Eurasian countries’ market potential was assessed by identifying their neighbors’ access to the broader trade network through the import and export of intermediate goods. For this estimation the neighbors of countries in Central Asia and the South Caucasus were ranked according to a market potential proxy measured as the neighbor’s total trade in intermediate goods, using average trade data for 2003–07 from the <mark>United Nations Commodity Trade Statistics Database (C</mark> OMTRADE). The difference in trade structure and trade direction between CEE countries and Eurasian countries was explained largely by the market potential of their respective neighborhoods.

Many Eurasian countries are landlocked, and their production structure is skewed toward natural resource–intensive goods, making them less likely to attract substantial FDI outside these rent sectors. Diversification could start at the regional level if investors (domestic or foreign) find it profitable to establish production and distribution networks through the import and export of goods and services based on each country’s competitive advantage. The _World Development Paper 2009: Reshaping Economic Geography_ proposes a policy framework for unleashing these forces, recommending institutions that unite places, infrastructure that connects places, and incentives that target places (World Bank 2009a). Needed institutional reforms involve measures behind the border (macroeconomic stability, business environment, and standards and conformity issues), at the border (goods, services, people, and capital mobility across borders), and between borders (trade and transport facilitation initiatives). And needed infrastructure investments include productivity-enhancing infrastructure (information and communications technology, and research and development–related facilities), mobility-enhancing infrastructure (education/training and research centers), and connectivity-enhancing infrastructure (transportation infrastructure, transport, and logistics facilities). Such improvements can be made if urban centers are better connected to surrounding markets.

# **Going forward: Rethinking Eurasian cities**

Eurasian countries have been through three major changes: the breakup of an empire, which transformed regions of the former Soviet Union into independent countries with sometimes competing interests and cumbersome border-crossing operations; the unleashing of market forces of agglomeration, migration, and specialization, which affected the form and function of settlements within these new countries; and the emergence of regional powers such as China, the EU, India, and Russia, which affected the structure and direction of trade of the new countries.

Looking ahead, the form and function of these cities need to be rethought to take advantage of market forces. The main issues are enhancing their connectivity to domestic and external markets to take advantage of the new biaxial Silk Road—and changing how they are financed to allow other Eurasian cities to complement Moscow, St. Petersburg, and Kiev as the anchors of this region in world markets.

# **_Rethinking the form and function of cities_**

After years of central planning, one of the main characteristics of Eurasian cities is the misallocation of land. Land in and around Soviet cities had two major idiosyncratic characteristics: it was centrally owned, thus preventing local stakeholders from responding flexibly to local dynamics, and its value was not factored into city development decisions. Cities other than Moscow could not adjust to a sudden influx of migrants by building new housing, by virtue of the _Propiska_ system. Yet people in the Soviet Union found their ways to regional centers, altering the equilibrium between urban infrastructure and city dwellers. As economic prospects in only a few Eurasian cities continue to attract an increasing number of workers, it will be important to rethink the form of cities by revisiting their planning.

Most Eurasian cities did not have suburbs—not necessarily a bad thing, as compact development has benefits that far outweigh sprawl. But older urban centers, with traditions of growing organically, developed beyond the municipality itself. They tended to be surrounded by villages that provided some of the food needs of urban dwellers. As cities grew, so did these satellite developments.

13