Economic freedom remains poor

Economic freedom remains a serious challenge among the five landlocked Central Asian countries of Uzbekistan, Kazakhstan, Kyrgyzstan, Turkmenistan and Tajikistan, following the collapse of the former Soviet Union in 1991, according to a new report.

"A legacy of interventionist policies lingers in many countries in Central Asia," Anthony Kim, a research assistant at the Center for International Trade and Economics (CITE) at the Washington-based Heritage Foundation told IRIN. "Burdened with a high cost of government, many bureaucratic hurdles to investment, and an ineffective financial sector, countries in the region have not been able to swiftly catch the momentum of solid economic growth."

Kim's comments follow a report earlier this month by the same group, which, in collaboration with the Wall Street Journal, ranked the level of economic freedom in 155 countries worldwide. As part of the 2004 Index of Economic Freedom, the 10th annual country-by-country report, documented those with the best scores enjoyed higher standards of living and higher per capita incomes.

Rankings were compiled by measuring trade policy, fiscal burden of government, government intervention in the economy, monetary policy, capital flows and foreign investment, banking and finance, wages and prices, property rights, and the regulation of informal (or black) market activity of the respective nations.

But Central Asia, a region of almost 60 million inhabitants, which continues to struggle to find its way since gaining independence 13 years ago, has a long way to go. According to the Heritage report, North Korea and Libya ranked the worst at 155 and 154 respectively. However, among the top 10 worst offenders were also Turkmenistan (150), Uzbekistan (149), and Tajikistan (145), with Kazakhstan not far behind at 133. (Kyrgyzstan was not ranked in the report)

"Former Soviet States in Central Asia such as Tajikistan, Turkmenistan, and Uzbekistan face tough challenges to achieving greater economic freedom. In most of these economies, the public sector still dominates much of economic activity and the banking system remains under heavy state control," Kim explained.

And while many leaders in the region had laid out articulate and ambitious plans for change, actual progress has yet to be realised towards opening up their economies and improving economic freedom. "There are many people in the region who know what they have to do, but they seem to have not formed strong political will to take real actions," he maintained.

Filip Noubel, of the International Crisis Group (ICG), a Brussels-based think tank group, was more frank, citing lack of political will along with corruption as the main impediments to economic freedom.

According to the former regional analyst, Central Asia was one economic region before 1991, but borders stopped natural economic ties and most countries, purposely closed borders, imposed taxes and impossible regulations. This was primarily due to corruption and political ambitions - noting Uzbekistan, Kazakhstan and Turkmenistan.

Citing Uzbekistan, the region's most populous nation, as a potentially rich nation, he noted that most of the country's 26 million inhabitants lived in poverty. Moreover, the whole Uzbek part of the Ferghana valley could be thriving if private land ownership and the convertibility of the local currency (Som) were legalized. Local bazaars being closed to force goods through shops thus extending control of an elite few, was also an issue, he explained.

"If you cross the border into Kyrgyzstan, you have the exact opposite picture," he told IRIN from the Nepalese capital Katmandu, noting while the mountainous nation of 5 million was far from rich, the inhabitants had a better life and actually hired seasonal workers from Uzbekistan.

Just last summer, Tashkent declared a "quarantine" to close all borders with its neighbours to prevent cross-border trade, he said, adding: "This ruined entire families of small traders in Uzbekistan. In many cases people committed suicide, even in public."

Kim singled out Uzbekistan and its energy-rich neighbour Turkmenistan as two of the most economically repressed countries in the world, noting the governments in both nations still commanded most economic activities, burdening their economies with heavy regulations. Additionally, lack of effective enforcement of property rights had eroded economic freedom in both countries, he added.

Asked what needed to be done, he maintained key efforts should be made in the governments' commitment to open trade policies, transparent regulatory framework, low tax rates, sound monetary policies, and strong maintenance of the rule of law. "It is the persistent maintenance of these combined institutional factors that enhances economic freedom and spurs economic prosperity," the researcher maintained.

As for the international community, he said: "Simply giving out aid to countries with misdirected policies and weak rule of law increases the recipients' debt without visible economic growth. [The] international community can do much better by encouraging countries to embrace more economic freedom and working to eliminate trade barriers. Removing barriers to trade is one of the most important actions that [the] international community can take to aid development in poor nations and should be pursued in all possible ways."

Meanwhile, Noubel placed his hope for change on the ability of small and medium sized business to develop in at least close-to-fair and transparent conditions. "Central Asian people have a historical tradition of small business and do not lack the skills or incentive - what they lack is freedom and protection from the state to do this."

[For a complete ranking of all 155 countries in the Heritage report see: www.heritage.org]


This article was produced by IRIN News while it was part of the United Nations Office for the Coordination of Humanitarian Affairs. Please send queries on copyright or liability to the UN. For more information: https://shop.un.org/rights-permissions

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