German businesses are looking towards Central Asia with a view to capitalising on a spurt of economic and trade growth in the region.
A new report from Commerzbank has found that economic growth among Central Asian nations will be higher than the global average, with the rising tide of China lifting all the boats around it.
“As a result of the proximity to China and Russia, the vast amount of catching-up vis-à-vis the industrialised nations, high foreign investment, and the long period of excellent global economic development, Central Asia and Mongolia have been able to rapidly industrialise and post high growth figures since the start of the new millennium,” says Rainer Schäfer, the bank’s head of country risk analysis.
The report praises the countries for modernising their economies and, despite a significant leaning towards natural resources in terms of their exports basket, the authors claim that countries in Central Asia have been successful in diversifying their trade routes.
As Germany seeks to untangle itself from its longstanding energy dependence on Russia, the Central Asian region could become an important trading partner. Furthermore, German companies are looking to capitalise on large infrastructure projects which will break ground in the region imminently.
Speaking to the authors, the former German Minister of State Dr Gernot Erler says: “In view of the many crises in our immediate neighbourhood, Central Asia and Mongolia may not be the centre of attention right now for the German and European public. Nevertheless, the region is becoming increasingly important: not only as a vital supplier of natural resources and energy, but also on account of its geographical location at the crossroads between Europe and Asia. An example of this is the development of a transcontinental transport infrastructure, particularly in the rail sector, which connects the Far East with Europe and runs through Central Asia as well as Mongolia.”
Of the five Central Asian countries examined – Kazakhstan, Kyrgyzstan, Mongolia, Turkmenistan and Uzbekistan – the authors found Kazakhstan to be the most developed in terms of trade relations with the west. However, the country’s failure to renew its guarantees with Euler Hermes in 2014 has left some regional watchers urging caution to German businesses operational in the area.
“Kazakhstan remains the most important economic partner for Germany by a large margin. The country’s government has set itself lofty and ambitious goals with its ‘Strategy 2050”’ Almost 90% of German trading turnover with Central Asia in the first quarter of 2014 was attributed to Kazakhstan. Nevertheless, some problems remain concerning bilateral economic relations, in particular the failure to renew the Hermes guarantees,” saysRainer Lindner of the Committee on Eastern European Economic Relations.
The German exports base to Central Asia is dominated by machinery and equipment – a trend the authors expect to continue as the five countries continue to industrialise.