Jul 11

Why is there so much construction in Central Asia’s capitals?

The Khan Shatyr shopping centre in Astana; Dushanbe’s “world’s largest” flagpole; yet another new apartment building in Bishkek


By John Heathershaw

On my most recent trip to Central Asia I had quite a different travelling experience than in previous times.  I don’t enjoy moving on all the time.  Normally I go to one place and try and stay there as long as possible, preferably to live there for a few months or longer.  Unavoidably, this time I hopped from one capital city to the next – from Astana to Dushanbe to Bishkek – in just ten days.

Of course, much is missed when one has so little time and moves on so quickly.  But the one benefit of such a trip is that you are forced to consider the similarities and differences of the three capitals.

It was the differences that initially stood out.  I had not been to Kazakhstan for ten years and had never been to Astana.  The sustained economic growth of a middle income country (’emerging market’ in neoliberal parlance) contrasts with the economic ups and downs of the poor (‘developing’) countries of Kyrgyzstan and Tajikistan.  Most notably, ‘middle class’ Kazakhs are apparently behaving like ‘middle class’ consumers to a far greater and this is evident in the loans they rely on and the purchasing habits they are acquiring.  In fact, it may be time to drop the scare quotes and just analyse the Kazakh economy as any other capitalist economy.

Yet one obvious similarity between the three states revealed some basic continuities in the structure of the political economy across all three.  I refer to the construction boom that is experienced to a greater or lesser degree by all three capitals.  This is a construction boom on two very distinct levels.  Firstly, there are grandiose new residential, office and retail buildings in the urban districts largely by, for and of the rich.  Secondly, there are the ‘new settlements’ in the peri-urban areas, often beyond the formal city limits, for poorer persons often trained in the technical professionals of the old soviet public sector.  In 2011, I did four months of research on protests in the latter.  What interested me this time was the nature of the former.

It is easy to explain the construction boom as the natural result of population growth, economic growth, and the need to replace a decaying Soviet era infrastructure.  There has indeed been a shortage of housing in Central Asia since the latter decades of the Soviet Union.  But these explanations tell us little about the nature of the boom and, particularly, the clear divide between the wealthy and the poor in construction.

During my trip I discussed with friends three explanations for the construction boom of Central Asian capitals, each of which has some merit and some support in the academic literature.

1. Marxist economic geographers and political economists would point to the emergence of small metropolitan cores of elites who control government and business at the expense of a much larger periphery of persons excluded from this economic growth.  The poor are left to rely on the ‘trickle-down’ from capital concentration in the metropolises thus expanding the population of the cities and leading to the new settlements.   In the centre a small population of the rich live in gated communities, separate from the grievances of the poor.  Retail spaces such as Khan Shatyr in Astana and Bishkek Park are affordable on a regular basis to this core minority whilst the peripheral majority window-shop.

This makes a lot of sense and explains a great deal of the political economy of ‘third world’ cities.  The limitation of this analysis is that supply outstrips demand: there are far fewer paying customers and property buyers who can afford these prices than there are shops and apartments.  Local friends in all three cities claimed that many of the new buildings were largely unoccupied.  This would be true of the apartment buildings of Astana as mortgage schemes fell through and the national library of Dushanbe with precious few books on its shelves.  In an era of vastly increasingly inequality on a global scale, and the rise of the 1%, the fact is that the wealthy are not a big enough population to explain the boom in residential and retail space.

2.   A second explanation is one I have written about at some length before.  If its not all about demand from the wealthy core, perhaps the roots of the construction boom are less material and more symbolic?  Maybe the real reason for all these new buildings is national prestige and the vainglorious attempt to brand the capital city in the self-images of the ruling elite?  The logic of ‘global performance’ indicates that this might be so as the governments of newly independent states seek to instantiate themselves in international business and politics to gain recognition from domestic and foreign audiences.  Khan Shatyr and Baiterek in Astana and the various museums, monuments and the famous flagpole that have reshaped the centre of Dushanbe are obviously nationalistic in form.  Bishkek has, mercifully, been relatively free of such prestige projects and accordingly has a slightly less authoritarian and more egalitarian feel.

However, fundamentally economic processes of construction booms cannot be explained purely in terms of symbolic politics.  Moreover, much of the construction we have seen is more mundane that grandiose.  We need a further explanation.

3. The final explanation I discussed with friends was that of the informal economy and money laundering.  The fact that all three states have in common and share with much of the world is that much of the business which is driving their growth is ‘grey’ or ‘black’.  Construction is itself a famous site of corruption – that is the false reporting of costs and prices by contractors and the demands of public officials for over-payments and side-payments.  When construction is financed by foreign companies or development banks everyone is a short-term winner except for the share-holders of the foreign company or the tax-payers of members states that finance the development bank.  It’s easy in these cases to see why everyone is for construction.

However, when the money comes from national businesses and elites this is not so straightforward unless one recognises the importance of money laundering in economies where little if any business activity is ever 100% legitimate.  Whether this is the trafficking of drugs through Kyrgyzstan and Tajikistan or the questionable business practices of Kazakh mining and oil service companies a great deal of the wealth of the new elites are formed of ill-gotten gains.  This money needs to be cleaned up and, for many centuries, one of the best ways to do this has been through construction.  Here, off-shore connections are essential as monies of uncertain provenance are wired to tax havens via company service providers in London, New York and other centres of global finance, and then returned to the country via the same routes, untaxed and cleaned.

Of course, it is close to impossible to demonstrate how much of the property boom of the three capital cities I visited is explained by the logic of money laundering.  In fact, all three of the explanations have some merit and all are inherent to global capitalism, wherever it emerges.  The demand of the new elite – which is growing – is important; in Astana we can even talk about ‘middle class demand’.  Prestige and global performance are an important too as reputation is a global currency in a global economy which is symbolic and (in some limited way) moral as well as material.  But let us not forget Central Asia’s off-shore connections.  This not least because it is via these ties that Central Asia is integrated into the financial and, eventually, political systems of the US and Europe.  It is through money laundering that Central Asia has truly transitioned to be part of the global economy. What might Anders Aslund and Jeffrey Sachs have to say about that?