Countries of Central Asia: What Are the Prospects?

By Dmitry Pertsev

According to the World Bank report, practically all developing countries are suffering from the economic crisis to greater or lesser extent. 84 of 116 developing countries are going over significant retardation of business activity. In 2009 international GDP reduced sufficiently for the first time since the Second World War.

According to the World Bank report, practically all developing countries are suffering from the economic crisis to greater or lesser extent.

84 of 116 developing countries are going over significant retardation of business activity. In 2009 international GDP reduced sufficiently for the first time since the Second World War.

International Monetary Fund depicted even graver situation. According to its evaluations, the world economic system can hardly reach half a percentage growth, and poor countries will occur on the brink of collapse.

As for Central Asia states, much depends on the pragmatism of each individual Government and the process of integration in the region in general.

But the analysis of the prospects for the countries of the region to survive the crisis shouldn’t calculate their “savings” but assess the maturity of economic models.


Naturally, the analysis of economic situation in this country lacks the urgent availability of information. However, considering fragmentary data we may conclude the following: industrial enterprises have suffered due to the lack of demand on their products.

Just like in other countries, the level of consumer’s demand declines, domestic market experiences problems.

But, in comparison with big countries of the region – Uzbekistan and Kazakhstan – there has never been no extended internal market, and the balance of demand and supply hasn’t been so significant.

The economic model is characterized by strict centralization of political power, democratic values are still “embryonic”.

The economy of Turkmenistan greatly depends on the incoming money for natural gas. Considering the long-term character of the agreements with Russian “Gazprom” it’s unlikely that the driving force of Turkmenian economy will weaken sufficiently.

Turkmenistan has no fear of industrial stagnation and of people dismiss: there is practically no industrial infrastructure thus there is no source for unemployment strengthening. The most important is for the Government to use gas resources to stabilize the internal situation of the country. In addition, the example of Turkmenistan proves that policy of neutrality and slight integration within the CIS is sometimes beneficial.

One of the poorest countries of the region was on the brink of collapse even within more favorable economic conditions. This situation occurs due to persistent energy crisis that is aggravated by low investment attractiveness of Tajikistani economy. Considering the dynamics of foreign investments it is observed, that they are flowing to the countries reach in raw hydrocarbons – Kazakhstan and Uzbekistan. At the same time these two countries possesses the greatest potential in the sphere of industrial infrastructure, and naturally intellectual potential.

Tajikistan obtained good production assets, for example aluminum plant and others. However, energy crisis and steady lack of free capacities played their part.

Foreign investors are aware of the situation and don’t hurry to bring their businesses into this Central-Asian country.

The great Tajikistani misfortune was also influenced by foreign political issues, i.e. the state became greatly dependant from Uzbekistan considering geographic point of view. Complicated relations of these countries Leaders who won’t cede harm mostly Tajikistan rather than Uzbekistan. Tajikistan has practically appeared to be isolated from the “big land”, thus Dushanbe has problems in trade and joint projects with its current CIS and EurAsEc partners.

Tashkent impedes the country to overcome the energy crisis, and this reduces its investment potential.

Tajikistan became one of the main suppliers of cheap working force to Russia and Kazakhstan. Money transfers of Tajik people stimulate consumer’s market in Tajikistan, gaining greater part within the structure of gross domestic product. But today, when crisis has reached the countries-consumers of working force, this instrument appeared to be ineffective. According to the evaluation of the World Bank specialists, in 2009 money transfers of migrant workers will reduce for 40-50%. That is why it will be difficult for Dushanbe to overcome the crisis. But there is a hope that Russia, Kazakhstan from one side and Uzbekistan from another, will still try to help the country to go through this tense period. They can’t undermine that destabilization in Tajikistan is disadvantageous for the region.

Another poorest country of the region demanding foreign support. This is not only due to the lack of hydrocarbon potential, but also due to a pretty ignorant policy of the former President Askar Akayev who considered that Kirgizia was ready for principal economic reforms.

Moreover, the level of principality of the reforms was directly proportional to the destabilizing moments, occurred in the society.

Today Kirgizia suffers from the results of that policy: the society is frustrated, it has lost clear guides, and there is still no power in the country that would be able to consolidate the society. Rapid joining of one of the poorest countries to the World Trade Organization damaged national industrial infrastructure, and Kirgizia has lost almost everything that gained during Soviet period.

Generally speaking, the country has turned into raw materials “appendix” of the great China. The availability of cheap Chinese, Turkish and other goods has provoked economic inconsistency, strong dependence and partial loss of the state sovereignty.

Naturally these facts forced Kirgiz people to seek for happiness in other countries, particularly, in neighboring Kazakhstan. Today Almaty and its region have become a real “Mecca” for many Kirgiz people striving for better life. A lot of Kirgiz people also work in Russia only because there are no new employment places in the country.

Investment potential was also captured by the WTO. Foreign investors simply don’t see investment objects in the country that have turned into a single Oriental bazaar. The state with its weak tax administrating and overall corruption is not able to accumulate the resources for development: every person plays for his/her own good.

Just in purpose I don’t mention hydro-technical potential of Kirgizia and Tajikistan, as it’s really hard to imply this potential within current conditions.

This country won’t suffer that much from the crisis due to its slight integration into the structures of the CIS, EurAsEc and world economy.   This slight integration has a number of benefits and disadvantages.

It is beneficial because economic sphere is strictly regulated by the state. In general, this process we can currently observe in the world – the state declares the necessity of economy regulation. But there is a great difference between the understanding of this process in West, Russia or Kazakhstan and in Uzbekistan. Omitting economic liberties of the mid 90s, the rest of the time the economy has been strictly controlled by the Government. Bank sphere is greatly dependant and follows the instructions of the Central Bank. Business serves for the Government. And together everything works for domestic market as foreign markets have been closed for long. Banks couldn’t take foreign credits, business had a role of an importing entity, set by authorities for import substitution and export orientation.

The disadvantages are concluded in the fact that the compatibility level of Uzbekistani economy invokes great concern. The goods of Uzbekistani manufacturers is poorer in quality not only in comparison with the best foreign samples, but with the products of its regional neighbors – Russia and Kazakhstan.

But, it’s worth mentioning, that there is car industry manufacturing cars of nice quality. Damping in prices in Russia forced the Government to return the rest of profit at the expense of domestic consumers: that is why Uzbek cars are more costy in Uzbekistan than in foreign countries. It’s unpredictable how long will this scheme exist without harming the car factory.

Natural gas that is exported by “Gazprom” to Europe, cotton, metals will remain liquid raw materials able to supply the economy modernization with resources.

By all attending circumstances we should acknowledge that crisis in this country of the region will hardly result in great social damages. Although much depends on the ability of authorities to employ their own people, who lost jobs in Russia and Kazakhstan. As mentioned earlier, the less harm will experience the isolated economics of Turkmenistan and Uzbekistan.

But it doesn’t mean that the crisis will pass them by and will flourish in Tajikistan and Kirgizia/

This is the complexity of the region: the problems of one state immediately influence neighbors. People migration gains power, that’s why people will head to more or less stable countries. And if these countries will try to isolate themselves from migration flows, then border-line will be endangered.

In case of Tajikistan, Kirgizia and Uzbekistan the situation in Fergana Valley for the power over which they struggle incites pretty great worries.

Economic model of Kazakhstan became more successful within pre-crisis period. Economic liberties and relatively liberal political way made possible for the country to attract foreign investments, to modernize financial system, to develop qualified management within processing industries.

I won’t comment on oil and profits: the issue of effective implementation of financial resources is pretty complicated. Raw material resources can be more than a significant advantage of Kazakhstan. Everything depends on the level of control over the funds spending. If the control over the funds granted into economy will be established properly, this will help to overcome the crisis at minimal losses. But if the money will be plainly “eaten” the situation can turn to be disastrous – it’s painful to fall of a big tree.

Before the crisis this country declared itself as a regional leader not only in policy, but also in economy. The crisis has revealed obvious flaws of this economic model: dependence from oil supplies and slight diversification of economy. Although, from the other hand, weak industrial infrastructure has also played a positive role. In the Republic of Kazakhstan there are only few industrial and major city enterprises, respectively there will be no mass job cuts and no consequent increase of a protest mass in society.

Despite fluctuations of prices in the world market, oil is still liquid and demanded raw material within foreign markets. Pretty nice market conditions could be observed with grain, without which the rest of the world won’t simply survive, especially it concerns developing countries.

But the most significant factor for Kazakh economy can become a neighboring Chinese market. Today international financial institutions underline the intensification of business activity in China. In its turn, the Government of Kazakhstan even in the crisis plans to accomplish its automobile and very important railway projects in West. Transit demanded by China can become a rescue for the economy of Kazakhstan.
Non-Alternative Integration

Mutual isolation, the intention to shut themselves within own borders by all means and to develop effective economy within a separate territory – these are harmful ideas, that have poisoned the life in the region. Elites are satisfied with the kind of situation, as it gives an opportunity to stick to national feed box and live happily ever after. The peoples of the region are satisfied with another scheme, when funds, brains, goods and services persistently migrate from one country to another.

The leaders of regional states should realize the commonplace truth: no one from the outside will never help them within integration processes. West needs this region as an alternative source of hydrocarbons to Russian, but regional integration – is not their headache. The United Central Asia is the last thing even in their nightmares. Under any rhetoric over integration they suggest in the best case the ideas of isolation of the region from Russia, in the worst – the opposition to Russia.

At the same time beautiful phrases that the West can exist in the region equally or together with Russia – is a simple myth. If to remember how the ideas of disintegration came into the region, we can state the obvious: from the moment when West began enforcing its positions here. There is an interesting message that is drummed into brains and consciousness of people of Central Asia. As if there have been contradictions since the USSR times, that is why they were in dormancy, and now they are awake. This idea has a historic retrospect: Russia as a successor to the USSR is the only power capable to intensify these contradictions. Naturally, West is a new power that contradicts to this process.

For its part, Russia has its native interest in regional integration over its control. It can’t ignore that the only way to preserve and enforce its influence within the region is counteraction to West and its influence within Central Asia.
The Greatest Problem of Russia

West can give the Central Asian countries its technologies and money. At the same time Russia can’t offer its natural allies neither of that. This is the key difference between the powers, fighting for the influence within the region.

The Russia of Yeltsin forgot about the existence of Central Asia, supposing that a sixth part of our Terra is self-sufficient and is able to solve any problem without assistance. The Russia of Putin realized that Central Asia is important to stop mild and kind in appearance aggression of the West, pushing Russia out from Eastern Europe, Baltic, Caucasus, and already controlling processes in Ukraine and Georgia.

Putin managed to capture Chechnya, Abkhazia and South Ossetia: if the processes of pushing out of Russia had the same speed, then Russia would soon have to declare the Moskva River as a defense line as it was in winter 1941.

And in Caucasus Putin had the simplest task as it was the reaction on revealed and uncovered aggression. Central Asia demonstrates no aggression and the significant problems of geopolitical strategy of Russia become immediately evident.

Moscow is capable to opposite the open threat, but it doesn’t know what to do with smiling aggression.  Probably, that is why Russia can gain a victory in Caucasus, but can’t do a thing in Baltic and Eastern Europe, and now also in Ukraine and Georgia.

The Russia of Yeltsin, Putin or now Medvedev couldn’t develop clear and comprehensive policy in Central Asia. In their turn, the countries of the region observing the stand-off of Russia intend to become friends with the USA, Europe or at least with China. Today, Russia can offer Central Asia resources and brains, the only things left after the years of complete mess. Many can consider that without money and technologies the two compounds don’t worth a penny. But it is a shallow judgment.
Integration Without Variants
Natural resources of Russia is the fund that attracts all Central Asian states without exclusions. Intellect within correct industrial policy is able to transform into Know-How and accomplished technologies. At the same time we shouldn’t undermine the technologic potential of China.  Today Chinese don’t trust that much Russia and Central Asia, but this situation may change if Russia together with China and its partners on Central Asia will develop Central-Asian strategy that would include China as an integral or separate part of the process – it doesn’t matter.

China wants to diversify the source of hydrocarbons supply and the ways of export.  This is a guarantee of Chinese security, and Beijing, Moscow and Central Asian capitals acknowledge this fact.  In fact not only Central Asia but also Russia can receive money and technologies from China. Chinese funds and technologies, resources and brains of Russia are able to create unprecedented integration vector within Eurasian region, attracting many countries.

For its part, Central Asia countries are simply obliged to intensify integration process to overcome the consequences of the crisis successfully. The attempts to isolate themselves within their borders simply aggravate the problems of the region, and instability in Kirgizia and Tajikistan can spread on neighboring countries and destroy the individually achieved results.

If Russia and China fail to agree with the regional countries on extended Eurasian integration, then the states of the region will have to integrate without assistance.  This is a pessimistic prospect, but it is topical, as today neither Moscow nor Beijing are ready to proceed joint military manoeuvres. In the framework of this scheme of integration, each country will occupy its specific branch.

Correct specialization and manufacturing cooperation are able to rescue the region from any crisis. In prospect the issues of establishment of single customs area, single Asian currency with a single regional emission center can be considered.

At the same time supranational economic structures will coordinate the consolidation and flow of funds specifically in demanded directions.

The most important is that United Central Asia will become a self-sufficient entity of international law with its investment attractiveness. This will be another world, able to react on the world processes rapidly. And even on financial-economic crisis.

Translated from Gazeta.kz