Chinese BRI Investments a Boon for the Central Asian Economies

Chinese BRI Investments a Boon for the Central Asian Economies

The grand Chinese plan known as the Belt and Road Initiative (BRI) brings a plethora of opportunities to the Central Asian States. The resource-rich Central Asian states have traditionally relied on the sale of their natural resources and on their small manufacturing sectors. The landlocked states have largely carried out intraregional trade amongst them and depended on the remittances flowing in from Russia.

However, all that seems to be changing with the BRI investments on the horizon.  The grand Chinese plan that will connect the landlocked region to the rest of the world through a network of roads and railways is welcomed by most Central Asian economies.

Kazakhstan was early to respond to the opportunities. The Kazakh government linked its domestic five-year development plans with the BRI. Besides the infrastructural developments to boost connectivity across the region, it also seeks cooperation in sectors such as the chemical industry, metallurgy, machinery manufacturing, etc. Since the Kazakh government was short on funds, Chinese investments became a welcome breath of fresh air. From here, the BRI investments took off across the region. Along came Tajikistan, and the Chinese investments also assumed the form of import substitutions when it installed a cement factory in Tajikistan. Uzbekistan soon followed and became another stakeholder in the BRI as it attracted investments into its value-added sectors alongside infrastructural investments.

The Central Asian countries couldn’t have found a better lender for their developmental needs. The investments that flew in and materialized across a number of sectors in the Central Asian economies could only have been made by China under its ambitious BRI project over such a short span of time.

A major hurdle in the development plans across these Central Asian economies was the inability to raise capital. Even the Asian Development Bank (ADB) wouldn’t help these capital-scarce developing economies. In fact, it took the bank over three years just to decide that the Astana Light Rail Transit project was not feasible and that it would not provide funding for it. On the contrary, when it comes to China, the same project was funded in no time.

The multilateral developmental or financial institutions such as the World Bank and ADB are bound by a number of corporate governance rules and regulations, which hamper their lending flexibility. This leaves developing economies without the required funding and capital to invest in the development of their economies, and that’s where China comes in.