AEIR 2019/2020


4
Nov
2020

In Central Asia, COVID-19 response demands improved regional cooperation

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By working together with countries to make sound socioeconomic development strategies, multilateral financial institutions can contribute substantially to the fight against the pandemic.

COVID-19 has caused a far worse global economic contraction than the financial crisis of 2008-09. Since February 2020, development agencies, such as the Asian Development Bank (ADB), International Monetary Fund, and the World Bank, have disbursed tens of billions of dollars in coronavirus response packages to developing and emerging economies.

Multilateral financial institutions have been quick to respond but they do not operate in a vacuum. They essentially act within the international economic system to boost international development efforts. They best function with effective development strategies and cooperation among such institutions, countries, and the private sector. Hence, development agencies encourage governments to strengthen regional and global partnerships during the pandemic.

In Central Asia, ADB forecasts that only Turkmenistan and Uzbekistan would have positive gross domestic product (GDP) growth rate in 2020. As economies are getting poorer and borders remain closed to prevent COVID-19 transmission from abroad, the main issues of international and regional cooperation like trade, partnership, and, to some degree, foreign aid become difficult to manage. The coronavirus outbreak has proven to drain financial resources quickly and even instilled a sense of isolationism and protectionism across both developed and developing economies.

If the pandemic lasts for a long time, foreign aid contributions from donor countries might become unstable. Furthermore, economic nationalism could motivate economies to impose import duties to protect domestic corporations and products. Therefore, the coronavirus outbreak demands more adaptive practices in the areas of international and regional cooperation.

Since international and regional cooperation could suffer if the coronavirus outbreak continues for a long period of time, development agencies should work with their members to improve the process of making policies and implementation strategies in the areas of trade, partnership, and development aid. This is particularly true in Central and West Asia, which includes the countries of Afghanistan, Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyz Republic, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan. These polices and strategies should consider:

1. Incorporating more socio-political analysis in partnership strategies. With increasing poverty rates across Central Asia, social conflicts could arise. Rising unemployment rates in Europe and Russia have caused many families in Central Asia to no longer receive remittances from abroad and some face food shortages. Hence, individual country and regional partnership strategies must factor in more socio-political aspects to design suitable roadmaps adapting to quickly changing situations.

2. Adopting more national perspectives in regional economic development programs. During the pandemic, developed and developing countries might be equally likely to be vulnerable in terms of infection, death, and economic contraction. In many instances in Europe and North America, a higher level of income per capita is not necessarily related to how effectively a country can contain the pandemic. As economic nationalism is rising even in some developed economies which used to be the strongest proponents of free trade, international development agencies should refrain from deemphasizing national perspectives in their approaches to international and regional cooperation programs.

3. Developing multiple strategies for scenarios of declining foreign aid. The practices in international and regional cooperation must adapt to the scenarios of declining aid. Some economies like Afghanistan that have been heavily dependent on aid in recent decades are currently seeing a decline in aid from development partners. In these challenging times, development agencies could facilitate regional cooperation strategies that connect and benefit donor and recipient countries mutually regardless of the status of aid. For example, regional cooperation can help shift its focus more toward trade deals rather than official grants.

COVID-19 has spread almost everywhere. While borders could be closed, countries are neither isolated nor alone in their struggles. As the pandemic might result in a long-term human crisis, hopefully more developed economies can rebound more quickly from the economic and public health crisis and release resources to support less developed ones.

Developing countries need to manage their own resources and available aid carefully to battle against COVID-19. During these challenging times, the role of development agencies has become more important than ever to facilitate cooperation between economies. By working with countries to make sound socioeconomic development strategies, multilateral financial institutions can contribute substantially to the fight against the pandemic.

Original article was published at the ADB Blog and duplicated here with permission from the author.
*Duc Tran is a Young Professional at ADB’s Central and West Asia Department.
The views expressed in this blog post are the views of the author and do not necessarily reflect the views or policies of ARIC, the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ARIC does not guarantee the accuracy of the information and data included in this blog post and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with official ADB terms.