Economic Developments in Tajikistan

Poor nations often leave countless young males without an education, a stable family, or a strong government to follow. These conditions make the choice to join a group of religious radicals appealing. Tajikistan, a country of over seven million located just north of Afghanistan in Central Asia, is surrounded by war torn, politically unstable neighbors and fits the profile of a hotbed for religious radicalism. While the country has avoided a large-scale international war, political instability and economic deficiencies have left Tajikistan primed for future conflict. The situation presents an intriguing study for those concerned with humanitarian issues and those involved in security matters alike. This in-depth inspection of the state’s complex economy reveals areas of great concern along with reasons for optimism. Economic Developments in Tajikistan Tajikistan is a nation in which a civil war and blatant government corruption have gone largely unnoticed by Western eyes. However, the country is located in the center of a region of great martial and economic importance to the United States and Western Europe. Its neighbor to the west, Uzbekistan, recently forced a U.S. military base off its territory. Iraq, a small distance southwest of Tajikistan is currently rebuilding its government while attempting to avoid civil war. Additionally, Afghanistan, directly to the south, remains occupied by U.S. troops. Tajikistan itself has the potential to become a focus of international attention for reasons other than its troubled neighbors. Poor Islamic 1 Haupert: Economic Developments in Tajikistan Published by Pepperdine Digital Commons, 2008 nations frequently leave countless young males without an education, a stable family, or a strong government to follow. These conditions make the choice to join a band of religious radicals appealing; such groups provide social networks, access to food and shelter, and a sense of purpose. In this context an understanding of Tajikistan’s economy becomes significant to any organization or individual concerned with violence and terrorism across the globe. The country’s combination of governmental corruption, a largely uneducated youth, and severe poverty creates a volatile atmosphere that merits attention from both humanitarian and international security entities. Since the Central Asian states gained their independence in 1991, much ink has been spilled regarding their economic development as both independent nations and as a collective region. While Kazakhstan and Turkmenistan possess significant oil resources, Uzbekistan boasts a sizeable industrial infrastructure, and Kyrgyzstan has implemented aggressive economic reform since the breakup of the Soviet Union, little progress has taken place in Tajikistan. In a region that would have been content to preserve the adjusted Soviet Union suggested by Gorbachev rather than be forced into independence, Tajikistan has experienced the most difficulty sustaining stable nationhood. However, despite being plagued by corruption, insufficient infrastructure, unfriendly neighbors and a crippling drug trade, the nation’s economy is not beyond repair. This essay will provide a brief background of Tajikistan’s current government and an assessment of the bloody civil war that, among other things, played a large part in placing the nation in its current state of poverty. Subsequently, a discussion of more specific issues affecting contemporary Tajikistani economy will be undertaken culminating in remarks on the country’s fiscal outlook as well as some suggestions for future action. 2 Global Tides, Vol. 2 [2008], Art. 2 http://digitalcommons.pepperdine.edu/globaltides/vol2/iss1/2 Civil War, Rahmonov, and Poverty Like the regimes in Turkmenistan and Uzbekistan, the Tajikistani government has been criticized for its lack of transparency. However, in contrast to its neighbors to the west, Tajikistan did not initially fall from Moscow’s hands into those of a powerful leader. Within a year of declaring its independence Tajikistan plunged into a devastating civil war that not only killed between 60,000 to 100,000 people, but was responsible for the destruction of much of the nation’s economic infrastructure. The war lasted from 1992 to 1997, and output dropped drastically during that time period. Due to a combination of deterioration, war-related destruction, and outright theft, “,manufacturing output in 1997 was only 27% and agricultural output 50% of the 1990 level”. During the span of 1991-1996, Tajikistan’s gross domestic product (GDP) declined at an average rate of 17% annually, before reporting modest growth between 1996 and 1999. Additionally, many government officials previously responsible for the oversight of the nation’s economy were killed or expelled during the war, leaving command to the inexperienced. Thus, Tajikistan was left with a damaged infrastructure which disabled its once thriving agricultural industry, and a largely inexperienced administration. As the war finally came to an end in 1997, a new president obtained complete control over Tajikistan. Emomali Rahmonov, a supposed democrat, brought corruption and further instability to the Tajikistanis, but, if nothing else, gave the nation a center of authority to follow. Rahmonov took little discretion when appointing individuals to numerous government positions. Rather than seeking qualified persons, the president 3 Haupert: Economic Developments in Tajikistan Published by Pepperdine Digital Commons, 2008 appointed those who had supported him during the war while marginalizing those who had not. A prime example of Rahmonov’s irresponsible appointments can be found in Ghaffor Mirzoyev, who was given the position of head of the Tajik Drug Control Agency in 2004. Less than a year later Mirzoyev was arrested for charges including illegal possession of weapons, tax evasion, and murder. The Tajikistani government not only has trouble controlling its citizens, as drug trafficking and tax evasion are major problems, but the recklessness of its administrative appointments results in lawlessness in positions where political stability is sorely needed. While the economic performance of Tajikistan has been poor, the rate of poverty among citizens is equally, if not more alarming. Although accurate statistics are difficult to gather, nearly 65% of the population is believed to live in poverty. While this is a marked improvement since 1999, when poverty was estimated at over 80%, the spread of reduction has been uneven, with the population in the Ferghana Valley experiencing a much slower decline. To put these numbers into perspective, per capita income in Tajikistan is currently less than $1 per day, and is anticipated to grow to only $375 per year by 2015. Thus, Tajikistanis are not expected to climb out of the ranks of the poorest nations in the world anytime soon. Issues The overwhelming rate of poverty in Tajikistan is the result of more multifaceted troubles than an irresponsible president and a civil war. The war did, however, put the nation almost a decade behind in trying to cope with the added responsibilities of independence. Today the economy in Tajikistan is characterized by problems in the 4 Global Tides, Vol. 2 [2008], Art. 2 http://digitalcommons.pepperdine.edu/globaltides/vol2/iss1/2 domestic market, a weak infrastructure, and complex foreign relations. Some of these issues, however, present hope and the possibility for improvement in the lives of Tajikistan’s populace. Trade: Internal and External The demand for internal commerce in Tajikistan is increasing. Unfortunately, the government has been largely unable to tax this trade. This is in part due to the great increase in informal services, which are very challenging to record, much less tax. Difficulty collecting taxes is further perpetuated by the incidence of tax evasion. Imports are to be taxed between 5% and 7.7%, according to the Eurasian Economic Community. However, under-invoicing—an evasive method in which importers report only a portion of the goods they receive—likely costs the Tajikistani government between $250 million and $300 million each year in revenue. Dushanbe simply lacks the resources to strictly enforce its tax policy and it pays dearly for this insufficiency. The sum of revenue lost from tax evasion is significant as it amounts to over 20% of Tajikistan’s yearly GDP of roughly $1.3 billion. The nation must find a way to better handle its own trade before it can sufficiently cope with its growing need for international commerce. Tajikistan’s external sector is vulnerable due to its reliance on a small number of products. Combined, cotton and aluminum account for over 80% of the nation’s exports. The third largest export, hydroelectricity, is plagued by poor infrastructure and sluggish construction of new plants. The export sector is growing, but an increased internal need for previously exported products will cause the nation to accumulate an 5 Haupert: Economic Developments in Tajikistan Published by Pepperdine Digital Commons, 2008 average account deficit increase of over $70 million during the next decade. On a more positive note, foreign direct investment is expected to accrue slowly, but steadily, due to an improving external policy environment. This will help Tajikistan begin to climb its way out of debt. Though currently working with a trade deficit, the import-to-export ratio will continue to improve in the near future. Taxes and trade, however, will remain problematic issues if Tajikistan is unable to improve administrative capabilities and gain control over a number of its industries.