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NEWS FROM THE ASIAN DEVELOPMENT BANK      OCTOBER 2005




                                           UNDP Report
                                            Window of
                                           Opportunity

                                                   ADB
                                         Strengthening
                                         Transport and
                                            Trade Links
                                             World Bank
                                       Tackling HIV/AIDS
CENTRAL ASIA

STRONGER
                                                              www.adb.org/review




TOGETHER                                       October 2005   1
ADB
Volume 37, Number 5
October 2005




                                                                                                                             Bread for sale in a market at
                                                                                                                             Khojand, Tajikistan’s major
                                                                                                                             northern city: the dietary staple is
                                                                                                                             shared by the new Central Asian
                                                                                                                             republics, along with similarities
                                                                                                                             of history, culture, and religion


CENTRAL ASIAN REPUBLICS                                                                   14 TRADE Gas Pipeline                 26 Rehab With a Heart
                                                                                             Race Turkmenistan                       The Kyrgyz Republic has
This issue was prepared in cooperation with ADB’s development partners                       moves a step closer toward              developed a progressive
in Central Asia, including governments, nongovernment organizations,                                                                 treatment program for HIV/
                                                                                             selling gas to the booming
United Nations Development Programme, and World Bank. It was written                                                                 AIDS that could be a regional
                                                                                             markets of South Asia
and photographed by Ian Gill, Principal External Relations Specialist.                                                               model
                                                                                          16 Hatmaker of
    6 New Members, New Scope, New Momentum                                                   Samarkand                          28 WATER AND ENERGY
      An alliance of countries and key institutions, CAREC is actively                       The Bozorov family                    Calming Troubled
      promoting economic cooperation in Central Asia                                         maintains a long tradition of         Waters UNDP is building
                                                                                             craftsmanship—but now                   bridges between Tajik and
    8 TRANSPORT AND TRADE Bumpy Road The southern                                            faces competition                       Kyrgyz communities that have
      Silk Road to the People’s Republic of China is largely unpaved,                                                                feuded over water
      but its reopening has seen rapid growth in the flow of goods                        18 Felt and Glass
      and services                                                                           A village cooperative and          30 Win-Win Solutions
                                                                                             an industrial firm show how             ADB and the World Bank are
10 Turkey Ties Since independence, Central Asian countries                                   the Kyrgyz Republic is                  encouraging Central Asian
      have resumed trade along the ancient silk routes to the west.                          overcoming challenges                   countries to optimize water
      Turkmenistan’s growing ties with Turkey is an example                                                                          and energy resources through
                                                                                          20 Shuttle Traders’                        a new power trade system
12 One-Stop Customs A pilot “one-stop” customs facility                                      Woes Recently intro-
      between Kazakhstan and the Kyrgyz Republic points the way to                           duced trade and border-            32 PICTORIAL Bukhara:
      more such collaboration in the future                                                  crossing restrictions are             Old and New
                                                                                             making life difficult for
                             ABOUT THE COVER                                                 small-time entrepreneurs           34 LABOR MIGRATION
                             A group of soccer-playing youths in Bishkek,                                                          Villages Without
                             Kyrgyz Republic, pose playfully. Just as                     22 PICTORIAL Secret of                   Men Poverty is so dire in
                             teamwork helps on the field, so would                           the Silk Road                           many Tajik villages that most
                             the new republics of Central Asia benefit                                                               young men leave each year to
                             from closer cooperation. A forthcoming                       24 HIV/AIDS On the Front                   work abroad
                             UNDP report shows the gains would                               Line A regional approach
                             include a big rise in incomes.                                  is needed to deal with the         36 THE INTERVIEW
                                                                                             explosive growth of HIV/              “We have to be
                             Cover photo by Ian Gill                                         AIDS                                  patient” says World
ADB Review, Department of External Relations, Asian Development Bank,                                                                Bank’s regional coordinator
6 ADB Avenue, Mandaluyong City 1550, Philippines; E-mail: review@adb.org;                                                            Simon Kenny
Fax: +63 2 636 2648; www.adb.org/review. In this publication, “$” refers to US dollars.
2                          October 2005
WINDOW OF
OPPORTUNITY
Central Asian republics need to cooperate more to compete
effectively in a global economy. A new United Nations Development
Programme (UNDP) report looks at the benefits of increased
integration—and the costs of noncooperation



I
   ncreased cooperation among Central Asian republics would produce big eco-
   nomic gains in reducing trade costs, increasing remittances, improving water
   use and flood control, and negotiating better cotton prices in the international
   market. On the other hand, the price of noncooperation in health (in treating
   HIV/AIDS and tuberculosis) and natural disasters, for example, would be large.
 On all these issues, regional cooperation can limit costs and increase benefits.
                                                                      October 2005   3
    These are among the conclusions of a
new UNDP report, Regional Cooperation for
Human Development and Human Security in
Central Asia, to be released in December.
    The report estimates that regional gross
domestic product (GDP) could rise signifi-
cantly after 10 years of comprehensive
regional cooperation, compared with the
status quo of limited cooperation. It adds
that the increase would be higher in smaller
countries.
    Moreover, regional cooperation will
likely help the poor more than the better
off. Reducing trade costs, increasing agri-
cultural productivity, and reducing flood-
ing would help the rural areas, where many
of the poor live. This especially applies to
border communities.
    Conversely, says the report, the costs of
noncooperation—for example, from a lack
of regional disaster preparedness or from
war and violence—tend to fall most heavily
on poorer people.
    Significantly, the report says, “The po-
litical push for change, open borders, and       rity challenges. With the collapse in eco-       TOURISM POTENTIAL Little-visited Tajik
regional cooperation will likely have to         nomic activity in the region came a dra-         mountains between Dushanbe and Khojand:
come either from the top leadership, or from     matic increase in poverty and a severe           Tourism has great potential for Central Asia
the enlightened self-interest of the elites      reduction in social services and social pro-
as they recognize that in the longer term,       tection.                                         country to address these many serious chal-
they will also benefit substantially from a          A new national identity and new na-          lenges, says the report. The five landlocked
more competitive, dynamic, and rapidly           tional government institutions had to be         countries will not flourish as long as rigid
growing regional economy—one based on            created and market reforms introduced            borders divide them, impeding cross-
integration and cooperation.”                    under these difficult circumstances, in          border cooperation and economic integra-
    But it warns that the drive for change       most cases by political and administrative       tion among themselves and with the rest
“could also come from those who feel most        cadres carried over from Soviet administra-      of the world.
oppressed by closed borders and corrupt of-      tions.                                               This does not mean recreating the cen-
ficials, the people in the border communi-           Over the past 6 years, Central Asia has      trally planned integration of Soviet times,
ties who are the most negatively affected        benefited from an economic recovery, and         but creating conditions that allow people
and most prone to turn to radical and po-        analysts believe it is turning the corner.       to connect across borders and help markets
tentially violent methods.”                      Some countries are growing strongly and          work across borders through trade and in-
    The report adds that the collapse of the     poverty rates are falling. The region’s huge     vestment, linked infrastructure, shared
Soviet Union in 1991 had a dramatic im-          appeal as a tourist destination will also help   water and energy, common environmental
pact on Central Asia that is still being felt.   boost future growth. Amid the expansion          and health protection, and a free flow of
Economic activity dropped precipitously          and modernization, Kazakhstan—the larg-          ideas and experiences.
in most of the region. The collapse of the       est economy with half the region’s GDP—              The report says that only if the borders
command economy and the presence of              is spurring regional growth as a center for      are open and only if the countries cooper-
new borders interrupted Soviet trade, trans-     investment and job creation.                     ate with each other and their neighbors
port, and financial flows.                           However, the report notes that in much       will Central Asia become once again an in-
    Skilled Russian labor, along with other      of the region incomes remain below those         tegral part of the Eurasian economic space.
minorities, left in large numbers; invest-       of 1990, governance indicators are gener-            “Only if Central Asian countries and
ments and traditional cooperation in key         ally poor, and social services and protection    their neighbors create borders that allow
sectors, especially water and energy, lapsed;    remain fragile.                                  people to connect with each other without
and the new countries faced great difficul-          Many challenges in economic, institu-        fear, without undue loss of time, and with-
ties integrating with the world economy          tional, and political reforms remain even        out bribes will Central Asia succeed in
due to their landlocked location, far from       as differences among the countries are           achieving economic prosperity, social
international markets.                           becoming clearly evident.                        progress, human security, and political sta-
    Some of them faced civil war and secu-           Much can—and must—be done in each            bility for their people,” the report asserts.

4                     October 2005
                                                                                                                OVERVIEW

                                                                                                    Despite such obstacles, the Central
                                                                                                Asian countries have a window of opportu-
                                                                                                nity to begin the process of creating a com-
                                                                                                mon economic and social space through
                                                                                                cooperation and integration.
                                                                                                    It was only natural that, in the early
                                                                                                years after the Soviet Union disintegrated,
                                                                                                the new republics focused on the internal
                                                                                                challenges of nation building and of the
                                                                                                painful transition from socialist-command
                                                                                                to market-based economic systems.
                                                                                                    Now, however, the report notes that most
                                                                                                leaders of the Central Asian republics
                                                                                                appear ready to increase their cooperation
                                                                                                bilaterally and regionally which would bring
                                                                                                        together the countries of the region
                                                                                                        and key neighbors, especially the
   Over the past 6 years,                                                                               PRC and Russia.
   Central Asia has                                                                                         In addition, the broader interna-
   benefited from an                                                                                    tional setting is more supportive of
                                                                                                        closer cooperation among the coun-
   economic recovery,                                                                                   tries.
   and analysts believe                                                                                     After the collapse of the Soviet
   it is turning the corner.                                                                            Union and for much of the 1990s,
                                                                                                        little international attention was
   Some countries are                                                                                   devoted to Central Asia as the focus
   growing strongly and                                                                                 was the rapid recovery of Central Eu-
                                               MODERNIZING Kazakhstan (above) contri-
   poverty rates are falling                   butes half of the region's GDP; a high-tech
                                                                                                rope, the civil war and reconstruction in the
                                               glass factory in the Kyrgyz Republic (top) is    Balkans, and the fitful transition of Russia.
                                               getting a boost from foreign investment              This changed after the terrorist attacks
    Fortunately, it says, the disintegration                                                    of 11 September 2001 when Central Asia,
of the Soviet Union and the end of the                                                          along with Afghanistan, was thrust into the
cold war opened a historic opportunity for     operate to create conditions that will allow     international limelight as a region of im-
the reintegration of the Eurasian continen-    the region to flourish as a peaceful and pros-   mediate geopolitical significance and of
tal space.                                     perous area and attract the investment and       potential long-term risks.
    The great continental powers—              expertise needed to build on its natural and         With its central location at the inter-
People’s Republic of China (PRC), India,       human resource base.                             cept of Eurasian east-west and north-south
Russia, and the European Union—are                 Of course, says the report, major chal-      political fault lines, with its great natural
no longer separated by sealed and hostile      lenges and potential obstacles threaten the      resource base, and with its serious economic
borders.                                       cooperation and integration of Central Asian     and social difficulties and apparent poten-
    There is new hope for a peaceful Af-       countries.                                       tial for political instability, Central Asia
ghanistan serving as a bridge between              The sense of competition and distrust        has become the focus of interest for the in-
North and South Asia. Regional economic        among the countries and their leaders that       ternational community.
and political institutions are beginning to    has come with the creation of new nation             Until recently, most of the attention was
serve as focal points for regional coopera-    states is reinforced by the traditional no-      devoted to strengthening the domestic poli-
tion throughout Eurasia.                       tion deeply embedded in socialist think-         cies and institutions in each country. But
    And modern means of communica-             ing that international and regional              multilateral and bilateral donors have in-
tions—including air transport, telecommu-      economic and political relations are strictly    creasingly understood that improved re-
nications, and the internet—are shrinking      a “zero-sum game” —that whatever one             gional cooperation has an important role to
overland distances both in cost and speed.     country gains must entail a loss to another      play in helping the countries in Central Asia
    As a result, Central Asia has the oppor-   country.                                         achieve sustained economic growth and
tunity to become a hub for the new trans-          Coupled with this perception is a strong     long-term stability.
continental links that are beginning to grow   resistance to the notion that any country
across Eurasia from east to west and north     might benefit from giving up any degree of       *
                                                                                                 This article contains extracts from the United
to south.                                      its newfound national sovereignty as part        Nations Development Programme’s Human
    However, to realize this opportunity,      of a process of regional cooperation or inte-    Development Report which will be released in
the Central Asian countries will need to co-   gration.                                         December 2005.

                                                                                                                        October 2005         5
NEW                                          Members
                                             Scope
                                             Momentum
As the only forum that brings together an alliance of
countries and key multilateral and regional institu-
tions within a single framework, CAREC is actively
promoting economic cooperation in Central Asia
By Craig Steffensen                              cooperation programs/institutions, particu-
Head, ADB’s Central Asia Regional Economic       larly the Shanghai Cooperation Organiza-




T
Cooperation Unit                                 tion and the Central Asia Cooperation
                                                 Organization. CAREC, indeed, is the only
             he 4th Ministerial Conference of    forum that brings together the countries of
             the Central Asia Regional Eco-      the region and the key multilateral and re-
             nomic Cooperation (CAREC)           gional institutions cited above within a
             Program will be held in Bishkek,    single institutional framework.
             Kyrgyz Republic on 5–6 No-              Some 200 delegates are expected to at-
vember 2005. Russia and Afghanistan will         tend the 4th Ministerial Conference, includ-
be represented at the conference for the first   ing Ministers and senior officials from the
time, as full participants in the CAREC          CAREC countries, senior representatives
Program. “Expanding the program to in-           of member multilateral institutions, and
clude Russia and Afghanistan adds signifi-       observers from neighboring countries and
cantly to CAREC’s profile, scope, and            bilateral and other regional organizations.
depth,” says Satish Rao, Director General        In addition to reviewing regional coopera-
of the Asian Development Bank (ADB)’s            tion to date in transport, trade facilitation,
East and Central Asia Department.                trade policy, and energy, Ministers will re-
    CAREC is an ADB-supported initiative         view a comprehensive plan of action to
to encourage economic cooperation in Cen-        2008, including sequencing and prioritiz-
tral Asia. Initiated in 1997, the program to     ing regional cooperation initiatives and de-
date has focused on regional initiatives in      veloping performance indicators. Most
transport, trade facilitation, trade policy,     importantly, Ministers will consider the ul-
and energy critical to improving the eco-        timate goals under the CAREC Program:
nomic performance of the region and the          Is regional cooperation intended to result       FUTURE HOPE A youthful group in rural
livelihoods of all people—especially of the      in some form of economic union or free trade     Kyrgyz Republic: like the newly indepen-
poor. The original participants include          area? If so, by when, and what short- and        dent countries of Central Asia, they have
                                                                                                  strong growth potential
Azerbaijan, People’s Republic of China           medium-term steps are needed to realize
[PRC] (Xinjiang Uygur Autonomous Re-             the goal?
gion), Kazakhstan, Kyrgyz Republic,                  Other agenda items include capacity          have been invited to attend, offering the
Mongolia, Tajikistan, and Uzbekistan.            building initiatives for regional cooperation;   likelihood of contributing importantly to
    CAREC is also an alliance of multilat-       a video documentary on regional coopera-         public/private sector partnership and dia-
eral institutions active in promoting eco-       tion in Central Asia; and presentation of        logue.
nomic cooperation in Central Asia, namely,       UNDP’s Human Development Report on                   The importance of regional cooperation
the European Bank for Reconstruction and         Central Asia, prepared with contributions        in Central Asia is threefold:
Development (EBRD), International Mon-           from ADB and the World Bank. Further, in         • While neighboring the world’s largest
etary Fund, Islamic Development Bank,            conjunction with the ministerial confer-         and fastest-growing markets (PRC, India,
United Nations Development Programme             ence, a regional business roundtable for         and Russia), Central Asia’s landlocked sta-
(UNDP), and World Bank—in addition to            Central and South Asia will be held, sup-        tus means regional transport costs are a
ADB. The CAREC Program also operates             ported by ADB and EBRD. Senior business          serious impediment to development. Co-
in close partnership with other key regional     representatives from throughout the region       operation in transport, trade, and transit

6                        October 2005
                                                                                                                         CAREC

                                                                                               CENTRAL ASIA REGIONAL
                                                                                               ECONOMIC COOPERATION
                                                                                               PROGRAM (CAREC)
                                                                                               Established 1997
                                                                                               Existing Member Countries
                                                                                               Azerbaijan, People’s Republic of China
                                                                                               (Xinjiang Uygur Autonomous Region),
                                                                                               Kazakhstan, Kyrgyz Republic, Mongolia,
                                                                                               Tajikistan, and Uzbekistan. Islamic
                                                                                               Republic of Afghanistan and the Rus-
                                                                                               sian Federation are expected to join by
                                                                                               October 2005.
                                                                                               Priority Areas Energy, trade facilitation,
                                                                                               trade policy, transport
                                                                                               Institutional Framework Components
                                                                                               • Ministerial Conference
                                                                                               • Senior Officials’ Meeting
                                                                                               • Sector Coordinating Committees
                                                                                               • Project Working Groups
                                                                                               • National Focal Points
                                                                                               • Sector Focal Points
                                                                                               • Multilateral Institutions Working Group
                                                                                               • Secretariat: Asian Development Bank
                                                                                                 (including staff, consultants, and
                                                                                                 long-term advisors assigned to ADB
                                                                                                 headquarters, 6 of 7 resident mis-
                                                                                                 sions, and the Almaty Office)
                                                                                               Donor Participants (since 2003)
                                                                                               ADB, EBRD, IMF, IsDB, UNDP, World Bank
                                                                                               Key Regional Investment Projects
                                                                                               • Almaty-Bishkek Regional Road
                                                                                                 Rehabilitation
                                                                                               • Dushanbe-Kyrgyz Border Road
                                                                                                 Rehabilitation
                                                                                               • Regional Road Development
                                                                                                 (Mongolia/People’s Republic of China)
                                                                                               • Southern Transport Corridor Road
                                                                                                 Rehabilitation (Osh-Sary Tash-
   CAREC has focused on regional initiatives in transport,                                       Irkeshtan Corridor)
                                                                                               • Regional Customs Modernization
   trade facilitation, trade policy, and energy critical to                                      and Infrastructure Development
   improving the economic performance of the region and                                        • Regional Trade Facilitation and
                                                                                                 Customs Cooperation Program
   the livelihoods of all people—especially of the poor
                                                                                               Total Lending to CAREC Countries
                                                                                               $2.84 billion, including $275.1 million
will yield important benefits.                  “goods” (e.g., knowledge sharing) and re-      in regional projects (as of end-June
• Central Asian countries share vital           gional “bads” (e.g., HIV, tuberculosis, drug   2005, excluding the PRC)
resources, notably energy and water. Har-       trade and use, terrorism), their contribu-
nessing these resources in a sustainable        tion to building trust and confidence in       Technical Assistance Grants
manner and managing their shared use in         Central Asia is part of the needed response.   $200.38 million, including $20.4 mil-
support of agriculture, industry, and liveli-      The CAREC Program is gaining new            lion in regional technical assistance
                                                                                               grants (as of end-June 2005, excluding
hoods require a high degree of regional         members, new scope, and new momentum.
                                                                                               the PRC)
cooperation and third party assistance.         The 4th Ministerial Conference will be piv-
• Although most regional cooperation            otal in advancing the regional agenda in       More Information: www.adb.org/carec
programs relate only indirectly to regional     Central Asia.

                                                                                                                     October 2005           7
    HOOFING IT A girl and her
    donkey on the road to the
    People’s Republic of China—
    could be faster than a truck




BUMPY ROAD
TO THE PEOPLE’S REPUBLIC OF CHINA
The southern Silk Road to the People’s Republic of China is largely unpaved and
can be tortuous to traverse. But its reopening has seen rapid growth in the flow of
goods and services between Central Asia and its eastern neighbor




T
OSH, KYRGYZ REPUBLIC                              tions of the road are still unpaved, how-             The impact of PRC trade is clearly
                                                  ever, and the bumpy ride can be tortuous,         evident in the bustling market at Karasu—
            ruck driver Arifzhan Tashlanbaev      especially in winter.                             30 km outside Osh—which teems with
            has an easygoing nature, which             “I get a lot of punctures and sometimes      traders from all over Central Asia and
            is handy as he and his wife have      the truck has to be pulled out of potholes,”      Russia.
            a family of five daughters. It also   says Mr. Tashlanbaev, with a grin. “With              “Almost everything you see here is from
            helps in his job, which involves      two drivers, we can cover 300 km to the           the PRC,” says Baarkan Ergesheva, an
driving along one of the most challenging         border and back in 24 hours; but during a         imposing woman who deals in textiles
roads in Central Asia.                            winter blizzard, sometimes we wait up to          and provides transport services for the PRC
    Several times a month, the 37-year-old        a week in one 75-km section because the           traffic.
Uzbek hauls scrap metal along the scenic          road is closed.”                                      She used to rent 5–6 trucks a month to
but rugged 262-kilometer (km) road from                Despite the conditions, Mr. Tashlanbaev      journey to the border, but today that num-
Osh, the biggest southern city of the Kyrgyz      is among a growing number of haulers along        ber has risen to 15 or 16 a month—despite
Republic, to Irkeshtam on the border of           the old Silk Road.                                increased competition.
the People’s Republic of China (PRC).                  Although concerned that the PRC’s                Ms. Ergesheva, a former school princi-
    He makes the return journey through           cheaper exports might threaten their goods,       pal who switched to trading after seeing
the mountains with PRC goods such as              generally Central Asia is keen to benefit         her salary and pension crumble, says the
television sets, shoes, and clothing.             from the PRC’s desire to develop strong ties      influence of the PRC is growing rapidly in
    Even after independence, the Irkeshtam        with the region, with its large energy reserves   this part of the world.
pass—gateway to Kashgar, capital of               and strategic links to Europe. The Kyrgyz             “The number of PRC businesses in Osh
Xinjiang Uighur Autonomous Region—was             Republic, a mountainous land with a nar-          and Karasu has grown enormously in the
for a long time open only to commercial           row manufacturing base, has less to lose          past few years,” she says. “When the up-
traffic and for limited periods each month.       than others from lowering trade barriers (it      grading of the road to the PRC is finished,
But since the summer of 2002, it has also         is, for example, the first Central Asian coun-    trade will explode.”
been open to passenger traffic. Large sec-        try to join the World Trade Organization).            The Kyrgyz Republic has a northern

8                      October 2005
                                                                    TRANSPORT                         AND           TRADE




                                                                                               PAVING THE WAY A PRC contractor
                                                                                               is upgrading the road between Osh
                                                                                               and Uzgen; more bids are expected




BRISK BUSINESS Truck driver Arifzhan
Tashlanbaev (top) has been stuck on
the road for nearly a week in winter;
transportation services provider Baarkan
Ergesheva (above) rents three times as
many trucks as before
                                                 Even before the highway is completely
                                             surfaced, PRC enterprises are making
trade route with the PRC from Bishkek        their presence felt. Drawn by the fertile
through Naryn to the Torugart Pass. But      Ferghana Valley, 2,000 PRC enterprises are
the southern link is rapidly gaining popu-   already registered in Osh, according to a
larity, especially since the two halves of   PRC trade association. Osh is enjoying a
the country, divided by mountain ranges,     boom as a result.
have been joined by an all-weather road          PRC service companies and traders
that can be crossed in winter.               are also coming over the mountains. Re-
    The Asian Development Bank (ADB)         cently, a PRC construction firm won an
has rehabilitated much of the 650-km         ADB contract to repair the road between
road between Bishkek and Osh. It is now      Osh and Uzgen.
also providing a loan of $32 million (with       “This is one of the first times PRC
the Organization of Petroleum Exporting      nationals have won a road contract in the
Countries Fund contributing another $4       Kyrgyz Republic and they are bidding for
million) to upgrade nearly half of the PRC   another project,” says Marat Miyarov,
road between Osh and Irkeshtam. Mean-        a manager from the Kyrgyz Ministry of
while, the PRC is already repairing a        Transport and Communications. “This          OPEN TRADE Most consumer goods and
stretch of this road on the Kyrgyz side of   firm is performing within budget and gen-    toys offered at the Karasu market are
the border.                                  erally within the time schedule.”            PRC products (middle and above)

                                                                                                                October 2005       9
Since independence,
Central Asian countries
have resumed trade along
the ancient Silk routes to
the west. Turkmenistan’s
growing ties with Turkey
are an example




T
ASHGABAT, TURKMENISTAN

             he stillness of Turkmenistan’s
             blazing desert is broken by a
             rumbling sound. Out of the
             empty expanse, a giant Turkish
             truck suddenly appears and
thunders past. It is a moment so brief
and incongruous that it later seems like a
mirage.
    Yet Turkish trucks are an increasingly
common sight here—and other parts of
Central Asia—as old Silk Road trade links
with Istanbul (formerly Constantinople)
and Europe are being reestablished follow-
ing the opening up of international borders
since independence.
    Turkmenistan’s growing trade with Tur-
key builds on deep historical, linguistic, and
cultural foundations. The ruined palaces
and mosques of the southern city of Merv,
also known as Mary, testify to its former
glory as a capital of the Seljuk Empire. De-
scendants of the Seljuk Turks helped found
the Ottoman Empire.
    Trade flows along two main routes,
either along the southern road through
Iran or via the northern road through Turk-
menbashi and across the Caspian Sea
by ferry to Baku and Georgia. Although
largely a desert country, Turkmenistan has
plenty to trade, with large reserves of oil
and natural gas. It is also one of the world’s
top cotton producers.
    Under the long-time leadership of
Saparmurat Niyazov—President since




TURKEY TIES
1990 and communist party chief for the




10                    October 2005
                                                   TRANSPORT                           AND            TRADE

                          previous decade—however, Turkmenistan           entrepreneurs invested $170 million in
                          has been slowest among the Central Asian        heavily automated plants that produce cot-
                          economies to reform. Numerous trade bar-        ton products such as clothes and sheets.
                          riers hamper it from trading more effectively   The joint venture between Turkey and
                          with the wider world.                           Turkmenistan started production in early
                              All this throws Turkey’s role in the        2002.
                          country’s development into sharp relief.            Speaking above the whir of machines,
                          Excluding Turkmenistan’s gas exports to         General Director Izzet Pekdogan says the
                          Russia and the Ukraine, Turkey is its larg-     complex exports 90% of its goods. The bulk,
                          est commercial partner. Trade between the       85%, goes to the United States and the rest,
                          two has risen by several multiples, espe-       to Europe. Despite the high level of mecha-
                          cially in imports of Turkish goods. Yimpas,     nization, the factory engages over 3,000
                          the largest and most modern department          women in a land of high unemployment.
                          store in Ashgabat, has a large range of Turk-       One of the women working among the
                          ish products.                                   numerous assembly lines has been with the
                              “Three quarters of what you see here        factory since it started. “My husband and I
                          are Turkish products,” says the store’s prod-   have four children,” says Nurtach Babaeva,
                          ucts manager, Bekir Adjun. He adds that         40. “I contribute a lot to my family’s needs.”
                          sales have risen steadily since the store           Altogether, some 200 Turkish firms are
                          opened in 2000. Turkmen exports—mainly          active in Turkmenistan’s construction,
                          textiles and electricity to Turkey—are not      textile, and food sectors.
                          lagging either. Last year, exports to Turkey        Turkish contractors have built much of
                          nearly doubled compared with 2003.              the country’s infrastructure, including
                              Turkey is helping build Turkmenistan’s      roads, telecommunications, airport, hotels,
                          fledgling manufacturing sector. At the          and factories. Apart from one prominent
                          Turkmenbashi Textile Complex, Turkish           French firm, they dominate the construc-
                                                                          tion sector.
                                                                              Turkmenistan would also like to add
Turkmenistan is less      PARTNERSHIP The Turks have brought high-
                                                                          Turkey—and others—to its list of buyers
                          tech machines into this cotton factory in
open than other Central   Ashgabat: the labor and raw materials are       of natural gas, but this involves building
Asian economies,          Turkmen (left); students at a computer class    pipelines under the Caspian Sea, and legal
                          in Merv: globalization is coming slowly         disputes over territoriality between coun-
but globalization may     (above); customers in a Turkish department      tries bordering the sea deter such ventures.
be coming slowly as       store, where a wide range of goods are on           Turkmenistan is less open than other
                          offer (below); ties are growing between
interest in computer      Turkmenistan and Turkey as shown by this
                                                                          Central Asian economies, but globalization
                                                                          may be coming slowly. Outside Merv,
courses increases         Turkish department store, one of the
                                                                          camels graze in the shadow of a mosque
                          biggest in Ashgabat (below right)
                                                                          from a bygone era. But in the city, in a small
                                                                          computer training center, half a dozen
                                                                          pupils—mainly young women—are staring
                                                                          at screens and tapping at keyboards. The
                                                                          teacher says this is among a handful of such
                                                                          schools and that it already has a waiting
                                                                          list of trainees.




                                                                                                  October 2005      11
TRANSPORT                           AND            TRADE




ONE-STOP
CUSTOMS
Remote and landlocked Central Asia can reduce
transport costs by improving roads and reducing for-
mal—and informal—border charges. A pilot “one-
stop” customs facility between Kazakhstan and the
Kyrgyz Republic points the way to the future




O
AL JOK, KYRGYZ REPUBLIC                          urgently needed. It is ironic that a region
                                                 that depends so heavily on trade—which
                 n the Kazakh side, we stand     accounts for between 53% and 129% of
                 in a line for “foreigners” to   gross domestic product among the five coun-    STANDARDS Searching a car: working toward
                 have our passports checked      tries—has created so many obstacles to it      one-stop customs (above); all-weather road
                 by computer. On the Kyrgyz      since independence.                            between Bishkek and Osh (right): financed
                 side, the driver takes our          The ADB video team retraced by vehicle     by ADB, which plans to upgrade the road to
                                                                                                the PRC
passports and handles the border formali-        many caravan trails between Silk Road cit-
ties while we wait in the car. The entire        ies such as Bukhara, Khojand, Merv, Osh,       sending the same container from Almaty
border crossing takes less than half an hour.    and Samarkand. To be sure, motor vehicles      to Urumchi—only a third of the distance
    At this border on the Almaty to Bishkek      are faster than camels, and roads have im-     to the Russian capital—takes 5 days at two
road—Al Jok is 30 kilometers (km) from           proved over sandy tracks. But national bor-    thirds of the cost. The contrast in costs per
the Kyrgyz capital—Kazakhstan and the            ders and their military-style customs posts    kilometer is even starker: 0.76 cents for the
Kyrgyz Republic are trying to establish a        are one obstacle that caravans of old did      trip to Moscow and $1.9 to Urumchi.
“one-stop shop” for customs and immigra-         not have to contend with.                          “The reason for the difference is that
tion. Streamlining procedures to facilitate          A World Bank report on trade and trans-    the road to Moscow is well established, with
trade has taken a lot of hard bargaining,        port in Central Asia says the physical costs   tried and tested procedures, whereas wait-
and is not working perfectly yet. A draft        of being remote and landlocked can add up      ing times, delays, and charges can be longer
agreement signed by the Kyrgyz Republic          to 50% to the value of goods being exported    over relatively new routes,” notes Mr. Kenny.
is awaiting ratification by Kazakhstan—          from the region. “But the nonphysical costs        Upgrading regional link roads is part of
and it simplifies procedures for customs,        like tariffs, customs barriers, long delays,   the solution. ADB, for example, is helping
but not yet for immigration.                     corruption, and rent-seeking of people         rehabilitate the highway between the
    “We are reaching an agreement with           creaming off money along the way can add       Kazakh capital of Almaty and Bishkek and
Kazakhstan to establish a one-stop customs       another 10–15% to the value of goods,” says    is either upgrading or planning to repair
post that will reduce customs procedures         Simon Kenny, the World Bank’s regional         regional road links between the Kyrgyz
and cut waiting times and costs,” says           program coordinator in Almaty.                 Republic and its neighbors, the People’s
Kumushbek Kurmanaliev, deputy director               The report stresses the region’s need to   Republic of China (PRC) and Tajikistan.
of the Kyrgyz State Customs Inspectorate.        reduce the “economic distance to mar-              Nowadays, driving across the mountain
“We hope this kind of facility will be ex-       kets”—defined as the sum of time, logisti-     range that divides north and south Kyrgyz
tended to other countries in Central Asia.”      cal, and clearance costs for moving a          Republic not only takes a much shorter
    Judging from the lengthy delays and          consignment to market.                         time than before but the all-weather road
other impediments to trade observed by an            It makes some telling comparisons. For     makes the journey possible year-round. In
Asian Development Bank (ADB) video pro-          example, it takes 10 days and costs $3,350     contrast, the slippery gravel road through
duction team during a recent 5,000-km road       to transport a 20-foot container from Almaty   the Tajik mountains between north and
trip around Central Asia, such reforms are       to Moscow, a distance of over 4,000 km. Yet    south is inaccessible for much of the year.

12                    October 2005
                                                          TRADE BARRIERS Truck driver awaiting
                                                          a search at a border: unofficial charges
                                                          are common in Central Asia and too many
                                                          restrictions can hamper trade


                                                               “Even more challenging than upgrad-
                                                          ing roads, however, is the need to simplify
                                                          and harmonize customs and immigration
                                                          procedures,” says Nigel Rayner, a director
                                                          in ADB’s East and Central Asia Department.
                                                               ADB is providing technical assistance to
                                                          facilitate trade by simplifying and harmo-
                                                          nizing customs procedures between the five
                                                          Central Asian countries, PRC, and Russia.
                                                               “As well as joint customs control and one-
                                                          stop services, Kazakhstan and the Kyrgyz
                                                          Republic are working toward a bilateral tran-
                                                          sit system to reduce the cost of trade pass-
                                                          ing through these countries on the way to
                                                          somewhere else,” says Jeffrey Liang, an ADB
                                                          principal trade economist. “We are also try-
                                                          ing to promote information and communi-
                                                          cation technology to automate facilities and
                                                          share data to speed up processing.”
                                                               A United Nations Development Pro-
                                                          gramme report to be issued in December
                                                          places the issue in a wider context. “The
                                                          big challenge for Central Asia is to develop




“
                                                          borders with a human face…ensuring that
                                                          people are treated with respect, fairness,
     The physical costs of being remote and           “   free of fear, according to the rules, and with-
                                                          out having to pay bribes.” While recogniz-
landlocked can add up to 50% to the value                 ing that countries need to control illicit
of goods being exported from the region                   trade, the report urges that this be balanced
                   Excerpt from a World Bank report       by “supportive and efficient border man-
                                                          agement” for those crossing legally.

                                                                                  October 2005       13
GAS PIPELINE R
Despite a report of
lower-than-expected gas
deliverability,
Turkmenistan has an
opportunity to open
new markets in India
and Pakistan, where
long-term demand is
expected to be strong




A
ASHGABAT, TURKMENISTAN

                  $3.3 billion scheme for
                 Turkmenistan to feed grow-
                 ing demand for gas in India
                 and Pakistan took a step
                 nearer reality with the re-
cent release of additional information on
natural gas reserves and production fore-        The project would bring clean fuel at competitive costs
casts.                                           to India and Pakistan, much-needed transit fees to
    The country’s Dauletabad gas field in        Afghanistan, and new markets for Turkmenistan
the south has gross reserves of 1.4 trillion
cubic meters (TCM) of gas. But produc-
tion forecasts are lower than expected, caus-
ing some analysts to doubt that it can meet
the proposed target of piping 30 billion
cubic meters (BCM) of gas a year to South
Asia via Afghanistan.
    With the reserves valuation, as well as a
security analysis report, the next step is for
the project’s steering committee to meet
and discuss inviting an international con-
sortium of investors to build the pipeline.
    “The reserves information shows that
Turkmenistan could supply enough gas
for the first few years but then production
is predicted to decline instead of increase,”
says Dan Millison, a senior Asian Devel-
opment Bank (ADB) energy specialist.
“They will need to find gas from other fields
to meet pipeline design targets.”
    In the meantime, a $7 billion scheme to
pipe natural gas to India and Pakistan from

14                    October 2005
                                                                                                                            TRADE




RACE
                                                                                                                   WORKING YOUTH
                                                                                                                   Turkmenistan is largely
                                                                                                                   a desert country:
                                                                                                                   education and health
                                                                                                                   services are slipping




                                                      A thaw in India-Pakistan relations means both
                                                      countries see mutual dependence on gas supplies
                                                      as an important means of cementing peace

                                                    Turkmenistan is a largely desert coun-       changed advantageously. The thaw in In-
                                                try with proven recoverable natural gas          dia-Pakistan relations means not only that
                                                reserves of 71 trillion cubic feet (Tcf, about   India is prepared to rely on a pipeline that
                                                2 TCM) and possible reserves of over 200         runs through Pakistan but that both coun-
                                                Tcf (about 6 TCM).                               tries see mutual dependence on gas sup-
                                                    It is one of the world’s largest gas         plies as an important means of cementing
                                                exporters. However, although its 4.5 mil-        peace. Uncertainties in the crude oil mar-
                                                lion people receive free gas, electricity and    ket and a global move towards cleaner en-
TO BE TAPPED Turkmenistan has an                water, incomes are among the lowest in           ergy also contribute to increased interest
opportunity to feed South Asia’s growing gas    Central Asia and health and education            in natural gas projects.
demand (above): reserves are huge but           services are declining.                              Despite costing more than double the
these await certification; Turkmenistan’s           With large gas reserves and a small          Turkmen scheme, support for the Iranian
Karakum Desert (left) is rich with gas fields
                                                population, Turkmenistan’s export poten-         pipeline—which would carry gas 2,700 km
that lie beneath the sand
                                                tial is huge, though substantial invest-         from an offshore field in the Arabian Gulf—
                                                ments are needed to increase production.         is gathering momentum. The project leaves
offshore Iran is also gaining momentum.         Turkmenistan currently pipes most of its         out Afghanistan, where security concerns
    “If the Iran pipeline is greenlighted       gas to Ukraine and Europe via Gazprom,           remain.
first, the Turkmenistan project might           the Russian utility, though it also has a            The United States is opposed to the
be put on the back burner for a while. How-     small pipeline to Iran.                          Iranian project—its 1984 sanctions against
ever, with long-term gas demand from                It recently renegotiated a 25 year agree-    Iran are still in place—but analysts say this
India and Pakistan estimated at 50 BCM          ment with Russia to sell gas at $44 per          is unlikely to influence India and Pakistan.
a year, there is a need for more than one       1,000 cubic meters (m3), and settled short-          Even if Turkmenistan settles for current
pipeline,” notes Mr. Millison.                  term contracts with Ukraine selling at           gas prices, observers note, it should have
    ADB has brokered the 1,700-kilometer        $58 per 1,000 m3. Both agreements are on         some pricing leverage within five years’
(km) pipeline project from Turkmenistan         an all-cash basis, replacing an earlier mix      time when the project comes on stream.
since 2002, promoting it as a win-win ex-       of cash and barter.                              They point out that Pakistan industries
ample of regional cooperation—a pioneer-            Projected demand in South Asia is so         and power plants currently pay $100 per
ing effort to link gas-rich Central Asia        strong that some believe there may be a          1,000 m3 for gas.
with energy-deficient South Asia through        need for a third pipeline from Qatar or              As well as financing the feasibility re-
Afghanistan.                                    Oman. Pakistan, with its own reserves de-        port for the Turkmen project, ADB financed
    The project would bring clean fuel at       clining, is expected to begin importing gas      a study for underground natural gas storage
competitive costs to India and Pakistan,        after late 2008. India already imports gas       in Pakistan, where storage capacity would
much-needed transit fees to Afghanistan,        and demand will soar in the next decade.         help meet local demand peaks in winter
and new markets for Turkmenistan.                   Moreover, the geopolitical situation has     and counter possible supply disruptions.

                                                                                                                        October 2005         15
U
SAMARKAND, UZBEKISTAN

                lmas Bozorov and his family
                are hatmakers in a city that
                has prized craftsmanship for
                two millennia.
                Tamerlane brought artisans
from far and wide to rebuild Samarkand
in the 14th century after the Mongol inva-
sion—and many fabulous monuments still
stand from that era.
    Chinese weavers who first discovered
how to make silk contributed to the city’s
early prosperity. Europeans coveted the new
fabric and Samarkand, being at the center
of the trade route between the Orient and
Europe, profited.
    Ulmas Bozorov, the 63-year-old sprightly
patriarch of his clan, is deeply conscious of
his city’s—and family’s—heritage. His
handicraft shop is down the road from the
mausoleum of Tamerlane and right oppo-
site another tomb that may be the city’s
oldest surviving building.
     “Our grandfathers and great grand-
fathers sold their goods in Afghanistan and
Iran. They went by camel along the Silk
Road,” he says.




HATMAKER OF SA
Ulmas Bozorov and his family maintain traditions of craftsmanship that
go back many generations. But they may have to adapt as they face
competition from bigger firms with modern technology
    Ulmas and his wife Sojida have three        with their skills intact, they slowly rebuilt   and, since it is summer, they are making
sons and three daughters who are skilled in     the business.                                   only 20 hats a day, he says. Demand is much
various crafts. But hatmaking is the staple         These days, the challenge is less dra-      stronger in winter.
expertise—the children acquire it before        matic but ranges from an increasingly re-           Repairing old hats helps keep the busi-
they read and write.                            strictive climate to competition from bigger    ness ticking over. “My heart feels big when
    But today the family faces the dilemma      enterprises armed with better technology.       people ask us to repair hats that they bought
of many long-established enterprises as             Given the important role that such          from us many years ago,” he says. “It shows
their countries become more market ori-         small- and medium-sized enterprises play        they are loyal.”
ented: they have to adapt or risk going         in Central Asia’s emerging private sector,          Specialty hats are another handy source
under.                                          governments and the international commu-        of income. The family makes ceremonial
    This is not the first time the Bozorovs     nity need to encourage their development        hats for Kyrgyz brides and production of these
confronted a challenge. In the 1930s, dur-      through regional schemes that provide help,     can rise to 20 a month during the wedding
ing a campaign against “rich” people, the       such as microfinance and skills training.       season from September to March. It also
authorities threatened to send the family           In his workshop, Karim, one of Ulmas’       makes distinctive hats known as a formovka
to Siberia. To avoid this, the family turned    sons, uses a mold and simple tools to fash-     from imported fur and local sheepskin
over everything to the Government. But          ion a fur hat. It does not take long to make    that are popular with Russian politicians.

16                    October 2005
                                                                              TRADE




    TRADITIONS Dilshod Bozorov in the hat shop:       The family does not travel far these days
    these days the world comes to them (left);    to sell its products—the longest journey
    Ulmas (above) making a musical instrument     would be a 3-hour car trip to a bazaar in
    called a tar: he has also composed a song     Bukhara, the next major city. The Bozorovs
    for hatmakers; in the close-knit Bozorov
                                                  either sell abroad through dealers or to
    family (below), children can make hats
                                                  international tourists who visit their shop.
    before they can read and write
                                                      At the hat shop, Dilshod, another son,




AMARKAND
                                                  shows the skins they import for their
                                                  products. “This is a white fox from Russia
                                                  and this dark mink is from China,” he says.
                                                  Tourists come from Europe, Japan, and
                                                  Russia, he adds.
                                                      Ulmas is a music lover and, as a side-
                                                  line, he makes a stringed instrument called
                                                  the tar.
                                                      Picking up a tar, he strums it while sing-
                                                  ing a song that he composed for shapochniki,
                                                  or hatmakers.
                                                      “When I go by the Silk Road from China
                                                  to Georgia, Europe also is my friend and my
                                                  job is making hats.”
                                                      He says the family is expanding its
                                                  operations and points out a new room that
                                                  is being built.
                                                      But he also admits, “Our problem is
                                                  that we do not have modern technology and
                                                  equipment. It is hard for us to compete
                                                  with large companies.” He has discussed
                                                  with the family the idea of importing Ital-
                                                  ian technology, but plans have not gone
                                                  beyond this.
                                                      As Uzbekistan and other Central Asian
                                                  economies open up to new ideas and tech-
                                                  nology, he may learn that traditional skills
                                                  handed down through the generations may
                                                  not be enough in the future.

                                                                          October 2005      17
T
KEMIN, KYRGYZ REPUBLIC                          provides cash during winter.”
                                                    The women soon diversified from mats
             wo women are beating tufts of      to toshok (quilts) as well as toys, slippers,
            wool with wiry metal sticks,        and souvenirs. They organized themselves
            pounding it into felt. Others       into a nongovernment organization, and
            squat on the grass, fashioning      UNDP organized seminars on how to make
            different colored felt patches      natural dyes and how to price and market
into a quilt. Finally, the women wrap the       their products.
quilt in rattan and roll it on the ground.          Today, the women are casting their eyes
    These are elements of a ritual that is      regionally and selling their crafts in mar-
bringing much-needed income to remote           kets as far afield as Almaty in Kazakhstan.
and impoverished mountain villages of the           “We earn on average 500–600 som
Kyrgyz Republic. It is also an example of       ($12.50–$15 at the rate of 40 som to $1) a
how entrepreneurial skills can be intro-        month, which could triple in peak months.
duced among the poorest sections of this        It provides cash to supplement our diet and
formerly controlled economy—and how             buy other essentials for the family,” says
eagerly they are being taken up.                Altyn Janyshbaeva, leader of one of the
    In the spring, the village of Shabdan-      groups.
Ata, in the northeast district of Kemin,            Quilt making is also attracting teen-
looks like a picture postcard, set amid         age girls, who come on weekends to learn
green pastures with snowcapped moun-            the skill so they can be assured of an in-
tains in the background. The women work         come when they finish high school. Besides
in the sun, as the children play. But in win-   helping women work with felt, UNDP’s


Isolated, mountainous, and sparsely populated,
the Kyrgyz Republic faces formidable challenges
as it morphs into a market economy. But a village
cooperative and an industrial firm show how to
succeed with initiative—and a regional reach



FELT AND GLASS
ter, it is a different story. Snow envelopes
the village and many inhabitants, who
                                                poverty reduction program also supports
                                                activities such as needlework, fruit drying,
                                                                                                    It started life in the 1970s as Ainek
                                                                                                (which means glass), one of the biggest pro-
subsist on vegetables, have a hard time         and tourism training.                           ducers of sheet glass in the Soviet Union.
getting through the cold months.                    Meanwhile, a ritual of another kind is      Following the breakup of the Soviet Union
    In 1998, an official from a United Na-      taking place in a factory in the town of        in 1991, it became a joint stock company
tions Development Programme (UNDP)              Tokmok, 75 kilometers east of Bishkek.          but had difficulty adjusting to new eco-
poverty reduction program asked some                It is temperate outside, but sweltering     nomic conditions. In 1999, its gas supply
women here if they would like to form a         inside the plant, where men and women           from Uzbekistan was cut off and, in Janu-
self-help group to make kurak (felt mats).      tend blazing furnaces that are burning          ary 2000, Ainek went bankrupt.
    From those beginnings now exist sev-        sand and gas to produce glass. From large           In September that year, Steinert Indus-
eral such groups—each typically compris-        machines emerge expansive sheets of the         tries GmbH of Germany bought the com-
ing 8–10 women—in Shabdan-Ata and               transparent material. These are carefully       pany at an open auction for $2.25 million
nearby villages.                                scrutinized for defects, cut into smaller       and renamed it Inter-Glass. Over the next
    “We just thought we would see what          sheets, and packed onto a railway line for      2 years, Steinert invested millions to up-
happens,” says Gulasel Nogoibaeva, a            dispatch.                                       grade the plant and bring in high-tech
United Nations volunteer.                           This once-ailing operation—rejuve-          equipment. After investments totaling over
    “The women, who are poor, like it as        nated by foreign capital and technology—        $20 million, the factory restarted produc-
it gives them a sense of community and it       has brought jobs for 1,500 workers.             tion in 2002.

18                    October 2005
                                                                            TRADE




                                                   Regional cooperation
                                                   helps the growth
REGIONAL SALES Quilt-making provides               of businesses, large
much-needed cash for the rural poor (above);
the factory’s rail yard (left) has helped          and small, which is
recapture markets in Russia and Central Asia;      key to developing
workers doing quality control at the Tokmok
glass factory (right)                              transitional economies

    Today, Inter-Glass produces high-
quality glass—and in far greater volumes        yard to join the Central Asian rail network.
than before. In 2004, its capacity was              “Our pricing strategy is to offer glass at
12 million square meters of glass a year,       competitive prices to distant customers,
compared with 1 million before the              with the customers paying for transport
makeover.                                       costs,” says Viktor Steinert, a German who
    From the beginning, the revamped            is the owner’s uncle and representative of
venture has had a regional perspective.         the company in the Kyrgyz Republic.
For the gas on which its production                 Mr. Steinert expects sales to be up 25–
depends, Steinert has secured a long-term       30% this year over 2004, due to an increase
supply from Uzbekistan.                         in capacity.
    It is also recapturing the markets it           He adds that the factory’s average wage
lost after independence, and today over         is $150 a month, more than double the
95% of its products are exported to Russia      national average.
and other parts of Central Asia.                    Regional cooperation clearly helps the
    Key to its exports is that it sends its     growth of such businesses, large and small,
products by rail. The glass is transported in   which is key to developing transitional
wooden pallets from the plant’s own rail        economies.

                                                                        October 2005      19
SHUTTLE TRADERS’
The easing of restrictions on international travel in the 1990s saw the emergence
of “shuttle traders” who went to the People’s Republic of China and Turkey to
bring back goods for resale. Now, recently introduced trade and border-crossing
restrictions, including high taxes, are making this important trade more difficult




O
BUKHARA, UZBEKISTAN                             them,” she says, crestfallen at the memory.     mates in Kazakhstan show that shuttle
                                                    Shuttle traders like Dilorom emerged        trade accounted for a quarter of total
                  n a recent business trip to   in Central Asia after the easing of inter-      imports in 1995, a third in 1996, and over
                  neighboring Kyrgyz Repub-     national travel restrictions, following the     four fifths by 1997.
                  lic, Uzbek shuttle trader     dismantling of the Soviet Union. Typically,         In Central Asia, bazaars at Bishkek and
                  Dilorom Gaibullaeva had a     individual traders would travel to the PRC,     Karasu (near Osh) in the Kyrgyz Republic
                  disillusioning experience.    Turkey, and the Gulf states to bring back       and at Shymkent in Kazakhstan became
The 43-year-old single mother spent one         consumer goods for resale in domestic           magnets for shuttle traders from Uzbekis-
million Uzbek sum (about $1,000) buying         bazaars.                                        tan who often brought fruit and vegetables
products, such as baby clothes, mainly from         Such activity became a lifeline for newly   from the fertile Ferghana Valley to trade
the People’s Republic of China (PRC), to        impoverished families as Central Asia’s         for consumer goods.
resell in her native town of Bukhara. But on    freshly independent countries saw export            Most shuttle traders are women because
her way home, parts of her goods were con-      markets tumble, factories shut down, and        men are often tied to jobs; women also tend
fiscated twice because she had exceeded         millions thrown out of work. As well as         to receive more lenient treatment from cus-
import quotas, customs officials said.          reducing poverty, shuttle trading engen-        toms officials and border guards. Shuttle
    The final blow was when she was fined       dered a spirit of entrepreneurship as the       traders are deterred from registering offi-
in an Uzbek court after failing to produce      republics moved toward market economies.        cially because of high taxes. They also tend
receipts for her goods. “I had my goods in          Such trade also became a bigger slice       to underinvoice or smuggle imports and of-
a small van, and I lost practically all of      of the macroeconomic pie—official esti-         ten bribe officials to turn a blind eye.

20                    October 2005
                                                                                                                      TRADE




 A LONG TRIP Many shuttle traders start
 their arduous journey from this Bukhara
 bus terminal to neighboring countries          FINDING A NICHE Shuttle trader Dilorom




’ WOES
                                                Gaibullaeva and her daughter Iroda (above)
                                                embroider ceremonial clothes at home;
                                                tough local competition drives Ms.
                                                Gaibullaeva abroad to trade (right)


                                                    Once, the returns made it worthwhile.
                                                But the profits are far less these days.
     An imposing woman with a headscarf             Though international travel became
 and loose black-and-white dress, Dilorom       easier, new borders in the former Soviet
 says she was raising two children alone on     Union made crossing borders more diffi-
 a kindergarten teacher’s salary when a         cult. On top of this, taxes and other charges,
 neighbor showed her how to do embroidery.      often imposed by corrupt border officials,
 The work involves sewing gold trimmings        have slashed incomes for informal traders.
 for ceremonial clothes used for weddings           “Some governments want to restrict
 and special anniversaries.                     shuttle trading with the view that it is not
     At first, she continued to teach by day    good for the economy. They want to reduce
 and did embroidery in the evenings. Then,      demand for foreign exchange and protect
 she decided to go into sewing as a full-time   their markets from being flooded by cheap
 business. She taught her daughter Iroda,       Chinese goods imported by shuttle trad-
 now 15, and also hired two trainees.           ers,” says Sean O’Sullivan, ADB’s country
     She found local competition intense,       director for Uzbekistan. “The Government




                                                                                                 “
 however, and decided to take her wares fur-    in Uzbekistan, for example, has moved to
 ther afield. She traveled to Kazakhstan and    formalize such trade.”
 later Russia and the Kyrgyz Republic—not           Noting that shuttle trading helped                Shuttle traders
 only to sell her products but also to buy      many poor survive after independence and
 consumer goods to resell at home.              also developed entrepreneurial skills, Mr.
                                                                                                 should enjoy a level
     It was not easy work—a round trip to       O’Sullivan believes shuttle traders should       playing field and not be       “
 the Kyrgyz Republic might take 2 weeks,        “enjoy a level playing field and not be disad-   disadvantaged compared
 including 4 or 5 days of hard travel, mainly   vantaged compared with other importers.”
 by bus.                                            Despite the challenges, Dilorom says
                                                                                                 with other importers
     “I would worry about leaving my chil-      she will continue making the long trip to                               Sean O’Sullivan
 dren at home but I had few ways to earn        the Kyrgyz Republic—because she has                 ADB Country Director for Uzbekistan
 money for the family,” she says.               little choice.

                                                                                                                  October 2005      21
TRANSFORMATION (clockwise from bottom
right) Tending silkworms in Tajikistan;




SECRET OF THE
dyeing, weaving, and spinning in Samarkand




22                  October 2005
                                                                                      PICTORIAL




                                          NIMBLE HANDS (above and below) Carpet




SILK ROAD
                                          making is a painstaking task




T
              he product that gave the Silk Road its name was discovered by
              the Chinese many centuries before the road opened around the
              second century BC.
                  The Chinese closely guarded the secrets of silk-making—
              to reveal the technique or smuggle silkworm eggs or cocoons
outside the country was punishable by death.
   As a result, the trade in silk—the beautiful and lightweight fabric, warm in
cool weather and cool in hot weather, and highly prized in Europe—helped
many cities along the Silk routes prosper.
   In time, however, the secret spread across the Taklamakan Desert to reach
Byzantium and eventually Europe. Today, silk production also takes place in Central
Asia—from the feeding of silkworms with mulberry leaves, to the production
of cocoons, and the unraveling, spinning, weaving, dyeing, and embroidering
of silk.

                                                                                        October 2005   23
                                                      W
PREVENTIVE WORK NGO workers                           TEMIRTAU, CENTRAL KAZAKHSTAN
(in blue on the right) distribute
sterile needles among drug users:                                          e keep about 20 meters
intravenous drug use is the main                                           behind the two nongov-
cause of HIV/AIDS
                                                                           ernment organization
                                                                           (NGO) workers as they
                                                                           deliver a box of sterile
                                                      syringes to some two dozen drug users, half-
                                                      concealed among trees and bushes.
                                                           The drug users are familiar with the
                                                      NGO staff, Irina and Slava, but are nervous
                                                      at seeing us, and sharp questions and
                                                      answers fly back and forth like darts.
                                                           Irina’s package of needles is gratefully
                                                      received, and she and Slava head across
                                                      open land toward another group of drug
                                                      users, who are peering suspiciously at us
                                                      from behind a wall. As we approach, an
                                                      object lands by my feet with a thump. It is
                                                      the heel of a shoe and it has been thrown
                                                      from behind the wall some 30 meters away.
                                                           Their mistrust of strangers is under-
                                                      standable. Those caught with drugs, in-
                                                      cluding those infected with HIV/AIDS
                                                      from intravenous use, cannot expect to
                                                      be treated lightly by the authorities. Stiff
                                                      jail sentences are common.
Intravenous use of drugs has fueled an explosive           Slava now shows how easy it is to pur-
                                                      chase drugs. He introduces us to a young
growth of HIV/AIDS in Central Asia. A regional        man who disappears down a lane and re-
approach is needed to deal with this cross-border     emerges minutes later holding a packet




ON THE
                                                      with a brown substance. This is known as
crisis, but finding effective solutions is not easy   “poppy straw” (the stalk of an opium plant)
                                                      that, after being boiled and mixed with
                                                      other ingredients, is injected into the veins.
                                                           Later, we accompany Irina and another
                                                      NGO worker, Svetlana, as they hand out




FRONT
                                                      packets of condoms to sex workers, who clus-
                                                      ter around tree-lined side streets waiting
                                                      for customers. The atmosphere is more re-
                                                      laxed, with the two women bussing sex
                                                      workers on the cheek and chatting like old
                                                      friends. As a police car cruises by, Irina says,
                                                      with a laugh, “Sometimes, the police ask
                                                      for free condoms—and I give them some.”




LINE
                                                           Welcome to the front line in the battle
                                                      against HIV/AIDS in Kazakhstan, which
                                                      has nearly half the reported total cases in
                                                      Central Asia.
                                                           Drugs are very much part of the HIV/
                                                      AIDS story in Central Asia, for experts say
                                                      the use of contaminated needles to inject
                                                      drugs causes 85% of HIV/AIDS cases and
                                                      affects mainly young people.
                                                           Moreover, the disease is spreading at an
                                                      alarming rate: recorded cases rose 1,600%
                                                      in Central Asia from 2000 to 2004, accord-

24                   October 2005
                                                                                                                     HIV/AIDS

ing to the Joint United Nations Programme         program for HIV/AIDS, but those with the       officials, and border troops.
on HIV/AIDS.                                      disease are required to register, submit to        Poverty will also accelerate the disease’s
    One major cause is the plentiful and          a background investigation, and undergo        spread as local populations become more
relatively cheap supply of heroin that flows      treatment at prison hospitals. In contrast,    involved in the drug trade. In Tajikistan,
from Afghanistan through its northern             Shapagat—formed in 1998 and one of only        for example, the World Bank estimates
borders to Tajikistan, Uzbekistan, and Turk-      two NGOs helping those with HIV/AIDS—          that 30–50% of economic activity is linked
menistan—and the rest of Central Asia.            offers a more compassionate approach and       to narcotics trafficking and that 30% of
    It is no coincidence that HIV/AIDS in-        treatment on a confidential basis.             the population depends on the illicit drug
fection rates are highest along the major             Attitudes may be changing, slowly.         business.
drug trafficking routes between Afghani-          Nurali Amanzholov, president of Shapagat,          The “stark and troubling reality,” ac-
stan and Russia—in cities like Karaganda,         says he has made two presentations to Par-     cording to the UNDP report, “is that as
Temirtau, and Pavlodar in Kazakhstan,             liament, which is reviewing HIV/AIDS leg-      long as the demand and supply forces
Tashkent in Uzbekistan, and Osh in the            islation.                                      abroad continue to drive the illicit drug
Kyrgyz Republic.                                       “I have proposed changing the law so      trade unabatedly, the drug transit problem
    Temirtau, a steel town set up by the          that people with HIV/AIDS can be treated       in Central Asia will remain intractable.”
Soviets amid the plains of central Kazakh-        as normal people who are ill, not as out-
stan, is a typical drug transit center. As pro-   casts and criminals,” he says.                 EASY ACCESS An NGO worker shows how
duction slowed following the collapse of              More problematic is the wider problem      easy it is to purchase heroin from
markets after the Soviet Union’s breakup,         of trafficking.                                Afghanistan; distributing condoms and
many who had wheeled and dealed in met-               Although the states of Central Asia are    needles to sex workers (below)
als turned to the lucrative drug trade. As a      seeking to refine narcotics laws, develop
result, Temirtau witnessed an explosive           police services, and cooperate with the in-
growth of HIV/AIDS in the mid-1990s.              ternational community, the United Na-
    To stem the spread, an NGO, Shapagat          tions Development Programme (UNDP)
(Revelation), distributes needles and             notes numerous serious constraints.
condoms from its headquarters in a                    These include the lack of sufficient re-
cramped apartment.                                sources for training and equipment; a weak
    Most of its members are HIV/AIDS posi-        institutional infrastructure; and corruption
tive and many are recovering drug users.          among law enforcement agencies, customs
Some have been to jail.
    Irina’s sad story echoes in many corners
of Central Asia.                                    Central Asian countries
    She is from a well-off family—her step-
father was an engineer in a metallurgy
                                                    are seeking to refine
plant—and she tried drugs as a curious teen-        narcotics laws, develop
ager in the early 1990s.                            police services, and
    “Drugs were so easy to get; it was like
going to the store to buy bread. Everyone
                                                    cooperate with the inter-
was trying them,” she recalls. “We had never        national community
heard of HIV/AIDS and we had no idea of
the dangers of sharing syringes.”
    The thrills turned into nightmare when
Irina became HIV-positive in 1995. Later,
she was arrested for possession of drugs and
spent years in jail.
    Now 30, Irina, who says she has been
drug-free since early 2004, is helping oth-
ers—and herself—through Shapagat.
    Irina has hopes for a normal life. She
has a boyfriend, though she says they are
not yet considering marriage. She says a
doctor told her she might have problems
conceiving children.
    People with HIV/AIDS say they often
experience discrimination in accessing
health care, housing, and education.
    The Government has a comprehensive

                                                                                                                         October 2005      25
T
BISHKEK, KYRGYZ REPUBLIC

            he drug rehabilitation center
            sits in a tranquil enclave at the
            end of a driveway. Outside, visi-
            tors talk quietly on benches be-
            neath shady trees.
    Inside, a small woman, energetic and
plain-spoken, is a magnet for drug users,
some of them infected with HIV/AIDS.
    Dr. Batma Estebesova, founder of
SOTSIUM, a nongovernment organization
(NGO) that helps wean drug users from
their habit, sits behind a computer.
    In 1995, the Kyrgyz Republic was con-
sidered the last HIV-free country by the
World Health Organization. A year later, the
Kyrgyz Republic recorded its first case of
HIV/AIDS but the number of new infec-
tions jumped tenfold from 14 cases between
1997 and 2000 to 149 in 2001.
    “We now have 735 recorded cases of
HIV/AIDS and 82% are from drug use,” says
Dr. Estebesova, who is also president of a
countrywide NGO network that includes
SOTSIUM.
    To combat the disease’s rapid prolife-
ration, observers note that the Government




REHAB WITH A H
has been generally receptive to inter-




The Kyrgyz Republic lost its HIV/AIDS-free status less than a decade ago. It has
developed a progressive treatment program that could serve as a regional model
national assistance, including the Joint        poverty and illness who died in an air crash    still unusual in Central Asia, where the
United Nations Programme on HIV/AIDS            in 1999).                                       legacy of heavy-handed state control re-
(UNAIDS) and United Nations Develop-                “Do you want to see what drugs can do       mains.
ment Programme, and NGO participation.          to you?” asks Dr. Estebesova. She takes us          Under the Soviet system, notes one
    Supporting NGOs like SOTSIUM is             into a room where a beautiful woman shows       leader in the fight against HIV/AIDS, “You
paying off for both the authorities and those   us, without shyness, a shocking wound—a         focused on the individual to maintain the
living with HIV/AIDS. For, in addition to       large abscess that has eaten away much of       health of society. You commanded that pa-
providing clean needles and condoms, Dr.        her leg.                                        tients be tested, you demanded answers.
Estebesova runs a compassionate program             Next, two women in their 40s enter the      With HIV, we understand other methods
that treats drug users as people with a dis-    office and obtain a bag of new syringes. They   are needed. We ask for cooperation.”
ease rather than as deviants or criminals.      are not bothered at all by the presence of          Interestingly, Dr. Estebesova, a psychia-
    For her progressive work—SOTSIUM            strangers.                                      trist as well as a medical doctor, used to
was established in 1998—Dr. Estebesova              Like the woman who heads it, this re-       work for the Government as deputy head of
was last year’s joint recipient of the          hab center in Bishkek exudes a refreshing       the state narcology center, but she devel-
Jonathan Mann award for media and NGO           openness that matches its humane meth-          oped her modern attitudes from 25 years of
work in the field of HIV/AIDS (the award        ods of treating those with drug and HIV/        working in narcology and alcoholism.
is named after the crusader against global      AIDS problems. Such an environment is               She recognizes that drug addiction, like

26                    October 2005
                                                                            HIV/AIDS

        alcoholism, is a sickness and she supports       should be in Kazakhstan or the Kyrgyz
        the 12-step program of Alcoholics Anony-         Republic.”
        mous, the worldwide mutual help program              Such a center is sorely needed not only
        that marks its 70th anniversary this year.       to provide effective treatment but also
            “One of the most important things is         to reduce ignorance, fear, and stigma in
        to take the suffering person out of the          public attitudes toward people with HIV/
        old environment and create a new one,” she       AIDS.
        says. “We offer to exchange needles with             Funding is an important issue, but sup-
        drug users to try to draw them into the          port may be forthcoming.
        program.”                                            In March, the World Bank approved a
            The sympathetic approach has pro-            $25 million grant for a Central Asia AIDS
        duced positive results. Many former drug         Control Project, cofinanced by the United
        users are now volunteer outreach workers         Kingdom’s Department for International
        and others are counselors. SOTSIUM also          Development in the amount of $1.9 mil-
        has a 24-hour “hotline” for those in distress.   lion, which has the support of the govern-
            SOTSIUM’s program includes 2,000             ments of Kazakhstan, Kyrgyz Republic,
        drug users—a fraction of the estimated           Tajikistan, and Uzbekistan.
        100,000 drug users countrywide—and Dr.               “The governments are putting money
        Estebesova points to evidence of success.        into this regional project to strengthen ca-
            “In the beginning, only 14% of drug          pacity for surveillance, training, and infor-
        users under our program used disposable          mation sharing to develop strategies for
        syringes,” she says. “Now 60–80% of users        cross-border issues that sit outside national
        do so.” Moreover, as a result of awareness-      strategies,” says Chris Lovelace, Senior
        raising, those with HIV/AIDS in the pro-         Manager for Central Asia Human Devel-
        gram are now more selective in their choice      opment in the World Bank.
        of sex partners and tend to use condoms              The project explicitly encourages co-
        more frequently than before.                     operation between public services, NGOs,
            Significantly, she says, “We are consid-     and the private sector and is inviting pro-




HEART
        ering establishing a regional center and         posals from state organizations such as the
        discussions are ongoing as to whether it         national AIDS center and NGOs like
                                                         SOTSIUM.
        FIGHTING BACK Technicians testing blood              It will focus on issues that require
        samples at the National AIDS Center in           regional cooperation such as surveillance,
        Bishkek (left); Dr. Batma Estebesova             testing, and training and will target vul-
        (below) chats to drug users: a progressive       nerable groups like intravenous drug
        approach treats addiction as a sickness          users, sex workers, homosexuals, migrants,
                                                         and truck drivers in epidemiological
                                                         “hotspots,” including cross-border areas.
                                                             For people living with HIV/AIDS, the
                                                         hope is that it will also help remove the
                                                         stigma that hinders the battle against the
                                                         disease.




                                                         INFORMATION Ads promote awareness of
                                                         the dangers of contracting HIV/AIDS through
                                                         unprotected sex and sharing needles

                                                                                October 2005       27
WATER                 AND            ENERGY




F
VORUKH, TAJIKISTAN                              farmer, Talay Ibraimov, is the elected head           Attempts by intergovernment commit-
                                                of Aksai, one of several Kyrgyz villages bor-     tees to demarcate the border have not been
           rom distant snowcapped moun-         dering the Tajik enclave of Vorukh. The doc-      successful: the Tajiks base their claims
           tains, the Isfara River tumbles      tor, Zabiyuvlo Teshaev, lives in Tojicon, one     on a 1924 map while the Kyrgyz refer to a
           past tall poplars on its descent     of the enclave’s many Tajik villages.             1958 map.
           into the valley. Amid such seren-        Standing in his parched field, Mr.                Prejudice, fear, and resentment—as
           ity, it is hard to imagine that      Ibraimov gestures futilely toward apricot         well as a siege mentality—have spilled over
this river has inflamed violent passions in     trees that withered from lack of water. He        into aggressive action at times. Early last
recent years.                                   airs a complaint expressed by his compa-          year, for example, Tajik farmers planted fruit
    A telltale sign of the fierce competition   triots: they are not receiving enough water       trees in a disputed border area. In response,
for its resources is the diversionary canals,   from an irrigation canal that flows through       Kyrgyz villagers pulled the trees from the
both at the river’s headwaters in the foot-     Tajik land.                                       ground. The Tajiks replanted them. Such
hills and at a downstream distribution              Countering this, Dr. Teshaev says the         scenes were repeated before the Kyrgyz
center.                                         Tajik community cannot meet its own wa-           threatened to bring in troops.
    Standing on a bridge at the distribution    ter needs, let alone the Kyrgyz requirement.          But today there is fresh hope. Mr.
center, manager Ibrahim Khusenov points         “There is not enough water to begin with—         Ibraimov and Dr. Teshaev say their com-
down to a canal that diverts one third of       and the irrigation system is old and ineffi-      munities want to end decades of distrust.
the river to the Kyrgyz Republic, while the     cient,” he says.                                      With support from the United Nations
rest flows to Tajikistan and Uzbekistan.            This dispute goes back to 1975 when,          Development Programme (UNDP) and the
    “The growing population and develop-        following a violent feud, the Soviets brought     Swiss Development Corporation, the com-
ment of agricultural land have sparked a        in the army and enforced an agreement un-         munities joined forces to rehabilitate an ir-
lot of conflict over water,” he says. Farming   der which the Kyrgyz were to give land to         rigation canal and work out a new system
is the main source of subsistence here, es-     the Tajiks, in return for a share of water from   of sharing the water.
pecially since many industries collapsed        a canal. To this day, the Kyrgyz say the              Also, a UNDP grant has repaired a
after the breakup of the Soviet Union.          Tajiks have not kept their side of the bar-       pumping station so that river water can be
    At the root of the tension is the ambigu-   gain, while the Tajiks say the agreement          carried more efficiently to farms of both
ous border that divides Tajikistan and the      was not tenable.                                  communities on higher ground. The pump-
Kyrgyz Republic, resulting in many disputes         In fact, the quarrels go back to the 1930s
over land—and the water to irrigate it.         when the nomadic, cattle-breeding Kyrgyz
    Two community leaders, a Kyrgyz farmer      came down from the mountains to find
and a Tajik doctor, explain why water is so     their pasture land occupied by Tajik farm-
bitterly contested—and how they are seek-       ers, who said they had settled on unoccu-
ing to resolve the issue peacefully. The        pied lands.


Acute pressure on land and water in a densely
populated border area has sparked numerous
conflicts between Tajiks and Kyrgyz. Now UNDP
is building bridges between the two communities



CALMING
TROUBLED
WATERS
28                    October 2005
ing system has limited effectiveness, as it
depends on expensive electricity, but other
ways of alleviating the water shortage are
being considered. One is the construction
of a gravity-fed canal from the mountains,
says Abdiraim Jorokulov, a Kyrgyz-based
UNDP manager, though he adds this would
be a costly project.
    Meanwhile, UNDP is also trying to pro-
mote better relations by building a medi-
cal clinic and a youth center, facilities that
the communities will share.
    “We are building on what Tajiks and
Kyrgyz already share—similarities in cul-
ture, religion, traditional values, and his-
torical background,” says Bahrom
Faizullaev, a Tajik-based cross-border coor-     FRESH START It is up to this boy’s generation
dinator with UNDP. “There has been a             to shed prejudices (above); near the border,
thaw in relationships.”                          the diversion canal on the right takes water    IN DEFENSE Tajik doctor Zabiyuvlo Teschaev
    Dr. Teshaev, who will be the new clinic’s    to the Kyrgyz Republic, and the rest goes to    says the irrigation system is old and
in-house medic, hopes the youth center           Tajikistan and Uzbekistan (below)               inefficient
will encourage a new generation, less fet-
tered by the past, to build bridges for the
future. “Two of my children went to a sum-           The communities joined forces to rehabilitate an
mer camp for both ethnic groups—they had
a great time and made many Kyrgyz
                                                     irrigation canal and work out a new system of
friends,” he says.                                   sharing the water




                                                                                                                       October 2005      29
WATER                  AND             ENERGY

ADB and the World Bank are encouraging Central
Asian countries to optimize water and energy
resources through a new power trade system, but
traditional “zero-sum” attitudes remain a barrier




WIN-WIN
SOLUTIONS
I
GULISTAN, TAJIKISTAN                               tan have abundant fossil fuels, notably oil,
                                                   coal, and gas.
       n a village not far from Tajikistan’s           In the Soviet era, these complementary
       principal hydropower facility, the          resources were harnessed to irrigate vast
       Nurek reservoir, a widow with 10            cotton- and wheat-growing regions and to
       children says she has electricity for       produce electricity downriver. The Soviets
       only 4 hours a day, even in the bit-        also established a very high-voltage power
terly cold winters.                                grid linking the Central Asian republics.
     “In summer it is fine, but in winter, it is       In return for irrigation water in summer,
too difficult. What can we do with 4 hours         the downstream countries provided the up-
of power?” asks Sogigul Ragabova in the            stream countries with coal and gas on a bar-
village of Khusnobod. “There is no heat and        ter basis for heating in winter.
the houses are cold; everywhere is cold. Be-           “For all intents and purposes, everyone
cause there is not enough electricity, the         was happy,” says Simon Kenny, the World
workshops where we sew are closed; we can-         Bank’s regional program coordinator in
not clean the school because the water is so       Almaty. “But as soon as the Soviet system
cold, and the kindergartens are not open.”         collapsed, that trade cooperation system fell
     It is a sad irony that mountainous            apart.”
Tajikistan is rich in hydropower resources             Since independence, understandably,
but the majority of its impoverished popu-         national interests have prevailed. For ex-
lation has little electricity.                     ample, the Kyrgyz Republic, not content
     On the larger canvas of Central Asia,         with the compensation it receives for irri-
the irony runs deeper. Between them, the           gation water, prefers to operate its Totogul
five Central Asian countries have more than        reservoir in the power mode to maximize
enough water and fuel for their require-           electricity generation in winter. The same
ments and could earn much-needed rev-              holds true for Tajikistan and its Nurek
enue by exporting hydropower, natural gas,         reservoir.
crude oil, and coal—if they could get their            The downstream countries are unhappy
act together.                                      either because they do not get enough
     With their glaciers, Tajikistan and the       water for their crops in summer, or they
Kyrgyz Republic have the snowmelt to               get flooded when the upstream countries
produce hydropower as well as to feed Cen-         release water for electricity in winter.
tral Asia’s two major rivers, the Syr Darya            Both the World Bank and Asian Devel-
and Amu Darya. For their part, low-lying           opment Bank (ADB) are trying to help coun-
Kazakhstan, Turkmenistan, and Uzbekis-             tries reach a new power trading agreement.

30                     October 2005
                                                                                                   “    Increased power
                                                                                                   trade would bring
                                                                                                   long-term savings to
                                                                                                   businesses and
                                                                                                   consumers and a more
                                                                                                   transparent operation
                                                                                                   would attract outside               “
                                                                                                   investment in new
                                                                                                   hydropower capacity
                                                                                                                   Xavier Humbert
                                                                                                              ADB energy specialist


                                                                                                incurred $35 million to operate the Totogul
                                                                                                reservoir in an irrigation mode in 2001, it
                                                                                                was compensated with only $29 million
                                                                                                worth of coal and gas by the downstream
                                                                                                countries.
                                                                                                     Or, from another view, the Kyrgyz say
                                                                                                that while it cost them $35 million to
                                                                                                operate Totogul in an irrigation mode,
                                                                                                Uzbekistan and Kazakhstan gained
                                                                                                $69 million in agricultural produce with
                                                                                                the extra water. The Kyrgyz wonder aloud if
                                                                                                they should not get a share of that benefit.
                                                                                                     A new power agreement remains elu-
                                                                                                sive for the time being, but Mr. Kenny takes
BIG POTENTIAL Tajikistan’s main hydropower     says one analyst. “There is resistance to the    the long view.
facility at Nurek (above): power could be      idea that a country might benefit from re-            “We are not looking at resolving regional
traded more effectively; the station’s giant   gional cooperation by ceding any of its na-      cooperation issues overnight,” he says. “We
generator power transformer (left): more       tional interests.”                               have to be patient and find ways of selling
investment would help develop new capacity
                                                   Such prejudice notwithstanding, “The         a lot of these options as win-win situations,
                                               case for more cooperation is that a power        not as ‘you win, we lose’ situations.”
    ADB has been supporting a bilateral        trade agreement between Tajikistan and                One win-win scenario would be if the
agreement between Tajikistan and               Uzbekistan would encourage others to form        Kyrgyz Republic and Tajikistan could de-
Uzbekistan by encouraging win-win sce-         a regional market,” says Xavier Humbert,         velop their hydropower potential and ex-
narios. For example, both sides would gain     an ADB energy specialist. “Increased power       port to Afghanistan, Iran, Pakistan, and
if Uzbekistan bought more hydropower           trade would also bring long-term savings to      Russia through the existing or a new trans-
from Tajikistan in summer and provided         businesses and consumers. Also, a fairer and     mission system. Earning more revenue
Tajikistan with enough income to buy gas-      more transparent operation of power sys-         would give them less reason to release wa-
fired electricity from Uzbekistan in win-      tems in Central Asia would attract outside       ter in winter. For Uzbekistan, too, an ex-
ter. As an inducement to reach agreement,      investment in new hydropower capacity and        panded regional power trading system
ADB is offering to finance repairs to the      enable the Kyrgyz Republic and Tajikistan        would provide cheaper electricity, enabling
power grid’s aging infrastructure, including   to export hydropower.”                           it to export gas at international prices rather
the dispatch center in Tashkent.                   An obstacle to monetizing the costs          than use it to fuel expensive thermal plants.
    However, issues of pricing and control     and benefits involved is the widely held              Meanwhile, rehabilitating the power
of the load dispatcher have been held up as    view that water is a natural resource that       grid, along with institutional improve-
sticking points in protracted negotiations.    should be free. The Kyrgyz Republic and          ments, is estimated to raise available gen-
    Outside observers, however, say that       Tajikistan do not argue with this, but claim     eration by as much as 30% in Tajikistan—
political factors might be more of a barrier   they should be compensated for the stor-         providing electricity for longer periods for
than technical issues. “There is a deeply      age costs in operating and maintaining           long-suffering consumers.
embedded socialist idea that regional rela-    their reservoirs.                                     Such news would be welcome indeed
tions are a zero-sum game and that a gain          Here, too, are different views. World Bank   to impoverished villagers such as Ms.
for one country entails a loss to another,”    estimates that while the Kyrgyz Republic         Ragabova and her family.

                                                                                                                        October 2005       31
B
               ukhara is a Silk Road
               city that has survived
               the ravages of both
               time and invaders. Its
               madrasas, royal fortress,
and remnants of a huge market span
1,000 years of history.
     Yet as well as being home to doz-
ens of historic monuments, Bukhara is
also a city of youth and promise. It has
three universities and several schools.
Although many factories from the So-
viet era are running at much-reduced
capacity, new businesses are starting
up, says Lola Fataeva, of the local Busi-
ness Women’s Association.
     Bukhara used to have a network of
canals and dozens of stone pools that
were meeting places for people to
wash and gossip. Some of these pools
have been restored, such as one in
Samani Park, beside the elegant mau-
soleum of Ismail Samani, founder of
the dynasty under which Bukhara flour-
ished in the 9th and 10th centuries.




                                            BUK
32                  October 2005
                                            OLD A
                         PICTORIAL




KHARA
AND NEW
          YOUNG AND OLD (clockwise from far left
          bottom) Matching colors of new generation
          and historic mosque; a historic monument;
          a young trio in front of Samani mausoleum;
          father and son feed the ducks; an elderly
          lady with pram by the canal; and young girl
          in Samani Park

                                October 2005      33
                                                 I
LONELY LIFE Dilafruz (left) with                 TOJICON, TAJIKISTAN
her sister: she sees her husband
for only a few weeks a year                             t is late afternoon, yet the main street
                                                        of this village is eerily quiet. It takes
                                                        a while to realize what is missing:
                                                        groups of men standing or sitting
                                                        around, smoking, and gossiping.
                                                     “On this street, we have 22 families,
                                                 yet only three male heads of family, includ-
                                                 ing myself, are here,” says Dr. Zabiyuvlo
                                                 Teshaev, the village doctor. “The other men
                                                 are away most of the time.”
                                                     Dilafruz, the doctor’s 22-year-old
                                                 daughter, has been married to Khayol, 24,
                                                 for 5 years. They have one child. But she
                                                 sees her husband for only a few months each
                                                 year. Around February, he makes the long
                                                 journey to Russia to work on construction
                                                 sites and does not return till around Octo-
                                                 ber. Most migrant men like Khayol work
                                                 in the building industry but others find
                                                 employment in factories and plants.
                                                     Tojicon is hardly alone in losing 80%
                                                 of its men under 50 to the annual migra-
                                                 tion to Russia and Kazakhstan. Countless
                                                 other villages in this poor, mountainous
                                                 country—as well as in neighboring Kyrgyz
                                                 Republic and Uzbekistan—experience a
                                                 similar exodus.
                                                     The money the migrants send home
                                                 keeps their families alive—and contributes
                                                 heftily to their economies. The Russian
                                                 Government estimates that Tajiks send
                                                 home $280 million a year, or 25% of
                                                 Tajikistan’s gross domestic product.
                                                     Unquestionably, by filling gaps in the
                                                 labor force, the migrants also benefit the
                                                 countries where they work. Yet, over the
                                                 past 15 years, they have faced mounting
                                                 restrictions on cross-border movements.
                                                     As a result, many have to work without
                                                 proper papers and are exposed to abuse
                                                 by employers and border officials. Illegal
Poverty is so dire in many Tajik villages that   workers often have to put up with low wages
                                                 and poor conditions. They can be fired or
most young men leave each year to work abroad.   deported anytime. They are vulnerable to
This relieves rampant unemployment at home,      extortion and violence from racketeers.
                                                     In a report to be released next month,
but can endanger family life




VILLAGES WITH
                                                 the United Nations Development Pro-




34                    October 2005
                                                                                        LABOR         MIGRATION

 gramme (UNDP) urges better treatment
 for migrants, noting that it is in the inter-
 est of Central Asian countries to cooperate
 more in facilitating the flow of migrant
 workers as this helps stabilize employment,
 encourages trade, and brings economic ben-
 efits to border areas.
      One positive move is that Russia signed
 an agreement with Tajikistan last year to
 allow several hundred thousand Tajik mi-
 grants to become legally registered work-
 ers with health insurance. When ratified
 by the Russian Parliament, this will pro-
 vide them with significant benefits.
      Despite risks, migrants leave their
 homes and families because they have
 little choice. Some lost their jobs when fac-
 tories closed or slowed production after in-
 dependence. The nearby town of Shurab is
 a case in point: once a thriving coal pro-
 ducer under the Soviets, it is now a shadow
 of its former self.
      There are few options for the men
 who stay behind. In the Vorukh area, which
 includes Tojicon, a UNDP official says
 some 7,000–8,000 men leave to work
 abroad; of those who remain, 3,800 work
 on collective farms, 600 are employed in
 schools, 40 in the hospital, and 20 in ad-
 ministration.
      The wages for those who stay are very
 low. For example, Dr. Teshaev, a graduate
 of Dushanbe Medical Institute and one
 of the most educated villagers, treats pa-       COPING WITH ABSENCE Tajik women help
 tients for free at his home and receives the     a neighbor build a home by making mud          Despite risks, migrants
 standard government salary of $7 a month.        bricks (top); Tojicon children grow up         leave their homes and
 He survives by supplementing his income          without dad (above); these men left behind
                                                  (below) are among a handful involved in        families because they
 from selling apricots grown in his garden.
      The migrants’ absence also has an im-       administrative work                            have little choice
 pact on those they leave behind. Women
 lead a conservative life in these rural areas.       Children have to grow up without fa-
 Girls are expected to marry at 14, and their     thers. The lack of a male role model and
 lives revolve around the home.                   paternal discipline can have a negative im-
      Dilafruz has her own house, but is lonely   pact upon youth in villages where dropout
 without her husband and spends a lot of          rate from schools is already high and social
 time in the home of her father and sisters.      centers and jobs are lacking. A UNDP offi-
      “Of course, it is hard bringing up my       cial says frustration and boredom create
 baby alone, and I miss my husband,” she          conditions for disorderly behavior, such as




HOUT MEN
 says.                                            fighting, drunkenness, and petty crime.




                                                                                                            October 2005   35
“ We have to                                                                           “
           be patient
  Regional cooperation is a long-term process,
  says Simon Kenny, World Bank’s regional
  program coordinator in Almaty, Kazakhstan
Do recent events in Central Asia un-              advantage: for example, physical costs can       Kazakhstan is well on the way to joining.
derscore an urgent need for countries             add up to 50% of a good’s export value. You      All the countries have concerns about pro-
to cooperate more with each other?                cannot reduce the physical distance, but         tecting their goods and competing with the
Let us first dispel the myth that they have       you can reduce the costs associated with         outside world, so it is a slow and long-term
not been cooperating. The Central Asian           transport by investing in good infrastruc-       process. One potential hindrance to WTO
republics have been cooperating for years;        ture and by modernizing the rolling stock        accession is the recent proliferation of pref-
they are not living in isolation. With the        (the railways). Then you can address the         erential trade and customs union agree-
fall of the Soviet Union, it was natural for      nonphysical barriers like tariffs, customs       ments that have been established under the
them to look after their national interests       barriers, long delays, and corruption that       various regional cooperation forums, e.g.,
in terms of security, the economy, and so         can add 10–15% to the value of goods.            the Eurasian Economic Community, Cen-
on. Nonetheless, we have seen an increase                                                          tral Asia Cooperation Organisation, etc.
in regional trade in recent years; similarly      Why are some countries liberalizing
there is ongoing negotiation and coopera-         faster than others?                              What impact is the PRC having on
tion in the water and energy sectors, even if     The Kyrgyz Republic has been more open           Central Asian cooperation?
there is room for improvement.                    to external trade because, arguably, it has      The PRC’s growth and need for energy re-
                                                  less to lose and more to gain from opening       sources make it a growing force in Central
But there are major obstacles. In                 up to, for example, the People’s Republic        Asia that also counterbalances Russia’s in-
transport, for example, there are                 of China (PRC) to buy goods they are not         terests. But a legitimate concern of its Cen-
now borders where there were none                 able to produce themselves. On the other         tral Asian neighbors is that the PRC’s
before independence.                              hand, Uzbekistan is a large country with         massive population and ability to produce
Borders have appeared, along with customs         huge interests in cotton production and          goods cheaply might also threaten their own
regimes, that make it hard for commercial         natural gas options; it wants to protect its     domestic markets.
people to move goods. There are also differ-      markets and is therefore slower to liberal-
ent tariff levels that distort the overall pic-   ize. Kazakhstan, with its proximity to Rus-      The need for cooperation is greatest in
ture. And being landlocked countries, there       sia, has a different economic base, with oil     sharing water and energy resources,
is the physical challenge of getting goods        being its main means of economic growth,         but this is also the most challenging
to the market. But it was a natural conse-        and by default it wants to trade with the        area, is it not?
quence of the fall of the Soviet Union that       outside world. Tajikistan is essentially still   It is complicated but in simple terms, the
made countries look to the interests of their     recovering from civil war and has high pov-      downstream countries, Kazakhstan and
own people, their employment prospects,           erty levels. So, despite impressive growth       Uzbekistan, need water to irrigate their
and the industries that they want to pro-         rates over the past few years, liberalization    crops whereas the upstream countries, the
tect. Slowly, we trust these barriers will be     is naturally slow. Turkmenistan has strong       Kyrgyz Republic and Tajikistan, have less
lifted and there will be freer options for        trade links with Russia, its main product        land for agriculture but have the water to
trade.                                            being gas, but seems less interested in co-      produce hydropower. Under the Soviet sys-
                                                  operating with its neighbors.                    tem, there was a massive expansion of
There is not much that can be done to                                                              irrigation to grow cotton and wheat down-
overcome the fact that these countries            To what extent is the prospect of                stream. They ran the two major rivers in an
are remote and landlocked.                        joining the World Trade Organization             irrigation mode, with 75% of the water re-
The huge distances and their landlocked           (WTO) a spur to regional cooperation?            leased in summer, and the upstream coun-
nature put Central Asian countries at a dis-      The Kyrgyz Republic has joined WTO and           tries would receive fossil fuels, coal, and

36                     October 2005
                                                                                                THE          INTERVIEW

gas for heating purposes in winter. For all     Kyrgyz Republic and Tajikistan. They           pendence or of being dominated by other
intents and purposes, everyone was happy.       therefore need to attract external invest-     countries.
But as soon as the Soviet system collapsed,     ment, both public and private sources of
that centrally managed system fell apart.       funding.                                       So how long will it take to establish
                                                                                               more meaningful cooperation?
Why is it so difficult for the countries to     Are you optimistic that a power trade          We are not looking at resolving regional co-
reach a new power trading agreement?            agreement will be reached?                     operation issues overnight. Regional coop-
Partly because delays in signing annual         You have to be optimistic. There is no ques-   eration is a long-term process. We have to
water-sharing agreements, and also because      tion that, for the upstream countries, their   be patient and find ways of selling coopera-
of the delays in receiving fossil fuels from    best option is to export hydropower as a       tive options as win-win solutions, not as
Kazakhstan and Uzbekistan, the Kyrgyz           source of revenue. However, if, for example,   “you win, we lose.” You can look at water
Republic has increasingly had little option     a bilateral agreement cannot be reached        and energy as exactly that. By investing in
but to increase reservoir discharges in win-    between Tajikistan and Uzbekistan to pro-      hydropower in upstream countries, there is
ter to meet its domestic heating needs. This    vide transmission system access, then it is    a chance of producing more power that can
means less water stored for the summer, and     inevitable that exporting countries find       be sold at competitive prices, thus raising
therefore less water for crops for the down-    other ways of bypassing the existing trans-    much-needed revenue for economic invest-
stream countries—and this has led to a          mission network such as by extending           ment and reducing the incentive for the
breakdown in the old cooperative system.        transmission lines from Tajikistan, through    Kyrgyz Republic to release water in winter.
Throughout the 1990s, there have been ef-       the Kyrgyz Republic, Kazakhstan, and on
forts to rereach agreement on this coopera-     to Russia.                                     Why do we need to wait such a long
tion, based on the premise that if the Kyrgyz



                                                  “
                                                                                               time?
Republic is not to release water in winter                                                     The region has been thrown into a global-
for heating, they need alternatives.                                                           izing world. It no longer has the protective
     Another factor is that people say water
                                                         We have to...find                     subsidies that it used to receive from Mos-
should be free. The international commu-           ways of selling coopera-                    cow; it has to compete with the outside
nity suggests that the water can be free but       tive options as win-win      “              world. It also has to go through a transition
its storage and transmission cost money.                                                       from centralized planning to market econo-
Therefore, upstream countries should be
                                                   solutions, not as                           mies, which is a slow and often painful pro-
compensated for the costs of maintaining           ‘you win, we lose’                          cess. At the same time, it is exposed to the
its reservoirs, dams, etc.                                                                     noneconomic results of liberalization, such
     Yet another factor is that hydropower is                                                  as illicit trade in drugs and the threat of
the main natural resource and potentially                                                      terrorism and fundamental thinking that
the main revenue generator for the Kyrgyz       Is it that simple?                             challenge the political base. But regional
Republic and Tajikistan. So, both want to       There are also domestic reforms that need      cooperation is happening even in these ar-
develop their potential to sell electricity     to take place regarding the subsidies pro-     eas and countries realize they cannot tackle
to neighboring countries, not necessarily to    vided for energy and the need to treat elec-   these issues on their own.
Central Asia.                                   tricity as a commercial commodity. In
                                                Tajikistan, for instance, the domestic         What is your take on the recent politi-
How feasible is this latter goal, given         charges need to rise in the order of 300%      cal developments in the Kyrgyz Repub-
their budgetary constraints?                    just to break even. These are hard political   lic and Uzbekistan?
There is an existing regional electricity       decisions to make but once they are sorted     There has been a lot of talk about whether
network. If power trade agreements were         out, external trade of electricity becomes     recent events in the Kyrgyz Republic and
in place, it could extend electricity trading   more viable.                                   Uzbekistan are connected to what hap-
to Russia and down to Afghanistan and,                                                         pened in Georgia and Ukraine, and the role
political constraints aside, to India and       What has to happen for regional coop-          of the West in supporting this. Whether
Pakistan. One problem is that the grid’s        eration to accelerate?                         or not this is the case is not for me to say,
infrastructure is decaying after years of       More political will or, put another way, a     but what I do believe is that, where you
lack of investment, so we come back to the      reduction in vested interests. The politi-     have highly populated areas, such as the
cooperation issue. Without funding to re-       cal elite has a lot to lose in terms of in-    Ferghana Valley—where people’s liveli-
habilitate and augment the transmission         creased liberalization. But we also have to    hoods are under pressure from natural re-
system, and without the guarantee of sur-       recognize this is a long-term process. There   source constraints, where a large majority
plus electricity being bought, either within    is a tendency within the donor community       live in poverty and are not employed, and
or outside the region, the options for coun-    to want to see big changes in the way that     where people are not receiving basic edu-
tries like the Kyrgyz Republic become fewer     countries deal with each other. But we for-    cation and health services—then inevita-
and fewer. Similarly, the costs of develop-     get that it is only just over a decade since   bly people are more likely to be swayed by
ing new hydropower options are enormous         these countries gained independence and        more hardline views. The consequences
and beyond the budgetary capacity of the        they have certain fears of losing that inde-   speak for themselves.

                                                                                                                      October 2005       37
BOOKSTORE


                                             Publications
 Rebuilding the Silk Road:                                           energy price indices, money and banking, government finance,
 Encouraging Economic                                                external trade, balance of payments, international reserves,
 Cooperation in Central Asia                                         exchange rates, and external indebtedness; and a special
 ISBN: 971-561-321-7                                                 chapter that focuses on labor and employment—“Labor
 Price: $10.00                                                       Markets in Asia: Promoting Full, Productive, and Decent
 After a decade of independence,                                     Employment;” poverty estimates, and projects.
 Central Asia remains a region in
 transition from a command to a                                      Asian Development Outlook 2005
 market economy. So far, the gains from the transition, in           UPDATE
 economic terms, are slim. Without stronger links between the        ISSN: 1655-4809
 republics and new trading partners, and without dramatically        Price: free with every purchase of
 improved infrastructure, its promise of richness and the            ADO 2005, excluding shipping cost
 aspirations of a brighter future may not be realized.               The economies of developing Asia and the
                                                                     Pacific performed well in the first half of
 Women in the Republic of                                            2005. This Update expects the region’s
 Uzbekistan                                                          gross domestic product to grow at 6.6%
 ISBN: 971-561-379-9                                                 over the full year, marginally up on the 6.5% projected in the
 Price: $10.00                                                       Asian Development Outlook 2005 in April. The Update features
 This publication is part of a series that                           an overview of recent trends within the region and sets them in
 provides information on the status and                              their global context. It also points to risks in the outlook and
 role of women in developing member                                  suggests appropriate responses. Recent economic trends and
 countries to assist ADB staff in country                            the outlook are reappraised and updated for selected countries.
 programming work, and project design                                A major theme of the Update is the challenge presented by
 and implementation.                                                 high oil prices, the main focus of Part 3. A key message that
                                                                     emerges is that higher oil prices may be here for some time,
 Central Asia’s Hidden Hunger (video)                                and that countries across developing Asia need to adjust to this
 Running time: 9:38 minutes                                          possibility.
 Price: $10.00
 Since the breakup of the former Soviet Union,                       Forthcoming Title
 Central Asia has seen an alarming rise in                           Asian Environment Outlook 2005
 mentally retarded and physically impaired                           Making Profits, Protecting Our Planet:
 children due to a lack of iodine and iron in the                    Corporate Responsibility for Environmental
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 iodized salt and fortified flour to improve the nutrition of poor   the private sector toward more responsible environmental
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 reform to spread the benefits evenly in the region.                 and communities to adjust their relations; and argues for
                                                                     enhanced enforcement of environmental regulations by
 Key Indicators 2005                                                 governments even as they reach out to the private sector for
 ISBN: 971-561-585-6                                                 stronger collaboration in environmental protection.
 ISSN: 0116-3000
 Price: $40.00
 This 36th edition of ADB’s flagship                                                For these and other publications,
                                                                                  contact the Asian Development Bank
 annual statistical data book features
                                                                           Publications Unit, Department of External Relations
 30 regional tables of socioeconomic
                                                                                    6 ADB Avenue, Mandaluyong City
 and financial indicators for 42 devel-                                              1550 Metro Manila, Philippines
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38                  October 2005
       A New Path for an Ancient Route
For centuries, Central Asia thrived as the meeting place of
East and West. As a bridge between great civilizations,
the region evolved as a center of trade, ideas, and
prosperity. Today, seven nations are reviving that age
of hope and opportunity. Azerbaijan, People’s
Republic of China, Kazakhstan, Kyrgyz Republic,
Mongolia, Tajikistan, and Uzbekistan are
working together to pursue a shared vision of
a region where goods, people, and ideas can
move freely. The Asian Development Bank is
committed to helping these nations create a better future
for their people and their region.


Rebuilding the Silk Road. Strength through regional cooperation.
                                                                   www.adb.org/carec




                                                                                 October 2005   39
SNAPSHOT




CLOSE-KNIT FAMILY A Kyrgyz family enjoys an outing on Suleyman Mountain in Osh, the South’s largest city. The mountain is
a place of pilgrimage, too, and home to a shelter and small mosque believed to have been built for Babur—founder of India’s Mogul
dynasty—in the 15th century after he was crowned king of Ferghana. Tourism is expected to spur growth in Central Asia.




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40                  October 2005

				
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