Regions and Countries

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p. 10 of 20 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture B. Infrastructure C. Social Infrastructure and Environment D. Governance Dimensions of ADB Operations F. Gender Dimensions of ADB Operations G. Private Sector Development IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Tajikistan : III. Sector Strategies

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B. Infrastructure

36. After independence in 1991, the energy sector experienced severe difficulties. Energy production fell sharply due to the cutback in capital investment and shortage of spare parts. The higher prices for imported fuels resulted in a decline in domestic consumption of these fuels and a switch toward greater reliance on hydropower. Electricity is the most important energy sector because of the country's abundant hydroelectric resources. However, power transmission and distribution facilities deteriorated rapidly as a result of the lack of funds for maintenance. These problems were compounded by the civil conflict and natural disasters, which damaged much of the energy infrastructure. Electricity production fell from more than 18 billion kWh in 1990 to 14 billion kWh in 1997. Widespread poverty made the adjustment of energy prices difficult to bear, thus contributing to the accumulation of electricity payments arrears.

37. The Government took initial measures to reform the sector. Prices of coal, oil, petroleum products, and natural gas for industry were liberalized and brought closer to world market levels. However, prices of electricity, district heating, and liquefied petroleum gas (LPG) for residential users remain under Government control and have been kept lower than the cost of services. The highly subsidized provision of electricity, district heating, and LPG for residential users has led to distorted energy consumption patterns, inequitable pricing among consumer categories, and deteriorating financial conditions of the energy entities. The Tajik authorities have begun to address these distortions and imbalances in the context of IMF supported programs and ADB's Postconflict Rehabilitation Program loan. The main objective of the Government's development strategy for the energy sector is to ensure adequate and reliable supplies of power by undertaking sector policy and institutional reforms, and rehabilitating and properly maintaining the existing power system. The sector policies are designed to facilitate the development of a legal and regulatory framework for efficient energy sector operation, increase the level of electricity tariffs to improve cost recovery, encourage private sector participation in the generation and supply of power, and promote energy conservation.

38. ADB's Interim Operational Strategy for the energy sector is aimed at promoting economic growth by removing policy, institutional, and financial impediments to the delivery of efficient services. ADB also supports the Government's ongoing economic transition to a market economy by assisting the energy sector in (i) developing an enabling policy and regulatory framework to foster economic development; (ii) commercializing and privatizing the state-owned enterprises to improve efficiency; (iii) promoting competition and private sector participation in the provision of energy services; (iv) improving cooperation with neighboring countries; (v) increasing funding for the energy sector by improving collection of tariffs and charges; (vi) developing a user-pay approach and removing subsidy-induced distortions in the pricing of services; (vii) rehabilitating basic infrastructure and improving operations, maintenance and safety standards; and (viii) developing human resources. Subject to the successful development of the reforms under the Program Loan, ADB will process the Power Rehabilitation Project in 2000. ADB is committed to ensuring that the poorest areas of Tajikistan benefit the most from the Project. Social safety net measures are also being considered to provide the poor segment of the population with electricity without straining the financial capacities of the energy sector. The investment is also expected to mitigate poverty by creating a wide range of job opportunities.

2. Transport

39. Tajikistan's economy is transport intensive as distances to international markets are long and costly. The transport network was largely designed to integrate Tajikistan with Russia and the network does not always utilize the most efficient links for domestic and non-former Soviet Union trade. Some locations within Tajikistan have no direct links and rely on connections through adjacent countries. Possible routes and modes of transport are also limited due to the country's geographical features. Road transport is the most important mode accounting for 82 percent of total freight and 98 percent of total passengers in 1997. Transport traffic has decreased drastically since 1991 due to the economic contraction. The transport sector difficulties were compounded by the civil war and natural disasters, which severely damaged transport infrastructure and parts of the transport fleet.

40. The Government has actively sought foreign investments and has improved road networks, including creating new road connections with PRC across its eastern border. The Government has limited capability to develop sound transport strategies and policies due to understaffing, fragmentation of responsibilities at different agencies for various subsectors, and lack of a comprehensive sector study. Efforts are required to restructure and strengthen institutions to improve transport management.

41. The transport sector reform in Tajikistan has been supported by ADB since 1998 under the Postconflict Infrastructure Program. ADB's strategy is to strengthen the transport sector to promote sustainable economic development, providing more employment opportunities and generating additional incomes in poor areas, thus contributing to poverty reduction. In the transport sector, ADB assists the Government to (i) undertake sector reforms to remove policy and institutional impediments to the delivery of efficient services, and (ii) rehabilitate deteriorating and damaged infrastructure. ADB operations concentrate on the road subsector, and the Road Rehabilitation Project is to be processed in 2000 subject to the satisfactory implementation of the Program Loan. ADB support will include (i) developing a policy and regulatory framework appropriate for a market economy; (ii) commercializing and privatizing operations of state-owned enterprises to improve operational efficiency; (iii) promoting competition and private sector participation in the provision of services; (iv) raising funding by improving collection of tariffs, introducing user charge practices, and removing subsidy-induced distortions in the pricing of services; (v) rehabilitating crucial infrastructure; (vi) improving maintenance and safety standards; and (vii) developing human resources and strengthening institutions.

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