Doing Business in Tajikistan

As a relatively young Central Asian nation that is only slightly larger than Greece or Nicaragua, the Republic of Tajikistan is not typically considered a major player in the grand scheme of global economics and politics. Meanwhile, the five-year civil war (2002-2007) between the Moscow-backed government and the Islamist-led opposition undoubtedly has severely damaged the country’s already fragile economic infrastructure and caused a sharp decline in industrial and agricultural production. However, in the wake of a UN peace agreement, Tajikistan now is slowly recovering and actively seeking foreign investment as it seeks to catch up with many of the rapidly expanding economies in the region, such as China, Mongolia, India and Kazakhstan, while it also hopes to avoid the pitfalls currently debilitating other regional players including Afghanistan and Pakistan.

According to the CIA World Factbook, Tajikistan has one of the lowest per capita GDPs among the 15 former Soviet republics. And due to a lack of employment opportunities in the country, as many as 1 million Tajik citizens work abroad – primarily in Russia – and their remittances make up almost half of the country’s GDP. Also, the fact that Tajikistan’s foreign revenue is precariously dependent upon exports of cotton and aluminum, and on remittances from Tajik migrant workers abroad, is making the country’s economy highly vulnerable to external shocks.

With an area of 143,100 square kilometers and a population of approximately 7.6 million, Tajikistan is the world’s 96th largest country by land mass and the 96th most populous country. This landlocked country lies to the west of China and south of Kyrgyzstan. To help increase north-south trade, the United States funded a US$36 million bridge that opened in August 2007 linking Tajikistan with Afghanistan. Meanwhile, Tajikistan has received substantial infrastructure development loans from the Chinese government to improve roads and electricity transmission.

Tajikistan is an agricultural economy but less than 7 percent of the land area is arable. Cotton is the most important crop and its production is closely monitored or in many cases, even controlled by the government. Following the National Bank of Tajikistan’s admission in December 2007 that it had improperly lent money to investors in the cotton sector, the IMF canceled its program in Tajikistan. Currently, a reform agenda is underway with which over US$500 million in farmer debt will be forgiven.

Other agricultural activities include stock raising, beekeeping and processing of vegetables, fruit, wool and leather. The government promises to significantly increase the country’s export capacities by applying modern technologies.

Generally, Tajikistan’s industry consists only of a large aluminum plant, hydropower facilities, and small obsolete factories mostly in light industry and food processing. Mineral resources include silver, gold, uranium, and tungsten. The country claims to have almost all of the elements on the periodic table.

In addition, electricity output expanded with completion of the Sangtuda-I hydropower dam, which was finished in 2009 with Russian investment. The Iranian invested Sanguda-II is scheduled for completion in 2012. If finished according to Tajik plans, the Roghun dam will be the tallest dam in the world – the government of Tajikistan is pinning major hopes on this massive project.

You can read the rest of this article by Lena Xia on Doing business in Tajikistan at China-Briefing.com. China-Briefing was founded by Chris Devonshire-Ellis who is also the founder of Dezan Shira & Associates, which advises on foreign direct investment in China

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