Tajikistan vs. Uzbekistan

Tajikistan is a poor, mountainous country with an economy dominated by minerals extraction, metals processing, agriculture, and reliance on remittances from citizens working abroad. Mineral resources include silver, gold, uranium, antimony, tungsten, and coal. Industry consists mainly of small obsolete factories in food processing and light industry, substantial hydropower facilities, and a large aluminum plant - currently operating well below its capacity. The 1992-97 civil war severely damaged an already weak economic infrastructure and caused a sharp decline in industrial and agricultural production. Today, Tajikistan is the poorest among the former Soviet republics. Because less than 7% of the land area is arable and cotton is the predominant crop, Tajikistan imports approximately 70% of its food.

Since the end of the civil war, the country has pursued half-hearted reforms and privatizations in the economic sphere, but its poor business climate remains a hindrance to attracting foreign investment. Some experts estimate the value of narcotics transiting Tajikistan is equivalent to 30%-50% of GDP.

Because of a lack of employment opportunities in Tajikistan, more than one million Tajik citizens work abroad - roughly 90% in Russia - supporting families back home through remittances that in 2017 were equivalent to nearly 35% of GDP. Tajikistan's large remittances from migrant workers in Russia exposes it to monetary shocks. Tajikistan often delays devaluation of its currency for fear of inflationary pressures on food and other consumables. Recent slowdowns in the Russian and Chinese economies, low commodity prices, and currency fluctuations have hampered economic growth. The dollar value of remittances from Russia to Tajikistan dropped by almost 65% in 2015, and the government spent almost $500 million in 2016 to bail out the country's still troubled banking sector.

Tajikistan's growing public debt - currently about 50% of GDP - could result in financial difficulties. Remittances from Russia increased in 2017, however, bolstering the economy somewhat. China owns about 50% of Tajikistan's outstanding debt. Tajikistan has borrowed heavily to finance investment in the country's vast hydropower potential. In 2016, Tajikistan contracted with the Italian firm Salini Impregilo to build the Roghun dam over a 13-year period for $3.9 billion. A 2017 Eurobond has largely funded Roghun's first phase, after which sales from Roghun's output are expected to fund the rest of its construction. The government has not ruled out issuing another Eurobond to generate auxiliary funding for its second phase.

Uzbekistan is a doubly landlocked country in which 51% of the population lives in urban settlements; the agriculture-rich Fergana Valley, in which Uzbekistan's eastern borders are situated, has been counted among the most densely populated parts of Central Asia. Since its independence in September 1991, the government has largely maintained its Soviet-style command economy with subsidies and tight controls on production, prices, and access to foreign currency. Despite ongoing efforts to diversify crops, Uzbek agriculture remains largely centered on cotton; Uzbekistan is the world's fifth-largest cotton exporter and seventh-largest producer. Uzbekistan's growth has been driven primarily by state-led investments, and export of natural gas, gold, and cotton provides a significant share of foreign exchange earnings.

Recently, lower global commodity prices and economic slowdowns in neighboring Russia and China have hurt Uzbekistan's trade and investment and worsened its foreign currency shortage. Aware of the need to improve the investment climate, the government is taking incremental steps to reform the business sector and address impediments to foreign investment in the country. Since the death of first President Islam KARIMOV and election of President Shavkat MIRZIYOYEV, emphasis on such initiatives and government efforts to improve the private sector have increased. In the past, Uzbek authorities accused US and other foreign companies operating in Uzbekistan of violating Uzbek laws and have frozen and seized their assets.

As a part of its economic reform efforts, the Uzbek Government is looking to expand opportunities for small and medium enterprises and prioritizes increasing foreign direct investment. In September 2017, the government devalued the official currency rate by almost 50% and announced the loosening of currency restrictions to eliminate the currency black market, increase access to hard currency, and boost investment.