id: 187480
date: 1/16/2009 7:16
refid: 09DUSHANBE62
origin: Embassy Dushanbe
classification: UNCLASSIFIED
destination:
header:
VZCZCXRO8484
RR RUEHAST
DE RUEHDBU #0062/01 0160716
ZNR UUUUU ZZH
R 160716Z JAN 09
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC 1343
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNS/NSC WASHINGTON DC
RUCPDOC/DEPARTMENT OF COMMERCE WASHINGTON DC 0109
RUEHAST/USOFFICE ALMATY 0096
—————— header ends —————-
UNCLAS SECTION 01 OF 02 DUSHANBE 000062
SIPDIS
AID/W FOR SCAA/FLYNN FULLER
ALMATY FOR USAID
E.O. 12958: N/A
TAGS: EAID, KHIV, SOCI, ELAB, SCUL, TI
SUBJECT: Mission Investing in
People Goal
1. Introduction and Summary: A recent review of the Mission
Strategic Plan provided a snapshot of what we achieved in the last
year and our top priorities looking ahead. This is the third cable
to provide a goal-by-goal look of what Embassy Dushanbe is doing.
With our Investing in People goal we seek a healthy, educated
workforce that supports economic growth, reduces the appeal of
extremism and engages in civic affairs. We support public health
system reform and policies to improve safe motherhood, newborn care,
and management of childhood illnesses, HIV/AIDS, drug demand, and
tuberculosis. We train teachers, boost community involvement in
schools, expand exchange programs, and work to improve education
finance, school curricula, and student assessment. We coordinate
with other donors to leverage U.S. resources. Among our key
achievements, we opened new health centers providing training in
primary healthcare. We helped Tajikistan secure resources for
HIV/AIDS and tuberculosis. We made progress in improving educational
finance, teacher training and primary school curriculums. We
expanded exchange programs. In 2009 we will continue to open new
health centers, train more teachers, expand education finance pilots
and send more people on exchanges. Post will conduct the second year
of mentoring for Tajik English teachers and we will use a regional
English Language Teachers’ conference in Dushanbe in June to improve
English teaching methodologies and build networks among regional
teachers. We will work to bring the Peace Corps to Tajikistan to
support English education. High turnover in the health and education
sectors is a major obstacle to achieving more progress. On the
bright side, the government has supported getting more local
ownership of health and education programs. End Intro and Summary.
Achievements
2. We executed Memoranda of Understanding with the Ministries of
Health and Education on our assistance for reforms in the health and
education sectors, including assistance with Global Fund and Fast
Track Initiative grants. Our support for Tajikistan’s TB and HIV
applications to Global Fund resulted in conditional approval of
awards totaling over $70 million. We helped improve hygiene and
health facilities in eighty schools in the Khatlon region. With
Mercy Corps, we launched a new multi-million dollar, multi-year
program to improve maternal and child health. We opened new
healthcare Centers of Excellence in Istravshan and Panjakent that
trained doctors in those regions in family medicine and the delivery
of quality healthcare services.
3. We revised teacher training modules in math, biology, chemistry,
language, and general education and submitted them to the Education
Ministry. We helped 28% of the districts in the country to adopt new
school finance mechanisms to expand per capita school financing. We
started a Fulbright Foreign Student program for Tajikistan that will
send six Tajikistanis to the United States for masters degrees this
year. We increased professional exchange participants through Open
World and Community Connections. We provided in-depth training for
twenty high school teachers, including a three-week course with
visiting experts from the University of Montana. We awarded ten
four-year scholarships to talented Tajik students the American
University of Central Asia. A Defense Department Civil Affairs team
renovated the Qumsangir Boarding School for homeless children, the
Qrenovated the Qumsangir Boarding School for homeless children, the
Teacher Training Institute in Khujand, and secondary School #17 and
the School for the Blind in Isfara Teacher Training Institute so the
schools could function year-round.
Goals
4. After conducting baseline surveys in 2008, with USG funding Mercy
Corps will open new maternal and child health sites in three towns
in the Sughd region. We will hand
over quality assurance
responsibilities for microscopy tuberculosis tests to oblast-level
specialists. We will provide educational exchanges and material to
heighten HIV/AIDS awareness in the armed forces and supply office
and medical equipment for HIV/AIDS testing centers at the national
and regional medical departments of the Ministry of Health. We will
look at ways to strengthen coordination and oversight of the use of
Global Fund monies to address HIV/AIDS and tuberculosis.
5. We will finish revising new curriculum modules for primary grades
in math, Tajik language and general education, and we will train
mentors. We will review the school management training module for
school principals that includes guidance on per capita financing,
budget formation, human resources, documentation, and strategic and
business planning. We will assess needs and integrate innovative
student-centered teaching methods into the teacher training
curriculum. We will work with the Ministries of Education and
Finance, World Bank, the Aga Khan Foundation and Education Finance
Working Group to revise per capita parameters and approve budgets
for pilot schools. We will launch the Fulbright U.S. Scholar Program
to bring a U.S. professor to Tajik university classrooms. We will
repeat the very successful 2008 summer camp program to share
DUSHANBE 00000062 002 OF 002
American values, teamwork, leadership, and basic English language
instruction with Tajik youth from isolated rural areas. We will
expand overall the number of participants in exchanges shooting for
a target of 200. We will use the Central Asian Teachers of English
Conference in June as a platform to promote English-language
learning in the region, to identify and develop the most effective
methodologies, build networks among regional teachers, and highlight
the contributions of Peace Corps volunteers as English teachers in
Central Asia. We will work to increase coordination among the
stakeholders, donor community and international organizations in
both the education and health sectors.
Obstacles and Positive Developments
6. All education programs — whether nationwide reform initiatives,
exchange programs for U.S. professors or students, or informal talks
by embassy personnel about U.S. society — require explicit approval
from the Minister of Education.
This bureaucratic structure
combined with our limited access to the Minister of Education
affected our ability to move some education reform issues. There is
some chance that the Minister will move on in 2009; if so we will
work to build a strong relationship with his successor and to
encourage more decentralized decision-making. High turnover in state
structures and the low capacity of government staff at all levels
limit what we can achieve. The Tajik government tends to focus its
efforts on getting short-term humanitarian assistance rather than
using development assistance to solve problems. On the bright side,
the government is willing to work with the international community
to strengthen the management of technical and financial support and
the government has been willing to approve projects that promote
local ownership and sustainability. Washington approved funds to add
local staff which will allow us to increase activities and outreach
with students and U.S. program alumni.
JACOBSON
=======================CABLE ENDS============================
id: 187491
date: 1/16/2009 8:12
refid: 09DUSHANBE64
origin: Embassy Dushanbe
classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY
destination: 08STATE123907
header:
VZCZCXRO8522
RR RUEHLN RUEHSK RUEHVK RUEHYG
DE RUEHDBU #0064/01 0160812
ZNR UUUUU ZZH
R 160812Z JAN 09
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC 1346
INFO RUCPDOC/USDOC WASHDC
RUCPCIM/CIMS NTDB WASHINGTON DC
RUCNCIS/CIS COLLECTIVE
RUEHIL/AMEMBASSY ISLAMABAD 0285
RUEHBUL/AMEMBASSY KABUL 0394
RUEHBJ/AMEMBASSY BEIJING 0256
RUEAIIA/CIA WASHDC 0276
RUCPDOC/DEPARTMENT OF COMMERCE WASHINGTON DC 0111
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNS/NSC WASHINGTON DC
—————— header ends —————-
UNCLAS SECTION 01 OF 10 DUSHANBE 000064
SENSITIVE
SIPDIS
DEPARTMENT FOR EB/IFD/OIA, SCA/CEN
E.O. 12958: N/A
TAGS: EINV, EFIN, ETRD, ELAB, KTDB, OPIC, PGOV, USTR, TI
SUBJECT: 2009 INVESTMENT CLIMATE STATEMENT — TAJIKISTAN
Ref: 08 State 123907
1. Tajikistan presents selected opportunities for savvy investors
who are willing to put significant research and effort into market
development. Tajikistan, which
lags behind most of its neighbors
economically, remains not only the poorest of the former Soviet
republics but one of the poorest countries in the world. The Tajik
Government relies largely on foreign state-led investment and loans
from international financial institutions for major infrastructure
projects. The Government has
shown interest in attracting broader
foreign investment but seems unwilling or uncertain how to implement
much needed economic reforms, including the incorporation of the
country’s considerable gray economy, streamlining the business
registration process, rationalizing the country’s tax codes, and
dealing with Tajikistan’s endemic corruption. Even where the legal
structure is favorable to attracting investment, the actual practice
of the authorities discourages investors. Until Tajikistan
addresses these and other impediments to investment, it will not
attract or support significant growth in foreign direct investment.
Openness to Foreign Investment
2. Although the Government of Tajikistan is hungry for foreign
investments, private investment from abroad has been minimal. The
principal investors in recent years have been governments with
geopolitical interests in the area, especially Russia, China, and
Iran. Those three countries were
responsible for $317 million in
investments in between January and October 2008. Foreign direct
investment from other sources totaled $145 million during the same
period.
3. President Rahmon has made numerous public and private statements
calling for increased foreign investment, particularly in the
hydropower sector. However, his
administration has yet to implement
the key reforms and regulations necessary to create an attractive
business climate. Tajikistan’s
authorities focus their efforts on
courting state-led investments from the country’s perceived
geopolitical friends rather than making conditions favorable to
private investors from the West, the EU, or other countries. The
Tajik Government burdens the private sector with unnecessary costs
and creates substantial uncertainty and risk through non-transparent
practices and unjustified barriers to competition.
4. Major opportunities for investment exist in the hydropower, food
processing, construction, textile, and consumer goods sectors, as
well as natural resource extraction.
A new Investment Law was signed in May 2007.
5. According to the law, foreign investments can be made 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
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.
Qactivity.
6. The judicial system recognizes sanctity of contracts in
principal; however contract enforcement is poor, due in part to
generally inadequate legal awareness and the court system’s lack of
independence. 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.
7. The Tajik Government’s Economic Development Strategy for
2005-2015 emphasizes economic and industrial growth. The Strategy
has no discriminatory effects on foreign-owned investors. According
to the Civil Code (Article 1) there is no legal discrimination
against foreign companies and entities.
Practically all of
Tajikistan’s international agreements have a provision for most
favored nation status.
DUSHANBE 00000064 002 OF 010
8. Foreign investors can acquire up to 50-year land-use rights,
although all land belongs to the state.
There are no legal
limitations on foreign ownership or control of other property.
9. Tajikistan’s Committee on Investments and State Property, which
was created in December 2006 with the aim of assisting investors,
has so far done little to fulfill its mission. Plans to create a
«one-stop shop» for business registration as well as a website
for
foreign investors seeking information on opportunities in Tajikistan
have not gotten off the ground yet.
10. There are no established criteria for screening investment
proposals. Instead of working
with a delegated investment promotion
agency, a potential investor has to go through a lengthy screening
process by all (potentially) 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 a formal no-objection statement.
If an office objects to
the proposed investment activity statement it forwards an official
note to the attention of the Government.
In principle, screening
includes a background check on the company and its representatives
as well as identification of a financial source to comply with anti
money-laundering regulations.
11. The government has embarked on an on-again, off-again process of
privatizing state-owned companies.
Privatization of small and
medium enterprises is mostly complete.
Because the privatization
process began during the civil war (1992-1997), few international
investors showed much interest.
Privatization of state property,
particularly larger concerns, still continues; although there are no
limitations on foreign participation, in many circumstances
non-transparent decisions are made that favor investors with
connections to the existing power structure. Some of the largest
enterprises, belonging to Tajikistan’s transportation,
infrastructure and electricity distribution and maintenance sectors,
are still government-owned but are slated for restructuring.
12. There is no legally-sanctioned 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 VAT-free importation of industrial equipment.
Companies may have a difficult time actually realizing these
benefits, however, due to poor implementation of taxation
regulations and/or corrupt tax authorities. In practice the onus of
proving that an investment qualifies for the benefits is on the
investor, and Tajik authorities are often skeptical. In addition,
President Rahmon pushes his government to increase tax revenue by
unfairly taxing profitable companies.
Legally, companies with
foreign investments are treated the same as domestic companies in
obtaining licenses, approvals and procurements. They may find,
however, that Tajik authorities demand higher official and
unofficial payments from them.
13. There are no laws or regulations specifically authorizing
Q13. There are no laws or regulations specifically authorizing
private firms to adopt articles of incorporation or association that
limit or prohibit foreign investment, participation, or control.
There are no other practices by private firms to restrict foreign
investment, participation in, or control of domestic enterprises.
14. Although the Tajik economy began growing rapidly at 8-10% per
annum in 2000, economic indicators remain below the benchmarks of
1991, when Tajikistan gained its independence. The government has
increased revenue collection for its social expenditures, but
investments in health and education remain extremely low. In
addition, as a result of non-transparent administration and
corruption in tax agencies, the tax burden is placed on private
sector companies that have a greater degree of compliance with
regulations, resulting in distorted competition. According to some
sources, even well-meaning companies are forced to breach some tax
legislation, since internal contradictions and draconian rules make
it impossible to abide by all existing rules.
15. Partly as a result of the global financial crisis, there has
been some nervousness among depositors, and bank deposits (legal
entities and personal) decreased by 27% from December 2007 to
November 2008 (from $676 million to $494 million). The informal
DUSHANBE 00000064 003 OF 010
economy is still quite substantial; according to some estimates, it
may be as high as $2 billion, over one-third the size of official
GDP. The global financial crisis
that began in late 2008 may
continue to have a chilling effect on Tajikistan’s nascent banking
sector.
Conversion and Transfer Policies
16. Tajikistan does not actively restrict conversion or transfer of
funds, although the National Bank has been preparing a package of
new regulations on this topic for three years. However,
underdeveloped banking infrastructure, with strict government
controls and limited capital, presents obstacles for investors in
finding local sources of financing.
Although legal, it is often
difficult in practice to conduct large currency transactions, due to
the limited amount of foreign currency available in the domestic
financial market. Investors are
free to import currency.
17. The minimum regulatory capital for commercials banks is $5
million. All banking institutions
(11 commercial banks and one
branch of Iranian Tijorat bank) meet this requirement.
Expropriation and Compensation
18. The Law on Foreign Investments details the types of actions that
can be taken with regard to expropriation of property. There have
been no known cases where foreign commercial entities have had their
property seized, but there have been several recent cases of
potential or actual state expropriation of other privately-owned
property under dubious circumstances.
In one case, that of a
foreign-owned church, the rationale appears to be political. In
another case involving the nationalization of a privately owned
warehouse for storing natural gas, the reasons may have been more
economic. While the Law states
that investors are to be reimbursed
for expropriated property, actual compensation has been minimal in
the cases noted above. The
sectors most likely to face
expropriation are monopolies where the state controls almost all of
the market.
Dispute Settlement
19. In official pronouncements, the Tajik government recognizes the
value of the rule of law; in practice, however, it has not
demonstrated a clear understanding of its importance to investors.
The international community, including the United States, 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. 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.
20. Despite this, foreign investors have found some relief in
disputes involving Tajik entities.
In 2007, a trade dispute
involving a U.S. company and a state-owned enterprise was resolved
by the Tajik government paying off the full amount of the claim. A
Norwegian company successfully settled a suit in foreign
arbitration. So far, though, such
cases have been very few.
21. Tajikistan does have well-written commercial and bankruptcy
laws. The country’s contract law
is modeled on European law. These
laws are regulated under the country’s civil code; however, they are
Qlaws are regulated under the country’s civil code; however, they are
not always enforced in the court system.
22. Tajikistan is just starting to develop an Institute of
International Arbitration. It has
signed bilateral agreements with
several countries on arbitration and investment disputes, but these
agreements are not always enforced or recognized. Tajikistan does
not have a bilateral agreement with the United States.
23. 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
DUSHANBE 00000064 004 OF 010
24. Current legislation provides the same tax and customs incentives
to local and foreign investors.
In practice, however, companies
with close connections to the government get preferential treatment.
The government does not formally
impose performance requirements as
formal a condition for establishing, maintaining, or expanding
investment. While there is no
requirement to «buy locally,» it is
encouraged.
25. The government does not impose geographic restrictions or
conditions, but the topography and poor infrastructure of the
country pose their own de facto restrictions. Roads within Dushanbe
and Khujand are poor even by regional standards, and roads outside
of major population centers are generally unpaved and poorly
maintained. A few major routes,
such as that between Dushanbe and
Khujand, are being renovated with foreign financing. Weather also
impacts travel, making overland travel to some parts of the country
(e.g., the Gorno-Badakhshan Autonomous Oblast) impossible for some
of the year. Electric power
production is well short of demand,
especially in the winter. For
three to six months of the year, most
parts of the country outside of Dushanbe are limited to a few hours
of power each day. Overland import/export
requires patience and
ingenuity as customs agents at borders and internal checkpoints
frequently operate on the principle that they constitute an assumed
cost of doing business.
Right to Private Ownership and Establishment
26. The government wants to encourage business development but faces
major obstacles, including its own practices. There is a major gulf
between legislation that is ostensibly business-friendly and actual
practices that are business-stifling.
In principle, 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. In
practice, however, the old Soviet mentality still prevails. The
average government inspector believes that activities are not
permitted unless they are expressly allowed (or unless he is
remunerated for adopting a more flexible interpretation), and since
laws are neither published nor uniformly applied and interpreted,
businesspeople often find Tajikistan frustrating.
27. There are other unofficial barriers to success. Informal
networks of clan-based, interrelated suppliers often exist, forcing
would-be investors to «buy in» to the system, hindering
competition
and sometimes constraining new investors from fully participating.
28. 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. While the Tajik
government has begun reviewing these weaknesses and is making some
improvements, the business environment remains difficult.
Protection of Property Rights
29. Undeveloped legal avenues for dispute resolution create a weak
environment for property rights protection in Tajikistan.
30. As noted above, all land belongs to the state, and there are
significant restrictions on using property titles as collateral. A
revised Land Code submitted to the government last year providing
Qrevised Land Code submitted to the government last year providing
for the sale of land-use rights, an equivalent to buying and selling
land, was changed at the last minute by an unknown official, leaving
the issue confused. Efforts are
underway by donors to clarify the
language. The government also
adopted mortgage legislation in
December 2007 which may allow parties to use property as collateral.
In practice land use continues as
before, however, because no legal
mechanisms and procedures were developed to implement these new
laws.
31. 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, since ownership
is often unclear. A system to
record, protect and facilitate
acquisition and disposition of property exists but would benefit
from improvement. Most banks have
temporarily halted much of their
lending as a result of the financial crisis; in the past mortgage
rates have been very high.
Finally, the legal system is not adept
at quickly and efficiently settling disputes.
DUSHANBE 00000064 005 OF 010
32. Tajikistan affords few protections for patents, copyrights,
trademarks and other intellectual property. However, with United
States government assistance, legislation addressing intellectual
property rights is being revised.
In addition, Tajikistan has taken
significant recent steps 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 parliamentary agreement to join the Rome Convention for the
protection of intellectual property.
Transparency of the Regulatory System
33. 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 — i.e., Presidential decrees, laws, Government orders,
instructions, ministerial memos, and regulations — are frequently
inaccessible, leaving businesses and investors in the dark about the
rules by which they should be abiding.
Furthermore, each Ministry
has its own set of normative acts which are not published and may be
contradictory to law and normative acts of other ministries.
34. Tajikistan’s tax code provides for 18 different types of taxes
and numerous ways to calculate them.
In addition to the complexity
of the regulations, economic development is further undermined by
inconsistent application that impedes development of small and
medium enterprises. The tax code
came into effect January 2005, and
is compliant with WTO standards.
Last year the Government of
Tajikistan declared a two-year moratorium on tax inspections, which
government officials had routinely used to extort bribes from
business owners.
35. An inspections law signed in 2006 and promoted extensively by
the International Finance Corporation has begun to reduce the
practice of other government agencies shaking down enterprises for
money, but reports of such incidents are still widespread.
Tajikistan is also working towards international accounting norms;
however, these have yet to be implemented.
36. Tajikstandart is the government agency responsible for
certifying goods and services, calibrating and accrediting testing
laboratories, and supervising compliance with state standards.
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. Suggestions
have been mooted to create
«one-stop shops» for certifying businesses in various
categories,
but so far no concrete steps have been taken.
37. 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. As long as government
Qemployees who interact with businesses daily. As long as government
inspectors continue to treat their positions as a license for
rent-seeking — and as long as the government tolerates such
corruption — Tajikistan will remain a difficult place for investors
looking for clear rules and practices.
Efficient Capital Markets and Portfolio Investment
38. Tajikistan’s nascent banking sector faces numerous challenges:
insufficient capital, limited banking services, mistrust as a result
of banking system crisis in early 1990s, and, more recently, fallout
from the global financial crisis.
The banking structure in
Tajikistan is two-tiered: the National Bank of Tajikistan performs
central bank functions, while commercial banks represent the second
level. The national currency, the
somoni, was introduced in 1999.
39. The total value of regulatory capital of all commercial banks in
Tajikistan as of October 2008 is $271 million (735,016,513 somoni),
representing a 57% increase since 2007.
40. Estimated net worth of the top three commercial banks is as
DUSHANBE 00000064 006 OF 010
follows:
— Orion Bank: 203 million somoni
($59.7 million)
— TojikSodirot Bank: 131 million
somoni ($38.5 million)
— AgroInvest Bank: 111 million
somoni ($32.6 million)
41. There are 12 second tier banks in Tajikistan. (The sole
first-tier bank is the National Bank of Tajikistan.) Five banks are
public, open joint stock companies, while five are closed joint
stock companies. The remaining
two banks, Tijorat Bank of Iran and
Amonat Bank, are state-owned.
Three of the banks are foreign,
including Tijorat, Kazcommercebank of Kazakhstan and First Micro
Finance Bank of Tajikistan, partly owned by the Aga Khan Fund for
Economic Development and the International Finance Corporation.
42. Tajikistan’s ratio of migrant labor remittances to GDP, standing
at 50%, is the highest in the world.
Over the course of 2008, as
many as a million Tajiks working abroad, primarily in Russia, sent
$2.69 billion back to Tajikistan.
Although an ever greater share of
remittances flow through the banking system, banks have limited
success luring consumers to deposit their funds into savings
accounts that could be used for economic investment. Intractable
agricultural debts over $500 million hurt the overall confidence in
the banking sector. Last year’s
scandal in which the National Bank
misreported loans it had underwritten to cotton investors has not
helped, although the International Monetary Fund reports that the
Bank, which has been meeting its scheduled repayments to the IMF,
has dramatically improved its accounting and cooperation. An
increase in deposits over 2007 may be offset by withdrawals in the
face of the financial crisis (see above, under the first heading).
Falling labor remittances may also hurt banks, which rely
significantly on commissions from money transfers.
43. Prior to the global financial crisis that indirectly hit Tajik
banks in November 2008, with inflation running about 14%, local
commercial banks were issuing 12-month loans worth more than
$100,000 at 24% APR, prohibitively expensive for most local
customers to develop a new business.
Interest on smaller, shorter
term loans reached 36% APR. In addition, banking officials were
known to ask for kickbacks in amounts up to 10% of the loan they
approved. Due to such high
interest rates and low capital, few
investors secure business or personal loans through banks; there are
currently reports that many banks have stopped lending entirely due
to fears of default as a result of the financial crisis. Checking
accounts do exist but are not widely used due to strict requirements
on cash withdrawal procedures.
44. 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.
45. There is no securities market in Tajikistan; although formally
Q45. There is no securities market in Tajikistan; although formally
there is a department at the Ministry of Finance responsible for
develop this market, it has little capacity to do so. No regulatory
system exists to encourage and to facilitate portfolio investment.
46. There are no known cross-shareholding or stable shareholder
arrangements. Hostile takeovers
are rare, although there are no
written protections against them.
State authorities are known to
selectively apply laws and regulations to take over or completely
shut down companies.
47. 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 established a Central Share Registry (CSR)
within the Ministry of Finance.
The Registry records, monitors, and
facilitates share purchase and 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
48. Political violence in Tajikistan is minimal. The security
situation has stabilized significantly since the Civil War ended in
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1997. All factions signed a peace
agreement, and the government
incorporated members of the opposition into a multi-party system —
although President Rahmon has since steadily removed opposition
figures to consolidate his power.
The Tajik government has worked
to minimize the impact of political discord on foreign investors.
With the civil war in recent memory, the people of Tajikistan are
keen to maintain peace, a factor sometimes adduced to explain the
population’s acceptance of the government’s more egregious
corruption.
49. Tajikistan sometimes serves as a transit country for extremist
terrorist groups. Terrorists may
use Tajikistan’s uncontrolled
mountainous regions as a safe haven, but evidence suggests they are
no longer politically active in Tajikistan. Narcotics trafficking
from Afghanistan is significant.
Corruption
50. As in previous years, the 2008 Transparency International
Corruption Perceptions Index ranked Tajikistan as very corrupt,
placing it at 151st place on a list of 180 countries surveyed.
Anemic anti-corruption efforts from the Tajik government have proven
ineffective — indeed, some anti-corruption units are ironically
known to be particularly corrupt.
Extremely low official salaries
do not help the situation, since they force many official employees
to look for other means to make ends meet. Buying a government
position is the 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.
51. As noted throughout this report, 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 OECD 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. In 2007,
President Rahmon created a new Agency to Fight Corruption and
Economic Crimes, reporting directly to the Presidential
Administration, to monitor fiscal activity of individuals, banks,
and corporations. This agency has
still done little to fight
corruption within government ranks, focusing instead on individual
and corporate malfeasance.
Bilateral Investment Agreements and Double Tax Treaties
52. Agreements on avoiding double taxation exist between Tajikistan
and Russia, Belarus, Ukraine, Azerbaijan, Turkey, and some other
countries, but not between Tajikistan and the United States.
Tajikistan is a member of the Eurasec trade organization, which
provides loose regulation of trade among, Russia, Belarus,
Kazakhstan, Kyrgyzstan, and Tajikistan.
OPIC and Other Investment Insurance Programs
53. Tajikistan is open to insurance and financing programs of the
Overseas Private Investments Corporation (OPIC). Thus far, OPIC’s
involvement in investments in Tajikistan has been limited to a
beverage bottling project.
Assuming the financial crisis does not
Qbeverage bottling project.
Assuming the financial crisis does not
cause lasting damage to the nascent financial sector, Tajikistan’s
relative macroeconomic stability and a growing economy provide for a
number of opportunities for OPIC insurance and financing.
54. The Export-Import Bank of the U.S. considers projects on a
case-by-case basis, although Tajikistan generally does not qualify
for its programs. Opportunities
exist in infrastructure projects,
aircraft export financing, agricultural machinery, and food
processing.
Labor
55. Due to a crumbling and corrupt education system, Tajikistan’s
labor force is becoming increasingly less educated and trained, and
is ill-equipped to provide Western standards of customer service and
business. International
businesses and NGOs lament the small pool
of qualified office staff for their organizations. Some have
brought in Chinese or Indian laborers for construction projects.
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Corruption in secondary schools and universities means degrees do
not reflect real professional training or competency. Although
education is compulsory, many students must work in order to support
their families. Unemployment
among younger Tajiks exceeds 60% in
some rural areas.
56. The official unemployment rate in Tajikistan is under two
percent, but the actual rate may be as high as 40% nationwide, with
some areas reaching 60%. These
high rates are offset by the
approximately one million labor migrants who work overseas, mainly
in Russia, although the financial crisis may force many of these
workers to return home. The
average salary in Tajikistan has risen
to $78.20 per month, but wages have not kept pace with inflation.
According to the World Bank, 53% of the population lives below the
poverty line and an additional 17% are considered «desperately
poor.» Labor emigration
leads to shortages in some skills. The
$2.69 billion in official migrant remittances pays for a high
percentage of Tajikistan’s growing appetite for imports,
particularly foreign vehicles, construction materials, and food and
consumer goods.
57. Tajikistan’s high birth rate means that 50% of the population is
less than 25 years old; if the trend continues, unemployment will
increase.
58. Nepotism and corruption play a large role in the labor market.
Many of the higher prestige or more lucrative jobs require a
«buy-in,» as well as continuing payments to supervisors,
leading the
job-holder to look for ways to pay back that sum by demand bribes or
engaging in other corrupt activity.
59. 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 will or know-how to effectively
advocate for workers’ rights. Unions
are tightly controlled by the
government.
60. Tajikistan is a party to 44 international labor conventions. In
June 2005, Tajikistan signed the Worst Forms of Child Labor
Convention, dedicated to eliminating child labor and protecting
children and young people.
Despite this there are frequent reports
that children and university students are forced to pick cotton,
providing one of the country’s main sources of income, and that
local officials are complicit in this practice. The International
Labor Organization notes that Tajikistan has not submitted reports
required by the Convention.
Foreign Trade Zones/Free Ports
61. Tajikistan is a landlocked country whose neighbors demonstrate
varying abilities and interest in trade.
Most of Tajikistan’s rail
and road links flow through Uzbekistan, which, as a result of
increasingly sour political relations between Dushanbe and Tashkent,
has made transit of goods through Uzbek territory difficult. For
example, in October 2007 Uzbekistan decreed that traders must pay
the full value of excise goods passing through its territory as a
customs deposit — a fee that is then difficult to get back. There
are no commercial flights between Uzbekistan and Tajikistan. In
order to overcome its dependence on its neighbor, Tajikistan has
sought to open alternative transit routes to the north, via
Kyrgyzstan and Kazakhstan; the south, via Afghanistan, Pakistan, and
QKyrgyzstan and Kazakhstan; the south, via Afghanistan, Pakistan, and
Iran; and the east, via China.
62. The opening of the Chinese border at Kulma, in Murghab District,
has helped facilitate increased trade with China, although the
border is open only half the days of each month, and is closed
completely for about half the year due to extreme cold weather.
Passing over the some of the roughest and least developed territory
in Asia, even when it is open, this route remains difficult and
time-consuming, and without major infrastructural improvements, it
will have limited impact on trade.
Several international financial
institutions, along with the governments of China and Iran, are
implementing projects to improve the road system. The Central Asia
Regional Economic Cooperation Program has created a road linkages
plan for all the Central Asian countries with funding from the Asian
Development Bank (ADB). Projects
underway include the renovation of
the road north to Khujand with Chinese funding, Iranian-financed
construction of the Anzob Tunnel which should allow for year-round
transit on the route, and ADB-financed improvements on the road
DUSHANBE 00000064 009 OF 010
leading northeast from Dushanbe, through Kyrgyzstan, to China.
There is also strong interest to improve links to the south. The
United States Government completed construction of a $39 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.
63. Although the Law on Free Trade Zones was enacted in 2004, only
in 2008 has the government made some progress on implementation,
with the establishment — at least on paper — of the Soghd Free
Economic Zone in the northern city of Khujand and the Pyanj Free
Economic Zone near the U.S.-funded bridge across the Pyanj River on
Tajik-Afghan border. Two
additional zones are under consideration.
The zones are designed to attract foreign capital, investments, and
technology, and to develop Tajikistan’s economic potential by
setting favorable conditions for foreign investors, including lower
or no taxes, lower land leasing rates, lower duties on imports and
exports, and special visa rules.
64. WTO accession negotiations were launched in 2004 after intensive
preparatory work conducted by the Tajik government with assistance
from the U.S. and other donors.
The last negotiations on
Tajikistan’s accession were conducted in Geneva in October 2006. In
January 2008, a group of WTO experts met with President Rahmon in
Dushanbe, who confirmed his intention to lead the country into the
WTO. Some Tajik experts believe
that it will take at least five
more years before that goal is realized.
Foreign Direct Investment Statistics
65. According to data from the State Statistical Committee, total
foreign direct investment (FDI) in the first nine months of 2008 was
$462 million. Of this, $282.9
million came from the former Soviet
states (mostly Russia, with investments of $240.8 million), while
$179 million came from other countries.
In 2007, total FDI was
$388.4 million. Between 1997 and
2008, total FDI amounted to $1.421
billion.
66. In the first nine months of 2008, the FDI to GDP ratio equaled
9%, down from 10% in 2007.
67. According to Tajikistan’s official state statistics, the largest
foreign direct investors for the first nine months in 2008 were:
Russia — $240.8 million
Cyprus — $70.2 million
United States — $17.8 million
Great Britain — $3.7 million
Switzerland — $2.6 million
Kazakhstan — $31.5 million
China — $60.0 million
UAE — $1.9 million
68. Foreign direct investment by sector over that period was as
follows:
Energy: $219 million
Communications: $49.4 million
Banking: $59.6 million
Gold mining: $22.4 million
Health: $1.1 million
Oil and Gas: $4.4 million
Agriculture: $0.3 million
69. (The government’s definition of investment for the purposes of
these statistics is not always clear.
Several major foreign direct
investors from Cyprus and the United States, for example, are
Tajik-held companies registered offshore.)
70. Major Russian investment in the Sangtuda-1 hydroelectric project
is continuing during the first part of 2009, while Iran is
developing the Sangtuda-2 project.
71. In terms of Tajik foreign investment abroad, Tajikistan has
Q71. In terms of Tajik foreign investment abroad, Tajikistan has
signed an agreement with Iran to modernize the Iranian port in
Bandar-Abbas in order to accelerate shipments of aluminum from and
alumina to the Talco plant in Tursunzade, Tajikistan. Due to the
world financial crisis little has been done so far, however.
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JACOBSON
=======================CABLE ENDS============================
id: 187661
date: 1/16/2009 16:30
refid: 09LONDON127
origin: Embassy London
classification: CONFIDENTIAL
destination:
header:
VZCZCXRO9170
PP RUEHBC RUEHDE RUEHDIR RUEHKUK
DE RUEHLO #0127/01 0161630
ZNY CCCCC ZZH
P 161630Z JAN 09
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 0947
INFO RUCNIRA/IRAN COLLECTIVE PRIORITY
RUEHDBU/AMEMBASSY DUSHANBE PRIORITY
—————— header ends —————-
C O N F I D E N T I A L SECTION 01 OF 02 LONDON 000127
SIPDIS
E.O. 12958: DECL: 01/16/2019
TAGS: PGOV, AF, IR, KPAO, PHUM, PREL, PROP, TI, UK
SUBJECT: IRAN: BBC PERSIAN TV
BEGINS OPERATIONS
REF: EMB LONDON (GAYLE) EMAIL TO DEPT 12/24/08
Classified By: Political Counselor Richard Mills, Jr. for reasons 1.4 (
b) and (d)
1. (C) Summary. BBC Persian TV
launched its well-resourced
broadcast operations January 14.
Both anti-regime exiles and
the Tehran regime continue to attack BBC’s objectivity. The
BBC’s effort is a long-term one aimed at attracting
Farsi-speaking audiences in Iran, Tajikistan, and
Afghanistan; broadcasts will be unhindered by jamming. BBC
Persian TV has no office in Tehran, but has in recent months
recruited many young journalists directly from Iran for its
London staff, and will rely heavily on internet contributors
for footage from inside the country.
One BBC executive’s
public comments, possibly intending to curry favor with
Iranian authorities, claimed for BBC Persian TV a level of
credibility and objectivity he argued compares favorably with
VOA Persian TV’s work. End Summary.
Iranians’ Criticism, BBC’s High Hopes;
BBC Radio Farsi Unaffected
—————————————
2. (C) BBC Persian TV, boasting a
sharply expanded staff and
lavish studio facilities on Regent Street in London, launched
its 8-hour per day broadcast operations January 14. The
launch comes amidst a flurry of rhetorical charges, widely
reported by BBC and other media, from the Tehran regime that
the BBC has a subversive agenda of regime change and
psychological warfare, along with opposing claims from
anti-regime Iranian exiles that BBC’s coverage has a biased,
pro-regime slant. Rhetoric from
both sides is likely to
continue, given Tehran’s broad distrust of Western media as
well as the BBC’s past role, in the eyes of many Iranians, as
an interested participant in modern Iranian history (most
notably, Iranians argue, in the 1953 Mossadegh coup and in
criticism of the late Shah before his 1978 fall). UK press,
and some Embassy contacts, see BBC Persian TV’s hiring of
several dozen young Iranian journalists and staff recently
arrived from Tehran as inherently suspect, and evidence of
manipulation by the Tehran regime of BBC programming.
3. (SBU) BBC World Service Head Nigel Chapman, as
reported
in UK press, said the BBC aims at 11 million viewers by 2011
in Afghanistan, Iran, and Tajikistan.
London Iran Watcher
(Poloff) in a December tour of BBC Persian’s spanking new
studios in Upper Regent Street engaged Daryush Karimi, a news
editor for the Persian TV operation.
Karimi said BBC’s
Persian radio (broadcasting since 1941) will be unaffected;
Persian radio is a separate program in BBC’s offices in
Aldwych, a different area of central London. Karimi said BBC
Persian TV would work closely with and draw from
contributions from BBC’s on-line Persian website and blogging
activities.
Jamming Not An Issue
———————
4. (C) Karimi told Poloff jamming
is not expected to be a
problem; he said BBC will jump its broadcasts back and forth
between two satellites. IRIG
entities, according to Karimi,
use one of the same satellites for their own programming and
are thus expected not to try to interfere with BBC
broadcasts. A UK media report
noted Iran’s Revolutionary
Guard Corps has Cuban-supplied jamming equipment, but that
such equipment is not cost-effective in the Iran context.
Large Budget but No Tehran Office;
Many Recent Hirees Fresh from Iran
———————————-
5. (C/NF) BBC Persian TV has a
USD 23 Million (GBP 15
million) annual budget. The
Foreign and Commonwealth Office
in 2007 had told Poloff BBC Persian TV was to start
operations just a few months after its 2006 authorization by
Parliament; FCO explanations since mid-2007 for the delay
have cited general funding problems.
Karimi and other BBC
Persian TV staff during Poloff’s mid-December visit to BBC
Persian TV studios were reluctant interlocutors but said
among BBC Persian’s 150-plus staff (a figure also in current
UK press reports) were dozens of 2008 arrivals to London in
their 20’s and 30’s from Iran, where they worked in
«journalism-related» positions. Extrapolating from the FCO-
and BBC-provided timeframes, the most recently hired staff at
BBC Persian TV appear to have been hired out of Iran after
BBC had been refused permission by IRIG to open an office in
Tehran. All recent arrivals at
the BBC from Iran to whom
Poloff spoke, and their managers, declined to discuss details
of their hiring and background, but said they were recruited
by BBC in Iran, by phone and internet, beginning in spring
2008. BBC has one accredited,
English-speaking staffer in
LONDON 00000127 002 OF 002
Tehran. BBC editors indicate BBC
will, because it has no
office in Tehran, have to rely heavily for news images on
input from other BBC offices in the region and, especially,
on internet uploads from web-savvy BBC collaborators and
audience members in Iran. All of
the dozen or more phone
conversation fragments Poloff overheard in BBC Persian TV’s
news and editing rooms were in Farsi, and may have been
international calls; most email screens were also in Persian.
6. (C) One staffer at BBC
Persian, whom Poloff first met in
November, is a 20-something who stated she had never traveled
to the West, and had been in the UK since September 2008, but
spoke remarkably fluent, idiomatic, U.S.-accented English.
She had worked for Press TV in Tehran — about which she was
non-specific but characterized as a «difficult» experience
due to constant official monitoring of loyalties and work
content. Perhaps still adjusting
to a Western environment,
and clearly struck by being in conversation at last with a
representative of the «Global Arrogance,» the staffer was
evasive over the course of several conversations, in
discussing how BBC found her or other recent hirees inside
Iran and how transparent she was with her then-current
employer about her BBC contacts.
BBC En