Tajikistan Too Underdeveloped for FEZ

30-Aug-07

Tajikistan will continue to experience setbacks in establishing free economic zones unless the government invests more in basic infrastructure and solves the winter energy shortage, say NBCentralAsia experts.

On August 20, Tajik president Imomali Rahmon expressed his dissatisfaction with the speed at which free economic zones, FEZ, areas where companies are taxed lightly or not at all to encourage development, are being set up in Tajikistan and called for faster progress.

Little has been done since the government began to weigh up the benefits of FEZs in the mid Nineties.

Tajikistan is still at the research stage and officials are currently analysing how FEZs affect trade and state revenue in Egypt and Turkey.

Deputy minister of economic development and trade Larisa Kislyakova explains that progress is slow because the procedure for developing tax and customs duty exemption schemes is overly complicated.

The government is also wary of repeating the failures in Kyrgyzstan where several unsuccessful FEZ have been forced to close.

The heads of the Khatlon, Sogd and Gorno-Badakshan regions, which have been earmarked for the zones, have been ordered to specify exactly where they should be.

Last year, the Russian company Norilski Nikel said that it wanted to invest more than one billion US dollars in Sogd provided the area was turned into a FEZ.

However, economists warn that the government would lose out on vital tax revenue if a FEZ was established in Sogd, the most industrialised region in Tajikistan where the largest companies operate.

NBCentralAsia experts say that Tajikistan is not ready for these zones because its lacks the basic infrastructure and reliable electricity supplies needed to attract investors.

Economist Gurez Rahimov says that there is nowhere suitable for a FEZ. The entire country is blighted by dire energy shortages in winter and the transportation and communications systems are so ancient that it is very difficult for freight to travel through the country.

Tajikistan has the largest hydroelectricity capacity in Central Asia, yet most of the country has to make do with two to three hours of electricity during winter, when there is a shortfall in generation.

The Khatlon region in the south of the country is probably Tajikistan’s best bet, continued Rahimov.

On August 26, a new bridge opened on the Panj river linking Tajikistan with Afghanistan and South Asia, and two new hydroelectric power stations and a railway network will also be completed in the region within the next two years.

But there is still a lack of services for workers and NBCentralAsia analyst Khodjimuhammed Umarov says that “good hotel and restaurant services and housing need to be set up otherwise foreign investment is unlikely to flow in”.

(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)