Honourable President of Tajikistan, heads of ministries and agencies, respected leaders of international financial organizations, esteemed development partners, representatives of the private sector, and members of civil society organizations, I am honoured to speak to this audience on behalf of the Development Coordination Council (DCC).
The DCC has played a key role in mobilizing development partners to support the implementation of the National Development Strategy of the Republic of Tajikistan until 2030. Eight years ago (in 2016) the Government adopted the National Development Strategy 2030, which aims to shift the country to a new growth model based on private investment, exports, and productivity to achieve sustained income growth. As we have already reached the half-way point in the Strategy’s implementation, it is a good time to look at what has been achieved and what remains to be done.
My conclusion at this point is: The country has achieved a lot – but we need to be more determined and more ambitious in our actions to enable Tajikistan’s economy to propel towards the new growth model.
Over the past two decades, on the back of economic growth and rising household incomes from remittances, GNI per capita increased nine-fold, from $160 in 2001 to $1,440 in 2023, which has supported rapid poverty reduction. The poverty rate, as measured by the international poverty line of $3.65 a day for lower middle-income countries, declined from over 90 percent in 1999 to an estimated level of 13.5 percent in 2023.
Tangible progress has also been made in key socioeconomic sectors, such as infrastructure development, healthcare, and education. In the last two decades, the share of stunted children under the age of 5 has reduced by half from over 40 percent to less than 20; life expectancy has increased by almost 10 years to an average of 71 years, and over the last 10 years enrolment in tertiary education has almost doubled – from 16 percent to nearly 32 percent. These are significant achievements and should be duly acknowledged.
But what got us here will not get us there! The NDS is actually very ambitious – and needs to be met with equally ambitious and determined policy actions to reach its goals. Let me give you a simple calculation to illustrate why I believe that we need to be much more determined in our policy actions, reforms, and investments. The World Bank and IMF estimate long-term potential GDP growth to be about 4.5 percent for Tajikistan. With the current population growing 2 percent annually, this leaves the net annual per-capita GDP growth at just 2.5 percent. At this growth rate, it will be 2060 before Tajikistan reaches the GNI per capita of an upper middle-income country. And this is if everything else stands still. SO, a steady state of 4.5% annual GDP growth is not enough. If we want to achieve an upper middle-income level by 2040, as envisioned by the NDS, we need an annual growth rate, not of 4.5% but of 8.5%.
So again, what got us here will not get us there. To meet the country’s development goals, the Government must be ambitious, implement deep structural reforms to further open and green the economy, address digital and physical connectivity bottlenecks, strengthen institutions for better public service delivery, and improve the quality of human capital—all of this to leave future generations with a livable and prosperous country.
From carbon-intensive towards a green economy: Tajikistan’s large rural population is dependent on irrigated agriculture. Its mountainous terrain is highly vulnerable to climate change and risks from natural disasters. According to the 2021 Notre Dame-gain index, a climate vulnerability index, Tajikistan ranks 98th out of 185 countries, indicating a high level of vulnerability to climate change. 50 percent of land area in Tajikistan is under a degradation trend. Climate change is causing glaciers to melt, and posing a threat to the country’s water resources, power generation, irrigation capacity, and food security. Although Tajikistan is not a significant contributor to greenhouse gas emissions, the carbon intensity of the economy is high. Recognizing these challenges, Development Partners are coordinating support to Tajikistan on greening its economy and building resilience with the adoption of the Green Economic Development Strategy for 2023-2037.
As an example, Tajikistan has the potential to transition to a greener economy by increasing the production of clean energy sources such as hydropower, solar, geo-thermal and wind. The completion of the Rogun Hydro-Power Plant is indeed essential for domestic clean energy supply, reducing the need for imported energy and associated emissions. The project is also expected to export electricity to neighboring countries, helping to reduce reliance on fossil fuels and decrease regional carbon emissions. Three critical steps to achieve lower carbon emissions and ensure a green transition include:
- First, establishing the right price incentives for low-carbon development and resilience building. This implies continuing to implement energy tariff reforms to make the power sector financially viable and, in the future, attract private capital to hydro, geo-thermal and solar projects.
- The Second step to lower carbon emissions requires introducing a gradual increase in excises on fossil fuels and carbon-intensive technologies that could not only reduce emissions and generate fiscal revenues but also support green public investments and promote co-benefits such as reduced air pollution and improved public health. Additionally, these resources could be used to compensate vulnerable households for the income loss from the negative impact of climate change and higher carbon prices.
- Finally, making significant improvements in the investment and business environment, to attract private capital for renewable and adaptation projects will be essential for an investment-driven, inclusive, green economy.
The sustainable exploration of rare earth metals could provide a new engine of economic growth and attract foreign investment. Tajikistan could capitalize on the opportunities that the green energy transition offers, including increasing the export of green goods, promoting green technologies, reducing fuel-import dependencies, and creating green employment opportunities in new industries. We also need to increasingly focus on urgent measures of adaptation and resilience building in vulnerable sectors, such as landscape restoration, climate smart agriculture, enhancing social protection mechanisms and addressing sustainable connectivity. These efforts align with the Green Economy Strategy and aim to ensure economic development while improving the population’s welfare standards.
From land-locked – to digital, air, land-linked country —
From digitally-locked – to digitally-linked Tajikistan: In the digital realm, we see immense potential for Tajikistan to leapfrog conventional growth pathways, unlocking opportunities for inclusive, resilient, and sustainable economic development. In digitalized markets, the probability that an individual is employed increases by over to 13 percent, employment per firm increases by up to 22 percent, and firm exports nearly quadruple. Digital technologies have the potential to reduce emissions in energy, mobility, and manufacturing by up to 20 percent by 2050. Moreover, the introduction of digital technologies can have a transformative effect on governments, driving effectiveness, efficiency, and transparency of public service delivery. It is estimated that developing economies could increase about 1 percent of GDP by introducing digital platforms.
Tajikistan, with a young and vibrant population, yet has the lowest levels of digital usage and digital skills in the region. Only 5 percent report making online payments to government services online). Investing in digital foundations (i.e., broadband and data connectivity and digital skills), digital enablers (i.e., interoperable, reusable, and safe digital platforms), and digital solutions can be transformative.
DCC partners are supporting the Government of Tajikistan in its efforts to mobilize internal and external resources to drive digital transformation with a focus on digitalizing public service delivery, moving to cashless economy and enabling digital solutions for improved governance, innovation, and economic growth and opportunities for youth, women, and vulnerable population groups. What is very critical is to make digital connectivity universal, affordable, and reliable. Cashless economy, online public services and digital financial services, e-commerce and business processes outsourcing, distance learning and telemedicine – none of these will be possible unless internet accessibility, quality and affordability are favourable. This requires significant investments -yes-, but first and foremost a favourable and modern policy and regulatory regime.
And the DCC has been very supportive on both the investment and the reform agenda – But we need to be met with the ambition and determination required by the NDS when it comes to modernizing telecom regulations, adopting a full package of regulatory acts to implement 2018 Data Protection Law, elaborating cybersecurity strategy and law, introducing a legal framework on digital identification, updating regulatory acts on digital banking, online consumer protection, and e-commerce.
From Air-locked to Air-Linked Tajikistan: Air connectivity stands as a priority in the country’s National Development Strategy 2030, as a means to develop Tajikistan’s real sector and build productive employment in hospitality industries. However, the sector is one of the most underdeveloped in the region and is not serving this purpose. The development of the sector is impaired by restrictive market access policies that prevent competition, weak capacity to enforce safety standards, and inefficient regulations that fail to regulate the conduct of service provider monopolies (e.g., airport, passenger, and fuel services) – resulting in high fees to passengers and airlines. Tajikistan stands 143rd in IATA’s Air Connectivity Global Ranking – the lowest in all ECA and only comparable to that of small island states in the Caribbean and the Pacific. As a result, Tajikistan passengers pay a hefty premium for air travel – in average 60-70 percent higher than other countries in the region with fully liberalized sectors, like Georgia or Armenia. These restrictions not only cause a significant welfare loss, but also curve passenger traffic. Even a partial opening as suggested by development partners in policy dialogue with the authorities would stimulate demand by at least 400,000 air travellers per year. What we need to do here is:
- To liberalize market access for international air services, government needs to adopt an Open Skies policy, without restrictions in the number of airlines, aircraft size, or tariffs.
- To improve the affordability and competitiveness of the sector, we need to enhance economic regulation governing passenger charges, fuel infrastructure sharing, and aeronautical infrastructure services, to avoid excess costs imposed by dominant market players or natural monopolies on users (airport services, jet fuel provider).
From Land-locked to Land-linked Tajikistan:
Transforming Tajikistan from landlocked to land-linked is important – (i) make cities more livable and (ii) transport as one key driver of development.
Make Cities More Livable: The recent National Urban Assessment for Tajikistan shows that urban development can be leveraged to alleviate challenges at the national level. But without a strategy that links economic development to urbanization, cities will be constrained from fulfilling their role as engines of growth and main generators of employment. The private sector has been central in creating employment opportunities in urbanizing countries, but its current role in key land-linked sectors of Tajikistan’s economy, such as real estate development, construction, and tourism, remains limited. Urban planning and land management systems need to be adjusted to sustain the shift to more competitive urban economies.
Transport sector as a key driver: The transport sector is a key driver for development but requires a profound transformation to fulfil the role. One of the objectives of the National Development Strategy is to transform Tajikistan into a transport hub, which entails enhancing connectivity through infrastructure, logistics canters, and border terminals. The lack of a national long term spatial development program indicating the location of economic centres impedes a strategic and comprehensive approach to transport sector planning.
Reforms in these areas are low hanging fruit in terms of improving the quality of life in Tajikistan’s cities and connecting them with rural economies; several partners stand ready to assist here.
Investing in Human Capital: Just a few weeks ago, the Government of Tajikistan, hosted the International Human Capital Forum in Dushanbe. The Forum was attended by over 400 participants from more than 40 countries, bringing together top experts in human capital from around the globe. The event highlighted smart investments in human capital that could lead to better outcomes, even with the existing financial resources, such as innovative approaches to investments in early childhood development and nutrition.
Human capital accounts for almost a third of the income gap between developing and developed countries. For example, two-thirds of the difference in the income level between the US and Taj can be explained by the level in the human capital. Thus, nothing is more important for Tajikistan’s future development than the knowledge, skills, and health of its people. Investments in human capital in Tajikistan are urgent. Financing human capital can no longer be thought of as an expenditure but as an investment. In fact, the rate of return per dollar invested in human capital is much higher than that of infrastructure investments.
Building human capital requires a unified and long-term effort, involving multiple sectors and actors. It involves collaboration between governments, civil society, global financial bodies, and the private sector. Elaborate on demographic dividend.
In Conclusion, as we look to the future, our focus will be on sustaining the momentum and addressing the emerging challenges. We remain committed to supporting Tajikistan in its journey towards achieving the targets set out in the National Development Strategy and the Mid-term Development Program for 2021-25.
We will continue to work closely with the Government and all development partners to ensure that our interventions are strategic, well-coordinated, and responsive to the evolving needs of the country. We are dedicated to supporting Tajikistan in realizing its development aspirations. Together, we can build a brighter, more sustainable future for all Tajik people. But it will take us to move the actions from a 4.5% GDP growth trajectory to 8.5% GDP growth trajectory.
Thank you for your attention, and I look forward to the productive discussions ahead.