Central Asia since the dissolution of the Soviet union: Economic reforms and eir impact on state-society relations

Perspectives on Global Development and Technology

Volumn 6, Issue 1-3, 2007, Pages 313-343

  Pomfret, Richard ^a  

^a UNIVERSITY OF ADELAIDE   (Australia)

Author keywords

Central Asia; Economic reforms; Economic transition

Indexed keywords

ECONOMIC POLICY; ECONOMIC REFORM; MARKET TRANSITION; NATIONAL STRATEGY; RESOURCE ECONOMY; STATE BUILDING;

ASIA; EURASIA; KAZAKHSTAN; KYRGYZSTAN; TAJIKISTAN; TURKMENISTAN; UZBEKISTAN; WEST ASIA;

EID: 34547946384     PISSN: 15691497     EISSN: 15691497     Source Type: Journal    
DOI: 10.1163/156914907X207775     Document Type: Article

References (40)

1. The southern border was especially sensitive; British troops briefly occupied Baku and Ashgabat after Russia made peace with Germany, and rebels fought for an independent Turkestan in the early 1920s. The Soviet Union was influential in western China, in the 1930s and 1940s, but after the Sino-Soviet split, the border with China was almost completely closed. In the 1980s, Central Asia was an important staging post for the war in Afghanistan.
2. Akçali analyses the political and social challenges to nation building in Central Asia. The present article focuses on economic aspects (see Akçali, P. 2004 "Nation-State Building in Central Asia: A Lost Case?" in M. P Aminen and H. Houweling (eds.), Central Eurasia in Global Politics: Conflict, Security and Development, Leiden and Boston: Brill Academic Publishers, 95-115).
3. The situation before independence and the immediate post-independence period (1992-3) are analyzed in Pomfret, R. 1995 The Economies of Central Asia. Princeton NJ: Princeton University Press. For alternative accounts of the region's economic development during the 1990s
4. see Islamov, B. 2001 The Central Asian States Ten Years After: How to Overcome Traps of Development, Transformation and Globalisation?Tokyo: Maruzen;
5. Gleason, G. 2003 Markets and Politics in Central Asia, Routledge: London.
6. An important difference to Putin's Russia, is the personal wealth of the president and his relatives, which is more reminiscent of Soeliarto's Indonesia. Since the turn of the century, it is unclear how strong the position of the financial/economic/media, groups is, and whether the president is the biggest oligarch, or the defender of the public interest against the ten megaholdings which control over four-fifths of the economy (a claim made, for example, in President Nazarbayev's speech opening Parliament on November 3, 2004).
7. The output mix was substantially transformed, after the end of central planning. Major producers collapsed and new goods and services appeared, raising index number issues, including the extreme problem of valuing new or obsolete goods and services. Apart from the issue of choosing appropriate relative prices, there is a practical problem of using aggregate price indices during the years of hyperinflation; the numbers for 1991-95 in Table 3 are imprecise and whether annual inflation is 1500 percent or 2000 percent makes little economic difference, but it affects calculations of real GDP. On the quantity side, data collection problems reflect the low priority given to statistical offices during the initial period of nation building, and the changing incentives to reporting. During the Soviet era managers over reported output and included in output some items, which were of no practical value, just to meet plan targets. After the transition to a market-based economy, the incentives shifted towards under-reporting in order to avoid taxes or other unwanted attention from the government. There was, however, under reporting in the Soviet era, especially of production on household, plots, and services were not included in the net material product. The difficulty is not only that the extent of under-reporting is higher now, but that it is non-random; the more market-oriented economies are likely to have larger service sectors, and all available estimates suggest a dichotomy between the large shadow economies of the Kyrgyzstan, Tajikistan, and Kazakhstan and the smaller shadow economies in Uzbekistan and Turkmenistan.
8. The interrepublic flows in the Soviet Union are difficult to measure because the Soviet economy was treated as a single unit and large flows took place within all-Union enterprises. Outsiders have estimated the net flow to the Kyrgyz republic in the late 1980s at around, a seventh of the republic's gross product (Pomftet 1995; Griffin 1996), but Central Asian economists have argued that the net inflow was much smaller or even that Central Asia subsidized the rest of the Soviet Union through Moscow-manipulated transfer pricing (Islamov 2001).
9. Rapid surveys were used to assess immediate needs in the early 1990s (e.g.) Howell, J. 1996 "Poverty and Transition in Kyrgyzstan: How some households cope." Central Asian Survey. 1,5(1): 59-73 on the southern districts of Kyrgyzstan) and more recently qualitative methods have been used to conceptualize interactions between social, economic, and psychological elements of changes in living standards
10. (see, for example, Kyrgyzstan Kuehnast, K. 2003 "Poverty Shock: The Impact of Rapid Economic Change on the Women of the Kyrgyz Republic," in N. Dudwick, E. Gomart and A. Marc with K Kuehnast (eds.) When Things Fall Apart: Qualitative Studies of Poverty in the Former Soviet Union, Washington D.C.: World Bank, ch. 3;
11. Tajikistan, Gomart, E. 2003 "Between Civil War and Land Reform: Among the Poorest of the Poor in Tajikistan." in ibid., ch. 4;
12. Uzbekistan Gomart, E. 2003 "Standing on a Knife's Edge: Doing Business in Uzbekistan," in ibid., ch. 5. Both of these approaches rely on small and possibly unrepresentative samples, which make generalization of the results difficult, but the patterns of traumatic economic decline during the first half of the 1990s, especially outside the capital cities, are incontrovertible. The household, survey data
13. (analyzed in Anderson, K. H. and R. Pomfret 2003 Consequences of Creating a Market Economy:Evidence from Household Surveys in Central Asia. Cheltenham: Edward Elgar) also present a picture of extensive poverty in the early and mid-1990s.
14. The reliability of data is an issue throughout this region, but, apart from the war years in Tajikistan, die situation is clearly worst in Turkmenistan. The figures quoted in the Tables are from international institutions, and it is important to stress that, while these organizations adjust data for definitional consistency, the raw data that come from national sources and international organizations have no way of correcting undisclosed, collection or reporting biases.
15. By 2000, Tajikistan with a national income per capita of US$180 was poorer than most of sub-Saharan Africa or the poorest countries of Asia. At purchasing power parity (PPP) the Central Asian countries' incomes are higher. Tajikistan's 2000 GNI per capita at PPP is US$1090. Corresponding figures for Kyrgyzstan are US$270 and US$2540 (PPP);
16. for Uzbekistan US$360 and US$2360 (PPP);
17. for Turkmenistan US$750 and US$3820 (PPP);
18. and for Kazakhstan US$1260 and US$5490 (PPP);
19. These figures are from the World Bank 2002 World Development Indicators, http://www.worldbank.org. As emphasized above, care needs to be taken in interpreting the national accounts data, and PPP conversions are even less firmly based. By Maddison's PPP estimates, Tajikistan's 1998 per capita GDP of US$830 (Table 1b) was about the same as that of Haiti or Bangladesh, only Afghanistan had lower per capita GDP in Asia, and in Africa only thirteen of the 42 countries for which Maddison provides estimates had lower per capita GDP than Tajikistan.
20. The econometric literature is reviewed in Pomfret, R. 2002 Constructing a Market Economy: Diverse Paths from Central Planning in Asia and Europe. Cheltenham: Edward Elgar, 90-3
21. and in World Bank 2002 Transition: The First Ten Years, Washington DC.
22. Among the studies finding a primary role for reform, policies are a series of papers by IMF economists (e.g., Fischer, S., R. Sahay and C. Végh 1998 "From Transition to Market: Evidence and Growth Prospects," IMF Working Paper WPI98/52, Washington DC: International Monetary Fund;
23. Fischer, S. and R. Sahay 2000 "The Transition Economies after Ten Years," IMF Working Paper WP/00/30, Washington DC: International Monetary Fund).
24. Initial conditions are the strongest determinants in the econometric work of EBRD economists Falcetti, E., M. Raiser and P. Sanfey 2000 "Defying the Odds: Initial Conditions, Reforms and Growth in the First Decade of Transition," EBRD Working Paper No. 55, London: European Bank for Reconstruction and Development, although they find that some countries defied the odds by performing better, or worse, than initial conditions suggested, and that the effect of initial conditions diminishes over time.
25. The idea of a threshold value beyond which inflation is harmful to growth was popularized by Bruno, M. and W. Easterly 1998 "Inflation Crises and Long-Run Growth," Journal of Monetary Economics. 41(1): 3-26, although their direshold of forty percent now appears too high.
26. Focusing only on transition economies, Christoffersen, E and P. Doyle 1998 "From Inflation to Growth: Eight Years of Transition," IMF Working Paper WP/98/100, Washington DC: International Monetary Fund, estimated a threshold of thirteen percent.
27. The largest single enterprise, a sugar refinery, which accounted for 3 percent of gross national product (GNP) in 1991, used cane sugar from Cuba as the raw material, and this supply link broke down completely. The other large industrial enterprises were part of the Soviet military-industrial complex and also encountered breakdown of their demand and. supply chains after 1990.
28. Kumtor accounted for over two-fifths of industrial output, and its share of GDP was 16 percent in the first quarter of 2001 (Center for Social and Economic Research in Kyrgyzstan 2001).
29. Many of the temporary emigrants have not sent remittances and appear to be establishing permanent residence in Russia, further complicating the impact on per capita income in Tajikistan.
30. The arrears complicate Turkmenistan's national accounts because gas sales are recorded as exports valued at the contract price. The arrears appear in the capital account of the balance of payments as capital outflows from Turkmenistan, even though the foreign assets being accumulated, were worth far less than their face value. The actual accounts are extremely opaque because revenues received, from energy and cotton exports go into off-budget funds under the president's personal control.
31. See, for example, the results of the Business Environment and Enterprise Performance survey reported in the European Bank for Reconstruction and Development 1999 Transition Report. November, London: European Bank for Reconstruction and Development. Among the twenty transition economies covered by the BEEPS, Uzbekistan ranked about fourth for lack of corruption, ahead of several East European countries generally considered to be transition leaders.
32. This section is based on Pomfret (2005). On regional cooperation, see also UNDP 2005 "Bringing Down Barriers: Regional Cooperation for Human Development and Human Society," Central Asia Human Development Report, Bratislava: United Nations Development Program.
33. The UN General Assembly formally recognized Turkmenistan's neutrality in a resolution of December 12, 1995 (Freitag-Wirminghaus 1998; Werner 2001).
34. On occasion only Israel and Uzbekistan voted with the US at the UN, and at the May 1996 ECO summit, Uzbekistan's denunciation of Iran was so vitriolic that the summit ended a day earlier than planned. In July 1996, President Karimov was warmly received by President Clinton in Washington DC. For more details of Uzbekistan's evolving foreign economic policies, see Bohr, A. 1998 Uzbekistan: Politics and Foreign Policy, London: Royal Institute of International Affairs, and Washington DC: The Brookings Institution;
35. Pomfret, R. 2000 "The Uzbek Model of Economic Development 1991-99," Economics of Transition 8(3): 733-48;
36. and Spechler, M. 2000 "Hunting the Central Asian Tiger," Comparative Economic Studies, 42(3): 101-20.
37. A draft Report of the Working Party, which, typically indicates that the endgame of accession negotiations has been reached, was prepared in May 2005.
38. In Turkmenistan, all domestic opposition has been muzzled, but an opposition in exile has emerged in recent years. In November 2002, an assassination attempt on President Niyazov (Turkmenbashi) was followed by a. domestic crackdown on suspects. The death in December 2006 of Turkmenbashi the Great, President for Life, occurred while this article was in press.
39. Two assassinations of opposition leaders in Kazakhstan in late 2005 and early 2006 indicate a willingness to use violence against specific targets. Contract killings of two members of parliament occurred in Kyrgyzstan in 2005, but these are not in the same league of repression as the beatings and imprisonment by the authorities in Turkmenistan and Uzbekistan, even prior to the Andijan massacre.
40. Cited at http://www.press-service.uz/eng/vizits_eng/ve21112002.htm by the press service of the President of Uzbekistan. President Rahmonov of Tajikistan also publicized improved ties with France and the US, making visits to the two countries in December 2002 as a signal of displeasure with Russia's deportation of Tajik guest workers. By contrast, on February 18-19, 2003, President Nazarbayev of Kazakhstan, facing US and EU criticisms of his regime's corruption and human rights record, made an official visit to Russia, where he is not criticized for such things.