A Hong Kong English-language newspaper South China Morning Post has sharply criticized the investment policy of official Beijing in in Central Asia’s nations, particularly in Tajikistan.

An article titled “Why Chinese Investors Are Struggling to Gain a Foothold in Tajikistan” that was published in South China Morning Post on October 7 notes that Tajikistan is one of first stops on ‘Belt and Road’, but legal difficulties, murky politics and security concerns pose obstacles to business.  

Chinese investors reportedly face a host of challenges, including a difficult legal environment, murky local politics and Beijing placing a greater emphasis on antiterrorism cooperation in Central Asia than business interests.

According to the article, Zhejiang businessman Zhu Bailin, 53, was one of those motivated to invest in Central Asia after Chinese President Xi Jinping proposed the Belt and Road Initiative during a visit to Astana, the capital of Kazakhstan, in September 2013.

A year later, Zhu’s Zhejiang Congcai Heavy Machinery Manufacture invested US$25 million for a 60 per cent stake in the Taj-China 2013 cement factory in Vahdat Township with the other 40 per cent owned by Tajik partner Adbuhalim Qodirov (director-general of Yoqut-2000 LLC – Asia-Plus).

A Tajik partner is reportedly not a legal requirement but is a common practice for Chinese investors because it can improve communication with different government departments, the head of the Federation of Overseas Chinese in Tajikistan, Hu Feng, was quoted as saying.

The Tajik partners are often powerful locals, and some big Chinese projects would prefer to partner with people with ties to Tajikistan’s president.

Zhu said the factory began production in 2015, but Qodirov later sought total control over it.   In September last year, Tajikistan’s State Committee for National Security asked representatives of the Chinese shareholders to attend a meeting at its headquarters, Zhu said, adding that they were threatened with the use of force if they did not comply.

Zhu reportedly said that he had since reached a compromise with Qodirov, who had agreed to lease the factory for US$454,000 a month. However, he was only receiving about a third of that amount.

Zhu, who has since returned to Zhejiang, said: “If I could go back in time, I would definitely not choose to invest in Tajikistan.”

Another Chinese businessman, Joseph Chan Nap-kee, the chairman of Hong Kong-listed Kaisun Energy, was quoted as saying it is difficult to challenge rulings by the Tajik authorities in the country’s courts.

According to him, Kaisun was charged more than twice the profits tax it expected after agreeing in 2012 to sell a 52 per cent stake in a Tajik prospecting and mining company to a company from China’s Xinjiang region for US$50.53 million.

“The US$20 million profit tax was ridiculous, but it was difficult for us to find a lawyer in Tajikistan that could defend the company in court,” said Chan said.  “From the Tajik local court to the highest court, we lost all the way. They all supported their national government.”

Mr. Kelimu Abudureyimu, a 53-year-old businessman from Xinjiang, found recourse to diplomatic channels equally fruitless in a commercial dispute.

He and four Chinese partners bought a fluorite and tungsten mine 40km north of Dushanbe from a Russian businessman, securing total control in 2012, but a Tajik court ordered its confiscation by the government in late 2014, saying the 2005 auction that led to its acquisition by the Russian had not followed proper procedures. 

Abudureyimu said he felt he had been fooled by the Tajiks and the Russian, and asked for help from the Chinese Embassy in Dushanbe and China’s State Council.

But in July 2015, a decree from Tajik President Emomali Rahmon endorsed the court ruling and ordered that management rights be transferred to Tajik Aluminum Company.  

The paper notes that even companies that have teamed up with the Tajik government on successful projects have run into problems.

Tajikistan-China joint venture Zeravshan, 75 per cent owned by China’s state-owned Zijin Mining and 25 per cent owned by the Tajik government, runs two gold mines in Tajikistan that have created more than 2,000 jobs.

But its general manager, Zhang Shunjin, said JV Zeravshan failed to buy another gold mine last year, because it valued the mine at 300 million to 400 million yuan but the Tajik government asked for US$500 million.

“That’s because Tajikistan has an illusion of floods of Chinese investors prompted by the Belt and Road Initiative and thinks highly of itself,” Zhang was quoted as saying.

---

China will get its way?

Tajikistan now owes China 1.2 billion U.S. dollars, nearly 50 percent of its external debt.  China has outrun Russia in terms of direct investment in Tajikistan’s economy.

According to data from the State Committee on Investment and State-owned Property Management (GosKomInvest) of Tajikistan, Chinese direct investments in Tajikistan’s economy over the first three months of this have come to some 80 million U.S. dollars, which is 60 percent of the overall volume of the direct investments accumulated over the report period.  

Experts consider that China will never refuse loans and grants to countries such as Tajikistan and it even can sacrifice the interests of Chinese investors in order to keep small countries on a short leash.

“Chinese officials realize after getting the required support these country will automatically become beholden to China and will not reject China’s requests,” Tajik political scientist Sobir Homidov said.    

“In Tajikistan, for example, practically all rich gold deposits are being explored and developed by Chinese companies.  Chinese farmers have received farming lands here.  Chinese companies are permitted to place ecologically unfriendly enterprises (cement plants) in Tajikistan.  Meanwhile, more polluting plants are forced to shut down or pay the costs of environmental damage in China,” Tajik expert added. 

China’s economic expansion in Tajikistan is relatively new. In the early 2000s, China’s influence in Tajikistan was quite weak and limited due to the lack of transport communications that could connect the two countries. Bilateral trade rates significantly increased only after the opening of a new major highway Dushanbe – Kulma. 

The bilateral economic relations entered a new phase during the deepening global economic crisis in 2008, and particularly as Tajikistan’s relations with Russia deteriorated.  In 2009, Russia took a position favoring Uzbekistan in its dispute with Tajikistan over the Roghun hydro power plant, which became the main catalyst that pushed official Dushanbe towards China. 

Tajik authorities were therefore looking for an alternative partner and economic counterweight to Russia, which became China.