Sunday, May 20, 2012

Mini Marshall Plan for Central Asia?

V.Ivanov (Photo by
A leading Russian business daily Kommersant and Rossiyskaya Gazeta report here (in Russian) and here  on a curious document submitted by Russian drug control czar Viktor Ivanov to the Government. The paper calls for the creation of what seems to be a Russian CA development agency. The document was floated by Ivanov's agency probably because Russians want to frame it as part of their comprehensive approach to drug control in Central Asia and new drug policy.

Claiming that 40% of GDP in some Central Asian states comes from drug trade (never clarified which one, hugely improbably number anyways), Ivanov proposed to kill illicit economy by encouraging legal economy. Apparently the way Russians see it is not through micro-credit and encouragement of small entrepreneurship, but through huge Russian state corporations taking over largest projects in the region and creating new ones.

Russian Corporation for Cooperation with Central Asian Countries, as the proposed agency is officially called, will be founded as a joint stock company with 51% of shares going to the Russian Government and 49 to Russian companies, mostly Russian state corps like RosNeft, VTB, GazProm, VEB, RosAtom, RJD and Inter RAO EES, Rostehnologii and Sberbank. From the private sector only Sistema and Alfa Group are mentioned.

List of proposed projects is very entertaining. Russians are proposing to take over hydroenergy constructions at Kambarata and Rogun, re-create Soviet energy distribution systems and add a new water pipe from Siberia to Fergana Valley. Also envisioned is construction of atomic energy plant in the region and of a big poultry production plant. Beside such big projects, creation of a university specializing in development education does not seem that fantastic (no one seems to have been interested whether development oriented schools already exist in the region).

The whole initiative is based on a number of very shaky assumptions.
First, it is somehow assumed that Central Asians will meet the alarmingly ambitious development initiative with joy and open embrace. This is not going to happen, regional elites are very wary of Russians' real motives.

Second, it is assumed that drug trafficking in Central Asia is done by impoverished individuals, much like the image of a poor and desperate Afghan farmer who plants poppy because there is nothing else to plant. To me at least it seems that a typical Central Asian drug trafficker is not that destitute and has ample income opportunities were he/she willing to take them up.

Moreover, it is assumed that the way to lure traffickers out of the drug game is not by giving 'em cheap credit to open up firms, but by building huge plants where they most probably be employed.

Third, Russians pretend they have extra cash to spend. The initial project cost is Rbl 2 billion (about USD 64 mln) and annual salary expenses will amount to USD 6 mln, and all expenses will surely be higher than that. Where is the money coming from, is the question to the Government of D.Medvedev that has yet to pay off the promised pension increases.

Russian drug agency planners also have very curious notions of public-private partnership. Given the list of proposed participants, public-private for Russian drug people means partnership of the state and state-run corporations. very is odd the promise that local firms will be allowed in the future.

Journalists claim this is all not more than a 'retirement project' for Ivanov that has very little chances of success, at least in the form declared. I agree. 


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