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Multiple Choice:The SCO Finds Its Way

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The Shanghai Cooperation Organization has intensified its focus on regional economic initiatives like the China-led Silk Road Economic Belt and the Russia-lead Eurasian Economic Union. At the Ufa summit in Russia, the member states adopted the SCO Development Strategy, which included bolstering finance, investment, and trade cooperation as a priority in the next ten years.

While Russia remains sensitive to China’s expanding influence into the former Soviet satellite states, the Central Asian member states are in need of infrastructure and energy investment and have been receptive to Beijing’s proposal to focus on economic cooperation through proposals such as launching a development fund and a free-trade zone.   Russia is acutely aware that it cannot and will not try to compete with China’s growing global economic influence, even if it is pushing into Russia’s traditional sphere of influence in Central Asia. Kazakhstan, Russia, and Turkmenistan have proposed expanding the energy cooperation among members, establishing a unified energy market for oil and gas exports. While some experts say the organization has emerged as an anti-U.S. bulwark in Central Asia, others believe frictions among its members effectively preclude a strong and unified SCO. This may be true, specifically as India and Pakistan, long-time rivals, join the membership roster, because the SCO adopts decision made by consensus and all member states must uphold the core principle of non-aggression and non-interference in internal affairs.   Crosston points out that a penchant for China and Russia pursuing micro-agendas is also likely to undermine group cohesion and sow mistrust.

However, a recent study conducted on the SCO’s voting record has shown that the foreign policy of the SCO is mixed. On one hand, the overall member and observer states have been increasingly voting in similar ways across all voting forums since 1992, when the post-Soviet member states were all admitted to the United Nations. As the voting patterns become increasingly similar, the risk for an individual state of committing itself to closer cooperation is reduced; it is simply less likely to find itself in a vulnerable outlier position or be forced to compromise on important policy preferences. Hansen points out that continued convergence in this way suggests, all things being equal, that the SCO will find it still easier to widen and deepen its foreign policy cooperation and even to allow observer states to join the group as full members. On the other hand, the slowing down of the process of convergence indicates that the member and observer states have reached a line that a least some of them will be reluctant to cross. This includes a mixed pool of core preferences on human rights, nuclear development, or weapons technology. This will likely continue to evolve and possibly become contentious with the addition of Pakistan and India, whose membership seems to have been driven by China’s fear of a new wave of terrorist attacks by Uighur separatists or ISIL fighters in Zinjiang or elsewhere in China . Russia remains a leading outlier: the growing influence of China may cause Russian policy makers to hesitate before committing to a closer cooperation or to future SCO enlargement, as what is good for China is not necessarily good for Russia.  

Through the SCO, China has largely benefited from offering the Central Asian states an alternative to Russia. As Grieger points out, China has significantly expanded its trade with, and investment in, the Central states. It has established a diplomatic and strategic foothold in the region, which allows it to gradually dilute Western influence. It has been able to pursue resource security interests but has been cautious not to enter into energy or mining competition with Russia. In energy matters, Chinese and Russian interests are often complementary as Russia relies on oil exports and China’s economy greatly depends on external energy sources.

China and Russia will continue to be skeptical bedfellows in the coming years despite opportunities. While their interests may overlap economically and in the security of their overlapping regions, neither is known for being particularly trustworthy of each other. This hurdle will be hard to overcome. China will continue to need trade agreements with the United States. This could leave Russia as the odd man out with increasing Western sanctions. China’s alliance with Russia could prove contentious for Western investment, so Russia will need to play well with China in a true partnership over the next decade or else it will risk being squeezed out of any global power economically.

The continued rise of China and resulting dilemma in relations between Russia, China, and the Central Asian states within the SCO could cause regional schisms. China’s economic rise could threaten to move Russia out of the seat of power while sanctions are increasingly piled on. China’s influence in areas like Pakistan, India, Malaysia, Sri Lanka, and others continues to grow through investments and industry. If SCO membership becomes weighted in China’s favor through this increasing influence, Russia could find themselves out in the cold and their agendas out of favor in the SCO.

What about the rest of the membership of the SCO? According to Beaten Eschment, an analyst at the Research Center of East European Studies at the University of Bremen, there is no unified Central Asian perspective. The countries’ interests are all pointedly different: Kyrgyzstan and Tajikistan are economically and militarily dependent on Russia; Turkmenistan, while not a member of the SCO, is trying to stay as neutral as possible like Mongolia. Uzbekistan is pursuing its own policy that bounces between Russia and China at the same time, while Kazakhstan, the biggest and militarily and economically strongest country in Central Asia is a complete Russophile, but is afraid that Russia will try to annex their northern territories after the situation with Crimea in Ukraine. These small concerns may give China the advantage in setting the SCO’s priorities so that the smaller members seek to limit Russia’s influence on their borders.

What links all of the SCO members is the rejection of Western-dominated institutions, whether it is the United States, United Nations, World Bank, NATO or other structures. The SCO see itself as a forum against the US-global order. Its approach tends to be comprehensive and not based only on military power, but also in China’s belief of economic ties and soft power. The SCO’s non-interference principle could establish a new modus operandi for international organizations. Unlike the United Nations or NATO, the members of the SCO have chosen to stay out of violent conflicts within its member states, such as when violent conflict between ethnic Kyrgyz and Uzbeks in Kyrgyzstan broke out in 2010. The members of the SCO stayed largely passive despite their ability to pull joint forces together that could intervene. This allows member states to avoid getting pulled into costly wars that could be to the detriment of all member states and to the organization as a whole.

While it will likely remain semi-ignored by Western media, the SCO will continue to make great strides in its development and growth. Alignment of Pakistan, India, Iran, Russia, and China creates the largest block of anti-Western sentiment in history. It could provide a counter balance to Western organizations’ influence not only in the Central Asian region but even from the edges of Europe all the way to the Pacific. China views this expansion as absolutely necessary to compete in a global market. If the SCO is to have real weight in the international arena and become a truly prestigious organization that is able to rival NATO, it requires additional members and revenue streams. President Putin suggested that China and Russia should “enhance coordination in international and regional affairs [so as to counter Western influence].” Prospects are good that Russia and China will continue to prioritize working on large multilateral projects in transportation, energy, innovative research and technology, agriculture, and the peaceful use of outer space. If the SCO can expand its membership and momentum on these priorities, Western organizations may soon find themselves facing an unexpected competitor with the resources and intent to box them out of markets and contain United States influence on the global stage.

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Central Asia

Productive Employment Needed to Boost Growth in Tajikistan

MD Staff

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Tajikistan will need to create enough jobs to maximize productivity of the country’s increasing working-age population and spur economic growth, says a new Asian Development Bank (ADB) report.

In its new Asian Development Outlook (ADO) 2018, ADB projects Tajikistan’s gross domestic product (GDP) growth to reach 6% in 2018 and 6.5% in 2019. GDP growth for the country stood at 7.1% in 2017. ADO is ADB’s annual flagship economic publication.

“Tajikistan has a young population and the percentage of working-age people is projected to continue rising to 2030. In many countries, this has led to higher growth from a ‘demographic dividend’,” said Pradeep Srivastava, ADB Country Director for Tajikistan. “But for Tajikistan to benefit from such a dividend, it needs to undertake structural reforms to improve the investment climate, increase human capital and skills, and let entrepreneurship flourish to create productive jobs for the workforce.”

Despite Tajikistan’s economy growing at an average of about 7.2% from 1997 to 2016, the country is not creating enough productive jobs for its growing working-age population, which grew by 3% annually from 1991 to 2016. However, employment only rose by 0.7% annually over the same period. The report notes the need for structural reforms to improve the country’s business climate—for example, reducing and consolidating the number of inspection bodies, creating a healthier banking sector to facilitate lending, and streamlining procedures for issuing construction permits, paying taxes, and enforcing contracts.

The report also highlights the importance of strengthening local value chains and helping small and medium-sized enterprises improve their productivity and earnings to promote job creation. Assessing demand for various skills and using that information to improve job training can match workforce skills to market demand.

ADB’s growth forecasts for Tajikistan in 2018 comes on the back of expected fiscal tightening from the government to address the high ratio of public debt to GDP, which will likely constrain public investment, and a weak banking sector curbing private investment. The slight recovery in growth projection in 2019 is based on expected gains in the country’s manufacturing and mining sectors, as well as strengthened remittances.

Inflation is forecast to accelerate to 7.5% in 2018—reflecting higher liquidity spurred by potential sizable bank recapitalization, public salary and electricity tariff hikes, and modest somoni depreciation—before easing back to 7.0% in 2019. In 2017, inflation reached 6.7%.

ADB is celebrating 20 years of development partnership with Tajikistan in 2018. To date, ADB has approved around $1.6 billion in concessional loans, grants, and technical assistance to the country. ADB and Tajikistan’s development partnership, which began in 1998, has restored and built the country’s new transport and energy infrastructure, supported social development, expanded agricultural production, and improved regional cooperation and trade.

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Central Asia

ILO Reports Important Progress on Child Labour and Forced Labour in Uzbek Cotton Fields

MD Staff

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A new International Labour Organization report to the World Bank finds that the systematic use of child labour in Uzbekistan’s cotton harvest has come to an end, and that concrete measures to stop the use of forced labour have been taken.

The report Third-party monitoring of measures against child labour and forced labour during the 2017 cotton harvest in Uzbekistan is based on more than 3,000 unaccompanied and unannounced interviews with a representative sample of the country’s 2.6 million cotton pickers. It shows that the country is making significant reforms on fundamental labour rights in the cotton fields.

“The 2017 cotton harvest took place in the context of increased transparency and dialogue. This has encompassed all groups of civil society, including critical voices of individual activists. This is an encouraging sign for the future. However, there is still a lag between the sheer amount of new decrees and reforms being issued by the central government and the capacity to absorb and implement these changes at provincial and district levels,” says Beate Andrees, Chief of the ILO’s Fundamental Principles and Rights at Work Branch.

The ILO has been monitoring the cotton harvest for child labour since 2013. In 2015, it began monitoring the harvest for forced labour and child labour as part of an agreement with the World Bank.

Interviews carried out by the monitors took place in all provinces of the country and included cotton pickers and other groups which are directly or indirectly involved in the harvest such as local authorities, education and medical personnel. In addition, a telephone poll of 1,000 randomly selected persons was conducted. Before the harvest, the ILO experts organized training for some 6,300 people directly involved with the recruitment of cotton pickers.

The results confirm that the large majority of the 2.6 million cotton pickers engaged voluntarily in the annual harvest in 2017 and that there is a high level of awareness in the country about the unacceptability of both child and forced labour. The report confirms earlier findings that the systematic use of child labour in the cotton harvest has ended though continued vigilance is required to ensure that children are in school.

Instructions have been given by the Uzbek national authorities to local administrations to ensure that all recruitment of cotton pickers is on a voluntary basis. In September 2017, an order was given withdrawing certain risk groups (students, education and medical personnel) from the harvest at its early stage.

Moreover, cotton pickers’ wages have been increased in line with recommendations by the ILO and the World Bank. The ILO recommends that the government continues to increase wages and also addresses working conditions more broadly to further attract voluntary pickers.

Last September, Uzbekistan President Shavkat Mirziyoyev spoke before the United Nations General Assembly in New York where he pledged to end forced labour in his country and underscored his government’s engagement with the ILO. In November 2017, at the Global Conference on the Sustained Eradication of Child Labour in Argentina, Uzbekistan also pledged to engage with independent civil society groups on the issue.

The ILO Third-Party Monitoring (TPM) project in Uzbekistan will now focus on the remaining challenges, particularly the need for further awareness raising and capacity building, which varies between provinces and districts. It will ensure that all those involved in recruitment will have the information and tools needed to ensure that cotton pickers are engaged in conformity with international labour standards.

The monitoring and results from a pilot project in the area of South Karkalpakstan also show that cotton picking economically empowers women in rural areas. The cotton harvest provides many women with a unique opportunity to earn an extra cash income which they control and can use to improve the situation of their families.

The ILO TPM Project is funded by a multi-donor trust fund with major contributions by the European Union, United States and Switzerland.

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Central Asia

Kazakhstan Launches Online Platform for Monitoring and Reporting Greenhouse Gases

MD Staff

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An online platform for monitoring, reporting and verifying emission sources and greenhouse gases (GHG) was officially launched today by the Ministry of Energy of the Republic of Kazakhstan and the World Bank.

The platform is an essential element of the National Emissions Trading System of Kazakhstan, which was launched in 2013 as the country’s main instrument to regulate domestic CO2 emissions and to drive the development of low-carbon technologies. Today, the National Emissions Trading System of Kazakhstan covers all major companies in the energy, oil and gas sectors, mining, metallurgical, chemical and processing industries.

Since 2014, the World Bank Trust Fund Partnership for Market Readiness has provided technical assistance to Kazakhstan in supporting the implementation of the National Emissions Trading System of Kazakhstan and related climate change mitigation policies.

“Kazakhstan’s emissions trading system is the first of its kind in the Central Asia region,” said Ato Brown, World Bank Country Manager for Kazakhstan. “With support from the Partnership for Market Readiness, the country has made a great effort to develop policy options for mid- and long-term emissions pathways and to develop an action plan on GHG emissions reductions by 2030. The World Bank will continue to support the Government during the crucial stages of policy implementation.”

The platform enables Kazakhstan’s major emitters to transmit and record data on GHGs emissions, as well as trade online. The National Allocation Plan, adopted in January 2018, sets an emission cap for 129 companies for the period 2018-2020. Per the national allocation plan, quotas have been allocated until 2020.

“The electronic platform undoubtedly proves the evolution of the Kazakhstan emission control system, which will allow the monitoring, reporting and verification system to be upgraded to a much higher level,” said Sergei Tsoy, Deputy General Director of JSC Zhasyl Damu.

GHG data is confirmed by accredited bodies for verification and validation and transferred to the Cadastre using an electronic digital signature. To date, there are seven verification companies accredited in Kazakhstan, with five more in the process of accreditation.

The platform was developed by JSC Zhasyl Damu with the support of France’s Technical Center on Air Pollution and Greenhouse Gases. The system is administered by JSC Zhasyl-Damu, while the beneficiaries are the Climate Change Department and the Committee for Environmental Regulation and Control of the Ministry of Energy of the Republic of Kazakhstan.

Background

Kazakhstan is one of the largest emitters of GHG in Europe and Central Asia with total annual national emissions of 300.9 MtCO2e in 2015. The energy sector accounts for 82% of total GHG emissions, followed by agriculture (9.6%) and industrial processes (6.4%). More than 80% of produced electricity in Kazakhstan is coal-fired, followed by natural gas (7%) and hydro power (8%).

Kazakhstan proposed as its Nationally Determined Contribution (NDC) an economy-wide reduction of GHG emissions of 15% from 1990 emissions levels by 2030. Kazakhstan ratified the Paris Agreement in November 2016 and committed itself to the fulfilment of the proposed target as its first INDC. The objective will contribute to sustainable economic development as well as to the achievement of the long-term global goal of keeping global temperatures below 2 degrees Celsius. 

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