Tajikistan remains dependent on FDI, humanitarian aid and grants from international organizations

An article by political scientist Umedjon Ibrohimzoda, posted on CABAR.asia's website, says Tajikistan, as a country with little economic growth, remains dependent on foreign direct investment, humanitarian aid and grants from international organizations and partner countries. An analysis of data for 2010-2021 on foreign direct investment received by partner countries showed that the thesis that the country is attractive for foreign investment is not justified. The investment climate, administrative barriers, underdeveloped investment infrastructure and inadequate tax incentives are more of an issue here than the overall potential of the country. According to data from the Agency for Statistics under the President of Tajikistan, the total inflow between 2007-2021, foreign investments totaled about US$11 billion, of which US$4.8 billion were direct investments, US$5.7 billion were other types of investments, and US$500 million were portfolio investments. Over the past fifteen years, investments have come in Tajikistan's economy from 65 countries, among which China, Russia, the United Kingdom, the United States and Kazakhstan have a comparatively high share. Since 2010, China has been the largest investor in Tajikistan's economy. China's total share of investment in its neighbor's economy is almost US$2.7 billion, making it the most important investor in Tajikistan over the past eleven years. China builds roads and participates in joint projects and large industrial projects. Chinese investments have been channeled into communications, construction, financial services, mining and the installation of technological equipment. A significant increase in Chinese investment was seen in 2016 and a sharp fall occurred during the Covid-19 pandemic. In 2021, investment inflows are in the process of recovery. One of the interesting features of Chinese investors is that they prefer direct investment in the Tajik economy, i.e. setting up their own companies or acquiring shares in existing enterprises in the country. Another form of Chinese investment in Tajikistan's economy is concessional lending. These loans are granted at an annual interest rate of 2.0 to 3.0 per cent for a period of more than 20 years. But most commonly, the condition for obtaining them is that the projects must be implemented by Chinese companies. Russia is second behind China with a share of US$1.2 billion. Next on the list is the UK with US$671 million. Russia has been one of Tajikistan's key economic partners for many years, directing direct investments in various sectors of Tajikistan's economy. Russian investments are mainly directed to construction, communications, geological exploration, health care, the construction industry and the energy sector. Russia is implementing various projects in Tajikistan, mainly in the fields of energy and education. Russia's investment activities were reportedly intense in Tajikistan in the early 2000s, when major projects were being implemented, and it is notable that it was the leading investor in Tajikistan's economy until 2014, but since 2015 China has caught up and surpassed it by a great margin. The UK is also one of Tajikistan's main investors. Significant growth of British investment was in 2015 and 2017, but since the year 2017, there has been a decline in investment from the UK. The Tajik authorities hope that the first Tajik-UK investment forum, held in London on March 28-29, 2023, will give a new impetus to joint projects between the two countries. During the forum, 23 new documents were signed between the two countries, totaling more than US$370 million. According to data from Tajikistan's Agency for Statistics Agency, UK investment, among other areas, is going towards construction, mining and geological studies, as well as coal mining and manufacturing industry. Next is Kazakhstan, which reportedly invested heavily in Tajikistan's economy from 2012 to 2015, but has sharply reduced its infusions since 2016. Kazakhstan's investments are directed towards the manufacturing industry, geological and mining research, financial services and trade. The article notes that these three countries [Russia, UK and Kazakhstan] have reduced investment since the second half of the 2010s when investment in Tajikistan's private sector was hampered for a number of reasons. Overall, the reason for the decline in investment, is reportedly the lack of compliance with a number of conditions by Tajikistan. These conditions include the development of democratic institutions, the rule of law, the creation of a pluralistic society and freedom of expression. There are also other reasons that prevent Tajikistan from attracting foreign investment into its economy. For instance, the unfavorable investment climate, administrative barriers, and underdeveloped investment infrastructure, Inadequate tax system and tax incentives, monopolization of market segments, corruption and unhealthy competition, the article says.

Source: Asia Plus