“The pandemic has shown us how regional cooperation can be a desirable goal. If we had a pre-existing cooperation in the health sector, we would exchange medical supplies and expertise better; If we had high quality tracking systems, we would be better off to contain the virus even across borders; if we had paperless trade and smooth customs cooperation, we would not need to shut down borders during the pandemic; if we had travel bubbles, tourism would not take such a steep fall. So, the pandemic has charted a new direction for us. It taught us to embrace, to diversify and to come together on a new journey to surmount these challenges,” said Safdar Parvez, Director at the Asian Development Bank (ADB), at an online research conference organized by the Central Asia Regional Economic Cooperation (CAREC) Institute in partnership with the Asian Development Bank Institute (ADBI) and ADB with the theme of COVID-19 and potential for economic recovery in CAREC.
The main objective of the conference was to identify means to revisit and rethink past, present, and future of CAREC in the wake of the pandemic and catalyze research on acute topics and produce relevant analytics that could aid CAREC economies stay in the forefront of sustainable development.
Researchers from the Development Strategy Center of Uzbekistan; University of Central Asia (Kyrgyzstan); Narxoz University of Kazakhstan; Institute of Applied Economic Research of the Russian Presidential Academy; Pakistan Institute of Development Economics (PIDE); Comsats University (Pakistan); Policy Research, Innovation, Development and Education (PRIDE) of Pakistan; and State Bank of Pakistan presented along with researchers and practitioners from the World Economic Forum, National University of Singapore, and renowned Turkish and European institutions.
Under the topic of e-commerce taxation, it was recommended to invest in building digital capacity for Central Asian tax authorities especially as a pre-condition for collaboration with e-commerce platforms in tackling the shadow economy, and introduction of the digital service tax based on the harmonized regional model. This could help find a balance between the goals of mobilizing tax revenues for financing the post-COVID-19 recovery and creating simple and certain conditions for foreign digital platforms to operate in Central Asia. Attracting foreign platforms to local economies was perceived as important for the digital transformation of SMEs, and it could partly compensate for their losses caused by COVID-19 restrictions.
Further, analysis on Central Asian trade finance application rejections led to recommendations to focus on building strong fintech foundation in Central Asia; bolstering the ICT and digital infrastructure; ensuring regulatory quality (e.g., cybersecurity and other technical vulnerabilities, data governance, and privacy protection), and enhancing required capabilities to advance inclusive trade and finance. It was also recommended for Central Asian countries to take advantage of the ADB-supported guarantees and loans through its Trade and Supply Chain Finance Program to facilitate international trade.
Common barriers were identified to e-government development in Central Asia, such as the digital divide, insufficient ICT infrastructure, costly Internet access, lack of qualifications among civil servants, lack of digital literacy among citizens, and low level of public confidence in digital documents. Policy advice was that developing countries with limited fiscal space will need to prioritize resources and efforts to target highest impact areas to be ready for future.
A research on Pakistan’s energy, industry, and investment overview analyzed unbalanced structure of energy consumption, power grid losses, low utilization of renewable energy sources, and heavy taxation of enterprises which impeded investment. In this light, China-Pakistan Economic Corridor (CPEC) was viewed as an opportunity to improve Pakistan’s transportation and logistics conditions, and make Pakistan a geographic entry port and trade area for the Chinese energy. Proposals were made to transfer part of China’s petroleum refining industry to Pakistan and combine it with Pakistan’s textile industry to promote development of Pakistan’s industrial economy. For this, it was suggested to improve the energy production system, establish energy cooperation in digital financial services, explore the energy financial system with capital market participation, and promote the driving effect of the energy industry on the economy.
The government debt was also analyzed and recovery scenarios were proposed. For example, to reduce debt to a sustainable 60% by 2030, Kyrgyzstan and Pakistan will need to reach and sustain 12% and 10% GDP growth respectively.
Research on adaptability of the Pakistan workforce towards remote work arrangements during the pandemic found that around 15% of the non-agricultural workforce in Pakistan could work from home, including 9% who can use computers and 5.3% that are engaged in home-based work. Policy recommendations suggested investment in development of ICT infrastructure for improving productivity of the country’s workforce and ensure preparedness for future uncertainties.
The conference materials will be published as a book at the end of 2021.