International Trade Centre, Tajikistan

Маркази тиҷорати байналмилалӣ, лоиҳаҳо дар Ҷумҳурии Тоҷикистон

WTO entry places Tajikistan in global marketplace

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As one of the poorest former Soviet Republics, Tajikistan has little going for it. A small population of seven million and GDP per capita of USD 991, the land-locked mountainous country does not boast of hydrocarbons production as some of its Central Asian counterparts.

Added to the energy poverty, is a repressive regime that is aligned with the Russian government and brooks little dissension.

Last year, Tajikistan was ranked among the 16 worst abusers of religious freedom by the United States Commission on International Religious Freedom.

The government “suppresses and punishes all religious activity independent of state control, and imprisons individuals on unproven criminal allegations linked to religious activity or affiliation,” the commission said in a scathing report.

For a country that seems to be on the periphery of the global economy, Tajikistan is also heavily dependent on the ebbs and flow of world markets. Highly dependent on food and fuel imports apart from remittances, Tajikistan remains vulnerable to external forces.

“A recession in Russia — where more than 90% of Tajik migrants are employed — would lower domestic demand and growth and would adversely affect government revenue, leading to an increase in the projected fiscal deficit,” said the World Bank in its report on the country.

But hopes have risen after Tajikistan is set to become the 159th member of the World Trade Organization on March 2.

The WTO notes that as part of the accession accord, Tajikistan has agreed to undertake a series of important commitments to further open its trade regime and accelerate its integration in the world economy.

“The deal offers as well a transparent and predictable environment for trade and foreign investment,” said the WTO in its statement. “Tajikistan would apply WTO provisions uniformly throughout its entire territory, including in regions engaging in border trade, special economic zones and areas where special regimes for tariffs, taxes and regulations were established.”

WTO offers silver lining

The WTO accession could give a boost to the economy which is already expected to grow 7.5% in 2012, a tad higher than the 7.4% recorded in the previous year, according to the country’s statistical agency.

“Over the medium term, real GDP is projected to grow at around 6% a year. The outlook for 2012 and beyond is generally positive,” said the Bank.

Much of the growth is expected to come from construction and services, apart from power, mining and agriculture.

Meanwhile, cotton and aluminum which had been the mainstay of the economy in the past have suffered due to lower global prices.

“Starting from a high base, remittances are expected to grow more slowly compared to the last five or six years. Nonetheless, they could be a bigger contributor to future growth if a larger share is directed into private investment.”

High remittances have also helped Tajikistan to reduce the poverty levels from 72% in 2003 to 46.7% in 2009, according to World Bank data.

But the European Bank for Reconstruction and Development expects economic growth to slow down in the short term.

“Eurozone developments and their impact on Russia are bound to affect Tajikistan through lower exports and remittance inflows. Moreover, recent measures to reduce railway traffic through Uzbekistan will also negatively affect trade and economic activity in Tajikistan.”

Indeed, relations between Tajikistan and Uzbekistan remain hostile, with Dushanbe accusing Tashkent of launching an economic blockade against the country.

“Dushanbe frequently condemns Tashkent for exerting pressure on Tajikistan in order to impose its will upon this smaller and weaker country,” wrote Farkhod Tolipov, an analyst with Central Asia Caucasus Institute. Last year, the Tajikistan’s Embassy in Moscow accused Uzbekistan of blockading railroads and cargo and gas supply to Tajikistan.

Much of the hostility surrounds, but is not limited to, Tajikistan’s Rogun Hydropower Station which is opposed by Uzbekistan, fearing that it will lose jobs and economic growth if the project is built.

Tajikistan desperately needs the power station to bring some relief to its overworked electricity grid and gain some kind of energy independence.

To push the project along, the World Bank recently arranged a meeting between all key parties impacted by the power station, and launched a couple of reports as well.

Developing natural resources

“The presentations on seismic hazard assessment and geology assessment contributed to a rich discussion on the key issues of dam and public safety, including analysis of possible earthquakes, tectonic faults, landslides, salt wedge, and other factors on the proposed project feasibility,” said Saroj Kumar Jha, World Bank Regional Director for Central Asia. “The interim findings from the presentations, reports and feedback from the panels of experts are that the dam type under consideration and stability of the slopes appear to be acceptable.”

However, Galina Saidova, Uzbekistan’s Minister of Economy argued that the “presented documents have serious omissions, distortions and mistakes that can lead to improper conclusions.”

“In these circumstances, we have to acknowledge that our fear related to serious risks of high degree probability under the implementation of the project of construction of the Rogun HES remain, and the existing currently studies confirm the possibility of negative impact of the construction of the object on the ecological and social atmosphere in the region.”

Help may come from other sources for Tajikistan.

Toronto Stock Exchange-listed Tethys Petroleum says it estimates prospective resources of 27.5 billion barrels of oil equivalent, consisting of 114 trillion cubic feet (3.22 trillion cubic meters) of gas and 8.5 billion barrels of oil.

“This is a tremendous deal for Tethys and extremely beneficial for the country of Tajikistan,” said Dr. David Robson, Executive Chairman and President of Tethys, who have now joined hands with France’s Total SA and China’s CNPC to develop the resources.

“Our partners each bring additional strengths to the project with extensive experience and skills in exploring and developing giant petroleum deposits and with the new pipelines carrying gas from Central Asia to China providing a potential export route for any sizeable gas discovery.”

See map of Tethy’s assets in Tajikistan:

Russian gas giant Gazprom is also active in the country and is working on basins which may yield as much as 80 billion cubic meters of gas.

“This would enable Tajikistan to provide all of its domestic needs for natural gas in full and liberate the country from energy dependence,” Gazprom said.

Joining the global trade club 

Tajikistan’s inclusion in the WTO club could help expand its economy, which have been constrained as a landlocked country dependent on tricky relationship with its neighbors.

While Tajikistan will benefit from access to global markets for exports of commodities such as silver and non-ferrous metals such as aluminum, lead and zinc, the WTO membership could also bring in greater foreign investment into the country.

“Membership in the WTO will likely reduce the cost of production in the industrial sector and may lead to a possible increase in exports of hydropower,” said the World Bank.

“A reduction of customs duties on imported goods will likely allow the relatively cheaper production of goods with a proportion of foreign components in Tajikistan.”

Still, don’t expect the rewards to come immediately. A number of former Soviet Republics such as Kyrgyzstan and Ukraine have not seen the expected economic bump, according to the World Bank.

“Due to the low competitiveness of its industrial products, Tajikistan will not avoid considerable losses after opening the home market to foreign goods,” the World Bank said.

Over time, foreign businessmen (in particular the Chinese) may expand their activity and local production will decline in less competitive sectors, which could increase unemployment.

Stagnation in small- and medium-sized businesses may occur because it will be difficult to compete with imported goods and services. Additionally, because the financial services sector is undeveloped, domestic banks may lose competitiveness that would adversely affect the reliability of the domestic banking system.

While the WTO accession may be a double-edged sword, it will certainly compel the Tajikistan authorities to invest in upgrading its own institutions and stimulating the private sector.

“Tajikistan’s biggest challenge in the coming years will be lifting its low rates of private investment,” said the Bank. “Total investment, dominated by public investment, has hovered around 20% of GDP during the past decade, with private investment stagnating at only around 5% of GDP.”

© 2013

© Copyright Zawya. All Rights Reserved.

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