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The Paradoxes of Social and Economic Development in Central Asia

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Central Asia is a region with very uneven social and economic dynamics. It is rapidly breaking down into areas with different quality of life, economic growth, environmental health, quality of social services and infrastructure access. This makes it hard to find common socio-economic problems that would be of equal concern to those living in big cities and small villages.

At the same time, Central Asia is riddled with many paradoxes that pose serious challenges to the region’s socio-economic development, so it is worth examining the situation as an interplay of contradictory processes.

First, the Central Asian population is still growing, and high unemployment is compounded by a lack of skilled workforce and low quality of human capital. Despite significant migration outflow over the last 30 years, the population of the region has increased by 47 per cent or more than 23 million people. Considering the youthful population (the average age in Central Asia, as of 2015, ranged from 22 in Tajikistan to 29 in Kazakhstan) and the large number of children in families (for example, in Tajikistan the average number of children per woman is 3.8), it is evident that the growth will continue, albeit at a slower pace.

Unemployment continues to be an issue in all the countries of the region, affecting young people the most. According to official statistics, the unemployment rate ranges from 2.3 per cent in Tajikistan to 9.3 per cent in Uzbekistan, while the total number of jobless tops two million.

Experts say the problem is much bigger, though, since a large share of unemployed people is unregistered, being classified as seasonal workers or self-employed, as well as migrating to find work abroad. Hundreds of thousands in Central Asia do not register as unemployed for several reasons: the complicated and lengthy bureaucratic procedure, a lack of legal literacy and the very low labour productivity.

The share of unemployment is estimated to be 10–15 per cent in cities and 40–60 per cent in rural areas. This makes mardikor bazaars, or day labourer markets, a universal phenomenon in labour-surplus parts of Central Asia and more than five million people are pushed to travel abroad to find work.

At the same time, there is a severe shortage of skilled professionals in the healthcare, education, industry, transport and utility sectors. This is why Central Asian economies annually attract several dozen thousand foreign blue- and white-collar workers from China, Turkey, Russia, India and other countries for implementing new industrial and construction projects.

One of the main reasons for this paradox is most people’s persistently low standard of education and skills in the region. The share of the able-bodied population with secondary and higher vocational education in Central Asia is significantly lower than in Russia or Europe. National education systems cannot provide the region’s economies with the required amount of adequately skilled workforce. A high level of corruption, low teacher qualifications and weak infrastructure do not allow for training students properly.

This is why a large proportion of young people in Central Asia study abroad, in Europe, North America, China and other East Asian countries. Russia has a strong position as the leading supplier of skills for the region, with it currently providing education to more than 100,000 people from Central Asia, which is over a half all the international students in Russia. Even though half of these stay in Russia to work after graduating, people with Russian degrees play a crucial role in Central Asia’s economic development. I am confident that their numbers should and will grow.

Second, Central Asia is characterised by rapid economic growth, which has been accompanied by a significant increase in the quality of life and success in combatting poverty in the last 20 years. At the same time, the poorly diversified local economies are dependent on the external economic situation. The small domestic market, weakened by a wave of currency devaluations in 2014–2019, cannot produce the required demand and new projects are entirely dependent on foreign companies in terms of technology.

In the last 15 years, the Central Asian economies have been growing faster than those of many of their neighbours, such as the EU, Russia, Iran and Turkey. The poorest country of the region, Tajikistan, has seen a drop in poverty from 73 per cent in 2003 to 31 in 2015. Significant changes have also been observed in GDP composition, with a significant fall in the share of agriculture. Yet the region’s economies are still dependent either on mineral exports (Kazakhstan, Turkmenistan and Uzbekistan) or on workforce exports (Tajikistan and Kyrgyzstan).

Considering the small middle class – its absolute size is difficult to ascertain, but it includes about 30 per cent of the population (from 35 per cent in Kazakhstan to 5 per cent in Tajikistan) – and the small domestic market, the countries of the region are bound to go down the path of export-orientated economic development. Even so, the low level of localisation of high-tech manufacturing, the lack of skilled workers, and the dependence on imported equipment and technology in the key economic sectors all create obstacles to developing value-added exports. Despite the obvious successes of individual sectors, such as light industry (textiles, clothing and food), non-ferrous metals, construction materials and transport, Central Asian countries are increasingly reaching the objective limits of their growth.

A colossal shadow economy characterises the region. For example, according to Minister of Employment and Labour Relations of the Republic of Uzbekistan Sherzod Qudbiyev, only 40 per cent of the country’s economically active population is officially employed, while the rest are engaged in the shadow sector. Widespread corruption and the active role of the state in the economy hinder the development of private business. Most big business owners either have connections to the state or accumulated their capital abroad.

Third, being located in the heart of Eurasia, the region has a unique geographical advantage. Still, its transit potential is poorly realised owing to underdeveloped infrastructure, customs and technical restrictions, as well as a high level of corruption. For example, railway freight transit across Kazakhstan in 2018 only slightly exceeded 17 million tonnes, which is a fraction of the volume carried along the Trans-Siberian Railway.

Underdevelopment of the infrastructure is the result of a variety of factors. For instance, Kazakhstan was the only country formed after the fall of the USSR that had a relatively well-developed railway network connecting all its regions. In other Central Asian states, transport between regions relied on transit through neighbouring countries. In Uzbekistan, the only railway connection from Tashkent to Termez was through Turkmenistan.

In the almost 30 years since the collapse of the USSR, Central Asian countries have built several thousand kilometres of domestic and international railway lines. Yet serious problems remain. Turkmenistan completed the consolidation of its national railway network into a single system in 2006, Uzbekistan only did so in 2018, while Tajikistan and Kyrgyzstan still do not have a fully-fledged national railway network. Road transit capacity also remains an open issue in the region.

In addition to the underdeveloped transport network, many parts of Central Asia suffer from an acute lack of other kinds of infrastructure, such as power and domestic gas supply. Systematic power supply restrictions are the norm in many areas of Uzbekistan, Tajikistan and Kyrgyzstan, and challenges related to grid access are among the most critical barriers to developing large-scale industrial production.

The housing and utilities infrastructure is also heavily stressed in Central Asian countries. For instance, according to the World Bank, central heating and small boilers are available to only 8 per cent of the population in Tajikistan, with most of those 8 per cent living in the capital Dushanbe. Heating services are also characterised by poor service quality and low supply reliability. As a result of the declining reliability of heat supply, radiators and the domestic heating infrastructure have been dismantled in almost 80 per cent of urban buildings previously connected to the centralised heating system. The severe energy crisis in the winter of 2007–2008 in Tajikistan and the accident at Bishkek Thermal Power Plant, Kyrgyzstan, in January 2018 highlight the fact that the utility gap remains.

To summarise, resolving the paradoxes outlined above will be the strategic goal for all Central Asian countries over the coming 15 to 20 years. This is precisely the key to the “big transformation” of the region that is currently underway.

From our partner RIAC

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Central Asia

The State of Civil Society in Central Asia: Insights from Kazakhstan and Uzbekistan

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The power transitions in Kazakhstan and Uzbekistan have raised a series of unanswered questions regarding their domestic and foreign policy implications. This paper specifically focuses on the challenges and opportunities of a vibrant civil society emergence in post-Nazarbayev Kazakhstan and post-Karimov Uzbekistan.

A vibrant civil society has long been thought to be a crucial instrument for political change in countries in transition and a key component of a democratic society.

Meanwhile, according to widely held beliefs, the Soviet authoritarian legacy combined with local conservative political culture has obstructed the emergence of democratic values and a vibrant civil society in Central Asian countries.

Kazakhstan represents a distinct Central Asian model of civil society, comparable to Russia but qualitatively different from that in Europe, where civil society is more cooperative with the authoritarian system and offers less resistance to state. As for Uzbekistan, while Islam Karimov’s authoritarian governance would put heavy restrictions on civil society organizations, a question arises as to what extent the government change in 2016 has trickled down to civil society. The presidential decree ‘On measures for strengthening civil society institutes’ role in democratization processes’ of April 2018 is seen as a considerable stride towards setting the foundations to build dialogue between civil society and the government while removing the procedures that would restrict NGOs activities.

Civil society in Uzbekistan has been primarily associated with mahallas, which are self-governing bodies responsible for helping members of the community and other social work (conflict resolution, overall community upkeep, etc.).

The question remains as to what the main challenges to the emergence of a youth-driven, issue-specific civil society are.

Essentially, one of the main priorities on the path to a vibrant civil society emergence in Uzbekistan includes developing the capacities of NGOs, particularly secular civil society organizations. Even though there are over 9000 NGOs registered in Uzbekistan, unlike conservative religious organizations, the opportunities for secular civil society organizations to represent societal interests remain limited due to their organizational weakness and lack of financial support. As a result, many of them have long been inactive with little to no potential to represent certain interest groups and influence decision making.

Similarly, the NGOs in Kazakhstan remain weak and unsustainable. The explanations of institutional ineffectiveness lay in disconnect with local traditions, low visibility of NGOs, and unsupportive government. Survey of general population suggests that people in Kazakhstan know little about NGOs and do not appreciate their utility.

Studies show that one of the main dimensions on the path to a vibrant and consolidated civil society is the “change on the inside”, related to the nature of civil society per se: such as the way it is organised and operates. This has a great deal to do with the development of adequate institutional and professional capacity in civil society organisations and networks as a vital tool for influencing policy making. The institutional development at the organisational level includes building organisational capacities for governance, decision-making, and conflict management, as well as clarifying organisational identity, values, and strategy of impact. The latter is of crucial relevance as a lot of CSOs in both countries were established with no predefined mission, strategic plans, and organization structure. That said, they were doomed to failure in terms of addressing the specific needs of their constituencies.

Another formidable challenge to civil society advancement is restrictive environment, compounded by state repression of dissent and pluralism in the two countries.

The freedom of expression remains severely restricted in both countries. The Karimov’s administration would meticulously control media narrative on politically sensitive issues in Uzbekistan, while shuttering or blocking independent outlets. Even though domestic media, including news websites and live television programs, now cautiously discuss social problems and even criticize local officials, it is not uncommon for journalist to avoid self-censorship to avoid harassment by government. As a result, they avoid openly criticizing Mirziyoyev and the government. Not surprisingly, as suggested by Human Rights Watch reports, censorship is still widespread in Uzbekistan, with the authorities consistently restricting the media through the official state bodies that issue registration for media outlets and regulate journalistic activity.

As for Kazakhstan, the new legislation that came into force in January 2018 has further exacerbated the crackdown on freedom of expression. The law requires journalists to verify the accuracy of information prior to publication by consulting with the relevant government bodies or officials, obtaining consent for the publication of personal or otherwise confidential information, and acquiring accreditation as foreign journalists if they work for foreign outlets.

Clearly, the restrictive legislation has taken its toll on Kazakhstan’s NGO landscape. In effect, NGOs operate under the conditions of mounting harassment by the government and are at risk of incurring fines and other punishments for obscurely stated offences, such as ‘interfering with government activities or engaging in work beyond the scope of their charters’. It is not uncommon for civil society activists to face criminal prosecution and imprisonment just for being outspoken and critical.

Along with the restrictive legislation, low trust, and misperceptions of civil society organizations, have significantly obstructed the advancement of a vibrant civil society. It has common for post-Soviet societies to treat civic associations as threat to the power and stability of the state together with the conviction that the state bears the responsibility for the wellbeing of the society.

As a matter of fact, establishing a civil society platform for NGOs, and media organizations to monitor government activity is essential for the emergence of a vibrant civil society. In the past two years, Uzbekistan has introduced several reforms and amended legislation, but there has been no analysis or monitoring of their implementation or potential or real impact on society. Meanwhile, the input from NGOs, think tanks and media can significantly contribute to the implementation of those state programs that are deemed useful by civil society. This, in turn, comes down to the changes in the very nature of civil society relations with the state and its potential and ability to foster reform, or what is often referred to as “change on the outside.”This has a lot to do with increasing their impact on public policy, through intensifying their interaction with public institutions and actors and most importantly, through engaging more with their constituencies.

A major impediment to civil society advancement in both countries is prevailing post-Soviet “informality” in the form of behavioral practices, such as considerable tolerance towards informal governance, the use of informal networks and connections in exchanges of favors, phone justice, corruption, etc. The latter has long condemned both countries to a vicious circle of underdevelopment and bad governance. Even though it would be an oversimplification to contend that graft is a way of life it takes a long time for deep rooted behavioral practices to change.

Moreover, the rise of ‘illiberal civil society’ or movements with a conservative agenda is a common phenomenon across Central Asia, and elsewhere. In Central Asia, Russian-language media, and religious-based outlets, have become instruments to spread illiberal ideas, which use ‘traditional family values’ and ‘national identity’ to condemn progress, often related to the rights of LGBT, the role of women in society or different minorities.

Overall, the core hindrances to the advancement of a vibrant civil society in the two Central Asian countries include severe limits on the freedom of expression, association, as well as the Uzbek and Kazakh governments’ tendency of silencing dissent. Meanwhile, eradicating these malpractices is critical to reassuring and reinforcing post-Nazarbayev and post-Karimov governments’ promises and pledges of significant democratic reforms.

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Tajikistan: Building Blocks for a Dynamic Post-COVID-19 Economy

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The pandemic year is slowly drawing to a close, but not all challenges associated with it will disappear with the beginning of the millennium’s third decade. Households, firms, and government are all focusing their efforts to ensure the security of food, income, and/or electricity over the next few months. At the same time, the country is in the middle of making decisions that will determine whether Tajikistan can transform this crisis into an opportunity to “build back better”.

The current crisis is the fourth over the last twelve years, with three of them having been outside Tajikistan’s influence and control. Following the impacts of the global financial and economic crisis of 2008, the oil price collapse of 2014 (with massive impacts on the value of remittances flowing back into Tajikistan’s economy), and the banking crisis of 2016 (having required a major budget-financed bail-out), the current difficulties have hit the country at a moment of fiscal fragility and a high risk of debt distress. Despite high rates of economic growth, these crises meant that Tajikistan has been struggling to respond with adequate fiscal resources to the combination of these inherited and emerging challenges.

But not all is gloom. In fact, the key to unlocking an effective crisis response— one with minimal upfront costs and future benefits to the budget—is found outside the government’s direct scope of control: if the state strengthens its partnership with entrepreneurs and (potential) investors, with clear and uniform rules, Tajikistan could tap into the considerable potential of sustainable economic dynamism. With profit opportunities in domestic and neighbouring markets (of which there are many) and the clarity and predictability of obligations towards the state (a current policy priority), the private sector is certain to exploit these. This, in turn, will open doors to addressing a long list of priority challenges influencing economic policymaking, well beyond the immediate one of broadening the tax base to a much larger number of successful firms. For instance, the (frequently prohibitively) high interest rates would be lowered when more firms and employees deposit their incomes in the banking sector and when financial institutions share the confidence in a firms’ future success. The trend depreciation of the Tajik somoni, with detrimental effects on, especially, the most vulnerable segments of the population, could be countered by having private companies exploit available export opportunities to the very large (now accessible), underserviced markets in the country’s direct vicinity. This would lead to an increased influx of foreign currency, which, in turn, would strengthen the domestic currency. Risks to social cohesion would be reduced by generating more and higher-paid employment opportunities—particularly in the remote and rural regions of the country—while food insecurity could be addressed by increasing local self-reliance on food production and agricultural inputs provided.

It is well understood that Tajikistan requires the private sector to play a more dynamic role, with considerable preparatory work having already been done to put into place the required reforms to boost private-sector confidence, domestic productivity, local production, exports, and job creation. The three following areas of reform are especially promising in providing the population with an environment characterized by lower inflation, interest, and tax rates, while accelerating the rate of job creation, and lifting average wages beyond the current levels prevailing in the market.

First, adopting a tax reform that aligns incentives and fosters compliance. Tajikistan’s current economic model, largely remittance-financed and import-reliant, is a legacy from an earlier period of reconstruction and transition. One element of this legacy relates to revenue collection. The levying of taxes, required to meet pre-defined tax collection targets, has been based disproportionately and non-transparently on tax penalties and pre-payment requests. To counter the negative effects on business confidence, very generous tax incentives—estimated at around six to ten percent of national income—were granted. These, however, did not generate commensurate socio-economic benefits (investments, innovations, employment, and/or regional development). The ongoing preparation of tax reforms thus aims at combining a modern, consistent, and simplified tax code with the redefinition of the Tax Committee’s overarching mission statement—with a focus on maximizing voluntary tax compliance. This would shift the tax authorities’ principal focus on analysing all information on the accuracy of tax-payer statements and conducting audits on the basis of identified inconsistencies. The reliance on risk-based tax audits would increase the tax authorities’ effectiveness and firms’ incentives to submit accurate tax statements. In parallel, temporary tax incentives would be subject to specific expectations that are monitored, recorded, and made the basis for subsequent decisions on potential extensions. The decision to launch public consultations on the new draft code would be a critical signal of the country’s commitment to developing a real partnership with the private sector as foundation for a strong, sustainable, and inclusive recovery.

Second, providing for the foundations of the economy’s digital transformation. The government is preparing reforms that would enable the country to “leap-frog” towards a modern, digital economy with a faster, less expensive internet. This would allow for dynamics that could increase (1) the quality of, and access to, public services (e-government, e-health, distant learning, smart city, or cashless payments); and (2) the scope for new digital firms, including in rural and remote areas, to explore new opportunities and create additional employment opportunities. For results that are both fast and tangible, the government would need to modernize the legal framework in the telecom sector and establish an independent (public) regulator to allow for proper competition to bring down prices and increase the quality of services. The government is in negotiations with international development partners that have shown interest in supporting foundational reforms and most providing critical investments needed for the national roll-out of e-government priorities that can finally utilize the potential for Tajikistan’s digital transformation.

Third, developing a modern supply chain from agricultural production to food processing. The COVID-19 crisis has heightened the risks of food scarcity during the off-season months, notwithstanding increased production during the summer and autumn. To this end, the government has focused important activities on planning measures to guarantee sufficient, high-quality food.

This includes measures to provide farmers with seeds and fertilizers, build resilient livelihoods and institutions, and create additional jobs in the agriculture and food-processing sectors for the next years to come. It is being sought to strengthen the crisis resiliency of the agricultural sector, increase the sustainable production of food, ensure safety, foster processing, and facilitate export competitiveness—especially in the high-potential horticulture sector. This can only be done with a viable sector of (new) micro, small, and medium-sized enterprises in rural areas. If linked to the digital agenda, farming and food production could allow for a dramatic increase of agricultural productivity, thereby transforming Tajikistan’s low-productivity, segmented, and crisis-prone agricultural sector to a modern one comprising effective systems of (1) managing seeds, seedlings, and planting materials; (2) promoting market-led, high-value horticulture value chains; (3) strengthening systems of quality control, food safety, and certification; and (4) linking these to strengthened systems of early warning and response.

In all of these efforts, Tajikistan finds itself well-prepared, on the eve of making the required—albeit difficult—decisions necessary to alter perceptions and dynamics. A view on the budget’s revenue side, in relation to the most urgent expenditure obligations, shows that tax revenues alone would not suffice in responding to current and future challenges. The state needs, as a partner, a dynamic, innovative, employment-generating, and tax-paying private sector. Its decisions to invest and innovate reflect perceptions of future profitability. In support, the government would need to continue to improve the environment and move towards guaranteeing the predictability in tax obligations, ensuring the ability to enforce contracts, and fostering the enormous development potential that is inherent in fair competition on a level playing field. With innovative, dynamic, exporting, and profitable enterprises, current priority challenges to economic policymaking—from taxes over interest and exchange rates, to employment opportunities—fade into the background,  providing the state more space to focus on strengthening health, education, and the necessary investment needed to increase the human capital of every citizen of Tajikistan, along with their standards of living and resilience to fragility and future crises.

Originally published in Asia Plus via World Bank

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Turkmenistan’s Neutrality: Silver Jubilee and Counting

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Permanent neutrality of Turkmenistan is in place since December 12, 1995 when United Nations General Assembly (UNGA) unanimously passed a resolution on it.185 permanent members of the Assembly voted in its favor. Although, Turkmenistan was promoter of neutrality since its independence from Soviet Union in 1991, the UNGA resolution stamped it. Later on, 12 December is declared as world neutrality day to enhance peace in the world. It was initiated by Turkmen President in the UNGA. The permanent neutrality was once again endorsed by another resolution of the UNGA on June 3, 2015. This year, 2020, is marking the 25th anniversary of Turkmenistan’s neutrality. Turkmenistan wants to spread the message of peace and neutrality to make it common and not to interfere in other’s internal matters as well as not to become part of any activity which may lead to conflict. It is refraining itself from joining so many treaties and regional organizations who might become part of political and defence objectives against any other state, region or bloc.

Neutrality is the most prominent tenet of Turkmen foreign policy. It is not being maintained for its own good but to inspire the whole world. Its neutrality is playing a constructive role in the world politics. Many regional and extra regional issues have been resolved with the help of Turkmenistan and it was possible due to its neutrality. Intra-Afghan and intra-Tajikistan dialogues are the examples. Moreover, it is the only state whose neutrality is endorsed by the UN and Turkmenistan’s efforts helped in declaring 12 December as the global neutrality day. Celebration of the day globally helps shaping narrative of states to respect sovereignty of other countries and creating environment of non-interference in each other’s internal affairs.

Turkmenistan adopted a constitutional law at end of the year when the UNGA passed its resolution of permanent neutrality for the first time in 1995. The law ensures “equality of rights, mutual respect and non-interference to internal affairs of other states”. Individuals are the top priority in the constitution and laws of Turkmen government. Its national narrative concludes that humans are categorically peaceful. The basic principle behind the adoption of neutrality by the Republic of Turkmenistan is ‘peace’. It wants peace in the country, region, continent and in the whole world. It has made itself distant from any type of political and strategic activity which may harm its neutrality and the peace.

Peace, security and sustainable development are some key goals being achieved by the Turkmen government through its permanent neutrality. These three objectives are important to make the earth a livable place. Moreover, it is efficiently promoting the UN agenda of 2030 for the accomplishment of sustainable goals. The agenda is embedded in multidimensional development projects of the country for 2019-2025. Turkmenistan’s neutrality is unbreakable which it is endorsed by the UN, moreover, it is open to world’s different civilizations, traditions and faiths. Its openness is certifying its neutral position inside out.

Turkmenistan’s neutrality is helpful in so many issues of the world which need to be resolved for maintaining global peace. These outstanding problems are Afghan issue, disarmament and weapon reduction, reasonable solution of water and energy problem and ecological issues. Turkmenistan has the potential to play constructive role in resolving these issues which are a serious danger for the world peace. global community should take benefit of its neutrality in resolving such issues pertaining since long. Afghan peace process and especially intra-Afghan dialogue has become headache for the states in the region. Turkmenistan could play role of a neutral venue for intra-Afghan dialogue and it is ready to do so.

Article 5 of the constitutional law on permanent neutrality grabs utmost attention where Turkmenistan vowed not to start any war or conflict as well as not to become part of any such activity, however, it possesses the right of self-defence. Furthermore, Turkmenistan has cleared that any aggression towards it will be involving the UN or any other nation. Still the country will adopt a better way to deal with the conflict, rather being directly involved, it may call a third party to resolve the issue. In its bilateral tensions with Uzbekistan during 2002 to 2004, Turkmenistan did not lose patience and resolved the issue peacefully through negotiations. Moreover, it has refrained itself from accomplishing any weapon of mass destruction in whatsoever situation would be in the future. This is due to the vision of neutrality prevailing within the country.

Turkmenistan lies in the proximity of the most volatile regions in the world and of course it is facing its effects. The Middle East and South Asia especially Afghanistan, sharing geographical border with Turkmenistan, are in continuous trouble and hurdle for the world peace. Still Turkmenistan is capable of distancing itself from the negative effects of the regional geopolitical scenario. Its neutrality is playing positive role in diminishing regional tensions and untoward situation among the states.

Central Asian region remains epicenter of global powers’ competition throughout the history. ‘The Great Game’ and ‘The New Great Game’ are an evidence of its geostrategic and geo-economics importance in the world. British and Russian empires were strong competitors for the sphere of influence in the region in 19th and 20th centuries. In the post-Cold War era, the US, China and Russia are engaged in the energy enriched states of Central Asia to boost their influence in the region. Russia, as previous holding entity of the region wants its role in Central Asian states. On the other hand, the US is securing its allies’ interests there and China needs concessions on energy imports from the region. The region has huge oil and natural gas reserves which is direly needed in many Eurasian states. Still Turkmenistan dared to neutralize itself. Its vows of being a permanent state are so strong that nothing could prevent its wishes. Presence of two giants, China and Russia, in its close proximity and deepening interests of the US did not limit Turkmenistan’s desire of peace and neutrality.

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