Identifier
Created
Classification
Origin
06DUSHANBE482
2006-03-13 13:45:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Dushanbe
Cable title:
TAJIKISTAN: IMF SEES ECONOMIC PROGRESS AND GROWTH
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UNCLAS SECTION 01 OF 02 DUSHANBE 000482
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EB
E.O. 12958: N/A
TAGS: PGOV ECON EINV EAGR ETRD ENRG TI
SUBJECT: TAJIKISTAN: IMF SEES ECONOMIC PROGRESS AND GROWTH
REF: DUSHANBE 0321
DUSHANBE 00000482 001.2 OF 002
UNCLAS SECTION 01 OF 02 DUSHANBE 000482
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EB
E.O. 12958: N/A
TAGS: PGOV ECON EINV EAGR ETRD ENRG TI
SUBJECT: TAJIKISTAN: IMF SEES ECONOMIC PROGRESS AND GROWTH
REF: DUSHANBE 0321
DUSHANBE 00000482 001.2 OF 002
1. (SBU) SUMMARY: Washington-based International Monetary
Fund (IMF) Tajikistan Country Director Carlos Pinerua gave an
upbeat assessment of Tajikistan's economy but remained concerned
about regulatory hurdles and lack of diversification for
continued growth. Pinerua painted a positive picture of the
strong GDP growth, increased tax collection and expanding
production. The IMF still worries, however, about the
inadequate regulatory framework, reliance on large
infrastructure projects, and the concentration of wealth in
1,000 families. The IMF will consider arranging a one-day crash
course on substantive economic reform to the newly appointed and
highly influential Presidential economic advisor Davlatov. END
SUMMARY.
TAX COLLECTION, CONSUMPTION, PRODUCTION UP
2. (SBU) Accompanied by IMF resident representative Samat
Khawaja, during a March 9 meeting with the Ambassador, Pinerua
confirmed that tax revenues were up this year - and not just
because Tajikistan Aluminum Plant (TadAZ) has begun paying
taxes. Pinerua credited increased tax collection in all
sectors, except for agriculture, to growing consumption fueled
by even higher remittances from abroad. Revenues from the Value
Added Tax (VAT),in addition to the increase in the price of
aluminum, fueled this increase. Pinerua said that taxes for
TadAZ are now based on international aluminum prices.
3. (SBU) The IMF predicts 8 percent growth and 7 percent
inflation for 2006. GDP growth remained high at 6.3 percent for
January and February. Tajikistan's fruit and vegetable exports
to Russia this year are expected to double because of freezing
weather in that country over the winter. In particular,
Tajikistan may export 90,000 tons of potatoes and up to 120,000
tons of onions due to lowered Russian tariffs. (COMMENT: This
will put upward price pressure on local produce in markets by
summer that will impact domestic consumers. END COMMENT.)
REGULATORY ENVIRONMENT, DIVERSIFICATION CONCERNS
4. (SBU) Without a better regulatory framework, economic
growth in Tajikistan will be delayed, according to Pinerua,
because "nobody is sure about the rules of the game." Pinerua
said the government should play a role in the regulatory
process, but the involvement of some officials presents a
troubling conflict of interest. The opening of the aviation
sector would be a good step in the right direction.
5. (SBU) Pinerua stressed that while big infrastructure
investment - such as hydropower - is important, broader based
economic development is essential for sustainable growth that
reaches the entire population. Khawaja pointed out that
approximately 1,000 families in Tajikistan control the economy:
e.g., one family for air transport, one family for grain, a few
families for cotton. The massive profits accruing to few
individual accounts for most of the new ostentatious private
residences being built in Dushanbe.
ROGUN
6. (SBU) The IMF was skeptical about Russian Aluminum's
(RusAl) cost benefit assessments for its proposed Rogun
hydropower plant , but noted the company could be looking at the
longer term (15-20 years). Pinerua said the pricing structure
was not clear and added none of his contacts believed Rogun
would ever be built. He also noted that if RusAl head Oleg
Deripaska gains control of the TadAZ smelter, he would not need
Rogun.
DUSHANBE 00000482 002.2 OF 002
EDUCATING DAVLATOV
7. (SBU) The Ambassador suggested to Pinerua and Khawaja that
the IMF coordinate a one-day International Financial
Institutions (IFIs) seminar on economic reforms for
newly-appointed Presidential Advisor on Economic Affairs
Matlubhon Davlatov (ref). Khawaja noted that the influential
and reasonable Davlatov's appointment was one of the most
important steps for Tajikistan so far in economic reform Both
Pinerua and Khawaja agreed to explore a conference or drafting
a short economic reform priorities "cheat sheet" for Davlatov.
8. (SBU) COMMENT: The IMF's assessment provides one snapshot
of Tajikistan's economic growth and coming challenges.
Pinerua's stress on broad-based small- and medium-enterprise
development tracks with Post's own concern that hydropower and
infrastructure projects alone will not create long-term economic
stability and may only concentrate economic prosperity in the
hands of an elite few. Despite the recent spate of press
releases announcing potential investments from Kazakhstan, Dubai
and elsewhere, Tajikistan can only attract long-term foreign
direct investment with transparent regulations and continued
substantive economic reform. END COMMENT.
HOAGLAND
SIPDIS
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EB
E.O. 12958: N/A
TAGS: PGOV ECON EINV EAGR ETRD ENRG TI
SUBJECT: TAJIKISTAN: IMF SEES ECONOMIC PROGRESS AND GROWTH
REF: DUSHANBE 0321
DUSHANBE 00000482 001.2 OF 002
1. (SBU) SUMMARY: Washington-based International Monetary
Fund (IMF) Tajikistan Country Director Carlos Pinerua gave an
upbeat assessment of Tajikistan's economy but remained concerned
about regulatory hurdles and lack of diversification for
continued growth. Pinerua painted a positive picture of the
strong GDP growth, increased tax collection and expanding
production. The IMF still worries, however, about the
inadequate regulatory framework, reliance on large
infrastructure projects, and the concentration of wealth in
1,000 families. The IMF will consider arranging a one-day crash
course on substantive economic reform to the newly appointed and
highly influential Presidential economic advisor Davlatov. END
SUMMARY.
TAX COLLECTION, CONSUMPTION, PRODUCTION UP
2. (SBU) Accompanied by IMF resident representative Samat
Khawaja, during a March 9 meeting with the Ambassador, Pinerua
confirmed that tax revenues were up this year - and not just
because Tajikistan Aluminum Plant (TadAZ) has begun paying
taxes. Pinerua credited increased tax collection in all
sectors, except for agriculture, to growing consumption fueled
by even higher remittances from abroad. Revenues from the Value
Added Tax (VAT),in addition to the increase in the price of
aluminum, fueled this increase. Pinerua said that taxes for
TadAZ are now based on international aluminum prices.
3. (SBU) The IMF predicts 8 percent growth and 7 percent
inflation for 2006. GDP growth remained high at 6.3 percent for
January and February. Tajikistan's fruit and vegetable exports
to Russia this year are expected to double because of freezing
weather in that country over the winter. In particular,
Tajikistan may export 90,000 tons of potatoes and up to 120,000
tons of onions due to lowered Russian tariffs. (COMMENT: This
will put upward price pressure on local produce in markets by
summer that will impact domestic consumers. END COMMENT.)
REGULATORY ENVIRONMENT, DIVERSIFICATION CONCERNS
4. (SBU) Without a better regulatory framework, economic
growth in Tajikistan will be delayed, according to Pinerua,
because "nobody is sure about the rules of the game." Pinerua
said the government should play a role in the regulatory
process, but the involvement of some officials presents a
troubling conflict of interest. The opening of the aviation
sector would be a good step in the right direction.
5. (SBU) Pinerua stressed that while big infrastructure
investment - such as hydropower - is important, broader based
economic development is essential for sustainable growth that
reaches the entire population. Khawaja pointed out that
approximately 1,000 families in Tajikistan control the economy:
e.g., one family for air transport, one family for grain, a few
families for cotton. The massive profits accruing to few
individual accounts for most of the new ostentatious private
residences being built in Dushanbe.
ROGUN
6. (SBU) The IMF was skeptical about Russian Aluminum's
(RusAl) cost benefit assessments for its proposed Rogun
hydropower plant , but noted the company could be looking at the
longer term (15-20 years). Pinerua said the pricing structure
was not clear and added none of his contacts believed Rogun
would ever be built. He also noted that if RusAl head Oleg
Deripaska gains control of the TadAZ smelter, he would not need
Rogun.
DUSHANBE 00000482 002.2 OF 002
EDUCATING DAVLATOV
7. (SBU) The Ambassador suggested to Pinerua and Khawaja that
the IMF coordinate a one-day International Financial
Institutions (IFIs) seminar on economic reforms for
newly-appointed Presidential Advisor on Economic Affairs
Matlubhon Davlatov (ref). Khawaja noted that the influential
and reasonable Davlatov's appointment was one of the most
important steps for Tajikistan so far in economic reform Both
Pinerua and Khawaja agreed to explore a conference or drafting
a short economic reform priorities "cheat sheet" for Davlatov.
8. (SBU) COMMENT: The IMF's assessment provides one snapshot
of Tajikistan's economic growth and coming challenges.
Pinerua's stress on broad-based small- and medium-enterprise
development tracks with Post's own concern that hydropower and
infrastructure projects alone will not create long-term economic
stability and may only concentrate economic prosperity in the
hands of an elite few. Despite the recent spate of press
releases announcing potential investments from Kazakhstan, Dubai
and elsewhere, Tajikistan can only attract long-term foreign
direct investment with transparent regulations and continued
substantive economic reform. END COMMENT.
HOAGLAND