Tajikistan's Milk-Free Cash Cow Reveals Debt Pile

Tajikistan’s largest industrial concern has for the first time revealed the scale of its debts and the picture is not a pretty one.

The Finance Ministry said this week that at the end of the first quarter TALCO had outstanding debts of 2.5 billion somoni ($318 million) and that the company was itself owed 465 million somoni ($59 million).

TALCO is unofficially the fiefdom President Emomali Rahmon’s brother-in-law and head of Oriyonbank, Hasan Asadullozoda (AKA Sadulloev), so the fate of the company is of great importance to the first family.

Despite production at the aluminum plant being on the increase, the company continues to lose money. The Finance Ministry links the losses to falling prices for the metal on the international market and the rise in cost for inputs.

The ministry and international advisors have recommended root-and-branch restructuring for the company and an overhaul of equipment. 

Things used to be so much brighter at TALCO. In 2007, the company churned out a record 419,000 tons of aluminum. That fell through the years, down to 121,000 tons in 2014. Last year, TALCO’s primary aluminum output returned to growth for the first time in seven years, up to 139,000 tons,

TALCO’s alleged cash cow status for the first family makes it something of a sacred cow too.

So it didn’t go down well when a few years ago, when respected religious authority Haji Akbar Turajonzoda suggested selling off the plant and diverting the money to the giant Rogun hydroelectric dam that is being financed primarily off the back of hard-up Tajiks.

“This suggestion has been made so as to pull the country and its people out of the electricity crisis and so Rogun hydroelectric station could remain fully Tajik,” Turajonzoda said, suggesting that securing the money through sale of TALCO would obviate the need for foreign investment in the dam.

Those comments only earned Turajonzoda accusations of being a stooge for Uzbekistan and Russia. 

But there is more than a bit of truth in the contention that TALCO hardly does much for the general welfare of the population as things now stand. The bulk of the money generated by the plant passes to its tolling partner, British Virgin Islands-registered TALCO Management Ltd, or TML. TML effectively acts as a financial middleman between TALCO and the world, buying raw materials for the factory and selling its finished product. TALCO, as a separate legal entity, receives a relatively modest fee for its part in the process.

Things are getting a little messy for TALCO on the legal front in Europe now with parliament in Norway investigating the identity of the company’s ultimate beneficiaries. Norsk Hydro, which is more 43 percent controlled by the Norwegian government, has for years been in business with TML.

Although the government touts TALCO as its industrial champion, accounting as it does for around one-third of Tajikistan’s exports, the reality is that the company is also a major debtor to the state. TALCO plants eat up around 40 percent of the electricity supply, which is in particularly short supply over the winter, and it often fails to pay for its power bills.

Management at TALCO clearly sees diversification as the company’s way out of the doldrums.

Late last year, the government approved giving the company a 25-year mining license for gold reserves in the Aini district of the northern Sughd region.

Also, TALCO announced last week that three chemical factories for materials used in the aluminum production cycle will be put into operation next month in the city of Yavan, around 60 kilometers outside Dushanbe. The purpose of these plants is to provide annual import substitution of goods worth around $126 million, the company said.

Typically, while $37 million for construction of these plants came out of TALCO’s own coffers, the other $88.5 million came courtesy of loans from China’s state-run Eximbank.

Tajikistan's Milk-Free Cash Cow Reveals Debt Pile

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