Comparison Of Tajikistan And Cyprus: Protectionism Vs. Free Trade (Essay)

1. Brief overview of your underdeveloped nation’s trade history (exports, imports)
2. Social, political and economic overview. Strengths and weaknesses
3. Orography of the nation
4. Infrastructures (road, maritime, rail)
5. Export value and import value. Identify main categories
6. How do goods depart/reach your nation? (maritime, land, air)
7. What is the time frame for import export? (note: usually too long, increasing risk for perishable goods)
8. Identify the transport constraints (lack of port personnel, bad road infrastructures, high jacking, corruption at customs …)
9. Documentation required for import/export? Is it standardized? Are they difficult to obtain? Language, complexity of document complementation …
10. Trade Facilitation roadmap. Objectives, areas for improvement, areas to be coordinated, investment (financial, training) = challenges
11. Trade facilitation roadmap: how are you going to prioritize the different areas for improvement?
12. Facilitation Trade agreement draft between poor nation and wealthier nation.

Protectionism and Free Trade Policies Defined

Protectionism can be defined as the policies and actions of the government that creates certain kind of restrictions on the international trade with the overall intention of guarding the domestic businesses and jobs from facing foreign completion (Wilcox& Martin 597-599).The methods adopted for the purpose of protectionism include the application of government regulations, restrictive quotas and tariffs on the imported articles (Chandra & Alexander 1-19).

On the other hand, free trade can be defined as the policy adopted by the governments of some countries in the international market where no restrictions are imposed by them in terms of imports and exports from other countries (Anderson, James & Yoto  279-298). This assignment focuses on the underdeveloped country, Tajikistan and the developed country, Cyprus and their associated backgrounds in respect of trade, their political, social and economic overview along with the time required for goods to depart/reach the nation and documentation requirements.

Tajikistan is one of the countries that are still considered as underdeveloped in the world .Since the independence of Tajikistan, most of the foreign revenue received by the country was dependent upon the exports of aluminium and cotton (Theesfeld, Insa & Frederike 81-96). In the year 2005, more than 80% of the exports were made to the customers residing outside Commonwealth of Independent States (CIS) and around greater than 70% to Turkey and the countries of European Union. Similarly, in the year 2005, Russia, Ukraine, China, Kazakhstan and Azerbaijan. With the passage of time the situations changed and today the major exports of Tajikistan include gold, raw aluminium, raw cotton, zinc ore and lead ore while its main imports include petroleum gas, refined petroleum, rubber footwear, wheat and knit men’s suits. Mostly exports are made to the countries such as Turkey, Afghanistan, Kazakhstan, Algeria and Switzerland while the imports are made from the countries such as Russia, China, Turkey, Kazakhstan and Switzerland (Middleton & Robert 245-265).

Tajikistan is located in the heart of Central Asia surrounded by Kyrgyzstan, China, Afghanistan and Uzbekistan. The national identity of Tajikistan is influenced by various ethnic ties. Most of the population of Tajikistan shares the same language and kinship like the people residing northeastern Afghanistan. There exist cultural differences within Tajikistan as most of people are Sunni Muslims, while some Iranians are Shiites. The people of Tajikistan are associated with the people and culture of Iran to a great extent since Persian and Tajik language are related to each other closely. Pamir Tajiks speak Shugni, Wakhi, Roshani, Ishkashimi, Khufi, Bartang and all other Iranian languages. Zeravshan River basin consists of another distinct group which is formed by descendants of ancient Sigdians and Yaghnabis. Tajik is recognized as the official language of the people in Tajikistan (Zafar & Athar 28).

Background of Tajikistan

The economy of Tajikistan is dependent upon agriculture which provides employment to 2/5^th of the labor force. The agriculture and industries suffered from the devastating impact after the civil war which occurred after the independence of Tajikistan. The principle trading partners of the country include Turkey, China, Kazakhstan and Iran. The national currency is issued by the central bank. Tajikistan is rich in mineral deposits. The hydroelectric power sources are exploited with the help of mountain streams. Reserves of petroleum and natural gas and coal deposits are the energy resources of the country (Ito et. al. 692-707). The country is also engaged in the exportation of dried apricots, almonds and grapes (Coulibaly, Souleymane & Lotte 16-25).

Tajikistan is a republic which consists of two of two legislative houses: Assembly of Representatives and the National Assembly.  The legislature of the country is granted the authority to interpret the constitution, enact various laws and provide confirmation to the presidential appointees. The constitution of the country specifies various rights of the citizens along with the mechanisms with the help of which these rights can be restricted. The president of Tajikistan is appointed directly for tenure of maximum of two terms of five years (Hofman & Irna 1-21).  

The strengths of Tajikistan include its potential for significant hydroelectric power. Also, Tajikistan is rich in terms of raw material resources and financial support from countries like China. However, the foreign exchange reserves of the country are very weak. Moreover, the country is dependent upon the remittances derived from expatriate workers. Islamist terrorism also increases the risk of destabilization. The governance is also poor and there exists high level of poverty in the country.

The orography of Tajikistan has resulted in its consideration as the main glacial centre of Central Asia. The glaciers of Tajikistan are responsible for the retention of water and perform the function of regulation of climate and river flows and are also regarded as the wealth of the country (Groll, et al. 743-763). The main sources of water for the country are its permafrost and glaciers which replenish the basins of Aral Sea River. The country’s main river basins receive fresh water every year as a result of melting of glaciers and snow. The Pamir Mountains are basically covered with the bulk of ice (Bohovic, et. al. 279-299).

Rail

The infrastructure of Tajikistan is considered to be well developed. The railway system of the country is 943 kilometers long which links some of the main towns to the railway network of Uzbekistan.  The southern regions of Tajikistan have the main segments of the country which connects its capital with the areas where the industries are located in Vakhsh valleys and Gissar.  The railway transport of the country is often utilized for the purpose of facilitating the international freight activities. Kulob, Dushanbe and Khudzhand have the largest airports in Tajikistan. Travelling to Tajikistan from various parts of the globe is often considered to be costly, time consuming and cumbersome. Domestic airlines such as Somon Air and Tajik Air perform flights to Saint- Petersburg, Dubai, Moscow, Istanbul, Urumqi, Tehran and various other places around the globe.

Economy of Tajikistan

Road

A network of 13,000 kilometers long roads covers the major parts of the country. Moreover, automobile transport accounts for the widely used mode of transportation for passengers and commodities as a result of the implementation of various major investment projects by Tajikistan such as Dushanbe- Kulma rehabilitation (access to Karrakorum highway and Chinese border) and many more. Tunnels have been constructed under the mountains of Shar- Shar, Shakhristan, Anzob and underway such as Chormazak (Halimjanova, et al. 115).  

Maritime

Tajikistan does not have any maritime boundaries, therefore does not have maritime infrastructure. It has only developed rail and road infrastructure.

Today Tajikistan stands on 152^nd position in terms of largest export economies in the world. The exports of Tajikistan amounts to $846M and imports amounts to $3.54B in the year 2015 with a negative trade balance of $2.69B. The exports of Tajikistan have significantly reduces in the previous five years at the annual rate of -4.4%. The most exported item is raw aluminium followed by Gold. On the other hand, the imports have increased in the previous five years at the annual rate of 3%. The most imported item is refined petroleum followed by wheat.

The air transport is used by Tajikistan for the purpose of import and export of goods as it allows the country to receive and depart goods quickly over long distances (Aslamov & Abdurafin 16-25). With the help of air transport of goods high level of security is ensured for sensitive items. A variety of goods are covered under the list that can be easily exported or imported through air transport.  The imports and exports are facilitated by Tajikistan with the help of railways which easily allows trade with the Central Asian countries. The national railways of the country handle the bookings. Moreover, the goods are cleared at the inland terminals in case of transit of goods by road. Tajikistan does not have access to the sea therefore cannot use the means of waterways for departing or receiving the goods.

The import and export of goods from Tajikistan usually take too long both in cases of air and road transport. Air transport is not suitable for all types of goods and also involves higher costs in comparison with other modes of transport. Moreover, sometimes the flights are often delayed or cancelled resulting in losses in case of perishable goods. Rail transport for the purpose of transport of consolidated cargoes is a very complex process as such service is not easily provided by CIS railways. The rail transport for import and export by Tajikistan often suffer from the inflexibility in terms of routes and timetables especially when it comes to remote areas. Moreover, it is costly than the road transport adopted by Tajikistan. Sometimes, even the disruption is caused to the railway services as a result of industrial actions and mechanical failures resulting in further delays in the departure/receipt of goods. The road transport of goods in case of imports and exports sometimes result in delays and breakdowns due to traffic. Also, long distance travelling tends to be risky for the goods which are exposed for damages. Travelling for a long distance is not predictable in terms of time for the arrival of goods at the destination (K?osowski, Jaros?aw & Jerzy 121-132).

Political System of Tajikistan

Various constraints are suffered in the course of transport by the imports and exports made by Tajikistan. The road infrastructure in Tajikistan results in increased cost of transportation from agricultural areas to the defined locations since the transportation infrastructure of Tajikistan is considered to be underdeveloped. Also, the transportation of precious goods is often vulnerable to hijacking. Moreover, corrupted customs officers demand heavy amounts for the release of goods which proof to be very expensive for small importers. Moreover, goods are subject to heavy taxes which are burdensome on part of the importer/ exporter. Sometimes they are unable to release their goods due to corruption which further results in losses for them. Unavailability of required personnel during the transportation of goods sometimes causes heavy damages or misplacement of goods or delivery of goods at the wrong ports. Last but not the least, importers and exporters suffer from budgetary constraints which halt them in selecting the required medium of transportation which ultimately lead them towards selecting the means which may proof to be risky for the safety of goods.

Documentation required for imports in Tajikistan includes the following-

• Copy of certificate of registration of the importer.
• Copy of TIN (Taxpayer Identification Number)
• Copy of Charter
• Copy of documents of incorporation
• Copy of Registration Certificate with State Statistics Committee.

The process of customs clearance requires the basic document i.e. Customs Cargo Declaration which clearly specifies the information regarding ownership, contents of shipment and destination. Customs Cargo Declaration requires certain documents to be attached with it such as Certificate of Origin, Invoice, documents relating to shipping, international sales contract, Power of Attorney that authorizes the agent for conducting customs clearance and various other documents.

The documentation needed for exports include Commercial Documents (commercial invoice, bill of lading, airway bill, bill of exchange, letter of credit) Regulatory Documents (legal documents, shipping bill, insurance policy, etc.). These are government documents and are therefore standardized. Moreover, they are in simple language with less complexity.

Trade Facilitation can be defined as various areas and activities such as government controls and regulations, transportation, business efficiency, payment systems and information and communication technologies (Kommerskollegium).Trade Facilitation Strategy and Roadmap was devised with the objective of enhancing the growth. Also, an initiative was made for the purpose of simplifying the procedures associated with customs and pre- customs with the view to facilitate trade and exports across the boundaries for the organizations. The focus of the strategy is set on reviewing the current processes and procedures with the view to simplifying as well as streamlining them where required thereby decreasing the administrative costs and time for the exporting companies (Beverelli, et.al 293-310). The objectives of the Trade Facilitation Strategy are as follows.

• Bringing about a reduction in the total number of days required to export
• Bringing about a reduction in the costs involved in exports
• Implementation of the measures of Trade Facilitation Agreement
• Reducing the documents requested for the purpose of procedures associated with imports and exports
• Electronic connection of trade border agencies for the purpose of fostering international trade and providing the option of selecting e-payment at every border posts (United Nations Conference on Trade and Development).

Strengths and Weaknesses of Tajikistan

The areas of improvement include the reduction in the days involved in trading across borders as this will significantly result in cost reduction and increase in international trade. Moreover, such improvement would often lead towards a rise in the Foreign Direct Investment (FDI) and will ultimately provide a progressive impact on the growth, competitiveness and employment. Also, areas of improvements also include focus on the contributions made by current impediments and making identification regarding the improvements required in the roadmap with respect to the improvements in previous section indicators. Other areas of improvement include the export’s risk assessment system such that it could be aligned with the best practices along with customs risk assessment system for exports, improvement of the various methods and forms of fighting against illegal trade of goods that are harmful for the environment across Customs border. Improvements in the trade procedures will bring about relief for the consumers and traders who face a trading environment that is challenging than their neighbor countries (Feenstra, Robert & Hong 158-177).

Trade facilitation often requires coordination in trade all across the supply chain. The private and public sector representatives are required to participate in regular meetings such that the implementation of the roadmap can be better coordinated (Grainger & Andrew 1167-1188).  Trade facilitation is affected by various challenges relating to the requirement of investment to perform contracts of industrial, commercial, government project or public utility and the need for training and the requirement for technology (Amin, Mohammad & Jamal 1441-1466).

The identified areas of improvement in the Trade Facilitation Roadmap will be prioritized in accordance with their requirements and importance (Marti, et.al. 202-222). The government’s first priority is identified to be exports which assist in the economic recovery of the nation. Therefore, priority must be given to the risk assessment system for the exports. Accordingly, the improvements will required to be made in the trading procedures to stay competitive in comparison with the neighboring countries. Then, the requirement for making reduction in the trading days across borders stands in priority for the purpose of increasing the international trade. Then the customs risk assessment system will be improved (Djankov, et.al 166-173).

The Facilitation Trade Agreement draft between a poor country i.e. Tajikistan and a wealthier country i.e. Cyprus will involve points such as differential and special treatment for the developed and the developing country in the implementation of trade facilitation, country’s current trade situations, trade policy initiatives and environment, the main obstacles and competitive situation, linking the high level policy objective to the vision of roadmap, the establishment of national trade facilitation bodies and also the international best practices from their countries (Olimov & Muzaffar 15).  

Background of Cyprus

Conclusion

Tajikistan is an underdeveloped country which still suffers from various insufficiencies in terms of infrastructure and has a negative trade balance. The country makes the use of roadways, railways and airways for the purpose of undertaking international trade i.e. import and export of goods. The countries do not make the use of waterways as its borders do not have access to the sea. Tajikistan faces various constraints in transportation. The undertaking of Trade Facilitation Strategy and roadmap with a wealthier country such as Cyprus can result in benefits for Tajikistan in terms of increase trade and Foreign Direct Investment (FDI). Moreover, it will also benefit the country by reducing the time taken for exports and will significantly ease the trading processes of the country.

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