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Challenges, Policy Options, and the Way Forward

Economic Diversification in Selected Asian Landlocked Developing Countries (Bhutan, Kazakhstan, Mongolia, and Turkmenistan)

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The study examines the trade and development challenges facing Asian Landlocked Developing Countries and their prospects for export diversification. It offers recommendations based on the case studies of the selected countries. The report argues that, despite complex trade and development challenges, the countries studied have significant potential to diversify their economies into the production and export of higher-value-added products in several sectors. These include agriculture (including agro-processing), light manufacturing (such as textiles, leather, and leather products), information and communications technology, tourism, and the construction sectors. Using the product-space approach, the report also identifies specific products that hold potential for export expansion and diversification in each country. For instance, agriculture and, to a lesser extent, manufacturing, are promising sectors for diversification, including niche products such as mandarin oranges (Bhutan), cashmere (Mongolia), silk (Turkmenistan), and cereal (Kazakhstan). The rich cultural heritage and varied geography of these countries are also conducive to tourism. In addition, there can be synergies between tourism and improvements in the quality of some local food and manufacturing products. However, a number of improvements in micro- and macro-economic policies and institutions are necessary to realize this potential.

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Turkmenistan

Turkmenistan’s economic growth has been impressive, with real GDP per capita tripling between 2000 and 2015, moving the country to upper-middle-income status, thanks largely the exploitation and export of natural gas. While data on poverty levels are unavailable, it is clear that the standard of living of the population has improved considerably (World Bank 2014). Natural gas revenue enables the government to provide electricity, gas, and water to the entire population free of charge. Prices of other basic consumer goods are also subsidized. Despite resulting distortions, low prices have generally improved the standard of living and secured the approval of the administration among the citizenry. In addition, natural gas exports have allowed Turkmenistan to accumulate large foreign exchange reserves, although their magnitude is difficult to ascertain, and thus to maintain a currency peg to the US dollar. Investment has been high as well, although many of the projects are of questionable usefulness in promoting diversification and inclusive growth.

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