Tajikistan 2018

Total score

40.26 change: -0.94

Score and comments

Rule of Law
Independence of the Judiciary

The judiciary in Tajikistan has been in far worse shape during the past years than the numeric results – mainly based on the optimism of the crony local business elite - might suggest. In reality it lacks much of the necessary independence, professionalism and integrity. Trials lack many of the principles of rule-of-law. Politically relevant trials are often held behind closed doors. Lawyers in general, particularly defense counselors in political cases, are under increasing pressure. Many retire from the profession or even emigrate, while the licenses of the remaining ones depend on the government. Detention often includes beating and the forceful extraction of confessions. Prisons are overcrowded, while inmates are ill-treated, and poorly cared for. Aside of political monopoly of the

ruling family, widespread bribing also distorts the entire justice system.

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Corruption

The state of corruption is catastrophic. Tajikistan provides a textbook example of grand corruption, whereby the misappropriated sums considerably diminish the national wealth. Freedom House describes the system as a “kleptocracy” and “nepotocracy”. The president`s broader family and adjacent clan control most of the key resources in the public as well as in the private sector. They are tolerated with avoiding regulation, obtaining privileges in taxation or tariffs, or simply protected by arbitrary prosecution of potential competitors. Petty corruption is omnipresent, from police and courts to enrollment in education. Country`s rating steeply falls in international indexes measuring corruption. In Transparency International`s CPI 2017, Tajikistan`s rank is 161-164/180, with only

21/100 points (of all post-Soviet and all OSCE countries, only Turkmenistan is worse). In Freedom House`s NiT 2018, its corruption score fell from (negative) 6.75 to 7.00 points (of possible 7), meaning that it can`t be worse.

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Protection of Human Rights

Civil liberties and human rights are severely curtailed in Tajikistan. Much of the anti-government criticism and association is subject to bans, arbitrary prosecution or informal pressure. NGO activities are restricted, especially if financed from abroad. The official narrative, blaming anything non-authorized that is coming from the “West” (or from other Muslim countries) as treacherous, anti-national and “extremist”, little by little takes a totalitarian shape. Since July 2017, authorities legally monitor citizens` online behavior and could fine or imprison those who visited certain sites or posted critical comments. Only one brand of Islam is permitted, while all the others are suspected as “extremist” and “terrorist”, while students aren`t allowed to study Islamic

theology abroad. Non-Muslim religious groups are occasionally persecuted. Trade unions are de facto dependent on authorities. Freedom House notes that “sexual harassment, discrimination, and violence against women are common, but cases are underreported and seldom adequately investigated”. Women suffer government and societal pressure to abandon foreign fashion (be it hijab or a Western-style dress) and stick to traditional folk dressing codes. LGBTs are free of criminalization but not free of stigmatization by authorities and of black-listing by the police. Black lists thereof are occasionally updated after round-ups in clubs or in the streets, now seemingly encompassing at least 367 names. The position of the biggest - Uzbek - ethno-linguistic (and to a degree religious) minority was for long marked by mistrust and sidelining. With recently improved relations between Tajikistan and Uzbekistan, that might change.

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Economic Freedom
Security of Property Rights

Property rights in Tajikistan are not adequately secured. Judiciary is not independent from the executive branch of government, state officials or politically connected groups. Government regulatory agencies are known to have been used to pressure businesses into ceding properties and business assets. Court rulings could also be inconsistent when applying laws, spelling divergent verdicts in similar cases. Legal enforcement of contracts is slow and expensive – on average it lasts more than 14 months and takes up one quarter of the claim, while judgment enforcement is the weakest link in the process. There are no rules on adjournments and little automation is used: court cases are still assigned to judges manually. Out-of-court settlements have not been systematically developed, since

the role of Third Party Arbitration Courts was brought to minimum. At the same time, clientele networks, nepotism and corruption among public officials are widespread, which basically undermines the liberal stance towards foreign investments. All land in Tajikistan is in state ownership, and it cannot be sold or bought - only first and second tier land use rights can be leased: to Tajik natural persons and companies indefinitely, while to foreign entities for up to 50 years. Weak performance of the land registry diminishes security of land use rights in the agricultural sector. Property registration is a slow process coupled with high fees. Insolvency regulations also lead to long processes, which can last up to two years and result in recovery of only one third of the claim.

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Size of Government: Expenditures, Taxes, and Enterprises

The size of government in Tajikistan, taken the total public spending of 32% of GDP in 2017, is considerably smaller as compared to developed European countries, and more adequate for a country on this level of development. This situation leaves room for lower taxes, but also for lower level of government services and lower quality of government administration. High share of the shadow economy basically restricts higher tax receipts. Growth of the economy is robust, due to the rising consumption spurred by an increase in remittances of workers abroad (which represent a third of the economy), mostly from Russia, and rise in exports and capital spending. Government deficit was substantially reduced, reaching -2.4% of GDP in 2017, but the fiscal situation has been deteriorating again due to

large infrastructure projects whereby the public debt will surpass 50% in 2018. There were negotiations regarding an IMF support program, but it has not yet been agreed upon. The role of the state in the economy is still considerable, with numerous big state-owned companies active in many fields, even in those where state interference is mostly obsolete, such as finances, food processing and mining. The most important SOEs are industrial facilities such as the largest company in the country, the aluminum company Talco. SOEs are in a de facto preferential position, since they receive a large share of government procurements, and are also financed by banks via preferential loans that could be either waived or taken over by the government, making them more a subsidy than a loan. Many of these SOEs have reported high financial losses during the previous years, which burdens public finances. SOEs` management is not professional, due to strong political influences from the government, while being a strong part of the clientele network. The split of the national electric company, the Barqi-Tojik, into three companies, one each for generation, transmission and distribution, has not yet been accomplished. Tajikistan is in the process of shifting to International Financial Reporting Standards (IFRS), while in the meantime SOEs are using the national accounting standards which deviate from the best international practice. The share of non-performing loans (NPL) stood at more than 35% at the end of 2017, officially, but non-official estimates reported this to be much higher, which not only showed that the banking system was in crisis but could have strong fiscal consequences in case of bank bailouts. Personal income tax is progressive, with rates of 8% and 13% and a low non-taxable threshold. Corporate income tax is also progressive, with the rates of 13% and 23% - the lower rate is attributed to companies that produce commodities. Both rates were decreased by 1 percentage point from their previous level in January 2017. VAT stands at 18%. High social security contributions paid by the employer, coupled with the income tax, lead to a moderate labour tax wedge of 30% on the average wage in the country.

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Regulation of Credit, Labour, and Business

Business environment in the country cannot be described as overall business friendly. Business regulations are often complicated and non-transparent, but the main problem lies in the area of their arbitrary and discriminatory implementation. Corruption in the administration is high, and political protection is important for businesses. Although the overall regulatory climate is not conducive to entrepreneurial activities, legislation in some areas could be considered as satisfactory: the cotton fiver tax was abolished in 2016; the sales tax was slightly reduced in 2017; while the simplified tax regime is now eligible for a larger share of small businesses. In obtaining construction permits, Tajikistan stands at the bottom of the world economies – on average it takes more than 6 months

to get a construction permit. Getting electricity is very expensive, and the year 2017 was the first year in which the government was able to provide year-round electricity to households and businesses across the country, since electricity shortages were common. On the other hand, starting a business has been relatively quick and without the paid-in capital, but expensive. The recent increase in revenue threshold for VAT registration was also a positive step for small businesses. Foreign currency regulation, high inflation and tax rates are most often considered as obstacles to a better business environment in the country. Labour regulations are mostly rigid: fixed term contracts are prohibited for permanent tasks, but there is no limit on their length. Working hours are not flexible, with high wage premiums for non-standard hours. There are complex regulations regarding redundancy, with priority rules and reassignment obligations, but notice periods and severance pay remain flat and do not increase with years in tenure. Trade unions are weak and mostly concentrated in the public sector, but also controlled by the government. Collective bargaining in the country is rare. The minimum wage is rather low in comparison to the average one, thus not bringing too much distortion into the economy. There is a legal requirement that at least 70% of the workforce must be local (and 75% if the CEO is a foreign national, or 80% or even 90% for projects financed by the Tajikistani government).

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Freedom to Trade Internationally

Freedom of trade is mostly respected in Tajikistan, yet with many problems that remain to be resolved. The country is a late comer to the World Trade Organization (WTO), since it joined it in 2013, which boosted trade freedom. However, tariffs on imported goods are still high, with the simple average MFN applied rate of 7.7%. Agriculture products face somewhat higher tariffs than those on industrial commodities. International trade faces objective constraints such as geographical position and low quality of transportation infrastructure, railroad in particular. Recent capital investments in this field might alleviate some of the problems, but they still leave the freight of goods expensive. Custom procedures also prove to be an obstacle to trade – although submitting customs

declarations can be done electronically, Tajikistani foreign trade procedures are burdensome, requiring numerous working hours and as many as 13 different documents to export. Arbitrary trade policy is also sometimes used in violation of the WTO rules, such as the ban on imported chicken meat from 2017. Obstacles in movement of goods are complemented by capital controls, which are used to maintain the exchange rate of the national currency, the somoni, which further devaluated from 8.8 to 9.4 per USD. Since 2017, these capital restrictions have been even increased, and large transactions in foreign currency are difficult to conduct. Tajikistan is still considering joining the Eurasian Economic Union, which would open Russian labour market further to local foreign workers, but would also lead to restrictions in trade with other countries. Procedures for obtaining residence permits for foreign nationals are also burdensome and provide for only up to one year of residence.

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Political Freedom
Free and Fair Elections

Tajikistan is an authoritarian state with a highly repressed political life in which elections serve only as “formality”. Legal framework gives political parties the right to found themselves and operate, but in practice they are allowed to do so only if they don’t challenge the decades-old authoritarian rule of the president Emomali Rahmon and his People’s Democratic Party (PDP). By preventing genuine political pluralism, the regime cracks down on any critical voice in society, from opposition politicians, journalists and activists to their family members and friends, by the use of physical violence, imprisonment, verbal intimidation and harassment. In such a restrictive environment there is no space for real opposition parties to emerge. Constitutional changes as of

2016 have strengthened further the role of the president, removed limitations to his term in office, and also introduced a ban on the establishment of faith-based political parties, thence clearly targeting the Islamic Renaissance Party (IRPT), which once had stood as the opposition but was later, in 2015, declared by the state as a terrorist organization. Many leaders of the IRPT remain behind bars. A solicitor defending IPRT in the court of law was convicted to 28 years in prison on dubious charges. Constitutional referendum also lowered the age limit for taking the presidential position, in a move allegedly done in order to allow president Rahmon’s son to have run at the presidential elections in 2020.

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Absence of Unconstitutional Veto Players

Entire power and all decision-making authority in Tajikistan are in the hands of president Emomali Rahmon with his close circle of family and friends. They have captured the Tajik state and have been in complete control of all branches of power, most institutions and security forces. The core elite systematically manipulate political processes for their personal benefits. Almost all important businesses in the country are controlled directly or indirectly by the ruling elite. The country is ranked as 161st at the Transparency International 2017 Corruption Perception Index. If president Rahmon withdraws from politics in 2020, it is still to be seen whether or not his successor will be able to maintain such power, taken that there are also other influential people in the country`s

political and military elite.

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Freedom of Press

Freedom of the press is restricted in Tajikistan. Legislative and political pressure are on in practice, shaping editorial policy of public and private media outlets. Journalists are living in an environment of fear, facing the same repressive methods of prosecution as opposition politicians and activists – meaning: imprisonment based on false accusation, violence, and/or harassment. Insulting the president or other state officials is punishable by law. Having in mind that there are no institutions to protect journalists in enjoying their constitutional rights, self-censorship is regularly practiced among them, or they even decide to leave the country. Broadcast and printed media outlets are under governmental control, while online-news websites have been regularly blocked

by the authorities. Legal amendments were adopted by the parliament in July 2017, allowing authorities to legally access the contents of online activities. Objective reporting is hardly found and mostly reserved for the media outlets residing abroad. In 2016, a law was introduced, that allowed the State Committee on Television and Radio to censorship the content of both private and public media outlets. * Press freedom score will be updated after data from primary source have been published. For more information see Methodology section.

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