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Central Asia: Multiple Economic Crises Hit Hard Last Year

  • Ben Partridge



London, 21 April 1999 RFE/RL) -- The Central Asian nations, hit by the Russian and Asian financial crises and by falling prices for their exports, were frank about their difficulties at the annual meeting of the European Bank for Reconstruction and Development in London.

The EBRD governor for Uzbekistan, R. Azimov, told the four-day meeting that last year was "one of the most dramatic years in recent decades" for the world economy.

He said the crises in Asia, Russia and other CIS countries showed that the process of transition is more complex than it seemed to some economists.

Concern about the impact of the multiple crises was also voiced by other delegations from Central Asian states.

Kazakhstan's EBRD governor Anvar Saidenov spoke of a "difficult" situation. A representative from Turkmenistan, H.A. Orazov, said his country experienced stagnating markets for its goods and falling prices for exports. Kyrgyzstan's EBRD governor for Kyrgyzstan, Ourkaly Isaev, said his country had been exposed to the contagious effects of the Russian crisis.

The admission of difficulties came at the eighth annual meeting of the EBRD governors after a year in which the bank, set up to promote market reforms and democracy, recorded a loss of 225 million dollars, largely from the aftershocks of the August 1998 Russian crisis. The problems include a shrinkage of regional trade and falling currencies, and a weakening in prices for oil, minerals and cotton.

Azimov said the financial crises in Asia and Russia and other CIS countries led to an outflow of investment funds from developing countries and this adversely affects the progress of reforms.

He said the CIS countries face a particularly difficult problem in making the transition from a command to a free market economy.

He said recent events, "the most dangerous consequence of which has been rejection of reforms by a significant proportion of the population, call for more viable reform mechanisms which will avert crises that lead to rapid inflation and to social tension."

He said: "Such crises are especially dangerous in those countries where there is a risk of penetration by Islamic extremism."

Azimov, whose country has been among the slower track nations in adopting reforms, said he in no way wanted to cast doubt "on the basic principles and mechanisms of market reform." But he said individual countries "must have the right to pursue flexible policies based on the actual state of the economy, on national priorities as regards structural changes, and on the mentality, traditions and social structure of society."

He said the decision of the EBRD's Board of Directors to hold the annual meeting in 2003 in Tashkent was a "recognition of central Asia as one of the most important of the bank's regions of operation."

Saidenov said that Kazakhstan has experienced a difficult year, but the successes and difficulties it has experienced jointly with the EBRD, "give us a useful basis for moving ahead." One encouraging sign, he said, was that two weeks after floating its national currency, its exchange rate against the U.S. dollar has stabilized, the banks do not face a liquidity crisis, and the government is confident it "will meet all external obligations."

The Turkmenistan delegate said the crisis in Asia and Russia was "a cruel but useful lesson for all of us." He said financial stabilization in the transitional countries might have been impressive except it was not supported by deep structural reforms in some countries. As a result, they had turned out to be "quite unstable and fragile."

But he called on the EBRD not to pay less attention to such countries but to try to maintain the level of progress already achieved.

In 1998, Turkmenistan experienced a range of difficulties, including falling prices for its basic exports: oil and cotton. Turkmenistan, with huge natural gas reserves, remained isolated from countries consuming its gas.

On the positive side, Turkmenistan has consolidated its banking sector and reformed its farm sector. Orazov said the transition from the Soviet collective system to private ownership of land is complete.

One of the most upbeat presentations came from the Kyrgyzstan's EBRD governor Ourkaly Isaev. His country is seen as one of the most committed to a fast pace of economic reform. Last year it became the first CIS country to be admitted to the World Trade Organization, an agency which encourages trading cooperation among its 132 member states.

Isaev, whose country recorded annual growth in 1996 of about seven percent, said real growth had shrunk to 1.8 percent last year and inflation rose to 18 percent.

He said, however, the "Russian crisis should not eclipse the fact that the transition countries made important progress last year." He cited the democratization of many societies, the privatization and restructuring of economies, and the growing liberalization of trade.

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