Regional cooperation is key to unlocking Central Asia’s economic potential
Central Asia, a region of enormous untapped potential, stands at the precipice of a new era of economic growth and development. As global markets continue to evolve and the world becomes increasingly interconnected, it finds itself at a crucial juncture. The region’s rich natural resources, strategic geographic location, and cultural heritage hold immense promise for its future. However, the key to unlocking this potential lies in fostering greater regional cooperation.
Central Asia, consisting of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, boasts a combined population of over 72 million and a wealth of natural resources, such as oil, gas, and minerals. Yet, despite these advantages, the region’s GDP has lagged behind other comparable emerging markets. According to the World Bank, Central Asia’s GDP per capita stood at $4,326 in 2019, far below the global average of $11,429.
One of the primary reasons for this underperformance is the lack of regional trade integration. Intraregional trade accounts for a mere 5% of the region’s total trade volume, according to a 2020 report by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). This is in stark contrast to regions such as the European Union and the Association of Southeast Asian Nations (ASEAN), where intraregional trade accounts for 64% and 23% of total trade, respectively.
The potential benefits of greater regional cooperation in trade are manifold. For instance, it would allow Central Asian countries to diversify their economies, reducing their reliance on exports of natural resources and mitigating the risks associated with fluctuating global commodity prices. Furthermore, increased intraregional trade would encourage the growth of regional value chains and the development of new industries, fostering innovation and entrepreneurship.
A prime example of the potential benefits of increased regional cooperation in trade can be seen in the case of the Central Asia Regional Economic Cooperation (CAREC) Program. Established in 2001, CAREC has brought together 11 countries, including the five Central Asian nations, to promote economic cooperation and integration. The program has already resulted in a significant increase in intraregional trade, with CAREC members’ trade volume growing from $12.5 billion in 2001 to $48.6 billion in 2019.
Another crucial area in which regional cooperation can unlock Central Asia’s economic potential is infrastructure development. Central Asia’s strategic location at the crossroads of Europe and Asia presents an opportunity to develop it into a vital trade and transit corridor. However, inadequate and poorly maintained infrastructure has long hindered the region’s connectivity and economic growth.
Regional cooperation in infrastructure development can help address these issues by pooling resources, knowledge, and expertise. Additionally, by working together, Central Asian countries can attract more foreign investment and development assistance. For instance, the Belt and Road Initiative (BRI), launched by China in 2013, has already started to yield significant benefits for the region in terms of infrastructure financing and development. As of 2021, Chinese investment in Central Asian infrastructure projects had exceeded $30 billion, according to the China Global Investment Tracker.
Moreover, regional cooperation in infrastructure development can help Central Asian countries leverage their connectivity to access new markets and integrate into global value chains. The Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline and the Central Asia South Asia (CASA-1000) electricity transmission project are just two examples of how regional cooperation can lead to tangible economic benefits for the region. Both projects have not only created jobs and generated revenue for the participating countries but have also facilitated access to new markets and enhanced energy security in the region.
Environmental challenges, such as water scarcity and climate change, are another critical area where regional cooperation can play a pivotal role in unlocking Central Asia’s economic potential. The region is highly vulnerable to the effects of climate change, with increasing temperatures, melting glaciers, and unpredictable rainfall patterns posing significant threats to agriculture and food security.
Cooperation in environmental management and sustainable development is vital to address these challenges effectively. By working together, Central Asian countries can develop and implement comprehensive regional strategies for water resource management, disaster risk reduction, and climate change adaptation. This collaborative approach will not only help mitigate the adverse effects of environmental challenges but also foster sustainable economic growth in the region.
A noteworthy example of regional cooperation in environmental management is the International Fund for Saving the Aral Sea (IFAS). Established in 1993, IFAS aims to facilitate joint efforts by Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan to address the environmental crisis in the Aral Sea Basin. Through IFAS, the Central Asian countries have jointly implemented a range of projects aimed at improving water resource management, promoting sustainable agriculture, and mitigating the impacts of climate change.
By fostering greater collaboration in trade, infrastructure development, and environmental management, Central Asian countries can capitalize on their natural resources, strategic location, and cultural heritage to achieve sustainable and inclusive economic growth. The success stories of the CAREC Program, BRI, TAPI, CASA-1000, and IFAS demonstrate that regional cooperation is not only feasible but also highly beneficial for the region.
As the global economy continues to evolve and the importance of regional integration becomes increasingly evident, Central Asia must seize the opportunity to strengthen its regional ties and work together to overcome its challenges. By doing so, the region can unlock its immense economic potential and chart a new course towards prosperity and progress.