Since it was launched 16 years ago, the Central Asia Regional Economic Cooperation (CAREC) program has built a strong track record in promoting economic cooperation across its member countries.
CAREC has financed more than 176 projects worth nearly $30 billion in four core strategic sectors: transport, energy, trade facilitation, and trade policy. It has made significant progress on many fronts. But much more remains to be done, for instance on tapping new areas of cooperation like tourism, agriculture, information and communications technology, and finance.
That’s why member countries agreed last year to create a new long-term strategy to respond to the rapidly changing global and regional landscape, address existing and emerging challenges, complement ongoing national plans, and better connect policies, projects, and people for shared prosperity and sustainable development.
The new strategy is an important milestone and a collective opportunity to unleash the potential of regional cooperation for Central Asia.
It’s also an opportunity for CAREC member countries and development partners to think about how to make CAREC more effective, and how to mobilize more support from stakeholders, including the private sector.
Among the main obstacles are lack of economic diversification and concentration of exports on a narrow range of markets and products, which have made CAREC countries highly vulnerable to fluctuations in oil and commodity prices. Several countries’ financial balance sheets have suffered from the steep decline in energy prices in recent years. Many economies in the region have also faced growth constraints due to their landlocked location.
For countries in Central Asia to become resilient against such external shocks, it’s time to double down on efforts to bolster economic stability, promote structural reforms to diversify economies, and enhance connectivity with other economies.
CAREC is a platform for its member countries to conduct dialogue on policies and actions to tackle these challenges.
Talking to and coordinating among each other will help CAREC countries formulate the economic policies for reform, development, and cooperation. It will also help to establish the right macroprudential policies, early warning systems, and countercyclical measures that can prevent or mitigate the impact of economic and financial crises.
Infrastructure to drive trade
CAREC should continue to support infrastructure development in its member countries. Infrastructure investments generate growth, support economic diversification, and help create an enabling environment for private sector-led development.
There is also an urgent need to boost trade to create business and employment opportunities in Central Asia, where intraregional trade accounted for only 6.5% of total trade in the region in 2015. The main problem is production structures that are too alike, and don’t complement each other.
Lack of trade openness is another major concern. CAREC member countries need to develop more tradable goods and services, enhance trade facilitation, and promote financial cooperation. Building value chains among members is a top priority of the future economic cooperation and integration.
Infrastructure and trade go hand in hand. Building, upgrading, and maintaining regional infrastructure will boost intra-regional trade and investment as well as transit trade along the transport corridors.
The goal is to move beyond transport corridors into trade corridors and ultimately to economic corridors that involve many countries and sectors.
The strategy will also provide a platform for member countries to launch regional initiatives that complement national actions in support of achievements of the Sustainable Development Goals and implementation of the 2015 Paris Agreement on climate change.
To move the strategy forward, CAREC will build effective linkages and synergies with other regional cooperation frameworks and mechanisms. These include the Belt and Road Initiative, the Partnership for Quality Infrastructure, the Eurasian Economic Union, Shanghai Cooperation Organization, and the Economic Cooperation Organization, among others.
As a regional development bank, ADB has a clear mandate to promote regional economic cooperation. We are keen to work with other development partners in this respect.
CAREC can be a vehicle for future prosperity in a region full of promise. The new strategy is a key step in that journey.