Supporting Small Businesses and Building the New Silk Road

This blog post by Deputy Assistant Secretary of the Treasury for Europe and Eurasia Christopher Smart originally appeared July 23 on the U.S. Department of the Treasury website. There are no republication restrictions for use by U.S. embassies.

Supporting Small Businesses and Building the New Silk Road
By: Christopher Smart

The countries of Central Asia are critical to United States security interests in the region though have long presented daunting trade-offs. They are crucial supply routes for U.S. operations in Afghanistan, yet remain caught between Chinese and Russian competition for influence. They have delivered patchy progress on economic reform, yet still struggle to overcome their Soviet legacy. They offer tantalizing prospects for integration into vast Indian and Pakistani markets to the south, but continue to stumble on longstanding regional rivalries.

I traveled to Kazakhstan and the Kyrgyz Republic last month to meet with government officials and take a first-hand look at a program designed by Treasury to support both political and economic security in a region that is strategically important to the United States.

Following the collapse of the Soviet Union, Congress allocated funds to support economic and political transitions in the region – a key component of larger regional stability. With a small share of these resources, Treasury established a trust fund at the European Bank for Reconstruction and Development (EBRD) in 2000 to provide debt financing and training to local banks to expand lending to small businesses. The debt financing has been repaid with interest, and now, the fund helps to support export strategies for small and medium businesses in Central Asia.

This contribution to the EBRD’s Small Business Support (SBS) program was pooled with $600,000 from the EBRD’s Shareholders Special Fund to provide training and counseling services to nearly 70 small businesses in Kazakhstan, Tajikistan and the Kyrgyz Republic. The idea is that helping enterprises meet the standards of U.S. and other international buyers will position these countries to boost exports, supporting economic development and reinforcing regional stability.

Even as the U.S. military involvement in Afghanistan winds down, our strategy in Central Asia includes developing elements of a New Silk Road, reconnecting trade routes between Asia and Europe. The businesses we visited offer a flavor of the potential new flows of commerce supported by the Small Business Support program:

A furniture and mattress maker in Bishkek, the capital of the Kyrgyz Republic, whose grandparents had been exiled to Central Asia by Stalin for running a silk business and who launched his company just as soon as Gorbachev permitted the establishment of “cooperative” businesses in the late 1980s. His mattresses are going through the final quality control tests and should soon be exported.

• A Kyrgyz manufacturer of boilers for heating systems, who has been expanding his product line with the help of an industry expert from Japan. With an improved technological platform, he now has his sights set on the Russian market.

• A ventilation and central air-conditioning system manufacturer near Almaty, which has significantly expanded its production capacity with a state-of-the-art facility. As the leading producer in Kazakhstan, the company hopes to expand to China, Turkey, and Western Europe with the support of a consultant who helped streamline its production process.

The work is focused, and the results are tangible. Building the capacity of small businesses reinforces the entrepreneurial backbone of a fragile region and builds fresh links between these economies and the flows of global trade.

Christopher Smart is the Deputy Assistant Secretary for Europe and Eurasia in the Office of International Affairs at the U.S. Department of the Treasury.

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