Global Economics

Asia's Emerging, New Silk Road


The struggling economies of Central Asia would benefit from a UN project aimed at rebuilding the famous trade route to Europe

It's obvious to anyone crossing from western China into Kazakhstan or Kyrgstan that you're entering another world. The traffic jams, billboards and smooth highways are replaced on the Kazakh side by long queues at immigration and little sign of economic activity on the bumpy road to Almaty, the commercial capital.

Central Asia's problems are many. Government remains stuck somewhere in between the centralized economies of the Soviet era and a free market system which can efficiently exploit the region's mineral and other wealth for the benefit of its people. They have so far seen little profit from the region's much talked-of oil and gas.

Next door, China is booming - and some believe this growth can spread.

The UN Development Program's Beijing-based Silk Road Initiative (SRI) wants to rebuild the old road which brought Chinese goods to Europe, with a view to sharing China's prosperity with its western neighbors. Central Asia would contribute natural and human resources in return.

SPACE-AGE SKILLS

Aside from oil and gas, Central Asian states have a workforce that is well trained compared to poor masses in western China. This is largely due to the space and nuclear research facilities that peppered the far flung steppes of Kazakhstan and Uzbekistan in the Soviet era, which has forged a legacy of science and engineering in the region.

By shifting production over the border or attracting skilled Central Asian labor to western Chinese cities like Urumqi, the SRI suggests that Chinese business can develop high-value manufacturing in regions such as Xinjiang, which have so far relied on agriculture and energy extraction.

Among the most serious obstacles to any such development are mutual suspicion and bad roads.

Central Asian governments remain oriented to Russia. The older generation of leaders in the region was handpicked by Moscow and Russian habits die hard. In Central Asia, this has unfortunately come to mean an authoritarian, state-centered approach to economics with plenty of cronyism attached.

Kazakhstan, the region's star performer, is still a long way behind acceptable norms in government accountability and transparency. It is said that up to 80% of the economy is controlled by the extended clan of President Nazarbaev. Neighboring Kyrgzstan has been more democratic, even deposing a president, but it remains hampered by bureaucracy and official corruption.

Border procedures remain drawn out, with an idiotic requirement for a visa for travel between states which are culturally and economically homogenous. What private business there exists is either slowed down here or suffocated by a pervasive bribe-seeking culture among police and government officials.

LIMITED OUTREACH

China too bears some of the blame for the obstacles to increased economic integration with Central Asia. Closed roads, border disputes and a lack of trade exchanges during the decades-long Sino-Soviet split remain hard to undo.

One remarkable Chinese initiative, the Shanghai Cooperation Organization, has thus far delivered on security issues for China.

It has secured Central Asian cooperation in shutting down cross-border cells of Uyghur fighters seeking to wrest Xinjiang province from Beijing's control. Today it's much harder for militant Uyghurs to seek refuge in Central Asian states, with whom they share religious and cultural affinities.

With that task accomplished, the SCO needs a sharper focus on economics. Beijing can extract oil and gas but the overall well being of its neighbors is important in giving China the stability it needs for its own economic growth. However, the organization has been distracted recently by Iran and India seeking membership and diluting the emphasis on integrating China and its Central Asian neighbors.

The Silk Road Initiative and the SCO both offer China a basis for a new, mutually beneficial relationship with Central Asia. Either could end up looking like the EU, which through trade integration and better infrastructure has turned poorer member states like Ireland and Spain (and now, Poland) into economic tigers.

Better roads, less bureaucracy and more cohesion in economic development policies could deliver similar benefits to China and Central Asia.


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