CENTRAL ASIA'S UNIQUE CHALLENGES
One aspect of the social upheaval and economic losses imposed by the spread of this highly infectious and life-threatening disease concerns the international labor market. While this is a widespread global problem caused by the pandemic, it has specific and significant social and economic effects in the countries of Central Asia. Large numbers of migrant workers from the Central Asian states were working in late 2019 in foreign countries, particularly the Russian Federation, Ukraine, and South Korea.
A large proportion of the GDP in countries such as Kyrgyzstan and Tajikistan have been attributed to remittances. These remittances can be expected to be immediately lost. Moreover, the scale of the repatriation, which may be necessary on a short-term basis as a result of the pandemic is staggering. A study conducted by the Japanese International Cooperation Agency (JICA) concluded that over 40 percent of the annual GDP in Tajikistan consisted of remittances from Tajik workers employed in foreign countries
, primarily Russia. The data presently available on the number of migrant laborers who have returned in the first quarter of 2020 is limited but can be expected to emerge in greater detail.
Another important economic aspect of the impact of the pandemic concerns the costs of the disruption of economic activity, the decrease in government revenue, and the increase of the demands for government outlays. Virtually all around the world the budgets of households, firms, and governments are based on past revenue and spending practice. Most people, most firms, and most governments plan to a certain extent on the unexpected variations in income and expense, but very few decision makers ever anticipate economic disruption on the level of this pandemic.
The response to the pandemic in advanced industrial countries such as those of Europe, North America, and Asia, has been to swiftly adopt emergency financial measures to minimize the social damage caused by the loss of income and revenue. These financial emergency packages differ from country-to-country but include making available emergency financial bailout packages such as loans, credits, one-time payments, subsidies, and other related measures. All national central banks have the authority to regulate their own currency. Emergency situations have historically been dealt with by central banks by producing currency to pay bills. The downside of such emergency measures has been that these measures by and large lead to a reduction in the value of the currency through inflation. Political leaders generally seek to avoid inflationary spirals because they historically have so often been associated with untenable political situations.
The response available to the leaders of the Central Asian countries are very different to those of the advanced nations in Europe, North America, and Asia. The Central Asian leadership in some of the Central Asian countries is highly competent and has promoted some of the best standards of government and financial management over the past three decades of independence and national sovereignty. Political leadership and financial management in both Kazakhstan and Uzbekistan have received very high marks for realistic, practical, and successful records. Uzbekistan, for example, in recent years emerged as having one of the most promising of post-Soviet economic reform programs, representing the second largest World Bank portfolio
in the Eurasian region.
But these nations now find themselves in a situation for which they did not prepare. All Central Asian countries have followed international prescriptions to develop diversified economies, but the prevailing circumstances have made it difficult to grow and diversify simultaneously. The most successful economy in the Central Asian region is Kazakhstan. But despite developing modern policy and practice throughout the system of governance, Kazakhstan remains highly dependent on primary commodity exports, particularly hydrocarbons, for its government revenue. While all oil market specialists counseled to prepare for price volatility for oil,
no one only a short time ago could have expected that the price of oil would plunge below zero.
Kazakhstan, along with all the other states of Central Asia, is highly dependent on exports for its source of foreign currency and highly dependent on imports for industrial goods and advanced technologies. Not one of the Central Asian states has the ability to finance from its own sources "stimulus plans" which will be capable of across the board payments to individuals, shops, production facilities, public enterprises such as schools, and local governments without the step of simply issuing more of its own currency. Initially the Kazakh government introduced a stimulus paycheck of US$95
to all unemployed in the country, as losses of the budget revenues estimated at US $5 B. In each of the Central Asian countries, simply issuing more of the national currency to offer bail-out payments would simply result in inflationary spirals. The only real exit from the economic conundrums caused by the COVID-19 pandemic is regional and international cooperation.
The long-term stage of the pandemic concerns the effects of the withdrawal from the containment and mitigation stages, going forward to the post-pandemic era. The long-term solutions to the problems of the pandemic are solutions which are regional and based on broad international cooperation. To their credit, the world's major international financial institutions have boldly stepped forward in marshaling financial resources for immediate assistance to countries around the world, including the Central Asian countries, in addressing the current medical emergency stage and looking forward to helping to finance containment and mitigation.
A great deal of the future will be shaped by how states negotiate international arrangements for addressing emerging global problems. The major international financial institutions such as the International Monetary Fund
and the World Bank
are rapidly working to develop financial platforms suited to developing countries such as the Central Asian states. Private philanthropic organizations such as Oxfam
, the Gates Foundation
, and many others are pledging to devote resources to the causes and the consequences of the COVID-19 pandemic. POST-PANDEMIC CENTRAL ASIA
We do not know how long the spread of COVID-19 will continue along the present trajectories and how virulent this coronavirus strain will prove in the long term. While everyone would like to retreat from the front line of battle with COVID-19, it is not clear that a retreat would not be followed by a more intense and more damaging confrontation. There are concerns about what is known from the first two months of the spread of the virus in Wuhan District of China is accurate and, even if the virus does follow a path of gradual attrition. Some observers
wonder whether a new wave or set of waves of higher or lower infectiousness of COVID-19 might follow.
The long-term effects of the pandemic can be expected to be profound but the direction that public policy will take is as volatile as the virus itself. Questions in the period ahead concern key policy questions. How will the immediate financial shortfall in the Central Asian countries be addressed? How will the migrant labor question be tackled? What will be the long-term lessons that are drawn from this crisis? Finally, what will be the impact regarding the values of society and leadership in post-pandemic Central Asia? How can economic collapse be averted? Some observers
note that Kazakh entrepreneurs expect the decline in the turnover of non-food producing companies to fall somewhere between 70 and 100%. Similarly, some predict
that as many as 30 percent of the Kazakh companies are destined to go bankrupt. What kind of new capacities can be expected to emerge to deal with problem of this scale, some ask
, "after more conventional approaches fell short"? Is Central Asia gaining the momentum needed to overcome the covid-19 crisis as a stronger and more connected region or is it on moving to the edge of the abyss? The debt issue in Central Asia just as in other areas of the pandemic terrain is clearly the urgent problem. Burhan Al-Gailani, argued
that "For now, governments are funding the immediate costs of their national stimulus packages through increased borrowing at historically low interest rates. Is it likely that this money will only be repaid after many decades, as was the case with European countries' Marshall Plan debts."
The economic conditions also spell difficult choices with respects to society and to public values. Catherine Putz raises critical questions
going forward. What lessons will be learned from the pandemic? Will law enforcement measures, vastly empowered during the crisis, be expected to recede to normal conditions after the crisis? Will the state's actions be up for judgement and state abuses open to punishment? Will civil rights abandoned during the crisis be restored after the pandemic is overcome? But how will this affect the values of society? In the past there were cases in which "strengthening the legitimate use of force
to ensure domestic security" was widely viewed as necessary, yet the state's current approach demonstrated a major shift in the balance between citizens' civil liberties and security, to the detriment of the former. Will the intrusiveness of necessary forms of oversight and surveillance such as those entailed by digitally-enhanced "contact tracing" also erode the individual's right to privacy, perhaps permanently?
In just the first few short months of 2020 the world witnessed the most fundamental transformation of the global order in recent history. The region of Central Eurasia provides vivid illustration of the many questions being raised by the pandemic. To many, it now appears the battle against the COVID-19 has two dialectically opposed aspects: only a strong state apparatus is capable of mobilizing the national capacity to fend off the immediate danger of spiking increases in the infection and, at the same time, only closely coordinated regional and global cooperation can in the end prevent the infection from spiraling to greater heights and spreading among more countries and regions of the world. Globalization bears the responsibility for this infectious disease. If it were not for the high-tech linkages of air, rail, and shipping connecting the entire globe, there could not be such rapid transmission of this new and dangerous virus. But more globalization may also be the only solution. Solutions to the many problems produced by this pandemic can only be achieved through the close connections of science, information, communication, and international cooperation that only more globalization can make possible.