Evgeny Vinokurov, Chief Economist at the EDB, presents an honorary lecture titled The New Central Asia at the 24th Yasin (April) International Academic Conference at the Higher School of Economics

Central Asia should be looked at from a fresh perspective

Central Asia is developing dynamically, acquiring new socio-economic significance and undergoing a transformative shift towards stronger intra-regional ties among its countries. However, the region’s potential is sometimes underestimated, as biases persist within the expert and investment communities regarding the opportunities it holds. Evgeny Vinokurov, Chief Economist at the EDB, presented a comprehensive analysis of Central Asia’s present and future, tracing the region’s journey towards close economic integration driven by internal and external factors. The hybrid lecture brought together experts, students, and postgraduate students of the HSE, Moscow State University, RUDN University, IMEMO, the Institute of Economics of the Russian Academy of Sciences, as well as universities and think tanks across CIS countries.

Impressive Dynamics

“Over the past twenty years, the region has come a long and successful way, which inspires sincere respect,” said Evgeny Vinokurov to commence his overview of the ongoing transformation in Central Asia. One parameter that clearly demonstrates the accelerating dynamics of development is population growth. Between 2000 and 2022, it increased by 40% to nearly 80 million people. The economic indicators also paint a promising picture. As of 2022, we are dealing with a region of 79 million people and with a GDP of US $397 billion. Over the past two decades, the annual average GDP growth rate has been 6.2%. These figures confirm Central Asia’s growing economic and social importance, as well as its substantial scale in various aspects. In recent years, the region has outpaced many developing countries in terms of growth, second only to China. Kazakhstan has been the primary driver of economic acceleration over the past twenty years. Uzbekistan also performed well, with a real economic growth rate of 5.7% last year. Central Asia’s significant growth is reflected in its share of global GDP at purchasing power parity (PPP), which has risen from 0.4% to 0.7% since 2000. Foreign direct investments are actively utilised to finance the construction of modern infrastructure and upgrade power plants, sparking increased investor interest in renewable energy. Evgeny Vinokurov highlighted an indicator that is often overlooked by researchers of sub-regional integration – population mobility (expressed in passenger-kilometres per person). He emphasised the importance of this indicator as it reflects not only economic reality, but also social developments – the population’s curiosity and active human communication.

From a Group of Countries to a Full-Fledged Region

Just a decade ago, Central Asia was not considered a region in the strict economic sense of the word. Instead, it was perceived as a group of countries primarily focused on external markets such as Russia, China, and the EU, with limited emphasis on fostering connections among themselves. Mutual trade and investment were at low levels. However, the situation has undergone significant changes. Mutual trade has steadily increased irrespective of periods of crisis. Statistics indicate a rapid exchange of direct investment since 2019. Although the current investment volumes remain relatively low, particularly when compared to Russia and China, the fact that they are growing and diversifying (not only commodities sectors, but also industry, retail, and real estate) is highly significant. This trend clearly demonstrates the strengthening and expanding network of connections between the countries, approaching the level of subjectness that characterises a fully developed economic region.

Central Asia continues to successfully mobilise resources, especially finance. The programmes of international organisations such as the World Bank, the International Monetary Fund, the Asian Development Bank, the Islamic Development Bank, and others play a significant role in concessional funding. When it comes to investing countries, Russia and China maintain their positions as the leaders in FDI into the region, focusing primarily on the resource sector. It is evident that investment is becoming “a significant catalyst for development in the region, particularly in low-income countries,” as indicated in the EDB Monitoring of Mutual Investments 2022.

Two significant trends emerge from the ongoing changes. Firstly, public policies are becoming increasingly complex and comprehensive. Secondly, the role of development institutions is to support a countercyclical function that stimulates the region’s economic mechanisms.

Risks and Limitations

Nevertheless, Central Asia’s impressive dynamism remains vulnerable to structural risks. Evgeny Vinokurov highlighted the most significant of these:

Commenting on the latter challenge, Evgeny Vinokurov emphasised the region’s susceptibility to climate change. Although the countries are committed to reducing greenhouse gas emissions under the Paris Agreement, the threat persists, with particular sensitivity in the areas of water supply, agriculture and biodiversity. Addressing these issues requires a comprehensive approach, recognising the close relationship between them and the water and energy complex.

In summary, Evgeny Vinokurov highlighted that Central Asia has transformed into as a full-fledged economic region with growing political subjectness over the past two decades. There has been an improvement in the quality of economic policies, creating significant opportunities for neighbouring countries in various sectors such as trade, investment, transport, retail, real estate, and green energy. The region is increasingly integrating into the global economy, as evidenced by the more than eightfold increase in foreign trade in goods. The EDB Chief Economist strongly believes that the region should be looked at from a fresh perspective, free of the outdated stereotypes. This is the only way to fully leverage the multitude of opportunities it presents.