Category Archives: Economics/Business

AUTHOR INTERVIEW: The Central Asian Economies in the Twenty-First Century: Paving a New Silk Road, by Richard Pomfret

In this post we welcome Alfinura Sharafeyeva (University of Adelaide), who interviews Professor Richard Pomfret (University of Adelaide) about the course of his work and career, including his most recent book, The Central Asian Economies in the Twenty-First Century: Paving a New Silk Road, where “Pomfret considers the enhanced role of the Central Asian nations in the global economy and their varied ties to China, the European Union, Russia, and the United States. With improved infrastructure and connectivity between China and Europe (reflected in regular rail freight services since 2011 and China’s announcement of its Belt and Road Initiative in 2013), relaxation of United Nations sanctions against Iran in 2016, and the change in Uzbekistan’s presidency in late 2016, a window of opportunity appears to have opened for Central Asian countries to achieve more sustainable economic futures” (Princeton University Press).

This is the third book where you provide analysis of the economic transition in Central Asia.  Do you remember how you started your work on Central Asia?

In July 1992 the new independent states of Central Asia joined the United Nations and had to elect which of the UN’s regional bodies they would participate in.  The Central Asian countries and Azerbaijan joined the UN Commission for Asia and the Pacific (ESCAP).  The ESCAP Secretariat had little idea how to interact with these formerly centrally planned economies and appointed me in December 1992 as a Regional Advisor.  The story that I was told was that, because I had worked on Poland and on China, I should be able to understand economies halfway in between.

In 1992 the Central Asian economies were unexpectedly in transition from central planning but had little conception of what they were transitioning to.  There were no economists with training in or experience of how market-based economies functioned.  Governments received advice from international bodies, but ministers and officials had little capacity to evaluate the advice.

In the fifteen months that I was with the UN, my role was often as an educator rather than as a policy adviser, and with more success when talking to younger policymakers than to ministers and deputy ministers.

Professor Richard Pomfret and his class during the course on Economic Development of post –Soviet Central Asia organized  by the Structured doctoral programme on Sustainable Agricultural Development in Central Asia (SUSADICA) in Tashkent, June 2019. Photo credit ©SUSADICA

 As an example, on the 1992-3 big issue of the ruble zone, it was difficult to convince senior policymakers, who believed that hyperinflation was due to monopolies increasing prices, that monetary policy was the driver of hyperinflation.  Either the ruble zone had to be reformed so that monetary policy could address the hyperinflation or countries should issue national currencies.  Only Kyrgyzstan learned this lesson in early 1993, while the other four countries did not control hyperinflation until the second half of the decade.                               

What was the most challenging aspect of researching and writing about the Central Asian economies? There are some statements in your book that probably may not sound plausible to the officials of these countries. Have you ever received any criticism with this regard?

My biggest challenge has been linguistic.  Having to conduct most meetings through an interpreter creates an inevitable element of incomplete communication.  It also emphasizes outsider status fuelling the criticism that I do not understand the special circumstances/history/culture of a country.

Good economics applies to all economies.  However, on almost all issues application needs to take into account the particular setting.  The criticism that I misunderstood the setting is hard to refute because it may be true on many points.  However, that does not justify the extreme position that “foreign” economics does not apply to country x.  Too often that criticism is used to justify bad economic policies.  To return to the money example; it was much easier to blame monopolists for hyperinflation than to work seriously on avoiding budget deficits that could be covered by creating more money – reducing budget deficits meant higher taxes or lower government spending, either of which would trigger opposition.

The key questions you attempt to answer in the book are related to the economic systems adopted in the newly established states of Central Asia after the collapse of Soviet Union and their consequences, as well as the challenges of development for resource-rich countries. Have you found a unique answer for all five countries to the questions you pose in your book, or each country should be treated individually? How does your work on the Central Asian economies contribute to our understanding of broader theories and themes in the development economies studies?

After returning to academia in 1994 I wrote my book The Economies of Central Asia, which introduced the five countries, their economic background and the initial construction of national economies after dissolution of the Soviet Union.  In 1992, they could be treated as components of a common region with minor variations, although already in 1993-4 economic differences were strengthening.  By 2020 national differences are much stronger, although shared geography, history and culture continue to provide a common background.

The 2006 book The Central Asian Economies since Independence took the story up to the early 2000s.  A big issue in the 1990s had been the choice of transition strategy: shock therapy or gradualism, sequencing of reforms, and so forth.   The Central Asian economies had been seen as a natural experiment with five countries starting from similar initial conditions and adopting different transition strategies.  An important lesson from the 1990s was that successful transition was not simply a matter of creating a market economy, privatizing and restructuring state enterprises, having good trade and macroeconomic policies and so on. It also depended on institutional factors, widely defined.  Uzbekistan benefited from Tashkent having been the administrative centre of Tsarist and Soviet Central Asia.  The Kyrgyz Republic introduced good reforms, but suffered from lack of the institutions needed for markets to flourish (property rights and rule of law more generally, and limited trust of third parties) as well as a paucity of efficient uncorrupted administrators.

The natural experiment was never completed because, more or less coinciding with the completion of basic transition in 1999 and before long-term consequences could be observed, the resource boom began.  Kazakhstan’s economy pulled away from the rest and the countries that were poor in oil and gas, Tajikistan and the Kyrgyz Republic, fell behind.

The title of the book mentions the new (ancient) Silk Road. Do you find the answers why, being a cross-roads of Eurasia, and liberalizing their markets by joining WTO and other trade agreements, the countries’ trading potential remain realized not in full? Do you agree with the common believe that it is a landlockedness that prevent countries from boosting their trade, or there some other factors that potentially play a greater impediment rather than the region’s geographical position? How do your findings support the active involvement of Central Asian states in the China’s One Belt One Road initiative? What are the key policy recommendations you could draw based on your findings?

Landlockedness can be a boon or a bane depending on a country’s neighbours, and its own policies.  After independence the Central Asian countries were suspicious of trade and of global markets, apart from as outlets for their cotton, oil and gas, or minerals.  Most importantly, this applied to Uzbekistan, which is potentially the major transit country but until 2016 imposed large transit costs.  The situation appears to be changing after the end of the resource boom as the countries seek economic diversification and, given the small domestic and regional markets, exports are a promising destination of new goods.

My 2019 book The Central Asian Economies in the Twenty-first Century: Paving a New Silk Road  discusses the prospects for export diversification, emphasizing the need to reduce policy-imposed costs of international trade.  There is a “window of opportunity” as Eurasian rail connections have been improved, which predates the Belt and Road Initiative but can easily be linked to the Belt and Road Initiative.  Chinese investment is helping to upgrade infrastructure, although there remains an element of anti-Chinese sentiment in the region that could easily be triggered.

A PhD student at Adelaide University is working on the reason why the costs of doing international trade are especially high in Central Asia.  Such research is important to understand the nature of the main trade costs before making policy recommendations for governments to facilitate trade and hence encourage the economic diversification that they wish to promote.

The road from Nukus.  Fieldwork photo credit R. Pomfret.

Would you agree that the economies of Central Asia receive relatively little attention by researchers? What are the remaining unexplored aspects of the Central Asian economies? What sorts of research do you see being done in the near future on this subject?

Yes, although this is changing, especially with the increasing number of Central Asian scholars now producing good research.  Coverage remains patchy and incomplete, but I am constantly positively surprised by seeing a specialized article, thesis or monograph on a previously unaddressed topic.

 

The Afterlives of Yurt Wall-hangings: Tus Kiiz by Guldana Salimjan, University of British Columbia

Gendering a Tourist Economy

Ölgii, the capital city of Bayan-Ölgii Province, is a small city that one can stroll all over in just an afternoon. Since falconry’s title of cultural heritage was affirmed by UNESCO, the concept of heritage has been widely accepted by locals. Just as falconry became a vital connection to the Kazakh historical past, natural environment, and traditional culture across Eurasia, handicrafts have also allowed Kazakhs to maintain their identity and traditional knowledge as an ethnic minority in Mongolia, and have become an attribute of “authentic” Kazakhness. While Kazakh men take up the iconic image and profit from falconry as part of ethnic tourism and international spectacle, women have quietly become the backbone of a local informal economy, clearly represented by traditional handicraft production. Continue reading The Afterlives of Yurt Wall-hangings: Tus Kiiz by Guldana Salimjan, University of British Columbia

From the Exeter Central Asian Studies Network: Asel Doolotkeldieva’s "What do we know about local democracy in Kyrgyzstan?"

(Reposted by agreement with the Exeter Central Asian Studies Network.  The original, posted on Dec. 6, 2013, can be found here.) By Asel Doolotkeldieva

Most people expect the main space of contestation in Kyrgyzstan to be found on the streets or with the use of violence on provincial roads. My ethnographic observations, however, indicate the presence of other emerging forms of social contestation.

On 8 April 2010, following the overthrow of President Kurmanbek Bakiev, a smaller change of power took place in one of the major state owned factories, Kyrgyzneftegas, located in Kochkor-Ata monogorod (a town where the majority of the population work at a single industrial enterprise), in Jalal-Abad province. This was initiated when a group of active workers, with a partial affiliation to the local branch of Ata-Meken party (the oldest opposition party which participated in the two revolutions), accused the director, Iskhak Pirmatov, of corruption and money laundering. According to them, Iskhah Pirmatov used “corruption schemes” to extract rents from the local production of oil. The ousting of Pirmatov provoked confrontations between him and opposition workers. However, the conflict escalated when the now rebranded Pirmatov joined the newly created Respublica party and when the party took control of the Ministry of State Property, which is responsible for the supervision of state holdings. From this moment on the conflict shifted from the local playground to the higher echelons of power.

When I first began studying this conflict in 2010 I was struck by the media coverage of these events. Articles in newspapers and discussions in public forums suggested that Kyrgyzneftegas was a story about a fierce competition over resources between Ata-Meken and Respublica. Portrayed as such, the factory’s workforce was simply reduced to puppets either in the hands of Pirmatov or Ata-Meken. However, when I visited the factory during my fieldwork, I was exposed to the intricate dealings inside the factory walls; the ongoing complex negotiations between the local trade union and the state.

I would like to illustrate one such instance that sheds light on an alternative form of contestation. In the spring of 2013 I attended the annual general meeting organised for the 223 Kyrgyzneftegas shareholders and their trustees (the state is the main shareholder and owns 85 percent of shares, the remaining 10 percent belong to the Social Fund and 5 percent are divided within factory workers). Representatives from Bishkek and regional government, as well as members of the board of directors and management, attended the meeting. It is worth noting that as a result of the workers’ protests, important meetings such as the AGM were moved from Bishkek to Kochkor-Ata. Through this move the workers gained a greater position of influence upon important decisions within the company.

The meeting was highly anticipated by the workers because of the highly controversial question of the new composition of the board of directors. The current chair of the board of directors, the well-respected Aman Omurzakov, was unexpectedly removed. The Ministry brought two candidates to the meeting, one of whom was a local activist of SDPK party (Social-democrat party created by the current president Almazbek Atambaev and which participated in two revolutions). This man had allegedly helped the party during the second revolution (2010) and the subsequent elections, but was rather inexperienced in management. Workers were concerned with these shifts and demanded clarifications from the Ministry. This was all in vain:

Worker 1:

–          Last year, thanks to the board of directors, we acquired a new factory and a drill. Our salaries were raised and our dividends were secured. These achievements were made possible by this board. We are concerned with the fact that Omurzakov is being removed. Explain the reasons to us! Why? This board must remain because they have proven their commitment to honesty and zero corruption! Leave them alone or stop the meeting! (Applause and cheers).

Nurbek Kalmatov, the State-secretary of the Ministry of state property [spokesperson of the Ministry]:

–          Dear shareholders, I am familiar with your problems as I was myself born and raised in Kochkor-Ata. The state doesn’t want the privatization to happen. But the Ministry is not entitled to make such decisions – the question of privatization is to be decided by the 120 members of Parliament. The Social Fund is another shareholder; and, together with you, we are all in the same position.

Worker 2:

–          Oh, give us a break with your origins!!! You are saying the ‘same position’, but you have the largest stake of shares and hence impose your decisions!

State-secretary:

–          On your insistence, we have reserved three directors of your choice!

Worker 3:

–          But we demand four! Respect the people! (Applause and cheers).

Aman Omurzakov [current chair of the board of directors]:

–          You know yourselves that today everything functions along the party principle. But my support doesn’t come from Respublica or SDPK. The work force backs me. I have no idea why they are getting rid of me. I have been working here for three years and you all know my work. We are one of the best companies – we made a great contribution to the national economy without any investors, all by our means! (Applause and cheers).

Worker 4:

–          We are repeatedly instigating revolutions but nothing changes! The people are satisfied with the government and with the board of directors. However, if these games don’t stop, the people will take to the streets again! Let’s close down the meeting! (Applause and cheers, movements in the auditorium).

By this point in time, the discontent of the workers was building. After dubious movements on the stage involving secret talks and phone calls, the state secretary invited everybody to take a short break. During this break, people left the building and conducted negotiations. Rumors circulated that the Prime Minister, Jantoro Satybaldiev, had been called. When the meeting was reconvened the workers exhibited a dramatic change in attitude.

Worker 1:

–          Dear stakeholders, well…, you see, today’s power is not as weak as it used to be. The power is even able to imprison deputies (A reference to the recent case of the trial of members of Parliament Kamchybek Tashiev and Sadyr Japarov) and can also punish us if we continue doing things at will. We can lose everything and roll back to where we were standing three years ago. We better accommodate Satybaldiev’s person in order to save our remaining directors. So, let’s carry on the meeting and come back to Omurzakov’s question later.

A female worker

–          You are hypocrites! A minute ago you were calling everyone to sabotage the meeting if Omurzakov’s question was not resolved immediately. Now, you say just the opposite. You are proving your southern mentality in its best tradition!

Worker 2:

–          No, he’s right. We ought to listen to the state and carry on the meeting.

The overall atmosphere was tense. Nevertheless, people looked as if they were accustomed to such intense discussions with each other and with state representatives. Ultimately, the chair Aman Omurzakov was removed and the workers had to approve the new SDPK affiliated chair. This short episode indicates that contestation in Kyrgyzstan doesn’t only occur on the streets but also in institutionalized spaces such as the factory. The Kyrgyzneftegas factory has been transformed into a bargaining arena in which party, state and workers’ interests clash. Far from reaching their final goals, we see that workers are highly reflective of changes in the political system and are flexible in order to accommodate the “power” but also to save their own interests.