Intermediating This Trade
In the absence of systematic data on cross-border trade, it was decided to base the investigation on surveys of traders and border authorities at border-crossing points (BCPs). A questionnaire was designed using semi- structured interviews that teams of local experts used to creatively extract information about the scope of cross-border trade, its significance for local populations, and challenges faced by traders when moving goods across borders. Surveys were conducted in the spring and summer of 2007 at the borders between China and Kazakhstan, China and the Kyrgyz Republic, Kazakhstan and the Kyrgyz Republic, the Kyrgyz Republic and Tajikistan, Kazakhstan and Uzbekistan, and Afghanistan and Tajikistan.
The surveys have convincingly shown the vital importance of border trade to the welfare of local populations. They not only have offered revealing insights into the importance of this trade and its significance to local interaction and welfare, but they also have pointed to the role of bazaars as a main venue of this trade. They have demonstrated the extreme vulnerability of border trade to government policies. Highly restrictive arrangements distort this trade, triggering illegal activities such as
160 Borderless Bazaars and Regional Integration in Central Asia
smuggling, whereas arrangements friendly toward small traders have paid off in terms of welfare gains for local populations.
During the first stage of the project, researchers relied exclusively on information from the surveys, since statistical information on border trade was unavailable. The surveys were conducted at border-crossing points (BCPs) between the following pairs of countries: Afghanistan–Tajikistan (three BCPs in Ishkashim, Tem, and Ruzvai on the Tajik side and Sher khan Bandar on the Afghan side), China–Kazakhstan (Korgos); the China–the Kyrgyz Republic (Irkeshtam); Kazakhstan–the Kyrgyz Republic (Kordoi); Kazakhstan–Uzbekistan (Jibek Joli); the Kyrgyz Republic– Tajikistan (Kulundu and Ovchi-Kalachi); and Tajikistan–Uzbekistan (Dusti and Patar). Since it was not possible to recruit an Afghan survey team within the study’s deadlines, information on Afghan conditions was obtained through interviews at three Afghanistan–Tajikistan BCPs on the Tajik side of the border. Uzbekistan declined to participate, but informa- tion on Uzbek conditions was gathered at various BCPs on its border.
Azerbaijan and Mongolia were excluded from the study. The former lacks a land border with a CAREC member, although its Baku International Airport bazaar is a hub for Caucasian bazaar trading. The latter borders only China along a long, thinly populated frontier and its trade within CAREC is almost exclusively with China. Research on China, a major source but not an appreciable recipient of goods traded in Central Asian bazaars, was confined to the Korgos BCP, bordering Kazakhstan, and the Irkeshtam BCP, bordering the Kyrgyz Republic.
Two tasks were identified in the next stage of the project. The first called for an examination of the role played by bazaars in Central Asia’s systems of production and distribution; the second for exploring the broader issue of building institutions to provide a framework for coop- eration between bordering regions. Since there were no in-depth empiri- cal studies of the role played by bazaars in production and distribution, a methodology was developed to extract and process information relevant not only to scholars studying Central Asia but also to policy makers, pro- viding them with practical recommendations designed to foster coopera- tion contributing to increased welfare of respective local populations.
Surveys combined with statistical analysis of available trade data were conducted in 2008.
From information gathered during the first stage, researchers distin- guished types of bazaars, which range from large international bazaars feeding into smaller bazaars, and bazaars trading not only domestically but also to bazaars located in other Central Asian countries. Bazaars were
divided into three categories: (1) big, international hub bazaars, (2) national and regional hub bazaars, and (3) local stationary bazaars, including those in cities. Excluded were border bazaars as they had been examined in the first stage. The sample for surveys included bazaars from each of the three categories.
Furthermore, an observation from the first stage was that the foreign trade of Central Asian economies could be characterized as occurring through three channels: (1) standard trade (bulk products such as oil, gas, metals, equipment, and machinery); (2) large-bazaar trade; and (3) bor- der trade.
Measuring large-bazaar and border trade is problematic. Standard trade data are captured in foreign trade statistics, but trade flowing through the other channels often goes unreported. A comparison of the import statistics of Kazakhstan and the Kyrgyz Republic, two Central Asian countries that report their foreign trade data to the United Nations, with exports statistics, initially with those of China, revealed huge dis- crepancies in data on products traded in bazaars. China’s exports of these products were significantly higher than their reported imports especially by the Kyrgyz Republic. Consequently, the researchers decided to care- fully examine these flows using the respective national trade statistics, with the assumption that a large portion of these flows is intermediated through bazaars.
As for border trade, bazaar income effects were estimated, which include logistics support (trucking, warehousing, leasing of sales outlets, and so on) and the imports of consumer products from outside those economies. Transport logistics rely mainly on data from trucks, which complement those of the standard channel, which relies mainly on rail- road data.
Hence, the second stage analyzed foreign trade data as they pertain to large-bazaar channels and surveys of bazaars. In all, 14 bazaars were sur- veyed: 6 in Kazakhstan, 3 in the Kyrgyz Republic, and 5 in Tajikistan. International bazaars happen to be the largest bazaars in these countries. Two international bazaars in the Kyrgyz Republic were surveyed because both are large and serve as a re-export platform to bazaars in neighboring Central Asian countries and southern parts of the Russian Federation. Large bazaars in Kazakhstan and Tajikistan other than those surveyed lack such international reach and only have national reach. International, national, and regional hub bazaars are complex trading and logistics cen- ters engaging a multiplicity of private entrepreneurs linked through an elaborate division of labor.
162 Borderless Bazaars and Regional Integration in Central Asia
City/local bazaars, usually located in urban areas, target the local population and are mainly retail facilities. They include larger border bazaars, which dominate this category. The items traded are foods, acquired either locally or at national hub bazaars, and consumer products. City bazaars covered by the survey included three in Kazakhstan (two in Almaty and one in Astana) and two in Tajikistan (Dushanbe and Khujand). Three of them specialize in food products, and two offer a broad range of products. Three bazaars specializing in agricultural prod- ucts were included to gain a better understanding of their functioning.
In each bazaar, one or more bazaar administration representatives (if there was one) and traders were interviewed using an interactive semi- structured survey format. Since the sample of interviewed traders was small due to time and funding limits, an effort was made to include rep- resentatives of different groups of traders, depending on type of sales outlet (stand, container, or shop) and specialization (shoes, clothing, and so on). In addition, the teams collected general information, including the number of sales outlets and people working in them, warehousing capacities, logistics (transportation and bus terminal), kind of auxiliary services available, and forms of ownership and governance. Particularly sought was information that would enable rough estimates of sales, sources of supply (local products versus imports, including their origins), retail versus wholesale sales, and destination of sales, that is, local versus foreign.
Surveyed bazaars ranged in size from small, designated areas that served as a meeting place for producers and wholesalers (often during limited seasons) to very large permanent bazaars akin to shopping malls, which are run by professional administrations and supply a wide range of services. Some are highly diversified, selling all kinds of consumer goods, including durables. Others solely attract sellers and buyers of construction materials or automobiles. Some engage in wholesale trade, feeding prod- ucts to bazaars located not only within a country but beyond; they bring together local and foreign residents and serve as a conduit for foreign trade operations. Some trade almost exclusively in domestic products, others in imported products, while still others specialize in agricultural products.
To enable estimates of total annual bazaar sales, the survey question- naire sought to incorporate all questions needed to extract information on cost components independent of the value of sales. Except for infor- mal payments, information is reliable, as traders and administrators had no incentive to distort or conceal it. Moreover, it is publicly available.
Finally, the analysis of foreign trade statistics relied on “mirror imports,” a method used to develop statistics on imports into countries that do not collect or make data on their imports available. This method provides that for any given Standard International Trade Classification (SITC) product, one country’s value of exports of that product into a second country is accepted as the second country’s value of imports of that product. The method results in approximates, in part because the value of an export excludes the cost of insurance and freight to transport the product to the place of import and the value of an import would include this cost. Other variables relate to variations in record keeping by customs officials. The method is described below with the discussion of that work to facilitate comprehension.
II. Guidelines for Semistructured Interviews