Q&A with Tajikistan’s Economics Minister
April 29, 2014 - 4:01am, by David Trilling
Tajikistan’s economic minister has one of the toughest jobs in his government: attracting foreign investment to the impoverished Central Asian country, which ranks poorly on international corruption and business-development indices.
A former head of Tajikistan’s National Bank and ambassador in Europe, Minister of Economic Development and Trade Sharif Rahimzoda, 55, helped negotiate Tajikistan’s 2013 entry into the World Trade Organization. He was also instrumental in securing a World Bank promise to fund the CASA-1000 project to carry Central Asian electricity to Afghanistan and Pakistan.
Rahimzoda, who has been economic minister since January 2012, sat down recently to discuss these projects and Tajikistan’s energy deficit with EurasiaNet.org in the lush garden behind his Dushanbe office. Rahimzoda spoke in English and Russian; the interview has been edited for length and clarity.
EurasiaNet: Russia is aggressively pushing to create a Customs Union and then a Eurasian Union among former Soviet states. The Kyrgyz have acutely felt this pressure and they’re moving toward membership. Some Russian officials have come here to Tajikistan and pushed for you to join. In terms of the Customs Union, how do you see Russian interests here manifesting themselves?
Sharif Rahimzoda: Yes, currently different seminars and discussions are going on regarding the inclusion of former Soviet states into the Customs Union, and Tajikistan is not an exception. But we’ve become a member of the WTO and naturally we have some obligations before other WTO members, including Russia [which joined in 2012]. We created a special commission to study all the agreements between members of the Customs Union. If it is beneficial for us, we are not against cooperating with them, but within the framework of our obligations to the WTO. The question is how we will negotiate. Naturally, we will protect our interests. Let’s say, under our agreement with the WTO members our priority is the development of light industry, agriculture and mining.
Russia is our main trading partner, and we’ll see how the Kyrgyz government implements their action plan on Customs Union membership. Sometimes they announce that they’re in favor of joining, sometimes they say, "No, we will lose by joining." They’re asking for some additional financing from other members of the Customs Union [Russia, Kazakhstan and Belarus]. But still, despite ongoing negotiations they have not yet joined the Customs Union.
EN: So is it safe to say you’re watching Kyrgyzstan’s experience closely?
SR: Yes, it is. We’re watching their experience, of course. And the Kazakhs are not so happy, either. With recent changes in Russian monetary policy, Kazakhstan lost some of its international reserves. They even changed their currency exchange rate in one night by 20 percent, but still they have some difficulties.
EN: How does the fall in the value of the Russian ruble affect Tajikistan?
SR: Of course we are under pressure too, and the exchange rate of our currency is also depreciating. Now we’re considering this problem and we have to see what happens if it continues and what actions to take. We had to spend some of our reserves in order to support a stable exchange rate for our somoni, but because of limited reserves we can’t do this for a long period of time. Certainly, it has some impact on our economy.
EN: The Talco aluminum plant, Tajikistan’s largest industrial asset, uses a lot of electricity. The World Bank says TALCO uses 40 percent of Tajikistan’s total electrical output, while the country faces major blackouts for most of the winter and spring. So it seems TALCO is stymying development. Is TALCO worth it to Tajikistan?
SR: Yes, TALCO is not only an economy-forming company. It plays important role in the social sphere as well. It is about a large number of jobs; the city [Tursunzoda] is dependent on it; many social issues depend on this plant. And as you know, in summer we have surplus electricity. And Talco consumes electricity mostly in summer, so we are sure that TALCO is very important for our economy. Therefore we support this company. Tajikistan, with its growing population, needs these jobs.
In countries with large economies, the closure of such an enterprise wouldn’t have a significant impact, because its contribution to the total GDP is not significant. However, Tajikistan has only a few such enterprises, and their share in the economy is large. We have more than 30 other enterprises manufacturing products for TALCO or providing services to it. That is why we have to support it.
We can’t stop the production process for even a short time, because restarting production would cost $250-$300 million. For Tajikistan that’s a huge amount of money.
EN: It’s impossible to come to Tajikistan these days and not hear about the Rogun dam project, which has been delayed for years. Many observers think that if the plans didn’t call for it to be the world’s tallest dam, it wouldn’t be so delayed. Do you feel that is the case? Would it be easier to get investment if it were shorter?
SR: It’s difficult to give a concrete answer now. We asked the World Bank to attract international experts and conduct technical-economic, environmental and social impact assessments for the Rogun hydropower project. The process is ongoing. Within one or two months we expect their final assessment. You may know we have other hydropower plants downstream – Nurek, Sangtuda-1 and 2, Boigozi, Golovnaya – and their life depends on Rogun. [Editor: because Rogun is seen as part of a system designed in the 1960s and 1970s to manage water and silt downstream.]
EN: The World Bank recently promised to fund about half the $1 billion-plus CASA-1000 electricity transmission project. Does that project make sense without Rogun?
SR: Yes, it does. Actually, they adopted this project because it depends not on Rogun, but on the amount of current surplus electricity in Kyrgyzstan and Tajikistan. For Rogun, new transmission lines will be built.
EN: But that summer surplus is falling because your economy is growing.
SR: Every year we need more and more electricity and, therefore, we need Rogun. Rogun has to give us electricity. Investors do not come because during winter we cannot provide electricity. They cannot run production year-round. We don’t have gas or oil. There’s only one source of energy – hydropower – and this is why we’re trying to build Rogun. At present, we produce around 16-17 billion kilowatt-hours annually and maybe in 15 or 20 years we will need over 30 billion kilowatt-hours.
EN: And what will you do with the money CASA-1000 brings into the country?
SR: First, it’s not such a big amount of money. Second, of course we will begin by paying our debt, because in order to build CASA-1000 we will have to attract loans from other countries, the World Bank, the Islamic Development Bank and other financial institutions. So, we will pay back all the loans and interest first. And then, the rest will go to the budget, and will be used for the development of other sectors of economy.
EN: There’s some concern that CASA-1000 will be used to export electricity in the winter when there’s a deficit. How will you ensure that this does not happen?
SR: We have an existing agreement between four countries: Kyrgyzstan, Tajikistan, Afghanistan and Pakistan. Based on the agreement, we have an obligation to sell electricity only during four or five months in the summer period. It is provided in the agreement, and even if we wanted to, we cannot export electricity during the winter period. However, there is a particular part of the country, Badakhshan [in the east], where power is produced in excessive quantities even during the wintertime. This excess power is not used for the country’s needs, since the region is not yet connected to the common grid. Therefore this limited amount of power is being exported to neighboring Afghanistan.
EN: So when I see a figure for winter electricity exports, is it mostly from Badakhshan?
SR: No, some is from Badakhshan, some is from central Tajikistan, but it is not much. Mostly we sell electricity to Afghanistan during the summer period.
EN: What is the biggest challenge to attracting non-political foreign investment, to attracting business that is not – like Chinese construction projects, for example – negotiated at the inter-governmental level?
SR: We do a lot to improve the investment climate. To this end, with the support of the European Bank for Reconstruction and Development and with the participation of local and foreign investors, we have established the Consultative Council on Improvement of the Investment Climate under our president. At Council meetings, we discuss issues concerning legal protection of investments, elimination of barriers impeding successful development of the private sector, etc. […]
As a result, Tajikistan was twice included in the list of top-ten reformers in the World Bank’s [annual] Doing Business Report. Currently we are working to implement an action plan to improve the indicators that determine a country’s rating. [Editor: Tajikistan ranks 143 out of 189 economies in the Bank’s most recent report.]
Our main goal is to increase the confidence of investors [by providing] a good return on their investments.
Attracting non-political investments along with the improvement of the investment climate […] requires political stability in the region. I believe that as the situation in Afghanistan improves, there will be more interest in investing in our country.
EN: Many businessmen, local and foreign, say they’re afraid the courts here are not independent. Tajikistan rates poorly in international corruption surveys. What do you tell investors with these concerns?
SR: Last year, Tajikistan became a member of the WTO [World Trade Organization]. In preparing for accession, we negotiated with WTO members in order to bring our legislation in compliance with international standards. Now, in addition to Tajikistan’s courts, foreign investors may approach international courts as well.
EN: And corruption? How do you assure investors that despite Tajikistan’s poor rating, it is is a good place to invest?
We do not ignore corruption and we fight against it. We have several state bodies fighting corruption. […] Parliament has adopted an anti-corruption law and the United Nations Convention against Corruption. In addition to that, and in order to modernize the system, the Accounts Chamber of Tajikistan was established in 2011 to apply international standards in [monitoring] budget revenues and expenditures, control over the activity of state banks, etc.
One of our government’s priorities is to eliminate corruption. The proper way to achieve this is to minimize the physical contact between citizens and civil servants. To this end, we’re implementing electronic-government initiatives, including for paying taxes, and single windows for opening new businesses, for export, import and transit procedures, which will begin test mode operation early this summer; a unified automated information system for customs declarations was launched in 2011. As you see, we are doing our best to create a favorable investment climate and to convince investors to invest in Tajikistan.
Editor's note:David Trilling is EurasiaNet's Central Asia editor.
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