Europe & Central Asia

Current Situation of Development in Central Asian Countries

Photograph: Akitoshi Iio
Photograph: Akitoshi Iio

In the last 24 years since the collapse of USSR, five Central Asian countries have been transformed. Each has transitioned from communism and planned economy into market-oriented economy and democracy, constructed independent histories, and escaped from Moscow-centered rule in attempt to establish new relationships with Western countries, Turkey, India, China, Korea and Japan. The relationships with big powers such as Russia, China and US have undergone the most dramatic change. Recently, in the face of the increasing need for a diverse and sustainable energy supply, Central Asia’s geopolitical position between Russia and China as well as its natural resources such as oil, natural gas, and uranium have drawn international attention.

We can see the contrasting levels of economic development between resource-rich countries and the others. Kazakhstan (USD 12,276 GDP per capita) and Turkmenistan (USD 9,031 GDP per capita) have been already ranked in upper e middle-income countries by the World Bank (WB), and Uzbekistan (USD 2,037 GDP per capita), Kyrgyz Republic (USD 1,269 GDP per capita), and Tajikistan (USD 1,099 GDP per capita) in lower middle-income countries as its development level is still not high. The economic disparity between resource-rich countries and the others in Central Asia is expected to keep expanding.

Additionally, this region has existing water problems between upstream countries –Kyrgyz Republic and Tajikistan- and downstream countries –Uzbekistan and Kazakhstan. Among these countries, conflict over the energy and water resources has been constant. Tajikistan is currently constructing Rogun dam, which after completion would be the world highest dam, but Uzbekistan has heavily contested this project. In order to prevent Rogun dam construction project, Tashkent has taken measures that range from cutting off energy supply to blockading cargo trains to obstruct the transportation of materials to Tajikistan, which has caused significant tension between the two parties. The water resource issue in Central Asia is now extending beyond the regional context and obtaining international political meaning, because Tajikistan shares its southern border with Afghanistan, meaning that these countries are expected to become the main power suppliers for re-construction of Afghanistan and many foreign players are investing to the hydro-power station project in Tajikistan. In September 2012, Islam Karimov, President of Uzbekistan, warned that war stemming from conflicts over water resources in Central Asia could become an issue. Under these circumstances, no airline has operated yet between Uzbekistan and Tajikistan, although they are neighboring countries.

Resource-rich countries are strengthening national industry by expanding the national income from natural resources, but so far their national economy still depends heavily on the agricultural sector. Uzbekistan is promoting industrialization by utilizing its natural resources, strengthening the auto industries through establishing joint-stock company with foreign capitals, but the agricultural sector still accounts for the large percentage of their national income.

One of the serious problems for countries in this region regards the Aral Sea, once the fourth largest lake of the world (66,000 km2), which is suffering from land degradation that stems from diverting water for irrigation from the 2 rivers, Amu Darya and Syr Darya. Another issue is health hazards due to the soil salinization caused by drying region-specific underground salts. The water resources of north Aral Sea, which is situated in the Kazakhstan side, have been protected by the project funded by the World Bank (WB), but the southern Aral Sea, in the Uzbekistan’s side, has almost disappeared in 2014 for the first time in its history. The glaciers in the mountainous area of Tajikistan, the source of rivers flowing into Aral Sea, is speculated to melt away by the middle of this century, while at the same time, the population in Aral Sea basin is growing and could soon cause high water-stress. In Uzbekistan’s side of Aral Sea, a joint-stock company with Korean capital is exploiting the gas field at the dried up bottom of the Aral Sea. The Aral Sea crisis, which many people consider worst environmental problem in the 20th century, is posing the question ‘economy or environment’.

Kazakhstan, which has been a leading economy among Central Asian countries, is now shifting from ODA recipient to donor, and is now in progress of establishing its own governmental international cooperation agency. In December 2014, the parliament of Kazakhstan approved the act to establish so called “KAZAID” and change its role as donor. Now KAZAID is being supported with the technical assistance of aid organizations such as United Nations Development Programme (UNDP) and Japan International Cooperation Agency (JICA) to gain knowledge that will help enhance its ability to function effectively as an international cooperation agency, and it is now moving closer towards becoming one of the top competing 30 economies through its own strategy, ‘Kazakhstan 2030’. However, in middle-income countries such as Kazakhstan, the income gap between urban and rural area/haves and have-nots has expanded in spite of the national economic growth because of ineffective distribution of the gained wealth and resources.

The non-resource rich countries in Central Asian region, Tajikistan and Kyrgyz Republic, are lagging behind in economic growth. The Kyrgyz Republic experienced revolutions twice—once in 2005 and again 2010—which is representative of the region’s fragility and problems facing its governance. Tajikistan’s fell behind in nation-building in the post-soviet period due to a civil war in the 90s. Furthermore, because of the authoritarian regime and agriculture-centered economy, the country’s prospects for future development are still unclear. In May 2015, the senior commander of Tajik police defected to IS, and in September Deputy Minister of Defense rebelled and attacked the government bodies with armed groups. In the current situation, stabilization of these countries is urgent and could have significant impact on the situation Afghanistan faces.

Central Asian countries have continuously kept the high economic growth rate (7-8%), even after the economic crisis. However, the crisis in Ukraine and the decline of Russian ruble caused by the economic sanction placed on Russia is significantly influencing Central Asian countries’ economies. 40% of Tajikistan’s GDP depends on remittance from immigration labor’s to Russia and was therefore strongly affected by the dropped value of ruble. The status of these economies is unstable and depends heavily on the policy of Russian government. For example, Russia now requires immigrant labors to take Russian language proficiency exam. It is indispensable for for both Tajikistan and Kyrgyz Republic to establish their own foundation for independent growth.

 

Authors: Study Group on Development in Central Asia and Caucasus Region

  • Naoki Nihei, Central Asia and the Caucasus Division, Japan International Cooperation Agency (JICA)
  • Akitoshi Iio, Ex-JICA ODA Loans Advisor (Central Asia Region)/Project Formulation Advisor, Japan International Cooperation Agency (JICA) Ethiopia Office.
  • Ryota Saito, Ph.D. candidate of Graduate school of Humanities and Social sciences in University of Tsukuba.

 

Special Edition: Prospects of Japan’s Assistance for Central Asia

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