Economic Development in Central Asia

Economic development in Central Asia is an important issue, with a global impact. During the Cold War, the Soviet Union provided an umbrella of sorts as a single economic space in this geographic region. With the dissolution of the Soviet Union, it was revealed that Russian and Central Asian economies were incapable of competing on the world market. This was manifested through the small ...

Economic development in Central Asia is an important issue, with a global impact. During the Cold War, the Soviet Union provided an umbrella of sorts as a single economic space in this geographic region. With the dissolution of the Soviet Union, it was revealed that Russian and Central Asian economies were incapable of competing on the world market. This was manifested through the small number of trade links that were held by the countries in the region.

As of 2011, the state of economic cooperation between the countries of Central Asia and Russia remains poor. Economic cooperation between regional players is obstructed by a lack of coordination and a haphazard approach to business activity. This can be seen in the fields of industrial production, transport and communication.

In order to achieve a state of competitiveness within the global market, many experts proposed that Russia and the countries comprising Central Asia once again form a single economic unit such as existed during the reign of the Soviet Union. No one proposed that the politics of the Soviet era be revived, only the economic cooperation that existed at the time of the Soviet Union between these various, now independent, nations. Of course, creating a state of cooperation between these varied sectors of the economy is not without obstacles.

One such obstacle is seen in the complicated geopolitical situation that surrounds Central Asia. The instability of Afghanistan has an obvious impact on the economy in this area. Warlike conditions in surrounding areas make it difficult to integrate communication between transport systems in Russia, the Central Asian nations and other countries.

The relationship between Russia and the nations of Central Asia has a long and rich history in which politics and economics have had an intimate intertwining. Trade between the nations of Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan) and Russia has its origins in the earliest days of the Great Silk Road. But the economic relationship between Russia and Central Asia changed with the latter half of the 19th century.

At that time, these countries merged into a single economic force. For a time, these countries comprised the Russian Empire. The nations of Central Asia gained access to Russian markets while Russian investment money came pouring into the region. Trade links were forged. As Central Asia strengthened its economic links with the Russian Empire, its trade links with other countries weakened. Central Asia remained an underdeveloped agrarian region during this time, acting as a supplier of wool, silk and cotton to the Russian Empire's textile industry.

Later on, the Russian Empire fell and with the onset of the Soviet Union, Central Asia underwent a second phase of economic integration with Russia which lasted until 1991. This period of economic intercourse also had both positive and negative effects on Central Asia's economy. This was a time of significant economic growth for both Russia and Central Asia. However, Central Asian countries were caught up in the rigidity of the framework of the Soviet system, which involved centralized planning and the controlled distribution of all regional resources. At times, links were formed between the various republics of the Soviet Union in spite of the knowledge that they would generate economic losses. These cooperative efforts were labeled by the Soviets: "planned loss-making enterprises."

With the fall of the Soviet Union, there was no alternative market-based system in place to serve as a substitute for the Soviet market system. As a result, each of the former republics were on their own, independent as nations as well as economically. The suddenness of the dissolution of the Soviet Union meant a total and sudden collapse of economic systems.

In 2011, the market was in slow recovery from this economic disaster. There were two main reasons for the improvement of the Central Asian economy. The cost of goods rose while the value of the United States dollar fell. The volume of trade between Russia and Central Asia increased. After a rough initial independent economic phase which ran from 1992-2003, trade volume increased by 50 to 100 percent

Trade between China and Central Asia has undergone an even more dynamic growth than that between Russia and Central Asia. Trade between Russia and Central Asia grew by a factor of 2.3 between 1992 and 2006. During this same period, trade between China and Central Asia grew by a factor of 25.6. For this reason, many experts felt that the main vehicle for economic development in this area was China. Ironically, China carried out almost no trade with Central Asia in 1991 but in 2011, traded with this area on a level comparable to that of Russia.