Tajikistan Business Economy - The Times Of Central Asia

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China-Kyrgyzstan-Uzbekistan Railway

Tajikistan Seeks to Join China-Kyrgyzstan-Uzbekistan Railway Project

Tajikistan has officially expressed interest in joining the China-Kyrgyzstan-Uzbekistan (CKU) railway construction project, an ambitious regional transport initiative designed to enhance connectivity across Central and South Asia. The proposal was raised during a meeting between Tajik Minister of Transport Azim Ibrahim and Chinese Minister of Transport Liu Wei on July 2 in Tianjin, on the sidelines of the 12th Meeting of Transport Ministers of the Shanghai Cooperation Organization (SCO) Member States. According to the Tajik Ministry of Transport, the two sides discussed potential Chinese support for Tajikistan’s accession to the CKU railway project, as well as participation in the development of a broader multimodal corridor linking China, Tajikistan, Uzbekistan, Turkmenistan, Iran, Turkey, and Europe. The CKU railway, a strategically vital infrastructure project, spans 523 kilometers. Construction officially began on December 27, 2024, in Jalal-Abad, Kyrgyzstan. Once completed, the route will connect Kashgar in China with Torugart, Makmal, and Jalal-Abad in Kyrgyzstan, and Andijan in Uzbekistan. The railway is projected to handle up to 15 million tons of cargo annually. Currently, neither Kyrgyzstan nor Uzbekistan has a direct rail link with China, the only such connection in Central Asia runs through Kazakhstan. At the SCO ministerial meeting, Minister Ibrahim noted that the SCO region already functions as a strategic bridge between East and West, North and South. He also outlined key emerging challenges, including the need to strengthen transport chain resilience, accelerate digitalization, reduce carbon emissions, and promote green logistics solutions. To that end, Ibrahim proposed the establishment of a Unified SCO Digital Platform for managing multimodal transportation. This platform would harmonize customs, border, and transport procedures, enable real-time cargo tracking, streamline documentation, and enhance operational transparency. The minister further emphasized the need to advance and integrate several major international corridors: China - Kyrgyzstan - Tajikistan - Afghanistan - Pakistan - Indian Ocean China - Tajikistan - Uzbekistan - Turkmenistan - Iran - Turkey - Europe Trans-Caspian International Transport Route (TITR) He also underscored the importance of attracting international partners to help restore and expand transport infrastructure through Afghanistan, describing it as key to unlocking new regional trade routes.

Irrigation

Tajikistan’s Irrigation Plans Require Major Upgrades

Tajikistan has the potential to become the irrigation center of Central Asia but only if it undergoes extensive modernization. This conclusion comes from a joint report by the Eurasian Development Bank (EDB) and the United Nations Industrial Development Organization (UNIDO). Industrial and Economic Potential The report highlights Tajikistan’s capacity to develop into a regional production and maintenance hub for irrigation equipment. Key advantages include affordable electricity, a readily available labor force, and a strategic geographic location. These factors position the country to play a central role in an emerging regional irrigation cluster. The southern provinces of Khatlon and Sughd are identified as particularly promising for industrial development. Proposed projects include manufacturing facilities for plastic pipes and components for drip and sprinkler systems, alongside service centers for pump repair. Investment requirements for such facilities range from $3-5 million, with a projected payback period of just 2-3 years. However, the report underscores the pressing need to overhaul the existing infrastructure. Approximately 77% of Tajikistan’s irrigation systems require reconstruction. Of the country’s 720,000 hectares of irrigated farmland, nearly 60% must be restored. Additionally, 80% of pumping stations are considered outdated, and water losses due to technical inefficiencies reach 45%. Without significant upgrades, the system will likely struggle to meet growing climatic and demographic pressures. To support the irrigation sector’s long-term viability, the report calls for the annual training of at least 3,000 specialists. Training one professional to international standards costs between $1,200 and $1,800. The authors stress the importance of state investment in vocational education and greater collaboration between educational institutions and industry. Tajikistan as a Regional Logistics Bridge Tajikistan also has the potential to serve as a strategic logistics hub. Its southern regions could facilitate transport between Central Asia, Afghanistan, Iran, and Pakistan, cutting shipping costs and improving equipment access in remote areas. Realizing this vision will require a strong state role, including tax incentives, subsidies, and streamlined investment procedures. International donor participation is equally vital. Currently, nearly 90% of irrigation equipment used in the region is imported, adding up to 30% in logistics costs. While cluster-based industrial development has proven effective in other Central Asian countries, boosting enterprise productivity by 15-20% within two to three years, Tajikistan still trails behind. In contrast to Uzbekistan, which has over 90 cotton and textile clusters, much of Tajikistan’s agricultural output undergoes minimal processing. Regional Water Reform Needs $50 Billion The report concludes by emphasizing that water supply issues extend beyond Tajikistan. Across Central Asia, agriculture accounts for up to 80% of water usage. Losses from open canals reach 50%, and over 30% of irrigated land is affected by salinization. To address these challenges by 2040, the region will require $40-50 billion in investment for infrastructure upgrades, digitization, and a transition to closed irrigation systems. “Without urgent modernization of the irrigation system, the region risks facing serious water shortages, lower crop yields, and increased social instability,” the authors warn.

Infrastructure

AIIB and Tajikistan Sign First Grant Agreement for Obigarm–Nurobod Road Project

The Asian Infrastructure Investment Bank (AIIB) and Tajikistan have signed a $2.04 million Project-Specific Window (PSW) Grant Agreement to support the Obigarm–Nurobod Road Project – Long Bridge and Approaches. This marks AIIB’s first PSW grant, a significant milestone in its efforts to mobilize blended finance for development impact. The Obigarm–Nurobod Road Project aims to restore critical connectivity along a 75-kilometer section of the M41 Highway in central Tajikistan. This section, located in the mountain range north of the Vahdat River Valley, was disrupted by the reservoir impoundment of the Rogun Hydropower Plant. The project is expected to enhance regional connectivity and improve access for communities in the affected areas. The agreement was signed at AIIB Headquarters in Beijing by Fayziddin Qahhorzoda, Tajikistan’s Minister of Finance, and Konstantin Limitovskiy, AIIB’s Chief Investment Officer. Representatives from the China International Development Cooperation Agency (CIDCA), which funds the grant, also attended the ceremony. “This first PSW grant is an important step in AIIB’s journey to scale impact through blended finance,” said Limitovskiy. “By combining infrastructure investment with local skills development and inclusive programming, we aim to deliver long-term benefits for communities, especially women and youth in project-affected areas. The PSW grant, funded by CIDCA, will focus on strengthening local capacity and promoting inclusive development. Key initiatives include: Technical and Vocational Training: Programs for infrastructure professionals and construction workers. Community Training Centers: Facilities aimed at empowering women through skills development. Entrepreneurship Support: Initiatives to improve livelihoods and promote economic empowerment in affected areas.

Industry Failures

Structural Barriers Continue to Hamper Industrial Growth in Tajikistan

Despite recent gains in industrial output, Tajikistan’s full industrial potential remains largely unrealized. Analysts point to a combination of systemic issues that continue to constrain the sector's sustainable development. Growth Driven by Extractive Industries According to the Statistical Agency under the President of Tajikistan, industrial production totaled 18.9 billion somoni in January, April 2025, marking a 25.2% increase compared to the same period in 2024. However, this growth was overwhelmingly fueled by the extractive sector, which surged by 90%. In contrast, manufacturing expanded by just 3.5%. While 121 new enterprises were launched during the first four months of the year, disruptions in existing operations and the narrow structure of industrial growth highlight deeper systemic problems. Idle Enterprises and Obsolete Equipment Minister of Industry and New Technologies Sherali Kabir reported that 92 industrial enterprises remained non-operational as of August 2024. Over half have been idle since 2008-2018, with the rest inactive since 2019-2022. The reasons range from financial difficulties and pandemic-related business closures to outdated equipment and low competitiveness. Rising input costs and limited market access further compound the problem. Some sectors, such as textiles and garments, could potentially resume operations, but only with significant modernization. Although some light and food industry enterprises have diversified, others, such as the porcelain factory in Tursunzade, have failed to adapt to changing market conditions. Raw Material Shortages Insufficient raw material supply remains a major bottleneck for several subsectors. The vegetable oil industry, for instance, requires approximately 833,000 tons of oilseeds to produce 100,000 tons of oil. However, domestic output is under 100,000 tons, limiting production to just 25,000 tons, four times below the national requirement. The canning industry faces similar constraints due to an inconsistent supply of fruits and vegetables. Energy Shortages Power outages continue to disrupt industrial output, especially in winter. Cotton processing plants produced 980 tons less fiber in the first half of 2025 compared to the same period in 2024 due to energy shortages. At the Azot plant in Levakant, production losses translated to a 7.3 million somoni revenue shortfall. Agricultural infrastructure has also been affected: the Land Reclamation Agency reported 130 pump station failures in 2023 alone, caused by voltage surges and sudden power cuts. Declining Cement and Coal Exports Despite advances in cement production, Tajikistan’s export volumes have declined sharply. From January to April 2025, the country exported just 154,000 tons of cement, down from 655,000 tons during the same period in 2024. This marks a 30.4 percent decline compared to the same period in 2023. The decline stems largely from reduced demand in key markets. Uzbekistan’s new cement plants have fulfilled domestic needs and displaced Tajik exports to Afghanistan. Coal exports have also suffered due to increased transit fees. Afghanistan raised its transit tariff from $7 to as much as $50 per ton, leading to a 15,000-ton decline in exports to Afghanistan and a 65,000-ton drop to Pakistan. High Production Costs Undermine Competitiveness High production costs across all sectors continue to undermine Tajikistan’s industrial competitiveness. For example, the...

Digital Development

The Battle for Control Over Central Asia’s Digital Future

Central Asia is digitalizing quickly. Governments across the region have invested in smart cities, 5G, and AI-powered platforms. Kazakhstan ranks 24th in the world in global e-government indexes, and in Tashkent and Bishkek, young, tech-savvy populations are pushing for innovation. But such progress is not without risks. A new report from the German Marshall Fund (GMF), a Washington-based think tank, outlines how Central Asia is becoming ever more reliant on Chinese and Russian technology. These two countries, the report argues, are using digital tools not just to supply infrastructure but to shape how governments in the region manage data, surveillance, and speech. Beijing and Moscow’s tech exports act as snares, tying customers into their own economies. “Central Asian governments are aware of these challenges,” Dylan Welch, the author of the report and a China analyst at the GMF, told The Times of Central Asia. But he notes that it can be difficult to convince policymakers to prioritize the dangers of such overexposure. “For the national leaders, their imperative is to deliver economic growth because they have these young, dynamic populations that need jobs… if they don't deliver on that, then they're in for a long period of instability at home,” he said. This makes Chinese and Russian offers to develop their digital industries extremely tempting. An Entrenched Presence The report coincides with a flurry of Russian and Chinese engagement in the region. Over the weekend, Kazakhstan announced that between them, Beijing and Moscow will be responsible for delivering a new generation of nuclear reactors to the country, currently leaving French and Korean alternatives out in the cold. Then came this week’s visit of Chinese President Xi Jinping to Astana for a summit with the five Central Asian leaders. On the digital front, one notable announcement from this summit included a plan to develop an Artificial Intelligence Cooperation Center in Kyrgyzstan. China has used the term “Digital Silk Road” to describe its investments in Central Asia, and it has built much of the physical infrastructure behind the region’s digitization drive. For its part, Russia has exported its software, legal models and surveillance practices. Taken together, these systems are helping local governments tighten control over digital life. “This strategic integration makes it more difficult for regional states to diversify in the future, even though many continue to pursue multi-vector foreign policies aimed at balancing global partnerships,” Yunis Sharifli, Non-Resident Fellow at the China-Global South Project, told TCA. Where the Vulnerabilities Lie The report uses a “technology stack” framework to explain the problem. This framework looks at five layers: network infrastructure, data storage, consumer devices, digital platforms, and government policies. Across these layers, it argues, Central Asia is exposed to Chinese and Russian influence. Take Kazakhstan. It may be the most advanced digital economy in the region, but most of its internet traffic still passes through Russia. Telecom firms across the region are also required to install a Russian-made surveillance technology known as SORM (System for Operative Investigative Activities), which can intercept internet...

Car Insurance

From Reform to Roadblocks: The Uneven Evolution of Motor Insurance in Central Asia

Motor insurance markets across Central Asia exhibit contrasting levels of development, from Kazakhstan’s expanding, digitized sector to Kyrgyzstan and Turkmenistan, where the system remains largely ineffective. Beyond compensating for damages, motor insurance is increasingly viewed as a tool for strengthening financial markets, promoting road safety, and easing the fiscal burden during emergencies. Kazakhstan Kazakhstan leads the region in insurance market volume. According to the Agency for Regulation and Development of the Financial Market (ARDFM), compulsory third-party motor insurance (OSGPO) premiums totaled more than KZT 106 billion ($205 million) in 2023, an 18% increase from the previous year. Since 2019, Kazakhstan has operated an electronic OSGPO registration system, streamlining policy purchases and reducing fraud. Integration with the Ministry of Internal Affairs databases now enables more effective monitoring of compliance. In April 2025, the country introduced a revised bonus-malus system with 18 risk classes, ranging from M2 (highest risk, coefficient 3.5) to Class 13 (lowest risk, coefficient 0.5). New drivers are assigned Class A with a coefficient of 1.8. The updated system accounts for accident history, traffic violations, and the duration of accident-free driving. Despite this progress, voluntary comprehensive insurance (CASCO) remains underutilized; fewer than 5% of car owners hold such policies. Barriers include high costs, limited public understanding, and the persistent mistrust of insurers. Nevertheless, demand for CASCO is growing amid rising accident rates and vehicle costs. Once considered a luxury for owners of new cars, CASCO is increasingly popular among middle-income drivers, particularly those buying vehicles on credit or lease. According to Ranking.kz, CASCO premiums reached KZT 13.4 billion ($26 million) in January-February 2025, slightly below the same period in 2024 ($29 million) but still well above pre-pandemic levels. CASCO now covers a broad range of risks, including accidents, theft, vandalism, fire, and natural disasters. For many Kazakhstani drivers, comprehensive coverage is becoming a central part of their financial strategy rather than a discretionary purchase. Kyrgyzstan In Kyrgyzstan, however, the motor insurance system is largely dormant. Although a compulsory insurance law was passed in 2015, only 8-10% of the vehicle fleet is insured. The absence of a unified digital platform, weak interagency coordination, and low public confidence hinder progress. The authorities intend to relaunch reforms in 2025, focusing on digital integration between the Ministry of Internal Affairs and the National Bank. Beginning July 1, 2025, fines will be imposed on uninsured drivers: 3,000 KGS (around $35) for individuals and 13,000 KGS (about $150) for foreign nationals and legal entities. The new penalties are expected to promote compliance and foster a stronger insurance culture. Uzbekistan Uzbekistan, in contrast, has made substantial strides since 2019. Restrictions on foreign insurers have been lifted, and the Insurance Market Development Agency has spearheaded a digital transformation of the sector. In 2023, motor insurance premiums surpassed 250 billion som, largely from OSGPO policies. The government has expanded policy coverage and supports online issuance to increase accessibility and competition. As of September 1, 2024, all compulsory motor insurance policies will be digitized and issued through a centralized...