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Kazakhstan

Mixed Progress, Lurking Problems: A Roundup of Regional GDP Results

Alec Appelbaum Aug 28, 2001

A rare point of agreement in Central Asia and the Caucasus concludes that former Soviet countries are not growing as fast or as steadily as one might hope. But how fast are they growing? To help readers gauge the region's economies in relation to the past and to each other, EurasiaNet presents the GDP roundup below.

We compiled Interfax reports from the past several weeks to produce this roundup. Readers should use this data to make general conclusions about trends, but should take specific numbers with a grain of salt. While two resource-rich states, Kazakhstan and Turkmenistan, showed steep growth over last year's output, all eight states must develop more diverse economies in order to prosper. Turkmenistan, for instance, looks more like an autocracy- even though its overall growth seems to exceed Kazakhstan's. The paragraphs below provide a snapshot of each state's progress to date - and imply necessary next steps.

ARMENIA

This Caucasus state's biggest problem, says Brookings Institution scholar Fiona Hill, is the rate at which people leave it for better opportunities elsewhere. So far this year, Armenia's economy grew 6% over corresponding output last year, with industrial production growing less than 1%. Encouragingly, wages are climbing; spokespeople say that average compensation is 12.3% higher than it was at this time last year. And unemployment is down 13.5%. But there's still too little legitimate work for the available labor pool. The shadow economy still accounts for between 30% and 40% of GDP.

AZERBAIJAN

Tasting the riches of its oil reserves, this country fattened its economy by 9.1% so far this year. Wages gained 24%, foreign trade ran a $550 million surplus, and official unemployment sits below 1%. Of course, these statistics tell only part of the story. Even with the gain, the average Azerbaijani earns less than a dollar a day, and it's hard to predict how overall living standards will rise as the price of oil fluctuates. Azerbaijan's financial industry also looks sloppy. Tax fraud has also surfaced in Azerbaijan, and past-due loans accounted for a third of all the state's debt. The state's management of its new oil fund will define further economic progress.

GEORGIA

While western oil companies and financiers strut around Tbilisi, this state remains heavily agrarian. Agriculture accounts for a fifth of its production, according to official data, and a 10% jump in agricultural output helped the economy grow 5.2% so far this year. In the cold first quarter, GDP grew only 1.7%. Georgia's mechanics appear unimpressive, though they are mending. Its tax collection rate of 15% of GDP is one of the region's lowest, and the shadow economy accounts for nearly a third of all output and more than half of small business activity. While both these indices improved slightly so far this year, the country's separatist movement and parliamentary squabbles suggest that tax evasion and corruption will persist.

KAZAKHSTAN

This country became the region's star by both tapping natural resources and building a nigh-genuine financial system. Its growth evokes that of a boomtown; a 14% increase in GDP, a 13.6% hike in industrial production, and a 30% rise in construction. And this growth seems to be spreading throughout the economy: transportation and communications spending reportedly climbed 11% as the state built a new capital in Astana and foreign businesses settled in Almaty. Like all its neighbors, though, Kazakhstan struggles with corruption. A well-publicized amnesty campaign brought $480 million in shadow capital back into the state coffers. [For more information see EurasiaNet's business archive .] If that money supports broad economic development, Kazakhstan could really outshine its neighbors.

KYRGYZSTAN

This country, once an emblem of democratic reform, has come to symbolize frustration as journalists and dissidents have complained of crackdowns. "Kyrgyzstan is perhaps the most disappointing of the Central Asian countries," House Foreign Relations Committee Chairman Benjamin Gilman said earlier this summer. Kyrgyzstan's economy also looks grim. The state reported 6% growth in GDP so far this year, with big boosts from agriculture and gold mining. In a news conference, though, Prime Minister Kurmanbek Bakiyev acknowledged that a 28% drop in investment overshadowed this modest growth. Bakiyev also forecast economic growth of 5% a year and thin surpluses of bread and cereal. Kyrgyzstan has begun restructuring its large foreign debt, but it appears mired in very difficult conditions.

TAJIKISTAN

This struggling state managed to boost its GDP by 8.9% in this year's first seven months, but still operates an official economy of roughly $452 million. That works out to $72 of output per resident, even with unemployment down 13%. Tajikistan's most notable industry is the distribution of heroin from Afghanistan; the UN reported that nearly 50% of the heroin that ends up in Western Europe moves through Central Asia. Tajik officials claim to have seized 50% more heroin in this year's first six months than they did in the same period last year. But the best pay in the country still seems to come from smuggling. The Los Angeles Times reported that a courier can make up to $700- a year's average wage- delivering a single shipment.

TURKMENISTAN

Under the increasingly tsar-like Saparmurat Niyazov, Turkmenistan reported a 16.2% increase in GDP so far this year, with a 10% boost in industrial production and a tripling of gas extraction. Per capita income has climbed from $1200 in 1992 to $4000 this year, according to official data. But that official data may be especially dubious. Turkmenistan claims to provide free bread, gas and electricity, and its aging president habitually sacks ministers who fall out of his favor. Scott Horton, a lawyer with Patterson, Belknap, Webb & Tyler who works in the region, notes that Turkmenistan is far behind Kazakhstan in the evolution of its financial system. With poverty rates almost as high as Kyrgyzstan's, this apparently rich state hides a wealth of problems.

UZBEKISTAN

Like Kyrgyzstan, Uzbekistan has to struggle both with a stalling economy and a disappointed West. The country's GDP grew 4.2% in this year's first half, and real incomes grew 19.6%, according to state data. These numbers scarcely bring Uzbekistan out of crisis. It remains hugely dependent on agriculture for revenue, and its shrinking Aral Sea has made the procurement of water a crisis. The state's official data, which Horton derides as "comic" for its exaggerations, implies anemic growth. The more disturbing prospect is that Uzbekistan may, like the Aral Sea, be getting smaller with no clear way to replenish itself.

Alec Appelbaum is a contributing editor to EurasiaNet.

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