Doing Business in Tajikistan No Easy Task

In a country like Tajikistan where it is hard enough to do business because of factors like the country’s remote geographic location, the government needs to do more to remove the obstacles that face entrepreneurs, NBCentralAsia economic experts say.



In its recently published annual report, the International Financial Corporation, IFC, ranked Tajikistan second from the bottom of a list of 28 countries of Eastern Europe and Central Asia in terms of the business climate.



NBCentralAsia analysts say this low ranking stems from an environment in which business have to devote a lot of time to gathering various kinds of permits, corruption is prevalent, and officials make arbitrary decisions. The analysts agree with the IFC’s findings, while arguing that official corruption is the number one obstacle to the development of the business sector.



The situation is such that if you open a business in Tajikistan, the main thing you need to know is whom to bribe so as to avoid problems in the future, they say.



Although only the taxation service is allowed to inspect functioning companies, other government agencies also carry out their own checks, sometimes by force. The experts say businessmen are unaware of their legal rights, and are reluctant to defend these rights for fear of being accused of some kind of legal breach.



One solution would be for the authorities to step up their campaign against corruption and overgrown bureaucracy, and offer more state support for small and medium-sized enterprises, SMEs. Only then, say NBCentralAsia’s experts, will the situation start improving.



But as well as these problems, making a success of any business venture is also made more difficult by objective factors such as Tajikistan’s landlocked position, underinvestment in infrastructure, the dearth of new technology, and lack of access to long-term loans.



This last factor - credit- is the major headache for entrepreneurs in Tajikistan: there are virtually no institutions offering loans to SMEs. Microfinance organisations only offer small loans and are not really interested in lending to business, while bank loans come with excessively high interest rates and short repayment periods.



With businesses in a losing situation from the outset, the government could be doing more to assist and protect them, for instance by trying to clamp down on smuggling more effectively.



Contraband imports make locally manufactured goods uncompetive. Take, for example, sales of socks, stockings and similar items. Domestic demand for them is put at 49 million pairs a year, yet only six million pairs are produced in the country and another 12 million are imported legally. All the rest are smuggled into Tajikistan. Local manufacturers, which have to buy their textiles in from abroad, are in no position to grow their businesses in the face of this level of grey imports.



Tajikistan’s official imports are put at 600 million US dollars a year, yet one analyst calculates that the real figure is three billion dollars.



A number of businessmen interviewed by NBCentralAsia said there are still opportunities to start a successful venture. All it takes is a substantial sum of money, good connections and a strong business idea. But Tajikistan’s macroeconomic statistics suggest that there aren't too many people around in possession of all three keys to success.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)