
law is modeled on European law. These laws are regulated under
the country's civil code; however, they are not always enforced
in the court system.

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Tajikistan is just starting to develop an Institute of
International Arbitration. It has signed bilateral agreements
with several countries on arbitration and investment disputes.
However, these agreements are not always enforced or recognized.
Tajikistan does not have a bilateral agreement with the United
States.
In 1993 Tajikistan became a member of the International
Association on Investment Guarantees as well as the
International Center for the Settlement of Investment Disputes
(Washington Convention). Tajikistan is not a party to the New
York Convention of 1958 on the Recognition and Enforcement of
Foreign Arbitral Awards.

Performance Requirements/Incentives
--------------
Joint stock companies with foreign investments receive
significant tax incentives that are not offered to private
companies with domestic investments. The government does not
formally impose performance requirements as a condition for
establishing, maintaining, or expanding investment. There are
few requirements for locally owned shares or reduced foreign
sales over time. While there is no requirement to "buy locally,"
it is encouraged. Under the Law on Foreign Investment, not less
than 70% of employees in foreign-owned enterprises must be local
employees.
The government does not impose geographic restrictions or
conditions, but the topography and poor infrastructure of the
country pose their own de facto restrictions. Transportation is
difficult. Roads within Dushanbe and Khujand are substandard
even by regional standards, and roads outside of major
population centers are generally unpaved and poorly maintained.
Weather also impacts travel, making overland travel to parts of
the country (e.g., Gorno Badakshan and Khujand via Anzob Pass)
impossible for much of the year. Overland import/export requires
patience and ingenuity as customs agents at borders and at
internal checkpoints frequently operate on the principle that
they constitute an assumed cost of doing business.

Right to Private Ownership and Establishment
--------------
The government wants to encourage business development but faces
major obstacles in doing so, including its own practices. On the
one hand, private entities may establish and own businesses and
engage in almost all forms of remunerative activity. Foreign
entities may establish, acquire, and dispose of interests in
business enterprises. On the other hand, the old Soviet
mentality still negatively impacts businesses. The average
government inspector believes that certain activities are not
permitted unless they are expressly allowed, and since laws are
neither published nor uniformly applied and interpreted,
businesspeople often find Tajikistan frustrating.
Tajikstandart is the government agency that handles
certifications of goods and services, calibration and
accreditation of testing laboratories, as well as supervises
compliance with state standards requirements. Tajikstandart does
not publish its fees for licenses and certificates, nor does it
publish the requirements necessary to run a business. As a
result, businesspeople are vulnerable to individual tax
inspectors' interpretations of the requirements and the prices
for them.
In addition, investors may need to work creatively to deal with
unofficial barriers to success. Informal networks of clan-based,
interrelated suppliers often exist, forcing would-be investors
to "buy in" to the system. This hinders competition and
sometimes constrains new investors from fully participating.
The government faces a daunting task to improve the operating
environment. Any restructuring must be implemented at each
sub-governmental level for each area of reform (communication,
expectations and patronage system, and so on). The Tajik
government has begun reviewing these weaknesses and is making
some improvements.

Protection of Property Rights

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--------------
Undeveloped legal avenues for dispute resolution create a weak
environment for property rights protection in Tajikistan.
All land belongs to the state, and there are significant
restrictions on using property titles as collateral. The World
Bank has been working for several years to develop a mortgage
program in Tajikistan, it is expected that the draft of mortgage
law will be completed in 2007.
Even when secured interests in property do exist, enforcement
remains an issue. Investors should be aware that establishing
title may be a more involved process than in western countries,
as it is often unclear who owns title, making it more difficult
to effectively transfer or acquire title. A system to record,
protect and facilitate acquisition and disposition of property
exists but would benefit from improvement. After many banks
failed or nearly failed as a result of the high default rate on
mortgages, they began a policy of taking upwards of 30% off the
top in service fees, with interest rates for repayment ranging
from 12-18%. Finally, the legal system is not adept at quickly
and efficiently settling disputes.
An erstwhile member of key international agreements on
international property rights, Tajikistan affords little real
protections for patents, copyrights, trademarks and other
intellectual property. However, with United States government
assistance, the drafting of Part III of the Civil Code that
addresses intellectual property rights has been completed. In
addition, Tajikistan has taken significant steps over the past
year to protect intellectual property, including: an amendment
to the Law on Intellectual Property to protect copyright owners
from Internet theft; a new office dealing with intellectual
property violations in the Ministry of Interior; and a November
parliamentary agreement to join the Rome Convention for the
protection of intellectual property.

Transparency of the Regulatory System
--------------
Tajikistan does not yet use transparent policies or effective
laws to foster competition; cronyism, nepotism and corruption
all work to create a business environment that favors those with
connections to the government. Tajikistan's regulatory system
lacks transparency and poses a serious impediment to businesses'
operational abilities. Regulators and officials often apply
laws arbitrarily, and are frequently unable or unwilling to make
decisions without a supervisor's permission, leading to lengthy
delays. Transparent executive documents are frequently
inaccessible, leaving businesses and investors in the dark as to
the rules of a particular game.
Tajikistan's tax code offers a sound legal basis for the tax
system; however, it is undermined by inconsistent application
that impedes development of small and medium enterprises. The
tax code came into effect January 2005, and is compliant with
World Trade Organization standards.
Tajikistan is also working towards international accounting
norms; however, these have yet to be implemented.
A new inspections law signed in 2006 could significantly reduce
the hassles associated with government agencies patting down
enterprises for money, if implemented properly.
Structural problems aside, the Tajik government needs to convey
its goals and procedures to the inspectors and other government
employees who interact with businesses daily. Bureaucratic
hassles are common, and as long as Tajikstandart, the agency
responsible for licenses and certificates, refuses to publish
requirements for specific enterprises and prices for required
documents, businesses will find it challenging to adequately
cost such fees, and the mysteriousness of the requirements may
leave businesses vulnerable to investigations of alleged
violations.

Efficient Capital Markets and Portfolio Investment
--------------

Tajikistan's nascent banking sector faces numerous challenges:
insufficient capital, limited banking services, mistrust as a

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result of banking system crisis in early 1990's. The banking
structure in Tajikistan is two-tiered - National Bank of
Tajikistan performs central bank functions, and commercial banks
represent the second level. The national currency, the somoni,
was introduced in 1995.

Total value of regulatory capital of all commercial banks in
Tajikistan is approximately $90 million. Estimated net worth of
top five commercial banks is below:

Orion Bank 58,8 million Somoni ($17.1 million)
AgroInvestBonk 52.4 million Somoni ($15.2 million
TajikSodirot Bank 39,89 million Somoni ($11.6 million)
Tajprom Bank 28.52 million Somoni ($8.3 million)
Sohibor Bank 18.27 million Somoni ($5.3 million)

Five banks are public and three banks are non-public joint stock
companies. All banks, except for Amonat Bank (State Savings
Bank) are privately owned.

The banking sector received a boost from a capital amnesty held
in 2003. According to data from the National Bank of Tajikistan
more than $190 million (USD equivalent) was transferred to
special tax-free accounts set up in several commercial banks in
Tajikistan.
While over $1 billion in foreign remittances flowed through the
banking system in 2006, banks have difficulty luring consumers
to deposit their funds into savings accounts that could be used
for economic investment. Having lost all their savings in the
Soviet Union to the Russia ruble conversion in 1993, few people
trust banks and hence hold money in their homes. Intractable
agricultural debts of up to $300 million hurt the overall
confidence in the banking sector. However, the increase in
deposits over the past year reflects growing confidence in the
banking system. Personal deposits continue to increase and
totaled approximately $250 million in October 2006, seven times
greater than in 2003. Still, a large number of Tajik migrant
workers use informal money transfer channels, including
traveling with cash.
The National Bank has launched a campaign to encourage more
Tajiks to open accounts, and although rising, the rate of
consumer savings accounts remains low. As a result, few
investors secure business or personal loans through banks partly
due to high interest rates, and capital remains tight. Local
commercial banks issue 12-month loans worth more than $100,000
at 24% annual percentage rate, prohibitively expensive for most
local customers to develop a new business. Interest on smaller,
shorter term loans reaches 36% annual percentage rate. Checking
accounts do exist but are not widely used due to strict
requirements on cash withdrawal procedures.

The private sector has access to micro-credit, commercial
credit, and factoring instruments. Some banks provide trade
financing services as well. In an effort to reduce barriers to
competition, the Government of Tajikistan has paved the way for
non-bank financial organizations and commercial microfinance.
However, there is no credit bureau; and much work is needed in
strengthening creditor and shareholder rights. Performance on
micro-credit loans exceeds 90%; business loans also perform well.

The securities market in Tajikistan is under-developed; no
regulatory system exists to encourage and to facilitate
portfolio investment.
There are no known cross-shareholding or stable shareholder
arrangements. Hostile takeovers are rare, although there are no
written protections against foreign takeovers. State
authorities use selective application of laws and regulations to
take over or completely shut down companies.
The stock market in Tajikistan was founded in 1994. Since then,
it has foundered due to a lack of new financial instruments. In
2000, the Government of Tajikistan established a Central Share
Registry within the Ministry of Finance of Tajikistan. The
Registry records, monitors, and facilitates share purchase and

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sale for more than 400 stock companies. The government issues
treasury bills to cover budget deficits, using local banks to
cover the loans.

Political Violence
--------------

Political violence in Tajikistan is minimal. The Civil War
ended in 1997 and since then, the situation has stabilized
considerably. All factions signed a peace agreement and the
government incorporated members of the opposition into a
multi-party system. The Tajik government is anxious to attract
foreign investment and has worked to minimize the impact of
political discord on foreign investors. President Rahmonov has
taken measures to consolidate his power base and eliminate
potential threats. With the civil war in recent memory, the
people of Tajikistan are keen on maintaining peace and there
have been no reported incidents of significant political
violence in 2005. The November 2006 Presidential Election took
place with no political violence or public demonstrations.

Tajikistan sometimes serves as a transit country for extremist
terrorist groups. Many terrorists use Tajikistan's uncontrolled
mountainous regions as a safe haven, but evidence suggests they
are no longer politically active. Narcotics trafficking from
Afghanistan is also significant.

Corruption
--------------
As in previous years, the 2006 Transparency International
Corruption Perceptions Index ranked Tajikistan as the 15th most
corrupt nation out of 163 surveyed. Anemic anti-corruption
efforts from the Tajik government and the United Nations have
proven ineffective. Extremely low official salaries have forced
many Tajiks to look for other means of making ends meet. Buying
a job position is a norm, and people frequently bribe superiors
for promotions. Cultural expectations play a role as well:
people are expected to share their good fortune with superiors
and extended family, and nepotism or other favors for
clan-members, extended family or superiors are commonplace.
Endemic corruption stifles business by local and international
investors. Officials at any number of agencies expect payoffs
for opening and running a business. Although a signatory to the
Organization for Economic Cooperation and Development Convention
on Combating Bribery, and to the United Nations Convention
against Corruption, corrupt practices are deeply embedded in
every aspect of commercial dealings and calculating the actual
cost is difficult. A new and untested Agency to Fight Corruption
and Economic Crimes, reporting directly to the Presidential
Administration, will monitor fiscal activity of individuals,
banks and corporations.

Bilateral Investment Agreements and Double Tax Treaties
--------------
Agreements on avoiding double taxation exist between Tajikistan
and Russia, Belarus, Ukraine and Turkey, but not between
Tajikistan and the United States. There is an agreement between
Tajikistan and the Netherlands on the "encouragement and mutual
protection of investments." Tajikistan is a member of the
Eurasec trade organization, which provides loose regulation of
trade among Central Asian states minus Turkmenistan, Russia, and
Belarus.

Overseas Private Investment Corporation and Other Investment
Insurance Programs
--------------
Tajikistan is open to insurance and financing programs of the
Overseas Private Investment Corporation. Thus far, Overseas
Private Investment Corporation involvement in investments in
Tajikistan has been limited to a beverage bottling project.
Macroeconomic stability and a growing economy provides for a
number of opportunities for OPIC insurance and financing.
Tajikistan generally does not qualify for programs of the

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Export-Import Bank of the U.S. and are considered on a
case-by-case basis. Opportunities exist in infrastructure
projects, aircraft export financing and agricultural machinery,
and food processing.

Labor
--------------
Due to a crumbling and corrupt education system, Tajikistan's
labor force is becoming increasingly less educated and trained,
and is ill-equipped to deal with Western standards of customer
service and business. International businesses and
non-governmental organizations lament the small pool of
qualified office staff for their organizations. Corruption in
secondary schools and universities means degrees do not reflect
real professional training or competency. The overall quality
and availability of education have sharply declined and the
younger generation will be less skilled and educated. Although
education is compulsory, many students must work in order to
support their families. Youth unemployment exceeds 60% in some
rural areas.
The official unemployment rate in Tajikistan is under
approximately two percent, but the actual rate may be as high as
40% nationwide with some areas with up to 60% unemployment.
Government statistics show that the average salary per month is
$27. Nearly 60% of the population lives below the poverty line.
Many well-educated Tajiks have sought employment abroad because
of greater job availability and higher wages. Estimates of the
number of labor migrants working outside Tajikistan (mainly in
Russia) at any given time range from five hundred thousand to as
high as one million. Labor emigration leads to shortages in the
workforce in parts of the country. Migrant remittances account
for 30-50 percent of Tajikistan's Gross Domestic Product.
Tajikistan's high birth rate means that 50% of the population is
less than 25 years old and if the trend continues, unemployment
will increase.

Nepotism and corruption play a large role in the labor market.
Many of the higher prestige or more lucrative jobs require a
"buy-in," leading to bribes to pay back the buy-in loan and
continue to pay off supervisors and higher-ups.

The labor market favors employers. Although technically, the
majority of workers are unionized, most are not aware of their
rights and few unions have the willpower or know-how to
effectively advocate for workers' rights.
Tajikistan is a party to 44 international labor conventions. In
June 2005, Tajikistan signed to the Worst Forms of Child Labor
Convention, 1999 to eliminate child labor and protect children
and young people. The International Labor Organization notes
that Tajikistan has not submitted reports due on the application
of ratified Conventions in accordance with its Constitution in
the past four years.

Foreign Trade Zones/Free Ports
--------------
Tajikistan is a landlocked country whose neighbors demonstrate
varying ability and interest in trade. Trade routes flow mainly
through Uzbekistan, however, because of political reasons,
Uzbekistan is not an ideal trading partner. For example, there
are no regular flights between the Uzbek and Tajik capitals,
despite ready markets. In some respects, however, the Tajiks
have used this poor relationship as an excuse to avoid difficult
but necessary improvements themselves.
Some experts have suggested that Tajikistan look to Kyrgyzstan
as a model. While Kyrgyzstan's free trade agreement could be
used as a model, Tajik-Kyrgyz trade is concentrated in the
poorest oblast in Kyrgyzstan - not a motivating factor for the
Tajiks. There continue to be untapped opportunities for
cooperation and development. The government may be more willing
to take the steps necessary to make Central Asia a more friendly
trading ground.
A new opening along the Chinese border in Kulma, Murgab District
will help facilitate increased trade with China. Transit times

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to the larger markets in Dushanbe remain long, however, and
without upgrades in the transportation infrastructure, this new
route will limit the potential from being realized. Several
international financial institutions are planning projects to
improve the road system, and China is funding and building a 360
km road from Dushanbe to the Uzbek border. The United States
Government is constructing a $30 million bridge linking
Tajikistan and Afghanistan, connected to a new road financed by
the Japanese, which will increase trade and help develop the
economy in the south. There is strong interest with
Tajikistan's neighbors to the south to cooperate on energy
trade.
Although the Law on Free Trade Zones was enacted in 2004, the
government has made no progress on implementation. The law is
designed to attract foreign capital, investments, and
technology, and to develop Tajikistan's economic potential by
setting favorable conditions for foreign investors including
lower taxes, lower land leasing rates, lower duties on imports
and exports, and special visa rules. The government has yet to
announce the locations, but it is likely these zones will be
created in Sughd and Khatlon provinces, because of the
geographical advantage for free flow of trade to Uzbekistan and
Kyrgyzstan.
World Trade Organization accession negotiations were launched in
2004 after intensive preparatory work conducted by the Tajik
government with the assistance from the U.S. Government and
other donors. In March 2004, the first round of multilateral
negotiations on the accession of Tajikistan and a number of
bilateral market access negotiations were conducted at the World
Trade Organization Headquarters in Geneva. The Tajik government
remains committed to World Trade Organization accession and
implementing the necessary reforms required as accession
conditions. Progress was made in 2005 on the Legislative Action
Plan and Goods and Services Offers Market Access Negotiations.
Working Party meetings on market access negotiations continued
into 2006, moving Tajikistan closer to its integration into the
world trading system.

Foreign Direct Investment Statistics
--------------

According to data from the State Statistical Committee, total
foreign direct investment (Foreign Direct Investment) in the
first nine months of 2006 was $233.1 million. Of this, $162
million originated in the former Soviet states, mostly Russia,
while $70.1 million came from outside countries. In 2005, total
Foreign Direct Investment was $54.5 million. Between 1997 and
2006, total Foreign Direct Investment equaled $497.3 million.
In the first six months of 2006, the Foreign Direct Investment
to Gross Domestic Product ratio equals 12.0. In 2005, the
Foreign Direct Investment to Gross Domestic Product ratio was
2.4.

The largest foreign direct investors for the first nine months
in 2006 of are:

Russia - $160.6 million
Cyprus - $24.0 million
United States - $18.6 million
Great Britain - $15.7 million

The top companies included in these investments (first nine
months of 2006) are:

Open Joint Stock Co. Sangtuda HPS 1 of Russia (Energy): $160.2
million
Sozidanie Ltd. of Cyprus (Construction): $20.4 million
Joint Venture Takom of USA (Telecom): $9.7 million
Joint Venture Zaravshan of Great Britain (Mining): $8.3 million
Combined Joint Stock Co. Indigo of USA (Telecom): $4.6 million
Closed Joint Stock Co. Guliston of Great Britain (Textiles):
$3.9 million
Closed Joint Stock Co. Babilon Mobile of USA (Telecom): $3.8

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million
Joint Venture Pakrut of Great Britain (Mining): $2.9 million

Foreign Direct Investment by Sector (January - September 2006):

Energy: $162.1 million
Industry: $21.0 million
Other: $20.5 million
Trade: $10.0 million
Communication: $8.3 million
Services: $5.3 million
Construction: $4.2 million
Agriculture: $1.5 million
Health: $0.1 million

Several major foreign direct investors from Cyprus and United
States are Tajik-held companies registered offshore. Major
Russian investment in the Sangtuda I dam project should continue
into 2007, in addition to expected Iranian investment in
Sangtuda II.

Statements above reflect fully materialized projects. Data on
contracts for foreign-investment projects are not included in
statements above. Tajikistan has not made any direct
investments abroad.
JACOBSON