Kyrgyzstan To Chair The Commonwealth of Independent States During 2023

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By Chris Devonshire-Ellis  

Revolving Presidencies of regional trade blocs has meant that Kyrgyzstan now chairs the Commonwealth of Independent States (CIS) for the year. Intra CIS trade has been increasing during 2022. I highlight these trends, the fundamentals behind them, and look at 2023 prospects as follows:    

Commonwealth of Independent States

The CIS includes Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan and Uzbekistan, and operates as a loose trade entity. This means that rather than having a precise free trade area amongst them, each CIS member has agreed unilateral trade deals with the others. It also means that the CIS does not enter into external trade agreements with other countries. There are pros and cons to this approach, as while it does allow for flexibility between CIS trade partners, it also means that there is no uniform CIS trade and tariff agreement, which can complicate matters. It also leaves national customs agencies in positions of greater power in determining applicable rates.

Nonetheless, the CIS has operated reasonably effectively since 1991, coming into being following the dissolution of the Soviet Union.   It covers an area of 20,368,759 km2 and has an estimated population of 240 million. The CIS encourages cooperation in economic, political and military affairs and has certain powers relating to the coordination of trade, finance, law-making, and security. It has also promoted cooperation on cross-border crime prevention. In total, the CIS has an actual GDP (nominal) of US$2.5 trillion and a GDP per capita of US$9,000. To compare, that roughly equates to an economy the size of France with an average individual income level of Brazil or Serbia. However, the sheer size of the CIS population renders it an attractive market – albeit awkward as it involves nine different countries with nine different currencies.

These differing mechanisms pose problems when dealing with the CIS as a whole, however this may be about to change. An obvious solution to the multi-currency issue is the formation of a CIS Digital Currency, probably backed by the Ruble as the lead. Discussions are being held, although a solution is unlikely to be found during 2023. Russia however is pushing ahead with trials for a Digital Ruble in April, while cryptocurrency exchanges are expected to be established in Russia from Q2. CIS members tend to be conservative, and adapting to change can take time. However successful implementation of Russia’s turn to digital trade finance can be expected to reach into the CIS should this occur. If it does, and should the CIS adopt a singular digital currency, prospects for CIS trade and development would significantly increase.

Kyrgyzstan meanwhile is probably going to be seen as a ‘safe pair of hands’ during its Presidency of the CIS. It has the smallest GDP of all CIS member states and is unlikely to be rocking the boat. However, it will give the country the opportunity to highlight its own development needs among other CIS members, and is likely to focus on improving interconnectivity infrastructure. Certainly the country has been on a roll during 2022, bilateral trade has hit record highs with fellow CIS members Belarus, and Uzbekistan and it has been attracting Russian investors by offering preferential tax incentives. External trade has also been increasing, and especially so with Turkmenistan and Turkey, both fellow participants in the Turkic Council. Both Russia and China’s online retailers, Wildberries and Alibaba are active in the country, while trade with China has also boomed, hitting US$7.5 billion in 2021 with fairly major increases on this expected in the 2022 figures.

Finally, Kyrgyzstan will be a beneficiary of the proposed China-Kyrgyzstan-Uzbekistan-Afghanistan Corridor, a rail project that would connect Central Asia to South Asia via rail networks running through their territories and onwards to the INSTC and the Caspian Sea disbursement region, and to Pakistan’s Arabic Sea ports and onward maritime trade into the Indian Ocean nations.

While a Kyrgyz Chairmanship of the CIS may not appear especially dynamic in terms of immediate new developments, what can be anticipated is a continuation of existing policies designed to integrate Central Asia with the Caspian States, Middle East and South Asia. Kyrgyzstan is at the center of these plans and can be expected to be active in seeing them implemented.

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