CAREC 2020 MIDTERM REVIEW
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Central Asia Regional Economic Cooperation Program CAREC 2020 MIDTERM REVIEW
Contents Abbreviationsiii I. Introduction 1 Ii. Global and Regional Developments 3 Iii. Achievements and Challenges in Priority Operational Areas 6 Iv. Issues Raised in Country and Sector Consultations 16 V. The Relevance of CAREC’s Strategic and Institutional Frameworks 18 Vi. Conclusions and Recommendations 20 References23 Appendix24 ii
Abbreviations
ABCI Almaty-Bishkek Corridor Initiative
ADB Asian Development Bank
ASEAN Association of Southeast Asian Nations
AIIB Asian Infrastructure Investment Bank
BCP border crossing point
CAREC Central Asia Regional Cooperation Program
CASAREM Central Asia – South Asia Regional Energy Market
CFCFA CAREC Federation of Carrier and Forwarder Associations
CI CAREC Institute
CPMM Corridor Performance Measurement and Monitoring
CCC Customs Coordinating Committee
DEfR Development Effectiveness Review
DMC developing member country
DP development partner
EEU Eurasian Economic Union
ExG expert group
GDP gross domestic product
GMS Greater Mekong Subregion
ICT information and communication technology
IFI international financial institution
km kilometer
MC Ministerial Conference
MTR Midterm Review
NDB New Development Bank
NFP National Focal Point
NSR New Silk Road
OBOR One Belt, One Road
OIF Overall Institutional Framework
PPP public-private partnership
PRC People’s Republic of China
QTTA Quadrilateral Traffic in Transit Agreement
RAM road asset management
iiiCAREC 2020 Midterm Review RCEP Regional Comprehensive Economic Partnership RCI regional cooperation and integration RIBS Regional Improvement of Border Services RICE Regional Improvement of Corridor Efficiency RUST Regional Upgrade of SPS Measures for Trade SCO Shanghai Cooperation Organization SOM Senior Officials’ Meeting SPS sanitary and phytosanitary SRF Silk Road Fund TA technical assistance TAP Turkmenistan-Afghanistan-Pakistan power transmission interconnection project TAPI Turkmenistan-Afghanistan-Pakistan-India natural gas pipeline TF trade facilitation TPCC Trade Policy Coordinating Committee TPCL TAPI Pipeline Company Limited TSCC Transport Sector Coordinating Committee TTFS Transport and Trade Facilitation Strategy TUTAP Turkmenistan-Uzbekistan-Tajikistan-Afghanistan-Pakistan WG working group WTO World Trade Organization iv
I. Introduction
A. Background “The MTR will review
the relevance and
1. The Asian Development (ADB) and the
responsiveness of CAREC,
Central Asian countries jointly launched the
Central Asia Regional Economic Cooperation and propose refinements
(CAREC) Program in 2001.1 Its first strategic and strategies moving
framework, the CAREC Comprehensive forward.”
Action Plan, provided guidance for the
program’s operations in 2006–2010. Following B. The Objectives and Institutional
a stocktaking of achievements and lessons Structure of CAREC
learned, in 2011 the CAREC Ministerial
Conference (MC) approved its second strategic 4. CAREC 2020 has a clearly defined
framework, CAREC 2020, to guide the program agenda that cascades from a vision (“Good
during the following decade, 2011–2020 (ADB, neighbors, good partners, good prospects”)
2012). and a goal (“Development through cooperation,
leading to accelerated economic growth
2. After five years of implementation, and shared prosperity”) to two strategic
in 2015, the Senior Officials’ Meeting (SOM) objectives (trade expansion and improved
endorsed the undertaking of a midterm review competitiveness) and seven operational
(MTR) of CAREC 2020. The purpose of MTR priorities (transport, trade facilitation, trade
is to review the relevance and responsiveness policy, energy, economic corridors, the CAREC
of CAREC 2020, including implementation Institute, and second-tier areas). The framework
performance, results achieved and the for the strategic agenda is in the Appendix.
effectiveness of the CAREC institutions; to
draw lessons from the experience gained 5. For the MTR, CAREC’s strategic
in the first five years of the strategy; and to objectives and seven operational priorities
propose refinements and strategies moving are particularly relevant and form the core of
forward. the review. CAREC 2020 defines its strategic
objectives as follows:
3. The MTR is based on (i) participatory
consultations with government agencies, “Trade expansion. CAREC 2020 will
think tanks and a range of stakeholders seek to increase trade through transport
from the CAREC countries, including key connectivity, facilitation of cross-border
development partners; (ii) close consultation movement of goods and people, trade
with concerned staff within ADB; and (iii) a openness, and energy trade. Improvements
review of relevant strategic and operational in these core areas will accelerate market-
reports and work plans. The MTR team driven economic cooperation. Energy
comprised staff of the CAREC Secretariat cooperation will harness the region’s
in ADB and a consultant2 comparative advantage; ensure reliable,
1
Originally, CAREC had eight member countries, Afghanistan, Azerbaijan, the PRC, Kazakhstan, the Kyrgyz Republic, Mongolia,
Tajikistan and Uzbekistan. Pakistan and Turkmenistan joined CAREC in 2010.
2
Country consultations were held in 2016 in Tashkent (4 April), Astana (6 April), Bishkek (7 April), Beijing (18 May), Ulaanbaatar (20
May) and Kuala Lumpur (13 June, including participants from Azerbaijan, Pakistan, Tajikistan and Turkmenistan, and a videolink
with Afghanistan). Consultations were also held with the Energy Sector Coordinating Committee (12 April), Transport Sector
Coordinating Committee and Customs Coordinating Committee (20–21 April) and Trade Policy Coordinating Committee (18 July).
1CAREC 2020 Midterm Review
secure and stable energy supplies; and and flexible, and CAREC 2020 specifically notes
promote energy trade. that it is expected to undergo refinement during
the strategy period. The CAREC MC sets the
“Improving competitiveness. CAREC 2020 strategy and guides the CAREC program, and
will seek to improve industrial competitiveness includes formal and informal meetings. The
through transport connectivity, development principal role of the SOM is as a recommending
of economic corridors, and energy sector body to the MC. As such, the SOM is expected
cooperation. Developing economic corridors to exercise a proactive role in addressing policy
can help diversify the region’s industries and and project-related issues. CAREC 2020 also
make them competitive through technology, highlights the important supporting role played
logistics, and other business support services.” by the national focal point (NFP) offices in each
country.
6. To achieve the strategic objectives,
CAREC 2020 sets out the following operational 8. At the sector level, four sector
priorities: (i) the four core sectors of operations, coordinating committees (transport, customs,
transport, trade facilitation, trade policy and trade policy and energy) are expected to ensure
energy; (ii) economic corridor development; effective and timely implementation of priority
and (iii) the CAREC Institute. It also indicates projects. In addition, the OIF includes the
that strategies and action plans in the four core CAREC Secretariat based in the ADB, and the
sectors will serve as the basis for planning, other participating development partners (DPs).
preparing and implementing priority projects and The OIF is in the Appendix.
initiatives. In addition, CAREC 2020 notes that
second-tier areas “will be revisited in the light of
emerging issues that impact core area activities “The overall institutional
and that are best addressed through regional
framework set out in the
collaboration.” It mentions communicable disease
control, disaster risk management and climate- strategy is intended to be
change proofing as examples (ADB, 2012). informal and flexible.”
“CAREC has two C. The Structure of the MTR Report
strategic objectives, trade
9. The report is presented in five sections.
expansion and improving
It starts with a review of global and regional
competitiveness. These are developments that have impacted on CAREC.
supported by operational This is followed by a review of achievements
priorities in four core and challenges in each of CAREC’s priority
areas, as well as economic operational areas. The third section sets out
key issues raised in the country and sector
corridor development and
consultations. Fourth, the report reviews
the CAREC Institute.” the relevance of CAREC’s strategic and
institutional frameworks. The final section draws
conclusions and recommends priority actions
7. The overall institutional framework (OIF) for CAREC during the remainder of the strategy
set out in the strategy is intended to be informal 2020 period and beyond.
2II. Global and Regional
Developments
A. The Changing Economic Environment 11. The three years leading up to the
global financial crisis, which also preceded
10. The CAREC program is operating the preparation of CAREC 2020, were marked
in a global and regional setting that is under by high economic growth averaging 12.5%3.
constant change, and with a direct bearing on In the following three years 2008–2010,
the program’s strategic planning. The economic growth dropped to 5.4%. When CAREC 2020
environment for the CAREC countries has was being formulated and the twin goals of
changed dramatically since the planning of expanded trade and improved competitiveness
CAREC 2020 in 2009–2010 and its inception in were established, it was generally assumed
2011. Following the 2008–2009 financial crisis, that the global economy would start to recover
the global recovery has been more sluggish and that CAREC countries would use the post-
than was initially expected, financial markets crisis period to implement structural reforms
have been slow to recover, and low commodity that would limit their vulnerability to shocks in
prices have affected both oil-exporting and commodity prices and financial markets.
oil-importing CAREC economies. The Russian
Federation is a major trading partner of most 12. Contrary to expectations during the
of the CAREC countries and the destination of formulation of CAREC 2020, in the first half of the
many migrant workers from the labor-exporting strategy period, 2011–2015, growth remained
CAREC countries. Its steep economic downturn subdued, averaging 4.8%. Initially, oil prices
since 2014 has had a negative impact on the recovered after the global crisis, but demand
entire region. GDP growth rates in the CAREC for other commodities, especially metals and
countries for 2005–2015 and projections for coal, did not. Importantly, the financial sector
2006–2020 are in Table 1. in most CAREC countries was unable to shake
Table 1. GDP growth in the CAREC countriesa (percent)
a
Excluding the PRC.
b
Data for 2010 only, when Pakistan and Turkmenistan joined CAREC.
Sources: Asian Development Outlook 2016, IMF World Economic Outlook, April 2016; and World Development Indicators Online
(downloaded on 1 June 2016).
3
The figure does not include the PRC.
3CAREC 2020 Midterm Review
off the deep effects of the crisis. In 2014, the 15. Volatile commodity markets have
price of oil collapsed, putting Central Asian highlighted the downside of growth strategies
currencies under renewed pressure. In 2015, oil reliant on commodity exports and with
prices declined further. Low oil prices and the limited diversification. Weak exchange rates
imposition of economic sanctions pushed the have increased the vulnerability of the highly
Russian economy into a steep downturn. This dollarized financial sector of the CAREC
in turn led to a sharp decline in trade between economies, with the exception of the People’s
Russia and the CAREC countries, large-scale Republic of China (PRC). Directed lending,
return of migrant workers, and a sharp decline loans to unhedged borrowers, and short open
in remittances, further exacerbating the CAREC foreign exchange positions have amplified the
countries’ economic crisis. impact of the external shocks on the financial
sector. This was evident in 2014–2015, when
13. The sluggish recovery and high external falling oil prices and the rapid depreciation
volatility have highlighted the underlying of the Russian ruble significantly reduced the
causes of the CAREC countries’ vulnerability competitiveness of the Central Asian currencies.
— their lack of economic diversification,
low productivity and competitiveness, and
modest progress in regional cooperation and “The underlying causes
integration. The countries face low growth rates, of the CAREC countries’
fiscal stress, and diminishing demand for their
exports, whether commodities or labor. Their
vulnerability include
depreciating currencies make imports more a lack of economic
expensive, and local substitutes are often not diversification, low
available to replace costly imports. productivity and
competitiveness, and
modest progress in
“The global economic regional cooperation.”
environment has changed
dramatically since the
16. In addition, massive return migration
planning of CAREC has led to rising unemployment, in particular
2020. Volatile commodity in the labor-exporting CAREC countries. The
markets have highlighted situation has put pressure on the region’s
the downside of growth weak labor markets and highlighted the
strategies reliant on CAREC countries’ low productivity, lack of
competitiveness and shortcomings in their
commodity exports.” education and skill development systems and
social safety nets.
14. As a result of countercyclical fiscal 17. The economic outlook for the
measures, declining oil revenues and weak remainder of the CAREC 2020 period remains
economic activity, fiscal balances have bleak. The growth forecast for 2016–2020, at
deteriorated across the region. This has 4.1%, remains low. Oil prices are expected to
put significant pressure on weak budgets. remain low for some time, at around $50 per
Oil exporters need medium-term fiscal barrel, which will hurt commodity exporters.
consolidation to ensure that they can replenish They will also hamper growth in oil importers
buffers and save adequately for future through spillovers from Russia, a major oil
generations. Oil importers also need to prioritize exporter. On the upside, effective infrastructure
fiscal consolidation, to preserve capital and expenditures to counter external shocks may
sustain social expenditure and inclusive growth. translate into increased economic activity. In
4II. Global and Regional Developments
general, in the second half of the CAREC 2020 “The international
period the CAREC countries will need to focus institutional setting has
on a very different set of economic priorities
from those envisaged when the strategy was
witnessed major changes,
prepared. including the establishment
of new mega-frameworks
B. The Changing International Institutional for cooperation, financial
Setting institutions and regional
18. The initial years of the CAREC 2020
trade agreements.”
period have also been marked by major changes
in the international institutional setting. These 22. At the same time, new financial
include the emergence of numerous global and institutions and initiatives have emerged. The
regional mega-frameworks for cooperation, BRICS countries, Brazil, Russia, India, the
the establishment of new international financial PRC and South Africa, established the New
institutions (IFIs), and rapid advancements in Development Bank (NDB) in 2014 with an
regional trade agreements. authorized capital base of $50 billion. The NDB is
intended to complement the financing provided
19. The United States’ New Silk Road (NSR) by the existing multilateral institutions. In 2015,
initiative dates back to 2011. It was established the PRC led the establishment of the Asian
as a means for Afghanistan to integrate more Infrastructure Investment Bank (AIIB) with an
closely with Central and South Asia by reviving authorized capital base of $100 billion. The AIIB
traditional trading routes and rehabilitating key is intended to help meet the enormous need for
infrastructure links. The NSR focuses on four infrastructure financing in Asia, and attracted 57
key areas: regional energy markets, trade and founding members, from Africa, Asia, Europe
transport, customs and border operations, and and Latin America. The NDB and the AIIB both
business and people-to-people contacts. started lending operations in mid-2016.
20. In October 2013, the PRC announced 23. In late 2014, the PRC announced the
establishment of the Silk Road Fund (SRF), with
the launch of its One Belt, One Road (OBOR)
an initial pledge of $40 billion. The SRF is intended
initiative, an ambitious scheme to build or
together with the PRC’s policy banks, to finance
rehabilitate infrastructure in over 60 countries,
infrastructure under OBOR. In May 2015, the
based on a comprehensive framework Japanese government announced the launch of
comprising a land belt from the PRC through a Quality Infrastructure Initiative, under which it
Central and South Asia to Europe and a committed to provide $110 billion over the next
maritime road via Southeast and South Asia, five years to finance infrastructure in Asia.
the Middle East and North Africa to European
markets. OBOR is being supported by 24. At the same time, regional trade
projects from a wide range of central and local agreements have made significant progress. The
government agencies in the PRC, and by the Trans-Pacific Partnership trade pact led by the
international lending of its large policy banks. US was signed by twelve Pacific Rim countries
The following month, Korea announced its in February 2016 and will lower trade barriers
Eurasia Initiative, a broad infrastructure-based among participating countries. Negotiations are
program with close links to OBOR. also ongoing for the Regional Comprehensive
Economic Partnership free trade agreement,
21. In May 2014, Belarus, Kazakhstan which includes Australia, India, Japan, Korea,
and the Russian Federation signed a treaty New Zealand, the PRC and the countries of the
establishing the Eurasian Economic Union Association of Southeast Asian Nations (ASEAN).
(EEU). Armenia and the Kyrgyz Republic joined The growing role of these new trade agreements
the EEU in 2015, and it is currently expanding has shifted much of the focus in Asian and
its role as a regional trading bloc and customs Pacific trade negotiations from the World Trade
union. Organization (WTO) to the regional level.
5III. Achievements and
Challenges in Priority
Operational Areas
25. As of September 2016, cumulative consisting of improvements in planning,
investments under CAREC totaled $28.9 billion. financing and management of road and
Of this figure, $22.6 billion (78%) was in transport, railway assets, road safety management,
$5.7 billion (20%) in energy, and $0.6 billion (2%) and increasing private sector participation.
in trade facilitation. ADB’s share was $10.1 billion At present, the investment program under
(35%). In addition, CAREC has financed a total TTFS 2020 includes 108 investment projects
of $466 million in technical assistance (TA), of with an estimated cost of $43.7 billion, and
which ADB’s share was $152 million (33%). 49 technical assistance (TA) projects with an
Achievements and challenges are discussed estimated cost of $76.2 million.
below by operational sector.
“Transport and trade
“Investments under facilitation have formed
CAREC totaled $28.9 the backbone of the
billion, for transport (78%), CAREC program.”
energy (20%) and trade
facilitation (2%).” 28. Implementation of the above three
operational priorities are the joint responsibility
A. Transport Sector of the Transport Sector Coordinating Committee
(TSCC) for priorities (i) and (iii), and the Customs
1. Key achievements in 2011–2016 Coordinating Committee (CCC) for priority (ii).
26. Since the commencement of the 29. Key achievements are set out in
CAREC program, transport and trade facilitation the latest sector progress report and work
have formed its backbone. Their interlinked plan (CAREC, 2016e). The CAREC countries
nature was recognized by combining the are making significant progress toward the
strategic planning for the two sectors. The completion of the multimodal corridors. In TTFS
CAREC Transport and Trade Facilitation 2020, the original six corridors were extended,
Strategy (TTFS) was initially formulated for the the routes comprising the corridors were more
period 2008–2017. It was subsequently refined precisely defined, and the results framework
and expanded to cover the period 2014–2020, was modified. The CAREC road corridor
referred to as TTFS 2020 (ADB, 2014). network is now expected to reach 29,350 km by
2020 rather than 24,000 km by 2017, the initial
27. The operational priorities of TTFS target of the TTFS.
2020 include: (i) multimodal corridor network
development, consisting of support for 30. The TTFS results framework identifies
corridor extensions; railway network and three physical infrastructure targets to be
multimodal logistics hub development; achieved by 2020, the completion of (i) 7,800
and border crossing point improvements; km of road construction or rehabilitation; (ii)
(ii) trade and border crossing service 1,800 km of newly constructed railway track;
improvements, consisting of customs and (iii) 2,000 km of renovated, electrified,
reform and modernization; coordinated or signalized railway track. In addition, the
border management; national single window framework targets five multimodal logistics
development; and sanitary and phytosanitary centers being operational and at least five
(SPS) reform and modernization; and (iii) border crossing points (BCPs) being improved
operational and institutional strengthening, by 2020.
6III. Achievements and Challenges in Priority Operational Areas
“Implementation of the vigorate discussions and actions on
transport and trade freedom of movement. In one practical
example, Pakistan, the Kyrgyz Repub-
facilitation action plan is lic, Kazakhstan and the PRC are work-
on or ahead of schedule.” ing under CAREC to revive the dormant
Quadrilateral Traffic in Transit Agree-
31. The TTFS 2020 and action plan ment (QTTA).
are being implemented satisfactorily, with
outputs on or ahead of target. The 809 km
of expressways or national highways built, 2. Major issues and problems
upgraded or improved in 2015 bring the encountered
cumulative road infrastructure to 93% of the
total 7,800 km corridor length targeted for 33. Infrastructure coordination. The
construction or improvement by 2020. No transport sector accounts for more than 80% of
new railways were completed during 2015, CAREC investments. However, country plans for
but achievements in the railway projects have infrastructure development are not consistently
already surpassed the 2020 targets, well ahead aligned with those of CAREC. Country-level
of schedule. Thirteen projects in other transport efforts have at times been diluted by competing
subsectors (two ports, two logistics centers, regional frameworks. With new IFIs operational
three BCPs, and six civil aviation projects) are and bilateral initiatives expanding, this challenge
being implemented. One BCP was improved in is expected to increase.
Tajikistan, two more (in Tajikistan and the Kyrgyz
Republic) are being improved, and a further 34. Trade logistics and transport
three (in Pakistan) are expected to be improved facilitation initiatives require buy-in from the
by 2020. governments to be effectively identified and
implemented. Trade logistics and transport
32. In 2015, CAREC decided to further facilitation projects normally require relatively
prioritize four key areas of immediate small investments, but a lot of management
importance: (i) road safety, (ii) road asset and coordination between ministries. This
management (RAM), (iii) railways and (iv) make projects riskier to implement, while their
transport facilitation (CAREC, 2015a). In these outcomes are less sustainable than transport
new areas, the following actions have been infrastructure projects. Support from DPs
taken: varies. Internally within ADB, delineation of
responsibilities for trade logistics and transport
• A Railway Working Group was created, facilitation among the operational divisions
and has met twice to draft the CAREC involved requires stronger coordination.
Railway Strategy.
• A high-level Commitment to Road Safe-
ty was prepared and endorsed by the “Road safety and road
MC in 2015. The member countries are asset management remain
now working to develop a CAREC Road
Safety Strategy.
major challenges.”
• For RAM, member countries are using
CAREC as a platform to share practical
knowledge. Two knowledge products, 35. Road safety and road asset
reference notes on performance-based management remain challenges. Their effective
road maintenance contracts and a com- implementation relies on policy-level actions in
pendium of best practices in road asset each country. Interest from countries is high,
management, are being prepared. but given the limited TA and staff resources,
• For transport facilitation, member there is a need to focus on what can be done
countries have used CAREC to rein- realistically under TTFS 2020.
7CAREC 2020 Midterm Review
36. Resources and funding. Sufficient TA infrastructure investments and institutional and
and staff resources are required for the transport operational development. A draft strategy report was
sector to continue to play a lead role in CAREC. circulated to the SOM in July 2016 (CAREC, 2016e).
A core TA budget is essential to support policy
dialogue with countries and DPs and develop 41. Fourth, CAREC should complete the
a strong pipeline of regional projects. On the preparation and start the implementation
investment side, there are unfunded projects of the proposed road safety strategy and
in the original TTFS 2020 investment pipeline. action plan, encouraging countries to adopt
There is a need to close CAREC’s financing measures focusing on five pillars, (i) road safety
gap by tapping co-financing and building the management, (ii) safer roads, (iii) safer vehicles,
capacity for public-private partnerships (PPPs). (iv) safer road users, and (v) post-crash care.
This will provide a coordinated platform for
37. It is important to cascade ADB’s introducing safety on CAREC road corridors.
development effectiveness review (DEfR) and
CAREC TTFS targets into divisional work plans “Railway development is
and the performance review of staff. Currently,
the latter is driven primarily by the project
of growing importance.
cycle (project approvals, contract awards, CAREC should prepare
disbursements, project completion). Projects with and implement a railway
soft components, including elements of PPP, are strategy.”
often considered an implementation risk.
42. Fifth, CAREC should support the
upcoming accession of several CAREC countries
3. Priorities for the remainder of the
to the TIR convention, by strengthening
CAREC 2020 period
partnerships between national governments,
the International Road Transport Union, national
38. First, the transport sector needs to
transport associations and DPs. CAREC will
maintain focus on completing the work under
provide assistance in reviving the QTTA to
TTFS 2020. Implementation of the TTFS
facilitate trade and transport among Kazakhstan,
should continue to be aligned with national
the Kyrgyz Republic, the PRC, Pakistan,
development strategies. There may be a need and possibly Tajikistan. Further cross-border
to rebalance priorities across different parts of transport facilitation agreements among CAREC
the program, and the institutional aspects of countries will be supported through TAs.
CAREC relative to other cooperation programs.
43. Sixth, CAREC priorities should be
39. Second, CAREC needs to strengthen its cascaded into operations. Project design and
dialogue with existing and new DPs in the region implementation is not fully aligned with RCI
before divergent visions of regional cooperation priorities. Many projects with RCI classification
emerge. DPs should play complementary roles tend to be more successful in achieving
and, to the extent possible, realign priorities for Infrastructure-related objectives, while RCI
the TTFS investment pipeline. As an established and other soft objectives are often considered
regional program, CAREC should play a strong secondary. RCI objectives are addressed by
coordination role. CAREC at the strategic level, but could be more
closely integrated into operations.
40. Third, railway development is of growing
importance. CAREC should complete the
preparation and start the implementation of B. Trade Facilitation
the proposed railway strategy. This can serve
as a vehicle for the policy dialogue on railways 1. Key achievements in 2011–2016
and linking investment priorities at the country
and regional levels. The strategy is expected to 44. The CAREC Trade Facilitation (TF)
provide a balanced approach encompassing both program has played a valuable role in supporting
8III. Achievements and Challenges in Priority Operational Areas
increased trade and enhanced competitiveness. (through CFCFA), CPMM and SPS are part of
Key achievements are set out in the latest progress the agenda.
report and summarized below (CAREC, 2016b).
45. Sustainable regional cooperation “Corridor Performance
mechanisms. The CCC and the CAREC Measurement and
Federation of Carrier and Forwarder
Monitoring provides
Associations (CFCFA) were established in
2002 and 2008 respectively. Both have been real-time data analysis,
instrumental in addressing issues under their and has gained wide
responsibility at the country and regional levels. recognition.”
46. International good practice. The TF
program has introduced international standards
at meetings, seminars and workshops which 49. Multi-country programs and projects.
CAREC countries have subsequently adopted Based on the bottlenecks identified through
into legislation and regulations. The CCC and CPMM, CAREC has launched pilot projects on
CFCFA, as well as the SPS working group, customs control, pre-arrival data exchange and
have benefited from close ties with international regional transit. The Regional Improvement of
organizations and standard-setting bodies. The Border Services (RIBS) projects were formulated
agenda and approaches adopted by both are to help CAREC member countries to modernize
consistent with the global agenda. CAREC TF adjacent BCPs and develop national single
mechanisms are also viewed as good practice windows. The Regional Upgrade of SPS
by international organizations. Measures for Trade (RUST) project was approved
in December 2015 to help member countries
47. Results management. Corridor reform SPS measures in line with international
Performance Measurement and Monitoring standards, develop a country and regional
(CPMM) was introduced in 2009. It has provided laboratory network, and promote data exchange.
comprehensive real-time data analysis based on Other regional initiatives are currently being
time, cost and distance data samples collected discussed, including the Regional Improvement
by CFCFA members to measure the performance of Corridor Efficiency (RICE) project.
of trade corridors and efficiency of trade flows.
Aggregate CPMM indicators provide critical inputs 50. Capacity building. The TF program
to the development effectiveness review (DEfR) of offers capacity building tailor-made for
CAREC 2020. CPMM has gained wide recognition specific audiences. Some training programs
among DPs and researchers. Complementary are conducted under ADB-financed TA, while
to CPMM, the time release studies allow trade others are organized in collaboration with
control agencies to analyze business processes other partners such as the World Customs
and address inefficiencies. The TF program is Organization’s capacity building centers in
building the capacity of member countries to Shanghai, Tokyo, Astana, and Baku. The TF
conduct national-level analyses. program also regularly conducts training with
the ADB Institute and the CAREC Institute.
48. Integrated TF agenda. TF requires
agencies to work together to rationalize
procedures, operations and trade while 2. Major issues and problems
safeguarding legitimate regulation. The CAREC encountered
TF program adopted an integrated agenda in
2008 to work alongside customs for maximum 51. Limited progress in achieving
impact. Coordinated border management, outcomes. The limited progress in several
single window, private sector participation areas of trade facilitation is reflected in the
9CAREC 2020 Midterm Review
very limited achievement of trade facilitation 3. Priorities for the remainder of
outcomes. Under CPMM, four key indicators the CAREC 2020 period
were established to measure progress, (i) time
taken to clear a border crossing, (ii) costs 54. Strengthen core competences. The
incurred at a border crossing, (iii) speed of travel TF program will continue to work in areas
over a 500 km section of the corridor, and (iv) where results have been achieved, namely
costs incurred in travelling a corridor section. strengthening regional groupings, supporting
Based on the latest annual report and most CAREC countries’ efforts to adopt international
recent sector progress report, the time to clear good practices, improving results management,
a border crossing has increased, costs incurred developing innovative programs and projects,
at a border crossing and speed of travel have and building country capacities.
declined only marginally, and costs incurred
in traveling a corridor section have increased
compared with the baseline year 2010 (CAREC, “There has been limited
2015, and CAREC 2016b). achievement of trade
facilitation outcomes.”
52. Inadequate investment planning
for trade facilitation. TF initiatives are often
described as low-hanging fruit, which require
modest investments and yield high returns. Due 55. Promote integrated trade facilitation.
to the small size of investments, and because Integrated TF removes bottlenecks and helps
of inter-agency and inter-country coordination improve the flow of goods, information, finance
challenges, these projects are often given and people across the CAREC region, while
lower priority than large infrastructure projects. safeguarding legitimate regulation. The TF
Complications in coordination impede program will build on its existing agenda,
investment planning, particularly in logistics including coordinated border management, single
facilities and services for the whole CAREC window development, CPMM, private sector
corridor system. engagement, and SPS reform and modernization,
and will develop approaches to address
53. Shortcomings in institutional immigration and cross-border financial services.
coordination. Trade facilitation involves the
close coordination of multiple countries and 56. Strengthen coordination among trade
agencies across various sectors. The work on facilitation initiatives. CAREC will work together
SPS, for example, is currently supported by with other initiatives to ensure that objectives are
ad hoc working groups, while work on national aligned and activities coordinated.
single windows can require the involvement
of up to a dozen different agencies. Customs 57. Reinforce country ownership for TF
cooperation alone has proved insufficient to programs. The TF team is working with the
address key challenges. CAREC Institute to build capability for policy
analysis and program and project formulation.
To improve TF performance, in particular as
“Integrated trade measured by the CPMM indicators, member
countries will need to analyze key constraints
facilitation removes and develop suitable policies and projects.
bottlenecks and helps
improve the flow of goods, 58. Look beyond CAREC. CAREC can
information, finance and generate more economic value by positioning
people.” itself as a bridge linking East, South-West and
North Asia and Europe. The CAREC TF program
10III. Achievements and Challenges in Priority Operational Areas
should strengthen inter-subregional linkages 61. Engaged WTO as an observer. To
beyond the CAREC subregion itself. benefit from WTO’s expertise, in October 2013
the TPCC invited WTO to participate in CAREC
meetings. Since then, WTO has participated in
C. Trade Policy meetings as an observer, and has provided its
support in the trade policy sector.
1. Key achievements in 2011–2016
62. Assisted CAREC non-WTO members
59. CAREC countries aim to interact in acceding to WTO. Recently, two more
efficiently with intraregional and interregional CAREC countries became WTO members,
markets to expand and diversify trade. The Tajikistan in March 2013 and Kazakhstan in
Trade Policy Coordinating Committee (TPCC) November 2015. In addition, in December 2015,
has focused on four key issues to help CAREC WTO Ministers formally approved Afghanistan’s
countries create an open, transparent and WTO membership terms, and Afghanistan is
predictable trade environment: (i) achieving shortly expected to finalize its WTO membership.
more trade openness prior to WTO accession;
(ii) achieving WTO accession and post-
accession adaptation; (iii) making non-tariff “Country ownership of the
measures consistent with the WTO Technical Trade Policy Coordinating
Barriers to Trade Agreement and SPS
Agreement; and (iv) expanding trade in services.
Committee needs to be
As indicated in CAREC 2020, knowledge enhanced.”
sharing and capacity building related to WTO
- and expanding and diversifying trade more
broadly - remains a key priority for CAREC trade 63. Post-accession adaptation,
policy work. Constant monitoring of progress knowledge sharing and capacity building.
achieved by CAREC countries in opening their CAREC member countries have shared
trade regimes is also under TPCC’s portfolio. experiences and lessons on pre- and post-
WTO accession, and the findings of related
research on service trade, non-tariff barriers
“CAREC has supported and SPS issues. ADB’s TA on “Strengthening
WTO accession as Tajikistan’s Trade and Investment Regime” was
welcomed by member countries for its practical
well as post-accession recommendations on post-accession adaptation.
adaptation, knowledge
sharing and capacity 2. Major issues and problems
building.” encountered
64. Lukewarm ownership by countries
and DPs. As CAREC countries continue to
60. Expanding the trade policy agenda. develop awareness of the importance of regional
The refined Trade Policy Strategic Action Plan cooperation in achieving national goals, country
2013–2017 was endorsed at the CAREC MC ownership of the TPCC needs to be enhanced to
in November 2013, and serves as the basis for reflect more explicitly the complementary role of
the most recent performance report (CAREC, regional initiatives in national development plans.
2016c). The expanded agenda includes Likewise, DPs should be encouraged to develop
supporting WTO accession and post-accession; comprehensive roadmaps to back up TPCC as
trade in industrial goods and services; and tariff facilitators, capacity builders, and knowledge
issues and non-tariff barriers, including the providers. Both country authorities and DPs
removal of quantitative restrictions that are not should be more proactive in support of the trade
WTO compliant. policy action plan.
11CAREC 2020 Midterm Review
65. Effectiveness and relevance of trade the-ground expert support for imple-
policy agenda under CAREC. There is a lack menting trade policy.
of consistent cooperation on trade policy under • Increase resource mobilization and DP
CAREC, especially in the more challenging engagement. Several DPs are actively
areas of trade in services, non-tariff measures, engaged in the trade policy sector, but
and post-WTO-accession adaptation. Studies lack resources. In connection with review-
presented by DPs lack actionable policy ing its priorities. The TPCC should con-
recommendations. Consequently, CAREC sider resource mobilization and the identi-
countries showed little interest and no reform fication of potential flagship projects.
momentum was created. The relevance of the • Improve coordination with trade fa-
WTO-accession centered TPCC agenda is cilitation sector work. As trade policy
likely to be diluted by (i) the fact that almost and TF activities converge, future action
all CAREC countries are already or are close plans should be closely coordinated to
to becoming WTO members, and (ii) the new reduce overlap and ensure clarity in pro-
regional mega-frameworks, which may play a posed policy actions. Coordination and
growing role in determining trading rules. consolidation of trade policy and trade
facilitation agendas would help CAREC
66. Lack of flagship projects to provide effectiveness going forward.
knowledge support. Unlike other sectors in
CAREC, trade policy has no high-impact loans 68. Now that WTO accession has been
or TAs to support its agenda. This is an area achieved in seven CAREC countries, the
that needs to be strengthened considerably in forward agenda of the TPCC is relatively thin.
the future. Key tasks include further post-WTO accession
adaptation and deepening the capacity building
and knowledge agenda (CAREC, 2016c).
3. Priorities for the remainder of the The TPCC should consider undertaking a
CAREC 2020 period comprehensive review of its forward agenda,
including how to work more closely with
established and new DPs, trade groups and
“CAREC needs regional groupings such as ASEAN.
to undertake a
comprehensive review D. Energy Sector
of its forward agenda for
trade policy.” 1. Key achievements in 2011–2016
69. The CAREC master plan for the energy
67. The TPCC had indicated the following sector and the Afghanistan master plan have
priority tasks for 2016–2017: formed the foundation for the work of the
Energy Sector Coordinating Committee (ESCC).
• Increase country ownership. This
could be linked to a more demand-driv-
en rather than donor-driven approach.
“The master plan for
One approach may be to seek an ex- the energy sector and
panded agenda that balances country Afghanistan energy master
demands with donor objectives for in- plan are the foundation of
troducing best practices in trade policy. the CAREC’s work in the
Some countries continue to need on-
energy sector.”
12III. Achievements and Challenges in Priority Operational Areas
70. The ADB provided TA to prepare the 73. In addition, the Turkmenistan-
regional power sector master plan for four Afghanistan-Pakistan power transmission
countries (Kazakhstan, the Kyrgyz Republic, interconnection project (TAP) is under
Tajikistan and Uzbekistan) and analyze preliminary survey. If found technically feasible
the technical requirements for connecting and agreed on by the three countries, ADB
Afghanistan with the Central Asian power could finance the project design and facilitate
system. The study noted that, while regional an agreement among the three countries. The
growth forecasts were modest, existing assets transmission line component in each country
were approaching the end of their economic life. would be financed by ADB, using the respective
Over 60% of power generation assets are over country allocations.
30 years old, and generation and transmission
will require investments of $33 billion by 2022. 74. The Turkmenistan-Afghanistan-
The study also noted that benefits from regional Pakistan-India (TAPI) natural gas pipeline project
energy trade can reach $1.5 billion annually by is the highlight of the energy sector program.
2020, if countries adopt a regional investment Acting as TAPI secretariat since 2003 and as
strategy and agree on benefit-sharing. transaction advisor since 2013, ADB has been
instrumental in the progress of the TAPI to date.
71. In the power sector, the Central The ADB helped establish the TAPI Pipeline
Asia–South Asia Regional Electricity Market Company Limited (TPCL) and managed due
(CASAREM) project with its two complementary diligence, including preparing the technical and
initiatives, the Central Asia–South Asia financial feasibility studies. The total project
Electricity Transmission and Trade Project cost will be determined upon completion of
(CASA-1000) supported by the World Bank the detailed design and is expected to exceed
and the Turkmenistan-Uzbekistan-Tajikistan- $10 billion.
Afghanistan-Pakistan Interconnection Project
(TUTAP) supported by the ADB, are the two 75. TAPI exemplifies the role played by ADB
most successful projects. in promoting RCI. TAPI will help bring gas from
Turkmenistan to meet Pakistan’s growing energy
demand. It will unlock economic opportunities,
“Achieving benefits from create employment, transform infrastructure,
regional trade in energy diversify the energy market for Turkmenistan,
will require a high degree and enhance energy security for the region.
TPCL will build, own, and operate the TAPI
of mutual confidence, pipeline, once completed. It is expected to
supported by long-term transport up to 33 billion cubic meters of natural
arrangements to address gas annually from Turkmenistan to the three
benefit-sharing.” other countries over the next 30 years. The
pipeline stretches about 1,600 kilometers from
the Afghanistan/Turkmenistan border to the
Pakistan/Indian border.
72. The Tajikistan-Afghanistan and
Uzbekistan-Afghanistan 220kV interconnections
are operational and are currently supplying 2. Major issues and problems
the Afghanistan network with 650 GWh from encountered
Tajikistan and 1500 GWh from Uzbekistan.
Implementation of the Turkmenistan- 76. During the Soviet period, the trans-
Afghanistan 500 kV interconnection, which will boundary power and water systems were
initially operate at 220 kV, has begun. A number designed to be operated regionally. Water
of interconnections between Afghanistan with releases were coordinated with downstream
Turkmenistan are also being implemented. irrigation needs. As a result, hydropower
13CAREC 2020 Midterm Review
exports by upstream countries in the summer huge reduction in renewable energy prices,
were offset by thermal power imports in the development of new energy technologies, and
winter. Since independence, the countries international commitments to take action on
have aimed for energy self-sufficiency, driven climate change.
by a concern for energy security. Based on
current country strategies, regional electricity 80. The ESCC noted the need for countries
trade can only resume once the countries have to diversify from fossil fuel dependency and
reached a higher degree of energy security. This identified options to integrate renewable energy,
dilemma—regional value vs. national energy energy efficiency and other new technologies
security—can make it difficult for countries to in country development plans. Countries are
agree on regional energy projects. interested in new technologies for different
reasons. Countries that are highly dependent on
77. Significant benefits can be achieved fossil fuel revenues are exploring diversification
from regional trade, but the uneven distribution options because of the long-term impact of
of energy makes it difficult to secure these low hydrocarbon prices. Energy importing
benefits. Thermal energy-producing countries countries, on the other hand, are exploring new
would need to defer a subset of required technologies to increase their energy security.
investments while hydro energy-producing
countries would need to make additional 81. There are about 80 million people
investments. This will require a high degree of without electrical power in the South Asian
mutual confidence, supported by long-term region. CAREC will consider linking energy
power purchase agreements to address benefit sector projects in Central and South Asia with
sharing. the significant energy surpluses in East Asia.
82. In 2015, the ESCC highlighted the need
to include climate change in its future strategy
“To address investment and work plan, and to identify activities that will
needs in the energy prepare CAREC members better for tackling the
impacts of climate change.
sector, countries need to
rehabilitate existing assets 83. The Energy Vulnerability to Climate
and consider non-public Change Study helps the Central Asian countries
financing modalities.” to understand climate change-induced energy
sector vulnerabilities, and to build resilience
through the development of adaptation policies.
The energy sector’s vulnerability to climate
78. Due to age of existing assets and change and adaptive capacity needs review.
limited investments over the last two decades, This will guide decision-makers in making
significant investments are required. Countries investment decisions and managing energy
need to prioritize rehabilitation of existing assets sector assets.
and consider non-public financing modalities for
a portion of the investments.
E. Economic Corridors
3. Priorities for the remainder of the 84. To improve competitiveness, CAREC
CAREC 2020 period 2020 included piloting the development of
economic corridors. The Almaty-Bishkek
79. In 2015, the ESCC initiated actions Corridor Initiative (ABCI) is so far the only
to align the strategies of the region’s energy undertaking by CAREC to move beyond
sector with the global energy mega trends—a transport and transit corridors to an economic
14III. Achievements and Challenges in Priority Operational Areas
corridor. The low population densities and F. The CAREC Institute
long distances between most cities in the
CAREC region pose significant challenges 86. The establishment of the CAREC
to the establishment of economic corridors Institute (CI) was agreed at the MC held in
compared with more densely populated and Wuhan in 2012. Subsequently, it has taken
geographically more integrated areas such as several years for the member countries to
the Greater Mekong Sub-region (GMS). work out the required legal agreement on the
establishment of the CI. The agreement is still
85. Progress on the ABCI is closely being finalized. In the meantime, the physical
linked to developments under the EEU, base for the CI was established in Urumqi
which is planning a wide range of measures. in 2014, and the CI has started to conduct
These include abolishing customs controls, capacity-building and knowledge-sharing
harmonizing taxes and technical regulations, activities, and initiated research activities.
freeing the movement of capital, and aligning
banking regulations and capital markets,
and will help to turn the ABCI into a genuine “The Almaty-Bishkek
economic corridor. In June 2016, Kazakhstan
Corridor is CAREC’s
and the Kyrgyz Republic established a high-
level ABCI Steering Committee comprising flagship initiative to move
vice ministers and deputy provincial (oblast) beyond transport and
governors. The committee will meet later in transit to an economic
2016 to consider the progress to date and corridor”.
guide future actions. CAREC will continue to
monitor the ABCI closely, to draw lessons from
the experience that might help in replicating the
initiative in other parts of the region.
15IV. Issues Raised in Country
and Sector Consultations
87. Between December 2015 and July 2016, transport, linking it more closely with economic
the MTR team held consultations with all CAREC activity. Some pointed out that the potential
member countries, including government, think for economic corridors is lower in sparsely
tank and DP representatives, and with the four populated Central Asia than GMS.
sector coordinating committees. The team also
consulted directly with the DPs. Participants in
the consultations raised a wide range of issues “The global slowdown
and made many useful suggestions regarding has highlighted the
priorities for CAREC during the remainder of importance of economic
the CAREC 2020 period and possible future
directions beyond that. These suggestions
diversification and the
fall in three broad categories, (i) completing need to broaden CAREC’s
the current agenda, (ii) broadening CAREC’s agenda.”
agenda in the future, and (iii) reviewing and
strengthening CAREC’s institutional framework
and partnerships. The key points are summarized 91. Continued engagement in energy.
below. The energy agenda under CAREC is carried
by large regional projects including TUTAP,
88. Achieve CAREC 2020 targets. CASA 1000 and TAPI and provides a platform
Progress in transport has been solid and for discussion. Given the large need for energy
CAREC is on track to meet 2020 targets. in several CAREC countries, and the fact that
However, this has been hampered by slow numerous countries are energy exporters, the
progress in other areas, in particular trade sector will continue to be a priority. There is
facilitation and trade policy. These constraints significant scope for CAREC to continue to
need renewed attention during the remainder of serve as an honest broker in the sector, facilitate
the 2020 period. the development of new projects, and facilitate
increased regional energy trade.
89. Transport remains important.
Developing transport infrastructure has worked 92. Broadening and diversifying CAREC’s
well as a priority, and the need for infrastructure agenda. Throughout the consultations, country,
in the CAREC region remains great. Even think tank and DP representatives as well as
with the economic slowdown, transport members of the sector coordinating committees
infrastructure is a prerequisite for economic highlighted the importance of broadening
diversification. The fact that numerous new and diversifying CAREC’s agenda. Given the
players are involved in transport highlights the economic slowdown and pressing need for
need for CAREC to remain a leader in this area. CAREC countries to diversify their economies,
broadening CAREC’s agenda takes on
90. Broadening the transport agenda. increased urgency. Participants suggested that
There was strong concern from both transport CAREC should consider expanding its activities
sector representatives and others that transport into the following areas: agriculture and
should remain at the core of the CAREC food safety, livestock and animal husbandry,
agenda. Going forward, railways should be tourism, entrepreneurship development,
increasingly central in CAREC’s agenda. Road and strengthening the role of the private
safety and road asset management are also sector. Education, health and information and
growing priorities for the sector. Many pointed communication technology (ICT) were also
out the need to broaden CAREC’s approach to raised and are discussed in more detail below.
16IV. Issues Raised in Country and Sector Consultations
93. Cooperation in education, skills and the new IFIs and regional programs. Generally,
HRD. Numerous participants noted the need for this was seen as an opportunity to expand
cooperation in education, skill development and cofinancing, and for CAREC to play a stronger
labor market issues. This need is highlighted coordinating role. Some participants also noted
by the economic slowdown, rising levels of the risk posed by greater competition and weak
unemployment, and the large number of migrant coordination.
workers returning to labor-exporting CAREC
countries.
94. Cooperation in health. Health issues “In the changed
should continue to be addressed on transport international institutional
projects. Numerous participants noted that setting, CAREC should
there is much broader potential for cooperation revisit its partnership
in the health sector, which should be explored, and cooperation
including how health authorities can cooperate
in the control of communicable diseases. arrangements.”
95. Cooperation in ICT. Participants
pointed to the scope for greater cooperation in 98. Revisiting partnership and
ICT, internet connectivity and related areas. cooperation issues. Many participants
This is a prerequisite for modernizing noted the changed international institutional
economic and financial cooperation, including environment and large number of new players.
e-commerce, e-trade and e-banking. They pointed to the need for CAREC to revisit
E-procurement will help to promote its partnership arrangements with multilateral
transparency and good governance. DPs, and to broaden these from the current six
officially recognized partners. In addition to new
96. Capacity building, knowledge and IFIs and regional programs, CAREC needs to
policy work. There is a strong perceived need find ways to reach out to the EEU, Russia and
among the CAREC countries for more capacity the SCO, possibly inviting them to the MC as
building and training for public officials and observers.
for knowledge and policy work to support
investment activities. Numerous participants 99. Need for renewal of the CAREC
noted the need to enhance cooperation among strategy. There was broad agreement that
think tanks. The CAREC Institute was seen as CAREC’s strategy needs to be reviewed and
moving slowly, and participants highlighted the renewed, to ensure that it is closely aligned
strong role the Institute is expected to play. with changing needs. There was also broad
agreement that this is an urgent priority. Rather
97. Working with the new institutions. than waiting for the remainder of the CAREC
Almost all consultation meetings discussed 2020 period, there was strong support for
the question of how CAREC should work with accelerating the preparation of a new strategy.
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