Tajikistan could boost growth and create more jobs by attracting investment to the agribusiness, textiles, and tourism sectors, says UNCTAD's investment policy review of the country, presented in Geneva on Tuesday.
With some of the world's highest mountains, Tajikistan was once a part of the Soviet Union. Today it maintains links with the Russian Federation, home to some 700,000 Tajiks migrant workers. In 2013, remittances accounted for 42% of Tajikistan's gross domestic product (GDP), among the highest shares in the world.
Although the country's GDP has grown on average 8% per year since 2000, half its working-age population is unemployed.
"What the data shows us is that private investment has been low, one of the lowest in Central Asia in fact, and that it has been concentrated in sectors that have not created enough jobs," said James Zhan, Director of UNCTAD's Division on Investment and Enterprise, speaking ahead of the presentation of UNCTAD's investment policy review for Tajikistan.
Between 2006 and 2014, Tajikistan attracted $2 billion worth of foreign direct investment (FDI), and more than half of this went into extractive activities such as mining. Russian and Chinese investors accounted for around 70% of total FDI during this period.
"We've seen increased investment in prospecting for minerals and oil, but for the time being, Tajikistan has only a few proven deposits compared with its neighbours," Mr. Zhan said, noting that these deposits are hard to access.
However, the report finds that the country, located in the old Silk Road region and in the heart of the Pamir Mountains, has strong potential in the agribusiness, tourism and textiles sectors.
Tajikistan, which shares some Persian traditions and a southern border with Afghanistan, used to be a major producer of fruits, vegetables, silk and cotton. But most of its agricultural products are unprocessed, leaving opportunity for processing, storage and packaging. Aluminum and cotton account for 60% of exports.
The report notes regulatory gaps, but Tajikistan's efforts to attract foreign investors have helped put the country into the world's top 10 reformers of the World Bank’s Doing Business report for the years 2010, 2011 and 2015.
"Foreign investment and a strong local private sector are essential to foster economic and social development,” said Mr. Dilshod Sharifi, Head of the WTO Affairs Department of the Ministry of Economic Development and Trade, commenting on the report.
UNCTAD has supported developing countries and economies in transition with a total of 45 investment policy reviews , and provided technical support with implementing recommendations. Studies show the reviews have helped countries to attract and benefit from FDI and to improve the business climate.