The Economic Future of Central Asia

By Pomfret, Richard | The Brown Journal of World Affairs, Fall 2012 | Go to article overview

The Economic Future of Central Asia

Pomfret, Richard, The Brown Journal of World Affairs

Economics and politics have always been strongly interconnected in Central Asia. The five Central Asian republics were, together with Azerbaijan, the poorest Soviet republics. Their role in the Soviet division of labor was limited to supplying a small range of primary products, including cotton, oil and gas, and minerals. With no prior history as independent nation states, the five countries faced an uncertain future after becoming independent in December 1991. At that time, they faced three major economic shocks: the end of central planning, hyperinflation, and the collapse of supply and demand chains.

Despite the challenges, three of the countries have been politically stable since independence. In Uzbekistan and Kazakhstan, the two most populous countries, the First Secretaries appointed by Mikhail Gorbachev became national presidents in 1991 and are still in power. In Turkmenistan a similar pattern was scarcely disrupted by the president's death in 2006 and the smooth succession by a member of the elite. By contrast, Tajikistan experienced a bitter civil war until 1997, and the Kyrgyz Republic has seen two presidents overthrown during the 2000s. The differing fortunes reflect the ability of the first group to live offtheir natural resources, in comparison with the more precarious resource base of the other two countries.

The first section of this paper reviews the five countries' economic history since independence, with an emphasis on the direct and indirect impacts of each country's resource endowment and variations in the world prices of their resource exports. The second section looks to analyze the extent to which the past can be a guide to the economic future and to ask what other considerations may be important. These considerations include the role of other countries, especially Russia, China, and the United States, and the importance of the national leader's specific qualities in economic policy making in autocratic states.

The Past

The story of the five Central Asian countries' economic development since independence has by now been widely analyzed.1 In the 1990s debate over post-Soviet transition strategy, Central Asia saw a wide range of positions. The Kyrgyz Republic was the most radical of any Soviet successor state in its pursuit of comprehensive price and trade liberalization and extensive privatization between 1993 and 1998. Indeed, it was the first of these states to join the World Trade Organization (WTO), ahead of even Baltic countries. This experience stands in contrast to less thoroughgoing reform found in Kazakhstan, a more gradual approach in Uzbekistan, and an overall lack of reform in Turkmenistan, which remains the least changed economy of any former Soviet republic. Economic performance, measured by real GDP in 1999 as a percentage of 1989 GDP, showed little relation to the transition strategy. Uzbekistan's economy was the best-performing of all former Soviet republics and, unsurprisingly, the worstperforming Central Asian economy was that of war-torn Tajikistan. However, the other three countries had more or less identical performances, with GDP about a third lower in 1999 than in 1989 despite the diversity of transition strategies.2

The main explanations of Uzbekistan's success emphasize the gradual transition strategy, favorable world market conditions for its major export (cotton), and good administration (and favorable inheritance from the Soviet era).3 Gradualism reduced the magnitude of the short-term transitional recession compared to countries adopting rapid reform. Good administration helped to reduce the decline in output (e.g., the maintenance of irrigation channels and ginning facilities kept cotton output up), in contrast to the decline in cotton output in Turkmenistan and Tajikistan. However, what transformed these factors into the best performance in the former Soviet Union was the 1992-1995 upturn in world cotton prices (Figure 1) combined with the relative ease of transporting cotton, a high value-to-bulk commodity, to world markets. …

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