We have considered several areas in the preceding studies that may form the basis for the creation of common economic space and integration of Central Asia. They include transport and power industries of Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, and Turkmenistan.
The topics previously raised include several systemic features which may prevent economic projects from being implemented. Among them are in particular different levels of economic development of the regional countries, prevailing commodity exports and slowdown in economic growth of at least three states in the region (Kyrgyzstan, Tajikistan, and Turkmenistan).
The economic divide even now restricts the potential for development of the lagging countries and complicates their full-fledged participation in the regional projects.
Thus, the group of leaders, Kazakhstan and Uzbekistan, in spite of some difficulties caused by the external economic and political processes, has reasonably good chances to make significant progress in economy, hence those countries will be able to claim leadership in the region.
Kyrgyzstan and Tajikistan still cannot claim any leadership in the region. Trying to address the challenges caused by deficiencies of their economic models, these countries have to settle the issues of survival rather than those of development, let alone leadership.
High dependence on external influence steadily makes these countries more unstable and increases existing risks.
The main factors raising concern are: situation with public debt (its continuing growth, approaching time limit for repayment of loan principle, instead of mere interests as it is the case now, high dependence on one single creditor, lack of possibility to restructure debts), dependence of their budgets on cash transfers from migrant workers, lack of possibility to implement industrial projects in key industries, gradual decline of the external investment volume and so on.
There are less evident issues indirectly related to economy but constituting the foundations for formation of the basic framework of government and non-government institutions with subsequent prospect of five republics being integrated: issues of security provision, degree of intraregional competition, aggravation of dependence on external players (Russia, China etc.), inefficient management system that increases the level of internal risks connected with both economy and social and political situation in general, etc.
All these reasons may be conditionally divided into internal ones, i.e. those occurring inside the country and influencing, first of all, the processes inside the state and, secondly, the region in general; and external ones - these are the processes to a greater extent determined by region-wide trends and not fully controllable and regulated by the applicable mechanisms inside the states of Central Asia.
Within this study, we shall review a range of factors preventing the Central Asia countries from being integrated into one single union.
Security. Central Asia is a reference designation of the region including five states: Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, and Turkmenistan. The concept of the region may be extended in some interpretations and include Afghanistan, Pakistan, and India. This understanding is often used by American researchers and they use the term Greater Central Asia for designation of the above mentioned eight countries.
The use of this precise designation is best suited for description of the security situation.
Afghanistan remains the main external source of concern. In spite of many years of expensive attempts by different countries to make the situation stable, the conflict in the country is far from being settled. The situation in Afghanistan negatively influences the economy of the neighbouring states and generates the risks of instability spreading over the nearby territories.
This statement is questionable since a range of the researchers believe that the threat emanating from the territory of Afghanistan is significantly exaggerated by those who seek to achieve political benefits. Taking advantage of that threat, border countries get technical and financial support from geopolitical actors. Moreover, using the threat idea, it is possible to obtain foreign political support for the current regimes. According to this logic, the main threats for the local countries are corruption, inefficiency of government institutions, radical Islam, interethnic tensions and potential conflicts over critical resources - water and land.
The fact is that the war in Afghanistan continues, population has large arsenals of weapons, no forces control the territory confidently, ISIS militants have been building up their influence in some provinces.
Tajikistan and Turkmenistan do not have sufficient force resources to insure their own security. The armed groups have broken the borders of these countries several times, for the time being mainly settling the issues of drug traffic.
Dushanbe and, to some extent, Ashkhabad regularly obtain support from stronger neighbours, Russia and China. These countries are interested in maintaining stability in the region and in the existence of buffer states blocking the threat emanating from Afghanistan.
The regional countries are the members of such military or pseudo-military blocks as the CSTO (Collective Security Treaty Organization), SCO (Shanghai Cooperation Organization) and Anti-terrorist Coalition. At the same time, the efficiency of these organizations in case of crisis remains unclear - they have not participated in military conflicts so far.
The main format of security provision is bilateral agreements between the donors and recipients of military, technical, financial and information aid.
Such interaction makes it possible for the regional countries to partly reduce risks, and for security donors - to achieve geopolitical goals going beyond mere military topics.
The roles of the regional countries in this system remain almost unchanged - one way or another, the entire region obtains support from outside but actually does not render it to the third countries. A steady role of a supplicant assumed by Tajikistan and Kyrgyzstan for many years (and Turkmenistan has joined them recently in view of deepening economic recession) underlines the dependence of the abovementioned countries on Russia and China.
Now this dependence is embodied in the presence of two Russian military bases - the 201st military base in Dushanbe (Tajikistan) and the Kant military base in Kyrgyzstan, not far from Bishkek.
The Chinese military presence is still significantly more modest and confined to plans of possible deployment of the military base in Afghanistan and (or) Pakistan. The official Beijing has denied this information so far. The first Chinese military facility beyond the limits of the country appeared in August 2017 in Africa.
The situation in the region is aggravated by the fact that the external threats are superimposed on the unfavourable internal situation which generates the growing risks in social and economic, religious, humanitarian, environmental and political areas.
Supposing that one day the level of real threat approaches the critical threshold and the existing tools appear to be inefficient, then the authorities may require external aid to stabilize the situation. Such scenario and ways of response thereto are established in the interstate agreements to which Kyrgyzstan and Tajikistan are the parties. Probably, if China continues strengthening its military presence in the region, which is quite likely, this amendment may appear in the already concluded anti-terrorist agreements.
However Beijing may opt for other forms of interest protection in Greater Central Asia, one of them may consist in using private security and military companies (similar services start being offered in Kyrgyzstan).
The issue of security is not only a tool of influencing and bargaining, it also remains a serious unsettled problem while assessing regional projects prospects. For example, such as CASA-1000.
CASA–1000 - the Central Asia-South Asia Power Project costs $1.16 billion and is currently under construction; it will make it possible to export excess hydroelectric power from Tajikistan and Kyrgyzstan to Pakistan and Afghanistan.
The aspects of security provision remain unclear in addition to the issues of economic efficiency including uncertain sources of financing diverse components of the global project, and to the issue of tariffs and geopolitical competition. As long as the territory of Afghanistan is a battlefield, nobody can provide real guarantees of security for the facilities under construction or already existing.
Intraregional Competition. The relationships between the countries of Greater Central Asia represent a tangle of complex, multi-level interests and contradictions in the form of mutual claims, coalitions, informal arrangements and attempts to shape new rules of game.
Kazakhstan and Uzbekistan are the two most economically developed countries in the post-Soviet Central Asia fighting for informal leadership. Tajikistan and Kyrgyzstan are small, economically dependent nations having suffered internal armed conflicts.
There are several key points around which competition takes different forms: struggle for resources, sales markets, investments, traffic flows, regional influence etc. An increasingly vital issue in the region is presence or absence of real opportunity to set new intraregional “rules of game” independently, without participation of external actors.
Competition is a fundamental force in solving the issue of a central state which will be the basis for and a driver of supposed changes whose aim is to integrate the region within the limits of one or several economic projects. Theoretically, several countries may claim to be a central state: in Central Asia it is Uzbekistan.
After authority transit started in 2016 Uzbekistan has proclaimed a policy of openness and economic liberalization. Dynamically developing economy with focus on export oriented industries as well as announced ambitious power and logistics projects indicate that Tashkent is likely to be able to assert its rights for regional supremacy and surpass Kazakhstan in terms of economic indicators.
As to the external investment flows, China has asserted itself confidently as such player. It has been sponsoring expensive and long-term projects as part of its One Belt, One Road initiative and has been building financial mechanisms consolidating the dependence of its partners on external inflows.
Against the background of the last economic recession, Beijing ambitiousness seemed so profitable that all the countries of the region lined up for Chinese investments.
That being said, the first wave of delight with quick and “easy” money was replaced by awareness of the necessity to control Chinese monetary share in industries strategically important for the regional countries. This changes nothing for Tajikistan and Kyrgyzstan: their low starting point and corrupt practices in the use of loans did not allow these states to efficiently use the obtained funds for their development.
Kazakhstan and Uzbekistan, possessing a part of the required funds for the development of their internal projects and having preserved a part of their industrial potential during the years of independence, managed to get more equal conditions from their Chinese partners. Thus, for example, Tashkent successfully implemented the project of railway connectivity of the country. Kazakhstan continues electrification of the remote regions of the Republic.
In addition to the abovementioned areas of traditional competition, there are some other economy sectors with competition being a natural process - these are illegal smuggling, drug trafficking, etc.
Dependence on External Players. The dependence concept in this context is used to describe the relationships having no alternative to a greater or lesser degree. Partnership in the form of multilateral agreements governing the relationships in one or several related industries cannot be interpreted as dependence.
The first factor causing serious concern and imposing serious restriction upon the prospects of intraregional cooperation is the level of public debt to China and rather doubtful prospects of its repayment within the time period agreed.
The existing situation threatens Kyrgyzstan and Tajikistan with increasing loss of investment attractiveness for external players, transfer of important and (or) profit-generating facilities under the PRC’s control and, in case current dynamics is maintained, with a range of unpopular measures restricting domestic political decision making. It could include, for instance, a long-term rent of a part of the national territory to the PRC or deployment of research and military facilities.
The second factor is dependence of economies on cash transfers from migrant workers. Statistically, Kyrgyzstan and Tajikistan are ranked first in terms of volume of the migrant workers’ cash transfers. Russia and Kazakhstan remain traditional labour markets for them. Millions of citizens of Central Asian republics leave their countries to work abroad due to geographical proximity, demand for cheap labour force, no language or significant legal barriers, high level of unemployment in their native countries and high birth rate.
Analysts predict that the number of migrant workers from Uzbekistan may increase starting from the next year since Moscow and Tashkent may simplify the processes of the Uzbek migrants movement and stay.
The third factor is the lack of alternative suppliers of strategically important goods. Kyrgyzstan and Tajikistan import the most part of oil products and fuels and lubricants, food products, part of textile industry products, vehicles, machinery, high-technology equipment, communication equipment etc. The main suppliers are either neighbouring countries - Kazakhstan and Uzbekistan, or Russia and China.
It is not easy to find alternative products with similar prices, quality and delivery speed, considering purchasing power.
The fourth factor is the lack of alternative sales markets. Russia (Eurasian market) and China remain the main buyers of the goods and resources of Central Asian republics. As to the expansion into new interesting markets - India, Pakistan, Turkey and Europe, it will be extremely difficult without large-scale upgrading of transport industry, industrial potential build-up and implementation of new technologies increasing labour productivity and quality of output products.
Taking into consideration the abovementioned features, which one way or another have an impact upon decision-making, it is difficult to assume that in the near future the Central Asian region will overcome the problems accumulated and will be able to aspire to high growth rate of local economies.
Experts’ forecasts are also rather bleak. Thus, the International Monetary Fund (IMF) reviewed its forecast upwards in relation to Kazakhstan only.
But the IMF expects Kazakhstan’s GDP growth to slowdown to 3.1% in 2019. In 2018 Uzbekistan’s GDP growth rate will decrease to 5%, that is by 0.3% lower than in 2017.
The GDP growth in Turkmenistan in 2018 will amount to 6.2%, that is by 0.3% lower than in 2017. The next year growth rate will decrease to 5.6%. In 2018 the growth rate in Tajikistan has fallen to 5% in comparison with 7.1% in 2017. In 2019 the GDP growth rate in the country will slowdown to 4%.
The GDP growth in Kyrgyzstan has become slower in 2018, it only amounted to 2.8% in comparison with 4.5% in 2017. The IMF predicts a rebound to 4.5% in 2019.
Conclusions. Integration of Central Asia within the framework of a common economic space appears impossible over a short-/mid-term period. There are several reasons:
Firstly, unresolved contradictions between the regional countries related to restricted resources allocation and use.
Secondly, specifics of the local elites aimed at personal wealth accumulation instead of implementation of the projects of nation-wide or region-wide importance.
Thirdly, different starting points both in terms of economic opportunities and priorities set.
Fourthly, gravitation towards different centres of strength depending on economic, political, social or other benefits in different time periods.
Fifthly, the lack of own potential for implementation of strategically important projects, although they will be profitable beyond reasonable doubt in future.
Thus, currently integration projects of the countries included in the so called Greater Central Asia remain a difficult challenge in the absence of fundamental systemic changes, solution of a range of national and regional problems, lack of clear strategy of development and substantial external inflows directed towards key productions upgrading.
Denis Berdakov, political scientist