Central Asian Economies Research Articles

Does regional energy consumption disparities assist to control environmental degradation in OBOR: an entropy approach.

China launched the One Belt & One Road (OBOR) initiative to minimize the energy resource shortage. The China's nearby countries are rich in energy resources especially Middle East and North Africa (MENA) and Asian countries which make them ideal locations to cooperate with China in terms of energy resources, as 42.8% of world energy consumption belongs to OBOR countries. The present study elaborates the spatial distribution pattern of energy consumption disparities and its impact on environment. To do this, an entropy approach is utilized to compute the energy consumption inequalities in OBOR and its regions. The spatial and Pareto analysis show that MENA, East, and Southeast Asian economies have the highest degree of energy consumption inequalities, while European and Central Asian economies show the lowest energy consumption inequalities in OBOR region. The long-run estimates indicate that energy consumption inequalities enhance the CO2 emission in OBOR and its region except South and Southeast Asia. Financial development also has a significantly positive impact on CO2 emission in all models for OBOR and its regions except East Asia. Based on findings, the spatial distribution analysis is applicable to maintain balance in regional energy consumption inequality within OBOR and its regions.

Evidence of the Environmental Kuznets Curve: Unleashing the Opportunity of Industry 4.0 in Emerging Economies

This study aims to investigate the relationship of economic development, measured as economic growth, energy use, trade and foreign direct investment, on the one hand, and environmental degradation (carbon dioxide (hereafter CO2) emissions), on the other hand, in eleven emerging Eastern European and Central Asian countries during the period of 1990 to 2014. The empirical results give an evidence of a carbon emission Kuznets curve for these emerging economies. The current income level indicates that not every country has reached the turning point for CO2 emissions reductions. Income elasticities for CO2 are positive for all eleven countries. The paper concludes that within the group, Ukraine and Kazakhstan have the most sensitive change in economic growth in respect to CO2. In addition, it concludes that there is a negative effect of total energy consumption on environment as such consumption increases CO2 emissions. The results also show a positive effect of foreign direct investment (FDI) on CO2 emissions in Eastern European and Central Asian countries. It is expected that the innovative transition to a low-carbon economy offers great opportunities for economic growth and job creation. Technological leadership (the initiative Industry 4.0) should be accompanied by the development and introduction of new technologies throughout Eastern European and Central Asian countries, hence, the paradigm of “sustainable development” should be considered as fatal. Furthermore, Eastern European and Central Asian economies should consider the experience of policy making implications made by other developing countries in gaining sustainable growth. Econometric analyses prove the existence of different impact on energy consumption of the ICT sector, which plays a key supporting role for intelligent manufacturing. Thus, there is a need for further investigations of the relationship between technology use and CO2 emissions.

Earnings management, audit quality, and cost of debt: evidence from a Central Asian economy

PurposeThis study aims to examine the effects of earnings management and audit quality on cost of debt of listed companies in Kazakhstan. The study also investigates the effects of audit quality on earnings management and whether the relationship between earnings management and cost of debt is affected by audit quality in the context of a given emerging economy.Design/methodology/approachThe study sample consists of public companies listed in the Kazakhstan Stock Exchange (KASE) from 2011 to 2016, and all data were obtained from audited financial statements and annual reports downloaded from the webpage of KASE. The study uses the cross-sectional ordinary least squares technique to test the impact of audit quality and earnings management on cost of debt.FindingsThe collected empirical evidence shows that earnings management is negatively related to cost of debt. The findings also indicate that higher audit quality leads to a lower cost of debt. However, the results suggest that audit quality has no impact on earnings management and that the effect of earnings management on cost of debt is not different for the companies audited by the Big Four and for the companies audited by other audit firms.Practical implicationsThe findings of the study can be of interest to policy-makers, regulators, investors and practitioners in emerging markets with an institutional environment similar to that of Kazakhstan.Originality/valueThe study throws more light on the impact of earnings management and audit quality on cost of debt in Kazakhstan, representing the Central Asian region. This study also extends the current literature by providing empirical evidence that the relationship between earnings management and cost of debt is not affected by audit quality.

The history of Samarkand branch of the Azov-Don commercial bank

The article deals with the basic activity and functions of the Samarkand branch of the Azov-Don Commercial Bank. In Soviet historiography banks were seen as an instrument of “colonialism”, both Western and Russian. Unfortunately, historians paid little attention to the quantitative data concerning banks, focusing on the general characteristics of industrial and financial relations in Central Asia. Basing on the archival sources, the author argues that the financial institutions of the Russian Empire took into account local specifics and encouraged the production of export-oriented products. The author uses interbank correspondence, annual reports of the branch director, as well as audit materials of the Samarkand branch. The article researches both active and passive operations of the bank, its expenses and profits, as well as correspondence related to the bank's staff. Unlike most Soviet and post-Soviet researchers, the author believes that banks have not become “monopolies” in Central Asian economy. Though Azov-Don Bank possessed four branches in the Central Asian region and strived to control all the export of cotton and fruits, in the end it failed to become the monopolist in the economic life of Turkestan. The main reason for this “failure”, according to the author, was the bank’s adaptation to real economic relations in Turkestan and khanates. The “modernization” of Central Asian economy in the banks’ management point of view meant to finance the cultivation of export-oriented crops and to mediate between the metropolis and the periphery. Thus, the “colonial” economy had a specific character, aimed not at the destruction of the local industry, but in the development of agriculture. As a result, the economic “modernization” of Central Asia was dragged out and assumed peculiar forms of agrarian “colonialism”. At first glance, the “colonial” periphery seemed an attractive area for investments and future super-profits, but speculative nature of Turkestan economy prevented the standard development of the local banks. World War I hindered the development of banking operations of the Samarkand Branch, which were limited to a role of an intermediary in the cotton sales at the Moscow Exchange. Finally, at the end of 1917 all the branches of the Azov-Don bank were nationalized by the Soviet State.

Climate variability and change over Uzbekistan – an analysis based on high resolution CHELSA data

Climate change and variability represent a major risk for the Central Asian economies, particularly for the agriculture and energy sectors. A detailed analysis of recent climatic changes is required in order to assess their impact. However, the observational network in Central Asia has significantly degraded after the dissolution of the Soviet Union, especially in the vulnerable high mountain regions (Unger-Shayesteh et al. 2013). Currently, the hydro-meteorological network of Uzhydromet is being modernized. Gridded climate data with high resolution represent a great opportunity to overcome these data related challenges, since they are freely available to all scientists and practitioners and enable a cross-border monitoring of climatic conditions. Here the authors introduce the CHELSA (“Climatologies at high resolution for the earth's land surface areas“) data set, which provides monthly data of precipitation and temperature for the entire globe at a resolution of 1x1 km for the period 1979-2013. The data set is evaluated against 20 stations across Uzbekistan. The authors show that CHELSA agrees in most cases with station observations, which is manifested in small deviations of mean seasonal temperature and precipitation sums. Further, temperature and precipitation trends as well as the relationship with large-scale atmospheric circulation modes, such as the El Nino Southern Oscillation and the North Atlantic Oscillation, are well represented by the CHELSA data set. The authors conclude, that CHELSA is a reasonable basis for the investigation of climate variability and change in Central Asia.

Does Belt and Road Initiative Hurt Node Countries? A Study from Export Perspective

ABSTRACT The existing studies on the Belt and Road Initiative (BRI) primarily explain its impact on China’s trade or foreign direct investment, whereas its impact on node countries’ export performance to China has not been examined. By considering the BRI as external policy shock and incorporating “Five Connection” indicators in the model, this article describes the mechanism and impact of the BRI on node countries’ exports to China. By using propensity score matching and a difference-in-difference approach, we tackle the endogeneity problem caused by self-selecting into the BRI node-country group. The estimates indicate that the BRI has an overall positive effect on node countries’ exports to China with an upward trend. The study also observes that facility connection, trade barriers reduction, financial integration, and people-to-people bond are efficient ways to enhance node countries’ exports. Further, the regional heterogeneity analysis finds a smaller positive effect on North African and on central and East Asian economies, while higher on other regions.

History of Namangan Agency of Volga-Kama Commercial Bank

The article considers the activity and function of the Namangan branch of the Volga-Kama commercial Bank. In Soviet historiography, banks were understood as an instrument of colonialism both Western and Russian. On the basis of archival data the author proves that the financial institutions of the Russian Empire took into account local specifics and encouraged the production of export-oriented products. The author actively uses interbank correspondence, annual reports of the director, as well as audit materials of the Namangan subsidiary. The active and passive operations of the Bank were investigated, the Banks expenses and profits were analyzed, and the staff of the bank was studied. The modernization of the Central Asian economy in financial sphere involved the financing of export crops and mediation between the metropolis and the periphery. Colonial periphery at first glance seemed to be an attractive area for investment and obtaining super profits, but the speculative nature of the Turkestan economy prevented the normal development of banks. As a result, the economic modernization of Central Asia slowed down and opened the way for the Soviet experiment.

The implications of the ‘Belt and Road Initiative’ on globalization and inclusive growth for the Eurasian continent

ABSTRACTThe ‘Belt and Road Initiative’ (BRI) and other emergent forms of transnational institution building raise new fundamental issues for economists and social scientists. Can BRI become a template for a new phase in the globalization process – a stage in which China takes a more proactive role? Can BRI help Central Asian economies that until now had been standing on the sidelines become fully integrated into the global division of labor? This article tries to analyze China’s potential of assuming a more central role in international economic governance and globalization process, which would also be in line with the size of its population and GDP. Further, the article analyzes the potential impacts of the BRI on inclusive growth for the poorly integrated Eurasian landmass by inspecting several direct and indirect channels.

Water in Kazakhstan, a key in Central Asian water management

ABSTRACTCentral Asia is one of the regions with the highest probability of conflicts over water. Kazakhstan is the main Central Asian economic power and therefore it is important to understand how the country’s water management policy is influencing water availability in the other Central Asian states. Already, the Central Asian economies are developing under increasing water deficiency, resulting in developmental problems. The main reasons for this are increasing political tensions and worsening ecological and socio-economic conditions. Kazakhstan was the first country in Central Asia to develop the pre-requisites for a transition towards integrated water resources management (IWRM). Therefore, Kazakhstan has potential to lead the development of transboundary water integration between all Central Asian states. A scenario for successful regional cooperation on water management in Central Asia involves establishing legal mechanisms for water management following international water law, assistance by international agencies and donors, and integrated social, economic and environmental methodology.

Carry Trade vs. Deposit-Driven Euroization

Financial “euroization”—or “dollarization” outside of Central and Eastern Europe—is typically analyzed as a singular phenomenon that can be traced to a common set of factors. This paper argues that two types of euroization need to be distinguished, which have different causes, economic consequences, and policy implications: carry trade euroization that emerges when households and corporations seek to exploit interest rate differentials between foreign currency loans and local currency deposits, and deposit-driven euroization that is rooted in distrust in the local currency as a savings vehicle. We present a theoretical framework that sketches key features of both euroization types, and test it with data from 28 Emerging European and Central Asian economies.

Carry Trade vs. Deposit-Driven Euroization

Financial “euroization”—or “dollarization” outside of Central and Eastern Europe—is typically analyzed as a singular phenomenon that can be traced to a common set of factors. This paper argues that two types of euroization need to be distinguished, which have different causes, economic consequences, and policy implications: carry trade euroization that emerges when households and corporations seek to exploit interest rate differentials between foreign currency loans and local currency deposits, and deposit-driven euroization that is rooted in distrust in the local currency as a savings vehicle. We present a theoretical framework that sketches key features of both euroization types, and test it with data from 28 Emerging European and Central Asian economies.

MIGRATION FLOWS FROM CENTRAL ASIA TO EUROPEAN UNION COUNTRIES

The system of international relations is in constant change, where new challenges, problems, trends are emerging. In this context, the global migration is no exception. The central question of this study is that labor migrants from Central Asia are changing their traditional directions, where Russia is replaced by other European countries. Such a trend can not be short-term for a number of reasons, both internal and external. Globalization, which neutralizes the natural borders of states, contributes to the gradual growth of world migration. Moreover, the leading countries of Europe with a high level of economic development have always attracted foreigners who were in search of work and a better life. Among other reasons of this problem is the rapid demographic development of Central Asia, the interest of European countries in cheaper labor, but quite qualified. In addition, the economic crisis in Russia, the complication of migration policy, the weakening of the currency, as well as the dependence of the budget of the Central Asian countries from remittances from abroad, it provokes great interest in changing traditional migratory direction. The objective of the research is to investigate the phenomenon of gradual increase in the number of migrants from Central Asian countries to Europe and analyze causes and consequences of this phenomenon in the context of the current international situation. Summarizing the results of the research, the authors make the important conclusion that the number of migrants from Central Asia in the countries of the European Union is gradually increasing. In the next decades this phenomenon will also be relevant because of the high birth rate and relatively young middle age of citizens in the countries of Central Asia, the EU’s need for cheap and at the same time qualified labor, a low level of the Central Asian economy and the economic crisis in Russia.

Kyrgyzstan’s Accession to the Eurasian Economic Union: Measuring Economy-Wide Impacts and Uncertainties

Joining the Eurasian Economic Union (EEU) has major economic implications for Kyrgyzstan, a small economy in which foreign remittances and profits from re-export trade generate almost a third of the national income. Most EEU studies overlook Kyrgyzstan or focus on specific impact channels, such as changes in tariffs, re-exporting, or migration. We use a computable general equilibrium model to estimate the net impact of multiple channels. We incorporate uncertainty into our analysis using a stochastic simulation procedure and empirically-informed impact distributions. The results indicate that accession is expected to reduce national welfare, because falling profits from re-exporting outweigh higher migrant remittances and tariff revenues. There is, however, a one-in-four chance that national welfare increases, as well as a strong likelihood that poor households benefit from accession. Achieving these gains depends on the successful integration of regional labor markets, not just product markets, and on the proposed Russia-Kyrgyzstan Development Fund. Our recommendations apply to other small Central Asian economies considering joining the EEU.

(Analysis on Development Issues in Central Asia and Its Implications for Korea's Development Cooperation)

Korean Abstract: 본고는 중앙아시아 지역의 개발과제와 한·중앙아 국가간 새로운 협력 방향을 종합적으로 고찰한 연구이다. 먼저 중앙아시아 지역의 개발현황에 대한 체계적인 분석을 바탕으로 중점과제들을 제시했다. 특히 지속가능개발목표(SDGs)의 17개 목표와 169개 세부목표, 그리고 관련 지표들(빈곤과 기아, 보건, 일자리와 이주노동, 무역과 인프라, 에너지, 기후변화와 환경)을 중심으로 중앙아시아 지역의 개발현황을 살펴보고, 중앙아시아 5개국의 신(新)발전전략에 기초하여 여섯 가지(농업개발, 인적자원 개발, 무역원활화, 수자원관리, 재생에너지, 거버넌스) 중점 개발과제를 선정했다. 본 연구 결과를 종합한 정책적 시사점은 다음과 같다. 첫째, 중앙아시아 국가들의 새로운 개발협력 수요를 반영한 접근 전략을 모색해야 한다. 이를 위해 수교 이후 25년 동안 진행된 한국의 중앙아시아 개발협력의 주요 성과와 과제를 종합적으로 평가함과 동시에, 이를 토대로 향후 바람직한 중앙아시아 개발협력 에 대한 정책방향을 수립할 필요성이 있다. 둘째, 중앙아시아 5개국에 대한 차별화된 개발협력 방안을 국가별로 수립하여 추진해나가야 한다. 중앙아시아 5개국의 기본적인 국가역량 및 경제발전 수준(인구, 자원 보유량, 사회경제적 인프라 현황 등), 개발협력 현황, 개발정책의 기본 방향과 중점 과제, 경제 및 산 업정책의 특성 등을 종합적으로 고려하여 국가별로 특화된 개발협력 방안을 마련해야 할 것이다. 셋째, 중앙아시아 개발협력 정책 추진에서 시너지를 창출할 수 있는 새로운 방안 마련이 필요하다. 특히 국제사회의 개발협력 정책 동향, 우리나라의 비교우위와 강점, 중앙아시아 지역의 대내외적 환경 변화에 대한 분석을 토대로 중앙아시아 국가별로 특화된 중점 협력과제를 선정함과 동시에 단계적인 접근을 시도해야 할 것이다. English Abstract: During the transition period following the collapse of the Soviet Union, Central Asian countries underwent economic crisis and the collapse of the Soviet welfare system. In the 2000s, thanks to the income gained by oil and gas exports, Kazakhstan and Turkmenistan successfully transformed into upper middle income countries (UMIC). However, the Kyrgyz Republic and Uzbekistan are still eager to lift themselves out from lower middle income country (LMIC) status, while Tajikistan remains a low income country (LIC). There are various views on why Central Asia is lagging behind in economic development. Basically, the area's geographical limitations as an inland region, political and security instability, and its planned economy are some of the key factors that impede the active development of trade, investment, technology and human resources. Moreover, the recent global financial crisis, the Russian economic crisis, and fall in commodity prices are causing the Central Asian economy to struggle. In this context, this study aims to provide an in-depth analysis on the development challenges in Central Asia, and provide policy suggestions for Korea’s development cooperation with Central Asia. Chapter 2 analyzes the current economic and social status in Central Asia based on the Sustainable Development Goals (SDGs). With additional consideration made for the national development strategies of each country, this study singles out six priority areas for cooperation: agriculture development, human resources development, trade facilitation, water management, renewable energy, and governance. Chapter 3 reviews the current status of development cooperation in Central Asia, illustrated in numbers. Case studies on Germany and Japan, two of the major cooperation partners of Central Asia, are introduced for implications to Korea's development cooperation. Chapter 4 evaluates Korea's development cooperation policy toward Central Asia, and identifies major achievements and key issues to be improved for future cooperation. This study concludes by providing some policy implications. Firstly, Korea needs to design customized strategies that reflect the demands for new development cooperation in Central Asia. Korea should identify the actual needs of the Central Asian region in accordance with changes in its internal and external situations, and establish measures to improve development effectiveness by building an organic cooperation system among different government departments. Secondly, differentiated development cooperation plans for individual Central Asian countries should be established and implemented. Such factors as basic national competence, economic development status (population, resource, socioeconomic infrastructure, etc.), and the basic directions of national development policies should be considered comprehensively. Thirdly, qualitative improvement in Korea's development cooperation policy is necessary. This can be achieved by expanding private and global partnership, including participation on the part of NGOs and private companies, diversifying development financing through strategic utilization of foreign direct investment and remittances, and establishing field-based policies based on actual development cooperation needs.

Central Asia — twenty-five years after the breakup of the USSR

Abstract Central Asia consists of five culturally and ethnically diverse countries that have followed different paths to political and economic transformation in the past 25 years since achieving independence from the Soviet Union. Kazakhstan and Kyrgyzstan have in relative terms made strides in market reforms, while Turkmenistan and Uzbekistan have not yet completed their transitions to market economies. Tajikistan represents an intermediate case. After experiencing more than a decade of growth based on hydrocarbon booms, Central Asian countries are faced with increasing challenges resulting from falling commodity prices, declining trade and lower migrant remittances. The main policy challenge is to move away from commodity-based growth strategies to market-oriented diversification and adoption of a broad spectrum of economic, institutional and political reforms. The major obstacles to political reform and structural diversification in the five Central Asian economies are internal and external geopolitical factors and deeply embedded institutional weaknesses within each country, particularly in areas where economic management interacts with authoritarian political systems and imperfect legal institutions.

Trends and Patterns in Foreign Trade of Central Asian Countries

One of the most important factors of economic development is foreign trade, and Central Asian economies are heavily dependent on trade. The paper discusses recent trends and patterns in the total and intraregional trade of Central Asia (including Afghanistan) and assesses their importance and policy implications. The analysis covers both formal and informal trade flows.

The spread of agriculture into northern Central Asia: Timing, pathways, and environmental feedbacks

Over the past decade, researchers have directed greater focus toward understanding Bronze (3200–800 BC) and Iron Age (800 BC–AD 400) economies of Central Asia. In this article, we synthesize paleobotanical data from across this broad region and discuss the piecemeal archaeological evidence for agriculture in relation to environmental records of vegetation and climate change. The synthesis shows that agricultural products were present in northern Central Asia by the mid-3rd millennium BC; however, solid evidence for their spread even further north into the Altai Mountains and southern Siberia only comes from the late 2nd and early 1st millennia BC. The earliest crops introduced into Central Asia likely came as a mixed package of free-threshing wheat, naked barley, and broomcorn millet, an assemblage pioneered further south along the northern foothills of the Central Asian mountains. Further east, in Mongolia, and debatably to the west of Central Asia, in the steppe of northern Kazakhstan and the southern Ural region of Russia, the earliest evidence of agriculture (with a similar mixed assemblage) is considerably later, roughly late 1st millennium BC. The lack of clear-cut early evidence for agricultural goods either east or west of the Central Asian mountain belt suggests that agriculture spread northward along these mountains, based on an agropastoral system pioneered millennia earlier at higher elevations of lower latitudes. Additionally, moister regional environmental conditions in the northern mountains after 3000 cal. BC may have increased the favorability of adopting an agricultural component in the economy.

New Estimates of Factor Income Shares in Central Asian Economies

This paper illustrates a simple method to derive the income accounts in the context of limited macroeconomic data. The method is relevant for several developing countries where the statements on income are clearly absent and the national accounts are confined to statements on expenditure and/or value added. Furthermore, the method is illustrated for four Central Asian economies, namely Kazakhstan, Mongolia, Kyrgyzstan and Uzbekistan. A Cobb‐Douglas factor utilisation function is then used to estimate factor income shares and the relative contributions of factors to economic growth. The analysis reveals limited contribution of labour to economic growth in these economies. This limitation appears to be strongest in the resource dependent economies of Kazakhstan and Mongolia.

Water Related Health Problems in Central Asia—A Review

The present paper provides an extensive literature review on water related health issues in Central Asia. Even though the per capita amount of available freshwater is substantial in all Central Asian states the uneven distribution in time and space creates problems for water availability. Due to this, the Central Asian economies are developing under increasing water deficiency. The degradation of water supply systems and sewage treatment plants is often severe leading to potentially high water loss rates and inadequate accessibility to safe water supply. In this context, rural areas are the most affected. Low tariffs in combination with absent metering and low collection rates for water fees mean that operation and maintenance costs for basic services of water supply and sanitation are not covered. Unsafe water supply contains both microbiological and non-microbiological contaminants. Helminthiasis and intestinal protozoa infections are of considerable public health importance in Central Asia. Agricultural and industrial pollution is especially affecting downstream areas of Amu Darya and Syr Darya rivers. In large areas copper, zinc, and chromium concentrations in water exceed maximum permissible concentration. Thus, there is an urgent need to strengthen the environmental monitoring system. Small-scale water supply and sanitation systems need to be developed in line with more efficient public spending on these.

Economic Integration in Central Asia: Challenges and Opportunities

Intra-regional economic integration in Central Asia remains low. This might be incompatible with these countries' desire to diversify their economies and move away from resource dependence. Evidence presented in this paper shows that Central Asian economies' ability to produce more sophisticated goods - measured by a complexity index - has been declining. To trade with greater variety of goods, Central Asian economies need to decrease transportation costs and trade barriers, making more products and services tradable across the borders.