Tajikistan and the Tyranny of Statistics (Report)

(HN, February 10, 2011) - Like most other economies in Europe and Central Asia, Tajikistan depends heavily on foreign trade. Economists who monitor the country’s import and export data—which are reported on a monthly basis by the Statistical Agency—may think they are keeping a finger on Tajikistan’s pulse.Water is become a scarce - and increasingly precious - resource in many countries surrounding Tajikistan. UNICEF

They might be wrong. Especially when it comes to exports.

Sometimes, however, these data obscure more than they illuminate. Rather than worrying about cotton and aluminum, it may be more helpful to think of Tajikistan as one of the world’s leading exporters—both directly and indirectly—of labour and water.

As per international practice, Tajikistan’s foreign trade statistics emphasize the final products that are bought and sold abroad. For Tajikistan’s exports, this boils down to aluminum and cotton, which generate three quarters of the country’s export revenues.

In one sense, this is no surprise: anyone familiar with rural life in Tajikistan knows that “cotton is still king” in the countryside. The importance of the TALCO aluminum smelter in Tursunzode just west of Dushanbe—Tajikistan’s largest industrial enterprise and leading exporter—is likewise well known.

However, both cotton and aluminum production can be seen as algorithms for reprocessing water—which is where Tajikistan’s true riches lie.

More than half of the water used by Central Asia’s 60 million inhabitants comes from rivers whose headwaters rise in Tajikistan (population 7.5 million).

It is this water that turns turbines in hydropower plants along the Vakhsh river cascade, which generate the electricity needed to derive aluminum from bauxite. Water from these rivers also feeds the canals that irrigate Tajikistan’s thirsty cotton fields. Tajikistan’s exports are really about water—embodied in aluminum ingots and cotton fiber.

When Tajikistan’s (mostly cotton and aluminum) exports are compared to its imports, they are often found wanting: the country reports a yearly trade deficit in the neighborhood of $1.5 billion. But Tajikistan’s single most important export—labour—is not captured in the trade statistics.

Every year some 800,000 to 1.5 million (no one is quite sure how many) Tajikistani citizens work abroad, chiefly in Russia. The IMF and National Bank of Tajikistan estimate that these migrants sent home $2.4 billion in remittances in 2010—roughly double the $1.2 billion earned from exporting aluminum, cotton, and other commodities and manufactured goods (see Charts 1 and 2 above).

If the country’s trade balance is recalculated as exports minus imports plus remittances, then Tajikistan consistently runs a healthy external surplus. Looked at from this perspective, Tajikistan’s reported average annual 9% GDP growth during 2000-2008 does not seem so surprising. Nor does the continuation of economic growth (albeit at a slower pace), or relative stability of the somoni (the national currency), during the global economic crisis of 2009-2010.

Many economists would argue that the balance of payments—and particularly the current account balance, which shows exports and imports of services, as well as of good and remittances—provides the fullest measure of an economy’s engagement with the rest  of the world.

But Tajikistan’s balance-of-payments data are reported with some delay: at present, the most recent BoP data available on the National Bank of Tajikistan website are from the first quarter of 2010. By contrast, data on merchandise exports and imports, and on remittances, are reported monthly. If we want to track how Tajikistan is faring in the world economy in real time, exports minus imports plus remittances may be our best shot.

Tajikistan is a low-income country where some 3 million people struggle to get by on $2.15/day or less. Poverty reduction, providing access to clean water and sanitation services, creating decent jobs at home, and addressing gender inequalities are major challenges. Migration may be a cash cow, but it can also be a hardship for divided families.

Understanding these challenges and helping the country to attain the Millennium Development Goals requires a deep knowledge of Tajikistan’s economy, and its official economic data.

Sometimes, however, these data obscure more than they illuminate. Rather than worrying about cotton and aluminum, it may be more helpful to think of Tajikistan as one of the world’s leading exporters—both directly and indirectly—of labour and water.

- UNDP, HUMNEWS staff