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. In October 2022, the U.S.-Tajik Business Council in partnership with the Tajik Government and the U.S. Embassy in Dushanbe hosted a United States-Tajikistan Private Business Roundtable to explore business and investment issues facing U.S. companies in Tajikistan. Also in 2022, the government hosted international business delegations from Russian, Iranian, Belarusian, and South Korean companies. Nevertheless, the poorest of the Central Asian countries has few U.S. investors and remains a largely uncompetitive investment destination.
President Emomali Rahmon publicly emphasizes the need to foster private-sector-led growth, and his administration prioritizes attracting investment in national development strategies, especially investment in industrialization, technological development, fintech, and moving Tajikistan’s agriculture and light industries up the value chain. 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, according to the business community. 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 in order to meet ever-increasing revenue targets.
Politics also play a role. Remittances sent by Tajik labor migrants historically have accounted for the equivalent of 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 exert pressure on Tajikistan to join the Russian-led Eurasian Economic Union. Tajikistan is also saturated in opaque loans connected to the People’s Republic of China’s Belt and Road Initiative. According to the official statistics, Chinese investments accounted for more than 99.8 percent of the country’s Foreign Direct Investment in 2022. 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 2022, 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, IT, and mining could prove promising.
|TI Corruption Perceptions Index||2022||150 of 180||https://www.transparency.org/en/countries/tajikistan|
|Global Innovation Index||2022||104 of 132||https://www.globalinnovationindex.org/Home|
|U.S. FDI in partner country ($M USD, historical stock positions)||2021*||$38||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2021*||$1,150||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD?locations=TJ|
* Latest data available at time of report