Russia Interested in Getting Quality Agricultural Products from Tajikistan

2 december 2016

“For the past decade Russia, China, and the US have been taking an active interest in Tajikistan,” said Denis Ershov, expert with the Analytical Center said, speaking at a Round table on bilateral co-operation in agriculture, held as part of the 5th Russo-Tajik Inter-Regional Forum. “This to a large extent determines the nature and pace of the development of the Republic’s foreign trade, including trade in the field of agricultural products.”

According to Mr Ershov, Tajikistan took a wait-and-see approach in regard to joining the Eurasian Economic Union and so far there is still some disagreement and debate going on within the country about the relative benefits and prospects of joining the Union. Nevertheless, the ratification of the intergovernmental agreement between Russia and Tajikistan on the opening of the two country’s representative offices of their customs services on a mutual basis was an important step toward developing bilateral cooperation. Under the agreement Russia is to open a representative office of its customs service in Tajikistan and Tajikistan is to open a representative office of its customs service in Russia to improve cooperation between the two countries’ customs services. Russia ratified the agreement in November in this year.

“The benefits that Tajikistan would get by joining the Eurasian Economic Union would include, first and foremost, resolving the problem of illegal labor migration while also giving the country access to the single market of goods and services, financial resources and new investment projects,” Mr Ershov believes. "What is holding the Tajik government back is fears that they might lose some of their political sovereignty if they join the Union.”

The expert believes that Russian business would definitely benefit if Tajikistan would join the Eurasian economic union. The labor market would become more transparent, which would have a positive effect on the economics of projects being implemented in Russia. On the other hand, the full-fledged opening of the Tajik market would allow Russian companies to promote and sell industrial products there, and set up joint ventures in Tajikistan. In the meantime, Russian companies that want to do business with Tajikistan have to overcome significant obstacles. These include the passivity of some Tajik representatives when it comes to working with potential investors, slow introduction of innovations, problems with the state that Tajik industrial facilities are in. 

Should Tajikistan emphasize exports of agricultural products to Russia rather than labor migration, the dependence of Tajikistan on the Russian economy would diminish, new jobs would be created back in Tajikistan, which would eventually drive down labor migration, the expert believes. The issue of increasing sales of Tajik agricultural products in Russia is one of the most burning ones on the economic agenda of the bilateral relations between Russia and Tajikistan. Russia is interested in getting quality agricultural products from Tajikistan and that means that expanding exports to Russia would have a positive effect on improving the employment situation in the republic and boosting local household income.

At the moment one of the main barriers to expanding mutual trade is the issue of customs clearance and getting goods delivered from Tajikistan, especially when it comes to agricultural products with limited shelf-life. Unfortunately, most suppliers take the path of least resistance, in their estimation: they ship their deliveries to Kyrgyzstan or Kazakhstan where                intermediator firms realize customs clearance for the goods and set up a new package of documents with new certificates of origin. After that, the goods are shipped on the exact same vehicles to Russia, only now they have certificates saying they were produced in Kyrgyzstan or Kazakhstan. In this manner Tajik suppliers try to save on VAT: in Kyrgyzstan and Kazakhstan the VAT rate is 12% while in Russia it’s 18%.

However, a lot of them probably don’t know that for the majority of vegetables (potatoes, tomatoes, onion, cabbage, carrot, beets, radishes, cucumbers, etc.) are subject to the Russian government’s resolution No 908 dated December 31, 2004, under which the VAT rate for them is just 10%. In other words, if they were to ship their goods direct to Russia, Tajik suppliers would have to pay VAT of just 10% rather than 18% or 12% when getting customs clearance for Russia, Mr Ershov said.

Photo from open sources