London, 16 April 1997 (RFE/RL) -- The gross domestic product of Tajikistan, still suffering the legacy of civil war, fell by a further seven percent last year while inflation is expected to soar to 100 percent this year. That's according to a report issued this week by experts from the European Bank for Reconstruction and Development.
The report says the problems of the Central Asian country, with its population of 5.8 million people, should not be underestimated.
Since independence the government has been plagued by serious civil unrest, most notably the civil war that erupted in 1992. But with a new pact between the government and its opponents in place since last December and the ceasefire of 1995 still holding, conditions "could soon be in place again for an end to the country's political instability."
The report says: "If conditions improve, Tajikistan will increase its contacts with the international economy. As this happens, investors keen on underdeveloped emerging markets will wish to consider the opportunities on offer in one of the world's last investment frontiers."
But Tajikistan is saddled with negative growth, rampant inflation, and a swollen state sector. It also has a high foreign debt.
In 1995, GDP declined 12 percent. In 1996, it fell by seven percent. But an increase in world market prices for one of Tajikistan's main exports, aluminum, brought an increase in hard currency income. The government hopes to reduce the decline in GDP to three percent in 1997.
Inflation continues to fluctuate. In 1994, it was five percent. In 1995, as the country introduced a new currency, the Tajik ruble, it jumped to 1,500 percent. In 1996, it dropped to 35 percent. The report says: "This year it is forecast to be 100 percent."
The restructuring of loss-making state enterprises has been delayed until this year.The government continues to be involved in day-to-day decision-making at major state companies. Management practices remain similar to those in place before independence in 1991.
The EBRD report says the number of people on compulsory unpaid leave and shortened working hours has increased sharply.
The civil war slowed Tajikistan's attempts to privatise state-owned enterprises. By the end of 1995, less than 10 percent had been privatised. A quarter of the consumer sector is private. But transport, wholesale trade and industrial sectors are still in the state sector.
In May, 1996, the government launched "a significant new privatisation program which aims at privatisng 40 percent of the country's public enterprises by the end of 1997."
Private ownership of agricultural land is not envisaged. Land will be assigned either to agricultural cooperatives without the right of resale, or leased to farmers on a long-term basis. Only six percent of cultivated land accounting for 30 percent of farm production has been leased to private farmers. But almost all dwellings have been privatised.
In 1992, the government lifted price controls on 80 percent of all goods. In 1993, some price controls were reintroduced. In 1995, prices for most consumer items were liberalised. Later, bread and flour prices were freed. But utility prices are still partially subsidised.
The report says the government's program aims at achieving a sharp reduction in inflation through the tightening of fiscal and monetary policy. It also seeks a normalisation of relations between the country and its external creditors through concessional debt restructuring.
In December, President Imomali Rakhmonov signed a decree to speed up privatization. Under the decree the government will establish a securities market, and seek to attract foreign and domestic investment.
The report says that life for the foreign investor in Tajikistan remains "rough and ready." Still, the country has attracted almost 100 million dollars in foreign investment. There are 200 local-foreign joint ventures registered in the country -- 70 percent in production.
In December, the EBRD announced it was providing $8.6 million to assist two local banks, Orientbank and Tajikbank, to offer credit lines for the financing of small private firms. This was the first loan the EBRD had extended in the country since independence in 1991.
However, the EBRD has been active in providing the country with technical assistance. In 1996, the EBRD, in cooperation with the Netherlands Ministry of Foreign affairs, carried out a $4 million progam to strengthen the runway at Dushanbe airport
The report says Tajikistan offers much potential to investors. It is rich in mineral resources. It is poised to become a leading producer of gold. It has significant deposits of silver, coal, and precious stones. It is the third largest producer of hydro-electric power in the world, and there are good opportunities for eco-tourism. But the report says: "Investor interest is offset at present by an array of uncertainties."