In order to develop economies and withstand global risks, the countries of Central Asia need tight integration. What projects are preferable for the "five" in terms of risks and benefits? Nabi Ziyadullaev, Doctor of Economics, Professor, Chief Researcher at the Institute for Market Problems of the Russian Academy of Sciences, discusses this in an article for the scientific magazine Society and Economics. The material was published by the portal Ia-centr.ru
Central Asia remains a region with strong development potential. The total GDP of the five countries is more than $300 billion (in 2016 it was $253 billion) and continues to grow. According to the World Bank estimates, the average economic growth rate in the region will be 4%, with the most impressive jump in Uzbekistan and Turkmenistan - about 6%. At the same time, the countries of the region develop unevenly. The leaders are Uzbekistan and Kazakhstan. Thus, the annual volume of FDI in Kazakhstan has grown to $17 billion. At the same time, Kyrgyzstan, despite the large amount of assistance from Russia through the EAEU, remains on the verge of default.
The region's economy remains vulnerable to global and local risks. In 2020, the turnover of the domestic market in Central Asia experienced a decline to $145.5 billion (from $168.2 billion in 2019) due to the COVID-19 pandemic. The region also faced the devaluation of national currencies (due to the depreciation of the ruble), inflation and a decline in world energy prices.
The raw material model of the economies of the Central Asian countries determines their dependence on world markets; high unemployment leads to the migration of part of the able-bodied population. It is impossible to solve these problems one by one - structural restructuring of national economies is possible only with coordinated actions of the countries of the region.
Central Asian integration will reduce socio-economic tension and attract additional investment to the region. Thus, thanks to integration, the Ferghana Valley, divided between Uzbekistan, Kyrgyzstan and Tajikistan, can become a growth driver. An isolated, demographically overloaded and agriculturally oriented region can become a growth point, provided that the possibility of interstate transit through the territory of the valley is facilitated.
The first projects of economic integration in Central Asia originated in the USSR. Since the 1970s, the Central Asian Commission of the Scientific Council of the Academy of Sciences of the USSR (chaired by Academician of the Academy of Sciences of the Uzbek SSR S. Ziyadullaev), together with Central Asian research institutes, developed projects for deepening economic ties within the region. However, neither these developments nor the diplomatic projects of the 1990s were ever implemented.
Since 2017, Uzbekistan has given a new impetus to regional cooperation. President Shavkat Mirziyoyev organized the format of consultative meetings of the heads of state of Central Asia, and for the first time the presidents of the "five" began to meet not at the sites of international organizations. Central Asian cooperation, which began to include even the most closed Turkmenistan, helped to consolidate the policy in the field of logistics, water use, border settlement.
However, the potential of Central Asian integration has not yet been fully realized. Thus, Uzbekistan has not yet become a full member of the EAEU (now it has the status of an observer state). Probably, the accession of Uzbekistan and Tajikistan will take place after a number of issues on the regional agenda are resolved. Otherwise, the unresolved problems of Central Asia will be transferred to the work of the EAEU and the CIS.
Today, integration is not only a matter of profit, but also of maintaining the economic independence of the Central Asian states. In addition, Central Asia needs a system of collective national security. Integration can become a means of protection against the aggressive expansion of external forces that also offer countries their integration projects.
What can the US, China and Turkey offer to Central Asia?
In 2005, the "US Strategy for Central Asia" was developed. According to the project, it was supposed to withdraw the Central Asian countries from the influence of Russia and China, and Afghanistan - from the orbit of Pakistan and Iran. Since the 2000s, Washington has been actively promoting two projects in the region: the TAPI gas transportation route and the construction of the CASA-1000 power transmission lines between the countries of Central and South Asia. The format of the C5+1 meetings is used by the United States to involve the Central Asian countries in economic and energy interconnection projects under the auspices of Washington. By working against the interests of Moscow and Beijing, the US is creating an arc of instability in Central Asia, exacerbating the crisis in Afghanistan.
China is actively penetrating Central Asia, offering cheap goods, loans and grants. Central Asia is of interest to Beijing primarily as a source of raw materials and a transport corridor to the EU, and not from the point of view of organizing industrial clusters and high-tech industries. The gas pipeline Turkmenistan - Uzbekistan - Kazakhstan - China, the highway China - Kyrgyzstan - Uzbekistan operate in the region. China's foreign trade turnover with the countries of the "five" is 25% of exports and 35% of imports. The latter is mainly represented by finished products. At the same time, China is tying the region to its digitalization and green energy standards.
The PRC operates both on a bilateral basis and through the structures of the SCO and the Belt and Road logistics project. At the same time, Beijing has no experience in implementing global integration and geopolitical projects, and when working with Central Asia, China prefers not to bind itself with significant obligations. In other words, if China decides to withdraw from the region, the "five" will be left with a huge debt on loans issued for Chinese projects.
The EU (seeking to establish an oil and gas route from Central Asia and the Caspian Sea to Europe), Great Britain (creating a platform for financial influence) and Turkey (offering investments, technologies and access to its seaports in exchange for access to Central Asian markets) are showing interest in the region. Iran, Arab countries (UAE, Saudi Arabia), states of South and East Asia are becoming active players. There are diplomatic and economic initiatives in the region of Japan (“CA + Japan” dialogue), South Korea (“Eurasian Initiative”) and India (“New Silk Road of Indian Foreign Policy”). The trade turnover of Central and South Asia in 2020 amounted to $4.4 billion, of which 53% came from Kazakhstan and 32% from Uzbekistan.
One of the most preferred vectors of cooperation for Central Asia is partnership with Russia. The countries of the region maintain close economic and infrastructural ties with Moscow, supported by the work of the CIS and EAEU platforms. Russia's accumulated investments in the region have reached about $50 billion, of which $36 billion - in Kazakhstan, over $10 billion - in Uzbekistan, and $1.5 billion each - in Tajikistan and Kyrgyzstan. More than 17,000 Russian and joint ventures operate in Central Asia, and Russia's trade with the Five exceeded $28 billion.
Central Asia can capitalize on anti-Russian sanctions
The regime of Western sanctions against Russia, introduced in 2022, had a negative impact on the economies of the Central Asian countries. There are difficulties in the transit of goods through Russia. The position of migrants is becoming more difficult, energy prices fluctuate.
At the same time, the current situation provides Central Asia with a number of opportunities. Given the transit status of Central Asia between Europe and Asia, it became possible to attract investments in civil aviation: if the Russian air fleet is faced with external restrictions, then Central Asian airlines fly freely around the world. In addition, the transit status of the region provides a window of opportunity for further development of logistics.
In the context of the crisis, the Central Asian countries should remove customs barriers, as well as abolish import duties and excise taxes on all food and consumer goods - this especially concerns the exchange of goods and freight traffic from Russia. Such measures will help reduce the risk of inflation and avoid shortages of goods. It is also necessary to simplify the visa regime and relocation for Russian business and IT specialists. The influx of new specialists will have a beneficial effect on the Central Asian economy.
Source: Ia-centr.ru
CentralasianLIGHT.org
February 2, 2023