Catalog

Window of Opportunity
ADB Review [ October 2005 ]

Central Asian republics need to cooperate more to compete effectively in a global economy. A new United Nations Development Programme (UNDP) report looks at the benefits of increased integration—and the costs of noncooperation

By Ian Gill, (igill@adb.org)
Principal External Relations Specialist

Increased cooperation among Central Asian republics would produce big economic gains in reducing trade costs, increasing remittances, improving water use and flood control, and negotiating better cotton prices in the international market. On the other hand, the price of noncooperation in health (in treating HIV/AIDS and tuberculosis) and natural disasters, for example, would be large. On all these issues, regional cooperation can limit costs and increase benefits.

These are among the conclusions of a new UNDP report, Regional Cooperation for Human Development and Human Security in Central Asia, to be released in December.

The report estimates that regional gross domestic product (GDP) could rise significantly after 10 years of comprehensive regional cooperation, compared with the status quo of limited cooperation. It adds that the increase would be higher in smaller countries.

Moreover, regional cooperation will likely help the poor more than the better off. Reducing trade costs, increasing agricultural productivity, and reducing flooding would help the rural areas, where many of the poor live. This especially applies to border communities.

Conversely, says the report, the costs of noncooperation—for example, from a lack of regional disaster preparedness or from war and violence—tend to fall most heavily on poorer people.

Significantly, the report says, “The political push for change, open borders, and regional cooperation will likely have to come either from the top leadership, or from the enlightened self-interest of the elites as they recognize that in the longer term, they will also benefit substantially from a more competitive, dynamic, and rapidly growing regional economy—one based on integration and cooperation.”

But it warns that the drive for change “could also come from those who feel most oppressed by closed borders and corrupt officials, the people in the border communities who are the most negatively affected and most prone to turn to radical and potentially violent methods.”

The report adds that the collapse of the Soviet Union in 1991 had a dramatic impact on Central Asia that is still being felt. Economic activity dropped precipitously in most of the region. The collapse of the command economy and the presence of new borders interrupted Soviet trade, transport, and financial flows.

Skilled Russian labor, along with other minorities, left in large numbers; investments and traditional cooperation in key sectors, especially water and energy, lapsed; and the new countries faced great difficulties integrating with the world economy due to their landlocked location, far from international markets.

Some of them faced civil war and security challenges. With the collapse in economic activity in the region came a dramatic increase in poverty and a severe reduction in social services and social protection.

TOURISM POTENTIAL Little-visited Tajik mountains between Dushanbe and Khojand: Tourism has great potential for Central Asia

A new national identity and new national government institutions had to be created and market reforms introduced under these difficult circumstances, in most cases by political and administrative cadres carried over from Soviet administrations.

Over the past 6 years, Central Asia has benefited from an economic recovery, and analysts believe it is turning the corner. Some countries are growing strongly and poverty rates are falling. The region’s huge appeal as a tourist destination will also help boost future growth. Amid the expansion and modernization, Kazakhstan—the largest economy with half the region’s GDP—is spurring regional growth as a center for investment and job creation.

However, the report notes that in much of the region incomes remain below those of 1990, governance indicators are generally poor, and social services and protection remain fragile.

Many challenges in economic, institutional, and political reforms remain even as differences among the countries are becoming clearly evident.

Much can—and must—be done in each country to address these many serious challenges, says the report. The five landlocked countries will not flourish as long as rigid borders divide them, impeding crossborder cooperation and economic integration among themselves and with the rest of the world.

This does not mean recreating the centrally planned integration of Soviet times, but creating conditions that allow people to connect across borders and help markets work across borders through trade and investment, linked infrastructure, shared water and energy, common environmental and health protection, and a free flow of ideas and experiences.

The report says that only if the borders are open and only if the countries cooperate with each other and their neighbors will Central Asia become once again an integral part of the Eurasian economic space.

“Only if Central Asian countries and their neighbors create borders that allow people to connect with each other without fear, without undue loss of time, and without bribes will Central Asia succeed in achieving economic prosperity, social progress, human security, and political stability for their people,” the report asserts.

Fortunately, it says, the disintegration of the Soviet Union and the end of the cold war opened a historic opportunity for the reintegration of the Eurasian continental space.

The great continental powers—People’s Republic of China (PRC), India, Russia, and the European Union—are no longer separated by sealed and hostile borders.

There is new hope for a peaceful Afghanistan serving as a bridge between North and South Asia. Regional economic and political institutions are beginning to serve as focal points for regional cooperation throughout Eurasia.

And modern means of communications—including air transport, telecommunications, and the internet—are shrinking overland distances both in cost and speed.

As a result, Central Asia has the opportunity to become a hub for the new transcontinental links that are beginning to grow across Eurasia from east to west and north to south.

However, to realize this opportunity, the Central Asian countries will need to cooperate to create conditions that will allow the region to flourish as a peaceful and prosperous area and attract the investment and expertise needed to build on its natural and human resource base.

Of course, says the report, major challenges and potential obstacles threaten the cooperation and integration of Central Asian countries.

The sense of competition and distrust among the countries and their leaders that has come with the creation of new nation states is reinforced by the traditional notion deeply embedded in socialist thinking that international and regional economic and political relations are strictly a “zero-sum game” —that whatever one country gains must entail a loss to another country.

Coupled with this perception is a strong resistance to the notion that any country might benefit from giving up any degree of its newfound national sovereignty as part of a process of regional cooperation or integration.

MODERNIZING Kazakhstan (above) contributes half of the region's GDP; a high-tech glass factory in the Kyrgyz Republic (below) is getting a boost from foreign investment

Despite such obstacles, the Central Asian countries have a window of opportunity to begin the process of creating a common economic and social space through cooperation and integration.

It was only natural that, in the early years after the Soviet Union disintegrated, the new republics focused on the internal challenges of nation building and of the painful transition from socialist-command to market-based economic systems.

Now, however, the report notes that most leaders of the Central Asian republics appear ready to increase their cooperation bilaterally and regionally which would bring together the countries of the region and key neighbors, especially the PRC and Russia.

In addition, the broader international setting is more supportive of closer cooperation among the countries.

After the collapse of the Soviet Union and for much of the 1990s, little international attention was devoted to Central Asia as the focus was the rapid recovery of Central Europe, the civil war and reconstruction in the Balkans, and the fitful transition of Russia.

This changed after the terrorist attacks of 11 September 2001 when Central Asia, along with Afghanistan, was thrust into the international limelight as a region of immediate geopolitical significance and of potential long-term risks.

With its central location at the intercept of Eurasian east-west and north-south political fault lines, with its great natural resource base, and with its serious economic and social difficulties and apparent potential for political instability, Central Asia has become the focus of interest for the international community.

Until recently, most of the attention was devoted to strengthening the domestic policies and institutions in each country. But multilateral and bilateral donors have increasingly understood that improved regional cooperation has an important role to play in helping the countries in Central Asia achieve sustained economic growth and long-term stability.

This article contains extracts from the United Nations Development Programme’s Human Development Report which will be released in December 2005.

Go back to current issue

Email this to a friend