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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (10286)	9/26/2001 6:41:39 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

Central Asia to gain from flurry of attention. Pretty soon Siemens, ABB, Skanska and a whole lot of infrastructure companies will be trucking stuff across the borders to go and build. That's the European way of helping. But the US behaves like the rich man in a poor neighboorhood. "Lets keep our house and surroundings clean and put policemen and border patrols." Central Asia to gain from flurry of attention Bye Ed Crooks in London, David Stern in Tashkent and Andrew Jack in Moscow Published: September 25 2001 20:06 \| Last Updated: September 25 2001 20:42 As military action against terrorist targets by the US-led coalition draws closer, the economic fortunes of the central Asian countries bordering Afghanistan come under growing scrutiny. Willem Buiter, chief economist of the European Bank for Reconstruction and Development, believes that the global crisis may have some positive consequences for the former Soviet republics expected to feel the impact of the campaign. "For a start, people are going to find out where they are," he says. Uzbekistan, Turkmenistan and Tajikistan do not generally feature high on the list of priorities for either diplomats or businesses in the west. But their location on Afghanistan's northern border, sandwiched between it and Russia, has suddenly given them a potentially vital strategic significance. Mr Buiter accepts that for those most far-flung of the EBRD's territories, as for the whole world, "the uncertainty about prospects has undoubtedly increased". They are likely to have specific problems, particularly regarding refugees. "But these are all manageable, given enough international support - and I think the support will be forthcoming," he says. Under President Islam Karimov, Uzbekistan in particular is very keen to align itself with the west, although what support Tashkent will provide is still not clear. The country seems to be moving towards providing some sort of logistic assistance for an attack on Afghanistan. Turkmenistan also has an eye on the west, although President Saparmurat Niyazov proclaims a policy of "positive neutrality", which generally translates into Turkmenistan avoiding any initiatives on a regional basis and preferring to negotiate with other countries individually. On Tuesday he said that after speaking by telephone to Colin Powell, the US secretary of state, he had agreed to open an air corridor for US aircraft to deliver "humanitarian goods" such as food to Afghanistan, but not military supplies. "If these countries are established as sympathetic to the part of the world that wishes to root out terrorism, then they may benefit from the increased international attention," Mr Buiter says. "There is an interest in creating stability and prosperity in that part of the world, if you want to 'drain the swamp': to eliminate the breeding grounds for terrorism." The EBRD's role will not be to deliver the immediate humanitarian relief but to carry on its usual job of development finance. The republics face numerous problems. All three are heavily dependent on commodities, especially cotton, which account for more than half their exports. All of them are also very poor, in large part because of their own mismanagement. Turkmenistan and Uzbekistan both have strictly controlled currency systems. Businesses are forced to trade at a fixed government exchange rate that can be more than twice the black market rate. They are also restricted in the amount of dollars they can export. Both countries are also ruled by autocratic leaders who have cracked down on political opposition. President Niyazov of Turkmenistan has erected around himself a bizarre cult of personality that at times even seemed to be on the verge of declaring him a "prophet". President Karimov of Uzbekistan, though not as colourful, has imprisoned perhaps as many as several thousand Uzbeks on the suspicion of supporting an Islamic insurgency. In Tajikistan, Mr Buiter says, "the reform effort has been quite remarkable for a country just out of five years of civil war" but it is the poorest of all. At purchasing-power parity its gross domestic product is only about $1,000 a head. Although the three countries start from very weak positions, they have little to fear from the new economic problems that have emerged following the attacks on the US: the threat of a higher oil price and the turbulence in financial markets. None of the three countries is a significant oil exporter, but they export to Russia and other oil producers in the region. Most recently the price of oil has been going down rather than up, but if it rises again it will help lift the prosperity of the whole area around the Caspian Sea. Mr Buiter believes that prospects for growth in Russia look good. "Across the board really remarkable changes are taking place," he says. "I am not euphoric but I am really very impressed with the improvements that are being made against the odds in Russia." The turbulence in emerging markets' debt and currencies, meanwhile, is largely passing central Asia by. "None of these countries is integrated into the world financial system in any way. So the general decline in investors' appetite for risk will not affect them as much as some of the more advanced countries," Mr Buiter said. However, although the economic effects of the sharpened international focus on the region may be small, or even beneficial, the political consequences may be less benign. International financial institutions have found working in the region difficult. The EBRD issued a warning in April to the Turkmen government, when Jean Lemierre, the bank's president, stressed the importance of democracy. If the US ends up using military and air bases in the central Asian states for an attack on Afghanistan it may have to dilute its long-standing demands for improvements to the record of civil rights and democratic reform in the region. Co-operation with the US could help reinforce the attitude towards political opposition parties that most of the regimes have taken over the past decade, arguing that their rivals are Muslim fundamentalists and terrorists who need to be suppressed.