The Government of Tajikistan plans to significantly increase inflow of foreign investment in its economy in the medium term, according to the press center of the State Committee on Investment and State-owned Property Management (GosKomInvest).
The forecasts of key macroeconomic variables for 2021-2023 note that Tajikistan is expected to receive 682 million USD in foreign investment in 2021, 924 million USD in foreign investment in 2022 and 1.069 billion USD in foreign investment in 2023.
According to data from GosKomInvest, foreign investment in Tajikistan’s economy last year amounted to 607.1 million somoni, with 345.9 million USD of them being foreign direct investment (FDI).
Foreign direct investment was reportedly attracted mostly in the mining industry (67 percent of a total volume of FDI).
Besides, foreign direct investment was also attracted in sectors like processing industry, transport, communications, tourism, construction and so forth.
Last year, China was Tajikistan's largest source of FDI, with a 75-percent share in total FDI, mainly in the country's gold mines, construction, transport and communications.
Besides, investments in relatively small volumes were made last year by Russia (financial services, construction, communications), the United Kingdom (mining and financial services), Turkey (processing industry, construction and financial services), and some other countries.
With an annual average of about 15% of GDP over the past decade, total investment in Tajikistan is relatively low by regional and international standards. According to the UNCTAD World Investment Report 2020, inbound FDI in Tajikistan decreased from 360 million USD in 2018 to 213 million USD in 2019. FDI stocks reportedly totaled up to USD 3 billion in 2019. Aluminum, cotton and energy are the sectors that attract the most foreign investment. Tourism also reveals its potential. Tajikistan offers a favorable environment for regional and cross-border investments. The main investors are, in order, China, Russia, Kazakhstan, the United Kingdom and the United States. China gradually replaced Russia as the largest investor in the country, as part of its Belt and Road Initiative. China funded thermal and hydropower plant projects in Tajikistan as well as a road infrastructure development project. The government is directing foreign investment towards the development of new industries while modernizing existing industries. All private investments are selected and require government approval. Investment laws are applied inconsistently. The Tajik parliament continued to grant tax exemptions to Chinese firms investing in the country.
Tajikistan was ranked 106th in the World Bank's Doing Business report for 2020, gaining 20 spots from last year. In particular, the World Bank highlights the progress made in getting credit and electricity as well as starting a business. However, poor industrial productivity, complicated procedures for obtaining a building permit, difficult access to credit and poor resolution of insolvency cases, a fragile and uncertain business environment and poor infrastructure are a few factors that limit the attractiveness of the country. Under Tajik law, all land belongs to the state. The judiciary lacks independence. Many judges are poorly trained and inexperienced, and corruption is widespread. Labor regulations are not flexible enough to facilitate dynamic employment growth.
