Take the long view

Central Asia, rich in natural resources and strategically located at the crossroads of Asia and Europe and the cusp of radical Islamic politics, is the theatre of intense competition between a host of nations and transnational corporations. The CARs are still at an uncertain stage in the transition begun eight years ago todemocratic political systems and market economies. At this point in their evolution, those who manage to make the massive investments in infrastructure, oil, gas and minerals projects needed to transform colonial economies into modern globally competitive ones will probably have a durable presence and influence in the region and its future will be shaped by the countries and corporations or sets of countries and corporations who do establish a strong presence.

India8217;s essential interest lies in the emergence of stable democracies and viable economies. Although the relationship is apparently going well on the political, cultural and science and technology fronts, the economic and commercial relationship is not developing as the government of India would wish. Trade consisting mainly of traditional exports and the import of primary goods has grown at a snail8217;s pace and is not yet significant. Having had mixed results, to put it kindly, with its own economic initiatives and joint ventures three of which didnot take off because of local indifference the government is eager to stimulate more Indian private sector investment in the region.

At a recent seminar co-sponsored by the MEA and the Centre for Central Eurasian Studies CCES, Mumbai University, one of two advanced research centres in the country, what emerged for Indian business was a picture of mind-boggling problems and risk but also great opportunities 8212; and the chance, as one management expert described it, to share in the excitement of building capitalism from scratch!

The state still plays a dominant role by default or design in all the CARs. According to scholars from there, they have emerged from the economic trauma of hyperinflation and declining production of the period immediately after the breakup of the Soviet Union and all but Kazakhstan are showing positive rates of GDP growth. However, there is a long way to go to achieve macroeconomic stability. The search for self-sufficiency and a wide range of economic partners has reduceddependency on Russia somewhat but it remains the major trading partner, there is a strong ethnic Russian presence in all economic spheres from industry to rail and road transport, and Moscow is often called upon for help in internal security.

Although scholars like P L Dash, director CCES, believe political independence is irreversible and 8220;relative stability8221; will emerge, the CARs are still far from realising their goals of viable market economies. Some analysts think that for all except Uzbekistan population 24 million or half that of the whole region a regional economic union or union with one of the major powers in the neighbourhood, rather than self-standing economies, is the only option.

For India the outcomes of failure to achieve politico-economic stability in the CARs would be worrisome. Among them are the spread of Islamic radicalism, terrorism and the narcotics trade, a combination of which looms al ready in India8217;s inner periphery of Pakistan and Afghanistan. There are alarming signals inthe CARs according to Prof Dash. Criminality is rising and there have been huge increases in the post-Soviet years in poppy cultivation. Unless controlled the narcotrade could prove a potent destabilising factor.

It is in everyone8217;s interest that the state-building enterprise in Central Asia succeed. Foreign investment, and the superstructure of laws, practices and institutions which will make FI materialise on the scale the CARs hope for, offers perhaps the most important means of mooring the region securely within the international order. But much depends, of course, on the form and sources of FI. If the process of integration with the world should not simultaneously lead to the modernisation of their economies it will leave the CARs resentful suppliers, as Kazakhstan is becoming, of raw material to advanced economies.

Major investments are being made by western countries and Japan in oil and natural gas, mining and processing and there are proposals for superhighways and telecommunications. Indianentrepreneurs are not falling over themmselves to get there largely because project capital requirements are enormous as are the uncertainties.

In some respects Indian business stands in relation to the CARs where American business stood in relation to India in the early 1990s, peering nervously over the edge. The pioneers have made the plunge: the Reddys in Uzbekistan, the Mittals in Kazakhstan; the Tatas have followed and the Confederation of Indian Industry has put up its shingle in Tashkent. But for the most part Indian business is not convinced the risks are worth taking. The major concerns are about the financial system and the legal environment for business.

Rating the region 8220;high risk8221;, the Export Credit and Guarantee Corporation is reluctant to lend for the same reasons. Abhijit Bhattacharya of the Nirma Institute of Management, speaking of the prospects for small businesses, says the region is awash with irrational expectations, entrepreneur- ship is not well understood as yet and viewedeven by officials as akin to speculation, organised crime is growing, legal safeguards are inadequate and property rights in a tangle.

But with all that it is still essential for India to put down stakes there. The government is exploring the possibilities of venture capital funds, joint sector projects in oil and natural gas, and niche areas for Indian business. It is right to take the long view and to think big.