Turkish lira casts pall over Caucasus and Central Asia
BISHKEK (TCA) — The fall of the Turkish lira against the US dollar may have a negative impact on Central Asia and Caucasus countries which have extensive trade and economic relations with Turkey, with the economy of Turkmenistan facing the most serious consequences. We are republishing this article on the issue, written by Maximilian Hess*, originally published by Eurasianet: The Turkish lira last week ended one of the most turbulent weeks in its history, settling uneasily at six to the dollar. Turkey’s borrowing spree and President Recep Tayyip Erdoğan’s insistence on low interest rates hastened the lira’s fall. But more trouble could be around the corner as a spat rumbles on between Erdoğan and his equally capricious American counterpart, Donald Trump. Such are the trade, political and person-to-person contacts between Turkey, Central Asia and the Caucasus that many fear the rot could spread. Trading trouble Turkey’s trade with Kyrgyzstan and Kazakhstan has been growing steadily, despite some hiccups caused by the creation of external tariff barriers under the Moscow-led Eurasian Economic Union. Ankara’s business ties with Tajikistan, which does not share a Turkic language like the other Central Asian states, have steadily grown as well. But it is Uzbekistan that has offered the most promise as a result of the gradual opening-up effected by President Shavkat Mirziyoyev, who has worked hard to mend strained ties with Turkey as part of his global charm offensive. The textile industry is seen as one of the strongest potential areas for growth in Turkish-Central Asian trade and it is a useful bellwether for understanding what impact the currency crisis will leave. When, last September, Uzbekistan caved after many years of resistance and allowed its domestic currency, the som, to float freely, the devaluation suddenly offered the prospect of significantly cheaper Uzbek cotton for Turkish buyers. But the lira’s sustained fall means that while one lira bought 2,300 Uzbek som in September 2017 – compared to 1,200 som in August of that same year – the lira has now fallen back to 1,300. Neighboring Kyrgyzstan has put up a reasonably strong defense of its currency, which is also affecting the textile sector. Small-scale clothes-making studios are a precious and rare job-generator. “The Kyrgyz som has so far maintained its position, which means that Turkish goods, in particular clothing, have become cheaper for Kyrgyz people,” Aziz Soltobayev, chief executive of Kyrgyzstan’s leading e-commerce platform Svetofor.info, told Eurasianet. “But this will have the opposite effect for Kyrgyzstan's light industry. Cheaper imported clothing from Turkey could significantly reduce the competitiveness of Kyrgyz textiles in the local market.” Caucasus concerns Elsewhere, the lira’s fall is already pushing down the Georgian lari and the Azeri manat. Georgia-based investment bank Galt & Taggart lowered its forecast for the Georgian lari in light of Turkey's turbulence, although it is also insisted contagion should be contained. Given Georgia's reliance on imports for secondary goods, the lira's weakening will have some benefits. At the same time, any upside will be mitigated by the fact...
