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Globalization Pros And Cons

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Globalization Pros And Cons Powered By Docstoc
					   The impact of globalization on
implementation of macroeconomic
 reform policies in the countries of
      North and Central Asia

 Prepared for the International Conference on
    Strengthening Regional Cooperation for
           Managing Globalization.

 Organized by UNESCAP in cooperation with the
 Chamber of Trade and Industry of the Russian
  Federation, Moscow, 28-30 September 2005
     Summary of country studies
Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan




 Globalization and regional integration
 Transition assessment
 Market and trade
 Investment liberalization policies
 Impact of globalization on social and
 human resources development
 Key challenges ahead
       Globalization: pros and cons

Advantages:
  Availability of newer, cheaper, faster and more diversified
  and expanded flows of resources, goods, services,
  facilities, ideas and knowledge, as well as higher living
  standards on a global basis.
Disadvantages:
  Benefits not equally distributed among all participating
  countries. Many nations more vulnerable to exogenous
  shocks.
The principal issue is how best to carry out the globalization
  process in a sustainable manner.
 Globalization and regional integration


Commonwealth of Independent States (CIS)
Eurasian Economic Community (EURASEC)
Economic Union
Central Asian Cooperation Organization (CACO)
Shanghai Cooperation Organization (SCO), Economic
Cooperation Organization (ECO), Black Sea Economic
Cooperation Organization (BSEC)
International Monetary Fund (IMF), World Bank, Asian
Development Bank (ADB), European Bank for
Reconstruction and Development (EBRD)
WTO
        Socio-economic profile: 2004

                                         GDP per
                                                        GDP per
                           Surface area capita (at
                Population                              capita (at
                            (thousands    current
               (thousands)                            PPPs, current
                             of sq km)   exchange
                                                       prices, US$)
                                        rates, US$)
Armenia           3 216          30        1 093          5 366
Azerbaijan         8 347         87        1 024          4 255
Georgia           4 315          70         866           4 816
Kazakhstan        15 068        2 725      2 715          9 416
Kyrgyzstan         5 121         200        425           3 219
Russian
Federation      143 600      17 075        4 093         10 857
Tajikistan       6 771        143           328           1 659
Turkmenistan     4 845        491          2 469          5 382
Uzbekistan       25 116       449           375           2 992
         The reform agenda

To sustain solid economic growth
To diversify production and export base
To improve investment and business climate
To pursue prudent monetary and fiscal policy to
contain inflation and keep exchange rate stable
To strengthen bank supervision
To continue institutional and structural reforms
To recover living standards and achieve MDGs
To accede to WTO
   Main macroeconomic indicators: 2001-2004
      (annual rate of growth, percentage)

                                                             Retail
                        Industrial Agricultural Capital
                    GDP                                      trade
                        production production investment
                                                           turnover
Armenia      2001   9.6       5        12          6         16
             2002   13.2     15        4          45         16
             2003   14.0     15        4          41         15
             2004   10.1      2        15         17         11
Azerbaijan   2001   9.9       5        11         21         10
             2002   10.6      4        6          84         10
             2003   11.2      6        6          74         11
             2004   10.2      6        5          36         13
Georgia      2001   4.8      -5        6          11         6
             2002   5.5       7        -1         18         4
             2003   11.0     15        11         91         9
             2004   6.2       3        -6         22         7
     Main macroeconomic indicators: 2001-2004
        (annual rate of growth, percentage) (Continuation)

                                                             Retail
                        Industrial Agricultural Capital
                    GDP                                      trade
                        production production investment
                                                           turnover
Kazakhstan   2001   13.5    14         17         45           15
             2002   9.8     10          3         11           8
             2003   9.3      9          1         17           10
             2004   9.4     10         0.1        11           11
Kyrgyzstan   2001   5.3      5          7         -14          6
             2002    0      -11         3         -10          9
             2003   6.7     17          3          -7          11
             2004   7.1      4          4          3           15
Russian      2001   5.1      5          8         10           11
Federation   2002   4.7      4          2          3           9
             2003   7.3      7          1         12           8
             2004   7.2      6          2         11           12
    Main macroeconomic indicators: 2001-2004
       (annual rate of growth, percentage) (Continuation)

                                                               Retail
                          Industrial Agricultural Capital
                      GDP                                      trade
                          production production investment
                                                             turnover
Tajikistan     2001   10.2    15         11         ...          2
               2002   10.8     8          ...       ...          18
               2003    11     10          ...       ...          25
               2004   10.6    14          ...       ...          22
Turkmenistan   2001   4.1      9         4.1        ...          32
               2002   1.8     5.1       -8.5        ...          32
               2003   6.8     8.1        8.2        ...          28
               2004    6      4.6       10.6        ...          ...
Uzbekistan     2001   4.5      8          5         4            10
               2002   4.2      8          6         4            2
               2003   4.4      6          6         ...          ...
               2004   4.9      ...        ...       ...          ...
    Macroeconomic Policy Challenges


One of the fastest growing regions in the world; but
growth is mostly driven by commodity exports
High commodity prices have boosted fiscal
revenues
Both have contributed to more balanced fiscal
positions
Stabilization funds have absorbed part of the
windfall (accumulated sizeable resources)
Risks of overheating
Symptoms of the “Dutch Disease” (real
appreciation of the exchange rate as a result of
resource windfalls)
Monetary policy has been generally accommodative
Risks Associated with the Current Pattern
        of Economic Performance


  The key factor behind the current economic
  boom: the expansion of extractive industries
  FDI has contributed to this boom but very
  little investment has gone to other sectors
  Narrow base of the recovery; vulnerability to
  external shocks
  Mineral extraction is a capital-intensive
  activity generating little employment
  Risks of a geographically unbalanced
  development and greater income inequality
    Merchandise exports and their rates of growth:
                    2001-2004

                          Value                     Exports (f.o.b.)
                     (millions of US$)     Annual rate of growth (percentage)
                           2004          2001       2002       2003       2004
Armenia                    715
   CIS countries                         21          8           34         -4
   Other countries                       11          62          36         6
Azerbaijan                3 614
   CIS countries                          -5         9           37         84
   Other countries                       39          -8          17         33
Georgia                    649
   CIS countries                         12          16          36         44
   Other countries                       -11         2           33         35
Kazakhstan                20 096
   CIS countries                         13         -17          36         37
   Other countries                        -7         25          33         61
    Merchandise exports and their rates of growth:
                    2001-2004                 (Continuation)


                          Value                    Exports (f.o.b.)
                     (millions of US$)    Annual rate of growth (percentage)
                           2004          2001      2002       2003       2004
Kyrgyzstan                 719
   CIS countries                         -19       0.1         19         37
   Other countries                        4         3          20         17
Russian Federation       181 532
   CIS countries                          6         7          30         43
   Other countries                        -4        7          24         34
Tajikistan                 915
   CIS countries                         -43       -11         -26        15
   Other countries                        7         25         20         15
Turkmenistan               3 870
   CIS countries                         10         3          12          ...
   Other countries                        -2        17         44          ...
Uzbekistan                 4 380         -6.1      -8.9        24.6      15.7
   Merchandise imports and their rates of growth:
                   2001-2004

                          Value                     Imports (c.i.f.)
                     (millions of US$)    Annual rate of growth (percentage)
                           2004          2001     2002        2003      2004
Armenia                   1 351
   CIS countries                         26        38          -7        10
   Other countries                        -7        4          46         4
Azerbaijan                3 504
   CIS countries                         19        46          31        41
   Other countries                       24         3          75        30
Georgia                   1 847
   CIS countries                         11        15          27        78
   Other countries                        4         1          54        54
Kazakhstan                12 781
   CIS countries                         21        -8          29        56
   Other countries                       36        13          26        49
   Merchandise imports and their rates of growth:
                   2001-2004                (Continuation)


                          Value                      Imports (c.i.f.)
                     (millions of US$)     Annual rate of growth (percentage)
                           2004          2001      2002        2003      2004
Kyrgyzstan                 941
   CIS countries                         -14        26          27         42
   Other countries                       -18        26          16         17
Russian Federation        75 590
   CIS countries                          -3        -9          29         35
   Other countries                       38         17          23         31
Tajikistan                1 375
   CIS countries                          -4         2           9         60
   Other countries                       30         16          63         48
Turkmenistan               3 320
   CIS countries                         27         -12         63         ...
   Other countries                       35         -8           -6        ...
Uzbekistan                 3 010         4.6       -14.4        8.3       23.8
Inflows of FDI: 1992-2003 (million dollar)

                                                       Cumulative
               1992    1995    1998    2000    2003    1992-2003
Armenia          -      25      221     104     121       853
Azerbaijan      ...     330    1 023    130    3 285     8 731
Georgia          -       6      265     131     338      1 388
Kazakhstan      100     964    1 152   1 283   2 088     15 805
Kyrgyzstan      ...     96      109     -2      46        481
Russian
Federation     1 454   2 065   2 761   2 714   7 958     35 915
Tajikistan       9      20      25      24      32        223
Turkmenistan    11      233     62      ...     ...        ...
Uzbekistan       9     - 24     140     75      ...       782*
 * 1992-2001
        Economic prospects

Outlook for 2005-2006 generally favourable with
strong economic growth in hydrocarbon
exporting countries and modest in others
Strong inflationary pressure
Inadequate investment to non-oil sectors
Vulnerability to changes in the external
environment
Harmonization of trade, liberalization of transit
regimes
  Towards Closer Economic Cooperation


The benefits of economic cooperation:
  Economic cooperation and trade enhance the growth
  potential and public welfare
  Fosters economic development in less developed countries
  Advances the transfer of knowledge and technological
  know-how
  Cooperation among neighbours stimulates global
  integration
  Beneficial for economic and political security
Common economic interest is the basis for
cooperation:
  Countries seeking cooperation should identify their common
  interest
  In the absence of common interest political initiatives may
  be doomed
   Towards Closer Economic Cooperation
                         (continued)



Forms of economic cooperation and integration:
  Trade facilitation
  Joint economic projects
  Liberalization of merchandise trade (free movement of goods)
  Unification of technical norms and standards
  Free movement of services, capital and labour
  Harmonization of macroeconomic policy
  Harmonization of economic legislation and regulation
WTO membership is a vital step for closer cooperation
  Provides universally accepted norms and rules of trade
  liberalization
  A common basis for the deepening of economic links among
  countries
Impact of globalization on social and
  human resources development

   Poverty
   Unemployment
   Income and employment generation
   programmes
   Family benefit schemes
   Poverty reduction strategies