Regional Cooperation in Central Asia: Viewpoint from Uzbekistan

Central Asia is a region strategically located in a part of the world which had attracted constantly the attention of superpowers of the world as evidenced by the term the Great Game. The term usually attributed to Arthur Conolly, was used to describe the rivalry and strategic conflict between the British and Russian Empires for supremacy in Central Asia. The term was later popularized by British novelist Rudyard Kipling in his work “Kim”. As the UNDP (2005) report notes, during 70 years of Soviet rule, when the Central Asian republics were largely shut off from the rest of the world, their economies became closely linked with the rest of the union. Many analysts consider that during this period living standards improved as a result of heavy investments in physical infrastructure and human capital. However, these improvements were accompanied with some devastating impact on the environment and culture of the region. The collapse of the Soviet Union in 1991 resulted in the creation of new countries in Central Asia— Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan—with a total population of almost 60 million. Independent states gradually began establishing real borders separating them. This process is not over yet. The borders, tensions between some of the countries, and security policies of the countries in the region disrupted trade links and weakened critical but vulnerable region-wide water and energy systems. This paper analyzes two important aspects of regional cooperation - trade in the region as a whole and electricity/power as a micro case study of cooperation between Uzbekistan and Tajikistan. The main research question of the report is “What are the main obstacles for greater regional cooperation?” The research of the two aspects of regional cooperation mentioned above identified the following impediments for greater regional cooperation. In the area of regional trade: - A country’s ability to cooperate with its neighbors depends on the level of development of the market economy and democratic governance mechanisms. These are not well developed in Central Asia yet, which has become a serious impediment for regional cooperation; - The Central Asian leaders adopted diverse economic strategies which led to divergence in their respective trade policies and hindered harmonization of regional cooperation; - Regional Trade Agreements involving the Central Asian republics generally have a narrow range and complex rules of origin and most of them have remained agreements on paper only. - Existence of significant trade barriers and protectionist trade policies; - Low degree of trade complementarity between Central Asian republics; In the power sector between Uzbekistan and Tajikistan: - The governments have had self-sufficiency as a policy goal totally ignoring possibility of cooperation. Past tensions between the governments were partly to blame for this; - A distorted system of energy prices is a significant barrier for greater regional cooperation between Uzbekistan and Tajikistan. Primary energy sources for thermal power generation are frequently and grossly undervalued by the state policy; - Potential nonpayment across borders