EDB identifies structural challenges for economic growth in Central Asia

According to the last survey prepared by the Eurasian Development Bank called «The Economy of Central Asia: A Fresh Perspective,» Central Asian countries face four major challenges that limit their economic growth.

Among these obstacles are lack of access to the sea, resource dependence and low level of financial development, lack of coordination in the water and energy complex, and climate change.

Since all Central Asian countries are landlocked, they have to pay more in terms of transportation costs.

«The region’s resurgence as the crossroads of meridional and latitudinal transport corridors connecting the main economic centers of Greater Eurasia will involve both the expansion of existing routes (INSTC, Europe – Western China, TITR, CAREC corridors, etc.) and the creation of new railway corridors (China – Kyrgyzstan – Uzbekistan, Kazakhstan – Uzbekistan – Afghanistan – Pakistan, Tajikistan – Afghanistan –Turkmenistan, etc.),» the survey said.

The domestic financial sector should become the basis for comprehensive development of the key sectors of the economy to allow the region to reduce its commodity dependence. In some countries, external financing should yield its dominant role to domestic sources, according to the development bank.

«In addition to financial services, reduction of resource dependence can be facilitated by other services — transport, education, medicine, IT, tourism. Implementation of mutual standards and classifications will encourage expansion of regional trade in services, boost competition, and increase the quality of services. With time, services will become the main growth driver for the economies of the region, opening Central Asia to the world, and making its economy more productive,» the EDB stated.

Lack of coordination in management of the water and energy complex inflicts heavy losses on the GDP of the countries of the region. Kyrgyzstan and Tajikistan are primarily interested in the use of water resources for energy generation, while Kazakhstan, Uzbekistan, and Turkmenistan give priority to irrigation because of severe shortage of fresh water.

«Better coordination of actions can create synergies by reducing capital expenditures of the countries of the region and providing sufficient resources to support the industry and population,» the report said.

The region has huge potential in terms of solar and hydro energy and waste recycling. Therefore, investments in low-carbon technologies and «green» projects, including renewable energy systems can boost economic development and improve the situation for those who work and live in the region, the report’s authors highlighted.

In July, during a meeting of leaders of the Central Asian states, President Tokayev suggested forming bridges between all five countries, which he described as the most important mission in the region.