VZCZCXRO4822
RR RUEHLN RUEHVK RUEHYG
DE RUEHDBU #1667/01 2511003
ZNR UUUUU ZZH
R 081003Z SEP 06
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC 8523
INFO RUCNCIS/CIS COLLECTIVE
RUEHNE/AMEMBASSY NEW DELHI 1793
RUEHBUL/AMEMBASSY KABUL 1769
RUEHIL/AMEMBASSY ISLAMABAD 1808
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHDBU/AMEMBASSY DUSHANBE 9933

UNCLAS SECTION 01 OF 02 DUSHANBE 001667 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR SCA/CEN 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV EAID PGOV EAGR EIND TI
SUBJECT: IT'S ALL RELATIVE: THE TAJIK TEXTILE BIZ 
 
 
DUSHANBE 00001667  001.2 OF 002 
 
 
¶1. (U)  SUMMARY:  Two major textile manufacturers in Tajikistan 
have taken two different roads to success.  Tajik Textiles uses 
its familial and political networks to succeed, while Giovani 
Manufacturing features a glitzy, Western-style approach. 
Although President Rahmonov's development program calls for 
domestic processing of all Tajik cotton by 2015, foreign textile 
companies operating in Tajikistan face severe challenges. 
However, close contacts with local partners allow foreign 
investors to navigate local laws and regulations, and more 
importantly, provide access to the Tajik familial and political 
networks crucial to every aspect of business operations in 
Tajikistan.  END SUMMARY. 
 
TAJIK TEXTILES-THE CITY IN A CITY 
 
¶2. (U)  The Soviet-built Tajik Textiles factory rests on 76 
hectares in central Dushanbe, processes 6,000 tons of cotton 
each year, and employs 3,000 people.  The largest textile 
company in Tajikistan, Tajik Textiles produces cloth fabric and 
limited finished goods for domestic and export markets. 
Finished goods include sheets and bedding, and also local 
military uniforms.  In grand Soviet style, the company has its 
own water, energy, and sewage resources, allowing the factory to 
operate 24/7, every day of the year.  Several in-house 
institutes provide specialized training for employees. 
 
¶3.  (SBU)  General Director of Tajik Textiles Anvar Kurbanov 
uses his extensive political and family connections to smooth 
business operations for the privately-held company.  During a 
meeting with EmbOffs, Kurbanov elaborated on his family 
connections in the government, with cotton ginners, bankers, and 
farmers.  In addition, during the civil war, Kurbanov and his 
brothers fought actively on the side of pro-government forces. 
Kurbanov proudly pointed out that 1,500 members of the People's 
Democratic Party of Tajikistan work for Tajik Textiles. 
Kurbanov credits his relatives and government with supplying 
Tajik Textiles with "as much cotton as he needs." 
 
BUILT IN A DAY 
 
¶4.  (U)  The Tajik-Polish Joint Venture "TajPolText" sprang from 
the ground in record time thanks to Kurbanov's extensive 
networks.  Kurbanov first met with several Polish businesspeople 
in Moscow two years ago at a textile exhibition.  At that time, 
the Polish Embassy told its citizens "security in Tajikistan is 
not so good and food is not so good and water is bad," causing 
the investors to   delay their visit for 18 months.  After 
Kurbanov traveled to Poland, they agreed that a group from 
Poland would come to Tajikistan to negotiate the terms and 
conditions for a joint venture.  Kurbanov arranged the group's 
visas in a few hours.  Upon arrival in Dushanbe, they prepared 
documents to register the venture at the Ministry of Justice in 
one day.  In early 2006, the Polish company started importing 
and installing equipment, and began operations in May. 
 
¶5.  (U)  In a resourceful example of joint venture cooperation, 
the Tajik and Polish companies each bring their comparative 
advantage to the table.  TajPolText operates independently 
within the Tajik Textiles factory.  The Polish side imports and 
operates the equipment, trains local employees on its use, buys 
the cotton, processes and packages the final product for export 
to Europe.  Tajik Textiles supplies the factory space, energy 
and water inputs, deals with taxes and customs and pesky 
government regulators, and provides social benefits to the 
employees.  Employees at Tajik Textiles earn on average 
$100/month - much higher than the local norm. 
 
ITALIAN STYLE IN TAJIKISTAN 
 
¶6.  (SBU)  Kurbanov dished the dirt on the much-heralded 
U.S.-Tajik "Giavoni" joint venture in Khujand.  According to 
Kurbanov, the Italian (now U.S.-owned) company cheated the 
government-owned partner when first starting up the joint 
venture in the mid-1990's.  The Italian company inflated the 
reported price of their investment, stating that $1.5 million in 
equipment was worth $39 million.  The Italian's "$39 million" 
investment bought the Italians' 50% share in the company. 
Giovani asserts the $39 million figure is accurate and notes the 
government has not contested it.  (COMMENT:  Using the same 
trick, Tajik partners have been known to inflate the value of 
land and equipment they bring to other joint ventures. END 
COMMENT.)  The allegedly new equipment had already been used in 
 
DUSHANBE 00001667  002.2 OF 002 
 
 
Southeast Asia.  Giavoni recently sold some of its shares to a 
third party, and played another shell game.  The third party 
thought he was buying shares in the entire company, not 
realizing he only bought shares in two of the five units of the 
company. 
 
¶7.  (U)  Employing 1,700 workers in the major northern 
industrial center, Khujand-based Giavoni faces "normal" 
interference with its business operations.  Giavoni produces 
Carrera brand jeans for European markets.  However, Giavoni 
struggles with the VAT on importing and re-exporting zippers and 
buttons.  The government delays repayment of the VAT to Giavoni 
often for months at a time.  Giavoni has postponed its plans to 
open up a new factory until the government resolves this issue. 
Meanwhile, $3 million in imported equipment for the new factory 
waits in storage. 
 
¶8.  (U)  COMMENT:  Kurbanov did not allow EmbOffs to see any of 
the 56-acre Tajik Textiles factory.  His dilapidated offices 
lack computers, and the company operates purely on personal 
relationships.  The polished Giovani representatives enjoy 
showing off their Italian-built factory that processes raw 
cotton into fancy pants and corduroys for Western markets. 
While both companies are succeeding in the Tajik market, 
familial ties and personal relationships remain the preferred 
and most hassle-free method for foreign companies seeking safe 
passage through the Tajik straits.  END COMMENT. 
 
 
 
JACOBSON 
HOAGLAND