A Vision for Shared Prosperity in Central Asia

The Obama administration recently completed a review of its policy towards Central Asia and has rolled out the main pillars of the United States’ "Enduring Vision for Central Asia" in a series of recent speeches by top officials. Richard E. Hoagland, Principal Deputy Assistant Secretary, Bureau of South and Central Asian Affairs, Nisha Desai Biswal, Assistant Secretary of State, Bureau of South and Central Asian Affairs, and Anthony Blinken, Deputy Secretary of State, all emphasized that U.S. interest in Central Asia is enduring, not transitory. In the words of Richard E. Hoagland: “Look at the map. Central Asia shares borders with Afghanistan, China, Russia, and Iran – this is an ‘interesting’ neighborhood, to say the least.”

For the past decade, U.S. policy towards Central Asia has been security-focused, with the strongest emphasis placed on the war in Afghanistan. With the drawdown of American forces, the conventional wisdom has been that Central Asia will become a lower priority for U.S. foreign policy. We instead see this as an opportune time for Washington to rebalance its policy towards the region to encourage broad-based economic growth and the realization of the gains offered by regional cooperation and connectivity, all while continuing to promote deeper security ties. With the regional security environment to an extent stabilized, the pursuit of economic development should now be the priority for U.S. engagement in Central Asia.

In Central Asia, a model of growth based on burgeoning regional trade ties and growing interconnectivity is gaining momentum, and the data from recent years suggests that the low level of integration in Central Asia may truly be a thing of the past. Trade in Central Asia is growing dynamically. Between 2005 and 2013, trade with their Central Asia partners more than quadrupled for Kazakhstan and Kyrgyzstan; more than tripled for Uzbekistan and Turkmenistan; and nearly doubled for Tajikistan. The growth of trade between Kazakhstan and Uzbekistan, the two largest economies in Central Asia, is particularly notable. Bilateral trade turnover in 2013 amounted to $2.3 billion, a nearly five-fold increase from 2005. While these figures appear low in absolute terms, they also underestimate the full scope of trade and economic relations. Central Asia is deeply interconnected through a web of informal flows at all levels of economic interaction, where region-wide informal linkages facilitate the cross-border movement of capital and goods while avoiding the heavy regulations and other controls formally imposed by countries themselves. According to some estimates, if these restrictions were removed trade would easily double, reinforcing the argument for intra-regional cooperation.

The countries of Central Asia are without exception displaying an interest in the development of broader transcontinental trade and transit corridors connecting in all directions. There is a unique opportunity for the region to emerge as a hub at the crossroads of growing ties between Europe and Asia. A multilateral system of international transport-communication corridors, which to date has been mainly driven by Chinese investment under the Silk Road Economic Belt (SREB) vision, provides Central Asia with sustainable access to global markets. The Silk Road has a powerful historic resonance in Central Asian societies and is associated with an era of remarkable prosperity and peace, as both nomads and settlers agreed on trade-and-protection exchange regime. Today the Central Asian countries have naturally embraced a demand from China enthusiastically, adjusting their policies towards investments in transit infrastructure that complement the SREB vision.

New economic poles, including China and (hopefully) Iran, are emerging in the neighborhood common to all the Central Asian states; with these developments, the interdependence of the Central Asian states will only continue to grow, as will their recognition of its importance. Look again at the map. Turkmenistan and Uzbekistan rely on Kazakhstan and Kyrgyzstan to reach China for their energy and non-energy exports, respectively. Kyrgyzstan and Kazakhstan rely on their southern neighbors to access Iran (a new powerful factor for regional cooperation), the markets of the Middle East, and Afghanistan. Tajikistan’s trade routes are largely dependent on Uzbekistan. For all the Central Asian countries, their shared market remains a principal destination for manufactured/non-oil goods; therefore, the expansion of trade and economic relations within the region could prove a stimulus for the diversification of the regional economy as a whole.

The foreign policies of the Central Asian states themselves still fail to fully recognize, and therefore promote, the potential of economic cooperation. If economic considerations were to shape foreign political agendas, Uzbekistan, not Kazakhstan would be the first country to advocate for closer ties within the region: the share of trade within the Commonwealth of Independent States (CIS) is as much as 46% in Uzbekistan and 13% in Kazakhstan.

As specific top-down policies to foster regional cooperation are largely absent in Central Asia itself, in his remarks Deputy Secretary of State Blinken made a strong case for the cooperation to develop from the bottom up, taking advantage of the immense human capital potential in Central Asia’s young, entrepreneurial class. For this growing and dynamic group, the values of open, cooperative, and connected markets are not just empty words. Instead, they strive to find their place in a restrictive business environment prone to corruption and nepotism. The United States is a recognized worldwide technological and entrepreneurial leader and, as Mr Blinken notes, can play an essential role in helping the Central Asian states develop their own culture of innovation and entrepreneurship. In his words, “freedoms are vital to building innovative societies.” We could not agree more. And while our Chinese partners will emphasize the construction of necessary hard transit infrastructure, the United States, Europe, and Japan should focus more on the soft infrastructure of regulatory and legal frameworks that are so essential for the efficiency of these emerging transit and trade networks. Higher-end skills should be created along the Silk Road providing a basis for more sustainable and equitable development of infrastructure and human development.

As Deputy Assistant Secretary Hoagland mentioned, over 24,000 Central Asian students and professionals have studied in the United States via U.S.-funded exchange programs over the last twenty-three years. They have gone on to become high-ranking government officials, effective community leaders, and successful pioneers in the world of business. They are a driving force for the future of Central Asia as open, connected and rules-based region. And to unlock the potential for interaction, they need specific economic policies that address their challenges to be implemented, rather than imposed by an external third party.

The United States should develop specific programs that target this group. In our view, such policies would be exceedingly beneficial over the long term for both the states of Central Asia themselves and the United States. Central Asian entrepreneurs need a sustainable business-to-business platform to meet, connect, exchange ideas and understand one another better. Wide information gaps on issues such as local business regulations, market, and logistics opportunities hamstring such efforts, while all the Central Asian states suffer from excessive state intervention in their economies. A regional business cooperation initiative would also facilitate joint regional projects attracting not only Central Asian investment but that of foreign investors as well. A bold, confident, and innovative Central Asian business community would help to turn the Silk Road into the Skills Road, allowing the Central Asian states to capture a greater share of the benefits of transcontinental trade and assert their role in the regional value chains.

The United States is developing a timely and far-reaching strategy in Central Asia. As a distant partner, that strategy can play a powerful complimentary role to the initiatives of other regional states such as the Chinese Silk Road Economic Belt and possibly others. But it is ultimately the Central Asian states themselves, not any external third party that must make the policy choices that will shape their future. The United States should gently nudge them in the right direction – that is, towards each other.

Andrew C. Kuchins is senior fellow and director of the Russia Eurasia Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Aitolkyn Kourmanova is a visiting fellow with the CSIS Russia and Eurasia program.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2015 by the Center for Strategic and International Studies. All rights reserved.