Central Asia Regional Economic Cooperation

Priority Areas

The CAREC Program is helping Central Asia and its neighbors realize their significant potential by promoting and facilitating regional cooperation in the areas of transport, energy, trade facilitation and trade policy.

In the transport sector, CAREC aims to help rehabilitate transport networks to improve connections and reduce transport costs. Major investments with assistance from multilateral institutions (MIs) include:

• Afghanistan: ADB approved a $138 million loan and grant for improving the North-South Corridor in September 2006
• Azerbaijan: ADB approved a $52 million loan for improving the Yevlakh-Ganja and Qazakh-Georgian border sections of the east-west road in December 2005 and the loan agreements were signed in June 2006; ADB is preparing a $100 million loan to improve the Masally-Astara section (on the border to Iran) of the southern road; the World Bank approved a $200 million loan for improving the Alyat-Masally section of the southern road in January 2006 and the loan agreement was signed in May 2006
• Kyrgyz Republic: IsDB approved a $9.2 million loan for improving the Taraz-Talas-Suusamyr road (phase 1); the China Development Bank and the Kyrgyz Government signed a credit agreement to cofinance the southern road corridor improvement project, together with ADB
• Mongolia: ADB is preparing a loan for developing a road in the western region to link the PRC and the Russian Federation
• PRC: ADB is preparing a $150 million loan for upgrading the Korla-Kuqa road in Xinjiang
• Tajikistan: ADB approved a $29.5 million loan for rehabilitating the Dushanbe-Kyrgyz border road (phase 2) in November 2005

Further, MI-supported activities include technical assistance to the preparation of the CAREC transport sector strategy and to Azerbaijan, Mongolia, and Uzbekistan to develop their country transport sector development strategies. Pre-feasibility studies of road links and a transport corridor performance measurement pilot project are also being supported. Other regional cooperation initiatives include drafting of an Agreement on Facilitation of International Road Transport, under the auspices of the SCO with the support of UNESCAP and ADB; and negotiations of Mongolia, PRC, and the Russian Federation over a draft Transit Traffic Framework Agreement.

In the energy sector, CAREC aims to support efficient and rational use of energy and water through cooperation. Following this basic approach, the program has focused on key investment projects such as improvement of power and gas transmission systems including:

• World Bank's support since 2003 for discussions of power sector reforms and regulations, analysis of the region's electricity export potential and the Syr Darya water/energy nexus, and support to the Central Asia Cooperation Organization in developing the concept for a Water-Energy Consortium
• Support from EBRD and IsDB for construction of the second Kazakhstan North-South 500 kilovolt (KV) Transmission Line Project
• IsDB's support for a 500 KV Syr Darya - Sogdiana Transmission Line in Uzbekistan ($25 million) and a 110 KV Batken - Karabulak Transmission Line in Kyrgyz Republic ($10 million)
• ADB’s loan to Afghanistan and Tajikistan approved in 2006 ($56.5 million) for the Regional Power Transmission Interconnection Project

In 2005, the CAREC Members Electricity Regulators’ Forum (CMERF) was established to support regional electricity trade in the Central Asia region. CMERF is designed to help members capitalize on their shared experiences as they seek to reform their power sectors and work towards closer cooperation in meeting power demand in the region and facilitating power exports.

In the area of trade facilitation, CAREC is focused on customs modernization and cooperation. CAREC has supported measures to facilitate trade and transit for goods and people in the region. These measures include the use of information technology for automated customs services and data exchanges; risk management and post-clearance audit; joint customs control and single window practices; and regional transit development. Specific results include

• Customs modernization and cooperation initiative launched in 2002, aimed at strengthening customs organizations and improve governance through cooperation; with support of ADB, the Kyrgyz Republic and Tajikistan adopted new customs codes in 2004
• ADB's support for bilateral trade and data sharing agreements, and pilot testing of joint-border processing
• EBRD's continued support for regional trade financing
• UNDP's support for trade facilitation under Phase II of the Silk Road Area Development Program, and joint EC/UNDP support for improving the effectiveness of border management through the Border Management Programme for Central Asia
• World Bank's initiatives-finalized a report on Trade and Transport Facilitation in Central Asia, prepared trade studies on several individual countries

Regarding trade policy, CAREC’s trade policy coordinating committee addresses trade liberalization in the context of the World Trade Organization (WTO) and the desire of nonmembers to become members of WTO. The committee also addresses bilateral and multilateral trade agreements in the region, with a view to minimizing trade distorting effects. The committee has undertaken assessments of current trade policies and trade policy initiatives including

• comparative advantages in trade for the Central Asia region
• regional trade agreements
• barriers to trade in Central Asia and the benefits of removing these barriers