China is seeking to expand transportation and logistics infrastructure, trade links, prosperity, new opportunity for stability and growth, investment, technology and new markets, exports, industries, industrial promotion, green and digital economy, reducing electricity shortage, and increasing exchanges in Central Asia. We look at what this means for Kyrgyzstan.
Introduction
Upon the breakup of the USSR in 1992, China was one of the first countries to recognize Kyrgyzstan’s independence, and their joint statement on establishing relations focused on principles such as friendship and cooperation, mutual interests and development.
Kyrgyzstan-China economic relations were minimal during the 1990s, but cooperation developed with the 1999 border demarcation treaty and the establishment of the Shanghai Cooperation Organization in 2001. The two countries established a strategic partnership relation in 2013 and agreed to further deepen this in 2014. In June 2019, China’s President, Xi Jinping held bilateral meetings and signed joint documents in Kyrgyzstan.
Kyrgyzstan has more than 1000 kilometers of common borders with western China. From 1992 to 2019, the total trade volume between China and Kyrgyzstan increased almost 180 times.
The Silk Road economic belt, which led to the Belt and Road Initiative (BRI), was first proposed by President Xi Jinping in 2013 and then enshrined in the Chinese Constitution in 2018.
Kyrgyzstan was one of the first countries to support and participate in the BRI. In the first meeting of the heads of China Plus Central Asia (C+C5) countries, China also asked Kyrgyzstan to deepen industrial cooperation, investment, and win-win cooperation in BRI and to increase regional industrial development in sectors such as the digital economy, energy, and agriculture.
From Beijing’s perspective, interaction with Kyrgyzstan with the BRI is important for connecting China to South Asia, the Middle East, and Europe. The volume of trade between EU countries and China continues to increase. Therefore, facilitating road-rail transportation to Europe and the Middle East through Central Asia as one of the safe routes will greatly reduce the distance between China, Europe, and the Middle East.
China’s BRI corridor in Kyrgyzstan connects China to Europe and West Asia. Routes such as China-Kyrgyzstan-Uzbekistan-Turkmenistan, and the route China-Kyrgyzstan-Tajikistan-Afghanistan-Iran and the Middle East are very useful. The construction of the BRI has become the most important platform for practical cooperation between China and Kyrgyzstan.
Since 2013, dozens of BRI projects are being implemented in Kyrgyzstan. More than half of foreign direct investment in Kyrgyzstan in the fields of energy, transportation and metallurgy, industry, agriculture, energy, resource exploration, and so on is performed by about 500 Chinese investors registered in the country.
Beijing is also interested in Kyrgyzstan’s minerals, such as non-ferrous metal deposits, copper and gold mines, cement factories, and the gradual increase of its presence in mining to ensure its sustainable economic growth.
In recent years, China’s attention to BRI in Kyrgyzstan has been towards industrialization, creation of work opportunities, promotion of services, socio-economic development, and sustainable growth such as acupuncture and hospitals, renovation of main and urban roads in Bishkek, the revival of rural irrigation, and exporting the Internet (optical fiber) project from China to Kyrgyzstan.
China’s projects in Kyrgyzstan include a household appliance manufacturing plant, the Kazakhstan-Kyrgyz highway, repair of the Bishkek thermal power plant and wind power plant, the renovation of irrigation projects, constructing the 500 kV Datka-Kamin transmission line, the Tajikistan-Kyrgyzstan CASA1000; the China-Kyrgyzstan-Uzbekistan highway, and many others.
Another important project is the construction of the China-Kyrgyzstan-Uzbekistan Railway (CKU). In September 2022, cooperation in the construction of the China-Kyrgyzstan-Uzbekistan railway was signed. Providing the shortest Central Asian routes, while crossing some of the world’s most spectacular mountainous terrain, this railway will give China the opportunity to diversify its trade routes, maintain better rail trade with the Middle East and Europe, and help the economic growth in central and western China.
China has first place in Kyrgyzstan’s trade exchanges with other countries and investment attraction at over US$4.6 billion. Bilateral commercial and economic cooperation includes infrastructure and transportation, energy, mining, and tourism.
China-Kyrgyz 2022 bilateral trade turnover reached US$9 billion, of which China’s share amounted to US$7.5 billion dollars. Kyrgyzstan mainly exports fruits, metals, and ores (mostly raw products).
Kyrgyzstan’s BRI Perspective and the Opportunities
Kyrgyzstan is a mountainous, land-locked country with an area of 199,900 square kilometers and a population of 6 million people. It is also one of the least developed countries in Central Asia. Kyrgyzstan focuses on neighboring countries with a balanced and pragmatic foreign policy. Its priorities are economic development and investment attraction, improvement of the domestic economic environment, and development of agriculture and tourism.
Kyrgyzstan has major expectations from the BRI, as the China-Kyrgyz-Uzbekistan railway, and the Turkmenistan-China gas pipeline both pass through Kyrgyzstan’s territory. The construction of roads, north-south and east-west better connects the geographical north and south of the country and provides enhanced trade opportunities with its neighbors.
The power transmission project and CKU railway also strengthen Kyrgyzstan’s position in BRI projects, while neighboring countries are also interested as the BRI can create new jobs and business opportunities in their economies while reducing the risk of internal unrest. Also, it can facilitate the process of integration with global markets, technology transfer, and tourism development. For example, the CKU railway will help transform landlocked Kyrgyzstan into a logistics center and reduce transportation time. Kyrgyzstan can develop as a transit hub and provide added value services, such as product consolidation, repackaging and warehousing along the BRI routes that transect it.
Kyrgyzstan’s BRI Challenges and Prospects
There are political problems, the replacement of governments, and the “North-South” divide in Kyrgyzstan. Sometimes Kyrgyz politicians have questioned the economic benefits of some projects, while as a relatively poor country – Kyrgyzstan’s 2022 GDP was under US$9 billion – means financial and technical challenges prevent the realization of some projects. The risk of developing dependence on China, and the vulnerability of the mining and extraction sector is a area of concern to opponents.The construction cost of the CKU railway alone will amount to about US$5 billion, and there are environmental concerns too. Opposition remains high, and constant.
Dozens of anti-Chinese demonstrations, local-Chinese conflicts, and some polls (66% of people are “very concerned” about Chinese investment) indicate challenges and negative feelings towards China in Kyrgyzstan. There is also the risk of Kyrgyzstan’s inability to repay debts to China, the risk of “debt trap diplomacy”; as well as increasing dependence on China. There are ambiguous security issues in the Northern Osh region, the influence of terrorism from Afghanistan and radical Islamist and even Kyrgyz nationalist groups, all of which can endanger or hinder the development of the CKU and the BRI.
However, although the huge trade deficit with China is a detriment to Kyrgyzstan’s economy, the BRI’s alignment with Kyrgyzstan’s national development strategy has contributed to economic and social development.
Phases of the BRI that were completed in 2022 included the reconstruction of roads and bridges, and these have been seen as successful. Considering the prospect of increasing trade between China and Kyrgyzstan until 2030, relatively high economic freedom, and the forecast of economic growth in Kyrgyzstan in 2023 at 3.5%, it appears that China’s BRI in Kyrgyzstan can largely move in the direction of a win-win between the two countries, and complete a large part of the projects. Gradually, a reluctance to change and a longer-term perspective that this might be a good thing is starting to slowly win people around.
Source: Silk Road Briefing
