Central Asian countries are easing trade barriers to create a unified regional market

The agreements mark the first steps towards the creation of a free trade zone, reports Eurasianet.

Central Asian states are dismantling trade barriers, creating the prerequisites for the formation of a unified regional market. Recent diplomatic efforts seem to have attracted the attention of the Kremlin, which is concerned that freer trade in Central Asia will facilitate the expansion of commercial networks bypassing Russia.

The creation of a unified market in Central Asia, ensuring the unhindered movement of goods and services, is a central goal of the regional economic program supported by the United States and known as the B5+1 process. This plan, launched in March, calls for the five Central Asian states – Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan – to take a leading role in promoting regional free trade and diversifying export routes.

Given the surge in diplomatic activity in mid-April, Central Asian leaders seem intent on exploring the potential of B5+1. The rationale behind B5+1 is that Central Asia, with simplified customs procedures, along with effective mechanisms for protecting property rights and resolving commercial disputes, will be able to attract more Western trade and investment. This, in turn, will make the “Middle Corridor” trade route the most profitable option for regional governments and businesses.

On April 18, during a meeting between Uzbekistan’s President Shavkat Mirziyoyev and his Tajik counterpart Emomali Rahmon, 28 intergovernmental agreements were signed covering various political, economic, and social spheres. Two agreements are specifically aimed at facilitating Uzbek-Tajik trade: one focuses on simplifying customs procedures at road, rail, and air border checkpoints, while the other addresses “industrial property” rights.

Prior to Mirziyoyev’s visit, around 600 officials and business leaders from both countries attended an investment forum in Dushanbe, the capital of Tajikistan. According to Uzbekistan’s Ministry of Trade, the participants showed the greatest interest in developing joint projects in the mining sector and green energy. They also focused on expanding trade.

The Tajik news service “Asia-Plus” reported that the two countries are working together to create a free trade zone at the Oybek-Fotehobod border crossing, as well as to build a logistics hub in Andarkhan in the Fergana Valley. Additionally, Tajikistan’s official news agency “Khovar” reported that both countries are preparing to eliminate the need to fill out cumbersome permit forms at Tajik-Uzbek border checkpoints for trucks transiting through both countries.

According to official data from Tajikistan, the bilateral trade turnover in 2023 amounted to 505 million dollars. However, officials aim to increase the annual trade turnover to 2 billion dollars “in the coming years,” according to a report from one of the Uzbek media outlets.

This same figure – 2 billion dollars – represented the target indicator for bilateral trade turnover mentioned by the President of Kazakhstan, Kassym-Jomart Tokayev, after he signed a series of bilateral agreements with the President of Kyrgyzstan, Sadyr Japarov, on April 19. Two of these agreements concerned measures to facilitate cross-border transportation. At a press conference following the signing ceremony, Tokayev stated that the main goal of bilateral relations is to stimulate the exchange of industrial goods.

“We have come to a common conclusion that there should be no unresolved issues between our countries. Special attention was paid to strengthening trade and economic ties,” Tokayev said. He added that “specific measures” are being implemented to facilitate trade, including the digitalization of customs operations at numerous Kazakhstan-Kyrgyz border crossings. The modernization is expected to be completed by 2028.

After negotiations with Japarov, Tokayev held a phone conversation with Mirziyoyev of Uzbekistan on April 23. Although there were few details about the substance of these talks, it is likely that the topic was regional trade. “The dynamic development of bilateral relations and cooperation at the regional level was emphasized,” noted Tokayev’s press service.

Trade statistics show that at the beginning of 2024, intergovernmental freight transportation by truck increased in Central Asia. However, not all news is positive for promoting free trade.

Perhaps the most complicated bilateral relations in Central Asia at the moment are between Tajikistan and Kyrgyzstan; the trade turnover between these two states in the first quarter of 2024 amounted to only 2.2 million dollars, which is one-fifth of the level for the same period last year. Border disputes in recent years have led to armed clashes, and about 10 percent of the Tajik-Kyrgyz border remains un-demarcated.

All movement in Central Asia towards facilitating trade seems to be troubling Moscow. In a report on the latest diplomatic events in Central Asia published on April 21 by the moderately pro-Kremlin “Independent Newspaper,” there was an attempt to downplay the potential of a functional regional market.

The article quotes an “expert on Central Asia” named Serdar Aitakov, who pointed out that Turkmenistan will remain a major obstacle to efforts to develop connections in the foreseeable future. Among the country’s problems is a “catastrophic shortage” of “qualified personnel for organizing international cooperation within contractual mechanisms.” Although this may be the case, Ashgabat’s interest in expanding regional trade seems relatively high, as evidenced by the large delegation the government sent to the first B5+1 conference in Almaty.

Alexander Knyazev, a researcher at MGIMO, one of the most prestigious higher education institutions in Russia, called discussions about regional economic integration premature, noting that no multilateral trade discussions have led to progress in forming a common market. The unification of bilateral agreements, rather than illusory multilateral formats, will shape regional trade, Knyazev stated, criticizing the B5+1 concept.

Despite this, bilateral agreements facilitate the search for points of contact among the states in the region. In a communiqué published following the B5+1 conference in Almaty, it was noted that “trade and transit costs in landlocked Central Asia are 60 percent higher than in coastal countries,” and it further stated that “participants agreed that [trade] costs could be reduced by eliminating non-geographic barriers that hinder the flow of goods and people across borders.” Agreements signed in mid-April demonstrate that Central Asian leaders are addressing this key issue.