30 October 2008
Talco, a major aluminum mining company controlled by Tajikistan President Emomali Rahmon, is being investigated by the IMF to address issues of extreme mismanagement of funds and lack of openness.
The International Monetary Fund (IMF) has ordered an independent audit to review the accounts of the Tajikistan Aluminium Company (Talco); the country’s largest corporation. The move comes at the wake of a June 2008 IMF report highly critical of Tajik President Emomali Rahmon-controlled Talco’s financial operations and transparency. Serious IMF investigations into Talco began in March 2008, after mounting concern over corruption of the national leader-run company of the poorest country in Central Asia.
Even though Talco is the most valuable exporter, biggest electricity consumer and principal industry in Tajikistan; the country’s economy earned a disproportionately low share of the value of Talco’s 2006 and 2007 aluminum shipments abroad. The discrepancy between Talco’s revenues and tolling fees paid into the Tajik budget widened even more in recent years as aluminum’s value nearly doubled between 2005 and 2007 but Talco’s payments shrank from 21% to 17%. In addition to this, as Talco’s profits have grown, the company has failed to make timely payment of wages and pensions to its employees, according to the IMF.
The IMF has identified Talco’s lack of public disclosure as a "key obstacle to good governance, the prevention of conflicts of interests, and implementation of prudential norms." Talco’s non-transparency has meant that the only evidence of the company’s profit has been attained through leaks from court proceedings. According to this information, combined with IMF reports, Talco is estimated to have generated US$1.145 billion in profit, most of it diverted tax-free abroad. Owing to the mounting pressure on Talco and President Rahmon, the tolling fee paid by the company was raised to 36%, but substantive changes to the management and fiscal structure of Tajikistan’s most important enterprise remains unchanged. Tajikistan faces growing economic difficulties, including a contraction in its industrial output, a major power shortage and a significant slowdown to the country’s GDP growth. The IMF has attributed at least a part of the blame for this trend to the Rahmon administration and its "years of serious mismanagement of the sector, including under-investment and lack of appropriate maintenance."
In addition to the IMF, several other international financial institutions (IFIs) have had an active presence in Tajikistan since the early 1990’s. The World Bank, International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) approved their first projects in the country in 1996. Since then, the combined approved loans of the three has been over US$650 million – a figure that is relatively low compared to Tajikistan’s neighbors (in Kyrgyzstan for example, the total loans from the three IFI’s have amounted to over US$1.03 billion). The IFI’s have however been engaged in several high profile ventures in Tajikistan, such as IFC’s Zeravshan Gold Mine project in 1997 and the World Bank’s Cotton Sector Recovery Project in 2007.
The extractive industry sector is extremely vulnerable to abuse by undemocratic governments and corrupt management, with highly detrimental effects on a region or nation’s natural resources, the environment, and potential for economic development and poverty reduction. In a nation like Tajikistan – so significantly reliant on the aluminum industry – corruption and mismanagement of national revenue constitutes a major problem that seriously endangers the Central Asian country’s chances at a more prosperous and democratic future. Despite launching an audit into Talco’s operations, the IMF has not explicitly referred to the company’s diversion of aluminum profits. The Fund, along with other IFIs involved in Tajikistan such as the World Bank, IFC, EBRD and the Asian Development Bank (ADB), must do more to pressure Emomali Rahmon’s government to pursue transparency and fairness in all of its ventures; especially in the highly crucial extractive industry sector.
The Bank Information Center (BIC) is committed to fostering such positive changes as well as encouraging the IFIs to adhere to their own disclosure policies and standards of fairness. In particular, BIC has advocated greater transparency for revenues paid by extractive industries to governments as an effective means of deterring corruption.
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