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why the b5+1 matters

Why the B5+1 Matters

Author: Dr. Marsha McGraw Olive

Mar 21, 2024

Image source: CIPE

The B5+1 held in Almaty in March 2024 was the first public-private dialogue at the regional level in Central Asia. It has an analogy in the sport of rowing.  Instead of facing forward, rowers look backwards, as if to the past, while pressing towards the finish line. 

Central Asian businesses want to put the past behind:  broken pandemic supply chains, long waits to cross borders, absence of airline connections between major cities, multiple permits, endless customs requirements.  The future they anticipate is a paperless regional market with connections as easy as traveling from the District of Columbia to Maryland or Virginia.  This vision, many speakers agreed, would merge the interests of the state and private sector. Like rowing, they see it as a team sport.

The forward-leaning forum emerged from the first presidential summit between the United States (the +1) and Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan (the C5) in September 2023, which was itself historically significant.  So was its business counterpart, in three respects. 

First, by launching the concept of a B (for business) forum in the New York Declaration, the summit signatories put Central Asian companies on the global stage.  For the first time, they stepped onto a high-level dialogue platform on trade and investment with C5 governments and the United States.  This follows the successful B7 and B20 engagement model, which has operated for over a decade in the largest economies in the world.

Second, the forum innovated at the regional level.  Nothing like this has ever happened in Central Asia.  During preparatory consultations, private companies discovered how much they have in common with those in neighboring countries, not just in trade and transport but in growing sectors such as agribusiness, tourism, and e-commerce.  Many want to export but don’t know how to access new markets.  Others need faster transit and financing to expand or insure shipments.  Several speakers argued that the private sector can be the main driver to find solutions.  The forum gave business associations a mechanism to coordinate, serve their members better, and advocate for complementary policies by C5 governments.  Creation of an umbrella organization at the regional level, as recommended in the communique, is the logical next step.

Third, all this matters for the people of Central Asia.  In contrast to the defensive protectionism that shut down cross-border trade during the pandemic, the forum was all about expanding markets through harmonized regulations and procedures. That makes Central Asia more attractive for domestic and foreign investors.  Who benefits? Consumers, companies, and, by the way, public finances.  When the regional economy grows, so do national budgets.  If spent wisely, it will come back to people, in a virtual circle, for health, education, and transport services, which in turn puts growth on a sustainable path.

The communique recommendations resulted from months of surveys and studies by various business groups, including local American chambers of commerce. By any measure, their ideas can be judged as reasonable foundational steps towards a more integrated regional market.

But what is economically rational can be politically irrational.  And here is the catch.  For regional markets to expand, governments must relinquish sovereign prerogative and coordinate key cross-border and national policies.  This is not easy for states that have here-to-fore assiduously aspired to strengthen national sovereignty. 

Understanding this dynamic, B5+1 working groups looked for low-hanging fruit.  For example, all Central Asian countries have acceded to the CMR Agreement (1956) governing responsibility for loss or damage to goods in transit. The first priority recommendation in the B5+1 communique is for Central Asian states to sign the protocol for an electronic version (e-CMR). This would standardize documentation on the rights and responsibilities of carriers, making handling costs three to four times less expensive.  Implementation would require investment in e-government systems.

There is a recent precedent with digital modernization of the TIR Convention (1975) allowing passage of commercial goods across borders without paying customs duties. In January 2023, Uzbekistan and Azerbaijan conducted the first electronic (e-TIR) multi-modal transport of goods from Tashkent to Baku in line with the convention, heralding a new digital era.  Georgia subsequently interconnected.  A project proposed by the UNECE in February 2024 would prepare customs authorities in Kazakhstan, Kyrgyzstan, and Tajikistan to join e-TIR as well. 

The significance of abandoning paper for digital solutions that meet international standards in the greater Caspian region cannot be overstated. For the private sector, it means turning the Middle Corridor into a more efficient, and thus competitive, choice over the Northern Corridor.  

Other regulatory actions, such as trucking permits, are at the discretion of national authorities.  To avoid long border delays, forum participants from Bishkek traveled in two buses.  They exited the first on the Kyrgyz side, walked across the border, and continued to Almaty in the second. A representative of a transport logistics company asked me to imagine the cost such disruptions entailed for truckers with perishable cargo.  Thus, the second priority recommendation is to abolish the visa regime for drivers of heavy vehicles.

C5 governments have more to fear from inaction than from adopting – and critically, implementing -- international standards.  The crux of the issue is growth and jobs.  One often hears about the enviably high growth rates of Central Asian economies.  But that is on an absolute basis.  Even dynamic Kazakhstan is falling behind other upper-middle-income countries in per capita growth.  The primary reason, according to several forum participants, is the large state footprint that reduces opportunities for small and medium enterprises (SMEs) to thrive and generate employment.  Relieving current constraints, both behind and across the border, can unlock their potential.  

A window has opened for Central Asia to pursue a new growth model.  Holding the B5+1 forum annually will help by spurring conditions for a transformative infusion of investment in public infrastructure, people, and private SMEs.  But the B5 should take the lead as soon as institutional mechanisms are in place.

Fortunately, as the forum demonstrated, there are many innovative companies in multiple sectors that can take up the gauntlet. At the same time, governments recognize the constraints and are increasingly committed to coordinate.   

Can the C5 cross the finish line to a regional market?  If practical steps build trust and momentum, it can.  And eventually without a +1. 

 

Note: The author moderated several panels at the B5+1 Forum that are reflected in this article.  


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