Tajikistan’s Shadow Economy

Having researched Tajikistan’s economy prior to arriving here, I had a difficult time reconciling the numbers. It has a literacy rate of 95% and fairly high costs of goods like a developed country yet exceptionally low per capita incomes of some $340 similar to those of the poorest in the world. How does an educated population earn so little yet pay for goods clearly beyond its reach?

It is the Soviet legacy which has left most of the population over the age of 30 with a reasonably good education. Mothers and fathers subsisted on moderate civil servant salaries at the ubiquitous bureaucracies and public facilities spawned by the Soviet Union. Children were free to attend school and ultimately graduate to a sterile yet subsistence wage job in the government. Since independence, the cost of supporting the Soviet infrastructure has overwhelmed the tiny economy here which now consists mostly of agriculture such as cotton and fruit. Roadsides outside the city are littered with crumbling factories and the opportunities and incomes for civil servant jobs have dwindled considerably. As a result, the population scrambles to work multiple jobs, open side businesses and often puts children to work in an effort to subsist.

I happened to arrive in Tajikistan in the middle of the cotton harvest when the government conscripts thousands of school-age children across the country into picking in the fields. From September through

October, classes are suspended and so are the teachers who work in the schools. I spoke recently with a temporarily unemployed teacher who explained that, when they are working, teachers here earn about $100/month or about 11 Somoni a day. To put that in perspective, a modest lunch here at a restaurant will generally cost about 7 to 10 Somoni. Not exactly a sustainable lifestyle. As a result, many teachers have left the profession in pursuit of better incomes. President Rahmon has made a big show of his “President’s schools” project where gleaming new buildings stand in stark contrast to the shabby apartments nearby, yet they sit dark and unused amid the dearth of teaching talent. Why not pay teachers more money instead of building new schools you ask? This is where the shadow economy kicks in…

Despite the $100/month wage, some teachers aren’t faring that poorly. It’s commonly discussed that some teachers will be mysteriously flush with cash around the time grades are awarded. And during cotton picking season, students can avoid the dismal conditions by securing a doctor’s excuse for around $100. I was told that, at the university level, the going rate for a PhD is around $2,000. What would one do with a PhD in Tajikistan which is worth the cost of $2,000? Teach at a university. As for construction, this process involves permits, bids, procurement of materials – in short, a lot of activities which provide more opportunities for government officials to skim dollars. Simply increasing teacher salaries doesn’t enrich anyone but teachers and they’re already getting theirs.

For those teachers who refuse to supplement their incomes in such a way – and there are many – they’re resigned to working additional jobs or starting businesses. By far the biggest business here is simply called ‘trade’ and it consists of sitting out in the bazaar or by the roadside to sell food and merchandise. Many who come to MicroInvest seeking working capital for trade inventory are teachers or even doctors and nurses who suffer similarly low government wages. Because of its geography, poor infrastructure and the bureaucratic red tape of entering or exiting the country, goods are incredibly hard to supply here. Vehicles with Uzbek plates are not allowed into the country so product from Tashkent needs to transfer at the border. While there is a newly constructed bridge to Afghanistan – courtesy of US funds – there is little in the way of (legal) export coming from south of the border. The one bright spot is the newly constructed road from China which was constructed by the Chinese as a means to access the market here. But this former major waystation on the Silk Road is now at the far end of a lengthy supply chain and goods are marked up accordingly.

But, back to the teacher shortage. With fewer teachers available the quality of education here has been declining. A starvation wage doesn’t provide much motivation for teachers and parents living on the edge of poverty increasingly see education as a luxury they can’t afford. Why pay for grades to graduate into an economy with no jobs rather than start working today to supplement the family income? For now the solution has been to start a business instead of rely on meager government wages. The hard reality of life here is that, in some cases, the few dollars a son or daughter brings home is the difference between eating or not. This is not a Monday-Friday, 9 to 5 economy.

Another aspect of the shadow economy supporting Tajikistan’s current state is the estimated 1 million Tajiks living or working abroad and sending money back to support families. On a daily basis I speak with women who have husbands or sons working in Russia where they may be able to earn multiples of the income they’d earn here in Tajikistan. Of course the cost of living in Russia is higher as well, but on balance they come out ahead with what they’re able to send home to the family. According to the government, remittances from workers abroad make up more than 25% of Tajikistan’s economy but some independent estimates put it at well over half.

In this kind of environment, microcredit makes a huge difference. Being able to purchase a few hundred dollars of goods at time makes the costly travel to Uzbekistan or Kyrgyszstan worthwhile. It allows the honest and hard-working to avoid stooping to corruption as a means of supplementing substandard salaries. And owning a side business allows those few teachers, doctors, nurses and other essential workers the ability to serve the community while withstanding the unsustainable wages.

Rob is a Kiva Fellow working in Khujand, Tajikistan with MLF MicroInvest. To learn more about MLF MicroInvest click here and if you would like to show your support for Tajikistan, please join the Kiva lending team, Supporters of Tajikistan

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