Benefits of Making Business in Tajikistan | Buy & Sell Business

1. BENEFITS OF MAKING BUSINESS IN TAJIKISTAN WWW.MERGERSCORP.COM

2. At MergersCorp M&A International we help our clients confidentially buy and sell privately held businesses, aligning the interests of all parties for mutual success and satisfaction. It is our goal to make the process of either buying a new business or selling your current business as smooth and efficient as possible. We know how important confidentiality is to our sellers and we treat it with the utmost importance. WWW.MERGERSCORP.COM

3. BENEFITS OF MAKING BUSINESS IN TAJIKISTAN WWW.MERGERSCORP.COM

4. Country Overview Tajikistan, officially the Republic of Tajikistan, a mountainous, landlocked country in central Asia, bordered by Afghanistan in south, Uzbekistan in west, Kyrgyzstan in north, and by China in east. Separated from the Kashmir region by Afghanistan's Wakhan Corridor. Tajikistan landscape is dominated by the Pamir and Alay mountains, largest body of water is Karakul lake, located in the Tajik National Park in the Pamir Mountains in Tajikistan's. With an area of 143,100 km², compared Tajikistan is less than half the size of Italy, or slightly smaller than the U.S. state of Wisconsin. The country has a population of 8.35 million people (in 2015). Capital and largest city is Dushanbe (Душанбе). Tajikistan remains the poorest country in Central Asia, about 35% of the population falling below the poverty line. Spoken languages are Tajik (official), Uzbek and Russian.

5. Executive Summary Tajikistan a country located in the southeastern part of the Central Asian, which borders Uzbekistan in north- west, Kyrgyzstan in the north, China in the east Afghanistan in south. Country’s 143 thousand square kilometers area, of which 93% is mountainous. The country remains strongly dependent on Russia, both for its economy and to help counter security problems. In particular, Tajikistan depends on Moscow to help fight drug smuggling from neighbouring Afghanistan and an emerging radical Islam movement. Tajikistan is also expanding its ties with China: Beijing has extended credits and has helped to build roads, tunnels and power infrastructure.

6. Introduction – Doing business in Tajikistan Tajikistan, with a population of 9 million and number of potentially sizeable energy infrastructure, mining, and tourism projects, and regional access to Uzbekistan, Afghanistan, Kyrgyzstan and China, has the potential to become a notable transit hub and market for U.S. exporters. If you are planning to start a new business in Taiwan, and you do not know where and how to begin, no worries at all. Tajikistan produces practically no oil, gas, or coal of its own. However, Tajikistan imports 43 billion cubic feet of natural gas per year, mostly from Uzbekistan. Tajikistan has proven reserves of 10-12 million barrels of oil, most of which are located in the northern part of the country in the Leninobod Soghd Region. Cotton and wheat are the two main cash crops in Tajikistan, cultivated on nearly 70% of the cropped area.

7. Conducting business in Tajikistan and has created on-line tax platforms and on-line tax payment models. The Tajik business community welcomed these moves, but corruption and burdensome bureaucracy remain a major concern. Tajikistan ranks 123 on the World Bank’s Ease of Doing Business Report. Of the various indicators used, Tajikistan ranks higher than its overall score in protecting minority investors, starting a business, and enforcing contracts. Tajikistan has a 2030 National Development Strategy, which outlined attracting investments as key factor for development. However, over the last 25 years Tajikistan was able to attract less than an average of $100 million annually of FDI into the country. Compared to neighboring countries, Tajikistan’s markets are less developed but offer potential to investors willing to navigate the risks. Opportunities exist in the following sectors: power generation and distribution, food processing and packaging, mining equipment and services, aviation and tourism. The Government of Tajikistan has undertaken some initiatives to simplify business registration processes and customs clearance,

8. Taxation in Tajikistan is taxable at 25%. The period of application of VAT exemptions on taxable operations related to performance of construction work, provision of catering and educational services was extended until 31 December 2023. With that, VAT rate increases for taxable operations related to performance of construction works, provision of catering services from 5% to 7%, and for educational services remains the same and equal to 5%. CIT is computed by applying the statutory 23% rate to taxable income (13% for enterprises producing goods), which is calculated based on gross income decreased by allowed deductions and losses carried forward from previous periods. CIT liability may not be less than 1% of aggregate income. The tax base for applying tax under the simplified system is the aggregate income. For activities related to production of goods, the tax rate is 5%; for other activities, the tax rate is 6%. Progressive rates of 0% to 13% are applied for calculating the income tax of individuals. Employment income of non-residents

9. Trade Complexity Index (ECI). In 2017, Tajikistan exported $939M and imported $3.04B, resulting in a negative trade balance of $2.1B. In 2017 the GDP of Tajikistan was $7.15B and its GDP per capita was $3.19k. The top exports of Tajikistan are Raw Aluminium($166M), Gold ($156M), Zinc Ore ($143M), Lead Ore($112M) and Raw Cotton ($63.2M), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Refined Petroleum ($188M), Wheat($166M), Petroleum Gas ($109M), Rubber Footwear($65.1M) and Seed Oils ($58.6M). The top export destinations of Tajikistan are Kazakhstan ($301M), Turkey ($194M), Switzerland($158M), Algeria ($82.7M) and India ($46.9M). The top import origins are China ($1.3B), Russia ($686M), Kazakhstan ($458M), Turkey ($155M) and Germany($57.6M). Tajikistan borders Afghanistan, China, Kyrgyzstan and Uzbekistan. Tajikistan is the 148th largest export economy in the world and the 109th most complex economy according to the Economic

10. Banking in Tajikistan while commercial banks represent the second level. The banking system in Tajikistan remains relatively undeveloped. The national currency, the somoni, was introduced in October 2000. There are several major concerns about the banking system, including: government-directed lending, insufficient capital, limited banking services, lingering mistrust as a result of the several economic and financial systemic crises in 1992, 1998 and 2009. Tajikistan banking sector experiences a number of systemic challenges since 2014 when the crisis in Russia hit. There are 17 commercial banks and 66 microfinance organizations operating in Tajikistan. Tijorat Bank is the branch of Iranian bank. Branch of National Bank of Pakistan present in Tajikistan. First Micro Finance Bank is the financial institution of the Aga Khan Fund for Economic Development. The electronic banking and the checking system is not developed in Tajikistan. Most payments are made by bank transfers; payments between two corporate entities must be made through the banking system. The banking structure in Tajikistan is two-tiered: the National Bank of Tajikistan performs regulatory central bank functions,

11. Our M&A Process NEGOTIATION & CLOSE POST MERGER INTEGRATION (PMI) INTEGRATION (PMI) POST MERGER TARGET APPRAISAL APPROACH DUE DILIGENCE Key Areas  Target & market analysis;  Initial assessment of synergies & value drivers;  Indicative valuation;  Go or No-Go decision;  Preparation of transaction documents (NDA – Non- disclosure Agreement/LOI- Letter of Intent);  Select Transaction team;  Appoint advisors;  Consider funding ability.  Initial approach letter;  Signing of NDA;  Prepare & share initial information requests;  Formulation of LOI (Letter of Intent) & possible negotiations;  Initial meeting and Q&A;  Circulate information on the Target to the Transaction team.  Set scope of due diligence;  Set up VDR (virtual data room);  Coordinating of due diligence, further meetings and Q&A sessions;  Consider points relevant to the Post-Merger (PMI) phase;  Revisit indicative valuation & prepare detailed valuation based on due diligence findings;  SPA negotiations with the seller;  Development of final structure (share/asset deal) and final valuation;  Approvals;  Signing of SPA & Close.  Consider the extent of integration;  Development of 100 Day PMI Plan;  Consider short & long term objectives;  Estimate requirements to capture synergies;  Determine resource needs & optimal allocation. Parties Involved  CFO;  Head of M&A;  Accountants;  Corporate finance advisors;  Consultants.  Senior management;  CEO, CFO, CTO;  Strategy director;  Head of M&A;  Head of Business Development;  Consultants.  Company general counsel;  Lawyers;  Senior management.  Company general counsel;  Lawyers;  Senior management/HR. 11 © Midaxo 2018 www.midaxo.com

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