Integrating Afghanistan into regional economy

This research examines the regional economic projects and their consequence to business development in Afghanistan. To make it clearer, this research specifically studies the RECCA summits. Based on the evidence there is potential for Afghanistan to be the center of regional cooperation. Since Afghanistan acts positively in the region, it can affect the business development in Afghanistan. This study suggests that focusing on regional projects especially to the expansion of connecting ways provides business development for member countries

The Central and South Asia regions have a long history of trade relations. There have nearly always been movements of goods and people between the regions, which in turn have linked their cultural and religious ties and impacted political relations. Yet today’s trade between the two regions remains low and significantly below regional trade in Africa, the Middle East, Latin America and Southeast Asia. Using different measures of trade, we estimate that inter-regional trade is only between 0.2 and 4 percent of total trade to all destinations. Even within the regions, trade among countries remains low. Intra-regional trade in Central Asia is less than 5 percent and that of South Asia is 1.5 percent of trade with all countries. The present study explores opportunities and challenges for intra- and inter-regional trade in the Central and South Asia areas by analyzing a wide range of channels impacting trade. Trade enhancing channels are divided into two broad categories. The first set refers to disaggregated or product-level characterizations of trade affecting competitiveness and complementarities between trading partners within and between the regions. The second refers to price, non-price and structural determinants that tend to affect all products traded between countries. The analysis also includes a gravity model to gauge the effect of economic growth, distance and price, non-price and structural determinants of regional trade. The empirical results indicate that, under existing trade patterns, the potential value of trade in the two regions is nearly twice as large as the actual level. The finding is not surprising. Opportunities for regional trade abound and there are numerous policy initiatives that could be taken to help spur trade and investment in and between the two regions. Among the possibilities are regional value chains that could create large gains in terms of higher value additions to exports, technologies transfers and employment generation. The analysis of different types of value chains in this study categorizes industries according to their value added contribution to trade, and it prioritizes industries according to interests ranging from the diversification of industries across resource-intensive, labor-intensive, and technology-intensive industries, as well as the potential participation of Afghanistan due to its comparative advantages in products exported by the industries or its geographic location for transit trade. Based on quantitative analyzes of actual and potential channels of trade, the study ranks the pattern of trade in terms of its adaptability to intra- and cross-regional commerce in the Central and South Asia regions and its predilection for regional value chains. The ranking uses an innovative methodology that takes account of difference preference orderings of stakeholders, such as governments and development partners that have interests in pro-poor trade, or large companies that favor cross-border fragmentation of production for regional and global value chains. Ratings are classified into the following categories: trade complementarities, export diversification, comparative advantages, structural factors, intra-industry trade, price competitiveness, trade costs, economic growth; and regional value chains. The baseline ratings suggest the following: First, the larger economies have higher ratings than the smaller, less developed ones, suggesting that size and level of development matter in the development of regional trade. Second, among the different channels of regional trade development, the most effective ones are (i) measures that promote price competitiveness; (ii) intra-industry trade; (iii) trade complementarities; and (iv) economic growth. Third, the effectiveness of country-specific measures differ, as for example in Afghanistan, where the trade enhancing channels that matter the most are structural factors, price competitiveness and trade complementarities with other countries in South Asia and with Central Asia in general. These findings have important implications for the ability of different trade-related policies, programs and institutional mechanisms to successfully promote greater commerce within and across the two regions. Each of these mechanisms has costs associated with them and different types of mechanisms can be programmed on the basis of their ease of implementation and impact potential. The material in this study is designed in such a way as to provide practical knowledge and methods for businesses to take advantage of Central and South Asia regional opportunities; analytical tools for policymakers and researchers; and policy and program recommendations for governments and development partners. It should be of interest to businesses, governments, international development partners, policymakers and researchers, and others concerned with Central and South Asia’s trade and the potential for developing value chains or so-called ‘trade in tasks’ across the two regions.

2018

The designations employed, descriptions and classifications of countries, and the presentation of this document do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations Industrial Development Organization (UNIDO) concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic system or degree of development. The responsibility for opinions expressed rests solely with the authors, and publication does not constitute an endorsement by UNIDO of the opinions expressed. Although great care has been taken to maintain the accuracy of information herein, neither UNIDO nor its Member States assume any responsibility for consequences which may arise from the use of the material. This document has been produced without formal United Nations editing. The views expressed in this document do not necessarily reflect the views of the Secretariat of the United Nations Industrial Organization. Terms such as "developed", "industrialized" and "developing" are intended for statistical convenience and do not necessarily express a judgement. Any indication of, or reference to, a country, institution or other legal entity does not constitute an endorsement. The mention of firm names or commercial products does not imply endorsement by UNIDO. Material in this publication may be freely quoted or reprinted, but acknowledgement is requested, together with a copy of the publication containing the quotation or reprint. ACKNOWLEDGEMENT This report is the product of joint efforts of the Research and Industrial Policy Advice (RPA) Division of the United Nations Industrial Development Organization (UNIDO), the International Institute for Applied Systems Analysis (IIASA) and the State Committee for Industry, Energy and Subsoil Use of the Kyrgyz Republic. It has been developed within the context of the project "Strategy of industrial development of Kyrgyzstan", funded by the Russian Federation. More specifically, under the overall supervision of Michele Clara, Senior Coordinator, RPA-UNIDO, the team that compiled the report consisted of experts from diverse organizations as follows: • Fernando Santiago-project manager (RPA-UNIDO); • Nadejda Komendantova-research team lead; Elena Rovenskaya and Love Ekenberg-senior experts; Nikita Strelkovski and Sergei Sizov as well as Elham Sedighi and Anastasia Stepanova (IIASA); • Nurshat Karabashov, Nurlan Atakanov, Uran Chekirbaev and Zhalyn Zheenaliev (senior experts from Kyrgyzstan). A special acknowledgment goes to Alymbek Orozbekov and his team at the State Committee for Industry, Energy and Subsoil Use for their continued support during the project implementation. Marat Usupov and his team, UNIDO representative to Kyrgyzstan, facilitated in-country operations and contacts to Kyrgyz stakeholders. Appreciation for inspiring discussions also goes to UNIDO colleagues Victor Zagrekov, Olga Memedovic, Rana Singh, Nobuya Haraguchi, Anatoly Balovnev and others. Significant inputs for the production of this report were received from members of a Critical Stakeholders Group consisting of senior representatives from the Kyrgyz government and private sector organizations, as well as participants at round tables held in Bishkek, Osh, Karakol and Jalal-Abad. The report also benefitted from feedback of the Steering Committee members who coordinated the implementation of this project. Special thanks go to Kyrgyz experts who were generous with their time and expertise during the interviews, namely

2008

Contents 1 Globalization and regional economies 2 Theoretical evolution of economic development 3 Governance: institutions, local leadership and the role of regional development agencies 4 Conflict management in regional development 5 Traditional regional economic development theories 6 Regional agglomeration and industrial clusters 7 Traditional methods for local and regional economic analysis 8 A regional decision support system 9 Concluding remarks References Annex 1: Local and regional economic analysis tools user guide Annex 2: Productivity, output and international trade extensions of shift-share Index