The U.S. Department of State’s Investment Climate Statements note that Tajikistan presents high-risk, high-reward opportunities for foreign investors who have experience in the region, a long-term investment horizon, and the patience and resources to conduct significant research and due diligence.

At the most senior levels, the Tajik government has consistently expressed interest in attracting more U.S. investment, but has not implemented reforms that would make the poorest of the Central Asian countries a more competitive investment destination.

In 2016, the government introduced the 2016-2030 National Development Strategy and the 2016-2020 Mid-Term Economic Development Strategy.  These strategies emphasize the importance of investment as a driver of growth.  President Rahmon created an investment council in 2007 with the EBRD support that includes government and private-sector stakeholders and conducts annual meetings.  Nonetheless, the council has not achieved tangible results in terms of increasing investment and improving the country’s business climate.  President Rahmon announced 300 days of reforms in January 2019, but has not made public a roadmap detailing what reforms this proposal would entail.

On January 15, President Rahmon announced a moratorium on all irregular inspections for the manufacturing sector for two years.  

Tajikistan’s three main strategic goals are energy independence, transportation connectivity, and food security.  The Tajik government has made some progress on these fronts, mostly with grant support from International Financial Institutions (IFIs).  Tajikistan has also benefited from Chinese Belt and Road Initiative loans for infrastructure projects.  However, the terms of these loans remain opaque and the international community – through fora such as the Paris Club – has expressed concerns over Tajikistan’s ability to service the increasing debt burden.  Nonetheless, advancing these strategic goals would make Tajikistan a more competitive investment destination.

The main obstacles to increased investment flows are Tajikistan’s authoritarian policies, geographic isolation, bureaucratic and financial hurdles, widespread corruption, a dysfunctional banking sector, non-transparent tax system, and countless business inspections.

Absent private investment, Tajikistan uses fiscal stimulus to achieve GDP growth, which pressures the Tax Committee to meet ever-increasing revenue targets.  Investors complain most vocally about the Tax Committee, which they claim arbitrarily enforces the tax code to maximize revenue collection.  Potential investors say the uncertainty this causes is more of a deterrent than high taxes.

The Tajik government has dedicated significant financial resources to the construction of Roghun Dam, an ambitious hydropower plant whose 3,600 MW capacity would double Tajikistan’s energy output.  Once completed in 2032, Roghun Dam’s electricity will meet Tajikistan’s domestic energy needs, provide sufficient power for the expansion of industrial enterprises, and be exported to South Asia.  Nonetheless, Roghun’s USD 3.9 billion price tag and the Tajik government’s struggle to secure concessional loans or investor financing has led the government to rely on its budget to fund construction.  This has severely affected Tajikistan’s investment climate, as tax collectors turn to the private sector to meet revenue targets.

The Antimonopoly Service, in consultation with the Tax Committee, the Ministry of Finance, and the Telecommunication Service, has raised rates for internet-based telephone calls and for mobile internet, services on which average Tajiks and businesses rely.  The plan increased internet-based phone tariffs tenfold and in the best case tripled mobile internet tariffs.  Mobile internet now costs USD 6.50 per gigabyte, one of the highest prices for internet in the world.

Tajikistan’s banking sector, which had suffered from lower remittance flows during the 2015 Russian recession, began to stabilize in 2017 despite an official non-performing loan rate of 30.3 percent in December 2018.  Some Embassy contacts believe this rate should be closer to 70 percent of the total loan portfolio.  Nonetheless, the improved stability was more a result of a rebounding world economy and larger remittance volumes, and not structural, economic changes.  At present, the National Bank of Tajikistan (NBT)’s policy rate is at 14.75 percent, with nominal lending rates at about 26 percent for loans in local currency and 18 percent for dollar loans.  A low financial inclusion rate of about 11 percent has forced commercial banks to restrict loan amounts they make available to borrowers.  Loans are therefore unaffordable for small- and medium-sized businesses (SMEs).  

Consumption is a major driver of Tajikistan’s GDP growth and household purchase power relies on migrant remittance flows, mostly from Russia where about one million labor migrants reside.  This reality heavily exposes Tajikistan’s economic performance to external shocks, especially to those from Russia.