Opinion: How regional cooperation could benefit Central Asian countries

Commuters and traffic signs along a key highway in Uzbekistan, upgraded as part of the CAREC Regional Road Project. Photo by: Asian Development Bank

Economic cooperation among countries is not a new phenomenon. The Silk Road, a network of trade and commerce routes that, among other things, connected China to the West through Central Asia, dates to ancient times. Economic partnership intensified in the aftermath of World War II with the formation of multilateral organizations and global and regional trade blocs. Such cooperation was made possible through trade agreements and unions focused on the free exchange of goods and services across nations.

The increasing trend toward specialization and fragmentation of production processes across value chains gave further impetus to trade and economic cooperation. Led by China, Japan, and other countries in Southeast Asia, the Asian continent became a powerhouse for global trade. Asia’s trade volume grew by 8.1 percent in 2017, up from 1.7 percent in 2016.

Trade integration, by comparison, has been less spectacular in Central Asia, where countries remain in economic transition and — unlike those in East and Southeast Asia — are situated largely outside global and regional supply chains. The shrinkage in global trade volumes in the post-crisis period, and recession in some key trading partners, further stalemated Central Asia’s integration prospects with the global economy.

And while the global economy has turned a corner since the Great Recession, and trade is rising again, it is still nowhere near the pre-crisis volumes. Additionally, the growing discontent with globalization and rising protectionist sentiments — including the most recent specter of tariff and trade wars — means that global prospects for trade will remain uncertain.

Under these circumstances, harnessing the potential of regional economic cooperation is critical for Central Asia to promote growth, generate trade, create jobs, and improve the quality of life of citizens.

Here’s why

1. Regional economic cooperation can make possible stronger transport and trade connectivity through coordinated physical investments and harmonization of policies, rules, and procedures. Economic corridors and value chains traversing sovereign borders can be promoted. Ultimately, an integrated Central Asian market can emerge with economies of the scale necessary to compete in international markets.  

2. Meaningful regional cooperation can help achieve the 2030 Sustainable Development Goals. A single-minded focus on national strategies and actions has diverted attention from critical regional actions needed to promote energy, food, and water security-related SDGs; strengthen environmental sustainability; address climate change; and prevent natural disasters. In Central Asia, this is all in the context of shared natural resources, joint eco-systems, and transboundary water management cooperation because of previous political and other difficulties in realizing meaningful cross-country collaboration in some of these areas in this region.

3. Regional cooperation can promote economic and financial stability through countries of Central Asia adopting synchronized fiscal, monetary, and exchange rate policies to prevent financial contagion; addressing shared systemic risks in banking systems; implementing common regulation and supervisory standards; and sharing lessons and experience from the implementation of countercyclical policies during crisis periods.  

4. Regional cooperation in labor markets and in education can be a force for job creation. New employment and entrepreneurship opportunities can come about by matching labor demand and supply through regional labor information systems; moving toward common qualification and certification standards for technical and vocational education; promoting faculty and student exchanges; establishing regional centers of excellence in specialized subject areas; and introducing new productivity-enhancing technologies at the regional level for cost-effectiveness.

5. Perhaps most importantly, regional cooperation can help build enough economic stakes in the region that promote peace and prosperity and substantially diminish the threat of aggression and war. A key opportunity for Central Asia now is the opening of Uzbekistan, due to a new government that is keen on bridging long-held differences with neighbors. This could pave the way for elevating regional economic cooperation to a new pinnacle.

How can the potential for regional cooperation in Central Asia be realized?

Political goodwill and strong buy-in by governments in the region are clearly necessary. The participation of the private sector is important. Identifying and implementing concrete projects that translate into material benefits will be vital — otherwise, there is no shortage of talk-shops that only verbally trumpet the benefits of cooperation in the region.  

Development partners can play a catalytic role, too. The Central Asia Regional Economic Cooperation program — sponsored by member governments, the Asian Development Bank, and other development partners — has invested upwards of $30 billion in transport connectivity, energy cooperation, and trade facilitation initiatives since 2001. A new and more ambitious CAREC 2030 strategy, endorsed by CAREC ministers in Oct. 2017, promises to help expand the scale and scope of regional economic cooperation by connecting people, policies, and projects for shared and sustainable development.

CAREC is, of course, not the only game in town. The Belt and Road Initiative is a key ongoing initiative to promote regional cooperation. So are the Shanghai Cooperation Organisation, the Economic Cooperation Organization, and the Eurasian Economic Union, among others. CAREC will collaborate and work closely with these and other initiatives.  

Can a country-driven bottoms-up approach to regional integration work? History shows that it can. Economic recovery and favorable regional dynamics in Central Asia add further momentum to this new era of regional economic cooperation. We must seize the opportunity provided by these fortuitous developments and deliver lasting peace, progress, and prosperity for countries and people in the region and beyond.  

About the author

  • Werner Liepach

    Werner Liepach is the director general of the Central and West Asia Department at the Asian Development Bank. He assumed office in February 2018. Mr. Liepach oversees the definition and execution of the departmental strategy and business plan, as well as the day-to-day management of operations of the department. He is responsible to oversee ADB’s regional portfolio, which now stands at $18.6 billion for over 155 projects in seven sector divisions at ADB headquarters and 10 country offices, covering energy; environment, natural resources and agriculture; transport, public management, financial sector, and trade; regional cooperation and operations coordination; social; and urban and water development.