The past months have seen a worrisome trend for Tajikistan, but, within it, positive news can be found. The Central Asian country reported a 24% increase in trade figures in the first half of 2024, however the trade gap between imports and exports has widened over 3.5 times within the last year. This, overall, results in growing concerns over the Tajik economy. Nevertheless, there is a silver lining in this statistic. Exports with a specific partner, namely Switzerland, have been increasing over the past 5 years at a rate of 23.2%, while exports with another partner, namely China, have been also increasing at an annual rate of a staggering 58% over the same timespan. Diving deeper into these figures, it can be understood that Tajikistan relies heavily on the mining sector to power exports to these countries, with gold, copper, antimony and other precious metals and minerals helping power its exports. In the wake of the energy transition, where rare earth metals are of uttermost importance, while the digital transformation mandates a huge demand in the semiconductor industry, Tajikistan can harness its position as a source of these elements. The main questions are what are the opportunities that can arise and what could be the limitations.
A World Full of Opportunities
Tajikistan has been well-known for its large gold reserves, but over the past years, several other resources have been revealed. As part of a deal of the national government with Zijin Mining, the mining site in Sughd has been acquired and, over the past 2 years, copper reserves have been found in the Jialu and Taror Mines, which were used solely for gold so far. More specifically, a 500 t/d copper smelter began commercial production in 2023. Copper is of uttermost importance for the energy sector, considering that it is a major conductor and is widely used in solar, wind and hydro power plants, as well as interconnection lines. Demand for the natural resource is booming and neighboring China alone accounted for 57% of the global demand for that element, with the rest of the Asian countries, with a focus on India, having 20% of the share, with high annual growth rates. Considering also an overall increase in demand of 20% by 2035, reaching 30 million mt/year, it can be considered a largely lucrative market for exports.
A similar situation exists for silver. The Sughd province is, again, the most lucrative one, being home to more than 100 thousand tonnes of silver reserves. Silver is perhaps the most important element for production of energy from solar panels and is in extremely high demand, with China, again, accounting for 18% of the demand, being located in the first place. Correspondingly to copper, India, Japan and other Asian countries, in close proximity to Tajikistan, are also among the world’s biggest consumers.
Other metals and minerals in Tajikistan that are expected to face major demand, on a similar level to silver and copper, are molybdenum, iron, as well as tin.
Existing Barriers & Mitigation Strategies
It can be understood, hence, that the energy transition is a major opportunity for Dushanbe to try and close the yawning gap between imports and exports and strengthen its economy. Nonetheless, there are several barriers that ought to be considered.
The most important barrier revolves around the need for additional infrastructure. For example, the Sughd region has several sites that are rich in Molybdenum, but its extraction requires substantial financing that does not exist on a national level. Dushanbe will need to reach out to international investors, with China holding the highest potential to provide financing. However, Tajikistan is already heavily indebted towards China and in general is struggling to hold its debt into sustainable levels. Another barrier might include social acceptance, as environmental damage, to which social acceptance is directly related. Leaks of cyanide into the water, damaging of fruit and vegetable crops are only a few of the issues reported as a result of mining activities and, without proper waste management practices and health and safety guidelines, it is likely that discontent and unrest will only grow towards the sector.
A way to resolve the barrier related to the infrastructure financing would be to develop a bilateral strategy, based on which Beijing will support Dushanbe in harnessing its mining sector to develop an industrial one on the new energy sector. More precisely, Tajikistan can use its vast reserves for EV, solar panel or other product manufacturing. In terms of the investment climate, Dushanbe is highly aligned with Beijing, having a centralized structure and relative stability, with the unrest in GBAO in 2022 being the sole exception.
This strategy also faces obstacles. Tajikistan is home to a very young workforce, with 70% of the population being below the age of 35. At the same time, a large part of the population is unskilled when it comes to the green energy sector, while also a large part of the workforce opts for seasonal work in Russia. And while the latter has been mitigated after the war on Ukraine started, the former persists. Other issues involve that Tajikistan already considers itself to have fallen on the debt trap diplomacy and that results in fear of even deeper engagement with China. Finally, China has not, to this extent, proven to open manufacturing/processing industries in other countries. With regards to the final point, nonetheless, it should be noted that this trend is changing. China seems to enter a new economic era, producing refined and high-technology products and looking to even outsource its production as a result of that, becoming a technology champion. The most indicative example of this is considered to be the passenger vehicle production plant in Hungary, constructed by BYD.
In sum, Tajikistan’s economy is facing considerable challenges on trade. However, based on its natural resource profile, it also has great potential of increasing its export volumes. Taking into account that this potential is currently buried in its mining sites, financial investments will be needed, which are very challenging for many players, like EU member states, due to the economic crisis that they are facing. China seems like an ideal partner, as well as other Asian states, such as India and Japan, however China’s further involvement is hindered by the Tajik debt. Broader collaboration to help also increase the country’s manufacturing industry can be a solution, but it needs to be developed in a sophisticated manner including green skills vocational training and, in the case of China, such outsourcing of production of its companies had not been witnessed to this point. Reflecting, nonetheless, on the tide shifting that is noticed the past year with regards to Beijing’s approach to outsourcing, it can be the perfect timing for Dushanbe to pursue such a joint strategy with China.
Written by: Dimitris Symeonidis
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