High marks for UNCTAD’s Investment Guide to the Silk Road (2009) as a source of information for trade and investment in Kyrgyzstan, Kazakhstan, Tajikistan, Uzbekistan and Western Chinese provinces

by M. Ulric Killion

A search for information on the polities and economies of Kazakhstan and Uzbekistan led to the discovery of the 2009 UNCTAD (United Nations Conference on Trade and Development) study, which is the UNCTAD’s Investment Guide to the Silk Road (2009). The UNCTAD’s 2009 study as a collection of data, a broad in depth coverage of the subject, and a clear presentation of facts and data deserves high marks.

On September 3, 2009, when launching the Investment Guide to the Silk Road in China, UNCTAD wrote, “As a step towards revitalizing the Silk Road region as a trading and investment location, UNCTAD´s Investment Guide to the Silk Road was launched during the Sixth International Investment Promotion Conference in China.” Additionally, UNCTAD wrote, “Launching the Guide during the Sixth International Investment Promotion Conference is of great significance, as the Conference aims at addressing challenges for investment promotion at a time of global economic crisis and of opportunities in the forthcoming recovery of the world economy.”

For these reasons, the UNCTAD’s Investment Guide to the Silk Road is a highly recommended study and reading for those seeking information concerning Central Asian countries or the Silk Road region. This is because the UNCTAD 2009-study serves as an important source of readily available history, background information, data and practical information regarding trade and investments in the region of the Silk Road. For purposes of the investment guide, the region known as the Silk Road, or more specifically, the Silk Road countries comprise Kyrgyzstan, Kazakhstan, Tajikistan, Uzbekistan and China – the Western Chinese provinces.

An excerpt from the Executive Summary of the Investment Guide to the Silk Road reads:

“The new Silk Road region is emerging from decades of centrally planned economies that were closed to foreign investment, and the current business environment does not meet international best practices in many respects. Despite an overall opening of the economies to international investment, the business/investment legal and regulatory frameworks of the Silk Road countries are still evolving, public institutions are still adjusting to their new roles of providing services and good governance, and certain types of human resource skills such as modern management can be in short supply.

Nonetheless, the Silk Road region may be one of the world’s most potentially lucrative untapped investment locations. It has an abundance of natural resources such as petroleum, natural gas, hydropower and minerals. It also excels at producing agricultural goods such as cotton, fruits and vegetables, meat and animal hides, and seed oils. The famed cities and attractions along the Silk Road make for an intriguing tourism destination.

In addition, the Silk Road countries have an educated workforce. This Investment Guide to the Silk Road is intended to give readers comprehensive introductory information about the investment climate and opportunities in the Silk Road region, but its primary goal is to encourage potential investors to explore in more detail their own ideas for possible regional investment projects.”

The UNCTAD accomplished this purpose by presenting a wealth of readily available data in a well-structured format. The subjects and subparts of the UNCTAD’s study widely range from: the old and new history of the Silk Road, political and economic development, market size and access, the global financial crisis, the business environment, economic performance and structure, trade and trade agreements, legal and regulatory framework for business, foreign direct investment and investment climate, key investment sectors, finance and taxation, capital markets, special economic zones (SEZs), infrastructure issues and demographic economics.

For those who are unfamiliar with the Silk Road countries and seeking information regarding finance and investments in the Silk Road countries, the UNCTAD study will be a wealth of information. This is because the Silk Road countries have been relatively isolated regions of polities and economies, though containing an abundance of natural resources such as oil, natural gas and minerals. As for trade and trade-related issues, the study is equally invaluable. This is because of the five Silk Road countries only two countries – Kyrgyzstan (1998 accession) and China (2001 accession) – are members of World Trade Organization (WTO). All this enhances the importance of garnering an understanding of a broad spectrum of trade-related issues such as the investment climate, financial structures and, especially, legal and regulatory frameworks.

For instance, excerpts from the UNCTAD’s Investment Guide to the Silk Road (2009), at pages 9-14, read as follows.

II. THE SILK ROAD BUSINESS OPERATING ENVIRONMENT

2. Structure of economies

The Central Asian economies are based largely on services, with that sector accounting for 43–55 per cent of GDP in all four countries (see Figure 5). The agricultural sector is still substantial at around 32 per cent of GDP in Kyrgyzstan and 22-24 percent in Tajikistan and Uzbekistan, but Kazakhstan’s figure of around 6 per cent shows the different economic structures in the region. The sectoral compositions of the four Chinese Silk Road provinces’ economies are remarkably similar, despite variations in their sizes and core industries. . . .

3. Trade

Trade was the foundation of the historical Silk Road and it is still important to the region. However, modern boundaries have complicated the flow of goods across the Silk Road because of the border customs inspections, tariffs, trade documentation, vehicle inspections, visas and other requirements. Many of these issues are being addressed by the World Trade Organization (WTO) to facilitate global trade. . . .

As for the Central Asian countries and their levels of intra-Silk Road trade, the composition of intraregional trade as a percentage of total imports and exports rose gradually between 1999 and 2005. . . .

To put this into a comparative perspective of how intraregional trade within the Silk Road stacks up against various formalized regional cooperation arrangements that have some form of a free trade agreement amongst the members, Table 5 displays the results of intraregional trade in the European Union (EU), the North American Free Trade Agreement (NAFTA), the Association of South-East Asian Nations (ASEAN) and others. . . .

4. Trade arrangements

The Silk Road countries do not have a regional free trade agreement, but they have several bilateral trade agreements (BTAs) with each other that is gradually developing into a trade network for the region. The Commonwealth of Independent States (CIS), which includes the Central Asian countries, have signed or implemented several BTAs with each other, and China is vigorously pursuing BTAs as well.

Table 11 shows the BTAs between the. . . .

5. Legal and regulatory framework for business

The Central Asian countries have made progress with numerous legal reforms since the early 1990s, such as new commercial legislation, but the implementation and enforcement of the legal and regulatory frameworks and the governing institutions upholding them have not always kept pace. Bureaucratic red tape for businesses has been reduced and continues to be addressed through regional trade facilitation programmes, bilateral agreements and unilateral simplification of procedures, but obstacles and delays are still common and increase transaction costs for firms. Gradual improvements are being made in areas such as investor protection and corporate governance standards, and in company, securities and bankruptcy laws, but as a whole Central Asia does not measure up to the standards of the new member of the European Union or the Baltic States. The Chinese Silk Road provinces are also making adjustments in response to the new economic realities in the global marketplace. Presently, their business legal and regulatory frameworks, along with the local government institutions implementing them, are not as ready for the requirements of international business as are China’s eastern provinces. The Silk Road provincial and autonomous regional Governments are introducing local economic policies and regulations that are in line with national economic reforms, Beijing’s “Great Western Development Strategy” (2000), its “Go West” campaign, and other western development plans and policies.

One of the key problems in much of the Silk Road is the implementation and enforcement of laws. . . .

Source: Investment Guide to the Silk Road [PDF, 78 Pages, 3616Kb]; Also 丝绸之路投资指南 is available in: Chinese.  

Copyright © Protected - All Rights Reserved M. Ulric Killion, 2009.