The Central Asian region comprising five land-locked countries of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, can be considered as the heart of Eurasia, the largest continental area of the world comprising Asia and Europe. “In the steppes of Central Asia,” a classical music symphonic poem composed by Alexander Borodin captures the wonder, beauty, and serenity of this region in terms of musical notes. The mention of the musical sounding names of cities like Astana, Almaty, Bishkek, Osh, Dushanbe, Hisar, Ashgabat, Türkmenabat, Tashkent, Samarkand, Bokhara, Fergana, and many others in each of these five countries.
Despite being land-locked, and throughout its history, Central Asia remained an important region in terms of economic exchange through land-based trade via the famous silk route, and interaction of people from the far-flung places of Asia and Europe. Famous travelers like Marco Polo[1] (in the 13th century) and Ibn Battuta[2] (in the 14th century) traveled through places within Central Asia and recorded their amazement and admiration about them. The region had come under different dynasties in its history and the five Central Asian countries came into prominence after their independence in 1991, and continue their economic, social, cultural, and scientific progress since then. The countries’ transport and communication channels within and with the rest of the world have continued to advance at a fast pace since their independence. Their involvement with China’s Belt and Road Initiative is playing a critical role in this respect in further modernization and expansion of connectivity within and globally.
Economic growth and development are at the heart of the growing importance of Central Asia in the global economy. According to the World Bank data[3], the combined Gross Domestic Product (GDP) of the five countries have gone up from USD 46.7 billion in 1991 to USD 438.2 billion in 2023, representing an increase of 839 percent since their independence. Central Asia had a share of 0.2 percent in the World GDP of USD 23.8 trillion in 1991. This share has doubled to 0.4 percent of the World GDP of USD 105.435 trillion in 2023. This remarkable growth has enabled all five countries to increase their per capita Gross National Income (GNI) significantly during this period. Kazakhstan’s per capita GNI has increased from USD 1,430 in 1993 to USD 10,940 in 2023. Kyrgyzstan’s per capita GNI has increased from USD 520 in 1992 to USD 1,700 in 2023. Tajikistan was able to increase its per capita GNI from USD 340 in 1992 to USD 1,440 in 2023. Turkmenistan increased its per capita GNI from USD 840 in 1991 to USD 7,130 in 2019. Uzbekistan increased its per capita GNI from USD 750 to USD 2,360 in 2023. Central Asian Countries’ growth journey in terms of GNI per capita (in current USD) is shown in Figure 1. The purchasing power of Central Asian people is better captured by their per capita GNI in purchasing power parity current international dollars. Expansion in this purchasing power is depicted in Figure 2. This per capita purchasing power in PPP international dollars was 35,420 for Kazakhstan in 2023; 9,640 for Uzbekistan; 6,750 for Kyrgyz Republic (Kyrgyzstan); and 6,380 for Tajikistan in 2023; 16,860 for Turkmenistan in 2019.
Figure 1 Gross National Income per Capita of Central Asian Countries
Figure 2 Gross National Income per Capita in PPP Current International Dollars of Central Asian Countries
Central Asia’s total population was 80.1 million in 2023 – close to one percent of the world population. Within Central Asia, Uzbekistan had the largest population share at 45.5 percent, followed by Kazakhstan at 24.9 percent, Tajikistan at 12.7 percent, Kyrgyzstan at 8.9 percent, and Turkmenistan at 8.1 percent in 2023. In terms of the value of combined GDP of Central Asia (in current USD) in 2023, Kazakhstan had the largest share at 59.7 percent, followed by Uzbekistan at 20.7 percent, Turkmenistan at 13.7 percent, Kyrgyzstan at 3.2 percent, and Tajikistan at 2.8 percent. All five countries of Central Asia have become gradually more business and investment friendly because of economic reforms undertaken by them over the years after their independence. The number of days required to start a business has gone down in all countries. In 2019, one could start a business in 10 days in Kyrgyzstan, 7 days in Tajikistan, 5 days in Kazakhstan, and just 3 days in Uzbekistan[4].
Economic growth in Central Asian countries have not only increased their income but also improved their human development significantly. According to the UNDP Human Development Report 2023/2024, Kazakhstan has a human development index (HDI) value of 0.802 that falls into the category of very high human development[5]. Turkmenistan, Uzbekistan, and Kyrgyzstan have high human development, while Tajikistan has medium level of development. Mobile cellular subscriptions (per 100 people) in all five countries are greater than 100, ranging from close to100 in Turkmenistan to over 130 in Kazakhstan[6]. This shows that the Central Asian people are well connected with each other and the rest of the world. Many Central Asians work abroad and send remittances to their home countries. Kyrgyzstan, Tajikistan, and Uzbekistan receive a significant amount of remittances in terms of share in GDP. Kyrgyzstan received USD 2.6 billion in 2023, which was equivalent to 18.6 percent of its GDP of USD 14 billion. Tajikistan received USD 4.6 billion in 2023, which was equivalent to 38.4 percent of its GDP of USD 12.1 billion. Uzbekistan received USD 16.1 billion in 2023, which was equivalent to 17.7 percent of its GDP of USD 90.9 billion. Kazakhstan which has the highest GDP (USD 261.4 billion in 2023) in Central Asia received only USD 440 million in 2023 which was less than 1 percent of its GDP. Turkmenistan had a GDP of USD 59.9 billion in 2023, it did not publish the value of its remittances. Remittances as percent of GDP from 2005 onwards are shown in Figure 3.
Central Asia is rich in mineral resources that helped drive its growth. Reliance on commodity exports has made all five countries substantially open in terms of international trade. Because of fluctuations in international commodity prices, the region has seen its ups and downs in terms of real GDP growth and trade openness. It has also helped all Central Asian countries to receive substantial amounts of foreign direct investment (FDI) primarily in mineral resource extraction and infrastructure sectors. All these countries have great potential to receive more FDI in other sectors as well as they have undertaken economic reforms over the years and substantially improved their climate for starting new businesses, as pointed out earlier. Foreign direct investment (FDI) as percent of GDP is shown in Figure 4 for all five countries.
While all five countries have started receiving FDI soon after independence and are still receiving it, Kazakhstan has received FDI as high as 13 percent of its GDP in 2004. Tajikistan also received its highest FDI (13.1 percent of its GDP) in 2004. Turkmenistan received its highest FDI in terms of its GDP of 22.5 percent in 2009. Kyrgyzstan received its highest FDI at 17.1 percent of its GDP in 2015. Uzbekistan received its highest FDI at 3.8 percent of its GDP in 2019. As a result of continuous accumulation of yearly flows of inward FDI in each of the five countries, the inward FDI stock of Central Asia has been estimated by the Eurasian Development Bank (EDB)[7] at USD 211 billion in 2021.
Richness of Central Asian countries in terms of mineral resources can be easily gleaned from the World Mining Data 2024[8]. This report contains the data for 165 countries of the world for 2022. The combined mineral output[9] of Central Asian Countries was 385.3 million metric tons valued at USD 189.4 billion in 2022. This constituted a share of 2.0 percent of the World minerals in production (in total tonnage), and 2.5 percent of the value (in USD) of World mineral output in 2022.
Figure 3 Remittances as % of GDP in Current USD
Figure 4 FDI as percent of GDP in Central Asian Countries
Kazakhstan was ranked 12thin the world in terms of its share of its total mineral production in the world total and ranked 14th in terms of share in value in 2022. Kazakhstan ranked the first in production of uranium in 2022 among 165 countries of the world, with a share of 44.7 percent in the total uranium production of the World. It ranked 2nd in the world in the production of chromium; 4thin baryte; 5th in bismuth; 7th in gold, rhenium, cadmium, and sulfur; 8th in steam coal; 9th in silver, coking coal and boron; 10th in bauxite, 11th in copper; 13thin petroleum and the list of ranks continue in similar manner for 31 different minerals produced by Kazakhstan in 2022.
Turkmenistan was ranked 29th in the world in terms of its share of its total mineral production in the world total and ranked 37th in terms of share in value in 2022. Turkmenistan ranked 11th in the world in the production of natural gas and ranked 33rd in the production of petroleum in 2022.
Uzbekistan ranked 38thin the world in terms of its share of its total mineral production in the world total and ranked 35th in terms of share in value in 2022. Uzbekistan ranked 5th in the world in the production of uranium, 9thin gold, 10th in palladium, 16th in silver and natural gas, 20th in lignite, and 55th in petroleum.
Kyrgyzstan ranked 94thin the world in terms of its share of its total mineral production in the world total and ranked 97th in terms of share in value in 2022. It ranked 23rd in the production of lignite, 29th in gold, 34thin steam coal, 45th in copper and 81st in petroleum in 2022.
Tajikistan ranked 102ndin the world in terms of its share of its total mineral production in the world total and ranked 100th in terms of share in value in 2022. Tajikistan ranked 11th in the world in the production of natural gas in 2022 and ranked 33rd in petroleum.
While the mineral extraction and export has helped central Asian countries to increase its real income and human development, the progress in Central Asian countries, in terms of the financial development, is uneven. The IMF has developed a Financial Development Index to measure the level of financial development defined as “as a combination of depth (size and liquidity of markets), access (ability of individuals to access financial services), and efficiency (ability of institutions to provide financial services at low cost and with sustainable revenues, and the level of activity of capital markets)”[10]. The level of this index ranges from zero to one and was 0.20 for the Central Asian region in 2021, compared with the world average of 0.32. Only Kazakhstan had a better than world average at 0.35 in 2021. The levels and trends of Financial Development Index for Central Asian countries are shown in Figure 5. It may be noted that Switzerland had the highest index level of 0.94 in the world in 2021. China had a level of 0.63 (25th in the world). The rank of Kazakhstan in 2021 was 69 and that of Uzbekistan at 90[11].
Figure 5 Financial Development Index in Central Asian Countries
It is well-known that
financial development improves resource allocation besides mobilizing savings,
increasing growth, and facilitating diversification. At the current level of
economic development there is a need to promote financial development to reap its
benefits. While it is true that after very high level of financial development,
its benefits begin to decline, Central Asian countries are at a lower level of
financial development and can gain from promoting their financial sectors.
Central Asian countries can exchange their experiences to focus on where
specifically to develop more within the financial sector to speedup this
progress. AFCA, in this regard, can go a long way in supporting Central Asian
Countries to realize their immense
potential.
[1] Cordier, H. (1903). Travels of Marco Polo.
【This article is AFCA Working Paper No. 2024-24/187】
Expert Biography
Riaz Riazuddin, Fellow of Asian Financial Cooperation Association Think Tankers Committee, earlier served as Deputy Governor of State Bank of Pakistan and lead its Policy Cluster of departments including monetary policy, research, economic analysis, statistics, strategic planning, finance and risk management. Also worked briefly as Acting Governor during 2nd May to 6thJuly 2017. Career spans over 27 years of work in central banking and academia. Central banking experience covers monetary operations, debt management and research in economics and finance. Teaching and curriculum development experience includes graduate level courses in international trade policy, applied econometrics, statistics, and mathematics for economists. Experience also covers training of central bank staff in macrofinance and implementation of monetary policy, applied econometrics, statistics, and mathematics for economists. Accomplishments include publication of comprehensive assessments of financial sector of Pakistan, launching of monthly Inflation Monitor and restructuring of research cluster of departments in SBP to produce more focused output relevant to monitoring economic conditions and formulation of monetary policy. Founding Editor of SBP Working Paper Series released periodically in SBP Website www.sbp.org.pk, which has ninety-six papers till March 2018, of which fifty-three under founding editor.
About AFTTC
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