Economic Transformation in Central Asia: A Journey of Twenty-five Years

Date01 July 2016
Published date01 July 2016
Subject MatterArticles
Economic Transformation
in Central Asia: A Journey
of Twenty-five Years
Raj Yadav1
Disintegration of the Soviet state was unanticipated in Central Asia and the new
independent states were unprepared. The end of central planning in the late 1980s
led to transitional recession and this got worse with the dissolution of the USSR. In
this difficult situation, the five countries moved at different paces to stabilize their
economies and establish market-based system. During transition era, Central Asian
states introduced stabilization and structural reforms in the form of monetary policy,
introduction of national currencies, price liberalization, privatization and fiscal
reforms. Kazakhstan and Kyrgyzstan lead by introducing various reforms while
Uzbekistan and Turkmenistan lagged behind and were slow reformers. Tajikistan
was one state that suffered due to internal civil war. These stabilization and struc-
tural reforms produced mixed results for Central Asian states. Present study will
provide an overview of the journey of 25 years of the five Central Asian states since
independence, their experience with the reforms and their performance in the region.
Command economy, market economy, transition, stabilization and structural
reforms, liberalization, privatization
More than two decades ago, five Central Asian countries left the cradle of cen-
trally planned economy to start transition to market-based economy.
Macroeconomic dynamics show that at present, the five countries are at different
milestones of transition. The Kyrgyz Republic has travelled the farthest, while
International Studies
53(3–4) 286–304
2018 Jawaharlal Nehru University
SAGE Publications
DOI: 10.1177/0020881718762185
1 Assistant Professor, Centre for Russian & Central Asian Studies, School of International Studies,
Jawaharlal Nehru University, New Delhi, India.
Corresponding author:
Raj Yadav, Assistant Professor, Centre for Russian & Central Asian Studies, School of International
Studies, Jawaharlal Nehru University, New Delhi, India.
Yadav 287
Kazakhstan is close behind. Among the lagging reformers, change in Uzbekistan
has been modest and marked by episodes of progress and retreat, while
Turkmenistan has substantially retained the key elements of the command econ-
omy and Tajikistan largely affected by regional tension. All the five countries are
now in the middle-income category, namely the Kyrgyz Republic (US$1,250),
Tajikistan (US$1,060) and Uzbekistan (US$2,090) are classified as lower middle-
income while the other two, the Kazakhstan (US$11,670) and the Turkmenistan
(US$8,020) are classified as upper middle-income countries (Nag, 2017, p. 2). By
global standards, all five countries together have a small population (approxi-
mately 65 million people) and geographically Central Asian states sit at a critical
intersection between Europe and Asia, surrounded by large countries that have
huge and fast-growing markets.1
This article seeks to understand the journey of the Central Asian states during
the last 25 years. It analyses the historical affiliation and economic significance of
Central Asian states with the Soviet Union. It will then discuss the major mile-
stones in the form of economic reforms adopted by Central Asian states and their
performance in the region.
Historical Perspective: Pre-reform Settings and Conditions
Nineteenth century Central Asia consisted of three Khanates—Kokand, Bukhara
and Khiva. They were economically backward feudal states with strong remnants
of older slave-owning society. Among the Turkmen, Kazakhs and Kyrgyz nomads,
the tribal system was prevalent. The main occupations of the people were cattle
breeding and horticulture. Small quantity of inferior quality cotton was also pro-
duced in the Central Asian Khanates (Kaushik, 1976, p. 53). Towns were the
centres of handicraft production and trade. Cotton and silk cloth produced by
craftsmen in Bukhara, Kokand, Tashkent and Samarkand were sold in the neigh-
bouring areas and in the Russian Empire. Taxation was heavy, mostly realized in
kind, which had adverse effect on the development of capitalist relations. Feudal
oppression and extractions by moneylenders hampered the growth of the handi-
crafts and agriculture (Kaushik, 1976, p. 53; Sharma, 1979, p. 62).
Russian Empire absorbed the Central Asian region in the eighteenth and the
nineteenth century and successfully accommodated it during the Tsarist and
Soviet era. After 1860s, southward region developed into a specific zone of cotton
production, and following railway creation it was assimilated into the Russian
imperial economy. Later in the 1917, Central Asian region developed as a part of
the Soviet Union and was divided into five republics by 1930s (Kaser, 1997, p. 8;
Pomfret, 2003, p. 12).
Economically, Central Asian Republics (CARs) acted as colonies of raw mate-
rials, mainly cotton, energy products and minerals to be supplied to the industries
of the Soviet Union. In order to build up the cotton sector, Karakum Canal was
constructed in 1950s, leading to further expansion of social sector comprising of
universal literacy and increased life expectancy (Pomfret, 2003, p. 14).

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