AKIPRESS.COM - Early this year, Tajikistan’s largest industrial enterprise sent home about a fifth of its workforce and cut wages by 30 percent for the rest. According to its own figures, the state-owned aluminum plant, TALCO, lost over $40 million last year and hasn’t turned a profit since 2010. Nonetheless, in 2011, millions of dollars in revenue generated by the plant went to pay for the world’s tallest flagpole – widely seen as a vanity project to please the impoverished country’s President, EurasiaNet's David Trilling believes.

A top TALCO executive said his company had proposed the flagpole as a “patriotic project” to promote Tajik national identity. But another Talco source said the real impetus had come from President Emomali Rahmon, who had been so impressed when Azerbaijan built the world’s then-tallest flagpole in 2010 that he wanted one too.

Long suspected of being a “cash cow” for Rahmon and his inner circle, and once estimated to account for a third of Tajikistan’s GDP, TALCO now appears to be in bad financial shape. The factory’s recent losses have already hurt the national economy and it faces a slew of deep-rooted inefficiencies. But with much of its cash flow cloaked in offshore mystery, the company remains capable of sparking infighting among Tajikistan’s non-transparent elites.

As a business, TALCO has long had to contend with an array of costly challenges – from dubious tolling schemes and pricy litigation to debilitating obstacles thrown up by neighboring Uzbekistan. In recent years, these have been compounded by a worldwide aluminum glut, which has driven prices to record lows – between $1,700 and $1,800 per metric ton on the London Metal Exchange, down from almost $2,800 in 2011.

TALCO’s output plunged 48% between 2007 and 2013, according to statistics provided by the company. The Economics Ministry expects it to fall another 30% this year. Adding to TALCO’s financial strain, last fall courts in Switzerland and the British Virgin Islands hit the company with almost $350 million in damages. The charges are part of a protracted standoff with RUSAL. The Russian aluminum giant is pursuing the case with fervor, combing through TALCO-related transactions, seeking ways to seize assets, and pursuing criminal charges against the company’s commercial director.

Because TALCO’s aluminum is Tajikistan’s top export, the company’s troubles have a direct negative impact on the economy as a whole.

In April, the Asian Development Bank said the plant’s decreased output cut 2013 industrial growth by 60% and generally made the economy more vulnerable. The same month, the World Bank said the decline has widened Tajikistan’s trade imbalance, increased reliance on labor remittances, and created a budget deficit.

The downsizing at TALCO – which officially had 10,800 employees before this year’s layoffs – has taken a steep human toll too. Besides the dismissals and pay cuts, TALCO is divesting itself of social programs in Tursunzoda, the town built for the plant’s workers and their families, about 60 kilometers west of Tajikistan’s capital, Dushanbe. Until this year, the company funded after-school dance and sewing classes, a workers’ sanatorium, and a school for gifted children. To cut costs, these will be handed over to the town administration, which, TALCO says, promises to keep them going.

Despite the obvious signs of hardship, the overall financial impact on TALCO is hard to quantify, in part because of the secrecy surrounding many of the payments related to the company.

The bulk of the money generated by the plant passes to its tolling partner, TALCO Management Ltd (TML). Registered in the British Virgin Islands, 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.

Non-transparency is the rule rather than the exception in Tajikistan, especially when large sums of money are involved. In Transparency International’s most recent Corruption Perceptions Index, the country ranked 154 out of 177.

The opaqueness cloaking TALCO’s financial dealings has done little to dispel widespread rumors that the company and its affiliates serve as a private piggy bank for some of the country’s top-level officials, all the way up to the president. The company denies such accusations, and repeated calls for comment to Rahmon's office went unanswered.

But projects like the record-setting 165-meter pole flying Tajikistan’s flag over Dushanbe have kept the rumor mill spinning.

Kabirov, TALCO’s commercial and financial director, said that TML had paid half the flagpole’s construction costs, with the other 50% coming from state coffers. The other company source estimated that the project had cost $5 million. The flagpole was part of celebrations marking the 20th anniversary of Tajikistan’s independence. Overall, the official total price tag for the anniversary festivities reached $212 million.

Tajikistan is the poorest country among formerly Soviet states; the average salary is around $110 a month and, according to the UN, a third of the population lives below the poverty line.

In 2008, then-U.S. Ambassador Tracey Jacobson articulated her concerns in cables later leaked by the Wikileaks, alleging that Rahmon keeps TALCO running “as a means of generating income for himself, his family members, and his inner circle… TALCO's revenue does not contribute to development of the country; rather much of it disappears for off-budget activities and projects, such as palaces and lavish state entertainments. The people of Tajikistan effectively subsidize TALCO, by living without adequate health services, education, or electricity.”

TALCO’s chief information officer, Igor Sattarov, denied claims of financial impropriety, saying U.S. Embassy personnel had been duped by false information published by TALCO’s “enemies.”

In March, Tajikistan’s Finance Ministry said TALCO is on the verge of bankruptcy – a charge the company vehemently denies. For observers of Dushanbe’s business scene, the controversy offered a possible clue into a power struggle within the ruling family.

Deputy Finance Minister Dzhamoliddin Nuraliyev, said to be the brains behind the Ministry, is Rahmon’s son-in-law. The banker who has had a hand in TALCO’s offshore tolling operations and is widely believed to control the plant is Rahmon’s brother-in-law, Khasan Asadullozoda. Asadullozoda’s wealth and influence, wrote Ambassador Jacobson in a 2008 cable, “have generated jealousy among President Rahmon's inner circle, particularly his children.”

If a change in the operational structure at the aluminum plant is in the works, it wouldn’t be the first time. The last major management switch took place in 2004. The former management alleges that members of the Rahmon family seized the factory and put Asadullozoda in charge. TALCO says the former management stole hundreds of millions of dollars. That sparked one of the most expensive lawsuits in the history of the London High Court.

A lot has changed in the past 10 years, and currently TALCO is not worth what it once was. But by all accounts in Dushanbe, the President’s nine children, as they grow up, are beginning to compete with each other, and distant relatives, for lucrative economic opportunities.

As one Tajik financial analyst said, paraphrasing a widely read U.S. Embassy cable, “The President and his family would rather have all of a $10 pie than 50% of a $100 pie.”