The Foreign Service Journal, April 2003

an increased risk of catastrophic failures. There is also a lack of cooperation, and increased politi- cal tension, about intra-regional water sharing and management, with some countries contemplating large, potentially inefficient invest- ments in water storage and trans- mission based on narrow country- based, rather than regional-level considerations. Trade and transit of both goods and people are increasingly prob- lematic, with Uzbekistan’s recent trade policies now creat- ing a special problem for the entire region, and for Kyrgyzstan and Tajikistan in particular. Communicable diseases, especially HIV/AIDS and TB, and the narcotics trade have both become serious problems for the entire region. Finally, the poorest sub-regions within these countries — for example, the densely populated Ferghana Valley that goes through Kyrgyzstan, Uzbekistan and Tajikistan, and the Aral Sea region of Kazakhstan and Uzbekistan — are hardest hit, with the most vulnerable population groups bearing the brunt of regional disintegration. Common Challenges The Central Asia countries face a common set of chal- lenges, although their intensity and impact differ signifi- cantly from nation to nation. At the national level, these challenges include: further market reform, enhanced institution building, an improved investment climate, reformed social service needs, and, in two cases, high external debt. At the regional level, the challenges include trade and transit, water and energy cooperation, oil and gas pipeline access, communicable diseases and drugs, and the environment. In addition, at least two countries face spe- cial needs for increased concessional finance, and all will require additional political reforms. Looking at these key challenges country by country, the following broad-brush picture emerges: Kazakhstan probably has the brightest economic prospects among all five Central Asian states, comparable to Russia and Ukraine, thanks entirely, and fortuitously, to its extraordinarily rich energy endowment. The major risk in the longer term may lie in the inappropriate use of rev- enues earned from these energy resources — a problem that has plagued many other resource-rich developed and devel- oping countries. Kyrgyzstan , much less well endowed with natural resources, except for water, has arguably made most progress in terms of economic reforms and in building a vibrant civil society. However, its lack of market access, serious institutional weaknesses, pervasive poverty, and an increasingly unsustainable level of external debt pose tremendous challenges and risks. Tajikistan is faced with challenges and risks that are very similar to those of Kyrgyzstan, and may be even more pronounced, especially in the light of the country’s institu- tional weaknesses and continued risk of internal instability and conflict. Turkmenistan stands out even within the region due to its near-total isolation and almost complete lack of eco- nomic or political reforms. Since there is little evidence that its policies or strategy may change in the foreseeable future, it also constitutes a significant obstacle to efforts to enhance regional cooperation in crucial areas such as water allocation and management. Uzbekistan , by far the largest in terms of population and the only country bordering the other four, faces seri- ous challenges in most dimensions. As a key player in the region, progress in economic reforms, an improvement in its economic performance and an increased readiness to deal with regional issues in a cooperative manner would have major benefits both for Uzbekistan and for the region as a whole. If, on the other hand, economic growth and structural reforms stagnate or, worse, go into reverse, the consequences for its poorest neighbors, Kyrgyzstan and Tajikistan, could be very serious. Priorities for the International Community Several key priorities emerge for the international com- munity as it reinforces its commitment to support eco- nomic recovery, poverty reduction and regional coopera- tion in Central Asia. Some priorities are country-specific while others are regional in scope. Among the country-specific priorities are: Democracy-building and political reforms. Bilateral aid agencies, multilateral organizations with specific mandates F O C U S 34 F O R E I G N S E R V I C E J O U R N A L / A P R I L 2 0 0 3 Unlike the formerly communist countries of East and Central Europe, the Central Asian states had virtually no experience with market economics.