Russian expert - is about that to compare the economies of Central Asia is incorrect, that the number of days required for export operations in Kyrgyzstan and about how China is using the crisis to their advantage.
What are the prospects for business development in Central Asia in a difficult period of economic crisis and what factors will shape the region countries' economies? Elena Yatsenko, head of the Russian Foundation "Legacy of Eurasia", which conducts a study in cooperation with experts from the region, spoke about this with Deutsche Welle in an exclusive interview.
Deutsche Welle: Elena, is it possible to speak about the prospects, set up for business development of Central Asia in a combined manner?
Elena Yatsenko: If someone speaks about Central Asia as a single region, he/she will make a mistake. The countries are fundamentally different. On the other hand, although Uzbekistan or Turkmenistan declares their specific model of development, globalization has touched them, as well. In the all presented ratings, which concern these countries or the Davos economic forum rating or the World Bank rating - the indicators are quite
For example, the gross national product, by purchasing power parity (true, the Davos rating was in 2006) Russia ranks 74th from 188 countries in the first half. Kazakhstan ranks 96th, and all other countries are far behind the list. Say, Tajikistan is on the 172nd place. And on the rating on competitiveness (in 2008), Kazakhstan ranks 56th, while Tajikistan and Kyrgyzstan took the double disadvantage: Tajikistan - 116th, and Kyrgyzstan
Of course, it is difficult and [may even be impossible tom compare them. We can say that the ratings are compiled by Western experts and have a distance portion of subjectivity. But there are not other international comparisons and we have to use them.
Q: What is the main obstacle for business development?
A: There is a critical situation in Russia and Central Asia due to corruption. It dramatically reduces the effectiveness of any economic policy and is a threat to development of the economy. Suppose that, all of our countries are in the list of 180 countries on the so-called Corruption Perceptions Index. Corruption affects the development of business, diverting significant resources away from core activities.
Moreover, a certain model is formed for entrepreneurs' behavior and the public consciousness which is a specific characteristic of these countries. Accounting and statistics has been complicated, even if they are published, it does not reflect the real situation, and as a result, the shadow economy is thriving.
During our meetings experts from the region indicated that the level of shadow economy in the same Tajikistan and Kyrgyzstan is more than 70 percent. Of course, it is difficult to talk about civilized rules of the game.
If you go back to the next western rating of conditions for doing business, de jure development of countries are not too bad in the annual report by the International Bank for Reconstruction and Development, but it is not de facto. For example, to create a company in Kyrgyzstan will require only four procedures and fifteen days and within a year you perform 75 payments and give 61.4 percent of the profits. The average time for the preparation and implementation of export trade operations is 64 days. You can think up how long it is, if you export fresh products. Imports take 75 days.
Q: Can Kyrgyzstan's indicators be compared with that of Kazakhstan?
A: You need to perform eight procedures in Kazakhstan and Russia to create a business. Establishment takes 21 days in Kazakhstan and 28 days in Russia. But within a year you perform 22 payments in Russia and 9 in Kazakhstan. We have to talks about the crisis, too. It has reached Uzbekistan and Turkmenistan. The corruption problems and development of shadow economy contribute to outflow of capital from the country. Accordingly, the crisis situation is an advantage to countries such as Japan, India and China. EU is still busy with its business and is not expanding its presence. At the same time, Iran reinforced work in Tajikistan and Chinese expansion is felt throughout Central Asia. It is understandable. Those who have cash in crisis are happy.
Q: Positive penetration of Chinese economy to the region was spoken about earlier. What is the secret behind it?
A: Previously, it was not so obvious, but now it is tangible throughout Central Asia. They are a large number of cheap loans and dumping of prices for services. Under current circumstances, Chinese model of economic expansion is very effective, because virtually all their loans are linked to purchase of their goods and services. They usually win tenders most of all.
They have been very active in the humanitarian space for the last three years, intensifying exchanges of students, Conficuis institutions develop their network in almost all countries and also there is a special program of free installation of satellites in Kyrgyzstan. Naturally, they would be directed to China. There is a stable trend of learning Chinese language. This is particularly felt in Kyrgyzstan.
Q: Until recently it was considered that the more open the society, the better conditions are for business. But Tajikistan, as one of the most closed systems (we do nit speak about Turkmenistan because you we not even mentioned it), and Kyrgyzstan, as apparently open, rank in last places...
A: You can not confuse an understanding of open societies in the Western understanding with an open society in Central Asia. Open Society in Kyrgyzstan it is nothing else but a large number of skilled managers of non-governmental sector. They are not allowed to business! Management has not even reached Tajikistan. The republic is in a situation like mid 1990s. Only expansion of NGOs has reached through large international organizations.
Q: What crisis has changed in relations in the region?
A: Previously, when Kazakh and Russian business there were, they thought that would be high profitable which will cover their expenses for political and other risks. But from the fourth quarter of last year we see that the Kazakh and Russian investors have chosen two main strategies: they buy assets or freeze them temporarily. Therefore, all hopes for these countries will be linked to public investments by Russia and Kazakhstan or foreign private investments.