How Central Asia to Escape from trade isolation?: Policy targeted scenarios by CGE modelling

Abstract

It has been 30 years since Central Asian ‘-stan’ countries, namely, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, declared their independence in 1991. The Republics have chosen various transition paths from centrally planned to the market-based economic system. The research found that Central Asian leaders’ protectionist policy, on top of the landlocked geographical environment, made trade costly, rendering these countries further isolated. Consequently, economic development slows down, unemployment increases and poverty rate extremes. Eventually, the isolated region (relatively, excluding Kazakhstan) is imprisoned in a low-income trap and framed into a vicious circle. As a solution for tackling high-trade costs in the region, this paper utilises the Global Trade Analysis Project (GTAP) Computational General Equilibrium (CGE) modelling to simulate the impacts of implementing policy-targeted scenarios. The study presents that tariff reduction/elimination and trade facilitation policies could flourish the region by bringing significant economic welfare and robust GDP growth. The trade facilitation scenarios impact the region's economy much more positively than do tariff liberalisation scenarios.