CAREC COUNTRIES ECONOMIES Overview CAREC REGION: 11 COUNTRIES 320 MILLION POPULATION 16 443 290 SQUARE KILOMETER AREA …BILLION USD ECONOMIC POWER

EXPORT DIVERSIFICATION CHALLENGES FOR CAREC COUNTRIES

DOCTOR, PROFESSOR ENKHBAIGALI BYAMBASUREN CAREC COUNTRIES ECONOMIES Overview CAREC REGION: 11 COUNTRIES 320 MILLION POPULATION 16 443 290 SQUARE KILOMETER AREA …BILLION USD ECONOMIC POWER

10/18/10 This is a Footer ECONOMIC POWERS OF CAREC COUNTRIES ARE DIFFERENT

Economic Trade with CAREC GDP, 2017 (billion GDP per GDP growth, Trade with CAREC Country complexiy countries as percent $) capita, 2017 ($) 2017 (%) countries index of total trade

AFGANISTAN 19,500,000,000 550.1 2.7 n.a 45.60% 414,500,000$

AZERBAIJAN 40,700,000,000 4 135.1 0.1 -0.65 15.65% 3,596,800,000$

CHINA 12,237,700,000,000 8 827.0 6.9 0.69 1.4%

GEORGIA 15,100,000,000 4 045.4 4.8 -0.06 27.8%

KAZAKHSTAN 162,900,000,000 9 030.3 4.1 0.09 19.1%

KYRGYZ 7,600,000,000 1 220.5 4.6 -0.29 33.6%

MONGOLIA 11,400,000,000 3 717.5 5.3 -0.79 76.0%

PAKISTAN 305,000,000,000 1 547.9 5.7 -0.86 9.0%

TAJIKSTAN 7,100,000,000 801.1 7.6 -1.1 39.0% National Development Institute of Mongolia TURKMENISTAN 37,900,000,000 6 586.6 6.5 -1.2 88.8%

10/18/10UZBEKISTAN 49,700,000,000 1 533.9 5.3 -0.85 28.0% 4 POPULATIONS AND WORKFORCE CAPABILITIES ARE DIFFERENT

Human Population number in Country Population GDP GDP per capita Poverty (%) Development poverty Index

AFGANISTAN 35,530,000 19,500,000,000 550.1$ 18,887,537 54.5% 0.498

AZERBAIJAN 9,854,000 40,700,000,000 4 135.1$ 501,972 5.4% 0.757

CHINA 1,386,400,000 12,237,700,000,000 8 827.0$ 42,978,245 3.1% 0.752

GEORGIA 3,700,000 15,100,000,000 4 045.4$ 816,432 21.9% 0.780

KAZAKHSTAN 18,000,000 162,900,000,000 9 030.3$ 450,944 2.5% 0.800

KYRGYZ 6,200,000 7,600,000,000 1 220.5$ 1,586,739 25.6% 0.672

MONGOLIA 3,100,000 11,400,000,000 3 717.5$ 842,727 27.4% 0.741

PAKISTAN 197,000,000 305,000,000,000 1 547.9$ 46,019,464 24.3% 0.562

TAJIKSTAN 8,900,000 7,100,000,000 801.1$ 2,675,727 31.3% 0.650 National Development Institute of Mongolia TURKMENISTAN 5,800,000 37,900,000,000 6 586.6$ n.a 0.706

10/18/10 UZBEKISTAN 32,400,000 49,700,000,000 1 533.9$ 4,264291 14.1% 0.710 5 BACKGROUND INFORMATION: 1990-1999 INITIAL TRANSITION PERIOD FOR TRANSITION COUNTRIES 40.00

30.00

20.00

Azerbaijan 10.00 China Georgia

- Kazakstan ...... Kyrgyz 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Mongolia

GDP growth GDP (10.00) Pakistan tajikstan

(20.00) Turkmenistan Uzbekistan

(30.00)

(40.00)

10/18/10 (50.00) BACKGROUND INFORMATION: 2000-2010 SECOND TRANSITION PERIOD FOR TRANSITION COUNTRIES 40.00

35.00

30.00

afganistaN 25.00 Azerbaijan China

20.00 Georgia

Kazakstan 15.00 Kyrgyz

Mongolia GDP growth GDP 10.00 Pakistan tajikstan Turkmenistan 5.00 Uzbekistan

- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

(5.00)

10/18/10 (10.00) BACKGROUND INFORMATION: 2010-2018 PERIOD AFTER TRANSITION 20.00

15.00

afganistaN Azerbaijan China

10.00 Georgia

Kazakstan Kyrgyz

Mongolia GDP growth GDP 5.00 Pakistan tajikstan Turkmenistan Uzbekistan

- 2010 2011 2012 2013 2014 2015 2016 2017

(5.00)10/18/10 EXPORT OF CAREC COUNTRIES

billion US dollars Country 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Afganistan 0.21 1.13 0.47 0.45 0.39 0.64 0.74 0.78 0.99 0.49

Azerbaijan 47.76 14.70 21.36 26.57 23.91 23.98 21.83 12.73 13.46 13.81

China 1,574.0 1,313.4 1,726.9 2,024.9 2,111.6 2,237.0 2,359.3 2,375.7 2,257.5 2,368.1

Georgia 1.93 1.81 2.59 3.35 3.31 3.43 3.58 2.77 2.54 3.20 not covered Kazakhstan 45.85 40.46 55.37 79.06 83.77 74.21 68.10 40.68 32.86 43.83

Kyrgyz 1.40 1.09 1.65 1.99 1.69 1.73 1.09 1.30 1.03 1.93

Mongolia 1.92 1.56 2.86 3.95 3.97 4.64 6.31 5.00 5.79 6.94

Pakistan 22.71 20.12 23.75 28.74 24.59 27.82 27.97 26.01 23.78 19.59

Tajikstan 0.89 0.79 0.92 0.88 0.89 0.78 0.70 0.80 0.72 0.93

Turkmenistan 1.84 1.17 2.19 6.46 9.63 10.53 10.81 8.49 6.84 7.16

10/18/10Uzbekistan 4.46 2.76 5.11 5.96 4.78 7.42 6.14 5.66 6.85 8.38 EXPORT GROWTH IN CAREC COUNTRIES ARE EVEN

2009 2010 2011 2012 2013 2014 2015 2016 2017

Afganistan 538% 42% 96% 87% 164% 116% 105% 127% 49% 147%

Azerbaijan 31% 145% 124% 90% 100% 91% 58% 106% 103% 94%

China 83% 131% 117% 104% 106% 105% 101% 95% 105% 105%

Georgia 94% 143% 129% 99% 104% 104% 77% 92% 126% 108%

Kazakhstan 88% 137% 143% 106% 89% 92% 60% 81% 133% 103%

Kyrgyz 78% 151% 121% 85% 102% 63% 119% 79% 187% 110%

Mongolia 81% 183% 138% 101% 117% 136% 79% 116% 120% 119%

Pakistan 89% 118% 121% 86% 113% 101% 93% 91% 82% 99%

Tajikstan 89% 116% 96% 101% 88% 90% 114% 90% 129% 101%

Turkmenistan 64% 187% 295% 149% 109% 103% 79% 81% 105% 130%

Uzbekistan 62% 185% 117% 80% 155% 83% 92% 121% 122% 113%

10/18/10 118% 140% 136% 99% 113% 98% 89% 98% 115% 112% EXPORT OF CAREC COUNTRIES ARE DEPENDENT FROM ONE MARKET

Volume of export CAREC-2017 /billion US dollars/ 2,368.10

0.49 13.81 3.20 43.83 1.93 6.94 19.59 0.93 7.16 8.38

Afganistan Azerbaijan China Georgia Kazakhstan Kyrgyz Mongolia Pakistan Tajikstan Turkmenistan Uzbekistan

Volume of export CAREC-2017 /billion dollars/ without PRC

43.83

19.59

13.81 8.38 6.94 7.16 3.20 1.93 0.49 0.93

Afganistan Azerbaijan Georgia Kazakhstan Kyrgyz Mongolia Pakistan Tajikstan Turkmenistan Uzbekistan

10/18/10 EXPORT OF AZERBAIJAN

2017 KAZ $ 132,630,359.76 1.70% UZB $ 20,638,186.37 0.26% CHN $ 723,518,904.51 9.10% TJK $ 45,874.78 0.00% TKM $ 96,548,309.55 1.20% KGZ $ 1,243,486.99 0.02% GEO $ 261,782,841.48 3.30% MNG $ 84,191.02 0.00% AFG - - PAK $ 5,842,587.13 0.07% OTHERS 84.35%

EXPORT OF AFGHANISTAN 2017

KAZ $ 1,968,194.28 0.22% UZB - -

CHN $ 2,861,675.63 0.33% TJK - - TKM - - KGZ $ 237,748.37 0.03% GEO $ 1,167.00 0.00% MNG - - AZE - - PAK $ 392,512,891.80 45.0% Other countries 54.4%

10/18/10 China-2017 2017 KAZ $ 5,798,781,583.50 0.24% UZB $ 2,714,922,790.00 0.11% AZE $ 723,518,904.51 0.03% TJK $ 1,299,207,491.00 0.06% TKM $ 361,286,142.00 0.02% KGZ $ 2,627,648,056.11 0.11% GEO $ 765,129,855.69 0.03% MNG $ 1,419,985,578.16 0.06% AZE $ 723,518,904.51 0.03% PAK $ 18,041,524,848.00 0.76% OTHERS 98.6% Georgia-2017

2017 KAZ $ 52,386,528.1 1.60% UZB $ 64,131,973.0 2.0% AZE $ 261,782,841.5 8.20% TJK $ 3,375,136.0 0.1% TKM $ 21,543,297.0 0.7% KGZ $ 9,099,464.2 0.28% CHN $ 215,821,479.7 6.70% MNG $ 1,208,305.6 0.0% AZE $ 261,782,841.5 8.2% PAK $ 779,274.0 0.0% 10/18/10OTHERS 72.2% Kazakhstan-2017

2017 GEO $ 30,681,780 0.07% UZB $ 1,250,223,547 2.90% AZE $ 132,630,360 0.30% TJK $ 458,288,027 1.00% TKM $ 55,069,778 0.13% KGZ $ 535,195,879 1.20% CHN $ 5,900,255,068 13.00% MNG $ 71,017,865 0.16% AZE $ 132,630,360 0.30% PAK $ 5,536,903 0.01% OTHERS 80.93%

Kyrgyzstan-2017

2017 KAZ $ 377,301,513 20% UZB $ 121,562,493 6.30% CHN $ 101,443,236 5.30% TJK $ 24,262,676 1.30% TKM $ 4,890,695 0.25% AFG $ 2,536,957 0.13% GEO $ 2,267,022 0.12% MNG $ 1,444,234 0.08% AZE $ 1,245,268 0.07% PAK $ 265,385 0.01%

10/18/10Others 66.45% Mongolia-2017

2017 GEO - - UZB $ 30,750.00 0.00% AZE $ 84,191.02 0.00% TJK - - TKM - - KGZ $ 268,683.46 0.00% CHN $ 5,276,430,407.97 76.00% KAZ $ 2,772,406.97 0.04% AZE $ 84,191.02 0.00% PAK $ 216,240.00 0.00% OTHERS 24% Tajikistan-2017

2017 GEO $ 3,000.00 0.00% UZB - - AZE $ 45,874.78 0.00% PAK - - TKM - - KGZ $ 13,848,660.45 1.50% CHN $ 46,211,644.76 5.00% KAZ $ 302,901,331.90 33.00% AZE $ 45,874.78 0.00% MNG $ 2,565.17 0.00% OTHERS 60.49%

Turkmenistan-2017

2017 GEO $ 119,237,259.00 1.70% UZB - - AZE $ 96,548,309.55 1.30% PAK - - TJK - - KGZ $ 451,466.41 0.01% CHN $ 6,006,584,801.96 84.00% KAZ $ 41,112,056.44 0.57% AZE $ 96,548,309.55 1.30% MNG - - OTHERS 11.12%

10/18/10 Uzbekistan-2017

2017 GEO $ 6,915,730.00 0.08% TJK - - AZE $ 20,638,186.37 0.25% PAK - - TKM - - KGZ $ 160,392,504.54 1.90% CHN $ 1,401,740,855.65 17.00% KAZ $ 714,191,028.48 8.50% AZE $ 20,638,186.37 0.25% MNG $ 769,040.85 0.01% OTHERS 72.01%

Pakistan-2017

2017 GEO $ 3,124,115.00 0% UZB - - AZE $ 5,842,587.13 0% TJK - - TKM - - KGZ $ 4,276,106.68 0% CHN $ 1,777,073,467.90 9% KAZ $ 22,259,711.80 0% AZE $ 5,842,587.13 0% MNG $ 1,502,310.18 0%

10/18/10OTHERS 91% 10/18/10 Weak external position, high budget deficit, high inflation rate, high debt service ratio as percentage of GDP (interest payment), high volatility of exchange rates, uneven wealth share

What are constraints for CAREC countries export divesification

10/18/10 National Development Institute of Mongolia 18 IS TRADE DEFICIT HIGH IN CAREC COUNTRIES?

Trade balance 2017 (% of GDP) 21% MNG

15% AZE

10% TKM

8% KAZ

7% CHN

-6% UZB

-7% PAK

-16% AFG

-30% TJK

-33% GEO

10/18/10-53% National Development Institute of Mongolia 19 KYZ -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% IS TRADE DEFICIT HIGH IN CAREC COUNTRIES? Trade balance average 2008-2017 (% of GDP)

36.67% AZE

20.37% KAZ

12.61% CHN

0.14% TKM

-10.45% PAK

-11.92% UZB

-14.34% MNG

-37.51% GEO

-42.71% AFG

-53.69% TJK

-98.16% KYZ

20 TRADE BALANCE IS NEGATIVE CAREC COUNTRIES Average 2008-2017, billion USD

CHN $770.38 KAZ $21.01 AZE $12.10 TKM $1.16 MNG $(0.24) TJK $(2.63) UZB $(3.92) GEO $(4.32) KYZ $(4.53) AFG $(5.46) PAK $(18.99)

$(100.00) $- $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.00 $800.00 $900.00

Average 2008-2017, billion USD (without PRC)

KAZ $21.01 AZE $12.10 TKM $1.16 MNG $(0.24) TJK $(2.63) UZB $(3.92) GEO $(4.32) KYZ $(4.53) AFG $(5.46) PAK $(18.99)

10/18/10 $(25.00) $(20.00) $(15.00) $(10.00) $(5.00) $- $5.00 $10.00 $15.00 $20.00 $25.0021 CURRENT ACCOUNT BALANCE DEFICIT IS NOT COVERED BY REMITTANCES

Current account balance Personal remittances Percentage of remittances in (BoP, current US$) (current US$) current account balance

Afganistan -4,227,132,365.8 378,240,417.2 9.0% not covered

Azerbaijan 1,684,559,000.0 1,133,371,000.0 67.3% partially covered

China 164,886,647,435.2 28,666,122,721.2 17.4% not covered

Georgia -1,332,212,424.1 1,793,945,160.5 134.7% covered

Kazakhstan -5,389,528,405.6 355,001,271.5 6.6% not covered

Kyrgyz -522,328,645.0 2,485,778,06.0 475.9% covered

Mongolia -1,155,443,731.6 273,364,998.1 23.7% not covered

Pakistan -16,251,040,000.0 19,689,000,000.0 121.2% covered

Tajikstan 150,599,803.2 2,236,691,733.1 1485.2% covered

Turkmenistan .. 10,305,844.8 - 10/18/10 22 INFLATION IS HIGH IN CAREC COUNTRIES

30 Mongolia Afghanistan Azerbaijan China 25 Georgia Kazakhstan Kyrgyz Republic 20 Pakistan Tajikistan

0 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

-5 National Development Institute of 10/18/10 -10 Mongolia 23 FDI IN CAREC COUNTRIES in million USD

mln 20000 US $

290,92 15000 8.4

10000

5000

2004 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

-5000

-10000 National

2017 1993 1996 1999 2002 2005 2008 2011 2014 1990 Afghanistan Azerbaijan Georgia DevelopmentKazakhstan Kyrgyz Republic Mongolia Pakistan InstituteTajikistan of 10/18/10 China Turkmenistan Uzbekistan Mongolia 24 FDI in CAREC countries (without PRC)

mln US $

20,000.0

15,000.0

10,000.0

5,000.0

0.0

-5,000.0

-10,000.0 National Development Afghanistan Azerbaijan Georgia Kazakhstan KyrgyzInstitute Republic of 10/18/10 Mongolia Pakistan Tajikistan Turkmenistan UzbekistanMongolia 25 EXCHANGE RATE VOLATILITY IN CAREC COUNTRIES

Std. Dev as % of Mean

443.57

67.21

22.55 14.22 6.50 0.25 0.88 0.33 2.12

Afghanistan Azerbaijan China Georgia Kazakhstan Kyrgyz Mongolia Pakistan Tajikistan Republic 10/18/10Afghanistan Azerbaijan China Georgia Kazakhstan Kyrgyz Republic Mongolia Pakistan Tajikistan SHARE OF BUDGET IN GDP IN CAREC COUNTRIES

Azerbaijan China, People's Republic of Kazakhstan Kyrgyz Republic Mongolia Pakistan Tajikistan Uzbekistan

While tax remains still comparatively low, budget income has been increased due to 49.59 increase in international market price fluctuation, FDI, and investment in mining.

43.95 44.04 43.41 42.17

41.18

39.91 39.53

38.38

38.68

36.83 36.86

37.78

36.64

35.19 36.37 35.71

34.44 35.38

33.98

34.51 33.41

33.20 34.23 33.73 31.13 31.2331.12

30.98 31.96 30.94 30.94 31.44 30.41 29.94

28.81

27.31

26.07

25.30

24.28 24.22

22.63

23.14

21.84 21.6621.82 21.77 22.50

21.28

21.21

21.66 20.34 19.48 20.1019.77 19.94

19.27 19.35 20.19

18.7519.75

18.11 19.50 18.05 18.72 17.4418.67 17.63 17.13 17.2518.24 17.06 16.52 16.14 16.10 15.94 16.78 15.18

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

10/18/10 27 Central government debt, total (% of GDP)

400

350 346.0

300

270.6 250 245.0 Afghanistan Azerbaijan 206.4 200 Kazakhstan Kyrgyz Republic % ofGDP % Mongolia 150 Pakistan Turkmenistan

100

50 National 23.0 20.119.1 16.2 Development 7.7 7.5 6.8 6.9 8.7 9.1 7.8 7.0 0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Institute of

10/18/10 28

2000 2013 1991 1992 1993 1994 1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2014 2015 2016 2017 1990 Mongolia SOME CAREC COUNTRIES HAVE HIGH DEBT SERVICE RATIO AS PERCENTAGE OF EXPORT, NATURALLY GROWTH OF GDP OF YEAR DEPENDS ON INCREASE IN FDI

60 58 Mongolia 56 54 52 50

48 46 44 42 40 38 36 34 32 30 28 26 24 22 20 18 16 14 Debt service ratio as percentage of export of percentageas ratio serviceDebt 12 10 8 6 4 2 0 -8 -3 2 7 12 10/18/10 GDP growth Moody’s rating in CAREC countries

Aa3 Good

Upper middle

Lower middle Baa3

Ba2 Good RISKY Ba2

B1 B2 HIGH RISK B3 B3 B3

BAD

Azerbaijan China Georgia Kazakhstan Kyrgyz Mongolia Pakistan Tajikstan Uzbekistan Republic

Sources: Moody.com Moody (Changes in GDP, investment, trade and other indicators are not related, policy coordination is weak) ARE THERE ANY FACTORS SUPPORTING ECONOMIC DIVERSITY

National Development 31 Institute of Mongolia GROSS SAVINGS (% OF GDP) LEVEL IS DIFFERENT IN CAREC COUNTRIES

0 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

-10 China Turkmenistan Afghanistan Georgia Kyrgyz Republic Pakistan Tajikistan Uzbekistan

10/18/10 Azerbaijan Kazakhstan Mongolia 32 Interest rate spread (lending rate minus deposit rate, %) has been high until 2017

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

-10

-20 Mongolia Afghanistan

-30 Azerbaijan China

-40 Georgia Kazakhstan

-50 Kyrgyz Republic Pakistan

-60 Tajikistan Turkmenistan National -70 Uzbekistan Develop ment 10/18/10 33 Institute of Mongoli a Interest rate spread (lending rate minus deposit rate, %) is still among high

Tajikistan, 26.04%Tajikistan,

Kyrgyz 17.07% Republic,Kyrgyz

Azerbaijan, 8.11% Azerbaijan,

Mongolia, 7.05% Mongolia,

Pakistan, 3.73% Pakistan,

China, 2.85%China, Georgia, 1.83% Georgia,

10/18/10 2017 34 INDUSTRY, VALUE ADDED (% OF GDP) IS NOT HIGH IN MOST OF CAREC COUNTRIES 70

49.61

42.34

37.59

37.56

36.39

36.19

35.28

35.14

33.11

30.92

29.17

28.87

27.46

27.37 27.36

27.24

26.43

25.91

24.98

24.96

24.56

24.51

24.39

22.96

22.47 22.30 20 22.04

China Mongolia Turkmenistan Afghanistan Azerbaijan Georgia Kazakhstan Kyrgyz Republic

10/18/10 Pakistan Tajikistan Uzbekistan 35 ECONOMIC COMPLEXITIES OF CAREC COUNTRIES

10/18/10 This is a Footer PRODUCT SPACES OF CAREC COUNTRIES

In calculations, we used raw data from Based on calculation of 2011, the product COMTRADE and calculated RCA’s using Balassa spaces with different proximities did not show definition. much change. The difference between 2000 and 2008 diffusion is related to textile and Proximities and PRODY, EXPY’s has been clothing sector change. calculated according to method used by C.A.Hidalgo, B.Klinger, A.L.Barabási, R.Hausmann It does not seem that economy of Mongolia using data of 779 products of 224 countries. had significant structural change since 2008, therefore calculation again proximities based on data of recent years. (The Product Space Conditions the Development of Nations, 2007), (What you export matters, 2007)

2008

10/18/10Source: Calculation of Enkhbaigali.B 37 PRODUCT SPACES OF CAREC COUNTRIES ARE NOT DIVERSE

AFGANISTAN AZERBAIJAN PRODUCT SPACES OF CAREC COUNTRIES ARE NOT DIVERSE, EXCEPT CHINA

CHINA GEORGIA PRODUCT SPACES OF CAREC COUNTRIES ARE NOT DIVERSE

KAZAKSTAN KYRGYZ PRODUCT SPACES OF CAREC COUNTRIES ARE NOT DIVERSE

PAKISTAN TAJIKSTAN PRODUCT SPACES OF CAREC COUNTRIES ARE NOT DIVERSE

TURKMENISTAN UZBEKISTAN PRODUCT SPACES OF CAREC COUNTRIES ARE NOT DIVERSE

MONGOLIA