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Central Asia: Development Bank Views Economic Cooperation With Optimism

The first Central Asian ministerial meeting on economic cooperation since the events of 11 September was held this week in the Philippines. The participants discussed a three-year regional assistance program by the Asian Development Bank (ADB) and singled out transport, energy, and trade as priority areas for cooperation. RFE/RL correspondent Antoine Blua spoke to an official in the ADB's East and Central Asia department, who says the ADB is optimistic about the prospects for improving economic cooperation among the Central Asian republics.

Prague, 29 March 2002 (RFE/RL) -- The ADB hosted the first ministerial conference on economic cooperation in Central Asia on 25-26 March at its headquarters in Manila, Philippines. It was part of an institutional framework established by the Bank and the Central Asian states to enhance sub-regional cooperation after September's terrorist attacks on New York and Washington.

The meeting was attended by high-ranking officials from Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, and China, as well as representatives from neighboring countries and international donor organizations.

Kunio Senga is the director of the operational coordination division at ADB's East and Central Asia department. He told RFE/RL that discussions in Manila focused on two areas: "The first matter was to review the progress made so far under the ADB-supported program. And as part of the review of the progress, we have discussed [the] future of the program, and we have had good guidance from the member countries as to how we should proceed for the coming three years. Then -- second aspect -- we have discussed ways to explore the new prospect for the economic cooperation in light of recent developments in Afghanistan."

Senga said the ADB envisages lending between $250 million and $300 million a year to Central Asian countries over the next three years. As for technical assistance grants, the Bank plans to provide around $16 million a year over the next three years.

Senga noted that the amount of funding has remained quite constant since 11 September because the Bank has to make sure the resources provided to the Central Asian republics continue to be used effectively under each program it has designed.

According to Senga, ADB's total loans in the region from 1997 to 2001 amounted to some $1.2 billion, which is only about 3.7 percent of ADB's total loans. ADB's technical assistance grants, however, amounted to almost $65 million, which is around 12 percent of the Bank's total.

Senga added that the ADB expects to make a larger commitment in the future, saying the Bank's operations in the region are quite new. Kazakhstan and Kyrgyzstan joined the Bank in 1994, Uzbekistan in 1995, and Tajikistan in 1998, followed by Turkmenistan in 2000.

In early 1997, the ADB began its Central Asia Regional Economic Cooperation (CAREC) program, which seeks to promote economic growth and raise living standards in the region by encouraging economic cooperation. The program covers China -- focusing on its western Xinjiang Autonomous Region -- Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. Turkmenistan, which is still considered an observer, Senga said, is expected to become active in the program in the near future.

The strategy of the CAREC program is to finance infrastructure projects and improve the environment for promoting cross-border activities in the areas of energy, trade, and transportation.

"ADB would like to reduce economic isolation through the improvement of transport systems. In the area of energy, ADB would like to promote the rational use of energy resources. In the area of trade facilitation, ADB would like to enhance market integration both within the region and with world markets," Senga said.

Senga noted that this is an opportune time for promoting sub-regional cooperation, as peace returns to Afghanistan: "Peace in Afghanistan provides historic windows of opportunity to enhance cooperation in the region. It is given close historical ties and potential economic linkage. So we strongly believe that economic cooperation among the countries should play an important role. This will affect, of course, ADB operations in Central Asia, Afghanistan, but also in South Asia. As you know, through Afghanistan, there is a great potential for economic cooperation between Central and South Asia."

The Bank believes, Senga said, that economic cooperation is especially important in Central Asia, saying the region's states face common development challenges. He said their physical isolation from global markets, their relatively small domestic markets, and their need for a rational use of complementary energy resources make the countries unusually interdependent.

Senga said partnerships among these countries will create a basis for expansion of market integration both inside the region, as well as with world markets. In response, he stressed, the ADB will continue its efforts to strengthen economic cooperation among the Central Asian countries.

"Even if the progresses are modest, I think as long as we keep on producing concrete progress, we will be able to build trust and consensus. So we are basically talking about a long-term effort by the ADB. So ADB will act as an honest broker among the countries to facilitate dialogue and coordination," Senga said.

During the Manila conference, the delegates issued a statement in which they "strongly advocated" for a "results-oriented" approach to regional cooperation in the fields of transport, energy, and trade.

Among the Central Asian leaders at the meeting was Uzbekistan's Deputy Prime Minister Rustam Azimov. He said the process of rebuilding Afghanistan should be "more closely connected" with the policy of regional development of Central Asia.

China's Vice Minister of Finance Jin Liqun -- who represented Beijing at the talks -- proposed that Central Asian states "work together as neighbors" and emulate a model used to develop the Greater Mekong sub-region, which straddles Laos, Cambodia, China, Myanmar, Thailand, and Vietnam. In addition, Jin proposed a regional cooperation center to promote human resources development parallel to efforts in infrastructure development programs.

Senga noted the close coordination between the ADB and the participating governments in the CAREC program. As the program grows, he said, the overall institutional framework -- which was endorsed last January by all participating countries -- will permit "very good overall planning," privatization, and the mobilization of necessary resources.

According to Senga, this structure should enable the ADB to "effectively coordinate" its operations with other development partners -- such as the World Bank, the European Bank for Reconstruction and Development (EBRD), as well as bilateral donors -- to promote economic cooperation projects.

Senga said, however, that the ADB recognizes that each country in the region faces different issues at the moment. He said the key to regional cooperation is to focus on concrete projects that will bring tangible benefits and that will help build "confidence and foster trust."

"ADB's approach is a phased and practical approach, I would say, because we see, indeed, great potential in generating benefits out of the economic cooperation. But we also recognize inherent difficulties in regional cooperation. We know that some of the issues are quite complex. So we first emphasize the importance of the potential aspect of the regional cooperation. Basically, this is to built trust and consensus. Then the next phase proceeds with identification and preparation of specific regional projects," Senga said.

Senga said one of the transport projects that was discussed on 26 March is the Transport Corridor Development Project: "This project is to link Uzbekistan and China through the Kyrgyz Republic. This refers to the trans-continental rail and regional road links between the two countries. The ADB recently approved a technical assistance grant to study this corridor, while the EU -- European Union -- started assisting for this project. So ADB would like to provide supplementary assistance, focusing on private sector participation and also to explore the appropriate financing options."

In mid-March, the Bank approved an $850,000 technical-assistance grant to facilitate cooperation among China, Kyrgyzstan, and Uzbekistan. The grant will go toward developing regional transport projects, including the China-Kyrgyzstan-Uzbekistan corridor development and the Andizhan-Osh-Irkeshtan-Kashgar road-improvement project.

Senga noted that the ADB has already recorded some successes in improving the overall transportation situation in the region. As a crucial element in the rehabilitation of the highway linking Almaty in Kazakhstan with Bishkek in Kyrgyzstan, Senga said, the two governments have committed to a cross-border agreement to ensure that inter-country travel and trade are encouraged.

In October 2000, the ADB approved a $65-million loan to Kazakhstan and a five-million-dollar loan to Kyrgyzstan for the rehabilitation of the highway. The project -- whose total cost is estimated at $119 million -- is co-financed by the EBRD and the EU.