Chris Rickleton, a Bishkek-based journalist, has a fascinating piece up on EurasiaNet about prospective Chinese rail construction in Kyrgyzstan. The piece cuts directly to tough political choices—namely, the push and pull between Russian and Chinese interests in Central Asia and, more important, how politicians in landlocked countries, like Kyrgyzstan, must try to balance among the larger countries on whom their economies depend for transit.
But Rickleton’s piece got me thinking about two questions:
(1) Since the obstacles to continental trade and transit are so high, is the game really worth the candle?
This is especially relevant because Secretary of State Hillary Clinton is vigorously promoting a “New Silk Road” concept, drawing heavily on a decade of prior efforts and experiences.
(2) With so much focus on the interests of the outside powers—Russia, China, Iran, and the United States, among others—what about the interests of the landlocked countries themselves?
But frankly, I do think the game is worth the candle—although there is no reason why these efforts must be done multilaterally in some kind of regional “grand bargain.” They can be done well enough by cumulating separate and self-interested, but complementary, bilateral and minilateral efforts and agreements among relevant countries.
Landlocked economies can face a growth deficit as high as 1.5 percentage points because transaction and other costs are so high. So why not try to help reconnect them to the world economy and reduce their dependence on a single point of transit? Central Asia has suffered greatly from a poisonous combination of landlocked geography and very bad economic policies. So as the United States prepares to draw down its military commitments in Afghanistan, it is wise, in my view, to renew attention to regional economics. In fact, that’s where a parallel strand of attention should have been squarely placed all along.
Still, there’s no question but that tangible progress will be slow. There has already been a decade of effort by the international financial institutions, particularly the Asian Development Bank, through its Central Asia Regional Economic Cooperation program, and the World Bank. And regional governments, leading scholars, and the Bush administration (in which I served) have also been in this mix.
Here are some of the central challenges:
For one thing, enthusiasm for cooperation is often far greater in Washington than in Central Asian capitals. The United States has been actively involved in promoting regional arrangements for two decades but has had very few successes.
At the same time, Central Asian countries desperately need to cooperate. But for nearly twenty years, their need for cooperation has too rarely translated into complementary policies. Central Asians and their neighbors are deeply dependent on one another, yet this reality is deeply disquieting to many.
Finally, an Afghan-centered effort is bound to meet especially big obstacles. We advocates need, therefore, to be intellectually honest enough to admit that this would all be a lot easier with Iran in the picture. But that’s just not going to happen. Iran’s noncompliance with its International Atomic Energy Agency safeguards agreements, and its defiance of United Nations Security Council resolutions, virtually guarantee that the United States will oppose such linkages. And Washington should be prepared for growing tension with Central Asian states as it enforces Security Council resolutions that call for enhanced vigilance over financial transactions.
But let’s also put the United States aside for a moment.
The more interesting question is whether the game is worth the candle for Central Asian states themselves. And there, I think the answer is also “yes.”
It’s worth revisiting this 2004 paper by Columbia University’s Michael Faye, John McArthur, Jeffrey Sachs, and Michael Snowe. The paper highlighted four types of dependence that hamper the development prospects of landlocked economies: dependence on neighbors’ infrastructure; dependence on sound cross-border political relations; dependence on neighbors’ peace and stability; and dependence on neighbors’ administrative practices.
Landlocked geography can be poisonous. But such dependencies on neighbors can be pretty pernicious as well.
What to do? Well, the Columbia team is blunt:
(1) Invest in internal infrastructure to lower transportation costs.
(2) Invest in regional integration strategies—somewhat as the “New Silk Road” and various prior efforts have aimed to do. It won’t matter if only one Central Asian country, like Kazakhstan, gets its infrastructure right. The point is, everyone needs to get it right. Or as the Columbia team put it in the context of landlocked African economies, “internal infrastructure investments in Burundi and Rwanda will yield limited returns if not accompanied by similar investments in Kenya, Tanzania and Uganda.”
(3) Regional integration strategies “need to focus on administrative coordination.” And that means getting customs and border procedures right—something the international financial institutions and the United States have focused on for years.
(4) Invest, where possible, in sectors less affected by transport costs. This will be difficult for Central Asian countries to do, but Kazakhstan, for example, has sought to develop some elements of a services economy.
One of the more trenchant critiques of these various regional efforts in continental Asia is that its origins lie in geopolitics, not economics. But there is plenty of research on the economics of landlocked countries to show why unfortunate geography can be tragic.
It doesn’t have to be.