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Over the past several years, Tajikistan’s president Emomali Rahmon has made foreign investment a key pillar of his national development strategy, a desire echoed by the higher elite of the Tajik government, and illustrated by an active outreach campaign for foreign investment.
As the poorest country in Central Asia, Tajikistan has seen modest and sustained yearly increases in GDP. But while the authoritarian regime will do anything in its power to ruthlessly suppress critics, Tajikistan’s bleak record on human rights and deep governmental corruption is well known and puts the country’s already weak economy on shaky ground. Even with specialized knowledge of the area, investment in Tajikistan comes with several considerable hurdles, be they practical or ethical.
Facing bureaucracy and corruption
One interested in investing in Tajikistan would need to be ready and willing to maneuver through a miasma of bureaucracy, rife with corruption on every level. While the Rahmon government makes a good pitch for simplified foreign investment, the reality is that the laws and tax system serve Rahmon and his elite network first. Rampant corruption and lack of regulation can also make foreigners the target of extremely lax legal interpretations and thus, exploitation. This is especially true when there is pressure to grow tax revenue (from outside Rahmon’s circle, of course) for major infrastructure projects, such as the current building of the Rogun Dam hydropower plant.
An unreliable regulatory system
Authoritarianism often replaces the rule of law with corruption, and as common social pacts erode, so does the legitimacy of institutions. While the legislation surrounding foreign investment doesn’t discriminate or impede the ability to invest, any investor in Tajikistan will first need to deal with the sketchy regulatory apparatus of the government, then with a dysfunctional banking system, and if legal issues arise–a judicial system that is controlled by Rahmon’s executive branch. Tajikistan’s economy is driven by a mostly unskilled labor market, with a large contingent of foreign migrants.
Approximately 30% of the national GDP is sent out of the country to families abroad. 60% of the economy would be characterized as “informal”–unregistered, and from which taxes are very loosely collected. (This is another reason why foreign investments may be abused in the tax system.) One final reason to give pause before considering an investment in Tajikistan may be made on ethical grounds: through the use of harassment, violence, imprisonment, torture, and even murder, the repressive Tajik government carries an abysmal human rights record. The government’s numerous crimes against the Tajik people have been well documented by human rights watch groups for decades.
These conditions, along with unfettered corruption ultimately stifle innovation, productivity, and economic development. And until the government is compelled to end these inexcusable abuses, investing in Tajikistan is not only a financial gamble, but it also supports a despotic regime.
Why Tajikistan is a good business place?
Tajikistan has several factors that make it a good business place. Here are some points to consider:
Strategic Location:
Tajikistan is situated at the crossroads of major trade routes, making it a key transit point for goods traveling between Europe and Asia. Tajikistan’s location is strategic because it sits at the intersection of important trade routes between Europe and Asia. This makes it a crucial transit point for goods that are being transported between these two regions.
Natural Resources:
Tajikistan is rich in natural resources such as minerals, including gold, silver, and uranium, and has a significant hydroelectric power generation capacity.Additionally, it has significant hydroelectric power generation capacity due to its mountainous terrain and numerous rivers. These natural resources offer potential opportunities for investment in the mining and energy sectors.
Improving Infrastructure:
The country has made significant investments in infrastructure, particularly in road and rail transportation, which has improved access to key markets. This has led to better connectivity and access to key markets within the region, making it easier for businesses to transport goods and materials. Additionally, the government has invested in upgrading its energy infrastructure, such as constructing new power plants and transmission lines, to meet the growing electricity demand.
Low Cost of Labor:
Tajikistan has a low cost of labor, making it an attractive location for labor-intensive industries such as textiles and agriculture. This low cost of labor is due to several factors, including a relatively low cost of living and a large pool of available workers. For businesses looking to minimize their labor costs, Tajikistan offers a competitive advantage.
Government Support:
The Tajik government has implemented several policies to attract foreign investment, including tax incentives and simplified procedures for registering businesses. Additionally, the government has established economic free zones to encourage investment in specific sectors, such as manufacturing and tourism. These policies demonstrate the government’s commitment to supporting business development and fostering a favorable environment for foreign investment in the country.
Skilled Workforce: Tajikistan has a relatively well-educated workforce, particularly in technical fields such as engineering and IT. Many universities and vocational training centers offer programs to train students in these areas, providing a skilled labor force for businesses looking to invest in these sectors. Additionally, the government has invested in vocational training programs to improve the skills of its workforce, particularly in areas such as agriculture and construction.
Stable Political Environment:
Tajikistan has a stable political environment, with a relatively low level of political unrest or instability. The government has taken steps to improve the business environment and reduce corruption, including implementing reforms to streamline the process of starting and operating a business. This stability and favorable business climate make Tajikistan an attractive destination for foreign investors looking to do business in Central Asia.
Close to Russia
Tajikistan shares a close relationship with Russia, which can be an advantage for businesses operating in the country. This close relationship can provide opportunities for investment and trade with Russia, as well as access to its large market and resources. Additionally, many Tajiks work in Russia and send remittances back home, which contributes to the country’s economy.
Conclusion
Overall, Tajikistan offers a range of opportunities for investors looking to enter the Central Asian market, with a relatively low cost of doing business, strategic location, improved infrastructure, and government support.
