Building Value Chains in Central Asia

We have been commissioned by the Afghanistan, Kyrgyzstan and Tajikistan (AKT) Consortium, financed by donors through UNDP, to conduct detailed value chain and trade flow studies of key products across the three AKT countries. Having lived and worked in the Middle East and Central Asia for over a decade, anyone travelling from Kabul to Kyrgyzstan will realize that Central Asia, Afghanistan, Iran and Pakistan second only to Greenland for lack of strategic infrastructure.

The IMF’s Regional Economic Outlook Update for the Caucasus and Central Asia, released on May 19 2015, forecasts a downward revision of 2.5 percentage points to 3 per cent, from the estimate made in October 2014. With the economic slowdown hitting key trading partner Russia (GDP growth is at 0.5 per cent), alongside lower oil prices (affecting the external position and current account balances of Azerbaijan, Kazakhstan, Turkmenistan, and Uzbekistan) growth outcomes are likely to remain subdued. In addition, the appreciation of the US dollar and the depreciation of the ruble have compounded the challenges faced by the region as a whole, with the growth outlook now looking as bad as it did in 2008- 09.As a result, identifying viable value chains for development are critical if Central Asia is to gain from the economic benefits resulting from accessing global markets.


The Central Asia-South Asia region continues to deal with a host of development challenges, which are well known. What is less well known, but becoming better known by the day, is the vast potential of this region for becoming a new global center of economic dynamism in the coming decades. The Silk Road parlance is increasingly being used by government officials, journalists, and academics in an ever wider number of countries, and other rosy projections for the future of Central Asia-South Asia are using such terms as the “global land bridge” and the coming “epicenter of global economic activity.” Regional economic banks like the ADB and other international financial institutions are increasingly turning out analyses that have lent greater legitimacy to the projections of future Central Asia-South Asian growth and development. The new Asian Infrastructure Investment Bank can also be expected to focus considerable resources on the region. The increased degree of attention being given to this topic is based on a variety of causal factors, chiefly increased foreign direct investment (FDI).

Economists are projecting that Central Asia-South Asia (with its onward connections to Europe and East Asia) will become the new global center of economic growth and activity in the next ten years, with the cornerstone of international economic dynamism shifting from East Asia to South Asia. The impact of a combination of intersecting factors is projected to result in a broad range of expanded growth and development across Central Asia-South Asia. In the short term however, with economic vulnerabilities exposed as a result of falling international commodity prices and a stronger US dollar, the entire regional geo-economic context is rapidly evolving. For example, the membership of the Shanghai Cooperation Organization (SCO) is increasing, with Afghanistan, Belarus, India, Iran, Mongolia and Pakistan now observers, and Armenia, Azerbaijan, Cambodia, Nepal, Sri Lanka, and Turkey now dialogue partners.
According to McKinsey & Company, in their 2012 report entitled ‘Urban World, Cities and the Rise of the Consuming Class’, it has been calculated that the economic center of gravity of the World is rapidly shifting east at a speed of 140 km a year; a pace faster than previously recorded in human history. As a result, we fielded a team of international and national experts to identify - based on empirics - high potential products that could boost exports and increase mutual dependencies.