《中亚学院:2024年中亚贸易增长和经济一体化概述报告(英文版)(54页).pdf》由会员分享,可在线阅读,更多相关《中亚学院:2024年中亚贸易增长和经济一体化概述报告(英文版)(54页).pdf(54页珍藏版)》请在三个皮匠报告上搜索。
1、张小可MUBINZHON ABDUVALIEVVisiting Fellow ProgramAn overview of Central Asian tradegrowth and economic integrationJANUARY 2024 Visiting Fellow Program An Overview of Central Asian Trade Growth and Economic Integration by Dr.Mubinzhon Abduvaliev Project Supervisor:Dr.Hans Holzhacker January 2024 ii Disc
2、laimer Under the Visiting Fellow Program,the CAREC Institute issued research grants in 2023 to support scholars and researchers to produce targeted knowledge products that would add to the body of knowledge on regional cooperation in the CAREC region.Scholars were encouraged to conduct research on C
3、AREC integration topics and carry out comparative analyses between(sub)regions to obtain insights for promoting and deepening regional integration among CAREC member countries particularly,as anticipated in the CAREC 2030 strategy and stated operational priorities.The paper is written by Dr.Mubinzho
4、n Abduvaliev.Dr.Hans Holzhacker,Chief Economist and Head of the Research Division of the CAREC Institute,advised on this research,and Ms.Emma Tong,Research Specialist of the CAREC Institute,provided grant administration support and coordination throughout the process.The CAREC Institutes Publication
5、 Board reviewed the paper and provided comments for its further improvement.The research is funded through the technical and financial assistance from the Asian Development Bank(ADB)under TA-6694 REG:Supporting the Central Asia Regional Economic Cooperation Institute-International Expert(CAREC Insti
6、tute Visiting Fellow-Batch 3).The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of the CAREC Institute,its funding entities,or its Governing Council.The CAREC Institute does not guarantee accuracy of the data included in this paper and
7、 accepts no responsibility for any consequences of its use.The terminology used may not necessarily be consistent with the CAREC Institutes official terms.The CAREC Institute accepts no liability or responsibility for any partys use of this paper or for the consequences of any partys reliance on the
8、 information or data provided herein.By making any designation of or reference to a particular territory or geographical area,or by using country names in the paper,the author did not intend to make any judgment as to the legal or other status of any territory or area.Boundaries,colors,denominations
9、,or any other information shown on maps do not imply any judgment on the legal status of any territory,or any endorsement or acceptance of such boundaries,colors,denominations,or information.This paper is available under the Creative Commons Attribution 3.0 IGO license(CC BY 3.0 IGO)https:/creativec
10、ommons.org/licenses/by/3.0/igo/.By using the content of this paper,you agree to be bound by the terms of this license.This CC license does not apply to other copyright materials in this paper.If the material is attributed to another source,please contact the copyright owner or publisher of that sour
11、ce for permission to reproduce it.The CAREC Institute cannot be held liable for any claims that arise as a result of your use of the material.Central Asia Regional Economic Cooperation(CAREC)Institute 21st Floor,Commercial Building Block 8,Vanke Metropolitan,No.66 Longteng Road,Shuimogou District,Ur
12、umqi,Xinjiang,the PRC,830028 f:+86- L inkedIn:carec-institute km carecinstitute.o rg ww w.carecinstitute.o rg iii Abstract After the disintegration of the Soviet Union,many Central Asian Republics(CARs)have adopted multivector foreign economic policies to enhance stability and develop the
13、ir economies through international cooperation.In consequence,multidimensional foreign economic policies became a distinctive characteristic of all CARs.Although the CARs share many similarities in economics,politics,history,culture,and other aspects,they have chosen to strengthen their inter-region
14、al cooperation rather than their intraregional integration.To assess the prospects of inter-and intra-CARs trade relations,we used panel data to examine the extent to which trade growth in the CARs is related to the performance of their major external partners,including China,the European Union(EU),
15、and Russia over the period 2005-2022.The coefficient of GDP for CARs takes a significant positive elasticity value of about 0.005 percent to 0.05 percent,indicating that if GDP rises by 1 percent,the amount of exports will go from 0.005 percent to 0.05 percent,respectively.The GDP of China,Russia,an
16、d the EU also takes a significant positive elasticity value of about 0.007 percent to 0.09 percent,respectively;this suggests that exports will increase by 0.007 percent to 0.09 percent if their economic size increases by 1 percent.Keywords:Central Asian Republics,Russia,China,European Union,gravity
17、,trade growth Table of ContentsTable of Contents Abstract.iii 1.Introduction.2 2.Literature review.6 3.General state of CARs trade and partnerships.18 4.Model specification.29 5.Results and discussion.33 6.Conclusion.35 7.Policy recommendations.36 References.40 Appendix 1.49 CAREC Institute.Visiting
18、 Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.2 1.Introduction The world is currently undergoing significant change.International relations were significantly impacted by the growth of regional trading blocs since the end of World War II;virtually every coun
19、try belongs to at least one of them now.An outstanding degree of heterogeneity existed among the newly independent Central Asian Republics(CARs)1 following the breakup of the Soviet Uniona heterogeneity that was probably hidden beneath the centralized Soviet hierarchy.However,the creation of new pol
20、itical and economic institutions,together with diverse economic reforms and performance has unveiled deep differences among CARs over the last three decades.A severe structural shock and deep economic and political crisis occurred in all post-Soviet states after the dissolution of the Soviet Union,w
21、hereas the accession of the three Baltic states to the European Union(EU)improved their living conditions substantially.While the other 12 post-Soviet statesparticularly the five CARsare still adjusting their economies and policies on their own,because of the economic and political instability throu
22、ghout the region.Many of the 12 states,particularly the five Central Asian landlocked countries,suffered substantial hardship.Perestroika(restructuring of the political and economic systems)in the Soviet Union was on the verge of collapse when the idea of an integrated Central Asian region was born.
23、Throughout the Soviet statehood crisis,there was a strong sense that many challenges were multiplied and needed to be overcome.As a result of the Soviet Unions central loss of ideological,political,and economic influence,for the first time in their Soviet history the CARs needed to act as a unique e
24、conomic block.In the current economic system,where global economic dynamics are dominant,regional economic integrations serve to achieve the common goals of countries with similar performances.Having rejected the Soviet Unions control over the economy,the economically and politically independent nat
25、ions(such as CARs)that emerged were forced to converge with the market economy to integrate into the global economy.There has been a growing interest in regional economic integration in the Central Asian region;regional economic integration has been one of the methods used by these countries to achi
26、eve economic cooperation within a relatively short period of time.There is no doubt that the conditions necessary for Central Asian integration exist:geographic proximity,mutual economic complementarity,cultural and linguistic proximity,common traditions,shared historical past,and a common vision fo
27、r the future.Hence,CARs should be viewed through a regional lens to assess their development challenges.By taking this approach,cross-border cooperation can be facilitated,and knowledge shared,as well as dialog and collaboration between the countries being strengthened.The Central Asian region is a
28、landlocked region located in the heart of Eurasia with a relatively small economy.Developing their economies sustainably requires trade promotion and close integration into the international trading system.Trade policy cooperation at regional level can help them achieve this objective(ADB,2006).Spec
29、ifically,reciprocal trade liberalization under regional trade agreements can help CARs liberalize trade policy at relatively low costs.This will reduce the risks of protectionist measures by trading partners at the same time as creating new trade.Depending on the design of the regional trade agreeme
30、nts and the context in which they are implemented,they can also distort existing trade and adversely affect social welfare in the CARs.Furthermore,full 1 Kazakhstan,Kyrgyz Republic,Tajikistan,Turkmenistan,Uzbekistan CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Grow
31、th and Economic Integration.3 integration into the international trade system,as well as sustainable development,are essential for the CARs to overcome the disadvantages and exploit the advantages of their location.However,CARs are highly dependent on exports of a few primary commodities and share a
32、 similar structure of production,making them more susceptible to sudden swings in global commodity prices.Owing to their limited involvement in global production networks and related trade in manufactured products,the CARs receive relatively little benefit from trade in terms of attracting FDI,acces
33、s to advanced technologies,and fostering sustained economic development.Trade in the CARs is concentrated in a few countries,which makes them vulnerable to changes in import demand.Owing to a lack of complementarities in industries and capacities,infrastructural limitations,the low level of institut
34、ional qualities and lack of trade facilitation measures within the Central Asian region,there is limited regional economic cooperation.2 As a result,CARs are more likely to export their resources to external markets than to trade with one another.There have been numerous efforts undertaken in recent
35、 years to address these challenges and promote intraregional trade in Central Asia.Several regional organizations have been established to promote economic cooperation between member countries.These include the Central Asia Regional Economic Cooperation(CAREC),3 the Eurasian Economic Union(EAEU),the
36、 Commonwealth of Independent States(CIS),and the Shanghai Cooperation Organization(SCO).These organizations provide a platform for dialog,negotiation,and coordination on trade-related issues,although progress within these organizations has been slowwith the EAEU,for example(among the five CARs,only
37、two are members of the EAEU)and there are still significant obstacles to overcome.Furthermore,owing to economic challenges,political instability,lack of effective institutions,diverse interests and priorities among member states,and limited scope of cooperation,CIS effectiveness has been limited.How
38、ever,CAREC plays a vital role in promoting intraregional trade between CARs.Furthermore,a number of CARs have embraced a multilateralist policy by becoming members of the World Trade Organization(WTO).The Kyrgyz Republic,Tajikistan,and Kazakhstan have joined the WTO,while the other CARs are in varyi
39、ng stages of accession.Joining the WTO would allow the CARs to expand their trade rapidly and liberalize their trade policy at relatively low costs by gaining better market access to many countries that are already members of the WTO,including their main external partnersChina,Russia,and the EU.Alth
40、ough some of the CARs are members of the WTO,the effect of the WTO on Central Asian intraregional cooperation remains relatively less significant.The limited regional integration of Central Asian sectors and industries into global value chains makes it difficult for them to work well together to int
41、egrate into global value chains as well as they might.By integrating economically with non-regional states,the Central Asian region would be able to increase trade and create new opportunities for development(ADB,2023).Despite the challenges mentioned earlier,Central Asian policymakers should priori
42、tize increased regional cooperation.The CARs would therefore be able to expand their trade,especially with distant countries;become more involved in global production trade networks and the geography of trade;and become a land bridge for rapidly expanding trade between East and South Asia and Europe
43、.Central Asia has an unprecedented opportunity to emerge as a trade and commerce hub owing to 2 The RTAs involving the CARs generally have a narrow coverage and complex rules of origin and most of them have remained agreements on paper only(ADB,2006 p12).3 CAREC is a partnership of 11 countries(Afgh
44、anistan,Azerbaijan,China,Georgia,Kazakhstan,the Kyrgyz Republic,Mongolia,Pakistan,Tajikistan,Turkmenistan,and Uzbekistan)and development partners that promotes regional economic cooperation and integration.CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Eco
45、nomic Integration.4 the rapid economic expansion of China,Russia,and other nearby countries.4 Furthermore,CARs may be able to benefit from preferential trade agreements,reduced trade barriers,and improved market access within the region if they participate in regional integration efforts.It can resu
46、lt in a reduction of reliance on a few traditional markets and a diversification of export destinations.Relevance and statement of problem.The importance of CARs can be attributed to several factors,particularly in terms of economy.Firstly,they are strategically located at the crossroads between Eur
47、ope,Asia,and the Middle East,which makes them crucial in Central Asias role in promoting economic integration,political cooperation,and cultural exchange within the Eurasian region owing to their role as transit hubs and resource-rich economies.Second,this region was a stop along the ancient Silk Ro
48、ad,a trade route connecting East and West in ancient times.The increased engagement of CARs with global powers has also contributed to their geopolitical importance in recent years.As part of Chinas Belt and Road Initiative(BRI),infrastructure projects will pass through Central Asia to enhance conne
49、ctivity between Asia and Europe.Transport networks and energy infrastructure in the region have been significantly upgraded as a result of this initiative.Despite this,post-Soviet literature has focused primarily on the experiences of Central and Eastern European countries and the Russian Federation
50、;however,less attention has been paid to CARs(Rummer,2000;Ramfret,2003;Hausmann et al,2005;UNDP,2005;Mazhikeyev et al,2015).It has been acknowledged that the transition from plan to market success and foreign trade performance is strongly correlated(Winters,1996;Mazhikeyev et al,2015).Furthermore,th
51、e literature on trade performance has not adequately addressed the performance and development of Central Asia in light of the recent globalization process.While the governments of Central Asia have been concerned with Central Asias regional integration since the early years of independence primaril
52、y owing to the countries historical economic and political backwardness,the relevance of the potential effects of regional integration on CARs has become an increasingly significant issue.Despite numerous attempts,however,regional integration has not been successful in the region owing to a number o
53、f factors,including a lack of political will,geopolitical tensions,economic diversion,infrastructure challenges,different economic and political systems,and a lack of regional identity,among others.This has made trade and investment in the region particularly challenging.Economies in Central Asia he
54、avily depend on a few primary commodities,such as oil,gas,and minerals,which limits their ability to diversify their exports.Consequently,countries are vulnerable to fluctuations in commodity prices and external shocks owing to their overdependence on a narrow range of products.The limited economic
55、development and infrastructure of certain CARs make them less attractive for foreign investment and business opportunities than more developed regions.The development of value-added industries and intraregional trade are hindered by a lack of diversification where these combination factors cause CAR
56、s to adopt multivector foreign economic policies.Following the dissolution of the Soviet Union,a number of CARs adopted multivector economic policies,which was an appropriate decision in light of the globalization process.The concept of a 4 Kazakhstan is one of the regions that has made significant
57、efforts to upgrade its transportation infrastructure at a rapid pace.Western Europe-Western China(WE-WC)International Transit Corridor Project(part of the CAREC)has been undertaken as part of the countrys ambitious road development program.CAREC Institute.Visiting Fellow Program 2023.An Overview of
58、Central Asian Trade Growth and Economic Integration.5 multivector approach refers to the diversification of economic and political relationships with multiple parties rather than heavily relying on one country or region.A multivector approach is required by CARs to improve their economic situation f
59、or a variety of reasons.These countries can benefit from this strategy by mitigating risks,improving economic stability,and promoting sustainable development.In addition,attracting foreign direct investment(FDI)is easier with a multivector approach.CARs will be able to expand their consumer markets
60、and take advantage of more trade opportunities as a result of expanding their network of economic partners.This can lead to higher export volumes,greater competitiveness,and improved economic growth.Owing to their geographic location,Central Asian landlocked countries face unique economic challenges
61、.Their main problem is that they do not have access to ports or coastlines,which can limit their trade and economic potential.In order to combat this problem,Central Asian landlocked countries have implemented multivector economic policies,in which multiple sectors of their economy are developed,suc
62、h as agriculture,industry,and services.This will help diversify their revenue streams and reduce their dependence on a single sector of the economy.Research objectives.As a main focus of our research,we intend to empirically evaluate the trade relations of CARs with their main external partners.In a
63、chieving this main goal,we set several specific objectives.Specifically,the first objective is addressed by reviewing the literature on economic integration,with a focus on the effects of trade openness,geographic disadvantage,distance,and inflows of FDI.The second specific objective is to attempt t
64、o determine the factors associated with the regional integration among the Central Asian region,thereby attempting to explain why intraregional trade shares,as well as investment inflow and outflows among CARs,are low,despite their steady potential extraregional growth in trade and investment inflow
65、.Furthermore,the research aims to understand why the five CARs have been puzzled by the regional agreement in their region for so long.Thirdly,we examine the empirical identification through the gravity model,with the ultimate objective of assessing the trade relations between CARs and their main tr
66、ading partnersChina,Russia,and the European Union(EU).Economic outcomes are increasingly being examined empirically as a result of regional trade integration.It has been noted appropriately by the WTO(2005)that these exercises in quantification have been made possible by advances in theory and analy
67、sis techniques,and by the greatly enhanced computational power and data processing capabilities of computers.Baier and Bergstrand(2007)argue that it has been four decades since the gravity equation emerged as the primary empirical tool for studying the impact of free trade agreements and customs uni
68、ons upon bilateral merchandise trade flows.Although gravity models are valuable tools for understanding spatial interactions,they do have some drawbacks that need to be addressed.A gravity model relies on assumptions and simplifications,assumes homogeneity and linearity,has a limited database,and is
69、 not capable of capturing time and spatial dynamics adequately(Beyer et al,2022;Hsu&Mustafavi,2021).These limitations should be recognized by researchers and other approaches or models should be supplemented in order to gain a more holistic understanding of complex spatial relationships.CAREC Instit
70、ute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.6 The paper proceeds as follows.Section 2 provides a brief survey of the literature,and section 3 discusses the trade and major trading partners of each CAR.Section 4 discusses the methodology as well
71、 as the econometric and economic properties of the tools.A summary of the findings and results is provided in section 5.In the concluding section,the potential implications for development are discussed.The paper is summarized with the policy recommendations.2.Literature review A discussion of the b
72、enefits of trade is one of the earliest and most fascinating topics in economics.No country has been able to achieve economic success in recent decades,in terms of a substantial rise in living standards for its citizens,without being open to the rest of the world and their diverse trade external tra
73、jectory(IMF,2001).Liberalization of trade and openness not only promotes exports and imports of a country,but also stimulates the economic activities of the private sector,attracts foreign investment,creates jobs,and increases foreign earnings(WTO,2008).By reducing trade barriers,CARs increase the g
74、ains from international trade as well as reducing associated costs(ADB,2006).Foreign trade can have detrimental effects on certain segments of society if appropriate policies and measures are not taken to address the challenges posed by import competition.There can be disproportionate effects on cer
75、tain groups within society as a result of worker displacement,downward pressure on wages,and social consequences.In order to mitigate these negative effects of foreign trade and make sure that the benefits are distributed more evenly,effective policies focusing on requalification and social protecti
76、on can be implemented.An economy grows as it produces and consumes more goods and services,while trade is the exchange of goods and services between countries.There are various theoretical frameworks,historical evidence,and empirical studies that can be used to analyze the relationship between trade
77、 and economic growth;most of them have demonstrated that trade and economic growth have a positive relationship.Theoretically,trade is considered beneficial for economic growth because it enables countries to specialize in producing goods and services in which they have a comparative advantage.As we
78、ll as promoting competition,trade facilitates innovation and technological progress by opening up larger markets beyond national borders and facilitating access to a broader range of products.Even though there is a vast literature that international trade performance is strongly correlated with the
79、success of openness(Romer,1990;Coe&Helpman,1995;Jozefna Semankov,2016;Mazhikeyev et al,2015;Elbourgh-Woytek K,2003;Dollar&Kraay,2002;Rodriguez&Rodrik,2001),regional integration and economic growth(Sala-i-Martin,2007;Badinger,2005;Bhagwati&Srinivasan,2002;Baldwin&Venables,1995;Balassa&Stoutjesdijk,19
80、75),free trade agreements and economic growth(Rodrik,2018;Baier&Bergstrand,2007;Dan Ben-David&Loewy,1998),development of the economy through exports(Balassa,1978;Krueger,1978;Kavoussi,1984;Renelt&Levine,1992),geographic diversity(Sarpong&Teirlinck,2018;Belderbos et al,2006)and geographic disadvantag
81、e and distance(Raballand et al,2005;Raballand G,2003;Carrre&Grigoriou,2007;Berthelon&Freund,2008),while empirical determinants and performance of CARs extraregional trade and CARs regional economic integration received relatively less attention.Growth may be affected both positively and negatively b
82、y economic integration,depending on whether it is viewed from a theoretical perspective.Free trade and regional economic integration are still highly debated issues among experts regarding whether a country should adopt it with its neighbors.Among the leading theoretical free traders of modern times
83、,Jagdish Bhagwati(2004)argues that nondiscriminatory multilateral trade liberalization opens up the economy most effectively.It is also CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.7 desirable to pursue unilateral policies of opening
84、 up the economy if no multilateral agreements exist.Sala-i-Martin(2007)assert that there is a greater consensus regarding the merits of multilateral and unilateral trade agreements than there is regarding regional trade agreements(RATs),while Bhagwati(2004)points out that RTAs may not only be unbene
85、ficial but may even be detrimental.5 Trade has been diverted by RTAs,but it appears that greater trade has been created than has been diverted(World Bank,2005).It appears that the trade diversion argument is particularly compelling for RTAs between rich countries(like the European Union)and poor cou
86、ntries(like Mercosur).Venables(2001)asserts that a trade agreement involving rich and poor(or north and south)nations tends to create new trade opportunities.He also argues that RTAs between developed countries do not appear to stimulate growth,but that RTAs between a developed country and a develop
87、ing country do,especially since they stimulate growth.Institutional reforms are often induced by RTAs,which make them more credible to investors and provide the poor partner with the opportunity to benefit from the knowledge spillovers and policy credibility of the rich.An increase in inter-regional
88、 trade improves access to technology advancements and an increase in institutional credibility is usually associated with RTAs.According to Estevadeordal et al(2004),a reduction in tariffs among potential participants in a free trade area of the Americas(FTAA)would significantly increase trade.Furth
89、ermore,it is found that the tariff-reducing effect of trade in the Americas is greater than in the sample as a whole.Torstensson(1999)asserts that investment and knowledge transfers are key channels linking economic integration and growth among OECD countries.While,based on a panel of 23 countries b
90、elonging to the OECD,Vanhoudt(1999)finds that EC members have neither positive nor negative growth effects compared with non-member OECD members.Using the case of EU member states over the period 1950-2000,Badinger(2005)finds that if no integration had taken place since 1950,todays GDP per capita wo
91、uld be approximately one-fifth lower.In a study of economic integration and economic growth,Kamau(2010)finds a positive relationship between economic integration and economic growth for the Common Market for Eastern and Southern Africa,the East African Community,and Southern African Development Comm
92、unity regional cooperation.Similarly,based on data spanning the period 1988-2017,Ejones et al.(2021)found that RTAs and trade openness are significant factors contributing to economic growth in the East African Community.They conclude that the impact of RTAs in the same region is greater than the im
93、pact of multilateral agreements on economic growth.Using a cross-country growth model based on a generalized method of moments with a dynamic panel framework,Bong and Premaratne(2018)examined the impact of regional integration on economic growth over a 43-year period(1970-2013)in Southeast Asia.Thei
94、r study suggests that regional integration influences economic growth in a significant manner.Concerning CARs,however,research and policymakers have long been puzzled by the five CARs regarding regional cooperation.Historically,Central Asian nations have focused more on their own national interests
95、than on regional cooperation.Their establishment of independent economies and political systems after independence from the Soviet Union in 1991 was challenging.It is often the case that efforts towards regional trade integration are overshadowed by this initial focus on nation-building.Despite this
96、,a number of fundamental political and economic changes have taken place in Central Asia since the collapse of the Soviet Union.The first discussion of regional integration and free trade among Central Asian leaders took place the year after independence in 1992(Bobokulov,5 Aside from the arguments
97、against RTAs related to multilateral agreements,Bhagwati argues that there are additional arguments against RTAs related to RTAs involving multilateral agreements,including the stumbling block argument that suggests that countries already involved in an RTA have fewer incentives to enter into multil
98、ateral agreements.CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.8 2006).In many ways,the transition has adversely affected these countries much more than the challenges of the former Soviet Unions European successor states and the tra
99、nsition from a centrally planned economy to a market economy in CARs(Dieter,2007).There are signs of stabilization in the Baltic States and the Russian Federation;however,this is not yet the case in the CARs.Each CAR experienced a steep economic decline as a result of this painful process.They took
100、radical action by their governments,resulting in a sharp drop in output in many sectors,particularly manufacturing,as a result of the drastic changes they introduced(World Bank,2002).Despite serious economic difficulties in the initial period and a number of other unifying factors,CARs have never es
101、tablished their own regional economic groupings or joined other serious economic integration in their entirety.6 There is broad agreement among economists that regional economic integration and cooperation have significant benefits for Central Asia.There are,however,a number of obstacles that still
102、need to be overcome in the spheres of politics and governance before these gains can be realized(Linn,2012;De Tray,2011).Among newly formed CARs,there is a strong sense of sovereignty,while some compete for water and energy(Tajikistan and Uzbekistan),supremacy in regional leadership(Kazakhstan and U
103、zbekistan),or prefer strict neutrality(Turkmenistan)(Linn,2012;Olcott,2011).With time,gradually,CARs participate in wider regional organizations like the Eurasian Economic Union(EAEU),the Commonwealth of Independent States(CIS),the Collective Security Treaty Organization(CSTO),and the Shanghai Coope
104、ration Organization(SCO);however,the significant impact of these originations to CAR economy requires an empirical investigation.The CIS,the first regional intergovernmental organization,was formed as a result of the dissolution of the Soviet Union in 1991.As a result of an amendment to the agreemen
105、t in 1999,exemptions were allowed to be negotiated bilaterally(Dragneva and Kort,2007).Despite this,not all member states of the CIS have been able to agree on a list of exclusions.Georgia withdrew because of the Russo-Georgian War of 2008(BBC News,2008;New York Times,2009),while Ukraine withdrew it
106、s representatives from the CIS in May 2018 and stopped actively participating in the CIS(UNIAN,2018).In 1992,CARs joined the Economic Cooperation Organization Trade Agreement(ECOTA)along with Iran,Pakistan,Afghanistan,and Turkey.However,the member states lack adequate infrastructure and institutions
107、 to properly utilize the available resources in the region.Tariff reductions have not yet been achieved in accordance with the original plan(OSCE,2013).However,ECOTAs weak progress does not necessarily mean that economic cooperation within the ECOTA region has broken down,but rather that alternative
108、 approaches or agreements are needed to improve trade and economic integration.Later in 1994,the Central Asian Cooperation Organization(CACO)was established by Kazakhstan,the Kyrgyz Republic,and Uzbekistan;however,Tajikistan and Turkmenistan did not participate.The CACO was dissolved in 2005(Kraphol
109、&Vasileva-Dienes,2020).In light of political frictions and conflicting national and supranational interests,the establishment of a Central Asian common market within the 6 As a result,our gravity model is not able to incorporate RTA or FTA owing to these issues.Although the gravity model does not ex
110、plicitly include free trade agreements(FTAs),it indirectly captures their effects through variables like GDP growth and distance.Comparing the CARs to those of other regions,it is evident that they do not engage extensively in FTAs.Various challenges prevent the development of FTAs in Central Asia,l
111、imiting their potential impact on trade flows.These include inadequate infrastructure,limited diversification of exports,bureaucratic barriers,and political instability.CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.9 CACO framework wa
112、s considered to be an overly ambitious goal(OSCE,2013;Tolipov,2005).However,in 2001,the Central Asian Regional Economic Cooperation(CAREC)was established as a key initiative for promoting economic cooperation and development,with the goal of enhancing regional economic cooperation and development in
113、 the region and beyond.As part of the initiative,regional connectivity is being improved,trade facilitation is being developed,energy infrastructure is being developed,and institutional capacity is being strengthened in the Central Asian region.CAREC has played a crucial role in promoting regional e
114、conomic integration by facilitating dialog and cooperation among its member countries(Javaid&Siraj,2022).In recent years,the CAREC region has become increasingly important as a transit area for Euro-Asian trade owing to increased trade and business relations.This has resulted in the strengthening of
115、 links between the CAREC countries and the rest of the world(Kalyuzhnova&Holzhacker,2021).It is notable that international organizations and multilateral development banks began providing substantial support to regional cooperation in Central Asia after the fall of the Soviet Union in 1991 and the A
116、sian Development Bank(ADB)was the first institution to map out regional integration.Economic growth and poverty reduction in Asia are seen as benefits of regional integration by ADB(ADB,2019).Its approach to regional integration is economic interdependence,based on the belief that there will be fewe
117、r barriers to trade and fewer bureaucracies if economic interdependence is realized.It is also important to mention the Eurasian Economic Union(EAEU),which promotes regional economic integration in Central Asia even though not all CARs are members of this organization.Featuring Armenia,Belarus,Kazak
118、hstan,the Kyrgyz Republic,and Russia,the EAEU was established in 2015.It has created a common market and facilitated trade among its member states.As part of the EAEU,regulations are harmonized,goods and services are moved more easily,and investments are promoted.However,Wang(2014)claims that there
119、is no clear indication as to whether the EAEU have contributed to the integration of this region.According to him,exports from CARs have benefited from integration;however,the EAEU has failed to meet the expectations of its member states since there are various levels of economic development in EAEU
120、 member states,defective industrial structures,and inadequate market integration.He concludes that Central Asia has established an initial market-based trade integration network that has achieved excellent results,but that the governments of these countries have yet to fully recognize the benefits a
121、nd potential of this network.Roberts and Moshes(2016)assert that,despite some early successes,the EAEU is more concerned with reproducing sovereignty than with transforming it,a discord between rhetoric and reality.Even this modest reality faces significant challenges when viewed from the perspectiv
122、e of their institutions,identity,and international context.However,Kubayeva(2015)argued that,as a member of the EAEU,Kazakhstan has one of the highest levels of global integration in Central Asia.There are several benefits and challenges associated with the Union for the economy.Being a landlocked C
123、entral Asian nation,Kazakhstan is reliant on economic integration to facilitate international trade.She also argues that membership of the EAEU will provide Kazakhstani businesses with more favorable conditions in relation to accessing Russian and European transport infrastructure,resulting in a red
124、uction in the cost of foreign trade transportation.Further,Kazakhstans position on the world market will be strengthened as it is part of an international economic bloc.However,in comparison to Kazakhstan,the Kyrgyz Republic has experienced largely frustrating experiences joining the EAEU from mid-2
125、015 to late 2017(Esenaliev&Asylbek,2017).They argue that an increase in access to EAEU markets and large-scale capital investment is yet to materialize,even though favorable employment conditions have been created CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth
126、 and Economic Integration.10 for Kyrgyz labor migrants.EAEU7 membership could become more attractive to the Kyrgyz Republic in the short term,provided that the organization works as intended.A Kyrgyz government that can navigate the multilateral structure is more likely to be effective as the groupi
127、ng expands and the Kyrgyz Republics membership in the EAEU serves as a test case.Overall,all member countries of the EAEU for CARs is an important factor(Amirbek et al,2020;Mogilevskii,2012).Taking a cautious approach to integration around the EAEU,the remaining three CARs(Tajikistan,Uzbekistan,and
128、Turkmenistan)have done so largely on their own accord,while the Union has maintained an open policy and has repeatedly expressed its interest in expanding it,primarily by including the remaining CARs.Although,it is not possible to conclude that Uzbekistan,Tajikistan,and Turkmenistan are exclusively
129、hostile to joining the EAEU.For instance,Tajikistan has repeatedly stated that it plans to study the issue of joining the EAEU in detail(Schulz,2020;Vinokurov,2017).On the other hand,Uzbekistan has made it clear that it does not intend to join the EAEU any time soon(Usmanova,2020).Turkmenistan8 has
130、clearly demonstrated its unwillingness to join the Union but has shown its willingness to work closely with it.Considering the national interests of Turkmenistan,while maintaining regional cooperation,is a reflection of the countrys approach.Further,to establish economic integration and a greater se
131、nse of integration with the rest of the world,the CARs considered joining the WTO.Central Asian economies are working to diversify their trade relations with the rest of the world as the global economy continues to worsen.In the event of external economic shocks,strong trade links can help increase
132、stability.Several of these economies,which are still outside the multilateral trading system,have become interested in joining the WTO(UNECE,2022).The transition economies were required to adopt a range of commitments beyond the formal WTO agreements to become members,including the deregulation of F
133、DI and the transformation of closed,centrally planned economies into market economies.However,the WTO presented the reforms as an opportunity to transform countries into knowledge-based economies despite its lack of knowledge of the nature of such a transition.WTO terms and conditions are often requ
134、ired to be accepted by newly acceding countries owing to the importance of being integrated into a global trading system and to the intransigence of WTO members(United Nations,2001).According to the United Nations Economic Commission for Europe(2012,p51),the Soviet Union innovation system was charac
135、terized in the following manner:The National Innovation System of centrally planned economies had a number of unique characteristics.New knowledge generated by basic research was transferred in a planned9 manner to applied research institutes,design offices,pilot factories,and,in the end,to final pr
136、oduction.State resources were allocated in a centralized manner to achieve specific goals,but the role of bottom-up initiatives was virtually non-existent.10 Further,Becker and Becker(1996)assert that,despite the lack of knowledge about how to transform former Soviet republics,they advocated market
137、fundamentalism.Three out of five Central Asian nations(Kazakhstan,the Kyrgyz Republic,and Tajikistan)are now WTO members(WTO,2023).The WTO is perceived as being a means of enhancing economic growth,7 The Kyrgyz Republic has allegedly been pressured by the Russians to join the Union,which has drawn m
138、uch attention.However,little consideration has been given to the actual motivations for joining the Union or to the possibility that it may even result in real benefits.(Peyrouse,2015:pp10-11).8 Since Turkmenistan followed a neutral policy bordering on isolation in its relations with such multilater
139、al institutions,its unwillingness to participate in the integration process was evident from the very beginning(Olcott,2011).9 An experiment that was tried,failed,and rejected was the planned economy as a historical anomaly,as an aberration(Shields,2012).10 See also T Mukhammadiyev,2020.CAREC Instit
140、ute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.11 improving competitiveness,and strengthening the rule of law in these countries.While these countries were undergoing the process of membership,they faced a number of different challenges.A negotiat
141、ion process of two years and eight months culminated in the Kyrgyz Republic becoming the first Central Asian member of the WTO in 1998.Having been admitted to the WTO so quickly,the Kyrgyz Republic was criticized for not having the time or space to develop or implement a strategic liberalization pol
142、icy.There were several challenges facing the country during this time,including political instability and economic difficulty(Ismailova&Du,2017).Several reforms have been implemented by the Kyrgyz Republic to align its policies with WTO standards.Based on WTO rules and norms,the country has adopted
143、a package of regulatory and institutional documents governing its trade regime.In addition to customs activities of enterprises,intellectual property rights,investments,and other specific sectorssuch as banking,insurance,and telecommunicationsseveral other key aspects of trade have been addressed(Vo
144、ronkov,2008).WTO membership may also have enhanced the ability of policymakers to resist a bad trade policy decision.By joining the EAEU,the Kyrgyz Republic would have to backslide on reforms due to substantial increases in Kyrgyz tariffs and reduced competition as a result of tariff harmonization w
145、ith countries such as the Russian Federation.As a member of the WTO,the Kyrgyz Republic has found it challenging to join the EAEC customs union because many of the tariffs that were agreed upon joining were lower than any common external tariffs that the Russian Federation could accept.As a pseudo-c
146、ost of WTO membership,the Kyrgyz Republics trade policy autonomy is restricted to the extent that it restricts its ability to do something that is not in its own interest(Romfret,2007).The Kyrgyz Republics small economy did not pose a challenge to incorporating it into the rules-based global economy
147、 of the WTO,which is why it joined the WTO so rapidly.He also argues that the Kyrgyz Republic did not suffer from a first-mover disadvantage since other CARs had not pledged to complete WTO negotiations in the 1990s.In 2001,Tajikistan applied for membership of the WTO.Trade-related issues include ma
148、rket access for goods and services,intellectual property rights,investment measures,and other trade-related issues.Tajikistan has maintained a relatively open trading and investment regime since its accession to the WTO in 2013.There is strong potential for growth in the country,which can be attribu
149、ted to the abundance of hydro resources,the young population,the mountainous landscape and the attractiveness of the country to tourists,as well as its proximity to large markets in the region.However,there are a number of challenges at sectoral level,including obstacles in the financial sector and
150、infrastructure bottlenecks,as well as attracting more private investment,diversifying and upgrading exports,and creating non-farm job opportunities(WTO,2021).Based on the ADB Completion Report(2016),a number of issues arose during Tajikistans accession to the WTO,including regulatory,legal,administr
151、ative,and economic impediments to trade,a low level of FDI,poor performance,and internally untenable conflicts of interest within the Standards Agency(Tajikstandart).During the WTO negotiations,the government committed to conducting policy research and analysis on Tajikstandarts organizational refor
152、ms for rationalizing and reducing technical barriers(Wu,2013).Reforms undertaken by Tajikistan in its trade and investment policies,as well as its efforts to improve its business environment,were instrumental in its accession to the WTO(WTO,2013)Overall,Tajikistans membership in the WTO enabled it t
153、o expand its economy and participate more actively in international trade.It has provided benefits such as improved market access,a rules-based trading system,and an improved legal framework,but it may also pose challenges owing to domestic reforms and increased competition.The Tajikistani governmen
154、t has successfully positioned itself as an attractive investment destination by adhering to international trade rules and regulations.CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.12 In 2015,Kazakhstan became the next Central Asian re
155、public to join the WTO after a 20-year process that was the longest in the history of the organization.A number of challenges were encountered during the countrys accession negotiations,including those relating to agriculture,intellectual property rights,and the trade of services.As a result of the
156、reduction in tariffs,the Kazakh agricultural sector has been subjected to increased competition from imported goods.Consequently,local farmers had to adjust and improve their competitiveness to remain competitive in the global market(Amirbekova&Gulyamova,2016;Kalymbek&Alimzhanova,2013).As Kazakhstan
157、s institutional and organizational structures were reformed more gradually than in any other transition economy that joined the WTO(Mukhamadiyev,2020),there was a greater opportunity for it to avoid systemic problems caused by a mismatch between formal and informal11 elements.Similar problems are li
158、kely to be experienced by other transition economies if they encounter mismatches between formal and informal structures.Nevertheless,Kazakhstan has successfully implemented reforms and made commitments to align its trade policies with those of the WTO.In addition to attracting foreign investment,Ka
159、zakhstans membership of the WTO contributed to the development of its economy.Trade has been opened up,transparency and predictability in trade policies have been enhanced,a dispute resolution mechanism has been provided to assist in the resolution of disputes,and domestic reform has been encouraged
160、(Bekturova et al,2017).Regarding the remaining CARs,the accession negotiations with Uzbekistan began in 1994.There was,however,a delay of 15 years in the process between 2005 and 2020.As a result,Uzbekistan has participated actively once again in negotiations,holding three rounds of meetings of the
161、Working Party.Uzbekistans recent policy developments,particularly those following the inauguration of its new president in 2016,raise hopes for the countrys economic and political openness in the global market(Normatov,2018).It is expected that the countrys WTO accession will progress as a result of
162、 these changes.In the case of Turkmenistan,the country became one of the first former Soviet republics to become a participant in the General Agreement on Tariffs and Trade in June 1992,but Turkmenistan did not continue to participate in the WTO.The Turkmenistan Working Party was established in Febr
163、uary 2022,shortly after the country became a WTO observer in July 2020(WTO,2023).In light of the Roundtable and Donor Engagement to Support Turkmenistans Accession to the WTO,held in Ashgabat,Turkmenistan on 30 May 2023,the technical sessions facilitated the preparation of sections of the Memorandum
164、 of Foreign Trade Regime pertaining to economic policy,foreign trade,and related legislation(CAREC,2023).Thus,regional economic cooperation among CARs has not yet been significantly impacted by the CARs WTO membership;however,accession of the remaining CARs to the WTO would facilitate greater region
165、al integration in the region(International Trade Center,2023).There is a strong link between regional integration and trade growth,as regional integration is likely to result in the removal of trade barriers,increased investment,improved infrastructure,and an increase in economic activityall of whic
166、h will facilitate the growth of trade.Regional integration is positively correlated with comparative advantage.With economic integration and the removal of trade barriers,countries are able to take advantage of their comparative advantages and specialize in producing goods and services that are most
167、 efficient for them.This leads to increased trade and economic growth.11 Politics and courts can change formal rules overnight,but customs,traditions,and codes of conduct tend to resist deliberate policy changes more readily(North,1990).CAREC Institute.Visiting Fellow Program 2023.An Overview of Cen
168、tral Asian Trade Growth and Economic Integration.13 In the view of pioneer economists Adam Smith(1776)and David Ricardo(1817),trade plays an important role in the growth of an economy.In international trade,comparative advantage12,13 is considered one of the most fundamental principles.In his 1817 b
169、ook On the Principles of Political Economy and Taxation,David Ricardo introduced this concept for the first time.A countrys objective is to specialize in producing goods and services that have a lower opportunity cost,or comparative advantage,in comparison to its competitors.The overall productivity
170、 and output of countries can be increased by doing so.In his study of economic growth in Asian developing countries over the period 1960-1970,Ekanayake(1999)found bidirectional causality between exports and economic growth in India,Sri Lanka,Indonesia,Korea,Pakistan,and Thailand.He asserts that,in t
171、he short run,there is no solid evidence of causality,as per the study.Later Din(2004)employed the Johansen cointegration tests and Granger causality tests to obtain data from 1960 to 2002,including Asian countries and found a bidirectional relationship between exports and output growth.For a short p
172、eriod of time,Sri Lanka,India,and Bangladesh experienced a negative balance between exports,imports,and output,whereas for a longer period of time,Pakistan and Bangladesh experienced a positive balance.As a result of Klavuz and Topcus(2012)analysis of 22 developing countries between 1998 and 2006,co
173、ncluded that in the first modelwhich included variables such as exports,investments,and the population of high-and low-tech manufacturing industriesonly two variables,exports,and investments,have a positive and significant effect on growth.A second model,in addition to the first model,examined how i
174、mports of high-and low-tech manufacturing industries affected growth.Economic growth is also attributed to a wide range of factors,including trade openness.This argument is based on a solid theoretical foundation that includes comparative advantage,competition,and foreign direct investment.In additi
175、on,empirical evidence suggests that trade openness is positively correlated with economic growth(Bhagwati,1978;Dollar,1992;Sachs et al,1995;Edward,1998;Frankel&Romer,1999;Rodriguez&Rodrik,2001;Wang,Liu&Wei,2004;Hosseinpour&Arman,2014;Cole&Tenreyo,2021).Developing countries with open economies grow a
176、t a rate of 4.49 percent per year,while developed nations with open economies grow at a rate of 2.29 percent per year,closed developing and developed economies,on the other hand,have experienced annual growth rates of 0.69 percent and 0.74 percent,respectively(Sachs et al,1995).To control for the po
177、tential endogeneity of trade,Frankel and Romer(1999)used geographic variables focusing on two samples.The first is the full set of 150 countries covered by the Penn World Table,and the second is the 98-country sample considered by N Gregory Mankiw et al(1992)as an exogenous variable to measure the r
178、eal GDP per person in 1985.There was a 20 percent increase in income per person when trade integration increased by 10 percent.According to Dollar 12 Regional integration is positively correlated with comparative advantage.With the integration of economies and the removal of trade barriers,countries
179、 are able to take advantage of their comparative advantages and specialize in producing goods and services that are most efficient for them.In turn,this leads to an increase in trade and economic growth.13 After independence,and especially after oil,gas,gold,and other minerals prices soared in the e
180、arly 2000s,Central Asias comparative advantage in traditional resource exports did not adversely affect export earnings(Brikman et al,2012;Romfret,2021).CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.14 and Kraay(2003),who applied the
181、Frankel and Romer measure of openness,doubled trade integration leads to an increase of 2.5 percent in GDP per person by the end of a decade.A subsequent study by Sakyi et al(2009)examined the trade-growth nexus for 115 developing countries over the period 1970-2009.According to their findings,trade
182、 openness is both a causal and a concomitant factor in determining income levels over the long term,suggesting trade openness has both causal and concomitant effects.Karras(2012)uses annual data collected between 1951 and 2007 from 62 developed and developing economies to demonstrate empirically tha
183、t fiscal policy effectiveness is in fact reduced by a countrys trade openness,and that the effects are quantitatively significant.The paper estimates that an increase in trade openness of 10 percent of GDP leads to a reduction of five to six percentage points in the magnitude of the long-run fiscal
184、multiplier.Trade openness favors countries with higher levels of inward FDI and gross fixed capital formation,as well as countries with higher levels of initial income per capita(Liargovas&Skandalis,2012;Adhikary,2011).Fetahi-Vehapi et al(2015)apply the generalized method of moments(GMM)to 16 years
185、of panel data from ten Southeast European countries over the period 1996-2012.Based on the estimation results,it appears that trade openness positively impacts economic growth in the context of initial income per capita and other explanatory variables,otherwise,robust evidence does not exist between
186、 these two variables.Using a GMM estimator,Huchet-Bourdon et al(2017)examined 169 countries between 1988 and 2014 and concluded that countries with a more outward-oriented orientation generally enjoy higher economic growth.Similarly,in his study of a panel of five emerging market economies covering
187、the period 1993-2016,Raghutla(2020)suggests that there is a significant contribution of trade openness to economic growth.However,the inappropriate use of technical issues in empirical research has been a topic of concern in the field of literature(Rodrik and Rodriguez,2000).Rodrik and Rodriguezs do
188、ubts are rooted in concerns about these studies inappropriate use of technical issues.As they point out,improper handling of technical issues can lead to biased or misleading results,which ultimately compromises the integrity of research.Various criticisms have been made of the measures of openness
189、used by Dollar(1992),and Sachs14&Warner(1995).Likewise,they have cast doubt on Edwards(1998)applied methodology,as well as Frankel and Romers(1998)instrumentation strategy.In conclusion,either inappropriate econometric techniques were utilized in the earlier studies,or the measures of openness used
190、in the earlier studies contributed to the positive relationship between trade openness and economic growth that was observed during 1990-2000.Later,however,Rodrik and Rodriguezs criticisms were dismissed by free trade advocates.According to Bhagwati and Srinivasan et al(2002)and Panagariya(2004),Sac
191、hs and Warners criticism is inconclusive following the analysis of Rodrik and Rodriguezs position.Based on cross-country growth regressions,they concluded that the evidence for the effectiveness of outward-oriented policies is not as weak as originally thought.14 Sachs and Warner(1995)provide furthe
192、r evidence of the positive trade-growth nexus by emphasizing that open developing economies have grown at a rate of 4.49 percent per year while open developed economies have grown at a rate of 2.29 percent per year.As a result,closed developing economies have experienced growth of 0.69 percent on av
193、erage and developed economies have experienced growth of 0.74 percent on average.CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.15 Yet despite this,some authors have argued that openness is not always a positive attribute(Winters,2004;
194、Babula&Aderson,2008;Kim,2011;Afzal&Hussain,2014)as the result of the loss of domestic industries,increased income inequality and dependency on foreign market.It is possible that a country will face increased competition from cheaper imports because of opening its borders to foreign trade.If domestic
195、 industries are unable to compete with foreign firms,they may suffer a decline or even extinction.It is also possible that trade openness will increase income inequality since some individuals and groups will benefit more from globalization than others.The wages of skilled workers may increase as ne
196、w technologies and work practices are adopted,while the wages of unskilled workers may decrease.In addition,the influx of cheap imports may result in lower prices for consumers,but it may also adversely affect domestic producers,which may result in job losses.A countrys exports could become dependen
197、t on foreign markets if its trade openness results in the concentration of its exports on a few key industries.An ambiguous effect of trade openness has been also found by Winters(2004),who concludes that trade openness increases economic growth at least over the medium term.While various issues exi
198、st,they are not insurmountable.A study by Chang et al(2005)found that increased openness is more likely to benefit economic growth if high levels of human capital investment,deeper markets,and infrastructure are available to support it.While Mendoza(2010)claims that trade openness and economic growt
199、h have a mixed track record,and the relationship between them is conditional.Later,Kim(2011)asserts that compared to countries with higher financial development,openness to trade has a negative effect on growth in countries with lower financial development.When a country experiences low inflation,tr
200、ade openness promotes economic growth;whereas,when a country experiences high inflation,it has little effect on economic growth.In a subsequent study,Kim and Suen(2012)claim that trade promotes economic growth in countries with high incomes,low inflation,and non-agricultural societies,but has a nega
201、tive impact in countries with the opposite characteristics.Additionally,Idris et al(2016)analyzed 87 OECD developing countries over the period 1977-2011 and concluded there is a causal relationship between trade openness and growth.On a further note,geographic separation between countries or regions
202、 plays a significant role in determining the nature and volume of trade flows(Huang,2007;Boisso&Ferrantino,1997).Trade integration and economic growth can be enhanced by proximity to major markets.However,the vast distances separating Central Asia from major economic centerssuch as Europe,China,Russ
203、ia,and South Asiapose challenges to regional integration.In addition to limiting the frequency and volume of trade flows,these distances also limit the countries of Central Asia from fully utilizing their comparative advantages and participating in global value chains.Cross-border trade is evidently
204、 affected by distance,according to empirical studies(Berthelon&Freund,2008;Hoffman,2002;Frankel,1997;Horrigan,1993;Krugman,1991).An increase in distance between trading partners tends to increase the cost of transportation in bilateral trade,thereby hindering the ability to gain beneficial results f
205、rom bilateral trade(Horrigan,1993;Krugman 1991).According to Frankel et al(1997),a 10 percent increase in the distance would have led to a 7 percent decrease in trade in the 1990s and a 4 percent decrease in trade in the 1960s.Additionally,estimates of the elasticity of trade to distance from the ea
206、rly 20th century are similar to those found today,which led Frankel(1997)to note that there has been no evidence of a decline in the distance coefficient over time in gravity estimates for more than a century.Later,in an investigation published by Blum and Goldfarb(2006),it was found that distance i
207、s a good proxy for taste and preference differences.According to the findings of the study,the perseverance effect in gravity regression can now be explained in a new way.Numerous products will still be CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Econom
208、ic Integration.16 affected by the distance effect in gravity even if transportation costs,search costs,and other types of trade barrier associated with distance are eliminated.Based on disaggregated bilateral trade data collected from 1985 to 2008,Berthelon and Freund(2008)found that for 776 SITC2 i
209、ndustries located in 100 countries,the elasticity of trade to distance has increased(in absolute terms)by about 10 percent from 1985 to 2008.Furthermore,they contend that the adjustment in the composition of trade had little effect,although distance became more important for 40 percent of industries
210、,with nearly all the remaining industries not showing any significant changes.Financial crises have a significant impact on trade,particularly for destinations that take longer to ship to(Berman et al,2013)and,during this crisis,geographic distance also played a role in explaining the pattern of adj
211、ustments in bilateral portfolio investment positions(Galtsyan&Lane,2013).It is important to note,however,that distance has a negative correlation with trade,but it does not function as the sole determinant of trade.Other factors influence trade patterns,including market size,comparative advantage,po
212、litical stability,trade policies,and technological advancements.A country with a larger economy,for example,may have a higher demand for goods and services,thereby compensating for the negative effects of distance on trade.In addition to these studies,it is noteworthy that trade distance is not the
213、only aspect of Central Asian trade growth to be considered.Connecting with international markets is a challenge for Central Asian landlocked countries15 owing to their heavy reliance on road,rail,and air transportation.Limao and Venables(2001)claim that trade costs are exaggerated by landlockedness,
214、which boosts trade costs by another 60 percent.Similarly,based on a limited sample of 46 countries,18 of which were landlocked,Roballand(2003)found that landlockedness reduced trade by more than 80 percent during the period 1995-1999.The results of Grigorious(2007)analysis of 167 countries,including
215、 CARs,indicate a modest increase in exports(imports)of 2.4 percent(3.1 percent)for CARs if the infrastructure was improved.As a result of improved infrastructure,the Central Asian transit countries would be able to increase their exports by 49 percent.Later,Carrre and Grigoriou(2011)assert that a la
216、ndlocked country is estimated to trade 28 percent less than a coastal nation based on a panel gravity model.As reported by the Asian Development Bank(2006),high transport costs and long and unpredictable transit times for international shipments to and from Central Asia present significant obstacles
217、 to trade.The CARs are landlocked and remote,and their topography is indeed challenging,but there is also a lack of transport infrastructure high costs and the inferior quality of the regions transportation and logistics services.Additionally,according to the ADB(2006),actual transport costs from Is
218、tanbul,Turkey to the CARs are two to three times higher than those in an ideal world,while actual transit times are 1.5 to two times longer.Similarly,a report released by the UN-OHRLLS16(2013)indicates that most post-Soviet states have transport costs that vary by up to 40 percent above those of a r
219、epresentative coastal economy.15 All five CARs do not have direct ocean access.Uzbekistan and Liechtenstein are the worlds only two double-landlocked countries(World Atlas,2023).Retrieved in July 2023.Available at:https:/ 16 United Nations Office of the High Representative for the Least Developed Co
220、untries,Landlocked Developing Countries and Small Island Developing States.CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.17 Traditional growth theories consider several factors in determining intraregional and extraregional trade.Base
221、d on the Heckscher-Ohlin model(Leamer 1995),the pattern of trade between two countries or regions may be explained by endowments of natural resources,factors of production,and skills.In this scenario,trade occurs without regard to geography or distance,in a world that is competitive and free of resi
222、stance.Even so,traditional theories are unable to fully explain the diverse characteristics of cross-border exports,particularly in light of recent globalization processes and political instability in Russia.To summarize,there is a strong correlation between trade and economic growth.In support of t
223、he idea that trade promotes economic growth by facilitating specialization,promoting innovation,expanding markets,and fostering competition,theoretical frameworks,historical evidence,and empirical studies all concur.As well as contributing to economic growth,trade also contributes to the reduction o
224、f poverty,the creation of jobs,and the improvement of living standards in general.Geographic distance,economic distance,and landlocked status all play a role in influencing trade growth.Geographic distance increases transportation costs and time,while economic distance can facilitate or hinder trade
225、 depending on the complementarity of economic structures.Landlocked countries face additional challenges because they lack direct access to international markets and must rely more heavily on transit routes.It is common for landlocked countries to seek partnerships and agreements with neighboring co
226、untries to improve transit routes and trade facilitation.A customs union or free trade agreement can also enhance the trade connectivity of a landlocked country and reduce the costs associated with trade.In summary,globalization is leading to the integration of countries and regional cooperation gro
227、ups are actively working to establish regional integration platforms around the world.However,it is concerning that CARs do not appear to be willing to move in this direction and even wish to maintain a degree of relative isolation from their immediate neighbors(Rahimov,2018;Tadjbakhsh,2012).Despite
228、 many similarities in economics,politics,history,culture,and other aspects,the CARs have chosen to integrate their economies into the global market at the expense of intraregional integration.Exports from Central Asia are dominated by China,Russia,and the EU.17 Owing to closer interactions with exte
229、rnal markets and the lack of proactive intraregional integration initiatives,and such patterns of trade and economic relations between regional partners,regional cooperation remains largely untapped even though such an approach violates economic laws.Although intraregional trade between CARs is very
230、 slow,there is a wide range of involvement.Following the end of the resource boom,Central Asian governments have recognized the need to diversify their economies.The development of new export-oriented activities is enabled by improved infrastructure,including overland trade across Eurasia.The ease o
231、f doing business and facilitation of cross-border trade will be essential for Central Asian countries looking to expand non-traditional exports through better connectivity.The region does not seem to be concerned about whether or when it will integrate and develop regionally.Besides being a transit
232、hub,Central Asia possesses a considerable amount of exploitable natural and human resources.It is crucial for Central Asian infrastructure development to have Russian and Chinese capital,which serves both their own interests and those of the Central Asian 17 CARs trade with each others accounts for
233、just 10 percent of their total trade,while most of their trade goes to China,the European Union,and Russia.These three partners account for two thirds of CAR imports and 57 percent of their exports(International Trade Centre,2023).CAREC Institute.Visiting Fellow Program 2023.An Overview of Central A
234、sian Trade Growth and Economic Integration.18 nations.CAREC and international financial organizations play a crucial role in promoting economic development and cooperation in Central Asia and improving the quality of life for millions of people.3.General state of CARs trade and partnerships Owing to
235、 its geographic location and natural resource endowments,Central Asia is a diverse region with a mixture of upper-,middle-and low-income countries(World Bank,2022).However,CARs have more in common than geography;they share a similar heritage,as well as a similar vision of the future.The evidence of
236、this can be found in a range of aspects,including history,culture,language,religion,and economic cooperation.Following the dissolution of the Soviet Union in 1991,CARs celebrated 30 years of independence in 2021.Compared to other regions,CARs are the most remote republics of the Soviet Union;they re
237、ceive less attention from the outside world than the rest.Furthermore,the fact that Central Asia is a landlocked region,as well as the history of the regionwhich includes seven decades of communist ruleand the central planning that dominated the region,make it an interesting area for scholars to stu
238、dy.In the decades following independence,all CARs have developed a multivector extraregional policy that involves maintaining a balance between their relations with their major external partners,namely Russia,China,and Western countries.In Central Asia,market integration does not promote regional co
239、operation because of low levels of regional economic interdependence.There is a similarity in the export of CARs,and they are closely related to each other;the regions compete rather than complement one another(Wang,2014).According to the UNCTAD(2021),68 percent of all European exports were to tradi
240、ng partners on the same continent,while Eurostat(2022)reports that exports of goods to partners in the EU were more than 200 billion euros in 2020,accounting for 73 percent of the total value of intra-EU exports of goods.According to the World Bank(2022),the ASEAN18 region has a rate of 25 percent,w
241、hereas the rate for CARs is 9 percent(IMF,2022;ADB,2022)(see Figure 1).A higher share indicates a greater degree of integration between partner countries/regions and a bigger number of SMEs can trade across borders(ADB,2022).A survey of the CARs in Figure 1 indicates that intraregional trade shares
242、range from 4.6 percent to 9.1 percent.Intraregional trade shares have increased from 5.4 percent to 9.1 percent over the past few decades.The export and import share do not exceed 10 percent.The level of trade intensity decreased from 20.1 percent in 2005 to 8.1 percent in 2010 and slightly increase
243、d during recent years to reach 17.3 percent.The trade share of CARs varies between 10 percent and 27 percent(see Figure 2).Figure 2 indicates that Tajikistan and the Kyrgyz Republic trade primarily with Kazakhstan and slightly with Uzbekistan among CARs.Tajikistans trade share with Kazakhstan is 20.
244、28 percent and its trade share with Uzbekistan is 7.80 percent,while the Kyrgyz Republics trade share with Kazakhstan is 14.65 percent and its trade share with Uzbekistan is 6.78 percent.During the same period,Uzbekistans trade share with Kazakhstan was 9.83 percent,while its trade share with the re
245、maining CARs was 1.13 percent to 2.45 percent,respectively.18 Association of Southeast Asian Nations.CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.19 Figure 1.CARs intraregional trade share,export share,import share,and intraregional
246、trade intensity index in percentage,during 2005-2021 Source:Author calculation using IMF Direction of Trade Statistics,2022;ADB,2022.Turkmenistan also has a relatively small share of trade with the CARs,ranging from 0.27 percent to 9.61 percent,of which Uzbekistan owns a majority of Turkmenistans tr
247、ade share.In contrast,Kazakhstans trade share with CARs varies from 0.37 percent to 4.21 percent,respectively.Between 2005 and 2022,the total trade turnover among CARs reached USD20.16 billion(ADB,2022),an increase of 2.2 times or 228.06 percent.054200620082000222024
248、Export Share(%)Import Share(%)Intra-Regional Trade Share(%)Intra-Regional Trade Intensity Index CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.20 Figure 2.Intraregional trade share of CARs in percentage,2005-2022 Source:Author calculat
249、ion using IMF Direction of Trade Statistics,2022;ADB,2022.Note:KAZ-Kazakhstan,KGZ-Kyrgyz Republic,TAJ-Tajikistan,TKM-Turkmenistan,UZB-Uzbekistan The low share of intraregional trade in the Central Asian region can be attributed to various factors such as limited transportation infrastructure,politic
250、al tensions,and a heavy reliance on natural resources.The CAREC program,however,is crucial to addressing these challenges by strengthening intraregional trade and contributing to the economic development of Central Asian economies through investments in infrastructure and trade facilitation efforts.
251、To measure the strength of economic cooperation among member countries,the CAREC Institute developed the CAREC Regional Integration Index(CRII).Based on the CRII,regional integration is measured across the six integration components:trade;investment;financial;transportation and communications;energy
252、;and human 00520025KAZKGZTAJTKMUZB0500520025KGZKAZTAJTKMUZB000520025TAJKAZKGZTKMUZB02462000200520025TKMKAZKGZTAJUZB05520025UZBKAZKGZTAJTKM CAREC Institute.Visiting Fellow Program 2023.An Overview of Ce
253、ntral Asian Trade Growth and Economic Integration.21 development.According to the CRII,19 regional integration averaged 0.344 for the period 2006-2019,a marginal increase from 0.337 for the period 2006-2016(CAREC Regional Index,2021).For all CAREC countries,Kazakhstan achieved a CRII score of 0.444,
254、the Kyrgyz Republic(0.408),Tajikistan(0.369),Turkmenistan(0.400),and Uzbekistan(0.3661).Ahmed and Javid(2022)argue that Kazakhstan,the Kyrgyz Republic,Tajikistan,Uzbekistan,and Pakistan are relatively more integrated than the rest of the CAREC region.Furthermore CRII(2021)reports that the average sc
255、ore in trade and investment in the CAREC region increased slightly over the period 2006-2019.There is generally a lower integration score when China is included in the trade and investment component.This is because Chinas participation in trade and investment with other CAREC countries is substantia
256、l and growing;however,Chinas trade and investment relations with other regions of the world,which are larger and more economically advanced,are still more important.A number of CAREC countries have experienced an increase in regional value chains owing to improved trade complementarity.As a result o
257、f high complementarity,exporters can meet the import profile of their partner countries with ease.The CRII measure of trade complementarity measures imports and exports as a percentage,with 0 indicating no overlap and 100 indicating an exact match(see Table 1).Table 1.CARs bilateral trade complement
258、arity indices Source:Regional Trade Dynamics and Selected Indicators in the CAREC region(CAREC,2019);Ahmed&Javed,2022.Note:KAZ-Kazakhstan,KRG-Kyrgyz Republic,TAJ-Tajikistan,TKM-Turkmenistan,UZB-Uzbekistan Table 1 indicates that the Kyrgyz Republic has the highest trade complementarity with the CARs
259、and Turkmenistan has the lowest.Likewise,the CARs engage in a diverse range of foreign trade.Through comparative advantage,openness encourages a more efficient allocation of resources.In 2022,the average trade openness(exports+imports over GDP)among the CARs was 56.3 percent(see Figure 3).The Kyrgyz
260、 Republic has the highest average trade openness at 88.9,followed by Tajikistan at 71.35,Kazakhstan at 59.54,Uzbekistan at 52.57,and Turkmenistan at 27.60.19 The CRII ranges from 0 to 1,with 0 representing the lowest integration and 1 the highest.KAZ KRG TAJ TKM UZB KAZ 0.35 0.11 0.09 0.12 KGZ 0.15
261、0.10 0.09 0.11 TAJ 0.19 0.31 0.11 0.15 TKM 0.11 0.29 0.08 0.08 UZB 0.19 0.29 0.12 0.09 Average 0.16 0.31 0.10 0.09 0.11 CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.22 Figure 3.CARs,trade openness(total trade as a percentage of GDP),
262、2005-2021 Source:Author calculations using International Monetary Fund(IMF)World Economic Outlook(WEO)October 2022 Database and IMF Direction of Trade Statistics(DOTS)December 2022 Database The World Bank(2016b)reports that some CARs are more open,while some are relatively low.Mazhikeyev et al(2015)
263、divided CARs into more open(Kazakhstan,the Kyrgyz Republic)and more isolationist(Tajikistan,Turkmenistan,and Uzbekistan)depending on their trade-to-GDP ratio;however,data provided by IMF indicate that the Kyrgyz Republic and Tajikistan have a more open economy,a more open trade policy,more open inve
264、stment regulations,and a more open business environment than Kazakhstan,Uzbekistan,and Turkmenistan.As such,it is important to keep in mind that each country faces unique challenges and circumstances that have an impact on its degree of openness.It is also consistent with the ranking found in the 20
265、20 World Banks Ease of Doing Business report.The highest-ranking CAR is Kazakhstan(25th out of 190 countries),followed by Uzbekistan(69),the Kyrgyz Republic(80),and Tajikistan20(106).Turkmenistan is unranked.It may be that this demonstrates the close relationship between trade openness and overall e
266、conomic and political reforms.CARs are increasingly transforming their foreign economic policies into open door policies as they transform their economies.There is a growing trend among foreign investors to invest in the countries of the region.Considering the abundance of natural resources in CARs,
267、as well as the presence of large populations,several studies have been conducted(Kenisarin&Andrews-Speed,2008;Paswan,2013;Metaxas&Kechagia,2016).According to economists,foreign direct investment 20 The World Banks Doing Business report(2020)identifies the ten economies that have improved the most in
268、 their level of ease of doing business as a result of regulatory reforms.Doing Business 2020 identifies Saudi Arabia,Jordan,Togo,Bahrain,Tajikistan,Pakistan,Kuwait,China,India,and Nigeria as the ten leading countries that have improved their business climate.The 59 regulatory reforms implemented by
269、these economies accounted for one-fifth of all global reforms in 2018/19.In addition to starting a business and obtaining construction permits,they also focused on cross-border trade.02040608004200620082000222024KazakhstanKyrgyz RepublicTajikistanTurkmenistanUzbekist
270、an CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.23 has a statistically significant impact on the progress and development of both developing and transition economies(Acaravci&Ozturk,2012;Mehic et al,2013).Since the beginning of the n
271、ew millennium,macroeconomic stability in the Central Asian region has been achieved and maintained,living standards have been raised,employment and education opportunities have improved,and economic growth has been enhanced(Roaf et al,2014).A study conducted by Ashurov et al(2020)examined the determ
272、inants of FDI in CARs over the period 2000-2017 and found that FDI and economic growth in CARs are positively correlated.Furthermore,the authors suggest that Central Asia should improve its economic growth,labor force,trade openness,and tax regulations to attract more FDI.Net FDI inflows into CARs t
273、otaled USD9.8 billion in 2020 and USD8.5 billion in 2021(World Development Indicator,2022).Owing to recent geopolitical tensions between neighboring countries(Russia),FDI in the region has decreased by 12.45 percent over the past two years.Kazakhstan has been identified as the main destination for F
274、DI attraction21 for 53 percent of the total net FDI inward to CARs,followed by Turkmenistan at 26 percent,Uzbekistan at 17 percent,Tajikistan at 3 percent,and the Kyrgyz Republic at 1 percent.The main sources of FDI by region are Europe,AsiaPacificparticularly Chinaand Russia.Europe also plays an im
275、portant role as a major investor in Central Asia,along with China and Russia.An Enhanced Partnership and Cooperation Agreement(EPCA)was signed between Kazakhstan and the EU in March 2020,which has contributed to the growth of bilateral trade(The Astana Times,July 2022)and FDI inflow.It was Russia an
276、d Turkey that made the largest investments in 2019,although this changed after 2020 when Chinese investments became more prominent in the Central Asian region.Source:Author calculation based on the UNCTAD and IMF databases,Balance of Payment database(2022)21 The abundance of natural resources,the st
277、rategic location,the stable political environment,the favorable investment climate,and the governments proactive policies all contribute to Kazakhstans attractiveness for foreign direct investment.Moreover,foreign investors are attracted to countries with significant oil and gas reserves,such as Kaz
278、akhstan and Turkmenistan.-2E-09246802004200620082000222024BillionsFigure 4:CARs FDI,Net Inflows(Bop.Current US$),2005-2022KazakhstanKyrgyz RepublicTajikistanTurkmenistanUzbekistan CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth
279、and Economic Integration.24 Chinese investors are becoming increasingly influential in the region.The Chinese government aimed to create a multimodal transportation network connecting China with Europe and other parts of Asia,reducing transportation costs,and increasing trade volumes.Essentially,Chi
280、na built its first links to the Central Asian economies decades ago and the Belt and Road Initiative(BRI)is a new,more advanced phase of the cooperation.Global trade within the BRI takes place primarily by sea,while rail is the second most important mode of international transport.CARs serve as a ma
281、jor corridor between China and Europe.Two of the six BRI corridors pass through the region,connecting China to Europe,Iran,and West Asia,respectively.According to the China Global Investment Tracker of the American Enterprise Institute(November 2021),the total volume of China to CARs from 2005 to 20
282、20 amounted to USD50 billion,of which USD35.58 billion went to Kazakhstan,USD4.73 billion to the Kyrgyz Republic,USD2.15 billion to Tajikistan,and USD5.79 billion to Uzbekistan.In addition,the third of six BRI corridors22 has been implemented in the Central Asian region,each with its own set of trad
283、e and investment opportunities.Silk Road Briefing(May 2023)reports that Chinas trade with the five CARs increased to USD70.2 billion in 2022 from USD0.46 billion in 1992 when China established diplomatic ties with the five CARs after the disintegration of the Soviet Union.Among the sectors in which
284、these investments are made are infrastructure,energy,mining,agriculture,manufacturing,and telecommunications.Chinese investment in CARs varies in terms of its extent and nature.Owing to their strategic location,natural resources,and favorable investment climate,some countriessuch as Kazakhstanhave a
285、ttracted more Chinese investment.The comparatively smaller economies of the Kyrgyz Republic and Tajikistan,however,have received a significant amount of Chinese investment in sectors such as infrastructure and energy.There is a high dependence on trade with China for the five CARs,with approximately
286、 14 percent to 36 percent of trade share,respectively(see Figure 5).Figure 5 indicates that Turkmenistan has the highest average trade share with China 36.4 percent,following Uzbekistan 21.8 percent,the Kyrgyz Republic 18.33 percent,Kazakhstan,and Tajikistan 14.1 percent and 14.3 percent,respectivel
287、y.A 52.3 percent share of Chinas trade with Turkmenistan was recorded in 2021,21.12 percent with the Kyrgyz Republic,17.4 percent and 17.6 percent with Kazakhstan,and Uzbekistan,and 14.38 percent with Tajikistan.22 The ChinaCentral AsiaWest Asia Corridor.This route connects Western China to Turkey.T
288、his economic corridor improves connectivity between China,Kazakhstan,the Kyrgyz Republic,Uzbekistan,Tajikistan,Turkmenistan,Iran,and Turkey by connecting railway networks from China to the Mediterranean Sea.Furthermore,to invest in rail,China is building roads and other infrastructure projects that
289、have the potential to transform the economies of Central Asia,which currently have limited trade relations.CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.25 Sources:Author calculation based on the IMF Directions of Trade Statistics,202
290、2 Along with China,the CARs maintain strong bilateral relations with the EU,and the EU has significant stakes in Central Asia.A good understanding of the general patterns of international trade between CARs and the EU exists.Among Central Asian export destinations and import sources in 2000,the EU r
291、anked second after Russia in terms of exports and third in terms of imports.The EU,however,holds the position as Central Asias largest export market in part because products such as cotton or oil are traded on European exchanges or sold to companies in the EU,regardless of where they ultimately go(P
292、omfret,2022).Owing primarily to the resource boom,Central Asian exports to the EU increased even further in 2010.Exports from the EU to Central Asia increased over the decade 2000-2010,but their share decreased,primarily owing to the rapid growth of Chinese exports and the ongoing tension between Ru
293、ssia and Ukraine.Mineral fuels constitute the majority of Central Asias exports to the EU.Approximately 41 percent of mineral fuel exports were exported in 2001,and this percentage will increase to 90 percent by 2020.This resulted in a reduction in the diversity of the export structure,which puts th
294、e countries of Central Asia at higher risk owing to ongoing tension between Russia and the Ukraine.The major route for Kazakh oil to reach the EU is through Russian territory,primarily through the Caspian Pipeline Consortium.23 From 2000 to 2021,Kazakhstans oil imports to the EU increased by nearly
295、900 percent.In recent years,Kazakhstan has emerged as the EUs third-largest oil supplier after Russia and Norway.23 Approximately 1 percent of the worlds oil supply is transported through the Caspian Pipeline Consortium pipeline,and 80 percent of Kazakhstans oil exports are handled by this pipeline(
296、and Ron,2022).0070200420062008200022Figure 5.CARs Trade Share(%)with China,2005-2021KazakhstanKyrgyzstanTajikistanTurkmenistanUzbekistan CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.26 Sources:Author
297、calculation based on the IMF Directions of Trade Statistics,2022 In addition to gathering crude oil from large fields located in West Kazakhstan,the Caspian Pipeline Consortium system also transports crude oil from Russian producers to the port of Novorossiysk for offshore processing.As a result of
298、this system,Kazakhstani oil is exported primarily through this route.There was a decrease of 3.3 percent in the amount of oil transported by the CPC in 2022 as compared to 2021,with 58.7 million tons(Kursiv Media Kazakhstan,2023).Figure 6 indicates that Kazakhstan has the highest average trade share
299、 with the EU,which is 31.9 percent,following Uzbekistan at 10.9 percent,Turkmenistan at 10.2 percent,Tajikistan at 9.2 percent,and the Kyrgyz Republic at 5.9 percent.However,the volume of trade between the CARs for which the EU is the primary partner has decreased by 26.8 percent since 2019 owing to
300、 the Western sanctions against Russia(see Figure 6).Sanctions imposed on Russia may pressure the EU to change its behavior,but these may have unintended consequences for the EUs trade with Central Asia,which may prevent them from engaging with and supporting the economic development and stability of
301、 the region.These consequences include trade disruptions,energy dependence,geopolitical shifts,transportation route disruptions,economic interdependence,and political considerations.Energy imports from Russia,particularly natural gas,are a major component of the economies of many CARs.As a result of
302、 sanctions imposed on Russia,CARs could suffer significant economic consequences owing to disruptions in their energy supply.Over 40 percent of the EUs gas consumption,27 percent of its oil consumption,and 46 percent of its coal consumption were imported from Russia in 2021(European Commission,20 Ap
303、ril 2022).In addition,Russia is the EUs largest trading partner in terms of energy products,with the EU being a major destination for Russian exports.Overall,a number of factors have contributed to the destabilization of Central Asian economies as a result of the Western sanctions imposed on Russia.
304、This economic challenge has been caused by a number of factors,including disruptions in trade flows,a decline in investment,and complications in the cooperation in the energy sector.Furthermore,the sanctions have restricted Russias access to Western technology and financing,which has indirectly affe
305、cted Russian investments and expertise in Central Asian energy projects.It also should be noted that a significant portion of Central Asian exports to Europe is transported through Russia.As a result of sanctions 0554045200420062008200022Figure 6.CARs Trade Share(%)w
306、ith EU,2005-2021KazakhstanKyrgyz RepublicTajikistanTurkmenistanUzbekistan CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.27 against Russia,Central Asian exporters may experience delays and increased costs because of disruptions to thes
307、e transportation routes.The result is a possible decrease in the competitiveness of their products in the EU market.Considering the medium-term effects of sanctions against Russia,the global cost-of-living crisis,and Chinas economic slowdown,Central Asia is likely to suffer major economic consequenc
308、es.Consumer spending will be reduced,and economic growth will be slowed owing to the rising costs of food,energy,and other essential goods.This will pose a particular challenge to countries such as the Kyrgyz Republic,Tajikistan,and Uzbekistan,which rely heavily on remittances from migrant workers t
309、o maintain their economic stability.It is important to note that,despite the robust trade channel so far across the region,Central Asias close ties with Russia make it vulnerable to political and supply risks.The rise in uncertainty may lead to a reduction in investment attractiveness and remittance
310、 inflow,while the development of the financial markets may adversely affect public finance sustainability.It is worthy to note that,as a result of their economic dependence,CARs can be categorized into two main categories:firstly,countries that export both oil and gas(Kazakhstan and Turkmenistan)and
311、,secondly,countries that are heavily dependent on migrant remittances,FDI and official development assistance(Kyrgyz Republic,Tajikistan,Uzbekistan).24 CARs,however,are highly dependent on the performance of the Russian economy through trade relations and remittance channels.A trade balance was prev
312、iously associated with Russian trade with the region.As a result of increased exports from the Kyrgyz Republic,Turkmenistan,and Uzbekistan,the surplus in Russias trade with these countries declined in 2019 compared with 2015(see Figure 7).Sources:Author calculation based on the IMF Directions of Tra
313、de Statistics,2022 Figure 7 indicates that,in 2021,Kazakhstan and Russias trade share increased by 23 percent.Mami and Kenzheali(2022)assert that,despite the war between Russia and Ukraine,a total of USD65.8 billion in exports from Kazakhstan were recorded between January and September 2022,an incre
314、ase of 47.5 percent over the same period in 2021.Rather than a significant increase in export volume,this was largely explained by an increase in commodity prices.Over the first nine months of 2022,24 See Abduvaliev&Bustillo(2020).0554045200420062008200022Figure 7.CA
315、Rs Trade Share(%)with Russia,2005-2021KazakhstanKyrgyz RepublicTajikistanTurkmenistanUzbekistan CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Trade Growth and Economic Integration.28 Kazakhstans exports to Russia increased by 16 percent,reaching USD5.9 billion,while impor
316、ts increased only marginally to USD12.4 billion.There was a significant increase in the Kyrgyz Republics bilateral trade with Russia by 32.5 percent.Exports from the Kyrgyz Republic increased by 2.4 times.In the past five years,Uzbekistan and Russias bilateral trade has grown by 18.5 percent,with ex
317、ports to Russia rising by 39 percent.Tajikistans trade share with Russia remained at 23.3 percent while Turkmenistan25 and Russia held a 6 percent share.Russias economic influence on the Kyrgyz Republic,Tajikistan,and Uzbekistan is largely attributed to large flows of labor migrants into the country
318、.Remittances,for example,were equivalent to or even greater than the countries exports of goods and services in the Kyrgyz Republic and Tajikistan in 2020;in 2022,remittances in the Kyrgyz Republic,Tajikistan,and Uzbekistan represented respectively 46 percent,31 percent,and 10 percent of their GDP i
319、n 2022(World Bank,2022).Ratha and Kim(2022)assert that a decline in economic activity in Russia,coupled with a weakening of the ruble against the dollar,will lead to sharp declines in remittance flows to Tajikistan,Uzbekistan,and the Kyrgyz Republic in 2022.However,despite the weak economic activity
320、 of Russia and the ongoing war between Russia and Ukraine,the real scenario contradicted Ratha and Kims prediction as the volume of inward remittances in the Kyrgyz Republic remained at 31 percent.Tajikistan,on the other hand,experienced an increase of 46 percent in remittances inflows,while Uzbekis
321、tan experienced a drastic increase of 53 percent(see Figure 8).Source:Author calculation based on the data of the World Development Indicator,2023 Note:Personal remittances comprise personal transfers and compensation of employees and include all current transfers between resident and nonresident in
322、dividuals.25 According to Mikhail Mishustin,the Russian Prime Minister,Turkmenistan and Russia increased mutual deliveries by 32.7 percent.In general,these statistics indicate that trade with Russia has increased with a rebound in COVID-19 but also the substitution of European suppliers on the Russi
323、an market owing to buoyant trade growth(Silk Road Briefing,2023).055404550200620082000222024Figure 8.CARs personal remittances,received(%of GDP),2007-2022Kyrgyz RepublicTajikistanUzbekistan CAREC Institute.Visiting Fellow Program 2023.An Overview of Central Asian Tra
324、de Growth and Economic Integration.29 Even though Uzbekistans remittances to GDP are lower than those of Tajikistan and the Kyrgyz Republic,Uzbekistans remittances inflows in current dollars are 4.4 times higher than those of the Kyrgyz Republic and 2.1 times higher than those of Tajikistan.A total
325、of USD3.05 billion of remittances was received by the Kyrgyz Republic in 2022,followed by USD5.3 billion by Tajikistan,and USD16.7 billion by Uzbekistan.However,in this paper,we do not intend to test Ratha and Kims findings,but rather to examine the extent to which Russian economic performance has a
326、 significant impact on the economies of neighboring CARs along with China and the EU.Considering that CARs have adopted a multivector external trade policy,they should maintain a balance between Russia,the EU,and China,since these partners have significant stakes in Central Asia.Chinese and Russian
327、policymakers are placing a greater emphasis on cooperation in Central Asia rather than competition for mutual benefit.These two main CARs partners have split their responsibilities in the region,with Russia focusing on security,trade,and migration,while China is mostly responsible for economic devel
328、opment,particularly through infrastructure investment and trade relations.The economic future of Central Asia lies primarily within its own neighborhood,and Sino-Russian cooperation is in the interests of these republics.Cooperation with the EU is one of the most important strategic directions for C
329、ARs in the years to come.As a result of intensifying their trade relations with EU countries,it will be possible to increase trade with them and attract investments.There are a variety of factors that contribute to the importance of the EU,including the size of the market,the level of income,the sta
330、ndards,the level of competition,and the rules of trade.As a result of the CARs decreased diversification of its exports,it remains a major source of fossil fuels,however,despite its diminished export diversification.Developing a mature economy and researching the EU market are two crucial steps for
331、the region to identify prospects for its producers.Additionally,there is also the possibility that CARs can intensify and diversify their trade through the implementation of institutional reforms.The successful implementation of economic and institutional reforms is necessary to penetrate the Europe
332、an market.While China,Russia,and the EU are highly important trading partners for Central Asia,intraregional trade between CARs has remained relatively low.To conclude,Central Asian trade relations with China,Russia,and the European Union have evolved over time.The BRI and Chinas energy requirements
333、 have driven Chinas engagement in the region.Historically,Russia has been an important trading partner because of its geographic proximity and historical ties.The EUs commitment to economic development and stability has resulted in an increase in trade cooperation.All three partners play an important role in shaping Central Asias trade landscape,despite their unique dynamics.4.Model specification