Tajikistan's WTO membership offers pros and cons

Many say the country's accession will boost the economy, but others fear domestic businesses will be unable to survive competition.

By Dilafruz Nabiyeva

2013-01-04

DUSHANBE – The year 2013 promises change in Tajikistan as it is set to join the second World Trade Organisation (WTO) member in Central Asia after Kyrgyzstan.

Tajik President Emomali Rakhmon and WTO Director-General Pascal Lamy on December 10 in Geneva signed a protocol adding Tajikistan to the WTO this summer. The Tajik parliament has until June 7 to ratify the protocol, and Tajikistan will become a full WTO member 30 days later. Tajikistan will join Kyrgyzstan as the two Central Asian countries in the WTO.

Tajikistan first applied for membership in 2001 and for the past 11 years has worked to liberalise its foreign trade and investment laws and reduce customs duties in an effort to be admitted.

"Tajikistan's accession to the WTO will mark the beginning of a new creative stage," Rakhmon said at the protocol signing ceremony. "The country will continue to carry out constructive reforms in all spheres of the economy and will focus on developing a free and transparent trading system."

Two opinions on membership

While some observers agree membership will boost economic development, others are discussing changes that the Tajik domestic market can expect and whether the country will be able to compete on the world stage.

Tajikistan's accession would help make small and medium-sized business more competitive, Tajik Chamber of Commerce and Industry Deputy Chairwoman Larisa Kislyakova told Central Asia Online.

"Considerable opportunities will open up for small manufacturing companies producing high-value-added products," she explained. "This business sector will grow, as the main tariff concessions provided by the WTO go to these product groups." Indeed, Tajikistan's economy already has benefited from legal reforms mandated by the WTO, according to Saifullo Safarov, deputy director of the Presidential Centre for Strategic Studies.

"Institutionally the republic made automatic progress by adjusting its laws," he said. "In this respect, Tajikistan is becoming more attractive to investors, whose interests will enjoy protection both under national law and from a global organisation."

Still, some say that change could be difficult, especially for agriculture.

"Small businesses set up by local entrepreneurs in rural areas hardly will be able to compete with foreign companies," Social-Democratic Party Deputy Chairman Shokirjon Khakimov predicted, adding that, under the terms of the WTO, agricultural subsidies in developing countries should not exceed 10% of the government budget.

Kislyakova rejected that argument, saying that Tajik agricultural subsidies presently amount to only 4% of government spending, so the cap shouldn't be a problem. Some farmers will abandon certain crops for others, economist Khodzhimukhammad Umarov said, predicting a decrease in cotton farming and adding, "Tajik farmers will … switch to more profitable crops."

Preparing for change

Tajikistan's entry into the WTO will open up doors to trade for the country; however, it also will heighten outside competition, economic columnist Olzhas Suleimen explained on his blog.

"Accepting the new WTO rules and reducing customs duties will naturally create competition on the domestic market, and this is where Tajik business owners will not be able to compete with foreign manufacturers," he wrote. "We should expect a consequent increase in imports at the expense of domestic producers, with foreign companies forcing out domestic entrepreneurs."

However, the market structure in Tajikistan is unlikely to change drastically, the owners of most small- and medium-sized businesses predict.

"There are virtually no domestic manufacturers in Tajikistan. Imported goods have outnumbered domestic goods for a long time," Konstantin Bondarenko, head of the NGO Centre for a Free Market, told Central Asia Online. "I do not expect to see a sudden increase in imports after Tajikistan enters the WTO."

After reading in the local newspapers about the risks he may face in the future, Tursunzade District farmer Urunbek Salimov is already making changes to make his business more competitive.

"Of course, I am worried and apprehensive," he told Central Asia Online. "We have very large gardens and vineyards covering five whole hectares. My whole family works here. We sell our produce in Dushanbe, and hence I am worried about what will happen next."

But Salimov and his family are spending their evenings working on solutions, like how to set up their own grape juice production facility. The men are calculating how much manpower and resources they need to run a grape juice production and packaging line that can compete with foreign competition and attract investors, he said.

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Reader Comments

  • Surely, this step is not on a large scale, not even half a step, but prospects are very good. It will give a new impetus to the economy as a whole. I work in the agricultural sector, and I attended an international agricultural exhibition in Berlin recently, and I intend to plant several hectares of intensive dwarf orchards including apples, pears, plums and nectarine using French rootstock M-9, and 4-5 years later I will import quality products to the Russian market.

    February 1, 2013 @ 08:02:19AM Илхом Хакимов
  • I do not see any benefits of WTO membership for Tajikistan.

    January 10, 2013 @ 07:01:43AM фед
  • To assess WTO accession prospects and implications for Tajikistan, you should analyze the situation in Kyrgyzstan. Upon entry, Kyrgyzstan was a post-Soviet trade center. The absence of borders and customs areas helped expand market capacity, facilitating the movement of capital. Trade was a source of the accumulation of commercial capital, but it failed to eventually flow to the manufacturing sector. Presently, the Kyrgyz market capacity decreases as shagreen, and this exacerbates both the economic and social situation. So now it is advisable to develop several models of development and take appropriate actions. Of course, there always will be unity and contradiction between business and the state. The government aims to accumulate financial resources to solve its problems of national importance, but businesses have always sought to pay as little as possible and that's where the state should start from the fundamental principle of medicine - do no harm. Because in seeking solutions to problems of the moment, tightening the tax noose tighter and tighter, it can stifle business development and its foundation. At the start of perestroika liberal tax laws allowed us, STATE UNIVERSITY employees, to open a scientific and production cooperative, YVETTA-ECO, to design and manufacture instruments that were sold all over the USSR. 20 years later, I recently watched a television report from the Moscow region SES and was pleasantly surprised to find out they were still using the instruments designed and manufactured in TAJIKISTAN, I'M NOT TALKING ABOUT TAJIKISTAN SES.

    January 8, 2013 @ 03:01:28AM Олег Синдюков
  • To say that Tajik farmers will simply switch out of cotton to other crops shows lack of understanding of the complex realities of Tajik agriculture.

    January 7, 2013 @ 01:01:26AM Ali
  • Already, it is hard to find in the markets (bazaars) of the republic local fruits and vegetables, which taste better than the imported ones. Europe is already crying and whining about genetically modified products. Tajikistan also opened its market to them. When will people learn from others’ mistakes? Probably NEVER!

    January 5, 2013 @ 07:01:33AM uallim591