On Tuesday, the foreign policy of Uzbekistan, which is aimed at rapprochement and strengthening good-neighborly, friendly, and mutually beneficial relations with neighboring states, has created a solid foundation for the development of trade, economic, and investment cooperation between the countries of Central Asia (CA).
The CA countries cover a market area of 75.3 million people. In 2020, the total GDP of the CA countries amounted to $291.1 billion and foreign trade turnover was $142.5 billion.
In recent years, the economies of the CA countries have had high growth rates in the range of 5-7% and even in the crisis year of 2020, the growth rates were negative only in Kazakhstan and Kyrgyzstan. According to the forecasts of the World Bank, the CA countries in 2021 will be able to restore the positive dynamics of GDP growth and increase the growth rates in 2022.
Favorable conditions for mutual trade have been created between the CA countries within the framework of the following trade agreements:
- all CA countries (except for Turkmenistan) are parties of«Agreement on a free trade zone of the CIS» from 2011, which the participating countries do not apply import customs duties to each other;
- Kazakhstan, Kyrgyzstan and Tajikistan are members of the WTO, Uzbekistan is actively negotiating on accession to the WTO, Turkmenistan in 2020 received observer status in the WTO;
- Kazakhstan and Kyrgyzstan as members of the EAEU are in a common customs space;
- the CA countries also have bilateral agreements to create favorable conditions for mutual trade.
Although CA countries are open to international and regional trade, labor and capital movements at various levels, they have great potential for building closer partnerships and integrated interactions with each other.
In 2020, the total trade turnover (in goods, excluding trade in services) between the CA countries amounted to $12.2 billion, the total foreign trade turnover - $145.5 billion.
Thus, the share of intraregional trade in the total foreign trade turnover of the CA countries amounted to 8.4%.
At the same time, it should be noted that the participation of CA countries in mutual intraregional trade is different.
Thus, the share of Kazakhstan and Turkmenistan in the volume of trade between the CA countries, their total trade turnover is the lowest and amounts to 5.5% and 4.5% respectively. The participation of Tajikistan and Kyrgyzstan in intraregional trade is the highest at 28.3% and 21.0% respectively. Uzbekistan occupies an intermediate position with an indicator of 13.3%.
Foreign trade of Kazakhstan and Turkmenistan is less focused on the regional market due to the predominance of hydrocarbons in their exports, which are mainly supplied to non-CIS countries (European countries, China, Russia) and most of the imports also go to these countries.
Despite the fact that the majority of the commodity exports of the CA countries are fossil natural resources, regional trade with each other to a much lesser extent than they sell them outside of the region.
In particular, in 2020, the share of gold in total exports of Tajikistan amounted to 58.1%, Kyrgyzstan - 50.2% and Uzbekistan - 38.3%, which is supplied to Switzerland or Great Britain. About 66% export of mineral products are supplied mainly to the countries of the European Union in the total export volume of Kazakhstan.
The main share of Turkmenistan's exports, almost 70-80% falls on China, where Turkmen natural gas is mainly exported.
In this regard, the share of mutual trade between CA countries will be much higher if their exports of raw materials (oil, gas and precious metals) to third countries are not taken into account.
At the same time, the CA countries have great prospects for increasing the volume of intraregional trade in finished products, which meets the interests of all countries in the region.
The creation by CA countries of regional value chains, including industrial and agricultural clusters, will contribute to an increase in the number of joint ventures for the production of finished products that can be exported to third countries.
Regional integration will help reduce the costs of producers and promote the production of products that are competitive in foreign markets. In addition, when the CA countries carrying out trade operations within the region, they have the shortest distances for the delivery of goods, which gives them advantages in saving on transport costs.
The interests of the CA countries also meet the joint creation of international transport corridors and international transport infrastructure in the region, which will help to reduce transport costs in the supply of export products from CA countries to world markets.
It should be noted that all the countries of the CA region are interested in increasing export volumes and persifying their foreign trade, entering new foreign markets, as well as creating and using new transport routes.
Currently, the main trade routes of the CA countries are laid in the northern direction, encouraging area of economic cooperation is the southern direction, including South Asian countries, which geographically lies on Afghanistan, Bangladesh, Bhutan, Malpes, Nepal, Pakistan, India and Sri Lanka.
Economic cooperation with Central and South Asian countries
The main trading partners of the CA countries among the South Asian countries are Afghanistan, India and Pakistan. At the same time, the most active trade and economic cooperation of the CA countries is with Afghanistan, due to the geographical proximity, as well as the great dependence of the Afghan domestic market on imports of food and industrial products.
The Central Asian countries are actively cooperating with India and Pakistan also within the framework of the SCO. In addition, India is negotiating a Free Trade Agreement with the EAEU, which includes Kazakhstan and Kyrgyzstan and with Uzbekistan to conclude a Preferential Trade Agreement.
At the same time, the increase in trade with Pakistan and India largely depends on the creation of reliable routes for the delivery of goods. The project for the construction of the Mazar-i-Sharif - Kabul - Peshawar railway occupies a special place and will significantly reduce transportation costs for delivery cargo between the countries of the region.
Thus, the main promising areas of cooperation between the countries of Central and South Asia are new transport corridors that provide access to the Central Asian countries to the southern seaports, cooperation in the energy sector (export of electricity), encouragement of mutual investments, as well as the expansion and persification of foreign trade.
It should be noted that Afghanistan, which is a bridge between the two regions, will contribute to the further development of economic cooperation between the countries of Central and South Asia.
In this regard, the implementation of transport and energy projects on the territory of Afghanistan will create conditions to expand opportunities for building up trade, economic and investment ties, strengthening transport and communication interaction between the countries of Central and South Asia.
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