Tajik Free Economic Zones developing, but need help

KHUDZHAND – Tajikistan’s Free Economic Zones (FEZs) are making progress, but they still need help. President Emomali Rakhmon signed the law creating FEZs in 2004, and the country has opened four – two in 2008 in Sughd and Panj, and two in 2009 in Dangara and Ishkashim.

Bakhrom Urakbayev, an economist specialising in FEZs, said FEZ businesses pay two of Tajikistan’s 15 main taxes: the 25% tax (for funding social welfare benefits) and the 13% individual income tax. Businesses pay an annual fee of US $1 (4.7 TJS) per sq. metre for a site in the FEZ, a flat fee of US $5,000 (23,600 TJS) to register for 15 years, and no customs duties.

“Unlike many countries in the region, Tajikistan has created very comfortable conditions, and therefore, we have witnessed an increased pace of development over the last year,” Urakbayev said. “Nevertheless, the FEZs still need investor and government help. If we are going to make an effort to develop FEZs, then this will first and foremost be to create new jobs in the (non-capital) regions and the emergence of local production.”

Only two FEZs are currently active: Sughd, with 14 entities, and Panj, with two, according to the Economic Development Ministry. The Dangara and Ishkashim FEZs are still in development. The active FEZs have already produced more than US $5m (23.6m TJS) in goods.

“Over the past year and a half, the number of jobs in the two FEZs has reached 110 and (US) $1.7m (8m TJS) of the predicted (US) $48m (226.4m TJS) has already been invested in Sughd,” Urakbayev said.

Two more businesses are planning to open in the Sughd FEZ: a Turkish-Tajik enterprise that produces construction materials and a Tajik company that will repair civilian MI-8, MI-8MTV and MI-172 helicopters, said Anvar Yakubov, director of the zone.

“Currently, our FEZ has businesses working with Polish, Cypriot, Turkish and domestic capital. They are producing polyethylene and polypropylene pipes from primary and secondary raw materials, deep oil or water pumps, and solar-energy collectors,” he said.

Various entrepreneurs have expressed their desire to invest US $38m (179.3m TJS) in the Sughd FEZ, which would create another 940 jobs, Yakubov said.

Firdavs Sanginov, general director of the Tajik-Cypriot company Star Plast, which manufactures polyethylene pipes, said he and his partners wanted to open a factory in Khudzhand.

“When we decided to launch the second business, we learned ... that a FEZ was being opened,” Sanginov said. “At that time, we were planning to start producing pipes of a wider diameter than we had been producing (before). We proposed the idea to our investors. ... After some thought, they conducted an analysis of the FEZ’s terms and agreed.”

The company is pleased with the FEZ site, he said, adding, “If the opportunity arises, we would like to open another business in the FEZ.”

While the Sughd FEZ is doing well, Gorno-Badakhshan Oblast’s Ishkashim FEZ needs help, Urakbayev said.

The Sughd FEZ’s location in a former industrial area is a major advantage, Aidibek Bekmurodi, director of the Ishkashim FEZ, said.

“That is, 70% of the infrastructure already exists and so investors go there,” he said. “International entities show an interest in that FEZ and support it, but there is very little interest in Ishkashim, which is rocky and desolate. In order to fully develop the Ishkashim FEZ and not to have problems with sanitation, storage and office buildings we need no less than (US) $10m (47m TJS).”

The State Investment and Regulation Committee is considering aid for the FEZ, said Ibragim Kholikov of the committee. “If the FEZ’s infrastructure is more developed, then it will attract investors more quickly since the geographic location is very convenient,” he said.

The number of entities interested in operating in Ishkashim is growing even though it faces difficulties, Bekmurodi said.

“Our local entrepreneurs have already expressed their desire to create mini-factories in the FEZ to produce sidewalk tiles and roofing shingles,” he said. “In addition, local entrepreneurs want to build mini-plants to produce sugar, beverages and Siberian orange berry oil.”

The Panj FEZ has made some progress. Faizullo Rasulov, the Panj FEZ administrative director, said four entities have registered this year and are planning to invest US $9m. “These entities are also involved in building infrastructure since we have to start from scratch,” he added.

“The existing FEZs’ success will enable the creation of new ones, which in turn will multiply the number of jobs, and we can count on our migrants and skilled workers coming back from abroad,” said Urakbayev.