THE

COTTON SECTOR of

TAJIKISTAN

NEW OPPORTUNITIES

for the

INTERNATIONAL COTTON TRADE

PRESENTED BY THE GOVERNMENT OF TAJIKISTAN APRIL 2007

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Index Page Foreword 4 1.0 Overview of Tajikistan and the Agricultural Sector 5 1.1 Geography and Demographics 1.2 Macro-Economic and Political Economic Background 1.3 Political structure 1.4 Agricultural sector overview 2.0 The Cotton Sector – Current situation and Reforms 8 2.1 Overview 2.2 Production trends 2.3 Seed cotton quality 2.4 Baled Cotton Quality classification 2.5 Cotton farmers, Processing, Market Infrastructure and Exports 2.6 Seed sector 3.0 Tajikistan - The Investment and Operating Environment 13 3.1 Financial sector 3.2 Reform of Business Licensing and Inspections 3.3 Legal Environment 3.3.1 Company structures available in Tajikistan 3.3.2 Company structure overview 3.3.3 Company Registration Procedures 3.3.4 Import duties for equipment 3.3.5 General taxation 3.3.6 Cotton exportation 3.4 Overview of other agricultural sector projects

3.4.1 World Bank Projects 3.4.2 Projects of other donors

4.0 Government of Tajikistan and World Bank Cotton Sector Recovery Project 19 4.1 Overview 4.2 Project objective and phases 4.3 Project Components

4.3.1 Debt Resolution 4.3.2 Support for Policy Analysis and Reform 4.3.3 Cotton Supply Chain Development

a) Cotton Ginneries b) Cotton Seed Supply c) Producer Support

4.4 Project Districts 4.4.1 Criteria for district selection 4.4.2 Preliminary selected districts

5.0 IFC 25 5.1 About IFC 5.2 IFC’s added value to potential investors 5.3 IFC’s Products and Services

5.3.1 Equity and Quasi-Equity 5.3.2 Loans and Intermediary Services 5.3.3 Syndicated Loans 5.3.4 Structured Finance 5.3.5 Risk Management 5.3.6 Technical Assistance and Advisory Services

5.4 Eligibility of the project 5.5 How can an investor apply for financing? 5.6 Where can an investor go for more information on IFC?

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6.0 Multilateral Investment Guarantee Agency (MIGA) 27 6.1 What is MIGA? 6.2 What is the relevance of MIGA for potential investors under the proposed project? 6.3 What investments would be eligible? 6.4 What is an SME as covered by SIP? 6.5 Who is an eligible investor as defined by SIP? 6.6 What is offered under a SIP guarantee?

6.6.1 Risk definitions 6.7 How to apply? 7.0 Way forward 29 Appendices Appendix 1.0 – Government of Tajikistan Cotton Sector Road Map 31 Appendix 1.1 - Methodica – minimum export price calculation and regulations 36 Appendix 2.1 – Production statistics 40 Appendix 2.2 – Quality production splits 41 Appendix 2.3 – Land Reform Statistics 42 Appendix 3.1 - Tax information 43 Appendix 4.1 – District statistics – Kumsangir 45 Appendix 4.2 – District statistics – Bohtar 47 Appendix 4.3 – District statistics – Farkhor 49 Appendix 4.4 – District statistics – Kabadian 51 Appendix 4.5 – District statistics – Vakhsh 53 Appendix 4.6 – District statistics – Shaartuz 55 Appendix 4.7 - District statistics – Vosse 57 Appendix 7.0 - Investor criteria 59 Figures Figure 1 – Map of Tajikistan Figure 2 – Administrative map of Tajikistan Figure 2.1 – Area and production data Figure 2.2 – MS production data Figure 2.3 – ELS production data Figure 2.4 – MS seed cotton quality Figure 2.5 - ELS seed cotton quality Figure 4.1 – Irrigated land Khatlon (by district) Figure 4.2 – Yield of seed cotton per hectare Khatlon (by district) Figure 4.3 – Total seed cotton production Khatlon (by district) Figure 4.4 – Percentage arable land under private use Khatlon (by district) Figure 4.5 – Percentage land sown to cotton Khalton (by district) Figure 4.6 – Average debt per hectare Khalton as of 01/01/2005 (by district)

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Foreword Cotton is not only an important crop for our Republic; it is entwined with our history and with the lives and future of our people. Since Independence we have gone through a very marked transition, the beneficial effects of which were initially hampered by a period of Civil Unrest. Therefore, unlike many of the other countries in the Former Soviet Union, our real reform to a market economy was delayed and only really began in 1999. Equally, the after affects of the unrest and the post-conflict situation created further difficulties for our Government and the people of our Republic. However, we are now benefiting from a period of political and economic stability, a situation that many of our neighbouring countries are not benefiting from. We, the Government of the Republic of Tajikistan, feel that the time is now right for a deepening of reforms, encouragement of foreign investment and a determined effort to support the private sector development of our economy. We are working closely with the wider international development community to foster and strengthen the enabling environment that will provide the structure within which the private sector will work. A number of important reforms have already been implemented in many areas of our economy. The most dramatic program for development and reform lies in the agricultural sector and specifically cotton. The President of the Republic and his Government have been working closely with donors for the past year to develop a vision for the cotton sector – a “Road Map” - that will lead to the true realisation of the potential of the sector in our Republic. We appreciate that certain international companies may have previously had less than satisfactory experiences in investing in the cotton sector in our Republic and in exporting our baled cotton. Whilst these experiences were not connected with the actions of our Government, we can ensure investors and the wider international cotton community that we are making all possible efforts to ensure the existence of a more transparent, equitable, dependable and profitable sector for all. This document gives a short outline of the recent and planned reforms for the cotton sector of Tajikistan. It also identifies a number of investment opportunities connected with a new project being undertaken in partnership with the International Development Association (World Bank). In general terms these opportunities are in the ginning sector where we actively seek new foreign investors for whom the project will make available seasonal finance lines. We are also seeking to attract new investors in the seed sector, for whom there will also be credit lines available for the purchase of modern seed treatment equipment. For specific details on these opportunities, please refer to section 4 of this document. We would like to draw to your attention that expressions of interest from potential investors should be presented to ourselves by 30th July 2007. However, we would like to bring to your attention the fact that we are also interested to further develop and strengthen our working relationships with yourselves in many other areas, be they export, warehousing, textiles or finance. Sharif Rahimov Chairman State Committee on Investments and State Property Management Republic of Tajikistan

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1.0 Overview of Tajikistan and the Agricultural Sector 1.1 Geography and Demographics Located in Central Asia, Tajikistan is landlocked by Kyrgyzstan, Afghanistan, Uzbekistan and China (see figure 1 below). The country has a population of approximately 7.3 million, of which 2 million are urban and 5.3 million are rural inhabitants. The country’s ethnic structure is comprised of 65% Tajiks, 25% Uzbeks, 3% Russian and 7% of others (such as Tartars, Kyrgyz and Koreans). The official language is Tajik, a Persian based language. Around 80% of the population are Sunni Muslims, the balance being made up of Ismailis, Orthodox Christians and Jews.

Figure 1 – Map of Tajikistan

The country is predominantly mountainous, with around 50% of the country at elevations of 3,000 meters above sea level and higher. Of the total area of 14.3 million hectares (ha), only 4.3 million ha is agricultural land and of that only 0.8 million ha is arable. Administratively, the Republic is divided into 4 main regions (Oblasts) – Sughd, Khatlon, Gorno-Badakshan (GBAO) and the Regions of Republican Subordination (including Dushanbe, the capital) – see figure 2 below. Sughd (in the north) covers around 18% of the country’s area and has about 30% of the population. About 75% of its population is rural. Although cotton is the dominant crop, apricots, apples, grapes, pears, nuts and potatoes are also grown (as well as a number of other crops in the Zeravshan Valley area). The Khatlon region, in the south, accounts for around 17% of the country’s area and about 35% of the population, of which 83% are rural inhabitants. The irrigated river valleys of Khatlon around Kurgan Tyube and Kulyab were among the most productive growing regions in the USSR. Part of the reason for this is the extensive irrigated infrastructure that supplies up to 320,000 ha of arable land in the region. Cotton is the main crop of the region, although there is a degree of diversification with other crops such as wheat, rice, potatoes, vegetables, lucerne and some sub-tropical fruits such as lemons and oranges. The GBAO, in the east of the country, accounts for 45% of the country’s total area, but only 3% of the total population. Given that it is situated in the mountainous area of the country, it has very little scope for agricultural production, but has important areas of pastures. The Regions of Republican Subordination (situated close to Dushanbe) occupy about 20% of the country’s total area, account for around 25% of the population, of whom around 90% are rural inhabitants. Cotton is also a dominant crop in this region, although there is a fair degree of crop diversification, the main concentration of which is on consumer products, mainly for the Dushanbe market.

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Figure 2 – Administrative map of Tajikistan

1.2 Macro-Economic and Political Economic Background Dissolution of the Soviet Union in 1991 and civil war from 1992-97 created severe hardship during the initial years of the Tajik Republic. The loss of transfers from the USSR central government (47% of Tajik government spending) and the social and economic dislocation brought about by war resulted in a steep fall in living standards, a drop in exports and erosion of institutional capacity. These factors also delayed the beginning of economic transition until political stability was finally achieved in 1998. The economy has grown strongly since, although living standards remain lower than in other countries in Central Asia. The sustained economic recovery since 1998 is due to continued political stability, an improving macro economic environment and substantial support from donors and International Financial Institutions (IFIs). These factors have resulted in annual economic growth of 8%-10% since 2000. Prudent fiscal management has kept the budget deficit low, inflation rates have fallen from 38% in 2001 to 8% in 2006, and the exchange rate has remained stable, with even a mild appreciation against the US dollar in 2006. Foreign debt was reduced from over 100% in 2000 to 42.8% of GDP in 2004. The country has an open trade regime with tariffs averaging 7.5%. This combination of political and macro-economic stability provides a sound base for future economic growth, as confirmed by IMF growth projections of 7%-8% per annum for 2007-2008. With political and macro-economic stability more assured, the government is now putting more emphasis on the reform of policies, institutions and product and factor markets, all of which are essential for sustainable growth. These measures have been given a high priority in the government’s National Development Strategy (NDS), and in the preparation of a national Poverty Reduction Strategy for 2006-2008. All of these reforms are receiving active supported from the donor community. World Bank support for agricultural reform is based on an agriculture sector strategy prepared recently with government, which identifies the completion of land privatization and reform of the cotton sub-sector as the foundation for sustainable agricultural growth. In support of this strategy the World Bank is providing continued support for land privatization, and preparing a project to strengthen the cotton sector.

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1.3 Political structure The main framework is a Presidential Republic, whereby the President is both head of the state and government, as well as of the pluriform, multi-party system. Legislative power exists in both the executive branch and the two chambers of parliament. The executive branch of government is headed by the President, who is elected by popular vote for a seven year term (the last election having been in 2006). The prime minister is appointed by the President, as is the council of ministers (although these appointments require the approval of the Supreme Assembly. The legislative branch of government is made up of the Supreme Assembly, which has 2 chambers. Firstly there is the Assembly of Representatives, which has 63 members, who are elected for 5 year terms. 22 members are elected by proportional representation, the remaining 41 in single seat constituencies. The National Assembly has 33 members, also elected for 5 years. 25 members are elected by local assembly deputies and 8 are appointed by the President. 1.4 Agricultural sector overview Agriculture is the second largest sector of the economy, after services. In 2004, it accounted for 24% of GDP, 66% of employment, 26% of exports and 39% of tax revenue. Cotton is the main agricultural export crop, contributing 90% of agricultural exports. In 2003 cotton accounted for 24.2% of total export revenue and 17.3% in 2004 (the difference largely being due to a fall in the international prices for cotton. Other agricultural exports include fresh and processed fruit and vegetables and silk products. Overall around 70% of the population lives in rural areas, with the majority of them involved in agriculture and over 60% of those mainly engaged in the cotton sector. To date there has been limited development of the non-farm rural economy. Tajikistan has good climatic conditions for growing a wide range of crops. It has a continental climate, with hot dry summers in the lowland areas, yet cooler and wetter weather in the mountain valleys and foothills. Soils are reasonably good in the south and in the upland valley areas, although less fertile in the northern valleys. Low precipitation levels limit the scope for rain-fed agriculture and necessitate a heavy reliance on irrigation for crop production. However, water resources are abundant and approximately 85% of arable land is located within the coverage area of the irrigation system. As with many other areas of the Tajik economy, agricultural output and productivity sharply declined following the dissolution of the Soviet Union and continued through the difficult period of the Civil War. However, recovery in this sector began to appear in 1996 and since 2000 it has grown at 2 digit levels. In fact, agriculture sector growth has made a powerful contribution to post-war economic recovery, accounting for approximately one third of overall economic growth from 1998 to 2004. Sector output increased by 65% in real terms during this period, and has now returned to the level extant at independence in 1990. Rural poverty has fallen significantly in response to these trends; with 65% of rural people below the poverty line ($2.15/day PPP) in 2004, compared to 82% in 1999. It should also be noted that the growth of the sector exceeded other areas of the economy (it was in excess of actual GDP growth between 2001 and 2004). The reason behind this growth is largely attributed to increases in actual yields, rather than in prices or planted area and this is largely due to improved macro-economic and political stability and enhanced access to inputs.

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2.0 The Cotton Sector – Current situation and Reforms 2.1 Overview Cotton makes a critical contribution to both the agricultural sector and the national economy. Within the agricultural sector, cotton accounts for 60% of agricultural output, supports 75% of the rural population, and uses 45% of irrigated arable land. At the national level it is an important source of both export earnings (15%) and tax revenue. Tajikistan is the fourth largest exporter of cotton, and there is strong demand on world markets for its high quality output. It is widely agreed that the sector, at the moment, is not performing at its best. Yields, on a national average, are not at optimum levels (currently around 1.8 MT/ha seed cotton basis). The quality of seed cotton on the plants still remains high, however the lack of competition in the ginning sector has led to a general reduction of baled cotton quality. Equally, the failure to control seed cotton collection and storage leads to a mixing of seed varieties and qualities, resulting in uneven staple lengths. The latter problem is largely a factor of the lack of interest that farmers have, due to low prices being offered for their product. It is clear that the temporary financing structure that has been operating (the so called “futurist” system) in the post-conflict situation in which the country found itself, whilst it solved the immediate problem of providing farmers with the basic means of production, was not constructive for the creation of a competitive, high performing, modern cotton sector. Therefore, the Government of Tajikistan is now in the process of dismantling the previous financing system and introducing a series of reforms to create an environment which will encourage competition and revitalise the sector. Firstly, the Government has formed an Independent Commission (IC) to manage the reform process, with representatives from all concerned Ministries and government agencies, with the 2 main donors in the country (WB and ADB) participating in the IC in an observer status. Secondly, in co-ordination with the Donor Community, the Government has identified the critical reforms that will be required to modernise the sector and these are contained in a Road Map (referred to below and contained in appendix 1). 2.2 Production trends Appendix 2.1 and figure 2.1 (below) present the total area and production statistics for Tajikistan since 1995.

Total Seed Cotton Production

0

100,000

200,000

300,000

400,000

500,000

600,000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Total Area (ha)Total production (MT)

Figure 2.1 – Area and production data

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The most noticeable trend is that the increase in total seed cotton production has outpaced the increase in the planted area of cotton. This is a clear indication that, whilst yields are still comparatively low, cotton yields are improving across the sector (despite a marked drop in 2005). In 2006 the average yield was 1.7 MT/ha of seed cotton, compared with a period low of 1.3 MT/ha in 1999. Given that these are average production figures, it is obvious that some farms are therefore outperforming these averages. It should further be noted that the low yielding years of the mid to late ‘90’s also coincide with the years of domestic unrest and conflict in the country, which made farming operations very difficult. It should also be noted that, whilst total planted area of cotton decreased by 9%, the total amount of cotton only decreased by 2%, clearly indicating a growth in yields. Tajikistan’s cotton crop is split between two major types of cotton – medium staple (MS) and extra long staple (ELS). In figure 2.2 are presented the area and production statistics for MS seed cotton production.

MS Seed Cotton Production

0

100,000

200,000

300,000

400,000

500,000

600,000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Total area (ha)

Total production (MT)

Figure 2.2 – MS production data

Figure 2.3 shows the trends in ELS seed cotton production and planted hectarage.

ELS Seed Cotton Production

0

20,000

40,000

60,000

80,000

100,000

120,000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Total area (ha)

Total production (MT)

Figure 2.3 – ELS production data

2.3 Seedcotton quality Post Independence, when Tajik cotton began to be widely traded on the international markets, it quickly came to be considered as the premium growth in the CARs. Appendix 2.2 and figure 2.4 present the statistical information on the split of qualities of seed cotton deliveries in the Republic.

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MS Seed Cotton Quality Split

0%10%20%30%40%50%60%70%80%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Piervy

Vtoroy

Triety

Chitvorty

Pyati

Figure 2.4 – MS seed cotton quality

The first thing to note is that the majority of cotton (around 70%) produced in the Republic is considered to be of first quality – piervy. It should also be noted that the results of quality testing for seed cotton are based on data provided by the buyers of the seed cotton. It is considered that the actual quality splits are actually better, with piervy being a higher overall percentage. It should be noted that even these statistics showed that in 2005 and 2006, 73% of medium staple seed cotton was graded as piervy. Figure 2.5 presents the seed cotton quality data for ELS.

ELS Seed Cotton Quality Split

0%10%20%30%40%50%60%70%80%90%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Piervy

Vtoroy

Triety

Chitvorty

Pyati

Figure 2.5 - ELS seed cotton quality

Although the quality splits for ELS appear to indicate that the average split for first grade is only in the region of 63% throughout the whole period, there is a large amount of evidence from actual farm operations that the actual percentage of first grade is in the region of 72-75%. It should be noted that statistics showed that the percentage of seed cotton collected in 2006 as piervy was actually 71% of the total production for that year. 2.4 Baled Cotton Quality classification Tajikistan currently operates the previous Soviet grading system (as do Kazakhstan and Kyrgyzstan), as amended by the inter-governmental standards agreement - GOST. Unfortunately, there are several drawbacks to this system in relation to price and the difficulties caused with international sale of cotton in accordance with certificates issued against this standard. Equally, up until recently, only TajikStandart has been the issuing agency for quality certificates (with licensing of individual classers working in the ginning plants).

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In conjunction with a project developed by the Government and the Asian Development Bank, the system of cotton grading in Tajikistan is now undergoing fundamental reform. A joint venture (JV) has been formed between the Government and Wakefield Inspection Services. This JV will now be accredited by TajikStandart so that they are able to classify Tajik cotton and issue quality certificates, acceptable to all the relevant internal agencies of the Government. In addition to the above, Tajikistan will adopt the Universal Cotton Grade Standards (UCGS) as maintained by the United States Department for Agriculture (USDA). Certification and accreditation will therefore be available for the JV and others to class in accordance with UCGS. Moreover, with the further help of the ADB project, TajikStandart, in its role as reference authority for standards, will be equipped with HVI machinery. This, in turn, will be supported by the construction of a number of HVI labs, which will be operated by the JV. Therefore, not only will certificates be available for manual classing in accordance with UCGS, but also for testing using HVI machinery and technology. The above reforms and amendments to the standards regime in Tajikistan are already under way and should be available for at least the 2008 crop onwards. 2.5 Cotton farmers, Processing, Market Infrastructure and Exports Due to the delays to reform caused by the initial instability, the reform of agricultural at the farmer level is not as developed as had been hoped for by both Government and Donors. However, there has been marked progress in this regard in the past 3 years, with nearly all of the previous state and collective farms having been dissolved and ownership passing to the members of the previous farms (for detailed land holding statistics see annex 2.3). There have been 2 other impediments to the division of land to the individual farmer and extended family farm level. Firstly, there have been inconsistencies in the land legislation that have led to a perception of lack of surety for farmers of tenure. Secondly, the debt situation that has developed in the sector led to a perception that debts would be directly attached to land parcels and that, therefore, farmers in accepting land parcels would therefore also be accepting personal responsibility for previous debts. As can be seen from the attached Road Map, farmers’ rights to secure land tenure are being increased, a registry will be set up to register these rights and land legislation will be amended to further ensure tenure. Equally, the process of debt resolution will be undertaken through a process whereby farmers will be “de-linked” from previous creditors and will be free to contract with whichever party they wish to. Originally there were around 20 gins in the Republic in the period immediately post Independence. There are now over 40 gins operating in the sector. The basis for competition, however, was hampered by the requirement to control the movement of seed cotton between administrative districts due to various internal taxation and VAT based issues. However, as can be seen from the Road Map, this practice of the control of movement of seed cotton will now be removed by reform of these internal regulations. The Government appreciates that these are stifling competition and therefore improvement of the performance of the sector. Obviously, for attraction of foreign investment, investors must be enabled to operate without unnecessary administrative controls and allowed to compete based on their own commercial terms. Under a new project (in cooperation between the Government and the Asian Development Bank) a number of independent warehouse complexes will be constructed and operated by the private sector. The Government appreciates that the ability of exporters to collateralise their stocks at origin enhances their ability to finance exports from the Republic and that this will lead to greater competition in the sector, with resulting higher prices for farmers. In order to ensure that this strategic and important investment is fruitful, the Government will also pass required legislation to enable full collateralisation of stocks at origin and their pledge to financial institutions.

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The current system of control of exports through licensing by crediting banks, the Central Bank and the Commodities Exchange developed to ensure that such issues as capital flight, tax avoidance and failure to pay for exported cotton were minimised. As with other issues in the sector, these were necessary measures in the immediate post-conflict situation. However, whilst these measures served a clear purpose at the time, it is clear to Government that their usefulness in the modern setting is lessened and that they now constitute barriers to the transparent and competitive development of the sector. Therefore, as per the Road Map, the practice of export passports being required from the Central Bank and others financing the sector will be removed. Equally importantly, the roles and functions of the Commodities Exchange are currently under review and will be amended so that the Exchange can perform a function more suitable to those of an actual trading platform, as opposed to a licensing authority. It should also be noted that a number of important amendments have been made to the minimum export pricing formula operating in Tajikistan – the “methodica”. Previously, the export pricing formula was very restrictive in the terms of sale available to exporters (basically FOB only). The new methodica enables exporters to contract on any terms covered by Incoterms 2000. This allows much greater flexibility and access to many more markets. In addition, whilst the previous versions of methodica were largely in the form of unofficial directions to the Commodity Exchange, the new methodica benefits from far greater transparency, the method of calculation available to all interested parties and exists as an official inter-ministerial directive, having the weight of law behind it. In order to enable farmers, processors and exporters to manage their price risk and therefore maximise their revenues, the new methodica also allows for forward contracting of bale cotton at fixed prices. The new Methodica is presented in appendix 1.1 to this document and we would very much encourage you to acquaint yourselves with it. 2.6 Seed sector Whilst Tajikistan was a leader during the Soviet period of cotton seed breeding (especially extra long staple varieties), budgetary constraints since Independence have meant that Government has not been able to maintain investment in this important sector. It is widely held that some of the falls in yields at the farm level are directly connected with the reduction in seed vigour and lack of introduction and development of new varieties. In order to encourage domestic development of the seed industry and enable the short term introduction of foreign varieties, a number of legislative steps need to be taken and these are also referred to in the attached Road Map.

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3.0 Tajikistan - The Investment and Operating Environment 3.1 Financial sector The financial sector in Tajikistan is based on a 2 tier system, with a total of 12 banks, 6 credit societies and 7 Non-Bank Financial Institutions (NBFIs) as of October 2006. The central bank of Tajikistan is known as the National Bank of Tajikistan (NBT). It has the main responsibilities of monetary oversight, as well as the supervision and regulation of the banking system (which includes commercial banks, NBFIs and Microfinance Organisations {MFOs}). The supervision of the banking sector has been substantially improved in recent years and the minimum capital requirement for commercial banks was increased to USD 5 million in January 2005. Various other reforms have reduced restrictions on banks’ operating parameters, leading to higher lending and increased liquidity, but within prudential requirements. The overall effect of the reforms has led to the emergence of a smaller, but more viable banking sector. Of the 12 banks in the country, 10 of them are commercial banks, one is a Microfinance Bank and the other one is a branch of a foreign bank. As of the end of 2004 AgroinvestBank (AIB), OrionBank, TodjiksodirotBank (TSOB) and Amonatbank held about 85% of total deposits and about 75% of outstanding loans in the banking system. It should be further noted that 6 of the banks have foreign shareholders. The 2 main banks with rural branch networks are AgroInvestBank (61 branches) and Orion Bank (30 branches). The microfinance sector in the country, although still in its infancy, is developing. It consists of micro-credit NGOs which evolved as part of various programmes developed by donors. Many development programmes and NGOs have started with in-kind lending, e.g. through the provision of agricultural inputs such as improved seeds. Credit was complemented by non-financial services such as extension and Business Development Services. A new Microfinance Law, passed in April 2004, clarified previous legal ambiguities under which MFOs were operating before. Just as with the microfinance sector, the leasing industry is also in its initial stages of development. A leasing law was passed in April 2003 with the help of the IFC under the first phase of its Central Asia Leasing Facility Project. The law sets out a framework for financial leasing and related accounting, in accordance with international standards. There is expected to be a follow-on second phase to this project which will assist banks and institutions active in this sector to develop and improve their leasing operations. For further information on the structure of the financing sector and macro economic information, please refer to the website of the National Bank of Tajikistan – www.nbt.tj/en 3.2 Reform of Business Licensing and Inspections Enormous progress has been achieved in the past 2 years in the fields of business licensing. In 2005 the Government adopted a new licensing law that reduced the number of activities subject to licensing from around 1,500 to 113. Another important facet if this law was that it also adopted a regulatory framework to implement and administer the law. Further to this, amendments were passed to the 2005 law that reduced the number of activities down to 65. Work is continuing, with the help of a number of donors, to further reduce this number and to continue to clarify implementation practices to continue enhancement of the improved business climate. According to a recent report of the World Bank (Doing Business 2007), the burden imposed by Tajikistan’s licensing regime is now less than that of 28 comparator countries in Eastern Europe and Central Asia and now much more resembles the situation prevalent in OECD countries.

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In addition to the above, work is ongoing with the help of donors such as the IFC with regards to the minimisation of the requirement to obtain permits for business purposes. A study was recently completed (January 2007) and further work and reforms will be undertaken in light of this. It should also be noted that a law on inspections and amendments to the tax code have recently been adopted and it is foreseen that, by the end of 2007 a number of further Decrees and amendments to various laws will be introduced and passed by Parliament to strengthen the work done to date and reduce the burden on business of inspections by government agencies and ministries. 3.3 Legal Environment 3.3.1 Company structures available in Tajikistan The current Civil Code (CC) of the Republic (RT) allows for the formation of legal entities as commercial and non-commercial organizations. According to article 50 of CC RT, commercial organizations are defined as legal entities which pursue profit as the basic purpose of their activity. The current law provides for the following types of commercial organizations: a) Partnerships b) Companies (Limited Liability Company {LLC}; Additional liability company {ALC}; Joint- stock companies {close and open types}) c) Other commercial organizations (Producers’ cooperative; Unitary enterprise {state}) Given the nature of the planned investments under this proposal, it is likely that the “company” structure will be of most interest to investors. 3.3.2 Company structure overview The legal status of an LLC and an ALC is overall provided by CC RT. LLCs are also covered by the Law “On limited liability companies” № 53 dated May 10, 2002. Article 5 of the Law “On LLC” defines that a company is a commercial organization whose authorized capital is divided into shareholdings, the size of which is defined by the constituent documents of the company and that shareholders only carry liabilities in accordance with the value of their contribution. Article 105 of CC RT defines an ALC the same as an LLC, except that shareholders liabilities can be more than their contribution. Shareholders in LLCs and ALCs can be both physical persons and legal entities. The number of shareholders of an LLC or ALC cannot exceed 30. According to article 17 of the present Law “On foreign investments”, the minimum size of the contribution of a foreign shareholder in the authorized capital of a company should be not less than ten thousands minimum wages (currently 200 000 Somoni, or approximately USD 58,000). At the moment of registration of a company at least 50 % of the authorized capital should be fully paid up. The balance should be paid within a year of registration of the company. Joint stock companies (JSCs) can either be of a closed or open format. For the former type, the number of shareholders cannot exceed 50 and are available only to the founders or initially defined group. The latter type can be made up of any number of shareholders and each shareholder has the right to dispose of or sell their shares without the express consent of the other shareholders. The operations and rules pertaining to JSCs are contained in the Law “On Joint Stock Companies”. The size of charter capital and pay up requirements for a JSC with foreign investment is the same as for LLCs and ALCs.

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3.3.3 Company Registration Procedures The state registration of a JSC or LLC/ALC is carried out in accordance with the Law «On state registration of the legal entity» №5, dated April 22, 2003. According to this Law the body registering all legal persons within the Republic is the Ministry of Justice. Documents required for registration should be presented to the Ministry within one month after the formal decision to create the company. The state registration should be completed within 10 working days from the moment of presentation of the documents, at which time it should receive the certificate of registration. Within 10 days after registration, the company should apply and receive statistic codes from the State Committee of Statistics (subject to presentation of required documentation). The company should receive the codes within 3 days of its application. Finally the company should register with the tax authorities of the Republic and this should be done within 30 calendar days of the company’s registration with the Ministry of Justice. 3.3.4 Import duties for equipment Import of goods to the Republic are subject to Customs duties. At the moment, Customs duties vary from 5 to 15% of the value of the goods, depending on their nature and origin. However, article 345 of the Customs Code does provide for certain privileges with regards to the standard duties. For example, there is an exemption from duties if the imports are of industrial or technical equipment (and their components) if the imports are for the formation of or addition to the authorised capital of the company or modernisation of the means of production. 3.3.5 General taxation Taxes are levied on companies at the national and local governmental levels. National level taxes include:

a) the income tax from physical persons b) profit tax from legal entities c) value-added tax (VAT) d) excises e) social tax f) land-tax g) tax from users of highways h) the customs duties and other customs payments i) State Duty j) sales tax (of cotton-fibre – 10% of FOB value) k) minimal tax on incomes of the enterprises

Local taxes include:

a) tax on real estate b) tax from owners of vehicles

A detailed list of taxes, their current levels and exemptions are contained in appendix 3.1. 3.3.6 Cotton exportation In order to export cotton from the Republic, registration of the contract and permission from TUGE is required. In order to obtain such permission, the following documents need to be presented to the TUGE:

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(i) Covering letter from the Seller in stating efficiency and expediency of the contract.

(ii) The certificates of verification made and signed by the parties to the contract on financing of cotton production (the farmer and the Investor).

(iii) The warehouse information which should include data concerning the location of the goods and a year of a crop.

(iv) Quality certificate (v) Phyto-sanitory certificate (vi) Certificate of origin (vii) Acknowledgement that the producer of the cotton did not have contractual

obligations to other investors for the cotton in question.

In addition to the above documents, in order to execute export, the following documents are required: i) Letter of attorney of owners of production on each sold lot

ii) Bank acknowledgement of payment iii) Acknowledgement of payment of all appropriate taxes (the tax from sales)

3.4 Overview of other agricultural sector projects In order to support the Government’s ongoing work in reforming the agricultural sector, a number of international financial institutions are active in the sector. Following is a list of such projects and short descriptions of them. 3.4.1 World Bank Projects a) Ferghana Valley Water Resources Management Project. The project objectives are (i)

to improve the capacity for increased productivity of irrigated agriculture in the Ferghana Valley by improving land and water management and (ii) to improve safety and regulation of the Kayrakum Dam and Reservoir, thereby contributing to enhanced water management security and efficiency at the basin level.

b) Land Registration & Cadastre System for Sustainable Agriculture Project. To expand

farm privatization through a repeater project to enable more rural people to become independent farmers and take management decisions in response to market forces, by providing them secure land use rights certificates distributed in a transparent and fair manner, and providing essential complementary support services.

c) Community Agriculture & Watershed Management Project. The project objective is

to build the productive assets of rural communities in selected mountain watersheds, in ways that sustainably increase productivity and curtail degradation of fragile lands and ecosystems.

d) Rural Infrastructure Rehabilitation Project. The project’s objective is to increase

water supply and efficiency in the main and secondary irrigation canals supplying the farms being privatized under the Farm Privatization Support Project and adjoining farms.

e) Farm Privatization Support Project. The project objective was to develop procedures

and institutional mechanisms at the state level and selected regions to ensure fair, secure and equitable transfer of land and other farm assets to private individuals or groups and create sustainable private family farming units and provide them with the enabling conditions to operate independently in a market economy.

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3.4.2 Projects of other donors a) Sustainable Cotton Subsector Project (ADB). The project consists of two

components: 1) farm-by-farm analysis and debt resolution, 2) market development project with four sub-components: (i) Tajik standard upgrade, (ii) joint venture on cotton grading, (iii) export facilitation methods including facilitation of bonded warehouse establishment for cotton, and (iv) training and cotton upgrading awareness.

b) Agriculture Rehabilitation Project (ADB) The main thrust of the Project is

rehabilitation of the selected irrigation and drainage facilities, which are in a critical state of disrepair; provision of associated farm production support services; and construction of rural water supply in main cotton production regions of Khatlon and Sughd. In parallel with these, the Project aims to accelerate the ongoing agriculture reform process by building capacity of the public sector agencies as well as farmers’ organizations.

c) Rural Development Project (ADB). The Project (i) address land use security; (ii)

develop policies and strategy for more effective pasture land management and capacity development; (iii) improve the administration and institutional aspects of business development; (iv) address the capacity and technical aspects of degradation of arable, pasture, and forest lands; (v) establish independent agriculture and rural business advisory services; (vi) establish an effective market information system; (vii) provide microcredit; and (viii) improve rural infrastructure in communities and raions.

d) Support to Seed Sector Development in Tajikistan (SIDA). The overall objective of

the project is to create a seed industry in Tajikistan which works according to internationally accepted standards, enabling it to produce high-quality seed of modern varieties for Tajik farmers.

e) Support for Development of Third Party Arbitration Court (DFID). The project is

implemented by the team of consultants who had the necessary experience accumulated under a similar project in Russia. The aim of the farm debt restructuring component is to develop a debt restructuring mechanism that will make it possible to reduce the debt burden on cotton-growing farms, including options available under third party arbitration.

f) Increase Agricultural Sector Productivity (USAID). The objective is to invest in

agricultural development through Agricultural Finance Plus (AgFin+) by working with targeted groups and markets, and assisting them to identify opportunities and overcome constraints in the farm-to-market value chain. USAID also provide assistance to Water User Associations, including replication of efficient irrigation demonstration models; expanding public outreach to farmers, government, and other donors; and implementation of a competitive small grants program.

g) Farm Ownership Model (IFC). The project consisted of establishing SudAgroSerice

(SAS), a company owned by farmer shareholders, which provided financing, technical advice, inputs supply and marketing services to cotton farmers as an alternative to the “futurist” financing model. The company operates in the northern oblast of the country, but has also recently begun assisting IFC with the provision of consulting services to on bank in the southern part of Tajikistan to assist that bank in expanding its cotton lending activities.

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4.0 Government of Tajikistan and World Bank Cotton Sector Recovery Project 4.1 Overview The total value of project is USD 15 million. It addresses a number of issues. Debt resolution will be the initial focus, but the broad emphasis will be on measures to reform policy, increase competition, encourage private sector investment and increase producer incomes. The project therefore provides a means to translate the newly completed agriculture strategy into action, a strategy that identifies land reform and cotton sector recovery as the two pillars of future sector growth. The various activities foreseen under the project will also act as a support to the Government’s recently adopted Road Map for reform of the sector. The project was approved by the Independent Commission on February 20th, 2007 and is expected to be submitted for the World Bank Board's consideration in May 2007. It is currently planned that an international conference about investment opportunities will be held in Dushanbe in September 2007. It is expected that the project will become fully operational and have available funding in the last quarter of 2007. 4.2 Project objective and phases The aim of the project is to support government efforts to rejuvenate the cotton sub-sector and create the conditions for sustainable growth of Tajik cotton production. In addition to resolving the debt crisis, the project will guide and support policy reforms conducive to increased competition and higher producer returns; and demonstrate the capacity of privately owned family farms to drive future cotton production given suitable conditions. These conditions, which represent the vision for future sector development, include: possession of a secure land use certificate specifying individual ownership rights; the right to choose how farm land is used as the basis for profitable and sustainable land use; ready access to essential resources for farming (finance, farm inputs, machinery and water); unrestricted access to a range of input and output market outlets; producer rights to choose who they associate with; and ready access to relevant information on modern farm technology. The project will focus on debt resolution and policy reform during the first two years of operation, accompanied by the establishment of new ginneries in 4 to 5 selected districts in Khatlon, by international cotton companies. These ginneries will service at least 40% of cotton output in a region that is the main cotton producing area of Tajikistan. As these ginneries strengthen and grow during years 2-5 they will demonstrate the benefits of active competition for producers, processors and exporters and provide guidance on how this experience can be extended to other cotton growing areas. The potential beneficiaries would be a rural population of 525,000 people living on 66,000 hectares of irrigated land, and the people providing goods and services to farms in 4 to 5 participating districts. Their incomes are expected to rise as a result of the project through increased yields, lower costs of production and better access to markets. 4.3 Project Components 4.3.1 Debt Resolution A transparent, rule-based mechanism for debt repayment is being prepared jointly with ADB as the basis for debt resolution. This mechanism will ensure that producer payments are commensurate with their ability to repay, and that the viability of the current financial system is preserved. Farmer participation will be subject to possession of a land certificate, and farmers will receive project support to obtain their land titles. Most notably, farmers will be “de-linked” from their creditors and a special Agency and financial vehicle (SPV) will be created to facilitate collections of repayments and transfer of monies owed to creditors. Therefore, farmers will be free to contract with whoever they wish and on the basis of competitive pricing for their outputs. This system will be applied nationally, not only in the selected project districts.

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4.3.2 Support for Policy Analysis and Reform The project’s impact at the national level will depend heavily on the capacity of government to act decisively in the areas of debt resolution, competition, land use and local government activity. To strengthen policy analysis and advice on policy reform in these areas a senior international policy adviser will be appointed to work with designated counterparts in the Independent Commission and the President’s Office. This input has been directly requested by the President. In addition to daily contact with senior government personnel, the international policy adviser will prepare policy briefs on all major issues, conduct national and regional seminars on critical policy issues, manage the input of short-term advisers brought in to strengthen particular areas of analysis, and organize training and study visits. 4.3.3 Cotton Supply Chain Development Cotton production is hampered by serious deficiencies throughout the cotton supply chain. Producers lack the incentives, resources and knowledge to raise production as a result of: inadequate access to inputs, low producer prices, and sub-optimal crop husbandry and farm management. Processing efficiency is low as a result of minimal competition between ginneries and marketing is hampered by inadequate grading and certification procedures and minimal competition between current operators. The project will address deficiencies associated with production, seed, processing and competition. a) Cotton Ginneries This sub-component will promote foreign direct investment in ginneries in selected districts and demonstrate the impact of increased competition on producer incentives. Foreign direct investment will be conditional on local government agreement to allow producers to use their land as they choose and to choose the enterprises with whom they contract for ginning and input supply. Farmers will benefit from more transparent business and contractual relationships, more efficient processing and fairer prices for inputs and output. Foreign partners will be required to bring not only capital, but also operational experience, access to premium sales markets, working capital and technical expertise as the basis for maximizing processing efficiency. To this end, the project will seek partnerships with strategic investors who have experience in cotton processing and international trading. These investors will be encouraged to finance cotton gins in 4 to 5 project districts, potentially together with IFC who will, subject to review of the business proposal and potential partner, take a minority shareholding and/or provide debt finance. It is envisaged, therefore, that the foreign investor will retain a majority (85– 90%) shareholding of the enterprise. Incentives to invest will also be enhanced by the availability of a MIGA guarantee against losses incurred as a result of political instability (see section 6 below). To supplement FDI and IFC equity/debt investments, the project will provide a revolving credit line to be used for working capital. Each ginning enterprise will sign a sub-credit agreement with the Ministry of Finance, acting for and on behalf of the Government of the Republic of Tajikistan, with a designated commercial bank as the channel for disbursement and collector for repayment. Prior to signing the sub-credit agreement, each application will have to be reviewed and approved by a loans committee and IDA. The maximum loan allowed under the credit line will be 50% of the total seasonal finance extended by the ginning venture to its contracted farmers in any one season. The marketing arrangements between farmers and the gin venture will be based on commercial negotiation, subject to the following provision: all marketing arrangements must be based on a clear price formula which relates seed cotton deliveries to the international price for baled cotton, as provided for in the Minimum Price Methodica maintained by the Commodities Exchange in Dushanbe. This formula, which denotes the minimum prices to be paid for seed cotton, will allow transparent management of the credit line and also improve the transparency of transactions between farmers and the ginning ventures.

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b) Cotton Seed Supply There is an urgent need to increase the supply of improved cotton seed. To stimulate this supply, the project will offer loans to finance the import of modern seed processing equipment, up to US$250-300,000 per investment. Preference will be given to enterprises with ready access to raw seed (a current ginnery for example). Both Tajik and foreign enterprises will be eligible for funding, including the foreign investors in the above sub-component, subject to conventional lending criteria and an acceptable business plan. This sub-component will be linked to the SIDA Seed Industry Development Project, which is supporting the development of a modern seed industry in Tajikistan through institutional strengthening of seed production, quality control and certification. c) Producer Support Firstly, there will be a Regional Public Awareness Program. Current awareness and knowledge of legal rights in general and land rights in particular, is very low among rural people – especially among rural women. A Khatlon wide program will be implemented to raise public awareness of: the legal rights of rural people to obtain their own land, to use this land as they choose, to engage in marketing and loan contracts, and to choose with whom they transact for marketing and processing. Secondly, a series of Community Outreach Programs will be mounted in the seven project districts to ensure that these messages are translated into action. These will include support to restructure farms and obtain land certificates, to negotiate contracts, to implement debt resolution and a monitoring and complaints facility to allow on-going assessment of progress and local government compliance with policy reform. Thirdly, a package of Farmer Extension Programs will be undertaken. The focus of these programs will be on improving the management of cotton and related crops, farm budgeting and bookkeeping. This will be implemented in the 4 to 5 project districts where new gins will be operating. 4.4 Project Districts Regional project activities (the cotton supply chain development component) will be located in Khatlon, which accounts for 60% of national cotton production and 74% of indebted cotton farms. Within Khatlon seven districts were chosen initially as the focus of community outreach and public awareness programs. Four or five districts will then be chosen from these seven, for additional foreign investment and farmer extension programs. 4.4.1 Criteria for district selection The following criteria were used to select the seven project districts: a) An irrigated area greater than 15,000 hectares and a high agro-climatic potential,

as demonstrated by historical yields; b) More than 50% of irrigated, arable land farmed by individuals or family groups; c) No major problems with irrigation or drainage; d) Cotton production is the major agricultural activity;

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Figure 4.1 – Irrigated land Khatlon (by district)

Figure 4.2 – Yield of seed cotton per hectare Khatlon (by district)

Figure 4.3 – Total seed cotton production Khatlon (by district)

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Figure 4.4 – Percentage arable land under private use Khatlon (by district)

Figure 4.5 – Percentage land sown to cotton Khalton (by district)

e) Selected project districts represent both Kurgan-Tyube and Kulyab zones; f) An average cotton debt greater than $500/ha;

Figure 4.6 – Average debt per hectare Khalton as of 01/01/2005 (by district)

g) A high incidence of rural poverty (over 50%); h) At least four investors are operating in the selected districts, without preferential support from local authorities; i) Proximity of other World Bank agricultural projects to enhance project activity.

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4.4.2 Preliminary selected districts Based on the above criteria Bokhtar, Kumsangir, Farkhor, Kabadian, Vaksh, Vosse and Shaartuz were chosen as the seven districts for project activity. Foreign investment and farmer extension programs will be implemented in four to five of these districts. Government approved this selection during the meeting of the Independent Commission on June 26, 2006 (minutes #7). Agriculture is the main economic activity in all project districts. Cotton is the most important crop, with 62%-74% of total agricultural production. Agro-climatic conditions are well suited to cotton production and are typical of the Khatlon region. Current yields are low but national experts estimate that they could be increased to 3.0 to 3.5 t/ha with higher input use. The major cotton investors in the project districts are: Ismoili Somoni Century ХХI, Tamer, Olimi Karimzod, Rakhsh, Pakhtai Khatlon, Zamin-textil, Somoni, Faizi Vakhsh. Generally, a single investor operates in each district currently. All districts are served by at least one ginnery and although there is ample ginning capacity, outturn rates are low (range from 28%-33%) and competition basically non-existent. Statistical data on the 7 districts can be found in appendices 4.1 to 4.7. Further information on the districts will be made available to potential investors, meeting with the initial investor criteria and how demonstrate concrete interest in the project.

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5.0 IFC 5.1 About IFC The International Finance Corporation is the private sector arm of the World Bank Group. IFC’S mission is to help reduce poverty and improve people’s lives by promoting sustainable private sector investment in developing countries. IFC invests primarily in enterprises majority-owned by the private sector, in addition to providing technical assistance and advisory services. 5.2 IFC’s added value to potential investors Although IFC lends on market terms, it does not compete with, but complements, private capital. IFC is a long-term partner for good and bad times. IFC invests in projects that meet its investment criteria, but that cannot get financing or technical expertise elsewhere on reasonable terms. IFC has extensive knowledge of how to do business in developing countries and excellent relationships with developing country governments. As an independent international organization, IFC can help companies and sponsors negotiate with host governments. By working with IFC, companies draw on the expertise and reputation of a partner recognized for its strong social and environmental safeguards. Companies worldwide are recognizing that long-term profitability is best enhanced when investments are made in a sustainable way. 5.3 IFC’s Products and Services 5.3.1 Equity and Quasi-Equity IFC risks its own capital by buying shares in project companies, other project entities, financial institutions, and portfolio or private equity funds. IFC can generally subscribe to between 5 and 20 percent of a company’s equity. IFC will not normally hold more than a 35 percent stake or be the largest stakeholder in a project. With quasi-equity instruments, IFC invest through products that have both debt and equity characteristics. 5.3.2 Loans and Intermediary Services IFC finance projects and companies through A-loans, which are for IFC’s own account. IFC cannot accept government guarantees as security for its loans. The maturities of A-loans generally range between seven and 12 years at origination, but some loans have been extended to as long as 20 years. IFC’s loans are provided in major currencies and in an increasing number of emerging market currencies. IFC also make loans to intermediary banks, leasing companies, and other financial institutions through credit lines that result in further on-lending. These credit lines are often targeted to smaller businesses. 5.3.3 Syndicated Loans Syndicated loans, or B-loans, play a critical role in IFC’s efforts to mobilize private sector financing in developing countries, thereby broadening their development impact. Through this mechanism, financial institutions share fully in the commercial credit risk of projects, while IFC remains the lender of record. Participants in IFC’s loans benefit from their status as a multilateral development institution, including their de facto preferred access to foreign exchange. 5.3.4 Structured Finance IFC also offers structured finance solutions to clients, enabling them to raise a significantly larger amount of capital than that represented by IFC’s own exposure. Through partial credit guarantees of debt instruments, IFC use their triple-A rating to help clients diversify their funding sources, extend maturities and obtain financing in their currency of choice. IFC also helps clients structure securitizations and risk-sharing facilities, transactions that allow a client to sell off part of the risk associated with a pool of assets.

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5.3.5 Risk Management IFC’s risk management products provide clients with access to long-term derivatives markets. Currency hedging instruments allow clients to hedge foreign exchange exposures typically related to foreign currency borrowings. 5.3.6 Technical Assistance and Advisory Services Technical assistance complements IFC’s investment activities by offering advisory and training services to private companies in developing countries. IFC deliver many of these services through donor-supported technical assistance facilities that focus on either a region or a strategic aspect of development 5.4 Eligibility of the project To be eligible for IFC funding, a project:

- Must be located in a developing country that is a member of IFC - Must be in the private sector, with the exception of sub-national entities in

which IFC invests without a government guarantee - Must be technically sound - Must have good prospects of being profitable - Must benefit the local economy - Must be environmentally and socially sound, satisfying IFC environmental

and social standards as well as those of the host country 5.5 How can an investor apply for financing? A company or entrepreneur, foreign or domestic, seeking to establish a new venture or expand an existing enterprise can approach IFC directly by submitting an Investment Proposal. After this initial contact and a preliminary review, IFC may proceed by requesting a detailed feasibility study or business plan to determine whether or not to appraise the project. IFC can never be the sole source of financing; it typically provides up to 25 percent of the project costs for its own account and usually makes a minimum commitment of $1 million. The proposal can be submitted to an IFC industry sector department or to the IFC field office in Tajikistan; 91-10 Shevchenko Street Dushanbe, 734025 Tajikistan, Fax: (992-372) 51-00-42. 5.6 Where can an investor go for more information on IFC? IFC’s Web site is www.ifc.org . The Corporate Relations Unit (202-473-3800) directs callers to the right source for more specific information. The Webmaster (Webmaster@ifc.org) answers e-mail requests. Information on “Sustainable Investor”, IFC’s free, online newsletter on private sector development trends and issues, may be accessed from IFC’s Web site, www.ifc.org.

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6.0 Multilateral Investment Guarantee Agency (MIGA) 6.1 What is MIGA? MIGA is a member of the World Bank Group and its mission is to promote foreign direct investment into developing countries. The Agency actively cooperates with public and private political risk insurers through coinsurance and reinsurance arrangements for joint coverage of eligible investment projects. 6.2 What is the relevance of MIGA for potential investors under the proposed project? MIGA has developed a guarantee program called the Small Investment Program (SIP) that is specifically designed for Small and Medium Investors (SMIs) investing in Small and Medium Enterprises (SMEs). MIGA helps the SME sector in emerging economies in two ways: (1) by providing political risk insurance (guarantees) to foreign investors who wish to invest in SMEs, and (2) by providing political risk insurance to financial institutions that will then lend to SMEs through affiliates. 6.3 What investments would be eligible? MIGA insures new investments destined for any developing country (such as Tajikistan) as well as investments directed at the expansion or restructuring of existing projects. The types of investments than can be covered include:

- equity - shareholder loans - shareholder loan guarantees (provided loan maturity minimum of 3 years) - commercial bank loans (subject to conditions) - other types of investments (subject to review and acceptance by MIGA)

6.4 What is an SME as covered by SIP? Investments in the non-financial sector (for example cotton or seed processing) are eligible for coverage if they are related to the establishment of an SME or to an existing SME in a developing member country such as Tajikistan. The SME must fulfil two out of three of the following criteria:

- No more than 300 employees - Total assets should not be more than USD 15 million - Total annual sales should not be more than USD 15 million

6.5 Who is an eligible investor as defined by SIP? Eligible investors include:

- Nationals of MIGA member countries - Corporations if they are either incorporated and have a principal place of

business in a member country, or if they are majority owned by nationals of member countries.

There are no restrictions under the SIP with regard to the size of the investor. However, the program is specifically designed to assist SMIs with their foreign direct investment activities. The application fee is therefore waived for SMIs. In order to qualify as an SMI, the company must have:

- No more than 375 employees - Have no more than USD 50 million in assets OR - Have no more than USD 100 million in annual sales

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6.6 What is offered under a SIP guarantee? SIP guarantees have a term of up to 10 years (3 years minimum) with the possibility of an extension of up to another 5 years (at MIGA’s discretion). The maximum value of the guarantee is USD 5 million. There is no minimum amount of guarantee. The SIP covers up to 90% of the investment for equity and up to 95% for debt. While the total size of the investment may be larger than USD 5 million, the investment must be for an SME in the host country (i.e. Tajikistan). The SIP contract guarantee includes coverage for 3 types of risk:

- Currency Inconvertibility and Transfer Restriction - Expropriation - War and Civil Disturbance

6.6.1 Risk definitions

- Currency Inconvertibility and Transfer Restriction Protects against losses arising from an investor’s inability to convert local currency (capital, interest, principal, profits, royalties and other remittances) into foreign exchange for transfer outside of the host country. It also insures against excessive delays in acquiring foreign exchange due to host government action or failure to act.

- Expropriation Protects against losses arising from host government actions that may reduce or eliminate ownership of, control over, or rights to the insured investment. Coverage is also available for “creeping expropriation” – a series of acts that, over time, have an expropriatory effect. The terms of level of insurance cover for each of these types of risk are available upon request from MIGA.

- War and Civil Disturbance Protects against loss from, damage to, or the destruction or disappearance of tangible assets caused by politically motivated acts of war or civil disturbance in the host country. Such acts include revolution, insurrection, coups d’etat, sabotage and terrorism.

6.7 How to apply? The investor will need to complete a definitive application and submit it to MIGA. The application form can be completed on-line, however a signed copy should be submitted to MIGA by fax or mail. The application asks for the amount and type of investment, the development and environment impacts of the project and its financial and economic viability. The approval process should take no longer than 4 weeks to complete if all the information requested in the definitive application is filled completely and MIGA is supplied with all relevant project documentation. While the registration of the application is in effect, the implementation of the investment may commence. However, until MIGA’s analysis and due diligence is complete, the agency will not be able to commit to providing the requested guarantees. For further information or questions regarding SIP or the application process please refer to: Web site : www.miga.orgEmail : migasip@worldbank.orgTelephone : + 1 202 458 4798 Fax : + 1 202 522 2630

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7.0 Way forward As you can see from the foregoing, we are seeking to attract new investors to our cotton sector. As you will appreciate, given the favourable conditions that will be available to investors and the need to develop our cotton sector in accordance with best international practice, we are seeking investors with strong financial backgrounds, clear experience of ginning cotton, established reputations in the trading of cotton and who can demonstrate clear intention of making solid investment in our country. Given the foregoing, we would like to make it clear that we are interested in attracting not only companies who possess these qualities individually, but also commercial consortia made up of companies who collectively possess the attributes that we require. The initial criteria for companies or consortia that would be acceptable for inclusion within the IDA project are set out in appendix 7.0 In order to proceed with the attraction of suitable investors and creation of these new ginning companies, we are hereby calling for expressions of interest from companies or consortia who are interested in this unique opportunity and feel that they meet the criteria set out in the appendix. Such expressions of interest should be sent directly to the below addresses preferably before the 30th of July 2007. Interested parties meeting the investor criteria will then be contacted and invited to submit detailed investment proposals and to begin discussions with IDA and the IFC. At this time, investors will be required to provide any required documentation in connection with the criteria. Interested parties will then be invited to Tajikistan to visit potential project sites, to hold discussion with relevant government and private sector participants and to finalise negotiations. We very much look forward to co-operating with you in the near future. Should you have any questions with regard to the contents of this document or interests outside of those we have highlighted in the foregoing, then we would obviously be very willing to discuss these with you.

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APPENDICES

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Appendix 1.0 – Government of Tajikistan Cotton Sector Road Map

DECREE OF THE GOVERNMENT OF THE REPUBLIC OF TAJIKISTAN

05 March, 2007 No 111 Dushanbe

On Approval of Plan of Measures for Cotton Farm Debt Resolution in the Republic of Tajikistan for 2007-2009

In order to improve competitiveness and profitability in cotton sector and cotton farm debt resolution, the Government of Tajikistan decrees: 1. Approve (as attached) Plan of Measures for Cotton Farm Debt Resolution in the Republic

of Tajikistan for 2007-2009. 2. Heads of ministries and agencies, state organizations, local state executive bodies to ensure

implementation of measures proposed in the Plan in timely manner and to submit to the Government of Tajikistan quarterly information on undertaken steps for implementation of measures.

3. The State Committee on Investment and State Property Management of Tajikistan and the

National Bank of Tajikistan to take actions to attract funds from donors for implementation the present Decree.

Emomali Rahmonov Chairman of the Government of Tajikistan

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Annex

To the Resolution No. _______ of the Government of Tajikistan

dated ____ March, 2007 THE PLAN OF ACTION

FOR COTTON FARM DEBT RESOLUTION IN THE REPUBLIC OF TAJIKISTAN FOR 2007-2009

Action Ways to implement

Time of completion Responsible entities

1. Terminate government interference in the operation of farms that involves cotton planning, production, processing, and marketing of cotton and cotton products.

Disseminate information among general public through extensive clarification in mass media on: 1. the farmer's right to use their land and sell their produce as they choose; 2. the termination of a practice exercised by central and local executive authorities such as: (a) setting cotton production targets and exercising daily control and reporting on cotton production and harvesting; (b) requirement to use irrigated tillage for cotton production; (c) controlling producers' choice of cotton processing site and cotton marketing, including the movement of seed cotton within a district [rayon] and between districts.

Continuously Government of the Republic of Tajikistan, local executive authorities.

2. Identify [the size of] cotton farms debt. To provide the Independent Commission (IC) with data on cotton farms debt as of January 1, 2007, by years.

April 2007 The National Bank of Tajikistan (upon agreement)

3. Improve legal and regulatory framework to ensure that land use rights are protected.

Introduce changes into laws and regulations in part that concerns: recognizing land as immovable asset; limiting the powers of local executive authorities in land use matters; ensuring compensation to the land user at market value when land is repossessed for state and public purposes; collateral and withdrawal of land use right; defining the legal status of dekhqan farms, etc. Improve the procedures of issuing land use certificates. Create legal and regulatory framework for an integrated system of registering rights for land as immovable asset.

First 6 months of 2007 Second half of 2008

Agency for Land Management, Land-Surveying and Cartography under the Government of Tajikistan, the Ministry of Finance of the Republic of Tajikistan, the Ministry of Justice of the Republic of Tajikistan, the State Committee on Investment and State Property Management of the Republic of Tajikistan Agency for Land Management, Land-Surveying and Cartography under the Government of Tajikistan, the Ministry of Justice of the Republic of Tajikistan

4. Cotton pricing reforms Review the mechanisms of determining transport and distribution costs for cotton in order to eliminate the discrepancy between domestic and export prices when marketing cotton. Improve the mechanism for estimating transport and distribution costs when marketing cotton, taking into account the introduction of Universal cotton classification [grading] standards.

March 2007 July 2007

The Ministry of Economic Development and Trade, the Ministry of Agriculture and Environmental Protection of the Republic of Tajikistan Ministry of Agriculture and Environmental Protection of the Republic of Tajikistan

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Action Ways to implement

Time of completion Responsible entities

5. The development and implementation of cotton debt resolution mechanism

Disseminate the results of analyzing the debt of pilot farms; Develop the procedures to resolve farm debt; Implement the procedures to resolve farm debt everywhere

March 2007 April 2007 Starting from the 2nd half of 2007

Debt Resolution and Sustainable Development of Cotton Sector Project Management Centre (PMC) Debt Resolution and Sustainable Development of Cotton Sector PMC Ministry of Agriculture and Environmental Protection of the Republic of Tajikistan, local executive authorities, the NBT (upon agreement)

6. Settlement of disputes among entities involved in cotton production and marketing process

Improve legal and regulatory framework on the courts of arbitration 2nd half of 2007 Working Group approved by the Order of the President of the Republic of Tajikistan as of 12.01.06 № 2027

7. Inform the public about actions being taken to resolve cotton farms debt

Perform activities to inform the public, using mass media, public debates, briefings, etc.

2007-2009

Ministry of Agriculture and Environmental Protection of the Republic of Tajikistan Debt Resolution and Sustainable Development of Cotton Sector PMC Television and Radio Committee under the Government of Tajikistan

8. Improve efficiency and competitiveness of cotton gins.

Analyze the efficiency of using state holding in cotton gins and take appropriate decisions based on the results of the analysis. Establish requirements for transparency in pricing, weighing, paying for cotton and producing output/by-products for the services provided by gins.

2nd half of 2007 2nd half of 2007

State Committee on Investment and State Property Management of the Republic of Tajikistan, The Ministry of Economic Development and Trade of the Republic of Tajikistan The Ministry of Energy and Industry of the Republic of Tajikistan

9. Simplify cotton export procedures To abolish the existing procedure of executing passports for cotton export transaction by serving banks. Take actions to reform the operations of the Universal Commodity Exchange (UCE) of the Republic of Tajikistan, including the removal of its function to issue a conclusion for selling cotton, and create the real exchange with marketing and brokerage functions, holding auctions for trade in cotton.

4th Q 2007 (taking debt resolution into account) 1st Q 2008

NBT (upon agreement) The Ministry of Economic Development and Trade of the Republic of Tajikistan

10. Improve cotton sector taxation.

Introduce changes into tax code in order to: - provide equitable system of tax collection for all dekhqan farms; - exclude the possibility for local executive authorities to control cotton movement and processing through taxation and other matters related to production and processing of agricultural produce.

4th Q 2007 The Ministry of Finance of the Republic of Tajikistan, the Ministry of Economic Development and Trade, Tax committee under the Government of Tajikistan

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Action Ways to implement

Time of completion Responsible entities

11. Introduce a universal cotton grading standard.

Create legal and regulatory framework for the application of the universal cotton grading standard (UCGS) and implement appropriate structural and institutional reforms for the Agency of Atandardization, Metrology, Certification and Trade Inspection under the Government of Tajikistan.

3rd Q 2007 Agency of Atandardization, Metrology, Certification and Trade Inspection under the Government of Tajikistan; the Ministry of Agriculture and Environmental Protection of the Republic of Tajikistan; Debt Resolution and Sustainable Development of Cotton Sector PMC

12. Improve access to new financial resources. Strengthen banking supervision over the operations of commercial banks and non-banking financial institutions. Improve legal and regulatory framework for establishing commodity warehouses and performing operations of commodity warehousing with the issuance of dual-purpose warehouse certificates (cotton receipts) for their potential use as collateral security. Improve financial instruments for agricultural lending Develop leasing operations for the procurement of agricultural machinery

4th Q2007 1st Q 2008 4th Q 2007 2007-2009

NBT (upon agreement) The Ministry of Economic Development and Trade of the Republic of Tajikistan; Customs Service under the Government of Tajikistan NBT (upon agreement); the Ministry of Finance of the Republic of Tajikistan; State Committee on Investment and State Property Management of the Republic of Tajikistan State Committee on Investment and State Property Management; the Ministry of Agriculture and Environmental Protection of the Republic of Tajikistan

13. Implement programs and projects for the development of agrarian sector.

Rehabilitation of land and the restoration of its fertility; Repair of irrigation and drainage systems; Organize training courses and seminars for farms on legal matters, economics, planning, accounting and book-keeping, etc. Regular monitoring of the analysis of soil condition to decide on the appropriateness of planting a particular crop.

2007-2009 2007-2009 2007-2009 2007-2009

The Ministry of Amelioration and Water Resources of the Republic of Tajikistan; the Ministry of Agriculture and Environmental Protection of the Republic of Tajikistan; Agency for Land Management, Land-Surveying and Cartography under the Government of Tajikistan The Ministry of Amelioration and Water Resources of the Republic of Tajikistan The Ministry of Agriculture and Environmental Protection of the Republic of Tajikistan Agency for Land Management, Land-Surveying and Cartography under the Government of Tajikistan

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Action Ways to implement

Time of completion Responsible entities

14. The development of seed-growing and other matters

Improve legal/regulatory and technical framework governing the operations of the State Supervisory Phyto-Sanitary Service for Plant and Seed Quarantine and of the State Commission for variety tests Introduce changes into appropriate legislation on seeds and seed-growing in order to ensure variety protection, payment of royalties and the availability of a license for seed production. Review regulations governing payment for water use and power supply services.

2nd Q 2007 3rd Q 2007 4th Q 2007

Ministry of Agriculture and Environmental Protection of the Republic of Tajikistan Ministry of Agriculture and Environmental Protection of the Republic of Tajikistan Ministry of Amelioration and Water Resources of the Republic of Tajikistan; Ministry of Energy and Industry of the Republic of Tajikistan; Ministry of Agriculture and Environmental Protection of the Republic of Tajikistan; The Ministry of Economic Development and Trade of the Republic of Tajikistan

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Appendix 1.1 - Methodica – minimum export price calculation and regulations

Methodica on transfer price and limiting dimensions of TRE calculation, connected to the cotton fiber marketing in RT

For the purpose of correct appliance of price for 2006 harvest of cotton fiber, marketed internally to the republican consumers and for export, the following order is set: The price basis for marketing of cotton fiber internally at the republican market is to be set by the TUGCE. Basic price to be calculated and set at Ex-Works basis (EXB) which is defined by INCOTERMS 2000. Ex-Works price to be set on the basis of Liverpool Cotton Exchange price quotation Index set for CA cotton. The Liverpool Stock Exchange price for CA cotton is based on mid length cotton fiber, second grade (base price) delivered CIF Northern Europe, meaning that the cotton is shipped to the port of Northern Europe port (freight and cargo is paid and insured), related taxes in exporter’s country, commission is paid to agents on cotton marketing and the interests of negotiator are taken into account. To calculate ex-Works basis price for Tajikistan, all above mentioned expenses to be deducted from CIF price. A calculation formula for Ex-Works price is indicated below. At the same time it should be noted that:

a) the below stated calculation is set for the minimal sales price for fiber-cotton on ex-works basis. Any price above the minimal price on ex-works basis is permitted and should be registered by TUGCE.

b) Buyer and Seller have rights to receive conclusion (permission) of TUGCE for their contract where specifies a definition for shipment under any delivery terms in accordance with the Terms determined by International rules for interpreting trade terms INCOTERMS-2000. In this case Buyer and Seller should demonstrate that the actual sales price is equal or above ex-works price plus all expenses are included to the terms of delivery of the contract.

c) In order to calculate the price for other grades then second grade of cotton fiber premium and discounts to the basic price to be applied. Cotton price adjustment for grade is +4% for first grade, -6% for third grade, - 10% for fourth grade and -20%for fifth grade.

d) Liverpool Cotton Exchange prices indicated in cents per pound. It is taken in calculations that: 1kg – 2.20462 pounds.

e) Calculation of the minimal base price will be applied for all cotton either delivered for internal consumption or sold for export.

The base price for calculation of tax imposition per one ton of fiber cotton to be arranged from the price on FOB terms in accordance with quotation of Liverpool Cotton Exchange for CA cotton. In order to calculate the price for cotton fiber on FOB terms the following deductions form CA cotton price quotation (CIF) to be applied:

Fixed freight price - 60 USD/ton Commission of the agent - 1.5% Insurance - 1.0% Negotiators earnings - 2.0%

Using the Central Asian cotton price quotation of the Liverpool Cotton Exchange for mid-fiber grades (type IV-V) from 22 February 2006 for second grade (basis price) at CIF delivery conditions of $1,344.81 per ton, the price for cotton fiber at delivery terms of FOB at quotation Index of 61.00 calculates as follows:

Expenses

Grade CIF

Price adjustment for grade to basis price

Commission of the agent

(1.5%)

Insurance (1.0 %)

Negotiators earnings (2.0

%)

Freight (average)

Total expenses FOB

1 1398.61 +4% 20.98 13.99 27.97 60,00 122.94 1275.67 2 1344.82 0% 20.17 13.45 26.89 60,00 120.51 1224.30 3 1264.13 -6% 18.96 12.64 25.28 60,00 116.88 1147.24 4 1210.33 -10% 18.15 12.10 24.21 60,00 114.46 1095.87 5 1075.85 -20% 16.14 10.75 23.52 60,00 108.41 967.44

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According to this order, the calculation of earnings of cotton producers per one ton of cotton fiber of second grade type IV-V (basis price) at Ex Works terms, less taxes, shipment for export and for internal consumers is applied as follows:

Expenses % Grounding Amount USD

1 FOB price (per 1 ton) 1224.30 2 Sales tax 10 122.43

3 Commission to TUGE 0,1 GRT Decree #237 from 8 of June 2001. 1.2243

3.1 For issuing the goods origin certificate by Chamber of Commerce and Industry 0,1

Law of RT “about the Chamber of Commerce and

Industry” 1.2243

3.2 State Plant Quarantine Inspection (Tajikgoskarantin) Stab

GRT Decree #38 from 4.02.2002; the list of charged and free of charge services of

Tajikgoskarantin

0.42

3.3 For research, tests, execution and issuing the compliance certificate by Tajikstandard Stab GRT Decree #84 from

17.02.2001 1.00

3.4 Custom procedure Stab, depend

on custom fees type

GRT Decree No 472 dd 02/12/2006 *

3.5 Railway tariff till the station of CIS (ex. from Kurgan-Tyube till Riga-Krasta) Stab 135.38

3.6 For serving, cleaning, sealing the wagons and other service of TJD with VAT Stab 2.00

3.7 Expenses on delivery to the railway station for departure, handling works and storage,

total Stab 10.00

3.8 Total expenses with sales tax 273.67*

5 Ex Works price (Cotton producers revenue) 946.95*

* the amount of custom fees is not included to Ex-Works price – this to be determined depending on types of custom services in accordance to the Decree of the Government of Tajikistan ref No 472 dd. 02/12/2006. Calculation of price for cotton fiber of fine-stapled grades (type II) to be set on the basis of Liverpool Cotton Exchange price quotation Index set for CA cotton for the indicated type. The price in quotation is set for cotton-fiber of 1st grade. For calculation of price for cotton-fiber of 2nd grade the following formula (Index A x 22.0462 x 0.961535) at CIF shipping is to be applied. Further discounts for cotton fiber of lower grades to be deducted from the proposed price for cotton fiber of 2nd grade. Hence, at quotation 79 cents for 1 pound, calculation of price at FOB for cotton fiber of type II is determined as follows:

Expenses

Grade CIF

shipping price

Price adjustment for grade to basis price

Commission of the agent

(1.5%)

Insurance (1.0 %)

Negotiators earnings (2.0 %)

Freight (average)

Total expenses

Ex Works shipping

price

1 1741.65 0 26,12 17,41 34,83 60,00 138,36 1603,28 2 1674.66 Х 0,961535 25,11 16,74 33,49 60,00 135,34 1539,30 3 1574.18 -6% 23,61 15,74 31,48 60,00 130,83 1443,34 4 1507.19 -10% 22,60 15,07 30,14 60,00 127,81 1379,37 5 1339.73 -20% 20,09 13,39 26,78 60,00 120,26 1219,47

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According to this order, the calculation of earnings of cotton producers per one ton of cotton fiber of type II grade 1 (basis price) at Ex Works terms, less taxes, shipment for export and for internal consumers is applied as follows:

Expenses % Grounding Amount USD

1 FOB price (per 1 ton) 1603.28 2 Sales tax 10 160.33

3 Commission to TUGE 0,1 GRT Decree #237 from 8 of June 2001. 1.603

3.1 For issuing the goods origin certificate by Chamber of Commerce and Industry 0,1

Law of RT “about the Chamber of Commerce and

Industry” 1.603

3.2 State Plant Quarantine Inspection (Tajikgoskarantin) Stab

GRT Decree #38 from 4.02.2002; the list of charged and free of charge services of

Tajikgoskarantin

0.42

3.3 For research, tests, execution and issuing

the compliance certificate by Tajikstandard

Stab GRT Decree #84 from 17.02.2001 1.00

3.4 Custom procedure Stab, depend

on custom fees type

GRT Decree No 472 dd 02/12/2006 *

3.5 Railway tariff till the station of CIS (ex. from Kurgan-Tyube till Riga-Krasta) Stab 135.28

3.6 For serving, cleaning, sealing the wagons and other service of TJD with VAT Stab 2.00

3.7 Expenses on delivery to the railway

station for departure, handling works and storage, total

Stab 10.00

3.8 Total expenses with sales tax 312.23*

5 Ex Works price (Cotton producers revenue) 1286.14*

* the amount of custom fees is not included to Ex-Works price – this to be determined depending on types of custom services in accordance to the Decree of the Government of Tajikistan ref No 472 dd. 02/12/2006. In addition to the above calculations and provisions, it should be noted, and under the following circumstances, that:

1. If railway tariffs and costs change, the Tajik Rail shall inform the Ministry of Economy and trade and TUCE in a written form in advance and these changes to be taken into account by appropriate parts of this document (methodica) in cost determination.

2. An aforementioned Liverpool Cotton Exchange quotation is not fixed and might change on the date of

contracting. Liverpool Cotton Exchange quotation, which is used in the contracting date should be also used for calculation of tax base on FOB terms of delivery.

3. At fixing the contract price an agent/negotiator or seller on behalf of the cotton owner should submit to the

TUGCE notarially confirmed agreement of the actual owner of the cotton on sales price of cotton reflected in the contract. An absence of this written agreement might be a reason for refusal in registration of the contract.

4. Cotton buyer (both for export and domestic consumption) is responsible for payment of all taxes on the basis of

FOB delivery terms (despite of delivery terms fixed in the contract) if this cotton is priced less taxes. This provision should be also reflected in a contract.

- 38 -

5. Railway tariffs for internal transportation (within the country) as fixed costs are not dependent on the price changes in Liverpool Cotton Exchange and on the cotton fiber grading.

6. The costs of commission fees for services of TUGE, TajikStandard and State Phyto-Sanitarian Control are fixed

with VAT inclusion.

This Order shall enter into force from the date of approval of this document. This document replaces all the earlier applied Orders (methodicas).

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Appendix 2.1 – Production statistics 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Total cotton area (ha) 268,381 228,189 218,600 247,300 247,800 238,600 257,400 269,200 284,300 293,601 289,000 263,000 % annual change -15% -4% 13% 0% -4% 8% 5% 6% 3% -2% -9% MS 225,178 187,086 186,400 221,700 226,900 211,500 225,300 213,200 252,364 259,068 272,151 236,365 % annual change -17% 0% 19% 2% -7% 7% -5% 18% 3% 5% -13% ELS 43,203 41,103 32,200 25,600 20,900 27,100 32,100 56,000 31,936 34,533 16,849 26,635 % annual change -5% -22% -20% -18% 30% 18% 74% -43% 8% -51% 58% Total production (MT) 410,805 312,572 353,300 383,600 313,100 335,400 452,700 515,500 537,400 556,991 445,244 438,547 % annual change -24% 13% 9% -18% 7% 35% 14% 4% 4% -20% -2% MS production 347,137 258,883 310,500 353,600 292,200 301,400 392,700 401,400 476,676 506,703 416,782 401,365 ELS production 63,668 53,689 42,800 30,000 20,900 34,000 60,000 114,100 60,724 50,288 28,462 37,182 Implied yield (MT/ha) 1.5 1.4 1.6 1.6 1.3 1.4 1.8 1.9 1.9 1.9 1.5 1.7 MS implied yield (MT/ha) 1.5 1.4 1.7 1.6 1.3 1.4 1.7 1.9 1.9 2.0 1.5 1.7 ELS implied yield (MT/ha) 1.5 1.3 1.3 1.2 1.0 1.3 1.9 2.0 1.9 1.5 1.7 1.4 MS as % of total 85% 83% 88% 92% 93% 90% 87% 78% 89% 91% 94% 92% ELS as % of total 15% 17% 12% 8% 7% 10% 13% 22% 11% 9% 6% 8% Source – Ministry of Agriculture

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Appendix 2.2 – Quality production splits 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Total production (MT) 410,805 312,572 353,300 383,600 313,100 335,400 452,700 515,500 537,400 556,991 447,900 438,547 % annual change -24% 13% 9% -18% 7% 35% 14% 4% 4% -20% -2% piervy 274,800 190,900 233,600 234,000 221,300 231,700 329,800 364,400 363,038 370,996 324,885 321,499 % total production 67% 61% 66% 61% 71% 69% 73% 71% 68% 67% 73% 73% vtoroy 70,300 65,900 64,600 92,500 63,900 63,300 61,000 79,700 93,393 79,935 55,965 66,335 % total production 17% 21% 18% 24% 20% 19% 13% 15% 17% 14% 12% 15% triety 35,900 41,200 34,300 39,800 18,500 24,500 33,600 36,800 38,017 39,821 35,466 29,489 % total production 9% 13% 10% 10% 6% 7% 7% 7% 7% 7% 8% 7% chitvorty 29,805 14,600 17,400 14,100 8,500 15,000 23,700 24,500 30,621 45,621 23,835 16,139 % total production 7% 5% 5% 4% 3% 4% 5% 5% 6% 8% 5% 4% pytatiy 0 0 3,400 3,200 900 900 4,600 10,100 12,289 20,618 7,749 5,085 % total production 0% 0% 1% 1% 0% 0% 1% 2% 2% 4% 2% 1% MS (total production) 347,137 258,883 310,500 353,600 292,200 301,400 392,700 401,400 476,676 506,703 419438 401365 piervy 235,000 162,400 206,600 215,900 205,200 209,500 292,300 292,800 324,544 339,402 307,539 294,971 % total production 68% 63% 67% 61% 70% 70% 74% 73% 68% 67% 73% 73% vtoroy 59,100 53,700 56,200 83,700 61,500 55,200 50,400 53,800 82,174 70,429 50,837 59,963 % total production 17% 21% 18% 24% 21% 18% 13% 13% 17% 14% 12% 15% triety 28,900 32,700 30,200 37,700 16,400 22,100 26,900 26,800 31,909 35,915 32,096 26,909 % total production 8% 13% 10% 11% 6% 7% 7% 7% 7% 7% 8% 7% chitvorty 24,105 10,100 14,400 13,100 8,200 13,700 19,900 20,000 26,167 41,340 21,793 14,638 % total production 7% 4% 5% 4% 3% 5% 5% 5% 5% 8% 5% 4% pyatiy 0 0 3,100 3,200 900 900 3,200 8,000 11,840 19,630 7,173 4,884 % total production 0% 0% 1% 1% 0% 0% 1% 2% 2% 4% 2% 1% ELS (total production) 63,668 53,689 42,800 30,000 20,900 34,000 60,000 114,100 60,724 50288 28462 37182 piervy 39,800 28,500 27,000 18,100 16,100 22,200 37,500 71,600 38,494 31,594 17,346 26,528 % total production 63% 53% 63% 60% 77% 65% 63% 63% 63% 63% 61% 71% vtoroy 11,200 12,200 8,400 8,800 2,400 8,100 10,600 25,900 11,219 9,506 5,128 6,372 % total production 18% 23% 20% 29% 11% 24% 18% 23% 18% 19% 18% 17% triety 7,000 8,500 4,100 2,100 2,100 2,400 6,700 10,000 6,108 3,906 3,370 2,580 % total production 11% 16% 10% 7% 10% 7% 11% 9% 10% 8% 12% 7% chitvorty 5,700 4,500 3,000 1,000 300 1,300 3,800 4,500 4,454 4,281 2,042 1,501 % total production 9% 8% 7% 3% 1% 4% 6% 4% 7% 9% 7% 4% pyatiy 0 0 300 0 0 0 1,400 2,100 449 988 576 201 % total production 0% 0% 1% 0% 0% 0% 2% 2% 1% 2% 2% 1% Source – Ministry of Agriculture

41

REPUBLIC OF TAJIKISTAN/LAND REFORM STATISTICS

INDICATOR 01-Jan-00

01-Jan-02

01-Jan-04

01-Jan-05 01-Jan-06

Total arable land (ploughed land and perrennials) (000 Hectares) 833 829 812 817 806 Including irrigated (000 Hectares) 579 577 575 577 570 Total number of land users (based on Land use title) (Units) 13,742 13,714 16,639 19,922 27,294 Arable land (defined as above) under state and collective and farms (000 Hectares) 297 182 95 80 64 Including Irrigated (000 Hectares) 234 149 76 66 53 Total number of state and collective farms (Units) 508 342 267 239 193 Arable land (defined as above) under agricultural cooperatives (000 Hectares) 45 44 37 32 22 Including Irrigated (000 Hectares) 28 24 28 25 19 Arable land (defined as above) under mezhkhozes (000 Hectares) 5 4 5 3 3 Including Irrigated (000 Hectares) 2 2 2 1 1 Arable land (defined as above) under state enterprises (000 Hectares) 162 149 92 73 65 Including Irrigated (000 Hectares) 108 88 51 40 35 Arable land (defined as above) under other users (joint stock companies, leaseholds and etc)

(000 Hectares)

137 100 118 80 55 Including Irrigated (000 Hectares) 92 79 88 63 45 Arable land (defined as above) under other horticulture farms and orhcards

(000 Hectares) 0 0 0 0 0

Including Irrigated (000 Hectares) 0 0 0 0 0 Arable land (defined as above) under dehqan farmers (000 Hectares) 166 328 444 526 575 Including Irrigated (000 Hectares) 103 224 318 369 405 Arable land (defined as above) under households (backyard plots) (000 Hectares) 179 125 140 152 159 Including Irrigated (000 Hectares) 109 78 80 86 90 Number of land use titles issued for household plots (Units) na na 745 4,166 25,177

MEMO ITEMS Number of Dehqon farms (Units) 11,536 11,676 19,565 23,322 27,040 Including Collective (Units) 10,395 6,897 6,455 7,916 8,740 Individual and Family Based (Units) 1,141 4,779 13,110 15,406 18,300 Total Agricultural Land under Dehqon Farms (000 Hectares) 2,378 3,629 4,519 4,681 4,628 Total Arable (ploughed) land under Dehqon Farms (000 Hectares) 145 290 414 459 484 Total Agricultural Land under COLLECTIVE Dehqon Farms (000 Hectares) 1,806 2,293 1,491 2,238 1,496 Total Arable (ploughed) land under COLLECTIVE Dehqon Farms (000 Hectares) 72 203 137 149 156 Total Agricultural Land under INDIVIDUAL AND FAMILY BASED Dehqon Farms

(000 Hectares) 572 1,336 3,028 2,443 3,132

Total Arable (ploughed) land under INDIVIDUAL AND FAMILY BASED Dehqon Farms

(000 Hectares) 73 87 277 311 328

Average size of Dehqon farm (Hectares) 85 79 231 159 171 Including irrigated (Hectares) 10 8 63 32 18 Number of land share certificates (Units) 95,693 243,781 465,476 515,144 615,225

Source – Government of Tajikistan

42

Appendix 3.1 - Tax information

1. Profits taxes

Type of tax Subjects of the taxation Objects of the taxation Rates Exemption Profit tax of legal entities (ats.142-145 TC RT)

Resident and foreign companies. (at.142 TC RT)

The profit received by the resident and foreign companies from activity in RT. (at. 143 TCRT)

25 % (at.144 TCRT)

- 2 years if investments up to USD 500,000; - 3 years if investments from USD 500,000 to USD 2,000,000; - 4 years if investments from USD 2,000,000 to USD 5,000,;

- 5 years if the investments more than USD 5,000,000. Only available fonew companies involved in manufacture of goods.

The taxation of net profit of the permanent establishment of the foreign legal entity (at.166 TCRT)

Permanent establishment of the foreign legal entity (Branch of the foreign legal entity in RT).

Net profit

8%.

Tax paid on simplified system (ats. 302-305 TC RT)

Legal entities whose gross income, without taking into account the VAT and the tax from retails, does not exceed 600 thousand Somoni. (at.303 TCRT). Subjects - payers under the simplified system are released from following taxes: - tax on profit of legal entities; - the minimal tax on company incomes; - the tax from users of highways. (at.303 TCRT)

the gross income received for the accounting period (at. 303 TCRT)

4% (at.304 TC RT)

Privileges are not stipulate in TCRT

The minimal tax on company incomes (ats.318-323 TCRT)

The resident and foreign companies which are carrying out business activity in RT through their permanent establishments (branches). (at. 318TCRT)

The gross income (except the accrued value-added tax, the tax from retails; and in case of delivery of cotton-fibre and primary aluminum - except the tax from sales) received (a subject of reception) for the accounting period. (at. 319 TC RT)

1% from object of the taxation. (at.321TC RT)

1. The companies which are released from the profit tax. (at.320 TCRT)

2. Value Added Tax.

Type of tax Subjects of the taxation Objects of the taxation Rates Exemption

Value-added tax (VAT)

1) the person registered or obliged to be registered as the payer of the VAT, taxable transactions of whom, for the previous period which is not exceeding 12 full consecutively (one after another) following calendar months, have exceeded 200 thousand somoni. 2) the persons who are carrying out the taxable import of the goods into RT. (at. 201 TC RT)

1). Taxable operations (deliveries of the goods, performance of works and rendering of services); 2). the taxable import (the goods importing or imported to the territory RT).

20 % (ст.224 TCRT);

Privileges are stipulated by at. 211TCRT.

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3. Income Tax

Type of tax Subjects of the taxation Objects of the taxation Rates Exemption Tax from incomes of physical persons (ats.133-141 TCRT)

residents and non-residents - the physical persons having objects of the taxation. (at.133 TC RT). The foreign physical person, who is being in territory RT over 90 days within one year is considered resident of RT. Therefore the foreign staff receiving wages for work in RT, and being in territory RT over 90 days within one year is a subject to the taxation of income tax in RT.

the gross income which consists of the incomes received by the resident from sources in RT and outside RT. (at.134 TCRT)

0 % - up to monthly minimum wage; 8 % - over monthly minimum wage (up to 100 somoni); 13 % - over 100 somoni. (at.140 TCRT)

Privileges are stipulated by at. 141TC RT.

Social tax (ats.258- 263TCRT)

1) physical persons and legal entities - employers, including permanent establishments of non-residents which pay wages to the physical persons-residents working for hire in RT; 2) physical persons and legal entities, including permanent establishments of non-residents which during their business activity carry out payment of services of the physical persons-residents rendered in RT on the basis of the civil contracts or without contracts; 3) the physical persons receiving payment, the workers of the enterprises specified in items; 4) the physical persons-residents who are carrying out the individual business activity in RT. (at.259 TCRT).

wages of workers - residents of RT (at.262 TCRT)

1 % - for workers (persons who are insured) and 25 % for employers (insurants); 20 % - individual entrepreneurs. (at.262 TCRT)

Privileges are stipulated by at.261 TCRT

44

Appendix 4.1 – District statistics - Kumsangir

Kumsangir District

Years Unit 2001 2002 2003 2004 2005

1. Number of jamoats 6 6 6 6 6

2. Number of villages 46 46 46 46 46

3. Population ‘000s people 87.7 89.8 92 94.5 96.8

4. Total agricultural output ‘000s somoni 45917 42691 63369 67861 63909

including plant growing ‘000s somoni 38619 37607 56609 60630 56401

including animal husbandry ‘000s somoni 7298 5084 6760 7231 7508 5. Crop sowing area, total hectare 20319 19322 19699 19166 18855 including grain and leguminous plants hectare 6670 5128 5142 3744 3708

Industrial crops, total hectare 10379 11024 11649 11616 11460

including cotton hectare 10353 11000 11604 11425 11425

potatoes hectare 614 616 638 657 657

vegetables hectare 492 506 606 824 823

gourds hectare 602 622 520 555 579

fodder crops hectare 1562 1426 1144 1770 1628

orchards hectare 581 485 643 599 669

vineyards hectare 389 407 385 364 434 6. Production of main types of agricultural products:

grain and leguminous plants ton 14984 12778 29466 28686 25127

cotton ton 12936 18881 19172 16423 12601

potatoes ton 3986 3165 9603 11688 12687

vegetables ton 6003 3254 11085 11926 12241

gourds ton 7957 7517 9789 12508 12511

fruit ton 4305 1543 1389 4865 5010

grapes ton 2951 2033 920 2100 2440

animal food calculated as feed unit ton 7832 5645 6169 6958 8110

meat (live weight) ton 773 409 793 819 1123

milk ton 8466 6241 6885 6926 7932

egg ‘000s 550 554 658 784 885

Wool ton 62 41 45 51 53

Cocoons ton 90.6 88.8 92 91.9 94

Honey ton 2 1.3

7. Crop productivity:

grain and leguminous plants c/ha 22.5 21.7 32.4 35.3 31.3

Cotton c/ha 15.9 17.2 16.5 14.6 11.4

Potatoes c/ha 65 51.4 15.4 177.9 136.6

Vegetables c/ha 121.9 55.9 172.6 162.1 155.1

Gourds c/ha 132.3 121.9 188.3 225.4 165.1

Fruit c/ha 74.1 32.1 25.8 92 97.7

Grapes c/ha 75.8 52.8 24 57.7 64.6

8. Livestock:

Cattle heads 17960 18056 19782 21050 21155

including cows heads 4955 5218 11861 11965 11970

goat and sheep heads 22109 22570 26112 26035 28766

Poultry heads 13400 16216 19922 22892 24195

Horse heads 1157 1229 1254 1275 1301

9. Availability of agricultural machinery

tractors, total units 214

including ploughing units 77

- 45 -

grain harvesters units 190

seeders, total units 93

including cotton seeders units 56

ploughs units 93

Cultivators units 116

10. Soil condition:

collector-drainage networks km 114 114 114 114 114

irrigation networks km 609 609 609 609 609

including concrete [flumes] km 30 30 30 30 30

pumping stations units 18 18 18 18 18

pumping station units units 71 71 71 71 71

sowing area under pumping irrigation ha 8400 8400 8400 8400 8400

- 46 -

Appendix 4.2 – District statistics – Bohtar

Bohtar District

Unit Years 2001 2002 2003 2004 2005

1. Number of jamoats 8 8 8 8 8

2. Number of villages 128 128 128 128 128

3. Population ‘000s people 180.8 184.5 189.5 194.5 198.9

4. Total agricultural output ‘000s somoni 60925 71827 97273 102758 99904

including plant growing ‘000s somoni 50957 60417 82381 85745 78790

including animal husbandry ‘000s somoni 9968 11410 14892 17013 21114

5. Crop sowing area hectare 24130 24057 24974 24291 24040 including grain and leguminous plants hectare 6946 5295 5206 3873 3879

Industrial crops, total hectare 14220 15083 15645 15725 15655

including cotton hectare 14146 15006 15548 15679 15644

potatoes hectare 302 413 690 1129 733

vegetables hectare 1121 1370 1337 1413 1331

gourds hectare 238 102 188 177 109

fodder crops hectare 1303 1794 1908 1974 2333

orchards hectare 569 567 612 587 556

vineyards hectare 825 705 774 772 687

6. Production of main types of agricultural products:

grain and leguminous plants ton 15937 16319 29040 22860 23822

cotton ton 24689 27948 33650 35868 25875

potatoes ton 2468 4810 10253 15832 17303

vegetables ton 14154 16401 23009 23221 25060

gourds ton 2723 3463 3839 3958 3960

fruit ton 1927 3902 3850 3941 3947

grapes ton 2514 3027 2584 3606 3618

animal food calculated as feed unit ton 11429 9510 8208 9064 10683

meat (live weight) ton 1564 1626 2374 2615 3312

Milk ton 7953 10614 12597 15002 20068

Egg ‘000s 854 862 972 1145 1378

Wool ton 81 85 105 117 125

Cocoons ton 59 59 60 60 64

Honey ton 2 2

7. Crop productivity:

grain and leguminous plants c/ha 24 23.4 34.1 33.7 28

Cotton c/ha 15.7 18.6 21.6 22.7 16.5

Potatoe c/ha 81.9 115.3 138.5 140.2 180.6

Vegetables c/ha 126.2 119.7 144.6 150 169.6

Gourds c/ha 114.3 159.3 150.4 165.4 148.4

Fruit c/ha 33.9 70.9 64.7 68.2 75.8

Grapes c/ha 30.5 43 46.5 46.8 52.7

8. Livestock:

Cattle heads 31014 33018 33282 33861 34104

including cows heads 18036 18501 18701 18703 19335

goat and sheep heads 29291 29788 33577 34516 35843

Poultry heads 42343 44074 48399 50894 52362

Horse heads 1459 1463 1074 867 613

9. Availability of agricultural machinery

tractors, total units 640

- 47 -

including ploughing units 106

Trucks units 167

grain harvesters units 15

seeders, total units 101

including cotton seeders units 94

ploughs units 127

Cultivators units 169

tractor trailers units 306

10. Soil condition:

collector-drainage networks км 772 772 772 772 772

including closed drainage км 16 16 16 16 16

irrigation networks км 1046 1046 1046 1046 1046

including concrete [flumes] км 72 72 72 72 72

pumping stations units 35 35 35 35 35

pumping station units units 39 39 39 39 39

11. Structure of sowing area:

agricultural crops, total ha 19981

including grain ha 2020

Cotton ha 14850

including fine-stapled cotton ha 8000

other industrial crops ha 100

potatoes ha 50

vegetables ha 200

Gourds ha 100

fodder crops ha 2661

Plough-land, total Ha 19984

including irrigated Ha 19681

pumping irrigation Ha 2243

- 48 -

Appendix 4.3 – District statistics – Farkhor

Farkhor District Years

Unit 2001 2002 2003 2004 2005

1. Number of jamoats 10 10 10 10 10

2. Number of villages 57 57 57 57 57

3. Population ‘000s people 115.9 118.4 121.2 124.5 126.1

4. Total agricultural output ‘000s somoni 40775 47741 56366 63202 59144

including plant growing ‘000s somoni 32041 36772 43169 48306 43016

including animal husbandry ‘000s somoni 8734 10969 13197 14896 16128 5. Crop sowing area, total hectare 28062 27822 25255 30081 29084 including grain and leguminous plants hectare 11069 7394 8429 13695 11456

Industrial crops, total hectare 12871 12870 12858 13682 14183

including cotton hectare 12800 12810 12787 13640 13626

potatoes hectare 308 176 373 400 387

vegetables hectare 456 399 398 409 466

gourds hectare 311 374 497 548 401

fodder crops hectare 3047 6609 2700 1347 2191

orchards hectare 317 704 491 327 300

vineyards hectare 136 512 121 127 128 6. Production of main types of agricultural products:

grain and leguminous plants ton 10407 9918 19570 20460 20899

cotton ton 17676 18177 17198 18754 14600

potatoes ton 3290 3293 6621 5872 7669

vegetables ton 4204 5282 8576 10055 5759

gourds ton 2564 4844 9357 9671 9671

fruit ton 897 2188 253 1923 950

grapes ton 781 2548 68 1026 805

animal food calculated as feed unit ton 12802 10049 10983 11450 13109

meat (live weight) ton 1555 2201 2697 3065 3280

Milk ton 6538 6877 8073 8916 10515

Egg ‘000s 401 402 463 556 676

Wool ton 67.1 66.1 64 74 82

Cocoons ton 91 91.1 94 91.6 93.3

Honey ton 1 1 1 1 4

7. Crop productivity:

grain and leguminous plants c/ha 9.4 12.5 21 15 16.8

Cotton c/ha 13.8 14.2 13.5 13.7 10.7

Potatoes c/ha 106.8 187.6 178 147 198.2

Vegetables c/ha 92.3 124.6 151.5 225.3 128.7

Gourds c/ha 82.4 110.3 184.4 147.7 124.2

Fruit c/ha 28.3 32.3 5.3 61.4 32.4

Grapes c/ha 57.5 49.8 5.6 80.8 62.9

8. Livestock:

Cattle heads 19975 21445 22305 32338 34163

including cows heads 12132 11236 12208 16989 18671

goat and sheep heads 42445 44262 46017 61695 65559

Poultry heads 12855 14650 22563 49471 50244

Horse heads 1618 1566 1822 1897 2073

9. Availability of agricultural machinery

tractors, total units 599

- 49 -

including ploughing units 116

Trucks units 184

grain harvesters units 36

seeders, total units 137

including cotton seeders units 105

Ploughs units 115

Cultivators units 133

10. Soil condition:

collector-drainage networks km 412.5 412.5 412.5 412.5 412.5

including closed drainage km 48 48 48 48 48

irrigation networks km 641.9 641.9 641.9 641.9 941.9

including concrete [flumes] km 47 47 47 47 47

- 50 -

Appendix 4.4 – District statistics – Kabadian

Years Unit of meas. 2001 2002 2003 2004 2005

1. Number of jamoats 7 7 7 7 7

2. Number of villages 43 43 43 43 43

3. Population ‘000s people 123.2 125.6 128.3 130.7 133.2

4. Total agricultural output ‘000s somoni 43807 54351 63193 78664 74621

including plant growing ‘000s somoni 38557 47572 53219 66299 58383

including animal husbandry ‘000s somoni 5250 6779 9974 12365 16238

5. Crop sowing area hectare 18859 19447 19467 20067 18951 including grain and leguminous plants hectare 5856 6189 5561 5095 4117

Industrial crops, total hectare 10066 10189 11378 11519 11538

including cotton hectare 10005 10134 11050 11369 11455

potatoes hectare 596 380 439 485 447

vegetables hectare 939 1030 606 1059 1029

gourds hectare 798 402 576 853 580

fodder crops hectare 604 1257 907 1070 1240

orchards hectare 458 763 751 472 936

vineyards hectare 510 545 252 477 568 6. Production of main types of agricultural products:

grain and leguminous plants ton 10894 13967 20370 22852 23415

cotton ton 17353 22258 25452 26664 13763

potatoes ton 4938 5752 6032 6320 6712

vegetables ton 7554 8726 8999 19597 20857

gourds ton 8239 8399 11641 14963 15342

fruit ton 1572 2200 502 1025 1043

grapes ton 1218 1376 80 1790 2041

animal food calculated as feed unit ton 7794 4432 4844 5388 6501

meat (live weight) ton 590 751 1621 2041 2744

milk ton 4731 6865 7049 9145 13312

Egg ‘000s 737 755 890 953 1360

Wool ton 92 93 231 238 289

Cocoons ton 86 88 93 86 86

Honey ton 3 3 3 3

7. Crop productivity:

grain and leguminous plants c/ha 18.6 21.2 27 34 29.7

Cotton c/ha 15.4 22 23 23.5 11.9

Potatoes c/ha 82.9 140.5 137.4 130.1 143.9

Vegetables c/ha 80.4 80.1 103.1 150.1 157.9

Gourds c/ha 103.3 117.4 111.2 175.3 246.8

Fruit c/ha 34.3 33.7 17.2 36.7 30.1

Grapes c/ha 23.9 29.5 4.6 42.7 43.1

8. Livestock:

Cattle heads 20083 19022 22937 26404 26535

including cows heads 13851 12530 15613 16554 16690

goat and sheep heads 32536 31511 31868 44465 47399

Poultry heads 20329 26076 46496 49830 50571

Horse heads 1080 1119 1037 1108 1122

9. Availability of agricultural machinery

tractors, total units 1034 972 897 861

including ploughing units 125 110 107 107 107

- 51 -

Trucks units 513 458 448 386 360

grain harvesters units 25 25 25 26 26

seeders, total units 154 143 131 131 131

including cotton seeders units 133 124 122 122 122

Ploughs units 147 134 119 116 116

Cultivators units 225 216 195 189 189

tractor trailers units 516 478 448 442 430

10. Soil condition:

collector-drainage networks км 401.6 401.6 401.6 401.6 401.6

Including closed drainage км 5.9 5.9 5.9 5.9 5.9

Irrigation networks км 461.6 461.6 461.6 461.6 461.6

Including concrete [flumes] км 59.9 59.9 59.9 59.9 59.9

pumping stations units 53 53 53 53 53

pumping station units units 147 147 147 147 147

11. Structure of sowing area:

agricultural crops, total ha 18859 19447 19467 20081 18951

Including grain ha 5856 6189 5561 5095 4117

Cotton ha 10005 10134 11050 11369 11455

Including fine-stapled cotton ha 1480 4973 2307 1852 331

other industrial crops ha 61 55 322 150 83

Potatoes ha 596 380 439 485 447

vegetables ha 939 1030 606 1059 1029

Gourds ha 798 402 576 853 580

fodder crops Ha 604 1257 907 1070 1240

Ploughed-land, total Ha 24021

including irrigated Ha 19493

pumping irrigation Ha 9280

- 52 -

Appendix 4.5 – District statistics – Vakhsh

years unit 2001 2002 2003 2004 2005

1. Number of jamoats 7 7 7 7 7

2. Number of villages 91 91 91 91 91

3. Population ‘000s people 130.8 133.1 135.8 138.6 141.3

4. Total agricultural output ‘000s somoni 50280 62599 73368 82744 81912

including plant growing ‘000s somoni 41103 50086 59772 68358 64212

including animal husbandry ‘000s somoni 9177 12513 13596 14386 17700

5. Crop sowing area hectare 21715 21947 22516 22270 22132 including grain and leguminous plants hectare 5887 6314 6153 5310 5670

Industrial crops, total hectare 11664 11721 12471 12593 12641

including cotton hectare 11500 11672 12432 12582 12586

potatoes hectare 640 663 478 589 575

vegetables hectare 1001 861 576 899 870

gourds hectare 333 279 341 396 320

fodder crops hectare 2190 2109 2497 2483 1495

orchards hectare 216 221 221 223 183

vineyards hectare 978 555 555 915 882

6. Production of main types of agricultural products:

grain and leguminous plants ton 12050 12843 23482 23051 23275

cotton ton 18948 25028 26033 25906 22280

potatoes ton 2313 6608 9276 11714 11716

vegetables ton 12186 10489 14878 15611 16315

gourds ton 3574 3614 6365 7339 7343

fruit ton 803 723 471 1350 1359

grapes ton 2966 3075 126 5759 2843

animal food calculated as feed unit ton 9452 9537 8346 8493 9842

meat (live weight) ton 1704 2788 2787 2863 3948

milk ton 5982 5578 7014 7712 9895

egg ‘000s 559 569 814 975 1182

wool ton 147 167 282 301 321

cocoons ton 52 56 56 55 56

honey ton 2 2 3

7. Crop productivity:

grain and leguminous plants c/ha 20.5 20.1 30.4 43.6 20.6

cotton c/ha 13.1 21.4 20.9 20.6 17.7

potatoes c/ha 36.1 92.3 145.8 198.9 201.8

vegetables c/ha 121.8 114.5 167.9 173.6 172.5

gourds c/ha 107.4 129.3 186.7 184.5 172.5

fruit c/ha 37.1 32.8 25.1 71.2 74.2

grapes c/ha 30.3 55.4 7.8 68.6 34.5

8. Livestock:

Cattle heads 15457 15908 16314 20808 22063

including cows heads 11048 11112 11223 11259 11926

goat and sheep heads 66856 69649 73948 85443 81217

poultry heads 9534 10628 15514 17989 21124

Horse heads 1823 1837 1579 1656 1704

9. Availability of agricultural machinery

tractors, total units 624 624 624 626 626

- 53 -

including ploughing units 111 111 111 112 112

Trucks units 324 324 324 324 324

grain harvesters units 19 19 19 19 19

seeders, total units 111 109 109 110 111

including cotton seeders units 98 96 96 97 98

Ploughs units 121 123 125 125 125

Cultivators units 143 145 144 146 148

tractor trailers units 335 335 340 340 346

10. Soil condition:

collector-drainage networks km 584 584 584 584 584

including closed drainage km 30 30 30 30 30

irrigation networks km 1086 1086 1086 1086 1086

including concrete [flumes] km 234 234 234 234 234

pumping stations units 40 40 40 40 40

pumping station units units 94 94 94 94 94

11. Structure of sowing area:

agricultural crops, total ha 21715 21947 22516 22516 22132

including grain ha 5887 6314 6153 5310 5670

Cotton ha 11500 11672 12432 12582 12586

including fine-stapled cotton ha 7100 7100 7100 7000 7200

other industrial crops ha 164 49 39 11 55

Potatoes ha 640 663 478 589 575

vegetables ha 1001 861 576 899 870

gourds ha 333 279 341 396 320

fodder crops ha 2190 2109 2497 2483 1495

Ploughed-land, total ha 18472 18472 18472 18472 18472

including irrigated ha 17251 17251 17251 17251 17251

pumping irrigation ha 4100 4100 4100 4100 4100

- 54 -

Appendix 4.6 – District statistics – Shaartuz

Years Unit 2001 2002 2003 2004 2005

1. Number of jamoats 5 5 5 5 5

2. Number of villages 36 36 36 36 36

3. Population ‘000s people 86.1 87.6 89 91.2 93.5

4. Total agricultural output ‘000s somoni 34392 38658 45401 55078 49684

including plant growing ‘000s somoni 30431 34175 39138 46567 40263

including animal husbandry ‘000s somoni 3961 4483 6263 8511 9421

5. Crop sowing area hectare 13724 13276 13206 13273 13133 including grain and leguminous plants hectare 5154 4280 4198 3559 3716

Industrial crops, total hectare 6784 7191 7208 7399 7284

including cotton hectare 6659 7105 7150 7353 7250

Potatoes hectare 394 394 390 401 346

Vegetables hectare 589 720 764 604 786

Gourds hectare 343 310 367 496 389

fodder crops hectare 460 381 279 814 612

Orchards hectare 592 632 505 611 581

Vineyards hectare 569 593 488 532 519

6. Production of main types of agricultural products:

grain and leguminous plants ton 9973 9431 17100 17675 18925

Cotton ton 14930 16729 15707 16076 8498

Potatoes ton 949 2322 4813 6252 5680

Vegetables ton 6606 6748 9181 15224 18213

Gourds ton 3120 4758 6374 8431 8999

Fruit ton 1764 2135 912 1174 1201

Grapes ton 1492 1566 446 1210 740

animal food calculated as feed unit ton 4606 1877 2051 2244 2751

meat (live weight) ton 165 211 743 1366 1751

Milk ton 4896 5483 5646 5811 6415

Egg ‘000s 780 873 842 979 1503

Wool ton 73 51 86 79 80

Cocoons ton 62 63 65 63 63

Honey ton 2

7. Crop productivity:

grain and leguminous plants c/ha 19.3 16.7 31.3 36.2 31.3

Cotton c/ha 22.4 23.5 21.8 21.9 11.7

Potatoes c/ha 24.1 58.9 123.4 156.3 164.4

Vegetables c/ha 112.1 93.1 118.2 216 216

Gourds c/ha 91 122 165.8 160.1 188.7

Fruit c/ha 29.8 33.8 23.9 25.3 29.3

Grapes c/ha 26.2 26.8 9.3 23.3 15.6

8. Livestock:

Cattle heads 15733 17931 18649 19077 19913

including cows heads 9298 10359 10888 11716 11918

goat and sheep heads 26115 30414 33466 35698 43498

Poultry heads 23347 25211 23913 40883 44393

Horse heads 1811 1499 1036 560 589

9. Availability of agricultural machinery

- 55 -

tractors, total units 477 443 475 449 419

including ploughing units 76 73 73 71 63

Trucks units 278 270 269 240 219

grain harvesters units 20 18 18 17 16

seeders, total units 92 86 83 84 73

including cotton seeders units 80 75 74 77 67

Ploughs units 99 92 91 90 72

Cultivators units 122 104 129 120 109

tractor trailers units 240 228 232 230 205

10. Soil condition:

collector-drainage networks км 434.3 434.3 434.3 434.3 434.4

including closed drainage км 5 5 5 5 5

irrigation networks км 329.2 329.2 329.2 329.2 329.2

including concrete [flumes] км 23.7 23.7 23.7 23.7 23.7

pumping stations units 20 20 20 20 20

pumping station units units 44 44 44 44 44

11. Structure of sowing area:

agricultural crops, total ha 8982 9459 9324 9646 9340

including grain ha 1552 1645 1576 961.5 1038.5

cotton ha 6659 7105 7105 7353 7250

including fine-stapled cotton ha 684 1505 480 620 684

other industrial crops ha 7 47 13.5 18.5 32.5

potatoes ha 2.4 4 9 8 6

vegetables ha 89 98 102 143 116

Gourds ha 179 206 208 367.5 287

fodder crops ha 358 307 867.5 799.5 610

Ploughed-land, total ha 9392

including irrigated ha 9391

pumping irrigation ha 1817

- 56 -

Appendix 4.7 - District statistics – Vosse

Vosse District

Years Unit 2001 2002 2003 2004 2005 2006

1. Number of jamoats 8 8 8 8 8 8

2. Number of villages 70 70 70 70 70 70

3. Population ‘000s people 153,1 156,1 158,9 161,9 165,8 171,5

4. Total agricultural output ‘000s somoni 45875 60946 68071 84291 76561 87382

including plant growing ‘000s somoni 37350 50900 56029 70051 60612 85664

including animal husbandry ‘000s somoni 8525 10046 12042 14240 15949 21718

5. Crop sowing area hectare 32325 30403 34550 35132 32485 33706 including grain and leguminous plants hectare 16702 15962 20326 19686 17234 17533

Industrial crops, total hectare 12320 10665 11979 12298 12137 11170

including cotton hectare 10450 10450 11332 11532 11532 10540

Potatoes hectare 434 324 354 333 345 376

Vegetables hectare 679 960 703 1028 920 996

Gourds hectare 267 261 238 272 290 292

fodder crops hectare 1923 2231 950 1515 1559 3339

Orchards hectare 403 424 414 416 416 446

Vineyards hectare 959 956 896 897 897 904

6. Production of main types of agricultural products:

grain and leguminous plants ton 15969 27033 32120 33704 34756 37919

Cotton ton 13660 19016 25556 266128 17807 15002

Potatoes ton 2689 3461 3532 4021 4196 6102

Vegetables ton 9320 10887 11085 15144 15208 17629

Gourds ton 2085 2675 2776 3242 3562 7662

Fruit ton 1788 1770 250 5071 5139 6270

Grapes ton 3822 3843 405 5411 6320 6479

animal food calculated as feed unit ton 11147 7181 7848 8193 9694 10225

meat (live weight) ton 1499 1501 1550 1588 2040 2086

Milk ton 6384 9628 11963 15942 18297 19667

Egg ‘000s 413 414 979 1154 1384 1846

Wool ton 86 103 135 149 152 203

Cocoons ton 97,7 97,6 97 97 99,4 95,1

Honey ton 1 1 1 1 3 6,4

7. Crop productivity:

grain and leguminous plants c/ha 9,6 17 15,8 15,7 18,5 21,4

Cotton c/ha 13 18,2 26,6 22,7 15,4 14,2

Potatoes c/ha 62 106,9 119,3 120 121,6 162,3

Vegetables c/ha 137,3 113,4 11,4 147,3 147,4 175,9

Gourds c/ha 78,1 123,9 116,6 119,2 120,6 259,6

Fruit c/ha 44,3 45,7 6,8 136,3 138,2 140,6

Grapes c/ha 39,9 40,2 4,5 60,3 70,5 71,7

8. Livestock:

Cattle heads 28347 29185 31189 31027 34450 34591

including cows heads 15845 16358 16829 17566 17583 17873

goat and sheep heads 47152 50049 51156 57929 61972 63787

Poultry heads 14175 27187 31316 34495 35967 36836

Horse heads 1495 1481 1574 1627 1690 1702

9. Availability of agricultural machinery

tractors, total units 459 450

including ploughing units 100 94

Trucks units 119 92

grain harvesters units 20 19

seeders, total units 110 109

including cotton seeders units 95 95

Ploughs units 82 52

Cultivators units 121 113

tractor trailers units 282 242

10. Soil condition:

collector-drainage networks кm 494 494 494 494 494 494

including closed drainage кm

irrigation networks кm 607 607 607 607 607 607

including concrete [flumes] кm 45 45 45 45 45 45

pumping stations units 22 22 22 22 22 22

pumping station units units 105 105 105 105 105 105

11. Structure of sowing area:

agricultural crops, total ha 32325 30403 34550 35132 32485 33706

including grain ha 16702 15962 20326 19686 17234 17533

cotton ha 10450 10450 11332 11532 11532 10540

including fine-stapled cotton ha 744 735 740 54 58 70

other industrial crops ha 1870 215 647 766 605 630

potatoes ha 434 324 354 333 345 376

vegetables ha 679 960 703 1028 920 996

Gourds ha 267 261 238 272 290 292

fodder crops ha 1923 2231 950 1515 1559 3339

Ploughed-land, total ha 24343 24343 24343 24343 24343 24343

including irrigated ha 15062 15062 15062 15062 15062 15062

pumping irrigation ha 9300 9300 9300 9300 9300 9300

- 57 -

Appendix 7.0 - Investor criteria 1. Registered member of international cotton association, not blacklisted in the past 2 years. 2. Legally registered in country of origin. 3. Financially solvent and not subject to legal proceedings in any jurisdiction totalling more than

25% of contributed capital. 4. Minimum annual trading volume in excess of 10,000 MT baled cotton for the past

3 years. 5. Minimum 3 years trading experience with Central Asian cottons - minimum annual volume of

2,000 MT. 6. Demonstrated minimum experience of 5 years of ginning either as principal, through a

subsidiary or in commercial partnership with another organisation who operated the gin. 7. Able to provide (subject to short listing) up to 3 years financial accounts, audited by an

internationally recognised accounting firm. 8. Willing to invest (subject to independent assessment) minimum USD 1 million in the

construction of a new ginning facility, purchase (minimum 75% of shares) and renovation of an existing gin in Tajikistan, or relocation of existing ginning facilities from another country to Tajikistan.

9. Willingness to contribute to seasonal finance for contracting farmers to a minimum value of

USD 0.5 million.

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