ECONOMIC HISTORY OF TAJIKISTAN

ECONOMIC HISTORY OF TAJIKISTAN

The Russians and Soviet traditionally viewed Central Asia as a place to produce cotton and grain and fruits and vegetables that needed a warm climate. Cotton production has left a terrible legacy of pollution and environmental damages but still remains an important sector the economy.

During the Soviet-era, the Central Asian republics were cogs in the centrally-planned Soviet economy. Their economic sectors—such as cotton production— were very specialized. Uzbekistan was dependent on the rest of the Soviet Union for markets, goods and supplies. Industry and mining didn't really get cranked up until after World War II. Much of the development of the oil industry has taken place since the break up of the Soviet Union

The Central Asian republics were the poorest republics in the Soviet Union. Those without oil wealth remained that way after independence. The Soviets opened stores and cooperatives but the majority of business continued to be carried out in open air markets and bazaars.

Marxist View of Tajik Development

According to the Chinese government: “The Tajik people were mainly engaged in animal husbandry and farming, but productivity was very low, unable to provide enough animal by-products in exchange for grain, tea, cloth and other necessities. The economic polarization resulting from heavy feudal oppression was best illustrated by the distribution of the means of production. The majority of the Tajik herdsmen owned very small herds, so that they were unable to maintain even the lowest standard of living, and still others had none at all. A small number of rich herdsmen not only owned numerous yaks, camels, horses and sheep, but held by force vast tracts of pasturage and fertile farmland. [Source: China.org china.org *|*]

“In the Tajik areas, the chief means of exploitation used by rich herd owners was hiring laborers, who received only one sheep and one lamb as pay for tending 100 sheep over a period of six months. The pay for tending 200 sheep for the herd owner for one year was just the wool and milk from 20 ewes. Herd owners also extorted free service from poor herdsmen through the tradition of "mutual assistance within the clan." *|*

“Tajik peasants in Shache, Zepu, Yecheng and other farming areas were cruelly exploited by the landlords. In those areas, "gang farming" was a major way of exploitation. Besides paying rent in kind that took up two-thirds of their total output, tenants had to work without pay on plots managed by the landlords themselves every year, and even the peasants' wives and daughters had to work for the landlords. There was practically no difference between tenants and serfs except that the former had a bit of personal freedom. *|*

“There were all kinds of taxes and levies in both pastoral and rural areas. The Tajik herdsmen in Taxkorgan were forced to hand in more than 3,000 sheep and 500 tons of forage and firewood a year to the reactionary government. Poverty-stricken under heavy exploitation, the Tajik people were unable to make a decent living, and widespread diseases reduced their population to just about 7,000 when Xinjiang was liberated in December 1949. *|*

Economy in the Soviet Era

Tajikistan was the poorest state in the Soviet Union. In may ways it was more like a colony or a third world country within the Soviet Union than a Soviet republic. The economy was devoted to supplying water and land for the Soviet cotton industry. Tajik were reliant on the Soviet Union for food and energy supplies and other goods.

In the Soviet era, trade was largely conducted on a non-monetary, barter basis. Hydroelectric power and other products were traded on the world market for hard currency or as a barter item. In return Tajikistan received goods and services from Moscow.

On the local level, produce was raised on private plots that were widespread in urban areas and the government constructed bazaars to help facilitate commerce. Under collectivization little land remained private although private homes were often retained.

As a result of being cogs in the centrally-planned Soviet economy, the economies of all the Central Asian nations were too specialized and too dependent on Russia for markets and supplies and had a hard time making a real go of their own after independence.

In the early 1990s, Tajikistan remained primarily an agricultural state. In 1990 agriculture contributed 38 percent of the country's net material product (NMP). Despite development of an extensive irrigation network in the Soviet era, water supply problems combined with Tajikistan's mountainous topography to limit agriculture to 8 percent of the republic's land in 1990. Some 800,000 hectares were under cultivation in 1990, of which about 560,000 hectares were irrigated. The irrigated land was used mostly to grow cotton; potatoes, vegetables, and grains also were cultivated. In 1994 the republic produced about 490,000 tons of vegetables and about 254,000 tons of cereals. The dominance of cotton combined with the rapidly growing population to render Tajikistan unable to meet domestic consumption requirements for some basic foodstuffs, especially meat and dairy products, in the last years of the Soviet era, even though the republic produced a surplus of fruits, vegetables, and eggs. In the early 1990s, about 98 percent of agricultural labor remained almost entirely unmechanized. [Source: Library of Congress, March 1996 *]

Through the mid-1990s, agricultural output continued to decline precipitously as a consequence of the civil war and the awkward transition to a post-Soviet economy. By 1995 overall production was estimated at about half the 1990 level, and shortages continued in urban areas. Besides the civil war, low prices for agricultural products and a shortage of animal feed contributed to the decline. Hardly any privatization of collective farms had occurred by the mid-1990s. *

See Separate Article ECONOMIC DEVELOPMENT IN TAJIKISTAN UNDER THE SOVIETS

Post-Soviet Economy in Central Asia

The economies of Central Asia declined in the years after independence. Their leaders had little business sense or grasp of market economic fundamentals. There were shortages, production declines, negative growth, high inflation, declining standards of living, unpaid workers, starving pensioners and professors driving taxis. Because the economies of Central Asia had traditionally been were very specialized and were dependent on Russia for markets, goods and supplies, they have had difficulty making goods of their own.

Unemployment rates are high, especially among young men. High unemployment has been blamed on outbreaks of ethnic violence such as that that occurred in 1989 and 1990 between Uzbek and Meshketian Turks and between Uzbeks and Kyrgyz.

The currency plunged 100 percent in the months that followed the Russia currency crisis in August, 1998.

Inflation averaged over 80 percent between independence and 1994. The economy shrunk less in Uzbekistan less than the economies of other former Soviet republics. In 1997 the GDP was 85 percent of 1990 level compared to 45 percent in Kazakhstan and 62 percent in Russia.

Economy in Post-Soviet-Era Tajikistan

After Tajikistan became independent in 1991, collectives were dismantled and replaced to some degree with private farms but the government retained a high degree of control over the agricultural sector. Commercial crop production has been difficult. Crop production has been limited by the limited amount of arable land. The agricultural sector has had a hard time keeping pace with soaring population growth. The government has had difficulties providing adequate housing for everyone.

Tajikistan continued to use the ruble longer than any other former Soviet republic. The Tajikistani ruble was introduced in May 1995 after using Soviet ruble (withdrawn elsewhere in the CIS in late 1993) until January 1994, then joining Russian ruble zone and adopting new Russian rubles then in use. January 1996 value of Tajikistani ruble 284 per US$1. [Source: Library of Congress, March 1996 *]

Tajikistan has issued privatization vouchers and opened a stock exchange.

Agriculture in Tajikistan in the 1990s

In the early 1990s, Tajikistan remained primarily an agricultural state. In 1990 agriculture contributed 38 percent of the country's net material product (NMP). Despite development of an extensive irrigation network in the Soviet era, water supply problems combined with Tajikistan's mountainous topography to limit agriculture to 8 percent of the republic's land in 1990. Some 800,000 hectares were under cultivation in 1990, of which about 560,000 hectares were irrigated. The irrigated land was used mostly to grow cotton; potatoes, vegetables, and grains also were cultivated. In 1994 the republic produced about 490,000 tons of vegetables and about 254,000 tons of cereals. The dominance of cotton combined with the rapidly growing population to render Tajikistan unable to meet domestic consumption requirements for some basic foodstuffs, especially meat and dairy products, in the last years of the Soviet era, even though the republic produced a surplus of fruits, vegetables, and eggs. In the early 1990s, about 98 percent of agricultural labor remained almost entirely unmechanized. [Source: Library of Congress, March 1996 *]

Through the mid-1990s, agricultural output continued to decline precipitously as a consequence of the civil war and the awkward transition to a post-Soviet economy. By 1995 overall production was estimated at about half the 1990 level, and shortages continued in urban areas. Besides the civil war, low prices for agricultural products and a shortage of animal feed contributed to the decline. Hardly any privatization of collective farms had occurred by the mid-1990s. *

Cotton is by far the most important crop in Tajikistan's agrarian economy. In parts of the republic, 85 percent of the land was planted to cotton by the late 1980s, a figure that even republic officials described as excessive. At the same time, the average cotton yield per hectare was about half that achieved in the United States. Cotton production declined in the early 1990s. In 1993 Tajikistan produced about 754,000 tons, a drop of 30 percent from the 1991 figure. *

Although cotton is fundamental to Tajikistan's economy, the republic's rewards for cotton production in the Soviet system were disappointing. About 90 percent of the harvest was shipped elsewhere for processing. Tajikistani factories produced thread from some of the cotton harvest, but, by the end of the Soviet era, more than 90 percent of the cotton thread that was spun went elsewhere to be turned into finished goods. In 1990 the two southern provinces of Qurghonteppa and Kulob produced roughly two-thirds of the republic's cotton, but they processed only 1 percent of the crop locally. *

Despite widespread concern about overemphasis on cotton cultivation, the post-civil war government attempted to expand the production of the country's most important cash crop. For example, in 1995 it mandated an increase over the preceding year of 10,000 hectares in land assigned to cotton. However, the cotton output remained far below both the government quota and the production levels of the late Soviet era. Independent Tajikistan continued to send most of its cotton crop elsewhere--mainly to CIS countries--for processing. *

Economic Conditions in the Early 1990s

At the close of the Soviet phase of Tajikistan's history, the economy deteriorated rapidly, and the level of economic activity declined sharply in the early 1990s. In 1992 the gross domestic product (GDP) was approximately half of what it had been in 1990. In the first half of 1991, agricultural and industrial output dropped substantially, and construction, a chronic weak point of the economy, was especially sluggish. The state's revenues for the same period were half as large as its expenses. According to Soviet statistics, the generation of national income in Tajikistan had already declined 7.8 percent from 1988 to 1989 and 8.9 percent from 1989 to 1990. In 1990, the per capita generation of national income was the lowest by far among Soviet republics, and 17 percent below the 1985 level. These figures reflect not only Tajikistan's poverty but also the low prices that were assigned to agricultural products and raw materials, Tajikistan's main products, in the state-run economy. Although Tajikistan was primarily an agricultural republic, in 1989 it imported more agricultural products, including foodstuffs, than it exported. [Source: Library of Congress, March 1996 *]

Political turmoil and the civil war of 1992-93 did enormous damage to Tajikistan's economy. According to an official estimate, that damage extended to 80 percent of the republic's industries. The conflict spurred the departure of large numbers of Russians and Germans who had been key technical personnel in Tajikistan's industries (see Population). After independence, the government was very slow to develop an institutional framework to promote movement toward a market economy. Through the mid-1990s, virtually no privatization of industry or agriculture occurred. *

The scarcity of reliable statistics makes quantification of Tajikistan's economic situation difficult. In 1994 the total economic loss from the civil war was estimated at 15 trillion rubles--about US$12 billion at the January 1, 1994, exchange rate. According to Western estimates, by 1994 production in industry had dropped 60 percent, in agriculture 33 percent, and in the transportation enterprises several hundred percent--all in comparison with 1990 levels. The GDP fell an estimated 28 percent in 1993, 12 percent in 1994, and 14 percent in 1995. Inflation soared at a rate of 1,157 percent in 1992; 2,195 percent in 1993; 341 percent in 1994; and 120 percent in 1995. The relatively lower rate in 1995 reflected the government's new anti-inflationary policies launched in the second half of the year.

Transition to a Market Economy in Tajikistan

In the last years of the Soviet system, Tajikistan followed the rest of the union in beginning a transition from the conventional Soviet centralized command system to a market economy. Early in 1991, the Dushanbe government legalized the leasing and privatization of state enterprises (excluding industries deemed critical for national security). However, the transition met firm resistance from individuals who still held positions that gave them access to economic power and technological know-how; political figures with ideological objections to market reforms also voiced opposition. Such influential people insisted that the previous system could be made efficient if Tajikistanis were urged to work harder. This view was made popular by the sharp price increases that followed price decontrol in the initial reform stage. Citizens' hardships, fear, and anger resulting from the initial economic shock greatly slowed the transition to a market economy. For instance, in the first year of independence, only four private farms were established. [Source: Library of Congress, March 1996 *]

The regime of Imomali Rahmonov, who came to power in December 1992, showed little interest in continuing the limited market reforms of 1991 and 1992. At the same time, the new regime declared its support for private enterprise on a small or moderate scale, expressing the hope that foreign investment would help revive the country's shattered economy. By the mid-1990s, about half of all small businesses, especially those in the service sector, were privately owned. In November 1995, the legislature approved a reform plan for the period 1995-2000, but the plan included no specific steps toward the general goals of privatization and the fostering of foreign and domestic investment.

In 1992 Tajikistan acquired its first commercial bank, the Tajikbankbusiness. Established primarily to invest in the republic's economy, the state-owned bank assumed the functions of the former Soviet State Bank (Gosbank); it also sought to develop links with the United States, Iran, China, Pakistan, Saudi Arabia, and Britain, among other countries. After the dissolution of the Soviet Union, Tajikistan continued to use the old Soviet ruble until Russia replaced that currency with the Russian ruble in 1994. At that time, Tajikistan joined the Russian ruble zone , a move that worked against Tajikistani interests. Russia did not send as many rubles as promised, and many of the new rubles that were sent quickly left Tajikistan as inhabitants bought commodities from other Soviet successor states, especially Uzbekistan and Russia. Thus handicapped, the cash economy often gave way to barter and promissory notes. As a result, the Dushanbe government decided to leave the ruble zone by introducing the Tajikistani ruble in 1995. At the time of its introduction, the new currency had an exchange rate of fifty per US$1, but its value slipped drastically through 1995, reaching 284 per US$1 in January 1996.

Standard of Living in Tajikistan in the 1990s

Beginning in the late 1980s, the troubled state of the Soviet economy in general led to shortages of consumer necessities in Tajikistan, including flour, meat, sugar, and soap. In every year from 1986 through 1989, the value of per capita consumption of goods and services was substantially lower there than in any other Soviet republic. The government in Dushanbe began rationing food early in 1991, but Tajikistan's consumption of meat and dairy products already had been the lowest in the Soviet Union for the previous six years. In 1990 annual per capita meat consumption was twenty-six kilograms in Tajikistan, compared with sixty-seven kilograms for the Soviet Union as a whole. In the same year, annual per capita milk consumption was 161 kilograms in Tajikistan, compared with 358 kilograms for the Soviet Union as a whole. [Source: Library of Congress, March 1996 *]

The national consumer price index went up about 6,000 percent in 1993 alone. In 1994 breadlines began forming at Dushanbe's single bakery at five in the morning, and the demand often exceeded the supply. Meanwhile, most state stores stood empty as bazaars offered food at prohibitively high prices. Such conditions worsened in the mid-1990s. Although at times bread (whose price was still government subsidized), meat, rice, soap, and other commodities were rationed, basic necessities often were difficult to obtain. In 1995 a 150 percent increase in bread prices, meant as a step toward price decontrol, had the side effect of compounding the difficulty of maintaining an adequate diet. Fuel deliveries in Dushanbe were irregular, and city apartments were cold in the winter.

By the end of the Soviet era, the great majority of Tajikistan's citizens had extremely low incomes even by Soviet standards. Industrial wages ranked second lowest among the republics in 1990. The income of peasants on collective farms was the lowest among all republics; for those on state farms, it was the second to lowest. The situation did not improve in the first post-Soviet years. At the end of 1994, the average monthly wage was 25,000 rubles, or US$7.30, and wages often went unpaid for several months. The maximum weekly wage was set at US$19.30 by a government policy that automatically deposited any payment above that level in the recipient's bank savings account.

By the 1980s, housing had become a serious problem, especially in Dushanbe. The "Housing-93" project of that period promised to provide accommodations by 1993 to families that were on the waiting lists in 1988, but construction fell far behind. By 1990, some 150,000 families were waiting to get an apartment in the capital, a situation that contributed to the outbreak of riots there in February of that year. The housing shortage in the northern province of Leninobod was similarly acute.

Tajikistan Economy After the Civil War

After the 1992-1997 civil war Tajikistan was described as a "crippled nation." The Tajik economy was wrecked by the the civil war and any chance of self-sufficiency was destroyed. It was seriously in debt and unable to pay back loans and keep the economy stable without foreign assistance. Some experts believed it would become a permanent welfare nation, dependent on foreign aid to remain afloat.

Much of foreign aid that was promised after the end of the civil war did not materialize or arrived much later than was promised. The already abysmal economy got worse. More than 600,000 Tajiks left for Russia to find work. The most profitable businesses were related to drug trafficking.

In the mid 2000s, Tajikistan began opening its borders to north-south trade and the economy started to improve. More foreign aid began to flow in and foreign companies were investing in Tajikistan mines. Growth increased to 8 percent a year.

Ahmed Rashid, the author of a book on the Taliban and Jihad: The Rise of Militant Islam in Central Asia, wrote in the International Herald Tribune in 2006: Dushanbe “is showing signs of prosperity. For the first time since the break up of the Soviet Union, people are actually smiling, despite the shortage of electricity and the biting cold...Workers are returning from Russia.”

Economic growth more than halved in 2009 to 3.4 percent from 7.9 percent in 2008. [Source: Roman Kozhevnikov, Reuters, February 19, 2010 <=>]

In the mid 2000s, China completed a new road linking Tajikistan with Xinjiang in western China and the United States was building a bridge between Tajikistan and Afghanistan and roads in Tajikistan were being improved. After the bridge was completed goods from China were able to go through Tajikistan to southern Pakistan and to Central Asia and good produced in Tajikistan could be distributed to China and Central Asia.

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, U.S. government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated April 2016

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