Participants at the European Bank for Reconstruction and Development's annual meeting in Bucharest said the Central Asian country of Tajikistan has come a long way since the end of its civil war and that there is plenty of room for private investment. But bank officials warned that enormous challenges will have to be met before the country can attract investment in substantial amounts.
Bucharest, 22 May 2002 (RFE/RL)) -- Participants at the European Bank for Reconstruction and Development's annual meeting in Bucharest said Sunday that Tajikistan has seen substantial progress since the end of its five-year civil war in 1997.
The EBRD's deputy chief economist, Ricardo Lago, said Tajikistan's gross domestic product has grown by one-third over the last three years. At the same time, he said, the government has managed to keep inflation low.
Problems, however, remain. Of the 27 countries being assisted by the EBRD -- founded in 1991 to promote free-market economies in the former communist countries of Eastern Europe and the Soviet Union -- Tajikistan comes in last place in terms of foreign investment.
Lago said that despite the country's economic growth and macroeconomic achievements, "formidable challenges" remain. "The challenges have to do with improving business climate, with issues of refugees, [and] politics, the debt sustainability of Tajikistan. The debt-to-fiscal-revenues rate is about 350 percent. So it's quite high."
Abdujabor Shirinov, first deputy chairman of the National Bank of Tajikistan, explained how the Tajik government is addressing these challenges. Speaking through an interpreter, Shirinov said the government is improving the investment climate and has implemented favorable changes in tax and customs procedures.
"All the customs and tax provisions are quite clear and transparent. Foreign investors are also protected by numerous bilateral agreements between Tajikistan and other countries. Tajikistan is a party to a number of multilateral documents that also provide foreign investors additional guaranties against risk," Shirinov said.
In addition, Shirinov said, the Tajik government has recently identified the main areas for economic reforms and growth.
"The priority sectors include hydroelectricity, transportation, and the processing of agricultural products based on our traditions and raw materials available in the country. It would be extremely profitable to develop water resources in the country, both for energy purposes and for our agriculture," Shirinov said.
Shirinov said the government is now working on a draft law on free-trade areas, which is believed to spur inflows of foreign investment, new technologies, and know-how.
"Tajikistan has all the conditions in place to establish such free-trade zones. Those [conditions] include a very good climate in the region, a large volume of low-cost natural resources, low-cost labor, [and] a substantial market for goods and services," Shirinov said.
Thomas Reinhart is a board member of Paul Reinhart AG, a family business based in Switzerland and involved in cotton exports out of Central Asia, including Tajikistan. He said that since the end of the civil war in 1997, cotton production has rebounded but remains lower than Soviet-era levels.
While a return to Soviet levels of cotton production might not be possible or even desirable, Reinhart added, there is still ample room for growth. The main obstacle for further recovery, he said, is the lack of financing.
"Since the end of the Soviet times, it has become difficult to obtain financing for inputs such as the maintenance of irrigation facilities, chemicals, fertilizers, pesticides, and so on," Reinhart said.
Reinhart said he regrets that efforts by Tajik companies to meet their economic obligations have not made it any easier to find financing. As far as his own company is concerned, he said, delays of reimbursement happen but contracts have always been respected despite the volatility of cotton prices.
Matthew Scanlon is project-development manager for the Aga Khan Fund for Economic Development, or AKFED, a for-profit international institution working in Tajikistan since 1992.
Scanlon said the Tajik legal environment is still in development. He pointed out, however, that the government has been cooperative in ensuring that the legal environment remains positive for investments.
"Our microfinance program [has been] operating in a legislative vacuum for a number of years. But this has not caused us problems because the government recognizes the project is beneficial. Now all that legislation is, of course, being cleared up on a continuous basis," Scanlon said.
Scanlon said, however, that foreign companies and investors looking to do business in Tajikistan would be well-advised to maintain a strong presence and demonstration of commitment. Many business endeavors, he said, require day-to-day effort in order to see any progress.
Scanlon said he sees agro-processing as one of the best investment opportunities for the country, although he said any activity will have to start on a relatively modest basis given the small concentration of products available in any region of Tajikistan. He also cited the textile industry as a potential area for major growth.