Tajikistan - Economy

Economy

Tajikistan was the poorest republic of the Soviet Union and is the poorest country in Central Asia as well as in the former Soviet Union today. The current economic situation remains fragile, largely owing to corruption, uneven economic reforms, and economic mismanagement. With foreign revenue precariously dependent upon remittances from migrant workers overseas and exports of aluminium and cotton, the economy is highly vulnerable to external shocks. In FY 2000, international assistance remained an essential source of support for rehabilitation programs that reintegrated former civil war combatants into the civilian economy, thus helping keep the peace. International assistance also was necessary to address the second year of severe drought that resulted in a continued shortfall of food production.

In 2006, GDP per capita of Tajikistan was 85% of 1990s level., while population has increased from 5.3 million in 1991 to 7.3 million in 2009.

On August 21, 2001, the Red Cross announced that a famine was striking Tajikistan, and called for international aid for Tajikistan and Uzbekistan. Tajikistan's economy grew substantially after the war. The GDP of Tajikistan expanded at an average rate of 9.6% over the period of 2000–2007 according to the World Bank data. This improved Tajikistan's position among other Central Asian countries (namely Turkmenistan and Uzbekistan), which seem to have degraded economically ever since. Tajikistan is an active member of the Economic Cooperation Organization (ECO).

In 2007 the Anzab tunnel was completed, connecting the previously hard to access Northern part of the country to the capital Dushanbe has been labeled as part of the new Silk Road. It is part of a road under construction that will connect Tajikistan to Iran and the Persian Gulf through Afghanistan.

In 2004 a bridge between Afghanistan and Tajikistan was built, improving the country's access to South Asia. The bridge was built by the United States.

The primary sources of income in Tajikistan are aluminium production, cotton growing and remittances from migrant workers. Aluminium industry is represented by the state-owned Tajik Aluminum Company - the biggest aluminium plant in Central Asia and one of the biggest in the world.

Tajikistan's rivers, such as the Vakhsh and the Panj, have great hydropower potential, and the government has focused on attracting investment for projects for internal use and electricity exports. Tajikistan is home to the Nurek, the highest dam in the world. Lately, Russia's RAO UES energy giant has been working on the Sangtuda-1 hydroelectric power station (670 MW capacity) commenced operations on 18 January 2008. Other projects at the development stage include Sangtuda-2 by Iran, Zerafshan by the Chinese company SinoHydro, and the Rogun power plant that, at a projected height of 335 metres (1,099 ft), would supersede the Nurek Dam as highest in the world if it is brought to completion CASA 1000 project will transmit 1000 MW of surplus electricity from Tajikistan to Pakistan with power transit through Afghanistan. The total length of transmission line is 750 km while the project is planned to be on Public-Private Partnership basis with the support of WB, IFC, ADB and IDB. The project cost is estimated to be around US$ 865 million.

Other energy resources include sizable coal deposits and smaller reserves of natural gas and petroleum.

Foreign remittance flows from Tajik migrant workers abroad, mainly in Russia, has become by far the main source of income for millions of Tajikistan's people and represents additional 36.2% of country's GDP directly reaching the poverty-stricken population. According to some estimates about 20% of the population lives on less than US$1.25 per day. Migration from Tajikistan and the consequent remittances have been unprecedented in their magnitude and economic impact. Tajikistan has achieved transition from a planned to a market economy without substantial and protracted recourse to aid (of which it by now receives only negligible amounts), and by purely market-based means, simply by exporting its main commodity of comparative advantage — cheap labor. The World Bank Tajikistan Policy Note 2006 concludes that remittances have played an important role as one of the drivers of Tajikistan's robust economic growth during the past several years, have increased incomes, and as a result helped significantly reduce poverty.

Drug trafficking is the major illegal source of income in Tajikistan as it is an important transit country for Afghan narcotics bound for Russian and, to a lesser extent, Western European markets; some opium poppy is also raised locally for the domestic market. However, with the increasing assistance from international organizations, such as UNODC, and cooperation with the US, Russian, EU and Afghan authorities a level of progress on the fight against illegal drug-trafficking is being achieved.

Tajikistan holds third place in the world for heroin and raw opium confiscations (1216.3 kg of heroin and 267.8 kg of raw opium in the first half of 2006). Drug money corrupts the country's government; according to some experts the well-known personalities that fought on both sides of the civil war and have held the positions in the government after the armistice was signed are now involved in the drug trade. UNODC is working with Tajikistan to strengthen border crossings, provide training, and set up joint interdiction teams. It also helped to establish Tajikistani Drug Control Agency.

Since the collapse of the USSR, there has been a significant and growing trend of Tajiks migrating abroad for jobs and seeking refuge. In 2010, remittances from Tajik labour migrants totaled an estimated 2.1 billion US dollars, an increase from 2009.