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Opening Remarks at the 2nd Ministerial Conference on Central Asia Regional Economic Cooperation, by Shigemitsu Sugisaki, Deputy Managing Director, IMF
November 12, 2003
1. Good morning Mr. Chairman, President Chino, Excellencies, Ladies and Gentlemen. It is a great pleasure to be here today to participate in this important conference. As I told Deputy Prime Minister Asimov yesterday, it is five years—almost to the day—since my last visit to Tashkent. My return has been too long in coming, but I am very pleased to be back and to have this opportunity to meet with you today.
2. The economies in Central Asia have achieved a great deal since my last visit. Economic growth has strengthened considerably, particularly for those countries that have succeeded in achieving macroeconomic stabilization and implementing market-oriented structural reforms. Prudent fiscal and monetary policies have sharply reduced inflation and contributed to impressive export performance in some cases, and structural reforms are now beginning to pay off.
3. However, much remains to be done. Stronger economic growth has yet to translate into a broad-based reduction of poverty, which remains unacceptably high across the region, especially in rural areas. Foreign investment into the region, outside the oil and gas sector, is still very low, and regional trade falls significantly short of potential, in large measure owing to trade barriers and informal trade restrictions. As the latest EBRD Transition Report confirms, Central Asia also continues to lag behind other transition economies in terms of creating a healthy business climate.
4. What is clear is that the Central Asia region needs to grow together. Our experience from around the world has demonstrated that countries that have adopted outward-oriented policies, by encouraging trade and foreign investment, have achieved more rapid growth and progress in poverty reduction. In contrast, those that have followed more isolationist policies have tended to lag behind. I share the view of Mr. Azimov that trade is an engine of the economy.
5. This is an important message that I would like to bring to you today. Your countries are endowed with vast natural resources and great potential for growth. By working together to foster closer economic integration—both within the region and outside it—and to exploit your respective comparative advantages, all your countries can move ahead. In this way, you can also benefit fully from the emerging growth hub in Asia, where growth has outpaced that of Europe by 5 percentage points a year over the past decade. That is why initiatives such as this Ministerial Conference are so important, and I commend President Chino and the ADB for their efforts in this forum and elsewhere.
6. Let me now say a few words on what we at the IMF see as the policy priorities. First, macroeconomic stability, underpinned by appropriate fiscal, monetary and exchange rate policies, is a prerequisite for strong and sustained economic growth. As I mentioned, a number of countries in the region have made encouraging progress in this regard.
7. Second, closer regional cooperation can help boost growth for all countries in Central Asia. Here, the issues before this conference are particularly relevant. Regional transportation networks need to be developed to facilitate access to world markets. And reinforcing cooperation in the areas of energy and water will be crucial for regional development and also for addressing serious environmental issues.
8. Third, there remains significant scope for greater trade liberalization. I applaud the decision to broaden the discussion in this conference and establish a coordinating committee on trade policies. This represents an important opportunity to reap the benefits of trade for the whole region by liberalizing trade regimes. Fifty seven million consumers in the region represent a promising market that companies will seek to access through trade and foreign direct investment. Only when businesses can establish themselves in one country and export to another will investment be viable anywhere in the region. I should add in this context that, while regional and bilateral preference schemes can play a useful role in promoting regional trade, our experience suggests that they are no lasting alternative to a multilateral approach.
9. Fourth, sustaining high growth requires economic diversification. Many countries in Central Asia show high concentration in both export commodities and markets, reflecting their natural resource endowments as well as economic and political history. This concentration may increase vulnerability to external shocks and limit the potential for job creation. Promoting diversification requires high quality investment by both the public and private sectors. This is not an issue of the government "picking winners" but rather of providing the physical infrastructure as well as the legal and regulatory environment to encourage development of private business.
10. Fifth, experience demonstrates that transparency and good governance play an important role in fostering stronger growth. In the region, there remains substantial scope for strengthening efforts to fight corruption and capture of the state by powerful political and business elites, including but not only in those countries that are rich in natural resources.
11. Finally, let me turn to the role of the IMF in Central Asia. I trust it goes without saying that we are fully committed to assisting you in your efforts to strengthen growth and improve the living standards for all your people. There are several ways in which we are doing this: (i) first, through our policy advice, drawing on the experience of our members; (ii) second, through our technical assistance activities, including on fiscal regimes and tax policies, our financial sector work, including through the FSAP process, and in the important area of economic statistics; and (iii) third, in our financial arrangements with several of the countries in the region.
12. To conclude, Mr. Chairman, this is an important conference and we welcome it. The Fund stands ready to do all it can to support reform efforts in your countries and to help Central Asia increase its integration into the global economy and achieve its potential for growth.
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