1 Warsaw, 16 December 2009 MA in Development Economics Warsaw University MA in Development Economics Warsaw University Development Challenges in Central Asia: A Need for Regional Cooperation Europe and CIS Jacek Cukrowski UNDP, Europe and the CIS Bratislava Regional Centre

2 Outline  Central Asia and its challenges  Selected issues Trade, transport and transit Trade, transport and transit Water, energy and environment Water, energy and environment Natural disasters, drugs, crime and terrorism Natural disasters, drugs, crime and terrorism Social development challenge Social development challenge Political and institutional constraints Political and institutional constraints  Conclusions and recommendations Europe and CIS

3 Central Asia and its challenges Europe and CIS

4 Central Asia: Key region in Eurasia

5 Jig-saw puzzle borders & complex relations between states Europe and CIS

6 Bridge between Kara-Suu (Kyrgyz Republic) and Quarasuv (Uzbekistan) Borders in Central Asia Europe and CIS

7 After September 11 Central Asia became important geopolitically After September 11 Central Asia became important geopolitically However, after several years we are still to see concrete results However, after several years we are still to see concrete results Recently, there has been a refocused interest in the region Recently, there has been a refocused interest in the region Democracy and good governance Democracy and good governance Human rights issues Human rights issues International interests in CA Europe and CIS

8  Common inheritance Soviet legacy left many difficult challenges Soviet legacy left many difficult challenges Geography: All Central Asian countries are landlocked Geography: All Central Asian countries are landlocked  Uzbekistan: Double-landlocked  National differences Size Size Resource endowment Resource endowment Incomes Incomes Interest in regional cooperation Interest in regional cooperation Central Asia – non homogenous region Europe and CIS

9 * GNI per capita, Atlas method (current US dollars). Turkmenistan - GDP per capita 2005 (HDR) ** Individuals in households with gross per capita monthly income of less than 75 rubles *** Percent of population with expenditures below 2.15US dollars (PPP) per day Poverty and inequalities in CA increased and remain high Europe and CIS Initial conditionsRecent data Per capita GNI (1990) * Gini coefficient (1989) Poverty, % of population (1989)** Per capita GNI (2006)* Gini coefficient (2005) Poverty, % of population*** (2003) USSR Kazakhstan $ $ Kyrgyzstan $ $ Tajikistan $ $ Turkmenistan $ $1, Uzbekistan $ $ Sources: Pomfret, Anderson (2001), World Bank (2005)

10 Per-capita $GDP, PPP terms, 2005 data Central Asia ’ s per-capita GDPs: Not unlike Africa ’ s Europe and CIS Source: UNDP Human Development Report (2007/2008)

11 HDI rank*HDI GDP per capita (PPP US$, 2005) Life expectancy at birth (years, 2005) Adult literacy rate (% ages 15 and older, 2005) Kazakhstan , Turkmenistan , Uzbekistan , na Kyrgyzstan , Tajikistan , Russian Federation , Source: UNDP 2007/2008 *Note: Out of 177 countries. Human Development Index (HDI) measuring the quality of life is low Europe and CIS

12 The distance from Central Asia The distance from Central Asia to the closest seaports in the Arabian Sea and the Persian Gulf: 3900 km to the closest seaports in the Arabian Sea and the Persian Gulf: 3900 km to the closest seaports in the Black Sea: almost 3,000 km to the closest seaports in the Black Sea: almost 3,000 km to the closest EU countries is about 4,000 km to the closest EU countries is about 4,000 km Geographical disadvantage: All CA countries are land-locked Europe and CIS

13 Capital Distance (km) KazakhstanAstana2800 KyrgyzstanBishkek2300 TajikistanDushanbe1700 TurkmenistanAshgabat1100 UzbekistanTashkent1900 ChadN’djamena 1200 Central African RepublicBangui 1000 NigerNiamey 900 Distances from capitals of CA and selected African land-locked countries to the closest sea Europe and CIS

14 Difficult conditions, … but starting from 1999 high economic growth Europe and CIS Growth rate (in percentage)

15 Net fuel exporters (GDP growth, percentages) Source: UNECE Net fuel importers (GDP growth, percentages) Recent trends … Europe and CIS

16 Rapid economic recovery since 1999 Rapid economic recovery since 1999 Progress in integration with the world economy Progress in integration with the world economy Kyrgyzstan in WTO since 1998 Kyrgyzstan in WTO since 1998 Rapid growth in energy, raw materials exports Rapid growth in energy, raw materials exports However However Sustainable progress requires regional cooperation Sustainable progress requires regional cooperation Partnership (donors involvement) is important but countries need to cooperate Partnership (donors involvement) is important but countries need to cooperate Central Asia ’ s opportunities Europe and CIS

17 Regional cooperation is a necessity, not an option  Partners and neighbours International and bilateral donors International and bilateral donors Neighbours: China, Russia, Iran Neighbours: China, Russia, Iran  Regional cooperation  to promote trade and investment  to better manage common infrastructure common infrastructure shared water and energy resources shared water and energy resources common environmental, health, and disaster preparedness challenges common environmental, health, and disaster preparedness challenges labour migration labour migration Europe and CIS

18 CENTRAL ASIA HUMAN DEVELOPMENT REPORT Bringing down barriers: Regional cooperation for human development and human security Download report at: Europe and CIS

19 Europe and CIS Selected issues Trade, transport and transit Trade, transport and transit Water, energy and environment Water, energy and environment Natural disasters, drugs, crime and terrorism Natural disasters, drugs, crime and terrorism Social development challenge Social development challenge Political and institutional constraints Political and institutional constraints

20 Borders are difficult/expensive/time consuming/dangerous Borders are difficult/expensive/time consuming/dangerous for trucks, cars, carts, people for trucks, cars, carts, people visa requirements are burdensome visa requirements are burdensome customs are often arbitrary and corrupt customs are often arbitrary and corrupt Regional trade agreements are overlapping, complex “spaghetti bowls” Regional trade agreements are overlapping, complex “spaghetti bowls” Substantial investment and maintenance costs from road and rail projects to circumvent borders Substantial investment and maintenance costs from road and rail projects to circumvent borders Air transport is underdeveloped, within region and with rest of world Air transport is underdeveloped, within region and with rest of world TTT: Special Issues (1) Europe and CIS

21 Transport is costly and time consuming Europe and CIS From… (to Europe) Transport cost a (US$)Transit time (days) Road b Rail b Air c Road b Rail b Air c Dushanbe (Tajikistan)9,2003,4002, Khodjant (Tajikistan)9,0003,0002, Tashkent (Uzbekistan)7,0002,8002, Almaty (Kazakhstan)8,0003,0002, Ashgabat (Turkmenistan)8,0003,3002, * 2004 г. a Including non-official payments b For container 40’ c For one metric tonne Source: UNDP

22 Spaghetti bowl of regional trade agreements Europe and CIS

23 Regional Agreements involving Central Asian Republics Europe and CIS

24 Shuttle traders (esp. women) face restrictions Shuttle traders (esp. women) face restrictions “If there were no such obstacles and additional expenses, the goods would have been way cheaper. We wouldn’t have seen the sad eyes of the parents, who cannot afford an expensive piece of clothing for their child.” (Interview with shuttle trader) “If there were no such obstacles and additional expenses, the goods would have been way cheaper. We wouldn’t have seen the sad eyes of the parents, who cannot afford an expensive piece of clothing for their child.” (Interview with shuttle trader) Reforms of trade, transit, business climate require “good governance” reforms Reforms of trade, transit, business climate require “good governance” reforms anti-corruption, civil service, transparency, accountability anti-corruption, civil service, transparency, accountability Europe and CIS TTT: Special Issues (2)

25 Kyrgyz-Uzbek border in the city of Kara Suu (Quarasuv) Shuttle trade Kyrgyz-Uzbek border in the city of Kara Suu (Quarasuv) Source: and UNDPwww.fеrgana.ru A bridge destroyed by Uzbek authorities in 2002 A bridge [temporarily] rebuilt by local population just after events in Andijan in May 2005 Europe and CIS

26 Trade could expand significantly Trade could expand significantly Better border management could reduce transport and transit barriers/costs by 50% Better border management could reduce transport and transit barriers/costs by 50% Borders are difficult, expensive, dangerous Borders are difficult, expensive, dangerous Especially for shuttle traders – often women Especially for shuttle traders – often women Lower trade costs boost incomes, employment, consumption in the region Lower trade costs boost incomes, employment, consumption in the region Conservative estimate: 20%-55% Conservative estimate: 20%-55% Many of the benefits go to Central Asia’s poor Many of the benefits go to Central Asia’s poor Europe and CIS TTT: Great barriers and opportunities

27 Recent projects: CAREC Trade Corridors Europe and CIS

28 UNDP: AfT for Central Asia: Support to Economic Development along Trade Corridors  Regional project financed by the Government of Finland  Support economic development of the areas located along selected transport corridors in Central Asia  Help small/micro entrepreneurs and farmers to gain from the economic opportunities the new transport infrastructure will bring  Support local communities placed along transport corridors promotion of international standards and procedures promotion of international standards and procedures identification of the products with the biggest trade potential identification of the products with the biggest trade potential improvement of the understanding of market mechanisms improvement of the understanding of market mechanisms matching potential trading partners matching potential trading partners  improving the regions competitiveness, expanding trade and alleviating poverty Europe and CIS

29 Europe and CIS Selected issues Trade, transport and transit Trade, transport and transit Water, energy and environment Water, energy and environment Natural disasters, drugs, crime and terrorism Natural disasters, drugs, crime and terrorism Social development challenge Social development challenge Political and institutional constraints Political and institutional constraints

30 The Aral sea disaster Source: UNDP Europe and CIS

31 Water, energy, environment: special issues Central Asia has large water/energy resources, export potential Central Asia has large water/energy resources, export potential Water, energy, environment are tightly linked Water, energy, environment are tightly linked Poor national policies, weak regional institutions create: Poor national policies, weak regional institutions create: obstacles to effective regional resource management obstacles to effective regional resource management potential for national, community conflicts potential for national, community conflicts Europe and CIS

32 Regional public goods in search of regional approaches Goal of self-sufficiency in water and energy resources for national security drives many of the policies of non-cooperation Goal of self-sufficiency in water and energy resources for national security drives many of the policies of non-cooperation Regional solutions? Regional solutions? Large common benefits... Large common benefits but require trust and some sharing of sovereignty... but require trust and some sharing of sovereignty Europe and CIS

33 Radioactive, chemical and biological hazards Source: UNEP EnvSec initiative Europe and CIS

34 Europe and CIS Selected issues Trade, transport and transit Trade, transport and transit Water, energy and environment Water, energy and environment Natural disasters, drugs, crime and terrorism Natural disasters, drugs, crime and terrorism Social development challenge Social development challenge Political and institutional constraints Political and institutional constraints

35 Natural disasters pose high economic and human risks Areas of high seismic risk Europe and CIS

36 Economic loss potential from catastrophic events is huge Europe and CIS

37 Regional responses to natural disasters needed Regional response essential Regional response essential Jigsaw puzzle borders “regionalise” many disaster issues Jigsaw puzzle borders “regionalise” many disaster issues National, regional institutions lack capacity in disaster National, regional institutions lack capacity in disaster risk assessment, management risk assessment, management prevention, preparedness, response prevention, preparedness, response Community involvement critical Community involvement critical Europe and CIS

38 Illicit drug trafficking Central Asia a major transit corridor for illicit drugs from Afghanistan... Central Asia a major transit corridor for illicit drugs from Afghanistan national production and use growing... national production and use growing Important links to: Important links to: HIV/AIDS HIV/AIDS crime and terrorism crime and terrorism weak institutions and poor governance weak institutions and poor governance Regional cooperation and drug trafficking: Regional cooperation and drug trafficking: necessary, but not sufficient necessary, but not sufficient long-term answers largely outside Central Asia long-term answers largely outside Central Asia Europe and CIS

39 Europe and CIS Selected issues Trade, transport and transit Trade, transport and transit Water, energy and environment Water, energy and environment Natural disasters, drugs, crime and terrorism Natural disasters, drugs, crime and terrorism Social development challenge Social development challenge Political and institutional constraints Political and institutional constraints

40 Labour migration Since the mid- 1990s, most migrants have left to seek better economic opportunities in Russia and recently in Kazakhstan Since the mid- 1990s, most migrants have left to seek better economic opportunities in Russia and recently in Kazakhstan Sources of labour migrants: Tajikistan, Uzbekistan, Kyrgyzstan Sources of labour migrants: Tajikistan, Uzbekistan, Kyrgyzstan Target countries: Russia, Kazakhstan Target countries: Russia, Kazakhstan In some countries remittances accounts for percent of GDP, but In some countries remittances accounts for percent of GDP, but Status of labour migrants is not regulated Status of labour migrants is not regulated Significant social costs of labour migration Significant social costs of labour migration Children, families, communities Children, families, communities Europe and CIS

41 Remittances are large (Inflows as percentage of GDP) Source: IMF Europe and CIS

42 Basic health indicators in CA have deteriorated Europe and CIS A decrease in life expectancy at birth Infant and under-five mortality

43 Tuberculosis is a regional problem Europe and CIS Source: UNDP Human Development Report (2007/2008)

44 Crisis of education School enrolment, tertiary (% gross) Source: WDI, World Bank, 2008 Europe and CIS

45 Other issues The risk of loosing Russian as a lingua franca The risk of loosing Russian as a lingua franca Access to information Access to information Internet users Internet users Gender issues Gender issues Equality of men and women Equality of men and women Europe and CIS

46 Europe and CIS Selected issues Trade, transport and transit Trade, transport and transit Water, energy and environment Water, energy and environment Natural disasters, drugs, crime and terrorism Natural disasters, drugs, crime and terrorism Social development challenge Social development challenge Political and institutional constraints Political and institutional constraints

47 Political and institutional constraints Not all political and economic interests benefit from cooperation Not all political and economic interests benefit from cooperation Even if there is interest in cooperation at the top, implementation may be blocked by those who would lose Even if there is interest in cooperation at the top, implementation may be blocked by those who would lose Corruption, poor administrative capacity, lack of accountability hinder reforms Corruption, poor administrative capacity, lack of accountability hinder reforms More participation by communities, giving voice to those who suffer from poor border management and related restrictions would help More participation by communities, giving voice to those who suffer from poor border management and related restrictions would help Europe and CIS

48 Prospects for regional cooperation Region-wide, comprehensive and intensive cooperation may not occur in Central Asia for some time to come, due to political and institutional constraints Region-wide, comprehensive and intensive cooperation may not occur in Central Asia for some time to come, due to political and institutional constraints …but progress on many selected issues is nonetheless possible and desirable …but progress on many selected issues is nonetheless possible and desirable Europe and CIS

49 Conclusions and recommendations Europe and CIS

50 Conclusions and recommendations Biggest gains come from improvements in: Biggest gains come from improvements in: trade, transport and transit trade, transport and transit water/energy development and use water/energy development and use Biggest potential threats come from: Biggest potential threats come from: natural disasters natural disasters communicable diseases communicable diseases regional conflict regional conflict Domestic reforms are a precondition Domestic reforms are a precondition good governance good governance trade and investment climate trade and investment climate social, environmental policies social, environmental policies Europe and CIS

51 More recommendations Broader networking across borders Broader networking across borders governments, business, academia, civil society governments, business, academia, civil society National development strategies should reflect regional dimensions National development strategies should reflect regional dimensions Key regional institutions: Key regional institutions: Should be strengthened Should be strengthened Mandates made clearer Mandates made clearer Neighbors and international organizations should support regional cooperation, integration Neighbors and international organizations should support regional cooperation, integration Europe and CIS

52 Priorities for actions Priorities for action should focus on creating Priorities for action should focus on creating “borders with a human face” Regional dimensions should be explicitly incorporated into national strategies (PRSPs) Regional dimensions should be explicitly incorporated into national strategies (PRSPs) Domestic reforms are an essential complement to regional cooperation Domestic reforms are an essential complement to regional cooperation especially to promote good governance, trade and investment, and social and environmental policies especially to promote good governance, trade and investment, and social and environmental policies Europe and CIS

53 Thank you… United Nations Development Programme, United Nations Development Programme, Europe and the Commonwealth of Independent States, Europe and the Commonwealth of Independent States, Bratislava Regional Centre Europe and CIS

54 Annex Europe and CIS

55 The report is “people centered” The report is “people centered” human development and human security defined in terms of broad goals and measures of human welfare human development and human security defined in terms of broad goals and measures of human welfare “freedom from want, freedom from fear” linked to Millennium Declaration, MDGs linked to Millennium Declaration, MDGs Addresses cooperation among the five Central Asian CIS countries Addresses cooperation among the five Central Asian CIS countries Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan And integration with the rest of the world And integration with the rest of the world especially neighbors (Afghanistan, China, Iran, Russia) and other partners especially neighbors (Afghanistan, China, Iran, Russia) and other partners Scope of the report Europe and CIS

56 I. Introduction II. Central Asia as a region III. Trade and investment IV. Resources: water, energy, environment V. Threats: natural disasters, drugs, crime, terrorism VI. Social development VII. Regional cooperation: political constraints VIII. Cooperation with neighbors, partners IX. Conclusions Report chapter structure Europe and CIS