JOURNAL OF COMPARATIVE ECONOMICS 23, 226–229 (1996)ARTICLE NO. 0059

RICHARD POMFRET, The Economies of Central Asia. Princeton: PrincetonUniversity Press, 1995. vii / 217 pp., index, $35.00.

This book is based on Pomfret’s experience as United Nations RegionalAdvisor to the newly independent economies of Central Asia, mostly in 1993.Its three main parts cover the background to the emergence of the formerSoviet republics as independent nations, descriptions of the economic struc-tures and transition policies of the individual countries, and a regional over-view and discussion of prospects for economic recovery and growth. Thedetail and completeness of treatment differs among the various countries,since as most researchers have found, some of these governments are muchless open with information than others, and the war conditions of Tajikistanmake it difficult either to know what is happening, or to discern any clearagenda of economic reform or development policy.

The book is an excellent survey of the initial economic conditions in theregion and the effect the breakup of the USSR had on the economies of theCentral Asian republics. They were all heavily integrated into the Sovietsystem, and the trade shock that accompanied dissolution sent their economiesinto a tailspin of disrupted supplies, lost markets, declining GNP, and unem-ployment. During much of the period Pomfret surveys, these countries werestill in the ruble zone, which complicated their relations with the rest of theCIS, and committed them to share in the inflation that the CIS as a wholewas experiencing. Pomfret’s full and informative treatment of the problemof inflation and trade arrangements within the ruble zone is a valuable partof the book.

Pomfret notes a number of common problems all these economies face.These include the constraint that their desert environment and limited waterresources place on economic development. They all have the common prob-lem of having been closely integrated into the Soviet economy, and in thatconnection of having a structure of output that is highly distorted in relationto the demands of survival under market conditions and participation in theworld system of market economies. They are remote from the developedregions of the world, and have poor transport links to major markets. Never-theless their experience since separation and their prospects for recovery andresumption of growth are far from uniform. Pomfret sees Kyrgyzstan andKazakhstan as the only ones committed to economic reform. His capsule

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description of Kazakhstan is that it is the ‘‘wild west in the East,’’ and heviews Kazakhstan as the country with the brightest prospects for development,largely because its rich hydrocarbon resources will attract large inflows offoreign capital. He characterizes Kyrgyzstan as ‘‘the Soviet republic leastprepared economically to exist as an independent economy.’’ As subtitle forhis Kyrgyz chapter he uses the once common characterization of the countryas ‘‘the Switzerland of Asia,’’ though in his description of its postseparationtrauma, he offers little evidence to support that metaphor. His chapter subtitlesdescribe Uzbekistan as ‘‘oriental despotism,’’ and Turkmenistan as the ‘‘Ku-wait of Asia,’’ and summarize Tajikistan’s main feature as ‘‘Civil War.’’

Conditions have changed a bit since 1993, and his thumbnail characteriza-tions seem less relevant and helpful now. Kazakhstan has faltered in realizingits promise partly through the impositions placed by Russia on a pipeline linkfor its hydrocarbons and partly by failure to move systematically to completethe set of structural reforms needed to create the conditions for a marketeconomy. It now seems that about the only characteristic Kyrgyzstan willshare with Switzerland is an abundance of mountains. Turkmenistan’s presi-dent, Suparmurad Niyazov, may well have thought that he could emulate amiddle eastern sheikdom, but the Turkmen economy has foundered on itsinability to get its hydrocarbon wealth to market and to get paid for it. Thereis no denying the illiberal character of the regime of Uzbekistan, which hasnot loosened since Pomfret’s writing, but the Uzbek government has morerecently begun to move a bit on reform and to accept more advice from theIMF and World Bank on stabilization and structural reform. Most importantly,it has managed to keep the decline in its GDP well below that registered inthe other Central Asian countries. Uzbek GDP is now probably larger thanthat of Kazakhstan. It started with some significant advantages, notably alesser degree of trade and energy dependence and a large cotton output, whichas a fungible commodity has enabled it to maintain trade by shifting awayfrom the CIS. All these countries have introduced domestic currencies oftheir own, with the concomitant independence in monetary policy, thoughtheir use of monetary independence for stabilization has been only partlyeffective. All experienced very high rates of inflation, on the order of 45%per month for certain periods, but, by the end of 1994, Kyrgyzstan andKazakhstan had brought monthly inflation down to single-digit levels, andUzbekistan had achieved some moderation in the growth of the money supplyand in the rate of inflation. In Turkmenistan and Tajikistan, inflation remainedout of control in 1995.

One premise underlying the book that the reviewer agrees should color allanalysis of Central Asia is a recognition that these countries face not only aproblem of transition, but also a problem of development. They have rapidlygrowing populations, with a large contingent of young people who will be

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ready to enter the workforce in the coming few years. Job creation, requiringthe discovery of lines of activity in which these countries can earn their wayin the world and large investment expenditures to create jobs in those activi-ties, is a crucial problem. Reviewing the inclinations revealed in CentralAsian development policies and the experience of the rest of the underdevel-oped world in the period since the Second World War, the author’s mainrecommendation is that they avoid protectionist import-substitution policiesas the solution to the trade-shock-induced recession. He says the lesson ofworld economic development in the 1970s is that countries which have gonedown that path have experienced economic stagnation. The success storiesall involve outward oriented, export-led, growth strategies. As he puts it, ‘‘thefirst and clearest lesson [of economic development experience elsewhere inthe world] is to avoid the temptation of import-substitution industrialization.’’This is an issue on which the reviewer takes a view somewhat different fromPomfret’s. Certainly these countries are all small enough and have the kindof resource base that makes it clear they can only develop as open economies.The population of Kyrgyzstan, for example, is only 4 million people, apprecia-bly less than that of my own state of Indiana. But the region as a whole isdisadvantaged in any effort to link up with markets abroad by virtue of beinglandlocked and remote from major markets and possessing only limited andexpensive landlinks with the outside world. The closest market is the rest ofthe CIS, with which Central Asia was originally integrated. But how soonthe CIS region will recover economically and become an expanding marketcapable of serving as a locomotive for Central Asian growth is quite uncertain,and much of the old intra-Soviet flows will never be reconstituted becausethey did not conform to comparative advantage. Moreover, any reintegrationwith Russia will encounter a Russian determination to impose onerous condi-tions on what after all are old colonies. The Russians will want to share inexploitation of natural resources, will want special investment opportunities,will impose high transit fees for rail and pipeline transport, and will usepotential denial of access as a threat. The lopsided structure imposed on mostof the Central Asian economies by the old Soviet system leaves some roomfor import substitution; most of these economies were forced into overspecia-lized roles as materials producers and suppliers, with weak upward and down-ward linkages from those activities. Much of the potential for replacing im-ports from the old Soviet Union to create a more well-rounded economy is,however, viable only for the region as a whole. In my view their future hasto lie in regional development, which requires some economic integration inthe sense of creation of a uniform market space and acceptance of specializa-tion on the basis of market principles. At the moment the various countries arefollowing rather autonomous development policies, Uzbekistan substitutingdomestic wheat grown on irrigated land for grain imports and Kazakhstan

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trying to shed its import of electricity from Kyrgyzstan to become self-sufficient in electric power generation.

The book concludes with a couple of appendices. One deals with measure-ment issues, raising useful warnings and generalizations that cast doubt onthe unqualified assertions often made about what is happening to major aggre-gates in those countries. Obviously, though, a short appendix can only scratchthe surface of this topic. The other offers some generalizations on lessons tobe learned from transition experience elsewhere in the socialist world. Someof them are conventional, but three seem especially a propos. The first is thatinternational advisors have a role to play in the transition, but that their advicecan sometimes be wrong or unhelpful. Vide the IMF’s early advocacy ofretaining a common currency for the CIS and the despair the Kyrgyz reformersmust feel as they dutifully follow IMF/WB guidance on macrostabilization,always meaning implicitly price-level stabilization, while their GDP continuesto spiral ever downward and much capacity that could be used to improvethe welfare of the population, as in education and health care, goes unutilized.The second is that an influx of foreign investment, which these countriesbadly need, depends on foreigners finding projects from which they thinkthey can make profits, not on what the host country thinks would be goodinvestments. The third is that, as China’s experience shows, in a country witha large agricultural sector, agriculture first is a good strategy, though freeingand untangling agriculture from its collective roots will be more complex inCentral Asia than it was in China.

ROBERT W. CAMPBELLIndiana UniversityBloomington, Indiana 47405

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