Tajikistan is a challenging place to do business but presents potential 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 continues to express interest in attracting more foreign investment. The government hosted an October 2021 investment forum to highlight its commitment to simplifying investment policies. Tajikistan’s ambassador to the United States – who formerly served as the head of the government’s Investment Committee – enlisted high-level government support for outreach to U.S. companies in 2021. Nevertheless, the poorest of the Central Asian countries harbors few U.S. investors and remains an uncompetitive investment destination.
President Emomali Rahmon publicly emphasizes the need to foster private-sector-led growth, and attracting investment is prioritized in national development strategies. These strategy documents notwithstanding, authoritarian policies, bureaucratic and financial hurdles, widespread corruption, a flawed banking sector, and countless business and tax inspections greatly hinder investors. The government’s commitment to dedicate significant financial resources to the construction of the Roghun Dam hydropower plant creates pressure for the Tax Committee to enforce or creatively interpret arbitrary tax regulations on companies outside of the wide business interests of President Rahmon’s family in order to meet ever-increasing revenue targets.
Politics also play a role. Remittances sent by Tajik labor migrants typically account for one-third of Tajikistan’s GDP, and the Russian Federation uses this leverage to ensure Tajik support for Russian foreign policy priorities, and/or to pressure Tajikistan into joining the Russian-led Eurasian Economic Union. Tajikistan is also saturated in opaque loans connected to China’s Belt and Road Initiative, and Chinese investments account for more than 60 percent of the country’s total Foreign Direct Investment. Finally, despite Tajikistan’s 2013 accession to the World Trade Organization, the Tajik government has imposed trade policies to protect private domestic interests without notifying its partners, notably in the poultry, mining, and alcoholic beverage sectors.
The COVID-19 pandemic laid bare endemic transport and infrastructure challenges in landlocked Tajikistan, imposed by geography but exacerbated by political isolation as borders with Afghanistan (following the Taliban’s return to power) and the Kyrgyz Republic (following deadly April 2021 border clashes) remain closed. Tajikistan’s rigid economy represents another systemic barrier as analyses show growth is consistently driven by remittance-fueled consumption and exports are concentrated in mining, metals, and agriculture, making Tajikistan especially vulnerable to commodity shocks in world markets.
Despite these challenges and risks to potential investors, Tajikistan is pursuing greater trade and investment links and has made modest progress on trade facilitation and tax reform to improve its investment climate in past years. In 2021 authorities continued small steps towards compliance on intellectual property rights protections. Should the government pursue an economic reform path, opportunities in energy, agribusiness, food processing, tourism, textiles, and mining could prove promising.